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SUP Superior Industries International

Participants
Troy Ford Vice President, Treasury & Corporate Development
Majdi Abulaban President & Chief Executive Officer
Matti Masanovich Executive Vice President & Chief Financial Officer
Stephanie Vincent JPMorgan
Call transcript
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Operator

Good day, and welcome to the Superior Industries First Quarter 2020 Earnings Teleconference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Troy Ford. Please, go ahead, sir.

Troy Ford

you. Thank and first everyone, call. XXXX to welcome morning, quarter our earnings Good

available section our be on and with and CFO. which are will today, the and the Vice President Matti the to release, During Abulaban, we CEO; presentation, call referring by discussion our I'm Superior's of website. our Majdi earnings earnings Masanovich, on joined Executive Investors President along our

Majdi, in company's I any Before presentation two would Reform to a Private I risk over Safe turn today Please and that SEC factors. contained of the Securities to complete to slide remind the for provisions the on presentation company's on discussion forward-looking commented to and statements to Harbor Annual Safe XX-K Form of this call or everyone Litigation subject current of of like XXXX. more forward-looking Report for are Act statement full Harbor the statements the refer including this filings, the

will measures be measures exclude We these the non-GAAP in comparable including therefore items Reconciliations of certain U.S. accordance and impact appendix are presentation. found GAAP GAAP. most These discussing and sales this to with today, also U.S. of calculated EBITDA. the can in adjusted non-GAAP be measures measures not the directly value-added of

With call to over turn that, the I'll Majdi.

Majdi Abulaban

our Thanks, Troy, XXXX quarter first results. review joining and to good morning, today everyone, for and thank us you

team our across times. I has would There Before thank sacrifices many to tremendous global been short the who I resiliency begin my these have remarks, shown first organization. throughout challenging like

My moving these have we and employees, you restarted of kept to the that after men back challenging work of this hat bottom On off the our page one during company goes the production times. forward in Germany. women to see

the highlights quarter, on you from have for were our with I'll COVID, Now, to our well the COVID the quarter In in impact will of economic we first impacted the provide an strategy down. current slide the larger our four. results customers automotive were as update seen shut that as environment. the moving pandemic. line all operating by nearly significantly discuss on I industry, then as

to our key And this actually deliver of roadmap. we we on of on escalation we metrics prior earlier. global on delivered significant value-creation various track shared were progress targets However, the with you the to crisis,

than we last and premium This or resulted continue consisting portfolio wheels on year. differentiated growth were XX% sales portfolio higher XX-inch our First, in with above execute we on to about of of of where our value-added X%, market of substantially greater technologies.

by lines, Our margins enhance rationalizing an North efforts footprint, fixing margin point entire a our in volume. year-on-year improvement despite business, our across decline the America, delivered in basis XX% to troubled and portfolio product our reducing expanding XX structural product costs,

and quarter the $XX in with ended million available of we Finally, reduction debt. net liquidity an million $XXX

Our current weather us it the liquidity position storm to is very allows strong and we ahead. believe

of production significant. and In Now facilities. regarding the quarter, our temporary the safety at the actually first measures our implemented of employees, COVID-XX. suspension ensure to of pandemic response, In was we the health impact immediately including the

Our unit about and by negatively shipments by XX% were impacted EBITDA actually $X million.

liquidity up changed our do in and on we environment costs moment. flexibility. balances. these preserve moved our and our the to actions down As I align augment the where actions To late will revolvers, a shoring covenants quarter, we not debt quickly, our in the taking drastically -- are scenario with not of all with compliance our we elaborate details financial we we cash foresee position, a in these. compliance not do see We drew on in remain

IHS the will full is end impact currently XXXX business, our we That a and year difficult predict have As to on near suspended decline said, in full industry production XXXX. the for it estimating of outlook is COVID-XX of XX% the March.

to we However, OEMs as change second move quarter begin suppliers and could and materially, the production. restart through that

rightsizing into and compared planning controlling pre-COVID manner. most are the production visibility are We're restarting clear remains of production we assuming the what and Without timing flexibility, superior cost of we costs, to the we financial are level. aligning recovery Ultimately, production, depressed health in safety efficient focused and our for workforce, and in on the can, planning. safe

on slide five. Turning to

on diving our America. COVID-XX restart plans, in like North an provide I response our and into continued Before deeper would to progress update

Our started are actions $XX rate cost between last results, and focused These discussing closing two portfolio, Our the are a the in margin regions. and primary customers. yielding mid positive run we efforts and year with rationalization creating gap technology improvement which three you areas: million

our We the profitability our PVD polishing and premium line of with new launched product improved advanced technology platforms. commercialization

also now optimize in reduced We North and our expenses footprint, which America cost. low is XXX%

certified European requirements, these have businesses facilities for been customers our America. Further, enabling in North new with

the margin narrow to between North we of operations many a European standpoint, stated these I quarter, American As expect from gap operations. and our last initiatives

these While represent manufacturing we room more improvement. have for progress, significant initiatives still

X. on to slide Moving

in mentioned moved health of our safety the COVID to my and employees. remarks, ongoing ensure earlier response the to As in decisively pandemic, we

we Additionally, production liquidity, financial flexibility took shoring to reducing our and by capacity. costs efficiently enhance action about managing

be chart primary to four the these our you areas Now focus. will see continue on

X. Turning on slide to

the place safety mentioned, in suspended put production we employees and health of late to our and safety our I ensure As March in playbook.

our the day necessary escalated, precautions my team to meeting on we I pandemic our implementing the phone at are leadership team facility. was the As every with began that ensure daily.

safety action. put heightened As we and our facilities, in slowly restart continue production into will we measures to health

We in structure, will rooms our facilities, We believe not conference demand. risk mitigate as do common all to have have such these to our of meet and practices cafeterias impact significant ability initiatives COVID-XX. capacity of on modified or production areas, a in our cost

overseeing also measures drive as committee health ramps actions. health and all global to safety protocols for these and an To committee our and of back across safety responsible our will created production footprint, consistent at health consistent sites drive safety up. we This employee steering continue

on to slide Moving X.

We liquidity decisive that. taken our position current confident are and steps in ensure have to

any capital and we to and continue can actions to nonessential further reduction on focus -- have eliminated cash other generate management generate capital expenditures cost all working can take initiatives. We through flow we

liquidity $XXX we were available caution, $XXX drew and previously, abundance part as credit liquidity in These we completed figures in of credit our ended the of up down on XX, balances the noted by our facilities April upsizing an We we European of with liquidity. cash maintained revolving facility, As of revolving to first shore quarter million January. of and our bolstered in million.

a headcount management our have we necessary the temporarily on and current We and executive furloughing cost standpoint, costs reducing measures the based cost better Turning footprint, workers. environment. steps reduce taken compensation broad-based the to to salaried by on From took across industry our with fit to and slide anticipated production, aligning reduction operating X. along current

example, SG&A For reduced we in America, headcount North XX%. approximately by our

where the authorization salary of Germany Additionally, the in of the across Germany, we is from government. have salaries all their work for production This taken employees workforce in advantage much there. and time -- receive in of our majority programs short associates

layoff. reduced the workers, contract a workforce In temporary post Mexico, releasing and reductions both we combination of through

our taking furlough. U.S. pay in and temporary received reduction are locations, Finally, a all in associates

slide to Turning on XX.

health -- in efficiency In facilities and of in facilities of to ensuring decisively in our and our we our and safety early have stopped Mexico, maximize responded to are to of our facility. each April Europe, manufacturing We production employees the our production sites by mid-March.

levels coming with fourth in have and inventory facilities operations actively opening summer the May that monitoring watching anticipate already hear reopened We're have three in the in we We're our Chihuahua this in restart on in by weeks. facilities XX. We government anticipate We happy this the of and Mexico line reopening heard to our which we light news. of the Europe and green demand. the of for decree this Mexico, way, morning in

on slide Moving XX. to

facilities As mix and the Europe in America and and local continue. product in we accordance our federal, state currently seeing guidelines, with positive trends open we're ongoing North

chart on of article an right see You to side mix. the there that relative

as we facilities North blueprint will Now use in this that through been the Europe for have reopening, a our America.

to ensure chain working We will to according -- seen close contact and have supply we ensure we in is the ready proceed to to and be demand. with suppliers understand customers to have closely our our been requirements

North the restore. in through anticipating production the production operating cannot Again weeks under reduced America coming in We're and managing the while inefficiencies inventory, restarting full the of we production predict COVID-XX, we'll worldwide. closely we're be volumes assumption of impact

negative utilize strategies all measured ramp-up the mitigate of to will Our restarts. impacts we and will be

controlling cost, these main cost Turning will the crisis be efficiently In full execute production. on on and managing coming of priority return to each and focus as manage slide to areas; months, liquidity, production to the maintaining XX. safety, four through and our and we

totaling and In Europe, XX% market. in XX% in our QX, XX% North industry declined volumes America in

we During OEM the in Europe in production latest forecast. XX% in both second year with on regions IHS are down full quarter, America vehicle in a about drop by anticipating North based and XX% the the XX%

to for near-term. assuming protracted are in recovery, levels and a decline the not the will we potential pre-COVID Given volume return the

over make turn I comments. I it Before to to a Matti, few final like would

welcome to appoint annual our significant to operational, Ray plan the First, Board meeting. and financial to I of Beruti table. to who we experience following would Directors industrial, Ray-Ban immediately like brings the

Ray's are Board. with We pleased addition the to

finally, dedication moving emerge in globally managing again based forward ready on in to I've to to I the and growth. compete I And from crisis through drive for these outlined, want Next, this am associates times. ability our thank confident to steps challenging Matti? their our

Matti Masanovich

Majdi. Thanks

effect XXXX. auto financial production. industry negatively of mentioned, impacted of adverse consumer Majdi pandemic COVID-XX for first the results widespread OEM continued a spread and the the our on on The quarter has As and both had automotive demand

XX. to Turning slide

sales sales wheels. value-added growth over our This impact outperformance due operations mix of European market broader delivered quarter. Our FX. first higher towards our growth X% quarter we We saw was due in outperformed to wheel shifting and larger to of per production content late COVID-XX headwinds the XXXX further value-added excluding largely the the X% of despite results market growth

year XX% macroeconomic with value-added diameter value-added sales are well decline globally compared shutdowns prior to as by sales America large auto to wheels the related to In Europe, XX%, and the Europe sales declined COVID and penetrate respectively. see of industry North America in and both XX. result value-added headwinds the production a continuing negatively Despite increasing the North was impacted period. overall per we

As Majdi period. for XX% the year accounted just portfolio, wheels of our approximately noted, in which compares XX-inch to over greater prior XX% in

demand wheels OEM penetration market to diameter on expect this XXXX. We the present The larger while based subject trend. and conditions continue ongoing schedules of change to in support currently release

and for portfolio XX% represent XX-inch wheels expect approximately full larger of XXXX. our We to year

the our to COVID-XX. regional global In key XX, for compared sales decline the unit the we in the prior net the primarily the million shipment period. shipments, compared breakdown -- units year XXXX outlined by $X.X first decreased wheel million first in On quarter value-added and to of sales, slide quarter units customers The related was our to $X change to period. a in prior driven as

loss loss a the compared diluted reported million In $XXX quarter, of of we share a a net the or $X.XX $X.XX period. of income diluted $X per first per or year loss million net to in of prior share,

spread slide first COVID-XX see XX. ongoing you the we indefinite-lived intangible on our quarter goodwill of to valuation required Due test were assets, the to in which and the of can

noncash discount Based additional that charge on these market valuation the first volumes higher earnings production automotive $XXX assets of European forecasted multiples, indicated lower million and analysis to were lower requiring impaired, valuation quarter. during XXXX the an rates

the these have of valuation volume still the strong ultimately assets. respective we expectations change well COVID-XX and resulted Europe, the in of business inputs in resulting the impact as full write-down in While a as

The of Staying XX. COVID-XX was impact our on results quarter slide impactful. first to

by an units and indicates $XX adjusted unfavorable analysis Our of to $X unfavorable negatively with impacted shipments that a impact approximately on net were impact or XX% EBITDA value-added of unit sales corresponding XXX,XXX million. million

translated the of lowered into loss In U.S. value our our in rates driven portfolio dollars. the statements goodwill the financial addition foreign noncash to Mexican hedging our subsidiaries net impairment. quarter the exchange for when and fair volatility by Increased

the impairments, reconciliation of to diluted shareholders' March exchange net impact and equity loss of The $XX items, the in XXXX. Please million appendix, to negative income reduced on the the table EPS of net other for and XXst see and restructuring, from EPS. acquisition, combination impacts diluted foreign as the

to change net On our the year-over-year, first $XXX value-added slide sales through in in sales decreased XXXX. I'll XX, the compared sales prior to for walk year quarter million, period. and million Value-added $XXX

premium shipped in The to $XX by first was adjusted content. due lower decrease XXXX, with On volume, portfolio quarter EBITDA to shutdowns by shipments, compared production year to the for larger prior of driven and $XX wheels, production slide million COVID-XX more was continued diameter offset the delayed million the partially XX, period.

America adjusted industry rationalization cost procurement including SG&A production EBITDA other as of the Europe, in by partially energy wheels implemented of to decrease was volumes and driven, content prices, shift lower by the fourth North The production quarter related and in savings in offset well lower savings, primarily COVID-XX, shutdowns manufacturing XXXX, footprint as higher savings.

the execute, on costs work Despite we align with our to priorities volumes, industry production production lower levels. strategic to

Majdi noted As our America. Europe our swiftly at acted his all production comments, employees, to and ceasing of health of facilities, the by we in temporarily and protect in safety North

year prior the sales, XXXX expense of a flat reference, For percentage first $XX.X of net for compared as of quarter SG&A the X% sales, was or period. to million

cash activities million, improved result prior to management, lower is improved cash quarter due earnings. capital year-over-year working Net million from was to first This Our compared operating in $XX XX. the on $XX slide was period. addressed despite flow

saw for at first the used cash quarter cuts compared relatively period. nonessential expenditures, as capital $XX investments million, are increase the In to $XX driver. in flat the remaining the Capital in to investing quarter, we made activities, we prior million million, for primary an net $XX at

million. $X dividends, $X.X of the shares Preferred paid of totaled Superior holders Europe, end million. the purchases have X% At approximately And first remaining less or minority $X during we than quarter, quarter, the of Industries totaled minority outstanding million. the from

of our pandemic our as million, allocation equipment new, an of European to low-cost financing entered rate the structure. and of overview XXXX. Prior X.X% maturing we strategy, part loans at an a provides capital solution, with into for XX, Slide $XX interest capital through

priorities compliance we covenants, with debt term to free our leverage and in ratio our our In first the generated utilized cash We financings limits, million remain $XX new quarter. We million $XX during all credit. lowered delivered net flow down lending line loan, full strategic quarter. on cash pay with of first by and the by in lines including

currently meeting negative various facilities. do not on the anticipate Based any forecasted these we scenarios, covenants under issues

So revolver the as adjusted debt LTM U.S. agreement. covenant defined aware is credit in times you our net EBITDA our to are X.X on

XX% is The not on covenant is U.S. Therefore, to expect if than drawn tested, maintain XX%, under only end. prior we on do on foresee the if a based that we're quarter given my more any the to covenant times, with U.S. revolver, requirement. to greater in revolver than X.X than issue, we this compliance order would borrowings, reduce less our comment, leverage

top XX, Turning our financial to in our priority preserving flexibility. slide heightened this is of period uncertainty,

impacts As credit our $XXX a U.S. against on precautionary drew measure, million net, we European lines. and potential revolving of COVID-XX,

of XXst million, cash March and including was cash on total availability, our million. $XXX hand of revolving $XXX availability As total on credit facilities XXXX, our with

near-term XXXX, we of excess April liquidity with debt million XXth of As maintained in no $XXX maturities.

manage available is in expected than cash liquidity which forward, burn significant our month, to the implies crisis. scenario, non-production to per business million the $XX less Going a be through

an our XX% Slide the decline. case, in of volume illustrates cash event approximately breakeven XX

minority expenditures, capital, remaining working the base the cash. preferred of of roughly flat acquisition cash be flow continued level shares, Assuming our in full for should maintenance neutral payment further And dividends year. capital our

decline with production XX% America with regard with we depending a in XXXX full net around and outlook, this to the we XXXX on due North finally a end volume, peaking uncertainty QX, year both, strong currently the production slide And is to in QX ramp-up expect forecasting debt previously IHS our withdrew volumes. outlook Europe. our XX, position, or on schedules. to Based on XXXX liquidity

saw by first or of XXXX quarter to the the returning margins quarter anticipate the also XXXX. in fourth we improving We

call the I'll to and want turn I open call answers. operator. to questions the back With to the the that

Operator

Thank from you. We'll first take [Operator Instructions] question Vincent our Stephanie with JPMorgan.

Stephanie Vincent

on Hi. my much questions. just leverage. for first you very taking My Thank is question the

So is obviously, position liquidity quite the good.

are you returning -- that either that? given liquidity of, some And repayment and with earlier consider What, that about realize to minimum space, what but the pay continued done multiples had just of be it do threshold back comfortable know to be through would proposition will sort through you helpful downs your QX supplier you this know bond trough. probably debt of buybacks level However made the QX, of I to have loan. I that term or quarter, liquidity you

question back then schedules QX capital about us is you QX, mid-May customers swing see months think early next working production level are on about coming sort just these summer my as erratic. what, when And talk difficult it's because are you your the for the May, to Can really absolute quite online working swing. in very analysts could capital of, of

I think that's quite helpful.

Matti Masanovich

Thank It's speaking. Matti, question. you the Stephanie. for So,

through the current continued B down debt we how the feel move the framed first pay bond perspective repayment how we're with do an either as from buybacks question we I So this in to I XX% you to as and how about what going And loan of environment. IHS going we're mentioned, what -- -- look kind year and up debt term or end -- then think, down I year. at

be think a I cash we'll perspective. breakeven cash flow from flow free

don't first paid down further to XXXX pay in extent to preserve year possible. from the debt what liquidity this cash and quarter. our we We're I build So the down going in anticipate

downs that's So forward I number any debt with don't anticipate going one? further pay

ended we we're up X.X quarter, out continue with that And supply it from worth March harvest then to and And goods. then inventory a manage finished the ended the we our the base. to with inventory ability online in receivables back working second to obviously, of with coming so ability where our week obviously continue to position DPOs working as capital reasonable about swing capital comes and factor mentioned Really to Majdi trying third swing. is our

a I'd think in of here as you that May. spot good tell begin we're with I And the start-ups to launch we kind in so

last X.X running we Europe in week so ago And week Europe. in started things and up getting a

think inventory we're as levels. of from kind perspective Initially versus inventory kind what where we trying just have of they we rebuild levels in coming I And of customer to and Europe, not is seeing view are thinking. a were here. is good move to out demand which hold My forward the we're stronger kind release

that's think good a but I it's got stick. So a start,

when we're know you as have a And build we -- inventory a we foundry.

we finished and go melting through with start we metal all way the So goods.

So we and we raw carry lot of a as here. sit whip

looking our as we of positions avenues inventory and at thrifty reduce go possibly as forward we as start we're in to all up. kind be So our can

Stephanie Vincent

great. And slip That's I another can if in one there.

Some having a week visibility. suppliers about of have talked two not or even worth

today you how up the May? that's good stand you past about improved you like As how even the feel are week do Do not? feel ramping schedules or in over

Matti Masanovich

We our with are with the the customers in of communication OEM constant OEMS. schedulers

what so phone ordering. we they're very And that calls tell close reconfirming you I'll with of We're tracking them. have via

verbatim. their just So we're not taking broadcast

what think good And so very going I to have we order. visibility they're on

confirm good what they're weeks schedules XX a I'll going consumer weeks But they're Now moving of do those to ordering to visibility consumer as clearly really give that's you be from I -- to I sentiment take back. XX the and and it. it's back get the They kind that think tell I mentioned bounces we going we demand actually into demand choppy, to have over we're going that because and hopeful as economy the customers. mid-term we're and the months. think stronger here from visibility to But standpoint summer us

So we're -- we're pushing. that's where going to where

Majdi Abulaban

off restart phone the in I my I just going. how -- Majdi. is with about it's the And this well Stephanie, and morning President actually this Europe. And got just just talking

would than above and up X/XX. a We're expected in we stability from Three Germany up are running facilities visibility pleased. we our of actually we're and so we slightly where more seeing standpoint, be. And is Europe thought running. -- now back

relying our So, remains and very a customers to our from more flexible. Mid-term, a We're to on it seen, and be in So be better lot just not forecast. to to business right? yes, I very we're PBIs, getting we're the close we calling we're visibility stability. staying and very, revisions is manufacturing really need making the standpoint, think,

cautious being start just So that. operations. we plants can We're up being -- back entire with very the

Stephanie Vincent

queue. great. get in That's Thank so back I’ll much. you

Majdi Abulaban

Thanks, Stephanie.

Operator

over Instructions] questions Thank like to for call At to you. are remarks. this Abulaban would further Majdi in turn there closing no I the time, [Operator queue. the back

Majdi Abulaban

more there you. safe out Thank will Since close you. ahead questions, these joining. Thank are go times. the in everyone challenging for we you and hope call. We well no Thanks stay in

Operator

This concludes today's conference.

may now You disconnect.