Superior Industries International, Inc.

Thank you, Kelsey. I appreciate it.

I'm going to start as usual with, first off, during our discussion today, as usual, we have a PowerPoint presentation, which we posted up on our website. The website address is www.supind.com.

And as usual, I'm going to, first, refer to Slide 2 of the presentation, where I would like to remind everyone that any forward-looking statements made in this webcast or contained in the presentation are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially because of issues and uncertainties that need to be considered in evaluating our financial outlook.

We assume no obligation to update publicly any forward-looking statements. Conditions, issues and uncertainties that may be discussed from time to time include, but are not limited to, global competition, product pricing and mix, domestic and foreign market demand, commodity prices, including metal and energy, foreign currency, manufacturing capacity and productivity and our strategic and operating plans.

Please refer to the company's SEC filings, including our annual report on Form 10-K, for a complete discussion on forward-looking statements and risk factors that may cause actual events to differ from these forward-looking statements.

Before I continue with the presentation, Steven, let me just check, did you want to make any opening comments at all?

Sure. Okay.

So is it up to me now? Okay, good morning, everybody.

So Kerry's going to obviously walk through the financial performance, but I wanted to make a couple of quick comments. And I'm going to not do it by script today, I've decided, even though I've got a script in front of me.

So we are continuing to see improvements, obviously, in the sector. That's good news on its merits, but it means that our plants continue to run at capacity levels.

And I know there's going to be questions about that, so I might as well talk about it right now.

We continue to assess what the opportunities may be for our future as far as adding new capacity to the company. So the difficult decision to make, based on a lot of facts, including cost of actual production of a plant, equipment, where you buy equipment, so we're trying -- I'm challenging the company to come up with a more constructive cost program on building a new facility.

That direction is what we're going to do. So in the meantime, we've decided to take a challenge and do think a little bit differently in our plants.

And we started in the Midwest by changing our shift situation to a 4-shift program. We've opened up capacity because of that.

We're on a much better preventative maintenance program with our equipment. It's allowing us to increase our capacity, but it's also allowing us to do, is find where we have issues within the organization that we can fix vis-à-vis this example equipment and so forth.

So we're taking a much more proactive role to add capacity without having to make the large capital expenditure of $100-plus million. Saying that, we're still looking at that opportunity and trying to fine-tune it before it's brought back to me to see if I want to make the final approval on that.

With that in mind, we also obviously are looking at the marketplace and the growth patterns that continue to play out in trying to determine by the time we put a plant in, is that growth going to be at a top of the market, is it going to be in the middle of the growth process, are we going back to $16 million or $17 million SAAR. And all of the analysts on the call today could probably answer that better than me.

But on the one hand, we recognize that the growth seems to be able to continue. And we need to figure out how to garner some of that.

And I recognize we're somewhat behind the eight ball.

And that's probably why we're not seeing as much margin traction as I'd like to see because we're running at such full capacity, and we're having to do things that don't give us as much breathing room to create more margin on one side. Then on the other side of the equation, a lot of new people in our organization that I feel very positive about and the actions that we're taking, particularly in the Midwest, are starting to show some results because we have a steadier -- even though it's not where it should be, a steadier gross margin number.

And Mexico is performing very, very well. I'm very happy with what I'm seeing there.

So we ought to continue to step up the opportunities in the Midwest. And so we are focused on performance improvement, along with the talented people that we brought in.

And as I've said quite a few weeks ago in the fourth quarter results and year end, we still believe that the actions we're taking will create further long-term profitable growth. I recognize it's still a very difficult task when you're running at 100-plus percent capacity.

We're financially very, very healthy. I know there's a lot of question about what do you do with $200 million in the bank, which is what we have today, cash and cash equivalents and no debt.

And we will continue to monitor that. And the good news is, that we're able to do a lot of things.

And so we're looking at all those opportunities. And I want you to be assured, as the CEO of this company and the largest shareholder today, and that's taken place basically because of the passing of my father, which has changed the shareholder holdings, and our entire family, we are today the largest shareholders of Superior.

So I want to make sure that everybody realizes that I'm focusing all of our energies collectively on continuing to remediate operational challenges to enhance our results. I know there'll be some questions afterwards.

I'll be happy to answer. But I'd like to turn it over to Kerry for his presentation.

Thanks, Steve, for the opening comments. Let me start with a very quick overview.

As you may have seen in this morning's press release, our first quarter results for 2012 were improved on the top line due to rather substantial volume growth when compared to the same period in 2011. Our income results basically reflect product mix changes, as Steve has alluded to, as well as higher income taxes.

For the specific point of reference, and you may want to turn quickly to Page 11 of the slide deck, which shows the condensed comparative income statement, what you see is that total revenue has improved about 7% in Q1 on an 11% increase in unit volume. While gross profit and operating income were up slightly, the net income decline primarily reflects a higher effective income tax rate in the current year.

Income per diluted share for Q1 of 2012 was $0.25 compared to $0.29 for the prior year.

With this brief overview in mind, I now would like to turn back to the beginning of the slide deck. I again will follow the same format of the presentation that I have used over the last year.

The majority of my comments will be focused on first quarter year-over-year comparisons.

Now if you would please turn to Slide #3, which is titled North American Vehicle Production Versus Superior Shipments. Here we can frame the market environment in which we operated during the first quarter of the year.

Let's confirm the slide format briefly, for the charts on the top show North American light vehicle production on the left and the company's sales volume on the right. Whenever I use the term sales volume, I am referring to the number of wheels that we shipped.

As most of you know, our business is focused on North America, so the graph on the left is a good overall indicator of the demand driver for our products. As you can see in the graph, as well as in the data table just below, the market in Q1 at almost 4 million units was up roughly 17% year-over-year.

This level of vehicle production is the highest it has been since the second quarter of 2007. On a sequential basis, Q1 production increased over 15% when compared to the fourth quarter of last year.

While the expectation is that Q1 production volumes will not hold up at this level for the remainder of the year, it obviously was a very strong quarter for the industry. Although not shown in the chart, the first quarter passenger car volume increased almost 23% year-over-year, while production of light trucks and SUVs grew at about 13%.

Compared to Q4 of last year, growth in both categories basically matched the market overall.

Turning to the chart on the right. You can see that Superior's sales volume increased over 11% year-over-year with our growth in volume for passenger cars and light trucks both occurring at relatively equal rates.

You can see from the relationship of market growth versus our volume increase that we did lose some market share during the first quarter. We estimate that our share with the available market decline somewhere between 1 and 1.5 percentage points overall.

Keep in mind, we sell about twice as many wheels for light trucks as for passenger cars, so our slight year-over-year share decline for the first quarter partially reflects that growth in passenger car production significantly outpaced the increase in light truck production.

If you turn next to Slide #4, we have provided some detail about production rates for our significant customers. I carried over the data table from the prior slide as an overall point of reference.

Our largest customers are Ford and GM. Production rates for both of these companies increased at substantially lower rates than for the industry overall with Ford at 3% and GM at plus 9%.

Ford had plus 3% and GM had plus 9%. This is another factor contributing to our slight market share decline.

Ford's growth is driven by passenger cars while GM's growth is fueled by light trucks. Chrysler was way up year-over-year with production at 24% on the plus side.

Growth for the Jeep Grand Cherokee led the way, but Chrysler had nice growth across many of their models, including for the Fiat brand. Production for the international brands in the aggregate also grew at a rate well over the increase for the overall market.

Toyota, Volkswagen, Nissan and BMW all showed big gains.

To understand what drove Superior's year-over-year volume changes for the first quarter, it helps to look at our underlying wheel programs. So please turn to Slide #5, which is titled Superior Shipments Year-Over-Year Comparison.

Once again, I have carried over the volume data table for your reference. I already have commented on the couple of key type dynamics affecting the market share comparison, so let's focus on how our business changed at the customer level.

Overall, our Q1 sales volume with all customers increased when compared to last year. In addition, our rate of shipment growth to Ford, GM, Chrysler and BMW exceeded the increase in overall production rates for these customers.

The situation was the opposite primarily with Nissan. More specifically, our Q1 shipments to Chrysler increased 26% compared to the first quarter of last year.

We were plus 11% at GM and plus 9% at Ford. The slide shows the underlying programs where our shipment increases were most significant.

For international brands, our shipments were 9% higher this year than in 2011. Shipment growth was still strong, especially the Toyota, BMW and Volkswagen.

Our growth with Nissan was well below the overall average with volume for the Maxima program, which was first introduced in Q3 of last year, partially offset by declines for the Sentra, Versa and the Xterra, Frontier programs.

If you would now please turn to Slide #6, we can look at the sequential comparison. The sequential comparison between Q1 of this year and the fourth quarter of last year told a bit of a different story for both the market and Superior.

Let's start with the market. Overall, market production rates still were up strongly at about 15% overall.

However, while the Q1-to-Q1 comparison showed growth in passenger cars to be much stronger than for light trucks, both of these categories grew at about the same rate in the sequential comparison.

Of the domestics, GM was the big gainer at plus 17%, with increases in light trucks outpacing the passenger car category. We believe that some of GM's Q1 light truck emphasis is timing-related as they prepare for major tooling changes for the next model year.

Chrysler production was plus 13%, while Ford was flat. International brands were up 22% sequentially, with roughly the same rate of increase in both cars and light trucks.

Now let's look at Superior shipments. As you can see in the data table, sequential shipments were down 2.8%, although keep in mind that Q1 is being compared to our stronger single quarter since 2007.

We benefited from GM's light truck volumes, but we're down fairly heavy at Ford especially in light trucks. Shipments for the F-Series programs were the source of the largest decline, much of which we believe is simply related to underlying mix within the program.

Also, similar to our business overall, F-Series shipments in Q4 of last year were very high, by far the strongest quarter of 2011. We increased very slightly in the international brands based on growth in the light truck category.

I next would like to turn to Slide #7, which focuses on net sales dollars and a year-over-year comparison for the first quarter. I've carried over the basic shipment volume from the prior slide from your reference.

As a quick orientation, this table segregates the impact on net sales for several items, the most significant of which typically are shipment volume, the aluminum component of our sales dollars and the price mix. We also separate project development revenues, sales adjustments and cladding upcharges, which we passed through from outside contractors.

In the bottom section of the table, we break out key components of what gets included in price mix. While I'm not going to review every line item, let's spend a few minutes discussing the more significant items.

As you can see quickly, the big driver of the current year increase was volume, which we already have discussed. The 11.4% unit volume increase translates to plus $20 million in sales dollars.

Below the volume line, you can see the variables that either added to or detracted from the volume gain. The single largest negative was a decline in the underlying price of aluminum, which equated to a minus $4.9 million.

You may recall the changes in the price for aluminum flowed through net sales based on the nature of our commercial agreements. These agreements provide for the periodic pass-through of aluminum fluctuations based on changes in published prices for commodity aluminum.

A little further below, you can see a negative $2.3 million impact resulting from improvement in the exchange rate between U.S. dollar and the Mexican peso.

A portion -- I'm sorry, for movement in the exchange rate between U.S. dollar and the Mexican peso.

A portion of our sales are denominated in pesos, so exchange rate fluctuations do affect reported revenues. Finally, we have price mix at the bottom of the schedule.

So the impact on sales was negligible. However, I will speak again about product mix in the gross margin analysis.

So let's now please move on to Slide #8, which does address gross margin. As you can see from the table at the top of Slide #8, we produced slightly more wheels than we sold in Q1 of this year.

Our total production set the second consecutive new high-water mark since we emerged from the 2009 downturn. We continue to run our plants with very high rates during this year's first quarter, with the overall utilization rates estimated well over practical capacity when computed on a conventional straight time basis.

We continue to use successfully what I refer to as search capacity to meet customer requirements, of course, incurring over time in the process. Also so you are aware, we factor out production days lost for maintenance shutdowns, which were more extensive in 2011 than in 2012.

On the lower half of the slide is the year-over-year gross margin comparison in the format we have used previously. In this analysis, we try to point out some key items affecting the comparability reported results from period-to-period.

To help anyone new on the call get oriented to the format, when shown in dollars, items in brackets are either expensed or unfavorable in their comparison and nonbracketed items are the opposite. When looking at the percent of sales analysis, we are removing the impact of such items from the gross profit for the reported gross profit rate, hence the opposite signs being used.

Since we already discussed the impact of aluminum value on sales on the previous slide, let's cover this one first. Because aluminum carries no margin and changes in value are basically passed through to the market, the Q1 price decline for metal added to the gross margin percent by 20 basis points.

The next item is product mix. We have discussed previously that our product mix has become more challenging.

Using actual pricing and standard cost as a measuring stick, we estimate about $1.2 million of profit erosion for the quarter due to the changing product mix, which equals about 60 basis points of margin percentage. As we have discussed previously, this erosion fundamentally reflects the impact of program bidding in this highly competitive market back in 2009.

The next line item is for shutdown expense. In Q1 of the prior year, we took badly needed plant shutdowns of various durations at all of our 5 factories.

This year, we took very limited shutdowns at only 2 of our plants.

Next on the list is repairs and maintenance. As we noted in the press release, this cost ran substantially higher, specifically about $1.3 million in this year's first quarter, with the increased focus in our 2 plants in Arkansas.

I think that most of you are aware that our U.S. plants are the oldest in our manufacturing complex.

In the first quarter of 2011, we incurred weather-related disruptions to all of our operations, including Mexico, which experienced a very rare dose of a crippling deep freeze. Lastly, our net wheel development expense was higher year-over-year.

About 1/2 of the change reflects lower customer reimbursements, with the remainder due to slightly higher spending for launch activity and research and development.

I also would like to note that we have not included a line item for plant performance. And when included, this item basically measures cost performance of our factories relative to the volume manufactured.

Cost performance in the aggregate was relatively neutral when looking year-over-year. However, what is masked is that its improve performance, especially in Mexico, largely was offset by continuing challenges in the U.S.

We continue to implement actions to improve our manufacturing performance. The current signal suggests that we are beginning to achieve improved production stability.

However, it still is premature to predict we have turned the corner financially with respect to our operating challenges. And finally, I just want to point out that the Q1 gross margin rate was stable on a sequential basis.

I think we are up 10 basis points, I think, from Q4 to Q1 of this year.

Let's see. Turning next to Slide #9.

I have a few further comments regarding income performance when comparing Q1 of 2012 to the same period last year. At this point, you also may want to refer to Slide #11, the first quarter income statement.

SG&A expense was up about 3% year-over-year, although it was down slightly when measured as a percent of sales. The prior year did include a favorable adjustment to the bad debt allowance and a small gain on the disposal of some minor fixed assets, neither of which recurred this year.

Excluding these items, SG&A expense actually was down roughly 2%. Other income was $350,000 lower this year.

And the major difference reflects the benefit of sales tax refunds that were recognized in Q1 of last year.

The effective income tax rate for Q1 of 2012 was 38%, about 10 percentage points higher than for Q1 of last year. The primary driver, taking the current rate over the U.S.

statutory rate, was an accrual for uncertain tax positions, partially offset by a decrease in tax rates related to deferred tax liabilities. The lower effective tax rate in 2011 reflected a benefit from releasing about $2.5 million of the tax valuation allowance.

And you likely will recall that all of the remaining valuation allowance was released in the fourth quarter of last year.

Please turn next to Slide #10, which addresses the balance sheet and cash flow. Cash and short-term investments reached $198 million at the end of Q1 2012.

That was about $5 million over the balance at the end of 2011 and about $20 million higher than at the same time last year. Net accounts receivable and inventory combined increased about $9 million from year-end 2011.

Higher accounts receivable reflects the timing of sales increases and higher aluminum value compared to the prior year end. For inventory, raw material was actually lower.

However, we deliberately have been building finished goods to buffer an anticipated capacity and demand balance.

1, respectively.

Slides #11 to 13 are the various data tables that we have referred to. So finally, and in conclusion, please turn to Slide #14.

To quickly summarize today's discussion, first quarter vehicle production growth in North America was robust and the highest since the second quarter of 2007. A modest decline in our market share resulted primarily due to shifts in customer and product mix.

Plant utilization remained very high and surge capacity has been used successfully to meet strong customer demand. While Q1 gross margin dollars increased only slightly over the same quarter last year, the margin rate was stable when compared to Q4 of last year.

And liquidity remained strong, plenty strong to support continuing investment and dividends.

Finally, I need to note that the last page of this presentation addresses the non-GAAP financial measure we have discussed today. Our first quarter 2012 report on Form 10-Q will be filed with the SEC today.

And once filed, the 10-Q also will be available on our website at www.supind.com.

With that, I'd like to thank each of you for attending the conference call today and for your kind attention. So we will now open the lines to take your questions.

So Kerry, can we go back to Slide 6 and talk about the sequential change in the industry versus the sequential change in the Superior shipments? I'm not fully clear on why there was such a disparity.

You mentioned the F-Series, maybe you can talk content there. And on the T900, which was up a lot from Q4 to Q1, I would've thought that, that helped you.

But maybe I need an update on what content you do have on that platform still and what content you don't have on that platform.

The T900 certainly did help us. But let me try to stand back a little bit, first off, at kind of 10,000 feet.

First off, if you look at the F-Series program, which is a very, very large program for us, we were -- first off, Ford was pretty much flat, going from Q4 to Q1. So as our largest customer, they were below, obviously, their 15% rate of change in the market overall, Chris.

So if we just kind of rode the wave with them and had no change, then that in itself would've resulted in some share issue for us. We were down in the F-Series, and we talked about that a lot because it's a major program for us.

And Mike may want to add something here. But as we've looked at kind of what's been going out in specific orders over the first quarter compared to the prior year, we have been aware of a lot of changes in underlying models within the F-Series program.

And that always does affect us. It can be anything from we don't have the right-sized tire in stock, so we're going to have to shift the wheel size, which may move some share temporarily because of other constraints the assembler is encountering.

There could be some trim line changes that affect different suppliers. But we're not concerned overall of our position on that program, which is just one of those things that kind of ebb and flow from quarter-to-quarter.

And again, I will remind you overall that Q4 of last year was an extremely strong one. So I mean, our sales were still strong in the first quarter overall, just coming off a really strong point of comparison.

Are there trim lines that you don't have? Like, for example, I know that they had very strong demand for the EcoBoost version.

Are you not on that as opposed to you are on the V8s? Or are you not on the heavies but you are on the lights?

Are there any of those kinds of mixed things that we need to understand?

Chris, this is Michael O'Rourke. To answer your question, I think there are probably about, between F-150, F-250 and the different trim lines, probably 16 or 17 different trim lines, and just platforms and combinations.

The EcoBoost V8 engine can be applied to an XLT or a Lariat combination. Typically, the wheels are going to be a trim line defined.

So an XLT or Lariat, which are really the mainstream platforms, were very strong. In the fourth quarter, we had a lot of shipments toward those mainstream trim lines.

It looks in the first quarter, what Ford did is pretty much took care of volume on the high end and also the relatively low end of the market. So that had an impact to us.

Back to the GMT900, I think our increase for the quarter was roughly 10%. And again, I think that was more of a mainstream application versus both the high end and the low end.

Yes. We were up 11% sequentially on the T900.

Is it the same kind of thing where it's the trim level and you're on certain trims but not others for the T900?

Yes.

Anything that you can shares so we have a better understanding of what to look for when we see what's being built?

It's really hard to find -- like I said before, primarily on both vehicle lines, we're the mainstream supplier of wheels. When those mix change, as an example, GMC decides to build more Denalis versus Sierra SLEs as an example, that would -- it could affect us positively or negatively.

But I don't think, as Kerry said, that it's an indication of any major trend, that happens from time to time.

And how big is the overall program for you, the T900, either in terms of number of units or revenue dollars or content per unit? How would you scope that?

Well, I can tell you that we sold in Q1 over 0.5 million wheels for that program.

Okay. And then just the last one, as you look to the second quarter on the T900, are you seeing schedules that suggest the volume will be down, call it, 15% to 20% versus what was produced in Q1?

It's definitely down because of so many plant schedules that GM has come up with in order to manage their changeovers. I don't anticipate it's going to be that far down for us.

I think what we saw in the first quarter on the plus side, which really wasn't so much in line with the total build, we would probably see in the second half. But again, it's hard to tell.

What they're doing is really a regional-type arrangement. So it again depends on who's sourced on what and what's being built and when.

And I think also if you stand back and you look at aggregate broad expectation Q2 versus Q1, if we have concerns -- and I think I've mentioned it earlier, Chris, that we were actually trying to build some inventory as we had room in Q1 because we're anticipating some capacity demand imbalance. And what that means is we need inventory because we're facing very heavy schedules for the second quarter overall.

Once again, I appreciate your willingness to leave things and give up market share when it's not financially productive. Of the market share that you have lost recently, how would you say -- how much of that would you say is due to competitive pressure?

And how much of it would you say is from the capacity constraints that you're wrestling with?

I would almost offer that neither one of those are really a factor, Jeff. Again, I think what tends to happen when you look short-term quarter-to-quarter with this business is that it's just the stuff that happens in the underlying mix.

We didn't lose any major programs, we didn't gain any new major programs. The Maxima came in, as I mentioned, third quarter last year.

We had some launch activity in the first quarter, but those are launches so they're still ramping up. It wasn't that competition specifically came in and grabbed something from us.

It's just, again, kind of circumstantial based on the programs that we're on. So I'm not concerned about anything at this point in time, and they're not major kind of strategic things happening in the marketplace.

But the other thing, I guess, where everybody -- because this is obviously a question of focus here. When we show you the vehicle builds, keep in mind, that total vehicle build, that's all vehicles, whether we're on it or not.

We want to give you an idea of what's going with the market because we've always said, it's the programs that we're on, it's the platforms that we're on that really make a difference. But it also includes steel and aluminum.

It's vehicles, regardless of whether or not they have aluminum content on them or not. So there can sometimes be a little bit of breakage between what you're seeing in the overall production numbers versus what's happening, when it really comes to aluminum available programs and what we're doing.

I'm still going to show you every quarter the production data because you're comfortable with it. I know most of you are latched onto that, it just kind of confirms the context for us.

But fundamentally, Jeff, I don't think it's competition, I don't think it's capacity. It's just the circumstances of what happened at the underlying program.

If that's normal variability, that's just fine. The only other question I have is, last time, there was a little bit of comment about trying to get some relief from your capacity constraints by some partnership with folks overseas.

Any update on that, any word on that?

We have been working with a couple of different people, one, in particular, as needed. We haven't had to take really any final action there based on what we're able to do in our current capacity situation.

But it's really kind of exploring some options just in case that's required. But right now, it doesn't appear that we're going to need to do that, at least for the foreseeable future.

Just a quick question on nat gas. Is there any structural benefit in terms of competitiveness now with North American prices of nat gas being so low to your international competition?

This is Steve Borick. It probably is because I believe, obviously, the pricing on nat gas, as we all have been watching, even though we've seen about a $0.10 increase this week, overall, we're buying a lot of spot gas today.

We do have some booked gas as you see in our 10-Q. I don't believe that if you look overseas, you see that same opportunity because there's still a lot of fuel oil being used because in a lot of places, there isn't natural gas.

And where there is, as an example, particularly on the international front in Asia, just based on their infrastructure, unless it's being subsidized, which I can't answer that question, they're certainly paying more than what we're paying for the same spot price for gas. There's no question about it.

And that is a big benefit and we're sort of standing pat right now on doing anything on any additional purchases because when you go out too far, you start to see the increase of $1 to $1.50 per Mcf. So it's better continue to buy at spot, which is what we're doing.

And Mark, I'll just, I guess, remind you to kind of again stand back and look at it strategically. While current natural gas prices certainly helped our bottom line trend-wise because cost goes down, if you look at it another way and ask the question, is it going to make a difference?

Are prices being bid in the market coming out of the Far East compared to what we're seeing here? I think the answer is no.

Still plenty of competition being played out, no doubt about that.

Well, thank you, Kelsey. I don't think we have any additional remarks.

So I just want to thank everybody for your attendance and your attention, and look forward to talking to you in 3 months.

Okay, thanks, everybody.