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Superior Industries International Inc. (SUP - Analyst Report) reported adjusted earnings per share of 36 cents in the third quarter of 2012 (excluding income tax benefit), significantly higher than 13 cents in the year-ago quarter and outpaced the Zacks Consensus Estimate by 17 cents.

Net income increased significantly to $9.9 million from $3.3 million in the third quarter of 2011. Meanwhile, on a reported basis, profits increased to $15.1 million or 55 cents per share in the quarter from $4.2 million or 16 cents in the year-ago quarter. The year-over-year growth in earnings was attributable to decreases in cost of sales and selling, general and administrative expenses (SG&A).

Cost of sales went down 8% to $178.9 million from $194.5 million in the year ago quarter. SG&A fell 9.8% to $6.0 million from $6.6 million in the same quarter a year ago. SG&A was positively impacted by lower environmental compliance costs, and labor and fringe benefit expenses.

Revenues in the quarter declined 6.3% to $193.9 billion, missing the Zacks Consensus Estimate of $209.0 million. The fall in revenues was driven by an 8% year-over-year decline in average selling prices due to lower average aluminum prices, partially offset by a 2% rise in unit shipments to 2.95 million in the quarter.

Revenues from the U.S. operations declined 11% to $68.5 million in the quarter. The year-over-year decline reflects a 6% decrease in unit shipments and an 8% fall in average selling prices. Revenues from Mexico operations dipped 4% to $125.4 million, due to an 8% fall in average selling prices, partially offset by a 7% rise in shipment volumes.

Gross profit increased 19.4% to $15.0 million or 8% of sales compared with $12.6 million or 6% in the third quarter of 2011. The growth in gross profit was due to a non-cash benefit of $3.5 million from resolution of a foreign consumption tax.  

Operating income shot up 51.8% to $9.1 million from $6.0 million a year ago. Operating margin improved to 5% from 3% in the year-ago quarter. Operating income was positively impacted by a foreign consumption tax reserve, partially offset by unfavorable impacts from changes in product mix.

Financial Position

As of September 30, 2012, Superior Industries had a working capital of $346.0 million including cash, cash equivalents and short-term investments of $219.9 million compared with a working capital of $335.7 million including cash, cash equivalents and short-term investments of $192.9 million as of December 31, 2011. The company’s balance sheet is devoid of any interest-bearing debt.

Cash flow from operating activities increased to $48.2 million in the first thirty-nine weeks of 2012 from $21.3 million in the same period of 2011. Capital expenditures increased to $14.3 million from $13.7 million in the first thirty-nine weeks of 2011.

Our Take

Based in California, Superior Industries is one of the world’s largest designers and manufacturers of cast aluminum road wheels for the automotive industry. The major customers of the company include Chrysler, General Motors Company (GM - Analyst Report), and Ford Motor Co. (F - Analyst Report), who accounted for 76% of company sales in the first nine months of 2012.  

Currently, Superior has a Zacks #1 Rank, which translates into a short-term (1 to 3 months) Strong Buy rating.

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