Good day, and welcome to the Superior Industries First Quarter 2014 Earnings Teleconference. At this time, I'd like to turn the call over to Mr. Kerry Shiba, Executive Vice President and Chief Financial Officer. Please go ahead. .

Thank you, Ryan, and welcome, everyone, to our first quarter 2014 earnings call. During our discussion today, as usual, we have a PowerPoint presentation that is available on our website at www.supind.com. Joining me on the call today is Mike O'Rourke, our Executive Vice President of Sales, Marketing and Operations. .

As usual, I'm going to start with Slide 2 of the presentation, where I would like to remind everybody that any forward-looking statements made in this webcast or contained in this 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. Specific conditions, issues and uncertainties that may be discussed from time to time are noted in detail on the slide.

I also would like to point you 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 we begin the discussion of the results of the first quarter, I'd like to turn your attention first to our press release that we issued earlier this week, which I believe was on Wednesday, and in case you didn't see it, the press release can be found on our website in the section titled Recent Headlines, or you can find it under the category labeled News.

We are pleased to announce that Superior Industries has a new President and CEO in Donald Stebbins, who also will become a member of the board. Don most recently was the CEO and Vice President of the Visteon Corporation, who most of you will recognize as a Tier 1 automotive supplier of electronics and climate control products.

Preceding his tenure at Visteon, Don also held senior positions at Lear Corp., the Tier 1 supplier of automotive seating and electrical distribution systems. We are fortunate to have someone of Don's experience and stature at Superior, and I know the organization looks forward to helping him quickly get acclimated to the Company. .

In addition, we also announced on Wednesday that Stephen Borick has chosen to step down off the Board of Directors. Don Stebbins will fill the vacancy created by Steve's departure. We want to thank Steve for his leadership and dedication to the company during his 33 years as part of the Superior team.

The company's position as a leader in the North American market reflects the Borick legacy. I know I speak for the thousands of employees at Superior in saying that we will miss Steve, and we wish him the very best as he turns to the next chapter in his life. .

Now I'm going to turn to the detailed discussion of the first quarter, and as usual, we look forward to addressing your questions at the conclusion of the formal presentation. We're going to follow the same format as the last call, by starting with a very brief overview intended to set overall context.

If you would like to refer to the data, Slide #16 shows the income statement summary for the first quarter. We noted in our last conference call, which took place around the beginning of March, that we were experiencing a softening of sales volume and revenues when compared to the prior year.

While the comparisons for February and March were better than for January, sales for the first quarter of 2014 still were down overall when compared to the prior year. The quarter ended with unit volume down 8%, while total revenues were 11% lower than for Q1 of 2013. .

Despite the somewhat steep volume decline, the gross profit margin increased 200 basis points from the same period last year, and earnings were improved all the way down to the pretax line. A $112,000 or 2% net income decline reflects a significant increase in income tax expense when compared to the low tax rate of 2013.

Finally, EPS was flat at $0.18 per share, as our share repurchases offset the impact of lower net income. .

With this brief overview in mind, if you now would turn back to Slide #3, I'll begin the detailed discussion of our first quarter financial results and hopefully give you the key underlying factors that affected the business. Slide #3 is titled North American Vehicle Production vs. Superior Shipments.

As usual, this is where we frame the market environment in where we operated. Let's first take a look at North American Light Vehicle Production, which is shown in red on the graph at the top of the slide. As most of you know, North American Vehicle Production provides a broad indication of the demand driver for our products.

As usual, I also will provide some detail on customer and product mix in the next few slides, which hopefully will help you contrast the overall market and our specific performance. .

The market reached 4.1 million units in the first quarter of this year. That's up 3.9% over what also was a strong quarter -- a strong Q1 of last year. There are only 2 quarters going back to the first quarter of 2002, where vehicle production levels were stronger.

First quarter assembly rates also increased on a sequential basis, up 3.6% over Q4 of 2013. As noted during the overview, Superior's first quarter unit sales volume was down 8% year-over-year. Against the growing market, we ceded an estimated 2.9 percentage points of share compared to Q1 of last year. I will speak more about this in a few minutes. .

If you would now please move to Slide #4, we will take a look at the production analysis by major customer. There's a quick orientation to the slide. The chart on the left shows our top 5 customers individually with the remainder of the OEMs grouped together in the last set of bars.

For each customer, we provide year-over-year production volume comparisons for the quarter, including a product category breakdown between light trucks, which is shown in blue, the passenger cars, which are shown in red. To remind you of the total industry context, total production was up almost 4%.

I will share some observations regarding our major customers in just a moment. .

Before getting there however, I would like to point to the chart on the right-hand side of the slide. This chart shows the year-over-year change in mix of vehicles assembled in North America. What quickly stands out is the almost 10% growth rate in the light-duty truck category.

As a reminder, the Light Truck category includes SUVs, crossover vehicles and vans, in addition to pickup trucks. In contrast, the first quarter build rate for passenger cars declined 3% when compared to last year. It doesn't show on the slide, but the mix between domestic and international brands was about unchanged. .

Here are a few key observations regarding our major customers. Ford is the #1 customer in our portfolio. Assembly rates for Ford were down about 2%, the only decline for domestic brands. The modest increase in light trucks was more than offset by a passenger car decline.

While our focus at Ford is tilted towards the Light Truck category, we also have significant participation in their passenger car programs. Commentary on the slide provides some underlying detail about the quarterly comparison of Ford, so I won't read them individually. GM is our second largest customer.

Their Q1 production rate was at plus 5% overall when compared to the same period last year. The improvement was much stronger in the passenger car category of plus 10%, with the increase spread across several individual programs. Our participation in GM passenger car programs is relatively modest.

While at a much more moderate pace, the growth in light trucks also was spread across several different GM programs. Chrysler's overall rate of production increased at well above the industry rate at a plus 13%.

Vehicle mix shifted rather dramatically, to reflect the -- reflective of a 32% rate of decline in passenger cars coupled with a 30% growth -- I'm sorry, 33% growth in light trucks. We are concentrated heavily in the light truck category at Chrysler. .

Production for the international brands in aggregate somewhat mirrored the overall market, with assembly rates increasing 3% overall. At Toyota, our #3 customer in unit sales volume, production was down 3% overall, a bit more in passenger cars than in light trucks. The decline was spread across several programs with the exceptions noted on the slide.

We participate in the Highlander and Tundra programs, but not on the Corolla. For other international brands affecting Superior, Nissan was up a very significant 23%. While about 2/3 of the vehicles mix at Nissan is focused on passenger cars, the rate of first quarter of growth in light trucks was over 3x greater than for passenger cars.

The change at BMW reflected the overall market, while production at Subaru and Volkswagen declined 11% and 20%, respectively. .

Turning to Slide #5, which is titled Superior Shipments Year-Over-Year Comparison, let's take a look at what drove the company's unit volume change when compared to the first quarter of last year. We are using the same chart format as just shown, except now the focus is on Superior's unit shipments to our customers.

As I noted earlier, the first quarter of this year started very slowly for us in terms of sales and unit shipments. While the total quarter ended up at minus 8% in terms of unit volume shipped, the comparisons to last year for February and March were improved over a very weak January.

As I mentioned earlier, we estimate the resulting year-over-year share decline at 2.9 percentage points. We have discussed in the past that our manufacturing capacity limitations, which stretch back to 2010, put us into a position to be more selective regarding our efforts to capture new business.

In addition, shipments for the GMT900 and K2XX platform in particular, also were down significantly when compared to last year. .

While it is difficult to discern from the chart, our first quarter sales mix between domestic and international brands shifted 300 basis points toward the international brands. This shift reflects a combination of a large increase at Nissan, coupled with declines at GM and Chrysler.

One last observation to be seen in the vehicle mix comparison shown on the right. While our volume was about flat in passenger cars, shipments in the light truck category were down about 11%. As mentioned, shipments for the GMT900 and K2XX platform were a large driver of that change. .

So let's now address our individual customers. For Ford, our volume was down about 4%, with most of the decline occurring in the Light Truck category. The majority of the decrease directionally followed changes in assembly volume at Ford.

The one exception was for the F-Series, where a somewhat modest decline in our shipments compared to flat production for this program. We don't see the first quarter representing a trend, with respect to our share of the F-Series program.

However, as most of you know, Ford will implement a rather substantial model changeover with the F-Series late in 2014. How both the extent and the timing of the changeover will impact us is somewhat of a wildcard still, as we look to hit the remainder of the year.

This is important to note, as the F-Series represents the largest single program in our portfolio. .

At GM, our #2 customer, we were down 18% overall. While the percentage decline in passenger cars was larger, the actual unit volume decrease for light trucks was higher, and was focused on the GMT900/K2XX comparison.

When looking back at Q1 of last year, it is apparent that our strong volume was affected by GM's build up of the GMT900 inventory in advance of the model conversion. This, in particular, was the case for the pickup truck version of the platform.

Going forward, we believe there has been more models and trim line differentiation spread among wheel suppliers for the K2XX, as compared to sourcing for the GMT900. For the result, we expect that volume will be more mix-sensitive than in the past, both for us, as well as our competition. .

At Chrysler, our business largely is focused on light trucks. The large year-to-year decline for the first quarter reflects phaseout of our participation on the Jeep programs.

On the Dodge Caravan, we were replaced partially by a steel wheel substitution at the beginning of the model year, while on the Journey, it most is a matter of unfavorable product trim line changes. These declines did mask nice gains on the Chrysler Town & Country, the Dodge Durango and the RAM truck programs. .

The year-over-year decline at Toyota was about 9%. The largest decline was for the Avalon, a program where vehicle assembly rates were also down significantly for the quarter. There was some model launch surge for the redesigned Avalon which occurred during a great portion of 2013. .

One more item that stands out on this Slide is the substantial rate of increase for Nissan at a whopping plus 57%. We are focused heavily on passenger car programs at Nissan, and our increase was driven by 3 programs in particular, including the Note, the Maxima, the Altima. You may recall that in Q2 of 2013, we experienced the opposite with Nissan.

This is a good example how trim line and model mix changes can impact our business in various periods, sometimes rather significantly. .

If you would now turn to Slide #6, we can look at the sequential sales volume comparison. The changes going from Q4 of last year to Q1 of 2014 tell a bit of a different story for both the market in Superior. Let's start with the context of what happened in the market.

First quarter assembly rates were up 3.6% on a sequential basis, which is relatively close to the year-over-year comparison. However, vehicle mix was more steady, as assembly rates were up, both for light trucks and passenger cars, a bit higher in the passenger car category.

The mix between domestic and international brands tilted about 200 basis point in favor of international, while this mix was flat in a year-over-year comparison. .

At the customer level, the story that stands out overall again is with Nissan, who increased assembly rates 20 -- 22% over Q4 of last year. The increase was large, in both the passenger car and the light truck categories, and was relatively broad-based across their model lineup.

Ford was up sequentially, as was GM, while Chrysler's assembly rates declined in contrast to a strong, year-over-year increase for Q1. I am not going to address all of the specific program deals which are noted on the slide for your information. .

Now let's take a look at Superior. Our unit volume also was down sequentially, but about 1/2 the rate of the year-over-year comparison. There was some relatively substantial differences when you look at the underlying mix. On the plus side, we experienced sequential increases at Chrysler, Toyota and Nissan.

The individual vehicle programs are noted on the slide. We did see declines at Ford, and to a much larger extent, to GM. The GM decline again was focused on the K2XX program. Similar to the year-over-year comparison, we believe there's still was some timing impact as the transition build out on the GMT900 SUV programs continued for most of 2013.

As noted earlier, the platform also is more vehicle and trim line sensitive, with respect to impact on individual wheel suppliers. .

I next would like to turn to Slide #7. In this slide, we focus on the net sales dollars and a year-over-year comparison for the first quarter. The slide is in the familiar format used in the past, so I'll move right to the data, and as usual, I will focus only on the larger items.

At the top, you can see the 8% unit volume decline, which is shown on the first line, on the data table. This change contrast with an 11% decrease in the sales dollars, which is shown on the second line. The remainder of the data breaks apart the components of the sales dollar comparison.

Not surprisingly, the volume decline is the largest component of the change, driving a $15 million drop in sales dollars. In addition, the value of the aluminum component fell, and reduced net sales almost $7 million as shown in the bottom section of the analysis.

Finally, the price mix comparison continues to be positive at plus $2 million for the quarter..

If you now would please turn to Slide #8, let's review what happened with gross margin. First, we look at the year-over-year comparison for the first quarter. As I discussed earlier during the overview, we achieved an approximate $2 million improvement in gross margin despite the relatively significant volume decline.

The improved gross margin equated to plus 200 basis points when measured as a percentage of sales. The somewhat sudden nature of the volume decline, which occurred most dramatically in January, did pose a significant challenge operationally.

As much as we could, product demand was reallocated to manufacturing capacity in Mexico to leverage our lower costs there. Such reallocation exacerbated volume reductions in the U.S. facilities, requiring production cutbacks, staffing reductions and controls on factory spending.

Notwithstanding quick reaction, overall, a drop in cost efficiency still was incurred, which you will see in a few minutes when we look at the sequential analysis. .

Despite the challenges of Q1, let's look at the waterfall analysis itself on Slide #8 to see what contributed to the gross margin expansion when compared to Q1 of 2013. We can start with the volume impact, which, of course, is substantially negative at minus $2.4 million.

The impact of product mix again was positive for the quarter at positive -- at plus $1.5 million. FX or foreign currency impact reflects some weakening of the Mexican peso compared to last year, which lowers our reported cost for the Mexico business. .

The next 2 items relates to aluminum. The first item, labeled Aluminum Pass-Through, has been discussed categorically on prior calls. As a review, you will recall that our commercial agreements generally provide a mechanism to pass commodity aluminum price changes through to the customer.

However, the sales adjustment, at times, does not precisely match the frequency of how procurement cost for metal moves first through inventory and then through the income statement. The timing difference can cause a short-term variance. For the first quarter, the impact was $1.7 million favorable.

For the first time, we are highlighting another aluminum component labeled Alloy Cost Increase. I haven't discussed this item in the past because the period-to-period impact was negligible. .

Let me start with some background. As a standard in the aluminum wheel industry, a special aluminum alloy is used in the product. This alloy carries a price market over the cost of commodity aluminum, primarily to reflect the value for extra alloy materials included in the metal.

The cost we pay for the alloy premium has increased in 2014 for a variety of reasons. .

Looking at the sales side, the periodic aluminum just -- adjustments just discussed typically are based on movement in published price indices for commodity aluminum. These price indices do not track changes in the alloy premium.

Because of this, what we have highlighted is $1.4 million of cost increase that we expect will not be fully recovered based on the structure of the majority of our existing sales agreement. .

The next item is labeled Plant Performance. This item fundamentally measures the change in manufacturing cost performance from period to period. Excluded is the impact of any operating cost items listed separately, for example, foreign currency translation.

In aggregate, we estimate the year-over-year change in plant cost performance at a net $900,000 positive. The variance reflects improved performance of our U.S. facilities, in particular at the larger of the 2 factories when compared to the first quarter of 2013. .

As we noted in our last conference call, process control and equipment reliability enhancements continue to improve overall manufacturing efficiency when compared to what, in general, was a very challenging first quarter of 2013 for our U.S. operations.

As I mentioned earlier, our ongoing goal is to try and keep our facilities in Mexico filled to take advantage of lower costs and improve on operating efficiencies there. As a final note on the slide, capacity utilization in the first quarter fell to an estimated 93%, reflective of the sudden falloff in unit volume. .

Please turn next to Slide #9, which provides an analysis of gross profit performance when compared to Q4 of last year. The financial impact of the volume decline is roughly proportional to the decline in unit volume, which is about 1/2 of the year-over-year comparison.

I'm going to jump over to the plant performance bar because this sequential comparison is markedly different from what you saw on the last slide. What you primarily see in the negative $3 million variance is the impact of the sudden volume decline that we experienced beginning very soon after the new year.

I discussed earlier the various operating adjustments that were made in response to the volume downturn, but it still took some time to react and reallocate volume, implement staffing reductions, turn down the valve on certain areas of expense and spending. .

Finally, I want to address the capacity utilization comparison shown at the bottom of the slide, which I know looks a bit odd on the surface. The 11% -- the 11-percentage-point decline masks a difference in effective capacity when comparing the quarters.

In the fourth quarter of last year, our scheduled plant maintenance shutdowns, which were at a minimum 1 week in duration, are excluded from the capacity base when computing the utilization rate. .

Moving on to Slide #10. We can address a couple of more areas of the income statement for the first quarter. SG&A expense was up $725 -- $725,000 compared to Q1 of 2013. The increase reflects $1.1 million of costs recognized in 2014 for executive severance costs, offset partially by lower payroll.

The income improvements down to the pretax line were offset by higher income tax expense. The effective income tax rate for the first quarter of last year was relatively low at 28%, which compares to roughly 40% for Q1 of this year. Individual factors affecting the comparison are noted on the slide.

Of these factors, the year-to-year difference in tax credits is the most material item in the quarterly comparison. As usual, our effective tax rate going forward may be affected by the occurrence of discrete events that occurred during any single quarter. .

Please turn next to Slide #11, which addresses the balance sheet and cash flow. These financial schedules are shown on Slide numbers 17 and 18, respectively. Cash and short-term investments ended the quarter at approximately $162 million, a decline of almost $42 million during the quarter.

As expected, the decline primarily resulted from higher capital expenditures for the new manufacturing facility in Mexico. In addition, we paid $4.9 million of dividends during the quarter. I'll speak more about these items and cash flow considerations in just a minute.

I think the remaining balance sheet comments on the slide are self-explanatory, so I will not address them individually. .

Moving on to cash flow. We have provided a breakdown of 2014 spending for the new factory versus what we spent on existing facilities. Just as a reminder, for Q1 of 2013, we had not yet started to flow cash for the new factory.

Regarding the year-to-year comparison for first quarter dividends, you will recall that we had no payments in Q1 of last year because we had accelerated the 2013 dividend into December 2012. .

Finally, we have some modest share repurchase activity, which continued into the first quarter of this year. It totaled about $1.8 million; and in total, we thus far repurchased $10 million worth of shares under the previously granted $30 million authority. .

Next, if you will turn to Slide #12, I will update you regarding some key factors affecting our liquidity outlook. The major factor to keep an eye on, obviously, is the pace of spending for the new manufacturing facilities.

Just to avoid any confusion, I'm going to focus my comments on cash, and that's in contrast to what has been accrued based on the accounting method being applied. .

In 2013, we invested just under $36 million, the bulk of which was for the facility and infrastructure. Money now is flowing from machinery and equipment. In Q1 of this year, we invested another $17 million, which brings us to $53 million in total.

As we continue to update status, it clearly looks like we should be able to bring the initial project in under original expectations. You may recall at the time that we announced the project kickoff, we estimated the total cost of the facility in the range of $125 million to $135 million.

At this stage, I am lowering the total capital range to $120 million to $125 million. And just to keep it simple by using round numbers, this leaves roughly $65 million to $70 million of capital spending still to go. .

I also see the pace of spending being a bit slower, with about 1/2 falling into Q2 and the bulk of the remaining capital outlay falling into Q3. The slower pace of cash spending should not be confused with timing expected for physical completion, which remains unchanged. .

I want to remind everybody that in addition, we also expect to incur startup costs, which we estimate in the range of around $8 million in 2014, a portion of which should be capitalized once all the proper accounting is determined. .

Finally, we also will need liquidity to support a working capital build expected to occur in 2015 after the plant becomes fully operational, and we begin to produce more commercial programs. We currently estimate this need to be in the range of $20 million to $25 million once we get the plant up close to capacity levels. .

With respect to the base business, you saw on the last slide that we spent $8.4 million for capital improvements in Q1 of this year. The upward range of investment in the existing facilities for 2014 is estimated to be $40 million. But we will continue to assess this in the context of current year performance. .

I won't speak to the aluminum sensitivities, but I want to remind everybody these are important to recognize the impact of metal pricing and what it -- how it affects our liquidity. And lastly, our dividend payments showed approximately $20 million for 2014 at the current rate. .

If you now please turn to Slide #13, we'll provide a brief update on physical progress of the new manufacturing facility. We also provided just a few photographs on Slide #14. As you can see, the building is basically fully closed in and infrastructure is almost complete. Machinery and equipment continues to arrive on site and is being installed.

The photographs show a melt furnace on the left, a proportion of one of the casting decks in the middle and construction of booth for the paint system on the right. We still estimate a startup of commercial production during the first half of 2015.

And as I mentioned previously, we currently expect the range of cost for fixed capital to be $120 million to $125 million. As we have commented before, we have provided infrastructure to allow an incremental expansion of up to an additional 500,000 wheels per year. .

Our summary and concluding points are on Slide #15. They're self-explanatory after these discussions, so I'm not going to read the list of bullets. On our Form 10-Q for the first quarter of 2014, it's going to be filed later today with the SEC. Once filed, the 10-Q also will be available on our website at www.supind.com. .

And with that, I'd like to thank each of you for attending our conference call today. And Ryan, we'll go ahead and open up the lines to take questions. .

[Operator Instructions] We'll take our first question from Mark Close with Oppenheimer & Close. .

On the F Series and the uncertainties surrounding that, can I mean, I would think their production will probably decline somewhat as they do the model changeover.

But where is Superior right now in terms of those programs for the new all aluminum F 150?.

I'm going to let Mike speak up. .

Sure. We're basically validating the tooling. We can offer it by Ford in anticipation of the launch. I think it's pretty clear to us that it's going to be spread out over a broad sizing period, with 2 different assembly plants will change over first being Duraport [ph].

So the uncertainty as far as that timing it's really the concern that Kerry is developing. We are busy validating molds and preparing for the launch. .

And Mark, we were just discussing this yesterday. And as Mike and I were reflecting, there's nobody who would rather have perfect clarity over this than, I think, Ford Motor Company at this point in time. It's a very, very important program for them also. We're just going to have to kind of keep our ear to our context at this stage.

It's a complicated changeover forum, maybe one of the more complicated ones they've gone through, certainly on this truck program, because of the aluminum body, these changes they're going to be putting on it.

So one thing, I guess, to keep in mind, and this is just me speaking, if I'm sitting on Ford's seat and for the importance of this program to their lineup, I think the last thing they want to do is lose market share in the light truck market.

So how they balance final production on the existing model compared to the startup variables that they're seeing on the new truck, that will be interesting to see. But we're prepared to, obviously, service them on either side of the line, if you will. .

[Operator Instructions] And we'll take our next question from Jimmy Baker with B. Riley. .

This is Richard Magnuson [ph] in for Jimmy Baker. This question's for Don Stebbins. I'm sure you have evaluated several opportunities over the past 1.5 years and obviously, Superior is not without some challenges.

But could you speak to us as to why you chose this option and share any initial thoughts on areas where you look to drive improvement?.

Richard, we don't have Don on the call. He doesn't really start as an employee until Monday morning. And so, obviously, he's not here to answer the question, and there's nobody sitting in the room who can speak for Don on that one. .

Okay. I do have a couple of other questions.

Can you give us an update on the pricing environment for the new programs? And have you seen many of your competitors adding capacity recently or any plans to do so?.

Richard, I'm going to stress that it is always competitive. We are in a globally competitive landscape.

So every opportunity becomes or we're looking at it in terms of how it fits within our plant capacities and capabilities but extremely competitive, and it has been pretty much forever and definitely would be likely executive shift to more the global supply opportunities that are very competitive.

In terms of additional capacities being added, I can't speak really for Asia. We know there has been capacity added for aluminum wheel production, and that's a mix, I'm sure, of opportunities that are in that region, as well as global opportunities that are out there. .

Will there be any unusual charges related to the executive changes that we should be modeling going forward?.

I'm sorry, will there be could you repeat that again?.

Yes.

Will there be any unusual charges related to executive changes that we should be modeling going forward?.

On an ongoing basis, there'll be some differences in compensation. I am not sure about the initial accounting for everything involved at this stage. So I guess, I'm just not prepared to be able to give you anything specific there, Richard. .

Okay.

And my last question is, what is your full year tax rate expectation?.

I knew that question would come up. Again, we run 40% for the first quarter. There's a couple of things that are sort of lurking, the R&D credit I mentioned, and I think there is talk about possibly even renewing that change permanently going forward.

It's been sort of handled on an annual basis lately and over the last few years, and we're not allowed to reflect any of those credits in our tax rate until the law is actually there to support that. So possibly, there's going to be an impact there going forward.

If they do enact the continuation of that credit it will lower our current run rate, maybe 100 basis points. And another thing lurking out there that I'm just not prepared to speak specifically to publicly that could have a positive impact on our tax rate, but it's going to take us a little bit of time to see whether or not that actually surfaces.

At this stage, to be conservative, I'd state the very high 30s for the year. I'm hoping that, that turns out to be a couple of hundred basis points on the conservative side. But I've got the guidance as stated the very high 30s right now. .

[Operator Instructions] We'll take our next question from Jeff Linroth with Leaving It Better. .

I just have 2 questions about that new plant that's coming online next year.

And one is, if you took approximately substantially the same set of production that is going on in the current in the Chihuahua plant and you put it into the new plant, what level of efficiency improvement would you anticipate? I'm just looking for some sort of comparison, but I anticipate it's going to be the best thing that you've got going in terms of efficiency.

.

Let me make sure I understand your question, Jeff.

Are you saying, compared to how we currently operate at our older facilities in Chihuahua, what will be what we expect to achieve in the new one?.

That's exactly the comparison I'm looking for. .

Yes. I'm going to kind of hedge on this one a little bit because, for competitive reasons, we choose to not disclose the economics of any of our plants individually. Directionally, I think there's going to be a change that's going to occur all the time. We will absolutely have some inefficiencies in the startup period. I think you can appreciate that.

And as volumes ramp up that start at a lower level than capacity, clearly, there's going to be less fixed cost absorption at the new facility than at the older ones.

The third difference, which is just on the pure cost perspective, we're going to obviously have a much higher depreciable base to start with when the new plant becomes commissioned compared to for example, our oldest plant in Mexico, which was started up in 1994, or something in that range, and there's quite a bit of older equipment that's fully depreciated.

So those are some directional comparisons just on the pure numbers and how it's going to transition through the 2015 time frame.

When it comes to operational efficiency, however, and therefore, if you're looking longer term at the benefit of the investment, I think there are many areas in the plant where we have taken what we would say has been our most tried and true technology and process approach, some of which has been developed over time, some of which we've suffered the throes of inefficiencies trying to improve things along the way, and we've taken the best of those approaches and we've installed them or are installing them in the new plant.

Good example is in the casting process, and now we're going to be running our casting machines. The heat treat process is another example of that. It kind of goes on and on and on.

So if you take out the depreciation, look at it more on an EBITDA basis and you allow us some inefficiency during the startup period, we clearly think this plant should be our best one. I'm sorry I can't give you a specific comparison, but we're going to choose not to do that. .

That's understandable, but thank you for that answer. A related question, I mean, we've been it's been hard on everybody but necessary to talk about the inefficiencies that are introduced because of the capacity constraints that everybody's been enduring the last few quarters.

When that plant, maybe, say, in the beginning of 2016, when that plant is up and running, do you think you're going to be able to look back and see and talk at that time about how the overall system has benefited from the relief that, that plant provides? Because I'm really looking forward to hearing something and hopefully, we'll be able to hear something about that benefit as well.

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I think, directionally, the answer is yes, Jeff. I mean, the with the new plant into place, it's obviously in our low cost location to ultimately, when we get all the bugs shaken out of it, it should be our most efficient facility.

So we, in aggregate, are clearly going to push us all down on the cost curve once we get up to running it at efficient levels. So in 2016, to expect to be able to look back and say, "Are we look are we performing better on an aggregate basis?" I think the answer is yes, number one.

Number two, I think an aspect of your question was by having a more sane operating rate overall, more sane capacity utilization rate that we think that we will benefit from that. I think the answer is yes, running at the very, very high utilization rates we have in 2010, 2011 and 2012.

As we've been candid about, rubber band started to break along the way, and it was a very, very difficult environment to operate in. .

[Operator Instructions] We'll take our next question from Brian Sponheimer from Gabelli & Company. .

Just a question, obviously, you guys announced Don Stebbins being hired on Wednesday.

Why not push the call back to have him on the call just for introductory purposes?.

Well, I part of it, Brian, is just trying to be fair to him, quite honestly, individually. We didn't want to push things like keep in mind the filing, which we would have pushed back if we push the earnings call back.

And I guess, put yourself in Don's seat, if you walk in the door to a brand new company a day before, if you will, that the 10 Q is being filed, how do you feel about putting your signature on an SEC filing? I think that would have put him in an unfair position, and so that had some impact.

I know Don's going to be anxious to be introduced and to have an opportunity to meet both the analysts who follow us, as well as obviously, our major investors. And we're going to look forward to being out there to talk about his views of the company as they crystallize over the next few weeks and a few months.

So without it's unfair for me to speak for him, but I'm very confident in saying he'll be very excited to get out there and meet people. It was just very early. .

Okay. Can you talk about the decisions, at least, as it relates to bringing on a President and CEO and some of the changes in the board that have taken place, specifically Mr.

Borick stepping down, was that a prerequisite for Don to take the job?.

Well, I will speak to that latter question first, and was it a prerequisite for Don to take the job? No. We didn't have the desire to expand the size of the board at this stage. I think Steve very graciously recognized that, and the board obviously, recognized it's appropriate to have a seat at the table for Don.

And in Steve's case, personally, it's also unfair for me to put words in his mouth, but I feel pretty confident in saying that he's very happy in his retirement. And the chances I've had to talk to them since March 31, I have kind of seen the weight of the world start to lift off his shoulders.

I think he's just he's stepping down off the board is just a continuation of his desire to focus on some other things in his life, as he honestly mentioned before.

He wants to spend a lot of time focused on philanthropic activities, something he's had very little time to devote to when he was here at Superior, and he has an oil business he runs out of Texas, which he's always his eyes light up whenever he talks about it.

And so I think him stepping down off the board was just a reflection of another step in that direction. .

Okay, very fair.

If I'm thinking about next, which was nice for you guys in the quarter and just on historical basis, some of the capacity constraints that you have struggled with over the course of the last couple of years, should we expect now Superior getting the benefit of becoming more choosy as it relates to some of the programs that you did in mixed income being kind of a more permanent positive of as we start thinking about the next 4 to 6 quarters?.

I'll offer you my view, and Mike very well is going to have a comment here also, Brian, but as Mike has just addressed for a question on pricing I think the thing to remember is that in the broad context, the industry remains, I would characterize it generally as still being very, very competitive from a pricing perspective.

So being choosy, the degree of freedom you have to move your margins by being choosy still have some pretty narrow upward and downward boundaries on them, if you want to stay in business basically.

So as you've seen over the last 1.5 years at this point in time, we have continually been moving our product mix upwards and that has helped us bit by bit on the sales and margin line.

We have some capabilities in our plant that exist today, and we'll keep focusing on tomorrow that we'll do our best to stay focused on higher end of the product mix and take advantage competitively of better margins there whenever we can.

But I don't want you standing back saying there's like an inflection point that we're getting here with regard to our pricing because it's still a really challenging industry. Mike, I don't know if there's anything to add there. .

The only thing I would add is the complexity of the offerings or platforms today versus 5 years ago, a lot more wheel offerings are not just differentiated by trim lines. So you have a range of quotation opportunities, sure, something's working for us. We want to take advantage of that. We have to be competitive.

And there's trade offs between volume versus a more specialty type focus, and that's just going to continue. The good thing about aluminum wheels is, our next year can look great. We always want to take full advantage of that product in differentiating their products. .

Mr. Shiba, we have no further questions in the queue at this time. .

Alrighty, well, once again, thank you everyone for joining us today, and we'll look forward to talking to you all of you in about 3 months. .

Thanks, Ryan. .

And that does conclude today's conference. Thank you for your participation..