8-K
Commercial Vehicle Group, Inc. (CVGI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED)
August 10, 2020
COMMERCIAL VEHICLE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
| Delaware | 001-34365 | 41-1990662 |
|---|---|---|
| (STATE OR OTHER JURISDICTION<br>OF INCORPORATION) | (COMMISSION<br>FILE NO.) | (IRS EMPLOYER<br>IDENTIFICATION NO.) |
7800 Walton Parkway, New Albany, Ohio 43054
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(614) 289-5360
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
|---|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| --- | --- | |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| --- | --- | |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
| --- | --- | |
| Securities registered pursuant to 12(b) of the Act: | ||
| --- | --- | --- |
| Title of Each Class | Trading <br>Symbols | Name of Each Exchange <br>on Which Registered |
| Common Stock, par value $0.01 | CVGI | The Nasdaq Global Select Market |
| Rights to Purchase Series B Junior Participating Preferred Stock | The NASDAQ Global Select Market | |
| Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).<br><br><br><br>Emerging growth company | ¨ | |
| --- | --- | |
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
Item 2.02. Results of Operations and Financial Condition.
On August 10, 2020, Commercial Vehicle Group, Inc. (the “Company”) issued the press release attached hereto as Exhibit 99.1 announcing earnings for the second quarter ended June 30, 2020. Additionally, the Company filed a presentation attached hereto as Exhibit 99.2.
The information, including exhibits 99.1 and 99.2 hereto, the registrant furnished in this report are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, or otherwise subject to the liabilities of that section. Registration statements or other documents filed with the Securities and Exchange Commission shall not incorporate this information by reference, except as otherwise expressly stated in such filing.
Item 7.01 Regulation FD Disclosure.
During August 2020, certain members of the Company’s management team expect to meet with existing or potential investors as part of one on one meetings or non-deal road shows and use the presentation attached hereto as Exhibit 99.2 to discuss, among other topics, the Company’s financial affairs and ability to drive value for shareholders.
As provided in General Instruction B.2 of Form 8-K, the information in this Item 7.01 and Exhibit 99.2 incorporated herein shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section. Registration statements or other documents filed with the Securities and Exchange Commission shall not incorporate this information by reference, except as otherwise expressly stated in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit <br>Number | Description |
|---|---|
| 99.1 | Second quarter ended June 30, 2020 earnings press release dated August 10, 2020. |
| 99.2 | Presentation of the Company. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
COMMERCIAL VEHICLE GROUP, INC.
By: /s/ Edmund S. Carney Name: Edmund S. Carney Title: Interim Chief Financial Officer & Treasurer
August 10, 2020
Document
Exhibit 99.1
COMMERCIAL VEHICLE GROUP ANNOUNCES SECOND QUARTER 2020 RESULTS
Second Quarter 2020 Highlights
•Revenues totaled $126.9 million
•Operating Loss of $10.5 million
•Adjusted EBITDA totaled $1.2 million
•$106.6 million total liquidity; $63.4 million cash and $43.2 million revolver availability
•Core markets in recovery mode
•Rapid cost reduction actions
NEW ALBANY, OHIO, August 10, 2020 /PRNewswire/ – Commercial Vehicle Group, Inc. (the “Company” or "CVG") (NASDAQ: CVGI) today reported financial results for the second quarter ended June 30, 2020, including revenues of $126.9 million, net loss of $12.5 million, EPS of $(0.40), pre-tax special charges of $7.0 million, and adjusted EPS of $(0.24).
| Second Quarter | ||
|---|---|---|
| ($ in millions except EPS) | 2020 | 2019 |
| Revenues | $126.9 | $243.2 |
| Operating (Loss) Income | $(10.5) | $15.9 |
| Adjusted Operating (Loss) Income ^1^ | $(3.6) | $15.9 |
| Net (Loss) Income | $(12.5) | $6.1 |
| Basic and Diluted EPS | $(0.40) | $0.20 |
| Adjusted Basic and Diluted EPS ^1^ | $(0.24) | $0.26 |
| Adjusted EBITDA ^1^ | $1.2 | $19.0 |
| ^1^See Appendix A for GAAP to Non-GAAP reconciliation |
“We navigated through an incredibly difficult quarter which was exacerbated by the COVID-19 pandemic that led to a rapid contraction in our end markets and the temporary shutdowns of our customers' operations. However, we moved quickly to align the business to the new realities we are facing, and as a result of our actions, we generated positive adjusted EBITDA and free cash flow during the quarter, while maintaining liquidity of greater than $100 million,” commented Harold Bevis, President and Chief Executive Officer of CVG.
“Importantly, we had significant new business wins with a large e-commerce customer to deliver warehouse automation and material handling equipment, and seating systems for last mile delivery electric vehicles, which we expect will come online in the next few quarters. We are also seeing strong signs of recovery in our core end markets. We continue to feel effects of the global pandemic throughout our operations and we believe we are taking necessary precautions to keep our employees safe and healthy and to keep our operations running efficiently. Our cost optimization efforts, including permanent and temporary cost reduction measures, coupled with the significant new business wins during the quarter have created new momentum and energy within the Company,” concluded Mr. Bevis.
Consolidated Results
Second Quarter 2020 Results
•Second quarter 2020 revenues were $126.9 million compared to $243.2 million in the prior year period, a decrease of 47.8%. The decrease in revenues reflects the sharp declines in sales due to the COVID-19 pandemic and market declines, and more specifically lower heavy-duty truck production in North America and in the global construction markets we serve, partially offset by an increase in industrial and military revenues primarily attributable to the First Source Electronics ("FSE") business. Foreign currency translation adversely impacted second quarter 2020 revenues by $1.8 million, or by 0.7%.
•Operating loss for the second quarter 2020 was $10.5 million compared to operating income of $15.9 million in the prior year period. The operating loss is primarily attributable to lower sales volume, and the second quarter results include charges of $2.9 million associated with ongoing restructuring initiatives, a $3.5 million charge for future milestone payments related to the performance of the FSE business and charges of $0.4 million associated with the 2019 restatement investigation. The second quarter of 2020 adjusted operating loss was $3.6 million when excluding special charges. The impact of the decline in sales and second quarter specific costs were partially offset by cost reduction initiatives.
•Interest associated with our debt and other expenses were $5.1 million and $7.5 million for the three months ended June 30, 2020 and 2019, respectively. The second quarter of 2019 results include a $2.5 million non-cash charge associated with the early payout of benefits to employees with deferred vested balances in the U.S. defined benefit pension plan.
•Net loss was $12.5 million for the second quarter 2020, or $0.40 per diluted share, compared to net income of $6.1 million in the prior year period, or $0.20 per diluted share.
At June 30, 2020, the Company had $15.0 million outstanding under its revolving credit facility and liquidity of $106.6 million; $63.4 million of cash and $43.2 million of availability from the revolving credit facility.
Segment Results
Electrical Systems Segment
Second Quarter 2020 Results
•Revenues for the Electrical Systems Segment in the second quarter 2020 were $74.2 million compared to $141.9 million for the prior year period, a decrease of 47.7% primarily resulting from market and COVID-19 related declines, partially offset by an increase in revenues attributable to the FSE business. Foreign currency translation adversely impacted second quarter 2020 revenues by $0.6 million, or by 0.4%.
•Operating loss for the second quarter 2020 was $6.2 million compared to operating income of $13.9 million in the prior year period. The operating loss is primarily attributable to lower sales volume, and the second quarter results include charges of $2.0 million associated with ongoing
restructuring initiatives, and a $3.5 million charge for future milestone payments related to the performance of the FSE business. The second quarter of 2020 adjusted operating loss was $0.7 million when excluding special charges.
Global Seating Segment
Second Quarter 2020 Results
•Revenues for the Global Seating Segment in the second quarter 2020 were $53.9 million compared to $105.3 million in the prior year period, a decrease of 48.8%, primarily resulting from market and COVID-19 related declines. Foreign currency translation adversely impacted second quarter 2020 revenues by $1.2 million, or by 1.1%.
•Operating income for the second quarter 2020 was $1.5 million compared to $9.4 million in the prior year period. The decline in operating income is primarily attributable to lower sales volume, and the second quarter results include charges of $0.5 million associated with ongoing restructuring initiatives. The second quarter of 2020 adjusted operating income was $2.1 million when excluding special charges.
Strategic Footprint Repositioning
The Company announced the strategic repositioning of its operations to grow faster, innovate rapidly, and lower its costs. This repositioning involves twelve facilities.
The Company’s business in the warehouse automation and military markets continues to grow with solid long-term outlook. We have taken strategic actions to significantly expand our footprint, capacity, and product complexity to serve these diverse markets. These actions are expected to support between $100 million to $150 million of new business, depending on the mix. Anchor customer business has already been established for this multi-plant expansion with key actions underway as follows:
1.Expanding our Elkridge, MD plant by securing new space at an adjacent property. This plant is the main plant for our manufacturing warehouse automation subsystems and military subsystems.
2.Repurposing floor space and creating new manufacturing capability in our Vonore, TN plant.
3.Repurposing floor space and creating new manufacturing capability in our Chillicothe, OH plant.
4.Repurposing floor space and creating new manufacturing capability in our Monona, IA plant.
5.Moving certain production from Monona, IA plant to our low cost facility in Agua Prieta, Mexico.
6.Design and installation of a new medium-duty seat production line in our Saltillo, Mexico plant.
The Company is also permanently consolidating a portion of our cost structure dedicated to mature markets through several deliberate actions including the redistribution of our centralized R&D capabilities to speed the time to market for new products and expand our ability to innovate in the Asian market. The key actions underway in this area are as follows:
1.The recently announced consolidation of our Piedmont, AL plant into our Vonore, TN plant.
2.Consolidation of one-half of our existing manufacturing footprint at our Concord, NC plant with our low cost facility in Saltillo, Mexico.
3.Consolidation of our corporate R&D center and activities into two existing U.S. plants and improving our R&D capabilities at our Shanghai, China site, with the goal of increased innovation in each market.
4.Closure of our facility in Morelos, Mexico, and consolidation of equipment into our Agua Prieta, Mexico plant.
“The goal of our strategic footprint realignment is to expand in growth areas, reduce costs in mature areas, and increase our ability to innovate. We are on track to permanently reduce our annualized costs by over $15 million
in mature markets through a combination of staff reductions, facility consolidations, and operational improvements.” said Mr. Bevis. “We believe these actions will make us stronger, increase our competitiveness, accelerate the speed of our innovation, and increase our opportunities to win. We are leveraging our know-how to serve top tier OEMs with high quality, on-time delivery of complex subsystems into new areas. We believe these actions will enable new value and new growth. We look forward to sharing updates on these activities as we execute our long term plan,” concluded Mr. Bevis.
Third Quarter Outlook
According to ACT Research, third quarter 2020 North American heavy-duty and medium-duty truck build is expected to increase approximately 50% and 30%, respectively, as compared to the second quarter of 2020, as the North American Truck OEMs rebound from the impacts of COVID-19. Although the COVID-19 pandemic creates forecasting uncertainties, we currently anticipate revenues to increase 25% to 35% for the three months ending September 30, 2020 as compared to the three months ended June 30, 2020.
GAAP to Non-GAAP Reconciliation
A reconciliation of GAAP to non-GAAP financial measures referenced in this release is included as Appendix A to this release.
Conference Call
A conference call to discuss this press release is scheduled for Monday, August 10, 2020, at 10:00 a.m. ET. To participate, dial (833) 235-5650 using conference code 4399004.
This call is being webcast by NASDAQ. The webcast, as well as a supplemental earnings presentation, can be accessed through the “Investors” section of Commercial Vehicle Group’s Web site at www.cvgrp.com, where it will be archived for one year.
A telephonic replay of the conference call will be available for a period of two weeks following the call. To access the replay, dial (800) 585-8367 using access code 4399004.
Company Contact:
Kirk Feiler, Investor Relations
Commercial Vehicle Group, Inc.
(614) 289-0195
About Commercial Vehicle Group, Inc.
Commercial Vehicle Group, Inc. (through its subsidiaries) is a leading supplier of seating systems, electro-mechanical assemblies, engineered material products, and warehouse automation subsystems for many markets including the following: trucking, military, warehouse automation, bus, agriculture, specialty transportation, mining, industrial equipment and off-road recreational markets. Information about the Company and its products is available on the internet at www.cvgrp.com.
Forward-Looking Statements
This press release contains forward-looking statements that are subject to risks and uncertainties. These statements often include words such as “believe”, “anticipate”, “plan”, “expect”, “intend”, “will”, “should”, “could”, “would”, “project”, “continue”, “likely”, and similar expressions. In particular, this press release may contain forward-looking statements about Company expectations for future periods with respect to its plans to improve financial results and enhance the Company, the future of the Company’s end markets, including the
short-term and potential longer-term impact of the COVID-19 pandemic on Class 8 and Class 5-7 North America truck build rates and performance of the global construction equipment business, expected cost savings, the Company’s initiatives to address customer needs, organic growth, the Company’s plans to focus on certain segments and markets and the Company’s financial position or other financial information. These statements are based on certain assumptions that the Company has made in light of its experience as well as its perspective on historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including but not limited to: (i) a material weakness in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements; (ii) future financial restatements affecting the company; (iii) general economic or business conditions affecting the markets in which the Company serves; (iv) the Company's ability to develop or successfully introduce new products; (v) risks associated with conducting business in foreign countries and currencies; (vi) increased competition in the medium- and heavy-duty truck markets, construction, agriculture, aftermarket, military, bus and other markets; (vii) the Company’s failure to complete or successfully integrate strategic acquisitions and the impact of such acquisitions on business relationships; (viii) the Company’s ability to recognize synergies from the reorganization of the segments; (ix) the Company’s failure to successfully manage any divestitures; (x) the impact of changes in governmental regulations on the Company's customers or on its business; (xi) the loss of business from a major customer, a collection of smaller customers or the discontinuation of particular commercial vehicle platforms; (xii) the Company’s ability to obtain future financing due to changes in the lending markets or its financial position; (xiii) the Company’s ability to comply with the financial covenants in its debt facilities; (xiv) fluctuation in interest rates or change in the reference interest rate relating to the Company’s debt facilities; (xv) the Company’s ability to realize the benefits of its cost reduction and strategic initiatives and address rising labor and material costs; (xvi) volatility and cyclicality in the commercial vehicle market adversely affecting us, including the impact of the current COVID-19 pandemic; (xvii) the geographic profile of our taxable income and changes in valuation of our deferred tax assets and liabilities impacting our effective tax rate; (xviii) changes to domestic manufacturing initiatives; (xix) implementation of tax or other changes, by the United States or other international jurisdictions, related to products manufactured in one or more jurisdictions where the Company does business (xx) security breaches and other disruptions that could compromise our information systems; (xxi) the impact of disruptions in our supply chain or delivery chains; (xxii) litigation against us; (xxiii) the impact of health epidemics or widespread outbreak of contagious disease; and (xxiv) various other risks as outlined under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for fiscal year ending December 31, 2019 and our filings with the Securities and Exchange Commission. There can be no assurance that statements made in this press release relating to future events will be achieved. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements.
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except per share amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 (as restated) | 2020 | 2019 (as restated) | |||||
| Revenues | $ | 126,896 | $ | 243,190 | $ | 314,001 | $ | 486,354 |
| Cost of Revenues | 120,421 | 210,754 | 287,223 | 420,829 | ||||
| Gross Profit | 6,475 | 32,436 | 26,778 | 65,525 | ||||
| Selling, General and Administrative Expenses | 15,984 | 16,248 | 33,083 | 31,447 | ||||
| Amortization Expense | 856 | 322 | 1,716 | 643 | ||||
| Impairment Expense | 150 | — | 29,017 | — | ||||
| Operating (Loss) Income | (10,515) | 15,866 | (37,038) | 33,435 | ||||
| Interest and Other Expense | 5,104 | 7,490 | 10,469 | 11,886 | ||||
| (Loss) Income Before Provision for Income Taxes | (15,619) | 8,376 | (47,507) | 21,549 | ||||
| (Benefit) Provision for Income Taxes | (3,122) | 2,230 | (10,416) | 5,417 | ||||
| Net (Loss) Income | $ | (12,497) | $ | 6,146 | $ | (37,091) | $ | 16,132 |
| (Loss) earnings per Common Share: | ||||||||
| Basic | $ | (0.40) | $ | 0.20 | $ | (1.20) | $ | 0.53 |
| Diluted | $ | (0.40) | $ | 0.20 | $ | (1.20) | $ | 0.52 |
| Weighted Average Shares Outstanding: | ||||||||
| Basic | 30,890 | 30,547 | 30,848 | 30,530 | ||||
| Diluted | 30,890 | 30,824 | 30,848 | 30,731 |
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands)
| June 30, 2020 | December 31, 2019 | |||
|---|---|---|---|---|
| (Unaudited) | ||||
| (In thousands, except per share amounts) | ||||
| Assets | ||||
| Current Assets: | ||||
| Cash | $ | 63,390 | $ | 39,511 |
| Accounts receivable, net of allowances of $595 and $432, respectively | 102,771 | 115,099 | ||
| Inventories | 70,711 | 82,872 | ||
| Other current assets | 13,684 | 18,490 | ||
| Total current assets | 250,556 | 255,972 | ||
| Property, plant and equipment, net of accumulated depreciation of $153,811 and $154,939, respectively | 66,867 | 73,686 | ||
| Operating lease right-of-use assets, net | 31,172 | 34,960 | ||
| Goodwill | — | 27,816 | ||
| Intangible assets, net of accumulated amortization of $12,975 and $11,440, respectively | 23,362 | 25,258 | ||
| Deferred income taxes | 26,385 | 14,654 | ||
| Other assets, net | 2,646 | 3,480 | ||
| Total assets | $ | 400,988 | $ | 435,826 |
| Liabilities and Stockholders’ Equity | ||||
| Current Liabilities: | ||||
| Accounts payable | $ | 54,561 | $ | 63,058 |
| Revolving credit facility | 15,000 | — | ||
| Current operating lease liabilities | 8,274 | 7,620 | ||
| Accrued liabilities and other | 37,140 | 32,673 | ||
| Current portion of long-term debt | 2,444 | 3,256 | ||
| Total current liabilities | 117,419 | 106,607 | ||
| Long-term debt | 151,729 | 153,128 | ||
| Operating lease liabilities | 25,176 | 29,414 | ||
| Pension and other post-retirement benefits | 9,986 | 10,666 | ||
| Other long-term liabilities | 8,817 | 7,323 | ||
| Total liabilities | 313,127 | 307,138 | ||
| Stockholders’ Equity: | ||||
| Preferred stock, $0.01 par value (5,000,000 shares authorized; no shares issued and outstanding) | — | — | ||
| Common stock, $0.01 par value (60,000,000 shares authorized; 30,985,669 and 30,801,255 shares issued and outstanding respectively) | 309 | 323 | ||
| Treasury stock, at cost: 1,334,251 shares, as of June 2020 and December 2019 | (11,230) | (11,230) | ||
| Additional paid-in capital | 247,582 | 245,852 | ||
| Retained deficit | (97,398) | (60,307) | ||
| Accumulated other comprehensive loss | (51,402) | (45,950) | ||
| Total stockholders’ equity | 87,861 | 128,688 | ||
| Total liabilities and stockholders’ equity | $ | 400,988 | $ | 435,826 |
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
BUSINESS SEGMENT FINANCIAL INFORMATION
(Unaudited)
(Amounts in thousands)
| Three Months Ended June 30, | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Electrical Systems | Global Seating | Corporate / Other | Total | ||||||||||||||
| 2020 | 2019<br>(as restated) | 2020 | 2019 | 2020 | 2019<br>(as restated) | 2020 | 2019<br>(as restated) | ||||||||||
| Revenues | |||||||||||||||||
| External Revenues | $ | 73,498 | $ | 139,089 | $ | 53,398 | $ | 104,101 | $ | — | $ | — | $ | 126,896 | $ | 243,190 | |
| Intersegment Revenues | 712 | 2,858 | 464 | 1,175 | (1,176) | (4,033) | — | — | |||||||||
| Total Revenues | $ | 74,210 | $ | 141,947 | $ | 53,862 | $ | 105,276 | $ | (1,176) | $ | (4,033) | $ | 126,896 | $ | 243,190 | |
| Gross Profit | 1,144 | 17,761 | 5,345 | 14,686 | (14) | (11) | 6,475 | 32,436 | |||||||||
| Selling, General & Administrative Expenses | 6,580 | 3,676 | 3,683 | 5,177 | 5,721 | 7,395 | 15,984 | 16,248 | |||||||||
| Amortization Expense | 729 | 186 | 127 | 136 | — | — | 856 | 322 | |||||||||
| Impairment Expense | — | — | — | — | 150 | — | 150 | — | |||||||||
| Operating (Loss) Income | $ | (6,165) | $ | 13,899 | $ | 1,535 | $ | 9,373 | $ | (5,885) | $ | (7,406) | $ | (10,515) | $ | 15,866 | |
| Six Months Ended June 30, | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Electrical Systems | Global Seating | Corporate / Other | Total | ||||||||||||||
| 2020 | 2019<br>(as restated) | 2020 | 2019 | 2020 | 2019<br>(as restated) | 2020 | 2019<br>(as restated) | ||||||||||
| Revenues | |||||||||||||||||
| External Revenues | $ | 184,665 | $ | 279,761 | $ | 129,336 | $ | 206,593 | $ | — | $ | — | $ | 314,001 | $ | 486,354 | |
| Intersegment Revenues | 1,643 | 5,797 | 506 | 2,744 | (2,149) | (8,541) | — | — | |||||||||
| Total Revenues | $ | 186,308 | $ | 285,558 | $ | 129,842 | $ | 209,337 | $ | (2,149) | $ | (8,541) | $ | 314,001 | $ | 486,354 | |
| Gross Profit | 12,090 | 37,093 | 14,714 | 28,466 | (26) | (34) | 26,778 | 65,525 | |||||||||
| Selling, General & Administrative Expenses | 10,531 | 7,825 | 8,475 | 10,514 | 14,077 | 13,108 | 33,083 | 31,447 | |||||||||
| Amortization Expense | 1,458 | 373 | 258 | 270 | — | — | 1,716 | 643 | |||||||||
| Impairment Expense | 23,415 | — | 4,809 | — | 793 | — | 29,017 | — | |||||||||
| Operating (Loss) Income | $ | (23,314) | $ | 28,895 | $ | 1,172 | $ | 17,682 | $ | (14,896) | $ | (13,142) | $ | (37,038) | $ | 33,435 |
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
Appendix A: Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)
(Amounts in thousands, except per share data)
| For the Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| June 30, 2020 | June 30, 2019 | |||||
| Operating (Loss) Income | $ | (10,515) | $ | 15,866 | ||
| Deferred Consideration Purchase Accounting | 3,461 | — | ||||
| Restructuring | 2,944 | — | ||||
| Investigation | 408 | — | ||||
| Impairment of Goodwill and Long-Lived Assets | 150 | — | ||||
| Adjusted Operating (Loss) Income | $ | (3,552) | $ | 15,866 | ||
| % of Revenues | (2.8) | % | 6.5 | % | ||
| Interest Expense | 5,309 | 4,805 | ||||
| Other Income / Expense | (205) | 2,687 | ||||
| Non-Cash Pension Expense | — | (2,500) | ||||
| (Loss) Income Before Provision for Income Taxes | $ | (8,656) | $ | 10,874 | ||
| Adjusted Provision for Income Taxes^1^ | (1,381) | 2,855 | ||||
| Adjusted Net (Loss) Income | $ | (7,275) | $ | 8,019 | ||
| Adjusted Basic and Diluted EPS | $ | (0.24) | $ | 0.26 | ||
| Adjusted Operating (Loss) Income | $ | (3,552) | $ | 15,866 | ||
| Depreciation Expense | 3,729 | 2,981 | ||||
| Amortization Expense | 856 | 322 | ||||
| Non Interest Other Income / Expense | 205 | (187) | ||||
| Adjusted EBITDA | $ | 1,238 | $ | 18,982 | ||
| % of Revenues | 1.0 | % | 7.8 | % |
^1.^Reported Tax (Benefit) Provision adjusted for tax effect of special charges at 25%
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
Appendix B: Segment Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)
(Amounts in thousands)
| For the Three Months Ended June 30, 2020 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Electrical<br>Systems | Global<br>Seating | Corporate | Total | ||||||||
| Operating (Loss) Income | $ | (6,165) | $ | 1,535 | $ | (5,885) | $ | (10,515) | |||
| Deferred Consideration Purchase Accounting | 3,461 | — | — | 3,461 | |||||||
| Restructuring | 1,986 | 546 | 412 | 2,944 | |||||||
| Investigation | — | — | 408 | 408 | |||||||
| Impairment of Long-Lived Assets | — | — | 150 | 150 | |||||||
| Adjusted Operating (Loss) Income | $ | (718) | $ | 2,081 | $ | (4,915) | $ | (3,552) | |||
| % of Revenues | (1.0) | % | 3.9 | % | (2.8) | % |
Use of Non-GAAP Measures
This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). In general, the non-GAAP measures exclude items that (i) management believes reflect the Company’s multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company’s performance, engage in financial and operational planning and to determine incentive compensation.
Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on the Company’s financial and operating results and in comparing the Company’s performance to that of its competitors and to comparable reporting periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. The financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated.
cvg_2020xq2xearningsxpre
Exhibit 99.2
Q2 2020 FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements that are subject to risks and uncertainties. These statements often include words such as “believe”, “anticipate”, “plan”, “expect”, “intend”, “will”, “should”, “could”, “would”, “project”, “continue”, “likely”, and similar expressions. In particular, this press release may contain forward-looking statements about Company expectations for future periods with respect to its plans to improve financial results and enhance the Company, the future of the Company’s end markets, including the short-term and potential longer-term impact of the COVID-19 pandemic on Class 8 and Class 5-7 North America truck build rates and performance of the global construction equipment business, expected cost savings, the Company’s initiatives to address customer needs, organic growth, the Company’s plans to focus on certain segments and markets and the Company’s financial position or other financial information. These statements are based on certain assumptions that the Company has made in light of its experience as well as its perspective on historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including but not limited to: (i) a material weakness in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements; (ii) future financial restatements affecting the company; (iii) general economic or business conditions affecting the markets in which the Company serves; (iv) the Company's ability to develop or successfully introduce new products; (v) risks associated with conducting business in foreign countries and currencies; (vi) increased competition in the medium- and heavy-duty truck markets, construction, agriculture, aftermarket, military, bus and other markets; (vii) the Company’s failure to complete or successfully integrate strategic acquisitions and the impact of such acquisitions on business relationships; (viii) the Company’s ability to recognize synergies from the reorganization of the segments; (ix) the Company’s failure to successfully manage any divestitures; (x) the impact of changes in governmental regulations on the Company's customers or on its business; (xi) the loss of business from a major customer, a collection of smaller customers or the discontinuation of particular commercial vehicle platforms; (xii) the Company’s ability to obtain future financing due to changes in the lending markets or its financial position; (xiii) the Company’s ability to comply with the financial covenants in its debt facilities; (xiv) fluctuation in interest rates or change in the reference interest rate relating to the Company’s debt facilities; (xv) the Company’s ability to realize the benefits of its cost reduction and strategic initiatives and address rising labor and material costs; (xvi) volatility and cyclicality in the commercial vehicle market adversely affecting us, including the impact of the current COVID-19 pandemic; (xvii) the geographic profile of our taxable income and changes in valuation of our deferred tax assets and liabilities impacting our effective tax rate; (xviii) changes to domestic manufacturing initiatives; (xix) implementation of tax or other changes, by the United States or other international jurisdictions, related to products manufactured in one or more jurisdictions where the Company does business (xx) security breaches and other disruptions that could compromise our information systems; (xxi) the impact of disruptions in our supply chain or delivery chains; (xxii) litigation against us; (xxiii) the impact of health epidemics or widespread outbreak of contagious disease; and (xxiv) various other risks as outlined under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for fiscal year ending December 31, 2019 and in other filings with the Securities and Exchange Commission since January 1, 2020. There can be no assurance that statements made in this press release relating to future events will be achieved. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements. 2
Q2 2020 GLOBAL TEAM DELIVERED DURING ABRUPT DOWNTURN Generated >$1m of adjusted EBITDA and >$9m of cash despite 48% decline in revenue • $8 million of cost-outs in the quarter: combination of permanent and short-term actions including corporate overhead reductions, plant overhead reductions, footprint consolidations, 1 additional actions are underway • Offset multi-million dollar impacts from covid one-time consequences: overhead absorption hits, excess inventory hits, COVID-related absences, temporary closures, reconfigured office and plant layouts to add barriers and create social distancing for ~7,000 people • Core markets are now in recovery mode: solid order books and backlogs in line with 3rd party external outlooks on truck build recovery, construction equipment recovery, and ecommerce investment & activity • Q3 20 North American heavy-duty truck build expected to increase ~50% vs Q2 20 • Q3 20 North America medium-duty truck build expected to increase ~30% vs Q2 20 FREE CASH FLOW* ($M) NORTH AMERICAN CLASS 8 PRODUCTION RECOVERY * * 80,000 9.1 70,000 60,000 48% 6.9 50,000 Drop 40,000 30,000 3.0 20,000 10,000 0 Q419 Q120 Q220 Q120 Q220 Q320 Q420 Q121 Q221 Q321 Q421 *Operating cash flow less capital expenditures, **Source: ACT Research Report July 2020 3
Q2 2020 COMPREHENSIVE SET OF ACTIONS TAKEN Free cash flow of >$9m and maintained solid liquidity of >$106M ACTIONS IN PROCESS • Comprehensive global set of actions: used 2 opportunity of light demand to initiate consolidation and repurposing of multiple Consolidating and repurposing facilities, ~$14m inventory reduction in the multiple facilities quarter, right-sized staff, right-sized material Right sizing salaried staff and ordering, reset discretionary spending discretionary spending decisions • Improvements still underway including Hiring new leaders for further cost-outs and pursuit of improved new markets inventory turns Strong new growth progress with notification of Redesigning procured new, big wins in targeted new growth areas materials and services • >$100m of new business in the final stages: Strict management of 3 new electric vehicle customer for seats, working capital warehouse equipment • Adding people and capacity in growth areas: repurposed floor space in plants to make warehouse subsystems, hiring new people in key positions 4
Q2 2020 MULTI-YEAR RECOVERY FORECAST FOR COMMERCIAL VEHICLES 1 End markets forecast to recover to pre-COVID levels 2 Lowering the cost structure on traditional business, expect better margins 3 Expecting additional revenue from new business wins beginning in Q4 END MARKET OUTLOOKS N.A. HEAVY-DUTY (CLASS 8) BUILD* 2019 2020 2021 2022 2023 N.A. MEDIUM-DUTY (CLASS 5-7) BUILD* 2019 2020 2021 2022 2023 *Source: July 2020 ACT Research Report 5
CHANGE IS UNDERWAY POSITIONING CVG FOR A NEW AND BETTER FUTURE LEADERSHIP INNOVATION NEW MARKETS Building a strong, new Kick-starting Adding market credibility leadership team with innovation & new and repurposing footprint robust experience product agendas and capabilities outside growing businesses across all divisions traditional markets 6
Q2 2020 PIVOTING THE COMPANY 1 Optimizing financial performance of the core business 2 Adding people & growth outside of traditional commercial vehicle business 3 Building strong momentum with new business wins and new opportunities • E-commerce material handling equipment • Electric vehicles and last-mile delivery vans • Power-generation equipment TRADITIONAL COMMERCIAL VEHICLE MARKETS TARGETED MARKETS CURRENT REVENUE FUTURE REVENUE COMPOSITION COMPOSITION 7
STRATEGIC REPOSITION OF FOOTPRINT IMPLEMENTING A SET OF DECISIVE STRATEGIC ACTIONS TO RESET THE COMPANY’S FOOTPRINT Adding Dedicated Moving to Consolidating Expanded footprint, capacity, and Floor Space Optimize Space Space product complexity to serve Vonore, TN warehouse automation and military markets Piedmont, AL Expected to support $100- Saltillo, MX Seating $150 million of new business Saltillo, MX Trim Agua Prieta, MX Permanently repositioning a portion Elkridge, MD of the cost structure and capacity Concord, NC dedicated to mature markets Expected to lower costs by Monona, IA $4-6 million and upgrade R&D Chillicothe, OH capabilities to pursue new Corp R&D growth 8
Q2 2020 PENETRATE FAST-GROWING ECOMMERCE, LAST-MILE DELIVERY MARKET KEY HIGHLIGHTS First win with Unity™ seat Multi-year, multi-million Last-mile delivery market for global platform aimed at accretive win with a major e-commerce growing at penetration of medium duty electric vehicle (EV) 10%+ CAGR*, expected to commercial vehicles market entrant reach ~$5 billion by 2024 * MarketStudyReport.com – Global Last Mile Delivery for E-Commerce Market 2019 9
Q2 2020 GROW WAREHOUSE AUTOMATION BUSINESS This market is central to the company’s growth strategy Multi-year, multi-million accretive win Market expected to grow at 11.7% CAGR to $27 billion by 2025 Expanded product portfolio with a top global warehouse automation technology provider Footprint repurposing actions provides $100 million to $150 million of additional capacity for future growth *ResearchandMarkets.com – Warehouse Automation Market by Technology, Industry, Geography, Forecast to 2025 10
Q2 2020 ENHANCING THE VALUE OF THE COMPANY NAVIGATING NEAR- TERM MARKET DISRUPTION AND INCREASING INVESTMENT IN LONG- TERM ADVANCEMENTS 11
Q2 2020 FOUR FOCUS AREAS FOR INCREASING THE VALUE OF THE COMPANY OPTIMIZE CORE BUSINESS WIN IN ELECTRIC VEHICLES • Leverage new unique global seating platform • EV market is growing with global delivery • Consolidate facilities companies • Improve ROI • Focused on last mile delivery vans and medium • Grow aftermarket business duty trucks • Exit certain no-profit business / customers • Recent new business wins prove-out CVG value proposition WIN IN WAREHOUSE AUTOMATION WIN IN NEW MARKETS • FSE acquisition has led to significant new opportunities • Repurpose equipment / plant floor space into • Material handling and warehouse automation growing products & markets • Military • Target medical, packaging & several other • Recent new business wins with major industries ecommerce customer • Deliberate repurposing activities in plastic part business and wire harness business • Investing in new people, new capabilities * MarketStudyReport.com – Global Last Mile Delivery for E-Commerce Market 2019 12
Q2 2020 NEW APPROACH, DIRECTION, AND DECISIONS FOR ACHIEVING SUCCESS NEW LEADERSHIP, NEW DIRECTION,NEW CUSTOMERS,NEW PRODUCTS, NEW MARKETS 13
FINANCIAL UPDATE Q2 2020 14
Q2 2020 CVG CONSOLIDATED FINANCIALS $ MILLIONS, EXCEPT PER SHARE DATA Q2 2020 Q2 2019 $ Change Q2 2020 NOTES Revenue 126.9 243.2 (116.3) Gross Profit 6.5 32.4 (25.9) • Revenue down 48% compared Gross Margin 5.1% 13.3% to prior year due to COVID-19 impacts SGA 16.0 16.2 (0.2) • Used opportunity of light Amortization 0.9 0.3 0.6 demand to initiate Impairment 0.2 - 0.2 consolidation and repurposing of several facilities Operating (Loss)/Income (10.5) 15.9 (26.4) • > $8M cost reduction actions Operating Margin (8.3)% 6.5% during Q2, much higher Diluted Earnings Per Share ($0.40) $0.20 (0.60) annualized amount Adjusted Operating (Loss)/Income* (3.6) 15.9 (19.5) • Generated $1.2M of adj. EBITDA despite falling sales Adjusted Operating Margin* (2.8)% 6.5% • Achieved decremental drop- Adjusted EBITDA* 1.2 19.0 (17.8) through rate of ~15% Adjusted EBITDA Margin* 1.0% 7.8% *See reconciliation to non-GAAP financial measures in the appendix 15
Q2 2020 ELECTRICAL SYSTEMS SEGMENT RESULTS $ MILLIONS Q2 2020 Q2 2019 $ Change Q2 2020 NOTES Revenue 74.2 141.9 (67.7) Gross Profit 1.1 17.8 (16.7) • Revenue down 48% compared Gross Margin 1.5% 12.5% to prior year due to covid impacts, offset partially by FSE SGA 6.6 3.7 2.9 • Used opportunity of light Amortization 0.7 0.2 0.5 demand to initiate consolidation and repurposing Operating (Loss)/Income (6.2) 13.9 (20.1) of several facilities Operating Margin (8.3)% 9.8% • FSE contributed $24 million of Adjusted Operating (Loss)/Income* (0.7) 13.9 (14.6) revenue in Q2 Adjusted Operating Margin* (1.0)% 9.8% • Awarded new business during the quarter and expanded warehouse automation footprint into 3 other factories *See reconciliation to non-GAAP financial measures in the appendix 16
Q2 2020 GLOBAL SEATING SEGMENT RESULTS $ MILLIONS Q2 2020 Q2 2019 $ Change Q2 2020 NOTES Revenue 53.9 105.3 (51.4) Gross Profit 5.3 14.7 (9.4) • Revenue down 49% compared Gross Margin 9.9% 13.9% to prior year due to covid impacts SGA 3.7 5.2 (1.5) Amortization 0.1 0.1 (0.0) • Used opportunity of light demand to initiate Operating Income 1.5 9.4 (7.9) consolidation and repurposing of several facilities Operating Margin 2.8% 8.9% • Awarded new business during Adjusted Operating Income* 2.1 9.4 (7.3) the quarter, during the covid Adjusted Operating Margin* 3.9% 8.9% downturn • New Unity™ global platform for medium duty and electric vehicles *See reconciliation to non-GAAP financial measures in the appendix 17
Q2 2020 BALANCE SHEET $ MILLIONS June 30, March 30, 2020 2020 Q2 2020 NOTES Cash 63.4 58.1 Accounts Receivable 102.8 123.3 • Cash and available liquidity at Inventories 70.7 84.5 June 30, 2020 was $106.6M Other Assets 164.1 165.3 • Reduced inventory by ~$14M in 2Q through a focused effort, Total Assets 401.0 431.2 despite light consumption / production, still a focus area Accounts Payable 54.6 73.6 • Capital spending was kept at maintenance levels during Q2 Debt (Current + Long Term) 154.2 155.6 • Amended loan terms during Q2 Line of Credit 15.0 15.0 Other Liabilities 89.4 90.1 Total Liabilities 313.1 334.3 Total Equity 87.9 96.9 Total Liabilities + Equity 401.0 431.2 18
SUPPLEMENTAL INFORMATION 19
Q2 2020 USE OF NON-GAAP FINANCIAL MEASURES This earnings presentation contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). In general, the non-GAAP measures exclude items that (i) management believes reflect the Company’s multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company’s performance, engage in financial and operational planning and to determine incentive compensation. Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on the Company’s financial and operating results and in comparing the Company’s performance to that of its competitors and to comparable reporting periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. The financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated. 20
Q2 2020 RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES – ADJUSTED OPERATING INCOME AND EBITDA 21
Q2 2020 RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES – ADJUSTED EBITDA $ Millions For the three months ended Trailing twelve months ended March 31, June 30, September 30, December 31, March 31, June 30, June 30, June 30, 2019 2019 2019 2019 2020 2020 2020 2019 Net Income 10.0 6.1 7.2 (7.5) (24.6) (12.5) (37.4) 35.5 Interest 4.6 4.8 3.9 3.6 4.6 5.3 17.4 18.1 Provision for Income Taxes 3.2 2.2 0.5 (0.1) (7.3) (3.1) (10.1) 5.6 Depreciation 3.4 3.0 3.4 3.8 3.8 3.7 14.7 13.3 Amortization 0.3 0.3 0.4 0.9 0.9 0.9 3.0 1.3 Impairment - - - - 28.9 0.2 29.0 - EBITDA 21.4 16.5 15.4 0.6 6.2 (5.6) 16.7 73.8 Adjustments CEO Transition - - - - 2.3 - 2.3 - Restructuring - - - 3.0 0.2 2.9 6.1 - Investigation - - - - 2.4 0.4 2.8 - FSE Acquisition Costs - - 0.9 - - - 0.9 - Deferred Consideration - - - - - 3.5 3.5 - Non Cash Pension Charge - 2.5 - - 2.5 Adjusted EBITDA 21.4 19.0 16.3 3.5 11.0 1.2 32.2 76.3 22
Q2 2020 BUSINESS SEGMENT FINANCIAL INFORMATION 23
Q2 2020 FREE CASH FLOW For the three months ended FREE CASH FLOW* ($M) December 31, March 31, June 30, 9.1 $ Millions 2019 2020 2020 6.9 Cash Flow from Operations $ 8.2 $ 10.3 $ 10.1 3.0 Capital Expenditures (5.2) (3.4) (1.0) Free Cash Flow $ 3.0 $ 6.9 $ 9.1 Q419 Q120 Q220 24
Q2 2020 PLAYBACK AND CONTACT INFORMATION Replay number: 800-585-8367 passcode: 4399004 Telephone replay available through August 24, 2020 Webcast / PowerPoint / replay available at ir.cvgrp.com Use “Slide Show” format for PowerPoint Investor Relations contact: Kirk Feiler (614) 289 - 0195 25