Earnings Call
Commercial Vehicle Group, Inc. (CVGI)
Earnings Call Transcript - CVGI Q4 2020
Operator, Operator
Good morning, ladies and gentlemen, and welcome to CVG's Fourth Quarter and Full Year 2020 Earnings Conference Call. I would now like to turn the call over to Mr. Chris Bohnert, Chief Financial Officer. Please go ahead, sir.
Christopher Bohnert, CFO
Thank you, and welcome to our call. Joining me today is Harold Bevis, President and Chief Executive Officer of CVG. As a reminder, a telephonic replay of this call will be available on the Investors section of our website until March 24, 2021. Additionally, a slide deck to complement today's discussion is also available on our website.
Harold Bevis, CEO
Thank you, Chris, and good morning, everyone. On today's call, we'll provide an overview of our fourth quarter and year-end results, followed by an update on our strategic initiatives designed to increase our earnings and make our earnings more stable and less cyclical. Chris will then follow this overview and discuss our financial results in more detail, and we will end by opening the call and answering your questions. If you have the presentation from our website in front of you, please turn to Slide 4. We would like to point out that we continue to see recovery in our legacy end markets that were disrupted by COVID and also continue to see growth in our focus areas, especially warehouse automation. For the fourth quarter of 2020, we delivered sales of $216 million, up 14% compared to the year-ago fourth quarter. This growth was primarily driven by warehouse automation, where we delivered $34.4 million in sales representing approximately 16% of the company's sales. Our operating income increased to $5 million in the quarter, which compares favorably to a loss of $4.3 million in the year-ago fourth quarter. Improvement was largely a result of better volumes, combined with our successful efforts over the past year to reduce our cost structure and drive operational efficiencies across the company. Rationalizing expenses has been a priority of our management team through the downturn and will provide a benefit as our sales continue to improve. Adjusted EBITDA was $13 million in the fourth quarter, representing a significant increase as we compare that to the $3.5 million that we delivered in the fourth quarter of 2019. The improvement was due to higher revenues, combined with an improving sales mix and the aforementioned expense reductions. Looking at our new business backlog, we achieved net new business wins in excess of $100 million annualized in 2020, primarily in our growth end markets of warehouse automation and electric vehicles. We expect substantially all of this new business to hit this year. These net new business wins represent approximately 14% of our annual sales and are a clear validation of our efforts to diversify our revenue mix. We are also pleased with our progress expanding into other new markets, including recreational vehicles, material handling equipment, boating, and mass transit, which further lessens our customer concentration and our end market concentration.
Christopher Bohnert, CFO
Thank you, Harold. If you're following along in the presentation, please turn to Page 13. Fourth quarter 2020 revenues were $216 million, an increase of 14% compared to $189.5 million in the same period last year. This growth is a result of the significant efforts our team has made to expand our business, along with a recovery in the heavy-duty truck market in North America. On a sequential basis, revenue rose by 15% from the third quarter of 2020, which had revenues of $187.7 million. Foreign currency translation positively influenced our fourth quarter revenues by $2.1 million, approximately 1%. Our gross margins expanded by around 530 basis points to 11% when compared to the fourth quarter of 2019, reflecting our renewed emphasis on profitability and better business mix. The primary factors behind this expansion included volume leverage and improved operational costs compared to 2019. The company announced consolidated operating income of $5 million for the fourth quarter of 2020, in contrast to a loss of $4.3 million during the same period last year. Looking at an adjusted basis, our operating income was $8.3 million versus a loss of $1.3 million in 2019. This improvement primarily stemmed from higher sales volumes and a better cost structure resulting from our cost measures and improved sales mix. Adjusted EBITDA for the fourth quarter reached $13 million, a significant rise from $3.5 million in the fourth quarter of the previous year. Adjusted EBITDA margins were at 6%, which is an improvement of approximately 410 basis points compared to 1.9% in the fourth quarter of 2019. This margin improvement resulted mainly from the revenue and cost shifts mentioned earlier. Our fourth quarter interest expense was $5.2 million compared to $3.6 million in the fourth quarter of 2019, attributed to increased PIK interest costs due to the amendment of our credit facilities in the second quarter of 2020. I will address our balance sheet and liquidity shortly but want to emphasize that we are committed to lowering our interest expense throughout 2021 as our financial performance improves and our leverage based on TTM EBITDA continues to drop. The net loss for the quarter was $4.1 million, or $0.13 per diluted share compared to a net loss of $7.5 million in the prior year period, which equated to $0.24 per diluted share. This includes a negative tax adjustment of $0.10 per share primarily related to a valuation allowance.
Operator, Operator
Your first question today comes from the line of Mike Shlisky with Collier Securities.
Michael Shlisky, Analyst
Could you provide some clarification? I understand you secured $100 million in new annual business, most of which will be recognized in 2021. However, how much of that was actually realized in 2020, particularly from the initial phases of that business? I'm looking to understand the year-over-year growth in that specific area of your revenue.
Christopher Bohnert, CFO
Yes, less than one-fifth of that point last year.
Michael Shlisky, Analyst
Okay. Perfect.
Christopher Bohnert, CFO
And then in the second half, Mike.
Michael Shlisky, Analyst
Yes, sure. Yes. Nothing has happened throughout the year, of course.
Christopher Bohnert, CFO
Yes.
Michael Shlisky, Analyst
And then for the next $100 million that you're pursuing in 2021, is it roughly the same end markets that you've been looking at in the past? Or do you have a whole new slate of places to look for some new business?
Harold Bevis, CEO
Our pipelines are bigger now because we're more mature with that topic. I would say they're going to be balanced between electric vehicles, warehouse automation, and alternate vehicle types. Last year was skewed towards warehouse automation. We need to put those numbers together because we were successful with some new products and got some big new business that was immediately needed. So, I think that can be nice if that cap is happening, but we're not going to count on it. So we have a balanced program, Mike.
Michael Shlisky, Analyst
Okay. And I wanted to ask quickly on the Xos partnership. I was very pleased to see it and kind of read some of the details there. Can you give us a sense, are you working with any other EV OEMs? I see some stuff on social media and other areas where you are, but is there anything that you're doing that's on the same scale as what you're doing with Xos at the current time?
Harold Bevis, CEO
Yes, we have several programs of similar scale, specifically less than ten but more than five. We need to be careful not to overcommit, and we are enhancing our capabilities in this area. This is a new initiative for us, requiring connection of various junction connectors, improved disconnects, along with prototyping and breadboarding. Last year, we hired an electrical engineering team that is now in place, along with a leader for that team, and we are continuing to recruit additional electrical engineers. It’s essential that we do not rush this process as it is new territory for us, and getting it right is crucial since it's a key component of the vehicle. We've brought in experts who understand the work and combined their skills with our internal resources, representing a significant improvement for our value addition. Although this isn't new technology globally, it is for CVG. We are currently prototyping with various vehicle manufacturers focused on mass transit, last-mile delivery, and long-haul logistics as part of the e-commerce supply chain, which involves transporting goods to warehouses and finally delivering them to customers' homes. We are particularly focused on engaging in the long-haul trucking segment and have been a prominent provider of connectivity solutions for warehouse automation and last-mile delivery.
Michael Shlisky, Analyst
Got it. And maybe one last one for me. Great-looking growth here in Class 8 into a really above normal year that's appearing to turn out to be here and certainly like the growth in warehouse. Can you give us any kind of sense, your feel for the end market growth in the construction and ag segment?
Harold Bevis, CEO
Yes. The bellwether reporters there are Cat and Deer and Volvo also report their construction segment. They're all giving outlooks that are conservative and are flat to up a little.
Operator, Operator
Your next question today comes from the line of John Franzreb with Sidoti.
John Franzreb, Analyst
Howard, first for you, as you look back on the past year and as best you can exclude COVID from the equation, what has surprised you to the upside about the company? And did you find it to be a little bit more challenging than you expected?
Harold Bevis, CEO
You broke up a little bit there. Could you repeat the heart of your question?
John Franzreb, Analyst
Sure. Excluding COVID, what's surprised you to the upside about the company? And what has proven to be a bit more challenging in the past year?
Harold Bevis, CEO
What did he say about the upside, Chris? Did you catch that?
Christopher Bohnert, CFO
Yes. What are the upsides in the business?
Harold Bevis, CEO
Yes. We initiated this pipeline activity shortly after I joined the company. Developing it required significant coaching and mentoring. We worked with the same team that was already in place, just with a new focus and prioritization. Some individuals had clear opportunities to pursue, while others needed to create their own opportunities. We have nine sub-business teams, each with varying levels of readiness based on my direction and the opportunities available to them. The size of our pipelines has significantly increased over time and continues to grow this year. We also identified the need for additional expertise on our team, so we brought in a few new members with relevant knowledge. We analyzed our losses to learn how to improve in those areas. It’s an ongoing process for us, supported by a database for tracking progress, with a dedicated person managing it. Our pipelines are expanding. On the challenges side, COVID has affected us through steel and supply chain constraints, as well as absenteeism due to health issues. Recently, a cold weather event in Texas impacted the foam industry, which is crucial for us. Additionally, we are facing a chip shortage that contributes to short-term supply issues. However, the demand environment remains positive, and the outlook for upcoming activities is promising. Like any responsible CEO, CFO, Chris, and I are focused on current and upcoming quarters, aware of the supply chain challenges we face. We have been monitoring COVID within our staff of 8,000 employees, noting a decrease in related issues from around 100 per week to about 20. While the situation is improving, we still face global supply chain difficulties regarding material availability. Labor stability has improved, but material sourcing remains a challenge that we are keeping an eye on for the second and third quarters.
John Franzreb, Analyst
All right. That's basically...
Harold Bevis, CEO
Go ahead.
John Franzreb, Analyst
It's perfect to answer, Howard, but that works perfectly into my next question. When we think about the cost side of the equation, Q1 versus Q4, how much increment costs still have to come back and how much of incremental raw material costs are you worried about in Q1 versus Q4?
Christopher Bohnert, CFO
Q1 of this year?
John Franzreb, Analyst
Yes.
Harold Bevis, CEO
Yes. We brought all of our employees back to full pay in the fourth quarter and reinstated incentive compensation. However, we did not start travel and our 401(k) plan was frozen for our U.S. employees. In the first quarter of this year, the only additional labor cost we incurred was related to the 401(k) benefits. I should mention that we are currently hiring a significant number of people, primarily through temp agencies, where we pay a temporary markup. While this does add some hourly costs, we have accounted for it in our budgeting. What about you, Chris?
Christopher Bohnert, CFO
Yes. There are no significant items affecting us in Q1 compared to Q4, so I agree with Harold.
Harold Bevis, CEO
Nothing major.
Christopher Bohnert, CFO
There's nothing major at this stage.
Harold Bevis, CEO
Just little zingers.
Christopher Bohnert, CFO
Yes, we're hiring for growth. But we're judicious about that and planning as we get the new business, but there's nothing material that will hit us in the first quarter that we can take...
Harold Bevis, CEO
That we can't offset. I mean, there's always pressure. The minimum wage went up in Mexico on January 1 on border and border states, in which we're in them, and we have over 2,000 employees there, but we took actions to offset it. It's just normal run the business stuff, I would say, Chris.
Christopher Bohnert, CFO
It is, yes.
John Franzreb, Analyst
Okay. And one more question, and I'll get back in the queue. Can you talk a little bit about your plastics initiative? And what do you think is a reasonable revenue and maybe margin targets for that business?
Harold Bevis, CEO
For plastics? Yes. We have special purpose assets when you get down to it. If you know a lot about the plastics industry, there are some mainstream equipment and mainstream machinery. I spent 10 years in that industry. We have special purpose large machinery generally. We have to be targeted with our pipeline activities there to areas that are conducive and we're nationally competitive. We have a couple of little machines we need. But if you look at one that fits us really well, it's the recreational vehicle market. Snowmobiles, ATVs, golf carts, those sort of things have big plastic bodies like big plastic truck pieces. So we're focused in there. But we had to be specific in that one. That was not a generic area where we have an open road with our capabilities. We're not to the point where we want to aggressively spend money there. It's very expensive type of capacity. So we're being very focused on high ROIs, but it's competing against momentum that we have in other areas. In the plastics area, we want to grow. We're being focused but we have modest expectations.
Christopher Bohnert, CFO
Agreed. Yes. Obviously, we want to fill up our equipment. We do have some processed technologies that are relatively unique, which are more difficult to do than other plastics manufacturers. We're going to try to capitalize on that, but it's filling the volume selectively with higher-margin business. Again, Harold, I agree. We're going to be very selective about that volume, especially in the off-road space as well.
Harold Bevis, CEO
I want to mention two more things. An automated warehouse contains many plastic parts of various kinds. I can't disclose the specifics as it could reveal our plans, but there are numerous plastic components involved. We are concentrating on enhancing our position as a supplier there by broadening our product range. Finally, although it’s not immediate, Chris and I are planning to revitalize the business development team in the future. The plastics sector is a promising area for us to expand our capacity and improve our customer relationships, but that's something for later, and we are not currently pursuing that.
Operator, Operator
Your next question comes from the line of Chris Howe with Barrington Research.
Chris Howe, Analyst
First question, can you discuss the various areas of growth as we enter the next fiscal year, such as warehouse automation, last-mile delivery, and electric vehicles? Can you also share insights on cash opportunities that you foresee for the business in this upcoming fiscal year, particularly regarding cash priorities? As you gain traction in these high-growth areas, you're likely acquiring valuable insights from deals you've secured or from analyzing competitive proposals. Are there any potential tuck-in acquisitions that might alter your cash priorities?
Christopher Bohnert, CFO
Yes. Thanks, Chris, for the question. Our goal overall is still to be cash flow positive to continue to pay down debt. We do have a couple of areas of investments that we're making. Harold mentioned in the call that Unity is through that. We're making other smaller investments. Unity is the big one. I don't know if you want to speak about Unity a little bit.
Harold Bevis, CEO
Yes. Chris, did you say tuck-ins like a tuck-in acquisition?
Chris Howe, Analyst
That's right.
Harold Bevis, CEO
Yes, we are not focusing on that at the moment. We are experiencing strong growth compared to our past trajectory and are facing the typical challenges that come with it. We are hiring a significant number of people and processing this growth. Our core markets are stabilizing, and our operating team has a lot on their plate. Currently, we do not have anyone overseeing business development. When I joined last March, we had a three-person team that had dissolved, and we haven’t reinstated it due to substantial organic growth, which we've reported at $100 million net. We mention this figure, Chris, because our growth wins surpass that, although we did lose some business. We are also being more proactive with our unprofitable legacy business by adjusting pricing. If we lose that business, we are prepared to replace it with more future opportunities. We are working on transforming our revenue line. I'm pleased that we achieved a 15% reduction in churn last year, and we aim to do the same this year, although it cannot be guaranteed. We are equipped to achieve this with our pipelines, but we need to convert effectively. Competition is strong at every account, so it’s a matter of having the best offering. Regarding investments, as Chris mentioned, Unity is a major focus. We are revitalizing several large plants and investing in our digital infrastructure, with Chris leading the effort to unify our financial and manufacturing systems, supply chain, and customer interface through a centralized data warehouse. Our capital expenditures are expected to be between $20 and $25 million. We held back last year to navigate ongoing challenges, but both Chris and I are aware of the necessary actions, and these tasks are prioritized. We had to manage our cash carefully, which we did. Our capital expenditures are not currently pressing, but they will trend higher due to some catch-up from last year.
Chris Howe, Analyst
That's very helpful. Appreciate the color. Just another question or a few other questions that are related to one another. You mentioned the $150 million warehouse automation revenue opportunity in fiscal year '21. If we take that into consideration with electric vehicle, and we think about the pipeline that continues to grow respective to these two areas of the business, how should we think about the maturation and conversion of this pipeline in combination with what's existing as we think about the cadence of these two markets in fiscal year '21?
Harold Bevis, CEO
Yes. So two separate questions there. Warehouse automation, there are reporters here, Cognex, Honeywell, and foreign reporters as well, including Fuku and others. They report out this information in their third-party data and the industry is facing supply constraints. There is over one-year backlog in that industry, and there's a need for companies like us to increase output. There’s upside opportunity there with what we already have, but we also are trying to continue to expand our product offering. If you look at our growth last year, we've got more volume per part number when we acquired FSC. The big enabler was really expanding our product, and we partnered a bit with repurposing portions of existing plants to make new products. We will keep going with that. It's working. Could it be upside this year if we convert similar to last year? Yes, but we're not going to count it into our base thinking. The cash flow is good. It's not CapEx intense; it's know-how intense and delivery intense. On the commercial vehicle side, the electric vehicle side, if you're following the path here, the electric vehicle wins are primarily future revenue, and we're very conservative with our thinking and reporting on comments here. Those companies are starting up with big market caps and no vehicles. The big companies are fielding their electric versions, and they have big sales plans, but we are only putting in our pipelines conservative revenue figures and operating income figures for the anchor orders that they have. There's upside on that in the future period, but we're going to wait until it turns into POs before we start talking big numbers in electric vehicles.
Chris Howe, Analyst
Great. I guess I'll squeeze one last one in about the partnership with Xos trucks. It's hard to ignore. As you said, it's groundbreaking. How should we think about this partnership from a long-term perspective? I imagine as we revisit this announcement a few years from now, some of the inflection for the electric vehicle business may be attributable to announcements like this.
Harold Bevis, CEO
Xos is a significant customer for us. We provide distinct advantages to companies like them, as we are a seasoned partner for vehicle manufacturers. Our full range of products allows us to offer a streamlined solution; one delivery of parts translates to one bill and one payment, simplifying the process. Our global presence aligns with the mature global truck market, and we have strategically located plants to support that. We have multiple programs with different types of vehicles from Xos, though most prefer to keep their partnership confidential under a non-disclosure agreement. We did request permission from Xos to announce our collaboration, which they agreed to. It's important to note that we have several similar relationships, but we cannot disclose details about them as they are still in progress. We are committed to partnering with companies that possess unique business strategies and sufficient capital, and we have faith in their initiatives. We are dedicated to promoting zero emissions and improving the planet while also working to reduce our reliance on a concentrated customer base, which we previously noted in our 10-K filing. We aim to diversify our partnerships and enhance our product offerings. We have shifted our focus towards providing design services instead of merely building to specifications created by others. We are developing our own designs, conducting tests, and taking responsibility for their performance, with expertise readily available to us. This is a significant advancement for our company, and we are enthusiastic about it. We are currently engaged in various vehicle projects on a global scale.
Operator, Operator
Your next question comes from the line of Barry Haimes with Sage Asset Management.
Barry Haimes, Analyst
Had a couple of questions. First one is, looking at this year, as volumes come up in the legacy businesses, what sort of incremental margin, variable margin should we be thinking about sales dropping down their pretax? And then as you add volumes in warehouse, what sort of variable margins?
Harold Bevis, CEO
Yes, that's a great question. Regarding the legacy ramp-up, we anticipate managing it effectively. We have the necessary fixed structures in place. For instance, although the outlook is for 302,000 Class 8 trucks this year in North America, we have the capacity to produce even more and have exceeded that capacity. Our teams are prepared to enhance variable contribution margins. As for warehouse automation and electric vehicles, they present unique challenges. You inquired about warehouse automation; we are currently expanding and commissioning a fifth plant, which introduces a new cost structure that includes rent and supervision that we previously did not have. We are experiencing some operational leverage on SG&A, and there’s slight leverage on the fixed costs within the plants. However, in this case, the leverage is not as strong because it comes with added costs due to our limited existing capacity and leadership bandwidth to manage that level of business expansion. Hence, we're gradually incurring additional costs.
Barry Haimes, Analyst
No, that makes sense. Any ranges you could give us numerically for the two businesses in terms of contribution margins?
Harold Bevis, CEO
I think in the past, the prior CFO gave guidance on that. I know what it is, but I don't really want to say. I don't want to give too much here, Chris.
Christopher Bohnert, CFO
Yes. The way I would characterize it is, you see where we're at in the full year. There's upsides and downsides. I think the upsides there, we're going to gain more leverage as we put more volume into the plants that make all the truck-related components. The downside is there's a little bit of supply chain pressure, as Harold mentioned. Steel prices have gone up and so forth. Net-net, I don't anticipate any significant changes in our margins. We've publicly disclosed that our warehouse automation margins are accretive overall, so as that business grows, you would see some uplift in gross margin there. That's kind of where it is.
Harold Bevis, CEO
At a minimum, obviously, we're going to commit to leverage over our SG&A. So I mean, that's a minimum. In warehouse automation a little bit in seating. Out of the two reportable segments, seating will leverage according to its historical rates.
Barry Haimes, Analyst
Got it. Okay. My other question is about EVs. You mentioned that 2021 is more of a development year. As we look to 2022, what kind of revenues should we expect? Is this the first year you'll really start delivering products? Additionally, if we look a year or two ahead with your current partners, what kind of run rate revenues might we anticipate? Any insights would be appreciated.
Harold Bevis, CEO
Yes. Underneath your question is what do I think the substitution rate is going to be between electrical and diesel engines in the truck market. That's going to be a driver behind my answer. If you look at the expected substitution rates, they vary by type of vehicle. Bus being the highest at 60%, we'll see all-electric buses and transit, and the lowest is Class 8 truck because of the dynamics of the pool and mid-range. The thinking is primarily going to be hydrogen fuel cell, alternate fuel but not electric totally, battery electric. As we smooth that out, we're trying to net grow ratios versus the truck build and deconcentrate our customer dependency that we've had. We want a top 10 or top 15 customer list instead of a top 4. We still want to be in diesel trucks as routes are staying like that globally. There is a lot of need for a diesel truck on certain routes, but we're going to be tougher on our economics. We previously cloned to those legacy positions like a life raft. We have some legacy positions that aren't very profitable, and we're staring into them. I hope to increase our profit and get that revenue. That's the win plus plus. We're not going to overcommit right now because we have to figure out who’s going to win or lose. There are so many players underway. But we have already added to our customer roster. We are getting new names on our customer list that we didn't have one year ago, and they're well-capitalized with anchor orders from premier companies. I can't say anything because that would identify our partners, but we are trying to penetrate the delivery van market, which we've never done before, and we've been successful. It's a key part of e-commerce.
Operator, Operator
Your next question comes from the line of Josh Taykowski with Crédit Suisse Asset Management.
Josh Taykowski, Analyst
Congrats on the results. Just wanted to talk a bit about the profitability in 4Q. Obviously, you saw some great expansion on the margin line year-over-year. But just wanted to ask a little bit further about the deterioration in margin sequentially from 3Q. I think you were kind of in the mid-8s EBITDA margin last quarter versus 6% this quarter. I realize there's a bit of seasonality, so not perfectly comparable, but is it possible to maybe bucket kind of the big drivers of that sequential contraction?
Christopher Bohnert, CFO
Yes, thanks for the question. We reported 6% adjusted EBITDA. There are a couple of one-time items in the fourth quarter. As Harold mentioned, we reinstated salaries to full strength along with the 401(k) plan, which affected the year-over-year comparisons. Additionally, we made some bonus adjustments in the fourth quarter of this year. Our increased stock price also impacts our other incentive compensation and our profit and loss. Those are the main factors in the fourth quarter of 2020.
Harold Bevis, CEO
Yes, there was nothing significant that occurred on the operational side. It was primarily a reconstruction of our SG&A model and the funding of discretionary incentive compensation. We had previously eliminated bonuses, which we announced in Q2, and then we began to catch up on that. We essentially had to fund a discretionary pool for a full year.
Josh Taykowski, Analyst
Got it. Makes sense. And then second question for me. Just on the legacy truck business, I know you've got the 1Q Class 8 truck builds expected for 1Q. I think it's up 14% year-over-year for this first quarter. Not asking for guidance from you for 1Q this year. But are you feeling in your own customer releases, that type of growth as we kind of end the first quarter here?
Harold Bevis, CEO
Yes. If you read these reports, I'll speak to you the highlights. The backlog in the industry is about nine months, and dealer inventories are low, and the miles traveled is good. There's a demand for vehicle capacity in North America. The natural replacement rate is around 260,000 trucks. That's how the trucks retire and need to be replaced to not add capacity just to stay even, and last year came out below that level. There was a pent-up demand. That’s why inventories are low at the dealer level as far as a backlog of new vehicle orders from the fleet. We are consistent with that and have a consistent outlook that shows that type of good demand environment. We get firm releases 30 days ahead in a frozen schedule: it's a JIT business. The demand is there. There are supply constraints that the industry is dealing with, chips and chemical chips globally because of COVID; everyone bought a PS5 and a new iPhone and all that. Chips are a problem, and the truck industry actually is way down the road, so we're not the first in line. There have been issues with steel and supply chain delays from China, and recently, with the weather in Texas, chemical outages affected foam. We make trim soft, and we use foam in our seating.
Operator, Operator
Your next question comes from the line of Steven Martin with Slater.
Steven Martin, Analyst
You made the comment that Chris had some work to do on the balance sheet. Can you get a little more specific about timing and you're sitting with a fair amount of cash while you're not paying down the debt a little more aggressively?
Harold Bevis, CEO
Yes, go ahead, Chris.
Christopher Bohnert, CFO
Steve. Yes. As you saw, we announced that we extended our ABL recently. Obviously, as I mentioned in the third quarter, we're taking a more active approach to managing the balance sheet, not only on the working capital side, making sure our terms are all appropriate, both on AR and AP, balancing that out a little better to stay cash flow positive. We are also working on, as it has been mentioned in the call, taking a look at our current debt structure to ensure it fits long-term with our business growth. That's very, very tight on the radar right now, and I think more to come on that. Obviously, our interest was really high in the fourth quarter, which is affecting, compared to the prior year.
Harold Bevis, CEO
And debt pay down.
Steven Martin, Analyst
The markets are currently quite aggressive, especially in the financing sectors for companies like yours.
Christopher Bohnert, CFO
Yes. We're seeing that as well.
Harold Bevis, CEO
On the cost-saving side, where do you stand on corporate general and administrative expenses? I know you've made some reductions there. As you evaluate the company's asset base, are there assets that can generate returns? The mainline strategy we have is to be a good partner to vehicle makers, have profitable productive relationships where our value-add is recognized in the form of pricing, and participate in the e-commerce spring from long-haul trucking, middle market, middle mile trucking, the warehouse itself, and logistics center in the last-mile delivery. We're mainstreaming into that macro trend. We also have complementary good businesses. We're in the European passenger car market. We're in the military equipment market. We're in recreational vehicles, material handling equipment, farm equipment, construction equipment, road paving equipment, a lot of different types of vehicle platforms. They're similar in that they have a long life, they're JIT produced and they have globally optimized cost structure in 10 geographies. If you force rank them, we know what's at the bottom. We don't have any of those operations losing money, so there's no addition by subtraction on a dollar basis, but it does improve your ratio. Chris and I are looking hard at the portfolio. We intend over time to transform the portfolio to support and win in these areas we're focusing on, but those are private things. Even if we were selling something this afternoon, I couldn't say it. It's on our things to-do list; we need to get our capital structure to be quote market and look at the portfolio. I mentioned earlier in the remarks on business development; we kind of have our hands full right now. The business is doing well and it's commanding our attention.
Steven Martin, Analyst
Okay. Can you provide some insight into the new automation business's key metrics over the next four quarters, since we don't have a historical background on it?
Harold Bevis, CEO
The builds are annual, so the top 50 retailers and shippers, right, that are in this. If you look at the industry, we mimic it. The industry reports what they plan to do and how they're going to compete against each other and beat on each other, and they all need physical infrastructure to pull that off as well as last mile delivery vehicles. So far, there's no cadence except we want more now. They perform an annual design freeze because they're very driven by software. You'll probably order something at your kitchen table this morning on your iPhone, and you expect it in 48 hours delivered to your doorstep in a delivery van. That whole shebang is very integrated software, preplanning inventory, and a smart warehouse and a smart connected delivery route. It’s secular; the desire for quick delivery is increasing. It doesn’t have a cadence, and the industry’s ability to deliver is behind our desire to get it. That’s why the industry is sold out for over a year. It will eventually have a pause, which we all know—it will probably be an exogenous event we aren’t anticipating. The core macro thing is pretty solid, and it’s just tied into consumer behavior.
Operator, Operator
Your next question comes from the line of John Franzreb with Sidoti.
John Franzreb, Analyst
Question has been addressed.
Harold Bevis, CEO
Okay. Amy, do we have any more questions in the queue?
Operator, Operator
There is one further question from the line of Mike Shlisky with Collier Securities.
Harold Bevis, CEO
All right, Mike, take us home.
Michael Shlisky, Analyst
Okay. I know we're kind of running long, but I've got one more for you, perhaps I can follow up later with other stuff. I noticed this was the first time I ever saw in your slide deck, in your press release that you never actually used the words Commercial Vehicle Group, only using CVG, and it appears to be scrubbed mostly from your website as well. I'm curious, do you have any major brand change underway or any long-term plan for how you name yourselves and call yourselves given that you're trying to go beyond just commercial vehicles?
Harold Bevis, CEO
You're correct that we've shortened ourselves to CVG. Commercial Vehicle Group adds credibility to what we're doing. There are commercial vehicles all along the route here. Is it a perfect name? No, but it's good enough. If you look at all the vehicle work that we're aligned with, they're not all commercial, of course, some military and recreational and other types of vehicles. If you could do it over again, would you probably not have to see in there? It's good enough. We started a social media campaign yesterday with our new image in the electric vehicle market, called CVG EV, and it’s rolling out right now. We're sticking with CVG and building upon it, which is net helpful. It’s net helpful, that legacy knowledge, and the name recognition. Thank you, Amy. With that, I think that we're through with the Q&A period.
Operator, Operator
All right. If you have any further closing remarks, please proceed.
Harold Bevis, CEO
Thank you, everyone, for your attention today, and we appreciate your support as current and future investors. We're very optimistic about our future, and we look forward to reporting our results in a balanced manner as we go through this. Thank you very much. With that, we'll end the call.
Operator, Operator
And this concludes today's conference call. Thank you for your participation. You may now disconnect.