Commercial Vehicle Group Inc

Previous wording

The discussion and analysis below described material changes in financial condition and results of operations as reflected in our condensed consolidated financial statements for the three months ended March 31, 2024 and 2023. This discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K.

Current wording

The discussion and analysis below described material changes in financial condition and results of operations as reflected in our condensed consolidated financial statements for the three and six months ended June 30, 2024 and 2023. This discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K.

Previous wording

We primarily manufacture customized products to meet the requirements of our customer. We believe our products are used by a majority of the North American Commercial Truck markets, many construction vehicle OEMs and top e-commerce retailers

Current wording

We primarily manufacture customized products to meet the requirements of our customers. We believe our products are used by a majority of the North American Commercial Truck markets, many construction vehicle OEMs and top e-commerce retailers

Previous wording

During the year ended December 31, 2023, management approved restructuring programs to align the Company’s cost structure to support margin expansion. The programs include workforce reductions and footprint optimization across segments. We incurred $1.9 million expense during the three months ended March 31, 2024 related to these programs.

Current wording

During the year ended December 31, 2023 and the six months ended June 30, 2024, management approved restructuring programs to align the Company’s cost structure to support margin expansion in key focus areas. The programs include workforce reductions, footprint optimization, and fundamental reorganization initiatives that were implemented to drive efficiencies and reduce operating costs in line with our go-forward business and financial objectives. We incurred $6.8 million expense during the six months ended June 30, 2024, related to these programs.

Previous wording

•a $21.6 million, or 10.0%, decrease in OEM and other revenues;

Current wording

•a $25.3 million, or 11.7%, decrease in OEM and other revenues;

Previous wording

•a $3.6 million, or 9.5%, decrease in aftermarket and OES sales; and

Current wording

•a $3.0 million, or 8.1%, decrease in aftermarket and OES sales; and

Previous wording

The decrease in revenues of 11.7% is due primarily to a softening in customer demand, the wind-down of certain programs in our Vehicle Solutions segment, and a further decline in our Industrial Automation and Aftermarket segments, partially offset by increased pricing in our Electrical Systems segment.

Current wording

The decrease in revenues of 12.3% is due primarily to a softening in customer demand in our Electrical Systems and Vehicle Solutions segments, the wind-down of certain programs in our Vehicle Solutions segment, and a decline in our Industrial Automation and Aftermarket segments.

Previous wording

Gross Profit. Included in gross profit is cost of revenues, which consists primarily of raw materials and purchased components for our products, wages and benefits for our employees and overhead expenses such as manufacturing supplies, facility rent and utilities costs related to our operations. The $8.5 million decrease in gross profit is primarily attributable to the impact of lower sales volumes partially offset by increased pricing. Cost of revenues decreased $22.1 million, or 9.7%, as a result of a decrease in raw material and purchased component costs of $22.9 million, or 15.5%, offset by an increase in labor and overhead expenses of $0.8 million, or 0.9%. As a percentage of revenues, gross profit margin was 11.5% for the three months ended March 31, 2024 compared to 13.4% for the three months ended March 31, 2023.

Current wording

Gross Profit. Included in gross profit is cost of revenues, which consists primarily of raw materials and purchased components for our products, wages and benefits for our employees and overhead expenses such as manufacturing supplies, facility rent and utilities costs related to our operations. The $17.4 million decrease in gross profit is primarily attributable to the impact of lower sales volumes, unfavorable mix and increased restructuring charges. Cost of revenues decreased $14.9 million, or 6.6%, as a result of a decrease in raw material and purchased component costs of $16.3 million, or 11.4%, offset by an increase in labor and overhead expenses of $1.4 million, or 1.7%. As a percentage of revenues, gross profit margin was 9.1% for the three months ended June 30, 2024 compared to 14.6% for the three months ended June 30, 2023. The three months ended June 30, 2024 results include charges of $4.7 million associated with restructuring programs.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative ("SG&A") expenses consist primarily of wages and benefits and other expenses such as marketing, travel, legal, audit, rent and utilities costs, which are not directly or indirectly associated with the manufacturing of our products. SG&A expenses decreased $0.5 million compared to the three months ended March 31, 2023, primarily as a result of reduced incentive compensation expense, partially offset by an increase in salary expense during the 2024 period. As a percentage of revenues, SG&A expense was 8.7% for the three months ended March 31, 2024 compared to 7.8% for the three months ended March 31, 2023.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative ("SG&A") expenses consist primarily of wages and benefits and other expenses such as marketing, travel, legal, audit, rent and utilities costs, which are not directly or indirectly associated with the manufacturing of our products. SG&A expenses decreased $2.2 million compared to the three months ended June 30, 2023, primarily as a result of reduced incentive compensation expense, partially offset by an increase in salary expense and consulting spend during the 2024 period. As a percentage of revenues, SG&A expense was 8.8% for the three months ended June 30, 2024 compared to 8.6% for the three months ended June 30, 2023. The three months ended June 30, 2024 results include charges of $0.2 million associated with restructuring programs.

Previous wording

Interest Expense. Interest associated with our debt was $2.3 million and $2.9 million for the three months ended March 31, 2024 and 2023, respectively. The decrease in interest expense primarily related to lower average debt balances and lower interest rates on variable rate debt during the respective comparative periods.

Current wording

Interest Expense. Interest associated with our debt was $2.5 million and $2.8 million for the three months ended June 30, 2024 and 2023, respectively. The decrease in interest expense primarily related to lower average debt balances offset by higher interest rates on variable rate debt during the respective comparative periods.

Previous wording

Revenues. The decrease in Vehicle Solutions Segment revenues of $22.7 million was primarily driven by a lower customer demand and the wind-down of certain programs.

Current wording

Revenues. The decrease in Vehicle Solutions Segment revenues of $11.8 million was primarily driven by a lower customer demand and the wind-down of certain programs.

Previous wording

Gross Profit. The decrease in gross profit of $3.2 million was primarily attributable to lower customer demand and increased freight offset by a decrease in cost of revenues driven by a decrease in raw material and purchased component costs of $15.6 million, or 16.4%, and a decrease in labor and overhead expenses of $3.8 million, or 8.4%.

Current wording

Gross Profit. The decrease in gross profit of $9.3 million was primarily attributable to lower customer demand, operational remediation investments and increased freight offset by a decrease in cost of revenues. The decrease in cost of revenues was driven by a decrease in raw material and purchased component costs of $2.2 million, or 2.5%, and a decrease in labor and overhead expenses of $0.3 million, or 0.7%.

Previous wording

As a percentage of revenues, gross profit margin was 8.2% for the three months ended March 31, 2024 compared to 15.2% for the three months ended March 31, 2023. The decrease in gross profit margin was primarily due to restructuring activities, labor inflation, and unfavorable foreign exchange impacts. The three months ended March 31, 2024 results include charges of $1.1 million associated with the restructuring program.

Current wording

As a percentage of revenues, gross profit margin was 6.3% for the three months ended June 30, 2024 compared to 16.3% for the three months ended June 30, 2023. The decrease in gross profit margin was primarily due to lower customer demand, restructuring costs, labor inflation, and unfavorable foreign exchange impacts. The three months ended June 30, 2024 results include charges of $1.4 million associated with the restructuring program.

Previous wording

Revenues. The decrease in Aftermarket & Accessories Segment revenues of $3.6 million primarily resulted from lower sales volume due to decreased customer demand and the reduction of backlog in the prior period.

Current wording

Revenues. The decrease in Aftermarket & Accessories Segment revenues of $3.0 million primarily resulted from lower sales volume due to decreased customer demand and the reduction of backlog in the prior period.

Previous wording

Gross Profit. The decrease in gross profit is primarily attributable to lower sales volume. Cost of revenues decreased in line with the sales decrease of 9.5%, driven by a decrease in raw material and purchased component costs of $2.7 million, or 13.6%; and a decrease in labor and overhead expenses of $0.1 million, or 1.1%.

Current wording

Gross Profit. The decrease in gross profit of $1.3 million is primarily attributable to lower sales volume. Cost of revenues decreased in line with the sales decrease of 8.1%, driven by a decrease in raw material and purchased component costs of $2.6 million, or 14.3%; offset by an increase in labor and overhead expenses of $1.0 million, or 9.1%.

Previous wording

Gross Profit. The decrease in gross profit of $0.8 million was primarily attributable to lower sales volume. Cost of revenues decreased in line with the sales decrease of 55.9%, driven by a decrease in raw material and purchased component costs of $4.2 million, or 62.2%; and a decrease in labor and overhead expenses of $0.4 million, or 15.8%.

Current wording

Gross Loss. The decrease in negative gross profit of $0.4 million was primarily attributable to benefits from restructuring programs implemented in 2023. Cost of revenues decreased in line with the sales decrease of 44.6%, driven by a decrease in raw material and purchased component costs of $4.4 million, or 58.0%; and a decrease in labor and overhead expenses of $0.1 million, or 4.6%.

Previous wording

As a percentage of revenues, gross profit margin was (12.9)% for the three months ended March 31, 2024 compared to 2.2% for the three months ended March 31, 2023. The decrease in gross profit margin is primarily due to the previously noted lower sales volume. The three months ended March 31, 2024 results include charges of $0.1 million associated with the restructuring program.

Current wording

As a percentage of revenues, negative gross profit margin was 3.8% for the three months ended June 30, 2024 compared to 7.1% for the three months ended June 30, 2023. The decrease in negative gross profit margin is primarily due to benefits from restructuring programs implemented in 2023. The three months ended June 30, 2024 results include charges of $0.1 million associated with the restructuring program.

Previous wording

Provision for Income Taxes. Income tax expense of $1.2 million and $3.3 million was recorded for the three months ended March 31, 2024 and 2023, respectively. The period over period change in income tax was primarily attributable to a $7.8 million decrease in pre-tax income versus the prior year period.

Current wording

Provision for Income Taxes. An income tax provision of $0.8 million and $5.9 million were recorded for the six months ended June 30, 2024 and 2023, respectively. The period over period change in income tax was primarily attributable to the $22.6 million decrease in pre-tax income versus the prior year period.

Previous wording

Net Income. Net income was $2.9 million for the three months ended March 31, 2024 compared to $8.7 million for the three months ended March 31, 2023. The decrease in net income is attributable to the factors noted above.

Current wording

Net Income. Net income was $1.3 million for the six months ended June 30, 2024 compared to $18.8 million for the six months ended June 30, 2023. The decrease in net income is attributable to the factors noted above.

Previous wording

Selling, General and Administrative Expenses. SG&A expenses increased $0.3 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Selling, General and Administrative Expenses. SG&A expenses increased $0.3 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Previous wording

Selling, General and Administrative Expenses. SG&A expenses increased $0.4 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily attributable to investment in new product development.

Current wording

Selling, General and Administrative Expenses. SG&A expenses decreased $0.2 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily driven by restructuring to be in line with the size of business partially offset by an investment in new product development.

Previous wording

As of March 31, 2024, the Company hadtotal liquidity of $189.3 million, including $46.8 million of cash and $142.5 million of availability from its U.S. and China credit facilities.

Current wording

As of June 30, 2024, the Company hadtotal liquidity of $192.2 million, including $39.3 million of cash and $152.9 million of availability from its U.S. and China credit facilities.

Previous wording

Our primary sources of liquidity as of March 31, 2024 were operating income, cash and availability under our credit facility. We believe that these sources of liquidity will provide adequate funds for our working capital needs, capital expenditures and debt service throughout the next twelve months. However, no assurance can be given that this will be the case. We also rely on the timely collection of receivables as a source of liquidity. As of March 31, 2024, we had outstanding letters of credit of $1.1 million and borrowing availability of $142.5 million from our U.S. and China credit facilities.

Current wording

Our primary sources of liquidity as of June 30, 2024 were operating income, cash and availability under our credit facility. We believe that these sources of liquidity will provide adequate funds for our working capital needs, capital expenditures and debt service throughout the next twelve months. However, no assurance can be given that this will be the case. We also rely on the timely collection of receivables as a source of liquidity. As of June 30, 2024, we had outstanding letters of credit of $1.1 million and borrowing availability of $152.9 million from our U.S. and China credit facilities.

Previous wording

As of March 31, 2024, cash of $46.8 million was held by foreign subsidiaries. The Company had a$0.5 million deferred tax liability as of March 31, 2024 for theexpected future income tax implications of repatriating cash from the foreign subsidiaries for which indefinite reinvestment is not expected.

Current wording

As of June 30, 2024, cash of $39.3 million was held by foreign subsidiaries. The Company had a$0.6 million deferred tax liability as of June 30, 2024 for theexpected future income tax implications of repatriating cash from the foreign subsidiaries for which indefinite reinvestment is not expected.

Previous wording

Operating activities. For the three months ended March 31, 2024, net cash used in operating activities was $2.4 million compared to net cash provided by operating activities of $0.1 million for the three months ended March 31, 2023. Net cash used in operating activities is primarily attributable to a smaller increase in working capital offset by the decrease in net income from the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Current wording

Operating activities. For the six months ended June 30, 2024, net cash provided by operating activities was $10.2 million compared to $11.5 million for the six months ended June 30, 2023. Net cash provided by operating activities is primarily attributable to a decrease in working capital for the six months ended June 30, 2024 as compared to higher net income offset by an increase in working capital for the six months ended June 30, 2023.

Previous wording

Investing activities. For the three months ended March 31, 2024, net cash used in investing activities of $1.9 million compared to $3.3 million for the three months ended March 31, 2023 was mainly due to an increase in capital expenditures, offset by $3.2 million proceeds from sale of the Company's FinishTEK business during the quarter. In 2024, we expect capital expenditures to be in the range of $25 million to $30 million.

Current wording

Investing activities. For the six months ended June 30, 2024, net cash used in investing activities of $8.1 million compared to $9.2 million for the six months ended June 30, 2023 was mainly due to a decrease in capital expenditures, offset by $3.2 million proceeds from sale of the Company's FinishTEK business during the current period. In 2024, we expect capital expenditures to be in the range of $25 million to $30 million.

Previous wording

Financing activities. For the three months ended March 31, 2024, net cash provided by financing activities was $14.2 million compared to $12.4 million for the three months ended March 31, 2023. Net cash provided by financing activities for the three months ended March 31, 2024 is attributable to borrowings under the revolving credit facility to fund the working capital increase.

Current wording

Financing activities. For the six months ended June 30, 2024, net cash provided by financing activities was $0.4 million compared to $7.9 million for the six months ended June 30, 2023. Decrease in net cash provided by financing activities in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 is primarily attributable to a decrease in borrowings under the revolving credit facility to fund the working capital.

Previous wording

This Quarter Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. For this purpose, any statements contained herein that are not statements of historical fact, including without limitation, certain statements under “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry outlook, the Company’s expectations for future periods with respect to its plans to improve financial results, the future of the Company’s end markets, changes in the Class 8 and Class 5-7 North America truck build rates, performance of the global construction equipment business, the Company’s prospects in the wire harness, warehouse automation and electric vehicle markets, the Company’s initiatives to address customer needs, organic growth, the Company’s strategic plans and plans to focus on certain segments, competition faced by the Company, volatility in and disruption to the global economic environment, including inflation and labor shortages, financial covenant compliance, anticipated effects of acquisitions, production of new products, plans for capital expenditures and our results of operations or financial position and liquidity, may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believe”, “anticipate”, “plan”, “expect”, “intend”, “will”, “should”, “could”, “would”, “project”, “continue”, “likely”, and similar expressions, as they relate to us, are intended to identify forward-looking statements. The important factors discussed in “Item 1A - Risk Factors”, among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations. Additionally, various economic and competitive factors could cause actual results to differ materially from those discussed in such forward-looking statements, including, but not limited to, factors which are outside our control.

Current wording

This Quarter Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. For this purpose, any statements contained herein that are not statements of historical fact, including without limitation, certain statements under “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry outlook, the Company’s expectations for future periods with respect to closing of the recently-announced sale of its Cab Structures Business, its plans to improve financial results, the future of the Company’s end markets, changes in the Class 8 and Class 5-7 North America truck build rates, performance of the global construction and agricultural equipment business, the Company’s prospects in the wire harness, warehouse automation and electric vehicle markets, the Company’s initiatives to address customer needs, organic growth, the Company’s strategic plans and plans to focus on certain segments, competition faced by the Company, volatility in and disruption to the global economic environment, including inflation and labor shortages, financial covenant compliance, anticipated effects of acquisitions, production of new products, plans for capital expenditures and our results of operations or financial position and liquidity, may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believe”, “anticipate”, “plan”, “expect”, “intend”, “will”, “should”, “could”, “would”, “project”, “continue”, “likely”, and similar expressions, as they relate to us, are intended to identify forward-looking statements. The important factors discussed in “Item 1A - Risk Factors”, among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations. Additionally, various economic and competitive factors could cause actual results to differ materially from those discussed in such forward-looking statements, including, but not limited to, factors which are outside our control.