Commercial Vehicle Group, Inc.

(UNAUDITED)

(Amounts in thousands, except for share and per share amounts and where specifically disclosed)

1. Description of Business and Basis of Presentation

Commercial Vehicle Group, Inc. and its subsidiaries, is a global provider of systems, assemblies and components to the global commercial vehicle market and the electric vehicle market. References herein to the "Company", "CVG", "we", "our", or "us" refer to Commercial Vehicle Group, Inc. and its subsidiaries.

We have manufacturing operations in the United States, Mexico, China, United Kingdom, Czech Republic, Ukraine, Thailand, India, Australia and Morocco. Our products are primarily sold in North America, Europe, and the Asia-Pacific region.

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 manufacturers, many construction and agricultural vehicle original equipment manufacturers ("OEMs"), parts and service dealers, and distributors.

The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America and the rules and regulations of the Securities and Exchange Commission and include the accounts of the Company and its subsidiaries. Except as disclosed within these condensed notes to unaudited quarterly consolidated financial statements, the adjustments made were of a normal, recurring nature. Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. Additionally, certain prior period amounts related to discontinued operations have been reclassified to conform to footnote presentation for the current year, as further described in this section.

During the year ended December 31, 2024, the Company sold its cab structures business with operations in Kings Mountain, North Carolina and its Industrial Automation segment including First Source Electronics (FSE) business with operations in Elkridge, Maryland. These divestitures represent a strategic shift in CVG's business and, in accordance with U.S. GAAP, qualified as discontinued operations. As a result, the operating results related to the cab structures business and Industrial Automation segment have been reflected as discontinued operations in the Consolidated Statements of Operations. See Note 18, Discontinued Operations, for additional information on the divestitures.

During the quarter ended March 31, 2025, the Company completed a strategic reorganization of its operations into three segments: Global Seating, Global Electrical Systems, and Trim Systems and Components. The reorganization was designed to enhance alignment with its customers and end markets which will allow the Company to better focus on growth opportunities, capital allocation and enhancing shareholder value. As a result of the strategic reorganization, the prior period amounts have been revised to conform to the Company’s current period presentation. The Company’s Chief Operating Decision Maker, its President and Chief Executive Officer, reviews financial information for these three reportable segments and makes decisions regarding the allocation of resources based on these segments. See Note 16, Segment Reporting, for more information.

The preparation of financial statements in conformity with GAAP in the United States requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods.

These condensed notes to unaudited quarterly consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K"), which includes a complete set of footnote disclosures, including the Company's significant accounting policies.

2. Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income-Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses. Additionally, in January 2025, the FASB issued ASU No. 2025-01 to clarify the effective date of ASU No. 2024-03. This ASU updates financial reporting to require public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This information is generally not presented in the financial statements today. The ASU also requires disclosure of the total amount of selling expenses and our definition of selling expenses. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.

3. Revenue Recognition

We had outstanding customer accounts receivable, net of allowances, of $119.5 million as of March 31, 2025 and $118.7 million as of December 31, 2024. We generally do not have material other assets or liabilities associated with customer arrangements.

Revenue Disaggregation -The following is the composition, by product category, of our revenues:

4. Debt

Debt consisted of the following:

Credit Agreement

On April 30, 2021, the Company and certain of its subsidiaries entered into a credit agreement (the “Credit Agreement”) between, among others, Bank of America, N.A. as administrative agent (the “Administrative Agent”) and other lenders party thereto (the “Lenders”) pursuant to which the Lenders made available a $150 million Term Loan Facility (the “Term Loan Facility”) and a $125 million Revolving Credit Facility (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Credit Facilities”). The Credit Facilities mature on May 12, 2027.

On May 12, 2022, the Company and certain of its subsidiaries entered into a second amendment (“Amendment No. 2”) to its Credit Agreement pursuant to which the Lenders upsized the existing term loan facility to $175 million in aggregate principal amount and increased the revolving credit facility commitments by $25 million to an aggregate of $150 million in revolving credit facility commitments.

On July 30, 2024, the Company and certain of its subsidiaries, as guarantors, entered into a third amendment (Amendment No. 3"), which amended the terms of the existing Credit Agreement to limit the mandatory prepayment requirements for certain specified asset dispositions of the Company and certain of its subsidiaries. The Company repaid $20.0 million in accordance with the terms of Amendment No.3 during the three months ended September 30, 2024.

On December 19, 2024, the Company and certain of its subsidiaries entered into a fourth amendment ("Amendment No. 4") to its credit agreement pursuant to which the Lenders reduced the existing term loan facility to $85 million in aggregate principal amount, reduced the revolving credit facility commitments by $25 million to an aggregate of $125 million in revolving credit facility commitments, and revised the covenant calculation including increasing the maximum consolidated total leverage ratio to 4.25:1.0 (which will be subject to step-downs to 3.75:1.0 at the end of the fiscal quarter ending September 30, 2025; and to 3.00:1.0 for each fiscal quarter thereafter). Subject to the terms of the amended Credit Agreement, the Revolving Credit Facility includes a $10 million swing line sublimit and a $10 million letter of credit sublimit. The amended Credit Agreement provides for an incremental term facility agreement and/or an increase of the Revolving Credit Facility, in a maximum aggregate amount of $15 million.

At March 31, 2025, we had $32.4 million of borrowings under the Revolving Credit Facility, outstanding letters of credit of $1.1 million and availability of $91.5 million. Combined with availability under our China Credit Facility (described below) of approximately $11.0 million, total consolidated availability was $102.5 million at March 31, 2025. The unamortized deferred financing fees associated with the Revolving Credit Facility of $0.7 million and $0.8 million as of March 31, 2025 and December 31, 2024, respectively, are being amortized over the remaining life of the Credit Agreement. At December 31, 2024, we had $50.5 million borrowings under the Revolving Credit Facility and we had outstanding letters of credit of $1.1 million.

Covenants and other terms

The Credit Agreement includes (a) a minimum consolidated fixed charge coverage ratio of 1.20:1.0, and (b) a maximum consolidated total leverage ratio of 4.25:1.0 (which is subject to step-downs to 3.75:1.0 at the end of the fiscal quarter ending September 30, 2025; to 3.00:1.0 for each fiscal quarter thereafter).

We were in compliance with these covenants as of March 31, 2025.

Repayment and prepayment

The Credit Agreement requires the Company to make quarterly amortization payments to the Term Loan Facility at an annualized rate of the loans under the Term Loan Facility for every year as follows:5.0%,7.5%,10.0%,12.5% and 15.0%. The Credit Agreement also requires all outstanding amounts under the Credit Facilities to be repaid in full on the Maturity Date.

The Credit Agreement requires mandatory prepayments from the receipt of proceeds of dispositions or debt issuance, subject to certain exceptions and the Company's ability to re-invest and use proceeds towards acquisitions permitted by the Credit Agreement.

Voluntary prepayments of amounts outstanding under the Credit Facilities are permitted at any time, without premium or penalty. See Note 15, Commitments and Contingencies, for the future minimum principal payments due on long-term debt for the next five years.

Foreign Facility

During the quarter ended March 31, 2023, we established a credit facility in China consisting of a line of credit which is subject to annual renewal (the "China Credit Facility"). The China Credit Facility was renewed during the quarter ended December 31, 2024, with availability of approximately $11.0 million (denominated in the local currency). We utilize the China Credit Facility to meet local working capital demands, fund letters of credit and bank guarantees, and support other short-term cash requirements of our China operations. We hadno outstanding borrowings under the China Credit Facility as of March 31, 2025 and December 31, 2024. At March 31, 2025, we had $11.0 million of availability under the China Credit Facility.

Cash Paid for Interest

For the three months ended March 31, 2025 and 2024, cash payments for interest were $2.8 million and $2.9 million, respectively.

5. Intangible Assets

Our definite-lived intangible assets were comprised of the following:

The aggregate intangible asset amortization expense was $0.1 million and $0.2 million for the three months ended March 31, 2025 and 2024, respectively.

6. Fair Value Measurement

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 - Unadjusted quoted prices in active markets for identical assets and liabilities.

Level 2 - Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3 - Significant unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

Our financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities, pension assets and liabilities. The carrying value of these instruments approximates fair value as a result of the short duration of such instruments or due to the variability of the interest cost associated with such instruments.

Recurring Measurements

Foreign Currency Forward Exchange Contracts. Our derivative assets and liabilities represent foreign exchange contracts that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk and counterparty credit risk. Based on the utilization of these inputs, the derivative assets and liabilities are classified as Level 2. To manage our risk for transactions denominated in Mexican Pesos and Czech Crown, we have entered into forward exchange contracts that are designated as cash flow hedge instruments, which are recorded in the Condensed Consolidated Balance Sheets at fair value. The gains and losses as a result of the changes in fair value of the hedge contract for transactions denominated in Mexican Pesos are deferred in accumulated other comprehensive loss and recognized in cost of revenues in the period the related hedge transactions are settled. As of March 31, 2025, hedge contracts for transactions denominated in Czech Crown were not designated as a hedging instruments; therefore, they are marked-to-market and the fair value of agreements is recorded in the Condensed Consolidated Balance Sheets with the offsetting gains and losses recognized in other (income) expense and recognized in cost of revenues in the period the related hedge transactions are settled in the Condensed Consolidated Statements of Operations.

Interest Rate Swaps. To manage our exposure to variable interest rates, we have entered into interest rate swaps to exchange, at a specified interval, the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount. The interest rate swaps are intended to mitigate the impact of rising interest rates on the Company and covered approximately 50% of outstanding debt under the Term Loan Facility. Any changes in fair value were included in earnings or deferred through Accumulated other comprehensive loss, depending on the nature and effectiveness of the offset.

Any ineffectiveness in a cash flow hedging relationship would be recognized immediately in earnings in the consolidated statements of operations.

During the quarter ended March 31, 2025, the Company entered into transactions to cash settle existing interest rate swaps and received proceeds of $0.6 million. The gain on the swap settlement has been recorded in Other comprehensive income (loss) and will be recognized over the life of the hedged transactions.

The fair values of our derivative assets and liabilities measured on a recurring basis are categorized as follows:

The following table summarizes the notional amount of our open foreign exchange contracts:

The following table summarizes the fair value and presentation of derivatives in the Condensed Consolidated Balance Sheets:

The following table summarizes the effect of derivative instruments on the Condensed Consolidated Statements of Operations:

We consider the impact of our credit risk on the fair value of the contracts, as well as our ability to honor obligations under the contract.

Other Fair Value Measurements

The fair value of long-term debt obligations is based on a fair value model utilizing observable inputs. Based on these inputs, our long-term debt fair value as disclosed was classified as Level 2 as of December 31, 2024. As of March 31, 2025 the classification was changed to a Level 3 due to the lack of observable market inputs or comparable instruments. Given the fact that our term loan matures on May 12, 2027, its carrying value approximates the fair value.

The carrying amounts and fair values of our long-term debt obligations are as follows:

1. Presented in the Condensed Consolidated Balance Sheets as the current portion of long-term debt of $13.9 million and long-term debt of $71.1 million as of March 31, 2025 and current portion of long-term debt of $8.4 million and long-term debt of $76.6 million as of December 31, 2024.

2. Leases

The components of lease expense are as follows:

Supplemental balance sheet information related to leases is as follows:

Cash payments on operating leases were $2.8 million and $2.5 million for the three months ended March 31, 2025 and 2024 respectively.

Anticipated future lease costs, which are based in part on certain assumptions to approximate annual rental commitments under non-cancelable leases, are as follows:

8. Income Taxes

We recorded a $2.1 million tax provision, or (207)% effective tax rate for the three months ended March 31, 2025, compared to a $0.7 million, or 32% effective tax rate for the three months ended March 31, 2024. The primary driver in the effective tax rate is the company's losses in the US while maintaining its full valuation allowance position on U.S. deferred tax assets. Income tax expense is based on an estimated annual effective tax rate, which requires management to make its best estimate of annual pretax income or loss. During the year, management regularly updates forecasted annual pretax results for the various countries in which the Company operates based on changes in factors such as prices, shipments, product mix, material inflation and manufacturing operations. To the extent that actual 2025 pretax results for U.S. and foreign income or loss vary from estimates, the actual income tax expense recognized in 2025 could be different from the forecasted amount used to estimate the income tax expense for the three months ended March 31, 2025.

For the three months ended March 31, 2025 and 2024, cash paid for taxes, net of refunds received, were $0.8 million and $1.9 million, respectively.

9. Pension and Other Post-Retirement Benefit Plans

The components of net periodic (benefit) cost related to pension and other post-retirement benefit plans is as follows:

Net periodic cost components, not inclusive of service costs, are recognized in other (income) expense within the Condensed Consolidated Statements of Operations.

10. Performance Awards

The following table summarizes performance awards granted in the form of cash awards under the equity incentive plans:

Unrecognized compensation expense was $0.2 million and $4.1 million as of March 31, 2025 and 2024, respectively.

11. Share-Based Compensation

The company's outstanding share-based compensation is comprised solely of restricted stock awards and performance stock awards to be settled in stock.

As of March 31, 2025, there was approximately $3.4 million of unrecognized compensation expense related to unvested share-based compensation arrangements granted under our equity incentive plans. This expense is subject to future adjustments and forfeitures and will be recognized on a straight-line basis over the remaining period listed above for each grant.

A summary of the status of our restricted stock awards as of March 31, 2025 and changes during the three months ended March 31, 2025, are presented below:

As of March 31, 2025, a total of 0.5 million shares were available for future grants from the shares authorized for award under our 2020 Equity Incentive Plan, including cumulative forfeitures.

12. Stockholders’ Equity

Common Stock — Our authorized capital stock consists of 60,000,000 shares of common stock with a par value of $0.01 per share; of which,33,693,402 and 33,694,396 shares were issued and outstanding as of March 31, 2025 and December 31, 2024, respectively.

Preferred Stock — Our authorized capital stock also consists of 5,000,000 shares of preferred stock with a par value of $0.01 per share, withno preferred shares outstanding as of March 31, 2025 and December 31, 2024.

Earnings (Loss) Per Share - Basic earnings (loss) per share is determined by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share presented is determined by dividing net income (loss) by the weighted average number of common shares and potential common shares outstanding during the period as determined by the treasury stock method. Potential common shares are included in the diluted earnings per share calculation when dilutive.

Diluted earnings (loss) per share for the three months ended March 31, 2025 and 2024 includes the effect of potential common shares issuable when dilutive, and is as follows:

There were 646 thousand outstanding restricted shares awarded that were excluded from the calculation of diluted earnings (loss) per share for the three months ended March 31, 2025 and 408 thousand outstanding restricted shares awarded were excluded from the calculation of diluted earnings (loss) per share for the three months ended March 31, 2024.

13. Other Comprehensive Income (Loss)

The after-tax changes in accumulated other comprehensive income (loss), are as follows:

The related tax effects allocated to each component of other comprehensive income (loss) are as follows:

As of March 31, 2025, the Company estimates that net pre-tax derivative loss of $0.4 million included in Accumulated other comprehensive income (loss) will be reclassified into earnings within the next 12 months.

14. Cost Reduction and Manufacturing Capacity Rationalization

The Company's restructuring program seeks to align cost structure to support margin expansion. The program includes workforce reductions and footprint optimization across segments.

The changes in accrued restructuring balances are as follows:

All of the $0.7 million costs incurred in the three months ended March 31, 2025 for restructuring related to headcount reductions. Of the $0.7 million costs incurred in the three months ended March 31, 2025 for restructuring, $0.5 million were recorded in cost of revenue and $0.2 million were recorded in selling, general and administrative expenses.

Of the $1.8 million costs incurred in the three months ended March 31, 2024 for restructuring, $1.5 million related to headcount reductions and $0.3 million related to facility exit and other. Of the $1.8 million costs incurred in the three months ended March 31, 2024 for restructuring, $1.6 million were recorded in cost of revenue and $0.2 million were recorded in selling, general and administrative expenses. Of the $1.8 million costs incurred in three months ended March 31, 2024 for restructuring, $1.1 million related to headcount in the Global Electrical Systems segment and $0.5 million related to headcount reductions in the Trim Systems and Components segment.

15. Commitments and Contingencies

Leases - As disclosed in Note 7, Leases, we lease office, warehouse and manufacturing space and equipment under non-cancelable operating lease agreements that generally require us to pay maintenance, insurance, taxes and other expenses in addition to annual rental fees. As of March 31, 2025, our equipment leases did not provide for any material guarantee of a specified portion of residual values.

Guarantees - Costs associated with guarantees are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of available facts; where no amount within a range of estimates is more likely, the minimum is accrued. As of March 31, 2025 and 2024, we had no such guarantees.

Litigation - We are subject to various legal proceedings and claims arising in the ordinary course of business, including but not limited to product liability claims, customer and supplier disputes, service provider disputes, examinations by taxing authorities, employment disputes, workers’ compensation claims, unfair labor practice charges, OSHA investigations, intellectual property disputes and environmental claims arising out of the conduct of our businesses.

Management believes that the Company maintains adequate insurance and that we have established reserves for issues that are probable and estimable in amounts that are adequate to cover reasonable adverse judgments not covered by insurance. Based upon the information available to management and discussions with legal counsel, it is the opinion of management that the ultimate outcome of the various legal actions and claims that are incidental to our business are not expected to have a material adverse impact on the consolidated financial position, results of operations, equity or cash flows; however, such matters are subject to many uncertainties and the outcomes of individual matters are not predictable with any degree of assurance.

Warranty - We are subject to warranty claims for products that fail to perform as expected due to design or manufacturing deficiencies. Depending on the terms under which we supply products to our customers, a customer may hold us responsible for some or all of the repair or replacement costs of defective products when the product supplied did not perform as represented. Our policy is to record provisions for estimated future customer warranty costs based on historical trends and for specific claims. These amounts, as they relate to the periods ended March 31, 2025 and December 31, 2024, are included within accrued liabilities and other in the accompanying Condensed Consolidated Balance Sheets.

On July 24, 2023, one of our customers issued a voluntary safety recall related to certain wiper system components supplied by us. To the extent a loss occurs that is attributed to us, we believe that we have reasonable levels of insurance coverage to mitigate recall exposure risk. It is reasonably possible that we will incur additional losses and fees above the amount accrued for warranty claims but we cannot estimate a range of such reasonably possible losses or fees related to these claims at this time. There are no assurances, however, that settlements reached and/or adverse judgments received, if any, will not exceed amounts normally accrued.

The following presents a summary of the warranty provision for the three months ended March 31, 2025:

Debt Payments - As disclosed in Note 4, Debt, the Credit Agreement requires the Company to repay a fixed amount of principal on a quarterly basis and make voluntary prepayments that coincide with certain events.

The following table provides future minimum principal payments due on long-term debt for the next five years. The existing long-term debt agreement matures in 2027; no payments are due thereafter:

16. Segment Reporting

During the quarter ended March 31, 2025, the Company completed a strategic reorganization of its operations into three segments: Global Seating, Global Electrical Systems, and Trim Systems and Components. The reorganization was designed to enhance alignment with its customers and end markets which will allow the Company to better focus on growth opportunities, capital allocation and enhancing shareholder value. As a result of the strategic reorganization, the prior period amounts have been revised to conform to the Company’s current period presentation.

Our President and Chief Executive Officer is the Company’s chief operating decision maker (“CODM”). The CODM uses segment operating income compared to historical results, budgets, and forecasted financial information, in order to assess segment performance and allocate operating and capital resources. During the quarter ended March 31, 2025, the Company revised its method for allocating corporate expenses to segment operating income to better align with how the segments utilize corporate support activities. This change provides the CODM meaningful segment profitability information to support operating decisions and the allocation of resources. The prior period amounts have been revised to conform to the Company’s current period presentation.

Certain of our facilities manufacture and sell products through multiple product lines. The products produced by each of our segments are more specifically described below.

The Global Seating segment designs, manufactures and sells the following products:

•Commercial vehicle seats for the global commercial vehicle markets including heavy duty trucks, medium duty trucks, last mile delivery trucks and vans, construction and agriculture equipment in North America, Europe and Asia-Pacific. This segment includes a portion of the company’s activities in the electric vehicle market.

•Seats and components sold into the commercial vehicle channels that provide repair and refurbishing. These channels include Original Equipment Service ("OES") centers and retail distributors, and are spread across North America, Europe and Asia-Pacific.

•Office seats primarily sold into the commercial and home office furniture distribution channels in Europe and Asia-Pacific.

The Global Electrical Systems segment designs, manufactures and sells the following products:

•Cable and harness assemblies for both high and low voltage applications, control boxes, dashboard assemblies and design and engineering for these applications.

•The end markets for these products are construction, agricultural, industrial, automotive (both internal combustion and electric vehicles), truck, mining, rail, marine, power generation and the military/defense industries in North America, Europe and Asia-Pacific.

The Trim Systems and Components segment designs, manufactures and sells the following products:

•Plastic components ("Trim") primarily for the North America commercial vehicle market, MD/HD truck market and power sports markets.

•Commercial vehicle accessories including wipers, mirrors, and sensors. These products are sold both as Original Equipment and as repair products.

The following tables present financial information for the Company's reportable segments for the periods indicated:

1. Segment operating income includes allocated corporate operating expenses associated with central services such as procurement, quality, logistics, environmental health and safety, information technology, insurance, finance, credit and collections, treasury and human resources. Operating expenses related to corporate headquarter functions are primarily allocated to each segment based on revenue contribution.

2. Unallocated corporate costs include enterprise and governance stewardship which include listing fees, audit fees, compliance costs, insurance costs, Board of Directors fees, and corporate management stock-based compensation expenses. Finally, interest expense, income taxes, and certain other items included in Other (income) expense, which are managed on a consolidated basis, are not allocated to the operating segments.

3. Other Financial Information

Items reported in inventories consisted of the following:

Items reported in property, plant, and equipment, net consisted of the following:

Items reported in accrued expenses and other liabilities consisted of the following:

18. Discontinued Operations

On July 31, 2024, the Company entered into a purchase agreement to sell its cab structures business with operations in Kings Mountain, North Carolina for approximately $40 million. On September 6, 2024, the Company entered into an Amendment to the Purchase Agreement whereby the transaction closed on September 6, 2024 with the Company receiving $20 million of the purchase price on September 6, 2024 and $20 million (subject to adjustment) on October 1, 2024. The decision to divest this business was part of our strategy to reduce our exposure to the cyclical Class 8 market, lower our customer concentration, remove complexity from our business, and improve our return profile.

On October 30, 2024, the Company entered into a purchase agreement to sell its First Source Electronics (FSE) business with operations in Elkridge, Maryland for approximately $1.5 million, with a note in the amount of $0.5 million and earn out potential of an additional $1.5 million subject to certain criteria. The Elkridge facility was the primary manufacturing facility of the Company's Industrial Automation segment. The decision to divest this business was part of our strategy to continually evaluate our portfolio of businesses and product lines for strategic fit and continued investment.

We determined that the sale of the cab structures and Industrial Automation businesses represent discontinued operations as they constitute disposals of a product line and an operating segment, respectively, and are a strategic shift that will have a major effect on our operations and financial results (individually and collectively). As a result, we reclassified the related earnings (loss) from continuing operations to earnings (loss) from discontinued operations - net of income taxes on the consolidated statement of earnings (loss) for all the periods presented. No amounts for shared general and administrative operating support expense were allocated to the discontinued operation.

The Company has continuing involvement with the cab structures business through a transition services agreement (TSA), pursuant to which the Company and Buyer parties provide certain service to each other for a period of time following the disposition, up to one year. While the transition services are expected to vary in duration depending upon the type of service provided, the Company expects to reduce costs as the transition services are completed. The Company recognized $0.4 million of income related to the transition services agreement for the three months ended March 31, 2025, which was presented in Continuing operations, Other (income) expense in the Condensed Consolidated Statements of Operations.

The following table provides a reconciliation of the individual discontinued operations to the Condensed Consolidated Statements of Operations for the three and three months ended March 31, 2025 and 2024.

The following tables present reconciliations of the captions within CVG's Condensed Consolidated Statements of Operations attributable to each discontinued operation for the three and three months ended March 31, 2025 and 2024.

The following tables present reconciliations of the captions within CVG's Condensed Consolidated Statements of Cash Flows attributable to discontinued operations for the three months ended March 31, 2025 and 2024.