Commercial Vehicle Group Announces Third Quarter 2019 Results
November 06, 2019 at 16:05 PM EST
NEW ALBANY, Ohio, Nov. 6, 2019 /PRNewswire/ -- Commercial Vehicle Group, Inc. (the "Company" or "CVG") (NASDAQ: CVGI) today reported financial results for the third quarter ended September 30, 2019.
"Continued strength in the North American heavy- and medium-duty truck markets was offset by ongoing weakness in the global construction markets, resulting in flat revenues compared to the prior year," commented Patrick Miller, President and Chief Executive Officer. "While we continue to be faced with ongoing cost headwinds, operationally the business performed as expected. We are starting to see the peak production levels in the North American Class 8 truck market recede and expect a return to more typical replacement levels for the medium term. As a result, we are highly focused on aligning our cost structure with lower build rates."
"In the third quarter, we enhanced our Electrical Systems segment with the strategic acquisition of the assets of First Source Electronics, LLC ("FSE"), an electronics system integrator (the "FSE Acquisition"). FSE complements our high complexity, low- to medium-volume electrical business, while extending our customer and market diversification. In addition, FSE will be a strong contributor to our long-term growth, providing us with the opportunity to leverage our global footprint and maximize cross selling opportunities," Mr. Miller concluded.
Tim Trenary, Chief Financial Officer stated, "The 50-basis point decline in gross profit margin for the quarter compared to the prior year period is attributable in part to the statutorily higher minimum wage in Mexico and costs associated with a troubled supplier. However, the impact of these costs have moderated. We continue to invest strategically in the business through corporate development activities, which includes our recent acquisition of FSE. These investments totaled $1.6 million in the third quarter, which largely drove the increase in selling, general and administrative expenses. With regards to the Company's balance sheet, net leverage at September 30, 2019 was 1.6 times trailing twelve months EBITDA; liquidity was $109 million."
Third Quarter 2019 Results
At September 30, 2019, the Company had liquidity of $109.2 million: $38.7 million of cash and $70.5 million of availability from our asset-based revolver. There were no borrowings on our asset-based revolver at September 30, 2019.
Electrical Systems Segment
Third Quarter 2019 Results
Global Seating Segment
Third Quarter 2019 Results
End Market Outlook
Management estimates that 2019 North American Class 8 truck production will approximate 345,000 units and 2019 North American Class 5-7 production will approximate 273,000 units. September 2019 year to date Class 8 production was 275,000 units and Class 5-7 production was 209,000 units. These Class 8 projections reflect a reduction in fourth quarter build of approximately 20% from the average year to date. Fourth quarter production is historically lower due to less work days. Furthermore, there has been and we anticipate continued pullback in Class 8 truck builds in the quarter. In addition, the construction markets we serve which have been lower in Asia Pacific are now softening in North America and Europe. Because of the slowing end market demand described above, our revenues are likely to decline in the fourth quarter compared to the prior year period, which is expected to have a negative impact on our reported earnings.
GAAP to Non-GAAP Reconciliation
A reconciliation of GAAP to non-GAAP financial measures referenced in this release is included as Appendix A.
A conference call to discuss this press release is scheduled for Thursday, November 7, 2019, at 8:00 a.m. ET. To participate, dial (844) 743-2497 using conference code 9970124.
This call is being webcast by NASDAQ. The webcast, as well as a supplemental earnings presentation, can be accessed through the "Investors" section of Commercial Vehicle Group's Web site at www.cvgrp.com, where it will be archived for one year.
A telephonic replay of the conference call will be available for a period of two weeks following the call. To access the replay, dial (855) 859-2056 using access code 9970124.
About Commercial Vehicle Group, Inc.
Commercial Vehicle Group, Inc. (through its subsidiaries) is a leading supplier of electrical wire harnesses, seating systems, and a full range of other cab related products for the global commercial vehicle markets, including medium- and heavy-duty trucks ("MD/HD Truck") and medium- and heavy-construction vehicles. We also supply electrical wire harnesses, control panels, electro-mechanical and cable assemblies, seating systems and other products to automotive, military, bus, agriculture, transportation, mining, industrial and off-road recreational markets. Information about the Company and its products is available on the internet at www.cvgrp.com.
This press release contains forward-looking statements that are subject to risks and uncertainties. These statements often include words such as "believe", "anticipate", "plan", "expect", "intend", "will", "should", "could", "would", "project", "continue", "likely", and similar expressions. In particular, this press release may contain forward-looking statements about Company expectations for future periods with respect to its plans to improve financial results and enhance the Company, the future of the Company's end markets, including Class 8 and Class 5-7 North America truck build rates and performance of the global construction equipment business, expected cost savings, the Company's initiatives to address customer needs, organic growth, the Company's plans to focus on certain segments and markets and the Company's financial position or other financial information. These statements are based on certain assumptions that the Company has made in light of its experience as well as its perspective on historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including but not limited to: (i) general economic or business conditions affecting the markets in which the Company serves; (ii) the Company's ability to develop or successfully introduce new products; (iii) risks associated with conducting business in foreign countries and currencies; (iv) increased competition in the medium- and heavy-duty truck markets, construction, agriculture, aftermarket, military, bus and other markets; (v) the Company's failure to complete or successfully integrate strategic acquisitions and the impact of such acquisitions on business relationships; (vi) the Company's ability to recognize synergies from the reorganization of the segments; (vii) the Company's failure to successfully manage any divestitures; (viii) the impact of changes in governmental regulations on the Company's customers or on its business; (ix) the loss of business from a major customer, a collection of smaller customers or the discontinuation of particular commercial vehicle platforms; (x) the impact of disruptions in our supply chain or delivery chain; (xi) the Company's ability to obtain future financing due to changes in the lending markets or its financial position; (xii) the Company's ability to comply with the financial covenants in its debt facilities; (xiii) fluctuation in interest rates or change in the reference interest rate relating to the Company's debt facilities; (xiv) the Company's ability to realize the benefits of its cost reduction and strategic initiatives and address rising labor and materials costs; (xv) a material weakness in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements; (xvi) volatility and cyclicality in the commercial vehicle market adversely affecting us; (xvii) the geographic profile of our taxable income and changes in valuation of our deferred tax assets and liabilities impacting our effective tax rate; (xviii) changes to domestic manufacturing initiatives; (xix) implementation of tax or other changes, by the United States or other international jurisdictions, related to products manufactured in one or more jurisdictions where the Company does business; and (xx) various other risks as outlined under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for fiscal year ending December 31, 2018 and the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019. There can be no assurance that statements made in this press release relating to future events will be achieved. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements.
Use of Non-GAAP Measures
This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP"). Management uses these non-GAAP financial measures internally to evaluate the Company's performance, engage in financial and operational planning and to determine incentive compensation.
Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on the Company's financial and operating results and in comparing the Company's performance to that of its competitors and to comparable reporting periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP. The financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated.
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SOURCE Commercial Vehicle Group, Inc.