Letter to the Stockholders
Our Strategic Objectives
Locations
Our Employees
Products & Processes
Executive Management
Financial Highlights
Director and Committee Info
Form 10-K
Investor Information
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During the past year, our many achievements were highlighted
with yet another consecutive year of top and bottom line growth. We were
faced with unprecedented volumes in our key markets, we completed
another strategic acquisition in the global commercial vehicle industry, further
consolidated and integrated our operations, broke ground on a new research
and development technical center as well as a world class manufacturing
facility in Mexico and were the recipients of several key quality and
technology awards presented to us by our customers.
Our long-term strategy for continued success is evident in our solid financial
performance for 2006, and we remain committed to our strategy and continue
to focus on accomplishing our mission “to be the preferred global supplier of
complete cab systems.”
As we continue to develop in our core markets, we are also committed to
advancing our presence in emerging markets around the world; expanding
our product offerings to new and existing customers; diversifying our end
markets by cross-selling existing products into new industries and customers;
and, selectively pursuing global acquisitions to compliment our existing
products and customer base.
At the same time, we continuously seek operational
efficiencies through lean manufacturing initiatives to
improve our productivity and increase profitability.
In addition, rationalizing our supply base provides
immediate cost advantages as well as increases our
presence in the world’s emerging markets.
We rely heavily on our competitive advantages
such as our track record of safety, quality and
delivery and our commitment to customer service
and technology to help set us apart from our
competition.
While we are proud of our continued success
during 2006, we look forward to the challenges
ahead and remain committed to our long-term
strategy of increasing our global competitive
position and, as a result, increasing stockholder
value.
Sincerely,
Mervin Dunn
President and CEO
global supplier
of interior and exterior
systems for cab-related
products. We supply
products and services
to the heavy duty truck,
construction, agricultural,
other commercial vehicle
and specialty markets.
Mervin Dunn
President and Chief Executive Officer
ToDay’s business environment moves at the
speed of light. Everyday business is changing, new
technologies are discovered, and opportunities
abound. Now, more than ever, companies are
looking for respected partners who can help
them gain that competitive edge and keep
pace in a high-speed world.
As a recognized global leader
in commercial vehicle solutions
for
the
heavy
truck, construction, agricultural,
industrial, commercial and marine industries,
Commercial Vehicle Group
is
looking for
partners and opportunities to expand our
horizons while adding value for our customers
and stockholders.
We are committed
to continuous
improvement,
constantly searching for ways to streamline our operations
and add value for the customer.
We are broadening our presence in the global
market.
We are expanding our already diversified
product and service offerings, end markets and
customer base.
We are continuing our aggressive commitment
to research and development.
Arizona
Douglas
Illinois
DeKalb
Indiana
Michigan City
Iowa
Monona
Edgewood
North Carolina
Concord
Kings Mountain
Statesville
Ohio
Bellaire
Chillicothe
Dublin
Gahanna
New Albany
Norwalk
Plain City
Shadyside
Oregon
Canby
Tennessee
Vonore
Virginia
Dublin
Washington
Seattle
Tacoma
Vancouver
Wisconsin
Redgranite
Mexico
Agua Prieta
China
Shanghai
Czech Republic
Brandys nad Orlici
Prague
Belgium
Seneffs (Brussels)
England
Northampton
Australia
Brisbane
Cab Structures
Sleeper Boxes
Body Panels
Structural Components
Seats
Seating Sytsems
Trim Systems
Components
Mirrors
Wipers
Controls
Electronic Wire Harnesses
Panel Assemblies
Core Products For the past year, our executive
management team has focused on integrating our recent acquisitions
into the organization allowing us to operate as one company in
order to take advantage of synergies to benefit our customers and
stockholders. Our team’s strength is evident through our long-term
success in organic growth, reducing costs, integrating business
acquisitions and continuous improvement.
Merv has served as a Director
since August 2004 and as our
President and Chief Executive
Officer since June 2002, and
prior thereto served as the
President of
Trim Systems,
commencing upon his joining
us in October 1999.
CVG
joined
in
Kevin
January, 2007, as Executive
Vice President of Business
Development.
Jerry has served as President,
Global Truck since November
2006. From April 2004
to
November 2006, he served as
President, CVG Americas and
from July 2002 to April 2004 as
Vice President and General
Manager of National Seating
and KAB North America.
Chad has served as our Chief
Financial Officer since January
2003, and prior
thereto held
the position of Vice President of
Finance at Trim Systems since July
2000.
Gordon has served as President
of Global Construction since
November 2006. From June 2005
to November 2006, he served as
our President, CVG International
and from 2002 - 2005 he held the
position of President and CEO of
Mayflower Vehicle Systems.
Jim has served as our Vice
President of Human Resources
since August 1999.
Through our disciplined approach to fiscal responsibility, detailed planning and
continuous improvement, Commercial Vehicle Group remains committed to enhancing
our solid financial foundation and increasing stockholder value.
During this past year, we completed our fourth acquisition in two years; capitalized on
unprecedented industry volumes; faced the challenges of raw material pricing pressures;
and continued to seek operational efficiencies. At the same time, we maintained our
financial flexibility to further pursue our strategic growth objectives. As a result of our
financial, strategic and operational approach, we celebrated our highest revenue and
operating income levels in the history of our company in 2006. In the last six years, in
fact, our revenues have increased approximately 275% and our operating income has
increased nearly 675%.
CVG remains focused on diversifying our end markets and improving the
breadth of our overall product offering in an effort to enhance our cross-selling
capabilities for continued growth. As a result of this strategic objective, we
have increased our presence in markets other than the North American
heavy truck market. Additionally, our product offerings have increased from
three primary product lines in 2000 to five in 2006. This diversification is a
key element in our long-term strategy for continued financial success and
enhancing our top and bottom line growth objectives, despite the cyclical
nature of our end markets.
We are extremely pleased with our financial achievements and successes
over the last six years and will continue to focus on strategic opportunities
and operational efficiencies to build upon, and further strengthen, the solid
financial foundation at CVG.
Sincerely,
Chad M. Utrup
Chief Financial Officer
scott D. Rued
Chairman of the Board
Independent
Mervin Dunn
President &
Chief Executive Officer
s. a. (Tony) Johnson
David R. Bovee
Audit Committee Chairman
Nominating & Corporate
Governance Committee
Independent
scott C. arves
Audit Committee
Compensation Committee
Independent
Richard a. snell
Compensation Committee Chairman
Nominating & Corporate
Governance Committee
Independent
Robert C. Griffin
Audit Committee
Compensation Committee
Nominating & Corporate Governance
Committee Chairman
Independent
Common Stock Information
Ticker Symbol: CVGI
Exchange: NASDAQ
Independent Registered Public Accountants
Deloitte & Touche LLP • Minneapolis, MN
Transfer Agent & Registrar
Computershare Trust Company, N.A.
PO Box 43078 • Providence, RI 02940-3010
Phone: 781.575.2879
Email: www.computershare.com
Annual Meeting of Stockholders
The meeting will be held Tuesday, May 22, 2007
at 1:00 PM EST in New Albany, OH
Official notice of the Annual Meeting and a Proxy
Statement will be mailed to stockholders.
additional Copies
Copies of this Annual Report,
along with our periodic filings
with the Securities and Exchange Commission
including Forms 10-K (excluding exhibits)
and 10-Q, are available on our website.
Printed copies are also available upon request,
free of charge, by contacting:
Chad M. Utrup
Chief Financial Officer
Commercial Vehicle Group, Inc.
6530 West Campus Oval
New Albany, OH 43054
614.289.5360
Commercial Vehicle Group
Corporate Headquarters
6530 West Campus Oval
New Albany, OH 43054
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:
December 31, 2006
Commission file number:
000-50890
COMMERCIAL VEHICLE GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State of Incorporation)
41-1990662
(I.R.S. Employer Identification No.)
6530 West Campus Oval
New Albany, Ohio
(Address of Principal Executive Offices)
43054
(Zip Code)
Registrant’s telephone number, including area code:
(614) 289-5360
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Name of Exchange on Which Registered
Common Stock, par value $.01 per share
The Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes n
No ¥
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Schedule 15(d) of the
Act. Yes n
No ¥
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¥
No n
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¥
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer n
Accelerated filer ¥
Non-accelerated filer n
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes n
No ¥
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to
the price at which the common equity was last sold on June 30, 2006, excluding shares owned beneficially by affiliates, was
$448,916,663.
As of February 28, 2007, 21,707,769 shares of Common Stock of the Registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Information required by Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K are incorporated by
reference from the Registrant’s Proxy Statement for its annual meeting to be held May 22, 2007 (the “2007 Proxy Statement”).
COMMERCIAL VEHICLE GROUP, INC.
Annual Report on Form 10-K
Table of Contents
PART I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Submission of Matters to a Vote of Security Holders
Item 4.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Item 12.
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships, Related Transactions and Director Independence . . . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14.
Page
1
19
27
27
29
29
29
32
35
48
50
93
93
97
97
99
100
100
100
Item 15. Exhibits and Financial Statements Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101
106
PART IV
i
CERTAIN DEFINITIONS
All references in this Annual Report on Form 10-K to the “Company,” “Commercial Vehicle Group,”
“CVG,” “we,” “us,” and “our” refer to Commercial Vehicle Group, Inc. and its consolidated subsidiaries
(unless the context otherwise requires).
FORWARD-LOOKING INFORMATION
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended. For this purpose, any statements contained herein that
are not statements of historical fact, including without limitation, certain statements under “Item 1 —
Business” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and located elsewhere herein regarding industry prospects and our results of operations or
financial position, may be deemed to be forward-looking statements. Without limiting the foregoing, the words
“believes,” “anticipates,” “plans,” “expects,” and similar expressions 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, such as risks relating to (i) our ability to develop or successfully
introduce new products; (ii) risks associated with conducting business in foreign countries and currencies;
(iii) general economic or business conditions affecting the markets in which we serve; (iv) increased
competition in the heavy-duty truck market; and (v) our failure to complete or successfully integrate additional
strategic acquisitions. All subsequent written and oral forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety by such cautionary statements.
ii
PART I
Item 1. Business
Overview
Commercial Vehicle Group, Inc. (a Delaware corporation) and its subsidiaries, is a leading supplier of
fully integrated system solutions for the global commercial vehicle market, including the heavy-duty truck
market, the construction and agriculture markets and the specialty and military transportation markets. As a
result of our strong leadership in cab-related products and systems, we are positioned to benefit from the
increased focus of our customers on cab design and comfort and convenience features to better serve their
end-user, the driver. Our products include suspension seat systems, interior trim systems (including instrument
panels, door panels, headliners, cabinetry and floor systems), cab structures and components, mirrors, wiper
systems, electronic wire harness assemblies and controls and switches specifically designed for applications in
commercial vehicles.
We are differentiated from suppliers to the automotive industry by our ability to manufacture low volume
customized products on a sequenced basis to meet the requirements of our customers. We believe that we have
the number one or two position in most of our major markets and that we are the only supplier in the North
American commercial vehicle market that can offer complete cab systems including cab body assemblies,
sleeper boxes, seats, interior trim, flooring, wire harnesses, panel assemblies and other structural components.
We believe our products are used by virtually every major North American commercial vehicle OEM, which
we believe creates an opportunity to cross-sell our products and offer a fully integrated system solution.
Demand for our products is generally dependent on the number of new commercial vehicles manufac-
tured, which in turn is a function of general economic conditions, interest rates, changes in governmental
regulations, consumer spending, fuel costs and our customers’ inventory levels and production rates. New
commercial vehicle demand has historically been cyclical and is particularly sensitive to the industrial sector
of the economy, which generates a significant portion of the freight tonnage hauled by commercial vehicles.
Production of commercial vehicles in North America peaked in 1999 and experienced a downturn from 2000
to 2003 that was due to a weak economy, an oversupply of new and used vehicle inventory and lower
spending on commercial vehicles and equipment. Demand for commercial vehicles improved in 2006 due to
broad economic recovery in North America, corresponding growth in the movement of goods, the growing
need to replace aging truck fleets and OEMs received larger than expected pre-orders in anticipation of the
new EPA emissions standards becoming effective in 2007.
The Company was formed on August 22, 2000. On October 6, 2000, the Company acquired the assets of
Bostrom plc in exchange for $83.6 million in cash and assumption of certain liabilities. The source of the cash
consisted of $49.8 million of debt and $33.8 million of equity.
On March 28, 2003, the Company and Commercial Vehicle Systems Holdings, Inc. (“CVS”) entered into
an Agreement and Plan of Merger whereby a subsidiary of the Company was merged into CVS. The holders
of the outstanding shares of CVS received, in exchange, shares of the Company on a one-for-one basis
resulting in the issuance of 4,870,228 shares of common stock. On May 20, 2004, the Company and Trim
Systems, Inc. (“Trim”) entered into an Agreement and Plan of Merger whereby a subsidiary of the Company
was merged into Trim (the CVS and Trim mergers are collectively referred to as the “Mergers”). On August 2,
2004, the Trim merger was effected. The holders of the outstanding shares of Trim received, in exchange,
shares of the Company on a .099-for-one basis resulting in the issuance of 2,769,567 shares of common stock.
In accordance with SFAS No. 141, the Mergers were accounted for as a combination of entities under common
control. Thus, the accounts of CVS, Trim and the Company were combined based upon their respective
historical basis of accounting. The financial statements reflect the combined results of the Company, CVS and
Trim as if the Mergers had occurred as of the beginning of the earliest period presented.
1
Recent Acquisitions
In November 2006, we acquired all of the outstanding common stock of C.I.E.B. Kahovec, spol. s.r.o.
(“C.I.E.B.”). See Note 3 to our consolidated financial statements contained in Item 8 of this Annual Report on
Form 10-K for detailed information on this transaction.
Industry
Within the commercial vehicle industry, we sell our products primarily to the heavy truck segment of the
North American OEM market (approximately 60% of our 2006 revenues), the aftermarket and OEM service
organizations (approximately 10% of our 2006 revenues) and the construction segments of the global OEM
market (approximately 18% of our 2006 revenues). The majority of our remaining 12% of 2006 revenues were
to other global commercial vehicle and specialty markets.
Commercial Vehicle Supply Market Overview
Commercial vehicles are used in a wide variety of end markets, including local and long-haul commercial
trucking, bus, construction, mining, general industrial, marine, municipal and recreation. The commercial
vehicle supply industry can generally be separated into two categories: (1) sales to OEMs, in which products
are sold in relatively large quantities directly for use by OEMs in new commercial vehicles; and (2) “aftermar-
ket” sales, in which products are sold as replacements in varying quantities to a wide range of OEM service
organizations, wholesalers, retailers and installers. In the OEM market, suppliers are generally divided into
tiers — “Tier 1” suppliers (like our company), who provide their products directly to OEMs, and “Tier 2” or
“Tier 3” suppliers, who sell their products principally to other suppliers for integration into those suppliers’
own product offerings.
Our largest end-market segment, the commercial truck industry, is supplied by heavy- and medium-duty
commercial truck suppliers. The commercial truck supplier industry is highly fragmented and comprised of
several large companies and many smaller companies. In addition, the Heavy-duty (Class 8) truck supplier
industry is characterized by relatively low production volumes as well as considerable barriers to entry,
including the following: (1) significant investment requirements, (2) stringent technical and manufacturing
requirements, (3) high transition costs to shift production to new suppliers, (4) just-in-time delivery
requirements and (5) strong brand name recognition. Foreign competition is limited in the North American
commercial vehicle market due to many factors, including the need to be responsive to order changes on short
notice, high shipping costs, customer concerns about quality given the safety aspect of many of our products
and service requirements.
Although OEM demand for our products is directly correlated with new vehicle production, suppliers like
us can also grow by increasing their product content per vehicle through cross selling and bundling of
products, further penetrating business with existing customers and gaining new customers and expanding into
new geographic markets. We believe that companies with a global presence and advanced technology,
engineering, manufacturing and support capabilities, such as our company, are well positioned to take
advantage of these opportunities.
Commercial Truck Market
Purchasers of commercial trucks include fleet operators, owner operators and other industrial end users.
Commercial vehicles used for local and long-haul commercial trucking are generally classified by gross
vehicle weight. Class 8 vehicles are trucks with gross vehicle weight in excess of 33,000 lbs. and Class 5
2
through 7 vehicles are trucks with gross vehicle weight from 16,001 lbs. to 33,000 lbs. The following table
shows commercial vehicle production levels for 2001 through 2006 in North America:
Class 8 heavy trucks . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class 5-7 light and medium-duty trucks . . . . . . . . . . . . .
146
189
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
335
(Thousands of units)
181
194
375
182
188
370
269
225
494
341
245
586
378
266
644
2001
2002
2003
2004
2005
2006
Source: ACT Publications, The Commercial Truck, Bus and Trailer Industry OUTLOOK (February 2007).
The following describes the major segments of the commercial vehicle market in which we compete:
Class 8 Truck Market
The global Class 8 truck manufacturing market is concentrated in three primary regions: North America,
Asia-Pacific and Europe. The global Class 8 truck market is localized in nature due to the following factors:
(1) the prohibitive costs of shipping components from one region to another, (2) the high degree of
customization of Class 8 trucks to meet the region-specific demands of end users, and (3) the ability to meet
just-in-time delivery requirements. According to ACT, four companies represented approximately 97% of
North American Class 8 truck production in 2006. The percentages of Class 8 production represented by
Freightliner, PACCAR, Volvo/Mack and International were approximately 33%, 25%, 20% and 19%, respec-
tively. We supply products to all of these OEMs.
Production of commercial vehicles in North America peaked in 1999 and experienced a downturn from
2000 to 2003 that was due to a weak economy, reduced sales following above-normal purchases in advance of
new EPA emissions standards, an oversupply of new and used vehicle inventory and lower spending on
commercial vehicles and equipment. Following a substantial decline from 1999 to 2001, truck unit production
increased modestly to approximately 181,000 units in 2002 from approximately 146,000 units produced in
2001, due primarily to the purchasing of trucks that occurred prior to the October 2002 mandate for more
stringent engine emissions requirements. Subsequent to the engine emissions requirements, truck production
continued to remain at historically low levels due to the continuing economic recession and the reluctance of
many trucking companies to invest during this period.
In mid-2003, evidence of renewed growth emerged and truck tonmiles (number of miles driven multiplied
by number of tons transported) began to increase. Accompanying the increase in truck tonmiles, new truck
sales also began to increase. During the second half of 2003, new truck dealer inventories declined and,
consequently, OEM truck order backlogs began to increase. According to ACT, monthly truck order rates
began increasing significantly in December 2003 through 2005. In 2006, OEMs received larger than expected
pre-orders in anticipation of the new EPA emissions standards becoming effective in 2007.
3
The following table illustrates North American Class 8 truck build for the years 1998 to 2011:
North American Class 8 Truck Build Rates
(In thousands)
333
267
252
181
182
146
378
341
384
269
272
268
216
208
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007 E
2008 E
2009 E
2010 E
2011 E
“E” — Estimated
Source: ACT Publications, Five Year Forecast (February 2007).
According to ACT, unit production for 2007 is estimated to decrease approximately 43% from 2006
levels to approximately 216,000 units. We believe that both the increase in 2006 as well as the projected
decrease in 2007 are also impacted by the institution of more stringent EPA emissions standards in early 2007.
We believe the increase in 2006 was primarily the result of the following factors: (1) improvement in the
general economy in North America, (2) corresponding growth in the movement of goods, (3) under investment
during the recession and the growing need to replace aging truck fleets and (4) OEMs received larger than
expected pre-orders in anticipation of the new EPA emissions standards becoming effective in 2007.
We believe the following factors are currently driving the North American Class 8 truck market:
Economic Conditions. The North American truck industry is directly influenced by overall economic
growth and consumer spending. Since truck OEMs supply the fleet lines of North America, their production
levels generally match the demand for freight. The freight carried by these trucks includes consumer goods,
machinery, food and beverages, construction equipment and supplies, electronic equipment and a wide variety
of other materials. Since most of these items are driven by macroeconomic conditions, the truck industry tends
to follow trends of gross domestic product (“GDP”). Generally, given the dependence of North American
shippers on trucking as a freight alternative, general economic conditions have been a primary indicator of
future truck builds.
Truck Freight Growth. ACT projects that total domestic truck freight will continue to increase over the
next five years, driven by growth in GDP. In addition, national suppliers and distribution centers, burdened by
the pricing pressure of large manufacturing and retail customers, have continued to reduce on-site inventory
levels. This reduction requires freight handlers to provide “to-the-hour” delivery options. As a result, Class 8
trucks have replaced manufacturing warehouses as the preferred temporary storage facility for inventory. Since
trucks are typically viewed as the most reliable and flexible shipping alternative, truck tonmiles, as well as
truck platform improvements, should continue to increase in order to meet the increasing need for flexibility
4
under the just-in-time system. ACT forecasts that total heavy-duty truck tonmiles will increase from
3,750 billion in 2006 to an all time high of 4,303 billion in 2011, as summarized in the following graph:
Total U.S. Tonmiles (Class 8)
(Number of tonmiles in billions)
3,750
3,852
3,972
3,625
4,102
4,183
4,303
2,867
2,998
3,091
3,100
3,122
3,381
3,220
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007 E
2008 E
2009 E
2010 E
2011E
“E” — Estimated
Source: ACT Publications, The Commercial Truck, Bus and Trailer Industry OUTLOOK (February 2007).
Truck Replacement Cycle and Fleet Aging. Since 1995, the average age of active Class 8 trucks has
increased from approximately 5.4 years in 1995 to approximately 5.7 years in 2006. The average fleet age
tends to run in cycles as freight companies permit their truck fleets to age during periods of lagging demand
and then replenish those fleets during periods of increasing demand. Additionally, as truck fleets age, their
maintenance costs typically increase. Freight companies must therefore continually evaluate the economics
between repair and replacement. Other factors, such as inventory management and the growth in
less-than-truckload freight shipping, also tend to increase fleet mileage and, as a result, the truck replacement
cycle. The chart below illustrates the average age of active U.S. Class 8 trucks:
Average Age of Active U.S. Class 8 Trucks
(Number of years)
5.9
5.9
5.9
5.8
5.8
5.7
5.7
5.5
5.5
5.5
5.4
5.4
5.3
5.3
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007 E
2008 E
“E” — Estimated
Source: ACT Research (2007).
5
Commercial Truck Aftermarket
Demand for aftermarket products tends to be less cyclical than OEM demand because vehicle owners are
more likely to repair vehicles than purchase new ones during recessionary periods, and thus aftermarket
demand generally is more stable during such periods. Demand for aftermarket products is driven by the quality
of OEM parts, the number of vehicles in operation, the average age of the vehicle fleet, vehicle usage, the
average useful life of vehicle parts and total tonmiles. The aftermarket is a growing market, as the overall size
of the North American fleet of Class 8 trucks has continued to increase and is attractive because of the
recurring nature of the sales. Additionally, aftermarket sales tend to be at a higher margin, as truck component
suppliers are able to leverage their already established fixed cost base and exert moderate pricing power with
their replacement parts. The recurring nature of aftermarket revenue provides some insulation to the overall
cyclical nature of the industry, as it tends to provide a more stable stream of revenues.
Commercial Construction Vehicle Market
Purchasers of heavy construction equipment (weighing over 12 metric tons) include construction
companies, municipalities, local governments, rental fleet owners, quarrying and mining companies, waste
management companies and forestry related concerns. Purchasers of light construction equipment (weighing
under 12 metric tons) include contractors, rental fleet owners, landscapers, logistics companies and farmers.
Sales of heavy construction equipment are particularly dependent on the level of major infrastructure
construction and repair projects such as highways, dams and harbors, which is a function of government
spending and economic growth.
Military Equipment Market
We supply products for heavy- and medium-payload tactical trucks that are used by the U.S. military and
other foreign militaries. Sales and production of these vehicles are influenced by overall defense spending both
by the U.S. government and foreign governments and the presence of military conflicts and potential military
conflicts throughout the world. Demand for these vehicles is expected to increase as the result of the
continuing conflict in the Middle East. In addition, demand has increased for remanufacturing and replacement
of the large fleet of vehicles that have served in the Middle East due to over-use and new armor and
technology requirements.
Commercial Vehicle Industry Trends
Our performance and growth are directly related to trends in the commercial vehicle market that are
focused on driver retention, comfort and safety. These commercial vehicle industry trends include the
following:
System Sourcing. Commercial vehicle OEMs are beginning to seek suppliers capable of providing fully-
engineered, complete systems rather than suppliers who produce the separate parts that comprise a system. By
outsourcing complete systems, OEMs are able to reduce the costs associated with the design and integration of
different components and improve quality by requiring their suppliers to assemble and test major portions of
the vehicle prior to beginning production. In addition, OEMs are able to develop more efficient assembly
processes when complete systems are delivered in sequence rather than as individual parts or components.
Globalization of Suppliers. To serve multiple markets more cost effectively, many commercial vehicle
OEMs are manufacturing global vehicle platforms that are designed in a single location but are produced and
sold in many different geographic markets around the world. Having operations in the geographic markets in
which OEMs produce their global platforms enables suppliers to meet OEMs’ needs more economically and
more efficiently.
Shift of Design and Engineering to Suppliers. OEMs are focusing their efforts on brand development
and overall vehicle design, instead of the design of individual vehicle systems. OEMs are increasingly looking
to their suppliers to provide suggestions for new products, designs, engineering developments and manufactur-
ing processes. As a result, Tier 1 suppliers are gaining increased access to confidential planning information
6
regarding OEMs’ future vehicle designs and manufacturing processes. Systems and modules increase the
importance of Tier 1 suppliers because they generally increase the Tier 1 suppliers’ percentage of vehicle
content.
Broad Manufacturing Capabilities. With respect to commercial vehicle interiors, OEMs are requiring
their suppliers to manufacture interior systems and products utilizing alternative materials and processes in
order to meet OEMs’ demand for customized styling or cost requirements. In addition, while OEMs seek to
differentiate their vehicles through the introduction of innovative interior features, suppliers are proactively
developing new interior products with enhanced features.
Ongoing Supplier Consolidation. The worldwide commercial vehicle supply industry is in the early
stages of consolidating as suppliers seek to achieve operating synergies through business combinations, shift
production to locations with more flexible work rules and practices, acquire complementary technologies, build
stronger customer relationships and follow their OEM customers as they expand globally. Suppliers need to
provide OEMs with single-point sourcing of integrated systems and modules on a global basis, and this is
expected to drive further industry consolidation. Furthermore, the cost focus of most major OEMs has forced
suppliers to reduce costs and improve productivity on an ongoing basis, including by achieving economies of
scale through consolidation.
Competitive Strengths
We believe that our competitive strengths include, but are not limited to, the following:
Leading Market Positions and Brands. We believe that we are the leading supplier of seating systems
and interior trim products, the only non-captive manufacturer of Class 8 truck body systems (which includes
cab body assemblies), the second largest supplier of wiper systems and mirrors for the North American
commercial vehicle market and the largest global supplier of construction vehicle seating systems. Our
products are marketed under brand names that are well known by our customers and truck fleet operators
based upon the amount of revenue we derive from sales to these markets. These brands include KAB Seating,
National Seating, Trim Systems, Sprague Controls, Sprague Devices», PrutsmanTM, Moto Mirror»,
RoadWatch», Mayflower» and C.I.E.B. The C.I.E.B. acquisition gave us a further penetration into the global
commercial vehicle marketplace. We plan to leverage our customer relationships and dedicated sales force to
cross-sell a broader range of products to position ourselves as the leading provider of complete cab systems to
the commercial vehicle market.
Comprehensive Cab Product and Cab System Solutions. We believe that we offer the broadest product
range of any commercial vehicle cab supplier. We manufacture a broad base of products, many of which are
critical to the interior and exterior subsystems of a commercial vehicle cab. We believe we are the only
supplier worldwide with the capability to manufacture and offer complete cab systems in sequence, integrating
interior trim and seats with the cab structure and the electronic wire harness and instrument panel assemblies.
We also utilize a variety of different processes, such as urethane molding, injection molding, Virtual
Engineered Composites (“VEC”) large composite molding, vacuum forming and “twin shell” vacuum forming
that enable us to meet each customer’s unique styling and cost requirements. The breadth of our product
offering enables us to provide a “one-stop shop” for our customers, who increasingly require complete cab
solutions from a single supply source. As a result, we believe that we have a substantial opportunity for further
customer penetration through cross-selling initiatives and by bundling our products to provide complete system
solutions.
End-User Focused Product Innovation. A key trend in the commercial vehicle market is that OEMs are
increasingly focused on cab design, comfort and features to better serve their end user, the driver, and our
customers are seeking suppliers that can provide product innovation. We have a full service engineering and
product development organization that proactively presents solutions to OEMs to meet these needs and enables
us to increase our overall content on current platforms and models.
Flexible Manufacturing Capabilities and Cost Competitive Position. Because commercial vehicle OEMs
permit their customers to select from an extensive menu of cab options, our customers frequently request
7
modified products in low volumes within a limited time frame. We have a highly variable cost structure and
can efficiently leverage our flexible manufacturing capabilities to provide low volume, customized products to
meet each customer’s styling, cost and just-in-time delivery requirements. We manufacture or assemble our
products at facilities in North America, Europe, China and Australia. Several of our facilities are located near
our customers to reduce distribution costs and to maintain a high level of customer service and flexibility.
Strong Free Cash Flow Generation. Our business generates strong free cash flow, as it benefits from
modest capital expenditure and working capital requirements. Over the three years ended December 31, 2006,
our consolidated capital expenditures averaged $17.3 million per year, which amounts to approximately 2.5%
of consolidated net revenues.
Strong Relationships with Leading Customers and Major Fleets. Because of our comprehensive product
offerings, leading Class 8 brand names and innovative product features, we believe we are an important long-
term supplier to all of the leading truck manufacturers in North America and also a global supplier to leading
heavy equipment customers such as Caterpillar, Oshkosh Truck, Deere & Co., Komatsu and Volvo. In addition,
through our sales force and engineering teams, we maintain active relationships with the major truck fleet
organizations that are end users of our products such as Yellow Freight, Swift Transportation, Schneider
National and Ryder Leasing. As a result of our high-quality, innovative products, well-recognized brand names
and customer service, a majority of the largest 100 fleet operators specifically request certain of our products.
Significant Barriers to Entry. We believe we are a leader in providing critical cab assemblies and
components to long running platforms. Considerable barriers to entry exist, including significant investment
and engineering requirements, stringent technical and manufacturing requirements, high transition costs for
OEMs to shift production to new suppliers, just-in-time delivery requirements and strong brand name
recognition.
Proven Management Team. Our management team is highly respected within the commercial vehicle
market, and our five senior executive officers have a combined average of 28 years of experience in the
industry. We believe that our team has substantial depth in critical operational areas and has demonstrated
success in reducing costs, integrating business acquisitions and improving processes through cyclical periods.
Strategy
Our primary growth strategies are as follows:
Increase Content, Expand Customer Penetration and Leverage System Opportunities. We believe we are
the only integrated commercial vehicle supplier that can offer complete interior cab systems. We are focused
on securing additional sales from our existing customer base, and we actively cross-market a diverse portfolio
of products to our customers to increase our content on the cabs manufactured by these OEMs. To complement
our North American capabilities and enhance our customer relationships, we are working with OEMs as they
increase their focus on international markets. We have established operations in Europe and Asia and are
aggressively working to secure new business from both existing and new customers with local manufacturing
operations and local OEMs. We believe we are well positioned to capitalize on the migration by OEMs in the
heavy truck and commercial vehicle sector towards commercial vehicle suppliers that can offer a complete
interior system and components.
Leverage Our New Product Development Capabilities. We have made a significant investment in our
engineering capabilities and new product development in order to anticipate the evolving demands of our
customers and end users. For example, we recently introduced our VEC technology molding capability which
has significant advantages over current processes including environmental, superior finish, durability and cost.
In addition, we believe that our new All Belts to Seat (“ABTS”) design should enable us to capture additional
market share in the North American bus market and provide us with opportunities to market this seat on a
global basis. We will continue to design and develop new products that add or improve content and increase
cab comfort and safety.
Capitalize on Operating Leverage. We continuously seek ways to lower costs, enhance product quality,
improve manufacturing efficiencies and increase product throughput and we continue to implement our Lean
8
Manufacturing and Total Quality Production Systems (“TQPS”) programs. We believe our ongoing cost saving
initiatives and the establishment of our sourcing relationships in Europe and Asia will enable us to continue to
lower our manufacturing costs. As a result, we are well positioned to grow our operating margins and
capitalize on any volume increases in the heavy truck sector with minimal additional capital expenditures.
With the integration of our acquisitions, our management will be pursuing cost reduction opportunities which
include: consolidating supplier relationships to achieve lower costs and better terms, strategic sourcing of
products to OEMs from new facility locations, implementing lean manufacturing techniques to achieve
operational efficiencies, improving product quality and delivery and providing additional capacity.
Grow Sales to the Aftermarket. While commercial vehicles have a relatively long life, certain
components, such as seats, wipers and mirrors, are replaced more frequently. We believe that there are
opportunities to leverage our brand recognition to increase our sales to the replacement aftermarket. Since
many aftermarket participants are small and locally focused, we plan to leverage our national presence to
increase our market share in the fragmented aftermarket. We believe that the continued growth in the
aftermarket represents an attractive opportunity to diversify our business due to its relative stability as well as
the market penetration opportunity.
Pursue Strategic Acquisitions and Continue to Diversify Sales. We will selectively pursue complemen-
tary strategic acquisitions that allow us to leverage the marketing, engineering and manufacturing strengths of
our business and expand our sales to new and existing customers. The markets in which we operate are highly
fragmented and provide ample consolidation opportunities. Recent acquisitions have enabled us to be a leading
supplier worldwide to offer complete cab systems in sequence, integrating interior trim and seats with the cab
structure, to provide integrated electronic systems into our cab products and to expand the breadth of our
interior systems capabilities. In addition, these acquisitions have allowed us to diversify our revenue base by
customer, market or product offering.
Products
We offer OEMs a broad range of products and system solutions for a variety of end market vehicle
applications that include local and long-haul commercial truck, bus, construction, agricultural, military, end
market industrial, marine, municipal and recreation. Fleets and OEMs are increasing their focus on cabs and
their interiors to differentiate products and improve driver comfort and retention. Although a portion of our
products are sold directly to OEMs as finished components, we use most of our products to produce “systems”
or “subsystems,” which are groups of component parts located throughout the vehicle that operate together to
provide a specific vehicle function. Systems currently produced by us include cab bodies, sleeper boxes,
seating, trim, body panels, storage cabinets, floor covering, mirrors, windshield wipers, headliners, window
lifts, door locks, temperature measurement and wire harnesses. We classify our products into five general
categories: (1) seats and seating systems, (2) trim systems and components, (3) mirrors, wipers and controls,
(4) cab structures, sleeper boxes, body panels and structural components and (5) electronic wire harnesses and
panel assemblies.
See Notes 2 and 10 to our consolidated financial statements in Item 8 in this Annual Report on Form 10-K
for information on our significant customer revenues and related receivables, as well as revenues by product
category and geographical location.
Set forth below is a brief description of our products and their applications:
Seats and Seating Systems. We design, engineer and produce seating systems primarily for heavy trucks
in North America and for commercial vehicles used in the construction and agricultural industries through our
European operations. For the most part, our seats and seating systems are fully-assembled and ready for
installation when they are delivered to the OEM. We offer a wide range of seats that include air suspension
seats, static seats, bus seats and rail car seats. As a result of our strong product design and product technology,
we are a leader in designing seats with convenience features and enhanced safety. Seats and seating systems
are the most complex and highly specialized products of our five product categories.
9
Heavy Truck Seats. We produce seats and seating systems for Heavy-duty (Class 8) trucks in our North
American operations. Our heavy truck seating systems are designed to achieve maximum driver comfort by
adding a wide range of manual and power features such as lumbar supports, cushion and back bolsters and leg
and thigh supports. Our heavy truck seats are highly specialized based on a variety of different seating options
offered in OEM product lines. Our seats are built to customer specifications in low volumes and consequently
are produced in numerous combinations with a wide range of price points. There are approximately 350 parts
in each seat, resulting in over two million possible seat combinations.
We differentiate our seats from our competitors’ seats by focusing on three principal goals: driver
comfort, driver retention and decreased workers’ compensation claims. Drivers of heavy trucks recognize and
are often given the opportunity to specify their choice of seat brands, and we strive to develop strong customer
loyalty both with the commercial vehicle OEMs and among the drivers. We believe that we have superior
technology and can offer a unique seat base that is ergonomically designed, accommodates a range of driver
sizes and absorbs shock to maximize driver comfort.
Other Commercial Vehicle Seats. We produce seats and seating systems for commercial vehicles used in
the global construction and agricultural, bus, commercial transport and municipal industries. The principal
focus of these seating systems is durability. These seats are ergonomically designed for difficult working
environments, to provide comfort and control throughout the range of seats and chairs.
Other Seating Products. We also manufacture office seating products. Our office chair was developed as
a result of our experience supplying chairs for the heavy truck, agricultural and construction industries and is
fully adjustable to maximize comfort at work. Our office chairs are available in a wide variety of colors and
fabrics to suit many different office environments, such as emergency services, call centers, receptions, studios,
boardrooms and general office.
Trim Systems and Components. We design, engineer and produce trim systems and components for the
interior cabs of commercial vehicles. Our interior trim products are designed to provide a comfortable interior
for the vehicle occupants as well as a variety of functional and safety features. The wide variety of features
that can be selected by the heavy truck customer makes trim systems and components a complex and highly
specialized product category. Set forth below is a brief description of our principal trim systems and
components:
Trim Products. Our trim products include A-Pillars, B-Pillars, door panels and interior trim panels. Door
panels consist of several component parts that are attached to a substrate. Specific components include vinyl
or cloth-covered appliqués, armrests, map pocket compartments, carpet and sound-reducing insulation. In
addition, door panels often incorporate electronic and electrical distribution systems and products, including
lock and latch, window glass, window regulators and audio systems as well as wire harnesses for the control
of power seats, windows, mirrors and door locks. Our products are attractive, lightweight solutions from a
traditional cut and sew approach to a contemporary “molded” styling theme. The parts can be color matched
or top good wrapped to integrate seamlessly with the rest of the interior.
Instrument Panels. We produce and assemble instrument panels that can be integrated with the rest of
the interior trim. The instrument panel is a complex system of coverings and foam, plastic and metal parts
designed to house various components and act as a safety device for the vehicle occupant.
Body Panels (Headliners/Wall Panels). Headliners consist of a substrate and a finished interior layer
made of fabrics and materials. While headliners are an important contributor to interior aesthetics, they also
provide insulation from road noise and can serve as carriers for a variety of other components, such as visors,
overhead consoles, grab handles, coat hooks, electrical wiring, speakers, lighting and other electronic and
electrical products. As the amount of electronic and electrical content available in vehicles has increased,
headliners have emerged as an important carrier of electronic features such as lighting systems.
Storage Systems. Our modular storage units and custom cabinetry are designed to improve comfort and
convenience for the driver. These storage systems are designed to be integrated with the interior trim. These
units may be easily expanded and customized with features that include refrigerators, sinks and water
10
reservoirs. Our storage systems are constructed with durable materials and designed to last the life of the
vehicle.
Floor Covering Systems. We have an extensive and comprehensive portfolio of floor covering systems
and dash insulators. Carpet flooring systems generally consist of tufted or non-woven carpet with a
thermoplastic backcoating which, when heated, allows the carpet to be fitted precisely to the interior or trunk
compartment of the vehicle. Additional insulation materials are added to minimize noise, vibration and
harshness. Non-carpeted flooring systems, used primarily in commercial and fleet vehicles, offer improved
wear and maintenance characteristics. The dash insulator separates the passenger compartment from the engine
compartment and prevents engine noise and heat from entering the passenger compartment.
Sleeper Bunks. We offer a wide array of design choices for upper and lower sleeper bunks for heavy
trucks. All parts of our sleeper bunks can be integrated to match the rest of the interior trim. Our sleeper
bunks arrive at OEMs fully assembled and ready for installation.
Grab Handles and Armrests. Our grab handles and armrests are designed and engineered with specific
attention to aesthetics, ergonomics and strength. Our T-SkinTM product uses a wide range of inserts and
substrates for structural integrity. The integral urethane skin offers a soft touch and can be in-mold coated to
specific colors.
Bumper Fascias and Fender Covers. Our highly durable, lightweight bumper fascias and fender covers
are capable of withstanding repeated impacts that would deform an aluminum or steel bumper. We utilize a
production technique that chemically bonds a layer of paint to the part after it has been molded, thereby
enabling the part to keep its appearance even after repeated impacts.
Privacy Curtains. We produce privacy curtains for use in sleeper cabs. Our privacy curtains include
features such as integrated color matching of both sides of the curtain, choice of cloth or vinyl, full “black
out” features and low-weight.
Mirrors, Wipers and Controls. We design, engineer and produce a wide range of mirrors, wipers and
controls used in commercial vehicles. Set forth below is a brief description of our principal products in this
category:
Mirrors. We offer a wide range of round, rectangular, motorized and heated mirrors and related
hardware, including brackets, braces and side bars. Most of our mirror designs utilize stainless steel pins,
fasteners and support braces to ensure durability. We have introduced both road and outside temperature
devices that are integrated into the mirror face or the vehicle’s dashboard through our RoadWatchTM family of
products. These systems are principally utilized by municipalities throughout North America to monitor
surface temperatures and assist them in dispersing chemicals for snow and ice removal.
Windshield Wiper Systems. We offer application-specific windshield wiper systems and individual
windshield wiper components for all segments of the commercial vehicle market. Our windshield wiper
systems are generally delivered to the OEM fully assembled and ready for installation. A windshield wiper
system is typically comprised of an electric motor, linkages, arms, wiper blades, washer reservoirs and related
pneumatic or electric pumps. We also supply air-assisted washing systems for headlights and cameras to assist
drivers with visibility for safe vehicle operation. These systems utilize window wash fluid and air to create a
turbulent liquid/air stream that removes road grime from headlights and cameras. We offer an optional
programmable washing system that allows for periodic washing and dry cycles for maximum safety.
Controls. We offer a range of controls and control systems that includes a complete line of window lifts
and door locks, mechanic, pneumatic, electrical and electronic HVAC controls and electric switch products.
We specialize in air-powered window lifts and door locks, which are highly reliable and cost effective as
compared to similar electrical products.
Cab Structures, Sleeper Boxes, Body Panels and Structural Components. We design, engineer and
produce complete cab structures, sleeper boxes, body panels and structural components for the commercial
11
vehicle and automotive industries in North America. Set forth below is a description of our principal products
in this category:
Cab Structures. We design, manufacture and assemble complete cab structures used primarily in heavy
trucks for the major commercial vehicle OEMs in North America. Our cab structures, which are manufactured
from both steel and aluminum, are delivered to our customers fully assembled and primed for paint. Our cab
structures are built to order based upon options selected by the vehicles’ end-users and delivered to the OEMs,
in line sequence, as these end-users’ trucks are manufactured by the OEMs. In addition, we also design,
produce and assemble cab structures for certain automotive OEMs.
Sleeper Boxes. We design, manufacture and assemble sleeper boxes primarily for heavy trucks in North
America. We manufacture both integrated sleeper boxes that are part of the overall cab structure as well as
stand alone assemblies depending on the customer application. Sleeper boxes are typically constructed using
aluminum exterior panels in combination with steel structural components delivered to our customers in line
sequence after the final seal and E-coat process.
Body Panels and Structural Components. We produce a wide range of both steel and aluminum large
exterior body panels and structural components for the internal production of our cab structures and sleeper
boxes as well as being sold externally to certain commercial vehicle and automotive OEMs.
Electronic Wire Harnesses and Panel Assemblies. We design, engineer and produce a wide range of
electronic wire harnesses and related assemblies as well as panel assemblies used in commercial vehicles and
other equipment. Set forth below is a brief description of our principal products in this category.
Electronic Wire Harnesses. We offer a broad range of complex electronic wire harness assemblies that
function as the primary current carrying devices used to provide electrical interconnections for gauges, lights,
control functions, power circuits and other electronic applications on a commercial vehicle. Our wire harnesses
are highly customized to fit specific end-user requirements and often include more than 350 individual circuits
and weigh more than 30 pounds. We provide our wire harnesses for a wide variety of commercial vehicles,
military vehicles, specialty trucks and other specialty applications, including heavy-industrial equipment.
Panel Assemblies. We assemble large, integrated components such as panel assemblies and cabinets for
commercial vehicle OEMs, other heavy equipment manufacturers and medical equipment manufacturers. The
panels and cabinets we assemble are installed in key locations on a vehicle or unit of equipment, are integrated
with our wire harness assemblies and provide user control over certain operational functions and features.
Manufacturing
A description of the manufacturing processes we utilize for each of our principal product categories is set
forth below:
(cid:129) Seats and Seating Systems. Our seating operations utilize a variety of manufacturing techniques
whereby fabric is affixed to an underlying seat frame. We also manufacture and assemble the seat
frame, which involves complex welding. Generally, we utilize outside suppliers to produce the
individual components used to assemble the seat frame.
(cid:129) Trim Systems and Components. Our interior systems process capabilities include injection molding,
low-pressure injection molding, urethane molding and foaming processes, compression molding and
vacuum forming as well as various trimming and finishing methods.
(cid:129) Mirrors, Wipers and Controls. We manufacture our mirrors, wipers and controls utilizing a variety of
manufacturing processes and techniques. Our mirrors, wipers and controls are primarily hand assem-
bled, tested and packaged.
(cid:129) Cab Structures, Sleeper Boxes, Body Panels and Structural Components. We utilize a wide range of
manufacturing processes to produce the majority of the steel and aluminum stampings used in our cab
structures, sleeper boxes, body panels and structural components and a variety of both robotic and
manual welding techniques in the assembly of these products. In addition, both our Norwalk, Ohio and
12
Kings Mountain, North Carolina facilities have large capacity, fully automated E-coat paint priming
systems allowing us to provide our customers with a paint-ready cab product. Due to their high cost,
full body E-coat systems, such as ours, are rarely found outside of the manufacturing operations of the
major OEMs. The major large press lines at our Shadyside, Ohio facility provide us with the in-house
manufacturing flexibility for both aluminum and steel stampings delivered just-in-time to our cab
assembly plants. This plant also provides us with low volume forming and processing techniques
including laser trim operations that minimize investment and time to manufacture for low volume
applications.
(cid:129) Electronic Wire Harnesses and Panel Assemblies. We utilize several manufacturing techniques to
produce the majority of our electronic wire harnesses and panel assemblies. Our processes, both manual
and automated, are designed to produce complex, low- to medium-volume wire harnesses and panel
assemblies in short time frames. Our wire harnesses and panel assemblies are both electronically and
hand tested.
We have a broad array of processes to offer our commercial vehicle OEM customers to enable us to meet
their styling and cost requirements. We believe the interior of the vehicle cab is the most significant and
appealing aspect to the driver of the vehicle, and consequently each commercial vehicle OEM has unique
requirements as to feel, appearance and features.
The end markets for our products are highly specialized and our customers frequently request modified
products in low volumes within an expedited delivery timeframe. As a result, we primarily utilize flexible
manufacturing cells at the vast majority of our production facilities. Manufacturing cells are clusters of
individual manufacturing operations and work stations grouped in a circular configuration, with the operators
placed centrally within the configuration. This provides flexibility by allowing efficient changes to the number
of operations each operator performs. When compared to the more traditional, less flexible assembly line
process, cell manufacturing allows us to maintain our product output consistent with our OEM customers’
requirements and reduce the level of inventory.
When an end-user buys a commercial vehicle, the end-user will specify the seat and other features for
that vehicle. Because each of our seating systems is unique, our manufacturing facilities have significant
complexity which we manage by building in sequence. We build our seating systems as orders are received,
and systems are delivered to the customer’s rack in the sequence that the vehicles come down the assembly
line. We have systems in place that allow us to provide complete customized interior kits in boxes that are
delivered in sequence, and we intend to expand upon these systems such that we will be able to provide, in
sequence, fully integrated modular systems combining the cab body and interior and seating systems.
In most instances, we keep track of our build sequence by vehicle identification number and components
are identified by bar code. Sequencing reduces our cost of production because it eliminates warehousing costs
and reduces waste and obsolescence, offsetting any increased labor costs. Several of our manufacturing
facilities are strategically located near our customers’ assembly plants, which facilitates this process and
minimizes shipping costs.
We employ just-in-time manufacturing and system sourcing in our operations to meet customer require-
ments for faster deliveries and to minimize our need to carry significant inventory levels. We utilize visual
material systems to manage inventory levels and, in certain locations, we have inventory delivered as often as
two times per day from a nearby facility based on the previous day’s order. This eliminates the need to carry
excess inventory at our facilities.
Typically, in a strong economy, new vehicle production increases and greater funding is available to be
spent on enhancements to the truck interior. As demand goes up, the mix of our products shifts towards more
expensive systems, such as sleeper units, with enhanced features and higher quality materials. The shift from
low-end units to high-end units amplifies the positive effect a strong economy has on our business. Conversely,
when economic conditions and indicators decline and customers shift away from ordering high-end units with
enhanced features, our business is adversely affected from both lower volume and lower pricing. We strive to
manage down cycles by running our facilities at capacity while maintaining the capability and flexibility to
13
expand. We work with our employees and rely on their involvement to help eliminate problems and re-align
our capacity. During a ramp-up of production, we have plans in place to manage increased demand and
achieve on-time delivery. Our strategies include alternating between human and machine production and
allowing existing employees to try higher skilled positions while hiring new employees for lower skilled
positions.
As a means to enhance our operations, we continue to implement TQPS throughout our operations. TQPS
is our customized version of Lean Manufacturing and consists of a 32 hour interactive class that is taught
exclusively by members of our management team. A significant portion of the labor efficiencies we gained
over the past few years is due to the program. TQPS is an analytical process in which we analyze each of our
manufacturing cells and identify the most efficient process to improve efficiency and quality. The goal is to
achieve total cost management and continuous improvement. Some examples of TQPS-related improvements
are: reduced labor to move parts around the facility, clear walking paths in and around manufacturing cells
and increased safety. An ongoing goal is to reduce the time employees spend waiting for materials within a
facility. In an effort to increase operational efficiency, improve product quality and provide additional capacity,
we intend to continue to implement TQPS improvements at each of our manufacturing facilities.
Raw Materials and Suppliers
A description of the principal raw materials we utilize for each of our principal product categories is set
forth below:
(cid:129) Seats and Seating Systems. The principal raw materials used in our seat systems include steel,
aluminum and foam chemicals, and are generally readily available and obtained from multiple suppliers
under various supply agreements. Leather, vinyl, fabric and certain components are also purchased from
multiple suppliers under supply agreements. Typically, our supply agreements are for a term of at least
one year and are terminable by us for breach or convenience. Some purchased components are obtained
from our customers.
(cid:129) Trim Systems and Components. The principal raw materials used in our interior systems processes are
resin and chemical products, foam, vinyl and fabric which are formed and assembled into end products.
These raw materials are obtained from multiple suppliers, typically under supply agreements which are
for a term of at least one year and are terminable by us for breach or convenience.
(cid:129) Mirrors, Wipers and Controls. The principal raw materials used to manufacture our mirrors, wipers
and controls are steel, stainless steel, aluminum, glass and rubber, which are generally readily available
and obtained from multiple suppliers.
(cid:129) Cab Structures, Sleeper Boxes, Body Panels and Structural Components. The principal raw materials
used in our cab structures, sleeper boxes, body panels and structural components are steel and
aluminum, the majority of which we purchase in sheets and stamp at our Shadyside, Ohio facility.
These raw materials are generally readily available and obtained from several suppliers, typically under
purchase orders that are cancellable by us without cause, pursuant to one year supply agreements.
(cid:129) Electronic Wire Harnesses and Panel Assemblies. The principal raw materials used to manufacture
our electronic wire harnesses are wire, connectors, terminals, switches, relays and braid fabric. These
raw materials are obtained from multiple suppliers and are generally readily available. Many of our
customers specify particular wire and connectors and, as such, negotiate pricing of these materials
directly with our suppliers. Our panel assembly materials are generally procured directly from the
customer.
Our supply agreements generally provide for fixed pricing but do not require us to purchase any specified
quantities. We have not experienced any significant shortages of raw materials and normally do not carry
inventories of raw materials or finished products in excess of those reasonably required to meet production
and shipping schedules as well as service requirements. We purchase materials such as steel, foam, vinyl and
cloth in large quantities on a global basis through our central corporate office, and other materials for which
we require lower volumes are purchased directly by our facilities. We purchase steel and copper at market
14
prices, which during the last year, have increased significantly. As a result, we are currently being assessed
surcharges and price increases on certain of our purchases of steel, copper and petroleum-related products. We
continue to work with our customers and suppliers to minimize the impact of such surcharges. We do not
believe we are dependent on a single supplier or limited group of suppliers for our raw materials.
Customers and Marketing
We sell our products principally to the commercial vehicle OEM truck market. Approximately 60% of
our 2006 revenues and approximately 62% of our 2005 revenues were derived from sales to commercial
vehicle truck OEMs, with the remainder of our revenues being generated principally from sales to the
construction and aftermarket.
We supply our products primarily to the heavy truck OEM market, construction market, the aftermarket
and OEM service segment and other commercial vehicle and specialty markets. The following is a summary
of our revenues by end-user market for the three years ended December 31:
Heavy Truck OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Aftermarket and OEM Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Military . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006
2005
2004
60% 62% 56%
15
18
9
10
2
2
2
3
1
1
9
6
18
15
2
2
1
6
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100% 100%
The change in revenues by end market in 2006 is primarily related to the increased demand in the North
American (Class 8) heavy truck market and the full year impact of the Mayflower Vehicle Systems
(“Mayflower”), Monona Wire Corporation (“Monona”) and Cabarrus Plastics, Inc. (“Cabarrus”) acquisitions.
Our principal customers in North America include International, PACCAR, Freightliner, Volvo/Mack and
Caterpillar. We believe we are an important long-term supplier to all leading truck manufacturers in North
America because of our comprehensive product offerings, leading brand names and product innovation. In our
European and Asian operations, our principal customers in the commercial vehicle market include Caterpillar,
Komatsu, Hitachi, CNH Global (Case New Holland) and JCB Limited. We also sell our trim products to
OEMs in the marine and recreational vehicle industries and seating products to office product manufacturers
principally in Europe.
The following is a summary of our significant revenues by OEM customer for the three years ended
December 31:
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PACCAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Freightliner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volvo/Mack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Caterpillar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Komatsu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deere & Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oshkosh Truck . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006
2005
2004
22% 19%
17
13
13
8
2
2
2
21
17
16
14
7
2
2
2
21
9%
28
17
6
5
3
1
—
31
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100% 100%
15
Except as set forth in the above table, no other customer accounted for more than 10% of our revenues
for the three years ended December 31, 2006. The change in revenues by significant OEM customers in 2006
is primarily related to the increased demand in the North American (Class 8) heavy truck market and the full
year impact of the Mayflower, Monona and Cabarrus acquisitions.
Our European, China and Australian operations collectively contributed approximately 13%, 16% and
28% of our revenues for the years ended December 31, 2006, 2005 and 2004, respectively. The change in
revenue by geographic location in 2006 is primarily related to the full year impact of the Mayflower, Monona
and Cabarrus acquisitions and the higher North American truck build rates resulting from the new EPA
emissions standards effective in 2007.
Our OEM customers generally source business to us pursuant to written contracts, purchase orders or
other firm commitments in terms of price, quality, technology and delivery. Awarded business generally covers
the supply of all or a portion of a customer’s production and service requirements for a particular product
program rather than the supply of a specific quantity of products. In general, these contracts, purchase orders
and commitments provide that the customer can terminate the contract, purchase order or commitment if we
do not meet specified quality, delivery and cost requirements. Such contracts, purchase orders or other firm
commitments generally extend for the entire life of a platform, which is typically five to seven years. Although
these contracts, purchase orders or other commitments may be terminated at any time by our customers (but
not by us), such terminations have been minimal and have not had a material impact on our results of
operations. In order to reduce our reliance on any one vehicle model, we produce products for a broad cross-
section of both new and more established models.
Our contracts with our major OEM customers generally provide for an annual productivity cost reduction.
These reductions are calculated on an annual basis as a percentage of the previous year’s purchases by each
customer. The reduction is achieved through engineering changes, material cost reductions, logistics savings,
reductions in packaging cost and labor efficiencies. Historically, most of these cost reductions have been offset
by both internal reductions and through the assistance of our supply base, although no assurances can be given
that we will be able to achieve such reductions in the future. If the annual reduction targets are not achieved,
the difference is recovered through price reductions. Our cost structure is comprised of a high percentage of
variable costs that provides us with additional flexibility during economic cycles.
Our sales and marketing efforts with respect to our OEM sales are designed to create overall awareness
of our engineering, design and manufacturing capabilities and to enable us to be selected to supply products
for new and redesigned models by our OEM customers. Our sales and marketing staff works closely with our
design and engineering personnel to prepare the materials used for bidding on new business as well as to
provide a consistent interface between us and our key customers. We currently have sales and marketing
personnel located in every major region in which we operate. From time to time, we also participate in
industry trade shows and advertise in industry publications. One of our ongoing initiatives is to negotiate and
enter into long term supply agreements with our existing customers that allow us to leverage all of our
business and provide a complete cab system to our commercial vehicle OEM customers.
Our principal customers for our aftermarket sales include OEM dealers and independent wholesale
distributors. Our sales and marketing efforts for our aftermarket sales are focused on support of these two
distribution chains, as well as direct contact with all major fleets.
Backlog
We do not generally obtain long-term, firm purchase orders from our customers. Rather, our customers
typically place annual blanket purchase orders, but these orders do not obligate them to purchase any specific
or minimum amount of products from us until a release is issued by the customer under the blanket purchase
order. Releases are typically placed within 30 to 90 days of required delivery and may be canceled at any
time, in which case the customer would be liable for work in process and finished goods. We do not believe
that our backlog of expected product sales covered by firm purchase orders is a meaningful indicator of future
sales since orders may be rescheduled or canceled.
16
Competition
Within each of our principal product categories, we compete with a variety of independent suppliers and
with OEMs’ in-house operations, primarily on the basis of price, breadth of product offerings, product quality,
technical expertise, development capability, product delivery and product service. We believe we are the only
supplier in the North American commercial vehicle market that can offer complete cab systems in sequence
integrating interior systems (including seats, interior trim and flooring systems) and wire harnesses with the
cab structure. A summary of our estimated market position and primary independent competitors is set forth
below:
(cid:129) Seats and Seating Systems. We believe that we have the number one market position in North
America with respect to our seating operations. We also believe that we have the number one market
position in supplying seats and seating systems to commercial vehicles used in the construction industry
on a worldwide basis. Our primary independent competitors in the North American commercial vehicle
market include Sears Manufacturing Company, Accuride Corporation, Grammer AG and Seats, Inc.,
and our primary competitors in the European commercial vehicle market include Grammar and
Isringhausen.
(cid:129) Trim Systems and Components. We believe that we have the number one market position in North
America with respect to our interior trim products. We face competition from a number of different
competitors with respect to each of our trim system products and components. Overall, our primary
independent competitors are ConMet, Fabriform, TPI, Findlay, Superior, Trim Masters, Inc., Blachford
Ltd., Gage Industries, Inc. and Mitras.
(cid:129) Mirrors, Wipers and Controls. We believe that we have the number two market position in North
America with respect to our windshield wiper systems and mirrors. We face competition from a number
of different competitors with respect to each of our principal products in this category. Our principal
competitors for mirrors are Hadley, Lang-Mekra and Trucklite, and our principal competitors for
windshield wiper systems are Johnson Electric, Trico and Valeo.
(cid:129) Cab Structures, Sleeper Boxes, Body Panels and Structural Components. We believe we are a leading
non-captive supplier in North America with respect to our cab structural components, cab structures,
sleeper boxes and body panels. Our principal competitors are Magna, Ogihara Corporation, Spartanburg
Stamping, Union Stamping, Able Body and Defiance Metal Products.
(cid:129) Electronic Wire Harnesses and Panel Assemblies. We believe that we are a leading producer of low-
to medium-volume complex, electronic wire harnesses and related assemblies used in the global heavy
equipment, commercial vehicle, heavy-truck and specialty and military vehicle markets. Our principal
competitors for electronic wire harnesses include large diversified suppliers such as AFL, Delphi,
Leoni, Stoneridge, Yazaki and smaller independent companies such as Fargo Assembly and Unlimited
Services.
Research and Development, Design and Engineering
Our objective is to be a leader in offering superior quality and technologically advanced products to our
customers at competitive prices. We engage in ongoing engineering and research and development activities to
improve the reliability, performance and cost-effectiveness of our existing products and to design and develop
new products for existing and new applications.
We work with our customers’ engineering and development teams at the beginning of the design process
for new components and assemblies, or the redesign process for existing components and assemblies, in order
to maximize production efficiency and quality. These processes may take place from one to three years prior
to the commencement of production. On average, the development time for a new component takes between
12 and 24 months during the design phase, while the re-engineering of an existing part may take between one
and six months. Early design involvement can result in a product that meets or exceeds the customer’s design
and performance requirements and is more efficient to manufacture. In addition, our extensive involvement
17
enhances our position for bidding on such business. We work aggressively to ensure that our quality and
delivery metrics distinguish us from our competitors.
We focus on bringing our customers integrated products that have superior content, comfort and safety.
Consistent with our value-added engineering focus, we place a large emphasis on the relationships with the
engineering departments of our customers. These relationships not only help us to identify new business
opportunities but also enable us to compete based on the quality of our products and services, rather than
exclusively on price. In addition, we have also provided engineering solutions for certain specialty vehicles
including, most recently, the body development for the prestigious Ford GT sports car.
We are currently involved in the design stage of several products for our customers and expect to begin
production of these products in the years 2007 to 2011.
Intellectual Property
We consider ourselves to be a leader in both product and process technology, and, therefore, protection of
intellectual property is important to our business. Our principal intellectual property consists of product and
process technology, a limited number of United States and foreign patents, trade secrets, trademarks and
copyrights. Although our intellectual property is important to our business operations and in the aggregate
constitutes a valuable asset, we do not believe that any single patent, trade secret, trademark or copyright, or
group of patents, trade secrets, trademarks or copyrights is critical to the success of our business. Our policy is
to seek statutory protection for all significant intellectual property embodied in patents, trademarks and
copyrights. From time to time, we grant licenses under our patents and technology and receive licenses under
patents and technology of others.
We market our products under well-known brand names that include KAB Seating, National Seating,
Trim Systems and Sprague Controls, Sprague Devices», PrutsmanTM, Moto Mirror», RoadWatch», Mayflower»
and C.I.E.B. We believe that our brands are valuable and are increasing in value with the growth of our
business, but that our business is not dependent on such brands. We own U.S. federal registrations for several
of our brands.
Seasonality
OEMs’ production requirements are generally higher in the first three quarters of the year as compared to
the fourth quarter. We believe this seasonality is due, in part, to demand for new vehicles softening during the
holiday season and as a result of the winter months in North America and Europe. Also, the major North
American OEM manufacturers generally close their production facilities at various times during the holiday
season in the last two months of the year.
Employees
As of December 31, 2006, we had approximately 5,790 permanent employees, of which approximately
15.0% were salaried and the remainder were hourly. Approximately 52.3% of the hourly employees in our
North American operations were unionized, and approximately 46.0% of our hourly employees at our United
Kingdom operations were represented by shop steward committees. Employees at our Seattle, Washington
facility elected to be represented by the International Association of Machinists and Aerospace Workers,
certified by a representative of the National Labor Relations Board effective May 8, 2006. We have not
experienced any material strikes, lockouts or work stoppages during 2006 and consider our relationship with
our employees to be satisfactory. On an as needed basis during peak periods, contract and temporary
employees are utilized.
As a result of the C.I.E.B. acquisition, our total number of employees at December 31, 2006 increased by
approximately 225, of which approximately 27.6% were salaried and the remainder were hourly. None of these
employees added with the C.I.E.B. acquisition were unionized.
18
Available Information
We maintain a website on the Internet at www.cvgrp.com. We make available free of charge through our
website, by way of a hyperlink to a third-party Securities Exchange Commission (SEC) filing website, our
Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
to those reports electronically filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of
1934. Such information is available as soon as such reports are filed with the SEC. Additionally, our Code of
Ethics may be accessed within the Investor Relations section of our website. Information found on our website
is not part of this Annual Report on Form 10-K or any other report filed with the SEC.
Item 1A. Risk Factors
You should carefully consider the risks described below before making an investment decision. The risks
and uncertainties described below are not the only ones we face. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may also impair our business operations.
If any of these certain risks and uncertainties were to actually occur, our business, financial condition or
results of operations could be materially adversely affected. In such case, the trading price of our common
stock could decline and you may lose all or part of your investment. These risks and uncertainties include, but
are not limited to, the following:
(cid:129) Volatility and cyclicality in the commercial vehicle market could adversely affect us.
Our profitability depends in part on the varying conditions in the commercial vehicle market. This market
is subject to considerable volatility as it moves in response to cycles in the overall business environment and is
particularly sensitive to the industrial sector, which generates a significant portion of the freight tonnage
hauled. Sales of commercial vehicles have historically been cyclical, with demand affected by such economic
factors as industrial production, construction levels, demand for consumer durable goods, interest rates and
fuel costs. For example, North American commercial vehicle sales and production experienced a downturn
from 2000 to 2003 due to a confluence of events that included a weak economy, an oversupply of new and
used vehicle inventory and lower spending on commercial vehicles and equipment. This downturn had a
material adverse effect on our business during the same period. We cannot provide any assurance as to the
length or ultimate level of the recovery of this decline. We expect that unit production of class 8 heavy trucks
will decline in 2007 from 2006 levels.
(cid:129) Our profitability could be adversely affected if the actual production volumes for our customers’
vehicles is significantly lower than expected.
We incur costs and make capital expenditures based upon estimates of production volumes for our
customers’ vehicles. While we attempt to establish a price of our components and systems that will
compensate for variances in production volumes, if the actual production of these vehicles is significantly less
than anticipated, our gross margin on these products would be adversely affected. We enter into agreements
with our customers at the beginning of a given platform’s life to supply products for that platform. Once we
enter into such agreements, fulfillment of our purchasing requirements is our obligation for the entire
production life of the platform, with terms ranging from five to seven years, and we have no provisions to
terminate such contracts. We may become committed to supply products to our customers at selling prices that
are not sufficient to cover the direct cost to produce such products. We cannot predict our customers’ demands
for our products either in the aggregate or for particular reporting periods. If customers representing a
significant amount of our revenues were to purchase materially lower volumes than expected, it would have a
material adverse effect on our business, financial condition and results of operations.
(cid:129) Our major OEM customers may exert significant influence over us.
The commercial vehicle component supply industry has traditionally been highly fragmented and serves a
limited number of large OEMs. As a result, OEMs have historically had a significant amount of leverage over
their outside suppliers. Our contracts with major OEM customers generally provide for an annual productivity
19
cost reduction. Historically, cost reductions through product design changes, increased productivity and similar
programs with our suppliers have generally offset these customer-imposed productivity cost reduction
requirements. However, if we are unable to generate sufficient production cost savings in the future to offset
price reductions, our gross margin and profitability would be adversely affected. In addition, changes in
OEMs’ purchasing policies or payment practices could have an adverse effect on our business.
(cid:129) We may be unable to successfully implement our business strategy and, as a result, our businesses and
financial position and results of operations could be materially and adversely affected.
Our ability to achieve our business and financial objectives is subject to a variety of factors, many of
which are beyond our control. For example, we may not be successful in implementing our strategy if
unforeseen factors emerge that diminish the expected growth in the heavy truck market, or we experience
increased pressure on our margins. In addition, we may not succeed in integrating strategic acquisitions and
our pursuit of additional strategic acquisitions may lead to resource constraints which could have a negative
impact on our ability to meet customers’ demands, thereby adversely affecting our relationships with those
customers. As a result of such business or competitive factors, we may decide to alter or discontinue aspects
of our business strategy and may adopt alternative or additional strategies. Any failure to successfully
implement our business strategy could adversely affect our business, results of operations and growth
potential.
Developing product innovations has been and will continue to be a significant part of our business
strategy. We believe that it is important that we continue to meet our customers’ demands for product
innovation, improvement and enhancement, including the continued development of new-generation products,
design improvements and innovations that improve the quality and efficiency of our products. However, such
development will require us to continue to invest in research and development and sales and marketing. In the
future, we may not have sufficient resources to make such necessary investments, or we may be unable to
make the technological advances necessary to carry out product innovations sufficient to meet our customers’
demands. We are also subject to the risks generally associated with product development, including lack of
market acceptance, delays in product development and failure of products to operate properly. We may, as a
result of these factors, be unable to meaningfully focus on product innovation as a strategy and may therefore
be unable to meet our customers’ demands for product innovation.
(cid:129) If we are unable to obtain raw materials at favorable prices, it could adversely impact our results of
operations and financial condition.
Numerous raw materials are used in the manufacture of our products. Steel, aluminum, resin, foam and
fabrics account for the most significant components of our raw material costs. Although we currently maintain
alternative sources for raw materials, our business is subject to the risk of price increases and periodic delays
in delivery. For example, we are currently being assessed surcharges as well as price increases on certain
purchases of steel, copper and other raw materials. If we are unable to purchase certain raw materials required
for our operations for a significant period of time, our operations would be disrupted, and our results of
operations would be adversely affected. In addition, if we are unable to pass on the increased costs of raw
materials to our customers, this could adversely affect our results of operations and financial condition. Our
operating results for the years ended December 31, 2006 and 2005 were adversely affected by the costs on
certain of our purchases of steel, petroleum and copper costs.
(cid:129) We may be unable to complete additional strategic acquisitions or we may encounter unforeseen diffi-
culties in integrating acquisitions.
The commercial vehicle component supply industry is beginning to undergo consolidation as OEMs seek
to reduce costs and their supplier base. We intend to actively pursue additional acquisition targets that will
allow us to continue to expand into new geographic markets, add new customers, provide new product,
manufacturing and service capabilities and increase penetration with existing customers. However, we expect
to face competition for acquisition candidates, which may limit the number of our acquisition opportunities
and may lead to higher acquisition prices. Moreover, acquisitions of businesses may require additional debt
20
financing, resulting in additional leverage. The covenants of our senior credit facility may further limit our
ability to complete acquisitions. There can be no assurance that we will find attractive acquisition candidates
or successfully integrate acquired businesses into our existing business. If we fail to complete additional
acquisitions, we may have difficulty competing with more thoroughly integrated competitors and our results of
operations could be adversely affected. To the extent that we do complete additional acquisitions, if the
expected synergies from such acquisitions do not materialize or we fail to successfully integrate such new
businesses into our existing businesses, our results of operations could also be adversely affected.
(cid:129) We may be adversely impacted by labor strikes, work stoppages and other matters.
The hourly workforces at our Norwalk and Shadyside, Ohio and Seattle, Washington facilities and
Mexico operations are unionized. The unionized employees at these facilities represented approximately 52.3%
of our total hourly employees in our North American operations as of December 31, 2006. Employees at our
Seattle, Washington facility elected to be represented by the International Association of Machinists and
Aerospace Workers, certified by a representative of the National Labor Relations Board effective May 8, 2006.
We have experienced limited unionization efforts at certain of our other North American facilities from time
to time. In addition, a significant portion of our employees at our United Kingdom operations are represented
by a shop steward committee, which may seek to limit our flexibility in our relationship with these employees.
We cannot assure you that we will not encounter future unionization efforts or other types of conflicts with
labor unions or our employees.
Many of our OEM customers and their suppliers also have unionized work forces. Work stoppages or
slow-downs experienced by OEMs or their other suppliers could result in slow-downs or closures of assembly
plants where our products are included in assembled commercial vehicles. In the event that one or more of our
customers or their suppliers experience a material work stoppage, such work stoppage could have a material
adverse effect on our business.
(cid:129) Our businesses are subject to statutory environmental and safety regulations in multiple jurisdictions,
and the impact of any changes in regulation and/or the violation of any applicable laws and
regulations by our businesses could result in a material and adverse affect on our financial condition
and results of operations.
We are subject to foreign, federal, state, and local laws and regulations governing the protection of the
environment and occupational health and safety, including laws regulating air emissions, wastewater dis-
charges, the generation, storage, handling, use and transportation of hazardous materials; the emission and
discharge of hazardous materials into the soil, ground or air; and the health and safety of our colleagues. We
are also required to obtain permits from governmental authorities for certain of our operations. We cannot
assure you that we are, or have been, in complete compliance with such environment and safety laws,
regulations and permits. If we violate or fail to comply with these laws, regulations or permits, we could be
fined or otherwise sanctioned by regulators. In some instances, such a fine or sanction could have a material
adverse effect on us. The environmental laws to which we are subject have become more stringent over time,
and we could incur material expenses in the future to comply with environmental laws. We are also subject to
laws imposing liability for the cleanup of contaminated property. Under these laws, we could be held liable for
costs and damages relating to contamination at our past or present facilities and at third party sites to which
we sent waste containing hazardous substances. The amount of such liability could be material.
Several of our facilities are either certified as, or are in the process of being certified as ISO 9001, 14000,
14001 or TS16949 (the international environmental management standard) compliant or are developing similar
environmental management systems. Although we have made, and will continue to make, capital expenditures
to implement such environmental programs and comply with environmental requirements, we do not expect to
make material capital expenditures for environmental controls in 2007 or 2008. The environmental laws to
which we are subject have become more stringent over time, however, and we could incur material costs or
expenses in the future to comply with environmental laws. Certain of our operations generate hazardous
substances and wastes. If a release of such substances or wastes occurs at or from our properties, or at or from
any offsite disposal location to which substances or wastes from our current or former operations were taken,
21
or if contamination is discovered at any of our current or former properties, we may be held liable for the
costs of cleanup and for any other response by governmental authorities or private parties, together with any
associated fines, penalties or damages. In most jurisdictions, this liability would arise whether or not we had
complied with environmental laws governing the handling of hazardous substances or wastes.
(cid:129) We may be adversely affected by the impact of government regulations on our OEM customers.
Although the products we manufacture and supply to commercial vehicle OEMs are not subject to
significant government regulation, our business is indirectly impacted by the extensive governmental regulation
applicable to commercial vehicle OEMs. These regulations primarily relate to emissions and noise standards
imposed by the Environmental Protection Agency, state regulatory agencies, such as the California Air
Resources Board (“CARB”), and other regulatory agencies around the world. Commercial vehicle OEMs are
also subject to the National Traffic and Motor Vehicle Safety Act and Federal Motor Vehicle Safety Standards
promulgated by the National Highway Traffic Safety Administration. Changes in emission standards and other
proposed governmental regulations could impact the demand for commercial vehicles and, as a result,
indirectly impact our operations. For example, new emission standards governing Heavy-duty (Class 8) diesel
engines that went into effect in the United States on October 1, 2002 resulted in significant purchases of new
trucks by fleet operators prior to such date and reduced short term demand for such trucks in periods
immediately following such date. New emission standards for truck engines used in Class 5 to 8 trucks
imposed by the EPA and CARB are scheduled to become effective in 2007. To the extent that current or future
governmental regulation has a negative impact on the demand for commercial vehicles, our business, financial
condition or results of operations could be adversely affected.
(cid:129) Our customer base is concentrated and the loss of business from a major customer or the discontin-
uation of particular commercial vehicle platforms could reduce our revenues.
Sales to International, PACCAR, Freightliner and Volvo/Mack accounted for approximately 22%, 17%,
13% and 13%, respectively, of our revenue in 2006, and our ten largest customers accounted for approximately
82% of our revenue in 2006. The loss of any of our largest customers or the loss of significant business from
any of these customers could have a material adverse effect on our business, financial condition and results of
operations. Even though we may be selected as the supplier of a product by an OEM for a particular vehicle,
our OEM customers issue blanket purchase orders which generally provide for the supply of that customer’s
annual requirements for that vehicle, rather than for a specific number of our products. If the OEM’s
requirements are less than estimated, the number of products we sell to that OEM will be accordingly reduced.
In addition, the OEM may terminate its purchase orders with us at any time.
(cid:129) Currency exchange rate fluctuations could have an adverse effect on our revenues and results of
operations.
We have operations in Europe, Australia, Mexico and China, and sales derived from these operations
were approximately 13% of our revenues in 2006. As a result, we generate a significant portion of our sales
and incur a significant portion of our expenses in currencies other than the U.S. dollar. To the extent that we
are unable to match revenues received in foreign currencies with costs paid in the same currency, exchange
rate fluctuations in any such currency could have an adverse effect on our financial results. During times of a
strengthening U.S. dollar, our reported revenues and earnings from our international operations will be reduced
because the applicable local currencies will be translated into fewer U.S. dollars. The converse is also true and
the strengthening of the European currencies in relation to the U.S. dollar can have a positive impact on our
foreign revenues and earnings.
(cid:129) We are subject to certain risks associated with our foreign operations.
We have operations in Europe, Australia, Mexico and China. Our international operations accounted for
approximately 13%, 16% and 28% of our total revenues for the years ended December 31, 2006, 2005 and
22
2004, respectively. There are certain risks inherent in our international business activities including, but not
limited to:
(cid:129) the difficulty of enforcing agreements and collecting receivables through certain foreign legal systems;
(cid:129) foreign customers, who may have longer payment cycles than customers in the United States;
(cid:129) tax rates in certain foreign countries, which may exceed those in the United States and foreign earnings
may be subject to withholding requirements or the imposition of tariffs, exchange controls or other
restrictions, including restrictions on repatriation;
(cid:129) intellectual property protection difficulties;
(cid:129) general economic and political conditions in countries where we operate, which may have an adverse
effect on our operations in those countries;
(cid:129) the difficulties associated with managing a large organization spread throughout various countries; and
(cid:129) complications in complying with a variety of foreign laws and regulations, which may conflict with
United States law.
As we continue to expand our business globally, our success will be dependent, in part, on our ability to
anticipate and effectively manage these and other risks associated with foreign operations. We cannot assure
you that these and other factors will not have a material adverse effect on our international operations or our
business, financial condition or results of operations as a whole.
(cid:129) Our inability to compete effectively in the highly competitive commercial vehicle component supply
industry could result in lower prices for our products, reduced gross margins and loss of market share,
which could have an adverse effect on our revenues and operating results.
The commercial vehicle component supply industry is highly competitive. Our products primarily
compete on the basis of price, breadth of product offerings, product quality, technical expertise and
development capability, product delivery and product service. Increased competition may lead to price
reductions resulting in reduced gross margins and loss of market share.
Current and future competitors may make strategic acquisitions or establish cooperative relationships
among themselves or with others, foresee the course of market development more accurately than we do,
develop products that are superior to our products, produce similar products at lower cost than we can or adapt
more quickly to new technologies, industry or customer requirements. By doing so, they may enhance their
ability to meet the needs of our customers or potential future customers. These developments could limit our
ability to obtain revenues from new customers and to maintain existing revenues from our customer base. We
may not be able to compete successfully against current and future competitors and the failure to do so may
have a material adverse effect on our business, operating results and financial condition.
(cid:129) Our products may be rendered less attractive by changes in competitive technologies.
Changes in competitive technologies may render certain of our products less attractive. Our ability to
anticipate changes in technology and to successfully develop and introduce new and enhanced products on a
timely basis will be a significant factor in our ability to remain competitive. There can be no assurance that
we will be able to achieve the technological advances that may be necessary for us to remain competitive. We
are also subject to the risks generally associated with new product introductions and applications, including
lack of market acceptance, delays in product development and failure to operate properly.
(cid:129) If we are unable to recruit or retain skilled personnel, or if we lose the services of any of our key man-
agement personnel, our business, operating results and financial condition could be materially
adversely affected.
Our future success depends on our continuing ability to attract, train, integrate and retain highly skilled
personnel. Competition for these employees is intense. We may not be able to retain our current key
23
employees or attract, train, integrate or retain other highly skilled personnel in the future. Our future success
also depends in large part on the continued service of key management personnel, particularly our key
executive officers. If we lose the services of one or more of these individuals or other key personnel, or if we
are unable to attract, train, integrate and retain the highly skilled personnel we need, our business, operating
results and financial condition could be materially adversely affected.
(cid:129) We have only limited protection for our proprietary rights in our intellectual property, which makes it
difficult to prevent third parties from infringing upon our rights.
Our success depends to a certain degree on our ability to protect our intellectual property and to operate
without infringing on the proprietary rights of third parties. While we have been issued patents and have
registered trademarks with respect to many of our products, our competitors could independently develop
similar or superior products or technologies, duplicate our designs, trademarks, processes or other intellectual
property or design around any processes or designs on which we have or may obtain patents or trademark
protection. In addition, it is possible that third parties may have or acquire licenses for other technology or
designs that we may use or desire to use, so that we may need to acquire licenses to, or to contest the validity
of, such patents or trademarks of third parties. Such licenses may not be made available to us on acceptable
terms, if at all, and we may not prevail in contesting the validity of third party rights.
In addition to patent and trademark protection, we also protect trade secrets, know-how and other
confidential information against unauthorized use by others or disclosure by persons who have access to them,
such as our employees, through contractual arrangements. These arrangements may not provide meaningful
protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized
use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. If we are
unable to maintain the proprietary nature of our technologies, our revenues could be materially adversely
affected.
(cid:129) Our products may be susceptible to claims by third parties that our products infringe upon their pro-
prietary rights.
As the number of products in our target markets increases and the functionality of these products further
overlaps, we may become increasingly subject to claims by a third party that our technology infringes such
party’s proprietary rights. Regardless of their merit, any such claims could be time consuming and expensive
to defend, may divert management’s attention and resources, could cause product shipment delays and could
require us to enter into costly royalty or licensing agreements. If successful, a claim of infringement against us
and our inability to license the infringed or similar technology and/or product could have a material adverse
effect on our business, operating results and financial condition.
(cid:129) The market price of our common stock may be extremely volatile.
Our stock price has fluctuated since our initial public offering in August 2004. The trading price of our
common stock is subject to significant fluctuations in response to variations in quarterly operating results, the
gain or loss of significant orders, changes in earnings estimates by analysts, announcements of technological
innovations or new products by us or our competitors, general conditions in the commercial vehicle industry
and other events or factors. In addition, the equity markets in general have experienced extreme price and
volume fluctuations which have affected the market price for many companies in industries similar or related
to that of ours and which have been unrelated to the operating performance of these companies. These market
fluctuations may have affected and may continue to affect the market price of our common stock.
(cid:129) Our operating results, revenues and expenses may fluctuate significantly from quarter-to-quarter or
year-to-year, which could have an adverse effect on the market price of our stock.
For a number of reasons, including but not limited to, those described below, our operating results,
revenues and expenses have in the past varied and may in the future vary significantly from quarter-to-quarter
or year-to-year. These fluctuations could have an adverse effect on the market price of our common stock.
24
Fluctuations in Quarterly or Annual Operating Results. Our quarterly operating results may fluctuate as
a result of:
(cid:129) the size, timing, volume and execution of significant orders and shipments;
(cid:129) changes in the terms of our sales contracts;
(cid:129) the timing of new product announcements;
(cid:129) changes in our pricing policies or those of our competitors;
(cid:129) market acceptance of new and enhanced products;
(cid:129) the length of our sales cycles;
(cid:129) changes in our operating expenses;
(cid:129) personnel changes;
(cid:129) new business acquisitions;
(cid:129) changes in foreign currency exchange rates; and
(cid:129) seasonal factors.
Limited Ability to Adjust Expenses. We base our operating expense budgets primarily on expected
revenue trends. Many of our expenses are relatively fixed and as such we may be unable to adjust expenses
quickly enough to offset any unexpected revenue shortfall. Accordingly, any shortfall in revenue may cause
significant variation in operating results in any quarter.
Based on the above factors, we believe that quarter-to-quarter or year-to-year comparisons of our
operating results may not be a good indication of our future performance. It is possible that in one or more
future quarters or years, our operating results may be below the expectations of public market analysts and
investors. In that event, the trading price of our common stock may be adversely affected.
(cid:129) We may be subject to product liability claims, recalls or warranty claims, which could be expensive,
damage our reputation and result in a diversion of management resources.
As a supplier of products and systems to commercial vehicle OEMs, we face an inherent business risk of
exposure to product liability claims in the event that our products, or the equipment into which our products
are incorporated, malfunction and result in personal injury or death. Product liability claims could result in
significant losses as a result of expenses incurred in defending claims or the award of damages.
In addition, we may be required to participate in recalls involving systems or components sold by us if
any prove to be defective, or we may voluntarily initiate a recall or make payments related to such claims as a
result of various industry or business practices or the need to maintain good customer relationships. Such a
recall would result in a diversion of management resources. While we do maintain product liability insurance,
we cannot assure you that it will be sufficient to cover all product liability claims, that such claims will not
exceed our insurance coverage limits or that such insurance will continue to be available on commercially
reasonable terms, if at all. Any product liability claim brought against us could have a material adverse effect
on our results of operations.
Moreover, we warrant the workmanship and materials of many of our products under limited warranties
and have entered into warranty agreements with certain OEMs that warranty certain of our products in the
hands of these OEMs’ customers, in some cases for as long as six years. Accordingly, we are subject to risk of
warranty claims in the event that our products do not conform to our customers’ specifications or, in some
cases in the event that our products do not conform with their customers’ expectations. It is possible for
warranty claims to result in costly product recalls, significant repair costs and damage to our reputation, all of
which would adversely affect our results of operations.
25
(cid:129) Equipment failures, delays in deliveries or catastrophic loss at any of our facilities could lead to pro-
duction or service curtailments or shutdowns.
We manufacture or assemble our products at facilities in North America, Europe, China and Australia. An
interruption in production or service capabilities at any of these facilities as a result of equipment failure or
other reasons could result in our inability to produce our products, which could reduce our net revenues and
earnings for the affected period. In the event of a stoppage in production at any of our facilities, even if only
temporary, or if we experience delays as a result of events that are beyond our control, delivery times to our
customers could be severely affected. Any significant delay in deliveries to our customers could lead to
increased returns or cancellations and cause us to lose future revenues. Our facilities are also subject to the
risk of catastrophic loss due to unanticipated events such as fires, explosions or violent weather conditions. We
may experience plant shutdowns or periods of reduced production as a result of equipment failure, delays in
deliveries or catastrophic loss, which could have a material adverse effect on our business, results of operations
or financial condition.
(cid:129) Our indebtedness could adversely affect our financial condition and make it more difficult to imple-
ment our business strategy.
The aggregate amount of our outstanding indebtedness was $162.1 million as of December 31, 2006. Our
substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to
pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness, including the
notes. Our substantial indebtedness, combined with our lease and other financial obligations and contractual
commitments could have other important consequences to you as a holder of the notes. For example, it could:
(cid:129) make it more difficult for us to satisfy our obligations with respect to our indebtedness, including the
notes, and any failure to comply with the obligations of any of our debt instruments, including financial
and other restrictive covenants, could result in an event of default under the indenture governing the
notes and the agreements governing such other indebtedness;
(cid:129) make us more vulnerable to adverse changes in general economic, industry and competitive conditions
and adverse changes in government regulation;
(cid:129) require us to dedicate a substantial portion of our cash flow from operations to payments on our
indebtedness, thereby reducing the availability of our cash flows to fund working capital, capital
expenditures, acquisitions and other general corporate purposes;
(cid:129) limit our flexibility in planning for, or reacting to, changes in our business and the industry in which
we operate;
(cid:129) place us at a competitive disadvantage compared to our competitors that have less debt; and
(cid:129) limit our ability to borrow additional amounts for working capital, capital expenditures, acquisitions,
debt service requirements, execution of our business strategy or other purposes.
Any of the above listed factors could materially adversely affect our business, financial condition and
results of operations.
(cid:129) The terms of our senior credit facility and the indenture governing the 8.0% senior notes due 2013
may restrict our current and future operations, particularly our ability to respond to changes in our
business or to take certain actions.
Our senior credit facility and the indenture governing the 8.0% senior notes due 2013 contain covenants
that, among other things, restricts our ability to:
(cid:129) incur liens;
(cid:129) incur or assume additional debt or guarantees or issue preferred stock;
(cid:129) pay dividends, or make redemptions and repurchases, with respect to capital stock;
26
(cid:129) prepay, or make redemptions and repurchases of, subordinated debt;
(cid:129) make loans and investments;
(cid:129) make capital expenditures;
(cid:129) engage in mergers, acquisitions, asset sales, sale/leaseback transactions and transactions with affiliates;
(cid:129) change the business conducted by us or our subsidiaries; and
(cid:129) amend the terms of subordinated debt.
Also, our senior credit facility requires us to maintain compliance with specified financial ratios and
satisfy certain financial condition tests (some of which become more restrictive over time). If we do not
comply with such covenants or satisfy such ratios, our lenders could declare a default under the senior credit
facility, and our indebtedness could be declared immediately due and payable. Our ability to comply with the
provisions of the senior credit facility may be affected by changes in economic or business conditions beyond
our control. In addition, these covenants could affect our ability to operate our business and may limit our
ability to take advantage of potential business opportunities as they arise.
(cid:129) Our inability to successfully execute any planned cost reductions, restructuring initiatives or the
achievement of operational efficiencies could result in the incurrence of additional costs and expenses
that could adversely affect our reported earnings.
As part of our business strategy, we continuously seek ways to lower costs, improve manufacturing
efficiencies and increase productivity and intend to apply this strategy to those operations acquired through
acquisitions. In this regard, we may incur restructuring charges in the future and such charges could adversely
affect our operating results and financial condition.
(cid:129) Our earnings may be adversely affected by changes to the carrying values of our tangible and intangi-
ble assets, including goodwill, as a result of recording any impairment charges deemed necessary in
conjunction with the execution of our periodic asset impairment assessment and testing policy.
At December 31, 2006, we had goodwill of approximately $134.8 million and other intangible assets of
approximately $84.2 million. We may identify additional anticipated or unanticipated impairments in any of
our tangible or intangible asset categories in future testing periods and be required to record charges against
earnings in the period in which the impairment is identified. Specific indicators that give rise to asset
impairment may include, but are not limited to, changes in the general economic environment, changes or
downturns in our industry as a whole, termination of any of our customer contracts, restructuring efforts and
general workforce reductions among other factors.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our corporate office is located in New Albany, Ohio. Several of our manufacturing facilities are located
near our OEM customers to reduce our distribution costs, reduce risk of interruptions in our delivery schedule,
27
further improve customer service and provide our customers with reliable delivery of products and services.
The following table provides selected information regarding our principal facilities:
Approximate
Square Footage
Ownership Interest
360,000 sq. ft.
Owned/Leased
245,000 sq. ft.
200,000 sq. ft.
Owned/Leased
Owned
210,000 sq. ft.
Leased
Location
Products Produced
Norwalk, Ohio (3 facilities)
Vonore, Tennessee (2 facilities)
Shadyside, Ohio
Northampton, England
Cab, Sleeper Box, Assembly and
Ford GT Service
Seats, Mirrors
Stamping of Steel and Aluminum
Structural and Exposed Stamped
Components
Seats (office and commercial
vehicle)
Kings Mountain, North Carolina
Statesville, North Carolina
Cab, Sleeper Box, Assembly
Interior Trim, Seats
(2 facilities)
Seattle, Washington
Michigan City, Indiana
Canby, Oregon
Dublin, Virginia
RIM Process, Interior Trim, Seats
Wipers, Switches
Road watch/Electronics Assembly
Interior Trim, Seats
Vancouver, Washington
Interior Trim
(2 facilities)
Chillicothe, Ohio
Shanghai, China (2 facilities)
Bellaire, Ohio
Tacoma, Washington
Plain City, Ohio
Seneffs (Brussels), Belgium
Brisbane (HQ), Australia
Dublin, Ohio
Interior Trim, Dash Assembly
Seats
Warehouse Facility
Injection Molding
R&D, Lab
Seat Assembly
Seat Assembly
Administration
180,000 sq. ft.
163,000 sq. ft.
156,000 sq. ft.
87,000 sq. ft.
4,000 sq. ft.
79,000 sq. ft.
63,000 sq. ft.
62,000 sq. ft.
74,000 sq. ft.
41,000 sq. ft.
25,000 sq. ft.
8,000 sq. ft.
35,000 sq. ft.
50,000 sq. ft.
14,000 sq. ft.
Agua Prieta, Mexico (4 facilities) Wire Harness Assembly
150,000 sq. ft.
Douglas, Arizona (2 facilities)
Monona, Iowa
Warehouse Facility
Wire Harness/Panel Assembly
Edgewood, Iowa
Redgranite, Wisconsin
Dekalb, Illinois
Gahanna, Ohio
Concord, North Carolina
(2 facilities)
New Albany, Ohio
Brandys nad Orlici, Czech
Republic
Wire Harness/Assembly
Wire Harness Engineering Support
Cab Assembly
R&D, Lab
Injection Molding
Corporate Headquarters
Seat Assembly
21,000 sq. ft.
62,000 sq. ft.
18,000 sq. ft.
2,000 sq. ft.
60,000 sq. ft.
29,000 sq. ft.
150,000 sq. ft.
16,000 sq. ft.
52,000 sq. ft.
Owned
Leased
Owned
Leased
Leased
Owned
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Owned
We also have leased sales and service offices located in Australia, France and Czech Republic.
Utilization of our facilities varies with North American and European commercial vehicle production and
general economic conditions in such regions. All locations are principally used for manufacturing or assembly,
except for our New Albany and Dublin, Ohio facilities which are corporate and administrative offices, our
28
Plain City and Gahanna, Ohio, Wixom, Michigan and Redgranite, Wisconsin research and development and
engineering facilities and our leased warehouse facilities in Douglas, Arizona and Bellaire and Norwalk, Ohio.
Item 3. Legal Proceedings
We are subject to various legal proceedings and claims arising in the ordinary course of business,
including, but not limited to, customer and supplier disputes and product liability claims arising out of the
conduct of our businesses and examinations by the Internal Revenue Service (“IRS”). The IRS routinely
examines our federal income tax returns and, in the course of those examinations, the IRS may propose
adjustments to our federal income tax liability reported on such returns. It is our practice to defend those
proposed adjustments that we deem lacking merit. We are not involved in any litigation at this time in which
we expect that an unfavorable outcome of the proceedings, including any proposed adjustments presented to
date by the IRS, individually or collectively, will have a material adverse effect on our financial position,
results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of stockholders during the fourth quarter of 2006.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our common stock is traded on the Nasdaq Global Select Market under the symbol “CVGI.” The
following table sets forth the high and low sale prices for our common stock, for the periods indicated as
regularly reported by the Nasdaq Global Select Market:
High
Low
Year Ended December 31, 2006:
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23.57
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21.08
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21.25
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $22.29
Year Ended December 31, 2005:
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21.11
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24.94
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21.74
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24.38
$18.47
$17.19
$17.82
$17.10
$17.30
$17.70
$16.51
$18.25
As of February 28, 2007, there were 128 holders of record of our outstanding common stock.
We have not declared or paid any dividends to the holders of our common stock in the past and do not
anticipate paying dividends in the foreseeable future. Any future payment of dividends is within the discretion
of the Board of Directors and will depend upon, among other factors, the capital requirements, operating
results and financial condition of CVG. In addition, our ability to pay cash dividends is limited under the
terms of the credit agreement governing our senior credit facility.
29
The graph below matches Commercial Vehicle Group, Inc.’s cumulative 28-month total stockholder return
on common stock with the cumulative total returns of the NASDAQ Composite Index, the Commercial Vehicle
OEM Composite Index and the Commercial Vehicle Supplier Composite Index. The Commercial Vehicle
OEM Composite Index includes four companies: Navistar International Corp., PACCAR Inc., Volvo AB and
Wabash National Corp. The Commercial Vehicle Supplier Composite Index includes five companies: Accuride
Corporation, ArvinMeritor, Inc., Cummins, Inc., Eaton Corp. and Modine Manufacturing Co. The graph tracks
the performance of a $100 investment in our common stock and in each index (with the reinvestment of all
dividends) from August 5, 2004 to December 31, 2006.
COMPARISON OF 28 MONTH CUMULATIVE TOTAL RETURN*
Among Commercial Vehicle Group, Inc., The NASDAQ Composite Index,
Commercial Vehicle OEM Composite Index and Commercial Vehicle Supplier Composite Index
$200
$175
$150
s
r
a
l
l
o
D
$125
$100
Aug. 5, 2004
Dec. 31, 2004
Dec. 31, 2005
Dec. 31, 2006
CVGI
NASDAQ
COMMERCIAL OEMS
COMMERCIAL SUPPLIERS
* $100 invested on 8/5/04 in stock or on 7/31/04 in index-including reinvestment of dividends.
Commercial Vehicle Group, Inc.
NASDAQ Composite
Commercial Vehicle OEM Composite
Commercial Vehicle Supplier Composite
08/05/04
12/31/04
12/31/05
12/31/06
$100.00
$166.64
$143.36
$166.41
$100.00
$118.75
$119.46
$129.61
$100.00
$103.78
$141.62
$188.02
$100.00
$116.42
$111.04
$129.90
The information in the graph and table above is not “soliciting material,” is not deemed “filed” with the
Securities and Exchange Commission and is not to be incorporated by reference in any of our filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made
before or after the date of this annual report, except to the extent that we specifically incorporate such
information by reference.
30
The following table sets forth information in connection with purchases made by, or on behalf of, us or
any affiliated purchaser, of shares of our common stock during the quarterly period ended December 31, 2006:
(c) Total
Number of
Shares (or
Units)
Purchased
as Part of
Publicly
Announced
Plans or
Programs
(d) Maximum
Number (or
Approximate
Dollar Value)
of Shares (or
Units) that
May Yet Be
Purchased
Under the
Plans or
Programs
—
—
—
—
—
—
(a) Total
Number of
Shares (or
Units)
Purchased
(b) Average
Price Paid
per Share
(or Unit)
5,836
$19.67
—
—
—
—
Month #1
(October 1, 2006 through
October 31, 2006) . . . . . . . . . . . . . . . . . . . . . .
Month #2
(November 1, 2006 through
November 30, 2006) . . . . . . . . . . . . . . . . . . . .
Month #3
(December 1, 2006 through
December 31, 2006) . . . . . . . . . . . . . . . . . . . .
We did not repurchase any of our common stock on the open market as part of a stock repurchase
program during the fourth quarter of 2006, however, our employees surrendered 5,836 shares of our common
stock to satisfy the tax withholding obligations on the vesting of restricted stock awards issued under our
Amended and Restated Equity Incentive Plan.
31
Item 6. Selected Financial Data
The following table sets forth selected consolidated financial data regarding our business and certain
industry information and should be read in conjunction with “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” and our consolidated financial statements and notes thereto
included elsewhere in this Annual Report on Form 10-K.
Material Events Affecting Financial Statement Comparability:
Collectively, our acquisitions of Mayflower, Monona, Cabarrus and C.I.E.B. materially impacted our
results of operations and as a result, our consolidated financial statements for the years ended December 31,
2006 and 2005 are not comparable to the results of the prior periods presented without consideration of the
information provided in Note 3 and Note 7 to our consolidated financial statements contained in Item 15 of
our Annual Report on Form 10-K for the year ended December 31, 2005, and Note 3 and Note 7 to our
consolidated financial statements contained in Item 8 of our Annual Report on Form 10-K for the year ended
December 31, 2006.
2006
Years Ended December 31,
2004
2003
(In thousands, except per share data)
2005
2002
Statement of Operations Data:
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . .
$918,751
768,913
$ 754,481
620,031
$380,445
309,696
$287,579
237,884
$298,678
249,181
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses. . .
Share-based compensation expense . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . .
149,838
51,950
—
414
Operating income . . . . . . . . . . . . . . . . . . . .
97,474
(Gain) loss on foreign currency forward
contracts and other. . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . .
Income before income taxes and cumulative
effect of accounting change . . . . . . . . . . .
Provision for income taxes. . . . . . . . . . . . . . . .
Income before cumulative effect of change
(3,468)
14,829
318
85,795
27,745
134,450
44,564
—
358
89,528
(3,741)
13,195
1,525
70,749
28,985
10,125
107
31,532
(1,247)
7,244
1,605
78,549
29,138
23,930
6,481
49,695
24,281
—
185
25,229
3,230
9,796
2,972
9,231
5,267
49,497
23,952
—
122
25,423
1,098
12,940
—
11,385
5,235
in accounting principle . . . . . . . . . . . . . . .
58,050
49,411
17,449
3,964
6,150
Cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
(51,630)
Net income (loss) . . . . . . . . . . . . . . . . . . . .
$ 58,050
$ 49,411
$ 17,449
$
3,964
$ (45,480)
Earnings (loss) per share:(1)
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average common shares outstanding:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2.74
2.69
$
$
2.54
2.51
$
$
1.13
1.12
$
$
0.29
0.29
$
$
(3.29)
(3.26)
21,151
21,545
19,440
19,697
15,429
15,623
13,779
13,883
13,827
13,931
32
Balance Sheet Data (at end of each period):
Working capital (current assets less current
liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities, excluding debt . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ investment . . . . . . . . . . . . .
Other Data:
Adjusted EBITDA(2). . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in):
Operating activities . . . . . . . . . . . . . . . . . . .
Investing activities . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . .
Capital expenditures, net . . . . . . . . . . . . . . . . .
North American Heavy-duty (Class 8) truck
2006
Years Ended December 31,
2004
2003
(In thousands, except per share data)
2005
2002
135,368
590,822
163,803
162,114
264,905
119,104
543,883
150,797
191,009
202,077
41,727
225,638
60,667
53,925
111,046
28,216
210,495
48,215
127,474
34,806
8,809
204,217
49,990
127,202
27,025
$115,910
$ 105,385
$ 40,389
$ 30,105
$ 33,007
36,922
(27,625)
(27,952)
14,983
22,389
44,156
(188,569)
188,547
12,064
20,669
34,177
(8,907)
(28,427)
7,567
8,907
10,442
(5,967)
(2,761)
8,106
5,967
18,172
(4,937)
(14,825)
8,682
4,937
production (units)(3) . . . . . . . . . . . . . . . . . .
378,000
341,000
269,000
182,000
181,000
(1) Earnings (loss) per share has been calculated giving effect to the reclassification of our outstanding classes
of common stock into one class of common stock and, in connection therewith, a 38.991-to-one stock
split.
(2) Adjusted EBITDA is a non-GAAP financial measure that is reconciled to net income, its most directly
comparable GAAP measure, in the accompanying financial tables. Adjusted EBITDA is defined as net
earnings before interest, taxes, depreciation, amortization, gains/losses on the early extinguishment of debt,
miscellaneous income/expenses and cumulative effect of changes in accounting principle. In calculating
Adjusted EBITDA, we exclude the effects of gains/losses on the early extinguishment of debt, miscella-
neous income/expenses and cumulative effect of changes in accounting principles because our management
believes that some of these items may not occur in certain periods, the amounts recognized can vary sig-
nificantly from period to period and these items do not facilitate an understanding of our operating perfor-
mance. Our management utilizes Adjusted EBITDA, in addition to the supplemental information, as an
operating performance measure in conjunction with GAAP measures, such as net income and gross margin
calculated in conformity with GAAP.
Our management uses Adjusted EBITDA, in addition to the supplemental information, as an integral part
of its report and planning processes and as one of the primary measures to, among other things:
(i) monitor and evaluate the performance of our business operations;
(ii) facilitate management’s internal comparisons of our historical operating performance of our
business operations;
(iii) facilitate management’s external comparisons of the results of our overall business to the
historical operating performance of other companies that may have different capital structures and debt
levels;
(iv) review and assess the operating performance of our management team and as a measure in
evaluating employee compensation and bonuses;
(v) analyze and evaluate financial and strategic planning decisions regarding future operating
investments; and
33
(vi) plan for and prepare future annual operating budgets and determine appropriate levels of
operating investments.
Our management believes that Adjusted EBITDA, in addition to the supplemental information, is useful
to investors as it provides them with disclosures of our operating results on the same basis as that used by our
management. Additionally, our management believes that Adjusted EBITDA, in addition to the supplemental
information, provides useful information to investors about the performance of our overall business because
the measure eliminates the effects of certain recurring and other unusual or infrequent charges that are not
directly attributable to our underlying operating performance. Additionally, our management believes that
because we have historically provided a non-GAAP financial measure in previous filings, that continuing to
include a non-GAAP measure in our filings provides consistency in our financial reporting and continuity to
investors for comparability purposes. Accordingly, we believe that the presentation of Adjusted EBITDA, when
used in conjunction with the supplemental information and GAAP financial measures, is a useful financial
analysis tool, used by our management as described above, that can assist investors in assessing our financial
condition, operating performance and underlying strength. Adjusted EBITDA should not be considered in
isolation or as a substitute for net income prepared in conformity with GAAP. Other companies may define
Adjusted EBITDA differently. Adjusted EBITDA, as well as the other information in this filing, should be
read in conjunction with our financial statements and footnotes contained in the documents that we file with
the U.S. Securities and Exchange Commission.
The following is a reconciliation of Net Income to Adjusted EBITDA:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .
Add (subtract): . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . .
Miscellaneous (income) expense . . . . . . . . . . . .
Cumulative effect of change in accounting
2006
$ 58,050
2005
Years Ended December 31,
2004
(In thousands)
$17,449
$ 49,411
2003
$ 3,964
14,983
14,829
27,745
318
(15)
12,064
13,195
29,138
1,525
52
7,567
7,244
6,481
1,605
43
8,106
9,796
5,267
2,972
—
2002
$(45,480)
8,682
12,940
5,235
—
—
—
principle . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
51,630
Adjusted EBITDA. . . . . . . . . . . . . . . . . . . . . . .
$115,910
$105,385
$40,389
$30,105
$ 33,007
Supplemental Information:
Noncash (gain) loss on forward exchange
contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,203)
(3,793)
(1,290)
3,230
1,098
Nonrecurring provision for prior period debt
service . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
750
—
—
—
—
(3) Source: Americas Commercial Transportation Research Co. LLC and ACT Publications.
34
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis in conjunction with the information set forth under
“Item 6 — Selected Financial Data” and our consolidated financial statements and the notes thereto included
in Item 8 in this Annual Report on Form 10-K. The statements in this discussion regarding industry outlook,
our expectations regarding our future performance, liquidity and capital resources and other non-historical
statements in this discussion are forward-looking statements. See “Forward-Looking Information” on page ii
of this Annual Report on Form 10-K. These forward-looking statements are subject to numerous risks and
uncertainties, including, but not limited to, the risks and uncertainties described under “Item 1A — Risk
Factors.” Our actual results may differ materially from those contained in or implied by any forward-looking
statements.
Company Overview
We are a leading supplier of fully integrated system solutions for the global commercial vehicle market,
including the Heavy-duty (Class 8) truck market, the construction and agriculture market and the specialty and
military transportation markets. As a result of our strong leadership in cab-related products and systems, we
are positioned to benefit from the increased focus of our customers on cab design and comfort and
convenience features to better serve their end-user, the driver. Our products include suspension seat systems,
interior trim systems (including instrument panels, door panels, headliners, cabinetry and floor systems), cab
structures and components, mirrors, wiper systems, electronic wire harness assemblies and controls and
switches specifically designed for applications in commercial vehicles.
We are differentiated from suppliers to the automotive industry by our ability to manufacture low volume
customized products on a sequenced basis to meet the requirements of our customers. We believe that we have
the number one or two position in most of our major markets and that we are the only supplier in the North
American commercial vehicle market that can offer complete cab systems including cab body assemblies,
sleeper boxes, seats, interior trim, flooring, wire harnesses, panel assemblies and other structural components.
We believe our products are used by virtually every major North American commercial vehicle OEM, which
we believe creates an opportunity to cross-sell our products and offer a fully integrated system solution.
Demand for our products is generally dependent on the number of new commercial vehicles manufac-
tured, which in turn is a function of general economic conditions, interest rates, changes in governmental
regulations, consumer spending, fuel costs and our customers’ inventory levels and production rates. New
commercial vehicle demand has historically been cyclical and is particularly sensitive to the industrial sector
of the economy, which generates a significant portion of the freight tonnage hauled by commercial vehicles.
Production of commercial vehicles in North America peaked in 1999 and experienced a downturn from 2000
to 2003 that was due to a weak economy, an oversupply of new and used vehicle inventory and lower
spending on commercial vehicles and equipment. Demand for commercial vehicles improved in 2006 due to
broad economic recovery in North America, corresponding growth in the movement of goods, the growing
need to replace aging truck fleets and OEMs received larger than expected pre-orders in anticipation of the
new EPA emissions standards becoming effective in 2007.
In 2006, approximately 60% of our revenue was generated from sales to North American heavy-duty
truck OEMs. Our remaining revenue in 2006 was primarily derived from sales to OEMs in the global
construction market, the aftermarket, OEM service organizations and other commercial vehicle and specialty
markets. Demand for our products is also driven to a significant degree by preferences of the end-user of the
commercial vehicle, particularly with respect to Heavy-duty (Class 8) trucks. Unlike the automotive industry,
commercial vehicle OEMs generally afford the ultimate end-user the ability to specify many of the component
parts that will be used to manufacture the commercial vehicle, including a wide variety of cab interior styles
and colors, the brand and type of seats, type of seat fabric and color and specific mirror styling. In addition,
certain of our products are only utilized in Heavy-duty (Class 8) trucks, such as our storage systems, sleeper
boxes, sleeper bunks and privacy curtains, and, as a result, changes in demand for Heavy-duty (Class 8) trucks
or the mix of options on a vehicle can have a greater impact on our business than changes in the overall
35
demand for commercial vehicles. To the extent that demand increases for higher content vehicles, our revenues
and gross profit will be positively impacted.
Along with North America, we have operations in Europe, Australia, Mexico and China. Our operating
results are, therefore, impacted by exchange rate fluctuations to the extent we are unable to match revenues
received in such currencies with costs incurred in such currencies. Strengthening of these foreign currencies as
compared to the U.S. dollar resulted in an approximate $3.0 million decrease in our revenues in 2006 as
compared to 2005 and an approximate $1.0 million increase in 2005 as compared to 2004. Because our costs
were generally impacted to the same degree as our revenue, this exchange rate fluctuation did not have a
material impact on our net income in 2005 as compared to 2006 and 2005 compared to 2004.
We continuously seek ways to improve our operating performance by lowering costs. These efforts
include, but are not limited to, the following:
(cid:129) establishing sourcing efforts in China and Europe;
(cid:129) eliminating excess production capacity through the closure and consolidation of manufacturing or
assembly facilities; and
(cid:129) implementing Lean Manufacturing and Total Quality Production System (“TQPS”) initiatives to
improve operating efficiency and product quality.
Although OEM demand for our products is directly correlated with new vehicle production, we also have
the opportunity to grow through increasing our product content per vehicle through cross selling and bundling
of products. We generally compete for new business at the beginning of the development of a new vehicle
platform and upon the redesign of existing programs. New platform development generally begins at least one
to three years before the marketing of such models by our customers. Contract durations for commercial
vehicle products generally extend for the entire life of the platform, which is typically five to seven years.
In sourcing products for a specific platform, the customer generally develops a proposed production
timetable, including current volume and option mix estimates based on their own assumptions, and then
sources business with the supplier pursuant to written contracts, purchase orders or other firm commitments in
terms of price, quality, technology and delivery. In general, these contracts, purchase orders and commitments
provide that the customer can terminate if a supplier does not meet specified quality and delivery requirements
and, in many cases, they provide that the price will decrease over the proposed production timetable. Awarded
business generally covers the supply of all or a portion of a customer’s production and service requirements
for a particular product program rather than the supply of a specific quantity of products. Accordingly, in
estimating awarded business over the life of a contract or other commitment, a supplier must make various
assumptions as to the estimated number of vehicles expected to be produced, the timing of that production,
mix of options on the vehicles produced and pricing of the products being supplied. The actual production
volumes and option mix of vehicles produced by customers depend on a number of factors that are beyond a
supplier’s control.
Recent Acquisitions
On November 29, 2006, we acquired all of the outstanding stock of C.I.E.B. C.I.E.B. is a manufacturer of
seats primarily for the commercial vehicle market. The C.I.E.B. acquisition was financed with borrowings
from our revolving credit facility. The operating results of C.I.E.B. have been included in our 2006
consolidated financial statements since the date of acquisition.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in conformity with accounting principles generally
accepted in the United States of America (“U.S. GAAP”). For a comprehensive discussion of our accounting
policies, see Note 2 to our consolidated financial statements in Item 8 in this Annual Report on Form 10-K.
The preparation of our consolidated financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
36
the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. These estimates and assumptions, particularly relating to revenue recognition and sales commitments,
provision for income taxes, restructuring and impairment charges and litigation and contingencies may have a
material impact on our financial statements, and are discussed in detail throughout our analysis of our results
of operations.
In addition to evaluating estimates relating to the items discussed above, we also consider other estimates,
including, but not limited to, those related to allowance for doubtful accounts, defined benefit pension plan
assumptions, uncertain tax positions and goodwill and other intangible assets. We base our estimates on
historical experience and various other assumptions that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of assets, liabilities and
equity that are not readily apparent from other sources. Actual results and outcomes could differ materially
from these estimates and assumptions. See Item 1A — Risk Factors for additional information regarding risk
factors that may impact our estimates.
We apply the following critical accounting polices in the preparation of our consolidated financial
statements.
Revenue Recognition and Sales Commitments — We recognize revenue in accordance with the SEC’s
Staff Accounting Bulletin (“SAB”) No. 101, Revenue Recognition in Financial Statements, and SAB No. 104,
Revenue Recognition, and other authoritative accounting literature. These pronouncements generally require
that we recognize revenue when (1) delivery has occurred or services have been rendered, (2) persuasive
evidence of an arrangement exists, (3) there is a fixed or determinable price and (4) collectibility is reasonably
assured. Our products are generally shipped from our facilities to our customers, which is when legal title
passes to the customer for substantially all of our revenues. We enter into agreements with our customers at
the beginning of a given platform’s life to supply products for that platform. Once we enter into such
agreements, fulfillment of our purchasing requirements is our obligation for the entire production life of the
platform, with terms generally ranging from five to seven years, and we have no provisions to terminate such
contracts.
Provisions for anticipated contract losses are recognized at the time they become evident. In certain
instances, we may be committed under existing agreements to supply product to our customers at selling
prices that are not sufficient to cover the cost to produce such product. In such situations, we record a
provision for the estimated future amount of such losses. Such losses are recognized at the time that the loss is
probable and reasonably estimable and are recorded at the minimum amount necessary to fulfill our
obligations to our customers. We had no such recorded loss as of December 31, 2006 and $0.1 million and
$0.6 million at December 31, 2005 and 2004, respectively.
Goodwill and Intangible Assets — Goodwill represents the excess of acquisition purchase price over the
fair value of net assets acquired. In July 2001, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations, and SFAS No. 142,
Goodwill and Intangible Assets. SFAS No. 141 requires all business combinations initiated after June 30, 2001
to be accounted for using the purchase method of accounting. Under SFAS No. 142, goodwill and intangible
assets with indefinite lives are no longer amortized, but reviewed annually or more frequently if impairment
indicators arise. Separable intangible assets that are not deemed to have indefinite lives will continue to be
amortized over their useful lives, but with no maximum life. Prior to the adoption of SFAS No. 142 on
January 1, 2002, goodwill was being amortized on a straight-line basis over 40 years.
We review goodwill and indefinite-lived intangible assets for impairment annually in the second fiscal
quarter and whenever events or changes in circumstances indicate the carrying value may not be recoverable
in accordance with SFAS No. 142. We review definite-lived intangible assets in accordance with the provisions
of SFAS No. 142 and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The
provisions of SFAS No. 142 require that a two-step impairment test be performed on goodwill. In the first
step, we compare the fair value of the reporting unit to the carrying value. Our reporting unit is consistent
with the reportable segment identified in Note 10 to our consolidated financial statements contained in this
Annual Report on Form 10-K for the year ended December 31, 2006. If the fair value of the reporting unit
37
exceeds the carrying value of the net assets assigned to that unit, goodwill is considered not impaired and we
are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit
exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in
order to determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting
unit’s goodwill exceeds its implied fair value, then we would record an impairment loss equal to the
difference. SFAS No. 142 also requires that the fair value of the purchased intangible assets with indefinite
lives be estimated and compared to the carrying value. We estimate the fair value of these intangible assets
using an income approach. We recognize an impairment loss when the estimated fair value of the intangible
asset is less than the carrying value. In this regard, our management considers the following indicators in
determining if events or changes in circumstances have occurred indicating that the recoverability of the
carrying amount of indefinite-lived and amortizing intangible assets should be assessed: (1) a significant
decrease in the market value of an asset; (2) a significant change in the extent or manner in which an asset is
used or a significant physical change in an asset; (3) a significant adverse change in legal factors or in the
business climate that could affect the value of an asset or an adverse action or assessment by a regulator; (4) an
accumulation of costs significantly in excess of the amount originally expected to acquire or construct an
asset; and (5) a current period operating or cash flow loss combined with a history of operating or cash flow
losses or a projection or forecast that demonstrates continuing losses associated with an asset used for the
purpose of producing revenue. Our annual goodwill and indefinite-lived (SFAS No. 142) and definite-life
intangible asset (SFAS No. 144) impairment analysis was performed during the second quarter of fiscal 2006
and did not result in an impairment charge.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant
estimates and assumptions. These estimates and assumptions include revenue growth rates and operating
margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market
conditions and determination of appropriate market comparables. We base our fair value estimates on
assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. The valuation
approaches we use include the Income Approach (the Discounted Cash Flow Method) and the Market
Approach (the Guideline Company and Transaction Methods) to estimate the fair value of the reporting unit;
earnings are emphasized in the Discounted Cash Flow, Guideline Company, and the Transaction Methods. In
addition, these methods utilize market data in the derivation of a value estimate and are forward-looking in
nature. The Discounted Cash Flow Method utilizes a market-derived rate of return to discount anticipated
performance, while the Guideline Company Method and the Transaction Method incorporate multiples that are
based on the market’s assessment of future performance. Actual future results may differ materially from those
estimates.
Intangible Assets — Indefinite-Lived
Basis for Accounting Treatment
Our indefinite-lived intangible assets consist of customer relationships acquired in the 2005 acquisitions
of Mayflower and Monona. We have accounted for these customer relationships as indefinite-lived intangible
assets, which we believe is appropriate based upon the following circumstances and conditions under which
we operate:
Sourcing, Barriers to Entry and Competitor Risks
The customer sourcing decision for the Mayflower and Monona businesses is heavily predicated on price,
quality, delivery and the overall customer relationship. Absent a significant change in any or all of these
factors, it is unlikely that a customer would source production to an alternate supplier. In addition, the factors
listed below impose a high barrier for new competitors to enter into this industry. Historical experience
indicates that Mayflower and Monona have not lost any primary customers and/or relationships due to these
factors and such loss is not anticipated in the foreseeable future for the following reasons:
(cid:129) Costs associated with setting up a new production line, including tooling costs, are typically cost
prohibitive in a competitive pricing environment;
38
(cid:129) The risk associated with potential production delays and a disruption to the supply chain typically
outweighs any potential economic benefit;
(cid:129) Significant initial outlays of capital and institutional production knowledge represent a significant
barrier to entry. Due to the asset-intensive nature of the businesses, a new competitor would require a
substantial amount of initial capital;
(cid:129) Changeover costs are high both from an economic and risk standpoint;
(cid:129) The highly complex nature of successfully producing electronic wiring harnesses and complete cab
structures in accordance with OEM quality standards makes it difficult for a competitor to enter the
business; and
(cid:129) There is significant risk in operating the businesses as a result of the highly customized nature of the
business. For example, production runs in the commercial vehicle business are significantly smaller and
are more “build to order” in nature which requires the systems, expertise, equipment and logistics in
order to be successful.
These costs and risks are the primary prohibiting factors which preclude our customers from sourcing
their business elsewhere at any given time.
Duration and Strength of Existing Customer Relationships/Concentrations of Revenue
Mayflower and Monona have long-standing relationships with their existing customers and have
experienced de minimis historical attrition. These relationships have endured over time and, accordingly, an
assumption of prospective attrition is inconsistent with this historical experience and management’s expecta-
tions. Both Mayflower and Monona have a limited customer base, consisting of three primary customers, that
has existed for many years, and we had pre-existing long-standing relationships with the same primary
customers prior to the acquisitions of Mayflower and Monona, which in most cases have exceeded a period of
40 years. We believe the addition of Mayflower and Monona further strengthens our existing customer
relationships with such customers. Specifically:
Mayflower and Monona’s relationships with their customers’ key decision-making personnel are mature
and stable.
(cid:129) Mayflower’s and Monona’s customers typically make purchasing decisions through a team approach
versus a single decision maker. Mayflower and Monona have historically maintained strong relation-
ships with individuals at all levels of the decision making process including the engineering, operations
and purchasing functions in order to successfully minimize the impact of any employee turnover at the
customer level.
The top three customers of Mayflower and Monona have been established customers for a substantial
period of time.
(cid:129) Mayflower has had relationships with Volvo/Mack, Freightliner and International since 1965, 1997 and
2001, respectively. We and/or our predecessor entities, had pre-existing relationships with these same
customers since 1949, 1954 and 1950, respectively. These customers comprised approximately 88% and
85% of Mayflower’s revenues for fiscal years 2006 and 2005, respectively.
(cid:129) Monona has had relationships with Deere & Co., Caterpillar and Oshkosh since 1969, 1970 and 1985,
respectively. We and/or our predecessor entities, had pre-existing relationships with these same
customers since 1987, 1958 and 1950, respectively. These customers comprised approximately 85% and
88% of Monona’s revenues for fiscal years 2006 and 2005, respectively.
Valuation Methodology
For valuation purposes, the income approach using the discounted cash flow method was employed for
the purpose of evaluating the Mayflower and Monona customer relationship intangible assets. Under this
39
approach, we determined that the fair value of the Mayflower and Monona customer relationship intangible
assets at their dates of acquisition was $45.9 million and $28.9 million, respectively.
Significant assumptions used in the valuation and determination of an indefinite useful life for these
customer relationship intangible assets included the following:
(cid:129) The revenue projections that we relied upon to substantiate the economic consideration paid for the
businesses is almost exclusively tied to the existing customer base. With regard to the valuation process,
we projected less than 1% of total revenue in 2005 and 2006 to be lost due to core customer attrition
and no core customer attrition thereafter.
(cid:129) Contributory asset charges were deducted for assets that contribute to income generation including:
(i) net working capital; (ii) personal property; (iii) real property; (iv) tradename and trademarks; and
(v) an assembled workforce.
(cid:129) The cash flows associated with the customer relationships acquired in the Mayflower and Monona
transactions were discounted at a rate of return of 25.0% and 29.5%, respectively, which is
approximately equal to the equity rate of return.
Intangible Asset Impairment — Accounting Treatment
If Mayflower and/or Monona were to prospectively lose any of their customers, in accordance with the
provisions of paragraphs 16 and 17 of SFAS No. 142, Goodwill and Other Intangible Assets, we would
perform an intangible asset impairment test to determine the impact of the loss on the customer relationship
intangible asset and if impairment was indicated, we would record an impairment loss in our consolidated
statement of operations.
Accounting for Income Taxes — As part of the process of preparing our consolidated financial statements,
we are required to estimate our income taxes in each of the jurisdictions in which we operate. In addition, tax
expense includes the impact of differing treatment of items for tax and accounting purposes which result in
deferred tax assets and liabilities which are included in our consolidated balance sheet. To the extent that
recovery of deferred tax assets is not likely, we must establish a valuation allowance. Significant judgment is
required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation
allowance recorded against our net deferred tax assets. As of December 31, 2004, we determined that we do
not require a valuation allowance against our deferred tax assets due to the likelihood of recovery in future
periods. In the event that our actual results differ from our estimates or we adjust these estimates in future
periods, the effects of these adjustments could materially impact our financial position and results of
operations. The net deferred tax liability as of December 31, 2006 was $1.8 million. We will adopt FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement
No. 109, (“FIN 48”) in the first quarter 2007. The adoption of this interpretation will change the manner in
which we evaluate recognition and measurement of uncertain tax positions. See “Recently Issued Accounting
Pronouncements” in Note 2 to our consolidated financial statements for further information regarding the
adoption of this authoritative literature.
Warranties — We are subjected to warranty claims for products that fail to perform as expected due to
design or manufacturing deficiencies. Customers continue to require their outside suppliers to guarantee or
warrant their products and bear the cost of repair or replacement of such products. Depending on the terms
under which we supplied 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 reserve for estimated future customer warranty costs based on historical trends and current
economic factors. The amount of such estimates for warranty provisions was approximately $5.2 million,
$7.1 million and $2.4 million at December 31, 2006, 2005 and 2004, respectively. The increase in estimate
from 2004 to 2005 is primarily the result of the Mayflower, Monona and Cabarrus acquisitions.
Pension and Other Post-Retirement Benefit Plans — We sponsor pension and other post-retirement benefit
plans that cover certain hourly and salaried employees in the United States and United Kingdom. Our policy is
40
to make annual contributions to the plans to fund the normal cost as required by local regulations. In addition,
we have an other post-retirement benefit plan for certain U.S. operations, retirees and their dependents.
Our Assumptions
The determination of pension and other post-retirement benefit plan obligations and related expenses
requires the use of assumptions to estimate the amount of the benefits that employees earn while working, as
well as the present value of those benefits. Our assumptions are determined based on current market
conditions, historical information and consultation with and input from our actuaries. Due to the significant
management judgment involved, our assumptions could have a material impact on the measurement of our
pension and other post-retirement benefit expenses and obligations.
Significant assumptions used to measure our annual pension and other post-retirement benefit expenses
include:
(cid:129) discount rate;
(cid:129) expected return on plan assets; and
(cid:129) health care cost trend rates.
Discount Rate — The discount rate represents the interest rate that should be used to determine the
present value of future cash flows currently expected to be required to settle the pension and other post-
retirement benefit obligations. In estimating this rate, we consider rates of return on high quality fixed-income
investments included in various published bond indexes. We consider the Moody’s Aa Corporate Bond Index
and the Barclay’s Capital AA Rated Sterling Bond Index in the determination of the appropriate discount rate
assumptions. The weighted average rate we used to measure our pension obligation as of December 31, 2006
was 5.8% for the U.S. and 5.0% for the non-U.S pension plans.
Expected Long-Term Rate of Return — The expected return on pension plan assets is based on our
historical experience, our pension plan investment strategy and our expectations for long-term rates of return.
Our pension plan investment strategy is reviewed annually and is established based upon plan liabilities, an
evaluation of market conditions, tolerance for risk and cash requirements for benefit payments. We use a third-
party advisor to assist us in determining our investment allocation and modeling our long-term rate of return
assumptions. For 2006 and 2005, we assumed an expected long-term rate of return on plan assets of 8.5 percent
and 8.5 percent, respectively, for the U.S. pension plans and 6.0 percent and 7.5 percent, respectively, for the
non-U.S. pension plans.
Changes in the discount rate and expected long-term rate of return on plan assets within the range
indicated below would have had the following impact on 2006 pension and other post-retirement benefits
results (in thousands):
1 Percentage
Point Increase
1 Percentage
Point Decrease
(Decrease) increase due to change in assumptions used to determine
net periodic benefit costs for the year ended December 31, 2006:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term rate of return on plan assets . . . . . . . . . . . . . . .
(Decrease) increase due to change in assumptions used to determine
benefit obligations for the year ended December 31, 2006:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(351)
(566)
$
$
579
566
$(11,929)
$15,675
Health Care Cost Trend Rates — The health care cost trend rates represent the annual rates of change in
the cost of health care benefits based on estimates of health care inflation, changes in health care utilization or
delivery patterns, technological advances and changes in the health status of the plan participants. For
measurement purposes, a 10% annual rate of increase in the per capita cost of covered health care benefits
was assumed for 2006 and 2005. The rate was assumed to decrease gradually to 5.0% through 2011 and
41
remain constant thereafter. Assumed health care cost trend rates can have a significant effect on the amounts
reported for other post-retirement benefit plans.
Differences in the ultimate health care cost trend rates within the range indicated below would have had
the following impact on 2006 other post-retirement benefit results (in thousands):
1 Percentage
Point Increase
1 Percentage
Point Decrease
Increase (Decrease) from change in health care cost trend rates
Other post-retirement benefit expense . . . . . . . . . . . . . . . . . . . . . . .
Other post-retirement benefit liability . . . . . . . . . . . . . . . . . . . . . . .
$ 20
$102
$(19)
$(95)
Recently Issued Accounting Pronouncements
See Note 2 to our consolidated financial statements in Item 8 in this Annual Report on Form 10-K for a
full description of recently issued and/or adopted accounting pronouncements.
Results of Operations
The table below sets forth certain operating data expressed as a percentage of revenues for the periods
indicated:
2006
2005
2004
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100.0% 100.0% 100.0%
82.2
83.7
81.4
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . .
Noncash option charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.3
5.7
—
—
10.6
(0.4)
1.6
—
9.4
3.0
17.8
5.9
—
—
11.9
(0.5)
1.7
0.2
10.5
3.9
18.6
7.6
2.7
—
8.3
(0.3)
1.9
0.4
6.3
1.7
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.4%
6.6% 4.6%
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
Revenues. Revenues increased $164.3 million, or 21.8%, to $918.8 million for the year ended Decem-
ber 31, 2006 from $754.5 million for the year ended December 31, 2005. This increase resulted primarily
from:
(cid:129) increased acquisition related revenue of approximately $77.0 million from the full year impact of the
acquisitions of Mayflower, Monona, Cabarrus and the partial year impact of C.I.E.B.;
(cid:129) a 10.9% increase in North American Heavy-duty (Class 8) truck production, fluctuations in production
levels for other North American end markets and net new business awards resulted in approximately
$88.0 million of increased revenues;
(cid:129) an increase in production levels, fluctuations in content and net new business awards for our European,
Australian and Asian markets of approximately $2.5 million;
(cid:129) unfavorable foreign exchange fluctuations and adjustments of approximately $3 million.
42
Gross Profit. Gross profit increased $15.3 million, or 11.4%, to $149.8 million for the year ended
December 31, 2006 from $134.5 million for the year ended December 31, 2005. As a percentage of revenues,
gross profit decreased to 16.3% for the year ended December 31, 2006 from 17.8% for the year ended
December 31, 2005. This decrease resulted primarily from the result of various raw material cost increases as
well as certain operational and other one-time events during the year. We continued to seek material cost
reductions, labor efficiencies and general operating cost reductions to generate additional profits during the
year ended December 31, 2006.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased
$7.4 million, or 16.6%, to $52.0 million for the year ended December 31, 2006 from $44.6 million for the
year ended December 31, 2005. This increase resulted primarily from the full year impact of the acquisitions
of Mayflower, Monona and Cabarrus during 2005 as well as increases in wages and the cost of adopting
FAS 123(r) during the year ended December 31, 2006.
Amortization Expense. Amortization expense increased to approximately $414,000 for the year ended
December 31, 2006 from approximately $358,000 for the year ended December 31, 2005. This increase was
primarily the result of the full year impact of the Mayflower and Monona acquisitions.
Other (Income). We use forward exchange contracts to hedge foreign currency transaction exposures of
our United Kingdom operations. We estimate our projected revenues and purchases in certain foreign
currencies or locations and will hedge a portion of the anticipated long or short position. We have not
designated any of our forward exchange contracts as cash flow hedges, electing instead to mark-to-market the
contracts and record the fair value of the contracts on our consolidated balance sheets, with the offsetting
noncash gain or loss recorded in our consolidated statement of operations. The $3.5 million gain for the year
ended December 31, 2006 and the $3.7 million gain for the year ended December 31, 2005 are primarily
related to the noncash change in value of the forward exchange contracts in existence at the end of each
period.
Interest Expense.
Interest expense increased $1.6 million to $14.8 million for the year ended Decem-
ber 31, 2006 from $13.2 million for the year ended December 31, 2005. This increase was primarily the result
of higher average interest rates during the year.
Loss on Early Extinguishment of Debt.
In 2006, we repaid approximately $25.0 million of our
U.S. dollar denominated term loan. In connection with this loan repayment, approximately $0.3 million of
deferred fees were written off. In 2005, as part of our 2005 issuance of 8.0% senior notes due 2013, we
amended our existing senior credit agreement and wrote off approximately $1.5 million of deferred fees.
Provision for Income Taxes. Our effective tax rate during the year ended December 31, 2006 was 32.3%
compared to 37.1% for 2005. Provision for income taxes decreased $1.4 million to $27.7 million for the year
ended December 31, 2006, compared to an income tax provision of $29.1 million for the year ended
December 31, 2005. The decrease in effective rate year over year can be primarily attributed to the tax
planning initiatives taken during 2006 which favorably impacted tax credits and provision rates.
Net Income. Net income increased $8.7 million to $58.1 million for the year ended December 31, 2006,
compared to $49.4 million for the year ended December 31, 2005, primarily as a result of the factors discussed
above.
Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
Revenues. Revenues increased $374.1 million, or 98.3%, to $754.5 million for the year ended Decem-
ber 31, 2005 from $380.4 million for the year ended December 31, 2004. This increase resulted primarily
from:
(cid:129) increased acquisition related revenue of approximately $315 million from the acquisitions of May-
flower, Monona and Cabarrus;
43
(cid:129) a 27% increase in North American Heavy-duty (Class 8) truck production, fluctuations in content and
production levels for our other North American end markets and net new business awards resulted in
approximately $49 million;
(cid:129) an increase in production levels, fluctuations in content and net new business awards for our European,
Australian and Asian markets of approximately $11 million;
(cid:129) unfavorable foreign exchange fluctuations and adjustments of approximately $1 million.
Gross Profit. Gross profit increased $63.7 million, or 90.0%, to $134.5 million for the year ended
December 31, 2005 from $70.8 million for the year ended December 31, 2004. As a percentage of revenues,
gross profit decreased to 17.8% for the year ended December 31, 2005 from 18.6% for the year ended
December 31, 2004. This decrease resulted primarily from the acquisitions of Mayflower, Monona and
Cabarrus, which experienced lower margins than those we achieved in the prior year. We continued to seek
material cost reductions, labor efficiencies and general operating cost reductions to generate additional profits
and to offset incremental costs of raw materials and petroleum related products and services experienced
during the year ended December 31, 2005.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased
$15.6 million, or 53.7%, to $44.6 million for the year ended December 31, 2005 from $29.0 million for the
year ended December 31, 2004. This increase resulted primarily from the acquisitions of Mayflower, Monona
and Cabarrus during the year as well as increases in wages and the cost of additional resources to
accommodate product innovation and growth in the commercial vehicle sector as well as the cost associated
with being a public company.
Stock Compensation Expense. To reward our senior management team for its success in reducing
operating costs, integrating businesses and improving processes through cyclical periods, we granted options to
purchase an aggregate of 910,869 shares of our common stock to 16 members of our management team in
May 2004. The exercise price for such options is $5.54 per share. As modified, such options have a ten-year
term with 100% of such options being currently exercisable. We incurred a compensation charge of
$10.1 million in the second quarter of 2004 as a result of the grant of these options. This compensation charge
equaled the difference between $5.54 and the fair market value of our common stock as of the grant date of
these options.
Amortization Expense. Amortization expense increased to approximately $358,000 for the year ended
December 31, 2005 from $107,000 for the year ended December 31, 2004. This increase was primarily the
result of the increase in deferred financing costs from the prior year period, due to fees related to the issuance
of our 8.0% senior notes due 2013, during the year.
Other (Income) Expense. We use forward exchange contracts to hedge foreign currency transaction
exposures of our United Kingdom operations. We estimate our projected revenues and purchases in certain
foreign currencies or locations and will hedge a portion of the anticipated long or short position. We have not
designated any of our forward exchange contracts as cash flow hedges, electing instead to mark-to-market the
contracts and record the fair value of the contracts on our consolidated balance sheets, with the offsetting
noncash gain or loss recorded in our consolidated statement of operations. The $3.7 million gain for the year
ended December 31, 2005 and the $1.2 million gain for the year ended December 31, 2004 are primarily
related to the noncash change in value of the forward exchange contracts in existence at the end of each
period.
Interest Expense.
Interest expense increased $6.0 million, or 83.3%, to $13.2 million for the year ended
December 31, 2005 from $7.2 million for the year ended December 31, 2004. This increase was primarily the
result of an increase in total debt due to acquisitions made during the year.
Loss on Early Extinguishment of Debt. As part of our August 2004 initial public offering, we wrote off
capitalized debt financing costs which approximated $1.6 million. As part of our 2005 issuance of 8.0% senior
notes due 2013 and amendment of our existing senior credit agreement, we wrote off approximately
$1.5 million of deferred fees.
44
Provision for Income Taxes. Our effective tax rate during the year ended December 31, 2005 was 37.1%
compared to 27.1% for 2004. Provision for income taxes increased $22.6 million to $29.1 million for the year
ended December 31, 2005, compared to an income tax provision of $6.5 million for the year ended
December 31, 2004. The increase in effective rate year over year can be primarily attributed to the reversal of
the existing valuation allowance in 2004 after consideration of our future profitability.
Net Income. Net income increased $31.9 million to $49.4 million for the year ended December 31,
2005, compared to $17.5 million for the year ended December 31, 2004, primarily as a result of the factors
discussed above.
Liquidity and Capital Resources
Cash Flows
For the year ended December 31, 2006, cash provided by operations was $36.9 million, compared to
$44.2 million in the year ended December 31, 2005. This decrease was primarily the result of the increases in
prepaid expenses, accounts receivable and inventories during the year. Cash provided by operations in the year
ended December 31, 2004 was $34.2 million.
Net cash used in investing activities was $27.6 million for the year ended December 31, 2006 compared
to $188.6 million in the year ended December 31, 2005 and $8.9 million in the year ended December 31,
2004. The amounts used in the year ended December 31, 2006 primarily reflect capital expenditure purchases
and the acquisition of C.I.E.B. During 2005 and 2004, all net cash used in investing activities was for
acquisitions and capital expenditures, primarily for equipment and tooling purchases related to new or
replacement programs and current equipment upgrades.
Net cash used in financing activities totaled $28.0 million for the year ended December 31, 2006,
compared to net cash provided by of $188.5 million in the year ended December 31, 2005 and net cash used
of $28.4 million in the year ended December 31, 2004. The net cash used in financing activities in the year
ended December 31, 2006 was primarily related to our repayment of our U.S. dollar denominated term loan.
The net cash provided for December 31, 2005 was primarily related to the issuance of our 8.0% senior notes
and the net cash used during the year ended December 31, 2004 was primarily related to repayments of
outstanding borrowings.
Debt and Credit Facilities
As of December 31, 2006, we had an aggregate of $162.1 million of outstanding indebtedness excluding
$1.8 million of outstanding letters of credit under various financing arrangements. We were in compliance with
all of our respective financial covenants under our debt and senior credit facility as of December 31, 2006.
The indebtedness consisted of the following:
(cid:129) $1.5 million under our revolving credit facility, $10.3 million under our term loan facility and
$0.3 million of capital lease obligations. The weighted average rate on these borrowings, for the year
ended December 31, 2006, ranged from approximately 7.1% with respect to the revolving borrowings
to approximately 6.8% for the term loan borrowings and;
(cid:129) $150 million of 8.0% senior notes due 2013.
In August 2004, in connection with our initial public offering, we entered into a senior credit facility,
consisting of a $65.0 million term loan and a $40.0 million revolving line of credit. We used borrowings under
the term loan, together with proceeds of the offering to repay all of our existing borrowings under our then-
existing senior credit facility and to repay all of our then existing subordinated indebtedness.
In February 2005, in connection with the Mayflower acquisition, we amended our senior credit facility to
increase the revolving credit facility from $40.0 million to $75.0 million and the term loans from $65.0 million
to $145.0 million. We used borrowings of approximately $106.4 million under our amended senior credit
facility to fund substantially all of the purchase price for the Mayflower acquisition.
45
On June 3, 2005, in connection with the Monona acquisition, we amended our senior credit facility to
increase the revolving credit facility from $75.0 million to $100.0 million. In addition, the amendment
increased certain baskets in the lien, investments and asset disposition covenants to reflect our increased size
as a result of the Mayflower and Monona acquisitions. We used revolving credit borrowings of approximately
$58.0 million under our amended senior credit facility to fund substantially all of the purchase price for the
Monona acquisition.
On July 6, 2005, we completed a secondary equity offering and the offering of the 8.0% senior notes due
2013. We used the net proceeds of these offerings of approximately $190.8 million primarily to repay a
portion of the borrowings under our senior credit facility. In connection with the offering of the 8.0% senior
notes due 2013, we entered into an additional amendment to our senior credit facility which provides for,
among other things, the incurrence of debt in connection with the offering of the 8.0% senior notes due 2013
and the application of the net proceeds therefrom.
On December 30, 2005, we entered into an additional amendment to our senior credit facility to increase
our annual capital expenditure limit from $25.0 million per year to $40.0 million per year.
On June 30, 2006, we repaid approximately $25.0 million of our U.S. dollar denominated term loan. The
repayment of the term loan reduced the overall borrowing capacity on the existing senior credit agreement
from approximately $140 to $115 million. In connection with this loan repayment, approximately $0.3 million
of deferred fees, representing a proportionate amount of total deferred fees, were expensed as a loss on early
extinguishment of debt.
The revolving credit facility is available until January 31, 2010 and the term loans are due and payable
on December 31, 2010. Based on the provisions of the AICPA’s Emerging Issues Task Force (EITF) Issue
No. 98-14, Debtor’s Accounting for the Changes in Line-of-Credit or Revolving-Debt Arrangements, and the
provisions of EITF Issue No. 96-19, Debtor’s Accounting for a Modification or Exchange of Debt Instruments,
approximately $4.8 million third party fees relating to the senior credit agreement and 8.0% senior notes due
2013 were capitalized at December 31, 2006 and are being amortized over the life of the senior credit facility.
Under the terms of our senior credit facility, availability under the revolving credit facility is subject to
the lesser of (i) a borrowing base that is equal to the sum of (a) 80% of eligible accounts receivable plus
(b) 50% of eligible inventory; or (ii) $100.0 million. Borrowings under the senior credit facility bear interest at
a floating rate which can be either the prime rate or LIBOR plus the applicable margin to the prime rate and
LIBOR borrowings based on our leverage ratio. The senior credit facility contains various financial covenants,
including a minimum fixed charge coverage ratio of not less than 1.30, and a minimum ratio of EBITDA to
cash interest expense of not less than 2.50, in each case for the twelve month period ending on December 31
of each year, a limitation on the amount of capital expenditures of not more than $40.0 million in any fiscal
year and a maximum ratio of total indebtedness to EBITDA as of the last day of each fiscal quarter as set
forth below:
Quarter(s) Ending
Maximum Total Leverage Ratio
12/31/05 through 9/30/06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12/31/06 and each fiscal quarter thereafter . . . . . . . . . . . . . . . . . . . . . .
2.75 to 1.00
2.50 to 1.00
The senior credit facility also contains covenants restricting certain corporate actions, including asset
dispositions, acquisitions, dividends, changes of control, incurring indebtedness, making loans and investments
and transactions with affiliates. If we do not comply with such covenants or satisfy such ratios, our lenders
could declare a default under the senior credit facility, and our indebtedness thereunder could be declared
immediately due and payable. The senior credit facility is collateralized by substantially all of our assets. The
senior credit facility also contains customary events of default.
The 8.0% senior notes due 2013 are senior unsecured obligations and rank pari passu in right of payment
to all of our existing and future senior indebtedness and are effectively subordinated to our existing and future
secured obligations. The 8.0% senior notes due 2013 are guaranteed by all of our domestic subsidiaries.
46
The indenture governing the 8.0% senior notes due 2013 contain covenants that limit, among other things,
additional indebtedness, issuance of preferred stock, dividends, repurchases of capital stock or subordinated
indebtedness, investments, liens, restrictions on the ability of our subsidiaries to pay dividends to us, sales of
assets, sale/leaseback transactions, mergers and transactions with affiliates. Upon a change of control, each
holder shall have the right to require that we purchase such holder’s securities at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid interest to the date of repurchase. The
indenture governing the 8.0% senior notes due 2013 also contains customary events of default.
In addition, prior to May 2, 2005, we also had $6.5 million of indebtedness from borrowings financed
through the issuance of industrial development bonds relating to our Vonore, Tennessee facility. These
borrowings had a final maturity of August 1, 2006 and bore interest at a variable rate which was adjusted on a
weekly basis by the placement agent such that the interest rate on the bonds was sufficient to cause the market
value of the bonds to be equal to, as nearly as practicable, 100% of their principal amount. On May 2, 2005
we redeemed these bonds for approximately $6.5 million.
We believe that cash flow from operating activities together with available borrowings under our senior
credit facility will be sufficient to fund currently anticipated working capital, planned capital spending and
debt service requirements for at least the next twelve months. Capital expenditures for 2007 are expected to be
approximately $23 million.
Contractual Obligations and Commercial Commitments
The following table reflects our contractual obligations as of December 31, 2006:
Long-term debt obligations . . . . . . . . . .
Estimated interest payments . . . . . . . . . .
Operating lease obligations . . . . . . . . . .
Pension and other post-retirement
Payments Due by Period
Total
Less Than
1 Year
$162,114
43,411
56,401
$ 2,158
12,753
7,430
1-3 Years
(In thousands)
$ 5,420
12,501
13,484
3-5 Years
More Than
5 Years
$ 4,536
12,157
10,244
$150,000
6,000
25,243
funding . . . . . . . . . . . . . . . . . . . . . . .
34,918
2,279
5,162
6,262
21,215
Total . . . . . . . . . . . . . . . . . . . . . . . . .
$296,844
$24,620
$36,567
$33,199
$202,458
Since December 31, 2006, there have been no material changes outside the ordinary course of business to
our contractual obligations as set forth above.
In addition to the obligations noted above, we have obligations reported as other long-term liabilities that
consist primarily of facility closure and consolidation costs, defined benefit plan and other post-retirement
benefit plans and other items. We also enter into agreements with our customers at the beginning of a given
platform’s life to supply products for the entire life of that vehicle platform, which is typically five to seven
years. These agreements generally provide for the supply of a customer’s production requirements for a
particular platform, rather than for the purchase of a specific quantity of products. Accordingly, our obligations
under these agreements are not reflected in the contractual obligations table above.
As of December 31, 2006, we were not party to significant purchase obligations for goods or services.
Off-Balance Sheet Arrangements
We use standby letters of credit to guarantee our performance under various contracts and arrangements,
principally in connection with our workers’ compensation liabilities and for leases on equipment and facilities.
These letter of credit contracts are usually extended on a year-to-year basis. As of December 31, 2006, we had
outstanding letters of credit of $1.8 million. We do not believe that these letters of credit will be required to
be drawn.
We currently have no non-consolidated special purpose entity arrangements.
47
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We are exposed to various market risks, including changes in foreign currency exchange rates and interest
rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. We do not enter into derivatives or other financial instruments for trading
or speculative purposes. We do enter into financial instruments, from time to time, to manage and reduce the
impact of changes in foreign currency exchange rates and interest rates and to hedge a portion of future
anticipated currency transactions. The counterparties are primarily major financial institutions.
We manage our interest rate risk by balancing the amount of our fixed rate and variable rate debt. For
fixed rate debt, interest rate changes affect the fair market value of such debt but do not impact earnings or
cash flows. Conversely for variable rate debt, interest rate changes generally do not affect the fair market value
of such debt, but do impact future earnings and cash flows, assuming other factors are held constant.
Approximately $11.8 million and $40.6 million of our debt was variable rate debt at December 31, 2006 and
2005, respectively. Holding other variables constant (such as foreign exchange rates and debt levels), a one
percentage point change in interest rates would be expected to have an impact on pre-tax earnings and cash
flows for the next year of approximately $0.1 million and $0.4 million, respectively. The impact on the fair
market value of our debt at December 31, 2006 and 2005 would have been insignificant.
Foreign Currency Risk
Foreign currency risk is the risk that we will incur economic losses due to adverse changes in foreign
currency exchange rates. We use forward exchange contracts to hedge foreign currency translation exposures
of our United Kingdom operations. We estimate our projected revenues and purchases in certain foreign
currencies or locations, and will hedge a portion or all of the anticipated long or short position. The contracts
typically run from three months up to three years. These contracts are marked-to-market and the fair value is
included in assets (liabilities) in our consolidated balance sheets, with the offsetting noncash gain or loss
included in our consolidated statements of operations. We do not hold or issue foreign exchange options or
forward contracts for trading purposes.
Outstanding foreign currency forward exchange contracts at December 31, 2006 are more fully described
in the notes to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K. The fair
value of these contracts at December 31, 2006 and 2005 amounted to $8.5 million and $4.3 million,
respectively, which is reflected in other assets in our consolidated balance sheets. None of these contracts have
been designated as cash flow hedges; thus, the change in fair value at each reporting date is reflected as a
noncash charge (income) in our consolidated statement of operations. We may designate future forward
exchange contracts as cash flow hedges.
Our primary exposures to foreign currency exchange fluctuations are pound sterling/Eurodollar and pound
sterling/Japanese yen. At December 31, 2006, the potential reduction in earnings from a hypothetical
instantaneous 10% adverse change in quoted foreign currency spot rates applied to foreign currency sensitive
instruments is limited by the assumption that all of the foreign currencies to which we are exposed would
simultaneously decrease by 10% because such synchronized changes are unlikely to occur. The effects of the
forward exchange contracts have been included in the above analysis; however, the sensitivity model does not
include the inherent risks associated with the anticipated future transactions denominated in foreign currency.
Foreign Currency Transactions
A portion of our revenues during the year ended December 31, 2006 were derived from manufacturing
operations outside of the United States. The results of operations and the financial position of our operations
in these other countries are primarily measured in their respective currency and translated into U.S. dollars. A
portion of the expenses generated in these countries is in currencies different from which revenue is generated.
As discussed above, from time to time, we enter into forward exchange contracts to mitigate a portion of this
48
currency risk. The reported income of these operations will be higher or lower depending on a weakening or
strengthening of the U.S. dollar against the respective foreign currency.
A portion of our assets at December 31, 2006 are based in our foreign operations and are translated into
U.S. dollars at foreign currency exchange rates in effect as of the end of each period, with the effect of such
translation reflected as a separate component of stockholders’ investment. Accordingly, our stockholders’
investment will fluctuate depending upon the weakening or strengthening of the U.S. dollar against the
respective foreign currency.
Effects of Inflation
Inflation potentially affects us in two principal ways. First, a portion of our debt is tied to prevailing
short-term interest rates that may change as a result of inflation rates, translating into changes in interest
expense. Second, general inflation can impact material purchases, labor and other costs. In many cases, we
have limited ability to pass through inflation-related cost increases due to the competitive nature of the
markets that we serve. In the past few years, however, inflation has not been a significant factor.
49
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Documents Filed as Part of this Annual Report on Form 10-K
Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2006 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the years ended December 31, 2006, 2005 and 2004 . . . . . . .
Consolidated Statements of Stockholders’ Investment for the years ended December 31, 2006, 2005 and
2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004 . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15 — Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
51
52
53
54
55
56
101
50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Commercial Vehicle Group, Inc.
We have audited the accompanying consolidated balance sheets of Commercial Vehicle Group, Inc. and
subsidiaries (the “Company”) (formerly Bostrom Holding, Inc., a Delaware corporation) as of December 31,
2006 and 2005 and the related consolidated statements of operations, stockholders’ investment, and cash flows
for each of the three years in the period ended December 31, 2006. Our audits also included the financial
statement schedule listed in the Index to Item 8. These consolidated financial statements and financial
statement schedule are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial
position of Commercial Vehicle Group, Inc. and subsidiaries as of December 31, 2006 and 2005 and the
results of their operations and their cash flows for each of the three years in the period ended December 31,
2006, in conformity with accounting principles generally accepted in the United States of America. Also, in
our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in Notes 2 and 14 to the consolidated financial statements, in 2006, the Company changed
its method of accounting for defined benefit pension and other post-retirement benefit plans and as discussed
in Note 13 to the consolidated financial statements, in 2006, the Company changed its method of accounting
for share-based compensation.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2006, based on the criteria established in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13,
2007 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s
internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
March 13, 2007
51
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2006 and 2005
2006
2005
(In thousands, except share
and per share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,821
Accounts receivable, net of reserve for doubtful accounts of $5,536 and $6,087,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
123,471
88,723
24,272
8,819
265,106
PROPERTY, PLANT AND EQUIPMENT
Land and buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
GOODWILL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTANGIBLE ASSETS, net of accumulated amortization of $840 and $451,
30,203
120,416
17,414
(77,645)
90,388
134,766
$ 40,641
114,116
69,053
4,724
12,571
241,105
27,310
93,912
15,827
(56,634)
80,415
125,607
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER ASSETS, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84,188
16,374
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $590,822
84,577
12,179
$543,883
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LONG-TERM DEBT, net of current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . .
DEFERRED TAX LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PENSION AND OTHER POST-RETIREMENT BENEFITS . . . . . . . . . . . . . . . . .
OTHER LONG-TERM LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,158
86,610
40,970
129,738
159,956
10,611
22,188
3,424
325,917
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS’ INVESTMENT:
Preferred stock $.01 par value; 5,000,000 shares authorized; no shares issued
and outstanding; common stock $.01 par value; 30,000,000 shares authorized;
21,368,831 and 21,145,954 shares issued and outstanding, respectively . . . . . .
Treasury stock purchased from employees; 5,836 shares . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
214
(115)
174,044
92,007
(1,245)
264,905
TOTAL LIABILITIES AND STOCKHOLDERS’ INVESTMENT . . . . . . . . $590,822
$
5,309
73,709
42,983
122,001
185,700
8,802
20,621
4,682
341,806
211
—
169,252
33,957
(1,343)
202,077
$543,883
The accompanying notes are an integral part of these consolidated financial statements.
52
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2006, 2005 and 2004
REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
COST OF REVENUES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006
2004
2005
(In thousands, except per share amounts)
$380,445
$754,481
$918,751
309,696
620,031
768,913
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES . . . . . . . .
AMORTIZATION EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
149,838
51,950
414
134,450
44,564
358
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LOSS ON EARLY EXTINGUISHMENT OF DEBT . . . . . . . . . . . . . . . .
Income Before Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . .
PROVISION FOR INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . .
97,474
(3,468)
14,829
318
85,795
27,745
89,528
(3,741)
13,195
1,525
78,549
29,138
70,749
39,110
107
31,532
(1,247)
7,244
1,605
23,930
6,481
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 58,050
$ 49,411
$ 17,449
EARNINGS PER COMMON SHARE:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2.74
2.69
$
$
2.54
2.51
$
$
1.13
1.12
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,151
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,545
19,440
19,697
15,429
15,623
The accompanying notes are an integral part of these consolidated financial statements.
53
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ INVESTMENT
Years Ended December 31, 2006, 2005 and 2004
Common Stock
Shares
Amount
Treasury
Stock
BALANCE — December 31, 2003 . . . . . 13,778,599
Issuance of common stock . . . . . . . . 4,072,875
Stock subscriptions received . . . . . . .
—
Exercise of stock purchase warrants in
$138
41
—
$ —
—
—
Retained
Earnings
(Accum.
Deficit)
Accum.
Other
Comp.
Income/
(Loss)
Deferred
Comp.
Stock
Subscription
Receivable
Additional
Paid-In
Capital
(In thousands, except share data)
$(430)
—
255
$ 76,803 $(43,028) $ — $ 1,323
—
—
—
—
46,393
—
—
—
Total
$ 34,806
46,434
255
connection with initial public
offering . . . . . . . . . . . . . . . . . . .
Share-based compensation expense . . .
Comprehensive income:
Net income . . . . . . . . . . . . . . . . .
Foreign currency translation
adjustment . . . . . . . . . . . . . . . .
Minimum pension liability
adjustment, net of tax . . . . . . . .
Total comprehensive income . . . . . . .
136,023
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
464
—
— 10,125
— 17,449
—
—
—
—
—
—
—
—
—
—
465
10,125
17,449
— 2,056
2,056
—
(544)
(544)
BALANCE — December 31, 2004 . . . . . 17,987,497
Issuance of common stock . . . . . . . . 2,671,229
Exercise of common stock under stock
option and equity incentive plans. . .
Issuance of restricted stock . . . . . . . .
Stock subscriptions received . . . . . . .
Comprehensive income:
319,928
167,300
—
Net income . . . . . . . . . . . . . . . . .
Foreign currency translation
adjustment . . . . . . . . . . . . . . . .
Minimum pension liability
adjustment, net of tax . . . . . . . .
Total comprehensive income . . . . . . .
—
—
—
$180
26
$ —
—
$(175)
—
$123,660
43,710
$(15,454) $ — $ 2,835
—
—
—
3
2
—
—
—
—
—
—
—
—
—
—
—
—
175
—
—
—
1,882
3,262
—
—
—
— (3,262)
—
—
— 49,411
—
—
—
—
—
—
—
—
—
— (3,645)
(3,645)
—
(533)
(533)
45,233
18,961
$111,046
43,736
1,885
2
175
49,411
BALANCE — December 31, 2005 . . . . . 21,145,954
$211
$ —
$ — $172,514 $ 33,957 $(3,262) $(1,343) $202,077
Exercise of common stock under stock
option and equity incentive plans. . .
Issuance of restricted stock . . . . . . . .
Effect of accounting change —
SFAS 123(r) . . . . . . . . . . . . . . . .
341,685
54,328
4
1
(167,300)
(2)
—
—
—
Treasury stock purchased from
employees at cost . . . . . . . . . . . . .
Share-based compensation expense . . .
Excess tax benefit — equity
transactions . . . . . . . . . . . . . . . . .
Comprehensive income:
Net income . . . . . . . . . . . . . . . . .
Foreign currency translation
adjustment . . . . . . . . . . . . . . . .
Minimum pension liability
adjustment, net of tax . . . . . . . .
Total comprehensive income . . . . . . .
Adjustment to initially apply FASB
Statement No. 158, net of tax . . . . .
(5,836) —
—
—
(115)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,141
—
—
—
—
—
(3,262)
— 3,262
—
2,006
645
—
—
—
— 58,050
—
—
—
—
—
—
—
—
—
—
—
2,145
1
(2)
(115)
2,006
645
58,050
—
—
—
—
—
— 3,874
3,874
—
(304)
(304)
61,620
—
— (3,472)
(3,472)
—
—
—
—
BALANCE — December 31, 2006 . . . . . 21,368,831
$214
$(115)
$ — $174,044 $ 92,007 $ — $(1,245) $264,905
The accompanying notes are an integral part of these consolidated financial statements.
54
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2006, 2005 and 2004
2006
2005
(In thousands)
2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,050
Adjustments to reconcile net income to net cash provided by operating activities:
$ 49,411
$ 17,449
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncash amortization of debt financing costs . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shared-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other post-retirement curtailment gain . . . . . . . . . . . . . . . . . . . . .
Deferred income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncash gain on forward exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . .
Noncash interest expense on subordinated debt. . . . . . . . . . . . . . . . . . . . . . . .
Change in other operating items:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from disposal/sale of property plant and equipment. . . . . . . . . . . . . . . .
Proceeds from disposal/sale of other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Post-acquisition and acquisition payments, net of cash received . . . . . . . . . . . . . .
Other assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock under equity incentive plans . . . . . . . . .
Purchases of treasury stock from employees . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from equity incentive plans . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings under revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of subordinated debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of 8% senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on capital lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs and other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . .
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . .
CASH AND CASH EQUIVALENTS:
14,983
895
318
2,006
(665)
(3,865)
9,417
(4,203)
—
(4,369)
(16,603)
(21,819)
2,213
564
36,922
(19,327)
352
2,032
(9,452)
(1,230)
(27,625)
—
2,140
(115)
645
(74,711)
72,398
(28,210)
—
—
—
(99)
—
(27,952)
(2,165)
(20,820)
12,064
848
1,525
—
(7)
(3,097)
7,248
(3,793)
—
(22,013)
(11,571)
9,958
10,145
(6,562)
44,156
(15,957)
—
—
(170,851)
(1,761)
(188,569)
43,914
1,887
—
—
(207,449)
206,778
(238,336)
227,459
—
150,000
(46)
4,340
188,547
7,567
522
1,031
10,125
—
—
1,340
(1,291)
481
(4,744)
(6,243)
(2,360)
11,383
(1,083)
34,177
(8,907)
—
—
—
—
(8,907)
46,640
465
—
—
(80,575)
58,092
(116,031)
66,061
(3,112)
—
(15)
48
(28,427)
(4,889)
39,245
1,067
(2,090)
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40,641
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,821
1,396
$ 40,641
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,869
$
6,340
Cash paid for income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,197
$ 24,603
Unpaid purchases of property and equipment included in accounts payable . . . . . . $ 3,061
$
4,712
3,486
1,396
7,564
2,767
—
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
55
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2006, 2005 and 2004
1. Organization
Commercial Vehicle Group, Inc. and its subsidiaries (“CVG” or the “Company”) design and manufacture
suspension seat systems, interior trim systems (including instrument and door panels, headliners, cabinetry,
molded products and floor systems), cab structures and components, mirrors, wiper systems, electronic wiring
harness assemblies and controls and switches for the global commercial vehicle market, including the heavy-
duty truck market, the construction and agriculture market and the specialty and military transportation
markets. We have operations located in the United States in Arizona, Indiana, Illinois, Iowa, North Carolina,
Ohio, Oregon, Tennessee, Texas, Virginia and Washington and outside of the United States in Australia,
Belgium, China, Czech Republic, Mexico and the United Kingdom.
2. Significant Accounting Policies
Principles of Consolidation — The accompanying consolidated financial statements include the accounts
of our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated
in consolidation.
Use of Estimates — The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. The more significant estimates are used for such items as allowance for doubtful
accounts, inventory reserves, warranty, pension and post retirement benefit liabilities, contingent liabilities,
goodwill and intangible assets impairment and depreciable lives of property and equipment. Actual results
may differ materially from those estimates.
Cash and Cash Equivalents — Cash and cash equivalents consist of highly liquid investments with an
original maturity of three months or less. Cash equivalents are stated at cost, which approximates fair value.
Accounts Receivable — Trade accounts receivable are stated at current value less an allowance for
doubtful accounts, which approximates fair value. This estimated allowance is based primarily on manage-
ment’s evaluation of specific balances as the balances become past due, the financial condition of our
customers and our historical experience of write-offs. If not reserved through specific identification procedures,
our general policy for uncollectible accounts is to reserve at a certain percentage threshold, based upon the
aging categories of accounts receivable. Past due status is based upon the due date of the original amounts
outstanding. When items are ultimately deemed uncollectible, they are charged off against the reserve
previously established in the allowance for doubtful accounts.
Inventories — We maintain our inventory primarily for the manufacture of goods for sale to our
customers. Inventory is composed of three categories: Raw Materials, Work in Process, and Finished Goods.
These categories are generally defined as follows: Raw Materials consist of materials that have been acquired
and are available for the production cycle; Work in Process is composed of materials that have been moved
into the production process and have some measurable amount of labor and overhead added; Finished Goods
are materials with added labor and overhead that have completed the production cycle and are awaiting sale
and delivery to customers.
Inventories are valued at the lower of first-in, first-out (“FIFO”) cost or market. Cost includes applicable
material, labor and overhead. We value our finished goods inventory at a standard cost that is periodically
adjusted to approximate actual cost. Inventory quantities on-hand are regularly reviewed, and where necessary,
provisions for excess and obsolete inventory are recorded based primarily on our estimated production
requirements driven by current market volumes. Excess and obsolete provisions may vary by product
depending upon future potential use of the product.
56
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Property, Plant and Equipment — Property, plant and equipment are stated at cost, net of accumulated
depreciation. For financial reporting purposes, depreciation is computed using the straight-line method over the
following estimated useful lives:
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tools and dies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer hardware and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15 to 40 years
3 to 20 years
5 years
3 years
Expenditures for maintenance and repairs are charged to expense as incurred. Expenditures for major
betterments and renewals that extend the useful lives of property, plant and equipment are capitalized and
depreciated over the remaining useful lives of the asset. When assets are retired or sold, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the
results of operations. Leasehold improvements are amortized using the straight-line method over the estimated
useful lives of the improvements or the term of the lease, whichever is shorter. Accelerated depreciation
methods are used for tax reporting purposes.
We follow the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, which provides a single accounting model for impairment of long-lived assets. We had no impairments
during 2006, 2005, or 2004.
Intangible Assets — Indefinite-Lived
Basis for Accounting Treatment
Our indefinite-lived intangible assets consist of customer relationships acquired in the 2005 acquisitions
of Mayflower and Monona. We have accounted for these customer relationships as indefinite-live intangible
assets, which we believe is appropriate based upon the following circumstances and conditions under which
we operate:
Sourcing, Barriers to Entry and Competitor Risks
The customer sourcing decision for the Mayflower and Monona businesses is heavily predicated on price,
quality, delivery and the overall customer relationship. Absent a significant change in any or all of these
factors, it is unlikely that a customer would source production to an alternate supplier. In addition, the factors
listed below impose a high barrier for new competitors to enter into this industry. Historical experience
indicates that Mayflower and Monona have not lost any primary customers and/or relationships due to these
factors and such loss is not anticipated in the foreseeable future for the following reasons:
(cid:129) Costs associated with setting up a new production line, including tooling costs, are typically cost
prohibitive in a competitive pricing environment;
(cid:129) The risk associated with potential production delays and a disruption to the supply chain typically
outweighs any potential economic benefit;
(cid:129) Significant initial outlays of capital and institutional production knowledge represent a significant
barrier to entry. Due to the asset-intensive nature of the businesses, a new competitor would require a
substantial amount of initial capital;
(cid:129) Changeover costs are high both from an economic and risk standpoint;
(cid:129) The highly complex nature of successfully producing electronic wiring harnesses and complete cab
structures in accordance with OEM quality standards makes it difficult for a competitor to enter the
business; and
57
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(cid:129) There is significant risk in operating the businesses as a result of the highly customized nature of the
business. For example, production runs in the commercial vehicle business are significantly smaller and
are more “build to order” in nature which requires the systems, expertise, equipment and logistics to be
successful.
These costs and risks are the primary prohibiting factors which preclude our customers from sourcing
their business elsewhere at any given time.
Duration and Strength of Existing Customer Relationships/Concentrations of Revenue
Mayflower and Monona have long-standing relationships with their existing customers and have
experienced de minimis historical attrition. These relationships have endured over time and accordingly, an
assumption of prospective attrition is inconsistent with this historical experience and management’s expecta-
tions. Both Mayflower and Monona have a limited customer base, consisting of three primary customers, that
has existed for many years, and we had pre-existing long-standing relationships with the same primary
customers prior to the acquisitions of Mayflower and Monona, which in most cases have exceeded a period of
40 years. We believe the addition of Mayflower and Monona further strengthens our existing customer
relationships with such customers. Specifically:
Mayflower and Monona’s relationships with their customers’ key decision-making personnel are mature
and stable.
(cid:129) Mayflower’s and Monona’s customers typically make purchasing decisions through a team approach
versus a single decision maker. Mayflower and Monona have historically maintained strong relation-
ships with individuals at all levels of the decision making process including the engineering, operations
and purchasing functions in order to successfully minimize the impact of any employee turnover at the
customer level.
The top three customers of Mayflower and Monona have been established customers for a substantial
period of time.
(cid:129) Mayflower has had relationships with Volvo/Mack, Freightliner and International since 1965, 1997 and
2001, respectively. We, and/or our predecessor entities, had pre-existing relationships with these same
customers since 1949, 1954 and 1950, respectively. These customers comprised approximately 88% and
85% of Mayflower’s revenues for fiscal years 2006 and 2005, respectively.
(cid:129) Monona has had relationships with Deere & Co., Caterpillar and Oshkosh since 1969, 1970 and 1985,
respectively. We, and/or our predecessor entities, had pre-existing relationships with these same
customers since 1987, 1958 and 1950, respectively. These customers comprised approximately 85% and
88% of Monona’s revenues for fiscal years 2006 and 2005, respectively.
Valuation Methodology
For valuation purposes, the income approach using the discounted cash flow method was employed for
the purpose of evaluating the Mayflower and Monona customer relationship intangible assets. Under this
approach, we determined that the fair value of the Mayflower and Monona customer relationship intangible
assets at their dates of acquisition was $45.9 million and $28.9 million, respectively.
Significant assumptions used in the valuation and determination of an indefinite useful life for these
customer relationship intangible assets included the following:
(cid:129) The revenue projections that we relied upon to substantiate the economic consideration paid for the
businesses is almost exclusively tied to the existing customer base. With regard to the valuation process,
58
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
we projected less than 1% of total revenue in 2005 and 2006 to be lost due to core customer attrition
and no core customer attrition thereafter.
(cid:129) Contributory asset charges were deducted for assets that contribute to income generation including:
(i) net working capital; (ii) personal property; (iii) real property; (iv) tradename and trademarks; and
(v) an assembled workforce.
(cid:129) The cash flows associated with the customer relationships acquired in the Mayflower and Monona
transactions were discounted at a rate of return of 25.0% and 29.5%, respectively, which is
approximately equal to the equity rate of return.
Intangible Asset Impairment — Accounting Treatment
If Mayflower and/or Monona were to prospectively lose any of their customers, in accordance with the
provisions of paragraphs 16 and 17 of SFAS No. 142, Goodwill and Other Intangible Assets, we would
perform an intangible asset impairment test to determine the impact of the loss on the customer relationship
intangible asset and if impairment was indicated, we would record an impairment loss in our consolidated
statement of operations.
Other Assets — Other assets primarily consist of the fair value of our foreign exchange forward contracts
of approximately $8.5 million at December 31, 2006 and $4.3 million at December 31, 2005 and debt
financing costs of approximately $4.8 million at December 31, 2006 and approximately $6.0 million at
December 31, 2005, which are being amortized over the term of the related obligations.
Revenue Recognition — Product revenue is derived from sales of our various manufactured products. Our
revenue recognition policy is in accordance with the SEC’s SAB No. 101, Revenue Recognition in Financial
Statements, SAB No. 104, Revenue Recognition, and other authoritative accounting literature. In accordance
with the provisions of such authoritative accounting literature, we recognize revenue when 1) delivery has
occurred or services have been rendered, 2) persuasive evidence of an arrangement exists, 3) there is a fixed
or determinable price, and 4) collectibility is reasonably assured. Our products are generally shipped from our
facilities to our customers, which is when title passes to the customer for substantially all of our revenues.
Provisions for anticipated contract losses are recognized at the time they become evident. In that regard,
in certain instances, we may be committed under existing agreements to supply product to our customers at
selling prices that are not sufficient to cover the cost to produce such product. In such situations, we record a
provision for the estimated future amount of such losses. Such losses are recognized at the time that the loss is
probable and reasonably estimable and are recorded at the minimum amount necessary to fulfill our
obligations to our customers. We had no such recorded loss as of December 31, 2006, and $0.1 million and
$0.6 million at December 31, 2005 and 2004, respectively. These amounts, as they relate to the year ended
December 31, 2005 are included within accrued liabilities and other long-term liabilities in the accompanying
consolidated balance sheets.
Warranty — We are subject to warranty claims for products that fail to perform as expected due to design
or manufacturing deficiencies. Customers continue to require their outside suppliers to guarantee or warrant
their products and bear the cost of repair or replacement of such products. 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
current economic factors. These amounts, as they relate to the years ended December 31, 2006 and 2005 are
59
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
included within accrued expenses in the accompanying consolidated balance sheets. The following presents a
summary of the warranty provision for the years ended December 31 (in thousands):
2006
2005
Balance — Beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,117
12
3,391
(5,366)
43
Increase due to acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional provisions recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deduction for payments made . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,408
5,183
2,074
(2,515)
(33)
Balance — End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,197
$ 7,117
Income Taxes — We account for income taxes following the provisions of SFAS No. 109, Accounting for
Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the our financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax laws and rates.
Comprehensive (Loss) — We follow the provisions of SFAS No. 130, Reporting Comprehensive Income,
which established standards for reporting and display of comprehensive income and its components. Compre-
hensive income reflects the change in equity of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. Comprehensive (loss) represents net income adjusted
for foreign currency translation adjustments, minimum pension liability and the deferred gain (loss) on certain
derivative instruments utilized to hedge certain of our interest rate exposures. In accordance with SFAS No. 130,
we have chosen to disclose comprehensive (loss) in the consolidated statements of stockholders’ investment.
The components of accumulated other comprehensive (loss) consisted of the following as of December 31 (in
thousands):
2006
2005
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,457
(6,702)
Pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,583
(2,926)
$(1,245)
$(1,343)
Fair Value of Financial Instruments — At December 31, 2006, our financial instruments consist of cash
and cash equivalents, accounts receivable, accounts payable, accrued liabilities and long-term debt, unless
otherwise noted. 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.
Concentrations of Credit Risk — Financial instruments that potentially subject us to concentrations of
credit risk consist primarily of cash, cash equivalents and accounts receivable. We place our cash equivalents
with high credit-quality financial institutions. We sell products to various companies throughout the world in
the ordinary course of business. We routinely assess the financial strength of our customers and maintain
60
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
allowances for anticipated losses. Customers that accounted for a significant portion of consolidated revenues
for each of the three years ended December 31 were as follows:
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PACCAR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Freightliner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Volvo/Mack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Caterpillar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22% 19%
17
13
13
8
17
16
14
7
9%
28
17
6
5
2006
2005
2004
As of December 31, 2006 and 2005, receivables from these customers represented approximately 67%
and 72% of total receivables, respectively.
Foreign Currency Translation — Our functional currency is the local currency. Accordingly, all assets and
liabilities of our foreign subsidiaries are translated using exchange rates in effect at the end of the period and
revenue and costs are translated using average exchange rates for the period. The related translation
adjustments are reported in accumulated other comprehensive income in stockholders’ investment. Translation
gains and losses arising from transactions denominated in a currency other than the functional currency of the
entity involved are included in the results of operations.
Foreign Currency Forward Exchange Contracts — We use forward exchange contracts to hedge certain of
our foreign currency transaction exposures of our United Kingdom operations. We estimate our projected
revenues and purchases in certain foreign currencies or locations, and will hedge a portion or all of the
anticipated long or short position. The contract duration is typically between three months and three years.
These contracts are marked-to-market and the fair value is included in assets or liabilities in the accompanying
consolidated balance sheets, with the offsetting noncash gain or loss included in the accompanying
consolidated statements of operations. We do not hold or issue foreign exchange options or forward contracts
for trading purposes. The following table summarizes the notional amount of our open foreign exchange
contracts at December 31, 2006 (in thousands):
Local
Currency
Amount
U.S. $
Equivalent
U.S. $
Equivalent
Fair Value
Commitments to sell currencies:
U.S. Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eurodollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swedish krona. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japanese yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Australian Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(715)
36,286
15,000
3,525,000
2,850
$ (715)
50,768
2,194
37,476
2,273
$ (715)
48,516
2,197
31,291
2,238
The difference between the U.S. $ equivalent and U.S. $ equivalent fair value of approximately
$8.5 million and $4.3 million is included in other assets in the consolidated balance sheet at December 31,
2006 and 2005, respectively.
Recently Issued Accounting Pronouncements — In February 2006, the FASB issued SFAS No. 155,
Accounting for Certain Hybrid Financial Instruments — an amendment of SFAS No. 133 and No. 140, which
is effective for fiscal years beginning after September 15, 2006. The statement was issued to clarify the
application of SFAS No. 133 to beneficial interests in securitized financial assets and to improve the
consistency of accounting for similar financial instruments, regardless of the form of the instruments. We have
evaluated the new statement and have determined that it will not have a significant impact on our consolidated
financial position and results of operations.
61
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets — an
amendment of SFAS No. 140, which is effective for fiscal years beginning after September 15, 2006. This
statement was issued to simplify the accounting for servicing rights and to reduce the volatility that results
from using different measurement attributes. We have evaluated the new statement and have determined that it
will not have a significant impact on our consolidated financial position and results of operations.
In July 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income
Taxes, an interpretation of SFAS 109, Accounting for Income Taxes. FIN 48 prescribes a comprehensive model
for how companies should recognize, measure, present, and disclose in their financial statements, uncertain tax
positions taken or expected to be taken on a tax return. Under FIN 48, tax positions shall initially be
recognized in the financial statements when it is more likely than not the position will be sustained upon
examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the
largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with
the tax authority assuming full knowledge of the position and all relevant facts. FIN 48 also revises disclosure
requirements to include an annual tabular roll forward of unrecognized tax benefits. The provisions of this
interpretation are required to be adopted for fiscal periods beginning after December 15, 2006. We will be
required to apply the provisions of FIN 48 to all tax positions upon initial adoption in the first quarter 2007,
with any cumulative effect adjustment to be recognized as an adjustment to retained earnings. We are currently
in the process of determining the impact of the adoption of this authoritative guidance on our consolidated
financial position and results of operations.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 establishes
a common definition for fair value to be applied to U.S. GAAP guidance requiring use of fair value,
establishes a framework for measuring fair value, and expands disclosure about such fair value measurements.
SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the
impact, if any, of adopting the provisions of SFAS No. 157 on our consolidated financial position and results
of operations.
In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(r). SFAS
No. 158 requires an employer to recognize the funded status of defined benefit pension and other post-
retirement benefit plans as an asset or liability in our consolidated balance sheets and to recognize changes in
that funded status in the year in which the changes occur through accumulated other comprehensive income in
stockholders’ investment. SFAS No. 158 also requires that, beginning in 2008, our assumptions used to
measure our annual defined benefit pension and other post-retirement benefit plans be determined as of the
balance sheet date, and all plan assets and liabilities be reported as of that date. Currently, the assumptions
used to measure our annual defined benefit pension and other post-retirement benefit plan expenses are
determined as of October 1 or December 31 (measurement dates) for our various plans, and all plan assets and
liabilities are generally reported as of those dates. In accordance with the provisions of SFAS No. 158, prior
year amounts have not been adjusted. We adopted SFAS No. 158 as of December 31, 2006 and recognized the
funded status of our defined benefit pension and other post-retirement benefit plans in our consolidated
financial statements, based upon the most recent valuations of our defined benefit pension and other post-
retirement benefit obligations. The financial impact of the adoption increased liabilities by approximately
$5.4 million and reduced accumulated other comprehensive income, a component of stockholders’ investment,
by a net after-tax amount of approximately $3.5 million, based on our current assumptions of discount rate
and return on plan assets. The adoption of SFAS No. 158 did not have a significant impact on our credit or
debt ratios or financing covenants. See Note 14 to our consolidated financial statements for further information
regarding the adoption of this authoritative literature.
In September 2006, the United States Securities and Exchange Commission (“SEC”) issued SAB No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year
62
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Financial Statements. SAB 108 is effective for fiscal years ending on or after November 15, 2006 and
addresses how financial statement errors should be considered from a materiality perspective and corrected.
The literature provides interpretive guidance on how the effects of the carryover or reversal of prior year
misstatements should be considered in quantifying a current year misstatement. Historically there have been
two common approaches used to quantify such errors: (i) the “rollover” approach, which quantifies the error
as the amount by which the current year income statement is misstated, and (ii) the “iron curtain” approach,
which quantifies the error as the cumulative amount by which the current year balance sheet is misstated. The
SEC Staff believes that companies should quantify errors using both approaches and evaluate whether either of
these approaches results in quantifying a misstatement that, when all relevant quantitative and qualitative
factors are considered, is material. We have evaluated the impact of adopting the provisions of SAB 108 and
have determined that it had no impact on our consolidated financial position and results of operations.
3. Business Combinations
On November 29, 2006, we acquired all of the outstanding common stock of C.I.E.B. for approximately
$8.8 million, and C.I.E.B. became an indirect wholly-owned subsidiary of CVG. C.I.E.B. is a seat manufac-
turer primarily for the commercial bus and truck markets. From the date of acquisition through December 31,
2006, C.I.E.B. recorded revenues of approximately $1.0 million and operating income of approximately
$0.1 million. The C.I.E.B. acquisition was financed with borrowings from our revolving credit facility. The
operating results of C.I.E.B. have been included in our 2006 consolidated financial statements since the date
of acquisition. On a pro forma basis, had the C.I.E.B. acquisition been included in our consolidated financial
statements for the full year 2006, our revenues would have increased by approximately $9.6 million and
operating income would have increased by approximately $1.1 million.
The C.I.E.B. acquisition was accounted for by the purchase method of accounting. Under purchase
accounting, the preliminary purchase price is allocated to the tangible and intangible assets and liabilities of
C.I.E.B. based upon their respective fair values. We continue to evaluate the purchase price allocation,
including intangible assets, contingent liabilities and property, plant and equipment, and expect to revise the
purchase price allocation as better information becomes available. The preliminary purchase price and costs
associated with the C.I.E.B. acquisition exceeded the preliminary fair value of the net assets acquired by
approximately $5.9 million. Our valuation of goodwill as of December 31, 2006 is as follows (in thousands):
Contract purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,332
(514)
Working capital and other adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preliminary purchase price (cash consideration) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction costs and other adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets at historical cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,818
214
(3,151)
Excess of purchase price over net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,881
Under the purchase method of accounting in accordance with SFAS No. 141, Business Combinations, the
preliminary purchase price as shown above is allocated to C.I.E.B.’s tangible and intangible assets and
63
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
liabilities based on their estimated fair values as of the date of the acquisition. The preliminary purchase price
allocation as of December 31, 2006 was as follows (in thousands):
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,834
1,284
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,797
Property, plant and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,881
Goodwill and other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,914)
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(121)
Other long term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,818
The following pro forma information presents the result of operations as if the 2005 acquisitions of
Mayflower, Monona, Cabarrus and the 2006 acquisition of C.I.E.B. had taken place at the beginning of each
period presented below. The pro forma results are not necessarily indicative of the financial position or result
of operations had the acquisitions taken place on the dates indicated. In addition, the pro forma results are not
necessarily indicative of the future financial or operating results.
2006
(Unaudited)
2005
(Unaudited)
(In thousands, except per
share data)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings Per Share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$928,302
$ 98,543
$ 58,420
$838,545
$ 99,235
$ 53,242
$
$
2.76
2.71
$
$
2.74
2.70
4.
Inventories, net
Inventories consisted of the following as of December 31 (in thousands):
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: excess and obsolete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$61,617
14,436
17,314
(4,644)
$46,218
12,571
13,655
(3,391)
2006
2005
$88,723
$69,053
64
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
5. Accrued Liabilities
Accrued liabilities consisted of the following as of December 31 (in thousands):
2006
2005
Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Product liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income and other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Facility closure and consolidation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,277
5,197
165
6,104
883
—
482
9,862
$16,069
7,117
286
5,974
490
1,605
312
11,130
$40,970
$42,983
6. Restructuring and Integration
Restructuring — In 2000, we recorded a $5.6 million restructuring charge as part of our cost and
efficiency initiatives, closing two manufacturing facilities, two administrative centers and reorganizing our
manufacturing and administrative functions. Approximately $1.7 million of the charge was related to employee
severance and associated benefits for the 225 terminated employees, approximately $2.6 million related to
lease and other contractual commitments associated with the facilities and approximately $1.3 million of asset
impairments related to the write-down of assets. All employees were terminated by 2001. The contractual
commitments continued through mid-2005.
In 2001, we continued our cost and efficiency initiatives and closed a third manufacturing facility. Of the
total $0.4 million restructuring charge, approximately $0.1 million related to employee severance and
associated benefits for 77 employees and approximately $0.3 million related to lease and other contractual
commitments associated with the facility. All employees were terminated by 2002. As of December 31, 2005,
we completed our restructuring activities as described above.
A summary of these restructuring activities for the years ended December 31, 2006 and 2005 is as
follows (in thousands):
Balance — December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Usage/cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance — December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Usage/cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee
Costs
Facility Exit
and Other
Contractual
Costs
$—
—
—
—
$ 278
(278)
—
—
Total
$ 278
(278)
—
—
Balance — December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
$ —
$ —
Integration — In connection with the acquisitions of Bostrom plc and the predecessor to CVS, facility
consolidation plans were designed and implemented to reduce the cost structure and to better integrate the
acquired operations. Purchase liabilities recorded as part of the acquisitions included approximately $3.3 mil-
lion for costs associated with the shutdown and consolidation of certain acquired facilities and severance and
other contractual costs. At December 31, 2006, we had principally completed our actions under these plans,
65
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
other than certain contractual commitments, which continue through 2008. Summarized below is the activity
related to these actions (in thousands):
Balance — December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Usage/cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance — December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Usage/cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee
Costs
Facility Exit
and Other
Contractual
Costs
$—
—
—
—
$ 423
(106)
317
(70)
Total
$ 423
(106)
317
(70)
Balance — December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . .
$—
$ 247
$ 247
In connection with the June 8, 2005 acquisition of Monona, plans were established to realign certain
operations in an effort to achieve synergies between us and Monona, including the closure of our Spring
Green, Wisconsin operations and the administrative office located in Naperville, Illinois. Purchase liabilities
recorded as part of the acquisition include approximately $0.9 million related to employee severance and
associated benefits for approximately 100 employees and approximately $1.1 million related to facility exit,
transition and other estimated costs. These activities were substantially complete as of December 31, 2006.
Summarized below is the activity related to these actions (in thousands):
Balance — December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ —
946
Balance — December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . .
Usage/cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
946
(886)
Employee
Costs
Facility Exit
and Other
Contractual
Costs
$ —
1,067
1,067
(1,067)
Total
$ —
2,013
2,013
(1,953)
Balance — December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 60
$ —
$
60
7. Debt
Debt consisted of the following at December 31 (in thousands):
Revolving credit facilities bore interest at a weighted average of 7.1% as of
December 31, 2006 and 6.6% as of December 31, 2005 due 2010 . . . . . . . $
1,469
$
3,446
2006
2005
Term loans, with principal and interest payable quarterly, bore interest at a
weighted average rate of 6.8% as of December 31, 2006 and 6.3% as of
December 31, 2005 due 2010. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.0% senior notes due 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,295
150,000
350
162,114
2,158
37,152
150,000
411
191,009
5,309
$159,956
$185,700
66
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Future maturities of debt as of December 31, 2006 are as follows (in thousands):
Year Ending December 31,
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,158
2,553
2,867
4,534
2
150,000
Credit Agreement — We account for amendments to our revolving credit facility under the provisions of
EITF Issue No. 98-14, Debtor’s Accounting for the Changes in Line-of-Credit or Revolving-Debt Arrange-
ments (EITF 98-14), and our term loan and 8.0% senior notes under the provisions of EITF Issue No. 96-19,
Debtor’s Accounting for a Modification or Exchange of Debt Instruments (EITF 96-19). Historically, we have
periodically amended the terms of our revolving credit facility and term loan to increase or decrease the
individual and collective borrowing base of the instruments on an as needed basis. We have not modified the
terms of our 8.0% senior notes subsequent to the original offering date. In connection with an amendment of
our revolving credit facility, bank fees incurred are deferred and amortized over the term of the new
arrangement and, if applicable, any outstanding deferred fees are expensed proportionately or in total, as
appropriate per the guidance of EITF 98-14. In connection with an amendment of our term loan, under the
terms of EITF 96-19, bank and any third-party fees are either expensed as an extinguishment of debt or
deferred and amortized over the term of the agreement based upon whether or not the old and new debt
instruments are substantially different.
In connection with our August 2004 initial public offering (“IPO”), we entered into a $105.0 million
senior credit agreement, consisting of a $40.0 million revolving credit facility and a $65.0 million term loan.
We used borrowings under the term loan, together with proceeds of the IPO to repay all amounts outstanding
under our then-existing senior credit agreement and our then-existing subordinated indebtedness. In connection
with this senior credit agreement, we recorded a loss on early extinguishment of debt of approximately
$1.6 million, relating to outstanding deferred fees from our prior debt agreements.
In connection with the February 2005 acquisition of Mayflower, we amended our senior credit agreement
to increase the revolving credit facility from approximately $40.0 million to $75.0 million and the term loan
from approximately $65.0 million to $145.0 million. We used borrowings of approximately $106.4 million
under our amended senior credit agreement to fund substantially all of the purchase price of the Mayflower
acquisition. The revolving credit facility is available until January 31, 2010 and the term loan is due and
payable on December 31, 2010. In connection with this change in our senior credit agreement, we incurred
bank fees totaling approximately $1.7 million that were deferred and are being amortized over the term of the
agreement (until 2010).
In connection with the June 2005 acquisition of Monona, we amended our senior credit agreement to
increase the revolving credit facility from approximately $75.0 million to $100.0 million. We used borrowings
of approximately $58.0 million under our amended senior credit agreement to fund substantially all of the
purchase price of the Monona acquisition. The revolving credit facility is available until January 31, 2010 and
the term loan is due and payable on December 31, 2010. This amendment increased certain baskets in the lien,
investments and asset disposition covenants to reflect our increased size as a result of the Mayflower and
Monona acquisitions. In connection with this change in our senior credit agreement, we incurred bank fees
totaling approximately $0.4 million that were deferred and are being amortized over the term of the agreement
(until 2010).
67
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In connection with the July 2005 secondary public equity offering and private offering of $150.0 million
aggregate principal amount of 8.0% senior notes due 2013, we entered into additional amendments to the
senior credit agreement that provided for, among other things, the occurrence of these offerings. The net
proceeds of approximately $190.8 million from these offerings were primarily used to repay indebtedness
under the senior credit agreement. Concurrent with the repayment of the outstanding debt, our total borrowing
base under the amended senior credit agreement was reduced to approximately $140.0 million. Accordingly,
we expensed $1.5 million of unamortized deferred financing fees as a loss on early extinguishment of debt. In
connection with the July 2005 8.0% senior notes offering, we incurred third-party fees totaling approximately
$4.3 million that were deferred and are being amortized over the term of the notes (until 2013).
In December 2005, we amended our senior credit agreement to increase our annual capital expenditure
limit from approximately $25.0 million per annum to $40.0 million per annum in connection with our growth
and development strategy.
On June 30, 2006, we repaid approximately $25.0 million of our U.S. dollar denominated term loan. The
repayment of the term loan reduced the overall borrowing capacity on the existing senior credit agreement
from approximately $140 to $115 million. In connection with this loan repayment, approximately $0.3 million
of deferred fees, representing a proportionate amount of total deferred fees, were expensed as a loss on early
extinguishment of debt.
As of December 31, 2006, approximately $4.8 million in deferred fees relating to previous amendments
of our senior credit agreement and fees related to the 8.0% senior note offering were outstanding and are being
amortized over the life of the agreements.
The senior credit agreement provides us with the ability to denominate a portion of our borrowings in
foreign currencies. As of December 31, 2006, none of the revolving credit facility borrowings and none of the
term loan were denominated in U.S. dollars, and approximately $1.5 million of the revolving credit facility
borrowings and approximately $10.3 million of the term loan were denominated in British pounds sterling.
Prior to May 2, 2005, we also had $6.5 million of indebtedness from borrowings financed through the
issuance of industrial development bonds relating to our Vonore, Tennessee facility. These borrowings had a
final maturity of August 1, 2006 and bore interest at a variable rate which was adjusted on a weekly basis by
the placement agent such that the interest rate on the bonds was sufficient to cause the market value of the
bonds to be equal to, as nearly as practicable, 100% of their principal amount. On May 2, 2005 we redeemed
these bonds for approximately $6.5 million.
Terms, Covenants and Compliance Status — Our senior credit agreement contains various restrictive
covenants, including limiting indebtedness, rental obligations, investments and cash dividends, and also
requires the maintenance of certain financial ratios, including fixed charge coverage and funded debt to
EBITDA as defined by our senior credit agreement. We were in compliance with respect to these covenants as
of December 31, 2006. Under this agreement, borrowings bear interest at various rates plus a margin based on
certain financial ratios. Borrowings under the senior credit agreement are secured by specifically identified
assets, comprising in total, substantially all assets. Additionally, as of December 31, 2006, we had outstanding
letters of credit of approximately $1.8 million.
8. Goodwill and Intangible Assets
Goodwill represents the excess of acquisition purchase price over the fair value of net assets acquired. In
July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and
Intangible Assets. SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method of accounting. Under SFAS No. 142, goodwill and intangible assets
with indefinite lives are no longer amortized, but reviewed annually or more frequently if impairment
indicators arise. Separable intangible assets that are not deemed to have indefinite lives will continue to be
68
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
amortized over their useful lives, but with no maximum life. Prior to the adoption of SFAS No. 142 on
January 1, 2002, goodwill was being amortized on a straight-line basis over 40 years.
We review goodwill and indefinite-lived intangible assets for impairment annually in the second fiscal
quarter and whenever events or changes in circumstances indicate the carrying value may not be recoverable
in accordance with SFAS No. 142. We review definite-lived intangible assets in accordance with the provisions
of SFAS No. 142 and SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The
provisions of SFAS No. 142 require that a two-step impairment test be performed on goodwill. In the first
step, we compare the fair value of our reporting unit to our carrying value. Our reporting unit is consistent
with the reportable segment identified in Note 10 to our consolidated financial statements contained in this
Annual Report on Form 10-K for the year ended December 31, 2006. If the fair value of the reporting unit
exceeds the carrying value of the net assets assigned to that unit, goodwill is considered not impaired and we
are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit
exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in
order to determine the implied fair value of the reporting unit’s goodwill. If the carrying value of a reporting
unit’s goodwill exceeds the implied fair value, then we would record an impairment loss equal to the
difference. SFAS No. 142 also requires that the fair value of the purchased intangible assets with indefinite
lives be estimated and compared to the carrying value. We estimate the fair value of these intangible assets
using an income approach. We recognize an impairment loss when the estimated fair value of the intangible
asset is less than the carrying value. In this regard, management considers the following indicators in
determining if events or changes in circumstances have occurred indicating that the recoverability of the
carrying amount of indefinite-lived and amortizing intangible assets should be assessed: (1) a significant
decrease in the market value of an asset; (2) a significant change in the extent or manner in which an asset is
used or a significant physical change in an asset; (3) a significant adverse change in legal factors or in the
business climate that could affect the value of an asset or an adverse action or assessment by a regulator; (4) an
accumulation of costs significantly in excess of the amount originally expected to acquire or construct an
asset; and (5) a current period operating or cash flow loss combined with a history of operating or cash flow
losses or a projection or forecast that demonstrates continuing losses associated with an asset used for the
purpose of producing revenue. Our annual goodwill and indefinite-lived (SFAS No. 142) and definite-life
intangible asset (SFAS No. 144) impairment analysis was performed during the second quarter of fiscal 2006
and did not result in an impairment charge.
Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant
estimates and assumptions. These estimates and assumptions include revenue growth rates and operating
margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market
conditions and determination of appropriate market comparables. We base our fair value estimates on
assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. The valuation
approaches we use include the Income Approach (the Discounted Cash Flow Method) and the Market
Approach (the Guideline Company and Transaction Methods) to estimate the fair value of the reporting unit;
earnings are emphasized in the Discounted Cash Flow, Guideline Company, and the Transaction Methods. In
addition, these methods utilize market data in the derivation of a value estimate and are forward-looking in
nature. The Discounted Cash Flow Method utilizes a market-derived rate of return to discount anticipated
performance, while the Guideline Company Method and the Transaction Method incorporate multiples that are
based on the market’s assessment of future performance. Actual future results may differ materially from those
estimates.
69
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Principal Factors Contributing to the Recognition of Goodwill
Mayflower:
The primary reasons for the acquisition of Mayflower and the principal factors that contributed to a
purchase price that resulted in the recognition of goodwill were:
(cid:129) Mayflower is the only non-captive producer of complete steel and aluminum truck cabs for the
commercial vehicle sector in North America;
(cid:129) We believe the acquisition allows us to be the only supplier worldwide to offer complete cab systems in
sequence, integrating interior trim and seats with the cab structure;
(cid:129) We believe the acquisition gives us a leading position in North American cab structures and complete
cab assemblies, as well as full service cab and sleeper engineering and development capabilities; and
(cid:129) Mayflower broadens our revenue base at International, Volvo/Mack and Freightliner and enhances our
cross-selling opportunities.
Monona:
The primary reasons for the acquisition of Monona and the principal factors that contributed to a purchase
price that resulted in the recognition of goodwill were:
(cid:129) Monona operates in the U.S. and Mexico which enhances our international footprint, solidifies our
domestic footprint and allows for cost savings opportunities;
(cid:129) We believe Monona will enhance our ability to offer comprehensive cab systems to our customers and
expands our electronic assembly capabilities; and
(cid:129) Monona broadens our revenue base at Caterpillar, Oshkosh and Deere & Co. and enhances our cross-
selling opportunities.
Cabarrus:
The primary reasons for the acquisition of Cabarrus and the principal factors that contributed to a
purchase price that resulted in the recognition of goodwill were:
(cid:129) Cabarrus offers injection molding capabilities and expertise which enhances our molding and plastics
product portfolio; and
(cid:129) We believe Cabarrus offers cross-selling opportunities as well as the capability to in-source products for
cost savings opportunities.
C.I.E.B.:
The primary reasons for the acquisition of C.I.E.B. and the principal factors that contributed to a purchase
price that resulted in the recognition of goodwill were:
(cid:129) C.I.E.B. provides us with a wide variety of bus and truck seats, complements our existing product
offering and provides us with a well positioned platform to utilize as a building block for our global
expansion and sourcing efforts.
70
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Our intangible assets as of December 31, 2006 and 2005 were comprised of the following, respectively
(in thousands):
December 31, 2006
Weighted-
Average
Amortization
Period
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Definite-lived intangible assets:
Tradenames/Trademarks . . . . . . . . . . . . . . . .
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
30 years
7 years
Indefinite-lived intangible assets:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . .
Total consolidated goodwill and intangible
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,790
438
$ 10,228
$134,766
74,800
$209,566
$(589)
(251)
$(840)
$ —
—
$ —
$
9,201
187
$
9,388
$134,766
74,800
$209,566
$218,954
December 31, 2005
Weighted-
Average
Amortization
Period
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Definite-lived intangible assets:
Tradenames/Trademarks . . . . . . . . . . . . . . . .
Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
30 years
7 years
Indefinite-lived intangible assets:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . .
Total consolidated goodwill and intangible
assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,790
438
$ 10,228
$125,607
74,800
$200,407
$(263)
(188)
$(451)
$ —
—
$ —
$
9,527
250
$
9,777
$125,607
74,800
$200,407
$210,184
The aggregate intangible asset amortization expense was approximately $0.4 million and $0.3 million, for
the fiscal years ended December 31, 2006 and 2005, respectively.
The estimated intangible asset amortization expense for the five succeeding fiscal years ending after
December 31, 2006, is as follows (in thousands):
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $389
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $389
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $389
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $326
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $326
71
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The changes in the carrying amounts of goodwill for the fiscal year ended December 31, 2006, were
comprised of the following (in thousands):
Balance — December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $125,607
5,881
Increase due to acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
634
Post-acquisition adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(357)
Asset sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,001
Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance — December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134,766
9. Accounting for Income Taxes
Pre-tax income consisted of the following for the years ended December 31 (in thousands):
2006
2005
2004
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$76,336
9,459
$70,673
7,876
$17,996
5,934
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$85,795
$78,549
$23,930
A reconciliation of income taxes computed at the statutory rates to the reported income tax provision for
the years ended December 31 is as follows (in thousands):
2006
2005
2004
Federal provision at statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . $30,028
272
U.S. tax on foreign income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(231)
Foreign provision in excess (less) than U.S. tax rate . . . . . . . . . . . .
1,864
State taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,169)
Extraterritorial income exclusion. . . . . . . . . . . . . . . . . . . . . . . . . . .
(610)
Manufacturer’s tax credit deduction . . . . . . . . . . . . . . . . . . . . . . . .
(175)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
(1,275)
R&D tax credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$27,492
$ 8,136
702
779
(242)
(20)
1,625
1,087
(55)
(37)
(420)
—
344
914
— (3,808)
—
(878)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $27,745
$29,138
$ 6,481
The provision for income taxes for the years ended December 31 is as follows (in thousands):
2006
2005
2004
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,328
9,417
$21,890
7,248
$5,141
1,340
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$27,745
$29,138
$6,481
72
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of deferred income tax assets and liabilities as of December 31 is as follows (in thousands):
2006
2005
Current deferred tax assets:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,560
2,950
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,550
Warranty costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,947)
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,478
Stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,830
Accrued benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,398
Other accruals not currently deductible for tax purposes . . . . . . . . . . . . . . .
$ 1,690
1,913
3,465
(1,509)
2,412
2,639
1,961
Net current deferred assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,819
$ 12,571
Noncurrent deferred tax liabilities:
Amortization and fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(24,212)
7,629
Pension obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,548
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,818
Foreign tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(41)
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
647
Other accruals not currently deductible for tax purposes . . . . . . . . . . . . . . .
$(19,506)
6,160
2,511
1,928
—
105
Net noncurrent deferred tax (liabilities) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(10,611)
$ (8,802)
As of December 31, 2006, we had approximately $2.6 million of federal and $16.5 million of state net
operating loss carryforwards related to our U.S. operations. Utilization of these losses is subject to the tax
laws of the applicable tax jurisdiction and our legal organizational structure, and may be limited by the ability
of certain subsidiaries to generate taxable income in the associated tax jurisdiction. Our net operating loss
carryforwards expire beginning in 2016 and continue through 2025. The deferred income tax provision consists
of the change in the deferred income tax assets, adjusted for the impact of the tax benefit on the cumulative
effect of the change in accounting and the tax impact of certain of the other comprehensive income (loss)
items. Deferred taxes have not been provided on unremitted earnings of certain foreign subsidiaries that arose
in fiscal years ending on or before December 31, 2006. It is not practical to determine the additional tax, if
any, that would result from the remittance of these amounts.
We operate in multiple jurisdictions and are routinely under audit by federal, state and international tax
authorities. Exposures exist related to various filing positions which may require an extended period of time to
resolve and may result in income tax adjustments by the taxing authorities. Reserves for these potential
exposures have been established which represent management’s best estimate of the probable adjustments. On
a quarterly basis, management evaluates the reserve amounts in light of any additional information and adjusts
the reserve balances as necessary to reflect the best estimate of the probable outcomes. Management believes
that we have established the appropriate reserve for these estimated exposures. However, actual results may
differ from these estimates. The resolution of these matters in a particular future period could have an impact
on our consolidated statement of operations and provision for income taxes.
10. Segment Reporting
In accordance with the provisions of SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, our operating components constitute a single operating segment due to the manner in
which our key decisions are made as well as the manner in which our operating components collectively
73
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
support similar markets and customers, utilize similar manufacturing and assembly processes and utilize the
same centralized network of personnel.
The following table presents revenues and long-lived assets for each of the geographic areas in which we
operate (in thousands):
2006
Revenues
North America . . . . . . . .
All other countries . . . . . .
$800,069
118,682
Long-lived
Assets
$81,930
8,458
Years Ended December 31,
2005
Revenues
$636,448
118,033
Long-lived
Assets
$74,633
5,782
2004
Revenues
$272,460
107,985
Long-lived
Assets
$26,918
6,047
$918,751
$90,388
$754,481
$80,415
$380,445
$32,965
Revenues are attributed to geographic locations based on the location of product production.
The following is a summary composition by product category of our revenues (dollars in thousands):
2006
Years Ended December 31,
2005
2004
Revenues
%
Revenues
%
Revenues
%
Cab structures, sleeper boxes, body panels
and structural components . . . . . . . . . .
Seats and seating systems . . . . . . . . . . . .
Trim systems and components . . . . . . . . .
Mirrors, wipers and controls . . . . . . . . . .
Electronic wire harnesses and panel
$317,682
266,401
158,707
72,544
assemblies . . . . . . . . . . . . . . . . . . . . . .
103,417
35
29
17
8
11
$252,090
241,941
133,591
71,893
54,966
33
32
18
10
7
$
—
202,469
106,172
71,804
—
—
53
28
19
—
$918,751
100
$754,481
100
$380,445
100
The significant change in the 2005 product categories is primarily the result of the acquisitions of
Mayflower, Monona and Cabarrus.
11. Commitments and Contingencies
Leases — We lease office and manufacturing space and certain equipment under non-cancelable operating
lease agreements that require us to pay maintenance, insurance, taxes and other expenses in addition to annual
rentals. The anticipated future lease costs are based in part on certain assumptions and we will continue to
monitor these costs to determine if the estimates need to be revised in the future. Lease expense was
approximately $8.7 million, $8.4 million and $5.6 million in 2006, 2005 and 2004, respectively. Capital lease
agreements entered into by us are immaterial in total. Future minimum annual rental commitments at
December 31, 2006 under these operating leases are as follows (in thousands):
Year Ending December 31,
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,430
7,365
6,119
5,506
4,738
25,243
74
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Litigation — We are subject to various legal actions and claims incidental to our business, including those
arising out of alleged defects, product warranties and employment-related, income tax and environmental
matters. Management believes that we maintain adequate insurance to cover these claims. We have established
reserves for issues that are probable and estimatable in amounts management believes 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 will not have a material adverse impact on the
consolidated financial position, results of operations or cash flows; however, such matters are subject to many
uncertainties and the outcomes of individual matters are not predictable with assurance.
12. Stockholders’ Investment
Common Stock — Our authorized capital stock consists of 30,000,000 shares of common stock with a par
value of $0.01 per share.
Preferred Stock — Our authorized capital stock consists of 5,000,000 shares of preferred stock with a par
value of $0.01 per share, with no shares outstanding as of December 31, 2006.
Earnings Per Share — In accordance with SFAS No. 128, Earnings per Share, as amended, basic earnings
per share is determined by dividing net income by the weighted average number of common shares
outstanding during the year. Diluted earnings per share, and all other diluted per share amounts presented, is
determined by dividing net income by the weighted average number of common shares and potential common
shares outstanding during the period as determined by the Treasury Stock Method, as amended, in
SFAS No. 123(r). Potential common shares are included in the diluted earnings per share calculation when
dilutive. Diluted earnings per share for years ended December 31, 2006, 2005 and 2004 includes the effects of
potential common shares consisting of common stock issuable upon exercise of outstanding stock options and
for the year ended December 31, 2006, the effect of nonvested restricted stock (in thousands, except per share
amounts):
2006
2005
2004
Net income applicable to common stockholders — basic and
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$58,050
$49,411
$17,449
Weighted average number of common shares outstanding . . . . . . . .
Dilutive effect of outstanding stock options and restricted stock
21,151
19,440
15,429
grants after application of the treasury stock method . . . . . . . . . .
394
257
194
Dilutive shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,545
19,697
15,623
Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2.74
$ 2.54
$ 1.13
Diluted earning per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2.69
$ 2.51
$ 1.12
Dividends — We have not declared or paid any cash dividends in the past. The terms of our senior credit
agreement restricts the payment or distribution of our cash or other assets, including cash dividend payments.
13. Share-Based Compensation
Effective January 1, 2006, we adopted SFAS No. 123(r), Share-Based Payment, using the modified
prospective application transition method. SFAS No. 123(r) eliminates the intrinsic value method under
Accounting Principles Board (“APB”) Opinion No. 25 as an alternative method of accounting for share-based
compensation arrangements. SFAS No. 123(r) also revises the fair value-based method of accounting for
share-based payment liabilities, forfeitures and modifications of share-based compensation arrangements and
clarifies the guidance of SFAS No. 123, Accounting for Stock-Based Compensation, in several areas, including
75
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
measuring fair value, classifying an award as equity or as a liability and attributing compensation cost to
reporting periods. Prior to our adoption of SFAS No. 123(r), benefits of tax deductions in excess of recognized
compensation costs were reported as operating cash flows. SFAS No. 123(r) amends SFAS No. 95, Statement
of Cash Flows, to require that excess tax benefits be reported as a financing cash inflow rather than as a
reduction of taxes paid, which is included within operating cash flows.
We estimate our pre-tax share-based compensation expense to be approximately $3.0 million in 2007
based on our current share-based compensation arrangements. The compensation expense that has been
charged against income for those arrangements was approximately $2.0 million for the year ended Decem-
ber 31, 2006. The total income tax benefit recognized in our consolidated statement of operations for share-
based compensation arrangements was approximately $0.7 million for the year ended December 31, 2006.
Because we accounted for our share-based compensation arrangements under APB Opinion No. 25 prior to
adopting SFAS No. 123(r), our net income for the year ended December 31, 2005 does not include any
compensation expense related to these arrangements.
For the year ended December 31, 2006, the adoption of SFAS No. 123(r) resulted in incremental share-
based compensation expense of approximately $0.6 million. The incremental share-based compensation
expense caused income before provision for income taxes to decrease for the year ended December 31, 2006
by approximately $0.6 million, and net income to decrease for the year by approximately $0.4 million. In
addition, basic and diluted earnings per share decreased by $0.02 and $0.02, respectively, for the year ended
December 31, 2006. Cash provided by operating activities decreased and cash provided by financing activities
increased by approximately $347 thousand for the year ended December 31, 2006, related to excess tax
benefits from share-based payment arrangements.
The following table illustrates the effect on net income and earnings per share had we applied the fair
value recognition provisions of SFAS No. 123(r) to awards granted under our amended and restated equity
incentive plan prior to the adoption of this standard for the years ended December 31, 2005 and 2004 (in
thousands, except per share amounts — unaudited):
Net income, as reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Less): Share-based compensation expense determined under the the fair-value-
based method for all awards, net of related tax effects . . . . . . . . . . . . . . . . .
2005
2004
$49,411
$17,449
(390)
(69)
Pro forma net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$49,021
$17,380
Basic earnings per share:
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2.54
$ 1.13
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2.52
$ 1.13
Diluted earnings per share:
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2.51
$ 1.12
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2.49
$ 1.11
Stock Option Grants and Restricted Stock Awards — In 1998, we granted options to purchase
57,902 shares of common stock at $9.43 per share, which are exercisable through December 2008. The options
were granted at exercise prices determined to be at or above fair value on the date of grant. As of
December 31, 2006, 28,951 of the initially granted options have been exercised.
In May 2004, we granted options to purchase 910,869 shares of common stock at $5.54 per share. These
options have a ten-year term and the original terms provided for 50% of the options becoming exercisable
76
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ratably on June 30, 2005 and June 30, 2006. During June 2004, we modified the terms of these options such
that they became 100% vested immediately.
In October 2004, we granted options to purchase 598,950 shares of common stock at $15.84 per share.
These options have a ten-year term and vest ratably in three equal annual installments commencing on
October 20, 2005. As of December 31, 2006, there was approximately $0.6 million of unearned compensation
related to nonvested stock options granted in October 2004 under the amended and restated equity incentive
plan. This expense is subject to future adjustments for vesting and forfeitures and will be recognized on a
straight-line basis over the remaining period of 10 months.
In November 2005, 168,700 shares of restricted stock were awarded by our compensation committee
under our Amended and Restated Equity Incentive Plan. Restricted stock is a grant of shares of common stock
that may not be sold, encumbered or disposed of, and that may be forfeited in the event of certain terminations
of employment, prior to the end of a restricted period set by the compensation committee. The shares of
restricted stock granted in November 2005 vest in three equal annual installments commencing on October 20,
2006. A participant granted restricted stock generally has all of the rights of a stockholder, unless the
compensation committee determines otherwise. As of December 31, 2006, there was approximately $2.0 mil-
lion of unearned compensation related to nonvested restricted stock awarded in 2005 under the amended and
restated equity incentive plan. This expense is subject to future adjustments for vesting and forfeitures and will
be recognized on a straight-line basis over the remaining period of 22 months.
In November 2006, 207,700 shares of restricted stock were awarded by our compensation committee
under our amended and restated equity incentive plan. Restricted stock is a grant of shares of common stock
that may not be sold, encumbered or disposed of, and that may be forfeited in the event of certain terminations
of employment, prior to the end of a restricted period set by the compensation committee. The shares of
restricted stock granted in November 2006 vest in three equal annual installments commencing on October 20,
2007. A participant granted restricted stock generally has all of the rights of a stockholder, unless the
compensation committee determines otherwise. As of December 31, 2006, there was approximately $4.0 mil-
lion of unearned compensation related to nonvested restricted stock awarded in 2006 under the amended and
restated equity incentive plan. This expense is subject to future adjustments for vesting and forfeitures and will
be recognized on a straight-line basis over the remaining period of 34 months.
We use the Black-Scholes option-pricing model to estimate the fair value of equity-based stock option
grants with the following weighted-average assumptions:
2004 Stock
Option Grants
Weighted-average fair value of option and restricted stock grants . . . . . . . . . . . . . . . .
Risk-free interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life in months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3.34
4.50%
23.12%
36
We currently estimate the forfeiture rate for our October 2004 stock option grants, November 2005
restricted stock awards and November 2006 restricted stock awards at 12.2%, 13.2% and 3.9%, respectively,
for all participants of each plan.
77
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A summary of the status of our stock options as of December 31, 2006 and changes during the twelve-
month period ending December 31, 2006 is presented below:
Stock Options
Options
(000’s)
Weighted-Average
Exercise Price
Weighted-Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value (000’s)
Outstanding at December 31, 2005 . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . .
Exercised. . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2006 . . . .
Exercisable at December 31, 2006 . . . .
1,219
—
(342)
(29)
848
673
$10.45
—
6.30
15.84
$11.94
$10.92
Nonvested, expected to vest at
December 31, 2006 . . . . . . . . . . . . .
158
$15.84
—
—
—
—
7.5
7.4
7.8
$ —
—
5,072
—
$8,588
$6,878
$ 837
The following table summarizes information about the nonvested stock options and restricted stock grants
as of December 31, 2006:
Nonvested Stock Options
Nonvested at December 31, 2005 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options
(000’s)
380
—
(176)
(29)
Nonvested at December 31, 2006 . . . . . . . . .
175
Weighted-Average
Grant-Date
Fair Value
$3.34
—
—
3.34
$3.34
Nonvested Restricted Stock
Weighted-Average
Grant-Date
Fair Value
Shares
(000’s)
167
208
(54)
(12)
309
$19.50
20.59
—
19.50
$20.21
We expect employees to surrender approximately six thousand shares of our common stock in connection
with the vesting of restricted stock during 2007 to satisfy income tax withholding obligations.
As of December 31, 2006, a total of 101,283 shares were available from the original 1.0 million shares
authorized for award under our Amended and Restated Equity Incentive Plan, including cumulative forfeitures.
Repurchase of Common Stock — In addition, during 2004, we repurchased 50,874 shares of common
stock from certain stockholders at an average price of $4.78 per share. During 2005, we did not repurchase
any shares of common stock.
The 50,874 shares repurchased during 2004 were stated separately in our consolidated statements of
stockholders’ investment included in our Annual Report on Form 10-K for the year ended December 31, 2004.
However, we netted this amount against the issuance of common stock line item in our consolidated statements
of stockholders’ investment included in our Annual Report on Form 10-K for the year ended December 31,
2005 to avoid potential investor confusion with the implication of a share repurchase of private company stock
versus such a transaction with public company stock.
These shares were originally purchased in 1997 by certain members of management when our predecessor
was formed; the shares were fully vested at the time of purchase. In connection with the issuance of the
shares, we entered into a stockholder agreement with certain members of management whereby each
management stockholder that was party to the agreement was required to sell their stock, at book value, to
either us or certain of our non-management stockholders in the event their employment was terminated for any
78
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
reason at any time prior to an initial public offering. During the second quarter of 2004, certain management
employees terminated their employment with us, and their shares (50,874 in total) were repurchased by us at
book value in accordance with the terms of the stockholders agreement. There was no compensation expense
recorded in connection with these transactions.
14. Defined Contribution Plans, Pension and Other Post-Retirement Benefit Plans
Defined Contribution Plans — We sponsor various 401(k) employee savings plans covering all eligible
employees, as defined. Eligible employees can contribute on a pre-tax basis to the plan. In accordance with
the terms of the 401(k) plans, we elect to match a certain percentage of the participants’ contributions to the
plans, as defined. We recognized expense associated with these plans of approximately $1.5 million, $1.2 mil-
lion and $463,000 in 2006, 2005 and 2004, respectively.
Pension and Other Post-Retirement Benefit Plans — We sponsor pension and other post-retirement benefit
plans that cover certain hourly and salaried employees in the United States and United Kingdom. Our policy is
to make annual contributions to the plans to fund the normal cost as required by local regulations. In addition,
we have a post-retirement benefit plan for certain U.S. operations, retirees and their dependents.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Act) introduced a
prescription drug benefit under Medicare Part D as well as a federal subsidy to sponsors of retiree health care
benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The effect of the
Medicare prescription drug subsidy was an immaterial component of our net periodic post-retirement benefit
cost for the years ended December 31, 2006, 2005 and 2004.
In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(r).
SFAS No. 158 requires an employer to recognize the funded status of defined benefit pension and other post-
retirement benefit plans as an asset or liability in our consolidated balance sheet and to recognize changes in
that funded status in the year in which the changes occur through accumulated other comprehensive income in
stockholders’ investment. SFAS No. 158 also requires that, beginning in 2008, our assumptions used to
measure our annual defined benefit pension and other post-retirement benefit plans be determined as of the
balance sheet date, and all plan assets and liabilities be reported as of that date. Currently, the assumptions
used to measure our annual defined benefit pension and other post-retirement benefit plan expenses are
determined as of October 1 or December 31 (measurement dates) for our various plans, and all plan assets and
liabilities are generally reported as of those dates. In accordance with the provisions of SFAS No. 158, prior
year amounts have not been adjusted.
The following illustrates the incremental effect of applying SFAS No. 158 on individual line items on our
consolidated balance sheet as of December 31, 2006 (in thousands):
Before
Application
of SFAS No. 158
Adjustments
After Application
of SFAS No. 158
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
Liability for pension benefits . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . .
Total stockholders’ investment . . . . . . . . . . . . . . . .
$ 40,678
$ 17,106
$ 12,513
$320,543
$
2,227
$268,377
$
292
$ 5,082
$(1,902)
$ 5,374
$(3,472)
$(3,472)
$ 40,970
$ 22,188
$ 10,611
$325,917
$ (1,245)
$264,905
79
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The change in benefit obligation, plan assets and funded status as of and for the years ended December 31,
2006 and 2005 consisted of the following (in thousands):
U.S. Pension Plans
2006
2005
Non-U.S. Pension Plans
Other
Post-Retirement
Benefit Plans
2006
2005
2006
2005
Change in benefit obligation:
Benefit obligation — Beginning of
year . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,664
628
1,684
—
59
(2,193)
—
(1,001)
781
—
Service cost . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . .
Curtailment (gain) . . . . . . . . . . . . . . . .
Acquisitions/divestitures . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . .
Exchange rate changes . . . . . . . . . . . . .
$
— $ 39,850
263
952
2,253
1,439
174
—
—
61
(776)
—
—
29,567
(1,360)
(538)
1,189
(817)
5,474
—
$ 4,398
$ 37,576
61
991
164
1,862
—
605
—
206
— (2,057)
—
—
(184)
(1,140)
(141)
3,914
—
(3,958)
$
687
233
362
—
(447)
(3,097)
6,454
(211)
417
—
Benefit obligation at end of year . . . . . .
Change in plan assets:
Fair value of plan assets — Beginning
of year . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . .
Acquisitions/divestitures . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . .
Risk benefit insurance premium . . . . . .
Exchange rate changes . . . . . . . . . . . . .
Fair value of plan assets at end of
30,622
30,664
47,067
39,850
2,447
4,398
19,722
1,061
—
806
—
(1,001)
—
—
—
489
18,832
939
—
(538)
—
—
29,844
3,278
—
1,033
174
(1,360)
(55)
4,099
28,397
3,728
—
1,437
605
(1,140)
(191)
(2,992)
—
—
—
240
—
(184)
—
—
—
—
—
211
—
(211)
—
—
year . . . . . . . . . . . . . . . . . . . . . . . . .
20,588
19,722
37,013
29,844
56
—
Funded status . . . . . . . . . . . . . . . . . . . .
Unrecognized net (gain) loss . . . . . . . . .
Unrecognized prior service cost. . . . . . .
(10,034)
—
—
(10,942)
(81)
—
(10,054)
—
—
(10,006)
9,341
138
(2,391)
—
—
(4,398)
55
—
Net (accrued) amount recognized . . . . . $(10,034)
$(11,023)
$(10,054)
$
(527)
$(2,391)
$(4,343)
At December 31, 2005, we recorded a minimum pension liability of approximately $5.3 million which is
included in liability for pension benefits and accumulated other comprehensive loss, net of tax, in the
consolidated financial statements.
80
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Amounts recognized in the consolidated balance sheets at December 31 consist of (in thousands):
U.S. Pension Plans
2006
2005
Non-U.S.
Pension Plans
2006
2005
Other Post-
Retirement
Benefit Plans
2006
2005
Current liabilities . . . . . . . . . . . . . . . .
Noncurrent liabilities . . . . . . . . . . . . .
$ — $ — $ — $ — $ 292
2,099
10,034
10,054
11,023
527
$ —
4,343
Net amount recognized . . . . . . . . . . .
$10,034
$11,023
$10,054
$527
$2,391
$4,343
Defined benefits plans with a projected benefit obligation and accumulated benefit obligation in excess of
plan assets at December 31 are as follows (in thousands):
U.S. Pension Plans
2006
2005
Non-U.S. Pension Plans
2006
2005
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . .
$30,622
$30,622
$20,588
$30,664
$28,516
$19,722
$47,067
$47,067
$37,013
$39,850
$35,154
$29,844
The components of net periodic benefit cost for the years ended December 31 are as follows (in
thousands):
U.S. Pension Plans
2006
2005
Non-U.S. Pension Plans
2005
2004
2006
Other Post-Retirement
Benefit Plans
2005
2006
2004
Service cost . . . . . . . . . . . . . . . $
Interest cost . . . . . . . . . . . . . . .
Expected return on plan
628
1,684
$
952
1,439
$
263
2,253
$
991
1,862
$ 1,213
1,879
$ 61
164
$233
362
$—
39
assets . . . . . . . . . . . . . . . . . .
(1,649)
(1,419)
(2,030)
(1,931)
(1,879)
Amortization of prior service
costs . . . . . . . . . . . . . . . . . .
Recognized actuarial loss . . . . .
Curtailment loss. . . . . . . . . . . .
—
—
—
—
—
—
Net periodic benefit cost . . . . . $
663
$
972
$
6
263
151
906
17
334
—
19
266
—
—
—
—
—
—
—
2
—
—
—
—
—
$ 1,273
$ 1,498
$225
$597
$39
Weighted-average assumptions used to determine benefit obligations at December 31 are as follows:
U.S. Pension
Plans
2006
2005
Non-U.S. Pension Plans
2006
2004
2005
Other Post-Retirement
Benefit Plans
2005
2004
2006
Discount rate . . . . . . . . . . . . . . . . . . . . . . . 5.75% 5.50% 5.00% 5.00% 5.50% 5.75% 5.50-5.75% 5.75%
Rate of compensation increase . . . . . . . . . . — 3.50% — 3.30% 3.20% —
—
—
Weighted-average assumptions used to determine net periodic benefit cost at December 31 are as follows:
U.S. Pension
Plans
2006
2005
Non-U.S. Pension Plans
2006
2004
2005
Other Post-Retirement
Benefit Plans
2006
2005
2004
5.50% 5.66% 5.00% 5.50% 5.75% 5.50-5.75% 5.66-5.75% 6.25%
Discount rate . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . .
8.50% 8.50% 6.00% 7.50% 7.50%
Rate of compensation increase . . . . . . — 3.50% 3.30% 3.20% 3.00%
—
—
—
—
—
—
81
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
We employ a total return investment approach whereby a mix of equities and fixed income investments
are used to maximize the long-term return of plan assets for a prudent level of risk. The intent of this strategy
is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established
through careful consideration of plan liabilities, plan funded status and corporate financial condition. The
investment portfolio contains a diversified blend of equity and fixed income investments. Furthermore, equity
investments are diversified across U.S. and non-U.S. stocks as well as growth, value and small and large
capitalizations. Other assets such as real estate, private equity and hedge funds are used judiciously to enhance
long-term returns while improving portfolio diversification. Derivatives may be used to gain market exposure
in an efficient and timely manner; however, derivatives may not be used to leverage the portfolio beyond the
market value of the underlying investments. Investment risk is measured and monitored on an ongoing basis
through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio
reviews. We expect to contribute $2.7 million to our pension plans and $0.0 million to our other post-
retirement benefit plans in 2007.
Our current investment allocation target for our pension plans for 2007 and our weighted-average asset
allocations of our pension assets for the years ended December 31, by asset category, are as follows:
Target Allocation
U.S.
Non-U.S.
Pension Plans
2006
2005
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52%
33
15
62%
18
20
58% 59%
24
18
28
13
100% 100% 100% 100%
For measurement purposes, a 10.0% annual rate of increase in the per capita cost of covered health care
benefits was assumed for 2006. The rate was assumed to decrease gradually to 5.0% through 2011 and remain
constant thereafter. Assumed health care cost trend rates can have a significant effect on the amounts reported
for other post-retirement benefit plans.
Differences in the ultimate health care cost trend rates within the range indicated below would have had
the following impact on 2006 other post-retirement benefit results (in thousands):
1 Percentage
Point Increase
1 Percentage
Point Decrease
Increase (Decrease) from change in health care cost trend rates
Other post-retirement benefit expense . . . . . . . . . . . . . . . . . . . . . . .
Other post-retirement benefit liability . . . . . . . . . . . . . . . . . . . . . . .
$ 20
$102
$(19)
$(95)
The following table summarizes our expected future benefit payments of our pension and other post-
retirement benefit plans (in thousands):
Year
Pension Plans
Other Post-
Retirement
Benefit Plans
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 to 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,987
$ 2,156
$ 2,390
$ 2,650
$ 2,891
$20,541
$292
$295
$321
$372
$350
$674
During 2005, we elected to freeze the pension plan for Mayflower salaried employees. This action was
undertaken by us in an effort to minimize future liabilities and as part of the integration process.
82
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
During 2005, we also elected to terminate the Mayflower medical and dental post-retirement plan. This
action was undertaken by us in an effort to minimize future liabilities and as part of the integration process.
As a result of this action, we recorded a curtailment gain of approximately $3.1 million which is included in
the consolidated financial statements of operations for the year ending December 31, 2005.
During 2006, we elected to freeze our U.K. pension scheme. This action was undertaken by us in an
effort to minimize future liabilities.
15. Related Party Transactions
We entered into the following related party transactions during the three years ended December 31, 2006:
On January 31, 2005, we entered into an advisory agreement with Hidden Creek Partners, LLC (“HCP”),
(formerly Hidden Creek Industries (“HCI”)), pursuant to which HCP agreed to assist us in financing activities,
strategic initiatives and acquisitions in exchange for an annual fee. In addition, the Company agreed to pay
HCP a transaction fee for services rendered that relate to transactions we may enter into from time to time, in
an amount that is negotiated between our Chief Executive Officer or Chief Financial Officer and approved by
our Board of Directors. All of the principals of HCP are employees and managing directors of Thayer Capital
Partners (“Thayer”). Scott D. Rued, our Chairman, is a managing partner of Thayer and Richard A. Snell, a
member of our Board of Directors and our Compensation Committee Chairman, is an operating partner of
Thayer. Thayer Capital, Scott D. Rued and Richard A. Snell are neither a party to, nor have any direct or
indirect financial interest in the advisory agreement between us and HCP. For the years ended December 31,
2006 and 2005, we made payments under these arrangements of approximately $0.3 million and $1.8 million,
respectively. In 2004, we paid HCI, approximately $1.0 million for financing and acquisition-related services.
On May 1, 2004, we entered into a Product Sourcing Assistance Agreement with Baird Asia Limited
(“BAL”), an affiliate of Baird Capital Partners III L.P. Pursuant to the agreement, BAL assisted us in procuring
materials and parts from Asia, including the countries of China, Malaysia, Hong Kong and Taiwan. BAL
received as compensation a percentage of the price of the materials and parts supplied to us, of at least 2% of
the price but not exceeding 10% of the price, to be determined on a case-by-case basis. For the years ended
December 31, 2005 and 2004, we incurred expenses of approximately $3.1 million and $0.2 million,
respectively, for the value of goods and services purchased under this agreement. In connection with the sale
of stock during 2005, BAL was no longer a related party as of and subsequent to December 31, 2005.
In 2001, Onex acquired a one-third interest in our $66.0 million senior credit facility. Total interest
expense related to the portion of this senior credit facility owned by Onex was approximately $0.5 million for
the year ended December 31, 2004. No payments were made during 2005, and in connection with the sale of
stock during 2005, Onex was no longer a related party as of and subsequent to December 31, 2005.
16. Consolidating Guarantor and Non-Guarantor Financial Information
The following consolidating financial information presents balance sheets, statements of operations and
cash flow information related to our business. Each guarantor, as defined, is a direct or indirect wholly-owned
subsidiary and has fully and unconditionally guaranteed the subordinated notes issued by us, on a joint and
several basis. Separate financial statements and other disclosures concerning the guarantors have not been
presented because management believes that such information is not material to investors.
The parent company includes all of the wholly-owned subsidiaries accounted for under the equity method.
The guarantor and non-guarantor companies include the consolidated financial results of their wholly-owned
subsidiaries accounted for under the equity method. All applicable corporate expenses have been allocated
appropriately among the guarantor and non-guarantor subsidiaries.
83
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 2006
Parent
Company
Guarantor
Companies
Non-Guarantor
Companies
(In thousands)
Elimination
Consolidated
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . $
Accounts receivable, net . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . .
Prepaid expenses. . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . .
ASSETS
— $ 18,268
148,244
—
66,337
—
6,984
—
11,570
—
$ 1,553
31,356
22,610
5,819
(2,751)
$
— $ 19,821
123,471
88,723
24,272
8,819
(56,129)
(224)
11,469
—
Total current assets . . . . . . . . . . . . .
—
251,403
58,587
(44,884)
265,106
PROPERTY, PLANT AND
EQUIPMENT, net. . . . . . . . . . . . . . . .
INVESTMENT IN SUBSIDIARIES . . . .
GOODWILL . . . . . . . . . . . . . . . . . . . . .
INTANGIBLE ASSETS, net . . . . . . . . . .
OTHER ASSETS, net . . . . . . . . . . . . . . .
DEFERRED INCOME TAXES . . . . . . . .
—
400,817
—
—
—
—
81,930
10,602
104,033
84,188
7,761
8,624
8,458
11,987
30,733
—
8,613
3,323
—
(423,406)
—
—
—
(11,947)
90,388
—
134,766
84,188
16,374
—
TOTAL ASSETS . . . . . . . . . . . . . . . . $400,817
$548,541
$121,701
$(480,237)
$590,822
CURRENT LIABILITIES:
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
Current maturities of long-term debt . . $
Accounts payable . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . .
— $
—
—
2,158
123,398
25,661
$
—
19,341
3,840
$
— $ 2,158
86,610
40,970
(56,129)
11,469
Total current liabilities. . . . . . . . . . .
LONG-TERM DEBT, net . . . . . . . . . . . .
DEFERRED TAX LIABILITIES . . . . . .
OTHER LONG-TERM LIABILITIES . . .
—
—
—
—
Total liabilities . . . . . . . . . . . . . . . .
STOCKHOLDERS’ INVESTMENT . . . .
—
400,817
TOTAL LIABILITIES AND
STOCKHOLDERS’
INVESTMENT . . . . . . . . . . . . . . . . $400,817
151,217
148,156
23,374
15,556
338,303
210,238
23,181
11,800
(816)
10,056
44,221
77,480
(44,660)
—
(11,947)
—
(56,607)
(423,630)
129,738
159,956
10,611
25,612
325,917
264,905
$548,541
$121,701
$(480,237)
$590,822
84
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2006
Parent
Company
Guarantor
Companies
Non-Guarantor
Companies
(In thousands)
$134,978
112,738
Elimination
Consolidated
$(6,179)
(5,344)
$918,751
768,913
22,240
(835)
149,838
REVENUES . . . . . . . . . . . . . . . . . . . . . .
COST OF REVENUES . . . . . . . . . . . . . .
$—
—
Gross Profit . . . . . . . . . . . . . . . . . . . . .
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES . . . . .
AMORTIZATION EXPENSE . . . . . . . . . .
Operating Income . . . . . . . . . . . . . . . . .
OTHER INCOME . . . . . . . . . . . . . . . . . .
INTEREST EXPENSE . . . . . . . . . . . . . . .
LOSS ON EARLY EXTINGUISHMENT
OF DEBT. . . . . . . . . . . . . . . . . . . . . . .
Income Before Provision for Income
Taxes . . . . . . . . . . . . . . . . . . . . . . . .
PROVISION FOR INCOME TAXES . . . .
—
—
—
—
—
—
—
—
—
$789,952
661,519
128,433
39,487
414
88,532
755
14,963
13,153
—
9,087
(4,223)
(134)
282
36
72,532
24,002
13,408
3,743
(690)
—
(145)
—
—
—
(145)
—
51,950
414
97,474
(3,468)
14,829
318
85,795
27,745
NET INCOME. . . . . . . . . . . . . . . . . . . . .
$—
$ 48,530
$
9,665
$ (145)
$ 58,050
85
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2006
Parent
Company
Guarantor
Companies
Non-Guarantor
Companies
(In thousands)
Elimination
Consolidated
$—
$ 48,530
$ 9,665
$
(145)
$ 58,050
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . .
Noncash amortization of debt financing
costs . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on early extinguishment of debt . . . . .
Share-based compensation expense . . . . . . .
(Gain) loss on sale of assets . . . . . . . . . . . .
Pension and post-retirement curtailment
(gain) loss . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax provision . . . . . . . . . .
Noncash gain on forward exchange
contracts . . . . . . . . . . . . . . . . . . . . . . .
Change in other operating items . . . . . . . . .
Net cash provided by operating
activities . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property, plant and equipment . . .
Proceeds from disposal/sale of property, plant
and equipment . . . . . . . . . . . . . . . . . . . . .
Proceeds from disposal/sale of other assets . . .
Post-acquisition and acquisitions payments,
net of cash received . . . . . . . . . . . . . . . . .
Other asset and liabilities . . . . . . . . . . . . . . .
Net cash used in investing activities . . . .
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock
under equity incentive plans. . . . . . . . . . . .
Purchases of treasury stock from employees . .
Excess tax benefit from equity incentive
plans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of revolving credit facility . . . . . .
Borrowings under revolving credit facility . . . .
Repayments of long-term borrowings . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . .
Payments on capital lease obligations . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . .
EFFECT OF CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . .
NET (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . .
CASH AND CASH EQUIVALENTS:
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12,906
2,077
855
282
2,006
(693)
(4,007)
7,616
—
(37,477)
40
36
—
28
142
1,801
(4,203)
(2,682)
30,018
6,904
(17,070)
(2,257)
332
2,032
(634)
(11,080)
(26,420)
2,140
(115)
645
(61,300)
61,300
(26,590)
—
(98)
—
(24,018)
20
—
(8,818)
(10,273)
(21,328)
—
—
—
(13,411)
11,098
(1,620)
—
(1)
20,123
16,189
(465)
(1,700)
(20,885)
65
—
—
—
—
—
—
—
—
145
—
—
—
—
—
20,123
20,123
—
—
—
—
—
—
—
—
(20,123)
(20,123)
14,983
895
318
2,006
(665)
(3,865)
9,417
(4,203)
(40,014)
36,922
(19,327)
352
2,032
(9,452)
(1,230)
(27,625)
2,140
(115)
645
(74,711)
72,398
(28,210)
—
(99)
—
(27,952)
—
—
—
—
(2,165)
(20,820)
40,641
$ 19,821
Beginning of period . . . . . . . . . . . . . . . . . . .
End of period . . . . . . . . . . . . . . . . . . . . . . .
—
$—
39,153
$ 18,268
1,488
$ 1,553
$
86
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 2005
Parent
Company
Guarantor
Companies
Non-Guarantor
Companies
(In thousands)
ASSETS
Elimination
Consolidated
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . $
Accounts receivable, net . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . .
Prepaid expenses. . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . .
— $ 39,153
144,793
—
50,953
—
(540)
—
13,551
—
$ 1,488
25,657
18,179
2,484
(980)
$
— $ 40,641
114,116
69,053
4,724
12,571
(56,334)
(79)
2,780
—
Total current assets . . . . . . . . . . . . .
—
247,910
46,828
(53,633)
241,105
PROPERTY, PLANT AND
EQUIPMENT, net. . . . . . . . . . . . . . . .
INVESTMENT IN SUBSIDIARIES . . . .
GOODWILL . . . . . . . . . . . . . . . . . . . . .
INTANGIBLE ASSETS, net . . . . . . . . . .
OTHER ASSETS, net . . . . . . . . . . . . . . .
DEFERRED INCOME TAXES . . . . . . . .
—
328,815
—
—
—
—
74,633
752
103,758
84,577
7,692
10,837
5,782
1,715
21,849
—
4,487
1,818
—
(331,282)
—
—
—
(12,655)
80,415
—
125,607
84,577
12,179
—
TOTAL ASSETS . . . . . . . . . . . . . . . . $328,815
$530,159
$82,479
$(397,570)
$543,883
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt . . $
Accounts payable . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . .
— $
—
—
5,309
115,704
37,124
Total current liabilities. . . . . . . . . . .
LONG-TERM DEBT, net . . . . . . . . . . . .
DEFERRED TAX LIABILITIES . . . . . .
OTHER LONG-TERM LIABILITIES . . .
—
—
—
—
Total liabilities . . . . . . . . . . . . . . . .
STOCKHOLDERS’ INVESTMENT . . . .
—
328,815
158,137
171,693
22,273
19,994
372,097
158,062
$ —
14,339
3,079
17,418
14,007
(816)
5,309
35,918
46,561
$
— $ 5,309
73,709
42,983
(56,334)
2,780
(53,554)
—
(12,655)
—
(66,209)
(331,361)
122,001
185,700
8,802
25,303
341,806
202,077
TOTAL LIABILITIES AND
STOCKHOLDERS’
INVESTMENT . . . . . . . . . . . . $328,815
$530,159
$82,479
$(397,570)
$543,883
87
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2005
Parent
Company
Guarantor
Companies
Non-Guarantor
Companies
(In thousands)
$124,751
103,366
Elimination
Consolidated
$(3,995)
(3,544)
$754,481
620,031
21,385
(451)
134,450
(372)
—
(79)
—
—
—
(79)
—
(79)
44,564
358
89,528
(3,741)
13,195
1,525
78,549
29,138
$ 49,411
REVENUES . . . . . . . . . . . . . . . . . . . . . .
COST OF REVENUES . . . . . . . . . . . . . .
$—
—
Gross Profit . . . . . . . . . . . . . . . . . . . . .
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES . . . . .
AMORTIZATION EXPENSE . . . . . . . . . .
Operating Income . . . . . . . . . . . . . . . . .
OTHER INCOME . . . . . . . . . . . . . . . . . .
INTEREST EXPENSE . . . . . . . . . . . . . . .
LOSS ON EARLY EXTINGUISHMENT
OF DEBT. . . . . . . . . . . . . . . . . . . . . . .
Income Before Provision for Income
Taxes . . . . . . . . . . . . . . . . . . . . . . . .
PROVISION FOR INCOME TAXES . . . .
—
—
—
—
—
—
—
—
—
$633,725
520,209
113,516
32,909
358
80,249
(6)
11,742
12,027
—
9,358
(3,735)
1,453
1,525
—
66,988
25,199
11,640
3,939
NET INCOME. . . . . . . . . . . . . . . . . . . . .
$—
$ 41,789
$
7,701
$
88
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Noncash amortization of debt financing costs . . . . . . . . . .
Loss on early extinguishment of debt . . . . . . . . . . . . . . . .
Share-based compensation expense . . . . . . . . . . . . . . . . .
(Gain) loss on sale of assets . . . . . . . . . . . . . . . . . . . . . .
Pension and post-retirement curtailment (gain) loss . . . . . .
Deferred income tax provision. . . . . . . . . . . . . . . . . . . . .
Noncash gain on forward exchange contracts . . . . . . . . . .
Change in other operating items . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . .
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment . . . . . . . . . . . . .
Post-acquisition and acquisitions payments, net of cash
received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other asset and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . .
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock. . . . . . . . . . . . . . .
Proceeds from issuance of common stock under equity
incentive plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of revolving credit facility . . . . . . . . . . . . . . . . .
Borrowings under revolving credit facility . . . . . . . . . . . . . .
Repayments of long-term borrowings. . . . . . . . . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of 8% senior notes. . . . . . . . . . . . . .
Payments on capital lease obligations . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities. . . . . . . . . . . .
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . .
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . .
CASH AND CASH EQUIVALENTS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parent
Company
Guarantor
Companies
Non-Guarantor
Companies
(In thousands)
Elimination Consolidated
$—
$ 41,789
$ 7,701
$(79)
$ 49,411
10,300
750
1,354
—
(14)
(3,097)
5,134
—
6,236
62,452
1,764
98
171
—
7
—
2,114
(3,793)
(26,358)
(18,296)
(13,892)
(2,065)
(171,076)
(1,761)
225
—
(186,729)
(1,840)
43,914
—
1,887
(187,068)
187,068
(237,008)
227,459
150,000
(46)
(17,714)
—
(20,381)
19,710
(1,328)
—
—
—
22,054
168,492
20,055
(5,456)
38,759
567
486
394
1,002
—
—
—
—
—
—
—
—
79
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12,064
848
1,525
—
(7)
(3,097)
7,248
(3,793)
(20,043)
44,156
(15,957)
(170,851)
(1,761)
(188,569)
43,914
1,887
(207,449)
206,778
(238,336)
227,459
150,000
(46)
4,340
188,547
(4,889)
39,245
1,396
$ 39,153
$ 1,488
$ —
$ 40,641
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$—
89
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004
Parent
Company
Guarantor
Companies
REVENUES . . . . . . . . . . . . . . . . . . . . . .
COST OF REVENUES . . . . . . . . . . . . . .
$—
—
$273,518
222,079
Non-Guarantor
Companies
(In thousands)
$107,985
88,675
Gross Profit . . . . . . . . . . . . . . . . . . . . .
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES . . . . .
AMORTIZATION EXPENSE . . . . . . . . . .
Operating Income . . . . . . . . . . . . . . . . .
OTHER (INCOME)/EXPENSE . . . . . . . .
INTEREST EXPENSE . . . . . . . . . . . . . . .
LOSS ON EARLY EXTINGUISHMENT
OF DEBT. . . . . . . . . . . . . . . . . . . . . . .
Income Before Provision for Income
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
PROVISION FOR INCOME TAXES . . . .
—
—
—
—
—
—
—
—
—
Elimination
Consolidated
$(1,058)
(1,058)
—
—
—
—
1,500
—
$380,445
309,696
70,749
39,110
107
31,532
(1,247)
7,244
51,439
19,310
27,873
107
23,459
(1,457)
4,879
11,237
—
8,073
(1,290)
2,365
1,605
—
—
1,605
18,432
6,383
6,998
98
(1,500)
—
23,930
6,481
NET INCOME. . . . . . . . . . . . . . . . . . . . .
$—
$ 12,049
$
6,900
$(1,500)
$ 17,449
90
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . .
Noncash amortization of debt financing costs . . .
Loss on early extinguishment of debt . . . . . . . . .
Share-based compensation expense . . . . . . . . . .
Deferred income tax provision . . . . . . . . . . . . .
Noncash gain on forward exchange contracts . . .
Noncash interest expense on subordinated debt . .
Change in other operating items . . . . . . . . . . . .
Net cash provided by operating activities . . . .
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment . . . . . .
Net cash used in investing activities. . . . . . . . . .
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock under
equity incentive plans . . . . . . . . . . . . . . . . . . .
Repayment of revolving credit facility . . . . . . . . . .
Borrowings under revolving credit facility . . . . . . .
Repayments of long-term borrowings . . . . . . . . . .
Long-term borrowings . . . . . . . . . . . . . . . . . . . . .
Repayment of subordinated debt . . . . . . . . . . . . . .
Payments on capital lease obligations . . . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . .
EFFECT OF CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . .
NET (DECREASE) IN CASH AND CASH
EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . .
CASH AND CASH EQUIVALENTS:
Beginning of period . . . . . . . . . . . . . . . . . . . . . .
End of period . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parent
Company
Guarantor
Companies
Non-Guarantor
Companies
(In thousands)
Elimination Consolidated
$—
$ 12,049
$ 6,900
$(1,500)
$ 17,449
6,086
478
1,031
10,125
1,643
—
481
(3,889)
28,004
(6,392)
(6,392)
47,105
(62,125)
45,775
(100,781)
52,000
(3,112)
(15)
(2,202)
(23,355)
1,481
44
—
—
(303)
(1,291)
—
842
7,673
(2,515)
(2,515)
—
(18,450)
12,317
(15,250)
14,061
—
—
750
(6,572)
112
955
(1,631)
(459)
2,025
1,461
—
—
—
—
—
—
—
—
(1,500)
—
—
—
—
—
—
—
—
—
1,500
1,500
—
—
—
7,567
522
1,031
10,125
1,340
(1,291)
481
(3,047)
34,177
(8,907)
(8,907)
47,105
(80,575)
58,092
(116,031)
66,061
(3,112)
(15)
48
(28,427)
1,067
(2,090)
3,486
$
394
$ 1,002
$ —
$
1,396
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$—
91
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
17. Quarterly Financial Data (Unaudited):
The following is a condensed summary of actual quarterly results of operations for 2006 and 2005 (in
thousands, except per share amounts):
Revenues
Gross Profit
Operating
Income
Net Income
Basic Earnings
Per Share
Diluted Earnings
Per Share(1)
2006:
First. . . . . . . . . $229,345
Second . . . . . . $234,787
Third . . . . . . . . $235,841
Fourth . . . . . . . $218,778
2005:
First. . . . . . . . . $152,415
Second . . . . . . $196,091
Third . . . . . . . . $205,859
Fourth . . . . . . . $200,116
$38,734
$40,197
$40,797
$30,110
$26,252
$36,142
$36,495
$35,561
$25,477
$26,847
$27,399
$17,751
$16,679
$25,830
$24,566
$22,453
$13,408
$15,494
$18,006
$11,142
$10,886
$14,185
$11,898
$12,442
$0.64
$0.73
$0.85
$0.52
$0.61
$0.79
$0.58
$0.59
$0.62
$0.72
$0.84
$0.51
$0.59
$0.78
$0.57
$0.58
(1) See Note 13 for discussion on the computation of diluted shares outstanding.
The sum of the per share amounts for the quarters does not equal the total for the year due to the
application of the treasury stock methods.
92
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no changes in or disagreements with our independent accountants on matters of accounting
and financial disclosures.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of December 31, 2006, our chief executive officer and chief financial
officer have concluded that our disclosure controls and procedures are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms and were
effective.
93
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated
under the Exchange Act as a process designed by, or under the supervision of our principal executive and
principal financial officers and effected by our board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles in the United States. Such
internal control includes those policies and procedures that:
(cid:129) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets;
(cid:129) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management
and directors; and
(cid:129) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of our assets that could have a material effect on the financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of
December 31, 2006. In making this assessment, it used the criteria set forth in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on this assessment, management has determined that, as of December 31, 2006, our internal control
over financial reporting is effective based on those criteria.
Management’s assessment of the effectiveness of our internal control over financial reporting as of
December 31, 2006 has been audited by Deloitte and Touche LLP, an independent registered public accounting
firm, as stated in their report which appears in this Annual Report on Form 10-K.
/s/ Mervin Dunn
Mervin Dunn
Chief Executive Officer
March 13, 2007
/s/ Chad M. Utrup
Chad M. Utrup
Chief Financial Officer
94
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Commercial Vehicle Group, Inc.
We have audited management’s assessment, included in the accompanying Management’s Report on
Internal Control Over Financial Reporting, that Commercial Vehicle Group, Inc. and subsidiaries (the
“Company”) maintained effective internal control over financial reporting as of December 31, 2006, based on
the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the “COSO Framework”). The Company’s management is
responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on
management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating
management’s assessment, testing and evaluating the design and operating effectiveness of internal control,
and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed by, or under the supervision
of, the company’s principal executive and principal financial officers, or persons performing similar functions,
and effected by the company’s board of directors, management, and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of
collusion or improper management override of controls, material misstatements due to error or fraud may not
be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the
internal control over financial reporting to future periods are subject to the risk that the controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
In our opinion, management’s assessment that the Company maintained effective internal control over
financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the criteria
established in the COSO Framework. Also, in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2006, based on the criteria established in
the COSO Framework.
95
We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated financial statements and financial statement schedule as of and for the
year ended December 31, 2006 of the Company and our report dated March 13, 2007, expressed an
unqualified opinion on those financial statements and financial statement schedule and included an explanatory
paragraph relating to the Company’s changes in its method of accounting for defined benefit pension and other
post-retirement benefit plans and share-based compensation plans in 2006.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
March 13, 2007
96
Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) occurred during the fiscal quarter ended December 31, 2006 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 10. Directors, Executive Officers and Corporate Governance
A. Directors of the Registrant
PART III
The following table sets forth certain information with respect to our current directors as of December 31,
2006:
Name
Age
Principal Position(s)
Scott D. Rued . . . . . . . . . . . . . . . . . . . .
Mervin Dunn. . . . . . . . . . . . . . . . . . . . .
Scott C. Arves. . . . . . . . . . . . . . . . . . . .
David R. Bovee . . . . . . . . . . . . . . . . . . .
Robert C. Griffin . . . . . . . . . . . . . . . . . .
S.A. Johnson . . . . . . . . . . . . . . . . . . . . .
Richard A. Snell . . . . . . . . . . . . . . . . . .
President, Chief Executive Officer and Director
50 Chairman and Director
53
50 Director
57 Director
58 Director
66 Director
65 Director
The following biographies describe the business experience of our directors:
Scott D. Rued has served as a Director since February 2001 and Chairman since April 2002. Since August
2003, Mr. Rued has served as a Managing Partner of Thayer Capital Partners (“Thayer”). Prior to joining
Thayer, Mr. Rued served as President and Chief Executive Officer of Hidden Creek Industries (“Hidden
Creek”) from May 2000 to August 2003. From January 1994 through April 2000, Mr. Rued served as
Executive Vice President and Chief Financial Officer of Hidden Creek. Mr. Rued also serves as a Director of
Suntron Corporation.
Scott C. Arves has served as a Director since July 2005. Since January 2007, Mr. Arves has served as
President and Chief Executive Officer of Transport America, a truckload, intermodal and logistics services
provider. Prior to joining Transport America, Mr. Arves was President of Transportation for Schneider
National, Inc., a provider of transportation, logistics and related services, from May 2000 to July 2006.
David R. Bovee has served as a Director since October 2004. Mr. Bovee served as Vice President and
Chief Financial Officer of Dura Automotive Systems, Inc. (“Dura”) from January 2001 to March 2005 and
from November 1990 to May 1997. In October 2006, when Mr. Bovee was no longer affiliated with that
company, Dura filed a voluntary petition for reorganization under the federal bankruptcy laws. From May
1997 until January 2001, Mr. Bovee served as Vice President of Business Development. Mr. Bovee also served
as Assistant Secretary for Dura. Prior to joining Dura, Mr. Bovee served as Vice President at Wickes in its
Automotive Group from 1987 to 1990.
Robert C. Griffin has served as a Director since July 2005. Mr. Griffin has held numerous positions of
responsibility in the financial sector, including Head of Investment Banking, Americas and Management
Committee Member for Barclay’s Capital from 2000 to 2002, and prior to that as the Global Head of Financial
Sponsor Coverage for Bank of America Securities from 1998 to 2000 and Group Executive Vice President of
Bank of America from 1997 to 1998. Mr. Griffin also currently serves as a Director of Builders FirstSource,
Inc.
97
S.A. (“Tony”) Johnson has served as a Director since September 2000. Mr. Johnson is currently a
Managing Partner of OG Partners, a private industrial management company, and has served in that capacity
since 2004. Mr. Johnson served as the Chairman of Hidden Creek from May 2001 to May 2004 and from
1989 to May 2001 was its Chief Executive Officer and President. Prior to forming Hidden Creek, Mr. Johnson
served from 1985 to 1989 as Chief Operating Officer of Pentair, Inc., a diversified industrial company.
Mr. Johnson also currently serves as Chairman and a Director of Tower Automotive, Inc. and Cooper-Standard
Automotive, Inc.
Richard A. Snell has served as a Director since August 2004. Mr. Snell has served as Chairman and Chief
Executive Officer of Qualitor, Inc. since May 2005 and as an Operating Partner at Thayer Capital Partners
since 2003. Prior to joining Thayer Capital Partners, Mr. Snell was a consultant from 2000 to 2003 and prior
thereto, served as Chairman and Chief Executive Officer of Federal-Mogul Corporation, an automotive parts
manufacturer, from 1996 to 2000. In October 2001, when Mr. Snell was no longer affiliated with that
company, Federal-Mogul Corporation filed a voluntary petition for reorganization under the federal bankruptcy
laws. Prior to joining Federal-Mogul Corporation, Mr. Snell served as Chief Executive Officer at Tenneco
Automotive, also an automotive parts manufacturer. Mr. Snell also currently serves as a Director of Schneider
National, Inc.
B. Executive Officers
The following table sets forth certain information with respect to our current executive officers as of
December 31, 2006:
Name
Mervin Dunn. . . . . . . . . . . . . . . . . . . . .
Chad M. Utrup . . . . . . . . . . . . . . . . . . .
Gerald L. Armstrong . . . . . . . . . . . . . . .
W. Gordon Boyd . . . . . . . . . . . . . . . . . .
James F. Williams . . . . . . . . . . . . . . . . .
Age
Principal Position(s)
President, Chief Executive Officer and Director
53
34 Chief Financial Officer
45
59
60 Vice President of Human Resources
President — CVG Global Truck
President — CVG Global Construction
The following biographies describe the business experience of our executive officers:
Mervin Dunn has served as a Director since August 2004 and as our President and Chief Executive
Officer since June 2002, and prior thereto served as the President of Trim Systems, commencing upon his
joining us in October 1999. From 1998 to 1999, Mr. Dunn served as the President and Chief Executive Officer
of Bliss Technologies, a heavy metal stamping company. From 1988 to 1998, Mr. Dunn served in a number of
key leadership roles at Arvin Industries, including Vice President of Operating Systems (Arvin North
America), Vice President of Quality, and President of Arvin Ride Control. From 1985 to 1988, Mr. Dunn held
several key management positions in engineering and quality assurance at Johnson Controls Automotive
Group, an automotive trim company, including Division Quality Manager. From 1980 to 1985, Mr. Dunn
served in a number of management positions for engineering and quality departments of Hyster Corporation, a
manufacturer of heavy lift trucks.
Chad M. Utrup has served as the Chief Financial Officer since January 2003, and prior thereto served as
the Vice President of Finance at Trim Systems since 2000. Prior to joining us in February 1998, Mr. Utrup
served as a project management group member at Electronic Data Systems. While with Electronic Data
Systems, Mr. Utrup’s responsibilities included financial support and implementing cost recovery and efficiency
programs at various Delphi Automotive Systems support locations.
Gerald L. Armstrong has served as President — CVG Global Truck since November 2006. From April
2004 to November 2006, Mr. Armstrong served as President — CVG Americas and from July 2002 to April
2004 as Vice President and General Manager of National Seating and KAB North America. Prior to joining
us, Mr. Armstrong served from 1995 to 2000 and from 2000 to July 2002 as Vice President and General
Manager, respectively, of Gabriel Ride Control Products, a manufacturer of shock absorbers and related ride
control products for the automotive and light truck markets, and a wholly-owned subsidiary of ArvinMeritor
Inc. Mr. Armstrong began his service with ArvinMeritor Inc., a manufacturer of automotive and commercial
98
vehicle components, modules and systems in 1987, and served in various positions of increasing responsibility
within its light vehicle original equipment and aftermarket divisions before starting at Gabriel Ride Control
Products. Prior to 1987, Mr. Armstrong held various positions of increasing responsibility including Quality
Engineer and Senior Quality Supervisor and Quality Manager with Schlumberger Industries and Hyster
Corporation.
W. Gordon Boyd has served as President — CVG Global Construction since November 2006. From June
2005 to November 2006, Mr. Boyd served as President — CVG International and prior thereto served as our
President — Mayflower Vehicle Systems from the time we completed the acquisition of Mayflower in
February 2005. Mr. Boyd joined Mayflower Vehicle Systems U.K. as Manufacturing Director in 1993. In
2002, Mr. Boyd became President and Chief Executive Officer of MVS, Inc.
James F. Williams has served as the Vice President of Human Resources since August 1999. Prior to
joining us, Mr. Williams served as Corporate Vice President of Human Resources and Administration for
SPECO Corporation from January 1996 to August 1999. From April 1984 to January 1996, Mr. Williams
served in various key human resource management positions in General Electric’s Turbine, Lighting and Semi
Conductor business. In addition, Mr. Williams served as Manager of Labor Relations and Personnel Services
at Mack Trucks’ Allentown Corporate location from 1976 to 1984.
On February 5, 2007, we appointed Kevin R.L. Frailey as Executive Vice President of Business
Development. Prior to joining us, Mr. Frailey served as General Manager for Joint Ventures and Business
Strategy at ArvinMeritor’s Emissions Technologies Group from 2003 to early 2007. From 1988 to 2007,
Mr. Frailey held several key management positions in engineering, sales and worldwide supplier development
at ArvinMeritor. In addition, during that time Mr. Frailey served on the board of various joint ventures, most
notably those of Arvin Sango, Inc., and AD Tech Co., Ltd.
There are no family relationships between any of our directors or executive officers.
C. Section 16(a) Beneficial Ownership Reporting Compliance
The information required by Item 10 with respect to compliance with reporting requirements is
incorporated herein by reference to the section labeled “Section 16(a) Beneficial Ownership Reporting
Compliance” which appears in CVG’s 2007 Proxy Statement.
Item 11. Executive Compensation
The information required by Item 11 is incorporated herein by reference to the sections labeled “Director
Compensation” and “Executive Compensation and Other Matters” which appear in CVG’s 2007 Proxy
Statement excluding information under the headings “Compensation Discussion and Analysis.”
99
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Options to purchase common shares of our common stock have been granted to certain of our executives
and key employees under our amended and restated equity incentive plan and our management stock option
plan. The following table summarizes the number of stock options granted, net of forfeitures and exercises,
and shares of restricted stock awarded and issued, net of forfeitures and shares on which restrictions have
lapsed, the weighted-average exercise price of such stock options and the number of securities remaining to be
issued under all outstanding equity compensation plans as of December 31, 2006:
Number of Securities to be
Issued upon Exercise of
Outstanding Options,
Warrants and Rights(1)
Weighted-average
Exercise Price of
Outstanding
Options, Warrants
and Rights
Number of
Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
Equity compensation plans
approved by security holders:
Amended and Restated Equity
Incentive Plan
Stock Options . . . . . . . . . . . .
Restricted Stock(2) . . . . . . . . .
Management Stock Option
515,850
309,274
Plan . . . . . . . . . . . . . . . . . . . .
303,308
Equity compensation plans not
approved by stockholders . . . . . .
—
Total . . . . . . . . . . . . . . . . . . .
1,128,432
$15.84
—
$ 5.54
—
$12.03
(3)
(3)
—
—
101,283
(1) In connection with our merger with Trim Systems, Inc., options to purchase shares of Trim Systems, Inc.’s
common stock were converted into options to purchase shares of our common stock. Of these, options to
purchase an aggregate of 28,951 shares at a weighted-average exercise price of $9.43 per share were out-
standing at December 31, 2006. These options are not included in the table.
(2) 207,700 shares of restricted stock were issued during 2006 under our Amended and Restated Equity Incen-
tive Plan. These shares of restricted stock vest in three equal annual installments commencing on Octo-
ber 20, 2007.
(3) 101,283 shares are available for future issuance under our Amended and Restated Equity Incentive Plan.
The information required by Item 12 is incorporated herein by reference to the sections labeled “Security
Ownership of Certain Beneficial Owners and Management” and “Employee Benefit Plans,” which appear in
CVG’s 2007 Proxy Statement.
Item 13. Certain Relationships, Related Transactions and Director Independence
The information required by Item 13 is incorporated herein by reference to the section labeled “Certain
Relationships and Related Transactions” and “Proposal No. 1 — Election of Directors — Director Indepen-
dence” which appears in CVG’s 2007 Proxy Statement.
Item 14. Principal Accountant Fees and Services
The information required by Item 14 is incorporated herein by reference to the section labeled “Principal
Accountant Fees and Services” which appears in CVG’s 2007 Proxy Statement.
100
PART IV
Item 15. Exhibits and Financial Statements Schedules
(1) LIST OF FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules of the Corporation and its subsidiaries are included
herein:
Schedule II — Valuation and Qualifying Accounts and Reserves.
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS
December 31, 2006, 2005 and 2004
Allowance for Doubtful Accounts:
The transactions in the allowance for doubtful account for the years ended December 31 were as follows
(in thousands):
2006
2005
2004
Balance — Beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition recorded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,087
119
4,246
(4,963)
47
$ 2,681
1,524
4,287
(2,194)
(211)
$ 2,530
—
2,448
(2,390)
93
Balance — End of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,536
$ 6,087
$ 2,681
Additional Purchase Liabilities Recorded in Conjunction with Acquisitions:
The transactions in the purchase liabilities account recorded in conjunction with acquisitions for the years
ended December 31 were as follows (in thousands):
Balance — Beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$317
—
(70)
$ 423
—
(106)
$ 620
—
(197)
Balance — End of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$247
$ 317
$ 423
2006
2005
2004
Facility Closure and Consolidation Costs:
The transactions in the facility closure and consolidation costs account for the years ended December 31
were as follows (in thousands):
2006
2005
2004
Balance — Beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,013
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Utilizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 278
— 2,013
(278)
(1,953)
$ 787
—
(509)
Balance — End of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
60
$2,013
$ 278
All other schedules for which provision is made in the applicable accounting regulations of the SEC
are not required under the related instructions or are inapplicable and, therefore, have been omitted.
101
(2) LIST OF EXHIBITS
The following exhibits are either included in this report or incorporated herein by reference as indicated
below:
Exhibit No.
2.1
2.2
2.3
3.1
3.2
4.1
4.2
4.3
4.4
4.5
10.1
10.2
EXHIBIT INDEX
Description
Agreement of Purchase and Sale, dated February 7, 2004, by and among, CVG Acquisition LLC,
Mayflower Vehicle Systems, Inc., Mayflower Vehicle Systems Michigan, Inc., Wayne Stamping and
Assembly LLC and Wayne-Orrville Investments LLC (incorporated by reference to the Company’s
annual report on Form 10-K (File No. 000-50890), filed on March 15, 2005).
Stock Purchase Agreement, dated as of June 3, 2005, by and between Monona Holdings LLC and
Commercial Vehicle Group, Inc. (incorporated by reference to the Company’s current report on
Form 8-K (File No. 000-50890), filed on June 8, 2005).
Stock Purchase Agreement, dated as of August 8, 2005, by and between Trim Systems, Inc. Cabarrus
Plastics, Inc. and the Shareholders listed therein (incorporated by reference to the Company’s current
report on Form 8-K (File No. 000-50890) filed on August 12, 2005).
Amended and Restated Certificate of Incorporation of Commercial Vehicle Group, Inc. (incorporated
by reference to the Company’s quarterly report on Form 10-Q (File No. 000-50890), filed on
September 17, 2004).
Amended and Restated By-laws of Commercial Vehicle Group, Inc. (incorporated by reference to the
Company’s quarterly report on Form 10-Q (File No. 000-50890), filed on September 17, 2004).
Indenture, dated July 6, 2005, among the Company, the subsidiary guarantors party thereto and
U.S. Bank National Association, as Trustee, with respect to 8.0% senior notes due 2013 (incorporated
herein by reference to the Company’s Current Report on Form 8-K (File No. 000-50890), filed on
July 8, 2005).
Supplemental Indenture, dated as of August 10, 2005, by and among the Company, Cabarrus Plastics,
Inc., the subsidiary guarantors party thereto and U.S. Bank National Association (incorporated by
reference to the Company’s current report on Form 8-K (File No. 000-50890) filed on August 12,
2005).
Supplemental Indenture, dated as of November 10, 2006, among the Company, CVG European
Holdings, LLC, the subsidiary guarantors party thereto and U.S. Bank National Association.
Registration Rights Agreement, dated July 6, 2005, among the Company, the subsidiary guarantors
party thereto and the purchasers named therein (incorporated herein by reference to the Company’s
Current Report on Form 8-K (File No. 000-50890), filed on July 8, 2005).
Form of senior note (attached as exhibit to Exhibit 4.1).
Revolving Credit and Term Loan Agreement, dated as of August 10, 2004, by and among Commercial
Vehicle Group, Inc., the subsidiary borrowers from time to time parties thereto, the foreign currency
borrowers from time to time parties thereto, the banks from time to time parties hereto, U.S. Bank
National Association, one of the banks, as administrative agent for the banks and Comerica Bank, one
of the banks, as syndication agent for the banks (incorporated by reference to the Company’s quarterly
report on Form 10-Q (File No. 000-50890), filed on September 17, 2004).
First Amendment to Revolving Credit and Term Loan Agreement, dated as of September 16, 2004, by
and among Commercial Vehicle Group, Inc., the subsidiary borrowers from time to time parties
thereto, the foreign currency borrowers from time to time parties thereto, the banks from time to time
parties hereto, U.S. Bank National Association, one of the banks, as administrative agent for the banks
and Comerica Bank, one of the banks, as syndication agent for the banks(incorporated by reference to
the Company’s annual report on Form 10-K (File No. 000-50890), filed on March 15, 2005).
102
Exhibit No.
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
Description
Second Amendment to Revolving Credit and Term Loan Agreement, dated as of February 7, 2005, by
and among Commercial Vehicle Group, Inc., the subsidiary borrowers from time to time parties
thereto, the foreign currency borrowers from time to time parties thereto, the banks from time to time
parties hereto, U.S. Bank National Association, one of the banks, as administrative agent for the banks
and Comerica Bank, one of the banks, as syndication agent for the banks (incorporated by reference to
the Company’s annual report on Form 10-K (File No. 000-50890), filed on March 15,2005).
Third Amendment to Revolving Credit and Term Loan Agreement, dated as of June 3, 2005, by and
among Commercial Vehicle Group, Inc., the subsidiary borrowers from time to time parties thereto, the
foreign currency borrowers from time to time parties thereto, the banks from time to time parties
thereto, U.S. Bank National Association, one of the banks, as administrative agent for the banks and
Comerica Bank, one of the banks, as syndication agent for the banks(incorporated by reference to the
Company’s current report on Form 8-K (File No. 000-50890), filed on June 8, 2005).
Fourth Amendment to Revolving Credit and Term Loan Agreement, dated as of June 29, 2005, by and
among Commercial Vehicle Group, Inc., the subsidiary borrowers from time to time parties thereto, the
foreign currency borrowers from time to time parties thereto, the banks from time to time parties
thereto, U.S. Bank National Association, one of the banks, as administrative agent for the banks and
Comerica Bank, one of the banks, as syndication agent for the banks (incorporated by reference to the
Company’s current report on Form 8-K (File No. 000-50890), filed on July 6, 2005).
Fifth Amendment to Revolving Credit and Term Loan Agreement, dated as of July 12, 2005, by and
among Commercial Vehicle Group, Inc., the subsidiary borrowers from time to time parties thereto, the
foreign currency borrowers from time to time parties thereto, the banks from time to time parties
thereto, U.S. Bank National Association, one of the banks, as administrative agent for the banks, and
Comerica Bank one of the banks, as syndication agent for the banks(incorporated by reference to the
Company’s current report on Form 8-K (File No. 000-50890), filed on July 14, 2005).
Sixth Amendment to Revolving Credit and Term Loan Agreement, dated as of December 30, 2005, by
and among Commercial Vehicle Group, Inc., the subsidiary borrowers from time to time parties
thereto, the foreign currency borrowers from time to time parties thereto, the banks from time to time
parties thereto, U.S. Bank National Association, one of the banks, as administrative agent for the banks,
and Comerica Bank, one of the banks, as syndication agent for the banks(incorporated by reference to
the Company’s current report on Form 8-K (File No. 000-50890), filed on January 1, 2006).
Investor Stockholders Agreement, dated October 5, 2000, by and among Bostrom Holding, Inc., Onex
American Holdings LLC, J2R Partners VII and the stockholders listed on the signature pages thereto
(incorporated by reference to the Company’s registration statement on Form S-1 (File No. 333-15708),
filed on May 21, 2004).
Investor Stockholders Joinder Agreement, dated as of March 28, 2003, by and among Bostrom
Holding, Inc. and J2RPartners VI, CVS Partners, LP and CVS Executive Investco LLC (incorporated
by reference to the Company’s registration statement on Form S-1 (File No. 333-15708), filed on
May 21,2004).
Joinder to the Investor Stockholders Agreement by and among Bostrom Holding, Inc. and the prior
stockholders of Trim Systems (incorporated by reference to the Company’s registration statement on
Form S-1 (File No. 333-15708), filed on May 21, 2004).
Management Stockholders Agreement, dated as of August 9,2004, by and among Commercial Vehicle
Group, Inc., Onex American Holdings II LLC and the individuals named on Schedule I thereto
(incorporated by reference to the Company’s quarterly report on Form 10-Q (File No. 000-50890), filed
on September 17, 2004).
Note Purchase Agreement, dated September 30, 2002, by and among Bostrom Holding, Inc., Baird
Capital Partners II Limited, BCP II Affiliates Fund Limited Partnership, Baird Capital II Limited
Partnership, Baird Capital Partners III Limited Partnership, BCP III Special Affiliates Limited
Partnership, BCP III Affiliates Fund Limited Partnership, Norwest Equity Partners VII, LP and
Hidden Creek Industries (incorporated by reference to the Company’s registration statement on
Form S-1 (File No. 333-15708), filed on May 21,2004).
103
Exhibit No.
10.13
10.14
10.15
10.16*
10.17*
10.18*
10.19*
10.20*
10.21
10.22
10.23
10.24
10.25
10.26*
10.27*
10.28*
10.29*
Description
Form of Subordinated Promissory Note issued by Bostrom Holding, Inc. in favor of each of BCP II
Affiliates Fund Limited Partnership, Baird Capital II Limited Partnership, Baird Capital Partners III
Limited Partnership, BCP III Special Affiliates Limited Partnership BCP III Affiliates Fund Limited
Partnership, Norwest Equity Partners VII, LP and Hidden Creek Industries (incorporated by reference
to the Company’s registration statement on Form S-1 (File No. 333-15708), filed on May 21, 2004).
Promissory Note, dated as of June 28, 2001, issued by Trim Systems Operating Corp. in favor of
1363880 Ontario Inc., in the amount of $6,850,000 (incorporated by reference to the Company’s
registration statement on Form S-1 (File No. 333-15708), filed on May 21, 2004).
Promissory Note, dated as of June 28, 2001, issued by Trim Systems Operating Corp. in favor of J2R
Partners II-B, LLC, in the amount of $150,000 (incorporated by reference to the Company’s
registration statement on Form S-1 (File No. 333-15708), filed on May 21, 2004).
Bostrom Holding, Inc. Management Stock Option Plan (incorporated by reference to the Company’s
registration statement on Form S-1 (File No. 333-15708), filed on May 21, 2004).
Form of Grant of Nonqualified Stock Option pursuant to the Bostrom Holding, Inc. Management Stock
Option Plan (incorporated by reference to the Company’s registration statement on Form S-1 (File
No. 333-15708), filed on May 21,2004).
Commercial Vehicle Group, Inc. Amended and Restated Equity Incentive Plan (incorporated by
reference to the Company’s quarterly report on Form 10-Q (File No. 000-59890), filed on May 11,
2005).
Form of Grant of Nonqualified Stock Option pursuant to the Commercial Vehicle Group, Inc.
Amended and Restated Equity Incentive Plan (incorporated by reference to the Company’s annual
report on Form 10-K (File No. 000-50890), filed on March 15, 2005).
Employment agreement, dated as of May 16, 1997, with Donald P. Lorraine (incorporated by reference
to the Company’s registration statement on Form S-1 (File No. 333-15708), filed on May 21, 2004).
Recapitalization Agreement, dated as of August 4, 2004, by and among Commercial Vehicle Group,
Inc. and the stockholders listed on the signature pages thereto (incorporated by reference to the
Company’s quarterly report on Form 10-Q (File No. 000-50890), filed on September 17,2004).
Form of Non-Competition Agreement (incorporated by reference to the Company’s registration
statement on Form S-1 (File No. 333-15708), filed on May 21, 2004).
Registration Agreement, dated October 5, 2000, by and among Bostrom Holding, Inc. and the investors
listed on Schedule A attached thereto (incorporated by reference to the Company’s registration
statement on Form S-1 (File No. 333-15708), filed on May 21, 2004).
Joinder to Registration Agreement, dated as of March 28,2003, by and among Bostrom Holding, Inc.
and J2R Partners VI, CVS Partners, LP and CVS Executive Investco LLC (incorporated by reference to
the Company’s registration statement on Form S-1 (File No. 333-15708), filed on May 21,2004).
Joinder to the Registration Agreement, dated as of May 20, 2004, by and among Commercial Vehicle
Group, Inc. and the prior stockholders of Trim Systems (incorporated by reference to the Company’s
quarterly report on Form 10-Q (File No. 000-50890), filed on September 17, 2004).
Commercial Vehicle Group, Inc. 2006 Bonus Plan (incorporated by reference to the Company’s current
report on Form 8-K (File No. 000-50890), filed on March 28, 2006).
Service Agreement, dated March 1, 1993, between Motor Panels(Coventry) Plc and William Gordon
Boyd (incorporated by reference to the Company’s registration statement on Form S-1 (File
No. 333-125626), filed on June 8, 2005).
Assignment and Assumption Agreement, dated as of June 1,2004, between Mayflower Vehicle
Systems PLC and Mayflower Vehicle Systems, Inc. (incorporated by reference to the Company’s
registration statement on Form S-1 (File No. 333-125626), filed on June 8, 2005).
Form of Restricted Stock Agreement pursuant to the Commercial Vehicle Group, Inc. Amended and
Restated Equity Incentive Plan (incorporated by reference to amendment no. 1 to the Company’s
registration statement on Form S-4 (File No. 333-129368), filed on December 1, 2005).
104
Exhibit No.
10.30*
10.31*
10.32*
10.33*
10.34*
12.1
21.1
23.1
31.1
31.2
32.1
32.2
Description
Change in Control & Non-Competition Agreement dated April 5, 2006 with Mervin Dunn
(incorporated by reference to the Company’s current report on Form 8-K (File No. 000-50890),
filed on April 7, 2006).
Change in Control & Non-Competition Agreement dated April 5, 2006 with Gerald L. Armstrong
(incorporated by reference to the Company’s current report on Form 8-K (File No. 000-50890), filed on
April 7, 2006).
Change in Control & Non-Competition Agreement dated April 5, 2006 with Chad M. Utrup
(incorporated by reference to the Company’s current report on Form 8-K (File No. 000-50890),
filed on April 7, 2006).
Change in Control & Non-Competition Agreement dated April 5, 2006 with James F. Williams
(incorporated by reference to the Company’s current report on Form 8-K (File No. 000-50890), filed on
April 7, 2006).
Deferred Compensation Plan (incorporated by reference to the Company’s quarterly report on
Form 10-Q (File No. 000-50890), filed on November 6, 2006).
Computation of ratio of earnings to fixed charges.
Subsidiaries of Commercial Vehicle Group, Inc.
Consent of Deloitte & Touche LLP.
Certification by Mervin Dunn, President and Chief Executive Officer.
Certification by Chad M. Utrup, Chief Financial Officer.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of
2002.
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-Oxley Act of
2002.
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this annual
report on Form 10-K.
All other items included in an Annual Report on Form 10-K are omitted because they are not applicable
or the answers thereto are none.
105
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
COMMERCIAL VEHICLE GROUP, INC.
By: /s/ SCOTT D. RUED
Scott D. Rued
Chairman
Date: March 13, 2007
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ SCOTT D. RUED
Scott D. Rued
/s/ MERVIN DUNN
Mervin Dunn
/s/ SCOTT C. ARVES
Scott C. Arves
/s/ DAVID R. BOVEE
David R. Bovee
/s/ ROBERT C. GRIFFIN
Robert C. Griffin
/s/ S.A. JOHNSON
S.A. Johnson
/s/ RICHARD A. SNELL
Richard A. Snell
/s/ CHAD M. UTRUP
Chad M. Utrup
Chairman and Director
March 13, 2007
President, Chief Executive Officer
(Principal Executive Officer) and
Director
March 13, 2007
Director
March 13, 2007
Director
Director
March 13, 2007
March 13, 2007
Director
March 13, 2007
Director
March 13, 2007
Chief Financial Officer (Principal
Financial and Accounting Officer)
March 13, 2007
106
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