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
Transition report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended:
December 31, 2015
Commission file number:
001-34365
or
COMMERCIAL VEHICLE GROUP, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State of Incorporation)
7800 Walton Parkway
New Albany, Ohio
(Address of Principal Executive Offices)
41-1990662
(I.R.S. Employer Identification No.)
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
Common Stock, par value $.01 per share
Name of exchange on which registered
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
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
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
No
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, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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, 2015, was $210,138,586.
As of March 10, 2016, 30,587,644 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 is incorporated by reference from the
Registrant’s Proxy Statement for its annual meeting to be held May 17, 2016 (the “2016 Proxy Statement”).
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COMMERCIAL VEHICLE GROUP, INC.
Annual Report on Form 10-K
Table of Contents
PART I
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
Selected Financial Data
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships, Related Transactions and Director Independence
Item 14. Principal Accountant Fees and Services
Item 15. Exhibits and Financial Statements Schedules
SIGNATURES
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 outlook, financial covenant
compliance, anticipated effects of acquisitions, production of new products, plans for capital expenditures and our results of
operations or financial position and liquidity, may be deemed to be forward-looking statements. Without limiting the foregoing,
the words “believes,” “anticipates,” “plans,” “expects,” “should,” 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) general economic or business conditions affecting the markets
in which we serve; (ii) our ability to develop or successfully introduce new products; (iii) risks associated with conducting business
in foreign countries and currencies; (iv) increased competition in the heavy-duty truck, construction or medium-duty agriculture
market; (v) our failure to complete or successfully integrate additional strategic acquisitions; (vi) the impact of changes in
governmental regulations on our customers or on our business; (vii) the loss of business from a major customer or the discontinuation
of particular commercial vehicle platforms; (viii) our ability to obtain future financing due to changes in the lending markets or
our financial position and (ix) our ability to comply with the financial covenants in our revolving credit facility. 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
Item 1.
Business
COMPANY OVERVIEW
PART I
Commercial Vehicle Group, Inc. is a Delaware (USA) corporation. We were formed as a privately-held company in August
2000. We became a publicly held company in 2004. The Company (and its subsidiaries) is a leading supplier of a full range of cab
related products and systems for the global commercial vehicle market, including the medium-and heavy-duty truck (“MD/HD
Truck”) market, the medium-and heavy-construction vehicle market, and the military, bus, agriculture, specialty transportation,
mining, industrial equipment and off-road recreational markets.
The Company has manufacturing operations in the United States, Mexico, United Kingdom, Czech Republic, Ukraine,
China, India and Australia. Our products are primarily sold in North America, Europe, and the Asia-Pacific region.
Our products include seats and seating systems (“Seats”); trim systems and components (“Trim”); cab structures, sleeper
boxes, body panels and structural components; mirrors, wipers and controls; and electronic wire harness and panel assemblies
specifically designed for applications in commercial and other vehicles.
We are differentiated from automotive industry suppliers by our ability to manufacture low volume, customized products
on a sequenced basis to meet the requirements of our customers. We believe our products are used by a majority of the North
American MD/HD Truck and certain leading global construction and agriculture original equipment manufacturers (“OEMs”),
which we believe creates an opportunity to cross-sell our products.
Our Long-term Strategy
Our long-term strategic plan is a roadmap by product, geographic region, and end market to guide resource allocation and
other decision making to achieve our long-term goals. The overarching goal is to deliver top quartile total shareholder return. To
that end, we evaluated our opportunity to grow organically by end market. We currently believe we have approximately 5% market
share of the addressable global truck, bus, construction and agriculture end markets. Accordingly, we believe we have significant
opportunity to grow organically in our end markets. We evaluated our product portfolio in the context of this organic market growth
opportunity and our ability to win in the marketplace. Our core products are Seats, Trim and wire harnesses and our complementary
products include structures, wipers, mirrors and office seats. We expect to realize some geographic diversification over the planned
period toward the Asia-Pacific region. We also expect to realize some end market diversification more weighted toward the
agriculture market, and to a lesser extent the construction market. We intend to allocate resources consistent with our strategic
plan; and more specifically, consistent with our core and complementary product portfolio, geographic region and end market
diversification objectives. We periodically evaluate our long-term strategic plan in response to significant changes in our business
environment and other factors.
Although our long-term strategic plan is an organic growth plan, we will consider opportunistic acquisitions to supplement
our product portfolio, and to enhance our ability to serve our customers in our geographic end markets.
Strategic Footprint
We continuously review our manufacturing footprint to ensure we efficiently utilize our resources. In November 2015,
management announced a restructuring and cost reduction plan, which is expected to lower operating costs by $8 to $12 million
annually when fully implemented as of the end of 2017. Pre-tax costs associated with these actions, including associated capital
investment, were $0.8 million in 2015 and are expected to be $6 to $8 million in 2016 and $4 to $6 million in 2017. The majority
of these costs are employee-related separation costs and other costs associated with the transfer of production and subsequent
closure of facilities.
SEGMENTS
Our operations are comprised of two reportable segments: the Global Truck and Bus Segment (“GTB Segment”) and the
Global Construction and Agriculture Segment (“GCA Segment”). This is consistent with how the Chief Operating Decision
Maker ("CODM"), the Company's President and Chief Executive Officer, manages the business. Each of these segments
consists of a number of manufacturing facilities. Generally, the facilities in the GTB Segment manufacture and sell Seats, Trim,
wipers, mirrors, structures and other products into the MD/HD Truck and bus markets. Generally, the facilities in the GCA
Segment manufacture and sell wire harnesses, Seats and other products into the construction and agriculture markets. Both
segments participate in the aftermarket. Certain of our manufacturing facilities manufacture and sell products through both of
our segments. Each manufacturing facility that sells products through both segments is reflected in the financial results of the
segment that has the greatest amount of sales from that manufacturing facility. Our segments are more specifically described
below.
1
The GTB Segment manufactures and sells the following products:
•
Seats; Trim; sleeper boxes; and cab structures, structural components and body panels. These products are sold
primarily to the MD/HD Truck markets in North America;
Seats to the truck and bus markets in Asia-Pacific and Europe;
•
• Mirrors and wiper systems to the truck, bus, agriculture, construction, rail, and military markets in North America;
• Trim to the recreational and specialty vehicle market in North America; and
• Aftermarket seats and components in North America.
The GCA Segment manufactures and sells the following products:
• Electronic wire harness assemblies and Seats for construction, agricultural, industrial, automotive, mining and military
industries in North America, Europe and Asia-Pacific;
Seats to the truck and bus markets in Asia-Pacific and Europe;
•
• Wiper systems to the construction and agriculture market in Europe;
• Office seating in Europe and Asia-Pacific; and
• Aftermarket seats and components in Europe and Asia-Pacific.
See Note 9 of the Notes to Consolidated Finance Statements under Item 8 Financial Statements and Supplementary Data
for financial information presented by segment for each of the three years ended December 31, 2015, 2014 and 2013, including
information on sales and assets by geographic area.
GLOBAL TRUCK AND BUS SEGMENT OVERVIEW
Global Truck and Bus Segment Products
Set forth below is a brief description of our products manufactured in the GTB Segment and their applications:
Seats and Seating Systems. We design, engineer and produce Seats for MD/HD Truck, and bus applications. For the most
part, our Seats are fully-assembled and ready for installation when they are delivered to the OEM. We offer a wide range of seats
that include mechanical and air suspension seats, static seats, bus seats and military seats. As a result of our product design and
product technology, we believe we are a leader in designing seats with convenience and enhanced safety features. Our Seats are
designed to achieve a high level of operator comfort by adding a wide range of manual and power features such as lumbar support,
cushion and back bolsters, and leg and thigh support. Our Seats are built to meet customer requirements in low volumes and
produced in numerous feature combinations to form a full-range product line with a wide level of price points. We also manufacture
seats, and parts and components for the aftermarket.
Trim Systems and Components. We design, engineer and produce Trim for MD/HD Truck, and recreational and specialty
vehicle applications. Our Trim products are used mostly for interior cabs of commercial vehicles as well as exterior components
for commercial recreational and specialty vehicles. Our Trim products are designed to provide a comfortable and durable interior
along with a variety of functional and safety features for the vehicle occupant. The wide variety of features that can be selected
makes Trim a complex and highly specialized product category. Set forth below is a brief description of our principal products in
the Trim category:
Trim Products. Our trim products include door panels and other interior trim panels. Specific components include vinyl or
cloth-covered appliqués, armrests, map pocket compartments, and sound-reducing insulation ranging from a traditional cut and
sew approach to a contemporary molded styling theme.
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.
Headliners/Wall Panels. Headliners and wall panels consist of a substrate and a finished interior layer made of fabrics and
other materials. While headliners and wall panels 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.
Storage Systems. Our modular storage units and custom cabinetry are designed to improve comfort and optimize space for
the operator. These storage systems are designed to be integrated with the interior trim.
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. Non-carpeted flooring
systems, used primarily in commercial and fleet vehicles, offer improved wear and maintenance characteristics.
2
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.
Grab Handles and Armrests. Our grab handles and armrests are designed and engineered with specific attention to aesthetics,
ergonomics and strength.
Privacy Curtains. We produce privacy curtains for use in sleeper cabs.
Plastics Decorating and Finishing. We offer customers a wide variety of cost-effective finishes in paint, ultra violet, hard
coating and customized industrial hydrographic films, paints and other interior and exterior finishes (simulated appearance of
wood grain, carbon fiber, brushed metal, marbles, camouflage and custom patterns).
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 MD/HD Trucks. Set forth below is a brief description of
our principal products in this category:
Cab Structures. We design, manufacture and assemble complete cab structures. Our cab structures, which are manufactured
from both steel and aluminum, are delivered fully assembled and primed for paint.
Sleeper Boxes. We design, manufacture and assemble sleeper boxes that can be part of the overall cab structure or standalone
assemblies depending on the customer application.
Bumper Fascias and Fender Liners. We design and manufacture durable, lightweight bumper fascias and fender liners.
Body Panels and Structural Components. We produce a wide range of both steel and aluminum large exterior body panels
and structural components for use in production of cab structures and sleeper boxes.
Mirrors, Wipers and Controls. We design, engineer and produce a variety 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 range of round, rectangular, motorized and heated mirrors and related hardware, including brackets,
braces and side bars. We have introduced both road and outside temperature devices that can be mounted on the cab integrated
into the mirror face and the vehicle’s dashboard through our RoadWatch™ family of products.
Windshield Wiper Systems. We offer application-specific windshield wiper systems and individual windshield wiper
components.
Controls. We offer a range of controls and control systems for window lifts, door locks and electric switch products.
Global Truck and Bus Segment Raw Materials and Suppliers
A description of the principal raw materials we utilize in our GTB Segment’s principal product categories is set forth below:
•
•
Seats and Seating Systems. The principal raw materials used in our Seats include steel, resin-based products and
foam products 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.
Trim Systems and Components. The principal raw materials used in our Trim are resin and chemical products,
foam, vinyl and fabric which are formed and assembled into end products. These raw materials are generally
readily available from multiple suppliers.
• 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 or coils. These raw materials are generally readily available and obtained from
multiple suppliers.
• Mirrors, Wipers and Controls. The principal raw materials used to manufacture our mirrors, wipers and controls
are steel, stainless steel, aluminum and rubber, which are generally readily available and obtained from multiple
suppliers. We also purchase sub-assembled products such as motors for our wiper systems and mirrors.
3
Global Truck and Bus Segment Customers and Marketing
The following is a summary of the GTB Segment’s significant revenues (figures are shown as a percentage of total GTB
Segment revenue) by end market for each of the three years ended December 31:
Medium-and Heavy-duty Truck OEMs
Aftermarket and OE Service
Bus OEMs
Construction OEMs
Other
Total
2015
70%
15
6
2
7
100%
2014
71%
14
6
2
7
100%
2013
70%
16
6
2
6
100%
In 2015, the classification of some sales by end market was changed for certain customers. These classification changes
were applied to prior periods in the table above to conform to 2015 presentation.
We believe we are a successful long-term supplier because of our comprehensive product offerings, leading brand names
and product innovation. Our principal customers include A.B. Volvo, Daimler Trucks, PACCAR and Navistar, which consist of a
combined total of 79%, 80% and 79% of GTB Segment revenue for the years ended December 31, 2015, 2014 and 2013,
respectively.
Our European and Asia-Pacific operations collectively contributed approximately 4%, 5% and 5% of the GTB Segment’s
revenues for the years ended December 31, 2015, 2014 and 2013, respectively.
Global Truck and Bus Industry
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, agricultural, military, industrial, municipal, off-road recreation
and specialty vehicle markets. 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 and construction
vehicles; and (2) aftermarket sales, in which products are sold as replacements in varying quantities to a wide range of original
equipment service organizations, wholesalers, retailers and installers. In the OEM market, suppliers are generally divided into tiers
— “Tier 1” suppliers that provide products directly to OEMs, and “Tier 2” and “Tier 3” suppliers that sell products principally to
other suppliers for integration into those suppliers’ own product offerings. We are generally a Tier I supplier.
Our largest end market, the North American commercial truck industry, is supplied by medium- and heavy-duty commercial
vehicle suppliers, as well as automotive suppliers. The commercial vehicle supplier industry is fragmented and comprised of several
large companies and many smaller companies. In addition, the commercial vehicle supplier industry is characterized by relatively
low production volumes and can have considerable barriers to entry, including the following: (1) specific technical and
manufacturing requirements, (2) high transition costs to shift production to new suppliers, (3) just-in-time delivery requirements
and (4) strong brand name recognition. Foreign competition is growing with the globalization of the world economy.
Although OEM demand for our products is directly correlated with new vehicle production, suppliers like us can grow by
increasing sales through the cross selling and bundling of products, further penetrating existing customers’ businesses, gaining
new customers, expanding into new geographic markets, developing new content in our products to meet changing customer needs
and by increasing aftermarket sales. We believe that companies with a global presence, advanced technology, engineering and
manufacturing and support capabilities, such as our company, are well positioned to take advantage of these opportunities.
North American Commercial Truck Market. Purchasers of commercial trucks include fleet operators, owner operators,
governmental agencies and 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
Classes 5 through 7 vehicles are trucks with gross vehicle weight from 16,001 lbs. to 33,000 lbs. The following table shows
production levels of commercial vehicles used for local and long-haul commercial trucking from 2011 through 2015 in North
America:
Class 8 heavy trucks
Class 5-7 light and medium-duty trucks
Source: ACT N.A. (January 2016).
2011
255
167
2012
279
189
2013
(Thousands of units)
246
201
2014
297
226
2015
323
237
4
The following describes the major markets within the commercial vehicle market in which the GTB Segment competes:
Class 8 Truck Market. The global Class 8 ("Class 8" or "heavy-duty") truck manufacturing market is concentrated in
three primary regions: North America, Europe and Asia-Pacific. 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
to meet the region-specific demands of end-users and (3) the ability to meet just-in-time delivery requirements. According to ACT
Research, four companies represented approximately 99% of North American Class 8 truck production in 2015. The percentages
of Class 8 production represented by Daimler, PACCAR, A.B. Volvo, and Navistar were approximately 40%, 27%, 20%, and 12%,
respectively, in 2015. We supply products to all of these OEMs.
New Class 8 truck commercial vehicle demand has historically been cyclical and is particularly sensitive to economic factors
that generate a significant portion of the freight tonnage hauled by commercial vehicles.
The following table illustrates North American Class 8 truck build for the years 2013 to 2020:
“E” — Estimated
Source: ACT (January 2016).
Class 5-7 Truck Market. North American Class 5-7 ("Class 5-7" or "medium-duty") includes recreational vehicles, buses
and medium-duty trucks. We primarily participate in the Class 6 and 7 medium-duty truck market. The medium-duty market is
influenced by overall economic conditions but has historically been less cyclical than the North American Class 8 market, with
highs and lows generally not as pronounced as the Class 8 market. As the North American truck fleet companies move to a
distribution center model, requiring less long-haul freight vehicles, the demand for medium-duty trucks may increase.
The following table illustrates the North American Class 5-7 truck build for the years 2013 through 2020:
“E” — Estimated
Source: ACT (January 2016).
5
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 conditions and
consumer spending. Since heavy-duty truck OEMs supply the fleet operators, their production levels generally reflect the demand
for freight and the fleet operators' access to capital.
Truck Replacement Cycle and Fleet Aging. The average age of the U.S. Class 8 truck population is approximately 10.6 years
in 2015. 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. As truck fleets age, maintenance costs typically
increase. Freight companies evaluate the economics between repair and replacement as well as the potential to utilize more cost-
effective technology in vehicles. The chart below illustrates the approximate average age of the U.S. Class 8 truck population:
“E” — Estimated
Source: ACT (January 2016).
Commercial Truck Aftermarket. The GTB Segment sells aftermarket products primarily in North America. 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, the content and value per vehicle, vehicle usage and the average useful life of vehicle parts. Aftermarket sales tend to be at
a higher margin. The recurring nature of aftermarket revenue can be expected to provide some insulation to the overall cyclical
nature of the industry as it tends to provide a more stable stream of revenues. Brand equity and the extent of a company’s distribution
network also contribute to the level of aftermarket sales. We believe CVG has a widely recognized brand portfolio and participates
in most retail sales channels including Original Equipment Dealer networks and independent distributors.
GLOBAL CONSTRUCTION AND AGRICULTURE SEGMENT OVERVIEW
Global Construction and Agriculture Segment Products
Set forth below is a brief description of our products manufactured in the GCA Segment and their applications:
Electronic Wire Harnesses and Panel Assemblies. We produce a wide range of electronic wire harnesses and electrical
distribution systems and related assemblies. 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 electric current carrying devices used to provide electrical interconnections for gauges, lights, control functions, power
circuits, powertrain and transmission sensors, emissions systems and other electronic applications on commercial vehicles. Our
wire harnesses are highly customized to fit specific end-user requirements. We provide our wire harnesses for a variety of commercial
and other vehicles.
Panel Assemblies. We assemble integrated components such as panel assemblies and cabinets that are installed in a vehicle
or unit of equipment and may be integrated with our wire harness assemblies. These components provide the user control over
multiple operational functions and features.
Seats and Seating Systems. We design, engineer and produce Seats predominately for the construction, agriculture and
military markets. For the most part, our Seats are fully-assembled and ready for installation when they are delivered to the OEM.
We offer a wide range of Seats that include mechanical and air suspension seats and static seats, as well as some seat frames. As
a result of our product design and product technology, we believe we are a leader in designing seats with convenience and enhanced
safety features. Our Seats are designed to achieve a high level of operator comfort by adding a range of manual and power features
6
such as lumbar support, cushion and back bolsters and leg and thigh support. Our Seats are built to meet customer requirements
in low volumes and produced in numerous feature combinations to form a full-range product line with a wide level of price points.
We also manufacture seats, parts and components for the aftermarket.
Office Seating. We manufacture office seating products. Our office chair was developed as a result of our experience
supplying seats for the heavy truck, agricultural and construction industries and is fully adjustable to achieve a high comfort level.
Our office chairs are designed to suit many different office environments including heavy usage environments, such as emergency
services, call centers, reception areas, studios and general office environments.
Wipers Systems. We design, engineer and produce a variety of wipers used in commercial vehicles. We offer application-
specific windshield wiper systems and individual windshield wiper components.
Global Construction and Agriculture Segment Raw Materials and Suppliers
A description of the principal raw materials we utilize in GCA Segment’s principal product categories is set forth below:
• Electronic Wire Harnesses and Panel Assemblies. The principal raw materials used to manufacture our
electronic wire harnesses are wire and cable, connectors, terminals, switches, relays and various covering
techniques involving braided yarn, braided copper, slit and non-slit conduit and molded foam. These raw materials
are obtained from multiple suppliers and are generally readily available.
Seats and Seating Systems. The principal raw materials used in our seating systems include steel, die-cast
aluminum, resin-based products and foam products and are generally readily available and obtained from multiple
suppliers under various supply agreements. Leather, vinyl, fabric and certain components are also readily
available to be purchased from multiple suppliers under supply agreements.
•
• Wiper Systems. The principal raw materials used to manufacture our wipers are steel, stainless steel and rubber,
which are generally readily available and obtained from multiple suppliers. We also purchase sub-assembled
products such as motors for our wiper systems.
Global Construction and Agriculture Segment’s Customers and Marketing
The following is a summary of the GCA Segment’s significant revenues (figures are shown as a percentage of total GCA
Segment revenue) by end market based for each of the three years ended December 31:
Construction
Aftermarket and OE Service
Automotive
Truck
Agriculture
Military
Other
Total
2015
52%
16
14
5
3
3
7
100%
2014
54%
16
14
5
2
3
6
100%
2013
52%
17
15
5
1
5
5
100%
In 2015, the classification of some sales by end market was changed for certain customers. These classification changes
were applied to prior periods in the table above to conform to current year presentation.
Our principal customers include Caterpillar and John Deere, constituting a combined total of 31%, 37% and 30% of GCA
Segment revenue for the years ended December 31, 2015, 2014 and 2013, respectively. We believe we are a successful long-term
supplier because of our comprehensive product offerings and product innovation services.
Our European and Asia-Pacific operations collectively contributed approximately 57%, 58% and 63% of our revenues for
the years ended December 31, 2015, 2014 and 2013, respectively.
Global Construction and Agriculture Industries
Commercial Construction Vehicle Market. New vehicle demand in the global construction equipment market generally
follows certain economic conditions including GDP, infrastructure investment, housing starts, business investment, oil and energy
investment and industrial production around the world. Within the construction market, there are two classes of construction
equipment markets: the medium and heavy construction equipment market (weighing over 12 metric tons) and the light construction
7
equipment market (weighing below 12 metric tons). Our construction equipment products are primarily used in the medium and
heavy construction equipment markets, with a growing emphasis on light and utility machines. The platforms that we generally
participate in include: cranes, pavers, planers & profilers, dozers, loaders, graders, haulers, tractors, excavators, backhoes, material
handling and compactors. Demand in the medium and heavy construction equipment market is typically related to the level of
larger-scale infrastructure development projects such as highways, dams, harbors, hospitals, airports and industrial development
as well as activity in the mining, forestry and other raw material based industries. The global production units in the construction
market for the primary products we market such as pavers, dozers, excavators, graders, skid steers, compactors, material handling
and loaders was soft in 2015 and we believe 2016 will have a bias toward continuing softness.
Purchasers of medium and heavy construction equipment include construction companies, municipalities, local governments,
rental fleet owners, quarrying and mining companies and forestry related industries. Purchasers of light construction equipment
include contractors, rental fleet owners, landscapers, logistics companies and farmers. In the medium and heavy construction
equipment market, we primarily supply OEMs with our wire harness and seating products.
The U.S. market experienced some slow down in the construction industry in 2015 and we expect a bias toward continued
softening in 2016. We expect the market for our products in Europe to grow moderately in 2016. Although we expect a continued
contraction in Asia-Pacific in the short term, we believe Asia-Pacific continues to be a key market in our organic growth strategy
and that the Asia-Pacific equipment markets will provide us with market penetration and growth opportunities in the long term.
Agricultural Equipment Market. We market most of our products for small, medium and large agricultural equipment
across a spectrum of machines including tractors, sprayers, bailers, farm telehandler equipment and harvesters. Sales and production
of these vehicles can be influenced by rising or falling farm commodity prices, land values, profitability, and other factors such
as increased mechanization in emerging economies and new uses for crop materials such as biofuels and other factors. In the
medium to longer term, a combination of factors create the need for more productive agricultural equipment, such as: (1) population
growth, (2) an evolving sophistication of dietary habits and (3) constraints on arable land and other macroeconomic and
demographic factors.
Military Equipment Market. We supply products for heavy- and medium-payload tactical trucks that are used by various
military customers. Military equipment production is particularly sensitive to political and governmental budgetary considerations.
OUR CONSOLIDATED OPERATIONS
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. A summary of our primary competitors is set forth below:
Seats and Seating Systems. We believe we have a strong market position supplying Seats to the North American MD/HD
Truck market. Our primary competitors in the North American commercial vehicle market include Sears Manufacturing Company,
Isringhausen, Grammer AG and Seats, Inc. Our primary competitors in the European commercial vehicle market include Grammer
AG and Isringhausen; and in Asia-Pacific include Isrihuatai and Tiancheng (in China); and Harita and Pinnacle (in India).
Trim Systems and Components. We believe we have a strong position supplying Trim products to the North American MD/
HD Truck market. We face competition from a number of different competitors with respect to each of our trim system products
and components. Our primary competitors are ConMet, International Automotive Components, Superior, Blachford Ltd. and
Magna.
Cab Structures, Sleeper Boxes, Body Panels and Structural Components. We are a supplier of cab structural components,
cab structures, sleeper boxes and body panels to the North American MD/HD Truck market. Our primary competitors in this
category are Magna, International Equipment Solutions (formerly Crenlo), Worthington Industries (formerly Angus Palm),
McLaughlin Body Company and Defiance Metal Products.
Mirrors, Wipers and Controls. We are a supplier of wiper systems and mirrors to the North American MD/HD Truck
market. We also sell wiper systems to the construction and agriculture market in Europe. We face competition from various
competitors in this category. Our principal competitors for mirrors are Hadley, Retrac, and Lang-Mekra and our principal competitors
for wiper systems are Doga, Wexco, Trico and Valeo.
Electronic Wire Harnesses and Panel Assemblies. We supply a wide range of electronic wire harnesses and panel assemblies
used in various commercial and other vehicles. Our primary competitors for electronic wire harnesses include large diversified
suppliers such as Delphi Automotive PLC, Leoni, Nexans SA, PKC Group, Stoneridge, St. Clair and Fargo Assembly as well as
many smaller companies.
8
Manufacturing Processes
A description of the manufacturing processes we utilize for each of our principal product categories is set forth below:
•
•
Seats and Seating Systems. Our Seats utilize a variety of manufacturing techniques whereby foam and various
other components along with fabric, vinyl or leather are affixed to an underlying seat frame. We also manufacture
and assemble seat frames.
Trim Systems and Components. Our Trim capabilities include injection molding, low-pressure injection molding,
urethane molding and foaming processes, compression molding, heavy-gauge thermoforming and vacuum
forming as well as various cutting, sewing, trimming and finishing methods.
• 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 utilize robotic and manual welding techniques in the
assembly of these products. In addition, we have facilities with large capacity, fully automated E-coat paint
priming systems thereby 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. We also have large press lines which provide us with manufacturing flexibility for both aluminum and
steel stampings delivered just-in-time to our cab assembly plants.
• 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 assembled utilizing semi-
automatic work cells, electronically tested and then packaged.
• 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, manual and automated, are
designed to produce a wide range of wire harnesses and panel assemblies in short time frames. Our wire harnesses
and panel assemblies are electronically and hand tested.
We have a broad array of processes to enable us to meet our OEM customers’ styling and cost requirements. The vehicle
cab is the most significant and appealing aspect to the operator of the vehicle; each commercial vehicle OEM therefore has unique
requirements as to feel, appearance and features.
The end markets for our products can be 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 most of our
production facilities. Manufacturing cells are clusters of individual manufacturing operations and work stations. 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 better 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
our Seats are unique, our manufacturing facilities have significant complexity which we manage by building in sequence. We build
our Seats as orders are received, and the Seats are delivered to our customer’s rack in the sequence in which 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. 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 requirements for faster
deliveries and to minimize our need to carry significant inventory levels. We utilize 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.
Within our cyclical industries, we strive to maintain a certain portion of temporary labor to improve our ability to flex our
costs and throughput as required by fluctuating customer demand. We engage our core employees to assist in making our processes
efficient.
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Seasonality
OEMs close their production facilities, around holidays or when demand drops, reducing work days. Our cost structure, to
the extent it is variable, provides us with some flexibility during these periods.
Our Supply Agreements
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. Steel,
aluminum, petroleum-based products, copper, resin, foam, fabrics, wire and wire components comprise the most significant portion
of our raw material costs. We typically purchase steel, copper and petroleum-based products at market prices that are fixed over
varying periods of time. Due to the volatility in pricing over the last several years, we use methods such as market index pricing
and competitive bidding to assist in reducing our overall cost. We strive to align our customer pricing and material costs to minimize
the impact of steel, copper and petrochemical price fluctuations. Certain component purchases and suppliers are directed by our
customers, so we generally will pass through directly to the customer any cost changes from these components. We do not believe
we are dependent on a single supplier or limited group of suppliers for our raw materials.
Our Customer Contracts
Our OEM customers generally source business to us pursuant to written contracts, purchase orders or other firm commitments
(“Commercial Arrangements”) 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 Commercial Arrangements provide that the customer can terminate them if we
do not meet specified quality, delivery and cost requirements. Although these Commercial Arrangements may be terminated at
any time by our customers (but not by us), such terminations have historically been minimal and have not had a material impact
on our results of operations. Because we produce products for a broad cross section of vehicle models, we are not overly reliant
on any one vehicle model.
Our contracts with our OEM customers may provide for an annual prospective productivity cost reduction. These productivity
cost reductions are generally 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.
Our sales and marketing efforts are designed to create customer awareness of our engineering, design and manufacturing
capabilities. Our sales and marketing staff work 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 have sales and
marketing personnel located in every major region in which we operate. From time to time, we participate in industry trade shows
and advertise in industry publications.
Our principal customers for our aftermarket sales include OEM dealers and independent wholesale or retail distributors. Our
sales and marketing efforts are focused on support of these two distribution chains, as well as participation in industry trade shows
and direct contact with major fleets.
Competitive Strengths
Our competitive strengths include, but are not limited to, the following:
Market Positions and Brands. We believe we have a strong market position supplying Seats and Trim products to the North
American MD/HD Truck market. Our strong position in the North American MD/HD Truck market leads us to believe we have
processes in place to design, manufacture and introduce products that meet customers’ expectations in that market. We also believe
we are competitive as a global supplier of construction vehicle Seats. Our major product brands include KAB Seating™, National
Seating™, Bostrom Seating®, Sprague Devices®, RoadWatch™, Stratos™, and FinishTEK™.
Comprehensive Cab Product and Cab System Solutions. We manufacture a broad base of products utilized in the interior
and the exterior of a commercial vehicle cab. We believe the breadth of our product offerings provides us with a potential opportunity
for further customer penetration through cross-selling initiatives and by bundling our products to provide complete system solutions.
End-User Focused Product Innovation. We believe that commercial vehicle OEMs focus on interior and exterior product
design features that better serve the vehicle operator and therefore seek suppliers that can provide product innovation. Accordingly,
we have engineering, and research and development capabilities to assist OEMs in meeting those needs. We believe this helps us
secure content on new as well as current platforms and models.
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Flexible Manufacturing Capabilities. Because commercial vehicle OEMs permit their customers to select from an extensive
menu of cab options, our end users frequently request modified products in low volumes within a limited time frame. We can
leverage our flexible manufacturing capabilities to provide low volume, customized products to meet styling, cost and just-in-time
delivery requirements. We manufacture or assemble our products at facilities in North America, Europe and in the Asia-Pacific
region.
Global Capabilities. Because many of our customers manufacture and sell their products on a global basis, we have sales,
engineering, manufacturing and assembly capabilities in North America, Europe and the Asia-Pacific region.
Relationships with Leading Customers and Major North American Fleets. Because of our comprehensive product offerings,
brand names and product features, we are a global supplier to many of the leading MD/HD Truck, construction and specialty
commercial vehicle manufacturers such as PACCAR, Caterpillar, Volvo/Mack, Navistar, Daimler Trucks, John Deere, Oshkosh
Corporation, Komatsu and
(part of the Volkswagen Group). In addition, we maintain relationships with the major MD/HD
Truck fleet organizations that are end-users of our products such as Schneider National, Werner, Walmart, FedEx and JB Hunt.
Barriers to Entry. Barriers to entry include investment, specific engineering requirements, transition costs for OEMs to
shift production to new suppliers, just-in-time delivery requirements and brand name recognition.
Management Team. We believe that our management team has substantial knowledge and expertise in critical operational
areas and has a demonstrated ability to reduce costs, improve processes and expand revenue through product, market, geography
and customer diversification.
Research and Development
Our research and development capabilities offer quality and technologically advanced products to our customers at
competitive prices. We offer industrial engineering, product design, specialized simulation and testing and evaluation services that
are necessary in today’s global markets. Our capabilities in acoustics, thermal efficiency, benchmarking, multi-axis durability,
biomechanics, comfort, prototyping and process prove-out allow us to provide complete integrated solutions for the end-user.
We engage in global engineering, and research and development activities that improve the reliability, performance and cost-
effectiveness of our existing products and support the design and development and testing of new products for existing and new
applications. We are developing a global engineering support center at our India facilities to provide a cost-effective global
engineering resource to all of our seat facilities.
Generally, we work with our customers’ engineering and development teams at the beginning of the concept design process
for new components and assemblies and systems, or the re-engineering process for existing components and assemblies, in order
to leverage production efficiency and quality. Our customers are continuously searching for advanced products while maintaining
cost, quality and performance deliverables.
Product development cycles are compressing and we believe we are staffed with experienced engineers and have equipment
and technology to support early design involvement that result in products that timely meet or exceed the customer’s design and
performance requirements and are more efficient to manufacture. Our ability to support our products and customers with extensive
involvement enhances our position for bidding on such business. We work aggressively to ensure that our quality and delivery
metrics distinguish us from our competitors.
Research and development costs for the years ended December 31, 2015, 2014 and 2013 totaled $7.4 million, $6.3 million
and $6.0 million, respectively.
Intellectual Property
Our principal intellectual property consists of product and process technology, a limited number of U.S. 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. As we diversify and globalize our operations,
we may encounter localized laws and practices that are not as stringent or enforceable as those in developed markets and thus risk
intellectual property infringement.
Our major brands include CVG™, Sprague Devices®, Moto Mirror®, RoadWatch®, KAB Seating™, National Seating™,
Bostrom Seating®, Stratos™ and FinishTEK™. We believe that our brands are valuable, but that our business is not dependent on
any one brand. We own U.S. federal trademark registrations for several of our products.
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Backlog
Our customers may place annual blanket purchase orders that 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
30 to 90 days prior to required delivery and may be canceled at any time within agreed terms. 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.
Employees
As of December 31, 2015, we had approximately 6,700 permanent employees, of whom approximately 18% were salaried
and the remainder hourly. As of December 31, 2015, approximately 60% of the employees in our North American operations were
unionized, with the majority of union represented personnel based in Mexico. On September 23, 2015, employees in our Piedmont,
Alabama facility voted to be represented by the United Auto Workers union. We continue to actively negotiate with union
representatives but no collective bargaining agreement has been reached and a contract has not yet been ratified. Approximately
57% of our employees of our European and Asia-Pacific operations were represented by shop steward committees. We did not
experience any material strikes, lockouts or work stoppages during 2015 and consider our relationship with our employees to be
satisfactory. On an as-needed basis during peak periods, contract and temporary employees are utilized. During periods of weak
demand, we respond to reduced volumes through flexible scheduling, furloughs and reductions in force as necessary.
Environmental Matters
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 discharges, and 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 environmental 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. 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 certified as or are in the process of being certified as ISO 9001, 14000 or 14001 compliant (the
international environmental management standard) or are developing similar environmental management systems. Although we
have made and will continue to make expenditures to implement such environmental programs and comply with environmental
requirements, we do not expect to make material expenditures for environmental controls in 2016. The environmental laws to
which we are subject have become more stringent over time, 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, or if contamination is discovered at any of our current or former properties, we may be held liable for the cost 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.
Government Regulations
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 ("EPA"),
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, in 2011, the EPA and National Highway Traffic Safety Administration ("NHTSA") adopted a program to reduce
greenhouse gas emissions and improve the fuel efficiency of medium-and heavy-duty vehicles. These standards phase in with
increasing stringency in each model year from 2014 to 2018. Any changes in EPA or CARB regulations can have an impact on
production volumes for new vehicles and, as a result, indirectly impact our operations. To the extent that current or future
12
governmental regulation has a negative impact on the demand for commercial vehicles, our business, financial condition or results
of operations could be adversely affected.
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.
EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth certain information with respect to our executive officers as of March 8, 2016:
Name
Patrick E. Miller
C. Timothy Trenary
Joseph Saoud
Age
48
59
45
Principal Position(s)
President, Chief Executive Officer, Director
Executive Vice President and Chief Financial Officer
President of Global Construction, Agriculture and Military
The following biographies describe the business experience of our executive officers:
Patrick E. Miller has served as President and Chief Executive Officer since November 2015 and as a Director since
November 2015. Mr. Miller, who most recently was President of the Company’s Global Truck & Bus Segment, has been with the
Company since 2005. During this time, he served in the capacity of Senior Vice President & General Manager of Aftermarket;
Senior Vice President of Global Purchasing; Vice President of Global Sales; Vice President & General Manager of North American
Truck and Vice President & General Manager of Structures. Prior to joining the Company, Mr. Miller held engineering, sales, and
operational leadership positions with Hayes Lemmerz International, Alcoa, Inc. and ArvinMeritor. He holds a Bachelor of Science
in Industrial Engineering from Purdue University and a Masters of Business Administration from the Harvard University Graduate
School of Business.
C. Timothy Trenary has served as Executive Vice President and Chief Financial Officer since October 2013. Mr. Trenary
served as Executive Vice President and Chief Financial Officer of ProBuild Holdings LLC, a privately held North American
supplier of building materials, from 2010 to 2013. Prior to that, Mr. Trenary served as Senior Vice President & Chief Financial
Officer of EMCON Technologies Holdings Limited, a privately held global automotive parts supplier, from 2008 to 2010; and as
Vice President and Chief Financial Officer of DURA Automotive Systems, Inc., a publicly held global automotive parts supplier,
from 2007 to 2008.
Joseph Saoud has served as President of Global Construction, Agriculture & Military Markets since July 1, 2015. Most
recently, Mr. Saoud, served as President of the Filtration Business Unit of Cummins Inc. Mr. Saoud has approximately 20 years
of experience with Cummins Inc. holding positions of increasing responsibility. Mr. Saoud earned a BSBA from Southern
Mississippi University, and an MBA from the Owen Graduate School of Management at Vanderbilt University.
Item 1A.
Risk Factors
You should carefully consider the risks described below before making an investment decision. These are not the only risks
we face.
If any of these 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.
Our results of operations could be significantly adversely affected by downturns in the U.S. and global economy which are
naturally accompanied by related declines in freight tonnage hauled and in infrastructure development and other
construction projects.
Our results of operations are directly impacted by changes in the U.S. and global economic conditions which are accompanied
by related declines in freight tonnage hauled in infrastructure development and other construction projects because, among other
things:
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• Demand for our MD/HD truck products is generally dependent on the number of new MD/HD truck commercial
vehicles manufactured in North America. Historically, the demand for MD/HD truck commercial vehicles has declined
during periods of weakness in the North American economy.
• Demand for our construction products is also dependent on the overall vehicle demand for new commercial vehicles
in the global construction equipment market.
• Demand in the medium and heavy construction vehicle market, which is the market in which our GCA products are
primarily used, is typically related to the level of larger-scale infrastructure development projects.
• Demand in the light construction equipment market is typically related to certain economic conditions such as the
level of housing construction and other smaller-scale developments and projects. If we experience periods of low
demand for our products in the future, it could have a negative impact on our revenues, operating results and financial
position.
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 of the economy, 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.
Historically, general weakness in the North American economy and corresponding decline in the need for commercial vehicles
to, among other factors, haul freight tonnage in North America has contributed to a downturn in the MD/HD Truck market. These
downturns historically have had a material adverse effect on our business. If unit production of MD/HD Truck declines in the
future it may materially adversely affect our business and results of operations.
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 common stock.
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.
Our operating results may fluctuate as a result of these and other events and factors:
•
•
•
•
the size, timing, volume and execution of significant orders and shipments;
changes in the terms of our sales contracts;
the timing of new product announcements by us and our competitors;
changes in our pricing policies or those of our competitors;
• market acceptance of new and enhanced products;
•
•
•
•
•
•
•
•
•
•
announcement of technological innovations or new products by us or our competitors;
the length of our sales cycles;
conditions in the commercial vehicle industry;
changes in our operating expenses;
personnel changes;
new business acquisitions;
uncertainty in Ukraine, the Middle East or any other geographic region;
cyber-attacks to our systems;
union actions; and
seasonal factors.
We base our operating expense budgets primarily on expected revenue trends. Certain 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 or year.
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 and may result in changes in analysts’ estimates. In such events, the trading price of our common
stock may be adversely affected.
14
In the past, companies that have experienced volatility in the market price of their stock have been the subject of securities
class action litigation. If we become involved in securities class action litigation in the future, it could result in substantial costs
and diversion of management attention and resources, thus harming our business.
Our common stock currently has a low trading volume and, as a result, any sale of a significant number of shares may
depress the trading price of our stock; shareholders may be unable to sell their shares above the purchase price.
Our common stock is traded on the NASDAQ Global Select Market under the symbol “CVGI.” The trading volume of
our common stock is limited as compared to common stock of a seasoned issuer which has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect on share prices. Because of the limited trading
volume, holders of our securities may not be able to sell quickly any significant number of such shares, and any attempted sale of
a large number of our shares may have a material adverse impact on the price of our common stock. Additionally, because of the
limited number of shares being traded, the price per share is subject to volatility and may continue to be subject to rapid price
swings in the future that may result in shareholders’ inability to sell their common stock at or above purchase price.
We could incur additional restructuring and impairment charges as we continue to evaluate our portfolio of assets and
identify opportunities to restructure our business in an effort to optimize our cost structure.
As we continue to evaluate our manufacturing footprint in order to improve our cost structure and remove excess,
underperforming, or assets that no longer fit our goals, we could incur restructuring charges in order to close facilities, such as,
lease termination charges, severance charges and impairment charges of leasehold improvements and/or machinery and equipment.
Also, if we decide to close or consolidate facilities, we may face execution risks which could adversely affect our ability to
serve our customers and could lead to loss of business adversely affecting our business, results of operations and financial condition.
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 diminishing the expected
growth in the commercial vehicle markets we supply, 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.
We are subject to certain risks associated with our foreign operations.
We have operations in the United Kingdom, Czech Republic, Ukraine, China, Australia, Mexico and India, which accounted
in the aggregate for approximately 23%, 26% and 25% of our total revenues for the years ended December 31, 2015, 2014 and
2013, respectively. There are certain risks inherent in our international business activities including, but not limited to:
•
•
the difficulty of enforcing agreements and collecting receivables through certain foreign legal systems;
foreign customers, who may have longer payment cycles than customers in the U.S.;
• material foreign currency exchange rate fluctuations affecting our ability to match revenue received with costs paid
in the same currency;
•
•
•
•
•
tax rates in certain foreign countries, which may exceed those in the U.S., withholding requirements or the imposition
of tariffs, exchange controls or other restrictions, including restrictions on repatriation, on foreign earnings;
intellectual property protection difficulties;
general economic and political conditions, along with major differences in business culture and practices, including
the challenges of dealing with business practices that may impact the company’s compliance efforts, in countries
where we operate;
the difficulties associated with managing a large organization spread throughout various countries; and
complications in complying with a variety of laws and regulations related to doing business with and in foreign
countries, some of which may conflict with U.S. law or may be vague or difficult to comply with.
Additionally, our international business activities are also subject to risks arising from violations of U.S. laws such as the
U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions, and various export control and trade embargo
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laws and regulations, including those which may require licenses or other authorizations for transactions relating to certain countries
and/or with certain individuals identified by the U.S. government. If we fail to comply with applicable laws and regulations, we
could suffer civil and criminal penalties that could adversely affect our results of operations and financial condition.
As we continue to expand our business on a global basis, we are increasingly exposed to these risks. Our success will be
dependent, in part, on our ability to anticipate and effectively manage these and other risks associated with foreign operations.
These and other factors may have a material adverse effect on our international operations, business, financial condition and results
of operations.
We have invested substantial resources in markets where we expect growth and we may be unable to timely alter our
strategies should such expectations not be realized.
Our future growth is dependent in part on our making the right investments at the right time to support product development
and manufacturing capacity in areas where we can support our customer base. We have identified the Asia-Pacific region, specifically
China and India, as key markets likely to experience substantial growth in our market share, and accordingly have made and expect
to continue to make substantial investments, both directly and through participation in various partnerships and joint ventures, in
numerous manufacturing operations, technical centers and other infrastructure to support anticipated growth in those regions. If
we are unable to maintain, deepen existing and develop additional customer relationships in these regions, we may not only fail
to realize expected rates of return on our existing investments, but we may incur losses on such investments and be unable to
timely redeploy the invested capital to take advantage of other markets, potentially resulting in lost market share to our competitors.
Our results will also suffer if these regions do not grow as quickly as we anticipate.
We may be unable to complete strategic acquisitions or we may encounter unforeseen difficulties in integrating acquisitions.
We may pursue acquisition targets that will allow us to continue to expand into new geographic markets, add new customers,
provide new products, 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, acquisition of businesses may require additional debt financing, resulting in additional
leverage. The covenants relating to our indenture and debt instruments may further limit our ability to complete acquisitions. There
can be no assurance we will find attractive acquisition candidates or successfully integrate acquired businesses into our existing
business. If the expected synergies from acquisitions do not materialize or we fail to successfully integrate such new businesses
into our existing businesses, our results of operations could also be materially adversely affected.
The agreement governing our revolving credit facility and the indenture governing our debt instruments contain covenants
that may restrict our current and future operations, particularly our ability to respond to changes in our business or to
take certain actions. If we are unable to comply with these covenants, our business, results of operations and liquidity could
be materially and adversely affected.
Our revolving credit facility requires us to maintain certain financial ratios. Our revolving credit facility and our other debt
instruments require us to comply with various operational and other covenants. If there were an event of default under our debt
instruments that was not cured or waived, the holders of the defaulted debt could cause all amounts outstanding with respect to
that debt to be due and payable immediately. We cannot assure you that our assets or cash flow would be sufficient to fully repay
borrowings under our outstanding debt instruments, either upon maturity or if accelerated, upon an event of default, or that we
would be able to refinance or restructure the payments on those debt instruments on acceptable terms.
If we do not comply with the financial and other covenants relating to our revolving credit facility and we are unable to
obtain necessary waivers or amendments, we would be precluded from borrowing under the facility, which could have a material
adverse effect on our business, financial condition and liquidity. If we are unable to borrow under the facility, we will need to meet
our capital requirements using other sources but, alternative sources of liquidity may not be available on acceptable terms. In
addition, if we do not comply with the financial and other covenants under the revolving credit facility, the lender could declare
an event of default, and our indebtedness under the facility could be declared immediately due and payable, resulting in an event
of default under our debt instruments. The lender under our revolving credit facility would also have the right in these circumstances
to terminate any commitments it has to provide further borrowings. Any of these events would have a material adverse effect on
our business, financial condition and liquidity.
In addition, the agreement governing the revolving credit facility contains covenants that, among other things, restrict our
ability to:
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incur liens;
incur or assume additional debt or guarantees or issue preferred stock;
pay dividends or repurchases with respect to capital stock;
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prepay, or make redemptions and repurchases of, subordinated debt;
• make loans and investments;
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engage in mergers, acquisitions, asset sales, sale/leaseback transactions and transactions with affiliates;
place restrictions on the ability of subsidiaries to pay dividends or make other payments to the issuer;
change the business conducted by us or our subsidiaries; and
amend the terms of subordinated debt.
Our substantial amount of indebtedness may adversely affect our cash flow and our ability to operate our business, remain
in compliance with debt covenants and make payments on our indebtedness.
The aggregate amount of our outstanding indebtedness was $235.0 million as of December 31, 2015. Our indebtedness,
combined with our lease and other financial obligations and contractual commitments could have other important consequences
to our stockholders, including:
• making it more difficult for us to satisfy our obligations with respect to our indebtedness, including the revolving
credit facility and our other debt instruments, 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 revolving
credit facility and the indenture governing the debt instruments;
•
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;
• making us more vulnerable to adverse changes in general economic, industry and competitive conditions;
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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;
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we
operate;
placing us at a competitive disadvantage compared to our competitors that have less debt; and
limiting our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service
requirements, or execution of our business strategy or other purposes.
Any of these factors could materially adversely affect our business, financial condition and results of operations.
Economic conditions and disruptions in the credit and financial markets could have an adverse effect on our business,
financial condition and results of operations.
Recently, the financial markets experienced a period of unprecedented turmoil, including the bankruptcy, restructuring or
sale of certain financial institutions and the intervention of the U.S. federal government. Disruptions in the credit and financial
markets may have a material adverse effect on our liquidity and financial condition if our ability to borrow money to finance our
operations were to be impaired. A crisis in the financial markets may also have a material adverse impact on the availability and
cost of credit in the future. Our ability to pay our indebtedness will depend on our future performance, which will be affected by,
among other things, prevailing economic conditions. Tightening of credit in financial markets may also adversely affect the ability
of our customers to obtain financing for significant truck orders and the ability of our suppliers to provide us with sufficient raw
materials for our products, either of which could adversely affect our business and results of operations.
Our inability to compete effectively in the highly competitive commercial vehicle component supply industry could result
in lower prices for our products, loss of market share and reduced gross margins, which could have an adverse effect on
our revenues and operating results.
The commercial vehicle component supply industry is highly competitive. Some of our competitors are companies that are
larger and have greater financial and other resources than we do. In some cases, we compete with divisions of our OEM customers.
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
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requirements. By doing so, they may enhance their ability to meet the needs of our customers or potential future customers more
competitively. These developments could limit our ability to obtain revenues from new customers or 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.
Our inability to successfully achieve 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 in our existing operations and intend to apply this strategy to those operations acquired through acquisitions. We may
be unsuccessful in achieving these objectives which could adversely affect our operating results and financial condition.
Additionally, aspects of the data upon which the company’s business strategy is based may be incomplete or unreliable,
which could lead to errors in the strategy, which in turn could adversely affect the company’s performance. Also, not all business
strategy can be based on data, and to the extent that it is based on assumptions and judgments that are untested, then it could be
unsound and thereby lead to performance below expectations.
We may be unable to successfully introduce new product and, as a result, our businesses and financial position and results
of operations could be materially and adversely affected.
Product innovations have been and will continue to be a significant part of our business strategy. We believe it is important
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.
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,
which could have a material adverse effect on our business, operating results and financial condition.
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 of products to operate properly,
all of which could adversely affect our business, results of operations and growth potential. 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 seven 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 to 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 materially adversely affect our
results of operations.
Our customer base is concentrated and the loss of business from a major customer or the discontinuation of particular
commercial vehicle platforms could reduce our revenues.
Sales to A.B. Volvo, Daimler Truck, PACCAR and Caterpillar accounted for approximately 20%, 18%, 11% and 8%,
respectively, of our revenue in 2015, and our ten largest customers accounted for approximately 76% of our revenue in 2015. 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. 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.
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Our profitability could be adversely affected if the actual production volumes for our customers’ vehicles are significantly
lower than expected.
We incur costs and make capital expenditures based in part upon estimates of production volumes for our customers’ vehicles.
While we attempt to establish a price for 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 the supply requirements is our obligation for the entire production
life of the platform, with terms generally ranging from five to seven years, and we have somewhat limited 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. If customers representing a
significant amount of our revenues were to purchase materially lower volumes than expected, or if we are unable to keep our
commitment under the agreements, it would have a material adverse effect on our business, financial condition and results of
operations.
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. Generally,
our contracts with major OEM customers provide for an annual productivity cost reduction. Historically, we have been able to
generally mitigate these customer-imposed cost reductions requirements through product design changes, increased productivity
and similar programs with our suppliers. However, if we are unable to generate sufficient production cost savings in the future to
offset these cost 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.
We may fail to recuperate our investment in design and development costs incurred for some customers, which could result
in lower margins.
We generally do not have clauses in our customer agreements that guarantee that we will recoup the design and development
costs that we incurred to develop a product. In other cases, we share the design costs with the customer and thereby have some
risk that not all the costs will be covered if the project does not go forward or if it is not as profitable as expected.
Vertical integration by our customers could materially adversely affect our financial statements.
Demand for our products could be materially reduced if our customers significantly vertically integrate their operations.
Our business and results of operations could be adversely affected by vertical integration by our customers.
If we are unable to obtain raw materials at reasonable 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, petroleum-based products, copper,
resin, foam, fabrics, wire and wire components account for the most significant portion of our raw material costs. Although we
currently maintain alternative sources for most raw materials, our business is subject to the risk of price increases and periodic
delays in delivery. We may be assessed surcharges 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.
We could experience disruption in our supply or delivery chain, which could cause one or more of our customers to halt
or delay production.
We, as with other component manufactures in the commercial vehicle industry, sometimes ship products to the customers
throughout the world so they are delivered on a “just-in-time” basis in order to maintain low inventory levels. Our suppliers
(external suppliers as well as our own production sites) also sometimes use a similar method. This just-in-time method makes
the logistics supply chain in our industry very complex and very vulnerable to disruptions.
The potential loss of one of our suppliers or our own production sites could be caused by a myriad of potential problems,
such as closures of one of our own or one of our suppliers’ plants or critical manufacturing lines due to strikes, mechanical
breakdowns, electrical outages, fires, explosions, political upheaval, as well as logistical complications due to weather, volcanic
eruptions, earthquakes, flooding or other natural disasters, mechanical failures, delayed customs processing and more. Additionally,
as we expand in growth markets, the risk for such disruptions is heightened. The lack of even a small single subcomponent necessary
to manufacture one of our products, for whatever reason, could force us to cease production, possibly for a prolonged period.
Similarly, a potential quality issue could force us to halt deliveries while we validate the products. Even where products are ready
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to be shipped or have been shipped, delays may arise before they reach our customer. Our customers may halt or delay their
production for the same reason if one of their other suppliers fails to deliver necessary components. This may cause our customers
to suspend their orders or instruct us to suspend delivery of our products, which may adversely affect our financial performance.
When we cease timely deliveries, we have to absorb our own costs for identifying and solving the root cause problem as
well as expeditiously producing replacement components or products. Generally, we must also carry the costs associated with
“catching up,” such as overtime and premium freight.
Additionally, if we are the cause for a customer being forced to halt production the customer may seek to recoup all of its
losses and expenses from us. These losses and expenses could be very significant and may include consequential losses such as
lost profits. Thus, any supply-chain disruption, however small, could potentially cause the complete shutdown of an assembly line
of one of our customers, and any such shutdown could expose us to material claims of compensation. Where a customer halts
production because of another supplier failing to deliver on time, we may not be fully compensated, if at all, and therefore our
business and financial results could be materially adversely affected.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause
our business and reputation to suffer.
In the ordinary course of our business, we collect and store sensitive data, including intellectual property, financial
information, our proprietary business information and that of our customers, suppliers and business partners, and personally
identifiable information of our customers and employees, in our data centers and on our networks. The secure processing,
maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures,
our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error,
malfunction, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there
could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal
claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disrupt our
operations and the services we provide to customers, damage our reputation, and cause a loss of confidence in our products and
services, which could adversely affect our business and our results of operations.
Equipment failures, delays in deliveries or catastrophic loss at any of our facilities could lead to production or service
curtailments or shutdowns.
We manufacture or assemble our products at facilities in North America, Europe, Asia 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. 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. Our facilities are also subject
to the risk of catastrophic loss due to unanticipated events such as fires, explosions, violent weather conditions or acts of God. We
may also 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 and financial condition.
Volatility in the commercial vehicle market could result from manmade and natural disasters and other global business
disruptions.
Natural disasters and other global business disruptions may disrupt the commercial vehicle supply chain and materially
adversely affect global production levels in our industry. The impact from disasters resulting in wide-spread destruction may not
be immediately apparent. It is particularly difficult to assess the impact of catastrophic losses on our suppliers and end customers,
who themselves may not fully understand the impact of such events on their businesses. Accordingly, there is no assurance our
results of operations will not be materially affected as a result of the impact of future disasters.
We could be adversely affected if transitions in senior management are not successful.
Our operations depend to a large extent on the efforts of our senior management team. In 2015, the Company's President
and Chief Executive Officer resigned and the company separated other members of the senior management team. As a result, our
President of the Global Truck and Bus segment was promoted to President and Chief Executive Officer. Additionally, we realigned
our executive team to ensure we retain an efficient operating structure.
We seek to develop and retain an effective management team through the proper positioning of existing key employees and
the addition of new management personnel where necessary. Our results of operations could be adversely affected if transitions
in senior management are not successful or if we are unable to sustain an effective management team.
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If we are unable to recruit or retain skilled personnel, our business, operating results and financial condition could be
materially adversely affected.
Retaining labor with the right skills at competitive wages can be difficult in certain markets in which we are doing business,
particularly those locations that are seeing much inbound investment and have highly mobile workforces. Additionally, attracting
sufficiently well-educated and talented management, especially middle-management employees, in certain markets can be
challenging.
Our future success depends on our continuing ability to attract, train, integrate and retain highly skilled personnel, as
competition for these employees is intense. We may not be able to retain our current skilled personnel or attract, train, integrate
or retain other highly skilled personnel in the future. If we lose the services of our skilled workforce, 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.
We may be adversely impacted by labor strikes, work stoppages and other matters.
The hourly workforces at our Piedmont, Alabama and Shadyside, Ohio facilities along with Mexico operations are unionized.
On September 23, 2015 employees in our Piedmont, Alabama facility voted to be represented by the United Auto Workers union.
We continue to actively negotiate with union representatives but no collective bargaining agreement has been reached and a contract
has not yet been ratified. The unionized employees at our North American facilities, with the majority being represented in Mexico,
represent approximately 60% of our employees as of December 31, 2015. We have experienced limited unionization efforts at
certain of our other North American facilities from time to time. In addition, approximately 57% of our employees of our European,
Asian and Australian operations were represented by a shop steward committee, which may limit our flexibility in our relationship
with these employees. We may 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.
Provisions in our charter documents and Delaware law could discourage potential acquisition proposals, could delay, deter
or prevent a change in control and could limit the price certain investors might be willing to pay for our stock.
Certain provisions of our certificate of incorporation and by-laws may inhibit changes in control of our company not approved
by our board of directors. These provisions include:
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a prohibition on stockholder action through written consents;
a requirement that special meetings of stockholders be called only by the board of directors;
advance notice requirements for stockholder proposals and director nominations;
limitations on the ability of stockholders to amend, alter or repeal the by-laws; and
the authority of the board of directors to issue, without stockholder approval, preferred stock and common stock with
such terms as the board of directors may determine.
We are also afforded the protections of Section 203 of the Delaware General Corporation Law, which would prevent us from
engaging in a business combination with a person who becomes a 15% or greater stockholder for a period of three years from the
date such person acquired such status unless certain board or stockholder approvals were obtained. These provisions could limit
the price that certain investors might be willing to pay in the future for shares of our common stock.
Our earnings may be adversely affected by changes to the carrying values of our tangible and intangible assets as a result
of recording any impairment charges deemed necessary.
We are required to perform impairment tests whenever events and circumstances indicate the carrying value of certain assets
may not be recoverable. Significant and unanticipated changes in circumstances, such as 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, may result in a charge for impairment that can materially and adversely affect our reported net income and
our stockholders’ equity.
We have taken, are taking, and may take future restructuring actions to realign and resize our production capacity and cost
structure to meet current and projected operational and market requirements. Charges related to these actions or any further
restructuring actions may have a material adverse effect on our results of operations and financial condition. There can be no
assurance that any current or future restructuring will be completed as planned or achieve the desired results. The failure to complete
restructuring as planned could materially adversely affect our results of operations.
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We have established and may establish in the future valuation allowances on deferred tax assets. These changes may have
a material adverse effect on our results of operations and financial position.
Additionally, from time to time in the past, we have recorded asset impairment losses relating to specific plants and operations.
Generally, we record asset impairment losses when we determine that our estimates of the future undiscounted cash flows from
an operation will not be sufficient to recover the carrying value of that facility’s building, fixed assets and production tooling. For
goodwill, we perform a qualitative assessment of whether it is more likely than not that the reporting unit’s fair value is less than
its carrying amount. If the fair value of the reporting unit is less than its carrying amount, we compare its implied fair value of
goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, the reporting unit would recognize
an impairment loss for that excess amount. There can be no assurance that we will not incur such charges in the future as changes
in economic or operating conditions impacting the estimates and assumptions could result in additional impairment. Any future
impairments may materially adversely affect our results of operations.
Tax legislation initiatives or challenges to our tax positions could adversely affect our results of operations and financial
condition.
We are a multinational corporation with operations in the United States and international jurisdictions. As such, we are
subject to the tax laws and regulations of the U.S. federal, state and local governments and many international jurisdictions. From
time to time, various legislative initiatives may be proposed that could adversely affect our tax positions. There can be no assurance
that our effective tax rate or tax payments will not be adversely affected by these initiatives. In addition, U.S. federal, state and
local, as well as international, tax laws and regulations are extremely complex and subject to varying interpretations. There can
be no assurance that our tax position will not be challenged by relevant tax authorities or that we would be successful in any such
challenge.
The geographic profile of our taxable income could adversely impact our tax provision and therefore our results of
operations.
Our future tax provision could be adversely affected by the geographic profile of our taxable income and by changes in the
valuation of our deferred tax assets and liabilities. Our results could be materially impacted by significant changes in our effective
tax rate.
Exposure to currency exchange rate fluctuations on cross border transactions and translation of local currency results into
United States dollars could materially impact our results of operations.
Cross border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign
currency fluctuations. The strengthening or weakening of the United States dollar may result in favorable or unfavorable foreign
currency translation effects in as much as the results of our foreign locations are translated into United States dollars. This could
materially impact our results of operations.
Litigation against us could be costly and time consuming to defend, as a result, our businesses and financial position could
be materially and adversely affected.
We are regularly subject to legal proceedings and claims that arise in the ordinary course of business, such as workers’
compensation claims, Occupational Safety and Health Administration investigations, employment disputes, unfair labor practice
charges, examination by the Internal Revenue Service, customer and supplier disputes, intellectual property disputes, environmental
claims and product liability claims arising out of the conduct of our business. Litigation may result in substantial costs and may
divert management’s attention and resources from the operation of our business, which could have a material adverse effect on
our business, results of operations or financial condition.
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 third parties may have or acquire licenses for other technology or designs
that we may use or desire to use, requiring us 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, or we may not prevail in contesting the
validity of third party rights.
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In addition to patent and trademark protection, we also protect trade secrets, “know-how” and other confidential information
against unauthorized use or disclosure by persons who have access to them, such as our employees and others, through contractual
arrangements. These arrangements may not provide meaningful protection for our trade secrets, know-how or other confidential
information in the event of any unauthorized use, misappropriation or disclosure. If we are unable to maintain the proprietary
nature of our technologies, trade secrets, know-how, or other confidential information, our revenues could be materially adversely
affected.
As we diversify and globalize our geographic footprint, we may encounter laws and practices in emerging markets that are
not as stringent or enforceable as those present in developed markets, and thus incur a higher risk of intellectual property
infringement, which could materially adversely affect our results of operations.
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 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.
Our products may be susceptible to claims by third parties that our products infringe upon their proprietary 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.
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 effect 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 discharges, 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 environmental and safety laws, and
regulations. 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, 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.
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 2016.
The environmental laws to which we are subject have become more stringent over time, and we could incur material costs
or expenses in the future to comply with environmental laws. If we violate or fail to comply with these laws and regulations or do
not have the requisite 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 our financial condition and results of operations.
23
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 EPA, state regulatory agencies in North America,
such as 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 NHTSA in the U.S. 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 for truck engines used in Class 5 to 8 trucks imposed by the EPA and
CARB became effective in 2010. In 2011, the EPA and National Highway Traffic Safety Administration adopted a program to
reduce greenhouse gas emissions and improve the fuel efficiency of medium-and heavy-duty vehicles. These standards will phase
in with increasing stringency in each model year from 2014 to 2018. 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.
We may be adversely affected by new regulations relating to conflict minerals.
In August 2012, the SEC adopted new disclosures and reporting requirements for companies whose products contain certain
minerals and their derivatives, namely tin, tantalum, tungsten or gold, known as conflict minerals. Companies must report annually
whether or not such minerals originate from the Democratic Republic of Congo (DRC) and adjoining countries and in some cases
to perform extensive due diligence on their supply chains for such minerals. The implementation of these new requirements could
adversely affect the sourcing, availability and pricing of materials used in the manufacturing of our products. In addition, we have
incurred and will continue to incur additional costs to comply with the disclosure requirements, including cost related to determining
the source of any of the relevant minerals used in our products. Since our supply chain is complex, the due diligence procedures
we implement may not enable us to ascertain with sufficient certainty the origins for these minerals, which may harm our reputation,
as well as incur costs associated with an audit. We may also face difficulties in satisfying customers who may require that our
products be DRC conflict free, which could harm our relationships with these customers and/or lead to a loss of revenue. These
new requirements also could have the effect of limiting the pool of suppliers from which we source these minerals, and we may
be unable to obtain conflict-free minerals at prices similar to the past, which could increase our costs and adversely affect our
financial condition or results of operations.
Item 1B.
Unresolved Staff Comments
None.
24
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 distribution costs, reduce risk of interruptions in our delivery schedule, 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 as of December 31, 2015:
Location
Piedmont, Alabama
Douglas, Arizona
Dalton, Georgia
Monona, Iowa
Edgewood, Iowa
Michigan City, Indiana
Wixom, Michigan
Kings Mountain, North Carolina
Concord, North Carolina
Shadyside, Ohio
Primary Product/Function
Seats & Mirrors
Warehouse
Trim & Warehouse
Wire Harness
Wire Harness
Wipers, Switches
Engineering
Cab, Sleeper Box
Injection Molding
Stamping of Steel and Aluminum Structural and Exposed Stamped
Components
Interior Trim & Warehouse
Chillicothe, Ohio
Corporate Headquarters / R&D
New Albany, Ohio
Seats, Mirrors & Warehouse
Vonore, Tennessee
Interior Trim & Warehouse
Dublin, Virginia
Agua Prieta, Mexico
Wire Harness
Interior Trim & Seats
Saltillo, Mexico
Seats
Northampton, United Kingdom
Seats
Brisbane, Australia
Seats
Sydney, Australia
Seats and Wire Harness
Jiading, China
R&D
Jiading, China
Seats
Brandys nad Orlici, Czech Republic
Wire Harness
Liberec, Czech Republic
Seats
Baska (State of Gujarat) India
Seats
Pune (State of Maharashtra), India
Dharwad (State of Karnataka), India Seats
L’viv, Ukraine
Wire Harness
Ownership Interest
Owned
Leased
Leased
Owned
Leased
Leased
Leased
Owned
Leased
Owned
Owned / Leased
Leased
Owned / Leased
Owned / Leased
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Leased
Leased
We also have leased sales and service offices located in the U.S., Belgium, Australia, and Czech Republic and a sales office
branch in Sweden. Our owned domestic facilities are subject to liens securing our obligations under our revolving credit facility
and 7.875% senior secured notes due 2019. See Note 6 to our audited consolidated financial statements in Item 8 in this Annual
Report on Form 10-K.
Utilization of our facilities varies with North American, European, Asian and Australian commercial vehicle production and
general economic conditions in such regions. All locations are principally used for manufacturing or assembly, except for our
Wixom, Michigan and New Albany, Ohio facilities, which are administrative offices.
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, workers’ compensation claims, OSHA investigations, employment disputes, unfair labor practice charges, customer and supplier
disputes, service provider disputes, product liability claims, intellectual property disputes, and environmental claims arising out
of the conduct of our businesses and examinations by the Internal Revenue Service (“IRS”). We are not involved in any litigation
at this time in which we expect that an unfavorable outcome of the proceedings will have a material adverse effect on our financial
position, results of operations or cash flows.
Item 4.
Mine Safety Disclosures
Not applicable.
25
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:
Year Ended December 31, 2015:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Year Ended December 31, 2014:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
High
Low
$
$
$
$
$
$
$
$
4.60
7.37
7.50
6.93
7.25
10.91
10.67
9.34
$
$
$
$
$
$
$
$
2.66
3.80
5.60
5.35
5.38
6.00
8.64
7.10
As of March 10, 2016, there were 176 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 Second Amended and Restated Loan and Security Agreement and
the indenture governing the 7.875% senior secured notes due 2015, as described in more detail under “Management’s Discussion
and Analysis —Liquidity and Capital Resources — Debt and Credit Facilities.”
The following graph compares the cumulative five-year total return to holders of Commercial Vehicle Group, Inc.’s common
stock to the cumulative total returns of the NASDAQ Composite Index and a Peer Group that includes Meritor Inc., WABCO
Holdings, Inc., Titan International Inc., Modine Manufacturing Co., EnPro Industries Inc., Accuride Corporation, Stoneridge Inc.,
Altra Industrial Motion Corp., L.B. Foster Company, Fuel Systems Technologies Inc., Core Molding Technologies Inc. The graph
assumes that the value of the investment in the Company’s common stock in the peer group and the index (including reinvestment
of dividends) was $100 on December 31, 2010 and tracks it through December 31, 2015.
26
Commercial Vehicle Group, Inc.
NASDAQ Composite
Peer Group
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
12/31/15
100.00
100.00
100.00
55.54
99.20
62.96
50.47
116.68
76.51
44.69
163.54
106.84
40.94
187.78
113.66
16.97
201.13
91.31
The information in the graph and table above is not “solicitation 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.
We did not repurchase any of our common stock on the open market as part of a stock repurchase program during 2015. Our
employees surrendered 99,920 shares of our common stock in 2015 to satisfy tax withholding obligations on the vesting of restricted
stock awards issued under our Fourth Amended and Restated Equity Incentive Plan and the 2014 Equity Incentive Plan. 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, 2015:
(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)
99,920
$
3.94
—
—
—
—
—
—
—
—
—
—
Month #1
(October 1, 2015 through
October 31, 2015)
Month #2
(November 1, 2015 through
November 30, 2015)
Month #3
(December 1, 2015 through
December 31, 2015)
Unregistered Sales of Equity Securities
We did not sell any equity securities during 2015 that were not registered under the Securities Act of 1933, as amended.
27
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:
There are no material events affecting financial statement comparability of our consolidated financial statements contained
in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2015.
Statement of Operations Data:
Revenues
Cost of revenues
Gross profit
Selling, general and administrative expenses
Amortization expense
Operating income
Other expense (income)
Interest expense
Loss on early extinguishment of debt
Income (loss) before (benefit) provision for income taxes
Provision (benefit) for income taxes
Net income (loss)
Less: Non-controlling interest in subsidiary’s income (loss)
Net income (loss) attributable to CVG stockholders
Income (loss) per share attributable to common
stockholders:
Basic
Diluted
Weighted average common shares outstanding:
$
$
$
Years Ended December 31,
2015
2014
2013
2012
2011
(Dollars in thousands, except per share data)
$ 825,341
$ 839,743
$ 747,718
$ 857,916
$ 832,022
741,378
116,538
717,099
114,923
714,519
110,822
732,055
107,688
71,469
1,327
38,026
(152)
21,359
—
16,819
9,758
7,061
1
72,480
1,515
33,693
215
20,716
—
12,762
5,131
7,631
1
667,989
79,729
71,711
1,580
6,438
139
21,087
—
(14,788)
(2,337)
(12,451)
(6)
7,060
$
7,630
$ (12,445) $
71,949
493
44,096
69
20,945
—
23,082
(26,948)
50,030
(47)
50,077
65,521
346
49,056
353
19,570
7,448
21,685
3,095
18,590
(15)
18,605
0.67
0.66
$
$
$
0.24
0.24
$
$
0.26
0.26
$
$
(0.44) $
(0.44) $
1.77
1.76
Basic
Diluted
29,209
29,403
28,926
29,117
28,584
28,584
28,230
28,428
27,848
28,190
28
Balance Sheet Data (at end of each period):
Working capital (current assets less current liabilities)
Total assets
Total liabilities, excluding debt
Total debt
Total CVG stockholders’ equity
Total non-controlling interest
Total stockholders’ equity
Other Data:
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Depreciation and amortization
Capital expenditures
Years Ended December 31,
2015
2014
2013
2012
2011
(Dollars in thousands)
$ 193,424
$ 192,618
$ 176,979
$ 187,111
$ 191,945
436,679
135,749
235,000
65,930
—
442,927
134,091
250,000
58,801
35
432,441
122,463
250,000
59,945
33
439,665
122,357
250,000
66,286
22
406,884
144,109
250,000
12,766
9
65,930
58,836
59,978
66,308
12,775
$
$
$
$
55,299
(14,506)
(16,008)
17,710
15,590
9,519
(12,289)
(527)
18,247
14,568
19,154
(12,949)
(937)
20,583
13,666
$
24,049
(42,759)
(1,178)
14,067
18,641
7,794
(32,376)
(70,930)
12,576
22,291
North American Heavy-duty Truck Production (units) 1
323,000
297,000
246,000
279,000
255,000
North America Class 5-7 Production (units) 1
237,000
226,000
201,000
189,000
167,000
(1)
Source: ACT (January 2016).
29
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.
30
Company Overview
Commercial Vehicle Group, Inc. is a Delaware (USA) corporation. We were formed as a privately-held company in August
2000. We became a publicly held company in 2004. The Company (and its subsidiaries) is a leading supplier of a full range of cab
related products and systems for the global commercial vehicle market, including the medium-and heavy-duty truck (“MD/HD
Truck”) market, the medium-and heavy-construction vehicle market, and the military, bus, agriculture, specialty transportation,
mining, industrial equipment and off-road recreational markets.
We have manufacturing operations in the United States, Mexico, United Kingdom, Czech Republic, Ukraine, China, India
and Australia. Our products are primarily sold in North America, Europe, and the Asia-Pacific region.
Our products include seats and seating systems (“Seats”); trim systems and components (“Trim”); cab structures, sleeper
boxes, body panels and structural components; mirrors, wipers and controls; and electronic wire harness and panel assemblies
specifically designed for applications in commercial and other vehicles.
We are differentiated from automotive industry suppliers by our ability to manufacture low volume, customized products
on a sequenced basis to meet the requirements of our customers. We believe our products are used by a majority of the North
American MD/HD Truck and certain leading global construction and agriculture original equipment manufacturers (“OEMs”),
which we believe creates an opportunity to cross-sell our products.
Business Overview
Demand for our heavy-duty (or "Class 8") truck products is generally dependent on the number of new heavy truck commercial
vehicles manufactured in North America, which in turn is a function of general economic conditions, interest rates, changes in
governmental regulations, consumer spending, fuel costs, freight costs and our customers’ inventory levels and production rates.
New heavy truck 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. The North American
Class 8 market declined in 2013 as production levels decreased approximately 12% from 2012; however, production levels
rebounded 31% from 246,000 in 2013 to 323,000 in 2015. According to a January 2016 report by ACT Research, a publisher of
industry market research, North American Class 8 production levels are expected to decline to 251,000 in 2016, be relatively flat
in 2017, and increase to 330,000 in 2020. We believe the demand for Class 8 vehicles in 2016 will be between 230,000 to 250,000
and will be driven by several factors, including growth in freight volumes and the replacement of aging vehicles. ACT estimates
that the average age of active U.S. Class 8 trucks is 10.6 years in 2015, which is consistent with the average age in 2014. As vehicles
age, their maintenance costs typically increase. ACT forecasts that the vehicle age will decline as aging fleets are replaced.
The North American Class 5-7 production has steadily increased from 201,000 in 2013 to 237,000 in 2015. According to a
January 2016 report by ACT Research, North American Class 5-7 production levels are expected to be relatively flat in 2016 at
233,000 and gradually increase to 273,000 in 2020. We believe the demand for North American Class 5-7 in 2016 will be relatively
stable.
In 2015, approximately 49% of our revenue was generated from sales to North American MD/HD Truck OEMs. Our remaining
revenue in 2015 was primarily derived from sales to OEMs in the global construction equipment market, aftermarket, OE service
organizations, military market and other commercial vehicle specialty markets. Demand for our products is driven to a significant
degree by preferences of the end-user of the commercial vehicle, particularly with respect to heavy-duty trucks. Unlike the
automotive industry, commercial vehicle OEMs generally afford the 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 interior styling. In addition, certain of our products are only utilized in
North American Class 8 market, such as our storage systems, sleeper boxes and privacy curtains, and, as a result, changes in
demand for heavy-duty trucks or the mix of options on a vehicle can have a greater impact on our business than changes in the
overall demand for commercial vehicles. To the extent that demand for higher content vehicles increases or decreases, our revenues
and gross profit will be impacted positively or negatively.
Demand for our construction products is dependent on the vehicle production and demand for new commercial vehicles in
the global construction equipment market and generally follows certain economic conditions around the world. Our products are
primarily used in the medium-and heavy-duty construction equipment markets (weighing over 12 metric tons). Demand in the
medium-and heavy-duty construction equipment market is typically related to the level of larger scale infrastructure development
projects such as highways, dams, harbors, hospitals, airports and industrial development, as well as activity in the mining, forestry
and other raw material based industries. We believe there is a bias toward continuing softness in global construction and agriculture
markets in 2016.
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
31
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.
Our Long-term Strategy
Our long-term strategic plan is a roadmap by product, geographic region, and end market to guide resource allocation and
other decision making to achieve our long-term goals. To that end, we evaluated our opportunity to grow organically by end
market. We currently believe we have approximately 5% market share of the addressable global truck, bus, construction and
agriculture end markets. Accordingly, we believe we have significant opportunity to grow organically in our end markets. We
evaluated our product portfolio in the context of this organic market growth opportunity and our ability to win in the marketplace. Our
core products are Seats, Trim and wire harnesses and our complementary products include structures, wipers, mirrors and office
seats. We expect to realize some geographic diversification over the planned period toward Asia-Pacific. We also expect to realize
some end market diversification more weighted toward the agriculture market, and to a lesser extent the construction market. We
intend to allocate resources consistent with our strategic plan; and more specifically, consistent with our core and complementary
product portfolio, geographic region and end market diversification objectives. We periodically evaluate our long-term strategic
plan in response to significant changes in our business environment and other factors.
Although our long-term strategic plan is an organic growth plan, we will consider opportunistic acquisitions to supplement
our product portfolio, and to enhance our ability to serve our customers in our geographic end markets.
Strategic Footprint
We continuously review our manufacturing footprint to ensure we efficiently utilize our resources. In December 2015,
management announced a restructuring and cost reduction plan, which is expected to lower operating costs by $8 to $12 million
annually when fully implemented as of the end of 2017. Pre-tax costs associated with these actions, including associated capital
investment, were $0.8 million in 2015 and are expected to be $6 to $8 million in 2016 and $4 to $6 million in 2017. The majority
of these costs are employee-related separation costs and other costs associated with the transfer of production and subsequent
closure of facilities.
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 description of recently
issued and/or adopted accounting pronouncements.
Consolidated Results of Operations
The table below sets forth certain operating data expressed as a percentage of revenues for the periods indicated (dollars are
in thousands):
2015
2014
2013
$
825,341
100.0% $
839,743
100.0% $
747,718
100.0 %
714,519
110,822
86.6
13.4
732,055
107,688
87.2
12.8
667,989
79,729
Revenues
Cost of revenues
Gross profit
Selling, general and
administrative expenses
Amortization expense
Operating income
Other (income) expense
Interest expense
Income before provision
(benefit) for income taxes
Provision (benefit) for income
taxes
Net income (loss)
Less: Non-controlling
interest in subsidiary’s
income (loss)
Net income (loss) attributable
to common stockholders
71,469
1,327
38,026
(152)
21,359
16,819
9,758
7,061
1
8.7
0.2
4.5
—
2.5
2.0
1.2
0.8
—
72,480
1,515
33,693
215
20,716
12,762
5,131
7,631
1
8.6
0.2
4.0
—
2.5
1.5
0.6
0.9
—
89.3
10.7
9.6
0.2
0.9
—
2.8
(1.9)
(0.3)
(1.6)
71,711
1,580
6,438
139
21,087
(14,788)
(2,337)
(12,451)
(6)
—
$
7,060
0.8% $
7,630
0.9% $
(12,445)
(1.6)%
32
Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
CONSOLIDATED RESULTS
Revenues. On a consolidated basis, revenue decreased $14.4 million, or 1.7%, to $825.3 million for the year ended December
31, 2015 compared to $839.7 million for the year ended December 31, 2014. The decrease in revenues primarily resulted from
foreign currency exchange translation and decreased sales in global construction markets, offset by increased North American
MD/HD Truck production volumes. Specifically, the $14.4 million revenue decrease resulted from:
•
•
•
•
•
a $29.7 million or 16% decrease in OEM global construction revenues;
a $2.5 million, or 2%, decrease in revenues from other markets;
a $12.9 million, or 3%, increase primarily in OEM North American MD/HD Truck revenues;
a $3.8 million, or 3%, increase in aftermarket revenues; and
a $1.1 million, or 13%, increase in agriculture revenues.
2015 revenues were adversely impacted by foreign currency exchange translation of $18.3 million, which is reflected in
the change in revenue above.
Gross Profit. Gross profit increased $3.1 million to $110.8 million for the year ended December 31, 2015 from $107.7
million for the year ended December 31, 2014. Included in gross profit is cost of revenues which consists primarily of raw materials
and purchased components for our products, wages and benefits for our employees and overhead expenses such as manufacturing
supplies, facility rent and utilities costs related to our operations. Cost of revenues decreased $17.5 million, or 2.4%, resulting
from a decrease in raw material and purchased component costs of $14.1 million, wages and benefits of $1.0 million and overhead
costs of $2.4 million. The increase in gross profit primarily resulted from ongoing margin enhancement efforts, offset by $2.6
million year over year increase in net warranty charges, a year over year increase in Tigard, Oregon facility closure costs of $0.2
million and additional employee separation and facility charges of $0.6 million as a part of our fourth quarter 2015 restructuring
plan. Additionally, 2014 results included a loss of $0.8 million on the sale of our Norwalk, Ohio facility. As a percentage of
revenues, gross profit increased to 13.4% for the year ended December 31, 2015 from 12.8% for the year ended December 31,
2014.
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of wages
and benefits and other overhead expenses such as marketing, travel, legal, audit, rent and utilities costs, which are not directly or
indirectly associated with the manufacturing of our products. Selling, general and administrative expense decreased $1.0 million,
or 1.4%, to $71.5 million for the year ended December 31, 2015 from $72.5 million for the year ended December 31, 2014. The
net decrease in selling, general and administrative expenses was primarily a result of favorable foreign currency exchange translation
and a focus on cost discipline while selectively investing in value accretive activities. This was slightly offset by $0.2 million of
employee separation charges as a part of our fourth quarter 2015 restructuring plan.
Interest Expense. Interest expense increased $0.7 million to $21.4 million for the year ended December 31, 2015 from
$20.7 million for the year ended December 31, 2014 as a result of costs incurred in the fourth quarter of 2015 for the partial
redemption of the 7.875% notes. On October 15, 2015, the Company elected to call for the redemption of $15 million of its $250
million then outstanding 7.875% notes. The redemption price for the 7.875% notes was equal to 103.938% of the principal amount
of the 7.875% notes, plus accrued and unpaid interest to, but not including, the redemption date. The redemption date was November
14, 2015. Upon the partial redemption by the Company of the 7.875% notes, $235 million of the 7.875% notes remain outstanding.
Provision for Income Taxes. Our provision for income taxes increased by $4.7 million to $9.8 million for the year ended
December 31, 2015 compared to an income tax provision of $5.1 million for the year ended December 31, 2014. This primarily
resulted from the mix of income between our U.S. and non-U.S. locations, tax valuation allowances established in China during
2015 and partially offset by valuation allowances released in Belgium and a partial release in Luxembourg during 2015. In addition,
tax benefits are not recognized in the U.K., China, Luxembourg, Ukraine and India where we have established valuation allowances.
In 2006, we expect our effective tax rate to be in the range of 45 percent to 55 percent. For additional information regarding the
income tax provision refer to Note 8 of our consolidated financial statements in Item 8 in this Annual Report on Form 10-K.
Net Income Attributable to CVG Stockholders. Net income attributable to CVG stockholders was $7.1 million for the year
ended December 31, 2015 compared to net income of $7.6 million.
33
SEGMENT RESULTS
Global Truck and Bus Segment Results
Revenues
Gross Profit
Selling, General & Administrative Expenses
Operating Income
$
565,269
85,702
25,263
59,252
(amounts in thousands)
100.0% $
15.2
4.5
10.5
534,118
81,430
28,890
51,171
100.0%
15.2
5.4
9.6
2015
2014
Revenues. GTB Segment revenues increased $31.2 million, or 5.8%, to $565.3 million for the year ended December 31,
2015 from $534.1 million for the year ended December 31, 2014. The increase in GTB Segment revenues is primarily a result of:
•
•
•
a $14.9 million, or 4%, increase primarily in OEM North American MD/HD Truck revenues;
a $10.4 million, or 14%, increase in aftermarket revenues; and
a $5.9 million, or 8%, increase in revenues from other markets.
GTB Segment 2015 revenues were adversely impacted by foreign currency exchange translation of $2.5 million, which is
reflected in the changes in revenue above.
Gross Profit. GTB Segment gross profit increased $4.3 million, or 5.2%, to $85.7 million for the year ended December
31, 2015 from $81.4 million for the year ended December 31, 2014. Included in gross profit is cost of revenues which consists
primarily of raw material and purchased component costs for our products, wages and benefits for our employees and overhead
expenses such as manufacturing supplies, facility rent and utilities costs related to our operations. Cost of revenues increased $26.9
million, or 5.9%, as a result of an increase in raw material and purchased component costs of $16.3 million, salaries and benefits
of $2.0 million and overhead of $8.6 million. The increase in gross profit resulted from the increase in sales and ongoing margin
enhancement efforts, offset by unfavorable foreign currency exchange translation impacts of $0.4 million, a year over year increase
in net warranty charges of $1.7 million, the net year over year increase in costs associated with the closure of our Tigard, Oregon
facility of $0.2 million and additional employee separation charges of $0.4 million as a part of our fourth quarter 2015 restructuring
plan. Additionally, 2014 results included a loss of $0.8 million on the sale of our Norwalk, Ohio facility. As a percentage of
revenues, gross profit of 15.2% for the year ended December 31, 2015 was unchanged from the year ended December 31, 2014.
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of wages
and benefits and other overhead expenses such as marketing, travel, legal, audit, rent and utilities costs, which are not directly or
indirectly associated with the manufacturing of our products. GTB Segment selling, general and administrative expenses decreased
$3.6 million, or 12.6%, to $25.3 million for the year ended December 31, 2015 from $28.9 million for the year ended December
31, 2014. The decrease in selling, general and administrative expenses was primarily a result of a reduction in the allocation of
shared corporate costs to the GTB Segment resulting from the realignment of certain corporate personnel to centrally led activities
conducted for the benefit of the Company taken as a whole and not for the benefit of the GTB Segment.
Global Construction and Agriculture Segment Results
Revenues
Gross Profit
Selling, General & Administrative Expenses
Operating Income
2015
2014
$
271,627
28,627
20,442
8,044
(amounts in thousands)
100.0% $
10.5
7.5
3.0
317,201
29,583
21,903
7,533
100.0%
9.3
6.9
2.4
Revenues. GCA Segment revenues decreased $45.6 million, or 14.4%, to $271.6 million for the year ended December 31,
2015 from $317.2 million for the year ended December 31, 2014. The decrease in GCA Segment revenue is primarily a result of:
•
•
•
•
a $30.3 million, or 18%, decrease in OEM construction revenue;
a $6.6 million, or 13%, decrease in aftermarket revenues;
a $6.0 million, or 13%, decrease in automotive revenues; and
a $2.7 million, or 5%, decrease in revenues from other markets.
34
GCA Segment 2015 revenues were adversely impacted by foreign currency exchange translation of $15.8 million, which
is reflected in the changes in revenue above.
Gross Profit. GCA Segment gross profit decreased $1.0 million, or 3.2%, to $28.6 million for the year ended December
31, 2015 from $29.6 million for year ended December 31, 2014. Included in gross profit is cost of revenues which consists primarily
of raw material and purchased component costs for our products, wages and benefits for our employees and overhead expenses
such as manufacturing supplies, facility rent and utilities costs related to our operations. Cost of revenues decreased $44.6 million,
or 15.5%, as a result of an decrease in raw material and purchased component costs of $33.0 million, salaries and benefits of $3.0
million and overhead of $8.6 million. The decrease in gross profit resulted from the decrease in sales, unfavorable foreign currency
exchange translation of $2.4 million, a year over year increase in net warranty charges of $0.9 million, employee separation and
facility charges of $0.3 million as a part of our fourth quarter 2015 restructuring plan. This increase was offset by ongoing margin
enhancement efforts in 2015. As a percentage of revenues, gross profit was 10.5% for the year ended December 31, 2015 compared
to 9.3% for the year ended December 31, 2014.
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of wages
and benefits and other overhead expenses such as marketing, travel, legal, audit, rent and utilities costs, which are not directly or
indirectly associated with the manufacturing of our products. GCA Segment selling, general and administrative expenses decreased
$1.5 million, or 6.7%, to $20.4 million in the year ended December 31, 2015 from $21.9 million for the year ended December 31,
2014. The decrease in selling, general and administrative expenses was primarily a result of favorable foreign currency exchange
translation, a focus on cost discipline while selectively investing in value accretive activities, and a reduction in the allocation of
shared corporate costs to the GCA Segment resulting primarily from the realignment of certain corporate personnel to centrally
led activities conducted for the benefit of the Company taken as a whole and not for the benefit of the GCA Segment. This was
partially offset by employee separation and facility charges of $0.2 million as a part of our fourth quarter 2015 restructuring plan.
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Consolidated Results
Revenues. Consolidated revenue increased $92.0 million, or 12.3%, to $839.7 million for the year ended December 31,
2014 from $747.7 million for the year ended December 31, 2013. The increase in sales primarily resulted from increased North
American MD/HD Truck production volumes and increased sales into the North American construction and agriculture markets.
Specifically, the $92.0 million revenue increase on a consolidated basis resulted from:
•
•
•
•
•
a $50.2 million, or 15%, increase primarily in OEM North American MD/HD Truck revenues;
a $26.1 million or 17% increase in OEM construction revenues;
a $4.6 million, or 4%, increase in aftermarket revenues;
a $4.5 million, or 99%, increase in agriculture revenues; and
a $6.6 million, or 5%, increase in revenues from other markets.
In 2015, the classification of some sales by end market were changed for certain customers. These classification changes
were applied to prior periods above to conform to 2015 presentation.
Gross Profit. Gross profit increased $28.0 million to $107.7 million for the year ended December 31, 2014 from $79.7
million for the year ended December 31, 2013. Included in gross profit is cost of revenues which consists primarily of raw materials
and purchased components for our products, wages and benefits for our employees and overhead expenses such as manufacturing
supplies, facility rent and utilities costs related to our operations. Cost of revenues increased $64.1 million, or 9.6%, resulting from
an increase in raw material and purchased component costs of $51.6 million, wages and benefits of $5.9 million and overhead
costs of $6.6 million. As a percentage of revenues, gross profit increased to 12.8% for the year ended December 31, 2014 from
10.7% for the year ended December 31, 2013. The increase in gross profit resulted from the increase in sales as well as non-
recurrence of asset impairments incurred in 2013 amounting to $2.7 million. This was offset by a loss of $0.8 million on the sale
of our Norwalk, Ohio facility and $1.3 million in closure costs of our Tigard, Oregon facility.
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of wages
and benefits and other expenses such as marketing, travel, legal, audit, rent and utilities costs which are not directly or indirectly
associated with the manufacturing of our products. Selling, general and administrative expense increased $0.8 million, or 1.1%,
to $72.5 million for the year ended December 31, 2014 from $71.7 million for the year ended December 31, 2013. The net increase
in selling, general and administrative expenses primarily resulted from additional spending incurred in 2014 to support
enhancements in the manner to which we go to market, including the development of a product line management infrastructure;
actions to institutionalize our operational excellence efforts; and the development of a centrally led procurement organization. In
addition, during 2013 we incurred expense of $2.8 million for third party consulting services, $2.5 million of expense related to
35
the change in the Company’s executive leadership and $1.8 million of expense for employee separations. We did not incur similar
charges in the year ended December 31, 2014.
Interest Expense. Interest expense decreased $0.4 million to $20.7 million for the year ended December 31, 2014 from
$21.1 million for the year ended December 31, 2013.
Provision (Benefit) for Income Taxes. Our provision for income taxes increased by $7.4 million to $5.1 million for the
year ended December 31, 2014 compared to an income tax benefit of $2.3 million for the year ended December 31, 2013. This
primarily resulted from the mix of income between our U.S. and non-U.S. locations, and tax valuation allowances established or
released during the year. In 2014, we established valuation allowances for deferred tax assets associated with certain U.S. state
tax net operating loss carry forwards that we have determined are likely to expire before they can be utilized. We released valuation
allowances in the Czech Republic and Luxemburg that had been established against deferred assets in prior years. In addition, tax
benefits are not recognized in the U.K., China, Ukraine and India where we are subject to valuation allowances. For additional
information regarding the deviation from statutory income tax refer to Note 8 of our consolidated financial statements in Item 8
in this Annual Report on Form 10-K.
Net Income (Loss) Attributable to CVG Stockholders. Net income attributable to CVG stockholders was $7.6 million for
the year ended December 31, 2014 compared to a loss of $12.4 million for the year ended December 31, 2013.
Global Truck and Bus Segment Results
Revenues
Gross Profit
Selling, General & Administrative Expenses
Operating Income
2014
2013
$
534,118
81,430
28,890
51,171
(amounts in thousands)
100.0% $
15.2
5.4
9.6
473,245
59,524
28,036
30,056
100.0%
12.6
5.9
6.4
Revenues. GTB Segment revenues increased $60.9 million, or 12.9%, to $534.1 million for the year ended December 31,
2014 from $473.2 million for the year ended December 31, 2013. The increase in GTB Segment revenues is primarily a result of:
•
•
•
•
a $49.5 million, or 15%, increase primarily in OEM North American MD/HD Truck revenues;
a $2.2 million, or 3%, increase in aftermarket revenues;
a $3.9 million, or 13%, increase in OEM bus revenues; and
a $5.3 million, or 13%, increase in revenues from other markets.
In 2015, the classification of some sales by end market were changed for certain customers. These classification changes
were applied to prior periods above to conform to current year presentation.
Gross Profit. GTB Segment gross profit increased $21.9 million, or 36.8%, to $81.4 million for the year ended December
31, 2014 from $59.5 million for the year ended December 31, 2013. Included in gross profit is cost of revenues which consists
primarily of raw material and purchased component costs for our products, wages and benefits for our employees and overhead
expenses such as manufacturing supplies, facility rent and utilities costs related to our operations. Cost of revenues increased $39.0
million, or 9.4%, as a result of an increase in raw material and purchased component costs of $31.7 million, salaries and benefits
of $4.7 million and overhead of $2.6 million. As a percentage of revenues, gross profit increased to 15.2% for the year ended
December 31, 2014 from 12.6% for the year ended December 31, 2013. The increase in gross profit resulted from the increase in
sales volume as well as non-recurrence of machinery and equipment and IT asset impairments incurred in 2013 amounting to $2.7
million. This was offset by closure costs of $1.3 million associated with our Tigard, Oregon facility and an impairment charge of
$0.8 million resulting from the sale of our Norwalk, Ohio facility.
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of wages
and benefits and other overhead expenses such as marketing, travel, legal, audit, rent and utilities costs, which are not directly or
indirectly associated with the manufacturing of our products. GTB Segment selling, general and administrative expenses increased
$0.9 million, or 3.0%, to $28.9 million for the year ended December 31, 2014 from $28.0 million for the year ended December
31, 2013. The increase in selling, general and administrative expenses is primarily the result of additional spending incurred in
2014 to support enhancements in the manner to which we go to market.
Global Construction and Agriculture Segment Results
36
Revenues
Gross Profit
Selling, General & Administrative Expenses
Operating Income
$
317,201
29,583
21,903
7,533
100.0% $
9.3
6.9
2.4
282,837
24,365
19,273
4,943
100.0%
8.6
6.8
1.8
2014
2013
(amounts in thousands)
Revenue. GCA Segment revenues increased $34.4 million, or 12.1%, to $317.2 million for the year ended December 31,
2014 from $282.8 million for the year ended December 31, 2013. The increase in GCA Segment revenue is primarily a result of:
•
•
•
a $24.7 million, or 17%, increase in North American OEM construction revenue;
a $4.4 million, or 210%, increase in agriculture revenues; and
a $5.4 million, or 4%, increase in revenues from other markets.
In 2015, the classification of some sales by end market were changed for certain customers. These classification changes
were applied to prior periods above to conform to current year presentation.
Gross Profit. GCA Segment gross profit increased $5.2 million, or 21.4%, to $29.6 million for the year ended December
31, 2014 from $24.4 million for the year ended December 31, 2013. Included in gross profit is cost of revenues which consists
primarily of raw material and purchased component costs for our products, wages and benefits for our employees and overhead
expenses such as manufacturing supplies, facility rent and utilities costs related to our operations. Cost of revenues increased $29.1
million, or 11.3%, as a result of an increase in raw material and purchased component costs of $23.5 million, salaries and benefits
of $1.2 million and overhead of $4.4 million. As a percentage of revenues, gross profit increased to 9.3% for the year ended
December 31, 2014 from 8.6% for the year ended December 31, 2013. The increase in gross profit resulted from the increase in
sales volume, partially offset by foreign currency exchange transaction impacts of $1.0 million.
Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of wages
and benefits and other overhead expenses such as marketing, travel, legal, audit, rent and utilities costs, which are not directly or
indirectly associated with the manufacturing of our products. GCA Segment selling, general and administrative expenses increased
$2.6 million, or 13.6%, to $21.9 million in the year ended December 31, 2014 from $19.3 million for the year ended December
31, 2013. The increase in selling, general and administrative expenses primarily resulted from the increase in additional spending
incurred in 2014 to support enhancements in the manner to which we go to market.
Liquidity and Capital Resources
Cash Flows
Our primary source of liquidity during the year ended December 31, 2015 was cash generated from the sale of our various
products to our customers throughout the year. We believe that cash from operations, existing cash reserves, and availability under
our revolving credit facility will provide adequate funds for our working capital needs, planned capital expenditures and cash
interest payments through 2016. However, no assurance can be given that this will be the case. We did not borrow under our
revolving credit facility during 2015.
For the year ended December 31, 2015, cash provided by operations was $55.3 million compared to $9.5 million in the year
ended December 31, 2014. This increase in cash provided year-over-year was primarily the result of a reduction in investment in
working capital. For the year ended December 31, 2014, cash provided by operations was $9.5 million compared to $19.2 million
in the year ended December 31, 2013, which resulted from the increase in investment in working capital in 2014.
Net cash used in investing activities was $14.5 million for the year ended December 31, 2015 compared to $12.3 million
for the year ended December 31, 2014, and $12.9 million for the year ended December 31, 2013. The increase in cash used in
investing activities for the year ended December 31, 2015 compared to 2014 was due primarily to an increase in capital expenditures
and a decrease in proceeds from the disposal or sale of property, plant and equipment. In 2016, we expect capital expenditures to
be in the range of $15 to $18 million. The decrease in cash used in investing activities for the year ended December 31, 2014
compared to 2013 was due primarily to a decline in cash contribution premiums into the life insurance policies used to fund the
Company’s deferred compensation plan, offset by an increase in capital expenditures.
Net cash used in financing activities was $16.0 million for the year ended December 31, 2015 compared to $0.5 million
provided by financing activities for the year ended December 31, 2014, and $0.9 million used in financing activities for the year
ended December 31, 2013. The increase in net cash used in financing activities for the year ended December 31, 2015 primarily
resulted from the redemption of $15 million of our 7.875% notes. The net cash provided by financing activities for the year ended
December 31, 2014 resulted from loan proceeds taken against our life insurance policies to fund deferred compensation payments
37
totaling $1.0 million. The net cash used in financing activities for the year ended December 31, 2013 primarily related to the
surrender of common stock by employees upon vesting of their restricted stock.
As of December 31, 2015, cash held by foreign subsidiaries was $25.8 million. If we were to repatriate any portion of these
funds back to the U.S. we would accrue and pay the appropriate withholding and income taxes on amounts repatriated. We do not
intend to repatriate funds held by our foreign affiliates, but rather intend to use the cash to fund the growth of our foreign operations.
Debt and Credit Facilities
As of December 31, 2015, our outstanding indebtedness consisted of an aggregate of $235.0 million of 7.875% Senior
Secured Notes due 2019 (the “7.875% notes”). In addition, we had $2.5 million of outstanding letters of credit under various
financing arrangements and $37.5 million of borrowing capacity under our revolving credit facility, which is subject to an availability
block and minimum availability commitment.
Revolving Credit Facility
On November 15, 2013, the Company and certain of our subsidiaries, as borrowers (collectively, the “borrowers”) entered
into a Second Amended and Restated Loan and Security Agreement ("Second ARLS Agreement") with Bank of America, N.A.
as agent and lender, which amended and restated the Amended and Restated Loan and Security Agreement, dated as of April 26,
2011.
The material terms of the Second ARLS Agreement include the following:
• A facility in the amount of up to $40.0 million with the ability to increase up to an additional $35.0 million under
certain conditions;
• Availability is subject to borrowing base limitations and an availability block equal to the amount of debt and foreign
cash management services Bank of America, N.A. or its affiliates makes available to the Company’s foreign
subsidiaries;
• Availability of up to an aggregate amount of $10.0 million for the issuance of letters of credit, which reduces the
total amount available;
• Extension of the maturity date to November 15, 2018;
• Amendments to certain covenants to provide additional flexibility, including (i) conditional permitted distributions,
permitted foreign investments, and permitted acquisitions on minimum availability, fixed charge coverage ratio and
other requirements, and (ii) permitting certain sale-leaseback transactions;
•
Permitting the repurchase of the Company’s 7.875% notes due 2019 under certain circumstances; and
• Reduction of the fixed charge coverage ratio maintenance requirement to 1.0:1.0 and reduction of the availability
threshold for triggering compliance with the fixed charge coverage ratio, as described below.
The applicable margin is based on average daily availability under the revolving credit facility as follows:
Level
III
II
I
Average Daily Availability
> $10,000,000 but <
$20,000,000
Domestic Base
Rate Loans
0.50%
0.75%
1.00%
LIBOR
Revolver Loans
1.50%
1.75%
2.00%
As of December 31, 2015, $2.8 million in deferred financing fees relating to the revolving credit facility and our 7.875%
notes were being amortized over the remaining life of the agreements.
As of December 31, 2015, we did not have borrowings under the revolving credit facility. In addition, as of December 31,
2015, we had outstanding letters of credit of $2.5 million and borrowing availability of $37.5 million under the revolving credit
facility.
The borrowers’ obligations under the revolving credit facility are secured by a first-priority lien (subject to certain permitted
liens) on substantially all of our tangible and intangible assets, as well as 100% of the capital stock of the direct domestic subsidiaries
of each borrower and 65% of the capital stock of each foreign subsidiary directly owned by a borrower. The borrowers are jointly
and severally liable for the obligations under the revolving credit facility and unconditionally guarantee the prompt payment and
performance thereof.
Until December 31, 2014, the applicable margin was set at Level III. Thereafter, the applicable margin is subject to increase
or decrease by the agent on the first day of the calendar month following each fiscal quarter end. If the agent is unable to calculate
38
average daily availability for a fiscal quarter because of our failure to deliver a borrowing base certificate when required, the
applicable margin will be set at Level I until the first day of the calendar month following receipt of a borrowing base certificate.
As of December 31, 2015, the applicable margin is set at Level III.
We pay a commitment fee to the lenders equal to 0.25% per annum of the unused amounts under the revolving credit facility.
Terms, Covenants and Compliance Status
The Second ARLS Agreement requires the maintenance of a minimum fixed charge coverage ratio calculated based upon
consolidated EBITDA (as defined in the Second ARLS Agreement) as of the last day of each of the Company’s fiscal quarters.
The borrowers are not required to comply with the fixed charge coverage ratio requirement for as long as the borrowers maintain
at least $7.5 million of borrowing availability under the revolving credit facility. If borrowing availability is less than $7.5 million
at any time, we would be required to comply with a fixed charge coverage ratio of 1.0:1.0 as of the end of any fiscal quarter, and
would be required to continue to comply with these requirements until we have borrowing availability of $7.5 million or greater
for 60 consecutive days. Because the Company had borrowing availability in excess of $7.5 million from January 1, 2015 through
December 31, 2015, the Company was not required to comply with the minimum fixed charge coverage ratio covenant during the
year ended December 31, 2015.
The Second ARLS Agreement contains other customary restrictive covenants, and customary reporting and other affirmative
covenants. See Note 6 to our audited consolidated financial statements in Item 8 in this Annual Report on Form 10-K for information
on the covenants. The Company was in compliance with these covenants as of December 31, 2015.
The Second ARLS Agreement contains customary events of default, including, without limitation:
•
nonpayment of obligations under the revolving credit facility when due;
• material inaccuracy of representations and warranties;
•
•
•
•
•
•
•
•
•
•
•
violation of covenants in the Second ARLS Agreement and certain other documents executed in connection with it;
breach or default of agreements related to debt in excess of $5.0 million that could result in acceleration of that debt;
revocation or attempted revocation of guarantees;
denial of the validity or enforceability of the loan documents or failure of the loan documents to be in full force and
effect;
certain judgments in excess of $2.0 million;
the inability of an obligor to conduct any material part of its business due to governmental intervention, loss of any
material license, permit, lease or agreement necessary to the business;
cessation of an obligor’s business for a material period of time;
impairment of collateral through condemnation proceedings;
certain events of bankruptcy or insolvency;
certain Employee Retirement Income Securities Act events; and
a change in control of the Company.
Certain of the defaults are subject to exceptions, materiality qualifiers, grace periods and baskets customary for credit facilities
of this type.
Voluntary prepayments of amounts outstanding under the revolving credit facility are permitted at any time, without premium
or penalty.
The Second ARLS Agreement requires the borrowers to make mandatory prepayments with the proceeds of certain asset
dispositions and upon the receipt of insurance or condemnation proceeds to the extent the borrowers do not use the proceeds for
the purchase of assets useful in the borrowers’ businesses.
7.875% Senior Secured Notes due 2019
The 7.875% notes were issued pursuant to an indenture, dated as of April 26, 2011 (the “7.875% Notes Indenture”), by and
among CVG, certain of our subsidiaries party thereto, as guarantors (the “guarantors”) and U.S. Bank National Association, as
trustee. Interest is payable on the 7.875% notes on April 15 and October 15 of each year until their maturity date of April 15, 2019.
The 7.875% notes are senior secured obligations of CVG. Our obligations under the 7.875% notes are guaranteed by the
guarantors. The obligations of CVG and the guarantors under the 7.875% notes are secured by a second-priority lien (subject to
certain permitted liens) on substantially all of the property and assets of CVG and the guarantors, and a pledge of 100% of the
39
capital stock of CVG’s domestic subsidiaries and 65% of the voting capital stock of each foreign subsidiary directly owned by
CVG and the guarantors. The liens, the security interests and all of the obligations of CVG and the guarantors and all provisions
regarding remedies in an event of default are subject to an intercreditor agreement among CVG, certain of its subsidiaries, the
agent for the revolving credit facility and the collateral agent for the 7.875% notes.
The 7.875% Notes Indenture contains restrictive covenants, including, without limitation, limitations on our ability and the
ability of our restricted subsidiaries to: incur additional debt; restrict dividends or other payments of subsidiaries; make investments;
engage in transactions with affiliates; create liens on assets; engage in sale/leaseback transactions; and consolidate, merge or
transfer all or substantially all of our assets and the assets of our restricted subsidiaries. In addition, subject to certain exceptions,
the 7.875% Notes Indenture does not permit us to pay dividends on, redeem or repurchase our capital stock or make other restricted
payments unless certain conditions are met, including (i) no default under the 7.875% Notes Indenture has occurred and is
continuing, (ii) we and our subsidiaries maintain a consolidated coverage ratio of 2.0 to 1.0 on a pro forma basis, as defined by
the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters divided by consolidated interest
expense for such four fiscal quarters, and (iii) the aggregate amount of the dividends or payments made under this restriction would
not exceed 50% of consolidated net income from October 1, 2010 to the end of the most recent fiscal quarter (or, if consolidated
net income for such period is a deficit, minus 100% of such deficit), plus cash proceeds received from certain issuances of capital
stock, plus certain other amounts. These covenants are subject to important qualifications and exceptions set forth in the 7.875%
Notes Indenture. We were in compliance with these covenants as of December 31, 2015.
The 7.875% Notes Indenture provides for events of default (subject in certain cases to customary grace and cure periods)
which include, among others:
•
•
•
•
•
nonpayment of principal or interest when due;
breach of covenants or other agreements in the 7.875% Notes Indenture;
defaults in payment of certain other indebtedness;
certain events of bankruptcy or insolvency; and
certain defaults with respect to the security interests.
Generally, if an event of default occurs, the trustee or the holders of at least 25% in principal amount of the then outstanding
7.875% notes may declare the principal of and accrued but unpaid interest on all of the 7.875% notes to be due and payable
immediately. All provisions regarding remedies in an event of default are subject to the Intercreditor Agreement.
Since April 15, 2014, the Company has been entitled at its option to redeem all or a portion of the Securities at the redemption
prices (expressed as percentages of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the
redemption date (subject to the rights of the securities holders on the relevant record date to receive interest due on the relevant
interest payment date), plus a redemption premium if redeemed during the 12-month period commencing on April 15, 2015 and
2016 of 103.9387% and 101.969%, respectively. Effective April 15, 2014, the "make-whole" premium is not applicable. We
evaluated the redemption premium under ASC 815-15 and determined that the premium is not required to be bifurcated from the
7.875% notes and accounted for as a separate derivative instrument. If we experience certain change of control events, holders of
the 7.875% notes may require us to repurchase all or part of their notes at 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the repurchase date.
On November 14, 2015, the Company redeemed $15 million of its $250 million then outstanding 7.875% notes. The
redemption price for the 7.875% notes was equal to 103.938% of the principal amount of the 7.875% notes, plus accrued and
unpaid interest to, but not including, the redemption date. Upon the partial redemption by the Company of the 7.875% notes, $235
million of the 7.875% notes remain outstanding. We paid a premium for early redemption totaling $0.6 million in accordance with
the provisions of the 7.875% notes.
Covenants and Liquidity
We continue to operate in a challenging economic environment, and our ability to comply with the covenants in the Second
ARLS Agreement may be affected in the future by economic or business conditions beyond our control. Based on our current
forecast, we believe that we will be able to maintain compliance with the fixed charge coverage ratio covenant, if applicable, and
other covenants in the Second ARLS Agreement for the next twelve months; however, no assurances can be given that we will be
able to comply. We base our forecasts on historical experience, industry forecasts and various other assumptions that we believe
are reasonable under the circumstances. If actual results are substantially different than our current forecast, or if we do not realize
a significant portion of our planned cost savings or sustain sufficient cash or borrowing availability, we could be required to comply
with our financial covenants, and there is no assurance that we would be able to comply with such financial covenants. If we do
not comply with the financial and other covenants in the Second ARLS Agreement, and we are unable to obtain necessary waivers
or amendments from the lender, we would be precluded from borrowing under the Second ARLS Agreement, which could have
a material adverse effect on our business, financial condition and liquidity. If we are unable to borrow under the Second ARLS
40
Agreement, we will need to meet our capital requirements using other sources and alternative sources of liquidity may not be
available on acceptable terms. In addition, if we do not comply with the financial and other covenants in the Second ARLS
Agreement, the lender could declare an event of default under the Second ARLS Agreement, and our indebtedness thereunder
could be declared immediately due and payable, which would also result in an event of default under the 7.875% notes. Any of
these events would have a material adverse effect on our business, financial condition and liquidity.
We believe that cash on hand, cash flow from operating activities together with available borrowings under the Second ARLS
Agreement will be sufficient to fund currently anticipated working capital, planned capital spending, certain strategic initiatives
and debt service requirements for at least the next 12 months. No assurance can be given, however, that this will be the case.
Contractual Obligations and Commercial Commitments
The following table reflects our contractual obligations as of December 31, 2015:
Payments Due by Period
Total
Less than
1 Year
1-3 Years
3-5 Years
More than
5 Years
Long-term debt obligations
Estimated interest payments
Operating lease obligations
Pension and other post-retirement funding
Total
$
$
235,000
79,449
47,420
44,954
406,823
$
$
(In thousands)
— $
— $
18,557
9,011
3,937
31,505
$
37,012
14,921
8,171
60,104
$
235,000
23,880
9,744
9,024
277,648
$
$
—
—
13,744
23,822
37,566
Since December 31, 2015, 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 long-term restructuring reserves and other items. We also enter into agreements with our customers at the beginning of a given
vehicle 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, 2015, 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. These letter of credit contracts are usually extended on a year-to-year basis.
As of December 31, 2015, we had outstanding letters of credit of $2.5 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.
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 significant 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 the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an
ongoing basis, particularly relating to accounts receivable reserves, inventory reserves, goodwill, intangible and long-lived assets,
income taxes, warranty reserves and pension and other post-retirement benefit plans. 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 in this Annual
Report on Form 10-K for additional information regarding risk factors that may impact our estimates.
41
Revenue Recognition — 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) collectability 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 vehicle platform’s life to supply
products for that vehicle 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.
Inventory — Inventories are valued at the lower of first-in, first-out 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 expected market volumes. Excess and obsolete provisions
may vary by product depending upon future potential use of the product.
Goodwill, Intangible and Long-Lived Assets — Goodwill represents the excess of consideration transferred over the fair
value of net assets acquired. We review goodwill for impairment annually, utilizing the one-step qualitative assessment, in the
second fiscal quarter and whenever events or changes in circumstances indicate the carrying value may not be recoverable. In
conducting the qualitative assessment, we consider relevant events and circumstances that affect the fair value or carrying amount
of the reporting unit. Such events and circumstances could include macroeconomic conditions, industry and market considerations,
overall financial performance, entity and reporting unit specific events, cost factors and capital markets pricing. We consider the
extent to which each of the adverse events and circumstances identified affect the comparison of the reporting unit’s fair value
with its carrying amount. We place more weight on the events and circumstances that most affect the reporting unit’s fair value or
the carrying amount of its net assets. We consider positive and mitigating events and circumstances that may affect its determination
of whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. These factors are all
considered by management in reaching its conclusion about whether to perform the first step of the impairment test.
If the reporting unit’s fair value is determined to be more likely than not impaired based on the one-step qualitative approach,
we then perform a quantitative valuation to estimate the fair value of our reporting unit. Implied fair value of goodwill is determined
by considering both the income and market approach. 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 inherently uncertain.
We review definite-lived intangible and long-lived assets for recoverability whenever events or changes in circumstances
indicate that carrying amounts may not be recoverable. If an indicator exists, management will ascertain whether property and
equipment and certain definite-lived intangibles are recoverable based on the sum of expected future undiscounted cash flows
from operating activities. Determining the fair value of these assets is judgmental in nature and involves the use of significant
estimates and assumptions. If the estimated undiscounted net cash flows are less than the carrying amount of such assets, we
will recognize an impairment loss in an amount necessary to write down the assets to fair value as determined from expected
discounted future cash flows. We base our fair value estimates on assumptions we believe to be reasonable, but that are
inherently uncertain.
For further information on our goodwill and intangible assets, see Notes 2 and 7 to our consolidated financial statements in
Item 8 in this Annual Report on Form 10-K.
Income Taxes — We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have
been included in our financial statements or tax returns. 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. In assessing the realizability
of deferred tax assets, we consider whether it is more likely than not that some, or a portion, of the deferred tax assets will not be
realized. We provide a valuation allowance for deferred tax assets when it is more likely than not that a portion of such deferred
tax assets will not be realized. We recognize tax positions initially in the financial statements when it is more likely than not the
position will be sustained upon examination by the tax authorities. 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. Such tax positions are
initially and subsequently 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.
Warranty Reserves — 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,
42
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 with certain products or customers concerning the lag time of claims made, magnitude of claims and current economic or
regulatory factors.
Pension and Other Post-Retirement Benefit Plans — We sponsor pension plans that cover certain hourly and salaried
employees in the U.S. 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 another post-retirement benefit plan providing medical benefits for certain
retirees and their dependents in certain U.S. operations.
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 third-party 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:
•
•
•
discount rate;
expected return on plan assets; and
health care cost trend rates.
Discount Rate — The discount rate represents the interest rate that is 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
Citigroup Pension Discount Curve, for U.S. pensions; and the iBoxx Over 15 Year AA Corporate Bond Yield for non-U.S. pensions
in 2015 and the Barclay’s Capital Corporate AA Rated Sterling Bond Index, for non-U.S. pensions in 2014, in the determination
of the appropriate discount rate assumptions. The weighted average rate we used to measure our pension obligation as of
December 31, 2015 and 2014 was 4.1% and 3.7%, respectively, for the U.S. pension plans and 3.9% and 3.5%, respectively, 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 2015, 2014 and 2013, we assumed an expected long-term rate of return on plan assets
of 7.5% for the U.S. pension plans. For 2015, we assumed an expected long-term rate of return on plan assets of 4.6% for non-
U.S. pensions compared to 5.8% for 2014 and 2013.
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 2015 pension and other post-retirement benefits results (in thousands):
(Decrease) increase due to change in assumptions used to determine net periodic
benefit costs for the year ended December 31, 2015:
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, 2015:
Discount rate
1 Percentage
Point Increase
1 Percentage
Point Decrease
$
$
$
(444) $
(743) $
437
754
(10,289) $
13,002
We believe we are in compliance with the requirements of the Affordable Care Act and do not anticipate any major impact
in the immediate future. We will continue to evaluate the situation for any potential impact the Affordable Care Act may present.
Affordable Care Act changes implemented to date include:
• Expansion of coverage for older children up to age 26
• Elimination of lifetime maximum benefit limits
• Elimination of preexisting condition exclusions for children
43
• Limited reimbursement under Flexible Spending Accounts for over the counter medications
• Women’s Preventive Care — expansion of preventive services without co-pays or deductibles
•
•
Flex Spending Limits — reduction in annual limit for flex spending accounts from $5,000 to $2,500
Increase in Medicare tax by 0.9 % on wages over $200,000 for single filers, $250,000 for joint filers and $125,000
for those who are married filing separately
• W-2 Reporting of Benefits — W-2 forms will be required to show the non-taxable cost of employer health care
coverage.
• Variable Hour Policy to identify and monitor the measurement, administrative, and stability periods of variable hour
employees to comply with the requirements of the employer mandate.
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 6% annual rate of increase in the
per capita cost of covered health care benefits was assumed for 2015 and 2014. The rate was assumed to decrease gradually to 5%
through 2018 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 2015 other post-retirement benefit results (in thousands):
Increase (decrease) from change in health care cost trends rates
Other post-retirement benefit expense
Other post-retirement benefit liability
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
1 Percentage
Point Increase
1 Percentage
Point Decrease
$
$
2
8
$
$
(2)
(8)
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. None of our debt was variable rate debt at December 31, 2015 and 2014.
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 certain of the foreign currency transaction exposures. 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 one month up to eighteen months. All existing forward foreign exchange contracts have
been marked-to-market and the fair value of contracts recorded in the consolidated balance sheets with the offsetting noncash gain
or loss recorded in our consolidated statements of income (loss). We do not hold or issue foreign exchange options or forward
contracts for trading purposes.
Outstanding foreign currency forward exchange contracts at December 31, 2015 are more fully described in Note 3 to our
consolidated financial statements in Item 8 of this Annual Report on Form 10-K. The fair value of our contracts at December 31,
2015 amounted to a net liability of $0.5 million, which was included in other current liabilities in our consolidated balance sheets.
The fair value of our contracts at December 31, 2014 amounted to a net liability of $0.3 million, which is included in other current
liabilities 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 income (loss).
Our primary exposures to foreign currency exchange fluctuations are Japanese yen/Chinese yuan, and Mexican peso/U.S.
dollar. At December 31, 2015 and 2014, the potential reduction in earnings from a hypothetical instantaneous 10 % adverse change
in quoted foreign currency spot rates applied to foreign currency sensitive instruments would be immaterial.
44
Foreign Currency Transactions
A portion of our revenues during the year ended December 31, 2015 were derived from manufacturing operations outside
of the U.S. 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 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 long-term assets and liabilities at December 31, 2015 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. The principal currencies of exposure are
the Euro, Czech Koruna, Australian Dollar, Japanese Yen, Mexican Peso and Ukrainian Hryvnia. Foreign currency translation
negatively impacted fiscal year 2015 revenues by $18.3 million, or 2.2 percent, due generally to the strengthening of the U.S.
Dollar.
Effects of Inflation
Inflation potentially affects us in two principal ways. First, any borrowings under our revolving credit facility would be 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.
45
Item 8.
Financial Statements and Supplementary Data
Documents Filed as Part of this Annual Report on Form 10-K
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2015 and 2014
Consolidated Statements of Income (Loss) for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013
Notes to Consolidated Financial Statements
Item 15 — Exhibits and Financial Statement Schedules
Page
47
48
49
50
51
52
53
82
46
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Commercial Vehicle Group, Inc.:
We have audited the accompanying consolidated balance sheets of Commercial Vehicle Group, Inc. and subsidiaries as of
December 31, 2015 and 2014, and the related consolidated statements of income (loss), comprehensive income (loss), stockholders’
equity, and cash flows for each of the years in the three-year period ended December 31, 2015. In connection with our audits of
the consolidated financial statements, we also have audited the financial statement Schedule II “Valuation and Qualifying
Accounts.” These consolidated financial statements and financial statement schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule
based on our audits.
We conducted our audits 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 the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Commercial Vehicle Group, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of their operations
and their cash flows for each of the years in the three-year period ended December 31, 2015, in conformity with U.S. generally
accepted accounting principles. Also in our opinion, the related 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.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Commercial Vehicle Group, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established
in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated March 10, 2016 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
/s/ KPMG LLP
Columbus, Ohio
March 10, 2016
47
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2015 and 2014
ASSETS
CURRENT ASSETS:
Cash
Accounts receivable, net of allowances of $4,539 and $2,808, respectively
Inventories
Other current assets
Total current assets
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 $6,858 and $5,613, respectively
DEFERRED INCOME TAXES, NET
OTHER ASSETS
TOTAL ASSETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable
Accrued liabilities and other
Total current liabilities
LONG-TERM DEBT
PENSION AND OTHER POST-RETIREMENT BENEFITS
OTHER LONG-TERM LIABILITIES
Total liabilities
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY:
Common stock, $.01 par value (60,000,000 shares authorized; 29,448,779 and 29,148,504
shares issued and outstanding, respectively)
Preferred stock, $.01 par value (5,000,000 shares authorized; no shares issued and
outstanding)
Treasury stock, at cost: 879,404 and 779,484 shares, respectively
Additional paid-in capital
Retained deficit
Accumulated other comprehensive loss
Total CVG stockholders’ equity
Non-controlling interest
Total stockholders’ equity
TOTAL LIABILITIES AND EQUITY
2015
2014
(In thousands, except share and
per share amounts)
$
$
$
$
92,194
130,240
75,658
10,185
308,277
70,091
139,912
83,776
6,351
300,130
27,330
166,380
11,849
(134,598)
70,961
7,834
16,946
25,253
7,408
28,512
161,667
7,114
(123,831)
73,462
8,056
18,589
33,290
9,400
436,679
$
442,927
$
66,657
48,196
114,853
235,000
17,233
3,663
370,749
70,826
36,686
107,512
250,000
23,356
3,223
384,091
294
(7,039)
234,760
(122,431)
(39,654)
65,930
—
65,930
296
(6,622)
231,907
(129,492)
(37,288)
58,801
35
58,836
$
436,679
$
442,927
The accompanying notes are an integral part of these consolidated financial statements.
48
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Years Ended December 31, 2015, 2014 and 2013
2015
2014
2013
REVENUES
COST OF REVENUES
Gross Profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
AMORTIZATION EXPENSE
Operating Income
OTHER (INCOME) EXPENSE
INTEREST EXPENSE
Income (Loss) Before Provision (Benefit) for Income Taxes
PROVISION (BENEFIT) FOR INCOME TAXES
NET INCOME (LOSS)
Less: Non-controlling interest in subsidiary’s income (loss)
NET INCOME (LOSS) ATTRIBUTABLE TO CVG STOCKHOLDERS
EARNINGS (LOSS) PER COMMON SHARE:
Basic
Diluted
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic
Diluted
$
$
$
$
$
$
(In thousands, except per share amounts)
825,341
714,519
110,822
71,469
1,327
38,026
(152)
21,359
16,819
9,758
7,061
1
7,060
839,743
732,055
107,688
72,480
1,515
33,693
215
20,716
12,762
5,131
7,631
1
7,630
747,718
667,989
79,729
71,711
1,580
6,438
139
21,087
(14,788)
(2,337)
(12,451)
(6)
(12,445)
$
$
0.24
0.24
$
$
0.26
0.26
$
$
(0.44)
(0.44)
29,209
29,399
28,926
29,117
28,584
28,584
The accompanying notes are an integral part of these consolidated financial statements.
49
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2015, 2014 and 2013
Net income (loss)
Other comprehensive (loss) income:
Foreign currency translation adjustments
Minimum pension liability, net of tax
Other comprehensive (loss) income
Comprehensive income (loss)
Less: Comprehensive income (loss) attributed to noncontrolling
interests
Comprehensive income (loss) attributable to CVG stockholders
2015
2014
(In thousands)
2013
7,061
$
7,631
$
(12,451)
(4,572)
2,206
(2,366)
4,695
(35)
4,730
$
$
(4,600)
(6,380)
(10,980)
(3,349) $
1
(3,350) $
(4,338)
5,910
1,572
(10,879)
(11)
(10,868)
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
50
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended December 31, 2015, 2014 and 2013
Common Stock
Shares
Amount
Treasury
Stock
Additional
Paid-In
Capital
Retained
Deficit
Accum.
Other
Comp.
Loss
Total CVG
Stockholders’
Equity
Non-
Controlling
Interest
Total
(In thousands , except share data )
28,463,479
$
290
$
(5,264) $ 223,822
$ (124,677) $
(27,885) $
66,286
$
22
$ 66,308
495,758
(99,094)
—
—
—
6
—
—
—
—
—
(831)
—
—
—
—
—
5,315
—
—
—
—
—
—
—
—
6
(831)
5,315
—
—
—
6
(831)
5,315
(12,445)
1,577
(10,868)
(11)
(10,879)
—
—
—
22
22
28,860,143
$
296
$
(6,095) $ 229,137
$ (137,122) $
(26,308) $
59,908
$
33
$ 59,941
378,597
(90,236)
—
—
—
—
—
—
—
—
—
(527)
—
—
—
—
—
2,770
—
—
—
—
—
—
—
—
—
(527)
2,770
7,630
(10,980)
(3,350)
—
—
—
—
—
—
1
1
—
(527)
2,770
(3,349)
1
29,148,504
$
296
$
(6,622) $ 231,907
$ (129,492) $
(37,288) $
58,801
$
35
$ 58,836
400,195
(99,920)
—
—
4
(6)
—
—
—
(417)
—
—
—
—
2,853
—
—
—
—
—
—
—
7,061
(2,366)
4
(423)
2,853
4,695
—
—
—
4
(423)
2,853
(35)
4,660
29,448,779
$
294
$
(7,039) $ 234,760
$ (122,431) $
(39,654) $
65,930
$
— $ 65,930
BALANCE —
December 31, 2012
Issuance of restricted
stock
Surrender of common
stock by employees
Share-based
compensation expense
Total comprehensive
income (loss)
Non-controlling
interests
BALANCE —
December 31, 2013
Issuance of restricted
stock
Surrender of common
stock by employees
Share-based
compensation expense
Total comprehensive
income (loss)
Non-controlling
interests
BALANCE —
December 31, 2014
Issuance of restricted
stock
Surrender of common
stock by employees
Share-based
compensation expense
Total comprehensive
income (loss)
BALANCE —
December 31, 2015
The accompanying notes are an integral part of these consolidated financial statements.
51
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2015, 2014 and 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
Provision for doubtful accounts
Noncash amortization of debt financing costs
Pension plan contributions
Loss on early extinguishment of debt
Shared-based compensation expense
Loss on sale of assets
Deferred income tax benefit
Noncash loss on forward exchange contracts
Change in other operating items:
Accounts receivable
Inventories
Prepaid expenses
Accounts payable
Accrued liabilities
Other operating activities, net
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
Other investing activities, net
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings against life insurance policies
Proceeds from issuance of common stock under equity incentive plans
Surrender of common stock by employees
Redemption of Notes
Early payment fee on debt and other debt issuance costs
Net cash (used in) provided by financing activities
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH
NET INCREASE (DECREASE) IN CASH
CASH:
Beginning of period
End of period
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest
Cash paid for income taxes, net
Unpaid purchases of property and equipment included in accounts payable
2015
2014
2013
(In thousands)
$
7,061
$
7,631
$
(12,451)
17,710
4,640
1,059
(2,958)
591
2,853
596
8,157
151
166
6,761
(3,743)
(3,642)
8,211
7,686
55,299
18,247
5,225
891
(2,965)
—
2,741
1,098
3,277
483
(27,875)
(5,370)
2,267
3,065
1,022
(218)
9,519
20,583
2,520
1,132
(3,103)
—
5,278
142
(398)
264
(6,934)
8,553
(1,250)
8,982
2,475
(6,639)
19,154
(14,685)
(13,704)
(12,626)
108
71
689
726
322
(645)
(14,506)
(12,289)
(12,949)
—
—
(417)
(15,000)
(591)
(16,008)
(2,682)
22,103
70,091
92,194
19,939
1,545
905
$
$
$
$
1,041
—
(527)
—
—
514
(348)
(2,604)
72,695
70,091
19,831
1,387
864
$
$
$
$
—
38
(831)
—
(144)
(937)
(942)
4,326
68,369
72,695
19,958
2,344
1,040
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
52
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2015, 2014 and 2013
1. Organization
Commercial Vehicle Group, Inc. and its subsidiaries (“CVG” or the “Company”) is a leading supplier of a full range of cab
related products and systems for the global commercial vehicle market, including the medium-and heavy-duty truck (“MD/HD
Truck”) market, the medium-and heavy-construction vehicle market, and the military, bus, agriculture, specialty transportation,
mining, industrial equipment and off-road recreational markets.
The Company has manufacturing operations in the United States, Mexico, United Kingdom, Czech Republic, Ukraine,
China, India and Australia. Our products are primarily sold in North America, Europe, and the Asia-Pacific region.
Our products include seats and seating systems (“Seats”); trim systems and components (“Trim”); cab structures, sleeper
boxes, body panels and structural components; mirrors, wipers and controls; and electronic wire harness and panel assemblies
specifically designed for applications in commercial vehicles.
Our operations are comprised of two reportable segments, Global Truck and Bus (“GTB”) and Global Construction and
Agriculture (“GCA”). The Company’s Chief Operating Decision Maker (“CODM”), its President and Chief Executive Officer,
reviews financial information for these two reportable segments and makes decisions regarding the allocation of resources based
on these segments.
2.
Significant Accounting Policies
Principles of Consolidation — The accompanying consolidated financial statements include the accounts of our wholly-
owned or controlled subsidiaries. All 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 U.S. 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 consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Significant estimates include allowance for doubtful
accounts, returns and allowances, inventory reserves, product warranty reserves and income tax valuation allowances. Actual
results may differ materially from those estimates. Certain reclassifications have been made to prior year amounts to conform to
current year presentation.
Cash — Cash consists of deposits with high credit-quality financial institutions.
Accounts Receivable — Trade accounts receivable are stated at current value less allowances, which approximates fair value.
We review our receivables on an ongoing basis to ensure that they are properly valued and collectible. This is accomplished through
two contra-receivable accounts - returns and allowances and allowance for doubtful accounts.
Returns and allowances are used to record estimates of returns or other allowances resulting from quality, delivery, discounts
or other issues affecting the value of receivables. This account is estimated based on historical trends and current market conditions,
with the offset to revenues.
The allowance for doubtful accounts is used to record the estimated risk of loss related to the customers’ inability to pay.
This allowance is maintained at a level that we consider appropriate based on factors that affect collectability, such as the financial
health of our customers, historical trends of charge-offs and recoveries and current economic market conditions. As we monitor
our receivables, we identify customers that may have payment problems, and we adjust the allowance accordingly, with the offset
to selling, general and administrative expense. Account balances are charged off against the allowance when recovery is considered
remote.
Inventories — Inventories are valued at the lower of first-in, first-out cost or market. Inventory quantities on-hand by product
are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based primarily on our
estimated production requirements taking into consideration expected market volumes and future potential use.
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:
53
Buildings and improvements
Machinery and equipment
Tools and dies
Computer hardware and software
15 to 40 years
3 to 20 years
3 to 7 years
3 to 5 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. Depreciation expense for the year ended December 31, 2015, 2014 and
2013 was $16.4 million, $16.7 million and $19.0 million, respectively.
We review long-lived assets for recoverability whenever events or changes in circumstances indicate that carrying amounts
of an asset group may not be recoverable. Our asset groups are established by determining the lowest level of cash flows available.
If the estimated undiscounted cash flows are less than the carrying amounts of such assets, we recognize an impairment loss in an
amount necessary to write down the assets to fair value as estimated from expected future discounted cash flows. Estimating the
fair value of these assets is judgmental in nature and involves the use of significant estimates and assumptions. We base our fair
value estimates on assumptions we believe to be reasonable, but that are inherently uncertain.
As a result of a decline in the construction and agriculture markets, more specifically in Asia-Pacific and Europe, and
operating losses in China and the United Kingdom during 2015, management determined that the long-lived asset groups related
to its China and United Kingdom facilities in the GCA Segment may be impaired. However, the Company’s estimates of the
undiscounted future cash flows for each of these asset groups indicates that the facilities should have sufficient cash flows to
recover the current carrying amounts of the long-lived assets of $5.9 million as of December 31, 2015. The estimate of undiscounted
cash flows may change in future periods resulting in impairment to fair value of these long-lived asset groups.
Goodwill — Goodwill represents the excess of acquisition purchase price over the fair value of net assets acquired. We
review goodwill for impairment annually, utilizing the one-step qualitative assessment, in the second fiscal quarter and whenever
events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is only held within the GTB
segment.
In conducting the qualitative assessment, we consider relevant events and circumstances that affect the fair value or carrying
amount of the reporting unit. Such events and circumstances could include macroeconomic conditions, industry and market
considerations, overall financial performance, entity and reporting unit specific events, cost factors and capital markets pricing.
We consider the extent to which each of the adverse events and circumstances identified affect the comparison of the reporting
unit’s fair value with its carrying amount. We place more weight on the events and circumstances that most affect the reporting
unit’s fair value or the carrying amount of its net assets. We consider positive and mitigating events and circumstances that may
affect its determination of whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount.
These factors are all considered by management in reaching its conclusion about whether to perform the first step of the impairment
test.
If the reporting unit’s fair value is determined to be more likely than not impaired based on the one-step qualitative approach,
we then perform a quantitative valuation to estimate the fair value of our reporting unit. Implied fair value of goodwill is determined
by considering both the income and market approach. 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 inherently uncertain.
Definite-Lived Intangible Assets — We review definite-lived intangible assets, including tradenames, licenses and customer
relationships, for recoverability whenever events or changes in circumstances indicate that carrying amounts may not be
recoverable. If the estimated undiscounted cash flows are less than the carrying amount of such assets, we recognize an impairment
loss in an amount necessary to write down the assets to fair value as estimated from expected future discounted cash flows.
Estimating the fair value of these assets is judgmental in nature and involves the use of significant estimates and assumptions. We
base our fair value estimates on assumptions we believe to be reasonable, but that are inherently uncertain. Definite-lived intangible
assets are amortized on a straight-line basis over the estimated life of the asset.
See Note 7 for additional information on our goodwill and intangible assets.
54
Revenue Recognition — 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) collectability is reasonably assured. Title on
our products generally passes to the customer when product is shipped from our facilities to our customers.
Shipping and Handling Costs — Shipping and handling costs are recognized in cost of goods sold on the consolidated
statement of income (loss).
Warranty — We are subject to warranty claims for products that fail to perform as expected due to design or manufacturing
deficiencies. Depending on the terms under which we supply products to our customers, a customer may hold us responsible for
some or all of the repair or replacement costs of defective products when the product supplied did not perform as represented. Our
policy is to record provisions for estimated future customer warranty costs based on historical trends and for specific claims. These
amounts, as they relate to the years ended December 31, 2015 and 2014 are included within accrued liabilities and other in the
accompanying consolidated balance sheets. The following presents a summary of the warranty provision for the years ended
December 31 (in thousands):
Balance — Beginning of the year
Provision for new warranty claims
Change in provision for preexisting warranty claims
Deduction for payments made
Currency translation adjustment
Balance — End of year
2015
2014
4,438
5,878
(467)
(2,192)
(77)
7,580
$
$
4,529
3,285
563
(3,900)
(39)
4,438
$
$
Research and Development Costs — Research and development costs are expensed as incurred and included in selling,
general and administration expenses. Research and development costs charged to expense for the years ended December 31, 2015,
2014 and 2013 were approximately $7.4 million, $6.3 million, and $6.0 million, respectively.
Income Taxes — We recognize deferred tax assets and liabilities for the expected future tax consequences of events that
have been included in our financial statements or tax returns. Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and liabilities based on enacted tax laws and rates. In assessing
the realizability of deferred tax assets, we consider whether it is more likely than not that a portion, of the deferred tax assets will
not be realized. We provide a valuation allowance for deferred tax assets when it is more likely than not that a portion of such
deferred tax assets will not be realized. We recognize tax positions initially 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 are initially and subsequently 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.
Comprehensive Income (Loss) — Comprehensive income (loss) reflects the change in equity of a business enterprise during
a period from transactions and other events and circumstances from non-owner sources. Comprehensive income (loss) represents
net income (loss) adjusted for foreign currency translation adjustments and minimum pension liability adjustments. We disclose
comprehensive income (loss) in the consolidated statements of comprehensive income (loss). See Note 15 for a rollforward of
activity in accumulated comprehensive income (loss).
Fair Value of Financial Instruments — The fair value framework requires the categorization of assets and liabilities into
three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure
of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:
Level 1 — Unadjusted quoted prices in active markets for identical assets and liabilities.
Level 2 — Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities
in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3 — Significant unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the
asset or liability.
Concentrations of Credit Risk — Financial instruments that potentially subject us to concentrations of credit risk consist
primarily of accounts receivable. 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 allowances for anticipated losses. As of December 31,
2015 and 2014, receivables from our primary customers, including A.B. Volvo, Daimler Trucks, PACCAR, Caterpillar, Navistar
and John Deere, represented approximately 67% and 65% of total receivables, respectively.
55
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 loss
in stockholders’ equity. 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 purchase exchange contracts to hedge certain of the
foreign currency transaction exposures. We estimate our projected revenues and purchases in certain foreign currencies or locations,
and hedge a portion of the anticipated long or short position. The contracts typically run from one month up to eighteen months.
All forward foreign exchange contracts have been marked-to-market and the fair value of contracts recorded in the consolidated
balance sheets with the offsetting non-cash gain or loss recorded in our consolidated statements of income (loss). We do not hold
or issue foreign exchange options or forward contracts for trading purposes.
Recently Issued Accounting Pronouncements — In February 2016, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update ("ASU") No. 2016-02, "Leases (Topic 842)." ASU 2016-02 is intended to increase
transparency and comparability among companies by recognizing lease assets and liabilities and disclosing key information about
leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2019. The Company will begin
assessing the impact of the pronouncement in 2016. We anticipate this pronouncement will impact the presentation of our lease
assets and liabilities and associated disclosures.
In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory (Topic 330).” ASU 2015-11
applies to inventory measured using first-in, first-out or average cost. Under this amendment, inventory should be measured at
lower of cost and net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably
predictable costs of completion, disposal, and transportation. This pronouncement is effective for fiscal years beginning after
December 15, 2016, including interim periods within those fiscal years. The Company does not believe this pronouncement will
have a material impact on its financial statements and will implement this pronouncement beginning in the period after December
15, 2016.
In April 2015, the FASB issued ASU No. 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing
Arrangement.” The update provides additional guidance about customer’s accounting for fees paid in a cloud computing
arrangement. ASU 2015-05 is effective for interim and annual periods beginning after December 15, 2015. The Company does
not believe this pronouncement will have a material impact on its financial statements and will implement the pronouncement
beginning in the period after December 15, 2015.
In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs.” This
standard amends existing guidance to require the presentation of debt issuance cost in the balance sheet as a deduction from the
carrying amount of the related debt liability instead of a deferred charge. ASU 2015-03 is effective for annual reporting periods
beginning after December 15, 2015, but early adoption is permitted. The Company does not believe this pronouncement will
have a material impact on the Company’s financial statements and will implement this pronouncement beginning in the period
after December 15, 2015.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements-Going Concern (Topic
205-40)” (“ASU 2014-15”). Under the standard, management is required to evaluate for each annual and interim reporting
period whether it is probable that the entity will not be able to meet its obligations as they become due within one year after the
date that financial statements are issued, or are available to be issued, where applicable. ASU 2014-15 is effective for fiscal
years, and interim periods within those years, beginning after December 15, 2016, but early adoption is permitted. The
Company does not believe that this pronouncement will have a material impact on the Company’s financial statements and will
implement this pronouncement beginning in the period after December 15, 2016.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which supersedes the
revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition
guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in
Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40,
Other Assets and Deferred Costs—Contracts with Customers. The mandatory adoption date is January 1, 2018, with an early
adoption date of January 1, 2017. The Company is currently assessing the impact of implementing the new guidance on its
financial statements and expects to continue this assessment throughout 2016.
3.
Fair Value Measurement
At December 31, 2015, our financial instruments consist of cash, accounts receivable, accounts payable and our revolving
credit facility. 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.
56
Foreign Exchange Contracts. Our derivative assets and liabilities represent foreign exchange purchase and sales contracts
that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk and our
counterparties’ credit risks. Based on the utilization of these inputs, the derivative assets and liabilities are classified as Level 2.The
fair values of our derivative assets and liabilities measured on a recurring basis as of December 31 are categorized as follows (in
thousands):
Derivative assets 1
Derivative liabilities 1
2015
2014
Total
$
$
36
524
Level 1
$ — $
$ — $
Level 2
36
524
Level 3
$ — $
$ — $
Total
232
562
Level 1
$ — $
$ — $
Level 2
232
562
Level 3
$ —
$ —
1
Based on observable market transactions of spot and forward rates.
The following table summarizes the notional amount of our open foreign exchange contracts at December 31 (in thousands):
2015
2014
U.S. $
Equivalent
U.S.
Equivalent
Fair Value
U.S. $
Equivalent
U.S.
Equivalent
Fair Value
Commitments to buy or sell currencies
$
15,490
$
15,479
$
24,206
$
23,411
We consider the impact of our credit risk on the fair value of the contracts, as well as the ability to execute obligations under
the contract.
The following table summarizes the fair value and presentation in the consolidated balance sheets for derivatives not
designated as accounting hedges at December 31 (in thousands):
Foreign exchange contracts
Foreign exchange contracts
2015
Balance Sheet
Location
Other current assets
2015
Balance Sheet
Location
Accrued liabilities
$
$
Asset Derivatives
2014
Fair Value
Balance Sheet
Location
Fair Value
36 Other current assets
$
232
Liability Derivatives
2014
Fair Value
Balance Sheet
Location
Fair Value
524 Accrued liabilities
$
562
The following table summarizes the effect of derivative instruments on the consolidated statements of income (loss) for
derivatives not designated as accounting hedges at December 31 (in thousands):
Foreign exchange contracts
2015
2014
Location of Gain (Loss)
Recognized in Income on
Derivatives
Cost of Revenues
$
Amount of Gain (Loss)
Recognized in Income on
Derivatives
151
$
(484)
Long-term debt. The fair value of long-term debt obligations is based on a fair value model utilizing observable inputs.
Based on the use of these inputs, our long-term debt is classified as Level 2. The carrying amounts and fair values of our long-
term debt at December 31 are as follows (in thousands):
Long-term debt
2015
2014
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
$
235,000
$
192,700
$
250,000
$
257,500
57
There were no fair value measurements of our long-lived assets and definite-lived intangible assets measured on a non-
recurring basis as of December 31, 2015 and 2014.
4.
Inventories
Inventories consisted of the following as of December 31 (in thousands):
Raw materials
Work in process
Finished goods
5. Accrued and Other Liabilities
Accrued and other liabilities consisted of the following as of December 31 (in thousands):
Compensation and benefits
Interest
Warranty costs
Deferred revenue
Deferred tooling
Accrued services
Legal and professional fees
Product liabilities
Accrued freight
Taxes payable
Other
6. Debt
Debt consisted of the following at December 31 (in thousands):
7.875% senior secured notes due April 15, 2019
Revolving Credit Facility
2015
2014
52,647
8,776
14,235
75,658
2015
16,864
4,041
7,580
818
2,010
1,140
3,379
1,711
1,636
2,343
6,674
48,196
$
$
$
$
58,359
10,969
14,448
83,776
2014
16,690
4,217
4,438
757
1,234
785
2,331
99
1,164
1,060
3,911
36,686
2015
235,000
$
2014
250,000
$
$
$
$
$
On November 15, 2013, the Company and certain of the Company’s subsidiaries, as borrowers (together with the Company,
the “borrowers”) entered into a Second Amended and Restated Loan and Security Agreement (the “Second ARLS Agreement”)
with Bank of America, N.A. as agent and lender, which amended and restated the Amended and Restated Loan and Security
Agreement, dated as of April 26, 2011, by and among the Company, the borrowers and Bank of America, N.A., as agent and lender,
as amended, governing the Company’s revolving credit facility.
The material terms of the Second ARLS Agreement include the following:
• A facility in the amount of up to $40.0 million with the ability to increase up to an additional $35.0 million under
certain conditions;
• Availability is subject to borrowing base limitations and an availability block equal to the amount of debt and foreign
cash management services Bank of America, N.A. or its affiliates makes available to the Company’s foreign
subsidiaries;
• Availability of up to an aggregate amount of $10.0 million for the issuance of letters of credit, which reduces the
total amount available;
• Extension of the maturity date to November 15, 2018;
58
• Amendments to certain covenants to provide additional flexibility, including (i) conditional permitted distributions,
permitted foreign investments, and permitted acquisitions on minimum availability, fixed charge coverage ratio and
other requirements, and (ii) permitting certain sale-leaseback transactions;
•
Permitting the repurchase of the Company’s 7.875% senior secured notes due 2019 ("7.875% notes) under certain
circumstances; and
• Reduction of the fixed charge coverage ratio maintenance requirement to 1.0:1.0 and reduction of the availability
threshold for triggering compliance with the fixed charge coverage ratio, as described below.
The size of the revolving credit facility was unchanged by the Second ARLS Agreement and remains at $40 million, but the
borrowers may request an increase in revolver commitments from time to time in an aggregate amount of up to $35 million, as
long as the requested increase does not breach any subordinated debt agreement of the borrowers or the indenture governing the
Company’s 7.875% notes due 2019. Availability under the revolving credit facility is subject to borrowing base limitations and
an availability block equal to the amount of debt and foreign cash management services Bank of America, N.A. or its affiliates
makes available to the Company’s foreign subsidiaries. Up to an aggregate of $10.0 million is available to the borrowers for the
issuance of letters of credit, which reduces availability under the revolving credit facility.
The applicable margin is based on average daily availability under the revolving credit facility as follows:
Level
III
II
I
Average Daily
Availability
Domestic Base
Rate Loans
LIBOR
Revolver Loans
> $10,000,000 but < $20,000,000
0.50%
0.75%
1.00%
1.50%
1.75%
2.00%
The applicable margin is subject to increase or decrease by the agent on the first day of the calendar month following each
fiscal quarter end. If the agent is unable to calculate average daily availability for a fiscal quarter due to borrower’s failure to
deliver a borrowing base certificate when required, the applicable margin will be set at Level I until the first day of the calendar
month following receipt of a borrowing base certificate. As of December 31, 2015 the applicable margin was set at Level III.
The Company pays a commitment fee to the lenders equal to 0.25% per annum of the unused amounts under the revolving
credit facility. As of December 31, 2015, $2.8 million in deferred financing fees relating to the revolving credit facility and our
7.875% notes were being amortized over the remaining life of the agreements.
As of December 31, 2015, we did not have borrowings under the revolving credit facility. In addition, as of December 31,
2015, we had outstanding letters of credit of $2.5 million and borrowing availability of $37.5 million under the revolving credit
facility.
The borrowers’ obligations under the revolving credit facility are secured by a first-priority lien (subject to certain permitted
liens) on substantially all of the tangible and intangible assets of the borrowers, as well as 100% of the capital stock of the direct
domestic subsidiaries of each borrower and 65% of the capital stock of each foreign subsidiary directly owned by a borrower.
Each of CVG and each other borrower is jointly and severally liable for the obligations under the revolving credit facility and
unconditionally guarantees the prompt payment and performance thereof.
Terms, Covenants and Compliance Status
The Second ARLS Agreement requires the maintenance of a minimum fixed charge coverage ratio calculated based upon
consolidated EBITDA (as defined in the revolving credit facility) as of the last day of each of the Company’s fiscal quarters. The
borrowers are not required to comply with the fixed charge coverage ratio requirement for as long as the borrowers maintain at
least $7.5 million of borrowing availability under the revolving credit facility. If borrowing availability is less than $7.5 million
at any time, the borrowers would be required to comply with a fixed charge coverage ratio of 1.0:1.0 as of the end of any fiscal
quarter, and would be required to continue to comply with these requirements until the borrowers have borrowing availability of
$7.5 million or greater for 60 consecutive days. Because the Company had borrowing availability in excess of $7.5 million from
January 1, 2015 through December 31, 2015, the Company was not required to comply with the minimum fixed charge coverage
ratio covenant during the year ended December 31, 2015.
The Second ARLS Agreement contains customary restrictive covenants, including, without limitation, limitations on the
ability of the borrowers and their subsidiaries to incur additional debt and guarantees; grant liens on assets; pay dividends or make
other distributions; make investments or acquisitions; dispose of assets; make payments on certain indebtedness; merge, combine
with any other person or liquidate; amend organizational documents; file consolidated tax returns with entities other than other
borrowers or their subsidiaries; make material changes in accounting treatment or reporting practices; enter into restrictive
59
agreements; enter into hedging agreements; engage in transactions with affiliates; enter into certain employee benefit plans; amend
subordinated debt or the indenture governing the 7.875% notes; and other matters customarily restricted in loan agreements. The
Second ARLS Agreement also contains customary reporting and other affirmative covenants. The Company was in compliance
with these covenants as of December 31, 2015.
The Second ARLS Agreement contains customary events of default, including, without limitation, nonpayment of obligations
under the revolving credit facility when due; material inaccuracy of representations and warranties; violation of covenants in the
Second ARLS Agreement and certain other documents executed in connection therewith; breach or default of agreements related
to debt in excess of $5.0 million that could result in acceleration of that debt; revocation or attempted revocation of guarantees;
denial of the validity or enforceability of the loan documents or failure of the loan documents to be in full force and effect; certain
judgments in excess of $2.0 million; the inability of an obligor to conduct any material part of its business due to governmental
intervention, loss of any material license, permit, lease or agreement necessary to the business; cessation of an obligor’s business
for a material period of time; impairment of collateral through condemnation proceedings; certain events of bankruptcy or
insolvency; certain Employee Retirement Income Securities Act events; and a change in control of the Company. Certain of the
defaults are subject to exceptions, materiality qualifiers, grace periods and baskets customary for credit facilities of this type.
Voluntary prepayments of amounts outstanding under the revolving credit facility are permitted at any time, without premium
or penalty.
The Second ARLS Agreement requires the borrowers to make mandatory prepayments with the proceeds of certain asset
dispositions and upon the receipt of insurance or condemnation proceeds to the extent the borrowers do not use the proceeds for
the purchase of assets useful in the borrowers’ businesses.
7.875% Senior Secured Notes due 2019
The 7.875% notes were issued pursuant to an indenture, dated as of April 26, 2011 (the “7.875% Notes Indenture”), by and
among CVG, certain of our subsidiaries party thereto, as guarantors (the “guarantors”), and U.S. Bank National Association, as
trustee. Interest is payable on the 7.875% notes on April 15 and October 15 of each year until their maturity date of April 15, 2019.
The 7.875% notes are senior secured obligations of CVG. Our obligations under the 7.875% notes are guaranteed by the
guarantors. The obligations of CVG and the guarantors under the 7.875% notes are secured by a second-priority lien (subject to
certain permitted liens) on substantially all of the property and assets of CVG and the guarantors, and a pledge of 100% of the
capital stock of CVG’s domestic subsidiaries and 65% of the voting capital stock of each foreign subsidiary directly owned by
CVG and the guarantors. The liens, the security interests and all of the obligations of CVG and the guarantors and all provisions
regarding remedies in an event of default are subject to an intercreditor agreement among CVG, certain of its subsidiaries, the
agent for the revolving credit facility and the collateral agent for the 7.875% notes.
Since April 15, 2014, the Company has been entitled at its option to redeem all or a portion of the Securities at the redemption
prices (expressed as percentages of principal amount on the redemption date), plus accrued and unpaid interest, if any, to the
redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest
payment date), plus a redemption premium if redeemed during the 12-month period commencing on April 15, 2015 and 2016 of
103.9387% and 101.969%, respectively. Effective April 15, 2014, the "make-whole" premium is not applicable. We evaluated the
redemption premium under ASC 815-15 and determined that the premium is not required to be bifurcated from the 7.875% notes
and accounted for as a separate derivative instrument. If we experience certain change of control events, holders of the 7.875%
notes may require us to repurchase all or part of their notes at 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the repurchase date.
The 7.875% Notes Indenture contains restrictive covenants and events of default (subject to certain customary grace periods).
We were in compliance with these covenants and were not in default as of December 31, 2015. On November 14, 2015, the
Company redeemed $15 million of its $250 million then outstanding 7.875% notes. The redemption price for the 7.875% notes
was equal to 103.938% of the principal amount of the 7.875% notes, plus accrued and unpaid interest to, but not including, the
redemption date. Upon the partial redemption by the Company of the 7.875% notes, $235 million of the 7.875% notes remain
outstanding. We paid a premium for early redemption totaling $0.6 million in accordance with the provisions of the 7.875% notes.
7. Goodwill and Intangible Assets
Our intangible assets as of December 31 were comprised of the following (in thousands):
60
Definite-lived intangible assets:
Trademarks/Tradenames
Customer relationships
Definite-lived intangible assets:
Trademarks/Tradenames
Customer relationships
Weighted-
Average
Amortization
Period
23 years
15 years
Weighted-
Average
Amortization
Period
23 years
15 years
$
$
$
$
December 31, 2015
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
9,460
14,344
23,804
$
$
(3,914) $
(2,944)
(6,858) $
5,546
11,400
16,946
December 31, 2014
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
9,580
14,622
24,202
$
$
(3,585) $
(2,028)
(5,613) $
5,995
12,594
18,589
The aggregate intangible asset amortization expense was $1.3 million, $1.5 million and $1.6 million for the fiscal years
ended December 31, 2015, 2014 and 2013, respectively. The estimated intangible asset amortization expense for each of the five
succeeding fiscal years ending after December 31, 2015 is $1.3 million per year through fiscal year ending December 31, 2019
and $1.2 million in the fifth year.
The changes in the carrying amounts of goodwill for the years ended December 31 are as follows (in thousands):
Balance — Beginning of the year
Currency translation adjustment
Balance — End of the year
8.
Income Taxes
2015
2014
$
$
8,056
(222)
7,834
$
$
8,220
(164)
8,056
Pre-tax income (loss) consisted of the following for the years ended December 31 (in thousands):
Domestic
Foreign
Total
2015
2014
$
$
16,819
—
16,819
$
$
6,820
5,942
12,762
$
$
2013
(20,863)
6,075
(14,788)
A reconciliation of income taxes computed at the statutory rates to the reported income tax (benefit) provision for the years
ended December 31 is as follows (in thousands):
Federal provision at statutory rate
U.S./foreign tax rate differential
Foreign non-deductible expenses
Foreign tax provision
State taxes, net of federal benefit
Change in uncertain tax positions
Change in valuation allowance
Tax credits
Share-based compensation
Other
Provision (benefit) for income taxes
61
2015
2014
2013
5,887
1
(479)
296
588
236
3,283
(283)
459
(230)
9,758
$
$
4,466
(991)
1,556
361
1,799
(150)
(2,538)
(91)
377
342
5,131
$
$
(5,176)
(809)
1,174
114
1,009
(253)
856
(326)
636
438
(2,337)
$
$
The provision (benefit) for income taxes for the years ended December 31 is as follows (in thousands):
Current
Provision
$
(153) $
380
1,374
1,601
$
2015
Deferred
Provision
6,077
389
1,691
8,157
Total
Provision
$ 5,924
769
3,065
$ 9,758
Current
Provision
26
$
316
1,512
1,854
$
2014
Deferred
Provision
4,799
$
2,834
(4,356)
3,277
$
Total
Provision
$ 4,825
3,150
(2,844)
$ 5,131
2013
Total
Provision
Deferred
Current
Provision
Provision
$ (2,689) $ (1,837) $ (4,526)
994
1,011
1,178
447
(396) $ (2,337)
17
731
$ (1,941) $
Federal
State and local
Foreign
Total
$
A summary of deferred income tax assets and liabilities as of December 31 is as follows (in thousands):
2015
2014
Noncurrent deferred tax assets:
Amortization and fixed assets
Accounts receivable
Inventories
Pension obligations
Warranty obligations
Accrued benefits
Foreign exchange contracts
Restricted stock
Tax credits carryforward
Net operating loss carryforward:
$
5,270
$
706
3,959
5,268
3,608
1,370
94
153
2,562
15,094
287
38,371
(13,118)
25,253
$
(1,158) $
2,121
(796)
167
(1,286)
(1,119) $
6,558
410
3,074
7,228
2,267
1,980
212
173
2,062
20,928
(573)
44,319
(11,029)
33,290
(938)
1,432
(667)
(173)
(741)
(914)
24,134
$
32,376
Other temporary differences not currently available for tax purposes
Total noncurrent assets
Valuation allowance
Net noncurrent deferred tax assets
Noncurrent deferred tax liabilities:
Amortization and fixed assets
Net operating loss carryforwards
Other temporary differences not currently available for tax purposes
Total noncurrent tax liabilities
Valuation allowance
Net noncurrent deferred tax liabilities
Total deferred tax asset
$
$
$
$
We have elected early adoption of FASB ASU 2015-17, “Income Taxes (Topic 740)” which requires deferred tax assets and
liabilities to be classified as noncurrent amounts in the consolidated balance sheets. We are adopting this change because this
method simplifies financial reporting and reduces complexity. We have applied the change retrospectively and have reclassified
the amounts in 2014 for comparison purposes. The impact of this change on the 2014 consolidated balance sheet was a decrease
in current assets of $9.2 million, a decrease in total assets of $0.1 million and a decrease in total liabilities of $0.1 million.
As of December 31, 2015, we had total noncurrent deferred assets of $38.4 million, which was offset by $13.1 million of
valuation allowances. Our total noncurrent deferred tax liabilities were $0.2 million, which was offset by $1.3 million of valuation
allowances. Our overall deferred tax position was a net deferred tax asset of $24.1 million.
As a result of certain realization requirements, the table of deferred tax assets and liabilities shown above does not include
certain deferred tax assets at December 31, 2015 that arose directly from tax deductions related to equity compensation in excess
of compensation recognized for financial reporting. Equity will be increased by $2.1 million if and when such deferred tax assets
are ultimately realized. We use tax law ordering for purposes of determining when excess tax benefits have been realized.
62
We assess whether valuation allowances should be established against deferred tax assets based on consideration of all
available evidence, both positive and negative, using a “more likely than not” standard. This assessment considers, among other
matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward
periods, our experience with tax attributes expiring unused and tax planning alternatives. In making such judgments, significant
weight is given to evidence that can be objectively verified.
During 2015, we released valuation allowances of $0.5 million in Belgium and Luxemburg that had been previously
established. A forecast of future profitability in our operations in Belgium and Luxembourg indicates that they will be able to
utilize their remaining deferred assets before expiration.Also, we released valuation allowance of $0.2 million associated with
certain U.S. state tax net operating loss carry forwards. We determined a valuation allowance of $1.9 million should be established
for our foreign deferred tax assets located in China which is in a cumulative loss position. 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.
As of December 31, 2015, we had $62.4 million of foreign, no federal and $54.6 million of state net operating loss
carryforwards available to offset future taxable income. Utilization of these losses is subject to the tax laws of the applicable tax
jurisdiction and may be limited by the ability of certain subsidiaries to generate taxable income in the associated tax jurisdiction.
Generally, our net operating loss carryforwards expire between 2016 and 2035. However, there are certain tax jurisdictions with
no expiration dates. We have established valuation allowances for all net operating losses that we believe are more likely than not
to expire before they can be utilized. Of the net operating losses that we anticipate utilizing, there are none that would expire in
2016 and $3.0 million that would expire before 2020.
As of December 31, 2015, we had $1.5 million of research and development tax credits being carried forward related to our
U.S. operations. Utilization of these credits may be limited by the ability to generate federal taxable income in future years and
the credits will expire between 2027 and 2034. We also had $1.1 million of alternative minimum tax credit carryforwards that do
not expire.
As of December 31, 2015, undistributed earnings from our foreign affiliates were $33.8 million. We do not intend to repatriate
these funds and consider these funds to be permanently reinvested. Deferred taxes have not been provided on these unremitted
earnings as determination of the liability is not practical because the liability would be dependent on circumstances existing if and
when remittance occurs.
As of December 31, 2015 cash of $25.8 million was held by foreign subsidiaries. If we were to repatriate any portion of
these funds back to the U.S., we would need to accrue and pay the appropriate withholding and income taxes on amounts repatriated.
We do not intend to repatriate funds held by our foreign affiliates, but intend to use the cash to fund the growth of our foreign
operations.
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. 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.
We file federal income tax returns in the U.S. and income tax returns in various states and foreign jurisdictions. With few
exceptions, we are no longer subject to income tax examinations by any of the taxing authorities for years before 2011. We currently
have no tax examinations in process.
As of December 31, 2015, and 2014, we provided a liability of $0.5 million and $27 thousand, respectively, of unrecognized
tax benefits related to federal, state, and foreign jurisdictions, all of which would impact our effective tax rate, if recognized. These
unrecognized tax benefits are netted against their related noncurrent deferred tax assets that are being carried forward (net operating
losses and tax credits).
We accrue interest and penalties related to unrecognized tax benefits through income tax expense. We had $0.1 million and
$2 thousand accrued for the payment of interest and penalties as of December 31, 2015 and December 31, 2014, respectively.
Accrued interest and penalties are included in the $0.5 million of unrecognized tax benefits.
We have no unrecognized tax reserves, interest and penalties we anticipate to be released within the next 12 months due to
the statue of limitations.
63
A reconciliation of the beginning and ending amount of unrecognized tax benefits (including interest and penalties) at
December 31 is as follows (in thousands):
Balance — Beginning of the year
Gross increase — tax positions in prior periods
Gross decreases — tax positions in prior periods
Gross increases — current period tax positions
Lapse of statute of limitations
Balance — End of the year
9.
Segment Reporting and Geographic Locations
2015
2014
2013
27
445
—
44
(27)
489
$
$
189
—
(170)
8
—
27
$
$
444
—
(257)
2
—
189
$
$
Operating segments are defined as components of an enterprise that are evaluated regularly by the Company’s CODM, which
is our President and Chief Executive Officer.
The Company's two reportable segments, the GTB Segment and the GCA Segment, consist of a number of manufacturing
facilities. Generally, the facilities in the GTB Segment manufacture and sell Seats, Trim, wipers, mirrors, structures and other
products into the MD/HD Truck and bus markets. Generally, the facilities in the GCA Segment manufacture and sell wire harnesses,
Seats and other products into the construction and agriculture markets. Both segments participate in the aftermarket. Certain of
our manufacturing facilities manufacture and sell products through both of our segments. Each manufacturing facility that sells
products through both segments is reflected in the financial results of the segment that has the greatest amount of sales from that
manufacturing facility. Our segments are more specifically described below.
The GTB Segment manufactures and sells the following products:
•
Seats; Trim; sleeper boxes; and cab structures, structural components and body panels. These products are sold
primarily to the MD/HD Truck markets in North America;
Seats to the truck and bus markets in Asia-Pacific and Europe;
•
• Mirrors and wiper systems to the truck, bus, agriculture, construction, rail and military markets in North America;
• Trim to the recreational and specialty vehicle market in North America; and
• Aftermarket seats and components into North America.
The GCA Segment manufactures and sells the following products:
• Electronic wire harness assemblies, and Seats for commercial, construction, agricultural, industrial, automotive,
mining and military industries in North America, Europe and Asia-Pacific;
•
Seats to the truck and bus markets in Asia-Pacific and Europe;
• Wiper systems to the construction and agriculture markets in Europe;
• Office seating in Europe and Asia-Pacific; and
• Aftermarket seats and components in Europe and Asia-Pacific
Corporate expenses consist of certain overhead and shared costs that are not directly attributable to the operations of a
segment. For purposes of business segment performance measurement, some of these costs that are for the benefit of the operations
are allocated based on a combination of methodologies. The costs that are not allocated to a segment are considered stewardship
costs and remain at corporate in our segment reporting.
The following table presents segment revenues, gross profit, depreciation and amortization expense, selling, general and
administrative expenses, operating income and other items as of and for the year ended December 31, 2015 (in thousands). The
table does not include assets as the CODM does not review assets by segment.
64
Revenues
External Revenues
Intersegment Revenues
Total Revenues
Gross Profit
Depreciation and Amortization Expense
Selling, General & Administrative Expenses
Operating Income
Capital and Other Items:
Capital Expenditures
Other Items 1
As of and for the year ended December 31, 2015
Global
Truck &
Bus
Global
Construction &
Agriculture
Corporate/
Other
Total
$
$
$
$
$
$
$
$
564,651
618
565,269
85,702
8,909
25,263
59,252
7,579
1,838
$
$
$
$
$
$
$
$
260,690
10,937
271,627
28,627
5,855
20,442
8,044
4,688
494
$
$
$
$
$
$
$
$
— $
(11,555) $
(11,555) $
(3,507) $
2,946
$
$
25,764
(29,270) $
825,341
—
825,341
110,822
17,710
71,469
38,026
3,323
$
— $
15,590
2,332
1 Other items include costs associated with plant closings, including employee severance or retention costs, lease cancellation
costs, building repairs and costs to transfer equipment of $1.8 million in the GTB Segment. Included in other items for
the GCA Segment are costs associated with plant closings and other restructuring, including employee severance or
retention costs and lease cancellation costs of $0.5 million.
The following table presents segment revenues, gross profit, depreciation and amortization expense, selling, general and
administrative expenses, operating income and other items as of and for the year ended December 31, 2014 (in thousands). The
table does not include assets as the CODM does not review assets by segment.
Revenues
External Revenues
Intersegment Revenues
Total Revenues
Gross Profit
Depreciation and Amortization Expense
Selling, General & Administrative Expenses
Operating Income
Capital and Other Items:
Capital Expenditures
Other Items 1
As of and for the year ended December 31, 2014
Global
Truck &
Bus
Global
Construction &
Agriculture
Corporate/
Other
Total
$
$
$
$
$
$
$
$
533,752
366
534,118
81,430
8,973
28,890
51,171
8,055
2,090
$
$
$
$
$
$
$
$
305,991
11,210
317,201
29,583
5,905
21,903
7,533
$
$
$
$
$
$
— $
(11,576) $
(11,576) $
(3,325) $
$
3,369
21,687
$
(25,011) $
839,743
—
839,743
107,688
18,247
72,480
33,693
5,140
$
— $
1,374
$
— $
14,569
2,090
1 Other items includes costs associated with plant closings, including employee severance or retention costs, lease
cancellation costs, building repairs and costs to transfer equipment of $1.3 million in the GTB Segment. Additionally, the
GTB Segment also includes a loss on sale of a manufacturing facility in Norwalk Ohio of $0.8 million.
The following table presents segment revenues, gross profit, depreciation and amortization expense, selling, general and
administrative expenses, operating income, total assets and other items as of and for the year ended December 31, 2013 (in
thousands). The table does not include assets as the CODM does not review assets by segment.
65
Revenues
External Revenues
Intersegment Revenues
Total Revenues
Gross Profit
Depreciation and Amortization Expense
Selling, General & Administrative Expenses
Operating Income
Capital and Other Items:
Capital Expenditures
Other Items 1
As of and for the year ended December 31, 2013
Global
Truck &
Bus
Global
Construction &
Agriculture
Corporate/
Other
Total
$
$
$
$
$
$
$
$
472,878
366
473,244
59,524
11,773
28,036
30,056
5,891
3,221
$
$
$
$
$
$
$
$
274,840
7,997
282,837
24,365
5,459
19,273
4,943
6,118
272
$
$
$
$
$
$
$
$
— $
(8,363) $
(8,363) $
(4,160) $
3,351
$
$
24,402
(28,561) $
747,718
—
747,718
79,729
20,583
71,711
6,438
1,650
6,309
$
$
13,659
9,802
1 Other items includes impairment of equipment for technology to manufacture truck components of $1.3 million and
IT software at a plant location of $1.3 million and charges associated with a reduction in force of $0.6 million in the GTB
Segment. Included in other items for the GCA Segment are charges associated with a reduction in force of $0.3 million.
Included in Corporate are third party consulting costs for an organizational assessment and separation charges relating
to the former CEO, in addition to costs associated with hiring a new CEO totaling $5.3 million and charges associated
with a reduction in force of $1.0 million.
The following table presents revenues and long-lived assets for each of the geographic areas in which we operate (in
thousands):
Years Ended December 31,
2015
2014
2013
United States
All other countries
Revenues
$ 635,627
189,714
$ 825,341
Long-lived
Assets
59,280
11,681
70,961
$
$
Revenues
$ 644,547
195,196
$ 839,743
Long-lived
Assets
60,819
12,643
73,462
$
$
Revenues
$ 557,389
190,329
$ 747,718
Long-lived
Assets
63,404
15,472
78,876
$
$
Revenues are attributed to geographic locations based on the geography from which the product is sold. Included in all other
countries are intercompany sales eliminations.
The following is the composition by product category of our revenues (dollars in thousands):
Seats and seating systems
Trim systems and components
Electronic wire harnesses and panel
assemblies
Cab structures, sleeper boxes, body
panels and structural components
Mirrors, wipers and controls
Years Ended December 31,
2015
2014
2013
Revenues
$ 339,724
179,713
154,417
96,046
55,441
$ 825,341
%
Revenues
$ 351,621
163,399
180,237
41
22
19
%
Revenues
$ 314,440
150,605
152,947
42
19
21
12
6
100
89,168
55,318
$ 839,743
11
7
100
74,219
55,507
$ 747,718
%
42
20
21
10
7
100
10. Commitments and Contingencies
Leases — We lease office, warehouse 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 under these arrangements was $11.3 million, $12.6 million and $16.8 million in
66
2015, 2014 and 2013, respectively. Capital lease agreements entered into by us are immaterial. Future approximate minimum
annual rental commitments at December 31, 2015 under these operating leases are as follows (in thousands):
Year Ending December 31,
2016
2017
2018
2019
2020
Thereafter
$ 9,011
8,075
6,846
6,157
3,587
13,744
Guarantees — We accrue for costs associated with guarantees when it is probable that a liability has been incurred and the
amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available
facts, and where no amount within a range of estimates is more likely, the minimum is accrued. We record a liability for the fair
value of such guarantees in the balance sheet. As of December 31, 2015 and 2014, we had no such guarantees.
Litigation — We are subject to various legal proceedings and claims arising in the ordinary course of business, including
but not limited to workers' compensation claims, OSHA investigations, employment disputes, service provider disputes, intellectual
property disputes, those arising out of alleged defects, breach of contracts, product warranties and environmental matters.
Management believes that we maintain adequate insurance or we have established reserves for issues that are probable and estimable
in amounts that are adequate to cover reasonable adverse judgments not covered by insurance. Based upon the information available
to management and discussions with legal counsel, it is the opinion of management that the ultimate outcome of the various legal
actions and claims that are incidental to our business 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.
11. Stockholders’ Equity (Deficit)
Common Stock — Our authorized capital stock consists of 60,000,000 shares of common stock with a par value of $0.01
per share, with 29,448,779 and 29,148,504 shares outstanding as of December 31, 2015. and 2014, respectively.
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, 2015.
Earnings Per Share — 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 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. Potential common shares are included in the diluted earnings per share calculation when dilutive.
Diluted earnings per share for years ended December 31, 2015, 2014 and 2013 includes the effects of potential common
shares consisting of common stock issuable upon exercise of outstanding stock options when dilutive (in thousands, except per
share amounts):
Net income attributable to common stockholders — basic and diluted
$
7,060
$
7,630
$
Weighted average number of common shares outstanding
29,209
28,926
2015
2014
2013
(12,445)
28,584
Dilutive effect of outstanding stock options and restricted stock grants
after application of the treasury stock method
190
191
—
Dilutive shares outstanding
Basic earnings per share attributable to common stockholders
Diluted earnings per share attributable to common stockholders
29,399
29,117
$
$
0.24
0.24
$
$
0.26
0.26
$
$
28,584
(0.44)
(0.44)
For the year ended December 31, 2015, diluted earnings per share excludes 501 thousand shares of nonvested restricted
stock as the effect would have been anti-dilutive. As of December 31, 2014, diluted earnings per share excludes 23 thousand shares
of nonvested restricted stock and 29 thousand shares of outstanding stock options as the effect would have been anti-dilutive. As
of December 31, 2013, diluted earnings per share excludes 855 thousand shares of nonvested restricted stock and 206 thousand
shares of outstanding stock options as the effect would have been anti-dilutive.
67
Dividends — We have not declared or paid any cash dividends in the past. The terms of the Second ARLS Agreement and
the 7.875% Notes Indenture restricts the payment or distribution of our cash or other assets, including cash dividend payments.
12. Performance Awards
Awards, defined as cash, shares or other awards, may be granted to employees under the Commercial Vehicle Group, Inc.
2014 Equity Incentive Plan (the “2014 EIP”). The award is earned and payable based upon the Company’s relative Total Shareholder
Return in terms of ranking as compared to the Peer Group over a three-year period (the “Performance Period”). Total Shareholder
Return is determined by the percentage change in value (positive or negative) over the applicable measurement period as measured
by dividing (A) the sum of (I) the cumulative value of dividends and other distributions paid on the Common Stock (or the publicly
traded common stock of the applicable Peer Group company) for the applicable measurement period, and (II) the difference
(positive or negative) between each such company’s starting stock price and ending stock price, by (B) the starting stock price.
The award is to be paid out at the end of the Performance Period in cash if the employee is employed through the end of the
Performance Period. If the employee is not employed as of the payment date, the award will be forfeited. These grants were
accounted for as cash settlement awards for which the fair value of the award fluctuates based on the change in Total Shareholder
Return in relation to the Peer Group. Performance awards were granted under the 2014 EIP in November 2015 and 2014, and in
November 2013 under the Fourth Amended and Restated Equity Incentive Plan. Expense associated with the performance awards
is reported in selling, general and administrative expenses in the consolidated statement of income. The following table summarizes
the grant activity for the years December 31, 2015, 2014 and 2013 (in thousands, except for the remaining periods):
Grant
Date
November
2012
November
2013
November
2014
November
2015
Grant
Amount
Forfeitures/
Adjustments Payments
Balance at
December 31,
2015
Vesting
Schedule
Unrecognized
Compensation
Remaining
Periods (in
Months) to
Vesting
$
1,865
$
(1,583) $
(282) $
1,351
2,087
1,487
(715)
(1,062)
—
—
—
—
$
6,790
$
(3,360) $
(282) $
—
636
1,025
1,487
3,148
November
2015
November
2016
November
2017
November
2018
$
$
—
159
598
1,363
2,120
0
9
21
33
13. Share-Based Compensation
The compensation expense that has been charged against income for those arrangements was $2.9 million, $2.7 million and
$5.3 million for the years ended December 31, 2015, 2014 and 2013, respectively. Share-based compensation expense is classified
in selling, general and administrative expenses in the consolidated statement of income.
Restricted Stock Awards — 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 of the board of directors. A participant granted restricted stock generally has all of the rights
of a stockholder, unless the compensation committee determines otherwise. The following table summarizes information about
restricted stock grants (in millions, except for share data):
Grant
November 2013
October 2014
April 2015
July 2015
October 2015
October 2015
Shares
470,997
Vesting Schedule
3 equal annual installments commencing on October 20, 2014
506,171
3 equal annual installments commencing on October 20, 2015
27,174
3 equal annual installments commencing on October 20, 2015
38,772
cliff vest as of October 20, 2018
595,509
3 equal annual installments commencing on October 20, 2016
138,888
fully vests as of October 20, 2016
Unearned
Compensation
0.6
$
$
$
$
$
$
1.5
0.1
0.2
1.5
0.3
Remaining
Period (in
months)
10
22
22
34
34
10
As of December 31, 2015, there was approximately $4.2 million of unrecognized compensation expense related to non-
vested share-based compensation arrangements granted under our equity incentive plans. This expense is subject to future
68
adjustments for vesting and forfeitures and will be recognized on a straight-line basis over the remaining period listed above for
each grant.
We currently estimate the forfeiture rate for November 2015, November 2014 and November 2013 restricted stock awards
at 8.5%, 10.3% and 8.2% respectively, for all participants of each plan. A summary of the status of our restricted stock awards as
of December 31, 2015 and changes during the twelve-month period ending December 31, 2015, 2014 and 2013 is presented below:
Nonvested - beginning of year
Granted
Vested
Forfeited
Nonvested - end of year
2015
2014
2013
Shares
(000’s)
Weighted-
Average
Grant-Date
Fair Value
Shares
(000’s)
Weighted-
Average
Grant-Date
Fair Value
Shares
(000’s)
Weighted-
Average
Grant-Date
Fair Value
$
915
818
(400)
(205)
1,128
$
6.96
3.24
7.06
6.93
4.24
855
$
577
(379)
(138)
915
$
7.59
6.91
8.06
7.59
6.96
908
$
571
(489)
(135)
855
$
10.10
6.96
11.05
9.30
7.59
We expect employees to surrender approximately 197 thousand shares of our common stock in connection with the vesting
of restricted stock during 2016 to satisfy income tax withholding obligations.
As of December 31, 2015, a total of 1,279,573 shares were available for future grants from the shares authorized for award
under our 2014 Equity Incentive Plan, including cumulative forfeitures.
Repurchase of Common Stock — We did not repurchase any of our common stock on the open market as part of a stock
repurchase program during 2015; however, our employees surrendered 99,920 shares of our common stock to satisfy tax withholding
obligations on the vesting of restricted stock awards issued under our 2014 EIP and the Fourth Amended and Restated Equity
Incentive Plan.
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. 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 $2.8 million in 2015 and $2.2 million in 2014 and 2013.
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 U.S. and United Kingdom. Our policy is to make annual contributions to the plans
to fund the minimum contributions as required by local regulations.
The change in benefit obligation, plan assets and funded status as of December 31 consisted of the following (in thousands):
69
Change in benefit obligation:
Benefit obligation — Beginning of year $
Service cost
Interest cost
Participant contributions
Benefits paid
Actuarial loss (gain)
Exchange rate changes
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets — Beginning
of year
Actual return on plan assets
Employer contributions
Participant contributions
Benefits paid
Exchange rate changes
Fair value of plan assets at end of year
U.S. Pension Plans
Non-U.S. Pension Plans
Other
Post-Retirement
Benefit Plans
2015
2014
2015
2014
2015
2014
50,764
$
42,029
$
43,569
$
43,271
$
515
$
135
1,846
—
(2,062)
(3,319)
—
84
1,887
—
(2,007)
8,771
—
47,364
50,764
—
1,470
—
(1,676)
(2,263)
(1,914)
39,186
—
1,758
—
(1,590)
2,642
(2,512)
43,569
35,660
532
2,140
—
(2,062)
—
36,270
33,542
2,035
2,090
—
(2,007)
—
35,660
(15,104) $
35,752
328
818
—
(1,676)
(1,614)
33,608
(5,578) $
35,044
3,599
733
—
(1,590)
(2,034)
35,752
(7,817) $
—
18
11
(117)
4
—
431
—
—
106
11
(117)
—
—
(431) $
686
—
28
14
(100)
(113)
—
515
—
—
86
14
(100)
—
—
(515)
Funded status
$
(11,094) $
Amounts recognized in the consolidated balance sheets at December 31 consist of (in thousands):
U.S. Pension Plans
Non-U.S. Pension Plans
Other Post-Retirement
Benefit Plans
2015
2014
2015
2014
2015
2014
Current liabilities
Noncurrent liabilities
Net amount recognized
$
$
— $
— $
— $
— $
11,094
15,104
5,578
7,818
11,094
$
15,104
$
5,578
$
7,818
$
74
356
430
$
$
81
434
515
The components of net periodic benefit cost for the years ended December 31 are as follows (in thousands):
U.S. Pension Plans
Non-U.S. Pension Plans
Other
Post-Retirement
Benefit Plans
2015
2014
2013
2015
2014
2013
2015
2014
2013
$
135
$
84
$
108
$
— $
— $
— $
— $
— $
1,846
1,887
1,704
1,470
1,758
1,761
(2,673)
(2,514)
(2,202)
(1,597)
(1,891)
(1,878)
—
—
—
—
—
—
18
—
6
28
—
6
—
29
—
(122)
Service cost
Interest cost
Expected return
on plan assets
Amortization of
prior service cost
Recognized
actuarial loss
(gain)
457
159
421
Net periodic
benefit cost
Net (benefit) cost $
(235)
(384)
(235) $
(384) $
31
31
$
275
148
148
$
249
116
116
$
302
185
185
(121)
(158)
(157)
(97)
(97) $
(124)
(124) $
(250)
(250)
$
70
Amounts Recognized in Accumulated Other Comprehensive Income (Loss) — Amounts recognized in accumulated other
comprehensive income (loss) at December 31 are as follows (in thousands):
U.S. Pension Plans
Non-U.S. Pension Plans
Other
Post-Retirement
Benefit Plans
2015
2014
2013
2015
2014
2013
2015
2014
2013
Net actuarial loss
(gain)
Prior service cost
$ 15,471
$ 17,105
$ 8,014
$ 8,784
$ 10,227
$ 10,130
$
(497) $
(620) $
—
—
—
—
—
$ 15,471
$ 17,105
$ 8,014
$ 8,784
$ 10,227
$ 10,130
$
69
(428) $
75
(545) $
(682)
81
(601)
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Loss) — Amounts
recognized as other changes in plan assets and benefit obligations in other comprehensive income for the year ended December
31 are as follows (in thousands):
U.S. Pension Plans
Non-U.S. Pension Plans
Other Post-
Retirement
Benefit Plans
2015
2014
2015
2014
2015
2014
Actuarial loss (gain)
$
(1,178) $
Amortization of actuarial (gain) loss
Prior Service credit
Total recognized in other
comprehensive income (loss)
(457)
—
$
9,251
(159)
—
(994) $
(275)
—
934
(249)
—
$
4
$
121
(6)
(113)
158
(6)
$
(1,635) $
9,092
$
(1,269) $
685
$
119
$
39
The estimated actuarial loss for the defined benefit pension plans that will be amortized from accumulated other
comprehensive income into net periodic benefit cost over the next fiscal year is $0.5 million. The estimated actuarial gain for the
other post-retirement benefit plans that will be amortized from accumulated other comprehensive income into net periodic benefit
cost over the next fiscal year is $0.1 million.
Weighted-average assumptions used to determine benefit obligations at December 31 are as follows:
U.S. Pension Plans
Non-U.S. Pension
Plans
Other Post-
Retirement
Benefit Plans
2015
2014
2015
2014
2015
2014
Discount rate
4.05%
3.73%
3.90%
3.50%
4.05%
3.73%
Weighted-average assumptions used to determine net periodic benefit cost at December 31 are as follows:
U.S. Pension Plans
Non-U.S. Pension Plans
Other Post-Retirement
Benefit Plans
2015
3.73%
2014
4.57%
2013
3.67%
2015
3.50%
2014
4.40%
2013
4.20%
2015
3.73%
2014
4.57%
2013
3.67%
7.50%
7.50%
7.50%
4.60%
5.80%
5.80%
N/A
N/A
N/A
Discount rate
Expected return on
plan assets
The rate of return assumptions are based on projected long-term market returns for the various asset classes in which the
plans are invested, weighted by the target asset allocations. An incremental amount for active plan asset management and
diversification, where appropriate, is included in the rate of return assumption. Our pension plan investment strategy is reviewed
annually.
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 taking into consideration 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,
balanced, fixed income and real estate 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 are used judiciously to enhance
long-term returns while improving portfolio diversification. Derivatives may be used to gain market exposure in an efficient and
71
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 approximately $3.0 million to our pension
plans and our other post-retirement benefit plans in 2016.
Our current investment allocation target for our pension plans for 2015 and our weighted-average asset allocations of our
pension assets for the years ended December 31, by asset category, are as follows:
Cash and cash
equivalents
Equity/balanced
securities
Fixed income securities
Real estate
Target Allocation
U.S. Pension Plans
Non-U.S. Pension Plans
U.S.
—
55
25
20
100%
Non-U.S.
—
60
40
—
100%
2015
1.2
51.0
24.0
23.8
100%
2014
0.1
54.1
24.4
21.4
100%
2015
0.4
61.1
38.5
—
100%
2014
0.5
59.3
39.3
0.9
100%
The following descriptions relate to our plan assets:
Equity Securities — The equity category includes common stocks issued by U.S., United Kingdom and other international
companies, equity funds that invest in common stocks and unit linked insurance policies. All equity investments generally allow
near-term (within 90 days of the measurement date) liquidity and are held in issues that are actively traded to facilitate transactions
at minimum cost.
Balanced — The balanced category includes funds primarily invested in a mix of equity and fixed income securities where
the allocations are at the discretion of the investment manager. All investments generally allow near-term (within 90 days of the
measurement date) liquidity and are held in issues that are actively traded to facilitate transactions at minimum cost.
Fixed Income Securities — The fixed income category includes U.S. dollar-denominated and United Kingdom and other
international marketable bonds and convertible debt securities as well as fixed income funds that invest in these instruments. All
investments generally allow near-term liquidity and are held in issues that are actively traded to facilitate transactions as minimum
cost.
The fair value of fixed income securities is determined by either direct or indirect quoted market prices. When the value of
assets held in separate accounts is not published, the value is based on the underlying holdings, which are primarily direct quoted
market prices on regulated financial exchanges.
Real Estate — Real estate provides an indirect investment into a diversified and multi-sector portfolio of property assets.
The fair value of real estate investments is valued by the fund managers. The fund managers value the real estate investments via
independent third-party appraisals on a periodic basis. Assumptions used to revalue the properties are updated every quarter.
The fair values of our pension plan assets by asset category and by level as described in Note 2 for the years ended December 31,
2015 and 2014 are as follows (in thousands):
72
December 31, 2015
Quoted Prices in
Active Markets for
Identical Assets
Significant
Observable Inputs
Significant
Unobservable Inputs
Total
Level 1
Level 2
Level 3
Cash and cash equivalents
$
551
$
551
$
— $
Equities:
U.S. large value
U.S. large growth
International blend
Emerging markets
Balanced
Fixed income securities:
Government bonds
Corporate bonds
Real Estate:
U.S. property
4,222
3,961
7,874
2,429
20,528
4,298
17,368
—
8,645
4,222
3,961
—
2,429
—
—
—
—
—
—
7,874
—
20,528
4,298
17,368
—
Total pension fund assets
$
69,876
$
11,163
$
50,068
$
—
—
—
—
—
—
—
—
8,645
8,645
December 31, 2014
Quoted Prices in
Active Markets for
Identical Assets
Significant
Observable Inputs
Significant
Unobservable Inputs
Total
Level 1
Level 2
Level 3
Cash and cash equivalents
$
223
$
223
$
— $
Equities:
U.S. large value
U.S. large growth
International blend
International growth
Emerging markets
Balanced
Fixed income securities:
Government bonds
Corporate bonds
Real Estate:
U.S. property
U.K. property
4,356
4,213
6,490
2,590
2,656
20,202
4,540
18,186
—
7,622
335
4,356
4,213
—
2,590
2,656
—
—
—
—
—
—
—
6,490
—
—
20,202
4,540
18,186
—
—
Total pension fund assets
$
71,413
$
14,038
$
49,418
$
—
—
—
—
—
—
—
—
—
7,622
335
7,957
The fair value of our pension plan assets measured using significant unobservable inputs (Level 3) at December 31 are as
follows (in thousands):
Beginning balance
Actual return on plan assets:
Relating to assets held at reporting date
Relating to assets sold during the period
Purchases, sales and settlements, net
Foreign currency translation adjustment
Ending balance
73
2015
2014
$
7,957
$
9,610
1,018
2
(322)
(10)
8,645
$
903
231
(2,204)
(583)
7,957
$
For measurement purposes, a 6% annual rate of increase in the per capita cost of covered health care benefits was assumed
for 2015. The rate was assumed to decrease gradually to 5% through 2018 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 2015 other post-retirement benefit results (in thousands):
Increase (Decrease) from change in health care cost trend rates
Other post-retirement benefit expense
Other post-retirement benefit liability
1 Percentage
Point Increase
2
$
$
8
1 Percentage
Point Decrease
(2)
$
(8)
$
The following table summarizes our expected future benefit payments of our pension and other post-retirement benefit plans
(in thousands):
Year
2016
2017
2018
2019
2020
2021 to 2025
Pension Plans
$
$
$
$
$
$
3,863
3,894
4,134
4,377
4,570
23,729
$
$
$
$
$
$
Other Post-
Retirement
Benefit Plans
74
77
68
46
32
106
15. Accumulated Comprehensive Income (Loss)
The activity for each item of accumulated other comprehensive income is as follows (in thousands):
Foreign
currency items
$
Pension and
postretirement
benefits plans
Accumulated other
comprehensive
loss
(11,907) $
(4,600)
—
(16,507) $
(4,572)
—
(21,079) $
(14,401) $
(6,633)
253
(20,781) $
1,720
486
(18,575) $
(26,308)
(11,233)
253
(37,288)
(2,852)
486
(39,654)
Beginning balance, January 1, 2014
Net current period change
Reclassification adjustments for losses reclassified into income
Ending balance, December 31, 2014
Net current period change
Reclassification adjustments for losses reclassified into income
Ending balance, December 31, 2015
$
$
74
The related tax effects allocated to each component of other comprehensive income (loss) for the years ended December 31,
2015 and 2014 are as follows:
2015
Retirement benefits adjustment:
Net actuarial gain (loss) and prior service credit
Reclassification of actuarial loss and prior service cost to net income
Net unrealized loss
Cumulative translation adjustment
Total other comprehensive income (loss)
2014
Retirement benefits adjustment:
Net actuarial gain (loss) and prior service credit
Reclassification of actuarial loss and prior service cost to net income
Net unrealized loss
Cumulative translation adjustment
Total other comprehensive income (loss)
16. Quarterly Financial Data (Unaudited)
Before Tax
Amount
Tax (Expense)
Benefit
After Tax Amount
$
$
$
$
2,169
$
616
2,785
(4,596)
(1,811) $
(449) $
(130)
(579)
24
(555) $
1,720
486
2,206
(4,572)
(2,366)
Before Tax
Amount
Tax (Expense)
Benefit
After Tax Amount
(10,071) $
256
(9,815)
(4,637)
(14,452) $
$
3,438
(3)
3,435
37
3,472
$
(6,633)
253
(6,380)
(4,600)
(10,980)
The following is a condensed summary of actual quarterly results of operations for 2015 and 2014 (in thousands, except per
share amounts):
Revenues
Gross Profit
Operating
Income
Net Income
(Loss)
Net Income
(Loss)
Attributable
to Common
Stockholders
Basic
Earnings (Loss)
Per Share
Diluted
Earnings (Loss)
Per Share
Attributable to
Common
Stockholders
1
$ 220,303
$ 217,617
$ 202,729
$ 184,692
$ 198,071
$ 215,996
$ 213,802
$ 211,874
$
$
$
$
$
$
$
$
29,074
29,506
27,890
24,352
24,304
28,185
28,426
26,773
$
$
$
$
$
$
$
$
11,198
11,588
9,946
5,294
$
3,593
$
$
3,205
$
$
$
2,554
$ (2,291) $
5,448
9,047
9,705
9,494
$
$
$
$
(508) $
$
2,739
$
1,163
$
4,237
$
3,592
$
3,205
2,554
$
(2,291) $
(506) $
$
2,739
$
1,162
$
4,235
$
0.12
$
0.11
0.09
$
(0.08) $
(0.02) $
$
0.09
$
0.04
$
0.15
0.12
0.11
0.09
(0.08)
(0.02)
0.09
0.04
0.15
2015:
First
Second
Third
Fourth
2014:
First
Second
Third
Fourth
(1)
See Note 11 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 method.
75
17. Restructuring
On November 19, 2015, the Board of Directors of the Company approved adjustments to the Company’s footprint and
capacity utilization, and reductions to selling, general and administrative costs. The restructuring and cost reduction actions began
in the fourth quarter of 2015 and are expected to continue through 2017. These actions are expected to lower operating costs
beginning in the first quarter of 2016.
The restructuring plan approved by the Board of Directors includes the following key activities:
• The closure of our Edgewood, Iowa facility and transfer of production to our Agua Prieta, Mexico facility. The closure
was announced on December 3, 2015. The closure and subsequent transfer of production will improve our manufacturing
capacity utilization in our wire harness business. We expect the closure to be completed in the second quarter of 2016.
The costs are expected to approximate $0.6 million in cost of sales, consisting of $0.3 million in employee separation
costs and $0.3 million in costs to move equipment and facility lease costs. Capital investment is expected to approximate
$0.1 million. Employee separation costs were recorded totaling $0.1 million in cost of sales during the year ended December
31, 2015.
• The closure of an administrative office in China and reduction in workforce occurred in the fourth quarter of 2015. The
employee separation costs were $0.2 million in cost of sales.
• The closure of additional manufacturing capacity and transfer of production to existing facilities is expected to occur
between the first quarter of 2016 and the fourth quarter of 2017. The closures and subsequent transfers of production will
further improve our manufacturing capacity utilization. The restructuring activities and associated capital expenditures
are expected to total approximately $10 million to $14 million in cost of sales, consisting of $3 million to $4 million in
employee separation costs, $5 million to $7 million in costs to move equipment and $2 million to $3 million of capital
investment. Costs were recorded in 2015 of $0.3 million in employee separation costs in cost of sales and $0.2 million
in selling, general and administrative expense for employee separation costs.
In 2014, management began the closure of its Tigard, Oregon facility and completed the closure in the third quarter of 2015.
The closure and transfer of production to other facilities cost $2.4 million and is reflected in cost of sales, of which $1.2 million
was incurred in each of the years ended December 31, 2015 and 2014. Of the $2.4 million incurred, $0.6 million pertained to
employee separation costs and $1.8 million pertained to costs to move equipment, perform building repairs and other related
expenditures.
A summary of the restructuring liability for the years ended December 31 is as follows (in thousands):
2015
Facility Exit and
Other Contractual
Costs
Employee Costs
Balance - Beginning of the year
Provisions
Utilizations
Balance - End of year
$531
790
(779)
$542
$72
1,542
(1,571)
$43
2014
Employee Costs
Facility Exit and
Other Contractual
Costs
Balance - Beginning of the year
Provisions
Utilizations
Balance - End of year
—
541
(10)
$531
198
780
(906)
$72
Total
$603
2,332
(2,350)
$585
Total
198
1,321
(916)
$603
76
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no disagreements with our independent accountants on matters of accounting and financial disclosures or
reportable events.
Item 9A.
Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required
to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in
the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our President
and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their
nature, can provide only reasonable assurance regarding management’s disclosure control objectives.
Evaluation of Disclosure Controls and Procedures
We evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of
our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange
Act”)) as of December 31, 2015. Based on this evaluation, our principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures were effective as of December 31, 2015 to provide reasonable assurance
that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to
management as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rule 13a-15(f) under the Exchange Act. Our internal control system is designed 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. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, controls deemed effective now may become inadequate in the future because of changes in conditions,
or because compliance with the policies or procedures has deteriorated or been circumvented. Management assessed the
effectiveness of our internal control over financial reporting as of December 31, 2015. In making this assessment, management
used the criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) (the “COSO criteria”). Based on management’s assessment and the COSO criteria,
management believes that our internal control over financial reporting was effective as of December 31, 2015.
Our independent registered public accounting firm, KPMG LLP, has issued a report on our internal control over financial
reporting. KPMG LLP’s report appears following Item 9A and expresses an unqualified opinion on the effectiveness of our internal
control over financial reporting.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2015 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
77
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Commercial Vehicle Group, Inc.:
We have audited Commercial Vehicle Group, Inc.’s internal control over financial reporting as of December 31, 2015, based
on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). The Company and its subsidiaries management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express
an opinion on 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, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that 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, Commercial Vehicle Group, Inc. and subsidiaries maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Commercial Vehicle Group, Inc. and subsidiaries as of December 31, 2015 and 2014, and the
related consolidated statements of income (loss), comprehensive income (loss), stockholders’ equity, and cash flows for each of
the years in the three-year period ended December 31, 2015, and our report dated March 10, 2016 expressed an unqualified opinion
on those consolidated financial statements.
/s/ KPMG LLP
Columbus, Ohio
March 10, 2016
78
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 March 10, 2016:
Name
Richard A. Snell
Patrick E. Miller
Scott C. Arves
Harold Bevis
David R. Bovee
Roger Fix
Robert C. Griffin
Age
Principal Position(s)
74 Chairman and Director
48 President, Chief Executive Officer and Director
59 Director
56 Director
66 Director
62 Director
68 Director
The following biographies describe the business experience of our directors:
Scott C. Arves has served as a Director since July 2005. From January 2007 to June 2015, Mr. Arves served as President and
Chief Executive Officer of Transport America, a truckload, intermodal and logistics 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. Mr. Arves brings over 30 years of transportation experience to his role as Director, including 19
years of P & L experience and 16 years as a Division President or Chief Executive Officer.
Harold Bevis has served as a Director since June 2014. He has 30 years of experience including 20 years of experience as
a business leader with leadership assignments at GE and Emerson Electric; and 14 years of experience as a CEO, President and
Director of global manufacturing companies. He has worked in public companies for 15 years and private companies for 15 years.
Mr. Bevis is currently President, Chief Executive Officer and Director of Xerium Technologies, Inc. (NYSE:XRM) since August
2012. He has led three successful multi-year operational turnarounds and has started one company. He has led 114 manufacturing
plants and operating teams in 21 countries including: Argentina, Australia, Austria, Brazil, Canada, China, Czech Republic, Finland,
France, Germany, India, Italy, Japan, Malaysia, Mexico, Morocco, Russia, South Korea, Spain, UK, and the United States. He has
led 10 acquisitions, 3 divestitures, 8 greenfield plant startups, 28 plant expansions, 24 plant closures, and multiple joint ventures.
His companies have received over 26 industry awards and over 300 new-to-world patented inventions. He has done many capital
structure transactions including: capital leases, operating leases, factoring, secured bank lending, unsecured bank lending, bond
offerings, covenant negotiations, asset pledges, equity pledges, restricted stock offerings, common stock offerings, restricted
subsidiaries, unrestricted subsidiaries, and secured agency ratings. He has led two complete reorganizations through bankruptcy
court. He has received many personal leadership awards including the Illinois Community Service Award for his work with the
Special Olympics. Mr. Bevis also serves on the State of North Carolina Chamber of Commerce Manufacturing Council, and the
City of Raleigh, North Carolina Chamber of Commerce Board of Advisors. Mr. Bevis earned a BS degree in engineering from
Iowa State University and an MBA degree from Columbia University.
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, subsequent to Mr. Bovee’s 2005 retirement, 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 for Dura. 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. Mr. Bovee’s relevant experience includes more than 10 years as a Chief Financial Officer and 15 years
as an executive officer of a major automotive supplier, and nearly 10 years of experience in a publicly traded company. Mr. Bovee’s
career spans 32 years in the manufacturing and transportation sectors, servicing a footprint similar to CVG. Mr. Bovee has spent
his entire career in finance roles, which suits him well to his position on the Audit Committee.
Roger Fix currently serves as the non-executive chairman of the board of directors of Standex International Corporation.
He served as President and Chief Executive Officer of Standex from 2003 to 2014. He was Standex’s President and Chief Operating
Officer from 2001 to 2003. Mr. Fix has served as a director of Flowserve Corporation since 2006 and serves as the Chairman of
the Corporate Nominating and Governance Committee and a member of the Audit Committee. Mr. Fix earned a master’s degree
79
in mechanical engineering from the University of Texas and a bachelor-of-science degree in mechanical engineering from the
University of Nebraska.
Robert C. Griffin has served as a Director since July 2005. His career spanned over 25 years in the financial sector, including
Head of Investment Banking Americas and Management Committee Member for Barclay’s Capital from 2000 to 2002. Prior to
that, Mr. Griffin served as the Global Head of Financial Sponsor Coverage for Bank of America Securities and a member of its
Montgomery Securities Subsidiary Management Committee from 1998 to 2000 and as Group Executive Vice President of Bank
of America and a member of its Senior Management Committee from 1997 to 1998. Mr. Griffin served as a Director of GSE
Holdings, Inc., from December 2011 to August 2014 where he was Chairman of the Board and a member of the Compensation
Committee and the Nominating and Corporate Governance Committee. Mr. Griffin serves as a Director of Builders FirstSource,
Inc., where he is Chairman of the Audit Committee, a member of the Compensation Committee and the Nominating Committee
and was Chairman of their Special Committee in 2009 and 2015, and as a Director of The J.G. Wentworth Company where he is
currently Chairman of the Audit Committee. Mr. Griffin brings strong financial and management expertise to our Board through
his experience as an officer and director of a public company, service on other boards and his senior leadership tenure within the
financial industry.
Patrick E. Miller has served as President and Chief Executive Officer since November 2015 and a Director since
November 2015. Mr. Miller, who most recently was President of the Company’s Global Truck & Bus Segment, has been with the
Company since 2005. During this time, he served in the capacity of Senior Vice President & General Manager of Aftermarket;
Senior Vice President of Global Purchasing; Vice President of Global Sales; Vice President & General Manager of North American
Truck and Vice President & General Manager of Structures. Prior to joining the Company, Mr. Miller held engineering, sales, and
operational leadership positions with Hayes Lemmerz International, Alcoa, Inc. and ArvinMeritor. He holds a Bachelor of Science
in Industrial Engineering from Purdue University and a Masters of Business Administration from the Harvard University Graduate
School of Business.
Richard A. Snell has served as a Director since August 2004 and as Chairman since March 2010. He has served as Chairman
and Chief Executive Officer of Qualitor, Inc. from May 2005 until April 2015 and as an Operating Partner at HCI Partners from
2003 to December 2015. Mr. Snell served as Chairman and Chief Executive Officer of Federal-Mogul Corporation, an automotive
parts manufacturer, where he served from 1996 to 2000, and as Chief Executive Officer at Tenneco Automotive, also an automotive
parts manufacturer, where he was employed from 1987 to 1996. Mr. Snell served as a Director of Schneider National, Inc., a multi-
national trucking company, and as a member of their Compensation and Governance Committees from 1996 to 2011.
B. Executive Officers
Information regarding our executive officers is set forth in Item 1 of Part I of this Annual Report on Form 10-K under the
heading “Executive Officers of the Registrant.”
There are no family relationships between any of our directors or executive officers.
C. Section 16(a) Beneficial Ownership Reporting Compliance and Corporate Governance
The information required by Item 10 with respect to compliance with reporting requirements is incorporated herein by
reference to the sections labeled “Section 16(a) Beneficial Ownership Reporting Compliance” and “Proposal No. 1 — Election
of Directors — Corporate Governance,” which appear in CVG’s 2016 Proxy Statement.
Item 11.
Executive Compensation
The information required by Item 11 is incorporated herein by reference to the sections labeled “Executive Compensation
— 2012 Director Compensation Table” and “Executive Compensation” and “Proposal No. 1 — Election of Directors — Corporate
Governance,” which appear in CVG’s 2016 Proxy Statement including information under the heading “Compensation Discussion
and Analysis.”
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 fourth 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, 2015:
80
Number of Securities to be
Issued upon Exercise of
Outstanding Options,
Warrants and Rights
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:
2014 Equity Incentive Plan
Equity compensation plans not approved by stockholders
Total
— $
— $
— $
—
—
—
1,279,573
—
—
The information required by Item 12 is incorporated herein by reference to the section labeled “Security Ownership of Certain
Beneficial Owners and Management,” which appears in CVG’s 2016 Proxy Statement.
Item 13
Certain Relationships, Related Transactions and Director Independence
The information required by Item 13 is incorporated herein by reference to the sections labeled “Certain Relationships and
Related Transactions” and “Proposal No. 1 — Election of Directors — Corporate Governance,” which appear in CVG’s 2016
Proxy Statement.
Item 14.
Principal Accountant Fees and Services
The information required by Item 14 is incorporated herein by reference to the section labeled “Proposal No. 3 — Ratification
of Appointment of the Independent Registered Public Accounting Firm,” which appears in CVG’s 2016 Proxy Statement.
81
Item 15.
Exhibits, Financial Statements Schedules
(1) LIST OF FINANCIAL STATEMENT SCHEDULES
PART IV
The following financial statement schedule of the Corporation and its subsidiaries is included herein:
Schedule II — Valuation and Qualifying Accounts and Reserves.
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS
December 31, 2015, 2014 and 2013
Accounts Receivable Allowances:
Transactions for the years ended December 31 were as follows (in thousands):
Balance — Beginning of the year
Provisions
Utilizations
Currency translation adjustment
Balance — End of the year
Income Tax Valuation Allowance:
2015
2014
2013
2,808
4,640
(2,828)
(81)
4,539
$
$
2,302
5,225
(4,659)
(60)
2,808
$
$
3,393
2,520
(3,607)
(4)
2,302
$
$
Transactions for the years ended December 31 were as follows (in thousands):
Balance — Beginning of the year
Provisions
Utilizations
Balance — End of the year
2015
2014
2013
$
$
11,770
3,436
(802)
14,404
$
$
17,189
928
(6,347)
11,770
$
$
17,492
2,640
(2,943)
17,189
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.
(2) LIST OF EXHIBITS
The following exhibits are either included in this report or incorporated herein by reference as indicated below:
82
Exhibit No.
2.1**
3.1
3.2
3.3
3.4
3.5
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
EXHIBIT INDEX
Description
Asset Purchase Agreement, dated as of January 28, 2011, by and among CVG Alabama LLC and Bostrom Seating,
Inc., (incorporated by reference to the Company’s annual report on Form 10-K (File No. 000-34365), filed on
March 15, 2011).
Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to the Company’s
quarterly report on Form 10-Q (File No. 000-50890), filed on September 17, 2004).
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated as of
May 12, 2011 (incorporated by reference to the Company’s current report on Form 8-K (File No. 001-34365),
filed on May 13, 2011).
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated as of
May 15, 2015 (incorporated by reference to the Company’s current report on Form 8-K (File No. 001-34365),
filed on May 15, 2015).
Amended and Restated By-laws of the Company (incorporated by reference to the Company’s quarterly report
on Form 10-Q (File No. 000-50890), filed on September 17, 2004).
Certificate of Designations of Series A Preferred Stock (included as Exhibit A to the Rights Agreement incorporated
by reference to Exhibit 4.8) (incorporated by reference to the Company’s current report on Form 8-K (File No.
000-50890), filed on May 22, 2009.
Supplemental Indenture, dated as of April 21, 2011, by and among the Company, 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. 001-34365), filed on April 27, 2011).
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) (incorporated herein by reference to the Company’s current
report on Form 8-K (File No. 000-50890), filed on July 8, 2005).
Commercial Vehicle Group, Inc. Rights Agreement, dated as of May 21, 2009, by and between the Company and
Computershare Trust Company, N.A. (incorporated by reference to the Company’s current report on Form 8-K
(File No. 000-50890), filed on May 22, 2009).
Form of Rights Certificate (included as Exhibit B to the Rights Agreement) (incorporated by reference to the
Company’s current report on Form 8-K (File No. 000-50890), filed on May 22, 2009).
Form of Summary of Rights to Purchase (included as Exhibit C to the Rights Agreement) (incorporated by reference
to the Company’s current report on Form 8-K (File No. 000-50890), filed on May 22, 2009).
Commercial Vehicle Group, Inc. Amendment No. 1 to Rights Agreement, dated as of March 9, 2011, by and
between the Company and Computershare Trust Company, N.A. (incorporated by reference to the Company’s
current report on Form 8-K (File No. 001-34365), filed on March 9, 2011).
Form of Certificate of Common Stock of the Company (incorporated by reference to the Company’s registration
statement on Form S-1/A (File No. 333-115708), filed August 3, 2004).
Indenture, dated as of April 26, 2011, by and among the Company, the subsidiary guarantors party thereto and
U.S. Bank National Association, as trustee, with respect to 7.875% senior secured notes due 2019 (incorporated
by reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on April 28, 2011).
4.10
Form of 7.875% Senior Secured Note due 2019 (included as Exhibit 1 to Exhibit 4.1) (incorporated by reference
to the Company’s current report on Form 8-K (File No. 001-34365), filed on April 28, 2011).
83
Exhibit No.
Description
4.11
4.12
4.13
4.14
10.1
10.2*
10.3*
10.4*
10.5*
10.6
10.7
10.8
10.9
10.10*
10.11*
10.12
Registration Rights Agreement, dated as of April 26, 2011, by and among the Company, the guarantors party
thereto and Credit Suisse Securities (USA) LLC (incorporated by reference to the Company’s current report on
Form 8-K (File No. 001-34365), filed on April 28, 2011).
Second Amended and Restated Loan and Security Agreement, dated as of November 15, 2013, by and among the
Company, certain of the Company’s subsidiaries, as borrowers, and Bank of America, N.A. as agent and lender,
(incorporated by reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on November
21, 2013).
Amended and Restated Loan and Security Agreement, dated as of April 26, 2011, by and among the Company
and certain of its subsidiaries, as borrowers, and Bank of America, N.A., as agent and lender (incorporated by
reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on April 28, 2011).
Amendment No. 1 to Second Amended and Restated Loan and Security Agreement made as of March 31, 2015
(incorporated by reference to the Company’s quarterly report on Form 10-Q (File No. 001-34365), filed on May
8, 2015).
Intercreditor Agreement, dated as of April 26, 2011, by and among the Company, certain of its subsidiaries, Bank
of America, N.A., as first lien administrative agent and first lien collateral agent for the First Priority Secured
Parties, and U.S. Bank National Association, as trustee and second priority agent for the Second Priority Secured
Parties (incorporated by reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on
April 28, 2011).
Commercial Vehicle Group, Inc. Fourth Amended and Restated Equity Incentive Plan (incorporated by reference
to the Company’s current report on Form 8-K (File No. 001-34365), filed on May 13, 2011).
Bostrom Holding, Inc. Management Stock Option Plan (incorporated by reference to the Company’s registration
statement on Form S-1 (File No. 333-115708), 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. 333-115708), filed
on May 21, 2004).
Form of Grant of Nonqualified Stock Option pursuant to the Commercial Vehicle Group, Inc. Third 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).
Form of Non-Competition Agreement (incorporated by reference to the Company’s registration statement on Form
S-1 (File No. 333-115708), 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. 333-115708), 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. 333-115708), 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. 2014 Bonus Plan (incorporated by reference to the Company’s quarterly report
on Form 10-Q (File No. 001-34365), filed on May 9, 2014).
Commercial Vehicle Group, Inc. 2015 Bonus Plan (incorporated by reference to the Company’s quarterly report
on Form 10-Q (File No. 001-34365), filed on May 8, 2015).
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).
84
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*
Description
Form of Restricted Stock Agreement pursuant to the Commercial Vehicle Group, Inc. Third Amended and Restated
Equity Incentive Plan (incorporated by reference to amendment no. 1 to the Company’s registration statement on
Form S-4/A (File No. 333-129368), filed on December 1, 2005).
Form of Cash Performance Award pursuant to the Commercial Vehicle Group, Inc. Fourth Amended and Restated
Equity Incentive Plan (incorporated by reference to the Company’s Annual Report on Form 10-K (File No.
001-34365), filed on March 11, 2013).
Commercial Vehicle Group, Inc. 2014 Equity Incentive Plan (incorporated by reference from the Company proxy
statement on Form Schedule 14A (File No. 001-34365), filed on April 11, 2014).
Form of Restricted Stock Agreement pursuant to the Commercial Vehicle Group, Inc. 2014 Equity Incentive Plan
(incorporated by reference from the Company quarterly report on Form 10-Q (File No. 001-34365), filed on
November 7, 2014).
Change in Control & Non-Competition Agreement dated May 22, 2007 with Kevin R.L. Frailey (incorporated by
reference to the Company’s current report on Form 8-K (File No. 000-50890), filed on May 25, 2007).
First Amendment to Change in Control & Non-Competition Agreement dated November 5, 2008 with Kevin R.L.
Frailey (incorporated by reference to the Company’s annual report on Form 10-K (File No. 000-50890), filed on
March 16, 2009).
Separation Agreement dated October 10, 2014, between the Company and Kevin R.L. Frailey (incorporated by
reference to the Company’s current report on Form 8-K (File No. 000-34365), filed on October 10, 2014).
Employment Agreement, dated as of August 14, 2013, between the Company and Richard P. Lavin (incorporated
by reference to the company’s current report on form 8-K (File No. 001-34365), filed on August 20, 2013).
Offer letter, dated September 27, 2013, to C. Timothy Trenary (incorporated by reference to the Company’s current
report on Form 8-K (File No. 001-34365), filed on September 30, 2013).
Change in Control & Non-Competition Agreement dated January 23, 2014 with C. Timothy Trenary (incorporated
by reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on January 24, 2014).
Separation Agreement dated July 11, 2014, between the Company and Timo Haatanen (incorporated by reference
to the Company’s current report on Form 8-K (File No. 000-34365), filed on July 18, 2014).
Amended and Restated Deferred Compensation Plan dated November 5, 2008 (incorporated by reference to the
Company’s annual report on Form 10-K (File No. 000-50890), filed on March 16, 2009).
Form of indemnification agreement with directors and executive officers (incorporated by reference to the
Company’s annual report on Form 10-K (File No. 000-50890), filed on March 14, 2008).
Terms and conditions of employment for executive officers (incorporated by reference to the Company’s annual
report on Form 10-K (File No. 000-50890), filed on March 14, 2008).
85
Exhibit No.
10.27*
Description
Employment Term Sheet between the Company and Geoffrey W. Perich dated October 24, 2014 (incorporated by
reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on October 28, 2014).
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*
10.34*
10.35*
10.36*
10.37*
10.38*
10.39*
12.1
21.1
23.1
31.1
31.2
32.1
32.2
Change in Control & Non-Competition Agreement dated October 24, 2014 with Geoffrey W. Perich (incorporated
by reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on October 28, 2014).
Change in Control & Non-Competition Agreement dated October 24, 2014 with Patrick Miller (incorporated by
reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on October 28, 2014).
Change in Control & Non-Competition Agreement dated October 24, 2014 with Stacie Fleming (incorporated by
reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on October 28, 2014).
Employment Offer Letter agreement between the Company and Mr. Saoud effective as of June 12, 2015
(incorporated by reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on June 16,
2015).
The Change in Control & Non-Competition Agreement effective as of June 12, 2015 with Joseph Saoud
(incorporated by reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on June 12,
2015).
Employment Offer letter, dated October 7, 2013, to Brent Walters (incorporated by reference to the Company’s
quarterly report on Form 10-Q (File No. 001-34365), filed on May 8, 2015).
Change in Control & Non-Competition Agreement dated October 24, 2014 with Brent Walters (incorporated by
reference to the Company’s quarterly report on Form 10-Q (File No. 001-34365), filed on October 24, 2015).
Separation Agreement between the Company and Mr. Walters dated November 21, 2015.
Separation Agreement between the Company and Mr. Lavin dated November 20, 2015 (incorporated by reference
to the Company’s current report on Form 8-K (File No. 001-34365), filed on November 23, 2015).
Employment Offer letter, dated June 20, 2014, to Ulf Lindqwister.
The Change in Control & Non-Competition Agreement effective as of August 24, 2014 with Ulf Lindqwister.
Separation Agreement between the Company and Mr. Lindqwister dated November 20, 2015.
Computation of ratio of earnings to fixed charges.
Subsidiaries of Commercial Vehicle Group, Inc.
Consent of KPMG LLP.
302 Certification by Patrick E. Miller, President and Chief Executive Officer.
302 Certification by C. Timothy Trenary, Executive Vice President and Chief Financial Officer.
906 Certification by Patrick E. Miller pursuant to 18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-
Oxley Act of 2002.
906 Certification by C. Timothy Trenary pursuant to 18 U.S.C. Section 1350, as adopted pursuant to the Sarbanes-
Oxley Act of 2002.
101.INS
XBRL Instance Document
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
101.LAB
XBRL Label Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
101.DEF
XBRL Definition Linkbase Document
86
*
**
Management contract or compensatory plan or arrangement required to be filed as an exhibit to this annual report on
Form 10-K.
The schedules and exhibits to the Asset Purchase Agreement have been omitted from this filing pursuant to Item 601(b)
(2) of Regulation S—K. The Company will furnish supplementally a copy of any such omitted schedules or exhibits to
the SEC upon request.
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.
87
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/ Patrick E. Miller
Patrick E. Miller
President and Chief Executive Officer
Date: March 10, 2016
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 indicated March 10, 2016.
Signature
Title
/s/ Richard A. Snell
Richard A. Snell
/s/ Patrick E. Miller
Patrick E. Miller
/s/ Scott C. Arves
Scott C. Arves
/s/ Harold Bevis
Harold Bevis
/s/ David Bovee
David Bovee
/s/ Roger Fix
Roger Fix
/s/ Robert C. Griffin
Robert C. Griffin
/s/ C. Timothy Trenary
C. Timothy Trenary
/s/ Stacie N. Fleming
Stacie N. Fleming
Chairman and Director
President, Chief Executive Officer
(Principal Executive Officer) and Director
Director
Director
Director
Director
Director
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
88