Commercial Vehicle Group, Inc. - Quarter Report: 2005 September (Form 10-Q)

e10vq

Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-50890

COMMERCIAL VEHICLE GROUP, INC.

(Exact name of Registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization) 6530 West Campus Oval New Albany, Ohio (Address of principal executive offices)		41-1990662 (I.R.S. Employer Identification No.) 43054 (Zip Code)

(614) 289-5360
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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, and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The number of shares outstanding of the Registrant’s common stock, par value $.01 per share, at October 15, 2005 was 20,975,441 shares.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL STATEMENTS

Table of Contents


			Page
PART I. FINANCIAL INFORMATION

	Item 1:	Financial Statements

		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2005 and 2004 (Unaudited)		3

		Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004 (Unaudited)		4

		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004 (Unaudited)		5

		Notes to Condensed Consolidated Financial Statements (Unaudited)		6

	Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

	Item 3:	Quantitative and Qualitative Disclosures about Market Risk		27

	Item 4:	Controls and Procedures		27

PART II. OTHER INFORMATION				28

SIGNATURE				29
Certification by President and CEO
Certification by Vice President of Finance and CFO
Certification Pursuant to Section 906
Certification Pursuant to Section 906

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ITEM 1 — FINANCIAL INFORMATION

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in thousands, except per share amounts)


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2005			2004		2005			2004

REVENUES	$	205,859		$	98,713	$	554,365		$	279,193

COST OF SALES		169,364			80,484		455,476			228,622


Gross Profit		36,495			18,229		98,889			50,571

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		11,876			6,918		31,597			21,282

NONCASH OPTION ISSUANCE CHARGE		—			—		—			10,125

AMORTIZATION EXPENSE		53			22		217			85


Operating Income		24,566			11,289		67,075			19,079

OTHER (INCOME) EXPENSE		(325	)		1,166		(3,598	)		(2,533	)

INTEREST EXPENSE		3,977			1,599		9,460			5,938

LOSS ON EARLY EXTINGUISHMENT OF DEBT		1,525			1,605		1,525			1,605


Income Before Income Taxes		19,389			6,919		59,688			14,069

PROVISION FOR INCOME TAXES		7,491			73		22,719			2,551


NET INCOME	$	11,898		$	6,846	$	36,969		$	11,518


BASIC EARNINGS PER SHARE	$	0.58		$	0.42	$	1.96		$	0.79


DILUTED EARNINGS PER SHARE	$	0.57		$	0.42	$	1.93		$	0.78

See notes to condensed consolidated financial statements.

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except per share amounts)


	September 30,			December 31,
	2005			2004
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	25,250		$	1,396
Accounts receivable — Net of allowance for doubtful accounts of $5,107 and $2,681		128,511			46,267
Inventories		66,635			36,936
Prepaid expenses and other current assets		4,392			6,081
Deferred income taxes		9,944			8,201

Total current assets		234,732			98,881
PROPERTY, PLANT AND EQUIPMENT — Net		70,796			32,965
GOODWILL		145,552			84,715
DEFERRED INCOME TAXES		9,870			5,901
INTANGIBLES AND OTHER ASSETS — Net		61,990			3,176

	$	522,940		$	225,638


LIABILITIES AND STOCKHOLDERS’ INVESTMENT

CURRENT LIABILITIES:
Current maturities of long-term debt	$	5,127		$	4,884
Accounts payable		74,697			33,846
Accrued liabilities		42,357			18,424

Total current liabilities		122,181			57,154
LONG-TERM DEBT — Net		186,473			49,041
OTHER LONG-TERM LIABILITIES		24,947			8,397

Total liabilities		333,601			114,592

COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ INVESTMENT:
Common stock, $0.01 par value per share; 30,000,000 shares authorized; 20,946,490 and 17,987,497 shares outstanding		209			180
Additional paid-in capital		168,565			123,660
Accumulated benefit (deficit)		21,515			(15,454	)
Stock subscriptions receivable		(49	)		(175	)
Accumulated other comprehensive income (loss)		(901	)		2,835

Total stockholders’ investment		189,339			111,046

	$	522,940		$	225,638

See notes to condensed consolidated financial statements.

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)


	Nine Months Ended
	September 30,
	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	36,969		$	11,518
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,926			5,829
Noncash amortization of debt financing costs		619			408
Noncash option issuance charge		—			10,125
Loss on early extinguishment of debt		1,525			1,031
Deferred income tax provision (benefit)		1,361			(2,993	)
Loss on sale of assets		78			—
Noncash gain on forward exchange contracts		(3,495	)		(2,554	)
Noncash interest expense on subordinated debt		—			481
Change in other operating items		(19,228	)		(2,330	)

Net cash provided by operating activities		26,755			21,515

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(9,332	)		(3,901	)
Payment for asset acquisitions — Net		(175,528	)		—

Net cash used in investing activities		(184,860	)		(3,901	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital leases		(21	)		(12	)
Repayments of revolving credit facility		(203,219	)		(77,518	)
Borrowings under revolving credit facility		201,613			55,965
Repayments of long-term debt		(237,223	)		(91,175	)
Borrowings of long-term debt		377,459			65,948
					47,168
Repayment of subordinated debt		—			(3,112	)
Proceeds from issuance of common stock		44,937			47,168
Other — Net		125			10

Net cash provided by (used in) financing activities		183,671			(2,726	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(1,712	)		(624	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		23,854			14,264
CASH AND CASH EQUIVALENTS — Beginning of period		1,396			3,486

CASH AND CASH EQUIVALENTS — End of period	$	25,250		$	17,750


SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	5,774		$	6,416

Cash paid for income taxes — Net	$	17,451		$	2,605

See notes to condensed consolidated financial statements.

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

Commercial Vehicle Group, Inc. and its subsidiaries (“CVG” or the “Company”) design and manufacture suspension seat systems, interior trim systems (including instrument and door panels, headliners, cabinetry, molded products and floor systems), cab structures and components, mirrors, wiper systems, electronic wiring harness assemblies and controls and switches for the global commercial vehicle market, including the heavy-duty truck market, the construction and agriculture market and the specialty and military transportation markets. The Company has operations located in Arizona, Indiana, Iowa, North Carolina, Ohio, Oregon, Tennessee, Texas, Virginia, Washington, Wisconsin, Australia, Belgium, China, Mexico, Sweden and the United Kingdom.

The Company has prepared the condensed consolidated financial statements of CVG without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures are adequate to make the information presented not misleading when read in conjunction with its fiscal 2004 consolidated financial statements and the notes thereto as filed with the SEC. Unless otherwise indicated, all amounts are in thousands except per share amounts.

Revenues and operating results for the three and nine months ended September 30, 2005 are not necessarily indicative of the results to be expected for the full year.

The Company was formed on August 22, 2000. On October 6, 2000, the Company acquired the assets of Bostrom plc in exchange for $83.6 million in cash and assumption of certain liabilities (the “Acquisition”). The source of the cash consisted of $49.8 million of debt and $33.8 million of equity. The Company had no operations prior to October 6, 2000.

The Acquisition was accounted for using the purchase method of accounting. Accordingly, the assets acquired and liabilities assumed by the Company were recorded at fair value as of the date of the Acquisition. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed has been recorded as goodwill.

On March 28, 2003, the Company and Commercial Vehicle Systems Holdings, Inc. (“CVS”) entered into an Agreement and Plan of Merger whereby a subsidiary of the Company was merged into CVS. The holders of the outstanding shares of CVS received, in exchange, shares of the Company on a one-for-one basis resulting in the issuance of 4,870,228 shares of common stock. On May 20, 2004, the Company and Trim Systems, Inc. (“Trim”) entered into an Agreement and Plan of Merger whereby a subsidiary of the Company was merged into Trim. On August 2, 2004, the Trim merger was effected (the CVS and Trim mergers are collectively referred to as the “Mergers”). The holders of the outstanding shares of Trim received, in exchange, shares of the Company on a .099-for-one basis resulting in the issuance of 2,769,567 shares of common stock. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, the Mergers were accounted for as a combination of entities under common control. Thus, the accounts of CVS, Trim, and the Company were combined based upon their respective historical bases of accounting. The financial statements reflect the combined results of the Company, CVS and Trim as if the Mergers had occurred as of the beginning of the earliest period presented.

On August 4, 2004, the Company reclassified all of its existing classes of common stock into one class of common stock and in connection therewith effected a 38.991-to-one stock split. The stock split has been reflected as of the beginning of all periods presented.

On August 10, 2004, the Company completed its initial public offering of common stock at a price of $13.00 per share. Of the total shares offered, 3,125,000 were sold by the Company and 6,125,000 were sold by certain selling stockholders. Net proceeds to the Company of approximately $34.6 million were used to repay outstanding indebtedness.

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On August 23, 2004, the underwriters, pursuant to their overallotment option, purchased an additional 1,034,500 shares of common stock resulting in net proceeds of approximately $12.6 million to the Company, which was used to further reduce outstanding indebtedness and for general corporate purposes.

On July 6, 2005, the Company completed an offering of common stock at a price of $17.75 per share. Of the total shares offered, 1,500,000 were sold by the Company and 6,308,191 were sold by certain selling stockholders. Net proceeds to the Company of approximately $23.8 million were used to repay outstanding indebtedness under the senior credit facility. In connection with this offering, Onex American Holdings II LLC and its affiliated investors and Baird Capital Partners III L.P. and its affiliated investors sold all of their share ownership in the Company. In addition, certain members of management exercised options to purchase 217,404 shares of common stock, which were sold in the offering as part of the 6,308,191 shares sold by the selling stockholders. Net proceeds to the Company of $1.2 million from the payment of the exercise price of such options were used to repay outstanding indebtedness under the senior credit facility.

On July 13, 2005, the underwriters, pursuant to their over allotment option, purchased an additional 1,171,229 shares of common stock resulting in net proceeds of approximately $19.9 million to the Company, which was used to further reduce outstanding indebtedness under the senior credit facility and for general corporate purposes.

2. Recently Issued Accounting Pronouncements

In December 2004, the FASB revised SFAS No. 123, Share Based Payment (SFAS No. 123R). This Statement supersedes Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, which resulted in no stock-based employee compensation cost related to stock options if the options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. SFAS No. 123R requires recognition of employee services provided in exchange for a share-based payment based on the grant date fair market value. In April 2005, the SEC deferred the required effective date of SFAS No. 123 to the fiscal year beginning after June 15, 2005. We are required to adopt SFAS No. 123R as of January 1, 2006. As of the effective date, this Statement applies to all new awards issued as well as awards modified, repurchased, or cancelled. Additionally, for stock-based awards issued prior to the effective date, compensation cost attributable to future services will be recognized as the remaining service is rendered. The Company is in the process of determining which method of adoption it will elect as well as the potential impact on its consolidated financial statements upon adoption.

3. Acquisitions and Financial Information

On February 7, 2005, CVG acquired substantially all of the assets and liabilities related to Mayflower Vehicle Systems’ North American Commercial Vehicle Operations (“Mayflower”) for cash consideration of $107.5 million (the “Mayflower acquisition”). Mayflower, whose products include cab frames and assemblies, sleeper boxes and other structural components, is the only non-captive producer of complete steel and aluminum truck cabs for the commercial vehicle sector with full service engineering and development capabilities. Mayflower serves the North American commercial vehicle sector from three manufacturing locations in Norwalk, Ohio; Shadyside, Ohio and Kings Mountain, North Carolina. For the year ended December 31, 2004, Mayflower recorded revenues of approximately $206.5 million and operating income of approximately $21.6 million. Financing for the acquisition consisted of an increase and amendment to the Company’s existing credit facility.

The Mayflower acquisition was accounted for by the purchase method of accounting. Under purchase accounting, the total purchase price has been allocated to the tangible and intangible assets and liabilities of Mayflower based upon their respective fair values. The purchase price and costs associated with the Mayflower acquisition exceeded the preliminary fair value of the net assets acquired by approximately $13.6 million. In connection with the allocation of the purchase price and intangible asset valuation, goodwill of $13.6 million and an intangible asset not subject to amortization of $45.7 million were recorded. The intangible asset is the customer relationship with an indefinite life.


Purchase price (cash consideration)	$	107,500
Transaction costs and other adjustments		3,833
Net assets of Mayflower at historical cost		(97,698	)

Excess of purchase price over net assets acquired	$	13,635

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On June 3, 2005, the Company acquired all of the stock of Monona Corporation, the parent of Monona Wire Corporation (“MWC”), for $55.0 million, and MWC became a wholly owned subsidiary of the Company (the “MWC acquisition”). The MWC acquisition was funded through an increase and amendment to the Company’s senior credit facility. MWC is a manufacturer of complex, electronic wire harnesses and related assemblies used in the global heavy equipment and specialty and military vehicle markets. It also produces panel assemblies for commercial equipment markets and cab frame assemblies for Caterpillar. MWC operates from primary manufacturing operations in the U.S. and Mexico. For the fiscal year ended January 31, 2005, MWC recorded revenues of approximately $85.5 million and operating income of approximately $9.6 million.

The MWC acquisition was also accounted for by the purchase method of accounting. Under purchase accounting, the total purchase price will be allocated to the tangible and intangible assets and liabilities of MWC based upon their respective fair values. This allocation will be based upon valuations and other studies that have not yet been completed. A preliminary allocation of the purchase price has been made to major categories of assets and liabilities based on available information. The actual allocation of purchase price and the resulting effect on income from operations may differ from the amounts included herein.

The purchase price and costs associated with the MWC acquisition exceeded the preliminary fair value of the net assets acquired by approximately $42.4 million. Pending completion of an independent valuation analysis, CVG has preliminarily allocated the excess purchase price over the fair value of the net assets acquired to goodwill. The acquired goodwill is not deductible for income tax purposes. CVG’s preliminary estimate of goodwill as of the acquisition date, which is subject to further refinement, is as follows (in thousands):


Purchase price (cash consideration)	$	55,000
Transaction costs		1,183
Net assets of MWC at historical cost		(13,805	)

Excess of purchase price over net assets acquired	$	42,378

On August 8, 2005, the Company acquired all of the stock of Cabarrus Plastics, Inc. (“CPI”) for $12.1 million, and CPI became an indirect wholly owned subsidiary of the Company (the “CPI acquisition”). CPI is a manufacturer of custom injection molded products primarily for the recreational vehicle market. For the year ended December 31, 2004, CPI recorded revenues of approximately $14.2 million and operating income of approximately $0.9 million. The CPI acquisition was financed with cash on hand.

The CPI acquisition was also accounted for by the purchase method of accounting. Under purchase accounting, the total purchase price will be allocated to the tangible and intangible assets and liabilities of CPI based upon their respective fair values. This allocation will be based upon valuations and other studies that have not yet been completed. A preliminary allocation of the purchase price has been made to major categories of assets and liabilities based on available information. The actual allocation of purchase price and the resulting effect on income from operations may differ from the amounts included herein.

The purchase price and costs associated with the CPI acquisition exceeded the preliminary fair value of the net assets acquired by approximately $6.9 million. Pending completion of an independent valuation analysis, CVG has preliminarily allocated the excess purchase price over the fair value of the net assets acquired to goodwill. The acquired goodwill is not deductible for income tax purposes. CVG’s preliminary estimate of goodwill as of the acquisition date, which is subject to further refinement, is as follows (in thousands):


Purchase price (cash consideration)	$	12,100
Transaction costs		92
Net assets of CPI at historical cost		(5,278	)

Excess of purchase price over net assets acquired	$	6,914

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4. Inventories

Inventories are valued at the lower of first-in, first-out (“FIFO”) cost or market. Cost includes applicable material, labor and overhead. Inventories consisted of the following (in thousands):


	September 30,		December 31,
	2005		2004
Raw materials	$	43,403	$	27,645
Work in process		12,435		2,111
Finished goods		10,797		7,180

	$	66,635	$	36,936

Inventory quantities on-hand are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based primarily on the Company’s estimated production requirements driven by current market volumes. Excess and obsolete provisions may vary by product depending upon future potential use of the product.

5. Stockholders’ Investment

Common Stock — The authorized common stock of the Company consists of 30,000,000 shares of common stock with a par value of $0.01 per share, with 17,987,497 shares outstanding at December 31, 2004 and 20,946,490 shares outstanding at September 30, 2005. In August 2004, the Company reclassified all of its existing classes of common stock and performed a 38.991-to-one stock split. In July 2005, the Company issued 2,888,633 shares. The stock split and offering have been reflected in the share and per share amounts for all periods presented.

Preferred Stock — The authorized preferred stock of the Company consists of 5,000,000 shares of preferred stock with a par value of $0.01 per share, with no shares outstanding at December 31, 2004 and September 30, 2005.

Earnings Per Share — Basic earnings per share was computed by dividing net income by the weighted average number of common shares outstanding during the three and nine months ended in accordance with SFAS No. 128. Diluted earnings per share for the three months ended September 30, 2005 and 2004 and the nine months ended September 30, 2005 and 2004 includes the effects of outstanding stock options and warrants using the treasury stock method.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004

Net income applicable to common stockholders — basic and diluted	$	11,898	$	6,846	$	36,969	$	11,518

Weighted average number of common shares outstanding		20,679		16,200		18,885		14,576

Dilutive effect of outstanding stock options and warrants after application of the treasury stock method		239		234		274		148

Diluted shares outstanding		20,918		16,434		19,159		14,724

Basic earnings per share	$	0.58	$	0.42	$	1.96	$	0.79

Diluted earnings per share	$	0.57	$	0.42	$	1.93	$	0.78

Stock Options and Warrants — In 1998, the Company issued options to purchase 57,902 shares of common stock at $9.43 per share, which are exercisable through December 2008, in connection with an acquisition. None of the initially granted options have been exercised as of September 30, 2005. The options were granted at an exercise price determined to be at or above fair value on the date of grant. In addition, the Company had outstanding warrants to purchase 136,023 shares of common stock at $3.42 per share, which were exercised in conjunction with the Company’s initial public offering in August 2004.

In May 2004, the Company granted options to purchase 910,869 shares of common stock at $5.54 per share. Initially, these options had a ten year term, with 50% of such options becoming immediately exercisable and the remaining 50% becoming exercisable ratably on June 30, 2005 and June 30, 2006. During June 2004, the Company modified the terms of these options to be 100% vested immediately. The Company recorded a noncash compensation charge of $10.1 million, equal to the difference between $5.54 and the estimated fair market value. As of September 30, 2005, 287,764 of the granted options have been exercised.

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In October 2004, the Company granted options to purchase 598,950 shares of common stock at $15.84 per share. The options were granted at an exercise price determined to be at or above fair value on the date of grant. These options have a ten-year term and vest equally in annual increments over a three-year period. Had compensation cost for these plans been determined as required under SFAS No. 123, the impact to net income for the nine months ended September 30, 2005 would have been approximately $0.4 million and basic and diluted earnings per share would have been reduced by approximately $0.02. As of September 30, 2005, 27,500 of the initially granted options were forfeited.

Dividends — The Company has not declared or paid any cash dividends in the past. The Company’s credit agreement prohibits the payment of cash dividends.

6. Debt

Debt consisted of the following (in thousands):


	September 30,			December 31,
	2005			2004
Revolving credit facilities, bearing interest at a weighted average rate of 6.8% as of September 30, 2005 and 7.0% as of December 31, 2004	$	2,644		$	4,566
Term loans, with principal and interest payable quarterly, bearing interest at a weighted average rate of 6.0% as of September 30, 2005 and 6.5% as of December 31, 2004		38,956			42,857
Senior notes, with interest payable semi-annually, bearing interest at a rate of 8.0%		150,000			—
Other		—			6,502

		191,600			53,925
Less current maturities		(5,127	)		(4,884	)

	$	186,473		$	49,041

Credit Agreement — In connection with the acquisition of MWC, the Company amended its senior credit facility to increase the revolving credit facility from $75.0 million to $100.0 million. The revolving credit facility is available until January 31, 2010 and the term loans are due and payable on December 31, 2010. Borrowings bear interest at various rates plus a margin based on certain financial ratios of the Company. In addition, the amendment increased certain baskets in the lien, investments and asset disposition covenants to reflect the Company’s increased size as a result of the Mayflower and MWC acquisitions.

In connection with our July 2005 stock and senior notes offerings, the Company entered into additional amendments to our senior credit facility which provided for, among other things, the occurrence of these offerings. In connection with these offerings, net proceeds of approximately $190.8 million were used to repay indebtedness under the senior credit facility.

The senior credit agreement contains various restrictive covenants, including limiting indebtedness, rental obligations, investments and cash dividends, and also requires the maintenance of certain financial ratios, including fixed charge coverage and funded debt to EBITDA. Compliance with respect to these covenants as of September 30, 2005 was achieved. Borrowings under the senior credit facility are secured by specifically identified assets of the Company, comprising, in total, substantially all assets of the Company. In addition, at September 30, 2005 the Company had outstanding letters of credit of approximately $2.1 million.

The credit facility provides the Company with the ability to denominate a portion of its borrowings in foreign currencies. As of September 30, 2005, none of the revolving credit facility borrowings and $27.9 million of the term loans were denominated in U.S. dollars and $2.6 million of the revolving credit facility borrowings and $11.1 million of the term loans were denominated in British pounds sterling.

Prior to May 2, 2005, the Company also had $6.5 million of indebtedness from borrowings financed through the issuance of industrial development bonds relating to its Vonore, Tennessee facility. These borrowings had a final maturity of August 1, 2006 and bore interest at a variable rate which was adjusted on a weekly basis by the placement agent such that the interest rate on the bonds was sufficient to cause the market value of the bonds to be equal to, as nearly as practicable, 100% of their principal amount. On May 2, 2005 the Company redeemed these bonds for approximately $6.5 million.

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On July 6, 2005, the Company completed a private offering of $150.0 million aggregate principal amount of 8.0% senior notes due 2013. The Company used the proceeds to reduce outstanding indebtedness under the senior credit facility and for general corporate purposes.

7. Goodwill and Intangible Assets

Goodwill represents the excess of acquisition purchase price over the fair value of net assets acquired, which prior to the adoption on January 1, 2002, of SFAS No. 142, Goodwill and Intangible Assets, was being amortized on a straight-line basis over 40 years. In July 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Intangible Assets. SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized, but reviewed annually or more frequently if impairment indicators arise. Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives, but with no maximum life.

The Company performs impairment tests annually during the second quarter and whenever events or circumstances occur indicating that goodwill might be impaired. During the nine months ended September 30, 2005, the Company reduced goodwill by approximately $2.1 million due to currency translation adjustments and goodwill was increased by approximately $62.9 million and intangibles were increased by approximately $45.7 million due to the Mayflower, MWC and CPI acquisitions.

8. Comprehensive Income

The Company follows the provisions of SFAS No. 130, Reporting Comprehensive Income, which established standards for reporting and display of comprehensive income and its components. Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. For the Company, comprehensive income (loss) represents net income (loss) adjusted for foreign currency translation adjustments and minimum pension liability. In accordance with SFAS No. 130, the Company has chosen to disclose comprehensive income (loss) in stockholders’ investment. The components of accumulated other comprehensive income consisted of the following as of September 30, 2005 (in thousands):


Foreign currency translation adjustment	$	1,997
Minimum pension liability		(2,898	)

	$	(901	)

Comprehensive income for the nine months ended September 30 is as follows (in thousands):


	2005			2004
Net income	$	36,969		$	11,518
Other comprehensive income:
Foreign currency translation adjustment		(3,231	)		(610	)
Minimum pension liability adjustment		(505	)		—

Comprehensive income	$	33,233		$	10,908

9. Commitments and Contingencies

Warranty — The Company is subject to warranty claims for products that fail to perform as expected due to design or manufacturing deficiencies. Customers continue to require their outside suppliers to guarantee or warrant their products and bear the cost of repair or replacement of such products. Depending on the terms under which the Company supplies products to its customers, a customer may hold the Company responsible for some or all of the repair or replacement costs of defective products when the product supplied did not perform as represented. The Company’s policy is to reserve for estimated future customer warranty costs based on historical trends and current economic factors. The following represents a summary of the warranty provision for the nine months ended September 30, 2005 (in thousands):

- 11 -


Balance — Beginning of period	$	2,408
Increase due to acquisitions		5,183
Additional provisions recorded		863
Deduction for payments made		(1,888	)
Currency translation adjustment		(26	)

Balance — End of period	$	6,540

Foreign Currency Forward Exchange Contracts — The Company uses forward exchange contracts to hedge certain of the foreign currency transaction exposures primarily related to its United Kingdom operations. The Company estimates its projected revenues and purchases in certain foreign currencies or locations, and will hedge a portion or all of the anticipated long or short position. The contracts typically run from three months up to three years. These contracts are marked-to-market and the fair value is included in assets (liabilities) in the consolidated balance sheets, with the offsetting noncash gain or loss included in the consolidated statements of operations. The Company does not hold or issue foreign exchange options or forward contracts for trading purposes.

The following table summarizes the notional amount of the Company’s open foreign exchange contracts at September 30, 2005 (in thousands):


	September 30, 2005
							U.S. $
	Local						Equivalent
	Currency			U.S. $			Fair
	Amount			Equivalent			Value
Commitments to sell currencies:
U.S. dollar	$	(265	)	$	(246	)	$	(265	)
Eurodollar		45,800			57,560			56,376
Swedish krona		7,750			1,052			1,003
Japanese yen		3,950,000			39,692			36,767
Australian dollar		6,400			4,645			4,851

The difference between the U.S. $ equivalent and U.S. $ equivalent fair value of approximately $4.0 million is included in other assets in the condensed consolidated balance sheet at September 30, 2005.

Litigation — The Company is subject to various legal actions and claims incidental to its business, including those arising out of alleged defects, product warranties, employment-related matters and environmental matters. Management believes that the Company maintains adequate insurance to cover these claims. The Company has established reserves for issues that are probable and estimatable in amounts management believes are adequate to cover reasonable adverse judgments not covered by insurance. Based upon the information available to management and discussions with legal counsel, it is the opinion of management that the ultimate outcome of the various legal actions and claims that are incidental to the Company’s business will not have a material adverse impact on the consolidated financial position, results of operations or cash flows of the Company; however, such matters are subject to many uncertainties, and the outcomes of individual matters are not predictable with assurance.

10. Defined Benefit Plan and Postretirement Benefits

The Company sponsors defined benefit plans that cover certain hourly and salaried employees in the United States and United Kingdom. The Company’s policy is to make annual contributions to the plans to fund the normal cost as required by local regulations. In addition, the Company has a postretirement medical benefit plan for certain U.S. operations’ retirees and their dependents, and has recorded a liability for its estimated obligation under this plan. The impact of the postretirement medical benefit plan was not significant as of and for the nine months ended September 30, 2005.

- 12 -

The components of net periodic benefit cost related to the defined benefit plans are as follows (in thousands):


	U.S. Pension Plans						U.K. Pension Plans
	Nine Months						Nine Months
	Ended Sept. 30,						Ended Sept. 30,
	2005			2004			2005			2004
Service cost	$	1,004		$	1,053		$	777		$	885
Interest cost		1,060			1,180			1,433			1,317
Expected return on plan assets		(1,037	)		(1,186	)		(1,486	)		(1,317	)
Recognized actuarial loss		—			250			254			184

Net periodic benefit cost	$	1,027		$	1,297		$	978		$	1,069

The Company previously disclosed in its financial statements for the year ended December 31, 2004, that it expected to contribute $1.1 million to its pension plans in 2005. Inclusive of the Mayflower acquisition, on a pro forma basis, CVG would have expected to contribute $2.2 million. As of September 30, 2005, $1.9 million of contributions have been made to the pension plans. The Company anticipates contributing an additional $0.4 million to its pension plans in 2005 for total estimated contributions during 2005 of $2.3 million.

11. Related Party Transactions

In May 2004, the Company entered in a Product Sourcing Assistance Agreement with Baird Asia Limited. Pursuant to the agreement, Baird Asia Limited will assist the Company in procuring materials and parts from Asia. For the nine months ended September 30, 2005, the Company made payment of approximately $2.0 million to Baird Asia Limited under this agreement. Of this amount, approximately $0.2 million was retained by Baird Asia Limited as its commission under the Product Sourcing Assistance Agreement.

12. Consolidating Guarantor and Non-Guarantor Financial Information

The following consolidating financial information presents balance sheets, statements of operations and cash flow information related to CVG’s business. Each Guarantor, as defined, is a direct or indirect wholly owned subsidiary of CVG and has fully and unconditionally guaranteed the Subordinated Notes issued by the Company, on a joint and several basis. Separate financial statements and other disclosures concerning the Guarantors have not been presented because management believes that such information is not material to investors.

The Parent Company includes all of the wholly owned subsidiaries accounted for under the equity method. The guarantor and non-guarantor companies include the consolidated financial results of their wholly owned subsidiaries accounted for under the equity method. All applicable corporate expenses have been allocated appropriately among the guarantor and non-guarantor subsidiaries.

- 13 -

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005


	Parent		Guarantor			Non-Guarantor
	Company		Companies			Companies			Elimination			Consolidated
						(Unaudited)
	(Amounts in thousands)

REVENUES	$	—	$	174,702		$	31,715		$	(558	)	$	205,859

COST OF SALES		—		143,321			26,492			(449	)		169,364


Gross Profit		—		31,381			5,223			(109	)		36,495

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		—		8,871			3,114			(109	)		11,876

AMORTIZATION EXPENSE		—		53			—			—			53


Operating Income		—		22,457			2,109			—			24,566

OTHER INCOME		—		(32	)		(293	)		—			(325	)

INTEREST EXPENSE		—		3,683			294			—			3,977

LOSS ON EARLY EXTINGUISHMENT OF DEBT		—		1,354			171			—			1,525


Income Before Income Taxes		—		17,452			1,937			—			19,389

PROVISION FOR INCOME TAXES		—		6,969			522			—			7,491


NET INCOME	$	—	$	10,483		$	1,415		$	—		$	11,898

- 14 -

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005


	Parent		Guarantor			Non-Guarantor
	Company		Companies			Companies			Elimination			Consolidated
						(Unaudited)
			(Amounts in thousands)

REVENUES	$	—	$	462,236		$	95,036		$	(2,907	)	$	554,365

COST OF SALES		—		379,178			78,906			(2,608	)		455,476


Gross Profit		—		83,058			16,130			(299	)		98,889

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		—		22,654			9,242			(299	)		31,597

AMORTIZATION EXPENSE		—		217			—			—			217


Operating Income		—		60,187			6,888			—			67,075

OTHER INCOME		—		(67	)		(3,531	)		—			(3,598	)

INTEREST EXPENSE		—		8,464			996			—			9,460

LOSS ON EARLY EXTINGUISHMENT OF DEBT		—		1,354			171			—			1,525


Income Before Income Taxes		—		50,436			9,252			—			59,688

PROVISION FOR INCOME TAXES		—		19,693			3,026			—			22,719


NET INCOME	$	—	$	30,743		$	6,226		$	—		$	36,969

- 15 -

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2005


	Parent		Guarantor		Non-Guarantor
	Company		Companies		Companies			Elimination			Consolidated
					(Unaudited)
			(Amounts in thousands)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—	$	23,382	$	1,868		$	—		$	25,250
Accounts receivable — Net		—		181,876		18,661			(72,026	)		128,511
Inventories		—		50,399		16,236			—			66,635
Prepaid expenses and other current assets		—		2,395		1,997			—			4,392
Deferred income taxes		—		10,167		(223	)		—			9,944

Total current assets		—		268,219		38,539			(72,026	)		234,732
PROPERTY, PLANT AND EQUIPMENT — Net		—		65,114		5,682			—			70,796
INVESTMENT IN SUBSIDIARIES		335,632		751		19,853			(356,236	)		—
GOODWILL		—		123,196		22,356			—			145,552
DEFERRED INCOME TAXES		—		7,949		1,921			—			9,870
INTANGIBLES AND OTHER ASSETS — Net		—		57,793		4,197			—			61,990

	$	335,632	$	523,022	$	92,548		$	(428,262	)	$	522,940


LIABILITIES AND STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt	$	—	$	5,127	$	—		$	—		$	5,127
Accounts payable		—		117,311		29,412			(72,026	)		74,697
Accrued liabilities		—		38,219		4,138			—			42,357

Total current liabilities		—		160,657		33,550			(72,026	)		122,181
LONG-TERM DEBT — Net		—		172,699		13,774			—			186,473
OTHER LONG-TERM LIABILITIES		—		20,142		4,805			—			24,947

Total liabilities		—		353,498		52,129			(72,026	)		333,601
STOCKHOLDERS’ INVESTMENT		335,632		169,524		40,419			(356,236	)		189,339

	$	335,632	$	523,022	$	92,548		$	(428,262	)	$	522,940

- 16 -

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005


	Parent		Guarantor			Non-Guarantor
	Company		Companies			Companies			Elimination		Consolidated
						(Unaudited)
			(Amounts in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	—	$	30,743		$	6,226		$	—	$	36,969
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		—		7,370			1,556			—		8,926
Noncash amortization of debt Financing costs		—		534			85			—		619
Loss on early extinguishment of debt		—		1,354			171			—		1,525
Deferred income tax provision (benefit)		—		—			1,361			—		1,361
Loss on sale of assets		—		72			6			—		78
Noncash gain on forward exchange contracts		—		—			(3,495	)		—		(3,495	)
Change in other operating items		—		(19,406	)		178			—		(19,228	)

Net cash provided by operating activities		—		20,667			6,088			—		26,755

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		—		(8,217	)		(1,115	)		—		(9,332	)
Payment for asset acquisition — Net		—		(175,753	)		225			—		(175,528	)

Net cash used in investing activities		—		(183,970	)		(890	)		—		(184,860	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital leases		—		(21	)		—			—		(21	)
Repayments of revolving credit facility		—		(187,068	)		(16,151	)		—		(203,219	)
Borrowings under revolving credit facility		—		187,068			14,545			—		201,613
Repayments of long-term debt		—		(236,209	)		(1,014	)		—		(237,223	)
Borrowings of long-term debt		—		377,459			—			—		377,459
Proceeds from issuance of common stock		—		44,937			—			—		44,937
Other — Net		—		125			—			—		125

Net cash provided by (used in) financing activities		—		186,291			(2,620	)		—		183,671

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		—		—			(1,712	)		—		(1,712	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		—		22,988			866			—		23,854
CASH AND CASH EQUIVALENTS — Beginning of period		—		394			1,002			—		1,396

CASH AND CASH EQUIVALENTS — End of period	$	—	$	23,382		$	1,868		$	—	$	25,250

- 17 -

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2004


	Parent		Guarantor		Non-Guarantor
	Company		Companies		Companies		Elimination			Consolidated
	(Unaudited)
	(Amounts in thousands)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—	$	394	$	1,002	$	—		$	1,396
Accounts receivable — Net		—		74,506		17,844		(46,083	)		46,267
Inventories		—		22,346		14,590		—			36,936
Prepaid expenses and other current assets		—		3,585		2,496		—			6,081
Deferred income taxes		—		6,913		1,288		—			8,201

Total current assets		—		107,744		37,220		(46,083	)		98,881
PROPERTY, PLANT AND EQUIPMENT — Net		—		26,918		6,047		—			32,965
INVESTMENT IN SUBSIDIARIES		192,920		750		18,088		(211,758	)		—
GOODWILL		—		60,293		24,422		—			84,715
DEFERRED INCOME TAXES		—		4,645		1,256		—			5,901
INTANGIBLES AND OTHER ASSETS — Net		—		1,869		1,307		—			3,176

	$	192,920	$	202,219	$	88,340	$	(257,841	)	$	225,638


LIABILITIES AND STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt	$	—	$	4,884	$	—	$	—		$	4,884
Accounts payable		—		52,382		27,547		(46,083	)		33,846
Accrued liabilities		—		15,374		3,050		—			18,424

Total current liabilities		—		72,640		30,597		(46,083	)		57,154
LONG-TERM DEBT — Net		—		31,258		17,783		—			49,041
OTHER LONG-TERM LIABILITIES		—		4,552		3,845		—			8,397

Total liabilities		—		108,450		52,225		(46,083	)		114,592
STOCKHOLDERS’ INVESTEMENT		192,920		93,769		36,115		(211,758	)		111,046

	$	192,920	$	202,219	$	88,340	$	(257,841	)	$	225,638

- 18 -

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004


	Parent		Guarantor		Non-Guarantor
	Company		Companies		Companies			Elimination		Consolidated
	(Unaudited)
	(Amounts in thousands)

REVENUES	$	—	$	71,769	$	26,944		$	—	$	98,713

COST OF SALES		—		57,868		22,616			—		80,484


Gross Profit		—		13,901		4,328			—		18,229

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		—		4,310		2,608			—		6,918

AMORTIZATION EXPENSE		—		22		—			—		22


Operating Income		—		9,569		1,720			—		11,289

OTHER EXPENSE		—		9		1,157			—		1,166

INTEREST EXPENSE		—		1,137		462			—		1,599

LOSS ON EARLY EXTINGUISHMENT OF DEBT		—		1,605		—			—		1,605


Income Before Income Taxes		—		6,818		101			—		6,919

PROVISION (BENEFIT) FOR INCOME TAXES		—		144		(71	)		—		73


NET INCOME	$	—	$	6,674	$	172		$	—	$	6,846

- 19 -

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004


	Parent		Guarantor			Non-Guarantor
	Company		Companies			Companies			Elimination			Consolidated
	(Unaudited)
	(Amounts in thousands)

REVENUES	$	—	$	197,612		$	81,581		$	—		$	279,193

COST OF SALES		—		161,131			67,491			—			228,622


Gross Profit		—		36,481			14,090			—			50,571

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		—		13,309			7,973			—			21,282

NONCASH OPTION ISSUANCE CHARGE		—		10,125			—			—			10,125

AMORTIZATION EXPENSE		—		85			—			—			85


Operating Income		—		12,962			6,117			—			19,079

OTHER INCOME		—		(1,481	)		(2,552	)		1,500			(2,533	)

INTEREST EXPENSE		—		3,995			1,943			—			5,938

LOSS ON EARLY EXTINGUISHMENT OF DEBT		—		1,605			—			—			1,605


Income Before Income Taxes		—		8,843			6,726			(1,500	)		14,069

PROVISION FOR INCOME TAXES		—		276			2,275			—			2,551


NET INCOME	$	—	$	8,567		$	4,451		$	(1,500	)	$	11,518

- 20 -

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004


	Parent		Guarantor			Non-Guarantor
	Company		Companies			Companies			Elimination			Consolidated
			(Unaudited) (Amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	—	$	8,567		$	4,451		$	(1,500	)	$	11,518
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		—		4,635			1,194			—			5,829
Noncash amortization of debt Financing costs		—		392			16			—			408
Noncash option issuance charge		—		10,125			—			—			10,125
Loss on early extinguishment of debt		—		1,031			—			—			1,031
Deferred income tax provision (benefit)		—		(4,015	)		1,022			—			(2,993	)
Loss on sale of assets		—		—			—			—			—
Noncash gain on forward exchange contracts		—		—			(2,554	)		—			(2,554	)
Noncash interest expense on subordinated debt		—		481			—			—			481
Change in other operating items		—		(6,557	)		4,227			—			(2,330	)

Net cash provided by operating activities		—		14,659			8,356			(1,500	)		21,515

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		—		(2,649	)		(1,252	)		—			(3,901	)
Payment for asset acquisition — Net		—		—			—			—			—

Net cash used in investing activities		—		(2,649	)		(1,252	)		—			(3,901	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital leases		—		(12	)		—			—			(12	)
Repayments of revolving credit facility		—		(62,125	)		(15,393	)		—			(77,518	)
Borrowings under revolving credit facility		—		45,775			10,190			—			55,965
Repayments of long-term debt		—		(78,420	)		(12,755	)		—			(91,175	)
Borrowings of long-term debt		—		52,000			13,948			—			65,948
Repayment of subordinated debt		—		(3,112	)		—			—			(3,112	)
Proceeds from issuance of common stock		—		47,168			—			—			47,168
Other — Net		—		(2,240	)		750			1,500			10

Net cash provided by (used in) financing activities		—		(966	)		(3,260	)		1,500			(2,726	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		—		—			(624	)		—			(624	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		—		11,044			3,220			—			14,264
CASH AND CASH EQUIVALENTS — Beginning of period		—		2,025			1,461			—			3,486

CASH AND CASH EQUIVALENTS — End of period	$	—	$	13,069		$	4,681		$	—		$	17,750

- 21 -

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview

We are a leading supplier of fully integrated system solutions for the global commercial vehicle market, including the heavy-duty truck market, the construction and agriculture market and the specialty and military transportation markets. As a result of our strong leadership in cab-related products and systems, we are positioned to benefit from the increased focus of our customers on cab design and comfort and convenience features to better serve the end user, the driver. Our products include suspension seat systems, cab structures and components, interior trim systems, such as instrument and door panels, headliners, cabinetry, molded products and floor systems, mirrors, wiper systems, electronic wire harness assemblies and controls and switches specifically designed for applications in commercial vehicle cabs. CVG is headquartered in New Albany, OH with operations throughout North America, Europe and Asia. Information about CVG and its products is available on the internet at www.cvgrp.com.

Demand for our products is generally dependent on the number of new commercial vehicles manufactured, which in turn is a function of general economic conditions, interest rates, changes in governmental regulations, consumer spending, fuel costs and our customers’ inventory levels and production rates. New commercial vehicle demand has historically been cyclical and is particularly sensitive to the industrial sector of the economy, which generates a significant portion of the freight tonnage hauled by commercial vehicles.

Although original equipment manufacturer (“OEM”) demand for our products is directly correlated with new vehicle production, we also have the opportunity to grow through increasing our product content per vehicle through cross-selling and bundling of products. We generally compete for new business at the beginning of the development of a new vehicle platform and upon the redesign of existing programs. New platform development generally begins at least one to three years before the marketing of such models by our customers. Contract durations for commercial vehicle products generally extend for the entire life of the platform, which is typically five to seven years.

In sourcing products for a specific platform, the customer generally develops a proposed production timetable, including current volume and option mix estimates based on their own assumptions, and then sources business with the supplier pursuant to written contracts, purchase orders or other firm commitments in terms of price, quality, technology and delivery. In general, these contracts, purchase orders and commitments provide that the customer can terminate if a supplier does not meet specified quality and delivery requirements and, in many cases, they provide that the price will decrease over the proposed production timetable. Awarded business generally covers the supply of all or a portion of a customer’s production and service requirements for a particular product program rather than the supply of a specific quantity of products. Accordingly, in estimating awarded business over the life of a contract or other commitment, a supplier must make various assumptions as to the estimated number of vehicles expected to be produced, the timing of that production, mix of options on the vehicles produced and pricing of the products being supplied. The actual production volumes and option mix of vehicles produced by customers depend on a number of factors that are beyond a supplier’s control.

Recent Acquisitions

On February 7, 2005, we acquired substantially all of the assets and liabilities related to Mayflower Vehicle Systems’ North American Commercial Vehicle Operations for $107.5 million, and Mayflower became a wholly owned subsidiary of CVG. The Mayflower acquisition was funded through an increase and amendment to our senior credit facility. Mayflower is the only non-captive producer of complete steel and aluminum truck cabs for the commercial vehicle sector in North America. Mayflower serves the North American commercial vehicle sector from three manufacturing locations, Norwalk, Ohio, Shadyside, Ohio and Kings Mountain, North Carolina, supplying three major product lines: cab frames and assemblies, sleeper boxes and other structural components. For the year ended December 31, 2004, Mayflower recorded revenues of $206.5 million and operating income of $21.6 million. We estimate that the future tax benefits related to the deductibility of goodwill and intangible asset amortization to have an estimated present value of $12.0 million.

On June 3, 2005, we acquired all of the stock of Monona Corporation, the parent of MWC, for $55.0 million, and MWC became a wholly owned subsidiary of CVG. The MWC acquisition was funded through an increase and amendment to our senior credit facility. MWC is a leading manufacturer of complex, electronic wire harnesses and related assemblies used in the global heavy equipment, commercial vehicle, heavy-truck and specialty and military vehicle markets. It also produces panel assemblies for commercial equipment markets and cab frame assemblies for Caterpillar. MWC operates from primary manufacturing operations in the U.S. and Mexico. For the fiscal year ended January 31, 2005, MWC recorded revenues of $85.5 million and operating income of $9.6 million.

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On August 8, 2005, the Company acquired all of the stock of Cabarrus Plastics, Inc. for $12.1 million, and CPI became an indirect wholly owned subsidiary of the Company. CPI is a manufacturer of custom injection molded products primarily for the recreational vehicle market. For the year ended December 31, 2004, CPI recorded revenues of approximately $14.2 million and operating income of approximately $0.9 million. The CPI acquisition was financed with cash on hand.

Basis of Presentation

Onex Corporation, Hidden Creek Industries and certain other investors acquired Trim Systems in 1997 and each of Commercial Vehicle Systems and National/KAB Seating in 2000. Each of these companies was initially owned through separate holding companies. The operations of Commercial Vehicle Systems and National/KAB Seating were formally combined under a single holding company, now known as Commercial Vehicle Group, Inc., on March 28, 2003. In connection with our initial public offering, Trim Systems became a wholly owned subsidiary of CVG on August 2, 2004. Because these businesses were under common control since their respective dates of acquisition, their respective historical results of operations have been combined for the periods in which they were under common control based on their respective historical basis of accounting. Our results of operations include the results of Mayflower, MWC and CPI since the date of their respective acquisitions.

Results of Operations

The table below sets forth certain operating data expressed as a percentage of revenues for the periods indicated:


	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2005			2004			2005			2004
Revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of Sales		82.3			81.5			82.2			81.9

Gross Profit		17.7			18.5			17.8			18.1
Selling, General and Administrative Expenses		5.8			7.0			5.7			7.6
Amortization Expense		0.0			0.0			0.0			0.0
Noncash Option Issuance Charge		0.0			0.0			0.0			3.6

Operating Income		11.9			11.5			12.1			6.9
Other (Income) Expense		(0.2	)		1.2			(0.7	)		(0.9	)
Interest Expense		1.9			1.6			1.7			2.1
Loss on Early Extinguishment of Debt		0.7			1.6			0.3			0.6

Income Before Income Taxes		9.5			7.1			10.8			5.1
Provision for Income Taxes		3.6			0.1			4.1			0.9

Net Income		5.9	%		7.0	%		6.7	%		4.2	%

Three Months Ended September 30, 2005 Compared to Three Months Ended September 30, 2004

Revenues. Revenues increased $107.1 million, or 108.5%, to $205.9 million in the three months ended September 30, 2005 from $98.7 million in the three months ended September 30, 2004. This increase resulted primarily from the acquisitions of Mayflower, MWC and CPI which equated to approximately $96.1 million of increased revenue. In addition, a 25.0% increase in North American heavy truck production and organic growth equated to approximately $9.1 million of increased revenues while higher OEM sales in the European and Asian seating markets increased revenues approximately $2.5 million. Foreign exchange fluctuations reduced approximately $0.6 million of revenues from the prior year period.

Gross Profit. Gross profit increased $18.3 million, or 100.2%, to $36.5 million in the three months ended September 30, 2005 from $18.2 million in the three months ended September 30, 2004. As a percentage of revenues, gross profit decreased to 17.7% in the three months ended September 30, 2005 from 18.5% in the three months ended September 30, 2004. This decrease resulted primarily from the reduced gross profit margins of the Mayflower, MWC and CPI acquisitions as well as continuing pressures on raw material commodities such as steel and petroleum-based products and services versus the prior year period.

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Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $5.0 million to $11.9 million in the three months ended September 30, 2005 from $6.9 million in the three months ended September 30, 2004. This increase resulted principally from the Mayflower, MWC and CPI acquisitions as well as additional costs related to the overall growth and costs related to being a public company versus the prior year period.

Amortization Expense. Amortization expense increased $31 thousand to $53 thousand in the three months ended September 30, 2005 from $22 thousand in the three months ended September 30, 2004.

Other (Income) Expense. We use forward exchange contracts to hedge foreign currency transaction exposures related primarily to our United Kingdom operations. We estimate our projected revenues and purchases in certain foreign currencies or locations and will hedge a portion of the anticipated long or short position. We have not designated any of our forward exchange contracts as cash flow hedges, electing instead to mark-to-market the contracts and record the fair value of the contracts in our balance sheets, with the offsetting noncash gain or loss recorded in our consolidated statements of operations. The $325 thousand gain in the three months ended September 30, 2005 and the $1.2 million loss in the three months ended September 30, 2004 primarily represent the noncash change in value of the forward exchange contracts in existence at the end of each respective period.

Interest Expense. Interest expense increased $2.4 million to $4.0 million in the three months ended September 30, 2005 from $1.6 million in the three months ended September 30, 2004. This increase primarily reflects an increase in total debt during the respective periods with the addition of debt related to the Mayflower and MWC acquisitions.

Loss on Early Extinguishment of Debt. As a part of the combination of CVG and Trim Systems, we wrote-off capitalized debt financing costs as well as certain costs incurred in connection with our credit agreement amendment. Total capitalized costs written-off and amendment costs expensed during the three months ended September 30, 2004 approximated $1.6 million. In connection with the receipt of proceeds from the $150.0 million senior notes transaction and the stock offering during the three months ended September 30, 2005, we reduced our existing credit facility and wrote-off a portion of our capitalized debt financing costs of approximately $1.5 million.

Provision for Income Taxes. Our effective tax rate was 38.6% for the three months ended September 30, 2005 and 1.1% for the same period in 2004. An income tax provision of $7.5 million was made for the three months ended September 30, 2005 compared to an income tax provision of $73 thousand for the three months ended September 30, 2004. The increase in effective rate quarter over quarter can be primarily attributed to our tax position in certain geographical regions and changes in federal and state rates from the prior year period in addition to the utilization of net operating loss carry-forwards during the quarter ended September 30, 2004.

Net Income. Net income increased $5.1 million to $11.9 million in the three months ended September 30, 2005, compared to $6.8 million in the three months ended September 30, 2004, primarily as a result of the factors discussed above.

Nine Months Ended September 30, 2005 Compared to Nine Months Ended September 30, 2004

Revenues. Revenues increased $275.2 million, or 98.6%, to $554.4 million in the nine months ended September 30, 2005 from $279.2 million in the nine months ended September 30, 2004. This increase resulted primarily from the Mayflower, MWC and CPI acquisitions which equated to approximately $218.5 million of increased revenue. In addition, a 36.0% increase in North American heavy truck production and organic growth equated to approximately $47.1 million of increased revenues while higher OEM sales in the European and Asian seating markets increased revenues approximately $8.5 million. Favorable foreign exchange fluctuations also added approximately $1.1 million of revenues over the prior year period.

Gross Profit. Gross profit increased $48.3 million, or 95.5%, to $98.9 million in the nine months ended September 30, 2005 from $50.6 million in the nine months ended September 30, 2004. As a percentage of revenues, gross profit decreased to 17.8% in the nine months ended September 30, 2005 as compared to 18.1% in the nine months ended September 30, 2004. This decrease resulted primarily from the reduced gross profit margins of the Mayflower, MWC and CPI acquisitions as well as continuing pressures on raw material commodities such as steel and petroleum-based products and services versus the prior year period.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $10.3 million to $31.6 million in the nine months ended September 30, 2005 from $21.3 million in the nine months ended September 30, 2004. This increase resulted principally from the Mayflower, MWC and CPI acquisitions as well as additional costs related to the overall growth and costs related to being a public company versus the prior year period.

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Amortization Expense. Amortization expense increased $132 thousand to $217 thousand in the nine months ended September 30, 2005 from $85 thousand in the nine months ended September 30, 2004.

Other (Income) Expense. We use forward exchange contracts to hedge foreign currency transaction exposures related primarily to our United Kingdom operations. We estimate our projected revenues and purchases in certain foreign currencies or locations and will hedge a portion of the anticipated long or short position. We have not designated any of our forward exchange contracts as cash flow hedges, electing instead to mark-to-market the contracts and record the fair value of the contracts in our balance sheets, with the offsetting noncash gain or loss recorded in our consolidated statements of operations. The $3.6 million gain in the nine months ended September 30, 2005 and the $2.5 million gain in the nine months ended September 30, 2004 primarily represent the noncash change in value of the forward exchange contracts in existence at the end of each respective period.

Interest Expense. Interest expense increased $3.5 million to $9.5 million in the nine months ended September 30, 2005 from $5.9 million in the nine months ended September 30, 2004. This increase reflects an increase in total debt during the respective periods with the addition of debt related to the Mayflower and MWC acquisitions.

Loss on Early Extinguishment of Debt. As a part of the combination of CVG and Trim Systems, we wrote-off capitalized debt financing costs as well as certain costs incurred in connection with our credit agreement amendment. Total capitalized costs written-off and amendment costs expensed during the nine months ended September 30, 2004 approximated $1.6 million. In connection with the receipt of proceeds from the $150.0 million senior notes transaction and the stock offering during the nine months ended September 30, 2005, we reduced our existing credit facility and wrote-off a portion of our capitalized debt financing costs of approximately $1.5 million.

Provision for Income Taxes. Our effective tax rate was 38.1% for the nine months ended September 30, 2005 and 18.1% for the same period in 2004. An income tax provision of $22.7 million in the nine months ended September 30, 2005 compared to a provision for income tax of $2.6 million in the nine months ended September 30, 2004. The increase in effective rate quarter over quarter can be primarily attributed to our tax position in certain geographical regions and changes in federal and state rates from the prior year period in addition to the utilization of net operating loss carry-forwards during the nine months ended September 30, 2004.

Net Income. Net income increased $25.5 million to $37.0 million in the nine months ended September 30, 2005, compared to $11.5 million in the nine months ended September 30, 2004, primarily as a result of the factors discussed above.

Liquidity and Capital Resources

Cash Flows

For the nine months ended September 30, 2005, we generated cash from operations of $26.8 million compared to $21.5 million from the prior year period, primarily as a result of the increase in operating earnings and the Mayflower, MWC and CPI acquisitions.

Net cash used in investing activities was $184.9 million for the nine months ended September 30, 2005 and $3.9 million for the comparable period in 2004. The amounts used in 2005 reflect both capital expenditure purchases and the acquisitions of Mayflower, MWC and CPI.

Net cash provided by financing activities totaled $183.7 million for the nine months ended September 30, 2005, compared to net cash used of $2.7 million in the same period of 2004. The net cash from financing activities in 2005 was principally related to additional borrowings related to the acquisitions of Mayflower and MWC, the use of cash on hand for the acquisition of CPI and the amendments to our senior credit facility.

Debt and Credit Facilities

As of September 30, 2005, we had an aggregate of $191.6 million of outstanding indebtedness excluding $2.1 million of outstanding letters of credit under various financing arrangements. We were in compliance with all of our respective financial covenants under our debt and credit facilities as of September 30, 2005.

In August 2004, in connection with our initial public offering, we entered into a $105.0 million senior credit facility, consisting of a $65.0 million term loan and a $40.0 million revolving line of credit. We used borrowings under the term loan, together with proceeds of the offering to repay all of our existing borrowings under our then existing senior credit facilities and to repay all of our then existing subordinated indebtedness. In connection with this senior credit facility, we recorded a loss in the third quarter of 2004 on the early extinguishment of debt of approximately $1.6 million related to unamortized deferred financings fees.

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In February 2005, in connection with the acquisition of Mayflower, we amended our senior credit facility to increase the revolving credit facility from $40.0 million to $75.0 million and the term loans from $65.0 million to $145.0 million. We used borrowings of approximately $106.4 million under our amended senior credit facility to fund substantially all of the purchase price for the Mayflower acquisition.

On June 3, 2005, in connection with the MWC acquisition, we amended our senior credit facility to increase the revolving credit facility from $75.0 million to $100.0 million. In addition, the amendment increased certain baskets in the lien, investments and asset disposition covenants to reflect our increased size as a result of the Mayflower and MWC acquisitions. We used revolving credit borrowings of approximately $58.0 million under our amended senior credit facility to fund substantially all of the purchase price for the MWC acquisition.

On July 6, 2005, we completed a public stock offering and a private offering of $150.0 million aggregate principal amount of 8.0% senior notes due 2013. We used the net proceeds of this offering of approximately $190.8 million to repay a portion of the borrowings under our senior credit facility.

As of September 30, 2005, under our senior credit facility we had borrowings of $2.6 million under our revolving credit facility and term loans of $39.0 million. The weighted average rate on these borrowings, for the quarter ended September 30, 2005, ranged from 6.8% with respect to the revolving borrowings to 6.0% for the term loan borrowings.

The revolving credit facility is available until January 31, 2010 and the term loans are due and payable on December 31, 2010. Based on the provisions of EITF 96-19, Debtor’s Accounting for a Modification or Exchange of Debt Instruments, approximately $2.0 million third party fees relating to the credit agreement were capitalized at September 30, 2005 and are being amortized over the life of the credit agreement.

Under the terms of our senior credit facility, availability under the revolving credit facility is subject to the lesser of (i) a borrowing base that is equal to the sum of (a) 80% of eligible accounts receivable plus (b) 50% of eligible inventory; or (ii) $100.0 million. Borrowings under the senior credit facility bear interest at a floating rate which can be either the prime rate or LIBOR plus the applicable margin to the prime rate and LIBOR borrowings based on our leverage ratio. The senior credit facility contains various financial covenants, including a minimum fixed charge coverage ratio of not less than 1.30, and a minimum ratio of EBITDA to cash interest expense of not less than 2.50, in each case for the twelve month period ending on December 31 of each year, a limitation on the amount of capital expenditures of not more than $25.0 million in any fiscal year and a maximum ratio of total indebtedness to EBITDA as of the last day of each fiscal quarter as set forth below:


		Maximum Total
Quarters(s) Ending		Leverage Ratio
9/30/05		3.00 to 1.00
12/31/05 through 9/30/06		2.75 to 1.00
12/31/06 and each fiscal quarter thereafter		2.50 to 1.00

The senior credit facility also contains covenants restricting certain corporate actions, including asset dispositions, acquisitions, dividends, changes of control, incurring indebtedness, making loans and investments and transactions with affiliates. If we do not comply with such covenants or satisfy such ratios, our lenders could declare a default under the senior credit facility, and our indebtedness thereunder could be declared immediately due and payable. The senior credit facility is collateralized by substantially all of our assets. The senior credit facility also contains customary events of default.

We believe that cash flow from operating activities together with available borrowings under our senior credit facility will be sufficient to fund currently anticipated working capital, planned capital spending and debt service requirements for at least the next twelve months. We regularly review acquisition and additional opportunities, which may require additional debt or equity financing.

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Forward-Looking Statements

All statements, other than statements of historical fact included in this Form 10-Q, including without limitation the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this Form 10-Q, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such forward-looking statements are based on the beliefs of our management as well as on assumptions made by and information currently available to us at the time such statements were made. Various economic and competitive factors could cause actual results to differ materially from those discussed in such forward-looking statements, including factors which are outside of our control, such as risks relating to: (i) our ability to develop or successfully introduce new products; (ii) risks associated with conducting business in foreign countries and currencies; (iii) general economic or business conditions affecting the markets in which we serve; (iv) increased competition in the heavy-duty truck market; and (v) our failure to complete or successfully integrate additional strategic acquisitions. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by such cautionary statements.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our exposure to market risk since December 31, 2004.

ITEM 4: CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this evaluation, the principal executive officer and principal financial officer had concluded that our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. There was no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Subsequent to the end of the period covered by this Quarterly Report on Form 10-Q, the Company determined that it had incorrectly classified a noncash stock option charge on its cash flow statement for the six months ended June 30, 2004. As a result, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were not effective at September 30, 2005 with respect to the classification of noncash option charges on its cash flow statements and the Company has restated its condensed consolidated statement of cash flows as of June 30, 2004. The Company is presently evaluating and testing its internal controls over financial reporting. Based on the results of the evaluation and testing, the Company will implement corrective action to its internal control procedures where required to improve the effectiveness of internal controls. The Company intends to complete the process of testing and remediation by the end of fiscal year 2005.

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PART II. OTHER INFORMATION

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

Item 1. Legal Proceedings:

From time to time, we are involved in various disputes and litigation matters that arise in the ordinary course of our business. We do not have any material litigation at this time.

Item 6. Exhibits:


2.1		Stock Purchase Agreement, dated as of August 8, 2005, by and between Trim Systems, Inc. Cabarrus Plastics, Inc. and the Shareholders listed therein (incorporated by reference to the Company’s current report on Form 8-K (File No. 000-50890) filed on August 12, 2005).

10.1		Indenture, dated July 6, 2005, among Commercial Vehicle Group, Inc., the subsidiary guarantors party thereto and U.S. Bank National Association, as Trustee, with respect to 8% Senior Notes due 2013 (incorporated herein by reference to the Company’s Current Report on Form 8-K (File No. 000-50890), filed on July 8, 2005).

10.2		Supplemental Indenture, dated as of August 10, 2005, by and among Commercial Vehicle Group, Inc., Cabarrus Plastics, Inc. and U.S. Bank National Association (incorporated by reference to the Company’s current report on Form 8-K (File No. 000-50890) filed on August 12, 2005).

10.3		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).

10.4		Fifth Amendment to Revolving Credit and Term Loan Agreement, dated as of July 12, 2005, by and among Commercial Vehicle Group, Inc., the subsidiary borrowers from time to time parties thereto, the foreign currency borrowers from time to time parties thereto, the banks from time to time parties thereto, U.S. Bank National Association, one of the banks, as administrative agent for the banks, and Comerica Bank, one of the banks, as syndication agent for the banks (incorporated by reference to the Company’s current report on Form 8-K (File No. 000-50890), filed on July 14, 2005).

31.1		Certification by Mervin Dunn, President and Chief Executive Officer.

31.2		Certification by Chad M. Utrup, Vice President of Finance and Chief Financial Officer.

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURE

Pursuant to the requirements 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.


	COMMERCIAL VEHICLE GROUP, INC.

Date: November 10, 2005	By	/s/ Chad M. Utrup

		Chad M. Utrup
		Chief Financial Officer

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