Commercial Vehicle Group, Inc. - Quarter Report: 2010 September (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

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

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

Commission file number 001-34365

COMMERCIAL VEHICLE GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware		41-1990662
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
7800 Walton Parkway		43054
New Albany, Ohio		(Zip Code)
(Address of principal executive offices)

(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 has submitted electronically and posted on its corporate Web site, 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 o No o

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.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
		(Do not check if a 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 o No þ

The number of shares outstanding of the Registrant’s common stock, par value $.01 per share, at September 30, 2010 was 28,545,253 shares.

 

 

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q

PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS			1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)			1
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009 (UNAUDITED)			2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)			3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)			4
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			23
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			31
ITEM 4 CONTROLS AND PROCEDURES			31
PART II OTHER INFORMATION			33
SIGNATURES			35
Certification of CEO
Certification of CFO
CEO Certification Pursuant to Section 906
CFO Certification Pursuant to Section 906
EX-31.1
EX-31.2
EX-32.1
EX-32.2

ITEM 1 – FINANCIAL STATEMENTS

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
		(In thousands, except per share								(In thousands, except per share
		amounts)								amounts)
REVENUES		$	150,950			$	110,811			$	439,706			$	322,844
COST OF REVENUES			131,086				107,199				385,194				323,570
Gross Profit (Loss)			19,864				3,612				54,512				(726	)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			14,533				11,298				41,412				35,007
AMORTIZATION EXPENSE			60				98				180				292
INTANGIBLE ASSET IMPAIRMENT			—				—				—				7,000
LONG-LIVED ASSET IMPAIRMENT			—				—				—				3,445
RESTRUCTURING COSTS			162				—				1,572				1,947
Operating Income (Loss)			5,109				(7,784	)			11,348				(48,417	)
OTHER (INCOME) EXPENSE			(1,061	)			1,211				(3,801	)			(7,186	)
INTEREST EXPENSE			4,418				3,989				12,839				11,299
LOSS ON EARLY EXTINGUISHMENT OF DEBT			—				459				—				1,254
EXPENSE RELATING TO DEBT EXCHANGE			—				2,902				—				2,902
Income (Loss) Before Provision (Benefit) for Income Taxes			1,752				(16,345	)			2,310				(56,686	)
PROVISION (BENEFIT) FOR INCOME TAXES			610				(463	)			(201	)			1,113
NET INCOME (LOSS)		$	1,142			$	(15,882	)		$	2,511			$	(57,799	)
INCOME (LOSS) PER COMMON SHARE:
Basic		$	0.04			$	(0.73	)		$	0.10			$	(2.66	)
Diluted		$	0.04			$	(0.73	)		$	0.09			$	(2.66	)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic			27,340				21,747				25,770				21,747
Diluted			28,087				21,747				26,584				21,747

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

		September 30,				December 31,
		2010				2009
		(Unaudited)				(Unaudited)
		(In thousands, except share and per
		share amounts)
ASSETS
CURRENT ASSETS:
Cash		$	43,783			$	9,524
Accounts receivable, net of reserve for doubtful accounts of $2,768 and $1,812, respectfully			90,435				74,063
Inventories, net			70,397				58,051
Prepaid expenses and other, net			9,960				26,781
Total current assets			214,575				168,419
PROPERTY, PLANT AND EQUIPMENT, net			57,201				62,315
INTANGIBLE ASSETS, net of accumulated amortization of $2,186 and $2,006, respectfully			3,907				4,087
OTHER ASSETS, net			13,634				15,688
TOTAL ASSETS		$	289,317			$	250,509
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable		$	66,999			$	59,657
Accrued liabilities, other			33,555				32,977
Total current liabilities			100,554				92,634
LONG-TERM DEBT			165,277				162,644
PENSION AND OTHER POST-RETIREMENT BENEFITS			25,521				26,915
OTHER LONG-TERM LIABILITIES			3,634				6,081
Total liabilities			294,986				288,274
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ DEFICIT:
Preferred stock $.01 par value; 5,000,000 shares authorized; 27,339,930 and 22,070,531 shares issued and outstanding, respectively			274				221
Treasury stock purchased from employees; 130,674 shares, respectively			(1,090	)			(1,090	)
Additional paid-in capital			214,668				186,291
Retained loss			(197,335	)			(199,846	)
Accumulated other comprehensive loss			(22,186	)			(23,341	)
Total stockholders’ deficit			(5,669	)			(37,765	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	289,317			$	250,509

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

		Nine Months Ended
		September 30,
		2010				2009
		(Unaudited)				(Unaudited)
		(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	2,511			$	(57,799	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			8,842				12,932
Noncash amortization of debt financing costs			1,136				1,069
Loss on early extinguishment of debt			—				1,254
Amortization of bond discount/premium, net			(936	)			—
Paid-in-kind interest			3,569				—
Shared-based compensation expense			1,998				2,139
(Gain) loss on sale of assets			(87	)			977
Noncash gain on forward exchange contracts			(3,377	)			(7,122	)
Intangible asset impairment			—				7,000
Long-lived asset impairment			—				3,445
Change in other operating items			(2,305	)			50,057
Net cash provided by operating activities			11,351				13,952
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(5,783	)			(4,799	)
Proceeds from disposal/sale of property plant and equipment			97				20
Other assets and liabilities			389				(1,969	)
Net cash used in investing activities			(5,297	)			(6,748	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net			25,359				—
Proceeds from issuance of common stock under equity incentive plans			1,126				—
Excess tax benefit from equity incentive plans			(52	)			—
Repayment of revolving credit facility			—				(237,290	)
Borrowings under revolving credit facility			—				222,490
Borrowing of long-term debt			—				13,120
Payments on capital lease obligations			—				(90	)
Debt issuance costs and other			—				(3,244	)
Net cash provided by (used in) financing activities			26,433				(5,014	)
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH			1,772				676
NET INCREASE IN CASH			34,259				2,866
CASH:
Beginning of period			9,524				7,310
End of period		$	43,783			$	10,176
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest		$	9,998			$	12,741
Cash received for income taxes, net		$	(21,116	)		$	(4,069	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Description of Business and Basis of Presentation

Commercial Vehicle Group, Inc. and its subsidiaries (“CVG”, “Company” or “we”) design and manufacture 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, military, bus, agriculture and specialty transportation market. We have facilities located in the United States in Arizona, Indiana, Illinois, Iowa, North Carolina, Ohio, Oregon, Tennessee, Virginia and Washington and outside of the United States in Australia, Belgium, China, Czech Republic, Mexico, Ukraine and the United Kingdom.

We have prepared the condensed consolidated financial statements included herein, without audit, pursuant to the rules and regulations of the United States 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 the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to make the information presented not misleading when read in conjunction with our fiscal 2009 consolidated financial statements and the notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K as filed with the SEC on March 12, 2010. 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, 2010 are not necessarily indicative of the results to be expected in future operating quarters.

2. Recently Issued Accounting Pronouncements

In January 2010, the FASB issued ASU 2010-6, “Improving Disclosures about Fair Value Measurements,” which requires interim disclosures regarding significant transfers in and out of Level 1 and Level 2 fair value measurements. Additionally, ASU 2010-6 requires disclosure for each class of assets and liabilities and disclosures about the valuation techniques and inputs used to measure fair value for both recurring and non-recurring fair value measurements. These disclosures are required for fair value measurements that fall in either Level 2 or Level 3. Further, ASU 2010-6 requires separate presentation of Level 3 activity for the fair value measurements. We adopted the interim disclosure requirements under this standard during the quarter ended March 31, 2010, with the exception of the separate presentation in the Level 3 activity rollforward, which is not effective until fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years.

3. Fair Value Measurement

Accounting guidance on fair value measurement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

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 — Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The fair values of our financial assets and liabilities are categorized as follows (in thousands):

		September 30,																December 31, 2009
		Total				Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3
Derivative assets (1)		$	—			$	—			$	—			$	—			$	66				—			$	66			$	—
Derivative liabilities (1)		$	958			$	—			$	958			$	—			$	4,400			$	—			$	4,400			$	—

Our derivative assets and liabilities represent foreign exchange contracts that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties’ credit risks. Based on these inputs, the derivative assets and liabilities are classified as Level 2.

The carrying amounts and fair values of financial instruments are as follows (in thousands):

		September 30, 2010								December 31, 2009
		Carrying								Carrying
		Amount				Fair Value				Amount				Fair Value
Long-term debt		$	165,277			$	146,794			$	162,644			$	103,473

The following methods were used to estimate the fair value of each class of financial instruments:

Long-term debt. The fair value of long-term debt is based on quoted market prices or on rates available on debt with similar terms and maturities.

4. Restructuring Activities

In the three months ended December 31, 2009, we announced the following restructuring plans:

	•		The closure and consolidation of one of our facilities located in Liberec, Czech Republic, which was a result of management’s continued focus on reducing fixed costs and eliminating excess capacity. We substantially completed the closure as of December 31, 2009.
	•		The closure of our Norwalk, Ohio truck cab assembly facility, which was a result of Navistar’s decision to insource the cab assembly operations into its existing assembly facility in Escobedo, Mexico. We substantially completed the Norwalk closure as of September 30, 2010.

We estimate that we will record total charges for these restructuring activities of approximately $4.4 million, consisting of approximately $0.6 million of employee-related costs and approximately $3.8 million of facility closure and other costs. For the three months ended September 30, 2010, we recorded restructuring charges of approximately $0.2 million, consisting of approximately $0.2 million of facility closure and other costs. We have incurred cumulative restructuring charges relating to these activities of approximately $3.3 million through September 30, 2010.

In the three months ended June 30, 2010, we established an additional restructuring reserve relating to the closure of our Norwalk, Ohio facility for one-time termination benefits and the fair value of the remaining lease rentals.

As a result of the closure of our Norwalk, Ohio facility, we are actively marketing the sale of approximately $2.3 million of assets consisting of $1.4 million in land and building and approximately $0.9 million in machinery and equipment. We expect to substantially complete this activity within this fiscal year and have, therefore, classified the assets as held-for-sale.

A summary of the restructuring liability for the nine months ended September 30, 2010 is as follows (in thousands):

						Facility Exit
						and Other
		Employee				Contractual
		Costs				Costs				Total
Balance — December 31, 2009		$	337			$	1,454			$	1,791
Provisions			889				823				1,712
Utilizations			(878	)			(590	)			(1,468	)
Currency Translation			—				(9	)			(9	)
Balance — September 30, 2010		$	348			$	1,678			$	2,026

5. Share-Based Compensation

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. A participant granted restricted stock generally has all of the rights of a stockholder, unless the compensation committee determines otherwise. Listed below is a summary of our restricted stock awards:

In October 2007, 328,900 shares of restricted stock were awarded by our compensation committee under our Second Amended and Restated Equity Incentive Plan. The shares of restricted stock granted in October 2007 vest in three equal annual installments commencing on October 20, 2008.

In November 2008, 798,450 shares of restricted stock were awarded by our compensation committee under our Second Amended and Restated Equity Incentive Plan. The shares of restricted stock granted in November 2008 vest in three equal annual installments commencing on October 20, 2009.

In November 2009, 638,150 shares of restricted stock were awarded by our compensation committee under our Third Amended and Restated Equity Incentive Plan (the “Plan”). The shares of restricted stock granted in November 2009 vest in three equal annual installments commencing on October 20, 2010.

As of September 30, 2010, there was approximately $2.5 million of unearned compensation expense related to non-vested share-based compensation arrangements granted under the Plan. This expense is subject to future adjustments for vesting and forfeitures and will be recognized on a straight-line basis over the remaining period of one month for the October 2007 awards, 13 months for the November 2008 awards and 25 months for the November 2009 awards, respectively.

We currently estimate the forfeiture rates for the October 2007, November 2008 and November 2009 restricted stock awards at 8.4%, 8.2% and 8.2%, respectively, for all participants in the Plan.

The following table summarizes information about the non-vested restricted stock grants as of September 30, 2010:

						Weighted-Average
		Shares				Grant-Date Fair
		(in thousands)				Value
Nonvested at December 31, 2009			1,226			$	7.60
Granted			—				—
Vested			—				—
Forfeited			(21	)			4.21
Nonvested at September 30, 2010			1,205			$	7.64

As of September 30, 2010, 679,136 shares of the 3.2 million shares authorized for issuance were available for issuance under the Plan, including cumulative forfeitures.

6. Stockholders’ Investment

Common Stock — Our authorized capital stock consists of 30,000,000 shares of common stock with a par value of $0.01 per share, with 28,545,253 shares outstanding as of September 30, 2010.

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 preferred shares outstanding as of September 30, 2010.

Earnings Per Share — Basic earnings per share is determined by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share, and all other diluted per share amounts presented, is determined by dividing net income by the weighted average number of common shares and potential common shares outstanding during the period as determined by the Treasury Stock Method, as amended. Potential common shares are included in the diluted earnings per share calculation when dilutive. Diluted earnings per share for the three months ended September 30, 2010 and 2009 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):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Net income (loss) applicable to common stockholders — basic and diluted		$	1,142			$	(15,882	)		$	2,511			$	(57,799	)
Weighted average number of common shares outstanding			27,340				21,747				25,770				21,747
Dilutive effect of outstanding stock options and restricted stock grants after application of the Treasury Stock Method			747				—				814				—
Dilutive shares outstanding			28,087				21,747				26,584				21,747
Basic income (loss) per share		$	0.04			$	(0.73	)		$	0.10			$	(2.66	)
Diluted income (loss) per share		$	0.04			$	(0.73	)		$	0.09			$	(2.66	)

For the three months ended September 30, 2010, diluted earnings per share did not include approximately 0.5 million outstanding stock options as the effect would have been antidilutive. For the three months ended September 30, 2009, diluted loss per share did not include approximately 491 thousand outstanding non-vested restricted stock and approximately 426 thousand warrants, as the effect would have been antidilutive. For the nine months ended September 30, 2010, diluted earnings per share did not include approximately 0.5 million outstanding stock options as the effect would have been antidilutive. For the nine months ended September 30, 2009, diluted loss per share did not include approximately 209 thousand outstanding non-vested restricted stock and approximately 142 thousand warrants, as the effect would have been antidilutive.

Dividends — We have not declared or paid any cash dividends in the past. The terms of our Loan and Security Agreement restrict the payment or distribution of our cash or other assets, including cash dividend payments.

Stockholder Rights Plan — In May 2009, our board of directors adopted a Stockholder Rights Plan (“Rights Plan”) intended to protect stockholders from coercive or otherwise unfair takeover tactics.

Under the Rights Plan, with certain exceptions, the rights will become exercisable only if a person or group acquires 20 percent or more of our outstanding common stock or commences a tender or exchange offer that could result in ownership of 20 percent or more of our common stock. The Rights Plan has a term of 10 years and will expire on May 20, 2019, unless the rights are earlier redeemed or terminated by the board of directors.

Common Stock Warrants — On August 4, 2009, we issued 745,000 warrants to purchase common stock. Each warrant was issued as part of a unit consisting of (i) $1,000 principal amount of 11%/13% third lien senior secured notes due 2013 and (ii) 17.68588 warrants. The units are immediately separable. The units were issued pursuant to a warrant and unit agreement with U.S. Bank National Association, as unit agent and warrant agent. As of September 30, 2010, approximately 741,073 warrants have been exercised.

Each warrant entitles the holder thereof to purchase one share of our common stock at an exercise price of $0.35 per share. The warrants provide for mandatory cashless exercise. The number of shares for which a warrant may be exercised and the exercise price are subject to adjustment in certain events. The warrants are exercisable at any time on or after separation and prior to their expiration on August 4, 2019.

7. Accounts Receivable

Trade accounts receivable are stated at current value less an allowance for doubtful accounts, which approximates fair value. This estimated allowance is based primarily on management’s evaluation of specific balances as the balances

become past due, the financial condition of our customers and our historical experience of write-offs. If not reserved through specific identification procedures, our general policy for uncollectible accounts is to reserve at a certain percentage threshold, based upon the aging categories of accounts receivable and our historical experience with write-offs. Past due status is based upon the due date of the original amounts outstanding. When items are ultimately deemed uncollectible, they are charged off against the reserve previously established in the allowance for doubtful accounts.

8. 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,
		2010				2009
Raw materials		$	50,654			$	41,677
Work in process			12,197				8,955
Finished goods			14,772				14,433
Less excess and obsolete			(7,226	)			(7,014	)
		$	70,397			$	58,051

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.

9. Intangible Assets

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. A determination is made by management to ascertain whether property and equipment and certain definite-lived intangibles have been impaired based on the sum of expected future undiscounted cash flows from operating activities. If the estimated undiscounted 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.

Our intangible assets were comprised of the following (in thousands):

September 30, 2010

December 31, 2009

Weighted-

Weighted-

Average

Average

Amortization

Gross Carrying

Accumulated

Net Carrying

Amortization

Gross Carrying

Accumulated

Net Carrying

Period

Amount

Amortization

Amount

Period

Amount

Amortization

Amount

Definite-lived intangible assets:

Trademarks/Tradenames

20 years

$

5,655

$

(1,748

)

$

3,907

20 years

$

5,655

$

(1,568

)

$

4,087

The aggregate intangible asset amortization expense was approximately $0.1 million and $0.1 million for the three months ended September 30, 2010 and 2009, respectively, and approximately $0.2 million and $0.3 million for the nine months ended September 30, 2010 and 2009, respectively.

The estimated intangible asset amortization expense for the fiscal year ending December 31, 2010, and for the five succeeding years is as follows (in thousands):

		Fiscal Year Ended				Estimated
		December 31,				Amortization Expense
			2010			$	240
			2011			$	240
			2012			$	240
			2013			$	240
			2014			$	240
			2015			$	240

10. Debt

Debt consisted of the following (in thousands):

		September 30,				December 31,
		2010				2009
Revolving credit facilities bore interest at a weighted average of 7.4% as of September 30, 2010 and 6.2% as of December 31, 2009		$	—			$	—
8.0% senior notes due July 1, 2013			97,810				97,810
15% second lien term loan due November 1, 2012 ($16,800 principal amount, net of $3,351 and $4,150, respectively, of original issue discount)			13,449				12,650
11%/13% third lien senior secured notes due February 15, 2013 ($42,124 principal amount and $6,062 and $7,797, respectively, of issuance premium)			48,186				49,921
Paid-in-kind interest on 11%/13% third lien senior secured notes due February 15, 2013			5,832				2,263
		$	165,277			$	162,644

On January 7, 2009, we and certain of our direct and indirect U.S. subsidiaries, as borrowers (the “borrowers”), entered into a Loan and Security Agreement with Bank of America, N.A., as agent and lender, which provides for a three-year asset-based revolving credit facility with an aggregate principal amount of up to $37.5 million (after giving effect to a second amendment to our Loan and Security Agreement entered into on August 4, 2009), which is subject to an availability block of $10.0 million, until we deliver a compliance certificate for any fiscal quarter ending March 31, 2010 or thereafter demonstrating a fixed charge coverage ratio of at least 1.1 to 1.0 for the most recent four fiscal quarters, at which time the availability block will be $7.5 million at all times while the fixed charge coverage ratio is at least 1.1 to 1.0 and certain borrowing base limitations are met. 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.

As of September 30, 2010, we did not have borrowings under the Loan and Security Agreement. In addition, as of September 30, 2010, we had outstanding letters of credit of approximately $2.4 million and borrowing availability of $35.1 million under the Loan and Security Agreement, which is subject to a $10.0 million availability block.

Our Loan and Security Agreement contains financial covenants, including a minimum fixed charge coverage ratio, if we do not maintain certain availability requirements. Because we had borrowing availability in excess of $5.0 million (after giving effect to the $10.0 million availability block) from July 1, 2010 through September 30, 2010, we were not required to comply with the minimum fixed charge coverage ratio covenant during the quarter ended September 30, 2010.

Under the Loan and Security Agreement, borrowings bear interest at various rates plus a margin based on certain financial ratios. The borrowers’ obligations under the Loan and Security Agreement 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 Loan and Security Agreement and unconditionally guarantees the prompt payment and performance thereof.

On September 7, 2010, we entered into a third amendment (the “Third Amendment”) to the Loan and Security Agreement. Pursuant to the Third Amendment, the applicable margin for borrowings was amended to reduce the applicable margin and include grid pricing based upon the fixed charge coverage ratio for the most recently ended fiscal quarter:

				Domestic Base				LIBOR
Level		Ratio		Rate Loans				Revolver Loans
III		≤ 1.25 to 1.00			2.00	%			3.00	%
II		≥ 1.25 to 1.00 but < 1.75 to 1.00			1.75	%			2.75	%
I		≥ 1.75 to 1.00			1.50	%			2.50	%

Until delivery of the financial statements and corresponding compliance certificate for the fiscal year ending December 31, 2010, the applicable margin shall be set at Level II. Thereafter, the applicable margin shall be subject to increase or decrease following receipt by the agent of the financial statements and corresponding compliance certificate for each fiscal quarter. If the financial statements or corresponding compliance certificate are not timely delivered, then the highest rate shall be applicable until the first day of the calendar month following actual receipt.

In addition, the unused commitment fee was reduced to (i) .875% per annum during any fiscal quarter in which the aggregate average daily unused commitment is equal to or greater than 50% of the revolver commitments or (ii) .625% per annum times the unused commitment during any fiscal quarter in which the aggregate average daily unused commitment is less than 50% of the revolver commitments.

Under the Third Amendment, Permitted Foreign Investments were increased from $5.0 million annually and $10.0 million during the term of the agreement, to $10.0 million annually and $20.0 million during the term of the agreement, so long as the Domestic Availability immediately prior to and after such investment is at least $5.0 million. Restricted Investments under Section 10.2.5 was also revised to allow for the investment in our Chinese subsidiary to be in the form of up to 70% Equity and 30% intercompany loan, also subject to the annual and lifetime Permitted Foreign Investment limitations.

Pursuant to the Third Amendment, the limitations on other aggregate Investments not otherwise permitted in the agreement, and other aggregate Debt not otherwise permitted in the agreement, was increased to $1.5 million and $5.0 million respectively.

We entered into a loan and security agreement (the “Second Lien Credit Agreement”), providing for a term loan (the “second lien term loan”), on August 4, 2009. We issued the 11%/13% third lien senior secured notes due 2013 (the “third lien notes”) pursuant to an indenture, dated as of August 4, 2009 (the “Third Lien Notes Indenture”), by and among CVG, certain of our subsidiaries party thereto, as guarantors (the “guarantors”), and U.S. Bank National Association, as trustee. The second lien term loan due 2012 and the third lien notes are senior secured obligations of CVG. The second lien term loan is secured by a second-priority lien, and the third lien notes are secured by a third-priority lien, on substantially all of the tangible and intangible assets of CVG and certain of its domestic subsidiaries, and a pledge of 100% of the capital stock of certain of CVG’s domestic subsidiaries and 65% of the capital stock of each foreign subsidiary owned directly by a domestic subsidiary. The second lien term loan and the third lien notes are guaranteed by certain of CVG’s domestic subsidiaries.

The second lien term loan bears interest at the fixed per annum rate of 15% until it matures on November 1, 2012. During an event of default, if the required lenders so elect, the interest rate applied to any outstanding obligations will be equal to the otherwise applicable rate plus 2.0%. Interest on our third lien notes is payable on February 15 and August 15 of each year until their maturity date of February 15, 2013. We paid interest entirely in pay-in-kind interest (“PIK interest”), by increasing the outstanding principal amount of the third lien notes, on the interest payment dates on February 15, 2010 and August 15, 2010, at an annual rate of 13.0%. We have elected to pay our February 15, 2011 interest in cash, at an annual rate of 11.0%. After February 15, 2011, we will be required to make all interest payments entirely in cash, at an annual rate of 11.0%.

The 8.0% senior notes due 2013 are senior unsecured obligations and rank pari passu in right of payment to all of our existing and future senior indebtedness and are effectively subordinated to our existing and future secured obligations. The 8.0% senior notes are guaranteed by certain of our domestic subsidiaries. The 8% senior notes due 2013 bear interest paid semi-annually on January 1 and July 1 at a fixed per annum rate of 8% until the maturity date of July 1, 2013.

11. Income Taxes

We, or one of our subsidiaries, file federal income tax returns in the United States 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 2004. There are currently no income tax examinations in process.

As of September 30, 2010, we have provided a liability of approximately $0.7 million of unrecognized tax benefits related to various federal and state income tax positions, which would impact our effective tax rate if recognized.

We accrue penalties and interest related to unrecognized tax benefits through income tax expense, which is consistent with the recognition of these items in prior reporting periods. We had approximately $241 thousand accrued for the payment of interest and penalties at September 30, 2010, of which $20 thousand was accrued during the current year. Accrued interest and penalties are included in the $0.7 million of unrecognized tax benefits.

During the current quarter, we did not release any tax reserves associated with items falling outside the statue of limitations and the closure of certain tax years for examination purposes. We anticipate events could occur within the next 12 months that would have an impact on the amount of unrecognized tax benefits that would be required. Approximately $86 thousand of unrecognized tax benefits relate to items that are affected by expiring statutes of limitation within the next 12 months.

12. Commitments and Contingencies

Warranty — We are subject to warranty claims for products that fail to perform as expected due to design or manufacturing deficiencies. Customers continue to require their outside suppliers to guarantee or warrant their products and bear the cost of repair or replacement of such products. Depending on the terms under which we supply products to our customers, a customer may hold us responsible for some or all of the repair or replacement costs of defective products when the product supplied did not perform as represented. Our policy is to 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, 2010 (in thousands):

Balance — December 31, 2009		$	3,066
Additional provisions recorded			793
Deduction for payments made			(1,175	)
Currency translation adjustment			2
Balance — September 30, 2010		$	2,686

Leases — We lease office and manufacturing space and certain equipment under non-cancelable operating lease agreements that require us to pay maintenance, insurance, taxes and other expenses in addition to annual rents. As of September 30, 2010, our equipment leases did not provide for any material guarantee of a specified portion of residual values.

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. In accordance with accounting guidance for guarantees issued after December 31, 2002, we record a liability for the fair value of such guarantees in the balance sheet. As of September 30, 2010, we had no such guarantees.

Litigation — We are subject to various legal actions and claims incidental to our business, including those arising out of alleged defects, product warranties, employment-related matters and environmental matters. Management believes that we maintain adequate insurance to cover these claims. We have established reserves for issues that are probable and estimatable in amounts management believes are adequate to cover reasonable adverse judgments not covered by insurance. Based upon the information available to management and discussions with legal counsel, it is the opinion of management that the ultimate outcome of the various legal actions and claims that are incidental to our business will not have a material adverse impact on our 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.

13. Foreign Currency Forward Exchange Contracts

We use forward exchange contracts to hedge certain of the foreign currency transaction exposures primarily related to our United Kingdom operations. We estimate our projected revenues and purchases in certain foreign currencies or locations and will hedge a portion or all of the anticipated long or short position. As of September 30, 2010, none of our derivatives were designated as hedging instruments; therefore, our 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 operations. We do not hold or issue foreign exchange options or forward contracts for trading purposes.

The following table summarizes the notional amount of our open foreign exchange contracts (in thousands):

		September 30, 2010								December 31, 2009
						U.S.								U.S.
		U.S. $				Equivalent				U.S. $				Equivalent
		Equivalent				Fair Value				Equivalent				Fair Value
Commitments to buy currencies:
Japanese Yen		$	—			$	—			$	(345	)		$	(338	)
Commitments to sell currencies:
Euro		$	1,730			$	2,203			$	12,809			$	15,095
Japanese Yen			1,548				2,033				8,004				10,045
		$	3,278			$	4,236			$	20,813			$	25,140
Total		$	3,278			$	4,236			$	20,468			$	24,802

The fair value of our derivative instruments was a net liability of approximately $1.0 million and $4.4 million as of September 30, 2010 and December 31, 2009, respectively, which is recorded within accrued liabilities in the condensed consolidated balance sheets.

We consider the impact of our and our counterparties’ credit risk on the fair value of the contracts as well as the ability of each party to execute its obligations under the contract. For the three and nine months ended September 30, 2010, we recorded a credit valuation adjustment of approximately $11 thousand and $0.2 million, respectively, on our foreign currency forward contracts, which is included in other income on the condensed consolidated statement of operations.

The following table summarizes the fair value and presentation in the consolidated balance sheets for derivatives not designated as hedging instruments (in thousands):

Asset Derivatives

September 30, 2010

December 31, 2009

Balance Sheet

Balance Sheet

Location

Fair Value

Location

Fair Value

Foreign exchange contracts

Other assets

$

—

Other assets

$

66

Liability Derivatives

September 30, 2010

December 31, 2009

Balance Sheet

Balance Sheet

Location

Fair Value

Location

Fair Value

Foreign exchange contracts

Accrued liabilities

$

958

Accrued liabilities

$

4,400

The following table summarizes the effect of derivative instruments on the consolidated statements of operations for derivatives not designated as hedging instruments (in thousands):

						Three Months Ended								Nine Months Ended
						September 30,								September 30,
		Location of Gain				2010				2009				2010				2009
		(Loss)
		Recognized in				Amount of Gain (Loss)
		Income on				Recognized in Income on								Amount of Gain Recognized in
		Derivatives				Derivatives								Income on Derivatives
Foreign exchange contracts		Other expenses				$	1,022			$	(1,228	)		$	3,377			$	7,122

14. Pension and Other Post-Retirement Benefit Plans

We sponsor pension and other post-retirement benefit plans that cover certain hourly and salaried employees in the United States and United Kingdom. Our policy is to make annual contributions to the plans to fund the normal cost as required

by local regulations. In addition, we have a post-retirement benefit plan for certain U.S. operations, retirees and their dependents.

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

																		Other Post-Retirement
		U.S. Pension Plans								Non-U.S. Pension Plans								Benefit Plans
		Three Months Ended September 30,								Three Months Ended September 30,								Three Months Ended September 30,
		2010				2009				2010				2009				2010				2009
Service cost		$	58			$	71			$	—			$	—			$	1			$	1
Interest cost			492				477				596				527				30				31
Expected return on plan assets			(426	)			(379	)			(451	)			(379	)			—				—
Amortization of prior service cost			—				—				—				—				(25	)			—
Recognized actuarial loss (gain)			24				27				104				49				2				(28	)
Net periodic benefit cost			148				196				249				197				8				4
Special termination benefits			27				41				—				—				68				85
Net benefit cost		$	175			$	237			$	249			$	197			$	76			$	89

We previously disclosed in our financial statements for the year ended December 31, 2009, that we expect to contribute approximately $1.8 million to our pension plans and $0.6 million to our other post-retirement benefit plans in 2010. As of September 30, 2010, approximately $1.7 million of contributions have been made to our pension plans. We anticipate contributing an additional $0.4 million to our pension plans in 2010 for total estimated contributions during 2010 of $2.1 million.

15. Comprehensive Loss

We follow the comprehensive income accounting guidance, 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. Comprehensive income represents net income adjusted for foreign currency translation adjustments and minimum pension liability. In accordance with the accounting guidance, we have elected to disclose comprehensive income in stockholders’ investment. The components of accumulated other comprehensive loss consisted of the following as of September 30, 2010 (in thousands):

Foreign currency translation adjustment		$	(6,935	)
Pension liability			(15,251	)
		$	(22,186	)

Comprehensive income (loss) was as follows (in thousands):

		Nine Months Ended September 30,
		2010				2009
Net income (loss)		$	2,511			$	(57,799	)
Other comprehensive loss:
Foreign currency translation adjustment			1,123				3,051
Pension liability			32				—
Comprehensive income (loss)		$	3,666			$	(54,748	)

16. Related Party Transactions

In May 2008, we entered into a freight services arrangement with Group Transportation Services Holdings, Inc. (“GTS”), a third party logistics and freight management company. Under this arrangement, which was approved by our Audit Committee on April 29, 2008, GTS manages a portion of the Company’s freight and logistics program as well as administers its payments to additional third party freight service providers. In May 2010, GTS merged with Roadrunner Transportation Systems, Inc. (“RRTS”) in connection with the initial public offering of RRTS. Scott D. Rued, a member of our Board of Directors, is Chairman of the Board of RRTS and Chad M. Utrup, our Chief Financial Officer, was elected to the Board of Directors of RRTS in May 2010. For the nine months ended September 30, 2010, we made payments (net of pass through payments to other third party freight service providers) to GTS/RRTS of approximately $0.4 million for these services.

17. Consolidating Guarantor and Non-Guarantor Financial Information

The following condensed consolidating financial information presents balance sheets, statements of operations and cash flow information related to our business. Each guarantor is a direct or indirect subsidiary of CVG and has fully and unconditionally guaranteed the 8% senior notes and third lien notes issued by CVG, on a joint and several basis.

The following condensed consolidating financial information presents the financial information of CVG (the “parent company”), the guarantor companies and the non-guarantor companies in accordance with Rule 3-10 under the Securities and Exchange Commission’s Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor companies or non-guarantor companies operated as independent entities. The guarantor companies and the 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.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

		Parent				Guarantor				Non-Guarantor
		Company				Companies				Companies				Elimination				Consolidated
		(In thousands)
REVENUES		$	—			$	111,946			$	49,477			$	(10,473	)		$	150,950
COST OF REVENUES			—				98,683				42,876				(10,473	)			131,086
Gross Profit			—				13,263				6,601				—				19,864
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			—				11,031				3,502				—				14,533
AMORTIZATION EXPENSE			—				60				—				—				60
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES			(4,970	)			(91	)			—				5,061				—
RESTRUCTURING COSTS			—				162				—				—				162
Operating Income			4,970				2,101				3,099				(5,061	)			5,109
OTHER INCOME			—				—				(1,061	)			—				(1,061	)
INTEREST EXPENSE (INCOME)			4,408				(48	)			58				—				4,418
Income Before (Benefit) Provision for Income Taxes			562				2,149				4,102				(5,061	)			1,752
(BENEFIT) PROVISION FOR INCOME TAXES			(580	)			895				295				—				610
NET INCOME		$	1,142			$	1,254			$	3,807			$	(5,061	)		$	1,142

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

		Parent				Guarantor				Non-Guarantor
		Company				Companies				Companies				Elimination				Consolidated
		(In thousands)
REVENUES		$	—			$	336,837			$	132,264			$	(29,395	)		$	439,706
COST OF REVENUES			—				296,815				117,774				(29,395	)			385,194
Gross Profit			—				40,022				14,490				—				54,512
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			—				32,014				9,398				—				41,412
AMORTIZATION EXPENSE			—				180				—				—				180
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES			(9,687	)			(672	)			—				10,359				—
RESTRUCTURING COSTS			—				1,572				—				—				1,572
Operating Income			9,687				6,928				5,092				(10,359	)			11,348
OTHER INCOME			(35	)			—				(3,766	)			—				(3,801	)
INTEREST EXPENSE (INCOME)			12,904				(205	)			140				—				12,839
(Loss) Income Before (Benefit) Provision for Income Taxes			(3,182	)			7,133				8,718				(10,359	)			2,310
(BENEFIT) PROVISION FOR INCOME TAXES			(5,693	)			3,531				1,961				—				(201	)
NET INCOME		$	2,511			$	3,602			$	6,757			$	(10,359	)		$	2,511

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2010

		Parent				Guarantor				Non-Guarantor
		Company				Companies				Companies				Elimination				Consolidated
		(In thousands)
ASSETS
CURRENT ASSETS:
Cash		$	31,436			$	678			$	11,669			$	—			$	43,783
Accounts receivable, net			219				61,924				28,292				—				90,435
Intercompany receivable			39,722				12,733				—				(52,455	)			—
Inventories, net			—				40,595				29,802				—				70,397
Prepaid expenses and other, net			3,784				9,460				8,830				(12,114	)			9,960
Total current assets			75,161				125,390				78,593				(64,569	)			214,575
PROPERTY, PLANT AND EQUIPMENT, net			—				51,423				5,778				—				57,201
EQUITY INVESTMENT IN SUBSIDIARIES			89,415				9,701				1				(99,117	)			—
INTANGIBLE ASSETS, net			—				3,907				—				—				3,907
OTHER ASSETS, net			4,784				9,120				(1	)			(269	)			13,634
TOTAL ASSETS		$	169,360			$	199,541			$	84,371			$	(163,955	)		$	289,317
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) INVESTMENT
CURRENT LIABILITIES:
Accounts payable		$	—			$	38,410			$	28,589			$	—			$	66,999
Intercompany payable			—				35,896				16,559				(52,455	)			—
Accrued liabilities, other			8,574				27,290				10,010				(12,319	)			33,555
Total current liabilities			8,574				101,596				55,158				(64,774	)			100,554
LONG-TERM DEBT, net			165,277				—				—				—				165,277
PENSION AND OTHER POST-RETIREMENT BENEFITS			—				13,580				11,941				—				25,521
OTHER LONG-TERM LIABILITIES			1,178				965				1,555				(64	)			3,634
Total liabilities			175,029				116,141				68,654				(64,838	)			294,986
STOCKHOLDERS’ (DEFICIT) INVESTMENT			(5,669	)			83,400				15,717				(99,117	)			(5,669	)
TOTAL LIABILITIES AND STOCKHOLDERS’ INVESTMENT		$	169,360			$	199,541			$	84,371			$	(163,955	)		$	289,317

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

		Parent				Guarantor				Non-Guarantor
		Company				Companies				Companies				Elimination				Consolidation
						(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash (used in) provided by operating activities		$	(3,993	)		$	16,315			$	(971	)		$	—			$	11,351
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			—				(4,708	)			(1,075	)			—				(5,783	)
Proceeds from disposal/sale of property plant and equipment			—				83				14				—				97
Other assets and liabilities			—				389				—				—				389
Net cash used in investing activities			—				(4,236	)			(1,061	)			—				(5,297	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net			25,359				—				—				—				25,359
Proceeds from issuance of common stock under equity incentive plans			1,126				—				—				—				1,126
Excess tax benefit from equity incentive plans			(52	)			—				—				—				(52	)
Change in intercompany receivables/payables			8,987				(11,440	)			2,453				—				—
Net cash provided by (used in) financing activities			35,420				(11,440	)			2,453				—				26,433
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH			—				1				1,771				—				1,772
NET INCREASE IN CASH			31,427				640				2,192				—				34,259
CASH:
Beginning of period			9				38				9,477				—				9,524
End of period		$	31,436			$	678			$	11,669			$	—			$	43,783