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Commercial Vehicle Group, Inc. - Quarter Report: 2011 March (Form 10-Q)

e10vq
Table of Contents

 
 
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
For the quarterly period ended March 31, 2011
OR
     
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 001-34365
COMMERCIAL VEHICLE GROUP, INC.
(Exact name of Registrant as specified in its charter)
     
Delaware
(State or other jurisdiction of
incorporation or organization)
  41-1990662
(I.R.S. Employer
Identification No.)
     
7800 Walton Parkway
New Albany, Ohio

(Address of principal executive offices)
  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 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 þ   Non-accelerated filer o   Smaller reporting company o
        (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 March 31, 2011 was 28,780,198 shares.
 
 

 


 

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
         
       
 
       
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    31  
 EX-31.1
 EX-31.2
 EX-32.1
 EX-32.2
Certification of CEO
Certification of CFO
CEO Certification Pursuant to Section 906
CFO Certification Pursuant to Section 906


Table of Contents

ITEM 1 — FINANCIAL STATEMENTS
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (Unaudited)     (Unaudited)  
    (In thousands, except per share amounts)  
REVENUES
  $ 182,509     $ 146,407  
COST OF REVENUES
    157,793       129,515  
 
           
Gross Profit
    24,716       16,892  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
    16,194       13,211  
AMORTIZATION EXPENSE
    96       60  
RESTRUCTURING COSTS
    310        
 
           
Operating Income
    8,116       3,621  
OTHER EXPENSE (INCOME)
    6       (1,459 )
INTEREST EXPENSE
    3,981       4,514  
 
           
Income Before Provision (Benefit) for Income Taxes
    4,129       566  
PROVISION (BENEFIT) FOR INCOME TAXES
    852       (110 )
 
           
NET INCOME
  $ 3,277     $ 676  
 
           
 
               
INCOME PER COMMON SHARE:
               
Basic
  $ 0.12     $ 0.03  
 
           
Diluted
  $ 0.12     $ 0.03  
 
           
 
               
WEIGHTED AVERAGE SHARES OUTSTANDING:
               
Basic
    27,765       22,898  
 
           
Diluted
    28,186       23,834  
 
           
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
                 
    March 31,     December 31,  
    2011     2010  
    (Unaudited)     (Unaudited)  
    (In thousands, except share and per  
    share amounts)  
ASSETS
               
CURRENT ASSETS:
               
Cash
  $ 18,492     $ 42,591  
Accounts receivable, net of reserve for doubtful accounts of $4,347 and $2,717, respectfully
    121,016       91,101  
Inventories
    69,929       66,622  
Prepaid expenses and other, net
    14,489       11,109  
 
           
Total current assets
    223,926       211,423  
 
           
PROPERTY, PLANT AND EQUIPMENT, net
    64,703       59,321  
INTANGIBLE ASSETS, net of accumulated amortization of $2,340 and $2,245, respectfully
    6,960       3,848  
OTHER ASSETS, net
    11,016       11,615  
 
           
TOTAL ASSETS
  $ 306,605     $ 286,207  
 
           
LIABILITIES AND STOCKHOLDERS’ INVESTMENT (DEFICIT)
               
CURRENT LIABILITIES:
               
Accounts payable
  $ 78,549     $ 61,216  
Accrued liabilities
    31,972       34,130  
 
           
Total current liabilities
    110,521       95,346  
 
           
LONG-TERM DEBT
    164,718       164,987  
PENSION AND OTHER POST-RETIREMENT BENEFITS
    22,802       23,343  
OTHER LONG-TERM LIABILITIES
    2,771       2,643  
 
           
Total liabilities
    300,812       286,319  
 
           
COMMITMENTS AND CONTINGENCIES
               
STOCKHOLDERS’ INVESTMENT (DEFICIT):
               
Preferred stock $.01 par value; 5,000,000 shares authorized; no shares issued and outstanding; common stock $.01 par value; 30,000,000 shares authorized; 27,766,024 and 27,756,759 shares issued and outstanding, respectively
    280       280  
Treasury stock purchased from employees; 285,208 shares, respectively
    (2,851 )     (2,851 )
Additional paid-in capital
    216,333       215,491  
Retained loss
    (190,082 )     (193,359 )
Accumulated other comprehensive loss
    (17,887 )     (19,673 )
 
           
Total stockholders’ investment (deficit)
    5,793       (112 )
 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ INVESTMENT (DEFICIT)
  $ 306,605     $ 286,207  
 
           
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 
    Three Months Ended  
    March 31,  
    2011     2010  
    (Unaudited)     (Unaudited)  
    (In thousands)  
CASH FLOWS FROM OPERATING ACTIVITIES:
               
Net income
  $ 3,277     $ 676  
 
           
Adjustments to reconcile net income to net cash used in operating activities:
               
Depreciation and amortization
    2,901       3,361  
Noncash amortization of debt financing costs
    379       379  
Amortization of bond discount/premium, net
    (269 )     (333 )
Paid-in-kind interest
          1,429  
Pension plan contributions
    (821 )     (576 )
Shared-based compensation expense
    842       647  
Loss (gain) on sale of assets
    6       (13 )
Noncash gain on forward exchange contracts
          (1,068 )
Change in other operating items
    (18,983 )     (14,208 )
 
           
Net cash used in operating activities
    (12,668 )     (9,706 )
 
           
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of property, plant and equipment
    (3,020 )     (718 )
Proceeds from disposal/sale of property plant and equipment
    7       22  
Payments for acquisitions, net of cash received
    (8,785 )      
Other assets and liabilities
          (285 )
 
           
Net cash used in investing activities
    (11,798 )     (981 )
 
           
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from issuance of common stock, net
          25,358  
 
           
Net cash provided by financing activities
          25,358  
 
           
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH
    367       1,119  
 
           
NET (DECREASE) INCREASE IN CASH
    (24,099 )     15,790  
CASH:
               
Beginning of period
    42,591       9,524  
 
           
End of period
  $ 18,492     $ 25,314  
 
           
SUPPLEMENTAL CASH FLOW INFORMATION:
               
Cash paid for interest
  $ 7,283     $ 4,777  
 
           
Cash received for income taxes, net
  $ (114 )   $ (255 )
 
           
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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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 markets. We have facilities located in the United States in Alabama, 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 2010 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 15, 2011. Unless otherwise indicated, all amounts are in thousands except per share amounts.
Revenues and operating results for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected in future operating quarters.
2. Recently Issued Accounting Pronouncements
As of March 31, 2011, there were no new standards applicable to us that have not yet been adopted.
3. Business Combinations
On January 28, 2011, we acquired all of the assets and certain liabilities related to Bostrom Seating, Inc. (“Bostrom”) for cash consideration of approximately $8.8 million (the “Bostrom acquisition”). Bostrom is a seat supplier to the North American heavy truck, aftermarket, bus and specialty vehicle markets. Bostrom has one owned manufacturing facility in Piedmont, Alabama. The acquisition of Bostrom further expands our North American presence in certain key end markets and enhances our overall aftermarket position. The operating results of Bostrom have been included in our consolidated financial statements since the date of acquisition. From the date of acquisition through March 31, 2011, Bostrom recorded revenues of approximately $5.6 million and an operating loss of $0.1 million. Acquisition related expenses of approximately $0.4 million were incurred during the three months ended March 31, 2011 and have been recorded as selling, general and administrative expenses on our consolidated statements of operations.
On a pro forma basis had the Bostrom acquisition been included in our consolidated financial statements for the three-months ended March 31, 2011, our revenues would have been approximately $2.3 million higher and operating income would have been approximately $0.2 million lower.
The Bostrom acquisition was accounted for by the acquisition method of accounting. Under acquisition accounting, the total purchase price has been allocated to the tangible and intangible assets and liabilities of Bostrom based upon their respective fair values. The purchase price and costs associated with the Bostrom acquisition exceeded the preliminary fair value of the net assets acquired by approximately $3.2 million. In connection with the allocation of the purchase price, we recorded definite-lived intangible assets of approximately $3.2 million as shown in the following table (in thousands):

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Purchase price (cash consideration)
  $ 8,785  
Net assets at fair value
    5,578  
 
     
Excess of purchase price over net assets acquired
  $ 3,207  
 
     
The preliminary purchase price allocation as of March 31, 2011 was as follows (in thousands):
         
Cash
  $  
Accounts receivable
    3,898  
Inventories
    2,274  
Other current assets
    4  
Property, plant and equipment, net
    4,960  
Definite-lived intangible assets
    3,207  
Current liabilities
    (5,558 )
 
     
Net assets acquired
    8,785  
Less: Cash received
     
 
     
Contract purchase price
  $ 8,785  
 
     
The following pro forma information for the three months ended March 31, 2011 and 2010 presents the result of operations as if the acquisition of Bostrom had taken place at the beginning of the periods. The pro forma results are not necessarily indicative of the financial position or result of operations had the acquisition taken place at the beginning of the periods. In addition, the pro forma results are not necessarily indicative of the future financial or operating results (in thousands, except per share data):
                 
    2011     2010  
    (Unaudited)     (Unaudited)  
Revenue
  $ 184,819     $ 152,439  
Operating income
  $ 8,001     $ 3,171  
Net income
  $ 3,163     $ 216  
 
               
Earnings Per Share:
               
Basic
  $ 0.11     $ 0.01  
Diluted
  $ 0.11     $ 0.01  
4. Fair Value Measurement
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
    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.
Our financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and revolving credit facility. The carrying value of these instruments approximates fair value as a result of the short duration of such instruments or due to the variability of interest cost associated with such instruments.
The carrying amounts and fair values of our long-term debt obligations are as follows (in thousands):

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    March 31, 2011     December 31, 2010  
    Carrying             Carrying        
    Amount     Fair Value     Amount     Fair Value  
Long-term debt
  $ 164,718     $ 173,155     $ 164,987     $ 159,376  
The fair value of long-term debt obligations is based on quoted market prices or on rates available on debt with similar terms and maturities. Based on these inputs, our long-term debt is classified as Level 2.
5. 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 28,780,198 shares outstanding as of March 31, 2011.
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 March 31, 2011.
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. Potential common shares are included in the diluted earnings per share calculation when dilutive. Diluted earnings per share for the three months ended March 31, 2011 and 2010 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  
    March 31,  
    2011     2010  
Net income applicable to common stockholders — basic and diluted
  $ 3,277     $ 676  
 
           
Weighted average number of common shares outstanding
    27,765       22,898  
Dilutive effect of outstanding stock options and restricted stock grants after application of the Treasury Stock Method
    421       936  
 
           
Dilutive shares outstanding
    28,186       23,834  
Basic income per share
  $ 0.12     $ 0.03  
 
           
Diluted income per share
  $ 0.12     $ 0.03  
 
           
For the three months ended March 31, 2011, 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 March 31, 2010, diluted earnings per share did not include approximately 0.5 million outstanding stock options and approximately 0.1 million non-vested restricted stock, 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 had a term of 10 years and would have expired on May 20, 2019, unless the rights were earlier redeemed or terminated by the board of directors. In March 2011, the board of directors amended our Rights Plan and accelerated the expiration date to March 8, 2011.
6. Share-Based Compensation
Restricted Stock Awards — Restricted stock is a grant of shares of common stock that may not be sold, encumbered or

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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. The following table summarizes information about restricted stock grants as of March 31, 2011:
                     
            Estimated    
            Forfeiture    
Grant   Shares   Rate   Vesting Schedule
November 2008     798,450       8.8 %  
3 equal annual installments commencing on October 20, 2009
November 2009     638,150       8.2 %  
3 equal annual installments commencing on October 20, 2010
November 2010     404,000       8.2 %  
3 equal annual installments commencing on October 20, 2011
As of March 31, 2011, there was approximately $6.7 million of unearned compensation expense related to non-vested share-based compensation arrangements granted under our equity incentive plans. 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 seven months for the November 2008 awards, 19 months for the November 2009 awards and 31 months for the November 2010 awards, respectively.
The following table summarizes information about the non-vested restricted stock grants as of March 31, 2011:
                 
            Weighted-Average  
    Shares     Grant-Date Fair  
    (in thousands)     Value  
Nonvested at December 31, 2010
    1,023     $ 9.02  
Granted
           
Vested
    (9 )     2.44  
Forfeited
           
 
           
Nonvested at March 31, 2011
    1,014     $ 9.02  
 
           
As of March 31, 2011, 293,484 shares of the 3.2 million shares authorized for issuance were available for issuance under the Third Amended and Restated Equity Incentive Plan, including cumulative forfeitures.
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):
                 
    March 31,     December 31,  
    2011     2010  
Raw materials
  $ 44,059     $ 46,194  
Work in process
    14,948       12,477  
Finished goods
    17,395       13,727  
Less excess and obsolete
    (6,473 )     (5,776 )
 
           
 
  $ 69,929     $ 66,622  
 
           

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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 assets for recoverability whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. If the estimated undiscounted cash flows are less than the carrying amount of such assets, we recognize an impairment loss in an amount necessary to write down the assets to fair value as estimated from expected future discounted cash flows. Estimating the fair value of these assets is judgmental in nature and involves the use of significant estimates and assumptions. We base our fair value estimates on assumptions we believe to be reasonable, but that are inherently uncertain.
Our intangible assets were comprised of the following (in thousands):
                                                                 
    March 31, 2011     December 31, 2010  
    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
  22 years   $ 8,862     $ (1,902 )   $ 6,960     20 years   $ 5,655     $ (1,807 )   $ 3,848  
We recorded approximately $3.2 million in definite-lived intangible assets (tradenames) with a useful life of 30 years in connection with the Bostrom acquisition.
The aggregate intangible asset amortization expense was approximately $96 thousand and $60 thousand for the three months ended March 31, 2011 and 2010, respectively.
The estimated intangible asset amortization expense for the fiscal year ending December 31, 2011, and for the five succeeding years is as follows (in thousands):
         
Fiscal Year Ended   Estimated  
December 31,   Amortization Expense  
2011
  $ 338  
2012
  $ 347  
2013
  $ 347  
2014
  $ 347  
2015
  $ 347  
2016
  $ 347  
10. Restructuring Activities
In 2009, we announced the following restructuring plans:
  A reduction in workforce and the closure of certain manufacturing, warehousing and assembly facilities. The facilities closed included an assembly and sequencing facility in Kent, Washington; seat sequencing and assembly facility in Statesville, North Carolina; manufacturing facility in Lake Oswego, Oregon; inventory and product warehouse in Concord, North Carolina; and seat assembly and distribution facility in Seneffs, Belgium. The decision to reduce our workforce was the result of the extended downturn of the global economy and, in particular, the commercial vehicle markets. We substantially completed these activities as of December 31, 2009.
  The closure of our Vancouver, Washington manufacturing facility. The decision to close the facility was the result of the extended downturn of the global economy and, in particular, the commercial vehicle markets. We substantially completed this closure as of December 31, 2009.
  The closure and consolidation of one of our facilities located in Liberec, Czech Republic and the closing of our

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    Norwalk, Ohio truck cab assembly facility. The closure and consolidation of our Liberec, Czech Republic facility was a result of management’s continued focus on reducing fixed costs and eliminating excess capacity. The closure of this facility was substantially completed as of December 31, 2009. The closure of our Norwalk, Ohio facility 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 cash expenditures for all of these restructurings of approximately $6.2 million, consisting of approximately $2.2 million of severance costs and $4.0 million of facility closure costs. For the three months ended March 31, 2011, we incurred charges of approximately $0.3 million in facility closure costs. We have incurred cumulative restructuring charges of $5.7 million consisting of approximately $2.4 million of severance costs and $3.3 million of facility closure costs as of March 31, 2011.
A summary of the restructuring liability for the three months ended March 31, 2011 is as follows (in thousands):
                         
            Facility Exit        
            and Other        
    Employee     Contractual        
    Costs     Costs     Total  
Balance — December 31, 2010
  $ 101     $ 1,362     $ 1,463  
Provisions
    31       279       310  
Utilizations
    (66 )     (547 )     (613 )
Currency
          60       60  
 
                 
Balance — March 31, 2011
  $ 66     $ 1,154     $ 1,220  
 
                 
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 buildings and approximately $0.9 million in machinery and equipment and have, therefore, classified the assets as held-for-sale.
11. 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 three months ended March 31, 2011 (in thousands):
         
Balance — December 31, 2010
  $ 2,653  
Increase due to acquisitions
    297  
Additional provisions recorded
    415  
Deduction for payments made
    (414 )
Currency translation adjustment
    8  
 
     
Balance — March 31, 2011
  $ 2,959  
 
     
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 March 31, 2011, 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 March 31, 2011, we had no such guarantees.

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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 estimable 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.
12. Debt
Debt consisted of the following (in thousands):
                 
    March 31,     December 31,  
    2011     2010  
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 $2,719 and $3,042, respectively, of original issue discount)
    14,081       13,758  
11%/13% third lien senior secured notes due February 15, 2013 ($42,124 principal amount and $4,870 and $5,463, respectively, of issuance premium)
    46,994       47,587  
Paid-in-kind interest on 11%/13% third lien senior secured notes due February 15, 2013
    5,833       5,832  
 
           
 
  $ 164,718     $ 164,987  
 
           
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 provided 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 was subject to an availability block. Up to an aggregate of $10.0 million was available to the borrowers for the issuance of letters of credit as of March 31, 2011, which reduces availability under the revolving credit facility.
As of March 31, 2011, we did not have borrowings under the Loan and Security Agreement. In addition, as of March 31, 2011, we had outstanding letters of credit of approximately $3.5 million and borrowing availability of $34.0 million under the Loan and Security Agreement, which was then subject to a $7.5 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 $7.5 million availability block) from July 1, 2010 through March 31, 2011, we were not required to comply with the minimum fixed charge coverage ratio covenant during the quarter ended March 31, 2011.
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:

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        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.
On January 28, 2011, we entered into a consent agreement (the “Consent Agreement”) to the Loan and Security Agreement. Pursuant to the Consent Agreement, Bank of America granted consent regarding the purchase of substantially all of the assets of Bostrom by CVG Alabama LLC for a preliminary purchase price not to exceed $8,785,000. Assets acquired in connection with the Bostrom acquisition shall not be considered Eligible Domestic Accounts or Inventory until such time as the Agent has performed all necessary field exams, audits, inspections, or other diligence.
On April 26, 2011, we announced that we amended and restated our asset based Loan and Security Agreement with Bank of America, N.A. (the “Amended and Restated Loan and Security Agreement”) to, among other things, (i) increase the facility size to $40.0 million from $37.5 million, (ii) extend the maturity date to April 26, 2014 from January 7, 2012 and (iii) decrease the fees and interest rates. Up to an aggregate of $10.0 million is available for the issuance of letters of credit, which reduces availability pursuant to the Amended and Restated Loan and Security Agreement. The Amended and Restated Loan and Security Agreement also contains modifications to certain financial and other covenants.
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 paid our February 15, 2011 interest in cash, at an annual rate of 11.0%.

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The 8.0% senior notes 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 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.
On April 26, 2011, we completed a private offering of $250.0 million aggregate principal amount of 7.875% Senior Secured Notes due 2019 (the “7.875% Notes”). We used the net proceeds from the offering of the 7.875% Notes (i) to repay all outstanding indebtedness under the second lien term loan, (ii) to fund the repurchase of approximately $94.0 million of the 8% senior notes and approximately $48.0 million of the third lien notes pursuant to tender offers and consent solicitations (the “Tender Offers and Consent Solicitations”) for the 8% senior notes and the third lien notes, and (iii) to pay related fees and expenses. See “Note 18. Subsequent Events.”
13. 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 2006. There is currently one income tax examination in process.
As of March 31, 2011, we have provided a liability of approximately $0.8 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 $0.4 million accrued for the payment of interest and penalties at March 31, 2011, of which $0.1 million was accrued during the current year. Accrued interest and penalties are included in the $0.8 million of unrecognized tax benefits.
During the current quarter, we did not release any tax reserves associated with items falling outside the statute of limitations and the closure of certain tax years for examination purposes. 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 $2 thousand of unrecognized tax benefits relate to items that are affected by expiring statutes of limitation within the next 12 months.
14. 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 positions. As of March 31, 2011, 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 effect of derivative instruments on the consolidated statements of operations for derivatives not designated as hedging instruments (in thousands):
                         
            Three Months Ended  
            March 31,  
    Location of Gain     2011     2010  
    Recognized in Income on     Amount of Gain Recognized in  
    Derivatives     Income on Derivatives  
Foreign exchange contracts
  Other income   $     $ 1,068  

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15. 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 March 31,     Three Months Ended March 31,     Three Months Ended March 31,  
    2011     2010     2011     2010     2011     2010  
Service cost
  $ 20     $ 46     $     $     $     $ 1  
Interest cost
    488       504       561       528       16       30  
Expected return on plan assets
    (478 )     (424 )     (467 )     (400 )            
Amortization of prior service cost
                            (32 )      
Recognized actuarial loss (gain)
    25       32       75       93       (34 )     1  
Net periodic benefit cost
    55       158       169       221       (50 )     32  
Special termination benefits
          28                         68  
Net benefit cost
  $ 55     $ 186     $ 169     $ 221     $ (50 )   $ 100  
We previously disclosed in our financial statements for the year ended December 31, 2010, that we expect to contribute approximately $2.8 million to our pension plans and $0.3 million to our other post-retirement benefit plans in 2011. As of March 31, 2011, approximately $0.8 million of contributions have been made to our pension plans. We anticipate contributing an additional $2.0 million to our pension plans in 2011 for total estimated contributions during 2011 of $2.8 million.
16. Comprehensive Loss
We follow the comprehensive income accounting guidance, which established standards for reporting and display of comprehensive loss and its components. Comprehensive loss reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. Comprehensive loss 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 loss in stockholders’ investment. The components of accumulated other comprehensive loss consisted of the following as of March 31, 2011 (in thousands):
         
Foreign currency translation adjustment
  $ (6,060 )
Pension liability
    (11,827 )
 
     
Accumulated other comprehensive loss
  $ (17,887 )
 
     
Comprehensive income was as follows (in thousands):
                 
    Three Months Ended March 31,  
    2011     2010  
Net income
  $ 3,277     $ 676  
Other comprehensive income:
               
Foreign currency translation adjustment
    1,786       158  
Pension liability
          200  
Comprehensive income
  $ 5,063     $ 1,034  
17. 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 our 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

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Systems, Inc. (“RRTS”) in connection with the initial public offering of RRTS. Chad M. Utrup, our Chief Financial Officer, was elected to the Board of Directors of RRTS in May 2010. For the three months ended March 31, 2011, we made payments (net of pass through payments to other third party freight service providers) to GTS/RRTS of approximately $0.1 million for these services.
18. Subsequent Events
On April 26, 2011, we completed a private offering of $250.0 million aggregate principal amount of 7.875% Senior Secured Notes due 2019 (the “7.875% Notes”). We also announced that we amended and restated our asset based Loan and Security Agreement with Bank of America, N.A. to, among other things, (i) increase the facility size to $40.0 million from $37.5 million, (ii) extend the maturity date to April 26, 2014 from January 7, 2012, and (iii) decrease the fees and interest rates. Up to an aggregate of $10.0 million is available for the issuance of letters of credit, which reduces availability under the Amended and Restated Loan and Security Agreement. The Amended and Restated Loan and Security Agreement also contains modifications to certain financial and other covenants.
We used the net proceeds from the offering of the 7.875% Notes (i) to repay all outstanding indebtedness under the second lien term loan, (ii) to fund the repurchase of approximately $94.0 million of the 8% senior notes (approximately 97.1% of the outstanding 8% senior notes) and approximately $48.0 million of the third lien notes (100% of the outstanding third lien notes) pursuant to Tender Offers and Consent Solicitations for the 8% senior notes and the third lien notes, and (iii) to pay related fees and expenses.
On April 26, 2011, in connection with the Tender Offers and Consent Solicitations, we entered into amendments to the indentures governing the 8% senior notes and the third lien notes to, among other things, (i) eliminate substantially all of the restrictive covenants contained in the indentures, (ii) eliminate or modify certain events of default contained in the indentures, (iii) eliminate or modify related provisions contained in the indentures, and (iv) with respect to the third lien notes, eliminate certain conditions to covenant defeasance contained in the indenture governing such notes and release the liens in respect of such notes.
19. 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.

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
                                         
    Parent     Guarantor     Non-Guarantor              
    Company     Companies     Companies     Elimination     Consolidated  
    (In thousands)  
REVENUES
  $     $ 134,624     $ 64,975     $ (17,090 )   $ 182,509  
COST OF REVENUES
          117,763       57,120       (17,090 )     157,793  
 
                             
Gross Profit
          16,861       7,855             24,716  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
          11,611       4,583             16,194  
AMORTIZATION EXPENSE
          96                   96  
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES
    (2,865 )     (146 )           3,011        
RESTRUCTURING COSTS
          310                   310  
 
                             
Operating Income
    2,865       4,990       3,272       (3,011 )     8,116  
OTHER EXPENSE
                6             6  
INTEREST EXPENSE
    379       3,596       6             3,981  
 
                             
Income Before (Benefit) Provision for Income Taxes
    2,486       1,394       3,260       (3,011 )     4,129  
(BENEFIT) PROVISION FOR INCOME TAXES
    (791 )     1,186       457             852  
 
                             
NET INCOME
  $ 3,277     $ 208     $ 2,803     $ (3,011 )   $ 3,277  
 
                             

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2011
                                         
    Parent     Guarantor     Non-Guarantor              
    Company     Companies     Companies     Elimination     Consolidated  
    (In thousands)  
ASSETS
CURRENT ASSETS:
                                       
Cash
  $ 4,901     $ 36     $ 13,555     $     $ 18,492  
Accounts receivable, net
    219       86,756       34,041             121,016  
Intercompany receivable
    68,929       14,461             (83,390 )      
Inventories
          41,726       28,203             69,929  
Prepaid expenses and other, net
    1,063       8,423       5,043       (40 )     14,489  
 
                             
Total current assets
    75,112       151,402       80,842       (83,430 )     223,926  
PROPERTY, PLANT AND EQUIPMENT, net
          57,340       7,363             64,703  
EQUITY INVESTMENT IN SUBSIDIARIES
    96,730       18,586             (115,316 )      
INTANGIBLE ASSETS, net
          6,960                   6,960  
OTHER ASSETS, net
    2,222       8,766       28             11,016  
 
                             
TOTAL ASSETS
  $ 174,064     $ 243,054     $ 88,233     $ (198,746 )   $ 306,605  
 
                             
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
                                         
CURRENT LIABILITIES:
                                       
Accounts payable
  $     $ 51,208     $ 27,341     $     $ 78,549  
Intercompany payable
          69,949       13,441       (83,390 )      
Accrued liabilities
    2,742       20,396       8,874       (40 )     31,972  
 
                             
Total current liabilities
    2,742       141,553       49,656       (83,430 )     110,521  
LONG-TERM DEBT
    164,718                         164,718  
PENSION AND OTHER POST-RETIREMENT BENEFITS
          12,569       10,233             22,802  
OTHER LONG-TERM LIABILITIES
    811       929       1,031             2,771  
 
                             
Total liabilities
    168,271       155,051       60,920       (83,430 )     300,812  
STOCKHOLDERS’ INVESTMENT
    5,793       88,003       27,313       (115,316 )     5,793  
 
                             
TOTAL LIABILITIES AND STOCKHOLDERS’ INVESTMENT
  $ 174,064     $ 243,054     $ 88,233     $ (198,746 )   $ 306,605  
 
                             

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
                                         
    Parent     Guarantor     Non-Guarantor              
    Company     Companies     Companies     Elimination     Consolidation  
    (In thousands)  
CASH FLOWS FROM OPERATING ACTIVITIES:
                                       
Net cash (used in) provided by operating activities
  $ (3,744 )   $ (11,269 )   $ 2,345     $     $ (12,668 )
 
                             
CASH FLOWS FROM INVESTING ACTIVITIES:
                                       
Purchases of property, plant and equipment
          (2,009 )     (1,011 )           (3,020 )
Proceeds from disposal/sale of property plant and equipment
                7             7  
Payments for acquisitions, net of cash received
          (8,785 )                 (8,785 )
Other assets and liabilities
                             
 
                             
Net cash used in investing activities
          (10,794 )     (1,004 )           (11,798 )
 
                             
CASH FLOWS FROM FINANCING ACTIVITIES:
                                       
Change in intercompany receivables/payables
    (22,828 )     22,072       756              
 
                             
Net cash (used in) provided by financing activities
    (22,828 )     22,072       756              
 
                             
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH
                367             367  
 
                             
NET (DECREASE) INCREASE IN CASH
    (26,572 )     9       2,464             (24,099 )
CASH:
                                       
Beginning of period
    31,473       27       11,091             42,591  
 
                             
End of period
  $ 4,901     $ 36     $ 13,555     $     $ 18,492  
 
                             

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2010
                                         
    Parent     Guarantor     Non-Guarantor              
    Company     Companies     Companies     Elimination     Consolidated  
                    (In thousands)                  
REVENUES
  $     $ 115,975     $ 39,273     $ (8,841 )   $ 146,407  
COST OF REVENUES
          102,962       35,394       (8,841 )     129,515  
 
                             
Gross Profit
          13,013       3,879             16,892  
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
          10,278       2,933             13,211  
AMORTIZATION EXPENSE
          60                   60  
EQUITY IN EARNINGS OF CONSOLIDATED SUBSIDIARIES
    (3,282 )     (488 )           3,770        
 
                             
Operating Income
    3,282       3,163       946       (3,770 )     3,621  
OTHER INCOME
                (1,459 )           (1,459 )
INTEREST EXPENSE (INCOME)
    4,510       (18 )     22             4,514  
 
                             
(Loss) Income Before (Benefit) Provision for Income Taxes
    (1,228 )     3,181       2,383       (3,770 )     566  
(BENEFIT) PROVISION FOR INCOME TAXES
    (1,904 )     1,535       259             (110 )
 
                             
NET INCOME
  $ 676     $ 1,646     $ 2,124     $ (3,770 )   $ 676  
 
                             

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2010
                                         
    Parent     Guarantor     Non-Guarantor              
    Company     Companies     Companies     Elimination     Consolidated  
                    (In thousands)                  
 
          ASSETS                        
CURRENT ASSETS:
                                       
Cash
  $ 31,473     $ 27     $ 11,091     $     $ 42,591  
Accounts receivable, net
    220       63,172       27,708       1       91,101  
Intercompany receivable
    46,102       942             (47,044 )      
Inventories
          38,284       28,340       (2 )     66,622  
Prepaid expenses and other, net
          6,490       4,659       (40 )     11,109  
 
                             
Total current assets
    77,795       108,915       71,798       (47,085 )     211,423  
PROPERTY, PLANT AND EQUIPMENT, net
          52,875       6,446             59,321  
EQUITY INVESTMENT IN SUBSIDIARIES
    91,238       9,559             (100,797 )      
INTANGIBLE ASSETS, net
          3,848                   3,848  
OTHER ASSETS, net
    2,600       8,986       28       1       11,615  
 
                             
TOTAL ASSETS
  $ 171,633     $ 184,183     $ 78,272     $ (147,881 )   $ 286,207  
 
                             
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) INVESTMENT
                                         
CURRENT LIABILITIES:
                                       
Accounts payable
  $     $ 37,657     $ 23,559     $     $ 61,216  
Intercompany payable
          34,359       12,685       (47,044 )      
Accrued liabilities
    6,092       19,931       8,147       (40 )     34,130  
 
                             
Total current liabilities
    6,092       91,947       44,391       (47,084 )     95,346  
LONG-TERM DEBT
    164,987                         164,987  
PENSION AND OTHER POST- RETIREMENT BENEFITS
          13,253       10,090             23,343  
OTHER LONG-TERM LIABILITIES
    666       911       1,066             2,643  
 
                             
Total liabilities
    171,745       106,111       55,547       (47,084 )     286,319  
STOCKHOLDERS’ (DEFICIT) INVESTMENT
    (112 )     78,072       22,725       (100,797 )     (112 )
 
                             
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) INVESTMENT
  $ 171,633     $ 184,183     $ 78,272     $ (147,881 )   $ 286,207  
 
                             

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010
                                         
    Parent     Guarantor     Non-Guarantor              
    Company     Companies     Companies     Elimination     Consolidation  
      (In thousands)  
CASH FLOWS FROM OPERATING ACTIVITIES:
                                       
Net cash used in operating activities
  $ (5,045 )   $ (2,200 )   $ (2,461 )   $     $ (9,706 )
 
                             
CASH FLOWS FROM INVESTING ACTIVITIES:
                                       
Purchases of property, plant and equipment
          (593 )     (125 )           (718 )
Proceeds from disposal/sale of property plant and equipment
          22                   22  
Other assets and liabilities
          (285 )                 (285 )
 
                             
Net cash used in investing activities
          (856 )     (125 )           (981 )
 
                             
CASH FLOWS FROM FINANCING ACTIVITIES:
                                       
Proceeds from issuance of common stock, net
    25,358                         25,358  
Change in intercompany receivables/payables
    (3,130 )     3,018       112              
 
                             
Net cash provided by financing activities
    22,228       3,018       112             25,358  
 
                             
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH
                1,119             1,119  
 
                             
NET INCREASE (DECREASE) IN CASH
    17,183       (38 )     (1,355 )           15,790  
CASH:
                                       
Beginning of period
    9       38       9,477             9,524  
 
                             
End of period
  $ 17,192     $     $ 8,122     $     $ 25,314  
 
                             

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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 (Class 8) truck market, the construction, military, bus and agriculture markets and the specialty transportation markets. Our products include static and suspension seat systems, electronic wire harness assemblies, control and switches, cab structures and components, interior trim systems (including instrument panels, door panels, headliners, cabinetry and floor systems), mirrors and wiper systems specifically designed for applications in commercial vehicles.
We are differentiated from suppliers to the automotive industry by our ability to manufacture low volume customized products on a sequenced basis to meet the requirements of our customers. We believe that we have the number one or two position in several of our major markets and that we are one of the only suppliers in the North American commercial vehicle market that can offer complete cab systems, including cab body assemblies, sleeper boxes, seats, interior trim, flooring, wire harnesses, panel assemblies and other structural components. We believe our products are used by a majority of the North American heavy truck OEMs, which we believe creates an opportunity to cross-sell our products and offer a fully integrated system solution.
Demand for our heavy truck products is generally dependent on the number of new heavy truck commercial vehicles manufactured in North America, which in turn is a function of general economic conditions, interest rates, changes in governmental regulations, consumer spending, fuel costs and our customers’ inventory levels and production rates. New heavy truck commercial vehicle demand has historically been cyclical and is particularly sensitive to the industrial sector of the economy, which generates a significant portion of the freight tonnage hauled by commercial vehicles. Production of heavy truck commercial vehicles in North America was strong from 2004 to 2006 due to the broad economic recovery in North America, corresponding growth in the movement of goods, the growing need to replace aging truck fleets and OEMs receiving larger than expected preorders in anticipation of the new EPA emissions standards becoming effective in 2007.
During 2007, the demand for North American Class 8 heavy trucks experienced a downturn as a result of preorders in 2006 and general weakness in the North American economy and corresponding decline in the need for commercial vehicles to haul freight tonnage in North America. The demand for new heavy truck commercial vehicles in 2008 was similar to 2007 levels as weakness in the overall North American economy continued to impact production related orders. The overall weakness in the North American economy and credit markets continued to put pressure on the demand for new vehicles in 2009 as reflected in the 42% decline of North American Class 8 production levels from 2008. We believe this general weakness has contributed to the reluctance of trucking companies to invest in new truck fleets. In 2010, North American Class 8 production levels had increased approximately 30% over the prior year period, suggesting a recovery in the heavy truck market. According to an April 2011 report by ACT Research, a publisher of industry market research, North American Class 8 production levels are expected to increase from 154,000 in 2010, peak at 326,000 in 2013 and decline to 250,000 in 2016, which represents a compound annual growth rate of approximately 8%.
Demand for our construction products is dependent on the overall vehicle demand for new commercial vehicles in the global construction equipment market and generally follows certain economic conditions around the world. Our products are primarily used in the medium/heavy construction equipment markets (weighing over 12 metric tons). Demand in the medium/heavy construction equipment market is typically related to the level of larger scale infrastructure development projects such as highways, dams, harbors, hospitals, airports and industrial development, as well as activity in the mining, forestry and other raw material based industries. During 2009, we experienced a significant decline in global construction equipment production levels as a result of the global economic downturn and related reduction in new equipment orders. During 2010 and through the first quarter of 2011, the global construction market has shown signs of recovery.
Along with the United States, we have operations in Europe, Asia, Australia and Mexico. Our operating results are, therefore, impacted by exchange rate fluctuations to the extent we translate our foreign operations from their local currencies into U.S. dollars.
We continuously seek ways to improve our operating performance by lowering costs. These efforts include, but are not limited to, the following:
    adjusting our hourly and salaried workforce to optimize costs in line with our production levels;

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    sourcing efforts in Mexico, Europe and Asia;
 
    consolidating our supply base to improve purchasing leverage;
 
    eliminating excess production capacity through the closure and consolidation of manufacturing, warehousing or assembly facilities;
 
    improving our manufacturing cost basis by locating production in low-cost regions of the world; and
 
    implementing Lean Manufacturing and TQPS initiatives to improve operating efficiency and product quality.
Although OEM demand for our products is directly correlated with new vehicle production, we also have the opportunity to grow through increasing our product content per vehicle through cross selling and bundling of products. We generally compete for new business at the beginning of the development of a new vehicle platform and upon the redesign of existing programs. New platform development generally begins at least one to three years before the marketing of such models by our customers. Contract durations for commercial vehicle products generally extend for the entire life of the platform, which is typically five to seven years.
In sourcing products for a specific platform, the customer generally develops a proposed production timetable, including current volume and option mix estimates based on their own assumptions, and then sources business with the supplier pursuant to written contracts, purchase orders or other firm commitments in terms of price, quality, technology and delivery. In general, these contracts, purchase orders and commitments provide that the customer can terminate if a supplier does not meet specified quality and delivery requirements and, in many cases, they provide that the price will decrease over the proposed production timetable. Awarded business generally covers the supply of all or a portion of a customer’s production and service requirements for a particular product program rather than the supply of a specific quantity of products. Accordingly, in estimating awarded business over the life of a contract or other commitment, a supplier must make various assumptions as to the estimated number of vehicles expected to be produced, the timing of that production, mix of options on the vehicles produced and pricing of the products being supplied. The actual production volumes and option mix of vehicles produced by customers depend on a number of factors that are beyond a supplier’s control.
Results of Operations
The table below sets forth certain operating data expressed as a percentage of revenues:
                 
    Three Months Ended March 31,  
    2011     2010  
Revenues
    100.0 %     100.0 %
Cost of revenues
    86.5       88.5  
 
           
Gross profit
    13.5       11.5  
Selling, general and administrative expenses
    8.9       9.0  
Amortization expense
           
Restructuring costs
    0.2        
 
           
Operating income
    4.4       2.5  
Other expense (income)
          (1.0 )
Interest expense
    2.2       3.1  
 
           
Income before provision (benefit) for income taxes
    2.2       0.4  
Provision (Benefit) for income taxes
    0.4       (0.1 )
 
           
Net income
    1.8 %     0.5 %

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Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
Revenues. Revenues increased approximately $36.1 million, or 24.7%, to $182.5 million in the three months ended March 31, 2011 from $146.4 million in the three months ended March 31, 2010. This change resulted primarily from:
    a 48% increase in North American heavy-duty (class 8) production, fluctuations in production levels for other North American end markets and net new business awards resulting in approximately $17.3 million of increased revenues;
 
    an increase in production levels due to higher global demand in our European, Australian and Asian markets resulting in approximately $11.7 million of increased revenues;
 
    favorable foreign exchange fluctuations from the translation of our foreign operations into U.S. Dollars resulting in an increase of approximately $1.5 million; and
 
    our acquisition of Bostrom Seating, Inc. (“Bostrom”) resulting in approximately $5.6 million of increased revenues.
Gross Profit. Gross profit was approximately $24.7 million for the three months ended March 31, 2011 compared to $16.9 million in the three months ended March 31, 2010, an increase of approximately $7.8 million. This increase was primarily the result of the impact of the increased revenues discussed above. As a percentage of revenues, gross profit was 13.5% for the three months ended March 31, 2011 compared to 11.5% for the three months ended March 31, 2010.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased approximately $3.0 million to $16.2 million in the three months ended March 31, 2011 from $13.2 million in the three months ended March 31, 2010. This increase was primarily the result of expenditures relating to our acquisition of Bostrom and increased wages and compensation, along with increased travel and other expenses to support our new business and strategic initiatives.
Amortization Expense. Amortization expense was approximately $0.1 million, respectively, for the three months ended March 31, 2011 and 2010.
Restructuring Costs. We recorded restructuring charges for the three months ended March 31, 2011 of $0.3 million relating to the closure of our Norwalk, Ohio and Vancouver, Washington facilities. We did not record restructuring charges for the three months ended March 31, 2010.
Other Expense (Income). 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 or all of the anticipated long or short position. As of March 31, 2011, we did not have any derivatives designated as hedging instruments. We recorded other expense for the three months ended March 31, 2011 of $6 thousand compared to other income for the three months ended March 31, 2010 of $1.5 million. The $1.5 million of other income recorded for the three months ended March 31, 2010, primarily related to the noncash change in value of the forward exchange contracts, which 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.
Interest Expense. Interest expense decreased approximately $0.5 million to $4.0 million in the three months ended March 31, 2011 from $4.5 million in the three months ended March 31, 2010. This decrease was primarily due to lower bank servicing fees.
Provision (Benefit) for Income Taxes. Our effective tax rate was 20.6% and negative 19.4% for the three months ended March 31, 2011 and 2010, respectively. An income tax provision of approximately $0.9 million was recorded for the three months ended March 31, 2011 compared to an income tax benefit of approximately $0.1 million for the three months ended March 31, 2010. The change in income tax from the prior year quarter can be primarily attributed to changes in tax reserves, geographic tax rates and profitability and to valuation allowances recorded against our deferred tax assets.
Net Income. Net income was $3.3 million in the three months ended March 31, 2011, compared to $0.7 million in the three months ended March 31, 2010, primarily as a result of the factors discussed above.

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Liquidity and Capital Resources
Cash Flows
For the three months ended March 31, 2011, net cash used in operations was approximately $12.7 million compared to net cash used of approximately $9.7 million for the three months ended March 31, 2010. The net cash used in operations for the three months ended March 31, 2011 was primarily a result of an increase in accounts receivable.
Net cash used in investing activities was approximately $11.8 million for the three months ended March 31, 2011 compared to $1.0 million for the three months ended March 31, 2010. The amounts used in investing activities for the three months ended March 31, 2011 primarily reflect capital expenditure purchases and our acquisition of Bostrom.
Net cash provided by financing activities was zero for the three months ended March 31, 2011, compared to $25.4 million for the three months ended March 31, 2010. The net cash provided by financing activities for the three months ended March 31, 2010 was primarily related to proceeds from issuance of our common stock.
Debt and Credit Facilities
As of March 31, 2011, we had an aggregate of $164.7 million of outstanding indebtedness, excluding $3.5 million of outstanding letters of credit under various financing arrangements and an additional $34.0 million of borrowing capacity under our revolving credit facility, which was subject to an availability block as of March 31, 2011. Our indebtedness consisted of the following:
    $97.8 million of 8.0% senior notes due 2013;
 
    $14.1 million ($16.8 million principal amount, net of $2.7 million of original issue discount) of 15% second lien term loan due 2012;
 
    $47.0 million ($42.1 million principal amount, net of $4.9 million of issuance premium) of 11%/13% third lien secured notes due 2013; and
 
    $5.8 million of paid-in-kind interest on the 11%/13% third lien secured notes due 2013.
Revolving Credit Facility
On January 7, 2009, we and certain of our direct and indirect U.S. subsidiaries, as borrowers (the “borrowers”), entered into a revolving credit facility (the “revolving credit facility”) with Bank of America, N.A., as agent and lender, which, as of March 31, 2011, provided 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 the revolving credit facility entered into on August 4, 2009), which was subject to an availability block. Up to an aggregate of $10.0 million was available to the borrowers for the issuance of letters of credit, which reduces availability under the revolving credit facility.
As of December 31, 2010, approximately $2.3 million in deferred fees relating to the revolving credit facility, our 8% senior notes and our third lien notes were outstanding and were being amortized over the life of the agreements.
Under the revolving credit facility, borrowings bear interest at various rates plus a margin based on certain financial ratios. The borrowers’ obligations under the revolving credit facility are secured by a first-priority lien (subject to certain permitted liens) on substantially all of the tangible and intangible assets of the borrowers, as well as 100% of the capital stock of the direct domestic subsidiaries of each borrower and 65% of the capital stock of each foreign subsidiary directly owned by a borrower. Each of CVG and each other borrower is jointly and severally liable for the obligations under the revolving credit facility and unconditionally guarantees the prompt payment and performance thereof.
Amendment and Restatement to Revolving Credit Facility
On April 26, 2011, in connection with the refinancing transactions described below, we entered into an amendment and restatement to the loan and security agreement governing the revolving credit facility (as so amended and restated, the “Loan and Security Agreement”) which, among other things, extended the maturity of the revolving credit facility to April 26, 2014, increased the revolving commitment to $40.0 million and revised the availability block to equal the amount of debt Bank of

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America, N.A. or its affiliates loans to the Company’s foreign subsidiaries. Up to an aggregate of $10.0 million is available to the borrowers for the issuance of letters of credit, which reduces availability under the revolving credit facility.
In connection with the amendment and restatement, the applicable margin is as follows:
             
        Domestic Base   LIBOR
Level   Ratio   Rate Loans   Revolver Loans
III  
< 1.25 to 1.00
  1.50%   2.50%
II  
≥ 1.25 to 1.00 but < 1.75 to 1.00
  1.25%   2.25%
I  
≥ 1.75 to 1.00
  1.00%   2.00%
Until receipt by the agent of the financial statements and corresponding compliance certificate for the fiscal quarter ending March 31, 2011, 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.
We will pay a commitment fee to the lenders, which is calculated at a rate per annum based on a percentage of the difference between committed amounts and amounts actually borrowed under the revolving credit facility multiplied by an applicable margin. The commitment fee is payable quarterly in arrears. Currently, the unused commitment fee is (i) .500% per annum times the unused commitment 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) .375% 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.
Terms, Covenants and Compliance Status
The revolving credit facility requires the maintenance of a minimum fixed charge coverage ratio calculated based upon consolidated EBITDA (as defined in the revolving credit facility) as of the last day of each of our fiscal quarters. We are not required to comply with the fixed charge coverage ratio requirement for as long as we maintain at least $10.0 million of borrowing availability under the revolving credit facility. If borrowing availability is less than $10.0 million at any time, we would be required to comply with a fixed charge coverage ratio of 1.1:1.0 as of the end of any fiscal quarter, and would be required to continue to comply with these requirements until we have borrowing availability of $10.0 million or greater for 60 consecutive days.
The revolving credit facility, as amended, contains customary restrictive covenants, including, without limitation, limitations on the ability of the borrowers and their subsidiaries to incur additional debt and guarantees; grant liens on assets; pay dividends or make other distributions; make investments or acquisitions; dispose of assets; make payments on certain indebtedness; merge, combine with any other person or liquidate; amend organizational documents; file consolidated tax returns with entities other than other borrowers or their subsidiaries; make material changes in accounting treatment or reporting practices; enter into restrictive agreements; enter into hedging agreements; engage in transactions with affiliates; enter into certain employee benefit plans; amend subordinated debt or the indenture governing the notes; and other matters customarily restricted in loan agreements. The revolving credit facility also contains customary reporting and other affirmative covenants. We were in compliance with these covenants as of March 31, 2011.
The revolving credit facility contains customary events of default, including, without limitation, nonpayment of obligations under the revolving credit facility when due; material inaccuracy of representations and warranties; violation of covenants in the revolving credit facility and certain other documents executed in connection therewith; breach or default of agreements related to debt in excess of $5.0 million that could result in acceleration of that debt; revocation or attempted revocation of guarantees; denial of the validity or enforceability of the loan documents or failure of the loan documents to be in full force and effect; certain judgments in excess of $2.0 million; the inability of an obligor to conduct any material part of its business due to governmental intervention, loss of any material license, permit, lease or agreement necessary to the business; cessation of an obligor’s business for a material period of time; impairment of collateral through condemnation proceedings; certain events of bankruptcy or insolvency; certain Employee Retirement Income Securities Act (“ERISA”) events; and a change in control of CVG. Certain of the defaults are subject to exceptions, materiality qualifiers, grace periods and baskets customary for credit facilities of this type.

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Voluntary prepayments of amounts outstanding under the revolving credit facility are permitted at any time, without premium or penalty.
The revolving credit facility requires us to make mandatory prepayments with the proceeds of certain asset dispositions and upon the receipt of insurance or condemnation proceeds to the extent we do not use the proceeds for the purchase of assets useful in our business.
Refinancing Transactions
On April 26, 2011, we announced the completion of a private offering of $250.0 million aggregate principal amount of 7.875% Senior Secured Notes due 2019 (the “7.875% Notes”). We used the net proceeds from the offering of the 7.875% Notes (i) to repay all outstanding indebtedness under the second lien term loan, (ii) to fund the repurchase of approximately $94.0 million of the 8% senior notes (approximately 97.1% of the outstanding 8% senior notes) and approximately $48.0 million of the third lien notes (100% of the outstanding third lien notes) pursuant to tender offers and consent solicitations (the “Tender Offers and Consent Solicitations”) for the 8% senior notes and the third lien notes, and (iii) to pay related fees and expenses.
On April 26, 2011, in connection with the Tender Offers and Consent Solicitations, we entered into amendments to the indentures governing the 8% senior notes and the third lien notes to, among other things, (i) eliminate substantially all of the restrictive covenants contained in the indentures, (ii) eliminate or modify certain events of default contained in the indentures, (iii) eliminate or modify related provisions contained in the indentures, and (iv) with respect to the third lien notes, eliminate certain conditions to covenant defeasance contained in the indenture governing such notes and release the liens in respect of such notes.
7.875% Senior Secured Notes due 2019
The 7.875% notes were issued pursuant to an indenture, dated as of April 26, 2011 (the “7.875% Notes Indenture”), by and among CVG, certain of our subsidiaries party thereto, as guarantors (the “guarantors”) and U.S. Bank National Associates, as trustee.
Interest is payable on the 7.875% notes on April 15 and October 15 of each year until their maturity date of April 15, 2019.
The 7.875% Notes Indenture provides that the 7.875% notes are senior secured obligations of CVG. Our obligations under the 7.875% notes are guaranteed by the guarantors. The obligations of CVG and the guarantors under the 7.875% notes are secured by a second-priority lien (subject to certain permitted liens) on substantially all of the property and assets of CVG and the guarantors, and a pledge of 100% of the capital stock of CVG’s domestic subsidiaries and 65% of the voting capital stock of each foreign subsidiary directly owned by CVG and the guarantors. The liens, the security interests and all of the obligations of CVG and the guarantors and all provisions regarding remedies in an event of default are subject to an intercreditor agreement between the agent for the revolving credit facility and the collateral agent for the 7.875% notes (the “Intercreditor Agreement”).
The 7.875% Notes Indenture contains restrictive covenants, including, without limitation, limitations on our ability and the ability of our restricted subsidiaries to: incur additional debt; pay dividends on, redeem or repurchase capital stock; restrict dividends or other payments of subsidiaries; make investments; engage in transactions with affiliates; create liens on assets; engage in sale/leaseback transactions; and consolidate, merge or transfer all or substantially all of our assets and the assets of our restricted subsidiaries. These covenants are subject to important qualifications set forth in the 7.875% Notes Indenture.
The 7.875% Notes Indenture provides for events of default (subject in certain cases to customary grace and cure periods) which include, among others, nonpayment of principal or interest when due, breach of covenants or other agreements in the indenture governing the 7.875% notes, defaults in payment of certain other indebtedness, certain events of bankruptcy or insolvency and certain defaults with respect to the security interests. Generally, if an event of default occurs, the trustee or the holders of at least 25% in principal amount of the then outstanding 7.875% notes may declare the principal of and accrued but unpaid interest on all of the 7.875% notes to be due and payable immediately. All provisions regarding remedies in an event of default are subject to the Intercreditor Agreement.

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We may redeem the 7.875% notes, in whole or in part, at any time prior to April 15, 2014 at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the “make-whole” premium set forth in the 7.875% Notes Indenture. We may redeem the 7.875% notes, in whole or in part, at any time on or after April 15, 2014 at the redemption prices set forth in the 7.875% Notes Indenture, plus accrued and unpaid interest, if any, to the redemption date. Not more than once during each twelve-month period ending on April 15, 2012, April 15, 2013 and April 15, 2014, we may redeem up to $25.0 million of the aggregate principal amount of the 7.875% notes at a redemption price equal to 103% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date. In addition, at any time on or prior to April 15, 2014, on one or more occasions, we may redeem up to 35% of the aggregate principal amount of the 7.875% notes with the net proceeds of certain equity offerings, as described in the 7.875% Notes Indenture, at a redemption price equal to 107.875% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date. If we experience certain change of control events, holders of the 7.875% notes may require us to repurchase all or part of their notes at 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.
Covenants and Liquidity
We continue to operate in a challenging economic environment, and our ability to comply with the covenants in the Loan and Security Agreement may be affected in the future by economic or business conditions beyond our control. Based on our current forecast, we believe that we will be able to maintain compliance with the fixed charge coverage ratio covenant or the minimum availability requirement, if applicable, and other covenants in the Loan and Security Agreement for the next twelve months; however, no assurances can be given that we will be able to comply. We base our forecasts on historical experience, industry forecasts and various other assumptions that we believe are reasonable under the circumstances. If actual results are substantially different than our current forecast, or if we do not realize a significant portion of our planned cost savings or sustain sufficient cash or borrowing availability, we could be required to comply with our financial covenants, and there is no assurance that we would be able to comply with such financial covenants. If we do not comply with the financial and other covenants in the Loan and Security Agreement, and we are unable to obtain necessary waivers or amendments from the lender, we would be precluded from borrowing under the Loan and Security Agreement, which would have a material adverse effect on our business, financial condition and liquidity. If we are unable to borrow under the Loan and Security Agreement, we will need to meet our capital requirements using other sources and alternative sources of liquidity may not be available on acceptable terms. In addition, if we do not comply with the financial and other covenants in the Loan and Security Agreement, the lender could declare an event of default under the Loan and Security Agreement, and our indebtedness thereunder could be declared immediately due and payable, which would also result in an event of default under the 7.875% notes. Any of these events would have a material adverse effect on our business, financial condition and liquidity.
We believe that cash on hand, cash flow from operating activities together with available borrowings under the Loan and Security Agreement will be sufficient to fund currently anticipated working capital, planned capital spending, certain strategic initiatives and debt service requirements for at least the next 12 months. No assurance can be given, however, that this will be the case.
Update on Contractual Obligations
At March 31, 2011, we have provided a liability for $0.8 million of unrecognized tax benefits related to various income tax positions. We do not expect a significant tax payment related to these obligations within the next year.
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,” “plan” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such forward-looking statements may include management’s expectations for future periods with respect to cost saving initiatives, market conditions, or financial covenant compliance and liquidity and our financial position or other financial information and 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) general economic or business conditions affecting the markets in which we serve; (ii) our ability to develop or successfully introduce new products; (iii) risks associated

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with conducting business in foreign countries and currencies; (iv) increased competition in the heavy-duty truck or construction market; (v) our failure to complete or successfully integrate additional strategic acquisitions; (vi) the impact of changes in governmental regulations on our customers or on our business; (vii) the loss of business from a major customer or the discontinuation of particular commercial vehicle platforms; (viii) our ability to obtain future financing due to changes in the lending markets or our financial position; (ix) our ability to comply with the financial covenants in our revolving credit facility; and (x) various other risks as outlined under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. 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, 2010.
ITEM 4 — CONTROLS AND PROCEDURES
Disclosure Controls and Procedures. Our senior management is responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
We have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report, with the participation of our Chief Executive Officer and Chief Financial Officer, as well as other key members of our management. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2011.
Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting during the three months ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls also can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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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 1A. Risk Factors:
There have been no material changes to our risk factors as disclosed in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 15, 2011 other than the risk factor set forth below to address the risk relating to manmade and natural disasters:
Volatility in the commercial vehicle market could result from manmade and natural disasters and other global business disruptions.
Volatility in the commercial vehicle market could result from manmade and natural disasters and other global business disruptions. Such catastrophic events may disrupt the commercial vehicle supply chain and materially adversely affect global production levels in our industry. Although we are not currently aware of any effect on our business from the earthquake and related tsunami that occurred on March 11, 2011 in Japan, the impact from these events or other disasters that result in wide-spread destruction may not be immediately apparent. It is particularly difficult to assess the impact of catastrophic losses on our suppliers and end customers, who themselves may not fully understand the impact of such events on their businesses. Accordingly, there is no assurance that our results of operations will not be materially affected as a result of the impact of the recent events in Japan or other future disasters.

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Item 6. Exhibits:
     
2.4**
  Asset Purchase Agreement, dated as of January 28, 2011, by and among CVG Alabama LLC and Bostrom Seating, Inc. (incorporated by reference to the Company’s annual report on Form 10-K (File No. 001-34365), filed on March 15, 2011).
 
   
4.12
  Commercial Vehicle Group, Inc. Amendment No. 1 to Rights Agreement, dated as of March 9, 2011, by and between the Company and Computershare Trust Company, N.A. (incorporated by reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on March 9, 2011).
 
   
4.6
  Supplemental Indenture, dated as of January 27, 2011, by and among Commercial Vehicle Group, Inc., CVG Alabama LLC, the subsidiary guarantors party thereto and U.S. Bank National Association (incorporated by reference to the Company’s annual report on Form 10-K (File No. 001-34365), filed on March 15, 2011).
 
   
10.1
  Commercial Vehicle Group, Inc. 2011 Bonus Plan (incorporated by reference to the Company’s current report on Form 8-K (File No. 001-34365), filed on February 28, 2011).
 
   
31.1
  Certification by Mervin Dunn, President and Chief Executive Officer.
 
   
31.2
  Certification by Chad M. Utrup, 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: May 6, 2011  By:   /s/ Chad M. Utrup    
    Chad M. Utrup   
    Chief Financial Officer
(Principal financial and accounting officer and duly authorized officer) 
 
 

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