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

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

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

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

For the transition period from                      to                     

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

PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS			1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (UNAUDITED)			1
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2011 AND DECEMBER 31, 2010 (UNAUDITED)			2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (UNAUDITED)			3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)			4
ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			21
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			28
ITEM 4 CONTROLS AND PROCEDURES			28
PART II OTHER INFORMATION			29
SIGNATURES			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

ITEM 1 — FINANCIAL STATEMENTS

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.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

		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.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

		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.

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):

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):

		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

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

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

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.

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:

				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%.

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

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

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.

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

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

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

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

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

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

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;

	•		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	%

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.