Commercial Vehicle(CVGI) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION ITEM 1 – FINANCIAL STATEMENTS This section presents the company's unaudited condensed consolidated financial statements and accompanying notes Condensed Consolidated Statements of Operations The company's revenues, gross profit, and net income declined in the second quarter and first half of 2025 Three Months Ended June 30, 2025 vs 2024 (in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $171,956 | $193,665 | $(21,709) | -11.2% | | Gross profit | $19,529 | $20,459 | $(930) | -4.5% | | Operating income | $797 | $1,064 | $(267) | -25.1% | | Net income (loss) | $(4,761) | $(1,600) | $(3,161) | 197.6% | | Basic EPS (continuing operations) | $(0.12) | $(0.04) | $(0.08) | 200.0% | | Basic EPS (discontinued operations) | $(0.02) | $(0.01) | $(0.01) | 100.0% | Six Months Ended June 30, 2025 vs 2024 (in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $341,751 | $388,291 | $(46,540) | -12.0% | | Gross profit | $37,322 | $43,623 | $(6,301) | -14.4% | | Operating income | $2,205 | $5,573 | $(3,368) | -60.4% | | Net income (loss) | $(9,073) | $1,338 | $(10,411) | -778.1% | | Basic EPS (continuing operations) | $(0.21) | $0.01 | $(0.22) | -2200.0% | | Basic EPS (discontinued operations) | $(0.05) | $0.03 | $(0.08) | -266.7% | Condensed Consolidated Statements of Comprehensive Income (Loss) Comprehensive income improved significantly due to favorable foreign currency adjustments and derivative gains Comprehensive Income (Loss) (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $5,007 | $(7,263) | $12,270 | 169.0% | | Six Months Ended June 30 | $5,301 | $(5,319) | $10,620 | 199.7% | Other Comprehensive Income (Loss) Components (Six Months Ended June 30, 2025 vs 2024, in thousands) | Component | 2025 | 2024 | Change ($) | | :--- | :--- | :--- | :--- | | Foreign currency exchange adjustments | $8,366 | $(3,856) | $12,222 | | Minimum pension liability, net of tax | $33 | $(858) | $891 | | Derivative instruments, net of tax | $5,975 | $(1,943) | $7,918 | | Total Other Comprehensive Income (Loss) | $14,374 | $(6,657) | $21,031 | Condensed Consolidated Balance Sheets Total assets and stockholders' equity increased slightly, driven by a significant rise in cash balances Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total assets | $429,794 | $424,573 | $5,221 | 1.2% | | Total current assets | $303,008 | $303,300 | $(292) | -0.1% | | Cash | $45,290 | $26,630 | $18,660 | 70.1% | | Accounts receivable, net | $107,369 | $118,683 | $(11,314) | -9.5% | | Inventories | $116,662 | $128,224 | $(11,562) | -9.0% | | Total liabilities | $287,159 | $288,981 | $(1,822) | -0.6% | | Total stockholders' equity | $142,635 | $135,592 | $7,043 | 5.2% | Condensed Consolidated Statements of Cash Flows Cash flow from operations increased substantially, while financing activities resulted in a cash outflow Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change ($) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $34,041 | $10,232 | $23,809 | | Net cash used in investing activities | $(5,271) | $(8,066) | $2,795 | | Net cash provided by (used in) financing activities | $(12,219) | $355 | $(12,574) | | Effect of currency exchange rate changes on cash | $2,109 | $(1,028) | $3,137 | | Net increase in cash | $18,660 | $1,493 | $17,167 | | Cash, end of period | $45,290 | $39,341 | $5,949 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity increased, driven by other comprehensive income despite a larger retained deficit Stockholders' Equity Summary (in thousands, except share amounts) | Metric | June 30, 2025 | December 31, 2024 | Change ($) | | :--- | :--- | :--- | :--- | | Common Stock (shares issued) | 33,882,848 | 33,694,396 | 188,452 | | Common Stock (amount) | $339 | $337 | $2 | | Treasury stock, at cost | $(16,479) | $(16,468) | $(11) | | Additional paid-in capital | $270,868 | $269,117 | $1,751 | | Retained deficit | $(83,124) | $(74,051) | $(9,073) | | Accumulated other comprehensive loss | $(28,969) | $(43,343) | $14,374 | | Total stockholders' equity | $142,635 | $135,592 | $7,043 | Notes to Condensed Consolidated Financial Statements 1. Description of Business and Basis of Presentation The company provides components for commercial and electric vehicles and recently reorganized into three segments - CVG is a global provider of systems, assemblies, and components for the commercial vehicle and electric vehicle markets[21] - Manufacturing operations are located in the United States, Mexico, China, United Kingdom, Czech Republic, Ukraine, Thailand, India, Australia, and Morocco[22] - The company sold its cab structures business and Industrial Automation segment (including FSE business) during 2024, reclassifying their operating results as discontinued operations[25] - Effective March 31, 2025, the company reorganized its operations into three segments: Global Seating, Global Electrical Systems, and Trim Systems and Components to enhance alignment with customers and end markets[26] 2. Recently Issued Accounting Pronouncements The company is assessing new accounting standards for income tax and expense disaggregation disclosures - ASU No 2023-09, Improvements to Income Tax Disclosures (Topic 740), is effective for annual periods beginning after December 15, 2024, requiring disaggregated information about effective tax rate reconciliation and income taxes paid[29][30] - ASU No 2024-03 (clarified by ASU No 2025-01), Disaggregation of Income Statement Expenses, is effective for fiscal years beginning after December 15, 2026, requiring additional disclosures about specific expense categories and the definition of selling expenses[31] 3. Revenue Recognition Revenue declined across most product categories in the first half of 2025 due to softening customer demand Revenue Disaggregation by Product Category (Three Months Ended June 30, in thousands) | Product Category | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Seats | $73,463 | $81,705 | $(8,242) | -10.1% | | Electrical wire harnesses, panels, assemblies | $54,579 | $54,338 | $241 | 0.4% | | Plastic & Trim components | $34,670 | $44,329 | $(9,659) | -21.8% | | Mirrors, wipers and controls | $9,244 | $13,293 | $(4,049) | -30.5% | | Total Revenues | $171,956 | $193,665 | $(21,709) | -11.2% | Revenue Disaggregation by Product Category (Six Months Ended June 30, in thousands) | Product Category | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Seats | $146,166 | $161,972 | $(15,806) | -9.8% | | Electrical wire harnesses, panels, assemblies | $105,737 | $113,594 | $(7,857) | -6.9% | | Plastic & Trim components | $70,393 | $85,984 | $(15,591) | -18.1% | | Mirrors, wipers and controls | $19,455 | $26,741 | $(7,286) | -27.2% | | Total Revenues | $341,751 | $388,291 | $(46,540) | -12.0% | 4. Debt The company refinanced its debt in June 2025 with a new Term Loan and ABL Revolving Credit Facility - On June 27, 2025, the Company entered into a new $95 million secured Term Loan due 2030 and a $115 million ABL Revolving Credit Facility due 2030, replacing its Prior Credit Facilities due 2027[36][45] - The Term Loan proceeds were used to pay down existing debt, cover transaction costs, and for working capital[37] - Interest rates for the Term Loan are SOFR plus 8.75% to 10.75% (initially SOFR plus 9.75%), and for the ABL Revolving Credit Facility, SOFR/SONIA/EURIBOR plus 1.50% to 2.00% (initially SOFR plus 1.75%)[38][47] - The Term Loan includes a maximum total leverage ratio covenant, stepping down from 7.25:1.0 (Q3 2025) to 4.00:1.0 (Q4 2027 and thereafter)[39][40] - The ABL Revolving Credit Facility has a springing minimum fixed charge coverage ratio of 1.0:1.0 when availability is low[49] - As of June 30, 2025, the company had $30.3 million borrowings under the ABL Revolving Credit Facility and $4.2 million under the China Credit Facility, with total consolidated availability of $90.6 million[53][58] Debt Composition (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Term Loan due 2030 | $95,000 | — | | ABL Revolving credit facility | $30,300 | — | | Prior Term Loan due 2027 | — | $85,000 | | Prior Revolver due 2027 | — | $50,500 | | Fair value of warrants issued to lenders | $(2,636) | — | | Unamortized debt discount and issuance costs | $(4,514) | — | | Total Debt | $118,150 | $135,500 | | Less: current portion of long-term debt | $(946) | $(8,438) | | Total long-term debt, net of current portion | $117,204 | $127,062 | | Short-term debt - China credit facility | $4,186 | — | 5. Intangible Assets The net carrying amount of definite-lived intangible assets, mainly trademarks and customer relationships, was $3.7 million Definite-Lived Intangible Assets (in thousands) | Asset Type | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :--- | :--- | :--- | | Trademarks/tradenames | $2,844 | $2,931 | | Customer relationships | $812 | $987 | | Total | $3,656 | $3,918 | Aggregate Intangible Asset Amortization Expense (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30 | $0.1 | $0.1 | | Six Months Ended June 30 | $0.3 | $0.3 | 6. Fair Value Measurement The fair value of long-term debt was reclassified to Level 3 due to a lack of observable market inputs after refinancing - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (significant unobservable inputs)[61][62] - Foreign currency forward exchange contracts are measured at fair value using observable market inputs (Level 2)[64] - Warrants issued to TCW Management for the purchase of up to 3,934,776 shares of common stock were valued at $2.6 million using the Binomial Lattice Model and recorded in Other long-term liabilities[67][68] - The fair value of long-term debt obligations was reclassified from Level 2 to Level 3 as of June 30, 2025, due to a lack of observable market inputs or comparable instruments after refinancing[72] Fair Value of Financial Instruments (June 30, 2025, in thousands) | Instrument | Total Level 2 | Total Level 3 | | :--- | :--- | :--- | | Foreign exchange contract designated as hedging instruments (Assets) | $2,304 | — | | Foreign exchange contract not designated as hedging instruments (Assets) | $89 | — | | Interest rate swap agreement settled in 2025 (Assets) | — | — | | Foreign exchange contract designated as hedging instruments (Liabilities) | $62 | — | | Foreign exchange contract not designated as hedging instruments (Liabilities) | — | — | | Warrants (Liabilities) | $2,636 | — | Fair Value of Long-Term Debt Obligations (in thousands) | Debt Type | June 30, 2025 Carrying Amount | June 30, 2025 Fair Value | December 31, 2024 Carrying Amount | December 31, 2024 Fair Value | | :--- | :--- | :--- | :--- | :--- | | Term Loan due 2030 | $87,850 | $87,850 | — | — | | Prior Term Loan due 2027 | — | — | $85,000 | $84,363 | | Revolving credit facility | $30,300 | $30,300 | $50,500 | $50,500 | 7. Leases Total lease expense and operating lease liabilities increased in the first half of 2025 compared to the prior year Total Lease Expense (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $4,470 | $3,753 | $717 | 19.1% | | Six Months Ended June 30 | $8,733 | $6,982 | $1,751 | 25.1% | Operating Lease Liabilities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Right-of-use assets, net | $34,412 | $29,931 | $4,481 | 15.0% | | Total operating lease liabilities | $35,379 | $30,828 | $4,551 | 14.8% | Anticipated Future Lease Payments (in thousands) | Year | Operating | Financing | Total | | :--- | :--- | :--- | :--- | | Remainder of 2025 | $6,150 | $44 | $6,194 | | 2026 | $10,461 | $79 | $10,540 | | 2027 | $7,124 | $57 | $7,181 | | 2028 | $5,563 | $50 | $5,613 | | 2029 | $4,508 | $45 | $4,553 | | Thereafter | $20,598 | $6 | $20,604 | | Total lease payments | $54,404 | $281 | $54,685 | 8. Income Taxes The company recorded a significant income tax provision, resulting in negative effective tax rates for H1 2025 Income Tax Provision (Benefit) and Effective Tax Rate | Period | 2025 Provision (Benefit) ($ in thousands) | 2025 Effective Tax Rate (%) | 2024 Provision (Benefit) ($ in thousands) | 2024 Effective Tax Rate (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $1,725 | (72)% | $(260) | 17% | | Six Months Ended June 30 | $3,841 | (113)% | $405 | 73% | - The effective tax rate is significantly impacted by the mix of profitable foreign operations and losses in the U.S, coupled with a full valuation allowance on U.S. deferred tax assets[76] - Cash paid for taxes, net of refunds, decreased to $1.7 million for the six months ended June 30, 2025, from $3.6 million in the prior year[77] 9. Pension and Other Post-Retirement Benefit Plans Net periodic pension cost for the non-U.S. pension plan increased due to higher interest costs and actuarial losses Non-U.S. Pension Plan Net Cost (in thousands) | Component | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Interest cost | $405 | $347 | $789 | $696 | | Expected return on plan assets | $(363) | $(315) | $(708) | $(632) | | Amortization of prior service cost | $13 | $13 | $26 | $26 | | Recognized actuarial loss | $242 | $199 | $473 | $399 | | Net cost | $297 | $244 | $580 | $489 | - Net periodic cost components, excluding service costs, are recognized in other (income) expense within the Condensed Consolidated Statements of Operations[79] 10. Performance Awards The liability for cash-settled performance-based stock awards increased to $1.0 million as of June 30, 2025 - Performance-based stock awards are granted under the 2014 EIP and 2020 EIP, with the 2020 EIP amended and restated on May 15, 2025[80] - Cash-settled performance awards are earned based on the greater of EBITDA performance or stock price performance, with the EBITDA component measured annually and the stock price component measured during the last 18 months of the award[81][82] - Unrecognized compensation expense for these awards was $2.8 million as of June 30, 2025[85] Performance Awards Settled in Cash (in thousands) | Metric | Amount | | :--- | :--- | | Adjusted Award Value at December 31, 2024 | $700 | | New grants | $3,461 | | Forfeitures | $(164) | | Adjustments | $(2,958) | | Payments | — | | Adjusted Award Value at June 30, 2025 | $1,039 | 11. Share-Based Compensation Unrecognized compensation expense for share-based awards was $5.8 million, with a significant increase in unvested awards - The company's share-based compensation is comprised solely of restricted stock awards and performance stock awards to be settled in stock[86] - As of June 30, 2025, there was approximately $5.8 million of unrecognized compensation expense related to unvested share-based compensation arrangements[87] - Stockholders approved increasing the number of shares available by 1.8 million shares under the amended and restated Commercial Vehicle Group, Inc 2020 Equity Incentive Plan on May 15, 2025[88] - A total of 0.02 million shares were available for future grants as of June 30, 2025[89] Restricted Stock Awards Status (in thousands, except fair value) | Metric | Shares (in thousands) | Weighted Average Grant-Date Fair Value | | :--- | :--- | :--- | | Unvested - December 31, 2024 | 835 | $5.02 | | Granted | 2,538 | $1.33 | | Vested | (199) | $(4.07) | | Forfeited | (92) | $3.64 | | Unvested - June 30, 2025 | 3,082 | $2.07 | 12. Stockholders' Equity Basic and diluted earnings per share from continuing operations were negative due to net losses in H1 2025 - Common stock outstanding increased to 33,882,848 shares as of June 30, 2025, from 33,694,396 shares at December 31, 2024[90] - No preferred shares were outstanding as of June 30, 2025, or December 31, 2024[90] - No outstanding restricted shares were excluded from diluted EPS calculation for the three and six months ended June 30, 2025, indicating no dilutive effect[92] Earnings (Loss) Per Common Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS (continuing operations) | $(0.12) | $(0.04) | $(0.21) | $0.01 | | Basic EPS (discontinued operations) | $(0.02) | $(0.01) | $(0.05) | $0.03 | | Diluted EPS (continuing operations) | $(0.12) | $(0.04) | $(0.21) | $0.01 | | Diluted EPS (discontinued operations) | $(0.02) | $(0.01) | $(0.05) | $0.03 | Weighted Average Shares Outstanding (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic | 33,799 | 33,393 | 33,747 | 33,359 | | Diluted | 33,799 | 33,393 | 33,747 | 33,834 | 13. Other Comprehensive Income (Loss) Accumulated other comprehensive loss improved significantly, driven by positive foreign currency and derivative gains - The company estimates that net pre-tax derivative income of $2.7 million included in Accumulated other comprehensive income (loss) will be reclassified into earnings within the next 12 months[93] Accumulated Other Comprehensive Income (Loss) (in thousands) | Component | December 31, 2024 | June 30, 2025 | Change ($) | | :--- | :--- | :--- | :--- | | Foreign currency translation adjustment | $(30,662) | $(22,296) | $8,366 | | Pension and post-retirement benefits plans | $(11,459) | $(11,426) | $33 | | Derivative instruments | $(1,222) | $4,753 | $5,975 | | Total Accumulated other comprehensive income (loss) | $(43,343) | $(28,969) | $14,374 | Total Other Comprehensive Income (Loss) (in thousands) | Period | 2025 | 2024 | Change ($) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $9,768 | $(5,663) | $15,431 | | Six Months Ended June 30 | $14,374 | $(6,657) | $21,031 | 14. Cost Reduction and Manufacturing Capacity Rationalization The company incurred $1.8 million in restructuring charges in H1 2025, primarily for headcount reductions - The restructuring program aims to align cost structure for margin expansion through workforce reductions and footprint optimization[94] Accrued Restructuring Balances (in thousands) | Segment | December 31, 2024 | New Charges (Q2 2025) | Payments & Adjustments (Q2 2025) | June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | | Global Seating | $28 | $358 | $(358) | — | | Global Electrical Systems | — | $539 | $(539) | — | | Trim Systems and Components | — | $243 | $(243) | — | | Corporate/Other | $360 | — | $(133) | $225 | | Total | $388 | $1,140 | $(1,273) | $225 | Restructuring Costs Incurred (in thousands) | Period | Total Costs | Headcount Reductions | Facility Exit & Other | Recorded in Cost of Revenues | Recorded in SG&A | | :--- | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30, 2025 | $1,140 | $1,140 | — | $1,140 | — | | Six Months Ended June 30, 2025 | $1,842 | $1,842 | — | $1,642 | $200 | | Three Months Ended June 30, 2024 | $3,775 | $3,375 | $400 | $3,475 | $300 | | Six Months Ended June 30, 2024 | $5,600 | $4,900 | $700 | $5,100 | $500 | 15. Commitments and Contingencies The company faces various commitments and contingencies, with adequate reserves and insurance believed to be in place - The company is subject to various legal proceedings and claims in the ordinary course of business, including product liability, customer/supplier disputes, and employment matters[101] - Management believes that adequate insurance and reserves are in place for probable and estimable liabilities, and the ultimate outcome of legal actions is not expected to have a material adverse impact[102] - A voluntary safety recall by a customer related to wiper system components in July 2023 could lead to additional losses, but the company believes it has reasonable insurance coverage[104] Warranty Provision (in thousands) | Metric | Amount | | :--- | :--- | | Balance - December 31, 2024 | $1,207 | | Provision for warranty claims | $1,013 | | Deduction for payments made and other adjustments | $(699) | | Balance - June 30, 2025 | $1,521 | Future Minimum Principal Payments on Long-Term Debt (in thousands) | Year | Total | | :--- | :--- | | Remainder of 2025 | $474 | | 2026 | $942 | | 2027 | $3,691 | | 2028 | $4,411 | | 2029 | $4,195 | | Thereafter | $111,587 | 16. Segment Reporting The company reorganized into three new reportable segments, with corporate expenses now allocated to segments - The company reorganized its operations into three segments: Global Seating, Global Electrical Systems, and Trim Systems and Components, effective March 31, 2025[107] - The reorganization aims to enhance alignment with customers and end markets, focusing on growth opportunities, capital allocation, and shareholder value[107] - Corporate expenses are now allocated to segment operating income based on how segments utilize corporate support activities, a change from prior periods[108] - Unallocated corporate costs include enterprise and governance stewardship expenses, interest expense, income taxes, and certain other items managed on a consolidated basis[111] Segment Operating Income (Loss) (Three Months Ended June 30, 2025 vs 2024, in thousands) | Segment | 2025 Operating Income (Loss) | 2024 Operating Income (Loss) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Global Seating | $2,711 | $2,100 | $611 | 29.1% | | Global Electrical Systems | $707 | $(539) | $1,246 | 231.2% | | Trim Systems and Components | $105 | $2,327 | $(2,222) | -95.5% | | Total Segment Operating Income | $3,523 | $3,888 | $(365) | -9.4% | Segment Operating Income (Loss) (Six Months Ended June 30, 2025 vs 2024, in thousands) | Segment | 2025 Operating Income (Loss) | 2024 Operating Income (Loss) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Global Seating | $5,415 | $4,895 | $520 | 10.6% | | Global Electrical Systems | $389 | $(96) | $485 | 505.2% | | Trim Systems and Components | $1,638 | $6,527 | $(4,889) | -74.9% | | Total Segment Operating Income | $7,442 | $11,326 | $(3,884) | -34.3% | 17. Other Financial Information Inventories decreased by 9.0%, while accrued liabilities saw notable shifts in compensation and derivative liabilities Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Raw materials | $86,701 | $98,677 | $(11,976) | -12.1% | | Work in process | $11,383 | $10,960 | $423 | 3.9% | | Finished goods | $18,578 | $18,587 | $(9) | -0.0% | | Total Inventories | $116,662 | $128,224 | $(11,562) | -9.0% | Property, Plant, and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Land and buildings | $30,147 | $26,613 | $3,534 | 13.3% | | Machinery and equipment | $220,926 | $211,984 | $8,942 | 4.2% | | Construction in progress | $4,848 | $8,075 | $(3,227) | -40.0% | | Property, plant, and equipment, gross | $255,921 | $246,672 | $9,249 | 3.7% | | Less accumulated depreciation | $(188,150) | $(177,811) | $(10,339) | 5.8% | | Property, plant and equipment, net | $67,771 | $68,861 | $(1,090) | -1.6% | Accrued Liabilities and Other (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Compensation and benefits | $18,580 | $12,542 | $6,038 | 48.1% | | Operating lease liabilities | $8,041 | $8,033 | $8 | 0.1% | | Taxes payable | $3,930 | $2,122 | $1,808 | 85.2% | | Accrued legal and professional fees | $2,720 | $1,694 | $1,026 | 60.6% | | Derivative liabilities | $62 | $5,701 | $(5,639) | -98.9% | | Accrued freight | $1,885 | $3,243 | $(1,358) | -41.9% | | Warranty costs | $1,521 | $1,207 | $314 | 26.0% | | Customer tooling projects | $815 | $1,259 | $(444) | -35.3% | | Other | $3,142 | $4,557 | $(1,415) | -31.0% | | Total Accrued liabilities and other | $40,696 | $40,358 | $338 | 0.8% | 18. Discontinued Operations The company divested its cab structures and Industrial Automation businesses, which are now reported as discontinued operations - The company sold its cab structures business (Kings Mountain, NC) for approximately $40 million and its First Source Electronics (FSE) business (Elkridge, MD) for approximately $1.5 million in 2024[113][114] - These divestitures represent a strategic shift to reduce exposure to the cyclical Class 8 market, lower customer concentration, and improve return profile[113][114][115] - The company has continuing involvement with the cab structures business through a transition services agreement (TSA), recognizing $0.4 million of income for the six months ended June 30, 2025[117] Income (Loss) from Discontinued Operations, Net of Tax (in thousands) | Operation | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Cab structures business | $(512) | $493 | $(1,535) | $3,513 | | Industrial Automation segment | $(143) | $(794) | $(293) | $(2,322) | | Total | $(655) | $(301) | $(1,828) | $1,191 | Cash Flows from Discontinued Operations (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $306 | $8,310 | | Net cash used in investing activities | — | $(434) | | Total cash provided by discontinued operations | $306 | $7,876 | ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section analyzes the company's financial performance, liquidity, capital resources, and critical accounting policies Business Overview The company is a global provider of customized systems and components for commercial and electric vehicle markets - CVG is a global provider of systems, assemblies, and components for the commercial vehicle and electric vehicle markets, with manufacturing operations across multiple countries[124][125] - The company primarily manufactures customized products for North American Commercial Truck manufacturers and construction/agriculture vehicle OEMs[126] Key Developments The company completed a major debt refinancing, implemented a new organizational structure, and is navigating market volatility - On June 27, 2025, the company closed on $210 million in senior secured credit facilities, including a $95 million Term Loan and a $115 million ABL revolving credit facility, both maturing on June 27, 2030[127] - In connection with the financing, TCW Group affiliates received five-year warrants to purchase up to 3,934,776 shares of common stock[128] - Effective January 1, 2025, the company implemented a new organizational structure, reorganizing into three operating divisions and reporting segments: Global Electrical Systems, Global Seating, and Trim Systems and Components[129] - The company is navigating external factors such as geopolitical dynamics, new tariff actions, tax regulation, and fluctuating foreign exchange rates, which create uncertainty and volatility[130] - The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, includes tax reform provisions like immediate expensing of R&E and expanded bonus depreciation, but the company does not expect a material impact[131] Consolidated Results of Operations (Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024) Revenues decreased due to softer demand, but gross margin improved partly due to lower restructuring charges - The decrease in revenues was primarily due to a softening in customer demand across Global Seating and Trim Systems & Components segments, with a $20.8 million (12.9%) decrease in OEM and other sales and a $0.9 million (2.8%) decrease in aftermarket and OES sales[133][140] - Gross profit margin improved to 11.4% in 2025 from 10.6% in 2024, despite lower sales volumes, partly due to reduced restructuring charges ($1.1 million in 2025 vs $5.1 million in 2024)[134] - SG&A expenses decreased by $0.7 million, mainly due to reduced incentive compensation expense[135] - A $0.5 million loss on extinguishment of debt was recorded due to the write-off of deferred financing fees from early repayment of the prior revolver[137] Consolidated Operating Data (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $171,956 | $193,665 | $(21,709) | -11.2% | | Gross profit | $19,529 | $20,459 | $(930) | -4.5% | | Selling, general and administrative expenses | $18,732 | $19,395 | $(663) | -3.4% | | Other (income) expense | $427 | $206 | $221 | 107.3% | | Interest expense | $2,291 | $2,417 | $(126) | -5.2% | | Loss on extinguishment of debt | $460 | — | $460 | NM | | Provision for income taxes | $1,725 | $(260) | $1,985 | NM | | Net income (loss) from continuing operations | $(4,106) | $(1,299) | $(2,807) | 216.1% | Segment Results (Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024) Segment performance varied, with improved operating income in Seating and Electrical Systems but a sharp decline in Trim Global Seating Segment Results Revenues decreased due to lower demand, but operating income improved due to reduced SG&A expenses - Revenues decreased by $7.9 million (9.6%) due to decreased customer demand[141] - Gross profit margin increased to 13.3% from 12.9%, despite lower sales volumes[142] - SG&A expenses decreased by $1.3 million, primarily due to reduced incentive compensation and headcount reduction[143] Global Seating Segment Operating Data (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $74,457 | $82,404 | $(7,947) | -9.6% | | Gross profit | $9,930 | $10,634 | $(704) | -6.6% | | Selling, general & administrative expenses | $7,219 | $8,534 | $(1,315) | -15.4% | | Operating income | $2,711 | $2,100 | $611 | 29.1% | Global Electrical Systems Segment Results Revenues remained flat while gross profit and operating income improved significantly due to lower restructuring costs - Revenues were essentially flat compared to the prior year[145] - Gross profit increased by $1.9 million, and gross profit margin improved significantly to 11.0% from 7.4%, primarily due to lower start-up and restructuring costs ($0.5 million in 2025 vs $2.5 million in 2024)[146][147] - SG&A expenses increased by $0.7 million[148] Global Electrical Systems Segment Operating Data (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $53,585 | $53,639 | $(54) | -0.1% | | Gross profit | $5,911 | $3,984 | $1,927 | 48.4% | | Selling, general & administrative expenses | $5,204 | $4,523 | $681 | 15.1% | | Operating income (loss) | $707 | $(539) | $1,246 | NM | Trim Systems and Components Segment Results Revenues and operating income declined sharply due to decreased customer demand and lower sales volumes - Revenues decreased by $13.7 million (23.8%) due to decreased customer demand[150] - Gross profit decreased by $2.3 million, and gross profit margin declined to 8.4% from 10.3%, primarily due to lower sales volumes[150][151] - SG&A expenses were relatively flat[151] Trim Systems and Components Segment Operating Data (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $43,914 | $57,622 | $(13,708) | -23.8% | | Gross profit | $3,688 | $5,950 | $(2,262) | -38.0% | | Selling, general & administrative expenses | $3,583 | $3,623 | $(40) | -1.1% | | Operating income | $105 | $2,327 | $(2,222) | -95.5% | Consolidated Results of Operations (Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024) Revenues and gross profit decreased in the first half of 2025 due to softening customer demand across all segments - Revenues decreased by $46.5 million (12.0%) primarily due to softening customer demand across all segments, with a $44.4 million (13.8%) decrease in OEM and other revenues and a $2.2 million (3.3%) decrease in aftermarket and OES sales[153] - Gross profit decreased by $6.3 million, and gross profit margin slightly declined to 10.9% from 11.2%, primarily due to lower sales volumes, partially offset by reduced restructuring charges ($1.6 million in 2025 vs $5.1 million in 2024)[154] - SG&A expenses decreased by $2.9 million, mainly due to reduced incentive compensation expense[155] - Interest expense increased by $0.2 million, primarily due to less benefit from interest rate swaps[156] - A $0.5 million loss on extinguishment of debt was recorded[157] Consolidated Operating Data (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $341,751 | $388,291 | $(46,540) | -12.0% | | Gross profit | $37,322 | $43,623 | $(6,301) | -14.4% | | Selling, general and administrative expenses | $35,117 | $38,050 | $(2,933) | -7.7% | | Other (income) expense | $355 | $418 | $(63) | -15.1% | | Interest expense | $4,794 | $4,603 | $191 | 4.1% | | Loss on extinguishment of debt | $460 | — | $460 | NM | | Provision (benefit) for income taxes | $3,841 | $405 | $3,436 | NM | | Net income (loss) from continuing operations | $(7,245) | $147 | $(7,392) | NM | Segment Results (Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024) Operating income improved for Seating and Electrical Systems but declined sharply for Trim Systems and Components Global Seating Segment Results Revenues and gross profit decreased, but operating income improved due to significantly lower SG&A expenses - Revenues decreased by $15.3 million (9.4%) due to decreased customer demand[160] - Gross profit decreased by $2.5 million, and gross profit margin declined to 12.9% from 13.2%, driven by lower sales volume and increased freight costs[161][162] - SG&A expenses decreased by $3.0 million, primarily due to reduced incentive compensation and headcount reduction[163] Global Seating Segment Operating Data (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $147,866 | $163,201 | $(15,335) | -9.4% | | Gross profit | $19,023 | $21,480 | $(2,457) | -11.4% | | Selling, general & administrative expenses | $13,608 | $16,585 | $(2,977) | -17.9% | | Operating income | $5,415 | $4,895 | $520 | 10.6% | Global Electrical Systems Segment Results Revenues decreased, but gross profit and operating income improved significantly due to lower restructuring costs - Revenues decreased by $8.3 million (7.4%) due to decreased customer demand[164] - Gross profit increased by $1.1 million, and gross profit margin improved to 9.5% from 7.8%, primarily due to lower start-up and restructuring costs ($1.0 million in 2025 vs $2.5 million in 2024)[165][166] - SG&A expenses increased by $0.6 million[167] Global Electrical Systems Segment Operating Data (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $104,037 | $112,365 | $(8,328) | -7.4% | | Gross profit | $9,900 | $8,809 | $1,091 | 12.4% | | Selling, general & administrative expenses | $9,511 | $8,905 | $606 | 6.8% | | Operating income (loss) | $389 | $(96) | $485 | -505.2% | Trim Systems and Components Segment Results Revenues, gross profit, and operating income all declined substantially due to lower customer demand and freight costs - Revenues decreased by $22.9 million (20.3%) due to decreased customer demand[168] - Gross profit decreased by $5.2 million, and gross profit margin declined to 9.3% from 12.0%, driven by lower sales volume and increased freight costs[169][170] - SG&A expenses decreased by $0.3 million[171] Trim Systems and Components Segment Operating Data (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $89,848 | $112,725 | $(22,877) | -20.3% | | Gross profit | $8,399 | $13,550 | $(5,151) | -38.0% | | Selling, general & administrative expenses | $6,761 | $7,023 | $(262) | -3.7% | | Operating income (loss) | $1,638 | $6,527 | $(4,889) | -74.9% | Liquidity and Capital Resources Liquidity remains adequate with cash of $45.3 million and $90.6 million available under credit facilities - Primary sources of liquidity as of June 30, 2025, were operating income, cash ($45.3 million), and availability under credit facilities ($90.6 million)[172] - The company believes these sources will provide adequate funds for working capital, capital expenditures, and debt service for the next twelve months[172] - As of June 30, 2025, $30.7 million of cash was held by foreign subsidiaries, with a $0.1 million deferred tax liability for expected repatriation[173] - The company expects to maintain compliance with financial covenants in the Term Loan and ABL Revolving Credit Facility based on current forecasts[174] - Net cash provided by operating activities increased significantly to $34.0 million in 2025, primarily due to a decrease in trade working capital[175] - Net cash used in investing activities decreased to $5.3 million, mainly due to less capital spending and proceeds from the sale of the FinishTEK business in 2024[176] - Net cash used in financing activities was $12.2 million, primarily due to debt refinancing costs ($6.1 million) and a net reduction of debt ($6.0 million)[177] - Capital expenditures for 2025 are expected to be in the range of $10 million to $15 million[176] Sources and Uses of Cash (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change ($) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $34,041 | $10,232 | $23,809 | | Net cash used in investing activities | $(5,271) | $(8,066) | $2,795 | | Net cash provided by (used in) financing activities | $(12,219) | $355 | $(12,574) | | Effect of currency exchange rate changes on cash | $2,109 | $(1,028) | $3,137 | | Net increase in cash | $18,660 | $1,493 | $17,167 | Critical Accounting Policies and Estimates There have been no material changes to the company's critical accounting estimates since the 2024 Form 10-K - The company's consolidated financial statements are prepared in conformity with U.S GAAP[179] - Critical accounting estimates involve management's most difficult, subjective, or complex judgments due to inherent uncertainties[180] - There have been no material changes to critical accounting estimates from those disclosed in the 2024 Form 10-K as of June 30, 2025[180] Forward-Looking Statements This report contains forward-looking statements that are subject to various economic and competitive risks - The report contains forward-looking statements regarding industry outlook, financial results, end markets, strategic plans, and economic factors[181] - These statements represent management's current expectations and are inherently uncertain, with actual results potentially differing materially due to various economic and competitive factors[181] - The company undertakes no obligation to update any forward-looking statement to reflect future events or developments[182] ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the company's market risk exposure since its 2024 Form 10-K - No material changes in exposure to market risk as of June 30, 2025, compared to the 2024 Form 10-K[183] ITEM 4 – CONTROLS AND PROCEDURES Management concluded that disclosure controls and procedures were effective as of the end of the reporting period - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025, by senior management[184][186] - No material changes occurred in internal control over financial reporting during the quarter ended June 30, 2025[187] - Management acknowledges the inherent limitations of control systems, which can only provide reasonable, not absolute, assurance against errors or fraud[188] PART II OTHER INFORMATION ITEM 1 Legal Proceedings The company is involved in ordinary course legal proceedings not expected to have a material adverse impact - The company is subject to various legal proceedings and claims, including product liability, customer/supplier disputes, and employment matters[189] - Management believes the ultimate outcome of these legal actions is not expected to have a material adverse impact on the consolidated financial position, results of operations, stockholders' equity, or cash flows[189] ITEM 1A Risk Factors Future sales of common stock could dilute existing stockholders' ownership and cause the stock price to decline - Investors should consider risk factors from this Form 10-Q and the 2024 Form 10-K[190] - Future sales and issuances of common stock or rights to purchase common stock could dilute existing stockholders' ownership and potentially cause the stock price to decline[191] ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds The company issued unregistered warrants to purchase up to 3.9 million shares of common stock in connection with financing - On June 30, 2025, the company issued five-year warrants to TCW Management affiliates to purchase up to 3,934,776 shares of common stock[192] - The warrants were issued as unregistered securities pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, in connection with loan financing[192] - The warrants have exercise prices of $1.52 and $2.07 per share and include company repurchase rights and anti-dilution adjustments[192] ITEM 3 Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - Not applicable[193] ITEM 4 Mine Safety Disclosures This item is not applicable to the company for the reporting period - Not applicable[194] ITEM 5 Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated during the last fiscal quarter - Neither the company nor its officers or directors adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter[195] ITEM 6 Exhibits This section lists all exhibits filed with the Form 10-Q, including credit agreements, warrants, and certifications - Exhibits include retention agreements, the amended and restated 2020 Equity Incentive Plan, loan and security agreements for the Term Loan and ABL Revolving Credit Facility, the form of warrant, and an Investor Rights Agreement[197] - Certifications by the President and CEO, and Executive Vice President and CFO (302 and 906 certifications) are also included[197] SIGNATURE - The report was signed on August 4, 2025, by Andy Cheung, Chief Financial Officer (Principal Financial Officer), and Angela M O'Leary, Chief Accounting Officer (Principal Accounting Officer)[199][201]