Commercial Vehicle Group, Inc. (the “Company”) (Nasdaq: CVGI) today reported financial results for the fourth quarter and fiscal year ended December 31, 2015.
Consolidated Results
Fourth Quarter 2015 Results
- Fourth quarter 2015 revenues were $184.7 million compared to $211.9 million in the prior-year period, a decrease of 12.8 percent, primarily resulting from a decline in fourth quarter heavy-duty truck production in North America, decreased sales into the global construction and agriculture markets, and foreign currency translation due to the relative strength of the U.S. Dollar. Foreign currency translation negatively impacted fourth quarter revenues by $3.3 million, or 1.5 percent.
- Operating income in the fourth quarter was $5.3 million compared to operating income of $9.5 million in the prior-year period. The decrease in operating income period-over-period was a result of decreased sales. The fourth quarter 2015 results included restructuring costs of $0.8 million and the fourth quarter of 2014 results included $0.7 million of restructuring costs related to the closure of the Tigard facility.
- Net loss was $2.3 million in the fourth quarter, or $0.08 per diluted share, compared to net income of $4.2 million, or $0.15 per diluted share, in the prior-year period. Net loss in the fourth quarter reflects an after-tax charge of $0.4 million associated with the redemption of $15 million of the Company’s senior secured notes, and an income tax provision of $1.7 million compared to an income tax benefit of $0.1 million in the prior-year period. The income tax provision in the fourth quarter resulted primarily from pre-tax losses in certain foreign subsidiaries with deferred tax asset valuation allowances; conversely, the income tax benefit in the prior year period resulted primarily from a reduction in deferred tax asset valuation allowances in certain foreign subsidiaries. Diluted shares outstanding were 29.7 million in the fourth quarter compared to 29.1 million for the prior-year period.
Fiscal Year 2015 Results
- Fiscal year 2015 revenues were $825.3 million compared to $839.7 million in the prior year, a decrease of 1.7 percent, resulting from decreased sales into the global construction and agriculture markets and the negative impact of foreign currency translation, offset by an increase in medium- and heavy-duty truck (“MD / HD Truck”) production in North America. Foreign currency translation negatively impacted fiscal year 2015 revenues by $18.3 million, or 2.2 percent.
- Operating income for the full year was $38.0 million compared to operating income of $33.7 million in the prior year, an increase of $4.3 million. The increase in operating income year-over-year resulted from gross profit margin improvement and reduced selling, general & administrative expenses. Results in 2015 included restructuring charges of $2.3 million (inclusive of $1.5 million of Tigard restructuring costs) and 2014 included restructuring charges of $2.1 million related to the closure of the Tigard facility and sale of the Norwalk facility.
- Net income was $7.1 million for fiscal year 2015, or $0.24 per diluted share, compared to a net income of $7.6 million, or $0.26 per diluted share, in fiscal year 2014. Net income in fiscal year 2015 reflects an income tax provision of $9.8 million compared to an income tax provision of $5.1 million in the prior year. The income tax provision in 2015 was adversely affected by pre-tax losses in certain foreign subsidiaries with deferred tax asset valuation allowances; conversely, the income tax provision in the prior year period benefited from a reduction in deferred tax asset valuation allowances in certain foreign subsidiaries. Diluted shares outstanding were 29.4 million for the fiscal year ending December 31, 2015 compared to 29.1 million for the fiscal year ending December 31, 2014.
In fiscal year 2015, the Company did not have any borrowings under its asset-based revolver and therefore was not subject to any financial maintenance covenants. At December 31, 2015, the Company had liquidity of $129.7 million; $92.2 million of cash and $37.5 million availability from its asset based revolver.
“Our North American heavy-duty truck business was adversely impacted in November and December as the heavy-duty truck OEMs adjusted their production schedules to reflect a decline in orders and to begin to re-balance truck inventory. We expect continuing softness in orders and production into the first half of this year and then an improvement in the second half of the year to production more consistent with replacement levels,” said Pat Miller, Commercial Vehicle Group President & CEO. Miller added, “Late last year, in anticipation of this change in demand, we set in motion restructuring and cost reduction actions to more closely align our business with the changing demand. We believe these actions will result in a structural change in manufacturing cost and enhanced productivity. Our facility restructuring is proceeding as planned, and we have reduced our selling, general and administrative spend entering 2016 – We expect SG&A to come in at approximately $16 to $17 million in the first quarter.”
Tim Trenary, Chief Financial Officer, stated, “We’ve been very focused on costs given the declining sales environment, and many adjustments have been made. This effort overall, and more specifically our centrally led procurement, and logistics and operational excellence initiatives, contributed to an improvement in operating income of $4 million on lower sales for the year. This is reflected in gross profit margin improvement of sixty basis points to 13.4 percent from 12.8 percent. We are also pleased with our cash build during the year, achieved in part from working capital management. This allowed us to redeem $15 million of our senior secured notes in the fourth quarter of 2015, thereby deleveraging our balance sheet.”
Miller concluded, “With our well-planned strategic restructuring under way, augmented by our focus on reducing our operating expenses, we believe we are positioning the Company to protect margins in the near term and meaningfully enhance profitability in the long term. Furthermore, we believe we will be better positioned to capture long-term growth in our global markets and expect to further strengthen our ability to deliver improved returns during cycle expansions. Additionally, we believe our cash position and liquidity provide ample flexibility for us in 2016 and beyond.”
Segment Results
Global Truck and Bus Segment
Fourth Quarter 2015 Results
- Revenues for the GTB Segment for the fourth quarter of 2015 were $127.1 million compared to $140.1 million for the prior-year period, a decrease of 9.3 percent primarily resulting from a decline in fourth quarter heavy-duty truck production in North America compared to the fourth quarter of 2014.
- Operating income for the fourth quarter was $13.7 million compared to operating income of $16.2 million for the prior-year period. This decrease in operating income period-over-period resulted from the decrease in sales. The fourth quarter 2015 and 2014 results included restructuring charges of $0.3 million and $0.7 million, respectively.
Fiscal Year 2015 Results
- Revenues for the GTB Segment in fiscal year 2015 were $565.3 million compared to $534.1 million in the prior year, an increase of 5.8 percent primarily resulting from increased MD / HD Truck production in North America.
- Operating income in fiscal year 2015 was $59.3 million compared to operating income of $51.2 million in the prior year. This increase in operating income year-over-year primarily resulted from the increase in revenue. Results in 2015 included restructuring charges of $1.8 million (inclusive of $1.5 million of Tigard restructuring costs) and 2014 included $2.1 million (consisting of $1.3 million of Tigard restructuring costs and $0.8 million for the loss on the sale of the Norwalk facility), respectively.
Global Construction and Agriculture Segment
Fourth Quarter 2015 Results
- Revenues for the GCA Segment in the fourth quarter of 2015 were $60.4 million compared to $74.8 million in the prior year, a decrease of 19.3 percent primarily reflecting the challenging marketplace in these end markets and foreign currency translation. Foreign currency translation negatively impacted fourth quarter 2015 revenue by $2.8 million, or 3.7 percent.
- Operating income in the fourth quarter was $0.7 million compared to operating loss of $1.6 million for the prior year period. The swing to operating income on lower sales in the current period from an operating loss in the prior year period resulted from the improvement in gross profit margin. Facility restructuring costs in the fourth quarter of 2015 were $0.5 million.
Fiscal Year 2015 Results
- Revenues for the GCA Segment in fiscal year 2015 were $271.6 million compared to $317.2 million in the prior year, a decrease of 14.4 percent primarily reflecting the challenging marketplace in these end markets and foreign currency translation. Foreign currency translation negatively impacted fiscal year 2015 revenue by $15.8 million, or 5.0 percent.
- Operating income in fiscal year 2015 was $8.0 million compared to operating income of $7.5 million in the prior year. This increase in operating income on lower sales resulted primarily from the improvement in gross profit margin. Fiscal year 2015 results included restructuring costs totaling $0.5 million.
GAAP to Non-GAAP Reconciliation
A reconciliation of GAAP to non-GAAP financial measures is included as Appendix A to this release.
2016 End Market Outlook
The 2015 North American Class 8 truck production was 323,000 units compared to 297,000 units in 2014. Class 5-7 truck production for 2015 was 235,000 units compared to 226,000 units in 2014. Management estimates that 2016 North American Class 8 truck production will be in the range of 230,000 – 250,000 units, North American Class 5-7 will be relatively stable, and that there is a bias toward continuing softness in global construction and agriculture markets in 2016.
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