Commercial Vehicle Group Inc. (NASDAQ:CVGI) Q1 2020 Earnings Conference Call - Final Transcript

May 19, 2020 • 08:00 am ET

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Commercial Vehicle Group Inc. (NASDAQ:CVGI) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
C. Timothy Trenary

global construction equipment markets, partially offset by higher sales of military and industrial equipment customers. As expected, FSE is adding value to the Company's long-term strategy, revenues were up 30% sequentially from the fourth quarter of 2019. As e-commerce becomes increasingly important, FSE has positioned to support this increased demand. Foreign currency translation negatively impacted Electrical Systems revenues by $0.4 million in the first quarter.

Electrical Systems segment reported an operating loss of $17.1 million in the first quarter of 2020 compared to operating income of $15 million in the prior year period. The operating loss was due in large part to the $23.4 million impairment charge, but also due to lower sales. Sequentially, first quarter 2020 adjusted operating income was $3 million more in the -- than in the fourth quarter of 2019 on $1.8 million fewer sales in the first quarter.

Moving now to the Global Seating segment, revenues declined to $76 million in the quarter compared to $104.1 million in the prior year period due primarily to heavy and medium-duty truck market in North America and the global construction equipment markets. Foreign currency translation negatively impacted Global Seating revenue by $0.9 million in the quarter. Global Seating segment reported an operating loss of $0.4 million during the first quarter of 2020 compared to operating income of $8.3 million in the prior year period. The operating loss was due in part to the $4.8 million impairment charge, but also due to the lower sales. Sequentially, first quarter 2020 adjusted operating income was $4.7 million more than in the fourth quarter of 2019 on $0.5 million fewer sales in the first quarter.

The Company last week concluded discussions with its lenders to amend the term loan and revolving credit agreements to provide the Company with more flexibility as we navigate the COVID-19 business environment. More specifically, as regards to the term loan agreement, the amendment provides for the suspension of the leverage ratio covenant beginning in the second quarter of 2020 through the quarter ended December 31, 2020 and the resetting of the leverage ratio covenant for the quarterly periods ended on or after March 31, 2021. Furthermore, the amendments provide for restrictions on the Company's ability to incur additional debt, make investments, grant liens, repurchase the Company's stock and issue dividends, as well as provide for increased pricing to the lenders. We are happy to have concluded these discussions with our lending partners.

As regards to remediations of material weaknesses in internal controls identified earlier this year, the Company is executing on its remediation plan. It's early, but the remediation plan is proceeding as expected. Until these material weakness are remediated, we plan to continue to perform additional analyzes and other procedures to help ensure our financial statements are prepared in accordance with Generally Accepted Accounting Principles.

This concludes concludes our prepared remarks. Chris, I'll now turn it over to you for Q&A.