What changed in this filing

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Item 1. Financial Statements

2020-08-10 compared with 2020-05-18 · 413 added, 302 removed, 578 unchanged (55% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

(In thousands, except per share amounts)

Current Assets:

Cash $ 63,390 $ 39,511

Accounts receivable, net of allowances of $ 595 and $ 432 , respectively

102,771 115,099

Inventories 70,711 82,872

Other current assets 13,684 18,490

1 unchanged sentence

Property, plant and equipment, net of accumulated depreciation of $ 153,811 and $ 154,939 , respectively

66,867 73,686

Operating lease right-of-use assets, net 31,172 34,960

Goodwill — 27,816

Intangible assets, net of accumulated amortization of $ 12,975 and $ 11,440 , respectively

23,362 25,258

Deferred income taxes 26,385 14,654

Other assets, net 2,646 3,480

Total assets $ 400,988 $ 435,826

Liabilities and Stockholders’ Equity

17 unchanged sentences

Treasury stock, at cost:

1,334,251 shares, as of March 2019 and December 2018

1,334,251 shares, as of June 2020 and December 2019

( 11,230 ) ( 11,230 )

Additional paid-in capital 247,582 245,852

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(as restated) 2020 2019

(as restated)

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

(In thousands, except per share amounts)

Revenues $ 126,896 $ 243,190 $ 314,001 $ 486,354

Cost of Revenues 120,421 210,754 287,223 420,829

Gross Profit 6,475 32,436 26,778 65,525

Selling, General and Administrative Expenses 15,984 16,248 33,083 31,447

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(Loss) Earnings per Common Share:

Basic $ ( 0.40 ) $ 0.20 $ ( 1.20 ) $ 0.53

Diluted $ ( 0.40 ) $ 0.20 $ ( 1.20 ) $ 0.52

Weighted Average Shares Outstanding:

Basic 30,890 30,547 30,848 30,530

Diluted 30,890 30,824 30,848 30,731

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(as restated) 2020 2019

(In thousands)

(as restated)

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

(In thousands) (In thousands)

Net (loss) income $ ( 12,497 ) $ 6,146 $ ( 37,091 ) $ 16,132

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency exchange translation adjustments 1,920 233 ( 2,885 ) 337

1 unchanged sentence

Derivative instrument, net of tax 1,104 ( 17 ) ( 1,674 ) 322

Other comprehensive loss

Other comprehensive income (loss) 2,578 1,955 ( 5,452 ) 1,749

Comprehensive (loss) income $ ( 9,919 ) $ 8,101 $ ( 42,543 ) $ 17,881

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

COMMERCIAL VEHICLE GROUP, INC.

MMERCIAL VEHICLE GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Additional Paid In Capital

Retained Deficit

Total CVG Stockholders’

Common Stock Treasury

Stock Additional Paid In Capital Retained Deficit Accumulated

Loss Total CVG Stockholders’

Shares Amount

(In thousands)

2 unchanged sentences

Total comprehensive loss — — — — ( 37,091 ) ( 5,452 ) ( 42,543 )

Balance - March 31, 2020

Balance - June 30, 2020 30,985 $ 309 $ ( 11,230 ) $ 247,582 $ ( 97,398 ) $ ( 51,402 ) $ 87,861

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(as restated)

(Unaudited) (Unaudited)

(In thousands)

4 unchanged sentences

Impairment expense 29,017 —

Provision for doubtful accounts

Non-cash amortization of debt financing costs 804 685

Shared-based compensation expense 1,730 1,479

Payment in kind interest expense 1,813 —

Deferred income taxes ( 11,568 ) 2,263

2 unchanged sentences

Accounts receivable 10,997 ( 23,610 )

Inventories 11,200 ( 462 )

Prepaid expenses 1,983 ( 2,501 )

1 unchanged sentence

Other operating activities, net 7,867 ( 607 )

Net cash provided by (used in) operating activities

Net cash provided by operating activities 20,508 8,749

Cash Flows from Investing Activities:

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Cash Flows from Financing Activities:

Borrowing on Revolving Credit Facility

Borrowing of Revolving Credit Facility 15,000 —

Loan amendment costs ( 2,579 ) —

Repayment of Term Loan ( 2,188 ) ( 6,338 )

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Commercial Vehicle Group, Inc.

(through its subsidiaries) is a leading supplier of electrical wire harnesses, seating systems, and a full range of other cab related products for the global commercial vehicle markets, including medium- and heavy-duty trucks ("MD/HD Truck") and medium- and heavy-construction vehicles.

We also supply electrical wire harnesses, control panels, electro-mechanical and cable assemblies, seating systems and other products to automotive, military, bus, agriculture, transportation, mining, industrial and off-road recreational markets.

(through its subsidiaries) is a leading supplier of seating systems, electro-mechanical assemblies, engineered material products, and warehouse automation subsystems for many markets including the following:

trucking, military, warehouse automation, bus, agriculture, specialty transportation, mining, industrial equipment and off-road recreational markets.

References herein to the "Company", "CVG", "we", "our", or "us" refer to Commercial Vehicle Group, Inc.

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We are differentiated from automotive industry suppliers by our ability to manufacture low volume, customized products on a sequenced basis to meet the requirements of our customers.

We believe our products are used by a majority of the North American MD/HD Truck and many medium- and heavy-duty construction vehicle original equipment manufacturers (“OEMs”), and to a lesser extent other makers of industrial equipment.

We believe our products are used by a majority of the North American medium- and heavy-duty truck ("MD/HD Truck") and many medium- and heavy-duty construction vehicle original equipment manufacturers (“OEMs”), and to a lesser extent other makers of industrial equipment.

We have prepared the unaudited condensed consolidated financial statements included herein pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”).

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2020-04, "Reference Rate Reform (Topic 848)".

The ASU facilitates the effects of Reference Rate Reform on financial reporting.

The ASU facilitates the effects of Reference Rate Reform on financial reporting and provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

ASU 2020-04 is effective as of March 12, 2020 through December 31, 2022.

We are evaluating the effect this ASU will have on the Company.

In December 2019, the FASB issued ASU No.

2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes".

The ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and otherwise clarifies and amends existing guidance.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020.

We are evaluating the effect this ASU will have on the Company.

Accounting Pronouncements Implemented in the three months ended March 31, 2020

Accounting Pronouncements Implemented in the six months ended June 30, 2020

In March 2020, the FASB issued ASU No.

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The Company implemented ASU 2017-04 as of January 1, 2020 with no material impact.

Subsequently as of March 31, 2020, we fully impaired our goodwill.

Refer to the Note 11 for more details.

Subsequent to such implementation, we fully impaired our goodwill.

Refer to Note 11 for more details.

In June 2016, the FASB issued ASU No.

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Restatement Background

As noted in our 2019 Form 10-K, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company, after considering the recommendations of management, and discussing such recommendations with outside SEC counsel, concluded that our 2018 Financial Statements, included in our Annual Report on Form 10-K as of and for the fiscal year ended December 31, 2018 (the “2018 Annual Report”), and our unaudited consolidated financial statements as of and for the quarterly periods ended March 31, 2019 and 2018, June 30, 2019 and 2018, and September 30, 2019 and 2018, included in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2019, June 30, 2019 and September 30, 2019 (the "2019 Quarterly Reports”), should no longer be relied upon due to misstatements that are described in greater detail below, and that we would restate such financial statements to make the necessary accounting corrections.

Quarterly Reports”), should no longer be relied upon due to misstatements that are described in greater detail below, and that we would restate such financial statements to make the necessary accounting corrections.

The Company evaluated the materiality of these errors both qualitatively and quantitatively in accordance with Staff Accounting Bulletin (“SAB”) No.

99, Materiality and SAB No.

108, Considering the Effects of Prior Year Misstatements in Current Year Financial Statements, and determined the effect of these corrections was material to the consolidated financial statements as of and for the year ended December 31, 2018 and the quarterly periods ended March 31, 2019 and 2018, June 30, 2019 and 2018,

and September 30, 2019 and 2018.

As a result of the material misstatements, we have restated our consolidated financial statements as of and for the year ended December 31, 2018 and our unaudited consolidated financial statements as of and for the quarterly periods ended March 31, 2019 and 2018, June 30, 2019 and 2018, and September 30, 2019 and 2018, in accordance with ASC 250, Accounting Changes and Error Corrections (the "Restated Financial Statements").

The following tables present the impacts of the restatement adjustments to the previously reported financial information for the period ended March 31, 2019 .

The following tables present the impacts of the restatement adjustments to the previously reported financial information for the period ended June 30, 2019.

The restatement references identified in the following tables directly correlate to the restatement adjustments detailed below.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2019

As Previously Reported

Restatement Adjustments

Restatement References

Cost of Revenues

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019

As Previously Reported Restatement Adjustments As Restated As Previously Reported Restatement Adjustments As Restated Restatement References

Revenues $ 243,190 $ — $ 243,190 $ 486,354 $ — $ 486,354

Cost of Revenues 209,407 1,347 210,754 418,011 2,818 420,829 a, b

Gross profit 33,783 ( 1,347 ) 32,436 68,343 ( 2,818 ) 65,525

Selling, General and Administrative Expenses 16,248 — 16,248 31,447 — 31,447

Amortization Expense 322 — 322 643 — 643

Operating Income (Loss)

Operating Income 17,213 ( 1,347 ) 15,866 36,253 ( 2,818 ) 33,435

Interest and Other Expense 7,490 — 7,490 11,886 — 11,886

Income before provision for income taxes

Provision for Income Taxes

Net Income (Loss)

Income (Loss) per share attributable to common stockholders:

Income before provision for income taxes 9,723 ( 1,347 ) 8,376 24,367 ( 2,818 ) 21,549 a, b

Provision for Income Taxes 2,546 ( 316 ) 2,230 6,060 ( 643 ) 5,417 a, b

Net Income $ 7,177 $ ( 1,031 ) $ 6,146 $ 18,307 $ ( 2,175 ) $ 16,132

Income per share attributable to common stockholders:

Basic $ 0.23 $ ( 0.03 ) $ 0.20 $ 0.60 $ ( 0.07 ) $ 0.53

Diluted $ 0.23 $ ( 0.03 ) $ 0.20 $ 0.60 $ ( 0.07 ) $ 0.52

Weighted average common shares outstanding:

For the three months ended March 31, 2019

Basic 30,547 30,547 30,547 30,530 30,530 30,530

Diluted 30,824 30,824 30,824 30,731 30,731 30,731

For the three months ended June 30, 2019

(a) Understatement of cost of revenues and impacted balance sheet accounts.

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and an immaterial increase in net income.

For the six months ended June 30, 2019

(a) Understatement of cost of revenues and impacted balance sheet accounts.

As a result of the understatement of cost of revenues, the correction resulted in a $ 2.9 million increase in cost of revenues;

a $ 0.7 million decrease in provision for income taxes;

and a $ 2.2 million decrease in net income.

(b) Property, plant and equipment, net error correction.

The immaterial error correction of property, plant and equipment, net, resulted in a $ 0.1 million decrease in cost of revenues;

an immaterial increase in provision for income taxes;

and a $ 0.1 million increase in net income.

COMMERCIAL VEHICLE GROUP, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31, 2019

As Previously Reported

Restatement Adjustments

Restatement References

Net Income (Loss)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019

As Previously Reported Restatement Adjustments As Restated As Previously Reported Restatement Adjustments As Restated Restatement References

Net Income $ 7,177 $ ( 1,031 ) $ 6,146 $ 18,307 $ ( 2,175 ) $ 16,132 a, b

Other comprehensive income (loss):

2 unchanged sentences

Derivative instrument ( 17 ) — ( 17 ) 322 — 322

Other comprehensive income (loss)

Comprehensive income (loss)

For the three months ended March 31, 2019

Other comprehensive income 1,955 — 1,955 1,749 — 1,749

Comprehensive income $ 9,132 $ ( 1,031 ) $ 8,101 $ 20,056 $ ( 2,175 ) $ 17,881

For the three months ended June 30, 2019

(a) Understatement of cost of revenues and impacted balance sheet accounts.

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Refer to descriptions of the adjustment and its impact to net income above.

For the six months ended June 30, 2019

(a) Understatement of cost of revenues and impacted balance sheet accounts.

As a result of the understatement of cost of revenues, the correction resulted in a $ 2.2 million decrease in net income.

Refer to descriptions of the adjustments and their impacts to net income above.

(b) Property, plant and equipment, net error correction.

The immaterial error correction of property, plant and equipment, net, resulted in a $ 0.1 million increase in net income.

Refer to descriptions of the adjustment and its impact to net income above.

COMMERCIAL VEHICLE GROUP, INC.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2019

As Previously Reported

Restatement Adjustments

Restatement References

Six Months Ended June 30, 2019

As Previously Reported Restatement Adjustments As Restated Restatement References

Cash Flows from Operating Activities:

Net Income $ 18,307 $ ( 2,175 ) $ 16,132 a, b

Adjustments to reconcile net income to cash flows from operating activities:

Depreciation and amortization

Provision for doubtful accounts

Depreciation and amortization 7,058 ( 74 ) 6,984 b

Non-cash amortization of debt financing costs 685 — 685

Shared-based compensation expense 1,479 — 1,479

Deferred income taxes

Non-cash loss / (gain) on derivative contracts

Deferred income taxes 2,906 ( 643 ) 2,263 a, b

Non-cash loss on derivative contracts 1,823 — 1,823

Change in other operating items:

Accounts receivable ( 23,610 ) — ( 23,610 )

Prepaid expenses

Inventories ( 462 ) — ( 462 )

Prepaid expenses ( 5,491 ) 2,990 ( 2,501 ) a

Accounts payable 6,563 — 6,563

17 unchanged sentences

Unpaid purchases of property and equipment included in accounts payable $ 526 $ — $ 526

For the three months ended March 31, 2019

For the six months ended June 30, 2019

(a) Understatement of cost of revenues and impacted balance sheet accounts.

1 unchanged sentence

a $ 0.7 million decrease in deferred income tax;

and a $1.5 million decrease in change in prepaid expenses.

a $ 3.0 million decrease in change in prepaid expenses;

and a $ 0.1 million increase in purchases of property, plant and equipment.

(b) Property, plant and equipment, net error correction.

The immaterial error correction of property, plant and equipment, net, resulted in an immaterial increase in net income;

an immaterial decrease in depreciation expense;

The immaterial error correction of property, plant and equipment, net, resulted in a $ 0.1 million increase in net income;

a $ 0.1 million decrease in depreciation expense;

and an immaterial increase in deferred income tax.

Revenue Recognition

Our products include electrical wire harnesses, control panels and assemblies;

Our products include electrical wire harnesses, control panels, electro-mechanical and cable assemblies;

trim systems and components ("Trim");

cab structures and sleeper boxes;

seats and seating systems ("Seats");

and cab structures and sleeper boxes;

mirrors, wipers and controls.

and seats and seating systems ("Seats").

We sell these products into multiple geographic regions including North America, Europe and Asia-Pacific and to multiple customer end markets including MD/HD Truck OEMs, Bus OEMs, Construction OEMs, the aftermarket and other markets.

We sell these products into multiple geographic regions including North America, Europe and Asia-Pacific and to multiple customer end markets including MD/HD Truck OEMs, Construction OEMs, industrial, military, Bus OEMs, the aftermarket and other markets.

The nature, timing and uncertainty of recognition of revenue and associated cash flows across the varying product lines, geographic regions and customer end markets is substantially consistent.

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Our payment terms vary by customer.

None of the Company's contracts as of March 31, 2020 , contained a significant financing component.

None of the Company's contracts as of June 30, 2020, contained a significant financing component.

We typically do not have multiple performance obligations requiring us to allocate a transaction price.

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Our customers typically do not have a general right of return for our products.

We had outstanding customer accounts receivable, net of allowances, of $123.3 million as of March 31, 2020 and $115.1 million as of December 31, 2019 .

We had outstanding customer accounts receivable, net of allowances, of $ 102.8 million as of June 30, 2020 and $ 115.1 million as of December 31, 2019.

We generally do not have other assets or liabilities associated with customer arrangements.

In general, we do not make significant judgments or have variable consideration that impact our recognition of revenue.

In general, we do not make significant judgments or have material variable consideration that impact our recognition of revenue.

Refer to Note 16 for revenue disclosures by reportable segments.

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Level 3 - Significant unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

Our financial instruments consisted of cash, accounts receivable, accounts payable, accrued liabilities and our revolving credit facility.

Our financial instruments consisted of cash, accounts receivable, accounts payable, accrued liabilities, pension assets and liabilities and our 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 the interest cost associated with such instruments.

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The fair values of our derivative assets and liabilities and contingent consideration measured on a recurring basis are categorized as follows:

March 31, 2020

December 31, 2019

Derivative assets

Foreign exchange contract 1

June 30, 2020 December 31, 2019

Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3

Derivative assets Foreign exchange contract 1

$ — $ — $ — $ — $ 464 $ — $ 464 $ —

Interest rate swap agreement 2

Derivative liabilities

Foreign exchange contract 3

$ 1,308 $ — $ 1,308 $ — $ 150 $ — $ 150 $ —

Derivative liabilities Foreign exchange contract 3

$ 1,582 $ — $ 1,582 $ — $ — $ — $ — $ —

Interest rate swap agreement 3

Earnout liability

Contingent consideration 4

Derivative equity

Foreign exchange contract 5

$ 2,882 $ — $ 2,882 $ — $ 995 $ — $ 995 $ —

Earnout liability Contingent consideration 4

$ 8,300 $ — $ — $ 8,300 $ 4,700 $ — $ — $ 4,700

Derivative equity Foreign exchange contract 5

$ 1,210 $ — $ 1,210 $ — $ 464 $ — $ 464 $ —

1 Presented in the Condensed Consolidated Balance Sheets in other current assets and based on observable market transactions of spot and forward rates.

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4 Presented in the Condensed Consolidated Balance Sheets in accrued liabilities and other long term liabilities and based on a Monte Carlo valuation model.

Presented in Condensed Consolidated Balance Sheets in accumulated other comprehensive income and based on observable market transactions of spot and forward rates.

5 Presented in the Condensed Consolidated Balance Sheets in accumulated other comprehensive income and based on observable market transactions of spot and forward rates.

The fair value of long-term debt obligations is based on a fair value model utilizing observable inputs.

1 unchanged sentence

The carrying amounts and fair values of our long-term debt obligations are as follows:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Amount Fair Value Carrying

Amount Fair Value

Term loan and security agreement 1

Presented in the Condensed Consolidated Balance Sheets as the current portion of long-term debt of $3.3 million and long-term debt of $152.3 million as of March 31, 2020 , and current portion of long-term debt of $3.3 million and long-term debt of $153.1 million as of December 31, 2019 .

$ 154,173 $ 148,589 $ 156,384 $ 157,983

1 Presented in the Condensed Consolidated Balance Sheets as the current portion of long-term debt of $ 2.4 million and long-term debt of $ 151.7 million as of June 30, 2020, and current portion of long-term debt of $ 3.3 million and long-term debt of $ 153.1 million as of December 31, 2019.

Long Lived Assets Impairment.

For the quarter ended March 31, 2020 , an impairment charge of $0.6 million was recognized for a corporate asset and was based on the estimated selling price, less selling costs, of $0.5 million .

For the quarter ended June 30, 2020, an impairment charge of $ 0.2 million was recognized for the corporate aircraft and was based on the estimated selling price, less selling costs, of $ 0.3 million, which is classified as Held for Sale and presented in the Condensed Consolidated Balance Sheet in other current assets.

The impairment charge is presented in impairment expense in the Condensed Consolidated Statements of Operations.

Given the limited market comparable values of the asset, it is classified as Level 2.

Additionally, in the quarter ended March 31, 2020 , we recorded a $0.4 million impairment associated with an operating lease right-of-use asset and an impairment of property, plant and equipment of $0.7 million in the Electrical Systems segment.

There were no fair value measurements of our long-lived assets and definite-lived intangible assets measured on a non-recurring basis as of March 31, 2019 .

Goodwill Impairment.

As a result of the Company's market capitalization maintaining a value less than the carrying value of its equity, the Company determined it had an impairment indicator.

Accordingly, we calculated the estimated fair value of the goodwill reporting units within the Electrical Systems and Global Seating Segments by discounting the estimated operating cash flows of each reporting unit.

We then compared these estimated fair values to the net carrying values at March 31, 2020 and, as a result, recognized a $27.1 million impairment charge to goodwill.

Given the subjectivity of the inputs into the fair value estimate of goodwill, the asset is classified as Level 3.

The Company determined it had an impairment indicator in the quarter ended June 30, 2020 for one asset group within the Electrical Systems Segment.

As a result, we performed a Step 1 undiscounted cash flow analysis in accordance with ASC 360, Property, Plant and Equipment, which resulted in estimated undiscounted cash flows exceeding the carrying value of the asset group.

No other non-recurring fair value measurements were assessed during the quarter ended June 30, 2020.

Stockholders’ Equity

Common Stock — Our authorized capital stock consists of 60,000,000 shares of common stock with a par value of $ 0.01 per share;

of which, 30,847,269 and 30,801,255 shares were issued and outstanding as of March 31, 2020 and December 31, 2019 , respectively.

of which, 30,985,669 and 30,801,255 shares were issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.

Preferred Stock — Our authorized capital stock also consists of 5,000,000 shares of preferred stock with a par value of $ 0.01 per share;

no preferred shares were outstanding as of March 31, 2020 and December 31, 2019 .

no preferred shares were outstanding as of June 30, 2020 and December 31, 2019.

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.

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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, 2020 and 2019 includes the effect of potential common shares issuable when dilutive, and is as follows:

Three Months Ended March 31,

Diluted earnings per share for the three and six months ended June 30, 2020 and 2019 includes the effect of potential common shares issuable when dilutive, and is as follows:

Three Months Ended June 30, Six Months Ended June 30,

(as restated) 2020 2019

(as restated)

Net (loss) income $ ( 12,497 ) $ 6,146 $ ( 37,091 ) $ 16,132

Weighted average number of common shares outstanding (in '000s) 30,890 30,547 30,848 30,530

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See Note 3 for details.

There were no outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per share for the three months ended March 31, 2020 and 190,803 outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per shares for the three months ended March 31, 2019 .

There were 396 thousand outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per share for the three months ended June 30, 2020 and no outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per shares for the three months ended June 30, 2019.

There were 286 thousand outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per share for the six months ended June 30, 2020 and 18 thousand outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per shares for the six months ended June 30, 2019.

Dividends — We have not declared or paid any cash dividends in the past.

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The changes in stockholder's equity are as follows:

Three Months Ended March 31, 2020

Additional Paid In Capital

Total CVG Stockholders’

Shares (in thousands)

Six Months Ended June 30, 2020

Common Stock Treasury

Stock Additional Paid In Capital Retained

Deficit Accumulated

Loss Total CVG Stockholders’

Shares (in thousands) Amount

Balance - December 31, 2019 30,801 $ 323 $ ( 11,230 ) $ 245,852 $ ( 60,307 ) $ ( 45,950 ) $ 128,688

Share-based compensation expense 46 — — 862 — — 862

Total comprehensive loss

Total comprehensive income — — — — ( 24,594 ) ( 8,030 ) ( 32,624 )

Balance - March 31, 2020 30,847 $ 323 $ ( 11,230 ) $ 246,714 $ ( 84,901 ) $ ( 53,980 ) $ 96,926

Three Months Ended March 31, 2019

Paid In Capital

Total CVG Stockholders’

Shares (in thousands)

December 31, 2018 (as restated)

Share-based compensation expense 138 ( 14 ) — 868 — — 854

Total comprehensive income — — — — ( 12,497 ) 2,578 ( 9,919 )

Balance - June 30, 2020 30,985 $ 309 $ ( 11,230 ) $ 247,582 $ ( 97,398 ) $ ( 51,402 ) $ 87,861

Six Months Ended June 30, 2019

Common Stock Treasury

Stock Additional

Paid In Capital Retained

Loss Total CVG Stockholders’

Shares (in thousands) Amount

Balance - December 31, 2018 (as restated) 30,513 $ 318 $ ( 10,245 ) $ 243,007 $ ( 76,013 ) $ ( 47,471 ) $ 109,596

Share-based compensation expense — — — 761 — — 761

Cumulative effect of adoption of Topic 842 — — — — ( 72 ) — ( 72 )

Total comprehensive income (as restated)

March 31, 2019 (as restated)

Total comprehensive income — — — — 9,986 ( 206 ) 9,780

Balance - March 31, 2019 (as restated) 30,513 $ 318 $ ( 10,245 ) $ 243,768 $ ( 66,099 ) $ ( 47,677 ) $ 120,065

Share-based compensation expense 68 1 — 718 — — 719

Total comprehensive income — — — — 6,146 1,955 8,101

Balance - June 30, 2019 (as restated) 30,581 $ 319 $ ( 10,245 ) $ 244,486 $ ( 59,953 ) $ ( 45,722 ) $ 128,885

The Company has adjusted certain prior period amounts for the restatement and immaterial corrections of error.

See Note 3 for details.

Shareholder Rights Plan

On June 23, 2020, the Company’s Board of Directors adopted a limited duration rights plan and declared a dividend distribution of one right (each, a “Right” and together with all other such rights distributed or issued pursuant thereto, the “Rights”) for each outstanding share of common stock, par value $ 0.01 , of the Company, as of July 5, 2020, the record date for such dividend.

Each holder of Common Stock as of the record date will receive a dividend of one Right per share of Common Stock.

The Rights will become exercisable only if a person or persons acquires beneficial ownership of 10 % or more of the Company's outstanding common stock, or 15 % in the case of certain passive investors.

In the event that the Rights become exercisable, each holder of Rights (other than the person or group triggering the rights plan) will be entitled to purchase, at the Right’s

exercise price, a number of shares of our common stock having a market value of twice the Right’s exercise price.

The rights plan will expire on June 24, 2021 unless earlier terminated or amended by our Board of Directors.

Share-Based Compensation

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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 outstanding restricted stock grants as of March 31, 2020 :

Shares Granted

Unvested Shares

Vesting Schedule

The following table summarizes information about outstanding restricted stock grants as of June 30, 2020:

Grant Shares Granted

(in thousands) Unvested Shares

(in thousands) Vesting Schedule Unearned

Compensation Remaining

Period to Vesting (in

3 equal annual installments commencing on October 20, 2018

3 equal annual installments commencing on October 20, 2019

Shares granted to independent board members that fully vest as of May 16, 2020

3 equal annual installments commencing on October 20, 2020

October 2017 303 53 3 equal annual installments commencing on October 20, 2018 $ 168.1 4

October 2018 382 136 3 equal annual installments commencing on October 20, 2019 $ 617.2 16

October 2019 12 12 3 equal annual installments commencing on October 20, 2020 $ 63.4 28

January 2020 149 137 3 equal annual installments commencing on October 20, 2020 $ 626.6 28

April 2020 646 546 3 equal annual installments commencing on December 31, 2022 $ 1,105.8 30

June 2020 210 210 Fully vests as of December 12, 2021 $ 525.6 17

June 2020 380 380 Fully vests as of June 12, 2022 $ 965.0 23

June 2020 185 185 Fully vests as of June 12, 2021 $ 427.1 11

We have elected to report forfeitures as they occur as opposed to estimating future forfeitures in our share-based compensation expense.

The following table summarizes information about the non-vested restricted stock grants for the three months ended March 31, 2020 and 2019 :

Three Months Ended March 31,

The following table summarizes information about the non-vested restricted stock grants for the six months ended June 30, 2020 and 2019:

Six Months Ended June 30,

(in thousands) Weighted-

Fair Value Shares

(in thousands) Weighted-

Nonvested at beginning of the period 403 $ 7.72 761 $ 7.56

Nonvested at March 31

Granted 1,575 2.86 75 7.60

Vested ( 184 ) 5.79 ( 68 ) 8.38

Forfeited ( 135 ) 6.03 ( 20 ) 7.48

Nonvested at June 30 1,659 $ 3.46 748 $ 7.49

Performance Awards

Awards, defined as cash, shares or other awards, may be granted to employees under the Amended and Restated Commercial Vehicle Group, Inc.

2014 Equity Incentive Plan (the “2014 EIP”).

The cash award is earned and payable based upon the Company’s relative Total Shareholder Return in terms of ranking as compared to the Peer Group over a three -year period (the “Performance Period”).

2014 Equity Incentive Plan (the “2014 EIP”) and the Commercial Vehicle Group 2020 Equity Incentive Plan (the “2020 Plan”).

The cash awards that have been granted will be earned and payable based upon the Company’s relative Total Shareholder Return in terms of ranking as compared to the Peer Group over a three-year period (the “Performance Period”).

Total Shareholder Return is determined by the percentage change in value (positive or negative) over the applicable measurement period as measured by dividing (A) the sum of (i) the cumulative value of dividends and other distributions paid on the Common Stock for the applicable measurement period, and (ii) the difference (positive or negative) between each such company’s starting stock price and ending stock price, by (B) the starting stock price.

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These grants are accounted for as cash settlement awards for which the fair value of the award fluctuates based on the change in Total Shareholder Return in relation to the Peer Group.

The following table summarizes performance awards granted in the form of cash awards under the 2014 EIP in November 2018 and 2017 :

Adjusted Award Value at

March 31, 2020

Vesting Schedule

Remaining Periods (in Months) to Vesting

November 2017

November 2020

November 2018

November 2021

Compensation benefit of $ 0.6 million and compensation expense of $ 0.3 million was recognized for the three months ended March 31, 2020 and 2019 , respectively.

Unrecognized compensation expense was $0.6 million and $2.2 million as of March 31, 2020 and 2019 , respectively.

The following table summarizes performance awards granted in the form of cash awards under the 2014 EIP in January 2020, November 2018 and 2017:

Grant Date Grant Amount Adjustments Forfeitures Adjusted Award Value at

June 30, 2020 Vesting Schedule Remaining Periods (in Months) to Vesting

November 2017 $ 1,584 $ ( 281 ) $ ( 1,022 ) $ 281 November 2020 4

November 2018 1,590 ( 547 ) ( 1,043 ) — November 2021 16

January 2020 2,108 ( 6 ) ( 781 ) 1,321 December 2022 29

$ 5,282 $ ( 834 ) $ ( 2,846 ) $ 1,602

Compensation benefit of $ 0.5 million and compensation expense of $ 0.4 million was recognized for the three months ended June 30, 2020 and 2019, respectively.

Compensation benefit of $ 1.1 million and compensation expense of $ 0.7 million was recognized for the six months ended June 30, 2020 and 2019, respectively.

Unrecognized compensation expense was $ 1.1 million and $ 1.8 million as of June 30, 2020 and 2019, respectively.

Accounts Receivable

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The allowance for credit losses is used to record the estimated risk of loss related to our customers’ inability to pay.

This allowance is maintained at a level that we consider appropriate based on factors that affect collectability, such as the financial health of our customers, historical trends of charge-offs and recoveries and current economic market conditions.

As we monitor our receivables, we identify customers that may have payment problems, and we adjust the allowance accordingly, with the offset to selling, general and administrative expense.

Account balances are charged off against the allowance when recovery is considered remote.

The Company's allowance for credit losses as of March 31, 2020 and December 31, 2019 was $0.4 million .

The following is a rollforward of the allowances for credit losses related to accounts receivable for the three months ended March 31, 2020 by reportable segment:

Three Months Ended March 31, 2020

Electrical Systems

The Company's allowance for credit losses was $ 0.6 million as of June 30, 2020 and $ 0.4 million as of December 31, 2019.

The following is a rollforward of the allowances for credit losses related to accounts receivable for the six months ended June 30, 2020 by reportable segment:

Six Months Ended June 30, 2020

Electrical Systems Global

Seating Total

Balance - Beginning of period $ 49 $ 383 $ 432

Provisions 60 177 237

Utilizations ( 29 ) ( 30 ) ( 59 )

Currency translation adjustment — ( 15 ) ( 15 )

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Inventories consisted of the following:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Raw materials $ 49,663 $ 57,742

1 unchanged sentence

Finished goods 9,688 12,518

$ 70,711 $ 82,872

Inventories on-hand are regularly reviewed and, when necessary, provisions for excess and obsolete inventory are recorded based primarily on our estimated production requirements, which reflect expected market volumes.

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Goodwill represents the excess of acquisition purchase price over the fair value of net assets acquired.

We review goodwill for impairment annually, initially utilizing a qualitative assessment in the second fiscal quarter and whenever events or changes in circumstances indicate it is more likely than not that the carrying value may not be recoverable.

Goodwill of $4.8 million was attributable to the Global Seating Segment and $22.3 million to the Electrical Systems Segment.

As disclosed in Note 20, the Company acquired substantially all of the assets and certain liabilities of First Source Electronics, LLC (“FSE”) on September 17, 2019 .

In the first quarter of 2020 we reduced the value of the goodwill associated with the purchase of FSE by $0.5 million as a result of the finalization of the purchase price for FSE.

As a result of the Company's market capitalization maintaining a value less than the carrying value of its equity, the Company determined it had an impairment indicator.

During the first quarter 2020, as a result of the Company's market capitalization maintaining a value less than the carrying value of its equity, the Company determined it had an impairment indicator.

We then compared these estimated fair values to the net carrying values at March 31, 2020 and, as a result, recognized $27.1

million impairment of goodwill.

We then compared these estimated fair values to the net carrying values at March 31, 2020 and, as a result, recognized $ 27.1 million impairment of goodwill, which represented the full value.

The impairment charge is presented in impairment expense in the Condensed Consolidated Statements of Operations.

The changes in the carrying amounts of goodwill are as follows:

March 31, 2020

December 31, 2019

Beginning of the period

June 30, 2020 December 31, 2019

Balance - Beginning of the period $ 27,816 $ 7,576

Finalization of FSE Purchase Accounting ( 537 ) 20,365

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Currency translation adjustment ( 205 ) ( 125 )

Balance - Ending

Balance - Ending of the period $ — $ 27,816

Our definite-lived intangible assets were comprised of the following:

March 31, 2020

December 31, 2019

Trademarks/Tradenames

Customer relationships

Technical know-how

Covenant not to compete

The aggregate intangible asset amortization expense was approximately $0.9 million for the three months ended March 31, 2020 and $0.3 million for the three months ended March 31, 2019 .

June 30, 2020 December 31, 2019

Amount Accumulated

Amortization Net

Amount Accumulated

Amortization Net

Trademarks/Tradenames 22 years $ 11,517 $ ( 4,443 ) $ 7,074 $ 11,553 $ ( 4,276 ) $ 7,277

Customer relationships 15 years 14,700 ( 6,930 ) 7,770 15,025 ( 6,574 ) 8,451

Technical know-how 5 years 9,790 ( 1,550 ) 8,240 9,790 ( 571 ) 9,219

Covenant not to compete 5 years 330 ( 52 ) 278 330 ( 19 ) 311

$ 36,337 $ ( 12,975 ) $ 23,362 $ 36,698 $ ( 11,440 ) $ 25,258

The aggregate intangible asset amortization expense was approximately $ 0.9 million for the three months ended June 30, 2020 and $ 0.3 million for the three months ended June 30, 2019.

The aggregate intangible asset amortization expense was approximately $ 1.7 million and $ 0.6 million for the six months ended June 30, 2020 and 2019.

The estimated intangible asset amortization expense for the fiscal year ending December 31, 2020 and for each of the three succeeding years is expected to be $ 3.4 million and $ 2.8 million in 2024.

The Company leases office, warehouse and manufacturing space and certain equipment under non-cancelable operating lease agreements that generally require us to pay maintenance, insurance, taxes and other expenses in addition to annual rental fees.

Our leases have remaining lease terms of one year to nine years, some of which include options to extend the leases for up to five years, and some of which include options to terminate the leases within one year.

Our leases have remaining lease terms of one year to nine years , some of which include options to extend the leases for up to five years , and some of which include options to terminate the leases within nine years .

The components of lease expense are as follows:

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Operating lease cost $ 2,562 $ 1,877 $ 5,028 $ 3,447

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Short-term lease cost 1

1,037 1,773 2,066 3,764

Total lease expense $ 3,711 $ 3,745 $ 7,307 $ 7,401

1 unchanged sentence

Supplemental cash flow information related to leases is as follows:

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:

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Supplemental balance sheet information related to leases is as follows:

Balance Sheet Location

March 31, 2020

December 31, 2019

Balance Sheet Location June 30, 2020 December 31, 2019

Operating Leases

Right-of-use assets, net

Operating lease right-of-use assets, net

Current liabilities

Current operating lease liabilities

Non-current liabilities

Operating lease liabilities

Right-of-use assets, net Operating lease right-of-use assets, net $ 31,172 $ 34,960

Current liabilities Current operating lease liabilities 8,274 7,620

Non-current liabilities Operating lease liabilities 25,176 29,414

Total operating lease liabilities $ 33,450 $ 37,034

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Accumulated depreciation ( 479 ) ( 343 )

Right-of-use assets, net

Other assets, net

Current liabilities

Accrued liabilities and other

Non-current liabilities

Other long-term liabilities

Right-of-use assets, net Other assets, net 935 792

Current liabilities Accrued liabilities and other 329 354

Non-current liabilities Other long-term liabilities 538 398

Total finance lease liabilities $ 867 $ 752

Weighted Average Remaining Lease Term

Operating leases

Finance leases

Operating leases 5.0 years 5.0 years

Finance leases 3.7 years 2.8 years

Weighted Average Discount Rate

1 unchanged sentence

Finance leases 5.3 % 7.2 %

Note that all new Financing leases added during the six months ended June 30, 2020 were executed before the loan amendment discussed in Note 14, or May 11, 2020.

Right-of-use Assets Impairment.

As disclosed in Note 5, the impairment of an operating lease right-of-use asset of $0.4 million was recorded for the first quarter ended March 31, 2020 .

The impairment of an operating lease right-of-use asset of $ 0.4 million was recorded for the first quarter ended March 31, 2020.

The impairment charge is presented in impairment expense in the Condensed Consolidated Statements of Operations.

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Anticipated future lease costs, which are based in part on certain assumptions to approximate minimum annual rental commitments under non-cancelable leases, are as follows:

Year Ending December 31,

Year Ending December 31, Operating Financing Total

$ 5,506 $ 196 $ 5,702

2021 9,679 304 9,983

2022 8,674 186 8,860

2023 5,157 122 5,279

2024 4,015 78 4,093

Thereafter 7,205 43 7,248

Total lease payments 40,236 929 41,165

1 unchanged sentence

Present value of lease liabilities $ 33,450 $ 867 $ 34,317

Excluding the three months ended March 31, 2020 .

1 Excluding the six months ended June 30, 2020.

Commitments and Contingencies

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Our policy is to record provisions for estimated future customer warranty costs based on historical trends and for specific claims.

These amounts, as they relate to the years ended March 31, 2020 and 2019 , are included within accrued liabilities and other in the accompanying Condensed Consolidated Balance Sheets.

The following represents a summary of the warranty provision for the three months ended March 31, 2020 :

These amounts, as they relate to the period ended June 30, 2020 and 2019, are included within accrued liabilities and other in the accompanying Condensed Consolidated Balance Sheets.

The following represents a summary of the warranty provision for the six months ended June 30, 2020:

Balance - December 31, 2019 $ 3,082

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Currency translation adjustment ( 29 )

Balance - March 31, 2020

Balance - June 30, 2020 $ 2,539

Leases - As disclosed in Note 12, we lease office, warehouse and manufacturing space and certain equipment under non-cancelable operating lease agreements that generally require us to pay maintenance, insurance, taxes and other expenses in addition to annual rental fees.

As of March 31, 2020 , our equipment leases did not provide for any material guarantee of a specified portion of residual values.

As of June 30, 2020, our equipment leases did not provide for any material guarantee of a specified portion of residual values.

Guarantees - Costs associated with guarantees are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated.

1 unchanged sentence

where no amount within a range of estimates is more likely, the minimum is accrued.

As of March 31, 2020 and 2019 , we had no such guarantees.

As of June 30, 2020 and 2019, we had no such guarantees.

Litigation - We are subject to various legal proceedings and claims arising in the ordinary course of business, including but not limited to workers' compensation claims, OSHA investigations, employment disputes, unfair labor practice charges, customer and supplier disputes, service provider disputes, product liability claims, intellectual property disputes, and environmental claims arising out of the conduct of our businesses and examinations by the Internal Revenue Service.

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Year Ending December 31,

2023 $ 148,581

Thereafter $ —

Debt and Credit Facilities

Debt consisted of the following:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Term loan and security agreement 1, 2

$ 154,173 $ 156,384

Presented in the Condensed Consolidated Balance Sheets as current portion of long-term debt of $ 2.4 million, net of current prepaid debt financing costs of $ 1.4 million and current original issue discount of $ 0.6 million;

and long-term debt of $152.3 million , net of long-term prepaid debt financing costs of $1.0 million and long-term original issue discount $1.1 million as of March 31, 2020 .

and long-term debt of $ 151.7 million, net of long-term prepaid debt financing costs of $ 2.4 million and long-term original issue discount $ 1.0 million as of June 30, 2020.

Presented in the Condensed Consolidated Balance Sheets as current portion of long-term debt of $ 3.3 million, net of current prepaid debt financing costs of $ 0.5 million and current original issue discount of $ 0.6 million;

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On April 12, 2017, the Company entered into a $ 175.0 million senior secured term loan credit facility, maturing on April 12, 2023, pursuant to a term loan and security agreement (the “TLS Agreement”), the terms of which are described in Note 9 in our 2019 Form 10-K.

The unamortized deferred financing fees of $1.6 million and original issue discount of $1.7 million are netted against the aggregate book value of the outstanding debt resulting in a balance of $155.6 million as of March 31, 2020 and are being amortized over the remaining life of the agreement.

The TLS Agreement contains customary restrictive, financial maintenance and reporting covenants that are described in Note 9 in our 2019 Form 10-K.

We were in compliance with the covenants as of March 31, 2020 .

On May 11, 2020, the Company entered into Amendment No.

1 of the TLS Agreement, the terms of which are discussed in Note 22.

The unamortized deferred financing fees of $ 3.8 million and original issue discount of $ 1.5 million are netted against the aggregate book value of the outstanding debt resulting in a balance of $ 154.2 million as of June 30, 2020 and are being amortized over the remaining life of the agreement.

The TLS Agreement contains customary restrictive, financial maintenance and reporting covenants that are described in Note 12 in our Q1 2020 Form 10-Q.

We were in compliance with the covenants as of June 30, 2020.

Revolving Credit Facility

On September 18, 2019, the Company entered into an amendment of the Third Amended and Restated Loan and Security Agreement (the “Revolving Loan Agreement”), dated as of April 12, 2017, the terms of which are described in Note 9 in our 2019 10-K and which governs the Company’s asset based revolving credit facility (the “Revolving Credit Facility”).

The Revolving Credit Facility matures on April 12, 2022.

The Amendment amends the terms of the Revolving Credit Facility to entitle the Company and the other named borrowers thereunder (subject to the terms and conditions described therein) to request loans and other financial accommodations in an amount equal to the lesser of $ 90.0 million and a borrowing base composed of accounts receivable and inventory (such facility, the “Tranche A Facility”).

Of the $ 90.0 million, $ 7.0 million shall be available as a first-in, last-out facility (the “Tranche B Facility”) at a 100 basis points premium, as reflected in the table below.

The applicable margin, which is set at Level III as of March 31, 2020 , is based on average daily availability under the revolving credit facility as follows:

Average Daily Availability

Revolver Loans

As amended, loans outstanding under the Revolving Loan Agreement accrue interest at a per annum rate based on (at the Company’s election) the base rate or the LIBOR rate plus a margin determined by reference to availability under the Revolving Credit Facility as follows, subject to a LIBOR floor of 1.00 %.

At June 30, 2020 we had 15.0 million of borrowings under the revolving credit facility, outstanding letters of credit were $ 1.6 million and we had availability of $ 43.2 million.

The unamortized deferred financing fees associated with the revolving credit facility were $ 0.5 million and $ 0.6 million as of June 30, 2020 and December 31, 2019, respectively, and are being amortized over the remaining life of the agreement.

At December 31, 2019, we did no t have borrowings under the revolving credit facility;

and we had outstanding letters of credit of $ 1.6 million.

The Revolving Loan Agreement contains customary restrictive, financial maintenance and reporting covenants that are described in Note 9 in our 2019 Form 10-K and as noted below.

The Company was in compliance with all applicable covenants as of June 30, 2020.

Term Loan and Revolving Credit Amendments

On May 11, 2020, the Company and certain of its subsidiaries, as guarantors or co-borrowers, as applicable, entered into (i) an Amendment No.

1 (the “Term Amendment”), which Term Amendment amends the TLS Agreement, dated as of April 12, 2017, with Bank of America, N.A.

as agent, and the lenders party thereto, which agreement governs the Company’s term loan credit facility and (ii) an Amendment No.

2 (the “Revolving Amendment”), which Revolving Amendment amends the Revolving Credit Facility, dated as of April 12, 2017, with Bank of America, N.A., as agent, and certain financial institutions as lenders, which agreement governs the Company’s asset-based revolving credit facility.

temporarily suspend the leverage ratio covenant through the fiscal quarter ending December 31, 2020 and to reset the leverage ratio covenant levels for quarterly periods ended on or after March 31, 2021.

In addition, amendments were made to certain restrictive covenants, the effect of which are to limit the Company's ability to incur additional debt, grant liens, repurchase the Company's stock and to issue dividends or make acquisitions.

As amended, through September 30, 2021, loans outstanding under the Term Loan Agreement accrue interest at a par annum rate based on (at the Company's election) the Base Rate plus 9.50 % or the LIBOR rate plus 10.50 %.

The Company has the option of setting aside the incremental 4.5 % of interest accrual as Payment In Kind and adding to the outstanding principal balance.

Commencing October 1, 2021, loans under the Term Loan Agreement will accrue interest at a par annum rate based on (at the Company's election) the Base Rate plus 5.00 % or the LIBOR rate plus 6.00 %.

The Term Loan Agreement, as amended, includes a hard call premium on repayments of the term loans outstanding thereunder of 2 % on amounts repaid through June 30, 2021 and 1 % on amounts repaid through June 30, 2022, subject to certain exceptions.

The Revolving Amendment amends the terms of the Revolving Loan Agreement to align certain of the restrictive covenants with the restrictive covenants set forth in the Term Loan Agreement, as amended.

Level Average Daily Availability Tranche A

Loans Tranche A

Revolver Loans Tranche B

Loans Tranche B

Revolver Loans

III ≥ $ 30,000,000

1.00 % 2.00 % 2.00 % 3.00 %

> $15,000,000 but < $30,000,000

II > $ 15,000,000 but < $ 30,000,000

1.25 % 2.25 % 2.25 % 3.25 %

At March 31, 2020 we had 15.0 million of borrowings under the revolving credit facility, outstanding letters of credit were $1.6 million and we had availability of $56.1 million .

The unamortized deferred financing fees associated with the revolving credit facility were $0.5 million and $0.6 million as of March 31, 2020 and December 31, 2019 , respectively, and are being amortized over the remaining life of the agreement.

At December 31, 2019 , we did not have borrowings under the revolving credit facility;

and we had outstanding letters of credit of $1.6 million .

The Revolving Loan Agreement contains customary restrictive, financial maintenance and reporting covenants that are described in Note 9 in our 2019 Form 10-K.

The Company was in compliance with all applicable covenants as of March 31, 2020 .

On May 11, 2020, the Company entered into Amendment No.

2 to the Revolving Credit Facility, the terms of which are discussed in Note 22.

I ≤ $ 15,000,000

1.50 % 2.50 % 2.50 % 3.50 %

The Revolving Loan Agreement, as amended, provides for an unused line fee of 0.35 % on undrawn amounts under the Revolving Credit Facility.

The Company determines its estimated annual effective tax rate at the end of each interim period based on estimated pre-tax income (loss) and facts known at that time.

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Accordingly, if the Company is unable to reliably estimate its annual effective tax rate the actual effective tax rate for the year-to-date period may be the best estimate of the annual effective tax rate.

For the three months ended March 31, 2020, we computed our $7.3 million income tax benefit based on our year-to-date actual effective tax rate as we were unable to reliably estimate our annual effective tax rate due the to uncertainty of the impact of the COVID-19 pandemic on our full year taxable income.

For the three months and six months ended June 30, 2020, we computed our $ 3.1 million and $ 10.4 million income tax benefit, respectively, based on our year-to-date actual effective tax rate as we were unable to reliably estimate our annual effective tax rate due to the uncertainty of the impact of the COVID-19 pandemic on our full year income (loss).

We file federal income tax returns in the U.S.

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In our major foreign jurisdictions including China, Czech Republic, Mexico and the United Kingdom, our income tax filings are generally subject to examination for three to five years.

As of March 31, 2020 and December 31, 2019 , the Company had $0.9 million , in unrecognized tax benefits related to U.S.

As of June 30, 2020 and December 31, 2019, the Company had $ 0.9 million, in unrecognized tax benefits related to U.S.

federal, state and foreign jurisdictions which may impact our effective tax rate, if recognized.

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We accrue penalties and interest related to unrecognized tax benefits through income tax expense.

Included in the unrecognized tax benefits is $0.4 million of interest and penalties as of March 31, 2020 and December 31, 2019 .

Included in the unrecognized tax benefits is $ 0.4 million of interest and penalties as of June 30, 2020 and December 31, 2019.

We are not aware of any events that could occur within the next twelve months that would have a material impact on the amount of unrecognized tax benefits.

At March 31, 2020 , due to cumulative losses and other factors, we continue to carry valuation allowances against certain deferred tax assets, primarily in the United Kingdom and Luxembourg.

At June 30, 2020, due to cumulative losses and other factors, we continue to carry valuation allowances against certain deferred tax assets, primarily in the United Kingdom and Luxembourg.

Additionally, we continue to carry valuation allowances related to certain state deferred tax assets that we believe are more likely than not to expire before they can be utilized.

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Segment Reporting

As disclosed in Note 12 of our 2019 Form 10-K, in the year ended December 31, 2018 , our operating segments are Electrical Systems and Global Seating.

The following tables present segment revenues, gross profit, selling, general and administrative expenses, depreciation and amortization expense, impairment expense, operating income, capital expenditures and other items for the three months ended March 31, 2020 and 2019 :

Three Months Ended March 31, 2020

As disclosed in Note 12 of our 2019 Form 10-K, following a strategic reorganization of our operations, our operating and reportable segments are Electrical Systems and Global Seating.

Three Months Ended June 30, 2020

Systems Global

Seating Corporate/

External Revenues $ 73,498 $ 53,398 $ — $ 126,896

Intersegment Revenues 712 464 ( 1,176 ) —

Total Revenues $ 74,210 $ 53,862 $ ( 1,176 ) $ 126,896

Gross Profit $ 1,144 $ 5,345 $ ( 14 ) $ 6,475

Selling, General & Administrative Expenses 6,580 3,683 5,721 15,984

Amortization Expense 729 127 — 856

Impairment Expense $ — $ — $ 150 $ 150

Operating Loss $ ( 6,165 ) $ 1,535 $ ( 5,885 ) $ ( 10,515 )

Capital Expenditures, Depreciation Expense and Other Items:

Capital Expenditures $ 642 $ 288 $ 64 $ 994

Depreciation Expense $ 2,176 $ 1,054 $ 499 $ 3,729

Other Items 1

$ 5,447 $ 546 $ 412 $ 6,405

Other Items include costs associated with restructuring activities, including employee severance and retention costs, and changes in contingent consideration.

Three Months Ended June 30, 2019 (as restated)

Electrical Systems 1

Global Seating

Seating Corporate/ Other 1

External Revenues $ 139,089 $ 104,101 $ — $ 243,190

1 unchanged sentence

Total Revenues $ 141,947 $ 105,276 $ ( 4,033 ) $ 243,190

Gross Profit $ 17,761 $ 14,686 $ ( 11 ) $ 32,436

Selling, General & Administrative Expenses

3,676 5,177 7,395 16,248

Amortization Expense 186 136 — 322

Operating Income $ 13,899 $ 9,373 $ ( 7,406 ) $ 15,866

Capital Expenditures and Depreciation Expense:

Capital Expenditures $ 5,837 $ 806 $ 773 $ 7,416

Depreciation Expense $ 1,317 $ 1,065 $ 600 $ 2,982

The Company has adjusted certain prior period amounts for the restatement and immaterial corrections of error.

See Note 3 for details.

Six Months Ended June 30, 2020

System Global

Seating Corporate/

External Revenues $ 184,665 $ 129,336 $ — $ 314,001

Intersegment Revenues 1,643 506 ( 2,149 ) —

Total Revenues $ 186,308 $ 129,842 $ ( 2,149 ) $ 314,001

Gross Profit $ 12,090 $ 14,714 $ ( 26 ) $ 26,778

Selling, General & Administrative Expenses 10,531 8,475 14,077 33,083

Amortization Expense 1,458 258 — 1,716

Impairment Expense $ 23,415 $ 4,809 $ 793 $ 29,017

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Other Items 1

Other items include costs associated with restructuring activities, including employee severance and retention costs, building repairs, and costs to transfer equipment.

Three Months Ended March 31, 2019 (as restated)

$ 5,447 $ 677 $ 452 $ 6,576

Other Items include costs associated with restructuring activities, including employee severance and retention costs, changes in contingent consideration, building repairs, and costs to transfer equipment.

Six Months Ended June 30, 2019 (as restated)

Electrical Systems 1

Seating Corporate/ Other 1

External Revenues $ 279,761 $ 206,593 $ — $ 486,354

1 unchanged sentence

Total Revenues $ 285,558 $ 209,337 $ ( 8,541 ) $ 486,354

Gross Profit $ 37,093 $ 28,466 $ ( 34 ) $ 65,525

Selling, General & Administrative Expenses

7,825 10,514 13,108 31,447

Amortization Expense 373 270 — 643

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The following table summarizes the notional amount of our open foreign exchange contracts:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Equivalent U.S.

Fair Value U.S.

Equivalent U.S.

Commitments to buy or sell currencies $ 11,359 $ 9,777 $ 22,474 $ 22,939

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The Interest Rate Swap Agreement has a rate floor of 2.07 % and an all-in rate of 8.07 % and a maturity date of April 30, 2022.

As of March 31, 2020 , the Interest Rate Swap Agreement was not designated as a hedging instrument;

As of June 30, 2020, the Interest Rate Swap Agreement was not designated as a hedging instrument;

therefore, it is marked-to-market and the fair value of the agreement recorded in the Condensed Consolidated Balance Sheets with the offsetting gain or loss recorded in interest and other expense in the Condensed Consolidated Statements of Operations.

1 unchanged sentence

Derivative Asset

March 31, 2020

December 31, 2019

Balance Sheet

June 30, 2020 December 31, 2019

Balance Sheet

Foreign exchange contracts

Other current assets

Interest rate swap agreement

Other assets, net

Location Fair Value Balance Sheet

Location Fair Value

Foreign exchange contracts Other current assets $ — Other current assets $ 464

Interest rate swap agreement Other assets, net $ 1,308 Other assets, net $ 150

Derivative Liability

March 31, 2020

December 31, 2019

Balance Sheet

June 30, 2020 December 31, 2019

Balance Sheet

Foreign exchange contracts

Accrued liabilities

Interest rate swap agreement

Accrued liabilities

Location Fair Value Balance Sheet

Location Fair Value

Foreign exchange contracts Accrued liabilities $ 1,582 Accrued liabilities $ —

Interest rate swap agreement Accrued liabilities $ 2,882 Accrued liabilities $ 995

Derivative Equity

March 31, 2020

December 31, 2019

Balance Sheet

June 30, 2020 December 31, 2019

Balance Sheet

Foreign exchange contracts

Accumulated other comprehensive loss

Location Fair Value Balance Sheet

Location Fair Value

Foreign exchange contracts Accumulated other comprehensive loss $ ( 1,210 ) Accumulated other comprehensive loss $ 464

The following table summarizes the effect of derivative instruments on the Condensed Consolidated Statements of Operations:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Location of Gain (Loss) on Derivatives

Recognized in Income

Amount of Gain (Loss) on Derivatives

Recognized in Income Amount of Gain (Loss) on Derivatives

Recognized in Income

Foreign exchange contracts

Cost of Revenues

Interest rate swap agreement

Interest and Other Expense

Foreign exchange contracts Cost of Revenues $ ( 885 ) $ — $ ( 885 ) $ 4

Interest rate swap agreement Interest and Other Expense $ ( 28 ) $ ( 1,004 ) $ ( 1,024 ) $ ( 1,656 )

Other Comprehensive Loss

The after-tax changes in accumulated other comprehensive loss are as follows:

currency translation adjustment

Derivative instruments

currency translation adjustment Derivative instruments Pension and

post-retirement

benefits plans

Accumulated other

benefits plans Accumulated other

comprehensive

3 unchanged sentences

Amortization of actuarial losses — — ( 893 ) ( 893 )

Ending balance, March 31, 2020

currency translation adjustment

Derivative instruments

Ending balance, June 30, 2020 $ ( 26,917 ) $ ( 1,210 ) $ ( 23,275 ) $ ( 51,402 )

currency translation adjustment Derivative instruments Pension and

post-retirement

benefit plans

Accumulated other

benefit plans Accumulated other

comprehensive

3 unchanged sentences

Amortization of actuarial losses — — 1,089 1,089

Ending balance, March 31, 2019

Ending balance, June 30, 2019 $ ( 22,509 ) $ 818 $ ( 24,031 ) $ ( 45,722 )

The related tax effects allocated to each component of other comprehensive loss are as follows:

Three Months Ended March 31, 2020

After Tax Amount

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020

Amount Tax Expense After Tax Amount Before Tax

Amount Tax Expense After Tax Amount

Amortization of actuarial losses $ ( 551 ) $ 105 $ ( 446 ) $ ( 1,105 ) $ 212 $ ( 893 )

2 unchanged sentences

Total other comprehensive loss $ 2,812 $ ( 234 ) $ 2,578 $ ( 6,035 ) $ 583 $ ( 5,452 )

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019 Six Months Ended June 30, 2019

Amount Tax Expense After Tax

Amount Before Tax

Amount Tax Expense After Tax

Amortization of actuarial losses $ 2,613 $ ( 874 ) $ 1,739 $ 1,808 $ ( 719 ) $ 1,089

7 unchanged sentences

The components of net periodic (benefit) cost related to pension and other post-retirement benefit plans is as follows:

Pension and Other Post-Retirement Benefit Plans

Three Months Ended March 31,

Pension and Other Post-Retirement Benefit Plans Non-U.S.

Three Months Ended June 30, Three Months Ended June 30,

2020 2019 2020 2019

Interest cost 281 447 204 279

3 unchanged sentences

Net (benefit) cost $ ( 161 ) $ 2,453 $ 94 $ 142

Pension and Other Post-Retirement Benefit Plans Non-U.S.

Six months ended June 30, Six months ended June 30,

2020 2019 2020 2019

Interest cost 562 894 408 563

Expected return on plan assets ( 1,037 ) ( 1,324 ) ( 529 ) ( 566 )

Amortization of prior service cost 3 2,497 286 24

Recognized actuarial loss 149 165 24 269

Net (benefit) cost $ ( 323 ) $ 2,232 $ 189 $ 290

Net periodic (benefit) cost components, not inclusive of service costs, are recognized in interest and other expense within the Condensed Consolidated Statements of Operations.

We expect to contribute $ 0.9 million to our pension and other post-retirement benefit plans in 2020.

As of March 31, 2020 , contributions totaling $0.2 million have been made.

As of June 30, 2020, contributions totaling $ 0.5 million have been made.

Business Combinations

8 unchanged sentences

The fair value for the milestone payments is based on a Monte Carlo simulation utilizing forecasted EBITDA through September 17, 2022.

The estimate was recorded within other long-term liabilities in the Condensed Consolidated Balance Sheet as of September 30, 2019.

The total undiscounted contingent milestone payments is estimated at $5.6 million and the fair value is $4.8 million as of March 31, 2020 .

The estimate of $ 4.7 million was recorded within other long-term liabilities in the

Condensed Consolidated Balance Sheet as of September 30, 2019.

The total undiscounted contingent milestone payments is estimated at $ 10.8 million and the fair value is $ 8.3 million as of June 30, 2020.

The Agreement contains customary indemnification provisions and provided for the establishment of an escrow fund of $ 3.0 million of the purchase price to secure indemnification claims by CVG FSE for an 18 -month period.

15 unchanged sentences

The valuation is final as of March 31, 2020.

The allocation of the fair value of the assets acquired and liabilities assumed, at acquisition and as adjusted for the final adjustment at March 31, 2020 , was as follows:

Preliminary Purchase Price allocation

Final Purchase Price Allocation

The allocation of the fair value of the assets acquired and liabilities assumed, at acquisition and as adjusted for the final adjustment at June 30, 2020, were as follows:

Preliminary Purchase Price Allocation Adjustment Final Purchase Price Allocation

Net working capital $ 2,856 $ — $ 2,856

2 unchanged sentences

Definite-lived intangible assets 14,500 — 14,500

20,365 ( 537 ) 19,828

Other long-term liabilities ( 1,174 ) — ( 1,174 )

4 unchanged sentences

Furthermore, the Company is implementing additional cost reduction initiatives and is considering further manufacturing capacity rationalization initiatives in response to the COVID-19 pandemic.

These actions were initiated in 2019 and are expected to continue through 2020 and into 2021.

These actions were initiated in 2019 and 2020.

These actions are expected to continue through 2020 and into 2021.

The Restructuring Initiatives consist primarily of headcount reductions in each segment and at corporate, as well as other costs associated with transfer of production and subsequent closure of facilities.

1 unchanged sentence

The changes in accrued restructuring balances are as follows:

Electrical Systems

BALANCE - December 31, 2019

Electrical Systems Global

Seating Corporate/

December 31, 2019 $ 1,276 $ 102 $ 947 $ 2,325

New Charges 1,986 677 452 3,115

Payments and Other Adjustments ( 2,431 ) ( 625 ) ( 627 ) ( 3,683 )

BALANCE - March 31, 2020

Approximately $0.1 million in employee costs were incurred in the three months ended March 31, 2020 in the Global Seating Segment and is included in cost of revenues.

June 30, 2020 $ 831 $ 154 $ 772 $ 1,757

Of the $ 3.1 million costs incurred in the six months ended June 30, 2020, $ 2.8 million primarily related to headcount reductions and $ 0.3 million related to facility exit and other costs.

Of the $ 3.1 million costs incurred, $ 2.1 million was recorded in cost of revenues and $ 1.0 million was recorded in selling, general and administrative expenses.

Subsequent Events

On May 11, 2020, the Company and certain of its subsidiaries, as guarantors or co-borrowers, as applicable, entered into (i) an Amendment No.

1 (the “Term Amendment”), which Term Amendment amends the TLS Agreement, dated as of April 12, 2017, with Bank of America, N.A.

as agent, and the lenders party thereto, which agreement governs the Company’s term loan credit facility and (ii) an Amendment No.

2 (the “Revolving Amendment”), which Revolving Amendment amends the Revolving Credit

Facility, dated as of April 12, 2017, with Bank of America, N.A., as agent, and certain financial institutions as lenders, which agreement governs the Company’s asset-based revolving credit facility.

The Term Amendment amends the terms of the existing Term Loan Agreement to add a new minimum consolidated liquidity covenant of $40.0 million , to be tested each fiscal quarter through the fiscal quarter ending September 30, 2021, and to temporarily suspend the leverage ratio covenant through the fiscal quarter ending December 31, 2020 and to reset the leverage ratio covenant levels for quarterly periods ended on or after March 31, 2021.

In addition, amendments were made to certain restrictive covenants, the effect of which are to limit the Company’s ability to incur additional debt, grant liens, repurchase the Company’s stock and to issue dividends or make investments.

As amended, through September 30, 2021, loans outstanding under the Term Loan Agreement accrue interest at a per annum rate based on (at the Company’s election) the base rate plus 9.50% or the LIBOR rate plus 10.50% .

Commencing October 1, 2021, loans outstanding under the Term Loan Agreement will accrue interest at a per annum rate based on (at the company’s election) the base rate plus 5.00% or the LIBOR rate plus 6.00% .The Term Loan Agreement, as amended, includes a hard call premium on repayments of the term loans outstanding thereunder of 2% on amounts repaid through June 30, 2021 and 1% on amounts repaid through June 30, 2022, subject to certain exceptions.The Revolving Amendment amends the terms of the Revolving Loan Agreement to align certain of the restrictive covenants with the restrictive covenants set forth in the Term Loan Agreement, as amended.

Average Daily Availability

Revolver Loans

≥ $30,000,000

> $15,000,000 but < $30,000,000

≤ $15,000,000

The Revolving Loan Agreement, as amended, provides for an unused line fee of 0.35% on undrawn amounts under the Revolving Credit Facility.

On July 15, 2020, the Company announced the permanent consolidation of its manufacturing and distribution facility in Piedmont, Alabama in connection with the Company's cost reduction plan previously announced on May 18, 2020.

The Piedmont facility primarily serves the commercial vehicle aftermarket, is more than 150,000 square feet in size, and employs approximately 49 employees.

The work performed at the Piedmont facility will be transferred to the Company's manufacturing and distribution facility in Vonore, Tennessee following the closure, which is expected to be substantially completed in the fourth quarter of 2020.

Vonore will become the new headquarters for CVG's Commercial Vehicle Aftermarket business.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements