What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-09 compared with 2020-08-10 · 179 added, 189 removed, 250 unchanged (60% of the section changed)

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis below describes material changes in financial condition and results of operations as reflected in our condensed consolidated financial statements for the six months ended June 30, 2020 and 2019.

This discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2019 Form 10-K.

Company Overview

Commercial Vehicle Group, Inc.

(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.

We have manufacturing operations in the United States, Mexico, China, United Kingdom, Czech Republic, Ukraine, Thailand, India and Australia.

CVG (through its subsidiaries) is a diversified industrial company and leading supplier of seating systems, warehouse automation subsystems, wire harnesses, plastic parts, and mechanical assemblies for many markets including the following:

trucking, construction, retail, military, bus, agricultural, and off-road recreational markets .

We have manufacturing operations in the United States, Mexico, China, United Kingdom, Belgium, Czech Republic, Ukraine, Thailand, India and Australia.

Our products are primarily sold in North America, Europe, and the Asia-Pacific region.

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 medium- and heavy-duty truck ("MD/HD Truck") and many medium- and heavy-duty construction vehicle original equipment manufacturers (“OEMs”), and other makers of industrial equipment.

We are primarily a manufacturer of low volume, customized products on a sequenced basis to meet the requirements of our customers.

We believe our trucking products are used by a majority of the North American Commercial Truck markets, many construction vehicle original equipment manufacturers (“OEMs”), and many of the top e-commerce retailers.

Business Overview

For the six months ended June 30, 2020, approximately 34% of our revenue was generated from sales to North American MD/HD Truck OEMs and approximately 18% from sales to OEMs in the global construction equipment market.

Our remaining revenue was primarily derived from sales to the aftermarket, OE service organizations, industrial, military and specialty markets.

We are having success with our strategy to diversify our end markets by growing in the industrial / material handling, and military end markets, primarily through the success of the FSE acquisition.

For the nine months ended September 30, 2020, 34.9% of our revenue was generated from sales to North American Commercial Truck OEMs and 16.7% from sales to OEMs in the global construction equipment market.

Our remaining revenue was primarily derived from warehouse automation subsystems and sales to the aftermarket, OE service organizations, industrial, military and specialty markets.

We are having success with our strategy to diversify our end markets by growing in the warehouse automation market , and military end markets, primarily through business expansion enhanced by the FSE acquisition.

These markets offer high growth rates and provide a balance to our traditional, cyclical end markets.

Commercial Trends

Demand for our products may be driven by preferences of the end-user of the vehicle, particularly with respect to heavy-duty trucks.

Unlike the automotive industry, heavy-duty truck OEMs generally afford the end-user the ability to specify many of the component parts that will be used to manufacture the vehicle, including a wide variety of cab interior styles and colors, brand and type of seats, type of seat fabric and color, and interior styling.

Heavy-duty truck OEMs generally afford the end-user the ability to specify many of the component parts that will be used to manufacture the vehicle, including a wide variety of cab interior styles and colors, brand and type of seats, type of seat fabric and color, and interior styling.

Certain of our products are only utilized in heavy-duty trucks, such as our storage systems, sleeper boxes and privacy curtains.

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We generally compete for new business at the beginning of the development of a new vehicle platform and upon the redesign of existing programs.

New platform development generally begins one to three years before the marketing of such models by our customers.

New platform development generally begins one to three years before the marketing of such models by our

Contract durations for commercial vehicle products generally extend for the entire life of the platform.

Several of the major truck makers have upgraded their truck platforms and we believe we have maintained our share of content in these platforms.

We continue to pursue opportunities to expand our content.

Truck OEMs routinely upgrade their product platforms for aesthetics, electronic improvements, comfort improvements, energy efficiency, safety improvements, and feature enhancements.

Additionally, there are new entrants to the global truck market that are focused on Electric Vehicle and low carbon emission product offerings.

The Company competes to retain its existing positions on platforms that are getting refreshed, competitively win new positions on platforms on which it is not the incumbent supplier, and gain first mover positions on new Electric Vehicle platforms.

The global truck market is evolving to include many offerings aimed at low emissions and less impact on the environment.

The Company has a targeted growth plan that it is pursuing to grow the Company.

In general, demand for our heavy-duty (or "Class 8") truck products is generally dependent on the number of new heavy-duty trucks manufactured in North America, which in turn is a function of general economic conditions, interest rates, changes in government regulations, consumer spending, fuel costs, freight costs, fleet operators' financial health and access to capital, used truck prices and our customers’ inventory levels.

New heavy-duty truck demand has historically been cyclical and is particularly sensitive to the industrial sector of the economy, which generates a significant portion of the freight tonnage hauled by commercial vehicles.

North American heavy-duty truck production was 345,000 units in 2019.

While CVG is not providing 2020 guidance, according to the July 2020 report by ACT Research, a publisher of industry market research, North American Class 8 production levels are expected to decrease to 169,000 units in 2020, steadily increase to 336,000 units in 2023 and then decline to 267,000 units in 2025.

North A merican heavy-duty truck production was 345,000 units in 2019.

According to the October 2020 report by ACT Research, a publisher of industry market research, North American Class 8 production levels are expected to be at 206,000 units in 2020, steadily increase to 278,000 in 2021, then increase to 321,000 in 2023 and then decline to 281,000 units in 2025.

ACT Research estimated that the average age of active North American Class 8 trucks was 11 and 11.2 years in 2019 and 2018, respectively.

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North American medium-duty (or "Class 5-7") truck production steadily increased from 249,000 units in 2017 to 281,000 units in 2019.

While CVG is not providing 2020 guidance, according to the July 2020 report by ACT Research, North American Class 5-7 truck production is expected to decrease to 166,000 units in 2020, steadily increase to 274,000 units in 2025.

According to the October 2020 report by ACT Research, North American Class 5-7 truck production is expected to decrease to 223,000 units in 2020, decrease to 218,000 in 2021, then increase to 280,000 in 2023, and decrease to 274,000 units in 2025.

We primarily participate in the class 6 and 7 portion of the medium-duty truck market.

Warehouse Automation Subsystems

Demand for our warehouse automation subsystems is derived by expansion of supply chain infrastructures to accommodate increased customer orders in e-commerce.

As the percentage of products ordered on-line increases, the delivery mechanisms must expand and increase output.

CVG provides subsystems that are placed into warehouses and material handling systems.

RoboticsBusinessReview.com suggests growth rates for warehouse automation greater than 20% through 2022.

Construction Equipment

Demand for our construction equipment products is dependent on vehicle production.

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Demand in the medium- and heavy-duty construction equipment market is typically related to the level of large scale infrastructure development projects, such as highways, dams, harbors, hospitals, airports and industrial development, as well as activity in the mining, forestry and commodities industries.

The construction markets we serve in North America, Europe and Asia have declined.

As more specifically described in Note 20, on September 17, 2019, the Company acquired substantially all of the assets and certain liabilities of First Source Electronics, LLC.

The industrial and military markets we serve in North America have been robust and continue to show growth opportunities.

The global spread of the novel strain of coronavirus ("COVID-19") that has been declared a pandemic by the World Health Organization and the preventative measures taken to contain or mitigate the outbreak has caused, and are continuing to cause, significant volatility, uncertainty and economic disruptions.

The outbreak has resulted in governments around the world implementing increasingly stringent measures to contain or mitigate the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments and other measures consistent with applicable government guidelines.

The outbreak has resulted in governments around the world implementing stringent measures to contain or mitigate the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments and other measures consistent with applicable government and public health guidelines.

Specifically, in the United States, most states placed restrictions on business operations and issued stay-at-home orders for residents beginning in late March and early April.

Although many of these restrictions were eased or lifted throughout the country during May and June, COVID-19 continues to spread, business operations remain challenging, and unemployment is at historically high levels.

On June 8, 2020, the National Bureau of Economic Research declared that a recession began in the United States in February 2020.

Based on the preliminary estimate released by the Bureau of Economic Analysis on July 30, 2020, the U.S.

gross domestic product (the “GDP”) decreased at an annual rate of 32.9% in the second quarter of 2020.

This sharp decline in the GDP represents the lowest quarter since the U.S.

government began tracking this measure in 1947 and illustrates the difficulty of the economic environment in which we are currently operating.

While we continue to operate certain of our facilities, we are experiencing, and may continue to experience, production slowdowns and/or shutdowns at our manufacturing facilities in North America, Europe and Asia Pacific as a result of government orders, our inability to obtain component parts from suppliers and/or decreased customer demand.

In addition, many of our suppliers and customers are also experiencing, and may continue to experience, production slowdowns and/or shutdowns, which may further

impact our business, sales and results of operation.

Although most of these restrictions were eased or lifted throughout the country, COVID-19 continues to spread and the upcoming winter months and the convergence with the traditional cold and flu season may trigger additional local and regional restrictions.

Business operations remain challenging, and unemployment is at historically high levels.

While we continue to operate our facilities, we may experience production slowdowns and/or shutdowns at our manufacturing facilities in North America, Europe and Asia Pacific as a result of government orders, our inability to obtain component parts from suppliers and/or decreased customer demand.

In addition, many of our suppliers and customers may experience production slowdowns and/or shutdowns, which may further impact our business, sales and results of operation.

Continued impact on the Company's business, sales and results of operations from the COVID-19 pandemic may also result in additional valuation allowances being recorded against our deferred tax assets.

The extent of the adverse effect of the COVID-19 pandemic on our business results depends on future developments, including the severity and duration of the pandemic and its overall impact on the economy.

As a result of the rapid changes in our end market conditions, our OEM customer ordering patterns and general uncertainties around the impacts of COVID-19 on businesses such as government-mandated shut downs, the Company will not be providing 2020 guidance related to North American Class 5-8 truck and global construction production.

Throughout 2020, the impact of the pandemic has

been uneven across our global footprint based on local and regional outbreaks.

Future waves may have a greater or lesser impact than the first wave, depending on the location of such breakouts and the response of the local government.

We continue to proactively monitor, assess and minimize disruptions and delays in production and take reasonable measures to protect our workforce.

Business Actions During COVID-19

In March 2020, we began implementing certain business continuity processes focused on maintaining productivity and service levels while prioritizing the health, welfare and safety of our employees and customers.

These processes include employee communication on proper hand washing, social distancing and personal protective equipment;

These processes include:

employee education or respiratory etiquette and personal hygiene protocols, the enforcement of social distancing;

restrictions via physical and visual barriers;

enhanced cleaning and disinfecting measures;

manufacturing and distributing reusable face masks to employees throughout the Company;

eliminating non-essential travel;

replacing internal and external meetings with video or teleconferences;

remote work arrangements for non-production personnel;

distribution of disposable and washable face masks to employees throughout the Company;

quarantining protocols, eliminating non-essential travel;

replacing internal and external group meetings with video or teleconferences;

temporary remote work arrangements for certain personnel;

flexed schedules for onsite personnel;

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In March 2020, the Company borrowed $15 million on its revolving credit facility as a proactive measure to preserve financial flexibility in consideration of general economic and financial market uncertainty resulting from the COVID-19 pandemic.

Additionally, in the three months ended June 30, 2020, we amended our Term Loan Facility and Revolving Credit Facility.

In September 2020, the Company repaid the $15 million outstanding balance under the revolving credit facility.

In the three months ended June 30, 2020, we amended our Term Loan Facility and Revolving Credit Facility.

The Term Loan Facility amendment temporarily suspends the leverage ratio covenant through the fiscal quarter ending December 31, 2020, and resets the leverage ratio covenant levels for quarterly periods ended March 31, 2021 through September 30, 2021, before returning to original leverage ratio covenant for the quarterly period ended on December 31, 2021.

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The maturity date remains unchanged.

In September 2020, the Company paid an additional $5.0 million of principal on the Term Loan Facility.

The Revolving Credit Facility amends the terms of the revolving loan agreement to align certain of the restrictive covenants with the restrictive covenants in the Term Loan Agreement, as amended.

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Actions included headcount reductions, reduction in recurring consulting expenses, reprioritization and decrease in capital spending and reduction in sales and marketing expenses.

Additionally, the Company eliminated Corporate Business Development, Aviation, Quality, Procurement and Operating Excellence departments.

Additionally, the Company eliminated its Corporate Business Development, Aviation, Quality, Procurement and Operating Excellence departments.

The Company also implemented other temporary measures including pay reductions, plant shutdowns, furloughs, elimination of most annual incentive pay, suspension of the employer 401(k) match, and reduction in non-essential travel in an effort to mitigate the future risk of uncertainty.

We believe these purposeful actions will permanently lower the Company’s cost structure and preserve core growth initiatives.

According to ACT Research, third quarter 2020 North American heavy-duty truck build is expected to increase by approximately 50% as compared to the second quarter of 2020, as the North American Truck OEMs rebound from the second quarter which was negatively impacted by COVID-19.

Third quarter medium-duty truck build is expected to increase by approximately 30% as compared to the second quarter, per ACT Research.

Although the COVID-19 pandemic creates forecasting uncertainties, we currently anticipate revenues to increase 25% to 35% for the three months ending September 30, 2020, as compared to the three months ended June 30, 2020.

Our Long-Term Strategy

Our long-term strategy is to grow revenue by product, geography and end market.

Our products include electrical wire harnesses and electro-mechanical and cable assemblies, Trim, molded plastics, mirrors, wipers and controls, cab structures and sleeper boxes, and Seats.

We intend to allocate resources consistent with our strategy;

more specifically, consistent with our product portfolio, geographic region and end market diversification objectives.

In September 2020, the Company announced it was relaxing certain temporary measures, specifically temporary pay reductions.

Long-Term Strategy

The Company's long-term organic strategy is to grow revenue by product, geography and end market diversification.

Our products include seating systems, warehouse automation subsystems, wire harnesses, plastic parts, mechanical assemblies, mirrors, wipers and cab structures.

We intend to allocate resources to implement our strategy.

Additionally, we have a long-term strategy to globally optimize our cost structure through manufacturing process enhancements, low cost footprint and global sourcing.

We periodically evaluate our long-term strategy and may adjust the strategy in response to changes in our business environment and other factors.

As part of our long-term strategy, we have considered and will consider acquisitions and divestitures to enhance return to our stockholders and service to customers.

We are also supplementing our organic strategy by considering acquisitions, subject to limitations in our credit facilities, and divestitures to strengthen our comprehensive positions, open new markets and customers, enhance return to our stockholders

and service to customers.

The Company completed the acquisition of FSE in September 2019.

This strategic acquisition improves our ability to participate in the progression of digitalization, connectivity and associated power and data applications.

The acquisition also complements our wire harness business, provides an entry into new markets, and provides us with an opportunity to leverage our global footprint and to increase cross-selling opportunities.

Strategic Footprint Repositioning

The Company is strategically repositioning its operations to grow faster, innovate rapidly, and lower its costs.

This repositioning involves twelve facilities.

The Company’s business in the warehouse automation and military markets continues to grow with solid long-term outlook.

We have taken strategic actions to significantly expand our footprint, capacity, and product complexity to serve these diverse markets.

These actions are expected to support between $100.0 million to $150.0 million of new business, depending on the mix.

Anchor customer business has already been established for this multi-plant expansion with key actions underway as follows:

Expanding our Elkridge, MD plant by securing new space at an adjacent property.

This plant is the main plant for

our manufacturing warehouse automation subsystems and military subsystems.

Repurposing floor space and creating new manufacturing capability in our Vonore, TN plant.

Repurposing floor space and creating new manufacturing capability in our Chillicothe, OH plant.

Repurposing floor space and creating new manufacturing capability in our Monona, IA plant.

Moving certain production from Monona, IA plant to our low cost facility in Agua Prieta, Mexico.

Design and installation of a new medium-duty seat production line in our Saltillo, Mexico plant.

The Company is also permanently consolidating a portion of our cost structure dedicated to mature markets through several deliberate actions including the redistribution of our centralized R&D capabilities to speed the time to market for new products and expand our ability to innovate in the Asian market.

The key actions underway in this area are as follows:

Consolidation of our Piedmont, AL plant into our Vonore, TN plant.

Consolidation of one-half of our existing manufacturing footprint at our Concord, NC plant with our low cost facility in Saltillo, Mexico.

Consolidation of our corporate R&D center and activities into two existing U.S.

plants and improving our R&D capabilities at our Shanghai, China site, with the goal of increased innovation in each market.

Closure of our facility in Morelos, Mexico, and consolidation of equipment into our Agua Prieta, Mexico plant.

We expect our strategic footprint realignment to help us expand in growth areas, reduce costs in mature areas, and increase our ability to innovate.

We believe we are on track to permanently reduce our annualized costs by over $15.0 million in mature markets through a combination of staff reductions, facility consolidations, and operational improvements.

We believe these actions will make us stronger, increase our competitiveness, accelerate the speed of our innovation, and increase our opportunities to win.

We are leveraging our know-how to serve top tier OEMs with high quality, on-time delivery of complex subsystems into new areas.

We believe these actions will enable new value and new growth.

This strategic acquisition improves our ability to participate in the growth of eCommerce and manufacturing of complicated mechanical assemblies.

This acquisition provides new customer relationships, and provides us with an opportunity to leverage our global footprint and to increase cross-selling opportunities.

Consolidated Results of Operations

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

The table below sets forth certain consolidated operating data for the three months ended June 30 (dollars are in thousands):

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

The table below sets forth certain consolidated operating data for the three months ended September 30 (dollars are in thousands):

(as restated) $ Change % Change

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Selling, General and Administrative Expenses $ 14,408 $ 17,531 $ (3,123) (17.8) %

Impairment Expense $ 150 $ — $ 150 100.0 %

Interest and Other Expense $ 5,674 $ 3,800 $ 1,874 49.3 %

(Benefit) Provision for Income Taxes $ (959) $ 496 $ (1,455) (293.3) %

Net (Loss) Income $ (12,497) $ 6,146 $ (18,643) (303.3) %

Net Income $ 4,178 $ 7,180 $ (3,002) (41.8) %

The decrease in consolidated revenues resulted from:

• a $43.3 million, or 38.6%, decrease in OEM North American MD/HD Truck revenues;

• a $18.3 million, or 42.8%, decrease in OEM construction equipment revenues;

• a $24.9 million, or 333.5%, increase in industrial and military revenues primarily attributable to the FSE acquisition;

• a $12.4 million, or 31.2%, decrease in OEM construction equipment revenues;

• a $6.8 million, or 21.2%, decrease in aftermarket and OES revenues;

• a $0.1 million, or 0.5%, decrease in other revenues.

While the end markets CVG serves were anticipated to decline somewhat in 2020 as compared to 2019, the sharp market declines noted in the second quarter of 2020 were primarily a result of the COVID-19 pandemic on the end markets we serve.

While the end markets CVG serves were anticipated to decline somewhat in 2020 as compared to 2019, the sharp market declines noted in the third quarter of 2020 were primarily a result of the COVID-19 pandemic.

These sharp market declines were partially offset by increased sales in industrial and military end markets we serve through the FSE business.

Second quarter 2020 revenues were adversely impacted by foreign currency exchange translation of $1.8 million, which is reflected in the change in revenues above.

Third quarter 2020 revenues were favorably impacted by foreign currency exchange translation of $1.0 million, which is reflected in the change in revenues above.

Gross Profit .

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The Restructuring Initiatives consist primarily of headcount reductions in each segment and at corporate.

In addition, the Company implemented a series of temporary reductions that will remain in place until conditions improve, including pay reductions, furloughs, suspension of the employer 401(k) match, and reductions in discretionary spending ("Temporary Actions").

Second quarter 2020 cost of revenues benefited from the initiatives that began in 2019 and the Temporary Actions.

The second quarter results include charges of $2.0 million associated with ongoing Restructuring Initiatives.

As a percentage of revenues, gross profit margin was 5.1% for the three months ended June 30, 2020 compared to 13.3% for the three months ended June 30, 2019.

In addition, the Company implemented a series of temporary reductions that were in place through September 30, 2020, including pay reductions, furloughs, suspension of the employer 401(k) match, and reductions in discretionary spending ("Temporary Actions").

On September 22, 2020, the Company announced that certain temporary actions were being halted, specifically temporary pay reductions.

Certain other temporary actions remain in effect.

Third quarter 2020 cost of revenues benefited from the initiatives that began in 2019 and the Temporary Actions.

The third quarter results include charges of $1.0 million associated with ongoing Restructuring Initiatives.

As a percentage of revenues, gross profit margin was 12.9% for the three months ended September 30, 2020 compared to 13.1% for the three months ended September 30, 2019.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses ("SG&A”) consist primarily of wages and benefits and other expenses such as marketing, travel, legal, audit, rent and utility costs which are not directly associated with the manufacturing of our products.

SG&A expenses decreased $0.3 million compared to the three months ended June 30, 2019.

Before giving effect to certain charges, SG&A expenses reduced by $4.7 million due the Restructuring Initiatives and the Temporary Actions taken in response to the COVID-19 pandemic.

These reductions were offset by a $3.5 million charge for future milestone payments related to the performance of the FSE business, charges of $1.0 million associated with ongoing Restructuring Initiatives and charges of $0.4 million associated with the 2019 restatement investigation completed in the first quarter of 2020 that resulted in the restatement of the Company's 2019 financial statements.

SG&A expenses decreased $3.1 million compared to the three months ended September 30, 2019.

Before giving effect to certain charges, SG&A expenses were reduced by $5.3 million due the Restructuring Initiatives and the Temporary Actions taken in response to the COVID-19 pandemic.

These reductions were offset by a $0.5 million charge for future milestone payments related to the performance of the FSE business, a $1.1 million

charge related to the abandonment of the R&D building and charges of $0.5 million associated with the 2019 restatement investigation completed in the first quarter of 2020 that resulted in the restatement of the Company's 2018 and quarterly 2019 financial statements.

Interest and Other Expense .

Interest, associated with our debt, and other expense was $5.1 million and $7.5 million for the three months ended June 30, 2020 and 2019, respectively.

The decrease in interest and other expense resulted primarily from a $2.5 million non-cash charge taken in prior year associated with the early payout of benefits to term vested participants in the U.S.

pension plan ("U.S.

Pension Plan"), which reduced future financial risk associated with the U.S.

Pension Plan and contributed to an improvement in funded status to approximately 100%.

Additionally in the second quarter of 2020, the

Company incurred Payment In Kind interest expense of $1.7 million resulting from the loan amendment that occurred in the first quarter of 2020, offset by lower interest expense of $0.4 million due to lower interest rates and favorable interest rate swap adjustments of $1.0 million,

Interest associated with our debt, and other expense was $5.7 million and $3.8 million for the three months ended September 30, 2020 and 2019, respectively.

The increase in interest and other expense primarily related to a $1.8 million Payment In Kind interest expense resulting from the loan amendment that occurred in the second quarter of 2020 and unfavorable change in foreign exchange translation adjustments of $0.3 million, offset by favorable change in interest rate swap adjustments of $0.2 million.

(Benefit) Provision for Income Taxes.

An income tax benefit of $3.1 million and an income tax provision of $2.2 million were recorded for the three months ended June 30, 2020 and 2019, respectively.

The period over period change in income tax was primarily attributable to the pre-tax loss sustained in the current period versus the pre-tax income generated in the prior year period.

The income tax benefit for the three months ended June 30, 2020, was calculated based the Company's actual effective tax rate for the current year-to-date period due to the uncertainty of the impact of the COVID-19 pandemic on our full year income (loss).

See Note 15 of the "Notes to Condensed Consolidated Financial Statements" for additional details.

Net (Loss) Income.

Net loss was $12.5 million for the three months ended June 30, 2020 compared to $6.1 million net income for the three months ended June 30, 2019.

An income tax benefit of $1.0 million and an income tax provision of $0.5 million were recorded for the three months ended September 30, 2020 and 2019, respectively.

The period over period change in income tax was primarily attributable to a $4.5 million decrease in pre-tax income versus the prior year period.

The period over period change was also impacted by a $2.0 million income tax benefit recorded in the current period for the impact of the below discussed high-tax exception to Global Intangible Low-Taxed Income ("GILTI"), offset by a smaller income tax benefit for period-specific tax adjustments recorded in the current versus prior year period.

On July 20, 2020, the U.S.

Treasury Department issued final regulations ("T.D.

9902") addressing the treatment of income earned by certain foreign corporations that are subject to a high rate of foreign income tax for purposes of the GILTI provisions of I.R.C.

section 951A.

Specifically, these regulations allow taxpayers to exclude certain high-taxed income of a controlled foreign corporation from their computation of GILTI on an elective basis ("High-Tax Exception").

Although the High-Tax Exception was effective July 23, 2020, taxpayers are allowed to apply the rule to the taxable years of their controlled foreign corporations beginning after December 31, 2017.

During the three months ended September 30, 2020, the Company recorded a $2.0 million U.S.

federal income tax benefit for the impact of the High-Tax Exception which consisted of a $0.7 million tax benefit related to the current year-to-date period, a $0.5 million tax benefit related to the year ended December 31, 2019, and a $0.8 million tax benefit related to the year ended December 31, 2018.

Net income was $4.2 million for the three months ended September 30, 2020 compared to $7.2 million for the three months ended September 30, 2019.

The decrease in net income is attributable to the factors noted above.

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Electrical System Segment Results

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

The table below sets forth certain Electrical Systems Segment operating data for the three months ended June 30 (dollars are in thousands):

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

The table below sets forth certain Electrical Systems Segment operating data for the three months ended September 30 (dollars are in thousands):

(as restated) $ Change % Change

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Selling, General & Administrative Expenses $ 3,166 $ 4,030 $ (864) (21.4) %

Operating (Loss) Income $ (6,165) $ 13,899 $ (20,064) (144.4) %

Operating Income $ 12,223 $ 12,801 $ (578) (4.5) %

The decrease in Electrical System Segment revenues resulted from:

• a $22.6 million, or 33.1%, decrease in OEM North American MD/HD Truck revenues;

• a $11.4 million, or 52.1%, decrease in OEM construction equipment revenues;

• a $23.3 million, or 312.6% increase in industrial and military revenues primarily attributable to the FSE acquisition;

• a $7.9 million, or 36.5%, decrease in OEM construction equipment revenues;

• a $2.6 million, or 21.2% decrease in aftermarket and OES revenue;

• a $0.5 million, or 2.2%, decrease in other revenues.

The acquisition of FSE and growth of warehouse automation subsystems revenue were driven by e-commerce demand and expansion of parcel handling facilities.

This growth was more than offset by sharp declines in sales in North American construction equipment markets.

These sharp market declines were partially offset by increased sales in industrial and military end markets we serve through the FSE business.

Electrical System Segment revenues were adversely impacted by foreign currency exchange translation of $0.6 million, which is reflected in the change in revenues above.

Electrical System Segment revenues were favorably impacted by foreign currency exchange translation of $0.4 million, which is reflected in the change in revenues above.

Gross Profit.

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and a decrease in overhead expenses of $4.0 million, or 13.2%.

Second quarter 2020 cost of revenues benefited from the Restructuring Initiatives and the Temporary Actions, The second quarter results include charges of $1.6 million associated with ongoing Restructuring Initiatives.

As a percentage of revenues, gross profit margin was 1.5% for the three months ended June 30, 2020 compared to 12.5% for the three months ended June 30, 2019.

Third quarter 2020 cost of revenues benefited from the Restructuring Initiatives and the Temporary Actions.

The third quarter results include charges of $0.7 million associated with ongoing Restructuring Initiatives.

As a percentage of revenues, gross profit margin was 13.3% for the three months ended September 30, 2020 compared to 13.0% for the three months ended September 30, 2019.

Selling, General and Administrative Expenses .

SG&A expenses increased $2.9 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019, primarily as a result of the decrease in revenues and cost reductions as a result of the Restructuring Initiatives and other reductions in costs.

SG&A expenses decreased $0.9 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, primarily as a result of the decrease in revenues and cost reductions as a result of the Restructuring Initiatives and other reductions in costs.

Before giving effect to certain charges, SG&A expenses reduced by $1.4 million due the Restructuring Initiatives and the Temporary Actions taken in response to the COVID-19 pandemic.

These reductions were offset by a $3.5 million charge for future milestone payments related to the performance of the FSE business and charges of $0.4 million associated with ongoing restructuring initiatives.

These reductions were offset by a $0.5 million charge for milestone payments related to the performance of the FSE business.

Global Seating Segment Results

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

The table below sets forth certain Global Seating Segment operating data for the three months ended June 30 (dollars are in thousands):

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

The table below sets forth certain Global Seating Segment operating data for the three months ended September 30 (dollars are in thousands):

(as restated) $ Change % Change

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Selling, General & Administrative Expenses $ 3,517 $ 5,044 $ (1,527) (30.3) %

Operating (Loss) Income $ 1,535 $ 9,373 $ (7,838) (83.6) %

Operating Income $ 4,772 $ 7,153 $ (2,381) (33.3) %

The decrease in Global Seating Segment revenues resulted from:

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• a $4.2 million, or 21.1%, decrease in aftermarket and OES sales;

• a $4.7 million, or 28.4%, decrease in other revenues.

Global Seating Segment revenues were adversely impacted by foreign currency exchange translation of $1.2 million, which is reflected in the change in revenues above.

• a $2.6 million, or 17.4%, increase in other revenues.

Global Seating Segment revenues were favorably impacted by foreign currency exchange translation of $0.6 million, which is reflected in the change in revenues above.

Gross Profit.

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and a decrease in overhead expenses of $4.4 million, or 21.4%.

Second quarter 2020 cost of revenues benefited from the Restructuring Initiatives and the Temporary Actions.

The second quarter results include charges of $0.4 million associated with ongoing restructuring initiatives.

As a percentage of revenues, gross profit margin was 9.9% for the three months ended June 30, 2020 compared to 13.9% for the three months ended June 30, 2019.

Third quarter 2020 cost of revenues benefited from the Restructuring Initiatives and the Temporary Actions.

The third quarter results include charges of $0.3 million associated with ongoing restructuring initiatives.

As a percentage of revenues, gross profit margin was 12.2% for the three months ended September 30, 2020 compared to 12.9% for the three months ended September 30, 2019.

Selling, General and Administrative Expenses .

SG&A expenses decreased $1.5 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

Before giving effect to certain charges, SG&A expenses reduced by $1.7 million due the Restructuring Initiatives and the Temporary Actions taken in response to the COVID-19 pandemic.

These reductions were partially offset by charges of $0.2 million associated with ongoing restructuring initiatives.

SG&A expenses decreased $1.5 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

Before giving effect to certain charges, SG&A expenses

reduced by $1.4 million due the Restructuring Initiatives and the Temporary Actions taken in response to the COVID-19 pandemic.

Consolidated Results of Operations

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

The table below sets forth certain consolidated operating data for the six months ended June 30 (dollars are in thousands):

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

The table below sets forth certain consolidated operating data for the nine months ended September 30 (dollars are in thousands):

(as restated) $ Change % Change

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• a $182.7 million, or 51.1%, decrease in OEM North American MD/HD Truck revenues;

• a $32.7 million, or 36.3%, decrease in OEM construction equipment revenues;

• a $58.7 million, or 340.0%, increase in industrial and military revenues primarily attributable to the FSE acquisition;

• a $45.7 million, or 35.3%, decrease in OEM construction equipment revenues;

• a $24.4 million, or 24.2%, decrease in aftermarket and OES revenues;

• a $16.0 million, or 15.0%, decrease in other revenues.

While the end markets CVG serves were anticipated to decline somewhat in 2020 as compared to 2019, the sharp market declines noted in the nine months ended September 30, 2020 were primarily a result of the COVID-19 pandemic on the end markets we serve.

These sharp market declines were partially offset by increased sales in industrial and military end markets we serve through the FSE business.

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Cost of revenues benefited from the Restructuring Initiatives and the Temporary Actions.

The year to date results include charges of $2.1 million associated with ongoing restructuring initiatives.

As a percentage of revenues, gross profit margin was 8.5% for the six months ended June 30, 2020 compared to 13.5% for the six months ended June 30, 2019.

The nine months ended September 30, 2020 results include charges of $3.2 million associated with ongoing restructuring initiatives.

As a percentage of revenues, gross profit margin was 10.2% for the nine months ended September 30, 2020 compared to 13.3% for the nine months ended September 30, 2019.

Selling, General and Administrative Expenses .

SG&A expenses increased $1.6 million compared to the six months ended June 30, 2019.

SG&A expenses increased $1.5 million compared to the nine months ended September 30, 2019.

Before giving effect to certain charges, SG&A expenses reduced by $13.4 million due the Restructuring Initiatives and the Temporary Actions taken in response to the COVID-19 pandemic.

These reductions were offset by a $3.5 million charge for future milestone payments related to the performance of the FSE business, charges of $1.0 million associated with ongoing restructuring initiatives, charges of $2.8 million associated with the 2019 restatement investigation that resulted in the restatement of the Company’s financial statements and $2.3 million in costs associated with the CEO transition.

These reductions were offset by a $4.1 million charge for future milestone payments related to the performance of the FSE business, a $1.1 million charge related to the abandonment of the R&D building, charges of $1.0 million associated with ongoing restructuring initiatives, charges of $3.3 million associated with the 2018 and quarterly 2019 financial statements restatement investigation that resulted in the restatement of the Company’s financial statements and $2.3 million in costs a ssociated with the CEO transition.

Impairment Expense .

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 recognized a $27.1 million impairment of goodwill for the six months ended June 30, 2020.

Additionally, the Company determined it had and impairment indicator of long-lived assets due to market conditions resulting in an impairment of $1.9 million for the six months ended June 30, 2020.

Accordingly, we recognized a $27.1 million impairment of goodwill for the nine months ended September 30, 2020.

Additionally, the Company determined it had and impairment indicator of long-lived assets due to market conditions resulting in an impairment of $1.9 million for the nine months ended September 30, 2020.

Interest and Other Expense .

Interest, associated with our debt, and other expense was $10.5 million and $11.9 million for the six months ended June 30, 2020 and 2019, respectively.

The decrease is primarily attributable to the prior year $2.5 million non-cash charge associated with the early payout of benefits to term vested participants in the U.S.

Interest associated with our debt, and other expense was $16.1 million and $15.7 million for the nine months ended September 30, 2020 and 2019, respectively.

The increase in interest and other expense primarily related to a $3.6 million Payment In Kind interest expense resulting from the loan amendment that occurred in the second quarter of 2020 and unfavorable change in foreign exchange translation adjustments and amortization of deferred financing fees of $1.6 million.

The offset to this increase is primarily attributable to the prior year $2.5 million non-cash charge associated with the early payout of benefits to term vested participants in the U.S.

pension plan, which reduced future financial risk associated with the U.S.

Pension Plan and contributed to an improvement in funded status to approximately 100%.

Partially offsetting this decrease were unfavorable foreign exchange translation adjustments of $0.7 million in the six months ended June 30, 2020 compared to a favorable foreign exchange translation adjustment gain in the prior year of $0.1 million.

Additionally in the third quarter of 2020, the Company incurred lower interest expense of $1.2 million due to lower interest rates and had a favorable interest rate swap adjustments of $0.9 million.

(Benefit) Provision for Income Taxes.

An income tax benefit of $10.4 million and an income tax provision of $5.4 million were recorded for the six months ended June 30, 2020 and 2019, respectively.

The period over period change in income tax was primarily attributable to the pre-tax loss sustained in the current period versus the pre-tax income generated in the prior year period.

The income tax benefit for the six months ended June 30, 2020, was calculated based the Company's actual effective tax rate for the current year-to-date period due to significant market uncertainty.

See Note 15 of the "Notes to Condensed Consolidated Financial Statements" for additional details.

An income tax benefit of $11.4 million and an income tax provision of $5.9 million were recorded for the nine months ended September 30, 2020 and 2019, respectively.

The period over period change in income tax was primarily attributable to the $44.3 million pre-tax loss sustained in the current period versus the $29.2 million pre-tax income generated in the prior year period.

The period over period change was also favorably impacted by a $2.0 million income tax benefit recorded in the current period for the impact of GILTI, offset by a smaller income tax benefit for period-specific tax adjustments recorded in the current versus prior year period.

During the nine months ended September 30, 2020, the Company recorded a $2.0 million U.S.

Net (Loss) Income.

Net loss was $37.1 million for the six months ended June 30, 2020 compared to $16.1 million net income for the six months ended June 30, 2019.

Net loss was $32.9 million for the nine months ended September 30, 2020 compared to $23.3 million net income for the nine months ended September 30, 2019.

The decrease in net income is attributable to the factors noted above.

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Electrical System Segment Results

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

The table below sets forth certain Electrical Systems Segment operating data for the six months ended June 30 (dollars are in thousands):

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

The table below sets forth certain Electrical Systems Segment operating data for the nine months ended September 30 (dollars are in thousands):

(as restated) $ Change % Change

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• a $112.4 million, or 51.1%, decrease in OEM North American MD/HD Truck revenues;

• a $17.5 million, or 38.5%, decrease in OEM construction equipment revenues;

• a $57.1 million, or 340.0% increase in industrial and military revenues primarily attributable to the FSE acquisition;

• a $26.0 million, or 35.3%, decrease in OEM construction equipment revenues;

• a $11.5 million, or 24.2%, decrease in aftermarket and OES revenues;

• a $16.8 million, or 15.0%, decrease in other revenues.

These sharp market declines were partially offset by increased sales in industrial and military end markets we serve through the FSE business Electrical System Segment revenues were adversely impacted by foreign currency exchange translation of $0.9 million, which is reflected in the change in revenues above.

These sharp market declines were partially offset by increased sales in industrial and military end markets we serve through the FSE business.

Electrical System Segment revenues were adversely impacted by foreign currency exchange translation of $0.7 million, which is reflected in the change in revenues above.

Gross Profit.

The decrease in gross profit was primarily attributable to the decrease in sales volume.

Included in gross profit is cost of revenues, which decreased $74.2 million, or 29.9%, as a result of a decrease in raw material and purchased component costs of $53.1 million, or 33.5%;

Included in gross profit is cost of revenues, which decreased $83.6 million, or 23.0%, as a result of a decrease in raw material and purchased component

costs of $56.7 million, or 24.5%;

a decrease in wages and benefits of $8.5 million, or 24.1%;

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Cost of revenues benefited from the Restructuring Initiatives and the Temporary Actions.

The year to date results include charges of $1.6 million associated with ongoing restructuring initiatives.

As a percentage of revenues, gross profit margin was 6.5% for the six months ended June 30, 2020 compared to 13.0% for the six months ended June 30, 2019.

The nine months ended September 30, 2020 results include charges of $2.3 million associated with ongoing restructuring initiatives.

As a percentage of revenues, gross profit margin was 9.2% for the nine months ended September 30, 2020 compared to 13.0% for the nine months ended September 30, 2019.

Selling, General and Administrative Expenses .

SG&A expenses increased $2.7 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

SG&A expenses increased $1.8 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Before giving effect to certain charges, SG&A expenses reduced by $2.6 million due the Restructuring Initiatives and the Temporary Actions taken in response to the COVID-19 pandemic.

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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 recognized a $22.3 million impairment of goodwill and an impairment of long-lived assets of $1.1 million for the six months ended June 30, 2020.

Accordingly, we recognized a $22.3 million impairment of goodwill and an impairment of long-lived assets of $1.1 million for the nine months ended September 30, 2020.

Global Seating Segment Results

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

The table below sets forth certain Global Seating Segment operating data for the six months ended June 30 (dollars are in thousands):

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

The table below sets forth certain Global Seating Segment operating data for the nine months ended September 30 (dollars are in thousands):

(as restated) $ Change % Change

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Impairment Expense $ 4,809 $ — $ 4,809 100.0 %

Operating (Loss) Income $ 1,172 $ 17,682 $ (16,510) (93.4) %

Operating Income $ 5,945 $ 24,835 $ (18,890) (76.1) %

The decrease in Global Seating Segment revenues resulted from:

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• a $3.6 million, or 8.0%, decrease in other revenues.

Global Seating Segment revenues were adversely impacted by foreign currency exchange translation of $1.4 million, which is reflected in the change in revenues above.

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Cost of revenues benefited from the Restructuring Initiatives and the Temporary Actions.

The year to date results include charges of $0.5 million associated with ongoing restructuring initiatives.

As a percentage of revenues, gross profit margin was 11.3% for the six months ended June 30, 2020 compared to 13.6% for the six months ended June 30, 2019.

The nine months ended September 30, 2020 results include charges of $0.8 million associated with ongoing restructuring initiatives.

As a percentage of revenues, gross profit margin was 11.6% for the nine months ended September 30, 2020 compared to 13.4% for the nine months ended September 30, 2019.

Selling, General and Administrative Expenses .

SG&A expenses decreased $2.0 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

SG&A expenses decreased $3.6 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Before giving effect to certain charges, SG&A expenses reduced by $3.8 million due the Restructuring Initiatives and the Temporary Actions taken in response to the COVID-19 pandemic.

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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 recognized a $4.8 million impairment of goodwill for the six months ended June 30, 2020.

Accordingly, we recognized a $4.8 million impairment of goodwill for the nine months ended September 30, 2020.

Critical Accounting Policies and Estimates

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As a result, we impaired the full value of our goodwill, $27.1 million.

We also recorded impairments of long-lived assets of $1.9 million based on certain other

impairment indicators for the six months ended June 30, 2020.

We are not aware of other specific events or circumstances that would require updates to our estimates or judgments or require us to revise the carrying value of our long-lived assets, including property, plant and equipment and definite-lived intangible assets as of June 30, 2020 or August 10, 2020, the date of issuance of this Quarterly Report on Form 10-Q.

We also recorded impairments of long-lived assets of $1.9 million based on certain other impairment indicators for the nine months ended September 30, 2020.

We are not aware of other specific events or circumstances that would require updates to our estimates or judgments or require us to revise the carrying value of our long-lived assets, including property, plant and equipment and definite-lived intangible assets as of September 30, 2020 or November 9, 2020, the date of issuance of this Quarterly Report on Form 10-Q.

These estimates may change as new events occur and additional information is obtained.

Actual results may differ from these estimates under different assumptions and conditions.

There were no other significant changes in our critical accounting estimates during the six months ended June 30, 2020 compared to those previously disclosed in “Critical Accounting Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2019 Form 10-K and Q1 2020 Form 10-Q.

There were no other significant changes in our critical accounting estimates during the nine months ended September 30, 2020 compared to those previously disclosed in “Critical Accounting Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2019 Form 10-K and Q2 2020 Form 10-Q.

Liquidity and Capital Resources

The Company borrowed $15.0 million under its revolving credit facility during the six months ended June 30, 2020.

At June 30, 2020, the Company had liquidity of $106.6 million;

The Company borrowed and repaid $15.0 million under its revolving credit facility during the nine months ended September 30, 2020.

In September 2020, the Company paid an additional $5.0 million of principal on the Term Loan Facility.

At September 30, 2020, the Company had liquidity of $126.2 million;

$53.6 million of cash and $72.6 million of availability from the revolving credit facility.

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(2) to invest in growth;

(3) to reduce debt;

and (4) to return capital to our shareholders.

Our primary sources of liquidity during the six months ended June 30, 2020 were cash reserves and availability under our revolving credit facility.

and (3) to reduce debt.

Our primary sources of liquidity during the nine months ended September 30, 2020 were cash reserves and availability under our revolving credit facility.

We believe that these sources of liquidity will provide adequate funds for our working capital needs, capital expenditures and debt service throughout the next twelve months.

However, no assurance can be given that this will be the case.

As of June 30, 2020, we had $15.0 million borrowings under our revolving credit facility and had borrowing availability of $43.2 million.

For the six months ended June 30, 2020, net cash provided by operating activities was $20.5 million compared to $8.7 million for the six months ended June 30, 2019.

The improvement in net cash provided by operating activities is primarily attributable to the reduction in working capital associated with the sales declines in the six months ended June 30, 2020 as compared to the to the prior year period.

As of September 30, 2020, we had no outstanding borrowings under our revolving credit facility and had borrowing availability of $72.6 million.

For the nine months ended September 30, 2020, net cash provided by operating activities was $30.8 million compared to $28.5 million for the nine months ended September 30, 2019.

The improvement in net cash provided by operating activities is primarily attributable to the reduction in working capital associated with the sales declines in the nine months ended September 30, 2020 as compared to the to the prior year period.

The cash generated by the working capital reduction was partially offset by the net loss in the current period compared to net income in the prior year period.

For the six months ended June 30, 2020, net cash used in investing activities was $4.4 million compared to $12.8 million for the six months ended June 30, 2019.

For the nine months ended September 30, 2020, net cash used in investing activities was $5.5 million compared to $52.7 million for the nine months ended September 30, 2019.

The decrease in investing activity is primarily due to the FSE Acquisition for $34.0 million completed within three months ended September 30, 2019.

In 2020, we expect capital expenditures to be in the range of $8 to $12 million.

For the six months ended June 30, 2020, net cash provided by financing activities was $10.0 million compared to net cash used in financing activities of $6.6 million for the six months ended June 30, 2019.

Net cash provided by financing activities for the six months ended June 30, 2020 is attributable to $15.0 million of borrowings under the revolving credit facility offset by repayments of the senior secured term loan credit facility.

Net cash used in financing activities for the six months ended June 30, 2019 is attributable to repayments of the senior secured term loan credit facility, including an excess cash flow payment on the facility.

As of June 30, 2020, cash of $42.1 million was held by foreign subsidiaries.

The Company currently maintains a $0.8 million deferred tax liability for the future income tax implications of repatriating earnings from the foreign subsidiaries for which it is not making the indefinite reinvestment assertion.

For the nine months ended September 30, 2020, net cash provided by financing activities was $11.2 million compared to net cash used in financing activities of $6.7 million for the nine months ended September 30, 2019.

Net cash provided by financing activities for the nine months ended September 30, 2020 is attributable to additional repayment of $5.0 million of the senior secured term loan credit facility.

Net cash used in financing activities for the nine months ended September 30, 2019 is attributable to repayments of the senior secured term loan credit facility, including an excess cash flow payment on the facility.

As of September 30, 2020, cash of $45.7 million was held by foreign subsidiaries.

The Company plans to repatriate between $7.0 million and $9.0 million from its foreign subsidiaries and a deferred tax liability of $0.8 million has been accrued for the expected future income tax implications .

Debt and Credit Facilities

The debt and credit facilities descriptions in Note 14 of the "Notes to Condensed Consolidated Financial Statements" are incorporated in this section by reference.

The debt and credit facilities descriptions in Note 14, Debt and Credit Facilities of the "Notes to Condensed Consolidated Financial Statements" are incorporated in this section by reference.

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

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Covenants and Liquidity

Our ability to comply with the covenants in the TLS Agreement and the Third ARLS Agreement, as discussed in Note 14, may be affected by economic or business conditions beyond our control.

Based on our current forecast, we believe that we will be able to maintain compliance with the financial maintenance covenants and the fixed charge coverage ratio covenant, if applicable, and other covenants in the TLS Agreement and the Third ARLS Agreement for the next twelve months as amended in accordance with Note 14;

Our ability to comply with the covenants in the TLS Agreement and the Third ARLS Agreement, as discussed in Note 14, Debt and Credit Facilities, may be affected by economic or business conditions beyond our control.

however, no assurances can be given that we will be able to comply.

We base our forecasts on

historical experience, industry forecasts and other assumptions that we believe are reasonable under the circumstances.

We base our forecasts on historical experience, industry forecasts and other assumptions that we believe are reasonable under the circumstances.

If actual results are substantially different than our current forecast we may not be able to comply with our financial covenants.

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Investors are warned that actual results may differ from management’s expectations.

In particular, this Form 10-Q may contain forward-looking statements about Company expectations for future periods with respect to its plans to improve financial results and enhance the Company, the future of the Company’s end markets, including the short-term and potential longer-term impact of the COVID-19 pandemic on Class 8 and Class 5-7 North America truck build rates and performance of the global construction equipment business, expected cost savings, the Company’s initiatives to address customer needs, organic growth, the Company’s plans to focus on certain segments and markets and the Company’s financial position or other financial information.

In particular, this Form 10-Q may contain forward-looking statements about Company expectations for future periods with respect to its plans to improve financial results and enhance the Company, the future of the Company’s end markets, including the short-term and long-term impact of the COVID-19 pandemic on our business, including the impact on Class 8 and Class 5-7 North America truck build rates and performance of the global construction equipment business, expected cost savings, the Company’s initiatives to address customer needs, organic growth, the Company’s plans to focus on certain segments and markets and the Company’s financial position or other financial information.

These statements are based on certain assumptions that the Company has made in light of its experience as well as its perspective on historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances.

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(x) the impact of changes in governmental regulations on the Company's customers or on its business;

(xi) the loss of business from a major customer, a collection of smaller customers or the discontinuation of particular commercial vehicle platforms;

(xi) the loss of business from a major customer, a collection of

smaller customers or the discontinuation of particular commercial vehicle platforms;

(xii) the Company’s ability to obtain future financing due to changes in the lending markets or its financial position;

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(xxiii) the impact of health epidemics or widespread outbreak of contagious disease;

and (xxiv) various other risks as outlined under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for fiscal year ending December 31, 2019 and the Company's fillings with the SEC.

There can be no assurance that statements made in this Form 10-Q relating to future events will be achieved.

The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future

operating results over time.

The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements.

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 2. Management’s Discussion and Analysis