Commercial Vehicle Group, Inc. 10-Q

ITEM 1 – FINANCIAL STATEMENTS 1 Table of Contents COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2020 December 31, 2019 (Unaudited) (In thousands, except per share amounts) Assets Current Assets: Cash $ 53,601 $ 39,511 Accounts receivable, net of allowances of $ 583 and $ 432 , respectively 128,648 115,099 Inventories 83,303 82,872 Other current assets 13,031 18,490 Total current assets 278,583 255,972 Property, plant and equipment, net of accumulated depreciation of $ 156,780 and $ 154,939 , respectively 64,556 73,686 Operating lease right-of-use assets, net 31,107 34,960 Goodwill — 27,816 Intangible assets, net of accumulated amortization of $ 13,913 and $ 11,440 , respectively 22,584 25,258 Deferred income taxes 28,109 14,654 Other assets, net 2,178 3,480 Total assets $ 427,117 $ 435,826 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable $ 89,435 $ 63,058 Current operating lease liabilities 8,874 7,620 Accrued liabilities and other 36,445 32,673 Current portion of long-term debt 2,435 3,256 Total current liabilities 137,189 106,607 Long-term debt 147,965 153,128 Operating lease liabilities 25,135 29,414 Pension and other post-retirement benefits 10,382 10,666 Other long-term liabilities 11,101 7,323 Total liabilities 331,772 307,138 Stockholders’ Equity: Preferred stock, $ 0.01 par value ( 5,000,000 shares authorized; no shares issued and outstanding) — — Common stock, $ 0.01 par value ( 60,000,000 shares authorized; 30,985,669 and 30,801,255 shares issued and outstanding respectively) 310 323 Treasury stock, at cost: 1,464,392 shares, as of September 2020 and December 2019 ( 11,230 ) ( 11,230 ) Additional paid-in capital 248,323 245,852 Retained deficit ( 93,220 ) ( 60,307 ) Accumulated other comprehensive loss ( 48,838 ) ( 45,950 ) Total stockholders’ equity 95,345 128,688 Total liabilities and stockholders’ equity $ 427,117 $ 435,826 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 2 Table of Contents COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 (as restated) 2020 2019 (as restated) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (In thousands, except per share amounts) Revenues $ 187,697 $ 225,399 $ 501,698 $ 711,753 Cost of Revenues 163,538 195,955 450,761 616,784 Gross Profit 24,159 29,444 50,937 94,969 Selling, General and Administrative Expenses 14,408 17,531 47,491 48,978 Amortization Expense 858 437 2,575 1,080 Impairment Expense — — 29,017 — Operating (Loss) Income 8,893 11,476 ( 28,146 ) 44,911 Interest and Other Expense 5,674 3,800 16,142 15,686 (Loss) Income Before Provision for Income Taxes 3,219 7,676 ( 44,288 ) 29,225 (Benefit) Provision for Income Taxes ( 959 ) 496 ( 11,375 ) 5,913 Net (Loss) Income $ 4,178 $ 7,180 $ ( 32,913 ) $ 23,312 (Loss) Earnings per Common Share: Basic $ 0.13 $ 0.23 $ ( 1.07 ) $ 0.76 Diluted $ 0.13 $ 0.23 $ ( 1.07 ) $ 0.76 Weighted Average Shares Outstanding: Basic 30,986 30,581 30,894 30,547 Diluted 31,617 30,852 30,894 30,829 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 Table of Contents COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 (as restated) 2020 2019 (as restated) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (In thousands) (In thousands) Net (loss) income $ 4,178 $ 7,180 $ ( 32,913 ) $ 23,312 Other comprehensive (loss) income: Foreign currency exchange translation adjustments 2,628 ( 3,388 ) ( 257 ) ( 3,051 ) Minimum pension liability, net of tax ( 957 ) ( 2,095 ) ( 1,850 ) ( 1,005 ) Derivative instrument, net of tax 893 ( 515 ) ( 781 ) ( 193 ) Other comprehensive (loss) income 2,564 ( 5,998 ) ( 2,888 ) ( 4,249 ) Comprehensive (loss) income $ 6,742 $ 1,182 $ ( 35,801 ) $ 19,063 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 Table of Contents COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Treasury Stock Additional Paid In Capital Retained Deficit Accumulated Other Comp. Loss Total CVG Stockholders’ Equity Shares Amount (Unaudited) (In thousands, except per share amounts) Balance - December 31, 2019 30,801,255 $ 323 $ ( 11,230 ) $ 245,852 $ ( 60,307 ) $ ( 45,950 ) $ 128,688 Share-based compensation expense 184,414 ( 13 ) — 2,471 — — 2,458 Total comprehensive loss — — — — ( 32,913 ) ( 2,888 ) ( 35,801 ) Balance - September 30, 2020 30,985,669 $ 310 $ ( 11,230 ) $ 248,323 $ ( 93,220 ) $ ( 48,838 ) $ 95,345 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Contents COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2020 2019 (as restated) (Unaudited) (Unaudited) (In thousands) Cash Flows from Operating Activities: Net (Loss) Income $ ( 32,913 ) $ 23,312 Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 13,835 10,865 Impairment expense 29,017 — Non-cash amortization of debt financing costs 1,365 1,030 Shared-based compensation expense 2,471 2,200 Payment in kind interest expense 3,649 — Deferred income taxes ( 13,267 ) 1,840 Non-cash loss on derivative contracts 2,038 2,092 Change in other operating items: Accounts receivable ( 13,686 ) ( 20,454 ) Inventories ( 626 ) 1,191 Prepaid expenses 2,539 ( 2,607 ) Accounts payable 26,856 3,272 Other operating activities, net 9,494 5,767 Net cash provided by operating activities 30,772 28,508 Cash Flows from Investing Activities: Purchases of property, plant and equipment ( 6,021 ) ( 18,743 ) Proceeds from disposal/sale of property, plant and equipment 569 20 Payments for acquisition of business — ( 34,000 ) Net cash used in investing activities ( 5,452 ) ( 52,723 ) Cash Flows from Financing Activities: Borrowing of Revolving Credit Facility 15,000 8,500 Repayment of Revolving Credit Facility ( 15,000 ) ( 8,500 ) Loan amendment costs ( 2,579 ) — Repayment of Term Loan ( 8,281 ) ( 6,338 ) Other financing activities ( 339 ) ( 381 ) Net cash provided by (used in) financing activities ( 11,199 ) ( 6,719 ) Effect of Foreign Currency Exchange Rate Changes on Cash ( 31 ) ( 1,276 ) Net Increase (Decrease) in Cash 14,090 ( 32,210 ) Cash: Beginning of period 39,511 70,913 End of period $ 53,601 $ 38,703 Supplemental Cash Flow Information: Cash paid for interest $ 9,317 $ 10,212 Cash paid for income taxes, net $ 906 $ 5,530 Unpaid purchases of property and equipment included in accounts payable $ 108 $ 155 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 Table of Contents COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Description of Business and Basis of Presentation Commercial Vehicle Group, Inc. (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 . References herein to the "Company", "CVG", "we", "our", or "us" refer to Commercial Vehicle Group, Inc. and its subsidiaries. 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 primarily manufacture 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. 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”). The information furnished in the unaudited condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to make the information presented not misleading when read in conjunction with our fiscal 2019 consolidated financial statements and the notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K ("2019 Form 10-K") as filed with the SEC on March 16, 2020. Unless otherwise indicated, all amounts are in thousands, except share and per share amounts. Certain changes to presentation of balances in the Condensed Consolidated Statement of Operations have been made to conform to current year presentation. S EGMENTS Operating segments are defined as components of an enterprise that are evaluated regularly by the Company’s chief operating decision maker (“CODM”), which is our President and Chief Executive Officer. Each of these segments consists of a number of manufacturing facilities. Certain of our facilities manufacture and sell products through both of our segments. Each manufacturing facility that sells products through both segments is reflected in the financial results of the segment that has the greatest amount of revenues from that manufacturing facility. Our segments are more specifically described below. The Electrical Systems Segment manufactures and sells the following products: • Electrical wire harnesses, control panels, electro-mechanical and cable assemblies primarily for the construction, agricultural, industrial, automotive, truck, mining, rail and military industries in North America, Europe and Asia-Pacific; • Plastic components ("Trim") primarily for the North America medium- and heavy-duty truck ("MD/HD Truck") market; • Mirrors, wipers and controls primarily for the truck, bus, agriculture, construction, rail and military markets in North America and Europe; • Cab structures for the North American MD/HD Truck market; and • Warehouse automation subsystems. The Global Seating Segment manufactures and sells the following products: • Seats and seating systems ("Seats") primarily to the MD/HD Truck, construction, agriculture and mining markets in North America, Asia-Pacific and Europe; • Office seating in Europe and Asia-Pacific; and • Aftermarket seats and components in North America, Europe and Asia-Pacific. 7 Table of Contents Corporate expenses consist of certain overhead and shared costs that are not directly attributable to the operations of a segment. For purposes of business segment performance measurement, some of these costs that are for the benefit of the operations are allocated based on a combination of methodologies. The costs that are not allocated to a segment are considered stewardship costs and remain at corporate in our segment reporting. 2. Recently Issued Accounting Pronouncements In March 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-04, "Reference Rate Reform (Topic 848)". 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. Accounting Pronouncements Implemented in the nine months ended September 30, 2020 In March 2020, the FASB issued ASU No. 2020-03, "Codification Improvements to Financial Instruments". The ASU clarifies disclosure guidance for fair value options, adds clarifications to the subsequent measurement of fair value, clarifies disclosure for depository and lending institutions, clarifies the line-of-credit or revolving-debt arrangements guidance, and the interaction of Financial Instruments - Credit Losses (Topic 326) with Leases (Topic 842) and Transfers and Servicing-Sales of Financial Assets (Subtopic 860-20). In accordance with ASU 2020-03, the Company adopted the guidance as of March 31, 2020. We were not materially impacted by the implementation of this pronouncement. In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment". ASU 2017-04 provides simplification for the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Annual impairment tests should be completed by comparing the fair value of a reporting unit to its carrying amount and impairment should not exceed the goodwill allocated to the reporting unit. Additionally, this ASU eliminated the requirement to assess reporting units with zero or negative carrying amounts. The Company implemented ASU 2017-04 as of January 1, 2020 with no material impact. Subsequent to such implementation, we fully impaired our goodwill. Refer to Note 11, Goodwill and Intangible Assets for more details. In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326)". The ASU requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The FASB subsequently issued ASU No. 2018-19, "Codification Improvements to Topic 326: Financial Instruments - Credit Losses", in November 2018 which provided further guidance on assessment of receivables for operating leases. ASU No. 2019-04, "Codification Improvements to Topic 326, Topic 815 and Topic 825" and ASU No. 2019-05, "Targeted Transition Relief", that were issued in April and May of 2019 do not materially impact the Company. In November 2019, the FASB issued ASU No. 2019-11, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses", which further clarified and improved the Codification to make it easier to understand and apply. The Company implemented ASU 2016-13, ASU 2018-19 and ASU 2019-11 as of January 1, 2020 and the ASUs did not have a material impact on the Company's consolidated financial statements. 3. Restatement of Previously Issued Consolidated Financial Statements 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. 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, 8 Table of Contents 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 September 30, 2019. The restatement references identified in the following tables directly correlate to the restatement adjustments detailed below. The restatement adjustments and error correction and their impact on previously reported consolidated financial statements are described below. (a) Understatement of cost of revenues and impacted balance sheet accounts - Corrections for the understatement of cost of revenues by improperly capitalizing certain manufacturing expenses. Balance sheet accounts adjusted as a result of the improper capitalization of expenses include other current assets, accounts receivable, net of allowances and construction in progress. (b) Property, plant and equipment, net - We recorded an adjustment for a previously identified property, plant and equipment, net error unrelated to the understatement of cost of revenues and related balance sheet accounts misstatements. This PPE was no longer in service as of the year ended December 31, 2016. COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 As Previously Reported Restatement Adjustments As Restated As Previously Reported Restatement Adjustments As Restated Restatement References Revenues $ 225,399 $ — $ 225,399 $ 711,753 $ — $ 711,753 Cost of Revenues 194,195 1,760 195,955 612,206 4,578 616,784 a, b Gross profit 31,204 ( 1,760 ) 29,444 99,547 ( 4,578 ) 94,969 Selling, General and Administrative Expenses 17,531 — 17,531 48,978 — 48,978 Amortization Expense 437 — 437 1,080 — 1,080 Operating Income 13,236 ( 1,760 ) 11,476 49,489 ( 4,578 ) 44,911 Interest and Other Expense 3,800 — 3,800 15,686 — 15,686 Income before provision for income taxes 9,436 ( 1,760 ) 7,676 33,803 ( 4,578 ) 29,225 a, b Provision for Income Taxes 916 ( 420 ) 496 6,976 ( 1,063 ) 5,913 a, b Net Income $ 8,520 $ ( 1,340 ) $ 7,180 $ 26,827 $ ( 3,515 ) $ 23,312 Income per share attributable to common stockholders: Basic $ 0.28 $ ( 0.04 ) $ 0.23 $ 0.88 $ ( 0.12 ) $ 0.76 Diluted $ 0.28 $ ( 0.04 ) $ 0.23 $ 0.87 $ ( 0.11 ) $ 0.76 Weighted average common shares outstanding: Basic 30,581 30,581 30,581 30,547 30,547 30,547 Diluted 30,852 30,852 30,852 30,829 30,829 30,829 For the three months ended September 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 $ 1.7 million increase in cost of revenues; a $ 0.4 million decrease in provision for income taxes; and a $ 1.3 million decrease in net income. 9 Table of Contents (b) Property, plant and equipment, net error correction. The immaterial error correction of property, plant and equipment, net, resulted in an immaterial decrease in cost of revenues; an immaterial increase in provision for income taxes; and an immaterial increase in net income. For the nine months ended September 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 $ 4.7 million increase in cost of revenues; a $ 1.1 million decrease in provision for income taxes; and a $ 3.6 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 (Unaudited) Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 As Previously Reported Restatement Adjustments As Restated As Previously Reported Restatement Adjustments As Restated Restatement References Net Income $ 8,520 $ ( 1,340 ) $ 7,180 $ 26,827 $ ( 3,515 ) $ 23,312 a, b Other comprehensive income (loss): — — Foreign currency translation adjustments ( 3,388 ) — ( 3,388 ) ( 3,051 ) — ( 3,051 ) Minimum pension liability, net of tax ( 2,095 ) — ( 2,095 ) ( 1,005 ) — ( 1,005 ) Derivative instrument ( 515 ) — ( 515 ) ( 193 ) — ( 193 ) Other comprehensive income ( 5,998 ) — ( 5,998 ) ( 4,249 ) — ( 4,249 ) Comprehensive income $ 2,522 $ ( 1,340 ) $ 1,182 $ 22,578 $ ( 3,515 ) $ 19,063 For the three months ended September 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 $ 1.3 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 an immaterial increase in net income. Refer to descriptions of the adjustment and its impact to net income above. For the nine months ended September 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 $ 3.6 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. 10 Table of Contents COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2019 As Previously Reported Restatement Adjustments As Restated Restatement References Cash Flows from Operating Activities: Net Income $ 26,827 $ ( 3,515 ) $ 23,312 a, b Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 10,976 ( 111 ) 10,865 b Non-cash amortization of debt financing costs 1,030 — 1,030 Shared-based compensation expense 2,200 — 2,200 Deferred income taxes 2,903 ( 1,063 ) 1,840 a, b Non-cash loss / (gain) on derivative contracts 2,092 — 2,092 Change in other operating items: Accounts receivable ( 19,765 ) ( 689 ) ( 20,454 ) a Inventories 1,191 — 1,191 Prepaid expenses ( 7,458 ) 4,851 ( 2,607 ) a Accounts payable 3,272 — 3,272 Other operating activities, net 5,767 — 5,767 Net cash provided by operating activities 29,035 ( 527 ) 28,508 Cash Flows from Investing Activities: Purchases of property, plant and equipment ( 19,270 ) 527 ( 18,743 ) a Proceeds from disposal/sale of property, plant and equipment 20 — 20 Payments for acquisitions ( 34,000 ) — ( 34,000 ) Net cash used in investing activities ( 53,250 ) 527 ( 52,723 ) Cash Flows from Financing Activities: Borrowings on Revolving Credit Facility 8,500 — 8,500 Repayment of Revolving Credit Facility ( 8,500 ) — ( 8,500 ) Repayment of Term Loan ( 6,338 ) — ( 6,338 ) Other financing activities ( 381 ) — ( 381 ) Net cash used in financing activities ( 6,719 ) — ( 6,719 ) Effect of Foreign Currency Exchange Rate Changes on Cash ( 1,276 ) — ( 1,276 ) Net Decrease in Cash ( 32,210 ) — ( 32,210 ) Cash: Beginning of period 70,913 — 70,913 End of period $ 38,703 $ — $ 38,703 Supplemental Cash Flow Information: Cash paid for interest $ 10,212 $ — $ 10,212 Cash paid for income taxes, net $ 5,530 $ — $ 5,530 Unpaid purchases of property and equipment included in accounts payable $ 155 $ — $ 155 11 Table of Contents For the nine months ended September 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 $ 3.6 million decrease in net income; a $ 1.1 million decrease in deferred income tax; a $ 0.7 million increase in change in accounts receivable, a $ 4.9 million decrease in change in prepaid expenses; and a $ 0.5 million decrease 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 a $ 0.1 million increase in net income; a $ 0.1 million decrease in depreciation expense; and an immaterial increase in deferred income tax. 4. Revenue Recognition Our products include electrical wire harnesses, control panels, electro-mechanical and cable assemblies; Trim; Seats; and cab structures and sleeper boxes; mirrors, wipers, controls and warehouse automation subsystems. We sell these products, except warehouse automation subsystems, 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. We sell warehouse automation subsystems to warehouse automation customers. 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. Contractual Arrangements Revenue is measured based on terms and conditions specified in contracts or purchase orders with customers. We have long-term contracts with some customers that govern overall terms and conditions which are accompanied by purchase orders that define specific order quantities and/or price. We have many customers with which we conduct business for which the terms and conditions are outlined in purchase orders without a long-term contract. We generally do not have customer contracts with minimum order quantity requirements. Amount and Timing of Revenue Recognition The transaction price is based on the consideration to which the Company will be entitled in exchange for transferring control of a product to the customer. This is defined in a purchase order or in a separate pricing arrangement and represents the stand-alone selling price. Our payment terms vary by customer. None of the Company's contracts as of September 30, 2020, contained a significant financing component. We typically do not have multiple performance obligations requiring us to allocate a transaction price. We recognize revenue at the point in time when we satisfy a performance obligation by transferring control of a product to a customer, usually at a designated shipping point and in accordance with customer specifications. Estimates are made for variable consideration resulting from quality, delivery, discounts or other issues affecting the value of revenue and accounts receivable. This amount is estimated based on historical trends and current market conditions, and only amounts deemed collectible are recognized as revenues. Other Matters Shipping and handling costs billed to customers are recorded in revenues and costs associated with outbound freight are generally accounted for as a fulfillment cost and are included in cost of revenues. We generally do not provide for extended warranties or material customer incentives. Our customers typically do not have a general right of return for our products. We had outstanding customer accounts receivable, net of allowances, of $ 128.6 million as of September 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 that impact our recognition of revenue. Refer to Note 16, Segment Reporting for revenue disclosures by reportable segments. 12 Table of Contents 5. Fair Value Measurement Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 - Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. 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, 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. Foreign Currency Forward Exchange Contracts. Our derivative assets and liabilities represent foreign exchange contracts that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk and counterparty credit risk. Based on the utilization of these inputs, the derivative assets and liabilities are classified as Level 2. To manage our risk for transactions denominated in Mexican Pesos, we have entered into forward exchange contracts that are designated as cash flow hedge instruments, which are recorded in the Condensed Consolidated Balance Sheets at fair value. The gains and losses as a result of the changes in fair value of the hedge contract are deferred in accumulated other comprehensive loss and recognized in cost of revenues in the period the related hedge transactions are recognized. Refer to Note 17, Derivative Contracts for additional disclosures. Interest Rate Swap Agreement. To manage our exposure to variable interest rates, we have entered into an agreement (the “Interest Rate Swap Agreement”) with Bank of America, N.A. whereby the Company has agreed to exchange, at a specified interval, the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount. The Interest Rate Swap Agreement is intended to mitigate the impact of rising interest rates on the Company and covers $ 80 million of outstanding debt under the senior secured term loan facility. The Company expects this agreement to remain effective during the remaining term of the Interest Rate Swap Agreement and records the impact of the agreement in interest and other expense in the Condensed Consolidated Statements of Operations. Refer to Note 17, Derivative Contracts for additional disclosures. The fair values of our derivative assets and liabilities and contingent consideration measured on a recurring basis are categorized as follows: September 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 $ 115 $ — $ 115 $ — $ 464 $ — $ 464 $ — Interest rate swap agreement 2 $ 1,127 $ — $ 1,127 $ — $ 150 $ — $ 150 $ — Derivative liabilities Foreign exchange contract 3 $ 530 $ — $ 530 $ — $ — $ — $ — $ — Interest rate swap agreement 3 $ 2,485 $ — $ 2,485 $ — $ 995 $ — $ 995 $ — Earnout liability Contingent consideration 4 $ 8,800 $ — $ — $ 8,800 $ 4,700 $ — $ — $ 4,700 Derivative equity Foreign exchange contract 5 $ ( 317 ) $ — $ ( 317 ) $ — $ 464 $ — $ 464 $ — 1. Presented in the Condensed Consolidated Balance Sheets in other current assets and other non-current assets and based on observable market transactions of spot and forward rates. 2. Presented in the Condensed Consolidated Balance Sheets in accrued liabilities and based on observable market transactions of forward rates. 13 Table of Contents 3. Presented in the Condensed Consolidated Balance Sheets in accrued liabilities and other and based on observable market transactions of forward rates. 4. Presented in the Condensed Consolidated Balance Sheets in accrued liabilities and other long term liabilities and based on a Monte Carlo valuation model. 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. Based on these inputs, our long-term debt fair value as disclosed is classified as Level 2. The carrying amounts and fair values of our long-term debt obligations are as follows: September 30, 2020 December 31, 2019 Carrying Amount Fair Value Carrying Amount Fair Value Term loan and security agreement 1 $ 150,400 $ 133,904 $ 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 $ 148.0 million as of September 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 nine months ended September 30, 2020, an impairment charge of $ 1.1 million was recognized for the Electrical Systems segment, $ 0.4 million related to an operating lease right-of-use asset and $ 0.7 million related to property, plant and equipment. Additionally, for the nine months ended September 30, 2020, an impairment charge of $ 0.8 million was recognized for the corporate aircraft and was based on the selling price, less selling costs, of $ 0.3 million. These impairment charges are presented in impairment expense in the Condensed Consolidated Statements of Operations. Goodwill Impairment. For the nine months ended September 30, 2020, an impairment charge of $ 27.1 million was recognized for goodwill and was based on the estimated fair values of goodwill for the reporting units compared to the net carrying values at March 31, 2020. The impairment charge is presented in impairment expense in the Condensed Consolidated Statements of Operations. No other non-recurring fair value measurements were assessed during the quarter ended September 30, 2020. 6. 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, 30,985,669 and 30,801,255 shares were issued and outstanding as of September 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 September 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. Diluted earnings per share presented is determined by dividing net income by the weighted average number of common shares and potential common shares outstanding during the period as determined by the Treasury Stock Method. Potential common shares are included in the diluted earnings per share calculation when dilutive. Diluted earnings per share for the three and nine months ended September 30, 2020 and 2019 includes the effect of potential common shares issuable when dilutive, and is as follows: 14 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 (as restated) 2020 2019 (as restated) Net (loss) income $ 4,178 $ 7,180 $ ( 32,913 ) $ 23,312 Weighted average number of common shares outstanding (in '000s) 30,986 30,581 30,894 30,547 Dilutive effect of restricted stock grants after application of the Treasury Stock Method (in '000s) 631 271 — 282 Dilutive shares outstanding 31,617 30,852 30,894 30,829 Basic (loss) earnings per share $ 0.13 $ 0.23 $ ( 1.07 ) $ 0.76 Diluted (loss) earnings per share $ 0.13 $ 0.23 $ ( 1.07 ) $ 0.76 The Company has adjusted certain prior period amounts for the restatement and immaterial corrections of error. See Note 3, Restatement of Previously Issued Consolidated Financial Statements for details. There were 282 thousand outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2020 and no outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per shares for the three months ended September 30, 2019. There were 256 thousand outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2020 and 18 thousand outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per shares for the nine months ended September 30, 2019. Dividends — We have not declared or paid any cash dividends in the past. The terms of our debt and credit facilities (as described in Note 14, Debt and Credit Facilities) restrict the payment or distribution of our cash and other assets, including cash dividend payments. The changes in stockholder's equity are as follows: Nine Months Ended September 30, 2020 Common Stock Treasury Stock Additional Paid In Capital Retained Deficit Accumulated Other Comp. Loss Total CVG Stockholders’ Equity Shares Amount Balance - December 31, 2019 30,801,255 $ 323 $ ( 11,230 ) $ 245,852 $ ( 60,307 ) $ ( 45,950 ) $ 128,688 Share-based compensation expense 46,014 — — 862 — — 862 Total comprehensive income — — — — ( 24,594 ) ( 8,030 ) ( 32,624 ) Balance - March 31, 2020 30,847,269 $ 323 $ ( 11,230 ) $ 246,714 $ ( 84,901 ) $ ( 53,980 ) $ 96,926 Share-based compensation expense 138,400 ( 14 ) — 868 — — 854 Total comprehensive income — — — — ( 12,497 ) 2,578 ( 9,919 ) Balance - June 30, 2020 30,985,669 $ 309 $ ( 11,230 ) $ 247,582 $ ( 97,398 ) $ ( 51,402 ) $ 87,861 Share-based compensation expense — 1 — 741 — — 742 Total comprehensive income — — — — 4,178 2,564 6,742 Balance - September 30, 2020 30,985,669 $ 310 $ ( 11,230 ) $ 248,323 $ ( 93,220 ) $ ( 48,838 ) $ 95,345 15 Table of Contents Nine Months Ended September 30, 2019 Common Stock Treasury Stock Additional Paid In Capital Retained Deficit 1 Accumulated Other Comp. Loss Total CVG Stockholders’ Equity Shares Amount Balance - December 31, 2018 (as restated) 30,512,843 $ 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 — — — — 9,986 ( 206 ) 9,780 Balance - March 31, 2019 (as restated) 30,512,843 $ 318 $ ( 10,245 ) $ 243,768 $ ( 66,099 ) $ ( 47,677 ) $ 120,065 Share-based compensation expense 68,431 1 — 718 — — 719 Total comprehensive income — — — — 6,146 1,955 8,101 Balance - June 30, 2019 (as restated) 30,581,274 $ 319 $ ( 10,245 ) $ 244,486 $ ( 59,953 ) $ ( 45,722 ) $ 128,885 Share-based compensation expense — — — 721 — — 721 Total comprehensive income — — — — 7,180 ( 5,998 ) 1,182 Balance - September 30, 2019 (as restated) 30,581,274 $ 319 $ ( 10,245 ) $ 245,207 $ ( 52,773 ) $ ( 51,720 ) $ 130,788 1. The Company has adjusted certain prior period amounts for the restatement and immaterial corrections of error. See Note 3, Restatement of Previously Issued Consolidated Financial Statements 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. 16 Table of Contents 7. Share-Based Compensation The company's outstanding share-based compensation is comprised solely of restricted stock awards. Restricted Stock Awards – Restricted stock awards are a grant of shares of common stock that may not be sold, encumbered or disposed of and that may be forfeited in the event of certain terminations of employment or in the case of the board of directors a separation for cause, prior to the end of a restricted period set by the Compensation Committee of the Board of Directors. 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 September 30, 2020: Grant Shares Granted (in thousands) Nonvested Shares (in thousands) Vesting Schedule Unearned Compensation Remaining Period to Vesting (in months) October 2017 303 51 3 equal annual installments commencing on October 20, 2018 $ 40.3 1 October 2018 382 130 3 equal annual installments commencing on October 20, 2019 $ 473.1 13 October 2019 12 10 3 equal annual installments commencing on October 20, 2020 $ 51.5 25 January 2020 149 134 3 equal annual installments commencing on October 20, 2020 $ 527.7 25 April 2020 646 520 3 equal annual installments commencing on December 31, 2022 $ 947.7 27 June 2020 210 210 Fully vests as of December 12, 2021 $ 432.8 14 June 2020 380 350 Fully vests as of June 12, 2022 $ 772.9 20 June 2020 185 185 Fully vests on the sooner of June 15, 2021 or the 2021 Annual Meeting of Stockholders $ 310.6 8 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 restricted stock grants for the nine months ended September 30, 2020 and 2019: Nine Months Ended September 30, 2019 2020 2019 Shares (in thousands) Weighted- Average Grant-Date Fair Value Shares (in thousands) Weighted- Average Grant-Date Fair Value Nonvested at beginning of the period 403 $ 7.72 760 $ 7.56 Granted 1,575 2.86 75 7.60 Vested ( 184 ) 5.79 ( 68 ) 8.38 Forfeited ( 204 ) 5.15 ( 21 ) 7.48 Nonvested at September 30 1,590 $ 3.46 746 $ 7.49 17 Table of Contents 8. 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”) 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. The award is to be paid out at the end of the Performance Period in cash only if the employee is employed through the end of the Performance Period. If the employee is not employed during the entire Performance Period, the award will be forfeited. 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 January 2020, November 2018 and 2017: Grant Date Grant Amount Adjustments Forfeitures Adjusted Award Value at September 30, 2020 Vesting Schedule Remaining Periods (in Months) to Vesting November 2017 $ 1,584 $ ( 262 ) $ ( 1,022 ) $ 300 November 2020 1 November 2018 1,590 ( 497 ) ( 1,093 ) — November 2021 13 January 2020 2,108 626 ( 844 ) 1,890 December 2022 26 $ 5,282 $ ( 133 ) $ ( 2,959 ) $ 2,190 Compensation expense of $ 0.3 million and $ 0.4 million was recognized for the three months ended September 30, 2020 and 2019, respectively. Compensation benefit of $ 0.8 million and compensation expense of $ 1.1 million was recognized for the nine months ended September 30, 2020 and 2019, respectively. Unrecognized compensation expense was $ 1.4 million and $ 1.6 million as of September 30, 2020 and 2019, respectively. 9. Accounts Receivable Trade accounts receivable are stated at current value less allowances, which approximates fair value. We review our receivables on an ongoing basis to ensure that they are properly valued and collectible. 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 and expected 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 was $ 0.6 million as of September 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 nine months ended September 30, 2020 by reportable segment: Nine Months Ended September 30, 2020 Electrical Systems Global Seating Total Balance - Beginning of period $ 49 $ 383 $ 432 Provisions 67 142 209 Utilizations ( 58 ) — ( 58 ) Currency translation adjustment 1 ( 1 ) — Balance - End of period $ 59 $ 524 $ 583 18 Table of Contents 10. Inventories Inventories are valued at the lower of first-in, first-out cost or market and are measured at the lower of cost or net realizable value. Cost includes applicable material, labor and overhead. Inventories consisted of the following: September 30, 2020 December 31, 2019 Raw materials $ 59,154 $ 57,742 Work in process 12,418 12,612 Finished goods 11,731 12,518 $ 83,303 $ 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. Excess and obsolete provisions may vary by product depending upon future potential use of the product. 11. Goodwill and Intangible Assets Goodwill represents the excess of acquisition purchase price over the fair value of net assets acquired. During the first quarter of 2020, as a result of the Company’s market capitalization value being less than the carrying value of its equity for a duration of time, the Company determined it had an impairment indicator. Accordingly, the Company estimated the fair value of each of the reporting units with goodwill by discounting the estimated cash flows of each reporting unit. The estimated fair values of the reporting units were then compared to their net carrying values as of March 31, 2020 and, as a result, the Company recognized $ 27.1 million impairment of goodwill, which represented the carrying amount of goodwill prior to the impairment charge. 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: September 30, 2020 December 31, 2019 Balance - Beginning of the period $ 27,816 $ 7,576 Finalization of FSE Purchase Accounting ( 537 ) 20,365 Goodwill impairment ( 27,074 ) — Currency translation adjustment ( 205 ) ( 125 ) Balance - Ending of the period $ — $ 27,816 Our definite-lived intangible assets were comprised of the following: September 30, 2020 December 31, 2019 Weighted- Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Trademarks/Tradenames 22 years $ 11,557 $ ( 4,558 ) $ 6,999 $ 11,553 $ ( 4,276 ) $ 7,277 Customer relationships 15 years 14,820 ( 7,246 ) 7,574 15,025 ( 6,574 ) 8,451 Technical know-how 5 years 9,790 ( 2,040 ) 7,750 9,790 ( 571 ) 9,219 Covenant not to compete 5 years 330 ( 69 ) 261 330 ( 19 ) 311 $ 36,497 $ ( 13,913 ) $ 22,584 $ 36,698 $ ( 11,440 ) $ 25,258 The aggregate intangible asset amortization expense was $ 0.9 million for the three months ended September 30, 2020 and $ 0.4 million for the three months ended September 30, 2019. The aggregate intangible asset amortization expense was $ 2.6 million and $ 1.1 million for the nine months ended September 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. 19 Table of Contents 12. Leases 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 eight 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 September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Operating lease cost 1 $ 3,665 $ 1,858 $ 8,693 $ 5,305 Finance lease cost Amortization of right-of-use assets 110 92 300 252 Interest on lease liabilities 11 16 34 46 Total finance lease cost 121 108 334 298 Short-term lease cost 2 922 1,793 2,988 5,557 Total lease expense $ 4,708 $ 3,759 $ 12,015 $ 11,160 1. The Company recognized accelerated lease costs of $ 1.1 million during the three months ended September 30, 2020 related to the corporate research and development center. 2. Includes variable lease costs, which are not significant Supplemental cash flow information related to leases is as follows: Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating leases $ 7,806 $ 5,200 Financing leases $ 339 $ 331 20 Table of Contents Supplemental balance sheet information related to leases is as follows: Balance Sheet Location September 30, 2020 December 31, 2019 Operating Leases Right-of-use assets, net Operating lease right-of-use assets, net $ 31,107 $ 34,960 Current liabilities Current operating lease liabilities 8,874 7,620 Non-current liabilities Operating lease liabilities 25,135 29,414 Total operating lease liabilities $ 34,009 $ 37,034 Finance Leases 1 Right-of-use assets $ 1,451 $ 1,135 Accumulated depreciation ( 595 ) ( 343 ) Right-of-use assets, net Other assets, net 856 792 Current liabilities Accrued liabilities and other 316 354 Non-current liabilities Other long-term liabilities 486 398 Total finance lease liabilities $ 802 $ 752 Weighted Average Remaining Lease Term Operating leases 4.7 years 5.0 years Finance leases 3.3 years 2.8 years Weighted Average Discount Rate Operating leases 8.1 % 9.1 % Finance leases 5.2 % 7.2 % 1. Note that all new Financing leases added during the nine months ended September 30, 2020 were executed before the loan amendment discussed in Note 14, Debt and Credit Facilities or May 11, 2020. Right-of-use Assets Impairment. 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. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments, which is reflective of the specific term of the leases and economic environment of each geographic region, and apply a portfolio approach for certain machinery and equipment that have consistent terms in a specific geographic region. 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, Operating Financing Total 2020 1 $ 3,186 $ 100 $ 3,286 2021 10,201 314 10,515 2022 9,190 194 9,384 2023 5,651 126 5,777 2024 4,463 79 4,542 Thereafter 7,628 42 7,670 Total lease payments 40,319 855 41,174 Less: Imputed interest ( 6,310 ) ( 53 ) ( 6,363 ) Present value of lease liabilities $ 34,009 $ 802 $ 34,811 1. Excluding the nine months ended September 30, 2020. 21 Table of Contents 13. Commitments and Contingencies Warranty - We are subject to warranty claims for products that fail to perform as expected due to design or manufacturing deficiencies. Depending on the terms under which we supply products to our customers, a customer may hold us responsible for some or all of the repair or replacement costs of defective products when the product supplied did not perform as represented. 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 period ended September 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 nine months ended September 30, 2020: Balance - December 31, 2019 $ 3,082 Provision for new warranty claims 524 Change in provision for pre-existing warranty claims 136 Deduction for payments made ( 1,559 ) Currency translation adjustment 12 Balance - September 30, 2020 $ 2,195 Leases - As disclosed in Note 12, Leases, 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 September 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. The most likely cost to be incurred is accrued based on an evaluation of available facts; where no amount within a range of estimates is more likely, the minimum is accrued. As of September 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. Management believes that the Company maintains adequate insurance or that we have established reserves for issues that are probable and estimable in amounts that are adequate to cover reasonable adverse judgments not covered by insurance. Based upon the information available to management and discussions with legal counsel, it is the opinion of management that the ultimate outcome of the various legal actions and claims that are incidental to our business are not expected to have a material adverse impact on the consolidated financial position, results of operations, equity or cash flows; however, such matters are subject to many uncertainties and the outcomes of individual matters are not predictable with any degree of assurance. Debt Payments - As disclosed in Note 14, Debt and Credit Facilities, the TLS Agreement requires the Company to repay a fixed amount of principal on a quarterly basis, make mandatory prepayments of excess cash flows and voluntary prepayments that coincide with certain events. The following table provides future minimum principal payments due on long-term debt for the next five years. The existing long-term debt agreements mature in 2023; no payments are due thereafter: Year Ending December 31, 2020 $ 1,094 2021 $ 4,375 2022 $ 4,375 2023 $ 145,417 2024 $ — Thereafter $ — 22 Table of Contents 14. Debt and Credit Facilities Debt consisted of the following: September 30, 2020 December 31, 2019 Term loan and security agreement 1, 2 $ 150,400 $ 156,384 1. 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 $ 148.0 million, net of long-term prepaid debt financing costs of $ 2.1 million and long-term original issue discount $ 0.8 million as of September 30, 2020. 2. 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; and long-term debt of $ 153.1 million, net of long-term prepaid debt financing costs of $ 1.2 million and long-term original issue discount $ 1.3 million as of December 31, 2019. Term Loan and Security Agreement 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, Debt in our 2019 Form 10-K. The unamortized deferred financing fees of $ 3.5 million and original issue discount of $ 1.4 million are netted against the aggregate book value of the outstanding debt resulting in a balance of $ 150.4 million as of September 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 below. We were in compliance with the covenants as of September 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, Debt 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. 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 September 30, 2020 we did no t have borrowings under the revolving credit facility, outstanding letters of credit were $ 1.6 million and we had availability of $ 72.6 million. The unamortized deferred financing fees associated with the revolving credit facility were $ 0.5 million and $ 0.6 million as of September 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, Debt in our 2019 Form 10-K and as described below. The Company was in compliance with all applicable covenants as of September 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. 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 23 Table of Contents 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 per 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 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. 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 %: Level Average Daily Availability Tranche A Base Rate Loans Tranche A LIBOR Revolver Loans Tranche B Base Rate Loans Tranche B LIBOR Revolver Loans III ≥ $ 30,000,000 1.00 % 2.00 % 2.00 % 3.00 % II > $ 15,000,000 but < $ 30,000,000 1.25 % 2.25 % 2.25 % 3.25 % 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. 15. Income Taxes 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 Global Intangible Low-Taxed Income ("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 period 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. We file federal income tax returns in the U.S. and income tax returns in various U.S. state and foreign jurisdictions. In the U.S., we are generally no longer subject to tax assessment for tax years prior to 2017. 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 September 30, 2020 and December 31, 2019, the Company had $ 1.0 million, in unrecognized tax benefits related to U.S. federal, state and foreign jurisdictions which may impact our effective tax rate, if recognized. The domestic unrecognized tax benefits are netted against the related deferred tax assets. 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 September 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 September 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. We evaluate the need for valuation allowances in each of our jurisdictions on a quarterly basis. 24 Table of Contents On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law. Although the Company continues to evaluate the new law, we do not expect either the U.S. or non-U.S. corporate income tax provisions of the CARES Act to have a material impact on our income tax (benefit) provision. 16. Segment Reporting As disclosed in Note 12, Segment Reporting and Geographic Locations of our 2019 Form 10-K, following a strategic reorganization of our operations, our operating and reportable 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 and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, 2020 Electrical Systems Global Seating Corporate/ Other Total Revenues External Revenues $ 120,723 $ 66,974 $ — $ 187,697 Intersegment Revenues 344 1,928 ( 2,272 ) — Total Revenues $ 121,067 $ 68,902 $ ( 2,272 ) $ 187,697 Gross Profit $ 16,118 $ 8,418 $ ( 377 ) $ 24,159 Selling, General & Administrative Expenses 3,166 3,517 7,725 14,408 Amortization Expense 729 129 — 858 Operating Income $ 12,223 $ 4,772 $ ( 8,102 ) $ 8,893 Capital Expenditures, Depreciation Expense and Other Items: Capital Expenditures $ 1,418 $ 158 $ 28 $ 1,604 Depreciation Expense $ 2,196 $ 1,109 $ 447 $ 3,752 Other Items 1 $ 1,204 $ 335 $ 17 $ 1,556 1. Other Items include costs associated with restructuring activities, including employee severance and retention costs, and changes in contingent consideration. Three Months Ended September 30, 2019 (as restated) Electrical Systems 1 Global Seating Corporate/ Other 1 Total Revenues External Revenues $ 129,710 $ 95,689 $ — $ 225,399 Intersegment Revenues 1,732 30 ( 1,762 ) — Total Revenues $ 131,442 $ 95,719 $ ( 1,762 ) $ 225,399 Gross Profit $ 17,134 $ 12,331 $ ( 21 ) $ 29,444 Selling, General & Administrative Expenses 4,030 5,044 8,457 17,531 Amortization Expense 303 134 — 437 Operating Income $ 12,801 $ 7,153 $ ( 8,478 ) $ 11,476 Capital Expenditures and Depreciation Expense: Capital Expenditures $ 3,847 $ 1,064 $ 661 $ 5,572 Depreciation Expense $ 1,771 $ 1,041 $ 632 $ 3,444 1. The Company has adjusted certain prior period amounts for the restatement and immaterial corrections of error. See Note 3, Restatement of Previously Issued Consolidated Financial Statements for details. 25 Table of Contents Nine Months Ended September 30, 2020 Electrical System Global Seating Corporate/ Other Total Revenues External Revenues $ 305,389 $ 196,309 $ — $ 501,698 Intersegment Revenues 1,987 2,435 ( 4,422 ) — Total Revenues $ 307,376 $ 198,744 $ ( 4,422 ) $ 501,698 Gross Profit $ 28,208 $ 23,133 $ ( 404 ) $ 50,937 Selling, General & Administrative Expenses 13,696 11,992 21,803 47,491 Amortization Expense 2,188 387 — 2,575 Impairment Expense 23,415 4,809 793 29,017 Operating Income $ ( 11,091 ) $ 5,945 $ ( 23,000 ) $ ( 28,146 ) Capital Expenditures, Depreciation Expense and Other Items: Capital Expenditures $ 3,936 $ 1,175 $ 394 $ 5,505 Depreciation Expense $ 6,455 $ 3,234 $ 1,571 $ 11,260 Other Items 1 $ 6,651 $ 1,012 $ 469 $ 8,132 1. 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. Nine Months Ended September 30, 2019 (as restated) Electrical Systems 1 Global Seating Corporate/ Other 1 Total Revenues External Revenues $ 409,471 $ 302,282 $ — $ 711,753 Intersegment Revenues 7,529 2,774 ( 10,303 ) — Total Revenues $ 417,000 $ 305,056 $ ( 10,303 ) $ 711,753 Gross Profit $ 54,227 $ 40,797 $ ( 55 ) $ 94,969 Selling, General & Administrative Expenses 11,855 15,558 21,565 48,978 Amortization Expense 676 404 — 1,080 Operating Income $ 41,696 $ 24,835 $ ( 21,620 ) $ 44,911 Capital Expenditures and Depreciation Expense: Capital Expenditures $ 13,267 $ 2,847 $ 2,274 $ 18,388 Depreciation Expense $ 4,770 $ 3,186 $ 1,829 $ 9,785 1. The Company has adjusted certain prior period amounts for the restatement and immaterial corrections of error. See Note 3 Restatement of Previously Issued Consolidated Financial Statements for details. 17. Derivative Contracts We use foreign exchange contracts to hedge some of our foreign currency transaction exposure. We estimate our projected revenues and purchases in certain foreign currencies and may hedge a portion of the anticipated long or short positions. The contracts typically run from one month up to eighteen months . As our foreign exchange contracts are designated as hedging instruments, the fluctuations in fair value are recorded in accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets until the contracts mature, at which time the gains and losses are recognized in cost of revenues in the Condensed Consolidated Statements of Operations. We do not hold or issue foreign exchange options or foreign exchange contracts for trading purposes. Our foreign exchange contracts are subject to a master netting agreement. We record assets and liabilities relating to our foreign exchange contracts on a gross basis in our Condensed Consolidated Balance Sheets. 26 Table of Contents The following table summarizes the notional amount of our open foreign exchange contracts: September 30, 2020 December 31, 2019 U.S. $ Equivalent U.S. $ Equivalent Fair Value U.S. $ Equivalent U.S. $ Equivalent Fair Value Commitments to buy or sell currencies $ 20,312 $ 19,897 $ 22,474 $ 22,939 We consider the impact of our credit risk on the fair value of the contracts, as well as our ability to honor obligations under the contract. On June 30, 2017, the Company entered into the Interest Rate Swap Agreement to fix the interest rate on an initial aggregate amount of $ 80.0 million of the senior secured term loan credit facility thereby reducing exposure to interest rate changes. 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 September 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. The following table summarizes the fair value and presentation of derivatives in the Condensed Consolidated Balance Sheets: Derivative Asset September 30, 2020 December 31, 2019 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Foreign exchange contracts Other non-current assets $ 21 Other non-current assets $ — Foreign exchange contracts Other current assets $ 94 Other current assets $ 464 Interest rate swap agreement Accrued liabilities $ 1,127 Accrued liabilities $ 150 Derivative Liability September 30, 2020 December 31, 2019 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Foreign exchange contracts Accrued liabilities $ 530 Accrued liabilities $ — Interest rate swap agreement Accrued liabilities $ 2,485 Accrued liabilities $ 995 Derivative Equity September 30, 2020 December 31, 2019 Balance Sheet Location Fair Value Balance Sheet Location Fair Value Foreign exchange contracts Accumulated other comprehensive loss $ 317 Accumulated other comprehensive loss $ 464 The following table summarizes the effect of derivative instruments on the Condensed Consolidated Statements of Operations: Three Months Ended September 30, Nine Months Ended September 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 $ ( 640 ) $ — $ ( 1,525 ) $ 4 Interest rate swap agreement Interest and Other Expense $ ( 2 ) $ ( 236 ) $ ( 1,026 ) $ ( 1,891 ) 27 Table of Contents 18. Other Comprehensive Loss The after-tax changes in accumulated other comprehensive loss are as follows: Foreign currency translation adjustment Derivative instruments Pension and post-retirement benefits plans Accumulated other comprehensive loss Ending balance, December 31, 2019 $ ( 24,032 ) 464 $ ( 22,382 ) $ ( 45,950 ) Net current period change ( 257 ) — — ( 257 ) Derivative instruments — ( 781 ) — ( 781 ) Amortization of actuarial losses — — ( 1,850 ) ( 1,850 ) Ending balance, September 30, 2020 $ ( 24,289 ) $ ( 317 ) $ ( 24,232 ) $ ( 48,838 ) Foreign currency translation adjustment Derivative instruments Pension and post-retirement benefit plans Accumulated other comprehensive loss Ending balance, December 31, 2018 $ ( 22,847 ) $ 496 $ ( 25,120 ) $ ( 47,471 ) Net current period change ( 3,048 ) — — ( 3,048 ) Derivative instruments — ( 193 ) — ( 193 ) Amortization of actuarial losses — — ( 1,008 ) ( 1,008 ) Ending balance, September 30, 2019 $ ( 25,895 ) $ 303 $ ( 26,128 ) $ ( 51,720 ) The related tax effects allocated to each component of other comprehensive loss are as follows: Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Before Tax Amount Tax Expense After Tax Amount Before Tax Amount Tax Expense After Tax Amount Amortization of actuarial losses $ ( 1,179 ) $ 222 $ ( 957 ) $ ( 2,284 ) $ 434 $ ( 1,850 ) Derivative instruments 1,167 ( 274 ) 893 ( 878 ) 97 ( 781 ) Cumulative translation adjustment 2,628 — 2,628 ( 257 ) — ( 257 ) Total other comprehensive loss $ 2,616 $ ( 52 ) $ 2,564 $ ( 3,419 ) $ 531 $ ( 2,888 ) Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Before Tax Amount Tax Expense After Tax Amount Before Tax Amount Tax Expense After Tax Amount Amortization of actuarial losses $ ( 2,186 ) $ 91 $ ( 2,095 ) $ ( 380 ) $ ( 628 ) $ ( 1,008 ) Derivative instruments ( 515 ) — ( 515 ) ( 193 ) — ( 193 ) Cumulative translation adjustment ( 3,388 ) — ( 3,388 ) ( 3,048 ) — ( 3,048 ) Total other comprehensive loss $ ( 6,089 ) $ 91 $ ( 5,998 ) $ ( 3,621 ) $ ( 628 ) $ ( 4,249 ) 28 Table of Contents 19. Pension and Other Post-Retirement Benefit Plans We sponsor pension and other post-retirement benefit plans that cover certain hourly and salaried employees in the United States and United Kingdom. Each of the plans are frozen to new participants. Our practice is to make annual contributions to the plans to fund the minimum contributions as required by local regulations. The components of net periodic (benefit) cost related to pension and other post-retirement benefit plans is as follows: U.S. Pension and Other Post-Retirement Benefit Plans Non-U.S. Pension Plan Three Months Ended September 30, Three Months Ended September 30, 2020 2019 2020 2019 Interest cost 281 217 210 268 Expected return on plan assets ( 519 ) ( 470 ) ( 277 ) ( 268 ) Amortization of prior service cost 2 23 151 12 Recognized actuarial loss 74 75 12 129 Net (benefit) cost $ ( 162 ) $ ( 155 ) $ 96 $ 141 U.S. Pension and Other Post-Retirement Benefit Plans Non-U.S. Pension Plan Nine months ended September 30, Nine months ended September 30, 2020 2019 2020 2019 Interest cost 843 1,107 618 831 Expected return on plan assets ( 1,556 ) ( 1,794 ) ( 806 ) ( 834 ) Amortization of prior service cost 5 2,517 437 36 Recognized actuarial loss 223 262 36 397 Net (benefit) cost $ ( 485 ) $ 2,092 $ 285 $ 430 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 $ 1.0 million to our pension and other post-retirement benefit plans in 2020. As of September 30, 2020, contributions totaling $ 0.7 million have been made. 20. Business Combinations On September 17, 2019, the Company entered into and closed on an Asset Purchase Agreement (the “Agreement”) with First Source Electronics, LLC (“FSE”), Kevin Popielarczyk and Richard Vuoto and the Company’s wholly-owned subsidiary, CVG FSE, LLC (“CVG FSE”). The Agreement provided for the acquisition by CVG FSE of substantially all of the assets and certain liabilities of FSE in exchange for a cash purchase price of $ 34.0 million, subject to a net working capital adjustment, plus a right to earn up to $ 10.8 million in contingent milestone payments. The purchase was funded through domestic cash on hand and $ 2.0 million of borrowings under our revolving credit facility. FSE is in the business of manufacturing, distributing, marketing and selling cable and electro-mechanical assemblies, control panels and other business and consumer electronics products and services. FSE improves our ability to participate in the progression of digitalization, connectivity and associated power and data applications. Furthermore, this strategic acquisition complements our high-complexity, low-to-medium volume electrical business, provides an entry into the warehouse automation market, and provides the opportunity to leverage our global footprint and to increase cross-selling opportunities. The contingent milestone payments are payable based on achieving certain earnings before interest, taxes, depreciation and amortization ("EBITDA") thresholds over the periods from (a) September 18, 2019 through September 17, 2020, (b) September 18, 2019 through March 17, 2021, (c) September 18, 2019 through September 17, 2022 and (d) March 18, 2021 through September 17, 2022. The payment amount will be determined on a sliding scale for reaching between 90 % and 100 % of the respective EBITDA targets. The fair value for the milestone payments is based on a Monte Carlo simulation utilizing forecasted EBITDA through September 17, 2022. The estimate of $ 4.7 million was recorded within other long-term liabilities in the 29 Table of Contents 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 $ 8.8 million as of September 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. The Company is a party to the Agreement solely as a guarantor of CVG FSE’s payment obligations. The FSE Acquisition was accounted for under the acquisition method of accounting. Under acquisition accounting, the acquired tangible and intangible assets and liabilities of FSE have been recorded at their respective fair values. The Company has completed its assessment of fair values of assets acquired and liabilities assumed, and the final amounts are reflected in the table below. The purchase price associated with the FSE Acquisition exceeded the preliminary fair value of the net assets acquired by approximately $ 19.8 million. This reflects an increase of $ 2.2 million from the initial valuation as of September 30, 2019. A final adjustment to the purchase price was made in the three months ended March 31, 2020 reducing goodwill by $ 0.5 million. The excess purchase price over net assets acquired is recorded as goodwill and was determined as follows: Initial cash paid, net of working capital adjustment $ 34,000 Purchase price adjustment ( 537 ) Contingent consideration at fair value 4,700 Total consideration $ 38,163 Net assets at fair value 18,335 Excess of total consideration over net assets acquired $ 19,828 In the first quarter of 2020, pursuant to the asset purchase agreement a final adjustment resulted in a $ 0.5 million reduction in the initial consideration paid and goodwill. 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 September 30, 2020, were as follows: Preliminary Purchase Price Allocation Adjustment Final Purchase Price Allocation Net working capital $ 2,856 $ — $ 2,856 Property, plant and equipment 503 — 503 Other long-term assets 1,650 — 1,650 Definite-lived intangible assets 14,500 — 14,500 Goodwill 1 20,365 ( 537 ) 19,828 Other long-term liabilities ( 1,174 ) — ( 1,174 ) Total consideration $ 38,700 $ ( 537 ) $ 38,163 1. As disclosed in Note 11, Goodwill and Intangible Assets, the full value of the Company's goodwill was impaired during the three months ended March 31, 2020. 21. Cost Reduction and Manufacturing Capacity Rationalization During 2019, the Company began implementing cost reduction and manufacturing capacity rationalization initiatives (the "Restructuring Initiatives") in response to declines in end market volumes. Furthermore, in 2020 the Company began implementing additional cost reduction initiatives and further manufacturing capacity rationalization initiatives in response to the COVID-19 pandemic ("the 2020 Initiatives"). These actions are expected to continue through 2020 and into 2021. The Restructuring Initiatives and 2020 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, and expansion of production footprint to manufacture warehouse automation subsystems. 30 Table of Contents The changes in accrued restructuring balances are as follows: Electrical Systems Global Seating Corporate/ Other Total December 31, 2019 $ 1,276 $ 102 $ 947 $ 2,325 New Charges 2,690 1,012 469 4,171 Payments and Other Adjustments ( 3,422 ) ( 879 ) ( 1,057 ) ( 5,358 ) September 30, 2020 $ 544 $ 235 $ 359 $ 1,138 Of the $ 4.2 million costs incurred in the nine months ended September 30, 2020, $ 3.3 million primarily related to headcount reductions and $ 0.9 million related to facility exit and other costs. Of the $ 4.2 million costs incurred, $ 3.2 million was recorded in cost of revenues and $ 1.0 million was recorded in selling, general and administrative expenses.