Commercial Vehicle Group, Inc. 10-Q

ITEM 1 – FINANCIAL STATEMENTS COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (Unaudited) (In thousands, except per share amounts) Revenues $ 171,772 $ 202,897 $ 560,063 $ 641,747 Cost of revenues 155,351 173,588 500,019 545,033 Gross profit 16,421 29,309 60,044 96,714 Selling, general and administrative expenses 17,481 20,389 55,531 60,910 Operating (loss) income ( 1,060 ) 8,920 4,513 35,804 Other (income) expense ( 1,033 ) 383 ( 615 ) 488 Interest expense 2,371 2,489 6,974 7,910 Income (loss) before provision for income taxes ( 2,398 ) 6,048 ( 1,846 ) 27,406 Provision (benefit) for income taxes ( 1,515 ) 1,367 ( 1,110 ) 6,345 Net income (loss) from continuing operations $ ( 883 ) $ 4,681 $ ( 736 ) $ 21,061 Net income from discontinued operations - Note 18 10,397 2,609 11,588 5,069 Net income 9,514 7,290 10,852 26,130 Earnings (loss) per Common Share: Basic earnings (loss) per share Income (loss) from continuing operations $ ( 0.03 ) $ 0.14 $ ( 0.02 ) $ 0.64 Income from discontinued operations $ 0.31 $ 0.08 $ 0.35 $ 0.15 Diluted earning (loss) per share Income (loss) from continuing operations $ ( 0.03 ) $ 0.14 $ ( 0.02 ) $ 0.63 Income from discontinued operations $ 0.31 $ 0.08 $ 0.35 $ 0.15 Weighted average shares outstanding: Basic 33,458 33,100 33,392 33,010 Diluted 33,458 33,350 33,392 33,408 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 1 Table of Contents COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 (Unaudited) (In thousands) Net income $ 9,514 $ 7,290 $ 10,852 $ 26,130 Other comprehensive income (loss): Foreign currency exchange translation adjustments 2,699 ( 3,452 ) ( 1,157 ) ( 1,946 ) Minimum pension liability, net of tax 176 ( 899 ) ( 682 ) ( 906 ) Derivative instruments, net of tax ( 3,658 ) ( 869 ) ( 5,601 ) 1,772 Other comprehensive loss ( 783 ) ( 5,220 ) ( 7,440 ) ( 1,080 ) Comprehensive income $ 8,731 $ 2,070 $ 3,412 $ 25,050 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 BALANCE SHEETS September 30, 2024 December 31, 2023 (Unaudited) (In thousands, except share and per share amounts) ASSETS Current Assets: Cash $ 30,885 $ 37,848 Accounts receivable, net of allowances of $ 348 and $ 208 , respectively 127,247 129,346 Inventories 130,917 117,267 Current assets held for sale 4,951 15,603 Note receivable - Note 18 20,000 — Other current assets 32,263 27,678 Total current assets 346,263 327,742 Property, plant and equipment, net 69,619 68,923 Intangible assets, net 4,133 6,594 Deferred income taxes 39,328 33,568 Noncurrent assets held for sale — 11,130 Other assets, net 35,998 35,257 Total assets $ 495,341 $ 483,214 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 93,008 $ 75,246 Accrued liabilities and other 49,910 51,354 Current portion of long-term debt and short-term debt 2,969 15,313 Current liabilities held-for-sale 4,251 3,276 Total current liabilities 150,138 145,189 Long-term debt 125,790 126,201 Pension and other post-retirement benefits 10,195 9,196 Noncurrent liabilities held-for-sale — 870 Other long-term liabilities 29,953 28,826 Total liabilities 316,076 310,282 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; 33,494,483 and 33,322,535 shares issued and outstanding respectively) 335 333 Treasury stock, at cost: 2,147,923 and 2,134,604 shares, respectively ( 16,209 ) ( 16,150 ) Additional paid-in capital 268,195 265,217 Retained deficit ( 35,332 ) ( 46,184 ) Accumulated other comprehensive loss ( 37,724 ) ( 30,284 ) Total stockholders’ equity 179,265 172,932 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 495,341 $ 483,214 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 CASH FLOWS Nine Months Ended September 30, 2024 2023 (Unaudited) (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 10,852 $ 26,130 Adjustments to reconcile net income to cash flows from operating activities from continuing operations: Depreciation and amortization 13,639 13,159 Noncash amortization of debt financing costs 240 227 Pension cash reversion — 2,942 Share-based compensation expense 2,978 2,270 Deferred income taxes ( 3,810 ) 24 Non-cash loss (income) on derivative contracts ( 716 ) ( 695 ) Gain on sale of assets ( 3,544 ) — Loss on write-down of Industrial automation segment assets 8,204 — Gain on sale of cab structures business ( 28,597 ) — Change in other operating items: Accounts receivable 1,890 ( 8,069 ) Inventories ( 13,334 ) 13,510 Prepaid expenses 512 ( 2,312 ) Accounts payable 17,628 ( 15,073 ) Other operating activities, net ( 12,777 ) ( 2,123 ) Net cash provided by (used in) operating activities ( 6,835 ) 29,990 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment ( 14,547 ) ( 15,196 ) Proceeds from disposal/sale of property, plant and equipment 4,455 — Proceeds from sale of business 22,960 — Net cash provided by (used in) investing activities 12,868 ( 15,196 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of term loan facility ( 26,563 ) ( 7,656 ) Borrowings under revolving credit facility 38,500 25,000 Repayment of revolving credit facility ( 24,500 ) ( 20,000 ) Surrender of shares to pay withholding taxes ( 59 ) ( 808 ) Debt issuance and amendment costs ( 217 ) — Other financing activities ( 88 ) 3,995 Net cash provided by (used in) financing activities ( 12,927 ) 531 EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH ( 69 ) ( 857 ) NET INCREASE (DECREASE) IN CASH ( 6,963 ) 14,468 CASH: Beginning of period 37,848 31,825 End of period $ 30,885 $ 46,293 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) Balance - December 31, 2022 32,826,852 $ 328 $ ( 14,514 ) $ 261,371 $ ( 95,595 ) $ ( 31,550 ) $ 120,040 Share-based compensation expense 164,616 2 ( 764 ) 1,771 — — 1,009 Net income from continuing operations for the period — — — — 7,146 — 7,146 Net income from discontinued operation for the period — — — — 1,554 — 1,554 Other comprehensive income — — — — — 4,040 4,040 Balance - March 31, 2023 32,991,468 $ 330 $ ( 15,278 ) $ 263,142 $ ( 86,895 ) $ ( 27,510 ) $ 133,789 Share-based compensation expense 101,524 — ( 24 ) ( 245 ) — — ( 269 ) Net income from continuing operations for the period — — — — 9,234 — 9,234 Net income from discontinued operation for the period — — — — 906 — 906 Other comprehensive income — — — — — 100 100 Balance - June 30, 2023 33,092,992 $ 330 $ ( 15,302 ) $ 262,897 $ ( 76,755 ) $ ( 27,410 ) $ 143,760 Share-based compensation expense 15,997 — ( 20 ) 744 — — 724 Net income from continuing operations for the period — — — — 4,681 — 4,681 Net income from discontinued operation for the period — — — — 2,609 — 2,609 Other comprehensive loss — — — — — ( 5,220 ) ( 5,220 ) Balance - September 30, 2023 33,108,989 $ 330 $ ( 15,322 ) $ 263,641 $ ( 69,465 ) $ ( 32,630 ) $ 146,554 Balance - December 31, 2023 33,322,535 $ 333 $ ( 16,150 ) $ 265,217 $ ( 46,184 ) $ ( 30,284 ) $ 172,932 Share-based compensation expense 3,438 — ( 2 ) 664 — — 662 Net income from continuing operations for the period — — — — 1,446 — 1,446 Net income from discontinued operation for the period — — — — 1,493 — 1,493 Other comprehensive loss — — — — — ( 994 ) ( 994 ) Balance - March 31, 2024 33,325,973 $ 333 $ ( 16,152 ) $ 265,881 $ ( 43,245 ) $ ( 31,278 ) $ 175,539 Share-based compensation expense 117,991 1 ( 18 ) 1,349 — — 1,332 Net loss from continuing operations for the period — — — — ( 1,299 ) — ( 1,299 ) Net loss from discontinued operation for the period — — — — ( 302 ) — ( 302 ) Other comprehensive loss — — — — — ( 5,663 ) ( 5,663 ) Balance - June 30, 2024 33,443,964 $ 334 $ ( 16,170 ) $ 267,230 $ ( 44,846 ) $ ( 36,941 ) $ 169,607 Share-based compensation expense 50,519 1 ( 39 ) 965 — — 927 Net loss from continuing operations for the period — — — — ( 883 ) — ( 883 ) Net income from discontinued operation for the period — — — — 10,397 — 10,397 Other comprehensive loss — — — — — ( 783 ) ( 783 ) Balance - September 30, 2024 33,494,483 $ 335 $ ( 16,209 ) $ 268,195 $ ( 35,332 ) $ ( 37,724 ) $ 179,265 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 Table of Contents COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Amounts in thousands, except for share and per share amounts and where specifically disclosed) 1. Description of Business and Basis of Presentation Commercial Vehicle Group, Inc. and its subsidiaries, is a global provider of systems, assemblies and components to the global commercial vehicle market and the electric vehicle market. 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, Czech Republic, Ukraine, Thailand, India, Australia and Morocco. Our products are primarily sold in North America, Europe, and the Asia-Pacific region. We primarily manufacture customized products to meet the requirements of our customers. We believe our products are used by a majority of the North American Commercial Truck manufacturers, many construction vehicle original equipment manufacturers ("OEMs"), parts and service dealers, and distributors. The unaudited condensed consolidated interim financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America and the rules and regulations of the Securities and Exchange Commission and include the accounts of the Company and its subsidiaries. Except as disclosed within these condensed notes to unaudited quarterly consolidated financial statements, the adjustments made were of a normal, recurring nature. Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. Additionally, certain prior period amounts related to discontinued operations have been reclassified to conform to footnote presentation for the current year, as further described in this section. During the quarter ended September 30, 2024, the Company entered into a purchase agreement to sell its cab structures business with operations in Kings Mountain, North Carolina and met the held for sale criteria with respect to its Industrial Automation segment given the Company's intent to sell its First Source Electronics (FSE) business with operations in Elkridge, Maryland. These divestitures represent a strategic shift in CVG's business and, in accordance with U.S. GAAP, qualified as discontinued operations. As a result, the operating results related to the cab structures business and Industrial Automation segment have been reflected as discontinued operations in the Condensed Consolidated Statements of Operations. The assets and liabilities that are to be sold have met the requirements to be classified within the Condensed Consolidated Balance Sheets under a held for sale designation. See Note 18, Discontinued Operations, for additional information on the divestitures. As a result of classifying the Industrial Automation reporting segment as a discontinued operation, CVG is now comprised of three reportable segments: Vehicle Solutions, Electrical Systems and Aftermarket & Accessories. The financial information reported for Vehicle Solutions and Aftermarket & Accessories excludes the activity from the Kings Mountain, North Carolina facility as a result of the divestiture. The preparation of financial statements in conformity with GAAP in the United States requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on management's best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the consolidated financial statements in future periods. These condensed notes to unaudited quarterly consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K"), which includes a complete set of footnote disclosures, including the Company's significant accounting policies. 2. Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring 6 Table of Contents disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. This ASU will likely result in us including the additional required disclosures when adopted. We are currently evaluating the provisions of this ASU and expect to adopt them for the year ending December 31, 2024. In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted. 3. Revenue Recognition We had outstanding customer accounts receivable, net of allowances, of $ 127.2 million as of September 30, 2024 and $ 129.3 million as of December 31, 2023. We generally do not have material other assets or liabilities associated with customer arrangements. Revenue Disaggregation - The following is the composition, by product category, of our revenues: Three Months Ended September 30, 2024 Vehicle Solutions Electrical Systems Aftermarket and Accessories Total Seats $ 59,392 $ — $ 16,313 $ 75,705 Electrical wire harnesses, panels and assemblies 939 43,380 3,333 47,652 Plastic & Trim components 36,350 — 833 37,183 Mirrors, wipers and controls 615 — 10,617 11,232 Total $ 97,296 $ 43,380 $ 31,096 $ 171,772 Three Months Ended September 30, 2023 Vehicle Solutions Electrical Systems Aftermarket and Accessories Total Seats $ 66,862 $ — $ 17,703 $ 84,565 Electrical wire harnesses, panels and assemblies 657 53,862 3,273 57,792 Plastic & Trim components 46,255 — 1,845 48,100 Mirrors, wipers and controls 1,461 — 10,979 12,440 Total $ 115,235 $ 53,862 $ 33,800 $ 202,897 Nine Months Ended September 30, 2024 Vehicle Solutions Electrical Systems Aftermarket and Accessories Total Seats $ 189,085 $ — $ 48,593 $ 237,678 Electrical wire harnesses, panels and assemblies 2,168 149,327 9,751 161,246 Plastic & Trim components 118,358 — 4,808 123,166 Mirrors, wipers and controls 3,174 — 34,799 37,973 Total $ 312,785 $ 149,327 $ 97,951 $ 560,063 7 Table of Contents Nine Months Ended September 30, 2023 Vehicle Solutions Electrical Systems Aftermarket and Accessories Total Seats $ 213,138 $ — $ 55,579 $ 268,717 Electrical wire harnesses, panels and assemblies 2,255 172,236 11,042 185,533 Plastic & Trim components 141,206 — 6,191 147,397 Mirrors, wipers and controls 6,221 — 33,879 40,100 Total $ 362,820 $ 172,236 $ 106,691 $ 641,747 4. Debt Debt consisted of the following: September 30, 2024 December 31, 2023 Term loan facility $ 115,000 $ 141,563 Revolving credit facility 14,000 — Unamortized issuance costs ( 241 ) ( 49 ) $ 128,759 $ 141,514 Less: current portion of long-term debt ( 2,969 ) ( 15,313 ) Total long-term debt, net of current portion $ 125,790 $ 126,201 Credit Agreement On April 30, 2021, the Company and certain of its subsidiaries entered into a credit agreement (the “Credit Agreement”) between, among others, Bank of America, N.A. as administrative agent (the “Administrative Agent”) and other lenders party thereto (the “Lenders”) pursuant to which the Lenders made available a $ 150 million Term Loan Facility (the “Term Loan Facility”) and a $ 125 million Revolving Credit Facility (the “Revolving Credit Facility” and together with the Term Loan Facility, the “Credit Facilities”). The Credit Facilities mature on May 12, 2027. On May 12, 2022, the Company and certain of its subsidiaries entered into a second amendment (the “Amendment”) to its Credit Agreement pursuant to which the Lenders upsized the existing term loan facility to $ 175 million in aggregate principal amount and increased the revolving credit facility commitments by $ 25 million to an aggregate of $ 150 million in revolving credit facility commitments. On July 30, 2024, the Company and certain of its subsidiaries, as guarantors, entered into an Amendment No. 3, which amends the Credit Agreement. Amendment No.3 amends the terms of the existing Credit Agreement to limit the mandatory prepayment requirements for certain specified asset dispositions of the Company and certain of its subsidiaries. The Company repaid $ 20.0 million in accordance with Amendment No.3 during the three months ended September 30, 2024. At September 30, 2024, we had $ 14.0 million of borrowings under the Revolving Credit Facility, outstanding letters of credit of $ 1.1 million and availability of $ 134.9 million. Combined with availability under our China Credit Facility (described below) of approximately $ 11.4 million, total consolidated availability was $ 146.3 million at September 30, 2024. The unamortized deferred financing fees associated with the Revolving Credit Facility of $ 0.8 million and $ 1.0 million as of September 30, 2024 and December 31, 2023, respectively, are being amortized over the remaining life of the Credit Agreement. At December 31, 2023, we had no borrowings under the Revolving Credit Facility and we had outstanding letters of credit of $ 1.2 million. Covenants and other terms The Credit Agreement includes (a) a minimum consolidated fixed charge coverage ratio of 1.20 :1.0, and (b) a maximum consolidated total leverage ratio of 3.00 :1.0. We were in compliance with these covenants as of September 30, 2024. Repayment and prepayment The Credit Agreement requires the Company to make quarterly amortization payments to the Term Loan Facility at an annualized rate of the loans under the Term Loan Facility for every year as follows: 5.0 %, 7.5 %, 10.0 %, 12.5 % and 15.0 %. The Credit Agreement also requires all outstanding amounts under the Credit Facilities to be repaid in full on the Maturity Date. 8 Table of Contents Amendment No. 3 amended the terms of the existing Credit Agreement and allowed mandatory prepayment requirements for certain specified asset dispositions of the Company and certain of its subsidiaries to be applied to quarterly amortization payments. The Company repaid $ 20 million in accordance with Amendment No.3 during the three months ended September 30, 2024 which will be applied to future amortization payments beginning with the September 30, 2024 payment. See Note 15, Commitments and Contingencies, for the future minimum principal payments due on long-term debt for the next five years. Foreign Facility During the quarter ended March 31, 2023, we established a credit facility in China consisting of a line of credit which is subject to annual renewal (the "China Credit Facility"). The China Credit Facility was renewed during the quarter ended December 31, 2023, with availability of approximately $ 11.3 million (denominated in the local currency). We utilize the China Credit Facility to meet local working capital demands, fund letters of credit and bank guarantees, and support other short-term cash requirements of our China operations. We had no outstanding borrowings under the China Credit Facility as of September 30, 2024 and December 31, 2023. At September 30, 2024, we had $ 11.4 million (denominated in the local currency and this amount varies based on the currency conversion rate) of availability under the China Credit Facility. Cash Paid for Interest For the nine months ended September 30, 2024 and 2023, cash payments for interest were $ 9.0 million and $ 9.5 million, respectively. 5. Intangible Assets Our definite-lived intangible assets were comprised of the following: September 30, 2024 December 31, 2023 Weighted- Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Trademarks/tradenames 30 years $ 8,277 $ ( 5,241 ) $ 3,036 $ 8,265 $ ( 5,070 ) $ 3,195 Customer relationships 15 years 5,339 ( 4,242 ) 1,097 12,972 ( 9,573 ) 3,399 $ 13,616 $ ( 9,483 ) $ 4,133 $ 21,237 $ ( 14,643 ) $ 6,594 The aggregate intangible asset amortization expense was $ 0.1 million and $ 0.3 million for the three months ended September 30, 2024 and 2023, respectively. The aggregate intangible asset amortization expense was $ 0.5 million and $ 0.8 million for the nine months ended September 30, 2024 and 2023 respectively. 6. 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 consist of cash, accounts receivable, accounts payable, accrued liabilities, pension assets and liabilities. 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. Recurring Measurements 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 9 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 and Czech Crown, 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 for transactions denominated in Mexican Pesos are deferred in accumulated other comprehensive loss and recognized in cost of revenues in the period the related hedge transactions are settled. As of September 30, 2024, hedge contracts for transactions denominated in Czech Crown were not designated as a hedging instruments; therefore, they are marked-to-market and the fair value of agreements is recorded in the Condensed Consolidated Balance Sheets with the offsetting gains and losses recognized in other (income) expense and recognized in cost of revenues in the period the related hedge transactions are settled in the Condensed Consolidated Statements of Operations. Interest Rate Swaps . To manage our exposure to variable interest rates, we have entered into interest rate swaps 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 swaps are intended to mitigate the impact of rising interest rates on the Company and covers approximately 50 % of outstanding debt under the Term Loan Facility. Any changes in fair value are included in earnings or deferred through Accumulated other comprehensive loss, depending on the nature and effectiveness of the offset. Any ineffectiveness in a cash flow hedging relationship is recognized immediately in earnings in the consolidated statements of operations. The fair values of our derivative assets and liabilities measured on a recurring basis are categorized as follows: September 30, 2024 December 31, 2023 Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Assets: Foreign exchange contract designated as hedging instruments $ 216 $ — $ 216 $ — $ 1,318 $ — $ 1,318 $ — Interest rate swap agreement $ 208 $ — $ 208 $ — $ 1,073 $ — $ 1,073 $ — Liabilities: Foreign exchange contract designated as hedging instruments $ 4,773 $ — $ 4,773 $ — $ — $ — $ — $ — Foreign exchange contract not designated as hedging instruments $ 182 $ — $ 182 $ — $ 304 $ — $ 304 $ — The following table summarizes the notional amount of our open foreign exchange contracts: September 30, 2024 December 31, 2023 U.S. $ Equivalent U.S. $ Equivalent Fair Value U.S. $ Equivalent U.S. $ Equivalent Fair Value Commitments to buy or sell currencies - Foreign exchange contract designated as hedging instruments $ 75,533 $ 77,084 $ 56,741 $ 58,094 Commitments to buy or sell currencies - Foreign exchange contract not designated as hedging instruments $ 9,702 $ 9,660 $ 16,608 $ 16,806 10 The following table summarizes the fair value and presentation of derivatives in the Condensed Consolidated Balance Sheets: Derivative Asset Balance Sheet Location Fair Value September 30, 2024 December 31, 2023 Foreign exchange contract designated as hedging instruments Other current assets $ 161 $ 1,179 Foreign exchange contract designated as hedging instruments Other assets, net $ 55 $ 139 Interest rate swap agreement Other assets, net $ 208 $ 1,073 Derivative Liability Balance Sheet Location Fair Value September 30, 2024 December 31, 2023 Foreign exchange contract designated as hedging instruments Accrued liabilities and other $ 4,488 $ — Foreign exchange contract designated as hedging instruments Other long-term liabilities $ 285 $ — Foreign exchange contracts not designated as hedging instruments Accrued liabilities and other $ 182 $ 304 Derivative Equity Balance Sheet Location Fair Value September 30, 2024 December 31, 2023 Foreign exchange contracts designated as hedging instruments Accumulated other comprehensive income (loss) $ ( 3,018 ) $ 1,354 Interest rate swap agreements Accumulated other comprehensive income $ 2,256 $ 3,484 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, 2024 2023 2024 2023 Location of Gain (Loss) on Derivatives Recognized in Income (Loss) Amount of Gain (Loss) on Derivatives Recognized in Income (Loss) Amount of Gain (Loss) on Derivatives Recognized in Income (Loss) Foreign exchange contracts designated as hedging instruments Cost of revenues $ ( 1,236 ) $ 1,973 $ ( 634 ) $ 3,666 Interest rate swap agreement Interest expense $ 408 $ 415 $ 1,227 $ 1,045 Interest rate swap agreement settled in 2022 Interest expense $ 189 $ 189 $ 566 $ 566 Foreign exchange contracts not designated as hedging instruments Other (income) expense $ 52 $ ( 183 ) $ 150 $ 129 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. 11 Other Fair Value Measurements 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, 2024 December 31, 2023 Carrying Amount Fair Value Carrying Amount Fair Value Term loan and security agreement 1 $ 114,759 $ 114,092 $ 141,514 $ 139,213 Revolving credit facility $ 14,000 $ 14,000 $ — $ — 1. Presented in the Condensed Consolidated Balance Sheets as the current portion of long-term debt of $ 3.0 million and long-term debt of $ 111.8 million as of September 30, 2024 and current portion of long-term debt of $ 15.3 million and long-term debt of $ 126.2 million as of December 31, 2023. 7. Leases The components of lease expense are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Operating lease cost $ 2,620 $ 2,660 $ 7,585 $ 6,787 Finance lease cost 27 35 92 122 Short-term lease cost 1,259 1,208 3,211 4,733 Total lease expense $ 3,906 $ 3,903 $ 10,888 $ 11,642 Supplemental balance sheet information related to leases is as follows: Balance Sheet Location September 30, 2024 December 31, 2023 Operating Leases Right-of-use assets, net Other assets, net $ 30,035 $ 29,208 Current liabilities Accrued liabilities and other 6,663 6,518 Non-current liabilities Other long-term liabilities 24,275 23,578 Total operating lease liabilities $ 30,938 $ 30,096 Finance Leases Right-of-use assets, net Other assets, net $ 119 $ 205 Current liabilities Accrued liabilities and other 85 108 Non-current liabilities Other long-term liabilities 45 107 Total finance lease liabilities $ 130 $ 215 Cash payments on operating leases were $ 7.3 million and $ 6.8 million for the nine months ended September 30, 2024 and 2023 respectively. 12 Table of Contents Anticipated future lease costs, which are based in part on certain assumptions to approximate annual rental commitments under non-cancelable leases, are as follows: Operating Financing Total Remainder of 2024 $ 2,491 $ 26 $ 2,517 2025 9,804 77 9,881 2026 8,448 30 8,478 2027 5,388 7 5,395 2028 3,867 — 3,867 Thereafter 17,969 — 17,969 Total lease payments $ 47,967 $ 140 $ 48,107 Less: Imputed interest ( 17,029 ) ( 10 ) ( 17,039 ) Present value of lease liabilities $ 30,938 $ 130 $ 31,068 8. Income Taxes We recorded a $ 1.5 million tax benefit, or 63 % effective tax rate for the three months ended September 30, 2024, and $ 1.1 million tax benefit, or 60 % effective tax rate for the nine months ended September 30, 2024, compared to a $ 1.4 million tax provision for the three months ended September 30, 2023, and $ 6.3 million tax provision for the nine months ended September 30, 2023, or 23 % effective tax rate for each period. Income tax expense is based on an estimated annual effective tax rate, which requires management to make its best estimate of annual pretax income or loss. During the year, management regularly updates forecasted annual pretax results for the various countries in which the Company operates based on changes in factors such as prices, shipments, product mix, material inflation and manufacturing operations. To the extent that actual 2024 pretax results for U.S. and foreign income or loss vary from estimates, the actual income tax expense recognized in 2024 could be different from the forecasted amount used to estimate the income tax expense for the three and nine months ended September 30, 2024. For the nine months ended September 30, 2024 and 2023, cash paid for taxes, net of refunds received, were $ 6.4 million and $ 9.2 million, respectively. 9. Pension and Other Post-Retirement Benefit Plans The components of net periodic (benefit) cost related to pension and other post-retirement benefit plans is as follows: Non-U.S. Pension Plan Three Months Ended September 30, 2024 2023 Interest cost $ 366 $ 359 Expected return on plan assets ( 334 ) ( 310 ) Amortization of prior service cost 13 11 Recognized actuarial loss 211 192 Net cost $ 256 $ 252 Non-U.S. Pension Plan Nine months ended September 30, 2024 2023 Interest cost $ 1,062 $ 1,064 Expected return on plan assets ( 966 ) ( 912 ) Amortization of prior service cost 39 36 Recognized actuarial loss 610 569 Net cost $ 745 $ 757 13 Table of Contents Net periodic cost components, not inclusive of service costs, are recognized in other (income) expense within the Condensed Consolidated Statements of Operations. 10. Performance Awards The following table summarizes performance awards granted in the form of cash awards under the equity incentive plans: Amount Adjusted Award Value at December 31, 2023 $ 1,901 New grants 3,028 Forfeitures ( 88 ) Adjustments ( 3,666 ) Payments ( 324 ) Adjusted Award Value at September 30, 2024 $ 851 Unrecognized compensation expense was $ 0.9 million and $ 2.8 million as of September 30, 2024 and 2023, respectively. 11. Share-Based Compensation The company's outstanding share-based compensation is comprised solely of restricted stock awards and performance stock awards to be settled in stock. As of September 30, 2024, there was approximately $ 4.8 million of unrecognized compensation expense related to unvested share-based compensation arrangements granted under our equity incentive plans. This expense is subject to future adjustments and forfeitures and will be recognized on a straight-line basis over the remaining period listed above for each grant. A summary of the status of our restricted stock awards as of September 30, 2024 and changes during the nine months ended September 30, 2024, are presented below: 2024 Shares (in thousands) Weighted- Average Grant-Date Fair Value Unvested - December 31, 2023 591 $ 7.66 Granted 509 6.09 Vested ( 185 ) 8.43 Forfeited ( 50 ) 6.95 Unvested - September 30, 2024 865 $ 6.61 As of September 30, 2024, a total of 1.4 million shares were available for future grants from the shares authorized for award under our 2020 Equity Incentive Plan, including cumulative forfeitures. 12. 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, 33,494,483 and 33,322,535 shares were issued and outstanding as of September 30, 2024 and December 31, 2023, 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, with no preferred shares outstanding as of September 30, 2024 and December 31, 2023. Earnings (Loss) Per Share - Basic earnings (loss) per share is determined by dividing net income (loss) by the weighted average number of common shares outstanding during the year. Diluted earnings (loss) per share presented is determined by dividing net income (loss) 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. 14 Table of Contents Diluted earnings per share for the three and nine months ended September 30, 2024 and 2023 includes the effect of potential common shares issuable when dilutive, and is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income $ 9,514 $ 7,290 $ 10,852 $ 26,130 Net income (loss) from continuing operations ( 883 ) 4,681 ( 736 ) 21,061 Net income from discontinued operations 10,397 2,609 11,588 5,069 Weighted average number of common shares outstanding (in '000s) 33,458 33,100 33,392 33,010 Dilutive effect of restricted stock grants after application of the Treasury Stock Method (in '000s) — 250 — 398 Dilutive shares outstanding 33,458 33,350 33,392 33,408 Basic earnings (loss) per share from continuing operations $ ( 0.03 ) $ 0.14 $ ( 0.02 ) $ 0.64 Basic earnings per share from discontinued operations $ 0.31 $ 0.08 $ 0.35 $ 0.15 Diluted earnings (loss) per share from continuing operations $ ( 0.03 ) $ 0.14 $ ( 0.02 ) $ 0.63 Diluted earnings per share from discontinued operations $ 0.31 $ 0.08 $ 0.35 $ 0.15 There were 733 thousand outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2024 and no outstanding restricted shares awarded were excluded from the calculation of diluted earnings per share for the three months ended September 30, 2023. There were 409 thousand outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2024 and no outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per share for the nine months ended September 30, 2023. 13. Other Comprehensive Income (Loss) The after-tax changes in accumulated other comprehensive income (loss), are as follows: Foreign currency translation adjustment Pension and post-retirement benefits plans Derivative instruments Accumulated other comprehensive income (loss) Balance - December 31, 2023 $ ( 23,227 ) $ ( 11,896 ) $ 4,839 $ ( 30,284 ) Net current period change ( 1,157 ) ( 1,006 ) ( 4,442 ) ( 6,605 ) Amounts reclassified into earnings — 324 ( 1,159 ) ( 835 ) Balance - September 30, 2024 $ ( 24,384 ) $ ( 12,578 ) $ ( 762 ) $ ( 37,724 ) Foreign currency translation adjustment Pension and post-retirement benefit plans Derivative instruments Accumulated other comprehensive income (loss) Balance - December 31, 2022 $ ( 24,811 ) $ ( 11,512 ) $ 4,773 $ ( 31,550 ) Net current period change ( 1,946 ) ( 1,221 ) 7,049 3,882 Amounts reclassified into earnings — 315 ( 5,277 ) ( 4,962 ) Balance - September 30, 2023 $ ( 26,757 ) $ ( 12,418 ) $ 6,545 $ ( 32,630 ) 15 Table of Contents The related tax effects allocated to each component of other comprehensive income (loss) are as follows: Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024 Before Tax Amount Tax Expense After Tax Amount Before Tax Amount Tax Expense After Tax Amount Net current period change Cumulative translation adjustment $ 2,699 $ — $ 2,699 $ ( 1,157 ) $ — $ ( 1,157 ) Net actuarial gain (loss) and prior service credit 64 1 65 ( 1,009 ) 3 ( 1,006 ) Derivative instruments ( 5,807 ) 1,510 ( 4,297 ) ( 5,939 ) 1,497 ( 4,442 ) Net unrealized gain (loss) $ ( 3,044 ) $ 1,511 $ ( 1,533 ) $ ( 8,105 ) $ 1,500 $ ( 6,605 ) Amounts reclassified into earnings: Actuarial gain and prior service cost $ 111 $ — $ 111 $ 324 $ — $ 324 Derivative instruments 867 ( 228 ) 639 ( 1,503 ) 344 ( 1,159 ) Net realized gain (loss) $ 978 $ ( 228 ) $ 750 $ ( 1,179 ) $ 344 $ ( 835 ) Total other comprehensive income (loss) $ ( 2,066 ) $ 1,283 $ ( 783 ) $ ( 9,284 ) $ 1,844 $ ( 7,440 ) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Before Tax Amount Tax Expense After Tax Amount Before Tax Amount Tax Expense After Tax Amount Net current period change Cumulative translation adjustment $ ( 3,452 ) $ — $ ( 3,452 ) $ ( 1,946 ) $ — $ ( 1,946 ) Net actuarial gain (loss) and prior service credit ( 1,009 ) 1 ( 1,008 ) ( 1,223 ) 2 ( 1,221 ) Derivative instruments 1,895 ( 187 ) 1,708 9,233 ( 2,184 ) 7,049 Net unrealized gain (loss) $ ( 2,566 ) $ ( 186 ) $ ( 2,752 ) $ 6,064 $ ( 2,182 ) $ 3,882 Amounts reclassified into earnings: Actuarial gain and prior service cost $ 109 $ — $ 109 $ 315 $ — $ 315 Derivative instruments ( 3,381 ) 804 ( 2,577 ) ( 7,033 ) 1,756 ( 5,277 ) Net realized gain (loss) $ ( 3,272 ) $ 804 $ ( 2,468 ) ( 6,718 ) 1,756 ( 4,962 ) Total other comprehensive income (loss) $ ( 5,838 ) $ 618 $ ( 5,220 ) $ ( 654 ) $ ( 426 ) $ ( 1,080 ) As of September 30, 2024, the Company estimates that net pre-tax derivative loss of $ 2.9 million included in Accumulated other comprehensive income (loss) will be reclassified into earnings within the next 12 months. 16 Table of Contents 14. Cost Reduction and Manufacturing Capacity Rationalization The Company's restructuring program includes aligning cost structure to support margin expansion. The program includes workforce reductions and footprint optimization across segments. The changes in accrued restructuring balances are as follows: Vehicle Solutions Electrical Systems Aftermarket & Accessories Corporate/Other Total December 31, 2023 $ 128 $ — $ — $ 983 $ 1,111 New charges 489 1,090 34 164 1,777 Payments and other adjustments ( 489 ) ( 1,090 ) ( 34 ) ( 540 ) ( 2,153 ) March 31, 2024 $ 128 $ — $ — $ 607 $ 735 New charges 2,199 1,379 197 — 3,775 Payments and other adjustments ( 2,203 ) ( 1,379 ) ( 197 ) ( 97 ) ( 3,876 ) June 30, 2024 $ 124 $ — $ — $ 510 $ 634 New charges 2,188 1,276 753 — 4,217 Payments and other adjustments ( 2,312 ) ( 1,276 ) ( 753 ) ( 81 ) ( 4,422 ) September 30, 2024 $ — $ — $ — $ 429 $ 429 Of the $ 4.2 million costs incurred in the three months ended September 30, 2024 for restructuring, $ 2.8 million related to headcount reductions and $ 1.4 million related to facility exit and other; $ 3.5 million were recorded in cost of revenue and $ 0.7 million were recorded in selling, general and administrative expenses. Of the $ 9.8 million costs incurred in the nine months ended September 30, 2024 for restructuring, $ 7.7 million related to headcount reductions and $ 2.1 million related to facility exit and other; $ 8.6 million were recorded in cost of revenues and $ 1.2 million were recorded in selling, general and administrative expenses. All of the $ 0.4 million costs incurred in the nine months ended September 30, 2023 for restructuring related to headcount reductions and primarily were recorded in cost of revenues within the Vehicle Solution segment. There were no costs incurred in the three months ended September 30, 2023. 15. Commitments and Contingencies Leases - As disclosed in Note 7, Leases, we lease office, warehouse and manufacturing space and 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, 2024, 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, 2024 and 2023, 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 product liability claims, customer and supplier disputes, service provider disputes, examinations by taxing authorities, employment disputes, workers’ compensation claims, unfair labor practice charges, OSHA investigations, intellectual property disputes and environmental claims arising out of the conduct of our businesses. Management believes that the Company maintains adequate insurance and 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. 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 17 Table of Contents 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 periods ended September 30, 2024 and December 31, 2023, are included within accrued liabilities and other in the accompanying Condensed Consolidated Balance Sheets. On July 24, 2023, one of our customers issued a voluntary safety recall related to certain wiper system components supplied by us. To the extent a loss occurs that is attributed to us, we believe that we have reasonable levels of insurance coverage to mitigate recall exposure risk. It is reasonably possible that we will incur additional losses and fees above the amount accrued for warranty claims but we cannot estimate a range of such reasonably possible losses or fees related to these claims at this time. There are no assurances, however, that settlements reached and/or adverse judgments received, if any, will not exceed amounts normally accrued. The following presents a summary of the warranty provision for the nine months ended September 30, 2024: Balance - December 31, 2023 $ 1,458 Provision for warranty claims 1 1,329 Deduction for payments made and other adjustments ( 1,497 ) Balance - September 30, 2024 $ 1,290 1. Provision for warranty claims includes $ 0.1 million of expense that is attributable to cab structures business and included in discontinued operations for the nine months ended September 30, 2024. Debt Payments - As disclosed in Note 4, Debt, the Credit Agreement requires the Company to repay a fixed amount of principal on a quarterly basis and make 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 agreement matures in 2027; no payments are due thereafter: Total Remainder of 2024 $ — 2025 $ 8,437 2026 $ 24,063 2027 $ 96,500 16. Segment Reporting 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 multiple segments. Our segments are more specifically described below. CVG's reportable segments were impacted in the current period due to the divestiture of the cab structure business with operations in Kings Mountain, North Carolina and the expected divestiture of the Industrial Automation segment. As a result of classifying the Industrial Automation reporting segment as a discontinued operation, CVG is now comprised of three reportable segments: Vehicle Solutions, Electrical Systems and Aftermarket & Accessories. The financial information reported for Vehicle Solutions and Aftermarket & Accessories excludes the activity from the Kings Mountain, North Carolina facility due to the divestiture. The Vehicle Solutions segment designs, manufactures and sells the following products: • Commercial vehicle seats for the global commercial vehicle markets including heavy duty trucks, medium duty trucks, last mile delivery trucks and vans, construction and agriculture equipment in North America, Europe and Asia-Pacific. This segment includes a portion of the company’s activities in the electric vehicle market. • Plastic & Trim components primarily for the North America commercial vehicle market and power sports markets; and Cab structures for the North American medium-duty/heavy-duty ("MD/HD") truck market. The Electrical Systems segment designs, manufactures and sells the following products: • Cable and harness assemblies for both high and low voltage applications, control boxes, dashboard assemblies and design and engineering for these applications. • The end markets for these products are construction, agricultural, industrial, automotive (both internal combustion and electric vehicles), truck, mining, rail, marine, power generation and the military/defense industries in North America, Europe and Asia-Pacific. 18 Table of Contents The Aftermarket & Accessories segment designs, manufactures and sells the following products: • Seats and components sold into the commercial vehicle channels that provide repair and refurbishing. These channels include Original Equipment Service ("OES") centers and retail distributors, and are spread across North America, Europe and Asia-Pacific. • Commercial vehicle accessories including wipers, mirrors, and sensors. These products are sold both as Original Equipment and as repair products. • Office seats primarily sold into the commercial and home office furniture distribution channels in Europe and Asia-Pacific. 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. The following tables present financial information for the Company's reportable segments for the periods indicated: Three Months Ended September 30, 2024 Vehicle Solutions Electrical Systems Aftermarket and Accessories Corporate/Other Total Revenues $ 97,296 $ 43,380 $ 31,096 $ — $ 171,772 Gross profit 8,774 2,213 5,474 ( 40 ) 16,421 Selling, general & administrative expenses 3,629 2,598 2,328 8,926 17,481 Operating income (loss) $ 5,145 $ ( 385 ) $ 3,146 $ ( 8,966 ) $ ( 1,060 ) Three Months Ended September 30, 2023 Vehicle Solutions Electrical Systems Aftermarket and Accessories Corporate/Other Total Revenues $ 115,235 $ 53,862 $ 33,800 $ — $ 202,897 Gross profit 15,050 7,881 6,416 ( 38 ) 29,309 Selling, general & administrative expenses 6,761 2,018 2,104 9,506 20,389 Operating income (loss) $ 8,289 $ 5,863 $ 4,312 $ ( 9,544 ) $ 8,920 Nine Months Ended September 30, 2024 Vehicle Solutions Electrical Systems Aftermarket and Accessories Corporate/Other Total Revenues $ 312,785 $ 149,327 $ 97,951 $ — $ 560,063 Gross profit 32,177 9,934 18,091 ( 158 ) 60,044 Selling, general & administrative expenses 15,985 7,799 6,228 25,519 55,531 Operating income (loss) $ 16,192 $ 2,135 $ 11,863 $ ( 25,677 ) $ 4,513 Nine Months Ended September 30, 2023 Vehicle Solutions Electrical Systems Aftermarket and Accessories Corporate/Other Total Revenues $ 362,820 $ 172,236 $ 106,691 $ — $ 641,747 Gross profit 49,263 26,524 21,071 ( 144 ) 96,714 Selling, general & administrative expenses 19,609 6,932 6,017 28,352 60,910 Operating income (loss) $ 29,654 $ 19,592 $ 15,054 $ ( 28,496 ) $ 35,804 19 Table of Contents 17. Other Financial Information Items reported in inventories consisted of the following: September 30, 2024 December 31, 2023 Raw materials $ 100,684 $ 88,474 Work in process 10,533 12,044 Finished goods 19,700 16,749 Inventories $ 130,917 $ 117,267 Items reported in property, plant, and equipment, net consisted of the following: September 30, 2024 December 31, 2023 Land and buildings $ 28,529 $ 28,575 Machinery and equipment 219,450 210,931 Construction in progress 5,705 6,295 Property, plant, and equipment, gross 253,684 245,801 Less accumulated depreciation ( 184,065 ) ( 176,878 ) Property, plant and equipment, net $ 69,619 $ 68,923 Items reported in accrued expenses and other liabilities consisted of the following: September 30, 2024 December 31, 2023 Compensation and benefits $ 21,152 $ 23,604 Operating lease liabilities 6,663 6,518 Derivative liabilities 4,670 304 Taxes payable 4,688 5,020 Accrued freight 3,184 2,679 Customer tooling projects 2,565 1,217 Accrued legal and professional fees 1,361 1,535 Warranty costs 1,290 1,458 Other 4,337 9,019 Accrued liabilities and other $ 49,910 $ 51,354 18. Discontinued Operations On July 31, 2024, the Company entered into a purchase agreement to sell its cab structures business with operations in Kings Mountain, North Carolina for approximately $ 40 million. On September 6, 2024, the Company entered into an Amendment to the Purchase Agreement whereby the transaction closed on September 6, 2024 with the Company receiving $ 20 million of the purchase price on September 6, 2024 and $ 20 million (subject to adjustment) on October 1, 2024. The decision to divest this business was part of our strategy to reduce our exposure to the cyclical Class 8 market, lower our customer concentration, remove complexity from our business, and improves our return profile. As a result of the transaction, CVG recorded an after-tax gain on the sale of the business of approximately $ 27.2 million for the three months ended September 30, 2024 and recorded a Note receivable of $ 20.0 million in its balance sheet as of September 30, 2024. The $ 20.0 million Note receivable was subsequently collected on October 1, 2024. On October 30, 2024, the Company entered into a purchase agreement to sell its First Source Electronics (FSE) business with operations in Elkridge, Maryland for approximately $ 1.5 million, with a note in the amount of $ 500 thousand and earn out potential of an additional $ 1.5 million subject to certain criteria. The Elkridge facility is the primary manufacturing facility of the Company's Industrial Automation segment. The decision to divest this business was part of our strategy to continually evaluate our portfolio of businesses and product lines for strategic fit and continued investment. As of September 30, 2024, the assets and liabilities of the Industrial Automation segment are classified as held for sale on the balance sheets, net of the 20 Table of Contents estimated write-down loss as of September 30, 2024. CVG recorded an estimated after-tax loss on the contemplated sale of the Industrial Automation business of approximately $ 7.8 million for the three months ended September 30, 2024. We determined that the sale of the cab structures and Industrial Automation businesses represent discontinued operations as they constitute disposals of a product line and an operating segment, respectively, meet the held for sale criteria, and are a strategic shift that will have a major effect on our operations and financial results (individually and collectively). As a result, we reclassified the related earnings (loss) from continuing operations to earnings (loss) from discontinued operations - net of income taxes on the consolidated statement of earnings (loss) for all the periods presented. No amounts for shared general and administrative operating support expense were allocated to the discontinued operation. The Company has continuing involvement with the cab structures business through a transition services agreement (TSA), pursuant to which the Company and Buyer parties provide certain service to each other for a period of time following the disposition, up to one year. While the transition services are expected to vary in duration depending upon the type of service provided, the Company expects to reduce costs as the transition services are completed. The Company collected a total of $ 2.0 million related to the transition services agreement for the three and nine months ended September 30, 2024, which was recognized in Continuing operations, Other (income) expense in the Condensed Consolidated Statements of Operations. The following table provides a reconciliation of the individual discontinued operations to the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Income (loss) from discontinued operations, net of tax Cab structures business $ 18,814 $ 2,130 $ 22,327 $ 7,060 Industrial Automation segment ( 8,417 ) 479 ( 10,739 ) ( 1,991 ) Total income from discontinued operations, net of tax $ 10,397 $ 2,609 $ 11,588 $ 5,069 The following tables present reconciliations of the captions within CVG's Condensed Consolidated Statements of Operations attributable to each discontinued operation for the three and nine months ended September 30, 2024 and 2023. Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Income (loss) from discontinued operations attributable to Cab structures business: Revenues $ 24,795 $ 30,770 $ 89,187 $ 98,066 Cost of revenues 33,627 27,970 93,367 88,745 Gross profit ( 8,832 ) 2,800 ( 4,180 ) 9,321 Income (loss) before provision for income taxes ( 8,832 ) 2,800 ( 4,180 ) 9,321 Provision (benefit) for income taxes of discontinued operations ( 425 ) 670 714 2,261 Gain on disposition of discontinued operations, net of income taxes 27,221 — 27,221 — Net income from discontinued operations, net of income taxes $ 18,814 $ 2,130 $ 22,327 $ 7,060 21 Table of Contents Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Income (loss) from discontinued operations attributable to Industrial Automation segment: Revenues $ 5,350 $ 13,020 $ 14,641 $ 31,777 Cost of revenues 5,185 11,205 15,107 30,278 Gross profit 165 1,815 ( 466 ) 1,499 Selling, general and administrative expenses 747 1,087 3,009 3,588 Operating income (loss) ( 582 ) 728 ( 3,475 ) ( 2,089 ) Interest expense 64 125 201 398 Income (loss) before provision for income taxes ( 646 ) 603 ( 3,676 ) ( 2,487 ) Provision (benefit) for income taxes of discontinued operations ( 38 ) 124 ( 746 ) ( 496 ) Loss on disposition of discontinued operations, net of income taxes ( 7,809 ) — ( 7,809 ) — Net income (loss) from discontinued operations, net of income taxes $ ( 8,417 ) $ 479 $ ( 10,739 ) $ ( 1,991 ) The following table presents the major classes of assets and liabilities of the Industrial Automation segment as of September 30, 2024, and of the cab structures and Industrial Automation segment as of December 31, 2023 that are classified as held for sale in the accompanying Condensed Consolidated Balance Sheets (in thousands). September 30, 2024 December 31, 2023 Account receivable, net 4,964 4,603 Inventories 3,710 10,815 Other current assets — 185 Property, plant and equipment, net 232 — Intangible assets, net 3,093 — Other assets, net 1,156 — Write-down loss on disposal group ( 8,204 ) — Current assets held for sale 4,951 15,603 Property, plant and equipment, net — 4,545 Intangible assets, net — 4,628 Other assets, net — 1,957 Non current assets held for sale — 11,130 Total assets held for sale $ 4,951 $ 26,733 Accounts payable 2,069 2,068 Accrued liabilities and other 2,067 1,208 Other long-term liabilities 115 — Current liabilities held-for-sale 4,251 3,276 Other long-term liabilities — 870 Noncurrent liabilities held-for-sale — 870 Total liabilities held for sale $ 4,251 $ 4,146 22 Table of Contents The following tables present reconciliations of the captions within CVG's Condensed Consolidated Statements of Cash Flows attributable to discontinued operations for the nine months ended September 30, 2024 and 2023. Net cash provided by operating activities for the nine months ended September 30, 2024 includes the gain and loss on the respective transactions, as noted above. Nine Months Ended September 30, 2024 2023 CASH FLOWS FROM DISCONTINUED OPERATIONS: Net cash provided by (used in) operating activities ( 4,567 ) 9,027 Net cash provided by (used in) investing activities ( 838 ) ( 414 ) Total cash provided by discontinued operations ( 5,405 ) 8,613 23 Table of Contents