CVG Reports Q4 Net Loss, Lower Revenue
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Commercial Vehicle Group Inc., a global supplier of cab-related products and systems, earlier this month reported a fourth-quarter net loss and lower revenue as the commercial vehicle and construction markets contracted, and shortly thereafter announced the appointment of a new leader.
The company on March 23 announced the appointment of Harold Bevis as president and CEO, effective immediately. Bevis succeeded Patrick Miller. Bevis will remain on the board, where he has served since 2014. Most recently, he was chairman and CEO of Boxlight Inc., which makes technology for the education market.
In commenting on the change, CVG Chairman Robert Griffin said, “We have untapped opportunities to embrace new technologies and innovation and to challenge the status quo as we work to improve our operating performance and achieve disciplined growth. I, along with our board, believe strongly in CVG’s strategy to enhance growth in alignment with favorable macro-economic trends in electronics and electrification, while at the same time diversifying our end market exposure to mitigate cyclicality. However, the pace at which this strategy is implemented must accelerate.”
For the period ended Dec. 31, the company posted a net loss of $7.5 million, or a loss of 24 cents per diluted share, on revenue of $189.4 million. That compared with net income of $8.1 million, or 26 cents, on revenue of $223.6 million a year earlier.
The year-over-year decrease of 15.3% in quarterly revenue primarily resulted from a decline in heavy-duty truck production in North America and the construction equipment markets, offset partially by $10.4 million of incremental revenue from the acquisition of First Source Electronics, an electronics systems integrator based in Elkridge, Md., that serves a diverse range of market segments including industrials, transportation and military. Foreign currency translation adversely impacted fourth-quarter revenues by $700,000, or 0.3%.
“The strong growth in the North American heavy- and medium-duty truck markets experienced in 2018 and early 2019 fell off substantially in the fourth quarter. This dynamic was exacerbated by declines in the global construction market, and as a result, weighed heavily on our 2019 results,” Miller said in a release March 17.
The New Albany, Ohio-based company took restructuring actions that it expects will reduce operating costs by $5 million to $7 million annually once fully implemented by early 2021, he said.
“As we have noted in the past, the speed at which business contraction affects our original equipment manufacturing customers creates challenges in flexing our workforce,” he said.
Quarterly revenue for the electrical systems segment fell to $113.9 million compared with $127 million in the prior-year period. Revenue for the global seating segment was $76.5 million in the quarter compared with $99.3 million a year earlier.
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“Our long-term strategy includes growing our electrical systems segment,” Chief Financial Officer C. Timothy Trenary said during an earnings conference call. “To that end, we made investments in our global wire harness and North American trim business during the year.”
Miller added during the call that early indications are that the FSE acquisition is meeting the growth targets “we anticipated without experiencing the cyclical downturns we see in our core markets.”
In 2019, CVG said the total cash consideration for the FSE transaction of as much as $44.75 million — with $34 million due at closing and the balance due in 12, 18 and 36 months — is subject to meeting certain targets. The transaction was funded with domestic cash on hand and $2 million available under its revolving credit facility.
Meanwhile, management estimated 2020 North American Class 8 truck production may decline 35% to 42% to 200,000 to 225,000 units compared with a year earlier. North American Classes 5-7 production may decline 15% to 20%, and the construction markets the company serves in North America, Europe and Asia Pacific may decline by 10% to 15%.
For the 12-month period, net income fell to $15.7 million, or 51 cents, on revenue of $901.2 million. That compared with net income of $41.4 million, or $1.36, on revenue of $897.7 million.
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