CVG Continues Margin Improvement
Commercial Vehicle Group, Inc. (the “Company” or “CVG”) (Nasdaq: CVGI) today reported financial results for the second quarter ended June 30, 2015.
Consolidated Results
- Second quarter 2015 revenues were $217.6 million compared to $216.0 million in the prior year period, an increase of 1 percent. Foreign currency exchange translation, due to the relative strength of the U.S. Dollar, negatively impacted second quarter 2015 sales compared to the prior year period by $5.5 million. As adjusted for foreign currency exchange translation, second quarter 2015 revenues increased by 3.3 percent as compared to the prior year period.
- Operating income in the second quarter was $11.6 million compared to operating income of $9.0 million in the prior year period, an increase of 29 percent period over period. Second quarter 2015 and 2014 results include $0.5 million and $0.1 million, respectively, of costs associated with the closure of our Tigard, Oregon facility.
- Net income was $3.2 million in the second quarter, or $0.11 per diluted share, compared to net income of $2.7 million, or $0.09 per diluted share in the prior year period. Earnings per share, as adjusted for special items, were $0.12 per diluted share in the second quarter, compared to $0.09 per diluted share in the prior year period.
For the quarter ended June 30, 2015, our effective tax rate was 51%. Our effective tax rate is adversely influenced by a disproportionate amount of pretax earnings arising in North America, more specifically in the United States, and by deferred tax asset valuation allowances in certain or our foreign subsidiaries. For 2015, we expect our effective tax rate to be approximately 45%.
For the quarter ended June 30, 2015, the Company did not have any borrowings under its asset-based revolver and therefore was not subject to any financial maintenance covenants. At June 30, 2015, the Company had liquidity of $125.7 million; $88.6 million of cash and $37.1 million of availability from its asset based revolving credit facility.
Rich Lavin, President and CEO of Commercial Vehicle Group, stated, “We had another solid quarter with improved operating income period over period. Additionally, year to date sales increased over 5 percent as compared to last year as we continue to benefit from favorable production volumes in the North American medium- and heavy-duty truck markets. Sales in our Global Truck and Bus segment increased 12 percent in the second quarter as compared to the same period last year. We continue to experience headwinds in the global construction and agriculture markets we serve, but with the recent addition of Joseph Saoud, President of our Global Construction and Agriculture Segment, we are intensifying our product development and sales efforts and expect to strengthen our position in the global construction and agriculture markets. Our growth potential in all of our core markets is significant and the entire organization is highly focused on our long-term strategy and the value-driving objectives of CVG 2020.”
Tim Trenary, Chief Financial Officer of Commercial Vehicle Group, stated, “As a result of our cost discipline and operational excellence initiatives, we continue to improve our margins even as we invest in talent, innovation, new product development, and sales initiatives. We are pleased to report that our second quarter of 2015 represents the fifth consecutive quarter of margin improvement, with our operating income margin now at 5.3 percent.”
Segment Results
Global Truck and Bus Segment
- Revenues for the Global Truck and Bus Segment for the second quarter of 2015 were $149.3 million compared to $133.0 million for the prior year period, an increase of 12.3 percent primarily resulting from increased medium- and heavy-duty truck production volumes in North America. Foreign currency exchange translation negatively impacted second quarter 2015 sales by $0.8 million.
- Operating income for the second quarter was $15.1 million compared to operating income of $11.6 million for the prior year period, primarily as a result of increased sales period over period. Second quarter 2015 and 2014 results include $0.5 million and $0.1 million, respectively, of costs associated with the closure of our Tigard facility.
Global Construction and Agriculture Segment
- Revenues for the Global Construction and Agriculture Segment in the second quarter of 2015 were $68.4 million compared to $83.0 million in the prior year period, a decrease of 17.6 percent. Foreign currency exchange translation negatively impacted second quarter 2015 sales by $4.7 million, or 5.7 percent. The global construction and agriculture end markets for which we manufacture products were down in the second quarter of 2015 as compared to the prior year period.
- Operating income in the second quarter of 2015 was $2.8 million compared to $4.7 million in the prior year period primarily as a result of decreased revenue.
GAAP to Non-GAAP Reconciliation
A reconciliation of GAAP to non-GAAP financial measures is included as Appendix A to this release.
2015 End Market Outlook
Management estimates that 2015 North American Class 8 truck production levels will be in the range of 320,000 – 330,000 units: up from our March 2015 estimate of 290,00 – 310,000 units; and up from the 297,000 units produced in 2014. We expect equipment production to remain soft for the remainder of 2015 in the global construction and agriculture end markets we serve.
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