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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 001-34365
 
 
COMMERCIAL VEHICLE GROUP, INC.
(Exact name of Registrant as specified in its charter)
 
 
Delaware
(State or other jurisdiction of
incorporation or organization)
41-1990662
(I.R.S. Employer
Identification No.)
7800 Walton Parkway
New Albany, Ohio
(Address of principal executive offices)
43054
(Zip Code)
(614) 289-5360
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.1 per share
CVGI
The NASDAQ Global Select Market
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
 
Accelerated filer
x
Non-accelerated filer
¨
 
Smaller reporting company
¨
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  x
The number of shares outstanding of the Registrant’s common stock, par value $.01 per share, at August 8, 2019 was 31,327,681 shares.
 

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
 
 
 
PART I FINANCIAL INFORMATION
 
 
 
 
 
Part II OTHER INFORMATION
 
 
 
 


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ITEM 1 – FINANCIAL STATEMENTS
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
June 30, 2019
 
December 31, 2018
 
(Unaudited)
 
 
 
(In thousands, except per share amounts)
Assets
Current Assets:
 
 
 
Cash
$
60,521

 
$
70,913

Accounts receivable, net of allowances of $5,295 and $5,139, respectively
157,882

 
134,624

Inventories
92,913

 
92,359

Other current assets
22,370

 
16,828

Total current assets
333,686

 
314,724

Property, plant and equipment, net of accumulated depreciation of $149,528 and $143,781, respectively
70,658

 
65,099

Operating lease right-of-use assets, net
22,097

 

Goodwill
7,624

 
7,576

Intangible assets, net of accumulated amortization of $10,242 and $9,568, respectively
12,188

 
12,800

Deferred income taxes
11,751

 
15,348

Other assets, net
2,322

 
2,583

Total assets
$
460,326

 
$
418,130

Liabilities and Stockholders’ Equity
Current Liabilities:
 
 
 
Accounts payable
$
93,320

 
$
86,645

Current operating lease liabilities
4,851

 

Accrued liabilities and other
34,936

 
36,969

Current portion of long-term debt
3,238

 
9,102

Total current liabilities
136,345

 
132,716

Long-term debt
154,758

 
154,656

Operating lease liabilities
18,567

 

Pension and other post-retirement benefits
11,812

 
12,065

Other long-term liabilities
2,342

 
3,655

Total liabilities
323,824

 
303,092

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; 30,581,274 and 30,512,843 shares issued and outstanding, respectively)
319

 
318

Treasury stock, at cost: 1,334,251 shares
(10,245
)
 
(10,245
)
Additional paid-in capital
244,486

 
243,007

Retained deficit
(52,336
)
 
(70,571
)
Accumulated other comprehensive loss
(45,722
)
 
(47,471
)
Total stockholders’ equity
136,502

 
115,038

Total liabilities and stockholders’ equity
$
460,326

 
$
418,130

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(Unaudited)
(In thousands, except per 
share amounts)
 
(Unaudited)
(In thousands, except per 
share amounts)
Revenues
$
243,190

 
$
233,391

 
$
486,354

 
$
449,126

Cost of Revenues
209,407

 
197,806

 
418,011

 
382,718

Gross Profit
33,783

 
35,585

 
68,343

 
66,408

Selling, General and Administrative Expenses
16,248

 
14,349

 
31,446

 
29,564

Amortization Expense
322

 
327

 
643

 
659

Operating Income
17,213

 
20,909

 
36,254

 
36,185

Interest and Other Expense
7,490

 
3,213

 
11,887

 
4,963

Income Before Provision for Income Taxes
9,723

 
17,696

 
24,367

 
31,222

Provision for Income Taxes
2,546

 
4,501

 
6,060

 
8,174

Net Income
$
7,177

 
$
13,195

 
$
18,307

 
$
23,048

Earnings per Common Share:
 
 
 
 
 
 
 
Basic
$
0.23

 
$
0.44

 
$
0.60

 
$
0.76

Diluted
$
0.23

 
$
0.43

 
$
0.60

 
$
0.75

Weighted Average Shares Outstanding:
 
 
 
 
 
 
 
Basic
30,547

 
30,219

 
30,530

 
30,219

Diluted
30,824

 
30,513

 
30,731

 
30,543

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019

2018
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)

(Unaudited)
 
(In thousands)
 
(In thousands)
Net income
$
7,177

 
$
13,195

 
$
18,307

 
$
23,048

Other comprehensive income (loss):
 
 
 
 

 

Foreign currency exchange translation adjustments
233

 
(5,304
)
 
338

 
(3,834
)
Minimum pension liability, net of tax
1,739

 
(593
)
 
1,089

 
(932
)
Derivative Instrument
(17
)
 

 
322

 

Other comprehensive income (loss)
1,955

 
(5,897
)
 
1,749

 
(4,766
)
Comprehensive income
$
9,132

 
$
7,298

 
$
20,056

 
$
18,282

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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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, 2018
30,513

 
$
318

 
$
(10,245
)
 
$
243,007

 
$
(70,571
)
 
$
(47,471
)
 
$
115,038

Share-based compensation expense
68

 
1

 

 
1,479

 

 

 
1,480

Cumulative effect of adoption of Topic 842

 

 

 

 
(72
)
 

 
(72
)
Total comprehensive income

 

 

 

 
18,307

 
1,749

 
20,056

Balance - June 30, 2019
30,581

 
$
319

 
$
(10,245
)
 
$
244,486

 
$
(52,336
)
 
$
(45,722
)
 
$
136,502

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
Six Months Ended June 30,
 
2019
 
2018
 
(Unaudited)
 
(Unaudited)
 
(In thousands)
Cash Flows from Operating Activities:
 
 
 
Net Income
$
18,307

 
$
23,048

Adjustments to reconcile net income to cash flows from operating activities:
 
 
 
Depreciation and amortization
7,058

 
7,748

Allowance for accounts receivable
3,396

 
3,829

Non-cash amortization of debt financing costs
685

 
701

Shared-based compensation expense
1,479

 
1,517

Deferred income taxes
2,906

 
6,676

Non-cash loss / (gain) on derivative contracts
1,823

 
(2,161
)
Change in other operating items:
 
 
 
Accounts receivable
(26,552
)
 
(47,334
)
Inventories
(462
)
 
7,010

Prepaid expenses
(5,491
)
 
(3,766
)
Accounts payable
6,563

 
2,845

Other operating activities, net
(1,061
)
 
788

Net cash provided by operating activities
8,651

 
901

Cash Flows from Investing Activities:
 
 
 
Purchases of property, plant and equipment
(12,702
)
 
(5,158
)
Proceeds from disposal/sale of property, plant and equipment
20

 

Net cash used in investing activities
(12,682
)
 
(5,158
)
Cash Flows from Financing Activities:
 
 
 
Borrowing of Revolving Credit Facility

 
80,500

Repayment of Revolving Credit Facility

 
(80,500
)
Repayment of Term Loan
(6,338
)
 
(2,188
)
Other financing activities
(222
)
 

Net cash used in financing activities
(6,560
)
 
(2,188
)
 
 
 
 
Effect of Foreign Currency Exchange Rate Changes on Cash
199

 
(1,125
)
 
 
 
 
Net Decrease in Cash
(10,392
)
 
(7,570
)
 
 
 
 
Cash:
 
 
 
Beginning of period
70,913

 
52,244

End of period
$
60,521

 
$
44,674

Supplemental Cash Flow Information:
 
 
 
Cash paid for interest
$
6,787

 
$
6,937

Cash paid for income taxes, net
$
4,180

 
$
1,693

Unpaid purchases of property and equipment included in accounts payable
$
526

 
$
416


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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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 leading supplier of electrical wire harnesses, seating systems, and a full range of other cab related products for the global commercial vehicle markets, including medium- and heavy-duty trucks ("MD/HD Truck") and medium- and heavy-construction vehicles. We also supply electrical wire harnesses, seating systems or other cab related products to automotive, military, bus, agriculture, specialty transportation, mining, industrial equipment 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 are differentiated from automotive industry suppliers by our ability to manufacture low volume, customized products on a sequenced basis to meet the requirements of our customers. We believe our products are used by a majority of the North American MD/HD Truck and many medium- and heavy-duty construction vehicle original equipment manufacturers (“OEMs”), and to a lesser extent other makers of industrial equipment.

We have manufacturing operations in the United States, Mexico, China, United Kingdom, Czech Republic, Ukraine, Thailand, India and Australia. Our products are primarily sold in North America, Europe, and the Asia-Pacific region.

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 2018 consolidated financial statements and the notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K ("2018 Form 10-K") as filed with the SEC on March 11, 2019.

Unless otherwise indicated, all amounts are in thousands, except share and per share amounts. Certain reclassifications to the Condensed Consolidated Statement of Operations have been made pertaining to prior year non-service pension cost (benefit) to conform to current year presentation.

SEGMENTS
In the quarter ended December 31, 2018, we completed a strategic reorganization of our operations into two business segments, Electrical Systems and Global Seating. The reorganization allows the Company to better focus its business along product lines, as opposed to end markets, which the Company believes will enhance the effectiveness of seeking growth opportunities and enhancing shareholder value. As a result of the strategic reorganization, we restated prior period segment information to conform to the current period segment presentation.
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 the segments consist 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:
 
Wire harness and panel assemblies primarily for the construction, agricultural, industrial, automotive, truck, mining and military industries in North America, Europe and Asia-Pacific;
Trim primarily for the North America 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
Aftermarket components in North America.

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The Global Seating Segment manufactures and sells Seats as follows:
 
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.
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 June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 to the Company. The Company anticipates ASU 2016-13 and ASU 2018-19 will apply to its trade receivables and will not have a material impact to the reported value of such receivables. We expect to implement ASU No. 2016-13 and 2018-19 on the effective date of January 1, 2020.

Accounting Pronouncements Implemented in the Six Months Ended June 30, 2019

In June 2018, the FASB issued ASU No. 2018-07, "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting". The ASU changed the measurement date for determining the fair value of share awards to nonemployees to the grant date and requires the consideration of the probability of satisfying performance obligations in assessing the awards. The ASU did not have a material impact on our recognition of share-based payments for nonemployees.
Lease Accounting
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" followed by ASU No. 2018-11, "Leases (Topic 842): Targeted Improvements", issued in July 2018. The ASU is intended to increase transparency and comparability among companies by recognizing lease assets and liabilities and disclosing key information about leasing arrangements. ASU 2016-02 was adopted by the Company on January 1, 2019.
In accordance with Topic 842, we elected not to recognize lease assets and lease liabilities for leases with a term of twelve months or less and elected to not separate lease and non-lease components. We elected the transition method option under ASU 2018-11 with the package of practical expedients that permits the Company to: (a) not reassess whether expired or existing contracts contain leases, (b) not reassess lease classification for existing or expired leases and (c) not consider whether previously capitalized initial direct costs would be appropriate under the new standard.  We recorded a right-of-use asset of approximately $21.2 million and a lease liability of approximately $22.2 million upon adoption. We also elected the option to apply the new leasing standard on the date of adoption and recognize a cumulative-effect transition adjustment to the opening balance of retained earnings in the period of adoption resulting in a cumulative effect as of January 1, 2019 of $0.1 million. Refer to footnote 11 for further details.

3. Revenue Recognition

Contractual Arrangements
Revenue is measured based on terms and considerations specified in contracts with customers. We have long-term contracts with some customers that govern overall terms and conditions accompanied by individual purchase orders that define specific order quantities and/or price. We have many customers that operate under terms 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

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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 the type and location of our customer and the products offered. None of the Company's contracts as of June 30, 2019 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. We make estimates for potential customer returns or adjustments based on historical experience, which reduce 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 $157.9 million as of June 30, 2019 and $134.6 million as of December 31, 2018. We generally do not have other assets or liabilities associated with customer contracts. In general, we do not make significant judgments or have variable consideration that impact our recognition of revenue.

Our products include electrical wire harnesses and panel assemblies; trim systems and components ("Trim"); cab structures and sleeper boxes; mirrors, wipers and controls; and seats and seating systems ("Seats"). We sell these products into multiple geographic regions including North America, Europe and Asia-Pacific and to multiple customer end markets including MD/HD Truck OEMs, Bus OEMs, Construction OEMs, the aftermarket and other markets. The nature, timing and uncertainty of our recognition of revenue and associated cash flows across the varying product lines, geographic regions and customer end markets are substantially consistent. Refer to footnote 15 for revenue disclosures by reportable segments.

4. 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 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 contracts is deferred in accumulated other comprehensive loss and recognized as an adjustment to Cost of Revenues in the period the related hedge transactions are recognized. Refer to footnote 16 for additional disclosures.

Interest Rate Swap Agreement. To manage our exposure to variable interest rates, we have entered into interest rate swap agreements in which the Company agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designed to mitigate changes in the interest rate of a portion of the outstanding borrowings. The Company entered into a series of interest rate swaps to initially cover $80 million of its outstanding debt under the senior secured term loan facility. The Company expects these derivatives to remain

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effective during the remaining term of the swaps and will record the impact in interest and other expense in the Condensed Consolidated Statements of Income. Refer to footnote 16 for additional disclosures.
The fair values of our derivative assets and liabilities are categorized as follows: 
 
 
 
June 30, 2019
 
December 31, 2018
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
Derivative assets
Foreign exchange contract 1
 
$
818

 
$

 
$
818

 
$

 
$
496

 
$

 
$
496

 
$

Interest rate swap agreement 2
 
$
345

 
$

 
$
345

 
$

 
$
1,131

 
$

 
$
1,131

 
$

Derivative liabilities
Interest rate swap agreement 2
 
$
1,037

 
$

 
$
1,037

 
$

 
$

 
$

 
$

 
$

Derivative equity
Foreign exchange contract 3
 
$
818

 
$

 
$
818

 
$

 
$
496

 
$

 
$
496

 
$


1 
Presented in the Condensed Consolidated Balance Sheets in other current assets and based on observable market transactions of spot and forward rates.
2 
Presented in the Condensed Consolidated Balance Sheets in accrued liabilities in the amount of $0.7 million and based on observable market transactions and forward rates.
3 
Presented in the 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 is classified as Level 2. The carrying amounts and fair values of our long-term debt obligations are as follows:
 
June 30, 2019
 
December 31, 2018
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Term loan and security agreement 1
$
157,996

 
$
155,970

 
$
163,758

 
$
161,759


1 
Presented in the Condensed Consolidated Balance Sheets as the current portion of long-term debt of $3.2 million and long-term debt of $154.8 million as of June 30, 2019, and current portion of long-term debt of $9.1 million and long-term debt of $154.7 million as of December 31, 2018.

There are no fair value measurements of our long-lived assets and definite-lived intangible assets measured on a non-recurring basis as of June 30, 2019 and 2018.
5. 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, 30,581,274 and 30,512,843 shares were issued and outstanding as of June 30, 2019 and as of December 31, 2018, 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 June 30, 2019 and December 31, 2018.
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 six months ended June 30, 2019 and 2018 includes the effects of potential common shares issuable when dilutive, and is as follows:

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Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
7,177

 
$
13,195

 
$
18,307

 
$
23,048

Weighted average number of common shares outstanding ('000s)
30,547

 
30,219

 
30,530

 
30,219

Dilutive effect of restricted stock grants after application of the Treasury Stock Method
277

 
294

 
201

 
324

Dilutive shares outstanding ('000s)
30,824

 
30,513

 
30,731

 
30,543

Basic earnings per share
$
0.23

 
$
0.44

 
$
0.60

 
$
0.76

Diluted earnings per share
$
0.23

 
$
0.43

 
$
0.60

 
$
0.75


There were no outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per share for the three months ended June 30, 2019 and 300,621 outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per shares for the three months ended June 30, 2018. There were 17,712 outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per share for the six months ended June 30, 2019 and 300,621 outstanding restricted shares awarded that were excluded from the calculation of diluted earnings per shares for the six months ended June 30, 2018.

Dividends — We have not declared or paid any cash dividends in the past. The terms of our debt and credit facilities (as described in footnote 13) restrict the payment or distribution of our cash or other assets, including cash dividend payments.
The changes in stockholder's equity are as follows: 
 
Six Months Ended June 30, 2019
 
Common Stock
 
Treasury
Stock
 
Additional Paid In Capital
 
Retained 
Deficit
 
Accumulated 
Other Comp. Loss
 
Total CVG Stockholders’ 
Equity
 
Shares ('000s)
 
Amount
 
Balance - December 31, 2018
30,513

 
$
318

 
$
(10,245
)
 
$
243,007

 
$
(70,571
)
 
$
(47,471
)
 
$
115,038

Share-based compensation expense

 

 

 
761

 

 

 
761

Cumulative effect of adoption of Topic 842

 

 

 

 
(72
)
 

 
(72
)
Total comprehensive income

 

 

 

 
11,130

 
(206
)
 
10,924

Balance - March 31, 2019
30,513

 
$
318

 
$
(10,245
)
 
$
243,768

 
$
(59,513
)
 
$
(47,677
)
 
$
126,651

Share-based compensation expense
68

 
1

 

 
718

 

 

 
719

Total comprehensive income

 

 

 

 
7,177

 
1,955

 
9,132

Balance - June 30, 2019
30,581

 
$
319

 
$
(10,245
)
 
$
244,486

 
$
(52,336
)
 
$
(45,722
)
 
$
136,502


 
Six Months Ended June 30, 2018
 
Common Stock
 
Treasury
Stock
 
Additional 
Paid In Capital
 
Retained 
Deficit
 
Accumulated 
Other Comp. Loss
 
Total CVG Stockholders’ 
Equity
 
Shares ('000s)
 
Amount
 
Balance - December 31, 2017
30,219

 
$
304

 
$
(9,114
)
 
$
239,870

 
$
(115,083
)
 
$
(41,235
)
 
$
74,742

Share-based compensation expense

 

 

 
673

 

 

 
673

Total comprehensive income

 

 

 

 
9,853

 
1,132

 
10,985

Balance - March 31, 2018
30,219

 
$
304

 
$
(9,114
)
 
$
240,543

 
$
(105,230
)
 
$
(40,103
)
 
$
86,400

Share-based compensation expense

 

 

 
844

 

 

 
844

Total comprehensive income

 
$

 
$

 
$

 
$
13,195

 
$
(5,898
)
 
$
7,297

Balance - June 30, 2018
30,219

 
$
304

 
$
(9,114
)
 
$
241,387

 
$
(92,035
)
 
$
(46,001
)
 
$
94,541

6. Share-Based Compensation
The Company's outstanding share-based compensation is comprised solely of restricted stock awards.

10

Table of Contents

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 June 30, 2019: 
Grant
 
Shares
('000)
 
Vesting Schedule
 
Unearned
Compensation
 
Remaining
Periods
(in months)
October 2016
 
411

 
3 equal annual installments commencing on October 20, 2017
 
$
205.1

 
4
July 2017
 
6

 
3 equal annual installments commencing on October 20, 2017
 
$
5.3

 
4
October 2017
 
303

 
3 equal annual installments commencing on October 20, 2018
 
$
1,177.5

 
16
October 2018
 
382

 
3 equal annual installments commencing on October 20, 2019
 
$
1,948.8

 
28
May 2019
 
71

 
Shares granted to independent board members that fully vest as of May 16, 2020
 
$
450.0

 
10
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 non-vested restricted stock grants for the six months ended June 30, 2019 and 2018: 
 
Six months ended June 30,
 
2019
 
2018
 
Shares
('000s)
 
Weighted-
Average
Grant-Date
Fair Value
 
Shares
('000s)
 
Weighted-
Average
Grant-Date
Fair Value
Nonvested at December 31
761

 
$
7.56

 
787

 
$
6.84

Granted
75

 
7.60

 
64

 
8.41

Vested
(68
)
 
8.38

 

 

Forfeited
(20
)
 
7.48

 
(6
)
 
6.98

Nonvested at June 30
748

 
$
7.49

 
845

 
$
6.96

7. 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”). The cash award is 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 November 2018, 2017 and 2016

11

Table of Contents

Grant Date
 
Grant Amount
 
Adjustments
 
Forfeitures
 
Adjusted Award Value June 30, 2019
 
Vesting Schedule
 
Remaining Periods (in Months) to Vesting
November 2016
 
$
1,434

 
$
(7
)
 
$
(88
)
 
$
1,339

 
November 2019
 
4
November 2017
 
1,584

 
(36
)
 
(53
)
 
1,495

 
November 2020
 
16
November 2018
 
1,590

 
(59
)
 
(55
)
 
1,476

 
November 2021
 
28
 
 
$
4,608

 
$
(102
)
 
$
(196
)
 
$
4,310

 
 
 
 
Compensation expense of $0.4 million and compensation benefit of $0.2 million was recognized for the three months ended June 30, 2019 and 2018, respectively. Compensation expense of $0.7 million and $0.6 million was recognized for the six months ended June 30, 2019 and 2018, respectively. Unrecognized compensation expense was $1.8 million as of June 30, 2019 and 2018.

8. 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. Returns and allowances are used to record estimates of returns or allowances resulting from quality, delivery, discounts or other issues affecting the value of receivables. This amount is estimated based on historical trends and current market conditions, with the offset to revenues.

The allowance for doubtful accounts 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 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.
9. Inventories
Inventories are valued at the lower of first-in, first-out cost or net realizable value. Cost includes applicable material, labor and overhead. Inventories consisted of the following: 
 
June 30, 2019
 
December 31, 2018
Raw materials
$
67,574

 
$
66,965

Work in process
12,347

 
12,333

Finished goods
12,992

 
13,061

 
$
92,913

 
$
92,359

Inventory quantities on-hand are regularly reviewed and, when necessary, provisions for excess and obsolete inventory are recorded based primarily on our estimated production requirements, taking into consideration expected market volumes and future potential use. Excess and obsolete provisions may vary by product depending upon future potential use of the product.
10. Goodwill and Intangible Assets
Goodwill represents the excess of acquisition purchase price over the fair value of net assets acquired. We review goodwill for impairment annually, initially utilizing a qualitative assessment in the second fiscal quarter and whenever events or changes in circumstances indicate it is more likely than not that the carrying value may not be recoverable. Goodwill of $5.2 million is attributable to the Global Seating Segment and $2.4 million to the Electrical Systems Segment. In conducting the qualitative assessment, we consider relevant events and circumstances that affect the fair value or carrying amount of the reporting unit. Such events and circumstances could include macroeconomic conditions, industry and market considerations, overall financial performance, entity and reporting unit specific events, cost factors and capital market pricing. We consider the extent to which each of the adverse events and circumstances identified affect the comparison of the reporting unit’s fair value with its carrying amount. We place more weight on the events and circumstances that most affect the reporting unit’s fair value or the carrying amount of its net assets. These factors are all considered by management in reaching its conclusion about whether to perform the first step of the impairment test. No impairment was recorded as a result of our second quarter 2019 assessment.
The changes in the carrying amounts of goodwill for the six months ended June 30, 2019 and the year ended December 31, 2018 are as follows: 

12



 
June 30, 2019
 
December 31, 2018
Balance - Beginning
$
7,576

 
$
8,045

Currency translation adjustment
48

 
(469
)
Balance - Ending
$
7,624

 
$
7,576

Our definite-lived intangible assets were comprised of the following:
 
 
 
June 30, 2019
 
December 31, 2018
 
Weighted-
Average
Amortization
Period
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Trademarks/Tradenames
23 years
 
$
8,348

 
$
(4,067
)
 
$
4,281

 
$
8,346

 
$
(3,888
)
 
$
4,458

Customer relationships
15 years
 
14,082

 
(6,175
)
 
7,907

 
14,022

 
(5,680
)
 
8,342

 
 
 
$
22,430

 
$
(10,242
)
 
$
12,188

 
$
22,368

 
$
(9,568
)
 
$
12,800

The aggregate intangible asset amortization expense was approximately $0.3 million for the three months ended June 30, 2019 and 2018. The aggregate intangible asset amortization expense was approximately $0.6 million and $0.7 million for the six months ended June 30, 2019 and 2018. The estimated intangible asset amortization expense for the fiscal year ending December 31, 2019 and for each of the five succeeding years is expected to be $1.3 million in 2019 and $1.2 million per year from 2020 through 2023.

11. 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 one year.

The components of lease expense are as follows:

 
Three Months Ended June 30, 2019
Six Months Ended June 30, 2019
 
 
 
Operating lease cost
$
1,877

$
3,447

Finance lease cost:
 
 
     Amortization of right-of-use assets
80

160

     Interest on lease liabilities
15

30

Total finance lease cost
$
95

$
190

Short-term lease cost  1
1,773

3,764

Total lease expense
$
3,745

$
7,401

1 Includes variable lease costs, which are not significant

Supplemental cash flow information related to leases is as follows:
 
Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
     Operating cash flows from operating leases
$
3,245

     Financing cash flows from finance leases
$
222


Supplemental balance sheet information related to leases is as follows:

13

Table of Contents


Balance Sheet Location
June 30, 2019
Operating Leases
 

Right-of-use assets, net
Operating lease right-of-use assets, net  1
$
22,097

 
 
 
Current liabilities
Current operating lease liabilities
$
4,851

Non-current liabilities
Operating lease liabilities
18,567

     Total operating lease liabilities
 
$
23,418

 
 
 
Finance Leases
 

Right-of-use assets
 
$
987

Accumulated depreciation
 
(162
)
     Right-of-use assets, net
Other assets, net
$
825

 
 
 
Current liabilities
Accrued liabilities and other
$
375

Non-current liabilities
Other long-term liabilities
432

     Total finance lease liabilities
 
$
807


 

Weighted Average Remaining Lease Term
 

     Operating leases
 
5.0 years

     Finance leases
 
2.9 years

Weighted Average Discount Rate
 

     Operating leases
 
11.0
%
     Finance leases
 
7.4
%
1  
Includes $20.4 million for operating leases existing on January 1, 2019 and $3.8 million for operating leases that commenced in the six months ended June 30, 2019, net of amortization of $2.1 million.

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. We utilize an incremental borrowing rate, 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
2019 1
 
$
3,438

 
$
212

 
$
3,650

2020
 
6,866

 
354

 
7,220

2021
 
6,455

 
201

 
6,656

2022
 
5,907

 
86

 
5,993

2023
 
2,378

 
28

 
2,406

 Thereafter
 
5,499

 

 
5,499

Total lease payments
 
$
30,543

 
$
881

 
$
31,424

Less: Imputed interest
 
(7,125
)
 
(74
)
 
(7,199
)
Present value of lease liabilities
 
$
23,418

 
$
807

 
$
24,225

1Excluding lease costs for the six months ended June 30, 2019.

The Company has additional operating leases for real estate of $11.8 million which have not commenced as of June 30, 2019, and as such, have not been recognized on the Company's Condensed Consolidated Balance Sheet. These operating leases are expected to commence during 2019 with leases terms between 5 years and 7 years.


14

Table of Contents

The Company elected to apply the modified retrospective approach. As such, we did not restate the prior year Condensed Consolidated Balance Sheet. The following are the future minimum annual rental commitments under Topic 840 as disclosed in our December 31, 2018 Form 10-K:
Year Ending December 31,
 
2019
$
7,558

2020
$
6,492

2021
$
5,960

2022
$
5,286

2023
$
1,676

 Thereafter
$
2,501

12. Commitments and Contingencies
Warranty — We are subject to warranty claims for products that fail to perform as expected due to design or manufacturing deficiencies. Customers generally require their outside suppliers to guarantee or warrant their products and bear the cost of repair or replacement of such products. 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 reserve for estimated future customer warranty costs based on historical trends and current economic factors.
The following represents a summary of the warranty provision for the six months ended June 30, 2019:
Balance - December 31, 2018
$
3,911

Provision for new warranty claims
1,038

Change in provision for preexisting warranty claims
(47
)
Deduction for payments made
(1,587
)
Currency translation adjustment
11

Balance - June 30, 2019
$
3,326

Leases — As disclosed in footnote 11, 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 June 30, 2019, our equipment leases did not provide for any material guarantee of a specified portion of residual values.
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 taxing authorities.
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 footnote 13, 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 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. A mandatory prepayment of $4.2 million pursuant to the excess free cash flow sweep provision of the TLS Agreement was made during the six months ended June 30, 2019. No mandatory prepayment was effective prior to 2019. The existing long-term debt agreements mature in 2023.

15

Table of Contents

Year Ending December 31,
2019
$
2,187

2020
$
4,375

2021
$
4,375

2022
$
4,375

2023
$
146,788

Thereafter
$

13. Debt and Credit Facilities
Debt consisted of the following:

June 30, 2019
 
December 31, 2018
Term loan and security agreement 1
$
157,996

 
$
163,758

1 Presented in the Condensed Consolidated Balance Sheets as of June 30, 2019 as current portion of long-term debt of 3.2 million, net of deferred financing costs and original issue discount each of $0.5 million; and long-term debt of $154.8 million, net of deferred financing costs and original issue discount of $1.4 million and $1.5 million, respectively.
Term Loan and Security Agreement
On April 12, 2017, the Company entered into a $175.0 million senior secured Term Loan and Security Agreement (the “TLS Agreement”) maturing on April 12, 2023, the terms of which are described in footnote 7 in our 2018 Form 10-K. The unamortized deferred financing fees of $2.0 million and original issue discount of $2.1 million are netted against the aggregate book value of the outstanding debt resulting in a balance of $158.0 million as of June 30, 2019 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 in footnote 7 in our 2018 Form 10-K. The Company was in compliance with the covenants as of June 30, 2019.
Revolving Credit Facility
On April 12, 2017, the Company entered into the Third Amended and Restated Loan and Security Agreement (the "Third ARLS Agreement") maturing on April 12, 2022, the terms of which are described in footnote 7 in our 2018 Form 10-K.
The applicable margin, which is set at Level III as of June 30, 2019, is based on average daily availability under the revolving credit facility as follows:
Level
 
Average Daily Availability
 
Base Rate
Loans
 
LIBOR
Revolver Loans
III
 
≥ $24,000,000
 
0.50
%
 
1.50
%
II
 
> $12,000,000 but < $24,000,000
 
0.75
%
 
1.75
%
I
 
≤ $12,000,000
 
1.00
%
 
2.00
%
At June 30, 2019 we had no borrowings under the revolving credit facility, and the outstanding letters of credit were $1.6 million and we had availability of $63.4 million. The unamortized deferred financing fees associated with our revolving credit facility of $0.6 million and $0.7 million as of June 30, 2019 and December 31, 2018, respectively, are being amortized over the remaining life of the agreement. At December 31, 2018 we did not have borrowings under the revolving credit facility and had outstanding letters of credit $1.7 million.
The Third ARLS Agreement contains customary restrictive, financial maintenance and reporting covenants that are described in footnote 7 in our 2018 Form 10-K. Since the Company had borrowing availability in excess of the greater of (i) $5.0 million or (ii) ten percent (10%) of the revolving commitments from December 31, 2018 through June 30, 2019, the Company was not required to comply with the minimum fixed charge coverage ratio covenant during the quarter ended June 30, 2019. The Company was in compliance with all applicable covenants as of June 30, 2019.
14. Income Taxes

16

Table of Contents

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 2014. 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 June 30, 2019 and December 31, 2018, the Company had $0.6 million and $0.5 million, respectively, 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 their 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 $0.3 million of interest and penalties as of June 30, 2019 and December 31, 2018. 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 that would require a reserve.
At June 30, 2019, 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.

15. Segment Reporting
As disclosed in footnote 10 of our 2018 Form 10-K, we completed a strategic reorganization of our operations into two business segments, Electrical Systems and Global Seating. As a result of the strategic reorganization, we restated prior period segment information to conform to the current period segment presentation.
The following tables present segment revenues, gross profit, selling, general and administrative expenses, amortization expense, operating income, capital expenditures and depreciation expense and other items for the three and six months ended June 30, 2019 and 2018: 
 
Three Months Ended June 30, 2019
 
Electrical Systems
 
Global Seating
 
Corporate/
Other
 
Total
Revenues
 
 
 
 
 
 
 
External Revenues
$
139,089

 
$
104,101

 
$

 
$
243,190

Intersegment Revenues
2,858

 
1,175

 
(4,033
)
 

Total Revenues
$
141,947

 
$
105,276

 
$
(4,033
)
 
$
243,190

Gross Profit
$
19,145

 
$
14,686

 
$
(48
)
 
$
33,783

Selling, General & Administrative Expenses
3,676

 
5,177

 
7,395

 
16,248

Amortization Expense
186

 
136

 

 
322

Operating Income
$
15,283

 
$
9,373

 
$
(7,443
)
 
$
17,213

 
 
 
 
 
 
 
 
Capital Expenditures
$
5,837

 
$
806

 
$
773

 
$
7,416

Depreciation Expense
$
1,317

 
$
1,065

 
$
638

 
$
3,020



17

Table of Contents

 
Three Months Ended June 30, 2018
 
Electrical Systems
 
Global
Seating
 
Corporate/
Other
 
Total
Revenues
 
 
 
 
 
 
 
External Revenues
$
132,311

 
$
101,080

 
$

 
$
233,391

Intersegment Revenues
2,250

 
1,092

 
(3,342
)
 

Total Revenues
$
134,561

 
$
102,172

 
$
(3,342
)
 
$
233,391

Gross Profit
$
21,340

 
$
14,488

 
$
(243
)
 
$
35,585

Selling, General & Administrative Expenses 
3,760

 
5,528

 
5,061

 
14,349

Amortization Expense
186

 
141

 

 
327

Operating Income
$
17,394

 
$
8,819

 
$
(5,304
)
 
$
20,909

 
 
 
 
 
 
 
 
Capital Expenditures
$
1,646

 
$
635

 
$
1,111

 
$
3,392

Depreciation Expense
$
1,728

 
$
1,093

 
$
787

 
$
3,608


 
Six Months Ended June 30, 2019
 
Electrical Systems
 
Global Seating
 
Corporate/
Other
 
Total
Revenues
 
 
 
 
 
 
 
External Revenues
$
279,761

 
$
206,593

 
$

 
$
486,354

Intersegment Revenues
5,797

 
2,744

 
(8,541
)
 

Total Revenues
$
285,558

 
$
209,337

 
$
(8,541
)
 
$
486,354

Gross Profit
$
39,985

 
$
28,466

 
$
(108
)
 
$
68,343

Selling, General & Administrative Expenses
7,825

 
10,515

 
13,106

 
31,446

Amortization Expense
373

 
270

 

 
643

Operating Income
$
31,787

 
$
17,681

 
$
(13,214
)
 
$
36,254

 
 
 
 
 
 
 
 
Capital Expenditures
$
9,322

 
$
1,783

 
$
1,613

 
$
12,718

Depreciation Expense
$
2,999

 
$
2,146

 
$
1,270

 
$
6,415


 
Six Months Ended June 30, 2018
 
Electrical Systems
 
Global
Seating
 
Corporate/
Other
 
Total
Revenues
 
 
 
 
 
 
 
External Revenues
$
253,430

 
$
195,696

 
$

 
$
449,126

Intersegment Revenues
4,059

 
1,592

 
(5,651
)
 

Total Revenues
$
257,489

 
$
197,288

 
$
(5,651
)
 
$
449,126

Gross Profit
$
39,294

 
$
27,609

 
$
(495
)
 
$
66,408

Selling, General & Administrative Expenses 
7,533

 
11,178

 
10,853

 
29,564

Amortization Expense
373

 
286

 

 
659

Operating Income
$
31,388

 
$
16,145

 
$
(11,348
)
 
$
36,185

 
 
 
 
 
 
 
 
Capital Expenditures
$
2,856

 
$
1,071

 
$
1,231

 
$
5,158

Depreciation Expense
$
3,479

 
$
2,154

 
$
1,456

 
$
7,089

 
16. Derivative Contracts

18

Table of Contents

We use foreign exchange contracts to hedge some of our foreign currency transaction exposures. 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 income 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 Income. 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.
The following table summarizes the notional amount of our open foreign exchange contracts: 
 
June 30, 2019
 
December 31, 2018
 
U.S. $
Equivalent
 
U.S. $
Equivalent
Fair Value
 
U.S. $
Equivalent
 
U.S. $
Equivalent
Fair Value
Commitments to buy or sell currencies
$
10,368

 
$
11,186

 
$
22,371

 
$
22,867

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 an interest rate swap agreement to fix the interest rate on an initial aggregate amount of $80.0 million of the Term Loan Facility thereby reducing exposure to interest rate changes. The interest rate swap has a floor rate of 2.07% and an all-in rate of 8.07%, with a maturity date of April 30, 2022. As of June 30, 2019, the interest rate swap agreement was not designated as a hedging instrument; therefore, it has been 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 our Condensed Consolidated Statements of Income.
The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheets for derivatives: 

 Derivative Asset

June 30, 2019
 
December 31, 2018

Balance Sheet
Location
 
Fair Value
 
Balance Sheet
Location
 
Fair Value
Foreign exchange contracts
Other current assets
 
$
818

 
Other current assets
 
$
496

Interest rate swap agreement
Other assets, net
 
$
345

 
Other assets, net
 
$
1,131

 
 Derivative Liability
 
June 30, 2019
 
December 31, 2018
 
Balance Sheet
Location
 
Fair Value
 
Balance Sheet
Location
 
Fair Value
Interest rate swap agreement
Accrued liabilities
 
$
1,037

 
Accrued liabilities
 
$

 
 Derivative Equity
 
June 30, 2019
 
December 31, 2018
 
Balance Sheet
Location
 
Fair Value
 
Balance Sheet
Location
 
Fair Value
Foreign exchange contracts
Accumulated other comprehensive loss
 
$
818

 
Accumulated other comprehensive loss
 
$
496

The following table summarizes the effect of derivative instruments on the Condensed Consolidated Statements of Income:
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
2019
 
2018
 
2019
 
2018
 
Location of (Loss) Gain
Recognized in Income on
Derivatives
 
Location of (Loss) Gain
Recognized in Income on
Derivatives
 
Location of (Loss) Gain
Recognized in Income on
Derivatives
Foreign exchange contracts
Cost of Revenues
 
$

 
$
(798
)
 
$
4

 
$
434

Interest rate swap agreement
Interest and Other Expense
 
$
(1,004
)
 
$
438

 
$
(1,656
)
 
$
1,600


17. Other Comprehensive Loss

19

Table of Contents

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, 2018
$
(22,847
)
 
496

 
$
(25,120
)
 
$
(47,471
)
Net current period change
338

 

 

 
338

Derivative instruments

 
322

 

 
322

Amortization of actuarial losses

 

 
1,089

 
1,089

Ending balance, June 30, 2019
$
(22,509
)
 
$
818

 
$
(24,031
)
 
$
(45,722
)

 
Foreign
currency translation adjustment
 
Derivative instruments
 
Pension and
post-retirement
benefit plans
 
Accumulated other
comprehensive
loss
Ending balance, December 31, 2017
$
(17,172
)
 
$

 
$
(24,063
)
 
$
(41,235
)
Net current period change
(3,834
)
 

 

 
(3,834
)
Derivative instruments

 

 

 

Amortization of actuarial losses

 

 
(932
)
 
(932
)
Ending balance, June 30, 2018
$
(21,006
)
 
$

 
$
(24,995
)
 
$
(46,001
)

The related tax effects allocated to each component of other comprehensive (loss) income are as follows:
 
Three Months Ended
 
Six Months Ended
 
June 30, 2019
 
June 30, 2019
 
Before Tax
Amount
 
Tax Expense
 
After Tax Amount
 
Before Tax
Amount
 
Tax Expense
 
After Tax Amount
Amortization of actuarial losses
$
2,613

 
$
(874
)
 
$
1,739

 
$
1,808

 
$
(719
)
 
$
1,089

Derivative instruments
(17
)
 

 
(17
)
 
322

 

 
322

Cumulative translation adjustment
233

 

 
233

 
338

 

 
338

Total other comprehensive income (loss)
$
2,829

 
$
(874
)
 
$
1,955

 
$
2,468

 
$
(719
)
 
$
1,749

 
Three Months Ended
 
Six Months Ended
 
June 30, 2018
 
June 30, 2018
 
Before Tax
Amount
 
Tax Expense
 
After Tax 
Amount
 
Before Tax
Amount
 
Tax Expense
 
After Tax 
Amount
Amortization of actuarial losses
$
(763
)
 
$
170

 
$
(593
)
 
$
(1,270
)
 
$
338

 
$
(932
)
Cumulative translation adjustment
(5,304
)
 

 
(5,304
)
 
(3,834
)
 

 
(3,834
)
Total other comprehensive (loss) income
$
(6,067
)
 
$
170

 
$
(5,897
)
 
$
(5,104
)
 
$
338

 
$
(4,766
)
18. Pension and Other Post-Retirement Benefit Plans
We sponsor two defined benefit pension plans and other post-retirement benefit plans that cover certain hourly and salaried employees in the United States and United Kingdom. Each of the defined benefit pension plans are frozen to new participants. We make contributions to the plans as required by local regulations.
During the six months ended June 30, 2019, the Company offered employees with deferred vested balances in the U.S. defined benefit pension plan the opportunity to voluntarily elect an early payout of their benefits. Payouts totaling $7.8 million were made during the three months ended June 30, 2019 and were paid out of plan assets resulting in a non-cash settlement charge of $2.5 million, which was recorded in interest and other expense in the Condensed Consolidated Statements of Income and is reflected in amortization of prior service cost in the table below.
The components of net periodic (benefit) cost related to pension and other post-retirement benefit plans is as follows:

20

Table of Contents

 
U.S. Pension Plans and Other Post-Retirement Benefit Plans
 
Non-U.S. Pension Plans
 
Three Months Ended June 30,
 
Three Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Interest cost
447

 
418

 
279

 
270

Expected return on plan assets
(573
)
 
(787
)
 
(280
)
 
(316
)
Amortization of prior service cost  1
2,496

 
2

 
12

 

Recognized actuarial loss
83

 
69

 
131

 
130

Net cost (benefit)
$
2,453

 
$
(298
)
 
$
142

 
$
84

1 Includes $2.5 million non-cash settlement charge.
 
U.S. Pension Plans and Other Post-Retirement Benefit Plans
 
Non-U.S. Pension Plans
 
Six Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Interest cost
894

 
836

 
563

 
556

Expected return on plan assets
(1,324
)
 
(1,574
)
 
(566
)
 
(650
)
Amortization of prior service cost  1
2,497

 
3

 
24

 

Recognized actuarial loss
165

 
138

 
269

 
267

Net cost (benefit)
$
2,232