Commercial Vehicle Group, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This filing reports annual results; the supplied text does not provide clear standalone fourth-quarter financial values. CVG supplies customized systems, assemblies and components for commercial vehicles, electric vehicles, warehouse automation and aftermarket markets. In the fourth quarter, it reorganized reporting into four segments: Vehicle Solutions, Warehouse Automation, Electrical Systems, and Aftermarket & Accessories.
Financial results and position
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $971.6 million | $717.7 million |
| Gross profit / margin | $119.0 million / 12.2% | $74.1 million / 10.3% |
| Operating income (loss) | $49.6 million | $(23.2) million |
| Net income (loss) | $23.7 million | $(37.0) million |
| Diluted EPS | $0.72 | $(1.20) |
| Cash from operating activities | $(29.8) million | $34.4 million |
| Cash / total debt at year-end | $35.0 million / $195.0 million | $50.5 million / $146.6 million |
| Liquidity, as reported by management | $109.2 million | — |
Revenue grew 35.4%, with increases across OEM, warehouse automation, aftermarket/OES and other sales. Gross margin improved, which management attributed to higher volume, pricing actions and an improved cost structure; inflation in materials, wages and freight remained a countervailing pressure. Operating cash flow turned negative primarily because of working-capital investment, including higher receivables and inventories. Capital expenditures were $17.7 million.
Segment revenue and operating income were: Vehicle Solutions, $498.9 million and $23.6 million; Warehouse Automation, $187.9 million and $23.6 million; Electrical Systems, $169.0 million and $14.6 million; Aftermarket & Accessories, $115.8 million and $12.1 million. Warehouse Automation revenue increased 84.9% year over year.
Material changes and notable items
- FY2021 results rebounded from pandemic-affected FY2020. FY2020 included $29.0 million of goodwill and other impairment charges; none were recorded in FY2021.
- CVG refinanced its debt in April 2021 with a $150 million term loan and $125 million revolving facility, both maturing in 2026. The refinancing generated a $7.2 million extinguishment loss. Year-end revolving-facility borrowings were $49.4 million, with $74.2 million available; the company reported covenant compliance at year-end.
- CVG issued notice in October 2021 of its intent to terminate its Volvo agreement, effective after 12 months unless the parties agree on revised terms. Volvo represented 17% of FY2021 revenue, versus 16% in 2020 and 22% in 2019.
- The board approved a restructuring program in November 2021 to reduce workforce and optimize the footprint. CVG incurred $1.9 million in 2021 and expects total program costs of $4 million to $6 million.
- The U.S. pension plan was slated for termination effective December 31, 2021, with settlement expected between late 2022 and early 2023.
Outlook, risks and contingencies
For 2022, management estimated North American Class 8 production of approximately 270,000 trucks, roughly flat with 2021, compared with an ACT Research forecast of 300,000. Management cited ACT’s forecast of 261,000 Class 5–7 trucks, up from 235,335 in 2021, and LogisticsIQ’s estimate of approximately 14% annual warehouse-automation market growth through 2026. CVG expected 2022 capital expenditures of $20 million to $25 million. Management said available cash and revolving-credit capacity should fund working capital, planned capital spending and debt service for the next 12 months, while cautioning that this is not assured.
Key risks include ongoing supply-chain disruption and shortages (including semiconductors), inflation in materials, labor and freight, customer production volatility, and the ability to recover higher costs through pricing. The filing also highlights customer concentration and the potential loss of Volvo business; COVID-19 impacts; cyclical truck and construction markets; labor availability; international and currency exposure, including risks to the Ukraine facility; and debt-covenant compliance. CVG reported ordinary-course legal claims and proceedings that management did not expect to have a material adverse effect, while noting outcomes are uncertain.
Most important facts for investors to verify
- Progress and negotiated outcome of the Volvo contract termination notice, and the revenue and margin exposure if the relationship ends.
- Whether operating cash flow recovers as working capital normalizes, particularly receivables and inventory.
- Whether pricing and productivity measures offset material, freight and labor inflation without losing business or margins.
- Actual 2022 truck production and warehouse-automation demand versus the differing industry and management forecasts.
- Debt levels, borrowing availability and compliance with financial covenants as scheduled debt repayments rise.
- Restructuring spending and realized savings, plus timing and costs of the U.S. pension-plan settlement.
The financial statements received an unqualified audit opinion from KPMG; the auditor also reported effective internal control over financial reporting as of December 31, 2021.