Commercial Vehicle Group Inc. has reported financial results for the third quarter, ended Sept. 30, 2017.
Patrick Miller, president and CEO, said, “We are pleased with the 29 percent improvement in sales in the third quarter of 2017 as compared to the third quarter of 2016. From a top line perspective, both segments performed well in the third quarter of 2017 compared to the prior year period, with our Global Truck and Bus Segment up 27 percent and our Global Construction and Agriculture Segment up 34 percent. In addition, the team has made progress in re-balancing capacity and improving our ability to support the higher volumes.”
Tim Trenary, chief financial officer, stated, “Adjusted operating income almost doubled in the third quarter of 2017 compared to the prior year period, and the associated margin rose to 5.6 percent. This is largely due to the 29 percent increase in sales but also reflects cost discipline. The costs associated with production challenges in our North American wire harness business are coming down; the impact on the third quarter approximated $2 million. We expect the impact on the second half of the year to be at the low end of the previously disclosed range of $3 million to $6 million. We also continue to experience headwinds from rising global commodity prices and some increase in production expenses arising primarily from new product launches and from the sharp acceleration in North American truck build.
“We have been managing working capital effectively; more specifically, accounts receivable and inventory net of accounts payable is up only 10 percent from the year ago period on the 29 percent increase in sales. This working capital management is in part responsible for our reduced borrowings and therefore lower interest expense,” he said.
Third Quarter 2017 Results
Third quarter 2017 revenues were $198.3 million compared to $153.6 million in the prior year period, an increase of 29.1 percent. The increase in revenues period-over-period reflects higher heavy-duty truck production in North America and improvement in the global construction markets we serve. Foreign currency translation favorably impacted third quarter 2017 revenues by $1.7 million, or by 1.1 percent when compared to the same period in the prior year.
Operating income for the third quarter 2017 was $10.7 million compared to operating income of $4.5 million in the prior year period. The increase in operating income period-over-period was primarily the result of higher revenues and the benefit of cost reduction and restructuring actions partially offset by rising commodity prices, product launch costs and near-term costs associated with the sharp acceleration in North American truck build. In addition, the company incurred approximately $2 million in production challenges in its North American wire harness operations. Third quarter 2017 results include $0.4 million of cost associated with its ongoing restructuring initiatives and other related expenditures. Third quarter 2016 results included $1.5 million of cost associated with the restructuring initiatives.
Net income was $4.8 million for the third quarter 2017, or 16 cents per diluted share, compared to net income of $1.1 million in the prior year period, or 4 cents per diluted share. Earnings per share, as adjusted for special items, were 16 cents per diluted share in the third quarter 2017 compared to 7 cents per diluted share in the prior year period.
During the three months ending Sept. 30, 2017, the company did not have any borrowings under its asset-based revolver. At Sept. 30, 2017, the company had liquidity of $113 million: $50 million of cash and $63 million of availability from the company’s asset-based revolver.
2017 End Market Outlook
Management estimates that the 2017 North American Class 8 truck production will be in the range of 235,000 to 255,000 units, as compared to 228,000 units in 2016; North American Class 5-7 production is expected to be up slightly year-over-year. The global construction markets we serve in Europe, Asia and North America are improving. The fundamentals in the global construction markets such as construction activity, order intake and order backlog are up year-over-year creating positive momentum for the business, says the company.
