Commercial Vehicle Group Inc. (CVGI) has reported financial results for the fourth quarter and fiscal year ended Dec. 31, 2019.

Fourth Quarter 2019 Results

• Revenues in the fourth quarter of 2019 were $189.5 million compared to $223.6 million in the prior year period, a decrease of 15.3 percent primarily resulting from a decrease in heavy-duty truck production in North America and the construction equipment markets we serve, offset partially by $10.4 million of incremental revenue from the FSE Acquisition. Foreign currency translation adversely impacted fourth quarter revenues by $0.7 million, or 0.3 percent. 
• Operating loss was $4.3 million in the fourth quarter of 2019 compared to operating income of $13.4 million in the prior year period. The decrease period-over-period is due primarily to the lower volumes, inflationary pressure on material and labor costs, and operating inefficiencies as a result of the sharp decline in end market volumes during the quarter. The fourth quarter of 2019 results include employee separation costs and charges associated with manufacturing capacity rationalization (the “Restructuring Initiatives”) that began in 2019 totaling $3.0 million. These restructuring initiatives are expected to mitigate the impact of lower production volumes in 2020. In addition, the statutorily higher minimum wage in Mexico, a troubled supplier and costs associated with manufacturing investments adversely impacted results in the fourth quarter of 2019 by approximately $1 million. 
• Net loss in the fourth quarter of 2019 was $7.5 million, or24 cents per diluted share, compared to a net income of $8.1 million, or 26 cents per diluted share, in the prior year period.

Fiscal Year 2019 Results

• Revenues in fiscal year 2019 were $901.2 million compared to $897.7 million in the prior year, an increase of 0.4 percent reflecting modest increases in North American heavy-duty truck production and the impact of the FSE acquisition, offset partially by declines in the global construction equipment markets we serve. Foreign currency translation adversely impacted 2019 revenues by $10.4 million, or 1.2 percent. 
• Operating income in fiscal year 2019 was $40.6 million compared to $62.9 million in the prior year. The decrease period-over-period is primarily attributable to the inflationary pressure on material and labor costs, and operating inefficiencies as a result of the sharp decline in end market volumes during the fourth quarter. Fiscal year 2019 results include charges of $3 million related to the Restructuring Initiatives. In addition, the statutorily higher minimum wage in Mexico, costs associated with a troubled supplier and costs associated with manufacturing investments adversely impacted 2019 results by approximately $7.2 million. 
• Interest and other expense was $19.1 million and $13.4 million for the years ended 2019 and 2018, respectively. The increase is primarily a result of the mark-to-market impact on our interest rate swap agreement, which resulted in a $1.9 million non-cash charge in fiscal 2019 and a $0.8 million gain in the prior year period. In addition, 2019 results include a $2.5 million non-cash charge associated with the early payout of benefits to employees with deferred vested balances in the U.S. defined benefit pension plan. 
• Net income was $15.8 million in fiscal year 2019, or $0.51 per diluted share, compared to $41.5 million, or $1.36 per diluted share, in fiscal year 2018.

As of Dec. 31, 2019, the company had liquidity of $94.6 million; $39.5 million of cash and $55.1 million availability from its asset-based revolver. There were no borrowings under its asset-based revolver at Dec. 31, 2019.

“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,” said Patrick Miller, president and CEO. “This dynamic was exacerbated by declines in the global construction market, and as a result, weighed heavily on our 2019 results. In response to weakening end markets, in the fourth quarter, we took proactive steps to align the business to the lower production levels. In total, the company’s restructuring actions are expected to reduce operating costs by $5 to $7 million annually once fully implemented by early 2021. As we have noted in the past, the speed at which business contraction effects our OEM customers creates challenges in flexing our workforce. However, we have a demonstrated ability to scale our business to volume changes and we anticipate more normal conversion rates as we proceed through 2020. Our strategy to diversify our end market exposure and accelerate growth in alignment with favorable macro-economic trends in electronics and electrification is underscored by our recent acquisition of FSE, which has been performing as we anticipated. Furthermore, this strategy should aid in mitigating the impact of end market cyclicality on our Company.  We plan to maintain our investments in our Electrical Systems segment, which is made possible in part by the cost saving actions we are taking across the business.”

Tim Trenary, CFO, added, “We began implementing the restructuring initiatives in the fourth quarter of 2019 and are well under way. Pre-tax costs associated with these actions are expected to total $6 million to $8 million, driven in large part by employee-related separation costs and other costs associated with the transfer of production, and subsequent closure of facilities.  Approximately $3 million of pre-tax costs related to these actions was incurred in the fourth quarter of 2019, with the remaining $3 to $5 million to be incurred in 2020. As we head into 2020, we continue to focus on cost-reduction actions intended to mitigate the challenges in this market environment.”