NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31,
2016
,
2015
and
2014
Commercial Vehicle Group, Inc. (and its subsidiaries)
(“CVG”) is a leading supplier of a full range of cab related products and systems for the global commercial vehicle market, including the medium- and heavy-duty truck (“MD/HD Truck”) market, the medium-and heavy-construction vehicle market, and the military, bus, agriculture, specialty transportation, mining, industrial equipment and off-road recreational markets. References herein to the "Company," "we," "our," or "us" refer to Commercial Vehicle Group, Inc. and its subsidiaries.
We have manufacturing operations in the United States, Mexico, United Kingdom, Czech Republic, Ukraine, China, India and Australia. Our products are primarily sold in North America, Europe, and the Asia-Pacific region.
Our products include seats and seating systems (“Seats”); trim systems and components (“Trim”); cab structures, sleeper boxes, body panels and structural components; mirrors, wipers and controls; and electronic wire harness and panel assemblies specifically designed for applications in commercial vehicles.
Our operations are comprised of
two
reportable segments, Global Truck and Bus (“GTB”) and Global Construction and Agriculture (“GCA”). The Company’s Chief Operating Decision Maker (“CODM”), its President and Chief Executive Officer, reviews financial information for these
two
reportable segments and makes decisions regarding the allocation of resources based on these segments.
|
|
2.
|
Significant Accounting Policies
|
Principles of Consolidation
— The accompanying consolidated financial statements include the accounts of our wholly-owned or controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
— The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include allowance for doubtful accounts, returns and allowances, inventory reserves, goodwill, intangible and long-lived assets, pension and other post-retirement benefits, product warranty reserves and income tax valuation allowances. Actual results may differ materially from those estimates.
Reclassifications
— Certain reclassifications have been made to prior year amounts to conform to current year presentation. Refer to "Accounting Pronouncements Implemented in the Period" below for further details.
Cash
— Cash consists of deposits with high credit-quality financial institutions.
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. This is accomplished through two contra-receivable accounts - returns and allowances and allowance for doubtful accounts.
Returns and allowances are used to record estimates of returns or other allowances resulting from quality, delivery, discounts or other issues affecting the value of receivables. This account 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 the 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.
Inventories
— Inventories are valued at the lower of first-in, first-out cost or market. Inventory quantities on-hand by product are regularly reviewed, and where 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.
Property, Plant and Equipment
— Property, plant and equipment are stated at cost, net of accumulated depreciation. For financial reporting purposes, depreciation is computed using the straight-line method over the following estimated useful lives:
|
|
|
Buildings and improvements
|
15 to 40 years
|
Machinery and equipment
|
3 to 20 years
|
Tools and dies
|
3 to 7 years
|
Computer hardware and software
|
3 to 5 years
|
Expenditures for maintenance and repairs are charged to expense as incurred. Expenditures for major betterments and renewals that extend the useful lives of property, plant and equipment are capitalized and depreciated over the remaining useful lives of the asset. When assets are retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the improvements or the term of the lease, whichever is shorter. Accelerated depreciation methods are used for tax reporting purposes. Depreciation expense for the
year ended December 31, 2016
,
2015
and
2014
was
$15.1 million
,
$16.4 million
and
$16.7 million
, respectively.
We review long-lived assets for recoverability whenever events or changes in circumstances indicate that carrying amounts of an asset group may not be recoverable. Our asset groups are established by determining the lowest level of cash flows available. If the estimated undiscounted cash flows are less than the carrying amounts of such assets, we recognize an impairment loss in an amount necessary to write down the assets to fair value as estimated from expected future discounted cash flows. Estimating the fair value of these assets is judgmental in nature and involves the use of significant estimates and assumptions. We base our fair value estimates on assumptions we believe to be reasonable, but that are inherently uncertain.
Goodwill
— Goodwill represents the excess of acquisition purchase price over the fair value of net assets acquired. We review goodwill for impairment annually, utilizing the one-step qualitative assessment, in the second fiscal quarter and whenever events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is only held within the GTB 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 markets 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. We consider positive and mitigating events and circumstances that may affect its determination of whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. These factors are all considered by management in reaching its conclusion about whether to perform the first step of the impairment test.
If the reporting unit’s fair value is determined to be more likely than not impaired based on the one-step qualitative approach, we then perform a quantitative valuation to estimate the fair value of our reporting unit. Implied fair value of goodwill is determined by considering both the income and market approach. Determining the fair value of a reporting unit is judgmental in nature and involves the use of significant estimates and assumptions. These estimates and assumptions include revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions and determination of appropriate market comparables. We base our fair value estimates on assumptions we believe to be reasonable but that are inherently uncertain.
Definite-Lived Intangible Assets
— We review definite-lived intangible assets, including trademarks, tradenames and customer relationships, for recoverability whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. If the estimated undiscounted cash flows are less than the carrying amount of such assets, we recognize an impairment loss in an amount necessary to write down the assets to fair value as estimated from expected future discounted cash flows. Estimating the fair value of these assets is judgmental in nature and involves the use of significant estimates and assumptions. We base our fair value estimates on assumptions we believe to be reasonable, but that are inherently uncertain. Definite-lived intangible assets are amortized on a straight-line basis over the estimated life of the asset.
See Note 7 for additional information on our goodwill and intangible assets.
Revenue Recognition
— We recognize revenue when 1) delivery has occurred or services have been rendered, 2) persuasive evidence of an arrangement exists, 3) there is a fixed or determinable price, and 4) collectability is reasonably assured. Title on our products generally passes to the customer when product is shipped from our facilities to our customers.
Shipping and Handling Costs
—
Shipping and handling costs are recognized in cost of goods sold on the consolidated statement of income.
Warranty
— We are subject to warranty claims for products that fail to perform as expected due to design or manufacturing deficiencies. 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 record provisions for estimated future customer warranty costs based on historical trends and for specific claims. These amounts, as they relate to the years ended
December 31, 2016
and
2015
are included within accrued liabilities and other in the accompanying consolidated balance sheets. The following presents a summary of the warranty provision for the years ended
December 31
(in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Balance — Beginning of the year
|
$
|
7,580
|
|
|
$
|
4,438
|
|
Provision for new warranty claims
|
1,798
|
|
|
5,878
|
|
Change in provision for preexisting warranty claims
|
389
|
|
|
(467
|
)
|
Deduction for payments made
|
(3,819
|
)
|
|
(2,192
|
)
|
Currency translation adjustment
|
(396
|
)
|
|
(77
|
)
|
Balance — End of year
|
$
|
5,552
|
|
|
$
|
7,580
|
|
Research and Development Costs
— Research and development costs are expensed as incurred and included in selling, general and administration expenses. Research and development costs charged to expense for the
years ended December 31,
2016
,
2015
and
2014
were approximately
$7.0 million
,
$7.4 million
, and
$6.3 million
, respectively.
Income Taxes
— We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities based on enacted tax laws and rates expected to be in place when the deferred tax items are realized. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that a portion, of the deferred tax assets will not be realized. We provide a valuation allowance for deferred tax assets when it is more likely than not that a portion of such deferred tax assets will not be realized. We recognize tax positions initially in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that is greater than
50%
likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts.
Comprehensive (Loss) Income
— Comprehensive (loss) income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive (loss) income represents net income adjusted for foreign currency translation adjustments and minimum pension liability adjustments. We disclose comprehensive (loss) income in the consolidated statements of comprehensive (loss) income. See Note 15 for a rollforward of activity in accumulated comprehensive income (loss).
Fair Value of Financial Instruments
— The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:
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.
Concentrations of Credit Risk
— Financial instruments that potentially subject us to concentrations of credit risk consist primarily of accounts receivable. We sell products to various companies throughout the world in the ordinary course of business. We routinely assess the financial strength of our customers and maintain allowances for anticipated losses. As of
December 31, 2016
and
2015
, receivables from our primary customers, including A.B. Volvo, Daimler Trucks, Caterpillar, Navistar, John Deere and PACCAR, represented approximately
64%
and
67%
of total receivables, respectively.
Foreign Currency Translation
— Our functional currency is the local currency. Accordingly, all assets and liabilities of our foreign subsidiaries are translated using exchange rates in effect at the end of the period and revenue and costs are translated using average exchange rates for the period. The related translation adjustments are reported in accumulated other comprehensive loss in stockholders’ equity. Translation gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in the results of operations.
Foreign Currency Forward Exchange Contracts
— We use forward purchase exchange contracts to hedge certain of the foreign currency transaction exposures. We estimate our projected revenues and purchases in certain foreign currencies or locations, and hedge a portion of the anticipated long or short position. The contracts typically run from
one
month up to
eighteen
months. All forward foreign exchange contracts have been marked-to-market and the fair value of contracts recorded in the consolidated balance sheets with the offsetting non-cash gain or loss recorded in our consolidated statement of income. We do not hold or issue foreign exchange options or forward contracts for trading purposes.
Recently Issued Accounting Pronouncements —
In October 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-16 Income Taxes (Topic 740):
Intra-Entity Transfers of Assets Other Than Inventory
, which requires entities to recognize at the transaction date the income tax consequences of intercompany asset transfers other than inventory. This will impact the Company to the extent we transfer machinery and equipment between wholly-owned subsidiaries as a part of the Company's overall restructuring plan, which should be completed by the time we implement this ASU in 2018. We do not anticipate the impact to be material. The ASU is effective for public entities for annual and interim periods in fiscal years beginning after December 15, 2017.
In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments,
which clarified the classification of multiple issues related to the Statement of Cash Flows. The ASU specifically clarified, among other classification issues, certain issues impacting the Company regarding the appropriate classification of insurance settlements to be consistent with the loss incurred and corporate owned life insurance policy proceeds as investing activity. To the extent the ASU applies to the Company, for example clarification of the classification of corporate owned life insurance policy proceeds, our presentation is consistent with the ASU. We do not anticipate a material impact to the presentation of the Statement of Cash Flows when fully implemented beginning on January 1, 2018. The ASU is effective for public entities beginning after December 15, 2017 and interim periods within 2017.
In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments,
which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new guidance will apply to loans, accounts receivable, trade receivables, other financial assets measured at amortized cost, loan commitments and other off-balance sheet credit exposures. The new guidance will also apply to debt securities and other financial assets measured at fair value through other comprehensive income. The new guidance is effective January 1, 2020, with early adoption permitted beginning January 1, 2019. We are in the process of evaluating the effect of the new guidance on our financial statements.
In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330):
Simplifying the Measurement of Inventory.
ASU 2015-11 applies to inventory measured using first-in, first-out or average cost. Under this amendment, inventory should be measured at lower of cost and net realizable value, which is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This pronouncement is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company does not believe this pronouncement will have a material impact on its financial statements.
Revenue Recognition Guidance
In May 2016, the FASB issued ASU No. 2016-12, "Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients." ASU 2016-12 provides additional guidance established by the FASB-IASB Joint Transition Resource Group for Revenue Recognition ("TRG") regarding the implementation of certain aspects of the new revenue recognition guidance. More specifically, the amendment provides additional guidance regarding assessing the collectability criterion, the presentation of sales taxes and other similar taxes collected from customers, noncash consideration, contract modifications or completed contracts at transition of the new revenue recognition guidance and technical corrections.
In April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing." ASU 2016-10 provides clarification established by the TRG regarding the implementation of the new revenue recognition guidance specific to identifying performance obligations and licensing activity.
In March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606) - Principal Versus Agent Considerations (Reporting Revenue Gross versus Net)." ASU 2016-08 provides clarification established by the FASB-IASB Joint Transition Resources Group regarding the implementation of the new revenue recognition guidance specific to principal versus agent considerations.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, ASU 2014-09 supersedes the cost guidance in Subtopic 605-35,
Revenue Recognition—Construction-Type and Production-Type Contracts, and creates new Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers.
The mandatory adoption date of each of the revenue recognition ASUs referenced above is January 1, 2018, with an early adoption date of January 1, 2017. With respect to each of the elements of the revenue recognition guidance above, the Company is in the process of assessing potential changes in revenue recognition for certain revenue streams. The Company's specific approach to implementing the accounting guidance may vary depending on the risk assessment to be performed. The Company will evaluate various revenue streams, which may be specific to product type, customer or region within segments. Contract terms can vary significantly between customers, resulting in different accounting conclusions. As management assesses its various revenue streams, we may establish revised accounting policies and measure and disclose the accounting impact. The amended guidance permits the use of either the retrospective or cumulative effect transition method. We have not selected a transition method nor have we determined the effect of the amended guidance on our ongoing financial reporting. We will not early adopt the new guidance.
Lease Accounting Guidance
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." ASU 2016-02 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 is effective for fiscal years beginning after December 15, 2018. The Company is assessing the impact of this pronouncement and anticipates it will impact the presentation of our lease assets and liabilities and associated disclosures by the recognition of lease assets and liabilities that are not included in the balance sheet under existing accounting guidance. The Company has determined its initial population of lease arrangements, including facility leases and machinery and equipment leases. The lease terms are not generally complex in nature. The Company will update its accounting policies as we complete our assessment of leases. The Company will also review other arrangements which could contain embedded lease arrangements to be considered under the revised guidance. The Company will determine the impact of the new guidance on its current lease arrangements that are expected to remain in place during 2017 and beyond.
Accounting Pronouncements Implemented in the Period
ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting" issued in March 2016, identifies areas for simplification involving several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company elected to adopt this amended accounting guidance during the third quarter of 2016. The impact resulting from the adoption of this amended guidance is summarized below.
|
|
•
|
Forfeitures
. The amended accounting guidance allows companies to make a policy election to reflect estimated forfeitures, as consistent with current accounting guidance, or to report forfeitures as they occur. The Company has elected to account for forfeitures as they occur. The amended accounting guidance requires that this change be made through a modified retrospective approach with any change to prior year expense reflected in beginning retained earnings. No impact was recorded to prior period share-based payment expense as the expense already reflected actual forfeiture rates, which were higher than estimated forfeitures. Approximately
$0.1 million
in additional expense was recorded in the third quarter of 2016 that pertained to estimated forfeitures in the first and second quarters of 2016.
|
|
|
•
|
Income Tax Accounting.
The amended accounting guidance requires all excess tax benefits and tax deficiencies to be recognized as an income tax benefit or expense on a prospective basis in the period of adoption. As shares vest, the Company will report the excess tax benefits or deficiencies prospectively in the consolidated statement of income. The Company recognized an adjustment to beginning retained earnings and a deferred tax asset of
$2.3 million
arising from prior year excess tax benefits not previously recognized.
|
|
|
•
|
Statement of Cash Flows Presentation.
The amended accounting guidance requires excess tax benefits to be classified as an operating activity in the consolidated statement of cash flows. Previously, excess tax benefits were presented as cash inflow from financing activities and cash outflow from operating activities.The retrospective impact to the presentation of the consolidated statement of cash flows was not material. The amended accounting guidance also requires cash paid by an employer when shares are directly withheld for tax withholding purposes be classified as a financing activity. The Company has retrospectively adjusted its presentation in the consolidated statement of cash flows.
|
Pursuant to ASU No. 2015-03, "Simplifying the Presentation of Debt Issuance Costs," issued in April 2015, and ASU No. 2015-15, "Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements," issued in August 2015, the Company now presents the carrying value of its long-term debt net of associated deferred financing charges, which were previously presented as a part of other long-term assets. In order to conform with ASU 2015-03, we reclassified
deferred financing fees associated with our long-term debt totaling
$2.6 million
from other assets to net against long-term debt of
$235.0 million
at December 31, 2015.
|
|
3.
|
Fair Value Measurement
|
At
December 31, 2016
, our financial instruments consist 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 Exchange Contracts.
Our derivative assets and liabilities represent foreign exchange purchase and sales contracts that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk and our counterparties’ credit risks. Based on the utilization of these inputs, the derivative assets and liabilities are classified as Level 2. The fair values of our derivative assets and liabilities measured on a recurring basis as of
December 31
are categorized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Derivative assets in other current assets
1
|
$
|
142
|
|
|
$
|
—
|
|
|
$
|
142
|
|
|
$
|
—
|
|
|
$
|
36
|
|
|
$
|
—
|
|
|
$
|
36
|
|
|
$
|
—
|
|
Derivative liabilities in accrued liabilities and other
1
|
$
|
1,234
|
|
|
$
|
—
|
|
|
$
|
1,234
|
|
|
$
|
—
|
|
|
$
|
524
|
|
|
$
|
—
|
|
|
$
|
524
|
|
|
$
|
—
|
|
|
|
1
|
Based on observable market transactions of spot and forward rates.
|
The following table summarizes the notional amount of our open foreign exchange contracts at
December 31
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
U.S. $
Equivalent
|
|
U.S.
Equivalent
Fair Value
|
|
U.S. $
Equivalent
|
|
U.S.
Equivalent
Fair Value
|
Commitments to buy or sell currencies
|
$
|
18,593
|
|
|
$
|
17,213
|
|
|
$
|
15,490
|
|
|
$
|
15,479
|
|
We consider the impact of our credit risk on the fair value of the contracts, as well as the ability to execute obligations under the contract.
The following table summarizes the effect of derivative instruments on the consolidated statements of income for derivatives not designated as accounting hedges at
December 31
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Location of Loss
Recognized in Income on
Derivatives
|
|
Amount of Loss
Recognized in Income on
Derivatives
|
Foreign exchange contracts
|
Cost of Revenues
|
|
$
|
603
|
|
|
$
|
151
|
|
Long-term debt
. The fair value of long-term debt obligations is based on a fair value model utilizing observable inputs. Based on the use of these inputs, our long-term debt is classified as Level 2. The carrying amounts and fair values of our long-term debt at
December 31
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015 (as adjusted)
|
|
Carrying
Amount
|
|
Fair Value
|
|
Carrying
Amount
|
|
Fair Value
|
Long-term debt
|
$
|
233,154
|
|
|
$
|
231,391
|
|
|
$
|
232,956
|
|
|
$
|
190,063
|
|
Long-lived assets.
There were no fair value measurements of our long-lived assets and definite-lived intangible assets measured on a non-recurring basis as of December 31, 2016, except for an impairment of
$0.6 million
recognized in the first quarter of 2016 for an asset held for sale based on the estimated selling price less selling costs of
$0.8 million
. The asset was classified as held and used at its estimated fair value of
$0.8 million
as of December 31, 2016. The impairment was recorded in selling, general and administrative expense in the consolidated statement of income. The asset is classified as Level 2. There were no fair value measurements of our long-lived assets and definite-lived intangible assets measured on a non-recurring basis as of December 31, 2015.
Inventories consisted of the following as of
December 31
(in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Raw materials
|
$
|
46,352
|
|
|
$
|
52,647
|
|
Work in process
|
11,234
|
|
|
8,776
|
|
Finished goods
|
13,468
|
|
|
14,235
|
|
|
$
|
71,054
|
|
|
$
|
75,658
|
|
|
|
5.
|
Accrued and Other Liabilities
|
Accrued and other liabilities consisted of the following as of
December 31
(in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Compensation and benefits
|
$
|
10,435
|
|
|
$
|
11,936
|
|
Warranty costs
|
5,552
|
|
|
7,580
|
|
Insurance
|
5,237
|
|
|
3,852
|
|
Interest
|
3,892
|
|
|
4,041
|
|
Deferred tooling
|
2,773
|
|
|
2,828
|
|
Legal and professional fees
|
2,827
|
|
|
3,211
|
|
Restructuring
|
2,271
|
|
|
336
|
|
Taxes payable
|
2,517
|
|
|
2,696
|
|
Accrued freight
|
1,465
|
|
|
1,636
|
|
Accrued services
|
1,309
|
|
|
1,140
|
|
Product liabilities
|
—
|
|
|
1,711
|
|
Other
|
7,421
|
|
|
7,229
|
|
|
$
|
45,699
|
|
|
$
|
48,196
|
|
Debt consisted of the following at
December 31
(in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
7.875% senior secured notes due April 15, 2019
|
$
|
233,154
|
|
|
$
|
232,363
|
|
Revolving Credit Facility
On
November 15, 2013
, the Company and certain of the Company’s subsidiaries, as borrowers (together with the Company, the “borrowers”) entered into a Second Amended and Restated Loan and Security Agreement (the “Second ARLS Agreement”) with Bank of America, N.A. as agent and lender, which amended and restated the Amended and Restated Loan and Security Agreement, dated as of April 26, 2011, by and among the Company, the borrowers and Bank of America, N.A., as agent and lender, as amended, governing the Company’s revolving credit facility.
The material terms of the Second ARLS Agreement include the following:
|
|
•
|
a facility in the amount of up to
$40.0 million
with the ability to increase up to an additional
$35.0 million
under certain conditions;
|
|
|
•
|
availability is subject to borrowing base limitations and an availability block equal to the amount of debt and foreign cash management services Bank of America, N.A. or its affiliates makes available to the Company’s foreign subsidiaries;
|
|
|
•
|
availability of up to an aggregate amount of
$10.0 million
for the issuance of letters of credit, which reduces the total amount available;
|
|
|
•
|
extension of the maturity date to
November 15, 2018
;
|
|
|
•
|
amendments to certain covenants to provide additional flexibility, including (i) conditional permitted distributions, permitted foreign investments, and permitted acquisitions on minimum availability, fixed charge coverage ratio and other requirements, and (ii) permitting certain sale-leaseback transactions;
|
|
|
•
|
permitting the repurchase of the Company’s
7.875%
senior secured notes due 2019 ("
7.875%
notes) under certain circumstances; and
|
|
|
•
|
reduction of the fixed charge coverage ratio maintenance requirement to
1.0
:1.0 and reduction of the availability threshold for triggering compliance with the fixed charge coverage ratio, as described below.
|
The size of the revolving credit facility was unchanged by the Second ARLS Agreement and remains at
$40.0 million
, but the borrowers may request an increase in revolver commitments from time to time in an aggregate amount of up to
$35.0 million
, as long as the requested increase does not breach any subordinated debt agreement of the borrowers or the indenture governing the Company’s
7.875%
notes due 2019. Availability under the revolving credit facility is subject to borrowing base limitations and an availability block equal to the amount of debt and foreign cash management services Bank of America, N.A. or its affiliates makes available to the Company’s foreign subsidiaries. Up to an aggregate of
$10.0 million
is available to the borrowers for the issuance of letters of credit, which reduces availability under the revolving credit facility.
The applicable margin is based on average daily availability under the revolving credit facility as follows:
|
|
|
|
|
|
|
|
|
|
Level
|
|
Average Daily
Availability
|
|
Domestic Base
Rate Loans
|
|
LIBOR
Revolver Loans
|
III
|
|
≥ to $20,000,000
|
|
0.50
|
%
|
|
1.50
|
%
|
II
|
|
> $10,000,000 but < $20,000,000
|
|
0.75
|
%
|
|
1.75
|
%
|
I
|
|
≤ to $10,000,000
|
|
1.00
|
%
|
|
2.00
|
%
|
The applicable margin is subject to increase or decrease by the agent on the first day of the calendar month following each fiscal quarter end. If the agent is unable to calculate average daily availability for a fiscal quarter due to borrower’s failure to deliver a borrowing base certificate when required, the applicable margin will be set at Level I until the first day of the calendar month following receipt of a borrowing base certificate. As of
December 31, 2016
the applicable margin was set at Level III.
The Company pays a commitment fee to the lenders equal to
0.25%
per annum of the unused amounts under the revolving credit facility. As of
December 31, 2016
,
$1.9 million
in deferred financing fees relating to the revolving credit facility and our
7.875%
notes were being amortized over the remaining life of the agreements.
As of
December 31, 2016
, we did
not
have borrowings under the revolving credit facility. In addition, as of
December 31, 2016
, we had outstanding letters of credit of
$2.5 million
and borrowing availability of
$37.5 million
under the revolving credit facility.
The borrowers’ obligations under the revolving credit facility are secured by a first-priority lien (subject to certain permitted liens) on substantially all of the tangible and intangible assets of the borrowers, as well as
100%
of the capital stock of the direct domestic subsidiaries of each borrower and
65%
of the capital stock of each foreign subsidiary directly owned by a borrower. Each of CVG and each other borrower is jointly and severally liable for the obligations under the revolving credit facility and unconditionally guarantees the prompt payment and performance thereof.
Terms, Covenants and Compliance Status
The Second ARLS Agreement requires the maintenance of a minimum fixed charge coverage ratio calculated based upon consolidated EBITDA (as defined in the revolving credit facility) as of the last day of each of the Company’s fiscal quarters. The borrowers are not required to comply with the fixed charge coverage ratio requirement for as long as the borrowers maintain at least
$7.5 million
of borrowing availability under the revolving credit facility. If borrowing availability is less than
$7.5 million
at any time, the borrowers would be required to comply with a fixed charge coverage ratio of
1.0
:
1.0
as of the end of any fiscal quarter, and would be required to continue to comply with these requirements until the borrowers have borrowing availability of
$7.5 million
or greater for
60
consecutive days. Because the Company had borrowing availability in excess of
$7.5 million
from January 1, 2016 through
December 31, 2016
, the Company was not required to comply with the minimum fixed charge coverage ratio covenant during the year ended
December 31, 2016
.
The Second ARLS Agreement contains customary restrictive covenants, including, without limitation, limitations on the ability of the borrowers and their subsidiaries to incur additional debt and guarantees; grant liens on assets; pay dividends or make other distributions; make investments or acquisitions; dispose of assets; make payments on certain indebtedness; merge, combine with any other person or liquidate; amend organizational documents; file consolidated tax returns with entities other than other borrowers or their subsidiaries; make material changes in accounting treatment or reporting practices; enter into restrictive agreements; enter into hedging agreements; engage in transactions with affiliates; enter into certain employee benefit plans; amend subordinated debt or the indenture governing the
7.875%
notes; and other matters customarily restricted in loan agreements. The Second ARLS Agreement also contains customary reporting and other affirmative covenants. The Company was in compliance with these covenants as of
December 31, 2016
.
The Second ARLS Agreement contains customary events of default, including, without limitation, nonpayment of obligations under the revolving credit facility when due; material inaccuracy of representations and warranties; violation of covenants in the Second ARLS Agreement and certain other documents executed in connection therewith; breach or default of agreements related to debt in excess of
$5.0 million
that could result in acceleration of that debt; revocation or attempted revocation of guarantees; denial of the validity or enforceability of the loan documents or failure of the loan documents to be in full force and effect; certain judgments in excess of
$2.0 million
; the inability of an obligor to conduct any material part of its business due to governmental intervention, loss of any material license, permit, lease or agreement necessary to the business; cessation of an obligor’s business for a material period of time; impairment of collateral through condemnation proceedings; certain events of bankruptcy or insolvency; certain Employee Retirement Income Securities Act events; and a change in control of the Company. Certain of the defaults are subject to exceptions, materiality qualifiers, grace periods and baskets customary for credit facilities of this type.
Voluntary prepayments of amounts outstanding under the revolving credit facility are permitted at any time, without premium or penalty.
The Second ARLS Agreement requires the borrowers to make mandatory prepayments with the proceeds of certain asset dispositions and upon the receipt of insurance or condemnation proceeds to the extent the borrowers do not use the proceeds for the purchase of assets useful in the borrowers’ businesses.
7.875% Senior Secured Notes due 2019
The
7.875%
notes were issued pursuant to an indenture, dated as of April 26, 2011 (the “
7.875%
Notes Indenture”), by and among CVG, certain of our subsidiaries party thereto, as guarantors (the “guarantors”), and U.S. Bank National Association, as trustee. Interest is payable on the
7.875%
notes on April 15 and October 15 of each year until their maturity date of
April 15, 2019
.
The
7.875%
notes are senior secured obligations of CVG. Our obligations under the
7.875%
notes are guaranteed by the guarantors. The obligations of CVG and the guarantors under the
7.875%
notes are secured by a second-priority lien (subject to certain permitted liens) on substantially all of the property and assets of CVG and the guarantors, and a pledge of
100%
of the capital stock of CVG’s domestic subsidiaries and
65%
of the voting capital stock of each foreign subsidiary directly owned by CVG and the guarantors. The liens, the security interests and all of the obligations of CVG and the guarantors and all provisions regarding remedies in an event of default are subject to an intercreditor agreement among CVG, certain of its subsidiaries, the agent for the revolving credit facility and the collateral agent for the
7.875%
notes.
The Company is entitled at its option to redeem all or a portion of the
7.875%
notes at the redemption price, plus accrued and unpaid interest, if any, to the redemption date, during the 12-month period commencing on April 15, 2014, April 15, 2015 and April 15, 2016 at
105.906%
,
103.938%
and
101.969%
, respectively. If we experience certain change of control events, holders of the
7.875%
notes may require us to repurchase all or part of their notes at
101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.
The
7.875%
Notes Indenture contains restrictive covenants and events of default (subject to certain customary grace periods). We were in compliance with these covenants and were not in default as of
December 31, 2016
. On November 14, 2015, the Company redeemed
$15 million
of its
$250 million
then outstanding
7.875%
notes. The redemption price for the
7.875%
notes was equal to
103.938%
of the principal amount of the
7.875%
notes, plus accrued and unpaid interest to, but not including, the redemption date. Upon the partial redemption by the Company of the
7.875%
notes,
$235 million
of the
7.875%
notes remain outstanding. We paid a premium for early redemption totaling
$0.6 million
in accordance with the provisions of the
7.875%
notes.
|
|
7.
|
Goodwill and Intangible Assets
|
Our intangible assets as of
December 31
were comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Weighted-
Average
Amortization
Period
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
Trademarks/Tradenames
|
23 years
|
|
$
|
8,378
|
|
|
$
|
(3,193
|
)
|
|
$
|
5,185
|
|
Customer relationships
|
15 years
|
|
14,181
|
|
|
(3,855
|
)
|
|
10,326
|
|
|
|
|
$
|
22,559
|
|
|
$
|
(7,048
|
)
|
|
$
|
15,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
Weighted-
Average
Amortization
Period
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Definite-lived intangible assets:
|
|
|
|
|
|
|
|
Trademarks/Tradenames
|
23 years
|
|
$
|
9,460
|
|
|
$
|
(3,914
|
)
|
|
$
|
5,546
|
|
Customer relationships
|
15 years
|
|
14,344
|
|
|
(2,944
|
)
|
|
11,400
|
|
|
|
|
$
|
23,804
|
|
|
$
|
(6,858
|
)
|
|
$
|
16,946
|
|
The aggregate intangible asset amortization expense was
$1.3 million
,
$1.3 million
and
$1.5 million
for the fiscal years ended
December 31, 2016
,
2015
and
2014
, respectively. The estimated intangible asset amortization expense for each of the five succeeding fiscal years ending after
December 31, 2016
is
$1.3 million
per year through December 31, 2019 and
$1.2 million
in the fourth and fifth years.
The changes in the carrying amounts of goodwill for the years ended
December 31
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Balance — Beginning of the year
|
$
|
7,834
|
|
|
$
|
8,056
|
|
Currency translation adjustment
|
(131
|
)
|
|
(222
|
)
|
Balance — End of the year
|
$
|
7,703
|
|
|
$
|
7,834
|
|
Pre-tax income (loss) consisted of the following for the years ended
December 31
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Domestic
|
$
|
(13,928
|
)
|
|
$
|
16,819
|
|
|
$
|
6,820
|
|
Foreign
|
20,762
|
|
|
—
|
|
|
5,942
|
|
Total
|
$
|
6,834
|
|
|
$
|
16,819
|
|
|
$
|
12,762
|
|
A reconciliation of income taxes computed at the statutory rates to the reported income tax provision for the years ended
December 31
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Federal provision at statutory rate
|
$
|
2,392
|
|
|
$
|
5,887
|
|
|
$
|
4,466
|
|
U.S./foreign tax rate differential
|
(1,842
|
)
|
|
1
|
|
|
(991
|
)
|
Foreign non-deductible expenses
|
743
|
|
|
(479
|
)
|
|
1,556
|
|
Foreign tax provision
|
336
|
|
|
296
|
|
|
361
|
|
State taxes, net of federal benefit
|
(171
|
)
|
|
556
|
|
|
1,958
|
|
State tax rate change, net of federal benefit
|
541
|
|
|
32
|
|
|
(159
|
)
|
Change in uncertain tax positions
|
114
|
|
|
236
|
|
|
(150
|
)
|
Change in valuation allowance
|
(1,858
|
)
|
|
3,283
|
|
|
(2,538
|
)
|
Tax credits
|
(104
|
)
|
|
(283
|
)
|
|
(91
|
)
|
Share-based compensation
|
(108
|
)
|
|
459
|
|
|
377
|
|
Other
|
6
|
|
|
(230
|
)
|
|
342
|
|
Provision for income taxes
|
$
|
49
|
|
|
$
|
9,758
|
|
|
$
|
5,131
|
|
The provision (benefit) for income taxes for the years ended
December 31
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Current
Provision (Benefit)
|
|
Deferred
Provision (Benefit)
|
|
Total
Provision (Benefit)
|
|
Current
Provision (Benefit)
|
|
Deferred
Provision
|
|
Total
Provision
|
|
Current
Provision
|
|
Deferred
Provision (Benefit)
|
|
Total
Provision (Benefit)
|
Federal
|
$
|
(4
|
)
|
|
$
|
(1,801
|
)
|
|
$
|
(1,805
|
)
|
|
$
|
(153
|
)
|
|
$
|
6,077
|
|
|
$
|
5,924
|
|
|
$
|
26
|
|
|
$
|
4,799
|
|
|
$
|
4,825
|
|
State and local
|
(27
|
)
|
|
1,021
|
|
|
994
|
|
|
380
|
|
|
389
|
|
|
769
|
|
|
316
|
|
|
2,834
|
|
|
3,150
|
|
Foreign
|
2,605
|
|
|
(1,745
|
)
|
|
860
|
|
|
1,374
|
|
|
1,691
|
|
|
3,065
|
|
|
1,512
|
|
|
(4,356
|
)
|
|
(2,844
|
)
|
Total
|
$
|
2,574
|
|
|
$
|
(2,525
|
)
|
|
$
|
49
|
|
|
$
|
1,601
|
|
|
$
|
8,157
|
|
|
$
|
9,758
|
|
|
$
|
1,854
|
|
|
$
|
3,277
|
|
|
$
|
5,131
|
|
A summary of deferred income tax assets and liabilities as of
December 31
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Noncurrent deferred tax assets:
|
|
|
|
Amortization and fixed assets
|
$
|
4,109
|
|
|
$
|
5,270
|
|
Accounts receivable
|
815
|
|
|
706
|
|
Inventories
|
2,899
|
|
|
3,959
|
|
Pension obligations
|
4,623
|
|
|
5,268
|
|
Warranty obligations
|
2,519
|
|
|
3,608
|
|
Accrued benefits
|
1,060
|
|
|
1,370
|
|
Foreign exchange contracts
|
460
|
|
|
94
|
|
Restricted stock
|
145
|
|
|
153
|
|
Tax credits carryforwards
|
2,238
|
|
|
2,562
|
|
Net operating loss carryforwards
|
20,130
|
|
|
15,094
|
|
Other temporary differences not currently available for tax purposes
|
2,135
|
|
|
287
|
|
Total noncurrent assets
|
41,133
|
|
|
38,371
|
|
Valuation allowance
|
(12,546
|
)
|
|
(13,118
|
)
|
Net noncurrent deferred tax assets
|
$
|
28,587
|
|
|
$
|
25,253
|
|
Noncurrent deferred tax liabilities:
|
|
|
|
Amortization and fixed assets
|
$
|
(764
|
)
|
|
$
|
(1,158
|
)
|
Net operating loss carryforwards
|
2,178
|
|
|
2,121
|
|
Other temporary differences not currently available for tax purposes
|
(1,430
|
)
|
|
(796
|
)
|
Total noncurrent tax liabilities
|
(16
|
)
|
|
167
|
|
Valuation allowance
|
—
|
|
|
(1,286
|
)
|
Net noncurrent deferred tax liabilities
|
$
|
(16
|
)
|
|
$
|
(1,119
|
)
|
Total deferred tax asset
|
$
|
28,571
|
|
|
$
|
24,134
|
|
Our overall deferred tax position was a net deferred tax asset of
$28.6 million
.
We assess whether valuation allowances should be established against deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with tax attributes expiring unused and tax planning alternatives. In making such judgments, significant weight is given to evidence that can be objectively verified.
During 2016, our foreign affiliates in China and India each generated enough income to no longer be in a cumulative three-year loss position. With an improved future forecast of income and other favorable evidence, valuation allowances totaling
$3.1 million
were released. The valuation allowance in the United Kingdom was reduced by
$1.3 million
due to a reduction in the statutory tax rate. We determined a valuation allowance of
$2.6 million
should be established for our foreign deferred assets in Luxembourg because projected future income is lower than originally expected. Also, we established a valuation allowance of
$0.3 million
for deferred assets associated with certain U.S. state tax net operating loss carry forwards. We expect to be able to realize the benefits of all of our deferred tax assets that are not currently offset by a valuation allowance, as discussed above. In the event that our
actual results differ from our estimates or we adjust these estimates in future periods, the effects of these adjustments could materially impact our financial position and results of operations.
As of
December 31, 2016
, we had
$61.9 million
of foreign,
$14.5 million
U.S. federal and
$61.6 million
of U.S. state net operating loss carryforwards available to offset future taxable income. Utilization of these losses is subject to the tax laws of the applicable tax jurisdiction and may be limited by the ability of certain subsidiaries to generate taxable income in the associated tax jurisdiction. Generally, our net operating loss carryforwards expire beginning in
2017
and continue through
2036
. However, there are certain tax jurisdictions with no expiration dates. We have established valuation allowances for all net operating losses that we believe are more likely than not to expire before they can be utilized.
As of
December 31, 2016
, we had
$1.5 million
of research and development tax credits being carried forward related to our U.S. operations. Utilization of these credits may be limited by the ability to generate federal taxable income in future years and the credits will expire between
2028
and
2035
. We also had
$0.8 million
of alternative minimum tax credit carryforwards that do not expire.
As of
December 31, 2016
, undistributed earnings from our foreign affiliates were
$41.2 million
. We do not intend to repatriate these funds and consider these funds to be permanently reinvested. Deferred taxes have not been provided on these unremitted earnings as determination of the liability is not practical because the liability would be dependent on circumstances existing if and when remittance occurs.
As of
December 31, 2016
, cash of
$34.8 million
was held by foreign subsidiaries. If we were to repatriate any portion of these funds back to the U.S., we would need to accrue and pay the appropriate withholding and income taxes on amounts repatriated. We do not currently have any plans or intentions to repatriate funds held by our foreign affiliates, but intend to use the cash to fund the growth of our foreign operations.
We operate in multiple jurisdictions and are routinely under audit by U.S. federal, U.S. state and international tax authorities. Exposures exist related to various filing positions which may require an extended period of time to resolve and may result in income tax adjustments by the taxing authorities. Reserves for these potential exposures have been established which represent management’s best estimate of the probable adjustments. On a quarterly basis, management evaluates the reserve amounts in light of any additional information and adjusts the reserve balances as necessary to reflect the best estimate of the probable outcomes. However, actual results may differ from these estimates. The resolution of these matters in a particular future period could have an impact on our consolidated statement of operations and provision for income taxes.
We file federal income tax returns in the U.S. and income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to income tax examinations by any of the taxing authorities for years before 2011. We currently have one tax examination in process in India.
As of December 31, 2016, and 2015, we provided a liability of
$0.6 million
and
$0.5 million
, respectively, for unrecognized tax benefits related to U.S. federal, U.S. state, and foreign jurisdictions, all of which would impact our effective tax rate, if recognized. These unrecognized tax benefits are netted against their related noncurrent deferred tax assets that are being carried forward (net operating losses and tax credits).
We accrue interest and penalties related to unrecognized tax benefits through income tax expense. We had
$0.2 million
and
$0.1 million
accrued for the payment of interest and penalties as of December 31, 2016 and December 31, 2015, respectively. Accrued interest and penalties are included in the
$0.6 million
of unrecognized tax benefits.
We have
$0.2 million
unrecognized tax reserves, interest and penalties we anticipate will be released within the next 12 months due to the statue of limitations.
A reconciliation of the beginning and ending amount of unrecognized tax benefits (including interest and penalties) at
December 31
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Balance — Beginning of the year
|
$
|
489
|
|
|
$
|
27
|
|
|
$
|
189
|
|
Gross increase — tax positions in prior periods
|
40
|
|
|
445
|
|
|
—
|
|
Gross decreases — tax positions in prior periods
|
—
|
|
|
—
|
|
|
(170
|
)
|
Gross increases — current period tax positions
|
103
|
|
|
44
|
|
|
8
|
|
Lapse of statute of limitations
|
(4
|
)
|
|
(27
|
)
|
|
—
|
|
Balance — End of the year
|
$
|
628
|
|
|
$
|
489
|
|
|
$
|
27
|
|
9. Segment Reporting and Geographic Locations
Operating segments are defined as components of an enterprise that are evaluated regularly by the Company’s CODM, which is our President and Chief Executive Officer.
The Company has
two
reportable segments: the GTB Segment and the GCA Segment. Each of these segments consists of a number of manufacturing facilities. Generally, the facilities in the GTB Segment manufacture and sell Seats, Trim, wipers, mirrors, structures and other products into the MD/HD Truck and bus markets. Generally, the facilities in the GCA Segment manufacture and sell wire harnesses, Seats and other products into the construction and agriculture markets. Both segments participate in the aftermarket. 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 sales from that manufacturing facility. Our segments are more specifically described below.
The GTB Segment manufactures and sells the following products:
|
|
•
|
Seats, Trim, sleeper boxes, cab structures, structural components and body panels. These products are sold primarily to the MD/HD Truck markets in North America.
|
|
|
•
|
Seats to the truck and bus markets in Asia-Pacific and Europe.
|
|
|
•
|
Mirrors and wiper systems to the truck, bus, agriculture, construction, rail and military markets in North America.
|
|
|
•
|
Trim to the recreational and specialty vehicle markets in North America.
|
|
|
•
|
Aftermarket seats and components in North America.
|
The GCA Segment manufactures and sells the following products:
|
|
•
|
Electronic wire harness assemblies and Seats for construction, agricultural, industrial, automotive, mining and military industries in North America, Europe and Asia Pacific.
|
|
|
•
|
Seats to the truck and bus markets in Asia-Pacific and Europe.
|
|
|
•
|
Wiper systems to the construction and agriculture markets in Europe.
|
|
|
•
|
Office seating in Europe and Asia-Pacific.
|
|
|
•
|
Aftermarket seats and components in 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.
The following table presents segment revenues, gross profit, depreciation and amortization expense, selling, general and administrative expenses, operating income and capital and other items as of and for the year ended
December 31, 2016
(in thousands). The table does not include assets as the CODM does not review assets by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended December 31, 2016
|
|
Global
Truck &
Bus
|
|
Global
Construction &
Agriculture
|
|
Corporate/
Other
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
External Revenues
|
$
|
415,154
|
|
|
$
|
246,958
|
|
|
$
|
—
|
|
|
$
|
662,112
|
|
Intersegment Revenues
|
1,125
|
|
|
7,066
|
|
|
(8,191
|
)
|
|
$
|
—
|
|
Total Revenues
|
$
|
416,279
|
|
|
$
|
254,024
|
|
|
$
|
(8,191
|
)
|
|
$
|
662,112
|
|
Gross Profit
|
$
|
54,665
|
|
|
$
|
34,060
|
|
|
$
|
(1,495
|
)
|
|
$
|
87,230
|
|
Depreciation and Amortization Expense
|
$
|
8,545
|
|
|
$
|
5,581
|
|
|
$
|
2,325
|
|
|
$
|
16,451
|
|
Selling, General & Administrative Expenses
|
$
|
22,557
|
|
|
$
|
18,240
|
|
|
$
|
19,745
|
|
|
$
|
60,542
|
|
Operating Income
|
$
|
30,943
|
|
|
$
|
15,680
|
|
|
$
|
(21,240
|
)
|
|
$
|
25,383
|
|
|
|
|
|
|
|
|
|
Capital and Other Items:
|
|
|
|
|
|
|
|
Capital Expenditures
|
$
|
6,384
|
|
|
$
|
4,609
|
|
|
$
|
924
|
|
|
$
|
11,917
|
|
Other Items
1
|
$
|
2,712
|
|
|
$
|
723
|
|
|
$
|
688
|
|
|
$
|
4,123
|
|
1
Other items impacting operating income in the GTB and GCA Segments include costs associated with restructuring activities, including employee severance or retention costs, lease cancellation costs, building repairs and costs to transfer equipment; and in corporate a write down of an asset held for sale and severance costs.
The following table presents segment revenues, gross profit, depreciation and amortization expense, selling, general and administrative expenses, operating income and capital and other items as of and for the year ended
December 31, 2015
(in thousands). The table does not include assets as the CODM does not review assets by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended December 31, 2015
|
|
Global
Truck &
Bus
|
|
Global
Construction &
Agriculture
|
|
Corporate/
Other
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
External Revenues
|
$
|
564,651
|
|
|
$
|
260,690
|
|
|
$
|
—
|
|
|
$
|
825,341
|
|
Intersegment Revenues
|
618
|
|
|
10,937
|
|
|
(11,555
|
)
|
|
$
|
—
|
|
Total Revenues
|
$
|
565,269
|
|
|
$
|
271,627
|
|
|
$
|
(11,555
|
)
|
|
$
|
825,341
|
|
Gross Profit
|
$
|
85,702
|
|
|
$
|
28,627
|
|
|
$
|
(3,507
|
)
|
|
$
|
110,822
|
|
Depreciation and Amortization Expense
|
$
|
8,909
|
|
|
$
|
5,855
|
|
|
$
|
2,946
|
|
|
$
|
17,710
|
|
Selling, General & Administrative Expenses
|
$
|
25,263
|
|
|
$
|
20,442
|
|
|
$
|
25,764
|
|
|
$
|
71,469
|
|
Operating Income
|
$
|
59,252
|
|
|
$
|
8,044
|
|
|
$
|
(29,270
|
)
|
|
$
|
38,026
|
|
|
|
|
|
|
|
|
|
Capital and Other Items:
|
|
|
|
|
|
|
|
Capital Expenditures
|
$
|
7,579
|
|
|
$
|
4,688
|
|
|
$
|
3,323
|
|
|
$
|
15,590
|
|
Other Items
1
|
$
|
1,838
|
|
|
$
|
494
|
|
|
$
|
—
|
|
|
$
|
2,332
|
|
1
Other items in the GTB and GCA Segments include costs associated with restructuring activities, including employee severance or retention costs, lease cancellation costs, building repairs and costs to transfer equipment.
The following table presents segment revenues, gross profit, depreciation and amortization expense, selling, general and administrative expenses, operating income, total assets and other items as of and for the year ended
December 31, 2014
(in thousands). The table does not include assets as the CODM does not review assets by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended December 31, 2014
|
|
Global
Truck &
Bus
|
|
Global
Construction &
Agriculture
|
|
Corporate/
Other
|
|
Total
|
Revenues
|
|
|
|
|
|
|
|
External Revenues
|
$
|
533,752
|
|
|
$
|
305,991
|
|
|
$
|
—
|
|
|
$
|
839,743
|
|
Intersegment Revenues
|
366
|
|
|
11,210
|
|
|
(11,576
|
)
|
|
$
|
—
|
|
Total Revenues
|
$
|
534,118
|
|
|
$
|
317,201
|
|
|
$
|
(11,576
|
)
|
|
$
|
839,743
|
|
Gross Profit
|
$
|
81,430
|
|
|
$
|
29,583
|
|
|
$
|
(3,325
|
)
|
|
$
|
107,688
|
|
Depreciation and Amortization Expense
|
$
|
8,973
|
|
|
$
|
5,905
|
|
|
$
|
3,369
|
|
|
$
|
18,247
|
|
Selling, General & Administrative Expenses
|
$
|
28,890
|
|
|
$
|
21,903
|
|
|
$
|
21,687
|
|
|
$
|
72,480
|
|
Operating Income
|
$
|
51,171
|
|
|
$
|
7,533
|
|
|
$
|
(25,011
|
)
|
|
$
|
33,693
|
|
|
|
|
|
|
|
|
|
Capital and Other Items:
|
|
|
|
|
|
|
|
Capital Expenditures
|
$
|
8,055
|
|
|
$
|
5,140
|
|
|
$
|
1,374
|
|
|
$
|
14,569
|
|
Other Items
1
|
$
|
2,090
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,090
|
|
1
Other items in the GTB and GCA Segments include costs associated with restructuring activities, including employee severance or retention costs, lease cancellation costs, building repairs and costs to transfer equipment.
The following table presents revenues and long-lived assets for each of the geographic areas in which we operate (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
Revenues
|
|
Long-lived
Assets
|
|
Revenues
|
|
Long-lived
Assets
|
|
Revenues
|
|
Long-lived
Assets
|
United States
|
$
|
496,473
|
|
|
$
|
54,334
|
|
|
$
|
635,627
|
|
|
$
|
59,280
|
|
|
$
|
644,547
|
|
|
$
|
60,819
|
|
All other countries
|
165,639
|
|
|
11,707
|
|
|
189,714
|
|
|
11,681
|
|
|
195,196
|
|
|
12,643
|
|
|
$
|
662,112
|
|
|
$
|
66,041
|
|
|
$
|
825,341
|
|
|
$
|
70,961
|
|
|
$
|
839,743
|
|
|
$
|
73,462
|
|
Revenues are attributed to geographic locations based on the geography from which the legal entity operates. Included in all other countries are intercompany sales eliminations.
The following is the composition by product category of our revenues (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
Revenues
|
|
%
|
|
Revenues
|
|
%
|
|
Revenues
|
|
%
|
Seats and seating systems
|
$
|
280,575
|
|
|
42
|
|
$
|
339,724
|
|
|
41
|
|
$
|
351,621
|
|
|
42
|
Trim systems and components
|
132,623
|
|
|
20
|
|
179,713
|
|
|
22
|
|
163,399
|
|
|
19
|
Electronic wire harnesses and panel assemblies
|
149,417
|
|
|
23
|
|
154,417
|
|
|
19
|
|
180,237
|
|
|
21
|
Cab structures, sleeper boxes, body panels and structural components
|
57,605
|
|
|
9
|
|
96,046
|
|
|
12
|
|
89,168
|
|
|
11
|
Mirrors, wipers and controls
|
41,892
|
|
|
6
|
|
55,441
|
|
|
6
|
|
55,318
|
|
|
7
|
|
$
|
662,112
|
|
|
100
|
|
$
|
825,341
|
|
|
100
|
|
$
|
839,743
|
|
|
100
|
|
|
10.
|
Commitments and Contingencies
|
Leases
— We lease office, warehouse and manufacturing space and certain equipment under non-cancelable operating lease agreements that require us to pay maintenance, insurance, taxes and other expenses in addition to annual rentals. The anticipated future lease costs are based in part on certain assumptions and we will continue to monitor these costs to determine if the estimates need to be revised in the future. Lease expense under these arrangements was
$10.6 million
,
$11.3 million
and
$12.6 million
in
2016
,
2015
and
2014
, respectively. Capital lease agreements entered into by us are immaterial. Future approximate minimum annual rental commitments at
December 31, 2016
under non-cancelable operating leases are as follows (in thousands):
|
|
|
|
|
|
Year Ending December 31,
|
|
|
2017
|
|
$
|
6,045
|
|
2018
|
|
4,201
|
|
2019
|
|
2,766
|
|
2020
|
|
2,012
|
|
2021
|
|
1,673
|
|
Thereafter
|
|
1,919
|
|
Guarantees
— We accrue for costs associated with guarantees when it is probable that a liability has been incurred and the amount can be reasonably estimated. The most likely cost to be incurred is accrued based on an evaluation of currently available facts, and where no amount within a range of estimates is more likely, the minimum is accrued. We record a liability for the fair value of such guarantees in the balance sheet. As of
December 31, 2016
and 2015, we had no such guarantees.
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, service provider disputes, intellectual property disputes, those arising out of alleged defects, breach of contracts, product warranties and environmental matters. Management believes that we maintain adequate insurance or 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 will not have a material adverse impact on the consolidated financial position, results of operations or cash flows; however, such matters are subject to many uncertainties and the outcomes of individual matters are not predictable with assurance.
On November 15, 2015, Bouchet & Co., a consulting firm, filed a lawsuit against the Company captioned Bouchet & Co. v. Commercial Vehicle Group, Inc., Case Number 1:15-CV-10333 in the United States District Court for the Northern District of Illinois, alleging
two
causes of actions. First, the plaintiff asserts a breach of contract claim, alleging that the Company breached an agreement signed on October 2, 2014 (the “Agreement”) and refused to pay plaintiff’s fees as set forth in the Agreement. In the breach of contract claim, the plaintiff seeks compensatory damages in the amount of
$2.5 million
. Second, the plaintiff asserts a promissory fraud cause of action. Under this claim, the plaintiff alleges that the Company committed fraud by promising to pay a fee to the plaintiff that the Company had no intention of paying. In the promissory fraud claim, the plaintiff seeks punitive damages, post judgment interest, and any other costs awarded by the Court. On October 24, 2016, the Court granted plaintiff’s motion for partial summary judgment on the breach of contract claim. Specifically, the Court held that the Company was liable for breach of contract, but reserved the issue of damages for the jury. The Court also denied the plaintiff’s motion for partial summary judgment on the promissory fraud claim, holding that liability on that claim would be a matter for the jury at trial. As of December 31, 2016, the Company has accrued
$950 thousand
related to this matter. Trial on this matter is scheduled for the end of May 2017. There can be no assurances that this proceeding will not have a material adverse effect on the Company's results of operations or financial condition.
|
|
11.
|
Stockholders’ Equity (Deficit)
|
Common Stock
— Our authorized capital stock consists of
60,000,000
shares of common stock with a par value of
$0.01
per share, with
29,871,354
and
29,448,779
shares outstanding as of December 31, 2016 and 2015, respectively.
Preferred Stock
— Our authorized capital stock consists of
5,000,000
shares of preferred stock with a par value of
$0.01
per share, with
no
shares outstanding as of
December 31, 2016
and 2015.
Earnings Per Share
— Basic earnings per share is determined by dividing net income by the weighted average number of common shares outstanding during the year. 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 years ended
December 31, 2016
,
2015
and
2014
includes the effects of potential common shares when dilutive (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
Net income attributable to common stockholders — basic and diluted
|
$
|
6,785
|
|
|
$
|
7,060
|
|
|
$
|
7,630
|
|
Weighted average number of common shares outstanding
|
29,530
|
|
|
29,209
|
|
|
28,926
|
|
Dilutive effect of outstanding stock options and restricted stock grants after application of the treasury stock method
|
348
|
|
|
190
|
|
|
191
|
|
|
|
|
|
|
|
Dilutive shares outstanding
|
29,878
|
|
|
29,399
|
|
|
29,117
|
|
Basic earnings per share attributable to common stockholders
|
$
|
0.23
|
|
|
$
|
0.24
|
|
|
$
|
0.26
|
|
Diluted earnings per share attributable to common stockholders
|
$
|
0.23
|
|
|
$
|
0.24
|
|
|
$
|
0.26
|
|
For the years ended
December 31, 2016
and 2015, diluted earnings per share excludes
350 thousand
shares and
501 thousand
shares, respectively, of nonvested restricted stock as the effect would have been anti-dilutive. As of
December 31, 2014
, diluted earnings per share excludes
23 thousand
shares of nonvested restricted stock and
29 thousand
shares of outstanding stock options as the effect would have been anti-dilutive.
Dividends
— We have not declared or paid any cash dividends in the past. The terms of the Second ARLS Agreement and the
7.875%
Notes Indenture restricts the payment or distribution of our cash or other assets, including cash dividend payments.
Awards, defined as cash, shares or other awards, may be granted to employees under the Commercial Vehicle Group, Inc. 2014 Equity Incentive Plan (the “2014 EIP”). The 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 (or the publicly traded common stock of the applicable Peer Group company) 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 if the employee is employed through the end of the Performance Period. If the employee is not employed as of the payment date, the award will be forfeited. These grants were 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. Performance awards were granted under the 2014 EIP in November 2016, 2015, and 2014. The November 2013 awards of
$0.3 million
were paid in 2016. Expense associated with the performance awards is reported in selling, general and administrative expenses in the consolidated statement of income. The following table summarizes the grant activity for the years December 31, 2016, 2015 and 2014 (in thousands, except for the remaining periods):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
Grant Amount
|
|
Forfeitures/Adjustments
|
|
Payments
|
|
Balance at December 31, 2016
|
|
Vesting Schedule
|
|
Unrecognized Compensation
|
|
Remaining Periods (in Months) to Vesting
|
November 2013
|
|
$
|
1,351
|
|
|
$
|
(1,033
|
)
|
|
$
|
(318
|
)
|
|
$
|
—
|
|
|
November 2016
|
|
$
|
—
|
|
|
0
|
November 2014
|
|
$
|
2,087
|
|
|
$
|
(1,062
|
)
|
|
$
|
—
|
|
|
$
|
1,025
|
|
|
November 2017
|
|
$
|
256
|
|
|
9
|
November 2015
|
|
1,487
|
|
|
(160
|
)
|
|
—
|
|
|
1,327
|
|
|
November 2018
|
|
774
|
|
|
21
|
November 2016
|
|
1,434
|
|
|
—
|
|
|
—
|
|
|
1,434
|
|
|
November 2019
|
|
1,315
|
|
|
33
|
|
|
$
|
6,359
|
|
|
$
|
(2,255
|
)
|
|
$
|
(318
|
)
|
|
$
|
3,786
|
|
|
|
|
$
|
2,345
|
|
|
|
|
|
13.
|
Share-Based Compensation
|
The compensation expense that has been charged against income for our share-based compensation arrangements was
$2.6 million
,
$2.9 million
and
$2.7 million
for the years ended
December 31, 2016
,
2015
and
2014
, respectively. Share-based compensation expense is classified in selling, general and administrative expenses in the consolidated statement of income.
Restricted Stock Awards
— Restricted stock is 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 separation from the board of directors 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 restricted stock grants (in millions, except for share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant
|
|
Shares
|
|
Vesting Schedule
|
|
Unearned
Compensation
|
|
Remaining
Period (in
months)
|
October 2014
|
|
506,171
|
|
|
3 equal annual installments commencing on October 20, 2015
|
|
$
|
0.6
|
|
|
10
|
April 2015
|
|
27,174
|
|
|
3 equal annual installments commencing on October 20, 2015
|
|
0.1
|
|
|
10
|
October 2015
|
|
595,509
|
|
|
3 equal annual installments commencing on October 20, 2016
|
|
1.0
|
|
|
22
|
January 2016
|
|
23,852
|
|
|
3 equal annual installments commencing on October 20, 2016
|
|
—
|
|
|
22
|
March 2016
|
|
38,758
|
|
|
3 equal annual installments commencing on October 20, 2016
|
|
—
|
|
|
22
|
October 2016
|
|
410,751
|
|
|
3 equal annual installments commencing on October 20, 2017
|
|
2.1
|
|
|
34
|
October 2016
|
|
97,951
|
|
|
fully vests as of October 20, 2017
|
|
0.4
|
|
|
10
|
As of
December 31, 2016
, there was approximately
$4.2 million
of unrecognized compensation expense related to non-vested share-based compensation arrangements granted under our equity incentive plans. This expense is subject to future adjustments for vesting and forfeitures and will be recognized on a straight-line basis over the remaining period listed above for each grant.
As noted in footnote 2, we have elected to report forfeitures as they occur as opposed to estimating future forfeitures in our share-based compensation expense. Additional expense was reported in the year ended December 31, 2016 of
$0.1 million
for estimated forfeitures that pertained to expense reported in the first and second quarters of 2016. A summary of the status of our restricted stock awards as of
December 31, 2016
and changes during the twelve-month period ending
December 31, 2016
,
2015
and
2014
is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
Shares
(000’s)
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
Shares
(000’s)
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
Shares
(000’s)
|
|
Weighted-
Average
Grant-Date
Fair Value
|
Nonvested - beginning of year
|
1,128
|
|
|
$
|
4.24
|
|
|
915
|
|
|
$
|
6.96
|
|
|
855
|
|
|
$
|
7.59
|
|
Granted
|
571
|
|
|
5.05
|
|
|
818
|
|
|
3.24
|
|
|
577
|
|
|
6.91
|
|
Vested
|
(558
|
)
|
|
4.68
|
|
|
(400
|
)
|
|
7.06
|
|
|
(379
|
)
|
|
8.06
|
|
Forfeited
|
(160
|
)
|
|
4.35
|
|
|
(205
|
)
|
|
6.93
|
|
|
(138
|
)
|
|
7.59
|
|
Nonvested - end of year
|
981
|
|
|
$
|
4.70
|
|
|
1,128
|
|
|
$
|
4.24
|
|
|
915
|
|
|
$
|
6.96
|
|
Employees surrendered approximately
135 thousand
shares of our common stock in connection with the vesting of restricted stock during 2016 to satisfy income tax withholding obligations.
As of
December 31, 2016
, a total of
868 thousand
shares were available for future grants from the shares authorized for award under our 2014 Equity Incentive Plan, including cumulative forfeitures.
Repurchase of Common Stock
— We did not repurchase any of our common stock on the open market as part of a stock repurchase program during 2016; however, our employees surrendered
135 thousand
shares of our common stock to satisfy tax withholding obligations on the vesting of restricted stock awards issued under our 2014 EIP and the Fourth Amended and Restated Equity Incentive Plan.
|
|
14.
|
Defined Contribution Plans, Pension and Other Post-Retirement Benefit Plans
|
Defined Contribution Plans
— We sponsor various 401(k) employee savings plans covering all eligible employees. Eligible employees can contribute on a pre-tax basis to the plan. In accordance with the terms of the 401(k) plans, we elect to match a certain percentage of the participants’ contributions to the plans, as defined. We recognized expense associated with these plans of
$2.7 million
in 2016,
$2.8 million
in 2015 and
$2.2 million
in
2014
.
Pension and Other Post-Retirement Benefit Plans
— We sponsor pension and other post-retirement benefit plans that cover certain hourly and salaried employees in the U.S. and United Kingdom. Each of the plans are frozen to new participants. All of the plans, except for the Shadyside pension plan, are frozen to additional service credits earned. Our policy is to make annual contributions to the plans to fund the minimum contributions as required by local regulations.
The change in benefit obligation, plan assets and funded status as of
December 31
consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension and Other Post-Retirement Benefit Plans
|
|
Non-U.S. Pension Plans
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
Benefit obligation — Beginning of year
|
$
|
47,795
|
|
|
$
|
51,279
|
|
|
$
|
39,186
|
|
|
$
|
43,569
|
|
Service cost
|
126
|
|
|
135
|
|
|
—
|
|
|
—
|
|
Interest cost
|
1,878
|
|
|
1,864
|
|
|
1,370
|
|
|
1,470
|
|
Participant contributions
|
7
|
|
|
11
|
|
|
—
|
|
|
—
|
|
Benefits paid
|
(2,161
|
)
|
|
(2,179
|
)
|
|
(1,454
|
)
|
|
(1,676
|
)
|
Actuarial loss (gain)
|
(133
|
)
|
|
(3,315
|
)
|
|
9,234
|
|
|
(2,263
|
)
|
Exchange rate changes
|
—
|
|
|
—
|
|
|
(7,516
|
)
|
|
(1,914
|
)
|
Benefit obligation at end of year
|
47,512
|
|
|
47,795
|
|
|
40,820
|
|
|
39,186
|
|
Change in plan assets:
|
|
|
|
|
|
|
|
Fair value of plan assets — Beginning of year
|
36,270
|
|
|
35,660
|
|
|
33,608
|
|
|
35,752
|
|
Actual return on plan assets
|
2,035
|
|
|
532
|
|
|
4,214
|
|
|
328
|
|
Employer contributions
|
2,239
|
|
|
2,246
|
|
|
756
|
|
|
818
|
|
Participant contributions
|
7
|
|
|
11
|
|
|
—
|
|
|
—
|
|
Benefits paid
|
(2,161
|
)
|
|
(2,179
|
)
|
|
(1,454
|
)
|
|
(1,676
|
)
|
Exchange rate changes
|
—
|
|
|
—
|
|
|
(6,044
|
)
|
|
(1,614
|
)
|
Fair value of plan assets at end of year
|
38,390
|
|
|
36,270
|
|
|
31,080
|
|
|
33,608
|
|
Funded status
|
$
|
(9,122
|
)
|
|
$
|
(11,525
|
)
|
|
$
|
(9,740
|
)
|
|
$
|
(5,578
|
)
|
Amounts recognized in the consolidated balance sheets at
December 31
consist of (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension and Other Post-Retirement Benefit Plans
|
|
Non-U.S. Pension Plans
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Current liabilities
|
$
|
64
|
|
|
$
|
74
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Noncurrent liabilities
|
9,058
|
|
|
11,451
|
|
|
9,740
|
|
|
5,578
|
|
Net amount recognized
|
$
|
9,122
|
|
|
$
|
11,525
|
|
|
$
|
9,740
|
|
|
$
|
5,578
|
|
The components of net periodic benefit cost for the years ended
December 31
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension and Other Post-Retirement Benefit Plans
|
|
Non-U.S. Pension Plans
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Service cost
|
$
|
126
|
|
|
$
|
135
|
|
|
$
|
84
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest cost
|
1,878
|
|
|
1,864
|
|
|
1,915
|
|
|
1,370
|
|
|
1,470
|
|
|
1,758
|
|
Expected return on plan assets
|
(2,719
|
)
|
|
(2,673
|
)
|
|
(2,514
|
)
|
|
(1,520
|
)
|
|
(1,597
|
)
|
|
(1,891
|
)
|
Amortization of prior service cost
|
6
|
|
|
6
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Recognized actuarial loss (gain)
|
308
|
|
|
336
|
|
|
1
|
|
|
210
|
|
|
275
|
|
|
249
|
|
Net periodic (benefit) cost
|
$
|
(401
|
)
|
|
$
|
(332
|
)
|
|
$
|
(508
|
)
|
|
$
|
60
|
|
|
$
|
148
|
|
|
$
|
116
|
|
Amounts Recognized in Accumulated Other Comprehensive (Loss) Income
— Amounts recognized in accumulated other comprehensive income (loss), before taking into account income tax effects, at
December 31
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension and Other Post-Retirement Benefit Plans
|
|
Non-U.S. Pension Plans
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Net actuarial loss (gain)
|
$
|
15,219
|
|
|
$
|
14,974
|
|
|
$
|
16,485
|
|
|
$
|
14,134
|
|
|
$
|
8,784
|
|
|
$
|
10,227
|
|
Prior service cost
|
63
|
|
|
69
|
|
|
75
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
15,282
|
|
|
$
|
15,043
|
|
|
$
|
16,560
|
|
|
$
|
14,134
|
|
|
$
|
8,784
|
|
|
$
|
10,227
|
|
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive (Loss) Income
— Amounts recognized as other changes in plan assets and benefit obligations in other comprehensive income, before taking into account income tax effects, for the year ended
December 31
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension and Other Post-Retirement Plans
|
|
Non-U.S. Pension Plans
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Actuarial loss (gain)
|
$
|
551
|
|
|
$
|
(1,172
|
)
|
|
$
|
6,001
|
|
|
$
|
(994
|
)
|
Amortization of actuarial (gain) loss
|
(308
|
)
|
|
(336
|
)
|
|
(193
|
)
|
|
(275
|
)
|
Prior Service credit
|
(6
|
)
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
Total recognized in other comprehensive income (loss)
|
$
|
237
|
|
|
$
|
(1,514
|
)
|
|
$
|
5,808
|
|
|
$
|
(1,269
|
)
|
The estimated actuarial loss will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is
$0.4 million
.
Weighted-average assumptions used to determine benefit obligations at
December 31
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension and Other Post-Retirement Benefit Plans
|
|
Non-U.S. Pension
Plans
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Discount rate
|
3.87
|
%
|
|
4.05
|
%
|
|
2.70
|
%
|
|
3.90
|
%
|
Weighted-average assumptions used to determine net periodic benefit cost at
December 31
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension and Other Post-Retirement Plans
|
|
Non-U.S. Pension Plans
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Discount rate
|
4.05
|
%
|
|
3.73
|
%
|
|
4.57
|
%
|
|
3.90
|
%
|
|
3.50
|
%
|
|
4.40
|
%
|
Expected return on plan assets
|
7.50
|
%
|
|
7.50
|
%
|
|
7.50
|
%
|
|
5.00
|
%
|
|
4.60
|
%
|
|
5.80
|
%
|
The rate of return assumptions are based on projected long-term market returns for the various asset classes in which the plans are invested, weighted by the target asset allocations. An incremental amount for active plan asset management and diversification, where appropriate, is included in the rate of return assumption. Our pension plan investment strategy is reviewed annually.
We employ a total return investment approach whereby a mix of equities, fixed income and real estate investments are used to maximize the long-term return of plan assets taking into consideration a prudent level of risk. The intent of this strategy is to minimize plan expenses by outperforming plan liabilities over the long run. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. The investment portfolio contains a diversified blend of equity, balanced, fixed income and real estate investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, as well as growth, value and large capitalizations. Other assets such as real estate are used judiciously to enhance long-term returns while improving portfolio diversification. Derivatives may be used to gain market exposure in an efficient and timely manner; however, derivatives may not be used to leverage the portfolio beyond the market value of the underlying investments. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews. We expect to contribute approximately
$3.7 million
to our pension plans and our other post-retirement benefit plans in 2017.
Our current investment allocation target for our pension plans for 2016 and our weighted-average asset allocations of our pension assets for the years ended
December 31
, by asset category, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Allocation
|
|
Actual Allocations as of December 31,
|
|
2016
|
|
2015
|
|
U.S. Pension Plans
|
|
Non-U.S. Pension Plans
|
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
|
Non-U.S.
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Cash and cash equivalents
|
—
|
|
—
|
|
—
|
|
—
|
|
0.1
|
|
1.2
|
|
—
|
|
0.4
|
Equity/balanced securities
|
55
|
|
55
|
|
55
|
|
60
|
|
52.1
|
|
51.0
|
|
55.2
|
|
61.1
|
Fixed income securities
|
25
|
|
45
|
|
25
|
|
40
|
|
23.3
|
|
24.0
|
|
44.8
|
|
38.5
|
Real estate
|
20
|
|
—
|
|
20
|
|
—
|
|
24.5
|
|
23.8
|
|
—
|
|
—
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
The following descriptions relate to our plan assets:
Equity Securities
— The equity category includes common stocks issued by U.S., United Kingdom and other international companies, equity funds that invest in common stocks and unit linked insurance policies. All equity investments generally allow near-term (within
90
days of the measurement date) liquidity and are held in issues that are actively traded to facilitate transactions at minimum cost.
Balanced
— The balanced category includes funds primarily invested in a mix of equity and fixed income securities where the allocations are at the discretion of the investment manager. All investments generally allow near-term (within 90 days of the measurement date) liquidity and are held in issues that are actively traded to facilitate transactions at minimum cost.
Fixed Income Securities
— The fixed income category includes U.S. dollar-denominated and United Kingdom and other international marketable bonds and convertible debt securities as well as fixed income funds that invest in these instruments. All investments generally allow near-term liquidity and are held in issues that are actively traded to facilitate transactions as minimum cost.
The fair value of fixed income securities is determined by either direct or indirect quoted market prices. When the value of assets held in separate accounts is not published, the value is based on the underlying holdings, which are primarily direct quoted market prices on regulated financial exchanges.
Real Estate
— Real estate provides an indirect investment into a diversified and multi-sector portfolio of property assets. The fair value of real estate investments is valued by the fund managers. The fund managers value the real estate investments via independent third-party appraisals on a periodic basis. Assumptions used to revalue the properties are updated every quarter.
The fair values of our pension plan assets by asset category and by level as described in Note 2 for the years ended
December 31, 2016
and
2015
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
|
|
Significant
Observable Inputs
|
|
Significant
Unobservable Inputs
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Cash and cash equivalents
|
$
|
174
|
|
|
$
|
174
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equities:
|
|
|
|
|
|
|
|
U.S. large value
|
4,800
|
|
|
4,800
|
|
|
—
|
|
|
—
|
|
U.S. large growth
|
4,805
|
|
|
4,805
|
|
|
—
|
|
|
—
|
|
International blend
|
7,954
|
|
|
—
|
|
|
7,954
|
|
|
—
|
|
Emerging markets
|
2,464
|
|
|
2,464
|
|
|
—
|
|
|
—
|
|
Balanced
|
18,486
|
|
|
—
|
|
|
18,486
|
|
|
—
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
Government bonds
|
8,402
|
|
|
—
|
|
|
8,402
|
|
|
—
|
|
Corporate bonds
|
12,976
|
|
|
—
|
|
|
12,976
|
|
|
—
|
|
Real Estate:
|
|
|
|
|
|
|
|
U.S. property
|
9,409
|
|
|
—
|
|
|
—
|
|
|
9,409
|
|
Total pension fund assets
|
$
|
69,470
|
|
|
$
|
12,243
|
|
|
$
|
47,818
|
|
|
$
|
9,409
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
|
|
Significant
Observable Inputs
|
|
Significant
Unobservable Inputs
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Cash and cash equivalents
|
$
|
551
|
|
|
$
|
551
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Equities:
|
|
|
|
|
|
|
|
U.S. large value
|
4,222
|
|
|
4,222
|
|
|
—
|
|
|
—
|
|
U.S. large growth
|
3,961
|
|
|
3,961
|
|
|
—
|
|
|
—
|
|
International blend
|
7,874
|
|
|
—
|
|
|
7,874
|
|
|
—
|
|
Emerging markets
|
2,429
|
|
|
2,429
|
|
|
—
|
|
|
—
|
|
Balanced
|
20,528
|
|
|
—
|
|
|
20,528
|
|
|
—
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
Government bonds
|
4,298
|
|
|
—
|
|
|
4,298
|
|
|
—
|
|
Corporate bonds
|
17,368
|
|
|
—
|
|
|
17,368
|
|
|
—
|
|
Real Estate:
|
|
|
|
|
|
|
|
U.S. property
|
8,645
|
|
|
—
|
|
|
—
|
|
|
8,645
|
|
Total pension fund assets
|
$
|
69,876
|
|
|
$
|
11,163
|
|
|
$
|
50,068
|
|
|
$
|
8,645
|
|
The fair value of our pension plan assets measured using significant unobservable inputs (Level 3) at
December 31
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Beginning balance
|
$
|
8,645
|
|
|
$
|
7,957
|
|
Actual return on plan assets:
|
|
|
|
Relating to assets held at reporting date
|
764
|
|
|
1,018
|
|
Relating to assets sold during the period
|
—
|
|
|
2
|
|
Purchases, sales and settlements, net
|
—
|
|
|
(322
|
)
|
Foreign currency translation adjustment
|
—
|
|
|
(10
|
)
|
Ending balance
|
$
|
9,409
|
|
|
$
|
8,645
|
|
The following table summarizes our expected future benefit payments of our pension and other post-retirement benefit plans (in thousands):
|
|
|
|
|
Year
|
Pension Plans
|
2017
|
$
|
3,698
|
|
2018
|
3,902
|
|
2019
|
4,095
|
|
2020
|
4,279
|
|
2021
|
4,326
|
|
2022 to 2026
|
22,372
|
|
|
|
15.
|
Accumulated Comprehensive Loss
|
The activity for each item of accumulated other comprehensive loss is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency items
|
|
Pension and
postretirement
benefits plans
|
|
Accumulated other
comprehensive
loss
|
Beginning balance, January 1, 2015
|
$
|
(16,507
|
)
|
|
$
|
(20,781
|
)
|
|
$
|
(37,288
|
)
|
Net current period change
|
(4,572
|
)
|
|
1,720
|
|
|
(2,852
|
)
|
Reclassification adjustments for losses reclassified into income
|
—
|
|
|
486
|
|
|
486
|
|
Ending balance, December 31, 2015
|
$
|
(21,079
|
)
|
|
$
|
(18,575
|
)
|
|
$
|
(39,654
|
)
|
Net current period change
|
(3,234
|
)
|
|
(6,347
|
)
|
|
(9,581
|
)
|
Reclassification adjustments for losses reclassified into income
|
—
|
|
|
390
|
|
|
390
|
|
Ending balance, December 31, 2016
|
$
|
(24,313
|
)
|
|
$
|
(24,532
|
)
|
|
$
|
(48,845
|
)
|
The related tax effects allocated to each component of other comprehensive (loss) income for the years ended
December 31, 2016
and
2015
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
Before Tax
Amount
|
|
Tax (Expense)
Benefit
|
|
After Tax Amount
|
Retirement benefits adjustment:
|
|
|
|
|
|
Net actuarial loss and prior service credit
|
$
|
(6,553
|
)
|
|
$
|
206
|
|
|
$
|
(6,347
|
)
|
Reclassification of actuarial loss and prior service cost to net income
|
507
|
|
|
(117
|
)
|
|
390
|
|
Net unrealized loss
|
(6,046
|
)
|
|
89
|
|
|
(5,957
|
)
|
Cumulative translation adjustment
|
(3,235
|
)
|
|
1
|
|
|
(3,234
|
)
|
Total other comprehensive loss
|
$
|
(9,281
|
)
|
|
$
|
90
|
|
|
$
|
(9,191
|
)
|
|
|
|
|
|
|
2015
|
Before Tax
Amount
|
|
Tax (Expense)
Benefit
|
|
After Tax Amount
|
Retirement benefits adjustment:
|
|
|
|
|
|
Net actuarial gain and prior service credit
|
$
|
2,169
|
|
|
$
|
(449
|
)
|
|
$
|
1,720
|
|
Reclassification of actuarial loss and prior service cost to net income
|
616
|
|
|
(130
|
)
|
|
486
|
|
Net unrealized loss
|
2,785
|
|
|
(579
|
)
|
|
2,206
|
|
Cumulative translation adjustment
|
(4,596
|
)
|
|
24
|
|
|
(4,572
|
)
|
Total other comprehensive loss
|
$
|
(1,811
|
)
|
|
$
|
(555
|
)
|
|
$
|
(2,366
|
)
|
|
|
16.
|
Quarterly Financial Data (Unaudited)
|
The following is a condensed summary of actual quarterly results of operations for
2016
and
2015
(in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
Gross Profit
|
|
Operating
Income
|
|
Net Income
(Loss)
|
|
Net Income
(Loss)
Attributable
to Common
Stockholders
|
|
Basic
Earnings (Loss)
Per Share
|
|
Diluted
Earnings (Loss)
Per Share
Attributable to
Common
Stockholders
1
|
2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
$
|
180,291
|
|
|
$
|
25,704
|
|
|
$
|
8,580
|
|
|
$
|
2,563
|
|
|
$
|
2,563
|
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
Second
|
178,251
|
|
|
24,331
|
|
|
8,427
|
|
|
2,720
|
|
|
2,720
|
|
|
0.09
|
|
|
0.09
|
|
Third
|
153,604
|
|
|
18,919
|
|
|
4,466
|
|
|
1,147
|
|
|
1,147
|
|
|
0.04
|
|
|
0.04
|
|
Fourth
|
149,966
|
|
|
18,276
|
|
|
3,910
|
|
|
355
|
|
|
355
|
|
|
0.01
|
|
|
0.01
|
|
2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
$
|
220,303
|
|
|
$
|
29,074
|
|
|
$
|
11,198
|
|
|
$
|
3,593
|
|
|
$
|
3,592
|
|
|
$
|
0.12
|
|
|
$
|
0.12
|
|
Second
|
217,617
|
|
|
29,506
|
|
|
11,588
|
|
|
3,205
|
|
|
3,205
|
|
|
0.11
|
|
|
0.11
|
|
Third
|
202,729
|
|
|
27,890
|
|
|
9,946
|
|
|
2,554
|
|
|
2,554
|
|
|
0.09
|
|
|
0.09
|
|
Fourth
|
184,692
|
|
|
24,352
|
|
|
5,294
|
|
|
(2,291
|
)
|
|
(2,291
|
)
|
|
(0.08
|
)
|
|
(0.08
|
)
|
|
|
(1)
|
See Note 11 for discussion on the computation of diluted shares outstanding.
|
Current Restructuring Activity
On November 19, 2015, the Board of Directors of the Company approved adjustments to the Company’s manufacturing footprint and capacity utilization, and reductions to selling, general and administrative costs. We expect the costs associated with restructuring activities to total
$7.6 million
to
$10.7 million
, and capital investments to total
$1.0 million
to
$2.0 million
. The restructuring and cost reduction actions began in the fourth quarter of 2015 and are expected to continue through 2017. As of December 31, 2016, restructuring costs incurred were
$0.8 million
in the fourth quarter of 2015 and
$3.5 million
during the year ended December 31, 2016. The following is a summary of some of our key actions:
Edgewood Facility
The closure of our Edgewood, Iowa facility and transfer of production to our Agua Prieta, Mexico facility was announced on December 3, 2015 and was completed during 2016.
Piedmont Facility
On May 2, 2016, the Company announced plans to consolidate its North American seat production into
two
North American facilities and cease seat production in its Piedmont, Alabama facility. The Company will continue to maintain a presence in Piedmont for our Aftermarket distribution channel. We anticipate completing the restructuring plan by the end of 2017.
Monona Facility
On July 19, 2016, the Company announced it will transfer all wire harness production from its manufacturing facility in Monona, Iowa to its facility in Agua Prieta, Mexico. We anticipate the transfer of production from the Monona facility to the Agua Prieta facility to be substantially complete by the end of 2017.
Shadyside Facility
On July 21, 2016, the Company announced that it will close its Shadyside, Ohio facility that performs assembly and stamping activities. These activities will be transferred to alternative facilities or sourced to local suppliers. We anticipate the closure of the Shadyside facility to be substantially complete by the end of 2017.
Ongoing Restructuring Expenditures
The table below summarizes the expenditures incurred to date and future expenditures associated with the restructuring activities approved on November 19, 2015 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Project Expense
|
|
|
|
|
|
Expected
|
|
|
|
|
|
2015
|
|
2016
|
|
Future Expense
|
|
Income Statement
|
|
|
Low
|
High
|
|
Expense
|
|
Expense
|
|
Low
|
High
|
|
Classification
|
Edgewood Wire Harness
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
$
|
0.3
|
|
$
|
0.3
|
|
|
$
|
0.1
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
$
|
—
|
|
|
Cost of revenues
|
Facility and other costs
|
|
0.1
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
—
|
|
|
Cost of revenues
|
Total
|
|
$
|
0.4
|
|
$
|
0.4
|
|
|
$
|
0.1
|
|
|
$
|
0.3
|
|
|
$
|
—
|
|
$
|
—
|
|
|
|
Piedmont Seating
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
$
|
0.8
|
|
$
|
0.9
|
|
|
$
|
0.1
|
|
|
$
|
0.5
|
|
|
$
|
0.2
|
|
$
|
0.3
|
|
|
Cost of revenues
|
Facility and other costs
|
|
0.5
|
|
0.7
|
|
|
—
|
|
|
0.4
|
|
|
0.1
|
|
0.3
|
|
|
Cost of revenues
|
Total
|
|
$
|
1.3
|
|
$
|
1.6
|
|
|
$
|
0.1
|
|
|
$
|
0.9
|
|
|
$
|
0.3
|
|
$
|
0.6
|
|
|
|
Monona Wire Harness
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
$
|
0.7
|
|
$
|
1.3
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
|
$
|
0.2
|
|
$
|
0.8
|
|
|
Cost of revenues
|
Facility and other costs
|
|
0.5
|
|
0.9
|
|
|
—
|
|
|
0.1
|
|
|
0.4
|
|
0.8
|
|
|
Cost of revenues
|
Total
|
|
$
|
1.2
|
|
$
|
2.2
|
|
|
$
|
0.2
|
|
|
$
|
0.4
|
|
|
$
|
0.6
|
|
$
|
1.6
|
|
|
|
Shadyside Stamping
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
$
|
2.2
|
|
$
|
2.7
|
|
|
$
|
0.2
|
|
|
$
|
1.5
|
|
|
$
|
0.5
|
|
$
|
1.0
|
|
|
Cost of revenues
|
Facility and other costs
|
|
1.1
|
|
2.0
|
|
|
—
|
|
|
0.2
|
|
|
0.9
|
|
1.8
|
|
|
Cost of revenues
|
Total
|
|
$
|
3.3
|
|
$
|
4.7
|
|
|
$
|
0.2
|
|
|
$
|
1.7
|
|
|
$
|
1.4
|
|
$
|
2.8
|
|
|
|
Other Restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
Separation costs
|
|
$
|
0.6
|
|
$
|
0.8
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
0.5
|
|
$
|
0.7
|
|
|
Cost of revenues
|
Separation costs
|
|
0.3
|
|
0.3
|
|
|
0.2
|
|
|
0.1
|
|
|
—
|
|
—
|
|
|
Selling, general and administrative
|
Facility and other costs
|
|
0.5
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
0.7
|
|
|
Cost of revenues
|
Total
|
|
$
|
1.4
|
|
$
|
1.8
|
|
|
$
|
0.2
|
|
|
$
|
0.2
|
|
|
$
|
1
|
|
$
|
1.4
|
|
|
|
Total Restructuring
|
|
$
|
7.6
|
|
$
|
10.7
|
|
|
$
|
0.8
|
|
|
$
|
3.5
|
|
|
$
|
3.3
|
|
$
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the restructuring liability for the years ended December 31 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
Employee Costs
|
|
Facility Exit and Other Contractual Costs
|
|
Total
|
Balance - Beginning of the year
|
$
|
542
|
|
|
$
|
43
|
|
|
$
|
585
|
|
Provisions
|
2,668
|
|
|
839
|
|
|
3,507
|
|
Utilizations
|
(981
|
)
|
|
(837
|
)
|
|
(1,818
|
)
|
Balance - End of year
|
$
|
2,229
|
|
|
$
|
45
|
|
|
$
|
2,274
|
|
|
|
|
|
|
|
|
2015
|
|
Employee Costs
|
|
Facility Exit and Other Contractual Costs
|
|
Total
|
Balance - Beginning of the year
|
$
|
531
|
|
|
$
|
72
|
|
|
$
|
603
|
|
Provisions
|
790
|
|
|
1,542
|
|
|
2,332
|
|
Utilizations
|
(779
|
)
|
|
(1,571
|
)
|
|
(2,350
|
)
|
Balance - End of year
|
$
|
542
|
|
|
$
|
43
|
|
|
$
|
585
|
|
During the fourth quarter of 2016 as part of the restructuring activities discussed within Footnote 17, the Company began negotiations with the the hourly employees of the Shadyside facility, via their union representatives. The purpose was to negotiate severance packages for these employees in order to retain them as the activities within the facility are wound down. In January 2017, the Company reached an agreement with the employees that will include a lump sum payment based on years of service along with continued health care benefits. The severance packages are contingent upon employees providing service to the Company through the closure date of the plant or their layoff date, whichever comes first.