SLIDE 1
2010 Annual Meeting
SLIDE 2 2
This presentation contains forward-looking statements that are subject to risks and uncertainties. These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or similar
- expressions. In particular, this presentation contains forward-looking statements about Company estimates for
future periods with respect to cost savings, restructuring charges, revenues or other financial information. These statements are based on certain assumptions that the Company has made in light of its experience in the industry as well as its perspective on historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including but not limited to: (i) general economic or business conditions affecting the markets in which the Company serves; (ii) the Company's ability to develop or successfully introduce new products; (iii) risks associated with conducting business in foreign countries and currencies; (iv) increased competition in the heavy-duty truck market; (v) our failure to complete or successfully integrate additional strategic acquisitions; (vi) the impact of changes in governmental regulations on the Company's customers or on its business; (vii) the loss of business from a major customer or the discontinuation of particular commercial vehicle platforms; (viii) the Company’s ability to obtain future financing due to changes in the lending markets or its financial position; (ix) our ability to comply with the financial covenants in our revolving credit facility; and (x) various other risks as outlined in CVG’s SEC filings. There can be no assurance that statements made in this presentation relating to future events will be achieved. CVG undertakes no obligation to update or revise forward- looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future
- perating results over time. All subsequent written and oral forward-looking statements attributable to CVG or
persons acting on behalf of CVG are expressly qualified in their entirety by such cautionary statements. For a complete description of risks, please refer to our 2009 Annual Report on Form 10-K and current SEC reports
SLIDE 3 Good Afternoon and Welcome to 2010 Annual Meeting of Stockholders
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SLIDE 4 4
Mervin Dunn, President & CEO Chad M. Utrup, Chief Financial Officer Gerald L. Armstrong, President, Cab Systems
- W. Gordon Boyd, President, Seating Systems
Kevin R.L. Frailey, Executive Vice President, Electrical Systems Robert E. Averitt, Vice President, Strategy and Business Development Patrick E. Miller, Executive Vice President, Purchasing
SLIDE 5
In response to production decreases in our heavy truck, construction and other key end-markets, we:
Closed or consolidated facilities world-wide Reduced workforce by more than 20% Cut SG&A expenses by nearly 24% compared to 2008 Imposed wage cuts and furloughs for employees Decreased capital spending Temporarily eliminated matching 401(k) contributions Eliminated non-strategic business Achieved incremental business wins with select customers Equity offering Tax refund Continued our strategic direction
SLIDE 6 Pursue initiatives to capitalize on Future Growth
– Expand capabilities in Mexico – Focus on growth in India and China
2010 NAFTA HDT Build Forecast
SLIDE 7 Heavy and Medium Truck
Market 265,000 units 1 Major Players
- Tata
- Mahindra/Navistar
- Force/Man
- Tatra
- AMW ( Asia Motor Works)
- Daimler
- Ashkok Leyland - Eicher/Volvo
Construction
Market 44,000 units 1 Major Players
- JCB
- Telco/TATA
- Case/Komatsu
- Ingersol Rand
- Escort
- Caterpillar
- Volvo
- BEML
1 Internal Company Sources
SLIDE 8
Pursue additional new business and “conquest” business wins – Continue to monitor competitors operating in a distressed state for additional opportunities – Invest in new processes or capabilities Pursue strategic, smaller, add-on acquisitions to augment strategic initiatives – Capitalize on track record of successful integration and performance
SLIDE 9
Support investment in technologies and efficiencies Support working capital requirements as volumes increase
SLIDE 10 Trim Systems and Components 100% Trim Systems and Components 17% Seats and Seating Systems 31% Wipers, Controls, Mirrors 9% Cab Structures and Components 19% Electronic Components and Systems 24%
CVG Sales by Product 1999 2009
Heavy Truck OEM 48% Construction 15% Aftermarket / OEM Service 14% Military, Ag. and Bus 15% Other 8%
Sales by End Market
Heavy Truck 95%
Other 5%
1999 2009
SLIDE 11 First Quarter 2010: public offering of common stock – 4.37 million shares – Priced at $6.25 per share – Robert W. Baird and Company acted as underwriter – CVG received approximately $25.4 million of net proceeds from the offering $21.4 million cash tax refund during the second quarter of 2010 Due to strong actions management has taken, 2009 Peak ABL Borrowing of $28.1M to 2010 Cash Balance of over $50.0M Stock Offering + Tax Refund + Revolver Capacity = Strong Balance Sheet / Liquidity – With this Liquidity we have the ability to:
$50
Jan 2009 May 2010
SLIDE 12
Grow – new markets / customers − Mexico Opportunities − China Opportunities − India Opportunities Innovate and invest in new products & technologies
SLIDE 13
2009 Financial
SLIDE 14 $380.4 $754.5 $918.8 $696.8 $763.5 $458.6 $585.6
2004 2005 2006 2007 2008 2009 Q1 2010 Annualized (2) ($ in millions)
N.A. Class 8 Production (3) 269 339 376 212 206 118 135
Revenues Adjusted Operating Income (1)
(in thousands)
$31.5 $89.5 $97.5 $20.3 $10.1 $(38.6) $14.4
2004 2005 2006 2007 2008 2009 Q1 2010 Annualized (2) ($ in millions)
N.A. Class 8 Production (3) 269 339 376 212 206 118 135
(1) Results excludes restructuring charges, gain on sale of long-lived assets, goodwill and intangible asset impairments and long-lived asset impairments. See
“Non-GAAP Measures” at the end of this presentation for further information.
(2) Q1 2010 annualized numbers are used for illustration only and should not be used as projections. (3) ACT Research.
(in thousands)
SLIDE 15 Global industry recession continued to challenge the business through 2009 with signs of recovery in late 2009 and early 2010 Continued improvement in financial results on a sequential quarter-over-quarter basis – last five quarters Favorable impact of SG&A cost reduction and manufacturing realignment throughout 2009 Continue to drive culture of entrepreneurship, innovation and employee engagement to improve
Focus on strategic efforts during downturn:
– diversification – profit improvement goals across
Actions during 2009 and into 2010 demonstrate significant progress towards CVG’s long-term financial opportunity
_____________________
(1)
Excludes restructuring charges, gain on sale of long-lived assets, goodwill and intangible asset impairments and long-lived asset impairments. See “Non-GAAP Measures” at the end of this presentation for further information.
Quarterly Revenue Quarterly Adjusted Operating Income (1)
$108.5 $103.5 $110.8 $135.7 $146.4 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 ($ in millions) $(16.7) $(11.6) $(7.8) $(2.6) $3.6 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010
SLIDE 16 2009 production expected to be cyclical low Recent momentum in freight activity Truck ages at historical highs North American Class 8 Build (1)
(units in thousands)
North American Class 5-7 Build (1)
(units in thousands)
2011F Global Medium and Heavy Truck Production (2)
_____________________
(1)
ACT Research.
(2)
JD Power. Note: Medium and Heavy Truck market defined as >6.0 tons. Asia defined as China and India.
Indicators Predict Early Stages of Recovery Early stages of penetration into large Asian commercial vehicle market Continued growth in China Opportunity in other emerging markets (India, Russia, South America etc.) New business wins with new and existing customers Significant Opportunity For Market Growth Growth opportunities in Asia with strong production volumes
376 212 206 118 135 232 299 311 2006 2007 2008 2009 2010F 2011F 2012F 2013F 275 206 158 98 116 154 177 192 2006 2007 2008 2009 2010F 2011F 2012F 2013F
Asia 58% North America 20% E.U. 22%
SLIDE 17 (5.0%) 0.0% 5.0% 10.0% 15.0% 20.0% $585 $600 $700 $800 $900 $1,000 $1,100
- Adj. Operating Income Margin
- Adj. Operating Income Margin
Recent trends and re-aligned cost structure provides positive potential with improved cost basis
Assumes 25% contribution margin only Illustration only – Not to be used as actual projections
_____________________ Note: Adjusted operating income excludes restructuring charges, gain on sale of long-lived assets, goodwill and intangible asset impairments and long-lived asset impairments. See “Non-GAAP Measures” at the end of this presentation for further information.
($ in millions)
Q1 2010 Run Rate 2007 Level $696.8 Sales 2.9% Margin 2006 Level $918.8 Sales 10.6% Margin
Annual Sales
SLIDE 18 Pro Forma Capitalization Pro Forma Liquidity
(1)
Tax benefit adjustment of approximately $21.4 million received in April 2010.
(2)
Includes paid-in-kind (PlK) interest.
(3)
$37.5 million line of credit adjusted to exclude $10 million reserve.
($ in millions)
Actual (3/31/10) Tax Benefit (1) Pro Forma
Cash $ 25.3 $ 21.4 $ 46.7 Long-Term Debt: Revolving Credit Facilities $ - 15% Second Lien Term Loan 12.9 12.9 11% / 13% Third Lien Senior Secured Notes (2) 53.0 53.0 8% Senior Notes Due 2013 97.8 97.8 Total Long-Term Debt 163.7 163.7 Total Net Debt $ 138.4 $ 117.0 ($ in millions)
Actual (3/31/10) Tax Benefit (1) Pro Forma Cash $ 25.3 $ 21.4 $ 46.7 Available Revolver (3) 27.5 27.5 Total $ 52.8 $ 74.2
SLIDE 19
Cab and Interior
SLIDE 20
Cab Structures and structural components & trim systems and components 2009 Revenues of approximately $163 million New Programs & Products – Organic & Conquest Business 8 Primary facilities based in the United States
SLIDE 21 Concept to production – hard trim product Annual sales approximately $5.0 million Launch currently in process – 2nd Quarter 2010 Exceeded customer expectations from design, quality, timing, durability, delivery and customer support.
Hard Trim Cabinets
SLIDE 22 2009 conquest (“take over”) business from distressed suppliers
- Annual sales approximately $14 million
- 100% delivery performance
- Well positioned for long-term supply agreement
- Capacity plan in place to support higher volumes in 2011/2012
- We are well positioned for long term agreements
SLIDE 23
Military Interiors Hard Trim Products Asia – Bunk Structures
SLIDE 24
Continue diversification of Trim products into non-truck applications Continue to pursue organic and conquest opportunities Focus on distressed competition in new and existing markets Capacity alignment in line with customer forecast and geographic location
SLIDE 26 2009 Revenues of approximately $153 million Wiring Harnesses, Electrical Panel Assemblies, Wiper Assemblies, Washers and Controls 9 Primary Facilities located in 4 Countries Organic Growth and Customer “wins”
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SLIDE 27 EU New Business NAFTA New Business Asia New Business Achievements Harness Harness Wiper Harness Harness Yeti and Superb MATV MATV Harvester VPG MV-1 7000/8000 RHD XCG Excavator Achieving Excellence Partner Status SQEP Certification
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SLIDE 28 28
North America Asia Europe South America MD/HD Truck Construction Agricultural Specialty/Military
Harness Harness Wiper Wiper Harness Wiper Harness Wiper
<2006 <2006 <2006 2007 2007 2008 2010 2011 and 2012 2011 2012 2013 & Beyond
SLIDE 29 More Electrical Content
Electrification Of Features Tier IV Off Highway Emissions 2011 Tier IV Off Highway Emissions 2014 Electric and Hybrid Drives
SLIDE 31 2009 Revenues of approximately $142 million Seats, Seating Systems & Components Truly a global supplier – presence in 12 countries New Products / Developments
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SLIDE 32 Manufacturing Sales R&D AMERICAS Vonore, TN USA New Albany, OH USA Portland, OR USA Mexico EUROPE Northampton England Seneffe Belgium Gothenburg Sweden Paris France Brandys Czech Republic Liberec Czech Republic ASIA & PACIFIC RIM Shanghai China Seoul South Korea Tokyo Japan Brisbane Australia India
Existing Facility Future Facility LEGEND
SLIDE 33 Compact Seat – Additional Variants to Take Advantage of New Global Markets City Bus Seat for public transport Lift Up Bus Universal Folding Seat New European Truck Seat
Still in development
SLIDE 34
New Universal Static Seat Hino Seats for medium duty truck applications Refreshed Aftermarket Truck Seat Range New Universal Arm Rest
SLIDE 35
Launched Wire Harness Production – John Deere Launched Nissan Diesel Truck Seats for Japan market Developed Low Cost QILIN TM Seat for Domestic Wheel Loader market Awarded Caterpillar SQEP - 3rd Year in a row
SLIDE 36 2006 2010 Goal 2014 Goal Market Diversification
Construction Truck Construction Construction Truck Seats Seats Wire Harness Trim Seats Wire Harness Wiper Trim
Product Diversification $ 9.7 million $ 40.0 million $ 120.0 million
Revenues
SLIDE 38
Developed for the military but has potential application for the commercial industry
− Manufactured using an existing CVG Trim process − Patent Pending composite is a self-extinguishing material − Certified to customer flammability standards − Trim provides acoustic and thermal insulation − Allows less space and weight of AC unit
SLIDE 39
Lightweight Cab Construction
– expertise in lightweight materials that will off set weight for incremental power source, inverter and drive train
Aerodynamic Styling
– expertise in processing materials that will maintain streamlined styling, minimize drag and maximize available power , which will reduce fuel costs for the end user
SLIDE 40
CVG travels to the customer’s site
– Reach a large number of qualified contacts – Raise awareness of CVG technical and product capabilities
CVG technical experts one-on-one with the customer
– Explore customer challenges real time and in depth – Unfiltered dialogue speeds problem-solution process
SLIDE 41 Vehicle performance analysis and teardown
– Acoustic and Thermal performance – Fit and finish analysis – Manufacturing methods and materials analysis
Developed CVG solutions
– Present findings to customer – High return opportunities lead to new programs
LH Window LH Wall
42.0 66.0 °F 50 60
SLIDE 43 Savings teams
– Cross functional representation by product area – Purchasing, Operations, Engineering, Finance
Cost reduction targets
– 1.5 – 2.5% of Revenues – 2009 Savings in the range of $10M – Over 50% project related
Savings from projects typically continue in ongoing years
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SLIDE 44 Qualified alternate or generic resins for molding
– $160k/yr annualized, – Additional $140k/yr in process
In-sourcing/Resourcing
– Injection molding, stamping, and fabrication, $575k/yr – Electrical sub-assemblies, steel tubing, seat tracks over
$400k/yr
Supplier consolidation
– Metal Stamping, fabricated components – $394k/yr annualized
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Our teams are currently managing over 300 projects
SLIDE 45 Payment Terms Improvements
– 14% improvement on top 500 direct suppliers – Top 500 represent 93% of direct buy
Supplier consolidation
– Established LTA’s on 20% of purchases – Reduced over 40 suppliers from base
Modified Supply Chain for inventory reductions
– Consolidated international shipments – reduce lead times – Domestically re-sourcing when viable
Sourcing new business only to suppliers that meet our expected terms
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SLIDE 46 $1.00 $1.10 $1.20 $1.30 $1.40 $1.50 $1.60 $1.70 $1.80 $1.90 $2.00 J a n
F e b
M a r
A p r
M a y
J u n
J u l
A u g
S e p
O c t
N
D e c
J a n
F e b
M a r
Isocyanates - $/lb Polyols - $/lb Foam - $/lb
$0.300 $0.500 $0.700 $0.900 $1.100 $1.300 $1.500 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 PP - $/lb ABS EG $/lb $1.40 $1.90 $2.40 $2.90 $3.40 $3.90 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Copper, Comex Average - $/lb
$0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 J a n
F e b
M a r
A p r
M a y
J u n
J u l
A u g
S e p
O c t
N
D e c
J a n
F e b
M a r
HR Sheet CR Sheet HD Galvenized Sheet Electrogalvenized Sheet
Proactively Monitor approximately 50 various raw materials
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Steel Copper Resins PolyPro and ABS
SLIDE 47 Cost Reductions
– Project Related savings – Commodity Management – Strategic Resourcing and in-sourcing where viable
Leverage and favorable terms
– Consolidation of buy – Terms through new business and LTA’s – Warranty accountability
Supply Chain
– Quality improvement plan for top 100 suppliers – On site supplier events generating DRIVE ideas – Developing new sourcing in global growth regions
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SLIDE 48
Closing
SLIDE 49
SLIDE 50 _____________________
(1) Q1 2010 annualized numbers are for illustration purposes only and should not be used as projections.
Reconciliation to Annual Adjusted Operating Income Reconciliation to Quarterly Adjusted Operating Income
($ in millions) Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Operating (Loss) Income as reported $ (18.4) $ (22.2) $ (7.8) $ (41.2) $ 3.6 Adjustments: Gain on sale of long-lived assets
- Intangible asset impairment
- 7.0
- 23.1
- Long-lived asset impairment
- 3.4
- 13.8
- Restructuring costs
1.7 0.2
- 1.7
- Adjusted Operating Income
$ (16.7) $ (11.6) $ (7.8) $ (2.6) $ 3.6 For the Fiscal Year Ending December 31, Annualized
(1)
($ in millions) 2004 2005 2006 2007 2008 2009 Q1 2010 Operating (Loss) Income as reported $ 31.5 $ 89.5 $ 97.5 $ 18.8 $ (191.4) $ (89.7) $ 14.4 Adjustments: Gain on sale of long-lived assets
- (6.1)
- Intangible asset impairment
- 207.5
30.1
- Long-lived asset impairment
- 17.3
- Restructuring costs
- 1.4
- 3.7
- Adjusted Operating Income
$ 31.5 $ 89.5 $ 97.5 $ 20.3 $ 10.1 $ (38.6) $ 14.4
