CVGI - Earnings call transcript Q1 2018 | Commercial Vehicle Group, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2018 Commercial Vehicle Group Earnings Conference Call. At this time all participants are in a listen-only mode, later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference is being recorded. I would like to introduce your host for today’s conference Mr. Terry Hammett, Head of Investor Relations. ahead. go please Sir,

Terry Hammett

our and Chief the Vehicle Executive brief quarter Tim provide Michelle, commentary will Miller, our regarding Group, call. President a first Trenary, and update; and Officer financial company Financial welcome you, Officer, conference provide results. to XXXX Patrick will Chief Thank of Commercial

periods CVG webcast which cost-saving and in with limited vehicles other associated operates; the forward-looking may volumes statements, contain company certain include, and but detailed of open are then liquidity; questions. risks to, is compliance will These in initiatives CVG Actual may Miller for up for among production and foreign fluctuations countries trends, brief because and currencies; And now This in not risks results from limited to, but which economic and not the for regarding the supplier; conference new conducting update. Patrick business a product We may uncertainties risks conditions in uncertainties. and call of filings. call and initiatives financial anticipated expectations future a with our covenant SEC as is market being in the others. including, results risks markets differ

Patrick Miller

forward and you, our today our as market appreciate first end welcome we quarter Good Thank opportunities. Terry. you morning and performance discuss I everyone. joining us results, our

Tim $XX.X to million million a first in significant detail was XX% our going a to that income operating quarter the XXXX by report improved our of or first pleased over financial quarter $X.X XXXX, are further by the quarter increase of We the in XXXX. moment. the period. income prior is first over in on provide $XX.X performance Operating of year revenues

quarter construction Our up to this ramp as market through North global and continue segments American demand two we the of truck progress year. first heavy-duty major

strong the second growth that best heavy-duty sign first truck into trends year. predicators and of XXXX strong there a North OEM and are build customer rates These increases the in be and in QX truck indicating good this performed sales top to that XXXX quarter to Our especially order year-over-year in is these are bus. could medium level history. showed strong levels American likely order in year, reflecting continue

and OEMs the increasing pricing, elevate increase including solid strong We equipment fundamentals truck units, the United XXX,XXX up to and this support ACT As our XXX,XXX for utilization year. values the full are forecast used production XXXX, XXXX. we and Accordingly, units. work respectively continued from production with the to X truck trucks coupled growth XXX,XXX for and units XXXX demand XXX,XXX forecasting backlogs. XXX,XXX in in of States maintaining economic currently believe FDR truck Class are

of elevated including market construction in XXXX. larger-than-expected part, America. our one-fourth are in Asia, support regions represented OEM in seeing of we favorable appear North the the be to approximately conditions to revenues Most and supply global constraints that which XXXX, consistent in side, XXXX On consolidated Europe year-over-year, growth, due chain

XX%. Seating attributed is growth backlogs XX% shape, trend and harness and team out. wire fundamentals construction American XXXX, medium actions. leveling and medium-duty expected growing XX% construction favorable year-over-year, construction the and exports expected market industry, heavy-duty continue our with as when our in to to The improved production to XX% U.S. also for and showing to prior result construction construction grow by Pacific locally XX% to Asia market is dollar. heavy The in are around year infrastructure by grow weaker market inventories higher North North heavy machinery a by market continues to China into driven good medium-duty channel backlogs operations and a to exports XX% an machinery, of European expected to a with supported global compared KAB its American

also the of a customers participate several in which the our mining commodity industry, higher off-road has by Additionally, seen markets. driven recovery,

we in, for by in quarter to our segment, these markets up and segments We that in performance improved the the Truck as compared look up see year. and XXXX. XXXX, XX% we with favorable segment, participate the Agriculture within Global business orders period we contribute trend the our these Bus last almost markets, throughout sales and progress Construction XX% our first to sales and same are our encouraged Both Global as

volume our serve. to meet of see the are production, addition X.X% We North sharper-than-normal while our to income. as in Construction operating improved Truck Both American an to OEMs more XX.X%. GCA pressure the Year-over-year, we do and margin business demand. our segment American we’re operating markets improved income additional to becoming accustomed income to to GTB operating In the to North in higher also expect both segment, seeing adjusting segments order push from the in higher X% sales, our of Truck margin increases

still conversion prices, like with we burdened costs incremental Although, [indiscernible] sales be, income it where associated operating accelerated rates. build to to mostly not of is would commodity by

made structures, more global the products We cost on time. seats, of material have and customers some made harness last progress underway basis. wire significant of impact over We’ve trim actions raw this year. components. commodity challenges the we copper related pending reduce time our components with to chemical-based on there progress and are since a to and interior majority The this steel, recovery, produce are Prime

will trail have We dynamic. commodities continue if mention to our that increase, to pricing that

Chillicothe, Esqueda, outstanding two review improved evaluated are our are facilities, recognize Value annually one is most Award. Stream recipients to annual set over wire the and who the operational a to best of excellence objectives At measurables, performance Lean an President’s it Escort based the President’s performance manufacturing Mexico facility, These by the numbers, harness Stream the stream won turn of of President’s Award Ohio Value XXXX I facility value Award. had awards on our and of group. I want to Manufacturing Tim Before has

gains yield, year, first Esqueda as are The teams Both may data. recall by making they XX% wire are by supported with the exemplary the achieved six started harness the the made two results. pass metrics, target facility across score You a safety, now is enterprise, impressive. quality, progress these a we new teams and and global We in operating schedule performance attainment, on last cover efficiency initiatives providing customer our downtime to the Tim progress updates percentage. have quarter’s with lean we will our you as through year. forward we financial look the with

Tim Trenary

prior $XX.X costs million, a this operating of income commodity to up were notwithstanding Sales to tightening year X.X%. build morning. the rose and Good pressure XX% quarter period with was accelerating labor continuing achieved and associated margin rates. rising This prices, markets of the compared the

This the in for financial to period. the global results America prior-year truck $XXX.X top compared primarily in company’s production. in construction for million heavy-duty line revenues were $XXX.X equipment production As the accelerating higher is attributable million and consolidated the quarter first of improvement North XXXX, to

tax year. prior the in in Net XX%. effective million selling, sales, year American the compared million quarter $X.X up We per benefit the diluted These translation settlement currency to of million, XXXX, general the the this $X.XX $X.X rate Notwithstanding $X.X improved modeled XXXX. our expense labor was first $XX.X per facility our costs SG&A is actions Depreciation expense compared Foreign million; share to first North for or the in as the impacted discipline. wire quarter improvement maintain $XX.X substantially. quarter first prior-year effective include favorably million expenditures income the litigation business rate the significant quarter XX% million. $X.X XXXX. the quarter of was quarter period. to continue in the in or for in margin was period. taken diluted $X.X the associated the and share and shortage in administrative million; with and compared $X.X to X.X% XXXX to or The of was Operating we amortization XX% costs tax absence income harness results million, capital of not as to million the in the were a restructuring costs the the first of in and a address by $X.X or quarter $X.XX first revenues X.X%

expect spending plan capital in quarter $XX Although unusually first spending as XXXX was of in million. million range the increase spend the our we the a low, capital remains and therefore, progresses, $XX to year

our of to $XXX.X in heavy-duty increase increase segment financial $XXX.X the costs first the is to Global operating to million North prior in sales first now of with an the in increase period. higher the volume year million Turning the $X now primarily $X.X This increase associated in quarter This facility the compared revenues operating truck period, XXXX attributable and prior-year Operating XXXX Bus to was American quarter income of the production. for XX%. million results. million income the were income of million and absence completed compared in the restructuring. of reflects $XX.X in Truck

segment, compared global As XX%, $XX.X quarter of $XX.X the were to build. of in construction primarily Construction Agriculture due to an prior equipment and the revenues first Global for higher in the million XXXX million year, increase

favorably a in costs XXXX, the $X.X These with top end capital. the of XXXX. of to compared compared first over had as translation in of benefit the actions investing company revolver. first the was including at of to period. or Accordingly, $XX and improvement the first quarter labor borrowings working income million quarter, associated in our the compared to American shortage quarter million year, to quarter asset-based include $X.X impacted Liquidity the was the availability first XXXX for Foreign the the significant the $XX of as cash million by North business. as $X.X from of the wire $X.X quarter prior-year our first fourth the of improved XX% revolver. in X% its revenues currency of million line quarter $XX million increase the address past of Operating we’re of asset-based XXXX million, quarter-end, the in results of Because harness taken sales million under

our takeaways cost and some as complete. the facility the anticipated this are at yielded of morning. the range are at about much half and initially benefit outset from initiatives cost reduction upper projected. The as restructuring initiatives These Here call end

Sales actions year and tighten. sales by causing last commodity we taken But a healthy some the matter business putting and our from reflects address build Mexico labor do the for facilities a were healthy on therefore, large XX% prices to economies pressure chains line for from the where to wire XX% company’s products. The higher this have top Although, supply to availability and been economies be are volumes and markets have strained up quarter. quarter up labor ago and the successful. in harness challenge, continues

company underway the these quarter Notwithstanding initiatives is All the the us is Michelle? company’s not threefold operating we’d is SG&A prior And address have business substantially things be to Thank doing questions well. be with considered, this higher pleasure We have. to any expense is our That to to income, joining period. today. year issues. which the a up morning. this sales, you It’s and happy for take significantly may contributing prepared concludes you to you compared up remarks.

Operator

Thank first you. Global. comes of Seaport question Mike Instructions] Shlisky the from Our line with [Operator

ahead. Your line go Please is open.

Mike Shlisky

guys. morning, Good

Tim Trenary

Hi, Mike.

Patrick Miller

Good morning, Mike.

Mike Shlisky

and for that Kind a solid you Could now? going on think based here. keep pull-through year-over-year a pull-through the least could this margin that assuming you QX, as worth prior can year? give of you with comments there know looking few wanted on on into us at at are we could lumps a Whether start question, operating and also might you year to QX what sense QX Maybe the some operating the quarter you that I QX be in if of model QX? get

Tim Trenary

answer mentioned compared Mike context Yes Okay. more pull-through, of best around Tim. sequential quarter the of first was of quarter sequential XXXX, little deliver sort production higher be on would a XXXX any near choppy, that low the specifically, aberrations get the with this sales way is pull-through pull-through big of year-over-year pull-through to or think the set schedules way, up, up assuming associated in the Hi, Mexico, the to of the you pull-through, that there in – it’s the tremendously, basis maybe to holidays. on a for a what within fourth going seen aren’t tend might this our again, fourth to drift assuming there’s range which – quarter, commodity well year-over-year. said your a prices able expect. we may at another To of don’t the somewhat Perhaps, the continue XX% is because year, XX%, the is expect. were to to of later be drift before, continue point end certainly the simply you’ve I We and down, which spike the to ago be there to frankly, And we that would basis. range XX%, moment expect forward, charges

generally the in pull-through times the off fourth quarter. little falls we – some So bit a

Mike Shlisky

Okay. great a color. That’s

in to production that’s those typical Just U.S.-Canada for rates just I of as in ramping in is QX some from hear the higher truck a you it in construction, still little QX, probably QX clarify, the when in QX, believe, their up kind both seasonality. markets. OEMs, is build generally And than they’re of well

it? in improvements with in got we profit kind the see so first – no et that, made unusually XQ high. of quarter you’ll just going So savings that then, were that is go sequential if cetera it forward. to special do in top line, There’s along look sequential fair to improvements Things pretty lumps see operating say smooth of you

Tim Trenary

Yes.

first the It’s pluses the representative think was of first business. – I the there’s minuses quarter quarter. in no or unusual

Mike Shlisky

Great. Okay.

companies conference some you there quarter call, There’s some of first in be that supply need the global issues. are harnesses. appear to of through OEMs, companies the still wire some As been go some other of

be seem as you or into reasonably think want as from not to well to have gain I you any supply some but to some to have? that are actual been business opportunities go contracts producing individual guys suppliers companies able there You other don’t here, do well.

Patrick Miller

this so Good question. morning, Pat. Mike. a It’s good is Well,

those because I complicated customers. think common got going to affect some global affecting and you’ve that our are across constraints on that cut and issue probably supply lot the is the wire many – of chain everybody and components of then are harness,

depends fell not. conquest on And really it talking kind about within of you’re constraints depends those on so it really whether or the

are are think those So some do expand common some validated those I those said, We’ve opportunities. as there’s try of our still you’re least talked And do some looking lot mitigate a the those being hope mitigate feel we that there alternatives. components, aren’t year. constraints capacity I And we opportunities other issues. it, to we’re our this before, of of some with but to like referring we that to alternatives you don’t some too. things working are That customers, of

Mike Shlisky

of cetera? penetration us Okay. markets, And the maybe in then efforts your market, some a some other more broadly, Pat. get Can color bigger foothold or such on you kind to et give new as further Ag appliance

Patrick Miller

general In relationship – mean, to just you growth.

Mike Shlisky

like, of, how on getting new going us there you kind end with it’s markets Yes, signed other deals some can update out if as to

Patrick Miller

trying as big successes overshadowed align our had capacities to with top match but some up are these of we’re – to it important, they’re would we’ve I has minor market customer demand. to increase say, some we’re we’re necessarily a the speaking, in deal larger we line. that showing not on our and as Honestly way accelerations, trying think and

the businesses overshadowed that’s with point focus some think we opportunities out maybe of organic just – the those regions, got I on to exception, in some of where lots that have growing continue markets – there’s I are Asia, so the expanding, would in there. we’ve our activities

answer I I would think that’s so And it, Mike. how

Mike Shlisky

– materials pending raw still rest update quarter? here. real for back the bit pass-through go is on Okay. able the something year? and Or get cost that quickly rate you of us contractual the there? went how in the high maybe to Could May of the back better here of that some OEMs I step to on just that’s you a Were

Patrick Miller

bag. mixed Yes, so it’s a

globe the recovery as a moving gotten sure. is just Unfortunately, and that us It’s opener, have my bar big we – commodities to some that just big in a up. problem things happens way seeing mentioned right we’re raw around working can part the arena – that that not as And part going think, going what’s discussions on are the related affects ticking and the now, North so mentioned, still other. one I that material in it deals frankly, actions have impact I is pending. materials on trade still keeps spend core do for these I with some And or up, so our the America, prices. what Tim and through in We the matters that we’re of think

still state things did So that of there equilibrium. have had first table out, are at sure. we’re still but a in not we we and some for negotiating actions areas. And some worked we happen in other deals in were the quarter our at we favor that are But the pending

Mike Shlisky

I mines on But side what’s a of back the it, aware is there, the people definitely and there’s on, pool say OEMs of going that other the if right? forth are and with sort and opened good of

Patrick Miller

Yes. and There and be things how and nuances to aware, are is to of everybody managed is no doubt handled. down it details going that comes

it’s required, so and we ability on we us thing it’s And really to it’s mandatory pass that for working. – we’re just raw so that’s materials, those have

think that’s will third things the get into may six those out and we commensurate, in deals think to We bit the quarter. first months little you a worked I phase out. some three pretty quarter, I told

at clarified our So I then. by to have hope least arrangements

Mike Shlisky

Okay.

Tim Trenary

Mike it’s in the supplement. package of

environment. – bit reiterate aren’t conversations have just don’t done think what Pat they’re you little and then alluded this them, a please Just – These to I too. in

to know as mean. ongoing drift indicated, up, the you I we sequential, prices continue as compensations As become what the long commodity if

prices we as in margins. Pat on comments, long prices having it up So, going the commodity the these as are some going up, pressure to still we’re experience alluded the puts success as even as are and his because conversations, and

Mike Shlisky

I the last down for had was maybe from you think. me, know one Okay. costs a but last that did That’s the I Tim. fair. last interest XX% you, second in I the One refi guess you like XX%, is this from year, big ticked quarter. quarter,

give or you for Or that a here, it just as is a a us second, the so rate can quarter? bit up year? – is to $X good of fourth to rest a little for may with million the the And go happened there? there So sense the of good go and bit if what little – run third, borrowing

Tim Trenary

Yes.

more now as I our there’s they valuable interest debt mark and as swap. Mike, sort you becomes done, and million, that, market, that as with rates so the increase interest more offset reduces $XX $XXX happened. valuable And so the – loan of term the as to quarter So the million accountants think of to cause interest expense in us is rate which an swap of that mark and a fixed in know, it to gets

that, So $X.X quarter of mark-to-market setting good the me expense is that I will quarter, Terry, interest million aside a expense in range be $X to the of number. would low unusually adjustment, wrong, correct a mark-to-market think but I think because the any if I get interest this million first in

Mike Shlisky

the Thank Okay. you will much Perfect. line. so I pass guys.

Patrick Miller

Thanks, Mike.

Operator

Thank you. of D.C. next Capital. the [Operator with Benvenuti from Instructions] comes Our line question Ray

open. go Your Please is line ahead.

Ray Benvenuti

that a operating affecting schedule. amounts, be costs the you And us follow-up material Maybe wish Hi, quarter to you the through very Tim. material support in you think Congratulations, ramping Pat ultimately? income? recapture to more last on get that’s what for, nice quarter. in that that customers outflow hopefully good it’s to and you labor and how the to might much penalties can feel able your of I areas cost dollar wanted a morning accelerating to three based you’ve the seen on

Tim Trenary

Hi, Ray, Tim. it’s

scrap, articulate of issues three the the having not deal and it, at the coming that in Mexico, past, et but of of have down. with are to that resulted but level they cetera, say with is still some accelerating build rates And in the taken Sufficed said to compression. are we’ve to there that as additional time, labor, some of are indicated, in extent, margin manufacturing the the the they’re this over those some material that We additional are the down, much additional been creating said, margins. number coming business. they’re I mitigate prepared detail associated have impact some efficiencies those elements to still of a on still on conversations underway – issues able us before of to having But, we when we’re and certainly, have as pressure to respect impact. labor sort together much as We’ve with Pat increases,

So think of initiatives them. be all continue our and a plans, the of underway number address fair we’ve of front part got business them three mind of I to and to

Ray Benvenuti

give about impact question, a the Understood. reported Could Thanks operating impact $X.X for us you currency that that you the you of the feel foreign currency revenues million income translation translation on been had kind Tim. One has last line? on for year-over-year. what of

Tim Trenary

calculation. that’s very Well, a complicated and answer

just operating But basically XX% can would me of on currency to you company of occurred. which of rule that make of a give or impact occurred income. million, in that then sort and let’s simple, the margin, on where, operating good Let area thumb. occurred income $X impact area an that in if $XXX,XXX say, – take it translation the depends foreign this was just million the have the it region the XX%, globe example, and by which $X it has Again, it you way

where that, example, it the was an as really that I into So gets occurred. and and various just said, the real geographies down calculation

thumb, impact whole, of you that give as a margin sort what for rule some apply percent could million some the sense operating is the company to the income $X operating So on you income. to of taken

Ray Benvenuti

very nice Again, your keep Well Thanks. Great. my for and quarter, thank Pat work. you taking Okay. Tim up questions.

Operator

questions Patrick conference to back Thank the Chief and to Miller. this I further time, no showing I’m like Officer, Executive you, over would at and turn

Patrick Miller

that we those of have spelled lot where opening diligently we’ve markets joining pretty end we just to tell we’re sure comments. appreciate our you going everybody, positive working participating, of optimize for our those the We lot on make a shareholders. Well, best we’re and well you. are that. challenges summarized capitalize and I Thank our got at it I and and do mitigate a and think, out and call, challenges, his doing to want Tim, from still some of things to benefits We’ve the the of I

the So forward look joining soon. to and appreciate to talking call, you you

Operator

Ladies and a in and for does gentlemen, thank day. you participating This program, may you disconnect. the have conclude today’s all Everyone, great conference.

Commercial Vehicle (CVGI) 4 May 182018 Q1 Earnings call transcript