UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-34365

COMMERCIAL VEHICLE GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		41-1990662 (I.R.S. Employer Identification No.)
7800 Walton Parkway New Albany, Ohio (Address of principal executive offices)		43054 (Zip Code)

(614) 289-5360
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.

Yes þ            No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o            No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller Reporting Company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o            No þ

The number of shares outstanding of the Registrant’s common stock, par value $.01 per share, at June 30, 2009 was 21,746,681 shares.

 

 

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q

PART I		FINANCIAL INFORMATION
ITEM 1		FINANCIAL STATEMENTS			1
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (UNAUDITED)			1
		CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 2009 AND DECEMBER 31, 2008 (UNAUDITED)			2
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (UNAUDITED)			3
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)			4
ITEM 2		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			28
ITEM 3		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			37
ITEM 4		CONTROLS AND PROCEDURES			37
PART II		OTHER INFORMATION			38
SIGNATURES					43

ITEM 1 – FINANCIAL STATEMENTS

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
		(In Thousands, except per share								(In Thousands, except per share
		amounts)								amounts)
REVENUES		$	103,503			$	209,240			$	212,033			$	406,244
COST OF REVENUES			104,592				185,832				216,371				362,071
Gross (Loss) Profit			(1,089	)			23,408				(4,338	)			44,173
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			10,366				16,760				23,709				31,778
AMORTIZATION EXPENSE			97				341				194				686
GAIN ON SALE OF LONG-LIVED ASSETS			—				—				—				(6,075	)
INTANGIBLE ASSET IMPAIRMENT			7,000				—				7,000				—
LONG-LIVED ASSET IMPAIRMENT			3,445				—				3,445				—
RESTRUCTURING COSTS			235				—				1,947				—
Operating (Loss) Income			(22,232	)			6,307				(40,633	)			17,784
OTHER (INCOME) EXPENSE			(3,505	)			(3,786	)			(8,397	)			5,912
INTEREST EXPENSE			3,666				3,792				7,310				7,699
LOSS ON EARLY EXTINGUISHMENT OF DEBT			—				—				795				—
Loss Before (Benefit) Provision For Income Taxes			(22,393	)			6,301				(40,341	)			4,173
PROVISION FOR INCOME TAXES			120				3,218				1,576				618
NET (LOSS) INCOME		$	(22,513	)		$	3,083			$	(41,917	)		$	3,555
(LOSS) EARNINGS PER COMMON SHARE:
Basic		$	(1.04	)		$	0.14			$	(1.93	)		$	0.17
Diluted		$	(1.04	)		$	0.14			$	(1.93	)		$	0.16
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic			21,747				21,537				21,747				21,537
Diluted			21,747				21,711				21,747				21,676

The accompanying notes are an integral part of these condensed consolidated financial statements.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		June 30,				December 31,
		2009				2008
		(Unaudited)				(Unaudited)
		(In thousands, except per
		share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	6,109			$	7,310
Accounts receivable, net of reserve for doubtful accounts of $2,916 and $3,419, respectively			67,573				100,898
Inventories, net			60,971				90,782
Prepaid expenses			12,871				20,428
Total current assets			147,524				219,418
PROPERTY, PLANT AND EQUIPMENT, net			81,408				90,392
INTANGIBLE ASSETS, net of accumulated amortization of $1,812 and $1,618, respectively			27,416				34,610
OTHER ASSETS, net			13,080				10,341
TOTAL ASSETS		$	269,428			$	354,761
LIABILITIES AND STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt		$	3,404			$	81
Accounts payable			47,380				73,451
Accrued liabilities, other			36,869				43,417
Total current liabilities			87,653				116,949
LONG-TERM DEBT, net of current maturities			150,008				164,814
PENSION AND OTHER POST-RETIREMENT BENEFITS			20,345				19,885
OTHER LONG-TERM LIABILITIES			5,673				9,171
Total liabilities			263,679				310,819
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS’ INVESTMENT:
Common stock $.01 par value; 30,000,000 shares authorized; 21,746,681 and 21,746,415 shares issued and outstanding, respectively			217				217
Treasury stock purchased from employees; 46,474 shares			(455	)			(455	)
Additional paid-in capital			182,306				180,848
Retained loss			(160,228	)			(118,311	)
Accumulated other comprehensive loss			(16,091	)			(18,357	)
Total stockholders’ investment			5,749				43,942
TOTAL LIABILITIES AND STOCKHOLDERS’ INVESTMENT		$	269,428			$	354,761

The accompanying notes are an integral part of these condensed consolidated financial statements.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six Months Ended
		June 30,
		2009								2008
		(Unaudited)								(Unaudited)
		(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income		$	(41,917	)						$	3,555
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization			8,853								9,476
Noncash amortization of debt financing costs			685								449
Loss on early extinguishment of debt			795								—
Share-based compensation expense			1,458								1,944
Loss (gain) on sale of assets			552								(6,066	)
Deferred income tax benefit			—								(3,883	)
Noncash (income) loss on forward exchange contracts			(8,350	)							5,936
Intangible asset impairment			7,000								—
Long-lived asset impairment			3,445								—
Change in other operating items			45,783								(22,541	)
Net cash provided by (used in) operating activities			18,304								(11,130	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment			(3,177	)							(6,824	)
Proceeds from disposal/sale of property, plant and equipment			14								7,454
Other investing activities			(1,529	)							(4,977	)
Net cash used in investing activities			(4,692	)							(4,347	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of revolving credit facility			(191,656	)							(89,000	)
Borrowings under revolving credit facility			180,240								101,000
Payments on capital lease obligations			(72	)							(64	)
Debt issuance costs and other			(2,669	)							(251	)
Net cash (used in) provided by financing activities			(14,157	)							11,685
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(656	)							2,523
NET DECREASE IN CASH AND CASH EQUIVALENTS			(1,201	)							(1,269	)
CASH AND CASH EQUIVALENTS:
Beginning of period			7,310								9,867
End of period		$	6,109							$	8,598
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest		$	6,568							$	6,680
Cash refund for income taxes, net		$	(4,858	)						$	(4,263	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Description of Business and Basis of Presentation

Commercial Vehicle Group, Inc. and its subsidiaries (“CVG”, “Company” or “we”) design and manufacture seat systems, interior trim systems (including instrument and door panels, headliners, cabinetry, molded products and floor systems), cab structures and components, mirrors, wiper systems, electronic wiring harness assemblies and controls and switches for the global commercial vehicle market, including the heavy-duty truck market, the construction, military, bus, agriculture and specialty transportation market. We have facilities located in the United States in Arizona, Indiana, Illinois, Iowa, North Carolina, Ohio, Oregon, Tennessee, Virginia and Washington and outside of the United States in Australia, Belgium, China, Czech Republic, Mexico, Ukraine and the United Kingdom.

We have prepared the condensed consolidated financial statements included herein, without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The information furnished in the condensed consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of operations and statements of financial position for the interim periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. We believe that the disclosures are adequate to make the information presented not misleading when read in conjunction with our fiscal 2008 consolidated financial statements and the notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K as filed with the SEC. Unless otherwise indicated, all amounts are in thousands except per share amounts.

Revenues and operating results for the three months ended June 30, 2009 are not necessarily indicative of the results to be expected in future operating quarters.

2. Recently Issued Accounting Pronouncements

In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. 157-1 and No. 157-2. FSP No. 157-1 amends Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements, to exclude SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing transactions. FSP No. 157-2 delays the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008 and interim periods with those fiscal years for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) until January 1, 2009 for calendar year end entities. The adoption did not have a material impact on our consolidated financial position and results of operations.

In October 2008, the FASB issued FSP No. 157-3, Determining Fair Value of a Financial Asset When the Market for that Asset is Not Active. FSP No. 157-3 clarifies the application of SFAS No. 157 in an inactive market. It demonstrates how the fair value of a financial asset is determined when the market for that financial asset is inactive. FSP No. 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The adoption did not have a material impact on our consolidated financial position and results of operations.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP No. 157-4 provides additional guidance on factors to consider in estimating fair value when there has been a significant decrease in market activity for a financial asset. FSP No. 157-4 is effective for interim and annual periods ending after June 15, 2009. The adoption did not have a material impact on our consolidated financial position and results of operations.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Finance Statements, an amendment of ARB No. 51. SFAS No. 141(R) changes how business acquisitions are accounted for and impacts financial statements both on the acquisition date and in subsequent periods. SFAS No. 160 changes the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. Early adoption is prohibited for

both standards. The provisions of SFAS No. 141(R) and SFAS No. 160 are effective for our 2009 fiscal year beginning January 1, 2009, and are to be applied prospectively.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an Amendment of FASB No. 133. SFAS No. 161 is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS No. 161 applies to all derivative instruments within the scope of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 161 also applies to non-derivative hedging instruments and all hedged items designated and qualifying under SFAS No. 133. SFAS No. 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. As SFAS No. 161 only requires additional disclosures on our derivative and hedging activities, the adoption did not impact our consolidated financial position and results of operations.

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The objective of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141(R), and other principles of U.S. GAAP. This FSP applies to all intangible assets, whether acquired in a business combination or otherwise, and shall be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years and applied prospectively to intangible assets acquired after the effective date. Early adoption is prohibited. This FSP did not have an impact on our consolidated financial position and results of operations.

In June 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. The FSP concludes that unvested share-based payment awards that contain rights to receive nonforfeitable dividends or dividend equivalents are participating securities, and thus, should be included in the two-class method of computing earnings per share (“EPS”). This FSP is effective for fiscal years beginning after December 15, 2008, and interim periods within those years and requires that all prior period EPS be adjusted retroactively. This FSP did not have an impact on our consolidated financial position and results of operations.

In December 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets. This FSP amends SFAS No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan on investment policies and strategies, major categories of plan assets, inputs and valuation techniques used to measure the fair value of plan assets and significant concentrations of risk within plan assets. This FSP shall be effective for fiscal years ending after December 15, 2009, with earlier application permitted. Upon initial application, the provisions of this FSP are not required for earlier periods that are presented for comparative purposes. As FSP FAS 132(R)-1 only requires additional disclosures about our pension and other post-retirement benefits plans, the adoption will not impact our consolidated financial position and results of operations.

In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosure about Fair Value of Financial Instruments, (FSP FAS 107-1 & APB 28-1). FSP FAS 107-1 & APB 28-1 require interim disclosures regarding the fair values of financial instruments that are within the scope of SFAS No. 107, Disclosures about the Fair Value of Financial Instruments. Additionally, FSP FAS 107-1 & APB 28-1 require disclosure of the methods and significant assumptions used to estimate the fair value of financial instruments on an interim basis as well as changes in the methods and significant assumptions from prior periods. FSP FAS 107-1 & APB 28-1 do not change the accounting treatment for these financial instruments. FSP FAS 107-1 & APB 28-1 is effective for interim and annual periods ending after June 15, 2009. As FSP FAS 107-1 & APB 28-1 only requires disclosure of the fair value of financial instruments, the adoption did not impact our consolidated financial position and results of operations.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. FSP FAS 115-2 and FAS 124-2 changes the method for determining whether an other-than-temporary impairment exists for debt securities and the amount of the impairment to be recorded in earnings. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual periods ending after June 15, 2009. The implementation of this standard did not have a material impact on our consolidated financial position and results of operations.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events, which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events. SFAS No. 165 is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of this standard did not have a material impact on our consolidated financial position and results of operations. The Company has evaluated subsequent events through the issuance of its condensed consolidated financial statements on August 10, 2009.

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment of FASB Statement No. 140. Among other items, SFAS No. 166 removes the concept of a qualifying special-purpose entity and clarifies that the objective is to determine whether a transferor and all of the entities included in the transferor’s financial statements being presented have surrendered control over transferred financial assets. SFAS No. 166 is effective for fiscal years beginning after November 15, 2009. Earlier application is prohibited. The Company does not expect the adoption of this pronouncement to have a material effect on the consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R). This statement amends the consolidation guidance applicable to variable interest entities and is effective for fiscal years beginning after November 15, 2009. Early adoption is prohibited. The Company does not expect this standard to have a material impact on its financial condition or results of operations.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162. The FASB Accounting Standards Codification (the Codification) will become the source of authoritative U.S. GAAP. The Codification, which changes the referencing of financial standards, is effective for interim or annual financial periods ending after September 15, 2009. The Codification is not intended to change or alter existing U.S. GAAP.

3. Fair Value Measurement

SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.

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 – Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.

The fair values of our financial assets and liabilities are categorized as follows:

		June 30, 2009																December 31, 2008
		Total				Level 1				Level 2				Level 3				Total				Level 1				Level 2				Level 3
Derivative assets (1)		$	19			$	—			$	19			$	—			$	32			$	—			$	32			$	—
Deferred compensation (2)			1,306				1,306				—				—				1,223				1,223				—				—
Total assets		$	1,325			$	1,306			$	19			$	—			$	1,255			$	1,223			$	32			$	—
Derivative liabilities (1)		$	6,968			$	—			$	6,968			$	—			$	15,331			$	—			$	15,331			$	—

Our derivative assets and liabilities represent foreign exchange 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 these inputs, the derivative assets and liabilities are classified as Level 2.

The carrying amounts and fair values of financial instruments at June 30, 2009 and December 31, 2008 are as follows:

		June 30, 2009								December 31, 2008
		Carrying								Carrying
		Amount				Fair Value				Amount				Fair Value
Cash and cash equivalents		$	6,109			$	6,109			$	7,310			$	7,310
Current maturities of long-term debt		$	3,404			$	3,404			$	81			$	81
Long-term debt and capital leases		$	150,008			$	85,508			$	164,814			$	72,014

The following methods were used to estimate the fair value of each class of financial instruments:

Cash and cash equivalents and current maturities of long-term debt. The fair values of cash and cash equivalents, and current maturities approximate the carrying value due to the short-term maturities of these instruments.

Long-term debt and capital leases. The fair value of long-term debt and capital lease obligations is based on quoted market prices or on rates available on debt with similar terms and maturities.

The following table summarizes the fair value measurement of our long-lived assets and indefinite-lived intangible assets measured on a non-recurring basis as of June 30, 2009 (in thousands):

		Fair Value Measurements Using
																		Total Gains
		Total				Level 1				Level 2				Level 3				(Losses)
Property, plant and equipment, net		$	81,408			$	—			$	—			$	81,408			$	(3,445	)
Indefinite-lived intangible asset		$	19,000			$	—			$	—			$	19,000				(7,000	)
																		$	(10,445	)

We review indefinite-lived intangible assets for impairment annually in the second fiscal quarter and whenever events or changes in circumstances indicate the carrying value may not be recoverable in accordance with SFAS No. 142, Goodwill and Intangible Assets.

Determining the fair value of our indefinite-lived intangible assets 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. The valuation approaches we use for our indefinite-lived intangible assets include the Income Approach (the Discounted Cash Flow Method) and the Market Approach (the Guideline Company and Transaction Methods). The Discounted Cash Flow Method utilizes a market-derived rate of return to discount anticipated performance, while the Guideline Company Method and the Transaction Method incorporate multiples based on the market’s assessment of future performance. Actual future results may differ materially from those estimates.

In accordance with the provisions of SFAS No. 142, indefinite-lived intangible assets with a carrying amount of approximately $26.0 million were written down to their fair value of approximately $19.0 million, resulting in an impairment charge of approximately $7.0 million.

We review long-lived assets in accordance with the provisions of SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, for recoverability whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. Based upon the decline in the North American Class 8 build rate from the prior year and lower demand in our construction, OEM bus, aftermarket, military, service and other specialty product markets, which negatively impacted our revenues, we determined that an impairment indicator existed. As a result, we performed additional analysis to determine the fair value of our long-lived assets.

Management reviewed the sum of expected future undiscounted cash flows from operating activities to determine if the estimated net cash flows were less than the carrying amount of such assets. Based upon an independent appraisal and in accordance with the provisions of SFAS No. 144, long-lived assets with a carrying amount of approximately $7.6 million were written down to their fair value of approximately $4.2 million, resulting in an impairment charge of approximately $3.4 million.

4. Restructuring Activities

On February 10, 2009, we announced a restructuring plan that includes a reduction in workforce and the closure of certain manufacturing, warehousing and assembly facilities. The facilities to be closed include an assembly and sequencing facility in Kent, Washington; seat sequencing and assembly facility in Statesville, North Carolina; manufacturing facility in Lake Oswego, Oregon; inventory and product warehouse in Concord, North Carolina; and seat assembly and distribution facility in Seneffs, Belgium. In addition, on March 18, 2009, we announced the closure of our Vancouver, Washington manufacturing facility. The decision to reduce our workforce and to close the facilities was the result of the extended downturn of the global economy, and in particular the commercial vehicle markets. We estimate that we will record in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, total charges of approximately $2.7 million, consisting of approximately $1.7 million of severance costs and $1.0 million of facility closure costs. The Company estimates that all of the restructuring charges will be incurred as cash expenditures, of which approximately $2.4 million is expected to be incurred in 2009 and approximately $0.3 million is expected to be incurred in 2010. For the three months ended June 30, 2009, we have incurred approximately $0.2 million of facility closure costs. For the six months ended June 30, 2009, we have incurred charges of approximately $1.7 million in employee related costs and $0.2 million in facility closure costs. The following table summarizes the restructuring liability as of June 30, 2009 (in thousands):

						Facility Exit
						and Other
		Employee				Contractual
		Costs				Costs				Total
Balance — December 31, 2008		$	—			$	—			$	—
Provision			1,712				—				1,712
Deductions for payments made			(1,620	)			—				(1,620	)
Balance — June 30, 2009		$	92			$	—			$	92

5. Share-Based Compensation

Stock Option Grants and Restricted Stock Awards

In November 2005, 168,700 shares of restricted stock and in November 2006, 207,700 shares of restricted stock were awarded by our compensation committee under our Amended and Restated Equity Incentive Plan. 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 prior to the end of a restricted period set by the compensation committee. The shares of restricted stock granted in November 2005 vest ratably in three equal annual

installments commencing on October 20, 2006. The shares of restricted stock granted in November 2006 vest ratably in three equal annual installments commencing on October 20, 2007. A participant granted restricted stock generally has all of the rights of a stockholder, unless the compensation committee determines otherwise.

In February 2007, 10,000 shares of restricted stock and in March 2007, 10,000 shares of restricted stock were awarded by our compensation committee under our Amended and Restated Equity Incentive Plan. The shares of restricted stock granted in February 2007 and March 2007 vest ratably in three equal annual installments commencing on October 20, 2007.

In October 2007, 328,900 shares of restricted stock were awarded by our compensation committee under our Second Amended and Restated Equity Incentive Plan. The shares of restricted stock granted in October 2007 vest ratably in three equal annual installments commencing on October 20, 2008.

In November 2008, 798,450 shares of restricted stock were awarded by our compensation committee under our Second Amended and Restated Equity Incentive Plan. The shares of restricted stock granted in November 2008 vest in three equal annual installments commencing on October 20, 2009.

At the 2009 Annual Meeting of Stockholders held on May 14, 2009, the stockholders approved the Company’s Third Amended and Restated Equity Incentive Plan (the “Plan”). The Plan was amended to increase the number of shares of common stock that may be issued under the Plan from 2,000,000 shares to 3,200,000 shares.

As of June 30, 2009, there was approximately $2.8 million of unearned compensation expense related to non-vested share-based compensation arrangements granted under the Plan. This expense is subject to future adjustments for vesting and forfeitures and will be recognized on a straight-line basis over the remaining period of four months for the November 2006, February 2007 and March 2007 awards, 16 months for the October 2007 awards and 28 months for the November 2008 awards, respectively.

We currently estimate the forfeiture rates for the November 2006, February/March 2007, October 2007 and November 2008 restricted stock awards at 3.5%, 0%, 5.6% and 5.0%, respectively, for all participants in the plan.

The following table summarizes information about the non-vested restricted stock grants as of June 30, 2009:

						Weighted-Average
						Grant-Date Fair
		Shares (000’s)				Value
Nonvested at December 31, 2008			1,072			$	8.49
Granted			—				—
Vested			—				—
Forfeited			(55	)			4.94
Nonvested at June 30, 2009			1,017			$	8.63

As of June 30, 2009, 1.3 million shares of the 3.2 million shares authorized for issuance were available for issuance under the Plan, including cumulative forfeitures.

6. Stockholders’ Investment

Common Stock — Our authorized capital stock consists of 30,000,000 shares of common stock with a par value of $0.01 per share.

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 June 30, 2009.

Earnings Per Share — In accordance with SFAS No. 128, Earnings per Share, as amended, basic earnings per share is determined by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share, and all other diluted per share amounts 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, as amended, in SFAS No. 123(R), Share Based Payment.

Potential common shares are included in the diluted earnings per share calculation when dilutive. Diluted earnings per share for the three and six months ended June 30, 2009 and 2008 includes the effects of potential common shares consisting of common stock issuable upon exercise of outstanding stock options when dilutive (in thousands, except per share amounts):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2009				2008				2009				2008
Net (loss) income applicable to common shareholders — basic and diluted		$	(22,513	)		$	3,083			$	(41,917	)		$	3,555
Weighted average number of common shares outstanding			21,747				21,537				21,747				21,537
Dilutive effect of outstanding stock options and restricted stock grants after application of the treasury stock method			—				174				—				139
Dilutive shares outstanding			21,747				21,711				21,747				21,676
Basic (loss) earnings per share		$	(1.04	)		$	0.14			$	(1.93	)		$	0.17
Diluted (loss) earnings per share		$	(1.04	)		$	0.14			$	(1.93	)		$	0.16

For the three months ended June 30, 2009, diluted loss per share did not include approximately 0.7 million outstanding stock options and approximately 1.0 million non-vested restricted stock, as the effect would have been antidilutive.

Dividends — We have not declared or paid any cash dividends in the past. The terms of our Loan and Security Agreement restricts the payment or distribution of our cash or other assets, including cash dividend payments.

Stockholder Rights Plan — In May 2009, our board of directors adopted a Stockholder Rights Plan (Rights Plan), intended to protect stockholders from coercive or otherwise unfair takeover tactics.

Under the Rights Plan, with certain exceptions, the rights will become exercisable only if a person or group acquires 20 percent or more of our outstanding common stock or commences a tender or exchange offer that could result in ownership of 20 percent or more of our common stock. The Rights Plan has a term of 10 years and will expire on May 20, 2019, unless the rights are earlier redeemed or terminated by the board of directors.

7. Accounts Receivable

Trade accounts receivable are stated at historical value less an allowance for doubtful accounts, which approximates fair value. This estimated allowance is based primarily on management’s evaluation of specific balances as the balances become past due, the financial condition of our customers and our historical experience of write-offs. If not reserved through specific identification procedures, our general policy for uncollectible accounts is to reserve at a certain percentage threshold, based upon the aging categories of accounts receivable. Past due status is based upon the due date of the original amounts outstanding. When items are ultimately deemed uncollectible, they are charged off against the reserve previously established in the allowance for doubtful accounts.

8. Inventories

Inventories are valued at the lower of first-in, first-out (“FIFO”) cost or market. Cost includes applicable material, labor and overhead. Inventories consisted of the following (in thousands):

		June 30,				December 31,
		2009				2008
Raw materials		$	43,334			$	57,954
Work in process			9,284				19,763
Finished goods			15,447				19,437
Less excess and obsolete			(7,094	)			(6,372	)
		$	60,971			$	90,782

Inventory quantities on-hand are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based primarily on our estimated production requirements driven by current market volumes. Excess and obsolete provisions may vary by product depending upon future potential use of the product.

9. Intangible Assets

We review indefinite-lived intangible assets for impairment annually in the second fiscal quarter and whenever events or changes in circumstances indicate the carrying value may not be recoverable in accordance with SFAS No. 142, Goodwill and Intangible Assets. SFAS No. 142 requires that the fair value of the purchased intangible assets with indefinite lives be estimated and compared to the carrying value. Determining 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. To estimate the fair value of these intangible assets, we use an income approach, which utilizes a market derived rate of return to discount anticipated performance. We recognize an impairment loss when the estimated fair value of the intangible asset is less than the carrying value.

We review definite-lived intangible and long-lived assets in accordance with the provisions of SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, for recoverability whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. A determination is made by management, in accordance with SFAS No.144, to ascertain whether property and equipment and certain definite-lived intangibles have been impaired based on the sum of expected future undiscounted cash flows from operating activities. If the estimated net cash flows are less than the carrying amount of such assets, we will recognize an impairment loss in an amount necessary to write down the assets to fair value as determined from expected discounted future cash flows.

Our annual indefinite-lived intangible asset analysis was performed during the second quarter of fiscal 2009. We determined that because the carrying value of our customer relationships exceeded the fair value, we recorded an impairment of approximately $7.0 million.

Our intangible assets were comprised of the following (in thousands):

		June 30, 2009																December 31, 2008
		Weighted-																Weighted-
		Average																Average
		Amortization				Gross Carrying				Accumulated				Net Carrying				Amortization				Gross Carrying				Accumulated				Net Carrying
		Period				Amount				Amortization				Amount				Period				Amount				Amortization				Amount
Definite-lived intangible assets:
Tradenames/Trademarks		30 years				$	9,790			$	(1,405	)		$	8,385			30 years				$	9,790			$	(1,242	)		$	8,548
Licenses		7 years					438				(407	)			31			7 years					438				(376	)			62
						$	10,228			$	(1,812	)		$	8,416							$	10,228			$	(1,618	)		$	8,610
Indefinite-lived intangible assets:
Customer relationships							19,000				—				19,000								26,000				—				26,000
						$	19,000			$	—			$	19,000							$	26,000			$	—			$	26,000
Total intangible assets														$	27,416															$	34,610

Based upon the decline in the North American Class 8 build rate from the prior year and lower demand in our construction, OEM bus, aftermarket, military, service and other specialty product markets, which negatively impacted our revenues, we determined that an impairment indicator existed. In accordance with SFAS No. 144, we recorded an impairment of approximately $3.4 million on our long-lived assets as the carrying value of the assets exceeded their fair value.

The aggregate intangible asset amortization expense was approximately $0.1 million and $0.3 million for the three months ended June 30, 2009 and 2008, respectively and approximately $0.2 million and $0.7 million for the six months ended June 30, 2009 and 2008, respectively.

The estimated intangible asset amortization expense for the fiscal year ending December 31, 2009, and for the five succeeding years is as follows (in thousands):

Fiscal Year Ended		Estimated
December 31,		Amortization Expense
2009		$389
2010		$326
2011		$326
2012		$326
2013		$326
2014		$326

10. Debt

Debt consisted of the following (in thousands):

		June 30,				December 31,
		2009				2008
Revolving credit facilities bore interest at a weighted average of 6.1% as of June 30, 2009 and 7.5% as of December 31, 2008		$	3,384			$	14,800
8.0% senior notes due 2013			150,000				150,000
Other			28				95
			153,412				164,895
Less current maturities			3,404				81
		$	150,008			$	164,814

Credit Agreement – We account for amendments to our revolving credit facility under the provisions of EITF Issue No. 98-14, Debtor’s Accounting for the Changes in Line-of-Credit or Revolving-Debt Arrangements (EITF 98-14), and our 8.0% senior notes under the provisions of EITF Issue No. 96-19, Debtor’s Accounting for a Modification or Exchange of Debt Instruments (EITF 96-19). Historically, we have periodically amended the terms of our prior revolving credit facility to increase or decrease the individual and collective borrowing base of the instruments on an as needed basis. We have not modified the terms of our 8.0% senior notes subsequent to the original offering date. In connection with an amendment of a revolving credit facility, bank fees incurred are deferred and amortized over the term of the new arrangement and, if applicable, any outstanding deferred fees are expensed proportionately or in total, as appropriate per the guidance of EITF 98-14. In connection with an amendment of our 8% senior notes, under the terms of EITF 96-19, bank and any third-party fees are either expensed as an extinguishment of debt or deferred and amortized over the term of the agreement based upon whether or not the old and new debt instruments are substantially different.

On January 7, 2009, we and certain of our direct and indirect U.S. subsidiaries, as borrowers (the “borrowers”), entered into a Loan and Security Agreement with Bank of America, N.A., as agent and lender, which provides for a three-year asset-based revolving credit facility with an aggregate principal amount of up to $37.5 million (after giving effect to the Second Amendment described below), which is subject to an availability block and the borrowing base limitations described below. Up to an aggregate of $10.0 million is available to the borrowers for the issuance of letters of credit, which reduce availability under the revolving credit facility. Based on the provisions of EITF 98-14, approximately $0.8 million of third party fees relating to the prior senior credit agreement were expensed as loss on early extinguishment of debt and the remaining $2.3 million of third party fees relating to the Loan and Security Agreement were capitalized and were being amortized over its remaining life. Set forth below is a description of the material terms and conditions of the Loan and Security Agreement:

On January 7, 2009, we borrowed $26.8 million under the revolving credit facility and used that amount to repay in full our borrowings under our prior senior credit agreement and to pay fees and expenses related to the Loan and Security Agreement. We use the revolving credit facility to fund ongoing operating and working capital requirements.

On March 12, 2009, we entered into a first amendment to the Loan and Security Agreement (the “First Amendment”). Pursuant to the terms of the First Amendment, the lenders consented to changing the thresholds in the minimum operating performance covenant. In addition, the First Amendment provided for (i) an increase in the applicable margin for interest rates on amounts borrowed by the domestic borrowers of 1.50%, (ii) a limitation on

permitted capital expenditures in 2009 and (iii) a temporary decrease in domestic availability until such time as the domestic borrowers demonstrate a fixed charge coverage ratio of at least 1.0:1.0 for any fiscal quarter ending on or after March 31, 2010. Based on the provisions of EITF 98-14, approximately $0.4 million of third party fees relating to the Loan and Security Agreement were capitalized and were being amortized over its remaining life.

As of June 30, 2009, approximately $4.4 million in deferred fees relating to the Loan and Security Agreement and fees related to the 8.0% senior notes offering were outstanding and were being amortized over the life of the agreements.

As of June 30, 2009, we had $3.4 million of the borrowings under the Loan and Security Agreement, all of which were denominated in U.S. dollars. As of June 30, 2009, these borrowings bore interest at a rate of 6.1% per annum. In addition, as of June 30, 2009, we had outstanding letters of credit of approximately $1.7 million.

On August 4, 2009, we entered into a second amendment to the Loan and Security Agreement (the “Second Amendment”). Pursuant to the terms of the Second Amendment, the lender consented to the notes exchange described below, including the issuance of the 11%/13% third lien senior secured notes due 2013 and the second lien term loan described below:

The Second Amendment includes a reduction in size of the commitment from $47.5 million to $37.5 million and provides that borrowings under the Loan and Security Agreement are subject to an availability block of $10.0 million, until we deliver a compliance certificate for any fiscal quarter ending March 31, 2010 or thereafter demonstrating a fixed charge coverage ratio of at least 1.1 to 1.0 for the most recent four fiscal quarters, at which time the availability block will be $7.5 million at all times while the fixed charge coverage ratio is at least 1.1 to 1.0.

The Second Amendment further provides that we need not comply with any minimum EBITDA requirement or fixed charge coverage ratio requirement for as long as we maintain at least $5.0 million of borrowing availability (after giving effect to the $10.0 million availability block) under the Loan and Security Agreement. If borrowing availability (after giving effect to the $10.0 million availability block) is less than $5.0 million for three consecutive business days or less than $2.5 million on any day, we will be required to comply with revised monthly minimum EBITDA requirements for 2009 set forth below and a fixed charge coverage ratio of 1.0:1.0 for fiscal quarters ending on or after March 31, 2010, and will be required to continue to comply with these requirements until we have borrowing availability (after giving effect to the $10.0 million availability block) of $5.0 million or greater for 60 consecutive days.

The revised monthly minimum EBITDA requirements for 2009, if applicable, would require us to maintain cumulative EBITDA, as defined in the Loan and Security Agreement, as amended, calculated monthly starting on September 30, 2009, for each of the following periods as of the end of each fiscal month specified below:

		EBITDA (as defined in
		the Loan and Security
		Agreement, as
Period Ending on or Around		amended)
July 1, 2009 through September 30, 2009		$	1,256,000
July 1, 2009 through October 31, 2009		$	3,422,000
July 1, 2009 through November 30, 2009		$	5,756,000
July 1, 2009 through December 31, 2009		$	7,191,000

The Second Amendment includes amendments to permit us to engage in asset securitization transactions involving accounts receivable, and eliminates our ability to add certain of our direct and indirect UK subsidiaries as borrowers under the Loan and Security Agreement.

The aggregate amount of loans permitted to be made to the borrowers under the revolving credit facility may not exceed a borrowing base consisting of the lesser of: (a) $37.5 million, minus the availability block and domestic letters of credit, and (b) the sum of eligible accounts receivable and eligible inventory of the borrowers, minus the availability block and certain availability reserves. Borrowings under the Loan and Security Agreement are denominated in U.S. dollars. The weighted average interest rate on borrowings under the Loan and Security Agreement was approximately 6.1% for the six months ended June 30, 2009.

The Loan and Security Agreement, as amended, includes a limitation on the amount of capital expenditures of not more than $4.3 million for the period from January 1, 2009 through June 30, 2009, and not more than $9.7 million for the fiscal year ending December 31, 2009.

The Loan and Security Agreement also contains other 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 or liquidate with any other person; 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; and amend subordinated debt or the indentures governing the third lien notes and the 8% senior notes due 2013. In addition, the Loan and Security Agreement contains customary reporting and other affirmative covenants. We were not in compliance with the minimum EBITDA requirement as of June 30, 2009. Pursuant to the Second Amendment, the lender agreed to waive this covenant default.

The Loan and Security Agreement contains customary events of default, including, without limitation: nonpayment of obligations under the Loan and Security Agreement when due; material inaccuracy of representations and warranties; violation of covenants in the Loan and Security 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 ERISA events; and a change in control of CVG.

The Loan and Security Agreement requires us to make mandatory prepayments with the proceeds of certain asset dispositions and upon the receipt of insurance or condemnation proceeds to the extent we do not use the proceeds for the purchase of satisfactory replacement assets.

In accordance with EITF 95-22, Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include both a Subjective Acceleration Clause and a Lock-Box Arrangement, we have classified our Loan and Security Agreement, which has a maturity date of more than one year from the balance sheet date, as a current liability since it includes a lockbox arrangement and a subjective acceleration clause.

Terms, Covenants and Compliance Status – Our Loan and Security Agreement, as in effect on June 30, 2009, contained financial covenants, including minimum operating performance, a limitation on capital expenditures and a minimum fixed charge coverage ratio commencing with the fiscal quarter ending March 31, 2010. We were not in compliance with the minimum EBITDA requirement in the Loan and Security Agreement as of June 30, 2009. Pursuant to the Second Amendment, the lender agreed to waive this covenant default. The Loan and Security Agreement also contains other customary restrictive covenants, customary reporting and other affirmative covenants and customary events of default.

Under the Loan and Security Agreement, borrowings bear interest at various rates plus a margin based on certain financial ratios. The borrowers’ obligations under the Loan and Security Agreement 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 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 Loan and Security Agreement and unconditionally guarantees the prompt payment and performance thereof.

We continue to operate in a challenging economic environment, and our ability to comply with the new covenants in the Loan and Security Agreement may be affected in the future by economic or business conditions beyond our control. Based on our current forecast, we believe that we will be able to maintain compliance with the minimum operating performance covenant and the fixed charge coverage ratio covenant, if applicable, and other covenants in the Loan and Security Agreement for the next twelve months; however, no assurances can be given that we will be able to comply. We base our forecasts on historical experience, industry forecasts and various other assumptions

that we believe are reasonable under the circumstances. If actual revenue is less than our current forecast by a substantial margin, or if we do not realize a significant portion of our planned cost savings, we could violate our financial covenants. If we do not comply with the financial and other covenants in the Loan and Security Agreement, and we are unable to obtain necessary waivers or amendments from the lender, we would be precluded from borrowing under the Loan and Security Agreement, which would have a material adverse effect on our business, financial condition and liquidity. If we are unable to borrow under the Loan and Security Agreement, we will need to meet our capital requirements using other sources. Due to current economic conditions, alternative sources of liquidity may not be available on acceptable terms if at all. In addition, if we do not comply with the financial and other covenants in the Loan and Security Agreement, the lender could declare an event of default under the Loan and Security Agreement, and our indebtedness thereunder could be declared immediately due and payable, which would also result in an event of default under the second lien term loan, the 11%/13% third lien senior secured notes due 2013 and the 8% senior notes due 2013. Any of these events would have a material adverse effect on our business, financial condition and liquidity.

11. Income Taxes

We, or one of our subsidiaries, file federal income tax returns in the United States 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 2004. There is currently one income tax examination in process. We do not anticipate that any adjustments from this examination will result in material changes to our consolidated financial position and results of operations.

We adopted the provisions of FIN No. 48, Accounting for Uncertainty in Income Taxes, effective January 1, 2007. As of June 30, 2009, we have provided a liability of approximately $2.9 million of unrecognized tax benefits related to various federal and state income tax positions. Of the $2.9 million, the amount that would impact our effective tax rate, if recognized, is $2.0 million. The remaining $0.9 million of unrecognized tax benefits consists of items that are offset by deferred tax assets, subject to valuation allowance, and thus could further impact the effective rate.

We accrue penalties and interest related to unrecognized tax benefits through income tax expense, which is consistent with the recognition of these items in prior reporting periods. We had approximately $0.8 million accrued for the payment of interest and penalties at June 30, 2009, of which $69 thousand was accrued during the current year. Accrued interest and penalties are included in the $2.9 million of unrecognized tax benefits.

During the current quarter, we did not release tax reserves associated with items with expiring statues of limitations. We anticipate events could occur within the next 12 months that would have an impact on the amount of unrecognized tax benefits that would be required. Approximately $0.3 million of unrecognized tax benefits relate to items that are affected by expiring statutes of limitation within the next 12 months.

12. Commitments and Contingencies

Warranty — We are subject to warranty claims for products that fail to perform as expected due to design or manufacturing deficiencies. Customers continue to require their outside suppliers to guarantee or warrant their products and bear the cost of repair or replacement of such products. 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 reserve for estimated future customer warranty costs based on historical trends and current economic factors. The following represents a summary of the warranty provision for the six months ended June 30, 2009 (in thousands):

Balance — December 31, 2008		$	3,706
Additional provisions recorded			728
Deduction for payments made			(944	)
Currency translation adjustment			11
Balance — June 30, 2009		$	3,501

Leases — We lease office 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 rents. As

of June 30, 2009, our equipment leases did not provide for any material guarantee of a specified portion of residual values.

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. In accordance with FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, for guarantees issued after December 31, 2002, we record a liability for the fair value of such guarantees in the balance sheet. As of June 30, 2009, we had no such guarantees.

Litigation — We are subject to various legal actions and claims incidental to our business, including those arising out of alleged defects, product warranties, employment-related matters and environmental matters. Management believes that we maintain adequate insurance to cover these claims. We have established reserves for issues that are probable and estimatable in amounts management believes 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 our 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.

13. Foreign Currency Forward Exchange Contracts

We use forward exchange contracts to hedge certain of the foreign currency transaction exposures primarily related to our United Kingdom operations. We estimate our projected revenues and purchases in certain foreign currencies or locations, and will hedge a portion or all of the anticipated long or short position. The contracts typically run from three months up to three years. As of June 30, 2009, none of our derivatives were designated as hedging instruments under SFAS No. 133; therefore, our 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 statements of operations. We do not hold or issue foreign exchange options or forward contracts for trading purposes.

The following table summarizes the notional amount of our open foreign exchange contracts (in thousands):

		June 30, 2009								December 31, 2008
						U.S.								U.S.
		U.S. $				Equivalent				U.S. $				Equivalent
		Equivalent				Fair Value				Equivalent				Fair Value
Commitments to buy currencies:
Eurodollar		$	—			$	—			$	(1,832	)		$	(1,345	)
Swedish krona			—				—				—				—
Japanese yen			—				—				(736	)			(765	)
		$	—			$	—			$	(2,568	)		$	(2,110	)
Commitments to sell currencies:
Eurodollar		$	23,252			$	26,976			$	35,236			$	43,532
Swedish krona			—				—				54				56
Japanese yen			13,837				17,062				15,813				22,372
		$	37,089			$	44,038			$	51,103			$	65,960
Total		$	37,089			$	44,038			$	48,535			$	63,850

The fair value of our derivative instruments was a net liability of approximately $7.0 million and $15.3 million as of June 30, 2009 and December 31, 2008, respectively. The net liability was comprised of $5.4 million and $10.1 million in accrued liabilities and $1.6 million and $5.2 million in other long-term liabilities in the condensed consolidated balance sheet as of June 30, 2009 and December 31, 2008, respectively.

We consider the impact of our and our counterparties’ credit risk on the fair value of the contracts as well as the ability of each party to execute its obligations under the contract. For the three and six months ended June 30, 2009, we recorded a credit valuation adjustment of approximately $0.8 million and $3.2 million, respectively, on our foreign currency forward contracts.

The following table summarizes the fair value and presentation in the consolidated balance sheets for derivatives not designated as hedging instruments under SFAS No. 133 (in thousands):

Asset Derivatives

June 30, 2009

December 31, 2008

Balance Sheet

Balance Sheet

Location

Fair Value

Location

Fair Value

Foreign exchange contracts

Other assets

$

19

Other assets

$

32

		Liability Derivatives
		June 30, 2009						December 31, 2008
		Balance Sheet						Balance Sheet
		Location		Fair Value				Location		Fair Value
Foreign exchange contracts		Accrued liabilities		$	5,362			Accrued liabilities		$	10,096
Foreign exchange contracts		Other long-term liabilities			1,606			Other long-term liabilities			5,235
				$	6,968					$	15,331

The following table summarizes the effect of derivative instruments on the consolidated statements of operations for derivatives not designated as hedging instruments under SFAS No. 133 (in thousands):

						Three Months Ended								Six Months Ended
						June 30,								June 30,
		Location of Gain				2009				2008				2009				2008
		(Loss)
		Recognized in				Amount of Gain (Loss)								Amount of Gain (Loss)
		Income on				Recognized in Income on								Recognized in Income on
		Derivatives				Derivatives								Derivatives
Foreign exchange contracts		Other Expenses				$	3,492			$	3,476			$	8,350			$	(5,936	)

14. 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 United States and United Kingdom. Our policy is to make annual contributions to the plans to fund the normal cost as required by local regulations. In addition, we have a post-retirement benefit plan for certain U.S. operations, retirees and their dependents.

The components of net periodic benefit cost related to the pension and other post-retirement benefit plans for the three months ended June 30 was as follows (in thousands):

																		Other Post-Retirement
		U.S. Pension Plans								Non-U.S. Pension Plans								Benefit Plans
		2009				2008				2009				2008				2009				2008
Service cost		$	76			$	73			$	—			$	—			$	3			$	4
Interest cost			479				456				518				688				33				37
Expected return on plan assets			(378	)			(495	)			(369	)			(532	)			—				—
Recognized actuarial loss (gain)			28				(4	)			48				68				(10	)			(5	)
Net periodic benefit cost			205				30				197				224				26				36
Special Termination Benefits			35				—				—				—				85				—
Net benefit cost		$	240			$	30			$	197			$	224			$	111			$	36

We previously disclosed in our financial statements for the year ended December 31, 2008, that we expect to contribute approximately $1.8 million to our pension plans in 2009. As of June 30, 2009, approximately $0.8

million of contributions have been made to our pension plans. We anticipate contributing an additional $1.1 million to our pension plans in 2009 for total estimated contributions during 2009 of $1.9 million.

15. Comprehensive (Loss) Income

We follow the provisions of SFAS No. 130, Reporting Comprehensive Income, which established standards for reporting and display of comprehensive income and its components. Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. Comprehensive income represents net income adjusted for foreign currency translation adjustments and minimum pension liability. In accordance with SFAS No. 130, we have elected to disclose comprehensive income in stockholders’ investment. The components of accumulated other comprehensive loss consisted of the following as of June 30, 2009 (in thousands):

Foreign currency translation adjustment		$	(5,942	)
Pension liability			(10,149	)
		$	(16,091	)

Comprehensive (loss) income for the six months ended June 30 was as follows (in thousands):

		2009				2008
Net (loss) income		$	(41,917	)		$	3,555
Other comprehensive income:
Foreign currency translation adjustment			2,266				3,619
Comprehensive (loss) income		$	(39,651	)		$	7,174

16. Related Party Transactions

In May 2008, we entered into a freight services arrangement with Group Transportation Services Holdings, Inc. (“GTS”), a third party logistics and freight management company. Under this arrangement, which was approved by our Audit Committee on April 29, 2008, GTS manages a portion of the Company’s freight and logistics program as well as administers its payments to additional third party freight service providers. Scott D. Rued, the Company’s Chairman, is also Chairman of the Board of GTS and Managing Partner of Thayer Hidden Creek, the controlling shareholder of GTS, and Richard A. Snell, a member of our Board of Directors, is an Operating Partner of Thayer Hidden Creek. For the six months ended June 30, 2009, we made payments under these arrangements of approximately $4.9 million, which consisted primarily of payments from us for other third-party service providers and the balance of which consisted of approximately $0.3 million of fees for GTS’s services.

17. Subsequent Events

On August 4, 2009, we announced a private exchange with certain holders of our 8.0% Senior Notes due 2013 (the “8.0% Notes”) and entered into a new discounted Second Lien Term Loan (the “Second Lien Term Loan”). We also announced that we entered into a second amendment (the “Second Amendment”) to our asset based Loan and Security Agreement with Bank of America, N.A.

Pursuant to the terms of the exchange, certain bondholders of our 8.0% Notes agreed to exchange approximately $52.2 million of 8.0% Notes for units consisting of approximately $42.1 million of new 11%/13% Third Lien Senior Secured Notes due February 2013 (the “Third Lien Notes”) and warrants to purchase 745 thousand shares of the our common stock at an exercise price of $0.35 per share. Interest on the Third Lien Notes will be paid-in-kind through February 15, 2010 and may, at our option, be paid-in-kind through February 15, 2011 at an annual rate of 13.0%. Thereafter, interest will be paid in cash at an annual rate of 11.0%.

In addition, we entered into a new $16.8 million Second Lien Term Loan with certain of the exchanging bondholders for proceeds of approximately $13.1 million (representing a discount of approximately 21.9%). We used these proceeds to reduce borrowings under the Loan and Security Agreement and to pay related transaction fees and expenses. The Second Lien Term Loan is due November 2012, and interest is payable in cash at an annual rate of 15.0%.

In connection with the exchange and the Second Lien Term Loan, we entered into the Second Amendment to its asset based Loan and Security Agreement. For a description of the Second Amendment, see “Note 10. Debt” to the unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q.

18. Consolidating Guarantor and Non-Guarantor Financial Information

The following consolidating financial information presents balance sheets, statements of operations and cash flow information related to our business. Each Guarantor, as defined, is a direct or indirect wholly owned subsidiary of the Company and has fully and unconditionally guaranteed the 8% senior notes issued by the Company, on a joint and several basis. Separate financial statements and other disclosures concerning the Guarantors have not been presented because management believes that such information is not material to investors.

The following consolidated financial information presents the financial information of the Company (the “Parent Company”), the guarantor companies and the non-guarantor companies in accordance with Rule 3-10 under the Securities and Exchange Commission’s Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had the guarantor companies or non-guarantor companies operated as independent entities. The guarantor companies and the non-guarantor companies include the consolidated financial results of their wholly owned subsidiaries accounted for under the equity method. All applicable corporate expenses have been allocated appropriately among the guarantor and non-guarantor subsidiaries.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2009

		Parent				Guarantor				Non-Guarantor
		Company				Companies				Companies				Elimination				Consolidated
		(Unaudited)
		(In thousands)
REVENUES		$	—			$	83,936			$	24,311			$	(4,744	)		$	103,503
COST OF REVENUES			—				82,476				27,028				(4,912	)			104,592
Gross Profit (Loss)			—				1,460				(2,717	)			168				(1,089	)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			—				6,913				3,453				—				10,366
AMORTIZATION EXPENSE			—				97				—				—				97
INTANGIBLE ASSET IMPAIRMENT			—				7,000				—				—				7,000
LONG-LIVED ASSET IMPAIRMENT			—				—				3,445				—				3,445
RESTRUCTURING COSTS			—				235				—				—				235
Operating Loss			—				(12,785	)			(9,615	)			168				(22,232	)
OTHER EXPENSE (INCOME)			—				2				(3,507	)			—				(3,505	)
INTEREST EXPENSE			—				3,580				495				(409	)			3,666
Loss Before Benefit (Provision) for Income Taxes			—				(16,367	)			(6,603	)			577				(22,393	)
PROVISION (BENEFIT) FOR INCOME TAXES			—				950				(830	)			—				120
NET LOSS		$	—			$	(17,317	)		$	(5,773	)		$	577			$	(22,513	)

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2009

		Parent				Guarantor				Non-Guarantor
		Company				Companies				Companies				Elimination				Consolidated
		(Unaudited)
		(In thousands)
REVENUES		$	—			$	173,152			$	48,988			$	(10,107	)		$	212,033
COST OF REVENUES			—				174,322				52,392				(10,343	)			216,371
Gross Loss			—				(1,170	)			(3,404	)			236				(4,338	)
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES			—				16,808				6,957				(56	)			23,709
AMORTIZATION EXPENSE			—				194				—				—				194
INTANGIBLE ASSET IMPAIRMENT			—				7,000				—				—				7,000
LONG-LIVED ASSET IMPAIRMENT			—				—				3,445				—				3,445
RESTRUCTURING COSTS			—				854				1,093				—				1,947
Operating Loss			—				(26,026	)			(14,899	)			292				(40,633	)
OTHER EXPENSE (INCOME)			—				15				(8,412	)			—				(8,397	)
INTEREST EXPENSE			—				7,183				935				(808	)			7,310
LOSS ON EARLY EXTINGUISHMENT OF DEBT			—				795				—				—				795
Loss Before (Benefit) Provision for Income Taxes			—				(34,019	)			(7,422	)			1,100				(40,341	)
PROVISION (BENEFIT) FOR INCOME TAXES			—				3,225				(1,649	)			—				1,576
NET LOSS		$	—			$	(37,244	)		$	(5,773	)		$	1,100			$	(41,917	)