Item 1A.Risk Factors
You should carefully consider the information in this Form 10-K. These risks could materially and adversely affect our results of operations, financial condition, liquidity and cash flows. Our business also could be affected by risks that we are not presently aware of or that we currently consider immaterial to our operations.
Risks Related to Our Business and Industry
Our results of operations could be adversely affected by declines in new truck orders by fleets, freight tonnage hauled and in infrastructure development and other construction projects as a result of a downturn in the U.S. and/or global economy or other reasons.
Our results of operations are directly impacted by declines in freight tonnage hauled and in infrastructure development and other construction projects resulting from U.S. and/or other global economic conditions or other reasons because, among other things:
▪Demand for our MD/HD Truck products is generally dependent on the number of new MD/HD Truck commercial vehicles manufactured in North America. Historically, the demand for MD/HD Truck commercial vehicles has declined during periods of weakness in the North American economy.
▪Demand for our construction and agriculture equipment products is dependent on vehicle demand for new commercial vehicles in the global construction and agriculture equipment market.
▪Demand in the medium and heavy-construction vehicle market, which is where our products are primarily used, is typically related to the level of larger-scale infrastructure development projects.
When we experience periods of low demand for our products or volatility in the commercial vehicle markets our revenues, operating results and financial position are adversely affected.
Changes in trade policies among the United States and other countries, in particular the imposition of new or higher tariffs, could place pressure on our average selling prices as our customers seek to offset the impact of increased tariffs on their own products. Increased tariffs or the imposition of other barriers to international trade has previously and could in the future decrease demand, increase costs and have a material adverse effect on our revenues and operating results.
The United States has recently imposed new or higher tariffs on a large number of products exported by U.S. trading partners. In response, many of those trading partners have imposed or proposed new or higher tariffs on American products. Although the U.S. Supreme Court recently ruled that the International Emergency Economic Powers Act ("IEEPA") does not authorize the President to impose tariffs, and invalidated those tariffs that President Trump imposed under IEEPA, the administration has announced across-the-board tariffs of 15 percent under Section 122 of the Trade Act of 1974, and we expect that the President may impose tariffs under other authority when these short-term tariffs expire. Continuing changes in U.S. and foreign government trade policies and a heightened risk of further increased tariffs that impose barriers to international trade could further decrease international demand. Our business and operating results are substantially dependent on international trade.
In addition, tariffs could make our OEM customers’ products less attractive relative to products offered by their competitors, which may not be subject to similar tariffs. Some OEMs in our industry have already implemented short-term price adjustments to offset such tariffs and transitioned their production and supply chain to locations not subject to the higher tariffs. We believe that sustained increases in tariffs on imported goods, further increases in tariffs on imported goods, or the failure to resolve current international trade disputes could further decrease demand and have a material adverse effect on our business and operating results.
7
Table of Contents
The tariff environment has been dynamic in 2025, with changes occurring on an ongoing basis. We expect that additional developments will occur in the future, as a result of negotiations between the U.S. and trade partners and the recent ruling by the U.S. Supreme Court regarding legal challenges to certain of the tariffs including imposition of additional tariffs by the U.S. The actual impact of the tariffs is subject to a number of factors including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs, any countermeasures that the target countries may take, the result of negotiations between the U.S. and trade partners, how our suppliers and customers react, and any mitigating actions that may become available. In addition, lower courts and administrative processes will need to provide guidance with respect to refund-related questions with respect to the IEEPA tariffs paid prior to the U.S. Supreme Court decision.
Furthermore, compliance with export controls and implementation of additional tariffs may increase compliance costs and further affect our business and operating results.
We face risks related to heightened inflation, recession, financial and credit market disruptions and other economic conditions.
Our financial results, operations and prospects depend significantly on worldwide economic and geopolitical conditions, the demand for our products, and the financial condition of our customers and suppliers. Economic weakness and geopolitical uncertainty have in the past resulted, and may result in the future, in reduced demand for our products resulting in decreased sales, margins and earnings. We may not be able to fully mitigate the impact of inflation or increased tariffs through price increases, productivity initiatives and cost savings, which could have an adverse effect on our results of operations. In addition, if the U.S. economy enters a recession, we may experience sales declines which could have an adverse effect on our business, operating results and financial condition.
Similarly, disruptions in financial and/or credit markets have in the past impacted, and may in the future impact, our ability to manage normal commercial relationships with our customers, suppliers and creditors. Further, in the event of a recession or threat of a recession, our customers and suppliers may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or collect revenue or otherwise could harm our business. An economic or credit crisis could occur and impair credit availability and our ability to raise capital when needed. A disruption in the financial markets could impair our banking or other business partners, on whom we rely for access to capital. In addition, changes in tax or interest rates in the U.S. or other nations, whether due to recession, economic disruptions or other reasons, could have an adverse effect on our operating results.
Economic weakness and geopolitical uncertainty have in the past led us, and may in the future lead us to impair assets, take restructuring actions or adjust our operating strategy and reduce expenses in response to decreased sales or margins. In the past, we were not able to, and may in the future not be able to adequately adjust our cost structure in a timely fashion, which results in an adverse effect on our operating results and financial condition. Uncertainty about economic conditions may increase foreign currency volatility in markets in which we transact business, which could have an adverse effect on our operating results.
Volatility in and disruption to the global economic environment and changes in the regulatory and business environments in which we operate may have an adverse effect on our business, results of operations and financial condition.
The global trade environment remains highly dynamic and continues to evolve. Increased tariffs and any retaliatory actions could significantly increase the cost of our products and result in lower demand for our products, delivery delays, and terminations of orders by customers.
The commercial vehicle industry as a whole has been more adversely affected by volatile economic conditions than many other industries, as the purchase or replacement of commercial vehicles, which are durable items, may be deferred for many reasons. Changes in the regulatory and business environments in which we operate, including increased trade protectionism and tariffs such as those announced by President Trump during 2025, and any retaliatory counter measures by affected countries, may adversely affect our ability to sell our products and source materials needed to manufacture our products. In addition, tariffs could increase our costs for materials sourced outside the US which we have not always been able to pass along to our customers and could therefore adversely affect our results of operations. Furthermore, financial instability or bankruptcy at any of our suppliers or customers could disrupt our ability to manufacture our products and impair our ability to collect receivables, any or all of which may have an adverse effect on our business, results of operations and financial condition. In addition, some of our customers and suppliers may experience serious cash flow problems and, thus, may find it difficult to obtain financing, if financing is available at all. Any inability of customers to pay us for our products and services, or any demands by suppliers for different payment terms, or inability of our suppliers to supply us may adversely affect our results of operations and financial condition. Furthermore, our suppliers may not be successful in generating sufficient sales, restarting or ramping up production or securing alternate financing arrangements, and therefore may no longer be able to supply goods and services to us. In that
8
Table of Contents
event, we would need to find alternate sources for these goods and services, and there is no assurance we would be able to find such alternate sources on favorable terms, if at all. Disruption in our supply chain has had and could continue to have an adverse effect on our ability to manufacture and deliver our products on a timely basis, and thereby affect our results of operations.
The U.S. government has taken actions or made proposals that are intended to address trade imbalances or trade practices, specifically with China, among other countries, which include encouraging increased production in the United States. The current administration has begun implementing a more protectionist trade environment, including through measures such as the imposition of higher tariffs on imports into the U.S., the renegotiation of some U.S. trade agreements and other government regulations affecting trade between the U.S. and other countries where we conduct our business. These actions and proposals have resulted or could result in retaliatory actions by affected countries. Such changes could increase the price we pay for certain raw materials we import from such countries, for which we may not able to obtain alternative supply at equivalent or lower prices, reduce demand for our products in other countries and adversely impact the U.S. economy or certain sectors thereof or the economy of other countries in which we conduct operations, our industry and supply chain, all of which could have a material adverse effect on our business, financial condition and results of operations.
We may be unable to successfully implement our business strategy and, as a result, our businesses and financial position and results of operations could be adversely affected.
Our ability to achieve our business and financial objectives is subject to a variety of factors, many of which are beyond our control. For example, we may not be successful in implementing our strategy if unforeseen factors emerge diminishing the current levels or any future expected growth in the commercial vehicle or electric vehicle markets we supply or expect to penetrate, or we experience increased pressure on our margins. Any failure to successfully implement our business strategy could have an adverse effect on our business, results of operations and growth potential.
Circumstances associated with our divestiture strategy could adversely affect our results of operations and financial condition.
From time to time we evaluate the performance and strategic fit of our businesses and may decide to sell a business or product line based on such an evaluation. Divestitures, have in the past, and may in the future, result in significant write-offs, including those related to goodwill and other tangible and intangible assets, and such write offs can have an adverse effect on our results of operations and financial condition.
Our customer base is concentrated and the loss of business from a major customer or the discontinuation of particular commercial vehicle platforms could reduce our revenues.
Even though we may be selected as the supplier of a product by an OEM for a particular vehicle, our OEM customers issue blanket purchase orders, which generally provide for the supply of that customer’s annual requirements for that vehicle, rather than for a specific number of our products. If the OEM’s requirements are less than estimated, the number of products we sell to that OEM will be accordingly reduced. In addition, the OEM may terminate its purchase orders with us at any time. The loss of any of our large customers or the loss of significant business from any of these customers could have an adverse effect on our business, financial condition and results of operations. In addition, as of December 31, 2025, receivables from our top five customers represented approximately 46% of total receivables.
Our profitability could be adversely affected if the actual production volumes for our customers’ vehicles are significantly lower than expected or our costs are higher than expected.
We incur costs and make capital expenditures based in part upon estimates of production volumes for our customers’ vehicles. While we attempt to establish a price for our components and systems that will compensate for variances in production volumes, when the actual production of these vehicles is significantly less than anticipated, our gross margin on these products is adversely affected. Our OEM customers have historically had a significant amount of leverage over us. We enter into agreements with our customers at the beginning of a given platform’s life to supply products for that platform. Once we enter into such agreements, fulfillment of the supply requirements is our obligation for the entire production life of the platform, with terms generally ranging from five to seven years, and we have limited provisions to terminate such contracts. We are committed to supplying products to our customers at selling prices that may, with the benefit of hindsight, not be sufficient to cover the direct cost to produce such products, which may be as a result of factors such as, inflation, new tariffs or increased employment costs due to increasingly competitive labor markets or other factors. We cannot predict our customers’ demands for our products. If customers representing a significant amount of our revenues were to purchase materially lower volumes than expected, or if we are unable to keep our commitment under the agreements, or if our costs are higher than anticipated, there would be an adverse effect on our business, financial condition and results of operations.
9
Table of Contents
Additionally, we generally do not have terms in our customer agreements that guarantee that we will recoup the design and development costs that we incurred to develop a product. In other cases, we share the design costs with the customer and therefore we have some risk that not all the development costs that we incur will be recouped if the project does not go forward or if the business relationship is not as profitable as expected.
Many of our new and targeted customers are start-up or early-stage companies and these customers are at substantial risk that their businesses will not succeed.
Our success depends, in part, upon our ability to maintain or increase our market share. Many of our new business wins and targeted prospects are early-stage or start-up companies. Early-stage or start-up companies are at substantial risk that the company’s business will not succeed. If the customer’s business does not succeed or the customer experiences cash flow problems, the customer may not be able to find financing or may not be able to pay us for our products and services, which may adversely affect our results of operations and financial condition. In addition, our future estimates and projections contemplate a continued business relationship and sales to these early-stage or start-up companies. If one or more of these customers no longer purchase products or services from us in the future, our sales and revenue will be adversely effected. Finally, we may incur significant initial costs in order to meet the production demands of these new customers, and our ability to recoup those costs requires a longer-term business relationship with the customer. Therefore, a failure of an early-stage or start-up customer may result in our inability to recoup the initial costs we incurred to prepare for production of products for that customer, which could adversely affect our business, results of operations, growth prospects and financial condition.
We may be unable to successfully implement price increases to offset inflation or new tariffs and, as a result, our businesses and financial position and results of operations could be adversely affected.
We may not be able to implement customer price increases where margin on product is not meeting profitability targets. Failure to meet our profitability target may be the result of a variety of factors, such as fluctuations in our material, freight and labor costs, inflation, new or increased tariffs or other competitive conditions, which are beyond our control. For example, we expect our cost of goods sold will continue to be impacted by tariffs which increase the price of goods purchased and sold to customers. In the past, we have negotiated with our customers in an attempt to pass on a portion of the costs of tariffs to our customers, although there is significant uncertainty as to our ability to pass these costs, or a portion of these costs, along to our customers. Customers may refuse to pay increased prices that meet our profitability targets, re-source from other suppliers, or not issue purchase orders to us with large volumes. Any failure to successfully implement price increases in order to meet profitability targets could have an adverse effect on our business, results of operations and growth potential.
We are subject to certain risks associated with our foreign operations.
We have operations in the Mexico, China, United Kingdom, Czech Republic, Morocco, Ukraine, Australia, India and Thailand, which collectively accounted for approximately 38% of our total revenues for the year ended December 31, 2025. We expect our foreign operations to continue to account for a significant portion of our revenues for the foreseeable future. There are certain risks inherent in our international business activities including, but not limited to:
•the difficulty of enforcing agreements and collecting receivables through certain foreign legal systems;
•foreign customers, who may have longer payment cycles than customers in the U.S.;
•changes in the global trade environment, including potential deterioration in geopolitical or trade relations between countries;
•foreign currency exchange rate fluctuations affecting our ability to match revenue received with costs;
•tax rates in certain foreign countries, which may exceed those in the U.S., withholding requirements or the imposition of tariffs, exchange controls or other restrictions, including restrictions on repatriation, of foreign earnings;
•tariffs, duties or other costs attributable to the importation of raw materials, parts, products and services, which could impact sales and/or delivery of products and services outside the U.S. and/or impose increased costs on us, our supply chain or our customers;
•intellectual property protection difficulties;
•general economic and political conditions, along with major differences in business culture and practices, including the challenges of dealing with business practices that may impact the company’s compliance efforts, in countries where we operate;
•exposure to local social unrest, including any acts of war, terrorism, international tensions, conflicts or similar events;
•exposure to local minimum wage requirements;
•the difficulties associated with managing a large organization spread throughout various countries; and
10
Table of Contents
•complications in complying with a variety of laws and regulations related to doing business with and in foreign countries, some of which may conflict with U.S. law or may be vague or difficult to comply with, as well as U.S. laws affecting the activities of U.S. companies abroad.
Additionally, our international business activities are also subject to risks arising from violations of U.S. laws such as the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions, and various export control and trade embargo laws and regulations, including those which may require licenses or other authorizations for transactions relating to certain countries and/or with certain individuals identified by the U.S. government. If we fail to comply with applicable laws and regulations, we could suffer civil and criminal penalties that could have an adverse effect on our results of operations and financial condition.
Our business has been impacted and may continue to be impacted by geopolitical conditions such as international trade wars (including between the United States and China, Mexico and Canada), the military conflict in Israel and Gaza, the Russia-Ukraine conflict, cyber-attacks and increased political tensions in Europe, the Middle East and Asia. Currently, significant uncertainty surrounds the future trade relationships among the United States, China, Mexico and Canada. The U.S. government continues to make significant changes in U.S. trade policies that could negatively affect our business. Additionally, policies made by other countries, such as China, Mexico and Canada or their allies, could have an adverse effect on our results of operations and financial condition.
Decreased availability or increased costs of materials could affect both our ability to produce products as well as the cost of producing our products.
We purchase raw materials, fabricated components, assemblies and services from a variety of suppliers. Steel, aluminum, petroleum-based products, copper, resin, foam, fabrics, wire and wire components, electronics and electrical components account for the most significant portion of our raw material costs. Although we currently maintain alternative sources for most raw materials, from time to time, the prices and availability of these materials fluctuate due to global market demands and other considerations, which could impair the Company's ability to procure necessary materials, or increase the cost of such materials. We may be assessed surcharges on certain purchases of steel, copper and other raw materials. Inflationary and other increases in costs, including as a result of new or increased tariffs, or shortages of the various materials that are needed for us to produce our products are currently having an impact on our business which may continue for the foreseeable future. In addition, freight costs associated with shipping and receiving product are impacted by fluctuations in freight tonnage, freight hauler availability or capacity and the cost of oil and gas. We occasionally experience difficulty purchasing and obtaining timely delivery of certain raw materials required for our operations, which could have an adverse effect on our results of operations. In addition, to the extent we are unable to pass on the increased costs of raw materials, freight and labor to our customers, it could adversely affect our results of operations and financial condition.
We have invested substantial resources in markets where we expect growth and we may be unable to timely alter our strategies should such expectations not be realized.
Our future growth is dependent in part on us making the right investments at the right time in people, technology, product development, manufacturing capacity, and to expand into new markets including in electric vehicle markets. If we fail to realize expected rates of return on our investments, we may incur losses on such investments and be unable to timely redeploy the invested capital to take advantage of other markets, potentially resulting in lost market share to our competitors.
We cannot guarantee that we will be successful in leveraging our capabilities into new markets and thus, in meeting the needs of these new customers and competing favorably in these new markets.
Our inability to compete effectively in the highly competitive commercial vehicle component supply industry could result in lower prices for our products, loss of market share and reduced gross margins, which could have an adverse effect on our revenues and operating results.
The commercial vehicle component supply industry is highly competitive. Some of our competitors are companies that are larger and have greater financial and other resources than we do. In some cases, we compete with divisions of our OEM customers. Our products primarily compete on the basis of price, breadth of product offerings, product quality, technical expertise, development capability, product delivery and product service. Increased competition may lead to price reductions resulting in reduced gross margins and loss of market share.
We may be unable to successfully introduce new products and, as a result, our business, and financial condition and results of operations could be adversely affected.
Product innovations have been and will continue to be a part of our business strategy. We believe it is important for us to continue to meet our customers’ demands for product innovation, improvement and enhancement, including the continued
11
Table of Contents
development of new-generation products, and design improvements and innovations that improve the quality and efficiency of our products including manufacturing seats with airbags, seatbelts and other safety devices and improvements. However, such development will require us to continue to invest in research and development and sales and marketing. Such investments are subject to the risks generally associated with product development, including difficulty in gaining market acceptance, delays in product development and failure of products to operate properly. Additionally, we have exposure to excess costs as we are engaged in multiple development programs for new electric vehicles, each with unique designs and timelines. These electric vehicle programs require the use of a higher level of technical expertise with increased costs and the incremental cost is variable depending on the pace and success rate of the innovation process, the prototyping and mule build process, the production tooling process and then production ramp-up. In addition, our competitors may develop new products before us or may produce similar products that compete with our new products. We may, as a result of these factors, be unable to meaningfully focus on product innovation as a strategy and may therefore be unable to meet our customers’ demands for product innovation, which could have an adverse effect on our business, operating results and financial condition.
We rely on third parties for raw materials, parts, and components.
We source a variety of systems, components, raw materials and parts, including but not limited to top covers, fabricated steel, chemicals, seat-foam, air bag, air bag inflators, seat belts, and other components from third parties. From time to time these third-party items do not meet the quality standards that we desire, which could harm our reputation, cause delays and cause us to incur significant costs. Furthermore, we may be unable to source third-party items in sufficient quantities or at acceptable prices. We have recently experienced and may in the future experience difficulty sourcing certain raw materials, parts and components required for our operations, which has had and may in the future have an adverse effect on our results of operations.
We could experience disruption in our supply or delivery chain, which could cause one or more of our customers to halt or delay production.
We, as with other component manufactures in the commercial vehicle industry, sometimes ship products to the customers throughout the world so they are delivered on a “just-in-time” basis in order to maintain low inventory levels. Our suppliers (external suppliers as well as our own production sites) also sometimes use a similar method. This just-in-time method makes the logistics supply chain in the industries we serve complex and vulnerable to disruptions.
The potential loss of one of our suppliers or our own production sites could be caused by a myriad of factors. Additionally, as we expand in growth markets, the risk for such disruptions is heightened. The lack of even a small single subcomponent necessary to manufacture one of our products, for whatever reason, could force us to cease production, possibly for a prolonged period. In the event of a reduction or stoppage in production at any of our facilities, even if only temporary, or if we experience delays as a result of events that are beyond our control, delivery times to our customers could be severely affected. Any significant delay in deliveries to our customers could lead to increased returns or cancellations. Similarly, a potential quality issue could force us to halt deliveries. Even where products are ready to be shipped or have been shipped, delays may arise before they reach our customer. Our customers may halt or delay their production for the same reason if one of their other suppliers fails to deliver necessary components. This may cause our customers to suspend their orders or instruct us to suspend delivery of our products, which may adversely affect our financial performance. When we cease timely deliveries, we have to absorb our own costs for identifying and solving the root cause problem as well as expeditiously producing replacement components or products. Generally, we must also carry the costs associated with “catching up,” such as overtime and premium freight.
Additionally, if we are the cause for a customer being forced to halt production the customer may seek to recoup all of its losses and expenses from us. These losses and expenses could include consequential losses such as lost profits. Thus, any supply chain disruption, however small, could potentially cause the complete shutdown of an assembly line of one of our customers, and any such shutdown could expose us to claims for compensation. When a customer halts production because of another supplier failing to deliver on time, we may not be fully compensated, if at all, and therefore our business and financial results could be adversely affected.
In recent years, we experienced supply chain disruptions (including longer lead-times to procure parts from China) that caused volatility on our customers' production schedules and had a negative impact on our results.
If we are unable to recruit or retain senior management and other skilled personnel, our business, operating results and financial condition could be adversely affected.
Our operations depend to a large extent on the efforts of our senior management team as well as our ability to attract, train, integrate and retain highly skilled personnel. We seek to develop and retain an effective management team through the proper positioning of existing key employees and the addition of new management personnel where necessary. Retaining personnel
12
Table of Contents
with the right skills at competitive wages can be difficult in certain markets in which we are doing business, particularly those locations that are seeing much inbound investment and have highly mobile workforces. Additionally, attracting sufficiently well-educated and talented management, especially middle-management employees, in certain markets can be challenging.
We may not be able to retain our current senior management and other skilled personnel or retain similarly skilled personnel in the future. If we lose senior management or the services of our skilled workforce, or if we are unable to attract, train, integrate and retain the highly skilled personnel we need, our business, operating results and financial condition could be adversely affected.
We may be adversely impacted by labor strikes, work stoppages and other matters.
As of December 31, 2025, a majority of employees based in Mexico are unionized. In addition, approximately 62% of our employees of our European, Asian and Australian operations were represented by a shop steward committee, which may limit our flexibility in our relationship with these employees. We may encounter future unionization efforts or other types of conflicts with labor unions or our employees.
Many of our OEM customers and their suppliers also have unionized work forces. Work stoppages or slow-downs experienced by OEMs or their other suppliers could result in slow-downs or closures of assembly plants where our products are included in assembled commercial vehicles. In the event that one or more of our customers or their suppliers experience a material work stoppage, such work stoppage could have an adverse effect on our business.
The Company has exposure to cost premiums as we use temporary labor during demand ramp-ups which carries with it a temporary premium cost.
Our earnings may be adversely affected by changes to the carrying values of our tangible and intangible assets as a result of recording any impairment charges deemed necessary.
We are required to perform impairment tests whenever events and circumstances indicate the carrying value of certain assets may not be recoverable. We cannot accurately predict the amount and timing of any impairment of assets. A significant amount of judgment is involved in determining if an indication of impairment exists. Factors that may be considered in assessing whether long-lived assets may not be recoverable include a decline in our stock price or market capitalization, reduced estimates of future cash flows, the general economic environment, changes or downturns in our industry as a whole, termination of any of our customer contracts, restructuring efforts and general workforce reductions. A continued decline in our stock price may trigger an evaluation of the recoverability of the recorded goodwill and other long-lived assets. Any charge for impairment could adversely affect our reported net income and our stockholders’ equity.
We have taken, are taking, and may take future restructuring actions to realign and resize our production capacity and cost structure to meet current and projected operational and market requirements. Charges related to these actions or any further restructuring actions may have an adverse effect on our results of operations and financial condition. There can be no assurance that any current or future restructuring will be completed as planned or achieve the desired results. The failure to complete restructuring as planned could have an adverse effect our results of operations.
We have established and may establish in the future valuation allowances on deferred tax assets. These changes may have an adverse effect on our results of operations and financial position.
Additionally, from time to time in the past, we have recorded asset impairment losses relating to specific plants and operations. Generally, we record asset impairment losses when we determine that our estimates of the future undiscounted cash flows from an operation will not be sufficient to recover the carrying value of that facility’s building, fixed assets and production tooling. There can be no assurance that we will not incur charges in the future as changes in economic or operating conditions impacting the estimates and assumptions could result in additional impairment. Any future impairments may adversely affect our results of operations.
Our inability to successfully achieve operational efficiencies could result in the incurrence of additional costs and expenses that could adversely affect our reported earnings.
As part of our business strategy, we continuously seek ways to lower costs, improve manufacturing efficiencies and increase productivity in our existing operations and intend to apply this strategy to those operations acquired through acquisitions. In addition, we incur restructuring charges periodically to close facilities, such as lease termination charges, severance charges and impairment charges of leasehold improvements and/or machinery and equipment, as we continue to evaluate our manufacturing footprint to improve our cost structure and remove excess, underperforming assets, or assets that no longer fit our goals. If we decide to close or consolidate facilities, we may face execution risks which could adversely affect our ability to serve our
13
Table of Contents
customers. Further, we may be unsuccessful in achieving these objectives which could adversely affect our operating results and financial condition.
The geographic profile of our taxable income could adversely impact our tax provision and therefore our results of operations.
Our future tax provision could be adversely affected by the geographic profile of our taxable income and by changes in the valuation of our deferred tax assets and liabilities. Our results could be adversely impacted by significant changes in our effective tax rate. Additionally, any changes to manufacturing activities could result in significant changes to our effective tax rate related to products manufactured either in the United States or in international jurisdictions. If the United States or another international jurisdiction implements a tax change related to products manufactured in a particular jurisdiction where we do business, our results could be adversely affected.
In 2021, as part of the Organization for Economic Co-operation and Development's ("OECD") Inclusive Framework, 140 member countries agreed to the implementation of the Pillar Two Global Minimum Tax ("Pillar Two") of 15%. The OECD continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. These changes, when enacted by various countries in which we do business, may increase our taxes in these countries. Changes to these and other areas in relation to international tax reform, including future actions taken by foreign governments in response to Pillar Two, could increase uncertainty and may adversely affect our tax rate and cash flow in future years. We continue to monitor the adoption of the OECD Pillar Two global minimum tax rules in each of our tax jurisdictions to evaluate its impact on our effective income tax rate. Pillar Two did not have a material impact to our effective tax rate for the year ended December 31, 2025.
Exposure to currency exchange rate fluctuations on cross border transactions and translation of local currency results into United States dollars could adversely impact our results of operations.
Cross border transactions, both with external parties and intercompany relationships, result in increased exposure to foreign currency fluctuations. The strengthening or weakening of the United States dollar may result in favorable or unfavorable foreign currency translation effects in as much as the results of our foreign locations are translated into United States dollars. This could adversely impact our results of operations.
We have only limited protection for our proprietary rights in our intellectual property, which makes it difficult to prevent third parties from infringing upon our rights and our operations could be limited by the rights of others.
Our success depends to a certain degree on our ability to protect our intellectual property and to operate without infringing on the proprietary rights of third parties. While we have been issued patents and have registered trademarks with respect to many of our products, our competitors could independently develop similar or superior products or technologies, duplicate our designs, trademarks, processes or other intellectual property or design around any processes or designs on which we have or may obtain patents or trademark protection. In addition, it is possible third parties may have or acquire licenses for other technology or designs that we may use or desire to use, requiring us to acquire licenses to, or to contest the validity of, such patents or trademarks of third parties. Such licenses may not be made available to us on acceptable terms, if at all, or we may not prevail in contesting the validity of third party rights.
As we diversify and globalize our geographic footprint, we may encounter laws and practices in emerging markets that are not as stringent or enforceable as those present in developed markets, and thus incur a higher risk of intellectual property infringement, which could have an adverse effect on our results of operations.
Our products may be susceptible to claims by third parties that our products infringe upon their proprietary rights.
As the number of products in our target markets increases and the functionality of these products further overlaps, we may become increasingly subject to claims by a third party that our technology infringes such party’s proprietary rights. Regardless of their merit, any such claims could be time consuming and expensive to defend, may divert management’s attention and resources, could cause product shipment delays and could require us to enter into costly royalty or licensing agreements. If successful, a claim of infringement against us and our inability to license the infringed or similar technology and/or product could have an adverse effect on our business, operating results and financial condition.
We may be subject to product liability claims, recalls or warranty claims, which could be expensive, damage our reputation and result in a diversion of management resources.
As a supplier of products and systems, we face an inherent business risk of exposure to product liability claims in the event that our products, or the equipment into which our products are incorporated, malfunction and result in injury to person or property
14
Table of Contents
or death. Product liability claims could result in significant losses as a result of expenses incurred in defending claims or the award of damages.
In addition, we may be required to participate in recalls involving systems or components sold by us if any prove to be defective, or we may or our customers may voluntarily initiate a recall and we have to make payments related to such recalls as a result of various industry or business practices, contractual obligations or the need to maintain good customer relationships. Such a recall would result in a diversion of management resources. While we maintain product liability insurance generally with a self-insured retention amount, we cannot assure you that it will be sufficient to cover all product liability claims, that such claims will not exceed our insurance coverage limits or that such insurance will continue to be available on commercially reasonable terms, if at all. Any product liability claim brought against us could have an adverse effect on our results of operations.
We warrant the workmanship and materials of many of our products under limited warranties and have entered into warranty agreements with certain customers that warranty certain of our products in the hands of customers of our customers, in some cases for many years. From time to time, we receive product warranty claims from our customers, pursuant to which we have or may be required to bear costs of repair or replacement of certain of our products. Accordingly, we are subject to risk of warranty claims in the event that our products do not conform to our customers’ specifications or, in some cases in the event that our products do not conform to their customers’ expectations. It is possible for warranty claims to result in costly product recalls, significant repair costs and damage to our reputation, all of which could adversely affect our results of operations.
Our businesses are subject to statutory environmental and safety regulations in multiple jurisdictions, and the impact of any changes in regulation and/or the violation of any applicable laws and regulations by our businesses could result in an adverse effect on our financial condition and results of operations.
We are subject to foreign, federal, state, and local laws and regulations governing the protection of the environment and occupational health and safety, including laws regulating air emissions, wastewater discharges, generation, storage, handling, use and transportation of hazardous materials; the emission and discharge of hazardous materials into the soil, ground or air; and the health and safety of our colleagues. We are also required to obtain permits from governmental authorities for certain of our operations. We cannot assure you that we are, or have been, in complete compliance with such environmental and safety laws, and regulations. Certain of our operations generate hazardous substances and wastes. If a release of such substances or wastes occurs at or from our properties, or at or from any offsite disposal location to which substances or wastes from our current or former operations were taken, or if contamination is discovered at any of our current or former properties, we may be held liable for the costs of cleanup and for any other response by governmental authorities or private parties, together with any associated fines, penalties or damages. In most jurisdictions, this liability would arise whether or not we had complied with environmental laws governing the handling of hazardous substances or wastes.
Several of our facilities are either certified as, or are in the process of being certified as ISO 9001, 14000, 14001 or TS16949 (the international environmental management standard) compliant or are developing similar environmental management systems. We have made, and will continue to make, capital and other expenditures to implement such environmental programs and comply with environmental requirements.
The environmental laws to which we are subject have become more stringent over time, and we could incur material costs or expenses in the future to comply with environmental laws. If we violate or fail to comply with these laws and regulations or do not have the requisite permits, we could be fined or otherwise sanctioned by regulators. In some instances, such a fine or sanction could have an adverse effect on our financial condition and results of operations.
We may be unable to complete strategic acquisitions, or we may encounter unforeseen difficulties in integrating acquisitions.
We pursue acquisition targets that will allow us to continue to expand into new geographic markets, add new customers, provide new products, manufacturing and service capabilities and increase penetration with existing customers. However, we expect to face competition for acquisition candidates, which may limit the number of our acquisition opportunities and may lead to higher acquisition prices. Moreover, acquisition of businesses may require additional debt and/or equity financing, perhaps resulting in additional leverage and/or shareholder dilution. The covenants in our debt instruments further limit our ability to complete acquisitions. There can be no assurance we will find attractive acquisition candidates or successfully integrate acquired businesses into our existing business. If the expected synergies from acquisitions do not materialize or we fail to successfully integrate such new businesses into our existing businesses, our results of operations could be adversely affected.
15
Table of Contents
Risks Related to Our Indebtedness
A credit rating downgrade could impair our ability to obtain additional debt financing on favorable terms, if at all, and significantly reduce the trading price of our common stock.
During 2024, we experienced a credit rating downgrade which affected the amount, type and terms of capital financings we have been able to obtain. Factors affecting our credit rating include, among others, our financial performance, success in raising sufficient equity capital, adverse changes in our debt and fixed charge coverage ratios, our capital structure, level of indebtedness and future changes in the regulatory framework applicable to our operators and industry. We may be unable to maintain our current credit ratings, and in the event that our current credit ratings deteriorate, a ratings agency downgrades our credit rating or places our rating under watch or review for possible downgrade, we would likely incur higher borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments and the trading price of our common stock may decline.
The agreements governing our credit facilities contain covenants that may restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions. If we are unable to comply with these covenants, our business, results of operations and liquidity could be adversely affected.
Our senior secured revolving and term loan credit facilities require us to maintain certain financial ratios and to comply with various operational and other covenants. If we do not comply with those covenants, we are precluded from borrowing under the senior secured revolving credit facility, which could have an adverse effect on our business, financial condition and liquidity. If we are unable to borrow under our senior secured revolving credit facility, we will need to meet our capital requirements using other sources; however, alternative sources of liquidity may not be available on acceptable terms. In addition, if we fail to comply with the covenants set forth in our credit facilities, the lenders could declare an event of default and cause all amounts outstanding to be due and payable immediately. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding credit facilities or other debt instruments we may have in place from time to time, either upon maturity or if accelerated, upon an event of default, or that we would be able to refinance or restructure the payments on the credit facilities or such other debt instruments on acceptable terms.
In addition, the agreements governing the senior secured revolving and term loan credit facilities contain covenants that, among other things, restrict our ability to:
•incur liens;
•incur or assume additional debt or guarantees or issue preferred stock;
•prepay, or make redemptions and repurchases of, subordinated debt;
•make loans and investments;
•engage in mergers, acquisitions, asset sales, sale/leaseback transactions and transactions with affiliates;
•place restrictions on the ability of subsidiaries to pay dividends or make other payments to the issuer;
•change the business conducted by us or our subsidiaries; and
•amend the terms of subordinated debt.
Our indebtedness may adversely affect our cash flow and our ability to operate our business, remain in compliance with debt covenants and make payments on our indebtedness.
Our indebtedness, combined with our lease and other financial obligations and contractual commitments could have other important consequences to our stockholders, including:
•making it more difficult for us to satisfy our obligations with respect to our indebtedness, including the revolving credit facility, term loan and our other debt instruments, and any failure to comply with the obligations of any of our debt instruments, including financial and other restrictive covenants, could result in an event of default under the revolving credit facility or term loan and the governing documents of our debt instruments;
•the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness;
•making us more vulnerable to adverse changes in general economic, industry and competitive conditions;
•require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flows to fund working capital, capital expenditures, acquisitions and other general corporate purposes;
16
Table of Contents
•limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
•placing us at a competitive disadvantage compared to our competitors that have less debt; and
•limiting our ability to borrow additional amounts for working capital, capital expenditures, acquisitions, debt service requirements, or execution of our business strategy or other purposes.
Any of these factors could have an adverse effect on our business, financial condition and results of operations. Our ability to make payments on our indebtedness depends on our ability to generate cash in the future. If we do not generate sufficient cash flow to meet our debt service and working capital requirements, we may need to seek additional financing or sell assets. This may make it more difficult for us to obtain financing on terms that are acceptable to us, or at all. Without any such financing, we could be forced to sell assets to make up for any shortfall in our payment obligations under unfavorable circumstances. If necessary, we may not be able to sell assets quickly enough or for sufficient amounts to enable us to meet our obligations.
Risks Related to Our Common Stock
Our operating results, revenues and expenses may fluctuate significantly from quarter-to-quarter or year-to-year, which could have an adverse effect on the market price of our common stock.
Our operating results, revenues and expenses have in the past varied and may in the future vary significantly from quarter-to-quarter or year-to-year. These fluctuations have in the past and could have in the future an adverse effect on the market price of our common stock.
We base our operating expense budgets in large part on expected revenue trends. However, certain of our expenses are relatively fixed and as such we may be unable to adjust expenses quickly enough to offset any unexpected revenue shortfall. Accordingly, any significant change in revenue may cause significant variation in operating results in any quarter or year.
It is possible that in one or more future quarters or years, our operating results may be below the expectations of public market analysts and investors and may result in changes in analysts’ estimates. In such events, the trading price of our common stock may be adversely affected.
Our common stock has historically had a low trading volume with limited analyst coverage and, as a result, any sale of a significant number of shares may depress the trading price of our stock; stockholders may be unable to sell their shares above the purchase price.
Our common stock is traded on the NASDAQ Global Select Market under the symbol “CVGI.” The trading volume and analyst coverage of our common stock has historically been limited as compared to common stock of an issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share prices. Because of the limited trading volume, holders of our securities may not be able to sell quickly any significant number of such shares, and any attempted sale of a large number of our shares may have an adverse impact on the price of our common stock. Additionally, because of the limited number of shares being traded, and changes in stock market analyst recommendations regarding our common stock or lack of analyst coverage, the price per share of our common stock is subject to volatility and may continue to be subject to rapid price swings in the future that may result in stockholders’ inability to sell their common stock at or above purchase price.
Future sales and issuances of our Common Stock or rights to purchase Common Stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.
We may issue additional securities, including shares of Common Stock and rights to purchase Common Stock. Future sales and issuances of our Common Stock or rights to purchase our Common Stock could result in substantial dilution to our existing stockholders and could potentially dilute future net income per share. We may issue and sell Common Stock in a manner as we may determine from time to time. If we sell any such Common Stock in subsequent transactions, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our Common Stock.
Provisions in our charter documents and Delaware law could discourage potential acquisition proposals, could delay, deter or prevent a change in control and could limit the price certain investors might be willing to pay for our stock.
Certain provisions of our certificate of incorporation and by-laws may inhibit changes in control of our company not approved by our board of directors. These provisions include:
•a prohibition on stockholder action through written consents;
17
Table of Contents
•a requirement that special meetings of stockholders be called only by the board of directors;
•advance notice requirements for stockholder proposals and director nominations;
•limitations on the ability of stockholders to amend, alter or repeal the by-laws; and
•the authority of the board of directors to issue, without stockholder approval, preferred stock and common stock with such terms as the board of directors may determine.
We are also afforded the protections of Section 203 of the Delaware General Corporation Law, which would prevent us from engaging in a business combination with a person who becomes a 15% or greater stockholder for a period of three years from the date such person acquired such status unless certain board or stockholder approvals were obtained. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock, discourage potential acquisition proposals and delay, deter or prevent a change in control.
Other Risk Factors
Security breaches and other disruptions could compromise our information systems and expose us to liability, which could cause our business and reputation to suffer.
We rely on technology for the operation of our business. Systems failures or outages could compromise our ability to conduct business and hurt our relationships with our business partners and customers. In the event of a disaster, such as a natural catastrophe, a pandemic, civil unrest, an industrial accident, a cyber-attack, a blackout, a terrorist attack (including conventional, nuclear, biological, chemical or radiological) or war, systems upon which we rely may be inaccessible to our employees for an extended period of time. While technology can streamline many business processes and ultimately reduce the costs of operations, technology initiatives present short-term cost and also have implementation and operational risks. In addition, we may have inaccurate expense projections, implementation schedules or expectations regarding the effectiveness of the end product. These issues could escalate over time. If we were unable to find and retain associates with key technical knowledge, our ability to develop and deploy key technology solutions could be hampered.
In the ordinary course of our business, we collect and store sensitive data, including intellectual property, financial information, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees, in our data centers and on our networks. Threats to data security, including unauthorized access and cyberattacks, rapidly emerge and change, exposing us to additional costs for protection or remediation and competing time constraints to secure our data in accordance with customer expectations and statutory and regulatory requirements. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Like most companies, our systems are under attack on a routine basis. Our systems have been, and will likely continue to be, subject to viruses or other malicious codes, unauthorized access, cyber attacks, cyber frauds or other computer related penetrations. While we take what we believe to be commercially reasonable measures to keep our systems and data secure, it is difficult or impossible to defend against every risk being posed by changing technologies as well as criminal and state-sponsored cybercrime and cyber threats. While we are not aware of having experienced a material breach of our cybersecurity systems in the recent past, administrative, internal accounting and technical controls as well as other preventative actions may be insufficient to prevent security breaches to our systems or those of third parties with whom we do business. Increasing sophistication of cyber criminals and terrorists make keeping up with new threats difficult and could result in a breach. Patching and other measures to protect existing systems and servers could be inadequate, especially on systems that are being retired. Controls employed by our U.S., off-shore and cloud vendors could prove inadequate. We could also experience a breach by intentional or negligent conduct on the part of associates or other internal sources. Our systems and those of our third-party vendors may become vulnerable to damage or disruption due to circumstances beyond our or their control, such as from catastrophic events, power anomalies or outages, natural disasters, network failures, and viruses, ransomware and malware. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disrupt our operations and the services we provide to customers, damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business and our results of operations.
Our implementation of a new ERP system may adversely affect our business and results of operations or the effectiveness of our internal control over financial reporting.
We are in the process of implementing a new enterprise resource planning ("ERP") system, as part of a plan to integrate and upgrade our systems and processes. ERP implementations are complex, labor intensive, and time-consuming projects and involve substantial expenditures on system software and implementation activities. The ERP system is critical to our ability to provide important information to our management, obtain and deliver products, provide services and customer support, fulfill
18
Table of Contents
contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, and otherwise operate our business. ERP implementations also require transformation of business and financial processes in order for the company to benefit from a robust ERP system. Any such implementation involves risks inherent in the conversion to a new computer system, including, but not limited to, loss of information and potential disruption to our normal operations. The implementation and maintenance of the new ERP system has required, and will continue to require, the investment of significant financial and human resources, the re-engineering of processes of our business, and the attention of many employees who would otherwise be focused on other aspects of our business. Our results of operations could be adversely affected if we experience time delays or cost overruns during the ERP implementation process. Any significant weakness in the design and implementation of the new ERP system could also result in potentially significantly higher costs than we anticipate spending and could adversely affect our ability to operate our business and otherwise negatively impact our financial reporting and internal control. Any of these consequences could have a material adverse effect on our results of operations and financial condition.
Pandemics, epidemics, disease outbreaks and other public health crises have disrupted our business and operations, and future public health crises could materially adversely impact our business, financial condition, liquidity and results of operations.
Pandemics, epidemics or disease outbreaks in the U.S. or globally, such as the COVID-19 pandemic, have previously disrupted, and may in the future disrupt, our business, which could materially affect our results of operations, financial condition, liquidity and future expectations. Any such events may adversely impact our global supply chain and global manufacturing operations and cause us to suspend our operations in the affected markets. In particular, we could experience, among other things: (1) continued or additional global supply disruptions; (2) labor disruptions or shortages; (3) an inability to manufacture; (4) an inability to sell to our customers; (5) a decline in customer demand; and (6) an impaired ability to access credit and the capital markets. Any new public health crisis could have a material impact on our business, financial condition and results of operations going forward.
Item 1B.Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws.
Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes. Cybersecurity risks related to our business, technical operations, privacy and compliance issues are identified and addressed through a multi-faceted approach including third party assessments, internal IT Audit, IT security, governance, risk and compliance reviews. To defend, detect and respond to cybersecurity incidents, we, among other things: conduct proactive privacy and cybersecurity reviews of systems and applications, audit applicable data policies, perform penetration testing using external third-party tools and techniques to test security controls, conduct employee training, monitor emerging laws and regulations related to data protection and information security and implement appropriate changes.
Security events and data incidents are evaluated, ranked by severity and prioritized for response and remediation. Incidents are evaluated to determine materiality as well as operational and business impact, and reviewed for privacy impact.
Cybersecurity risks are evaluated when determining the selection and oversight of applicable third-party service provider risks when handling and/or processing our employee, business or customer data. In addition to new vendor onboarding, we perform risk management during third-party cybersecurity compromise incidents to identify and mitigate risks to us from third-party incidents.
We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “Security breaches and other disruptions could compromise our information systems and expose us to liability, which could cause our business and reputation to suffer” included as part of our risk factor disclosures at Item 1A of this Annual Report on Form 10-K.
19
Table of Contents
Cybersecurity Governance
Cybersecurity is an important part of our risk management processes and an area of focus for our Board and management. Our Audit Committee is responsible for the oversight of risks from cybersecurity threats.Members of the Audit Committee receive updates periodically from senior management regarding matters of cybersecurity. This includes existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents (if any) and status on key information security initiatives. Our Board members also engage in ad hoc conversations with management on cybersecurity-related news events and discuss any updates to our cybersecurity risk management and strategy programs.
Our cybersecurity risk management and strategy processes are overseen by our CFO and CLO. These individuals are informed about, and monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan, and report to the Audit Committee on any appropriate items.
Item 2.Properties
Our corporate office is located in New Albany, Ohio. Several of our facilities are located near our OEM customers to reduce distribution costs, reduce risk of interruptions in our delivery schedule, further improve customer service and provide our customers with reliable delivery of products and services. We have five owned and 22 leased principal facilities. We consider our properties to generally be in good condition, well maintained, and suitable and adequate to meet our business requirements for the foreseeable future. We do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities. Our owned domestic facilities are subject to liens securing our obligations under our revolving credit facility and term loan credit facility as described in Note 3, Debt, to our consolidated financial statements in Item 8 in this Annual Report on Form 10-K.
Utilization of our facilities varies with North American, European, Asian and Australian commercial vehicle production and general economic conditions in the regions. All locations are principally used for manufacturing, assembly, distribution or warehousing, except for our New Albany, Ohio and Chihuahua, Mexico facilities, which are principally administrative offices, and the research and development facility in Phoenix, AZ.
Item 3.Legal Proceedings
We are subject to various legal proceedings and claims arising in the ordinary course of business, including, but not limited to, product liability claims, customer and supplier disputes, service provider disputes, examinations by taxing authorities, employment disputes, workers’ compensation claims, unfair labor practice charges, OSHA investigations, intellectual property disputes and environmental claims arising out of the conduct of our businesses. 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 are not expected to have a material adverse impact on the consolidated financial position, results of operations, stockholders' equity or cash flows; however, such matters are subject to many uncertainties and the outcomes of individual matters are not predictable with any degree of assurance.
Item 4.Mine Safety Disclosures
Not applicable.
20
Table of Contents
PART II
21
Table of Contents
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the NASDAQ Global Select Market under the symbol “CVGI.”
As of March 10, 2026, there were approximately 142 holders of record of our outstanding common stock.
We have not declared or paid any dividends to the holders of our common stock in the past and do not anticipate paying dividends in the foreseeable future. Any future payment of dividends is within the discretion of the Board of Directors and will depend upon, among other factors, the capital requirements, operating results and financial condition of CVG.
The following graph compares the cumulative five-year total return to holders of CVG’s common stock to the cumulative total returns of the NASDAQ Composite Index, our Legacy Peer Group, and New Peer Group. The composition of our Legacy Peer Group and our New Peer Group are discussed below. The graph assumes that the value of the investment in the Company’s common stock, in the legacy peer group, in the new peer group, and the index (including reinvestment of dividends) was $100 on December 31, 2020 and tracks it through December 31, 2025.
The legacy peer group includes Altra Industrial Motion Corp., American Railcar Industries Inc., ASTEC Industries Inc., Columbus McKinnon Corp., Dorman Products Inc., EnPro Industries, Federal Signal Corp., Freightcar America Inc., Gentherm Inc., L.B. Foster Company, LCI Industries, Modine Manufacturing, Shiloh Industries, Spartan Motors Inc., Standard Motor Products Inc., Stoneridge Inc., and Supreme Industries (the "Legacy Peer Group"). Shiloh Industries was purchased by MiddleGround Capital LLC and is reported as part of the peer group only through 2020.
The new peer group includes Altra Industrial Motion Corp., ASTEC Industries Inc., Blue Bird Corp., Columbus McKinnon Corp., Cooper-Standard Holdings Inc., EnPro Industries, Federal Signal Corp., Gentherm Inc., L.B. Foster Company, Modine Manufacturing, Motorcar Parts of America, Inc., Myers Industries, Inc., NN Inc., Standard Motor Products Inc., Stoneridge Inc., Superior Industries International Inc., The Shyft Group Inc., and Wabash National Corp (the "New Peer Group").
The information in the graph and table above is not “solicitation material”, is not deemed “filed” with the Securities and Exchange Commission and is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as
22
Table of Contents
amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this annual report, except to the extent that we specifically incorporate such information by reference.
We did not repurchase any of our common stock on the open market during 2025. Our employees surrendered 157,974 shares of our common stock in 2025 to satisfy tax withholding obligations on the vesting of restricted stock awards issued under our 2020 Equity Incentive Plan. The following table sets forth information in connection with purchases made by, or on behalf of, us or any affiliated purchaser, of shares of our common stock during the period ended December 31, 2025:
No other shares were surrendered during the year ended December 31, 2025.
Unregistered Sales of Equity Securities
We did not sell any equity securities during 2025 that were not registered under the Securities Act of 1933, as amended.
Item 6.[Reserved]
23
Table of Contents
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis in conjunction with the information set forth in our consolidated financial statements and the notes thereto included in Item 8 in this Annual Report on Form 10-K. The statements in this discussion regarding industry outlook, our long-term strategy, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. See “Forward-Looking Information” on page ii of this Annual Report on Form 10-K. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described under “Item 1A - Risk Factors.” Our actual results may differ materially from those contained in or implied by any forward-looking statements.
Business Overview
CVG is a global provider of systems, assemblies and components to the global commercial vehicle market, and the electric vehicle markets. We deliver real solutions to complex design, engineering and manufacturing problems while creating positive change for our customers, industries, and communities we serve.
We have manufacturing operations in the United States, Mexico, China, United Kingdom, Czech Republic, Ukraine, Morocco, Thailand, India and Australia. Our products are primarily sold in North America, Europe, and the Asia-Pacific region.
We primarily manufacture customized products to meet the requirements of our customer. We believe our products are used by a majority of the North American Commercial Truck markets, many construction and agriculture vehicle OEMs, parts and service dealers and distributors.
Commercial Trends in the Global Seating and Trim Systems and Components Segments
Demand for our products may be driven by preferences of the end-user of the vehicle, particularly with respect to heavy-duty trucks in North America. Heavy-duty truck OEMs generally dictate the specifications of component parts that will be used to manufacture the vehicle, including a wide variety of cab interior styles and colors, brand and type of seats, type of seat fabric and color, and interior styling. Certain of our products are only utilized in heavy-duty trucks, such as our storage systems, sleeper boxes and privacy curtains. To the extent that demand for higher content vehicles increases or decreases, our revenues and gross profit will be impacted positively or negatively.
Current trends include future adoption of electric vehicles in the commercial truck segment. Commercial truck makers are developing electric models of all classes of trucks and buses in their fleets. This has created an increased number of platform opportunities relative to historical trends of platform changes. The Company competes to retain its existing positions on platforms that are getting refreshed, competitively win new positions on platforms on which it is not the incumbent supplier, and gain first fit positions on new Electric Vehicle platforms. The global truck market is evolving to include many offerings aimed at low emissions and less impact on the environment.
In general, demand for our heavy-duty (or "Class 8") truck products is generally dependent on the number of new heavy-duty trucks manufactured in North America, which in turn is a function of general economic conditions, supply chain constraints, interest rates, changes in government regulations, consumer spending, fuel costs, freight costs, fleet operators' financial health and access to capital, used truck prices and our customers’ inventory levels. New heavy-duty truck demand has historically been cyclical and is particularly sensitive to the industrial sector of the economy, which generates a significant portion of the freight tonnage hauled by commercial vehicles.
North American heavy-duty truck production was 251,247 units in 2025. According to a February 2026 report by ACT Research, a publisher of industry market research, North American Class 8 production levels are expected to increase to approximately 260,000 units in 2026. ACT Research estimated that the average age of active North American Class 8 trucks was 5.8 years in 2025. As vehicles age, maintenance costs typically increase. ACT Research forecasts that the vehicle age will decline as aging fleets are replaced.
North American medium-duty (or "Class 5-7") truck production was 195,522 units in 2025. According to a February 2026 report by ACT Research, North American Class 5-7 truck production is expected to increase to approximately 197,000 units in 2026. We primarily participate in the class 6 and 7 portion of the medium-duty truck market.
Commercial Trends in the Global Electrical Systems Segment
Demand for our Global Electrical Systems products, such as wire harnesses, is primarily driven by construction and agriculture equipment vehicle production. Demand for new vehicles in the global construction and agriculture equipment market generally follows certain economic conditions around the world. Our products are primarily used in the medium- and heavy-duty construction and agriculture equipment market (vehicles weighing over 12 metric tons). Demand in the medium- and heavy-
24
Table of Contents
duty construction and agriculture equipment market is typically related to the level of large scale infrastructure development projects, such as highways, dams, harbors, hospitals, airports and industrial development, as well as activity in the mining, forestry and commodities industries.
A developing trend that may have a favorable impact on our Global Electrical Systems segment is the expectation that autonomous, self-driving cars are expected to become more common with continued advancements in technology, including applications such as last mile delivery. Demand for autonomous vehicles will contribute to higher electrical and electronic content per vehicle and increased complexity in vehicle wiring architectures. As vehicles incorporate additional sensors, connectivity features, and electronic systems, demand is expected to increase for more complex wire harness solutions supporting power distribution, data transmission, and safety-related functions. This trend may create opportunities for suppliers, like us, with capabilities in advanced design, engineering, and manufacturing of integrated wiring systems. The timing and extent of adoption of these technologies remain uncertain and are influenced by factors such as regulatory requirements, technology readiness, infrastructure development, and overall vehicle production levels. Changes in vehicle mix, platform design, or customer demand could impact volumes and content levels and, in turn, affect demand for the Company’s products.
Other Key Developments
The Company announced on June 27, 2025, it had closed on $210 million in senior secured credit facilities, consisting of (i) a $95 million senior secured Term Loan with TCW Group, as agent, and (ii) a $115 million senior secured asset-based revolving credit facility with Bank of America, N.A., as agent. Obligations under the new senior secured credit facilities will mature on June 27, 2030, with the ABL revolving credit facility springing to 91 days prior to the maturity of the Term Loan or third-party subordinated debt.
In connection with the financing, TCW Group affiliates received five-year warrants for the purchase of up to 3,934,776 shares of the company’s common stock, issued in two equal tranches. The tranches of warrants have an exercise price of $1.52 and $2.07 per share, respectively. Until the fourth anniversary after issuance, the Company has the right to repurchase up to 50% of each tranche of warrants at a price equal to $1.40 or $1.00 per share, respectively, above the applicable exercise price. Upon a refinancing of the new credit agreement, the holders can require the Company to repurchase up to 50% of each tranche at a price equal to the price of the common stock at the time of repurchase less the exercise price. The warrants contain customary anti-dilution adjustments. The Company has provided the holders with certain information and registration rights, including filing a registration statement within 45 days to register the resale of the shares underlying the warrants.
The Company announced a new organizational structure designed to enhance alignment with its customers and end markets, effective January 1, 2025. Under this new structure, CVG reorganized its vertical business units into the following three operating divisions and reporting segments: Global Electrical Systems, Global Seating, Trim Systems and Components. As part of this realignment, the Company’s Aftermarket & Accessories business unit was absorbed in these three segments. Its seating and electrical portfolio transitioned to Global Seating and Global Electrical Systems, respectively. Its wiper systems became part of the newly formed Trim Systems and Components business unit in addition to the trim and components businesses from the prior Vehicle Solutions segment.
We are navigating through several challenging external factors which create uncertainty and volatility in our end markets, including, but not limited to, geopolitical dynamics, new and changing tariff actions and responses, tax regulation and fluctuating foreign exchange rates. We expect the Company’s cost of goods sold will continue to be impacted by tariffs which increase the price of materials purchased and products sold to customers. In the past, we have negotiated with our customers in an attempt to pass on a portion of the increased costs resulting from the tariffs to our customers, although there is significant uncertainty as to our ability to pass these costs, or a portion of these costs, along to our customers. Geopolitical uncertainties will continue to create a challenging operating environment. We continue to closely monitor the situation and are prepared to remain agile in responding to any new developments. In addition, lower courts and administrative processes will need to provide guidance with respect to refund-related questions with respect to the IEEPA tariffs paid prior to the recent U.S. Supreme Court decision.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”), which includes a broad range of tax reform provisions, was signed into law in the United States. Key provisions of the bill include, but are not limited to, immediate expensing of R&D expenditures, restoration and expansion of 100% bonus depreciation and permanent reinstatement of the EBITDA limitation for the calculation of the 163(j) business interest expense deduction. Additionally, the bill extends and modifies certain international tax provisions of the 2017 Tax Cuts and Jobs Act that were set to expire at the end of 2025. The tax provisions in OBBBA did not have a material impact on the Company’s consolidated financial statements or results of operations.
25
Table of Contents
Our Long-term Strategy
The Company's long-term strategy is to increase our sales, profits and shareholder value by growing our Global Electrical Systems segment to be our largest business while financially optimizing its core legacy businesses, organically growing in targeted areas, strengthening our product portfolio, increasing our margins and evaluating opportunities to add to our businesses through a focused M&A program. The Company expects to diversify its revenue and profits by product, customer, platform, and end market with a goal of becoming less cyclical and less customer concentrated while strengthening / enhancing current positions, entering new markets, developing relationships with new customers, and enhancing service to our customers, leading to increased return to our stockholders. Our products include electrical wire harnesses, seating systems, plastic components, mirrors, wipers and other accessories.
We have a long-term strategy to globally optimize our cost structure through manufacturing process enhancements, low cost footprint and global sourcing. Our Board and management periodically and from time to time, review and evaluate our short-term and long-term strategies, as well as potential strategic alternatives, to enhance shareholder value. These strategic alternatives may include, among others, acquisitions, dispositions and other business combination transactions, recapitalizations, restructurings or other transactions, in each case, involving all or a portion of our business. There can be no assurance that any such transaction will be pursued or completed, or, if completed, that it will achieve the intended strategic or financial objectives.
CONSOLIDATED RESULTS OF OPERATIONS
The table below sets forth certain operating data expressed as a percentage of revenues for the twelve months ended (dollars are in thousands):
26
Table of Contents
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Consolidated Results
The table below sets forth certain consolidated operating data for thetwelve months ended indicated (dollars are in thousands):
1.Not meaningful
Revenues. The decrease in consolidated revenues resulted from:
•a $69.4 million, or 11.7%, decrease in sales to OEM and a decrease in other revenues; and
•a $5.0 million, or 3.9%, decrease in aftermarket and OES sales.
The decrease in revenues of 10.3% was primarily driven by a softening in customer demand in the Global Seats and Trim Systems & Components segments.
Gross Profit. Included in gross profit is cost of revenues, which consists primarily of raw materials and purchased components for our products, wages and benefits for our employees and overhead expenses such as manufacturing supplies, facility rent and utilities costs related to our operations. The decrease in gross profit was primarily attributable to the impact of lower sales volumes. Cost of revenues decreased $69.6 million, or 10.7% as a result of a decrease in raw material and purchased component costs of $46.8 million, or 12.3%; a decrease in wages and benefits of $4.3 million, or 6.9%; and a decrease in overhead expenses of $18.4 million, or 8.9%. As a percentage of revenues, gross profit margin was 10.5% for the year ended December 31, 2025 compared to 10.1% for the year ended December 31, 2024.
Selling, General and Administrative Expenses. Selling, general and administrative ("SG&A") expenses consist primarily of wages and benefits and other expenses such as marketing, travel, legal, audit, rent and utilities costs, which are not directly or indirectly associated with the manufacturing of our products. SG&A expenses decreased $4.8 million in the year ended December 31, 2025 as compared to the year ended December 31, 2024, primarily due to implementation of cost control measures designed to align with the magnitude of continuing operations and focus on leveraging existing resources to improve profitability in a low demand period. The twelve months ended December 31, 2024 results include a benefit of $3.5 million from the gain on the sale of a building. As a percentage of revenues, SG&A expense was 10.6% for the twelve months ended December 31, 2025 compared to 10.2% for the twelve months ended December 31, 2024.
Other (Income) Expense. Other expense increased $3.8 million in the year ended December 31, 2025 as compared to the year ended December 31, 2024 due primarily to transition service fee income of $3.2 million recognized during the year ended December 31, 2024 which supported the transition of discontinued operations transactions.
Interest Expense. Interest associated with our debt was $13.0 million and $9.2 million for the years ended December 31, 2025 and 2024, respectively. The increase in interest expense was primarily attributed to higher weighted average margins on debt balances, partially offset by the impact of lower average debt balances during the respective comparative periods.
Loss on extinguishment of debt. On June 27, 2025, the Company recognized a loss on extinguishment of debt to reflect the write-off of deferred financing fees related to early repayment of the prior revolver of $0.5 million. On December 19, 2024, the Company refinanced its long-term debt, which resulted in a loss of $0.5 million, including a $0.3 million non-cash write off relating to deferred financing costs of the Term loan facility due 2027 and $0.2 million of other associated fees.
Provision (Benefit) for Income Taxes. Income tax expense of $4.7 million and $27.5 million were recorded for the years ended December 31, 2025 and 2024, respectively. The period over period change in income tax was primarily attributable to establishing a full valuation allowance on our U.S. deferred tax assets of $28.8 million in 2024.
27
Table of Contents
In 2021, as part of the Organization for Economic Co-operation and Development's ("OECD") Inclusive Framework, 140 member countries agreed to the implementation of the Pillar Two Global Minimum Tax ("Pillar Two") of 15%. The OECD continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. These changes, when enacted by various countries in which we do business, may increase our taxes in these countries. Changes to these and other areas in relation to international tax reform, including future actions taken by foreign governments in response to Pillar Two, could increase uncertainty and may adversely affect our tax rate and cash flow in future years. We continue to monitor the adoption of the OECD Pillar Two global minimum tax rules in each of our tax jurisdictions to evaluate its impact on our effective income tax rate. Pillar Two did not have a material impact to our effective tax rate for the year ended December 31, 2025.
Net Income (Loss) from continuing operations. Net loss from continuing operations was $20.5 million for the twelve months ended December 31, 2025 compared to net loss from continuing operations of $35.7 million for the twelve months ended December 31, 2024. The decrease in net income from continuing operations was attributable to the factors noted above.
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
Consolidated Results
The table below sets forth certain consolidated operating data for the periods indicated (dollars are in thousands):
1.Not meaningful
Revenues. The decrease in consolidated revenues resulted from:
•a $104.6 million, or 15.0%, decrease in sales to OEM and a decrease in other revenues; and
•a $7.5 million, or 5.5%, decrease in aftermarket and OES sales.
The decrease in revenues of 13.4% was primarily driven by a softening in customer demand across all segments, and the wind-down of certain programs in our Global Seating/ Trim Systems and Components segments.
Gross Profit. The decrease in gross profit was primarily attributable to the impact of lower sales volumes, unfavorable mix, and increased restructuring charges. Cost of revenues decreased $64.1 million, or 9.0% as a result of a decrease in raw material and purchased component costs of $54.9 million, or 12.6%; a decrease in wages and benefits of $6.9 million, or 9.9%; and a decrease in overhead expenses of $2.3 million, or 1.1%. As a percentage of revenues, gross profit margin was 10.1% for the year ended December 31, 2024 compared to 14.5% for the year ended December 31, 2023.
Selling, General and Administrative Expenses. SG&A expenses decreased $7.3 million in the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily as a result of the gain on the sale of a building of $3.5 million and reduced incentive compensation expense, partially offset by an increase in salary expense and consulting spend during the 2024 period. As a percentage of revenues, SG&A expense was 10.2% for the twelve months ended December 31, 2024 compared to 9.7% for the twelve months ended December 31, 2023.
Other (Income) Expense. Other expense increased $3.4 million in the year ended December 31, 2024 as compared to the year ended December 31, 2023 due primarily to transition service fees of $3.2 million recognized during the year ended December 31, 2024 which supported the transition of discontinued operations transactions as well as favorable change in foreign currency of $0.5 million.
28
Table of Contents
Interest Expense. Interest associated with our debt was $9.2 million and $10.2 million for the years ended December 31, 2024 and 2023, respectively. The decrease primarily related to lower average debt balances, partially offset by higher interest rates on variable rate debt during the respective comparative periods.
Loss on extinguishment of debt. On December 19, 2024, the Company refinanced its long-term debt, which resulted in a loss $0.5 million, including a $0.3 million non-cash write off relating to deferred financing costs of the Term loan facility due 2027 and $0.2 million of other associated fees.
Provision (Benefit) for Income Taxes. Income tax expense of $27.5 million and income tax benefit of $15.2 million were recorded for the years ended December 31, 2024 and 2023, respectively. The period over period change in income tax was primarily attributable to the $36.7 million decrease in pre-tax income versus the prior year period which led to establishing a full valuation allowance on our U.S. deferred tax assets of $28.8 million in 2024. During 2023 the Company reversed the $22.0 million valuation allowance on our U.S. deferred tax assets that was established in 2022.
Net Income (Loss) from continuing operations. Net loss from continuing operations was $35.7 million for the twelve months ended December 31, 2024 compared to net income from continuing operations of $43.6 million for the twelve months ended December 31, 2023. The decrease in net income from continuing operations was attributable to the factors noted above.
SEGMENT RESULTS OF OPERATIONS
Global Seating Segment Results
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 and Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
The table below sets forth certain Global Seating Segment operating data for the twelve months ended, (dollars are in thousands):
Revenues. The decrease in Global Seating Segment revenues in 2025 of $27.4 million from 2024 primarily resulted from lower sales volume due to decreased customer demand in North America. The decrease in 2024 revenues of $34.0 million from 2023 primarily resulted from lower sales volume due to decreased customer demand and the wind-down of certain programs.
Gross Profit. The decrease in 2025 gross profit of $2.3 million from 2024 was primarily due to lower sales volume and restructuring activities, offset by lower freight costs and improved operational efficiency, and a decrease in cost of revenues driven by a decrease in raw material and purchased component costs of $22.3 million, or 13.0%; a decrease in overhead expenses of $2.1 million, or 2.6%; and a decrease in wages and benefits of $0.8 million, or 3.6%. The decrease in 2024 gross profit of $5.6 million from 2023 was primarily due to lower sales volume, restructuring activities and increased freight costs, partially offset by a decrease in cost of revenues driven by a decrease in raw material and purchased components costs of $20 million, or 10.5%; a decrease in overhead expenses of $6.8 million, or 7.5%; and a decrease in wages and benefits of $1.6 million, or 6.9%.
As a percentage of revenues, gross profit for the years ended December 31, 2025 and 2024, was 12.3% and 12.0%, respectively. The decrease in gross profit in 2025 from 2024 was primarily due to lower sales volume. The twelve months ended December 31, 2025 results include charges of $2.3 million associated with the restructuring program. The decrease in gross profit margin in 2024 from 2023 was primarily due to lower sales volume, restructuring activities and increased freight costs. The twelve months ended December 31, 2024 results include charges of $1.5 million associated with the restructuring program.
Selling, General and Administrative Expenses. The decrease in 2025 SG&A expenses of $6.1 million from 2024 was primarily a result of reduced payroll and benefits expense. The twelve months ended December 31, 2025 results include charges of $0.2 million associated with the restructuring program. The decrease in 2024 SG&A expenses of $0.5 million from 2023 was primarily a result of reduced incentive compensation expense.
29
Table of Contents
Global Electrical Systems Segment Results
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 and Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
The table below sets forth certain Global Electrical Systems Segment operating data for the twelve months ended, (dollars are in thousands):
1.Not meaningful
Revenues. The Global Electrical Systems segment revenues in 2025 were flat from 2024. The decrease in 2024 revenues of $39.3 million from 2023 was primarily attributable to lower sales volume driven by global softness in Construction & Agriculture end-markets.
Gross Profit. The increase in 2025 gross profit of $8.3 million from 2024 was primarily attributable to mix and improved operational efficiency, and a decrease in cost of revenues driven by a decrease in overhead expenses of $7.0 million, or 10.8%; a decrease in wages and benefits of $0.8 million, or 2.8%; and a decrease in raw material and purchased component costs of $0.5 million, or 0.5%. The decrease in 2024 gross profit of $26.5 million from 2023 was primarily attributable to lower sales volume, restructuring activities, labor inflation and unfavorable foreign exchange impacts.
As a percentage of revenues, gross profit for the years ended December 31, 2025 and 2024, was 10.6% and 6.5%, respectively. The increase in 2025 gross profit margin was primarily due to mix and improved operational efficiency. The twelve months ended December 31, 2025 results include charges of $1.6 million associated with the restructuring program. The decrease in 2024 gross profit margin was primarily due to lower sales volume, restructuring activities, labor inflation, and unfavorable foreign exchange impacts. The twelve months ended December 31, 2024 results include charges of $3.7 million associated with the restructuring program.
Selling, General and Administrative Expenses. 2025 SG&A expenses increased $1.7 million from 2024, primarily driven by increased salaries and benefits. The increase of $0.7 million in 2024 from 2023, primarily driven by increased salaries.
30
Table of Contents
Trim Systems and Components Segment Results
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 and Year Ended December 31, 2024 Compared to Year Ended December 31, 2023
The table below sets forth certain Trim Systems and Components Segment operating data for the twelve months ended, (dollars are in thousands):
1.Not meaningful
Revenues. The decrease in Trim Systems and Components segment revenues in 2025 of $47.0 million from 2024 was driven by lower sales volume due to a decreased customer demand in North America. The decrease in 2024 revenues of $38.8 million from 2023 was driven by lower sales volume due to decreased customer demand and the reduction of backlog in the prior period.
Gross Profit. The decrease in 2025 gross profit of $10.9 million from 2024 was primarily due to the lower sales volume. Cost of revenues decrease was driven by a decrease in raw material and purchased component costs of $24.0 million, or 21.0%; a decrease in overhead expenses of $9.3 million, or 16.1%; and a decrease in wages and benefits of $2.7 million, or 24.8%. The decrease in 2024 gross profit of $15.9 million from 2023 was primarily due to the lower sales volume.
As a percentage of revenues, gross profit for the years ended December 31, 2025 and 2024, was 7.3% and 11.0%, respectively. The decrease in 2025 gross profit margin was primarily due to lower sales volume. The twelve months ended December 31, 2025 results include charges of $1.0 million associated with the restructuring program. The decrease in 2024 gross profit margin was primarily due to lower sales volume and restructuring related expenses. The twelve months ended December 31, 2024 results include charges of $3.9 million associated with the restructuring program.
Selling, General and Administrative Expenses. SG&A expenses increased by $1.7 million in 2025 compared to 2024 primarily as a result of the gain on the sale of a building of $3.5 million in the prior year period. The decrease in 2024 SG&A expenses of $6.7 million from 2023 was primarily due to gain on the sale of a building of $3.5 million.
Liquidity and Capital Resources
At December 31, 2025, the Company had $16.8 million in outstanding borrowings under its revolving credit facility and outstanding letters of credit of $2.1 million. At December 31, 2025, the Company had liquidity of $135.1 million, including $33.3 million of cash and $101.8 million availability from its U.S. and China credit facilities (subject to borrowing base and other conditions of the facilities).
We intend to allocate resources consistent with the following priorities: (1) invest in growth; (2) invest in operational improvements; (3) manage working capital; (4) reduce debt; and (5) other actions deemed appropriate by management to improve operational performance.
Our primary sources of liquidity during the year ended December 31, 2025 were operating income, cash and availability under our credit facility. We believe that these sources of liquidity will provide adequate funds for our working capital needs, capital expenditures and debt service throughout the next twelve months. However, no assurance can be given that this will be the case. We also rely on the timely collection of receivables as a source of liquidity.
As of December 31, 2025, cash of $33.0 million was held by foreign subsidiaries. The Company had a $0.1 million deferred tax liability as of December 31, 2025 for the expected future income tax implications of repatriating cash from the foreign subsidiaries for which indefinite reinvestment is not expected.
Covenants and Liquidity
Our ability to comply with the covenants in the Term Loan and ABL Revolving Credit Facility, as discussed in Note 3, Debt,
31
Table of Contents
may be affected 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 financial maintenance covenants and the fixed charge coverage ratio covenant and other covenants in the Term Loan and ABL Revolving Credit Facility 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 other assumptions that we believe are reasonable under the circumstances. If actual results are substantially different than our current forecast, we may not be able to comply with our financial covenants.
Cash Flows
(In thousands)
Net cash provided by (used in) operating activities $ 44,643 $ (33,452) $ 38,276
Net cash provided by (used in) investing activities (10,606) 30,896 (19,696)
Net cash provided by (used in) financing activities (29,233) (7,122) (12,729)
Effect of currency exchange rate changes on cash 1,848 (1,540) 172
Operating activities. For the year ended December 31, 2025, net cash provided by operations was $44.6 million compared to net cash used in operations of $33.5 million for the year ended December 31, 2024. Net cash provided by operating activities was primarily attributable to a decrease in working capital for the twelve months ended December 31, 2025 as compared to a loss from continuing and discontinued operations, including cash used to support restructuring programs for the twelve months ended December 31, 2024.
Investing activities. Net cash used in investing activities was $10.6 million for the year ended December 31, 2025 compared to net cash provided by investing activities of $30.9 million for the twelve months ended December 31, 2024. The change was mainly due to a targeted reduction of capital spending in the current year, compared with $23.0 million proceeds from the sale of the Company's cab structures and FinishTEK businesses during the prior year period and $4.5 million proceeds from the sale of a building during the 2024 period offsetting expenditures. In 2026, we expect capital expenditures to be in the range of $12 million to $18 million.
Financing activities. For the year ended December 31, 2025, net cash used in financing activities was $29.2 million compared to $7.1 million for the year ended December 31, 2024. Net cash used in financing activities for the year ended December 31, 2025 was primarily attributable to the net repayment of $23.7 million of long-term debt and $6.1 million debt issuance and amendment costs to refinance our debt, compared to net repayment of $6.1 million during 2024.
Debt and Credit Facilities
The debt and credit facility summaries described in Note 3, Debt, to our consolidated financial statements in Item 8 in this Annual Report on Form 10-K are incorporated in this section by reference.
Contractual Obligations and Commercial Commitments
The following table reflects our contractual obligations as of December 31, 2025 (in thousands):
Payments Due by Period
Total 1 Year 2-3 Years 4-5 Years More than5 Years
(In thousands)
We estimated future interest payments based on the effective interest rate as of December 31, 2025. Since December 31, 2025, there have been no material changes outside the ordinary course of business to our contractual obligations as set forth above.
32
Table of Contents
Generally, we enter into agreements with our customers at the beginning of a given vehicle platform’s life to supply products for the entire life of that vehicle platform. These agreements generally provide for the supply of a customer’s production requirements for a particular platform rather than for the purchase of a specific quantity of products. The obligations under these agreements and regulations are not reflected in the contractual obligations table above.
As of December 31, 2025, we were not a party to significant purchase obligations for goods or services.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). For a comprehensive discussion of our significant accounting policies, see Note 1, Significant Accounting Policies, to our consolidated financial statements in Item 8 in this Annual Report on Form 10-K.
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an ongoing basis, particularly relating to accounts receivable reserves, inventory reserves, intangible and long-lived assets, income taxes, warranty reserves, litigation reserves and pension and other post-retirement benefit plans. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets, liabilities and equity that are not readily apparent from other sources. Actual results and outcomes could differ materially from these estimates and assumptions. See Item 1A - Risk Factors in this Annual Report on Form 10-K for additional information regarding risk factors that may impact our estimates.
Revenue Recognition — We recognize revenue when our performance obligation has been satisfied and control of products has been transferred to a customer, which typically occurs upon shipment. Revenue is measured based on the amount of consideration we expect to receive in exchange for the transfer of goods or services. We enter into agreements with certain customers in the Global Seating and Trim Systems and Components segments at the beginning of a vehicle platform’s life to supply products for that vehicle platform. Once we enter into such agreements, fulfillment of our requirements is our obligation for the entire production life of the platform. Such contracts typically contain restrictive provisions related to termination. Management judgments and estimates must be made in estimating sales returns and allowances relating to revenue recognized in a given period.
Inventory — Inventories are valued at the lower of first-in, first-out cost or net realizable value. Cost includes applicable material, labor and overhead. We value our finished goods inventory at a standard cost that is periodically adjusted to approximate actual cost. 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 expected market volumes.
Income Taxes — We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statements and tax basis of assets and liabilities using enacted tax laws and rates expected to be in place when the deferred tax items are realized. We recognize tax positions initially in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Judgment is required in estimating valuation allowances for deferred tax assets. The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in either the carryback or carryforward periods under tax law. We provide a valuation allowance for deferred tax assets when it is more likely than not that a portion of such deferred tax assets will not be realized. In our assessment, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, (1) the cumulative three-year income position, (2) the nature, frequency and severity of any current and cumulative losses; (3) forecasts of future profitability; (4) the duration of statutory carryforward periods; (5) our experience with operating loss and tax credit carryforwards not expiring unused, and (6) tax planning alternatives. As of December 31, 2025 and 2024, the Company was in a cumulative three-year taxable loss position in the U.S. which was given the most weight in our analysis of all positive and negative evidence when determining whether to establish a valuation allowance. As of December 31, 2023, the Company was in a cumulative three-year taxable income position in the U.S. which was given the most weight in our analysis of all positive and negative evidence when determining whether to reverse the previously recognized valuation allowance.
Item 7A.Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We enter into financial
33
Table of Contents
instruments, from time to time, to manage the impact of changes in foreign currency exchange rates and interest rates and to hedge a portion of future anticipated currency transactions. The counterparties are primarily major financial institutions.
Interest Rate Risk
We are exposed to market risk related to changes in interest rates on our variable-rate debt. As of December 31, 2025, we had floating rate debt outstanding of $94.5 million under our Term Loan Facility and of 16.8 million under our ABL Revolving Credit Facility. A hypothetical change in interest rates of 100 basis points for a full twelve-month period would have an approximate $1.1 million impact on interest expense.
Foreign Currency Risk
A portion of our revenues during the year ended December 31, 2025 were derived from manufacturing operations outside of the U.S. The results of operations and the financial position of our operations in these other countries are primarily measured in their respective currency and translated into U.S. Dollars. A portion of the expenses incurred in these countries is in currencies different from which revenue is generated. As discussed above, from time to time, we enter into forward exchange contracts to mitigate a portion of this currency risk. The reported income of these operations will be higher or lower depending on a weakening or strengthening of the U.S. Dollar against the respective foreign currency.
A portion of our long-term assets and liabilities at December 31, 2025 are based in our foreign operations and are translated into U.S. Dollars at foreign currency exchange rates in effect as of the end of each period with the effect of such translation reflected as a separate component of stockholders’ equity. Accordingly, our stockholders’ investment will fluctuate depending upon the weakening or strengthening of the U.S. Dollar against the respective foreign currency. The principal currencies of exposure are the Mexican Peso, Chinese Yuan, British Pound, Euro, Czech Koruna, Australian Dollar, Indian Rupee, Thai Baht, Ukrainian Hryvnia and Moroccan Dirham.
Refer to Note 5, Fair Value Measurement, of the Notes to Consolidated Financial Statements included in this Form 10-K for discussion of these market risks and the derivatives used to manage these risks.
Effects of Inflation
Inflation potentially affects us in two principal ways. First, borrowings under our revolving credit facility are tied to prevailing short-term interest rates that may change as a result of inflation rates, translating into changes in interest expense. Second, general inflation can impact material purchases, labor, and pension liabilities. In many cases, we have limited ability to pass through inflation-related cost increases due to the competitive nature of the markets that we serve.
34
Table of Contents
Item 8.Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Documents Filed as Part of this Annual Report on Form 10-K
Page
Report of Independent Registered Public Accounting Firm 36
Consolidated Balance Sheets as of December 31, 2025 and 2024 40
Notes to Consolidated Financial Statements 43
Item 15 - Exhibits 84
35
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors
Commercial Vehicle Group, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Commercial Vehicle Group, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes to the consolidated financial statements (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 10, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Testing of Revenue
As discussed in Note 2 to the consolidated financial statements, revenue is recognized when a performance obligation has been satisfied and control of a product has been transferred to the customer, usually at a designated shipping point and in accordance with customer specifications. Revenue is measured based on the amount of consideration the Company expects to receive in exchange for the transfer of goods or services. For the year ended December 31, 2025, the Company recorded 649.0 million of revenue.
We identified the testing of revenue as a critical audit matter due to the large volume of data and the number and complexity of the revenue accounting systems. While revenues consist of a large number of similar, individually low value transactions, the processing and recording of revenue is reliant upon multiple information technology (IT) systems used to process large volumes of customer billing data. Specialized skills and knowledge were needed to test the IT systems used for the processing and recording of revenue.
36
Table of Contents
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over revenue. We evaluated the design and tested the operating effectiveness of certain internal controls related to the processing and recording of revenue. This included controls over the IT systems and automated and manual process level controls related to the processing and recording of revenue. We performed a software-assisted data analysis to assess certain relationships among revenue transactions. For a selection of transactions, we (1) compared the amount of revenue recorded to a combination of Company internal data, executed contracts, and/or other relevant and reliable third-party data, including cash received from customers and (2) evaluated the timing of revenue recognition based on the shipment date. In addition, we involved IT professionals with specialized skills and knowledge, who assisted in the identification and testing of certain IT systems used by the Company for the processing and recording of revenue. We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of the audit effort.
/s/ KPMG LLP
We have served as the Company’s auditor since 2012.
Detroit, Michigan
March 10, 2026
37
Table of Contents
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2025, 2024 and 2023
(In thousands, except per share amounts)
Loss on extinguishment of debt 460 509 —
Income (loss) before provision for income taxes (15,737) (8,241) 28,430
Net income (loss) from discontinued operations - Note 17 (2,304) 7,867 5,778
Earnings (loss) per common share
Basic earnings (loss) per share
Income (loss) from continuing operations $ (0.61) $ (1.07) $ 1.32
Income (loss) from discontinued operations $ (0.07) $ 0.24 $ 0.18
Diluted earning (loss) per share
Income (loss) from continuing operations $ (0.61) $ (1.07) $ 1.30
Income (loss) from discontinued operations $ (0.07) $ 0.24 $ 0.17
Weighted average shares outstanding
The accompanying notes are an integral part of these consolidated financial statements.
38
Table of Contents
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years Ended December 31, 2025, 2024 and 2023
(In thousands)
Other comprehensive income (loss):
Change in defined benefit plans, net of tax 2,169 437 (384)
Derivative instruments, net of tax 5,424 (6,061) 66
The accompanying notes are an integral part of these consolidated financial statements.
39
Table of Contents
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2025 and 2024
ASSETS (in thousands, except share and per share amounts)
Current assets:
Operating lease right-of-use asset, net 36,755 29,931
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current operating lease liabilities 7,914 8,033
Current portion of long-term debt and short-term debt 2,371 8,438
Long-term operating lease liabilities 29,833 22,795
Pension and other post-retirement liabilities 6,902 8,143
Commitments and contingencies (Note 15)
Stockholders’ equity:
Accumulated other comprehensive loss (26,350) (43,343)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 391,714 $ 424,573
The accompanying notes are an integral part of these consolidated financial statements.
40
Table of Contents
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended December 31, 2025, 2024 and 2023
Shares Amount
(In thousands, except share data )
Issuance of restricted stock 730,291 7 — — — — 7
Share-based compensation expense — — — 3,846 — — 3,846
Net income from continuing operations for the period — — — — 43,633 — 43,633
Net income from discontinued operation for the period — — — — 5,778 — 5,778
Total comprehensive income — — — — — 1,266 1,266
Issuance of restricted stock 489,562 4 — — — — 4
Surrender of common stock by employees (117,701) — (318) — — — (318)
Share-based compensation expense — — — 3,900 — — 3,900
Net loss from continuing operations for the period — — — — (35,734) — (35,734)
Net income from discontinued operation for the period — — — — 7,867 — 7,867
Total comprehensive loss — — — — — (13,059) (13,059)
Issuance of restricted stock 649,260 7 — — — — 7
Surrender of common stock by employees (157,974) (2) (238) — — — (240)
Share-based compensation expense — — — 3,786 — — 3,786
Net loss from continuing operations for the period — — — — (20,477) — (20,477)
Net income from discontinued operation for the period — — — — (2,304) — (2,304)
The accompanying notes are an integral part of these consolidated financial statements.
41
Table of Contents
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2025, 2024 and 2023
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net income to cash flows from operating activities:
Noncash amortization of debt financing costs 1,128 337 303
Pension plan settlement — — 2,942
Noncash (gain) loss on derivative contracts (1,719) (1,036) (535)
Gain on sale of assets — (3,544) —
Loss on extinguishment of debt 460 509 —
Loss on sale of Industrial Automation segment — 7,856 —
Gain on sale of Cab structures business — (28,754) —
Change in other operating items:
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal/sale of property, plant and equipment 45 4,455 —
Proceeds from sale of business — 44,961 —
Net cash provided by (used in) investing activities (10,606) 30,896 (19,696)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under Term Loan due 2030 95,000 — —
Repayment of Term Loan due 2030 (475) — —
Borrowings under prior revolving credit facility — 89,000 25,000
Borrowings under ABL revolving credit facility due 2030 30,300 — —
Repayment of ABL revolving credit facility due 2030 (13,461) — —
Borrowings under China credit facility 4,186 — 4,368
Repayment of China credit facility (2,757) — (4,368)
Surrender of common stock by employees (238) (318) (1,636)
Debt extinguishment payments and early payment fees on debt — (416) —
Debt issuance and amendment costs (6,127) (218) —
Other financing activities, net (161) (107) (155)
Net cash provided by (used in) financing activities (29,233) (7,122) (12,729)
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH 1,848 (1,540) 172
CASH:
The accompanying notes are an integral part of these consolidated financial statements.
42
Table of Contents
COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2025, 2024 and 2023
1. Significant Accounting Policies
Organization - Commercial Vehicle Group, Inc. and its subsidiaries is a global provider of systems, assemblies and components to the global commercial vehicle market, and the electric vehicle markets. References herein to the "Company", "CVG", "we", "our", or "us" refer to Commercial Vehicle Group, Inc. and its subsidiaries.
We have manufacturing operations in the United States, Mexico, China, United Kingdom, Czech Republic, Ukraine, Morocco, Thailand, India and Australia. Our products are primarily sold in North America, Europe, and the Asia-Pacific region.
We primarily manufacture customized products to meet the requirements of our customer. We believe our products are used by a majority of the North American Commercial Truck manufacturers, many construction and agriculture vehicle original equipment manufacturers ("OEMs"), parts and service dealers and distributors.
During the year ended December 31, 2024, the Company sold its cab structures business with operations in Kings Mountain, North Carolina and its Industrial Automation segment including First Source Electronics (FSE) business with operations in Elkridge, Maryland. These divestitures represented a strategic shift in CVG's business and, in accordance with U.S. GAAP, qualified as discontinued operations. As a result, the operating results related to the cab structures business and Industrial Automation segment have been reflected as discontinued operations in the Consolidated Statements of Operations. See Note 17, Discontinued Operations, for additional information on the divestitures.
During the quarter ended March 31, 2025, the Company completed a strategic reorganization of its operations into three segments: Global Seating, Global Electrical Systems, and Trim Systems and Components. The reorganization was designed to enhance alignment with its customers and end markets which will allow the Company to better focus on growth opportunities, capital allocation and enhancing shareholder value. As a result of the strategic reorganization, the prior period amounts have been revised to conform to the Company’s current period presentation. See Note 16, Segment Reporting, for more information.
Unless otherwise indicated, all amounts in the tables below are in thousands, except share and per share amounts.
Principles of Consolidation - The accompanying consolidated financial statements include the accounts of our wholly-owned or controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from those estimates. Certain prior period amounts have been reclassified to conform to footnote presentation for the current year.
Cash - Cash consists of deposits with high credit-quality financial institutions.
Accounts Receivable - Trade accounts receivable are stated at current value less allowances, which approximates fair value. We review our receivables on an ongoing basis to ensure that they are properly valued and collectible.
The allowance for credit losses is used to record the estimated risk of loss related to our customers’ inability to pay. This allowance is maintained at a level that we consider appropriate based on factors that affect collectability, such as the financial health of our customers, historical trends of charge-offs and recoveries and current and expected economic market conditions. As we monitor our receivables, we identify customers that may have payment problems, and we adjust the allowance accordingly, with the offset to selling, general and administrative expense. Account balances are charged off against the allowance when recovery is considered remote.
Inventories - Inventories are valued at the lower of first-in, first-out cost or net realizable value. Inventory quantities on-hand are regularly reviewed and when necessary provisions for excess and obsolete inventory are recorded based primarily on our estimated production requirements, taking into consideration expected market volumes and future potential use.
43
Table of Contents
Inventories consisted of the following as of December 31:
Property, Plant and Equipment - Property, plant and equipment are stated at cost, net of accumulated depreciation.
Property, plant, and equipment, net consisted of the following as of December 31:
Property, plant and equipment, net $ 66,638 $ 68,861
For financial reporting purposes, depreciation is computed using the straight-line method over the estimated useful lives (generally 15 to 40 years for buildings and building improvements, three to 20 years for machinery and equipment, three to seven years for tools and dies, and three to five years for computer hardware and software). Expenditures for maintenance and repairs are charged to expense as incurred. Expenditures for major betterments and renewals that extend the useful lives of property, plant and equipment are capitalized and depreciated over the remaining useful lives of the asset. When assets are retired or sold, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the improvements or the term of the lease, whichever is shorter. Accelerated depreciation methods are used for tax reporting purposes. Depreciation expense for property, plant and equipment for each of the years ended December 31, 2025, 2024 and 2023 was $14.2 million, $13.9 million and $13.1 million, respectively.
For each of the years ended December 31, 2025, 2024 and 2023, unpaid purchases of property and equipment included in accounts payable were $0.7 million, $1.3 million and $1.0 million, respectively.
We review long-lived assets for recoverability whenever events or changes in circumstances indicate that carrying amounts of an asset group may not be recoverable. Our asset groups are established by determining the lowest level of cash flows available. If the estimated undiscounted cash flows are less than the carrying amounts of such assets, we recognize an impairment loss in an amount necessary to write down the assets to fair value as estimated from expected future discounted cash flows. Estimating the fair value of these assets is judgmental in nature and involves the use of significant estimates and assumptions. We base our fair value estimates on assumptions we believe to be reasonable, but that are inherently uncertain.
Leases - The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As most leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The length of a lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company's accounting policy election is to not recognize lease assets or liabilities for leases with a term of 12 months or less. Additionally, when accounting for leases, the Company combines payments for leased assets, related services and other components of a lease.
Revenue Recognition - We recognize revenue when our performance obligation has been satisfied and control of products has been transferred to a customer, which typically occurs upon shipment. Revenue is measured based on the amount of consideration we expect to receive in exchange for the transfer of goods or services.
Refer to Note 2, Revenue Recognition, for our revenue recognition policies.
Income Taxes - We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statements and tax basis of assets and liabilities using enacted tax laws and rates expected to be
44
Table of Contents
in place when the deferred tax items are realized. We recognize tax positions initially in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Judgment is required in estimating valuation allowances for deferred tax assets. The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in either the carryback or carryforward periods under tax law. We provide a valuation allowance for deferred tax assets when it is more likely than not that a portion of such deferred tax assets will not be realized. In our assessment, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, (1) the cumulative three-year income position, (2) the nature, frequency and severity of any current and cumulative losses; (3) forecasts of future profitability; (4) the duration of statutory carryforward periods; (5) our experience with operating loss and tax credit carryforwards not expiring unused, and (6) tax planning alternatives. As of December 31, 2025 and 2024, the Company was in a cumulative three-year taxable loss position in the U.S. which was given the most weight in our analysis of all positive and negative evidence when determining whether to establish a valuation allowance. As of December 31, 2023, the Company was in a cumulative three-year taxable income position in the U.S. which was given the most weight in our analysis of all positive and negative evidence when determining whether to reverse the previously recognized valuation allowance.
Comprehensive Income (Loss) - Comprehensive income (loss) reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources including foreign currency translation, derivative instruments and pension and other post-retirement adjustments. See Note 13, Other Comprehensive (Income) Loss, for a rollforward of activity in accumulated comprehensive loss.
Fair Value of Financial Instruments - The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (i.e., 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 and inactive markets.
Level 3 - Significant unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability.
Concentrations of Credit Risk - Financial instruments that potentially subject us to concentrations of credit risk consist primarily of accounts receivable. We sell products to various companies throughout the world in the ordinary course of business. We routinely assess the financial strength of our customers and maintain allowances for anticipated losses. As of December 31, 2025, receivables from our top five customers represented approximately 46% of total receivables.
Foreign Currency Translation - Our functional currency is the local currency. Accordingly, all assets and liabilities of our foreign subsidiaries are translated using exchange rates in effect at the end of the period; revenue and costs are translated using average exchange rates for the period. The related translation adjustments are reported in accumulated other comprehensive income (loss) in stockholders’ equity. Translation gains and losses arising from transactions denominated in a currency other than the functional currency of the entity are included in the results of operations.
Foreign Currency Forward Exchange Contracts - We use forward exchange contracts to hedge certain foreign currency transaction exposures. We estimate our projected revenues and purchases in certain foreign currencies or locations and hedge a portion of the anticipated long or short position. The contracts typically run from one month to twelve months. All forward foreign exchange contracts that are not designated as hedging instruments 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. For forward contracts that are designated as hedging instruments, the gains and losses are recorded in accumulated other comprehensive income (loss) and recognized in the Consolidated Statement of Operations when the contracts are settled. We do not hold or issue foreign exchange options or forward contracts for trading purposes.
Interest Rate Swap Agreement - We have historically used interest rate swap agreements to fix the interest rate on a portion of our variable interest debt thereby reducing exposure to interest rate changes. The interest rate swap agreements are formally designated at inception as a hedging instrument. Therefore, changes in the fair value of the interest rate swap are recorded in accumulated other comprehensive income (loss) and recognized in the Consolidated Statement of Operations when the contracts are settled.
Share-Based Compensation - We recognize share-based compensation based on the grant-date fair value of the equity instruments awarded. Share-based compensation expense is recognized in the consolidated financial statements on a straight-line basis over the requisite service period for the entire award. We account for forfeitures of stock-based compensation awards as they occur. Refer to Note 11, Share-Based Compensation for additional discussion.
45
Table of Contents
Recently Issued Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income-Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU updates improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This information is generally not presented in the financial statements today. The ASU also requires disclosure of the total amount of selling expenses and our definition of selling expenses. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. This ASU clarifies interim disclosure requirements and provides a new disclosure principle for reporting material events occurring after the most recent fiscal year. This standard is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. This ASU updates a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements that has a wide application to any entity affected by accounting guidance. The amendments make the codification easier to understand and apply. The standard is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
Accounting Pronouncements Implemented During the Year Ended December 31, 2025
In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company implemented ASU 2023-09 as of December 31, 2025 on a prospective basis. See Note 7, Income Taxes.
2. Revenue Recognition
Our products include seating systems, plastic components, electrical wire harnesses, mirrors, wipers and other accessories. We sell these products into multiple geographic regions including North America, Europe and Asia-Pacific and to multiple end markets. The nature, timing and uncertainty of recognition of revenue and associated cash flows across the varying product lines, geographic regions and customer end markets is substantially consistent.
Contractual Arrangements - Revenue is measured based on terms and conditions specified in contracts or purchase orders with customers. We have long-term contracts with some customers that govern overall terms and conditions which are accompanied by purchase orders that define specific order quantities and/or price. We have many customers with which we conduct business for which the terms and conditions are outlined in purchase orders without a long-term contract. We generally do not have customer contracts with minimum order quantity requirements.
Amount and Timing of Revenue Recognition - The transaction price is based on the consideration to which the Company will be entitled in exchange for transferring control of a product to the customer. This is defined in a purchase order or in a separate pricing arrangement and represents the stand-alone selling price. Our payment terms vary by customer. None of the Company's business arrangements as of December 31, 2025, contained a significant financing component. We typically do not have multiple performance obligations requiring us to allocate a transaction price.