John Hyre - Director, Investor Relations Rich Lavin - Chief Executive Officer Tim Trenary - Chief Financial Officer.

Robert Kosowsky - Sidoti Gregory Macosko - Montrose Advisors Jeff Bernstein - AH Lisanti.

Good day, ladies and gentlemen and welcome to the First Quarter 2014 Commercial Vehicle Group Inc. Earnings Conference Call. My name is Lisa and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

(Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. John Hyre, Director of Investor Relations. Please proceed sir..

Thank you, Lisa and welcome everyone to our conference call. Rich Lavin, our CEO will give a brief company update and Tim Trenary, our CFO will take you through our first quarter 2014 results. We will then answer questions. I would like to remind you that this conference call is being webcast.

It may also contain forward-looking statements including, but not limited to expectations for future periods regarding market trends, cost savings initiatives and new product initiatives among others. Actual results may differ from anticipated results because of certain risks and uncertainties.

These risks and uncertainties may include, but are not limited to the economic conditions and the markets in which CVG operates, fluctuation in the production volumes of vehicles for which CVG is a supplier, financial covenant compliance and liquidity, risks associated with conducting business in foreign countries and currencies and other risks detailed in our SEC filings.

With that, I would like to now turn the call over to Rich..

Thanks, John. Good morning, everybody and welcome to our first quarter call. We are pleased to report that our revenues improved by $20.2 million or 11%, gross profit improved by $6.2 million and operating income improved by $5.7 million.

The revenue increase largely resulted from higher production volumes in the North American heavy duty truck industry and improved sales to construction equipment OEMs in the global markets we serve.

During the quarter, the conversion of higher sales in the operating income approached 30% compared to our historical incremental margin performance of 20% to 25%. This was primarily a consequence of the operating leverage we achieved from cost structure discipline in a rising market.

As you know, heavy duty truck orders have been comparatively strong during the first three months of the year. This leads us to expect an improving industry trends for the remainder of 2014. Our revised forecast for the 2014 North American heavy duty truck build is in the range of 265,000 to 285,000 units.

We believe this trend is being led by improved freight growth and aging fleet that needs replacement and increased optimism about the U.S. economy going forward. With improved orders, we have begun to see an uptick in our truck-related volumes.

As the market improves, we have the manufacturing capacity and a stable supply base in place to serve our customers. We don’t anticipate any significant production issues as customer demand increases.

We believe that our global construction end markets will experience modest improvement for the remainder of the year and we expect the European economy to remain relatively flat to the remainder of 2014. We continue to see China as a significant growth opportunity for CVG.

Chinese GDP expectations on the order of 7.5% for the year combined with continued infrastructure development and organization lead us to believe that the Chinese construction equipment industry will provide CVG with significant growth opportunities going forward.

We also see on highway truck and agriculture as important growth areas, particularly as the Chinese government increases focus on domestic consumption as an economic growth driver.

In short, we feel that projected increases in production levels for the North American heavy duty truck market, the return of inventories to more normal levels in the global construction markets and the economic growth forecast in North America and China bodes well for the balance of the year.

As regards new business development, we are pleased to announce that we have been awarded contracts to provide additional seating products to a major North American heavy and medium duty truck OEM. This new ceiling designed primarily for vocational applications will be used in both medium and heavy duty trucks.

During the quarter, we also gained new wire harness business with a major North American OEM in the agricultural end market. We project an annualized run rate of approximately $14.3 million from this new business award.

CVG’s aftermarket group and a major automotive replacement parts and accessories retailer in the United States are moving forward with plans for the retailer to sell National and Bostrom seats through its network at more than 100 stores in the U.S. We have already delivered a container load of seats to their showrooms.

We anticipate this new arrangement can provide $550,000 per year in additional aftermarket sales as the program matures. Within CVG we further refined our global business organization by assigning our structures operations to our global truck and bus division under Pat Miller.

We believe the structures products are more appropriately managed as part of the truck and bus end markets. This change will allow Timo Haatanen to focus more on increasing CVG’s important aftermarket business. Under this new structure Timo will also have responsibility for supply chain management.

We believe a centrally led supply chain management group will help us deliver efficiencies by leveraging our supplier selection, material buy and VA, VE activities across all our global business segments. I am also pleased to announce that Kevin (Lang) joined CVG on April 1 as Managing Director of our European, Middle East and African markets.

Kevin will have responsibility for the development and deployment of business strategies across EMEA as well as manufacturing operations in all of our facilities in the EMEA region. In this role Kevin will report directly to me with the matrix reporting relationship to our through – to our three global business presidents.

Kevin comes to CVG following the successful crew of McKinsey & Company. He has extensive experience in the global automotive and construction equipment industries. His global experience includes assignments in China, India and Europe. Also during the quarter, we announced the plan to close our production and warehouse facility in Tigard, New Oregon.

The work performed there includes the production of interior trim components such as instrument panels and storage cabinets used in large commercial vehicles. The majority of this work will be distributed to other CVG facilities in North America. We expect to complete closure of Tigard by the end of December 2014.

We anticipate restructuring charges of approximately $3.2 million to $3.5 million will be incurred by year 2014. The annualized savings from this action are expected to be in the range of $1.5 million to $2.5 million.

As we have indicated in previous calls, we evaluate our manufacturing capacity utilization and footprint in the normal course of business. The Tigard action followed a lengthy evaluation and it was necessary to respond to the changing customer needs and industry demands.

I hope you can see that we are fundamentally and very purposefully changing CVG in several respects. We are focusing SG&A away from what I would characterize as pure overhead in the areas that are going to drive profitable organic growth well into the future.

We now have a globally focused leadership team in place with end to end accountabilities for developing their businesses on a global basis. We are also in the process of centralizing our purchasing function into the global organization that will proactively help to drive synergies and cost reduction opportunities with the key suppliers.

Our product volume managers are going to be key leaders and contributors in our organization. They will be accountable for the design of our products and our go to market strategies.

They will introduce a much better understanding of customer expectations in markets around the world and help ensure we continue to provide each of our OEM customers with highly differentiated cab systems and components.

They will help us as the global supplier to global OEMs design and offer the components that will help make our customers products more attractive and value added based on each markets and customers specific needs.

Overall that will help us better – build better customer relationships and over the long-term a better company for employees and our shareholders. We look forward to sharing our results with you in the coming quarters. Thanks again to everybody for calling in. And with that, I will the call over to Tim for comment on our financial performance..

Thank you, Rich. As Rich mentioned compared to the first quarter of 2013, our top line and therefore our financial results were positively affected by increased build in the North American heavy duty truck market and by increased production volumes in the global construction markets we serve.

Our first quarter 2014 revenues were $198.1 million, an increased of $20.2 million or an 11.4% improvement compared to the first quarter of 2013. On a sequential basis that is compared to the fourth quarter of 2013, our revenue increased $15 million or by 8.2%.

Operating income in the first quarter was $5.4 million compared to operating loss of $0.3 million in the first quarter of 2013. Compared to the fourth quarter of 2013, our operating income decreased $2.6 million largely due to the increased SG&A spend associated with the development of the infrastructure necessary to execute on our initiatives.

Net loss for the quarter was $0.5 million or $0.02 per diluted share compared to a net loss of $4.6 million or $0.16 per diluted share in the first quarter of 2013.

Included in first quarter 2014 pre-tax results is a severance charge of $0.5 million associated with the impending closure of our Tigard, Oregon facility and an asset impairment charge of approximately $0.8 million resulting from the sale of our Norwalk, Ohio facility, which was closed in 2010. The Norwalk facility was sold for $0.6 million in April.

SG&A for the quarter was $18.5 million compared to $18 million in the first quarter of 2013. As we have previously indicated, actions taken over the last two quarters of 2013 reduced our SG&A expense in the fourth quarter of 2013 to an unsustainable level.

Accordingly, during the first quarter of ‘14, our SG&A spending returned to more historically normal levels.

This increase in SG&A when compared to the fourth quarter of 2013 was largely due to enhancements in the manner in which we go to market, including the development of a product line management infrastructure and actions to institutionalize our operational excellence effort and the development of a centrally-led procurement organization.

Depreciation was $4 million in the first quarter and amortization was $0.4 million. First quarter capital spending was $1.5 million. We expect increased capital spending throughout the remainder of the year as we invest in our facilities, sales growth, operational excellence and other activities.

We continue to anticipate that total 2014 capital spending will be on the order of $20 million. An income tax provision of $0.8 million was recorded for the three months ended March 31, 2014 compared to an income tax benefit of $1 million for the prior year period.

The company’s effective tax rate in the first quarter was adversely affected as certain favorable tax laws, including the research and development tax credit were not extended by Congress.

Additionally, certain foreign affiliates, which are subject to deferred tax asset valuation allowances experienced modest pre-tax losses, which could not be used to offset the tax provision for affiliates that generated pre-tax income.

We finished the quarter with almost $74 million of cash and approximately $37 million of availability from our ABL facility and therefore liquidity of over $100 million.

To conclude, the growth in our top line during the quarter is encouraging and we were pleased with the rate at which we were able to convert the incremental sales into gross profit and operating income. We are optimistic as regards the general health of our global end markets and we look forward to further developing CVG during the year and beyond.

And with that, we will open the call for questions..

(Operator Instructions) Your first question comes from the line of Robert Kosowsky with Sidoti. Please proceed..

Rich, Tim, and John, how are you doing?.

Thank you, Rob..

Pretty good.

I just had a question about the raw material opportunity with this new global sourcing initiative, I was wondering if you could give us an idea of what savings you potentially see and maybe the cadence of that would it be something that might be upfront lot of savings and over time you get annual productivity over time and the kind of framework I look at that as WABCO gets about 5%, Meritor gets like 2% to 3%, I am wondering where CVGI would fit in kind of on a longer term basis and also if there is upfront kind of steers that savings as well?.

Yes. Rob. It’s Rich Lavin. Thanks for your question. Jim (indiscernible) has been with us for just four months. He is the Vice President responsibility for global supply chain management. He reports to Timo Haatanen.

Jim is just in the process really of digging into our supply base and our logistics network to better understand what the savings and efficiencies opportunities are for us going forward. We have a 90-day review with them about a month ago.

And I’d say we were encouraged by the progress he has made in a very short period of time in identifying opportunities in both materials and in logistics. I think it’s too early in the game, Rob, to give you a sense as to what we are looking for both in the short-term and in the long-term being that will be driven by Jim and his global organization.

Though we have high expectations for what we are going to be able to deliver out of that group with Jim’s leadership.

So, I guess I would ask you, you will standby and as we get a better sense of where the opportunities are, how Jim is going to address along with our division Presidents and regional managing directors will give you a better idea of what we can expect in the way of ongoing efficiencies, improvements, and cost reductions.

One thing to kind in mind I think is that Jim is going to be focused not only inside the four walls of CVG, he is also going to be focused on working with our suppliers to improve their operational efficiencies and to ensure that we are capturing the savings or some of the savings that they are realizing in their shops..

Okay, that’s very helpful. And I guess of the new business wins, it’s good to see those new contracts rolling in.

I am wondering if these are fruits of the new sales approach or were these things that CVGI was working on for a while? And also when do we expect to see the new sales approach really start to move the needle going forward?.

The deals we reported on this morning, Rob, had been in process for a while.

So, I couldn’t characterize them as the direct result of product managed organizations or an increased focus on go-to-market, but we are beginning to see opportunities come up in those areas as a result of the product managers’ leadership and a sharper focus on sales and go-to-market.

I would expect we would be in a position by the end of this year to begin to report on improvements that we are seeing and opportunities that were being created through the product managers and their sales organizations..

Okay, fair enough.

And then also question for Tim, where were the charges in the P&L?.

Yes, hi, Rob. The Tigard, the charges associated with the Tigard closure and the building in Ohio and Norwalk are both in cost of sales..

Okay, thank you very much..

Thank you..

(Operator Instructions) Your next question comes from the line of Gregory Macosko with Montrose Advisors. Please proceed..

Yes, thank you. Just one question I had with regarding – with regard to exports to Mexico and the like, I know that in years past, there were a number of – there were cabs and things that were exported to Mexico. And the nature of those exports, there was sort of higher end and lower end and the like.

And I wondered is that activity still in place and could you give us some description of it?.

Yes, this is Rich. I mean as we have – I would say expanded our manufacturing footprint in Mexico, there has been less exposure to Mexico from the U.S., but there are still exports occurring between the U.S. and our Mexican operations.

As far as the high tier, mid tier aspect of your question is concerned, there is still some of that and that will probably more of that going forward not only in terms of materials that we are exporting from U.S., but also components that we are designing and manufacturing in country, simply because you have got to have a couple of different price points, a couple of value propositions to address very needs among customers in markets like Mexico, like China, like India.

So our product managers have really taken the challenge of fitting through the tier design approach that they need to take with their products to ensure that we have a complete line of products to offer across different value propositions in those markets. We are also looking at tiering of offerings in U.S.

and other markets, but it’s especially important that we have got different price points, different value propositions to address customer needs in those emerging markets..

Are you seeing any trend in that regard there with regard to high versus medium and low end, is there any direction that it’s setting, has it pretty much been a steady mix?.

It’s interesting, I am most familiar – I think at this stage with what we have seen in the construction equipment market in China. And I think with some of better Chinese OEMs we are seeing that their product and component designs are moving more in the direction of the multinational players like Caterpillar, Komatsu, Volvo and the others.

And we are also seeing increasing prices on those upgraded products and components as those OEMs go to market and compete with the other multinationals. So I would say there is a trend in that direction and I would expect we are going to see that in the other markets as well and also with other products and other industries in China.

So yes, there has been movement in that direction for some time, hard to characterize I guess how strong it is, but it is occurring..

Okay, good, very nice incremental profit improvement. Thank you..

Thank you..

(Operator Instructions) Your next question comes from the line of Jeff Bernstein with AH Lisanti. Please proceed..

Hi, good morning. Thanks for taking my questions.

Just a couple, you talked about the facilities closures as being part of kind of ongoing operations, is that to mean that you have completed a sort of strategic review of all the manufacturing operations of a company and you are sort of satisfied except for tactical changes with where you are at or should we expect some commentary on a more strategic look at some point in the future? That’s my first question..

Okay. Jeff it’s Tim, I would answer your question this way, the company’s assessment of its manufacturing capacity utilization and it’s footprint in a strategic sense is ongoing.

As I think we have indicated in the past on the call the company I think 6, 7, 8 weeks ago launched a strategic planning process that we expect to conclude this summer that we will inform further as to the appropriate level of manufacturing capacity utilization and the footprint.

Having said that, I am used to the cadence and the discipline if you will that even after on assessment of capacity utilization and footprint in a strategic sense the company to your point would on an ongoing basis and in the normal course continue to make tactical sort of evaluations of that.

So well to-date – and Tigard is an example of this and we have seen fit and in the completion of the strategic planning process to take an action. I think it’s reasonable to assume that we should all remain open minded with respect to possible additional actions..

Understood.

And then additionally, in terms of the various component parts that you guys make I think originally there was the idea that complete cab outsourcing would be a trend that never seem to really develop, do you see opportunities there in the future and whether it’s in another geography or whether it’s sort of ag versus heavy duty truck or are you also kind of reviewing the portfolio of products that the company is making and might we hear some changes there at some point?.

Yes, Jeff. It’s Rich Lavin. The complete cab outsourcing idea is one that – I think the company took a hard look at a couple of years ago. It’s one that we are keeping in front of us frankly as we look at our longer term strategy for driving organic growth.

But right now, we are really focused on ensuring that we have got a complete set of parts and components as possible to offer to OEMs across truck, construction and ag to ensure that we are seeing as those OEMs as key suppliers and key contributors, if you will, to their value add, to their value proposition.

So, I suspect that when we rolled the long-term strategy out in the August-September timeframe, we are going to have more to say about that. But we are always very interested in adding to our stable of components.

And we challenged our product managers frankly to think hard about what we can do to design additional components inside CVG to add to our offerings..

Great.

And then lastly, are you guys planning to have an Analyst Meeting with the Street to go through the results of the strategic reviews?.

Yes, we are Jeff. I mean, John will get back to all of you with our plans, but we are thinking late summer, early fall, we will probably have that wrapped up and ready to share with you all..

Great, thanks very much..

There are no additional questions. I would now like to turn the presentation back over to Mr. Rich Lavin for final comments..

Yes, thank you. Listen, I just close by thanking all of you for dialing in. We appreciate your questions. We appreciate the opportunity to share with you our results for the first quarter. We look forward to sharing our results going forward.

Just a reminder again that John will be getting in touch with you regarding the completion of our strategic planning process and the event that we would like to get scheduled late summer, early fall to share the outcome of the planning process with all of you. Thanks very much..

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day..