Commercial Vehicle Group Inc (CVGI)
Q2 2010 Earnings Call
August 5, 2010 10:00 am ET
Chad Utrup - CFO
Merv Dunn - President and CEO
Greg Williams – JPMorgan
Keith Schicker - Robert W. Baird
Derek Wenger - Jefferies & Co
Kirk Ludtke - CRT Capital Group
Previous Statements by CVGI
» Commercial Vehicle Group, Inc. Q1 2010 Earnings Call Transcript
» Commercial Vehicle Group Inc. Q2 2009 Earnings Call Transcript
» Commercial Vehicle Group Q1 2009 Earnings Call Transcript
Good day, ladies and gentlemen and welcome to the Second Quarter 2010 Commercial Vehicle Group Earnings Conference Call. My name is [Fab], and I’ll 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).
I would now like to turn the call over to Mr. Chad Utrup. Please proceed.
Thanks everybody and welcome to the conference call. Before we begin the call today I’ll read through Safe Harbor language as usual. Merv will give a company update. And then I'll take you through the results, the second quarter of 2010 afterwards we'll take time to answer your questions.
With that, I'd like to remind you that the conference call contains forward-looking statements. Actual results may differ from anticipated results because of certain risks and uncertainties. These may include, but are not limited to the economic conditions in the markets in which CVG operates, fluctuations in the production volumes of vehicles for which CVG is a supplier, risks associated with conducting business in foreign countries and currencies, and other risks detailed in our SEC filings.
And with that, I'll turn the call over to Merv.
Good morning and thanks Chad and thanks to everyone who has joined our call today. If (Inaudible) we are not in the same location today. I kind of got stuck on the web service on some customer calls.
Overall the second quarter showed continued progress. On a year-over-year basis as revenues increased and our cost containment efforts continue to work. We are pleased with both our operating and financial performance. We also feel that our cash position and the fact that we have no debt on our revolving credit facility at the end of the quarter but within a solid financial position as our industry recovers from the economic turbulence of the past few years.
We had originally anticipated a stronger start for 2010 with mid-year slowdown, followed by a moderate uptake in the later part of the year. When looking sequentially at our second quarter, we are pleased to see that although revenues for the second quarter were down slightly compared to the first quarter, where we are still able to make an improvement in our operating income, excluding one time charges as previously announced closure of our Norwalk, Ohio facility in May.
To-date, some recovery signal such as US employment figures are mix, others such as the increasing trend in North American class 8 sales show improvement. In addition we feel that our European and Asian construction business is experiencing a positive trend and strengthening as the year progresses. Combined with the American Trucking Association reports of improved freight levels, we believe that a moderate cyclical recovery maybe progressing.
Additionally, we continue to feel that pent-up demand exist and our key end market and we should start to see a moderate volume improvement towards the end of 2010. While, we are slightly optimistic for the balance of the year, we are still projecting that we won’t see significant improvements in our heavy duty truck business volumes, up to 2011.
China continues to be a vibrant and growing market, and has real potential for the growth of CVG in both the construction and the heavy truck market. During the quarter we were pleased to announce that CVG was selected by XCMG a leading Chinese construction machinery manufactures has one of the two key seat suppliers for their extensive family of products.
We will provide them with a range of constructions seats, products for multiple vehicles lines including mobile cranes, rollers, wheel loaders, excavators, graders, truck cranes and concrete pumps. We recently started production of the seats designated for XCMG’s crane product at our Shanghai facility and with five additional production for other XCMG construction vehicles over the next 12 months.
As we progressed in our relationship with XCMG, we anticipate that we will supply around 70% of their seating requirements for all of their product lines. We estimate the annualized revenue from this additional business to be in the range to $4 to $6 million as today’s volume levels.
XCMG is ranked as one of the largest construction machinery producers in China and this new agreement represents a great opportunity for us. We consider this new business to be strategically significant, because it demonstrates our ability to market and sell products in China where we are seeing great long-term prospects exists for us to grow our business. This additional revenue also supports the aggressive growth target we have set for our China operations.
During the quarter we were also pleased to that CVG rejoined the Russell 3000 index. We see this as a positive development that shows we are emerging from the undervalued position of our company’s stock experienced during the recession. We also feel that being included in Russell Index will result in increased exposure and help get the CVG story more widely distributed.
While our results over the past several quarters are showing positive trends. We continue to remain focused on profit improvement initiatives. All of our employees around the world have worked extremely hard to improve our operating and financial performance and we are all excited to aggressively continue this trend into the future.