Good day, ladies and gentlemen and welcome to the Commercial Vehicle Group Inc. Q3 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call maybe recorded. I would now like to introduce your host for today’s conference, Mr. Terry Hammett, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Christie, and welcome everyone to our conference call. 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 saving 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 in the markets in which CVG operates, fluctuations 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. I will now turn the call over to Rich Lavin, Chief Executive Officer of Commercial Vehicle Group. Following Rich, Pat Miller, President of Global Truck and Bus will provide an update on our Global Truck and Bus segment. Then, Tim Trenary, our Chief Financial Officer, will cover the quarter’s financial results. I will now turn the call over to Rich.

Thanks, Terry. Good morning and welcome to our call. As regards our results, our consolidated revenues were down in the third quarter of 2015 as compared to the third quarter of 2014 by about 5%. More than all of this, decline in sales is attributable to the macroeconomic headwinds that continued to adversely affect the marketplace for construction and agricultural products. On the other hand, North American medium and heavy duty truck production continued apace in the third quarter. Notwithstanding the consolidated decline in sales, net income this quarter was up compared to the year ago period as was earnings per share. Net income was $2.6 million compared to $1.2 million and earnings per share was $0.09 in the third quarter as compared to $0.04 in the third quarter of last year. We were pleased with our overall cost discipline and therefore operating income pull-through on the lower sales for the quarter. This is especially true of our construction and agricultural segment. This segment’s sales were down about $15 million in the quarter compared to the third quarter of last year. As disappointing as this quarter-over-quarter top-line performance was, operating income was relatively unchanged. This is a rather remarkable achievement, flat operating income on a 15% reduction in sales and reflects considerable cost discipline on the part of our business associates in the Con-Ag. And this illustrates our ability to protect margins on lower sales. There has been a fair amount of news of late [ph] regarding the continuing global contraction in construction and ag equipment sales. And as I have already mentioned, this is reflected in our sales performance. But we firmly believe that construction and ag products are core businesses for us over the long-term, representing a very attractive growth opportunity. As part of CVG 2020, our long-term…

Thanks Rich. As Rich mentioned, I manage the global truck and bus division for CVG. Our sales for North America remained on a strong pace in the third quarter. The total year is still shaping up to be a very good one historically for truck and bus. There were some normal customer shutdowns during the summer and there were also some unplanned down days taken by a few of the OEMs. We have seen tempering of build rates with a few OEMs as they work to balance inventory levels, their backlog and their production flow. Most of the market indicators like freight tonnage and truck retail sales, are still positive year-over-year. The market experienced net truck order reductions during the summer months and consequently a reduction in the backlog. The backlog is still in a healthy range. The order cancellation experienced in August and September has led to near-term empty slots. October North American Class 8 orders were about 25,000 units, which is more in line with ongoing replacement rates. We are maintaining our projection that the Class 8 North American truck production for 2015 will be in the range of 320,000 to 330,000 units. As for 2016, we believe production levels will decline from 2015 but will likely remain above replacement levels. North American medium-duty Class 5 through Class 7 production levels have been consistent in 2015. October’s strong order rate suggests that that consistency will continue in 2016. The medium-duty backlog and sales are in balance and both our healthy. We have been very active around the globe and in particular in North America as many of the OEMs are currently refreshing platforms targeted for 2017 and 2018 timeframe. As we have discussed before, CVG is fully engaged in quoting, developing and launching a pipeline of next gen…

Thank you, Pat. Consolidated third quarter 2015 revenues were $202.7 million compared to $213.8 million in the prior year period, a decrease of 5%. Our financial results and more specifically our revenues, continue to be adversely impacted by foreign currency exchange rate or FX headwinds. Our top line was adversely impacted by FX translation in the third quarter by $4.5 million. As adjusted for foreign currency exchange translation, third quarter 2015 revenues decreased by 3%. Our consolidated sales also continue to be adversely impacted by the soft global construction and agricultural equipment markets. On the other hand, our global truck and bus businesses continue to benefit from high levels of truck production in North America. Global truck and bus revenues increased 3% over the third quarter of 2014. Operating income in the third quarter was $9.9 million compared to operating income of $9.7 million in the prior year period. This 2% improvement in operating income was achieved notwithstanding the lower revenues in the current quarter. Accordingly, the company’s operating income margin in the third quarter improved to 4.9% from 4.5% last year. Our operating income margin is benefiting from an improved gross profit margin and lower selling, general and administrative expenses. Year-over-year for the quarter and for the nine months ended September 30, 2015, the company’s gross profit margin is up 50 basis points and 60 basis points respectively. Meanwhile, SG&A was down almost $1 million quarter-over-quarter is down almost $3 million for the nine months ended September 30, 2015. FX translation is helping us a bit here but most of the decline in SG&A is cost management. Net income was $2.6 million in the third quarter or $0.09 per diluted share compared to net income of $1.2 million or $0.04 per diluted share in the prior year period. Some…

Thank you. [Operator Instructions] Our first question is from the line of Mike Shlisky with Seaport Global Securities. Your line is open. Mr. Shlisky if your line is muted please un-mute it

I am sorry. Good morning guys.

Good morning Mike.

Sorry about that. Hey, I have got a couple questions here. I know you guys don’t usually give full guidance here, but we are already in November, you have already probably got a good portion of at least the truck OEM builds, I would actually probably imagine some of the construction and ag guys too. Could you give us any kind of sense whether you expect to see as a sequential improvement in your revenues or perhaps year-over-year improvement in the fourth quarter at the very least?

Industry for our global truck and bus, sure, fourth quarter for us in truck and bus in 2015, first there is less actual build days in the fourth quarter, just by the nature of the calendar and the holidays. That tends to impact our revenues every year, historically. Additionally, this year there are, as I mentioned there has been some planned shutdown days at our customers due to some inventory buildups and also they are cleaning up some of the production flow and overflow that they have been experiencing the high build rates. And so when we look at that quarter-over-quarter, we think that will impact us negatively compared to the third quarter.

Okay.

And Mike, this is Rich Lavin, in construction and ag I think everybody is aware of the I think some of the dynamics in those industries and everybody is aware of the results announcements from some of the large OEMs. I think the expectation is that we have either touched bottom or have nearly touched bottom in construction and ag in the third and fourth quarter of this year. So our expectation is that what we are seeing in the fourth quarter may be the worst that we will see out of construction and ag and that’s kind of our mindset heading into 2016.

Okay, that’s great color. Thanks guys. Can we also just touch on the balance sheet as well, trying to map this out here even if you include the debt repayment at $85 million of cash, you have still got more than you had a year ago. And I am looking at where the outlook is for the truck markets in 2016 as well as quite frankly some construction and ag markets, is there a way or a chance you can liquidate some of your working capital in ’16, generate some more cash, obviously hopefully have good margins as well and potentially pay down some additional debt at some point late next year?

So Mike, it’s Tim. Let me first of all provide you with what I will characterize as a short answer to your question and then give you – provide a little color as to why I come to that conclusion. The short answer is yes, that’s what we believe, yes to your question. Let me give you some color. As regards the operating working capital, if you got a chance to look at the cash flow statement, we have done a nice job of managing that for the first nine months of this year. Perhaps a more meaningful comp would be to look back to September of last year because it takes out the sort of vagaries of the various cycles, quarterly cycles. If you were to do that, what you would learn is that for the last 12 months we have managed down the company’s operating working capital, receivables, inventory and payables collectively by $12 million, okay. So over the last 12 months that’s $12 million of cash build. Going into next year, to your point about being able to continue to manage that, we have our – it has our attention and we believe that through continued management of that piece of the balance sheet that there is perhaps some additional opportunity there. We think we have harvested the lion’s share of it. But I think there still is perhaps some opportunity. Now, those comments taken together with the cash at September 30 pro forma for the interest payment and the redemption, more specifically the $85 million that you mentioned, that is especially taken together with the ABL, adequate liquidity to manage our business. And as we move through next year and the health of our markets Con-Ag, Pat’s business in truck and bus, the management of our balance sheet, and other sort of considerations, we will in the normal course continue to consider the deleveraging of the balance sheet, so more to come on that.

Okay. Exploring some more here, if you guys don’t mind, could you give me some kind of visibility that you have been hearing from some of the OEMs, especially in truck and bus on their production schedules going into 2016, I guess what I am going to getting at is, you have got pretty high industry backlog, so everyone knows what’s coming on their production schedules, have they given you plenty of kind of notice here on when to ship what and do you feel pretty confident about keeping your operating income pull-through at a relatively high level in 2016?

This was specifically for truck and bus?

Well, sure of course, I would ask a similar question, I would say for construction and ag too, but yes I was talking more about truck and bus?

So the way I would answer that is, yes the visibility varies depending on what kind of orders they have got in their backlog. We don’t always have complete visibility to what exactly is in the backlog. I believe we have demonstrated clearly over the past 2 years in our group that we are able to flex up and down as those orders fluctuate and deliver the pull-through that we have been achieving. And I think we have a pretty good track record of that. I think as far as – a little bit more color. If you are asking where they are seeing it, I believe the customers have come out here recently, at least a couple of them, larger OEMs have come out and given some guidance or what they believe 2016 looks like in total.

Well, I guess what I am saying is – and I know, Rich I don’t think you were here last time we had a pretty big decline in the market, if I recall correctly. But there were some issues with CVGI trying to keep up with the declines and inventories that may have been too high. And it also had some issues on the upside too. When things got better, there were some issues with getting things shipped quickly and so forth. There wasn’t a lot of lead time. And I guess my question here is, do you feel better about where you are about the OEM price indication now than what we saw a couple of years back, to kind manage your people and your production?

So that’s a good question. I am sorry I didn’t completely understand that was your direction there. So I think if you go back historically through some of the previous downturns, a lot of times as some of the orders moderated the production levels would continue to stay at the high levels they were at too long. And consequently you get an overbuild and then you would have to have a correction. And it’s interesting as you are tracking today where things are, it seems to be much more aligned. As some of the orders have moderated, we have seen adjustments already being made ahead of time by our customers and consequently by us. We are paying very close attention to that issue. As you can imagine, many of us who went through the last one understand the ramifications of that. So it’s a good question. It’s something that’s on our minds as we manage through the changes in the cycles here.

Mike, the only thing I would add – this is Rich Lavin. The only thing I would add is that on the construction-ag side of the business we are getting, I think good information from the OEMs regarding their inventory situations, but also there their build schedules going through the first and into the second quarter of 2016. But I think it’s important to note that as part of our business planning process this year, we are going through a very rigorous exercise to ensure that we are positioned to respond quickly in the event we see changes in industry, changes in order levels that go beyond what we are anticipating as a part of our base business plan. So we are getting good information. We think we have got a good sense as to where the OEMs are at, where they will be in the first quarter, first half of 2016. We are also putting very explicit, well thought through complete plans in place to respond in the event we see something more negative than we are currently projecting.

Okay. And if I could just throw in one more follow-up here on what you said earlier and maybe that’s follow to what you just said, Rich. I know you didn’t want to put any details out. Perhaps we will get something in the next month or two months here, but on the changes you might be making to your footprint or your capacity and so forth, I mean are you guys looking at a formalized restructuring plan. And Tim, could there be a cash impact there as well, I mean can you give me a sense as to what might happen or is this going to be simply scaling your labor, I mean can you just kind of talk about how powerful discussion it would be?

Yes. I mean obviously, we can’t speak to any details in the plan right now, but I can say that it goes beyond simply managing headcount to respond to fluctuations in demand levels from our OEMs. It really is across the board, deep look at our manufacturing footprint, the customers we are now serving out of different locations, the capacity we are going to require in order to serve markets and serve key OEMs going forward. It will be on that basis that we come up with a plan for restructuring, changing our footprint going forward, does that help?

I mean obviously, we have to wait for the details. Obviously, I think the devil is in the details. I guess I would just ask, is there a potential for a pretty big cash outlay here or is it simply is it more non-cash in nature or possibly the sale of something which would generate cash, that’s the main question. The balance sheet impact here, mainly?

It will have a cash – this restructuring program that Rich just described will have both cash and non-cash impacts, Mike.

Okay, alright guys. I have grilled you enough. I will hop back in queue. Thank you very much.

Thanks Mike.

Thank you. [Operator Instructions] I am not showing any further questions on the phone lines at this time. I would like to turn the call back over to Mr. Rich Lavin for any closing remarks.

I think I would just close by thanking everybody for calling in. The third quarter was a good quarter in many respects. And I think we really made the investments, we put the plans in place to continue to grow our business going forward. And so, we look forward to sharing those plans and the results of those plans with you in the future. Thanks again for calling in.

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