Ladies and gentlemen, thank you for standing by, and welcome to the Commercial Vehicle Group Q4 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]I would now like to hand the conference over to your speaker today, Kirk Feiler. You may begin.

Thank you, Lisa, and welcome to our conference call. Joining me on the call today are Patrick Miller, President and Chief Executive Officer of Commercial Vehicle Group; and Tim Trenary, Chief Financial Officer. They will provide a brief company update as well as commentary regarding our fourth quarter and full year 2019 financial results. We will then open the call up for questions.This conference call is being webcast and a supplemental earnings presentation is available on our website. Both may 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 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 as detailed in our SEC filings.I will now turn the call over to Pat Miller to provide a company update.

Thank you, Kirk. Thank you everyone for joining the call today. Before I get into what was already a difficult quarter, I want to take a few minutes to discuss the restatement we announced last evening.As we disclosed last evening we have restated our financial statements for fiscal year 2018 and those affecting the three quarters in 2019. We also corrected other immaterial errors in our previously filed financial statements. As part of our preparation of the 2019 financial statements, we discovered a potential overstatement of the prepaid tooling -- production tooling account in our vehicle cap structures manufacturing facility.As a result with oversight by the Audit Committee, an investigation was conducted by external counsel with the assistance of a forensic accounting firm. This investigation concluded that the misstatements in our consolidated financial statements were due to inappropriate journal entries prepared by a former employee. The inappropriate journal entries consisted of the former employee understating cost of revenue by improperly capitalizing certain manufacturing expenses, primarily as prepaid production tooling.During the course of and as a result of the investigation, the company terminated the former employee and has taken additional personnel actions. Tim and I and our entire senior management team as well as the Board of Directors take this matter seriously. We believe based on our investigation that this was isolated to one employee and one manufacturing facility.However, we acknowledged that we had control failures that prevented us from detecting the former employee's inappropriate action and as a result we have material weaknesses in our internal controls. We have put into place a plan to strengthen our internal controls and remediate the material weaknesses, including enhancing the design of the balance sheet account reconciliation process, enhancing the design of the manual journal entry processes and enhancing the company's risk assessment…

Thank you, Pat, and good morning. As Pat pointed out, the company had restated 2018 financial results and within the 2019 Form 10-K filed yesterday the financial results for the three quarters of 2019, immaterial corrections were made to the 2017 financial statements. The impact of the restatement on the company's statements of operations for 2018 and for the nine-months ended September 30, 2019 is an understatement of cost of revenues more specifically material costs by $3.9 million and $4.6 million respectively.As regards to the manufacturing facility associated with the restatement, looking forward to 2020 we estimate that material costs in the facility will decline by $4 million to $5 million from 2019, partly due to material supplier actions, and partly due to the anticipated decline in production levels in the facility.As part of the independent investigation, the cost of which will be incurred in the first quarter was $3 million and which is now complete, we determined that assets were not misappropriated from the company. Furthermore, we determined that the company's cash flow was not impacted.Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As a consequence of the misstatements, we have identified material weaknesses in the design of certain of our internal controls. These material weaknesses did not allow us to prevent the misstatements nor did they us allow to detect the misstatements timely.The company has developed a remediation plan. Until these material weaknesses are remediated, we intend to perform additional analyses and other procedures to help ensure that our consolidated financial statements are prepared in accordance with generally accepted accounting principles.Before I speak to the company's fourth quarter and full year 2019 financial results here are some overarching remarks regarding the business environment the company operated in during the year. Consolidated sales…

Thank you. [Operator Instructions] And our first question comes from the line of Chris Howe from Barrington Research. Your line is open.

Good morning, everyone.

Hi, Chris.

Hi. First off, just start off with what you're seeing in the current macroeconomic environment, as it relates to your workforce, in retaining that workforce through the weakness you saw in the fourth quarter in this fiscal year? And more specifically, in regard to the restructuring of your sales and engineering teams, how do you feel about the current staff that's in place as you look to expand your capabilities into high-speed data and also high-voltage cabling applications?

Okay. So, I think, I understood the question. This is Pat. Good morning, by the way, Chris. As far as retaining workforce, I think, as Tim mentioned in his prepared remarks, we have seen a steady improvement in that condition, especially as production has leveled through the year in most of the places in which we operate.So it has reduced our expenses from attrition and recruiting, for the most part across the company and I think it helps stabilize those costs. And, frankly, improve productivity. We've been seeing improved productivity across most of our operations. So that's a general statement as far as workforce.Now there have been some special considerations, certainly, in China, during February and March. But even then, we've worked very closely with all of our employees through a lot of government required actions, as well as the well-being of our team there.They've been able to help and facilitate people in getting back where they need to go. Travel and whatnot was restricted for some period of time. And as we mentioned, things are starting to return to a normal operating, at least up to where we're at today and what we see for the foreseeable future.From a sales and engineering standpoint, we have made pretty dramatic changes in particular in the electrical arena. And that's in both parts of that business on the electrical -- electronics side, as well as in the interior trim and injection molding chemical based process side of things.And for the most part, we implemented a new organic growth process across that segment. That included analyzing and revamping how we go about reacting to new customers. Overtime, as you have six or seven large customers with similar characteristics and needs and requirements, our systems have adapted to their systems. And as we try…

That's interesting. And following up on some of your comments in regard to FSE, as I have slide seven of the deck in front of me, can you talk about the level of visibility you have this next fiscal year, as it relates to cross-selling opportunities, potential new businesses coming online, as well as the synergistic opportunities here?And assuming the noise in the global markets continues kind of a worst-case scenario does this change at all, your capital allocation or preservation activities? I know you mentioned the $94 million of liquidity on-hand in case of emergency. But how should we think about that as it relates to your potential for accretive inorganic opportunities or investments in the current Electrical Systems business?

Okay. Let me talk about the first one which is, how much visibility do we have? We -- that business is different than our other businesses. It tends to be discrete project-oriented orders, but from some of the same repetitive customers and similar type products.And so, we have a pretty good visibility to the pipeline through the first six months of 2020 in the form of hard orders. In the back half of 2020, what we're seeing is very positive indicators from many of the same customers on pending orders that they are seeing in their business which would result in orders in our business. That's kind of how it works.Let me give you a flavor of the types of customers. I can't -- I'm not prepared to talk specific customers because I don't know that we've devolved that publicly, but I will say the businesses that we're helping to support in industrial automation includes all of these new logistic automated warehouses that are expanding across -- tied directly to online sales, last mile deliveries and not just in North America, but that business is blossoming globally.Our customers are international customers. They have that capability. Today, we're predominantly supporting them in North America, but that's another longer-term opportunity for us. But my point is that, particular business is continuing to grow. And speed is critical for them. And so, the faster that we can help produce those programs for our customers.So we're down in the chain. So we're like a Tier II supplier into that chain making electromechanical assemblies, as well as the electronic control units for those electromechanical systems, so that business has been blossoming.Second major industry segment for them is defense -- the defense side and in particular the electronics and the communication modules for the defense side.…

Great. That's very helpful. And can you perhaps comment on the other part of my question as far as -- given the noise that you're seeing in the global markets, does that impact at all your assessment of inorganic opportunities this next fiscal year in Electrical Systems?

Well, if -- this is Tim, Chris. If the question is in regards to the company's ability to continue to invest in growth, organically more specifically in the Electrical Systems segment, we had at the end of the year, a total liquidity approaching $100 million. And cash flow has been pretty static so far this year. So that hasn't been an issue at all.Of course, look I mean it's no -- there's a tremendous uncertainty now in the near-term with respect to the global economy, but especially our economy here in the United States because of this virus. So I can't pretend or begin to anticipate what that might mean for us. But setting that aside, I believe that we have today adequate capital to continue to invest organically in the company's business…

Inorganic.

Inorganically, I'm sorry. Okay, I'm going to get to that, okay? Continue to invest organically in the business.As for inorganic, about 15 months ago now, we made a conscious decision to develop a corporate development function, which as evidenced by the acquisition of FSE was I think a wise investment and a successful investment. We're very happy with First Source Electronics.We, notwithstanding, the downturn here in the markets and the contraction in the company's business somewhat, we tend to continue to make this investment in corporate development to explore inorganic activities. If we are so fortunate as to find the right opportunity with the right set of products, the right customers, the right cash flow profile, we will consider how best to finance that opportunity at that point in time. Of course it will depend on capital markets, the construct of the cash flows, et cetera, et cetera.But I believe that if we find the right opportunity, the right fit for our company, the right set of cash flows and if the capital markets are open, I think that we have a fair shot of getting it financed and so we're going to continue to pursue corporate development opportunities.

Thanks, Tim and Pat. Appreciate all the color. I’ll hop back in the queue for now. Thank you.

Our next question comes from the line of Mike Shlisky from Dougherty & Company. Your line is open.

Good morning guys.

Hi, Mike.

Hey there. I was wondering if you can give us a sense of the seasonality you think of the truck build schedules in 2020, perhaps maybe just in general. And then also have you seen any changes in the last few weeks or so in the order patterns or the build schedule based on the COVID-19 situation?

As far as our expectation initially going into the year in 2020 for truck builds were that there was going to need to be some correction in the builds, which unfortunately started in earnest in the fourth quarter and continued in early in first quarter. And our expectation and they were communicating clearly were to reduce build rates down to some lower daily build rates and allow us to align our daily build rates with theirs.That has -- it was -- the intent was to correct the inventory levels and what not resulting from lower order rates. And so that is really how we expected the year to proceed unclear about the second half of 2020, but that's how we expected the first half.And there haven't been any large impacts related to the COVID virus from the North American truck build at this stage that we've seen related to order patterns. So the orders have been a little bit erratic in the first quarter, but not related to anything other than correcting for the market dynamics.So I think that is to be seen. I mean, obviously, -- have been changing daily here over the last week or two in North America, and we will adapt as required to what their needs are.Globally interestingly, we have continued to see orders along the ways that we have planned in our other operations, which are -- support a couple of different other industries in addition to some of the commercial trucking but as well as construction and others. So far we've not seen any major reactions. Now what's going to happen over the next few months and few weeks, it's uncertain.

Okay. I wanted to just switch over quickly to some of the things you said on EVs. You mentioned that there were some units coming out in 2021 and 2022. Hopefully, you're working closely with those OEMs. Are those heavy vehicles or medium? And do you have any sense as to whether the content per vehicle from CVG will be higher compared to diesel?

Okay. Oh sorry. So electric vehicle. Yes. I mean, I think the exciting and interesting thing about that emerging market space for us is related to the fact; there are some new entrants, right? So there are new entrants who need support, they need help, they need -- they need suppliers who have wherewithal across the multitude of product portfolios because they're trying to launch companies. And we have found that there's opportunities for us to support them in that process.And while things are still new and emerging in that arena, we are encouraged by the activities and the activity level we have across our product portfolio. It varies Mike to answer your question on content. Obviously, if we can put a multitude of products on a vehicle that we get that's a good content per vehicle for us.If we're strictly trying to look at apples-to-apples in particular related to the electrical content, I'd say it's equivalent because what we see going away -- and let me characterize that a little differently. It's equivalent if the vehicle and the powertrains and everything are just swapping electric for diesel. But what we're seeing is there is an evolution of increased electronic and electric -- electrically controlled subsystems in these vehicles. And so that is driving an inflation what we're calling technical inflation, all right?And so what we're seeing is, in particular, in the two new products that I mentioned, high-voltage and high-speed data is each of these subsystems have to talk to each other. They have to be powered and they have to have high-speed data coming to and from them. You've got cameras in places where you didn't have cameras and it's multiplied. And what that's doing is that is dramatically increasing the amount of content opportunity for our electrical group, okay? So, that's really where we see the content change is the type of systems that they're putting in.So, what they have today hydraulic or electromechanical system, they're converting that to either an electric system, which needs power and data or it's at least electronically monitored with sensors and data generation and communication. So, that's where we're seeing the content growth.

Got it. And then maybe last one for me. There are two major truck OEMs that are in the process of possibly emerging right now. One, I know is your customer, the other one I'm not sure about. Can you give us a sense as to whether there's an opportunity there. They've already been trying to work together on their supply agreements. But is there any kind of opportunity for CVG to capture some more business going forward from that tie up?

I assume you're referring to VW and NAV. And...

Yes.

We have a long history and relationship and they are a major customer for us Navistar in North America. We work with Volkswagen predominantly through Skoda in the Czech Republic on the passenger car side and a little bit on the truck side, but not a lot. So the opportunity for us would be able -- would be to have access into that European side of things. That would be the major opportunity for us.It's an inflection point and -- but they've been actually working together at least on the procurement side pretty closely for I think the last 12 months. So, we've been interacting with I think Navistar with support from Volkswagen for -- since they took a bigger stake about a year ago.

Okay, got it. I will pass along. Thanks guys.

I would now like to turn the call back to Pat Miller for closing remarks.

Okay. Thank you, Lisa. Listen, I want to tell everyone I appreciate them joining the call. We have -- I want to reassure you that we have managed through other market cycles in the past and we are taking the necessary steps now to align our business as well as preparing for other potential scenarios as they unfold. And we appreciate your support and your patience as we work through those dynamic issues and I wish you the best, stay safe and well. And we look forward to talking to you next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.