Restatement of Previously Issued Consolidated Financial Statements

Restatement Background

On March 12, 2020, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company, after considering the recommendations of management, and discussing such recommendations with outside SEC counsel, concluded that our 2018 Financial Statements, included in our Annual Report on Form 10-K as of and for the fiscal year ended December 31, 2018 (the “2018 Annual Report”), and our unaudited consolidated financial statements as of and for the quarterly periods ended March 31, 2019 and 2018, June 30, 2019 and 2018, and September 30, 2019 and 2018, included in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2019, June 30, 2019 and September 30, 2019 (the "2019 Quarterly Reports”), should no longer be relied upon due to misstatements that are described in greater detail below, and that we would restate such financial statements to make the necessary accounting corrections.

During the preparation of our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 Annual Report”), we noted a potential overstatement of the prepaid production tooling account of our vehicle cab structures manufacturing facility (presented in other current assets in the consolidated balance sheets). An investigation was conducted, under the direction of the Audit Committee, by external counsel with the assistance of a forensic accounting firm. As a result of the investigation, the Company concluded that the misstatements in our consolidated financial statements for the periods identified above were due to a former employee preparing manual journal entries to understate cost of revenues by improperly capitalizing certain manufacturing expenses, primarily in the prepaid production tooling account. The former employee made intentional misrepresentations during the investigation. During the course of, and as a result of, the investigation, the Company terminated the former employee and has taken additional personnel actions.

The Company evaluated the materiality of these errors both qualitatively and quantitatively in accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality and SAB No. 108, Considering the Effects of Prior Year Misstatements in Current Year Financial Statements, and determined the effect of these corrections was material to the consolidated financial statements as of and for the year ended December 31, 2018 and the quarterly periods ended March 31, 2019 and 2018, June 30, 2019 and 2018, and September 30, 2019 and 2018. As a result of the material misstatements, we have restated our consolidated financial statements as of and for the year ended December 31, 2018 and our unaudited consolidated financial statements as of and for the quarterly periods ended March 31, 2019 and 2018, June 30, 2019 and 2018, and September 30, 2019 and 2018, in accordance with ASC 250, Accounting Changes and Error Corrections (the "Restated Financial Statements").

Based on the analysis noted above, the correction of errors resulting from the former employee's actions noted above were immaterial to the previously reported consolidated financial statements as of and for the year ended December 31, 2017 (the “2017 Annual Report”). The amounts in the 2017 Annual Report have been revised to reflect the correction of these errors.

In addition to the adjustments to correct the understatement of cost of revenues and impacted balance sheet accounts, we also made an adjustment to correct an overstatement of property, plant and equipment (“PPE”) that was no longer in service as of the year ended December 31, 2016, and was unrelated to the correction of errors resulting from the former employee's actions. The Company evaluated this error in accordance with SAB 99 and 108 and concluded that the correction of the PPE error was immaterial to our consolidated financial statements.

The restated interim financial information for the relevant unaudited interim financial statements for the quarterly periods ended March 31, 2019 and 2018, June 30, 2019 and 2018, September 30, 2019 and 2018, and December 31, 2018, is included in Note 19.

The restatement adjustments and error correction and their impact on previously reported consolidated financial statements are described below.

(a) Understatement of cost of revenues and impacted balance sheet accounts - Corrections for the understatement of cost of revenues by improperly capitalizing certain manufacturing expenses. Balance sheet accounts adjusted as a result of the improper capitalization of expenses include other current assets, accounts receivable, net of allowances and construction in progress.

(b) Property, plant and equipment, net - We recorded an adjustment for a previously identified property, plant and equipment, net error unrelated to the understatement of cost of revenues and related balance sheet accounts misstatements. This PPE was no longer in service as of and for the year ended December 31, 2016.

Summary impact of restatement adjustments and immaterial error correction to previously reported financial information

The following tables present the summary impacts of the restatement adjustments and immaterial error correction on our previously reported retained deficit and total stockholders’ equity for the year ended December 31, 2016, and income before provision for income taxes and net income (loss) for the years ended December 31, 2018 and 2017:



	December 31, 2016
	Retained deficit			Total Stockholders' Equity
As previously reported	$	(113,378	)	$	67,690
Cumulative adjustments	(1,855		)	(1,855		)
As adjusted	$	(115,233	)	$	65,835



	For the years ended December 31,
	2018			2017
Income before income taxes - as previously reported	$	53,508		$	13,645
Restatement adjustments	(4,080		)	—
Error corrections	148			(847		)
Income before income taxes - as restated / adjusted	$	49,576		$	12,798

Net income (loss) - as previously reported	$	44,512		$	(1,705	)
Restatement adjustments	(3,135		)	—
Error corrections	112			(564		)
Net income (loss) - as restated / adjusted	$	41,489		$	(2,269	)

The following table presents the effect of the error correction on the Company’s consolidated balance sheets for the period indicated:

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET



	As of December 31, 2018									Restatement References
	As Previously Reported			Restatement Adjustments			As Restated			Restatement References
ASSETS
Current Assets:
Cash	$	70,913		$	—		$	70,913
Accounts receivable, net of allowances of $5,139	134,624			(689		)	133,935			a
Inventories	92,359			—			92,359
Other current assets	16,828			(4,748		)	12,080			a
Total current assets	314,724			(5,437		)	309,287
Property, Plant and Equipment:
Land and buildings	26,240			—			26,240
Machinery and equipment	175,990			(2,219		)	173,771			b
Construction in progress	6,650			—			6,650
Less accumulated depreciation	(143,781		)	1,221			(142,560		)	b
Property, plant and equipment, net	65,099			(998		)	64,101
Goodwill	7,576			—			7,576
Intangible assets, net of accumulated amortization of of $9,568	12,800			—			12,800
Deferred income taxes, net	15,348			993			16,341			a, b
Other assets	2,583			—			2,583
TOTAL ASSETS	$	418,130		$	(5,442	)	$	412,688
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	86,645		$	—		$	86,645
Accrued liabilities and other	36,969			—			36,969
Current portion of long-term debt	9,102			—			9,102
Total current liabilities	132,716			—			132,716
Long-term debt	154,656			—			154,656
Pension and other post-retirement liabilities	12,065			—			12,065
Other long-term liabilities	3,655			—			3,655
Total liabilities	303,092			—			303,092
Stockholders’ Equity:
Preferred stock, $.01 par value (5,000,000 shares authorized; no shares issued and outstanding)	—			—			—
Common stock, $.01 par value (60,000,000 shares authorized; 30,512,843 shares issued and outstanding)	318			—			318
Treasury stock, at cost: 1,334,251 shares	(10,245		)	—			(10,245		)
Additional paid-in capital	243,007			—			243,007
Retained deficit	(70,571		)	(5,442		)	(76,013		)	a, b
Accumulated other comprehensive loss	(47,471		)	—			(47,471		)
Total CVG stockholders’ equity	115,038			(5,442		)	109,596
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	418,130		$	(5,442	)	$	412,688

As of December 31, 2018

(a) Understatement of cost of revenues and impacted balance sheet accounts. As a result of the understatement of cost of revenues, the correction resulted in a $0.7 million decrease in accounts receivable, net; a $4.7 million decrease in other current assets; a $1.3 million increase in long-term deferred tax assets; and a $4.1 million increase in retained deficit.

(b) Property, plant and equipment, net error correction. The immaterial error correction of property, plant and equipment, net, resulted in a $2.2 million decrease in machinery and equipment; a $1.2 million decrease in accumulated depreciation; a $0.3 million decrease in long-term deferred tax assets; and a $1.3 million increase in retained deficit.

The following table presents the effect of the error corrections on the consolidated statements of income for the periods indicated:

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS



	For the Year Ended December 31, 2018							For the Year Ended December 31, 2017
	As Previously Reported		Restatement Adjustments			As Restated		As Previously Reported			Adjustments			As Adjusted			Restatement References
Revenues	$	897,737	$	—		$	897,737	$	755,231		$	—		$	755,231
Cost of revenues	768,885		3,932			772,817		663,513			847			664,360			a, b
Gross profit	$	128,852	$	(3,932	)	$	124,920	$	91,718		$	(847	)	$	90,871
Selling, general and administrative expenses	60,679		—			60,679		59,547			—			59,547
Amortization expense	1,300		—			1,300		1,320			—			1,320
Operating income	$	66,873	$	(3,932	)	$	62,941	$	30,851		$	(847	)	$	30,004
Other expense	1,311		—			1,311		1,943			—			1,943
Interest expense	14,676		—			14,676		19,149			—			19,149
Income before provision for income taxes	$	53,508	$	(3,932	)	$	49,576	$	13,645		$	(847	)	$	12,798		a, b
Provision for income taxes	8,996		(909		)	8,087		15,350			(283		)	15,067			a, b
Net income (loss)	$	44,512	$	(3,023	)	$	41,489	$	(1,705	)	$	(564	)	$	(2,269	)
Earnings (loss) per common share
Basic	$	1.47	$	(0.10	)	$	1.37	$	(0.06	)	$	(0.02	)	$	(0.08	)
Diluted	$	1.46	$	(0.10	)	$	1.36	$	(0.06	)	$	(0.02	)	$	(0.08	)
Weighted average shares outstanding
Basic	30,277		30,277			30,277		29,942			29,942			29,942
Diluted	30,587		30,587			30,587		29,942			29,942			29,942

For the year ended December 31, 2018

(a) Understatement of cost of revenues and impacted balance sheet accounts. As a result of the understatement of cost of revenues, the correction resulted in a $4.1 million increase in cost of revenues; a $1.0 million decrease in provision for income taxes; and a $3.1 million decrease in net income.

(b) Property, plant and equipment, net error correction. The immaterial error correction of property, plant and equipment, net, resulted in a $0.1 million decrease in cost of revenues; an immaterial increase in provision for income taxes; and a $0.1 million increase in net income.

For the year ended December 31, 2017

(a) Understatement of cost of revenues and impacted balance sheet accounts. As a result of the understatement of cost of revenues, the correction resulted in a $1.0 million increase in cost of revenues; a $0.2 million decrease in provision for income taxes; and a $0.8 million increase in net loss.

(b) Property, plant and equipment, net error correction. The immaterial error correction of property, plant and equipment, net, resulted in a $0.1 million decrease in cost of revenues; a $0.1 million decrease in provision for income taxes; and a $0.2 million decrease in net loss.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME



	For the Year Ended December 31, 2018									For the Year Ended December 31, 2017
	As Previously Reported			Restatement Adjustments			As Restated			As Previously Reported			Adjustments			As Adjusted			Restatement References
Net income (loss)	$	44,512		$	(3,023	)	$	41,489		$	(1,705	)	$	(564	)	$	(2,269	)	a, b
Other comprehensive (loss) income:
Foreign currency translation adjustments	(5,675		)	—			(5,675		)	7,141			—			7,141
Minimum pension liability, net of tax	(1,057		)	—			(1,057		)	469			—			469
Derivative instrument	496			—			496			—			—			—
Other comprehensive (loss) income	$	(6,236	)	$	—		$	(6,236	)	$	7,610		$	—		$	7,610
Comprehensive income (loss)	$	38,276		$	(3,023	)	$	35,253		$	5,905		$	(564	)	$	5,341

For the year ended December 31, 2018

(b) Property, Plant and Equipment, Net error correction. The immaterial error correction of property, plant and equipment, net, resulted in a $0.1 million increase in net income. Refer to descriptions of the adjustment and its impact to net income above.

For the year ended December 31, 2017

(b) Property, Plant and Equipment, Net error correction. The immaterial error correction of property, plant and equipment, net, resulted in a $0.2 million decrease in net loss. Refer to descriptions of the adjustment and its impact to net loss above.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



	Common Stock			Treasury Stock			Additional Paid-In Capital		Retained Deficit			Accumulated Other Comprehensive Loss			Total CVG Stockholders’ Equity
	Shares	Amount		Treasury Stock			Additional Paid-In Capital		Retained Deficit			Accumulated Other Comprehensive Loss			Total CVG Stockholders’ Equity

BALANCE - December 31, 2016 (As Previously Reported)	29,871,354	$	299	$	(7,753	)	$	237,367	$	(113,378	)	$	(48,845	)	$	67,690
Cumulative adjustments	—	—		—			—		(1,855		)	—			(1,855		)
BALANCE - December 31, 2016 (As Adjusted)	29,871,354	$	299	$	(7,753	)	$	237,367	$	(115,233	)	$	(48,845	)	$	65,835

BALANCE - December 31, 2017 (As Previously Reported)	30,219,278	$	304	$	(9,114	)	$	239,870	$	(115,083	)	$	(41,235	)	$	74,742
Cumulative adjustments	—	—		—			—		(2,419		)	—			(2,419		)
BALANCE - December 31, 2017 (As Adjusted)	30,219,278	$	304	$	(9,114	)	$	239,870	$	(117,502	)	$	(41,235	)	$	72,323

BALANCE - December 31, 2018 (As Previously Reported)	30,512,843	$	318	$	(10,245	)	$	243,007	$	(70,571	)	$	(47,471	)	$	115,038
Cumulative restatement adjustments	—	—		—			—		(5,442		)	—			(5,442		)
BALANCE - December 31, 2018 (As Restated)	30,512,843	$	318	$	(10,245	)	$	243,007	$	(76,013	)	$	(47,471	)	$	109,596

As of December 31, 2018, 2017 and 2016

The increase in retained deficit and corresponding decrease of total CVG stockholders’ equity for each restated period was the result of the adjustments for understatement of costs of revenues and impacted balance sheet accounts and the adjustment to property, plant and equipment, net. These adjustments resulted in a $5.4 million increase in retained deficit and corresponding decrease of total CVG stockholders’ equity as of December 31, 2018, a $2.4 million increase in retained deficit and corresponding decrease of total CVG stockholders’ equity as of December 31, 2017, and a $1.9 million increase in retained deficit and corresponding decrease of total CVG stockholders’ equity as of December 31, 2016.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW



	For the Year Ended December 31, 2018
	As Previously Reported			Restatement Adjustments			As Restated			Restatement References
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	44,512		$	(3,023	)	$	41,489		a, b
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	15,418			(148		)	15,270			b
Provision for doubtful accounts	7,607			—			7,607
Noncash amortization of debt financing costs	1,404			—			1,404
Shared-based compensation expense	3,137			—			3,137
Deferred income tax	5,940			(909		)	5,031			a, b
Noncash (gain) loss on derivative contracts	(1,468		)	—			(1,468		)
Change in other operating items:
Accounts receivable	(35,674		)	687			(34,987		)	a
Inventories	4,836			—			4,836
Prepaid expenses	(5,685		)	3,393			(2,292		)	a
Accounts payable	1,451			—			1,451
Accrued liabilities	2,631			—			2,631
Other operating activities, net	(3,117		)	—			(3,117		)
Net cash provided by operating activities	40,992			—			40,992
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(14,150		)	—			(14,150		)
Proceeds from disposal/sale of property, plant and equipment	49			—			49
Net cash used in investing activities	(14,101		)	—			(14,101		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of Revolving Credit Facility	80,500			—			80,500
Repayment of Revolving Credit Facility	(80,500		)	—			(80,500		)
Repayment of Term Loan Facility principal	(4,375		)	—			(4,375		)
Surrender of common stock by employees	(1,131		)	—			(1,131		)
Other financing activities, net	(329		)	—			(329		)
Net cash used in financing activities	(5,835		)	—			(5,835		)
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH	(2,387		)	—			(2,387		)
NET (DECREASE) INCREASE IN CASH	18,669			—			18,669
CASH:
Beginning of period	52,244			—			52,244
End of period	$	70,913		$	—		$	70,913

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	14,046		$	—		$	14,046
Cash paid for income taxes, net	$	3,143		$	—		$	3,143
Unpaid purchases of property and equipment included in accounts payable	$	509		$	—		$	509

For the year ended December 31, 2018

(a) Understatement of cost of revenues and impacted balance sheet accounts. As a result of the understatement of cost of revenues, the correction resulted in a $3.1 million decrease in net income; a $0.9 million decrease in deferred income tax; a $0.7 million decrease in change in accounts receivable; and a $3.4 million decrease in change in prepaid expenses. Refer to descriptions of the adjustments and their impacts to net income above.

(b) Property, plant and equipment, net error correction. The immaterial error correction of property, plant and equipment, net, resulted in a $0.1 million increase in net income; a $0.1 million decrease in depreciation expense; and an immaterial increase in deferred income tax. Refer to descriptions of the adjustment and its impact to net income above.

The impact of these error corrections to relevant segment and quarterly financial information is presented in Notes 12 and 19 to these consolidated financial statements, respectively.

COMMERCIAL VEHICLE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOW



	For the Year Ended December 31, 2017
	As Previously Reported			Adjustments			As Adjusted			Restatement References
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(1,705	)	$	(564	)	$	(2,269	)	a, b
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	15,344			(148		)	15,196			b
Provision for doubtful accounts	5,622			—			5,622
Noncash amortization of debt financing costs	1,251			—			1,251
Shared-based compensation expense	2,503			—			2,503
(Gain) loss on sale of assets	(586		)	—			(586		)
Deferred income tax	7,992			(283		)	7,709			a, b
Noncash (gain) loss on derivative contracts	(726		)	—			(726		)
Change in other operating items:
Accounts receivable	(13,794		)	2			(13,792		)	a
Inventories	(25,104		)	—			(25,104		)
Prepaid expenses	(814		)	993			179			a
Accounts payable	23,250			—			23,250
Accrued liabilities	(12,284		)	—			(12,284		)
Other operating activities, net	1,308			—			1,308
Net cash provided by operating activities	2,257			—			2,257
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(13,458		)	—			(13,458		)
Proceeds from disposal/sale of property, plant and equipment	2,682			—			2,682
Net cash used in investing activities	(10,776		)	—			(10,776		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of Term Loan Facility	175,000			—			175,000
Repayment of Term Loan Facility principal	(2,188		)	—			(2,188		)
Surrender of common stock by employees	(1,361		)	—			(1,361		)
Redemption of Notes	(235,000		)	—			(235,000		)
Prepayment charge for redemption of Notes	(1,543		)	—			(1,543		)
Payment of Term Loan Facility discount	(3,500		)	—			(3,500		)
Payment of debt issuance costs	(4,256		)	—			(4,256		)
Net cash used in financing activities	(72,848		)	—			(72,848		)
EFFECT OF CURRENCY EXCHANGE RATE CHANGES ON CASH	3,451			—			3,451
NET (DECREASE) INCREASE IN CASH	(77,916		)	—			(77,916		)
CASH:
Beginning of period	130,160			—			130,160
End of period	$	52,244		$	—		$	52,244
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	18,572		$	—		$	18,572
Cash paid for income taxes, net	$	3,276		$	—		$	3,276
Unpaid purchases of property and equipment included in accounts payable	$	109		$	—		$	109

For the year ended December 31, 2017

(a) Understatement of cost of revenues and impacted balance sheet accounts. As a result of the understatement of cost of revenues, the correction resulted in a $0.8 million increase in net loss; a $0.2 million decrease in deferred income tax; an immaterial decrease in change in accounts receivable; and a $1.0 million decrease in change in prepaid expenses. Refer to descriptions of the adjustments and their impacts to net income above.

(b) Property, plant and equipment, net error correction. The immaterial error correction of property, plant and equipment, net, resulted in a $0.2 million decrease in net loss; a $0.1 million decrease in depreciation expense; and a $0.1 million decrease in deferred income tax.

Refer to descriptions of the adjustment and its impact to net income above. The impact of these error corrections to relevant segment and quarterly financial information is presented in Notes 12 and 19 to these consolidated financial statements, respectively.