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Core Molding Technologies
CMT
#8528
Rank
A$0.28 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
A$32.52
Share price
-0.88%
Change (1 day)
33.55%
Change (1 year)
๐Ÿงช Chemicals ๐Ÿญ Manufacturing
Categories
  1. Core Molding Technologies
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2020 Q3

Core Molding Technologies - 10-Q quarterly report FY2020 Q3


Text size:
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UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM
10-Q
 
☑
QUARTERLY
 
REPORT PURSUANT TO
 
SECTION 13
 
OR 15(d) OF
 
THE SECURITIES EXCHANGE
 
ACT
OF
1934
For the quarterly period ended September
 
30, 2020
 
OR
 
☐
TRANSITION REPORT
PURSUANT TO SECTION
 
13 OR
 
15(d) OF THE
 
SECURITIES EXCHANGE
 
ACT
OF 1934
for the transition period from
 
 
To
 
Commission File Number
001-12505
 
CORE MOLDING TECHNOLOGIES, INC.
 
___________________________________________________________________________________
 
(Exact name of registrant as specified in its charter)
 
Delaware
31-1481870
(State or other jurisdiction
incorporation or organization)
(I.R.S. Employer Identification No.)
 
800 Manor Park Drive
,
Columbus
,
Ohio
43228-0183
(Address of principal executive office)
(Zip Code)
Registrant’s telephone number,
 
including area code (
614
)
 
870-5000
 
N/A
 
_______________________________________________________________
 
Former name, former address and former fiscal year, if changed
 
since last report.
 
 
Indicate by check mark whether the registrant (1)
 
has filed all reports required to be filed by Section
 
13 or 15(d) of the Securities
Exchange Act of 1934
 
during the preceding
 
12
 
months (or for
 
such shorter period
 
that the registrant
 
was required to
 
file such
reports), and (2)
 
has been subject to such filing requirements for the past 90
 
days.
Yes
☑
 
No
☐
 
Indicate by check mark
 
whether the registrant has
 
submitted electronically every Interactive
 
Data File required to
 
be submitted
pursuant to Rule
 
405 of Regulation
 
S-T (§232.405
 
of this chapter)
 
during the preceding
 
12
 
months (or for
 
such shorter period
that the registrant was required to submit such files).
Yes
☑
 
No
☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of “accelerated filer,”
 
“large accelerated filer,” and “smaller reporting company,” in Rule
 
12b-
2 of the Exchange Act.
 
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☑
(Do not check if a
 
smaller
reporting company)
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
 
transition period for
complying with any new or revised financial accounting standards
 
provided pursuant to Section 13(a) of the Exchange Act.
☐
 
 
Indicate by check mark whether the registrant is a shell company as defined
 
in Rule
 
12b-2 of the Exchange Act. Yes
☐
 
No
☑
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Name of each exchange on which registered
Trading Symbol
Common Stock, par value $0.01
NYSE American LLC
CMT
 
As of
 
November 6,
 
2020, the
 
latest practicable
 
date,
8,496,655
 
shares of
 
the registrant’s
 
common stock
 
were issued,
 
which
includes
524,782
 
shares of unvested restricted common stock.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
 
Item 1. Financial Statements
 
Part I — Financial Information
 
Core Molding Technologies, Inc. and Subsidiaries
 
 
Consolidated Statements of Income (Loss)
 
(Unaudited)
 
 
 
 
Three months ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Net sales
$
59,873,000
$
74,655,000
$
161,705,000
$
228,168,000
Cost of sales
49,035,000
68,171,000
137,192,000
210,043,000
Gross margin
10,838,000
6,484,000
24,513,000
18,125,000
Selling, general and administrative expense
6,517,000
7,041,000
17,136,000
21,431,000
Goodwill impairment
—
4,100,000
—
4,100,000
Total
 
expenses
6,517,000
11,141,000
17,136,000
25,531,000
Operating income (loss)
4,321,000
(4,657,000)
7,377,000
(7,406,000)
Other income and expense
Interest expense
966,000
1,113,000
3,338,000
2,878,000
Net periodic post-retirement benefit
(20,000)
(23,000)
(60,000)
(71,000)
Total
 
other expense
946,000
1,090,000
3,278,000
2,807,000
Income (loss) before taxes
3,375,000
(5,747,000)
4,099,000
(10,213,000)
Income tax expense (benefit)
32,000
378,000
(4,933,000)
(452,000)
Net income (loss)
$
3,343,000
$
(6,125,000)
$
9,032,000
$
(9,761,000)
Net income (loss) per common share:
Basic
$
0.39
$
(0.78)
$
1.07
$
(1.25)
Diluted
$
0.39
$
(0.78)
$
1.07
$
(1.25)
See notes to unaudited consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
 
Core Molding Technologies, Inc. and Subsidiaries
 
Consolidated Statements of Comprehensive Income (Loss)
 
(Unaudited)
 
 
Three months ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Net income (loss)
$
3,343,000
$
(6,125,000)
$
9,032,000
$
(9,761,000)
Other comprehensive income (loss):
Foreign currency hedging derivatives:
Unrealized hedge gain (loss)
415,000
(254,000)
(456,000)
539,000
Income tax benefit (expense)
(88,000)
58,000
98,000
(144,000)
Interest rate swaps:
Unrealized hedge gain (loss)
172,000
(87,000)
(550,000)
(809,000)
Income tax benefit (expense)
(39,000)
20,000
125,000
184,000
Post retirement benefit plan adjustments:
Net actuarial gain
46,000
28,000
136,000
88,000
Prior service costs
(124,000)
(122,000)
(372,000)
(372,000)
Income tax benefit
17,000
20,000
50,000
60,000
Comprehensive income (loss)
$
3,742,000
$
(6,462,000)
$
8,063,000
$
(10,215,000)
See notes to unaudited consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
 
Core Molding Technologies, Inc. and Subsidiaries
 
Consolidated Balance Sheets
 
 
 
September 30,
 
2020
December 31,
(Unaudited)
2019
Assets:
Current assets:
Cash and cash equivalents
$
14,809,000
$
1,856,000
Accounts receivable, net
26,306,000
32,424,000
Inventories, net
15,233,000
21,682,000
Income tax receivable
2,657,000
652,000
Prepaid expenses and other current assets
3,688,000
4,611,000
Total current assets
62,693,000
61,225,000
Right of use asset
3,506,000
4,484,000
Property, plant and equipment,
 
net
75,207,000
79,206,000
Goodwill
17,376,000
17,376,000
Intangibles, net
12,003,000
13,464,000
Other non-current assets
3,215,000
3,551,000
Total
 
Assets
$
174,000,000
$
179,306,000
Liabilities and Stockholders’ Equity:
Current liabilities:
Current portion of long-term debt
$
2,753,000
$
49,451,000
Accounts payable
17,949,000
19,910,000
Contract liabilities
2,745,000
3,698,000
Compensation and related benefits
6,450,000
5,515,000
Accrued other liabilities
7,101,000
5,260,000
Total current liabilities
36,998,000
83,834,000
Long-term debt
31,537,000
—
Other non-current liabilities
3,962,000
3,119,000
Post retirement benefits liability
7,974,000
7,927,000
Total
 
Liabilities
$
80,471,000
$
94,880,000
Commitments and Contingencies
—
—
Stockholders’ Equity:
Preferred stock — $0.01 par value, authorized shares — 10,000,000;
 
no shares outstanding at
September 30, 2020 and December 31, 2019
—
—
Common stock — $0.01 par value, authorized shares – 20,000,000;
 
outstanding shares: 7,971,873 at
September 30, 2020 and 7,877,945 at December 31, 2019
80,000
79,000
Paid-in capital
35,831,000
34,772,000
Accumulated other comprehensive income (loss), net of income taxes
401,000
1,370,000
Treasury stock - at cost, 3,810,929
 
at September 30, 2020 and 3,806,355 at December 31, 2019
(28,521,000)
(28,501,000)
Retained earnings
85,738,000
76,706,000
Total
 
Stockholders’ Equity
93,529,000
84,426,000
Total
 
Liabilities and Stockholders’ Equity
$
174,000,000
$
179,306,000
See notes to unaudited consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
 
Core Molding Technologies, Inc. and Subsidiaries
 
Consolidated Statement of Stockholders’
 
Equity
 
(Unaudited)
 
For the three months ended September
 
30, 2019:
 
 
 
Common Stock
Outstanding
Accumulated
Other
Total
Paid-In
Comprehensive
Treasury
Retained
 
Stockholders'
Shares
Amount
Capital
Income
Stock
Earnings
Equity
Balance at June 30, 2019
7,854,736
$
79,000
$
34,074,000
$
2,001,000
$
(28,463,000)
$
88,293,000
$
95,984,000
Net loss
(6,125,000)
(6,125,000)
Change in post retirement
 
benefits, net of tax benefit
of $20,000
(75,000)
(75,000)
Unrealized foreign currency
 
hedge loss, net of tax
 
benefit of $58,000
(196,000)
(196,000)
Change in interest rate
 
swaps, net of tax benefit
 
of $20,000
(67,000)
(67,000)
Share-based compensation
398,000
398,000
Balance at September 30,
 
2019
7,854,736
$
79,000
$
34,472,000
$
1,663,000
$
(28,463,000)
$
82,168,000
$
89,919,000
For the nine months ended September
 
30, 2019:
 
Common Stock
Outstanding
Accumulated
Other
Total
Paid-In
Comprehensive
Treasury
Retained
 
Stockholders'
Shares
Amount
Capital
Income
Stock
Earnings
Equity
Balance at December 31,
2018
7,776,164
$
78,000
$
33,208,000
$
2,117,000
$
(28,403,000)
$
91,929,000
$
98,929,000
Net loss
(9,761,000)
(9,761,000)
Change in post retirement
 
benefits, net of tax
 
benefit of $60,000
(225,000)
(225,000)
Unrealized foreign currency
 
hedge gain, net of tax of
 
$144,000
396,000
396,000
Change in interest rate
 
swaps, net of tax benefit
 
of $184,000
(625,000)
(625,000)
Purchase of treasury stock
(7,744)
(60,000)
(60,000)
Restricted stock vested
86,316
1,000
1,000
Share-based compensation
1,264,000
1,264,000
Balance at September 30,
 
2019
7,854,736
$
79,000
$
34,472,000
$
1,663,000
$
(28,463,000)
$
82,168,000
$
89,919,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7
 
For the three months ended September
 
30, 2020:
 
Common Stock
Outstanding
Accumulated
Other
Total
Paid-In
Comprehensive
Treasury
Retained
 
Stockholders'
Shares
Amount
Capital
Income
Stock
Earnings
Equity
Balance at June 30, 2020
7,965,289
$
80,000
$
35,476,000
$
2,000
$
(28,501,000)
$
82,395,000
$
89,452,000
Net income
3,343,000
3,343,000
Change in post retirement
 
benefits, net of tax
 
benefit of $17,000
(61,000)
(61,000)
Unrealized foreign currency
 
hedge gain, net of tax
 
of $88,000
327,000
327,000
Change in interest rate
 
swaps, net of tax
 
of $39,000
133,000
133,000
Purchase of treasury stock
(4,574)
(20,000)
(20,000)
Restricted stock vested
11,158
Share-based compensation
355,000
355,000
Balance at September 30,
 
2020
7,971,873
$
80,000
$
35,831,000
$
401,000
$
(28,521,000)
$
85,738,000
$
93,529,000
For the nine months ended September
 
30, 2020:
 
Common Stock
Outstanding
Accumulated
Other
Total
Paid-In
Comprehensive
Treasury
Retained
 
Stockholders'
Shares
Amount
Capital
Income
Stock
Earnings
Equity
Balance at December 31, 2019
7,877,945
$
79,000
$
34,772,000
$
1,370,000
$
(28,501,000)
$
76,706,000
$
84,426,000
Net income
9,032,000
9,032,000
Change in post retirement
 
benefits, net of tax
 
benefit of $50,000
(186,000)
(187,000)
Unrealized foreign currency
 
hedge loss, net of tax
benefit of $98,000
(358,000)
(358,000)
Change in interest rate
 
swaps, net of tax benefit
 
of $125,000
(425,000)
(424,000)
Purchase of treasury stock
(4,574)
(20,000)
(20,000)
Restricted stock vested
98,502
1,000
1,000
Share-based compensation
1,059,000
1,059,000
Balance at September 30,
 
2020
7,971,873
$
80,000
$
35,831,000
$
401,000
$
(28,521,000)
$
85,738,000
$
93,529,000
See notes to unaudited consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
 
Core Molding Technologies, Inc. and Subsidiaries
 
Consolidated Statements of Cash Flows
 
(Unaudited)
 
 
 
Nine Months Ended
September 30,
2020
2019
Cash flows from operating activities:
Net income (loss)
$
9,032,000
$
(9,761,000)
Adjustments to reconcile net income (loss) to net cash provided
 
by operating activities:
Depreciation and amortization
8,425,000
7,700,000
Deferred income tax
517,000
(632,000)
Goodwill impairment
—
4,100,000
Share-based compensation
1,059,000
1,264,000
Losses (gains) on foreign currency translation
203,000
(22,000)
Change in operating assets and liabilities:
Accounts receivable
6,118,000
(378,000)
Inventories
6,449,000
2,352,000
Prepaid and other assets
(747,000)
1,900,000
Accounts payable
(2,053,000)
(2,505,000)
Accrued and other liabilities
2,238,000
253,000
Post retirement benefits liability
(189,000)
(298,000)
Net cash provided by operating activities
31,052,000
3,973,000
Cash flows from investing activities:
Purchase of property, plant
 
and equipment
(2,716,000)
(6,280,000)
Net cash used in investing activities
(2,716,000)
(6,280,000)
Cash flows from financing activities:
Gross repayments on revolving line of credit
(59,356,000)
(148,679,000)
Gross borrowings on revolving line of credit
47,349,000
152,121,000
Proceeds from term loan
175,000
—
Payment of principal on term loans
(3,391,000)
(2,532,000)
Payment of deferred loan costs
(140,000)
(434,000)
Payments related to the purchase of treasury stock
(20,000)
(60,000)
Net cash provided by (used in) financing activities
(15,383,000)
416,000
Net change in cash and cash equivalents
12,953,000
(1,891,000)
Cash and cash equivalents at beginning of period
1,856,000
1,891,000
Cash and cash equivalents at end of period
$
14,809,000
$
—
Cash paid for:
 
Interest
$
3,523,000
$
2,706,000
 
Income taxes
$
467,000
$
1,160,000
Non-cash investing activities:
Fixed asset purchases in accounts payable
$
146,000
$
429,000
See notes to unaudited consolidated financial statements.
 
 
 
9
 
Core Molding Technologies, Inc. and Subsidiaries
 
Notes to Consolidated Financial Statements
 
(Unaudited)
 
1. BASIS OF PRESENTATION
 
 
The accompanying unaudited consolidated
 
financial statements have been
 
prepared in accordance with the
 
instructions to Form
10-Q and include all of the information and disclosures required by accounting principles generally accepted in
 
the United States
of America for
 
interim reporting,
 
which are less
 
than those
 
required for
 
annual reporting.
 
In the opinion
 
of management, the
accompanying unaudited
 
consolidated financial
 
statements contain
 
all adjustments
 
(all of
 
which are
 
normal and
 
recurring in
nature) necessary to present fairly the financial position of Core Molding Technologies, Inc. and its subsidiaries (“Core
 
Molding
Technologies” or the “Company”) at September
 
30, 2020, and the results of operations and cash flows for the nine months
 
ended
September
 
30, 2020. The Company has reclassified certain prior-year amounts to conform to the current-year's presentation. The
“Notes to
 
Consolidated Financial
 
Statements”
 
contained in
 
the Company's
 
Annual Report
 
on Form
 
10-K for
 
the year
 
ended
December
 
31, 2019, should be read in conjunction with these consolidated financial statements.
 
 
Core Molding
 
Technologies and
 
its subsidiaries
 
operate in
 
the composites
 
market as
 
one operating
 
segment as
 
a molder
 
of
thermoplastic and thermoset
 
structural products. The
 
Company's operating segment
 
consists of two
 
component reporting units,
Core Traditional and Horizon Plastics. The Company produces and
 
sells molded products for varied markets, including
 
medium
and heavy-duty trucks, automobiles, marine, construction and other commercial
 
markets. The Company offers customers a wide
range of manufacturing processes to fit various
 
program volume and investment requirements.
 
These processes include
compression molding of sheet
 
molding compound ("SMC"), bulk
 
molding compounds ("BMC"), resin
 
transfer molding ("RTM"),
liquid molding of dicyclopentadiene
 
("DCPD"), spray-up and hand-lay-up,
 
glass mat thermoplastics ("GMT"),
 
direct long-fiber
thermoplastics ("D-LFT") and structural foam and structural web injection molding ("SIM"). Core Molding Technologies has its
headquarters in
 
Columbus, Ohio,
 
and operates
 
seven production
 
facilities in
 
Columbus and
 
Batavia, Ohio;
 
Gaffney, South
Carolina; Winona,
 
Minnesota; Matamoros
 
and Escobedo,
 
Mexico; and
 
Cobourg, Ontario,
 
Canada. All production
 
facilities
produce structural composite products.
 
 
2. CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 
 
The preparation
 
of financial
 
statements in
 
conformity with
 
accounting principles
 
generally accepted
 
in the
 
United States
 
of
America requires
 
management to
 
make estimates
 
and assumptions
 
that affect
 
the reported
 
amounts of
 
assets and
 
liabilities,
disclosures of contingent assets
 
and liabilities, and reported
 
amounts of revenues and
 
expenses during the
 
reporting period. On
an on
 
-going basis,
 
management evaluates
 
its estimates
 
and judgments.
 
Management bases
 
its estimates
 
and judgments
 
on
historical experience and on various other factors that are believed to be reasonable under the
 
circumstances, the results of which
form the basis
 
for making judgments
 
about the carrying
 
value of assets
 
and liabilities that
 
are not readily
 
apparent from other
sources. Actual results may differ from these estimates, due
 
to the uncertainty around the magnitude and duration of the COVID-
19 pandemic, as well as other factors.
 
 
Management believes the following
 
critical accounting policies, among
 
others, affect its more
 
significant judgments and estimates
used in the preparation of its consolidated financial statements.
 
 
Going Concern:
 
Under FASB ASU 2014-15, “Presentation of Financial Statements - Going Concern,”
 
management is required
to evaluate conditions or events as related to uncertainties that raise substantial doubt about the Company’s ability to continue as
a going concern and
 
to provide related financial disclosures,
 
as applicable. As
 
of September 30, 2020, the
 
Company was in default
under the
 
Company's Amended and
 
Restated Credit
 
Agreement, dated
 
January 16,
 
2018 (the
 
“A/R Credit
 
Agreement”), with
KeyBank National Association as the
 
administrative agent (the
 
"Administrative Agent") and various other
 
financial institutions
thereto as
 
lenders (the
 
"Lenders") as
 
discussed in
 
Note 11,
 
“Debt”. As a
 
result of
 
the default,
 
the Lenders
 
requested that
 
the
Company seek alternative financing, which caused uncertainty about the Company’s future liquidity and raised substantial doubt
about the Company’s ability to
 
continue as a going concern.
 
 
 
 
 
10
 
On October
 
27, 2020,
 
the Company
 
entered into
 
a credit
 
agreement and
 
a master
 
security agreement
 
(the “Refinancing
Agreements”) with Wells Fargo Bank, National Association and FGI
 
Equipment Finance LLC, respectively, as discussed in Note
16, “Subsequent
 
Events”, and
 
repaid all
 
of its
 
obligations under
 
the A/R Credit
 
Agreement. Management
 
believes that
 
the
Refinancing Agreements will provide sufficient liquidity to sustain the
 
Company’s needs for
 
the next 12 months. The closing of
the Refinancing Agreements alleviated the substantial doubt about the Company’s ability to
 
continue as a going concern prior to
the filing date of our Form 10-Q, see Note 16, “Subsequent Events”.
 
 
Revenue Recognition:
 
The Company
 
recognizes revenue
 
from two
 
streams, product
 
revenue and
 
tooling revenue.
 
Product
revenue is earned from the manufacture
 
and sale of sheet molding compound and
 
thermoset and thermoplastic products. Revenue
from product sales is
 
generally recognized as
 
products are shipped,
 
as the Company transfers
 
title and risk
 
of ownership to
 
the
customer and is entitled
 
to payment. In limited
 
circumstances, the Company recognizes revenue
 
from product sales when
 
products
are produced and the customer takes title and risk of ownership
 
at the Company's production facility.
 
 
Tooling revenue is earned from manufacturing tools, molds and assembly equipment as part of a tooling program for a customer.
Given that the
 
Company is providing
 
a significant service
 
of producing highly
 
interdependent component
 
parts of the
 
tooling
program, each tooling
 
program consists of
 
a single performance
 
obligation to provide
 
the customer the capability
 
to produce a
single product. Based
 
on the arrangement
 
with the customer,
 
the Company recognizes
 
revenue either at
 
a point in
 
time or over
time. When the Company does
 
not have an enforceable right
 
to payment, the Company recognizes
 
tooling revenue at a
 
point in
time. In such cases,
 
the Company recognizes
 
revenue upon customer
 
acceptance, which is
 
when the customer has
 
legal title to
the tools.
 
 
Certain tooling programs
 
include an enforceable
 
right to payment.
 
In those cases,
 
the Company recognizes
 
revenue over time
based on the extent of
 
progress towards completion of
 
its performance obligation. The
 
Company uses a cost-to
 
-cost measure of
progress for such
 
contracts because it
 
best depicts the
 
transfer of value
 
to the customer
 
and also correlates
 
with the amount
 
of
consideration to which the
 
entity expects to be
 
entitled in exchange
 
for transferring the
 
promised goods or services
 
to the customer.
 
Under the cost-to-cost measure of progress, progress towards completion is measured based on the ratio of costs incurred to date
to the
 
total estimated
 
costs at
 
completion of
 
the performance
 
obligation. Revenues
 
are recorded
 
proportionally as
 
costs are
incurred.
 
 
Accounts Receivable Allowances:
 
Management maintains allowances for
 
doubtful accounts for estimated
 
losses resulting from
the inability
 
of its
 
customers to
 
make required
 
payments. If
 
the financial
 
condition of
 
the Company
 
’s customers
 
were to
deteriorate, resulting in an impairment
 
of their ability to make
 
payments, additional allowances may
 
be required. The Company
recorded an allowance for doubtful accounts
 
of $
130,000
 
and $
50,000
 
at September
 
30, 2020 and December
 
31, 2019,
respectively.
 
 
Management also records an
 
allowance for estimated customer
 
chargebacks for returns, price
 
discounts and adjustments, premium
freight and expediting costs and customer
 
production line disruption costs resulting from
 
late deliveries. At
 
times, customers have
asserted a right
 
to significant production
 
line disruption charges
 
to recover damages
 
as a result
 
of late delivery.
 
The Company
typically works
 
with its customers
 
to minimize
 
disruption charges,
 
validate damages
 
and negotiate
 
resolution. The
 
Company
records accruals
 
for customer
 
chargebacks when
 
a valid
 
charge is
 
probable and
 
the amount
 
of the
 
charge can
 
be reasonably
estimated. Should
 
customer chargebacks
 
fluctuate from
 
the estimated
 
amounts, additional
 
allowances may
 
be necessary.
 
The
Company reduced accounts receivable for chargebacks by $
105,000
 
at September
 
30, 2020 and $
476,000
 
at December
 
31, 2019.
 
 
Inventories:
 
Inventories, which
 
include material,
 
labor and
 
manufacturing overhead,
 
are valued
 
at the
 
lower of
 
cost or
 
net
realizable value.
 
The inventories
 
are accounted
 
for using the
 
first-in, first
 
-out (FIFO)
 
method of
 
determining inventory
 
costs.
Inventory quantities
 
on-hand are
 
regularly reviewed,
 
and where
 
necessary, provisions
 
for excess
 
and obsolete
 
inventory are
recorded based
 
on historical
 
and anticipated
 
usage. The
 
Company has
 
recorded an
 
allowance for
 
slow moving
 
and obsolete
inventory of $
726,000
 
at September
 
30, 2020 and $
898,000
 
at December
 
31, 2019.
 
 
 
 
 
11
 
Contract Assets/Liabilities:
Contract assets and liabilities
 
represent the net cumulative
 
customer billings, vendor
 
payments and
revenue recognized
 
for tooling
 
programs. For
 
tooling programs
 
where net
 
revenue recognized
 
and vendor
 
payments exceed
customer billings, the
 
Company recognizes a
 
contract asset. For
 
tooling programs where
 
net customer billings
 
exceed revenue
recognized and vendor payments, the Company recognizes a contract liability. Customer payment
 
terms vary by contract and can
range from progress
 
payments based on
 
work performed or
 
one single payment
 
once the contract
 
is completed. The
 
Company
has recorded
 
contract assets
 
of $
343,000
 
at September
 
30, 2020,
 
and $
888,000
 
at December
 
31, 2019.
 
Contract assets
 
are
generally classified as current within prepaid expenses and other current assets on the Consolidated Balance Sheets. For the nine
months ended
 
September
 
30, 2020,
 
the Company
 
recognized
no
 
impairments on
 
contract assets.
 
For the
 
nine months
 
ended
September 30,
 
2020, the
 
Company recognized
 
$
5,710,000
 
amount of
 
revenue from
 
contract liabilities
 
related to
 
open jobs
outstanding as of December 31, 2019.
 
 
Income Taxes:
 
The Company’s Consolidated
 
Balance Sheets include a
 
net non-current deferred
 
tax asset of $
2,026,000
 
for the
Canadian and Mexican
 
tax jurisdictions and
 
a net non-current
 
deferred tax liability
 
of $
517,000
 
for the U.S.
 
tax jurisdiction at
September 30, 2020. The Company evaluates the balance of
 
deferred tax assets that will be realized based on the
 
premise that the
Company is
 
more likely
 
than not
 
to realize
 
deferred tax
 
benefits through
 
the generation
 
of future
 
taxable income.
 
For more
information, refer to
 
Note 12, "Income
 
Taxes", of the
 
Notes to Consolidated
 
Financial Statements contained
 
in the Company's
Annual Report on Form 10-K for the year ended December
 
31, 2019.
 
 
Derivative Instruments:
Derivative instruments
 
are utilized
 
to manage exposure
 
to fluctuations
 
in foreign currency
 
exchange
rates and interest
 
rates on long
 
term debt obligations.
 
All derivative instruments
 
are formally documented
 
as cash flow
 
hedges
and are recorded
 
at fair value at
 
each reporting period.
 
Gains and losses
 
related to currency
 
forward contracts and
 
interest rate
swaps are
 
deferred and
 
recorded as
 
a component
 
of Accumulated Other
 
Comprehensive Income
 
(Loss) in
 
the Consolidated
Statement of Stockholders' Equity
 
and then subsequently
 
recognized in the
 
Consolidated Statement of
 
Income (Loss) when the
hedged item affects
 
net income. The ineffective
 
portion of the
 
change in fair
 
value of a hedge,
 
if any, is recognized
 
in income.
For additional information on derivative instruments, see Note
 
14, "Fair Value of Financial Instruments".
 
 
Long-Lived Assets:
 
Long-lived assets
 
consist primarily
 
of property,
 
plant and
 
equipment and
 
definite-lived intangibles.
 
The
recoverability of long-lived assets is evaluated by an analysis of operating results and consideration of other significant events or
changes in the business
 
environment. The Company
 
evaluates whether impairment
 
exists for property,
 
plant and equipment
 
on
the basis of undiscounted expected future cash flows from
 
operations before interest. There was
no
 
impairment of the Company's
long-lived assets for the nine months ended September
 
30, 2020 or September
 
30, 2019.
 
 
Goodwill and Other Intangibles:
 
The Company evaluates goodwill annually on December
 
31
 
to determine whether impairment
exists, or
 
at interim
 
periods if
 
an indicator
 
of possible
 
impairment exists.
 
As a
 
result of
 
the Horizon
 
Plastics acquisition
 
on
January
 
16, 2018
 
and the status
 
of its integration,
 
the Company established
 
two
 
reporting units,
 
Core Traditional and
 
Horizon
Plastics.
 
The annual impairment
 
tests of goodwill
 
may be completed
 
through qualitative
 
assessments, however
 
the Company
may elect to bypass the qualitative assessment and proceed directly to a
 
quantitative impairment test for any reporting unit in any
period. The Company may resume the qualitative assessment for any reporting
 
unit in any subsequent period.
 
 
Due to the Company's
 
financial performance and continued depressed
 
stock price, the Company
 
performed a quantitative analysis
for both of its reporting units at September 30, 2019. During 2019, the Company incurred a loss of margin in its Horizon Plastics
reporting unit caused by selling price decreases that the Company
 
has not been able to fully offset with material cost reductions.
As a result of the quantitative
 
analysis, the Company concluded
 
that the carrying value of
 
Horizon Plastics was greater than
 
the
fair value, which resulted
 
in a goodwill impairment
 
charge of $
4,100,000
 
at September 30, 2019 representing
19
% of the goodwill
related to the Horizon Plastics reporting unit.
 
 
There were no
 
indicators of impairment
 
for the
 
nine months ended
 
September 30, 2020
 
that would trigger
 
additional analysis;
however, should
 
the Company
 
experience a
 
prolonged suspension
 
of operations
 
due to
 
COVID-19, the
 
Company may
 
incur
goodwill and intangible impairment charges in the future.
 
 
 
 
12
 
 
Self-Insurance:
 
The Company is self-insured with respect to its Columbus and Batavia, Ohio, Gaffney, South
 
Carolina, Winona,
Minnesota and Brownsville,
 
Texas medical, dental
 
and vision claims
 
and Columbus and
 
Batavia, Ohio workers’ compensation
claims, all of
 
which are subject
 
to stop-loss insurance
 
thresholds. The Company
 
is also self
 
-insured for dental
 
and vision with
respect to its Cobourg, Canada location. The Company has recorded an estimated
 
liability for self-insured medical, dental, vision
and worker’s
 
compensation claims
 
incurred but
 
not reported at
 
September
 
30, 2020
 
and December
 
31, 2019
 
of $
807,000
 
and
$
1,203,000
 
respectively.
 
 
Post-retirement Benefits:
 
Management records an accrual
 
for post-retirement costs associated with
 
the health care plan
 
sponsored
by Core
 
Molding Technologies.
 
Should actual
 
results differ
 
from the
 
assumptions used
 
to determine
 
the reserves,
 
additional
provisions may be required. In particular, increases in future healthcare costs above
 
the assumptions could have an adverse effect
on Core Molding Technologies’
 
operations. The effect of a
 
change in healthcare costs is
 
described in Note 13, "Post
 
Retirement
Benefits", of the Notes
 
to Consolidated Financial
 
Statements contained in
 
the Company's Annual Report
 
on Form 10-K
 
for the
year ended
 
December
 
31, 2019.
 
Core Molding
 
Technologies had
 
a liability
 
for post
 
retirement healthcare
 
benefits based
 
on
actuarially computed estimates of $
9,207,000
 
at September
 
30, 2020 and $
9,160,000
 
at December
 
31, 2019.
 
 
Government Subsidies
:
 
The Company
 
received $
25,000
 
and $
1,416,000
 
in government
 
subsidies during
 
the three
 
and nine
months ended
 
September 30,
 
2020. The
 
Company accounted
 
for government subsidies in
 
accordance with International
Accounting Standards 20, Accounting
 
for Government Grants and Disclosure of
 
Government Assistance. The Company
 
recorded
the assistance in
 
selling, general
 
and administrative expenses
 
and determined that
 
there is reasonable
 
assurance all conditions
attached to
 
the assistance
 
were met
 
and the
 
grants would
 
be received.
 
The government
 
subsidies consisted
 
of the
 
Canadian
Emergency Wage
 
Subsidy,
 
Employee Retention
 
Credit under
 
the Cares
 
Act and
 
the Shared
 
Work Programs
 
of Ohio,
 
South
Carolina and Minnesota.
 
 
3. RECENT ACCOUNTING PRONOUNCEMENTS
 
 
Current expected credit loss (CECL)
 
In June 2016, the FASB
 
issued ASU 2016-13, “Financial Instruments
 
-Credit Losses,” which changes
 
the impairment model for
most financial assets
 
and certain other
 
instruments. For trade
 
and other receivables,
 
held-to-maturity debt securities,
 
loans and
other instruments, entities will
 
be required to use
 
a new forward-looking “expected
 
loss” model that will
 
replace today’s “incurred
loss” model and generally will result in
 
the earlier recognition of allowances for losses. For
 
available-for-sale debt securities with
unrealized losses,
 
entities will
 
measure credit
 
losses in
 
a manner
 
similar to
 
current practice,
 
except that
 
the losses
 
will be
recognized as an allowance.
 
Subsequent to issuing ASU 2016
 
-13, the FASB issued
 
ASU 2018-19, “Codification Improvements
to Topic 326, Financial Instruments
 
- Credit Losses,” for
 
the purpose of clarifying
 
certain aspects of ASU 2016
 
-13. ASU 2018-
19 has
 
the same
 
effective date
 
and transition
 
requirements as
 
ASU 2016
 
-13. In
 
April 2019,
 
the FASB
 
issued ASU 2019
 
-04,
“Codification Improvements to Topic 326, Financial Instruments - Credit Losses,
 
Topic 815, Derivatives and Hedging, and Topic
825, Financial Instruments,
 
”
 
which is effective
 
with the adoption
 
of ASU 2016-13. In
 
May 2019, the
 
FASB issued ASU 2019-
05, “Financial Instruments - Credit Losses (Topic 326),” which is
 
also effective with the adoption of ASU
 
2016-13. In November
2019, the FASB voted to delay the implementation date for certain companies, including those that qualify as a smaller reporting
company under SEC rules, until fiscal years beginning
 
after December 15, 2022. We will adopt
 
this ASU on its effective date of
January 1, 2023.
 
We do not
 
expect the adoption
 
of this ASU to
 
have a material
 
impact on our
 
consolidated financial
 
position,
results of operations, cash flows, or presentation thereof.
 
 
Simplifying the Accounting for Income Taxes
 
In December 2019, the FASB issued
 
ASU 2019-12, Income Taxes –
 
Simplifying the Accounting for Income
 
Taxes. This guidance
is intended to
 
simplify various aspects
 
of income tax
 
accounting including the
 
elimination of certain
 
exceptions related
 
to the
approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of
deferred tax
 
liabilities for
 
outside basis
 
differences. The
 
new guidance also
 
simplifies aspects
 
of the accounting
 
for franchise
taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis
of goodwill. The Company adopted
 
the new standard effective January
 
1, 2020 during the third
 
quarter with no material impact
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13
 
on our consolidated financial statements. Adoption of this guidance requires certain changes to primarily be made prospectively,
with some changes to be made retrospectively.
 
 
 
Facilitation of the Effects of Reference Rate Reform
 
In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on
 
Financial Reporting
(Topic 848). The ASU provides optional expedients and exceptions for applying GAAP
 
to transactions affected by reference rate
(e.g., LIBOR) reform
 
if certain criteria
 
are met, for
 
a limited period
 
of time to
 
ease the potential
 
burden in accounting
 
for (or
recognizing the
 
effects of)
 
reference rate
 
reform on
 
financial reporting.
 
The ASU is
 
effective as
 
of March
 
12, 2020
 
through
December 31, 2022.
 
We will evaluate
 
transactions or contract
 
modifications occurring as
 
a result of
 
reference rate reform
 
and
determine whether to apply the optional guidance on an ongoing basis.
 
 
4. NET INCOME (LOSS) PER COMMON SHARE
 
 
The following table
 
sets forth the
 
computation of basic
 
and diluted earnings
 
per share using
 
the two-class method
 
for amounts
attributable to the Company's
 
common shares. The Company
 
uses the two-class method
 
to calculate basic and
 
diluted earnings
per share as a result of outstanding participating securities in the form of
 
restricted stock awards.
 
 
 
Three months ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Net income (loss)
$
3,343,000
$
(6,125,000)
$
9,032,000
$
(9,761,000)
Less: net income allocated to participating securities
206,000
—
558,000
—
Net income (loss) available to common shareholders
$
3,137,000
$
(6,125,000)
$
8,474,000
$
(9,761,000)
Weighted average common
 
shares outstanding — basic
7,969,000
7,851,000
7,922,000
7,804,000
Effect of dilutive securities
—
—
—
—
Weighted average common
 
and potentially issuable
common shares outstanding — diluted
7,969,000
7,851,000
7,922,000
7,804,000
Basic net income (loss) per common share
$
0.39
$
(0.78)
$
1.07
$
(1.25)
Diluted net income (loss) per common share
$
0.39
$
(0.78)
$
1.07
$
(1.25)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
 
5. MAJOR CUSTOMERS
 
 
The Company
 
had five
 
major customers
 
during the
 
nine months
 
ended September
 
30, 2020,
 
Universal Forest
 
Products, Inc.
(“UFP”), Navistar, Inc. (“Navistar
 
”), PACCAR, Inc. (“PACCAR”), Volvo
 
Group North America, LLC (“Volvo”), and BRP,
 
Inc.
(“BRP”). Major customers are defined
 
as customers whose sales individually
 
consist of more than
 
ten percent of total
 
sales during
any annual or interim reporting period in the
 
current year. The loss of a
 
significant portion of sales to these customers
 
would have
a material adverse effect on the business of the Company.
 
 
The following table
 
presents sales revenue
 
for the above
 
-mentioned customers for
 
the three and
 
nine months ended
 
September
30, 2020 and 2019:
 
 
 
Three months ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
UFP product sales
$
12,188,000
$
6,751,000
$
30,659,000
$
22,076,000
UFP tooling sales
—
—
—
—
Total UFP sales
12,188,000
6,751,000
30,659,000
22,076,000
Navistar product sales
8,065,000
15,115,000
25,231,000
46,411,000
Navistar tooling sales
5,198,000
145,000
6,384,000
927,000
Total Navistar sales
13,263,000
15,260,000
31,615,000
47,338,000
PACCAR product
 
sales
8,268,000
11,532,000
19,383,000
35,779,000
PACCAR tooling
 
sales
179,000
165,000
386,000
1,325,000
Total PACCAR
 
sales
8,447,000
11,697,000
19,769,000
37,104,000
Volvo
 
product sales
4,907,000
11,117,000
14,647,000
40,213,000
Volvo
 
tooling sales
38,000
61,000
2,186,000
200,000
Total Volvo
 
sales
4,945,000
11,178,000
16,833,000
40,413,000
BRP product sales
4,240,000
3,116,000
13,693,000
11,287,000
BRP tooling sales
175,000
2,502,000
508,000
3,358,000
Total BRP sales
4,415,000
5,618,000
14,201,000
14,645,000
Other product sales
16,572,000
19,880,000
48,406,000
58,637,000
Other tooling sales
43,000
4,271,000
222,000
7,955,000
Total other sales
16,615,000
24,151,000
48,628,000
66,592,000
Total product sales
54,240,000
67,511,000
152,019,000
214,403,000
Total tooling sales
5,633,000
7,144,000
9,686,000
13,765,000
Total sales
$
59,873,000
$
74,655,000
$
161,705,000
$
228,168,000
 
6. INVENTORY
 
 
Inventories, net consisted of the following:
 
 
 
September 30, 2020
December 31, 2019
Raw materials
$
9,871,000
$
13,041,000
Work in process
1,536,000
1,818,000
Finished goods
3,826,000
6,823,000
Total
$
15,233,000
$
21,682,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15
 
Inventory quantities
 
on-hand are
 
regularly reviewed,
 
and where
 
necessary, provisions
 
for excess
 
and obsolete
 
inventory are
recorded based on historical and anticipated usage.
 
 
7. LEASES
 
 
The Company has operating leases
 
with fixed payment terms for
 
certain buildings and warehouses.
 
The Company's leases have
remaining lease
 
terms of
 
less than
one year
 
to
four years
, some
 
of which
 
include options
 
to extend
 
the lease
 
for
five years
.
Operating leases
 
are included
 
in operating
 
lease right
 
-of-use ("ROU")
 
assets, accrued
 
other liabilities
 
and other
 
non-current
liabilities in the
 
Consolidated Balance Sheets.
 
ROU assets represent
 
our right to
 
use an underlying asset
 
for the lease
 
term and
lease liabilities represent our obligation to make lease payments arising
 
from the lease.
 
 
The Company used the applicable incremental
 
borrowing rate at implementation date to
 
measure lease liabilities and ROU
 
assets.
The incremental borrowing rate used by
 
the Company was based on baseline rates
 
and adjusted by the credit spreads
commensurate with
 
the Company
 
’s secured
 
borrowing rate.
 
At each reporting
 
period when
 
there is
 
a new lease
 
initiated, the
Company will utilize
 
its incremental borrowing
 
rate to perform
 
lease classification
 
tests on
 
lease components and
 
to measure
ROU assets and lease liabilities.
 
 
The components of lease expense were as follows:
 
 
 
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Operating lease cost
$
357,000
$
358,000
$
1,072,000
$
1,073,000
Total net lease cost
$
357,000
$
358,000
$
1,072,000
$
1,073,000
 
Other supplemental balance sheet information related to leases was as
 
follows:
 
 
 
September 30, 2020
December 31, 2019
Operating leases:
Operating lease right of use assets
$
3,506,000
$
4,484,000
Total operating lease right of
 
use assets
$
3,506,000
$
4,484,000
Current operating lease liabilities
(A)
$
843,000
$
1,304,000
Noncurrent operating lease liabilities
(B)
2,602,000
3,119,000
Total operating lease liabilities
$
3,445,000
$
4,423,000
Weighted average remaining
 
lease term (in years):
Operating leases
3.5
4.0
Weighted average discount
 
rate:
Operating leases
5.0
%
4.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16
 
(A)
 
Current operating lease liabilities are included in
accrued other liabilities
 
on the Consolidated Balance Sheets.
 
(B)
 
Noncurrent operating
 
lease liabilities
 
are included
 
in
other non-current liabilities
 
on the
 
Consolidated Balance
Sheets.
 
 
Other information related to leases were as follows:
 
 
 
Nine Months Ended
September 30,
2020
2019
Cash paid for amounts included in the measurement
 
of lease liabilities
Operating cash flows from operating leases
(C)
$
1,072,000
$
1,073,000
 
(C)
 
Cash flow from operating lease included in prepaid and other assets
 
on the Consolidated Statements of Cash Flows.
 
 
 
As of September
 
30, 2020, maturities of lease liabilities were as follows:
 
 
 
Operating Leases
2020 (remainder of year)
$
358,000
2021
1,174,000
2022
1,102,000
2023
1,000,000
2024
530,000
 
Total lease payments
4,164,000
Less: imputed interest
(719,000)
 
Total lease obligations
3,445,000
Less: current obligations
(843,000)
 
Long-term lease obligations
$
2,602,000
 
As of December
 
31, 2019, maturities of lease liabilities were as follows:
 
 
 
Operating Leases
2020
$
1,433,000
2021
1,174,000
2022
1,102,000
2023
1,000,000
2024
530,000
 
Total lease payments
5,239,000
Less: imputed interest
(816,000)
 
Total lease obligations
4,423,000
Less: current obligations
(1,304,000)
 
Long-term lease obligations
$
3,119,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17
 
8. PROPERTY, PLANT & EQUIPMENT
 
 
Property, plant and equipment, net consisted of the following for
 
the periods specified:
 
 
 
September 30, 2020
December 31, 2019
Property, plant and equipment
$
173,644,000
$
170,881,000
Accumulated depreciation
(98,437,000)
(91,675,000)
Property, plant and equipment
 
— net
$
75,207,000
$
79,206,000
 
Property, plant, and equipment are recorded at cost, unless
 
obtained through acquisition, then assets are recorded at estimated fair
value at the date
 
of acquisition. Depreciation is
 
provided on a straight
 
-line method over the
 
estimated useful lives of
 
the assets.
The carrying amount of long-lived assets is evaluated
 
annually to determine if an adjustment to
 
the depreciation period or to the
unamortized balance
 
is warranted. Depreciation
 
expense for
 
the three
 
months ended
 
September 30,
 
2020 and
 
2019 was
$2,273,000 and
 
$1,977,000, respectively. Depreciation
 
expense for the
 
nine months ended
 
September 30,
 
2020 and 2019
 
was
$6,764,000 and $5,115,000,
 
respectively. Amounts invested in capital
 
additions in progress were
 
$1,858,000 and $1,615,000
 
at
September 30, 2020
 
and December 31,
 
2019, respectively. At
 
September 30, 2020
 
and December 31,
 
2019, purchase
commitments for capital expenditures in progress were $338,000
 
and $336,000, respectively.
 
 
 
 
9. GOODWILL AND INTANGIBLES
 
 
Goodwill activity for the nine months ended September
 
30, 2020 consisted of the following:
 
 
 
Balance at December 31, 2019
$
17,376,000
Additions
—
Impairment
—
Balance at September 30, 2020
$
17,376,000
 
Intangibles, net at September
 
30, 2020 were comprised of the following:
 
 
 
Definite-lived Intangible Assets
Amortization Period
Gross Carrying
 
Amount
Accumulated
 
Amortization
Net Carrying
 
Amount
Trade name
25 Years
$
250,000
$
(56,000)
$
194,000
Trademarks
10 Years
1,610,000
(435,000)
1,175,000
Non-competition agreement
5 Years
1,810,000
(981,000)
829,000
Developed technology
7 Years
4,420,000
(1,709,000)
2,711,000
Customer relationships
10-12 Years
9,330,000
(2,236,000)
7,094,000
Total
$
17,420,000
$
(5,417,000)
$
12,003,000
 
The aggregate intangible
 
asset amortization expense
 
was $487,000 for
 
the three months
 
ended September 30,
 
2020 and 2019.
The aggregate intangible asset amortization expense was $1,461,000
 
for the nine months ended September 30, 2020 and 2019.
 
 
 
 
 
 
Intangibles, net at December
 
31, 2019 were comprised of the following:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18
 
 
 
Definite-lived Intangible Assets
Amortization Period
Gross Carrying
 
Amount
Accumulated
 
Amortization
Net Carrying
 
Amount
Trade name
25 Years
$
250,000
$
(48,000)
$
202,000
Trademarks
10 Years
1,610,000
(315,000)
1,295,000
Non-competition agreement
5 Years
1,810,000
(709,000)
1,101,000
Developed technology
7 Years
4,420,000
(1,237,000)
3,183,000
Customer relationships
10-12 Years
9,330,000
(1,647,000)
7,683,000
Total
$
17,420,000
$
(3,956,000)
$
13,464,000
 
10. POST RETIREMENT BENEFITS
 
 
The components of expense for the Company’s post-retirement
 
benefit plans for the three and nine months ended September
 
30,
2020 and 2019 are as follows:
 
 
 
Three months ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Pension expense:
Multi-employer plan
$
157,000
$
270,000
$
549,000
$
732,000
Defined contribution plan
258,000
364,000
766,000
950,000
Total pension expense
415,000
634,000
1,315,000
1,682,000
Health and life insurance:
Interest cost
59,000
72,000
177,000
216,000
Amortization of prior service costs
(124,000)
(125,000)
(372,000)
(375,000)
Amortization of net loss
45,000
30,000
135,000
88,000
Net periodic benefit cost
(20,000)
(23,000)
(60,000)
(71,000)
Total post retirement benefits
 
expense
$
395,000
$
611,000
$
1,255,000
$
1,611,000
 
The Company made
 
payments of $1,518,000
 
to pension plans
 
and $131,000
 
for post-retirement healthcare
 
and life insurance
during the nine
 
months ended
 
September 30,
 
2020. For the
 
remainder of 2020,
 
the Company expects
 
to make approximately
$276,000 of pension plan payments,
 
of which $98,000 was accrued
 
at September 30, 2020. The Company
 
also expects to make
approximately $1,102,000 of post-retirement healthcare and life insurance payments
 
for the remainder of 2020, all of
 
which were
accrued at September 30, 2020.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19
 
11. DEBT
 
Debt consists of the following:
 
 
 
September 30,
December 31,
 
2020
2019
Term loans, interest at a variable
 
rate (8.0% at September 30, 2020 and 6.30% at
December 31, 2019) with monthly payments of interest and quarterly
 
payments of
principal through January 2023
$
34,875,000
$
38,250,000
Revolving loans, interest at a variable rate
 
(8.0% at September 30, 2020 and 6.04% at
 
December 31, 2019)
—
12,008,000
Term loan, interest at a
 
fixed rate (5.5% at September 30, 2020) with monthly payments
 
of interest and principal through April 2025
160,000
—
Total
35,035,000
50,258,000
Less deferred loan costs
(745,000)
(807,000)
Less current portion
(2,753,000)
(49,451,000)
Long-term debt
$
31,537,000
$
—
 
Credit Agreement
 
 
On January 16, 2018, the Company entered into an Amended and
 
Restated Credit Agreement (the "A/R Credit Agreement")
 
with
KeyBank National Association as administrative agent and various financial institutions party thereto as lenders (the "Lenders").
Pursuant to the terms
 
of the A/R
 
Credit Agreement (i)
 
the Company may borrow
 
revolving loans in the
 
aggregate principal amount
of up to
 
$40,000,000 (the “
 
US Revolving Loans”)
 
from the Lenders
 
and term loans
 
in the aggregate
 
principal amount of
 
up to
$32,000,000 from
 
the Lenders,
 
(ii) the Company's
 
wholly-owned subsidiary,
 
Horizon Plastics
 
International, Inc.,
 
(the
"Subsidiary") may
 
borrow revolving
 
loans in
 
an aggregate
 
principal amount
 
of up
 
to $10,000,000
 
from the
 
Lenders (which
revolving loans shall
 
reduce the availability
 
of the US
 
Revolving Loans to
 
the Company on
 
a dollar-for-dollar basis) and
 
term
loans in an
 
aggregate principal
 
amount of up
 
to $13,000,000
 
from the Lenders,
 
(iii) the
 
Company obtained
 
a Letter of
 
Credit
Commitment of $250,000, of which $160,000 has been issued and (iv) the Company repaid the outstanding term loan balance of
$6,750,000. The A/R Credit Agreement is secured by a guarantee of each U.S. and Canadian subsidiary of the
 
Company, and by
a lien on substantially all of the present
 
and future assets of the Company and its
 
U.S. and Canadian subsidiaries, except that only
65% of the stock issued by Corecomposites de Mexico, S. de
 
R.L. de C.V. has been pledged.
 
 
Concurrent with the
 
closing of
 
the A/R Credit
 
Agreement the Company
 
borrowed the
 
$32,000,000 term
 
loan and
 
$2,000,000
from the U.S. Revolving
 
Loan and the Subsidiary borrowed
 
the $13,000,000 term loan
 
and $2,500,000 from revolving
 
loans to
provide $49,500,000 of funding for the acquisition of Horizon Plastics.
 
Interest is payable monthly at one month LIBOR
 
plus a
 
basis point margin of 700 basis points with a LIBOR floor of 100
 
basis points.
 
 
During 2019, the Company and the Lenders acknowledged and confirmed that an event of default occurred under the A/R Credit
Agreement resulting from
 
the Borrowers failure
 
to maintain the
 
required Fixed Charge
 
Coverage Ratio (as
 
defined in the
 
A/R
Credit Agreement).
 
On November 22,
 
2019, the Company and
 
the Lenders entered
 
into a forbearance agreement
 
(the
"Forbearance Agreement"), which
 
was amended twice,
 
first on March
 
13, 2020
 
(the "Amended Forbearance
 
Agreement") and
then on May 29, 2020 (the “Second Amended Forbearance Agreement”).
 
 
The Second Amended Forbearance Agreement
 
provided that the Company and the Lenders agreed to modify certain terms of the
Amended Forbearance
 
Agreement and
 
extend the
 
Forbearance Agreement
 
through September
 
30, 2020.
 
The modifications
include (1) that the Company will maintain liquidity of not less than $5,000,000, to be measured twice monthly, on every second
and fourth Friday of each month
 
during the forbearance period, (2)
 
the Company shall maintain minimum year-to-date
 
earnings
before income
 
tax, depreciation
 
and amortization
 
(“YTD-EBITDA”) of
 
not less
 
than $5,000,000,
 
measured upon delivery
 
of
Company’s July
 
2020 financial statements
 
and also upon delivery
 
of Company’s
 
August 2020 financial
 
statements, with YTD-
 
 
 
20
 
EBITDA determined based on
 
consolidated EBITDA,
 
(3) a change
 
of interest rate
 
to LIBOR rate
 
plus 700 basis
 
points with a
LIBOR floor of
 
100 basis points,
 
(4) on or
 
before July 15,
 
2020 the Borrowers
 
shall have obtained
 
executed term sheets
 
from
involved parties and/or lenders, (5) on or before September 30, 2020, the Borrowers shall have closed on a new capital structure,
(6) forbearing compliance with the leverage covenant
 
and fixed charge covenant through September
 
30, 2020, and (7)
implementation of a capital expenditure spend limit of $3,000,000
 
for the nine months ended September 30, 2020.
 
 
The Company has unblocked
 
maximum availability of
 
$20,000,000 of variable
 
rate revolving loans of
 
which $0 is outstanding
as of September 30, 2020.
 
 
On April 24, 2020
 
the Company entered
 
into a finance
 
agreement with Leaf
 
Capital Funding of
 
$175,000 for equipment.
 
The
parties agreed
 
to a fixed
 
interest rate
 
of 5.5%
 
and a term
 
of 60
 
months. The amount
 
outstanding at
 
September 30,
 
2020 was
$160,000 of which, $127,000 was classified as long term debt.
 
 
On October 27, 2020, the Company entered into
 
the Refinancing Agreements, as defined in
 
Note 2, “Critical Accounting Policies
and Estimates
 
”, and repaid
 
all of its
 
obligations under
 
the A/R Credit
 
Agreement. Management
 
believes that
 
the Refinancing
Agreements will
 
provide sufficient
 
liquidity to
 
sustain the
 
Company’s needs
 
for the
 
next 12
 
months. The
 
closing of
 
the
Refinancing Agreements alleviated the substantial doubt about the Company’s ability to
 
continue as a going concern prior to the
filing date of our Form 10
 
-Q, see Note 16, “Subsequent
 
Event”. The Company, therefore,
 
classified its debt between short
 
-term
and long-term in accordance with the A/R Credit Agreement.
 
Interest Rate Swaps
 
 
The Company
 
entered into
 
two interest
 
rate swap
 
agreements that
 
became effective
 
January 18,
 
2018 and
 
continue through
January 2023, one of which was designated
 
as a cash flow hedge for $25,000,000
 
of the $32,000,000 term loan to the Company
mentioned above and the other
 
designated as a cash flow
 
hedge for $10,000,000 of the
 
$13,000,000 term loan to the
 
Subsidiary
mentioned above. Under
 
these agreements, the
 
Company will pay
 
a fixed rate
 
of approximately 2.49%
 
to the counterparty
 
and
receives 30
 
day LIBOR
 
for both cash
 
flow hedges. The
 
fair value of
 
the interest
 
rate swap
 
was a liability
 
of $1,255,000
 
and
$706,000 at
 
September 30,
 
2020 and
 
December 31,
 
2019, respectively.
 
On October
 
27, 2020,
 
concurrent with
 
the Company
entering into the Refinancing Agreements,
 
both interest rate swap agreement were
 
terminated, see Note 16, “Subsequent Events”.
 
 
12. INCOME TAXES
 
 
The Company’s
 
Consolidated Balance Sheets
 
include a net
 
non-current deferred tax
 
asset of $2,026,000
 
for the Canadian
 
and
Mexican tax jurisdictions
 
and a net non
 
-current deferred tax liability
 
of $517,000 for the
 
U.S. tax jurisdiction at
 
September 30,
2020. The Company evaluates
 
the balance of deferred
 
tax assets that will be
 
realized based on the
 
premise that the Company
 
is
more likely than not to
 
realize deferred tax benefits
 
through the generation of
 
future taxable income. As of September
 
30, 2020
and December
 
31, 2019,
 
the Company had
 
no liability
 
for unrecognized
 
tax benefits.
 
The Company
 
does not
 
anticipate that
unrecognized tax benefits will significantly change within the
 
next twelve months.
 
 
Income tax benefit for
 
the nine months ended
 
September 30, 2020 is
 
estimated to be $4,933,000,
 
approximately 120.3% of income
before income taxes.
 
The effective tax
 
rate for 2020
 
reflects recording net
 
operating losses in
 
U.S. jurisdictions at
 
the tax rate,
34%, which will be applied when the Company carries 2020 losses back
 
to previous years.
 
 
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted in response to the
COVID-19 pandemic, and
 
among other things,
 
provides tax relief
 
to businesses. Tax
 
provisions of the
 
CARES Act include the
deferral of certain payroll
 
taxes, relief for retaining
 
employees, and other
 
provisions, including allowing
 
net operating losses to
be carried back five years
 
versus an indefinite carryforward.
 
The Company has filed with
 
the Internal Revenue Service
 
to carry
back net operating losses incurred in
 
2018 and 2019 under this new
 
law, resulting in an income tax
 
refund of $6,155,000 of which
 
all has been collected
 
as of September 30,
 
2020. An income tax benefit
 
of $5,638,000 was
 
realized in the first
 
quarter of 2020.
The income tax benefit consists of the reversal of the full valuation allowance against net deferred tax assets in the United States
for approximately $3,267,000.
 
The income tax
 
benefit also
 
consists of a
 
rate benefit of
 
$2,371,000 based
 
on the losses
 
being
 
 
 
 
 
 
 
 
 
 
 
21
 
carried back to
 
years where the
 
Company paid tax
 
at 34% compared
 
to the valuation
 
of the losses
 
being recorded
 
at the 21%
current U.S. statutory tax rate.
 
 
The Company files income
 
tax returns in the U.S.,
 
Mexico, Canada and various
 
state jurisdictions. The Company is
 
not subject
to U.S. federal and
 
state income tax examinations
 
by tax authorities for
 
years prior to 2016,
 
not subject to Mexican
 
income tax
examinations by Mexican authorities
 
for years prior to
 
2014 and not
 
subject to Canadian tax
 
examinations by Canadian authorities
for years prior to 2018.
 
 
13. STOCK BASED COMPENSATION
 
 
The Company has
 
a Long Term
 
Equity Incentive Plan
 
(the “2006 Plan”),
 
as approved by
 
the Company’s
 
stockholders in May
2006 and as amended in
 
May 2015. The 2006 Plan
 
allows for grants to directors
 
and employees of non
 
-qualified stock options,
incentive stock options,
 
stock appreciation
 
rights, restricted
 
stock, performance shares,
 
performance units
 
and other
 
incentive
awards (“Stock
 
Awards”) up
 
to an
 
aggregate of
 
3,000,000 awards,
 
each representing
 
a right
 
to buy
 
a share
 
of Core
 
Molding
Technologies common stock. Stock Awards can be granted under the 2006 Plan through the earlier of December 31, 2025, or the
date the maximum number of available awards under the 2006
 
Plan have been granted.
 
 
Restricted Stock
 
 
The Company
 
grants shares
 
of its
 
common stock
 
to certain
 
directors, officers,
 
key managers
 
and employees in
 
the form
 
of unvested
stock and units
 
(“Restricted Stock”). These
 
awards are recorded at
 
the market value
 
of the Company's common
 
stock on the
 
date
of issuance and
 
amortized ratably as
 
compensation expense over
 
the applicable vesting
 
period, which
 
is typically three
 
years. The
Company adjusts compensation expense for actual forfeitures, as
 
they occur.
 
The following summarizes the status of
 
Restricted Stock and changes during the nine
 
months ended September 30, 2020:
 
 
Weighted Average
 
Number of
Grant Date
Shares
Fair Value
Unvested balance at December 31, 2019
343,919
$
9.37
Granted
287,750
4.62
Vested
(98,502)
10.37
Forfeited
(8,385)
13.72
Unvested balance at September 30, 2020
524,782
$
6.46
 
At September
 
30, 2020
 
and 2019,
 
there was
 
$1,928,000 and
 
$2,377,000, respectively,
 
of total
 
unrecognized compensation
expense, related
 
to Restricted
 
Stock granted
 
under the
 
2006 Plan.
 
That cost
 
is expected
 
to be
 
recognized over
 
the weighted-
average period of 2.3 years. Total compensation
 
cost related to restricted stock grants
 
for the three months ended Septe
 
mber 30,
2020 and 2019 was
 
$319,000 and $350,000, respectively,
 
all of which
 
was recorded to selling,
 
general and administrative expense.
Total compensation cost related to restricted stock grants for the nine months ended September 30, 2020 and 2019 was $968,000
and $1,121,000, respectively, all of which was recorded
 
to selling, general and administrative expense
 
 
During the
 
nine months
 
ended September
 
30, 2020
 
and 2019,
 
employees surrendered
 
4,574 shares
 
and 7,744
 
shares of
 
the
Company's common stock to satisfy income tax withholding obligations
 
in connection with the vesting of restricted awards.
 
 
Stock Appreciation Rights
 
 
As part of the Company's 2019 annual grant, Stock
 
Appreciation Rights ("SARs") were granted
 
with a grant price of $10. These
awards have a contractual term of five years and vest ratably over
 
a period of three years or immediately vest if the recipient
 
is
over 65 years of age. These
 
awards are valued using the Black-Scholes option pricing model.
 
A summary
 
of the Company's stock appreciation rights activity for the nine months ended September
 
30, 2020 is as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22
 
 
 
Weighted Average
 
Number of
Grant Date
Shares
Fair Value
Outstanding as of December 31, 2019
222,112
$
2.57
Granted
—
—
Exercised
—
—
Forfeited
(27,266)
2.57
Outstanding at end of the period ended September 30, 2020
194,846
$
2.57
Exercisable at end of the period ended September 30, 2020
84,300
$
2.57
 
The average
 
remaining contractual
 
term for
 
those SARs
 
outstanding at
 
September 30,
 
2020 is
 
3.6 years,
 
with no
 
aggregate
intrinsic value.
 
At September
 
30,
 
2020 and
 
2019, there
 
was $225
 
,000 and
 
$435,000, respectively,
 
of total
 
unrecognized
compensation expense, net of
 
estimated forfeitures, related to
 
SARs. Total compensation cost
 
related to SARs for
 
the three months
ended September 30
 
,
 
2020 and 2019
 
was $36,000 and
 
$42,000, respectively, all
 
of which was
 
recorded to selling,
 
general and
administrative expense. Total compensation
 
cost related to
 
SARs for the nine
 
months ended September 30
 
,
 
2020 and 2019 was
$91,000 and
 
$145,000, respectively,
 
all of
 
which was
 
recorded to
 
selling, general
 
and administrative
 
expense. That
 
cost is
expected to be recognized over the weighted- average period
 
of 1.6 years.
 
 
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
 
 
Fair value is
 
defined as the
 
price that would
 
be received to
 
sell an asset
 
or paid to
 
transfer a liability
 
in a transaction
 
between
market participants
 
as of
 
the measurement
 
date. Fair
 
value is
 
measured using
 
the fair
 
value hierarchy
 
and related
 
valuation
methodologies as
 
defined in
 
the authoritative
 
literature. This
 
guidance provides
 
a fair
 
value framework
 
that requires
 
the
categorization of assets and liabilities into three
 
levels based upon the assumptions (inputs)
 
used to price the assets or liabilities.
Level 1 provides the most reliable measure of fair value, whereas
 
Level 3 generally requires significant management judgment.
 
 
The three levels are defined as follows:
 
 
Level 1 -
 
Quoted prices in active markets for identical assets and liabilities.
 
Level 2 -
 
Quoted prices for similar
 
instruments in active
 
markets, quoted prices
 
for identical or similar
 
instruments in
markets that
 
are not
 
active and
 
model-derived valuations,
 
in which
 
all significant
 
inputs are
 
observable in
active markets.
 
Level 3 -
 
Significant unobservable
 
inputs reflecting management's
 
own assumptions about
 
the inputs used
 
in pricing
the asset or liability.
 
 
The Company’s financial
 
instruments consist of cash and cash equivalents,
 
accounts receivable, accounts payable, debt,
 
interest
rate swaps and foreign
 
currency derivatives. Cash and cash
 
equivalents, accounts receivable and accounts payable
 
carrying values
as of
 
September 30,
 
2020 and
 
December 31,
 
2019 approximate
 
fair value
 
due to
 
the short
 
-term maturities
 
of these
 
financial
instruments. The carrying amounts of long-term debt and the revolving line of credit
 
approximate fair value as of September 30,
2020 and December 31, 2019 due to the short term nature of the underlying variable rate LIBOR agreements. The Company had
Level 2 fair
 
value measurements at
 
September 30, 2020
 
and December 31,
 
2019 relating to
 
the Company’s
 
interest rate swaps
and foreign currency derivatives.
 
 
Derivative and hedging activities
 
 
Foreign Currency Derivatives
 
 
The Company conducted business
 
in foreign countries
 
and paid certain expenses
 
in foreign currencies; therefore,
 
the Company
was exposed
 
to foreign
 
currency exchange
 
risk between
 
the U.S.
 
Dollar and
 
foreign currencies,
 
which could
 
impact the
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23
 
Company’s operating income
 
and cash flows. To mitigate risk associated with foreign
 
currency exchange, the Company entered
into forward contracts to exchange a fixed
 
amount of U.S. Dollars for a
 
fixed amount of foreign currency, which will
 
be used to
fund future foreign currency cash flows. At
 
inception, all forward contracts are formally documented as cash
 
flow hedges and are
measured at fair value each reporting period.
 
 
Derivatives are formally
 
assessed both at
 
inception and at
 
least quarterly thereafter,
 
to ensure that
 
derivatives used in
 
hedging
transactions are highly effective in offsetting changes in cash flows of
 
the hedged item. If it is determined that a
 
derivative ceases
to be
 
a highly
 
effective hedge,
 
or if
 
the anticipated
 
transaction is
 
no longer
 
probable of
 
occurring, hedge
 
accounting is
discontinued, and
 
any future
 
mark-to-market adjustments
 
are recognized
 
in earnings.
 
The effective
 
portion of
 
gain or
 
loss is
reported in other comprehensive income
 
and the ineffective portion
 
is reported in earnings. The impacts
 
of these contracts were
largely offset
 
by gains and
 
losses resulting
 
from the impact
 
of changes in
 
exchange rates
 
on transactions
 
denominated in
 
the
foreign currency. As of September
 
30, 2020, the Company had no ineffective portion related
 
to the cash flow hedges.
 
 
Interest Rate Swaps
 
 
The Company
 
entered into
 
interest rate
 
swap contracts
 
to fix
 
the interest
 
rate on
 
an initial
 
aggregate amount
 
of $35,000,000
thereby reducing exposure
 
to interest
 
rate changes.
 
The interest
 
rate swap pays
 
a fixed rate
 
of 2.49%
 
to the counterparty
 
and
receives 30 day LIBOR for
 
both cash flow hedges.
 
At inception, all interest rate
 
swaps were formally documented
 
as cash flow
hedges and are measured at fair value each reporting period.
 
See Note 11, "Debt", for additional information.
 
 
Financial statements impacts
 
 
The following tables detail amounts related to our derivatives designated
 
as hedging instruments:
 
 
 
Fair Value
 
of Derivative Instruments
September 30, 2020
Asset Derivatives
Liability Derivatives
Balance Sheet Location
Fair Value
Balance Sheet Location
Fair Value
Foreign exchange contracts
Prepaid expenses other current assets
$
—
Accrued other liabilities
$
4,000
Notional contract values
$
—
$
51,000
Interest rate swaps
Prepaid expenses other current assets
$
—
Accrued other liabilities
$
1,255,000
Notional swap values
$
—
$
27,125,000
December 31, 2019
Asset Derivatives
Liability Derivatives
Balance Sheet Location
Fair Value
Balance Sheet Location
Fair Value
Foreign exchange contracts
Prepaid expenses other current assets
$
452,000
Accrued other liabilities
$
—
Notional contract values
$
15,358,000
$
—
Interest rate swaps
Prepaid expenses other current assets
$
—
Accrued other liabilities
$
706,000
Notional swap values
$
—
$
29,750,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
 
The following tables
 
summarize the
 
amount of unrealized
 
and realized gain
 
(loss) recognized
 
in Accumulated Other
Comprehensive Income (Loss) ("AOCI") for the three months ended
 
September 30, 2020 and 2019:
 
 
 
 
Amount of Unrealized
 
Derivatives in
 
Gain (Loss) Recognized
 
Location of Gain (Loss)
 
Amount of Realized Gain
 
subtopic 815-20
 
in Accumulated Other
 
Reclassified from
 
(Loss) Reclassified from
 
Cash Flow Hedging
 
Comprehensive Income (Loss) on
Accumulated Other
 
Accumulated Other
 
Relationship
Derivative
Comprehensive Income (Loss)
(A)
Comprehensive Income (Loss)
2020
2019
2020
2019
Foreign exchange
contracts
$
668,000
$
(192,000)
Cost of goods sold
$
(219,000)
$
55,000
Selling, general and
administrative expense
$
(33,000)
$
8,000
Interest rate swaps
$
321,000
$
(101,000)
Interest expense
$
(149,000)
$
(14,000)
 
(A)
 
The foreign currency derivative
 
activity reclassified from Accumulated Other
 
Comprehensive Income (Loss) is
 
allocated
to cost of goods sold and selling, general and administrative
 
expense based on the percentage of foreign currency spend.
 
 
The following tables
 
summarize the
 
amount of unrealized
 
and realized gain
 
(loss) recognized
 
in Accumulated Other
Comprehensive Income (Loss) ("AOCI") for the nine months
 
ended September 30, 2020 and 2019:
 
 
 
Amount of Unrealized
 
Derivatives in
 
Gain (Loss) Recognized
 
Location of Gain (Loss)
 
Amount of Realized Gain
 
subtopic 815-20
 
in Accumulated Other
 
Reclassified from
 
or (Loss) Reclassified from
 
Cash Flow Hedging
 
Comprehensive Income (Loss)
on
 
Accumulated Other
 
Accumulated Other
 
Relationship
Derivative
Comprehensive Income (Loss)
(A)
Comprehensive Income (Loss)
2020
2019
2020
2019
Foreign exchange
 
contracts
$
135,000
$
649,000
Cost of goods sold
$
(525,000)
$
110,000
Selling, general and
 
administrative expense
$
(67,000)
$
—
Interest rate swaps
$
(206,000)
$
(823,000)
Interest expense
$
(343,000)
$
(13,000)
 
(A)
 
The foreign currency derivative
 
activity reclassified from Accumulated Other
 
Comprehensive Income (Loss) is
 
allocated
to cost of goods sold and selling, general and administrative
 
expense based on the percentage of foreign currency spend.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25
 
15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
 
 
The following table presents changes in Accumulated
 
Other Comprehensive Income (Loss), net of tax, for
 
the nine months ended
September
 
30, 2020 and 2019:
 
 
 
Accumulated
 
Derivative
 
Post Retirement
 
Other
 
Hedging
 
Benefit Plan
 
Comprehensive
 
2019:
Activities
Items
(A)
Income (Loss)
Balance at December 31, 2018
$
(612,000)
$
2,729,000
$
2,117,000
Other comprehensive loss before
 
reclassifications
(174,000)
—
(174,000)
Amounts reclassified from accumulated
 
other comprehensive income (loss)
(96,000)
(284,000)
(380,000)
Income tax benefit
40,000
60,000
100,000
Balance at September 30, 2019
$
(842,000)
$
2,505,000
$
1,663,000
2020:
Balance at December 31, 2019
$
(191,000)
$
1,561,000
$
1,370,000
Other comprehensive loss before
 
reclassifications
(71,000)
—
(71,000)
Amounts reclassified from accumulated
 
other comprehensive income (loss)
(935,000)
(236,000)
(1,171,000)
Income tax benefit
223,000
50,000
273,000
Balance at September 30, 2020
$
(974,000)
$
1,375,000
$
401,000
 
(A)
 
The effect of post-retirement benefit items reclassified from Accumulated Other Comprehensive Income (Loss) is included in
other income and expense on the Consolidated Statements
 
of Income (Loss). These Accumulated Other Comprehensive
 
Income
(Loss) components
 
are included
 
in the computation
 
of net
 
periodic benefit
 
cost (see
 
Note 10,
 
"Post Retirement
 
Benefits" for
additional details). The tax effect
 
of post-retirement benefit items
 
reclassified from Accumulated Other
 
Comprehensive Income
(Loss) is included in income tax expense on the Consolidated
 
Statements of Income (Loss).
 
 
 
 
 
16.
 
SUBSEQUENT EVENTS
 
 
 
 
26
 
Credit Refinancing
 
 
On
October 27, 2020
, the Company entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National
Association, as administrative
 
agent, lead arranger
 
and book runner,
 
and the lenders
 
party thereto (the
 
“Lenders”). Pursuant to
the terms of the
 
Credit Agreement, the Lenders made
 
available to the Company
 
secured loans (the “
 
Wells Fargo Loans
 
”) in the
maximum aggregate principal
 
amount of $
43,500,000
, consisting of
 
(i) a revolving
 
loan commitment of
 
$
25,000,000
(approximately $
8,745,000
 
of which was
 
advanced to
 
the Company on
 
October 28,
 
2020) and (ii)
 
term loan commitments
 
of
$
18,500,000
 
($
16,790,000
 
of which was
 
advanced to
 
the Company
 
on October
 
28, 2020).
 
Such revolving
 
loan commitment
terminates, and all outstanding borrowings thereunder must be repaid, on
October 27, 2024
, and such term loans are to be repaid
in
monthly
 
installments with the remaining outstanding balance due on
October 27, 2024
, in each case subject to certain optional
and mandatory repayment
 
terms.
 
The Company’s
 
obligations under
 
the Credit Agreement
 
and the Loans
 
are unconditionally
guaranteed by each
 
of the Company’s U.S. and
 
Canadian subsidiaries, with such
 
obligations of the Company
 
and such subsidiaries
being secured by a lien on substantially
 
all of their U.S. and Canadian assets.
 
Interest is payable monthly and is based
 
on either
LIBOR Rate or
 
Base Rate, as
 
defined by the
 
Credit Agreement, at the
 
discretion of the
 
Company. As of October
 
28, 2020, the
revolving loan was based on the
Base Rate
 
resulting in a rate of
4.75
% and the term loan was based on the
LIBOR Rate
 
resulting
in a rate of
3.75
%.
 
 
In connection
 
with the funding of the Wells Fargo Loans, FGI Equipment Finance LLC advanced to the Company, pursuant to a
Master Security Agreement, dated as of
October 27, 2020
 
(the “Security Agreement”), among FGI Equipment Finance LLC, the
Company as debtor,
 
and each of Core
 
Composites Corporation and
 
CC HPM, S. de
 
R.L. de C.V.
 
as a guarantor,
 
a term loan in
the principal
 
amount of
 
$
13,200,000
 
(the “FGIEF
 
Loan”), which
 
loan is
 
secured by
 
certain assets
 
of the
 
Company and
 
the
guarantors located in Mexico.
 
Interest is payable
monthly
 
at a fixed rate of
8.25
%.
 
 
The proceeds of the Wells Fargo Loans and the FGIEF Loans were
 
used in part to repay all existing outstanding indebtedness
 
of
the Company owing
 
to KeyBank
 
National Association, and
 
to pay certain
 
fees and expenses
 
associated with
 
the transactions
contemplated by the
 
Credit Agreement and the
 
Security Agreement, and will
 
be used to
 
finance the ongoing
 
general corporate
needs of the Company.
 
 
Concurrent with the closing of the Credit
 
Agreement and the Master Security Agreement, the Company settled both
 
outstanding
interest rate swaps, which resulted in a loss
 
and cash outflow of $
1,253,000
, recorded in interest expense and operating activities,
respectively. The
 
Company also
 
recorded losses
 
of $
605,000
 
from writing
 
off outstanding
 
deferred loan
 
costs related
 
to the
Amended A/R Credit Agreement.
 
 
Facility Closure
 
On November 5, 2020 the Company announced it will close the manufacturing facility located in Batavia, Ohio in 2021. The
Company has begun working with customers to relocate the business into other Core locations or to third parties.
 
Revenue from
the facility accounts for less than
5
% of the Company's total revenues and the Company anticipates
 
approximately half of those
revenues will transition to other Core locations. The Company anticipates shutdown
 
costs to consist of severance cost, moving
and production testing and recertification costs and asset impairment
 
charges. Management has determined the costs related
 
to
the closure of the manufacturing facility located in Batavia, Ohio to
 
be immaterial to the Company’s
 
consolidated financial
statements.
 
 
 
 
27
 
Part I — Financial Information
 
 
Management’s Discussion and Analysis of Financial Condition and Results of
 
Operations
 
 
Item 2.
 
Management’s Discussion and Analysis
 
of Financial Condition and Results of Operations
 
 
This Management's
 
Discussion and
 
Analysis of
 
Financial Condition
 
and Results
 
of Operations
 
contains forward-looking
statements within
 
the meaning of the federal securities
 
laws. As a general matter,
 
forward-looking statements are
 
those focused
upon future plans,
 
objectives or
 
performance as
 
opposed to
 
historical items
 
and include
 
statements of
 
anticipated events
or trends and expectations and beliefs
 
relating to
 
matters not
 
historical in
 
nature. Such
 
forward-looking statements
 
involve known
and unknown risks and are
 
subject to uncertainties and factors
 
relating to Core
 
Molding Technologies' operations and business
environment, all
 
of which are difficult
 
to predict and
 
many of which
 
are beyond Core Molding
 
Technologies' control. Words
such as
 
“may,” “will,” “could,” “would,” “should,” “anticipate,” “predict,”
 
“potential,” “continue,” “expect,” “intend,”
“plans,” “projects,”
 
“believes,” “estimates,” “encouraged,” “confident” and similar expressions are used to identify these
forward-looking statements.
 
These uncertainties and factors
 
could cause Core Molding
 
Technologies' actual results to
 
differ
materially from those matters expressed
 
in or implied by such forward-looking
 
statements.
 
 
Core Molding
 
Technologies believes
 
that the
 
following factors,
 
among others,
 
could affect
 
its future
 
performance and
 
cause actual
results to
 
differ materially from
 
those expressed
 
or implied by
 
forward-looking statements
 
made in this
 
report: business
 
conditions
in the plastics, transportation, marine and
 
commercial product
 
industries (including changes in demand for truck production);
federal and state regulations (including engine emission regulations); general economic, social, regulatory (including foreign
trade policy) and
 
political environments in the
 
countries in which
 
Core Molding Technologies operates;
 
the adverse impact
of coronavirus (COVID-19) global pandemic on our
 
business, results
 
of operations, financial position,
 
liquidity or cash
 
flow, as
well as
 
impact on customers
 
and supply chains;
 
safety and security
 
conditions in Mexico
 
and Canada; dependence upon
 
certain
major customers
 
as the primary source of
 
Core Molding Technologies’ sales
 
revenues; efforts of Core
 
Molding Technologies to
expand its
 
customer base;
 
the ability
 
to develop
 
new and
 
innovative products
 
and to
 
diversify markets,
 
materials and
 
processes and
increase operational enhancements; the
 
actions of competitors,
 
customers, and suppliers;
 
failure of
 
Core Molding
 
Technologies’
suppliers to perform their obligations; the availability of raw materials; inflationary pressures; new
 
technologies; regulatory
matters; labor
 
relations; labor
 
availability; the
 
loss or
 
inability of
 
Core Molding
 
Technologies to
 
attract and retain
 
key personnel;
the Company's
 
ability to successfully
 
identify, evaluate and
 
manage potential acquisitions
 
and to benefit
 
from and properly
integrate any completed
 
acquisitions; federal, state and local environmental laws and regulations; the availability of capital;
the ability
 
of Core Molding
 
Technologies to provide on-time
 
delivery to customers,
 
which may require additional
 
shipping
expenses to
 
ensure on-time delivery
 
or otherwise
 
result in
 
late fees
 
and other
 
customer char
 
ges; risk
 
of cancellation
 
or
rescheduling of orders; management’s decision
 
to pursue new products or businesses which involve additional costs, risks or
capital expenditures;
 
inadequate insurance coverage
 
to protect against potential
 
hazards; equipment and
 
machinery failure;
product liability and
 
warranty claims;
 
and other
 
risks identified from
 
time to
 
time in
 
Core Molding
 
Technologies’ other
public documents on
 
file with the
 
Securities and Exchange
 
Commission, including those described in Item 1A of the Annual
Report on Form 10-K for the year
 
ended December 31, 2019.
 
 
 
 
 
28
 
 
Description of the Company
 
 
Core Molding Technologies
 
and its
 
subsidiaries operate in
 
the composites
 
market as
 
one operating segment as
 
a molder
 
of
thermoplastic and thermoset structural products. The Company's
 
operating segment consists of two component reporting
 
units,
Core Traditional and Horizon Plastics. The Company offers customers a wide
 
range of manufacturing processes to fit
 
various
program volume
 
and investment
 
requirements. These
 
processes include
 
compression molding
 
of sheet
 
molding compound
("SMC"), bulk molding compounds
 
("BMC"), resin transfer molding
 
("RTM"), liquid molding
 
of dicyclopentadiene ("DCPD"),
spray-up and
 
hand-lay-up, glass mat
 
thermoplastics ("GMT"), direct
 
long-fiber thermoplastics ("D-LFT")
 
and structural
 
foam and
structural web injection molding ("SIM"). Core Molding Technologies
 
serves a wide variety of markets, including the medium
and heavy-duty
 
truck, marine,
 
automotive, agriculture,
 
construction, and
 
other commercial
 
products. The
 
demand for Core
Molding Technologies’ products
 
is affected by economic conditions in the United States, Mexico, and Canada. Core
 
Molding
Technologies’ manufacturing
 
operations have
 
a significant fixed
 
cost component.
 
Accordingly, during periods
 
of changing
demand, the
 
profitability of Core
 
Molding Technologies’ operations may change
 
proportionately more
 
than revenues from
operations.
 
In 1996, Core
 
Molding Technologies
 
acquired substantially all
 
of the assets
 
and assumed certain liabilities
 
of Columbus Plastics,
a wholly owned operating unit of Navistar’s truck manufacturing division since its formation in late 1980. Columbus Plastics,
located in Columbus, Ohio, was a compounder and compression molder
 
of SMC. In 1998, Core Molding Technologies began
operations at its second
 
facility in Gaffney,
 
South Carolina, and in
 
2001, Core Molding Technologies
 
added a production facility
in Matamoros, Mexico
 
by acquiring
 
certain assets
 
of Airshield Corporation.
 
As a
 
result of
 
this acquisition,
 
Core Molding
Technologies expanded its fiberglass molding capabilities to include the spray up, hand-lay-up open mold processes and RTM
closed molding. In
 
2005, Core Molding
 
Technologies acquired certain
 
assets of the
 
Cincinnati Fiberglass Division
 
of Diversified
Glass, Inc.,
 
a Batavia,
 
Ohio-based, privately
 
held manufacturer
 
and distributor
 
of fiberglass
 
reinforced plastic
 
components supplied
primarily to
 
the heavy-duty
 
truck market.
 
In 2009,
 
the Company
 
completed construction
 
of a
 
new production
 
facility in
 
Matamoros,
Mexico that replaced its
 
leased facility. In
 
March 2015, the Company
 
acquired substantially all
 
of the assets of
 
CPI Binani, Inc.,
a wholly owned
 
subsidiary of Binani
 
Industries Limited, located in
 
Winona, Minnesota ("CPI"),
 
which expanded the
 
Company's
process capabilities to include D-LFT and diversified the customer base. In January 2018, the
 
Company acquired substantially
all the
 
assets of
 
Horizon Plastics,
 
which has
 
manufacturing operations
 
in Cobourg,
 
Ontario and
 
Escobedo, Mexico.
 
This
acquisition expanded
 
the Company's customer base, geographic
 
footprint, and process capabilities to
 
include structural foam
and structural web molding.
 
Business Overview
 
 
General
 
 
The Company’s business
 
and operating results are
 
directly affected by
 
changes in overall
 
customer demand, operational costs
 
and
performance and leverage of our fixed cost
 
and selling, general and administrative ("SG&A") infrastructure.
 
Product sales fluctuate in
 
response to several
 
factors including many
 
that are beyond
 
the Company’s control,
 
such as general
economic conditions, interest
 
rates, government regulations,
 
consumer spending, labor
 
availability, and
 
our customers’ production
rates and inventory
 
levels. Product sales consist
 
of demand from
 
customers in many
 
different markets with different
 
levels of
cyclicality and seasonality. Product sales from the Company's largest market, the North American
 
truck market, which is highly
cyclical, accounted for
 
42% and 60%
 
of the Company’s product
 
revenue for the
 
nine months ended
 
September 30, 2020
 
and
2019, respectively.
 
Operating performance is dependent on the
 
Company’s ability to manage changes in input
 
costs for items such as raw
 
materials,
labor, and overhead operating costs. Performance
 
is also affected by manufacturing efficiencies,
 
including items such as on time
delivery, quality, scrap, and productivity.
 
Market factors of supply and demand
 
can impact operating costs.
 
In periods of rapid
increases or decreases in customer demand, the
 
Company is required to ramp operations activity
 
up or down quickly which may
impact manufacturing efficiencies more than
 
in periods of steady demand.
 
Operating performance is
 
also dependent
 
on the Company’s
 
ability to effectively
 
launch new customer
 
programs, which are
typically extremely complex
 
in nature. The
 
start of production
 
of a new
 
program is the
 
result of a
 
process of developing
 
new molds
and assembly equipment,
 
validation testing, manufacturing
 
process design, development
 
and testing, along
 
with training
 
and often
hiring employees. Meeting the
 
targeted levels of
 
manufacturing efficiency for
 
new programs usually
 
occurs over
 
time as the
 
 
 
 
29
 
Company gains experience
 
with new tools
 
and processes. Therefore,
 
during a new
 
program launch period,
 
start-up costs and
inefficiencies can affect
 
operating results.
 
Nine Months Ended September
 
30, 2020
 
 
Product sales for the
 
nine months ended September
 
30, 2020 decreased 29%
 
compared to the same
 
period in 2019. Operating
income increased from a loss of $7,406,000 to income of $7,
 
377,000 for the nine months ended September 30, 2020
 
compared
to the same period
 
a year ago. Lower demand
 
from our customers
 
as a result
 
of a cyclical
 
downturn in the
 
truck market and
the negative
 
effect of
 
COVID-19 on most
 
customer demand were
 
the primary drivers
 
of the sales
 
decrease. The increase
 
in
operating income was largely due
 
to improved manufacturing efficiencies
 
and cost savings
 
at several of
 
the Company's facilities.
The Company also incurred lower operating and SG&A cost
 
s.
 
For the nine months
 
ended September 30, 2020,
 
product sales to truck
 
customers decreased by 45%
 
compared to the same
 
period
in 2019, as
 
a result of a
 
cyclical downturn in
 
the truck market and
 
demand deterioration related to
 
COVID-19. According
 
to ACT
Research, North
 
American heavy-duty truck production
 
decreased approximately 47%
 
for the nine months
 
ended September 30,
2020 compared to the same period in 2019.
 
For the nine months ended September
 
30, 2020, the Company recorded net income of
 
$9,032 ,000 or
 
$1.07 per basic and diluted
share, compared
 
with net loss of $9,761,000,
 
or ($1.25) per
 
basic and diluted share
 
for the nine months
 
ended September 30,
2019. Net income in
 
2020 was favorably impacted
 
by $5,638,000, or $0.69
 
per share, as a result of
 
a tax valuation allowance
reversal and a tax rate benefit
 
due to tax law changes that
 
allow the Company to carryback net operating losses to
 
offset taxable
income in 2013 through
 
2015 and the tax rate change of 21% to 34%
 
.
 
Looking forward, the Company anticipates lower product sales for 2020 when compared to 2019, due to the negative impact of
customer shutdowns
 
as a
 
result of
 
COVID-19 and
 
lower demand
 
from truck
 
customers. Based
 
on customer
 
forecasts, the
Company anticipates product sales demand to be down slightly for the three months ended December 31, 2020 when compared
to the same period ended December 31, 2019
 
Results of Operations
 
 
Three Months Ended September
 
30, 2020, as Compared to Three Months Ended September
 
30, 2019
 
 
Net sales for the three months ended September 30, 2020
 
and 2019 totaled $59,873,000 and $74,655,000, respectively. Included
in net sales were
 
tooling project sales of
 
$5,663,000 and $7,144,000
 
for the three months ended
 
September 30, 2020 and
 
2019,
respectively. These sales are sporadic
 
in nature and fluctuate in
 
regard to scope and
 
related revenue on a period
 
-to-period basis.
Product sales, excluding
 
tooling project sales,
 
for the three
 
months ended September
 
30, 2020
 
were $54,240,000 compared
 
to
$67,511,000 for the same period in 2019. This decrease
 
in sales is
 
primarily the result
 
of lower demand
 
from truck and marine
customers partially
 
offset by higher
 
demand from customers
 
in the construction
 
and all-terrain
 
vehicle market.
 
 
Gross margin was
 
approximately 18.1
 
%
 
of sales for
 
the three months
 
ended September 30,
 
2020, compared with
 
8.7% for the
three months ended September 30, 2019.
 
The gross margin percentage increase was due to a favorable net change in product mix
and productivity efficiency of 11.9%, offset by an increase in
 
sales return of 2.0% and lower leverage of fixed costs of 1.0%.
 
 
Selling, general and
 
administrative expense (“SG&A”) was
 
$6,517,000 for the three
 
months ended September 30,
 
2020, compared
to $7,041,000
 
for the
 
three months
 
ended September
 
30, 2019.
 
Decreased SG&A
 
expenses resulted
 
primarily from
 
lower
professional and outside service expenses of $272,000 and
 
travel expenses of $157,000.
 
 
The Company incurred a goodwill impairment of
 
$4,100,000 associated with its Horizon Plastics
 
reporting unit during the three
months ended September 30, 2019.
 
The Company incurred lower profit margins
 
in its Horizon Plastics reporting unit
 
caused by
selling price decreases that the Company had not been able to
 
fully offset with material cost reductions.
 
 
 
 
 
30
 
Interest expense totaled
 
$966,000 for the
 
three months ended
 
September 30, 2020,
 
compared to interest expense
 
of $1,113,000
for the three
 
months ended September
 
30, 2019. The decrease
 
in interest expense was
 
due to a
 
lower average outstanding
 
debt
balance, offset by higher interest rates during the three months ended September 30, 2020, when compared to the same period
 
in
2019.
 
 
Income tax expense for
 
the three months ended
 
September 30, 2020 was
 
1.0% of income
 
before income taxes,
 
and income tax
for the three months ended September 30,
 
2019 was 6.6% of loss before income taxes. The Company’s effective tax rates reflect
the effects of taxable
 
income and
 
taxable losses being generated in tax jurisdictions with different tax rates.
 
The effective tax rate
for 2020 reflects recording net
 
operating losses in US jurisdictions
 
at the tax rate which
 
will be applied when
 
the Company carries
2020 losses back to previous tax years.
 
 
 
The Company recorded net income for the three months ended September 30,
 
2020 of $3,343,000 or $0.39 per basic and diluted
share, compared with
 
a net loss of
 
$6,125,000, or $0.78
 
per basic and
 
diluted share, for
 
the three months ended
 
September 30,
2019.
 
 
Comprehensive income totaled
 
$3,742,000 for the three
 
months ended September 30,
 
2020, compared to
 
comprehensive losses
of $6,462,000
 
for the same period ended September 30, 2019. The increase was primarily related to an increase in net income of
$9,468,000 and a change in unrealized foreign currency hedges of $
 
523,000, net of tax.
 
 
Nine Months Ended September
 
30, 2020, as Compared to Nine Months Ended September
 
30, 2019
 
 
Net sales
 
for the
 
nine months
 
ended September
 
30, 2020
 
and 2019
 
totaled $161,705,000
 
and $228,168,000,
 
respectively.
Included in total sales were tooling project sales of $9,686,000 and $13,765,000 for the nine months ended September 30, 2020
and 2019, respectively.
 
These sales are sporadic
 
in nature and fluctuate
 
in regard to scope
 
and related revenue on
 
a period-to-
period basis. Product sales, excluding tooling
 
project sales, for the nine months ended
 
September 30, 2020 were $152,019,000
compared to $214,403,000
 
for the same period
 
in 2019. This decrease
 
in sales is primarily the result of lower cyclical demand
from truck customers as well as lower demand from most all
 
customers as a result of COVID
 
-19.
 
 
Gross margin was
 
approximately 15
 
.2%
 
of sales for
 
the nine months
 
ended September 30,
 
2020, compared with
 
7.9% for the
nine months ended September
 
30, 2019. The gross
 
margin percentage increase
 
was due to favorable
 
net change in product
 
mix
and manufacturing
 
efficiency of 8.9%
 
and a favorable
 
net change in
 
selling price and
 
material costs of
 
1.1%, offset by
 
lower
leverage of fixed costs of 2.1% and higher sales returns of 0.9%.
 
 
Selling, gener
 
al and
 
administrative expense
 
(“SG&A”) was
 
$17,136,000 for
 
the nine
 
months ended
 
September 30,
 
2020,
compared to $21,431,000 for the
 
nine months ended September 30, 2019.
 
The decrease in SG&A
 
expense primarily resulted from
lower professional and outside services of $1,417,000, government subsides enacted as a result of COVID-19 of $1,416,000
 
and
lower travel expenses of $619,000.
 
 
The Company incurred a
 
goodwill impairment of $4,100,000
 
associated with its Horizon Plastics
 
reporting unit during the nine
months ended September 30, 2019.
 
The Company incurred lower profit margins
 
in its Horizon Plastics reporting unit
 
caused by
selling price decreases that the Company had not been able to
 
fully offset with material cost reductions.
 
 
Interest expense totaled $3,338,000 for
 
the nine months ended September 30, 2020,
 
compared to interest expense of $2,878,000
for the nine months ended September
 
30, 2019. The increase in interest expense
 
was due to higher interest rates
 
during the nine
months ended September 30, 2020, when compared to the same period
 
in 2019.
 
 
Income tax benefit for
 
the nine months ended
 
September 30, 2020 was
 
120.3% of the income before
 
income taxes, and income
 
tax
benefit for
 
the nine months ended September
 
30, 2019 was 4.4%
 
of the loss before income
 
taxes. The Company’s effective
 
tax
rates reflect the effects of
 
taxable income and
 
taxable losses being generated in tax jurisdictions with different tax
 
rates.
 
 
 
 
 
31
 
 
The Company recorded a net income
 
for the nine months ended September
 
30, 2020 of $9,032,000, or $1.07
 
per basic and diluted
share, compared with
 
a net loss
 
of $9.761,000
 
or $1.25 per
 
basic and diluted
 
share, for the
 
nine months ended
 
September 30,
2019.
 
 
Comprehensive income totaled
 
$8,063,000 for the
 
nine months ended
 
September 30, 2020,
 
compared to
 
comprehensive losses
of $10,215,000
 
for the
 
same period
 
ended September
 
30, 2019.
 
The increase
 
was primarily
 
related to
 
higher net
 
income of
$18,793,000 and a
 
change in unrealized foreign
 
currency hedges of $753,000,
 
net of tax, for
 
the nine months ended
 
September
30, 2020.
 
 
Liquidity and Capital Resources
 
 
Historically, the Company
 
’s primary sources
 
of funds have been
 
cash generated from operating
 
activities and borrowings
 
from
third parties. Primary cash requirements are for
 
operating expenses, increases in working capital, capital expenditures,
 
repayment
of long-term
 
debt and
 
business acquisitions.
 
The Company
 
from time
 
to time
 
will enter
 
into foreign
 
exchange contracts
 
and
interest rate swaps to mitigate
 
risk of foreign exchange and
 
interest rate volatility. As of September
 
30, 2020, the Company had
outstanding foreign
 
exchange contracts
 
with notional
 
amounts totaling
 
$51,000, compared
 
to $15,358,000
 
outstanding as
 
of
December 31,
 
2019. As of September
 
30, 2020,
 
the Company also
 
had outstanding interest
 
rate swaps with
 
notional amounts
totaling $27,125,000, compared to $29,750,000 outstanding as of December
 
31, 2019.
 
 
Cash provided
 
by operating
 
activities for
 
the nine
 
months ended
 
September 30,
 
2020 totaled
 
$31,052,000. Net
 
income of
$9,032,000 positively
 
impacted operating
 
cash flows.
 
Non-cash deductions
 
of depreciation
 
and amortization
 
included in
 
net
income amounted
 
to $8,425,000.
 
Changes in working
 
capital increased
 
cash provided
 
by operating activities
 
by $11,816,000,
which primarily related to changes in accounts receivable, inventory and
 
other accrued liabilities, offset by accounts payable.
 
 
 
At September 30, 2020, the Company had
 
$14,809,000 cash on hand, and an available
 
balance on the revolving line of credit
 
of
$20,000,000. If a
 
material adverse change in
 
the financial position
 
of the Company should
 
occur, or if actual
 
sales or expenses
are substantially different than
 
what has been forecasted, the
 
Company's liquidity and ability to
 
obtain further financing to
 
fund
future operating and capital requirements could be negatively impacted.
 
 
Cash used in investing
 
activities for the nine
 
months ended September 30,
 
2020 was $2,716,000,
 
which related to purchases
 
of
property, plant and equipment.
 
The Company anticipates
 
spending up to $2,000,000
 
during the remainder of
 
2020 on property,
plant and equipment purchases for all of the Company's operations.
 
 
At September 30,
 
2020, purchase commitments
 
for capital expenditures
 
in progress were
 
$338,000. The Company
 
anticipates
using cash from operations and its available revolving line of credit
 
to fund capital investments.
 
 
Cash used in financing activities for
 
the nine months ended September 30,
 
2020 totaled $15,383,000, which primarily consisted
of net
 
revolving loan
 
payments of
 
$12,007,000 and
 
net scheduled
 
repayments of
 
principal on
 
outstanding term
 
loans of
$3,391,000. The Company
 
was able to
 
make the repayments
 
primarily due to
 
the cash provided
 
by operating activities
 
of the
$15,399,000 for the nine months ended of September 30,
 
2020.
 
 
On January 16, 2018, the Company entered into an Amended and
 
Restated Credit Agreement (the "A/R Credit Agreement")
 
with
KeyBank National Association as administrative agent and various financial institutions party thereto as lenders (the "Lenders").
Pursuant to the terms
 
of the A/R
 
Credit Agreement (i)
 
the Company may borrow
 
revolving loans in the
 
aggregate principal amount
of up to
 
$40,000,000 (the “
 
US Revolving Loans”)
 
from the Lenders
 
and term loans
 
in the aggregate
 
principal amount of
 
up to
$32,000,000 from
 
the Lenders,
 
(ii) the Company's
 
wholly-owned subsidiary,
 
Horizon Plastics
 
International, Inc.,
 
(the
"Subsidiary") may
 
borrow revolving
 
loans in
 
an aggregate
 
principal amount
 
of up
 
to $10,000,000
 
from the
 
Lenders (which
revolving loans shall
 
reduce the availability
 
of the US
 
Revolving Loans to
 
the Company on
 
a dollar-for-dollar basis) and
 
term
 
 
 
32
 
loans in an
 
aggregate principal
 
amount of up
 
to $13,000,000
 
from the Lenders,
 
(iii) the
 
Company obtained
 
a Letter of
 
Credit
Commitment of $250,000, of which $160,000 has been issued and (iv) the Company repaid the outstanding term loan balance of
$6,750,000. The A/R Credit Agreement is secured by a guarantee of each U.S. and Canadian subsidiary of the
 
Company, and by
a lien on substantially all of the present
 
and future assets of the Company and its
 
U.S. and Canadian subsidiaries, except that only
65% of the stock issued by Corecomposites de Mexico, S. de
 
R.L. de C.V. has been pledged.
 
 
Concurrent with the
 
closing of
 
the A/R Credit
 
Agreement the Company
 
borrowed the
 
$32,000,000 term
 
loan and
 
$2,000,000
from the U.S. Revolving
 
Loan and the Subsidiary borrowed
 
the $13,000,000 term loan
 
and $2,500,000 from revolving
 
loans to
provide $49,500,000 of funding for
 
the acquisition of Horizon Plastics.
 
Interest is payable monthly at
 
one month LIBOR plus a
basis point margin of 700 basis points with a LIBOR floor of 100
 
basis points.
 
 
During 2019, the Company and the Lenders acknowledged and confirmed that an event of default occurred under the A/R Credit
Agreement resulting from
 
the Borrowers failure
 
to maintain the
 
required Fixed Charge
 
Coverage Ratio (as
 
defined in the
 
A/R
Credit Agreement).
 
On November 22,
 
2019, the Company and
 
the Lenders entered
 
into a forbearance agreement
 
(the
"Forbearance Agreement"),
 
which was amended twice, first on March
 
13, 2020 agreement (the "Amended Forbearance
Agreement") and then on May 29, 2020 (the “Second Amended Forbearance Agreement”).
 
 
The Second Amended Forbearance Agreement
 
provided that the Company and the Lenders agreed to modify certain terms of the
Amended Forbearance
 
Agreement and
 
extend the
 
Forbearance Agreement
 
through September
 
30, 2020.
 
The modifications
include (1) that the Company will maintain liquidity of not less than $5,000,000, to be measured twice monthly, on every second
and fourth Friday of each month
 
during the forbearance period, (2)
 
the Company shall maintain minimum year-to-date
 
earnings
before income
 
tax, depreciation
 
and amortization
 
(“YTD-EBITDA”) of
 
not less
 
than $5,000,000,
 
measured upon delivery
 
of
Company’s July
 
2020 financial statements
 
and also upon delivery
 
of Company’s
 
August 2020 financial
 
statements, with YTD-
EBITDA determined based on
 
consolidated EBITDA,
 
(3) a change
 
of interest rate
 
to LIBOR rate
 
plus 700 basis
 
points with a
LIBOR floor of
 
100 basis points,
 
(4) on or
 
before July 15,
 
2020 the Borrowers
 
shall have obtained
 
executed term sheets
 
from
involved parties and/or lenders, (5) on or before September 30, 2020, the Borrowers shall have closed on a new capital structure,
(6) forbearing compliance with the leverage covenant
 
and fixed charge covenant through September
 
30, 2020, and (7)
implementation of a capital expenditure spend limit of $3,000,000
 
for the nine months ended September 30, 2020.
 
 
The Company has unblocked
 
maximum availability of
 
$20,000,000 of variable
 
rate revolving loans of
 
which $0 is outstanding
as of September 30, 2020.
 
 
On April 24, 2020
 
the Company entered
 
into a finance
 
agreement with Leaf
 
Capital Funding of
 
$175,000 for equipment.
 
The
parties agreed to a fixed interest rate of 550 basis point and a term of 60 months. The amount outstanding at September 30, 2020
was $160,000 of which, $127,000 was classified as long term debt.
 
 
On October 27, 2020, the Company entered into
 
the Refinancing Agreements, as defined in
 
Note 2, “Critical Accounting Policies
and Estimates”, and repaid
 
all of its obligations under
 
the A/R Credit Agreement. Management believes that existing
 
cash, cash
flow from
 
operating activities
 
and available
 
borrowings under
 
the Refinancing
 
Agreements will
 
be sufficient
 
to meet
 
the
Company’s liquidity
 
needs for
 
the next 12
 
months. Based on
 
the Company
 
’s forecasts,
 
which are based
 
on industry analysts’
estimates of heavy and medium-duty truck production volumes, customers' forecasts, as well as other assumptions,
 
management
believes that the Company will be able to maintain compliance with its financial covenants for
 
the next 12 months.
 
If a material
adverse change in
 
the financial position
 
of the Company
 
should occur, or
 
if actual sales or
 
expenses are substantially
 
different
than what has been forecasted, the
 
Company’s liquidity and ability to obtain further financing to
 
fund future operating and capital
requirements could be negatively impacted.
 
 
Off-Balance Sheet Arrangements
 
 
The Company did not have any significant off-balance sheet
 
arrangements as of September 30, 2020 or December 31, 2019.
 
 
 
 
33
 
 
The Company
 
did not
 
have or
 
experience any
 
material changes
 
outside the
 
ordinary course
 
of business
 
as to
 
contractual
obligations, including long-term
 
debt obligations, capital
 
lease obligations, operating
 
lease obligations, purchase
 
obligations or
other long- term
 
liabilities reflected on
 
the Company’s
 
balance sheet under
 
GAAP, as of
 
September 30, 2020
 
or December 31,
2019.
 
 
Critical Accounting Policies and Estimates
 
 
For information on
 
critical accounting policies
 
and estimates, see
 
Note 2, "Critical
 
Accounting Policies and
 
Estimates," to
 
the
consolidated financial statements included herein.
 
 
Recent Accounting Pronouncements
 
 
For information on the impact of recently
 
issued accounting pronouncements, see Note 3, "Recent Accounting
 
Pronouncements,"
to the consolidated financial statements included here
 
 
 
 
34
 
Part I — Financial Information
 
 
Item 3.
 
Quantitative and Qualitative Disclosures About Market Risk
 
 
Core Molding Technologies
 
’
 
primary market risk
 
results from
 
changes in
 
the price
 
of commodities
 
used in its
 
manufacturing
operations. Core
 
Molding Technologies
 
is also
 
exposed to
 
fluctuations in
 
interest rates
 
and foreign
 
currency fluctuations
associated with
 
the Mexican
 
peso and
 
Canadian Dollar.
 
Core Molding
 
Technologies does
 
not hold
 
any material
 
market risk
sensitive instruments
 
for trading
 
purposes. The
 
Company may
 
use derivative
 
financial instruments
 
to hedge
 
exposure to
fluctuations in foreign exchange rates and interest rates.
 
 
Core Molding Technologies has the following three items
 
that are sensitive to market risks: (1)
 
Revolving Loans and Term Loans
under the Amended and Restated Credit
 
Agreement, some of which bear
 
a variable interest rate;
 
(2) foreign currency purchases
in which the Company purchases Mexican pesos and Canadian dollars with
 
United States dollars to meet certain obligations; and
(3) raw material purchases in which
 
Core Molding Technologies purchases various
 
resins, fiberglass, and metal components
 
for
use in production.
 
The prices
 
and availability of
 
these materials
 
are affected
 
by the prices
 
of crude
 
oil, natural gas
 
and other
feedstocks, tariffs, as well as processing capacity versus demand.
 
 
Assuming a hypothetical 10%
 
change in short-term interest
 
rates, interest paid on the Term
 
Loan would have been impacted,
 
as
the interest rate on these loans is based upon LIBOR. It would
 
not, however, have a material effect on earnings before tax.
 
 
Assuming a
 
hypothetical 10%
 
decrease in
 
the United
 
States dollar
 
to Mexican
 
peso and
 
Canadian dollar
 
exchange rate,
 
the
Company would be impacted by an increase in operating costs, which would
 
have an adverse effect on operating margins.
 
 
Assuming a hypothetical
 
10% increase in
 
commodity prices, Core
 
Molding Technologies would
 
be impacted by
 
an increase in
raw material costs, which would have an adverse effect on operating margins.
 
 
 
 
35
 
Part I — Financial Information
 
 
Item 4.
 
Controls and Procedures
 
 
 
As of the end of the period covered by this report, the Company has carried out an
 
evaluation, under the supervision and with the
participation of its management, including its Chief Executive
 
Officer and its Chief Financial Officer, of the effectiveness
 
of the
design and operation
 
of its disclosure
 
controls and procedures
 
(as defined in Rule
 
13a-15(e) of the
 
Exchange Act). Based upon
this evaluation, the
 
Company’s management,
 
including its Chief
 
Executive Officer
 
and its Chief
 
Financial Officer,
 
concluded
that the Company
 
’s disclosure
 
controls and procedures
 
were (i) effective to
 
ensure that information
 
required to be
 
disclosed in
the Company
 
’s reports
 
filed or
 
submitted under
 
the Exchange
 
Act was
 
accumulated and
 
communicated to
 
the Company
 
’s
management, including its Chief
 
Executive Officer and Chief
 
Financial Officer, as appropriate
 
to allow timely decisions
 
regarding
required disclosure,
 
and (ii)
 
effective to
 
ensure that
 
information required
 
to be
 
disclosed in
 
the Company
 
’s reports
 
filed or
submitted under
 
the Exchange
 
Act is recorded,
 
processed, summarized
 
and reported
 
within the time
 
periods specified
 
in the
Securities and Exchange Commission
 
’s rules and
 
forms.There were no changes
 
in internal controls
 
over financial reporting (as
such term is defined in Exchange Act Rule
 
13a-15(f)) that occurred in the last
 
fiscal quarter that have materially affected,
 
or are
reasonably likely to materially affect, our internal controls over financial
 
reporting.
 
 
 
 
 
 
 
 
 
36
 
Part II — Other Information
 
 
Legal Proceedings
 
 
From time to time, the Company is involved in litigation incidental
 
to the conduct of its business. The Company is presently not
involved in
 
any legal
 
proceedings which
 
in the
 
opinion of
 
management are
 
likely to
 
have a
 
material adverse
 
effect on
 
the
Company's consolidated financial position or results of operations.
 
 
Risk Factors
 
 
The following risk factor supplements
 
the “Risk Factors” section
 
in Part 1, Item
 
1A, of our Annual
 
Report on Form 10-K
 
for the
fiscal year ended
 
December 31,
 
2019 (our “Form
 
10-K"). The following
 
risk factor disclosure
 
should be read
 
in conjunction with
the other risk factors set out in our Form 10-K.
 
The Recent Coronavirus
 
(COVID-19) Outbreak Has
 
Adversely Impacted our Business
 
and Could in the
 
Future Have a
 
Material
Adverse Impact on
 
our Business, Results
 
of Operation, Financial
 
Condition and Liquidity,
 
the Nature and
 
Extent of Which
is Highly
 
Uncertain
 
 
The global outbreak of
 
the coronavirus (COVID-19) has
 
significantly increased economic,
 
demand and operational uncertainty.
We have global operations, customers
 
and suppliers, including in countries most
 
impacted by COVID-19. Authorities around
the world
 
have taken a variety
 
of measures to slow
 
the spread of COVID-19,
 
including travel bans
 
or restrictions, increased
border controls
 
or closures,
 
quarantines, shelter-in-place
 
orders and
 
business shutdowns and
 
such authorities
 
may impose
additional restrictions.
 
We have also taken actions
 
to protect our employees and
 
to mitigate the spread
 
of COVID-19, including
embracing guidelines set
 
by the
 
World Health Organization
 
and the
 
Centers for
 
Disease Control and
 
Prevention on social
distancing, good hygiene, restrictions on employee travel
 
and in-person meetings, and
 
changes to employee work
 
arrangements
including remote work arrangements where feasible. The actions
 
taken around the world
 
to slow the spread
 
of COVID-19 have
also impacted our customers
 
and suppliers, and
 
future developments could cause
 
further disruptions to the
 
Company due to the
interconnected nature of our business relationships.
 
The impact of
 
COVID-19 on the
 
global economy and
 
our customers has
 
negatively impacted demand for
 
our products and
 
could
continue to do
 
so in
 
the future. Its
 
effects could also
 
result in further
 
disruptions to our
 
manufacturing operations, including
 
higher
rates of employee
 
absenteeism, and supply
 
chain disruption, which
 
could continue to
 
negatively impact our
 
ability to meet
customer demand. Additionally, the potential deterioration and volatility of credit and financial markets could limit our ability
to obtain external
 
financing. The extent to
 
which COVID-19 will
 
impact our business, results
 
of operations, financial condition
or liquidity is highly uncertain and will
 
depend on future developments,
 
including the spread
 
and duration of
 
the virus, potential
actions taken by governmental authorities, and how quickly economic conditions stabilize and
 
recover.
 
 
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
 
Period
Total Number of
Shares Purchased
Average Price
Paid per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Maximum Number that
May Yet
 
be Purchased
Under the Plans or
Programs
July 1 to 30, 2020
3,788
4.61
—
—
August 1 to 31, 2020
—
—
—
—
September 1 to 30, 2020
—
—
—
—
 
Defaults Upon Senior Securities
 
 
None.
 
 
 
 
 
37
 
Mine Safety Disclosures
 
 
None.
 
 
Other Information
 
 
None.
 
 
Item 6.
 
 
Exhibits
 
 
See Index to Exhibits.
 
 
 
 
 
 
38
 
SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has
 
duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
 
 
CORE MOLDING TECHNOLOGIES, INC.
Date:
November
6, 2020
By:
/s/ David L. Duvall
David L. Duvall
President, Chief Executive Officer, and Director
Date:
November
6, 2020
By:
/s/ John P. Zimmer
John P. Zimmer
 
Executive Vice President, Secretary, Treasurer and Chief Financial Officer
 
 
 
 
 
 
 
 
39
 
INDEX TO EXHIBIT
 
 
Exhibit No.
Description
Location
2(a)(1)
Asset Purchase Agreement
 
dated as of
 
September
12,
1996, as amended October
31, 1996, between Navistar
and RYMAC Mortgage Investment Corporation
1
2(a)(2)
Second Amendment to
 
Asset Purchase
 
Agreement
dated December
16, 1996
1
2(b)(1)
Agreement and
 
Plan of
 
Merger dated
 
as of
November
1, 1996,
 
between Core
 
Molding
Technologies, Inc. and RYMAC Mortgage Investment
Corporation
2(b)(2)
First Amendment
 
to Agreement and
 
Plan of
 
Merger
dated as of December
27, 1996 between Core Molding
Technologies, Inc. and RYMAC Mortgage Investment
Corporation
2(c)
Asset Purchase Agreement
 
dated as of October
10,
2001, between
 
Core Molding
 
Technologies, Inc.
 
and
Airshield Corporation
2(d)
Asset Purchase
 
Agreement dated
 
as of March
20,
2015, between
 
Core Molding
 
Technologies, Inc
 
and
CPI Binani, Inc.
2(e)
Asset Purchase Agreement
 
dated as of January
16,
2018 between
 
1137952 B.C.
 
Ltd., Horizon
 
Plastics
International, Inc., 1541689
 
Ontario Inc., 2551024
Ontario Inc., Horizon Plastics
 
de Mexico, S.A. de
 
C.V.,
and Brian Read
3(a)(1)
Certificate of Incorporation of Core Molding
Technologies, Inc. as
 
filed with the
 
Secretary of State
of Delaware on October
8, 1996
3(a)(2)
Certificate of
 
Amendment of
 
Certificate of
Incorporation of
 
Core Molding
 
Technologies, Inc.
 
as
filed with the
 
Secretary of
 
State of Delaware
 
on
November
6, 1996
3(a)(3)
Certificate of
 
Amendment of
 
Certificate of
Incorporation as
 
filed with
 
the Secretary
 
of State
 
of
Delaware on August
28, 2002
3(a)(4)
Certificate of
 
Designation, Preferences
 
and Rights
 
of
Series
A Junior Participating
 
Preferred Stock
 
as filed
with the
 
Secretary of
 
State of
 
Delaware on
 
July
18,
2007
3(a)(5)
Certificate of
 
Elimination of
 
Series A Junior
Participating Preferred Stock,
 
as filed with the
Secretary of State of the State of
 
Delaware on April
2,
2015.
3(b)
Amended and Restated By-Laws of Core
 
Molding
Technologies, Inc.
3(b)(1)
Amendment No. 1
 
to the Amended
 
and Restated By-
Laws of Core Molding Technologies, Inc.
4(a)(1)
Certificate of Incorporation of Core Molding
Technologies, Inc. as
 
filed with the
 
Secretary of State
of Delaware on October
8, 1996
 
 
 
 
 
 
40
 
 
 
Exhibit No.
Description
Location
4(a)(2)
Certificate of
 
Amendment of
 
Certificate of
Incorporation of
 
Core Molding
 
Technologies, Inc.
 
as
filed with
 
the Secretary
 
of State
 
of Delaware
 
on
November
6, 1996
4(a)(3)
Certificate of
 
Amendment of
 
Certificate of
Incorporation as
 
filed with
 
the Secretary
 
of State
 
of
Delaware on August
28, 2002
4(a)(4)
Certificate of
 
Designation, Preferences
 
and Rights
 
of
Series A Junior
 
Participating Preferred
 
Stock as
 
filed
with the
 
Secretary of
 
State of
 
Delaware on
 
July
18,
2007
4(a)(5)
Certificate of
 
Elimination of
 
Series A Junior
Participating Preferred
 
Stock, as filed
 
with the
Secretary of State of
 
the State of Delaware
 
on April
2,
2015
4 (a) (6)
Certificate of
 
Designation, Preferences
 
and Rights
 
of
Series B Junior
 
Participating Preferred
 
Stock, as filed
with the Secretary of State of the
 
State of Delaware on
April 21, 2020
4(a)(7)
Rights Agreement, dated
 
as of April 21,
 
2020, by and
between Core
 
Molding Technologies,
 
Inc. and
American Stock Transfer &
 
Trust Company, as
 
Rights
Agent
11
Computation of Net Income per Share
31(a)
Section
302 Certification
 
by David
 
L. Duvall,
President, Chief Executive Officer, and Director
31(b)
Section
302 Certification by
 
John P. Zimmer,
 
Vice
President, Secretary, Treasurer, and
 
Chief Financial
Officer
32(a)
Certification of
 
David L.
 
Duvall, Chief
 
Executive
Officer of Core
 
Molding Technologies, Inc.,
 
dated
November
6, 2020, pursuant to 18 U.S.C.
 
Section
1350
32(b)
Certification of
 
John P.
 
Zimmer, Chief
 
Financial
Officer of Core
 
Molding Technologies, Inc.,
 
dated
November
6, 2020, pursuant to 18 U.S.C.
 
Section
1350
101.INS
XBRL Instance Document
Filed Herein
101.SCH
XBRL Taxonomy Extension Schema Document
Filed Herein
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
Filed Herein
101.LAB
XBRL Taxonomy Extension Label Linkbase
Filed Herein
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
Filed Herein
101.DEF
XBRL Taxonomy Extension Definition Linkbase
Filed Herein
 
The Asset Purchase Agreement, as filed with the Securities and Exchange Commission as Exhibit
 
2-A to Registration Statement
on Form
 
S-4 (Registration
 
No.
 
333-15809), omits
 
the exhibits
 
(including the
 
Buyer Note,
 
Special Warranty
 
Deed, Supply
Agreement, Registration Rights Agreement and Transition Services Agreement identified in the
 
Asset Purchase Agreement) and
schedules (including
 
those identified
 
in Sections
 
1, 3,
 
4, 5,
 
6, 8
 
and 30
 
of the
 
Asset Purchase
 
Agreement). Core
 
Molding
Technologies, Inc. will provide any omitted exhibit or schedule to
 
the Securities and Exchange Commission upon request.
 

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