SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 -------------- 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 MATERIALS CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 31-1481870 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) incorporation or organization) 800 Manor Park Drive, P.O. Box 28183 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 [ X ] NO [ ] As of May 14, 2002, the latest practicable date, 9,778,680 shares of the registrant's common shares were issued and outstanding.
PART 1 - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS CORE MATERIALS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, DECEMBER 31, 2002 2001 ------------ ------------ (UNAUDITED) ASSETS Cash and cash equivalents $ 4,678,113 $ 3,194,156 Accounts receivable (less allowance for doubtful accounts: March 31, 2002 - $503,000; December 31, 2001 - $715,000) 13,913,686 11,946,137 Inventories: Finished and work in process goods 2,497,758 1,679,745 Stores 1,961,612 2,222,250 ------------ ------------ Total inventories 4,459,370 3,901,995 Deferred tax asset 1,079,995 1,079,995 Prepaid expenses and other current assets 1,763,276 1,704,262 ------------ ------------ Total current assets 25,894,440 21,826,545 Property, plant and equipment 42,849,846 42,759,871 Accumulated depreciation (17,857,986) (17,398,659) ------------ ------------ Property, plant and equipment - net 24,991,860 25,361,212 Deferred tax asset - net 11,547,641 11,692,678 Mortgage-backed security investment 602,550 924,041 Goodwill 1,097,433 1,097,433 Other assets 392,372 405,356 ------------ ------------ TOTAL $ 64,526,296 $ 61,307,265 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Current liabilities Current portion long-term debt $ 365,000 $ 355,000 Accounts payable 6,186,157 3,756,735 Accrued liabilities: Compensation and related benefits 2,957,242 3,050,120 Interest 478,715 85,939 Taxes 954,346 636,934 Graduated lease payments 946,585 889,267 Professional fees 304,632 417,487 Other accrued liabilities 807,024 848,826 ------------ ------------ Total current liabilities 12,999,701 10,040,308 Long-term debt 25,920,150 26,015,150 Interest rate swap 285,716 366,826 Deferred long-term gain 1,895,328 2,008,716 Postretirement benefits liability 5,262,245 5,340,164 STOCKHOLDERS' EQUITY: Common stock - $0.01 par value, authorized shares - 20,000,000; 97,787 97,787 Outstanding shares: March 31, 2002 and December 31, 2001 - 9,778,680 Paid-in capital 19,251,392 19,251,392 Accumulated other comprehensive income (loss), net of income tax effect (188,572) (242,105) Retained earnings (deficit) (997,451) (1,570,973) ------------ ------------ Total stockholders' equity 18,163,156 17,536,101 ------------ ------------ TOTAL $ 64,526,296 $ 61,307,265 ============ ============ See notes to consolidated financial statements 2
CORE MATERIALS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) THREE MONTHS ENDED MARCH 31, ---------------------------- 2002 2001 ------------ ------------ NET SALES: International $ 10,248,853 $ 9,986,041 Yamaha 4,133,050 5,630,788 Lear 2,273,182 326,675 Freightliner 1,740,468 -- Other 1,901,114 3,155,781 ------------ ------------ Total Sales 20,296,667 19,099,285 ------------ ------------ Cost of Sales 16,682,174 16,428,104 Postretirement benefits expense 255,989 253,872 ------------ ------------ Total cost of sales 16,938,163 16,681,976 ------------ ------------ GROSS MARGIN 3,358,504 2,417,309 ------------ ------------ Selling, general and administrative expense 1,904,271 1,967,692 Postretirement benefits expense 60,047 59,550 ------------ ------------ Total selling, general and administrative expense 1,964,318 2,027,242 INCOME BEFORE INTEREST AND TAXES 1,394,186 390,067 Interest income 35,651 96,006 Interest expense (501,161) (479,833) ------------ ------------ INCOME BEFORE INCOME TAXES 928,676 6,240 Income taxes: Current 237,695 1,027 Deferred 117,459 1,557 ------------ ------------ Total income taxes 355,154 2,584 ------------ ------------ NET INCOME $ 573,522 $ 3,656 ============ ============ NET INCOME PER COMMON SHARE: Basic & diluted $ 0.06 $ 0.00 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic and diluted 9,778,680 9,778,680 See notes to consolidated financial statements 3
CORE MATERIALS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) <TABLE> <CAPTION> COMMON STOCK ACCUMULATED OUTSTANDING OTHER TOTAL PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS' SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS) EQUITY ----------- ----------- ----------- ----------- ------------- ------------- <S> <C> <C> <C> <C> <C> <C> BALANCE AT JANUARY 1, 2002 9,778,680 $ 97,787 $19,251,392 $(1,570,973) $ (242,105) $17,536,101 Net Income 573,522 573,522 Hedge accounting effect of the 53,533 53,533 interest rate swap at March 31, 2002, net of deferred income tax expense of $27,578 ----------- ----------- ----------- ----------- ----------- ----------- BALANCE AT MARCH 31, 2002 9,778,680 $ 97,787 $19,251,392 (997,451) $ (188,572) $18,163,156 =========== =========== =========== =========== =========== =========== </TABLE> See notes to consolidated financial statements. 4
CORE MATERIALS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED MARCH 31, 2002 2001 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 573,522 $ 3,656 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 506,416 536,095 Deferred income taxes 117,459 1,557 Loss on disposal of assets -- 31,359 Amortization of gain on sale/leaseback transactions (113,388) (113,388) Change in operating assets and liabilities: Accounts receivable (1,967,549) (976,525) Inventories (557,375) (222,889) Prepaid and other assets (59,014) 1,288,567 Accounts payable 2,429,422 2,638,790 Accrued and other liabilities 519,971 1,077,160 Postretirement benefits liability (77,919) 253,115 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,371,545 4,517,497 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (124,079) (572,509) Proceeds from sale of property and equipment -- 19,800 Proceeds from maturities on mortgage-backed security investment 321,491 6,672 ----------- ----------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 197,412 (546,037) CASH FLOWS FROM FINANCING ACTIVITIES: Payment of principal on industrial revenue bond (85,000) (80,000) ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (85,000) (80,000) NET INCREASE IN CASH 1,483,957 3,891,460 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,194,156 2,712,412 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,678,113 $ 6,603,872 =========== =========== Cash paid for: Interest (net of amounts capitalized) $ 85,592 $ 59,332 =========== =========== Income taxes (refund) $ (15,905) $ (39,544) =========== =========== See notes to consolidated financial statements. 5
CORE MATERIALS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10Q 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 Materials Corporation and its subsidiaries ("Core Materials") at March 31, 2002, and the results of its operations and cash flows. The "Consolidated Notes to Financial Statements", which are contained in the 2001 Annual Report to Shareholders, should be read in conjunction with these Consolidated Financial Statements. Certain reclassifications have been made to prior year's amounts to conform to the classifications of such amounts for 2002. Core Materials Corporation and its subsidiaries operate in the plastics market in a family of products known as "reinforced plastics". Reinforced plastics are combinations of resins and reinforcing fibers (typically glass or carbon) that are molded to shape. The Columbus, Ohio and Gaffney, South Carolina facilities produce reinforced plastics by compression molding sheet molding compound (SMC) in a closed mold process. The Matamoros, Mexico facility produces reinforced plastic products by spray-up and hand-lay-up open mold processes and vacuum assisted resin infused (VRIM) closed mold process. 2. EARNINGS PER COMMON SHARE Basic earnings per common share is computed based on the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed similarly but include the effect of the exercise of stock options under the treasury stock method. In calculating net income per share for the three months ended March 31, 2002, and March 31, 2001, stock options had no effect on the weighted average shares for the computation of diluted income per share and consequently basic and diluted net income per share were the same. 6
3. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) represents net income (loss) plus the results of certain non-shareowners' equity changes not reflected in the Statement of Income. The components of comprehensive income (loss), net of tax, are as follows: THREE MONTHS ENDED MARCH 31, ------------------- 2002 2001 -------- -------- Net income $573,522 $ 3,656 Hedge accounting effect of interest rate 53,533 (81,290) swap, net of tax effect of $27,578 and $41,877, respectively -------- -------- Comprehensive income (loss) $627,055 $(77,634) ======== ======== 4. ACQUISITION OF AIRSHIELD CORPORATION ASSETS On October 16, 2001, Core Materials Corporation purchased substantially all of the assets, consisting primarily of inventory, accounts receivable and manufacturing equipment, of Airshield Corporation, a privately held manufacturer of fiberglass reinforced plastic parts for the truck and automotive-aftermarket industries. Airshield is based in Brownsville, Texas, with manufacturing operations in Matamoros, Mexico. Airshield had been operating under Chapter 11 bankruptcy protection since March 2001. Core Materials Corporation has continued operations from Airshield's former manufacturing facility in Matamoros, Mexico. The following (unaudited) pro forma consolidated results of operations have been prepared as if the acquisition of substantially all of the assets of Airshield Corporation had occurred at the beginning of 2001. Quarter Ended March 31, 2001 -------------- Net sales $ 22,885,276 ============ Net income (loss) $ (410,139) ============ Net income (loss) per share- basic and diluted $ (0.04) ============ The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results. The effects of the acquisition have been included in the consolidated statement of income since the acquisition date. 5. NEW ACCOUNTING PRONOUNCEMENTS On June 29, 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations". This statement improves the transparency of the accounting and reporting for business combinations by requiring that all business combinations be accounted for under a single method - the purchase method. This Statement is effective for all business combinations initiated after June 30, 2001. The acquisition of substantially all of the assets of Airshield Corporation was accounted for under SFAS No. 141. Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets". This statement applies to intangibles and goodwill acquired after June 30, 2001, as well as goodwill and intangibles previously acquired. Under this statement goodwill as well as other intangibles determined to have an infinite life will no longer be amortized; however these assets will be reviewed for impairment on a periodic basis. Due to the 7
adoption of SFAS No. 142, the Company does not amortize goodwill. The total net book value of goodwill at March 31, 2002 was $1,097,433, and there was no goodwill recorded at March 31, 2001. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The adoption of this statement, as of January 1, 2002, did not have an impact on the Company's consolidated financial statements. 8
PART I - FINANCIAL INFORMATION ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements under this caption constitute "forward-looking statements" which involve certain risks and uncertainties. Core Materials' actual results may differ significantly from those discussed in the forward-looking statements. Factors that may cause such a difference include, but are not limited to: business conditions in the plastics, transportation, recreation and commercial product industries, the general economy, competitive factors, the dependence on four major customers, the recent efforts of Core Materials to expand its customer base, new technologies, regulatory requirements, labor relations, the loss or inability to attract key personnel, the availability of capital, the start up of new operations in Mexico and management's decisions to pursue new products or businesses which involve additional costs, risks or capital expenditures. OVERVIEW Core Materials is a compounder of sheet molding composite ("SMC") and molder of fiberglass reinforced plastics. The Company produces high quality fiberglass reinforced molded products and SMC materials for varied markets, including medium and heavy-duty trucks, automobiles, personal watercraft and other commercial products. The demand for Core Materials' products is affected by economic conditions in the United States, Canada and Mexico. Core Materials' manufacturing operations have a significant fixed cost component. Accordingly, during periods of changing demands, the profitability of Core Materials' operations may change proportionately more than revenues from operations. On December 31, 1996, Core Materials acquired substantially all of the assets and assumed certain liabilities of Columbus Plastics, a wholly owned operating unit of International's truck manufacturing division since its formation in late 1980. Columbus Plastics was a compounder and compression molder of SMC. In October 2001, Core Materials acquired certain assets of Airshield Corporation. As a result of this acquisition, Core Materials expanded its fiberglass molding capabilities to include the spray up, hand-lay-up and vacuum assisted resin infusion molding processes. The acquisition was accounted for under the purchase accounting method and accordingly the effects of the acquisition are included in the results of operations and financial condition of Core Materials from the date of the acquisition and forward. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2002, AS COMPARED TO THREE MONTHS ENDED MARCH 31, 2001 Net sales for the three months ended March 31, 2002, totaled $20,297,000 representing an approximate 6% increase from the $19,099,000 reported for the three months ended March 31, 2001. Sales to International increased to $10,249,000 from $9,986,000 for the three months ended March 31, 2001. The reason for the increase was due to additional business with International that was obtained as a result of the October 2001 acquisition, noted above. Sales to Yamaha decreased for the three months ended March 31, 2002, by approximately 27% to $4,133,000 compared with $5,631,000 for the three months ended March 31, 2001. The decrease in sales to Yamaha was primarily due to the negative impact general economic conditions have had on the demand for personal watercraft. Sales to Lear increased to $2,273,000 for the three months ended March 31, 2002, from $327,000 for the same period a year ago primarily due to the first quarter of 2001 being the ramp up of production for the Lear product. Additionally, sales to Freightliner totaled $1,740,000 for the three months ended March 31, 2002. Core Materials began selling product to Freightliner in the fourth quarter of 2001 as a result of the October 2001 acquisition, noted above. Sales to other customers for the three months ended March 31, 2002, decreased approximately 40% to $1,901,000 from $3,156,000 for the three months ended March 31, 2001. The decrease in sales was primarily the result of Core Materials discontinuing its business relationship with Case/New Holland in 2001. For the three months ending March 31, 2001, sales to Case/New Holland amounted to $2,190,000. Offsetting a portion of the decreases were sales of $938,000 to other various customers brought on from the acquisition noted above. 9
Gross Margin was approximately 16.5% of sales for the three months ended March 31, 2002, compared with 12.7% for the three months ended March 31, 2001. The increase in gross margin, as a percent of sales from the prior year, was due to a combination of many factors including improved labor utilization, improved manufacturing processes leading to a reduction of scrap costs, and reduced energy costs at the Company's Columbus, Ohio and Gaffney, South Carolina facilities. Gross margin from the newly established operation resulting from the acquisition noted above was generally in line with the Company's historical business. During the quarter, gross margin for this operation was favorably impacted by temporary customer price concessions. These price concessions expired in April 2002; however, the Company expects the gross margin for this operation to stay in line with its other operations due to continuing efforts to improve manufacturing processes and reduce manufacturing costs. Selling, general and administrative expenses ("SG&A") totaled $1,964,000 for the three months ended March 31, 2002, decreasing from $2,027,000 for the three months ended March 31, 2001. Downsizing of the workforce and cost saving programs implemented in the Columbus, Ohio and Gaffney, South Carolina facilities were offset by the addition of the Mexican operation. Interest expense totaled $501,000 for the three months ended March 31, 2002, increasing from $480,000 for the three months ended March 31, 2001. The increase in interest expense from 2001 was primarily due to interest expense being reduced in 2001 by a higher amount of capitalized interest associated with assets being constructed. Interest rates experienced by the Company with respect to the industrial revenue bond were favorable; however, due to the interest rate swap the Company entered into, the interest rate is essentially fixed for this debt instrument. Income taxes for the three months ended March 31, 2002, are estimated to be approximately 38% of total earnings before taxes. Actual tax payments will be lower than the recorded expenses as Core Materials has substantial federal tax loss carryforwards. These loss carryforwards were recorded as a deferred tax asset. As the tax loss carryforwards are utilized to offset federal income tax payments, Core Materials reduces the deferred tax asset as opposed to recording a reduction in income tax expense. Projected future income tax payments related to income earned for the three months ended March 31, 2002, are estimated to be approximately $238,000, which reflects federal alternative minimum, state and local taxes. Net income for the three months ended March 31, 2002, was $574,000, or $.06 per basic and diluted share, representing an increase of $570,000 over the net income for the three months ended March 31, 2001, of $4,000, or $.00 per basic and diluted share. LIQUIDITY AND CAPITAL RESOURCES Core Materials' primary cash requirements are for operating expenses and capital expenditures. These cash requirements have historically been met through a combination of cash flow from operations, equipment leasing, issuance of Industrial Revenue Bonds and bank lines of credit. Cash provided by operations for the three months ended March 31, 2002, totaled $1,372,000. Net income increased operating cash flows by $574,000. Also adding positive cash flow was an increase in accounts payable of $2,429,000, primarily related to timing effects. Additionally, depreciation and amortization provided $506,000 in positive cash flow. Decreasing the operating cash flow was an increase in accounts receivable of $1,968,000, which was primarily due to the increased volume in sales in the first quarter of 2002 compared to the volume in the fourth quarter of 2001. Also decreasing the operating cash flow was an increase in inventory of $557,000 primarily due to the Company building ahead on certain products due to scheduled tooling refurbishments. Investing activities increased cash flow by $197,000 for the three months ended March 31, 2002. Capital expenditures totaled $124,000, which was primarily related to the acquisition of machinery and equipment. Offsetting these expenditures were proceeds from maturities on the Company's mortgage-backed security investment of $321,000. Financing activities reduced cash flow by $85,000 due to principal repayments on the $7,500,000 Industrial Revenue Bond that was issued in 1998. At March 31, 2002, Core Materials had cash on hand of $4,678,000 and an available line of credit of $7,500,000, which is scheduled to mature on August 1, 2002. As of March 31, 2002, Core Materials was in violation of two of its three financial debt covenants for its line of credit, its letter of credit securing the Industrial Revenue Bond and certain equipment leases. The covenants relate to maintaining certain financial ratios. Core Materials has received a written commitment from the bank to waive these covenants each quarter through the 10
quarter ended September 30, 2002, if Core Materials operates in compliance with financial projections for fiscal year 2002 and does not experience any material adverse change to its financial condition. Core Materials has operated in compliance with the financial projections for the three months ended March 31, 2002, and the bank has waived the covenants for this period. Management expects Core Materials to meet these projections for the remainder of 2002. However, if performance should fall below these projections or if a material adverse change in the financial position of Core Materials should occur, Core Materials' liquidity and ability to obtain further financing to fund future operating and capital requirements could be negatively impacted. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to accounts receivable, inventories, post retirement benefits, and income taxes. 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 under different assumptions or conditions. 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. 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. Management also records estimates for customer returns and discounts offered to customers. Should customer returns and discounts fluctuate from the estimated amounts, additional allowances may be required. Inventories: Management identifies slow moving or obsolete inventories and estimates appropriate loss provisions related to these inventories. Historically, these loss provisions have not been significant. Should actual results differ from these estimates, additional provisions may be required. Post retirement benefits: Management records an accrual for post retirement costs associated with the Company sponsored health care plan. Should actual results differ from the assumptions used to determine the reserves, additional provisions may be required. Income taxes: Management records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. The Company has considered future taxable income in assessing the need for the valuation allowance and recorded a valuation allowance (see Note 10 to the consolidated financial statements for the year ended December 31, 2001, included in the 2001 Annual Report to Shareholders). The valuation reserve will be adjusted as the Company determines the actual amount of deferred tax assets that will be realized. 11
PART I - FINANCIAL INFORMATION ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Core Materials' primary market risk results from fluctuations in interest rates. Core Materials is also exposed to changes in the price of commodities used in its manufacturing operations. The Company does not hold any material market risk sensitive instruments for trading purposes. Core Materials has the following five items that are sensitive to a change in interest rates: (1) Long-term debt consisting of an Industrial Revenue Bond ("IRB") with a balance at March 31, 2002, of $6,365,000. Interest is variable and is computed weekly; the average interest rate charged for the three months ended March 31, 2002, was 1.6%, and the maximum interest rate that may be charged at any time over the life of the IRB is 10%. In order to minimize the effect of the interest rate fluctuation, Core Materials has entered into an interest rate swap arrangement under which Core Materials pays a fixed rate of 4.89% to a bank and receives 76% of the 30 day commercial paper rate; (2) Long-term Secured Note Payable with a balance as of March 31, 2002, of $19,920,000 that bears interest at a fixed annual rate of 8%; (3) 7% mortgage-backed security which matures in November 2025. Such security is recorded at cost and is considered held to maturity as Core Materials has the intent and ability to hold such security to maturity; (4) Revolving line of credit which bears interest at LIBOR plus three and one-quarter percent or prime plus one-quarter percent; and (5) Foreign currency purchases in which Core Materials purchases Mexican pesos with United States dollars to meet certain obligations that arise due to the facility located in Mexico. Assuming a hypothetical 20% change in short-term interest rates in both the three month periods ended March 31, 2002, and 2001, interest expense would not change significantly, as the interest rate swap agreement would generally offset the impact. 12
PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No material changes in the two legal proceedings reported in Form 10-K for the year ending December 31, 2001. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No submission of matters to a vote of security holders occurred for the three months ended March 31, 2002. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Exhibits: See Index to Exhibits REPORTS ON FORM 8-K: None 13
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 MATERIALS CORPORATION Date: May 15, 2002 By: /s/ James L. Simonton ------------ ----------------------------------------- James L. Simonton President, Chief Executive Officer and Director Date: May 15, 2002 By: /s/ Kevin L. Barnett ------------ ----------------------------------------- Kevin L. Barnett Vice President, Treasurer, Secretary, and Chief Financial Officer 14
INDEX TO EXHIBITS <TABLE> <CAPTION> EXHIBIT NO. DESCRIPTION LOCATION ----------- ----------- -------- <S> <C> <C> 2(a)(1) Asset Purchase Agreement Incorporated by reference to Dated as of September 12, 1996, Exhibit 2-A to Registration As amended October 31, 1996, Statement on Form S-4 between Navistar International Transportation (Registration No. 333-15809) Corporation and RYMAC Mortgage Investment Corporation(1) 2(a)(2) Second Amendment to Asset Purchase Agreement Incorporated by reference to dated December 16, 1996(1) Exhibit 2(a)(2) to Annual Report on Form 10-K for the year-ended December 31, 2001 2(b)(1) Agreement and Plan of Merger dated as of Incorporated by reference to November 1, 1996, between Core Materials Exhibit 2-B to Registration Corporation and RYMAC Mortgage Investment Statement on Form S-4 Corporation (Registration No. 333-15809) 2(b)(2) First Amendment to Agreement and Plan of Incorporated by reference to Merger dated as of December 27, 1996 Exhibit 2(b)(2) to Annual Between Core Materials Corporation and Report on Form 10-K RYMAC Mortgage Investment Corporation for the year ended December 31, 1997 2(c)(1) Asset Purchase Agreement dated as of October 10, Incorporated by reference to 2001, between Core Materials Corporation and Exhibit 1 to Form 8K Airshield Corporation filed October 31, 2001 3(a)(1) Certificate of Incorporation of Core Materials Incorporated by reference to Corporation As filed with the Secretary of Exhibit 4(a) to Registration State of Delaware on October 8, 1996 Statement on Form S-8 (Registration No. 333-29203) 3(a)(2) Certificate of Amendment of Incorporated by reference to Certificate of Incorporation Exhibit 4(b) to Registration of Core Materials Corporation Statement on Form S-8 as filed with the Secretary of State (Registration No. 333-29203) of Delaware on November 6, 1996 3(a)(3) Certificate of Incorporation of Core Incorporated by reference to Materials Corporation, reflecting Exhibit 4(c) to Registration Amendments through November 6, Statement on Form S-8 1996 [for purposes of compliance (Registration No. 333-29203) with Securities and Exchange Commission filing requirements only] 3(b) By-Laws of Core Materials Corporation Incorporated by reference to Exhibit 3-C to Registration Statement on Form S-4 (Registration No. 333-15809) </TABLE> 15
<TABLE> <CAPTION> EXHIBIT NO. DESCRIPTION LOCATION ----------- ----------- -------- <S> <C> <C> 4(a)(1) Certificate of Incorporation of Core Materials Incorporated by reference to Corporation as filed with the Secretary of State Exhibit 4(a) to Registration of Delaware on October 8, 1996 Statement on Form S-8 (Registration No. 333-29203) 4(a)(2) Certificate of Amendment of Certificate Incorporated by reference to of Incorporation of Core Materials Exhibit 4(b) to Registration Corporation as filed with the Secretary of Statement on Form S-8 State of Delaware on November 6, 1996 (Registration No. 333-29203) 4(a)(3) Certificate of Incorporation of Core Materials Incorporated by reference to Corporation, reflecting amendments through Exhibit 4(c) to Registration November 6, 1996 [for purposes of compliance Statement on Form S-8 with Securities and Exchange Commission (Registration No. 333-29203) filing requirements only] 4(b) By-Laws of Core Materials Corporation Incorporated by reference to Exhibit 3-C to Registration Statement on Form S-4 (Registration No. 333-15809) 11 Computation of Net Income per Share Exhibit 11 omitted because the required information is Included in Notes to Financial Statement </TABLE> (1) The Asset Purchase Agreement, as filed with the Securities and Exchange Commission at 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 Materials Corporation will provide any omitted exhibit or schedule to the Securities and Exchange Commission upon request. 16