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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, 2003
--------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from To
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Commission File Number 001-12505
CORE MOLDING TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 31-1481870
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(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
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (614) 870-5000
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N/A
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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 [ ]
Indicate by check mark whether the registrant is an accelerated filer
as defined by Rule 12b-2 of the Exchange Act.
Yes [ ] NO [ X ]
As of May 14, 2003, 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 MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2003 2002
------------ ------------
(UNAUDITED)
ASSETS
Cash and cash equivalents ..................................... $ 8,709,294 $ 8,976,059
Accounts receivable (less allowance for doubtful accounts:
March 31, 2003 - $588,000; December 31, 2002 - $543,000) .. 11,551,732 11,281,060
Inventories:
Finished and work in process goods ........................ 2,397,739 2,391,077
Stores .................................................... 2,224,529 2,042,535
------------ ------------
Total inventories ..................................... 4,622,268 4,433,612
Deferred tax asset ............................................ 1,151,158 1,151,158
Prepaid expenses and other current assets ..................... 2,064,528 2,218,900
------------ ------------
Total current assets .................................. 28,098,980 28,060,789
Property, plant and equipment
43,222,147 43,001,396
Accumulated depreciation ...................................... (19,440,910) (18,970,136)
------------ ------------
Property, plant and equipment - net ........................... 23,781,237 24,031,260
Deferred tax asset - net ...................................... 10,451,304 10,746,223
Mortgage-backed security investment ........................... 90,890 94,589
Goodwill ...................................................... 1,097,433 1,097,433
Other assets .................................................. 340,434 353,419
------------ ------------
TOTAL ......................................................... $ 63,860,278 $ 64,383,713
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities
Current portion long-term debt ............................. $ 395,000 $ 2,251,000
Accounts payable ........................................... 5,114,866 5,114,655
Accrued liabilities:
Compensation and related benefits ........................ 2,944,629 2,706,272
Interest ................................................. 472,043 92,844
Taxes .................................................... 869,322 819,621
Current portion graduated lease payments ................. 205,812 188,219
Professional fees ........................................ 94,307 300,796
Other accrued liabilities ................................ 866,751 677,647
------------ ------------
Total current liabilities ............................. 10,962,730 12,151,054
Long-term debt ................................................ 23,664,288 23,764,150
Interest rate swap ............................................ 754,117 773,434
Graduated lease payments ...................................... 864,110 903,835
Deferred long-term gain ....................................... 1,441,773 1,555,162
Postretirement benefits liability ............................. 6,291,915 5,961,915
STOCKHOLDERS' EQUITY:
Common stock - $0.01 par value, authorized shares - 20,000,000; 97,787 97,787
Outstanding shares: March 31, 2003 and December 31, 2002 -
9,778,680
Paid-in capital
19,251,392 19,251,392
Accumulated other comprehensive loss, net of income tax effect (497,717) (510,466)
Retained earnings ............................................. 1,029,883 435,450
------------ ------------
Total stockholders' equity ................................ 19,881,345 19,274,163
------------ ------------
TOTAL ......................................................... $ 63,860,278 $ 64,383,713
============ ============
See notes to consolidated financial statements
2
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
2003 2002
------------ ------------
NET SALES:
Products .................................. $ 19,062,891 $ 20,296,667
Tooling ................................... 10,481,536 729,608
------------ ------------
Total Sales ............................. 29,544,427 21,026,275
------------ ------------
Cost of Sales .................................. 25,238,746 17,338,064
Postretirement benefits expense ................ 374,659 255,989
------------ ------------
Total cost of sales ..................... 25,613,405 17,594,053
------------ ------------
GROSS MARGIN ................................... 3,931,022 3,432,222
------------ ------------
Selling, general and administrative expense .... 2,418,231 1,977,989
Postretirement benefits expense ................ 64,014 60,047
------------ ------------
Total selling, general and administrative 2,482,245 2,038,036
expense
INCOME BEFORE INTEREST AND TAXES ............... 1,448,777 1,394,186
Interest income ................................ 23,096 35,651
Interest expense ............................... (493,021) (501,161)
------------ ------------
INCOME BEFORE INCOME TAXES ..................... 978,852 928,676
Income taxes:
Current ................................... 96,067 237,695
Deferred .................................. 288,352 117,459
------------ ------------
Total income taxes ...................... 384,419 355,154
------------ ------------
NET INCOME ..................................... $ 594,433 $ 573,522
============ ============
NET INCOME PER COMMON SHARE:
Basic & diluted ........................... $ 0.06 $ 0.06
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted ......................... 9,778,680 9,778,680
See notes to consolidated financial statements
3
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
COMMON STOCK ACCUMULATED
OUTSTANDING OTHER TOTAL
PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS) EQUITY
------------- ------------ -------------- --------------- ------------------- ----------------
BALANCE AT JANUARY 1, 2003 9,778,680 $ 97,787 $ 19,251,392 $ 435,450 $ (510,466) $ 19,274,163
Net Income 594,433 594,433
Hedge accounting effect of the
interest rate swap at March 31,
2003, net of deferred income tax
expense of $6,568. 12,749 12,749
------------- ------------ -------------- --------------- ------------------- ----------------
BALANCE AT MARCH 31, 2003 9,778,680 $ 97,787 $ 19,251,392 $ 1,029,883 $ (497,717) $ 19,881,345
============= ============ ============== =============== =================== ================
See notes to consolidated financial statements.
4
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................... $ 594,433 $ 573,522
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization .................................... 500,326 506,416
Deferred income taxes ............................................ 288,352 117,459
Loss on disposal of assets ....................................... 25,933 --
Amortization of gain on sale/leaseback transactions .............. (113,389) (113,388)
Change in operating assets and liabilities:
Accounts receivable ........................................... (270,672) (1,967,549)
Inventories ................................................... (188,656) (557,375)
Prepaid and other assets ...................................... 154,372 (59,014)
Accounts payable .............................................. 211 2,429,422
Accrued and other liabilities ................................. 627,740 256,052
Postretirement benefits liability ............................. 330,000 186,000
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ........................... 1,948,650 1,371,545
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ........................... (263,252) (124,079)
Proceeds from sale of property and equipment ........................ -- --
Proceeds from maturities on mortgage-backed security investment ..... 3,699 321,491
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES ................. (259,553) 197,412
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of principal on secured note payable ....................... (1,860,862) --
Payment of principal on industrial revenue bond ..................... (95,000) (85,000)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES ............................... (1,955,862) (85,000)
NET INCREASE/(DECREASE) IN CASH ..................................... (266,765) 1,483,957
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................... 8,976,059 3,194,156
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................... $ 8,709,294 $ 4,678,113
=========== ===========
Cash paid for:
Interest (net of amounts capitalized) ............................ $ 92,844 $ 85,592
=========== ===========
Income taxes (refund) ............................................ $ (228,603) $ (15,905)
=========== ===========
See notes to consolidated financial statements.
5
CORE MOLDING TECHNOLOGIES, INC. 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 Molding Technologies, Inc. and its subsidiaries
("Core Molding Technologies") at March 31, 2003, and the results of its
operations and cash flows. The "Consolidated Notes to Financial Statements",
which are contained in the 2002 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 2003.
Core Molding Technologies 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, 2003, and March 31, 2002, 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.
3. SALES REVENUE
Core Molding Technologies currently has four major customers,
International Truck & Engine Corporation ("International"), Yamaha, Lear
Corporation ("Lear") and Freightliner, LLC ("Freightliner"). The following table
presents sales revenue for the above-mentioned customers for the three months
ended March 31, 2003 and March 31, 2002:
THREE MONTHS ENDED
MARCH 31,
--------------------------------
2003 2002
----------- -----------
International ......... $19,061,883 $10,978,461
Yamaha ................ 4,143,251 4,133,050
Lear .................. 2,324,051 2,273,182
Freightliner .......... 2,220,137 1,740,468
----------- -----------
Subtotal ......... $27,749,322 $19,125,161
Other ................. 1,795,105 1,901,114
----------- -----------
Total ............ $29,544,427 $21,026,275
=========== ===========
6
4. COMPREHENSIVE INCOME
Comprehensive income represents net income plus the results of certain
non-shareowners' equity changes not reflected in the Statement of Income. The
components of comprehensive income, net of tax, are as follows:
THREE MONTHS ENDED
MARCH 31,
--------------------------
2003 2002
-------- --------
Net income .................................... $594,433 $573,522
Hedge accounting effect of interest rate
swap, net of tax effect of $6,568 and
$27,578, respectively ......................... 12,749 53,533
-------- --------
Comprehensive income ......................... $607,182 $627,055
======== ========
5. STOCK-BASED COMPENSATION
The Company accounts for its stock option plans in accordance with APB
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for all stock option plans been determined consistent with the
SFAS No. 123, "Accounting for Stock Based Compensation," the Company's net
income (loss) and earnings/(loss) per common share would have resulted in the
amounts as reported below.
THREE MONTHS ENDED MARCH 31,
2003 2002
-------- -----------
Net income as reported ................................. $594,433 $ 573,522
Deduct: Total stock-based employee compensation
expense determined under fair value based method for all
awards, net of related tax effects
77,147 71,718
-------- -----------
Pro forma net income ................................... $517,286 $ 501,804
======== ===========
Earnings per share:
Basic and diluted - as reported ................... $ 0.06 $ 0.06
Basic and diluted - pro forma ..................... $ 0.05 $ 0.05
The pro forma amounts are not representative of the effects on reported
net earnings or earnings per common share for future years.
6. NEW ACCOUNTING PRONOUNCEMENTS
As previously reported, FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" in April 2002. It is effective for the first quarter in the year
ended December 31, 2003. The Company does not believe the adoption of SFAS No.
145 will have a significant impact on its consolidated financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
included in restructurings. This Statement eliminates the definition and
requirements for recognition of exit costs as defined in EITF Issue 94-3, and
requires that liabilities for exit activities be recognized when incurred
instead of at the exit activity commitment date. This Statement is effective for
exit or disposal activities initiated after December 31, 2002. The adoption of
this statement, as of January 1, 2003, did not have an impact on Core Molding
Technologies' consolidated financial statements.
7
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 Molding
Technologies' 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 and industrial product industries, the
general economy, competitive factors, the dependence on four major customers,
the recent efforts of Core Molding Technologies to expand its customer base, new
technologies, regulatory requirements, labor relations, the loss of 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 Molding Technologies is a compounder of sheet molding composite
("SMC") and molder of fiberglass reinforced plastics. Core Molding Technologies
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 Molding
Technologies' products is affected by economic conditions in the United States,
Canada and Mexico. Core Molding Technologies' manufacturing operations have a
significant fixed cost component. Accordingly, during periods of changing
demands, the profitability of Core Molding Technologies' operations may change
proportionately more than revenues from operations.
On December 31, 1996, Core Molding Technologies 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, located in Columbus, Ohio, was a
compounder and compression molder of SMC. In 1998 Core Molding Technologies
began compression molding operations at its second facility in Gaffney, South
Carolina, and in October 2001, Core Molding Technologies acquired 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 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 Molding Technologies from the date of
the acquisition and forward.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003, AS COMPARED TO THREE MONTHS ENDED MARCH
31, 2002
Net sales for the three months ended March 31, 2003, totaled $29,544,000
representing an approximate 41% increase from the $21,026,000 reported for the
three months ended March 31, 2002. The primary reason for the increase in sales
was due to the completion of tooling projects. Revenue from tooling projects
totaled $10,482,000 for the three months ended March 31, 2003. Tooling project
revenues for the three months ended March 31, 2002, totaled $729,000. Tooling
project revenues represented the primary reason for the increase in sales to
International and Freightliner for the three months ended March 31, 2003, as
compared to the three months ended March 31, 2002. Tooling project revenues are
sporadic in nature and do not represent a recurring trend. Total product sales
revenue, excluding tooling project revenue, was lower by approximately 6% for
the three months ended March 31, 2003, as compared to March 31, 2002. The
primary reason for this decrease was due to the negative impact general economic
conditions have had on the demand for medium and heavy-duty trucks and
automobiles. Sales to Lear increased slightly for the three months ended March
31, 2003, compared to the same time period last year. The primary reason for
this increase was due to a one-time reimbursement of $449,000 for packaging
costs incurred by Core Molding Technologies in 2002.
8
Sales to other customers for the three months ended March 31, 2003,
decreased approximately 6% to $1,795,000 from $1,901,000 for the three months
ended March 31, 2002. The decrease in sales was primarily due to the negative
impact general economic conditions have had on the demand for medium and
heavy-duty trucks and the automobile aftermarket products.
Gross Margin was approximately 13.3% of sales for the three months ended
March 31, 2003, compared with 16.3% for the three months ended March 31, 2002.
The decrease in gross margin, as a percentage of sales from the prior year, was
due to a combination of many factors. The primary reason for the decrease was
due to the dilutive effect of tooling project revenue on the current quarter's
gross margin. Historically, Core Molding Technologies has not achieved margins
on tooling projects similar to margins on its sales of SMC and molded products.
Partially offsetting this decrease was the one time reimbursement from Lear, as
noted above. Production efficiencies largely offset increases in employee
benefit programs, most notably healthcare costs and postretirement benefits for
the union workforce at Core Molding Technologies' Columbus, Ohio facility and
higher energy cost, specifically natural gas pricing. Overall, product margins
(excluding the dilutive effect of tooling revenues and the one-time
reimbursement from Lear) were consistent between the three months ended March
31, 2003 and March 31, 2002.
Selling, general and administrative expenses ("SG&A") totaled $2,482,000 for
the three months ended March 31, 2003, increasing from $2,038,000 for the three
months ended March 31, 2002. The primary reasons for this increase were due to
increases in salaries and employee benefits, primarily profit sharing accruals,
as well as increases in Core Molding Technologies' insurance costs.
Interest expense totaled $493,000 for the three months ended March 31,
2003, decreasing from $501,000 for the three months ended March 31, 2002. The
primary reason for the decrease was due to the principal payment made by Core
Molding Technologies on the secured note payable due to International Truck and
Engine Corporation (see Note 6 in the 2002 Annual Report to Shareholders).
Interest rates experienced by Core Molding Technologies 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, 2003, are estimated to be
approximately 39% of total earnings before taxes. Actual tax payments will be
lower than the recorded expenses as Core Molding Technologies 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 Molding Technologies reduces the deferred tax asset as
opposed to recording a reduction in income tax expense.
Net income for the three months ended March 31, 2003, was $594,000, or $.06
per basic and diluted share, representing an increase of $20,000 over the net
income for the three months ended March 31, 2002, of $574,000, or $.06 per basic
and diluted share.
LIQUIDITY AND CAPITAL RESOURCES
Core Molding Technologies' 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, 2003,
totaled $1,949,000. Net income increased operating cash flows by $594,000.
Non-cash deductions of depreciation and amortization added $500,000 to positive
cash flow. Also adding to positive cash flow for the quarter was accrued
interest payable of $379,000, which will be paid in the third quarter of 2003.
In addition, an increase in the postretirement benefits liability provided
$330,000 of positive cash flow. Core Molding Technologies expects this item to
provide positive cash flow until such time that retirees begin to utilize their
retirement medical benefits. Also adding positively to operating cash flows was
accrued payroll expense of $270,000. A decrease in deferred income taxes also
had a positive impact on operating cash flows of $288,000, which is a result of
Core Molding Technologies' net operating loss carryforwards reducing current
year tax obligations. Partially offsetting the above mentioned increases in
operating cash flows were increases in accounts receivable of $271,000 and
inventories of $189,000.
Investing activities decreased cash flow by $260,000 for the three
months ended March 31, 2003. Capital expenditures totaled $263,000, which was
primarily related to the acquisition of machinery and equipment. Core Molding
Technologies anticipates spending an additional $1,903,000 for the remainder of
the year for capital projects. Offsetting these expenditures were proceeds from
maturities on the Company's mortgage-backed security investment of $4,000.
9
Financing activities reduced cash flow by $1,956,000 due to principal
repayments on the secured note payable due to International Truck and Engine of
$1,861,000 and for the regularly scheduled payment on the Industrial Revenue
Bond of $95,000.
At March 31, 2003, Core Molding Technologies had cash on hand of
$8,709,000 and an available line of credit of $7,500,000, which is scheduled to
mature on April 30, 2004. As of March 31, 2003, Core Molding Technologies was in
compliance of all three of its financial debt covenants for the Line of Credit
and letter of credit securing the industrial revenue bond and certain equipment
leases. The covenants relate to maintaining certain financial ratios. Management
expects Core Molding Technologies to meet these covenants for the year 2003.
However, if a material adverse change in the financial position of Core Molding
Technologies should occur, Core Molding Technologies' 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 Core Molding Technologies' 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, goodwill
and long-lived assets, 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. Core Molding Technologies had recorded an allowance
for doubtful accounts of $588,000 at March 31, 2003, and $543,000 at December
31, 2002. Management also records estimates for customer returns, discounts
offered to customers and for price adjustments. Should customer returns,
discounts and price adjustments fluctuate from the estimated amounts, additional
allowances may be required. Core Molding Technologies had recorded an allowance
for chargebacks of $703,000 at March 31, 2003, and $473,000 at December 31,
2002.
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. Core Molding
Technologies had recorded an allowance for slow moving and obsolete inventory of
$303,000 at March 31, 2003, and $278,000 at December 31, 2002.
Goodwill and Long-Lived Assets
Management evaluates whether impairment exists for goodwill and
long-lived assets. Should actual results differ from the assumptions used to
determine impairment, additional provisions may be required. In particular,
decreases in future cash flows from operations below the assumptions could have
an adverse affect on Core Molding Technologies' operations. Core Molding
Technologies has not recorded any impairment to goodwill or long-lived assets
for the quarter ended March 31, 2003 or the year ended December 31, 2002.
10
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. In particular, increases in future healthcare costs above the
assumptions could have an adverse affect on Core Molding Technologies'
operations. Core Molding Technologies had recorded a liability for post
retirement medical benefits based on actuarially computed estimates of
$6,292,000 at March 31, 2003, and $5,962,000 at December 31, 2002.
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.
Core Molding Technologies 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, 2002,
included in the 2002 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. Core Molding Technologies had recorded a valuation
allowance of $1,425,000 at March 31, 2003 and December 31, 2002.
11
PART I - FINANCIAL INFORMATION
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Core Molding Technologies' primary market risk results from
fluctuations in interest rates. Core Molding Technologies 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 Molding Technologies has the following four 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, 2003, of $6,000,000.
Interest is variable and is computed weekly; the average interest rate charged
for the three months ended March 31, 2003, was 1.3%, 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 Molding
Technologies has entered into an interest rate swap arrangement under which Core
Molding Technologies 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, 2003, of $18,059,288 that bears interest at a fixed
annual rate of 8%; (3) Revolving line of credit, which bears interest at LIBOR
plus three and one-quarter percent or the prime rate; and (4) Foreign currency
purchases in which Core Molding Technologies 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, 2003, and 2002, interest expense would
not change significantly, as the interest rate swap agreement would generally
offset the impact.
12
PART I - FINANCIAL INFORMATION
ITEM 4
CONTROLS AND PROCEDURES
Within the 90 days prior to the filing date of this Form 10-Q, Core
Molding Technologies carried out an evaluation, under the supervision and with
the participation of Core Molding Technologies' management, including Core
Molding Technologies' Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of Core Molding Technologies'
disclosure controls and procedures as defined in Rule 13a-14 of the Securities
Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that Core Molding Technologies' disclosure
controls and procedures are effective in timely alerting them to material
information required to be included in this Quarterly Report on Form 10-Q. There
have been no significant changes in Core Molding Technologies' internal controls
or in other factors, which could significantly affect internal controls
subsequent to the date Core Molding Technologies carried out its evaluation.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No material changes in the legal proceeding reported in Form
10-K for the year ending December 31, 2002.
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, 2003.
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
14
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: May 14, 2003 By: /s/ James L. Simonton
------------ _____________________
James L. Simonton
President, Chief Executive Officer and
Director
Date: May 14, 2003 By: /s/ Herman F. Dick, Jr.
------------ _______________________
Herman F. Dick, Jr.
Treasurer and Chief Financial Officer
15
SECTION 302 CERTIFICATION
I, James L. Simonton, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Core Molding
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 14, 2003
/s/ James L. Simonton
-------------------------------
James L. Simonton
President, Chief Executive Officer and
Director
16
SECTION 302 CERTIFICATION
I, Herman F. Dick, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Core Molding
Technologies, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 14, 2003
/s/ Herman F. Dick, Jr.
---------------------------------------
Herman F. Dick, Jr.
Treasurer and Chief Financial Officer
17
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION LOCATION
----------- ----------- --------
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
Corporation1
2(a)(2) Second Amendment to Asset Purchase Incorporated by reference to
Agreement dated December 16, 19961 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 Molding Exhibit 2-B to Registration
Technologies, Inc. and RYMAC Mortgage Investment Statement on Form S-4
Corporation (Registration No. 333-15809)
2(b)(2) First Amendment to Agreement and Plan Incorporated by reference to
of Merger dated as of December 27, 1996 Exhibit 2(b)(2) to Annual
Between Core Molding Technologies, Inc. and Report on Form 10-K for the
RYMAC Mortgage Investment Corporation year ended December 31, 2002
2(c)(1) Asset Purchase Agreement dated as of October 10, Incorporated by reference to
2001, between Core Molding Technologies, Inc. Exhibit 1 to Form 8K filed
and Airshield Corporation October 31, 2001
3(a)(1) Certificate of Incorporation of Incorporated by reference to
Core Molding Technologies, Inc. Exhibit 4(a) to Registration
As filed with the Secretary of State Statement on Form S-8
of Delaware on October 8, 1996 (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 Molding Technologies, Inc. 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(a)(4) Certificate of Amendment of Certificate of Incorporated by reference to
Incorporation as filed with the Secretary of Exhibit 3(a)(4) to Quarterly
State of Delaware on August 28, 2002 Report on Form 10-Q for the
quarter ended September 30,
2002
18
EXHIBIT NO. DESCRIPTION LOCATION
----------- ----------- --------
3(b) By-Laws of Core Molding Technologies, Inc. Incorporated by reference to
Exhibit 3-C to Registration
Statement on Form S-4
(Registration No. 333-15809)
4(a)(1) Certificate of Incorporation of Core Molding Incorporated by reference to
Technologies, Inc. as filed with the Secretary Exhibit 4(a) to Registration
of State Statement on Form S-8
of Delaware on October 8, 1996 (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(a)(4) Certificate of Amendment of Certificate of Incorporated by reference to
Incorporation as filed with the Secretary of Exhibit 3(a)(4) to Quarterly
State of Delaware on August 28, 2002 Report on Form 10-Q for the
quarter ended September 30,
2002
4(b) By-Laws of Core Molding Technologies, Inc. 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
99(a) Certification of James L. Simonton, Chief Filed Herein
Executive Officer of Core Molding Technologies,
Inc., dated May 14, 2003, pursuant to 18 U.S.C.
Section 1350
99(b) Certification of Herman F. Dick, Jr., Chief Filed Herein
Financial Officer of Core Molding Technologies,
Inc., dated May 14, 2003, pursuant to 18 U.S.C.
Section 1350
19
(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 Molding Technologies, Inc. will provide any omitted exhibit or
schedule to the Securities and Exchange Commission upon request.
20