UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended ......................____________________ December 31, 20022003
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 of (I.R.S. Employer ofIdentification No.)
incorporation or organization) Identification No.)
800 Manor Park Drive, P.O. Box 28183, Columbus, Ohio 43228 - 0183
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 870-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.01 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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[X] No ___[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer
as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes ___[ ] No X[X]
The aggregate market value of the registrant's voting and non-voting
common equity held by non-affiliates was $14,668,020$19,068,426 as of June 28, 2002. On
such date, the closing price of the registrant's Common Stock, as quoted on the
American Stock Exchange, was $1.50. The aggregate market value of the
registrant's voting and non-voting common equity held by non-affiliates was
$12,712,284 as of March 24,30, 2003. On
such date, the closing price of the registrant's Common Stock, as quoted on the
American Stock Exchange, was $1.30.$1.95. The aggregate market value of the
registrant's voting and non-voting common equity held by non-affiliates was
$36,278,903 as of March 22, 2004. On such date, the closing price of the
registrant's Common Stock, as quoted on the American Stock Exchange, was $3.71.
The registrant had 9,778,680 shares of Common Stock outstanding as of March 24,
2003.22,
2004.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Registrant's 20032004 definitive Proxy Statement to be filed with the
Securities and Exchange Commission no later than 120 days after the end of the
registrant's fiscal year are incorporated herein by reference in PART III of
this Form 10-K.
1
PART I
ITEM 1. DEVELOPMENT OF BUSINESS OF CORE MOLDING.MOLDING TECHNOLOGIES, INC.
In 1996, RYMAC Mortgage Investment Corporation ("RYMAC") incorporated
Core Molding Technologies, Inc. ("Core Molding"the Company"), formerly known as Core
Materials Corporation before changing its name on August 28, 2002, for the
purpose of acquiring the Columbus Plastics unit of International Truck & Engine
Corporation ("International"). On December 31, 1996, RYMAC merged with Core
Moldingthe
Company with the result being that Core Moldingthe Company was the surviving entity.
Immediately after the merger, Core Moldingthe Company acquired substantially all the assets
and liabilities of Columbus Plastics from International in return for a secured
note in an original principal amount of $25,504,000, subject to adjustment, and
4,264,000 shares of newly issued common stock of Core Molding.1the Company.1 International
currently owns 43.6% of the outstanding stock of Core Molding.the Company.
In the first quarter of 1998, Core Moldingthe Company opened a second compression
molding plant located in Gaffney, South Carolina as part of the Company's growth
strategy to expand its customer base. This facility provided the companyCompany with
additional capacity and a strategic geographic location to serve both current
and prospective customers.
In October 2001, Core Moldingthe Company incorporated Core Composites Corporation
as a wholly owned subsidiary under the laws of the State of Delaware. This
entity was established for the purpose of holding and establishing operations
for Airshield Corporation's assets, which Core Moldingthe Company acquired on October 16,
2001 ("the Airshield Asset Acquisition") as part of the Company's diversified
growth strategy. Airshield Corporation was a privately held manufacturer and
marketer of fiberglass reinforced plastic parts primarily for the truck and
automotive aftermarket industries. Core
MoldingThe Company purchased substantially all the
assets of Airshield Corporation through the United States Bankruptcy Court as
Airshield Corporation had been operating under Chapter 11 bankruptcy protection
since March 2001.
In conjunction with establishment of operations for the assets acquired
from Airshield Corporation, Core Moldingthe Company also incorporated two corporations in
Mexico. In October 2001, Core Moldingthe Company (5% owner) and Core Composites Corporation
(95% owner) incorporated Composites Services de Mexico, S. de R.L. de C.V.
("Composites Services") and Corecomposites de Mexico, S. de R.L. de C.V.
("Corecomposites") in Matamoros, Mexico. Composites Services was established to
be the employer of all Mexican national employees for Core Molding'sthe Company's operations
in Mexico. Corecomposites was organized to operate under a maquiladora program
whereby substantially all product produced is exported back to Core Composites
Corporation who sells such product to United States based external customers.
DESCRIPTION OF BUSINESS OF CORE MOLDING TECHNOLOGIES, INC.
Certain statements under this caption of this Annual Report on Form
10-K constitute 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. 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.
- -------------------
1------------------------------
(1) The principal amount of the Secured Note and the number of shares of common
stock received by International were subject to adjustment pursuant to the terms
of the Asset Purchase Agreement. Effective December 31, 1996, the amount of the
Secured Note was increased to $29,514,000 in order to reflect an increase in the
"net tangible assets" of Columbus Plastics as of the December 31, 1996
acquisition date. In 1997, as a result of a review of the closing balance sheet
and all purchase price adjustments, the Secured Note amount was reduced by
$1,629,000 to reflect an amendment to the closing balance sheet as of the
acquisition date. In addition, International was to receive consideration in the
form of an increase in the principal amount of the Secured Note if Core Moldingthe Company
achieved earnings results above specified levels during the period 1997 through
1999. This consideration was to be accounted for by an increase in the amount of
the Secured Note, and a reduction in the amount of Core Molding'sthe Company's retained
earnings. Based on Core Molding'sthe Company's earnings for the years ended December 31, 1998
and 1997, the Secured Note was increased by $4,098,000 and $2,937,000,
respectively. Core Molding'sThe Company's earnings for the year ended 1999 did not result in
any further increase in the Secured Note. On December 30, 2003, the Company paid
the balance due on the secured note.
2
DESCRIPTION OF BUSINESS OF CORE MOLDING
Certain statements under this caption of this Annual Report on Form
10-K constitute "forward-looking statements" which involve certain risksCore Molding Technologies believes that the following factors, among
others, could affect its future performance and uncertainties. Core Molding'scause actual results mayto differ
significantlymaterially from those discussedexpressed or implied by forward-looking statements made in
the forward-looking statements. Factors that may cause such a
difference include, but are not limited to:this report: business conditions in the plastics, transportation, recreationwatercraft and
commercial and industrial product industries,industries; general economic conditions in the general economy, competitive factors, themarkets in
which Core Molding Technologies operates; dependence onupon four major customers
as the primary source of Core Molding Technologies' sales revenues; recent
efforts of Core Molding Technologies to expand its customer base,base; failure of
Core Molding Technologies' suppliers to perform their contractual obligations;
new technologies,technologies; competitive and regulatory requirements,matters; labor relations,relations; the loss
or inability of Core Molding Technologies to attract key personnel,personnel; the
availability of capital,capital; the start upability of new
operationsCore Molding Technologies to provide
on-time delivery to customers, which may require additional shipping expenses to
ensure on-time delivery or otherwise result in Mexicolate fees; risk of cancellation
or rescheduling of orders; and management's decisionsdecision to pursue new products or
businesses which involve additional costs, risks or capital expenditures.
Core Molding Technologies, Inc. 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. As a result of the acquisitionAirshield
Asset Acquisition discussed above, in 2001 Core Moldingthe Company established operations in
a Matamoros, Mexico facility, which produces reinforced plastic products by
spray-up and hand-lay-up open mold processes and a vacuum assisted resin infused
(VRIM) closed mold process.
Reinforced plastics compete largely against metals and have the
strength to function well during prolonged use. Management believes that
reinforced plastic components offer many advantages over metals, including:
- heat resistance
- corrosion resistance
- lighter weight
- lower cost
- greater flexibility in product design
- part consolidation for multiple piece assemblies
- lower initial tooling costs for lower volume applications
- high strength-to-weight ratio
- dent-resistance in comparison to steel or aluminum.
The largest markets for reinforced plastics are transportation
(automotive and truck), recreational vehicles, commercial products and
industrial applications. Core Molding'sThe Company's four major customers are International,
Yamaha Motor Manufacturing Corporation ("Yamaha"), Lear Corporation ("Lear") and
Freightliner, LLC ("Freightliner"), which are supplied proprietary reinforced
plastic products for medium and heavy-duty trucks, personal watercraft and
automobiles. Core MoldingThe Company also supplies reinforced plastic products to other
truck manufacturers, to automotive manufacturers and to manufacturers of
commercial products. In general, product growth and diversification are achieved
in several different ways: (1) resourcing of existing reinforced plastic product
from another supplier by an original equipment manufacturer ("OEM"); (2)
obtaining new reinforced plastic products through a selection process in which
an OEM solicits bids; and (3) successful marketing of reinforced plastic
products for previously non-reinforced plastic applications. Core Molding'sThe Company's
efforts are currently directed towards all three areas.
MAJOR COMPETITORS
Core MoldingThe Company believes that it is one of the five largest compounders and
molders of reinforced plastics using the SMC, spray up, hand lay upspray-up, hand-lay-up and VRIM
processes in the United States. Core MoldingThe Company faces competition from a number of
other molders including, most significantly, Meridian Automotive Systems, Budd
Plastics Division, Venture Industries, Applied Composites, Molded Fiber Glass
Companies, Goldshield, Polywheels, Camoplast and Renee Composites. Core MoldingThe Company
believes that the Company is well positioned to compete based primarily on
manufacturing capability, product quality, cost and delivery. However, the
industry 3
remains highly competitive and some of Core Molding'sthe Company's competitors have
greater financial resources, research and development facilities, design
engineering and manufacturing and marketing capabilities.
3
MAJOR CUSTOMERS
Core MoldingThe Company currently has four major customers, International, Yamaha,
Lear and Freightliner. The loss of a significant portion of sales to
International, Yamaha, Lear or Freightliner would have a material adverse effect
on the business of Core Molding.the Company.
RELATIONSHIP WITH INTERNATIONAL
As a result of its acquisition of Columbus Plastics from International,
Core Molding assumedIn May 2003, the long-standing relationship between Columbus Plastics
and International's truck manufacturing operations. In 1996, as a condition to
the acquisition, International and Core MoldingCompany entered into a five year
Comprehensive Supply Agreement,
pursuant to which Core Moldingwas effective as of November 1, 2002. Under this Comprehensive Supply
Agreement, the Company became the primary supplier of International's original
equipment and service requirements for fiberglass reinforced parts using the SMC
process, as long as the Company remains competitive in cost, quality and
delivery, effective through DecemberOctober 31, 2001. This Comprehensive Supply Agreement was not renewed during
2002; however, at the end of 2002, Core Molding and International began
negotiations on a new Comprehensive Supply Agreement, which would be retroactive
to November 1, 2002. There can be no assurance that such an agreement will
ultimately be consummated. After the expiration of the original Comprehensive
Supply Agreement, business with International continued on a purchase order
basis, like Core Molding operates with all of its other customers. The purchase
orders typically provide volume commitments for four weeks at prices previously
negotiated. Customers can update their orders on a daily basis for changes in
demand that allow them to run their inventories on a "just-in-time" basis.2006.
International manufactures and markets medium and heavy-duty trucks,
including school buses, mid-range diesel engines and service parts in North
America and in certain export markets. Based upon publicly available
information, International delivered 81,70082,200 class 5 through 8 trucks, including
school buses, in the United States, Mexico and Canada during its fiscal 2003,
representing a 1% increase from the 81,700 units delivered in 2002 representing an 11%and a 10%
decrease from the 91,300 units delivered in 2001 and a 31% decrease from the 118,200 units delivered in
2000.2001. International's market share
in the combined United States and Canadian class 5 through 8 truck market was
26.2% in 2003, 25.8% in 2002, and 26.3% in 2001, and 26.9% in
2000.
Core Molding2001.
The Company makes products for International's Chatham (Canada)
assembly plant, its Springfield, Ohio assembly and body plants, its Garland,
Texas assembly facility, its bus facilities in Conway, Arkansas and Tulsa,
Oklahoma and its Escobedo, Mexico assembly facility. Core MoldingThe Company works closely
on new product development with International's engineering and research
personnel at International's Fort Wayne, Indiana Technical Center. Some of the
products sold to International include hoods, air deflectors, air fairings,
fenders, splash panels, engine covers and other components.
The North American truck market in which International competes is
highly competitive and the demand for trucks is subject to considerable
volatility as it moves in response to cycles in the overall business environment
and is particularly sensitive to the industrial sector, which generates a
significant portion of the freight tonnage hauled. Truck demand also depends on
general economic conditions, among other factors. Sales to International
amounted to approximately 49%55%, 56%49% and 62%56% of total sales for 2003, 2002 2001 and
2000,2001, respectively.
RELATIONSHIP WITH YAMAHA
Core MoldingThe Company also assumed from International the long-standing supply
relationship between Columbus Plastics and Yamaha. Core MoldingThe Company has supplied a
significant amount of the SMC products for Yamaha's personal watercraft since
1990.
Products produced for Yamaha include decks, hulls, hull liners, engine
hatches, bulkheads, reinforcements and SMC compound. Core MoldingThe Company has worked
closely with Yamaha over the years to improve the surface quality of Yamaha
products and to identify new process control techniques and improved materials.
Demand for products from Yamaha is related to the level of general economic
activity and specifically to the cyclical and seasonal nature of the personal
watercraft industry among other factors.
Sales to Yamaha amounted to approximately 14%15%, 18%14% and 21%18% of total
sales for 2003, 2002 and 2001, and 2000, respectively.
4
RELATIONSHIP WITH LEAR
Core MoldingThe Company began a supply relationship with Lear in mid-2000, with
sales to Lear beginning in January 2001. Core MoldingThe Company supplies seat backs and
seat bottoms to Lear, who produces full seat assemblies for an automotive
original equipment manufacturer. The Company also began producing mid-gates for
Lear for their assembly of an automotive original equipment manufacturer.
Sales to Lear amounted to approximately 10%, 12% of total sales for 2002 and 14% of total sales
of total sales for 2001.2003, 2002 and 2001, respectively.
4
RELATIONSHIP WITH FREIGHTLINER
As a result of the October 2001 acquisition discussed above, Core
MoldingAirshield Asset Acquisition, the Company began a
supply relationship with Freightliner. Core MoldingThe Company produces hoods, air
deflectors, air fairings, splash panels and other components for Freightliner
who uses such products on its heavy and medium duty trucks.
Sales to Freightliner amounted to approximately 11% of total sales for
2002, 11% and 2% of
total sales for 2001.2003, 2002 and 2001, respectively.
OTHER CUSTOMERS
Core MoldingThe Company also produces products for other truck manufacturers, the
automotive after-market industries and various other customers. In 2002,2003, sales
to these customers individually were all less than 10% of total sales.
EXPORT SALES
Core MoldingThe Company provides products to International'ssome of its customers that have
manufacturing and service locations in Canada and Mexico. Export sales, includingwhich
are denominated in United States dollars and include sales to Canada, were
approximately $13,907,000, $8,472,000$17,084,000, $22,369,000 and $14,428,000$18,782,000 for the years ended 2003,
2002 2001 and 2000,2001, respectively. These export sales dollars represent approximately
15%18%, 12%24% and 17%26% of total sales for 2003, 2002 2001 and 2000,2001, respectively.
FOREIGN OPERATIONS
As a result of the acquisition ofAirshield Asset Acquisition, the establishment of operations in
Mexico, Core MoldingCompany began
importing products into the United States as substantially all product produced
in Core Molding'sthe Company's Mexican facility are sold to customers in the United States.
The sales of products imported were approximately 20%, 22% of total sales in 2002 and approximately 5% of total sales
in 2001.
Core Molding2003, 2002 and 2001, respectively.
The Company owns long-lived assets totaling $298,000$256,000 at December 31,
2003 that are located at the Mexican operations.
PRODUCTS
SMC COMPOUND
SMC compound is a combination of resins, fiberglass, catalysts and
fillers compounded and cured in sheet form. The sheet is then used to
manufacture compression-molded products, as discussed below and on a limited
basis sold to other molders.
Core MoldingThe Company incorporates a sophisticated computer program that assists
in the compounding of various complex SMC formulations tailored to customer
needs. The system provides for the following:
- Control information during various production processes; and
- Data for statistical batch controls.
Core MoldingThe Company has the capacity to manufacture approximately 5348 million
pounds of SMC sheet material annually. The following table shows production of
SMC for 2003, 2002 2001 and 2000.2001.
SMC Pounds
Produced
Year (Millions)
- ---- ----------
2003..................... 27
2002 .................... 25
2001 .................... 25
5
SMC Pounds
Produced
Year (Millions)
---- ----------
2002..................................... 25
2001 .................................... 25
2000 .................................... 36
CLOSED MOLDED PRODUCTS
Core MoldingThe Company produces reinforced plastic products using both compression
molding and vacuum resin infusion molding process methods of closed molding.
COMPRESSION MOLDING:
Compression molding is a process whereby SMC is molded to form by
matched die steel molds through which a combination of heat and pressure are
applied via a molding press. This process produces high quality, dimensionally
consistent products. This process is typically used for higher volume products,
which is necessary to justify the customers' investment in molds.
Core MoldingThe Company currently owns or leases 17 compression-molding presses in
its Columbus, Ohio plant ranging in size from 500 to 4,500 tons. Core MoldingThe Company
also owns or leases 11 presses in its Gaffney, South Carolina plant ranging in
size from 1,000 to 3,000 tons.
Large platen, high tonnage presses (greater than 2,000 tons) provide
the ability to compression mold very large SMC parts. Core MoldingThe Company believes that
it possesses a significant portion of the large platen, high tonnage molding
capacity in the industry.
To enhance the surface quality and paint finish of products, Core
Moldingthe
Company uses both in-mold coating and vacuum molding processes. In-mold coating
is a manufacturing process performed by injecting a liquid over the molded part
surface and then applying pressure at elevated temperatures during an extended
molding cycle. The liquid coating serves to fill and/or bridge surface porosity
as well as provide a barrier against solvent penetration during subsequent
top-coating operations. Likewise, vacuum molding is the removal of air during
the molding cycle for the purpose of reducing the amount of surface porosity.
Core MoldingThe Company believes that it is among the industry leaders in in-mold coating
and vacuum molding applications, based on the size and complexity of parts
molded.
VACUUM RESIN INFUSION MOLDING (VRIM):
This process employs two molds, typically a core and a cavity, similar
to matched die molding. The composite is produced by placing glass mat, chopped
strand or continuous strand fiberglass in the mold cavity in the desired
pattern. The core mold is then fitted to the cavity, and upon a satisfactory
seal, a vacuum is applied. When the proper vacuum is achieved, the resin is
injected into the mold to fill the part. Finally, the part is allowed to cure,
and then it is removed from the mold and trimmed to shape. Fiberglass reinforced
products produced from the VRIM process exhibit a high quality surface on both
sides of the part and excellent part thickness.
OPEN MOLDED PRODUCTS
Core MoldingThe Company produces reinforced plastic products using both the
spray
upspray-up and hand lay uphand-lay-up methods of open molding.
HAND LAYUP:HAND-LAY-UP:
This process utilizes a shell mold, typically the cavity, where glass
cloth, either chopped strand or continuous strand glass mat, is introduced into
the cavity. Resin is then applied to the cloth and rolled out to achieve a
uniform wet-out from the glass and to remove any trapped air. The part is then
allowed to cure and removed from the mold. After removal, the part typically
undergoes trimming to achieve the net shape desired. Parts that would be
cosmetic in their end use would have a gel coat applied to the mold surface
prior to the layup to improve the surface quality of the finished part. Parts
produced from this process have a smooth outer surface and an unfinished, or
non-smooth, interior surface. These fiberglass-reinforced products are typically
non-cosmetic components or structural reinforcements that are sold externally or
used internally as components of larger assemblies.
6
SPRAY LAYUP:SPRAY-UP:
This process utilizes the same type of shell mold, but instead of using
glass cloth to produce the composite part, a chopper/spray system is employed.
Glass yarns and resin feed the chopper/spray gun. The resin coated, chopped
glass, which is approximately one inch in length, is sprayed into the mold to
the desired thickness. The resin coated glass in the mold is then rolled out to
ensure complete wet-out and to remove any trapped air. The part is then allowed
to cure, is removed from the mold and is then trimmed to the desired shape.
Parts that would be used for cosmetic purposes in their end use would typically
have a gel coat
6
applied to the mold surface prior to the resin coated glass being sprayed into
the mold to improve the surface quality of the finished part. Parts produced
from this process have a smooth outer surface and an unfinished, or non-smooth,
interior surface.
Core MoldingThe Company currently operates tentwelve separate spray-up cells in the
Matamoros, Mexico facility that are capable of producing fiberglass-reinforced
products with and without gelcoat surfaces. Part sizes weigh from a few pounds
to well over a hundred pounds with surface quality tailored for the end use
application.
ASSEMBLY, MACHINING AND PAINT PRODUCTS
Many of the products molded by Core Moldingthe Company are assembled, machined
and/or prime painted to result in a completed product used by Core Molding'sthe Company's
end-customers.
Core MoldingThe Company has demonstrated manufacturing flexibility that accepts a
range of low volume, hand assembly and machining work to high volume, highly
automated assembly and machining systems. Robotics are used as deemed productive
for material handling, machining and adhesive applications. In addition to
conventional machining methods, water-jet cutting technology is also used where
appropriate. Core MoldingThe Company has a prime paint operation in its Columbus, Ohio
facility, which uses an overhead conveyor to transfer product through two paint
booths and bake ovens that is used for higher volume applications. The Company
also utilizes spot paint booths and batch ovens in its facilities when
warranted. Core MoldingThe Company contracts with outside parties when customers require
that the Company provide a finish of a top coat of paint be provided by Core Molding.paint.
RAW MATERIALS
The principal raw materials used in the compounding of SMC and the
closed and open molding processes are polyester resins, fiberglass rovings and
filler. Other significant raw materials include adhesives for assembly of molded
components and in-mold coating and prime paint for preparation of cosmetic
surfaces. Many of the raw materials used by Core Moldingthe Company are petroleum and energy
based, and therefore, the costs of certain raw materials can fluctuate based on
changes in costs of these underlying commodities. Core MoldingThe Company has historically
used single source, long-term (2-5 years) supply contracts, which do not include
minimum purchase requirements, as a means to attain competitive pricing and an
adequate supply of these raw materials. Core MoldingThe Company has experienced price
increases for certain of these materials, which has caused the Company to
reevaluate this strategy and consider alternative suppliers. Each raw material
generally has supplier alternatives, which are being evaluated as the current
contracts expire. Core MoldingThe Company is regularly evaluating its supplier base for
certain supplies, repair items and componentry to improve its overall purchasing
position as supply of these items is generally available from multiple sources.
BACKLOG
Core MoldingThe Company relies on production schedules provided by its customers to
plan and implement production. These schedules are typically provided on a
weekly basis and are considered firm typically for four weeks. Some customers
can update these schedules daily for changes in demand that allow them to run
their inventories on a "just-in-time" basis. The ordered backlog was
approximately $4.8$7.1 million and $5.6$4.8 million at December 31, 20022003 and 2001,2002,
respectively, all of which Core Moldingthe Company expects to ship within a year.
CAPACITY CONSTRAINTS
In previous years, Core Moldingthe Company has been required to work an extended
shift and day schedule, up to a seven-day/three shift operation, to meet its
customers' production requirements. Core MoldingThe Company has used various methods from
overtime to a weekend manpower crew to support the different shift schedules
required.
7
Based on recent production schedules, the Company has not had
difficulty in providing various shift schedules necessary to meet customer
requirements.
See further discussion of machine and facility capacities at "Item 2
Properties" contained elsewhere in this report.
CAPITAL EXPENDITURES AND RESEARCH AND DEVELOPMENT
Capital expenditures totaled approximately $1.4 million, $0.7 million
and $1.3 million for 2003, 2002 and $2.0 million for 2002, 2001, and 2000, respectively. Capital expenditures
consist primarily of the purchase of production equipment to manufacture parts
as well as storage equipment, computers and office furniture and fixtures.
7
Product development is a continuous process at Core Molding.the Company. Research
and development activities focus on developing new SMC formulations, new
reinforced plastic products and improving existing products and manufacturing
processes.
Core MoldingThe Company does not maintain a separate research and development
organization or facility but uses its production equipment, as necessary, to
support these efforts and cooperates with its customers and its suppliers in its
research and development efforts. Likewise, manpower to direct and advance
research and development is integrated with the existing manufacturing,
engineering, production, and quality organizations. Management of Core Moldingthe Company
has estimated that internal costs related to research and development activities
approximate $251,000 in 2003, $270,000 in 2002 and $225,000 in 2001 and $250,000 in 2000.2001.
ENVIRONMENTAL COMPLIANCE
Core Molding'sThe Company's manufacturing operations are subject to federal, state
and local environmental laws and regulations, which impose limitations on the
discharge of pollutants into the air and water and establish standards for the
treatment, storage and disposal of hazardous waste. Core Molding'sThe Company's policy is to
conduct its business with due regard for the preservation and protection of the
environment. Core Molding'sThe Company's environmental waste management involves the regular
auditing of all satellite hazardous waste accumulation points, all hazardous
waste activities and every authorized treatment, storage and disposal facility.
Core Molding'sThe Company's environmental staff also trains employees on waste management and
other environmental issues.
Core MoldingThe Company believes that its facilities are in compliance with the
applicable federal, state and local environmental laws and regulations. In JanuaryJune
2003, the Ohio Environmental Protection Agency ("Ohio EPA") deniedissued Core Molding's request to remove a permanent total enclosure, involving Core
Molding'sMolding
Technologies' final Title V Operating Permit for the Columbus, Ohio SMC compound production area.facility.
Since that time, Core Molding Technologies has substantially complied with the
requirements of this permit. Core Molding Technologies does not believe that the
cost to continue to comply with this requestpermit will have a material effect on its operations,
competitive position or capital expenditures through fiscal year 2003.2004.
EMPLOYEES
As of December 31, 2002, Core Molding2003, the Company employed a total of 929948 employees,
which consists of 401438 employees in its United States operations and 528510
employees in its Mexican operations. Of these 929948 employees, 196248 are covered by
a collective bargaining agreement with the International Association of
Machinists and Aerospace Workers ("IAM"), which extends to August 7, 2004, and
464495 are covered by a collective bargaining agreement with Sindicato de
Jorneleros y Obreros, which extends to January 16, 2005.
PATENTS, TRADE NAMES AND TRADEMARKS
Core MoldingThe Company will evaluate, apply for and maintain patents, trade names
and trademarks where it believes that such patents, trade names and trademarks
are reasonably required to protect its rights in its products. Core MoldingThe Company does
not believe that any single patent, trade name or trademark or related group of
such rights is materially important to its business or its ability to compete.
SEASONALITY Core Molding's& BUSINESS CYCLE
The Company's business is affected annually by the production schedules
of its customers. Core Molding'sThe Company's customers typically shut down their operations
on an annual basis for a period of several weeks during Core
Molding's third.the Company's third
quarter. As a result, demand for Core Molding'sthe Company's products drops significantly
during the third quarter. Similarly, demand for medium and heavy-duty trucks,
personal watercraft, and automotive products fluctuate on a cyclical and
seasonal basis, causing a corresponding fluctuation for demand of Core Molding'sthe Company's
products. These customers also typically shut down their operations during the
last week of December, as well.
8
ITEM 2. PROPERTIES.
Core MoldingThe Company owns two production plants in the United States that are
situated, respectively, in Columbus, Ohio and in Gaffney, South Carolina. Core
MoldingThe
Company believes that, through productive use, these facilities have adequate
production capacity to meet current production volume. The Company measures
molding capacity in terms of its ten large molding presses (i.e. 2,000 tons and
greater). The approximate large press capacity utilization for the molding of
production products in the Core Molding'sCompany's United States production facilities was
28%65%, 26%65%, and 41%53% in the fourth quarter of 2003, 2002 2001 and 2000,2001, respectively.
Capacity utilization is measured on the basis of a sixfive day, three-shifts per
day operation. The Company has two additional large presses, which are not
included in the capacity calculation, in storage that could be put into
operation if needed.
The Columbus, Ohio plant is located at 800 Manor Park Drive on
approximately 28.2 acres of land. The approximate 323,596 square feet of
available floor space at the Columbus, Ohio plant is comprised of the following:
Approximate
Square Feet
Manufacturing/Warehouse.................... 307,447
Office .................................. 16,149
-----------
Manufacturing/Warehouse.......................... 307,447
Office........................................... 16,149
-------
323,596
Core Molding
The Company acquired the property at 800 Manor Park Drive as a result
of the Asset Purchase Agreement with International.
The Gaffney, South Carolina plant, which was opened in early 1998, is
located at 24 Commerce Drive, Meadow Creek Industrial Park on approximately 20.7
acres of land. The approximate 110,900 square feet of available floor space at
the Gaffney, South Carolina plant is comprised of the following:
Approximate
Square Feet
Manufacturing/Warehouse.................... 105,700
Office .................................. 5,200
-----------
Manufacturing/Warehouse.......................... 105,700
Office........................................... 5,200
-------
110,900
The Columbus, Ohio and Gaffney, South Carolina properties are subject
to liens and security interests as a result of the properties being pledged by
Core Moldingthe Company as collateral for its debt as described in Note 67 of the "Notes to
Consolidated Financial Statements" in Part II, Item 8 of this Form 10-K.
In conjunction with the establishment of operations in Mexico, as
discussed above, the Company leases a production plant in Matamoros, Mexico,
located at Ave. Uniones Y Michigan, Matamoros, Tamps. Mexico. The term of the
lease is ten years, with an option to renew for an additional ten years and with
an option to buy the facility at any time within the first seven years of the
lease. The lease is cancelable by Core Moldingthe Company with six months notice. The
facility consists of approximately 313,000 square feet on approximately 12
acres. Core Molding'sThe Company's Mexican operation leases approximately 267,700 square feet
of the facility, with an option to lease additional space, comprised as follows:
Approximate
Square Feet
Manufacturing/Warehouse.................... 264,100
Office .................................. 3,600
-------------
Approximate
Square Feet
-----------
Manufacturing/Warehouse.......................... 264,100
Office........................................... 3,600
-------
267,700
The capacity of production in this facility is not linked directly to
equipment capacities, as in Core Molding'sthe Company's other facilities, due to the nature of
the products produced. Capacity of the facility is tied to available floor space
and the availability of personnel. The approximate capacity utilization for this
operation was 57%, 63% and 50% in the fourth quarterquarters of 2003, 2002 and 2001,
respectively. Capacity utilization for the Matamoros' operation is measured on
the basis of a five day, two 9.6-hour9.6 hour shifts per day.
9
ITEM 3. LEGAL PROCEEDINGS.
In late 2001 and 2002, several lawsuits were filed in Mexico against
Airshield de Mexico, which is a Mexican subsidiary of Airshield Corporation. As
noted above, Core Molding acquired substantially all the assets of Airshield
Corporation in October 2001; however, Core Molding did not purchase the assets
or the stock of Airshield de Mexico. The lawsuits were filed by certain of
Airshield de Mexico's vendors as a result of unpaid debts of Airshield de
Mexico. Through these lawsuits, the vendors have attempted to foreclose on
inventory and equipment owned by Core Molding and located at its Mexico
facility. The total value of these assets at December 31, 2002, was $1,097,000.
To date, Core Molding has been successful in preventing these foreclosure
attempts. Core Molding is taking various actions through the Mexican legal
system to defend its assets and to prevent future claims. Core Molding's Mexican
legal counsel has advised the Company that it has valid legal position to
support the ownership of these assets; however, as with any case involving
litigation, the outcome of these claims is uncertain.
In July of 2001, a former employee of Core Molding filed a suit in
United States District Court, Southern District of Ohio, Eastern Division,
claiming her employment was terminated in 1999 as a result of race
discrimination. In December of 2002, the two parties settled this suit outside
of court. The result of the settlement did not have a material impact on the
financial results of Core Molding.None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Core MoldingThe Company submitted no matters to a vote of its security holders
during the fourth quarter of its fiscal year ended December 31, 2002.2003.
10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is traded on the American Stock Exchange
under the symbol "CMT".
The table below sets forth the high and low sale prices of Core Moldingthe Company
for each full quarterly period within the two most recent fiscal years for which
such stock was traded, as reported on the American Stock Exchange Composite
Tape.
High Low
---- ---
CORE MOLDING TECHNOLOGIES, INC. High Low
- ------------------------------- ---- ---
First Quarter 2003 $1.50 1.04
Second Quarter 2003 2.60 1.25
Third Quarter 2003 3.34 1.77
Fourth Quarter 2003 3.49 2.56
First Quarter 2002 1.79 1.03
Second Quarter 2002 2.35 1.20
Third Quarter 2002 1.55 1.00
Fourth Quarter 2002 1.50 0.90
First Quarter 2001 1.56 0.68
Second Quarter 2001 1.95 0.65
Third Quarter 2001 1.89 0.80
Fourth Quarter 2001 1.90 0.76
The Company's common stock was held by 564538 holders of record on March
24, 2003.
Core Molding22, 2004.
The Company made no payments of cash dividends during 20022003 and 2001.
Core Molding2002.
The Company currently expects that its earnings will be retained to finance the
growth and development of its business and does not anticipate paying dividends
on its common stock in the foreseeable future.
Moreover, Core Molding has agreed to prohibitions on its ability to pay
dividends as a result of restrictive covenants contained in the Secured Note due
International. Such prohibitions apply so long as Core Molding owes any amounts
under the Secured Note to International. The prohibitions are discussed further
in Note 6 of the "Notes to Consolidated Financial Statements" in Part II, Item 8
of this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data are derived from the audited
consolidated financial statements of Core Molding Technologies, Inc.the Company. The information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," the financial statements and
related notes included elsewhere in this Annual Report on Form 10-K. As
discussed in Note 16 to the Company's consolidated financial statements, the
Company's 2002 financial statements have been restated. Selected financial data
presented below give effect to the restatement.
(IN THOUSANDS, YEARS ENDED DECEMBER 31,
(IN THOUSANDS,
EXCEPT PER SHARE DATA) 2003 2002 2001 2000 1999
1998
- --------------------------------- ----------- --------- ---------- ---------- ---------------------------------- -------- -------- -------- -------- --------
(as restated)
Net sales $94,089 $73,180 $84,892 $93,232 $78,407$ 92,783 $ 94,089 $ 73,180 $ 84,892 $ 93,232
Gross margin 13,81913,898 13,511 7,859 11,915 10,863
15,488
Income/Income (loss) before interest 5,083and taxes 4,403 4,775 (108) 2,862 1,720
7,659
and taxes
Net income/income (loss) 2,0061,665 1,813 (1,860) 715 71
3,652
Net income/income (loss) per common share:
.21Basic .17 .19 (.19) .07 .01
.38
Basic .21Diluted .17 .19 (.19) .07 .01
.37
Diluted
Total assets 64,38456,152 64,076 61,307 62,785 67,982
65,328
Long term debt 12,999 23,764 26,015 26,370 26,700
27,005
Stockholders' equity 19,27420,854 19,081 17,536 19,638 18,923 18,852
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
CertainAs discussed in Note 16 to the Company's consolidated financial
statements, under this captionthe Company's 2002 financial statements have been restated.
Management's Discussions and Analysis of this Annual Report on Form
10-K constitute "forward-looking statements" whichFinancial Condition and Results of
Operations presented below gives effect to the restatement.
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 certainknown and unknown risks and uncertainties.are subject to
uncertainties and factors relating to Core Molding'sMolding Technologies' operations and
business environment, all of which are difficult to predict and many of which
are beyond Core Molding Technologies' control. These uncertainties and factors
could cause Core Molding Technologies' actual results mayto differ significantlymaterially from
those discussedmatters expressed in theor implied by such forward-looking statements.
FactorsCore Molding Technologies believes that maythe following factors, among
others, could affect its future performance and cause such a
difference include, but are not limited to:actual results to differ
materially from those expressed or implied by forward-looking statements made in
this report: business conditions in the plastics, transportation, recreationwatercraft and
commercial and industrial product industries,industries; general economic conditions in the general economy, competitive factors, themarkets in
which Core Molding Technologies operates; dependence onupon four major customers
as the primary source of Core Molding Technologies' sales revenues; recent
efforts of Core Molding Technologies to expand its customer base,base; failure of
Core Molding Technologies' suppliers to perform their contractual obligations;
new technologies,technologies; competitive and regulatory requirements,matters; labor relations,relations; the loss
or inability of Core Molding Technologies to attract key personnel,personnel; the
availability of capital,capital; the start upability of new
operationsCore Molding Technologies to provide
on-time delivery to customers, which may require additional shipping expenses to
ensure on-time delivery or otherwise result in Mexicolate fees; risk of cancellation
or rescheduling of orders; and management's decisionsdecision to pursue new products or
businesses which involve additional costs, risks or capital expenditures.
OVERVIEW
Core Molding has historically beenThe Company is a compounder and compression molder of sheet molding
compositescompound (SMC) fiberglass reinforced plastic products. In October 2001, Core Moldingthe
Company acquired certain assets of Airshield Corporation; see Note 34 of notes to
the financial statements. As a result of this acquisition,
Core Moldingthe Airshield Asset Acquisition, the
Company expanded its fiberglass molding capabilities to include the spray
up, hand lay upspray-up,
hand-lay-up and vacuum assisted resin infusion molding processes. The acquisitionAirshield
Asset Acquisition was accounted for under the purchase accounting method and
accordingly the effects of the acquisitionAirshield Asset Acquisition are included in the
results of operations and financial condition of Core Moldingthe Company from the date of
the acquisition and forward. All references to Core Moldingthe Company herein refer to the
consolidated operations of Core Moldingthe Company and its subsidiaries unless noted
otherwise. Core MoldingThe Company produces and sells both SMC compound and molded products
for varied markets, including the automotive and trucking industries,
recreational vehicles and commercial and industrial products. Core MoldingThe Company
presently has four major customers, International Truck and Engine Corporation
("International"), Yamaha Motor Manufacturing Corporation ("Yamaha"), Lear
Corporation ("Lear") and Freightliner LLC ("Freightliner"), which account for
approximately 87%91% of the Company's sales in 20022003 and 90%87% in 2001.2002. The demand for
Core Molding'sthe Company's products is affected by the volume of purchases from its
customers, whose orders are primarily affected by economic conditions in the
United States and Canada. Core Molding'sThe Company's manufacturing operations have a
significant fixed cost component. Accordingly, during periods of changing
demands, the profitability of Core Molding'sthe Company's operations may change
proportionately more than revenues from operations.
On December 31, 1996, Core Moldingthe Company 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. AtIn May 2003, the time of the acquisition of Columbus Plastics,
International and Core MoldingCompany entered into a Comprehensive
Supply Agreement, which expired on December 31, 2001.was effective as of November 1, 2002. Under the terms of thethis
Comprehensive Supply Agreement, Core Moldingthe Company became the primary supplier of
International's original equipment and service requirements for fiberglass
reinforced parts using the SMC process.process, as long as the Company remains
competitive in cost, quality and delivery, effective through October 31, 2006.
12
RESULTS OF OPERATIONS
2003 COMPARED WITH 2002
Net sales for 2003 totaled $92,783,000, an approximate 1% decrease from
the $94,089,000 reported for 2002. Included in total sales are tooling project
revenues of $11,488,000 for 2003 and $12,784,000 for 2002. Tooling project
revenues are sporadic in nature and do not represent a recurring trend. Sales to
International totaled $51,205,000, an approximate 12% increase from the 2002
amount of $45,823,000. The primary reason for the increase was due to revenue
from completed tooling projects. Sales to Yamaha in 2003 amounted to
$13,612,000, which was slightly higher than the $13,291,000 in 2002. Sales to
Lear for 2003 totaled $9,390,000, an approximate 20% decrease from the 2002
amount of $11,716,000. The primary reason for the decrease was due to lower
tooling project revenues of $3,173,000. This Comprehensive Supply Agreementdecrease was not renewed during 2002;
however,mitigated by an
increase in product sales of $497,000 primarily due to new business that began
in 2003. Sales to Freightliner totaled $9,820,000 for 2003, which was a decrease
of approximately 8% from the $10,691,000 for 2002. The primary reason for the
decrease was due to reduced demand for their molded product.
Sales to other customers decreased by approximately 30% to $8,755,000
from $12,566,000 in 2002. This decrease was primarily the result of decreased
tooling project revenue.
Gross margin was 15.0% of sales in 2003 compared to 14.4% of sales in
2002. The increase in gross margin was primarily due to a combination of many
factors including improvements in material costs, labor efficiency and repairs
and maintenance costs at the endCompany's Columbus, Ohio facility. This increase in
gross margin was partially offset by reduced margins at the Company's Gaffney,
South Carolina facility primarily due to operational inefficiencies that
occurred throughout the year. Also impacting the Gaffney facility's gross margin
was premium freight costs incurred in the fourth quarter of 2003 to meet a
customer production schedule. Gross margins from the operations acquired in the
Airshield Asset Acquisition were generally in line with its previous results.
Selling, general and administrative expenses totaled $9,495,000 in
2003, which was greater than the $9,237,000 incurred in 2002. The increase from
2002 Core Moldingwas primarily due to increases in the Company's insurance by $178,000 and
travel expenses by $90,000.
Interest expense totaled $1,852,000 for 2003 decreasing from $2,025,000
in 2002. The primary reason for the decrease was due to the principal payment on
the note payable due to International began negotiationsthat was made in the first quarter of
2003. 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.
Interest income totaled $88,000 for 2003, decreasing from $133,000 for 2002
primarily due to a decrease in the interest rate earned on investments.
Income tax expense for 2003 was approximately 37% of total income
before taxes. Actual tax payments will be lower than the recorded expenses as
the Company has substantial federal tax loss carryforwards. These loss
carryforwards were recorded as a new Comprehensive Supply Agreement, which would be retroactivedeferred tax asset. As the tax loss
carryforwards are utilized to November
1, 2002. There can be no assurance that such an agreement will ultimately be
consummated. Afteroffset federal income tax payments, the expirationCompany
reduces the deferred tax asset as opposed to recording a reduction in income tax
expense.
Net income for 2003 was $1,665,000 or $.17 per basic and diluted share,
representing a decrease of $148,000 from the original Comprehensive Supply
Agreement, business with International continued on a purchase order basis, like
Core Molding operates with all2002 net income of its other customers. The purchase orders
typically provide volume commitments for four weeks at prices previously
negotiated. Customers can update their orders on a daily basis for changes in
demand that allow them to run their inventories on a "just-in-time" basis.
RESULTS OF OPERATIONS$1,813,000 or
$.19 per basic and diluted share.
2002 COMPARED WITH 2001
Net sales for 2002 totaled $94,089,000, an approximate 29% increase
from the $73,180,000 reported for 2001. Included in total sales are tooling
project revenues of $12,783,000$12,784,000 for 2002 and $4,816,000$4,815,000 for 2001. Tooling
project revenues are sporadic in nature and do not represent a recurring trend.
Sales to International totaled $45,823,000, an approximate 12% increase from the
2001 amount of $40,765,000. The primary reason for the increase was due to
additional business with International that was obtained as a result of the
October 2001 acquisition, noted above.Airshield Asset Acquisition. Sales to Yamaha in 2002 amounted to $13,291,000,
which was slightly higher than the $13,160,000 in 2001. Sales to Lear for 2002
totaled $11,716,000, an approximate 14% increase from the 2001 amount of
$10,246,000. The primary reason for the increase was due to the completion of
tooling projects for new business that Core Moldingthe Company has acquired from Lear. This
increase was partially offset by reductions in selling prices on current
products being manufactured for Lear. Sales to Freightliner, which began as a
result of the 12
acquisition noted above,Airshield Asset Acquisition, totaled $10,691,000 for 2002. In
2001, sales to Freightliner amounted to $1,598,000 due to the acquisition, as noted above,
occurring in October 2001. Products sold to Freightliner include hoods, air
deflectors, air fairings, splash panels and other components for the production
of its heavy and medium duty trucks.Airshield Asset
Acquisition.
13
Sales to other customers increased approximately 70% to $12,566,000
from $7,410,000 in 2001. This increase was primarily the result of new business
with Paccar. The Company began manufacturing a truck hood and fenders for Paccar
in the first quarter of 2002. Sales to Paccar amounted to $5,689,000. Sales to
Paccar were generated primarily from the completion of tooling projects for new
business that the Company has acquired. Also adding to the increase were sales
of $2,559,000 to various customers acquired in the October 2001 acquisition, noted
above.Airshield Asset Acquisition.
Partially offsetting the gain was the Company discontinuing its business
relationship with Case/New Holland. Sales to Case/New Holland in 2001 were
$3,188,000
for the year ending December 31, 2001.$3,188,000.
Gross Marginmargin was 14.7%14.4% of sales in 2002 compared to 10.7% of sales in
2001. The increase in gross margin was primarily due to a combination of many
factors including improvements in material costs, labor efficiency, reduced
energy costs and repairs and maintenance costs at the Company's Columbus, Ohio
facility. This increase in gross margin was partially offset by reduced margins
at the Company's Gaffney, South Carolina facility primarily due to selling price
reductions to Lear Corporation, as noted above, and operating inefficiencies
that were experienced throughout the year.year, primarily related to scrap costs.
Gross margins from the newly established operations resulting from the acquisition noted aboveAirshield
Asset Acquisition were generally in line with Core Molding'sthe Company's historical business.
Selling, general and administrative expenses totaled $9,237,000$3,844,000 in
2002, which was greater than the $7,967,000 incurred in 2001. The increase from
2001 was primarily due to the additional costs added as a result of the
acquisition of the Mexican operation.
OtherIn 2002, other income totaled $500,000 for the year ending December 31, 2002.$500,000. This income was earned from the
sale of Core Molding'sthe Company's stock ticker symbol ("CME") to another corporation.
Interest expense totaled $2,025,000 for 2002 increasing slightly from
$1,999,000 in 2001. 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. Interest income totaled $133,000 for 2002, decreasing from
$305,000 for 2001 primarily due to a decrease in the interest rate earned on
investments.
Income tax expense for 2002 was approximately 37% of total income
before taxes. Actual tax payments will be lower than the recorded expenses as
the Company 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 Moldingthe Company
reduces the deferred tax asset as opposed to recording a reduction in income tax
expense.
Net income for 2002 was $2,006,000$1,813,000 or $.21$.19 per basic and diluted share,
representing an increase of $3,867,000$3,673,000 over the 2001 net loss of ($1,860,000) or
($.19) per basic and diluted share.
2001 COMPARED WITH 2000
Net sales for 2001 totaled $73,180,000, down approximately 14% from the
$84,892,000 reported for 2000. Included in total sales are tooling project
revenues of $4,816,000 for 2001 and $1,347,000 for 2000. Tooling project
revenues are sporadic in nature and do not represent a recurring trend. Sales to
International totaled $40,765,000, an approximate 22% decrease from the 2000
amount of $52,276,000. The primary reason for the decrease was lower demand from
International resulting from an industry wide general decline in truck orders
due to the soft general economy during 2001. Sales to Yamaha of components for
personal watercraft decreased in 2001 by 27% to $13,160,000 compared with
$18,061,000 in 2000. The decrease in sales to Yamaha is primarily due to the
negative impact general economic conditions have had on the demand for personal
watercraft. Sales to Lear for 2001 totaled $10,246,000. The Lear product
consists of components that Lear assembles into seat bottoms and backs for a
sports utility/pick-up truck recently introduced by an automotive original
equipment manufacturer. Core Molding began selling these products in the first
quarter of 2001. Sales to Freightliner, as a result of the acquisition noted
above, for 2001 totaled $1,598,000. Products sold to Freightliner include hoods,
air deflectors, air fairings, splash panels and other components for the
production of its heavy and medium duty trucks.
Sales to other customers decreased approximately 49% to $7,410,000 from
$14,555,000 in 2000. This decrease was primarily the result of decreased sales
to Case/New Holland of $5,613,000 as a result of Case/New Holland moving
production of
13
their products to another supplier in May 2001. Also adding to the decrease was
the discontinuance of the Company's business relationship with Caradon Doors and
Windows, Peachtree Division, in July 2000. Sales to Peachtree totaled $1,271,000
in 2000. Offsetting a portion of the decrease were sales brought on from the
acquisition noted above to other various customers of $600,000 from the
acquisition date through the end of the year.
Gross Margin was 10.7% of sales in 2001 compared to 14.0% of sales in
2000. The decrease in gross margin was primarily due to fixed costs associated
with excess capacity, production inefficiencies associated with reduced order
flow, and new product start-ups, mostly affecting the Columbus plant. However,
improved productivity and a better product mix resulted in gross margin
improvement in the Gaffney plant compared to last year. The Company also
experienced increasing employee benefit costs, mainly due to an increase in
employee health insurance costs. Gross margins from the newly established
operations resulting from the acquisition noted above were in line with the
Company's other operations.
Selling, general and administrative expenses totaled $7,967,000 in
2001, which was less than the $9,053,000 incurred in 2000. The year 2001 saw a
reduction of the salary workforce in the Columbus and Gaffney facilities
resulting in a $222,000 cost savings; however, increasing benefit costs, mainly
due to employee health care costs, partially offset this. The Company also
implemented a cost containment plan that resulted in total cost reductions of
$990,000 in the areas of supplies, outside and professional services, travel and
other miscellaneous expenses.
Interest expense totaled $1,999,000 for 2001 increasing slightly from
$1,970,000 in 2000. The increase in interest expense from 2000 was primarily the
result of a decrease in interest capitalized on capital projects due to lower
capital expenditures.
Tax expense for 2001 was approximately 3% of total loss before taxes.
Income tax expense primarily consists of $646,000 of expense related to Core
Molding increasing the valuation allowance for its net operating loss
carryforwards primarily offset by the tax benefit of the current year's
operating loss.
Net loss for 2001 was $(1,860,000) or $(.19) per basic and diluted
share, representing a decrease of $2,575,000 over the 2000 net income of
$715,000 or $.07 per basic and diluted share.
LIQUIDITY AND CAPITAL RESOURCES
Core Molding'sThe Company's 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 operationsoperating activities in 20022003 totaled $5,988,000. Net income
provided $2,006,000 of operating cash flows. Non-cash deductions of depreciation
and amortization added $2,089,000 of positive cash flow.$3,844,000. An
increase in accounts payable contributed $1,358,000$1,467,000 to operating cash flows from operating
activities due to timing differences. A decrease in deferred income taxes also had a positive effect on
cash flow of $1,014,000, which is a result of Core Molding's net operating loss
carryforwards reducing current year tax obligations. In addition, the increase in the
postretirement benefits liability of $951,000 also provided positive$888,000 is not a current cash flow. Core Molding expectsobligation,
and this item to provide positivewill not be a cash flowobligation until such
time that retirees begin to utilize
their retirement medical benefits. Partially offsetting the above mentionedabove-mentioned
increases in cash flows from operating cash flowactivities was a decreasean increase in other accrued liabilitiesaccounts
receivable of $568,000$1,549,000, primarily due to increased sales volumes in the settlement of various
liabilities that were assumed as partfinal
two months of the Airshield acquisition.year. Also decreasing cash flows from operating cash flowactivities was
an increase of inventory of $532,000.$726,000. This was primarily due to inventory levels
at Core Molding's Gaffney, South Carolina
facility adjusting for new business that began late in 2001. An increase in
prepaid expenses and other current assets decreased operating cash flow by
$514,000 primarily due to recoverable taxes related to the Mexican operation.
Investing activities increased cash flows by $149,000 in 2002. Proceeds
from maturities on the Company's mortgage-backed security investmentColumbus, Ohio facility increasing for expected sales volume
increases.
Cash flows from investing activities were $829,000uses of $1,364,000 in 2002. Core Molding has an outstanding balance of $95,000 in this
investment.2003.
Capital expenditures totaled $681,000,$1,369,000, which was primarily related to the
acquisition of machinery and equipment. At December 31, 2002,2003, commitments for
capital expenditures in progress were $107,435.$376,000. Capital expenditures for 20032004
are expected to be $2,166,000.
Financing activities reduced$2,100,000.
Cash flows from financing were uses of $11,110,000. The Company paid
the note payable due International in two payments. The first payment in the
amount of $1,861,000 occurred in the first quarter of 2003, and a second payment
of $17,859,000 was made on December 30, 2003. For the second payment, the
Company borrowed $9,000,000 in the form of a note payable from its primary bank
and used its cash flowsreserves. The remaining balance of the International note of
$200,000 was replaced by $355,000a new, 8% note due
14
December 31, 2004. This note will be forgiven by International if the Company
meets certain earnings targets for the year ending December 31, 2004. The
Company also made principal repaymentpayments in the amount of $390,000 on the Industrial Revenue Bond,industrial
revenue bond.
On December 30, 2003, the Company borrowed $9,000,000 in the form of a
note payable collateralized by the Company's assets. The note payable bears
interest at a variable rate of LIBOR plus 200 basis points or the prime rate.
Monthly payments of principal in the amount $107,143 are payable under this note
through January 1, 2011. Effective January 1, 2004, the Company entered into an
interest rate swap agreement, which was issued in 1998. Principal
paymentsis designated as a cash flow hedge of the
bank loan. Under this agreement, the Company pays a fixed rate of 5.75% to the
bank and receives LIBOR plus 200 basis points. The swap term and notional amount
matches the payment schedule on the Industrial Revenue Bond increase each year throughsecured note payable with final maturity in
January 2011. While the maturity
date, whichCompany is April 2013.
14
exposed to credit loss on its interest rate
swap in the event of non-performance by the counterparty to the swap, management
believes such non-performance is unlikely to occur given the financial resources
of the counterparty.
At December 31, 2002, Core Molding2003, the Company had cash on hand of $8,976,000$346,000 and an
available line of credit of $7,500,000, which is scheduled to mature on April
30, 2004.2005. As of December 31, 2002, Core Molding2003, the Company was in compliance of all threewith both of
its financial debt covenants for the Line of Credit and letter of credit
securing the industrial revenue bond and certain equipment leases.borrowings. The covenants relate to
maintaining certain financial ratios. Management expects the Company to meet
these covenants for the year 2003.2004. However, if a material adverse change in the
financial position or results of operations of the Company should occur, the
Company's liquidity and ability to obtain further financing to fund future
operating and capital requirements could be negatively impacted.
BecauseThe Company has the following minimum commitments under contractual
obligations, including purchase obligations, as defined by the United States
Securities and Exchange Commission. A "purchase obligation" is defined as an
agreement to purchase goods or services that is enforceable and legally binding
on the Company was in complianceand that specifies all significant terms, including: fixed or
minimum quantities to be purchased; fixed, minimum or variable price provisions;
and the approximate timing of all three of its debt covenants; had a cash balance in excess of $3,000,000;
and had no outstanding balance on the revolving line of credit, a principal
payment in the amount of $1,861,000, which is classifiedtransaction. Other long-term liabilities are
defined as a current portion of
long term debtlong-term liabilities that are reflected on the Company's balance
sheet has been beunder accounting principles generally accepted in the United States. Based
on this definition, the tables below include only those contracts, which include
fixed or minimum obligations. It does not include normal purchases, which are
made to International
on March 21,in the ordinary course of business.
The following table provides aggregated information about contractual
obligations and other long-term liabilities as of December 31, 2003.
2004 2005 - 2006 2007 - 2008 2009 and after Total
------------ ------------ ------------ -------------- ------------
Debt $ 1,906,000 $ 3,512,000 $ 3,682,000 $ 5,805,000 $ 14,905,000
Operating lease obligations 3,546,000 6,800,000 3,779,000 688,000 14,813,000
Contractual commitments for
capital expenditures 376,000 - - - 376,000
Postretirement benefits 42,000 157,000 316,000 6,334,000 6,849,000
------------ ------------ ------------ ------------ ------------
Total $ 5,870,000 $10,469,000 $ 7,777,000 $ 12,827,000 $ 36,943,000
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.
15
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 had recorded an allowance for doubtful
accounts of $379,000 at December 31, 2003 and $543,000 at December 31, 2002 and $715,000 at December 31, 2001.2002.
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. The Company had recorded an allowance for these chargebacks of
$851,000 at December 31, 2003 and $473,000 at December 31, 2002 and $383,000 at December 31, 2001.2002.
Inventories:
Management identifies slow moving or obsolete inventories and estimates
appropriate loss provisions related to these inventories.inventories based on expectations
of future usage. Historically, these loss provisions have not been significant.
Should actual results differ from these estimates, additional provisions may be
required. The Company had recorded an allowance for slow moving and obsolete
inventory of $325,000 at December 31, 2003 and $278,000 at December 31, 2002 and $171,000 at December 31, 2001.2002.
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 operationsoperating activities below the assumptions
could have an adverse affecteffect on the company's operations.Company's ability to recover its long-lived
assets. The Company has not recorded any impairment to goodwill orfor long-lived
assets for the years ended December 31, 20022003 and 2001.
15
2002.
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 the Company's operations. The effect
of a change in healthcare costs is described in the notes to the financial
statements. The Company had recorded a liability for post retirement medical
benefits based on actuarially computed estimates of $6,605,000 at December 31,
2003 and $5,718,000 at December 31, 2002 and $4,767,000
at December 31, 2001.2002.
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.
The Company has considered future taxable income in assessing the need for the
valuation allowance and recorded athe amount of the valuation allowance.allowance recorded. The
valuation reserveallowance will be adjusted as the Company determines the actual amount
of deferred tax assets that will be realized. The Company had recorded a
valuation allowance of $1,425,000 at December 31, 20022003 and at December 31, 2001.
INCOME TAXES2002.
The balance sheet at December 31, 20022003 and 20012002 includes a deferred tax
asset of $11,897,000$11,270,000 and $12,773,000,$11,897,000, net of a valuation allowance of $1,425,000
in 20022003 and 2001.2002. The deferred tax asset is net of a valuation allowance since
it is more likely than not that a portion of the deferred tax asset may not be
realized in the future.
The deferred tax asset at December 31, 2002,2003, primarily includes the tax
benefits associated with cumulative net operating losses of approximately
$17,015,000,$15,211,000, temporary differences between the book and tax basis of Core
Molding'sthe
Company's property and equipment of approximately $9,194,000$8,540,000 and temporary
differences relating to post-retirement and pension benefits of $7,670,000.$8,440,000. The
valuation allowance at December 31, 2002,2003, assumes that it is more likely than
not that approximately $4,200,000 of the cumulative net operating losses will
not be realized before their expiration date.
Taxable income/(loss) for 2002 and
2001 was approximately $3,190,000 and ($1,846,000), respectively.
ExtensiveAn analysis is performed to determine the amount of the deferred tax
asset.asset that will be realized. Such analysis is based upon the premise that Core Moldingthe
Company is and will continue as a going concern and that it is more likely than
not that deferred tax benefits will be realized through the generation of future
taxable income. Management reviews all available evidence, both positive and
negative, to assess the long-term earnings potential of Core Moldingthe Company using a
number of alternatives to evaluate financial results in economic cycles at
various industry volume conditions. Other factors considered are the Company's
long-standing relationship with its two largest customers (International and
Yamaha), and Core
Molding'sthe Company's recent customer diversification efforts.efforts and the
refinancing of notes payable at a lower interest rate. The projected
availability of taxable income to realize the tax benefits from net operating
loss carryforwards and the reversal of temporary differences before expiration
of these benefits are also considered. Management believes that, with the
combination of available tax planning strategies and the maintenance of its
relationships with its key customers, earnings are achievable in order to
realize the net deferred tax asset of $11,897,000.$11,270,000.
16
INFLATION
Inflation generally affects Core Moldingthe Company by increasing the cost of
labor, equipment and raw materials. Management believes that, because rates of
inflation have been moderate during the periods presented, inflation has not had
a significant impact on our results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
On June 29, 2001,In January 2003, the FASBFinancial Accounting Standards Board ("FASB")
issued SFAS No.142, "Goodwill and Other
Intangible Assets"FIN No. 46, Consolidation of Variable Interest Entities, which was
replaced by FIN No. 46 (Revised December 2003), Consolidation of Variable
Interest Entities (FIN No. 46R). This statement appliesFIN No. 46 requires consolidation by business
enterprises of variable interest entities that meet certain requirements. FIN
No. 46(R) changes the effective date of FIN 46 for certain entities. Public
companies shall apply either FIN No. 46 or FIN No. 46(R) to intangibles and goodwill acquiredtheir interest in
special purpose entities (SPEs) as of the first interim or annual period ending
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 theDecember 15, 2003. The Company's adoption of SFASFIN No. 142 on
January 1, 2002, the Company does not amortize goodwill. The total net book
value of goodwill at December 31, 200246 and 2001 was $1,097,433. The adoption of
SFASFIN No. 142 did not have an impact on the financial statements of the Company.
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." Because
16
SFAS No. 121 did not address the accounting for a segment of a business
accounted for as a discontinued operation under Opinion 30, two accounting
models existed for long-lived assets to be disposed of. The Board decided to
establish a single accounting model, based on the framework established in
Statement 121, for long-lived assets to be disposed of by sale. The Company
adopted SFAS No. 144 on January 1, 2002, and it46(R)
did not have a material impact
on the Company's financial position, results of operations, or cash flows.
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 Company is
currently analyzing the impact of this statement and does not believe it will
have a material impact on its consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Core Molding'sThe Company's primary market risk results from fluctuations in interest
rates. Core MoldingThe Company is also exposed to changes in the price of commodities used
in its manufacturing operations.operations and foreign currency fluctuations associated
with the Mexican peso. The Company does not hold any material market risk
sensitive instruments for trading purposes.
Core MoldingThe Company has the following four items that are sensitive to a
change in interest rates:market
risks: (1) Long-term debt consisting of an Industrial Revenue Bond ("IRB") with a balance at December 31, 2002, of $6,095,000. Interest is
variable and is computed weekly.interest rate. The
averageCompany has an interest rate charged for 2002 was
1.7% and the maximum interest rate that may be charged at any time over the life
of the IRB is 10%. In orderswap to minimize the effect offix the interest rate fluctuation, Core Molding has entered an interest swap arrangement under which
Core Molding pays a fixed rate ofat 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
December 31, 2002 of $19,920,000 at a fixed interest rate of 8%; (3) Revolvingrevolving line of credit, which bears a variable interest rate; (3) bank note
payable, as of December 30, 2003, with a variable interest rate. The Company
entered into a swap agreement effective January 1, 2004, to fix the interest
rate at LIBOR plus three and one-quarter percent
or the prime rate;5.75%; and (4) Foreignforeign currency purchases in which Core Moldingthe Company 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
20022003 and 2001,2002, interest expense would not change significantly, as the interest
rate swap agreement would generally offset the impact.impact, and the Company had no
borrowings under the revolving line of credit.
17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
Core Molding Technologies, Inc. and Subsidiaries
Columbus, Ohio
We have audited the accompanying consolidated balance sheets of Core
Molding Technologies, Inc. (formerly Core Materials Corporation) and Subsidiaries (the "Company") as of December 31,
20022003 and 2001,2002, and the related consolidated statements of operations,
stockholders' equity and comprehensive income (loss), and cash flows for each of
the three years in the period ended December 31, 2002.2003. Our audits also included
the consolidated financial statement schedules listed in the Index at Item 15.
These consolidated financial statements and the consolidated financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on thethese consolidated financial statements and the
consolidated financial statement schedules based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Core Molding Technologies,
Inc. and its subsidiaries as of December 31, 20022003 and 2001,2002, and the results of
their operations and their cash flows for each of the three years in the period ended
December 31, 2002,2003, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such consolidated
financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, presentspresent fairly in all
material respects the information set forth therein.
On January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133 "Accounting for Derivatives".
As discussed in Note 16, the 2002 consolidated financial statements
have been restated.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Columbus, Ohio
March 7, 200325, 2004
18
SECTION 302 CERTIFICATION
I, James L. Simonton, certify that:
1. I have reviewed this annual report on Form 10-K of Core Molding
Technologies, Inc.;
2. Based on my knowledge, this annual 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
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 annual report (the "Evaluation Date");
and
c) presented in this annual 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 annual 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: March 31, 2003
/s/ James L. Simonton
------------------------------
James L. Simonton
President, Chief Executive Officer and Director
19
SECTION 302 CERTIFICATION
I, Herman F. Dick, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Core Molding
Technologies, Inc.;
2. Based on my knowledge, this annual 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
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 annual report (the "Evaluation Date");
and
c) presented in this annual 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 annual 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: March 31, 2003
/s/ Herman F. Dick, Jr.
------------------------------
Herman F. Dick, Jr.
Treasurer and Chief Financial Officer
20
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002,
2001 AND 2000
YEAR ENDED DECEMBER 31,
2002
(AS
RESTATED,
2003 SEE NOTE 16) 2001
2000
------------ ------------ ----------------------- ----------- -----------
NET SALES:
International $ 45,823,311 $ 40,765,466 $ 52,275,698
Yamaha 13,291,332 13,160,114 18,061,407
Lear 11,716,455 10,246,079 --
Freightliner 10,691,302 1,598,311 --
Other 12,566,450 7,409,561 14,554,658
------------ ------------ ------------Products $81,295,487 $81,305,282 $68,364,704
Tooling 11,487,847 12,783,568 4,814,827
----------- ----------- -----------
TOTAL SALES 92,783,334 94,088,850 73,179,531 84,891,763
Cost of sales 79,022,17777,587,866 79,330,177 64,243,230 71,827,602
Postretirement benefits expense 1,297,561 1,247,182 1,077,547
1,148,822
------------ ------------ ----------------------- ----------- -----------
TOTAL COST OF SALES 80,269,35978,885,427 80,577,359 65,320,777
72,976,424
------------ ------------ ----------------------- ----------- -----------
GROSS MARGIN 13,819,49113,897,907 13,511,491 7,858,754
11,915,339
------------ ------------ ----------------------- ----------- -----------
Selling, general and administrative expense 9,151,676 8,877,853 7,703,310 8,854,633
Postretirement benefits expense 343,064 358,955 263,454
198,857
------------ ------------ ----------------------- ----------- -----------
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 9,494,740 9,236,808 7,966,764
9,053,490
------------ ------------ ----------------------- ----------- -----------
OTHER INCOME - 500,000 -- --
------------ ------------ ------------
INCOME/-
----------- ----------- -----------
INCOME (LOSS) BEFORE INTEREST AND INCOME TAXES 5,082,6834,403,167 4,774,683 (108,010) 2,861,849
Interest income 87,508 132,922 305,453
339,512
Interest expense (1,852,065) (2,025,187) (1,999,159)
(1,970,378)
------------ ------------ ------------
INCOME/----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 3,190,4182,638,610 2,882,418 (1,801,716) 1,230,983
Income taxes:
Current 170,457401,711 55,573 30,367
231,051
Deferred 571,640 1,013,538 28,058
284,581
------------ ------------ ----------------------- ----------- -----------
TOTAL INCOME TAXES 1,183,995973,351 1,069,111 58,425
515,632
------------ ------------ ----------------------- ----------- -----------
NET INCOME/INCOME (LOSS) $ 2,006,4231,665,259 $ (1,860,141) $ 715,351
============ ============ ============1,813,307 $(1,860,141)
=========== =========== ===========
NET INCOME/INCOME (LOSS) PER COMMON SHARE:
BASIC AND DILUTED $ 0.210.17 $ 0.19 $ (0.19)
$ 0.07
============ ============ ======================= =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC AND DILUTED 9,778,680 9,778,680 9,778,680
============ ============ ======================= =========== ===========
See notes to consolidated financial statements.
2119
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
2002
2001(AS RESTATED,
2003 SEE NOTE 16)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,976,059346,191 $ 3,194,1568,976,059
Accounts receivable (less allowance for doubtful accounts:
2003 - $379,000 and 2002 - $543,000 and 2001 - $715,000)$543,000) 12,830,356 11,281,060 11,946,137
Inventories:
Finished and work in process goods 2,391,077 1,679,7452,028,702 2,083,077
Stores 2,823,243 2,042,535 2,222,250
------------ ------------
Total inventories 4,433,612 3,901,9954,851,945 4,125,612
Deferred tax asset 1,381,935 1,151,158
1,079,995Foreign tax receivable 1,746,698 965,247
Prepaid expenses and other current assets 2,218,900 1,704,262408,467 1,253,653
------------ ------------
Total current assets 28,060,789 21,826,54521,565,592 27,752,789
Property, plant and equipment 43,856,499 43,001,396 42,759,871
Accumulated depreciation (20,647,567) (18,970,136) (17,398,659)
------------ ------------
Property, plant and equipment - net 23,208,932 24,031,260 25,361,212
Deferred tax asset - net9,888,287 10,746,223 11,692,678
Mortgage-backed security investment 94,589 924,041
Goodwill 1,097,433 1,097,433
Other assets 353,419 405,356391,279 448,008
------------ ------------
TOTAL $ 64,383,71356,151,523 $ 61,307,26564,075,713
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Current portion long-term debt $ 1,905,714 $ 2,251,000
$ 355,000Current portion deferred gain 453,555 453,555
Accounts payable 6,581,912 5,114,655 3,756,735
Accrued liabilities:
Compensation and related benefits 2,669,027 2,706,272
3,379,217
Interest 77,104 92,844
85,939
Taxes 819,621 636,934361,215 704,737
Current portion of graduated lease payments 229,269 188,219 13,241
Professional fees 236,055 300,796 417,487
Other accrued liabilities 677,647 848,826507,525 224,092
------------ ------------
Total current liabilities 12,151,054 9,493,37913,021,376 12,036,170
Long-term debt 12,999,286 23,764,150 26,015,150
Interest rate swap 610,142 773,434 366,826
Graduated lease payments 715,616 903,835
876,026
Deferred long-term gain 1,101,607 1,555,162 2,008,716
Postretirement benefits liability 6,849,418 5,961,915 5,011,067
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - $0.01 par value, authorized shares - 10,000,000;
outstanding shares: 2003 and 2002 - 0 - -
Common stock - $0.01 par value, authorized shares - 20,000,000;
outstanding shares: 20022003 and 20012002 - 9,778,680 97,787 97,787
Paid-in capital 19,251,392 19,251,392
Accumulated other comprehensive loss, net of income tax benefit (402,694) (510,466) (242,105)
Retained earnings (accumulated deficit) 435,450 (1,570,973)1,907,593 242,334
------------ ------------
Total stockholders' equity 19,274,163 17,536,10120,854,078 19,081,047
------------ ------------
TOTAL $ 64,383,71356,151,523 $ 61,307,26564,075,713
============ ============
See notes to consolidated financial statements
22statements.
20
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
ACCUMULATED
COMMON STOCK RETAINED OTHER TOTAL
OUTSTANDING PAID-IN EARNINGS COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) LOSSINCOME (LOSS) EQUITY
--------- ------- ----------- ---------- -------------- ------------ ---------------- --------------------------- -----------
BALANCE AT JANUARY 1, 20002001 9,778,680 $97,787 $19,251,392 $ 19,251,392 $ (426,183)289,168 $ - $ 18,922,996
Net Income 715,351 715,351
----------- ---------- -------------- ------------ ---------------- --------------
BALANCE AT DECEMBER 31, 2000 9,778,680 97,787 19,251,392 289,168 - 19,638,347
Net loss (1,860,141) (1,860,141)$19,638,347
To record the initial fair market (104,762) (104,762)
value of the interest rate swap, net
of deferred income tax benefit of $53,968 (104,762) (104,762)
Net Loss (1,860,141) (1,860,141)
Hedge accounting effect of the
(137,343) (137,343)
interest rate swap, at December 31,
2001, net of deferred
tax benefit of $70,753 (137,343) (137,343)
-----------
---------- -------------- ------------ ---------------- --------------Comprehensive Loss (1,997,484)
-----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2001 9,778,680 97,787 19,251,392 (1,570,973) (242,105) 17,536,101
Net Income 2,006,423 2,006,423(as restated, see Note 16) 1,813,307 1,813,307
Hedge accounting effect of the
(268,361) (268,361)
interest rate swap, at December 31,
2002, net of deferred
tax benefit of $138,247 (268,361) (268,361)
-----------
---------- -------------- ------------ ---------------- --------------Comprehensive Income
(as restated, see Note 16) 1,544,946
-----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2002 (AS
RESTATED, SEE NOTE 16) 9,778,680 $ 97,787 $ 19,251,392 $ 435,450 $242,334 (510,466) $ 19,274,163
=========== ========== ============== ============ ================ ==============19,081,047
Net Income 1,665,259 1,665,259
Hedge accounting effect of the
interest rate swap, net of deferred
tax expense of $55,519 107,772 107,772
-----------
Comprehensive Income 1,773,031
-----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2003 9,778,680 $97,787 $19,251,392 $1,907,593 $(402,694) $20,854,078
=========================================================================================
See notes to consolidated financial statements.
2321
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------------------------
2002
(AS
RESTATED,
2003 SEE NOTE 16) 2001
2000
----------- ----------- ----------------------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/income (loss) $ 2,006,423 $(1,860,141)1,665,259 $ 715,3511,813,307 $ (1,860,141)
Adjustments to reconcile net income/income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,162,126 2,088,591 2,039,732 2,121,221
Deferred income taxes 571,640 1,013,538 28,058
284,581
Loss/(gain)Loss on disposal of assets 89,333 22,794 42,458
(11,376)
Amortization of deferred gain on sale/leaseback transactions(453,555) (453,554) (453,555)
(453,555)
Loss/Loss (gain) on translation of foreign currency financial
statements 119,930 (48,622) 9,598 --
Change in operating assets and liabilities:
Accounts receivable (1,549,296) 665,077 3,312,104
6,493,234
Inventories (531,617)(726,333) (223,617) 135,019 1,798,459
Prepaid expenses and other assets 63,735 (514,638) 805,850
(2,225,985)
Accounts payable 1,467,258 1,357,920 (1,509,283) (5,801,650)
Accrued and other liabilities (568,436)(453,408) (683,320) 91,589 (74,549)
Postretirement benefits liability 887,503 950,848 718,247
721,981
----------- ----------- ----------------------- ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,844,192 5,988,324 3,359,676 3,567,712
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,368,701) (680,873) (1,301,432) (1,977,722)
Acquisition of Airshield assets - - (1,953,000)
Proceeds from maturities on mortgage-backed security
investment 4,791 829,452 686,700 298,554
Proceeds from sale of property, plant and equipment - - 19,800
----------- ----------- ----------------------- ------------ ------------
NET CASH PROVIDED/(USED) INPROVIDED (USED IN) INVESTING ACTIVITIES (1,363,910) 148,579 (2,547,932) (1,679,168)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank note payable 9,000,000 - -
Payment of principal on secured note payable - International
Truck & Engine Corporation (19,720,150) - -
Payment of principal on industrial revenue bond (390,000) (355,000) (330,000)
(305,000)
----------- ----------- ----------------------- ------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (11,110,150) (355,000) (330,000)
(305,000)
----------- ----------- ----------------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,629,868) 5,781,903 481,744 1,583,544
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,976,059 3,194,156 2,712,412
1,128,868
----------- ----------- ----------------------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 346,191 $ 8,976,059 $ 3,194,156
$ 2,712,412
=========== =========== ======================= ============ ============
Cash paid for:
Interest (net of amounts capitalized) $ 1,819,492 $ 1,935,994 $ 1,902,044
$ 2,690,141
=========== =========== ======================= ============ ============
Income taxes (refund) $ (173,907) $ (3,302) $ 186,000
============ ============ ============
Non-cash transactions:
Note payable - International Truck & Engine Corporation $ (84,666)
=========== =========== ===========
Supplemental disclosure of non-cash financing activities:
Sale leaseback receivable200,000 $ 1,584,000
===========$ -
============ ============ ============
See notes to consolidated financial statements.
2422
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS FORMATION AND NATURE OF OPERATIONS
Core Molding Technologies, Inc. ("Core Molding", "the Company"),
formerly known as Core Materials Corporation, was
formed in 1996 for the purpose of acquiring substantially all the assets and
assuming certain of the liabilities of Columbus Plastics Operation ("Columbus
Plastics"), an operating unit of Navistar International Transportation Corp.
(now known as International Truck and& Engine Corporation, "International"). In
October 2001, Core Moldingthe Company acquired certain assets of Airshield Corporation ("the
Airshield Asset Acquisition"), see note 3.Note 4. As a result of this acquisition, Core Moldingthe
Company expanded its fiberglass molding capabilities to include the spray up, hand lay upspray-up,
hand-lay-up and vacuum assisted resin infused molding processes.
Core MoldingThe Company operates in one business segment as a compounder of sheet
molding composites (SMC)("SMC") and molder of fiberglass reinforced plastics. Core
MoldingThe
Company produces and sells both SMC compound and molded products for varied
markets, including medium and heavy-duty trucks, automotive, recreational
vehicles and commercial and industrial products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial
statements include the accounts of all subsidiaries after elimination of all
material intercompany accounts, transactions and profits. All significant
intercompany transactions have been eliminated.
USE OF 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. Actual results could differ from those estimates.
REVENUE RECOGNITION - Revenue from product sales is recognized at the
time products are shipped and title transfers. Allowances for returned products
and other credits are estimated and recorded as revenue is recognized. Tooling
revenue is recognized when the customer approves the tool and accepts ownership.
CASH AND CASH EQUIVALENTS - Core MoldingThe Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents. Cash is held primarily in one bank.
MORTGAGE-BACKED SECURITY - The security that matures in November 2025,
is considered held to maturity and is carried at cost. Core Molding has the
intent and ability to hold this security to maturity.
INVENTORIES - Inventories are stated at the lower of cost (first-in,
first-out) or market. The Company had recorded an allowance for slow moving and
obsolete inventory of $325,000 at December 31, 2003 and $278,000 at December 31,
2002 and $171,000 at December 31,
2001.2002.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are
recorded at cost. 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 adjustment to the depreciation period or
to the unamortized balance is warranted.
Ranges of estimated useful lives for computing depreciation are as
follows:
Land improvements 20 years
Building and improvements 20-40 years
Machinery and equipment 3-15 years
Tools, dies and patterns 3-5 years
Depreciation expense was $2,153,000, $1,983,000 and $2,010,000 for
2003, 2002, and $2,094,000 for2001.
In 2003, 2002 and 2001, approximately $33,000, $0 and 2000.
In 2002, 2001 and 2000, approximately $0, $37,000 and $50,000 of
interest costs were capitalized in property, plant and equipment.
25DEFERRED GAIN - Deferred gains resulted from sales leaseback
transactions that occurred in 1997 and 1998 and are being amortized over the
lease period.
23
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
LONG-LIVED ASSETS - Long-lived assets consist primarily of property and
equipment and goodwill. The recoverability of long-lived assets is evaluated at
the operating unit level by
an analysis of operating results and consideration of other significant events
or changes in the business environment. If an
operating unit has indications of impairment, such as current operating losses,
theThe Company will evaluateevaluates whether impairment
exists for property and equipment on the basis of undiscounted expected future
cash flows from operations before interest for the remaining amortization period.interest. For goodwill, the Company will
evaluateevaluates
whether impairment exists on the basis of discounted expected future
cash flows from operations before interest.estimated fair value of the reporting
unit. If impairment exists, the carrying amount of the long-lived assets is
reduced to its estimated fair value, less any costs associated with the final
settlement. For the years ended December 31, 2003, 2002 2001 and 2000,2001, there was no
impairment of the Company's long-lived assets.
SELF-INSURANCE - Core MoldingThe Company is self-insured with respect to most of
its medical and dental claims and workers' compensation claims. Core MoldingThe Company has
recorded an estimated liability for self-insured medical and dental claims
incurred but not reported and worker's compensation claims incurred but not
reported at December 31, 2003 and 2002 of $860,000 and 2001 of $650,000, and $625,000, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Core Molding'sThe Company's financial
instruments consist of a mortgage backed security investment, long term debt, an
interest rate swap, accounts receivable accrued liabilities and accounts payable. The carrying
amount of these financial instruments approximated their fair value.
The fair value of the Company's interest rate swap at December 31,
2002 and 2001 was a liability of $773,000 and $367,000, respectively.
CONCENTRATION OF CREDIT RISK - Core MoldingThe Company has significant transactions
with four customers International, Yamaha Motor Manufacturing
Corporation, Lear Corporation(see Note 3), which together comprised 91%, 87% and Freightliner, which comprised 87%, 90% and 83% of
total sales in 2003, 2002 and 2001, respectively and 200082% and 93% and 81% of the accounts
receivable balances at December 31, 2003 and 2002, and 2001. Core Moldingrespectively. The Company
performs ongoing credit evaluations of its customers' financial condition. Core MoldingThe
Company maintains reserves for potential bad debt losses, and such bad debt
losses have been historically within Core Molding'sthe Company's expectations. Export sales,
including sales to Canada and Mexico, for products provided to International'scertain
customers' manufacturing and service locations totaled 15%18%, 12%24% and 17%26% of total
sales for 2003, 2002 and 2001, and 2000,
respectively.
EARNINGS/EARNINGS (LOSS) PER COMMON SHARE - Basic earnings/earnings (loss) per common
share is computed based on the weighted average number of common shares
outstanding during the period. Diluted earnings/earnings (loss) per common share are
computed similarly but include the effect of the assumed exercise of dilutive
stock options under the treasury stock method.
The computation of basic and diluted earnings (loss) per common share
is as follows:
YEARS ENDED DECEMBER 31,
2003 2002 2001
------------ ----------- ------------
Net income (loss) $ 1,665,259 $ 1,813,307 $ (1,860,141)
Weighted average common shares outstanding 9,778,680 9,778,680 9,778,680
Plus: dilutive options assumed exercised 0 0 0
Less: shares assumed repurchased with proceeds from exercise 0 0 0
------------ ----------- ------------
Weighted average common and potentially issuable
common shares outstanding 9,778,680 9,778,680 9,778,680
Basic and diluted earnings (loss) per common share $ 0.17 $ 0.19 $ (0.19)
214,000 shares at December 31, 2003, 1,209,000 shares at December 31,
2002 and 1,149,000 shares at December 31, 2001 were not included in diluted
earnings per share as they were anti-dilutive.
24
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
STOCK BASED COMPENSATION - The Company accounts for its stock option
plans in accordance with APBAccounting Principles Board ("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 SFASfair value method
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock Based Compensation," the Company's net income (loss) and
earnings/earnings (loss) per common share would have resulted in the amounts as reported
below.
YEARS ENDED DECEMBER 31,
2003 2002 2001 2000
----------- ----------- -----------
Net income (loss) as reported $ 2,006,4231,665,259 $ 1,813,307 $(1,860,141) $ 715,351
Deduct: Total stock-based employee compensation
expense determined under fair value based method for all
awards, net of related tax effects 198,788 223,214 74,474737,923 (198,788) (223,214)
----------- ----------- -----------
Pro forma net income (loss) $ 1,807,6352,403,182 $ 1,614,519 $(2,083,355) $ 640,877
=========== =========== ===========
Earnings (loss) per share:
Basic and diluted - as reported $ 0.210.17 $ (0.19)0.19 $ 0.07(0.19)
Basic and diluted - pro forma $ 0.190.25 $ (0.21)0.17 $ 0.07(0.21)
The pro forma amounts are not representative of the effects on reported
net earnings or earnings per common share for future years and exclude the pro
forma effect of the Mexican acquisitionAirshield Asset Acquisition (see Note 3)4). 26
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
RECLASSIFICATIONS - Reclassifications have been made to prior years'
amounts to conform toOn August 4, 2003,
of the classifications of such amounts1,171,500 stock options outstanding, 978,000 options were tendered for
2002. In the
current year, thecancellation. The Company has classified completed tooling projects as revenue
and cost of goods sold in the consolidated statements of operations. Previously,
the Company classified the net effect of tooling projects as a miscellaneous
gain (loss) in selling, general and administrative expenses. Tooling projects
are and have been accounted for under the completed contracts method. For
comparative purposes, amounts in prior years have been reclassified to conform
to current year presentations. 2001 tooling revenue was $4,815,000 and the
associated cost of goods sold was $4,787,000. 2000 tooling revenue was
$1,346,000 and the associated cost of goods sold was $1,346,000. This change in
classification had no effectissued 885,950 options on previously reported net income (loss), cash flow
or stockholders' equity.February 9, 2004 at $3.21
per share.
OTHER INCOME - Effective September 3, 2002, the Company changed its
ticker symbol on the American Stock Exchange from "CME" to "CMT". This change
took place because another corporation purchased the rights to use "CME" from
the Company for $500,000, which is included in other income in the consolidated
statements of operations.
RESEARCH AND DEVELOPMENT - Research and Developmentdevelopment costs, which are
expensed as incurred, totaled approximately $251,000 in 2003, $270,000 in 2002
and $225,000 in 2001 and $250,000 in 2000.2001.
RECENT ACCOUNTING PRONOUNCEMENTS - EffectiveIn January 1, 2002,2003, the Company adopted SFAS No.142, "Goodwill and Other Intangible Assets"Financial
Accounting Standards Board issued FIN No. 46, Consolidation of Variable Interest
Entities, which was replaced by FIN No. 46 (Revised December 2003),
Consolidation of Variable Interest Entities (FIN No. 46R). This
statement appliesFIN No. 46 requires
consolidation by business enterprises of variable interest entities that meet
certain requirements. FIN No. 46(R) changes the effective date of FIN 46 for
certain entities. Public companies shall apply either FIN No. 46 or FIN No.
46(R) to intangibles and goodwill acquiredtheir interest in special purpose entities (SPEs) as of the first
interim or annual period ending 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 are no
longer amortized; however, these assets will be reviewed for impairment
periodically. Due to theDecember 15, 2003. The Company's adoption
of SFASFIN No. 142, the Company does not amortize
goodwill. The total net book value of goodwill at December 31, 200246 and 2001 was
$1,097,433. The adoption of SFASFIN No. 14246(R) did not have an impact on the financial
statements of the Company.
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.
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 Company is
currently analyzing the impact of this statement and does not believe it will
have a material impact on its
consolidated financial statements.
FOREIGN CURRENCY ADJUSTMENTS - In conjunction with Core Molding'sthe Company's
acquisition of certain assets of Airshield Corporation (see Note 3)4), the Company
has established operations in Mexico. The functional currency for the Mexican
operations is the United States dollar. All foreign currency asset and liability
amounts are remeasured into United States dollars at end-of-period exchange
rates except for inventories, prepaid expenses and property plant and equipment,
which are remeasured at historical rates. Income statement accounts are translated at the monthly average rates for the year.rates.
Gains and losses resulting from translation of foreign currency financial
statements into United States dollars and gains and losses resulting from
foreign currency transactions are included in current results of operations.
Aggregate foreign currency translation and transaction gains(gains) losses included
in operations totaled $48,622$119,930 in 2002.
272003 and ($48,622) in 2002 and $9,598 in 2001.
25
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. MAJOR CUSTOMERS
Core Molding Technologies currently has four major customers,
International Truck & Engine Corporation ("International"), Yamaha Motor
Manufacturing Corporation ("Yamaha"), Lear Corporation ("Lear"), and
Freightliner, LLC ("Freightliner"). The following table presents net sales for
the above-mentioned customers for the years ended December 31, 2003, 2002 and
2001:
2003 2002 2001
----------- ----------- -----------
International $51,205,429 $45,823,311 $40,765,466
Yamaha 13,612,040 13,291,332 13,160,114
Lear 9,390,216 11,716,455 10,246,079
Freightliner 9,820,473 10,691,302 1,598,311
----------- ----------- -----------
Subtotal 84,028,158 81,522,400 65,769,970
Other 8,755,176 12,566,450 7,409,561
----------- ----------- -----------
Total $92,783,334 $94,088,850 $73,179,531
=========== =========== ===========
4. ACQUISITION OF AIRSHIELD CORPORATION ASSETS
On October 16, 2001, Core Molding Technologies, Inc. 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 was based in Brownsville, Texas,
with manufacturing operations in Matamoros, Mexico. Airshield had been operating
under Chapter 11 bankruptcy protection since March 2001. Core MoldingThe Company has continued operations fromof
Airshield's former manufacturing facility in Matamoros, Mexico.
The purchase price for the acquisition of substantially all of the
assets of Airshield Corporation was $1,953,000. In addition, Core Moldingthe Company or its
subsidiaries assumed certain liabilities related to the transfer of employees
from Airshield's Mexican subsidiary to Core Molding'sthe Company's new Mexican subsidiary.
The acquisition was financed from the cash reserves of Core Molding.
The following table presents the allocation of the acquisition cost,
including professional fees and other related acquisition costs, to the assets
acquired and liabilities assumed:
Inventory $ 392,896
Accounts receivable 2,036,921
Property, plant and equipment 166,375
Goodwill 1,097,433
-------------
Total Assets 3,693,625
=============
Payroll liabilities assumed 1,700,194
Other current liabilities 40,431
-------------
Total Liabilities 1,740,625
=============
Total acquisition cost $ 1,953,000
=============
The following (unaudited) pro forma consolidated results of operations
have been prepared as if the acquisition of substantially all the assets of Airshield Corporation had
occurred at the beginning of the year presented.
Year Ended Year Ended
December 31, 2001 December 31, 2000
----------------- -----------------
Net sales $ 84,537,505 $ 101,329,083
============== ==============
Net loss $ (3,280,948) $ (1,330,195)
============== ==============
Net loss per share - basic
and diluted $ (0.34) $ (0.14)
============== ==============
Year Ended
December 31, 2001
-----------------
Net sales $ 84,537,505
============
Net loss $ (3,280,948)
============
Net loss per share - basic and diluted $ (0.34)
============
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 operations since
the acquisition date.
2826
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4.5. FOREIGN OPERATIONS
In conjunction with the Company's acquisition of substantially all the
assets of Airshield
Corporation on October 16, 2001(see Note 3)4), Core Moldingthe Company established
manufacturing operations in Mexico (under the Maquiladora program). The Mexican
operation is a captive manufacturing facility of Core Molding.the Company. Essentially all
sales of the Mexican operation are made to United States customers in United
States dollars, which totaled $18,322,000 in 2003, $20,468,000 in 2002 and
$3,532,000 in 2001. Expenses are incurred in the United States dollar and the
Mexican peso. Expenses incurred in pesos include labor, utilities, supplies and
materials, and amounted to approximately 32% of sales in 2003, 39% of sales in
2002 and 31% of sales from the acquisition date to December 31,in 2001. Core MoldingThe Company owns long-lived assets that are
geographically located at the Mexican operation, which total $298,000$256,000 at
December 31, 2002. Core Molding's2003. The Company's manufacturing operation in Mexico is subject to
various political, economic, and other risks and uncertainties inherent to
Mexico. Among other risks, Core Molding'sthe Company's Mexican operation isoperations are subject to
domestic and international customs and tariffs, changing taxation policies and
governmental regulations.
5.6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31:
2003 2002 2001
------------ ------------
Land and land improvements $ 2,150,606 $ 2,150,606
Buildings 17,391,966 17,319,654
Machinery and equipment 20,202,400 19,954,637
Tools, dies and patterns 566,814 566,814
Additions in progress 2,689,610 2,768,160
------------ ------------
Total 43,001,396 42,759,871
Less accumulated depreciation (18,970,136) (17,398,659)
------------
------------ -----------
Land and land improvements $ 2,138,329 $ 2,150,606
Buildings 17,574,848 17,391,966
Machinery and equipment 22,780,490 20,202,400
Tools, dies and patterns 566,814 566,814
Additions in progress 796,018 2,689,610
------------ -----------
Total 43,856,499 43,001,396
Less accumulated depreciation (20,647,567) (18,970,136)
------------ -----------
Property, plant and equipment - net $ 23,208,932 $24,031,260 $25,361,212
============
============ ===========
Additions in progress at December 31, 20022003 and 20012002 primarily relate
to the purchase and installation of equipment at Core Molding'sthe Company's operating
facilities. At December 31, 20022003 and 2001,2002, commitments for capital expenditures
in progress were $376,000 and $107,000, and $32,000, respectively.
Core Molding has entered into various sale-leaseback arrangements with
a financial institution, whereby it sold certain equipment and leased such back
under operating lease arrangements (see Note 6).
2927
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6.7. DEBT AND LEASES
Long-term debt consists of the following at December 31:
2003 2002
2001
----------------------- ------------
SecuredNote Payable to bank, interest at a variable rate with monthly payments
of interest and principal over a seven year period, collateralized by a
security interest in all the Company's assets. $ 9,000,000 -
Note Payable due to International, interest at 8%. - $ 19,920,150
Note Payable due to International, interest at 8%, payable
semi-annually, principal due on
December 2006, secured by a subordinated
lien and security interest in all Core Molding's assets. $ 19,920,150 $ 19,920,15031, 2004 200,000 -
Industrial Revenue Bond, interest adjustable weekly (2002(2003 average 1.7%1.3%;
20012002 average 3.0%1.7%), payable quarterly, principal due in variable
quarterly installments through April, 2013, secured by a bank letter of
credit with a balance of $6,279,000$5,877,000 as of December 31, 2002.2003. 5,705,000 6,095,000
6,450,000
----------------------- ------------
Total 14,905,000 26,015,150 26,370,150
Less current portion (1,905,714) (2,251,000)
(355,000)
----------------------- ------------
Long-term debt $12,999,286 $ 23,764,150
$ 26,015,150
======================= ============
SECURED NOTE PAYABLE Under- BANK
On December 30, 2003, the termsCompany borrowed $9,000,000 in the form of the secureda
note payable to International, Core Molding may
be required to make payments on the principal of the note if either of the
following two conditions exists:
a) Within ninety (90) days after the end of each fiscal year of Core
Molding during the term of the Secured Note, Core Molding is to pay
principal in an amount equal to the amount, if any, by which the
total cash and cash equivalents of Core Molding, as of the end of
such fiscal year, exceeds $3,000,000, as long as there is no
outstanding balance on the revolving line of credit and to the
degree Core Molding is in compliance with all loan covenants; and
b) In the event Core Molding obtained, from time to time, any
refinancing loan (as definedcollateralized by the terms of the Secured
Note), Core Molding is to promptly, upon obtaining such loan,
pay principal in an amount equal to the proceeds of such loan.
Total cash and cash equivalents of Core Molding as of December 31, 2002
were $8,976,059. Because the Company was in compliance of all three of its debt
covenants, a principal payment in the amount of $1,861,000, which is classified
as a current portion of long term debt on the Company's balance sheet, was made
to International in March 2003. Based upon the financial position of Core
Molding at December 31, 2002, the remaining balance of the Secured Note is
classified as long-term on the balance sheet.assets. The provisions of the Secured Note prohibit the declaration or payment
of cash dividends, the repurchase or retirement of capital stock, as well as the
pledge of any of Core Molding's assets or revenue as a security lien to a third
party, except as approved by International, as long as the Secured Note is
outstanding.
LINE OF CREDIT
At December 31, 2002, Core Molding had available a $7,500,000 variable
rate bank revolving line of credit scheduled to mature on April 30, 2004. The
line of creditnote payable bears
interest at a variable rate of LIBOR plus three and one-quarter percent200 basis points or at the prime rate. The line of credit is secured by a first priority lien and
security interest in all Core Molding's business assets. There was no
outstanding balance under this facility at any time during the years ended
December 31, 2002 and 2001.
30
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
INDUSTRIAL REVENUE BOND
In May 1998, Core Moldingthe Company borrowed $7,500,000 through the issuance of an
Industrial Revenue Bond ("IRB"). The IRB bears interest at a weekly adjustable
rate and matures in April 2013. The maximum interest rate that may be charged at
any time over the life of the IRB is 10%.
Total remaining principal
maturities by year are: 2003 - $390,000; 2004 - $420,000; 2005 - $450,000; 2006
- - $490,000; 2007 - $530,000 and thereafter - $3,815,000.
As security for the IRB, Core Moldingthe Company obtained a letter of credit from a
commercial bank, which has a balance of $6,279,000$5,877,000 as of December 31, 2002.2003. The
letter of credit can only be used to pay principal and interest on the IRB. Any
borrowings made under the letter of credit bear interest at the bank's prime
rate and are secured by a lien and security interest in all of Core Molding's
businessthe Company's
assets. The letter of credit expires in April 2004, but mayand the Company intends to
extend the letter of credit each year as required by the IRB.
28
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE PAYABLE - INTERNATIONAL
The Company paid the note payable due International Truck & Engine
Corporation in two payments. The first payment in the amount of $1,861,000
occurred in the first quarter of 2003, and a second payment of $17,859,000 was
made on December 30, 2003. For the second payment, the Company borrowed
$9,000,000 in the form of a note payable from its primary bank and used its cash
reserves. The remaining balance of the International note of $200,000 was
replaced by a new, 8% note due December 31, 2004. This note will be extendedforgiven by
International if the Company meets certain earnings targets for an additional one-year period inthe year ended
December 31, 2004.
Annual maturities of long-term debt are as follows:
2004 $ 1,906,000
2005 1,736,000
2006 1,776,000
2007 1,816,000
2008 1,866,000
Thereafter 5,805,000
---------
Total $14,905,000
===========
LINE OF CREDIT
At December 31, 2003, the Company had available a $7,500,000 variable
rate bank revolving line of credit scheduled to mature on April 30, 2005. The
line of each year.credit bears interest at LIBOR plus two percent or at the prime rate.
The line of credit is collateralized by all the Company's assets. There was no
outstanding balance under this facility at any time during the years ended
December 31, 2003 and 2002.
INTEREST RATE SWAP
When Core Molding Technologies, Inc. enters into variable rate
obligations or purchases variable rate interest bearing assets, it considers the
potential effect of interest rate fluctuations on such instruments. In order to
minimize the effects of interest rate fluctuations on its operations, the
Company may enter into interest rate management arrangements.SWAPS
In conjunction with its variable rate Industrial Revenue Bond, Core
Moldingthe
Company entered into an interest rate swap agreement, which wasis designated as a
cash flow hedging instrument, with a commercial bank in June 1998.instrument. Under this agreement, Core Moldingthe Company pays a fixed
rate of 4.89% to the bank and receives 76% of the 30-day commercial paper rate.
The swap term and notional amount matches the payment schedule on the IRB with
final maturity in April 2013. The difference paid or received varies as
short-term interest rates change and is accrued and recognized as an adjustment
to interest expense. The swap term and notional amount matchesWhile the payment
schedule on the IRB with final maturity in April 2013. While Core MoldingCompany is exposed to credit loss on its interest
rate swap in the event of non-performance by the counterparty to the swap,
management believes such non-performance is unlikely to occur given the
financial resources of the counterparty. The effectiveness of the swap is
assessed at each financial reporting date by comparing the commercial paper rate
of the swap to the benchmark rate underlying the variable rate of the Industrial
Revenue Bond.
Effective January 1, 2004, the Company entered into an interest rate
swap agreement, which is designated as a cash flow hedge of the bank note
payable. Under this agreement, the Company pays a fixed rate of 5.75% to the
bank and receives LIBOR plus 200 basis points. The swap term and notional amount
matches the payment schedule on the secured note payable with final maturity in
January 2011. While the Company is exposed to credit loss on its interest rate
swap in the event of non-performance by the counterparty to the swap, management
believes such non-performance is unlikely to occur given the financial resources
of the counterparty.
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 133, Accounting for Derivative Instruments and Hedging Activities, on
January 1, 2001. At January 1, 2001, Core MoldingThe Company recorded the fair value of its
interest rate swap agreement of $159,000 as a long-term liability and $105,000
(net of deferred income tax benefit of $54,000) to accumulated other
comprehensive income (loss).
Core Molding recorded an additional liability of
$407,000 and $208,000 to adjust the interest rate swap to fair value at December
31, 2002 and 2001 respectively.
BANK COVENANTS
Core MoldingThe Company is subject to formal debt covenants with regardsrelated to its
Line of Creditminimum
fixed charge coverage and letter of credit securing the industrial revenue bond and
certain equipment leases.total funded obligations debt ratios. As of December
31, 2002, Core Molding2003, the Company 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.
31with these covenants.
29
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
LEASES
Core MoldingThe Company leases a significant portion of its manufacturing equipment
asand a result of sale-leaseback arrangements Core Molding has entered
with financial institutions in previous years. These leases have been recorded
aswarehouse facility under operating leases, which had original lease terms of 2 to 12 years.
As a result of earlier sale-leaseback transactions, Core Molding
recognized into income in 2002, 2001 and 2000 approximately $454,000 of the
deferred gains in each of the three years. At December 31, 2002 and 2001, Core
Molding's deferred gains from leasing transactions totaled $2,009,000 and
$2,462,000, respectively. The current portion of the deferred gains was $454,000
at December 31, 2002 and 2001 and was included in accrued liabilities.agreements.
In October 2001, in conjunction with the acquisitionAirshield Asset Acquisition
discussed at Note 3, Core Molding's4, the Company's Mexican subsidiary entered into a 10-year
lease agreement for a manufacturing facility in Matamoros, Mexico. The Company leases 266,717 square
feet of a 313,221 square feet facility, with an option to lease the entire
facility. The Company
has an option to purchase the facility at any time during the first seven years.
The Company may cancel the lease upon giving six months notice to the lessor.
Annual rent on the facility is determined based on the
number of square feet rented multiplied by the following factors: year one and
two equals $0.24 per square foot; year three equals $0.28 per square foot; year
four equals $0.30 per square foot; and years five through ten will be based on
the previous year's monthly rental rate plus a percentage increase or decrease
based on the Consumer Price Index.
Core Molding also leases a warehouse facility in Brownsville, Texas.
The lease term of this facility is three years and provides for monthly rental
payments of $7,560. This lease is cancelable with sixty days written notice.
Total rental expense was $4,388,000, $4,341,000 and $3,757,000 for
2003, 2002 and $3,301,000 for
2002, 2001 and 2000.2001.
The future minimum lease payments under non-cancelable operating leases
that have lease terms in excess of one year are as follows:
2003 $3,464,000
2004 3,546,000
2005 3,546,000
2006 3,254,000
2007 2,852,000
Thereafter 1,614,000
-----------
Total minimum lease payments $18,276,000
============
32
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) represents net income (loss) plus the
results of certain non-shareowners' equity changes not reflected in the
Consolidated Statement of Operations. The components of comprehensive income
(loss), net of tax, are as follows:
2002 2001 2000
----------- ----------- -----------
Net income/(loss)2004 $ 2,006,423 $(1,860,141) $ 715,351
Cumulative effect of change in accounting principle -- (104,762) --
(SFAS No. 133) on other comprehensive income
Hedge accounting effect of interest rate swap (268,361) (137,343) --3,546,000
2005 3,546,000
2006 3,254,000
2007 2,852,000
2008 927,000
Thereafter 688,000
-----------
----------- -----------
Comprehensive income (loss) $ 1,738,062 $(2,102,246) $ 715,351
=========== ===========Total minimum lease payments $14,813,000
===========
8. EQUITY
ANTI-TAKEOVER MEASURES
Core Molding'sThe Company's Certificate of Incorporation and By-laws contain certain
provisions designed to discourage specific types of transactions involving an
actual or threatened change of control of Core Molding.the Company. These provisions, which
are designed to make it more difficult to change majority control of the Board
of Directors without its consent, include the following provisions related to removal of
Directors, the approval of a merger and certain other transactions as outlined
in the Certificate of Incorporation and any amendments to these
provisions:those provisions.
RESTRICTIONS ON TRANSFER
Core Molding'sThe Company's Certificate of Incorporation also contains a provision (the
"Prohibited Transfer Provision") designed to help assure the continued
availability of Core Molding'sthe Company's substantial net operating loss and capital loss
carryforwards (see Note 10) by seeking to prevent an "ownership change" as
defined under current Treasury Department income tax regulations. Under the
Prohibited Transfer Provision, if a stockholder transfers or agrees to transfer
stock, the transfer will be prohibited and void to the extent that it would
cause the transferee to hold a "Prohibited Ownership Percentage" (as defined in
Core Molding'sthe Company's Certificate of Incorporation, but generally, means direct and
indirect ownership of 4.5% or more of the Company's common stock) or if the
transfer would result in the transferee's ownership increasing if the transferee
had held a Prohibited Ownership Percentage within the three prior years or if
the transferee's ownership percentage already exceeds the Prohibited Ownership
Percentage under applicable Federal income tax rules. The Prohibited Transfer
Provision does not prevent transfers of stock between persons who do not hold a
Prohibited Ownership Percentage.
PREFERRED STOCK
Core Molding has authorized 10,000,000 shares of preferred stock (par
value: $0.01) of which none is issued.
3330
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. INCENTIVE STOCK PLANS
STOCK OPTIONS
The Company has a Long Term Equity Incentive Plan (the "Plan"), as
originally approved by the shareholders in May 1997, and as amended in May 2000
to increase the number of shares authorized for issuance, that allows for grants
to directors and key employees of non-qualified stock options, incentive stock
options, director options, stock appreciation rights, restricted stock,
performance shares, performance units and other incentive awards up to an
aggregate of 3.0 million awards, each representing a right to buy a share of Core Molding'sthe
Company's common stock. The Plan expires on the earlier of December 31, 2006, or
the date the maximum number of available awards under the plan have been
granted.
During 2003, 2002 2001 and 2000,2001, the Company granted stock options under the
plan. The options have vesting schedules of five or nine and one-half years from
the date of grant, are not exercisable after ten years from the date of grant,
and were granted at prices which equaled or exceeded the fair market value of
Core Molding'sthe Company's common stock at the date of grant.
The weighted average fair value of options granted during 2003, 2002
and 2001 was $2,18, $1.40 and 2000 were $1.40, $1.17, and $1.84, respectively. The fair value of the options
granted were estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: risk free interest rate of
5%, no expected dividend yield, expected lives of 8 and 9 years and expected
volatility of 56%, 89% for 2002,and 87% for 2003, 2002 and 2001, and 104%respectively.
On August 4, 2003, of the 1,171,500 stock options outstanding, 978,000
options were tendered for 2000.cancellation. The Company issued 855,950 options on
February 9, 2004, at $3.21 per share.
The following summarizes all stock option activity for the years ended
December 31:
2003 2002 2001
2000
--------------------------- -------------------------- ----------------------------------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------------- ---------- ------------ ---------- ----------- ------------------ --------- -------- --------- --------
Outstanding - beginning of year 1,149,000 $ 3.10 1,168,000 $ 3.11 1,038,100 $ 3.19
Granted 84,500 2.75 32,000 2.75 467,500 2.75
Forfeited (24,500) 3.26 (51,000) 2.89 (337,600) 2.88
--------- ------ --------- ------ --------- ------
Outstanding - end of year 1,209,000 $ 3.07 1,149,000 $ 3.10 1,168,000 $ 3.11
Granted 35,000 3.33 84,500 2.75 32,000 2.75
Forfeited (1,030,000) 3.11 (24,500) 3.26 (51,000) 2.89
---------- -------- --------- -------- --------- --------
Outstanding - end of year 214,000 $ 2.93 1,209,000 $ 3.07 1,149,000 $ 3.10
========== ======== ========= ============== ========= ====== ========= ==============
Exercisable at December 31 93,100 $ 3.17 622,050 $ 3.17 506,250 $ 3.15
313,350 $ 3.19========== ======== ========= ============== ========= ====== ========= ==============
Options available for grant 2,778,400 1,783,400 1,843,400
1,824,400
=================== ========= =========
31
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The following table summarizes information about stock options outstanding and
exercisable as of December 31, 2002:2003:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------
WEIGHTED
WEIGHTED AVERAGE WEIGHTED
RANGE OF NUMBER OF AVERAGE CONTRACTUAL LIFE NUMBER OF WEIGHTED AVERAGE
EXERCISE PRICES OPTIONS EXERCISE PRICE IN YEARS OPTIONS EXERCISE PRICE
------------------------ -------------- ---------------- ----------------- --------------- -------------------------- --------------
$2.75 869,500157,000 $ 2.75 6.3 417,4006.2 72,700 $ 2.75
$3.33 35,000 3.33 9.8 - 0.00
$3.40 to $3.81 269,50022,000 3.58 5.6 148,650 3.63
$5.13 70,000 5.13 5.4 56,000 5.13
--------- ------4.6 20,400 3.57
------- ------ 1,209,000------ ------
214,000 $ 3.07 622,0502.93 93,100 $ 3.17
================ ====== ============= ======
34
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)PHANTOM STOCK AGREEMENT
In 2000, the Company issued 150,000 phantom stock units to an officer.
For each unit, the officer is entitled to a cash payment of an amount equal to
the excess of the market value on the date of the exercise over $2.75. The units
vest on December 31, 2004 and expire one year later, assuming continued
employment of the officer. Compensation expense was $26,000 in 2003, and $0 in
2002 and 2001.
10. INCOME TAXES
Components of the provision (credit) for income taxes are as follows:
2003 2002 2001
2000---------- ----------- ----------- --------------------
Current:
Federal - US $ (111,000)72,000 $ (217,000) $ 24,000
$ 27,000
Federal - MexicoForeign 224,000 301,000 -- ---
State and local (20,000)106,000 (29,000) 6,000
204,000---------- ----------- ----------- -----------
170,000---------
402,000 55,000 30,000 231,000
Deferred:
Federal 548,000 491,000 (655,000) 351,000
State and local 23,000 523,000 37,000 (66,000)
Increase in valuation allowance
for net operating loss carryforward --- - 646,000
------------ ----------- ----------- --------------------
571,000 1,014,000 28,000
285,000---------- ----------- ----------- --------------------
Provision for income taxes $ 1,184,000973,000 $ 1,069,000 $ 58,000
$ 516,000========== =========== =========== ====================
A reconciliation of the income tax provision based on the federal
statutory income tax rate of 34% to the Company's income tax provision for the
year ended December 31 is as follows:
2003 2002 2001
2000--------- ----------- ----------- --------------------
Provision at federal statutory rate - US $ 1,085,000897,000 $ (613,000) $ 419,000980,000 $(613,000)
Effect of foreign taxes (14,000) 32,000 -- ---
State and local tax expense, net of federal benefit 81,00064,000 71,000 17,000
91,000Non-deductible expenses 10,000 15,000 8,000
Other 16,000 (29,000) -
Increase in valuation allowance for net operating
loss carryforward - - 646,000
--
Non-deductible expenses 15,000 8,000 6,000
Revision of prior years' taxes (29,000) -- ----------- ----------- ----------- --------------------
Provision for income taxes $ 1,184,000973,000 $ 1,069,000 $ 58,000
$ 516,000========= =========== =========== ====================
Deferred tax assets (liabilities) consist of the following at December 31:
2002 2001
------------ ------------
Current Asset:
Accrued liabilities $ 1,019,000 $ 974,000
Other, net 132,000 106,000
------------ ------------
Total current asset 1,151,000 1,080,000
Non-current asset:
Property, plant and equipment 3,126,000 3,709,000
Net operating loss carryforwards 5,785,000 6,974,000
Postretirement benefits 2,608,000 2,257,000
Interest rate swap 263,000 125,000
Other, net 389,000 53,000
------------ ------------
Total non-current asset 12,171,000 13,118,000
------------ ------------
Total deferred tax asset 13,322,000 14,198,000
Less valuation allowance (1,425,000) (1,425,000)
------------ ------------
Total deferred tax asset - net $ 11,897,000 $ 12,773,000
============ ============
3532
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Deferred tax assets (liabilities) consist of the following at December 31:
2003 2002
------------ ------------
Current Asset:
Accrued liabilities $ 982,000 $ 1,019,000
Other, net 400,000 132,000
------------ ------------
Total current asset 1,382,000 1,151,000
Non-current asset:
Property, plant and equipment 2,903,000 3,126,000
Net operating loss carryforwards 5,172,000 5,785,000
Postretirement benefits 2,869,000 2,608,000
Interest rate swap 207,000 263,000
Other, net 162,000 389,000
------------ ------------
Total non-current asset 11,313,000 12,171,000
------------ ------------
Total deferred tax asset 12,695,000 13,322,000
Less valuation allowance (1,425,000) (1,425,000)
------------ ------------
Total deferred tax asset - net $ 11,270,000 $ 11,897,000
============ ============
At December 31, 2002, Core Molding2003, the Company had approximately $17.0$15.2 million of
NOL carryforwards available to offset future taxable income. A valuation
allowance has been provided for those NOL carryforwards, and temporary
differences, which are estimated to
expire before they are utilized. The valuation allowance at December 31, 2002,2003,
assumes that it is more likely than not that approximately $4,200,000 of the
cumulative net operating losses will not be realized before their expiration
date.
Core Molding'sThe Company's NOL carryforwards expire as follows:
2008 $10,560,000
2009 3,614,000
2010 638,000
2011 357,000
2021 1,846,000
------------
Total $17,015,000
============
2008 $ 8,750,000
2009 3,614,000
2010 638,000
2011 362,000
2021 1,847,000
-----------
Total $15,211,000
===========
33
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
11. POSTRETIREMENT BENEFITS
Core MoldingThe Company provides postretirement benefits to substantially all of
its United States employees. Costs associated with postretirement benefits
include pension expense, postretirement health care and life insurance expense
and expense related to contributions to two 401(k) defined contribution plans.
In addition, Core Moldingthe Company also participates in a multi-employer defined benefit
plan for its United States union represented employees. All of Core Molding'sthe Company's
United States union employees are covered under a multi-employer defined benefit
pension plan administered under a collective bargaining agreement. Core MoldingThe Company
does not administer this plan and contributions are determined in accordance
with provisions in the negotiated labor contract.
Prior to the acquisition of Columbus Plastics from International,
certain of Core Molding'sthe Company's employees were participants in various International
sponsored pension and postretirement plans. The International pension plan for
non-represented employees was non-contributory and both benefits and years of
service were frozen as of the date of the Acquisition.acquisition of Columbus Plastics. In
connection with the Acquisition, International retained responsibility for the
vested benefits as of December 31, 1996, and Core Moldingthe Company agreed to reimburse
International for early retirement subsidies for certain employees. The
accumulated benefit obligation, which equals the projected benefit obligation
and net liability, is $233,000 at December 31, 2003 and $218,000 at December 31,
2002 and $203,000 at December 31, 2001.2002.
The postretirement health and life insurance plan provides healthcare
and life insurance for certain employees upon their retirement, along with their
spouses and certain dependents and requires cost sharing between Core Molding,the Company,
International and the participants in the form of premiums, co-payments and
deductibles. Core MoldingThe Company and International share the cost of benefits for
certain employees, using a formula that allocates the cost based upon the
respective portion of time that the employee was an active service participant
after the Acquisitionacquisition of Columbus Plastics to the period of active service prior
to the Acquisition.
36
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)acquisition of Columbus Plastics.
The funded status of the Company's postretirement health and life
insurance benefits plan as of December 31, 20022003 and 20012002 and reconciliation with
the amounts recognized in the consolidated balance sheets are provided below:
POST RETIREMENT BENEFITS
-------------------------------------------
2003 2002 2001 2000
----------- ----------- -----------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 8,852,000 $ 6,787,000 $ 4,678,000
$ 4,020,000
Service cost 451,000 434,000 385,000
367,000
Interest cost 494,000 491,000 351,000
301,000
Unrecognized loss/(gain)loss 99,000 1,196,000 1,427,000
(10,000)
Benefits paid (133,000) (56,000) (54,000) --
----------- ----------- -----------
BENEFIT OBLIGATION AT END OF YEAR $ 9,763,000 $ 8,852,000 $ 6,787,000 $ 4,678,000
----------- ----------- -----------
Unfunded status $(9,763,000) $(8,852,000) $(6,787,000) $(4,678,000)
Unrecognized net loss 3,158,000 3,134,000 2,020,000 614,000
----------- ----------- -----------
Net liability $(6,605,000) $(5,718,000) $(4,767,000) $(4,064,000)
=========== =========== ===========
PLAN ASSETS -- -- --
=========== =========== ===========
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31:
Discount rate 6.00% 6.50% 7.25% 7.50%
34
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The components of expense for all of Core Molding'sthe Company's postretirement benefits plans
are as follows:
2003 2002 2001 2000
---------- ---------- ----------
Pension Expense:
Interest cost $ 15,000 $ 15,000 $ 15,000
Defined contribution plan
contributions 282,000 231,000 329,000 296,000
Multi-employer plan
contributions 324,000 352,000 240,000 331,000
---------- ---------- ----------
Total Pension Expense 621,000 598,000 584,000 642,000
---------- ---------- ----------
Health and Life Insurance:
Service cost 451,000 434,000 385,000
367,000
Interest cost 494,000 491,000 351,000 301,000
Amortization of net loss 75,000 83,000 21,000 38,000
---------- ---------- ----------
Net periodic benefit cost 1,020,000 1,008,000 757,000 706,000
---------- ---------- ----------
Total postretirement benefits
expense $1,641,000 $1,606,000 $1,341,000 $1,348,000
========== ========== ==========
The weighted average rate of increase in the per capita cost of covered health
care benefits is projected to be 8.7%9.65%. The rate is projected to decrease
gradually to 5% by the year 20072008 and remain at that level thereafter. The
comparable assumptions for the prior year were 9.65%8.7% and 5%.
37
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The effect of changing the health care cost trend rate by one-percentage point
for each future year is as follows:
1-PERCENTAGE1- PERCENTAGE 1-PERCENTAGE
POINT INCREASE POINT DECREASE
--------------------- ----------------------------------- --------------
Effect on total of service and interest cost components $ 208,869213,306 $ (162,355)(165,804)
Effect on postretirement benefit obligation 1,965,801 (1,608,582)1,032,995 (875,980)
The estimated future benefit payments of the health care plan are:
Fiscal 2004 $ 42,000
Fiscal 2005 63,000
Fiscal 2006 94,000
Fiscal 2007 136,000
Fiscal 2008 180,000
Fiscal 2009 - 2013 1,900,000
12. RELATED PARTIESPARTY TRANSACTIONS
In connection with the acquisition of Columbus Plastics, Core Moldingthe Company
and International entered into a Supply Agreement. Under the terms of the Supply
Agreement, International agreed to purchase from Core Molding,the Company, and Core Moldingthe Company
agreed to sell to International at negotiated prices, which approximate fair
value, all of International's original equipment and
service requirements for Fiberglass Reinforced Parts using the Sheet Molding
CompositeCompound process as they then existed or as they may be improved or modified.
AsIn May 2003, the Company entered into a Comprehensive Supply Agreement, which
was effective as of DecemberNovember 1, 2002. Under this Comprehensive Supply Agreement,
the Company became the primary supplier of International's original equipment
and service requirements for fiberglass reinforced parts using the SMC process,
as long as the Company remains competitive in cost, quality and delivery,
through October 31, 2001,
the contract expired and has not been renewed, and business with International
continues on a purchase order basis, like business with all of Core Molding's
other customers. The purchase orders typically provide volume commitments for
four weeks at prices previously negotiated. Customers can update their orders on
a daily basis for changes in demand that allow them to run their inventories on
a "just-in-time" basis.2006.
35
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
International owns 43.6% of the Company's outstanding common stock.
Sales to International were $51,205,000 in 2003, $45,823,000 in 2002 and
$40,765,000 in 2001, and
$52,276,000 in 2000, of which $6,418,000$5,617,000 and $6,147,000$6,418,000 had not been received as
of December 31, 20022003 and 20012002 and were included in accounts receivable.
Receivables as of December 31, 20022003 and 20012002 also include an additional$18,000 and $964,000,
and $875,000,
respectively, for tooling costs owed by International. Accounts payable included
$382,000$0 and $211,000,$382,000, respectively, as of December 31, 20022003 and 20012002 for product
returns, returnable container deposits, material purchases from International
and rework charges. Core MoldingThe Company expensed $1,487,000 in 2003, $1,616,000 in 2002
and $1,625,000 in 2001, and $1,611,000 in 2000, for interest expense on its note payable to
International. During 2003, the Secured
NoteCompany repaid $19,720,150 of which $9,000 had not been paid atthe International
note and the balance of $200,000 was replaced by a note due December 31, 2002. There was no
outstanding liability for accrued interest at December 31, 2001.2004.
13. LABOR CONCENTRATION
As of December 31, 2002, Core Molding2003, the Company employed a total of 929948 employees,
which consists of 401438 employees in its U.S. operations and 528510 employees in its
Mexican operations. Of these 929438 employees, 196248 are covered by a collective
bargaining agreement with the International Association of Machinists and
Aerospace Workers ("IAM"), which extends to August 7, 2004, and 464495 are covered
by a collective bargaining agreement with Sindicato de Jorneleros y Obreros,
which extends to January 16, 2005.
14. COMMITMENTS AND CONTINGENCIES
In late 2001The Company is involved in various litigation arising in the ordinary
course of business. The Company and early 2002, several lawsuits were filed in Mexico
against Airshield de Mexico, which is a Mexican subsidiary of Airshield
Corporation. As noted above, Core Molding acquired substantially all the assets
of Airshield Corporation in October 2001; however, Core Molding did not purchase
the assets or the stock of Airshield de Mexico. The lawsuits were filed by
certain of Airshield de Mexico's vendors as a result of unpaid debts of
Airshield de Mexico. Through these lawsuits, the vendors have attempted to
foreclose on inventory and equipment owned by Core Molding and located at its
Mexico facility. The total value of these assets at December 31, 2002, was
$1,027,000. To date, Core Molding has been successful in preventing these
foreclosure attempts. Core Molding is taking various actions through the Mexican
legal system to defend its assets and to prevent future claims. Core Molding'
Mexican legal counsel has advisedbelieve the Company that it has valid legal position
to support the ownershipresolution of
these assets; however, as with any case involvingsuch litigation the outcome of these claims is uncertain.
In July 2001, a former employee of Core Molding filed a suit in United
States District Court, Southern District of Ohio, Eastern Division, claiming her
employment was terminated in 1999 as a result of race discrimination. In
December 2002, the two parties settled this suit outside of court. The result of
the settlement didwill not have a material impacteffect on the Company's consolidated
financial position or results of Core
Molding.
38
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)operations.
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations for the years ended December 31, 2003 and 2002. The operating results
for each of the quarters in the period January 1, 2002 and 2001.through September 30,
2003 have been restated as discussed in Note 16 to the consolidated financial
statements.
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL YEAR
----------- ----------- ------------ ----------- ----------- ----------
2002:2003:
Net sales $21,026,271 $26,651,614$29,544,427 $21,139,795 $ 23,398,880 $ 23,012,085 $94,088,85019,334,805 $22,764,307 $92,783,334
Gross margin 3,432,222 4,118,884 3,307,265 2,961,120 13,819,4913,804,022 4,400,290 2,704,692 2,988,903 13,897,907
Income before interest and taxes 1,394,186 1,567,577 1,352,646 768,274 5,082,683
Net income 573,522 667,022 485,466 280,413 2,006,423
Net income per common share:
Basic and diluted $0.06 $0.07 $0.05 $0.03
$0.21
2001:
Net sales $20,533,600 $18,443,413 $ 14,535,477 $ 19,667,041 $73,179,531
Gross margin 2,391,036 2,434,952 936,180 2,096,586 7,858,754
Income (loss) before interest and taxes 390,067 698,230 (899,778) (296,529) (108,010)1,321,777 2,016,937 394,692 669,761 4,403,167
Net income (loss) 3,656 175,757 (785,786) (1,253,768) (1,860,141)515,439 969,292 (5,491) 186,019 1,665,259
Net income (loss) per common
share:
Basic and diluted $.00 $.02 $(.08) $(.13)
$(0.19)$ 0.05 $ 0.10 $ (0.00) $ 0.02 $ 0.17
2002 (RESTATED):
Net sales $21,026,271 $26,651,614 $ 23,398,880 $23,012,085 $94,088,850
Gross margin 3,345,222 4,019,884 3,247,265 2,899,120 13,511,491
Income before interest and taxes 1,307,186 1,468,577 1,292,646 706,274 4,774,683
Net income 518,973 604,949 447,846 241,539 1,813,307
Net income per common share:
Basic and diluted $ 0.05 $ 0.06 $ 0.05 $ 0.02 $ 0.19
No cash dividends were paid during36
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The restated Condensed Quarterly Financial Data (unaudited) is as follows (in
thousands, except per share data):
QUARTER ENDED
------------------------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
AS AS AS AS
PREVIOUSLY PREVIOUSLY PREVIOUSLY AS PREVIOUSLY AS
REPORTED AS RESTATED REPORTED AS RESTATED REPORTED RESTATED REPORTED RESTATED
---------- ----------- ---------- ----------- ---------- -------- ---------- --------
2003:
Net sales $ 29,544 $ 29,544 $ 21,140 $ 21,140 $ 19,335 $ 19,335
Gross margin 3,931 3,804 4,527 4,400 2,804 2,705 Not Previously Reported
Income before
interest and taxes 1,449 1,322 2,144 2,017 494 395
Net income (loss) 594 515 1,048 969 56 (5)
Net income (loss)
per common share:
Basic and diluted $ 0.06 $ 0.05 $ 0.11 $ 0.10 $ 0.01 $ (0.00)
2002:
Net sales $ 21,026 $ 21,026 $ 26,652 $ 26,652 $ 23,399 $ 23,399 $ 23,012 $ 23,012
Gross margin 3,432 3,345 4,119 4,020 3,307 3,247 2,961 2,899
Income before
interest and taxes 1,394 1,307 1,568 1,469 1,353 1,293 768 706
Net income 574 519 667 605 485 448 280 242
Net income per
common share:
Basic and diluted $ 0.06 $ 0.05 $ 0.07 $ 0.06 $ 0.05 $ 0.05 $ 0.03 $ 0.02
37
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
16. RESTATEMENT
Subsequent to the issuance of the Company's consolidated financial
statements for the year ended December 31, 2002, and 2001.the Company determined that
inventory was overstated as a result of incorrect accounting entries in
connection with the results of physical inventory observations at the Company's
Gaffney, South Carolina facility. Accordingly, the consolidated financial
statements for the year ended December 31, 2002 have been restated from amounts
previously reported.
A summary of significant effects of the restatement are as follows:
December 31, 2002
-----------------------------
As previously
reported As restated
------------- -----------
BALANCE SHEET:
Inventory - finished and work in process $ 2,391,077 $ 2,083,077
Total inventory 4,433,612 4,125,612
Total assets 64,383,713 64,075,713
Taxes 819,621 704,737
Total current liabilities 12,151,054 12,036,170
Retained earnings 435,450 242,334
Total stockholders' equity 19,274,163 19,081,047
Total liabilities and stockholders' equity 64,383,713 64,075,713
Year Ended December 31, 2002
----------------------------
INCOME STATEMENT:
Cost of sales 79,022,177 79,330,177
Total cost of sales 80,269,359 80,577,359
Gross margin 13,819,491 13,511,491
Income before interest and taxes 5,082,683 4,774,683
Income before taxes 3,190,418 2,882,418
Current income taxes 170,457 55,573
Total income taxes 1,183,995 1,069,111
Net income 2,006,423 1,813,307
Basic and diluted earnings per common share 0.21 0.19
38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable
ITEM 9A. CONTROLS AND PROCEDURES
Core Molding Technologies is committed to maintaining disclosure
controls and procedures that are designed to ensure that information required to
be disclosed in its reports filed pursuant to the Securities Exchange Act of
1934 ("the Exchange Act") is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to its management, including its
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
for timely decisions regarding required disclosure. In designing and evaluating
the disclosure controls and procedures, management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives and are subject
to certain limitations, including the exercise of judgment by individuals, the
difficulty to identify unlikely future events, and the difficulty to eliminate
misconduct completely. As a result, there can be no assurance that our
disclosure controls and procedures will prevent all errors or fraud or ensure
that all material information will be made known to management in a timely
manner.
In January 2004, as part of the Company's annual physical inventory
review, the Company learned of certain intentional inventory misstatements by a
former employee that occurred at the Gaffney, South Carolina facility. The Audit
Committee of the Company's Board of Directors immediately began an investigation
into the inventory misstatements, with the assistance of a private investigation
firm and an independent forensic accounting firm.
The investigation confirmed that a concealment of inventory shortages
from 2002 through the third quarter 2003 existed and were limited to the actions
of a former employee at the Gaffney production facility. In the course of its
investigation, the Audit Committee further concluded that material weaknesses in
internal controls specifically relating to the completeness of accounting
policies and procedures and the segregation of duties of certain personnel with
respect to inventory reporting existed at the Gaffney facility.
The Company's investigation determined and the private investigators
and the independent forensic accounting firm confirmed that it was an isolated
incident confined to its Gaffney facility. The investigation also confirmed
that the inventory misstatements masked material and labor inefficiencies
within the plant and that inventory misstatements did not affect any customer
deliveries.
In addition, the investigation determined that the then existing
analysis of monthly inventory trends was broad based and did not include
detailed analysis of scrap disposal as compared to scrap reported. Furthermore,
the investigation found inadequate focus by plant management on inventory
accuracy.
No significant changes in internal controls over financial reporting
were made during the quarter ended December 31, 2003. However, since January 15,
2004, the Company has taken measures to improve the effectiveness of internal
controls and believes these efforts address the matters described above. Certain
measures taken through March 30, 2004 include, but are not limited to, the
following:
- Personnel changes at the Gaffney, South Carolina facility,
including an interim plant manager, a new production manager,
plant accountant, and materials manager.
- Increased monthly analysis of inventory balances and inventory
transactions including scrap analysis and reconciliations,
inventory turns analysis by inventory classification and
additional interim physical inventory analyses, and approval
of manual adjustments to inventory records.
- Continued emphasis by the Company's senior management that
overriding of internal controls will not be tolerated; and
- The establishment of a whistle blower hotline to allow
employees to anonymously report improper conduct.
As required by Rule 13a-15(b) of the Exchange Act, 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. The evaluation examined those disclosure controls and
procedures as of December 31, 2003, the end of the period covered by this
report. Based upon the evaluation, the Company's management, including its Chief
Executive Officer and its Chief Financial Officer, concluded that, as of
December 31, 2003, the Company's disclosure controls and procedures were
effective, except as described above, 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 its Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.
39
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Part III, Item 10 is incorporated by
reference from Core Molding'sThe Company's definitive proxy statement for its annual meeting
of stockholders to be held on or about May 15, 2003,13, 2004, which is expected to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A of
the Securities Exchange Act of 1934 within 120 days after the end of the fiscal
year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Part III, Item 11 is incorporated by
reference from Core Molding'sThe Company's definitive proxy statement for its annual meeting
of stockholders to be held on or about May 15, 2003,13, 2004, which is expected to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A of
the Securities Exchange Act of 1934 within 120 days after the end of the fiscal
year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Part III, Item 12 is incorporated by
reference from Core Molding'sThe Company's definitive proxy statement for its annual meeting
of stockholders to be held on or about May 15, 2003,13, 2004, which is expected to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A of
the Securities Exchange Act of 1934 within 120 days after the end of the fiscal
year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Part III, Item 13 is incorporated by
reference from Core Molding'sThe Company's definitive proxy statement for its annual meeting
of stockholders to be held on or about May 15, 2003,13, 2004, which is expected to be
filed with the Securities and Exchange Commission pursuant to Regulation 14A of
the Securities Exchange Act of 1934 within 120 days after the end of the fiscal
year covered by this report.
ITEM 14. CONTROLSPRINCIPAL ACCOUNTANT FEES AND PROCEDURES
Within the 90 days priorSERVICES
The information required by this Part III, Item 14 is incorporated by
reference from The Company's definitive proxy statement for its annual meeting
of stockholders to the date of this report, the Company
carried out an evaluation, under the supervision andbe held on or about May 13, 2004, which is expected to be
filed with the participationSecurities and Exchange Commission pursuant to Regulation 14A of
the Company's management, includingSecurities Exchange Act of 1934 within 120 days after the Company's Chief Executive Officer and
Chief Financial Officer,end of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company and its consolidated subsidiaries required to be
included in the Company's periodic SEC filings. There were no significant
changes in the Company's internal controls or, to the Company's knowledge, in
other factors that could significantly affect such internal controls subsequent
to the date of the Company's evaluation of its internal controls.fiscal
year covered by this report.
40
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(A) DOCUMENTS FILED AS PART OF THIS REPORT:
(1) FINANCIAL STATEMENTS
The following consolidated financial statements are included
in Part II, Item 8 of this Form 10-K:
Independent Auditors' Report
Consolidated Statements of Operations for the Years
Ended December 31, 2003, 2002 2001(Restated) and 20002001
Consolidated Balance Sheets as of December 31, 2003
and 2002 and 2001(Restated)
Consolidated Statements of Stockholders' Equity and
Comprehensive Income (Loss) for the Years Ended
December 31, 2003, 2002 2001(Restated) and 20002001
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2003, 2002 2001(Restated) and 20002001
Notes to Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule isschedules are
filed with this Annual Report on Form 10-K:
Schedule II - Valuation and Qualifying Accounts and
Reserves for the years ended December 31, 2003, 2002
2001
and 20002001
All other schedules are omitted because of the
absence of the conditions under which they are
required.
(3) EXHIBITS
See Index to Exhibits filed with this Annual Report on Form
10K.10-K.
(b) REPORTS ON FORM 8-K
The CompanyOn January 6, 2004, Core Molding Technologies filed a report on Form 8-K on November 14, 2002,with the
Securities and Exchange Commission regarding the certificationrefinancing of its
note payable with International Truck & Engine Corporation.
On January 26, 2004, Core Molding Technologies filed a Form 8-K with
the financial statements for the period ending
September 30, 2002. The report also included the actual certification
letters as signedSecurities and Exchange Commission regarding a charge resulting
from operational inefficiencies that were concealed by the Chief Executive Officer and Chief Financial
Officer of the Company.intentional
inventory misstatements by a former employee.
41
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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.
By /s/ James L. Simonton
----------------------------------------------------------------------------------
James L. Simonton
President and Chief Executive Officer
Date: March 31, 200330,2004
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
/s/ James L. Simonton President, Chief Executive Officer March 31, 200330, 2004
- ------------------------------------------------------------------------- and Director
James L. Simonton
/s/ Herman F. Dick, Jr. Treasurer and March 31, 200330, 2004
- ------------------------------------------------------------------------- Chief Financial Officer
Herman F. Dick, Jr.
* Director March 31, 200330, 2004
- -------------------------------------------------------------------------
James F. Crowley
* Director March 31, 200330, 2004
- -------------------------------------------------------------------------
Ralph O. Hellmold
* Director March 31, 200330, 2004
- -------------------------------------------------------------------------
Thomas M. Hough
* Director March 31, 200330, 2004
- -------------------------------------------------------------------------
Malcolm M. Prine
* Director March 31, 200330, 2004
- -------------------------------------------------------------------------
Thomas R. Cellitti
* Director March 30, 2004
- ----------------------------
John P. Wright
*By /s/ James L. Simonton Attorney-In-Fact March 31, 2003
------------------------------------30, 2004
-----------------------
James L. Simonton
42
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE II
Consolidated valuation and qualifying accounts and reserves for the years ended
December 31, 2003, 2002 2001 and 2000.2001.
Reserves deducted from asset to which it applies - allowance for doubtful
accounts.
Additions
-------------------------------------------------------
Balance at Charged to Charged to
Beginning Costs & Other Deductions Balance At
of Year Expenses Accounts (A) End of Year
--------------- ------------- --------------- --------------- ------------------------- ---------- ---------- ---------- -----------
Year Ended December 31, 2003 $ 543,000 $ 85,000 $ 249,000 $ 379,000
Year Ended December 31, 2002 $ 715,000 $ 174,000 $ 346,000 $ 543,000
Year Ended December 31, 2001 $ 424,000 $ 454,000 $ 163,000 $ 715,000
Year Ended December 31, 2000 $ 431,000 $ 91,000 $ 98,000 $ 424,000
(A) Amount represents uncollectible accounts written off.
Reserves deducted from asset to which it applies - deferred income tax valuation
allowance.
Additions
-------------------------------------------------------
Balance at Charged to Charged to
Beginning Costs & Other Deductions Balance At
of Year Expenses Accounts (A)Deductions End of Year
--------------- ------------- --------------- --------------- ------------------------- ---------- ---------- ---------- -----------
Year Ended December 31, 20022003 $1,425,000 $ 1,425,000
Year Ended December 31, 2002 $1,425,000 $ 1,425,000
Year Ended December 31, 2001 $ 2,160,000$2,160,000 $ 646,000 $ 1,381,000$1,381,000(A) $ 1,425,000
Year Ended December 31, 2000 $ 2,160,000 $ 2,160,000
(A) Amounts representAmount represents reserves for capital loss carryforwards that expired in
2001.
Reserves deducted from asset to which it applies - inventory obsolescence.
Additions
-------------------------------
Balance at Charged to Charged to
Beginning Costs & Other Deductions Balance At
of Year Expenses Accounts (A) End of Year
--------------- ------------- --------------- --------------- ---------------
Year Ended December 31, 2002 $ 171,000 $ 107,000 $ 278,000
Year Ended December 31, 2001 $ 118,000 $ 53,000 $ 171,000
Year Ended December 31, 2000 $ 0 $ 118,000 $ 118,000
(A) Amount represents inventory that has been disposed.
43
INDEX TO EXHIBITS
Exhibit No. Description Location
- ----------- ----------- ------------------ ---------------------------------- --------------------------------
2(a)(1) Asset Purchase Agreement Incorporated by
dated as of September 12, 1996, reference to Exhibit
as amended October 31, 1996, 2-A to Registration
between Navistar and RYMAC1RYMAC(1) Statement on Form S-4
(Registration
No. 333-15809)
2(a)(2) Second Amendment to Asset Purchase Incorporated by
Agreement dated December 16, 1996(1) reference to 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 Incorporated by
dated as of November 1, 1996, reference to Exhibit
between Core Molding and 2-B to Registration
RYMAC Statement on Form
S-4 (Registration
No. 333-15809)
2(b)(2) First Amendment to Agreement and Filed HereinIncorporated by reference to
Plan of Merger dated as of Exhibit 2(b)(2) tp Annual Report
December 27, 1996 between on Form 10-K for the year
Core Molding and RYMAC Ended December 31, 2002
2(c)(1) Asset Purchase Agreement dated as Incorporated by
of October 10, 2001, between reference to Exhibit 1 to
Core Molding Technologies, Inc. and Form 8K filed
Airshield Corporation October 31, 2001
3(a)(1) Certificate of Incorporation of Incorporated by
Core Molding Technologies, Inc. reference to Exhibit
as filed with the Secretary of State 4(a) to Registration
of Delaware on October 8, 1996 Statement on Form
S-8, (Registration
No. 333-29203)
3(a)(2) Certificate of Amendment of Incorporated by
Certificate of Incorporation reference to Exhibit
of Core Molding Technologies, Inc. 4(b) to Registration
as filed with the Secretary of State Statement on Form
of Delaware on November 6, 1996 S-8 (Registration
No. 333-29203)
44
Exhibit No. Description Location
- ----------- ----------- ------------------ -------------------------------------------- ----------------------------
3(a)(3) Certificate of Incorporation of Core Incorporated by
Molding Technologies Inc., reflecting reference to Exhibit 4(c)
amendments through November 6, to Registration
1996 [for purposes of compliance Statement on Form S-8
with Securities and Exchange (Registration No.
Commission filing requirements only] 333-29203)
3(a)(4) Certificate of Amendment of Certificate Incorporated by
of Incorporation as filed with the Secretary reference to Exhibit 3(a)(4)
of State of Delaware on August 28, 2002 to Quarterly Report on
Form 10-Q for the quarter
ended September 30, 2002
3(b) By-Laws of Core Molding Incorporated by
Technologies, Inc. reference to Exhibit
3-C to Registration
Statement on Form
S-4 (Registration
No. 333-15809)
4(a)(1) Certificate of Incorporation of Incorporated by
Core Molding Technologies, Inc. reference to Exhibit
as filed with the Secretary of State 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 Incorporated by
Certificate of Incorporation reference to Exhibit
of Core Molding Technologies, Inc. 4(b) to Registration
as filed with the Secretary of State Statement on Form
of Delaware on November 6, 1996 S-8 (Registration
No. 333-29203)
4(a)(3) Certificate of Incorporation of Core Incorporated by
Molding Technologies, Inc., reflecting reference to
amendments through November 6, Exhibit 4(c) to
1996 [for purposes of compliance Registration Statement
with Securities and Exchange on Form S-8
Commission filing requirements only] (Registration
No. 333-29203)
4(a)(4) Certificate of Amendment of Certificate Incorporated by
of Incorporation as filed with the Secretary reference to Exhibit 3(a)(4)
of State of Delaware on August 28, 2002 to Quarterly Report on
Form 10-Q for the quarter
ended September 30, 2002
45
Exhibit No. Description Location
- ----------- ----------- ------------------ ---------------------------------------- --------------------
4(b) By-Laws of Core Molding Incorporated by
Technologies, Inc. reference to Exhibit
3-C to Registration
Statement on Form
S-4 (Registration
No. 333-15809)
10(a)(1) Core Molding Technologies, Inc. Incorporated by
Secured Promissory Note, dated reference to Exhibit
December 31, 1996, to Navistar 10(a)(1) to Annual
International Transportation Corp. Report on Form 10-K
for the year ended
December 31, 2001
10(a)(2) Amendment No. 1 to Secured Incorporated by
Promissory Note, dated reference to Exhibit
December 31, 1996, to Navistar 10(a)(2) to Annual
International Transportation Corp. Report on Form 10-K
for the year ended
December 31, 2001
10(a)(3) Amendment No. 2 to Secured Incorporated by
Promissory Note, dated April 6, 1998 reference to Exhibit
to Navistar International Transportation 10(a)(3) to Annual
Corp. Report on Form 10-K
for the year-ended
December 31, 1998
10(a)(4) Amendment No. 3 to Secured Incorporated by
Promissory Note, dated April 20, 1999 reference to Exhibit
to Navistar International Transportation 10(a)(4) to Annual
Corp. Report on Form 10-K
for the year-ended
December 31, 1999
10(d) Registration Rights Agreement,10(a)(5) Payoff Letter of International Truck Filed Herein
& Engine Corporation dated Incorporated byDecember 29,
2003 acknowledging satisfaction of the
obligations under the Secured Promissory
Note, dated December 31, 1996 by and between referencedelivered
to Exhibit
Navistar
International Transportation 10(d) to Annual
Corp. and various other persons who Report on Form 10-K
become parties pursuant to the agreement for the year ended
December 31, 2001
10(e) Loan Agreement,10(a)(6) Core Molding Technologies, Inc. Filed Herein
Unsecured Promissory Note, dated
December 3,29, 2003, to International
Truck & Engine Corporation
10(a)(7) Amendment No. 1 to Unsecured Filed Herein
1997,herein
Promissory Note, dated January 30, 2004
to International Truck and Engine Corp.
10(b) Comprehensive Supply Agreement, Filed herein
dated November 1, 2002, by and
between Core Molding Technologies, Inc.
and International Truck and Engine
Corp.
10(d) Registration Rights Agreement, dated Incorporated by
December 31, 1996, by and between reference to Exhibit
Navistar International Transportation 10(d) to Annual
Corp. and various other persons who Report on Form 10-K
become parties pursuant to the agreement for the year ended
December 31, 2001
46
Exhibit No. Description Location
- ---------- ----------------------------------------- -------------------------------
10(e) Loan Agreement, dated December 3, Incorporated by reference to
1997, by and between Core Molding Exhibit 10(e) to Annual Report
Technologies, Inc. and Key Bank National on Form 10-K for the year ended
Association December 31, 2002
10(e)(1) Amendment, dated March 29, 2001, to Incorporated by reference
the Loan Agreement dated December 3, 1997 to Exhibit 10(e)(1) to
by and between Core Molding Technologies, Annual Report on Form 10-K
Inc. and Key Bank National Association for the year ended December, 31
2000
10(e)(2) Amendment, dated December 12, 2002, to Filed HereinIncorporated by reference to
the Loan Agreement dated December 3, 1997 Exhibit 10(e)(2) to Annual
by and between Core Molding Technologies, Report on Form 10-K for the
Inc. and Key Bank National Association year ended December 31, 2002
10(e)(3) Loan Agreement, date December 30, 2003, Filed herein
by and between Core Molding Technologies,
Inc. and Key Bank National Association
46
Exhibit No. Description Location
- ----------- ----------- --------
Association(2)
10(f) Master Equipment Lease Agreement(2) Filed HereinAgreement(3) Incorporated by reference to
by and between KeyCorp Leasing, Exhibit 10(f) to Annual Report
a division of Key Corporate on Form 10-K for the year
Capital, Inc. and Core Molding ended December 31, 2002
Technologies, Inc.
10(f)(1) Amendment, dated March 29, 2001, to Incorporated by reference
Master Equipment Lease Agreement(2)Agreement(3) by to Exhibit 10(f)(1) to
and between KeyCorp Leasing, Annual Report on Form
a division of Key Corporate 10-K for the year ended
Capital, Inc. and Core Molding December 31, 2000
Technologies, Inc.
10(g) Loan Agreement, dated April 1, Incorporated byFiled Herein
1998, by and between South Carolina
reference to Exhibit
Jobs - Economic Development Authority
10(a)(1) to Quarterly
and Core Molding Technologies, Inc.
Report on Form 10-Q
for the quarter ended
June 30, 1998
10(h) Reimbursement Agreement, dated Incorporated byFiled Herein
April 1, 1998, by and between Core
reference to Exhibit
Molding Technologies, Inc. and Key Bank
10(a)(2) to Quarterly
National Association Report on Form 10-Q
for the quarter ended
June 30, 1998National Association
47
Exhibit No. Description Location
- ---------- ----------------------------------------------- -------------------------------
10(h)(1) Amendment, dated March 29, 2001, to Incorporated by reference
Reimbursement Agreement, dated to Exhibit 10(h)(1) to
April 1, 1998, by and between Core Annual Report on Form
Molding Technologies, Inc. and Key Bank 10-K for the year ended
National Association December 31, 2000
10(i) Core Molding Technologies, Inc. Incorporated by
Employee Stock Purchase Plan reference to Exhibit
4(c) to Registration
Statement on Form S-8
(Registration No. 333-60909)
10(i)(1) 2002 Core Molding Technologies, Inc. Incorporated by
Employee Stock Purchase Plan reference to Exhibit
B to Definitive Proxy
Statement dated April 15, 2002
10(j) Letter Agreement Regarding Terms and Incorporated byFiled Herein
Conditions of Interest Rate Swap
reference to Exhibit 10(j)
Agreement between KeyBank National
to Annual Report on Form
Association and Core Molding 10-K for the year-ended
Technologies, Inc. December 31, 1998
47
Exhibit No. Description Location
- ----------- ----------- ---------
10(k) Long Term Equity Incentive Plan(3)Plan(4) Incorporated by
reference to Exhibit
4(e) to Registration
Statement on Form
S-8 (Registration
No. 333-29203)
10(l) 1995 Stock Option Plan(3)Plan(4) Incorporated by
reference to Exhibit
10(l) to Annual Report
on Form 10-K for the
year ended December 31,
2001
10(m) Informal Cash Filed hereinIncorporated by reference to
Profit Sharing Plan(3)Plan(4) Exhibit 10(m) to Annual Report
On Form 10-K for the year ended
December 31, 2002
10(o) Compensation Agreement with Incorporated by reference
Malcolm M. Prine(3)Prine(4) to Exhibit 10(o) to Annual
Report on Form 10-K for
the year ended December 31,
2000
48
Exhibit No. Description Location
- ---------- ----------------------------------------- -------------------------
11 Computation of Net Income per Share Exhibit 11 is omitted
because the required
information is included
in the Notes to Financial
Statements in Part II,
Item 8 of this Annual
Report on Form 10-K
14 Code of Business Conduct and Ethics Filed Herein
23 Consent of Deloitte & Touche LLP Filed Herein
24 Powers of Attorney Filed Herein
99(a)31(a) Section 302 Certification by James L. Filed Herein
Simonton, President and Chief Executive
Officer
31(b) Section 302 Certification by Herman F. Filed Herein
Dick, Jr., Treasurer and Chief Financial
Officer
32(a) Certification of James L. Simonton, Filed Herein
Chief Executive Officer of Core Molding
Technologies, Inc., dated March 31,30, 2003,
pursuant to 18 U.S.C. Section 1350
99(b)32(b) Certification of Herman F. Dick, Jr., Filed Herein
Chief Financial Officer of Core Molding
Technologies, Inc., dated March 31,30, 2003,
pursuant to 18 U.S.C. Section 1350
(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.
(2)The Loan Agreement filed with this Annual Report on Form 10-K, omits the
exhibits (including Revolving Credit Note, Term Note, Security Agreement, Ohio
Mortgage, South Carolina Mortgage, and Guaranty) and schedules. Core Molding
Technologies, Inc. will provide any omitted exhibit or schedule to the
Securities and Exchange Commission upon request.
(3)The Master Equipment Lease, incorporated by reference in the Exhibits to this
Annual Report on Form 10-K, omits certain schedules (including, addendum to the
schedules) which separately identify equipment subject to the Master Equipment
Lease and certain additional terms applicable to the lease of such equipment.
New schedules may be added under the terms of the Master Equipment Lease from
time to time and existing schedules may change. Core Molding Technologies, Inc.
will provide any omitted schedule to the Securities and Exchange Commission upon
request.
(3) (4)Indicates management contracts or compensatory plans that are required to be
filed as an exhibit to this Annual Report on Form 10-K.
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