þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 31-1481870 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
800 Manor Park Drive, P.O. Box 28183, Columbus, Ohio | 43228 - 0183 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each exchange on which registered | |
Common Stock, par value $.01 |
Large accelerated filero | Accelerated filero | Non-accelerated filero | Smaller reporting companyþ | |||
(Do not check if a smaller reporting company) |
Defined Terms | ||||||||
3 | ||||||||
10 | ||||||||
56 | ||||||||
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EX-10.(i)(1) | ||||||||
EX-23 | ||||||||
EX-24 | ||||||||
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3
• | 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. |
4
4
5
5
• | Control information during various production processes; and | ||
• | Data for statistical batch controls. |
SMC Pounds | SMC Pounds | |||||||
Produced | Produced | |||||||
Year | (Millions) | (Millions) | ||||||
2008 | 22 | |||||||
2007 | 22 | 22 | ||||||
2006 | 31 | 31 | ||||||
2005 | 31 | |||||||
6
7
7
8
8
9
9
10
10
11
11
12
12
13
1314
Approximate | ||||
Square Feet | ||||
Manufacturing/Warehouse | 315,409 | |||
Office | 16,149 | |||
Total | 331,558 |
Approximate | ||||
Square Feet | ||||
Manufacturing/Warehouse | 105,700 | |||
Office | 5,200 | |||
Total | 110,900 |
Approximate | ||||
Square Feet | ||||
Manufacturing/Warehouse | 103,976 | |||
Office | 3,764 | |||
Total | 107,740 |
14
15
Approximate | ||||
Square Feet | ||||
Manufacturing/Warehouse | 309,400 | |||
Office | 3,600 | |||
Total | 313,000 |
1516
Core Molding Technologies, Inc. | Core Molding Technologies, Inc. | High | Low | Core Molding Technologies, Inc. | High | Low | ||||||||||||||||||
Fourth Quarter | 2007 | $ | 7.71 | $ | 6.75 | 2008 | $ | 6.24 | $ | 2.05 | ||||||||||||||
Third Quarter | 2007 | 8.74 | 6.70 | 2008 | 7.49 | 5.50 | ||||||||||||||||||
Second Quarter | 2007 | 8.48 | 6.56 | 2008 | 7.40 | 6.55 | ||||||||||||||||||
First Quarter | 2007 | 10.35 | 7.05 | 2008 | 7.90 | 6.48 | ||||||||||||||||||
Fourth Quarter | 2006 | $ | 11.22 | $ | 6.59 | 2007 | $ | 7.71 | $ | 6.75 | ||||||||||||||
Third Quarter | 2006 | 7.10 | 5.25 | 2007 | 8.74 | 6.70 | ||||||||||||||||||
Second Quarter | 2006 | 7.90 | 5.02 | 2007 | 8.48 | 6.56 | ||||||||||||||||||
First Quarter | 2006 | 8.99 | 5.05 | 2007 | 10.35 | 7.05 |
Number of Shares | Weighted | Number of Shares | ||||||||||||||||||||||
to be Issued Upon | Average | Number of | to be Issued Upon | Weighted | ||||||||||||||||||||
Exercise of | Exercise Price | Shares | Exercise of | Average Exercise | ||||||||||||||||||||
Outstanding | of Outstanding | Remaining | Outstanding | Price of | Number of Shares | |||||||||||||||||||
Options or Vesting | Options or | Available for | Options or | Outstanding | Remaining | |||||||||||||||||||
of Restricted | Restricted | Future | Vesting of | Options or | Available for | |||||||||||||||||||
Plan Category | Grants | Grants | Issuance | Restricted Grants | Restricted Grants | Future Issuance | ||||||||||||||||||
Equity compensation plans approved by stockholders | 682,116 | $ | 3.66 | 2,023,730 | 499,681 | $ | 3.96 | 2,012,596 | ||||||||||||||||
Equity compensation plans not approved by stockholders (1) | 155,650 | $ | 3.21 | — | 155,650 | $ | 3.21 | — |
(1) | On August 4, 2003, the Company issued 261,250 options that were not covered under the Plan at $3.21 to its Directors. |
1617
* | $100 invested on 12/31/ | |
Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||
(In thousands, | ||||||||||||||||||||||||||||||||||||||||
(In thousands, | Years Ended December 31, | |||||||||||||||||||||||||||||||||||||||
except per share data) | 2007 | 2006 | 2005 | 2004 | 2003 | 2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||||||||||||||||
Operating Data: | ||||||||||||||||||||||||||||||||||||||||
Product sales | $ | 101,045 | $ | 150,174 | $ | 124,910 | $ | 103,733 | $ | 81,295 | $ | 110,539 | $ | 101,045 | $ | 150,174 | $ | 124,910 | $ | 103,733 | ||||||||||||||||||||
Tooling sales | 21,667 | 12,156 | 5,633 | 8,112 | 11,488 | 6,116 | 21,667 | 12,156 | 5,633 | 8,112 | ||||||||||||||||||||||||||||||
Net sales | 122,712 | 162,330 | 130,543 | 111,845 | 92,783 | 116,655 | 122,712 | 162,330 | 130,543 | 111,845 | ||||||||||||||||||||||||||||||
Gross margin | 16,968 | 29,869 | 23,275 | 17,113 | 13,898 | 21,210 | 16,968 | 29,869 | 23,275 | 17,113 | ||||||||||||||||||||||||||||||
Income before interest and taxes | 5,569 | 15,856 | 10,394 | 6,572 | 4,403 | 9,190 | 5,569 | 15,856 | 10,394 | 6,572 | ||||||||||||||||||||||||||||||
Net income | 3,726 | 10,411 | 6,286 | 5,135 | 1,665 | 5,643 | 3,726 | 10,411 | 6,286 | 5,135 | ||||||||||||||||||||||||||||||
Earnings Per Share Data: | ||||||||||||||||||||||||||||||||||||||||
Net income per common share: | ||||||||||||||||||||||||||||||||||||||||
Basic | .43 | 1.03 | .63 | .53 | .17 | .84 | .43 | 1.03 | .63 | .53 | ||||||||||||||||||||||||||||||
Diluted | .41 | 1.00 | .60 | .52 | .17 | .81 | .41 | 1.00 | .60 | .52 | ||||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||||||||||||||
Total assets | 61,695 | 89,506 | 74,221 | 68,960 | 56,152 | 73,831 | 61,695 | 89,506 | 74,221 | 68,960 | ||||||||||||||||||||||||||||||
Working capital | 6,253 | 27,575 | 22,766 | 13,530 | 8,544 | 10,631 | 6,253 | 27,575 | 22,766 | 13,530 | ||||||||||||||||||||||||||||||
Long-term debt | 5,914 | 7,779 | 9,595 | 11,371 | 12,999 | 11,129 | 5,914 | 7,779 | 9,595 | 11,371 | ||||||||||||||||||||||||||||||
Stockholders’ equity | 21,827 | 42,694 | 34,141 | 26,277 | 20,854 | 28,975 | 21,827 | 42,694 | 34,141 | 26,277 | ||||||||||||||||||||||||||||||
Return on Equity | 17 | % | 24 | % | 18 | % | 20 | % | 8 | % | 19 | % | 17 | % | 24 | % | 18 | % | 20 | % |
1718
1819
20
21
19
20
22
2008 | 2009 - 2010 | 2011 - 2012 | 2013 and after | Total | 2009 | 2010 – 2011 | 2012 – 2013 | 2014 and after | Total | |||||||||||||||||||||||||||||||
Debt | $ | 1,866,000 | $ | 3,866,000 | $ | 1,627,000 | $ | 420,000 | $ | 7,779,000 | $ | 2,906,000 | $ | 6,227,000 | $ | 4,638,000 | $ | 264,000 | $ | 14,035,000 | ||||||||||||||||||||
Line of credit | 2,252,000 | — | — | — | 2,252,000 | 1,194,000 | — | — | — | 1,194,000 | ||||||||||||||||||||||||||||||
Interest | 365,000 | 419,000 | 115,000 | 4,000 | 903,000 | 1,502,000 | 1,469,000 | 745,000 | 253,000 | 3,969,000 | ||||||||||||||||||||||||||||||
Operating lease obligations | 604,000 | 941,000 | 11,000 | — | 1,556,000 | 362,000 | 349,000 | — | — | 711,000 | ||||||||||||||||||||||||||||||
Contractual commitments for capital expenditures | 486,000 | — | — | — | 486,000 | 8,455,000 | — | — | — | 8,455,000 | ||||||||||||||||||||||||||||||
Postretirement benefits | 489,000 | 934,000 | 1,396,000 | 13,623,000 | 16,442,000 | 520,000 | 890,000 | 1,375,000 | 13,093,000 | 15,878,000 | ||||||||||||||||||||||||||||||
Unrecognized tax benefit | 24,000 | — | — | — | 24,000 | |||||||||||||||||||||||||||||||||||
Total | $ | 6,086,000 | $ | 6,160,000 | $ | 3,149,000 | $ | 14,047,000 | $ | 29,442,000 | $ | 14,939,000 | $ | 8,935,000 | $ | 6,758,000 | $ | 13,610,000 | $ | 44,242,000 |
21
23
24
22
25
23
26
2427
/s/ Deloitte & Touche LLP Columbus, Ohio | ||
2528
Years Ended December 31, | Years Ended December 31, | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2008 | 2007 | 2006 | |||||||||||||||||||
Net sales: | ||||||||||||||||||||||||
Products | $ | 101,045,056 | $ | 150,173,598 | $ | 124,909,485 | $ | 110,538,646 | $ | 101,045,056 | $ | 150,173,598 | ||||||||||||
Tooling | 21,666,831 | 12,156,392 | 5,633,379 | 6,116,189 | 21,666,831 | 12,156,392 | ||||||||||||||||||
Total sales | 122,711,887 | 162,329,990 | 130,542,864 | 116,654,835 | 122,711,887 | 162,329,990 | ||||||||||||||||||
Cost of sales | 103,350,263 | 130,093,453 | 105,054,151 | 93,194,073 | 103,350,263 | 130,093,453 | ||||||||||||||||||
Postretirement benefits expense | 2,393,642 | 2,367,602 | 2,213,622 | 2,251,179 | 2,393,642 | 2,367,602 | ||||||||||||||||||
Total cost of sales | 105,743,905 | 132,461,055 | 107,267,773 | 95,445,252 | 105,743,905 | 132,461,055 | ||||||||||||||||||
Gross margin | 16,967,982 | 29,868,935 | 23,275,091 | 21,209,583 | 16,967,982 | 29,868,935 | ||||||||||||||||||
Selling, general, and administrative expense | 10,856,539 | 13,488,297 | 12,353,191 | 11,507,890 | 10,856,539 | 13,488,297 | ||||||||||||||||||
Postretirement benefits expense | 542,221 | 524,889 | 528,147 | 512,108 | 542,221 | 524,889 | ||||||||||||||||||
Total selling, general, and administrative expense | 11,398,760 | 14,013,186 | 12,881,338 | 12,019,998 | 11,398,760 | 14,013,186 | ||||||||||||||||||
Income before interest and income taxes | 5,569,222 | 15,855,749 | 10,393,753 | 9,189,585 | 5,569,222 | 15,855,749 | ||||||||||||||||||
Interest income | 542,167 | 645,120 | 226,202 | — | 542,167 | 645,120 | ||||||||||||||||||
Interest expense | (717,162 | ) | (488,310 | ) | (750,763 | ) | (689,135 | ) | (717,162 | ) | (488,310 | ) | ||||||||||||
Income before income taxes | 5,394,227 | 16,012,559 | 9,869,192 | 8,500,450 | 5,394,227 | 16,012,559 | ||||||||||||||||||
Income taxes: | ||||||||||||||||||||||||
Current | 1,540,421 | 3,956,972 | 828,012 | 2,866,659 | 1,540,421 | 3,956,972 | ||||||||||||||||||
Deferred | 127,333 | 1,644,940 | 2,755,124 | (9,695 | ) | 127,333 | 1,644,940 | |||||||||||||||||
Total income taxes | 1,667,754 | 5,601,912 | 3,583,136 | 2,856,964 | 1,667,754 | 5,601,912 | ||||||||||||||||||
Net income | $ | 3,726,473 | $ | 10,410,647 | $ | 6,286,056 | $ | 5,643,486 | $ | 3,726,473 | $ | 10,410,647 | ||||||||||||
Net income per common share: | ||||||||||||||||||||||||
Basic | $ | .43 | $ | 1.03 | $ | 0.63 | $ | .84 | $ | .43 | $ | 1.03 | ||||||||||||
Diluted | $ | .41 | $ | 1.00 | $ | 0.60 | $ | .81 | $ | .41 | $ | 1.00 | ||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||||||
Basic | 8,686,905 | 10,078,800 | 9,913,209 | 6,742,316 | 8,686,905 | 10,078,800 | ||||||||||||||||||
Diluted | 9,004,429 | 10,387,122 | 10,412,774 | 6,992,249 | 9,004,429 | 10,387,122 | ||||||||||||||||||
2629
December 31, | December 31, | |||||||||||||||
2007 | 2006 | 2008 | 2007 | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash | $ | — | $ | 16,096,223 | $ | — | $ | — | ||||||||
Accounts receivable (less allowance for doubtful accounts: | ||||||||||||||||
2007 - $334,000 and 2006 - $262,000) | 12,469,502 | 22,456,177 | ||||||||||||||
Accounts receivable (less allowance for doubtful accounts: 2008 — $109,000 and 2007 — $334,000) | 15,435,103 | 12,469,502 | ||||||||||||||
Inventories: | ||||||||||||||||
Finished and work in process goods | 3,333,119 | 2,793,993 | 4,991,848 | 3,333,119 | ||||||||||||
Stores | 5,011,291 | 4,598,983 | 4,740,375 | 5,011,291 | ||||||||||||
Total inventories | 8,344,410 | 7,392,976 | ||||||||||||||
Total inventories, net | 9,732,223 | 8,344,410 | ||||||||||||||
Deferred tax asset | 1,625,781 | 1,529,592 | 1,869,198 | 1,625,781 | ||||||||||||
Foreign sales tax receivable | 959,767 | 1,032,058 | 584,230 | 959,767 | ||||||||||||
Income tax receivable | — | 1,432,324 | ||||||||||||||
Prepaid expenses and other current assets | 632,329 | 730,109 | 876,094 | 632,329 | ||||||||||||
Total current assets | 24,031,789 | 50,669,459 | 28,496,848 | 24,031,789 | ||||||||||||
Property, plant, and equipment | 59,906,910 | 56,927,053 | 71,970,638 | 59,906,910 | ||||||||||||
Accumulated depreciation | (29,691,245 | ) | (26,389,062 | ) | (33,155,187 | ) | (29,691,245 | ) | ||||||||
Property, plant, and equipment — net | 30,215,665 | 30,537,991 | 38,815,451 | 30,215,665 | ||||||||||||
Deferred tax asset | 6,173,514 | 6,916,348 | 5,318,623 | 6,173,514 | ||||||||||||
Goodwill | 1,097,433 | 1,097,433 | 1,097,433 | 1,097,433 | ||||||||||||
Customer list/ Non-compete | 87,629 | 138,814 | 37,139 | 87,629 | ||||||||||||
Other assets | 89,168 | 145,668 | 65,598 | 89,168 | ||||||||||||
Total | $ | 61,695,198 | $ | 89,505,713 | $ | 73,831,092 | $ | 61,695,198 | ||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Current portion long-term debt | $ | 1,865,716 | $ | 1,815,716 | $ | 2,905,716 | $ | 1,865,716 | ||||||||
Notes payable line of credit | 2,251,863 | — | 1,193,965 | 2,251,863 | ||||||||||||
Accounts payable | 8,537,895 | 10,735,295 | 6,866,388 | 8,537,895 | ||||||||||||
Tooling in progress | 102,419 | 1,179,684 | 212,065 | 102,419 | ||||||||||||
Current portion graduated lease payments | — | 70,373 | ||||||||||||||
Current portion of postretirement benefit liability | 489,000 | 247,000 | 520,000 | 489,000 | ||||||||||||
Accrued liabilities: | ||||||||||||||||
Compensation and related benefits | 3,350,867 | 7,111,475 | 4,715,884 | 3,350,867 | ||||||||||||
Interest payable | 89,721 | 76,373 | 96,103 | 89,721 | ||||||||||||
Taxes | 23,221 | — | 427,972 | 23,221 | ||||||||||||
Other | 1,067,792 | 1,858,662 | 928,080 | 1,067,792 | ||||||||||||
Total current liabilities | 17,778,494 | 23,094,578 | 17,866,173 | 17,778,494 | ||||||||||||
Long-term debt | 5,913,563 | 7,779,279 | 11,129,184 | 5,913,563 | ||||||||||||
Interest rate swaps | 223,566 | 35,848 | 502,381 | 223,566 | ||||||||||||
Graduated lease payments | — | 41,050 | ||||||||||||||
Postretirement benefits liability | 15,952,891 | 15,860,558 | 15,357,897 | 15,952,891 | ||||||||||||
Total Liabilities | 39,868,514 | 46,811,313 | 44,855,635 | 39,868,514 | ||||||||||||
Commitments and Contingencies | ||||||||||||||||
Stockholders’ Equity: | ||||||||||||||||
Preferred stock — $0.01 par value, authorized shares - 10,000,000; outstanding shares: 2007 and 2006 - 0 | — | — | ||||||||||||||
Common stock — $0.01 par value, authorized shares - 20,000,000; outstanding shares: 2007 - 6,727,871 and 2006 - 10,204,607 | 67,279 | 102,046 | ||||||||||||||
Preferred stock — $0.01 par value, authorized shares — 10,000,000; outstanding shares: 2008 and 2007 — 0 | — | — | ||||||||||||||
Common stock — $0.01 par value, authorized shares — 20,000,000; outstanding shares: 2008 — 6,765,790 and 2007 — 6,727,871 | 67,658 | 67,279 | ||||||||||||||
Paid-in capital | 22,614,127 | 21,872,723 | 23,002,472 | 22,614,127 | ||||||||||||
Accumulated other comprehensive loss, net of income tax effect | (2,209,540 | ) | (3,019,315 | ) | (1,092,977 | ) | (2,209,540 | ) | ||||||||
Treasury stock | (26,179,054 | ) | — | (26,179,054 | ) | (26,179,054 | ) | |||||||||
Retained earnings | 27,533,872 | 23,738,946 | 33,177,358 | 27,533,872 | ||||||||||||
Total stockholders’ equity | 21,826,684 | 42,694,400 | 28,975,457 | 21,826,684 | ||||||||||||
Total | $ | 61,695,198 | $ | 89,505,713 | $ | 73,831,092 | $ | 61,695,198 | ||||||||
2730
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Other | Total | Other | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding | Paid-In | Retained | Comprehensive | Treasury | Stockholders’ | Common Stock | Comprehensive | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Income (Loss) | Stock | Equity | Outstanding | Paid-In | Retained | Income | Treasury | Stockholders’ | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | (Loss) | Stock | Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2005 | 9,780,067 | $ | 97,801 | $ | 19,451,378 | $ | 7,042,243 | $ | (314,536 | ) | $ | — | $ | 26,276,886 | ||||||||||||||||||||||||||||||||||||||||||
Net Income | 6,286,056 | 6,286,056 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hedge accounting effect of the interest rate swap, net of deferred income tax expense of $125,794 | 255,645 | 255,645 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | 6,541,701 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued from exercise of stock options | 261,400 | 2,614 | 805,747 | 808,361 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax effect from exercise of stock options | 513,819 | 513,819 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2005 | Balance at December 31, 2005 | 10,041,467 | 100,415 | 20,770,944 | 13,328,299 | (58,891 | ) | — | 34,140,767 | 10,041,467 | $ | 100,415 | $ | 20,770,944 | $ | 13,328,299 | $ | (58,891 | ) | $ | — | $ | 34,140,767 | |||||||||||||||||||||||||||||||||
Net Income | 10,410,647 | 10,410,647 | 10,410,647 | 10,410,647 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Hedge accounting effect of the interest rate swap, net of deferred income tax expense of $25,541 | 39,576 | 39,576 | 39,576 | 39,576 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | 10,450,223 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income | 10,450,223 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued from exercise of stock options | 152,270 | 1,522 | 483,495 | 485,017 | 152,270 | 1,522 | 483,495 | 485,017 | ||||||||||||||||||||||||||||||||||||||||||||||||
Tax effect from exercise of stock options | 279,505 | 279,505 | 279,505 | 279,505 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock issued | 10,870 | 109 | 89,821 | 89,930 | 10,870 | 109 | 89,821 | 89,930 | ||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | 248,958 | 248,958 | 248,958 | 248,958 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Adoption of SFAS 158, net of deferred income tax benefit of $1,740,000 | (3,000,000 | ) | (3,000,000 | ) | (3,000,000 | ) | (3,000,000 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2006 | Balance at December 31, 2006 | 10,204,607 | 102,046 | 21,872,723 | 23,738,946 | (3,019,315 | ) | — | 42,694,400 | 10,204,607 | $ | 102,046 | $ | 21,872,723 | $ | 23,738,946 | $ | (3,019,315 | ) | $ | — | $ | 42,694,400 | |||||||||||||||||||||||||||||||||
Net Income | 3,726,473 | 3,726,473 | 3,726,473 | 3,726,473 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Hedge accounting effect of the interest rate swap, net of deferred income tax benefit of $63,824 | (89,230 | ) | (89,230 | ) | (89,230 | ) | (89,230 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Deferral of unrecognized net gain, net of tax expense of $485,096 | 730,005 | 730,005 | 730,005 | 730,005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of unrecognized net loss, net of tax expense of $98,041 | 169,000 | 169,000 | 169,000 | 169,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income | 4,536,248 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income | 4,536,248 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued from exercise of stock options | 115,256 | 1,153 | 357,071 | 358,224 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax effect from exercise of stock options | 116,139 | 116,139 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock issued | 8,008 | 80 | 56,705 | 56,785 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | 211,489 | 211,489 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative impact of change in accounting for uncertainties in income taxes (FIN 48 - Note 9) | 68,453 | 68,453 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of treasury stock | (3,600,000 | ) | (36,000 | ) | (26,179,054 | ) | (26,215,054 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | 6,727,871 | $ | 67,279 | $ | 22,614,127 | $ | 27,533,872 | $ | (2,209,540 | ) | $ | (26,179,054 | ) | $ | 21,826,684 | |||||||||||||||||||||||||||||||||||||||||
Net Income | 5,643,486 | 5,643,486 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hedge accounting effect of the interest rate swap, net of deferred income tax benefit of $77,269 | (149,991 | ) | (149,991 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferral of unrecognized net gain, net of tax expense of $653,000 | 1,184,000 | 1,184,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of unrecognized net loss, net of tax expense of $45,437 | 82,554 | 82,554 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income | 6,760,049 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common shares issued from exercise of stock options | 115,256 | 1,153 | 357,071 | 358,224 | 32,000 | 320 | 99,810 | 100,130 | ||||||||||||||||||||||||||||||||||||||||||||||||
Tax effect from exercise of stock options | 116,139 | 116,139 | 1,092 | 1,092 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted stock issued | 8,008 | 80 | 56,705 | 56,785 | 5,919 | 59 | 41,292 | 41,351 | ||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | 211,489 | 211,489 | 246,151 | 246,151 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative impact of change in accounting for uncertainties in income taxes (FIN 48 - Note 10) | 68,453 | 68,453 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Purchase of Treasury stock | (3,600,000 | ) | (36,000 | ) | (26,179,054 | ) | (26,215,054 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2007 | 6,727,871 | $ | 67,279 | $ | 22,614,127 | $ | 27,533,872 | $ | (2,209,540 | ) | $ | (26,179,054 | ) | $ | 21,826,684 | |||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2008 | 6,765,790 | $ | 67,658 | $ | 23,002,472 | $ | 33,177,358 | $ | (1,092,977 | ) | $ | (26,179,054 | ) | $ | 28,975,457 | |||||||||||||||||||||||||||||||||||||||||
2831
Years Ended December 31, | Years Ended December 31, | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2008 | 2007 | 2006 | |||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Net income | $ | 3,726,473 | $ | 10,410,647 | $ | 6,286,056 | $ | 5,643,486 | $ | 3,726,473 | $ | 10,410,647 | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | 3,409,867 | 2,715,517 | 2,255,702 | 3,544,676 | 3,409,867 | 2,715,517 | ||||||||||||||||||
Deferred income taxes | 127,332 | 1,644,804 | 2,755,124 | (9,695 | ) | 127,332 | 1,644,804 | |||||||||||||||||
Interest expense (income) related to ineffectiveness of swap | 34,664 | (3,401 | ) | 7,746 | 51,555 | 34,664 | (3,401 | ) | ||||||||||||||||
Loss (Gain) on disposal of assets | (3,116 | ) | 49,049 | 14,701 | ||||||||||||||||||||
(Gain) Loss on disposal of assets | — | (3,116 | ) | 49,049 | ||||||||||||||||||||
Share-based compensation | 268,274 | 338,888 | — | 287,502 | 268,274 | 338,888 | ||||||||||||||||||
Amortization of gain on sale/leaseback transactions | — | (648,054 | ) | (453,554 | ) | — | — | (648,054 | ) | |||||||||||||||
Loss (Gain) on translation of foreign currency financial statements | 7,826 | 27,814 | (19,506 | ) | ||||||||||||||||||||
Change in operating assets and liabilities (net of effects from acquisition in 2005): | ||||||||||||||||||||||||
Loss on translation of foreign currency financial statements | 190,509 | 7,826 | 27,814 | |||||||||||||||||||||
Change in operating assets and liabilities: | ||||||||||||||||||||||||
Accounts receivable | 9,986,675 | �� | (176,589 | ) | (3,112,488 | ) | (2,965,601 | ) | 9,986,675 | (176,589 | ) | |||||||||||||
Inventories | (951,434 | ) | (97,955 | ) | (81,663 | ) | (1,387,813 | ) | (951,434 | ) | (97,955 | ) | ||||||||||||
Prepaid expenses and other assets | 170,072 | (57,507 | ) | 568,315 | 331,261 | 170,072 | (57,507 | ) | ||||||||||||||||
Accounts payable | (2,442,408 | ) | 169,719 | (2,697,636 | ) | (1,675,948 | ) | (2,442,408 | ) | 169,719 | ||||||||||||||
Accrued and other liabilities | (4,202,820 | ) | 935,226 | 794,198 | 1,746,083 | (4,202,820 | ) | 935,226 | ||||||||||||||||
Postretirement benefits liability | 1,816,475 | 1,601,014 | 1,731,770 | 1,400,998 | 1,816,475 | 1,601,014 | ||||||||||||||||||
Net cash provided by operating activities | 11,947,880 | 16,909,172 | 8,048,765 | 7,157,013 | 11,947,880 | 16,909,172 | ||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Purchase of property, plant, and equipment | (2,742,675 | ) | (9,226,312 | ) | (3,044,643 | ) | (12,097,474 | ) | (2,742,675 | ) | (9,226,312 | ) | ||||||||||||
Proceeds from sale of property and equipment | 3,116 | 10,563 | 65,000 | — | 3,116 | 10,563 | ||||||||||||||||||
Acquisition of Cincinnati Fiberglass, Inc. | — | — | (688,077 | ) | ||||||||||||||||||||
Proceeds from maturities on mortgage-backed security investment | — | — | 88,239 | |||||||||||||||||||||
Net cash used in investing activities | (2,739,559 | ) | (9,215,749 | ) | (3,579,481 | ) | (12,097,474 | ) | (2,739,559 | ) | (9,215,749 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Proceeds from issuance of common stock | 358,224 | 485,017 | 808,361 | 100,130 | 358,224 | 485,017 | ||||||||||||||||||
Net borrowing on revolving Line of Credit | 2,251,863 | — | — | |||||||||||||||||||||
Tax effect from exercise of stock options | 116,139 | 279,505 | 513,819 | 1,092 | 116,139 | 279,505 | ||||||||||||||||||
Gross repayments on revolving line of credit | (55,399,546 | ) | — | — | ||||||||||||||||||||
Gross borrowings on revolving line of credit | 54,341,649 | — | — | |||||||||||||||||||||
Net borrowings on revolving line of credit | — | 2,251,863 | — | |||||||||||||||||||||
Financing costs for new credit agreement | (358,485 | ) | — | — | ||||||||||||||||||||
Gross borrowings on the construction loan | 8,121,337 | — | — | |||||||||||||||||||||
Payment of principal on bank note | (1,285,716 | ) | (1,285,716 | ) | (1,285,716 | ) | (1,285,716 | ) | (1,285,716 | ) | (1,285,716 | ) | ||||||||||||
Payment of principal on industrial revenue bond | (530,000 | ) | (490,000 | ) | (450,000 | ) | (580,000 | ) | (530,000 | ) | (490,000 | ) | ||||||||||||
Payments related to purchase of Treasury Stock | (26,215,054 | ) | — | — | ||||||||||||||||||||
Payments related to purchase of treasury stock | — | (26,215,054 | ) | — | ||||||||||||||||||||
Net cash used in financing activities | (25,304,544 | ) | (1,011,194 | ) | (413,536 | ) | ||||||||||||||||||
Net cash provided by (used in) financing activities | 4,940,461 | (25,304,544 | ) | (1,011,194 | ) | |||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | (16,096,223 | ) | 6,682,229 | 4,055,748 | ||||||||||||||||||||
Net (decrease) increase in cash and cash equivalents | — | (16,096,223 | ) | 6,682,229 | ||||||||||||||||||||
Cash and cash equivalents at beginning of year | 16,096,223 | 9,413,994 | 5,358,246 | — | 16,096,223 | 9,413,994 | ||||||||||||||||||
Cash and cash equivalents at end of year | $ | — | $ | 16,096,223 | $ | 9,413,994 | $ | — | $ | — | $ | 16,096,223 | ||||||||||||
Cash paid during the year for: | ||||||||||||||||||||||||
Interest | $ | 627,873 | $ | 578,300 | $ | 668,709 | $ | 659,520 | $ | 627,873 | $ | 578,300 | ||||||||||||
Income taxes (net of tax refunds) | $ | 19,912 | $ | 5,054,371 | $ | 526,918 | $ | 2,327,387 | $ | 19,912 | $ | 5,054,371 | ||||||||||||
Non Cash: | ||||||||||||||||||||||||
Fixed asset purchases in accounts payable | $ | 203,436 | $ | 237,182 | $ | 313,465 | ||||||||||||||||||
2932
33
30
Ranges of estimated useful lives for computing depreciation are as follows:
Depreciation expense was $3,463,000, $3,302,000, and $2,613,000 for 2008, 2007, and Long-Lived Assets Self-insurance Fair Value of Financial Instruments In September 2006, the FASB issued Statement No. 157 to define fair value, establish a framework for measuring fair value and to expand disclosures about “Fair Value Measurements” (“SFAS No.157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 does not change the requirements to apply fair value in existing accounting standards. Under SFAS No. 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The standard clarifies that fair value should be based on the assumptions market participants would use when pricing the asset or liability. To increase consistency and comparability in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy disclosed is based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy defined by SFAS No. 157 are as follows:
34 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements – (Continued) SFAS No. 157 became effective for the Company as of January 1, 2008. The provisions of SFAS No. 157 are to be applied prospectively, except for the initial impact on the following three items, which are required to be recorded as an adjustment to the opening balance of retained earnings in the year of adoption: (1) changes in fair value measurements of existing derivative financial instruments measured initially using the transaction price under EITF Issue No. 02-3, (2) existing hybrid financial instruments measured initially at fair value using the transaction price and (3) blockage factor discounts. Under the current disclosure requirements of SFAS 157, the Company’s lone fair value measure is its interest rate swaps. The Company uses a calculation of future cash inflows and estimated future outflows related to the interest rate swaps, which are discounted and netted to determine the current fair value. Additional inputs to the present value calculation include the contract terms, as well as market parameters such as current and projected interest rates and volatility. As they are based on observable data and valuations of similar instruments, the interest-rate swaps are categorized in Level 2 in the fair value hierarchy. For further discussion of the interest rate swaps see Note 6. The adoption of SFAS No. 157 did not have an impact on the Company’s January 1, 2008 balance of retained earnings and is not anticipated to have a material impact prospectively. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (“FSP 157-2”), “Effective Date of FASB Statement No. 157”, which provides a one year deferral of the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. In accordance with this interpretation, we have only adopted the provisions of SFAS No. 157 with respect to our financial assets and financial liabilities that are measured at fair value as of the beginning of fiscal year 2008. The provisions of SFAS No. 157 have not been applied to non-financial assets and non-financial liabilities. The major categories of non-financial assets and non-financial liabilities that are measured at fair value, for which we have not applied the provisions of SFAS No. 157, are as follows: reporting units measured at fair value in the first step of a goodwill impairment test and long-lived assets measured at fair value for an impairment assessment. The following table presents financial liabilities measured and recorded at fair value at the Company’s Consolidated Balance Sheet on a recurring basis and their level within the fair value hierarchy as of December 31, 2008:
Concentration of Credit Risk Earnings Per Common Share
Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements The computation of basic and diluted earnings per common share is as follows:
25,000 shares at December 31, 2008, 33,000 shares at December 31, 2007, and 51,000 shares at December 31, 2006 Research and Development Recent Accounting Pronouncements In December 2007, the FASB issued SFAS No. 141R to improve the relevance, representational faithfulness, and comparability of information that a reporting entity provides in its financial reports regarding business combinations and its effects, including recognition of assets and liabilities, the measurement of goodwill and required disclosures. This Statement is effective for
fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 and earlier adoption is prohibited. In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”). The objective of SFAS 160 is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing certain accounting and reporting standards that address: the ownership interests in subsidiaries held by parties other than the parent; the amount of net income attributable to the parent and non-controlling interest; changes in the parent’s ownership interest; and any retained non-controlling equity investment in a deconsolidated subsidiary. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption of SFAS 160 is prohibited. We do not anticipate the adoption of SFAS 160 will have a material impact on our consolidated financial statements. 36 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements — (Continued) In In April 2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets”. FSP FAS 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under SFAS No. 142, “Goodwill and Other Intangible Assets”. This guidance for determining the useful life of a recognized intangible asset applies prospectively to intangible assets acquired individually or with a group of other assets in either an asset acquisition or business combination. FSP FAS 142-3 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2008, and early adoption is prohibited. FSP FAS 142-3 will be applied to any prospective acquisitions. In May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles(SFAS 162). SFAS 162 identifies a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with GAAP for nongovernmental entities (the Hierarchy). The Hierarchy within SFAS 162 is consistent with that previously defined in the American Institute of Certified Public Accountants (AICPA) Statement on Auditing Standards No. 69,The Meaning of “Present Fairly in Conformity With Generally Accepted Accounting Principles”(SAS 69). SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to the AICPA’s Auditing section No. 411,The Meaning of “Present Fairly in Conformity With Generally Accepted Accounting Principles.”SFAS 162 did not have a material effect on the Consolidated Financial Statements because we utilize the guidance within SAS 69. In December 2008, the FASB issued FSP FAS 132(R)-1 to amend SFAS No. 132(R), to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP FAS 132(R)-1 is effective for fiscal years ending after December 15, 2009 with earlier adoption permitted. The Company is currently reviewing the additional disclosure requirements to determine the impact on the Consolidated Financial Statements and Notes to Consolidated Financial Statements. Foreign Currency Adjustments 3. Major Customers The Company currently has two major customers, Navistar, Inc. (“Navistar”) formerly known as International Truck & Engine Corporation, and PACCAR, Inc. (“PACCAR”). Major customers are defined as customers whose sales individually consist of more than ten percent of total sales. The loss of a significant portion of sales to Navistar, or PACCAR would have a material adverse effect on the business of the Company. 37 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements — (Continued) The following table presents net sales for the above-mentioned customers for the years ended December 31, 2008, 2007,
4.
In conjunction with the Company’s acquisition of assets of Airshield Corporation on October 16, 2001, the Company established manufacturing operations in Mexico (under the Maquiladora program). The Mexican operation is a captive manufacturing facility of the Company and the functional currency is United States dollars. Essentially all sales of the Mexican operation are made to United States customers in United States dollars, which totaled $18,500,000 in 2008, $18,800,000 in 2007 and $28,737,000 in Property, plant, and equipment consist of the following at December 31:
38 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements — (Continued) Additions in progress at December 31, 2008 primarily relate to the construction of the new production facility in Mexico. Additions in progress at December 31, 2007 6. Debt and Leases
On December 9, 2008, the Company and its wholly owned subsidiary, CoreComposites de Mexico, S. de R.L. de C.V., entered into a Credit Agreement to refinance some existing debt and borrow funds for the Company’s new manufacturing facility in Mexico. Under this Credit Agreement, the Company has received certain loans, subject to the terms and conditions stated in the agreement, which include (i) a $12,000,000 construction loan, (ii) an $8,000,000 construction loan, (iii) an $8,000,000 revolving line of credit, and (iv) a $2,678,563 term loan to refinance an existing term loan. The Credit Agreement is secured by a guarantee of each U.S. subsidiary of the Company, and by a lien on substantially all of the present and future assets of the Company and its U.S. subsidiaries, except that only 65% of the stock issued by CoreComposites de Mexico, S. de C.V. has been pledged. The $8,000,000 construction loan is also secured by substantially all of the present and future assets of the Company’s Mexican subsidiary. The $12,000,000 construction loan, which had a balance of $8,121,337 at December 31, 2008, is structured as a construction draw loan through May 31, 2009 to finance a portion of the Company’s new production facility in Matamoros, Mexico. Commencing June 1, 2009 the construction draw loan will convert to a seven-year term loan with fixed monthly principal payments. The Company expects to make principal payments of approximately $1,000,000 towards this loan in 2009, which are classified as current obligations on the Consolidated Balance Sheet. Amounts borrowed under this loan may not be reborrowed once repaid. Borrowings made pursuant to this loan will bear interest, payable monthly at 30 day LIBOR rate plus
Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements
On December 30, 2003, the Company borrowed $9,000,000 in the form of a note payable collateralized by the Company’s assets. The Credit Agreement entered into by the Company on December 9, 2008 provided for refinancing the Company’s existing balance on this note. The terms of the refinance with respect to the amortization and repayment of the principal amount of such indebtedness were unchanged. Borrowings made pursuant to the refinanced term loan will bear interest, payable monthly at 30 day LIBOR rate plus 2.15%. The note payable Industrial Revenue Bond In May 1998, the 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%. As security for the IRB, the Company obtained a letter of credit from a commercial bank, which has a balance of Revolving Line of Credit At December 31,
Annual maturities of long-term debt are as follows:
Interest Rate Swaps In conjunction with its variable rate Industrial Revenue Bond, the Company entered into an interest rate swap agreement, which is designated as a cash flow hedging instrument. Under this agreement, the 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 40 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements — (Continued) change and is accrued and recognized as an adjustment to interest expense. 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 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. In all periods presented this cash flow hedge was highly effective; any ineffectiveness was recorded to interest expense. Interest expense of $51,556 and $34,664 was recorded for the year ended December 31, 2008 and 2007, respectively, related to ineffectiveness of the swap. The fair value of the swap was a liability of $322,108 and $228,156 as of December 31, 2008 and December 31, 2007, respectively. None of the changes in Effective January 1, 2004, the Company entered into an interest rate swap agreement, which is designated as a cash flow hedge of the Effective December 18, 2008, the Company entered into an interest rate swap agreement that will be in effect beginning May 1, 2009, which is designated as a cash flow hedge of the$12,000,000 construction loan. Under this agreement, the Company pays a fixed rate of 2.30% to the bank and receives LIBOR. The swap term and notional amount matches the payment schedule on the secured note payable with final maturity in May 2016. The interest rate swap is a highly effective hedge because the amount, benchmark interest rate index, term, and repricing dates of both the interest rate swap and the hedged variable interest cash flows are substantially the same. The fair value of the swap was a liability of $100,300 at December 31, 2008; the swap did not exist at December 31, 2007. While the Company is exposed to credit loss on its interest rate swap in the event non-performance by the counterparty to the swap, management believes that such non-performance is unlikely to occur given the financial resources of the counterparty. Interest expense includes $143,000 of expense in 2008, $28,000 of income in 2007, and $26,000 of income in 2006 Bank Covenants The Company is On March 31, 2009, the Company entered into a first amendment to the Credit Agreement with KeyBank (the “First Amendment”). Pursuant to the terms of the First Amendment, the lender agreed to modify certain terms of the Credit Agreement. These modifications included (1) modification of the definition of EBITDA to add back transition costs up to $3,200,000 associated with the transition and startup of the new production facility in Matamoros and add back non-cash compensation expense recorded under SFAS 123R (2) modification of the fixed charge definition to exclude from consolidated interest expense any measure of ineffectiveness from interest rate swaps and amortization of loan origination and issuance costs (3) modification of the leverage ratio from 3.0x to 3.2x at June 30, 2009, 3.4x at September 30, 2009, and 3.2x at December 31, 2009 (4) increase the applicable margin for interest rates applicable to LIBOR loans effective March 31, 2009 to 400 basis points for both construction loans and the revolving line of credit; all rates decrease 25 basis points upon reaching a leverage ratio of less than 2.25 to 1.00 (5) increase the letter of credit fee on the Industrial Revenue Bond to 300 basis points (6) increase the 1% Libor floor on the $8,000,000 construction loan and revolving line of credit to 1.5% and(7) implement a 1.5% Libor floor on the $12,000,000 construction loan. Based on the Company’s forecasts which are primarily based on industry analysts’ estimates of 2009 heavy and medium-duty truck production volumes as well as other assumptions management believes to be reasonable, management believes that the Company will be able to maintain compliance with the covenants as amended under the First Amendment to the Credit Agreement for the next 12 months. Management believes that cash flow from operating activities together with available borrowings under the Credit Agreement will be sufficient to meet Core Molding Technologies liquidity needs. However, if a material adverse change in the financial position of Core Molding Technologies should occur, or if actual sales or expenses are substantially different than what has been forecasted, Core Molding Technologies’ liquidity and ability to obtain further financing to fund future operating and capital requirements could be negatively impacted. Leases In August 2005, in conjunction with the acquisition of the Cincinnati Fiberglass Division of Diversified Glass, Inc., Core Composites Cincinnati, LLC entered into a 7-year operating lease agreement through July 2012 for the manufacturing facility located in Batavia, Ohio. The Company has the option to terminate the lease effective any time after July 31, 2006, by 41 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements — (Continued) providing written notice to the lessor no later than 90 days prior to intended termination date. The Company has the option to purchase the property at the end of every lease year. In October 2001, in conjunction with the Airshield Asset Acquisition, the Company’s Mexican subsidiary entered into a 10-year operating lease agreement through October 2011 for a manufacturing facility in Matamoros, Mexico. 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.
Total rental expense was $2,323,000, $2,611,000, and $3,892,000 for 2008, 2007, and
Treasury Stock On July 18, 2007, the Company entered into a stock repurchase agreement with Navistar, pursuant to which the Company repurchased 3,600,000 shares of the Company’s common stock, from Navistar in a privately negotiated transaction at $7.25 per share, for a total purchase price of $26,100,000. Navistar continues to be a significant stockholder of the Company’s common stock with 664,000 shares, or approximately Anti-takeover Measures The 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 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 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 those provisions. Restrictions on Transfer On July 16, 2007, the Board of Directors approved a Shareholders Rights Plan (the “Plan”) in conjunction with the approval of the repurchase of shares of stock from Navistar. The Plan was implemented to protect the interests of the Company’s stockholders by encouraging potential buyers to negotiate directly with the Board prior to attempting a takeover. Under the Plan, each The Company’s Certificate of Incorporation contains a provision (the “Prohibited Transfer Provision”) designed to help assure the continued availability of the Company’s previous substantial net operating loss and capital loss carryforwards 42 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements — (Continued) 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 the 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.
Core Molding Technologies has a Long Term Equity Incentive Plan (the “2006 Plan”), as approved by the shareholders in May 2006. This 2006 Plan replaced the Long Term Equity Incentive Plan (the “Original Plan”) as originally approved by the shareholders in May 1997 and as amended in May 2000. The 2006 Plan allows for grants to directors and key employees of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, performance shares, performance units, and other incentive awards (“Stock Awards”) up to an aggregate of 3,000,000 awards, each representing a right to buy a share of Core Molding Technologies common stock. Stock Awards can be granted under the 2006 Plan through the earlier of December 31, 2015, or the date the maximum number of available awards under the 2006 Plan have been granted. The options that have been granted under the 2006 Plan have vesting schedules of five or nine and one-half years from the date of grant, or immediately upon change in ownership, are not exercisable after ten years from the date of grant, and were granted at prices which equal or exceed the fair market value of Core Molding Technologies common stock at the date of grant. Restricted stock granted under the 2006 Plan require the individuals receiving the grants to maintain certain common stock ownership thresholds and vest over three years or upon the date of the participants’ sixty-fifth birthday, death, disability or change in control. Effective January 1, 2006, Core Molding Technologies adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No.123R”) requiring that compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).
There were no grants of options in the years ended December 31, 2008, 2007 and 2006. During the year ended December 31, 2008, Core Molding Technologies received approximately $100,000 in cash from the exercise of stock options. The aggregate intrinsic value of these options was approximately $116,000. In 2008, the Company received a tax benefit of $1,000 as a result of disqualified dispositions. During the year ended December 31, 2007, Core Molding Technologies received approximately $358,000 in cash from the exercise of stock options. The aggregate intrinsic value of these options was approximately $641,000. Tax 43 Core Molding Technologies, Notes to Consolidated Financial Statements — (Continued) The following summarizes all stock option activity for the years ended December 31:
The following summarizes the activity relating to stock options under the Original Plan mentioned above for the
Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements The following summarizes the status of, and changes to, unvested options during the years ended December 31, 2008, 2007
At December 31, The following table summarizes information about stock options outstanding and exercisable as of December 31,
In May of 2006, Core Molding Technologies began awarding shares of its common stock to certain directors, officers, and key executive employees in the form of unvested stock (“Restricted Stock”). These awards will be recorded at the market value of Core Molding Technologies’ common stock on the date of issuance and amortized ratably as compensation expense over the applicable vesting period. 45 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements — (Continued) The following summarizes the status of the Restricted Stock and changes during the years ended December 31:
As of December 31, Components of the provision (credit) for income taxes are as follows:
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 years ended December 31 is as follows:
The American Jobs Creation Act provides a tax deduction calculated as a percentage of qualified income from manufacturing in the United States. The deduction percentage increases from 3% to 9% over a six-year period beginning in 2005. The amount of the deduction available to the Company in 46 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements — (Continued) Certain tax benefits related to incentive stock options recorded directly to additional paid in capital totaled $1,000, $116,000 and $280,000 in 2008, 2007 and Deferred tax assets (liabilities) consist of the following at December 31:
At December 31, On January 1, 2007, the Company adopted the provisions of FIN 48. As a result of the implementation of FIN 48, the Company recognized a $68,000 increase to the opening balance of retained earnings. This increase is represented by the recognition of state tax benefits of $212,000 and related accrued interest receivable of $16,000. These benefits generate a federal tax liability of $60,000. The Company also recorded a liability for unrecognized tax benefits of $52,000 and $48,000 related to uncertain state and foreign tax positions, respectively, and the amounts were recorded in accrued taxes in the Consolidated Balance Sheet.
The 2006 federal tax return is currently under an IRS audit; however, there have been no findings at this time. There are no The Company files income tax returns in the U.S. federal jurisdiction, Mexico and various state jurisdictions. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 47 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements — (Continued) The Company provides postretirement benefits to some of its United States employees. Costs associated with postretirement benefits include postretirement health care and life insurance expense and expense related to contributions to two 401(k) defined contribution plans. In addition, all of the Company’s United States union employees are covered under a multi-employer defined benefit pension plan administered under a collective bargaining agreement. The 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, certain of the Company’s employees were participants in Navistar’s postretirement plan. In connection with the acquisitions 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 the Company, Navistar and the participants in the form of premiums, co-payments, and deductibles. The Company and Navistar 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 acquisition of Columbus Plastics to the period of active service prior to the acquisition of Columbus Plastics.
The funded status of the Company’s postretirement health and life insurance benefits plan as of December 31,
The components of expense for all of the Company’s postretirement benefits plans are as follows:
48 Core Molding Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements — (Continued) Effective December 31, 2006, the Company adopted SFAS No. 158, which requires the recognition of the funded status of a defined benefit pension or postretirement plan in the consolidated statements of financial position. For the year ended December 31, 2008, the Company recognized net actuarial gains of $1,837,000 on the Consolidated Balance Sheet. This amount was recorded as other comprehensive income in the amount of $1,184,000, net of tax, for the year ended December 31, 2008. For the year ended December 31, 2007, the Company recognized net actuarial gains of $1,215,000 on the Amounts not yet recognized as a component of net periodic benefit costs at December 31, 2008 and 2007 were approximately $1,294,000 and $3,259,000, respectively. The amount in accumulated other comprehensive loss expected to be recognized as a component of net periodic post retirement costs during The weighted average rate of increase in the per capita cost of covered health care benefits is projected to be
The effect of changing the health care cost trend rate by one-percentage point for each future year is as follows:
The estimated future benefit payments of the health care plan are:
In connection with the acquisition of Columbus Plastics, the Company and Navistar entered into a Supply Agreement. Under the terms of the Supply Agreement, Navistar agreed to purchase from the Company, and the Company agreed to sell to Navistar all of Navistar’s original equipment and service requirements for fiberglass reinforced parts using the Sheet Molding Compound process as they then existed or as they may be improved or modified. In In 1996, the Company acquired substantially all of the assets and liabilities of the Columbus Plastics unit from Navistar, in return for a secured note, which has been repaid, and 4,264,000 shares of Common Stock of the Company. On July 18, 2007, the Company entered into a stock repurchase agreement with Navistar, pursuant to which the Company repurchased 3,600,000 shares of common stock, from Navistar as detailed in Note 49 Notes to Consolidated Financial Statements — (Continued) 12. Labor Concentration As of December 31, From time to time, the Company is involved in litigation incidental to the conduct of its business. However, the Company is presently not involved in any legal proceedings which in the opinion of management are likely to have a material adverse effect on the Company’s consolidated financial position or results of operations.
The following is a summary of the unaudited quarterly results of operations for the years ended December 31,
ITEM 9A(T). CONTROLS AND PROCEDURES Disclosure Controls and Procedures As of the end of the period covered by this report, the Company has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon this evaluation, the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were (i) effective to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act were accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures, and (ii) effective to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. Management’s Report on Internal Control over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s financial statements would be prevented or detected. The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report. Changes In Internal Controls There were no changes in internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) that occurred in the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART III The information required by this Part III, Item 10 is incorporated by reference from the Company’s definitive proxy statement for its annual meeting of stockholders to be held on or about May The information required by this Part III, Item 11 is incorporated by reference from the Company’s definitive proxy statement for its annual meeting of stockholders to be held on or about May The information required by this Part III, Item 12 is incorporated by reference from the Company’s definitive proxy statement for its annual meeting of stockholders to be held on or about May The information required by this Part III, Item 13 is incorporated by reference from the Company’s definitive proxy statement for its annual meeting of stockholders to be held on or about May
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 be held on or about May
PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SIGNATURES Pursuant to the requirements of Section 13 or15(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.
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:
Core Molding Technologies, Inc. and Subsidiaries Schedule II Consolidated valuation and qualifying accounts and reserves for the years ended December 31, 2008, 2007, Reserves deducted from asset to which it applies — allowance for doubtful accounts.
INDEX TO EXHIBITS
57
58
59
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