Ranges of estimated useful lives for computing depreciation are as follows: | | | | Land improvements | | 20 years | | Building and improvements | | 20-4020–40 years | | Machinery and equipment | | 3-153–15 years | | Tools, dies and patterns | | 3-53–5 years |
Depreciation expense was $3,463,000, $3,302,000, and $2,613,000 for 2008, 2007, and $2,158,000 for 2007, 2006, and 2005, respectively. In 2007,2008, approximately $18,000$82,000 of interest cost was capitalized in property, plant, and equipment. In 2007, approximately $18,000 of interest cost was capitalized and in 2006 approximately $125,000 of interest cost was capitalized. No interest costs were capitalized in 2005. Long-Lived Assets–— Long-lived assets consist primarily of property and equipment, goodwill, and a customer list. The recoverability of long-lived assets is evaluated by an analysis of operating results and consideration of other significant events or changes in the business environment. The Company evaluates whether impairment exists for property and equipment and the customer list on the basis of undiscounted expected future cash flows from operations before interest. For goodwill, the Company evaluates annually on December 31st whether impairment exists or at interim periods if an indicator of possible impairment exists. 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, 2008, 2007, 2006, and 2005,2006, there was no impairment of the Company’s long-lived assets. Self-insurance –—The Company is self-insured with respect to its Columbus and Batavia, Ohio and Gaffney, South Carolina medical and dental claims and Columbus and Batavia, Ohio workers’ compensation claims. The 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, 2008, and 2007 of $1,109,000 and 2006 of $1,141,000, and $1,036,000, respectively. Fair Value of Financial Instruments–— The Company’s financial instruments consist of long-term debt, an interest rate swap,swaps, accounts receivable, and accounts payable. The carrying amount of these financial instruments approximated their fair value. 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: | • | | Level 1 inputs are quoted prices (unadjusted) in active markets for identical asset or liabilities that the company has the ability to access as of the reporting date. | | | • | | Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly through corroboration with observable market data. | | | • | | Level 3 inputs are unobservable inputs, such as internally developed pricing models for the asset or liability due to little or no market activity for the asset or liability. |
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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: | | | | | | | | | | | | | | | | | | | | | Quoted Prices in | | | | | | | | | | Active Markets for | | Significant Other | | Significant | | | | Recurring Fair Value Measurements | | Identical Assets | | Observable Inputs | | Unobservable Inputs | | Balance as of | | (in millions) | | (Level 1) | | (Level 2) | | (Level 3) | | December 31, 2008 | | | Liabilities | | | | | | | | | | | | | | | | | | Interest rate swaps | | $ | – | | | $ | 502,000 | | | $ | – | | | $ | 502,000 | | | | | Total | | $ | – | | | $ | 502,000 | | | $ | – | | | $ | 502,000 | | | |
Concentration of Credit Risk–- The Company has significant transactions with two major customers (see Note 3), which together comprised 77%83%, 72%77%, and 63%72% of total sales in 2008, 2007, 2006, and 2005,2006, respectively and 64%67% and 68%64% of the accounts receivable balances at December 31, 20072008 and 2006,2007, respectively. The Company performs ongoing credit evaluations of its customers’ financial condition. The Company maintains reserves for potential bad debt losses, and such bad debt losses have been historically within the Company’s expectations. Export sales, including sales to Canada and Mexico, for products provided to certain customers’ manufacturing and service locations totaled 15%13%, 20%15%, and 20% of total sales for 2008, 2007, 2006, and 2005,2006, respectively. Earnings Per Common Share–- Basic earnings per common share is computed based on the weighted average number of common shares outstanding during the period. Diluted earnings per common share are computed similarly but include the effect of the assumed exercise of dilutive stock options and vesting of restricted stock under the treasury stock method. 3135
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements –— (Continued)
The computation of basic and diluted earnings per common share is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Years Ended December 31, | | | Years Ended December 31, | | | | | 2007 | | 2006 | | 2005 | | | 2008 | | 2007 | | 2006 | | | Net income | | $ | 3,726,473 | | $ | 10,410,647 | | $ | 6,286,056 | | | $ | 5,643,486 | | $ | 3,726,473 | | $ | 10,410,647 | | | | | Weighted average common shares outstanding | | 8,686,905 | | 10,078,800 | | 9,913,209 | | | 6,742,316 | | 8,686,905 | | 10,078,800 | | | Plus: dilutive options assumed exercised | | 587,700 | | 748,956 | | 1,027,700 | | | 545,225 | | 587,700 | | 748,956 | | | Plus: weighted average non-vested restricted stock | | 33,532 | | 15,616 | | — | | | 18,089 | | 33,532 | | 15,616 | | | Less: shares assumed repurchased with proceeds from exercise | | 303,708 | | 456,250 | | 528,135 | | | 313,381 | | 303,708 | | 456,250 | | | | | | | | | | | | | | | | | | | Weighted average common and potentially issuable common shares outstanding | | 9,004,429 | | 10,387,122 | | 10,412,774 | | | 6,992,249 | | 9,004,429 | | 10,387,122 | | | | | | | Basic earnings per common share | | $ | .43 | | $ | 1.03 | | $ | 0.63 | | | $ | .84 | | $ | .43 | | $ | 1.03 | | | Diluted earnings per common share | | $ | .41 | | $ | 1.00 | | $ | 0.60 | | | $ | .81 | | $ | .41 | | $ | 1.00 | |
25,000 shares at December 31, 2008, 33,000 shares at December 31, 2007, and 51,000 shares at December 31, 2006 and 5,000 shares at December 31, 2005 were not included in diluted earnings per share as they were anti-dilutive. Research and Development–— Research and development costs, which are expensed as incurred, totaled approximately $202,000 in 2008, $223,000 in 2007, and $254,000 in 2006, and $360,000 in 2005.2006. Deferred Gain– Deferred gains resulted from sales leaseback transactions that occurred in 1997 and 1998 and were being amortized over the lease period.
Recent Accounting Pronouncements –—In July 2006,February 2007, the FASB issued InterpretationStatement No. 48159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FIN 48”FAS 159”),“Accounting for Uncertainty provides companies with an option to report selected financial assets and liabilities at fair value. The objective of FAS-159 is to reduce both complexity in Income Taxes,”which clarifies the accounting for uncertaintyfinancial instruments and the volatility in income taxes recognized in the financial statements in accordance with FASB Statement No. 109,Accounting for Income Taxes. FIN 48 provides guidance on the financial statement recognitionearnings caused by measuring related assets and measurement of a tax position taken, or expected to be taken, in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. This interpretation is effective for fiscal years beginning after December 15, 2006, and will become effective for the Company on January 1, 2007. For benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The impact of the adoption of FIN 48 is discussed in Note 10. In September 2006, the FASB issued SFAS No. 157“Fair Value Measurements.”SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, rather it applies under existing accounting pronouncements that require or permit fair value measurements. SFAS No. 157 isliabilities differently. FAS-159 was effective for fiscal years beginning after November 15, 2007. The Company is currently evaluating theapplication of FAS-159 did not have any impact of SFAS No. 157 on the consolidatedCompany’s earnings or financial statements.
In February 2007,position, because the FASB issued SFAS No. 159,Establishing the Fair Value Option for Financial Assets and Liabilities, to permit all entities to choose toCompany did not elect to measure eligibleuse the fair value option for any financial instruments at fair value. SFAS No. 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157,Fair Value Measurements.An entity is prohibited from retrospectively applying SFAS No. 159, unless it chooses early adoption. Management is currently evaluating the impact of SFAS No. 159 on the consolidated financial statements.assets or liabilities.
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 32
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements – (Continued)
fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 and earlier adoption is prohibited. ManagementThe Company is currently evaluating the impact ofreviewing the provisions of SFAS No. 141R to determine the impact on future business combinations. 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 FebruaryMarch 2008, the FASB issued FASB Staff PositionSFAS No. FAS 157-2, “Effective Date161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS 161”). SFAS 161 is an amendment of FASB Statement No. 157” (“FSP FAS 157-2”). FSP FAS 157-2 defers133, and requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. The Statement is effective date provision of SFAS 157. As a result of the issuance of FSP FAS 157-2, the provisions of SFAS 157 are effectiveprospectively for fiscal years beginning after November 15, 2008. Management is currently evaluating the impact of adopting SFAS 157the provisions of FAS-161 on the consolidated financial statementsstatements. 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–— In conjunction with the Company’s acquisition of certain assets of Airshield Corporation, the Company 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. Income statement accounts are translated at the weighted monthly average 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 losses (gains) losses included in Selling General and Administration totaled $121,530 in 2008, $5,975 in 2007, and ($17,219) in 2006, and $90,131 in 2005.2006. 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. In previous years the Company identified Freightliner, LLC (“Freightliner”) as a major customer; however, in 2007 Freightliner’s individual sales were less than ten percent of total sales. 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, 2006, and 2005:2006: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2007 | | 2006 | | 2005 | | | 2008 | | 2007 | | 2006 | | | Navistar product sales | | $ | 45,306,691 | | $ | 71,016,465 | | 61,391,320 | | | $ | 63,759,160 | | $ | 45,306,691 | | $ | 71,016,465 | | | Navistar tooling sales | | 8,322,599 | | 10,206,378 | | 4,990,603 | | | 3,120,481 | | 8,322,599 | | 10,206,378 | | | | | | | | | | | | | | | | | | | Total Navistar sales | | 53,629,290 | | 81,222,843 | | 66,381,923 | | | 66,879,641 | | 53,629,290 | | 81,222,843 | | | | | | | PACCAR product sales | | 27,813,324 | | 34,990,325 | | 15,446,600 | | | 27,695,164 | | 27,813,324 | | 34,990,325 | | | PACCAR tooling sales | | 12,518,169 | | 1,232,015 | | 65,484 | | | 2,505,368 | | 12,518,169 | | 1,232,015 | | | | | | | | | | | | | | | | | | | Total PACCAR sales | | 40,331,493 | | 36,222,340 | | 15,512,084 | | | 30,200,532 | | 40,331,493 | | 36,222,340 | | | | | | | Other product sales | | 27,925,041 | | 44,166,808 | | 48,071,565 | | | 19,084,322 | | 27,925,041 | | 44,166,808 | | | Other tooling sales | | 826,063 | | 717,999 | | 577,292 | | | 490,340 | | 826,063 | | 717,999 | | | | | | | | | | | | | | | | | | | Total other sales | | 28,751,104 | | 44,884,807 | | 48,648,857 | | | 19,574,662 | | 28,751,104 | | 44,884,807 | | | | | | | Total product sales | | 101,045,056 | | 150,173,598 | | 124,909,485 | | | 110,538,646 | | 101,045,056 | | 150,173,598 | | | Total tooling sales | | 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 | | | | | | | | | | | | | | | | | |
4. Acquisitions On August 3, 2005 Core Molding Technologies, Inc. acquired certain assets of the Cincinnati Fiberglass Division of Diversified Glass, Inc., a Batavia, Ohio-based, privately held manufacturer and distributor of fiberglass reinforced plastic components supplied primarily to the heavy-duty truck market, for $688,077. The acquisition was part of the Company’s growth strategy. Core Molding Technologies has continued operation of the Batavia facility. As part of the acquisition, Core Molding Technologies agreed to lease the manufacturing facility from the previous owner of Diversified Glass, Inc.
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Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements – (Continued)
The acquisition was recorded using the purchase method of accounting and, accordingly, the operating results of the Batavia facility have been included with those of the Company subsequent to August 3, 2005.
The following table presents the allocation of the purchase price:
| | | | | | | Inventories | | $ | 668,862 | | | Property and Equipment | | | 95,000 | | | Non-compete agreement | | | 5,000 | | | Tooling accounts receivable | | | 36,265 | | | | | | | | Total assets purchased | | | 805,127 | | | | | | | | | Accrued vacation assumed | | | (117,050 | ) | | | | | | | Net purchase price | | $ | 688,077 | | | | | | |
5. Foreign Operations
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 2006, and $25,005,000 in 2005.2006. 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 42% of sales in 2008, 41% of sales in 2007, and 33% of sales in 2006, and 31% of sales in 2005.2006. The Company owns long-lived assets that are geographically located at the Mexican operation, which have a net book value of $956,000$11,563,000 at December 31, 2007.2008, of which $8,787,000 is part of the construction of the Company’s new manufacturing facility. The Company’s manufacturing operation in Mexico is subject to various political, economic, and other risks and uncertainties inherent to Mexico. Among other risks, the Company’s Mexican operations are subject to domestic and international customs and tariffs, changing taxation policies, and governmental regulations. In August of 2008, the Company entered into a construction agreement to begin building a new 437,000 square foot production facility in Matamoros, Mexico that will replace its leased facility. Occupancy is expected during the second quarter of 2009. 6.5. Property, Plant, and Equipment
Property, plant, and equipment consist of the following at December 31: | | | | | | | | | | | | | | | | | | | | | 2007 | | 2006 | | | 2008 | | 2007 | | | Land and land improvements | | $ | 2,311,507 | | $ | 2,311,507 | | | $ | 2,311,507 | | $ | 2,311,507 | | | Buildings | | 20,257,248 | | 20,140,860 | | | 20,260,380 | | 20,257,248 | | | Machinery and equipment | | 36,062,831 | | 32,360,557 | | | 37,740,971 | | 36,062,831 | | | Tools, dies, and patterns | | 765,268 | | 733,160 | | | 773,254 | | 765,268 | | | Additions in progress | | 510,056 | | 1,380,969 | | | 10,884,526 | | 510,056 | | | | | | | | | | | | | | | | | | | Total | | 59,906,910 | | 56,927,053 | | | 71,970,638 | | 59,906,910 | | | Less 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 | | | | Property, plant, and equipment — net | | | $ | 38,815,451 | | $ | 30,215,665 | | | | | | | | | | | | | |
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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 and 2006 primarily relate to the purchase and installation of equipment at the Company’s operating facilities. At December 31, 20072008 and 2006,2007, commitments for capital expenditures in progress were $8,455,000 and $486,000, respectively. Capitalized interest for the years ended December 31, 2008 and $682,000,2007 is $82,000 and $18,000 respectively. 6. Debt and Leases | | | | | | | | | | | | | December, 31 | | | | | 2008 | | | 2007 | | | Construction loan payable to a bank for new manufacturing facility, interest at a variable rate with monthly payments of interest and principal over a seven-year period through May 2016 | | | 8,121,337 | | | | — | | | | | | | | | | | | | Construction loan payable to a bank, interest at a variable rate with annual principal and interest payments over a five-year period through May 2014 | | | — | | | | — | | | | | | | | | | | | | Note payable to bank interest at a variable rate with monthly payments of interest and principal over a seven-year period through December 2010 | | | 2,678,563 | | | | 3,964,279 | | | | | | | | | | | | | Industrial Revenue Bond, interest adjustable weekly (2008 average 2.68%; 2007 average 3.78%), payable quarterly, principal due in variable quarterly installments through April, 2013, secured by a bank letter of credit with a balance of $3,332,000 and $3,930,000 as of December 31, 2008 and 2007, respectively | | | 3,235,000 | | | | 3,815,000 | | | | | | | | | | | | | Revolving line of credit, collateralized by all the Company’s assets | | $ | 1,193,965 | | | $ | 2,251,863 | | | | | | | | | | | Total | | | 15,228,865 | | | | 10,031,142 | | | Less current portion | | | (4,099,681 | ) | | | (4,117,579 | ) | | | | | | | | | | Long-term debt | | $ | 11,129,184 | | | $ | 5,913,563 | | | | | | | | | |
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 3439
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements –— (Continued)
7. Debt and Leases1.90% initially, subject to an adjusting scale as described in the Credit Agreement. The 30 day Libor rate was 0.45% at December 31, 2008.
| | | | | | | | | | | | | December, 31 | | | | | 2007 | | | 2006 | | | Revolving line of credit, collateralized by all the Company’s assets. | | $ | 2,251,863 | | | $ | — | | | | | | | | | | | | | Note Payable to bank, interest at a variable rate with monthly payments of interest and principal over a seven-year period through December 2010, collateralized by a security interest in all the Company’s assets. | | | 3,964,279 | | | | 5,249,995 | | | | | | | | | | | | | Industrial Revenue Bond, interest adjustable weekly (2007 average 3.78%; 2006 average 3.60%), payable quarterly, principal due in variable quarterly installments through April, 2013, secured by a bank letter of credit with a balance of $3,930,000 as of December 31, 2007. | | | 3,815,000 | | | | 4,345,000 | | | | | | | | | | | Total | | | 10,031,142 | | | | 9,594,995 | | | Less current portion | | | (4,117,579 | ) | | | (1,815,716 | ) | | | | | | | | | | Long-term debt | | $ | 5,913,563 | | | $ | 7,779,279 | | | | | | | | | |
Note Payable – Bank
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 bears interest athad a variable ratebalance of LIBOR plus 200 basis points or the prime rate$2,678,563 and this rate was 7.23%$3,964,279 at December 31, 2007.2008 and 2007, respectively. 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 $3,930,000$3,332,000 as of December 31, 2007.2008. The Credit Agreement entered into by the Company on December 9, 2008 also included a commitment for this existing letter of credit. 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 the Company’s assets. The letter of credit expires in April 2010, and the Company intends to extend the letter of credit each year as required by the IRB. Revolving Line of Credit At December 31, 2007,2008, the Company had available a $15,000,000an $8,000,000 variable rate bank revolving line of credit scheduled to mature on April 30, 2009.2010. The line of credit bears interest at daily LIBOR plus 200 basis points or at1.90% initially, subject to adjusting scale as described in the prime rate. The line of credit is collateralized by all the Company’s assets.Credit Agreement. At December 31, 20072008 there was a balance of $2,252,000$1,194,000 on the bank revolving line of credit. There was noan outstanding balance of $2,252,000 on the bank revolving line of credit at December 31, 2006.2007. The outstanding balance onCredit Agreement provides a floor to the linedaily LIBOR rate in effect of credit is not due until April 2009; however the Company anticipates paying off the balance within the next 12 months and therefore has classified the outstanding balance as a current liability on the Consolidated Balance Sheets. 35
Core Molding Technologies, Inc. and Subsidiaries1%.
Notes to Consolidated Financial Statements – (Continued)
Annual maturities of long-term debt are as follows: | | | | | | | | | | | 2008 | | $ | 4,118,000 | | | | 2009 | | 1,906,000 | | | $ | 4,100,000 | | | 2010 | | 1,960,000 | | | 3,675,000 | | | 2011 | | 837,000 | | | 2,552,000 | | | 2012 | | 790,000 | | | 2,504,000 | | | 2013 | | | 2,134,000 | | | Thereafter | | 420,000 | | | 264,000 | | | | | | | | | | | Total | | $ | 10,031,000 | | | $ | 15,229,000 | | | | | | | | | |
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 the fair value of the interest rate swap have been excluded from the assessment of hedge effectiveness. 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.December 30, 2003 borrowing. 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. 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 exactlysubstantially the same. The fair value of the swap was a liability of $79,973 and an asset of $4,590 as of December 31, 2008 and December 31, 2007, respectively. 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 that such non-performance is unlikely to occur given the financial resources of the counterparty. 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 and $162,000 of expense in 2005 for settlements related to the swaps. Bank Covenants The Company is subjectrequired to formalmeet certain financial covenants included in its debt covenants relatedagreements with respect to minimumleverage ratios, fixed charge coverageratios, capital expenditures as well as other customary affirmative and total funded obligations debt ratios.negative covenants. As of December 31, 2007,2008, the Company was in compliance with these covenants.its financial debt covenants for the Line of Credit, the secured note payable, the two construction loans related to the new facility in Mexico, the letter of credit securing the Industrial Revenue Bond and certain equipment leases. 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 The Company leases a portion of its manufacturing facilities, manufacturing equipment and a warehouse facility under operating lease agreements. During 2007 the Company purchased machinery and equipment amounting to $1,169,000 by exercising an early buyout option and as a result a gain of $49,000 was recognized from the reversal of a graduated lease payment liability.
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. 36
Core Molding Technologies, Inc. and Subsidiaries The Company has given notice to the lessor of intent to terminate the lease in June 2009.
Notes to Consolidated Financial Statements – (Continued)
Total rental expense was $2,323,000, $2,611,000, and $3,892,000 for 2008, 2007, and $4,195,000 for 2007, 2006, and 2005, respectively. The future minimum lease payments under non-cancelable operating leases that have lease terms in excess of one year are as follows: | | | | | | | | | | | 2008 | | $ | 604,000 | | | | 2009 | | 603,000 | | | $ | 362,000 | | | 2010 | | 338,000 | | | 338,000 | | | 2011 | | 11,000 | | | 11,000 | | | | | | | | | | | Total minimum lease payments | | $ | 1,556,000 | | | $ | 711,000 | | | | | | | | | |
8.7. Equity
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 9.9%9.8% of the shares outstanding after the repurchase. Navistar is also the Company’s largest customer, accounting for approximately 44%57% of the Company’s 20072008 sales. The Company used approximately $19 million of existing cash and $7.1 million from its revolving line of credit to fund the repurchase. The Company also incurred approximately $115,000 in costs related to the stock repurchase agreement, which are recorded as part of the cost of its treasury stock. 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 shareholderstockholder will receive a dividend of one right per share of common stock of the Company owned on the record date, July 18, 2007. The rights will not initially be exercisable until, subject to action by the Board of Directors, a person acquires 15% or more of the voting stock without approval of the Board. If the rights become exercisable, all holders except the party triggering the rights shall be entitled to purchase shares of the Company at a discount. Each right entitles the registered holder to purchase from the Company a unit consisting of one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share. In connection with the adoption of the Rights Agreement, on July 18, 2007, the Company filed a Certificate of Designations of Series A Junior Participating Preferred Stock with the Secretary of State of the State of Delaware. 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 (see Note 10) by 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. 37
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements – (Continued)
9.8. Stock Based Compensation
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). Prior to January 1, 2006, Core Molding Technologies accounted for share-based compensation to employees in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and related interpretations. Core Molding Technologies also followed the disclosure requirements of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, as amended by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”. Core Molding Technologies adopted SFAS No. 123R using the modified prospective method and, accordingly, financial statement amounts for prior periods presented in this Form 10-K have not been restated to reflect the fair value method of recognizing compensation cost relating to non-qualified stock options.method. Under this method, the provisions of SFAS 123R apply to all awards granted or modified after the date of adoption. In addition, compensation expense must be recognized for any unvested stock option awards outstanding as of the date of adoption on a straight-line basis over the remaining vesting period. The total impact of adoption on results of operations, net of tax benefit, recorded in 2006 was $311,000 or $.03 per basic and diluted share. Under APB No. 25 there was no compensation cost recognized for non-qualified stock options awarded in the year ended December 31, 2005 as these non-qualified stock options had an exercise price equal to the market value of the underlying stock at the grant date. The following table sets forth pro forma information as if compensation cost had been determined consistent with the requirements of SFAS No. 123R.
| | | | | | | | | Year Ended | | | | | December 31, | | | | | 2005 | | | Net income, as reported | | $ | 6,286,056 | | | Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects | | | (264,813 | ) | | | | | | | Pro forma net income | | $ | 6,021,243 | | | | | | | | Earnings per share: | | | | | | Basic – as reported | | $ | 0.63 | | | Basic – pro forma | | $ | 0.61 | | | Diluted – as reported | | $ | 0.60 | | | Diluted – pro forma | | $ | 0.58 | |
38
Core Molding Technologies, Inc. and SubsidiariesStock Options
Notes to Consolidated Financial Statements – (Continued)
Stock Options
There were no grants of options in the years ended December 31, 2008, 2007 and 2006. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The weighted average fair value of options granted during 2005 was $4.12. The fair value of the options granted in 2005 were estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: risk free interest rate of 4.37%, no expected dividend yield, expected lives of 8 to 10 years and expected volatility of 91%. Total compensation cost related to incentive stock options for the years ended December 31, 2008, 2007 and 2006 was $98,536, $129,671 and $243,220, respectively. Compensation expense is allocated such that $81,573, $96,687, and $186,151 is included in selling, general, and administrative expenses and $16,963, $32,984 and $57,069 is recorded in cost of sales for the year ended December 31, 2008, 2007 and 2006, respectively. There was no tax benefit recorded for this compensation cost as the expense primarily relates to incentive stock options that do not qualify for a tax deduction until, and only if, a disqualifying disposition occurs. 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 benefitsbenefit received as a result of disqualified dispositions werewas $116,000. During the year ended December 31, 2006, Core Molding Technologies received approximately $485,000 in cash from the exercise of stock options. The aggregate intrinsic value of these options was approximately $896,000. Tax benefitsbenefit received as a result of disqualified dispositions werewas $280,000. During the year ended December 31, 2005, 43
Core Molding Technologies, received approximately $808,000 in cash from the exercise of stock options. The aggregate intrinsic value of these options was approximately $1,448,000. Tax benefits received as a result of a disqualified dispositions were $514,000.Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued) The following summarizes all stock option activity for the years ended December 31: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2007 | | 2006 | | 2005 | | | 2008 | | 2007 | | 2006 | | | | | Weighted | | Weighted | | Weighted | | | Weighted | | Weighted | | Weighted | | | | | Number | | Average | | Number | | Average | | Number | | Average | | | Number | | Average | | Number | | Average | | Number | | Average | | | | | of | | Exercise | | of | | Exercise | | of | | Exercise | | | of | | Exercise | | of | | Exercise | | of | | Exercise | | | | | Options | | Price | | Options | | Price | | Options | | Price | | | Options | | Price | | Options | | Price | | Options | | Price | | | Outstanding — beginning of year | | 799,956 | | $ | 3.35 | | 1,032,700 | | $ | 3.33 | | 1,203,900 | | $ | 3.12 | | | | Outstanding- beginning of year | | | 620,700 | | $ | 3.33 | | 799,956 | | $ | 3.35 | | 1,032,700 | | $ | 3.33 | | | Granted | | — | | — | | — | | — | | 123,000 | | 4.95 | | | — | | — | | — | | — | | — | | — | | | Exercised | | | (115,256 | ) | | 3.11 | | | (152,270 | ) | | 3.19 | | | (261,400 | ) | | 3.09 | | | | (32,000 | ) | | 3.13 | | | (115,256 | ) | | 3.11 | | | (152,270 | ) | | 3.19 | | | Forfeited | | | (64,000 | ) | | 3.96 | | | (80,474 | ) | | 3.45 | | | (32,800 | ) | | 2.80 | | | | (18,475 | ) | | 4.60 | | | (64,000 | ) | | 3.96 | | | (80,474 | ) | | 3.45 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding — end of year | | 620,700 | | $ | 3.33 | | 799,956 | | $ | 3.35 | | 1,032,700 | | $ | 3.33 | | | | Outstanding-end of year | | | 570,225 | | $ | 3.30 | | 620,700 | | $ | 3.33 | | 799,956 | | $ | 3.35 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at December 31 | | 458,350 | | $ | 3.28 | | 493,176 | | $ | 3.23 | | 514,625 | | $ | 3.18 | | | 481,395 | | $ | 3.29 | | 458,350 | | $ | 3.28 | | 493,176 | | $ | 3.23 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The following summarizes the activity relating to stock options under the Original Plan mentioned above for the yearsyear ended December 31, 2007:2008: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted | | | | | Weighted | | | | | | | Number | | Weighted | | Average | | Aggregate | | | Average | | | | | | | of | | Average | | Remaining | | Intrinsic | | | Number | | Weighted | | Remaining | | Aggregate | | | | | Shares | | Exercise Price | | Contractual Term | | Value | | | of | | Average | | Contractual | | Intrinsic | | | Outstanding at December 31, 2006 | | 799,956 | | $ | 3.35 | | | | | | | Shares | | Exercise Price | | Term | | Value | | | Outstanding at December 31, 2007 | | | 620,700 | | $ | 3.33 | | | Exercised | | | (115,256 | ) | | 3.11 | | $ | 641,000 | | | | (32,000 | ) | | 3.13 | | $ | 116,000 | | | Granted | | — | | — | | | — | | — | | | Forfeited | | | (64,000 | ) | | 3.96 | | | | (18,475 | ) | | 4.60 | | | | | | | | | | | | | | | | | | | | | | | Outstanding at December 31, 2007 | | 620,700 | | $ | 3.33 | | 6.32 | | $ | 2,316,000 | | | | Outstanding at December 31, 2008 | | | 570,225 | | $ | 3.30 | | 5.29 | | $ | — | | | | | | | | | | | | | | | | | | | | | | | Exercisable at December 31, 2007 | | 458,350 | | $ | 3.28 | | 6.13 | | $ | 1,731,000 | | | | Exercisable at December 31, 2008 | | | 481,395 | | $ | 3.29 | | 5.18 | | $ | — | | | | | | | | | | | | | | | | | | | | | | | Vested or expected to vest at December 31, 2007 | | 613,062 | | $ | 3.33 | | 6.56 | | $ | 2,288,000 | | | | Vested or expected to vest at December 31, 2008 | | | 565,784 | | $ | 3.30 | | 5.29 | | $ | — | | | | | | | | | | | | | | | | | | | | | |
3944
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements –— (Continued)
The following summarizes the status of, and changes to, unvested options during the years ended December 31, 2008, 2007 2006 and 2005:2006: | | | | | | | | | | | | | | | | | | | | | Weighted | | | Weighted | | | | | Number | | Average | | | Number | | Average | | | | | Of | | Grant Date | | | Of | | Grant Date | | | | | Shares | | Fair Value | | | | Unvested at December 31, 2004 | | 596,044 | | $ | 3.04 | | | | Granted | | 123,000 | | 4.95 | | | | Vested | | | (168,172 | ) | | 3.10 | | | | Forfeited | | | (32,800 | ) | | 2.80 | | | | | | | | | | | Shares | | Fair Value | | | Unvested at December 31, 2005 | | 518,072 | | 3.49 | | | 518,072 | | 3.49 | | | Granted | | — | | — | | | — | | — | | | Vested | | | (130,818 | ) | | 3.39 | | | | (130,818 | ) | | 3.39 | | | Forfeited | | | (80,474 | ) | | 3.45 | | | | (80,474 | ) | | 3.45 | | | | | | | | | | | | | | | Unvested at December 31, 2006 | | 306,780 | | 3.54 | | | 306,780 | | 3.54 | | | Granted | | — | | — | | | — | | — | | | Vested | | | (83,930 | ) | | 3.36 | | | | (83,930 | ) | | 3.36 | | | Forfeited | | | (60,500 | ) | | 4.24 | | | | (60,500 | ) | | 4.24 | | | | | | | | | | | | | | | Unvested at December 31, 2007 | | 162,350 | | $ | 3.46 | | | 162,350 | | $ | 3.46 | | | Granted | | | — | | — | | | Vested | | | | (62,720 | ) | | 3.38 | | | Forfeited | | | | (10,800 | ) | | 4.67 | | | | | | | | | | | | | | | Unvested at December 31, 2008 | | | 88,830 | | 3.37 | | | | | | | | | |
At December 31, 2007,2008, there was $282,000$146,000 of total unrecognized compensation cost, related to unvested stock options granted under the Original Plan expected to be recognized over a weighted average of 2.021.8 years. The following table summarizes information about stock options outstanding and exercisable as of December 31, 2007:2008: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Options | | | | Options Outstanding | | Options Exercisable | | | Options Outstanding | | Exercisable | | | | Weighted | | | | | Weighted | | | | | | Weighted | | Average | | Weighted | | | Average | | | | Range of | | Number of | | Average | | Contractual Life | | Number of | | Average | | | Number of | | Contractual Life | | Number of | | Exercise Prices | | Options | | Exercise Price | | In Years | | Options | | Exercise Price | | | Options | | In Years | | Options | | $2.75 | | 94,600 | | $ | 2.75 | | 6.4 | | 29,700 | | $ | 2.75 | | | 85,600 | | 4.2 | | 37,400 | | | $3.21 | | 436,100 | | 3.21 | | 6.1 | | 391,450 | | 3.21 | | | 419,625 | | 5.1 | | 404,995 | | | $3.28 to $3.50 | | 57,000 | | 3.29 | | 7.0 | | 24,000 | | 3.30 | | | | $6.40 to $7.98 | | 33,000 | | 6.64 | | 7.9 | | 13,200 | | 6.64 | | | | $3.28 | | | 40,000 | | 6.2 | | 24,000 | | | $6.40 | | | 20,000 | | 6.8 | | 12,000 | | | $7.98 | | | 5,000 | | 7.0 | | 3,000 | | | | | | | | | | | | | | | | | | | | | 620,700 | | $ | 3.33 | | 458,350 | | $ | 3.28 | | | 570,225 | | 481,395 | | | | | | | | | | | | | | | | | |
40
Core Molding Technologies, Inc. and SubsidiariesRestricted Stock
Notes to Consolidated Financial Statements – (Continued)
Restricted Stock
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: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2007 | | 2006 | | | 2008 | | 2007 | | 2006 | | | | | Weighted | | Weighted | | | Number | | Weighted | | Number | | Weighted | | Number | | Weighted | | | | | Number | | Average | | Number | | Average | | | of | | Average | | of | | Average | | of | | Average | | | | | of | | Grant Date | | of | | Grant Date | | | Shares | | Fair Value | | Shares | | Fair Value | | Shares | | Fair Value | | | | | Shares | | Fair Value | | Shares | | Fair Value | | | | Unvested balance at beginning of year | | 22,972 | | $ | 6.70 | | — | | $ | — | | | | Unvested- beginning of year | | | 61,416 | | $ | 7.02 | | 22,972 | | $ | 6.70 | | — | | $ | — | | | Granted | | 51,105 | | 7.15 | | 36,305 | | 6.70 | | | 41,635 | | 7.01 | | 51,105 | | 7.15 | | 36,305 | | 6.70 | | | Vested | | | (8,008 | ) | | 7.09 | | | (10,870 | ) | | 6.70 | | | | (5,919 | ) | | 6.99 | | | (8,008 | ) | | 7.09 | | | (10,870 | ) | | 6.70 | | | Forfeited | | | (4,653 | ) | | 6.70 | | | (2,463 | ) | | 6.70 | | | | (12,026 | ) | | 7.09 | | | (4,653 | ) | | 6.70 | | | (2,463 | ) | | 6.70 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unvested at end of year | | 61,416 | | $ | 7.02 | | 22,972 | | $ | 6.70 | | | 85,106 | | $ | 7.01 | | 61,416 | | $ | 7.02 | | 22,972 | | $ | 6.70 | | | | | | | | | | | | | | | | | | | | | | | | | | | Vested and expected to vest at December 31, 2007 | | 77,223 | | $ | 6.98 | | 32,675 | | $ | 6.70 | | | | | | | | | | | | | | | | Vested and expected to vest at December 31 | | | 105,648 | | $ | 6.99 | | 77,223 | | $ | 6.98 | | 32,675 | | $ | 6.70 | | | | | | | | | | | | | | | | | |
As of December 31, 20072008 there was $304,000$313,000 of total unrecognized compensation cost related to Restricted Stock granted. That remaining cost is expected to be recognized over the weighted-average period of 2.291.90 years. The total fair value of shares that vestedcompensation expense during the years ended December 31, 2008, 2007 and 2006 was $57,000$189,000, $139,000 and $96,000, respectively, and was recorded as selling, general, and administrative compensation expense. 10.9. Income Taxes
Components of the provision (credit) for income taxes are as follows: | | | | | | | | | | | | | | | | | 2007 | | | 2006 | | | 2005 | | | Current: | | | | | | | | | | | | | | Federal – US | | $ | 1,606,000 | | | $ | 3,284,000 | | | $ | 494,000 | | | Federal – Foreign | | | 137,000 | | | | 104,000 | | | | 107,000 | | | State and local | | | (202,000 | ) | | | 569,000 | | | | 227,000 | | | | | | | | | | | | | | | | | 1,541,000 | | | | 3,957,000 | | | | 828,000 | | | | | | | | | | | | | | | | | Deferred: | | | | | | | | | | | | | | Federal | | | (142,000 | ) | | | 1,655,000 | | | | 2,065,000 | | | State and local | | | 269,000 | | | | (10,000 | ) | | | 690,000 | | | | | | | | | | | | | | | | | 127,000 | | | | 1,645,000 | | | | 2,755,000 | | | | | | | | | | | | | | Provision for income taxes | | $ | 1,668,000 | | | $ | 5,602,000 | | | $ | 3,583,000 | | | | | | | | | | | | |
41
Core Molding Technologies, Inc. and Subsidiaries| | | | | | | | | | | | | | | | | 2008 | | | 2007 | | | 2006 | | | Current: | | | | | | | | | | | | | | Federal — US | | $ | 2,639,000 | | | $ | 1,606,000 | | | $ | 3,284,000 | | | Federal — Foreign | | | 71,000 | | | | 137,000 | | | | 104,000 | | | State and local | | | 157,000 | | | | (202,000 | ) | | | 569,000 | | | | | | | | | | | | | | | | | 2,867,000 | | | | 1,541,000 | | | | 3,957,000 | | | Deferred: | | | | | | | | | | | | | | Federal | | | (37,000 | ) | | | (142,000 | ) | | | 1,655,000 | | | State and local | | | 27,000 | | | | 269,000 | | | | (10,000 | ) | | | | | | | | | | | | | | | | (10,000 | ) | | | 127,000 | | | | 1,645,000 | | | | | | | | | | | | | | Provision for income taxes | | $ | 2,857,000 | | | $ | 1,668,000 | | | $ | 5,602,000 | | | | | | | | | | | | |
Notes to Consolidated Financial Statements — (Continued)
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: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2007 | | 2006 | | 2005 | | | 2008 | | 2007 | | 2006 | | | Provision at federal statutory rate – US | | $ | 1,834,000 | | $ | 5,444,000 | | $ | 3,356,000 | | | | Provision at federal statutory rate — US | | | $ | 2,890,000 | | $ | 1,834,000 | | $ | 5,444,000 | | | Effect of foreign taxes | | | (81,000 | ) | | | (81,000 | ) | | | (71,000 | ) | | | (47,000 | ) | | | (81,000 | ) | | | (81,000 | ) | | State and local tax expense, net of federal benefit | | 83,000 | | 407,000 | | 285,000 | | | 128,000 | | 83,000 | | 407,000 | | | Federal manufacturing deduction | | | (98,000 | ) | | | (106,000 | ) | | — | | | | (141,000 | ) | | | (98,000 | ) | | | (106,000 | ) | | Other | | | (70,000 | ) | | | (62,000 | ) | | 13,000 | | | 27,000 | | | (70,000 | ) | | | (62,000 | ) | | | | | | | | | | | | | | | | | | Provision for income taxes | | $ | 1,668,000 | | $ | 5,602,000 | | $ | 3,583,000 | | | $ | 2,857,000 | | $ | 1,668,000 | | $ | 5,602,000 | | | | | | | | | | | | | | | | | |
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 20052006 and 2007 was not significant, however the deduction taken in 2006 was $316,000 and $297,000, respectively and the deduction is estimated to be $289,000$415,000 in 2007.2008. In December 2004, the FASB issued a new staff position providing for this deduction to be treated as a special deduction, as opposed to a tax rate reduction in accordance with SFAS No. 109. 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 $514,000 in 2007, 2006, and 2005, respectively. Deferred tax assets (liabilities) consist of the following at December 31: | | | | | | | | | | | | | | | | | | | | | 2007 | | 2006 | | | 2008 | | 2007 | | | Current Asset: | | | | Current asset(liability): | | | | Accrued liabilities | | $ | 674,000 | | $ | 736,000 | | | $ | 1,083,000 | | $ | 674,000 | | | Accounts receivable | | 672,000 | | 572,000 | | | 301,000 | | 672,000 | | | Inventory | | 376,000 | | 345,000 | | | 543,000 | | 376,000 | | | Other, net | | | (96,000 | ) | | | (124,000 | ) | | | (58,000 | ) | | | (96,000 | ) | | | | | | | | | | | | | | Total current asset | | 1,626,000 | | 1,529,000 | | | 1,869,000 | | 1,626,000 | | | | | | | | | | | | | | | | | | | Non-current asset (liability): | | | | Property, plant, and equipment | | 425,000 | | 1,295,000 | | | | (314,000 | ) | | 425,000 | | | Postretirement benefits | | 5,842,000 | | 5,907,000 | | | 5,637,000 | | 5,842,000 | | | Interest rate swap | | 76,000 | | 12,000 | | | 153,000 | | 76,000 | | | Other, net | | | (170,000 | ) | | | (298,000 | ) | | | (157,000 | ) | | | (170,000 | ) | | | | | | | | | | | | | | Total non-current asset | | 6,173,000 | | 6,916,000 | | | 5,319,000 | | 6,173,000 | | | | | | | | | | | | | | | | | | | Total deferred tax asset – net | | $ | 7,799,000 | | $ | 8,445,000 | | | | Total deferred tax asset — net | | | $ | 7,188,000 | | $ | 7,799,000 | | | | | | | | | | | | | |
At December 31, 2007,2008, a provision has not been made for U.S. taxes on accumulated undistributed earnings of approximately $2,338,000$2,407,000 of the Company’s Mexican subsidiary that would become payable upon repatriation to the United States. It is the intention of the Company to reinvest all such earnings in operations and facilities outside of the United States. 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. 42
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
Below is a reconciliation of the change in unrecognized tax benefits recorded on Consolidated Balance Sheets from the January 1, 2007 FIN 48 adoption through December 31, 2007 is as follows:
| | | | | | | Unrecognized Tax Benefits – Opening Balance | | $ | 99,000 | | | Settlement | | | (75,000 | ) | | | | | | | Unrecognized Tax Benefits – Ending Balance | | $ | 24,000 | |
As of December 31,During 2007 the Consolidated Balance Sheets reflectsliability was reduced by $48,000 due to settlement of a reduction of $75,000 inforeign tax case. Also during 2007, the Company reduced the remaining $52,000 liability for unrecognized tax benefits from the January 1, 2007 amount. The liability was reduced by $48,000 to offset a $65,000 payment made to settle a foreign tax case. The payment in excess of liability was recorded to income tax expense. The liability was also reduced by $28,000 due to collection of state tax claims. This amount was recorded to income tax expense. The remaining liability of $24,000 at December 31, 2007 relatesrelated to uncertain state tax positions andby $28,000 due to favorable settlement. In 2008, the entire amount if recognized would affectremaining $24,000 related to uncertain state tax positions was reduced due to favorable resolution. These amounts were recorded to income tax expense in each of the effectiverespective years. At December 31, 2008 the Company has no liability for unrecognized tax rate.benefits under FIN 48. The Company does not anticipate that the unrecognized tax benefits will significantly change within the next twelve months.
The 2006 federal tax return is currently under an IRS audit; however, there have been no findings at this time. There are no federalstate or stateforeign income tax audits in process. During the year ended December 31, 2008 and 2007, the Company recorded interest income of $9,000 and $9,000, respectively from state tax refunds, which was coded toclassified as a reduction of income tax expense. During the year ended December 31, 2006, the Company recorded no interest expense or penalties related to unrecognized tax benefits and no interest and penalties were accrued on the Consolidated Balance Sheets at December 31, 2006. 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 20032005 due to the expiration of the statute of limitations and is subject to income tax examinations by Mexican authorities since the Company began business in Mexico in 2001. The Company does not anticipate that the unrecognized tax benefits will significantly change within the next twelve months. 47
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued) 11.10. Postretirement Benefits
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. 43
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
The funded status of the Company’s postretirement health and life insurance benefits plan as of December 31, 20072008 and 20062007 and reconciliation with the amounts recognized in the consolidated balance sheets are provided below: | | | | | | | | | | | | | | | | | | | | | Postretirement Benefits | | | Postretirement Benefits | | | | | 2007 | | 2006 | | | 2008 | | 2007 | | Change in benefit obligation: | | | | Benefit obligation at beginning of year | | $ | 16,107,000 | | $ | 15,081,000 | | | $ | 16,442,000 | | $ | 16,107,000 | | | Service cost | | 798,000 | | 797,000 | | | 637,000 | | 798,000 | | | Interest cost | | 995,000 | | 862,000 | | | 1,049,000 | | 995,000 | | | Unrecognized gain | | | (1,215,000 | ) | | | (519,000 | ) | | | (1,837,000 | ) | | | (1,215,000 | ) | | Benefits paid | | | (243,000 | ) | | | (114,000 | ) | | | (413,000 | ) | | | (243,000 | ) | | | | | | | | | | | | | | Benefit obligation at end of year | | $ | 16,442,000 | | $ | 16,107,000 | | | $ | 15,878,000 | | $ | 16,442,000 | | | | | | | | | | | | | | | | | | Plan Assets | | — | | — | | | — | | — | | | | | | | | | | | | | | | | | | Amounts recorded in other comprehensive income: | | $ | 3,259,000 | | $ | 4,740,000 | | | $ | 1,294,000 | | $ | 3,259,000 | | | | | | | | | | | | | | | | | | Weighted-average assumptions as of December 31: | | | | Discount rate used to determine benefit obligation | | | 6.50 | % | | | 5.60 | % | | | 6.10 | % | | | 6.50 | % | | | | | | | | | | | | | | | | | | Discount rate used to determine net periodic benefit cost | | | 5.90 | % | | | 5.60 | % | | | 6.10 | % | | | 5.90 | % | | | | | | | | | | | | |
The components of expense for all of the Company’s postretirement benefits plans are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2007 | | 2006 | | 2005 | | | 2008 | | 2007 | | 2006 | | | Pension Expense: | | | | Multi-employer plan contributions | | $ | 424,000 | | $ | 423,000 | | $ | 382,000 | | | $ | 535,000 | | $ | 424,000 | | $ | 423,000 | | | Defined contribution plan contributions | | 452,000 | | 510,000 | | 483,000 | | | 414,000 | | 452,000 | | 510,000 | | | | | | | | | | | | | | | | | | | Total pension expense | | 876,000 | | 933,000 | | 865,000 | | | 949,000 | | 876,000 | | 933,000 | | | | | | | | | | | | | | | | | | | | | | | Health and life insurance: | | | | Service cost | | 798,000 | | 797,000 | | 901,000 | | | 637,000 | | 798,000 | | 797,000 | | | Interest cost | | 995,000 | | 862,000 | | 737,000 | | | 1,049,000 | | 995,000 | | 862,000 | | | Amortization of net loss | | 267,000 | | 300,000 | | 238,000 | | | 128,000 | | 267,000 | | 300,000 | | | | | | | | | | | | | | | | | | | Net periodic benefit cost | | 2,060,000 | | 1,959,000 | | 1,876,000 | | | 1,814,000 | | 2,060,000 | | 1,959,000 | | | | | | | | | | | | | | | | | | | | | | | Total postretirement benefits expense | | $ | 2,936,000 | | $ | 2,892,000 | | $ | 2,741,000 | | | $ | 2,763,000 | | $ | 2,936,000 | | $ | 2,892,000 | | | | | | | | | | | | | | | | | |
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 balance sheet.Consolidated Balance Sheet. This amount was recorded as other comprehensive income in the amount of $730,000, net of tax, for the year ended December 31, 2007. Upon adoption at December 31, 2006, the Company recognized net actuarial losses of $4,740,000 on the balance sheet.Consolidated Balance Sheet. This was recorded as other comprehensive loss in the amount of $3,000,000, net of tax. 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 2008 consists2009 is zero due to unrecognized loss being less than ten percent of a net loss amortization of $128,000, or $82,000 net of tax.accumulated postretirement benefit obligations. The weighted average rate of increase in the per capita cost of covered health care benefits is projected to be 8%7%. The rate is projected to decrease gradually to 5% by the year 20132015 and remain at that level thereafter. The comparable assumptions for the prior year were 8% and 5%, respectively. 44
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- Percentage | | 1-Percentage | | 1- Percentage | | 1-Percentage | | | | Point Increase | | Point Decrease | | Point Increase | | Point Decrease | | Effect on total of service and interest cost components | | $ | 365,000 | | $ | (289,000 | ) | | $ | 300,000 | | $ | (244,000 | ) | | Effect on postretirement benefit obligation | | $ | 2,597,000 | | $ | (2,127,000 | ) | | $ | 2,495,000 | | $ | (2,043,000 | ) |
The estimated future benefit payments of the health care plan are: | | | | | | | | | Fiscal 2008 | | $ | 489,000 | | | | Fiscal 2009 | | $ | 424,000 | | | $ | 520,000 | | | Fiscal 2010 | | $ | 510,000 | | | $ | 394,000 | | | Fiscal 2011 | | $ | 625,000 | | | $ | 496,000 | | | Fiscal 2012 | | $ | 771,000 | | | $ | 624,000 | | | Fiscal 2013 – 2017 | | $ | 5,572,000 | | | | Fiscal 2013 | | | $ | 751,000 | | | Fiscal 2014 – 2018 | | | $ | 5,099,000 | |
12.11. Related Party Transactions
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 October 2006,June 2008, the Company renewed theentered into a new Comprehensive Supply Agreement, which was effective as of November 1, 2006.June 24, 2008. Under this Comprehensive Supply Agreement, the Company isremains the primary supplier of Navistar’s original equipment and service requirements for fiberglass reinforced parts, as long as the Company remains competitive in cost, quality and delivery, through October 31, 2011.2013. 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 8 of the December 31, 2007 Form 10-K.7. At December 31, 2007,2008, Navistar owns 9.9%9.8% of the Company’s outstanding common stock. Sales to Navistar were $66,880,000 in 2008, $53,629,000 in 2007 and $81,223,000 in 2006, and $66,382,000 in 2005, of which $6,144,000$7,310,000 and $10,671,000$6,144,000 had not been received as of December 31, 20072008 and 20062007 and were included in accounts receivable. ReceivablesAccounts receivables as of December 31, 20072008 and 20062007 also include $443,000$102,000 and $1,008,000$443,000 respectively, for tooling costs owed by Navistar. 49
13.Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
12. Labor Concentration As of December 31, 2007,2008, the Company employed a total of 942933 employees, which consists of 571562 employees in its United States operations and 371 employees in its Mexican operations. Of these 942933 employees, 266312 are covered by a collective bargaining agreement with the International Association of Machinists and Aerospace Workers (“IAM”), which extends to August 4, 2010, and 311292 are covered by a collective bargaining agreement with Sindicato de Jorneleros y Obreros, which extends to January 16, 2009.2010. 14.13. Commitments and Contingencies
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. 45
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)
15.14. Quarterly Results of Operations (Unaudited)
The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 20072008 and 2006.2007. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | Total Year | | 2008: | | | | Product sales | | | $ | 25,983,212 | | $ | 29,395,247 | | $ | 29,497,102 | | $ | 25,663,085 | | $ | 110,538,646 | | | Tooling sales | | | 3,102,225 | | 543,447 | | 533,461 | | 1,937,056 | | 6,116,189 | | | | | | | | | | | | | | | | | Net sales | | | 29,085,437 | | 29,938,694 | | 30,030,563 | | 27,600,141 | | 116,654,835 | | | Gross margin | | | 4,316,206 | | 5,620,963 | | 6,037,862 | | 5,234,552 | | 21,209,583 | | Income before interest and taxes(1) | | | 1,501,871 | | 2,627,145 | | 2,851,822 | | 2,208,748 | | 9,189,585 | | Net income(1) | | | 864,153 | | 1,716,261 | | 1,687,927 | | 1,375,144 | | 5,643,486 | | | Net income per common share: | | | Basic(1) | | | $ | 0.13 | | $ | 0.25 | | $ | 0.25 | | $ | 0.20 | | $ | 0.84 | | Diluted(1) | | | $ | 0.12 | | $ | 0.24 | | $ | 0.24 | | $ | 0.20 | | $ | 0.81 | | | | | 1st Quarter | | 2nd Quarter | | 3rd Quarter | | 4th Quarter | | Total Year | | | 2007: | | | | Product sales | | $ | 30,650,936 | | $ | 24,685,106 | | $ | 23,744,611 | | $ | 21,964,403 | | $ | 101,045,056 | | | $ | 30,650,936 | | $ | 24,685,106 | | $ | 23,744,611 | | $ | 21,964,403 | | $ | 101,045,056 | | | Tooling sales | | 578,155 | | 13,610,170 | | 6,175,333 | | 1,303,173 | | 21,666,831 | | | 578,155 | | 13,610,170 | | 6,175,333 | | 1,303,173 | | 21,666,831 | | | | | | | | | | | | | | | | | | | | | | | | | | | Net sales | | 31,229,091 | | 38,295,276 | | 29,919,944 | | 23,267,576 | | 122,711,887 | | | 31,229,091 | | 38,295,276 | | 29,919,944 | | 23,267,576 | | 122,711,887 | | | Gross margin | | 4,825,686 | | 4,605,074 | | 4,079,067 | | 3,458,155 | | 16,967,982 | | | 4,825,686 | | 4,605,074 | | 4,079,067 | | 3,458,155 | | 16,967,982 | | | Income before interest and taxes | | 1,734,103 | | 1,817,912 | | 1,292,471 | | 724,736 | | 5,569,222 | | | 1,734,103 | | 1,817,912 | | 1,292,471 | | 724,736 | | 5,569,222 | | | Net income | | 1,212,770 | | 1,266,133 | | 717,182 | | 530,388 | | 3,726,473 | | | 1,212,770 | | 1,266,133 | | 717,182 | | 530,388 | | 3,726,473 | | | Net income per common share: | | | Basic(1) | | $ | 0.12 | | $ | 0.12 | | $ | 0.10 | | $ | 0.08 | | $ | 0.43 | | | $ | 0.12 | | $ | 0.12 | | $ | 0.10 | | $ | 0.08 | | $ | 0.43 | | Diluted(1) | | $ | 0.11 | | $ | 0.12 | | $ | 0.09 | | $ | 0.08 | | $ | 0.41 | | | $ | 0.11 | | $ | 0.12 | | $ | 0.09 | | $ | 0.08 | | $ | 0.41 | | | | | | 2006: | | | | Product sales | | $ | 35,354,658 | | $ | 38,425,961 | | $ | 38,854,393 | | $ | 37,538,586 | | $ | 150,173,598 | | | | Tooling sales | | 1,147,656 | | 1,084,696 | | 9,223,766 | | 700,274 | | 12,156,392 | | | | | | | | | | | | | | | | | | Net sales | | 36,502,314 | | 39,510,657 | | 48,078,159 | | 38,238,860 | | 162,329,990 | | | | Gross margin | | 6,828,571 | | 7,846,899 | | 8,292,674 | | 6,900,791 | | 29,868,935 | | | | Income before interest and taxes | | 3,652,100 | | 3,946,030 | | 4,547,151 | | 3,710,468 | | 15,855,749 | | | | Net income | | 2,281,906 | | 2,503,027 | | 2,937,775 | | 2,687,939 | | 10,410,647 | | | | Net income per common share: | | | | Basic | | $ | 0.23 | | $ | 0.25 | | $ | 0.29 | | $ | 0.26 | | $ | 1.03 | | | Diluted(1) | | $ | 0.22 | | $ | 0.24 | | $ | 0.28 | | $ | 0.25 | | $ | 1.00 | | |
| | | | (1) | | Sum of the quarters do not sum to total year due to rounding. |
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| | | ITEM 9. | | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 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 Company'sCompany’s internal control over financial reporting based on the framework and criteria established in Internal Control — Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2007.2008. 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. | | | ITEM 9B. | | OTHER INFORMATION |
ITEM 9B. OTHER INFORMATION4751
PART III | | | ITEM 10. | | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE |
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCEThe 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 14, 2008,28, 2009, which is expected to be filed with the SEC 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 |
ITEM 11. EXECUTIVE COMPENSATIONThe 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 14, 2008,28, 2009, which is expected to be filed with the SEC 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 AND RELATED STOCKHOLDER MATTERS |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSThe 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 14, 2008,28, 2009, which is expected to be filed with the SEC 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, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe 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 14, 2008,28, 2009, which is expected to be filed with the SEC 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. | | ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES |
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 14, 2008,28, 2009, which is expected to be filed with the SEC 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. 4852
PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) | | (a)Documents filed as Part of this Report: |
| (1) | | (1)Financial Statements |
| | | The following consolidated financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K: |
| | | Report of Independent Registered Public Accounting Firm | | | | | Consolidated Statements of Income for the Years Ended December 31, 2007, 2006, and 2005 | | | | | Consolidated Balance Sheets as of December 31, 2007 and 2006 | | | | | Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2007, 2006, and 2005 | | | | | Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006, and 2005 | | | | | Notes to Consolidated Financial Statements |
| (2) | | Financial Statement Schedules |
Consolidated Statements of Income for the Years Ended December 31, 2008, 2007, and 2006 | | | The following consolidated financial statement schedules are filed with this Annual Report on Form10-K: |
Consolidated Balance Sheets as of December 31, 2008 and 2007 | | | Schedule II — ValuationConsolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2008, 2007, and Qualifying Accounts and Reserves for the years ended December 31, 2007, 2006 and 2005 | | | | | All other schedules are omitted because of the absence of the conditions under which they are required. |
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007, and 2006 | | | Notes to Consolidated Financial Statements (2)Financial Statement Schedules The following consolidated financial statement schedules are filed with this Annual Report on Form10-K: Schedule II — Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2008, 2007, and 2006 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 10-K. |
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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. | | | | | | | | | | CORE MOLDING TECHNOLOGIES, INC. | | | | | | | | | | By | | /s/ Kevin L. BarnettKevin L. Barnett | | | | | | By | | /s/ Kevin L. BarnettPresident and Chief Executive Officer | | | | | | | | | | | | | | | | Kevin L. Barnett | | | | | | | President and Chief Executive OfficerDate: April 1, 2009 | | |
Date: March 28, 2008
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/ Kevin L. Barnett | | | | | | |
President, Chief Executive Officer, and Director | | March 28, 2008
April 1, 2009 | | | | | | | /s/ Herman F. Dick, Jr. | | | | | | |
Vice President, Secretary, Treasurer, and
Chief Financial Officer | March 28, 2008 |
April 1, 2009 | | | | | | | * | | | | | | |
Director | | March 28, 2008
April 1, 2009 | | | | | | | * | | | | | | |
Director | | March 28, 2008
April 1, 2009 | | | | | | | * | | | | | | |
Director | | March 28, 2008
April 1, 2009 | | | | | | | * | | | | | | |
Director | | March 28, 2008
April 1, 2009 | | | | | | | *By /s/ Herman F. Dick, Jr. | | | | | | |
Attorney-In-Fact | | March 28, 2008
April 1, 2009 |
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Core Molding Technologies, Inc. and Subsidiaries Schedule II Consolidated valuation and qualifying accounts and reserves for the years ended December 31, 2008, 2007, 2006, and 2005.2006. Reserves deducted from asset to which it applies — allowance for doubtful accounts. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Additions | | | | | | Additions | | | | | | | | Balance at | | Charged to | | Charged to | | | | | | (Recovered)/ | | | | | | | | | | Beginning | | Costs & | | Other | | Deductions | | Balance At | | Balance at | | Charged to | | Charged to | | | | | | | | of Year | | Expenses | | Accounts | | (A) | | End of Year | | Beginning | | Costs & | | Other | | Deductions | | Balance At | | | | | of Year | | Expenses | | Accounts | | (A) | | End of Year | | Year Ended December 31, 2008 | | | $ | 334,000 | | $ | (110,000 | ) | | — | | $ | 115,000 | | $ | 109,000 | | | | | | Year Ended December 31, 2007 | | $ | 262,000 | | $ | 107,000 | | — | | $ | 35,000 | | $ | 334,000 | | | $ | 262,000 | | $ | 107,000 | | — | | $ | 35,000 | | $ | 334,000 | | | | | | Year Ended December 31, 2006 | | $ | 214,000 | | $ | 120,000 | | — | | $ | 72,000 | | $ | 262,000 | | | $ | 214,000 | | $ | 120,000 | | — | | $ | 72,000 | | $ | 262,000 | | | | | | | Year Ended December 31, 2005 | | $ | 235,000 | | $ | 93,000 | | — | | $ | 114,000 | | $ | 214,000 | | |
| | | | (A) | | Amount represents uncollectible accounts written off. |
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INDEX TO EXHIBITS | | | | | | | Exhibit No. | | Description | | Location | | | | | | | 2(a)(1) | | Asset Purchase Agreement dated as of September 12, 1996, as amended October 31, 1996, between Navistar and RYMAC1 | | Incorporated by reference to Exhibit 2-A to Registration Statement on Form S-4 (Registration No. 333-15809) | | | | | | | | 2(a)(2) | | Second Amendment to Asset Purchase Agreement dated December 16, 19961 | | Incorporated by 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 dated as of November 1, 1996, between Core Molding and RYMAC | | Incorporated by reference to Exhibit 2-B to Registration Statement on Form S-4 (Registration No. 333-15809) | | | | | | | | 2(b)(2) | | First Amendment to Agreement and Plan of Merger dated as of December 27, 1996 between Core Molding and RYMAC | | Incorporated by reference to Exhibit 2(b)(2) to Annual Report on Form 10-K for the year ended December 31, 2002 | | | | | | | | 2(c) | | Asset Purchase Agreement dated as of October 10, 2001, between Core Molding Technologies, Inc. and Airshield Corporation | | Incorporated by reference to Exhibit 1 to Form 8-K filed October 31, 2001 | | | | | | | | 3(a)(1) | | Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996 | | Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-8, (Registration
No. 333-29203) | | | | | | | | 3(a)(2) | | Certificate of Amendment of Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on November 6, 1996 | | Incorporated by reference to Exhibit 4(b) to Registration Statement on Form S-8 (Registration
No. 333-29203) |
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| | | | | | | Exhibit No. | | Description | | Location | 3(a)(3) | | Certificate of Incorporation of Core Molding Technologies Inc., reflecting amendments through November 6, 1996 [for purposes of compliance with Securities and Exchange Commission filing requirements only] | | Incorporated by reference to Exhibit 4(c) to Registration Statement on Form S-8 (Registration No. 333-29203) | | | | | | | 3(a)(4)(3) | | Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002 | | Incorporated by reference to Exhibit 3(a)(4) to Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 | | | | | | | 3(a)(5)(4) | | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on July 18, 2007 | | Incorporated by reference to Exhibit 3.1 to Form 8-K filed July 19, 2007 | | | | | | | | 3(b) | | Amended and Restated By-Laws of Core Molding Technologies, Inc. | | Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed January 4, 2008 | | | | | | | | 4(a)(1) | | Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996 | | Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-8 (Registration No. 333-29203) | | | | | | | | 4(a)(2) | | Certificate of Amendment of Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on November 6, 1996 | | Incorporated by reference to Exhibit 4(b) to Registration Statement on Form S-8 (Registration No. 333-29203) | | | | | | | | 4(a)(3) | | Certificate of Incorporation of Core Molding Technologies, Inc., reflecting amendments through November 6, 1996 [for purposes of compliance with Securities and Exchange Commission filing requirements only] | | Incorporated by reference to Exhibit 4(c) to Registration Statement on Form S-8 (Registration No. 333-29203) | | | | | | 4(a)(4) | | Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002 | | Incorporated by reference to Exhibit 3(a)(4) to Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 |
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| | | | | | Exhibit No. | | Description | | Location | 4(a)(5)(4) | | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on July 18, 2007 | | Incorporated by reference to Exhibit 3.1 to Form 8-K filed July 19, 2007 | | | | | | | | 4(b) | | Stockholder Rights Agreement dated as of July 18, 2007, between Core Molding Technologies, Inc. and American Stock Transfer & Trust Company | | Incorporated by reference to Exhibit 4.1 to Current Report Form 8-K filed July 19, 2007 | | | | | | | | 10(a) | | Supply Agreement, dated October 31, 2006June 23, 2008 between Core Molding Technologies, Inc. and Core Composites Corporation and International Truck and Engine Corp.Navistar, Inc.5 | | Incorporated by reference to Exhibit 10(b)10(a) to AnnualQuarterly Report on Form 10-K10-Q for the yearquarter ended December 31, 2006June 30, 2008 |
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| | | | | | Exhibit No. | | Description | | Location | | | | | | | | 10(b) | | Supply and Management Agreement dated as of June 1, 2006 between PACCAR Inc. and Core Molding Technologies, Inc.5 | | Incorporated by reference to Exhibit 10(a) to Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 | | | | | | | | 10(c) | | Registration Rights Agreement, dated December 31, 1996, by and between Navistar International Transportation Corp. and various other persons who become parties pursuant to the agreement | | Incorporated by reference to Exhibit 10(d) to Annual Report on Form 10-K for the year ended December 31, 2001 | | | | | | | | 10(d) | | Loan Agreement,Credit agreement, dated December 3, 1997,9, 2008, by and between Core Molding Technologies, Inc.Inc and CoreComposites de Mexico, S De. R.L. de C.V. and Key Bank National Association | | Incorporated by reference to Exhibit 10(e) to Annual Report on Form 10-K for the year ended December 31, 2002Filed herein | | | | | | | 10(e)(1) | | Amendment, dated March 29, 2001, to the Loan Agreement dated December 3, 1997 by and between Core Molding Technologies, Inc. and Key Bank National Association | | Incorporated by reference to Exhibit 10(e)(1) to Annual Report on Form 10-K for the year ended December 31, 2002 | | | | | | 10(e)(2) | | Amendment, dated December 12, 2002, to the Loan Agreement dated December 3, 1997 by and between Core Molding Technologies, Inc. and Key Bank National Association | | Incorporated by reference to Exhibit 10(e)(2) to Annual Report on Form 10-K for the year ended December 31, 2002 | | | | | | 10(e)(3) | | Loan Agreement, dated December 30, 2003, by and between Core Molding Technologies, Inc. and Key Bank National Association2 | | Incorporated by reference to Exhibit 10(e)(3) to Annual Report on Form 10-K for the year ended December 31, 2003 | | | | | | 10(e)(4) | | Second Amendment to Loan Agreement, Revolving Variable Rate Cognovit Promissory Note and Security Agreement, dated as of July 1 2007, between Core Molding Technologies, Inc. and Key Bank National Association | | Incorporated by reference to Exhibit 10.1 to Form 8-K 7, filed July 19, 2007 |
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| | | | | Exhibit No. | | Description | | Location | 10(f) | | Master Equipment Lease Agreement3 by and between KeyCorp Leasing, a division of Key Corporate Capital, Inc. and Core Molding Technologies, Inc. | | Incorporated by reference to Exhibit 10(f) to Annual Report on Form 10-K for the year ended December 31, 2002 | | | | | | | 10(f)10(e)(1) | | Amendment, dated March 26, 2001, to Master Equipment Lease Agreement3by and between KeyCorp Leasing, a division of Key Corporate Capital, Inc. and Core Molding Technologies, Inc. | | Incorporated by reference to Exhibit 10(f)(1) to Annual Report on Form 10-K for the year ended December 31, 2000 | | | | | | | 10(g)10(f) | | Loan Agreement, dated April 1, 1998, by and between South Carolina Jobs — Economic Development Authority and Core Molding Technologies, Inc. | | Incorporated by reference to Exhibit 10(g) to Annual Report on Form 10-K for the year ended December 31, 2003 | | | | | | | 10(h)10(g) | | Reimbursement Agreement, dated April 1, 1998, by and between Core Molding Technologies, Inc. and Key Bank National Association | | Incorporated by reference to Exhibit 10(h) to Annual Report on Form 10-K for the year ended December 31, 2003 | | | | | | | 10(h)(1) | | Amendment, dated March 29, 2001, to Reimbursement Agreement, dated April 1, 1998, by and between Core Molding Technologies, Inc. and Key Bank National Association | | Incorporated by reference to Exhibit 10(h)(1) to Annual Report on Form 10-K for the year ended December 31, 2000 | | | | | | 10(i) | | Core Molding Technologies, Inc. Employee Stock Purchase Plan4 | | Incorporated by reference to Exhibit 4(e) to Registration Statement on Form S-8
(Registration (Registration No. 333-60909) | | | | | | | 10(i)10(h)(1) | | 2002 Core Molding Technologies, Inc. Employee Stock Purchase Plan (as amended May 17, 2006)4 | | Incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K dated May 23, 2006 | | | | | | | 10(j)10(i) | | Letter Agreement Regarding Terms and Conditions of Interest Rate Swap Agreement between Key Bank National Association and Core Molding Technologies, Inc. | | Incorporated by reference to Exhibit 10(j) to Annual Report on Form 10-K for the year ended December 31, 2003 |
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| | | | | | 10(k)Exhibit No. | | Description | | Location | | | | | | | 10(i)(1) | | Letter Agreement Regarding Terms and Conditions of Interest Rate Swap Agreement between Key Bank National Association and Core Molding Technologies, Inc. | | Filed Herein | | | | | | | 10(j) | | 2006 Core Molding Technologies, Inc. Long Term Equity Incentive Plan4 | | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated May 23, 2006 | | | | | | | 10(l)10(k) | | Core Molding Technologies, Inc. 2007 Cash Profit Sharing Plan4 | | Filed HereinIncorporated by reference to Exhibit 10(1) to Current Report on Form 8-K dated December 29, 2008 | | | | | | | 10(m)10(l) | | Form of Amended and Restated Executive Severance Agreement between Core Molding Technologies, Inc. and certain executive officers4 | | Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K dated January 4,December 29, 2008 |
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| | | | | | Exhibit No. | | Description | | Location | 10(n)10(m) | | Form of Amended and Restated Restricted Stock Agreement between Core Molding Technologies, Inc. and certain executive officers4 | | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated January 4, 2008 | | | | | | | 10(o)10(n) | | Form of Executive Severance Agreement between Core Molding Technologies, Inc. and certain executive officers4 | | Incorporated by reference to Exhibit 10.4 to Current Report on Form 8-K dated May 23, 2006 | | | | | | | 10(p)10(o) | | Form of Restricted Stock Agreement between Core Molding Technologies, Inc. and certain executive officers4 | | Incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K dated May 23, 2006 | | | | | | 10(q) | | Stock repurchase agreement dated July 17, 2007 between International Truck and Engine Corp and Core Molding Technologies Inc. | | Incorporated by reference to Exhibit 10(b) to Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 | | | | | | | | 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 Conduct and Business Ethics | | Incorporated by reference to Exhibit 14 to Annual Report on Form 10-K for the year ended December 31, 2003 | | | | | | | | 23 | | Consent of Deloitte & Touche LLP | | Filed Herein | | | | | | | | 24 | | Powers of Attorney | | Filed Herein | | | | | | | | 31(a) | | Section 302 Certification by Kevin L. Barnett, President and Chief Executive Officer | | Filed Herein |
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| | | | | | Exhibit No. | | Description | | Location | | | | | | | | 31(b) | | Section 302 Certification by Herman F. Dick, Jr., Vice President, Secretary, Treasurer, and Chief Financial Officer | | Filed Herein | | | | | | | | 32(a) | | Certification of Kevin L. Barnett, Chief Executive Officer of Core Molding Technologies, Inc., dated March 28, 2008,April 1, 2009, pursuant to 18 U.S.C. Section 1350 | | Filed Herein | | | | | | | | 32(b) | | Certification of Herman F. Dick, Jr., Vice President, Treasurer, Secretary, and Chief Financial Officer of Core Molding Technologies, Inc., dated March 28, 2008,April 1, 2009, pursuant to 18 U.S.C. Section 1350 | | Filed Herein |
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| | | | 1 | | The Asset Purchase Agreement, as filed with the SEC 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 SEC 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 to the SEC 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 SEC upon request. | | | | 4 | | Indicates management contracts or compensatory plans that are required to be filed as an exhibit to this Annual Report on Form 10-K. | | | | 5 | | Certain portions of this Exhibit have been omitted intentionally subject to a confidentiality treatment request. A complete version of the Exhibit has been filed separately with the Securities and Exchange Commission. |
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