ANNUAL REPORT2014CREATIVE • RELIABLE • COMPOSITESCORE MOLDING TECHNOLOGIES, INC.800 Manor Park Drive Columbus, OH 43228 www.coremt.comCMT-015 AnnualReport.FA.indd 1-23/31/15 9:18 AM INVESTOR INFORMATIONShare Trading Shares of Core Molding Technologies common stock are traded on the NYSE MKT LLC under the symbol “CMT.”Notice of Annual Meeting The Company’s 2015 annual meeting will be held on May 14, 2015. The meeting will be held at the Company’s Columbus, Ohio facility, 800 Manor Park Drive, Columbus, Ohio 43228 and will convene at 9:00 a.m.Investor Relations Investor inquiries, including requests to obtain copies without charge of the Company’s annual report as filed with the Securities & Exchange Commission, should be directed to:Core Molding Technologies, Inc. Investor Relations 800 Manor Park Drive Columbus, OH 43228 Website: www.coremt.comStockholder Inquiries Questions such as changes of address, name changes or lost certificates should be directed to the Company’s stock transfer agent:American Stock Transfer & Trust Co., LLC 6201 15th Avenue Brooklyn, NY 11219 (800) 937-5449 info@amstock.comCORPORATE OFFICERSKevin L. Barnett President and Chief Executive OfficerTerrence J. O’Donovan Vice President, Marketing and SalesWilliam R. Ringling Vice President of OperationsJohn P. Zimmer Vice President, Secretary, Treasurer and Chief Financial OfficerBOARD OF DIRECTORSJames L. Simonton, ChairmanThomas R. CellittiJames F. CrowleyRalph O. HellmoldMatthew E. JauchiusKevin L. BarnettSELECTED FINANCIAL HIGHLIGHTS (dollars in millions except per share numbers)YEARS ENDED DECEMBER 3120142013201220112010Net Sales175.2144.1162.5143.4100.3Income before interest and taxes14.610.112.516.96.4Net Income9.66.98.210.52.4Net Income per common share: Basic1.280.951.151.510.36Net Income per common share: Diluted1.280.921.111.440.34Long-term debt0.72.45.79.513.6Stockholders’ equity76.167.458.050.1 38.1NET SALES(Dollars in millions)$200$150$100$50$0 2010 2011 2012 2013 2014144.1100.3143.4162.5175.2INCOME BEFORE INTEREST AND TAXES(Dollars in millions)$20$15$10$5$0 2010 2011 2012 2013 201410.16.416.912.514.6$1.75$1.50$1.25$1.00$0.75$0.50$0.25$0.00NET INCOME PER SHARE(Basic) 2010 2011 2012 2013 20140.950.361.511.151.28Core Molding Technologies, Inc. is a manufacturer of sheet molding compound (SMC) and molder of fiberglass-reinforced plastics. The Company produces high quality fiberglass-reinforced, molded products and SMC materials for varied markets, including medium and heavy-duty trucks, automotive, marine, agriculture, construction and other commercial products. The Company offers customers a wide range of manufacturing processes to fit various volume and capital requirements. These processes include compression molding of SMC, glass mat thermoplastics (GMT) and bulk molding compounds (BMC); resin transfer molding (RTM), liquid molding of dicyclopentadiene (DCPD), spray-up and hand-lay-up. Compression and transfer molding of direct long-fiber thermoplastics (D-LFT) was added in March 2015, when the Company acquired substantially all of the assets of CPI Binani, Inc. Core Molding Technologies has its headquarters in Columbus, Ohio, and operates production facilities in Columbus and Batavia, Ohio; Gaffney, South Carolina; Winona, Minnesota; and Matamoros, Mexico. Core’s common stock is traded on the NYSE MKT LLC under the symbol “CMT.”CORE MOLDING TECHNOLOGIES, INC. ANNUAL REPORT TO SHAREHOLDERS2014CMT-015 AnnualReport.FA.indd 3-43/31/15 9:18 AM TO OUR SHAREHOLDERS
We are pleased to report that our sales in 2014 topped $175 million, representing a new Company record. We are also pleased that we
were able to leverage the higher sales with meaningful operating improvements that resulted in our earnings growing by more than 40%.
A big part of our growth came from the expansion of our business with Volvo Group North America (“Volvo”) as we increased our sales
to Volvo to nearly $49 million from $12 million the previous year. We are very proud of the hard work and dedication displayed by all
of our employees to accomplish the integration and growth of this business.
We also had several other significant accomplishments in 2014 that supported our continued growth:
• We installed a new Sheet Molding Compound (“SMC”) production line which more than doubles our SMC production capacity.
• We added four new large compression molding presses.
•
In total, we invested over $ 10.5 million in new production equipment and other fixed assets to support our continued growth.
• We developed and released to market two new ultra-low density SMC materials: Mirilite™, a Class A high surface performance
material, and Econolite®, a lower cost material targeted for reinforcement structures and other components.
• We shipped our 2,000,000th truck hood and 1,000,000th automotive underbody shield.
• We renewed our Long Term Supply Agreement with Navistar through 2018.
• We continued to strengthen our organization with key personnel additions throughout the Company.
• We were presented the “Supplier of the Year” award by Yamaha Motor Manufacturing Corporation of America.
• Forbes recognized us as number 37 on their list of the 100 Best Small Companies in America.
Financial Results
Net income for the year ended December 31, 2014 was $9,634,000, or $1.28 per basic and diluted share, compared to $6,866,000, or
$0.95 per basic and $.92 per diluted share, for the year ended December 31, 2013.
Total net sales for 2014, including tooling, were $175,204,000 compared to $144,125,000 for 2013. Products sales for 2014 were
$169,744,000 compared to 2013 product sales of $134,096,000.
Our stockholders’ equity of $76.1 million as of December 31, 2014 represents $10.07 per share in book value equity. We reduced long-
term debt to less than $1 million, resulting in a long term debt to equity ratio of 0.01, which positions the Company well, from a leverage
perspective, to support growth.
Looking Ahead
We are expecting to achieve continued growth in sales and earnings in 2015 based on our customers’ and truck industry analysts’
forecasts and as a result of our continued focus on operational efficiencies.
We will also continue to focus on our strategic initiatives including material development, process technology expansion, customer and
market expansion, operational excellence and strategic acquisitions. We believe that progressing on these initiatives is key to building
shareholder value.
In line with these objectives, we completed the acquisition of substantially all the assets of CPI, Binani, Inc., on March 20, 2015. This
acquisition expands the Company’s process offerings into direct long-fiber thermoplastics, a growing process technology that offers
many product performance benefits. This acquisition also further diversifies the markets we serve and brings new offerings to our
existing customers.
We are excited about the opportunities ahead of us and we are committed to continued growth and making the appropriate investments
to position Core for continued success.
We do recognize that we could not achieve our successes without the ongoing support of our customers, suppliers, employees and
shareholders. As always, we thank you for your continued support.
Kevin L. Barnett
President and Chief Executive Officer
James L. Simonton
Chairman of the Board
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:2)(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
(cid:4)(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 001-12505
CORE MOLDING TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
incorporation or organization)
31-1481870
(I.R.S. Employer Identification No.)
800 Manor Park Drive, Columbus, Ohio
(Address of principal executive office)
43228-0183
(Zip Code)
Registrant's telephone number, including area code: (614) 870-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, par value $0.01
Preferred Stock purchase rights, par value $0.01
NYSE MKT LLC
NYSE MKT LLC
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:4) No (cid:2)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:4) No (cid:2)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes (cid:2) No (cid:4)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes (cid:2) No (cid:4)(cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. (cid:2)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer (cid:4)
Smaller reporting company (cid:4)
Accelerated filer (cid:2)
Non-accelerated filer (cid:4)
(Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:4) No (cid:2)
As of June 30, 2014, the aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates of the
registrant was approximately $78,233,896, based upon the closing sale price of $13.00 on the NYSE MKT LLC on June 30, 2014, the
last business day of registrant's most recently completed second fiscal quarter. As of the close of business on March 13, 2015, the
number of shares of registrant's common stock outstanding was 7,562,012.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 2015 definitive Proxy Statement to be filed with the Securities and Exchange Commission no later than 120
days after the end of the registrant's fiscal year are incorporated herein by reference in Part III of this Form 10-K.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchase of
Equity Securities
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
3
10
15
15
16
16
17
18
19
26
27
50
50
50
51
51
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 51
Item 13. Certain Relationships, Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Signatures
Index to Exhibits
51
51
52
53
55
2
PART I
ITEM 1. BUSINESS
HISTORICAL DEVELOPMENT OF BUSINESS OF CORE MOLDING TECHNOLOGIES, INC.
In 1996, RYMAC Mortgage Investment Corporation (“RYMAC”) incorporated Core Molding Technologies, Inc. (“Core Molding
Technologies” or the “Company”), formerly known as Core Materials Corporation before changing its name on August 28, 2002, for
the purpose of acquiring the Columbus Plastics unit of Navistar, Inc. (“Navistar”), formerly known as International Truck & Engine
Corporation. On December 31, 1996, RYMAC merged with and into the Company, with the Company as the surviving entity.
Immediately after the merger, the Company acquired substantially all 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 newly issued 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 the Company’s common stock, from Navistar. On August 16, 2013, Navistar sold its remaining 664,000 shares of
common stock in a series of open market sales.
In 1998, the Company opened a second compression molding plant located in Gaffney, South Carolina as part of the Company’s growth
strategy to expand its customer base. This facility provided the Company with additional capacity and a strategic location to serve both
current and prospective customers.
In October 2001, the Company incorporated Core Composites Corporation as a wholly owned subsidiary under the laws of the State of
Delaware. This entity was established for the purpose of holding and establishing operations for Airshield Corporation’s assets, which
the Company acquired on October 16, 2001 (the “Airshield Asset Acquisition”) as part of the Company’s diversified growth strategy.
Airshield Corporation was a privately held manufacturer and marketer of fiberglass reinforced plastic parts primarily for the truck and
automotive aftermarket industries. The Company purchased substantially all of the assets of Airshield Corporation through the United
States Bankruptcy Court as Airshield Corporation had been operating under Chapter 11 bankruptcy protection since March 2001.
In conjunction with establishment of operations for the assets acquired in the Airshield Asset Acquisition, the Company established a
Mexican subsidiary and leased a production facility in Mexico. In October 2001, the Company (5% owner) and Core Composites
Corporation (95% owner) incorporated Corecomposites de Mexico, S. de R.L. de C.V. (“Corecomposites”) in Matamoros, Mexico.
Corecomposites was organized to operate under a maquiladora program whereby substantially all products produced are exported back
to Core Composites Corporation which sells such products to United States based external customers. In June of 2009, the Company
completed construction and took occupancy of a new production facility in Matamoros, Mexico that replaced its leased facility.
In September 2004, the Company formed Core Automotive Technologies, LLC (“Core Automotive”), a Delaware limited liability
company and wholly owned subsidiary of the Company. This entity was formed for the purpose of establishing operations and holding
assets acquired from Keystone Restyling, Inc., which the Company acquired as part of its diversified growth strategy in September,
2004. Keystone Restyling, Inc. was a privately held manufacturer and marketer of fiberglass reinforced plastic parts primarily for the
automotive and light truck aftermarket industries. The Company’s facility in Matamoros, Mexico provides manufacturing services for
Core Automotive Technologies.
In August 2005, the Company formed Core Composites Cincinnati, LLC, ("Core Composites Cincinnati") a Delaware limited liability
company and wholly owned subsidiary of the Company. This entity was formed for the purpose of establishing operations and holding
assets acquired from the Cincinnati Fiberglass Division of Diversified Glass Inc., which the Company acquired in August, 2005. The
Cincinnati Fiberglass Division of Diversified Glass, Inc. was a privately held manufacturer and distributor of fiberglass reinforced plastic
components supplied primarily to the heavy-duty truck market. As a result of this acquisition, the Company leases a manufacturing
facility in Batavia, Ohio.
In July 2011, the Company formed Core Specialty Composites, LLC ("Core Specialty Composites"), a Delaware limited liability
company and wholly owned subsidiary of the Company, which leased a facility in Warsaw, Kentucky to produce parts for customers
outside of the Company's traditional markets. Due to changing market conditions for products manufactured at the Warsaw facility the
Company terminated its lease and closed its Warsaw facility in October 2012.
3
DESCRIPTION OF BUSINESS OF CORE MOLDING TECHNOLOGIES, INC.
Certain statements under this caption of this Annual Report on Form 10-K constitute forward-looking statements within the meaning of
the federal securities laws. As a general matter, forward-looking statements are those focused upon future plans, objectives or
performance as opposed to historical items and include statements of anticipated events or trends and expectations and beliefs relating
to matters not historical in nature. Such forward-looking statements involve known and unknown risks and are subject to uncertainties
and factors relating to Core Molding Technologies' operations and business environment, all of which are difficult to predict and many
of which are beyond Core Molding Technologies' control. These uncertainties and factors could cause Core Molding Technologies'
actual results to differ materially from those matters expressed in or implied by such forward-looking statements.
Core Molding Technologies believes that the following factors, among others, could affect its future performance and cause actual
results to differ materially from those expressed or implied by forward-looking statements made in this report: business conditions in
(cid:2)(cid:3)(cid:4)(cid:5) (cid:6)(cid:7)(cid:8)(cid:9)(cid:2)(cid:10)(cid:11)(cid:9)(cid:12)(cid:5) (cid:2)(cid:13)(cid:8)(cid:14)(cid:9)(cid:6)(cid:15)(cid:13)(cid:2)(cid:8)(cid:2)(cid:10)(cid:15)(cid:14)(cid:12)(cid:5) (cid:16)(cid:8)(cid:13)(cid:10)(cid:14)(cid:4)(cid:5) (cid:8)(cid:14)(cid:17)(cid:5) (cid:11)(cid:15)(cid:16)(cid:16)(cid:4)(cid:13)(cid:11)(cid:10)(cid:8)(cid:7)(cid:5) (cid:6)(cid:13)(cid:15)(cid:17)(cid:18)(cid:11)(cid:2)(cid:5) (cid:10)(cid:14)(cid:17)(cid:18)(cid:9)(cid:2)(cid:13)(cid:10)(cid:4)(cid:9)(cid:19)(cid:5) (cid:20)(cid:4)(cid:17)(cid:4)(cid:13)(cid:8)(cid:7)(cid:5) (cid:8)(cid:14)(cid:17)(cid:5) (cid:9)(cid:2)(cid:8)(cid:2)(cid:4)(cid:5) (cid:13)(cid:4)(cid:21)(cid:18)(cid:7)(cid:8)(cid:2)(cid:10)(cid:15)(cid:14)(cid:9)(cid:5) (cid:22)(cid:10)(cid:14)(cid:11)(cid:7)(cid:18)(cid:17)(cid:10)(cid:14)(cid:21)(cid:5) (cid:4)(cid:14)(cid:21)(cid:10)(cid:14)(cid:4)(cid:5) (cid:4)(cid:16)(cid:10)(cid:9)(cid:9)ion
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(cid:14)(cid:4)(cid:25)(cid:5) (cid:2)(cid:4)(cid:11)(cid:3)(cid:14)(cid:15)(cid:7)(cid:15)(cid:21)(cid:10)(cid:4)(cid:9)(cid:19)(cid:5) (cid:13)(cid:4)(cid:21)(cid:18)(cid:7)(cid:8)(cid:2)(cid:15)(cid:13)(cid:29)(cid:5) (cid:16)(cid:8)(cid:2)(cid:2)(cid:4)(cid:13)(cid:9)(cid:19)(cid:5) (cid:7)(cid:8) (cid:15)(cid:13)(cid:5) (cid:13)(cid:4)(cid:7)(cid:8)(cid:2)(cid:10)(cid:15)(cid:14)(cid:9)(cid:19)(cid:5) (cid:2)(cid:3)(cid:4)(cid:5) (cid:7)(cid:15)(cid:9)(cid:9)(cid:5) (cid:15)(cid:13)(cid:5) (cid:10)(cid:14)(cid:8) (cid:10)(cid:7)(cid:10)(cid:2)(cid:29)(cid:5) (cid:15)(cid:20)(cid:5) (cid:26)(cid:15)(cid:13)(cid:4)(cid:5) (cid:27)(cid:15)(cid:7)(cid:17)(cid:10)ng Technologies to attract and retain key
(cid:6)(cid:4)(cid:13)(cid:9)(cid:15)(cid:14)(cid:14)(cid:4)(cid:7)(cid:19)(cid:5) (cid:20)(cid:4)(cid:17)(cid:4)(cid:13)(cid:8)(cid:7)(cid:12)(cid:5) (cid:9)(cid:2)(cid:8)(cid:2)(cid:4)(cid:5) (cid:8)(cid:14)(cid:17)(cid:5) (cid:7)(cid:15)(cid:11)(cid:8)(cid:7)(cid:5) (cid:4)(cid:14)(cid:24)(cid:10)(cid:13)(cid:15)(cid:14)(cid:16)(cid:4)(cid:14)(cid:2)(cid:8)(cid:7)(cid:5) (cid:7)(cid:8)(cid:25)(cid:9)(cid:5) (cid:8)(cid:14)(cid:17)(cid:5) (cid:13)(cid:4)(cid:21)(cid:18)(cid:7)(cid:8)(cid:2)(cid:10)(cid:15)(cid:14)(cid:9)(cid:19)(cid:5) (cid:2)(cid:3)(cid:4)(cid:5) (cid:8)(cid:24)(cid:8)(cid:10)(cid:7)(cid:8) (cid:10)(cid:7)(cid:10)(cid:2)(cid:29)(cid:5) (cid:15)(cid:20)(cid:5) (cid:11)(cid:8)(cid:6)(cid:10)(cid:2)(cid:8)(cid:7)(cid:19)(cid:5) (cid:2)(cid:3)(cid:4)(cid:5) (cid:8) (cid:10)(cid:7)(cid:10)(cid:2)(cid:29)(cid:5) (cid:15)(cid:20)(cid:5) (cid:26)(cid:15)(cid:13)(cid:4)(cid:5) (cid:27)(cid:15)(cid:7)(cid:17)ing
Technologies to provide on-time delivery to customers, which may require additional shipping expenses to ensure on-time delivery or
(cid:15)(cid:2)(cid:3)(cid:4)(cid:13)(cid:25)(cid:10)(cid:9)(cid:4)(cid:5)(cid:13)(cid:4)(cid:9)(cid:18)(cid:7)(cid:2)(cid:5)(cid:10)(cid:14)(cid:5)(cid:7)(cid:8)(cid:2)(cid:4)(cid:5)(cid:20)(cid:4)(cid:4)(cid:9)(cid:19)(cid:5)(cid:13)(cid:10)(cid:9)"(cid:5)(cid:15)(cid:20)(cid:5)(cid:11)(cid:8)(cid:14)(cid:11)(cid:4)(cid:7)(cid:7)(cid:8)(cid:2)(cid:10)(cid:15)(cid:14)(cid:5)(cid:15)(cid:13)(cid:5)(cid:13)(cid:4)(cid:9)(cid:11)(cid:3)(cid:4)(cid:17)(cid:18)(cid:7)(cid:10)(cid:14)(cid:21)(cid:5)(cid:15)(cid:20)(cid:5)(cid:15)(cid:13)(cid:17)(cid:4)(cid:13)(cid:9)(cid:19)(cid:5)(cid:16)(cid:8)(cid:14)(cid:8)(cid:21)(cid:4)(cid:16)(cid:4)(cid:14)(cid:2)!(cid:9)(cid:5)(cid:17)(cid:4)(cid:11)(cid:10)(cid:9)(cid:10)(cid:15)(cid:14)(cid:5)(cid:2)(cid:15)(cid:5)(cid:6)(cid:18)(cid:13)(cid:9)(cid:18)(cid:4)(cid:5)(cid:14)(cid:4)(cid:25)(cid:5)(cid:6)(cid:13)(cid:15)(cid:17)(cid:18)(cid:11)(cid:2)(cid:9)(cid:5)(cid:15)r businesses
(cid:25)(cid:3)(cid:10)(cid:11)(cid:3)(cid:5)(cid:10)(cid:14)(cid:24)(cid:15)(cid:7)(cid:24)(cid:4)(cid:5)(cid:8)(cid:17)(cid:17)(cid:10)(cid:2)(cid:10)(cid:15)(cid:14)(cid:8)(cid:7)(cid:5)(cid:11)(cid:15)(cid:9)(cid:2)(cid:9)(cid:12)(cid:5)(cid:13)(cid:10)(cid:9)"(cid:9)(cid:5)(cid:15)(cid:13)(cid:5)(cid:11)(cid:8)(cid:6)(cid:10)(cid:2)(cid:8)(cid:7)(cid:5)(cid:4)(cid:30)(cid:6)(cid:4)(cid:14)(cid:17)(cid:10)(cid:2)(cid:18)(cid:13)(cid:4)(cid:9)(cid:19)(cid:5)(cid:8)(cid:14)(cid:17)(cid:5)(cid:15)(cid:2)(cid:3)(cid:4)r risks identified from time to time in Core Molding Technologies’
other public documents on file with the Securities and Exchange Commission, including those described in Item 1A of this Annual Report
on Form 10-K.
Core Molding Technologies and its subsidiaries operate in the plastics market in a family of products known as “reinforced plastics.”
Reinforced plastics are combinations of resins and reinforcing fibers (typically glass or carbon) that are molded to shape. Core Molding
Technologies is a manufacturer of sheet molding compound ("SMC") and molder of fiberglass reinforced plastics. The Company
specializes in large-format moldings and offers a wide range of fiberglass processes, including compression molding of SMC, glass mat
thermoplastics ("GMT") (cid:2)(cid:3)(cid:4)(cid:5) (cid:6)(cid:7)(cid:8)(cid:9)(cid:5) (cid:10)(cid:11)(cid:8)(cid:4)(cid:12)(cid:3)(cid:13)(cid:5) (cid:14)(cid:11)(cid:10)(cid:15)(cid:11)(cid:7)(cid:3)(cid:4)(cid:16)(cid:5) (cid:17)(cid:18)(cid:19)(cid:20)(cid:21)(cid:18)(cid:22)(cid:23)(cid:5) (cid:16)(cid:15)(cid:24)(cid:2)(cid:25)-up, hand-lay-up, and resin transfer molding ("RTM").
Additionally, the Company offers reaction injection molding ("RIM"), utilizing dicyclopentadiene technology. Core Molding
Technologies operates four production (cid:26)(cid:2)(cid:14)(cid:12)(cid:8)(cid:12)(cid:27)(cid:12)(cid:28)(cid:16)(cid:5)(cid:12)(cid:3)(cid:5)(cid:21)(cid:11)(cid:8)(cid:7)(cid:10)(cid:6)(cid:7)(cid:16)(cid:29)(cid:5)(cid:30)(cid:31)(cid:12)(cid:11)(cid:23)(cid:5)(cid:19)(cid:2)(cid:27)(cid:2) (cid:12)(cid:2)(cid:29)(cid:5)(cid:30)(cid:31)(cid:12)(cid:11)(cid:23)(cid:5)!(cid:2)(cid:26)(cid:26)(cid:3)(cid:28)(cid:25)(cid:29)(cid:5)"(cid:11)(cid:7)(cid:27)(cid:31)(cid:5)(cid:21)(cid:2)(cid:24)(cid:11)(cid:8)(cid:12)(cid:3)(cid:2)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)(cid:5)(cid:20)(cid:2)(cid:27)(cid:2)(cid:10)(cid:11)(cid:24)(cid:11)(cid:16)(cid:29)(cid:5)(cid:20)(cid:28)#(cid:12)(cid:14)(cid:11)$
Reinforced plastics compete largely against metals and have the strength to function well during prolonged use. Management believes
that reinforced plastic components offer many advantages over metals, including:
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(cid:8)(cid:11)%(cid:28)(cid:24)(cid:5)(cid:14)(cid:11)(cid:16)(cid:27)(cid:23)
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(cid:15)(cid:2)(cid:24)(cid:27)(cid:5)(cid:14)(cid:11)(cid:3)(cid:16)(cid:11)(cid:8)(cid:12)(cid:4)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)(cid:26)(cid:11)(cid:24)(cid:5)(cid:10)(cid:7)(cid:8)(cid:27)(cid:12)(cid:15)(cid:8)(cid:28)(cid:5)(cid:15)(cid:12)(cid:28)(cid:14)(cid:28)(cid:5)(cid:2)(cid:16)(cid:16)(cid:28)(cid:10)(cid:6)(cid:8)(cid:12)(cid:28)(cid:16)(cid:23)
lower initial tooling costs for lower volume a(cid:15)(cid:15)(cid:8)(cid:12)(cid:14)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:16)(cid:23)
high strength-to-%(cid:28)(cid:12)(cid:13)(cid:31)(cid:27)(cid:5)(cid:24)(cid:2)(cid:27)(cid:12)(cid:11)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)
dent-resistance in comparison to steel or aluminum.
The largest markets for reinforced plastics are transportation (automotive and truck), agriculture, construction, marine, and industrial
applications. The Company currently has four manufacturing facilities producing reinforced plastic products. Our manufacturing
(cid:26)(cid:2)(cid:14)(cid:12)(cid:8)(cid:12)(cid:27)(cid:12)(cid:28)(cid:16)(cid:5) (cid:7)(cid:27)(cid:12)(cid:8)(cid:12)&(cid:28)(cid:5) (cid:2)(cid:24)(cid:12)(cid:11)(cid:7)(cid:16)(cid:5) (cid:15)(cid:24)(cid:11)(cid:4)(cid:7)(cid:14)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5) (cid:15)(cid:24)(cid:11)(cid:14)(cid:28)(cid:16)(cid:16)(cid:28)(cid:16)(cid:23)(cid:5) (cid:31)(cid:11)%(cid:28) (cid:28)(cid:24)(cid:29)(cid:5) (cid:28)(cid:3)(cid:4)(cid:5) (cid:15)(cid:24)(cid:11)(cid:4)(cid:7)(cid:14)(cid:27)(cid:16)(cid:5) (cid:2)(cid:24)(cid:28)(cid:5) (cid:16)(cid:12)(cid:10)(cid:12)(cid:8)(cid:2)(cid:24)(cid:5) (cid:2)(cid:3)(cid:4)(cid:5) (cid:2)(cid:24)(cid:28)(cid:5) (cid:3)(cid:11)(cid:27)(cid:5) (cid:7)(cid:3)(cid:12)’(cid:7)(cid:28)(cid:5) (cid:27)(cid:11)(cid:5) (cid:2)(cid:5) (cid:26)(cid:2)(cid:14)(cid:12)(cid:8)(cid:12)(cid:27)(cid:25)(cid:5) (cid:11)(cid:24)(cid:5) (cid:14)(cid:7)(cid:16)(cid:27)(cid:11)(cid:10)er base.
Operating decision makers (officers of the Company) are headquartered in Columbus, Ohio and oversee all manufacturing operations
for all products as well as oversee customer relationships with all customers. The Company supplies reinforced plastic products to truck
manufacturers, automotive suppliers, and manufacturers of marine and other commercial products. In general, product growth and
diversification are achieved in several different ways: (1) resourcing of existing reinforced plastic product from another supplier by an
(cid:11)(cid:24)(cid:12)(cid:13)(cid:12)(cid:3)(cid:2)(cid:8)(cid:5)(cid:28)’(cid:7)(cid:12)(cid:15)(cid:10)(cid:28)(cid:3)(cid:27)(cid:5)(cid:10)(cid:2)(cid:3)(cid:7)(cid:26)(cid:2)(cid:14)(cid:27)(cid:7)(cid:24)(cid:28)(cid:24)(cid:5)(cid:17)((cid:30))(cid:20)*(cid:22)(cid:23)(cid:5)(cid:17)+(cid:22)(cid:5)(cid:11)(cid:6)(cid:27)(cid:2)(cid:12)(cid:3)(cid:12)(cid:3)(cid:13)(cid:5)(cid:3)(cid:28)%(cid:5)(cid:24)(cid:28)(cid:12)(cid:3)(cid:26)(cid:11)(cid:24)(cid:14)(cid:28)(cid:4)(cid:5)(cid:15)(cid:8)(cid:2)(cid:16)(cid:27)(cid:12)(cid:14)(cid:5)(cid:15)(cid:24)(cid:11)(cid:4)(cid:7)(cid:14)(cid:27)(cid:16)(cid:5)(cid:27)(cid:31)(cid:24)(cid:11)(cid:7)(cid:13)(cid:31)(cid:5)(cid:2)(cid:5)(cid:16)(cid:28)(cid:8)(cid:28)(cid:14)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)(cid:15)(cid:24)(cid:11)(cid:14)(cid:28)(cid:16)(cid:16)(cid:5)(cid:12)(cid:3)(cid:5)%(cid:31)(cid:12)(cid:14)(cid:31)(cid:5)(cid:2)n OEM
(cid:16)(cid:11)(cid:8)(cid:12)(cid:14)(cid:12)(cid:27)(cid:16)(cid:5)(cid:6)(cid:12)(cid:4)(cid:16)(cid:23)(cid:5)(cid:17),(cid:22)(cid:5)(cid:16)(cid:7)(cid:14)(cid:14)(cid:28)(cid:16)(cid:16)(cid:26)(cid:7)(cid:8)(cid:5)(cid:10)(cid:2)(cid:24)(cid:9)(cid:28)(cid:27)(cid:12)(cid:3)(cid:13)(cid:5)(cid:11)(cid:26)(cid:5)(cid:24)(cid:28)(cid:12)(cid:3)(cid:26)(cid:11)(cid:24)(cid:14)(cid:28)(cid:4)(cid:5)(cid:15)(cid:8)(cid:2)(cid:16)(cid:27)(cid:12)(cid:14)(cid:5)(cid:15)(cid:24)(cid:11)(cid:4)(cid:7)(cid:14)(cid:27)(cid:16)(cid:5)(cid:26)(cid:11)(cid:24)(cid:5)(cid:15)(cid:24)(cid:28) (cid:12)(cid:11)(cid:7)(cid:16)(cid:8)(cid:25)(cid:5)(cid:3)(cid:11)(cid:3)-reinforced plastic applica(cid:27)(cid:12)(cid:11)(cid:3)(cid:16)(cid:23)(cid:5)(cid:17)-(cid:22)(cid:5)(cid:16)(cid:7)(cid:14)(cid:14)(cid:28)(cid:16)(cid:16)(cid:26)(cid:7)(cid:8)(cid:5)
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to be directed towards all six areas.
4
MAJOR COMPETITORS
The Company believes that it is one of the three largest compounders and molders of reinforced plastics using the SMC, spray-up, hand-
lay-up, and RTM molding processes in the United States. The Company faces competition from a number of other molders including,
most significantly, Molded Fiber Glass Companies, Continental Structural Plastics, Ashley Industrial Molding, Sigma Industries and
The Composites Group. The Company believes that it is well positioned to compete based primarily on manufacturing capability and
location, product quality, engineering capability, cost, and delivery. However, the industry remains highly competitive and some of the
Company's competitors have greater financial resources, research and development facilities, design engineering, manufacturing, and
marketing capabilities.
MAJOR CUSTOMERS
The Company has four major customers, Navistar, Volvo Group ("Volvo"), PACCAR Inc. ("PACCAR") and Yamaha Motor
Manufacturing Corporation of America ("Yamaha"), in 2014. Major customers are defined as customers whose current year sales
individually consist of more than ten percent of total sales during any annual or interim reporting period in the current year. The loss of
a significant portion of sales to Navistar, Volvo, PACCAR, or Yamaha would have a material adverse effect on the business of the
Company.
The North American truck market in which Navistar, Volvo, and PACCAR compete is highly competitive and the demand for heavy and
medium-duty trucks is subject to considerable volatility as it moves in response to cycles in the overall business environment and is
particularly sensitive to the industrial sector, which generates a significant portion of the freight tonnage hauled. Truck demand also
depends on general economic conditions, among other factors.
Yamaha Motor Manufacturing Corporation of America, a wholly owned subsidiary of Yamaha Motor Corporation, U.S.A., is a top
manufacturer of recreational vehicles including golf carts, all-terrain vehicles, personal watercraft and side by side utility
vehicles. Demand in the recreational vehicle market is typically influenced by the rapid introduction of new models creating a short
product lifecycle, the brand recognition of the various competitors, general economic conditions, and seasonal effects, among other
factors.
Relationship with Navistar
The Company has historically had a Comprehensive Supply Agreement with Navistar that provides for the Company to be 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. The Company's current Comprehensive Supply Agreement with Navistar is effective through
October 31, 2018.
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aftermarket products for service distribution centers. The Company works closely on new product development with Navistar's
engineering and research personnel. Some of the products sold to Navistar include hoods, roofs, air deflectors, cab extenders, fender
extensions, splash panels, and other components. Sales to Navistar amounted to approximately 29%, 33% and 39% of total sales for
2014, 2013 and 2012, respectively.
Relationship with Volvo
The Company makes products for Volvo’s New River Valley (Dublin, Virginia) and Macungie, Pennsylvania assembly plants, as well
as aftermarket products for service distribution centers. The Company works closely on new product development with Volvo’s
engineering and research teams. Products sold to Volvo include hoods, roofs, sunvisors, air deflectors and other components. Sales to
Volvo amounted to approximately 28%, 9% and 4% of total sales for 2014, 2013 and 2012, respectively.
Relationship with PACCAR
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Mexicali, Mexico assembly plants, as well as aftermarket products for service distribution centers. The Company also works closely on
new product development with PACCAR's engineering and research personnel. Products sold to PACCAR include hoods, roofs, back
panels, air deflectors, air fairings, fenders, splash panels, and other components. Sales to PACCAR amounted to approximately 21% of
total sales in 2014 and approximately 35% of total sales in both 2013 and 2012.
Relationship with Yamaha
The Company manufactures sheet molding compound and products for Yamaha’s assembly plant located in Newnan, GA. The Company
also works closely on new product and material development with Yamaha’s engineering and research personnel. Products include sheet
molding compound and various molded components to support the assembly of personal watercraft. Sales to Yamaha amounted to
approximately 10%, 9%, and 8% of total sales in 2014, 2013 and 2012, respectively.
5
OTHER CUSTOMERS
The Company also produces products for other truck manufacturers, the automotive industry, marine industry, commercial product
industries, automotive aftermarket industries, and various other customers. Sales to these customers individually were all less than 10%
of total annual sales. Sales to these customers amounted to approximately 13% of total sales in 2014 and 14% of total sales in 2013 and
2012, respectively.
GEOGRAPHIC INFORMATION
All of the Company's product is sold to U.S. based customers is U.S. dollars. The following table provides information related to the
Company's sales by country, based on the ship to location of customers' production facilities, for the years ended December 31:
United States
Mexico
Canada
Total
2014
123,317,000 $
47,772,000
4,115,000
175,204,000 $
2013
95,063,000 $
45,069,000
3,993,000
144,125,000 $
2012
115,226,000
43,358,000
3,866,000
162,450,000
$
$
The following table provides information related to the location of the Company's property, plant and equipment, net, as of December
31:
United States
Mexico
Total
2014
31,674,000 $
30,321,000
61,995,000 $
2013
24,285,000
32,193,000
56,478,000
$
$
PRODUCTS
Sheet Molding Compound (“SMC”)
SMC is primarily a combination of resins, fiberglass, fillers, and catalysts compounded and cured in sheet form, which is then used to
manufacture compression-molded products, as discussed below. The Company also sells SMC to other molders.
The Company incorporates a sophisticated computer program in the process of compounding various complex SMC formulations
tailored to meet customer needs. The program provides for the control of information during various production processes and data for
statistical batch controls.
Closed Molded Products
The Company manufactures reinforced plastic products using compression molding and resin transfer molding process methods of
closed molding.
Compression Molding - Compression molding is a process whereby SMC or GMT is molded to form by matched die steel molds
through which a combination of heat and pressure are applied via a molding press. This process produces high quality, dimensionally
consistent products. This process is typically used for high volume products. Higher volumes justify the customer's investment in
matched die steel molds.
As of December 31, 2014, the Company owned 17 compression-(cid:10)(cid:11)(cid:8)(cid:4)(cid:12)(cid:3)(cid:13)(cid:5) (cid:15)(cid:24)(cid:28)(cid:16)(cid:16)(cid:28)(cid:16)(cid:5) (cid:12)(cid:3)(cid:5) (cid:12)(cid:27)(cid:16)(cid:5) (cid:21)(cid:11)(cid:8)(cid:7)(cid:10)(cid:6)(cid:7)(cid:16)(cid:29)(cid:5) (cid:30)(cid:31)(cid:12)(cid:11)(cid:5) (cid:26)(cid:2)(cid:14)(cid:12)(cid:8)(cid:12)(cid:27)(cid:25)(cid:23)(cid:5) 89(cid:5) (cid:15)(cid:24)(cid:28)(cid:16)(cid:16)(cid:28)(cid:16)(cid:5) (cid:12)(cid:3)(cid:5) (cid:12)(cid:27)(cid:16)(cid:5)
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in size from 250 to 4,500 tons. The Company installed two new presses in each of its Columbus and Gaffney facilities in 2014 to support
the Company's new business award from Volvo in 2013 and to provide capacity for future growth.
Large platen, high tonnage presses (2,000 tons or greater) provide the ability to mold very large reinforced plastic parts. The Company
believes that it possesses a significant portion of the large platen, high tonnage molding capacity in the industry. To enhance the surface
quality and the paint finish of our products, the Company uses both in-mold coating and vacuum molding processes. In-mold coating
is the process of injecting a liquid over the molded part surface and then applying pressure at elevated temperatures during an extended
molding cycle. The liquid coating serves to fill and/or bridge surface porosity as well as provide a barrier against solvent penetration
during subsequent top-coating operations.
6
Vacuum molding is the removal of air during the molding cycle for the purpose of reducing the amount of surface porosity. The Company
believes that it is among the industry leaders in in-mold coating and vacuum molding applications, based on the size and complexity of
parts molded.
Resin Transfer Molding (“RTM”) - This process employs two molds, typically a core and a cavity, similar to matched die molding.
The composite is produced by placing glass mat, chopped strand, or continuous strand fiberglass in the mold cavity in the desired pattern.
Parts used for cosmetic purposes typically have a gel coat applied to the mold surface. The core mold is then fitted to the cavity, and
upon a satisfactory seal, a vacuum is applied. When the proper vacuum is achieved, the resin is injected into the mold to fill the part.
Finally, the part is allowed to cure and is then removed from the mold and trimmed to shape. Fiberglass reinforced products produced
from the RTM process exhibit a high quality surface on both sides of the part and excellent part thickness. The multiple insert tooling
technique can be utilized in the RTM process to improve throughput based upon volume requirements.
Reaction Injection Molding (“RIM”) - This is a process whereby a composite is produced through the injection of a two-component
thermoset resin system utilizing dicyclopentadiene (“DCPD”) technology. DCPD technology involves injecting a liquid compound into
matched die aluminum molds to form the part. In this process the mold is prepared, closed and the liquid compound is injected into the
tool then cured. Additional finishing is required when the part is designated for top coat painting. The RIM process is an alternative to
other closed mold processes for mid-volume parts that require a high level of impact resistance.
Open Molded Products
The Company produces reinforced plastic products using both the hand lay-up and spray-up methods of open molding.
Hand Lay-Up - This process utilizes a shell mold, typically the cavity, where glass cloth, either chopped strand or continuous strand
glass mat, is introduced into the cavity. Resin is then applied to the cloth and rolled out to achieve a uniform wet-out from the glass and
to remove any trapped air. The part is then allowed to cure and removed from the mold. After removal, the part typically undergoes
trimming to achieve the shape desired. Parts used for cosmetic purposes typically have a gel coat applied to the mold surface prior to
the lay-up to improve the surface quality of the finished part. Parts produced from this process have a smooth outer surface and an
unfinished or rough interior surface. These fiberglass-reinforced products are typically non-cosmetic components or structural
reinforcements that are sold externally or used internally as components of larger assemblies.
Spray-Up - This process utilizes the same type of shell mold as hand-lay-up, but instead of using glass cloth to produce the composite
part, a chopper/spray system is employed. Glass rovings and resin feed the chopper/spray gun. The resin coated, chopped glass is
sprayed into the mold to the desired thickness. The resin coated glass in the mold is then rolled out to ensure complete wet-out and to
remove any trapped air. The part is then allowed to cure, is removed from the mold and is then trimmed to the desired shape. Parts used
for cosmetic purposes typically have a gel coat applied to the mold surface prior to the resin-coated glass being sprayed into the mold
to improve the surface quality of the finished part. Parts produced from this process have a smooth outer surface and an unfinished or
rough interior surface.
The Company also has a chain driven robotic gel-coating and spray-up line and a hand spray-up cell at our Batavia, Ohio location. Part
sizes weigh from a few pounds to several thousand pounds with surface quality tailored for the end use application.
Assembly, Machining, and Paint Products
Many of the products molded by the Company are assembled, machined, prime painted, or topcoat painted to result in a completed
product used by the Company's customers.
The Company has demonstrated manufacturing flexibility that accommodates a range of low volume hand assembly and machining
work, to high volume, highly automated assembly and machining systems. Robotics are used as deemed productive for material
handling, machining, and adhesive applications. In addition to conventional machining methods, water-jet cutting technology is also
used where appropriate. The Company also utilizes paint booths and batch ovens in its facilities. The Company generally contracts with
outside providers for higher volume applications that require top coat paint.
RAW MATERIALS
The principal raw materials used in the compounding of SMC and the closed and open molding processes are polyester, vinyl ester and
epoxy resins, fiberglass rovings, and filler. Other significant raw materials include adhesives for assembly of molded components, in-
mold coating, gel-coat, prime paint for preparation of cosmetic surfaces, and hardware (steel components). Many of the raw materials
used by the Company are crude oil based, natural gas based and downstream components, and therefore, the costs of certain raw materials
can be affected by changes in costs of these underlying commodities. Due to fluctuating commodity prices, suppliers are typically
reluctant to enter into long-term contracts. The Company generally has supplier alternatives for each raw material, and regularly
evaluates its supplier base for certain supplies, repair items, and components to improve its overall purchasing position.
7
BACKLOG
The Company relies on production schedules provided by its customers to plan and implement production. These schedules are normally
provided on a weekly basis and typically considered firm for approximately four weeks. Some customers update these schedules daily
for changes in demand, allowing them to run their inventories on a “just-in-time” basis. The ordered backlog of four weeks of expected
shipments, was approximately $15.6 million (all of which the Company shipped during the first quarter of 2015) and $14.4 million at
December 31, 2014 and 2013, respectively.
CAPACITY CONSTRAINTS
Capacity utilization is measured based on a standard work week of five days per week, three-shifts per day. During times when demand
exceeds a five day, three-shift capacity, the Company will work weekends to create additional capacity, which can provide capacity
utilization percentages greater than 100%.
The Company has historically produced SMC utilizing one production line. The approximate SMC production line capacity utilization
was 100% and 84% for the years ended December 31, 2014 and 2013, respectively. During the first quarter of 2014, the Company
placed an order for an additional SMC production line to increase capacity and provide for more flexibility. The new SMC production
line was placed in service late in the fourth quarter of 2014 and is expected to approximately double capacity.
The Company measures facility capacity in terms of its large molding presses (2,000 tons or greater) for the Columbus, Ohio, Gaffney,
South Carolina and the SMC molding portion at the Matamoros, Mexico facility. In order to support anticipated production levels, and
to allow for additional capacity to provide for future growth, the Company installed two new compression molding presses in each of
its Columbus and Gaffney facilities in 2014.
The Company owned 24 large molding presses at December 31, 2014. The combined approximate large press capacity utilization in
these production facilities was 79% and 55% for the years ended December 31, 2014 and 2013, respectively. The increased utilization
mainly resulted from the addition of new Volvo business in late 2013, partially offset by the increased capacity provided by the four new
presses installed in 2014.
The capacity of production in the Batavia, Ohio facility and the spray-up, hand-lay-up and RTM portion at the Matamoros, Mexico
facility are not linked directly to equipment capacities, due to the nature of the products produced. Capacity of these operations is tied
to available floor space. The approximate capacity utilization for these operations was 49% and 55% for the years ended December 31,
2014 and 2013, respectively.
The Company has been required at times to run up to a three shift/seven day operation to meet its customers' production
requirements. The Company has used various methods from overtime to a weekend manpower crew to support the customers' production
requirements. Based on industry analysts' forecasts for medium and heavy-duty truck production levels, recent and forecasted customer
requirements, the Company anticipates running a three shift/seven day schedule, from time to time, to meet customer production
requirements in 2015.
CAPITAL EXPENDITURES AND RESEARCH AND DEVELOPMENT
Capital expenditures totaled approximately $10.7 million, $9.3 million and $8.3 million in 2014, 2013 and 2012 respectively. These
capital expenditures in each year primarily consisted of building improvements, compression molding presses, a new SMC production
line and purchases of production equipment to manufacture parts.
The Company continuously engages in product development. Research and development activities focus on developing new material
formulations, new structural plastic products, new production capabilities and processes, and improving existing products and
manufacturing processes. The Company does not maintain a separate research and development organization or facility, but uses its
production equipment, as necessary, to support these efforts and cooperates with its customers and its suppliers in research and
development efforts. Likewise, manpower to direct and advance research and development is integrated with the existing manufacturing,
engineering, production, and quality organizations. Management of the Company has estimated that costs related to research and
development were approximately $475,000, $466,000 and $449,000 in 2014, 2013 and 2012, respectively.
ENVIRONMENTAL COMPLIANCE
The Company's manufacturing operations are subject to federal, state, and local environmental laws and regulations, which impose
limitations on the discharge of hazardous and non-hazardous pollutants into the air and waterways. The Company has established and
implemented standards for the treatment, storage, and disposal of hazardous waste. The Company's policy is to conduct its business with
due regard for the preservation and protection of the environment. The Company's environmental waste management process involves
the regular auditing of hazardous waste accumulation points, hazardous waste activities and authorized treatment, storage and disposal
8
facility. As part of the Company's environmental policy, all manufacturing employees are trained on waste management and other
environmental issues.
The Ohio Environmental Protection Agency has issued Core Molding Technologies Title V Operating Permits for its Columbus, Ohio
facility and its Batavia, Ohio facility. The South Carolina Department of Health and Environmental Control has also issued a Title V
Operating Permit for the Gaffney, South Carolina facility. Core Molding Technologies has substantially complied with the requirements
of these permits.
The Company holds various environmental operating permits for its production facility in Matamoros, Mexico as required by U.S. and
Mexican state and federal regulations. The Company has substantially complied with all requirements of these operating permits.
EMPLOYEES
As of December 31, 2014, the Company employed a total of 1,490 employees, which consists of 714 employees in its United States
operations and 776 employees in its Mexico operations. Of these 1,490 employees, 333 employees at the Company's Columbus, Ohio
facility are covered by a collective bargaining agreement with the International Association of Machinists and Aerospace Workers
(“IAM”), which extends to August 7, 2016, and 672 employees at the Company's Matamoros, Mexico facility are covered by a collective
bargaining agreement with Sindicato de Jorneleros y Obreros, which extends to January 16, 2017.
PATENTS, TRADE NAMES, AND TRADEMARKS
The Company will evaluate, apply for, and maintain patents, trade names, and trademarks where it believes that such patents, trade
names, and trademarks are reasonably required to protect its rights in its products. The Company has increased its activity related
to trademark protection in recent years, including the federal registration of the trademarks Nano-Lite®, N-sulGuard®,
Featherlite®, Airilite®, FeatherliteXL® and Econolite®. However, the Company does not believe that any single patent, trade
name, or trademark or related group of such rights is materially important to its business or its ability to compete.
SEASONALITY & BUSINESS CYCLE
The Company's business is affected annually by the production schedules of its customers. Certain of the Company's customers typically
shut down their operations on an annual basis for a period of one to several weeks during the Company's third quarter. Certain customers
also typically shut down their operations during the last week of December. As a result, demand for the Company's products typically
decreases during the third and fourth quarters. Demand for medium and heavy-duty trucks, marine, and automotive products also
fluctuate on an economic, cyclical and a seasonal basis, causing a corresponding fluctuation for demand of the Company's products.
9
ITEM 1A. RISK FACTORS
The following risk factors describe various risks that may affect our business, financial condition, and operations. References to “we,”
“us,” and “our” in this “Risk Factors” section refer to Core Molding Technologies and its subsidiaries, unless otherwise specified or
unless the context otherwise requires.
Our business has concentration risks associated with significant customers.
Sales to four customers constituted approximately 87% of our 2014 total sales. No other customer accounted for more than 10% of our
total sales for this period. The loss of any significant portion of sales to any of our significant customers could have a material adverse
effect on our business, results of operations, and financial condition.
Accounts receivable balances with four customers accounted for 90% of accounts receivable at December 31, 2014. The Company
performs ongoing credit evaluations of its customers’ financial condition and maintains reserves for potential bad debt losses. If the
financial conditions of any of these customers were to deteriorate impacting their ability to pay their receivables to our Company our
reserves may not be adequate which could have a material adverse effect on our business, results of operations, or financial condition.
We are continuing to engage in efforts intended to strengthen and expand our relations with significant customers, as well as provide
support for our entire customer base. We have supported our position with customers through direct and active contact through our sales,
quality, engineering, and operational personnel. We cannot make any assurances that we will maintain or improve our customer
relationships, whether these customers will continue to do business with us as they have in the past or whether we will be able to supply
these customers or any of our other customers at current levels.
Our business is affected by the cyclical nature of the industries and markets that we serve.
The North American heavy and medium-duty truck industries are highly cyclical. In 2014, approximately 83% of product sales were in
these industries. These industries and markets fluctuate in response to factors that are beyond our control, such as general economic
conditions, interest rates, federal and state regulations (including engine emissions regulations, tariffs, import regulations, and other
taxes), consumer spending, fuel costs, and our customers' inventory levels and production rates. Our manufacturing operations have a
significant fixed cost component. Accordingly, during periods of changing demands, the profitability of our operations may change
proportionately more than revenues from operations. In addition, our operations are typically seasonal as a result of regular customer
maintenance shutdowns, which typically vary from year to year based on production demands and occur in the third and fourth quarter
of each calendar year. This seasonality may result in decreased net sales and profitability during the third and fourth fiscal quarters of
each calendar year. Weakness in overall economic conditions or in the markets that we serve, or significant reductions by our customers
in their inventory levels or future production rates, could result in decreased demand for our products and could have a material adverse
effect on our business, results of operations, or financial condition.
Price increases in raw materials and availability of raw materials could adversely affect our operating results and financial
condition.
We purchase resins and fiberglass for use in production as well as hardware and other components for product assembly. The prices for
purchased materials are affected by the prices of material feed stocks such as crude oil, natural gas, and downstream components, as
well as processing capacity versus demand. We attempt to reduce our exposure to increases by working with suppliers, evaluating new
suppliers, improving material efficiencies, and when necessary through sales price adjustments to customers. If we are unsuccessful in
developing ways to mitigate these raw material increases we may not be able to improve productivity or realize our ongoing cost
reduction programs sufficiently to help offset the impact of these increased raw material costs. As a result, higher raw material costs
could result in declining margins and operating results.
Cost reduction and quality improvement initiatives by original equipment manufacturers could have a material adverse effect
on our business, results of operations, or financial condition.
We are primarily a components supplier to the heavy and medium-duty truck industries, which are characterized by a small number of
original equipment manufacturers (“OEMs”) that are able to exert considerable pressure on components suppliers to reduce costs,
improve quality, and provide additional design and engineering capabilities. Given the fragmented nature of the industry, OEMs continue
to demand and receive price reductions and measurable increases in quality through their use of competitive selection processes, rating
programs, and various other arrangements. We may be unable to generate sufficient production cost savings in the future to offset such
price reductions. OEMs may also seek to save costs by relocating production to countries with lower cost structures, which could in turn
lead them to purchase components from suppliers with lower production costs that are geographically closer to their new production
facilities. These decisions by OEMs could require us to shift production between our plants so that we are more competitive. Moving
production lines between our plants could result in significant costs required for transfer expenses and capital investment. Additionally,
OEMs have generally required component suppliers to provide more design engineering input at earlier stages of the product
development process, the costs of which have, in some cases, been absorbed by the suppliers. To the extent that the Company does not
10
meet the quality standards or demands of quality improvement initiatives sought by OEMs, or does not match the quality of suppliers
of comparable products, OEMs may choose to purchase from these alternative suppliers, and as a result the Company may lose existing
or new business with OEMs. Future price reductions, increased quality standards, and additional engineering capabilities required by
OEMs may reduce our profitability and have a material adverse effect on our business, results of operations, or financial condition.
We may be subject to product liability claims, recalls or warranty claims, which could have a material adverse effect on our
business, results of operations, or financial condition.
As a components supplier to OEMs, we face a business risk of exposure to product liability claims in the event that our products
malfunction and result in personal injury or death. Product liability claims could result in significant losses as a result of expenses
incurred in defending claims or the award of damages. In addition, we may be required to participate in recalls involving components
sold by us if any prove to be defective, or we may voluntarily initiate a recall or make payments related to such claims in order to
maintain positive customer relationships. While we do maintain product liability insurance, it may not be sufficient to cover all product
liability claims, and as a result, any product liability claim brought against us could have a material adverse effect on our results of
operations. Further, we warrant the quality of our products under limited warranties, and as such, we are subject to risk of warranty
claims in the event that our products do not conform to our customers’ specifications. Such warranty claims may result in costly product
recalls, significant repair costs and damage to our reputation, all of which would adversely affect our results of operations.
We operate in highly competitive markets.
The markets in which we operate are highly competitive. We compete with a number of other manufacturers that produce and sell similar
products. Our products primarily compete on the basis of capability, product quality, cost, and delivery. Some of our competitors have
greater financial resources, research and development facilities, design engineering, manufacturing, and marketing capabilities.
We may be subject to additional shipping expense or late fees if we are not able to meet our customers' on-time demand for our
products.
We must continue to meet our customers' demand for on-time delivery of our products. Factors that could result in our inability to meet
customer demands include a failure by one or more of our suppliers to supply us with the raw materials and other resources that we need
to operate our business effectively, poor management of our Company or one or more of its plants and an unforeseen spike in demand
for our products which would create capacity constraints, among other factors. If this occurs, we may be required to incur additional
shipping expenses to ensure on-time delivery or otherwise be required to pay late fees, which could have a material adverse effect on
our business, results of operations, or financial condition.
If we fail to attract and retain key personnel our business could be harmed.
Our success largely depends on the efforts and abilities of our key personnel. Their skills, experience, and industry contacts significantly
benefit us. The inability to retain key personnel could have a material adverse effect on our business, results of operations, or financial
condition. Our future success will also depend in part upon our continuing ability to attract and retain highly qualified personnel.
Work stoppages or other labor issues at our facilities or at our customers' facilities could adversely affect our operations.
As of December 31, 2014, unions at our Columbus, Ohio and Matamoros, Mexico facilities represented approximately 67% of our entire
workforce. As a result, we are subject to the risk of work stoppages and other labor-relations matters. The current Columbus, Ohio and
Matamoros, Mexico union contracts extend through August 7, 2016 and January 16, 2017, respectively. Any prolonged work stoppage or
strike at either our Columbus, Ohio or Matamoros, Mexico unionized facilities could have a material adverse effect on our business,
results of operations, or financial condition. Any failure by us to reach a new agreement upon expiration of such union contracts may
have a material adverse effect on our business, results of operations, or financial condition.
In addition, if any of our customers or suppliers experiences a material work stoppage, that customer may halt or limit the purchase of
our products or the supplier may interrupt supply of our necessary production components. This could cause us to shut down production
facilities relating to these products, which could have a material adverse effect on our business, results of operations, or financial
condition.
Changes in the legal, regulatory and social responses to climate change, including any possible effect on energy prices, could
adversely affect our business and reduce our profitability.
It is possible that various proposed legislative or regulatory initiatives related to climate changes, such as cap-and-trade systems,
increased limits on emissions of greenhouse gases and fuel efficiency standards, or other measures, could in the future have a material
impact on us, our customers, or the markets we serve, thereby resulting in a material adverse effect on our financial condition or results
of operation. For example, customers in the transportation (automotive and truck) industry could be required to incur greater costs in
order to comply with such initiatives, which could have an adverse impact on their profitability or viability. This could in turn lead to
further changes in the structure of the transportation industry that could reduce demand for our products. We are also reliant on energy
11
to manufacture our products, with our operating costs being subject to increase if energy costs rise. During periods of higher energy
costs we may not be able to recover our operating cost increases through production efficiencies and price increases. While we may
hedge our exposure to higher prices via future energy purchase contracts, increases in energy prices for any reason (including as a result
of new initiatives related to climate change) will increase our operating costs and likely reduce our profitability.
Our business is subject to risks associated with manufacturing equipment and infrastructure.
7(cid:28)(cid:5)(cid:14)(cid:11)(cid:3) (cid:28)(cid:24)(cid:27)(cid:5)(cid:24)(cid:2)%(cid:5)(cid:10)(cid:2)(cid:27)(cid:28)(cid:24)(cid:12)(cid:2)(cid:8)(cid:16)(cid:5)(cid:12)(cid:3)(cid:27)(cid:11)(cid:5)(cid:10)(cid:11)(cid:8)(cid:4)(cid:28)(cid:4)(cid:5)(cid:15)(cid:24)(cid:11)(cid:4)(cid:7)(cid:14)(cid:27)(cid:16)(cid:5)(cid:27)(cid:31)(cid:24)(cid:11)(cid:7)(cid:13)(cid:31)(cid:5)(cid:2)(cid:5)(cid:10)(cid:2)(cid:3)(cid:7)(cid:26)(cid:2)(cid:14)(cid:27)(cid:7)(cid:24)(cid:12)(cid:3)(cid:13)(cid:5)(cid:15)(cid:24)(cid:11)(cid:14)(cid:28)(cid:16)(cid:16)(cid:5)(cid:2)(cid:27)(cid:5)(cid:15)(cid:24)(cid:11)(cid:4)(cid:7)(cid:14)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)(cid:26)(cid:2)(cid:14)(cid:12)(cid:8)(cid:12)(cid:27)(cid:12)(cid:28)(cid:16)(cid:5)(cid:12)(cid:3)(cid:5)(cid:21)(cid:11)(cid:8)(cid:7)(cid:10)(cid:6)(cid:7)(cid:16)(cid:29)(cid:5)(cid:30)(cid:31)(cid:12)(cid:11)(cid:23)(cid:5)!(cid:2)(cid:26)fney,
"(cid:11)(cid:7)(cid:27)(cid:31)(cid:5) (cid:21)(cid:2)(cid:24)(cid:11)(cid:8)(cid:12)(cid:3)(cid:2)(cid:23)(cid:5) (cid:19)(cid:2)(cid:27)(cid:2) (cid:12)(cid:2)(cid:29)(cid:5) (cid:30)(cid:31)(cid:12)(cid:11)(cid:23)(cid:5) (cid:2)(cid:3)(cid:4)(cid:5) (cid:20)(cid:2)(cid:27)(cid:2)(cid:10)(cid:11)(cid:24)(cid:11)(cid:16)(cid:29)(cid:5) (cid:20)(cid:28)#(cid:12)(cid:14)(cid:11)$(cid:5)7(cid:31)(cid:12)(cid:8)(cid:28)(cid:5) %(cid:28)(cid:5) (cid:10)(cid:2)(cid:12)(cid:3)(cid:27)(cid:2)(cid:12)(cid:3)(cid:5) (cid:12)(cid:3)(cid:16)(cid:7)(cid:24)(cid:2)(cid:3)(cid:14)(cid:28)(cid:5) (cid:14)(cid:11) (cid:28)(cid:24)(cid:12)(cid:3)(cid:13)(cid:5) (cid:11)(cid:7)(cid:24)(cid:5) (cid:10)(cid:2)(cid:3)(cid:7)(cid:26)(cid:2)(cid:14)(cid:27)(cid:7)(cid:24)(cid:12)(cid:3)(cid:13)(cid:5) (cid:2)(cid:3)(cid:4)(cid:5) production
facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of our facilities due to accident, fire,
explosion, or natural disaster, whether short or long-term, could have a material adverse effect on our business, results of operations, or
financial condition.
Unexpected failures of our equipment and machinery may result in production delays, revenue loss, and significant repair costs, as well
as injuries to our employees. Any interruption in production capability may require us to make large capital expenditures to remedy the
situation, which could have a negative impact on our profitability and cash flows. Our business interruption insurance may not be
sufficient to offset the lost revenues or increased costs that we may experience during a disruption of our operations. Because we supply
our products to OEMs, a temporary or long-term business disruption could result in a permanent loss of customers. If this were to occur,
our future sales levels and therefore our profitability could be materially adversely affected.
Our business is subject to risks associated with new business awards. In order to recognize profit from new business, we must
accurately estimate product costs as part of the quoting process and implement effective and efficient manufacturing processes.
The success of our business relies on our ability to produce products which meet the quality, performance and price expectations of our
customers. Our ability to recognize profit is largely dependent upon accurately identifying the costs associated with the manufacture of
our products, and executing the manufacturing process in a cost effective manner. There can be no assurance that all costs will be
accurately identified during the Company's quoting process, or that the expected level of manufacturing efficiency will be achieved, and
as a result we may not realize the anticipated operating results related to new business awards.
Our insurance coverage may be inadequate to protect against the potential hazards incident to our business.
We maintain property, business interruption, stop loss for healthcare and workers' compensation, director and officer, product liability,
and casualty insurance coverage, but such insurance may not provide adequate coverage against potential claims, including losses
resulting from war risks, terrorist acts, or product liability claims relating to products we manufacture. Consistent with market conditions
in the insurance industry, premiums and deductibles for some of our insurance policies have been increasing and may continue to
increase in the future. In some instances, some types of insurance may become available only for reduced amounts of coverage, if at
all. In addition, there can be no assurance that our insurers would not challenge coverage for certain claims. If we were to incur a
significant liability for which we were not fully insured or that our insurers disputed, it could have a material adverse effect on our
financial position.
We have made acquisitions and may make acquisitions in the future. We may not realize the operating results that we anticipate
from these acquisitions or from acquisitions we may make in the future, and we may experience difficulties in integrating the
acquired businesses or may inherit significant liabilities related to such businesses.
We explore opportunities to acquire businesses that we believe are related to our core competencies from time to time, some of which
may be material to us. We expect such acquisitions will produce operating results consistent with our other operations, however, we
cannot provide assurance that this assumption will prove correct with respect to any acquisition.
Any acquisitions may present significant challenges for our management due to the increased time and resources required to properly
integrate management, employees, information systems, accounting controls, personnel, and administrative functions of the acquired
business with those of ours and to manage the combined company on a going forward basis. The diversion of management's attention
and any delays or difficulties encountered in connection with the integration of these businesses could adversely impact our business,
results of operations, and liquidity, and the benefits we anticipate may never materialize.
Expected future sales from business awards may not materialize. We may not realize the sales or operating results that we
anticipate from new business awards, and we may experience difficulties in meeting the production demands of new business
awards.
We will continue to pursue, and may be awarded, new business from existing or new customers. The Company may make capital
investments, which may be material to the Company, in order to meet the expected production requirements of existing or new customers
related to these business awards, and to support the potential production demands which may result from continued sales growth. The
anticipated impact on the Company's sales and operating results related to these business awards, for various reasons, may not
12
materialize. Any delays or production difficulties encountered in connection with these business awards, and any change in customer
demand, could adversely impact our business, results of operations, and liquidity, and the benefits we anticipate may never materialize.
If we are unable to meet future capital requirements, our business may be adversely affected.
As we grow our business, we may have to incur significant capital expenditures. We may make capital investments to, among other
things, build new or upgrade our facilities, purchase leased facilities and equipment, and enhance our production processes. We cannot
assure you that we will have, or be able to obtain, adequate funds to make all necessary capital expenditures when required, or that the
amount of future capital expenditures will not be materially in excess of our anticipated or current expenditures. If we are unable to
make necessary capital expenditures we may not have the capability to support our customer demands, which, in turn could reduce our
sales and profitability and impair our ability to satisfy our customers' expectations. In addition, even if we are able to invest sufficient
resources, these investments may not generate net sales that exceed our expenses, generate any net sales at all, or result in any
commercially acceptable products.
Our failure to comply with our debt covenants could have a material adverse effect on our business, financial condition or results
of operations.
Our debt agreements contain certain covenants. A breach of any of these covenants could result in a default under the applicable
agreement. If a default were to occur, we would likely seek a waiver of that default, attempt to reset the covenant, or refinance the
instrument and accompanying obligations. If we were unable to obtain this relief, the default could result in the acceleration of the total
due related to that debt obligation. If a default were to occur, we may not be able to pay our debts or borrow sufficient funds to refinance
them. Any of these events, if they occur, could materially adversely affect our results of operations, financial condition, and cash flows.
We may not achieve expected efficiencies related to the proximity of our customers' production facilities to our manufacturing
facilities, or with respect to existing or future production relocation plans.
Our facilities are located in close proximity to our customers in order to minimize both our customer's and our own costs. If any of our
customers were to move or if nearby facilities are closed, that may impact our ability to remain competitive. Additionally, our
competitors could build a facility that is closer to our customers' facilities which may provide them with a geographic advantage. Any
of these events might require us to move closer to our customers, build new facilities or shift production between our current facilities
to meet our customers' needs, resulting in additional cost and expense.
Our products may be rendered obsolete or less attractive if there are changes in technology, regulatory requirements, or
competitive processes.
Changes in technology, regulatory requirements, and competitive processes may render certain products obsolete or less attractive.
Future chemical regulations may restrict our ability to manufacture products, cause us to incur substantial expenditures to comply with
them, and subject us to liability for adverse environmental or health effects linked to the manufacture of our products. Failure to comply
with future regulations may subject us to penalties or other enforcement actions. Our ability to anticipate changes in these areas will be
a significant factor in our ability to remain competitive. If we are unable to identify or compensate for any one of these changes it may
have a material adverse effect on our business, results of operations, or financial condition.
Our stock price can be volatile.
Our stock price can fluctuate widely in response to a variety of factors. Factors include actual or anticipated variations in our quarterly
operating results, our relatively small public float, changes in securities analysts' estimates of our future earnings, and the loss of major
customers or significant business developments relating to us or our competitors, and other factors, including those described in this
“Risk Factors” section. Our common stock also has a low average daily trading volume, which limits a person's ability to quickly
accumulate or quickly divest themselves of large blocks of our stock. In addition, a low average trading volume can lead to significant
price swings even when a relatively few number of shares are being traded.
We are subject to environmental, occupational health and safety rules and regulations that may require us to make substantial
expenditures or expose us to financial or other obligations including substantial damages, penalties, fines, civil or criminal
sanctions and remediation costs that could adversely affect our results.
Our operations, facilities, and personnel are subject to extensive and evolving laws and regulations pertaining to air emissions,
wastewater discharges, the handling and disposal of solid and hazardous materials and wastes, health and safety, the investigation and
remediation of contamination, and the protection of the environment and natural resources. It is difficult to predict the future
interpretations and developments of environmental and health and safety laws and regulations or their impact on our future results and
cash flows. Continued compliance could result in significant increases in capital expenditures and operating costs. In addition, we may
be exposed to obligations or involved from time to time in administrative or legal proceedings relating to environmental, health and
safety or other regulatory matters, and may incur financial and other obligations relating to such matters.
13
Although we do not presently anticipate terminating any senior management employees, certain senior management employees
have entered into potentially costly severance arrangements with us if terminated after a change in control.
We have entered into executive severance agreements with executive officers that provide for significant severance payments in the
event such employee's employment with us is terminated within two years of a change in control (as defined in the severance agreement)
either by the employee for good reason (as defined in the severance agreement) or by us for any reason other than cause (as defined in
the severance agreement), or for death, or disability. A change in control under these agreements includes any transaction or series of
related transactions as a result of which less than fifty percent (50%) of the combined voting power of the then-outstanding securities
immediately after such transaction are held in the aggregate by the holders of our voting stock immediately prior to such transa(cid:14)(cid:27)(cid:12)(cid:11)(cid:3)(cid:23)(cid:5)
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beginning of the period cease to constitute at least a majority thereof. These agreements would make it costly for us to terminate certain
of our senior management employees and such costs may also discourage potential acquisition proposals, which may negatively affect
our stock price.
Our foreign operations subject us to risks that could negatively affect our business.
We operate a manufacturing facility in Matamoros, Mexico and, as a result, a significant portion of our business and operations are
subject to the risk of changes in economic conditions, tax systems, consumer preferences, social conditions, safety and security
conditions and political conditions inherent in Mexico, including changes in the laws and policies that govern foreign investment, as
well as changes in United States laws and regulations relating to foreign trade and investment. In addition, our results of operations and
the value of certain foreign assets and liabilities are affected by fluctuations in Mexican currency exchange rates, which may favorably
or adversely affect reported earnings. Having transferred certain of our production lines to Matamoros, Mexico in recent years, our
operations in Mexico have increased materially, and accordingly our exposure to the aforementioned risks relating to foreign operations
has increased. There can be no assurance as to the future effect of any such changes on our results of operations, financial condition, or
cash flows.
Economic conditions and disruptions in the financial markets could have an adverse effect on our business, financial condition
and results of operations.
In recent years, financial markets experienced turmoil and uncertainty. Disruptions in the financial markets could have a material
adverse effect on our liquidity and financial condition if our ability to borrow money from our existing lenders were to be impaired.
Disruptions in the financial markets may also have a material adverse impact on the availability and cost of credit in the future. Our
ability to pay our debt or refinance our obligations will depend on our future performance, which could be affected by, among other
things, prevailing economic conditions. Disruptions in the financial markets may also have an adverse effect on the U.S. and world
economies, which would have a negative impact on demand for our products. In addition, tightening of credit markets may have an
adverse impact on our customers' ability to finance the sale of new trucks or our suppliers' ability to provide us with raw materials, either
of which could adversely affect our business and results of operations.
14
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Company owns three production facilities that are situated in Columbus, Ohio, Gaffney, South Carolina and Matamoros, Mexico,
and leases a production facility in Batavia, Ohio and a distribution center in Brownsville, Texas.
The Columbus, Ohio plant is located at 800 Manor Park Drive on approximately 28 acres of land. The Company acquired the property
at 800 Manor Park Drive in 1996 as a result of the Asset Purchase Agreement with Navistar. The Company added approximately 6,000
square feet to the Columbus plant during 2014 in connection with its SMC capacity expansion. The current 338,000 square feet of
available floor space at the Columbus, Ohio plant is comprised of the following:
Manufacturing/Warehouse
Office
Total
Approximate
Square Feet
322,000
16,000
338,000
The Gaffney, South Carolina plant, which was opened in early 1998, is located at 24 Commerce Drive, Meadow Creek Industrial Park
on approximately 21 acres of land. The approximate 111,000 square feet of available floor space at the Gaffney, South Carolina plant is
comprised of the following:
Manufacturing/Warehouse
Office
Total
Approximate
Square Feet
106,000
5,000
111,000
The Matamoros, Mexico plant which was opened in mid 2009 is located at Guillermo Gonzalez Camarena y Thomas Alva Edison
Manzana, Matamoros, Tamaulipas, Mexico. The facility consists of approximately 476,000 square feet on approximately 22 acres
comprised of the following:
Manufacturing/Warehouse
Office
Total
Approximate
Square Feet
461,000
15,000
476,000
The Columbus, Ohio, Gaffney, South Carolina and Matamoros, Mexico properties are subject to liens and security interests as a result
of the properties being pledged by the Company as collateral for its debt as described in Note 7 of the “Notes to Consolidated Financial
Statements” in Part II, Item 8 of this Annual Report on Form 10-K.
The Company leases a production plant in Batavia, Ohio located at 4174 Half Acre Road on approximately 9 acres of land. The current
7-year operating lease agreement expires in July 2019. The approximate 108,000 square feet of available floor space at the Batavia,
Ohio plant is comprised of the following:
Manufacturing/Warehouse
Office
Total
Approximate
Square Feet
104,000
4,000
108,000
15
The Company leases a warehouse and distribution center in Brownsville, Texas located at 1385 Cheers Street on approximately 2 acres
of land. The current 5-year operating lease agreement expires in October 2017. The approximate 42,000 square feet of available floor
space at the Brownsville, Texas location is comprised of the following:
Warehouse/Distribution
Office
Total
Approximate
Square Feet
39,000
3,000
42,000
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation incidental to the conduct of its business. 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.
ITEM 4. Mine Safety Disclosures
None.
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company's common stock is traded on the NYSE MKT LLC under the symbol “CMT”.
The table below sets forth the high and low sale prices of the Company for each full quarterly period within the two most recent fiscal
years for which such stock was traded.
Core Molding Technologies, Inc.
High
Low
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
$
$
2014
2014
2014
2014
2013
2013
2013
2013
14.27 $
14.78
13.95
15.49
14.00 $
9.64
9.52
9.30
12.47
12.50
10.18
11.21
9.35
8.50
8.30
6.35
The Company's common stock was held by 321 holders of record on March 11, 2015.
The Company made no payments of cash dividends during 2014, 2013 and 2012. The Company currently expects that its earnings will
be retained to finance the growth and development of its business and does not anticipate paying dividends on its common stock in the
foreseeable future.
Equity Compensation Plan Information
The following table shows certain information concerning our common stock to be issued in connection with our equity compensation
plans as of December 31, 2014:
Plan Category
Equity compensation plans approved by
stockholders
Number of Shares to be
Issued Upon Exercise of
Outstanding Options or
Vesting of
Restricted Grants
Weighted Average
Exercise Price of
Outstanding Options or
Restricted Grants
Number of Shares
Remaining Available for
Future Issuance
107,068
$
10.67
1,598,083
Information concerning our stock repurchases during the three months ended December 31, 2014 is below. All stock was purchased to
satisfy employee tax withholding obligations upon vesting of restricted stock awards.
Period
October 1 to 31, 2014
November 1 to 30, 2014
December 1 to 31, 2014
Total Number of
Shares Purchased
7,368
—
—
Average Price Paid
per Share
13.81
—
—
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
Maximum Number
that May Yet Be
Purchased Under
the Plans or
Programs
—
—
—
—
—
—
17
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data is derived from the audited consolidated financial statements of the Company. The information set
forth below should be read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of
Operations,” the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
(In thousands, except per share data)
Operating Data:
Product sales
Tooling sales
Net sales
Gross margin
Income before interest and taxes
Net income
Earnings Per Share Data:
Net income per common share:
Basic
Diluted
Balance Sheet Data:
Total assets
Working capital
Long-term debt
Stockholders' equity
Return on beginning equity
Book value per share
Years Ended December 31,
2014
2013
2012
2011
2010
$ 169,744
5,460
175,204
30,186
14,647
9,634
$ 134,096
10,029
144,125
23,574
10,114
6,866
$ 149,698
12,752
162,450
25,848
12,490
8,190
$ 138,845
4,576
143,421
29,883
16,944
10,526
$ 89,903
10,355
100,258
16,349
6,417
2,433
$
$
1.28
1.28
$
$
0.95
0.92
$
$
1.15
1.11
$
$
1.51
1.44
$
$
0.36
0.34
$ 117,715
23,244
714
76,146
$ 97,121
17,869
2,429
67,448
$ 91,849
18,639
5,743
57,998
$ 93,298
16,983
9,477
50,096
14%
12%
16 %
28%
$
10.07
$
9.22
$
8.13
$
7.11
18
$ 79,062
14,916
13,581
38,064
8%
5.53
$
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements under this caption of this Annual Report on Form 10-K constitute forward-looking statements within the meaning of
the federal securities laws. As a general matter, forward-looking statements are those focused upon future plans, objectives or
performance as opposed to historical items and include statements of anticipated events or trends and expectations and beliefs relating
to matters not historical in nature. Such forward-looking statements involve known and unknown risks and are subject to uncertainties
and factors relating to Core Molding Technologies' operations and business environment, all of which are difficult to predict and many
of which are beyond Core Molding Technologies' control. These uncertainties and factors could cause Core Molding Technologies'
actual results to differ materially from those matters expressed in or implied by such forward-looking statements.
Core Molding Technologies believes that the following factors, among others, could affect its future performance and cause actual
results to differ materially from those expressed or implied by forward-looking statements made in this report: business conditions in
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Technologies to provide on-time delivery to customers, which may require additional shipping expenses to ensure on-time delivery or
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other public documents on file with the Securities and Exchange Commission, including those described in Item 1A of this Annual Report
on Form 10-K.
OVERVIEW
Core Molding Technologies is a manufacturer of sheet molding compound ("SMC") and molder of fiberglass reinforced plastics. The
Company specializes in large-format moldings and offers a wide range of fiberglass processes, including compression molding of SMC,
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Additionally, the Company offers reaction injection molding ("RIM"), utilizing dicyclopentadiene technology. Core Molding
Technologies serves a wide variety of markets, including the medium and heavy-duty truck, marine, automotive, agriculture,
construction and other commercial products. Product sales to medium and heavy-duty truck markets accounted for 83% of the
Company’s sales for the years ended December 31, 2014 and 81% of the Company's sales for the years ended December 31, 2013 and
2012, respectively. The demand for Core Molding Technologies’ products is affected by economic conditions in the United States,
Mexico, and Canada. Core Molding Technologies’ manufacturing operations have a significant fixed cost component. Accordingly,
during periods of changing demand, the profitability of Core Molding Technologies’ operations may change proportionately more than
revenues from operations.
In 1996, Core Molding Technologies acquired substantially all of the assets and assumed certain liabilities of Columbus Plastics, a
wholly owned operating unit of Navistar’s truck manufacturing division since its formation in late 1980. Columbus Plastics, located in
Columbus, Ohio, was a compounder and compression molder of SMC. In 1998, Core Molding Technologies began operations at its
second facility in Gaffney, South Carolina, and in 2001, Core Molding Technologies acquired certain assets of Airshield Corporation.
As a result of this acquisition, Core Molding Technologies expanded its fiberglass molding capabilities to include the spray up, hand-
lay-up open mold processes and RTM closed molding. In 2004, Core Molding Technologies acquired substantially all the operating
assets of Keystone Restyling Products, Inc., a privately held manufacturer and distributor of fiberglass reinforced products for the
automotive-aftermarket industry. In 2005, Core Molding Technologies 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. In 2009, the Company completed construction of a new production facility in
Matamoros, Mexico that replaced its leased facility. In July 2011, the Company formed Core Specialty Composites and leased a facility
in Warsaw, Kentucky to produce parts for customers outside of the Company’s traditional markets. Due to changing market conditions
for products manufactured at the Warsaw facility the Company terminated its lease and closed its Warsaw facility in October 2012.
19
Core Molding Technologies recorded net income in 2014 of $9,634,000, or $1.28 per basic and diluted share, compared with net income
of $6,866,000, or $0.95 per basic and $0.92 per diluted share, in 2013. Product sales in 2014 increased 27% from 2013 product sales.
This resulted primarily from increased demand from North American heavy and medium-duty truck customers and the full year impact
of business awarded from Volvo in 2013.
Looking forward, the Company anticipates 2015 sales levels to increase as compared to 2014, as industry analysts are forecasting
moderate increases in truck production for 2015.
RESULTS OF OPERATIONS
2014 COMPARED WITH 2013
Net sales for 2014 totaled $175,204,000, representing a 22% increase from the $144,125,000 reported for 2013. Included in total sales
were tooling project sales of $5,460,000 for 2014 and $10,029,000 for 2013. Tooling project sales result primarily from customer
approval and acceptance of molds and assembly equipment specific to their products as well as other non-production services. These
sales are sporadic in nature and fluctuate in regard to scope and related revenue on a period-to-period basis. Total product sales for 2014,
excluding tooling project sales, totaled $169,744,000, representing a 27% increase from the $134,096,000 reported for 2013. In 2014,
sales were positively impacted by approximately $37,000,000 from new business starting production in 2014 and the full year impact
of new business started in 2013. Other customer demand increases positively impacted sales by approximately $9,000,000. Partially
offsetting these increases were lower product sales to PACCAR associated with programs nearing the end of their production life of
approximately $10,000,000.
Sales to Navistar in 2014 totaled $51,330,000, compared to $47,356,000 reported for 2013. Included in total sales are tooling sales of
$76,000 and $972,000 for 2014 and 2013, respectively. Product sales to Navistar increased 11% in 2014 as compared to 2013 primarily
due to an overall increase in demand from Navistar.
Sales to Volvo in 2014 totaled $48,859,000, compared to $12,444,000 reported for 2013. Included in total sales are tooling sales of
$2,519,000 and $936,000 for 2014 and 2013, respectively. Product sales to Volvo increased by $34,832,000 in 2014 as compared to
2013 primarily due to the full year impact of 2013 business awards, which did not start generating product revenues for the Company
until the third quarter of 2013, and due to an overall increase in demand from Volvo.
Sales to PACCAR in 2014 totaled $36,128,000, compared to $50,154,000 reported for 2013. Included in total sales are tooling sales of
$526,000 and $7,370,000 for 2014 and 2013, respectively. Product sales to PACCAR decreased 17% in 2014 as compared to 2013. This
decrease was primarily due to lower sales of products nearing the end of their production life of approximately $10,000,000, partially
offset by sales of new products of approximately $2,000,000 and from increased demand from PACCAR of approximately$1,000,000.
Sales to Yamaha in 2014 totaled $16,911,000, compared to $13,648,000 reported for 2013. This 24% increase in sales was due to both
Yamaha transitioning additional business to the Company and an overall increase in demand from Yamaha.
Sales to other customers in 2014 totaled $21,976,000, increasing 7% from $20,523,000 reported for 2013. Included in total sales are
tooling sales of $2,339,000 and $751,000 in 2014 and 2013, respectively. Product sales in 2014 totaled $19,637,000, which remained
consistent with 2013 sales of $19,772,000.
Gross margin was approximately 17.2% of sales in 2014 and 16.4% in 2013. Improved fixed cost absorption favorably impacted gross
margin as a percent of sales by 1.5%, due to higher production volumes. In addition, production efficiencies favorably impacted gross
margin as a percent of sales by 1.4%. Partially offsetting these improvements was the change in sales mix, which resulted in an
unfavorable impact on gross margin of 2.1%.
Selling, general and administrative expense (“SG&A”) totaled $15,539,000 in 2014, compared to $13,460,000 in 2013. The increase is
primarily driven by increases in labor and benefit related expenses of $1,049,000, profit sharing of $734,000, and outside service costs
$347,000, which were primarily incurred during the third quarter in connection with certain strategic initiatives, including an
unsuccessful bid for a targeted acquisition.
Net interest expense totaled $122,000 for the year ended December 31, 2014, compared to net interest expense of $214,000 for the year
ended December 31, 2013. Reductions in outstanding term loan balances and higher capitalized interest reduced interest expense by
$130,000. Partially offsetting this reduction was an increase in interest expense of $43,000 due to outstanding revolver line of credit
balance during 2014.
Income tax expense was approximately 34% and 31% of total income before income taxes in 2014 and 2013, respectively. Income tax
as a percent of total income in 2013 was lower, primarily due to a one-time $240,000 favorable credit to deferred income taxes associated
with Mexican tax reform.
20
Net income for 2014 was $9,634,000 or $1.28 per basic and diluted share, compared with net income of $6,866,000 or $0.95 per basic
and $0.92 per diluted share for 2013.
2013 COMPARED WITH 2012
Net Sales for 2013 totaled $144,125,000, representing a 11% decrease from the $162,450,000 reported for 2012. Included in total sales
were tooling project sales of $10,029,000 for 2013 and $12,752,000 for 2012. Tooling project sales result primarily from customer
approval and acceptance of molds and assembly equipment specific to their products as well as other non-production services. These
sales are sporadic in nature and fluctuate in regard to scope and related revenue on a period-to-period basis. Total product sales for 2013,
excluding tooling project sales, totaled $134,096,000, representing a 10% decrease from the $149,698,000 reported for 2012. Awards of
new business had a favorable impact on product sales of approximately $10,000,000 during 2013. Lower demand for the Company's
existing products as well as lower sales for certain products reaching the end of their production life from customers in the medium and
heavy-duty truck market had an unfavorable impact on product sales of approximately $25,000,000 during 2013.
Sales to Navistar in 2013 totaled $47,356,000, compared to $63,303,000 reported for 2012. Included in total sales are tooling sales of
$972,000 and $8,301,000 for 2013 and 2012, respectively. Product sales to Navistar decreased by 16% in 2013 as compared to 2012
due to an overall decline in demand from Navistar.
Sales to PACCAR in 2013 totaled $50,154,000, compared to $57,252,000 reported for 2012. Included in total sales are tooling sales of
$7,370,000 and $1,728,000 for 2013 and 2012, respectively. Product sales to PACCAR decreased 23% in 2013 as compared to 2012
primarily due to decreased demand from PACCAR as well as lower sales for products reaching the end of their product life.
Sales to Volvo in 2013 totaled $12,444,000, compared to $6,228,000 reported for 2012. Included in total sales are tooling sales of
$936,000 and $33,000 for 2013 and 2012, respectively. Product sales to Volvo increased by $5,313,000 in 2013 as compared to 2012
primarily due to the awards of new business.
Sales to Yamaha in 2013 totaled $13,648,000, compared to $12,623,000 reported for 2012. Included in total sales are tooling sales of $0
and $4,000 for 2013 and 2012, respectively. Product sales to Yamaha increased by $1,029,000 in 2013 as compared to 2012 due to an
overall increase in demand from Yamaha.
Sales to other customers in 2013 totaled $20,523,000, decreasing 11% from $23,044,000 reported for 2012. Included in total sales are
tooling sales of $751,000 and $2,686,000 in 2013 and 2012, respectively. Product sales to other customers decreased $586,000 or 3%
in 2013 as compared to 2012. The decrease was primarily due to decreases from other customers in the medium and heavy-duty truck
industry offset by an increase in sales from customers in the automotive industries.
Gross margin was approximately 16% of sales in both 2013 and 2012. During 2013, lower absorption of fixed costs of production
negatively impacted gross margin as a percent of sales by approximately 1% due to reduced sales volume. Comparatively, gross margin
for 2012 was unfavorably impacted by 1% of sales due to start-up costs and production inefficiencies at the Company's Warsaw,
Kentucky facility which was closed in October 2012.
Selling, general and administrative expense ("SG&A") totaled $13,460,000 in 2013, compared to $13,358,000 in 2012. Labor and benefit
costs increased $460,000 and outside service costs increased by $173,000. These increases were partially offset by lower profit sharing
expense of $364,000 and lower travel costs of $150,000.
Net interest expense totaled $214,000 for the year ended December 31, 2013, compared to net interest expense of $334,000 for the year
ended December 31, 2012. Capitalized interest related to facility and capacity expansion projects reduced interest expense by $63,000
and $174,000 for the years ended December 31, 2013 and 2012, respectively. Reductions in outstanding loan balances due to regularly
scheduled principal payments, lower outstanding balances on the revolving line of credit, and lower interest rates reduced interest
expense by $194,000. Favorable mark to market adjustments on the Company's interest rate swaps and less loss amortization from
accumulated other comprehensive income, due to the expiration of the IDRB interest rate swap, had a favorable impact on interest
expense of $37,000.
Income tax expense was approximately 31% and 33% of total income before income taxes in 2013, and 2012, respectively. The primary
reason for the decrease in income tax as a percent of total income for 2013 was due to a one-time $240,000 favorable credit to deferred
income taxes associated with Mexican tax reform enacted in December 2013.
Net income for 2013 was $6,866,000 or $0.95 per basic and $0.92 per diluted share, compared with net income of $8,190,000 or $1.15
per basic and $1.11 per diluted share for 2012.
21
LIQUIDITY AND CAPITAL RESOURCES
The Company’s primary sources of funds have been cash generated from operating activities and borrowings from third parties. Primary
cash requirements are for operating expenses and capital expenditures.
In 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 to finance the construction of the Company’s manufacturing facility in Mexico.
Under this Credit Agreement, the Company received certain loans, subject to the terms and conditions stated in the agreement, which
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credit in an undrawn face amount of $3,332,493 with respect to the Company’s existing industrial development revenue bond financing.
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 Mexican loan was also secured by substantially all of the present and future assets of the
Company’s Mexican subsidiary.
On March 27, 2013, the Company and its wholly owned subsidiary, CoreComposites de Mexico, S. de R.L. de C.V., entered into an
eighth amendment (the "Eighth Amendment") to the Credit Agreement. Pursuant to the terms of the Eighth Amendment, the parties
agreed to modify certain terms of the Credit Agreement. These modifications included (1) an increase to the borrowing limit on the
revolv(cid:12)(cid:3)(cid:13)(cid:5)(cid:8)(cid:12)(cid:3)(cid:28)(cid:5)(cid:11)(cid:26)(cid:5)(cid:14)(cid:24)(cid:28)(cid:4)(cid:12)(cid:27)(cid:5)(cid:26)(cid:24)(cid:11)(cid:10)(cid:5)<=(cid:29):::(cid:29):::(cid:5)(cid:27)(cid:11)(cid:5)<8=(cid:29):::(cid:29):::(cid:23)(cid:5)(cid:17)+(cid:22)(cid:5)(cid:10)(cid:11)(cid:4)(cid:12)(cid:26)(cid:12)(cid:14)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)(cid:27)(cid:11)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:26)(cid:12)#(cid:28)(cid:4)(cid:5)(cid:14)(cid:31)(cid:2)(cid:24)(cid:13)(cid:28)(cid:5)(cid:4)(cid:28)(cid:26)(cid:12)(cid:3)(cid:12)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)(cid:27)(cid:11)(cid:5)(cid:28)#(cid:14)(cid:8)(cid:7)(cid:4)(cid:28)(cid:5)(cid:14)(cid:2)(cid:15)(cid:12)(cid:27)(cid:2)(cid:8)(cid:5)(cid:28)#(cid:15)(cid:28)(cid:3)(cid:4)(cid:12)tures
of up to $18,000,000 associated with the Company's compression molding capacity expansion and any sheet molding compound
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cancel, effective immediately, the unused $10,000,000 Mexican Expansion Revolving Loan that was added as part of the sixth
amendment to the Credit Agreement, which had a zero balance at December 31, 2012 and was scheduled to expire on May 31, 2013.
On October 31, 2013, the Company and its wholly owned subsidiary, Corecomposites de Mexico, S. DE R.L. DE C.V., entered into a
ninth amendment (the "Ninth Amendment") to the Credit Agreement. Pursuant to the terms of the Ninth Amendment, the parties agreed
to decrease the applicable margin for interest rates on Eurodollar Loans and Daily Libor Loans to 160 basis points from 175 basis points.
Cash provided by operating activities totaled $10,827,000 for the year ended December 31, 2014. Net income of $9,634,000 positively
impacted operating cash flows. Non-cash deductions of depreciation and amortization contributed $5,023,000 to operating cash flow.
Changes in working capital decreased cash provided by operating activities by $6,381,000. Changes in working capital primarily relate
to an increase in accounts receivable due to increased sales in the fourth quarter of 2014 as compared to the fourth quarter of 2013, as
well as an increase in income tax receivable and higher inventory levels. These were partially offset by increased accrued and other
liabilities.
Cash used in investing activities totaled $10,679,000 for the year ended December 31, 2014, primarily consisting of capital investment
related to capacity expansions, and equipment purchases for the Company’s production facilities. The Company anticipates spending
approximately $8,000,000 during 2015 on property, plant and equipment purchases for all of the Company's operations. The Company
anticipates using cash from operations and its revolving line of credit to finance this capital investment. At December 31, 2014, purchase
commitments for capital expenditures in progress were approximately $1,682,000.
Cash used in financing activities totaled $102,000 for the year ended December 31, 2014, which included net borrowings from the
revolver of $2,768,000 and $3,315,000 of repayments of principal on the Company’s Mexican loan and capex loan. Proceeds from the
exercise of stock options amounted to $328,000. Additionally reductions in taxes payable due to disqualified dispositions and vesting
of restricted stock contributed $395,000 to cash flow. Purchases of treasury stock to satisfy employee tax withholding requirements on
vested restricted stock reduced cash flow from financing activities by $278,000.
At December 31, 2014, the Company had cash on hand of $2,312,000 and an available revolving line of credit of $15,232,000.
Management believes that cash flow from operating activities and available borrowings under the Credit Agreement will be sufficient
to meet the Company’s liquidity needs. 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.
The Company is required to meet certain financial covenants included in the Credit Agreement with respect to leverage ratios, fixed
charge ratios, capital expenditures as well as other customary affirmative and negative covenants. As of December 31, 2014, the
Company was in compliance with its financial covenants.
Management regularly evaluates the Company’s ability to effectively meet its debt covenants. Based on the Company’s forecast, which
is primarily based on industry analysts’ estimates of heavy and medium-duty truck production volumes, as well as other assumptions,
management believes that the Company will be able to maintain compliance with its financial covenants for the next 12 months.
22
On November 14, 2014 the Company filed a universal shelf Registration Statement on Form S-3 (the “Registration Statement”) with
the SEC in accordance with the Securities Act of 1933, as amended, which became effective on November 25, 2014. The Registration
Statement registered common stock, preferred stock, debt securities, warrants, depositary shares, rights, units and any combination of
the foregoing, for a maximum aggregate offering price of up to $50.0 million, which may be sold from time to time. The terms of any
securities offered under the Registration Statement and intended use of proceeds will be established at the times of the offerings and will
be described in prospectus supplements filed with the SEC at the times of the offerings. The Registration Statement has a three year
term.
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET TRANSACTIONS
The Company has the following minimum commitments under contractual obligations, including purchase obligations, as defined by
the SEC. A “purchase obligation” is defined as an agreement to purchase goods or services that is enforceable and legally binding on
(cid:27)(cid:31)(cid:28)(cid:5) (cid:21)(cid:11)(cid:10)(cid:15)(cid:2)(cid:3)(cid:25)(cid:5) (cid:2)(cid:3)(cid:4)(cid:5) (cid:27)(cid:31)(cid:2)(cid:27)(cid:5) (cid:16)(cid:15)(cid:28)(cid:14)(cid:12)(cid:26)(cid:12)(cid:28)(cid:16)(cid:5) (cid:2)(cid:8)(cid:8)(cid:5) (cid:16)(cid:12)(cid:13)(cid:3)(cid:12)(cid:26)(cid:12)(cid:14)(cid:2)(cid:3)(cid:27)(cid:5) (cid:27)(cid:28)(cid:24)(cid:10)(cid:16)(cid:29)(cid:5) (cid:12)(cid:3)(cid:14)(cid:8)(cid:7)(cid:4)(cid:12)(cid:3)(cid:13)>(cid:5) (cid:26)(cid:12)#(cid:28)(cid:4)(cid:5) (cid:11)(cid:24)(cid:5) (cid:10)(cid:12)(cid:3)(cid:12)(cid:10)(cid:7)(cid:10)(cid:5) ’(cid:7)(cid:2)(cid:3)(cid:27)(cid:12)(cid:27)(cid:12)(cid:28)(cid:16)(cid:5) (cid:27)(cid:11)(cid:5) (cid:6)(cid:28)(cid:5) (cid:15)(cid:7)(cid:24)(cid:14)(cid:31)(cid:2)(cid:16)(cid:28)(cid:4)(cid:23)(cid:5) (cid:26)(cid:12)#(cid:28)(cid:4)(cid:29)(cid:5) (cid:10)(cid:12)(cid:3)(cid:12)(cid:10)(cid:7)(cid:10)(cid:29) or
(cid:2)(cid:24)(cid:12)(cid:2)(cid:6)(cid:8)(cid:28)(cid:5)(cid:15)(cid:24)(cid:12)(cid:14)(cid:28)(cid:5)(cid:15)(cid:24)(cid:11) (cid:12)(cid:16)(cid:12)(cid:11)(cid:3)(cid:16)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:2)(cid:15)(cid:15)(cid:24)(cid:11)#(cid:12)(cid:10)(cid:2)(cid:27)(cid:28)(cid:5)(cid:27)(cid:12)(cid:10)(cid:12)(cid:3)(cid:13)(cid:5)(cid:11)(cid:26)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:27)(cid:24)(cid:2)(cid:3)(cid:16)(cid:2)(cid:14)(cid:27)(cid:12)(cid:11)(cid:3)$(cid:5)(cid:30)(cid:27)(cid:31)(cid:28)(cid:24)(cid:5)(cid:8)(cid:11)(cid:3)(cid:13)-term liabilities are defined as long-term liabilities
that are reflected on the Company’s balance sheet under accounting principles generally accepted in the United States. Based on this
definition, the table below includes only those contracts which include fixed or minimum obligations. It does not include normal
purchases, which are made in the ordinary course of business.
The following table provides aggregated information about the maturities of contractual obligations and other long-term liabilities as of
December 31, 2014:
Long-term debt
Revolving line of credit
Interest
Operating lease
obligations
Contractual
commitments for
capital expenditures(A)
Post retirement benefits
Total
2015
$ 1,714,000 $
2,768,000
2016
714,000 $
—
127,000
25,000
2017
2018
2019
2020 and
after
Total
— $
—
—
— $
—
—
— $
—
—
— $ 2,428,000
2,768,000
—
152,000
—
535,000
539,000
486,000
328,000
192,000
—
2,080,000
1,682,000
—
—
—
1,064,000
379,000
$ 7,890,000 $ 1,657,000 $
392,000
878,000 $
370,000
698,000 $
—
—
1,682,000
9,172,000
368,000
6,599,000
560,000 $ 6,599,000 $ 18,282,000
(A) Includes $557,000 recorded on the balance sheet in accounts payable at December 31, 2014.
Interest is calculated based on the effective interest rates on the Company’s borrowing arrangements reflective of the interest rate swap
agreement in place for the long-term borrowings. As of December 31, 2014, the Company had no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss the Company’s consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation
of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and
judgments, including those related to accounts receivable, inventories, goodwill and other long-lived assets, self-insurance, post
retirement benefits, and income taxes. Management bases its estimates and judgments on historical experience and on various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used
in the preparation of its consolidated financial statements.
Accounts Receivable Allowances
Management maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make
required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required. The Company recorded an allowance for doubtful accounts of $289,000 at
December 31, 2014 and $141,000 at December 31, 2013. Management also records estimates for chargebacks for customer returns and
23
deductions, discounts offered to customers, and price adjustments. Should customer chargebacks fluctuate from the estimated amounts,
additional allowances may be required. The Company has reduced accounts receivable for chargebacks by $813,000 at December 31,
2014 and $973,000 at December 31, 2013.
Inventories
Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or market. The inventories are
accounted for using the first-in, first-out (FIFO) method of determining inventory costs. Inventory quantities on-hand are regularly
reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based on historical and anticipated usage.
The Company has recorded an allowance for excess and obsolete inventory of $940,000 at December 31, 2014 and $792,000 at
December 31, 2013.
Long-Lived Assets
Long-lived assets consist primarily of property, plant and equipment. 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, plant and equipment on the basis of undiscounted expected future cash flows from operations
before interest. There was no impairment of the Company's long-lived assets for the years ended December 31, 2014 and 2013.
Goodwill
Core Molding Technologies acquired certain assets of Airshield Corporation in 2001, and as a result, recorded goodwill related to its
Matamoros, Mexico operations in the amount of $1,097,000. The Company evaluates goodwill annually on December 31st to determine
whether impairment exists, or at interim periods if an indicator of possible impairment exists. The Company evaluates goodwill for
impairment using fair value measurements based on a projected discounted cash flow valuation model, in accordance with ASC 350,
“Intangibles-Goodwill and Other.” If impairment exists, the carrying amount of the goodwill is reduced to its estimated fair value, less
any costs associated with the final settlement. There was no impairment of the Company's goodwill for the years ended December 31,
2014 and 2013.
Self-Insurance
The Company is self-insured with respect to its Columbus and Batavia, Ohio, Gaffney, South Carolina and Brownsville, Texas medical,
dental and vision claims and Columbus and Batavia, Ohio workers’ compensation claims, all of which are subject to stop-loss insurance
thresholds. 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, 2014 and December 31, 2013 of $1,165,000 and $1,092,000,
respectively.
Post Retirement Benefits
Management records an accrual for post retirement costs associated with the health care plan sponsored by the Company for certain
employees. Should actual results differ from the assumptions used to determine the reserves, additional provisions may be required. In
particular, increases in future healthcare costs above the assumptions could have an adverse effect on the Company's operations. The
effect of a change in healthcare costs is described in Note 11 of the Notes to Consolidated Financial Statements. Core Molding
Technologies had a liability for post retirement healthcare benefits based on actuarially computed estimates of $9,172,000 at
December 31, 2014 and $6,774,000 at December 31, 2013.
Revenue Recognition
Revenue from product sales is recognized at the time products are shipped and title transfers. Allowances for returned products and other
credits are estimated and recorded as revenue is recognized. Tooling revenue is recognized when the customer approves the tool and
accepts ownership. Progress billings and expenses are shown net as an asset or liability on the Company’s Consolidated Balance Sheet.
Tooling in progress can fluctuate significantly from period to period and is dependent upon the stage of tooling projects and the related
billing and expense payment timetable for individual projects and therefore does not necessarily reflect projected income or loss from
tooling projects. At December 31, 2014, the Company had a net liability related to tooling in progress of $8,068,000, which represents
approximately $10,407,000 of progress tooling billings and $2,339,000 of progress tooling expenses. At December 31, 2013 the
Company had a net liability related to tooling in progress of $334,000, which represents approximately $3,344,000 of progress tooling
billings and $3,010,000 of progress tooling expenses.
24
Income Taxes
Management assesses the need for a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely
than not to be realized. The Company has considered future taxable income in assessing the need for a valuation allowance and has not
recorded a valuation allowance due to anticipating it being more likely than not that the Company will realize these benefits.
An analysis is performed to determine the amount of the deferred tax asset that will be realized. Such analysis is based upon the premise
that the Company is and will continue as a going concern and that it is more likely than not that deferred tax benefits will be realized
through the generation of future taxable income. Management reviews all available evidence, both positive and negative, to assess the
long-term earnings potential of the Company using a number of alternatives to evaluate financial results in economic cycles at various
industry volume conditions. Other factors considered are the Company’s relationships with its major customers, and any recent customer
diversification efforts. The projected availability of taxable income to realize the tax benefits from the reversal of temporary differences
before expiration of these benefits are also considered. Management believes that, with the combination of available tax planning
strategies and the maintenance of its relationships with its key customers, earnings are achievable in order to realize the net deferred tax
asset.
Management recognizes the financial statement effects of a tax position when it is more likely than not the position will be sustained
upon examination.
Inflation
Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. A high
rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross profit and selling, general and
administrative expenses as a percentage of net sales if the selling prices of our products do not increase with these increased costs.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic
606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. ASU Topic 606 is based on the
principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services. The ASU Topic 606 also requires additional disclosure
about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant
judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date for ASU
Topic 606 will be the first quarter of fiscal year 2017 using one of two retrospective application methods. The Company is currently
assessing the transition alternatives and potential impact the pronouncement and adoption of ASU Topic 606 will have on the Company's
financial statements. Early adoption is not permitted.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, "Presentation of Financial Statements-Going Concern
(Topic 205-40)" ("ASU 2014-15"). Under the standard, management is required to evaluate for each annual and interim reporting period
whether it is probable that the entity will not be able to meet its obligations as they become due within one year after the date that
financial statements are issued. ASU 2014-15 is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2016, and early adoption is permitted. Accordingly, the standard is effective for the Company on January 1, 2017. The
Company does not believe that the pronouncement will have an impact on the Company's financial statements.
25
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Core Molding Technologies’ primary market risk results from changes in the price of commodities used in its manufacturing operations.
Core Molding Technologies is also exposed to fluctuations in interest rates and foreign currency fluctuations associated with the Mexican
Peso. Core Molding Technologies does not hold any material market risk sensitive instruments for trading purposes.
Core Molding Technologies has the following four items that are sensitive to market risks at December 31, 2014: (1) Revolving Line of
(cid:21)(cid:24)(cid:28)(cid:4)(cid:12)(cid:27)(cid:5)(cid:7)(cid:3)(cid:4)(cid:28)(cid:24)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:21)(cid:24)(cid:28)(cid:4)(cid:12)(cid:27)(cid:5)4(cid:13)(cid:24)(cid:28)(cid:28)(cid:10)(cid:28)(cid:3)(cid:27)(cid:5)%(cid:31)(cid:12)(cid:14)(cid:31)(cid:5)(cid:6)(cid:28)(cid:2)(cid:24)(cid:16)(cid:5)(cid:2)(cid:5) (cid:2)(cid:24)(cid:12)(cid:2)(cid:6)(cid:8)(cid:28)(cid:5)(cid:12)(cid:3)(cid:27)(cid:28)(cid:24)(cid:28)(cid:16)(cid:27)(cid:5)(cid:24)(cid:2)(cid:27)(cid:28)(cid:23)(cid:5)(cid:17)+(cid:22)(cid:5)(cid:21)(cid:2)(cid:15)(cid:28)#(cid:5)?(cid:11)(cid:2)(cid:3)(cid:5)(cid:15)(cid:2)(cid:25)(cid:2)(cid:6)(cid:8)(cid:28)(cid:5)%(cid:12)(cid:27)(cid:31)(cid:5)(cid:2)(cid:5) (cid:2)(cid:24)(cid:12)(cid:2)(cid:6)(cid:8)(cid:28)(cid:5)(cid:12)(cid:3)(cid:27)(cid:28)(cid:24)(cid:28)(cid:16)(cid:27)(cid:5)(cid:24)(cid:2)(cid:27)(cid:28)(cid:5)(although
the Company has an interest rate swap to fix the variable portion of the applicable interest (cid:24)(cid:2)(cid:27)(cid:28)(cid:5)(cid:2)(cid:27)(cid:5)+$,;(cid:22)(cid:23)(cid:5)(cid:17),(cid:22)(cid:5)(cid:26)(cid:11)(cid:24)(cid:28)(cid:12)(cid:13)(cid:3)(cid:5)(cid:14)(cid:7)(cid:24)(cid:24)(cid:28)(cid:3)(cid:14)(cid:25)(cid:5)(cid:15)(cid:7)(cid:24)(cid:14)(cid:31)(cid:2)(cid:16)(cid:28)(cid:16)(cid:5)
in which the Company purchases Mexican pesos with United States dollars to meet certain obligations that arise due to operations at the
(cid:26)(cid:2)(cid:14)(cid:12)(cid:8)(cid:12)(cid:27)(cid:25)(cid:5)(cid:8)(cid:11)(cid:14)(cid:2)(cid:27)(cid:28)(cid:4)(cid:5)(cid:12)(cid:3)(cid:5)(cid:20)(cid:28)#(cid:12)(cid:14)(cid:11)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)(cid:5)(cid:17)-(cid:22)(cid:5)(cid:24)(cid:2)%(cid:5)(cid:10)(cid:2)(cid:27)(cid:28)(cid:24)(cid:12)(cid:2)(cid:8)(cid:5)(cid:15)(cid:7)(cid:24)(cid:14)(cid:31)(cid:2)(cid:16)(cid:28)(cid:16)(cid:5)(cid:12)(cid:3)(cid:5)%(cid:31)(cid:12)(cid:14)(cid:31)(cid:5)(cid:21)(cid:11)(cid:24)(cid:28)(cid:5)Molding Technologies purchases various resins and fiberglass
for use in production. The prices and availability of these materials are affected by the prices of crude oil and natural gas as well as
processing capacity versus demand.
Assuming a hypothetical 10% increase in commodity prices, Core Molding Technologies would be impacted by an increase in raw
material costs, which would have an adverse effect on operating margins.
Assuming a hypothetical 10% change in short-term interest rates, interest paid on the Company’s Line of Credit would impact the
interest paid by the Company, as the interest rate on these loans is based upon LIBOR, however, it would not have a material effect on
earnings before taxes.
A 10% change in future interest rate curves would impact the fair value of the Company’s interest rate swap, however, it would not have
a material effect on earnings before taxes.
26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Core Molding Technologies, Inc.
Columbus, Ohio
We have audited the accompanying consolidated balance sheets of Core Molding Technologies, Inc. and Subsidiaries (the “Company”)
as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31, 2014. We also have audited the consolidated financial
statement schedule, Schedule II - Valuation and Qualifying Accounts and Reserves, and the Company's internal control over financial
reporting as of December 31, 2014, based on criteria established in the 2013 Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these
consolidated financial statements and consolidated financial statement schedule, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated
financial statements and consolidated financial statement schedule and an opinion on the company's internal control over financial
reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures
in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
(cid:14)(cid:11)(cid:10)(cid:15)(cid:2)(cid:3)(cid:25)(cid:23)(cid:5)(cid:17)+(cid:22)(cid:5)(cid:15)(cid:24)(cid:11) (cid:12)(cid:4)(cid:28)(cid:5)(cid:24)(cid:28)(cid:2)(cid:16)(cid:11)(cid:3)(cid:2)(cid:6)(cid:8)(cid:28)(cid:5)(cid:2)(cid:16)(cid:16)(cid:7)(cid:24)(cid:2)(cid:3)(cid:14)(cid:28)(cid:5)(cid:27)(cid:31)(cid:2)(cid:27)(cid:5)(cid:27)(cid:24)(cid:2)(cid:3)(cid:16)(cid:2)(cid:14)(cid:27)(cid:12)(cid:11)(cid:3)(cid:16)(cid:5)(cid:2)(cid:24)(cid:28)(cid:5)(cid:24)(cid:28)(cid:14)(cid:11)(cid:24)(cid:4)(cid:28)(cid:4)(cid:5)(cid:2)(cid:16)(cid:5)(cid:3)(cid:28)(cid:14)(cid:28)(cid:16)(cid:16)(cid:2)(cid:24)(cid:25)(cid:5)(cid:27)(cid:11)(cid:5)(cid:15)(cid:28)(cid:24)(cid:10)(cid:12)(cid:27)(cid:5)(cid:15)(cid:24)(cid:28)(cid:15)(cid:2)(cid:24)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)(cid:11)(cid:26)(cid:5)(cid:26)inancial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
(cid:2)(cid:14)(cid:14)(cid:11)(cid:24)(cid:4)(cid:2)(cid:3)(cid:14)(cid:28)(cid:5)%(cid:12)(cid:27)(cid:31)(cid:5)(cid:2)(cid:7)(cid:27)(cid:31)(cid:11)(cid:24)(cid:12)&(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:16)(cid:5)(cid:11)(cid:26)(cid:5)(cid:10)(cid:2)(cid:3)(cid:2)(cid:13)(cid:28)(cid:10)(cid:28)(cid:3)(cid:27)(cid:5)(cid:2)(cid:3)(cid:4)(cid:5)(cid:4)(cid:12)(cid:24)(cid:28)(cid:14)(cid:27)(cid:11)(cid:24)(cid:16)(cid:5)(cid:11)(cid:26)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:14)(cid:11)(cid:10)(cid:15)(cid:2)(cid:3)(cid:25)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)(cid:5)(cid:17),(cid:22)(cid:5)(cid:15)(cid:24)(cid:11) (cid:12)(cid:4)(cid:28)(cid:5)(cid:24)(cid:28)(cid:2)(cid:16)(cid:11)(cid:3)(cid:2)(cid:6)(cid:8)(cid:28)(cid:5)assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Core Molding Technologies, Inc. and Subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash
flows for each of the years in the three-year period ended December 31, 2014 in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, the related consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set
forth therein. Also in our opinion, Core Molding Technologies, Inc. and Subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2014, based on criteria established in the 2013 Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
/s/ Crowe Horwath LLP
Columbus, Ohio
March 13, 2015
27
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Income
Years Ended December 31,
2014
2013
2012
$ 169,744,000 $ 134,096,000 $ 149,698,000
12,752,000
162,450,000
5,460,000
175,204,000
10,029,000
144,125,000
145,018,000
120,551,000
136,602,000
30,186,000
23,574,000
25,848,000
Net sales:
Products
Tooling
Total net sales
Total cost of sales
Gross margin
Total selling, general and administrative expense
15,539,000
13,460,000
13,358,000
Income before interest and taxes
14,647,000
10,114,000
12,490,000
Interest expense
122,000
214,000
334,000
Income before income taxes
14,525,000
9,900,000
12,156,000
Income taxes:
Current
Deferred
Total income taxes
Net income
Net income per common share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
See notes to consolidated financial statements.
2,370,000
2,521,000
4,891,000
2,755,000
279,000
3,034,000
3,956,000
10,000
3,966,000
$
9,634,000 $
6,866,000 $
8,190,000
$
$
1.28 $
1.28 $
0.95 $
0.92 $
1.15
1.11
7,508,000
7,553,000
7,220,000
7,435,000
7,104,000
7,379,000
28
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
Net income
Other comprehensive income:
Interest rate swaps:
Adjustment for amortization of
losses included in net income
Income tax expense
Post retirement benefit plan
adjustments:
Net actuarial (loss) gain
Prior service costs
Income tax benefit (expense)
Years Ended December 31,
2014
9,634,000 $
2013
6,866,000 $
2012
8,190,000
$
21,000
(7,000)
36,000
(12,000)
83,000
(28,000)
(2,679,000)
(496,000)
1,119,000
3,118,000
(496,000)
(961,000)
(633,000)
(496,000)
384,000
Comprehensive income
$
7,592,000 $
8,551,000 $
7,500,000
See notes to consolidated financial statements.
29
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31,
2014
2013
Assets:
Current assets:
Cash and cash equivalents
Accounts receivable (less allowance for doubtful accounts: December 31,
2014 - $+=@(cid:29):::(cid:23)(cid:5)6(cid:28)(cid:14)(cid:28)(cid:10)(cid:6)(cid:28)(cid:24)(cid:5),8(cid:29)(cid:5)+:8,(cid:5)- $141,000)
$
2,312,000 $
2,266,000
34,360,000
22,069,000
Inventories:
Finished goods
Work in process
Stores
Total inventories, net
Deferred tax asset-current portion
Foreign sales tax receivable
Income taxes receivable
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment — net
Deferred tax asset
Goodwill
Total Assets
Liabilities and Stockholders’ Equity:
Liabilities:
Current liabilities:
Current portion of long-term debt
Revolving line of credit
Current portion of interest rate swaps
Accounts payable
Tooling in progress
Current portion of post retirement benefits liability
Accrued liabilities:
Compensation and related benefits
Taxes
Other
Total current liabilities
Long-term debt
Interest rate swaps
Deferred tax liability
Post retirement benefits liability
Total Liabilities
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock — $0.01 par value, authorized shares — 8:(cid:29):::(cid:29):::(cid:23)(cid:5)
outstanding shares: 0 at December 31, 2014 and December 31, 2013
Common stock — $0.01 par value, authorized shares – +:(cid:29):::(cid:29):::(cid:23)(cid:5)
outstanding shares: 7,559,012 at December 31, 2014 and 7,318,773 at
December 31, 2013
Paid-in capital
Accumulated other comprehensive income, net of income taxes
Treasury stock
Retained earnings
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
See notes to consolidated financial statements.
30
1,402,000
1,621,000
8,612,000
11,635,000
1,868,000
1,447,000
2,286,000
715,000
54,623,000
61,995,000
—
1,097,000
$ 117,715,000 $
$
1,714,000 $
2,768,000
34,000
9,256,000
8,068,000
1,064,000
7,087,000
256,000
1,132,000
31,379,000
714,000
3,000
1,365,000
8,108,000
41,569,000
—
1,739,000
1,515,000
7,573,000
10,827,000
1,615,000
1,324,000
327,000
822,000
39,250,000
56,478,000
296,000
1,097,000
97,121,000
3,314,000
—
71,000
9,625,000
334,000
943,000
5,952,000
199,000
943,000
21,381,000
2,429,000
32,000
—
5,831,000
29,673,000
—
—
—
76,000
28,138,000
2,830,000
(27,360,000)
72,462,000
76,146,000
$ 117,715,000 $
73,000
26,757,000
4,872,000
(27,082,000)
62,828,000
67,448,000
97,121,000
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statement of Stockholders’ Equity
Common Stock
Outstanding
Amount
Shares
7,048,069 $ 70,000 $ 24,872,000 $
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Retained
Earnings
3,877,000 $ (26,495,000) $ 47,772,000 $
8,190,000
Total
Stockholders’
Equity
50,096,000
8,190,000
Balance at January 1, 2012
Net income
Change in post retirement
benefits, net of tax of
$384,000
Change in interest rate swaps,
net of tax of $28,000
Common stock issued
Excess tax benefit — equity
transactions
Purchase of treasury stock
Restricted stock vested
25,775
81,000
163,000
(31,455)
88,415
1,000
410,000
Share-based compensation
Balance at December 31, 2012 7,130,804 $ 71,000 $ 25,526,000 $
Net income
Change in post retirement
benefits, net of tax of
$961,000
Change in interest rate swaps,
net of tax of $12,000
Common stock issued
Excess tax benefit — equity
transactions
Purchase of treasury stock
Restricted stock vested
132,725
1,000
409,000
409,000
(36,329)
91,573
1,000
413,000
Share-based compensation
Balance at December 31, 2013 7,318,773 $ 73,000 $ 26,757,000 $
Net income
Change in post retirement
benefits, net of tax of
$1,119,000
Change in interest rate swaps,
net of tax of $7,000
Common stock issued
Excess tax benefit — equity
transactions
Purchase of treasury stock
Restricted stock vested
186,060
2,000
326,000
311,000
(21,797)
75,976
1,000
(745,000)
55,000
(253,000)
3,187,000 $ (26,748,000) $ 55,962,000 $
6,866,000
1,661,000
24,000
(334,000)
4,872,000 $ (27,082,000) $ 62,828,000 $
9,634,000
(2,056,000)
14,000
(278,000)
(745,000)
55,000
81,000
163,000
(253,000)
1,000
410,000
57,998,000
6,866,000
1,661,000
24,000
410,000
409,000
(334,000)
1,000
413,000
67,448,000
9,634,000
(2,056,000)
14,000
328,000
311,000
(278,000)
1,000
744,000
76,146,000
744,000
Share-based compensation
Balance at December 31, 2014 7,559,012 $ 76,000 $ 28,138,000 $
2,830,000 $ (27,360,000) $ 72,462,000 $
See notes to consolidated financial statements.
31
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Deferred income taxes
Mark-to-market of interest rate swaps
Share-based compensation
Loss on disposal of assets
Loss on foreign currency translation and transaction
Change in operating assets and liabilities:
Accounts receivable
Inventories
Taxes receivable
Prepaid and other assets
Accounts payable
Accrued and other liabilities
Post retirement benefits liability
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Proceeds from sale of property and equipment
Net cash used in investing activities
2014
Years Ended
2013
2012
$ 9,634,000 $ 6,866,000 $ 8,190,000
5,023,000
2,521,000
(45,000)
744,000
—
108,000
4,878,000
279,000
(73,000)
413,000
5,000
27,000
(12,292,000)
(808,000)
(1,959,000)
(78,000)
(275,000)
9,031,000
(777,000)
10,827,000
(7,446,000)
(862,000)
944,000
93,000
2,259,000
125,000
(591,000)
6,917,000
4,523,000
(782,000 )
(64,000 )
410,000
—
4,000
7,425,000
1,444,000
(1,271,000 )
(558,000 )
(2,099,000 )
(2,593,000 )
169,000
14,798,000
(10,679,000)
—
(9,332,000)
92,000
(10,679,000) (9,240,000)
(8,258,000 )
777,000
(7,481,000 )
Cash flows from financing activities:
Gross repayments on revolving line of credit
Gross borrowings on revolving line of credit
Payment of principal on Mexican loan
Payment of principal on capex loan
Payment of principal on industrial development revenue bond
Excess tax benefit from equity incentive plans
Payments related to the purchase of treasury stock
Proceeds from issuance of common stock
Net cash used in financing activities
(67,993,000)
70,761,000
(1,600,000)
(1,715,000)
—
395,000
(278,000)
328,000
(102,000)
—
—
(1,600,000)
(1,714,000)
(420,000)
409,000
(334,000)
410,000
(3,249,000)
(47,369,000 )
47,369,000
(1,600,000 )
(1,714,000 )
(790,000 )
163,000
(253,000 )
81,000
(4,113,000 )
Net change in cash and cash equivalents
46,000
(5,572,000)
3,204,000
Cash and cash equivalents at beginning of year
2,266,000
7,838,000
4,634,000
Cash and cash equivalents at end of year
$ 2,312,000 $ 2,266,000 $ 7,838,000
Cash paid for:
Interest (net of amounts capitalized)
Income taxes
Non Cash:
110,000 $ 204,000 $
284,000
$
$ 3,567,000 $ 1,296,000 $ 4,734,000
Fixed asset purchases in accounts payable
$
557,000 $ 709,000 $
241,000
See notes to consolidated financial statements.
32
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Basis of Presentation
Core Molding Technologies and its subsidiaries operate in the plastics market in a family of products known as “reinforced plastics.”
Reinforced plastics are combinations of resins and reinforcing fibers (typically glass or carbon) that are molded to shape. Core Molding
Technologies is a manufacturer of sheet molding compound ("SMC") and molder of fiberglass reinforced plastics. The Company
specializes in large-format moldings and offers a wide range of fiberglass processes, including compression molding of SMC, glass mat
(cid:27)(cid:31)(cid:28)(cid:24)(cid:10)(cid:11)(cid:15)(cid:8)(cid:2)(cid:16)(cid:27)(cid:12)(cid:14)(cid:16)(cid:5) (cid:17)(cid:18)!(cid:20)0(cid:18)(cid:22)(cid:5) (cid:2)(cid:3)(cid:4)(cid:5) (cid:6)(cid:7)(cid:8)(cid:9)(cid:5) (cid:10)(cid:11)(cid:8)(cid:4)(cid:12)(cid:3)(cid:13)(cid:5) (cid:14)(cid:11)(cid:10)(cid:15)(cid:11)(cid:7)(cid:3)(cid:4)(cid:16)(cid:5) (cid:17)(cid:18)(cid:19)(cid:20)(cid:21)(cid:18)(cid:22)(cid:23)(cid:5) (cid:16)(cid:15)(cid:24)(cid:2)(cid:25)-up, hand-lay-up, and resin transfer molding ("RTM").
Additionally, the Company offers reaction injection molding ("RIM"), utilizing dicyclopentadiene technology. Core Molding
0(cid:28)(cid:14)(cid:31)(cid:3)(cid:11)(cid:8)(cid:11)(cid:13)(cid:12)(cid:28)(cid:16)(cid:5)(cid:11)(cid:15)(cid:28)(cid:24)(cid:2)(cid:27)(cid:28)(cid:16)(cid:5)(cid:26)(cid:11)(cid:7)(cid:24)(cid:5)(cid:15)(cid:24)(cid:11)(cid:4)(cid:7)(cid:14)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)(cid:26)(cid:2)(cid:14)(cid:12)(cid:8)(cid:12)(cid:27)(cid:12)(cid:28)(cid:16)(cid:5)(cid:12)(cid:3)(cid:5)(cid:21)(cid:11)(cid:8)(cid:7)(cid:10)(cid:6)(cid:7)(cid:16)(cid:29)(cid:5)(cid:30)(cid:31)(cid:12)(cid:11)(cid:23)(cid:5)(cid:19)(cid:2)(cid:27)(cid:2) (cid:12)(cid:2)(cid:29)(cid:5)(cid:30)(cid:31)(cid:12)(cid:11)(cid:23)(cid:5)!(cid:2)(cid:26)(cid:26)(cid:3)(cid:28)(cid:25)(cid:29)(cid:5)"(cid:11)(cid:7)(cid:27)(cid:31)(cid:5)(cid:21)(cid:2)(cid:24)(cid:11)(cid:8)(cid:12)(cid:3)(cid:2)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)(cid:5)(cid:20)(cid:2)(cid:27)(cid:2)(cid:10)(cid:11)(cid:24)(cid:11)(cid:16)(cid:29)(cid:5)(cid:20)(cid:28)xico.
The Company operates in one business segment as a manufacturer of SMC and molder of fiberglass reinforced plastics. The Company
produces and sells SMC and molded products for varied markets, including light, medium, and heavy-duty trucks, automobiles and
automotive aftermarket, marine, construction and other commercial products.
In July 2011, the Company formed Core Specialty Composites and leased a facility in Warsaw, Kentucky to produce parts for customers
outside of the Company’s traditional markets. Due to changing market conditions for products manufactured at the Warsaw facility the
Company terminated its lease and closed its Warsaw facility in October 2012. Operations at the Warsaw, Kentucky facility generated
pre-tax expense of approximately $1,100,000 during 2012. Contributing to the loss were start-up costs, production inefficiencies and
plant closure costs, net of settlement proceeds received, all of which were included in cost of goods sold in the Company's 2012
Consolidated Statement of Income.
2. Summary of Significant Accounting Policies
Principles of Consolidation - The accompanying consolidated financial statements include the accounts of all subsidiaries after
elimination of all intercompany accounts, transactions, and profits.
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities, and reported amounts of revenues and expenses during the reporting period. Significant
estimates relate to allowances for doubtful accounts, inventory reserves, self-insurance reserves related to healthcare and workers
compensation, deferred taxes, post retirement benefits, goodwill and long-lived assets. Actual results could differ from those estimates.
Revenue Recognition - Revenue from product sales is recognized at the time products are shipped and title transfers. Allowances for
returned products and other credits are estimated and recorded as revenue is recognized. Tooling revenue is recognized when the
customer approves the tool and accepts ownership. Progress billings and expenses are shown net as an asset or liability on the Company’s
Consolidated Balance Sheet. Tooling in progress can fluctuate significantly from period to period and is dependent upon the stage of
tooling projects and the related billing and expense payment timetable for individual projects and therefore does not necessarily reflect
projected income or loss from tooling projects. At December 31, 2014, the Company had a net liability related to tooling in progress of
$8,068,000, which represents approximately $10,407,000 of progress tooling billings and $2,339,000 of progress tooling expenses. At
December 31, 2013, the Company had a net liability related to tooling in progress of $334,000 which represents approximately
$3,344,000 of progress tooling billings and $3,010,000 of progress tooling expenses.
Cash and Cash Equivalents - The Company considers all highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents. Cash is held primarily in one bank. The Company had cash on hand of $2,312,000 at December 31, 2014
and $2,266,000 at December 31, 2013.
Accounts Receivable Allowances - Management maintains allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances may be required. The Company recorded an allowance for
doubtful accounts of $289,000 at December 31, 2014 and $141,000 December 31, 2013. Management also records estimates for
customer returns and deductions, discounts offered to customers, and for price adjustments. Should customer returns and deductions,
discounts, and price adjustments fluctuate from the estimated amounts, additional allowances may be required. The Company had an
allowance for estimated chargebacks of $813,000 at December 31, 2014 and $973,000 at December 31, 2013. There have been no
material changes in the methodology of these calculations.
Inventories - Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or market. The
inventories are accounted for using the first-in, first-out (FIFO) method of determining inventory costs. Inventory quantities on-hand
are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based on historical and
33
anticipated usage. The Company has recorded an allowance for slow moving and obsolete inventory of $940,000 at December 31, 2014
and $792,000 at December 31, 2013.
Property, Plant, and Equipment - Property, plant, and equipment are recorded at cost. Depreciation is provided on a straight-line
method over the estimated useful lives of the assets. The carrying amount of long-lived assets is evaluated annually to determine if
adjustment to the depreciation period or to the unamortized balance is warranted.
Ranges of estimated useful lives for computing depreciation are as follows:
Land improvements
20 years
Buildings and improvements
20 - 40 years
Machinery and equipment
Tools, dies and patterns
3 - 15 years
3 - 5 years
Depreciation expense was $5,009,000, $4,783,000 and $4,421,000 for the years ended December 31, 2014, 2013 and 2012, respectively.
The Company capitalized interest costs of approximately $80,000 and $63,000 for the years ended December 31, 2014 and 2013,
respectively.
Long-Lived Assets - Long-lived assets consist primarily of property, plant and equipment. 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, plant and equipment on the basis of undiscounted expected future cash
flows from operations before interest. There was no impairment of the Company's long-lived assets for the years ended December 31,
2014, 2013 and 2012.
Goodwill - Core Molding Technologies acquired certain assets of Airshield Corporation in 2001, and as a result, recorded goodwill
related to its Matamoros, Mexico operations in the amount of $1,097,000. The Company evaluates goodwill annually on December 31st
to determine whether impairment exists, or at interim periods if an indicator of possible impairment exists. The Company
evaluates goodwill for impairment using fair value measurements based on a projected discounted cash flow valuation model, in
accordance with ASC 350, “Intangibles-Goodwill and Other.” There was no impairment of the Company's goodwill for the years ended
December 31, 2014, 2013 and 2012.
Income Taxes - The Company records deferred income taxes for differences between the financial reporting basis and income tax basis
of assets and liabilities. A detailed breakout is located in Note 10.
Self-Insurance - The Company is self-insured with respect to its Columbus and Batavia, Ohio, Gaffney, South Carolina and Brownsville,
Texas medical, dental and vision claims and Columbus and Batavia, Ohio workers’ compensation claims, all of which are subject to
stop-loss insurance thresholds. The Company has recorded an estimated liability for self-insured medical, dental and vision claims
incurred but not reported and worker’s compensation claims incurred but not reported at December 31, 2014 and December 31, 2013 of
$1,165,000 and $1,092,000, respectively.
Post Retirement Benefits - Management records an accrual for post retirement costs associated with the health care plan sponsored by
the Company for certain employees. Should actual results differ from the assumptions used to determine the reserves, additional
provisions may be required. In particular, increases in future healthcare costs above the assumptions could have an adverse effect on the
Company's operations. The effect of a change in healthcare costs is described in Note 11 of the Notes to Consolidated Financial
Statements. Core Molding Technologies had a liability for post retirement healthcare benefits based on actuarially computed estimates
of $9,172,000 at December 31, 2014 and $6,774,000 at December 31, 2013.
Fair Value of Financial Instruments - The Company's financial instruments consist of long-term debt, interest rate swaps, accounts
receivable, and accounts payable. The carrying amount of these financial instruments approximated their fair value. Further detail is
located in Note 14.
Concentration Risks - The Company has concentration risk related to significant amounts of sales and accounts receivable with certain
customers. Sales to four major customers comprised 87%, 86% and 86% of total sales in 2014, 2013 and 2012, respectively (see Note
4). Concentrations of accounts receivable balances with four customers accounted for 90% and 87% of accounts receivable at December
31, 2014 and 2013, 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.
Sales to certain customers' manufacturing and service locations in Mexico and Canada totaled 30%, 34% and 29% of total sales for
2014, 2013 and 2012, respectively.
As of December 31, 2014, the Company employed a total of 1,490 employees, which consisted of 714 employees in its United States
operations and 776 employees in its Mexican operations. Of these 1,490 employees, 333 are covered by a collective bargaining
34
agreement with the International Association of Machinists and Aerospace Workers (“IAM”), which extends to August 7, 2016, and 672
are covered by a collective bargaining agreement with Sindicato de Jorneleros y Obreros, which extends to January 16, 2017.
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. A detailed computation of earnings
per share is located in Note 3.
Research and Development - Research and development activities focus on developing new material formulations, new products, new
production capabilities and processes, and improving existing products and manufacturing processes. The Company does not maintain
a separate research and development organization or facility, but uses its production equipment, as necessary, to support these efforts
and cooperates with its customers and its suppliers in research and development efforts. Likewise, manpower to direct and advance
research and development is integrated with the existing manufacturing, engineering, production, and quality organizations. Research
and development costs, which are expensed as incurred, totaled approximately $475,000, $466,000 and$449,000 in 2014, 2013 and
2012.
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. Net foreign currency translation and transaction losses included in selling, general and administrative expense totaled
$108,000, $27,000 and $4,000 in 2014, 2013 and 2012, respectively.
Recent Accounting Pronouncements - In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue
from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition.
ASU Topic 606 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU Topic 606 also
requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer
contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a
contract. The effective date for ASU Topic 606 will be the first quarter of fiscal year 2017 using one of two retrospective application
methods. The Company is currently assessing the transition alternatives and potential impact the pronouncement and adoption of ASU
Topic 606 will have on the Company's financial statements. Early adoption is not permitted.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, "Presentation of Financial Statements-Going Concern
(Topic 205-40)" ("ASU 2014-15"). Under the standard, management is required to evaluate for each annual and interim reporting period
whether it is probable that the entity will not be able to meet its obligations as they become due within one year after the date that
financial statements are issued. ASU 2014-15 is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2016, and early adoption is permitted. Accordingly, the standard is effective for the Company on January 1, 2017. The
Company does not believe that the pronouncement will have an impact on the Company's financial statements.
35
3. Net Income per Common Share
Net income per common share is computed based on the weighted average number of common shares outstanding during the period.
Diluted net income per common share is computed similarly but includes the effect of the assumed exercise of dilutive stock options
and restricted stock under the treasury stock method.
The computation of basic and diluted net income per common share is as follows:
December 31,
Net income
Weighted average common shares outstanding —
basic
Effect of dilutive securities
Weighted average common and potentially issuable
2014
2013
$ 9,634,000 $ 6,866,000 $ 8,190,000
2012
7,508,000
45,000
7,220,000
215,000
7,104,000
275,000
common shares outstanding — diluted
7,553,000
7,435,000
Basic net income per common share
Diluted net income per common share
$
$
1.28 $
1.28 $
0.95 $
0.92 $
7,379,000
1.15
1.11
At December 31, 2014, 2013 and 2012, all unexercised stock options were included in diluted earnings per share.
4. Major Customers
The Company had four major customers during 2014, Navistar, Volvo, PACCAR and Yamaha. Major customers are defined as customers
whose current year sales individually consist of more than ten percent of total sales during any annual or interim reporting period in the
current year. The loss of a significant portion of sales to Navistar, Volvo, PACCAR or Yamaha would have a material adverse effect on
the business of the Company.
The following table presents sales revenue for the above-mentioned customers for the years ended December 31:
Navistar product sales
Navistar tooling sales
Total Navistar sales
Volvo product sales
Volvo tooling sales
Total Volvo sales
PACCAR product sales
PACCAR tooling sales
Total PACCAR sales
Yamaha product sales
Yamaha tooling sales
Total Yamaha sales
Other product sales
Other tooling sales
Total other sales
Total product sales
Total tooling sales
Total sales
36
2014
2013
$ 51,254,000 $ 46,384,000 $ 55,002,000
8,301,000
63,303,000
972,000
47,356,000
76,000
51,330,000
2012
46,340,000
2,519,000
48,859,000
11,508,000
936,000
12,444,000
6,195,000
33,000
6,228,000
35,602,000
526,000
36,128,000
42,784,000
7,370,000
50,154,000
55,524,000
1,728,000
57,252,000
16,911,000
—
16,911,000
13,648,000
—
13,648,000
12,619,000
4,000
12,623,000
19,637,000
2,339,000
21,976,000
19,772,000
751,000
20,523,000
20,358,000
2,686,000
23,044,000
169,744,000
5,460,000
149,698,000
12,752,000
$ 175,204,000 $ 144,125,000 $ 162,450,000
134,096,000
10,029,000
5. Foreign Operations
In conjunction with the Company's acquisition of certain 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 operations are made in United
States dollars, which totaled $61,313,000, $61,612,000 and $74,667,000 in 2014, 2013 and 2012, respectively. 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 22%, 23% and 20% of sales produced at the Matamoros operations in 2014, 2013 and 2012, respectively.
The Company's manufacturing operation in Mexico is subject to various political, economic, and other risks and uncertainties including
safety and security concerns 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.
All of the Company's product is sold to U.S. based customers in U.S. dollars. The following table provides information related to sales
by country, based on the ship to location of customers' production facilities, for the years ended December 31:
United States
Mexico
Canada
Total
2014
123,317,000 $
47,772,000
4,115,000
175,204,000 $
2013
95,063,000 $
45,069,000
3,993,000
144,125,000 $
2012
115,226,000
43,358,000
3,866,000
162,450,000
$
$
The following table provides information related to the location of property, plant and equipment, net, as of December 31:
United States
Mexico
Total
2014
31,674,000 $
30,321,000
61,995,000 $
2013
24,285,000
32,193,000
56,478,000
$
$
6. Property, Plant, and Equipment
Property, plant, and equipment consisted of the following at December 31:
Land and land improvements
Buildings
Machinery and equipment
Tools, dies, and patterns
Additions in progress
Total
Less accumulated depreciation
Property, plant, and equipment - net
2014
5,098,000 $
37,143,000
75,905,000
808,000
979,000
119,933,000
(57,938,000)
61,995,000 $
2013
5,098,000
36,651,000
60,897,000
808,000
5,953,000
109,407,000
(52,929,000)
56,478,000
$
$
Additions in progress at December 31, 2014 and 2013 relate to equipment purchases that were not yet completed at year end. At
December 31, 2014, commitments for capital expenditures in progress were $1,682,000 and included $557,000 recorded on the balance
sheet in accounts payable. At December 31, 2013, commitments for capital expenditures in progress were $4,629,000, and included
$709,000 recorded on the balance sheet in accounts payable. The Company capitalized interest of $80,000 and $63,000 for the years
ended December 31, 2014 and 2013, respectively.
37
7. Debt and Leases
Long-term debt consists of the following at:
Capex loan payable to a bank, interest at a variable rate (1.76% and 1.77% at December
31, 2014 and 2013, respectively) with monthly payments of interest and principal over
a seven-year period through May 2016.
Mexican loan payable to a bank, interest at a variable rate (1.73% at December 31, 2013)
with annual principal and monthly interest payments over a five-year period through
January 2014. Paid in full January 2014.
Revolving Line of Credit
Total
Less current portion
Long-term debt
Credit Agreement
December 31,
2014
December 31,
2013
$
2,428,000
$
4,143,000
—
2,768,000
5,196,000
(4,482,000)
$
714,000 $
1,600,000
—
5,743,000
(3,314,000)
2,429,000
In 2008, the Company and its wholly owned subsidiary, CoreComposites de Mexico, S. de R.L. de C.V., entered into a credit agreement
(the “Credit Agreement”) to refinance certain existing debt and borrow funds to finance the construction of the Company’s
manufacturing facility in Mexico.
Under this Credit Agreement, the Company received certain loans, subject to the terms and conditions stated in the agreement, which
included (1) (cid:2)(cid:5)<8+(cid:29):::(cid:29):::(cid:5)(cid:21)(cid:2)(cid:15)(cid:28)#(cid:5)(cid:8)(cid:11)(cid:2)(cid:3)(cid:23)(cid:5)(cid:17)+(cid:22) (cid:2)(cid:3)(cid:5)<=(cid:29):::(cid:29):::(cid:5)(cid:20)(cid:28)#(cid:12)(cid:14)(cid:2)(cid:3)(cid:5)(cid:8)(cid:11)(cid:2)(cid:3)(cid:23)(cid:5)(cid:17),(cid:22) (cid:2)(cid:3)(cid:5)<=(cid:29):::(cid:29):::(cid:5) (cid:2)(cid:24)(cid:12)(cid:2)(cid:6)(cid:8)(cid:28)(cid:5)(cid:24)(cid:2)(cid:27)(cid:28)(cid:5)(cid:24)(cid:28) (cid:11)(cid:8) (cid:12)(cid:3)(cid:13)(cid:5)(cid:8)(cid:12)(cid:3)(cid:28)(cid:5)(cid:11)(cid:26)(cid:5)(cid:14)(cid:24)(cid:28)(cid:4)(cid:12)(cid:27)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)(cid:5)
(4) a letter of credit in an undrawn face amount of $3,332,493 with respect to the Company’s existing Industrial Development Revenue
Bond (“IDRB”) financing. 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 Mexican loan was also secured by substantially all of the
present and future assets of the Company’s Mexican subsidiary.
On March 27, 2013, the Company and its wholly owned subsidiary, CoreComposites de Mexico, S. de R.L. de C.V., entered into an
eighth amendment (the "Eighth Amendment") to the Credit Agreement. Pursuant to the terms of the Eighth Amendment, the parties
agreed to modify certain terms of the Credit Agreement. These modifications included (1) an increase to the borrowing limit on the
(cid:24)(cid:28) (cid:11)(cid:8) (cid:12)(cid:3)(cid:13)(cid:5)(cid:8)(cid:12)(cid:3)(cid:28)(cid:5)(cid:11)(cid:26)(cid:5)(cid:14)(cid:24)(cid:28)(cid:4)(cid:12)(cid:27)(cid:5)(cid:26)(cid:24)(cid:11)(cid:10)(cid:5)<=(cid:29):::(cid:29):::(cid:5)(cid:27)(cid:11)(cid:5)<8=(cid:29):::(cid:29):::(cid:23)(cid:5)(cid:17)+(cid:22)(cid:5)(cid:10)(cid:11)(cid:4)(cid:12)(cid:26)(cid:12)(cid:14)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)(cid:27)o the fixed charge definition to exclude capital expenditures
of up to $18,000,000 associated with the Company's compression molding capacity expansion and any sheet molding compound
(cid:10)(cid:2)(cid:3)(cid:7)(cid:26)(cid:2)(cid:14)(cid:27)(cid:7)(cid:24)(cid:12)(cid:3)(cid:13)(cid:5)(cid:14)(cid:2)(cid:15)(cid:2)(cid:14)(cid:12)(cid:27)(cid:25)(cid:5)(cid:28)#(cid:15)(cid:2)(cid:3)(cid:16)(cid:12)(cid:11)(cid:3)(cid:23)(cid:5)(cid:17),(cid:22)(cid:5)(cid:27)(cid:11)(cid:5)(cid:28)#(cid:27)(cid:28)(cid:3)(cid:4)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:14)(cid:11)(cid:10)(cid:10)(cid:12)(cid:27)(cid:10)(cid:28)(cid:3)(cid:27)(cid:5)(cid:15)(cid:28)(cid:24)(cid:12)(cid:11)(cid:4)(cid:5)(cid:26)(cid:11)(cid:24) (cid:27)(cid:31)(cid:28)(cid:5)(cid:24)(cid:28) (cid:11)(cid:8) (cid:12)(cid:3)(cid:13)(cid:5)(cid:8)(cid:12)(cid:3)(cid:28)(cid:5)(cid:11)(cid:26)(cid:5)(cid:14)(cid:24)(cid:28)(cid:4)(cid:12)(cid:27)(cid:5)(cid:27)(cid:11)(cid:5)(cid:20)(cid:2)(cid:25)(cid:5),8(cid:29)(cid:5)+:8.(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)(cid:5)(cid:17)-(cid:22)(cid:5)(cid:27)(cid:11)(cid:5)
cancel, effective immediately, the unused $10,000,000 Mexican Expansion Revolving Loan that was added as part of the sixth
amendment to the Credit Agreement, which had no borrowings outstanding and was scheduled to expire on May 31, 2013.
On October 31, 2013, the Company and its wholly owned subsidiary, Corecomposites de Mexico, S. de R.L. de C.V., entered into a
ninth amendment (the "Ninth Amendment") to the Credit Agreement. Pursuant to the terms of the Ninth Amendment, the parties agreed
to decrease the applicable margin for interest rates on Eurodollar Loans and Daily Libor Loans to 160 basis points from 175 basis points.
Capex Loan
The $12,000,000 Capex loan was a construction draw loan that converted to a seven-year term loan with fixed monthly principal
payments. Borrowings made pursuant to this loan bear interest, payable monthly at 30 day LIBOR plus 160 basis points.
Mexican Loan
The $8,000,000 Mexican loan was also a construction draw loan to finance the production facility in Matamoros, Mexico that was
converted to a term loan in July 2009. This commitment had an original term of five years with annual payments commencing January
31, 2010. Borrowings made pursuant to this loan bore interest, payable annually at daily LIBOR plus 160 basis points.
Industrial Development Revenue Bond
In May 1998, the Company borrowed $7,500,000 through the issuance of an Industrial Development Revenue Bond (“IDRB”). The
IDRB bears interest at a weekly adjustable rate and was paid in full in April 2013. As security for the IDRB, the Company obtained a
letter of credit from a commercial bank. The letter of credit expired in April 2013 upon final payment of the loan.
38
Revolving Line of Credit
At December 31, 2014, the Company had available an $18,000,000 variable rate revolving line of credit scheduled to mature on May
31, 2015. The revolving line of credit bears interest at daily LIBOR plus 160 basis points and is collateralized by 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).
Annual maturities of long-term debt are as follows:
2015
2016
Total
$
$
4,482,000
714,000
5,196,000
Interest Rate Swaps
In conjunction with its variable rate IDRB, the Company entered into an interest rate swap agreement through April 2013, which was
initially designated as a cash flow hedging instrument. The IDRB interest rate swap expired in April 2013 upon payment in full of the
IDRB. Under this agreement, the Company paid a fixed rate of 4.89% to the counterparty and received 76% of the 30-day commercial
paper rate (0.10% at December 31, 2012). During 2010, the Company determined this interest rate swap was no longer highly effective.
As a result, the Company discontinued the use of hedge accounting effective January 1, 2010 related to this swap, and began recording
mark-to-market adjustments within interest expense in the Company’s Consolidated Statements of Income. The pre-tax loss previously
recognized in Accumulated Other Comprehensive Income (Loss), totaling $200,000 as of December 31, 2009, was amortized as an
increase to interest expense of $5,000 per month, or $3,000 net of tax, over the remaining term of the interest rate swap agreement. The
IDRB was paid in full in April 2013.
On December 18, 2008, the Company entered into an interest rate swap agreement that became effective May 1, 2009 and continues
through May 2016, which was designated as a cash flow hedge of the $12,000,000 Capex loan. Under this agreement, the Company
pays a fixed rate of 2.295% to the counterparty and receives 30 day LIBOR (0.17% at December 31, 2014). Effective March 31, 2009,
the interest terms in the Company’s Credit Agreement related to the $12,000,000 Capex loan were amended. The Company then
determined this interest rate swap was no longer highly effective. As a result, the Company discontinued the use of hedge accounting
effective March 31, 2009 related to this swap, and began recording mark-to-market adjustments within interest expense in the Company’s
Consolidated Statements of Income. The pre-tax loss previously recognized in Accumulated Other Comprehensive Income (Loss),
totaling $146,000 as of March 31, 2009, is being amortized as an increase to interest expense of $2,000 per month, or $1,000 net of tax,
over the remaining term of the interest rate swap agreement. The fair value of the swap as of December 31, 2014 and December 31,
2013 was a liability of $37,000 and $103,000, respectively. The Company recorded interest income of $66,000, $102,000 and $74,000
for mark-to-market adjustments of fair value related to this swap for the years ended December 31, 2014, 2013 and 2012, respectively.
The notional amount of the swap at December 31, 2014 and December 31, 2013 was $2,428,000 and $4,143,000, respectively.
For the years ended December 31, 2014, 2013 and 2012, interest expense includes expense of $70,000, $110,000 and $170,000,
respectively, for settlements related to the Company’s swaps.
Bank Covenants
The Company is required to meet certain financial covenants included in the Credit Agreement with respect to leverage ratios, fixed
charge ratios, and capital expenditures, as well as other customary affirmative and negative covenants. As of December 31, 2014, the
Company was in compliance with its financial covenants associated with the loans made under the Credit Agreement as described above.
Management regularly evaluates the Company’s ability to meet its debt covenants. Based upon the Company’s forecasts, which are
primarily based on industry analysts’ estimates of heavy and medium-duty truck production volumes, as well as other assumptions,
management believes that the Company will be able to maintain compliance with its financial covenants for the next 12 months.
Leases
In September 2013, the Company renewed its operating lease agreement through July 2019 for the manufacturing facility located in
Batavia, Ohio.
The Company leases a warehouse and distribution center in Brownsville, Texas under a 5-year operating lease agreement expiring in
October 2017.
39
Total rental expense was $767,000, $800,000 and $994,000 for 2014, 2013 and 2012, respectively. Included in rental expense are both
operating lease payments and rental costs related to the use of equipment during the normal course of business under nonbinding terms.
Future minimum operating lease payments are as follows:
2015
2016
2017
2018
2019
Thereafter
Total minimum lease payments
$
$
535,000
539,000
486,000
328,000
192,000
—
2,080,000
8. 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. The Company also incurred approximately $115,000 in costs related to the stock repurchase agreement,
which were recorded as part of the cost of its treasury stock. Navistar remains a major customer, accounting for approximately 29%,
33% and 39% of the Company's sales in 2014, 2013 and 2012, respectively.
During 2014 and 2013, employees surrendered 21,797 and 36,329 shares, respectfully, of the Company's common stock to satisfy income
tax withholding obligations in connection with the vesting of restricted 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 stockholder 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.
9. Stock Based Compensation
The Company has a Long Term Equity Incentive Plan (the “2006 Plan”), as approved by the Company’s stockholders in May 2006. This
2006 Plan replaced the Long Term Equity Incentive Plan (the “Original Plan”) as originally approved by the stockholders in May 1997
and as amended in May 2000. The 2006 Plan allows for grants to directors and 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.
40
Core Molding Technologies follows the provisions of FASB ASC 718 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).
Core Molding Technologies adopted FASB ASC 718 using the modified prospective method. Under this method, FASB ASC 718 applies
to all awards granted or modified after the date of adoption. In addition, compensation expense has been recognized for any unvested
stock option awards outstanding as of the date of adoption on a straight-line basis over the remaining vesting period.
Stock Options
There were no grants of options in the years ended December 31, 2014, 2013 and 2012. Total compensation cost related to incentive
stock options was $0 for the year ended December 31, 2014 and $5,000 for each of the years ended December 31, 2013 and 2012.
Compensation expense from incentive stock options is included in selling, general, and administrative expenses. There was no tax
benefit recorded for this compensation cost as the expense relates to incentive stock options that do not qualify for a tax deduction until,
and only if, a disqualifying disposition occurs.
During the years ended December 31, 2014, 2013 and 2012 Core Molding Technologies received approximately $328,000, $410,000
and $81,000, respectively, in cash from the exercise of stock options. The aggregate intrinsic value of these options was approximately
$915,000, $825,000 and $144,000, respectively, in each of those years. The intrinsic value of a stock option is the amount by which the
market value of the underlying stock exceeds the exercise price of the option.
Tax benefit received as a result of disqualified dispositions related to stock options was $311,000, for the year ended December 31,
2014, which was recorded as a credit to income tax expense of $84,000 and a credit to additional paid in capital of $227,000. For the
years ended December 31, 2013 and 2012 the tax benefit received as a result of disqualified dispositions related to stock options was
$300,000 and $52,000, respectively, which was recorded as a credit to additional paid in capital.
The following summarizes the activity relating to stock options under the plans mentioned above for the years ended December 31:
2014
2013
2012
Outstanding - beginning of year
Granted
Exercised
Forfeited
Outstanding - end of year
Exercisable at December 31
Vested or expected to vest at
December 31
Number
of
Options
227,750 $
—
(224,750)
—
3,000 $
3,000 $
Wtd. Avg.
Exercise
Price
Number
of
Options
374,875 $
—
(132,725)
(14,400)
227,750 $
227,750 $
Wtd. Avg.
Exercise
Price
Number
of
Options
400,650 $
—
(25,775)
—
374,875 $
360,475 $
3.37
—
3.09
2.75
3.57
3.57
3.57
—
3.53
—
6.40
6.40
Wtd. Avg.
Exercise
Price
3.35
—
3.14
—
3.37
3.39
3,000
$
6.40
227,750
$
3.57
374,875
$
3.37
As of December 31, 2014, outstanding options had an aggregate intrinsic value of approximately $42,000 and a weighted average
remaining contractual term of less than one year.
41
The following summarizes the status of, and changes to, unvested options during the years ended December 31:
Unvested at January 1, 2012
Granted
Vested
Forfeited
Unvested at December 31, 2012
Granted
Vested
Forfeited
Unvested at December 31, 2013
Granted
Vested
Forfeited
Unvested at December 31, 2014
Number
of
Options
Wtd. Avg.
Exercise
Price
20,100 $
—
(5,700)
—
14,400
—
—
(14,400)
—
—
—
—
— $
2.75
—
2.75
—
2.75
—
—
2.75
—
—
—
—
—
At December 31, 2014, there were no unvested stock options and no unrecognized compensation cost related to stock options granted
under the Original Plan.
The following table summarizes information about stock options outstanding and exercisable as of December 31, 2014:
Options Outstanding and Exercisable
Range of
Exercise Prices Number of Options
$
6.40
3,000
Wtd. Avg. Contractual
Life in Years
0.84
Restricted Stock
In 2006, the Company began granting shares of its common stock to certain directors, officers, and key managers in the form of unvested
stock (“Restricted Stock”). These awards are 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.
The following summarizes the status of Restricted Stock and changes during the years ended December 31:
2014
2013
2012
Unvested - beginning of year
Granted
Vested
Forfeited
Unvested - end of year
Number
of
Shares
98,281 $
81,763
(75,976)
—
104,068 $
Wtd. Avg.
Grant Date
Fair Value
8.91
12.04
10.03
—
10.79
Number
of
Shares
139,730 $
63,876
(91,573)
(13,752)
98,281 $
Wtd. Avg.
Grant Date
Fair Value
Number
of
Shares
173,556 $
59,070
(88,415)
(4,481)
139,730 $
Wtd. Avg.
Grant Date
Fair Value
5.21
7.93
4.44
7.68
6.77
6.77
9.32
5.95
8.74
8.91
At December 31, 2014 and 2013, there was $775,000 and $571,000, respectively, of total unrecognized compensation expense related
to Restricted Stock granted under the 2006 Plan. That cost is expected to be recognized over the weighted-average period of 1.6 years.
Total compensation expense related to restricted stock grants for the years ended December 31, 2014, 2013 and 2012 was $744,000,
$408,000 and $405,000, respectively, and is recorded as selling, general and administrative expense.
Compensation expense for restricted stock is recorded at the fair market value at the time of the grant over vesting period of the restricted
stock grant. The Company does not receive a tax deduction for restricted stock until the restricted stock vests. The tax deduction for
restricted stock is based on the fair market value on the vesting date. Tax benefits received for vested restricted stock in excess of the
42
fair market value at grant date amounted to $84,000, $109,000 and $111,000 for the years ended December 31, 2014, 2013 and 2012,
respectively.
10. Income Taxes
Components of the provision for income taxes are as follows:
$
Current:
Federal - US
Federal - Foreign
State and local
Deferred:
Federal
Federal- Foreign
State and local
Provision for income taxes
$
2014
2013
2012
1,875,000 $
453,000
42,000
2,370,000
2,423,000
(29,000)
127,000
2,521,000
4,891,000 $
2,540,000 $
171,000
44,000
2,755,000
496,000
(240,000)
23,000
279,000
3,034,000 $
3,633,000
227,000
96,000
3,956,000
10,000
—
—
10,000
3,966,000
A reconciliation of the income tax provision based on the federal statutory income tax rate of 34% to the Company's income tax provision
for the years ended December 31 is as follows:
Provision at federal statutory rate - US
$
Effect of Mexican tax law change
Effect of foreign taxes
Disqualified stock options
State and local tax expense, net of federal
benefit
Other
Provision for income taxes
2014
4,938,000 $
—
(115,000)
(84,000)
2013
3,366,000 $
(240,000)
(192,000)
—
2012
4,133,000
—
(169,000)
—
170,000
(18,000)
4,891,000 $
44,000
56,000
3,034,000 $
59,000
(57,000)
3,966,000
$
In December 2013, Mexican legislature approved tax reform that became effective for tax years beginning January 1, 2014. The new
tax reform eliminated the Mexican IETU (Flat Rate Business Tax), under which the Company has historically been taxed. As a result
of the approved tax reform in Mexico, the Company will now be subject to taxation under Mexico's income tax regime. Accordingly,
during the fourth quarter of 2013, the Company recorded a net deferred tax asset on its balance sheet and a credit to deferred tax expense
of $240,000 for net deductions expected to be realized in future years as a result of this Mexican tax reform.
Certain tax benefits related to incentive stock options and vesting of restricted stock totaled $395,000, $409,000 and $163,000 for the
years ended December 31, 2014, 2013 and 2012, respectively.
The Company performs analyses to evaluate the balance of deferred tax assets that will be realized. Such analyses are based on the
premise that the Company is, and will continue to be, a going concern and that it is more likely than not that deferred tax benefits will
be realized through the generation of future taxable income. Based on the analyses, the Company has not realized a valuation allowance
on the deferred tax assets as of December 31, 2014 and 2013.
43
Deferred tax assets consist of the following at December 31:
Current asset (liability):
Accrued liabilities
Accounts receivable
Inventory
Other, net
Total current asset
Non-current asset (liability):
Property, plant, and equipment
Post retirement benefits
Other, net
Total non-current asset (liability)
Total deferred tax asset - net
2014
2013
$
808,000 $
484,000
680,000
(104,000)
1,868,000
742,000
400,000
576,000
(103,000)
1,615,000
(4,273,000)
3,419,000
(511,000)
(1,365,000)
$
503,000 $
(2,030,000)
2,554,000
(228,000)
296,000
1,911,000
At December 31, 2014, a provision has not been made for U.S. taxes on accumulated undistributed earnings of approximately $6,204,000
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.
At December 31, 2014 and 2013 the Company had no liability for unrecognized tax benefits under guidance relating to tax uncertainties.
The Company does not anticipate that the unrecognized tax benefits will significantly change within the next twelve months.
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 the years before 2011, and no longer subject to Mexican
income tax examinations by Mexican authorities for the years before 2008.
11. Post Retirement Benefits
The Company provides post retirement benefits to certain of its United States employees, including contributions to a multi-employer
defined benefit pension plan, health care and life insurance benefits, and contributions to three 401(k) defined contribution plans.
The Company contributes to a multi-employer defined benefit pension plan for its employees represented by the International
Association of Machinists and Aerospace Workers ("IAM") at the Company’s Columbus, Ohio production facility. The Company does
not administer this plan and contributions are determined in accordance with provisions of the collective bargaining agreement. The
risks of participating in this multi-employer plan are different from a single-employer plan in the following aspects:
• Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other
•
•
participating employers.
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining
participating employers.
If the Company chooses to stop participating in its multi-employer plan, the Company may be required to pay the plan an
amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The Company’s participation in the multi-employer defined benefit pension plan for the years ended December 31, 2014 and 2013 is
outlined in the table below. The most recent Pension Protection Act ("PPA") zone status available in 2014 and 2013 is for the plan’s
year-end at December 31, 2013, and December 31, 2012, respectively. The zone status is based on information the Company received
from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans
in the yellow zone are less than 80% funded, and plans in the green zone are at least 80% funded. The “FIP/RP Status
Pending/Implemented” column indicates whether a financial improvement plan ("FIP") or a rehabilitation plan ("RP") is either pending
or has been implemented.
Pension Fund
EIN/Pension
Plan Number
IAM National Pension Fund /
National Pension Plan(A)
51-6031295 - 002
Pension Protection
Act Zone Status
2013
2014
Green
Green
as of
as of
12/31/12
12/31/13
FIP/RP
Status
Pending/
Implemented
Contributions of the
Company
2014
2013
Surcharge
Imposed
Expiration
Date of
Collective
Bargaining
Agreement
No
$719,000 $464,000
No
8/17/2016
Total Contributions: $719,000 $464,000
44
(A) The National Pension Plan utilized a five year amortization extension in accordance with § 431(d) of the Internal Revenue Code
of 1986 ("the Code") to amortize its losses from 2008. The plan re-certified its zone status after using the amortization provisions
of the Code. The Company's contributions to the plan did not represent more than 5% of total contributions to the plan as indicated
in the plan's most recently available annual report for the plan year ended December 31, 2013. Under the terms of the collective-
bargaining agreement, the Company is required to make contributions to the plan for each hour worked up to a maximum of 40
(cid:31)(cid:11)(cid:7)(cid:24)(cid:16)(cid:5)(cid:15)(cid:28)(cid:24)(cid:5)(cid:15)(cid:28)(cid:24)(cid:16)(cid:11)(cid:3)(cid:29)(cid:5)(cid:15)(cid:28)(cid:24)(cid:5)%(cid:28)(cid:28)(cid:9)(cid:29)(cid:5)(cid:2)(cid:27)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:26)(cid:11)(cid:8)(cid:8)(cid:11)%(cid:12)(cid:3)(cid:13)(cid:5)(cid:24)(cid:2)(cid:27)(cid:28)(cid:16)>(cid:5)(cid:5)<8$+:(cid:5)(cid:15)(cid:28)(cid:24)(cid:5)(cid:31)(cid:11)(cid:7)(cid:24)(cid:5)(cid:26)(cid:24)(cid:11)(cid:10)(cid:5)4(cid:7)(cid:13)(cid:7)(cid:16)(cid:27)(cid:5)=(cid:29)(cid:5)+:88(cid:5)(cid:27)(cid:31)(cid:24)(cid:11)(cid:7)(cid:13)(cid:31)(cid:5)4(cid:7)(cid:13)(cid:7)(cid:16)(cid:27)(cid:5)8+(cid:29)(cid:5)+:8+(cid:23)(cid:5)<8$+.(cid:5)(cid:15)(cid:28)(cid:24)(cid:5)(cid:31)our
(cid:26)(cid:24)(cid:11)(cid:10)(cid:5)4(cid:7)(cid:13)(cid:7)(cid:16)(cid:27)(cid:5)8,(cid:29)(cid:5)+:8+(cid:5)(cid:27)(cid:31)(cid:24)(cid:11)(cid:7)(cid:13)(cid:31)(cid:5)4(cid:7)(cid:13)(cid:7)(cid:16)(cid:27)(cid:5)8:(cid:29)(cid:5)+:8,(cid:23)(cid:5)<8$,:(cid:5)(cid:15)(cid:28)(cid:24)(cid:5)(cid:31)(cid:11)(cid:7)(cid:24)(cid:5)(cid:26)(cid:24)(cid:11)(cid:10)(cid:5)4(cid:7)(cid:13)(cid:7)(cid:16)(cid:27)(cid:5)88(cid:29)(cid:5)+:8,(cid:5)(cid:27)(cid:31)(cid:24)(cid:11)(cid:7)(cid:13)(cid:31)(cid:5)4(cid:7)(cid:13)(cid:7)(cid:16)(cid:27)(cid:5)8:(cid:29)(cid:5)+:8-(cid:23)(cid:5)<8$,.(cid:5)(cid:15)(cid:28)(cid:24)(cid:5)(cid:31)(cid:11)(cid:7)(cid:24)(cid:5)
(cid:26)(cid:24)(cid:11)(cid:10)(cid:5)4(cid:7)(cid:13)(cid:7)(cid:16)(cid:27)(cid:5)88(cid:29)(cid:5)+:8-(cid:5)(cid:27)(cid:31)(cid:24)(cid:11)(cid:7)(cid:13)(cid:31)(cid:5)4(cid:7)(cid:13)(cid:7)(cid:16)(cid:27)(cid:5)@(cid:29)(cid:5)+:8.(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)(cid:5)<8$-:(cid:5)(cid:15)(cid:28)(cid:24)(cid:5)(cid:31)(cid:11)(cid:7)(cid:24)(cid:5)(cid:26)(cid:24)(cid:11)(cid:10)(cid:5)4(cid:7)(cid:13)(cid:7)(cid:16)(cid:27)(cid:5)8:(cid:29)(cid:5)+:8.(cid:5)(cid:27)(cid:31)(cid:24)(cid:11)(cid:7)(cid:13)(cid:31)(cid:5)4(cid:7)(cid:13)(cid:7)(cid:16)(cid:27)(cid:5)89(cid:29)(cid:5)+:8/$
Prior to the acquisition of Columbus Plastics, certain of the Company's employees were participants, or were eligible to participate, in
Navistar's post retirement health and life insurance benefit plan. This plan provides healthcare and life insurance benefits 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 these employees, using a formula that allocates the cost based upon the respective portion of time that the employee was an
active service participant after the acquisition of Columbus Plastics to the period of active service prior to the acquisition of Columbus
Plastics.
The Company also sponsors a post retirement health and life insurance benefit plan for certain union retirees of its Columbus, Ohio
production facility. In August 2010, the Company entered into a new collective bargaining agreement with union-represented employees
at the Company’s Columbus, Ohio production facility. As part of the new agreement, the post retirement health and life insurance benefits
for all current and future represented employees who were not retired as of August 7, 2010 were eliminated in exchange for a one-time
cash payment of $1,257,000. Individuals who retired prior to August 7, 2010 remain eligible for post retirement health and life insurance
benefits.
The elimination of post retirement health and life insurance benefits described above resulted in a reduction of the Company’s post
retirement benefits liability of approximately $10,282,000 in 2010. This reduction in post retirement benefits liability was treated as a
negative plan amendment and is being amortized as a reduction to net periodic benefit cost over approximately twenty years, the actuarial
life expectancy of the remaining participants in the plan at the time of the amendment. This negative plan amendment resulted in net
periodic benefit cost reductions of approximately $496,000 in 2014, 2013 and 2012, and will result in net periodic benefit cost reductions
of approximately $496,000 in 2015 and each year thereafter during the amortization period, as well as lower interest costs associated
with the reduced post retirement benefits liability.
The funded status of the Company's post retirement health and life insurance benefits plan as of December 31, 2014 and 2013 and
reconciliation with the amounts recognized in the consolidated balance sheets are provided below.
Post Retirement Benefits
2013
2014
Change in benefit obligation:
Benefit obligation at January 1
Interest cost
Unrecognized (gain) loss
Benefits paid
Benefit obligation at December 31
Plan Assets
Amounts recorded in accumulated other comprehensive
income:
Prior service credit
Net loss
Total
Weighted-average assumptions as of December 31:
Discount rate used to determine benefit obligation and net
periodic benefit cost
$
$
$
$
45
$
6,774,000
277,000
2,726,000
(605,000)
9,172,000
$
9,987,000
332,000
(2,917,000)
(628,000)
6,774,000
—
—
(8,090,000) $
4,156,000
(3,934,000) $
(8,586,000)
1,477,000
(7,109,000)
3.8%
4.6%
The components of expense for all of the Company's post retirement benefit plans for the years ended December 31:
Pension expense:
Multi-employer plan
Defined contribution plans
Total pension expense
Health and life insurance:
Interest cost
Amortization of prior service costs
Amortization of net loss
Net periodic benefit cost
2014
2013
2012
$
719,000 $
701,000
1,420,000
464,000 $
571,000
1,035,000
443,000
527,000
970,000
277,000
(496,000)
47,000
(172,000)
332,000
(496,000)
201,000
37,000
364,000
(496,000)
159,000
27,000
Total post retirement benefits expense
$
1,248,000
$
1,072,000
$
997,000
The Company accounts for post retirement benefits under FASB ASC 715, which requires the recognition of the funded status of a
defined benefit pension or post retirement plan in the consolidated balance sheets. For the year ended December 31, 2014, the Company
recognized a net actuarial loss of $2,726,000 in other comprehensive loss. For the year ended December 31, 2013, the Company
recognized a net actuarial gain of $2,917,000 in other comprehensive income.
Amounts not yet recognized as a component of net periodic benefit costs at December 31, 2014 and 2013 were a net credit of $3,934,000
and $7,109,000, respectively. The amount in accumulated other comprehensive income expected to be recognized as components of net
periodic post retirement cost during 2015 consists of a prior service credit of $496,000, and a net loss of $169,000. In addition, 2015
interest expense related to post retirement healthcare is expected to be $316,000, for a total post retirement healthcare net gain of
approximately $11,000 in 2015. The Company expects contributions in 2015 to be consistent with estimated future benefit payments
as shown in the table below.
The weighted average rate of increase in the per capita cost of covered health care benefits is projected to be 7%. The rate is projected
to decrease gradually to 5% by the year 2021 and remain at that level thereafter. The comparable assumptions for the prior year were
7% and 5%, respectively.
The effect of changing the health care cost trend rate by one-percentage point for each future year is as follows:
Effect on total of service and interest cost components
Effect on post retirement benefit obligation
$
$
23,000 $
1,060,000 $
(38,000 )
(1,250,000 )
1- Percentage
Point Increase
1-Percentage
Point Decrease
The estimated future benefit payments of the health care plan are as follows:
Year
2015
2016
2017
2018
2019
2020-2024
Postretirement Health
Care Benefits Plan
$
1,064,000
379,000
392,000
370,000
368,000
2,082,000
12. Related Party Transactions
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
46
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. On August 16, 2013, Navistar sold its remaining 664,000 shares in a series of open market sales.
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.
14. Fair Value of Financial Instruments
The Company holds certain financial instruments, which are recognized and disclosed at fair value in the financial statements on a
recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in a transaction
between market participants as of the measurement date. Fair value is measured using the fair value hierarchy and related valuation
methodologies as defined in the authoritative literature. This guidance provides a fair value framework that requires the categorization
of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the
most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined
as follows:
Level 1 - Quoted prices in active markets for identical assets and liabilities.
Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets
that are not active and model-derived valuations, in which all significant inputs are observable in active markets.
Level 3 - Significant unobservable inputs reflecting management's own assumptions about the inputs used in pricing the asset
or liability.
The Company’s financial instruments consist of long-term debt, interest rate swaps, accounts receivable, and accounts payable. The
carrying amount of these financial instruments approximated their fair value. The Company has two Level 2 fair value measurements
all of which relate to the Company’s interest rate swaps. The Company utilizes interest rate swap contracts to manage its targeted mix
of fixed and floating rate debt, and these swaps are valued using observable benchmark rates at commonly quoted intervals for the full
term of the swaps (market approach). These interest rate swaps are discussed in detail in Note 7.
The following table presents financial liabilities measured and recorded at fair value on the Company’s Consolidated Balance Sheets on
a recurring basis and their level within the fair value hierarchy as of December 31, 2014 and December 31, 2013:
Core Molding Technologies' derivative instruments included on the Consolidated Balance Sheets were as follows:
Derivatives not designated as hedging instruments
Interest rate risk activities
Interest rate swaps $
37,000
$
103,000
Balance Sheet
Location
December 31,
2014 Fair Value
December 31,
2013 Fair Value
There were no non-recurring fair value measurements for the year ended December 31, 2014.
The effect of derivative instruments on the Consolidated Statements of Income was as follows:
Derivatives Not
Designated as
Hedging Instruments
Location of Gain (Loss)
Recognized
in Income on Derivative
Year ended
Amount of Realized/Unrealized Gain
(Loss) Recognized in Income on
Derivatives
December 31,
2013
December 31,
2014
December 31,
2012
Interest rate swaps
Interest expense
$
46,000 $
73,000 $
36,000
During 2014 and 2013, the Company did not reclassify any amounts related to its cash flow hedges from accumulated other
comprehensive income (loss) to earnings due to the probability that certain forecasted transactions would not occur. As discussed in
Note 7, the Company discontinued the use of hedge accounting for its two interest rate swaps, effective March 31, 2009 for the Capex
swap and January 1, 2010 for the IDRB swap. The Company now records all mark to market adjustments related to these interest rate
swaps within interest expense in the Company’s Consolidated Statements of Income. It is anticipated that during the next twelve months
the expiration and settlement of cash flow hedge contracts along with the loss amortization on its remaining discontinued hedge will
result in income statement recognition of amounts currently classified in accumulated other comprehensive loss of approximately
$21,000, or $14,000 net of taxes.
47
15. Accumulated Other Comprehensive Income
The following table presents changes in Accumulated Other Comprehensive Income by component, net of tax, for the years ended
December 31, 2014 and 2013:
2013:
Balance at January 1, 2013
Other comprehensive income before
reclassifications
Amounts reclassified from accumulated other
comprehensive income
Income tax (expense) benefit
Balance at December 31, 2013
$
(30,000) $
Losses on
Interest Rate
Swaps(A)
Post
Retirement
Benefit Plan
Items(B)
Total
$
(54,000) $
3,241,000 $
3,187,000
—
2,917,000
2,917,000
36,000
(12,000)
(295,000)
(259,000)
(961,000)
4,902,000 $
(973,000)
4,872,000
2014:
Balance at December 31, 2013
Other comprehensive income before
reclassifications
Amounts reclassified from accumulated other
comprehensive income
Income tax (expense) benefit
$
(30,000) $
4,902,000 $
4,872,000
—
(2,726,000)
(2,726,000)
21,000
(7,000)
(449,000)
1,119,000
2,846,000 $
(428,000)
1,112,000
2,830,000
Balance at December 31, 2014
$
(16,000) $
(A) The losses on interest rate swaps reclassified from Accumulated Other Comprehensive Income is included in interest expense
on the Consolidated Statements of Income. The tax effect of losses on interest rate swaps reclassified from Accumulated
Other Comprehensive Income is included in income tax expense on the Consolidated Statements of Income.
(B) The effect of post retirement benefit items reclassified from Accumulated Other Comprehensive Income is included in total
cost of sales on the Consolidated Statements of Income. These Accumulated Other Comprehensive Income components are
included in the computation of net periodic benefit cost (see Note 11 Post Retirement Benefits for additional details). The tax
effect of post retirement benefit items reclassified from Accumulated Other Comprehensive Income is included in income tax
expense on the Consolidated Statements of Income.
48
16. Quarterly Results of Operations (Unaudited)
The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2014, 2013 and 2012.
2014:
Product sales
Tooling sales
Net sales
Gross margin
Income before interest and taxes
Net income
Net income per common share:
Basic (1)
Diluted (1)
2013:
Product sales
Tooling sales
Net sales
Gross margin
Income before interest and taxes
Net income
Net income per common share:
Basic (1)
Diluted (1)
2012:
Product sales
Tooling sales
Net sales
Gross margin
Income before interest and taxes
Net income
Net income per common share:
Basic (1)
Diluted (1)
$
$
$
$
$
$
$
$
$
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total Year
40,664,000 $
411,000
41,075,000
6,645,000
3,116,000
2,120,000
43,317,000 $ 43,171,000 $
2,807,000
46,124,000
7,599,000
3,873,000
2,520,000
420,000
43,591,000
8,147,000
3,704,000
2,428,000
42,592,000 $ 169,744,000
5,460,000
1,822,000
175,204,000
44,414,000
30,186,000
7,795,000
14,647,000
3,954,000
9,634,000
2,566,000
0.29 $
0.28 $
0.34 $
0.33 $
0.32 $
0.32 $
0.34 $
0.34 $
1.28
1.28
32,858,000 $
1,504,000
34,362,000
5,890,000
2,617,000
1,681,000
32,146,000 $ 32,342,000 $
2,535,000
34,681,000
5,989,000
2,500,000
1,589,000
5,092,000
37,434,000
6,370,000
2,948,000
1,960,000
36,750,000 $ 134,096,000
10,029,000
144,125,000
23,574,000
10,114,000
6,866,000
898,000
37,648,000
5,325,000
2,049,000
1,636,000
0.24 $
0.23 $
0.22 $
0.21 $
0.27 $
0.26 $
0.22 $
0.22 $
0.95
0.92
44,331,000 $
198,000
44,529,000
7,631,000
4,018,000
2,635,000
41,209,000 $ 32,149,000 $
3,335,000
44,544,000
7,026,000
3,439,000
2,341,000
5,532,000
37,681,000
4,989,000
1,957,000
1,151,000
32,009,000 $ 149,698,000
12,752,000
3,687,000
162,450,000
35,696,000
25,848,000
6,202,000
12,490,000
3,076,000
8,190,000
2,063,000
0.37 $
0.36 $
0.33 $
0.32 $
0.16 $
0.16 $
0.29 $
0.28 $
1.15
1.11
(1) Sum of the quarters may not sum to total year due to rounding.
49
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not Applicable.
ITEM 9A. 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 Commission’s 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’s internal controls over financial reporting based on the criteria established in the 2013 Internal
Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This
evaluation included a 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, 2014.
The Company's independent registered public accounting firm, Crowe Horwath LLP, audited our internal control over financial reporting
as of December 31, 2014, as stated in their report in the section entitled "Report of Independent Registered Public Accounting Firm"
included elsewhere in this Form 10-K, which expressed an unqualified opinion on the effectiveness of the Company's internal control
over financial reporting as of December 31, 2014.
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) and Rule
15d-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
None.
50
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
The information required by this Part III, Item 10 is incorporated by reference from the Company’s definitive proxy statement for its
annual meeting of stockholders to be held on or about May 14, 2015, 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
The information required by this Part III, Item 11 is incorporated by reference from the Company’s definitive proxy statement for its
annual meeting of stockholders to be held on or about May 14, 2015, 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
The information required by this Part III, Item 12 is incorporated by reference from the Company’s definitive proxy statement for its
annual meeting of stockholders to be held on or about May 14, 2015, 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
The information required by this Part III, Item 13 is incorporated by reference from the Company’s definitive proxy statement for its
annual meeting of stockholders to be held on or about May 14, 2015, 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. 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, 2015, 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.
51
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as Part of this Report:
(1) Financial Statements
See Part II, Item 8 hereof.
(2) Financial Statement Schedules and Independent Auditor's Report
The following consolidated financial statement schedules are filed with this Annual Report on Form 10-K:
Schedule II — Valuation and Qualifying Accounts and Reserves for the Years Ended December 31,
2014 and 2013
54
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.
52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CORE MOLDING TECHNOLOGIES, INC.
By
/s/ Kevin L. Barnett
Kevin L. Barnett
President and Chief Executive Officer
March 13, 2015
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
Kevin L. Barnett
/s/ John P. Zimmer
John P. Zimmer
*
James L. Simonton
*
Thomas R. Cellitti
*
James F. Crowley
*
Ralph O. Hellmold
*
Matthew Jauchius
President, Chief Executive Officer, and Director
(Principal Executive Officer)
March 13, 2015
Vice President, Secretary, Treasurer, and Chief
Financial Officer (Principal Financial Officer and
Principal Accounting Officer)
March 13, 2015
Director
Director
Director
Director
Director
March 13, 2015
March 13, 2015
March 13, 2015
March 13, 2015
March 13, 2015
*By /s/ John P. Zimmer
John P. Zimmer
Attorney-In-Fact
March 13, 2015
53
Core Molding Technologies, Inc. and Subsidiaries
Schedule II
Consolidated valuation and qualifying accounts and reserves for the years ended December 31, 2014 and 2013.
Reserves deducted from asset to which it applies — allowance for doubtful accounts.
Additions
Balance at
Beginning of
Year
(Recovered)/C
harged to
Costs &
Expenses
Charged to
Other
Accounts
Deductions (A)
Balance at End
of Year
Year Ended December 31, 2014
Year Ended December 31, 2013
$
$
141,000 $
258,000 $
197,000 $
51,000 $
— $
— $
49,000 $
168,000 $
289,000
141,000
(A) Amount represents uncollectible accounts written off.
54
Exhibit No.
2(a)(1)
2(a)(2)
2(b)(1)
2(b)(2)
2(c)
3(a)(1)
3(a)(2)
3(a)(3)
3(a)(4)
3(b)(1)
3(b)(2)
4(a)(1)
4(a)(2)
4(a)(3)
4(a)(4)
4(b)
INDEX TO EXHIBITS
Description
Location
Asset Purchase Agreement Dated as of September 12,
1996, As amended October 31, 1996, between
Navistar and RYMAC Mortgage Investment
Corporation1
Second Amendment to Asset Purchase Agreement
dated December 16, 19961
Incorporated by reference to Exhibit 2-A to
Registration Statement on Form S-4 (Registration No.
333-15809)
Incorporated by reference to Exhibit 2(a)(2) to
Annual Report on Form 10-K for the year-ended
December 31, 2001
Agreement and Plan of Merger dated as of November
1, 1996, between Core Molding Technologies, Inc.
and RYMAC Mortgage Investment Corporation
Incorporated by reference to Exhibit 2-B to
Registration Statement on Form S-4 (Registration No.
333-15809)
First Amendment to Agreement and Plan of Merger
dated as of December 27, 1996 Between Core
Molding Technologies, Inc. and RYMAC Mortgage
Investment Corporation
Asset Purchase Agreement dated as of October 10,
2001, between Core Molding Technologies, Inc. and
Airshield Corporation
Incorporated by reference to Exhibit 2(b)(2) to
Annual Report on Form 10-K for the year ended
December 31, 2002
Incorporated by reference to Exhibit 1 to Form 8-K
filed October 31, 2001
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)
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)
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
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
Amended and Restated By-Laws of Core Molding
Technologies, Inc.
Incorporated by reference to Exhibit 3.1 to Form 8-K
filed July 19, 2007
Incorporated by reference to Exhibit 3.1 to Current
Report on Form 8-K filed January 4, 2008
Amendment No. 1 to the 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 December 17, 2013
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)
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
Certificate of Amendment of Certificate of
Incorporation as filed with the Secretary of State of
Delaware on August 28, 2002
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
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(b) to
Registration Statement on Form S-8 (Registration
No. 333-29203)
Incorporated by reference to Exhibit 3(a)(4) to
Quarterly Report on Form 10-Q for the quarter ended
September 30, 2002
Incorporated by reference to Exhibit 3.1 to Form 8-K
filed July 19, 2007
Incorporated by reference to Exhibit 4.1 to Current
Report Form 8-K filed July 19, 2007
55
Description
Location
Exhibit No.
10(a)
10(c)
10(c)(1)
10(c)(2)
10(c)(3)
10(c)(4)
10(c)(5)
10(c)(6)
10(c)(7)
10(c)(8)
10(c)(9)
10(e)
10(f)
Supply Agreement, dated August 4, 2014 between Core
Molding Technologies, Inc. and Core Composites
Corporation and Navistar, Inc.3
Credit agreement, dated December 9, 2008, by and between
Core Molding Technologies, Inc and CoreComposites de
Mexico, S De. R.L. de C.V. and KeyBank National
Association
First Amendment Agreement, dated March 31, 2009, to the
Credit Agreement dated December 9, 2008, among Core
Molding Technologies, Inc., Core Composites de Mexico, S.
De R.L. de C.V. and KeyBank National Association
Second Amendment Agreement, dated June 30, 2009, to the
Credit Agreement dated December 9, 2008, among Core
Molding Technologies, Inc., Core Composites de Mexico, S.
De R.L. de C.V. and KeyBank National Association
Third Amendment Agreement, dated December 1, 2009, to
the Credit Agreement dated December 9, 2008, among Core
Molding Technologies, Inc., Core Composites de Mexico, S.
De R.L. de C.V. and KeyBank National Association
Fourth Amendment Agreement, dated March 8, 2010, to the
Credit Agreement dated December 9, 2008, among Core
Molding Technologies, Inc., Core Composites de Mexico, S.
De R.L. de C.V. and KeyBank National Association
Fifth Amendment Agreement, dated May 11, 2010, to the
Credit Agreement dated December 9, 2008, among Core
Molding Technologies, Inc., Core Composites de Mexico, S.
De R.L. de C.V. and KeyBank National Association
Sixth Amendment Agreement, dated June 1, 2011, to the
Credit Agreement dated December 9, 2008, among Core
Molding Technologies, Inc., Core Composites de Mexico, S.
De R.L. de C.V. and Keybank National Association
Seventh Amendment Agreement, dated July 9, 2012, to the
Credit Agreement dated December 9, 2008, among Core
Molding Technologies, Inc., Core Composites de Mexico, S.
De R.L. de C.V. and Keybank National Association
Eighth Amendment Agreement, dated March 27, 2013, to
the Credit Agreement dated December 9, 2008, among Core
Molding Technologies, Inc., Core Composites de Mexico, S.
De R.L. de C.V. and Keybank National Association
Ninth Amendment Agreement, dated October 31, 2013, to
the Credit Agreement dated December 9, 2008, among Core
Molding Technologies, Inc., Core Composites de Mexico, S.
De R.L. de C.V. and Keybank National Association
Reimbursement Agreement, dated April 1, 1998, by and
between Core Molding Technologies, Inc. and KeyBank
National Association
Core Molding Technologies, Inc. Employee Stock Purchase
Plan2
10(f)(1)
2002 Core Molding Technologies, Inc. Employee Stock
Purchase Plan (as amended May 17, 2006) 2
Incorporated by reference to Exhibit 10(a) to
Quarterly Report on Form 10-Q for the quarter
ended September 30, 2014
Incorporated by reference to Exhibit 10(b) to
Quarterly Report on Form 10-Q for the quarter
ended September 30, 2010
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed April 2, 2009
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed July 2, 2009
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed December 7,
2009
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K dated March 10,
2010
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K dated May 14,
2010
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed June 21, 2011
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed July 10, 2012
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed March 27,
2013
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed November 4,
2013
Incorporated by reference to Exhibit 10(h) to
Annual Report on Form 10-K for the year ended
December 31, 2003
Incorporated by reference to Exhibit 10(i) to
Annual Report on Form 10-K for the year ended
December 31, 2013.
Incorporated by reference to Exhibit 10.3 to
Current Report on Form 8-K dated May 23,
2006
10(g)
Letter Agreement Regarding Terms and Conditions of
Interest Rate Swap Agreement between KeyBank 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
56
Exhibit No.
10(g)(1)
Description
Letter Agreement Regarding Terms and Conditions of
Interest Rate Swap Agreement between KeyBank National
Association and Core Molding Technologies, Inc.
10(h)
2006 Core Molding Technologies, Inc. Long Term Equity
Incentive Plan2
10(i)
Core Molding Technologies, Inc. Cash Profit Sharing Plan2
Location
Incorporated by reference to Exhibit 10(i)(1) to
Annual Report on Form 10-K for the year ended
December 31, 2008
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K dated May 23,
2006
Incorporated by reference to Exhibit 10(i) to
Annual Report on Form 10-K for the year ended
December 31, 2013.
10(j)
10(k)
10(l)
10(m)
10(n)
11
23
24
31(a)
31(b)
32(a)
32(b)
Form of Amended and Restated Executive Severance
Agreement between Core Molding Technologies, Inc. and
certain executive officers 2
Incorporated by reference to Exhibit 10.2 to
Current Report on Form 8-K dated December
29, 2008
Form of Amended and Restated Restricted Stock Agreement
between Core Molding Technologies, Inc. and certain
executive officers 2
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K dated January 4,
2008
Form of Executive Severance Agreement between Core
Molding Technologies, Inc. and certain executive officers2
Form of Restricted Stock Agreement between Core Molding
Technologies, Inc. and certain executive officers2
Form of Second Amended and Restated Restricted Stock
Agreement between Core Molding Technologies, Inc. and
Stephen J. Klestinec2
Computation of Net Income per Share
Consent of Crowe Horwath LLP
Powers of Attorney
Section 302 Certification by Kevin L. Barnett, President,
Chief Executive Officer, and Director
Incorporated by reference to Exhibit 10.4 to
Current Report on Form 8-K dated May 23,
2006
Incorporated by reference to Exhibit 10.2 to
Current Report on Form 8-K dated May 15,
2012
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K dated May 15,
2012
Exhibit 11 omitted because the required
information is Included in Notes to Financial
Statements in Part II, Item 8 of this Annual
Report on Form 10-K
Filed Herein
Filed Herein
Filed Herein
Section 302 Certification by John P. Zimmer, Vice President,
Secretary, Treasurer, and Chief Financial Officer
Filed Herein
Certification of Kevin L. Barnett, Chief Executive Officer of
Core Molding Technologies, Inc., dated March 13, 2015,
pursuant to 18 U.S.C. Section 1350
Filed Herein
Certification of John P. Zimmer, Chief Financial Officer of
Core Molding Technologies, Inc., dated March 13, 2015,
pursuant to 18 U.S.C. Section 1350
Filed Herein
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
Filed Herein
Filed Herein
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
Filed Herein
101.LAB
XBRL Taxonomy Extension Label Linkbase
Filed Herein
101.PRE
XBRL Taxonomy Extension Presentation Linkbase
Filed Herein
101.DEF
XBRL Taxonomy Extension Definition Linkbase
Filed Herein
57
1. The Asset Purchase Agreement, as filed with the Securities and Exchange Commission at Exhibit 2-A to Registration Statement on
Form S-4 (Registration No. 333-15809), omits the exhibits (including, the Buyer Note, Special Warranty Deed, Supply Agreement,
Registration Rights Agreement and Transition Services Agreement, identified in the Asset Purchase Agreement) and schedules
(including, those identified in Sections 1, 3, 4, 5, 6, 8 and 30 of the Asset Purchase Agreement. Core Molding Technologies, Inc.
will provide any omitted exhibit or schedule to the Securities and Exchange Commission upon request.
2.
Indicates management contracts or compensatory plans that are required to be filed as an exhibit to this Annual Report on Form 10-
K.
3. 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.
58
SECTION 302 CERTIFICATION
I have reviewed this annual report on Form 10-A(cid:5)(cid:11)(cid:26)(cid:5)(cid:21)(cid:11)(cid:24)(cid:28)(cid:5)(cid:20)(cid:11)(cid:8)(cid:4)(cid:12)(cid:3)(cid:13)(cid:5)0(cid:28)(cid:14)(cid:31)(cid:3)(cid:11)(cid:8)(cid:11)(cid:13)(cid:12)(cid:28)(cid:16)(cid:29)(cid:5)B(cid:3)(cid:14)$(cid:23)(cid:5)
I, Kevin L. Barnett, certify that:
1.
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
(cid:24)(cid:28)(cid:16)(cid:15)(cid:28)(cid:14)(cid:27)(cid:5)(cid:27)(cid:11)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:15)(cid:28)(cid:24)(cid:12)(cid:11)(cid:4)(cid:5)(cid:14)(cid:11) (cid:28)(cid:24)(cid:28)(cid:4)(cid:5)(cid:6)(cid:25)(cid:5)(cid:27)(cid:31)(cid:12)(cid:16)(cid:5)(cid:2)(cid:3)(cid:3)(cid:7)(cid:2)(cid:8)(cid:5)(cid:24)(cid:28)(cid:15)(cid:11)(cid:24)(cid:27)(cid:23)(cid:5)
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
(cid:12)(cid:3)(cid:5)(cid:27)(cid:31)(cid:12)(cid:16)(cid:5)(cid:2)(cid:3)(cid:3)(cid:7)(cid:2)(cid:8)(cid:5)(cid:24)(cid:28)(cid:15)(cid:11)(cid:24)(cid:27)(cid:23)(cid:5)
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
Exhibit 31(a)
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this annual report is being
(cid:15)(cid:24)(cid:28)(cid:15)(cid:2)(cid:24)(cid:28)(cid:4)(cid:23)
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
(cid:15)(cid:24)(cid:28)(cid:15)(cid:2)(cid:24)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)(cid:11)(cid:26)(cid:5)(cid:26)(cid:12)(cid:3)(cid:2)(cid:3)(cid:14)(cid:12)(cid:2)(cid:8)(cid:5)(cid:16)(cid:27)(cid:2)(cid:27)(cid:28)(cid:10)(cid:28)(cid:3)(cid:27)(cid:16)(cid:5)(cid:26)(cid:11)(cid:24)(cid:5)(cid:28)#(cid:27)(cid:28)(cid:24)(cid:3)(cid:2)(cid:8)(cid:5)(cid:15)(cid:7)(cid:24)(cid:15)(cid:11)(cid:16)(cid:28)(cid:16)(cid:5)(cid:12)(cid:3)(cid:5)(cid:2)(cid:14)(cid:14)(cid:11)(cid:24)(cid:4)(cid:2)(cid:3)(cid:14)(cid:28)(cid:5)%(cid:12)(cid:27)(cid:31)(cid:5)(cid:13)(cid:28)(cid:3)(cid:28)(cid:24)(cid:2)(cid:8)(cid:8)(cid:25)(cid:5)(cid:2)(cid:14)(cid:14)(cid:28)(cid:15)(cid:27)(cid:28)(cid:4)(cid:5)(cid:2)(cid:14)(cid:14)(cid:11)(cid:7)(cid:3)(cid:27)(cid:12)(cid:3)(cid:13)(cid:5)(cid:15)(cid:24)(cid:12)(cid:3)(cid:14)(cid:12)(cid:15)(cid:8)(cid:28)(cid:16)(cid:23)
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
(cid:2)(cid:3)(cid:3)(cid:7)(cid:2)(cid:8)(cid:5)(cid:24)(cid:28)(cid:15)(cid:11)(cid:24)(cid:27)(cid:5)(cid:6)(cid:2)(cid:16)(cid:28)(cid:4)(cid:5)(cid:11)(cid:3)(cid:5)(cid:16)(cid:7)(cid:14)(cid:31)(cid:5)(cid:28) (cid:2)(cid:8)(cid:7)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
(cid:12)(cid:3)(cid:26)(cid:11)(cid:24)(cid:10)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 13, 2015
/s/ Kevin L. Barnett
Kevin L. Barnett
President, Chief Executive Officer, and Director
59
SECTION 302 CERTIFICATION
I have reviewed this annual report on Form 10-A(cid:5)(cid:11)(cid:26)(cid:5)(cid:21)(cid:11)(cid:24)(cid:28)(cid:5)(cid:20)(cid:11)(cid:8)(cid:4)(cid:12)(cid:3)(cid:13)(cid:5)0(cid:28)(cid:14)(cid:31)(cid:3)(cid:11)(cid:8)(cid:11)(cid:13)(cid:12)(cid:28)(cid:16)(cid:29)(cid:5)B(cid:3)(cid:14)$(cid:23)(cid:5)
I, John P. Zimmer, certify that:
1.
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
(cid:24)(cid:28)(cid:16)(cid:15)(cid:28)(cid:14)(cid:27)(cid:5)(cid:27)(cid:11)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:15)(cid:28)(cid:24)(cid:12)(cid:11)(cid:4)(cid:5)(cid:14)(cid:11) (cid:28)(cid:24)(cid:28)(cid:4)(cid:5)(cid:6)(cid:25)(cid:5)(cid:27)(cid:31)(cid:12)(cid:16)(cid:5)(cid:2)(cid:3)(cid:3)(cid:7)(cid:2)(cid:8)(cid:5)(cid:24)(cid:28)(cid:15)(cid:11)(cid:24)(cid:27)(cid:23)(cid:5)
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
(cid:12)(cid:3)(cid:5)(cid:27)(cid:31)(cid:12)(cid:16)(cid:5)(cid:2)(cid:3)(cid:3)(cid:7)(cid:2)(cid:8)(cid:5)(cid:24)(cid:28)(cid:15)(cid:11)(cid:24)(cid:27)(cid:23)(cid:5)
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
Exhibit 31(b)
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this annual report is being
(cid:15)(cid:24)(cid:28)(cid:15)(cid:2)(cid:24)(cid:28)(cid:4)(cid:23)
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
(cid:15)(cid:24)(cid:28)(cid:15)(cid:2)(cid:24)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)(cid:11)(cid:26)(cid:5)(cid:26)(cid:12)(cid:3)(cid:2)(cid:3)(cid:14)(cid:12)(cid:2)(cid:8)(cid:5)(cid:16)(cid:27)(cid:2)(cid:27)(cid:28)(cid:10)(cid:28)(cid:3)(cid:27)(cid:16)(cid:5)(cid:26)(cid:11)(cid:24)(cid:5)(cid:28)#(cid:27)(cid:28)(cid:24)(cid:3)(cid:2)(cid:8)(cid:5)(cid:15)(cid:7)(cid:24)(cid:15)(cid:11)(cid:16)(cid:28)(cid:16)(cid:5)(cid:12)(cid:3)(cid:5)(cid:2)(cid:14)(cid:14)(cid:11)(cid:24)(cid:4)(cid:2)(cid:3)(cid:14)(cid:28)(cid:5)%(cid:12)(cid:27)(cid:31)(cid:5)(cid:13)(cid:28)(cid:3)(cid:28)(cid:24)(cid:2)(cid:8)(cid:8)(cid:25)(cid:5)(cid:2)(cid:14)(cid:14)(cid:28)(cid:15)(cid:27)(cid:28)(cid:4)(cid:5)(cid:2)(cid:14)(cid:14)(cid:11)(cid:7)(cid:3)(cid:27)(cid:12)(cid:3)(cid:13)(cid:5)(cid:15)(cid:24)(cid:12)(cid:3)(cid:14)(cid:12)(cid:15)(cid:8)(cid:28)(cid:16)(cid:23)
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
(cid:2)(cid:3)(cid:3)(cid:7)(cid:2)(cid:8)(cid:5)(cid:24)(cid:28)(cid:15)(cid:11)(cid:24)(cid:27)(cid:5)(cid:6)(cid:2)(cid:16)(cid:28)(cid:4)(cid:5)(cid:11)(cid:3)(cid:5)(cid:16)(cid:7)(cid:14)(cid:31)(cid:5)(cid:28) (cid:2)(cid:8)(cid:7)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
(cid:12)(cid:3)(cid:26)(cid:11)(cid:24)(cid:10)(cid:2)(cid:27)(cid:12)(cid:11)(cid:3)(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 13, 2015
/s/ John P. Zimmer
John P. Zimmer
Vice President, Secretary, Treasurer and Chief Financial
Officer
60
CORE MOLDING TECHNOLOGIES, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32(a)
In connection with the Annual Report of Core Molding Technologies, Inc. (the “Company”) on Form 10-K for the period ended
December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin L. Barnett,
President, Chief Executive Officer, and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 that:
(1) 0(cid:31)(cid:28)(cid:5)5(cid:28)(cid:15)(cid:11)(cid:24)(cid:27)(cid:5)(cid:26)(cid:7)(cid:8)(cid:8)(cid:25)(cid:5)(cid:14)(cid:11)(cid:10)(cid:15)(cid:8)(cid:12)(cid:28)(cid:16)(cid:5)%(cid:12)(cid:27)(cid:31)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:24)(cid:28)’(cid:7)(cid:12)(cid:24)(cid:28)(cid:10)(cid:28)(cid:3)(cid:27)(cid:16)(cid:5)(cid:11)(cid:26)(cid:5)(cid:16)(cid:28)(cid:14)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)8,(cid:17)(cid:2)(cid:22)(cid:5)(cid:11)(cid:24)(cid:5)8.(cid:17)(cid:4)(cid:22)(cid:5)(cid:11)(cid:26)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)"(cid:28)(cid:14)(cid:7)(cid:24)(cid:12)(cid:27)(cid:12)(cid:28)(cid:16)(cid:5))#(cid:14)(cid:31)(cid:2)(cid:3)(cid:13)(cid:28)(cid:5)4(cid:14)(cid:27)(cid:5)(cid:11)(cid:26)(cid:5)8@,-(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
/s/ Kevin L. Barnett
Kevin L. Barnett
President, Chief Executive Officer, and Director
March 13, 2015
CORE MOLDING TECHNOLOGIES, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32(b)
In connection with the Annual Report of Core Molding Technologies, Inc. (the “Company”) on Form 10-K for the period ended
December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John P. Zimmer, Vice
President, Secretary, Treasurer, and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
(1) 0(cid:31)(cid:28)(cid:5)5(cid:28)(cid:15)(cid:11)(cid:24)(cid:27)(cid:5)(cid:26)(cid:7)(cid:8)(cid:8)(cid:25)(cid:5)(cid:14)(cid:11)(cid:10)(cid:15)(cid:8)(cid:12)(cid:28)(cid:16)(cid:5)%(cid:12)(cid:27)(cid:31)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)(cid:24)(cid:28)’(cid:7)(cid:12)(cid:24)(cid:28)(cid:10)(cid:28)(cid:3)(cid:27)(cid:16)(cid:5)(cid:11)(cid:26)(cid:5)(cid:16)(cid:28)(cid:14)(cid:27)(cid:12)(cid:11)(cid:3)(cid:5)8,(cid:17)(cid:2)(cid:22)(cid:5)(cid:11)(cid:24)(cid:5)8.(cid:17)(cid:4)(cid:22)(cid:5)(cid:11)(cid:26)(cid:5)(cid:27)(cid:31)(cid:28)(cid:5)"(cid:28)(cid:14)(cid:7)(cid:24)(cid:12)(cid:27)(cid:12)(cid:28)(cid:16)(cid:5))#(cid:14)(cid:31)(cid:2)(cid:3)(cid:13)(cid:28)(cid:5)4(cid:14)(cid:27)(cid:5)(cid:11)(cid:26)(cid:5)8@,-(cid:23)(cid:5)(cid:2)(cid:3)(cid:4)
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
/s/ John P. Zimmer
John P. Zimmer
Vice President, Secretary, Treasurer and Chief Financial Officer
March 13, 2015
61
INVESTOR INFORMATIONShare Trading Shares of Core Molding Technologies common stock are traded on the NYSE MKT LLC under the symbol “CMT.”Notice of Annual Meeting The Company’s 2015 annual meeting will be held on May 14, 2015. The meeting will be held at the Company’s Columbus, Ohio facility, 800 Manor Park Drive, Columbus, Ohio 43228 and will convene at 9:00 a.m.Investor Relations Investor inquiries, including requests to obtain copies without charge of the Company’s annual report as filed with the Securities & Exchange Commission, should be directed to:Core Molding Technologies, Inc. Investor Relations 800 Manor Park Drive Columbus, OH 43228 Website: www.coremt.comStockholder Inquiries Questions such as changes of address, name changes or lost certificates should be directed to the Company’s stock transfer agent:American Stock Transfer & Trust Co., LLC 6201 15th Avenue Brooklyn, NY 11219 (800) 937-5449 info@amstock.comCORPORATE OFFICERSKevin L. Barnett President and Chief Executive OfficerTerrence J. O’Donovan Vice President, Marketing and SalesWilliam R. Ringling Vice President of OperationsJohn P. Zimmer Vice President, Secretary, Treasurer and Chief Financial OfficerBOARD OF DIRECTORSJames L. Simonton, ChairmanThomas R. CellittiJames F. CrowleyRalph O. HellmoldMatthew E. JauchiusKevin L. BarnettSELECTED FINANCIAL HIGHLIGHTS (dollars in millions except per share numbers)YEARS ENDED DECEMBER 3120142013201220112010Net Sales175.2144.1162.5143.4100.3Income before interest and taxes14.610.112.516.96.4Net Income9.66.98.210.52.4Net Income per common share: Basic1.280.951.151.510.36Net Income per common share: Diluted1.280.921.111.440.34Long-term debt0.72.45.79.513.6Stockholders’ equity76.167.458.050.1 38.1NET SALES(Dollars in millions)$200$150$100$50$0 2010 2011 2012 2013 2014144.1100.3143.4162.5175.2INCOME BEFORE INTEREST AND TAXES(Dollars in millions)$20$15$10$5$0 2010 2011 2012 2013 201410.16.416.912.514.6$1.75$1.50$1.25$1.00$0.75$0.50$0.25$0.00NET INCOME PER SHARE(Basic) 2010 2011 2012 2013 20140.950.361.511.151.28Core Molding Technologies, Inc. is a manufacturer of sheet molding compound (SMC) and molder of fiberglass-reinforced plastics. The Company produces high quality fiberglass-reinforced, molded products and SMC materials for varied markets, including medium and heavy-duty trucks, automotive, marine, agriculture, construction and other commercial products. The Company offers customers a wide range of manufacturing processes to fit various volume and capital requirements. These processes include compression molding of SMC, glass mat thermoplastics (GMT) and bulk molding compounds (BMC); resin transfer molding (RTM), liquid molding of dicyclopentadiene (DCPD), spray-up and hand-lay-up. Compression and transfer molding of direct long-fiber thermoplastics (D-LFT) was added in March 2015, when the Company acquired substantially all of the assets of CPI Binani, Inc. Core Molding Technologies has its headquarters in Columbus, Ohio, and operates production facilities in Columbus and Batavia, Ohio; Gaffney, South Carolina; Winona, Minnesota; and Matamoros, Mexico. Core’s common stock is traded on the NYSE MKT LLC under the symbol “CMT.”CORE MOLDING TECHNOLOGIES, INC. ANNUAL REPORT TO SHAREHOLDERS2014CMT-015 AnnualReport.FA.indd 3-43/31/15 9:18 AM ANNUAL REPORT2014CREATIVE • RELIABLE • COMPOSITESCORE MOLDING TECHNOLOGIES, INC.800 Manor Park Drive Columbus, OH 43228 www.coremt.comCMT-015 AnnualReport.FA.indd 1-23/31/15 9:18 AM