CORE MOLDING TECHNOLOGIES, INC.800 Manor Park Drive Columbus, OH 43228 www.coremt.comANNUAL REPORT SELECTED FINANCIAL HIGHLIGHTS (dollars in millions except per share numbers)YEARS ENDED DECEMBER 3120222021202020192018Net Sales377.4307.5222.4284.3269.5Operating Income (loss)18.011.110.4(11.5)(3.1)Net Income (loss)12.24.78.2(15.2)(4.8)Net Income (loss) per common share: Basic1.440.550.98(1.94)(0.62)Net Income (loss) per common share: Diluted1.440.550.98(1.94)(0.62)Stockholders’ equity116.1100.193.984.498.9Core Molding Technologies, Inc. and its subsidiaries operate in the engineered materials market as one operating segment as a molder of thermoplastic and thermoset structural products. The Company produces and sells molded products for varied markets, including medium and heavy-duty trucks, automobiles, power sports, construction and agriculture, building products and other commercial markets. Core Molding Technologies has its headquarters in Columbus, Ohio, and operates six production facilities in three countries, the United States, Canada and Mexico. CORE MOLDING TECHNOLOGIES, INC. ANNUAL REPORT TO SHAREHOLDERS2022INVESTOR INFORMATIONShare Trading Shares of Core Molding Technologies common stock are traded on the NYSE American LLC under the symbol “CMT.”Notice of Annual Meeting The Company’s 2023 annual meeting will be held on May 11, 2023. 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 OFFICERSDavid L. Duvall President and Chief Executive OfficerRenee R. Anderson Executive Vice President of Human ResourcesJ. Chris Highfield Executive Vice President of Sales and MarketingEric Palomaki Executive Vice President of OperationsJohn P. Zimmer Executive Vice President, Secretary, Treasurer and Chief Financial OfficerBOARD OF DIRECTORSThomas R. Cellitti, ChairmanJames F. CrowleyDavid L. Duvall Ralph O. HellmoldMatthew E. JauchiusSandra L. KowaleskiAndrew O. Smith 2022 Highlights
We had a year of record-breaking great performance and I would like to start by thanking our teams across the
Company for making this happen. It is exciting to see our clear business strategy and focus on people, processes and
execution is gaining momentum. As always, this is best demonstrated in the results. Some of our key record-breaking
financial results are:
(cid:120) Revenue of $377.4 million, a 22.7% increase from prior year
(cid:120) Adjusted EBITDA of $31.9 million, a 19.7% increase from prior year
(cid:120) Net Income of $12.2 million, a 159.6% increase from prior year
(cid:120) EPS of $1.44 per diluted share, a 161.8% increase from prior year
(cid:120) Achieved revenue over $100 million in one of our plants
We continually drive to improve, build, and institutionalize our business, organizational and operational systems,
which is the foundational value of a continuous improvement culture and learning organization.
A few other important 2022 achievements.
(cid:120) We are excited and proud to announce the publication of Core Molding’s inaugural Sustainability Report,
which highlights the ES&G areas that we are advancing. Core is committed to advancing our work in this
area and I am proud of our team for getting us to this point in our corporate social responsibility journey.
(cid:120) We continue to invest in our people and organizational capabilities.
o We graduated an additional 16 people from our yearlong management leadership training program
and implemented a Front-Line Leader training program.
o We launched an online technical & engineering training program to leverage the knowledge of our
Core subject matter experts and institutionalize their knowledge.
o The results of these efforts, and many more, are seen in internal promotions which account for over
30% of our outstanding positions in 2022.
(cid:120) Also, we continued our partnership with the “Center for Design and Manufacturing Excellence” and expanded
our technical internship program to a total of 6 colleges and universities.
In summary, we fully understand that recruiting, retaining and developing a highly motivated and knowledgeable team
is a competitive advantage and, quite simply, the most important factor in driving future success.
We continued to drive our industry diversification strategy in 2022, and we saw meaningful growth in our powersports
and industrial/utilities industries. Increased demand in our truck market, combined with our ability to recover material
costs, drove truck revenue to 45% from 41% in 2021, as a percent of product sales. Our current industry mix provides
us with a solid platform to continue winning new business with customers needing a technical solution sale and
supporting existing customers with composite solutions --from design and development, to launch. We are especially
encouraged by our expansion of industrial, utilities and packaging verticals where we see longer term growth trends.
We launched programs in the Industrials and Utilities categories, specifically a number of projects related to stormwater
solutions, flush cover and inground vault products along with other industrial/utilities projects that we expect to be in
full production in 2023. We are excited about these launches because they represent growing end markets where we
have created engineered solutions, that provide a unique solution to our customers.
We are pleased with our 2022 results and remain optimistic about the future growth potential for our end markets. We
plan to remain cautious and disciplined with our capital allocation strategy. This means that we will continue to monitor
cash, our return profile, and long-term value creation, especially as macro changes impact businesses.
Looking forward 2023:
Entering 2023, customer demand remains strong, and we are closely monitoring forecasted business for impacts of
macroeconomic events and monetary policy changes. We are bullish on our long-term growth potential in the industries
we serve and we are evaluating growth opportunities in the future through acquisition or the addition of new capacity.
We remain disciplined in advancing our business transformation through a combination of sales growth, enhanced
margins, improved plant efficiencies, and maintaining a return on capital employed consistent with our long-term goals.
Our technical solutions team is continuing to be selective and will be diligent about growing sales, utilizing our capacity
and resources, with the highest value industries and opportunities that benefit from our engineered material solutions
and conversions.
In 2023, we are strategically focused on improving operational performance, and specifically improving the
productivity and profitability at all of our facilities to carry this momentum forward. Just like price recovery was our
“Must Win Battle” for 2022, our “Must Win Battle” for 2023 is to fully embed our Operational Excellence processes
in all our operations. We estimate that this will increase our capacity by 20% in some of our underperforming plants
and it better enables our solutions sales approach. For solution sales to be effective, we require a high level of
performance and capabilities from all of our processes. We have made significant productivity and capacity
improvements, but we have known opportunities to continue driving additional improvements. We will always have
much to do, but we have a solid foundation, a committed team of professionals and a clearly defined path to continually
improve our business and achieve our goals.
Our 2023 outlook is optimistic based on the robust demand we currently see and from discussions with our customers.
We recently won a major UTV program, which is a part of the powersports industry. Our UTV and PWC customer
demand remains strong through the first half. In addition, we are continuing to do development work for large
industrial and infrastructure companies, as well as automotive and truck companies.
Overall, the Company is positioned well to leverage our existing large capital infrastructure, technical expertise in
engineered materials, industry-leading process portfolio breadth and execution engine into diversified large and
growing markets. We are able to engage earlier in the development phase with our existing customers and provide
high-value solutions and conversions to new customers, where we continually improve our ability to serve. We will
continue to concentrate on new industries, especially in the industrial and utility sectors, as more people work where
they want to live in both suburban and rural settings, where improved infrastructure is needed. We will continue to
invest in our capacity, capabilities, sustainability and most importantly our team members so we remain the employer
and supplier of choice.
I want to thank our entire team for their commitment, drive and resilience in making this happen. I look forward to
communicating our progress and results as we continue to execute our transformational business strategy.
Thank You,
David Duvall
President and CEO
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:59) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
(cid:133) 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
Common Stock, par value $0.01
Trading Symbol (s)
CMT
Name of each exchange on which registered
NYSE American 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:133)
No (cid:59)
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:133) No (cid:59)
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:59) No (cid:133)
Indicate by check mark whether the registrant has submitted electronically, 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:59) No (cid:133)
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:133) Accelerated filer (cid:133) Non-accelerated Filer (cid:1409)
Smaller reporting company
Emerging growth company
(cid:1409)
(cid:1407)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. Yes (cid:133) No (cid:59)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. (cid:59)
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of
the registrant included in the filing reflect the correction of an error to previously issued financial statements. (cid:133)
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-
based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to
§240.10D-1(b). (cid:133)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:133) No(cid:59)
As of June 30, 2022, the aggregate market value of the registrant's voting and non -voting common equity held by non-
affiliates of the registrant was approximately $60,832,000, based upon the closing sale price of $9.19 on the NYSE American
LLC on June 30, 2022, the last business day of registrant's most recently completed second fiscal quarter. As of March 13,
2023, the latest practicable date, 9,113,163 shares of the registrant’s common stock were issued, which includes 695,508
shares of unvested restricted common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 2022 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 Disclosure
Part II
Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchase of Equity
Securities
Item 6. [RESERVED]
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 (PCAOB 173)
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding foreign Jurisdictions that Prevent Inspections
Part III
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
Exhibit 23
Exhibit 24
Exhibit 31(a)
Exhibit 31(b)
Exhibit 32(a)
Exhibit 32(b)
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABEL LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT
(cid:25)
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Information Regarding Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of the
federal securities laws, which are subject to the "safe harbor" created by Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act")..
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. Words such as “may,” “will,” “could,” “would,” “should,”
“anticipate,” “predict,” “potential,” “continue,” “expect,” “intend,” “plans,” “projects,” “believes,” “estimates,”
“encouraged,” “confident” and similar expressions are used to identify these forward-looking statements. 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 Annual Report
on Form 10-K:
•
•
•
•
•
•
•
•
•
•
•
•
•
business conditions in the plastics, transportation, power sports, utilities and commercial product industries
(including changes in demand for truck production);
federal and state regulations (including engine emission regulations);
general economic, social, regulatory (including foreign trade policy) and political environments in the countries in
which Core Molding Technologies operates;
the adverse impact of coronavirus (COVID-19) global pandemic on our business, results of operations, financial
position, liquidity or cash flow, as well as impact on customers and supply chains;
safety and security conditions in Mexico;
fluctuations in foreign currency exchange rates;
dependence upon certain major customers as the primary source of Core Molding Technologies’ sales revenues;
efforts of Core Molding Technologies to expand its customer base; the ability to develop new and innovative
products and to diversify markets, materials and processes and increase operational enhancements;
ability to accurately quote and execute manufacturing processes for new business; the actions of competitors,
customers, and suppliers;
failure of Core Molding Technologies’ suppliers to perform their obligations;
the availability of raw materials;
inflationary pressures; new technologies; regulatory matters;
labor relations and labor availability as well as possible work stoppages or labor disruptions at one or more of our
union locations or one of our customer or supplier locations;
•
the loss or inability of Core Molding Technologies to attract and retain key personnel;
4
•
•
•
the ability to successfully identify, evaluate and manage potential acquisitions and to benefit from and properly
integrate any completed acquisitions;
federal, state and local environmental laws and regulations;
the availability of sufficient capital; the ability of Core Molding Technologies to provide on-time delivery to
customers, which may require additional shipping expenses to ensure on-time delivery or otherwise result in late
fees and other customer charges; risk of cancellation or rescheduling of orders;
• management’s decision to pursue new products or businesses which involve additional costs, risks or capital
expenditures;
•
•
•
inadequate insurance coverage to protect against potential hazards; equipment and machinery failure;
product liability and warranty claims; and
other 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.
5
PART I
ITEM 1. BUSINESS
DESCRIPTION OF BUSINESS OF CORE MOLDING TECHNOLOGIES, INC.
Core Molding Technologies, Inc. (the "Company") and its subsidiaries operate in the engineered materials market as one
operating segment as a molder of thermoplastic and thermoset structural products. The Company produces and sells molded
products for varied markets, including medium and heavy-duty trucks, automobiles, power sports, construction and
agriculture, building products and other commercial markets. Core Molding Technologies has its headquarters in Columbus,
Ohio, and operates six production facilities in the United States, Canada and Mexico.
In general, the Company achieves product growth and diversification in several different ways, including: (1) resourcing of
existing structural products from another supplier by an original equipment manufacturer (“OEM”); (2) obtaining new
structural products through a selection process in which an OEM solicits bids; (3) successful marketing of structural products
for previously non-structural applications; (4) converting alternative materials to engineered materials; (5) successful
marketing of structural products to OEMs outside of our traditional markets; (6) developing of new materials, technology
and processes to meet current or prospective customer requirements; and (7) acquiring an existing business. The Company's
efforts continue to be directed towards all seven of those identified areas.
PRODUCTS
Structural plastics compete largely against metals and have the strength to function well during prolonged use. Management
believes that structural plastic components offer many advantages over metals, including:
•
•
•
•
•
•
•
•
•
heat resistance;
corrosion resistance;
lighter weight;
lower cost;
greater flexibility in product design;
part consolidation for multiple piece assemblies;
lower initial tooling costs for lower volume applications;
high strength-to-weight ratio; and
dent-resistance in comparison to steel or aluminum.
Our manufacturing facilities utilize various production processes; however, end products are similar and are not unique to a
facility or customer base.
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 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.
The Company also sells SMC to other molders.
Molded Products
The Company manufactures structural products using compression molding (52 presses), resin transfer molding (4 presses),
and injection molding processes (24 presses). As of December 31, 2022, the Company owned 80 molding presses including
19 in its Columbus, Ohio facility; 23 in its Matamoros, Mexico facility; 19 in its Cobourg, Canada facility; 10 in its Gaffney,
South Carolina facility; 4 in its Winona, Minnesota facility; and 5 in its Escobedo, Mexico facility. The Company's molding
presses range in size from 250 to 5,500 tons.
6
SMC compression molding is a process whereby SMC is molded to form by matched die steel molds through which a
combination of heat and pressure are applied via a molding press. Outer components and high strength reinforcing
components are fabricated with this process. Visually appealing components are produced with vacuum assisted molding and
through utilizing in-mold coating (IMC). IMC can provide an additional benefit of conductivity assisting in the process of
post paint application along with reducing porosity and improving surface appearance. This thermoset process produces high
quality, dimensionally consistent products and is typically used for high volume products.
Direct Long Fiber Thermoplastic (“DLFT”) compression molding employs two molds, typically a core and a cavity,
similar to matched die SMC molding. This is a process for compounding and molding thermoplastic materials with "long"
fibers (typically, 0.5 inch or longer). Engineered thermoplastic pellets and performance additives are compounded in a screw
extruder, to which chopped reinforcements (typically, glass fibers) are added and further extruded. A "charge" of material is
cut to a precise weight, and this "charge" is directly moved to a compression or injection transfer process, where it is molded
into a finished part. The process allows for direct processing of the compounded material, bypassing the expense and delay
of producing an intermediate product (pellets or sheets) as is used in other fiber-reinforced thermoplastic molding processes.
The D-LFT process is an attractive option for products that have highly complex geometry, require high strength and stiffness,
and benefit from the recyclability of a thermoplastic resin.
Vacuum resin transfer compression molding (“RTM”) process employs two mold halves, 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.
Structural Foam and Web Injection Molding (“SIM”) are low-pressure injection molding processes that develop high-
strength, rigid parts at low weight. This is accomplished by mixing a foaming agent (usually, nitrogen gas) with the melted
polymer (structural foam process), or by injecting nitrogen gas into the mold cavity immediately after the plastic resin is
injected (structural web molding). Structural foam produces a cellular interior structure that can provide twice the rigidity of
a solid plastic molding. The structural web process pushes the plastic out to the mold cavity walls, uniformly packing out the
entire mold and hollowing out thicker sections to create products of varying wall thicknesses. As a result, structural web
molded parts have a smoother, glossier finish than other low-pressure parts. Both processes give part designers flexibility
when designing products that need strength and stiffness at low weight and also have the benefit of recyclability due to the
use of a thermoplastic resin.
Reaction Injection Molding (“RIM”) 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.
Hand Lay-Up is a process that 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 is 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.
7
Spray-Up is a process that 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.
Assembly, Machining, and Paint Products
Many of the products molded by the Company are assembled, machined, and prime painted or topcoat painted to result in a
finished 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.
CAPITAL EXPENDITURES AND RESEARCH AND DEVELOPMENT
Capital expenditures totaled approximately $16.6 million, $11.6 million, and $3.7 million in 2022, 2021, and 2020
respectively. These capital expenditures primarily consisted of building and equipment improvements and additional
production equipment to manufacture parts.
The Company continuously engages in product development. Research and development activities focus on developing new
material formulations, new structural composite 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 has estimated
that costs related to research and development were approximately $1.6 million, $1.3 million and $1.2 million in 2022, 2021,
and 2020, respectively.
MAJOR CUSTOMERS
The Company had five major customers during the year ended December 31, 2022, BRP, Inc. (“BRP”), Navistar, Inc.
(“Navistar”), PACCAR, Inc. (“PACCAR”), Universal Forest Products, Inc. (“UFP”) and Volvo Group North America, LLC
(“Volvo”). Major customers are defined as customers whose 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 these customers
could have a material adverse effect on the business of the Company. The following table presents sales to major customers
as a percent of total sales for the years ended December 31:
BRP
Navistar
PACCAR
Volvo
UFP
2022
14%
17%
10%
14%
9%
2021
12%
15%
12%
12%
12%
2020
10%
18%
13%
12%
17%
Supply
Agreement
Supply Agreement
Expiration
Yes
No
Yes
Yes
Yes
July 31, 2024
N/A
November 30, 2023
December 31, 2027
March 10, 2027
8
BRP provides a portfolio of industry-leading products comprising of snowmobiles, watercraft, on and off-road vehicles,
power sports propulsion systems as well as engines for karts, motorcycles and recreational aircraft. Demand for these
products is driven by consumer demand and general economic conditions.
(cid:3)
The North American truck market in which Navistar, Volvo, and PACCAR compete is highly competitive and the demand
for medium and heavy-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.
UFP supplies products to three industry segments: retail, industrial, and construction. These are highly-competitive markets,
with suppliers competing for a share of available shelf space at large “big box” retailers and independent contractors. As a
discretionary product category, suppliers must also strive continuously to differentiate their products with unique designs,
colors, and features, in addition to maintaining a constant focus on cost reduction. Demand for these products is driven by
residential and commercial construction and general economic conditions, among other influences.
OTHER CUSTOMERS
The Company also produces products for other customers and industries, including medium and heavy-duty trucks, power
sports, building products, industrial and utilities and other commercial markets. Sales to these customers individually were
all less than 10% of total sales for interim and annual reporting during 2022.
GEOGRAPHIC INFORMATION
Substantially all of the Company's products are sold in 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 (in thousands):
United States
Mexico
Canada
Other
Total
$
$
2022
2021
2020
231,391 $
113,245
26,829
5,911
377,376 $
191,667 $
88,952
22,642
4,222
307,483 $
136,424
64,942
16,827
4,163
222,356
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, power sports, automotive, and commercial products also fluctuates on an economic, cyclical and seasonal basis,
causing a corresponding fluctuation for demand of the Company's products.
MAJOR COMPETITORS
The Company believes that it is one of the largest compounders and molders of thermoset and thermoplastic structural
products in North America. The Company faces competition from a number of other molders including, most significantly,
Molded Fiber Glass Companies, Teijin, Ashley Industrial Molding, René Matériaux Composite Ltée ("RMC"), STS Group,
and 20/20 Custom Molded Plastics.
RAW MATERIALS
The principal raw materials used in the Company's processes are unsaturated polyester, vinyl ester, polyethylene,
polypropylene, and dicyclopentadiene resins, fiberglass, 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
(primarily metal components). Many of the raw materials used by the Company are petrochemical-based, natural gas-based,
as well as downstream derivatives, and therefore, the costs of certain raw materials can be affected by changes in costs in
9
these upstream 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 supply base to
improve its overall purchasing position; however, current supply chain conditions have limited sourcing alternatives.
Normally we do not carry inventories of raw materials or finished products in excess of what is reasonably required to meet
production and shipping schedules, and to manage risk of supply and variation in demand.
CAPACITY CONSTRAINTS(cid:3)
Capacity utilization is measured based on standard cycle times and a standard work week, which can range from five days
per week, three-shifts per day to seven days per week, 24x7 operation, depending on the facility and molding process. During
times when demand exceeds the standard five day, three -shift capacity, the Company will work weekends to create additional
capacity, which can provide capacity utilization percentages greater than 100%. During 2022, the Company has used various
methods from overtime to a weekend manpower crews to support the customers' production requirements.
The Company measures facility capacity in terms of its large compression molding presses (2,000 tons or greater). The
Company owned 26 large compression molding presses at its facilities at December 31, 2022. The capacity utilization in
these production facilities was 89% and 85% for the years ended December 31, 2022 and 2021, respectively.
The Company measures facility capacity in terms of its large injection molding presses (750 tons or greater). The Company
owned 12 large injection molding presses at its facilities at December 31, 2022. The capacity utilization in these production
facilities was 79% and 73% for the years ended December 31, 2022 and 2021, respectively.
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 $30.3 million (100% of which the Company shipped during
the first month of 2023) and $27.7 million at December 31, 2022 and 2021, respectively.
HUMAN CAPITAL MANAGEMENT
As of December 31, 2022, the Company employed a total of 1,986 employees, which consisted of 690 employees in the
United States, 1,073 employees in Mexico and 223 employees in Canada. The salary workforce consisted of 385 employees,
while 1,601 employees were hourly. Four plant locations making up 69.0% of the workforce are covered by collective
bargaining agreements.
Details on the collective bargaining agreements are as follows:
Plant Location
Union Name
International Association of Machinists and Aerospace Workers
("IAM")
Columbus, Ohio
Matamoros,
Mexico
Cobourg, Canada United Food & Commercial Workers Canada ("UFCW")
Sindicato de Jorneleros y Obreros
August 9, 2025
January 1, 2024
November 1, 2025
Expiration Date Employees
Escobedo,
Mexico
Sindicato de trabajadores de la industria metalica y del comercio
del estado de Nuevo Leon Presidente Benito Juarez Garcia
C T M
February 1,
2023(1)
(1)The Company is currently negotiating an extension to the Escobedo, Mexico collective bargaining agreement.
10
320
805
177
69
To support the Company’s long-term strategic plan, the Company is committed to being an employer of choice focusing on
providing a safe place to work, organizational development opportunities, competitive total rewards packages while keeping
diversity, equity and inclusion in the forefront.
Safety – The safety of the Company's workforce is a top priority with continued improvement in the Company's safety record.
The Company utilizes behavior-based safety programs at all global facilities as a proactive method of increasing safe
behaviors.
Diversity, Equity and Inclusion – The Company is committed to diversity, equity and inclusion, including a focus on
continued diversity of our Board of Directors and leadership team. The Company has implemented initiatives to help maintain
a workforce that represents diversity and inclusion.
Organizational Development – The Company offers learning and development opportunities throughout the workforce,
including a comprehensive leadership program for high-potential employees identified through our succession and talent
planning process.
Talent Planning – The Company has developed people management processes that enable us to hire, retain and develop a
high-performing workforce. We have performance procedures that align with our organization’s strategic goals and support
employee development. Employee engagement surveys are conducted to understand employee satisfaction and provide
opportunities to create action plans to improve our workplace culture and employee retention.
Total Rewards – Our total rewards package supports an environment where employees want to stay and build their career.
We provide fair and competitive compensation and benefits that promote physical, emotional and financial well-being. With
a focus on the employee experience, our workplace fosters employee engagement, productivity and morale while
encouraging effort, creativity and innovation.
ENVIRONMENTAL, CLIMATE RELATED REGULATIONS AND 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. Our policy is to
conduct our business with due regard for the preservation and protection of the environment. Our environmental waste
management process involves the regular auditing of hazardous waste accumulation points, hazardous waste activities,
authorized treatment, and storage and disposal facilities. We believe that our operations are in substantial compliance with
all material environmental laws and regulations applicable to our plants and operations. Historically, our annual costs of
achieving and maintaining compliance with environmental laws and regulations have not been material to our financial
results. However, new requirements, more stringent application of existing requirements or the discovery of previously
unknown environmental conditions could result in material environmental related expenditures in the future. See below under
"Item 1A Risk Factors - Legal, Insurance, Tax and Cybersecurity Risks - Changes in legal, regulatory, and social responses
to climate change, including any possible effect on energy prices, could adversely affect our business and reduce our
profitability."
The Company has Environmental Management Systems at all of its facilities and has obtained ISO 14001 certification at all
facilities except for Cobourg, Canada, which complies with strict Canadian environmental reporting. As part of the
Company's environmental policy, all manufacturing employees are trained on waste management and other environmental
issues. The Company's full Board of Directors provides oversight of the Company's environmental and climate matters
through an Enterprise Risk Management system and quarterly reporting process.
The Company holds various environmental operating permits for its production facilities in the U.S., Mexico, and Canada as
required by U.S., Mexican and Canadian federal, state and local regulations. The Company has substantially complied with
all requirements of these operating permits.
The Company produces structural parts that are long-lived assets and generally not considered single source plastics. As
such, the Company is not currently subject to any resin plastic taxes or single use plastic regulations.
11
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. 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.
AVAILABLE INFORMATION
We maintain a website at www.coremt.com. Annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, all amendments to those reports, and other information about us are available free of charge through this
website as soon as reasonably practicable after the reports are electronically filed with the SEC. These materials are also
available from the SEC’s website at www.sec.gov.
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.
Risks Relating to our Business
Our business has concentration risks associated with significant customers.
Sales to five customers constituted approximately 64% of our 2022 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 five customers accounted for 67% of accounts receivable at December 31, 2022. 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, 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 using direct and active contact
through our sales, quality, engineering, and operational personnel. These customers may not continue to do business with us
as they have in the past and we may not be able to supply these customers or any of our other customers at current levels.
Our business is affected by the cyclical and overall nature of the industries and markets that we serve.
The North American heavy and medium-duty truck industry, on which the demand of our products is largely dependent, is
highly cyclical. In 2022, approximately 45% of our product sales was in this industry. The market for this industry fluctuates
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, supply chain constraints, our customers' inventory levels and production rates, and the overall strength of the economy.
Our manufacturing operations have a significant fixed cost component. Accordingly, during periods of changing demands,
including an increase or slowdown in truck demand, 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.
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Price increases in raw materials (including price increases due to prolonged inflation) and availability of raw materials,
including disruptions in supply chain, 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 or are unable to offset the
increase through price increases to our customers, our results of operations could be materially adversely impacted.
We manufacture and sell products globally and rely upon a global supply chain to deliver the raw materials, components,
systems and parts that we need to manufacture and service our products. Any direct or indirect supply chain disruptions may
have an adverse impact on our business, financial condition, results of operations or cash flows. In addition, recent
inflationary pressures have resulted in increased raw material, labor and logistics expenses, which, if they continue for a
prolonged period, may adversely affect our results of operations. If our costs are subject to continuing significant inflationary
pressures, we may not be able to fully offset such higher costs through price increases. Our inability to do so could harm our
results of operation.
Long-term fixed price customer contracts could adversely impact operating results in an inflationary economy.
In order to obtain new business in a competitive environment, the Company enters into long-term contracts that fix the
customer product price and requires the Company to accept all product orders. These fixed price customer contracts allow
for certain price increases but may not provide for recovery of all of the Company's cost increases. As a result, if the
Company’s operating costs, such as raw material, labor and overhead costs, increase the Company may not be able to increase
the price of products sold to customers enough to offset operating costs increases, which could adversely affect our operating
results and financial condition.
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 large 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. 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
purchasing components from suppliers that are geographically closer to their production facilities or relocating production
to locations with lower cost structures and purchasing components from suppliers with lower production costs. These
decisions by OEMs could require us to shift production between our facilities, move production lines between our facilities,
or open new facilities to remain competitive. Shifting production, moving production lines, or opening new locations could
result in significant costs required for capital investment, transfer expenses, and operating costs. 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
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.
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We operate in highly competitive markets, and if we are unable to effectively compete it may negatively impact future
operating results, sales, and earnings.
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. If we are unable to develop new and innovative products, diversify the markets, materials, and
processes we utilize and increase operational enhancements, we may fall behind competitors or lose the ability to achieve
competitive advantages. In the highly competitive market in which we operate, this may negatively impact our ability to
retain existing customers or attract new customers, and if that occurs, it may negatively impact future operating results, sales,
and earnings.
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 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.
Increasing competition for highly skilled and talented workers, as well as labor shortages, could adversely affect our
business.
Our success largely depends on the efforts and abilities of our key personnel and our continuing ability to attract and retain
highly qualified personnel. Their skills, experience, and industry contacts significantly benefit us. A number of factors may
adversely affect the labor force available to us or increase labor costs, including high employment levels and government
regulations. To date we have experienced an increasingly competitive labor market. The increasing competition for highly
skilled and talented employees has resulted, and could in the future result, in higher compensation costs and could result in
difficulties in maintaining a capable workforce. If we are unable to hire and retain employees capable of performing at a high
level, or if mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party
outsourcing, have unintended negative effects, our business could be adversely affected. A sustained labor shortage, lack of
skilled labor, increased turnover or labor cost inflation, caused by the ongoing COVID-19 pandemic or as a result of general
macroeconomic factors, could lead to increased costs, such as increased overtime to meet demand and increased wage rates
to attract and retain employees, which could negatively affect our ability to efficiently operate our manufacturing facilities
and overall business and have other adverse effects on our results of operations and financial condition.
Work stoppages or other labor issues at our facilities or at our customers' facilities could adversely affect our operations.
As of December 31, 2022, unions at our Columbus, Ohio, Matamoros and Escobedo, Mexico, and Cobourg, Canada facilities
represented approximately 69.0% 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, Matamoros, Mexico, Cobourg, Canada, and Escobedo, Mexico union
contracts extend through August 9, 2025, January 1, 2024, November 1, 2025 and February 1, 2023, respectively. Any
prolonged work stoppage or strike at our 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. The Company is currently
negotiating an extension to the Escobedo, Mexico collective bargaining agreement.
In addition, if any of our customers or suppliers experience a material work stoppage, that customer may halt or limit the
purchase of our products or that supplier may interrupt supply of our necessary production components. This could cause us
14
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.
Our foreign operations in Mexico and Canada subject us to risks that could negatively affect our business.
We operate manufacturing facilities in Matamoros and Escobedo, Mexico and Cobourg, Canada. As a result, a significant
portion of our business and operations is 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 and Canada,
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. Changes in laws and regulations related to foreign trade and investment
may have an adverse effect on our results of operations, financial condition, or cash flows.
Our business is subject to risks associated with manufacturing equipment and infrastructure.
We convert raw materials into molded products through a manufacturing process at each production facility. 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. 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.
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 manufacturing of our products and executing the manufacturing process in a cost-effective manner. All
costs may not be accurately identified during the Company's quoting process and the expected level of manufacturing
efficiency may not be achieved. As a result, we may not realize the anticipated operating results related to 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
may not materialize, as our growth could be adversely affected by many factors, including macroeconomic events such as
inflation, recession, and interest rate increases, competition, and labor market shortages or regulations. 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.
15
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, some of which may be
material to us. We expect such acquisitions will produce operating results consistent with our other operations; however, any
such acquisition could fail to produce the expected operating results.
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.
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 equipment, and enhance our production processes. We may not
have, or be able to obtain, adequate funds to make all necessary capital expenditures when required, and the amount of future
capital expenditures may 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.
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.
Certain facilities are located in close proximity to our customers in order to minimize both our customers' 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.
Difficulty in hiring, training, and retaining skilled labor could result in increased cost overruns, an inability to satisfy
customer demands, and otherwise adversely affect our business.
We depend on skilled labor in the manufacturing of our products. High demand for skilled manufacturing labor in the United
States has resulted in difficulty hiring, training, and retaining labor in a tightening labor market. Difficulties in securing
16
skilled labor could result in increased hiring and training costs, increased overtime to meet demand, increased wage rates to
attract and retain operators, and higher scrap and rework costs due to inexperienced workers which would adversely affect
our business.
Financial and Accounting Risks
Fluctuations in foreign currency exchange rates could adversely affect our results of operations, cash flow, liquidity, or
financial condition.
Because of our international operations, we are exposed to risk associated with value changes in foreign currencies, which
may adversely affect our business. Historically, our reported net sales, earnings, cash flow, and financial condition have been
subjected to fluctuations in foreign exchange rates. Our primary exchange rate exposure is with the Canadian dollar and the
Mexican peso against the U.S. dollar. We believe we may experience losses from foreign currency exchange rate fluctuations,
and such losses could adversely affect our sales, earnings, cash flow, liquidity, 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,
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 have incurred impairment charges in the past and we may be required to incur additional impairment charges in the
future on a portion or all of the carrying value of our goodwill or other intangible assets associated with our reporting unit
which may adversely affect our financial condition and results of operations.
Each year, and more frequently on an interim basis if appropriate, we are required by ASC Topic 350, “Intangibles-Goodwill
and Other,” to assess the carrying value of our indefinite lived intangible assets and goodwill to determine whether the
carrying value of those assets is impaired. Such assessment and determination involves significant judgments to estimate the
fair value of our reporting unit including estimating future cash flows, near term and long term revenue growth, and
determining appropriate discount rates, among other assumptions. If operating earnings fall below forecasted operating
earnings, we would perform an interim or annual goodwill impairment analysis. Should that analysis conclude that the
reporting unit’s fair value were to be below carrying value a goodwill impairment charge would be necessary. Any such
charges could materially adversely affect our financial results in the periods in which they are recorded.
Our ability to maintain effective internal control over financial reporting may be insufficient to allow us to accurately report
our financial results or prevent fraud, and this could cause our financial statements to become materially misleading and
adversely affect the trading price of our common stock.
We require effective internal control over financial reporting in order to provide reasonable assurance with respect to our
financial reports and to effectively prevent fraud. Internal control over financial reporting may not prevent or detect
misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding
of controls, or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the
preparation and fair presentation of financial statements. If we cannot provide reasonable assurance with respect to our
financial statements and effectively prevent fraud, our financial statements could become materially misleading, which could
adversely affect the trading price of our common stock.
If we are not able to maintain the adequacy of our internal control over financial reporting, including any failure to implement
required new or improved controls or if we experience difficulties in their implementation, our business, financial condition,
17
and operating results could be harmed. Any material weakness could affect investor confidence in the accuracy and
completeness of our financial statements. As a result, our ability to obtain any additional financing, or additional financing
on favorable terms, could be materially and adversely affected. This, in turn, could materially and adversely affect our
business, financial condition, and the market value of our stock and require us to incur additional costs to improve our internal
control systems and procedures. In addition, perceptions of the Company among customers, suppliers, lenders, investors,
securities analysts, and others could also be adversely affected. Material weaknesses may arise in the future due to our failure
to implement and maintain adequate internal control over financial reporting.
Our failure to comply with our debt covenants could have a material adverse effect on our business, financial condition, or
results of operations.
The Company’s credit agreements contain certain covenants. The Company’s ability to borrow money and repay existing
debt on scheduled terms under its existing credit agreements requires the Company to be compliant with its covenants. If a
default of covenants were to occur, we may not be able to pay our debts or borrow sufficient funds, which could materially
adversely affect our results of operations, financial condition, and cash flows.
Legal, Insurance, Tax and Cybersecurity Risks
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.
Many of our products are made from a material whose manufacturing process involves the emission of carbon dioxide, a
greenhouse gas that scientists have attributed as a cause of climate change. Our products require transportation from our
facilities to the site where they are used, which consumes energy. Although it is uncertain at this time precisely what actions
various governmental bodies will take early to address the affects of climate change and to achieve goals in response to the
potential effects of climate change, 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 to manufacture our products, with our
operating costs being subject to increase if energy costs rise. If new regulations would result in higher energy costs we may
not be able to recover our operating cost increases through production efficiencies and price increases. 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. Until the timing, scope and extent of any future regulation becomes known, we cannot predict
its effect on our cost structure or our operating results, but it is likely our costs will increase in relation to any climate change
legislation and regulation concerning greenhouse gases, which could have an adverse effect on our future financial position,
results of operations or cash flows.
In addition, changes in weather severity may result in sufficient insurance availability to be limited or the price of insurance
to materially increase. The Company, its suppliers and customers are located in areas that may be subject to damage or
disruption due to changes in weather severity (i.e. floods, hurricanes, fires, etc.). Although the Company maintains property
and business interruption insurance, damage from a weather event or disruption in the supply chain or customer demand may
not be fully covered by our insurance and could cause a material adverse impact on our business. Disruption in our supply
chain could also have an adverse effect on our ability to manufacture and deliver our products on a timely basis, and thereby
affect our results of operations. Thus, any supply chain disruption, however small, could potentially cause the complete
shutdown of an assembly line of one of our customers, and any such shutdown could expose us to claims for compensation.
If the Company is unable to obtain sufficient insurance coverage or the cost of insurance materially increases, the Company’s
financial condition and results of operation could be materially impacted.
18
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.
Our insurance coverage may be inadequate to protect against the potential hazards to our business.
We maintain property, business interruption, stop loss for health care and workers' compensation, director and officer, product
liability, cyber, 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, our insurers may 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 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.
Certain senior management employees have entered into potentially costly severance arrangements with us if terminated by
the employee for good reason.
We have entered into executive employment agreements with executive officers that provide for significant severance
payments in the event such employee's employment with us is terminated by the employee for good reason (as defined in the
employment agreement). Good reason includes one or more of the following occurring in the ordinary course of business or
within one year of a change in control: (i) a material reduction in base salary, (ii) a material diminution in the executive's
position and/or duties, (iii) a material breach of the employment agreement by the person or other entity then controlling the
Company, or (iv) a disavowal of the employment agreement by the person or other entity then controlling the Company. A
change in control occurs when (a) one Person (as defined in the employment agreement), or more than one Person acting as
a group, acquires ownership of stock of the Company that, together with the stock held by such Person or group, constitutes
more than 50% of the total fair market value or total voting power of the stock of the Company, (b) a majority of the members
of the Company's Board of Directors are replaced during any twelve-month period by directors whose appointment or
19
election is not endorsed by a majority of the Board before the date of appointment or election, or (c) the sale of all or
substantially all of the Company’s assets. These agreements would make it costly for the employment of certain of our senior
management employees to be terminated and such costs may also discourage potential acquisition proposals, which may
negatively affect our stock price.
Our provision for income tax, adverse tax audits, or changes in tax policy could have an adverse effect on our business,
financial condition, and results of operations.
We are subject to income taxes in the United States, Mexico, and Canada. Our provision for income taxes and cash flow
related to taxes may be negatively impacted by: (1) changes in the mix of earnings taxable in jurisdictions with different
statutory rates, (2) changes in tax laws and accounting principles, (3) changes in the valuation of our deferred tax assets and
liabilities, (4) discovery of new information during the course of tax return preparation, (5) increases in nondeductible
expenses, or (6) being subject to include foreign income in the United States as part of the GILTI tax provision.
Tax audits may also negatively impact our business, financial condition, and results of operations. We are subject to continued
examination of our income tax returns, and tax authorities may disagree with our tax positions and assess additional tax. We
regularly evaluate the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our
provision for income taxes. Outcomes from examinations may have a negative impact on our future financial condition and
operating results.
Cybersecurity attacks may threaten our confidential information, disrupt operations and result in harm to our reputation and
adversely impact our business and financial performance.
Cybersecurity attacks across industries, including ours, are increasing in sophistication and frequency and may range from
uncoordinated individual attempts to measures targeted specifically at us. These attacks include but are not limited to,
malicious software or viruses, attempts to gain unauthorized access to, or otherwise disrupt, our information systems,
attempts to gain unauthorized access to business, proprietary or other confidential information, and other electronic security
breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected
information and corruption of data. Cybersecurity failures may be caused by employee error, malfeasance, system errors or
vulnerabilities, including vulnerabilities of our vendors, suppliers, and their products. We have been subject to cybersecurity
attacks in the past. Based on information known to date, past attacks have not had a material impact on our financial condition
or results of operations. We may experience such attacks in the future, potentially with more frequency or sophistication.
In the conduct of our business, we collect, use, transmit and store data on information systems, which are vulnerable to
disruption and an increasing threat of continually evolving cybersecurity risks. Failures of our IT systems as a result of
cybersecurity attacks or other disruptions could result in a breach of critical operational or financial controls and lead to a
disruption of our operations, commercial activities or financial processes. Cybersecurity attacks or other disruptions
impacting significant customers and/or suppliers could also lead to a disruption of our operations or commercial activities.
Despite our attempts to implement safeguards on our systems and mitigate potential risks, our actions may not be sufficient
to prevent cyberattacks or security breaches that manipulate or improperly use our systems or networks, compromise
confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt our operations. The occurrence
of such events could have a material adverse effect on our business financial condition and results of operations.
Risks Related to Economic Conditions
The ongoing COVID-19 pandemic has adversely impacted our business and the COVID-19 pandemic or similar public health
crises could, in the future, have a material adverse impact on our business, results of operation, financial condition and
liquidity, the nature and extent of which is highly uncertain.
The COVID-19 pandemic has caused, and continues to cause volatility in the global economy, the automotive industry and
our business, resulting in increased economic, demand and operational uncertainty. We have global operations, customers
and suppliers in countries impacted by COVID-19 where there are numerous uncertainties, including the duration and
20
severity of the pandemic, the impact of the spread of new and existing variants of the virus, and the related macroeconomic
impacts, including labor shortages, high inflation rates or other disruptions to our supply chain. The increased demand for
imported goods driven by a shift in consumer spending has also stressed the global supply chain, from factory production
capacity to transportation availability. Our suppliers could fail to deliver product in a timely manner as a result of disruption
to the global supply chain due to the ongoing COVID-19 pandemic, which could materially interrupt our business operations
and/or impact our liquidity.
Authorities around the world have taken a variety of measures to slow the spread of COVID-19, including travel bans or
restrictions, increased border controls or closures, quarantines, shelter-in-place orders, business shutdowns and such
authorities may impose additional restrictions. We have also taken actions to protect our employees and to mitigate the spread
of COVID-19, including embracing guidelines set by the World Health Organization and the Centers for Disease Control
and Prevention on social distancing, good hygiene, restrictions on employee travel and in-person meetings, and changes to
employee work arrangements including remote work arrangements where feasible. The actions taken around the world to
slow the spread of COVID-19 have also impacted our customers and suppliers, and future developments could cause further
disruptions to the Company due to the interconnected nature of our business relationships. The extent to which COVID-19,
or any other similar public health crisis, will impact our ongoing business, results of operations, financial condition or
liquidity is highly uncertain and will depend on future developments, including the control of the spread of the virus, spread
of new strains of the virus, additional actions taken by governmental authorities, and the ability to vaccinate the general
population.
Economic conditions and disruptions in the financial markets could have an adverse effect on our business, financial
condition, and results of operations.
Disruptions in the financial markets could have a material adverse effect on our liquidity and financial condition if our ability
to borrow money 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.
21
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Core Molding Technologies has its headquarters in Columbus, Ohio, and operates six production facilities in three countries,
United States, Canada and Mexico. Four of the production facilities are owned and the remaining two are leased. We consider
our properties to generally be in good condition, well maintained, and suitable and adequate to meet our business
requirements for the foreseeable future. We do not anticipate difficulty in renewing existing leases as they expire or in finding
alternative facilities. All owned facilities are subject to liens securing the Company's obligations under our revolving and
term loans as described in Note 9, Debt to the Consolidated Financial Statements included herein.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is not aware
of any material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their
property is the subject.
ITEM 4. MINE SAFETY DISCLOSURE
None.
22
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASE OF EQUITY SECURITIES
The Company's common stock is traded on the NYSE American LLC under the symbol “CMT”. The Company's common
stock was held by 331 holders of record on March 13, 2023.
The table below sets forth the high and low sale prices of the Company stock 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
$
$
2022
2022
2022
2022
2021
2021
2021
2021
13.00 $
13.60
11.36
11.51
12.00 $
17.35
16.00
14.92
8.74
8.50
8.89
7.96
8.16
11.41
11.01
11.08
We repurchased 48,285 shares of our common stock during the year ended December 31, 2022. All stock was purchased to
satisfy tax withholding obligations upon vesting of restricted stock awards. Details of the repurchases of our common stock
during the three months ended December 31, 2022, are included in the following table:
Total number of
shares purchased
Average price paid
per share
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
— $
—
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
Period
October 1 to 31, 2022
November 1 to 30, 2022
December 1 to 31, 2022
Total
ITEM 6. [RESERVED]
23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
DESCRIPTION OF THE COMPANY
Core Molding Technologies and its subsidiaries operate in the engineered materials market as one operating segment as a
molder of thermoplastic and thermoset structural products. During the year ended December 31, 2022 the Company's
operating segment consisted of one component reporting unit. The Company produces and sells molded products for varied
markets, including medium and heavy-duty trucks, power sports, building products, industrial and utilities and other
commercial markets. Core Molding Technologies has its headquarters in Columbus, Ohio, and operates six production
facilities in the United States, Canada and Mexico.
BUSINESS OVERVIEW
General
The Company’s business and operating results are directly affected by changes in overall customer demand, operational
costs, and performance and leverage of our fixed cost and selling, general and administrative ("SG&A") infrastructure.
Product sales fluctuate in response to several factors including many that are beyond the Company’s control, such as general
economic conditions, interest rates, government regulations, consumer spending, labor availability, and our customers’
production rates and inventory levels. Product sales consist of demand from customers in many different markets with
different levels of cyclicality and seasonality. The Company's largest market, North American truck, which is highly cyclical,
accounted for 45%, 41%, and 43% of the Company’s product revenue for the years ended December 31, 2022, 2021, and
2020, respectively.
Operating performance is dependent on the Company’s ability to manage changes in input costs for items such as raw
materials, labor, and overhead operating costs. The Company has certain contractual commitments that restrict its ability to
pass through changes in input costs to certain customers. As a result, during periods of significant increases or decreases in
input costs operating results may be impacted.
Performance is also affected by manufacturing efficiencies, including items such as on time delivery, quality, scrap, and
productivity. Market factors of supply and demand can impact operating costs. In periods of rapid increases or decreases in
customer demand, the Company is required to ramp operational activity up or down quickly, which may impact
manufacturing efficiencies more than in periods of steady demand.
Operating performance is also dependent on the Company’s ability to effectively launch new customer programs, which are
typically extremely complex in nature. The start of production of a new program is the result of a process of developing new
molds and assembly equipment, validation testing, manufacturing process design, development and testing, along with
training and often hiring employees. Meeting the targeted levels of manufacturing efficiency for new programs usually occurs
over time as the Company gains experience with new tools and processes. Therefore, during a new program launch period,
start-up costs and inefficiencies can affect operating results.
Business Outlook
Looking forward, based on industry analyst projections, customers' forecasts, price changes and anticipated new program
launches offset by programs reaching end of life, the Company expects revenues for 2023 to be flat to slightly higher than
2022. The most significant impact to changes in revenues in 2023 compared to 2022 are expected from projected increases
in medium and heavy-duty truck due to full year impact of 2022 program launches and price increases partially offset by
expected decreases in the building products market. The Company will continue to monitor customer projections for impacts
of ongoing monetary tightening conditions in North America.
The Company experienced raw material price stabilization in the later part of 2022 for most of the Company's significant
raw materials and anticipates raw material prices to remain stable in 2023 at elevated levels above historic raw material cost
24
levels. The Company experienced lower commodity resin prices in 2022 as compared to 2021, but those costs have stabilized
and the Company anticipates those costs will remain flat for 2023.
Labor markets in Company locations have stabilized although wage rates remain elevated and pressure on wage rates is
expected to continue in 2023. If labor costs continue to increase, the Company will continue to pursue customer price
increases, where such increases will not have a significant negative impact on demand.
2022 compared to 2021
Net sales for the years ended December 31, 2022 and 2021 totaled $377,376,000 and $307,483,000, respectively. Included
in total sales were tooling project sales of $18,675,000 and $23,458,000 for the years ended December 31, 2022 and 2021,
respectively. These sales are sporadic in nature and fluctuate in regard to scope and related revenue on a period-to-period
basis. Product sales, excluding tooling project sales, for the year ended December 31, 2022 were $358,701,000 compared to
$284,025,000 for the same period in 2021. The increase in sales is primarily the result of higher demand from the heavy-
duty truck and power sports industries, price increases related to the recoupment of raw material inflation costs, and launch
of new programs.
The Company's product sales for the year ended December 31, 2022 compared to the same period of 2021 by market are as
follows (in thousands):
Medium and heavy-duty truck
Power sports
Building products
Industrial and utilities
All other
Net product revenue
2022
$ 158,649
84,727
41,038
27,988
46,299
$ 358,701
2021
$ 114,805
60,230
44,981
27,227
36,782
$ 284,025
Gross margin was approximately 13.9% of sales for the year ended December 31, 2022, compared with 13.4% for the year
ended December 31, 2021. The gross margin percentage increase was due to net changes in selling price and raw material
cost of 2.5% and higher fixed cost leverage of 0.8% offset by unfavorable product mix and production inefficiencies of 2.8%.
Selling, general and administrative expense ("SG&A") totaled $34,399,000 for the year ended December 31, 2022, compared
to $30,276,000 in 2021. Included in selling, general and administrative (“SG&A”) for the year ended December 31, 2021
are closure costs of $2,027,000 related to the manufacturing facility in Batavia, Ohio. Excluding closing costs, remaining
SG&A costs for the year ended December 31, 2021 totaled $28,249,000. The increase in SG&A expense primarily resulted
from higher labor and benefit costs of $2,112,000, higher bonus of $1,096,000, higher professional fees of $1,296,000 and
higher travel costs of $374,000.
During the year ended December 31, 2022, the Company refinanced its existing credit facility. As a result, the Company
recorded one-time losses of $1,234,000 from writing off outstanding deferred loan costs and $348,000 from prepayment fees
associated with the repayment of the FGI Term Loan.
Interest expense totaled $1,960,000 for the year ended December 31, 2022, compared to interest expense of $2,311,000 for
the year ended December 31, 2021. The decrease in interest expense was primarily due to lower interest rates resulting from
the Company refinancing its credit facility during 2022, when compared to 2021.
Income tax expense was approximately $2,382,000, or 16.3% of total income before income taxes for the year ended
December 31, 2022. The Company’s income tax expense for the year ended December 31, 2022 includes statutory foreign
tax expense from foreign taxable income offset by tax benefits from tax losses in the United States. Income tax expense for
the year ended December 31, 2022, also includes a valuation allowance reversal of $2,363,000 related to deferred tax assets
related to the federal jurisdiction in the United States. Income tax expense for the year ended December 31, 2021 was
25
$4,248,000 and includes statutory foreign tax expense from foreign taxable income offset by tax benefits, net of valuation
allowances, for tax losses in the United States.
The Company recorded net income for 2022 of $12,203,000 or $1.44 per basic and diluted share, compared with net income
of $4,671,000 or $0.55 per basic and diluted share for 2021.
Comprehensive income totaled $14,181,000 in 2022, compared with comprehensive income of $4,371,000 in 2021. The
increase was primarily related to an increase in net income of $7,532,000 and a net increase in post retirement benefit plan
adjustments of $1,732,000.
2021 Compared to 2020
Net sales for the years ended December 31, 2021 and 2020 totaled $307,483,000 and $222,356,000, respectively. Included
in total sales were tooling project sales of $23,458,000 and $11,776,000 for the years ended December 31, 2021 and 2020,
respectively. These sales are sporadic in nature and fluctuate in regard to scope and related revenue on a period-to-period
basis. Product sales, excluding tooling project sales, for the year ended December 31, 2021 were $284,025,000 compared to
$210,580,000 for the same period in 2020. The increase in sales is primarily the result of higher demand from the heavy-
duty truck, power sports, and consumer product markets and the recoupment of raw material inflation costs.
The Company's product sales for the year ended December 31, 2021 compared to the same period of 2020 by market are as
follows (in thousands):
Medium and heavy-duty truck
Power sports
Building products
Industrial and utilities
All other
Net product revenue
2021
$ 114,805
60,230
44,981
27,227
36,782
$ 284,025
2020
$ 91,078
35,226
41,026
16,400
26,850
$ 210,580
Gross margin was approximately 13.4% of sales for the year ended December 31, 2021, compared with 15.5% for the year
ended December 31, 2020. The gross margin percentage decrease was due to net changes in selling price and raw material
cost of 4.8% offset by favorable product mix and production efficiencies of 0.5% and higher fixed cost leverage of 2.3%.
Included in selling, general and administrative (“SG&A”) for the year ended December 31, 2021 are closure costs of
$2,027,000 related to the manufacturing facility in Batavia, Ohio. Excluding closing costs, remaining SG&A costs for the
year ended December 31, 2021 totaled $28,249,000, compared to $24,084,000 in 2020. The increase in SG&A expense
primarily resulted from higher labor and benefit costs of $1,355,000, insurance costs of $505,000 and higher travel costs of
$233,000. SG&A expenses for the year ended December 31, 2020 were favorably impacted from COVID-19 related
government subsidies of $1,416,000, which the Company did not receive in 2021.
Interest expense totaled $2,311,000 for the year ended December 31, 2021, compared to interest expense of $5,923,000 for
the year ended December 31, 2020. The decrease in interest expense was primarily due to incurring for the year ended
December 31, 2020 a loss on termination of interest rate swaps of $1,253,000 and a one-time expense related to the deferred
loan costs for the debt refinancing of $583,000. As a result of restructuring of the Company's debt in 2020, the Company has
lower average outstanding debt balance and lower interest rates during the year ended 2021, when compared to 2020.
Income tax expense was approximately $4,248,000 of total income before income taxes for the year ended December 31,
2021. The Company’s income tax expense for the year ended December 31, 2021 includes statutory foreign tax expense from
foreign taxable income offset by tax benefits, net of valuation allowances, for tax losses in the United States. Income tax
benefit for the year ended December 31, 2020 was $3,618,000 and includes net valuation allowance change of $2,074,000
26
and a rate benefit of $3,205,000 based on losses being carried back to years where the Company paid tax at 34% compared
to the valuation of the losses being recorded at the 21% current U.S. statutory tax rate.
The Company recorded net income for 2021 of $4,671,000 or $0.55 per basic and diluted share, compared with net income
of $8,165,000 or $0.98 per basic and diluted share for 2020.
Comprehensive income totaled $4,371,000 in 2021, compared to a comprehensive income of $8,170,000 in 2020. The
decrease was primarily related to a decrease in net income of $3,494,000 and a net decrease in hedging activities of $191,000.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow
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, capital expenditures, repayments of debt, and acquisitions.
The Company from time to time will enter into foreign exchange contracts and interest rate swaps to mitigate risk of foreign
exchange and interest rate volatility. As of December 31, 2022, the Company had outstanding foreign exchange contracts
and interest rate swaps with notional amounts totaling $13,851,000 and $24,479,000, respectively. At December 31, 2021,
the Company had no outstanding foreign exchange contracts and no outstanding interest rate swaps.
Cash provided by operating activities totaled $18,982,000 for the year ended December 31, 2022. Net income of $12,203,000
positively impacted operating cash flows. Non-cash deductions included in net income from depreciation and amortization
and share based compensation amounted to $11,884,000 and $2,329,000, respectively, positively impacted cash flows. Non-
cash increases included in net income from deferred income taxes of $3,469,000 and an increase in working capital of
$5,595,000 resulted in a decrease in cash. The decrease in cash from working capital was primarily related to net changes in
accounts receivable and other accrued expenses, offset by net changes in accounts payable and inventory.
Cash used in investing activities totaled $16,588,000 for the year ended December 31, 2022, primarily related to purchases
of property, plant and equipment for additional capacity, automation, new programs and equipment improvements at the
Company’s production facilities. Included in the $16,588,000 is approximately $8,800,000 of capacity expansion and
automation investment. The Company anticipates spending approximately $13,000,000 on property, plant and equipment
purchases for all of the Company's operations for the year ended December 31, 2023. The Company plans on using cash
from operations and its revolving line of credit and revolving capex line of credit to finance capital expenditures. At
December 31, 2022, purchase commitments for capital expenditures in progress were approximately $2,812,000.
Cash used in financing activities totaled $4,357,000 for the year ended December 31, 2022. Cash activity primarily consisted
of repayments of principal on outstanding term loans of $25,913,000 and net repayments of revolving loans of $2,560,000,
offset by proceeds from the Company's new credit facility with Huntington National Bank of $25,000,000. The Company's
deposit with FGI of $1,200,000 was utilized to repay long-term debt.
At December 31, 2022, the Company had $4,183,000 of cash on hand, an available revolving line of credit of $23,136,000
and capex line of credit of $25,000,000. If a material adverse change in the financial position of the Company should occur,
or if actual sales or expenses are substantially different than what has been forecasted, the Company's liquidity and ability to
obtain further financing to fund future operating and capital requirements could be negatively impacted.
Management believes cash on hand, cash flow from operating activities and available borrowings under the Company’s credit
agreement will be sufficient to meet the Company’s current liquidity needs.
Huntington Credit Agreement
On July 22, 2022, the Company entered into a credit agreement (the “Huntington Credit Agreement”) with The Huntington
National Bank (“Huntington”), as the sole lender, administrative agent, lead arranger and book runner, and the lenders from
time to time thereto. Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company
secured loans (the “Huntington Loans”) in the maximum aggregate principal amount of $75,000,000 ($38,689,000 of which
27
was advanced to the Company on July 22, 2022), comprised of three $25,000,000 commitments: a term loan commitment, a
CapEx loan commitment, and a revolving loan commitment.
The initial proceeds from the Huntington Credit Agreement were used in part to (i) repay all existing outstanding indebtedness
of the Company owing to Wells Fargo Bank, National Association, and FGI Equipment Finance LLC (“FGI”) and (ii) pay
certain fees and expenses associated with entering the Huntington Credit Agreement.
At the option of the Company, the Huntington Loans shall be comprised of Alternative Base Rate (ABR) Loans or Secure
Overnight Financing Rate (SOFR) Loans.
ABR Loans bear interest at a per annum rate equal to ABR plus a margin of 280 to 330 basis points determined based on the
Company’s leverage ratio. ABR is the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect
on such day plus 0.50% per annum and (c) Daily Simple SOFR for such day (taking into account any floor set forth in the
definition of “Daily Simple SOFR”) plus 1.00% per annum; provided, that if the ABR shall be less than 0.00%, then ABR
shall be deemed to be 0.00%.
SOFR Loans bear interest at a per annum rate equal to Daily Simple SOFR plus a margin of 180 to 230 basis points
determined based on the Company’s leverage ratio. Daily Simple SOFR means, for any day (a “SOFR Rate Day”), a rate per
annum equal to the greater of (a) SOFR for the day (such day, the “SOFR Determination Date”) that is five (5) U.S.
Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day,
such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government
Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR
Administrator on the SOFR Administrator’s Website, and (b) 0.00%.
The Company’s obligations under the Huntington Credit Agreement are secured by all of the U.S. and Canadian assets of the
Company, including all of its equity interests in each of the Company’s U.S. and Canadian subsidiaries and 65% of the
Company’s equity interest in its Mexican subsidiaries, and are unconditionally guaranteed by certain subsidiaries of the
Company.
The Huntington Credit Agreement contains certain customary representations and warranties, conditions, affirmative and
negative covenants and events of default. The Company is in compliance with such covenants as of December 31, 2022.
Voluntary prepayments of amounts outstanding under the Huntington Loans are permitted at any time without premium or
penalty.
The interest rate for the Huntington Revolving Loan and Huntington Term Loan was 6.12% and 6.10% as of December 31,
2022, respectively.
In connection with the credit agreement, the Company incurred debt origination fees of $402,000 related to the Huntington
Credit Agreement, which is being amortized over the life of the Credit Agreement. The aggregate unamortized deferred
financing fees as of December 31, 2022 totaled $370,000.
Huntington Term Loan
Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a Term Loan
commitment (the “Huntington Term Loan”) of $25,000,000 ($25,000,000 of which was advanced to the Company on July
22, 2022). The Huntington Term Loan is to be repaid in monthly installments beginning August 2022 of $104,000 per month
for the first 24 months, $156,000 per month for the next 24 months, $208,000 for the next 12 months and the remaining
balance to be paid on July 22, 2027.
Huntington Capex Loan
Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company secured Capex loan
(the “Huntington Capex Loan”) in the maximum aggregate principal amount of $25,000,000 (none of which was advanced
to the Company on July 22, 2022 and through December 31, 2022). Proceeds of the Huntington Capex Loan will be used to
finance the ongoing capital expenditure needs of the Company.
28
Any borrowings from the Huntington Capex Loan will be converted to new term loans annually each February, beginning
February 2025, and will have monthly principal repayments based on a sixty-month amortization period with all amounts
outstanding on the Huntington Capex Loan being fully due on July 22, 2027.
Huntington Revolving Loan
Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a revolving loan
commitment (the “Huntington Revolving Loan”) of $25,000,000 ($13,689,000 of which was advanced to the Company on
July 22, 2022). The Company has $25,000,000 of available revolving loans of which $1,864,000 is outstanding as of
December 31, 2022.
The Huntington Credit Agreement makes available to the Company a revolving commitment in the maximum amount of
$25,000,000 at the Company’s option at any time during the five-year period following the closing. The revolving loan
commitment terminates, and all outstanding borrowings thereunder must be repaid on July 22, 2027.
Leaf Capital Funding
On April 24, 2020 the Company entered into a finance agreement with Leaf Capital Funding of $175,000 for equipment. The
parties agreed to a fixed interest rate of 5.50% and a term of 60 months.
Wells Fargo Loan
On December 31, 2021, the Company had term loans (the "WF Term Loans") and a revolving loan (the "WF Revolving
loan") with Wells Fargo Bank, National Association, with balances of $13,992,000 and $4,424,000, respectively. The
Company’s term and revolving loans had variable interest rates on December 31, 2021 of 3.77% and 4.25%, respectively.
On July 22, 2022, all existing outstanding indebtedness of the Company owed to Wells Fargo Bank, National Association
was repaid in full as part of the Huntington Credit Agreement.
FGI Equipment Finance LLC Term Loan
On December 31, 2021, the Company had a term loan (the "FGI Term Loan"), evidenced by a promissory note (the "FGI
Note") with FGI, with a balance of $12,561,000. The Company’s term loan had a fixed interest rate of 8.25% at December
31, 2021. On July 22, 2022, all existing outstanding indebtedness of the Company owed to FGI was repaid in full as part of
the Huntington Credit Agreement.
At December 31, 2022, the company recorded losses of $1,234,000 from writing off outstanding deferred loan costs and
approximately $348,000 from prepayment fees associated with the FGI Term Loan.
Interest Rate Swap Agreement
The Company entered into an interest rate swap agreement that became effective July 22, 2022 and continues through July
2027, which was designed as a cash flow hedge for an initial aggregate amount of $25,000,000 of the Huntington Term Loan.
Under this agreement, the Company will pay a fixed SOFR rate of 2.95% to the swap counterparty in exchange for the Term
Loans daily variable SOFR. The fair value of the interest rate swap was an asset of $765,000 at December 31, 2022.
Shelf Registration
On December 11, 2020 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 December
16, 2020. The Registration Statement replaces an existing shelf Registration Statement which expired on November 14, 2020.
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 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
29
Long-term debt
Interest(A)
Operating lease
obligations
Contractual
commitments for
capital expenditures
Post retirement benefits
Total
legally binding on the Company and that specifies all significant terms, including: fixed or minimum quantities to be
purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Other long-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, 2022:
2023
2024
2025
2026
2027 and
after
Total
$ 1,286,000 $ 1,549,000 $ 1,885,000 $ 2,135,000 $ 17,709,000 $ 24,564,000
4,667,000
1,134,000
1,066,000
891,000
980,000
596,000
1,716,000
1,722,000
1,065,000
979,000
189,000
5,671,000
2,812,000
1,434,000
2,812,000
6,625,000
$ 8,382,000 $ 4,750,000 $ 4,351,000 $ 4,441,000 $ 22,415,000 $ 44,339,000
—
3,921,000
—
436,000
—
421,000
—
413,000
(A)Estimated future interest payments based on the effective interest rate as of December 31, 2022.
As of December 31, 2022 and 2021, the Company had no significant 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, revenue recognition
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 and 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 has determined that a
no allowance for doubtful accounts is needed at December 31, 2022 and $90,000 at December 31, 2021. 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 $502,000 at December 31, 2022
and $222,000 at December 31, 2021. There have been no material changes in the methodology of these calculations.
30
Inventories
Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or net realizable value.
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 slow moving and obsolete inventory
of $433,000 at December 31, 2022 and $362,000 at December 31, 2021.
Long-Lived Assets
Long-lived assets consist primarily of property, plant and equipment and finite-lived intangibles. 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 long-lived assets 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, 2022, 2021, and 2020.
Goodwill
The purchase consideration of acquired businesses have been allocated to the assets and liabilities acquired based on the
estimated fair values on the respective acquisition dates. Based on these values, the excess purchase consideration over the
fair value of the net assets acquired was allocated to goodwill. The Company accounts for goodwill in accordance with FASB
ASC Topic 350, Intangibles - Goodwill and Other. FASB ASC Topic 350 prohibits the amortization of goodwill and requires
these assets be reviewed for impairment at the reporting unit level.
The annual impairment tests of goodwill may be completed through qualitative assessments; however the Company may
elect to bypass the qualitative assessment and proceed directly to a quantitative impairment test for the reporting unit in any
period. The Company may resume the qualitative assessment for the reporting unit in any subsequent period.
Under a qualitative and quantitative approach, the impairment test for goodwill consists of an assessment of whether it is
more-likely-than-not that the reporting unit’s fair value is less than its carrying amount. As part of the qualitative assessment,
the Company considers relevant events and circumstances that affect the fair value or carrying amount of the Company. Such
events and circumstances could include changes in economic conditions, industry and market conditions, cost factors, overall
financial performance, reporting unit specific events and capital markets pricing. The Company places more weight on the
events and circumstances that most affect the Company's fair value or carrying amount. These factors are all considered by
management in reaching its conclusion about whether to perform step one of the impairment test. If the Company elects to
bypass the qualitative assessment for the reporting unit, or if a qualitative assessment indicates it is more-likely-than-not that
the estimated carrying value of the reporting unit exceeds its fair value, the Company proceeds to a quantitative approach.
The Company performed a qualitative analysis for the years end December 31, 2022, 2021 and 2020, and determined there
was no impairment of the Company’s goodwill.
Self-Insurance
The Company is self-insured with respect to Columbus, Ohio; Gaffney, South Carolina; Winona, Minnesota; and
Brownsville, Texas for medical, dental and vision claims and Columbus, Ohio for workers’ compensation claims, all of which
are subject to stop-loss insurance thresholds. The Company is also self-insured for dental and vision with respect to its
Cobourg, Canada location. 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, 2022 and
December 31, 2021 of $889,000 and $916,000, respectively, included within the Other Current Liabilities on the Company's
Consolidated Balance Sheets.
Post-Retirement Benefits
Management records an accrual for post retirement costs associated with the health care plan sponsored by the Company for
certain retirees. 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
31
Company's operations. The effect of a change in healthcare costs is described in Note 12 - Post Retirement Benefits. Core
Molding Technologies had a liability for post retirement healthcare benefits based on actuarially computed estimates of
$6,625,000 at December 31, 2022 and $9,080,000 at December 31, 2021.
Revenue Recognition
The Company historically has recognized revenue from two streams, product revenue and tooling revenue. Product revenue
is earned from the manufacture and sale of sheet molding compound and thermoset and thermoplastic products. Revenue
from product sales is generally recognized as products are shipped, as the Company transfers control to the customer and is
entitled to payment upon shipment. In certain circumstances, the Company recognizes revenue from product sales when
products are produced and the customer takes control at our production facility.
Tooling revenue is earned from manufacturing multiple tools, molds and assembly equipment as part of a tooling program
for a customer. Given that the Company is providing a significant service of producing highly interdependent component
parts of the tooling program, each tooling program consists of a single performance obligation to provide the customer the
capability to produce a single product. Based on the arrangement with the customer, the Company recognizes revenue either
at a point in time or over time. When the Company does not have an enforceable right to payment, the Company recognizes
tooling revenue at a point in time. In such cases, the Company recognizes revenue upon customer acceptance, which is when
the customer has legal title to the tools.
Certain tooling programs include an enforceable right to payment. In those cases, the Company recognizes revenue over time
based on the extent of progress towards completion of its performance obligation. The Company uses a cost-to-cost measure
of progress for such contracts because it best depicts the transfer of value to the customer and also correlates with the amount
of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services to the
customer. Under the cost-to-cost measure of progress, progress towards completion is measured based on the ratio of costs
incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded
proportionally as costs are incurred.
Income Taxes
The Company evaluates the balance of deferred tax assets that will be realized based on the premise that the Company is
more likely than not to realize deferred tax benefits 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. 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. The Company evaluates provisions and deferred tax assets quarterly to determine if adjustments
to our valuation allowance are required based on the consideration of all available evidence.
As of December 31, 2022 the Company had a net deferred tax asset of $3,462,000 consisting of $163,000, $893,000 and
$2,406,000 related to tax positions in Canada, Mexico and the United States, respectively. During 2022, the Company
recorded a valuation allowance of $1,154,000 against the entire state and local net loss carryforward and a portion of the
interest limitation carryforward, due to cumulative losses in the United States over the last three years and uncertainty related
to the Company’s ability to realize the deferred assets. The Company believes that the deferred tax assets associated with the
Canadian and Mexican tax jurisdictions are more-likely-than-not to be realizable based on estimates of future taxable income.
Management recognizes the financial statement effects of a tax position when it is more likely than not the position will be
sustained upon examination.
Recent Accounting Pronouncements
Current expected credit loss (CECL)
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses,” which changes the impairment model
for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans
and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s
32
“incurred loss” model and generally will result in the earlier recognition of allowances for losses. For available-for-sale debt
securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the
losses will be recognized as an allowance. Subsequent to issuing ASU 2016-13, the FASB issued ASU 2018-19, “Codification
Improvements to Topic 326, Financial Instruments - Credit Losses,” for the purpose of clarifying certain aspects of ASU
2016-13. ASU 2018-19 has the same effective date and transition requirements as ASU 2016-13. In April 2019, the FASB
issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815,
Derivatives and Hedging, and Topic 825, Financial Instruments,” which is effective with the adoption of ASU 2016-13. In
May 2019, the FASB issued ASU 2019-05, “Financial Instruments - Credit Losses (Topic 326),” which is also effective with
the adoption of ASU 2016-13. In November 2019, the FASB voted to delay the implementation date for certain companies,
including those that qualify as a smaller reporting company under SEC rules, until fiscal years beginning after December 15,
2022. We will adopt this ASU on its effective date of January 1, 2023. We do not expect the adoption of this ASU to have a
material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.
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 and Canadian Dollar. Core Molding Technologies does not hold any material market risk
sensitive instruments for trading purposes.
Core Molding Technologies has the following three items that are sensitive to market risks at December 31, 2022: (1) Term
Loans and Revolving Loan which bear a variable interest rate; (2) foreign currency purchases in which the Company
purchases Mexican Pesos or Canadian Dollars with United States dollars to meet certain obligations that arise due to
operations at the facilities located in Mexico or Canada; and (3) raw material purchases in which Core Molding Technologies
purchases various resins and fiberglass for use in production. The prices and availability of these materials are affected by
the prices certain feedstocks, transportation costs, as well as processing capacity versus demand.
Assuming a hypothetical 10% change in short-term interest rates, interest paid on the Company’s Revolving Loan and Term
Loan would impact the interest paid by the Company, as the interest rate on these loans is based upon SOFR; however, it
would not have a material effect on earnings before taxes.
Assuming a hypothetical 10% decrease in the United States dollar to Mexican Peso or Canadian Dollar exchange rates, the
Company would be impacted by an increase in operating costs, which would have an adverse effect on operating margins.
Assuming a hypothetical 10% increase in raw material costs, Core Molding Technologies would be impacted, which would
have an adverse effect on operating margins.
33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors of
Core Molding Technologies, Inc. and Subsidiaries
Columbus, Ohio
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Core Molding Technologies, Inc. and Subsidiaries (the
"Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income
(loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the
related notes and Schedule II (collectively referred to as the "financial statements"). We also have audited the Company’s
internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –
Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework:
(2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, 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 the Company’s financial statements and an opinion on the Company’s internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. 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.
Definition and Limitations of Internal Control Over Financial Reporting
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
34
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable 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.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that
there are no critical audit matters.
Crowe LLP
We have served as the Company's auditor since 2009.
Franklin, Tennessee
March 14, 2023
35
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except for per share data)
Years Ended December 31,
2021
2020
2022
$
377,376 $
307,483 $
222,356
324,974
266,139
187,882
52,402
41,344
34,474
Net sales
Total cost of sales
Gross margin
Selling, general and administrative expense
34,399
30,276
24,084
Operating income
18,003
11,068
10,390
Other income and expense
Loss due to extinguishment of debt
Net periodic post-retirement benefit
Net interest expense
Total other income and expense
1,582
(124)
1,960
3,418
—
(162)
2,311
2,149
—
(80)
5,923
5,843
Income before income taxes
14,585
8,919
4,547
Income taxes:
Current
Deferred
Total income taxes
Net income
Net income per common share:
Basic
Diluted
See notes to consolidated financial statements.
5,851
(3,469)
2,382
4,615
(367)
4,248
(5,713)
2,095
(3,618)
12,203 $
4,671 $
8,165
1.44 $
1.44 $
0.55 $
0.55 $
0.98
0.98
$
$
$
36
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands)
Net income
Other comprehensive income:
Foreign currency hedging derivatives:
Unrealized hedge gain (loss)
Income tax benefit
Interest rate hedging derivatives:
Unrealized benefit
Income tax benefit (expense)
Post retirement benefit plan adjustments:
Net actuarial gain
Prior service costs
Income tax benefit (expense)
Years Ended December 31,
2021
2020
2022
$
12,203 $
4,671 $
8,165
(85)
27
765
(161)
2,309
(496)
(381)
—
—
—
—
89
(496)
107
(452)
98
705
(160)
283
(496)
27
Comprehensive income
$
14,181 $
4,371 $
8,170
See notes to consolidated financial statements.
37
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except for share data)
$
$
Assets:
Current assets:
Cash and cash equivalents
Accounts receivable, net
Inventories, net
Foreign sales tax receivable
Prepaid expenses and other current assets
Total current assets
Right of use asset
Property, plant and equipment, net
Goodwill
Intangibles, net
Other non-current assets
Total Assets
Liabilities and Stockholders' Equity:
Liabilities:
Current liabilities:
Current portion of long-term debt
Revolving debt
Accounts payable
Contract liabilities
Accrued liabilities:
Compensation and related benefits
Other
Total current liabilities
Other non-current liabilities
Long-term debt
Post retirement benefits liability
Total Liabilities
Commitments and Contingencies
Stockholders' Equity:
Preferred stock — $0.01 par value, authorized shares - 10,000,000; no shares outstanding at
December 31, 2022 and December 31, 2021
Common stock — $0.01 par value, authorized shares - 20,000,000; outstanding shares:
8,417,656 at December 31, 2022 and 8,235,740 at December 31, 2021
Paid-in capital
Accumulated other comprehensive income, net of income taxes
Treasury stock — at cost, 3,866,451 shares at December 31, 2022 and 3,818,166 shares at
December 31, 2021
Retained earnings
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity
See notes to consolidated financial statements.
38
December 31,
2022
2021
$
4,183
$
44,261
23,871
2,680
5,670
80,665
5,114
83,267
17,376
7,619
4,574
6,146
35,261
25,129
2,665
5,941
75,142
5,577
75,897
17,376
9,567
3,133
198,615
$
186,692
1,208
$
1,864
29,586
1,395
9,101
7,643
50,797
3,516
22,986
5,191
82,490
—
84
40,342
3,053
(29,099)
101,745
116,125
3,943
4,424
22,695
6,256
7,532
8,202
53,052
4,605
21,251
7,689
86,597
—
82
38,013
1,075
(28,617)
89,542
100,095
186,692
$
198,615
$
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3(cid:28)
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
2022
Years Ended
2021
2020
$
12,203 $
4,671 $
8,165
Depreciation and amortization
Deferred income taxes
Share-based compensation
Loss on disposal of assets
Loss from extinguishment of debt
Loss on foreign currency
Change in operating assets and liabilities:
Accounts receivable
Inventories
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, plant and equipment
Net cash used in investing activities
Cash flows from financing activities:
Gross borrowings on revolving loans
Gross repayment on revolving loans
Proceeds from term loan
Payment of principal of term loan
Payment of deferred loan costs
Payments related to the purchase of treasury stock
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash paid for:
Interest
Income taxes
Non-cash investing activities:
Fixed asset purchases in accounts payable
Non-cash financing activities:
Deposit used in payment of principal on term loans
See notes to consolidated financial statements.
$
$
$
$
$
40
11,884
(3,469)
2,329
—
1,234
396
(9,000)
1,258
928
5,999
(4,067)
(713)
18,982
(16,588)
—
(16,588)
165,172
(167,732)
25,000
(25,913)
(402)
(482)
(4,357)
(1,963)
6,146
4,183 $
1,677 $
6,649 $
11,616
(475)
1,886
571
—
172
(8,952)
(6,769)
(565)
5,346
5,481
(436)
12,546
(11,569)
154
(11,415)
49,610
(45,606)
—
(3,022)
(2)
(96)
884
2,015
4,131
6,146 $
1,840 $
5,067 $
868 $
329 $
1,200 $
— $
11,662
1,097
1,355
—
—
237
4,840
3,322
(2,018)
(3,142)
2,910
(264)
28,164
(3,683)
—
(3,683)
56,793
(68,381)
30,165
(38,725)
(2,038)
(20)
(22,206)
2,275
1,856
4,131
3,854
570
147
—
Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Basis of Presentation
Core Molding Technologies and its subsidiaries operate in the engineered materials market as one operating segment as a
molder of thermoplastic and thermoset structural products. During the year ended December 31, 2022, the Company's
operating segment consisted of one component reporting unit. The Company produces and sells molded products for varied
markets, including medium and heavy-duty trucks, power sports, building products and other industrial markets. The
Company offers customers a wide range of manufacturing processes to fit various program volumes and investment
requirements. These processes include compression molding of sheet molding compound ("SMC"), resin transfer molding
("RTM"), liquid molding of dicyclopentadiene ("DCPD"), spray-up and hand-lay-up, direct long-fiber thermoplastics ("D-
LFT") and structural foam and structural web injection molding ("SIM"). Core Molding Technologies has its headquarters
in Columbus, Ohio, and operates six production facilities in Columbus, Ohio; Gaffney, South Carolina; Winona, Minnesota;
Matamoros and Escobedo, Mexico; and Cobourg, Ontario, Canada. All production facilities produce structural composite
products.
2. Summary of Significant Accounting Policies
Principles of Consolidation - The accompanying consolidated financial statements include the accounts of all subsidiaries
after elimination of all intercompany accounts, transactions, and profits.
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in
the United States 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. On an on-going basis, management evaluates its estimates and judgments. 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 and conditions.
Revenue Recognition - The Company historically has recognized revenue from two streams, product revenue and tooling
revenue. Product revenue is earned from the manufacture and sale of sheet molding compound and thermoset and
thermoplastic products. Revenue from product sales is generally recognized as products are shipped, as the Company
transfers control to the customer and is entitled to payment upon shipment. In certain circumstances, the Company recognizes
revenue from product sales when products are produced and the customer takes control at our production facility.
Tooling revenue is earned from manufacturing multiple tools, molds and assembly equipment as part of a tooling program
for a customer. Given that the Company is providing a significant service of producing highly interdependent component
parts of the tooling program, each tooling program consists of a single performance obligation to provide the customer the
capability to produce a single product. Based on the arrangement with the customer, the Company recognizes revenue either
at a point in time or over time. When the Company does not have an enforceable right to payment, the Company recognizes
tooling revenue at a point in time. In such cases, the Company recognizes revenue upon customer acceptance, which is when
the customer has legal title to the tools.
Certain tooling programs include an enforceable right to payment. In those cases, the Company recognizes revenue over time
based on the extent of progress towards completion of its performance obligation. The Company uses a cost-to-cost measure
of progress for such contracts because it best depicts the transfer of value to the customer and also correlates with the amount
of consideration to which the entity expects to be titled in exchange for transferring the promised goods or services to the
customer. Under the cost-to-cost measure of progress, progress towards completion is measured based on the ratio of costs
incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded
proportionally as costs are incurred.
41
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 three banks in three separate jurisdictions. The Company
had $4,183,000 cash on hand at December 31, 2022 and had $6,146,000 cash on hand at December 31, 2021.
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 has determined that a no allowance for doubtful accounts is needed at December 31, 2022 and $90,000 at
December 31, 2021. 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
$502,000 at December 31, 2022 and $222,000 at December 31, 2021. 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 net
realizable value. 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 slow moving and obsolete
inventory of $433,000 at December 31, 2022 and $362,000 at December 31, 2021.
Inventories, net consisted of the following (in thousands):
Raw materials and components
Work in process
Finished goods
Total inventories, net
$
$
December 31,
2022
2021
16,523 $
2,929
4,419
23,871 $
17,160
1,976
5,993
25,129
Contract Assets/Liabilities - Contract assets and liabilities represent the net cumulative customer billings, vendor payments
and revenue recognized for tooling programs. For tooling programs where net revenue recognized and vendor payments
exceed customer billings, the Company recognizes a contract asset. For tooling programs where net customer billings exceed
revenue recognized and vendor payments, the Company recognizes a contract liability. Customer payment terms vary by
contract and can range from progress payments based on work performed or one single payment once the contract is
completed. Contract assets are classified as current and are included in prepaid expenses and other current assets on the
Consolidated Balance Sheet. Contract assets as of December 31, 2022 and 2021 are $344,000 and $17,000, respectively.
During the years ended December 31, 2022 and December 31, 2021, the Company recognized no impairments on contract
assets. Contract liabilities are classified as current on the Consolidated Balance Sheets as of December 31, 2022 and 2021.
Contract liabilities as of December 31, 2022 and 2021 are $1,395,000 and $6,256,000, respectively. The Company recognized
$14,562,000 and $5,820,000 for the years ended December 31, 2022 and 2021, respectively, corresponding with revenue
from contract liabilities related to jobs outstanding at December 31, 2021 and December 31, 2020, respectively.
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.
42
Ranges of estimated useful lives for computing depreciation are as follows:
Land improvements
Buildings and improvements
Machinery and equipment
Tools, dies and patterns
20 years
20 - 40 years
3 - 15 years
3 - 5 years
Long-Lived Assets - Long-lived assets consist primarily of property, plant and equipment and finite-lived intangibles. 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 long-lived assets 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, 2022, 2021 and 2020. The Company completed the closure of the
manufacturing facility located in Batavia, Ohio as of December 31, 2021, and recognized a loss of $571,000 on the disposal
of long-lived assets at December 31, 2021.
Goodwill - The purchase consideration of acquired businesses have been allocated to the assets and liabilities acquired based
on the estimated fair values on the respective acquisition dates. Based on these values, the excess purchase consideration
over the fair value of the net assets acquired was allocated to goodwill. The Company accounts for goodwill in accordance
with FASB ASC Topic 350, Intangibles - Goodwill and Other. FASB ASC Topic 350 prohibits the amortization of goodwill
and requires these assets be reviewed for impairment at the reporting unit level.
The annual impairment tests of goodwill may be completed through qualitative assessments; however the Company may
elect to bypass the qualitative assessment and proceed directly to a quantitative impairment test for the reporting unit in any
period. The Company may resume the qualitative assessment for the reporting unit in any subsequent period.
Under a qualitative and quantitative approach, the impairment test for goodwill consists of an assessment of whether it is
more-likely-than-not that the reporting unit’s fair value is less than its carrying amount. As part of the qualitative assessment,
the Company considers relevant events and circumstances that affect the fair value or carrying amount of the Company. Such
events and circumstances could include changes in economic conditions, industry and market conditions, cost factors, overall
financial performance, reporting unit specific events and capital markets pricing. The Company places more weight on the
events and circumstances that most affect the Company's fair value or carrying amount. These factors are all considered by
management in reaching its conclusion about whether to perform step one of the impairment test. If the Company elects to
bypass the qualitative assessment for the reporting unit, or if a qualitative assessment indicates it is more-likely-than-not that
the estimated carrying value of the reporting unit exceeds its fair value, the Company proceeds to a quantitative approach.
The Company performed a qualitative analysis for the years end December 31, 2022, 2021 and 2020, and determined there
was no impairment of the Company’s goodwill.
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 11 - Income Taxes.
Self-Insurance - The Company is self-insured with respect to Columbus, Ohio; Gaffney, South Carolina; Winona,
Minnesota; and Brownsville, Texas for medical, dental and vision claims and Columbus, Ohio for workers’ compensation
claims, all of which are subject to stop-loss insurance thresholds. The Company is also self-insured for dental and vision with
respect to its Cobourg, Canada location. 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,
2022 and December 31, 2021 of $889,000 and $916,000, respectively, included within the Other Current Liabilities on the
Company's Consolidated Balance Sheets.
Post Retirement Benefits - Management records an accrual for post retirement costs associated with the health care plan
sponsored by the Company for certain retirees. Should actual results differ from the assumptions used to determine the
43
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 12
- Post Retirement Benefits. Core Molding Technologies had a liability for post retirement healthcare benefits based on
actuarially computed estimates of $6,625,000 at December 31, 2022 and $9,080,000 at December 31, 2021.
Fair Value of Financial Instruments - The Company's financial instruments historically consist of long-term debt, revolving
loans, interest rate swaps, foreign currency hedges, accounts receivable, and accounts payable. Further detail is located in
Note 14 - Fair Value of Financial Instruments.
Concentration Risks - The Company has concentration risk related to significant amounts of sales and accounts receivable
with certain customers. The Company had five major customers during the year end December 31, 2022, BRP, Inc. (“BRP”),
Navistar, Inc. (“Navistar ”), PACCAR, Inc. (“PACCAR”), Universal Forest Products, Inc. (“UFP”), and Volvo Group North
America, LLC (“Volvo”). 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. Sales to five major customers
comprised 64%, 63% and 70% of total sales in 2022, 2021 and 2020, respectively (see Note 4 - Major Customers).
Concentrations of accounts receivable balances with five customers accounted for 67% and 55% of accounts receivable at
December 31, 2022 and 2021, 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.
As of December 31, 2022, the Company employed a total of 1,986 employees, which consisted of 690 employees in the
United States, 1,073 employees in Mexico and 223 employees in Canada. The salary workforce consisted of 385 employees,
while 1,601 employees were hourly. Four plant locations making up 69.0% of the workforce are covered by collective
bargaining agreements.
Details on the collective bargaining agreements are as follows:
Plant Location
Union Name
International Association of Machinists and Aerospace Workers
("IAM")
Columbus, Ohio
Matamoros,
Mexico
Cobourg, Canada United Food & Commercial Workers Canada ("UFCW")
Sindicato de Jorneleros y Obreros
Escobedo,
Mexico
Sindicato de trabajadores de la industria metalica y del comercio
del estado de Nuevo Leon Presidente Benito Juarez Garcia
C.T.M.
Expiration Date Employees
August 9, 2025
January 1, 2024
November 1, 2025
February 1, 2023(1)
320
805
177
69
(1)The Company is currently negotiating an extension to the Escobedo, Mexico collective bargaining agreement.
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.
Certain of the Company's restricted shares are entitled to receive dividends and voting rights applicable to the Company's
common stock, irrespective of any vesting requirement. These restricted shares are considered a participating security and
the Company is required to apply the two-class method to consider the impact of the restricted shares on the calculation of
basic and diluted earnings per share. A detailed computation of earnings per share is located in Note 3 - Net Income (Loss)
per Common Share.
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.
44
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 $1.6 million, $1.3 million and $1.2 million in 2022, 2021 and 2020.
Foreign Currency - The functional currency for the Mexican and Canadian 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 remeasured at the weighted monthly average rates. Gains and losses resulting from remeasurement
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 remeasurement and transaction activity is
included in selling, general and administrative expense. This activity resulted in an expense of $401,000, $149,000 and
$214,000 in 2022, 2021 and 2020, respectively.
Recent Accounting Pronouncements
Current expected credit loss (CECL)
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses,” which changes the impairment model
for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans
and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s
“incurred loss” model and generally will result in the earlier recognition of allowances for losses. For available-for-sale debt
securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the
losses will be recognized as an allowance. Subsequent to issuing ASU 2016-13, the FASB issued ASU 2018-19, “Codification
Improvements to Topic 326, Financial Instruments - Credit Losses,” for the purpose of clarifying certain aspects of ASU
2016-13. ASU 2018-19 has the same effective date and transition requirements as ASU 2016-13. In April 2019, the FASB
issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815,
Derivatives and Hedging, and Topic 825, Financial Instruments,” which is effective with the adoption of ASU 2016-13. In
May 2019, the FASB issued ASU 2019-05, “Financial Instruments - Credit Losses (Topic 326),” which is also effective with
the adoption of ASU 2016-13. In November 2019, the FASB voted to delay the implementation date for certain companies,
including those that qualify as a smaller reporting company under SEC rules, until fiscal years beginning after December 15,
2022. We will adopt this ASU on its effective date of January 1, 2023. We do not expect the adoption of this ASU to have a
material impact on our consolidated financial position, results of operations, cash flows, or presentation thereof.
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 appreciation rights and restricted stock under the treasury stock method.
On May 13, 2021, the Company's shareholders approved the 2021 Long Term Equity Incentive Plan (the “2021 Plan”) that
replaced the 2006 Long Term Equity Incentive Plan (the “2006 Plan”) approved in May 2006 and amended in May 2015.
The 2021 Plan provides restricted stock award recipients voting rights equivalent to the Company's common stock and
accrual of dividends but not receipt of dividends until all conditions or restrictions related to such award have been satisfied.
Accordingly, the restricted shares are not considered participating shares. The 2006 Plan provides restricted stock award
recipients voting rights equivalent to the Company’s common stock and accrual and receipt of dividends irrespective of any
conditions or restrictions related to such award being satisfied. Accordingly, the restricted shares granted from the 2006 Plan
are considered a participating security and the Company is required to apply the two-class method to consider the impact of
the restricted shares on the calculation of basic and diluted earnings per share.
45
The computation of basic and diluted net income per common share is as follows (in thousands, except for per share data):
Net income
Less: net income allocated to participating securities
Net income available to common shareholders
Weighted average common shares outstanding — basic
Effect of dilutive securities
Weighted average common and potentially issuable common shares
outstanding — diluted
Basic net income per common share
Diluted net income per common share
2022
December 31,
2021
2020
$
$
$
$
12,203 $
180
12,023 $
8,356
12
8,368
1.44 $
1.44 $
4,671 $
232
4,439 $
8,062
—
8,062
0.55 $
0.55 $
8,165
424
7,741
7,936
3
7,939
0.98
0.98
The computation of basic and diluted net income per participating share is as follows (in thousands):
2022
December 31,
2021
2020
Net income allocated to participating securities
$
180 $
232
Weighted average participating shares outstanding — basic
Effect of dilutive securities
Weighted average participating and potentially issuable participating
shares outstanding — diluted
125
—
125
422
—
422
Basic net income per participating share
Diluted net income per participating share
$
$
1.44 $
1.44 $
0.55 $
0.55 $
424
434
—
434
0.98
0.98
4. Major Customers
The Company had five major customers during the year ended December 31, 2022, BRP, Navistar, PACCAR, UFP, and
Volvo. Major customers are defined as customers whose 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 these customers
could have a material adverse effect on the business of the Company.
46
The following table presents sales revenue for the above-mentioned customers for the years ended December 31 (in
thousands):
BRP product sales
BRP tooling sales
Total BRP sales
Navistar product sales
Navistar tooling sales
Total Navistar sales
PACCAR product sales
PACCAR tooling sales
Total PACCAR sales
UFP product sales
UFP tooling sales
Total UFP sales
Volvo product sales
Volvo tooling sales
Total Volvo sales
Other product sales
Other tooling sales
Total other sales
Total product sales
Total tooling sales
Total sales
5. Foreign Operations
2022
2021
2020
$
51,057 $
1,613
52,670
35,078 $
2,735
37,813
60,778
3,126
63,904
36,652
1,293
37,945
33,638
—
33,638
51,428
215
51,643
39,546
6,962
46,508
33,545
2,016
35,561
38,292
—
38,292
35,854
123
35,977
125,148
12,428
137,576
358,701
18,675
377,376 $
101,710
11,622
113,332
284,025
23,458
307,483 $
$
20,269
1,662
21,931
33,656
6,569
40,225
27,997
507
28,504
38,530
—
38,530
23,538
2,186
25,724
66,590
852
67,442
210,580
11,776
222,356
Primarily 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 (in thousands):
United States
Mexico
Canada
Other
Total
2022
2021
2020
$
$
231,391 $
113,245
26,829
5,911
377,376 $
191,667 $
88,952
22,642
4,222
307,483 $
136,424
64,942
16,827
4,163
222,356
The following table provides information related to the location of the Company's property, plant and equipment, net, as of
December 31 (in thousands):
United States
Mexico
Canada
Total
2022
2021
37,483 $
36,405
9,379
83,267 $
33,823
34,250
7,824
75,897
$
$
47
6. Property, Plant, and Equipment
Property, plant, and equipment consisted of the following at December 31 (in thousands):
Land and land improvements
Building and improvements
Machinery and equipment
Tools, dies, and patterns
Additions in progress
Total
Less accumulated depreciation
Property, plant and equipment, net
2022
2021
6,009 $
44,490
139,408
3,222
7,396
200,525
(117,258)
83,267 $
6,009
43,901
124,760
2,225
6,605
183,500
(107,603)
75,897
$
$
Additions in progress at December 31, 2022 and 2021 relate to building improvements and equipment purchases that were
not yet completed and placed in service at year end. At December 31, 2022, commitments for capital expenditures in progress
were $2,812,000 and included $868,000 recorded on the balance sheet in accounts payable. At December 31, 2021,
commitments for capital expenditures in progress were $5,315,000, and included $329,000 recorded on the balance sheet in
accounts payable. Depreciation expense was $9,655,000, $9,181,000 and $8,659,000 for the years ended December 31, 2022,
2021 and 2020, respectively.
7. Leases
The Company has operating leases with fixed and variable payment terms primarily associated with buildings and
warehouses. The Company's leases have remaining lease terms of twenty one months to fifty seven months, some of which
include options to extend the lease for five years. Operating leases are included in right-of-use ("ROU") assets, other accrued
liabilities and other non-current liabilities on the Consolidated Balance Sheets. ROU assets represent the right to use an
underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease.
The Company used the applicable incremental borrowing rate at lease inception date to measure lease liabilities and ROU
assets. The incremental borrowing rate used by the Company was based on baseline rates and adjusted by the credit spreads
commensurate with the Company’s secured borrowing rate. At each reporting period when there is a new lease initiated, the
Company will utilize the rate implicit in the lease if readily determinable and if not readily determinable, then the Company
will utilize the incremental borrowing rate to perform lease classification tests on lease components and to measure ROU
assets and lease liabilities.
The following table provides information related to the components of lease expense as of December 31 (in thousands):
Operating lease cost
Short-term lease cost
Total net lease cost
2022
2021
$
$
1,715 $
1,549
3,264 $
1,533
1,092
2,625
48
The following table provides information related to other supplemental balance sheet information related to operating leases
as of December 31, (in thousands):
Operating lease:
Operating lease right of use assets
Total operating lease right of use assets
Current operating lease liabilities (A)
Noncurrent operating lease liabilities (B)
Total operating lease liabilities
2022
2021
$
$
$
$
5,114 $
5,114 $
1,626 $
3,516
5,142 $
5,577
5,577
1,489
4,024
5,513
(A) Current operating lease liability included in "Other Current Accrued Liabilities" on the Consolidated Balance Sheets.
(B) Noncurrent operating lease liability included in "Other Non-Current Liabilities" on the Consolidated Balance Sheets.
Weighted average remaining lease term (in years):
Weighted average discount rate:
Other information related to leases as of December 31 (in thousands):
Cash Paid for amounts included in the measurement of lease liabilities
Operating cash flow from operating leases
Right of use assets obtained in exchange for new operating lease liabilities
As of December 31, 2022, maturities of lease liabilities were as follows (in thousands):
2022
2021
3.6
4.1 %
4.2
4.1 %
2022
2021
$
$
1,640 $
1,525
1,099 $
3,928
2023
2024
2025
2026
2027
Total lease payments
Less: imputed interest
Total lease obligations
Less: current obligations
Long-term lease obligations
Operating
Leases
$
$
1,716
1,722
1,065
979
189
5,671
(529)
5,142
(1,626)
3,516
49
8. Goodwill and Intangibles
Goodwill activity for the year consisted of the following at December 31, (in thousands):
Balance at beginning of year
Additions
Impairment
Balance at end of year
2022
2021
17,376 $
—
—
17,376 $
17,376
—
—
17,376
$
$
Intangible assets at December 31, 2022 were comprised of the following (in thousands):
Definite-lived Intangible Assets
Trade Name
Trademarks
Non-competition Agreement
Developed Technology
Customer Relationships
Total
Amortization
Period
25 years
10 years
5 years
7 years
10-12 years
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
$
250 $
1,610
1,810
4,420
9,330
17,420 $
(78) $
(798)
(1,795)
(3,131)
(3,999)
(9,801) $
172
812
15
1,289
5,331
7,619
Intangible assets at December 31, 2021 were comprised of the following (in thousands):
Definite-lived Intangible Assets
Trade Name
Trademarks
Non-competition Agreement
Developed Technology
Customer Relationships
Total
Amortization
Period
25 years
10 years
5 years
7 years
10-12 years
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
$
$
250 $
1,610
1,810
4,420
9,330
17,420 $
(68) $
(637)
(1,433)
(2,499)
(3,216)
(7,853) $
182
973
377
1,921
6,114
9,567
The Company incurred $1,948,000, $1,949,000 and $1,948,000 of amortization expense for the years ended December 31,
2022, 2021, and 2020, respectively.
As of December 31, 2022, future intangible amortization was follows (in thousands):
2023
2024
2025
2026
2027
2028 and thereafter
Total intangibles as of December 31, 2022
50
Amortization
Expense
$
$
1,602
1,587
952
916
916
1,646
7,619
9. Debt
Long-term debt consists of the following at (in thousands):
Wells Fargo term loans payable
FGI term loans payable
Leaf Capital term loan payable
Huntington term loans payable
Total
Less: deferred loan costs
Less: current portion
Long-term debt
December 31,
2022
December 31,
2021
$
$
— $
—
85
24,479
24,564
(370)
(1,208)
22,986 $
13,992
12,561
119
—
26,672
(1,478)
(3,943)
21,251
Huntington Credit Agreement
On July 22, 2022, the Company entered into a credit agreement (the “Huntington Credit Agreement”) with The Huntington
National Bank (“Huntington”), as the sole lender, administrative agent, lead arranger and book runner, and the lenders from
time to time thereto. Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company
secured loans (the “Huntington Loans”) in the maximum aggregate principal amount of $75,000,000 ($38,689,000 of which
was advanced to the Company on July 22, 2022), comprised of three $25,000,000 commitments: a term loan commitment, a
CapEx loan commitment, and a revolving loan commitment.
The initial proceeds from the Huntington Credit Agreement were used in part to (i) repay all existing outstanding indebtedness
of the Company owing to Wells Fargo Bank, National Association, and FGI Equipment Finance LLC (“FGI”) and (ii) pay
certain fees and expenses associated with entering the Huntington Credit Agreement.
At the option of the Company, the Huntington Loans shall be comprised of Alternative Base Rate (ABR) Loans or Secure
Overnight Financing Rate (SOFR) Loans.
ABR Loans bear interest at a per annum rate equal to ABR plus a margin of 280 to 330 basis points determined based on the
Company’s leverage ratio. ABR is the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect
on such day plus 0.50% per annum and (c) Daily Simple SOFR for such day (taking into account any floor set forth in the
definition of “Daily Simple SOFR”) plus 1.00% per annum; provided, that if the ABR shall be less than 0.00%, then ABR
shall be deemed to be 0.00%.
SOFR Loans bear interest at a per annum rate equal to Daily Simple SOFR plus a margin of 180 to 230 basis points
determined based on the Company’s leverage ratio. Daily Simple SOFR means, for any day (a “SOFR Rate Day”), a rate per
annum equal to the greater of (a) SOFR for the day (such day, the “SOFR Determination Date”) that is five (5) U.S.
Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day,
such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government
Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR
Administrator on the SOFR Administrator’s Website, and (b) 0.00%.
The Company’s obligations under the Huntington Credit Agreement are secured by all of the U.S. and Canadian assets of the
Company, including all of its equity interests in each of the Company’s U.S. and Canadian subsidiaries and 65% of the
Company’s equity interest in its Mexican subsidiaries, and are unconditionally guaranteed by certain subsidiaries of the
Company.
The Huntington Credit Agreement contains certain customary representations and warranties, conditions, affirmative and
negative covenants and events of default. The Company is in compliance with such covenants as of December 31, 2022.
51
Voluntary prepayments of amounts outstanding under the Huntington Loans are permitted at any time without premium or
penalty.
The interest rate for the Huntington Revolving Loan and Huntington Term Loan was 6.12% and 6.10% as of December 31,
2022, respectively.
In connection with the credit agreement, the Company incurred debt origination fees of $402,000 related to the Huntington
Credit Agreement, which is being amortized over the life of the Credit Agreement. The aggregate unamortized deferred
financing fees as of December 31, 2022 totaled $370,000.
Huntington Term Loan
Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a Term Loan
commitment (the “Huntington Term Loan”) of $25,000,000 ($25,000,000 of which was advanced to the Company on July
22, 2022). The Huntington Term Loan is to be repaid in monthly installments beginning August 2022 of $104,000 per month
for the first 24 months, $156,000 per month for the next 24 months, $208,000 for the next 12 months and the remaining
balance to be paid on July 22, 2027.
Huntington Capex Loan
Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company secured Capex loan
(the “Huntington Capex Loan”) in the maximum aggregate principal amount of $25,000,000 (none of which was advanced
to the Company on July 22, 2022 and through December 31, 2022). Proceeds of the Huntington Capex Loan will be used to
finance the ongoing capital expenditure needs of the Company.
Any borrowings from the Huntington Capex Loan will be converted to new term loans annually each February, beginning
February 2025, and will have monthly principal repayments based on a sixty-month amortization period with all amounts
outstanding on the Huntington Capex Loan being fully due on July 22, 2027.
Huntington Revolving Loan
Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a revolving loan
commitment (the “Huntington Revolving Loan”) of $25,000,000 ($13,689,000 of which was advanced to the Company on
July 22, 2022). The Company has $25,000,000 of available revolving loans of which $1,864,000 is outstanding as of
December 31, 2022.
The Huntington Credit Agreement makes available to the Company a revolving commitment in the maximum amount of
$25,000,000 at the Company’s option at any time during the five-year period following the closing. The revolving loan
commitment terminates, and all outstanding borrowings thereunder must be repaid on July 22, 2027.
Leaf Capital Funding
On April 24, 2020 the Company entered into a finance agreement with Leaf Capital Funding of $175,000 for equipment. The
parties agreed to a fixed interest rate of 5.50% and a term of 60 months.
Wells Fargo Loan
On December 31, 2021, the Company had term loans (the "WF Term Loans") and a revolving loan (the "WF Revolving
loan") with Wells Fargo Bank, National Association, with balances of $13,992,000 and $4,424,000, respectively. The
Company’s term and revolving loans had variable interest rates on December 31, 2021 of 3.77% and 4.25%, respectively.
On July 22, 2022, all existing outstanding indebtedness of the Company owed to Wells Fargo Bank, National Association
was repaid in full as part of the Huntington Credit Agreement.
FGI Equipment Finance LLC Term Loan
On December 31, 2021, the Company had a term loan (the "FGI Term Loan"), evidenced by a promissory note (the "FGI
Note") with FGI, with a balance of $12,561,000. The Company’s term loan had a fixed interest rate of 8.25% at December
31, 2021. On July 22, 2022, all existing outstanding indebtedness of the Company owed to FGI was repaid in full as part of
the Huntington Credit Agreement.
52
At December 31, 2022, the company recorded losses of $1,234,000 from writing off outstanding deferred loan costs and
approximately $348,000 from prepayment fees associated with the FGI Term Loan.
Interest Rate Swap Agreement
The Company entered into an interest rate swap agreement that became effective July 22, 2022 and continues through July
2027, which was designed as a cash flow hedge for an initial aggregate amount of $25,000,000 of the Huntington Term Loan.
Under this agreement, the Company will pay a fixed SOFR rate of 2.95% to the swap counterparty in exchange for the Term
Loans daily variable SOFR. The fair value of the interest rate swap was an asset of $765,000 at December 31, 2022.
Annual maturities of long-term debt are as follows (in thousands):
2023
2024
2025
2026
2027
Total long-term debt as of December 31, 2022
10. Stock Based Compensation
$
$
1,286
1,549
1,885
2,135
17,709
24,564
On May 13, 2021, the Company's shareholders approved the 2021 Long Term Equity Incentive Plan (the “2021 Plan”) that
replaced the 2006 Long Term Equity Incentive Plan (the “2006 Plan”) approved in May 2006 and amended in May 2015.
The 2021 Plan allows for grants to employees, officers, non-employee directors, consultants, independent contractors and
advisors of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock
units, and other stock-based awards (“stock awards”) up to an aggregate of 441,158 awards. Awards can be granted under
the 2021 Plan through the earlier of May 13, 2031, or the date the maximum number of available awards under the 2021 Plan
have been granted. No new awards may be granted from the 2006 Plan.
Awards under the 2021 Plan vest over one to three years and shares previously awarded and currently unvested under the
2006 Plan vest over three years. Shares granted under both the 2006 and 2021 Plans vest upon the date of a participant’s
death, disability or change in control.
The Company 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).
Restricted Stock
The Company grants shares of its common stock to certain directors and officers in the form of unvested stock (“Restricted
Stock”). These awards are measured at the fair value of Core Molding Technologies’ common stock on the date of issuance
and recognized ratably as compensation expense over the applicable vesting period.
53
The following summarizes the status of Restricted Stock and changes during the years ended December 31:
2022
2021
2020
Number
of
Shares
Wtd. Avg.
Grant Date
Fair Value
Number
of
Shares
Wtd. Avg.
Grant Date
Fair Value
Number
of
Shares
Wtd. Avg.
Grant Date
Fair Value
Unvested - beginning of
year
Granted
Vested
Forfeited
Unvested - end of year
459,420 $
287,485
(230,201)
(13,957)
502,747 $
9.79
10.39
7.87
11.28
10.46
507,835 $
250,635
(262,461)
(36,589)
459,420 $
6.35
13.74
6.89
7.66
9.79
343,919 $
292,886
(107,145)
(21,825)
507,835 $
9.37
4.70
10.21
9.86
6.35
At December 31, 2022 and 2021, there was $3,570,000 and $3,029,000, respectively, of total unrecognized compensation
expense. That cost is expected to be recognized over the weighted-average period of 1.8 years. Total compensation expense
related to restricted stock grants for the years ended December 31, 2022, 2021 and 2020 was $2,284,000, $1,762,000, and
$1,254,000, respectively, and is recorded as selling, general and administrative expense.
Tax deficiencies in connection with payment of taxes upon the vesting of restricted stock previously issued to employees for
the year ended December 31, 2022, was $79,000. Tax benefits in connection with payment of taxes upon the vesting of
restricted stock previously issued to employees for the year ended December 31, 2021 was $305,000. Tax deficiencies in
connection with payment of taxes upon the vesting of restricted stock previously issued to employees for the year ended
December 31, 2020, was $97,000.
During 2022, 2021 and 2020, employees surrendered 48,285, 7,237 and 4,574 shares, respectfully, of the Company's common
stock to satisfy income tax withholding obligations in connection with the vesting of restricted stock.
Stock Appreciation Rights
As part of the Company's 2019 annual grant, Stock Appreciation Rights (SARs) were granted with a grant price of $10. These
awards have a contractual term of five years and vest ratably over a period of three years or immediately vest if the recipient
is over 65 years of age. These awards are valued using the Black-Scholes option pricing model, and are amortized ratably as
compensation expense over a three year period.
A summary of the Company's stock appreciation rights activity for the years ended December 31, is as follows:
2022
2021
2020
Number
of
Shares
Wtd. Avg.
Grant Date
Fair Value
Number
of
Shares
Wtd. Avg.
Grant Date
Fair Value
Number
of
Shares
Wtd. Avg.
Grant Date
Fair Value
Outstanding - beginning of
year
Granted
Exercised
Forfeited
Outstanding - end of year
Exercisable - end of year
177,016 $
—
—
—
177,016 $
177,016 $
2.57
—
—
—
2.57
2.57
180,925 $
—
—
(3,909)
177,016 $
124,801 $
—
—
2.57 222,112 $
—
—
2.57 (41,187)
2.57 180,925 $
73,888 $
2.57
2.57
—
—
2.57
2.57
2.57
The average remaining contractual term for SARs outstanding at December 31, 2022 is 1.3 years, with $529,000 aggregate
intrinsic value. At December 31, 2022, there were no unrecognized compensation expense related to SARs. At December 31,
2021, there was $45,000 of total unrecognized compensation expense related to SARs.
54
Total compensation cost related to SARs for the years ended December 31, 2022, 2021 and 2020 was $45,000, $127,000 and
$101,000 respectively, all of which was recorded to selling, general and administrative expense.
11. Income Taxes
Components of the provision for income taxes are as follows (in thousands):
Current:
Federal
Foreign
State and local
Deferred:
Federal
Foreign
State and local
Provision (benefit) for income taxes
2022
2021
2020
$
$
(18) $
5,896
(27)
5,851
(3,533)
80
(16)
(3,469)
2,382 $
(388) $
4,979
24
4,615
(208)
(167)
8
(367)
4,248 $
(8,378)
2,660
5
(5,713)
955
1,098
42
2,095
(3,618)
A reconciliation of the income tax provision based on the federal statutory income tax rate to the Company's income tax
provision for the years ended December 31 is as follows (in thousands):
Provision at United States federal statutory rate
U.S. federal valuation allowance
U.S. state and local valuation allowance
Net operating loss carryback at 34% tax rate
Effect of foreign taxes
State and local tax expense
Other
Provision (benefit) for income taxes
2022
2021
2020
$
$
3,063 $
(2,363)
349
—
1,519
(391)
205
2,382 $
1,870 $
1,706
269
(137)
996
(237)
(219)
4,248 $
954
(2,493)
419
(3,205)
790
(372)
289
(3,618)
At December 31, 2022, a provision has not been made for U.S. taxes on accumulated undistributed earnings of approximately
$28,100,000 and $16,479,000 of the Company's Canadian and Mexican subsidiary, respectively, 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. It is not practicable to estimate the amount of deferred tax liability related to
investments in these foreign subsidiaries.
The Company evaluates the balance of deferred tax assets that will be realized based on the premise that the Company is
more likely than not to realize deferred tax benefits through the generation of future taxable income. Management makes
assumptions, judgments, and estimates to determine our current and deferred tax provision and also the deferred tax assets
and liabilities. The Company evaluates provisions and deferred tax assets quarterly to determine if adjustments to our
valuation allowance are required based on the consideration of all available evidence.
As of December 31, 2022 the Company had a net deferred tax asset of $3,462,000 consisting of $163,000, $893,000 and
$2,406,000 related to tax positions in Canada, Mexico and the United States, respectively. During 2022, the Company
reversed $2,363,000 of its valuation allowance on deferred tax assets related to federal tax positions in the United States, due
to tax planning strategies. As of December 31, 2022, the Company had a valuation allowance of $1,154,000 against the net
deferred tax asset related to local tax positions in the United States, due to cumulative losses over the last three years and
55
uncertainty related to the Company’s ability to realize the deferred assets. The Company believes that the deferred tax assets
associated with the Canadian and Mexican tax jurisdictions are more-likely-than-not to be realizable based on estimates of
future taxable income.
Deferred tax assets consist of the following at December 31:
Net operating loss carryforwards
Interest limitation carryforwards
Accrued liabilities
Accounts receivable
Inventory
Property, plant, and equipment
Post retirement benefits
Goodwill and finite-lived assets, net
Other, net
Total deferred tax asset
Valuation allowance for deferred tax assets
Total deferred tax asset, net
2022
2021
3,399 $
1,734
626
44
215
(5,111)
1,629
1,662
418
4,616
(1,154)
3,462 $
2,439
1,321
704
45
137
(5,216)
2,107
2,146
6
3,689
(3,168)
521
$
$
At December 31, 2022, the Company's estimated net operating loss carryforwards and interest limitation carryforwards in
the United States federal tax jurisdiction were $10,836,000 and $7,883,000, respectively. Both carryforwards do not expire.
At December 31, 2022, the Company had no net operating loss carryforwards in Canada or Mexico or jurisdictions.
At December 31, 2022 and 2021 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 United States, Mexico, Canada and various state and local jurisdictions. The
Company is subject to federal income tax examinations for tax years 2014 through 2017 but the scope of examination is
limited to adjustments resulting from Net Operating Loss carry back claims from the 2018, 2019, and 2020 tax years. The
Company is subject to federal income tax examinations for years 2018 through 2021 with unlimited scope. The Company is
not subject to state examinations for years before 2017. The Company is not subject to Mexican income tax examinations by
Mexican authorities for the years before 2017 and is not subject to Canadian income tax examinations by Canadian authorities
for the years before 2018.
12. Post Retirement Benefits
The Company provides post retirement benefits to certain of its United States and Canadian employees, including
contributions to a multi-employer defined benefit pension plan, health care and life insurance benefits, and contributions to
several defined retirement 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.
56
•
•
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, 2022 and
2021 is outlined in the table below. The most recent Pension Protection Act ("PPA") zone status is for the plan’s year-end at
December 31, 2021. 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
IAM National
Pension Fund /
National Pension
Plan (A)
Pension Protection Act Zone
Status
EIN/Pension
Plan Number
2022
2021
FIP/RP
Status
Pending/
Implemented
Contributions of the Company
2022
2021
Surcharge
Imposed
Expiration
Date of
Collective
Bargaining
Agreement
51-6031295 -
002
Red Zone as of
12/31/21
Red Zone as of
12/31/20
Implemented
$
1,191,000
$
716,000
Yes
8/7/2025
Total Contributions: $
1,191,000 $
716,000
(A)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, 2021. 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 hours per person, per
week at $1.55 per hour from August 10, 2019 through August 9, 2025. The Company is paying a surcharge of $0.16 for
each hour worked up to a maximum of 40 hours per person, per week as a result of the pension plan being in the Red Zone.
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, as part of a new collective-bargaining agreement, the post retirement health and
life insurance benefits for all current and future represented employees who were not retired were eliminated in exchange for
a one-time cash payment. Individuals who retired prior to August 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
2022, 2021 and 2020, and will result in net periodic benefit cost reductions of approximately $496,000 in 2023 and each year
thereafter during the amortization period.
57
The funded status of the Company's post retirement health and life insurance benefits plan as of December 31, 2022 and
2021 and reconciliation with the amounts recognized in the Consolidated Balance Sheets are provided below (in thousands):
Change in benefit obligation:
Benefit obligation at January 1
Interest cost
Unrecognized loss (gain)
Benefits paid, net
Benefit obligation at December 31
Plan Assets
Amounts recorded in accumulated other comprehensive income:
Prior service credit
Net loss
Total
Post Retirement Benefits
2022
2021
$
$
$
$
$
9,080
198
(2,136)
(517)
$
6,625
—
9,109
161
79
(269)
9,080
—
(4,122) $
948
(3,174) $
(4,618)
3,257
(1,361)
Weighted-average assumptions as of December 31:
Discount rate used to determine benefit obligation and net periodic benefit cost
4.9 %
2.5 %
The components of expense for all of the Company's post retirement benefit plans for the years ended December 31 (in
thousands):
Pension expense:
Multi-employer plan
Defined contribution plans
Total pension expense
Health and life insurance:
Interest cost
Amortization of prior service credits
Amortization of net loss
Net periodic benefit credit
Total post retirement benefits expense
2022
2021
2020
$
$
1,137 $
1,482
2,619
857 $
1,231
2,088
198
(496)
174
(124)
2,495 $
161
(496)
173
(162)
1,926 $
676
1,173
1,849
235
(496)
181
(80)
1,769
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, 2022, the Company recognized a net actuarial gain of $2,136,000 which is comprised of an actuarial gain of
$2,272,000, offset by differences between actual and expected benefit payments, expenses and balance sheet accruals
resulting in a loss of $136,000. For the year ended December 31, 2021, the Company recognized a net actuarial loss of
$79,000, which is comprised of an actuarial loss of $187,000, offset by differences between actual and expected benefit
payments, expenses and balance sheet accrual resulting in a gain of $108,000. The net actuarial gain and loss for the years
ended December 31, 2022 and 2021, respectively, were recorded in accumulated other comprehensive income.
Amounts not yet recognized as a component of net periodic benefit costs at December 31, 2022 and 2021 were a net credit
of $3,174,000 and $1,361,000, respectively. The amount in accumulated other comprehensive income expected to be
recognized as components of net periodic post retirement cost during 2023 consists of a prior service credit of $496,000 and
a net loss of $22,000. In addition, 2023 interest expense related to post retirement healthcare is expected to be $265,000, for
58
a total post retirement healthcare net gain of approximately $209,000 in 2023. The Company expects benefits paid in 2023
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 as of December 31, 2022 and
2021 is projected to be 5.8% and 5.4%, respectively. The rate is projected to decrease gradually to medical pre age 65 of
5.0%, medical post age 65 of 4.25% and drugs – all ages of 5.0% by the year 2029 and remain at that level thereafter. As of
December 31, 2021, the comparable assumptions for prior year were medical pre age 65 of 5.4%, medical post age 65 of
4.25% and drug - all ages of 5.0% by the year 2027.
The estimated future benefit payments of the health care plan for the next ten years are as follows (in thousands):
2023
2024
2025
2026
2027
2028 - 2032
Postretirement
Health Care
Benefits Plan
$
1,434
413
421
436
424
2,142
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
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 hierarchical valuation methodology provides a fair value
framework that describes the categorization of assets and liabilities in 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 cash and cash equivalents, accounts receivable, accounts payable, debt,
interest rate swaps and foreign currency derivatives. Cash and cash equivalents, accounts receivable and accounts payable
carrying values as of December 31, 2022 and December 31, 2021 approximate fair value due to the short-term maturities of
these financial instruments. As of December 31, 2022, the carrying amounts of the Huntington Term Loan and Huntington
Revolving Loan approximated fair value due to the short-term nature of the underlying variable rate SOFR agreements. As
of December 31, 2021, the carrying amounts of the WF Term Loans and WF Revolving Loan approximated fair value due
to the short-term nature of the underlying variable rate LIBOR agreements. The FGI Term Loan approximated fair value as
59
of December 31, 2021 due to the immaterial movement in interest rates since the Company entered into the FGI Note on
October 20, 2020. The Company had Level 2 fair value measurements at December 31, 2022 relating to the Company’s
interest rate swaps and foreign currency derivatives.
Derivative and hedging activities
Foreign currency derivatives
The Company conducted business in foreign countries and paid certain expenses in foreign currencies; therefore, the
Company was exposed to foreign currency exchange risk between the U.S. Dollar and foreign currencies, which could impact
the Company’s operating income and cash flows. To mitigate risk associated with foreign currency exchange, the Company
entered into forward contracts to exchange a fixed amount of U.S. Dollars for a fixed amount of foreign currency, which will
be used to fund future foreign currency cash flows. At inception, all forward contracts are formally documented as cash flow
hedges and are measured at fair value each reporting period.
Derivatives are formally assessed both at inception and at least quarterly thereafter, to ensure that derivatives used in hedging
transactions are highly effective in offsetting changes in cash flows of the hedged item. If it is determined that a derivative
ceases to be a highly effective hedge, or if the anticipated transaction is no longer probable of occurring, hedge accounting
is discontinued, and any future mark-to-market adjustments are recognized in earnings. The effective portion of gain or loss
is reported in other comprehensive income and the ineffective portion is reported in earnings. The impacts of these contracts
were largely offset by gains and losses resulting from the impact of changes in exchange rates on transactions denominated
in the foreign currency. As of December 31, 2022 and 2021 the Company had no ineffective portion related to the cash flow
hedges.
Interest Rate Swaps
The Company entered into an interest rate swap contract to fix the interest rate on an initial aggregate amount of $25,000,000
thereby reducing exposure to interest rate changes. The interest rate swap pays a fixed rate of 2.95% to the swap counterparty
in exchange for daily SOFR. At inception, all interest rate swaps were formally documented as cash flow hedges and are
measured at fair value each reporting period. See Note 9, "Debt", for additional information.
Financial statements impacts
The following table detail amounts related to our derivatives designated as hedging instruments (in thousands):
Fair Value of Derivative Instruments
December 31, 2022
Asset Derivatives
Liability Derivatives
Balance Sheet Location
Prepaid expenses other current
assets
Other non-current assets
Prepaid expenses other current
assets
Other non-current assets
Foreign exchange
contracts
Notional Contract values
Interest rate swaps
Notional Contract values
Fair Value Balance Sheet Location
Fair Value
$
$
$
$
$
$
72 Accrued other liabilities
$
— Other non-current liabilities $
157
—
3,379
$
10,472
280 Accrued other liabilities
$
485 Other non-current liabilities $
$
24,479
—
—
—
At December 31, 2021 the Company had no derivatives designated as hedging instruments.
60
As of December 31, 2022, the Company had foreign exchange contracts related to the Mexican Peso with an exchange rate
of 20.27 and the Canadian Dollar with exchange rates ranging from 1.31 to 1.36.
The following tables summarize the amount of unrealized / realized gain and loss recognized in Accumulated Comprehensive
Income (AOCI) for the years ended December 31, 2022, 2021 and 2020 (in thousands):
Derivatives in
subtopic 815-20
Cash Flow
Hedging
Relationship
Amount of Unrealized Gain or
(Loss) Recognized in Accumulated
Other Comprehensive Income on
Derivative
2021
2020
2022
Location of Gain or
(Loss) Reclassified
from Accumulated
Other Comprehensive
Income(A)
Amount of Realized Gain or (Loss)
Reclassified from Accumulated
Other Comprehensive Income
2021
2020
2022
Foreign exchange contracts
Interest rate swaps
$
$
(82) $
— $
770 $
— $
142 Cost of goods sold
Selling, general and
administrative expense $
$
(915) Interest Expense
$
3 $
— $
5 $
— $
— $
— $
526
68
(1,620)
(A) The foreign currency derivative activity reclassified from Accumulated Other Comprehensive Income is allocated to
cost of goods sold and selling, general and administrative expense based on the percentage of foreign currency spend.
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, 2022 and 2021 (in thousands):
2021:
Balance at January 1, 2021
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income
Income tax (expense) benefit
Balance at December 31, 2021
2022:
Balance at January 1, 2022
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive income
Income tax (expense) benefit
Balance at December 31, 2022
Post
Retirement
Benefit Plan
Items(A)
Hedging
Derivative
Activities
Total
$
$
$
$
— $
—
—
—
— $
— $
688
(8)
(134)
546 $
1,375 $
(84)
(323)
107
1,075 $
1,075 $
2,136
(323)
(381)
2,507 $
1,375
(84)
(323)
107
1,075
1,075
2,824
(331)
(515)
3,053
(A) The effect of post-retirement benefit items reclassified from Accumulated Other Comprehensive Income is included in
other income and expense on the Consolidated Statements of Operations. These Accumulated Other Comprehensive
Income components are included in the computation of net periodic benefit cost (see Note 12 - 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 Operations.
61
16. Quarterly Results of Operations (Unaudited)
The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2022, 2021
and 2020 (in thousands).
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Year
2022:
Product sales
Tooling sales
Net sales
Gross margin
Operating income
Net income
Net income per common share:
Basic (1)
Diluted (1)
2021:
Product sales
Tooling sales
Net sales
Gross margin
Operating income (loss)
Net income (loss)
Net income (loss) per common share:
Basic (1)
Diluted (1)
2020:
Product sales
Tooling sales
Net sales
Gross margin
Operating income (loss)
Net income (loss)
Net income (loss) per common share:
Basic (1)
Diluted (1)
$
$
$
$
$
$
$
$
$
89,901 $
691
90,592
14,507
6,012
3,864
93,317 $
5,418
98,735
13,045
4,385
2,188
92,340 $
9,266
101,606
13,303
4,632
1,319
83,143 $
3,300
86,443
11,547
2,974
4,832
358,701
18,675
377,376
52,402
18,003
12,203
0.46 $
0.46 $
0.26 $
0.26 $
0.16 $
0.16 $
0.57 $
0.57 $
1.44
1.44
69,133 $
3,696
72,829
12,718
5,346
3,456
79,117 $
1,344
80,461
13,736
6,173
4,086
67,643 $
13,382
81,025
6,415
(2,393)
(3,312)
68,132 $
5,036
73,168
8,475
1,942
441
284,025
23,458
307,483
41,344
11,068
4,671
0.41 $
0.41 $
0.48 $
0.48 $
(0.41) $
(0.41) $
0.05 $
0.05 $
0.55
0.55
61,930 $
2,093
64,023
10,766
4,261
7,961
35,847 $
1,959
37,806
2,903
(1,206)
(2,272)
54,240 $
5,633
59,873
10,838
4,321
3,343
58,563 $
2,091
60,654
9,967
3,014
(867)
210,580
11,776
222,356
34,474
10,390
8,165
0.97 $
0.97 $
(0.29) $
(0.29) $
0.39 $
0.39 $
(0.10) $
(0.10) $
0.98
0.98
(1) Sum of the quarters may not sum to total year due to rounding.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
62
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 of 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, 2022.
The Company's independent registered public accounting firm, Crowe LLP, audited our internal control over financial
reporting as of December 31, 2022, 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, 2022.
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 controls over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
63
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 11, 2023, 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 11, 2023, 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
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, 2022:
Plan Category
Equity compensation plans approved by stockholders
Number of Shares
to be Issued Upon
Exercise of
Outstanding
Options or
Vesting (1)
Weighted
Average
Exercise Price
of Outstanding
Options (2)
555,675 $
12.99
Number of
Shares
Remaining
Available for
Future Issuance
441,158
(1) This amount includes outstanding awards under the Company's 2021 Long Term Equity Incentive Plan (the "2021
Plan") and the 2006 Long Term Equity Incentive Plan (the "2006 Plan"). Includes (i) 502,747 shares issuable
pursuant to restricted stock awards and (ii) 52,928 shares issuable pursuant to outstanding stock appreciation rights,
based on the Company's December 31, 2022 closing stock price.
(2) Weighted average exercise price shown in this table above does not take into account restricted stock awards.
Other 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 11, 2023, 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 AND 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 11, 2023, 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.
64
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 11, 2023, 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.
65
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, 2022, 2021,
and 2020
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.
ITEM 16. FORM 10-K SUMMARY
Not Applicable.
66
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/ David L. Duvall
David L. Duvall
President and Chief Executive Officer
March 14, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has signed below by the following persons
been on behalf of the registrant and in the capacities and on the dates indicated:
/s/ David L. Duvall
David L. Duvall
/s/ John P. Zimmer
John P. Zimmer
*
Sandra L. Kowaleski
*
Thomas R. Cellitti
*
James F. Crowley
*
Ralph O. Hellmold
*
Matthew Jauchius
*
Andrew O. Smith
*By /s/ John P. Zimmer
John P. Zimmer
President, Chief Executive Officer, and
Director (Principal Executive Officer)
March 14, 2023
Vice President, Secretary, Treasurer,
and Chief Financial Officer (Principal
Financial Officer and Principal
Accounting Officer)
March 14, 2023
Director
Director
Director
Director
Director
Director
March 14, 2023
March 14, 2023
March 14, 2023
March 14, 2023
March 14, 2023
March 14, 2023
Attorney-In-Fact
March 14, 2023
67
Core Molding Technologies, Inc. and Subsidiaries
Schedule II
Consolidated valuation and qualifying accounts and reserves for the years ended December 31, 2022, 2021 and 2020.
Reserves deducted from asset to which it applies:
Allowance for Doubtful Accounts
Additions
Balance at
Beginning of
Year
(Recovered)/
Charged to
Costs &
Expenses
Charged to
Other
Accounts
Deductions(A)
Balance at
End
of Year
Year Ended December 31, 2022
Year Ended December 31, 2021
Year Ended December 31, 2020
$
$
$
90,000 $
41,000 $
50,000 $
(90,000) $ — $
— $
51,000 $
— $
27,000 $
— $
2,000 $
36,000 $
—
90,000
41,000
Customer Chargeback Allowance
Additions
Year Ended December 31, 2022
Year Ended December 31, 2021
Year Ended December 31, 2020
(Recovered)/
Charged to
Costs &
Expenses
Balance at
Beginning of
Year
222,000 $
179,000 $
476,000 $
$
$
$
Charged to
Other
Accounts
Deductions(B)
Balance at
End
of Year
736,000 $
83,000 $
291,000 $
— $
— $
— $
456,000 $
40,000 $
588,000 $
502,000
222,000
179,000
(A) Amount represents uncollectible accounts written off.
(B) Amount represents customer returns and deductions, discounts and price adjustments accepted.
68
INDEX TO EXHIBITS
Exhibit No.
3(a)(1)
Description
Location
Certificate of Incorporation of Core Molding
Technologies, Inc. as filed with the Secretary of
State of Delaware on October 8, 1996
Incorporated by reference to Exhibit 4(a) to
Registration Statement on Form S-8 (Registration
No. 333-29203)
3(a)(2)
3(a)(3)
3(a)(4)
3(a)(5)
3(b)(1)
3(b)(2)
Certificate of Amendment of Certificate of
Incorporation of Core Molding Technologies, Inc.
as filed with the Secretary of State of Delaware on
November 6, 1996
Incorporated by reference to Exhibit 4(b) to filed
with the Secretary of State of Delaware on
November 6, 1996 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 B Junior Participating Preferred Stock as
filed with the Secretary of State of Delaware on
April 21, 2020
Incorporated by reference to Exhibit 3.1 to Form 8-
K filed April 22, 2020
Certificate of Elimination of the Series A Junior
Participant Preferred Stock as filed with the
Delaware Sec. of State on April 1, 2021
Incorporated by reference to Exhibit 3(a)(5) to
Form 8-K filed April 6, 2021
Amended and Restated By-Laws of Core Molding
Technologies, Inc.
Incorporated by reference to Exhibit 3.1 to Current
Report on Form 8-K filed January 4, 2008
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
4
Description of Securities
Filed Herein
10(a)
10(b)
10(b)(1)
10(b)(2)
Supply Agreement, dated August 4, 2014 between
Core Molding Technologies, Inc. and Core
Composites Corporation and Navistar, Inc.2
Incorporated by reference to Exhibit 10(a) to
Quarterly Report on Form 10-Q for the quarter
ended September 30, 2014
Credit Agreement, dated October 27, 2020,
between Core Molding Technologies, Inc. and
Wells Fargo Bank, National Association, as
administrative agent, lead arranger and book
runner, and the lenders party thereto.
Master Security Agreement, dated as of October 20,
2020, among FGI Equipment Finance LLC, Core
Molding Technologies, Inc. as debtor, and each of
Core Composites Corporation and CC HPM, S. de
R.L. de C.V., as guarantors
Promissory Note, dated October 20, 2020, between
Core Molding Technologies, Inc. and FGI
Equipment Finance LLC.
69
Incorporated by reference to Exhibit 10.1 to Form
8-K filed November 2, 2020
Incorporated by reference to Exhibit 10.2 to Form
8-K filed November 2, 2020
Incorporated by reference to Exhibit 10.3 to Form
8-K filed November 2, 2020
Exhibit No.
10(c)
Description
Core Molding Technologies, Inc. Employee Stock
Purchase Plan1
Location
Incorporated by reference to Exhibit 4(c) to
Registration Statement on Form S-8 (Registration
No. 333-60909).
10(c)(1)
10(d)
2002 Core Molding Technologies, Inc. Employee
Stock Purchase Plan (as amended May 17, 2006)1
Incorporated by reference to Exhibit 10.3 to
Current Report on Form 8-K dated May 23, 2006
2006 Core Molding Technologies, Inc. Long Term
Equity Incentive Plan as amended and restated
effective May 12, 20171
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K dated May 15, 2017
10(e)
10(f)
10(g)
10(h)
10(i)
10(j)
10(k)
10(l)
Core Molding Technologies, Inc. Executive Cash
Incentive Plan1
Incorporated by reference to Exhibit A to Definitive
Proxy Statement on Schedule 14A dated April 8,
2016
Core Molding Technologies, Inc. Salaried
Employee Bonus Plan2
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K dated December 9,
2020
Form of Restricted Stock Agreement between Core
Molding Technologies, Inc. and certain executive
officers1
Incorporated by reference to Exhibit 10.2 to
Current Report on Form 8-K dated May 15, 2012
Form of Award for Stock Appreciation Rights
between Core Molding Technologies, Inc. and
certain executive officers1
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed May 20, 2019
Form of Restricted Stock Agreement between Core
Molding Technologies, Inc. and certain executive
officers, dated August 6, 20211
Incorporated by reference to Exhibit 10(m) to
Quarterly Report on Form 10-Q for the quarter
ended June 30, 2021
Form of Executive Employment Agreement
between David L. Duvall and Core Molding
Technologies, Inc, dated August 6, 20211
Incorporated by reference to Exhibit 10(n) to
Quarterly Report on Form 10-Q for the quarter
ended June 30, 2021
Form of Executive Employment Agreement
between Core Molding Technologies, Inc. and
certain executive officers, dated August 6, 20211
Incorporated by reference to Exhibit 10(q) to
Current Report on Form 10-Q filed on August 6th,
2021
Credit Agreement, dated July 22, 2022 between
Core Molding Technologies, Inc. and The
Huntington National Bank, as administrative agent,
sole lead arranger and sole bookrunner, and the
lenders from time to time thereto
Incorporated by reference to Exhibit 10.1 to
Current Report on Form 8-K filed on July 28, 2022
11
Computation of Net Income per Share
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
21
List of Subsidiaries
Filed Herein
70
Exhibit No.
Description
Location
23
24
31(a)
31(b)
32(a)
32(b)
Consent of Crowe LLP
Powers of Attorney
Section 302 Certification by David L. Duvall,
President, Chief Executive Officer, and Director
Section 302 Certification by John P. Zimmer, Vice
President, Secretary, Treasurer, and Chief Financial
Officer
Certification of David L. Duvall, Chief Executive
Officer of Core Molding Technologies, Inc., dated
March 14, 2022, pursuant to 18 U.S.C. Section
1350
Filed Herein
Filed Herein
Filed Herein
Filed Herein
Filed Herein
Certification of John P. Zimmer, Chief Financial
Officer of Core Molding Technologies, Inc., dated
March 14, 2022, pursuant to 18 U.S.C. Section
1350
Filed Herein
101.INS
XBRL Instance Document
Filed Herein
101.SCH
XBRL Taxonomy Extension Schema Document
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
104
Cover Page Interactive Data File (formatted in
Inline XBRL and contained in Exhibit 101)
Filed Herein
1.
Indicates management contracts or compensatory plans that are required to be filed as an exhibit to this Annual Report
on Form 10-K.
2. 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.
71
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SELECTED FINANCIAL HIGHLIGHTS (dollars in millions except per share numbers)YEARS ENDED DECEMBER 3120222021202020192018Net Sales377.4307.5222.4284.3269.5Operating Income (loss)18.011.110.4(11.5)(3.1)Net Income (loss)12.24.78.2(15.2)(4.8)Net Income (loss) per common share: Basic1.440.550.98(1.94)(0.62)Net Income (loss) per common share: Diluted1.440.550.98(1.94)(0.62)Stockholders’ equity116.1100.193.984.498.9Core Molding Technologies, Inc. and its subsidiaries operate in the engineered materials market as one operating segment as a molder of thermoplastic and thermoset structural products. The Company produces and sells molded products for varied markets, including medium and heavy-duty trucks, automobiles, power sports, construction and agriculture, building products and other commercial markets. Core Molding Technologies has its headquarters in Columbus, Ohio, and operates six production facilities in three countries, the United States, Canada and Mexico. CORE MOLDING TECHNOLOGIES, INC. ANNUAL REPORT TO SHAREHOLDERS2022INVESTOR INFORMATIONShare Trading Shares of Core Molding Technologies common stock are traded on the NYSE American LLC under the symbol “CMT.”Notice of Annual Meeting The Company’s 2023 annual meeting will be held on May 11, 2023. 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 OFFICERSDavid L. Duvall President and Chief Executive OfficerRenee R. Anderson Executive Vice President of Human ResourcesJ. Chris Highfield Executive Vice President of Sales and MarketingEric Palomaki Executive Vice President of OperationsJohn P. Zimmer Executive Vice President, Secretary, Treasurer and Chief Financial OfficerBOARD OF DIRECTORSThomas R. Cellitti, ChairmanJames F. CrowleyDavid L. Duvall Ralph O. HellmoldMatthew E. JauchiusSandra L. KowaleskiAndrew O. Smith CORE MOLDING TECHNOLOGIES, INC.800 Manor Park Drive Columbus, OH 43228 www.coremt.comANNUAL REPORT