Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020March 31, 2021
OR
o☐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)
Delaware31-1481870
(State or other jurisdiction
incorporation or organization)
(I.R.S. Employer Identification No.)
800 Manor Park Drive, Columbus, Ohio43228-0183
(Address of principal executive office)(Zip Code)
Registrant’s telephone number, including area code (614) 870-5000
N/A

Former name, former address and former fiscal year, if changed since last report.
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 þ☒ No o¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ☒ No o¨
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 definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company,” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o¨
Accelerated filer o¨
Non-accelerated filer oFiler ¨
Smaller reporting companyþ
☒
(Do not check if a smaller reporting company)
Emerging growth companyo
☐
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. o¨

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o☐ No þ

☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each className of each exchange on which registeredTrading Symbol
Common Stock, par value $0.01NYSE American LLCCMT

As of August 7, 2020,May 6, 2021, the latest practicable date, 8,501,2298,484,477 shares of the registrant’s common stock were issued, which includes 535,940496,677 shares of unvested restricted common stock.

Table of Contents

Table of Contents


Part I — Financial Information
Part I — Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income (Loss)Operations
3
Consolidated Statements of Comprehensive Income (Loss)
4
Consolidated Balance Sheets
5
Consolidated StatementsStatement of Stockholders’ Equity
6
Consolidated Statements of Cash Flows
87
Notes to Consolidated Financial Statements
98
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2522
Item 3. Quantitative and Qualitative Disclosures About Market Risk
3228
Item 4. Controls and Procedures
3329
Part II — Other Information
Item 1. Legal Proceedings
3430
Item 1A. Risk Factors
3430
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
3430
Item 3. Defaults Upon Senior Securities
3430
Item 4. Mine Safety Disclosures
3430
Item 5. Other Information
3430
Item 6. Exhibits
3430
Signatures
3531
Index to Exhibits
3632



2
Table of Contents
Part I — Financial Information
Item 1. Financial Statements
Part I — Financial Information
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Income (Loss)Operations
(In thousands, except for per share data)
(Unaudited)

Three Months Ended
Six Months Ended
June 30,
June 30,Three months ended
March 31,
2020
2019
2020 201920212020
Net sales$37,806,000
 $81,247,000
 101,830,000
 153,513,000
Net sales$72,829 $64,023 
       
Cost of sales34,903,000
 72,756,000
 88,161,000
 141,872,000
Cost of sales60,111 53,257 
       
Gross margin2,903,000

8,491,000

13,669,000

11,641,000
Gross margin12,718 10,766 
       
Selling, general and administrative expense4,109,000
 7,224,000
 10,614,000
 14,390,000
Selling, general and administrative expense7,372 6,505 
       
Operating income (loss)(1,206,000) 1,267,000
 3,055,000
 (2,749,000)
Operating incomeOperating income5,346 4,261 
       
Other income and expense       Other income and expense
Interest expense1,197,000
 869,000
 2,371,000
 1,765,000
Interest expense579 1,174 
Net periodic post-retirement benefit(20,000) (24,000) (40,000) (48,000)Net periodic post-retirement benefit(40)(20)
Total other income and expense1,177,000
 845,000
 2,331,000
 1,717,000
Total other expenseTotal other expense539 1,154 
       
Income (loss) before taxes(2,383,000) 422,000
 724,000
 (4,466,000)
Income before taxesIncome before taxes4,807 3,107 
       
Income tax expense (benefit)(111,000)
213,000

(4,965,000)
(830,000)Income tax expense (benefit)1,351 (4,854)
       
Net income (loss)$(2,272,000)
$209,000

$5,689,000

$(3,636,000)
Net incomeNet income$3,456 $7,961 
       
Net income (loss) per common share:       
Net income per common share:Net income per common share:
Basic$(0.29)
$0.03

$0.67

$(0.47)Basic$0.41 $0.97 
Diluted$(0.29)
$0.03

$0.67

$(0.47)Diluted$0.41 $0.97 
See notes to unaudited consolidated financial statements.

3

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Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(Unaudited)

 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Net income (loss)$(2,272,000) $209,000
 $5,689,000
 $(3,636,000)
        
Other comprehensive income (loss):       
        
Foreign currency hedging derivatives:       
Unrealized hedge gain (loss)803,000
 270,000
 (871,000) 794,000
Income tax benefit (expense)(174,000) (68,000) 186,000
 (202,000)
        
Interest rate swaps:       
Unrealized hedge gain (loss)61,000
 (468,000) (722,000) (722,000)
Income tax benefit (expense)(14,000) 106,000
 164,000
 164,000
        
Post retirement benefit plan adjustments:       
Net actuarial gain45,000
 31,000
 90,000
 60,000
Prior service costs(124,000) (125,000) (248,000) (250,000)
   Income tax benefit16,000
 20,000
 33,000
 40,000
        
Comprehensive income (loss)$(1,659,000) $(25,000) $4,321,000
 $(3,752,000)
Three months ended
March 31,
20212020
Net income$3,456 $7,961 
Other comprehensive income:
Foreign currency hedging derivatives:
Unrealized hedge loss0 (1,674)
Income tax benefit0 360 
Interest rate swaps:
Unrealized hedge loss0 (783)
Income tax benefit0 178 
Post retirement benefit plan adjustments:
Net actuarial gain43 45 
Prior service costs(124)(124)
Income tax benefit17 17 
Comprehensive income$3,392 $5,980 
See notes to unaudited consolidated financial statements.

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Core Molding Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
 June 30, 2020 December 31,
 (Unaudited) 2019
Assets:   
Current assets:   
Cash and cash equivalents$4,604,000
 $1,856,000
Accounts receivable, net21,582,000
 32,424,000
Inventories, net16,225,000
 21,682,000
Income tax receivable6,870,000
 652,000
Prepaid expenses and other current assets2,248,000
 4,611,000
Total current assets51,529,000
 61,225,000
    
Right of use asset3,832,000
 4,484,000
Property, plant and equipment, net76,528,000
 79,206,000
Goodwill17,376,000
 17,376,000
Intangibles, net12,490,000
 13,464,000
Other non-current assets3,363,000
 3,551,000
Total Assets$165,118,000
 $179,306,000
    
Liabilities and Stockholders’ Equity:   
Current liabilities:   
Current portion of long-term debt$35,360,000
 $49,451,000
Accounts payable11,955,000
 19,910,000
Contract liabilities3,078,000

3,698,000
Compensation and related benefits6,508,000
 5,515,000
Accrued other liabilities6,973,000
 5,260,000
Total current liabilities63,874,000
 83,834,000
    
Long-term debt135,000
 —
Other non-current liabilities3,703,000
 3,119,000
Post retirement benefits liability7,954,000
 7,927,000
Total Liabilities$75,666,000
 $94,880,000
Commitments and Contingencies—
 —
Stockholders’ Equity:   
Preferred stock — $0.01 par value, authorized shares — 10,000,000; no shares outstanding at June 30, 2020 and December 31, 2019—
 —
Common stock — $0.01 par value, authorized shares – 20,000,000; outstanding shares: 7,965,289 at June 30, 2020 and 7,877,945 December 31, 201980,000
 79,000
Paid-in capital35,476,000
 34,772,000
Accumulated other comprehensive income (loss), net of income taxes2,000
 1,370,000
Treasury stock - at cost, 3,806,355 at June 30, 2020 and December 31, 2019(28,501,000) (28,501,000)
Retained earnings82,395,000
 76,706,000
Total Stockholders’ Equity89,452,000
 84,426,000
Total Liabilities and Stockholders’ Equity$165,118,000
 $179,306,000
(In thousands, except for share data)

(Unaudited)
March 31,
2021		December 31,
2020
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents$3,027 $4,131 
Accounts receivable, net40,202 27,584 
Inventories, net20,373 18,360 
Income tax receivable2,255 2,026 
Prepaid expenses and other current assets3,966 4,377 
Total current assets69,823 56,478 
Right of use asset4,346 2,754 
Property, plant and equipment, net74,000 74,052 
Goodwill17,376 17,376 
Intangibles, net11,029 11,516 
Other non-current assets3,211 3,332 
Total Assets$179,785 $165,508 
Liabilities and Stockholders’ Equity:
Current liabilities:
Current portion of long-term debt$2,938 $2,535 
Revolving debt3,001 420 
Accounts payable25,465 16,994 
Taxes payable1,041 2,613 
Contract liability2,153 1,319 
Compensation and related benefits7,300 8,305 
Accrued other liabilities4,411 3,809 
Total current liabilities46,309 35,995 
Other non-current liabilities3,893 2,560 
Long-term debt24,226 25,198 
Post retirement benefits liability7,762 7,823 
Total Liabilities82,190 71,576 
Commitments and Contingencies0 0 
Stockholders’ Equity:
Preferred stock — $0.01 par value, authorized shares — 10,000,000; 0 shares outstanding at March 31, 2021 and December 31, 20200 0 
Common stock — $0.01 par value, authorized shares – 20,000,000; outstanding shares 7,987,800 at March 31, 2021 and 7,980,516 at December 31, 202080 80 
Paid-in capital36,445 36,127 
Accumulated other comprehensive income, net of income taxes1,311 1,375 
Treasury stock - at cost, 3,810,929 at March 31, 2021 and December 31, 2020(28,568)(28,521)
Retained earnings88,327 84,871 
Total Stockholders’ Equity97,595 93,932 
Total Liabilities and Stockholders’ Equity$179,785 $165,508 
See notes to unaudited consolidated financial statements.

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Core Molding Technologies, Inc. and Subsidiaries
Consolidated StatementsStatement of Stockholders’ Equity
(Unaudited)(In thousands, except for share data)


(Unaudited)
For the three months ended June 30, 2019:March 31, 2020:
Common Stock
Outstanding		Paid-In
Capital		Accumulated
Other
Comprehensive
Income		Treasury
Stock		Retained
Earnings		Total
Stockholders'
Equity
SharesAmount
Balance at December 31, 20197,877,945 $79 $34,772 $1,370 $(28,501)$76,706 $84,426 
Net income7,961 7,961 
Change in post retirement benefits, net of tax benefit of $17(62)(62)
Unrealized foreign currency hedge loss, net of tax benefit of $360(1,314)(1,314)
Change in interest rate swaps, net of tax benefit of $178(605)(605)
Restricted stock vested4,771 — — 
Share-based compensation316 316 
Balance at March 31, 20207,882,716 $79 $35,088 $(611)$(28,501)$84,667 $90,722 
 
Common Stock
Outstanding
 
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income
 Treasury Stock Retained
Earnings		 
Total
Stockholders’
Equity
 Shares Amount    
Balance at March 31, 20197,785,161
 $78,000
 $33,558,000
 $2,236,000
 $(28,403,000) $88,084,000
 $95,553,000
Net income          209,000
 209,000
Change in post retirement benefits, net of tax benefit of $20,000      (75,000)     (75,000)
Change in unrealized foreign currency hedge, net of tax of $68,000      202,000
     202,000
Change in interest rate swaps, net of tax benefit of $106,000      (362,000)     (362,000)
Purchase of treasury stock(7,744)       (60,000)   (60,000)
Restricted stock vested77,319
 1,000
         1,000
Share-based compensation    516,000
       516,000
Balance at June 30, 20197,854,736
 $79,000
 $34,074,000
 $2,001,000
 $(28,463,000) $88,293,000
 $95,984,000


For the six months ended June 30, 2019:
 Common Stock
Outstanding		 Paid-In
Capital		 Accumulated
Other
Comprehensive
Income		 Treasury Stock Retained
Earnings		 Total
Stockholders’
Equity
 Shares Amount    
Balance at December 31, 20187,776,164
 $78,000
 $33,208,000
 $2,117,000
 $(28,403,000) $91,929,000
 $98,929,000
Net loss          (3,636,000) (3,636,000)
Change in post retirement benefits, net of tax benefit of $40,000      (150,000)     (150,000)
Change in unrealized foreign currency hedge, net of tax of $202,000      592,000
     592,000
Change in interest rate swaps, net of tax benefit of $164,000      (558,000)     (558,000)
Purchase of treasury stock(7,744)       (60,000)   (60,000)
Restricted stock vested86,316
 1,000
         1,000
Share-based compensation    866,000
       866,000
Balance at June 30, 20197,854,736
 $79,000
 $34,074,000
 $2,001,000
 $(28,463,000) $88,293,000
 $95,984,000






For the three months ended June 30, 2020:March 31, 2021:
 
Common Stock
Outstanding
 
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 Treasury Stock Retained
Earnings		 
Total
Stockholders’
Equity
 Shares Amount    
Balance at March 31, 20207,882,716
 $79,000
 $35,088,000
 $(611,000) $(28,501,000) $84,667,000
 $90,722,000
Net loss          (2,272,000) (2,272,000)
Change in post retirement benefits, net of tax benefit of $16,000      (63,000)     (63,000)
Change in unrealized foreign currency hedge, net of tax of $174,000      629,000
     629,000
Change in interest rate swaps, net of tax of $14,000      47,000
     47,000
Restricted stock vested82,573
 1,000
         1,000
Share-based compensation    388,000
       388,000
Balance at June 30, 20207,965,289
 $80,000
 $35,476,000
 $2,000
 $(28,501,000) $82,395,000
 $89,452,000


For the six months ended June 30, 2020:
 
Common Stock
Outstanding
 
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 Treasury Stock Retained
Earnings		 
Total
Stockholders’
Equity
 Shares Amount    
Balance at December 31, 20197,877,945
 $79,000
 $34,772,000
 $1,370,000
 $(28,501,000) $76,706,000
 $84,426,000
Net income          5,689,000
 5,689,000
Change in post retirement benefits, net of tax benefit of $33,000      (125,000)     (125,000)
Change in unrealized foreign currency hedge, net of tax benefit of $186,000      (685,000)     (685,000)
Change in interest rate swaps, net of tax benefit of $164,000      (558,000)     (558,000)
Restricted stock vested87,344
 1,000
         1,000
Share-based compensation    704,000
       704,000
Balance at June 30, 20207,965,289
 $80,000
 $35,476,000
 $2,000
 $(28,501,000) $82,395,000
 $89,452,000

Common Stock
Outstanding		Paid-In
Capital		Accumulated
Other
Comprehensive
Income		Treasury
Stock		Retained
Earnings		Total
Stockholders'
Equity
SharesAmount
Balance at December 31, 20207,980,516 $80 $36,127 $1,375 $(28,521)$84,871 $93,932 
Net income3,456 3,456 
Change in post retirement benefits, net of tax benefit of $17(64)(64)
Purchase of treasury stock(47)(47)
Restricted stock vested7,284 — — 
Share-based compensation318 318 
Balance at March 31, 20217,987,800 $80 $36,445 $1,311 $(28,568)$88,327 $97,595 
See notes to unaudited consolidated financial statements.

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Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,Three Months Ended
March 31,
2020 201920212020
Cash flows from operating activities:   Cash flows from operating activities:
Net income (loss)$5,689,000
 $(3,636,000)
   
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Net incomeNet income$3,456 $7,961 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization5,588,000
 5,180,000
Depreciation and amortization3,049 2,823 
Deferred income tax517,000
 —
Deferred income tax0 517 
Share-based compensation704,000
 866,000
Share-based compensation318 316 
Losses (Gains) on foreign currency translation(45,000) 17,000
Losses (gains) on foreign currency translationLosses (gains) on foreign currency translation235 (74)
Change in operating assets and liabilities:
  Change in operating assets and liabilities:
Accounts receivable10,842,000
 (2,745,000)Accounts receivable(12,618)4,389 
Inventories5,457,000
 1,798,000
Inventories(2,013)2,050 
Prepaid and other assets(3,667,000) 2,367,000
Prepaid and other assets303 (4,882)
Accounts payable(7,910,000) (1,412,000)Accounts payable8,283 (7,444)
Accrued and other liabilities1,438,000
 1,060,000
Accrued and other liabilities(1,385)(184)
Post retirement benefits liability(130,000) (198,000)Post retirement benefits liability(140)(93)
Net cash provided by operating activities18,483,000
 3,297,000
Net cash provided (used in) by operating activitiesNet cash provided (used in) by operating activities(512)5,379 
   
Cash flows from investing activities:   Cash flows from investing activities:
Purchase of property, plant and equipment(1,644,000) (5,201,000)Purchase of property, plant and equipment(2,436)(456)
Net cash used in investing activities(1,644,000) (5,201,000)Net cash used in investing activities(2,436)(456)
   
Cash flows from financing activities:   Cash flows from financing activities:
Gross repayments on revolving line of credit(59,357,000) (98,473,000)Gross repayments on revolving line of credit(5,915)(38,814)
Gross borrowings on revolving line of credit47,349,000
 101,201,000
Gross borrowings on revolving line of credit8,496 34,582 
Proceeds from term loan175,000
 —
Payments related to the purchase of treasury stockPayments related to the purchase of treasury stock(47)0 
Payment of deferred loan costsPayment of deferred loan costs(2)0 
Payment of principal on term loans(2,258,000) (1,688,000)Payment of principal on term loans(688)(1,125)
Payment of deferred loan costs—
 (434,000)
Payments related to the purchase of treasury stock—
 (60,000)
Net cash provided by (used in) financing activities(14,091,000) 546,000
Net cash provided by (used in) financing activities1,844 (5,357)
   
Net change in cash and cash equivalents2,748,000
 (1,358,000)Net change in cash and cash equivalents(1,104)(434)
   
Cash and cash equivalents at beginning of period1,856,000
 1,891,000
Cash and cash equivalents at beginning of period4,131 1,856 
   
Cash and cash equivalents at end of period$4,604,000
 $533,000
Cash and cash equivalents at end of period$3,027 $1,422 
   
Cash paid for:   Cash paid for:
Interest$2,377,000
 $1,660,000
Interest$467 $1,088 
Income taxes$302,000
 $1,016,000
Income taxes$2,560 $185 
Non cash:   
Non-cash investing activities:Non-cash investing activities:
Fixed asset purchases in accounts payable$146,000
 $368,000
Fixed asset purchases in accounts payable$99 $184 
See notes to unaudited consolidated financial statements.

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Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by accounting principles generally accepted in the United States of America for interim reporting, which are less than those required for annual reporting. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (all of which are normal and recurring in nature) necessary to present fairly the financial position of Core Molding Technologies, Inc. and its subsidiaries (“Core Molding Technologies” or the “Company”) at June 30, 2020,March 31, 2021, and the results of operations and cash flows for the sixthree months ended June 30, 2020. The Company has reclassified certain prior-year amounts to conform to the current-year's presentation.March 31, 2021. The “Notes to Consolidated Financial Statements” contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2019,2020, should be read in conjunction with these consolidated financial statements.

Core Molding Technologies and its subsidiaries operate in the composites market as one1 operating segment as a molder of thermoplastic and thermoset structural products. The Company's operating segment consists of two component1 reporting units,unit, Core Traditional and Horizon Plastics.Technologies. The Company produces and sells molded products for varied markets, including medium and heavy-duty trucks, automobiles, marine, construction and other commercial markets. The Company offers customers a wide range of manufacturing processes to fit various program volume and investment requirements. These processes include compression molding of sheet molding compound ("SMC"), bulk molding compounds ("BMC"), resin transfer molding ("RTM"), liquid molding of dicyclopentadiene ("DCPD"), spray-up and hand-lay-up, glass mat thermoplastics ("GMT"), 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 seven production facilities in Columbus and Batavia, Ohio; Gaffney, South Carolina; Winona, Minnesota; Matamoros and Escobedo, Mexico; and Cobourg, Ontario, Canada. All production facilities produce structural composite products.

2. CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Principles of Consolidation: 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.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and reported amounts of revenues and expenses during the reporting period. 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, due to the uncertainty around the magnitude and duration of the COVID-19 pandemic, as well as other factors.

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.
Going Concern: Under FASB ASU 2014-15, “Presentation of Financial Statements - Going Concern,” management is required to evaluate conditions or events as related to uncertainties that raise substantial doubt about the Company’s ability to continue as a going concern and to provide related financial disclosures, as applicable. Our consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As further discussed in Note 11, "Debt", as of June 30, 2020, the Company was not in compliance with the leverage and fixed charge coverage ratio requirements under the Company's Amended and Restated Credit Agreement, dated January 16, 2018 (the “A/R Credit Agreement”), with KeyBank National Association as the administrative agent (the "Administrative Agent") and various other financial institutions thereto as lenders (the "Lenders").

On November 22, 2019, the Company entered into a forbearance agreement (the "Forbearance Agreement") with the Lenders. Pursuant to the Forbearance Agreement, the Borrowers and the Lenders acknowledged and confirmed that an event of default occurred under the A/R Credit Agreement resulting from the Borrowers failure to maintain the required fixed charge coverage ratio (as defined in the A/R Credit Agreement) for the fiscal quarter ended September 30, 2019. The Forbearance Agreement provided that the Administrative Agent and Lenders shall forbear from the exercise of rights and remedies pursuant to the loan documents described in the A/R Credit Agreement through March 13, 2020, as long as the Company satisfies the conditions set forth in the Forbearance Agreement. See additional detail in Note 11, "Debt".

On March 13, 2020, the Company amended the Forbearance Agreement and entered into the First Amendment to the Forbearance

Agreement (the “First Amended Forbearance Agreement”) with the Lenders. The First Amended Forbearance Agreement provided that the Administrative Agent and Lenders shall forbear from the exercise of rights and remedies pursuant to the loan documents described in the A/R Credit Agreement through May 29, 2020, as long as the Company satisfies the conditions set forth in the First Amended Forbearance Agreement. See additional detail in Note 11, "Debt".

As a result of the COVID-19 pandemic several of the Company’s major customers suspended operations during April and May 2020 due to reduced demand and the impact of government regulations and mandates. Potential new lenders required Company’s customers to resume operations before proceeding with refinancing. On May 29, 2020, the Company amended the First Amended Forbearance Agreement and entered into the Second Amendment to the Forbearance Agreement (the “Second Amended Forbearance Agreement”) with the Lenders. The Second Amended Forbearance Agreement provided that the Administrative Agent and Lenders shall forbear from the exercise of rights and remedies pursuant to the loan documents described in the A/R Credit Agreement through September 30, 2020, as long as the Company satisfies the conditions set forth in the Amended Forbearance Agreement. See additional detail in Note 11, "Debt".

As a result of non-compliance with the A/R Credit Agreement, the Company’s remaining borrowings under the A/R Credit Agreement, consisting of $36,000,000 in borrowings under the revolving credit commitment and the loan commitments, were classified as a current liability in the Company’s consolidated balance sheet as of June 30, 2020. As a result, the Company’s current liabilities exceeded its current assets by $12,345,000 as of June 30, 2020. If the Lenders were to call the loans or demand repayment of all existing borrowings, this could result in the Company being unable to meet its working capital obligations.

The Company has executed term sheets with new lenders to obtain financing to refinance the A/R Credit Agreement. Closing of the new financing is subject to normal closing conditions including completion of business and legal due diligence, asset appraisals, environmental reports, negotiated loan documents, and final credit committee approval. While the Company has executed term sheets, the Company will not have firm commitments until the completion of all closing conditions and therefore there can be no assurances that the Company will be able to secure additional financing. As there can be no assurance that the Company will be able to close its new financing, substantial doubt exists as to the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. The Company's consolidated financial statements do not include adjustments, if any, that might arise from the outcome of this uncertainty.

Management implemented an operational turnaround plan starting in December of 2018 and successfully improved operational performance including improved equipment uptime, improved employee retention and reduced premium freight costs for expediting shipments to customers. Even with the negative effects of the COVID-19 pandemic reductions in sales and partial shutdown of operations, the Company’s financial results for the six months ended June 30, 2020 reflect the operational improvements implemented in 2019 as the Company returned to operational profitability. Management believes that the operational turnaround is complete and is now focused on continuous improvement and operational excellence. Management has made, or is in the process of making, the following continuous improvement actions which will further improve financial performance at its operating facilities:

Implemented quality management systems that provide for continual improvement, defect prevention and reduction of variation and waste in manufacturing processes
Improved inventory management systems to reduce stock outage events which cause downtime and labor inefficiency
Implemented the improved mold and waterjet fixture change procedures to reduce production equipment downtime.
Conducted value add/value engineer projects with customers to remove waste from the operating process and reduce cost
Implementation of focused problem solving to improve quality and reduce scrap costs
Implemented cost saving measures and actions to align controllable spending and labor workforce to reduced sales volumes in the current market as a result of the COVID-19 pandemic
Implemented technical training programs specific to the Company’s products and processes
Improved free cash flow through improved terms with customers and vendors
Utilized the Kaizen techniques, process mapping and multi-functional problem solving teams to improve operational performance and reduce waste

The Company’s improved operational performance and free cash flows has resulted in a reduction of borrowings under the A/R Credit Agreement for the six months ended June 30, 2020 of $14,258,000.

The Company has a tax receivable of $5,688,000 as of June 30, 2020, due to tax law changes made by the Coronavirus Aid Relief and Economic Security Act (the "CARES Act") which will allow the Company to carryback tax net operating losses. (See Note 12, "Income Taxes") The Company has completed the required filing with the Internal Revenue Service to claim the tax refund and expects to receive the payment prior to September 30, 2020. The funds from the utilization of the net operating losses will provide additional financial resources for the Company to operate the business and refinance its existing debt.

Revenue Recognition: The Company recognizes revenue from two streams, product revenue and tooling revenue. Product revenue is earned from the manufacture and sale of sheet molding compoundthermoplastic and thermoset and thermoplasticstructural products. Revenue from product sales is generally recognized as products are shipped, as the Company transfers controltitle and risk of ownership to the customer and is entitled to payment upon shipment.payment. In certainlimited circumstances, the Company recognizes revenue from product sales when products are produced and the customer takes controltitle and risk of ownership at ourthe Company's 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
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incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred.
Accounts Receivable Allowances: Management maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company recorded an allowance for doubtful accounts of $109,000$51,000 and $50,000$41,000 at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.
Management also records an allowance for estimated customer chargebacks for returns, price discounts and adjustments, premium freight and expediting costs and customer production line disruption costs resulting from late deliveries. At times, customers have asserted a right to significant production line disruption charges to recover damages as a result of late delivery. The Company typically works with its customers to minimize disruption charges, validate damages and negotiate resolution. The Company records accruals for customer chargebacks when a valid charge is probable and the amount of the charge can be reasonably estimated. Should customer chargebacks fluctuate from the estimated amounts, additional allowances may be necessary. The Company reduced accounts receivable for chargebacks by $148,000$402,000 at June 30, 2020March 31, 2021 and $476,000$179,000 at December 31, 2019.2020.
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 $823,000$451,000 at June 30, 2020March 31, 2021 and $898,000$546,000 at December 31, 2019.2020.
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. The Company has recorded contract assets of $61,000 as of June 30, 2020and $888,000$549,000 at March 31, 2021, and $554,000 at December 31, 2019.2020. Contract assets are generally classified as current within prepaid expenses and other current assets on the Consolidated Balance Sheets. DuringFor the sixthree months ended June 30, 2020,March 31, 2021, the Company recognized no0 impairments on contract assets. For the sixthree months ended June 30, 2020,March 31, 2021, the Company recognized $729,000$2,710,000 amount of revenue from contract liabilities related to open jobs outstanding as of December 31, 2019.2020.
Income Taxes: The Company’s Consolidated Balance Sheets include a net non-current deferred tax asset of $2,026,000 for the Canadian and Mexican tax jurisdictions and a net non-current deferred tax liability of $517,000 for the U.S. tax jurisdiction at June 30, 2020. 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. For more information, refer to Note 12,11, "Income Taxes", of the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Derivative Instruments: Derivative instruments are utilized to manage exposure to fluctuations in foreign currency exchange rates and interest rates on long term debt obligations. All derivative instruments are formally documented as cash flow hedges and are recorded at fair value at each reporting period. Gains and losses related to currency forward contracts and interest rate swaps are

deferred and recorded as a component of Accumulated Other Comprehensive Income (Loss) in the Consolidated Statement of Stockholders' Equity and then subsequently recognized in the Consolidated Statement of Income (Loss) when the hedged item affects net income. The ineffective portion of the change in fair value of a hedge, if any, is recognized in income. For additional information on derivative instruments, see Note 14, "Fair Value of Financial Instruments".
Long-Lived Assets: Long-lived assets consist primarily of property, plant and equipment and definite-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 property, plant and equipment on the basis of undiscounted expected future cash flows from operations before interest. There was no0 impairment of the Company's long-lived assets for the sixthree months ended June 30, 2020March 31, 2021 or June 30, 2019.March 31, 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 Intangibles: The Company evaluatesOther. FASB ASC Topic 350 prohibits the amortization of goodwill annually on December 31 to determine whether impairment exists, or at interim periods if an indicator of possible impairment exists. As a result of the Horizon Plastics acquisition on January 16, 2018 and the status of its integration, the Company established two reporting units, Core Traditional and Horizon Plastics. requires these assets be reviewed for impairment.
The annual impairment tests of goodwill may be completed through qualitative assessments,assessments; however the, Company may elect to bypass the qualitative assessment and proceed directly to a quantitative impairment test for any reporting unit in any period. The Company may resume the qualitative assessment for any reporting unit in any subsequent period.

Due toUnder a qualitative and quantitative approach, the Company's financial performance and continued depressed stock price, the Company performed a quantitative analysisimpairment test for bothgoodwill consists of its reporting units at September 30, 2019. During 2019, the Company incurred a lossan assessment of margin in its Horizon Plastics reporting unit caused by selling price decreaseswhether it is more-likely-than-not that the Company has not been able to fully offset with material cost reductions. As a result of the quantitative analysis, the Company concluded that the carrying value of Horizon Plastics was greater than the fair value which resulted in a goodwill impairment charge of $4,100,000 at September 30, 2019 representing 19%is less than its carrying amount. As part of the goodwill relatedqualitative 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, and
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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 Horizon Plastics reporting unit.

impairment test. If the Company elects to bypass the qualitative assessment, or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying value exceeds its fair value, the Company proceeds to a quantitative approach.
There were no indicators of impairment for the sixthree months ended June 30,March 31, 2021. The company also performed a qualitative analysis for the year end December 31, 2020 and determined that would trigger additional analysis; however, shouldno impairment is needed for the Company experience a prolonged suspension of operations due to COVID-19, the Company may incur goodwill and intangible impairment charges in the future.year 2020.
Self-Insurance: The Company is self-insured with respect to its Columbus and Batavia, Ohio; Gaffney, South Carolina; Winona, MinnesotaMinnesota; and Brownsville, Texas for medical, dental and vision claims and Columbus and Batavia, 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 June 30, 2020March 31, 2021 and December 31, 20192020 of $901,000$763,000 and $1,203,000,$933,000, respectively.
Derivative Instruments: Derivative instruments are utilized to manage exposure to fluctuations in foreign currency exchange rates and interest rates on long term debt obligations. All derivative instruments are formally documented as cash flow hedges and are recorded at fair value at each reporting period. Gains and losses related to currency forward contracts and interest rate swaps are deferred and recorded as a component of Accumulated Other Comprehensive Income in the Consolidated Statement of Stockholders' Equity and then subsequently recognized in the Consolidated Statement of Operations when the hedged item affects net income. The ineffective portion of the change in fair value of a hedge, if any, is recognized in income. For additional information on derivative instruments, see Note 14, "Fair Value of Financial Instruments".
Post-retirement benefits: The CompanyBenefits: Management records an accrual for post-retirement costs associated with the health care plan sponsored by the Company for certain employees.Core Molding Technologies. Should actual results differ from the assumptions used to determine the reserves, additional provisions may be required. In particular, increases in future healthcare costs above the assumptions could have an adverse effect on the Company'sCore Molding Technologies’ operations. The effect of a change in healthcare costs is described in Note 13,12, "Post Retirement Benefits", of the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. The Company2020. Core Molding Technologies had a liability for post retirement healthcare benefits based on actuariallyactuarial computed estimates of $9,187,000$9,048,000 at June 30, 2020March 31, 2021 and $9,160,000$9,109,000 at December 31, 2019.2020.
Government subsidies: The Company received $1,391,000 in government subsidies during the three and six months ended June 30, 2020. The Company accounted for government subsidies in accordance with International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance. The Company recorded the assistance in selling, general and administrative expenses and determined that there is reasonable assurance all conditions attached to the assistance were met and the grants would be received. The government subsidies consisted of the Canadian Emergency Wage Subsidy and the Shared Work Programs of Ohio, South Carolina and Minnesota.

3. 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.

Facilitation of the Effects of Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU is effective as of March 12, 2020 through December 31, 2022. We will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis.

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4. NET INCOME (LOSS) PER COMMON SHARE
Net income per common share is computed based on the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed similarly but includes the effect of the assumed exercise of dilutive stock options and restricted stock under the treasury stock method.
The following table sets forthCompany's restricted shares are entitled to receive dividends and voting rights applicable to the computationCompany's common stock, irrespective of any vesting requirement. Accordingly, the 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 using the two-class method for amounts attributable to the Company's common shares. share.
The Company uses the two-class method to calculatecomputation of basic and diluted earningsnet income per common share (in thousands, except for per share data) is as a resultfollows:
Three months ended
March 31,
20212020
Net income$3,456 $7,961 
Less: net income allocated to participating securities204 321 
Net income available to common shareholders$3,252 $7,640 
Weighted average common shares outstanding — basic7,985,000 7,882,000 
Effect of dilutive securities7,000 0 
Weighted average common and potentially issuable common shares outstanding — diluted7,992,000 7,882,000 
Basic net income per common share$0.41 $0.97 
Diluted net income per common share$0.41 $0.97 

The computation of outstandingbasic and diluted net income per participating securities in the form of restricted stock awards.shares is as follows (in thousands, except for per share data):
Three months ended
March 31,
20212020
Net income allocated to participating securities$204 $321 
Weighted average participating shares outstanding — basic500,000 338,000 
Effect of dilutive securities0 0 
Weighted average common and potentially issuable common shares outstanding — diluted500,000 338,000 
Basic net income per participating share$0.41 $0.97 
Diluted net income per participating share$0.41 $0.97 



11

 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
Net income (loss)$(2,272,000) $209,000
 $5,689,000
 $(3,636,000)
Less: net income allocated to participating securities—
 10,000
 358,000
 —
Net income (loss) available to common shareholders(2,272,000) 199,000
 5,331,000
 (3,636,000)
        
Weighted average common shares outstanding — basic7,916,000
 7,822,000
 7,899,000
 7,786,000
Effect of dilutive securities—
 —
 —
 —
Weighted average common and potentially issuable common shares outstanding — diluted7,916,000
 7,822,000
 7,899,000
 7,786,000
        
Basic net income (loss) per common share$(0.29) $0.03
 $0.67
 $(0.47)
Diluted net income (loss) per common share$(0.29) $0.03
 $0.67
 $(0.47)
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5. MAJOR CUSTOMERS
The Company had five5 major customers during the sixthree months ended June 30, 2020,March 31, 2021, Universal Forest Products, Inc. (“UFP”), Navistar, Inc. (“Navistar”), Volvo Group North America, LLC (“Volvo”), Universal Forest Products, Inc. (“UFP”), PACCAR, Inc. (“PACCAR”), and BRP, Inc. (“BRP”). 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 wouldcould have a material adverse effect on the business of the Company.
The following table presents sales revenue for the above-mentioned customers for the three and six months ended June 30,March 31, 2021 and 2020 and 2019:(in thousands):
Three months ended
March 31,
20212020
UFP product sales$10,657 $8,987 
UFP tooling sales0 0 
Total UFP sales10,657 8,987 
Navistar product sales9,937 10,667 
Navistar tooling sales306 98 
Total Navistar sales10,243 10,765 
Volvo product sales10,125 7,573 
Volvo tooling sales20 1,525 
Total Volvo sales10,145 9,098 
PACCAR product sales9,354 7,949 
PACCAR tooling sales329 207 
Total PACCAR sales9,683 8,156 
BRP product sales8,568 7,247 
BRP tooling sales115 220 
Total BRP sales8,683 7,467 
Other product sales20,492 19,507 
Other tooling sales2,926 43 
Total other sales23,418 19,550 
Total product sales69,133 61,930 
Total tooling sales3,696 2,093 
Total sales$72,829 $64,023 


12
 Three Months Ended Six Months Ended
 June 30, June 30,
 2020 2019 2020 2019
UFP product sales$9,484,000
 $9,203,000
 $18,471,000
 $15,325,000
UFP tooling sales—
 —
 —
 —
Total UFP sales9,484,000
 9,203,000
 18,471,000
 15,325,000
        
Navistar product sales6,500,000
 17,043,000
 17,166,000
 31,296,000
Navistar tooling sales1,088,000
 743,000
 1,186,000
 782,000
Total Navistar sales7,588,000
 17,786,000
 18,352,000
 32,078,000
        
Volvo product sales2,167,000
 14,581,000
 9,740,000
 29,096,000
Volvo tooling sales622,000
 32,000
 2,147,000
 139,000
Total Volvo sales2,789,000
 14,613,000
 11,887,000
 29,235,000
        
PACCAR product sales3,167,000
 12,435,000
 11,116,000
 24,247,000
PACCAR tooling sales—
 987,000
 207,000
 1,160,000
Total PACCAR sales3,167,000
 13,422,000
 11,323,000
 25,407,000
        
BRP product sales2,206,000
 2,429,000
 9,453,000
 7,977,000
BRP tooling sales113,000
 38,000
 333,000
 129,000
Total BRP sales2,319,000
 2,467,000
 9,786,000
 8,106,000
        
Other product sales12,323,000
 19,749,000
 31,831,000
 38,951,000
Other tooling sales136,000
 4,007,000
 180,000
 4,411,000
Total other sales12,459,000
 23,756,000
 32,011,000
 43,362,000
        
Total product sales35,847,000
 75,440,000
 97,777,000
 146,892,000
Total tooling sales1,959,000
 5,807,000
 4,053,000
 6,621,000
Total sales$37,806,000
 $81,247,000
 $101,830,000
 $153,513,000
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6. INVENTORY

Inventories, net consisted of the following:following (in thousands):

June 30, 2020 December 31, 2019March 31, 2021December 31, 2020
Raw materials$10,558,000
 $13,041,000
Raw materials$13,576 $11,640 
Work in process1,623,000
 1,818,000
Work in process1,808 1,679 
Finished goods4,044,000
 6,823,000
Finished goods4,989 5,041 
$16,225,000
 $21,682,000
TotalTotal$20,373 $18,360 
Inventory quantities on-hand are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based on historical and anticipated usage.


7. LEASES

The Company has operating leases with fixed payment terms for certain buildings and warehouses. The Company's leases have remaining lease terms of less than one year to four years, some of which include options to extend the lease for five years. Operating leases are included in operating lease right-of-use ("ROU") assets, accrued other liabilities and operating leaseother non-current liabilities in the Consolidated Balance Sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

The Company used the applicable incremental borrowing rate at implementation 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 its incremental borrowing rate to perform lease classification tests on lease components and to measure ROU assets and lease liabilities.

The components of lease expense were as follows:follows (in thousands):
Three Months Ended Six Months EndedThree Months Ended
March 31,
June 30, June 30,20212020
2020 2019 2020 2019
Operating lease cost$357,000
 $358,000
 $714,000
 $715,000
Operating lease cost$368 $357 
Total net lease cost$357,000
 $358,000
 $714,000
 $715,000
Total net lease cost$368 $357 
Other supplemental balance sheet information related to leases was as follows:follows (in thousands):
March 31, 2021December 31, 2020
Operating leases:
Operating lease right of use assets$4,346 $2,754 
Total operating lease right of use assets$4,346 $2,754 
Current operating lease liabilities(A)
$1,289 $1,023 
Noncurrent operating lease liabilities(B)
3,017 1,670 
Total operating lease liabilities$4,306 $2,693 
  
 June 30, 2020 December 31, 2019
Operating Leases:   
Operating lease right of use assets$3,832,000
 $4,484,000
    Total operating lease right of use assets$3,832,000
 $4,484,000
   
      
Current operating lease liabilities(A)
$743,000
 $1,304,000
Noncurrent operating lease liabilities (B)
3,028,000
 3,119,000
    Total operating lease liabilities$3,771,000
 $4,423,000
    
Weighted average remaining lease term (in years):   
Operating leases3.8
 4.0
    
Weighted average discount rate:   
Operating leases5.0% 4.9%

(A)Current operating lease liabilities are included in accrued other liabilities on the Consolidated Balance Sheets.
(B)Noncurrent operating lease liabilities are included in other non-current liabilities on the Consolidated Balance Sheets.

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The following table presents certain information related to lease terms and discount rates for leases as of March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
Weighted average remaining lease term (in years):
Operating leases4.23.5
Weighted average discount rate:
Operating leases5.5 %5.9 %
Other information related to leases were as follows:follows (in thousands) :
Three Months Ended
March 31,
20212020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases(C)
$368 $357 
 Six Months Ended
 June 30,
 2020 2019
Cash paid for amounts included in the measurement of lease liabilities   
Operating cash flows from operating leases(C)
$714,000
 $715,000

(C)Cash flow from operating lease included in prepaid and other assets on the Consolidated Statements of Cash Flows.

As of June 30,March 31, 2021, maturities of lease liabilities were as follows (in thousands):
Operating Leases
2021 (remainder of year)$1,130 
20221,157 
20231,058 
20241,063 
2025628 
Total lease payments5,036 
Less: imputed interest(730)
Total lease obligations4,306 
Less: current obligations1,289 
Long-term lease obligations$3,017 
As of December 31, 2020, maturities of lease liabilities were as follows:follows (in thousands):
Operating Leases
2021$1,215 
2022811 
2023706 
2024705 
20250 
Total lease payments3,437 
Less: imputed interest(744)
Total lease obligations2,693 
Less: current obligations(1,023)
Long-term lease obligations$1,670 

14
 Operating Leases
2020 (remainder of year)$716,000
20211,174,000
20221,102,000
20231,000,000
2024530,000
    Total lease payments4,522,000
Less: imputed interest(751,000)
    Total lease obligations3,771,000
Less: current obligations(743,000)
    Long-term lease obligations$3,028,000

AsTable of December 31, 2019, maturities of lease liabilities were as follows:Contents
 Operating Leases
2020$1,433,000
20211,174,000
20221,102,000
20231,000,000
2024530,000
    Total lease payments5,239,000
Less: imputed interest(816,000)
    Total lease obligations4,423,000
Less: current obligations(1,304,000)
    Long-term lease obligations$3,119,000

8. PROPERTY, PLANT & EQUIPMENT

Property, plant and equipment, net consisted of the following for the periods specified:specified (in thousands):
June 30, 2020 December 31, 2019March 31, 2021December 31, 2020
Property, plant and equipment$172,683,000
 $170,881,000
Property, plant and equipment$176,942 $174,553 
Accumulated depreciation(96,155,000) (91,675,000)Accumulated depreciation(102,942)(100,501)
Property, plant and equipment — net$76,528,000
 $79,206,000
Property, plant and equipment — net$74,000 $74,052 
Property, plant, and equipment are recorded at cost, unless obtained through acquisition, then assets are recorded at estimated fair value at the date of acquisition. 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 an adjustment to the depreciation period or to the unamortized balance is warranted. Depreciation expense for the three months ended June 30,March 31, 2021 and 2020 was $2,482,000 and 2019 was $2,216,000 and $2,075,000, respectively. Depreciation expense for the six months ended June 30, 2020 and 2019 was $4,488,000 and $4,101,000,$2,269,000, respectively. Amounts invested in capital additions in progress were $1,973,000$2,543,000 and $1,615,000$1,422,000 at June 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. At June 30, 2020March 31, 2021 and December 31, 2019,2020, purchase commitments for capital expenditures in progress were $917,000$5,041,000 and $336,000,$677,000, respectively.


9. GOODWILL AND INTANGIBLES

Goodwill activity for the sixthree months ended June 30, 2020March 31, 2021 consisted of the following:following (in thousands):

Balance at December 31, 2020$17,376 
Additions0 
Impairment0 
Balance at March 31, 2021$17,376 
Intangibles, net at March 31, 2021 were comprised of the following (in thousands):
Balance at December 31, 2019 $17,376,000
Additions —
Impairment —
Balance at June 30, 2020 $17,376,000
Definite-lived Intangible AssetsAmortization PeriodGross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount
Trade name25 Years$250 $(60)$190 
Trademarks10 Years1,610 (516)1,094 
Non-competition agreement5 Years1,810 (1,161)649 
Developed technology7 Years4,420 (2,025)2,395 
Customer relationships10-12 Years9,330 (2,629)6,701 
Total$17,420 $(6,391)$11,029 

Intangible assetsIntangibles, net at June 30,December 31, 2020 were comprised of the following:following (in thousands):

Definite-lived Intangible Assets Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Trade Name 25 Years $250,000
 $(53,000) $197,000
Trademarks 10 Years 1,610,000
 (395,000) 1,215,000
Non-competition Agreement 5 Years 1,810,000
 (890,000) 920,000
Developed Technology 7 Years 4,420,000
 (1,552,000) 2,868,000
Customer Relationships 10-12 Years 9,330,000
 (2,040,000) 7,290,000
Total   $17,420,000
 $(4,930,000) $12,490,000

Definite-lived Intangible AssetsAmortization PeriodGross Carrying
Amount		Accumulated
Amortization		Net Carrying
Amount
Trade name25 Years$250 $(58)$192 
Trademarks10 Years1,610 (476)1,134 
Non-competition agreement5 Years1,810 (1,071)739 
Developed technology7 Years4,420 (1,869)2,551 
Customer relationships10-12 Years9,330 (2,430)6,900 
Total$17,420 $(5,904)$11,516 
The aggregate intangible asset amortization expense was $487,000 for the three months ended June 30, 2020March 31, 2021 and 2019, respectively. The aggregate intangible asset amortization expense was $974,000 for the six months ended June 30, 2020 and 2019, respectively.

Intangible assets at December 31, 2019 were comprised of the following:

2020.
15
Definite-lived Intangible Assets Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Trade Name 25 Years $250,000
 $(48,000) $202,000
Trademarks 10 Years 1,610,000
 (315,000) 1,295,000
Non-competition Agreement 5 Years 1,810,000
 (709,000) 1,101,000
Developed Technology 7 Years 4,420,000
 (1,237,000) 3,183,000
Customer Relationships 10-12 Years 9,330,000
 (1,647,000) 7,683,000
Total   $17,420,000
 $(3,956,000) $13,464,000

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10. POST RETIREMENT BENEFITS
The components of expense for the Company'sCompany’s post-retirement benefit plans for the three and six months ended June 30, 2020 and 2019 are as follows:follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,Three months ended
March 31,
2020 2019 2020 201920212020
Pension expense:       Pension expense:
Multi-employer plan$145,000
 $231,000
 $391,000
 $462,000
Multi-employer plan$189 $246 
Defined contribution plan215,000
 324,000
 508,000
 586,000
Defined contribution plan302 293 
Total pension expense360,000
 555,000
 899,000
 1,048,000
Total pension expense491 539 
       
Health and life insurance:       Health and life insurance:
Interest cost59,000
 72,000
 118,000
 144,000
Interest cost41 59 
Amortization of prior service costs(124,000) (125,000) (248,000) (250,000)Amortization of prior service costs(124)(124)
Amortization of net loss45,000
 29,000
 90,000
 58,000
Amortization of net loss43 45 
Net periodic benefit cost(20,000) (24,000) (40,000) (48,000)Net periodic benefit cost(40)(20)
       
Total post retirement benefits expense$340,000
 $531,000
 $859,000
 $1,000,000
Total post retirement benefits expense$451 $519 
The Company made payments of $511,000$201,000 to pension plans and $91,000$101,000 for post-retirement healthcare and life insurance during the sixthree months ended June 30, 2020.March 31, 2021. For the remainder of 2020,2021, the Company expects to make approximately $1,385,000$1,599,000 of pension plan payments, of which $839,000$774,000 was accrued at June 30, 2020.March 31, 2021. The Company also expects to make approximately $1,142,000$1,185,000 of post-retirement healthcare and life insurance payments for the remainder of 2020,2021, all of which were accrued at June 30, 2020.March 31, 2021.

11. DEBT
Debt consists of the following:following (in thousands):
March 31,
2021		December 31,
2020
Wells Fargo term loans payable$15,791 $16,390 
FGI term loans payable13,069 13,148 
Leaf Capital term loan payable144 152 
Total29,00429,690
Less deferred loan costs(1,840)(1,957)
Less current portion(2,938)(2,535)
Long-term debt$24,226 $25,198 
 June 30,
2020		 December 31,
2019
Term loans, interest at a variable rate (8.0% at June 30, 2020 and 6.30% at December 31, 2019) with monthly payments of interest and quarterly payments of principal through January 2023$36,000,000
 $38,250,000
Revolving loans, interest at a variable rate (8.0% at June 30, 2020 and 6.04% at December 31, 2019)—
 12,008,000
Term loan, interest at a fixed rate (5.5% at June 30, 2020) with monthly payments of interest and principal through April 2025167,000
 —
Total36,167,000
 50,258,000
Less deferred loan costs(672,000) (807,000)
Less current portion(35,360,000) (49,451,000)
Long-term debt$135,000
 $—
Term Loans


Credit Agreement

Wells Fargo Term Loans
On January 16, 2018,October 27, 2020, the Company entered into an Amended and Restated Credit Agreementa credit agreement (the "A/R Credit Agreement"“Credit Agreement”) with KeyBankWells Fargo Bank, National Association, as administrative agent, lead arranger and various financial institutionsbook runner, and the lenders party thereto as lenders (the "Lenders"“Lenders”). Pursuant to the terms of the A/R Credit Agreement, (i)the Lenders made available to the Company may borrow revolvingsecured term loans (the “WF Term Loans”) in the maximum aggregate principal amount of up to $40,000,000 (the “U.S. Revolving Loans”) from the Lenders and term loans in the aggregate principal amount$18,500,000 ($16,790,000 of up to $32,000,000 from the Lenders, (ii) the Company's wholly-owned subsidiary, Horizon Plastics International, Inc., (the "Subsidiary") may borrow revolving loans in an aggregate principal amount of up to $10,000,000 from the Lenders (which revolving loans shall reduce the availability of the U.S. Revolving Loanswhich was advanced to the Company on a dollar-for-dollar basis) and term loans in an aggregate principal amount of up to $13,000,000October 28, 2020). The proceeds from the Lenders, (iii)WF Term Loans were used to pay off the Company’s existing outstanding indebtedness with KeyBank National Association, and to pay certain fees and expenses associated with the financing.

At the option of the Company, obtainedthe WF Term Loans bears interest at a Letterper annum rate equal to LIBOR plus a margin of Credit Commitment300 basis points or base rate plus a margin of $250,000,200 basis points. LIBOR rate means the greater of which $160,000 has been issued(a) 0.75% per annum and (iv)(b) the Companyper annum published LIBOR rate for interest periods of one, three or six months as chosen by the Company. Base rate is the greater of (a) 1.0% per annum, (b) the Federal Funds Rate plus 0.5%, (c) LIBOR Rate plus 100 basis or (d) prime rate. The weighted average interest rate was 3.77% as of March 31, 2021.

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The WF Term Loans are to be repaid in monthly installments of $200,000 plus interest, with the remaining outstanding term loan balance due on November 30, 2024, subject to certain optional and mandatory repayment terms. The Company’s obligations under the WF Term Loans are unconditionally guaranteed by each of $6,750,000. The Credit

Agreement is secured by a guarantee of eachthe Company’s U.S. and Canadian subsidiarysubsidiaries, with such obligations of the Company and such subsidiaries being secured by a lien on substantially all of their U.S. and Canadian assets.

The WF Term Loans contains reporting, indebtedness, and financial covenants. The Company is in compliance with its covenants as of March 31, 2021.

Voluntary prepayments of amounts outstanding under the presentWF Term Loans are permitted at any time without premium or penalty. To the extent applicable, LIBOR breakage fees may be charged in connection with any prepayment.

FGI Equipment Finance LLC Term Loan
On October 20, 2020, the Company entered into a Master Security Agreement and future assetsa Promissory Note, among FGI Equipment Finance LLC, (“FGI”) the Company as debtor, and each of Core Composites Corporation, a subsidiary of the Company organized in Delaware, and its U.S. and Canadian subsidiaries, except that only 65%CC HPM, S. de R.L. de C.V., a subsidiary of the stock issuedCompany organized in Mexico, as guarantors, the principal amount of $13,200,000 (the “FGI Term Loan”). On October 27, 2020, FGI advanced to the Company $12,000,000 which proceeds were used to pay off the Company’s existing outstanding indebtedness with KeyBank National Association, and to pay certain fees and expenses associated with the transactions, and $1,200,000 which proceeds were used to fund a security deposit to be held by CorecompositesFGI. Interest on the FGI Term Loan is a fixed rate of 8.25% and is payable monthly. The security deposit of $1,200,000 is located in prepaid expenses and other current assets on the Consolidated Balance Sheets.

Following the advance of funds by FGI, the FGI Term Loan is to be repaid in monthly principal and interest installments of $117,000 for the first 12 months, $246,000 for the subsequent 59 months and $1,446,000 due on October 31, 2026, subject to certain optional and mandatory repayment terms. The Company’s obligations under the Master Security Agreement are secured by certain machinery and equipment of the guarantors located in Mexico, and real property of Core Composites de Mexico, S. de R.L. de C.V. has been pledged.

Concurrent with the closing of the A/R Credit Agreement the Company borrowed the $32,000,000 term loan and $2,000,000 from the U.S. Revolving Loan and the Subsidiary borrowed the $13,000,000 term loan and $2,500,000 from revolving loans to provide $49,500,000 of funding for the acquisition of Horizon Plastics. Interest is payable monthly at one month LIBOR plus ,a basis point margin of 700 basis points with a LIBOR floor of 100 basis points.

On March 14, 2019, the Company entered into the first amendment (“First Amendment”) to the A/R Credit Agreement (as amended by the First Amendment, the "Amended Credit Agreement") with the Lenders. Pursuant to the terms of the First Amendment, the Company and Lenders agreed to modify certain terms of the A/R Credit Agreement. These modifications included (1) implementation of an availability block on the U.S. Revolving Loans reducing availability from $40,000,000 to $32,500,000, (2) modification to the definition of EBITDA to add back certain one-time expenses, (3) waiver of non-compliance with the leverage covenant as of December 31, 2018 and modification of the leverage ratio definition and covenant to eliminate testing of the leverage ratio until December 31, 2019, (4) waiver of non-compliance with the fixed charge covenant as of December 31, 2018 and modification of the fixed charge coverage ratio definition and covenant requirement, (5) implementation of a capital expenditure spend limit of $7,500,000 during the first six months of 2019 and $12,500,000 for the full year 2019, (6) an increase of the applicable interest margin spread for existing term and revolving loans, and (7) an increase in the commitment fees on any unused U.S. Revolving Loans.

On November 22, 2019, the Company entered into a forbearance agreement (the "Forbearance Agreement") with the Lenders. Pursuant to the Forbearance Agreement, the Borrowers and the Lenders acknowledged and confirmed that an event of default occurred under the A/R Credit Agreement resulting from the Borrowers failure to maintain the required Fixed Charge Coverage Ratio (as defined in the A/R Credit Agreement) for the fiscal quarter ended September 30, 2019. The Forbearance Agreement provided that the Administrative Agent and Lenders shall forbear from the exercise of rights and remedies pursuant to the Loan Documents described in the A/R Credit Agreement through March 13, 2020, as long as the Company satisfies the conditions set forth in the Forbearance Agreement, including, (i) the Borrowers shall remain current on all loan payments during the forbearance period, (ii) on or before December 6, 2019, the Administrative Agent and Lenders shall each receive a copy of a report of Huron Consulting Group containing findings and observations in respect of the businesses and operationssubsidiary of the Company andorganized in Mexico, located in Matamoros, Mexico.

The Company may prepay in full or in part (but not less than the Borrowers shall deliver a strategic alternative assessment in respectamount equal to 20% of the Borrowers’ operations and financing, (iii)original principal amount of the loan) outstanding amounts before they are due on or before December 15, 2019, the Administrative Agent and Lenders shall each receiveany scheduled Payment Date upon at least thirty (30) days’ prior written notice. The Company will pay a copy of appraisals of machinery and equipment and inventory appraisals, and the Borrowers shall have determined and proposed a new capital structure“Prepayment Fee” in an amount equal to an additional sum equal to the Administrative Agent and Lenders, (iv) on or before February 14, 2020,following percentage of the Borrowers shall have obtained a definitive, written commitment from involved parties and/or lenders providingprincipal amount to be prepaid for prepayments occurring in the basis for implementation of a new capital structure, and (v) on or before March 13, 2020, the Borrowers shall have closed on a new capital structure, acceptableindicated period: four percent (4.0%) (for prepayments occurring prior to the Administrative Agentsfirst anniversary of the FGI Term Loan); three percent (3.0%) (for prepayments occurring on the first anniversary of the FGI Term Loan until the second anniversary of the FGI Term Loan); two percent (2.0%) (for prepayments occurring on and Lenders. The Forbearance Agreement also implemented a new availability block with respectafter the second anniversary of the FGI Term Loan and prior to the U.S. Revolving Loans portionthird anniversary of the A/R Credit Agreement, reducing availability from $32,500,000 to $28,000,000Loan ); and increasing the applicable margin for existing term and revolving loans, as well as increasing the commitment fees onone percent (1.0%) (for prepayments occurring any unused U.S. Revolving Loans.time thereafter).


On March 13, 2020, the Company amended the Forbearance Agreement and entered into the First Amendment to the Forbearance Agreement (the “First Amended Forbearance Agreement”) with the Lenders. Pursuant to the terms of the First Amended Forbearance Agreement, the Company and Lenders agreed to modify certain terms of the Forbearance Agreement and extend the Forbearance Agreement through May 29, 2020. The modifications include (1) a reduction in the U.S. Revolving Loan to $25,000,000 with an availability block of $5,000,000 which can be borrowed with the approval of the lenders, (2) a change of interest rate to LIBOR plus 650 basis points, (3) forbearing compliance with the leverage covenant and fixed charge covenant through May 29, 2020, and (4) implementation of a capital expenditure spend limit of $3,500,000 from the effective date of the First Amended Forbearance Agreement through May 29, 2020.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 550 basis point5.5% and a term of 60 months. The amount outstanding at June 30, 2020 was $167,000 of which, $135,000 was classified as long term debt.

Revolving Loans

Wells Fargo Revolving Loan
On May 29,October 27, 2020, the Company amended the First Amended Forbearance Agreement and entered into the Second Amendment to the Forbearance Agreementa credit agreement (the “Second Amended Forbearance“Credit Agreement”) with the Lenders. The Second Amended Forbearance Agreement provided that the CompanyWells Fargo Bank, National Association, as administrative agent, lead arranger and book runner, and the Lenders agreedlenders party thereto (the “Lenders”). Pursuant to modify certainthe terms of the Amended ForbearanceCredit Agreement, and extend the Forbearance Agreement through September 30, 2020. The modifications include (1) thatLenders made available to the Company will maintain liquiditya revolving loan commitment (the “WF Revolving Loan”) of not less than $5,000,000,$25,000,000 ($8,745,000 of which was advanced to be measured twice monthly after the effective date,Company on every secondOctober 28, 2020). The proceeds from the WF Revolving Loan were used to pay off the Company’s existing outstanding indebtedness with KeyBank National Association, and fourth Fridayto pay certain fees and expenses associated with the financing.

The Credit Agreement also makes available to the Company an incremental revolving commitment in the maximum amount of each month$10,000,000 at the Company’s option at any time during the forbearancethree-year period (2)following the closing.

The borrowing availability under the WF Revolving Loan is the lesser of (a) the loan commitment of $25,000,000 or (b) the sum of 90% of eligible investment grade accounts receivable, 85% of non-investment grade eligible accounts receivable and 65% of eligible inventory.

At the option of the Company, shall maintain minimum year-to-date earnings before

income tax, depreciation and amortization (“YTD-EBITDA”) of not less than $5,000,000, measured upon delivery of Company’s July 2020 financial statements and also upon delivery of Company’s August 2020 financial statements, with YTD-EBITDA determined based on consolidated EBITDA, (3)the WF Revolving Loan bears interest at a change of interestper annum rate equal to LIBOR plus a margin of 200 to 250 basis points or base rate plus 700a margin of 100 to 150 basis points, with athe margin rate being based on the excess
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availability amount under the line of credit. LIBOR floorrate means the greater of (a) 0.75% per annum and (b) the per annum published LIBOR rate for interest periods of one, three or six months as chosen by the Company. Base rate is the greater of (a) 1.0% per annum, (b) the Federal Funds Rate plus 0.5%, (c) LIBOR Rate plus 100 basis points, (4) on or before July 15, 2020 the Borrowers shall have obtained executed term sheets from involved parties and/or lenders, (5) on or before September 30, 2020, the Borrowers shall have closed on a new capital structure, (6) forbearing compliance with the leverage covenant and fixed charge covenant through September 30, 2020, and (7) implementation of a capital expenditure spend limit of $3,000,000 for the nine months ended September 30, 2020. Capitalized terms used in this paragraph but not defined shall have the meaning ascribed to such terms in the Seconded Amended Forbearance Agreement.

As a result of non-compliance with the A/R Credit Agreement, the Company’s remaining borrowings under the A/R Credit Agreement, consisting of $36,000,000 under the revolving credit commitment and the term loan commitments, were classified as a current liability in the Company’s consolidated balance sheet(d) prime rate. The weighted average interest rate was 3.25% as of JuneDecember 31, 2020.

The WF Revolving Loan commitment terminates, and all outstanding borrowings thereunder must be repaid, by November 30, 2020. As a result, the Company’s current liabilities exceeded its current assets by $12,345,000 as of June 30, 2020. If the Lenders were to call the loans or demand repayment of all existing borrowings, this could result in the Company being unable to meet its working capital obligations.

2024. The Company has unblocked maximum availability$24,278,000 of $20,000,000 of variableavailable rate revolving loans of which $0$3,001,000 is outstanding as of June 30,March 31, 2021.

The WF Revolving Loan contains the same covenants as the WF Term Loans.

Wells Fargo Bank will issue up to $2,000,000 of Letters of Credit in accordance with the terms of the Credit Agreement upon the Company’s request. As of March 31, 2021, the Company had one Letter of Credit outstanding for $160,000.


KeyBank Loan

On March 31, 2020, the Company had a term loan and revolving loan balance of $37,125,000 and $7,776,000 with KeyBank National Association, respectively. The Company’s term loan and revolving loan had variable interest rates of 7.50% and 6.62%, respectively at March 31, 2020.


Bank Covenants

The Company is required to meet certain financial covenants included in the A/R Credit Agreement with respect to leverage ratios, fixed coverage charge ratios and capital expenditures.ratio. As of June 30, 2020,March 31, 2021, the Company was in defaultcompliance with its fixed charge coverage and leverage ratiofinancial covenants associated with the loans made under the A/R Credit Agreement as described above. As a result of this default the Company and the Administrative Agent on behalf of the Lenders entered into a Second Amended Forbearance Agreement to address the non-compliance and establish milestones for the Company related to restructuring of its existing debt.


The Company has executed term sheets with new lenders to obtain financing to refinance the A/R Credit Agreement. Closing of the new financing is subject to normal closing conditions including completion of business and legal due diligence, asset appraisals, environmental reports, negotiated loan documents, and final credit committee approval. While the Company has executed term sheets, the Company will not have firm commitments until completion of all closing conditions and therefore there can be no assurances that the Company will be able to secure additional financing. As there can be no assurance that the Company will be able to close its new financing, substantial doubt exists as to the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. The Company's consolidated financial statements do not include adjustments, if any, that might arise from the outcome of this uncertainty.

Interest Rate Swaps

The Company entered into two interest rate swap agreements that became effective January 18, 2018 and continue through January 2023, one of which was designated as a cash flow hedge for $25,000,000 of the $32,000,000 term loan to the Company mentioned above and the other designated as a cash flow hedge for $10,000,000 of the $13,000,000 term loan to the Subsidiary mentioned above. Under these agreements, the Company will pay a fixed rate of approximately 2.49% to the counterparty and receives 30 day LIBOR for both cash flow hedges. The fair value of the interest rate swap was a liability of $1,428,000 and $706,000 at June 30, 2020 and December 31, 2019, respectively. While the Company is exposed to credit loss on its interest rate swaps in the event of non-performance by the counterparty to the swap, management believes that such non-performance is unlikely to occur given the financial resources of the counterparty.

12. INCOME TAXES
The Company’s Consolidated Balance Sheets include a net non-current deferred tax asset of $2,026,000$663,000 for the Canadian and Mexican tax jurisdictions and a net non-current deferred tax liability of $517,000$883,000 for the U.S. tax jurisdiction at June 30, 2020.March 31, 2021. The non-current deferred tax asset is classified in other non-current assets and non-current deferred tax liabilities are in other non-current liabilities. 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. As of June 30, 2020March 31, 2021 and December 31, 2019,2020, the Company had no0 liability for unrecognized tax benefits. The Company does not anticipate that unrecognized tax benefits will significantly change within the next twelve months.
Income tax benefitexpense for the sixthree months ended June 30, 2020March 31, 2021 is estimated to be $4,965,000,$1,351,000, approximately 686%28.1% of the income before income taxes. Income tax benefit for the sixthree months ended June 30, 2019March 31, 2020 was estimated to be $830,000, or$4,854,000, approximately 19%156% of lossincome before income taxes.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted in response to the COVID-19 pandemic, and among other things, provides tax relief to businesses. Tax provisions of the CARES Act include the deferral of certain payroll taxes, relief for retaining employees, and other provisions, including allowing net operating losses to be carried back five years versus an indefinite carryforward. The Company has filed with the Internal Revenue Service to carry back net operating losses incurred in 2018 and 2019 under this new law, resulting in an income tax refund of $6,155,000 of which $466,000 has been received in the second quarter of 2020 and the remaining is expected to be received by September 30th, 2020. An income tax benefit of $5,638,000 was realized in the first quarter of 2020. The income tax benefit consists of the reversal of the full valuation allowance against net deferred tax assets in the United States for approximately $3,267,000. ItThe income tax benefit also consists of a rate benefit of $2,371,000 based on the 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 files income tax returns in the U.S., Mexico, Canada and various state jurisdictions. The Company is not subject to U.S. federal and state income tax examinations by tax authorities for years prior to 2016,2017, not subject to Mexican income tax examinations by Mexican authorities for years prior to 20142015 and not subject to Canadian tax examinations by Canadian authorities for years prior to 2018.


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13. STOCK BASED COMPENSATION
The Company has a Long Term Equity Incentive Plan (the “2006 Plan”), as approved by the Company’s stockholders in May 2006 and as amended in May 2015. The 2006 Plan allows for grants to directors and employees of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, performance shares, performance units and other incentive awards (“Stock Awards”) up to an aggregate of 3,000,000 awards, each representing a right to buy a share of Core Molding Technologies common stock. Stock Awards can be granted under the 2006 Plan through the earlier of December 31, 2025, or the date the maximum number of available awards under the 2006 Plan have been granted.
Restricted Stock
The Company grants shares of its common stock to certain directors, officers, key managers and employees in the form of unvested stock and units (“Restricted Stock”). These awards are recorded at the market value of the Company's common stock on the date of issuance and amortized ratably as compensation expense over the applicable vesting period, which is typically three years. The Company adjusts compensation expense for actual forfeitures, as they occur.
The following summarizes the status of Restricted Stock and changes during the sixthree months ended June 30, 2020:March 31, 2021:
Number of
Shares		Weighted Average Grant Date Fair Value
Number of
Shares
 
Weighted Average
Grant Date
Fair Value
Unvested balance at December 31, 2019343,919
 $9.37
Unvested balance at December 31, 2020Unvested balance at December 31, 2020507,835 $6.25 
Granted287,750
 4.62
Granted0 0 
Vested(87,344) 10.69
Vested(11,158)3.38 
Forfeited(8,385) 13.72
Forfeited0 0 
Unvested balance at June 30, 2020535,940
 $6.54
Unvested balance at March 31, 2021Unvested balance at March 31, 2021496,677 $6.00 
At June 30,March 31, 2021 and 2020, and 2019, there was $2,249,000$1,325,000 and $2,736,000,$1,292,000, respectively, of total unrecognized compensation expense, related to Restricted Stock granted under the 2006 Plan. That cost is expected to be recognized over the weighted-average period of 2.61.9 years. Total compensation cost related to restricted stock grants for the three months ended June 30,March 31, 2021 and 2020 was $289,000 and 2019 was $357,000 and $413,000,$292,000, respectively, all of which was recorded to selling, general and administrative expense. Total compensation cost related to restricted stock grants for the six months ended June 30, 2020 and 2019 was $649,000 and $763,000, respectively, all of which was recorded to selling, general and administrative expense

During the sixthree months ended June 30, 2020 and 2019,March 31, 2021, employees surrendered no shares and 7,7443,874 shares of the Company's common stock to satisfy income tax withholding obligations in connection with the vesting of restricted awards.

NaN shares were surrendered for the three months ended March 31, 2020.
Stock Appreciation Rights

As part of the Company's 20192020 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.

A summary of the Company's stock appreciation rights activity for the quarterthree months ended June 30, 2020March 31, 2021 is as follows:

Number of
Shares		Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2020180,925 $2.57 
Granted0 0 
Exercised0 0 
Forfeited0 0 
Outstanding at end of the period ended March 31, 2021180,925 $2.57 
Exercisable at end of the period ended March 31, 202173,888 $2.57 
19
 Number of
Shares		 Weighted Average
Grant Date
Fair Value
Outstanding as of December 31, 2019222,112
 $2.57
Granted—
 —
Exercised—
 —
Forfeited(27,266) 2.57
Outstanding at the period ended June 30, 2020194,846
 $2.57
Exercisable at the period ended June 30, 202084,300
 $2.57
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The average remaining contractual term for those SARs outstanding at June 30, 2020March 31, 2021 is 3.83.1 years, with no aggregate intrinsic value.value of $313,000. At June 30,March 31, 2021 and 2020, and 2019, there was $260,000$149,000 and $478,000,$292,000, respectively, of total unrecognized compensation expense, net of estimated forfeitures, related to SARs. Total compensation cost related to SARs for the three months ended June 30,March 31, 2021 and 2020 was $30,000 and 2019 was $31,000 and $103,000, respectively, all of which was recorded to selling, general and administrative expense. Total compensation cost related to SARs for the six months ended June 30, 2020 and 2019 was $55,000 and $103,000,$24,000, respectively, all of which was recorded to selling, general and administrative expense. That cost is expected to be recognized over the weighted-averageweighted- average period of 1.81.1 years.

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 guidance provides a fair value framework that requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment.

The three levels are defined as follows:

Level 1 -Quoted prices in active markets for identical assets and liabilities.
Level 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.

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 June 30, 2020March 31, 2021 and December 31, 20192020 approximate fair value due to the short-term maturities of these financial instruments. The carrying amounts of long-term debtWF Term Loan and the revolving line of creditWF Revolving Loan approximate fair value as of June 30, 2020March 31, 2021 and December 31, 20192020 due to the short term nature of the underlying variable rate LIBOR agreements. The Company had Level 2FGI Term Loan approximate fair value measurements at June 30, 2020as of March 31, 2021 and December 31, 2019 relating2020 due to the Company’simmaterial movement in 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,rates since 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 ratesPromissory Note on transactions denominated in the foreign currency. As of June 30, 2020, the Company had no ineffective portion related to the cash flow hedges.
Interest Rate Swaps
The Company entered into interest rate swap contracts to fix the interest rate on an initial aggregate amount of $35,000,000 thereby reducing exposure to interest rate changes. The Company pays a fixed rate of approximately 2.49% to the counterparty and receives 30 day LIBOR for both cash flow hedges. At inception, all interest rate swaps were formally documented as cash flow hedges and are measured at fair value each reporting period. See Note 11, "Debt", for additional information.
Financial Statement Impacts
The following tables detail amounts related to our derivatives designated as hedging instruments:
 Fair Value of Derivative Instruments
 June 30, 2020
 Asset Derivatives Liability Derivatives
 Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Foreign exchange contractsPrepaid expense other current assets $—
 Accrued other liabilities $419,000
Notional contract values  $—
   $3,958,000
Interest rate swapsPrepaid expense other current assets $—
 Accrued other liabilities $1,428,000
Notional swap values  $—
   $28,000,000
        
 December 31, 2019
 Asset Derivatives Liability Derivatives
 Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Foreign exchange contractsPrepaid expense other current assets $452,000
 Accrued other liabilities $—
Notional contract values  $15,358,000
   $—
Interest rate swapsPrepaid expense other current assets $—
 Accrued other liabilities $706,000
Notional swap values  $—
   $29,750,000
October 20, 2020.
The following tables summarize the amount of unrealized and realized gain (loss) recognized in Accumulated Other Comprehensive Income (Loss) ("AOCI") for the three months ended June 30,March 31, 2021 and 2020 and 2019:(in thousands):
Derivatives in
subtopic 815-20
Cash Flow Hedging
Relationship		Amount of Unrealized
Gain (Loss) Recognized
in Accumulated Other
Comprehensive Income (Loss) on
Derivative
Location of Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive Income (Loss)(A)
Amount of Realized Gain
(Loss) Reclassified from
Accumulated Other
Comprehensive Income (Loss)
2021202020212020
Foreign exchange
contracts		$0 $(1,745)Cost of goods sold$0 $(58)
Selling, general and administrative expense$0 $(13)
Interest rate swaps$0 $(833)Interest expense$0 $(50)
Derivatives in subtopic 815-20 Cash Flow Hedging Relationship
Amount of Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss) on Derivative 
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss)(A)
 Amount of Realized Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss)


20202019
 20202019
Foreign exchange contracts $1,213,000
$354,000
 Cost of goods sold $(364,000)$(79,000)
  Selling, general and administrative expense $(47,000)$(4,000)
Interest rate swaps $205,000
$(470,000) Interest expense $(144,000)$(1,000)

(A)The foreign currency derivative activity reclassified from Accumulated Other Comprehensive Income (Loss) is allocated to cost of goods sold and selling, general and administrative expense based on the percentage of foreign currency spend.


The following tables summarize the amount of unrealized and realized gain (loss) recognized in Accumulated Other Comprehensive Income (Loss) ("AOCI") for the six months ended June 30, 2020 and 2019:
20
Derivatives in subtopic 815-20 Cash Flow Hedging Relationship
Amount of Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Income (Loss) on Derivative 
Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss)(A)
 Amount of Realized Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss)


20202019
 20202019
Foreign exchange contracts $(532,000)$841,000
 Cost of goods sold $(306,000)$(55,000)
  Selling, general and administrative expense $(34,000)$8,000
Interest rate swaps $(528,000)$(722,000) Interest expense $(194,000)$—

(A) The foreign currency derivative activity reclassified from Accumulated Other Comprehensive Income (Loss) is allocated to costTable of goods sold and selling, general and administrative expense based on the percentage of foreign currency spend.Contents

15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents changes in Accumulated Other Comprehensive Income (Loss), net of tax, for the sixthree months ended June 30,March 31, 2021 and 2020 and 2019:(in thousands):

2020:Derivative
Hedging
Activities
Post Retirement
Benefit Plan
Items(A)
Accumulated
Other
Comprehensive
Income (Loss)
Balance at December 31, 2019$(191)$1,561 $1,370 
Other comprehensive loss before reclassifications(2,578)0 (2,578)
Amounts reclassified from accumulated other comprehensive income (loss)121 (79)42 
Income tax benefit538 17 555 
Balance at March 31, 2020$(2,110)$1,499 $(611)
2021:
Balance at December 31, 2020$0 $1,375 $1,375 
Other comprehensive loss before reclassifications0 0 0 
Amounts reclassified from accumulated other comprehensive income (loss)0 (81)(81)
Income tax benefit0 17 17 
Balance at March 31, 2021$0 $1,311 $1,311 
2019:Hedging Derivative Activities
Post Retirement Benefit Plan Items(A)
Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2018$(612,000)$2,729,000
$2,117,000
Other comprehensive income (loss) before reclassifications119,000
—
119,000
Amounts reclassified from accumulated other comprehensive income (loss)(47,000)(190,000)(237,000)
Income tax benefit (expense)(38,000)40,000
2,000
Balance at June 30, 2019$(578,000)$2,579,000
$2,001,000
    
2020:   
Balance at December 31, 2019$(191,000)$1,561,000
$1,370,000
Other comprehensive income (loss) before reclassifications(1,060,000)—
(1,060,000)
Amounts reclassified from accumulated other comprehensive income (loss)(533,000)(158,000)(691,000)
Income tax benefit350,000
33,000
383,000
Balance at June 30, 2020$(1,434,000)$1,436,000
$2,000

(A)The effect of post-retirement benefit items reclassified from Accumulated Other Comprehensive Income (Loss) is included in other income and expense on the Consolidated Statements of Income (Loss).Operations. These Accumulated Other Comprehensive Income (Loss) components are included in the computation of net periodic benefit cost (see Note 10, "Post Retirement Benefits" for additional details). The tax effect of post-retirement benefit items reclassified from Accumulated Other Comprehensive Income (Loss) is included in income tax expense on the Consolidated Statements of Income (Loss).Operations.

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Part I — Financial Information

Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 2.
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the federal securities laws. As a general matter, forward-looking statements are those focused upon future plans, objectives or performance as opposed to historical items and include statements of anticipated events or trends and expectations and beliefs relating to matters not historical in nature. Such forward-looking statements involve 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 report:Quarterly Report on Form 10-Q: business conditions in the plastics, transportation, marine 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 and Canada; 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; labor availability; a work stoppage or labor disruption at one 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; the Company's 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 the Annual Report on Form 10-K for the year ended December 31, 2019.2020.


Description of the Company

Core Molding Technologies and its subsidiaries operate in the composites market as one operating segment as a molder of thermoplastic and thermoset structural products. The Company's operating segment consists of two componentone reporting units,unit, Core Traditional and Horizon Plastics.Molding Technologies. The Company offers customers a wide range of manufacturing processes to fit various program volume and investment requirements. These processes include compression molding of sheet molding compound ("SMC"), bulk molding compounds ("BMC"), resin transfer molding ("RTM"), liquid molding of dicyclopentadiene ("DCPD"), spray-up and hand-lay-up, glass mat thermoplastics ("GMT"), direct long-fiber thermoplastics ("D-LFT") and structural foam and structural web injection molding ("SIM"). Core Molding Technologies serves a wide variety of markets, including the medium and heavy-duty truck, marine, automotive, agriculture, construction, and other commercial products. The demand for Core Molding Technologies’ products is affected by economic conditions in the United States, Mexico, and Canada. Core Molding Technologies’ manufacturing operations have a significant fixed cost component. Accordingly, during periods of changing demand, the profitability of Core Molding Technologies’ operations may change proportionately more than revenues from operations.

In 1996, Core Molding Technologies acquired substantially all of the assets and assumed certain liabilities of Columbus Plastics, a wholly owned operating unit of Navistar’s truck manufacturing division since its formation in late 1980. Columbus Plastics, located in Columbus, Ohio, was a compounder and compression molder of SMC. In 1998, Core Molding Technologies began operations at its second facility in Gaffney, South Carolina, and in 2001, Core Molding Technologies added a production
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facility in Matamoros, Mexico by acquiring certain assets of Airshield Corporation. As a result of this acquisition, Core Molding Technologies expanded its fiberglass molding capabilities to include the spray up, hand-lay-up open mold processes and RTM closed molding. In 2005, Core Molding Technologies acquired certain assets of the Cincinnati Fiberglass Division of Diversified Glass, Inc., a Batavia, Ohio-based, privately held manufacturer and distributor of fiberglass reinforced plastic components supplied primarily to the heavy-duty truck market. In 2009, the Company completed construction of a new production facility in Matamoros, Mexico that replaced its leased facility. In March 2015, the Company acquired substantially all of the assets of CPI Binani, Inc., a wholly owned subsidiary of Binani Industries Limited, located in Winona, Minnesota ("CPI"), which expanded the Company's process capabilities to include D-LFT and diversified the customer base. In January 2018, the Company acquired substantially all the assets of Horizon Plastics, which has manufacturing operations in Cobourg, Ontario and Escobedo, Mexico. This acquisition expanded the Company's customer base, geographic footprint, and process capabilities to include structural foam and structural web molding.


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 ofdriven by demand from customers in many different markets with different levels of cyclicality and seasonality. Product sales from the Company's largest market, theThe North American truck market, which is highly cyclical, accounted for 42%44% and 60%46% of the Company’s product revenue for the sixthree months ended June 30,March 31, 2021 and 2020 and 2019, 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. 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 operations 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.




SixThree Months Ended June 30, 2020

March 31, 2021
Product sales for the sixthree months ended June 30, 2020 decreased 33%March 31, 2021 increased 12% compared to the same period in 2019.2020. Operating income increased from a loss of $2,749,000$4,261,000 to $5,346,000 for the sixthree months ended June 30, 2019March 31, 2021 compared to profit of $3,055,000 for the six months ended June 30, 2020. Lowersame period a year ago. Higher demand from our heavy-duty truck, building product and consumer product customers as a result of a cyclical downturn in the truck market and the negative effect of COVID-19 on most customer demand waswere the primary driverdrivers of the sales decrease.increase. The increase in operating income was largely due to improved manufacturing efficiencies and cost savings at several of the Company's facilities and lower operating and SG&A costs.

facilities.
For the sixthree months ended June 30, 2020,March 31, 2021, product sales to truck customers decreasedincreased by 53%9% compared to the same period in 2019,2020, as a result of a cyclical downturnuptick in the truck market and demand deterioration related to COVID-19.market. According to ACT Research, North American heavy-duty truck production decreasedincreased approximately 52%10% for the sixthree months ended June 30, 2020March 31, 2021 compared to the same period in 2019.

2020.
For the sixthree months ended June 30, 2020,March 31, 2021, the Company recorded net income of $5,689,000,$3,456,000 or $0.67$0.41 per basic and diluted share, compared with net loss of $3,636,000,$7,961,000, or $(0.47)$0.97, per basic and diluted share for the sixthree months ended June 30, 2019. NetMarch 31, 2020. In 2020, net income in 2020 was favorably impacted by $5,638,000, or $0.69 per share, as a result of a tax valuation allowance reversal and a tax rate benefit due to tax law changes that allow the Company to carryback net operating losses to offset taxable income in 2013 through 2015.

2015, where the Company paid tax at 34% compared to the valuation of the losses being recorded at the 21% current United States statutory rate.
Looking forward, the Company anticipates product sales demand to rebound from the second quarter 2020 levels which were negatively impacted bybased on industry analysts’ projections and customer shutdowns as a result of COVID-19. Although the Company anticipates product sales demand to rebound,forecasts, the Company expects an uncertainsales levels for 2021 to increase compared to 2020. In the Company’s largest market, North American heavy-duty truck, ACT Research is forecasting production to increase approximately 41%. In several other industries the Company serves, customers are forecasting higher demand environment associated with COVID-19 and the concurrent unfolding market dynamics. Future developments such as a reboundin 2021 including in the spreadbuilding products, power sports, and consumer goods markets. The Company and our
23
Table of COVID-19, further actions taken by governmental authorities, including potential shutdowns of our operations, or changes in economic conditions could further adversely affect our operationsContents
customers have experienced supply disruptions and financial results,material cost increases due to storms, port delays, supplier force majeure as well as thoseoverall heavy global demand for certain materials. Although some of the supply disruptions have started to subside, we anticipate the disruptions to continue to impact revenues through the remainder of 2021.

The Company incurred increased raw material costs in the first quarter of 2021 and anticipates higher raw material costs to continue through the remainder of 2021. For a majority of our customers and suppliers.business, the Company has the ability to pass through a portion, but not all, of the cost increases to its customers.


Results of Operations


Three Months Ended June 30, 2020,March 31, 2021, as Compared to the Three Months Ended June 30, 2019

March 31, 2020
Net sales for the three months ended June 30,March 31, 2021 and 2020 totaled $72,829,000 and 2019 totaled $37,806,000 and $81,247,000,$64,023,000, respectively. Included in totalnet sales were tooling project sales of $1,959,000$3,696,000 and $5,807,000$2,093,000 for the three months ended June 30,March 31, 2021 and 2020, and 2019, 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 three months ended June 30, 2020March 31, 2021 were approximately $35,847,000$69,133,000 compared to $75,440,000$61,930,000 for the same period in 2019.2020. This decreaseincrease in sales is primarily the result of lower cyclicalhigher demand from the heavy-duty truck, customers as well as lower demand from most all customers as a resultbuilding product and consumer product markets. New business that the Company launched in the second quarter of COVID-19. As a result2020 in our power sports market also contributed to the increase in sales in the first quarter of COVID-19, several of the Company’s major customers suspended operations during April and May due to reduced demand and the impact of government regulations and mandates. 

2021.
Gross margin was approximately 8%17.5% of sales for the three months ended June 30, 2020,March 31, 2021, compared with 10%16.8% for the three months ended June 30, 2019.March 31, 2020. The gross margin percentage decreaseincrease was due to lower leveragefavorable product mix and production efficiencies of fixed costs of 7%4.4%, offset by a favorable net change in product mix and manufacturing efficiency of 3% and a favorable net changeunfavorable changes in selling priceprices and material costsmaterials cost of 2%3.7%.

Selling, general and administrative expense (“SG&A”) was $4,109,000$7,372,000 for the three months ended June 30, 2020,March 31. 2021, compared to $7,224,000$6,505,000 for the three months ended June 30, 2019.March 31, 2020. Increased SG&A expenses resulted primarily from higher labor and benefits costs of $474,000. The decrease in SG&A expense primarily resulted from CanadianCompany also received government subsidies enacted asfrom Canada in the resultthree months ended March 31, 2020 of COVID-19 totaling $1,391,000$143,000.
Interest expense totaled $579,000 for the three months ended June 30, 2020, lower labor and benefit costsMarch 31, 2021 compared to interest expense of $818,000, lower travel costs of $321,000 and lower outside and professional services of $171,000.

Interest expense totaled $1,197,000$1,174,000 for the three months ended June 30, 2020, compared to interest expense of $869,000 for the three months ended June 30, 2019.March 31, 2020. The increasedecrease in interest expense was due to a forbearance amendment fee of $225,000lower average outstanding debt balance, and higherlower interest rates during the three months ended June 30, 2020,March 31, 2021, when compared to the same period in 2019.

2020. Interest expense for the three months ended March 30, 2020 includes $225,000 of forbearance fees resulting from an amendment of the Company’s credit agreement.
Income tax expense for the three months ended March 31, 2021 was 28% of income before income taxes, and income tax benefit for the three months ended June 30,March 31, 2020 was 5% of loss before income taxes, and income tax for the three months ended June 30, 2019 was 50%156% of income before income taxes. The Company’s effective tax rates reflect the effects of taxable income and taxable losses being generated in highertax jurisdictions with different tax rates. The effective tax rate jurisdictions while taxable losses are being generated in lower tax rate jurisdictions.


The Company recordedfor 2020 reflects a net loss for the three months ended June 30, 2020 of $2,272,000, or $(0.29) per basic and diluted share, compared with net income of $209,000, or $0.03 per basic and diluted share, for the three months ended June 30, 2019.

Comprehensive loss totaled $1,659,000 for the three months ended June 30, 2020, compared to comprehensive loss of $25,000 for the same period ended June 30, 2019. The decrease was primarily related to lower net income of $2,481,000 offset by a net change in foreign currency hedges of $427,000 and a net change in interest rate swaps of $409,000.

Six Months Ended June 30, 2020, as Compared to the Six Months Ended June 30, 2019

Net sales for the six months ended June 30, 2020 and 2019 totaled $101,830,000 and $153,513,000, respectively. Included in total sales were tooling project sales of $4,053,000 and $6,621,000 for the six months ended June 30, 2020 and 2019, 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 six months ended June 30, 2020 were approximately $97,777,000 compared to $146,892,000 for the same period in 2019. This decrease in sales is primarily the result of lower cyclical demand from truck customers as well as lower demand from most all customers as a result of COVID-19. As a result of COVID-19, several of the Company’s major customers suspended operations during April and May due to reduced demand and the impact of government regulations and mandates. 

Gross margin was approximately 13% of sales for the six months ended June 30, 2020, compared with 8% for the six months ended June 30, 2019. The gross margin percentage increase was due to a favorable net change in product mix and manufacturing efficiency of 8% and a favorable net change in selling price and material costs of 2%, offset by lower leverage of fixed costs of 3%.

SG&A was $10,614,000 for the six months ended June 30, 2020, compared to $14,390,000 for the six months ended June 30, 2019. The decrease in SG&A expense primarily resulted from government subsidies enacted as a result of COVID-19 totaling $1,391,000 for the six months ended June 30, 2020, lower outside and professional services of $1,147,000, lower travel costs of $463,000 and lower labor and benefit costs of $277,000.

Interest expense totaled $2,371,000 for the six months ended June 30, 2020, compared to interest expense of $1,765,000 for the six months ended June 30, 2019. The increase in interest expense was due to forbearance amendment fees of $450,000 and higher interest rates during the six months ended June 30, 2020, when compared to the same period in 2019.

Income tax benefit for the six months ended June 30, 2020 was 685% of the income before income taxes, and income tax benefit for the six months ended June 30, 2019 was 19% of the loss before income taxes. The effective rate in 2020 includes the impact of reversing the full valuation allowance against net deferred tax assets in the United Stateschange of approximately $3,267,000$2,433,000 and a rate benefit of $2,371,000$3,205,000 based on the 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 the sixthree months ended June 30, 2020March 31, 2021 of $5,689,000,$3,456,000 or $0.67$0.41 per basic and diluted share, compared with a net loss of $3,636,000,$7,961,000, or $(0.47)$0.97 per basic and diluted share, for the sixthree months ended June 30, 2019.

March 31, 2020. In 2020, net income was favorably impacted by $5,638,000, or $0.69 per share, as a result of a tax valuation allowance reversal and a tax rate benefit due to tax law changes that allow the Company to carryback net operating losses to offset taxable income in 2013 through 2015, where the Company paid tax at 34% compared to the valuation of the losses being recorded at the 21% current United States statutory rate.
Comprehensive income totaled $4,321,000$3,392,000 for the sixthree months ended June 30, 2020,March 31, 2021, compared to comprehensive loss of $3,752,000$5,980,000 for the same period ended June 30, 2019.March 31, 2020. The increasedecrease was primarily related to higherthe decrease in net income of $9,325,000,$4,505,000, offset by a net change inincreases related to the foreign currency hedgesderivatives, net of $1,277,000.tax of $1,314,000 and interest rate swaps, net of tax of $605,000.


Liquidity and Capital Resources

Historically, theThe 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, increases in working capital, capital expenditures, repaymentrepayments of long-term debt, and business 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 June 30, 2020, theThe Company had no outstanding foreign exchange contracts with notional amounts totaling $3,958,000, compared to $15,358,000 outstanding as of December 31, 2019. As of June 30, 2020, the Company also had outstandingnor interest rate swaps with notional amounts totaling $28,000,000, compared to $29,750,000 outstanding as of DecemberMarch 31, 2019.2021.

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Cash provided byused in operating activities for the sixthree months ended June 30, 2020March 31, 2021 totaled $18,483,000.$512,000. Net income of $5,689,000$3,456,000 positively impacted operating cash flows. Non-cash deductions of depreciation and amortization included in net income amounted to $5,588,000.$3,049,000. Changes in working capital increased cash provided byused in operating activities by $6,030,000, which$7,570,000. The decrease in working capital was primarily related to changes in accounts receivable and inventory, offset by change in accounts payablepayable.
Cash used in investing activities for the three months ended March 31, 2021 was $2,436,000, which related to purchases of property, plant and other prepaid assets.equipment. The Company anticipates spending up to $17,064,000 during the remainder of 2021 on property, plant and equipment purchases for all of the Company's operations, including approximately $3,900,000 to expand the Company’s DLFT capacity in Matamoros, Mexico. At March 31, 2021, purchase commitments for capital expenditures in progress were $5,041,000. The Company anticipates using cash from operations and its available revolving line of credit to fund capital investments.

Cash provided by financing activities for the three months ended March 31, 2021 totaled $1,844,000, which primarily consisted of net revolving loan borrowings of $2,581,000 and net scheduled repayments of principal on outstanding term loans of $688,000.
At June 30, 2020,March 31, 2021, the Company had $4,604,000$3,027,000 cash on hand, and an available balance on the revolving line of credit of $20,000,000.$21,277,000.
The Company is required to meet certain financial covenants included in the Credit Agreement with respect to fixed coverage charge ratio. As of March 31, 2021, the Company was in compliance with its financial covenants associated with the loans made under the Credit Agreement as described above.

Management regularly evaluates the Company’s ability to effectively meet its debt covenants. Based on the Company’s forecasts, which are based on industry analysts’ estimates of heavy and medium-duty truck production volumes, customers' forecasts, as well as other assumptions, management believes that the Company will be able to maintain compliance with its financial covenants for the next 12 months. Management believes that existing cash, cash flow from operating activities and available borrowings under the Credit Agreement will be sufficient to meet the Company’s liquidity needs for the next 12 months. 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'sCompany’s liquidity and ability to obtain further financing to fund future operating and capital requirements could be negatively impacted.

Term Loans
Cash used in investing activities for the six months ended June 30, 2020 was $1,644,000, which primarily related to purchases of property, plant and equipment. The Company anticipates spending up to $3,500,000 during the remainder of 2020 on property, plant and equipment purchases for all of the Company's operations.

At June 30, 2020, purchase commitments for capital expenditures in progress were $917,000. The Company anticipates using cash from operations and its available revolving line of credit to fund capital investments.

Cash used in financing activities for the six months ended June 30, 2020 totaled $14,091,000, which primarily consisted of net revolving loan payments of $12,008,000 and net scheduled repayments of principal on outstanding term loans of $2,258,000. The Company was able to make the repayments primarily due to the cash provided by operating activities of the $13,104,000 for the three months ended of June 30, 2020.
The Company is required to meet certain financial covenants included in the Amended Credit Agreement with respect to leverage ratios and fixed charge ratios and capital expenditures, as well as other customary affirmative and negative covenants. As of June 30, 2020, the Company was not in compliance with its financial covenants. The following table presents the financial covenants specified in our Amended A/R Credit Agreement and the actual covenant calculations as of June 30, 2020:

Financial CovenantsActual Covenants as of June 30, 2020
Fixed Charge Coverage RatioMinimum 1.150.75
Leverage Ratio3.25 or Lower3.52

Wells Fargo Term Loans
On January 16, 2018,October 27, 2020, the Company entered into an Amended and Restated Credit Agreementa credit agreement (the "A/R Credit Agreement"“Credit Agreement”) with KeyBankWells Fargo Bank, National Association, as administrative agent, lead arranger and various financial institutionsbook runner, and the lenders party thereto as lenders (the "Lenders"“Lenders”). Pursuant to the terms of the A/R Credit Agreement, (i)the Lenders made available to the Company may borrow revolvingsecured term loans (the “WF Term Loans”) in the maximum aggregate principal amount of up to $40,000,000 (the “U.S. Revolving Loans”) from the Lenders and term loans in the aggregate principal amount$18,500,000 ($16,790,000 of up to $32,000,000 from the Lenders, (ii) the Company's wholly-owned subsidiary, Horizon Plastics International, Inc., (the "Subsidiary") may borrow revolving loans in an aggregate principal amount of up to $10,000,000 from the Lenders (which revolving loans shall reduce the availability of the U.S. Revolving Loanswhich was advanced to the Company on a dollar-for-dollar basis) and term loans in an aggregate principal amount of up to $13,000,000October 28, 2020). The proceeds from the Lenders, (iii)WF Term Loans were used to pay off the Company’s existing outstanding indebtedness with KeyBank National Association, and to pay certain fees and expenses associated with the financing.

At the option of the Company, obtainedthe WF Term Loans bears interest at a Letterper annum rate equal to LIBOR plus a margin of Credit Commitment300 basis points or base rate plus a margin of $250,000,200 basis points. LIBOR rate means the greater of which $160,000 has been issued(a) 0.75% per annum and (iv)(b) the Companyper annum published LIBOR rate for interest periods of one, three or six months as chosen by the Company. Base rate is the greater of (a) 1.0% per annum, (b) the Federal Funds Rate plus 0.5%, (c) LIBOR Rate plus 100 basis or (d) prime rate. The weighted average interest rate was 3.77% as of March 31, 2021.

The WF Term Loans are to be repaid in monthly installments of $200,000 plus interest, with the remaining outstanding term loan balance due on November 30, 2024, subject to certain optional and mandatory repayment terms. The Company’s obligations under the WF Term Loans are unconditionally guaranteed by each of $6,750,000. The Credit Agreement is secured by a guarantee of eachthe Company’s U.S. and Canadian subsidiarysubsidiaries, with such obligations of the Company and such subsidiaries being secured by a lien on substantially all of their U.S. and Canadian assets.

The WF Term Loans contains reporting, indebtedness, and financial covenants. The Company is in compliance with its covenants as of March 31, 2021.

Voluntary prepayments of amounts outstanding under the presentWF Term Loans are permitted at any time without premium or penalty. To the extent applicable, LIBOR breakage fees may be charged in connection with any prepayment.

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FGI Equipment Finance LLC Term Loan
On October 20, 2020, the Company entered into a Master Security Agreement and future assetsa Promissory Note, among FGI Equipment Finance LLC, (“FGI”) the Company as debtor, and each of Core Composites Corporation, a subsidiary of the Company organized in Delaware, and its U.S. and Canadian subsidiaries, except that only 65%CC HPM, S. de R.L. de C.V., a subsidiary of the stock issuedCompany organized in Mexico, as guarantors, the principal amount of $13,200,000 (the “FGI Term Loan”). On October 27, 2020, FGI advanced to the Company $12,000,000 which proceeds were used to pay off the Company’s existing outstanding indebtedness with KeyBank National Association, and to pay certain fees and expenses associated with the transactions, and $1,200,000 which proceeds were used to fund a security deposit to be held by CorecompositesFGI. Interest on the FGI Term Loan is a fixed rate of 8.25% and is payable monthly. The security deposit of $1,200,000 is located in prepaid expenses and other current assets on the Consolidated Balance Sheets.

Following the advance of funds by FGI, the FGI Term Loan is to be repaid in monthly principal and interest installments of $117,000 for the first 12 months, $246,000 for the subsequent 59 months and $1,446,000 due on October 31, 2026, subject to certain optional and mandatory repayment terms. The Company’s obligations under the Master Security Agreement are secured by certain machinery and equipment of the guarantors located in Mexico, and real property of Core Composites de Mexico, S. de R.L. de C.V. has been pledged.

Concurrent with the closing of the A/R Credit Agreement the Company borrowed the $32,000,000 term loan and $2,000,000 from the U.S. Revolving Loan and the Subsidiary borrowed the $13,000,000 term loan and $2,500,000 from revolving loans to provide $49,500,000 of funding for the acquisition of Horizon Plastics. Interest is payable monthly at one month LIBOR plus ,a basis point margin of 700 basis points with a LIBOR floor of 100 basis points.

On March 14, 2019, the Company entered into the first amendment (“First Amendment”) to the A/R Credit Agreement (as amended by the First Amendment, the "Amended Credit Agreement") with the Lenders. Pursuant to the terms of the First Amendment, the Company and Lenders agreed to modify certain terms of the A/R Credit Agreement. These modifications included (1) implementation of an availability block on the U.S. Revolving Loans reducing availability from $40,000,000 to $32,500,000, (2) modification to the definition of EBITDA to add back certain one-time expenses, (3) waiver of non-compliance with the leverage covenant as of December 31, 2018 and modification of the leverage ratio definition and covenant to eliminate testing of the leverage ratio until December 31, 2019, (4) waiver of non-compliance with the fixed charge covenant as of December 31, 2018 and modification of the fixed charge coverage ratio definition and covenant requirement, (5) implementation of a capital expenditure spend limit of $7,500,000 during the first six months of 2019 and $12,500,000 for the full year 2019, (6) an increase of the applicable interest margin spread for existing term and revolving loans, and (7) an increase in the commitment fees on any unused U.S. Revolving Loans.


On November 22, 2019, the Company entered into a forbearance agreement (the "Forbearance Agreement") with the Lenders. Pursuant to the Forbearance Agreement, the Borrowers and the Lenders acknowledged and confirmed that an event of default occurred under the A/R Credit Agreement resulting from the Borrowers failure to maintain the required Fixed Charge Coverage Ratio (as defined in the A/R Credit Agreement) for the fiscal quarter ended September 30, 2019. The Forbearance Agreement provided that the Administrative Agent and Lenders shall forbear from the exercise of rights and remedies pursuant to the Loan Documents described in the A/R Credit Agreement through March 13, 2020, as long as the Company satisfies the conditions set forth in the Forbearance Agreement, including, (i) the Borrowers shall remain current on all loan payments during the forbearance period, (ii) on or before December 6, 2019, the Administrative Agent and Lenders shall each receive a copy of a report of Huron Consulting Group containing findings and observations in respect of the businesses and operationssubsidiary of the Company andorganized in Mexico, located in Matamoros, Mexico.

The Company may prepay in full or in part (but not less than the Borrowers shall deliver a strategic alternative assessment in respectamount equal to 20% of the Borrowers’ operations and financing, (iii)original principal amount of the loan) outstanding amounts before they are due on or before December 15, 2019, the Administrative Agent and Lenders shall each receiveany scheduled Payment Date upon at least thirty (30) days’ prior written notice. The Company will pay a copy of appraisals of machinery and equipment and inventory appraisals, and the Borrowers shall have determined and proposed a new capital structure“Prepayment Fee” in an amount equal to an additional sum equal to the Administrative Agent and Lenders, (iv) on or before February 14, 2020,following percentage of the Borrowers shall have obtained a definitive, written commitment from involved parties and/or lenders providingprincipal amount to be prepaid for prepayments occurring in the basis for implementation of a new capital structure, and (v) on or before March 13, 2020, the Borrowers shall have closed on a new capital structure, acceptableindicated period: four percent (4.0%) (for prepayments occurring prior to the Administrative Agentsfirst anniversary of the FGI Term Loan); three percent (3.0%) (for prepayments occurring on the first anniversary of the FGI Term Loan until the second anniversary of the FGI Term Loan); two percent (2.0%) (for prepayments occurring on and Lenders. The Forbearance Agreement also implemented a new availability block with respectafter the second anniversary of the FGI Term Loan and prior to the U.S. Revolving Loans portionthird anniversary of the A/R Credit Agreement, reducing availability from $32,500,000 to $28,000,000Loan ); and increasing the applicable margin for existing term and revolving loans, as well as increasing the commitment fees onone percent (1.0%) (for prepayments occurring any unused U.S. Revolving Loans.time thereafter).


On March 13, 2020, the Company amended the Forbearance Agreement and entered into the First Amendment to the Forbearance Agreement (the “First Amended Forbearance Agreement”) with the Lenders. Pursuant to the terms of the First Amended Forbearance Agreement, the Company and Lenders agreed to modify certain terms of the Forbearance Agreement and extend the Forbearance Agreement through May 29, 2020. The modifications include (1) a reduction in the U.S. Revolving Loan to $25,000,000 with an availability block of $5,000,000 which can be borrowed with the approval of the lenders, (2) a change of interest rate to LIBOR plus 650 basis points, (3) forbearing compliance with the leverage covenant and fixed charge covenant through May 29, 2020, and (4) implementation of a capital expenditure spend limit of $3,500,000 from the effective date of the First Amended Forbearance Agreement through May 29, 2020.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 550 basis point5.5% and a term of 60 months. The amount outstanding at June 30, 2020 was $167,000 of which, $135,000 was classified as long term debt.

Revolving Loans

Wells Fargo Revolving Loan
On May 29,October 27, 2020, the Company amended the First Amended Forbearance Agreement and entered into the Second Amendment to the Forbearance Agreementa credit agreement (the “Second Amended Forbearance“Credit Agreement”) with the Lenders. The Second Amended Forbearance Agreement provided that the CompanyWells Fargo Bank, National Association, as administrative agent, lead arranger and book runner, and the Lenders agreedlenders party thereto (the “Lenders”). Pursuant to modify certainthe terms of the Amended ForbearanceCredit Agreement, and extend the Forbearance Agreement through September 30, 2020. The modifications include (1) thatLenders made available to the Company will maintain liquiditya revolving loan commitment (the “WF Revolving Loan”) of not less than $5,000,000,$25,000,000 ($8,745,000 of which was advanced to be measured twice monthly after the effective date,Company on every secondOctober 28, 2020). The proceeds from the WF Revolving Loan were used to pay off the Company’s existing outstanding indebtedness with KeyBank National Association, and fourth Fridayto pay certain fees and expenses associated with the financing.

The Credit Agreement also makes available to the Company an incremental revolving commitment in the maximum amount of each month$10,000,000 at the Company’s option at any time during the forbearancethree-year period (2)following the closing.

The borrowing availability under the WF Revolving Loan is the lesser of (a) the loan commitment of $25,000,000 or (b) the sum of 90% of eligible investment grade accounts receivable, 85% of non-investment grade eligible accounts receivable and 65% of eligible inventory.

At the option of the Company, shall maintain minimum year-to-date earnings before income tax, depreciation and amortization (“YTD-EBITDA”) of not less than $5,000,000, measured upon delivery of Company’s July 2020 financial statements and also upon delivery of Company’s August 2020 financial statements, with YTD-EBITDA determined based on consolidated EBITDA, (3)the WF Revolving Loan bears interest at a change of interestper annum rate equal to LIBOR plus a margin of 200 to 250 basis points or base rate plus 700a margin of 100 to 150 basis points, with athe margin rate being based on the excess availability amount under the line of credit. LIBOR floorrate means the greater of (a) 0.75% per annum and (b) the per annum published LIBOR rate for interest periods of one, three or six months as chosen by the Company. Base rate is the greater of (a) 1.0% per annum, (b) the Federal Funds Rate plus 0.5%, (c) LIBOR Rate plus 100 basis points, (4) on or before July 15, 2020 the Borrowers shall have obtained executed term sheets from involved parties and/or lenders, (5) on or before September 30, 2020, the Borrowers shall have closed on a new capital structure, (6) forbearing compliance with the leverage covenant and fixed charge covenant through September 30, 2020, and (7) implementation of a capital expenditure spend limit of $3,000,000 for the nine months ended September 30, 2020. Capitalized terms used in this paragraph but not defined shall have the meaning ascribed to such terms in the Seconded Amended Forbearance Agreement.

As a result of non-compliance with the A/R Credit Agreement, the Company’s remaining borrowings under the A/R Credit Agreement, consisting of $36,000,000 under the revolving credit commitment and the term loan commitments, were classified as a current liability in the Company’s consolidated balance sheet(d) prime rate. The weighted average interest rate was 3.25% as of JuneDecember 31, 2020.

The WF Revolving Loan commitment terminates, and all outstanding borrowings thereunder must be repaid, by November 30, 2020. As a result, the Company’s current liabilities exceeded its current assets by $12,345,000 as of June 30, 2020. If the Lenders were to call the loans or demand repayment of all existing borrowings, this could result in the Company being unable to meet its working capital obligations.

2024. The Company has unblocked maximum availability$24,278,000 of $20,000,000 of variableavailable rate revolving loans of which $0$3,001,000 is outstanding as of June 30,March 31, 2021.

The WF Revolving Loan contains the same covenants as the WF Term Loans.

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Wells Fargo Bank will issue up to $2,000,000 of Letters of Credit in accordance with the terms of the Credit Agreement upon the Company’s request. As of March 31, 2021, the Company had one Letter of Credit outstanding for $160,000.



KeyBank Loan

On March 31, 2020, the Company had a term loan and revolving loan balance of $37,125,000 and $7,776,000 with KeyBank National Association, respectively. The Company’s term loan and revolving loan had variable interest rates of 7.50% and 6.62%, respectively at March 31, 2020.



Bank Covenants

The Company is required to meet certain financial covenants included in the Credit Agreement with respect to fixed coverage charge ratio. As of March 31, 2021, the Company was in compliance with its financial covenants associated with the loans made under the Credit Agreement as described above.

Off-Balance Sheet Arrangements

The Company did not have any significant off-balance sheet arrangements as of June 30, 2020March 31, 2021 or December 31, 2019.

2020.
The Company did not have or experience any material changes outside the ordinary course of business as to contractual obligations, including long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-termlong- term liabilities reflected on the Company’s balance sheet under GAAP, as of June 30, 2020March 31, 2021 or December 31, 2019.2020.

Critical Accounting Policies and Estimates

For information on critical accounting policies and estimates, see Note 2, "Critical Accounting Policies and Estimates," to the consolidated financial statements included herein.

Recent Accounting Pronouncements
For information on the impact of recently issued accounting pronouncements, see Note 3, "Recent Accounting Pronouncements," to the consolidated financial statements included herein.here

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Part I — Financial Information

Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 3.    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 Pesopeso and Canadian Dollar. Core Molding Technologies does not hold any material market risk sensitive instruments for trading purposes. The Company may use derivative financial instruments to hedge exposure to fluctuations in foreign exchange rates and interest rates.
Core Molding Technologies has the following three items that are sensitive to market risks: (1) Revolving Loans and Term Loans under the Amended A/R Credit Agreement, some of which bear a variable interest rate; (2) foreign currency purchases in which the Company purchases Mexican Pesospesos and Canadian Dollarsdollars with United States Dollarsdollars to meet certain obligations; and (3) raw material purchases in which Core Molding Technologies purchases various resins, fiberglass, and fiberglassmetal components for use in production. The prices and availability of these materials are affected by the prices of crude oil, natural gas and other feedstocks, tariffs, as well as processing capacity versus demand.
Assuming a hypothetical 10% change in short-term interest rates, interest paid on the term loanTerm Loan would have been impacted, as the interest rate on these loans is based upon LIBOR. It would not, however, have a material effect on earnings before tax.
Assuming a hypothetical 10% decrease in the United States Dollardollar to Mexican Pesopeso and Canadian Dollardollar exchange rate, 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 commodity prices, Core Molding Technologies would be impacted by an increase in raw material costs, which would have an adverse effect on operating margins.

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Part I — Financial Information

Item 4.Controls and Procedures
Item 4.    Controls and Procedures
As of the end of the period covered by this report, the Company has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon this evaluation, the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were (i) effective to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act was 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 disclosure, 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. There were no changes in internal controls over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) that occurred in the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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Part II — Other Information

Legal Proceedings
Item 1.Legal Proceedings
From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is presently not involved in any legal proceedings which in the opinion of management are likely to have a material adverse effect on the Company's consolidated financial position or results of operations.

Item 1A.Risk Factors

The followingThere have been no material changes in Core Molding Technologies' risk factor supplements the “Risk Factors” sectionfactors from those previously disclosed in Part 1, Item 1A, of ourCore Molding Technologies' Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (our “Form 10-K"). The following risk factor disclosure should be read in conjunction with the other risk factors set out in our Form 10-K.2020.

Unregistered Sales of Equity Securities and Use of Proceeds
The Recent Coronavirus (COVID-19) Outbreak Has Adversely Impacted our Business and Could inCompany did not make any unregistered sales of equity securities during 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 Uncertainthree months ended March 31, 2021.

PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number that May Yet be Purchased Under the Plans or Programs
January 1 to 31, 20213,874 $12.20 — — 
February 1 to 28, 2021— — — — 
March 1 to 31, 2021— — — — 
The global outbreak of the coronavirus (COVID-19) has significantly increased economic, demand and operational uncertainty. We have global operations, customers and suppliers, including in countries most impacted by COVID-19. 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 and 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 impact of COVID-19 on the global economy and our customers has negatively impacted demand for our products and could continue to do so in the future. Its effects could also result in further disruptions to our manufacturing operations, including higher rates of employee absenteeism, and supply chain disruption, which could continue to negatively impact our ability to meet customer demand. Additionally, the potential deterioration and volatility of credit and financial markets could limit our ability to obtain external financing. The extent to which COVID-19 will impact our business, results of operations, financial condition or liquidity is highly uncertain and will depend on future developments, including the spread and duration of the virus, potential actions taken by governmental authorities, and how quickly economic conditions stabilize and recover.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None
Item 3.Defaults Upon Senior Securities
None.

Item 4.Mine Safety Disclosures
None.

Item 5.Other Information

None.

Mine Safety Disclosures
None.
Other Information
None.
Item 6.    Exhibits

See Index to Exhibits.

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SIGNATURES
Pursuant to the requirements 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.
Date:May 7, 2021By:/s/ David L. Duvall
David L. Duvall
President, Chief Executive Officer, and Director
CORE MOLDING TECHNOLOGIES, INC.
Date:August 10, 2020By:/s/ David L. Duvall
David L. Duvall
President, Chief Executive Officer, and Director 
Date:August 10, 2020May 7, 2021By:/s/ John P. Zimmer
John P. Zimmer
Executive Vice President, Secretary, Treasurer and Chief Financial Officer



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INDEX TO EXHIBIT
Exhibit No.DescriptionLocation
Exhibit No.2(a)(1)DescriptionLocation
2(a)(1)
Asset Purchase Agreement dated as of September 12, 1996, as amended October 31, 1996, between Navistar and RYMAC Mortgage Investment Corporation1
Incorporated by reference to Exhibit 2-A to Registration Statement on Form S-4 (Registration No. 333-15809)
2(a)(2)
Second Amendment to Asset Purchase Agreement dated December 16, 19961
Incorporated by reference to Exhibit 2(a)(2) to Annual Report on Form 10-K for the year-ended December 31, 2001
2(b)(1)Agreement and Plan of Merger dated as of November 1, 1996, between Core Molding Technologies, Inc. and RYMAC Mortgage Investment Corporation
Incorporated by reference to Exhibit 2-B to Registration Statement on Form S-4 (Registration No. 333-15809)
2(b)(2)First Amendment to Agreement and Plan of Merger dated as of December 27, 1996 between Core Molding Technologies, Inc. and RYMAC Mortgage Investment Corporation
Incorporated by reference to Exhibit 2(b)(2) to Annual Report on Form 10-K for the year ended December 31, 2002
2(c)Asset Purchase Agreement dated as of October 10, 2001, between Core Molding Technologies, Inc. and Airshield Corporation
Incorporated by reference to Exhibit 1 to Current Report on Form 8-K filed October 31, 2001
2(d)Asset Purchase Agreement dated as of March 20, 2015, between Core Molding Technologies, Inc and CPI Binani, Inc.
Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed March 23, 2015
2(e)Asset Purchase Agreement dated as of January 16, 2018 between 1137952 B.C. Ltd., Horizon Plastics International, Inc., 1541689 Ontario Inc., 2551024 Ontario Inc., Horizon Plastics de Mexico, S.A. de C.V., and Brian Read
Incorporate by reference to Exhibit 2.1 to Current Report on Form 8-K filed January 19, 2018
3(a)(1)Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996
Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-8 (Registration No. 333-29203)
3(a)(2)Certificate of Amendment of Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on November 6, 1996
Incorporated by reference to Exhibit 4(b) to Registration Statement on Form S-8 (Registration No. 333-29203)
3(a)(3)Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002
Incorporated by reference to Exhibit 3(a)(4) to Quarterly Report on Form 10-Q for the quarter ended September 30, 2002
3(a)(4)Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on July 18, 2007
Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed July 19, 2007
3(a)(5)Certificate of Elimination of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware on April 2, 2015.
Incorporated by reference to Exhibit 3(a)(5) to Current Report on Form 8-K filed April 2, 2015
3(b)3(a)(6)Certificate of Designation, Preferences and Rights of Series B Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware on April 21, 2020
Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed April 22, 2020
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Exhibit No.DescriptionLocation
3(a)(7)Certificate of Elimination of Series B Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware on April 1, 2021.
Incorporated by reference to Exhibit 3(a)(5) to Current Report on Form 8-K filed April 6, 2021
3(a)(8)Rights Agreement, dated as of April 21, 2020, by and between Core Molding Technologies, Inc. and American Stock Transfer & Trust Company, as Rights Agent
Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed April 22, 2020

3(a)(9)Amendment No. 1 to Stockholder Rights Agreement, dated as of March 30, 2021, between Core Molding Technologies, Inc. and American Stock Transfer & Trust Company
Incorporated by reference to Exhibit 4(b)(1) to Current Report on Form 8-K filed April 6, 2021

3(b)Amended and Restated By-Laws of Core Molding Technologies, Inc.
Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed January 4, 2008
3(b)(1)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(a)(1)Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996
Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-8 (Registration No. 333-29203)

Exhibit No.4(a)(2)DescriptionLocation
4(a)(2)Certificate of Amendment of Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on November 6, 1996
Incorporated by reference to Exhibit 4(b) to Registration Statement on Form S-8 (Registration No. 333-29203)
4(a)(3)Certificate of 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
4(a)(4)Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on July 18, 2007
Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed July 19, 2007
4(a)(5)Certificate of Elimination of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware on April 2, 2015
Incorporated by reference to Exhibit 3(a)(5) to Current Report on Form 8-K filed April 2, 2015
4(a)4 (a)(6)
Certificate of Designation, Preferences and Rights of
Series B Junior Participating Preferred Stock, , as filed with the Secretary of State of the State of Delaware on April 21, 2020
Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed April 22, 2020

4(a)(7)Certificate of Elimination of Series B Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware on April 1, 2021.
Incorporated by reference to Exhibit 3(a)(5) to Current Report on Form 8-K filed April 6, 2021
4(a)(8)Rights Agreement, dated as of April 21, 2020, by and
between Core Molding Technologies, Inc. and American Stock Transfer & Trust Company, as Rights Agent
Incorporated by reference to Exhibit 4.1 to Current Report on Form 8-K filed April 22, 2020
104(a)(9)Second Amendment No. 1 to ForbearanceStockholder Rights Agreement, dated as of May 29, 2020, among amongMarch 30, 2021, between Core Molding Technologies, Inc., Horizon Plastics International, Inc., the Lenders Named Therein, KeyBank National Association and Core Composites CorporationAmerican Stock Transfer & Trust Company
Incorporated by reference to Exhibit 1099.14(b)(1) to Current Report on Form 8-K filed June 2, 2020.April 6, 2021

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11Exhibit No.DescriptionLocation
11Computation of Net Income per Share
Exhibit 11 omitted because the required information is Included in Notes to Financial Statement
31(a)Section 302 Certification by David L. Duvall, President, Chief Executive Officer, and Director
Filed Herein
31(b)Section 302 Certification by John P. Zimmer, Vice President, Secretary, Treasurer, and Chief Financial Officer
Filed Herein
32(a)Certification of David L. Duvall, Chief Executive Officer of Core Molding Technologies, Inc., dated August 10 2020,May 7, 2021, pursuant to 18 U.S.C. Section 1350
Filed Herein
32(b)Certification of John P. Zimmer, Chief Financial Officer of Core Molding Technologies, Inc., dated August 10 2020,May 7, 2021, pursuant to 18 U.S.C. Section 1350
Filed Herein
101.INSXBRL Instance DocumentFiled Herein
101.SCHXBRL Taxonomy Extension Schema DocumentFiled Herein
101.CALXBRL Taxonomy Extension Calculation LinkbaseFiled Herein
101.LABXBRL Taxonomy Extension Label LinkbaseFiled Herein
101.PREXBRL Taxonomy Extension Presentation LinkbaseFiled Herein
101.DEFXBRL Taxonomy Extension Definition LinkbaseFiled Herein

1.The Asset Purchase Agreement, as filed with the Securities and Exchange Commission as Exhibit 2-A to Registration Statement on Form S-4 (Registration No. 333-15809), omits the exhibits (including the Buyer Note, Special Warranty Deed, Supply

The Asset Purchase Agreement, as filed with the Securities and Exchange Commission as Exhibit 2-A to Registration Statement on Form S-4 (Registration No. 333-15809), omits the exhibits (including the Buyer Note, Special Warranty Deed, Supply Agreement, Registration Rights Agreement and Transition Services Agreement identified in the Asset Purchase Agreement) and schedules (including those identified in Sections 1, 3, 4, 5, 6, 8 and 30 of the Asset Purchase Agreement). Core Molding Technologies, Inc. will provide any omitted exhibit or schedule to the Securities and Exchange Commission upon request.

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