5. MAJOR CUSTOMERS
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 | | 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 sales | 9,484,000 |
| | 9,203,000 |
| | 18,471,000 |
| | 15,325,000 |
|
| | | | | | | |
Navistar product sales | 6,500,000 |
| | 17,043,000 |
| | 17,166,000 |
| | 31,296,000 |
|
Navistar tooling sales | 1,088,000 |
| | 743,000 |
| | 1,186,000 |
| | 782,000 |
|
Total Navistar sales | 7,588,000 |
| | 17,786,000 |
| | 18,352,000 |
| | 32,078,000 |
|
| | | | | | | |
Volvo product sales | 2,167,000 |
| | 14,581,000 |
| | 9,740,000 |
| | 29,096,000 |
|
Volvo tooling sales | 622,000 |
| | 32,000 |
| | 2,147,000 |
| | 139,000 |
|
Total Volvo sales | 2,789,000 |
| | 14,613,000 |
| | 11,887,000 |
| | 29,235,000 |
|
| | | | | | | |
PACCAR product sales | 3,167,000 |
| | 12,435,000 |
| | 11,116,000 |
| | 24,247,000 |
|
PACCAR tooling sales | — |
| | 987,000 |
| | 207,000 |
| | 1,160,000 |
|
Total PACCAR sales | 3,167,000 |
| | 13,422,000 |
| | 11,323,000 |
| | 25,407,000 |
|
| | | | | | | |
BRP product sales | 2,206,000 |
| | 2,429,000 |
| | 9,453,000 |
| | 7,977,000 |
|
BRP tooling sales | 113,000 |
| | 38,000 |
| | 333,000 |
| | 129,000 |
|
Total BRP sales | 2,319,000 |
| | 2,467,000 |
| | 9,786,000 |
| | 8,106,000 |
|
| | | | | | | |
Other product sales | 12,323,000 |
| | 19,749,000 |
| | 31,831,000 |
| | 38,951,000 |
|
Other tooling sales | 136,000 |
| | 4,007,000 |
| | 180,000 |
| | 4,411,000 |
|
Total other sales | 12,459,000 |
| | 23,756,000 |
| | 32,011,000 |
| | 43,362,000 |
|
| | | | | | | |
Total product sales | 35,847,000 |
| | 75,440,000 |
| | 97,777,000 |
| | 146,892,000 |
|
Total tooling sales | 1,959,000 |
| | 5,807,000 |
| | 4,053,000 |
| | 6,621,000 |
|
Total sales | $ | 37,806,000 |
| | $ | 81,247,000 |
| | $ | 101,830,000 |
| | $ | 153,513,000 |
|
6. INVENTORY
Inventories, net consisted of the following:following (in thousands):
| | | June 30, 2020 | | December 31, 2019 | | March 31, 2021 | | December 31, 2020 |
Raw materials | $ | 10,558,000 |
| | $ | 13,041,000 |
| Raw materials | $ | 13,576 | | | $ | 11,640 | |
Work in process | 1,623,000 |
| | 1,818,000 |
| Work in process | 1,808 | | | 1,679 | |
Finished goods | 4,044,000 |
| | 6,823,000 |
| Finished goods | 4,989 | | | 5,041 | |
| $ | 16,225,000 |
| | $ | 21,682,000 |
| |
Total | | Total | $ | 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 Ended | | Three Months Ended March 31, | |
| June 30, | | June 30, | | 2021 | | 2020 | |
| 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, 2021 | | December 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 leases | 3.8 |
| | 4.0 |
|
| | | |
Weighted average discount rate: | | | |
Operating leases | 5.0 | % | | 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.
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, 2021 | | December 31, 2020 | |
Weighted average remaining lease term (in years): | | | | |
Operating leases | 4.2 | | 3.5 | |
| | | | |
Weighted average discount rate: | | | | |
Operating leases | 5.5 | % | | 5.9 | % | |
| | | | |
Other information related to leases were as follows:follows (in thousands) :
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
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 | | |
| 2022 | 1,157 | | |
| 2023 | 1,058 | | |
| 2024 | 1,063 | | |
| 2025 | 628 | | |
| Total lease payments | 5,036 | | |
| Less: imputed interest | (730) | | |
| Total lease obligations | 4,306 | | |
| Less: current obligations | 1,289 | | |
| 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 | | |
| 2022 | 811 | | |
| 2023 | 706 | | |
| 2024 | 705 | | |
| 2025 | 0 | | |
| Total lease payments | 3,437 | | |
| Less: imputed interest | (744) | | |
| Total lease obligations | 2,693 | | |
| Less: current obligations | (1,023) | | |
| Long-term lease obligations | $ | 1,670 | | |
|
| | | |
| Operating Leases |
2020 (remainder of year) | $ | 716,000 |
|
2021 | 1,174,000 |
|
2022 | 1,102,000 |
|
2023 | 1,000,000 |
|
2024 | 530,000 |
|
Total lease payments | 4,522,000 |
|
Less: imputed interest | (751,000 | ) |
Total lease obligations | 3,771,000 |
|
Less: current obligations | (743,000 | ) |
Long-term lease obligations | $ | 3,028,000 |
|
|
| | | |
| Operating Leases |
2020 | $ | 1,433,000 |
|
2021 | 1,174,000 |
|
2022 | 1,102,000 |
|
2023 | 1,000,000 |
|
2024 | 530,000 |
|
Total lease payments | 5,239,000 |
|
Less: imputed interest | (816,000 | ) |
Total lease obligations | 4,423,000 |
|
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, 2019 | | March 31, 2021 | | December 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 | |
Additions | 0 | |
Impairment | 0 | |
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 Assets | Amortization Period | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Trade name | 25 Years | | $ | 250 | | | $ | (60) | | | $ | 190 | |
Trademarks | 10 Years | | 1,610 | | | (516) | | | 1,094 | |
Non-competition agreement | 5 Years | | 1,810 | | | (1,161) | | | 649 | |
Developed technology | 7 Years | | 4,420 | | | (2,025) | | | 2,395 | |
Customer relationships | 10-12 Years | | 9,330 | | | (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 Assets | Amortization Period | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
Trade name | 25 Years | | $ | 250 | | | $ | (58) | | | $ | 192 | |
Trademarks | 10 Years | | 1,610 | | | (476) | | | 1,134 | |
Non-competition agreement | 5 Years | | 1,810 | | | (1,071) | | | 739 | |
Developed technology | 7 Years | | 4,420 | | | (1,869) | | | 2,551 | |
Customer relationships | 10-12 Years | | 9,330 | | | (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.
|
| | | | | | | | | | | | | | |
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 |
|
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 | | 2019 | | 2021 | | 2020 | |
Pension expense: | | | | | | | | Pension expense: | | | | |
Multi-employer plan | $ | 145,000 |
| | $ | 231,000 |
| | $ | 391,000 |
| | $ | 462,000 |
| Multi-employer plan | $ | 189 | | | $ | 246 | | |
Defined contribution plan | 215,000 |
| | 324,000 |
| | 508,000 |
| | 586,000 |
| Defined contribution plan | 302 | | | 293 | | |
Total pension expense | 360,000 |
| | 555,000 |
| | 899,000 |
| | 1,048,000 |
| Total pension expense | 491 | | | 539 | | |
| | | | | | | | |
Health and life insurance: | | | | | | | | Health and life insurance: | | | | |
Interest cost | 59,000 |
| | 72,000 |
| | 118,000 |
| | 144,000 |
| Interest cost | 41 | | | 59 | | |
Amortization of prior service costs | (124,000 | ) | | (125,000 | ) | | (248,000 | ) | | (250,000 | ) | Amortization of prior service costs | (124) | | | (124) | | |
Amortization of net loss | 45,000 |
| | 29,000 |
| | 90,000 |
| | 58,000 |
| Amortization of net loss | 43 | | | 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 payable | 13,069 | | | 13,148 | |
Leaf Capital term loan payable | 144 | | | 152 | |
Total | 29,004 | | 29,690 |
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 2025 | 167,000 |
| | — |
|
Total | 36,167,000 |
| | 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.
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
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.
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, 2019 | 343,919 |
| | $ | 9.37 |
| |
Unvested balance at December 31, 2020 | | Unvested balance at December 31, 2020 | 507,835 | | | $ | 6.25 | |
Granted | 287,750 |
| | 4.62 |
| Granted | 0 | | | 0 | |
Vested | (87,344 | ) | | 10.69 |
| Vested | (11,158) | | | 3.38 | |
Forfeited | (8,385 | ) | | 13.72 |
| Forfeited | 0 | | | 0 | |
Unvested balance at June 30, 2020 | 535,940 |
| | $ | 6.54 |
| |
Unvested balance at March 31, 2021 | | Unvested balance at March 31, 2021 | 496,677 | | | $ | 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, 2020 | 180,925 | | | $ | 2.57 | |
Granted | 0 | | | 0 | |
Exercised | 0 | | | 0 | |
Forfeited | 0 | | | 0 | |
Outstanding at end of the period ended March 31, 2021 | 180,925 | | | $ | 2.57 | |
Exercisable at end of the period ended March 31, 2021 | 73,888 | | | $ | 2.57 | |
|
| | | | | | |
| Number of Shares | | Weighted Average Grant Date Fair Value |
Outstanding as of December 31, 2019 | 222,112 |
| | $ | 2.57 |
|
Granted | — |
| | — |
|
Exercised | — |
| | — |
|
Forfeited | (27,266 | ) | | 2.57 |
|
Outstanding at the period ended June 30, 2020 | 194,846 |
| | $ | 2.57 |
|
Exercisable at the period ended June 30, 2020 | 84,300 |
| | $ | 2.57 |
|
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 contracts | Prepaid expense other current assets | | $ | — |
| | Accrued other liabilities | | $ | 419,000 |
|
Notional contract values | | | $ | — |
| | | | $ | 3,958,000 |
|
Interest rate swaps | Prepaid 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 contracts | Prepaid expense other current assets | | $ | 452,000 |
| | Accrued other liabilities | | $ | — |
|
Notional contract values | | | $ | 15,358,000 |
| | | | $ | — |
|
Interest rate swaps | Prepaid 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) |
| | 2021 | | 2020 | | | | 2021 | | 2020 |
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) |
|
| 2020 | 2019 |
| | 2020 | 2019 |
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:
|
| | | | | | | | | | | | | | | | | |
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) |
|
| 2020 | 2019 |
| | 2020 | 2019 |
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 | ) | $ | — |
|
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 benefit | 538 | | | 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 reclassifications | 0 | | | 0 | | | 0 | |
Amounts reclassified from accumulated other comprehensive income (loss) | 0 | | | (81) | | | (81) | |
Income tax benefit | 0 | | | 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 reclassifications | 119,000 |
| — |
| 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 benefit | 350,000 |
| 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.
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
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
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.
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 Covenants | | Actual Covenants as of June 30, 2020 |
Fixed Charge Coverage Ratio | Minimum 1.15 | | 0.75 |
Leverage Ratio | 3.25 or Lower | | 3.52 |
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.
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.
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
Part I — Financial Information
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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.
Part I — Financial Information
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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.
Part II — Other Information
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.
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.
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Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number that May Yet be Purchased Under the Plans or Programs |
January 1 to 31, 2021 | | 3,874 | | | $ | 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.
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None
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Item 3. | Defaults Upon Senior Securities |
None.
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Item 4. | Mine Safety Disclosures |
None.
None.
None.
Other Information
None.
Item 6. Exhibits
See Index to Exhibits.
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.
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| | CORE MOLDING TECHNOLOGIES, INC. |
Date: | May 7, 2021 | By: | /s/ David L. Duvall | |
| | | David L. Duvall | |
| | | President, Chief Executive Officer, and Director |
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| | CORE MOLDING TECHNOLOGIES, INC. |
Date: | August 10, 2020 | By: | /s/ David L. Duvall | |
| | | David L. Duvall | |
| | | President, Chief Executive Officer, and Director |
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Date: | August 10, 2020May 7, 2021 | By: | /s/ John P. Zimmer | |
| | | John P. Zimmer | |
| | | Executive Vice President, Secretary, Treasurer and Chief Financial Officer |
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Exhibit No. | | Description | | Location |
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Exhibit No.2(a)(1) | | Description | | Location |
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2(a)(1) | | Asset Purchase Agreement dated as of September 12, 1996, as amended October 31, 1996, between Navistar and RYMAC Mortgage Investment Corporation1 | | |
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2(a)(2) | | Second Amendment to Asset Purchase Agreement dated December 16, 19961 | | |
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2(b)(1) | | Agreement and Plan of Merger dated as of November 1, 1996, between Core Molding Technologies, Inc. and RYMAC Mortgage Investment Corporation | | |
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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 | | |
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2(c) | | Asset Purchase Agreement dated as of October 10, 2001, between Core Molding Technologies, Inc. and Airshield Corporation | | |
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2(d) | | Asset Purchase Agreement dated as of March 20, 2015, between Core Molding Technologies, Inc and CPI Binani, Inc. | | |
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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 | | |
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3(a)(1) | | Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996 | | |
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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 | | |
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3(a)(3) | | Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002 | | |
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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 | | |
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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. | | |
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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 | | |
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Exhibit No. | | Description | | Location |
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. | | |
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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 | |
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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 | |
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3(b) | | Amended and Restated By-Laws of Core Molding Technologies, Inc. | | |
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3(b)(1) | | Amendment No. 1 to the Amended and Restated By-Laws of Core Molding Technologies, Inc. | | |
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4(a)(1) | | Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996 | | |
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Exhibit No.4(a)(2) | | Description | | Location |
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 | | |
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4(a)(3) | | Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002 | | |
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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 | | |
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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 | | |
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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 | |
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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. | | |
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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 | | |
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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 | |
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11Exhibit No. | | Description | | Location |
11 | | Computation of Net Income per Share | | |
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31(a) | | Section 302 Certification by David L. Duvall, President, Chief Executive Officer, and Director | | |
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31(b) | | Section 302 Certification by John P. Zimmer, Vice President, Secretary, Treasurer, and Chief Financial Officer | | |
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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 | | |
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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 | | |
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101.INS | | XBRL Instance Document | | Filed Herein |
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101.SCH | | XBRL Taxonomy Extension Schema Document | | Filed Herein |
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101.CAL | | XBRL Taxonomy Extension Calculation Linkbase | | Filed Herein |
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101.LAB | | XBRL Taxonomy Extension Label Linkbase | | Filed Herein |
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101.PRE | | XBRL Taxonomy Extension Presentation Linkbase | | Filed Herein |
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101.DEF | | XBRL Taxonomy Extension Definition Linkbase | | Filed Herein |
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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.