1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
--------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from To
-------------- ------------
Commission File Number 001-12505
CORE MATERIALS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1481870
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
800 Manor Park Drive, P.O. Box 28183
Columbus, Ohio 43228-0183
- --------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (614) 870-5000
--------------
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] NO [ ]
As of August 9, 2000, the latest practicable date, 9,778,680 shares of
the registrant's common shares were issued and outstanding.
2
PART 1 - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
CORE MATERIALS CORPORATION
BALANCE SHEETS
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 5,427,580 $ 1,128,868
Accounts receivable (less allowance for doubtful accounts:
June 30, 2000 - $471,665; December 31, 1999 - $430,598) 15,167,485 19,714,554
Inventories:
Finished and work in process goods 1,653,449 2,929,515
Stores 2,398,013 2,513,062
------------ ------------
Total inventories 4,051,462 5,442,577
Deferred tax asset 1,069,914 1,069,914
Prepaid expenses and other current assets 660,120 184,127
------------ ------------
Total current assets 26,376,561 27,540,040
Property, plant and equipment 41,447,197 39,667,232
Accumulated depreciation (14,580,397) (13,461,300)
------------ ------------
Property, plant and equipment - net 26,866,800 26,205,932
Deferred tax asset - net 11,362,102 11,890,677
Mortgage-backed security investment 1,625,126 1,909,295
Other assets 670,271 436,539
------------ ------------
TOTAL $ 66,900,860 $ 67,982,483
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities
Current portion long-term debt $ 315,000 $ 305,000
Accounts payable 7,915,590 11,067,668
Accrued liabilities:
Compensation and related benefits 1,929,216 1,355,288
Interest 884,829 892,477
Other accrued liabilities 2,350,388 1,923,143
------------ ------------
Total current liabilities 13,395,023 15,543,576
Long-term debt 26,540,150 26,700,150
Deferred long-term gain 2,689,048 2,915,825
Postretirement benefits liability 4,116,409 3,899,936
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $0.01 par value, authorized shares - 20,000,000; 97,787 97,787
Outstanding shares: June 30, 2000 - 9,778,680,
December 31, 1999 - 9,778,680
Paid-in capital 19,251,392 19,251,392
Retained earnings (deficit) 811,051 (426,183)
------------ ------------
Total stockholders' equity 20,160,230 18,922,996
------------ ------------
TOTAL $ 66,900,860 $ 67,982,483
============ ============
See notes to financial statements.
2
3
CORE MATERIALS CORPORATION
STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
NET SALES:
Navistar $13,897,237 $15,925,220 $31,333,207 $32,164,244
Yamaha 4,999,875 4,145,798 9,646,274 8,312,546
Other 4,310,417 4,165,136 8,140,704 6,191,079
----------- ----------- ----------- -----------
Total Sales 23,207,529 24,236,154 49,120,185 46,667,869
----------- ----------- ----------- -----------
Cost of Sales 19,519,884 21,115,181 40,680,147 38,954,356
Postretirement benefits expense 280,525 276,323 564,430 531,914
----------- ----------- ----------- -----------
Total cost of sales 19,800,409 21,391,504 41,244,577 39,486,270
----------- ----------- ----------- -----------
GROSS MARGIN 3,407,120 2,844,650 7,875,608 7,181,599
----------- ----------- ----------- -----------
Selling, general and administrative expense 2,284,147 2,155,913 4,905,644 4,144,189
Postretirement benefits expense 57,457 37,376 111,534 71,237
----------- ----------- ----------- -----------
Total selling, general and
administrative expense 2,341,604 2,193,289 5,017,178 4,215,426
INCOME BEFORE INTEREST AND TAXES 1,065,516 651,361 2,858,430 2,966,173
Interest income 67,703 72,096 119,652 161,371
Interest expense (421,912) (467,729) (863,696) (875,426)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 711,307 255,728 2,114,386 2,252,118
Income taxes:
Current 117,642 42,057 348,578 370,394
Deferred 178,494 63,814 528,574 561,984
----------- ----------- ----------- -----------
Total income taxes 296,136 105,871 877,152 932,378
----------- ----------- ----------- -----------
NET INCOME $ 415,171 $ 149,857 $ 1,237,234 $ 1,319,740
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE:
Basic $ 0.04 $ 0.02 $ 0.13 $ 0.13
=========== =========== =========== ===========
Diluted $ 0.04 $ 0.02 $ 0.13 $ 0.13
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 9,778,680 9,778,680 9,778,680 9,778,680
=========== =========== =========== ===========
Diluted 9,778,680 9,843,365 9,778,680 9,862,023
=========== =========== =========== ===========
3
See notes to financial statements.
4
CORE MATERIALS CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
TOTAL
COMMON STOCK OUTSTANDING PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------- ------- ----------- ---------- -----------
BALANCE AT JANUARY 1, 2000 9,778,680 $97,787 $19,251,392 $ (426,183) $18,922,996
Net Income 1,237,234 1,237,234
--------- ------- ----------- ---------- -----------
BALANCE AT JUNE 30, 2000 9,778,680 $97,787 $19,251,392 $ 811,051 $20,160,230
========= ======= =========== ========== ===========
4
See notes to financial statements.
5
CORE MATERIALS CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
JUNE 30
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,237,234 $ 1,319,740
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,179,973 997,712
Deferred income taxes 528,574 561,984
Loss on disposal of assets 26,411 --
Amortization of gain on sale/leaseback transactions (226,777) (226,777)
Change in operating assets and liabilities:
Accounts receivable 4,547,069 (1,409,555)
Inventories 1,391,115 (2,651,369)
Prepaid and other assets (475,993) (204,842)
Accounts payable (3,152,078) 4,684,273
Accrued and other liabilities 993,526 (276,072)
Postretirement benefits liability 216,473 238,235
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,265,527 3,033,329
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (2,100,984) (3,420,750)
Proceeds from maturities on mortgage-backed security investment 284,169 644,384
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,816,815) (2,776,366)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of principal on industrial revenue bond (150,000) (140,000)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (150,000) (140,000)
----------- -----------
NET INCREASE IN CASH 4,298,712 116,963
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,128,868 3,117,085
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,427,580 $ 3,234,048
=========== ===========
Cash paid for:
Interest (net of amounts capitalized) $ 829,011 $ 1,463,992
=========== ===========
Income taxes $ (84,666) $ 559,000
=========== ===========
5
See notes to financial statements.
6
CORE MATERIALS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10Q and include all of the information
and disclosures required by generally accepted accounting principles for interim
reporting, which are less than those required for annual reporting. In the
opinion of management, the accompanying unaudited financial statements contain
all adjustments (all of which are normal and recurring in nature) necessary to
present fairly the financial position of Core Materials Corporation ("Core
Materials") at June 30, 2000, and the results of operations and cash flows. The
"Notes to Financial Statements" which are contained in the 1999 Annual Report to
shareholders should be read in conjunction with these Financial Statements.
Certain reclassifications have been made to prior year's amounts to conform to
the classifications of such amounts for 2000.
Core Materials was formed on October 8, 1996, by RYMAC Mortgage
Investment Corporation ("RYMAC"), as a wholly owned subsidiary, for the purpose
of acquiring substantially all of the assets and assuming certain liabilities of
Columbus Plastics Operation ("Columbus Plastics"), an operating unit of Navistar
International Transportation Corp. (now known as International Truck and Engine
Corporation, "International").
On December 31, 1996, RYMAC merged into its wholly owned subsidiary,
Core Materials, by converting each outstanding common share of RYMAC into the
right to receive one common share of Core Materials, with Core Materials as the
surviving corporation and continuing registrant. Simultaneously, on December 31,
1996, Core Materials purchased substantially all of the assets and assumed
certain liabilities of Columbus Plastics.
Core Materials operates principally in one business segment as a
compounder and compression molder of Sheet Molding Composites ("SMC") fiberglass
reinforced plastics. Core Materials produces and sells both SMC compound and
molded products for varied markets including the automotive and trucking
industries, recreational vehicles and commercial and industrial products.
2. RESTRICTED CASH
Included in cash at June 30, 2000, is $330,819, which is restricted
pursuant to the terms of the Industrial Revenue Bond, which was issued in May
1998. This restriction will be removed as Core Materials incurs and submits
reimbursement of qualified expenditures related to the project for which the
bond was issued.
3. EARNINGS PER COMMON SHARE
Basic earnings per common share are computed based on the weighted
average number of common shares outstanding during the period. Diluted earnings
per common share are computed similarly but include the effect of the exercise
of stock options under the treasury stock method. In calculating net income per
share for the three and six months ended June 30, 2000, stock options had no
effect on the weighted average shares for the computation of diluted income per
share and consequently basic and diluted net income per share were the same. In
calculating net income per share for the three and six months ended June 30,
1999, weighted average shares increased for the computation of diluted income
per share by 64,685 and 83,343 shares, respectively, due to the effect of stock
options which had no effect on net income per share.
6
7
4. COMMITMENTS AND CONTINGENCIES
At June 30, 2000, Core Materials had remaining outstanding commitments
for the purchase of two compression molding presses for $649,000.
7
8
PART I - FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain statements under this caption constitute "forward-looking
statements" which involve certain risks and uncertainties. Core Materials'
actual results may differ significantly from those discussed in the
forward-looking statements. Factors that may cause such a difference include,
but are not limited to: business conditions in the plastics, transportation,
recreation and consumer products industries, the general economy, competitive
factors, the dependence on two major customers, the recent efforts of Core
Materials to expand its customer base, new technologies, regulatory
requirements, labor relations, the loss or inability to attract key personnel,
ramp up of the Company's South Carolina facility, the availability of capital
and management's decisions to pursue new products or businesses which involve
additional costs, risks or capital expenditures.
OVERVIEW
On December 31, 1996, Core Materials acquired substantially all of the
assets and assumed certain liabilities of Columbus Plastics, a wholly owned
operating unit of International's truck manufacturing division since its
formation in late 1980.
Core Materials manufactures high quality compression SMC fiberglass
reinforced parts. The demand for Core Materials' products is affected by
economic conditions in the United States and Canada. Core Materials'
manufacturing operations have a significant fixed cost component. Accordingly,
during periods of changing demands, the profitability of Core Materials'
operations may change proportionately more than revenues from operations.
At the time of the acquisition of Columbus Plastics, International and
Core Materials entered into a Comprehensive Supply Agreement with an initial
term of five years. Under the terms of the Comprehensive Supply Agreement, Core
Materials became the primary supplier of International's original equipment and
service requirements for fiberglass reinforced parts using the SMC process.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 AS COMPARED TO THREE MONTHS ENDED JUNE
30, 1999
Net sales for the three months ended June 30, 2000, totaled $23,208,000
down 4% from the $24,236,000 reported for the three months ended June 30, 1999.
Sales to International decreased to $13,897,000 from $15,925,000 for the three
months ended June 30, 1999. The primary reason for the decrease was lower demand
from International resulting from an industry wide general decline in truck
orders. Sales to Yamaha increased for the three months ended June 30, 2000, by
21% to $5,000,000 compared with $4,146,000 for the three months ended June 30,
1999. The increase in Yamaha sales is primarily due to an overall increase in
demand from Yamaha for Core Materials' products.
Sales to other customers for the three months ended June 30, 2000,
increased 4% to $4,310,000 from $4,165,000 for the three months ended June 30,
1999. The increase in sales was primarily the result of adding new customers
during 1998 and 1999. Sales increases to these customers over the three months
ended June 30, 2000, were as follows: Case Corporation - $248,000; John Deere -
$142,000; Mack Trucks - $235,000; Caradon Doors and Windows, Peachtree Division
- - $218,000; New Holland North America, Inc. - $194,000. These increases were
partially offset by a decrease in sales to Volvo Trucks North America, Inc. of
approximately $827,000.
Gross Margin was 14.68% of sales for the three months ended June 30,
2000, compared with 11.74% for the three months ended June 30, 1999. The
increase in gross margin as a percent of sales, from the prior year,
8
9
is primarily due to reduced scrap, improved labor utilization, lower overtime
costs, reduced repairs, improved supply usage and to a lesser degree, product
mix refinements.
Selling, general and administrative expenses ("SG&A") totaled
$2,342,000 for the three months ended June 30, 2000, increasing from $2,193,000
for the three months ended June 30, 1999. The increase from 1999 is primarily
due to the increased level of the salaried workforce and associated recruiting
and relocation costs related to the reorganization and strengthening of the Core
Materials' management team, which took place in the latter part of 1999 and the
first quarter of 2000. Travel expenses were also higher to support the various
growth and operational improvement programs.
Interest expense totaled $422,000 for the three months ended June 30,
2000, decreasing from $468,000 for the three months ended June 30, 1999. The
decrease in interest expense from 1999 is primarily due to an increase in
capitalized interest due to an increased level of construction in progress.
Income taxes for the three months ended June 30, 2000, are estimated to
be approximately 41% of total earnings before taxes. Actual tax payments will be
lower than the recorded expenses as Core Materials has substantial federal tax
loss carryforwards. These loss carryforwards were recorded as a deferred tax
asset. As the tax loss carryforwards are utilized to offset federal income tax
payments, Core Materials reduces the deferred tax asset as opposed to recording
a reduction in income tax expense. Projected future income tax payments related
to income earned for the three months ended June 30, 2000, are estimated to be
approximately $118,000 which reflects federal alternative minimum, state and
local taxes.
Net income for the three months ended June 30, 2000, was $415,000 or
$.04 per basic and $.04 per diluted share, an increase of $265,000 over the net
income for the three months ended June 30, 1999, of $150,000 or $.02 per basic
and $.02 per diluted share. The Company has approximately $20 million of
operating tax loss carryforwards that are available to offset income taxes on
future earnings. These tax loss carryforwards do not begin to expire until the
year 2007. If the benefit of the Company's operating tax loss carryforwards were
recorded as a reduction in income tax expense, which is reflective of the actual
cash treatment, net income for the three months ended June 30, 2000, would have
been increased by $178,000, or $.02 per diluted share, to a total of $593,000,
or $.06 per diluted share. The comparable 1999 net income would have been
increased by $64,000, or $.01 per diluted share, to a total of $214,000, or $.02
per diluted share.
SIX MONTHS ENDED JUNE 30, 2000 AS COMPARED TO SIX MONTHS ENDED JUNE 30,
1999
Net sales for the six months ended June 30, 2000, totaled $49,120,000
up 5% from the $46,668,000 reported for the six months ended June 30, 1999.
Sales to International decreased slightly to $31,333,000 from $32,164,000 for
the six months ended June 30, 1999. Sales to Yamaha increased for the six months
ended June 30, 2000, by 16% to $9,646,000 compared with $8,312,000 for the six
months ended June 30, 1999. The increase in Yamaha sales is primarily due to an
increase in demand from Yamaha for Core Materials' products.
Sales to other customers for the six months ended June 30, 2000,
increased 31% to $8,141,000 from $6,191,000 for the six months ended June 30,
1999. The increase in sales was primarily the result of new customers added
during 1998 and 1999, including: New Holland North America, Inc. - $1,565,000
and Caradon Doors and Windows, Peachtree Division - $570,000. New customers
added at the end of 1999 that resulted in sales during 2000 included: John Deere
- - $268,000 and Mack Truck - $345,000. These increases were partially offset by a
decrease in sales to Volvo Trucks North America, Inc. of $440,000.
Gross margin was 16% of sales for the six months ended June 30, 2000,
compared with 15.4% for the six months ended June 30, 1999. The improvement in
the gross margin percentage is primarily due to the reasons noted above for the
three months ended June 30, 2000.
SG&A totaled $5,017,000 for the six months ended June 30, 2000,
increasing from $4,215,000 for the six months ended June 30, 1999. The increase
over the 1999 amount is primarily due to the reasons noted above for the three
months.
9
10
Income taxes for the six months ended June 30, 2000, are estimated to
be approximately 41% of total earnings before taxes. Actual tax payments will be
lower than the recorded expenses as Core Materials has substantial federal tax
loss carryforwards. These loss carryforwards were recorded as a deferred tax
asset. As the tax loss carryforwards are utilized to offset federal income tax
payments, Core Materials reduces the deferred tax asset as opposed to recording
a reduction in income tax expense. Projected future income tax payments related
to income earned for the six months ended June 30, 2000, are estimated to be
approximately $349,000 which reflects federal alternative minimum, state and
local taxes.
Net income for the six months ended June 30, 2000, was $1,237,000 or
$.13 per basic and $.13 per diluted share, a decrease of $83,000 compared to the
net income for the six months ended June 30, 1999, of $1,320,000 or $.13 per
basic and $.13 per diluted share. The Company has approximately $20 million of
operating tax loss carryforwards that are available to offset income taxes on
future earnings. These tax loss carryforwards do not begin to expire until the
year 2007. If the benefit of the Company's operating tax loss carryforwards were
recorded as a reduction in income tax expense, which is reflective of the actual
cash treatment, net income for the six months ended June 30, 2000, would have
been increased by $529,000, or $.05 per diluted share, to a total of $1,767,000,
or $.18 per diluted share. The comparable 1999 net income would have been
increased by $562,000, or $.06 per diluted share, to a total of $1,882,000, or
$.19 per diluted share.
LIQUIDITY AND CAPITAL RESOURCES
Core Materials' primary cash requirements are for operating expenses
and capital expenditures. These cash requirements have historically been met
through a combination of cash flow from operations, equipment leasing, issuance
of Industrial Revenue Bonds and bank lines of credit.
Cash provided by operations for the six months ended June 30, 2000,
totaled $6,266,000. Net income contributed $1,237,000 with depreciation and
amortization adding another $1,180,000. A decrease in accounts receivable
contributed $4,547,000; this decrease was primarily the result of collecting on
past due invoices. Also adding positive cash flow was the reduction of inventory
levels by $1,391,000. In addition, accrued and other liabilities added $994,000
in positive cash flow primarily due to increases in employee benefit accruals
that will be paid in the future. Decreasing the operating cash flow was a
decrease in accounts payable of $3,152,000, primarily due to timing effects.
Also decreasing the operating cash flow was an increase in prepaid expenses of
$476,000 due to the payment of annual insurance premiums.
Investing activities negatively affected cash flow by $1,817,000 for
the six months ended June 30, 2000. Capital expenditures totaled $2,101,000
primarily related to the acquisition of machinery and equipment. Offsetting
these expenditures were proceeds from maturities on Core Materials'
mortgage-backed security investment of $284,000.
Financing activities reduced cash flow by $150,000 due to principal
repayments on the $7,500,000 Industrial Revenue Bond that was issued in 1998.
At June 30, 2000, Core Materials had cash on hand of $5,428,000 of
which $331,000 is restricted and an available line of credit of $7,500,000. As
of June 30, 2000, Core Materials was in violation of all three of its financial
debt covenants for its line of credit, its letter of credit securing the
industrial revenue bond and certain equipment leases. The covenants relate to
maintaining certain financial ratios. On March 14, 2000, Core Materials received
a written commitment from the bank to waive these covenants each quarter through
the quarter ended September 30, 2000, if Core Materials operates in compliance
with financial projections for fiscal year 2000 and does not experience any
material adverse change to its financial condition. Core Materials has operated
in compliance with the financial projections for the six months ended June 30,
2000, and the bank has waived the covenants for this period. Management expects
Core Materials to meet the projections for the remainder of 2000. However, if
performance should fall below these projections or if a material adverse change
in the financial position of the Company should occur, Core Materials' liquidity
and ability to obtain further financing to fund future operating and capital
requirements could be negatively impacted.
During the second quarter, Core Materials announced new business
relationships with two customers. On April 19, 2000, the Company announced a new
agreement with Mack Trucks Inc. to begin manufacturing products for Mack's
leading heavy-duty truck models. Projected production start-up for these
products is late in the year 2000. On June 5, 2000, the Company announced a new
agreement with Lear Corporation to supply sheet molding composite (SMC) products
for three new sport utility/pick up truck models. Production of two of the
models is expected to begin in early 2001 with the third model starting later in
the year. Management has determined that any additional capital needs for these
two arrangements will be able to be funded through the normal operations of the
business, and these capital needs will not have a significant impact on the
liquidity of the Company.
YEAR 2000 READINESS STATEMENT
Core Materials utilized internal and external sources to make the
required modifications to both computer systems and internal operations related
apparatus. In addition, Core Materials worked with its suppliers and
10
11
customers to aid in their becoming Y2K compliant. As of the date of this filing,
Core Materials has not experienced any material Y2K problems with its software,
hardware and manufacturing of its products or with the operation of its business
in general. In addition, Core Materials has not experienced any material
problems with any of its customers or suppliers. Core Materials will continue to
monitor its systems as unique dates within the year are encountered.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," to establish accounting and reporting
requirements for derivative instruments. This standard requires recognition of
all derivative instruments in the statement of financial position as either
assets or liabilities, measured at fair value. This statement additionally
requires changes in the fair value of derivatives to be recorded each period in
current earnings or comprehensive income depending on the intended use of the
derivatives. This statement is effective for the Company beginning January 1,
2001. The Company is currently assessing the impact of SFAS No. 133, and the
Company does not anticipate this statement to have a material effect on its
results of operations and its financial position.
11
12
PART I - FINANCIAL INFORMATION
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Core Materials' primary market risk results from fluctuations in
interest rates. Core Materials is also exposed to changes in the price of
commodities used in its manufacturing operations. The Company does not hold any
material market risk sensitive instruments for trading purposes.
Core Materials has the following three items that are sensitive to a
change in interest rates: (1) Long-term debt consisting of an Industrial Revenue
Bond ("IRB") with a balance at June 30, 2000, of $6,935,000. Interest is
variable and is computed weekly; the average interest rate charged for the six
months ended June 30, 2000, was 4.3%, and the maximum interest rate that may be
charged at any time over the life of the IRB is 10%. In order to minimize the
effect of the interest rate fluctuation, Core Materials has entered into an
interest rate swap arrangement under which Core Materials pays a fixed rate of
4.89% to a bank and receives 76% of the 30 day commercial paper rate; (2)
Long-term Secured Note Payable with a balance as of June 30, 2000, of
$19,920,000 at a fixed interest rate of 8%; (3) 7% mortgage-backed security
which matures in November 2025. Such security is recorded at cost and is
considered held to maturity as Core Materials has the intent and ability to hold
such security to maturity.
Assuming a hypothetical 20% change in short-term interest rates in both
the six month period ended June 30, 2000 and 1999, interest expense would not
change significantly, as the interest rate swap agreement would generally offset
the impact.
12
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of the shareholders of Core Materials
Corporation held May 18, 2000, the following issues were voted
upon with the indicated results:
A. ELECTION OF DIRECTORS: SHARES VOTED FOR SHARES VOTED AGAINST
Thomas R. Cellitti 9,088,310 519,652
James F. Crowley 9,001,010 606,952
Ralph O. Hellmold 9,001,010 606,952
Thomas M. Hough 9,000,910 607,052
Malcolm M. Prine 8,998,810 609,152
James L. Simonton 9,090,410 517,552
The above elected directors constitute the full acting
Board of Directors for Core Materials Corporation; all
terms expire at the 2001 annual meeting of stockholders of
the Company.
B. APPROVE AN AMENDMENT TO THE COMPANY'S LONG-TERM EQUITY
INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED
FOR ISSUANCE THEREUNDER BY 1,500,000:
SHARES VOTED FOR SHARES AGAINST SHARES ABSTAINING BROKER NON-VOTES
5,353,033 1,108,725 28,611 3,117,593
C. RATIFICATION OF DELOITTE AND TOUCHE, LLP AS AUDITORS FOR
THE YEAR ENDING DECEMBER 31, 2000:
SHARES VOTED FOR SHARES AGAINST SHARES ABSTAINING
9,570,970 15,326 21,666
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
See Index to Exhibits
REPORTS ON FORM 8-K:
None
13
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORE MATERIALS CORPORATION
Date: August 10, 2000 By: /s/ James L. Simonton
--------------- --------------------------------
James L. Simonton
President, Chief Executive
Officer and Director
Date: August 10, 2000 By: /s/ Kevin L. Barnett
--------------- --------------------------------
Kevin L. Barnett
Vice President, Treasurer,
Secretary, and Chief
Financial Officer
14
15
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION LOCATION
----------- ----------- --------
2(a)(1) Asset Purchase Agreement Incorporated by reference to
Dated as of September 12, 1996, Exhibit 2-A to Registration
as amended October 31, 1996, Statement on Form S-4
between Navistar International Transportation (Registration No. 333-15809)
Corporation and RYMAC Mortgage Investment
Corporation(1)
2(a)(2) Second Amendment to Asset Purchase Incorporated by reference to
Agreement dated December 16, 1996(1) Exhibit 2.1.1 to Annual
Report on Form 10-K for the
year-ended December 31, 1996
2(b)(1) Agreement and Plan of Merger dated as of Incorporated by reference to
November 1, 1996, between Core Materials Exhibit 2-B to Registration
Corporation and RYMAC Mortgage Investment Statement on Form S-4
Corporation (Registration No. 333-15809)
2(b)(2) First Amendment to Agreement and Plan Incorporated by Reference to
of Merger dated as of December 27, 1996 Exhibit 2(b)(2) to Annual
Between Core Materials Corporation and RYMAC Report on Form 10-K for the
Mortgage Investment Corporation year ended December 31, 1997
3(a)(1) Certificate of Incorporation of Incorporated by reference to
Core Materials Corporation Exhibit 4(a) to Registration
as filed with the Secretary of State Statement on Form S-8
of Delaware on October 8, 1996 (Registration No. 333-29203)
3(a)(2) Certificate of Amendment of Incorporated by reference to
Certificate of Incorporation Exhibit 4(b) to Registration
of Core Materials Corporation Statement on Form S-8
as filed with the Secretary of State (Registration No. 333-29203)
of Delaware on November 6, 1996
3(a)(3) Certificate of Incorporation of Core Incorporated by reference to
Materials Corporation, reflecting Exhibit 4(c) to Registration
amendments through November 6, Statement on Form S-8
1996 [for purposes of compliance (Registration No. 333-29203)
with Securities and Exchange
Commission filing requirements only]
3(b) By-Laws of Core Materials Corporation Incorporated by reference to
Exhibit 3-C to Registration
Statement on Form S-4
(Registration No. 333-15809)
4(a)(1) Certificate of Incorporation of Core Materials Incorporated by reference to
Corporation as filed with the Secretary Exhibit 4(a) to Registration
of State of Delaware on October 8, 1996 Statement on Form S-8
(Registration No. 333-29203)
15
16
EXHIBIT NO. DESCRIPTION LOCATION
----------- ----------- --------
4(a)(2) Certificate of Amendment of Certificate Incorporated by reference to
of Incorporation of Core Materials Exhibit 4(b) to Registration
Corporation as filed with the Secretary of Statement on Form S-8
State of Delaware on November 6, 1996 (Registration No. 333-29203)
4(a)(3) Certificate of Incorporation of Core Materials Incorporated by reference to
Corporation, reflecting amendments through Exhibit 4(c) to Registration
November 6, 1996 [for purposes of compliance Statement on Form S-8
with Securities and Exchange Commission (Registration No. 333-29203)
filing requirements only]
4(b) By-Laws of Core Materials Corporation Incorporated by reference to
Exhibit 3-C to Registration
Statement on Form S-4
(Registration No. 333-15809)
11 Computation of Net Income per Share Exhibit 11 omitted because
the required information is
Included in Notes to
Financial Statement
27 Financial Data Schedule Filed herein
(1)The Asset Purchase Agreement, as filed with the Securities and Exchange
Commission at Exhibit 2-A to Registration Statement on Form S-4 (Registration
No. 333-15809), omits the exhibits (including, the Buyer Note, Special Warranty
Deed, Supply Agreement, Registration Rights Agreement and Transition Services
Agreement, identified in the Asset Purchase Agreement) and schedules (including,
those identified in Sections 1, 3, 4, 5, 6, 8 and 30 of the Asset Purchase
Agreement). Core Materials Corporation will provide any omitted exhibit or
schedule to the Securities and Exchange Commission upon request.
16