COLUMBUS, Ohio, Nov. 18, 2019 /PRNewswire/ -- Core Molding
Technologies, Inc. (NYSE American: CMT) ("Core Molding", "Core" or
the "Company") today announced results for the third quarter
ended September 30, 2019.
Net sales increased $10.0 million
or 15.4% and $31.8 million or 16.2%
for the third quarter and first nine months of 2019 compared to the
same periods last year. Product sales, excluding tooling sales,
increased 8.4% and 14.5% for the third quarter and first nine
months of 2019 compared to the same periods in 2018. Sales growth
for both the quarter and year to date has been driven primarily by
increased demand from North American heavy-duty truck customers and
the Company's marine customers.
The Company had a net loss of $6.1
million in the third quarter of 2019 and $9.8 million in the first nine months of 2019
compared to a net loss of $1.8
million and $0.8 million for
the third quarter and first nine months of 2018. The third quarter
and the nine months ended September 30,
2019 net loss includes a non-cash impairment charge of
$3.0 million, net of tax, to
write-down goodwill and a non-cash charge of $1.9 million to write-down deferred tax assets.
Excluding the non-cash charges, the Company would have recorded a
net loss of $1.2 million and
$4.9 million for the third quarter
and year to date 2019, respectively.
As a result of the third quarter 2019 net loss, the Company was
unable to meet its loan covenants. The Company is actively
negotiating with its bank group terms of a forbearance agreement
which would restrict the bank group from taking action on the
Company's loan covenant default while the Company is restructuring
or refinancing its existing credit agreement. The Company has
engaged Huron Consulting Services as a financial advisor to
evaluate the Company's turnaround financial projections, to review
with management various strategic alternatives that could result in
a financing arrangement supported by projected future performance,
and to serve as the Company's financial advisor in a potential
modification of the existing credit agreement. The Company
anticipates that it will execute a forbearance agreement and an
amendment to the credit agreement with its existing lenders or
obtain other financing within a time period acceptable to its
existing lenders.
"The Company continues to execute on its turnaround plan and has
significantly improved its customer performance metrics and reduced
customer chargebacks. We are making operational and business
improvements across the organization but those are taking longer
than expected to impact the bottom line, and the delayed benefit
has resulted in us failing our loan covenants," said David Duvall, President and Chief Executive
Officer. "Improving our customer performance was our highest
priority at the beginning of this year. Now that we have improved
customer service, we are working relentlessly to drive actions that
create the highest financial return," Duvall continued. "Our speed
of execution needs to and will improve."
Third Quarter 2019 Compared to Third Quarter 2018:
- Net sales were $74.7 million
compared to $64.7 million.
- Product sales were $67.5 million
compared to $62.3 million.
- Gross margin was 8.7% compared to 7.5%.
- Selling, general and administrative expenses were $7.0 million compared to $6.3 million.
- Goodwill impairment charge was $4.1
million for the three months ended September 30, 2019.
- Operating loss was $4.7 million
compared to $1.5 million.
- Net loss was $6.1 million, or
$0.78 per share, compared to net loss
of $1.8 million, or $0.23 per share.
First Nine Months 2019 Compared to First Nine Months
2018:
- Net sales were $228.2 million
compared to $196.3 million.
- Product sales were $214.4 million
compared to $187.2 million.
- Gross margin was 7.9% compared to 10.5%.
- Selling, general and administrative expenses were $21.4 million compared to $19.6 million.
- Goodwill impairment charge was $4.1
million for the nine months ended September 30, 2019.
- Operating loss was $7.4 million
compared to operating income of $1.1
million.
- Net loss was $9.8 million, or
$1.25 per share, compared to net loss
of $0.8 million, or $0.11 per share.
Third quarter 2019 gross margin improved over the same period
last year as a result of favorable material costs and lower
customer chargebacks. "Two of the initial goals of the turnaround
plan were to reduce chargebacks and improve the Company's strategic
sourcing to lower material costs. The Company has been successful
with both of these initiatives," said John
Zimmer, Chief Financial Officer. "Although the Company has
experienced improvements in certain key focus areas, the Company's
manufacturing efficiency has not yet met management's turnaround
goals, which has caused gross margin improvement to be slower than
originally anticipated," Zimmer concluded.
Selling, general and administrative expenses increased in the
third quarter and year to date 2019 compared to the same periods of
2018 due primarily to higher spending on labor to support the
Company's turnaround efforts and as a result of higher sales.
Due to the Company's financial performance and continued
depressed stock price, the Company performed a quantitative
analysis of goodwill impairment as of September 30, 2019. As a result of changes in the
Horizon Plastics reporting unit business resulting from
modifications in certain commercial agreements, the Company
realized a reduction in Horizon Plastics' profitability. As a
result of the quantitative analysis, the Company concluded that the
carrying value of Horizon Plastics was greater than the fair value,
which resulted in a non-cash goodwill impairment charge of
$4,100,000 ($3.0 million, net of tax). The impairment charge
recorded does not affect the Company's liquidity or compliance with
its debt covenants.
Financial Position at September 30,
2019:
- Total assets of $195.0
million.
- Total debt of $59.0 million.
- Stockholders' equity of $89.9
million.
Outlook
Based on industry analysts' projections and customer forecasts,
the Company expects sales levels for the fourth quarter of 2019 to
soften due to decreased demand from truck customers. ACT Research
is forecasting fourth quarter of 2019 heavy-duty truck production
to decrease approximately 19% compared to the third quarter of
2019.
"The Company is beginning to see the effects of the slowdown in
demand from our heavy-duty truck customers. The Company was
anticipating the slowdown and we have already implemented several
actions to lower cost including reducing headcount," said
Eric Palomaki, Executive Vice
President of Operations. "Although we realize from past cyclical
downturns the need to move quickly in adjusting costs, we also
remain focused on long-term improvements that will result in the
Company achieving operational excellence. I am proud that our team
has successfully completed external audited certifications for ISO
and IATF, demonstrating our commitment to our customers that we are
building a long-term world class organization," continued
Palomaki.
Duvall concluded, "I believe we are making the right changes
necessary to improve the Company's long-term financial performance.
The operational improvements we have already made were instrumental
in the Company securing a sizable new program win with a new
automotive customer, which is anticipated to launch in the first
quarter of 2021. I appreciate the hard work and dedication of our
entire team during the turnaround process and believe we continue
to be on the right track to turn around the overall performance of
the organization."
About Core Molding Technologies, Inc.
Core Molding Technologies is a manufacturer of sheet molding
compound ("SMC") and molder of thermoset and thermoplastic
products. The Company operates in one operating segment as a molder
of thermoplastic and thermoset (plastic) structural products. The
Company's operating segment consists of two component reporting
units, Core Traditional and Horizon Plastics. The Company produces
and sells molded products for varied markets, including medium and
heavy-duty trucks, automobiles, marine, construction and other
commercial markets. The Company offers customers a wide range of
manufacturing processes to fit various program volume and
investment requirements. These processes include compression
molding of SMC, bulk molding compounds ("BMC"), resin transfer
molding ("RTM"), liquid molding of dicyclopentadiene ("DCPD"),
spray-up and hand-lay-up, glass mat thermoplastics ("GMT"), direct
long-fiber thermoplastics ("D-LFT") and structural foam and
structural web injection molding ("SIM"). Core Molding Technologies
has its headquarters in Columbus,
Ohio, and operates production facilities in Columbus and Batavia, Ohio; Gaffney, South Carolina; Winona, Minnesota; Matamoros and Escobedo, Mexico; and Cobourg, Ontario, Canada. For further
information, visit the company's website at www.coremt.com.
This press release may contain certain 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: 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; safety and
security conditions in Mexico and
Canada; dependence upon certain
major customers as the primary source of Core Molding Technologies'
sales revenues; the efforts of Core Molding Technologies to expand
its customer base and increase profitability; the ability to
develop new and innovative products and to diversify markets,
materials and processes and increase operational enhancements; 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; 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, including the acquisition of Horizon Plastics; the
risk that the integration of Horizon Plastics may be more
difficult, time-consuming or costly than expected; expected revenue
synergies and cost savings from the acquisition of Horizon Plastics
may not be fully realized within the expected timeframe; revenues
following the acquisition of Horizon Plastics may be lower than
expected; customer and employee relationships and business
operations may be disrupted by the acquisition of Horizon Plastics;
federal, state and local environmental laws and regulations; the
availability of capital; the risks associated with our current
levels of indebtedness, including borrowings under our Amended A/R
Credit Agreement and the ability to restructure or refinance our
existing debt or otherwise adhere to financial covenants related to
our borrowing arrangements; the impact of the inclusion in any
report of our auditor regarding substantial doubt as to our ability
to continue as a going concern; 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,
2018.
Company Contact:
John Zimmer
Vice President & Chief Financial Officer
614-870-5604
jzimmer@coremt.com
CORE MOLDING
TECHNOLOGIES, INC.
|
|
Condensed
Consolidated Statements of Income (Loss) (Unaudited)
(in thousands,
expect per share data)
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net
sales:
|
|
|
|
|
|
|
|
Products
|
$
|
67,511
|
|
|
|
$
|
62,305
|
|
|
|
$
|
214,403
|
|
|
|
$
|
187,243
|
|
|
Tooling
|
7,144
|
|
|
|
2,371
|
|
|
|
13,765
|
|
|
|
9,081
|
|
|
Total net
sales
|
74,655
|
|
|
|
64,676
|
|
|
|
228,168
|
|
|
|
196,324
|
|
|
|
|
|
|
|
|
|
|
Total cost of
sales
|
68,171
|
|
|
|
59,813
|
|
|
|
210,043
|
|
|
|
175,679
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
6,484
|
|
|
|
4,863
|
|
|
|
18,125
|
|
|
|
20,645
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
7,041
|
|
|
|
6,349
|
|
|
|
21,431
|
|
|
|
19,587
|
|
|
Goodwill
impairment
|
4,100
|
|
|
|
—
|
|
|
|
4,100
|
|
|
|
—
|
|
|
Total
expenses
|
11,141
|
|
|
|
6,349
|
|
|
|
25,531
|
|
|
|
19,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(4,657)
|
|
|
|
(1,486)
|
|
|
|
(7,406)
|
|
|
|
1,058
|
|
|
|
|
|
|
|
|
|
|
Other income and
expense
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
1,113
|
|
|
|
632
|
|
|
|
2,878
|
|
|
|
1,705
|
|
|
Net periodic
post-retirement benefit cost
|
(23)
|
|
|
|
(12)
|
|
|
|
(71)
|
|
|
|
(36)
|
|
|
Total other income
and expense
|
1,090
|
|
|
|
620
|
|
|
|
2,807
|
|
|
|
1,669
|
|
|
|
|
|
|
|
|
|
|
Loss before
taxes
|
(5,747)
|
|
|
|
(2,106)
|
|
|
|
(10,213)
|
|
|
|
(611)
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
378
|
|
|
|
(304)
|
|
|
|
(452)
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
$
|
(6,125)
|
|
|
|
$
|
(1,802)
|
|
|
|
$
|
(9,761)
|
|
|
|
$
|
(839)
|
|
|
|
|
|
|
|
|
|
|
Net (loss) per
common share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.78)
|
|
|
|
$
|
(0.23)
|
|
|
|
$
|
(1.25)
|
|
|
|
$
|
(0.11)
|
|
|
Diluted
|
$
|
(0.78)
|
|
|
|
$
|
(0.23)
|
|
|
|
$
|
(1.25)
|
|
|
|
$
|
(0.11)
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
7,851
|
|
|
|
7,804
|
|
|
|
7,806
|
|
|
|
7,758
|
|
|
Diluted
|
7,851
|
|
|
|
7,804
|
|
|
|
7,806
|
|
|
|
7,758
|
|
|
Condensed
Consolidated Balance Sheets
(in
thousands)
|
|
|
|
|
As of
9/30/2019
(Unaudited)
|
|
As of
12/31/2018
|
Assets:
|
|
|
|
|
Cash
|
|
$
|
—
|
|
|
|
$
|
1,891
|
|
Accounts Receivable,
net
|
|
45,846
|
|
|
|
45,468
|
|
Inventories,
net
|
|
23,413
|
|
|
|
25,765
|
|
Other Current
Assets
|
|
5,829
|
|
|
|
7,178
|
|
Right of Use
Asset
|
|
4,823
|
|
|
|
—
|
|
Property, Plant and
Equipment, net
|
|
80,428
|
|
|
|
80,657
|
|
Goodwill
|
|
17,376
|
|
|
|
21,476
|
|
Intangibles,
net
|
|
13,952
|
|
|
|
15,413
|
|
Other Long-Term
Assets
|
|
3,371
|
|
|
|
3,350
|
|
Total
Assets
|
|
$
|
195,038
|
|
|
|
$
|
201,198
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current Portion of
Long-Term Debt
|
|
$
|
38,220
|
|
|
|
$
|
3,230
|
|
Current Portion of
Revolving Debt
|
|
20,817
|
|
|
|
—
|
|
Accounts
Payable
|
|
22,481
|
|
|
|
25,450
|
|
Compensation and
Related Benefits
|
|
6,241
|
|
|
|
5,154
|
|
Accrued Other
Liabilities
|
|
7,009
|
|
|
|
6,357
|
|
Lease
Liability
|
|
3,445
|
|
|
|
—
|
|
Long-Term
Debt
|
|
—
|
|
|
|
37,784
|
|
Revolving
Debt
|
|
—
|
|
|
|
17,375
|
|
Post Retirement
Benefits Liability
|
|
6,906
|
|
|
|
6,919
|
|
Stockholders'
Equity
|
|
89,919
|
|
|
|
98,929
|
|
Total Liabilities
and Stockholders' Equity
|
|
$
|
195,038
|
|
|
|
$
|
201,198
|
|
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content:http://www.prnewswire.com/news-releases/core-molding-technologies-reports-third-quarter-2019-results-300959652.html
SOURCE Core Molding Technologies, Inc.