COLUMBUS, Ohio, March 13, 2020 /PRNewswire/ -- Core Molding
Technologies, Inc. (NYSE American: CMT) ("Core Molding", "Core" or
the "Company") today announced results for the fourth quarter and
full year ended December 31, 2019.
For the fourth quarter 2019, net sales decreased $17.0 million or 23% compared to the same period
in 2018 as demand from North American heavy-duty truck customers
decreased consistent with industry analysts' expectations of a
cyclical industry downturn. Higher demand from marine
customers in the fourth quarter 2019 compared to the same period in
2018 partially offset the lower demand from North American
heavy-duty truck customers. The Company's net sales increased
$14.8 million or 5.5% for the full
year 2019 to $284.3 million compared
to $269.5 million in the full year
2018. Increased demand from North American heavy-duty truck
customers and marine customers were primarily responsible for the
increase in sales.
The Company recorded a net loss of $5.5
million in the fourth quarter 2019 and $15.2 million for full year 2019 compared to a
net loss of $3.9 million and
$4.8 million for the fourth quarter
and full year 2018. The full year losses in 2019 and 2018
include non-cash impairment charges for the write-down of goodwill
of $3.0 million and $1.9 million, net of tax, respectively. For
the full year and fourth quarter 2019, the Company recorded
non-cash charges of $3.3 million and
$1.4 million to write-down deferred
tax assets. Excluding the non-cash charges, the Company would
have recorded net losses of $8.9
million and $2.9 million for
the full year 2019 and 2018, respectively, and $4.1 million and $2.0
million for the fourth quarter ended 2019 and
2018.
"The fourth quarter results were significantly affected by
decreased revenues from heavy-duty truck customers. Demand
from heavy-duty truck customers declined due to labor strike
shutdowns at multiple customer locations, the beginning of a
cyclical downturn and normal seasonality. Anticipating the
revenue decrease, the Company reduced costs in the fourth quarter
through headcount reductions, shift modifications and temporary
plant shutdowns. We were not able to fully offset the
decrease in revenues, but believe the cost reductions made, along
with a seasonal rebound in revenues from the fourth quarter, has
set up the Company for a solid first quarter in 2020," said
Duvall.
The Company announced in November
2019 that it provided its customer, Volvo Group, with a
twelve-month notice of its intention to terminate its supply
agreement. "The Company is pleased to announce that it was
able to come to a mutual resolution with Volvo and renegotiate
certain terms of its supply agreement. Consequently, the
Company has rescinded its termination notification," said
Duvall.
Fourth Quarter 2019 Compared to Fourth Quarter 2018:
- Net sales were $56.1 million
compared to $73.2 million.
- Product sales were $54.6 million
compared to $69.0 million.
- Gross margin was 6.0% compared to 8.9%.
- Selling, general and administrative expenses were $7.5 million compared to $8.3 million.
- Goodwill impairment charge was $2.4
million for the three months ended December 31, 2018.
- Operating loss was $4.1 million
compared to $4.2 million.
- Net loss was $5.5 million, or
$0.69 per share, compared to net loss
of $3.9 million, or $0.51 per share.
Year ended 2019 Compared to Year ended 2018:
- Net sales were $284.3 million
compared to $269.5 million.
- Product sales were $269.0 million
compared to $256.2 million.
- Gross margin was 7.6% compared to 10.1%.
- Selling, general and administrative expenses were $29.0 million compared to $27.8 million.
- Goodwill impairment charge was $4.1
million compared to $2.4
million.
- Operating loss was $11.5 million
compared to $3.1 million.
- Net loss was $15.2 million, or
$1.94 per share, compared to net loss
of $4.8 million, or $0.62 per share.
Full year and fourth quarter 2019 gross margin declined over the
same periods in 2018 as a result of operational inefficiencies and
lower leverage of fixed costs, offset by a favorable net change in
selling price and material costs. "We started to see an
improvement in gross margin in the third quarter of 2019, but the
improvement reversed in the fourth quarter as sales decreased
significantly," said John Zimmer,
Chief Financial Officer. "The decrease in gross margin in the
fourth quarter of 2019 was driven largely by lower leverage of
fixed costs resulting from lower sales. The effect on gross
margin of operational inefficiencies was lower in the fourth
quarter than any other quarter in 2019. This is an indication
that the operational improvements made through 2019 are beginning
to have a positive effect on gross margin," Zimmer concluded.
Selling, general and administrative expenses decreased in the
fourth quarter compared to the same period in 2018 due primarily to
lower labor and benefit costs and lower professional fees, as the
Company reduced costs in response to decreasing sales.
Selling, general and administrative expenses increased for the full
year 2019 compared to the full year 2018 due primarily to higher
spending on labor to support the Company's turnaround efforts and
as a result of higher sales.
Financial Position at December 31,
2019:
- Total assets of $179.3
million.
- Revolving line of credit debt of $12.0
million.
- Term loan debt of $37.4
million.
- Stockholders' equity of $84.4
million.
Through a focus on generating free cash flows (non-GAAP), the
Company reduced its total debt outstanding at December 31, 2019 to $49.4
million from $59.0 as of
September 30, 2019. Lower
working capital levels and a reduction in spending allowed the
Company to generate free cash flows in the fourth quarter and
reduce its outstanding line of credit balance as of December 31, 2019 by 42% from September 30, 2019.
As of September 30, 2019, the
Company was unable to meet its loan covenants. On November 22, 2019, the Company executed a
forbearance agreement that provides that the bank group shall
forbear from the exercise of rights taking action on the Company's
loan covenant default while the Company is restructuring or
refinancing its existing credit agreement. On March 12, 2020, the Company amended the
forbearance agreement to extend the forbearance period until
May 29, 2020. The Company has
engaged Huron Transactional Advisors to assist the Company to
refinance its current debt facility. The Company has received
multiple term sheets to refinance the debt facility. The
Company is evaluating the term sheets and expects to have executed
term sheets by March 31, 2020, in
time to refinance the existing debt structure prior to the
expiration of the amended forbearance agreement.
Outlook
Based on industry analysts' projections and customer forecasts,
the Company expects sales levels for 2020 to decrease compared to
2019 due to decreased demand from truck customers. ACT
Research is forecasting 2020 North American production of
heavy-duty trucks to decrease approximately 34% compared to
2019.
"While the fourth quarter heavy-duty truck plant shut downs and
reduction in demand reduced profitability, we continued to see
benefits in the fourth quarter from operational improvements we
made throughout 2019. In 2020 we will use operational
systems implemented in 2020 to focus on several key performance
metrics including improved quality performance, labor productivity,
scrap and overhead spend reductions," said Eric Palomaki, Executive Vice President of
Operations. "Through the outstanding hard work and efforts of
our dedicated teams we have been able to deliver substantially
improved service to all of our customers. In 2020 we will
build off these changes and systems to improve financial
performance," Palomaki concluded.
"The past year was a year of significant foundational
improvements, which we are now just realizing substantial
benefit. We have already seen benefit in the first two months
of 2020 with an improvement of more than $5.5 million in operational profit compared to
the same period in 2019. We anticipate the first quarter of
2020 to be the Company's first profitable quarter since the second
quarter of 2019. Our operational foundation has stabilized and is
now moving into a continuous improvement phase, with our focus
turning to leveraging our Sales & Marketing function across our
entire business. The 2019 year was all about fixing problems
and servicing our customers, so that we could successfully operate
and grow the business. We expect 2020 to realize the full
financial benefit of our operational stabilization efforts, which
will allow us to focus on the long-term profitable growth of the
Company," Duvall concluded.
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,
2019.
Company
Contact:
John
Zimmer
Vice President &
Chief Financial Officer
614-870-5604
jzimmer@coremt.com
|
|
(See Accompanying Tables)
CORE MOLDING
TECHNOLOGIES, INC.
|
|
Condensed
Consolidated Statements of Income (Loss) (Unaudited)
|
(in thousands,
expect per share data)
|
|
|
Three Months
Ended
|
|
Year
Ended
|
|
December
31,
|
|
December
31,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net
sales:
|
|
|
|
|
|
|
|
Products
|
$
|
54,585
|
|
|
|
$
|
68,975
|
|
|
|
$
|
268,987
|
|
|
|
$
|
256,217
|
|
|
Tooling
|
1,537
|
|
|
|
4,187
|
|
|
|
15,303
|
|
|
|
13,268
|
|
|
Total net
sales
|
56,122
|
|
|
|
73,162
|
|
|
|
284,290
|
|
|
|
269,485
|
|
|
|
|
|
|
|
|
|
|
Total cost of
sales
|
52,740
|
|
|
|
66,665
|
|
|
|
262,784
|
|
|
|
242,344
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
3,382
|
|
|
|
6,497
|
|
|
|
21,506
|
|
|
|
27,141
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expense
|
7,503
|
|
|
|
8,250
|
|
|
|
28,934
|
|
|
|
27,838
|
|
|
Goodwill
impairment
|
—
|
|
|
|
2,403
|
|
|
4,100
|
|
|
|
2,403
|
|
Total
expenses
|
7,501
|
|
|
10,653
|
|
|
33,034
|
|
|
30,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(4,121)
|
|
|
|
(4,156)
|
|
|
|
(11,528)
|
|
|
|
(3,100)
|
|
|
|
|
|
|
|
|
|
|
Other income and
expense
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
1,266
|
|
|
|
689
|
|
|
|
4,144
|
|
|
|
2,394
|
|
|
Net periodic
post-retirement benefit cost
|
(22)
|
|
|
|
(12)
|
|
|
|
(94)
|
|
|
|
(48)
|
|
|
Total other income
and expense
|
1,244
|
|
|
|
677
|
|
|
|
4,050
|
|
|
|
2,346
|
|
|
|
|
|
|
|
|
|
|
Loss before
taxes
|
(5,365)
|
|
|
|
(4,833)
|
|
|
|
(15,578)
|
|
|
|
(5,446)
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
97
|
|
|
|
(891)
|
|
|
|
(355)
|
|
|
|
(664)
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
$
|
(5,462)
|
|
|
|
$
|
(3,942)
|
|
|
|
$
|
(15,223)
|
|
|
|
$
|
(4,782)
|
|
|
|
|
|
|
|
|
|
|
Net (loss) per
common share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.69)
|
|
|
|
$
|
(0.51)
|
|
|
|
$
|
(1.94)
|
|
|
|
$
|
(0.62)
|
|
|
Diluted
|
$
|
(0.69)
|
|
|
|
$
|
(0.51)
|
|
|
|
$
|
(1.94)
|
|
|
|
$
|
(0.62)
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
7,868
|
|
|
|
7,750
|
|
|
|
7,830
|
|
|
|
7,750
|
|
|
Diluted
|
7,868
|
|
|
|
7,750
|
|
|
|
7,830
|
|
|
|
7,750
|
|
|
Condensed
Consolidated Balance Sheets
|
|
(in
thousands)
|
|
As of
12/31/2019
(Unaudited)
|
|
As of
12/31/2018
|
Assets:
|
|
|
|
|
Cash
|
|
$
|
1,856
|
|
|
|
$
|
1,891
|
|
Accounts Receivable,
net
|
|
32,424
|
|
|
|
45,468
|
|
Inventories,
net
|
|
21,682
|
|
|
|
25,765
|
|
Other Current
Assets
|
|
5,263
|
|
|
|
7,178
|
|
Right of Use
Asset
|
|
4,484
|
|
|
|
—
|
|
Property, Plant and
Equipment, net
|
|
79,206
|
|
|
|
80,657
|
|
Goodwill
|
|
17,376
|
|
|
|
21,476
|
|
Intangibles,
net
|
|
13,464
|
|
|
|
15,413
|
|
Other Long-Term
Assets
|
|
3,551
|
|
|
|
3,350
|
|
Total
Assets
|
|
$
|
179,306
|
|
|
|
$
|
201,198
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current Portion of
Long-Term Debt
|
|
$
|
37,443
|
|
|
|
$
|
3,230
|
|
Current Portion of
Revolving Debt
|
|
12,008
|
|
|
|
—
|
|
Accounts
Payable
|
|
19,910
|
|
|
|
25,450
|
|
Compensation and
Related Benefits
|
|
5,515
|
|
|
|
5,154
|
|
Accrued Other
Liabilities
|
|
7,725
|
|
|
|
5,200
|
|
Lease
Liability
|
|
3,119
|
|
|
|
—
|
|
Long-Term
Debt
|
|
—
|
|
|
|
37,784
|
|
Revolving
Debt
|
|
—
|
|
|
|
17,375
|
|
Post Retirement
Benefits Liability
|
|
9,160
|
|
|
|
8,076
|
|
Stockholders'
Equity
|
|
84,426
|
|
|
|
98,929
|
|
Total Liabilities
and Stockholders' Equity
|
|
$
|
176,306
|
|
|
|
$
|
201,198
|
|
Non-GAAP Financial Measures
This press
release contains financial information determined by methods other
than in accordance with accounting principles generally accepted in
the United States of America
("GAAP"). The Company's management uses non-GAAP measures in its
analysis of the Company's performance. Investors are encouraged to
review the reconciliation of non-GAAP financial measures to the
comparable GAAP results available in the accompanying
table.
Non-GAAP Reconciliation of Free Cash
Flow
This press release includes references to free
cash flow, a non-GAAP financial measure that comprises cash
provided by operating activities less cash expenditures for
property, plant and equipment. Free cash flow is a measure used by
management and the Company's board of directors to assess the
Company's ability to generate cash. Accordingly, management
believes that free cash flow provides useful information to
investors and others in understanding and evaluating our ability to
generate cash flow from operations after cash expenditures for
property, plant and equipment.
This non-GAAP financial measures is used in addition to and
in conjunction with results presented in accordance with GAAP. The
non-GAAP financial information presented herein should be
considered supplemental to, and not as a substitute for, or
superior to, financial measures calculated in accordance with GAAP
and are reconciled to the most appropriate GAAP number
below.
|
|
Three months
ended 12/31/2019
|
|
Twelve months
ended 12/31/19
|
|
|
|
|
|
Cash provided by
operating activities
|
|
12,728
|
|
16,701
|
Expenditures for
property, plant and equipment
|
|
(1,180)
|
|
(7,460)
|
Free Cash
Flow
|
|
11,548
|
|
9,241
|
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SOURCE Core Molding Technologies, Inc.