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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
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 MOLDING TECHNOLOGIES, INC.
_______________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware
31-1481870
(State or other jurisdiction
incorporation or organization)
(I.R.S. Employer Identification No.)
800 Manor Park Drive, 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 No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company,” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated Filer ¨
Smaller reporting company
(Do not check if a smaller reporting company)
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Trading Symbol
Common Stock, par value $0.01
NYSE American LLC
CMT
As of November 5, 2021, the latest practicable date, 8,715,785 shares of the registrant’s common stock were issued, which includes 632,506 shares of unvested restricted common stock.


Table of Contents
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Part I — Financial Information
Item 1. Financial Statements
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
(In thousands, except for per share data)
(Unaudited)
Three months ended
September 30,
Nine months ended
September 30,
2021 2020 2021 2020
Net sales $ 81,025  $ 59,873  $ 234,315  $ 161,705 
Cost of sales 74,610  49,035  201,446  137,192 
Gross margin 6,415  10,838  32,869  24,513 
Selling, general and administrative expense 8,808  6,517  23,744  17,136 
Operating income (loss) (2,393) 4,321  9,125  7,377 
Other income and expense
Interest expense 563  966  1,725  3,338 
Net periodic post-retirement benefit (40) (20) (120) (60)
Total other expense 523  946  1,605  3,278 
Income (loss) before taxes (2,916) 3,375  7,520  4,099 
Income tax expense (benefit) 396  32  3,290  (4,933)
Net income (loss) $ (3,312) $ 3,343  $ 4,230  $ 9,032 
Net income (loss) per common share:
Basic $ (0.41) $ 0.39  $ 0.50  $ 1.08 
Diluted $ (0.41) $ 0.39  $ 0.50  $ 1.08 
See notes to unaudited consolidated financial statements.
3

Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(Unaudited)
Three months ended
September 30,
Nine months ended
September 30,
2021 2020 2021 2020
Net income (loss) $ (3,312) $ 3,343  $ 4,230  $ 9,032 
Other comprehensive income (loss):
Foreign currency hedging derivatives:
Unrealized hedge gain (loss) —  415  —  (456)
Income tax benefit (expense) —  (88) —  98 
Interest rate swaps:
Unrealized hedge gain (loss) —  172  —  (550)
Income tax benefit (expense) —  (39) —  125 
Post-retirement benefit plan adjustments:
Amortization of net actuarial loss 43  46  130  136 
Amortization of prior service credits (124) (124) (372) (372)
Income tax benefit 18  17  51  50 
Comprehensive income (loss) $ (3,375) $ 3,742  $ 4,039  $ 8,063 
See notes to unaudited consolidated financial statements.
4

Core Molding Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except for share data)
(Unaudited)
September 30,
2021
December 31,
2020
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents $ 615  $ 4,131 
Accounts receivable, net 39,427  27,584 
Inventories, net 22,410  18,360 
Income tax receivable 2,601  2,026 
Foreign tax receivable 4,317  1,916 
Prepaid expenses and other current assets 1,613  2,461 
Total current assets 70,983  56,478 
Right of use asset 3,631  2,754 
Property, plant and equipment, net 74,377  74,052 
Goodwill 17,376  17,376 
Intangibles, net 10,054  11,516 
Other non-current assets 3,033  3,332 
Total Assets $ 179,454  $ 165,508 
Liabilities and Stockholders’ Equity:
Current liabilities:
Current portion of long-term debt $ 3,774  $ 2,535 
Revolving debt 2,320  420 
Accounts payable 24,149  16,994 
Taxes payable 2,557  2,613 
Contract liability 3,062  1,319 
Compensation and related benefits 7,269  8,305 
Accrued other liabilities 4,292  3,809 
Total current liabilities 47,423  35,995 
Other non-current liabilities 2,742  2,560 
Long-term debt 22,252  25,198 
Post-retirement benefits liability 7,745  7,823 
Total Liabilities 80,162  71,576 
Commitments and Contingencies —  — 
Stockholders’ Equity:
Preferred stock — $0.01 par value, authorized shares — 10,000,000; no shares outstanding at September 30, 2021 and December 31, 2020
—  — 
Common stock — $0.01 par value, authorized shares – 20,000,000; outstanding shares 8,083,279 at September 30, 2021 and 7,980,516 at December 31, 2020
81  80 
Paid-in capital 37,543  36,127 
Accumulated other comprehensive income, net of income taxes 1,184  1,375 
Treasury stock - at cost, 3,818,166 shares at September 30, 2021 and 3,810,929 shares at December 31, 2020
(28,617) (28,521)
Retained earnings 89,101  84,871 
Total Stockholders’ Equity 99,292  93,932 
Total Liabilities and Stockholders’ Equity $ 179,454  $ 165,508 
See notes to unaudited consolidated financial statements.
5

Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statement of Stockholders’ Equity
(In thousands, except for share data)
(Unaudited)
For the three months ended September 30, 2020:

Common Stock
Outstanding
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Retained
Earnings
Total
Stockholders'
Equity
Shares Amount
Balance at June 30, 2020 7,965,289  $ 80  $ 35,476  $ $ (28,501) $ 82,395  $ 89,452 
Net income 3,343  3,343 
Change in post-retirement benefits, net of tax $17
(61) (61)
Change in unrealized foreign currency hedge, net of tax $88
327  327 
Change in interest rate swaps, net of tax $39
133  133 
Purchase of treasury stock (4,574) (20) (20)
Restricted stock vested 11,158  —  — 
Share-based compensation 355  355 
Balance as of September 31, 2020 7,971,873  $ 80  $ 35,831  $ 401  $ (28,521) $ 85,738  $ 93,529 
For the nine months ended September 30, 2020:
Common Stock
Outstanding
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Retained
Earnings
Total
Stockholders'
Equity
Shares Amount
Balance at December 31, 2019 7,877,945  $ 79  $ 34,772  $ 1,370  $ (28,501) $ 76,706  $ 84,426 
Net income 9,032  9,032 
Change in post-retirement benefits, net of tax $50
(186) (186)
Change in unrealized foreign currency hedge, net of tax $98
(358) (358)
Change in interest rate swaps, net of tax $125
(425) (425)
Purchase of treasury stock (4,574) (20) (20)
Restricted stock vested 98,502 
Share-based compensation 1,059  1,059 
Balance as of September 30, 2020 7,971,873  $ 80  $ 35,831  $ 401  $ (28,521) $ 85,738  $ 93,529 
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For the three months ended September 30, 2021
Common Stock
Outstanding
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Retained
Earnings
Total
Stockholders'
Equity
Shares Amount
Balance at June 30, 2021 8,040,748  $ 80  $ 36,931  $ 1,247  $ (28,568) $ 92,413  $ 102,103 
Net loss (3,312) (3,312)
Change in post-retirement benefits, net of tax $18
(63) (63)
Purchase of treasury stock (3,363) (49) (49)
Restricted stock vested 45,894 
Share-based compensation 612  612 
Balance at September 30, 2021 8,083,279  $ 81  $ 37,543  $ 1,184  $ (28,617) $ 89,101  $ 99,292 
For the nine months ended September 30, 2021:
Common Stock
Outstanding
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Retained
Earnings
Total
Stockholders'
Equity
Shares Amount
Balance at December 31, 2020 7,980,516  $ 80  $ 36,127  $ 1,375  $ (28,521) $ 84,871  $ 93,932 
Net income 4,230  4,230 
Change in post-retirement benefits, net of tax $51
(191) (191)
Purchase of treasury stock (7,237) (96) (96)
Restricted stock vested 110,000 
Share-based compensation 1,416  1,416 
Balance at September 30, 2021 8,083,279  $ 81  $ 37,543  $ 1,184  $ (28,617) $ 89,101  $ 99,292 
See notes to unaudited consolidated financial statements.
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Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended
September 30,
2021 2020
Cash flows from operating activities:
Net income $ 4,230  $ 9,032 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 9,273  8,425 
Loss on disposal of property, plant and equipment 625  — 
Deferred income tax (595) 517 
Share-based compensation 1,416  1,059 
Losses on foreign currency translation 214  203 
Change in operating assets and liabilities:
Accounts receivable (11,843) 6,118 
Inventories (4,050) 6,449 
Prepaid and other assets (1,829) (747)
Accounts payable 6,841  (2,053)
Accrued and other liabilities 1,085  2,238 
Post-retirement benefits liability (319) (189)
Net cash provided by operating activities 5,048  31,052 
Cash flows from investing activities:
Purchase of property, plant and equipment (8,301) (2,716)
Net cash used in investing activities (8,301) (2,716)
Cash flows from financing activities:
Gross repayments on revolving line of credit (9,707) (59,356)
Gross borrowings on revolving line of credit 11,607  47,349 
Payments related to the purchase of treasury stock (96) (20)
Payment of deferred loan costs (2) (140)
Proceeds from term loan —  175 
Payment of principal on term loans (2,065) (3,391)
Net cash used in financing activities (263) (15,383)
Net change in cash and cash equivalents (3,516) 12,953 
Cash and cash equivalents at beginning of period 4,131  1,856 
Cash and cash equivalents at end of period $ 615  $ 14,809 
Cash paid for:
Interest $ 1,376  $ 3,523 
Income taxes $ 4,313  $ 467 
Non-cash investing activities:
Fixed asset purchases in accounts payable $ 123  $ 146 
See notes to unaudited consolidated financial statements.
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Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by accounting principles generally accepted in the United States of America for interim reporting, which are less than those required for annual reporting. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (all of which are normal and recurring in nature) necessary to present fairly the financial position of Core Molding Technologies, Inc. and its subsidiaries (“Core Molding Technologies” or the “Company”) at September 30, 2021, and the results of operations and cash flows for the nine months ended September 30, 2021. The “Notes to Consolidated Financial Statements” contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, should be read in conjunction with these consolidated financial statements.
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 one reporting unit. The Company produces and sells molded products for varied markets, including medium and heavy-duty trucks, automobiles, marine, construction and agriculture, building products and other commercial markets. The Company offers customers a wide range of manufacturing processes to fit various program volume and investment requirements. These processes include compression molding of sheet molding compound ("SMC"), resin transfer molding ("RTM"), liquid molding of dicyclopentadiene ("DCPD"), spray-up and hand-lay-up, direct long-fiber thermoplastics ("D-LFT") and structural foam and structural web injection molding ("SIM"). Core Molding Technologies has its headquarters in Columbus, Ohio, and operates seven production facilities in Columbus and Batavia, Ohio; Gaffney, South Carolina; Winona, Minnesota; Matamoros and Escobedo, Mexico; and Cobourg, Ontario, Canada. All production facilities produce structural composite products. On November 5, 2020, the Company announced it will close the manufacturing facility located in Batavia, Ohio and is expected to complete the closure in the fourth quarter of 2021.
2. CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Principles of Consolidation: Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates, due to the uncertainty around the magnitude and duration of the COVID-19 pandemic, as well as other factors.
Revenue Recognition: The Company recognizes revenue from two streams, product revenue and tooling revenue. Product revenue is earned from the manufacture and sale of thermoplastic and thermoset structural products. Revenue from product sales is generally recognized as products are shipped, as the Company transfers title and risk of ownership to the customer and is entitled to payment. In limited circumstances, the Company recognizes revenue from product sales when products are produced and the customer takes title and risk of ownership at the Company's production facility.
Tooling revenue is earned from manufacturing tools, molds and assembly equipment as part of a tooling program for a customer. Given that the Company is providing a significant service of producing highly interdependent component parts of the tooling program, each tooling program consists of a single performance obligation to provide the customer the capability to produce a single product. Based on the arrangement with the customer, the Company recognizes revenue either at a point in time or over time. When the Company does not have an enforceable right to payment, the Company recognizes tooling revenue at a point in time. In such cases, the Company recognizes revenue upon customer acceptance, which is when the customer has legal title to the tools.
Certain tooling programs include an enforceable right to payment. In those cases, the Company recognizes revenue over time based on the extent of progress towards completion of its performance obligation. The Company uses a cost-to-cost measure of
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progress for such contracts because it best depicts the transfer of value to the customer and also correlates with the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services to the customer. Under the cost-to-cost measure of progress, progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred.
Accounts Receivable Allowances: Management maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company recorded an allowance for doubtful accounts of $107,000 and $41,000 at September 30, 2021 and December 31, 2020, respectively.
Management also records an allowance for estimated customer chargebacks for returns, price discounts and adjustments, premium freight and expediting costs and customer production line disruption costs resulting from late deliveries. At times, customers have asserted a right to significant production line disruption charges to recover damages as a result of late delivery. The Company typically works with its customers to minimize disruption charges, validate damages and negotiate resolution. The Company records accruals for customer chargebacks when a valid charge is probable and the amount of the charge can be reasonably estimated. Should customer chargebacks fluctuate from the estimated amounts, additional allowances may be necessary. The Company reduced accounts receivable for chargebacks by $611,000 at September 30, 2021 and $179,000 at December 31, 2020.
Inventories: Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or net realizable value. The inventories are accounted for using the first-in, first-out (FIFO) method of determining inventory costs. Inventory quantities on-hand are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based on historical and anticipated usage. The Company has recorded an allowance for slow moving and obsolete inventory of $268,000 at September 30, 2021 and $546,000 at December 31, 2020.
Contract Assets/Liabilities: Contract assets and liabilities represent the net cumulative customer billings, vendor payments and revenue recognized for tooling programs. For tooling programs where net revenue recognized and vendor payments exceed customer billings, the Company recognizes a contract asset. For tooling programs where net customer billings exceed revenue recognized and vendor payments, the Company recognizes a contract liability. Customer payment terms vary by contract and can range from progress payments based on work performed or one single payment once the contract is completed. The Company has recorded contract assets of $104,000 at September 30, 2021, and $554,000 at December 31, 2020. Contract assets are classified as current within prepaid expenses and other current assets in the Consolidated Balance Sheets. For the nine months ended September 30, 2021, the Company recognized no impairments on contract assets. For the nine months ended September 30, 2021, the Company recognized $4,867,000 of revenue from contract liabilities related to open jobs outstanding as of December 31, 2020.
Income Taxes: 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.

Long-Lived Assets: Long-lived assets consist primarily of property, plant and equipment and definite-lived intangibles. The recoverability of long-lived assets is evaluated by an analysis of operating results and consideration of other significant events or changes in the business environment. The Company evaluates whether impairment exists for property, plant and equipment on the basis of undiscounted expected future cash flows from operations before interest. There was no impairment of the Company’s long-lived assets for the nine months ended September 30, 2021 and September 30, 2020.
Goodwill: The purchase consideration of acquired businesses have been allocated to the assets and liabilities acquired based on the estimated fair values on the respective acquisition dates. Based on these values, the excess purchase consideration over the fair value of the net assets acquired was allocated to goodwill. The Company accounts for goodwill in accordance with FASB ASC Topic 350, Intangibles - Goodwill and Other. FASB ASC Topic 350 prohibits the amortization of goodwill and requires these assets be reviewed for impairment.
The annual impairment tests of goodwill may be completed through qualitative assessments; however the, Company may elect to bypass the qualitative assessment and proceed directly to a quantitative impairment test for any period. The Company may resume the qualitative assessment in any subsequent period.
Under a qualitative and quantitative approach, the impairment test for goodwill consists of an assessment of whether it is more-likely-than-not that the fair value is less than its carrying amount. As part of the qualitative assessment, the Company considers
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relevant events and circumstances that affect the fair value or carrying amount of the Company. Such events and circumstances could include changes in economic conditions, industry and market conditions, cost factors, overall financial performance, and capital markets pricing. The Company places more weight on the events and circumstances that most affect the Company's fair value or carrying amount. These factors are all considered by management in reaching its conclusion about whether to perform step one of the impairment test. If the Company elects to bypass the qualitative assessment, or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying value exceeds its fair value, the Company proceeds to a quantitative approach.
There were no indicators of impairment for the nine months ended September 30, 2021. The company also performed a qualitative analysis for the year end December 31, 2020 and determined that no impairment was needed for the year 2020.
Self-Insurance: The Company is self-insured with respect to Columbus and Batavia, Ohio; Gaffney, South Carolina; Winona, Minnesota; and Brownsville, Texas for medical, dental and vision claims and Columbus and Batavia, Ohio for workers’ compensation claims, all of which are subject to stop-loss insurance thresholds. The Company is also self-insured for dental and vision with respect to its Cobourg, Canada location. The Company has recorded an estimated liability for self-insured medical, dental and vision claims incurred but not reported and worker’s compensation claims incurred but not reported at September 30, 2021 and December 31, 2020 of $1,143,000 and $933,000, respectively.
Derivative Instruments: Derivative instruments are utilized to manage exposure to fluctuations in foreign currency exchange rates and interest rates on long term debt obligations. All derivative instruments are formally documented as cash flow hedges and are recorded at fair value at each reporting period. Gains and losses related to currency forward contracts and interest rate swaps are deferred and recorded as a component of Accumulated Other Comprehensive Income in the Consolidated Statement of Stockholders' Equity and then subsequently recognized in the Consolidated Statement of Operations when the hedged item affects net income. The ineffective portion of the change in fair value of a hedge, if any, is recognized in income. For additional information on derivative instruments, see Note 14, "Fair Value of Financial Instruments".
Post-retirement Benefits: Management records an accrual for post-retirement costs associated with the health care plan sponsored by Core Molding Technologies. Should actual results differ from the assumptions used to determine the reserves, additional provisions may be required. In particular, increases in future healthcare costs above the assumptions could have an adverse effect on Core Molding Technologies’ operations. The effect of a change in healthcare costs is described in Note 12, "Post-Retirement Benefits", of the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. Core Molding Technologies had a liability for post-retirement healthcare benefits based on actuarial computed estimates of $9,031,000 at September 30, 2021 and $9,109,000 at December 31, 2020.
3. RECENT ACCOUNTING PRONOUNCEMENTS
Current expected credit loss (CECL)
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses,” which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred loss” model and generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be recognized as an allowance. Subsequent to issuing ASU 2016-13, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses,” for the purpose of clarifying certain aspects of ASU 2016-13. ASU 2018-19 has the same effective date and transition requirements as ASU 2016-13. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,” which is effective with the adoption of ASU 2016-13. In May 2019, the FASB issued ASU 2019-05, “Financial Instruments - Credit Losses (Topic 326),” which is also effective with the adoption of ASU 2016-13. In November 2019, the FASB voted to delay the implementation date for certain companies, including those that qualify as a smaller reporting company under SEC rules, until fiscal years beginning after December 15, 2022. We will adopt this ASU on its effective date of January 1, 2023. This ASU will have no material impact on our consolidated financial statements.
Facilitation of the Effects of Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU is effective as of March 12,
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2020 through December 31, 2022. We will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis.
4. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based on the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed similarly but includes the effect of the assumed exercise of dilutive stock appreciation rights and restricted stock under the treasury stock method.
On May 13, 2021, the Company's shareholders approved the 2021 Long Term Equity Incentive Plan (the “2021 Plan”) that replaced the 2006 Long Term Equity Incentive Plan (the “2006 Plan”) approved in May 2006 and amended in May 2015. The 2021 Plan provides restricted stock award recipients voting rights equivalent to the Company's common stock and accrual of dividends but not receipt of dividends until all conditions or restrictions related to such award have been satisfied. Accordingly, the restricted shares are not considered participating shares. The 2006 Plan provides restricted shares award recipients voting rights equivalent to the Company’s common stock and accrual and receipt of dividends irrespective of any conditions or restrictions related to such award being satisfied. Accordingly, the restricted shares granted from the 2006 Plan are considered a participating security and the Company is required to apply the two-class method to consider the impact of the restricted shares on the calculation of basic and diluted earnings per share.
The computation of basic and diluted net income (loss) per common share (in thousands, except for per share data) is as follows:
Three months ended
September 30,
Nine months ended
September 30,
2021 2020 2021 2020
Net income (loss) $ (3,312) $ 3,343  $ 4,230  $ 9,032 
Less: net income allocated to participating securities —  207  234  438 
Net income (loss) available to common shareholders $ (3,312) $ 3,136  $ 3,996  $ 8,594 
Weighted average common shares outstanding — basic 8,053,000  7,969,000  8,015,000  7,922,000 
Effect of weighted average dilutive securities —  —  32,000  — 
Weighted average common and potentially issuable common shares outstanding — diluted 8,053,000  7,969,000  8,047,000  7,922,000 
Basic net income (loss) per common share $ (0.41) $ 0.39  $ 0.50  $ 1.08 
Diluted net income (loss) per common share $ (0.41) $ 0.39  $ 0.50  $ 1.08 
The computation of basic and diluted net income per participating share (in thousands, except for per share data) is as follows:
Three months ended
September 30,
Nine months ended
September 30,
2021 2020 2021 2020
Net income allocated to participating securities $ —  $ 207  $ 234  $ 438 
Weighted average participating shares outstanding — basic —  526,000  470,000  404,000 
Effect of dilutive securities on participating shares —  —  —  — 
Weighted average common and potentially issuable participating shares outstanding — diluted —  526,000  470,000  404,000 
Basic net income per participating share $ 0.00  $ 0.39  $ 0.50  $ 1.08 
Diluted net income per participating share $ 0.00  $ 0.39  $ 0.50  $ 1.08 


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5. MAJOR CUSTOMERS
The Company had five major customers during the nine months ended September 30, 2021, BRP, Inc. (“BRP”), Navistar, Inc. (“Navistar”), PACCAR, Inc. (“PACCAR”), Universal Forest Products, Inc. (“UFP”), and Volvo Group North America, LLC (“Volvo”). Major customers are defined as customers whose sales individually consist of more than ten percent of total sales during any annual or interim reporting period in the current year. The loss of a significant portion of sales to these customers could have a material adverse effect on the Company.
The following table presents sales revenue for the above-mentioned customers for the three and nine months ended September 30, 2021 and 2020 (in thousands):
Three months ended
September 30,
Nine months ended
September 30,
2021 2020 2021 2020
BRP product sales $ 6,907  $ 4,240  $ 25,896  $ 13,693 
BRP tooling sales 124  175  362  508 
Total BRP sales
7,031  4,415  26,258  14,201 
Navistar product sales 10,027  8,065  30,933  25,231 
Navistar tooling sales 6,656  5,198  6,962  6,384 
Total Navistar sales
16,683  13,263  37,895  31,615 
PACCAR product sales 6,872  8,268  27,056  19,383 
PACCAR tooling sales 715  179  1,547  386 
Total PACCAR sales
7,587  8,447  28,603  19,769 
UFP product sales 7,551  12,188  33,323  30,659 
UFP tooling sales —  —  —  — 
Total UFP sales
7,551  12,188  33,323  30,659 
Volvo product sales 7,804  4,907  25,359  14,647 
Volvo tooling sales 70  38  117  2,186 
Total Volvo sales
7,874  4,945  25,476  16,833 
Other product sales 28,482  16,572  73,327  48,406 
Other tooling sales 5,817  43  9,433  222 
Total other sales
34,299  16,615  82,760  48,628 
Total product sales 67,643  54,240  215,894  152,019 
Total tooling sales 13,382  5,633  18,421  9,686 
Total sales
$ 81,025  $ 59,873  $ 234,315  $ 161,705 

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6. INVENTORY
Inventories, net consisted of the following (in thousands):
September 30, 2021 December 31, 2020
Raw materials
$ 14,662  $ 11,640 
Work in process
1,501  1,679 
Finished goods
6,247  5,041 
Total
$ 22,410  $ 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 other 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 (in thousands):
Three Months Ended
September 30,
Nine months ended
September 30,
2021 2020 2021 2020
Operating lease cost $ 390  $ 357  $ 1,145  $ 1,072 
Other supplemental balance sheet information related to leases was as follows (in thousands):
September 30, 2021 December 31, 2020
Operating lease right of use assets $ 3,631  $ 2,754 
Current operating lease liabilities(A)
$ 1,137  $ 1,023 
Noncurrent operating lease liabilities(B)
2,453  1,670 
Total operating lease liabilities $ 3,590  $ 2,693 
(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 in the Consolidated Balance Sheets.
14

The following table presents certain information related to lease terms and discount rates for leases as of September 30, 2021 and December 31, 2020:
Operating leases September 30, 2021 December 31, 2020
Weighted average remaining lease term (in years): 3.8 3.5
Weighted average discount rate: 5.5  % 5.9  %
Other information related to leases were as follows (in thousands):
Nine months ended
September 30,
2021 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases(C)
$ 1,145  $ 1,072 
(C)Cash flow from operating leases are included in prepaid and other assets in the Consolidated Statements of Cash Flows.
Maturities of operating lease liabilities were as follows (in thousands):
September 30, 2021
December 31, 2020
2021 (remainder of year) $ 373  $ 1,215 
2022 1,143  811 
2023 1,044  706 
2024 1,050  705 
2025 and beyond 629  — 
Total lease payments 4,239  3,437 
Less: imputed interest (649) (744)
Total lease obligations 3,590  2,693 
Less: current obligations (1,137) (1,023)
Long-term lease obligations $ 2,453  $ 1,670 
8. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment, net consisted of the following for the periods specified (in thousands):
September 30, 2021 December 31, 2020
Property, plant and equipment $ 181,556  $ 174,553 
Accumulated depreciation (107,179) (100,501)
Property, plant and equipment — net $ 74,377  $ 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 September 30, 2021 and 2020 was $2,471,000 and $2,273,000, respectively. Depreciation expense for the nine months ended September 30, 2021 and 2020 was $7,414,000 and $6,764,000, respectively. Amounts invested in capital additions in progress were $5,227,000 and $1,422,000 at September 30, 2021 and December 31, 2020, respectively. At September 30, 2021 and December 31, 2020, purchase commitments for capital expenditures in progress were $3,561,000 and $677,000, respectively.
15

9. GOODWILL AND INTANGIBLES
Goodwill activity for the nine months ended September 30, 2021 consisted of the following (in thousands):
Balance at December 31, 2020 $ 17,376 
Additions — 
Impairment — 
Balance at September 30, 2021 $ 17,376 
Intangibles, net at September 30, 2021 were comprised of the following (in thousands):
Definite-lived Intangible Assets Amortization Period Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Trade name 25 Years $ 250  $ (65) $ 185 
Trademarks 10 Years 1,610  (597) 1,013 
Non-competition agreement 5 Years 1,810  (1,343) 467 
Developed technology 7 Years 4,420  (2,342) 2,078 
Customer relationships
10-12 Years
9,330  (3,019) 6,311 
Total $ 17,420  $ (7,366) $ 10,054 
Intangibles, net at December 31, 2020 were comprised of the following (in thousands):
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 $488,000 and $487,000 for the three months ended September 30, 2021 and 2020, respectively. The aggregate intangible asset amortization expense was $1,462,000 and $1,461,000 for the nine months ended September 30, 2021 and 2020, respectively.
10. POST-RETIREMENT BENEFITS
The components of expense for the Company’s post-retirement benefit plans are as follows (in thousands):
Three months ended
September 30,
Nine months ended
September 30,
2021 2020 2021 2020
Pension expense:
Multi-employer plan
$ 179  $ 157  $ 600  $ 549 
Defined contribution plan
263  258  881  766 
Total pension expense 442  415  1,481  1,315 
Health and life insurance:
Interest cost
41  58  122  177 
Amortization of prior service credits (124) (124) (372) (372)
Amortization of net loss
43  46  130  135 
Net periodic benefit credit (40) (20) (120) (60)
Total post-retirement benefits expense $ 402  $ 395  $ 1,361  $ 1,255 
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The Company made payments of $1,602,000 to pension plans and $198,000 for post-retirement healthcare and life insurance during the nine months ended September 30, 2021. For the remainder of 2021, the Company expects to make approximately $300,000 of pension plan payments, of which $136,000 was accrued at September 30, 2021. The Company also expects to make approximately $1,088,000 of post-retirement healthcare and life insurance payments for the remainder of 2021, all of which were accrued at September 30, 2021.
11. DEBT
Debt consists of the following (in thousands):
September 30,
2021
December 31,
2020
Wells Fargo term loans payable $ 14,591  $ 16,390 
FGI term loans payable 12,906  13,148 
Leaf Capital term loan payable 127  152 
Total 27,624 29,690
Less deferred loan costs (1,598) (1,957)
Less current portion (3,774) (2,535)
Long-term debt $ 22,252  $ 25,198 
Term Loans

Wells Fargo Term Loans
On October 27, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, lead arranger and book runner, and the lenders party thereto (the “Lenders”). Pursuant to the terms of the Credit Agreement, the Lenders made available to the Company secured term loans (the “WF Term Loans”) in the maximum aggregate principal amount of $18,500,000 ($16,790,000 of which was advanced to the Company on October 28, 2020). The proceeds from the 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, the WF Term Loans bears interest at a per annum rate equal to LIBOR plus a margin of 300 basis points or base rate plus a margin of 200 basis points. LIBOR rate 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 or (d) prime rate. The weighted average interest rate was 3.77% as of September 30, 2021.

The WF Term Loans are to be repaid in monthly installments of $200,000 plus interest, with the remaining outstanding 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 the Company’s U.S. and Canadian subsidiaries, 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 September 30, 2021.

Voluntary prepayments of amounts outstanding under the WF 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 a 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 CC HPM, S. de R.L. de C.V., a subsidiary of the Company 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 FGI. 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 included in other assets in the Consolidated Balance Sheets.
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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.,a subsidiary of the Company organized in Mexico, located in Matamoros, Mexico.

The Company may prepay in full or in part (but not less than the amount equal to 20% of the original principal amount of the loan) outstanding amounts before they are due on any scheduled Payment Date upon at least thirty (30) days’ prior written notice. The Company will pay a “Prepayment Fee” in an amount equal to an additional sum equal to the following percentage of the principal amount to be prepaid for prepayments occurring in the indicated period: four percent (4.0%) for prepayments occurring prior to the first 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 after the second anniversary of the FGI Term Loan and prior to the third anniversary of the Loan; and one percent (1.0%) for prepayments occurring any time thereafter.

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 5.5% and a term of 60 months.

Revolving Loans

Wells Fargo Revolving Loan
On October 27, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, lead arranger and book runner, and the lenders party thereto (the “Lenders”). Pursuant to the terms of the Credit Agreement, the Lenders made available to the Company a revolving loan commitment (the “WF Revolving Loan”) of $25,000,000 ($8,745,000 of which was advanced to the Company on October 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 to 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 $10,000,000 at the Company’s option at any time during the three-year period 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, the WF Revolving Loan bears interest at a per annum rate equal to LIBOR plus a margin of 200 to 250 basis points or base rate plus a margin of 100 to 150 basis points, with the margin rate being based on the excess availability amount under the line of credit. LIBOR rate 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 and (d) prime rate. The weighted average interest rate was 4.25% as of September 30, 2021.

The WF Revolving Loan commitment terminates, and all outstanding borrowings thereunder must be repaid, by November 30, 2024. The Company has $24,321,000 of available rate revolving loans of which $2,320,000 is outstanding as of September 30, 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 September 30, 2021, the Company had one Letter of Credit outstanding for $160,000.

KeyBank Loan

On September 30, 2020, the Company had a term loan of $35,035,000 and no revolving loan balance with KeyBank National Association. The Company’s term loan and revolving loan had variable interest rate of 8.00% at September 30, 2020.


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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 September 30, 2021, the Company was in compliance with its financial covenants associated with the loans made under the Credit Agreement as described above.

12. INCOME TAXES
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. Management makes assumptions, judgments, and estimates to determine the deferred tax assets and liabilities. The Company evaluates provisions and deferred tax assets quarterly to determine if adjustments to our valuation allowance are required based on the consideration of all available evidence.
The Company’s Consolidated Balance Sheets include net deferred tax assets of $460,000 for the Canadian and $469,000 for Mexican tax jurisdictions and a net deferred tax liability of $288,000 for the U.S. tax jurisdiction at September 30, 2021. The deferred tax asset is classified in other non-current assets and deferred tax liabilities are in other non-current liabilities. During the nine months ended September 30, 2021, the Company increased its valuation allowance from $1,193,000 at December 31, 2020 to $2,259,000 at September 30, 2021. The valuation allowance is against the interest limitation carryforward, U.S. state and local net loss carryforward and a portion of the U.S. federal net loss carryforward, due to cumulative losses in the United States over the last three years and uncertainty related to the Company's ability to realize the deferred assets. The Company believes that the deferred tax assets associated with the Canadian and Mexican tax jurisdictions are more-likely-than-not to be realizable based on estimates of future taxable income.
Income tax expense for the nine months ended September 30, 2021 is estimated to be $3,290,000, approximately 43.8% of income before income taxes, and includes tax expense in Canadian and Mexican tax jurisdictions and a valuation allowance of $1,066,000 against U.S. tax jurisdiction deferred tax assets, offset by a tax benefit in U.S. tax jurisdictions. Income tax benefit for the nine months ended September 30, 2020 was estimated to be $4,933,000, approximately 120.3% of income 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. 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. The 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 2017, not subject to Mexican income tax examinations by Mexican authorities for years prior to 2015 and not subject to Canadian tax examinations by Canadian authorities for years prior to 2018.

13. STOCK BASED COMPENSATION

On May 13, 2021, The Company's shareholders approved the 2021 Long Term Equity Incentive Plan (the “2021 Plan”) that replaced the 2006 Long Term Equity Incentive Plan (the “2006 Plan”) approved in May 2006 and amended in May 2015. The 2021 Plan allows for grants to employees, officers, non-employee directors, consultants, independent contractors and advisors of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards (“stock awards”) up to an aggregate of 924,823 awards. Awards can be granted under the 2021 Plan through the earlier of May 13, 2031, or the date the maximum number of available awards under the 2021 Plan have been granted. No new awards may be granted from the 2006 Plan.

Awards under the 2021 Plan vest over one to three years and shares previously awarded and currently unvested under the 2006 Plan vest over three years. Shares granted under both the 2006 and 2021 Plans vest upon the date of a participant’s death, disability or change in control.
19

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 nine months ended September 30, 2021:
Number of
Shares
Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2020 507,835  $ 6.25 
Granted 250,635  13.75 
Vested (110,000) 7.08 
Forfeited (15,964) 5.30 
Unvested balance at September 30, 2021 632,506  $ 9.06 
At September 30, 2021 and 2020, there was $3,664,000 and $1,928,000, respectively, of total unrecognized compensation expense, related to Restricted Stock grants. The unrecognized compensation expense at September 30, 2021 is expected to be recognized over the weighted-average period of 2.3 years. Total compensation cost related to Restricted Stock grants for the three months ended September 30, 2021 and 2020 was $578,000 and $319,000, respectively. Total compensation cost related to Restricted Stock grants for the nine months ended September 30, 2021 and 2020 was $1,322,000 and $968,000, respectively, all of which was recorded to selling, general and administrative expense.
During the nine months ended September 30, 2021 and 2020, employees surrendered 6,740 and 4,574 shares, respectively of the Company's common stock to satisfy income tax withholding obligations in connection with the vesting of restricted awards.
Stock Appreciation Rights
As part of the Company's 2020 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 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 nine months ended September 30, 2021 is as follows:
Number of
Shares
Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2020 180,925  $ 2.57 
Granted —  — 
Exercised —  — 
Forfeited (3,909) 2.57 
Outstanding at end of the period ended September 30, 2021 177,016  $ 2.57 
Exercisable at end of the period ended September 30, 2021 124,801  $ 2.57 
The average remaining contractual term for those SARs outstanding at September 30, 2021 is 2.5 years, with aggregate intrinsic value of $267,000. At September 30, 2021 and 2020, there was $81,000 and $225,000, respectively, of total unrecognized compensation expense, related to SARs. The total unrecognized compensation expenses as of September 30, 2021 is expected to be recognized over the weighted average period of 0.5 years. Total compensation cost related to SARs for the three months ended September 30, 2021 and 2020 was $34,000 and $36,000, respectively. Total compensation cost related to SARs for the nine months ended September 30, 2021 and 2020 was $94,000 and $91,000, respectively, all of which was recorded to selling, general and administrative expense.
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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 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 September 30, 2021 and December 31, 2020 approximate fair value due to the short-term maturities of these financial instruments. The carrying amounts of WF Term Loan and WF Revolving Loan approximate fair value as of September 30, 2021 and December 31, 2020 due to the short term nature of the underlying variable rate LIBOR agreements. The FGI Term Loan approximate fair value as of September 30, 2021 and December 31, 2020 due to immaterial movement in interest rates since the Company entered into the Promissory Note on October 20, 2020.The following tables summarize the amount of unrealized and realized gain (loss) recognized in Accumulated Other Comprehensive Income ("AOCI") for the three months ended September 30, 2021 and 2020 (in thousands):
Derivatives in
subtopic 815-20
Cash Flow Hedging
Relationship
Amount of Unrealized
Gain (Loss) Recognized
in Accumulated Other
Comprehensive Income on
Derivative
Location of Gain (Loss)
Reclassified from
Accumulated Other
Comprehensive Income(A)
Amount of Realized Gain
(Loss) Reclassified from
Accumulated Other
Comprehensive Income
2021 2020 2021 2020
Foreign exchange
contracts
$ —  $ 668  Cost of goods sold $ —  $ (219)
Selling, general and administrative expense $ —  $ (33)
Interest rate swaps $ —  $ 321  Interest expense $ —  $ (149)


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The following tables summarize the amount of unrealized and realized gain (loss) recognized in Accumulated Other Comprehensive Income ("AOCI") for the nine months ended September 30, 2021 and 2020 (in thousands):

Derivatives in
subtopic 815-20
Cash Flow Hedging
Relationship
Amount of Unrealized
Loss Recognized
in Accumulated Other
Comprehensive Income on
Derivative
Location of Loss
Reclassified from
Accumulated Other
Comprehensive Income (A)
Amount of Realized Loss
Reclassified from
Accumulated Other
Comprehensive Income
2021 2020 2021 2020
Foreign exchange
contracts
$ —  $ 135,000  Cost of goods sold $ —  $ (525,000)
Selling, general and
administrative expense
$ —  $ (67,000)
Interest rate swaps $ —  $ (206,000) Interest expense $ —  $ (343,000)
(A)The foreign currency derivative activity reclassified from Accumulated Other Comprehensive Income is allocated to cost of goods sold and selling, general and administrative expense based on the percentage of foreign currency spend.
15. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table presents changes in Accumulated Other Comprehensive Income, net of tax, for the nine months ended September 30, 2021 and 2020 (in thousands):
2020: Derivative
Hedging
Activities
Post Retirement
Benefit Plan
Items(A)
Accumulated
Other
Comprehensive
Income
Balance at December 31, 2019 $ (191) $ 1,561  $ 1,370 
Other comprehensive loss before reclassifications
(71) —  (71)
Amounts reclassified from accumulated other comprehensive income (935) (236) (1,171)
Income tax benefit
223  50  273 
Balance at September 30, 2020 $ (974) $ 1,375  $ 401 
2021:
Balance at December 31, 2020 $ —  $ 1,375  $ 1,375 
Other comprehensive income before reclassifications —  —  — 
Amounts reclassified from accumulated other comprehensive income —  (242) (242)
Income tax benefit
—  51  51 
Balance at September 30, 2021 $ —  $ 1,184  $ 1,184 
(A)The effect of post-retirement benefit items reclassified from Accumulated Other Comprehensive Income is included in other income and expense on the Consolidated Statements of Operations. These Accumulated Other Comprehensive Income 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 is included in income tax expense on the Consolidated Statements of Operations.
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Part I — Financial Information
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 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, 2020.
Description of the Company
Core Molding Technologies and its subsidiaries operate in one operating segment as a molder of thermoplastic and thermoset structural products. The Company's operating segment consists of one reporting unit. 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"), resin transfer molding ("RTM"), liquid molding of dicyclopentadiene ("DCPD"), spray-up and hand-lay-up, 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, construction and agriculture, building products and other commercial products. The demand for Core Molding Technologies’ products is affected by economic conditions in the United States, Mexico, and Canada. Core Molding Technologies’ manufacturing operations have a significant fixed cost component. Accordingly, during periods of changing demand, the profitability of Core Molding Technologies’ operations may change proportionately more than revenues from operations.
In 1996, Core Molding Technologies acquired substantially all of the assets and assumed certain liabilities of Columbus Plastics, a wholly owned operating unit of Navistar’s truck manufacturing division since its formation in late 1980. Columbus Plastics, located in Columbus, Ohio, was a compounder and compression molder of SMC. In 1998, Core Molding Technologies began operations at its second facility in Gaffney, South Carolina, and in 2001, Core Molding Technologies added a production
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facility in Matamoros, Mexico by acquiring certain assets of Airshield Corporation. As a result of this acquisition, Core Molding Technologies expanded its fiberglass molding capabilities to include the spray up, hand-lay-up open mold processes and RTM closed molding. In 2005, Core Molding Technologies acquired certain assets of the Cincinnati Fiberglass Division of Diversified Glass, Inc., a Batavia, Ohio-based, privately held manufacturer and distributor of fiberglass reinforced plastic components supplied primarily to the heavy-duty truck market. In 2009, the Company completed construction of a new production facility in Matamoros, Mexico that replaced its leased facility. In March 2015, the Company acquired substantially all of the assets of CPI Binani, Inc., a wholly owned subsidiary of Binani Industries Limited, located in Winona, Minnesota, 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. On November 5, 2020, the Company announced it will close the manufacturing facility located in Batavia, Ohio and is expected to complete the closure in the fourth quarter of 2021.

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, raw material cost inflation, labor availability, and our customers’ production rates and inventory levels. The Company's customers operate in many different markets with different cyclicality and seasonality. The North American truck market, which is highly cyclical, accounted for 41% and 42% of the Company’s product revenue for the nine months ended September 30, 2021 and 2020 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. The Company has certain contractual commitments that restrict its ability to pass through changes in input costs to certain customers. As a result, during periods of significant increases or decreases in input costs operating results may be impacted.

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 operational 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 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.

For the nine months ended September 30, 2021, the Company experienced larger than normal increases in raw material costs and customer demand disruptions due to customer supply chain challenges. For the nine months ended September 30, 2021, the Company incurred raw material cost inflation of approximately $19,103,000 of which the Company was able to recoup approximately $12,253,000 from customers, which is included within product sales. Due to contractual limitations, the Company is not able to pass through all of its raw material price increases to its customers; however, the Company is pursuing recovery of raw material inflation costs, including from customers with contractual constraints and customers whose contractual commitments expire.

The Company incurred operating losses, including closure costs, for the three months and nine months ended September 30, 2021 of $2,258,000 and $2,276,000, respectively, for the closure of its Batavia, Ohio facility. The Company initially planned to complete the closure of the facility in the first half of 2021 but was delayed to ensure an orderly transition of customer products to other Company facilities as well as other third-party suppliers. During the third quarter of 2021, the Company completed the product transition plan with its customers, which will allow for closure of the facility by December 31, 2021. As a result of finalizing the transition plan the Company has facility shutdown costs for losses on disposal of fixed assets of $625,000, building repairs of $431,000 and severance costs of $392,000. The Company does not anticipate any additional material expenses related to the Batavia manufacturing closure in the fourth quarter of 2021.
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Forward Looking

Looking forward, based on industry analysts’ projections and customer forecasts, the Company expects sales for the fourth quarter of 2021 to increase as compared to the fourth quarter of 2020, primarily due to raw material cost inflation recoupment. Excluding the raw material cost inflation recoupment, the Company expects sales for the fourth quarter of 2021 to be flat to prior year fourth quarter. In the Company’s largest market, North American heavy-duty truck, ACT Research is forecasting production of heavy-duty truck to be flat in the fourth quarter of 2021 compared to the same period in the prior year. The Company anticipates that supply chain disruptions our customers have experienced will continue in the fourth quarter and will result in sporadic changes to demand.

The Company has experienced raw material cost inflation due to ongoing raw material shortages and supply chain disruptions. The Company anticipates increased raw material costs to continue through the remainder of 2021. The Company will continue to pursue recoupment of higher raw material costs where not contractually constrained and where practical.

Labor markets in all Company locations have tightened over the past several months and the Company anticipates the markets to remain tight. The Company has had to raise wages and create other solutions in order to hire and retain workers. The Company will pursue customer price increases to recoup wage increases where contractually possible and where such increases will not significantly negatively impact demand.

Results of Operations

Three Months Ended September 30, 2021, as Compared to Three Months Ended September 30, 2020
Net sales for the three months ended September 30, 2021 and 2020 totaled $81,025,000 and $59,873,000, respectively. Included in net sales were tooling project sales of $13,382,000 and $5,663,000 for the three months ended September 30, 2021 and 2020, 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 September 30, 2021 were $67,643,000 compared to $54,240,000 for the same period in 2020. The increase in sales is primarily the result of higher demand from the heavy-duty truck, power sports, and consumer product markets and the recoupment of raw material inflation costs.

The Company experienced increased raw material costs in the three months ended September 30, 2021 due to supply disruptions and overall increase in global demand of certain materials. The Company has the ability to pass through a portion, but not all, of the raw material cost inflation incurred to its customers. For the three months ended September 30, 2021, the Company had raw material cost inflation of approximately $9,941,000. The Company was able to recoup approximately $6,544,000 of the raw material cost inflation during the three months ended September 30, 2021. Raw material cost inflation was immaterial for the three months ended September 30, 2020.

Gross margin was approximately 7.9% of sales for the three months ended September 30, 2021, compared with 18.1% for the three months ended September 30, 2020. The gross margin percentage decrease was due to net changes in selling price and raw material cost of 7.0% and unfavorable product mix and production inefficiencies of 4.9%, offset by higher fixed cost leverage of 0.8%.

Included in selling, general and administrative expense (“SG&A”) for the three months ended September 30, 2021 are closure costs of $1,768,000 related to the manufacturing facility in Batavia, Ohio. The remaining SG&A costs for the three months ended September 30, 2021 totaled $7,040,000 for the three months ended September 30, 2021, compared to $6,517,000 for the three months ended September 30, 2020. Increased SG&A expenses resulted primarily from higher labor and benefits costs of $309,000 and increased travel costs of $110,000.

Interest expense totaled $563,000 for the three months ended September 30, 2021, compared to interest expense of $966,000 for the three months ended September 30, 2020. As a result of restructuring the Company's debt in 2020, the Company had lower average outstanding debt balance and lower interest rates during the three months ended September 30, 2021, when compared to the same period in 2020, which decreased interest expense in 2021. Interest expense for the three months ended September 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 September 30, 2021 was $396,000 and includes statutory foreign tax expense from foreign taxable income, offset by tax benefits net of valuation allowance for tax losses in the United States. Income tax expense for the three months ended September 30, 2020 was $32,000 and includes statutory foreign tax expense from foreign taxable income and an adjustment in the Company’s United States net operating losses as the Company will receive a benefit from carrying back 2020 losses to previous tax years with higher tax rates.
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The Company recorded a net loss for the three months ended September 30, 2021 of $3,312,000 or $(0.41) per basic and diluted share, compared with a net income of $3,343,000, or $0.39 per basic and diluted share, for the three months ended September 30, 2020. During the three months ended September 30, 2021 the Company incurred net of tax losses of $1,784,000 or ($0.22) per basic and diluted share for the Batavia manufacturing facility closure.

Comprehensive loss totaled $3,375,000 for the three months ended September 30, 2021, compared to comprehensive income of $3,742,000 for the same period ended September 30, 2020. The decrease was primarily related to the decrease in net income of $6,655,000 and foreign currency derivatives, net of tax of $327,000.

Nine months Ended September 30, 2021, as Compared to Nine Months Ended September 30, 2020

Net sales for the nine months ended September 30, 2021 and 2020 totaled $234,315,000 and $161,705,000, respectively. Included in net sales were tooling project sales of $18,421,000 and $9,686,000 for the nine months ended September 30, 2021 and 2020, 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 nine months ended September 30, 2021 were $215,894,000 compared to $152,019,000 for the same period in 2020. This increase in sales is primarily the result of higher demand from the heavy-duty truck, building product, power sports, and consumer product markets and the recoupment of raw material cost inflation.

The Company experienced increased raw material costs in the nine months ended September 30, 2021 due to supply disruptions and overall increase in global demand of certain materials. The Company has the ability to pass through a portion, but not all, of the raw material cost inflation incurred to its customers. For the nine months ended September 30, 2021, the Company had raw material cost inflation of approximately $19,103,000. The Company was able to recoup approximately $12,253,000 of the raw material cost inflation during the nine months ended September 30, 2021. Raw material cost inflation was immaterial for the nine months ended September 30, 2020.

Gross margin was approximately 14.0% of sales for the nine months ended September 30, 2021, compared with 15.2% for the nine months ended September 30, 2020. The gross margin percentage decrease was due to net changes in selling price and raw material costs of 4.6%, offset by net favorable product mix and production efficiencies of 1.3% and higher fixed cost leverage of 2.4%.

Included in selling, general and administrative expense (“SG&A”) for the nine months ended September 30, 2021 are closure costs of $2,027,000 related the manufacturing facility in Batavia, Ohio. Excluding closing costs, remaining SG&A costs for the nine months ended September 30, 2021 totaled $21,717,000 compared to $17,136,000 for the nine months ended September 30, 2020. Increased SG&A expenses resulted primarily from higher labor and benefits costs of $1,539,000, increased business technology costs of $552,000 and increased travel costs of $256,000. SG&A expenses for the nine months ended September 30, 2020 was favorably impacted from cost savings efforts implemented due to COVID-19 and includes the favorable impact of COVID-19 related government subsidies of $1,391,000.

Interest expense totaled $1,725,000 for the nine months ended September 30, 2021, compared to interest expense of $3,338,000 for the nine months ended September 30, 2020. As a result of restructuring the Company's debt in 2020, the Company had lower average outstanding debt balance and lower interest rates during the nine months ended September 30, 2021, when compared to the same period in 2020, which decreased interest expense in 2021. Interest expense for the nine months ended September 30, 2020 includes $675,000 of forbearance fees resulting from amendments to the Company’s credit agreement.

Income tax expense for the nine months ended September 30, 2021 was $3,290,000 and includes statutory foreign tax expense from foreign taxable income offset by tax benefits, net of valuation allowances, for tax losses in the United States. Income tax benefit for the nine months ended September 30, 2020 was $4,933,000 and includes $5,638,000 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.

The Company recorded net income for the nine months ended September 30, 2021 of $4,230,000 or $0.50 per basic and diluted share, compared with $9,032,000, or $1.08 per basic and diluted share, for the nine months ended September 30, 2020. During the nine months ended September 30, 2021 the Company incurred net of tax losses of $1,798,000 or ($0.22) per basic and diluted share for the Batavia manufacturing facility closure.

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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 allowed 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 $4,039,000 for the nine months ended September 30, 2021, compared to $8,063,000 for the same period ended September 30, 2020. The decrease was primarily related to the decrease in net income of $4,802,000, offset by increases related to the foreign currency derivatives, net of tax of $358,000 and interest rate swaps derivatives, net of tax of $425,000.

Liquidity and Capital Resources
The 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, capital expenditures, repayments of debt, and 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. The Company had no outstanding foreign exchange contracts nor interest rate swaps as of September 30, 2021.
Cash provided by operating activities for the nine months ended September 30, 2021 totaled $5,048,000. Net income of $4,230,000 positively impacted operating cash flows. Non-cash deductions of depreciation and amortization included in net income amounted to $9,273,000. Changes in working capital decreased cash provided by operating activities by $10,116,000. The decrease in working capital was primarily related to changes in accounts receivable and inventory, offset by change in accounts payable and accrued liabilities.
Cash used in investing activities for the nine months ended September 30, 2021 was $8,301,000, which related to purchases of property, plant and equipment. The Company anticipates spending up to $15,000,000 during 2021 on property, plant and equipment purchases for all of the Company's operations, including approximately $3,400,000 to expand the Company’s DLFT capacity in Matamoros, Mexico. At September 30, 2021, purchase commitments for capital expenditures in progress were $3,561,000. The Company anticipates using cash from operations, its available revolving line of credit or equipment financing to fund capital investments.
Cash used for financing activities for the nine months ended September 30, 2021 totaled $263,000, which primarily consisted of net revolving loan borrowings of $1,900,000 and scheduled repayments of principal on outstanding term loans of $2,065,000.
At September 30, 2021, the Company had $615,000 cash on hand, and a net available balance on the revolving line of credit of $22,001,000.
The Company is required to meet certain financial covenants included in the Credit Agreement with respect to fixed coverage charge ratio. As of September 30, 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’s liquidity and ability to obtain further financing to fund future operating and capital requirements could be negatively impacted.
Term Loans

Wells Fargo Term Loans
On October 27, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, lead arranger and book runner, and the lenders party thereto (the “Lenders”). Pursuant to the terms of the Credit Agreement, the Lenders made available to the Company secured term loans (the “WF Term Loans”) in the maximum aggregate principal amount of $18,500,000 ($16,790,000 of which was advanced to the Company on October 28, 2020). The proceeds from the 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.
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At the option of the Company, the WF Term Loans bears interest at a per annum rate equal to LIBOR plus a margin of 300 basis points or base rate plus a margin of 200 basis points. LIBOR rate 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 or (d) prime rate. The weighted average interest rate was 3.77% as of September 30, 2021.

The WF Term Loans are to be repaid in monthly installments of $200,000 plus interest, with the remaining outstanding 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 the Company’s U.S. and Canadian subsidiaries, 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 September 30, 2021.

Voluntary prepayments of amounts outstanding under the WF 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 a 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 CC HPM, S. de R.L. de C.V., a subsidiary of the Company 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 FGI. 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 included in other assets in 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.,a subsidiary of the Company organized in Mexico, located in Matamoros, Mexico.

The Company may prepay in full or in part (but not less than the amount equal to 20% of the original principal amount of the loan) outstanding amounts before they are due on any scheduled Payment Date upon at least thirty (30) days’ prior written notice. The Company will pay a “Prepayment Fee” in an amount equal to an additional sum equal to the following percentage of the principal amount to be prepaid for prepayments occurring in the indicated period: four percent (4.0%) for prepayments occurring prior to the first 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 after the second anniversary of the FGI Term Loan and prior to the third anniversary of the Loan; and one percent (1.0%) for prepayments occurring any time thereafter.

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 5.5% and a term of 60 months.

Revolving Loans

Wells Fargo Revolving Loan
On October 27, 2020, the Company entered into a credit agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, lead arranger and book runner, and the lenders party thereto (the “Lenders”). Pursuant to the terms of the Credit Agreement, the Lenders made available to the Company a revolving loan commitment (the “WF Revolving Loan”) of $25,000,000 ($8,745,000 of which was advanced to the Company on October 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 to 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 $10,000,000 at the Company’s option at any time during the three-year period following the closing.
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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, the WF Revolving Loan bears interest at a per annum rate equal to LIBOR plus a margin of 200 to 250 basis points or base rate plus a margin of 100 to 150 basis points, with the margin rate being based on the excess availability amount under the line of credit. LIBOR rate 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 and (d) prime rate. The weighted average interest rate was 4.25% as of September 30, 2021.

The WF Revolving Loan commitment terminates, and all outstanding borrowings thereunder must be repaid, by November 30, 2024. The Company has $24,321,000 of available rate revolving loans of which $2,320,000 is outstanding as of September 30, 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 September 30, 2021, the Company had one Letter of Credit outstanding for $160,000.

KeyBank Loan

On September 30, 2020, the Company had a term loan of $35,035,000 and no revolving loan balance with KeyBank National Association. The Company’s term loan and revolving loan had variable interest rate of 8.00% at September 30, 2020.
Off-Balance Sheet Arrangements
The Company did not have any significant off-balance sheet arrangements as of September 30, 2021 or December 31, 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 term liabilities reflected in the Company’s Consolidated Balance Sheet under GAAP, as of September 30, 2021 and December 31, 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.
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Part I — Financial Information
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 peso 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 Credit Agreement, some of which bear a variable interest rate; (2) foreign currency purchases in which the Company purchases Mexican pesos and Canadian dollars with United States dollars to meet certain obligations; and (3) raw material purchases in which Core Molding Technologies purchases various resins, fiberglass, and metal 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 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 dollar to Mexican peso and Canadian dollar exchange rate, the Company would be impacted by an increase in operating costs, which would have an adverse effect on operating margins.
Assuming a hypothetical 10% increase in commodity prices, Core Molding Technologies would be impacted by an increase in raw material costs, which would have an adverse effect on operating margins.
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Part I — Financial Information
Item 4.    Controls and Procedures
As of the end of the period covered by this report, the Company has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon this evaluation, the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were (i) effective to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act was accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure, and (ii) effective to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There were no changes in internal controls over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) that occurred in the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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Part II — Other Information
Item 1. Legal Proceedings
From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is presently not involved in any legal proceedings which in the opinion of management are likely to have a material adverse effect on the Company's consolidated financial position or results of operations.
Item 1A. Risk Factors
There have been no material changes in Core Molding Technologies' risk factors from those previously disclosed in Core Molding Technologies' Annual Report on Form 10-K for the year ended December 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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
July 1 to 31, 2021 3,363  14.46  —  — 
August 1 to 31, 2021 —  —  —  — 
September 1 to 30, 2021 —  —  —  — 

Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5.    Other Information
None.
Item 6.    Exhibits

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CORE MOLDING TECHNOLOGIES, INC.
Date:
November 8, 2021
By:
/s/ David L. Duvall
David L. Duvall
President, Chief Executive Officer, and Director
Date:
November 8, 2021
By:
/s/ John P. Zimmer
John P. Zimmer
Executive Vice President, Secretary, Treasurer and Chief Financial Officer

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INDEX TO EXHIBIT
Exhibit No. Description Location
2(a)(1)
Asset Purchase Agreement dated as of September 12, 1996, as amended October 31, 1996, between Navistar and RYMAC Mortgage Investment Corporation1
2(a)(2)
Second Amendment to Asset Purchase Agreement dated December 16, 19961
2(b)(1) Agreement and Plan of Merger dated as of November 1, 1996, between Core Molding Technologies, Inc. and RYMAC Mortgage Investment Corporation
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
2(c) Asset Purchase Agreement dated as of October 10, 2001, between Core Molding Technologies, Inc. and Airshield Corporation
2(d) Asset Purchase Agreement dated as of March 20, 2015, between Core Molding Technologies, Inc and CPI Binani, Inc.
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
3(a)(1) Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996
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
3(a)(3) Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002
3(a)(4) Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on July 18, 2007
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.
3(b) Amended and Restated By-Laws of Core Molding Technologies, Inc.
3(b)(1) Amendment No. 1 to the Amended and Restated By-Laws of Core Molding Technologies, Inc.
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Exhibit No. Description Location
4(a)(1) Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996
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
4(a)(3) Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002
4(a)(4) Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on July 18, 2007
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
10 (m) Form of Restricted Stock Agreement between Core Molding Technologies, Inc. and certain executive officers, dated August 6, 2021
10 (n) Form of Executive Employment Agreement between David L. Duvall and Core Molding Technologies, Inc, dated August 6, 2021
10 (q) Form of Executive Employment Agreement between Core Molding Technologies, Inc. and certain executive officers, dated August 6, 2021
11 Computation of Net Income per Share
31(a) Section 302 Certification by David L. Duvall, President, Chief Executive Officer, and Director
31(b) Section 302 Certification by John P. Zimmer, Vice President, Secretary, Treasurer, and Chief Financial Officer
32(a) Certification of David L. Duvall, Chief Executive Officer of Core Molding Technologies, Inc., dated November 5, 2021, pursuant to 18 U.S.C. Section 1350
32(b) Certification of John P. Zimmer, Chief Financial Officer of Core Molding Technologies, Inc., dated November 5, 2021, pursuant to 18 U.S.C. Section 1350
101.INS XBRL Instance Document Filed Herein
101.SCH XBRL Taxonomy Extension Schema Document Filed Herein
101.CAL XBRL Taxonomy Extension Calculation Linkbase Filed Herein
101.LAB XBRL Taxonomy Extension Label Linkbase Filed Herein
101.PRE XBRL Taxonomy Extension Presentation Linkbase Filed Herein
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Exhibit No. Description Location
101.DEF XBRL Taxonomy Extension Definition Linkbase Filed Herein
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) Filed Herein
The Asset Purchase Agreement, as filed with the Securities and Exchange Commission as Exhibit 2-A to Registration Statement on Form S-4 (Registration No. 333-15809), omits the exhibits (including the Buyer Note, Special Warranty Deed, Supply Agreement, Registration Rights Agreement and Transition Services Agreement identified in the Asset Purchase Agreement) and schedules (including those identified in Sections 1, 3, 4, 5, 6, 8 and 30 of the Asset Purchase Agreement). Core Molding Technologies, Inc. will provide any omitted exhibit or schedule to the Securities and Exchange Commission upon request.
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