Core Molding Technologies Reports Strong Full Year 2020 Results

COLUMBUS, Ohio, March 11, 2021 /PRNewswire/ -- Core Molding Technologies, Inc. (NYSE American: CMT) ("Core Molding", "Core" or the "Company") today announced results for the full year and fourth quarter ended December 31, 2020.

The Company recorded net income of $8.2 million for the full year 2020 compared to a net loss of $15.2 million for the same period in 2019.  Operational improvements in 2020 drove the increase in net income as the Company benefited from the completion of its turnaround started in the fourth quarter of 2018.  For the fourth quarter 2020, the Company recorded a net loss $0.9 million compared to a net loss of $5.5 million for the fourth quarter of 2019.  The 2020 fourth quarter net loss includes a one-time charge, net of tax, of $1.3 million from the successful refinancing of the Company's debt in October 2020.  Excluding the one-time charge, the Company would have recorded net income of $0.4 million in the fourth quarter 2020. 

The Company's net sales decreased $61.9 million or 22% for the full year 2020 to $222.4 million compared to $284.3 million in 2019.  Lower demand from our customers as a result of a cyclical downturn in the truck market and the full year negative effect of COVID-19 on most customer demand were the primary drivers of the sales decrease.  For the fourth quarter 2020, net sales increased $4.5 million or 8% to $60.7 million compared to the same period in 2019 due to increased demand in the construction and all-terrain vehicles markets combined with stable demand in the other markets the Company serves.  Customer demand continued to improve in the fourth quarter 2020 from COVID-19 effected demand levels in the second quarter of 2020.

"The two foundational components of our transformation strategy are the Core Molding Values and Execution Excellence.  We first needed to create an inspired team and then create a culture of excellence in executing the business," said David Duvall, President and Chief Executive Officer.  "I am proud of the progress we have made in these areas and it directly shows in our 2020 financial performance.  Even with a $62 million decrease in net sales we were able to increase our net income by over $23 million.  These two foundational components must always remain a part of who Core Molding is and how we operate," concluded Duvall.   

The Company generated cash flows from operations for the full year 2020 of $28.2 million compared to $16.7 million for the same period of 2019.  Year over year improvement in cash flows from operations is a result of the Company's operational improvements and focus on managing working capital.

Fourth Quarter 2020 Compared to Fourth Quarter 2019:

• Net sales were $60.7 million compared to $56.1 million.
• Product sales were $58.6 million compared to $54.6 million.
• Gross margin was 16.4% compared to 6.0%.
• Selling, general and administrative expenses were $7.0 million compared to $7.5 million.
• Goodwill impairment charge was $4.1 million for the three months ended December 31, 2019.
• Operating income was $3.0 million compared to operating loss of $4.1 million.
• Net loss was $0.9 million, or ($0.10) per share, compared to net loss of $5.5 million, or ($0.69) per share.

Year ended 2020 Compared to Year ended 2019:

• Net sales were $222.4 million compared to $284.3 million.
• Product sales were $210.6 million compared to $269.0 million.
• Gross margin was 15.5% compared to 7.6%.
• Selling, general and administrative expenses were $24.1 million compared to $28.9 million.
• Goodwill impairment charge was $4.1 million for the year ended December 31, 2019.
• Operating income was $10.4 million compared to operating loss of $11.5 million.
• Net income was $8.2 million, or $0.98 per share, compared to net loss of $15.2 million, or ($1.94) per share.

Full year and fourth quarter 2020 gross margin increased over the same periods in 2019 primarily as a result of product mix and operational improvements.  "Operational improvements implemented as part of the Company's turnaround have stabilized the Company's performance and improved the Company's profitability," said John Zimmer, Executive Vice President and Chief Financial Officer.

Full year and fourth quarter 2020 selling, general and administrative expenses decreased compared to the same period in 2020 due primarily to lower professional services, due to the stabilization of the Company's operations in 2020, and due to lower travel costs due to travel restrictions resulting from the effects of COVID-19.  In addition, the Company received $1.4 million of COVID-19 related government subsidies in the second and third quarter of 2020 which reduced full year 2020 selling, general and administrative costs. 

Full year operating income improved to $10.4 million from an operating loss of $11.5 million in 2019.  "I am incredibly proud of the entire team who proved we have the ability to adapt to any challenge while executing with excellence in 2020.  In the second quarter we cut costs, improved inventory turns, and protected against the early pandemic customer shutdowns.  In the second half of 2020 we used the same flexibility and operational execution techniques to deliver on rapidly increasing demands," said Eric Palomaki, Executive Vice President of Operations.  "The 2020 results are a testament to the creativity and the ability to handle both extremes with a desire to win with integrity and demonstrates our preparedness for 2021 and the right to grow and pursue the future transformation of business," concluded Palomaki. 

Financial Position at December 31, 2020:

• Total assets of $165.5 million.
• Revolving line of credit debt of $0.4 million.
• Term loan debt of $27.7 million.
• Stockholders' equity of $93.9 million.

The Company's debt to equity ratio as of December 31, 2020 is 30%.  "As a result of refinancing of the Company's credit facility in the fourth quarter of 2020 and due to strong cash flows from operations for all of 2020, the Company has been able to reduce its debt to equity ratio nearly in half from the 2019 year end level of 59%," said Zimmer.  "With the improvement in the Company's debt to equity ratio, the Company is in good position financially to turn its attention to growing the business," concluded Zimmer.

Outlook
Looking forward, based on industry analysts' projections and customer forecasts, the Company expects sales levels for 2021 to increase compared to 2020.  In the Company's largest market, North American heavy-duty truck, ACT Research is forecasting production to increase approximately 41%.  In several other industries the Company serves, customers are forecasting higher demand in 2021 including in the marine and all-terrain vehicle markets. 

The Company anticipates higher raw material costs in 2021 as global economies continue to strengthen from the COVID-19 effected 2020 economic levels.  Global demand for certain raw materials the Company uses has increased in the second half of 2020 and in the first quarter of 2021.  As a result, suppliers have been increasing the price of these materials.  The Company has the ability to pass through a portion, but not all, of the cost increases to its customers.  

In February 2021, an unprecedented winter storm in Texas and Mexico caused operational disruptions to many companies in the area including the Company's Matamoros and Monterey Mexico operations as well as to our customers and suppliers.  Much of North American resins and glass supply originate from the region and these supplier operations were significantly affected causing suppliers to claim force majeure and set supply allocations.  While the Company has been able to coordinated its raw material supply with customer demand, other supplier disruptions throughout our customers' supply chain have resulted in our customers delaying orders. In addition, suppliers of certain materials, such as polypropylene, have increased prices due to a shortage of supply.  Suppliers have indicated they anticipate supply levels to recover during the second quarter of 2021.

"We are now able to effectively leverage our ability to execute well by better serving our current customers and continuing our diversification of the business.  With our expertise and industry leading breadth of composite and plastic processes we can offer complete solutions that are uniquely developed to maximize value for our customers' applications," said Duvall.  "We are increasing our investment in materials development, technology and applications engineering to better understand the market needs and translate those to high value solutions for our customers.  With more focus on environmental stewardship we are seeing increased interest in composite and plastic solutions that provide lighter weights, consolidation of components, and higher performance," concluded Duvall.   

About Core Molding Technologies, Inc.
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 two component reporting units, Core Traditional and Horizon Plastics. The Company offers customers a wide range of manufacturing processes to fit various program volume and investment requirements. These processes include compression molding of sheet molding compound ("SMC"), bulk molding compounds ("BMC"), resin transfer molding ("RTM"), liquid molding of dicyclopentadiene ("DCPD"), spray-up and hand-lay-up, direct long-fiber thermoplastics ("D-LFT") and structural foam and structural web injection molding ("SIM"). Core Molding Technologies serves a wide variety of markets, including the medium and heavy-duty truck, marine, automotive, agriculture, construction, and other commercial products. The demand for Core Molding Technologies' products is affected by economic conditions in the United States, Mexico, and Canada. Core Molding Technologies' manufacturing operations have a significant fixed cost component. Accordingly, during periods of changing demand, the profitability of Core Molding Technologies' operations may change proportionately more than revenues from operations.

This press release 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 Annual Report on Form 10-K: 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 this Annual Report on Form 10-K.

Company Contact:
John Zimmer
ExweVice President & Chief Financial Officer
614-870-5604
[email protected]

(See Accompanying Tables)

SOURCE Core Molding Technologies, Inc.

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