COLUMBUS, Ohio, Aug. 10, 2020 /PRNewswire/ — Core Molding Technologies, Inc. (NYSE American: CMT) (“Core Molding”, “Core” or the “Company”) today announced results for the second quarter ended June 30, 2020.
The Company’s results for the three months ended June 30, 2020 reflect the impact of COVID-19, which forced many of the Company’s customers to suspend operations during the quarter. The Company had a net loss of $2.3 million in the second quarter of 2020 compared to net income of $0.2 million in the second quarter of 2019. The results for the first half of 2020 reflect the operational improvements the Company made during its turnaround as the Company generated net income of $5.7 million compared to a net loss of $3.6 million for the first half of 2019.
“The Company had operating losses in April and May due to the global effects of COVID-19, which caused many of our customers to fully or partially shut down. Although the Company reacted quickly to reduce costs, the Company could not fully offset the product sales decrease of more than 70% in April and 40% in May compared to the average monthly product sales in the first quarter of 2020,” said David Duvall, President and Chief Executive Officer. “When customers reopened in June and revenues rebounded, to approximately 85% of first quarter’s average monthly revenues, we recorded our highest monthly operating profit of the past five years. It is a clear statement that we have created a stronger company and more resilient organization,” Duvall concluded.
Net sales decreased $43.4 million, or 53.5%, for the second quarter of 2020 compared to the same period last year. The sales decline in the second quarter of 2020 was due to a reduction in customer demand from the effects of COVID-19. Although demand was significantly lower in many of the industries the Company serves, the Company’s efforts to diversify its customer base have proven beneficial, as customer demand increased compared to the second quarter 2019 from customers in industries such as residential renovation and water treatment. For the six months ended June 30, 2020 net sales decreased $51.7 million, or 33.7%, compared to the same period last year.
The Company generated strong cash flows from operations for the three and six months ended June 30, 2020 of $13.1 million and $18.5 million, respectively, due to solid operating earnings and a focused effort to reduce working capital.
“As a team we have been through significant change since we started the business transformation at the beginning of 2019, and then through the COVID-19 global shutdown we have shown that “winners win” no matter what the circumstances. I want to thank all of our team members for their commitment and dedication for persevering through the challenges and for the outstanding improvements we have made,” said Duvall. “Our employees’ commitment to our customers and the Company has allowed us to navigate through the effects of COVID-19 and minimize the negative financial impact in the face of an extremely challenging situation. I am proud to be a part of the Core Molding team,” Duvall continued.
Second Quarter 2020 Compared to Second Quarter 2019:
- Net sales were $37.8 million compared to $81.2 million.
- Product sales were $35.8 million compared to $75.4 million.
- Gross margin was 7.7% compared to 10.5%.
- Selling, general and administrative expenses were $4.1 million compared to $7.2 million.
- Operating loss was $1.2 million compared to operating income of $1.3 million.
- Net loss was $2.3 million, or ($0.29) per diluted share, compared with net income of $0.2 million, or $0.03 per diluted share.
- Cash flows from operations were $13.1 million compared to $0.4 million.
First Half 2020 Compared to First Half 2019:
- Net sales were $101.8 million compared to $153.5 million.
- Product sales were $97.8 million compared to $146.9 million.
- Gross margin was 13.4% compared to 7.6%.
- Selling, general and administrative expenses were $10.6 million compared to $14.4 million.
- Operating income was $3.1 million compared to operating loss of $2.8 million.
- Net income was $5.7 million, or $0.67 per diluted share, compared with net loss of $3.6 million, or ($0.47) per diluted share.
- Cash flows from operations were $18.5 million compared to $3.3 million.
Second quarter 2020 gross margin declined 2.8 percentage points compared to second quarter 2019. Although the Company had a substantial improvement in product mix and manufacturing efficiency, the effect of lower sales as a result of COVID -19 reduced the Company’s fixed cost leverage resulting in a decrease in gross margin. For the six months ended June 30, 2020 gross margin improved 5.8 percentage points compared to the same period in 2019 due to product mix and manufacturing efficiency improvements which were a direct result of the Company’s operational systems and processes implemented throughout 2019. “We continue to drive operational excellence, through all areas of our business, as a foundational building block of our strategy,” said Eric Palomaki, Executive Vice President of Operations. “Even with the effect of COVID-19, the Company was able to continue to drive operational improvements and leverage the pandemic’s forced downtime to complete important upgrades and improvement projects which will enable us to become even stronger,” continued Palomaki.
Financial Position at June 30, 2020:
- Total assets of $165.1 million.
- Total debt of $35.5 million.
- Stockholders’ equity of $89.5 million.
The Company’s debt to equity ratio is 40%. During the second quarter 2020 the Company generated cash flows from operations in excess of $13.1 million which were used to reduce outstanding debt by $8.7 million and increase cash on hand by $3.2 million. “Through operational performance and lower working capital needs the Company reduced its outstanding debt by more than 40% from peak debt levels reached in November 2019. The Company’s efforts to refinance its existing debt facility were delayed due to COVID-19 as potential lenders wanted to see operations reopen prior to submitting final term sheets. Since operations reopened in June, the Company has been able to demonstrate to potential lenders strong operational performance and has received several new term sheets,” said John Zimmer, Executive Vice President and Chief Financial Officer. “The Company has executed term sheets with new lenders and is targeting closing the new financing prior to September 30, 2020,” Zimmer continued.
Although Company operations have reopened, substantial uncertainty remains about the potential future effect of COVID-19 on the North American economy and the Company’s customers’ operations. In the Company’s largest industry that it serves, the North American truck industry, industry analysts and customer forecasts project sales to rebound from second quarter 2020 levels but to be lower for the remainder of 2020 compared to 2019. Customers in the marine industry are also projecting reductions in 2020 sales compared to 2019 resulting from the COVID-19 pandemic.
“Phase one of our transformation focused on creating robust and efficient operations as a foundation, which is a required platform from which to grow. We are now focused on strengthening our resources in technology and innovation, organizational development and profitable growth. This will enable the Company to take a much more targeted, proactive and value focused approach to the markets we serve. We have won several new programs and more than doubled our sales pipeline already and have only recently started implementation of our Go-To-Market transformation. It all starts with a foundation of operational excellence and a team with an integrity-based winning culture,” Duvall concluded.
About Core Molding Technologies, Inc.
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 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, glass mat thermoplastics (“GMT”), 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 report: business conditions in the plastics, transportation, marine and commercial product industries (including changes in demand for truck production); federal and state regulations (including engine emission regulations); general economic, social, regulatory (including foreign trade policy) and political environments in the countries in which Core Molding Technologies operates; 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; 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; the actions of competitors, customers, and suppliers; failure of Core Molding Technologies’ suppliers to perform their obligations; the availability of raw materials; inflationary pressures; new technologies; regulatory matters; labor relations; labor availability; the loss or inability of Core Molding Technologies to attract and retain key personnel; the Company’s ability to successfully identify, evaluate and manage potential acquisitions and to benefit from and properly integrate any completed acquisitions; federal, state and local environmental laws and regulations; the availability of 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, 2019.
Executive Vice President & Chief Financial Officer
(See Accompanying Tables)