Categories: Wire Stories

Core Molding Technologies Reports Fiscal 2023 Third Quarter Results

Strategic Initiatives Continue to Drive Higher Returns and Generate Strong Cash Flow

COLUMBUS, Ohio, Nov. 07, 2023 (GLOBE NEWSWIRE) — Core Molding Technologies, Inc. (NYSE American: CMT) (“Core Molding”, “Core” or the “Company”), a leading engineered materials company specializing in molded structural products, principally in building products, industrial and utilities, medium and heavy-duty truck and powersports industries across the United States, Canada and Mexico today reports financial and operating results for the fiscal periods ended September 30, 2023.

Third Quarter 2023 Highlights

  • Net sales of $86.7 million, compared to $101.6 million in the prior year; and product sales of $80.9 million, down 12.4% from the prior year. Product sales increased by 19.6% on a cumulative basis over two years from 2021 levels when combining the 36.5% product sales increase from the 2022 third quarter with the 12.4% decrease in the 2023 third quarter.
  • Gross margin of $15.3 million, or 17.6% of net sales, compared to $13.3 million or 13.1% of net sales in the prior year.
  • Selling, general and administrative expenses of $9.4 million, or 10.8% of net sales compared to $8.7 million or 8.5% of net sales in the prior year same period. The current year quarter included one-time equipment relocation costs of $0.5 million.
  • Operating income of $5.9 million, or 6.8% of net sales, versus operating income of $4.6 million, or 4.6% of net sales in the prior year.
  • Net income of $4.4 million, or $0.49 per diluted share, compared to net income of $1.3 million, or $0.16, in the prior year. Adjusted net income was $0.53 per diluted share1 this year, up 51%, versus $0.35 per diluted share1 in the prior year, which excludes $0.5 million in equipment relocation costs this quarter and $1.6 million of loss from early extinguishment of debt from refinancing last year.
  • Adjusted EBITDA1 of $9.8 million, or 11.3% of net sales, compared to $8.4 million, or 8.3% of net sales in the prior year.

Nine Month 2023 Highlights

  • Net sales of $284.0 million, down 2.4% from $290.9 million in the prior year; and product sales of $274.9 million, down 0.2% from the prior year.
  • Gross margin of $53.6 million, or 18.9% of net sales, compared to $40.9 million or 14.1% of net sales from the prior year.
  • Selling, general and administrative expenses of $29.6 million, or 10.4% of net sales compared to $25.9 million or 8.9% in the prior year same period.
  • Operating income of $24.0 million, or 8.5% of net sales, versus $15.0 million, or 5.2% of net sales in the prior year.
  • Net income of $18.1 million, or $2.08 per diluted share, compared to net income of $7.4 million, or $0.87 a year ago. Adjusted net income was $2.12 per diluted share1 this year, up 100%, versus $1.06 per diluted share1 last year.
  • Adjusted EBITDA1 of $35.8 million, or 12.6% of net sales, compared to $25.9 million, or 8.9% of net sales in the prior year.

1 Adjusted EBITDA and Adjusted Net Income Per Share are non-GAAP financial measures as defined and reconciled below.

David Duvall, the Company’s President and Chief Executive Officer, said, “Our performance for the third quarter was in line with our expectations, and our operational improvements are progressing according to plan. Gross margins remained solid and within our targeted ranges this quarter, based on a combination of additional operational improvements and continued pricing discipline. We were awarded $50 million of new or replacement business through the first nine months of this year, which launches primarily in 2024 and later, demonstrating the continued strong demand for our services. Our product sales results this quarter were not surprising given the strong comparisons from last year, and on a two-year basis, we increased almost 20% versus 2021 levels. We will remain focused on further revenue expansion, diversification through technical solution sales, continued improvements in profitability, and the generation of cash flow.”

John Zimmer, the Company’s EVP and Chief Financial Officer commented, “Third quarter was a return to more historical seasonality than last year when customers were rebuilding inventories against higher demand. Regarding product sales this quarter, medium and heavy-duty trucks were up, while other end markets were down as customers worked inventories lower throughout the period. For the third quarter, excluding the equipment moving cost this year and the refinancing costs last year, Adjusted diluted net income per share1 increased by 51% from the year-ago quarter, and we expanded Adjusted EBITDA1 margin by 300 basis points. Our trailing twelve months of Adjusted EBITDA1 increased to a Company record of $41.8 million, giving us confidence that our strategic growth initiatives are progressing as expected. Free cash flow1 for the first nine months was $19.3 million, and with a strong balance sheet, we ended the quarter with $68 million of available liquidity.

“Similar to the third quarter, our outlook for the fourth quarter anticipates a return to historical seasonality and customer de-stocking, which along with the impact of UAW strikes at customer locations in the fourth quarter, is expected to result in sales declines of 15% to 20% from the fourth quarter of 2022.  We continue to target gross margins in the 17.5% to 18.5% range for fiscal year 2023, and full-year revenues may be down 5% to 10% compared to fiscal year 2022.”

1Adjusted EBITDA, Adjusted Net Income per Diluted Shares and Free Cash Flow are non-GAAP financial measures as defined and reconciled below.

2023 Capital Expenditures

For the first nine months, capital expenditures were $6.8 million, including approximately $1.8 million of capacity expansion and automation investments. The Company’s total 2023 capital expenditures are expected to be in the range of approximately $9.0 to $11.0 million.

Financial Position at September 30, 2023

The Company’s cash and cash equivalents at September 30, 2023, were $18 million, and its cash provided by operating activities for the nine months totaled $26.1 million. The Company’s total liquidity at the end of the third fiscal quarter of 2023 was $68.0 million, with $18.0 million in cash, $25.0 million of undrawn capacity under the Company’s revolving credit facility and $25.0 million of undrawn capacity under the Company’s capex credit facility. The Company’s term debt was $23.3 million on September 30, 2023. The term debt-to-trailing twelve months Adjusted EBITDA1 was less than one times Adjusted EBITDA1 at the end of the fiscal third quarter. The Company had a return on capital employed1 of 17.2% on a trailing twelve month basis as of September 30, 2023.

1 Adjusted EBITDA and return on capital employed are non-GAAP financial measures as defined and reconciled below.

Conference Call

The Company will conduct a conference call today at 10:00 a.m. Eastern Time to discuss financial and operating results for the quarter ended September 30, 2023. To access the call live by phone, dial (844) 881-0134 and ask for the Core Molding Technologies call at least 10 minutes prior to the start time. A telephonic replay will be available through November 14, 2023, by calling 877-344-7529 and using passcode ID: 8134739#. A webcast of the call will also be available live and for later replay on the Company’s Investor Relations website at www.coremt.com/investor-relations/events-presentations/.

About Core Molding Technologies, Inc.

Core Molding Technologies is a leading engineered materials company specializing in molded structural products, principally in building products, utilities, transportation and powersports industries across North America. The Company operates in one operating segment as a molder of thermoplastic and thermoset structural products. The Company’s operating segment consists of one reporting unit, Core Molding Technologies. The Company offers customers a wide range of manufacturing processes to fit various program volume and investment requirements. These thermoset processes include compression molding of sheet molding compound (“SMC”), resin transfer molding (“RTM”), liquid molding of dicyclopentadiene (“DCPD”), spray-up and hand-lay-up. The thermoplastic processes include direct long-fiber thermoplastics (“DLFT”) and structural foam and structural web injection molding. 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’ operations may change proportionately more than revenues from operations.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws that are subject to risks and uncertainties. These statements often include words such as “believe”, “anticipate”, “plan”, “expect”, “intend”, “will”, “should”, “could”, “would”, “project”, “continue”, “likely”, and similar expressions. In particular, this press release may contain forward-looking statements about the Company’s expectations for future periods with respect to its plans to improve financial results and the future of the Company’s end markets. Factors that could cause actual results to differ from those reflected in forward-looking statements relating to our operations and business include: general macroeconomic, social, regulatory and political conditions, including uncertainties surrounding volatility in financial markets; the short-term and long-term impact of the coronavirus (COVID-19) pandemic, or other pandemics in the future, on our business; changes in the plastics, transportation, marine and commercial product industries; efforts of the Company to expand its customer base and develop new products to diversify markets, materials and processes and increase operational enhancements; the Company’s initiatives to quote and execute manufacturing processes for new business, acquire raw materials, address inflationary pressures, regulatory matters and labor relations; and the Company’s financial position or other financial information. These statements are based on certain assumptions that the Company has made in light of its experience as well as its perspective on historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties, including those included in the Company’s filings with the SEC. There can be no assurance that statements made in this press release relating to future events will be achieved. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements.

Company Contact:
Core Molding Technologies, Inc.
John Zimmer
Executive Vice President & Chief Financial Officer
jzimmer@coremt.com

Investor Relations Contact:
Three Part Advisors, LLC
Sandy Martin or Steven Hooser
214-616-2207

– Financial Statements Follow –

 
Core Molding Technologies, Inc.
Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
       
  Three months ended September 30,   Nine months ended September 30,
  2023   2022   2023   2022
               
Net sales:              
Products $ 80,896     $ 92,340     $ 274,933     $ 275,558  
Tooling   5,832       9,266       9,028       15,375  
Total net sales   86,728       101,606       283,961       290,933  
               
Total cost of sales   71,450       88,303       230,380       250,015  
               
Gross margin   15,278       13,303       53,581       40,918  
               
Selling, general and administrative expense   9,403       8,671       29,562       25,889  
               
Operating income   5,875       4,632       24,019       15,029  
               
Other income and expense              
Loss due to the extinguishment of debt         1,582             1,582  
Interest expense   187       511       836       1,511  
Net periodic post-retirement benefit   (52 )     (31 )     (157 )     (93 )
Total other income and expense   135       2,062       679       3,000  
               
Income before income taxes   5,740       2,570       23,340       12,029  
               
Income tax expense   1,386       1,251       5,198       4,658  
               
Net income $ 4,354     $ 1,319     $ 18,142     $ 7,371  
               
Net income per common share:              
Basic $ 0.50     $ 0.16     $ 2.13     $ 0.87  
Diluted $ 0.49     $ 0.16     $ 2.08     $ 0.87  
                               

 
Core Molding Technologies, Inc.
Product Sales by Market
(unaudited, in thousands)
       
  Three months ended September 30,   Nine months ended September 30,
  2023
  2022
  2023
  2022
Medium and heavy-duty truck $ 45,395     $ 44,951     $ 140,104     $ 116,864  
Power sports   13,705       19,963       59,619       62,133  
Building products   4,823       6,779       27,301       36,219  
Industrial and Utilities   4,473       6,087       17,525       19,814  
All Other   12,500       14,560       30,384       40,528  
Net Product Revenue $ 80,896     $ 92,340     $ 274,933     $ 275,558  
                               

 
Core Molding Technologies, Inc.
Consolidated Balance Sheets
(in thousands)
       
  As of    
  9/30/2023   As of
  (unaudited)   12/31/2022
Assets:      
Current assets:      
Cash and cash equivalents $ 18,035     $ 4,183  
Accounts receivable, net   45,938       44,261  
Inventories, net   24,988       23,871  
Prepaid expenses and other current assets   13,171       8,350  
Total current assets   102,132       80,665  
       
Right of use asset   4,261       5,114  
Property, plant and equipment, net   81,788       83,267  
Goodwill   17,376       17,376  
Intangibles, net   6,414       7,619  
Other non-current assets   4,686       4,574  
Total Assets $ 216,657     $ 198,615  
       
Liabilities and Stockholders’ Equity:      
Liabilities:      
Current liabilities:      
Current portion of long-term debt $ 1,310     $ 1,208  
Revolving debt         1,864  
Accounts payable   28,682       29,586  
Contract liabilities   1,146       1,395  
Compensation and related benefits   10,523       9,101  
Accrued other liabilities   11,209       7,643  
Total current liabilities   52,870       50,797  
       
Other non-current liabilities   2,998       3,516  
Long-term debt   21,982       22,986  
Post retirement benefits liability   4,815       5,191  
Total Liabilities   82,665       82,490  
       
Stockholders’ Equity:      
Common stock   86       84  
Paid in capital   42,565       40,342  
Accumulated other comprehensive income, net of income taxes   3,222       3,053  
Treasury stock   (31,768 )     (29,099 )
Retained earnings   119,887       101,745  
Total Stockholders’ Equity   133,992       116,125  
Total Liabilities and Stockholders’ Equity $ 216,657     $ 198,615  
               

 
Core Molding Technologies, Inc.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
   
  Nine months ended September 30,
  2023   2022
Cash flows from operating activities:      
Net income $ 18,142     $ 7,371  
Adjustments to reconcile net income to net cash used in operating activities:      
Depreciation and amortization   9,575       9,406  
Loss on disposal of property, plant and equipment   80        
Share-based compensation   2,223       1,705  
Loss on the extinguishment of debt         1,234  
Losses on foreign currency   202       178  
Change in operating assets and liabilities:      
Accounts receivable   (1,677 )     (19,036 )
Inventories   (1,117 )     (1,725 )
Prepaid and other assets   (4,474 )     1,940  
Accounts payable   (414 )     10,355  
Accrued and other liabilities   4,340       (2,773 )
Post retirement benefits liability   (731 )     (166 )
Net cash provided by operating activities   26,149       8,489  
Cash flows from investing activities:      
Purchase of property, plant and equipment   (6,803 )     (12,284 )
Net cash used in investing activities   (6,803 )     (12,284 )
Cash flows from financing activities:      
Gross borrowings on revolving loans   (38,962 )     (120,357 )
Gross repayment on revolving loans   37,098       119,985  
Payment of deferred loan costs         (402 )
Payments for taxes related to net share settlement of equity awards   (2,669 )     (482 )
Proceeds from term loan         25,000  
Payment on principal on term loans   (961 )     (25,586 )
Net cash used in financing activities   (5,494 )     (1,842 )
Net change in cash and cash equivalents   13,852       (5,637 )
Cash and cash equivalents at beginning of year   4,183       6,146  
Cash and cash equivalents at end of year $ 18,035     $ 509  
Cash paid for:      
Interest $ 939     $ 1,320  
Income taxes $ 4,518     $ 5,378  
Non cash investing activities:      
       
Fixed asset purchases in accounts payable and other non-current liabilities $ 848     $ 1,058  
Non-cash financing activities:      
Deposit used in payment of principal on term loans $     $ 1,200  
               

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Core Molding management uses non-GAAP measures in its analysis of the Company’s performance. Investors are encouraged to review the reconciliation of non-GAAP financial measures to the comparable GAAP results available in the accompanying tables.

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA represents net income before, as applicable from time to time, (i) interest expense, net, (ii) provision (benefit) for income taxes, (iii) depreciation and amortization of long-lived assets, (iv) share based compensation expense, (v) plant closure costs, and (vi) nonrecurring legal settlement costs and associated legal expenses unrelated to the Company’s core operations. Free Cash Flow represents net cash (used in) provided by operating activities less purchase of property, plant and equipment. Return on capital employed represents earnings before (i) interest expense, net and (ii) provision (benefit) for income taxes divided by (i) stockholders’ equity and (ii) current and long-term debt. Adjusted net income per share represents net income before (i) equipment relocation costs net of related provision (benefit) for income taxes and (ii) loss due to extinguishment of debt net of related provision (benefit) for income taxes divided by either (i) weighted average common shares outstanding – basic or (ii) weighted average common and potentially issuable common share outstanding – diluted.

We present Adjusted EBITDA, Adjusted EBITDA as a percent of net sales, adjusted net income per share, debt-to-trailing twelve months adjusted EBITDA, Free Cash Flow and Return on Capital Employed because management uses these measures as key performance indicators, and we believe that securities analysts, investors and others use these measures to evaluate companies in our industry. These measures have limitations as analytical tools and should not be considered in isolation or as an alternative to performance measure derived in accordance with GAAP as an indicator of our operating performance. Our calculation of these measures may not be comparable to similarly named measures reported by other companies. The following tables present reconciliations of net income to Adjusted EBITDA, Cash Flow from Operating Activities to Free Cash Flow, and Adjusted Net Income Per Share to Net Income Per Share, the most directly comparable GAAP measures, and Return on Capital Employed, for the periods presented:

 
Core Molding Technologies, Inc.
Net Income to Adjusted EBITDA Reconciliation
(unaudited, in thousands)
       
  Three months ended September 30,   Nine months ended September 30,
  2023   2022   2023   2022
Net income $ 4,354     $ 1,319     $ 18,142     $ 7,371  
Provision for income taxes   1,386       1,251       5,198       4,658  
Total other expenses(1)   135       2,062       679       3,000  
Depreciation and amortization   3,208       3,170       9,516       9,146  
Share-based compensation   736       623       2,223       1,705  
Adjusted EBITDA $ 9,819     $ 8,425     $ 35,758     $ 25,880  
               
Adjusted EBITDA as a percent of net sales   11.3 %     8.3 %     12.6 %     8.9 %
               
(1)Includes interest expense, non-cash periodic post-retirement benefit cost and loss of extinguishment of debt
 

 
Core Molding Technologies, Inc.
Computation of Debt to Trailing Twelve Months Adjusted EBITDA
(unaudited, in thousands, except for ratio)
                   
  Q4 2022   Q1 2023   Q2 2023   Q3 2023   Trailing Twelve Month Adjusted EBITDA
Net income $ 4,832     $ 5,852     $ 7,936     $ 4,354     $ 22,974  
Provision for income taxes   (2,276 )     1,919       1,893       1,386       2,922  
Total other expenses(1)   418       304       241       135       1,098  
Depreciation and amortization   2,457       3,390       2,918       3,208       11,973  
Share-based compensation   624       731       756       736       2,847  
Adjusted EBITDA $ 6,055     $ 12,196     $ 13,744     $ 9,819     $ 41,814  
                   
Total Outstanding Term Debt as of September 30, 2023   $ 23,292  
                   
Debt to Trailing Twelve Months Adjusted EBITDA     0.56  
                   
(1)Includes interest expense, non-cash periodic post-retirement benefit cost and loss of extinguishment of debt
 

 
Core Molding Technologies, Inc.
Computation of Return on Capital Employed
(unaudited, in thousands)
                   
  Q4 2022   Q1 2023   Q2 2023   Q3 2023   Trailing Twelve Month Adjusted EBITDA
Operating income $ 2,974     $ 8,075     $ 10,070     $ 5,875     $ 26,994  
                   
Equity as of September 30, 2023   $ 133,992  
Structure debt as of September 30, 2023   $ 23,292  
Total structured investment as of September 30, 2023   $ 157,284  
                   
Trailing twelve month return on capital employed as of September 30, 2023     17.2 %
     
  Q4 2021   Q1 2022   Q2 2022   Q3 2022   Trailing Twelve Month Adjusted EBITDA
Operating income $ 1,942     $ 6,012     $ 4,385     $ 4,632     $ 16,971  
 
Equity as of September 30, 2022   $ 108,672  
Structure debt as of September 30, 2022   $ 24,500  
Total structured investment as of September 30, 2022   $ 133,172  
                   
Trailing twelve month return on capital employed as of September 30, 2022     12.7 %
         

 
Core Molding Technologies, Inc.
Free Cash Flow
Nine Months Ended September 30, 2023 and 2022
(unaudited, in thousands)
               
  2023   2022
Cash flow provided by operations $ 26,149     $ 8,489  
Purchase of property, plant and equipment   (6,803 )     (12,284 )
Free cash flow (deficit) surplus $ 19,346     $ (3,795 )
               

 
Core Molding Technologies, Inc.
Adjusted Net Income per Share
(unaudited, in thousands)
       
  Three Months Ended September 30,   Nine Months Ended September 30,
  2023   2022
  2023   2022
Net Income $ 4,354     $ 1,319     $ 18,142     $ 7,371  
Loss due to extinguishment of debt $     $ 1,582     $     $ 1,582  
Equipment relocation expense $ 540     $     $ 540     $  
Tax impact(1) $ (162 )   $     $ (162 )   $  
Adjusted net income $ 4,732     $ 2,901     $ 18,520     $ 8,953  
               
Weighted average common shares outstanding – basic   8,623,000       8,414,000       8,515,000       8,337,000  
Weighted average common and potentially issuable common shares outstanding- diluted   8,842,000       8,418,000       8,716,000       8,338,000  
               
Net income per share – basic $ 0.50     $ 0.16     $ 2.13     $ 0.87  
Loss due to extinguishment of debt         0.19             0.19  
Equipment relocation expense   0.06             0.06        
Tax impact(1)   (0.02 )           (0.02 )      
Adjusted net income per share – basic $ 0.54     $ 0.35     $ 2.17     $ 1.06  
               
Net income per share – diluted $ 0.49     $ 0.16     $ 2.08     $ 0.87  
Loss due to extinguishment of debt         0.19             0.19  
Equipment relocation expense   0.06             0.06        
Tax impact(1)   (0.02 )           (0.02 )      
Adjusted net income per share – diluted $ 0.53     $ 0.35     $ 2.12     $ 1.06  
               
(1)Due to the Company’s net operating loss position in the United States in 2022, tax benefits from losses were fully offset by a valuation allowance.
 

Alex

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