CORE MOLDING TECHNOLOGIES INC

Previous wording

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, which are subject to the "safe harbor" created by Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exhcange Act"). 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.

Current wording

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, which are subject to the "safe harbor" created by Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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.

Previous wording

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-Q:

Current wording

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:

Previous wording

•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.

Current wording

•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 Core Molding Technologies' Annual Report on Form 10-K for the year ended December 31, 2023.

Previous wording

Looking forward, based on industry analyst projections, customer forecasts, anticipated price changes, as well as anticipated new program launches, offset by current programs that we expect to begin to ramp down in the second half of 2024 as further described below, the Company expects revenues for calendar year 2024 to decrease by approximately 10 to 15 percent as compared to 2023. Additional factors contributing to our anticipated 2024 revenue outlook include an expected cyclical demand slowdown, decreased customer inventory builds due to stabilizing inventory levels as well as a consumer demand environment that is more consistent with pre-pandemic levels. The Company anticipates the revenue decrease to be more significant in the first half of 2024 and a lesser decrease in the second half of 2024 compared to the same periods in 2023.

Current wording

Looking forward, based on industry analyst projections, customer forecasts, anticipated price changes, as well as anticipated new program launches, offset by current programs that we expect to begin to ramp down in the second half of 2024 as further described below, the Company expects revenues for calendar year 2024 to decrease by approximately 10 to 15 percent as compared to 2023. Additional factors contributing to our anticipated 2024 revenue outlook include an expected cyclical demand slowdown, decreased customer inventory builds due to stabilizing inventory levels as well as a consumer demand environment that is more consistent with pre-pandemic levels. Due to seasonality shifts and product mix changes the Company anticipates the first half and second half of 2024 percentage revenue decreases to be at similar levels.

Previous wording

The Company’s raw material supply chains remain stable, and the Company anticipates raw material pricing in 2024 to remain flat or slightly higher as compared to 2023. Labor markets have also stabilized, although at higher cost levels over the past several years. The Company does not anticipate challenges in hiring hourly labor, although management believes wage pressure will continue, especially in Mexico.

Current wording

The Company’s raw material supply chains remain stable, and the Company anticipates raw material pricing in 2024 to remain flat or slightly lower as compared to 2023. Labor markets have also stabilized, although at higher cost levels over the past several years. The Company does not anticipate challenges in hiring hourly labor, although management believes wage pressure will continue primarily in Mexico.

Previous wording

Net sales for the three months ended March 31, 2024 and 2023 totaled $78,145,000 and $99,507,000, respectively. Included in net sales were tooling project sales of $2,314,000 and $1,170,000 for the three months ended March 31, 2024 and 2023, respectively. Tooling 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 March 31, 2024 were $75,831,000 compared to $98,337,000 for the same period in 2023. The decrease in sales is primarily the result of lower demand across all industries. The Company's product sales for the three months ended March 31, 2024 compared to the same period in 2023 by market are as follows (in thousands):

Current wording

Net sales for the three months ended June 30, 2024 and 2023 totaled $88,743,000 and $97,725,000, respectively. Included in net sales were tooling project sales of $4,787,000 and $2,022,000 for the three months ended June 30, 2024 and 2023, respectively. Tooling 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 June 30, 2024 were $83,956,000 compared to $95,703,000 for the same period in 2023. The decrease in sales is primarily the result of lower demand across most industries. The Company's product sales for the three months ended June 30, 2024 compared to the same period in 2023 by market are as follows (in thousands):

Previous wording

Gross margin was 17.0% and 17.8% of sales for the three months ended March 31, 2024 and 2023, respectively. Gross margin compared to last year was impacted by increased net changes in selling price and raw material costs of 1.7%, offset by lower fixed cost leverage of 1.7% and operational inefficiencies and product mix of 0.8%.

Current wording

Gross margin was 20.0% and 21.0% of sales for the three months ended June 30, 2024 and 2023, respectively. Gross margin compared to last year was unfavorably impacted by lower fixed cost leverage of 1.2% and operational inefficiencies and product mix of 0.5%, offset by net changes in selling price and raw material costs of 0.7%.

Previous wording

Selling general and administrative expense ("SG&A") was $8,573,000 for the three months ended March 31, 2024, compared to $9,668,000 for the three months ended March 31, 2023. Decreased SG&A expenses resulted primarily from lower bonus of $512,000, favorable foreign currency translation of $210,000 and lower labor and benefits costs of $117,000 .

Current wording

Selling general and administrative expense ("SG&A") was $10,236,000 for the three months ended June 30, 2024, compared to $10,492,000 for the three months ended June 30, 2023. Decreased SG&A expenses resulted primarily from lower bonus and labor and benefits of $650,000, offset by unfavorable foreign currency translation of $478,000.

Previous wording

Net interest expense totaled $82,000 for the three months ended March 31, 2024, compared to $356,000 for the three months ended March 31, 2023. Lower interest expense was primarily due to higher interest income from cash accumulation of $252,000.

Current wording

Net interest income totaled $38,000 for the three months ended June 30, 2024, compared to net interest expense of $293,000 for the three months ended June 30, 2023. Lower net interest expense was primarily due to higher interest income of $340,000 from cash accumulation.

Previous wording

Income tax expense for the three months ended March 31, 2024 is estimated to be $1,029,000, approximately 21.5% of income before income taxes. Income tax expense for the three months ended March 31, 2023 was estimated to be $1,919,000, approximately 24.7% of income before income taxes.

Current wording

Income tax expense for the three months ended June 30, 2024 is estimated to be $1,246,000, approximately 16.3% of income before income taxes. Income tax expense for the three months ended June 30, 2023 was estimated to be $1,893,000, approximately 19.3% of income before income taxes. The company's effective tax rate reflects the effects of taxable income being generated in lower tax rate jurisdictions and Foreign-Derived Intangible Income rate utilization throughout the quarter.

Previous wording

The Company recorded net income for the three months ended March 31, 2024 of $3,759,000 or $0.43 perbasic and diluted share compared with net income of $5,852,000, or $0.69 per basic and $0.66 diluted share, for the three months ended March 31, 2023.

Current wording

The Company recorded net income for the three months ended June 30, 2024 of $6,419,000 or $0.74 perbasic and $0.73 diluted share compared with net income of $7,936,000, or $0.93 per basic and $0.91 diluted share, for the three months ended June 30, 2023.

Previous wording

Comprehensive income totaled $3,465,000 for the three months ended March 31, 2024, compared to comprehensive income of $5,900,000 for the same period ended March 31, 2023. The decrease was primarily related to the decrease in net income of $2,093,000.

Current wording

Comprehensive income totaled $5,388,000 for the three months ended June 30, 2024, compared to comprehensive income of $8,691,000 for the same period ended June 30, 2023. The decrease was primarily related to the decrease in net income of $1,517,000 and decrease in valuation of foreign currency hedging of $1,386,000.

Previous wording

Historically, 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. As of March 31, 2024, the Company had outstanding foreign exchange contracts with notional amounts totaling $5,063,000. As of March 31, 2024, the Company had outstanding interest rate swaps with notional amounts totaling $22,917,000.

Current wording

Historically, 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. As of June 30, 2024, the Company had outstanding foreign exchange contracts with notional amounts totaling $36,759,000. As of June 30, 2024, the Company had outstanding interest rate swaps with notional amounts totaling $22,604,000.

Previous wording

Cash provided by operating activities for the three months ended March 31, 2024 totaled $5,072,000. Net income of $3,759,000 positively impacted operating cash flows. Non-cash deductions of depreciation and amortization, and share-based compensation included in net income amounted to $3,292,000 and $739,000, respectively. Increased working capital decreased cash provided by operating activities by $2,504,000. Higher working capital was primarily related to changes in accrued liabilities and inventory offset by changes in in prepaid assets, accounts receivable and accounts payable.

Current wording

Cash provided by operating activities for the six months ended June 30, 2024 totaled $20,943,000. Net income of $10,178,000 positively impacted operating cash flows. Non-cash deductions of depreciation and amortization, and share-based compensation included in net income amounted to $6,728,000 and $1,505,000, respectively. Decreased working capital increased cash provided by operating activities by $1,897,000.

Previous wording

Cash used in investing activities for the three months ended March 31, 2024 was $1,893,000, which related to purchases of property, plant and equi pment. The Company anticipates spending approximately$13,000,000 during 2024 on property, plant and equipment purchases for all of the Company's operations. At March 31, 2024, purchase commitments for capital expenditures in progress were $2,939,000. The Company anticipates using cash from operations, its available revolving line of credit or its capex line to fund capital investments.

Current wording

Cash used in investing activities for the six months ended June 30, 2024 was $4,805,000, which related to purchases of property, plant and equi pment. The Company anticipates spending approximately$13,000,000 during 2024 on property, plant and equipment purchases for all of the Company's operations. At June 30, 2024, purchase commitments for capital expenditures in progress were $3,550,000. The Company anticipates using cash from operations, its available revolving line of credit or its capex line to fund capital investments.

Previous wording

Cash used for financing activities for the three months ended March 31, 2024 totaled $665,000, which consisted of the purchase of treasury stock of $343,000 in exchange for payment of taxes related to net shares settlements of equity awards and repayments of long-term debt of $322,000.

Current wording

Cash used for financing activities for the six months ended June 30, 2024 totaled $2,455,000, which consisted of the purchase of treasury stock of $1,417,000 in exchange for payment of taxes related to net shares settlements of equity awards, repayments of long-term debt of $645,000 and purchase of treasury stock of $393,000.

Previous wording

At March 31, 2024, the Company had $26,618,000 cash on hand, a $25,000,000 revolving loan facility of which none is outstanding, and a $25,000,000 Capex loan facility with no outstanding balance.

Current wording

At June 30, 2024, the Company had $37,787,000 cash on hand, a $25,000,000 revolving loan facility of which none is outstanding, and a $25,000,000 Capex loan facility with no outstanding balance.

Previous wording

The interest rate for the Huntington Revolving Loan was 7.11% and 7.11% as of March 31, 2024 and December 31, 2023, respectively.

Current wording

The interest rate for the Huntington Revolving Loan was 7.14% and 7.11% as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a Term Loan commitment (the “Huntington Term Loan”) of $25,000,000 ($25,000,000 of which was advanced to the Company on July 22, 2022). The Huntington Term Loan is to be repaid in monthly installments beginning August 2022 of $104,000 per month for the first 24 months, $156,000 per month for the next 24 months, $208,000 for the next 12 months and the remaining balance to be paid on July 22, 2027. The interest rate for the Huntington Term Loan was 7.11% and 7.11% as of March 31, 2024 and December 31, 2023, respectively.

Current wording

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a Term Loan commitment (the “Huntington Term Loan”) of $25,000,000 ($25,000,000 of which was advanced to the Company on July 22, 2022). The Huntington Term Loan is to be repaid in monthly installments beginning August 2022 of $104,000 per month for the first 24 months, $156,000 per month for the next 24 months, $208,000 for the next 12 months and the remaining balance to be paid on July 22, 2027. The interest rate for the Huntington Term Loan was 7.14% and 7.11% as of June 30, 2024 and December 31, 2023, respectively.