Core Molding Technologies, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The company is a single-segment manufacturer of thermoplastic and thermoset structural molded products, serving truck, power sports, building products, industrial and other markets through six facilities in the U.S., Canada and Mexico. The filing also reports fourth-quarter results.
Financial performance
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Net sales | $377.4 million | $307.5 million |
| Gross profit / margin | $52.4 million / 13.9% | $41.3 million / 13.4% |
| Operating income | $18.0 million | $11.1 million |
| Net income | $12.2 million | $4.7 million |
| Diluted EPS | $1.44 | $0.55 |
| Cash from operating activities | $19.0 million | $12.5 million |
| Capital expenditures | $16.6 million | $11.6 million |
Sales rose about 23%, driven principally by truck and power sports demand, new program launches and customer price increases that helped recover raw-material inflation. Product sales increased to $358.7 million; tooling revenue declined to $18.7 million from $23.5 million and is described as sporadic. Truck products represented 45% of product sales.
Gross margin improved 0.5 percentage points: favorable pricing and raw-material changes and improved fixed-cost leverage were partly offset by product mix and production inefficiencies. Operating income included higher SG&A. Net income also reflected $1.6 million of debt-extinguishment losses and a $2.4 million tax benefit from reversing a U.S. federal deferred-tax valuation allowance; the company retained a $1.2 million allowance against certain U.S. state and local deferred tax assets.
Fourth quarter: Sales were $86.4 million versus $73.2 million in Q4 2021; operating income was $3.0 million versus $1.9 million, and net income was $4.8 million versus $0.4 million. Q4 2022 results included $3.3 million of tooling sales.
Cash, debt and liquidity
- Year-end cash was $4.2 million, down from $6.1 million. Operating cash flow of $19.0 million less $16.6 million of capital expenditures was approximately $2.4 million before financing and other items.
- Year-end gross term debt was $24.6 million, plus $1.9 million outstanding on the revolving facility. The company reported $23.0 million of long-term debt on the balance sheet after current maturities and deferred financing costs.
- The July 2022 Huntington refinancing provides up to $75 million across term, revolving and capital-expenditure commitments. At year-end, $23.1 million remained available on the $25 million revolver and the separate $25 million capex facility was undrawn. Term and revolving rates were 6.10% and 6.12%, respectively.
- Debt is secured by substantially all U.S. and Canadian assets and specified equity in Mexican subsidiaries. The company reported compliance with its debt covenants at year-end. A swap hedges the SOFR component on an initial $25 million of term debt through July 2027.
Changes, outlook and key risks
Capital spending increased to $16.6 million, including approximately $8.8 million for capacity expansion and automation. Large compression-press utilization rose to 89% from 85%; large injection-press utilization rose to 79% from 73%. Management expects 2023 capital spending of approximately $13 million.
Management expects 2023 revenue to be flat to slightly higher than 2022. Expected truck growth, the full-year contribution of 2022 program launches and price increases are anticipated to be partly offset by lower building-products sales. Raw-material prices stabilized late in 2022 but are expected to remain elevated versus historical levels; wage rates also remain elevated, with further labor-cost pressure expected. Management will pursue customer price increases where it believes demand will not be materially affected.
- Customer and market concentration: Five customers represented 64% of 2022 sales and 67% of year-end receivables. Truck demand is cyclical and is a major end market.
- Costs and operations: Inflation, raw-material availability, labor shortages, fixed-price customer contracts, production inefficiencies, and new-program launch execution could pressure margins or delivery.
- Financial exposure: Variable-rate borrowing, foreign-exchange movements, and commodity-price changes affect results. The company cautions that covenant noncompliance or weaker-than-forecast sales or expenses could impair liquidity.
- Other risks: Union work stoppages, international operating conditions, environmental and climate-related rules, product liability and warranty claims, cybersecurity incidents, and customer or supplier disruptions. The Escobedo, Mexico labor agreement was under extension negotiation.
- The company reported no material pending legal proceedings, no goodwill or long-lived-asset impairment, and no significant off-balance-sheet arrangements. The auditor issued unqualified opinions on the financial statements and internal control; it reported no critical audit matters.
Important facts for investors to verify
- Whether management’s flat-to-slightly-higher 2023 revenue outlook is being realized, particularly truck growth and the building-products offset.
- How customer concentration, customer production schedules and receivables collection evolve.
- Whether pricing recovers persistent raw-material, labor and logistics costs, and whether production efficiency improves.
- Actual capital spending, utilization, cash generation and borrowing needs; confirm revolver availability, capex-facility drawdowns, interest costs and covenant headroom.
- The sustainability of earnings excluding the refinancing charges and the effect of tax valuation-allowance judgments on reported results.