Core Molding Technologies Reports First Quarter 2018 Results

May 14 2018

“The Company recorded strong sales growth compared to the same period of last year driven by the first quarter 2018 acquisition of Horizon Plastics International, Inc. (“Horizon Plastics”), increased demand from North American heavy-duty truck customers and higher tooling sales,” said Kevin Barnett, President and Chief Executive Officer. “Net sales, including Horizon Plastics net sales of $14.7 million, increased $26.3 million or 72% compared to the first quarter of 2017. Excluding Horizon Plastics, net sales increased 32%. Supporting our strategic objectives, Horizon Plastics expands our process and material offerings and increases the number of end markets we serve. As a result of the acquisition, for the first time in Core Molding’s history, our non-truck sales represent approximately one-half of our total sales.”

First Quarter 2018 Compared to First Quarter 2017:
•Net sales were $63.0 million compared to $36.7 million.
•Product sales were $59.7 million compared to $36.3 million.
•Gross margin was 12.5% compared to 17.7%.
•Selling, general and administrative expenses were $6.8 million compared to $3.9 million.
•Operating income was $1.1 million compared to $2.6 million.
•Net income was $0.5 million, or $0.07 per diluted share, compared with $1.7 million, or $0.22 per diluted share.

First quarter 2018 gross margin of 12.5% was lower than prior year’s gross margin of 17.7%. The Company continued to see pressure on gross margin, primarily due to higher raw material and labor costs and increased manufacturing inefficiencies. Raw material cost increases have continued across multiple commodities and multiple vendors, driven primarily by underlying cost pressures while labor costs have increased due to tightening labor market conditions. The rapid ramp up in demand by Core Molding’s customers and the launch of multiple new business programs has caused manufacturing inefficiencies, including hiring, training, overtime, contract labor and premium freight costs. Selling, general and administrative expenses increased $2.9 million compared to 2017, primarily due to the Horizon Plastics acquisition. As a result of the acquisition, the Company incurred one-time acquisition transaction costs and will have ongoing operating costs of the new entity along with the amortization costs of the intangible assets acquired.

The one-time acquisition transaction costs negatively impacted net income by $0.9 million ($1.3 million pre-tax), or $0.12 per share. Excluding the one-time costs, the Company’s net income would have been $1.4 million, or $0.19 per share. The Horizon Plastics acquisition, excluding one-time transaction costs, contributed earnings per share for the quarter of $0.07.

Financial Position at March 31, 2018:
•Cash and cash equivalents of $2.6 million.
•Total assets of $195.1 million.
•Total debt of $54.5 million.
•Stockholders’ equity of $104.0 million.

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