UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended ...................... December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 001-12505
CORE MOLDING TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1481870
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
800 Manor Park Drive, P.O. Box 28183, Columbus, Ohio 43228 - 0183
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (614) 870-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $.01 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Yes ___ No X
The aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates was $14,668,020 as of June 28, 2002. On such date, the closing price of the registrant's Common Stock, as quoted on the American Stock Exchange, was $1.50. The aggregate market value of the registrant's voting and non-voting common equity held by non-affiliates was $12,712,284 as of March 24, 2003. On such date, the closing price of the registrant's Common Stock, as quoted on the American Stock Exchange, was $1.30. The registrant had 9,778,680 shares of Common Stock outstanding as of March 24, 2003.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Registrant's 2003 definitive Proxy Statement to be filed with the Securities and Exchange Commission no later than 120 days after the end of the registrant's fiscal year are incorporated herein by reference in PART III of this Form 10-K.
PART I
ITEM 1. DEVELOPMENT OF BUSINESS OF CORE MOLDING.
In 1996, RYMAC Mortgage Investment Corporation ("RYMAC") incorporated Core Molding Technologies, Inc. ("Core Molding"), formerly known as Core Materials Corporation before changing its name on August 28, 2002, for the purpose of acquiring the Columbus Plastics unit of International Truck & Engine Corporation ("International"). On December 31, 1996, RYMAC merged with Core Molding with the result being that Core Molding was the surviving entity. Immediately after the merger, Core Molding acquired substantially all the assets and liabilities of Columbus Plastics from International in return for a secured note in an original principal amount of $25,504,000, subject to adjustment, and 4,264,000 shares of newly issued common stock of Core Molding.1 International currently owns 43.6% of the outstanding stock of Core Molding.
In the first quarter of 1998, Core Molding opened a second compression molding plant located in Gaffney, South Carolina as part of the Company's growth strategy to expand its customer base. This facility provided the company with additional capacity and a strategic geographic location to serve both current and prospective customers.
In October 2001, Core Molding incorporated Core Composites Corporation as a wholly owned subsidiary under the laws of the State of Delaware. This entity was established for the purpose of holding and establishing operations for Airshield Corporation's assets, which Core Molding acquired on October 16, 2001 as part of the Company's diversified growth strategy. Airshield Corporation was a privately held manufacturer and marketer of fiberglass reinforced plastic parts primarily for the truck and automotive aftermarket industries. Core Molding purchased substantially all the assets of Airshield Corporation through the United States Bankruptcy Court as Airshield Corporation had been operating under Chapter 11 bankruptcy protection since March 2001.
In conjunction with establishment of operations for the assets acquired from Airshield Corporation, Core Molding also incorporated two corporations in Mexico. In October 2001, Core Molding (5% owner) and Core Composites Corporation (95% owner) incorporated Composites Services de Mexico, S. de R.L. de C.V. ("Composites Services") and Corecomposites de Mexico, S. de R.L. de C.V. ("Corecomposites") in Matamoros, Mexico. Composites Services was established to be the employer of all Mexican national employees for Core Molding's operations in Mexico. Corecomposites was organized to operate under a maquiladora program whereby substantially all product produced is exported back to Core Composites Corporation who sells such product to United States based external customers.
DESCRIPTION OF BUSINESS OF CORE MOLDING
Certain statements under this caption of this Annual Report on Form 10-K constitute "forward-looking statements" which involve certain risks and uncertainties. Core Molding's actual results may differ significantly from those discussed in the forward-looking statements. Factors that may cause such a difference include, but are not limited to: business conditions in the plastics, transportation, recreation and commercial and industrial product industries, the general economy, competitive factors, the dependence on four major customers, the recent efforts of Core Molding to expand its customer base, new technologies, regulatory requirements, labor relations, the loss or inability to attract key personnel, the availability of capital, the start up of new operations in Mexico and management's decisions to pursue new products or businesses which involve additional costs, risks or capital expenditures.
Core Molding Technologies, Inc. and its subsidiaries operate in the plastics market in a family of products known as "reinforced plastics". Reinforced plastics are combinations of resins and reinforcing fibers (typically glass or carbon) that are molded to shape. The Columbus, Ohio and Gaffney, South Carolina facilities produce reinforced plastics by compression molding sheet molding compound (SMC) in a closed mold process. As a result of the acquisition discussed above, in 2001 Core Molding established operations in a Matamoros, Mexico facility, which produces reinforced plastic products by spray-up and hand-lay-up open mold processes and a vacuum assisted resin infused (VRIM) closed mold process.
Reinforced plastics compete largely against metals and have the strength to function well during prolonged use. Management believes that reinforced plastic components offer many advantages over metals, including:
- heat resistance
- corrosion resistance
- lighter weight
- lower cost
- greater flexibility in product design
- part consolidation for multiple piece assemblies
- lower initial tooling costs for lower volume applications
- high strength-to-weight ratio
- dent-resistance in comparison to steel or aluminum.
The largest markets for reinforced plastics are transportation (automotive and truck), recreational vehicles, commercial products and industrial applications. Core Molding's four major customers are International, Yamaha, Lear Corporation ("Lear") and Freightliner, LLC ("Freightliner"), which are supplied proprietary reinforced plastic products for medium and heavy-duty trucks, personal watercraft and automobiles. Core Molding also supplies reinforced plastic products to other truck manufacturers, to automotive manufacturers and to manufacturers of commercial products. In general, product growth and diversification are achieved in several different ways: (1) resourcing of existing reinforced plastic product from another supplier by an original equipment manufacturer ("OEM"); (2) obtaining new reinforced plastic products through a selection process in which an OEM solicits bids; and (3) successful marketing of reinforced plastic products for previously non-reinforced plastic applications. Core Molding's efforts are currently directed towards all three areas.
MAJOR COMPETITORS
Core Molding believes that it is one of the five largest compounders and molders of reinforced plastics using the SMC, spray up, hand lay up and VRIM processes in the United States. Core Molding faces competition from a number of other molders including, most significantly, Meridian Automotive Systems, Budd Plastics Division, Venture Industries, Applied Composites, Molded Fiber Glass Companies, Goldshield, Camoplast and Renee Composites. Core Molding believes that the Company is well positioned to compete based primarily on manufacturing capability, product quality, cost and delivery. However, the industry
remains highly competitive and some of Core Molding's competitors have greater financial resources, research and development facilities, design engineering and manufacturing and marketing capabilities.
MAJOR CUSTOMERS
Core Molding currently has four major customers, International, Yamaha, Lear and Freightliner. The loss of a significant portion of sales to International, Yamaha, Lear or Freightliner would have a material adverse effect on the business of Core Molding.
RELATIONSHIP WITH INTERNATIONAL
As a result of its acquisition of Columbus Plastics from International, Core Molding assumed the long-standing relationship between Columbus Plastics and International's truck manufacturing operations. In 1996, as a condition to the acquisition, International and Core Molding entered into a five year Comprehensive Supply Agreement, pursuant to which Core Molding became the primary supplier of International's original equipment and service requirements for fiberglass reinforced parts using the SMC process, effective through December 31, 2001. This Comprehensive Supply Agreement was not renewed during 2002; however, at the end of 2002, Core Molding and International began negotiations on a new Comprehensive Supply Agreement, which would be retroactive to November 1, 2002. There can be no assurance that such an agreement will ultimately be consummated. After the expiration of the original Comprehensive Supply Agreement, business with International continued on a purchase order basis, like Core Molding operates with all of its other customers. The purchase orders typically provide volume commitments for four weeks at prices previously negotiated. Customers can update their orders on a daily basis for changes in demand that allow them to run their inventories on a "just-in-time" basis.
International manufactures and markets medium and heavy-duty trucks, including school buses, mid-range diesel engines and service parts in North America and in certain export markets. International delivered 81,700 class 5 through 8 trucks, including school buses, in the United States, Mexico and Canada during its fiscal 2002, representing an 11% decrease from the 91,300 units delivered in 2001 and a 31% decrease from the 118,200 units delivered in 2000. International's market share in the combined United States and Canadian class 5 through 8 truck market was 25.8% in 2002, 26.3% in 2001, and 26.9% in 2000.
Core Molding makes products for International's Chatham (Canada) assembly plant, its Springfield, Ohio assembly and body plants, its Garland, Texas assembly facility, its bus facilities in Conway, Arkansas and Tulsa, Oklahoma and its Escobedo, Mexico assembly facility. Core Molding works closely on new product development with International's engineering and research personnel at International's Fort Wayne, Indiana Technical Center. Some of the products sold to International include hoods, air deflectors, air fairings, fenders, splash panels, engine covers and other components.
The North American truck market in which International competes is highly competitive and the demand for trucks is subject to considerable volatility as it moves in response to cycles in the overall business environment and is particularly sensitive to the industrial sector, which generates a significant portion of the freight tonnage hauled. Truck demand also depends on general economic conditions, among other factors. Sales to International amounted to approximately 49%, 56% and 62% of total sales for 2002, 2001 and 2000, respectively.
RELATIONSHIP WITH YAMAHA
Core Molding also assumed from International the long-standing supply relationship between Columbus Plastics and Yamaha. Core Molding has supplied a significant amount of the SMC products for Yamaha's personal watercraft since 1990.
Products produced for Yamaha include decks, hulls, hull liners, engine hatches, bulkheads, reinforcements and SMC compound. Core Molding has worked closely with Yamaha over the years to improve the surface quality of Yamaha products and to identify new process control techniques and improved materials. Demand for products from Yamaha is related to the level of general economic activity and specifically to the cyclical and seasonal nature of the personal watercraft industry among other factors.
Sales to Yamaha amounted to approximately 14%, 18% and 21% of total sales for 2002, 2001 and 2000, respectively.
RELATIONSHIP WITH LEAR
Core Molding began a supply relationship with Lear in mid-2000, with sales to Lear beginning in January 2001. Core Molding supplies seat backs and seat bottoms to Lear, who produces full seat assemblies for an automotive original equipment manufacturer.
Sales to Lear amounted to approximately 12% of total sales for 2002 and 14% of total sales for 2001.
RELATIONSHIP WITH FREIGHTLINER
As a result of the October 2001 acquisition discussed above, Core Molding began a supply relationship with Freightliner. Core Molding produces hoods, air deflectors, air fairings, splash panels and other components for Freightliner who uses such products on its heavy and medium duty trucks.
Sales to Freightliner amounted to approximately 11% of total sales for 2002 and 2% of total sales for 2001.
OTHER CUSTOMERS
Core Molding also produces products for other truck manufacturers, the automotive after-market industries and various other customers. In 2002, sales to these customers individually were all less than 10% of total sales.
EXPORT SALES
Core Molding provides products to International's manufacturing and service locations in Canada and Mexico. Export sales, including sales to Canada, were approximately $13,907,000, $8,472,000 and $14,428,000 for the years ended 2002, 2001 and 2000, respectively. These export sales dollars represent approximately 15%, 12% and 17% of total sales for 2002, 2001 and 2000, respectively.
FOREIGN OPERATIONS
As a result of the acquisition of the establishment of operations in Mexico, Core Molding began importing products into the United States as substantially all product produced in Core Molding's Mexican facility are sold to customers in the United States. The sales of products imported were approximately 22% of total sales in 2002 and approximately 5% of total sales in 2001.
Core Molding owns long-lived assets totaling $298,000 that are located at the Mexican operations.
PRODUCTS
SMC COMPOUND
SMC compound is a combination of resins, fiberglass, catalysts and fillers compounded and cured in sheet form. The sheet is then used to manufacture compression-molded products, as discussed below and on a limited basis sold to other molders.
Core Molding incorporates a sophisticated computer program that assists in the compounding of various complex SMC formulations tailored to customer needs. The system provides for the following:
- Control information during various production processes; and
- Data for statistical batch controls.
Core Molding has the capacity to manufacture approximately 53 million pounds of SMC sheet material annually. The following table shows production of SMC for 2002, 2001 and 2000.
SMC Pounds
Produced
Year (Millions)
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2002..................................... 25
2001 .................................... 25
2000 .................................... 36
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CLOSED MOLDED PRODUCTS
Core Molding produces reinforced plastic products using both compression molding and vacuum resin infusion molding process methods of closed molding.
COMPRESSION MOLDING:
Compression molding is a process whereby SMC is molded to form by matched die steel molds through which a combination of heat and pressure are applied via a molding press. This process produces high quality, dimensionally consistent products. This process is typically used for higher volume products, which is necessary to justify the customers' investment in molds.
Core Molding currently owns or leases 17 compression-molding presses in its Columbus, Ohio plant ranging in size from 500 to 4,500 tons. Core Molding also owns or leases 11 presses in its Gaffney, South Carolina plant ranging in size from 1,000 to 3,000 tons.
Large platen, high tonnage presses (greater than 2,000 tons) provide the ability to compression mold very large SMC parts. Core Molding believes that it possesses a significant portion of the large platen, high tonnage molding capacity in the industry.
To enhance the surface quality and paint finish of products, Core Molding uses both in-mold coating and vacuum molding processes. In-mold coating is a manufacturing process performed by injecting a liquid over the molded part surface and then applying pressure at elevated temperatures during an extended molding cycle. The liquid coating serves to fill and/or bridge surface porosity as well as provide a barrier against solvent penetration during subsequent top-coating operations. Likewise, vacuum molding is the removal of air during the molding cycle for the purpose of reducing the amount of surface porosity. Core Molding believes that it is among the industry leaders in in-mold coating and vacuum molding applications, based on the size and complexity of parts molded.
VACUUM RESIN INFUSION MOLDING (VRIM):
This process employs two molds, typically a core and a cavity, similar to matched die molding. The composite is produced by placing glass mat, chopped strand or continuous strand fiberglass in the mold cavity in the desired pattern. The core mold is then fitted to the cavity, and upon a satisfactory seal, a vacuum is applied. When the proper vacuum is achieved, the resin is injected into the mold to fill the part. Finally, the part is allowed to cure, and then it is removed from the mold and trimmed to shape. Fiberglass reinforced products produced from the VRIM process exhibit a high quality surface on both sides of the part and excellent part thickness.
OPEN MOLDED PRODUCTS
Core Molding produces reinforced plastic products using both the spray up and hand lay up methods of open molding.
HAND LAYUP:
This process utilizes a shell mold, typically the cavity, where glass cloth, either chopped strand or continuous strand glass mat, is introduced into the cavity. Resin is then applied to the cloth and rolled out to achieve a uniform wet-out from the glass and to remove any trapped air. The part is then allowed to cure and removed from the mold. After removal, the part typically undergoes trimming to achieve the net shape desired. Parts that would be cosmetic in their end use would have a gel coat applied to the mold surface prior to the layup to improve the surface quality of the finished part. Parts produced from this process have a smooth outer surface and an unfinished, or non-smooth, interior surface. These fiberglass-reinforced products are typically non-cosmetic components or structural reinforcements that are sold externally or used internally as components of larger assemblies.
SPRAY LAYUP:
This process utilizes the same type of shell mold, but instead of using glass cloth to produce the composite part, a chopper/spray system is employed. Glass yarns and resin feed the chopper/spray gun. The resin coated, chopped glass, which is approximately one inch in length, is sprayed into the mold to the desired thickness. The resin coated glass in the mold is then rolled out to ensure complete wet-out and to remove any trapped air. The part is then allowed to cure, is removed from the mold and is then trimmed to the desired shape. Parts that would be used for cosmetic purposes in their end use would typically have a gel coat applied to the mold surface prior to the resin coated glass being sprayed into the mold to improve the surface quality of the finished part. Parts produced from this process have a smooth outer surface and an unfinished, or non-smooth, interior surface.
Core Molding currently operates ten separate spray-up cells in the Matamoros, Mexico facility that are capable of producing fiberglass-reinforced products with and without gelcoat surfaces. Part sizes weigh from a few pounds to well over a hundred pounds with surface quality tailored for the end use application.
ASSEMBLY, MACHINING AND PAINT PRODUCTS
Many of the products molded by Core Molding are assembled, machined and/or prime painted to result in a completed product used by Core Molding's end-customers.
Core Molding has demonstrated manufacturing flexibility that accepts a range of low volume, hand assembly and machining work to high volume, highly automated assembly and machining systems. Robotics are used as deemed productive for material handling, machining and adhesive applications. In addition to conventional machining methods, water-jet cutting technology is also used where appropriate. Core Molding has a prime paint operation in its Columbus, Ohio facility, which uses an overhead conveyor to transfer product through two paint booths and bake ovens that is used for higher volume applications. The Company also utilizes spot paint booths and batch ovens in its facilities when warranted. Core Molding contracts with outside parties when customers require that a finish of a top coat of paint be provided by Core Molding.
RAW MATERIALS
The principal raw materials used in the compounding of SMC and the closed and open molding processes are polyester resins, fiberglass rovings and filler. Other significant raw materials include adhesives for assembly of molded components and in-mold coating and prime paint for preparation of cosmetic surfaces. Many of the raw materials used by Core Molding are petroleum and energy based, and therefore, the costs of certain raw materials can fluctuate based on changes in costs of these underlying commodities. Core Molding has historically used single source, long-term (2-5 years) supply contracts as a means to attain competitive pricing and an adequate supply of these raw materials. Core Molding has experienced price increases for certain of these materials, which has caused the Company to reevaluate this strategy and consider alternative suppliers. Each raw material generally has supplier alternatives, which are being evaluated as the current contracts expire. Core Molding is regularly evaluating its supplier base for certain supplies, repair items and componentry to improve its overall purchasing position as supply of these items is generally available from multiple sources.
BACKLOG
Core Molding relies on production schedules provided by its customers to plan and implement production. These schedules are typically provided on a weekly basis and are considered firm typically for four weeks. Some customers can update these schedules daily for changes in demand that allow them to run their inventories on a "just-in-time" basis. The ordered backlog was approximately $4.8 million and $5.6 million at December 31, 2002 and 2001, respectively, all of which Core Molding expects to ship within a year.
CAPACITY CONSTRAINTS
In previous years, Core Molding has been required to work an extended shift and day schedule, up to a seven-day/three shift operation, to meet its customers' production requirements. Core Molding has used various methods from overtime to a weekend manpower crew to support the different shift schedules required.
Based on recent production schedules, the Company has not had difficulty in providing various shift schedules necessary to meet customer requirements.
See further discussion of machine and facility capacities at "Item 2 Properties" contained elsewhere in this report.
CAPITAL EXPENDITURES AND RESEARCH AND DEVELOPMENT
Capital expenditures totaled approximately $0.7 million, $1.3 million and $2.0 million for 2002, 2001 and 2000, respectively. Capital expenditures consist primarily of the purchase of production equipment to manufacture parts as well as storage equipment, computers and office furniture and fixtures.
Product development is a continuous process at Core Molding. Research and development activities focus on developing new SMC formulations, new reinforced plastic products and improving existing products and manufacturing processes.
Core Molding does not maintain a separate research and development organization or facility but uses its production equipment, as necessary, to support these efforts and cooperates with its customers and its suppliers in its research and development efforts. Likewise, manpower to direct and advance research and development is integrated with the existing manufacturing, engineering, production, and quality organizations. Management of Core Molding has estimated that internal costs related to research and development activities approximate $270,000 in 2002, $225,000 in 2001 and $250,000 in 2000.
ENVIRONMENTAL COMPLIANCE
Core Molding's manufacturing operations are subject to federal, state and local environmental laws and regulations, which impose limitations on the discharge of pollutants into the air and water and establish standards for the treatment, storage and disposal of hazardous waste. Core Molding's policy is to conduct its business with due regard for the preservation and protection of the environment. Core Molding's environmental waste management involves the regular auditing of all satellite hazardous waste accumulation points, all hazardous waste activities and every authorized treatment, storage and disposal facility. Core Molding's environmental staff also trains employees on waste management and other environmental issues.
Core Molding believes that its facilities are in compliance with the applicable federal, state and local environmental laws and regulations. In January 2003, the Ohio Environmental Protection Agency ("Ohio EPA") denied Core Molding's request to remove a permanent total enclosure, involving Core Molding's Columbus, Ohio, SMC compound production area. Core Molding does not believe that the cost to continue to comply with this request will have a material effect on its operations, competitive position or capital expenditures through fiscal year 2003.
EMPLOYEES
As of December 31, 2002, Core Molding employed a total of 929 employees, which consists of 401 employees in its United States operations and 528 employees in its Mexican operations. Of these 929 employees, 196 are covered by a collective bargaining agreement with the International Association of Machinists and Aerospace Workers ("IAM"), which extends to August 7, 2004, and 464 are covered by a collective bargaining agreement with Sindicato de Jorneleros y Obreros, which extends to January 16, 2005.
PATENTS, TRADE NAMES AND TRADEMARKS
Core Molding will evaluate, apply for and maintain patents, trade names and trademarks where it believes that such patents, trade names and trademarks are reasonably required to protect its rights in its products. Core Molding does not believe that any single patent, trade name or trademark or related group of such rights is materially important to its business or its ability to compete.
SEASONALITY
Core Molding's business is affected annually by the production schedules of its customers. Core Molding's customers typically shut down their operations on an annual basis for a period of several weeks during Core Molding's third. As a result, demand for Core Molding's products drops significantly during the third quarter. Similarly, demand for medium and heavy-duty trucks, personal watercraft, and automotive products fluctuate on a cyclical and seasonal basis, causing a corresponding fluctuation for demand of Core Molding's products. These customers also typically shut down their operations during the last week of December, as well.
ITEM 2. PROPERTIES.
Core Molding owns two production plants in the United States that are situated, respectively, in Columbus, Ohio and in Gaffney, South Carolina. Core Molding believes that, through productive use, these facilities have adequate production capacity to meet current production volume. The approximate capacity utilization for the molding of production products in the Core Molding's United States production facilities was 28%, 26%, and 41% in the fourth quarter of 2002, 2001 and 2000, respectively. Capacity utilization is measured on the basis of a six day, three-shifts per day operation.
The Columbus, Ohio plant is located at 800 Manor Park Drive on approximately 28.2 acres of land. The approximate 323,596 square feet of available floor space at the Columbus, Ohio plant is comprised of the following:
Approximate
Square Feet
Manufacturing/Warehouse.................... 307,447
Office .................................. 16,149
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323,596
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Core Molding acquired the property at 800 Manor Park Drive as a result of the Asset Purchase Agreement with International.
The Gaffney, South Carolina plant, which was opened in early 1998, is located at 24 Commerce Drive, Meadow Creek Industrial Park on approximately 20.7 acres of land. The approximate 110,900 square feet of available floor space at the Gaffney, South Carolina plant is comprised of the following:
Approximate
Square Feet
Manufacturing/Warehouse.................... 105,700
Office .................................. 5,200
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110,900
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The Columbus, Ohio and Gaffney, South Carolina properties are subject to liens and security interests as a result of the properties being pledged by Core Molding as collateral for its debt as described in Note 6 of the "Notes to Consolidated Financial Statements" in Part II, Item 8 of this Form 10-K.
In conjunction with the establishment of operations in Mexico, as discussed above, the Company leases a production plant in Matamoros, Mexico, located at Ave. Uniones Y Michigan, Matamoros, Tamps. Mexico. The term of the lease is ten years, with an option to renew for an additional ten years and with an option to buy the facility at any time within the first seven years of the lease. The lease is cancelable by Core Molding with six months notice. The facility consists of approximately 313,000 square feet on approximately 12 acres. Core Molding's Mexican operation leases approximately 267,700 of the facility, with an option to lease additional space, as follows:
Approximate
Square Feet
Manufacturing/Warehouse.................... 264,100
Office .................................. 3,600
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267,700
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The capacity of production in this facility is not linked directly to equipment capacities, as in Core Molding's other facilities, due to the nature of the products produced. Capacity of the facility is tied to available floor space and the availability of personnel. The approximate capacity utilization for this operation was 63% and 50% in the fourth quarter of 2002 and 2001, respectively. Capacity utilization for the Matamoros' operation is measured on the basis of a five day, two 9.6-hour shifts per day.
ITEM 3. LEGAL PROCEEDINGS.
In late 2001 and 2002, several lawsuits were filed in Mexico against Airshield de Mexico, which is a Mexican subsidiary of Airshield Corporation. As noted above, Core Molding acquired substantially all the assets of Airshield Corporation in October 2001; however, Core Molding did not purchase the assets or the stock of Airshield de Mexico. The lawsuits were filed by certain of Airshield de Mexico's vendors as a result of unpaid debts of Airshield de Mexico. Through these lawsuits, the vendors have attempted to foreclose on inventory and equipment owned by Core Molding and located at its Mexico facility. The total value of these assets at December 31, 2002, was $1,097,000. To date, Core Molding has been successful in preventing these foreclosure attempts. Core Molding is taking various actions through the Mexican legal system to defend its assets and to prevent future claims. Core Molding's Mexican legal counsel has advised the Company that it has valid legal position to support the ownership of these assets; however, as with any case involving litigation, the outcome of these claims is uncertain.
In July of 2001, a former employee of Core Molding filed a suit in United States District Court, Southern District of Ohio, Eastern Division, claiming her employment was terminated in 1999 as a result of race discrimination. In December of 2002, the two parties settled this suit outside of court. The result of the settlement did not have a material impact on the financial results of Core Molding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Core Molding submitted no matters to a vote of its security holders during the fourth quarter of its fiscal year ended December 31, 2002.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is traded on the American Stock Exchange under the symbol "CMT".
The table below sets forth the high and low sale prices of Core Molding for each full quarterly period within the two most recent fiscal years for which such stock was traded, as reported on the American Stock Exchange Composite Tape.
High Low
---- ---
CORE MOLDING TECHNOLOGIES, INC.
First Quarter 2002 1.79 1.03
Second Quarter 2002 2.35 1.20
Third Quarter 2002 1.55 1.00
Fourth Quarter 2002 1.50 0.90
First Quarter 2001 1.56 0.68
Second Quarter 2001 1.95 0.65
Third Quarter 2001 1.89 0.80
Fourth Quarter 2001 1.90 0.76
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The Company's common stock was held by 564 holders of record on March 24, 2003.
Core Molding made no payments of cash dividends during 2002 and 2001. Core Molding currently expects that its earnings will be retained to finance the growth and development of its business and does not anticipate paying dividends on its common stock in the foreseeable future.
Moreover, Core Molding has agreed to prohibitions on its ability to pay dividends as a result of restrictive covenants contained in the Secured Note due International. Such prohibitions apply so long as Core Molding owes any amounts under the Secured Note to International. The prohibitions are discussed further in Note 6 of the "Notes to Consolidated Financial Statements" in Part II, Item 8 of this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data are derived from the audited consolidated financial statements of Core Molding Technologies, Inc. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," the financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
YEARS ENDED DECEMBER 31,
(IN THOUSANDS,
EXCEPT PER SHARE DATA) 2002 2001 2000 1999 1998
--------------------------------- ----------- --------- ---------- ---------- ------------
Net sales $94,089 $73,180 $84,892 $93,232 $78,407
Gross margin 13,819 7,859 11,915 10,863 15,488
Income/(loss) before interest 5,083 (108) 2,862 1,720 7,659
and taxes
Net income/(loss) 2,006 (1,860) 715 71 3,652
Net income/(loss) per common
share: .21 (.19) .07 .01 .38
Basic .21 (.19) .07 .01 .37
Diluted
Total assets 64,384 61,307 62,785 67,982 65,328
Long term debt 23,764 26,015 26,370 26,700 27,005
Stockholders' equity 19,274 17,536 19,638 18,923 18,852
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Certain statements under this caption of this Annual Report on Form 10-K constitute "forward-looking statements" which involve certain risks and uncertainties. Core Molding's actual results may differ significantly from those discussed in the forward-looking statements. Factors that may cause such a difference include, but are not limited to: business conditions in the plastics, transportation, recreation and commercial and industrial product industries, the general economy, competitive factors, the dependence on four major customers, the recent efforts of Core Molding to expand its customer base, new technologies, regulatory requirements, labor relations, the loss or inability to attract key personnel, the availability of capital, the start up of new operations in Mexico and management's decisions to pursue new products or businesses which involve additional costs, risks or capital expenditures.
OVERVIEW
Core Molding has historically been a compounder and compression molder of sheet molding composites (SMC) fiberglass reinforced plastic products. In October 2001, Core Molding acquired certain assets of Airshield Corporation; see Note 3 of notes to the financial statements. As a result of this acquisition, Core Molding expanded its fiberglass molding capabilities to include the spray up, hand lay up and vacuum assisted resin infusion molding processes. The acquisition was accounted for under the purchase accounting method and accordingly the effects of the acquisition are included in the results of operations and financial condition of Core Molding from the date of the acquisition and forward. All references to Core Molding herein refer to the consolidated operations of Core Molding and its subsidiaries unless noted otherwise. Core Molding produces and sells, both SMC compound and molded products for varied markets, including the automotive and trucking industries, recreational vehicles and commercial and industrial products. Core Molding presently has four major customers, International Truck and Engine Corporation ("International"), Yamaha Motor Manufacturing Corporation ("Yamaha"), Lear Corporation ("Lear") and Freightliner LLC ("Freightliner"), which account for approximately 87% of the Company's sales in 2002 and 90% in 2001. The demand for Core Molding's products is affected by the volume of purchases from its customers, whose orders are primarily affected by economic conditions in the United States and Canada. Core Molding's manufacturing operations have a significant fixed cost component. Accordingly, during periods of changing demands, the profitability of Core Molding's operations may change proportionately more than revenues from operations.
On December 31, 1996, Core Molding acquired substantially all of the assets and assumed certain liabilities of Columbus Plastics, a wholly owned operating unit of International's truck manufacturing division since its formation in late 1980. At the time of the acquisition of Columbus Plastics, International and Core Molding entered into a Comprehensive Supply Agreement, which expired on December 31, 2001. Under the terms of the Comprehensive Supply Agreement, Core Molding became the primary supplier of International's original equipment and service requirements for fiberglass reinforced parts using the SMC process. This Comprehensive Supply Agreement was not renewed during 2002; however, at the end of 2002, Core Molding and International began negotiations on a new Comprehensive Supply Agreement, which would be retroactive to November 1, 2002. There can be no assurance that such an agreement will ultimately be consummated. After the expiration of the original Comprehensive Supply Agreement, business with International continued on a purchase order basis, like Core Molding operates with all of its other customers. The purchase orders typically provide volume commitments for four weeks at prices previously negotiated. Customers can update their orders on a daily basis for changes in demand that allow them to run their inventories on a "just-in-time" basis.
RESULTS OF OPERATIONS
2002 COMPARED WITH 2001
Net sales for 2002 totaled $94,089,000, an approximate 29% increase from the $73,180,000 reported for 2001. Included in total sales are tooling project revenues of $12,783,000 for 2002 and $4,816,000 for 2001. Tooling project revenues are sporadic in nature and do not represent a recurring trend. Sales to International totaled $45,823,000, an approximate 12% increase from the 2001 amount of $40,765,000. The primary reason for the increase was due to additional business with International that was obtained as a result of the October 2001 acquisition, noted above. Sales to Yamaha in 2002 amounted to $13,291,000, which was slightly higher than the $13,160,000 in 2001. Sales to Lear for 2002 totaled $11,716,000, an approximate 14% increase from the 2001 amount of $10,246,000. The primary reason for the increase was due to the completion of tooling projects for new business that Core Molding has acquired from Lear. This increase was partially offset by reductions in selling prices on current products being manufactured for Lear. Sales to Freightliner, which began as a result of the
acquisition noted above, totaled $10,691,000 for 2002. In 2001, sales to Freightliner amounted to $1,598,000 due to the acquisition, as noted above, occurring in October 2001. Products sold to Freightliner include hoods, air deflectors, air fairings, splash panels and other components for the production of its heavy and medium duty trucks.
Sales to other customers increased approximately 70% to $12,566,000 from $7,410,000 in 2001. This increase was primarily the result of new business with Paccar. Sales to Paccar amounted to $5,689,000. Sales to Paccar were generated primarily from the completion of tooling projects for new business that the Company has acquired. Also adding to the increase were sales of $2,559,000 to various customers acquired in the October 2001 acquisition, noted above. Partially offsetting the gain was the Company discontinuing its business relationship with Case/New Holland. Sales to Case/New Holland were $3,188,000 for the year ending December 31, 2001.
Gross Margin was 14.7% of sales in 2002 compared to 10.7% of sales in 2001. The increase in gross margin was primarily due to a combination of many factors including improvements in material costs, labor efficiency, reduced energy costs and repairs and maintenance costs at the Company's Columbus, Ohio facility. This increase in gross margin was partially offset by reduced margins at the Company's Gaffney, South Carolina facility primarily due to selling price reductions to Lear Corporation, as noted above, and operating inefficiencies that were experienced throughout the year. Gross margins from the newly established operations resulting from the acquisition noted above were generally in line with Core Molding's historical business.
Selling, general and administrative expenses totaled $9,237,000 in 2002, which was greater than the $7,967,000 incurred in 2001. The increase from 2001 was primarily due to the additional costs added as a result of the acquisition of the Mexican operation.
Other income totaled $500,000 for the year ending December 31, 2002. This income was earned from the sale of Core Molding's stock ticker symbol ("CME") to another corporation.
Interest expense totaled $2,025,000 for 2002 increasing slightly from $1,999,000 in 2001. Interest rates experienced by the Company with respect to the industrial revenue bond were favorable; however, due to the interest rate swap the Company entered into, the interest rate is essentially fixed for this debt instrument. Interest income totaled $133,000 for 2002, decreasing from $305,000 for 2001 primarily due to a decrease in the interest rate earned on investments.
Income tax expense for 2002 was approximately 37% of total income before taxes. Actual tax payments will be lower than the recorded expenses as the Company has substantial federal tax loss carryforwards. These loss carryforwards were recorded as a deferred tax asset. As the tax loss carryforwards are utilized to offset federal income tax payments, Core Molding reduces the deferred tax asset as opposed to recording a reduction in income tax expense.
Net income for 2002 was $2,006,000 or $.21 per basic and diluted share, representing an increase of $3,867,000 over the 2001 net loss of ($1,860,000) or ($.19) per basic and diluted share.
2001 COMPARED WITH 2000
Net sales for 2001 totaled $73,180,000, down approximately 14% from the $84,892,000 reported for 2000. Included in total sales are tooling project revenues of $4,816,000 for 2001 and $1,347,000 for 2000. Tooling project revenues are sporadic in nature and do not represent a recurring trend. Sales to International totaled $40,765,000, an approximate 22% decrease from the 2000 amount of $52,276,000. The primary reason for the decrease was lower demand from International resulting from an industry wide general decline in truck orders due to the soft general economy during 2001. Sales to Yamaha of components for personal watercraft decreased in 2001 by 27% to $13,160,000 compared with $18,061,000 in 2000. The decrease in sales to Yamaha is primarily due to the negative impact general economic conditions have had on the demand for personal watercraft. Sales to Lear for 2001 totaled $10,246,000. The Lear product consists of components that Lear assembles into seat bottoms and backs for a sports utility/pick-up truck recently introduced by an automotive original equipment manufacturer. Core Molding began selling these products in the first quarter of 2001. Sales to Freightliner, as a result of the acquisition noted above, for 2001 totaled $1,598,000. Products sold to Freightliner include hoods, air deflectors, air fairings, splash panels and other components for the production of its heavy and medium duty trucks.
Sales to other customers decreased approximately 49% to $7,410,000 from $14,555,000 in 2000. This decrease was primarily the result of decreased sales to Case/New Holland of $5,613,000 as a result of Case/New Holland moving production of
their products to another supplier in May 2001. Also adding to the decrease was the discontinuance of the Company's business relationship with Caradon Doors and Windows, Peachtree Division, in July 2000. Sales to Peachtree totaled $1,271,000 in 2000. Offsetting a portion of the decrease were sales brought on from the acquisition noted above to other various customers of $600,000 from the acquisition date through the end of the year.
Gross Margin was 10.7% of sales in 2001 compared to 14.0% of sales in 2000. The decrease in gross margin was primarily due to fixed costs associated with excess capacity, production inefficiencies associated with reduced order flow, and new product start-ups, mostly affecting the Columbus plant. However, improved productivity and a better product mix resulted in gross margin improvement in the Gaffney plant compared to last year. The Company also experienced increasing employee benefit costs, mainly due to an increase in employee health insurance costs. Gross margins from the newly established operations resulting from the acquisition noted above were in line with the Company's other operations.
Selling, general and administrative expenses totaled $7,967,000 in 2001, which was less than the $9,053,000 incurred in 2000. The year 2001 saw a reduction of the salary workforce in the Columbus and Gaffney facilities resulting in a $222,000 cost savings; however, increasing benefit costs, mainly due to employee health care costs, partially offset this. The Company also implemented a cost containment plan that resulted in total cost reductions of $990,000 in the areas of supplies, outside and professional services, travel and other miscellaneous expenses.
Interest expense totaled $1,999,000 for 2001 increasing slightly from $1,970,000 in 2000. The increase in interest expense from 2000 was primarily the result of a decrease in interest capitalized on capital projects due to lower capital expenditures.
Tax expense for 2001 was approximately 3% of total loss before taxes. Income tax expense primarily consists of $646,000 of expense related to Core Molding increasing the valuation allowance for its net operating loss carryforwards primarily offset by the tax benefit of the current year's operating loss.
Net loss for 2001 was $(1,860,000) or $(.19) per basic and diluted share, representing a decrease of $2,575,000 over the 2000 net income of $715,000 or $.07 per basic and diluted share.
LIQUIDITY AND CAPITAL RESOURCES
Core Molding's primary cash requirements are for operating expenses and capital expenditures. These cash requirements have historically been met through a combination of cash flow from operations, equipment leasing, issuance of Industrial Revenue Bonds and bank lines of credit.
Cash provided by operations in 2002 totaled $5,988,000. Net income provided $2,006,000 of operating cash flows. Non-cash deductions of depreciation and amortization added $2,089,000 of positive cash flow. An increase in accounts payable contributed $1,358,000 to operating cash flows due to timing differences. A decrease in deferred income taxes also had a positive effect on cash flow of $1,014,000, which is a result of Core Molding's net operating loss carryforwards reducing current year tax obligations. In addition, the increase in the postretirement benefits liability of $951,000 also provided positive cash flow. Core Molding expects this item to provide positive cash flow until such time that retirees begin to utilize their retirement medical benefits. Partially offsetting the above mentioned increases in operating cash flow was a decrease in other accrued liabilities of $568,000 due to the settlement of various liabilities that were assumed as part of the Airshield acquisition. Also decreasing operating cash flow was an increase of inventory of $532,000. This was primarily due to inventory levels at Core Molding's Gaffney, South Carolina facility adjusting for new business that began late in 2001. An increase in prepaid expenses and other current assets decreased operating cash flow by $514,000 primarily due to recoverable taxes related to the Mexican operation.
Investing activities increased cash flows by $149,000 in 2002. Proceeds from maturities on the Company's mortgage-backed security investment were $829,000 in 2002. Core Molding has an outstanding balance of $95,000 in this investment. Capital expenditures totaled $681,000, which was primarily related to the acquisition of machinery and equipment. At December 31, 2002, commitments for capital expenditures in progress were $107,435. Capital expenditures for 2003 are expected to be $2,166,000.
Financing activities reduced cash flows by $355,000 for the principal repayment on the Industrial Revenue Bond, which was issued in 1998. Principal payments on the Industrial Revenue Bond increase each year through the maturity date, which is April 2013.
At December 31, 2002, Core Molding had cash on hand of $8,976,000 and an available line of credit of $7,500,000, which is scheduled to mature on April 30, 2004. As of December 31, 2002, Core Molding was in compliance of all three of its financial debt covenants for the Line of Credit and letter of credit securing the industrial revenue bond and certain equipment leases. The covenants relate to maintaining certain financial ratios. Management expects the Company to meet these covenants for the year 2003. However, if a material adverse change in the financial position of the Company should occur, the Company's liquidity and ability to obtain further financing to fund future operating and capital requirements could be negatively impacted. Because the Company was in compliance of all three of its debt covenants; had a cash balance in excess of $3,000,000; and had no outstanding balance on the revolving line of credit, a principal payment in the amount of $1,861,000, which is classified as a current portion of long term debt on the Company's balance sheet, has been be made to International on March 21, 2003.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to accounts receivable, inventories, post retirement benefits, and income taxes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.
Accounts receivable allowances:
Management maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company had recorded an allowance for doubtful accounts of $543,000 at December 31, 2002 and $715,000 at December 31, 2001. Management also records estimates for customer returns, discounts offered to customers, and for price adjustments. Should customer returns, discounts, and price adjustments fluctuate from the estimated amounts, additional allowances may be required. The Company had recorded an allowance for chargebacks of $473,000 at December 31, 2002 and $383,000 at December 31, 2001.
Inventories:
Management identifies slow moving or obsolete inventories and estimates appropriate loss provisions related to these inventories. Historically, these loss provisions have not been significant. Should actual results differ from these estimates, additional provisions may be required. The Company had recorded an allowance for slow moving and obsolete inventory of $278,000 at December 31, 2002 and $171,000 at December 31, 2001.
Goodwill and Long-Lived Assets
Management evaluates whether impairment exists for goodwill and long-lived assets. Should actual results differ from the assumptions used to determine impairment, additional provisions may be required. In particular, decreases in future cash flows from operations below the assumptions could have an adverse affect on the company's operations. The Company has not recorded any impairment to goodwill or long-lived assets for the years ended December 31, 2002 and 2001.
Post retirement benefits:
Management records an accrual for post retirement costs associated with the Company sponsored health care plan. Should actual results differ from the assumptions used to determine the reserves, additional provisions may be required. In particular, increases in future healthcare costs above the assumptions could have an adverse affect on the Company's operations. The Company had recorded a liability for post retirement medical benefits based on actuarially computed estimates of $5,718,000 at December 31, 2002 and $4,767,000 at December 31, 2001.
Income taxes:
Management records a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. The Company has considered future taxable income in assessing the need for the valuation allowance and recorded a valuation allowance. The valuation reserve will be adjusted as the Company determines the actual amount of deferred tax assets that will be realized. The Company had recorded a valuation allowance of $1,425,000 at December 31, 2002 and December 31, 2001.
INCOME TAXES
The balance sheet at December 31, 2002 and 2001 includes a deferred tax asset of $11,897,000 and $12,773,000, net of a valuation allowance of $1,425,000 in 2002 and 2001. The deferred tax asset is net of a valuation allowance since it is more likely than not that a portion of the deferred tax asset may not be realized in the future.
The deferred tax asset at December 31, 2002, primarily includes the tax benefits associated with cumulative net operating losses of approximately $17,015,000, temporary differences between the book and tax basis of Core Molding's property and equipment of approximately $9,194,000 and temporary differences relating to post-retirement and pension benefits of $7,670,000. The valuation allowance at December 31, 2002, assumes that it is more likely than not that approximately $4,200,000 of the cumulative net operating losses will not be realized before their expiration date. Taxable income/(loss) for 2002 and 2001 was approximately $3,190,000 and ($1,846,000), respectively.
Extensive analysis is performed to determine the amount of the deferred tax asset. Such analysis is based upon the premise that Core Molding is and will continue as a going concern and that it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. Management reviews all available evidence, both positive and negative, to assess the long-term earnings potential of Core Molding using a number of alternatives to evaluate financial results in economic cycles at various industry volume conditions. Other factors considered are the Company's long-standing relationship with its two largest customers (International and Yamaha) and Core Molding's recent customer diversification efforts. The projected availability of taxable income to realize the tax benefits from net operating loss carryforwards and the reversal of temporary differences before expiration of these benefits are also considered. Management believes that, with the combination of available tax planning strategies and the maintenance of its relationships with its key customers, earnings are achievable in order to realize the net deferred tax asset of $11,897,000.
INFLATION
Inflation generally affects Core Molding by increasing the cost of labor, equipment and raw materials. Management believes that, because rates of inflation have been moderate during the periods presented, inflation has not had a significant impact on our results of operations.
RECENT ACCOUNTING PRONOUNCEMENTS
On June 29, 2001, the FASB issued SFAS No.142, "Goodwill and Other Intangible Assets". This statement applies to intangibles and goodwill acquired after June 30, 2001, as well as goodwill and intangibles previously acquired. Under this statement goodwill as well as other intangibles determined to have an infinite life will no longer be amortized; however these assets will be reviewed for impairment on a periodic basis. Due to the adoption of SFAS No. 142 on January 1, 2002, the Company does not amortize goodwill. The total net book value of goodwill at December 31, 2002 and 2001 was $1,097,433. The adoption of SFAS No. 142 did not have an impact on the financial statements of the Company.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Because
SFAS No. 121 did not address the accounting for a segment of a business accounted for as a discontinued operation under Opinion 30, two accounting models existed for long-lived assets to be disposed of. The Board decided to establish a single accounting model, based on the framework established in Statement 121, for long-lived assets to be disposed of by sale. The Company adopted SFAS No. 144 on January 1, 2002, and it did not have a material impact on the Company's financial position, results of operations, or cash flows.
As previously reported, FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections" in April 2002. It is effective for the first quarter in the year ended December 31, 2003. The Company does not believe the adoption of SFAS No. 145 will have a significant impact on its consolidated financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities included in restructurings. This Statement eliminates the definition and requirements for recognition of exit costs as defined in EITF Issue 94-3, and requires that liabilities for exit activities be recognized when incurred instead of at the exit activity commitment date. This Statement is effective for exit or disposal activities initiated after December 31, 2002. The Company is currently analyzing the impact of this statement and does not believe it will have a material impact on its consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Core Molding's primary market risk results from fluctuations in interest rates. Core Molding is also exposed to changes in the price of commodities used in its manufacturing operations. The Company does not hold any material market risk sensitive instruments for trading purposes.
Core Molding has the following four items that are sensitive to a change in interest rates: (1) Long-term debt consisting of an Industrial Revenue Bond ("IRB") with a balance at December 31, 2002, of $6,095,000. Interest is variable and is computed weekly. The average interest rate charged for 2002 was 1.7% and the maximum interest rate that may be charged at any time over the life of the IRB is 10%. In order to minimize the effect of the interest rate fluctuation, Core Molding has entered an interest swap arrangement under which Core Molding pays a fixed rate of 4.89% to a bank and receives 76% of the 30-day commercial paper rate; (2) Long-term Secured Note Payable with a balance as of December 31, 2002 of $19,920,000 at a fixed interest rate of 8%; (3) Revolving line of credit, which bears interest at LIBOR plus three and one-quarter percent or the prime rate; and (4) Foreign currency purchases in which Core Molding purchases Mexican pesos with United States dollars to meet certain obligations that arise due to the facility located in Mexico.
Assuming a hypothetical 20% change in short-term interest rates in both 2002 and 2001, interest expense would not change significantly, as the interest rate swap agreement would generally offset the impact.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
Core Molding Technologies, Inc. and Subsidiaries Columbus, Ohio
We have audited the accompanying consolidated balance sheets of Core Molding Technologies, Inc. (formerly Core Materials Corporation) and Subsidiaries (the "Company") as of December 31, 2002 and 2001, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2002. Our audits also included the consolidated financial statement schedules listed in the Index at Item 15. These consolidated financial statements and the consolidated financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and the consolidated financial statement schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Core Molding Technologies, Inc. and its subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP ------------------------- DELOITTE & TOUCHE LLP Columbus, Ohio March 7, 2003 |
SECTION 302 CERTIFICATION
I, James L. Simonton, certify that:
1. I have reviewed this annual report on Form 10-K of Core Molding Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 31, 2003
/s/ James L. Simonton
------------------------------
James L. Simonton
President, Chief Executive Officer and Director
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SECTION 302 CERTIFICATION
I, Herman F. Dick, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Core Molding Technologies, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: March 31, 2003
/s/ Herman F. Dick, Jr.
------------------------------
Herman F. Dick, Jr.
Treasurer and Chief Financial Officer
|
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2002,
2001 AND 2000
YEAR ENDED DECEMBER 31,
2002 2001 2000
------------ ------------ ------------
NET SALES:
International $ 45,823,311 $ 40,765,466 $ 52,275,698
Yamaha 13,291,332 13,160,114 18,061,407
Lear 11,716,455 10,246,079 --
Freightliner 10,691,302 1,598,311 --
Other 12,566,450 7,409,561 14,554,658
------------ ------------ ------------
TOTAL SALES 94,088,850 73,179,531 84,891,763
Cost of sales 79,022,177 64,243,230 71,827,602
Postretirement benefits expense 1,247,182 1,077,547 1,148,822
------------ ------------ ------------
TOTAL COST OF SALES 80,269,359 65,320,777 72,976,424
------------ ------------ ------------
GROSS MARGIN 13,819,491 7,858,754 11,915,339
------------ ------------ ------------
Selling, general and administrative expense 8,877,853 7,703,310 8,854,633
Postretirement benefits expense 358,955 263,454 198,857
------------ ------------ ------------
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSE 9,236,808 7,966,764 9,053,490
------------ ------------ ------------
OTHER INCOME 500,000 -- --
------------ ------------ ------------
INCOME/(LOSS) BEFORE INTEREST AND TAXES 5,082,683 (108,010) 2,861,849
Interest income 132,922 305,453 339,512
Interest expense (2,025,187) (1,999,159) (1,970,378)
------------ ------------ ------------
INCOME/(LOSS) BEFORE INCOME TAXES 3,190,418 (1,801,716) 1,230,983
Income taxes:
Current 170,457 30,367 231,051
Deferred 1,013,538 28,058 284,581
------------ ------------ ------------
TOTAL INCOME TAXES 1,183,995 58,425 515,632
------------ ------------ ------------
NET INCOME/(LOSS) $ 2,006,423 $ (1,860,141) $ 715,351
============ ============ ============
NET INCOME/(LOSS) PER COMMON SHARE:
BASIC AND DILUTED $ 0.21 $ (0.19) $ 0.07
============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC AND DILUTED 9,778,680 9,778,680 9,778,680
============ ============ ============
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See notes to consolidated financial statements.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
2002 2001
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 8,976,059 $ 3,194,156
Accounts receivable (less allowance for doubtful accounts:
2002 - $543,000 and 2001 - $715,000) 11,281,060 11,946,137
Inventories:
Finished and work in process goods 2,391,077 1,679,745
Stores 2,042,535 2,222,250
------------ ------------
Total inventories 4,433,612 3,901,995
Deferred tax asset 1,151,158 1,079,995
Prepaid expenses and other current assets 2,218,900 1,704,262
------------ ------------
Total current assets 28,060,789 21,826,545
Property, plant and equipment 43,001,396 42,759,871
Accumulated depreciation (18,970,136) (17,398,659)
------------ ------------
Property, plant and equipment - net 24,031,260 25,361,212
Deferred tax asset - net 10,746,223 11,692,678
Mortgage-backed security investment 94,589 924,041
Goodwill 1,097,433 1,097,433
Other assets 353,419 405,356
------------ ------------
TOTAL $ 64,383,713 $ 61,307,265
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Current liabilities:
Current portion long-term debt $ 2,251,000 $ 355,000
Accounts payable 5,114,655 3,756,735
Accrued liabilities:
Compensation and related benefits 2,706,272 3,379,217
Interest 92,844 85,939
Taxes 819,621 636,934
Current portion graduated lease payments 188,219 13,241
Professional fees 300,796 417,487
Other accrued liabilities 677,647 848,826
------------ ------------
Total current liabilities 12,151,054 9,493,379
Long-term debt 23,764,150 26,015,150
Interest rate swap 773,434 366,826
Graduated lease payments 903,835 876,026
Deferred long-term gain 1,555,162 2,008,716
Postretirement benefits liability 5,961,915 5,011,067
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $0.01 par value, authorized shares - 20,000,000;
outstanding shares: 2002 and 2001 - 9,778,680 97,787 97,787
Paid-in capital 19,251,392 19,251,392
Accumulated other comprehensive loss, net of income tax benefit (510,466) (242,105)
Retained earnings (accumulated deficit) 435,450 (1,570,973)
------------ ------------
Total stockholders' equity 19,274,163 17,536,101
------------ ------------
TOTAL $ 64,383,713 $ 61,307,265
============ ============
|
See notes to consolidated financial statements
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ACCUMULATED
COMMON STOCK RETAINED OTHER TOTAL
OUTSTANDING PAID-IN EARNINGS COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) LOSS EQUITY
----------- ---------- -------------- ------------ ---------------- --------------
BALANCE AT JANUARY 1, 2000 9,778,680 $97,787 $ 19,251,392 $ (426,183) $ - $ 18,922,996
Net Income 715,351 715,351
----------- ---------- -------------- ------------ ---------------- --------------
BALANCE AT DECEMBER 31, 2000 9,778,680 97,787 19,251,392 289,168 - 19,638,347
Net loss (1,860,141) (1,860,141)
To record the initial fair market (104,762) (104,762)
value of the interest rate swap, net
of deferred income tax benefit of
$53,968
Hedge accounting effect of the (137,343) (137,343)
interest rate swap at December 31,
2001, net of deferred tax benefit of
$70,753
----------- ---------- -------------- ------------ ---------------- --------------
BALANCE AT DECEMBER 31, 2001 9,778,680 97,787 19,251,392 (1,570,973) (242,105) 17,536,101
Net Income 2,006,423 2,006,423
Hedge accounting effect of the (268,361) (268,361)
interest rate swap at December 31,
2002, net of deferred tax benefit of
$138,247
----------- ---------- -------------- ------------ ---------------- --------------
BALANCE AT DECEMBER 31, 2002 9,778,680 $ 97,787 $ 19,251,392 $ 435,450 $ (510,466) $ 19,274,163
=========== ========== ============== ============ ================ ==============
|
See notes to consolidated financial statements.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------------------------
2002 2001 2000
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 2,006,423 $(1,860,141) $ 715,351
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
Depreciation and amortization 2,088,591 2,039,732 2,121,221
Deferred income taxes 1,013,538 28,058 284,581
Loss/(gain) on disposal of assets 22,794 42,458 (11,376)
Amortization of gain on sale/leaseback transactions (453,554) (453,555) (453,555)
Loss/(gain) on translation of foreign currency financial
statements (48,622) 9,598 --
Change in operating assets and liabilities:
Accounts receivable 665,077 3,312,104 6,493,234
Inventories (531,617) 135,019 1,798,459
Prepaid expenses and other assets (514,638) 805,850 (2,225,985)
Accounts payable 1,357,920 (1,509,283) (5,801,650)
Accrued and other liabilities (568,436) 91,589 (74,549)
Postretirement benefits liability 950,848 718,247 721,981
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,988,324 3,359,676 3,567,712
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (680,873) (1,301,432) (1,977,722)
Acquisition of Airshield assets (1,953,000)
Proceeds from maturities on mortgage-backed security investment 829,452 686,700 298,554
Proceeds from sale of property, plant and equipment 19,800
----------- ----------- -----------
NET CASH PROVIDED/(USED) IN INVESTING ACTIVITIES 148,579 (2,547,932) (1,679,168)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of principal on industrial revenue bond (355,000) (330,000) (305,000)
----------- ----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (355,000) (330,000) (305,000)
----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,781,903 481,744 1,583,544
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,194,156 2,712,412 1,128,868
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 8,976,059 $ 3,194,156 $ 2,712,412
=========== =========== ===========
Cash paid for:
Interest (net of amounts capitalized) $ 1,935,994 $ 1,902,044 $ 2,690,141
=========== =========== ===========
Income taxes (refund) $ (3,302) $ 186,000 $ (84,666)
=========== =========== ===========
Supplemental disclosure of non-cash financing activities:
Sale leaseback receivable $ 1,584,000
===========
|
See notes to consolidated financial statements.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS FORMATION AND NATURE OF OPERATIONS
Core Molding Technologies, Inc. ("Core Molding", "the Company"), formerly known as Core Materials Corporation, was formed in 1996 for the purpose of acquiring substantially all the assets and assuming certain of the liabilities of Columbus Plastics Operation ("Columbus Plastics"), an operating unit of Navistar International Transportation Corp. (now known as International Truck and Engine Corporation, "International"). In October 2001, Core Molding acquired certain assets of Airshield Corporation, see note 3. As a result of this acquisition, Core Molding expanded its fiberglass molding capabilities to include the spray up, hand lay up and vacuum assisted resin infused molding processes.
Core Molding operates in one business segment as a compounder of sheet molding composites (SMC) and molder of fiberglass reinforced plastics. Core Molding produces and sells both SMC compound and molded products for varied markets, including medium and heavy-duty trucks, automotive, recreational vehicles and commercial and industrial products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements include the accounts of all subsidiaries after elimination of all material intercompany accounts, transactions and profits.
USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION - Revenue from product sales is recognized at the time products are shipped and title transfers. Allowances for returned products and other credits are estimated and recorded as revenue is recognized.
CASH AND CASH EQUIVALENTS - Core Molding considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash is held primarily in one bank.
MORTGAGE-BACKED SECURITY - The security that matures in November 2025, is considered held to maturity and is carried at cost. Core Molding has the intent and ability to hold this security to maturity.
INVENTORIES - Inventories are stated at the lower of cost (first-in, first-out) or market. The Company had recorded an allowance for slow moving and obsolete inventory of $278,000 at December 31, 2002 and $171,000 at December 31, 2001.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are recorded at cost. Depreciation is provided on a straight-line method over the estimated useful lives of the assets. The carrying amount of long-lived assets is evaluated annually to determine if adjustment to the depreciation period or to the unamortized balance is warranted.
Ranges of estimated useful lives for computing depreciation are as follows:
Land improvements 20 years Building and improvements 20-40 years Machinery and equipment 3-15 years Tools, dies and patterns 3-5 years |
Depreciation expense was $1,983,000, $2,010,000 and $2,094,000 for 2002, 2001, and 2000.
In 2002, 2001 and 2000, approximately $0, $37,000 and $50,000 of interest costs were capitalized in property, plant and equipment.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
LONG-LIVED ASSETS - Long-lived assets consist primarily of property and equipment and goodwill. The recoverability of long-lived assets is evaluated at the operating unit level by an analysis of operating results and consideration of other significant events or changes in the business environment. If an operating unit has indications of impairment, such as current operating losses, the Company will evaluate whether impairment exists for property and equipment on the basis of undiscounted expected future cash flows from operations before interest for the remaining amortization period. For goodwill, the Company will evaluate whether impairment exists on the basis of discounted expected future cash flows from operations before interest. If impairment exists, the carrying amount of the long-lived assets is reduced to its estimated fair value, less any costs associated with the final settlement. For the years ended December 31, 2002, 2001 and 2000, there was no impairment of the Company's long-lived assets.
SELF-INSURANCE - Core Molding is self-insured with respect to most of its medical and dental claims and workers' compensation claims. Core Molding has recorded an estimated liability for self-insured medical and dental claims incurred and worker's compensation claims incurred but not reported at December 31, 2002 and 2001 of $650,000 and $625,000, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Core Molding's financial instruments consist of a mortgage backed security investment, long term debt, an interest rate swap, accounts receivable, accrued liabilities and accounts payable. The carrying amount of these financial instruments approximated their fair value. The fair value of the Company's interest rate swap at December 31, 2002 and 2001 was a liability of $773,000 and $367,000, respectively.
CONCENTRATION OF CREDIT RISK - Core Molding has significant transactions with four customers, International, Yamaha Motor Manufacturing Corporation, Lear Corporation and Freightliner, which comprised 87%, 90% and 83% of total sales in 2002, 2001 and 2000 and 93% and 81% of the accounts receivable balances at December 31, 2002 and 2001. Core Molding performs ongoing credit evaluations of its customers' financial condition. Core Molding maintains reserves for potential bad debt losses, and such bad debt losses have been historically within Core Molding's expectations. Export sales, including sales to Canada, for products provided to International's manufacturing and service locations totaled 15%, 12% and 17% of total sales for 2002, 2001 and 2000, respectively.
EARNINGS/(LOSS) PER COMMON SHARE - Basic earnings/(loss) per common share is computed based on the weighted average number of common shares outstanding during the period. Diluted earnings/(loss) per common share are computed similarly but include the effect of the assumed exercise of dilutive stock options under the treasury stock method.
STOCK BASED COMPENSATION - The Company accounts for its stock option plans in accordance with APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for all stock option plans been determined consistent with the SFAS No. 123, "Accounting for Stock Based Compensation," the Company's net income (loss) and earnings/(loss) per common share would have resulted in the amounts as reported below.
YEARS ENDED DECEMBER 31,
2002 2001 2000
----------- ----------- -----------
Net income (loss) as reported $ 2,006,423 $(1,860,141) $ 715,351
Deduct: Total stock-based employee compensation
expense determined under fair value based method for all
awards, net of related tax effects 198,788 223,214 74,474
----------- ----------- -----------
Pro forma net income (loss) $ 1,807,635 $(2,083,355) $ 640,877
=========== =========== ===========
Earnings per share:
Basic and diluted - as reported $ 0.21 $ (0.19) $ 0.07
Basic and diluted - pro forma $ 0.19 $ (0.21) $ 0.07
|
The pro forma amounts are not representative of the effects on reported net earnings or earnings per common share for future years and exclude the pro forma effect of the Mexican acquisition (see Note 3).
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
RECLASSIFICATIONS - Reclassifications have been made to prior years' amounts to conform to the classifications of such amounts for 2002. In the current year, the Company has classified completed tooling projects as revenue and cost of goods sold in the consolidated statements of operations. Previously, the Company classified the net effect of tooling projects as a miscellaneous gain (loss) in selling, general and administrative expenses. Tooling projects are and have been accounted for under the completed contracts method. For comparative purposes, amounts in prior years have been reclassified to conform to current year presentations. 2001 tooling revenue was $4,815,000 and the associated cost of goods sold was $4,787,000. 2000 tooling revenue was $1,346,000 and the associated cost of goods sold was $1,346,000. This change in classification had no effect on previously reported net income (loss), cash flow or stockholders' equity.
OTHER INCOME - Effective September 3, 2002, the Company changed its ticker symbol on the American Stock Exchange from "CME" to "CMT". This change took place because another corporation purchased the rights to use "CME" from the Company for $500,000, which is included in other income in the consolidated statements of operations.
RESEARCH AND DEVELOPMENT - Research and Development costs, which are expensed as incurred, totaled approximately $270,000 in 2002 and $225,000 in 2001 and $250,000 in 2000.
RECENT ACCOUNTING PRONOUNCEMENTS - Effective January 1, 2002, the Company adopted SFAS No.142, "Goodwill and Other Intangible Assets". This statement applies to intangibles and goodwill acquired after June 30, 2001, as well as goodwill and intangibles previously acquired. Under this statement goodwill as well as other intangibles determined to have an infinite life are no longer amortized; however, these assets will be reviewed for impairment periodically. Due to the adoption of SFAS No. 142, the Company does not amortize goodwill. The total net book value of goodwill at December 31, 2002 and 2001 was $1,097,433. The adoption of SFAS No. 142 did not have an impact on the financial statements of the Company.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes FASB Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The adoption of this statement, as of January 1, 2002, did not have an impact on the Company's consolidated financial statements.
As previously reported, FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections" in April 2002. It is effective for the first quarter in the year ended December 31, 2003. The Company does not believe the adoption of SFAS No. 145 will have a significant impact on its consolidated financial statements.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities included in restructurings. This Statement eliminates the definition and requirements for recognition of exit costs as defined in EITF Issue 94-3, and requires that liabilities for exit activities be recognized when incurred instead of at the exit activity commitment date. This Statement is effective for exit or disposal activities initiated after December 31, 2002. The Company is currently analyzing the impact of this statement and does not believe it will have a material impact on its consolidated financial statements.
FOREIGN CURRENCY ADJUSTMENTS - In conjunction with Core Molding's acquisition of certain assets of Airshield Corporation (see Note 3), the Company has established operations in Mexico. The functional currency for the Mexican operations is the United States dollar. All foreign currency asset and liability amounts are remeasured into United States dollars at end-of-period exchange rates except for inventories, prepaid expenses and property plant and equipment, which are remeasured at historical rates. Income statement accounts are translated at average rates for the year. Gains and losses resulting from translation of foreign currency financial statements into United States dollars and gains and losses resulting from foreign currency transactions are included in current results of operations. Aggregate foreign currency translation and transaction gains included in operations totaled $48,622 in 2002.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
3. ACQUISITION OF AIRSHIELD CORPORATION ASSETS
On October 16, 2001, Core Molding Technologies, Inc. purchased substantially all of the assets, consisting primarily of inventory, accounts receivable and manufacturing equipment, of Airshield Corporation, a privately held manufacturer of fiberglass reinforced plastic parts for the truck and automotive-aftermarket industries. Airshield was based in Brownsville, Texas, with manufacturing operations in Matamoros, Mexico. Airshield had been operating under Chapter 11 bankruptcy protection since March 2001. Core Molding has continued operations from Airshield's former manufacturing facility in Matamoros, Mexico.
The purchase price for the acquisition of substantially all of the assets of Airshield Corporation was $1,953,000. In addition, Core Molding or its subsidiaries assumed certain liabilities related to the transfer of employees from Airshield's Mexican subsidiary to Core Molding's new Mexican subsidiary. The acquisition was financed from the cash reserves of Core Molding.
The following table presents the allocation of the acquisition cost, including professional fees and other related acquisition costs, to the assets acquired and liabilities assumed:
Inventory $ 392,896
Accounts receivable 2,036,921
Property, plant and equipment 166,375
Goodwill 1,097,433
-------------
Total Assets 3,693,625
=============
Payroll liabilities assumed 1,700,194
Other current liabilities 40,431
-------------
Total Liabilities 1,740,625
=============
Total acquisition cost $ 1,953,000
=============
|
The following (unaudited) pro forma consolidated results of operations have been prepared as if the acquisition of substantially all the assets of Airshield Corporation had occurred at the beginning of the year presented.
Year Ended Year Ended
December 31, 2001 December 31, 2000
----------------- -----------------
Net sales $ 84,537,505 $ 101,329,083
============== ==============
Net loss $ (3,280,948) $ (1,330,195)
============== ==============
Net loss per share - basic
and diluted $ (0.34) $ (0.14)
============== ==============
|
The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results. The effects of the acquisition have been included in the consolidated statement of operations since the acquisition date.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. FOREIGN OPERATIONS
In conjunction with the Company's acquisition of substantially all the assets of Airshield Corporation on October 16, 2001(see Note 3), Core Molding established manufacturing operations in Mexico (under the Maquiladora program). The Mexican operation is a captive manufacturing facility of Core Molding. Essentially all sales of the Mexican operation are made to United States customers in United States dollars, which totaled $20,468,000 in 2002 and $3,532,000 in 2001. Expenses are incurred in the United States dollar and the Mexican peso. Expenses incurred in pesos include labor, utilities, supplies and materials, and amounted to approximately 39% of sales in 2002 and 31% of sales from the acquisition date to December 31, 2001. Core Molding owns long-lived assets that are geographically located at the Mexican operation, which total $298,000 at December 31, 2002. Core Molding's manufacturing operation in Mexico is subject to various political, economic, and other risks and uncertainties inherent to Mexico. Among other risks, Core Molding's Mexican operation is subject to domestic and international customs and tariffs, changing taxation policies and governmental regulations.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31:
2002 2001
------------ ------------
Land and land improvements $ 2,150,606 $ 2,150,606
Buildings 17,391,966 17,319,654
Machinery and equipment 20,202,400 19,954,637
Tools, dies and patterns 566,814 566,814
Additions in progress 2,689,610 2,768,160
------------ ------------
Total 43,001,396 42,759,871
Less accumulated depreciation (18,970,136) (17,398,659)
------------ ------------
Property, plant and equipment - net $24,031,260 $25,361,212
============ ============
|
Additions in progress at December 31, 2002 and 2001 primarily relate to the purchase and installation of equipment at Core Molding's operating facilities. At December 31, 2002 and 2001, commitments for capital expenditures in progress were $107,000 and $32,000, respectively.
Core Molding has entered into various sale-leaseback arrangements with a financial institution, whereby it sold certain equipment and leased such back under operating lease arrangements (see Note 6).
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. DEBT AND LEASES
Long-term debt consists of the following at December 31:
2002 2001
------------ ------------
Secured Note Payable due to International, interest at 8%, payable
semi-annually, principal due December 2006, secured by a subordinated
lien and security interest in all Core Molding's assets. $ 19,920,150 $ 19,920,150
Industrial Revenue Bond, interest adjustable weekly (2002 average 1.7%;
2001 average 3.0%), payable quarterly, principal due in variable
quarterly installments through April, 2013, secured by a bank letter of
credit with a balance of $6,279,000 as of December 31, 2002. 6,095,000 6,450,000
------------ ------------
Total 26,015,150 26,370,150
Less current portion (2,251,000) (355,000)
------------ ------------
Long-term debt $ 23,764,150 $ 26,015,150
============ ============
|
SECURED NOTE PAYABLE
Under the terms of the secured note payable to International, Core Molding may be required to make payments on the principal of the note if either of the following two conditions exists:
a) Within ninety (90) days after the end of each fiscal year of Core Molding during the term of the Secured Note, Core Molding is to pay principal in an amount equal to the amount, if any, by which the total cash and cash equivalents of Core Molding, as of the end of such fiscal year, exceeds $3,000,000, as long as there is no outstanding balance on the revolving line of credit and to the degree Core Molding is in compliance with all loan covenants; and
b) In the event Core Molding obtained, from time to time, any refinancing loan (as defined by the terms of the Secured Note), Core Molding is to promptly, upon obtaining such loan, pay principal in an amount equal to the proceeds of such loan.
Total cash and cash equivalents of Core Molding as of December 31, 2002 were $8,976,059. Because the Company was in compliance of all three of its debt covenants, a principal payment in the amount of $1,861,000, which is classified as a current portion of long term debt on the Company's balance sheet, was made to International in March 2003. Based upon the financial position of Core Molding at December 31, 2002, the remaining balance of the Secured Note is classified as long-term on the balance sheet.
The provisions of the Secured Note prohibit the declaration or payment of cash dividends, the repurchase or retirement of capital stock, as well as the pledge of any of Core Molding's assets or revenue as a security lien to a third party, except as approved by International, as long as the Secured Note is outstanding.
LINE OF CREDIT
At December 31, 2002, Core Molding had available a $7,500,000 variable rate bank revolving line of credit scheduled to mature on April 30, 2004. The line of credit bears interest at LIBOR plus three and one-quarter percent or at the prime rate. The line of credit is secured by a first priority lien and security interest in all Core Molding's business assets. There was no outstanding balance under this facility at any time during the years ended December 31, 2002 and 2001.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
INDUSTRIAL REVENUE BOND
In May 1998, Core Molding borrowed $7,500,000 through the issuance of
an Industrial Revenue Bond ("IRB"). The IRB bears interest at a weekly
adjustable rate and matures in April 2013. The maximum interest rate that may be
charged at any time over the life of the IRB is 10%. Total remaining principal
maturities by year are: 2003 - $390,000; 2004 - $420,000; 2005 - $450,000; 2006
- $490,000; 2007 - $530,000 and thereafter - $3,815,000.
As security for the IRB, Core Molding obtained a letter of credit from a commercial bank, which has a balance of $6,279,000 as of December 31, 2002. The letter of credit can only be used to pay principal and interest on the IRB. Any borrowings made under the letter of credit bear interest at the bank's prime rate and are secured by a lien and security interest in all of Core Molding's business assets. The letter of credit expires in April 2004 but may be extended for an additional one-year period in April of each year.
INTEREST RATE SWAP
When Core Molding Technologies, Inc. enters into variable rate obligations or purchases variable rate interest bearing assets, it considers the potential effect of interest rate fluctuations on such instruments. In order to minimize the effects of interest rate fluctuations on its operations, the Company may enter into interest rate management arrangements.
In conjunction with its variable rate Industrial Revenue Bond, Core Molding entered into an interest rate swap agreement, which was designated as a cash flow hedging instrument, with a commercial bank in June 1998. Under this agreement, Core Molding pays a fixed rate of 4.89% to the bank and receives 76% of the 30-day commercial paper rate. The difference paid or received varies as short-term interest rates change and is accrued and recognized as an adjustment to interest expense. The swap term and notional amount matches the payment schedule on the IRB with final maturity in April 2013. While Core Molding is exposed to credit loss on its interest rate swap in the event of non-performance by the counterparty to the swap, management believes such non-performance is unlikely to occur given the financial resources of the counterparty. The effectiveness of the swap is assessed at each financial reporting date by comparing the commercial paper rate of the swap to the benchmark rate underlying the variable rate of the Industrial Revenue Bond.
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, on January 1, 2001. At January 1, 2001, Core Molding recorded the fair value of its interest rate swap agreement of $159,000 as a long-term liability and $105,000 (net of deferred income tax benefit of $54,000) to accumulated other comprehensive income (loss). Core Molding recorded an additional liability of $407,000 and $208,000 to adjust the interest rate swap to fair value at December 31, 2002 and 2001 respectively.
BANK COVENANTS
Core Molding is subject to formal debt covenants with regards to its Line of Credit and letter of credit securing the industrial revenue bond and certain equipment leases.
As of December 31, 2002, Core Molding was in compliance of all three of its financial debt covenants for the Line of Credit and letter of credit securing the industrial revenue bond and certain equipment leases. The covenants relate to maintaining certain financial ratios.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
LEASES
Core Molding leases a significant portion of its manufacturing equipment as a result of sale-leaseback arrangements Core Molding has entered with financial institutions in previous years. These leases have been recorded as operating leases, which had original lease terms of 2 to 12 years.
As a result of earlier sale-leaseback transactions, Core Molding recognized into income in 2002, 2001 and 2000 approximately $454,000 of the deferred gains in each of the three years. At December 31, 2002 and 2001, Core Molding's deferred gains from leasing transactions totaled $2,009,000 and $2,462,000, respectively. The current portion of the deferred gains was $454,000 at December 31, 2002 and 2001 and was included in accrued liabilities.
In October 2001, in conjunction with the acquisition discussed at Note 3, Core Molding's Mexican subsidiary entered into a 10-year lease agreement for a manufacturing facility in Matamoros, Mexico. The Company leases 266,717 square feet of a 313,221 square feet facility, with an option to lease the entire facility. The Company has an option to purchase the facility at any time during the first seven years. The Company may cancel the lease upon giving six months notice to the lessor. Annual rent on the facility is determined based on the number of square feet rented multiplied by the following factors: year one and two equals $0.24 per square foot; year three equals $0.28 per square foot; year four equals $0.30 per square foot; and years five through ten will be based on the previous year's monthly rental rate plus a percentage increase or decrease based on the Consumer Price Index.
Core Molding also leases a warehouse facility in Brownsville, Texas. The lease term of this facility is three years and provides for monthly rental payments of $7,560. This lease is cancelable with sixty days written notice.
Total rental expense was $4,341,000, $3,757,000 and $3,301,000 for 2002, 2001 and 2000.
The future minimum lease payments under non-cancelable operating leases that have lease terms in excess of one year are as follows:
2003 $3,464,000
2004 3,546,000
2005 3,546,000
2006 3,254,000
2007 2,852,000
Thereafter 1,614,000
-----------
|
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) represents net income (loss) plus the
results of certain non-shareowners' equity changes not reflected in the
Consolidated Statement of Operations. The components of comprehensive income
(loss), net of tax, are as follows:
2002 2001 2000
----------- ----------- -----------
Net income/(loss) $ 2,006,423 $(1,860,141) $ 715,351
Cumulative effect of change in accounting principle -- (104,762) --
(SFAS No. 133) on other comprehensive income
Hedge accounting effect of interest rate swap (268,361) (137,343) --
----------- ----------- -----------
Comprehensive income (loss) $ 1,738,062 $(2,102,246) $ 715,351
=========== =========== ===========
|
8. EQUITY
ANTI-TAKEOVER MEASURES
Core Molding's Certificate of Incorporation and By-laws contain certain provisions designed to discourage specific types of transactions involving an actual or threatened change of control of Core Molding. These provisions, which are designed to make it more difficult to change majority control of the Board of Directors without its consent, include the following provisions related to removal of Directors, the approval of a merger and certain other transactions as outlined in the Certificate of Incorporation and any amendments to these provisions:
RESTRICTIONS ON TRANSFER
Core Molding's Certificate of Incorporation also contains a provision (the "Prohibited Transfer Provision") designed to help assure the continued availability of Core Molding's substantial net operating loss and capital loss carryforwards (see Note 10) by seeking to prevent an "ownership change" as defined under current Treasury Department income tax regulations. Under the Prohibited Transfer Provision, if a stockholder transfers or agrees to transfer stock, the transfer will be prohibited and void to the extent that it would cause the transferee to hold a "Prohibited Ownership Percentage" (as defined in Core Molding's Certificate of Incorporation, but generally, means direct and indirect ownership of 4.5% or more of the Company's common stock) or if the transfer would result in the transferee's ownership increasing if the transferee had held a Prohibited Ownership Percentage within the three prior years or if the transferee's ownership percentage already exceeds the Prohibited Ownership Percentage under applicable Federal income tax rules. The Prohibited Transfer Provision does not prevent transfers of stock between persons who do not hold a Prohibited Ownership Percentage.
PREFERRED STOCK
Core Molding has authorized 10,000,000 shares of preferred stock (par value: $0.01) of which none is issued.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. INCENTIVE STOCK PLANS
STOCK OPTIONS
The Company has a Long Term Equity Incentive Plan (the "Plan"), as originally approved by the shareholders in May 1997, and as amended in May 2000 to increase the number of shares authorized for issuance, that allows for grants to directors and key employees of non-qualified stock options, incentive stock options, director options, stock appreciation rights, restricted stock, performance shares, performance units and other incentive awards up to an aggregate of 3.0 million awards, each representing a right to buy a share of Core Molding's common stock. The Plan expires on the earlier of December 31, 2006, or the date the maximum number of available awards under the plan have been granted.
During 2002, 2001 and 2000, the Company granted stock options under the plan. The options have vesting schedules of five or nine and one-half years from the date of grant, are not exercisable after ten years from the date of grant, and were granted at prices which equaled or exceeded the fair market value of Core Molding's common stock at the date of grant.
The weighted average fair value of options granted during 2002, 2001 and 2000 were $1.40, $1.17 and $1.84, respectively. The fair value of the options granted were estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: risk free interest rate of 5%, no expected dividend yield, expected lives of 8 and 9 years and expected volatility of 89% for 2002, 87% for 2001 and 104% for 2000.
The following summarizes all stock option activity for the years ended December 31:
2002 2001 2000
--------------------------- -------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------------- ---------- ------------ ---------- ----------- ----------
Outstanding - beginning of year 1,149,000 $ 3.10 1,168,000 $ 3.11 1,038,100 $ 3.19
Granted 84,500 2.75 32,000 2.75 467,500 2.75
Forfeited (24,500) 3.26 (51,000) 2.89 (337,600) 2.88
--------- ------ --------- ------ --------- ------
Outstanding - end of year 1,209,000 $ 3.07 1,149,000 $ 3.10 1,168,000 $ 3.10
========= ====== ========= ====== ========= ======
Exercisable at December 31 622,050 $ 3.17 506,250 $ 3.15 313,350 $ 3.19
========= ====== ========= ====== ========= ======
Options available for grant 1,783,400 1,843,400 1,824,400
========= ========= =========
|
The following table summarizes information about stock options outstanding and exercisable as of December 31, 2002:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------- -------------------------------------
WEIGHTED WEIGHTED AVERAGE
RANGE OF NUMBER OF AVERAGE CONTRACTUAL LIFE NUMBER OF WEIGHTED AVERAGE
EXERCISE PRICES OPTIONS EXERCISE PRICE IN YEARS OPTIONS EXERCISE PRICE
--------------- ---------------- ----------------- --------------- -----------------
$2.75 869,500 $ 2.75 6.3 417,400 $ 2.75
$3.40 to $3.81 269,500 3.58 5.6 148,650 3.63
$5.13 70,000 5.13 5.4 56,000 5.13
--------- ------ ------- ------
1,209,000 $ 3.07 622,050 $ 3.17
========= ====== ======= ======
|
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. INCOME TAXES
Components of the provision (credit) for income taxes are as follows:
2002 2001 2000
----------- ----------- -----------
Current:
Federal - US $ (111,000) $ 24,000 $ 27,000
Federal - Mexico 301,000 -- --
State and local (20,000) 6,000 204,000
----------- ----------- -----------
170,000 30,000 231,000
Deferred:
Federal 491,000 (655,000) 351,000
State and local 523,000 37,000 (66,000)
Increase in valuation allowance for
net operating loss carryforward -- 646,000 --
----------- ----------- -----------
1,014,000 28,000 285,000
----------- ----------- -----------
Provision for income taxes $ 1,184,000 $ 58,000 $ 516,000
=========== =========== ===========
|
A reconciliation of the income tax provision based on the federal statutory income tax rate of 34% to the Company's income tax provision for the year ended December 31 is as follows:
2002 2001 2000
----------- ----------- -----------
Provision at federal statutory rate - US $ 1,085,000 $ (613,000) $ 419,000
Effect of foreign taxes 32,000 -- --
State and local tax expense, net of federal benefit 81,000 17,000 91,000
Increase in valuation allowance for net operating
loss carryforward 646,000 --
Non-deductible expenses 15,000 8,000 6,000
Revision of prior years' taxes (29,000) -- --
----------- ----------- -----------
Provision for income taxes $ 1,184,000 $ 58,000 $ 516,000
=========== =========== ===========
|
Deferred tax assets (liabilities) consist of the following at December 31:
2002 2001
------------ ------------
Current Asset:
Accrued liabilities $ 1,019,000 $ 974,000
Other, net 132,000 106,000
------------ ------------
Total current asset 1,151,000 1,080,000
Non-current asset:
Property, plant and equipment 3,126,000 3,709,000
Net operating loss carryforwards 5,785,000 6,974,000
Postretirement benefits 2,608,000 2,257,000
Interest rate swap 263,000 125,000
Other, net 389,000 53,000
------------ ------------
Total non-current asset 12,171,000 13,118,000
------------ ------------
Total deferred tax asset 13,322,000 14,198,000
Less valuation allowance (1,425,000) (1,425,000)
------------ ------------
Total deferred tax asset - net $ 11,897,000 $ 12,773,000
============ ============
|
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
At December 31, 2002, Core Molding had approximately $17.0 million of NOL carryforwards available to offset future taxable income. A valuation allowance has been provided for those NOL carryforwards and temporary differences, which are estimated to expire before they are utilized. The valuation allowance at December 31, 2002, assumes that it is more likely than not that approximately $4,200,000 of the cumulative net operating losses will not be realized before their expiration date.
Core Molding's NOL carryforwards expire as follows:
2008 $10,560,000
2009 3,614,000
2010 638,000
2011 357,000
2021 1,846,000
------------
Total $17,015,000
============
|
11. POSTRETIREMENT BENEFITS
Core Molding provides postretirement benefits to substantially all of its United States employees. Costs associated with postretirement benefits include pension expense, postretirement health care and life insurance expense and expense related to contributions to two 401(k) defined contribution plans. In addition, Core Molding also participates in a multi-employer defined benefit plan for its United States union represented employees. All of Core Molding's United States union employees are covered under a multi-employer defined benefit pension plan administered under a collective bargaining agreement. Core Molding does not administer this plan and contributions are determined in accordance with provisions in the negotiated labor contract.
Prior to the acquisition of Columbus Plastics from International, certain of Core Molding's employees were participants in various International sponsored pension and postretirement plans. The International pension plan for non-represented employees was non-contributory and both benefits and years of service were frozen as of the date of the Acquisition. In connection with the Acquisition, International retained responsibility for the vested benefits as of December 31, 1996, and Core Molding agreed to reimburse International for early retirement subsidies for certain employees. The accumulated benefit obligation, which equals the projected benefit obligation and net liability, is $218,000 at December 31, 2002 and $203,000 at December 31, 2001.
The postretirement health and life insurance plan provides healthcare and life insurance for certain employees upon their retirement, along with their spouses and certain dependents and requires cost sharing between Core Molding, International and the participants in the form of premiums, co-payments and deductibles. Core Molding and International share the cost of benefits for certain employees, using a formula that allocates the cost based upon the respective portion of time that the employee was an active service participant after the Acquisition to the period of active service prior to the Acquisition.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The funded status of the Company's postretirement health and life insurance benefits plan as of December 31, 2002 and 2001 and reconciliation with the amounts recognized in the consolidated balance sheets are provided below:
POST RETIREMENT BENEFITS
-------------------------------------------
2002 2001 2000
----------- ----------- -----------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 6,787,000 $ 4,678,000 $ 4,020,000
Service cost 434,000 385,000 367,000
Interest cost 491,000 351,000 301,000
Unrecognized loss/(gain) 1,196,000 1,427,000 (10,000)
Benefits paid (56,000) (54,000) --
----------- ----------- -----------
BENEFIT OBLIGATION AT END OF YEAR $ 8,852,000 $ 6,787,000 $ 4,678,000
----------- ----------- -----------
Unfunded status $(8,852,000) $(6,787,000) $(4,678,000)
Unrecognized net loss 3,134,000 2,020,000 614,000
----------- ----------- -----------
Net liability $(5,718,000) $(4,767,000) $(4,064,000)
=========== =========== ===========
PLAN ASSETS -- -- --
=========== =========== ===========
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31:
Discount rate 6.50% 7.25% 7.50%
|
The components of expense for all of Core Molding's postretirement benefits plans are as follows:
2002 2001 2000
---------- ---------- ----------
Pension Expense:
Interest cost $ 15,000 $ 15,000 $ 15,000
Defined contribution plan
contributions 231,000 329,000 296,000
Multi-employer plan
contributions 352,000 240,000 331,000
---------- ---------- ----------
Total Pension Expense 598,000 584,000 642,000
---------- ---------- ----------
Health and Life Insurance:
Service cost 434,000 385,000 367,000
Interest cost 491,000 351,000 301,000
Amortization of net loss 83,000 21,000 38,000
---------- ---------- ----------
Net periodic benefit cost 1,008,000 757,000 706,000
---------- ---------- ----------
Total postretirement benefits
expense $1,606,000 $1,341,000 $1,348,000
========== ========== ==========
|
The weighted average rate of increase in the per capita cost of covered health care benefits is projected to be 8.7%. The rate is projected to decrease gradually to 5% by the year 2007 and remain at that level thereafter. The comparable assumptions for the prior year were 9.65% and 5%.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The effect of changing the health care cost trend rate by one-percentage point
for each future year is as follows:
1-PERCENTAGE 1-PERCENTAGE
POINT INCREASE POINT DECREASE
--------------------- ---------------------
Effect on total of service and interest cost components $ 208,869 $ (162,355)
Effect on postretirement benefit obligation 1,965,801 (1,608,582)
|
12. RELATED PARTIES
In connection with the acquisition of Columbus Plastics, Core Molding and International entered into a Supply Agreement. Under the terms of the Supply Agreement, International agreed to purchase from Core Molding, and Core Molding agreed to sell to International at negotiated prices, which approximate fair value, all of International's original equipment and service requirements for Fiberglass Reinforced Parts using the Sheet Molding Composite process as they then existed or as they may be improved or modified. As of December 31, 2001, the contract expired and has not been renewed, and business with International continues on a purchase order basis, like business with all of Core Molding's other customers. The purchase orders typically provide volume commitments for four weeks at prices previously negotiated. Customers can update their orders on a daily basis for changes in demand that allow them to run their inventories on a "just-in-time" basis.
International owns 43.6% of the Company's outstanding common stock. Sales to International were $45,823,000 in 2002, $40,765,000 in 2001 and $52,276,000 in 2000, of which $6,418,000 and $6,147,000 had not been received as of December 31, 2002 and 2001 and were included in accounts receivable. Receivables as of December 31, 2002 and 2001 also include an additional $964,000 and $875,000, respectively, for tooling costs owed by International. Accounts payable included $382,000 and $211,000, respectively as of December 31, 2002 and 2001 for product returns, returnable container deposits, material purchases from International and rework charges. Core Molding expensed $1,616,000 in 2002, $1,625,000 in 2001 and $1,611,000 in 2000, for interest expense on the Secured Note of which $9,000 had not been paid at December 31, 2002. There was no outstanding liability for accrued interest at December 31, 2001.
13. LABOR CONCENTRATION
As of December 31, 2002, Core Molding employed a total of 929 employees, which consists of 401 employees in its U.S. operations and 528 employees in its Mexican operations. Of these 929 employees, 196 are covered by a collective bargaining agreement with the International Association of Machinists and Aerospace Workers ("IAM"), which extends to August 7, 2004, and 464 are covered by a collective bargaining agreement with Sindicato de Jorneleros y Obreros, which extends to January 16, 2005.
14. COMMITMENTS AND CONTINGENCIES
In late 2001 and early 2002, several lawsuits were filed in Mexico against Airshield de Mexico, which is a Mexican subsidiary of Airshield Corporation. As noted above, Core Molding acquired substantially all the assets of Airshield Corporation in October 2001; however, Core Molding did not purchase the assets or the stock of Airshield de Mexico. The lawsuits were filed by certain of Airshield de Mexico's vendors as a result of unpaid debts of Airshield de Mexico. Through these lawsuits, the vendors have attempted to foreclose on inventory and equipment owned by Core Molding and located at its Mexico facility. The total value of these assets at December 31, 2002, was $1,027,000. To date, Core Molding has been successful in preventing these foreclosure attempts. Core Molding is taking various actions through the Mexican legal system to defend its assets and to prevent future claims. Core Molding' Mexican legal counsel has advised the Company that it has valid legal position to support the ownership of these assets; however, as with any case involving litigation, the outcome of these claims is uncertain.
In July 2001, a former employee of Core Molding filed a suit in United States District Court, Southern District of Ohio, Eastern Division, claiming her employment was terminated in 1999 as a result of race discrimination. In December 2002, the two parties settled this suit outside of court. The result of the settlement did not have a material impact on the financial results of Core Molding.
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2002 and 2001.
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER TOTAL YEAR
----------- ----------- ----------- ----------- ----------
2002:
Net sales $21,026,271 $26,651,614 $ 23,398,880 $ 23,012,085 $94,088,850
Gross margin 3,432,222 4,118,884 3,307,265 2,961,120 13,819,491
Income before interest and taxes 1,394,186 1,567,577 1,352,646 768,274 5,082,683
Net income 573,522 667,022 485,466 280,413 2,006,423
Net income per common share:
Basic and diluted $0.06 $0.07 $0.05 $0.03
$0.21
2001:
Net sales $20,533,600 $18,443,413 $ 14,535,477 $ 19,667,041 $73,179,531
Gross margin 2,391,036 2,434,952 936,180 2,096,586 7,858,754
Income (loss) before interest and taxes 390,067 698,230 (899,778) (296,529) (108,010)
Net income (loss) 3,656 175,757 (785,786) (1,253,768) (1,860,141)
Net income (loss) per common share:
Basic and diluted $.00 $.02 $(.08) $(.13)
$(0.19)
|
No cash dividends were paid during 2002 and 2001.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Part III, Item 10 is incorporated by reference from Core Molding's definitive proxy statement for its annual meeting of stockholders to be held on or about May 15, 2003, which is expected to be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934 within 120 days after the end of the fiscal year covered by this report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Part III, Item 11 is incorporated by reference from Core Molding's definitive proxy statement for its annual meeting of stockholders to be held on or about May 15, 2003, which is expected to be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934 within 120 days after the end of the fiscal year covered by this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Part III, Item 12 is incorporated by reference from Core Molding's definitive proxy statement for its annual meeting of stockholders to be held on or about May 15, 2003, which is expected to be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934 within 120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Part III, Item 13 is incorporated by reference from Core Molding's definitive proxy statement for its annual meeting of stockholders to be held on or about May 15, 2003, which is expected to be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934 within 120 days after the end of the fiscal year covered by this report.
ITEM 14. CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company and its consolidated subsidiaries required to be included in the Company's periodic SEC filings. There were no significant changes in the Company's internal controls or, to the Company's knowledge, in other factors that could significantly affect such internal controls subsequent to the date of the Company's evaluation of its internal controls.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
(1) FINANCIAL STATEMENTS
The following consolidated financial statements are included in Part II, Item 8 of this Form 10-K:
Independent Auditors' Report
Consolidated Statements of Operations for the Years
Ended December 31, 2002, 2001 and 2000
Consolidated Balance Sheets as of December 31, 2002
and 2001
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 2002, 2001 and 2000
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2002, 2001 and 2000
Notes to Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule is filed with this Annual Report on Form 10-K:
Schedule II - Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2002, 2001 and 2000
All other schedules are omitted because of the absence of the conditions under which they are required.
(3) EXHIBITS
See Index to Exhibits filed with this Annual Report on Form 10K.
(b) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K on November 14, 2002, regarding the certification of the financial statements for the period ending September 30, 2002. The report also included the actual certification letters as signed by the Chief Executive Officer and Chief Financial Officer of the Company.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
CORE MOLDING TECHNOLOGIES, INC.
By /s/ James L. Simonton
------------------------------------------
James L. Simonton
President and Chief Executive Officer
Date: March 31, 2003
|
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:
/s/ James L. Simonton President, Chief Executive Officer March 31, 2003
--------------------------------------------- and Director
James L. Simonton
/s/ Herman F. Dick, Jr. Treasurer and March 31, 2003
--------------------------------------------- Chief Financial Officer
Herman F. Dick, Jr.
* Director March 31, 2003
---------------------------------------------
James F. Crowley
* Director March 31, 2003
---------------------------------------------
Ralph O. Hellmold
* Director March 31, 2003
---------------------------------------------
Thomas M. Hough
* Director March 31, 2003
---------------------------------------------
Malcolm M. Prine
* Director March 31, 2003
---------------------------------------------
Thomas R. Cellitti
*By /s/ James L. Simonton Attorney-In-Fact March 31, 2003
------------------------------------
James L. Simonton
|
CORE MOLDING TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE II
Consolidated valuation and qualifying accounts and reserves for the years ended December 31, 2002, 2001 and 2000.
Reserves deducted from asset to which it applies - allowance for doubtful accounts.
Additions
-------------------------------
Balance at Charged to Charged to
Beginning Costs & Other Deductions Balance At
of Year Expenses Accounts (A) End of Year
--------------- ------------- --------------- --------------- ---------------
Year Ended December 31, 2002 $ 715,000 $ 174,000 $ 346,000 $ 543,000
Year Ended December 31, 2001 $ 424,000 $ 454,000 $ 163,000 $ 715,000
Year Ended December 31, 2000 $ 431,000 $ 91,000 $ 98,000 $ 424,000
|
(A) Amount represents uncollectible accounts written off.
Reserves deducted from asset to which it applies - deferred income tax valuation allowance.
Additions
-------------------------------
Balance at Charged to Charged to
Beginning Costs & Other Deductions Balance At
of Year Expenses Accounts (A) End of Year
--------------- ------------- --------------- --------------- ---------------
Year Ended December 31, 2002 $ 1,425,000 $ 1,425,000
Year Ended December 31, 2001 $ 2,160,000 $ 646,000 $ 1,381,000 $ 1,425,000
Year Ended December 31, 2000 $ 2,160,000 $ 2,160,000
|
(A) Amounts represent reserves for capital loss carryforwards that expired in 2001.
Reserves deducted from asset to which it applies - inventory obsolescence.
Additions
-------------------------------
Balance at Charged to Charged to
Beginning Costs & Other Deductions Balance At
of Year Expenses Accounts (A) End of Year
--------------- ------------- --------------- --------------- ---------------
Year Ended December 31, 2002 $ 171,000 $ 107,000 $ 278,000
Year Ended December 31, 2001 $ 118,000 $ 53,000 $ 171,000
Year Ended December 31, 2000 $ 0 $ 118,000 $ 118,000
|
(A) Amount represents inventory that has been disposed.
INDEX TO EXHIBITS
Exhibit No. Description Location
----------- ----------- --------
2(a)(1) Asset Purchase Agreement Incorporated by
dated as of September 12, 1996, reference to Exhibit
as amended October 31, 1996, 2-A to Registration
between Navistar and RYMAC1 Statement on Form S-4
(Registration
No. 333-15809)
2(a)(2) Second Amendment to Asset Purchase Incorporated by
Agreement dated December 16, 1996(1) reference to Exhibit
2(a)(2) to Annual Report on
Form 10-K for the year
Ended December 31, 2001
2(b)(1) Agreement and Plan of Merger Incorporated by
dated as of November 1, 1996, reference to Exhibit
between Core Molding and 2-B to Registration
RYMAC Statement on Form
S-4 (Registration
No. 333-15809)
2(b)(2) First Amendment to Agreement and Filed Herein
Plan of Merger dated as of
December 27, 1996 between
Core Molding and RYMAC
2(c)(1) Asset Purchase Agreement dated as Incorporated by
of October 10, 2001, between reference to Exhibit 1 to
Core Molding Technologies, Inc. and Form 8K filed
Airshield Corporation October 31, 2001
3(a)(1) Certificate of Incorporation of Incorporated by
Core Molding Technologies, Inc. reference to Exhibit
as filed with the Secretary of State 4(a) to Registration
of Delaware on October 8, 1996 Statement on Form
S-8, (Registration
No. 333-29203)
3(a)(2) Certificate of Amendment of Incorporated by
Certificate of Incorporation reference to Exhibit
of Core Molding Technologies, Inc. 4(b) to Registration
as filed with the Secretary of State Statement on Form
of Delaware on November 6, 1996 S-8 (Registration
No. 333-29203)
|
Exhibit No. Description Location
----------- ----------- --------
3(a)(3) Certificate of Incorporation of Core Incorporated by
Molding Technologies Inc., reflecting reference to Exhibit 4(c)
amendments through November 6, to Registration
1996 [for purposes of compliance Statement on Form S-8
with Securities and Exchange (Registration No.
Commission filing requirements only] 333-29203)
3(a)(4) Certificate of Amendment of Certificate Incorporated by
of Incorporation as filed with the Secretary reference to Exhibit 3(a)(4)
of State of Delaware on August 28, 2002 to Quarterly Report on
Form 10-Q for the quarter
ended September 30, 2002
3(b) By-Laws of Core Molding Incorporated by
Technologies, Inc. reference to Exhibit
3-C to Registration
Statement on Form
S-4 (Registration
No. 333-15809)
4(a)(1) Certificate of Incorporation of Incorporated by
Core Molding Technologies, Inc. reference to Exhibit
as filed with the Secretary of State 4(a) to Registration
of Delaware on October 8, 1996 Statement on Form
S-8 (Registration
No. 333-29203)
4(a)(2) Certificate of Amendment of Incorporated by
Certificate of Incorporation reference to Exhibit
of Core Molding Technologies, Inc. 4(b) to Registration
as filed with the Secretary of State Statement on Form
of Delaware on November 6, 1996 S-8 (Registration
No. 333-29203)
4(a)(3) Certificate of Incorporation of Core Incorporated by
Molding Technologies, Inc., reflecting reference to
amendments through November 6, Exhibit 4(c) to
1996 [for purposes of compliance Registration Statement
with Securities and Exchange on Form S-8
Commission filing requirements only] (Registration
No. 333-29203)
4(a)(4) Certificate of Amendment of Certificate Incorporated by
of Incorporation as filed with the Secretary reference to Exhibit 3(a)(4)
of State of Delaware on August 28, 2002 to Quarterly Report on
Form 10-Q for the quarter
ended September 30, 2002
|
Exhibit No. Description Location
----------- ----------- --------
4(b) By-Laws of Core Molding Incorporated by
Technologies, Inc. reference to Exhibit
3-C to Registration
Statement on Form
S-4 (Registration
No. 333-15809)
10(a)(1) Core Molding Technologies, Inc. Incorporated by
Secured Promissory Note, dated reference to Exhibit
December 31, 1996, to Navistar 10(a)(1) to Annual
International Transportation Corp. Report on Form 10-K
for the year ended
December 31, 2001
10(a)(2) Amendment No. 1 to Secured Incorporated by
Promissory Note, dated reference to Exhibit
December 31, 1996, to Navistar 10(a)(2) to Annual
International Transportation Corp. Report on Form 10-K
for the year ended
December 31, 2001
10(a)(3) Amendment No. 2 to Secured Incorporated by
Promissory Note, dated April 6, 1998 reference to Exhibit
to Navistar International Transportation 10(a)(3) to Annual
Corp. Report on Form 10-K
for the year-ended
December 31, 1998
10(a)(4) Amendment No. 3 to Secured Incorporated by
Promissory Note, dated April 20, 1999 reference to Exhibit
to Navistar International Transportation 10(a)(4) to Annual
Corp. Report on Form 10-K
for the year-ended
December 31, 1999
10(d) Registration Rights Agreement, dated Incorporated by
December 31, 1996, by and between reference to Exhibit
Navistar International Transportation 10(d) to Annual
Corp. and various other persons who Report on Form 10-K
become parties pursuant to the agreement for the year ended
December 31, 2001
10(e) Loan Agreement, dated December 3, Filed Herein
1997, by and between Core Molding
Technologies, Inc. and Key Bank National
Association
10(e)(1) Amendment, dated March 29, 2001, to Incorporated by reference
the Loan Agreement dated December 3, 1997 to Exhibit 10(e)(1) to
by and between Core Molding Technologies, Annual Report on Form 10-K
Inc. and Key Bank National Association for the year ended December 31,
2000
10(e)(2) Amendment, dated December 12, 2002, to Filed Herein
the Loan Agreement dated December 3, 1997
by and between Core Molding Technologies,
Inc. and Key Bank National Association
|
Exhibit No. Description Location
----------- ----------- --------
10(f) Master Equipment Lease Agreement(2) Filed Herein
by and between KeyCorp Leasing,
a division of Key Corporate
Capital, Inc. and Core Molding
Technologies, Inc.
10(f)(1) Amendment, dated March 29, 2001, to Incorporated by reference
Master Equipment Lease Agreement(2) by to Exhibit 10(f)(1) to
and between KeyCorp Leasing, Annual Report on Form
a division of Key Corporate 10-K for the year ended
Capital, Inc. and Core Molding December 31, 2000
Technologies, Inc.
10(g) Loan Agreement, dated April 1, Incorporated by
1998, by and between South Carolina reference to Exhibit
Jobs - Economic Development Authority 10(a)(1) to Quarterly
and Core Molding Technologies, Inc. Report on Form 10-Q
for the quarter ended
June 30, 1998
10(h) Reimbursement Agreement, dated Incorporated by
April 1, 1998, by and between Core reference to Exhibit
Molding Technologies, Inc. and Key Bank 10(a)(2) to Quarterly
National Association Report on Form 10-Q
for the quarter ended
June 30, 1998
10(h)(1) Amendment, dated March 29, 2001, to Incorporated by reference
Reimbursement Agreement, dated to Exhibit 10(h)(1) to
April 1, 1998, by and between Core Annual Report on Form
Molding Technologies, Inc. and Key Bank 10-K for the year ended
National Association December 31, 2000
10(i) Core Molding Technologies, Inc. Incorporated by
Employee Stock Purchase Plan reference to Exhibit
4(c) to Registration
Statement on Form S-8
(Registration No. 333-60909)
10(i)(1) 2002 Core Molding Technologies, Inc. Incorporated by
Employee Stock Purchase Plan reference to Exhibit B to
Definitive Proxy Statement
dated April 15, 2002
10(j) Letter Agreement Regarding Terms and Incorporated by
Conditions of Interest Rate Swap reference to Exhibit 10(j)
Agreement between KeyBank National to Annual Report on Form
Association and Core Molding 10-K for the year-ended
Technologies, Inc. December 31, 1998
|
Exhibit No. Description Location
----------- ----------- ---------
10(k) Long Term Equity Incentive Plan(3) Incorporated by
reference to Exhibit
4(e) to Registration
Statement on Form
S-8 (Registration
No. 333-29203)
10(l) 1995 Stock Option Plan(3) Incorporated by
reference to Exhibit
10(l) to Annual Report
on Form 10-K for the
year ended December 31,
2001
10(m) Informal Cash Filed herein
Profit Sharing Plan(3)
10(o) Compensation Agreement with Incorporated by reference
Malcolm M. Prine(3) to Exhibit 10(o) to Annual
Report on Form 10-K for
the year ended December 31,
2000
11 Computation of Net Income per Share Exhibit 11 is omitted
because the required
information is included
in the Notes to Financial
Statements in Part II,
Item 8 of this Annual
Report on Form 10-K
23 Consent of Deloitte & Touche LLP Filed Herein
24 Powers of Attorney Filed Herein
99(a) Certification of James L. Simonton, Filed Herein
Chief Executive Officer of Core Molding
Technologies, Inc., dated March 31, 2003,
pursuant to 18 U.S.C. Section 1350
99(b) Certification of Herman F. Dick, Jr., Filed Herein
Chief Financial Officer of Core Molding
Technologies, Inc., dated March 31, 2003,
pursuant to 18 U.S.C. Section 1350
|
(1) The Asset Purchase Agreement, as filed with the Securities and Exchange Commission at Exhibit 2-A to Registration Statement on Form S-4 (Registration No. 333-15809), omits the exhibits (including, the Buyer Note, Special Warranty Deed, Supply Agreement, Registration Rights Agreement and Transition Services Agreement, identified in the Asset Purchase Agreement) and schedules (including, those identified in Sections 1, 3, 4, 5, 6, 8 and 30 of the Asset Purchase Agreement. Core Molding Technologies, Inc. will provide any omitted exhibit or schedule to the Securities and Exchange Commission upon request.
(2) The Master Equipment Lease, incorporated by reference in the Exhibits to this Annual Report on Form 10-K, omits certain schedules (including, addendum to the schedules) which separately identify equipment subject to the Master Equipment Lease and certain additional terms applicable to the lease of such equipment. New schedules may be added under the terms of the Master Equipment Lease from time to time and existing schedules may change. Core Molding Technologies, Inc. will provide any omitted schedule to the Securities and Exchange Commission upon request.
(3) Indicates management contracts or compensatory plans that are required to be filed as an exhibit to this Annual Report on Form 10-K.
EXHIBIT 2(b)2
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This First Amendment to the Agreement and Plan of Merger (the "First Amendment") is entered into as of the 27th day of December, 1996, by and between RYMAC Mortgage Investment Corporation, a Maryland corporation ("RYMAC"), and Core Materials Corporation, a Delaware corporation ("Core Materials");
WITNESSETH:
WHEREAS, RYMAC and Core Materials entered into a certain Agreement and Plan of Merger dated as of November 1, 1996 (the "Agreement"), pursuant to which RYMAC shall be merged with and into Core Materials, and Core Materials shall be the surviving corporation;
WHEREAS, RYMAC and Core Materials desire to amend the Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree to amend the Agreement as follows, said provisions to control whenever inconsistent with the original provisions of the Agreement, and the capitalized terms herein shall have the same meaning as set forth in the Agreement unless stated otherwise herein:
1. Section 6 of the Agreement is hereby amended by adding at the end thereof the following language:
"Anything contained in this Agreement to the contrary notwithstanding, no holder of outstanding shares of Maryland Common Stock shall be entitled to receive a fractional share of Delaware Common Stock. In lieu of such fractional share(s), Core Materials shall make a cash payment therefor valuing said fractional shares based on the market price of Maryland Common Stock on the American Stock Exchange at the close of business on the last business day preceding the Effective Time."
2. Except as expressly amended hereby, the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this First Amendment to be duly executed as of the date first written above.
RYMAC MORTGAGE INVESTMENT
CORPORATION
By:/s/ Richard R. Conte ------------------------------------ Name: Richard R. Conte Title: Chief Executive Officer |
CORE MATERIALS CORPORATION
By:/s/ Richard R. Conte ------------------------------------- Name: Richard R. Conte Title: President |
EXHIBIT 10(e)
This agreement is made effective December 3, 1997, between Core Materials Corporation, a Delaware corporation ("Borrower"), and KeyBank, National Association, a national banking association ("Lender").
A. Borrower has applied to Lender for the Loan (deemed in ss.l, below).
B. Lender has approved Borrower's application for the Loan by the commitment letter dated August 28, 1997, as amended (the "Loan Commitment"), and Lender is willing to make the Loan available to Borrower but only on the terms and subject to the conditions set forth in this agreement and the Loan Documents (defined in ss.2, below).
C. Pursuant to the Loan Commitment, Lender is providing three other credit facilities to Borrower in the form of (i) a $12,000,000 sale/leaseback equipment financing facility (the "Sale/Leaseback"); (ii) a $5,500,000 equipment lease (the "Operating Lease"); and (iii) a standby letter of credit (the "Letter of Credit") to be issued on behalf of Borrower to support the issuance of "Industrial Development Revenue Bonds" (the "Bonds") by Borrower in the approximate amount of $7,500,000. The documents executed by Borrower in connection with the Sale/Leaseback and the Operating Lease, including without limitation the Master Equipment Lease Agreements between Borrower and Lender, are sometimes hereafter collectively referred to as the "Lease Documents."
D. It is presently anticipated that the Letter of Credit will be issued during the first calendar quarter of 1998. The Borrower's obligations relating to the issuance of the Letter of Credit shall be evidenced by a Reimbursement Agreement between Borrower and Lender and such other documents as Lender may require (collectively, the "Letter of Credit Documents"), which shall be executed on or before the date of issuance of the Letter of Credit.
Borrower and Lender acknowledge the accuracy of the foregoing Background Information and agree as follows:
SECTION.l. LOAN; USE OF LOAN PROCEEDS. On the terms and subject to the conditions set forth in this agreement and the Loan Documents (as defined below), Lender shall provide to Borrower and Borrower shall accept from Lender a $7,500,000 revolving loan (the "Loan"). Borrower shall use the proceeds of the Loan to refinance Borrower's existing debt, to finance Borrower's new facility in Gaffney, South Carolina, for working capital, to pay the Fee (defined in ss.5, below), and to pay Lender's Costs (defined in ss.6, below).
SECTION 2. EVIDENCE OF INDEBTEDNESS AND SECURITY FOR THE LOANS. The Loan shall be evidenced by a Revolving Variable Rate Promissory Note (the "Note"), a copy of which is attached to this agreement as Exhibit A and incorporated into this agreement by reference.
The Note, including all extensions, renewals, amendments, modifications and replacements thereof, along with all of Borrower's obligations under this agreement and the other Loan Documents (defined below), shall be secured by:
(a) a first priority security interest in all business assets of Borrower, including without limitation all inventory, equipment, materials, receivables, instruments, mortgage-backed securities and other tangible and intangible property, excepting the property leased by Borrower as set forth on Schedule l attached hereto ("Leased Property"), (collectively the "Assets");
(b) first priority mortgage liens upon the real and personal property of Borrower located at: (i) 800 Manor Park Drive, Columbus, Ohio (the "Ohio Property"); and (ii) 24 Commerce Drive, Gaffney, South Carolina
(the "South Carolina Property"), such Properties being hereafter sometimes referred to individually as a "Property" and collectively as the "Properties;" and
(c) UCC-1 Financing Statements to perfect Lender's security interest in the Collateral (the "UCC Financing Statements") which will be filed with the following:
(1) Ohio Secretary of State
(2) Franklin County, Ohio Recorder, Real Estate
Records
(3) Franklin County, Ohio Recorder, Personal
Property Records
(4) South Carolina Secretary of State
(5) Cherokee County, South Carolina Recorder,
Real Estate Records
(6) Cherokee County, South Carolina, Personal
Property Records
The security interest described in (a) shall be in the form of a Security Agreement between Borrower and Lender (the "Security Agreement") and the mortgage liens described in (b) shall be in the form of an Open-End Mortgage, Assignment of Rents and Leases and Security Agreement from Borrower to Lender covering the Properties (the "Mortgages"). The Note, Security Agreement, Mortgages, and UCC Financing Statements shall be referred to collectively as the "Loan Documents." The Assets and the Properties shall hereinafter be referred to collectively as the "Collateral."
SECTION 3. RATE OF INTEREST; TERMS OF PAYMENTS: LATE CHARGES; PREPAYMENT CHARGES; AND DEFAULT. The rate of interest, terms of payment, late charges, prepayment charges, and default rates for the Loan shall be those set forth in the Note.
SECTION 4. TERM OF LOAN. The principal balance of the Note and accrued interest thereon shall be due and payable in accordance with the Note and the entire unpaid principal balance of the Note and all accrued interest thereon shall be due and payable on or before the "Maturity Date" as set forth in the Note.
SECTION 5. FEES. At the closing of the Loan (the "Closing"), Borrower
shall pay to Lender a loan fee of $10,000 (the "Fee"). Borrower is also paying
(a) a $25,000 fee in connection with the Sale/Leaseback at the time of its
execution and (b) an origination fee of $20,000, the first annual fee equal to
1% of the face amount of the letter of credit, and an investment banking fee of
$75,000 at the time of the issuance of the Letter of Credit.
Borrower shall also pay to Lender a fee in connection with the Loan equal to one-eighth of one-percent per annum of the unused portion of such Loan during the previous calendar quarter, commencing in the first quarter of 1998, which fee shall be due within fifteen days after receipt of an invoice from Lender.
SECTION 6. COSTS AND EXPENSES. In addition to the payment of the Fee, Borrower shall pay or reimburse Lender, as applicable, for all of Lender's reasonable out-of-pocket costs and expenses relating to, or incidental with, the Loan, including without limitation recording and filing fees, title examination and insurance costs, escrow fees, appraiser's fees, engineer's fees, environmental audit fees, inspection fees, surveyor's fees, costs and expenses relating to administration of the Loan, Lender's attorneys' fees (including costs and expenses) whether incurred before or after the Closing (collectively, "Lender's Costs").
SECTION 7. DEPOSITORY REQUIREMENTS. While any sums advanced under the Loan remain outstanding, Borrower shall maintain its primary depository/cash management relationship with Lender.
SECTION 8. REPRESENTATIONS, WARRANTIES, AND AFFIRMATIVE COVENANTS. Except as specifically set forth on Schedule 2 attached hereto (Exceptions to Representations and Warranties), Borrower represents, warrants, and covenants, as applicable, that all of the following statements are true and correct as of the date of this agreement and shall continue to be true and correct until such time as the Notes are paid in full and all of Borrower's obligations under this agreement and the Loan Documents are satisfied in full:
(a) Borrower is a duly organized and validly existing Delaware corporation in good standing under the laws of the State of Delaware, and is qualified to do business and is in good standing in each other jurisdiction where Borrower's operations require it to be so qualified, including without limitation in the States of Ohio and South Carolina.
(b) Except as noted on Schedule 2, as of the Closing, there has been no material adverse change in Borrower's financial statements and other documents and materials submitted to Lender with Borrower's application for the Loan since the period covered by such statements, documents and materials.
(c) Borrower has not employed or engaged any broker, finder, or agent who may claim a commission or fee relating to the Loan, and Borrower shall indemnify and hold Lender harmless from any such claim, demand, or litigation resulting therefrom.
(d) Borrower has full power and authority to execute and deliver this agreement and the Loan Documents and to perform and observe its obligations under this agreement and the Loan Documents; and this agreement and the Loan Documents have been duly and validly executed and delivered by Borrower, and are the legal, valid, and binding obligations of Borrower enforceable in accordance with their respective terms.
(e) Neither the execution or delivery of this agreement or the Loan Documents, nor the consummation of any of the transactions contemplated in this agreement or the Loan Documents, nor compliance with the terms and provisions in this agreement or the Loan Documents, will contravene or conflict with: (i) any provision of law, statute, or regulation to which Borrower or any of its properties is subject; (ii) any judgment, license, order, or permit applicable to Borrower or any of its properties; (iii) any indenture, mortgage, or other agreement or instrument to which Borrower is a party or by which Borrower or any of its properties is subject or bound; or (iv) Borrower's certificate of incorporation, by-laws, qualifications to do business in any state, or any actions or proceedings of Borrower. No consent, approval, authorization, or order of any court or governmental authority or third party is required in connection with the execution, delivery, and performance by Borrower of this agreement or the Loan Documents.
(f) Borrower is not in material default under any agreement, indenture, mortgage, deed of trust, security agreement, lease, franchise, or other obligation to which it is a party or by which it or any of its property is bound. Borrower is not in violation of any law, ordinance, governmental rule, or regulation to which it is subject, which violation might materially adversely affect the business, prospects, profits, properties, or financial condition of Borrower. No event has occurred and is continuing which constitutes an Event of Default (as defined in ss.13, below) or would, with the lapse of time or giving of notice or both, constitute such a default.
(g) There are no claims, suits, or causes of action (whether legal, equitable, or administrative) pending or threatened against Borrower which will or may materially adversely affect the properties, business, prospects, profits, or financial condition of Borrower or the ability of Borrower to consummate or perform the transactions contemplated by this agreement or the Loan Documents.
(h) Borrower is not in default or delinquent in the payment of any type of material tax or assessment with any governmental entity.
(i) As of the Closing, there is no fact that Borrower has not disclosed in writing to Lender which could materially or adversely affect the properties, business, prospects, or conditions (financial or other) of Borrower.
(j) Borrower shall use the proceeds of the Loan solely for those uses permitted under ss.l.
(k) Borrower shall furnish to Lender, promptly upon becoming aware of the existence of any condition or event constituting an Event of Default, or which, with the giving of notice or lapse of time or
both,
would constitute an Event of Default under this agreement or any Loan Document, a written notice specifying the nature and period of existence thereof, and what action Borrower is taking or proposes to take with respect thereto.
(l) Borrower shall maintain proper books of account and records containing entries of all of the transactions entered into by Borrower in accordance with generally accepted accounting principles.
(m) Upon reasonable advance notice (oral or written), Borrower shall provide Lender and Lender's employees and agents access to the Collateral to examine the existence and condition of such Collateral, which shall include but not be limited to reviewing (and, in the event of default, making copies of) all of Borrower's books and records relating thereto.
(n) Borrower shall maintain liability and all-risk (hazard) insurance coverage on all of the Collateral in amounts reasonably satisfactory to Lender. Such insurance coverages shall be issued by an insurance company (or companies) acceptable to Lender, shall contain such terms and be in such amounts acceptable to Lender, shall name Lender as an additional named insured and loss payee, shall provide Lender with written notice 30 days prior to the expiration, cancellation, non-renewal, or amendment of such policy (or policies). Borrower shall, from time to time upon the reasonable request of Lender, provide Lender with copies of the binder (or binders) and the policy (or policies) to evidence the coverage required under this section.
(o) Borrower shall pay when due all taxes, assessments, and other governmental charges imposed upon it or its assets, franchises, business, income, or profits before any penalty or interest accrues thereon, and all claims (including without limitation claims for labor, services, materials, and supplies) for sums which by law might be a lien or charge upon any of its assets; provided that (unless any material item or property would be lost, forfeited, or materially damaged as a result thereof) Borrower's failure to pay any such tax, assessment or charge shall not be a default if Borrower pays the same within 30 days after Borrower becomes aware that the same is overdue or if it is being diligently contested in good faith by Borrower and, if such contested charges, together with all interest and penalties thereon, exceeds $250,000, if Lender is notified in advance of such contest and receives adequate reserve or other appropriate security (including without limitation demonstrated financial capacity of Borrower to pay same) reasonably acceptable to Lender to protect the Lender against any loss therefrom.
(p) Borrower shall deliver, or cause to be delivered, to
Lender: (i) monthly internally prepared financial statements for
Borrower certified as being true, accurate, and complete by an officer
of Borrower, not later than 50 days after the expiration of each month;
(ii) quarterly and annual covenant compliance certificates for Borrower
certified as being true, accurate, and complete by an officer of
Borrower, relating to those covenants described in ss.11, below, not
later than 50 days after the expiration of each fiscal quarter and 95
days after expiration of each fiscal year, as applicable, of the
Company; (iii) year-end financial statements prepared in accordance
with generally accepted accounting principles for Borrower, audited by
a firm of independent accountants, not later than 95 days after the
expiration of each fiscal year of Borrower; and (iv) all other
information or documentation (financial or otherwise), including
without limitation, financial statements, tax returns, income
statements, balance sheets, accounts receivable and account payable
agings relating to Borrower upon reasonable request of Lender from time
to time.
(q) Borrower has good and marketable title to all of its properties and assets, including without limitation the Collateral. The attached Schedule 1 sets forth all real or personal property leased by Borrower. All such properties and assets are free from liens or encumbrances, other than (1) the liens in favor of Mellon Bank which Borrower is causing to be terminated and released of record contemporaneously with the execution and delivery of this agreement, and (2) the liens in favor of Navistar International Transportation Corp., a Delaware corporation ("Navistar"), which are being subordinated to the liens of Lender pursuant to a subordination agreement, dated on or about this same date (the "Subordination Agreement"). The amount of outstanding principal and interest owed by Borrower to Navistar, at any given point in time, is hereinafter referred to as the "Subordinated Debt." Borrower shall not cause or permit any other liens or encumbrances to affect or attach to any such properties
and assets, whether now owned or hereafter acquired, without the prior written consent of Lender, except for purchase money liens for assets purchased by Borrower after the Closing.
SECTION 9. EVIDENCE OF TITLE. Prior to the Closing, Borrower shall furnish to Lender ALTA mortgagee's title insurance commitments with extended coverage (i.e., without any of the standard exceptions) (the "Title Commitments") for the Properties (in the amount of $7,500,000 on the Ohio Property and $5,000,000 on the South Carolina Property), with such provisions for reinsurance or co-insurance as Lender may require, written by a title insurance company acceptable to Lender, which bind the title insurance company to insure Lender that Borrower will have, upon Closing, good and marketable title to the respective Property covered thereby, and that each Mortgage will be the first lien on the respective Property to which it applies. The Title Commitment shall show each Property to be free and clear of all defects, liens, encumbrances, security interests, restrictions and easements which are not acceptable to Lender or which would unreasonably interfere with the present use of such Property. The Title Commitments shall contain all affirmative coverages and endorsements as may be required by Lender in its discretion, including without limitation affirmative coverage that the Property covered thereby has ingress and egress to a publicly dedicated street. The title policies issued pursuant to the Title Commitments (the "Title Policies") shall be delivered to Lender within 15 days after the Closing. Both the Title Commitments and the Title Policies shall show Lender as the insured, and shall contain no exceptions except those specifically approved by Lender. Prior to Closing, Borrower shall execute and deliver a no-lien affidavit and such agreements, affidavits, waivers, bonds, and indemnities as are desired or required by either Lender or the title insurance company to issue the Title Commitments and Title Policies.
Lender shall be provided with an insured closing letter from the title insurance company regarding the title agent, if any. Lender reserves the right to require reinsurance in such amounts and from such companies as may be acceptable to Lender (such reinsurance to be evidenced by an ALTA Reinsurance Agreement with provisions for direct access).
SECTION 10. SURVEY AND SURVEYOR'S CERTIFICATION. Prior to the Closing, Borrower shall furnish to Lender a current survey of each of the Properties prepared in accordance with the minimum detail requirements for land title surveys, including without limitation those items set forth in "Table A," as adopted by the American Land Title Association and the American Congress on Surveying and Mapping (version 1992) (the "Survey"). The Surveys shall: (a) be prepared by a surveyor registered in the State in which the Property is located; and (b) show: (i) all of the boundaries of the Property; (ii) the location of any improvements on the Property (including all dimensions thereof); (iii) all easements and encumbrances set forth in the Title Commitment, setback lines, deviations between survey lines and title lines, rights-of-way, encroachments, bench marks; and (iv) all utility lines (water, sewer, gas, electric, and telephone); and (c) depict any other matters requested by Lender. In addition, the Surveys must contain a full legal description of the Property covered thereby, certification of square footage and acreage, identification of adjacent and contiguous streets as well as measurements to the nearest intersection. The Surveys shall contain a surveyor's certification in form and substance satisfactory to Lender, including a certification that, other than the area set forth on the Surveys and disclosed to Lender, the Property is located within a HUD-designated flood hazard area.
SECTION 11. NEGATIVE COVENANTS. In addition to the affirmative covenants set forth in ss.8, until such time as the Notes are paid in full and all of Borrower's obligations under this agreement and the Loan Documents are satisfied in full, Borrower shall:
(a) Not permit the Maximum Senior Funded Debt to EBITDA Ratio (as defined below) to exceed 4.0:1.00 as determined at the end of each fiscal quarter, commencing December 31, 1998, calculated for the four quarters then ended.
(b) Not permit the Minimum Fixed Charge Coverage Ratio (defined below) to be less than 1.10:1.00 as determined at the end of each fiscal quarter, commencing with the quarter ending December 31, 1999, calculated for the four quarters then ended.
(c) Not permit the Minimum Debt Service Coverage Ratio (defined below) to be less than 1.50:1.00 as determined at the end of each fiscal quarter, commencing March 31, 1998, for the fiscal quarter then ended; June
30, 1998, for the two fiscal quarters then ended; September 30, 1998, for the three fiscal quarters then ended; and December 31, 1998, and each fiscal quarter thereafter for the four quarters then ended.
(d) Not incur Unfunded Capital Expenditures (as defined below) in excess of $5,500,000 during the fiscal year ending December 31, 1998.
For purposes of this section:
(i) "Maximum Senior Funded Debt to EBITDA Ratio" shall mean the (A) sum of the commitment amount of the Loan ($7,500,000 as of the date hereof), the total Sale/Leaseback obligations, and the outstanding principal balances of the Industrial Development Revenue Bonds and any other permitted debt (other than the Subordinated Debt) divided by (B) EBITDA (as defined below).
(ii) "Minimum Fixed Charge Coverage Ratio" shall mean the sum of EBITDA and rent (lease) expense, including without limitation rent payments in connection with the Sale/Leaseback and the Operating Lease, for a given period, divided by the sum of (A) interest expense (which shall not include interest on the Subordinated Debt which is deferred and not paid), (B) rent (lease) expense, including without limitation rent payments in connection with the Sale/Leaseback and Operating Lease, (C) principal payments on the Subordinated Debt, the Bonds and any other permitted debt, and (D) Unfunded Capital Expenditures in the amounts disclosed by Borrower in its financial statements, for such period.
(iii) "Minimum Debt Service Coverage Ratio" shall mean the sum of EBITDA and rent (lease) expense, including without limitation rent payments in connection with the Sale/Leaseback and the Operating Lease, for a given period, divided by the sum of (A) interest expense (which shall not include interest on the Subordinated Debt which is deferred and not paid), (B) rent (lease) expense, including without limitation rent payments in connection with the Sale/Leaseback and Operating Lease, and (C) principal payments on the Subordinated Debt, the Bonds and any other permitted debt, for such period.
(iv) "EBITDA" shall mean, for any period, (A) the sum of the amounts for such period of (1) net income, (2) interest expense, (3) charges for federal, state, local and foreign income taxes, (4) depreciation and amortization expense, and (5) extraordinary losses (and any unusual losses arising outside the ordinary course of business not included in extraordinary losses determined in accordance with generally accepted accounting principles) minus (B) the sum of the amounts for such period of (1) extraordinary gains (and any unusual gains arising outside the ordinary course of business not included in extraordinary gains determined in accordance with generally accepted accounting principles) and (2) to the extent not deducted from total interest expense, any net payments received during such period under interest rate contracts and any interest income received in respect of cash investments.
(v) "Unfunded Capital Expenditures" shall mean any capital expenditure made for which no long-term funding source is specifically available.
SECTION 12. CLOSING DELIVERIES. At or prior to the Closing, Borrower shall have delivered or cause to be delivered to Lender, unless specifically waived by Lender in writing, the following items, each of which shall be in form and content satisfactory to Lender:
(a) Fully-executed originals of this agreement and all of the Loan Documents.
(b) All items, instruments, documents, insurance policies, title commitments, surveys, opinions, certificates, and all other matters and documents required to be furnished by Borrower at or prior to the Closing under this agreement or any of the Loan Documents or otherwise required by Lender.
(c) Payment of the Fee and payment or reimbursement of all of Lender's Costs.
(d) An environmental audit for each Property prepared by a firm acceptable to Lender which audit contains findings acceptable to Lender.
(e) The Surveys as required under ss.10.
(f) Confirmation satisfactory to Lender that no Event of Default exists and no condition which through notice or passage of time or both would cause or result in an Event of Default and that all representations and warranties contained in this agreement and all of the Loan Documents shall be true and complete in all material respects.
(g) Copies of all applicable governmental permits required to operate Borrower's business and evidence of, and compliance with, all governmental laws, regulations, ordinances, and other requirements pertaining thereto.
(h) The Title Commitments and any affidavits, agreements, indemnities, or other documentation to be delivered by Borrower to Lender or the title insurance company in accordance with ss.9.
(i) The Subordination Agreement signed by Navistar, together with the mortgage subordination and UCC-3 financing statements referred to therein.
Notwithstanding anything here to the contrary, the agreement of Lender to execute, deliver and/or accept this agreement and the other Loan Documents at Closing prior to its receipt of all of the items listed above shall not be construed as a waiver by Lender of its right to receive, review and approve such items, nor as a waiver of all or any of the conditions to disbursement of Loan proceeds under ss.16, below.
SECTION 13. EVENTS OF DEFAULT. The occurrence of any of the following events shall be an Event of Default under this agreement and all of the Loan Documents.
(a) The determination by Lender that any representation or warranty made by Borrower in this agreement (including without limitation those representations and warranties set forth in ss.8) or any of the Loan Documents is untrue or was untrue in any material (as determined by Lender) respect when made.
(b) The failure by Borrower to pay the full amount of any installment of interest or principal and interest, within 5 days alter the same is due under the Note.
(c) The failure by Borrower to perform or observe any covenant, condition, or obligation contained in this agreement or any of the Loan Documents (excluding those monetary obligations covered under (b), above, and excluding the representations and warranties covered under (a), above) which failure continues uncured for 15 days after delivery by Lender to Borrower of notice of such failure.
(d) The occurrence of any default described in ss.14.
(e) The filing of a voluntary or involuntary petition in bankruptcy or insolvency or for reorganization, arrangement, adjustment, liquidation, dissolution or composition or for the appointment of a receiver, guardian, or trustee by or against Borrower, provided that if such petition is an involuntary petition, Borrower shall have 25 days from the date of such filing to have the same discharged.
(f) The making of an assignment for the benefit of creditors by Borrower, or at such time as Borrower fails generally to pay its debts as they become due.
(g) The appointment of a receiver or trustee for all or any portion of the Collateral.
(h) The dissolution, merger, reorganization, or other change in the corporate structure of Borrower, without the prior written consent of Lender.
(i) The transfer or attempted transfer by Borrower of any legal or equitable ownership interest in all or any portion of the Collateral, except for sales in the ordinary course of Borrower's business, without the prior written consent of Lender, which consent may be withheld in Lender's sole discretion.
(j) The determination by Lender that the condition of all or any portion of the Collateral has deteriorated to the extent that Lender's security has been materially impaired.
(k) The entry of a material judgment or lien against Borrower which is not satisfied, discharged or bonded-off, or any collection action relating to such judgment or lien is not stayed so as to prevent the issuance of a certificate of judgment against Borrower, within 10 days alter the date of entry of such judgment or lien.
(l) Any change in the financial position of Borrower which, in the reasonable opinion of Lender, materially and adversely affects Lender's security position with respect to the Collateral.
(m) The concealment or removal by Borrower of any part of its property with intent to hinder, delay, or defraud its creditors or any of them, or the making or suffering of a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance, or similar law, or the making by Borrower of any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid, or any other action by Borrower which results in Borrower permitting any creditor to obtain a lien upon any of its property through legal proceedings which is not vacated within 10 days from the date thereof.
(n) The failure by Borrower to pay the full amount of any payment when due, including any applicable grace period therein, or to observe or perform any of its other obligations under the Lease Documents.
(o) The occurrence of any material default by Borrower under its supply agreement with Navistar.
Upon the occurrence of any of the above-described events,
Lender may declare the Note due and payable upon demand without presentment,
protest, notice, or demand of any kind. Borrower shall not have the opportunity
to cure any default if such failure is incapable of being cured, in Lender's
reasonable discretion, or if the failure is described under any of (a), (b),
(d), (e), (f), (g), (h), (i), (j) and (n).
SECTION 14. CROSS DEFAULT. Any default by Borrower of any obligation of Borrower to Lender or any of Lender's affiliates, whether or not relating to the Loan, including without limitation any default under the Lease Documents or the Letter of Credit Documents, shall constitute an Event of Default under this agreement and all of the Loan Documents.
SECTION 15. EXISTENCE AND AUTHORITY OPINION OF COUNSEL. At or prior to the Closing, Borrower shall furnish or cause to be furnished to Lender:
(a) Evidence satisfactory to Lender that Borrower has the authority under its organizational documents to enter into this agreement and the Loan Documents, and to perform all of its covenants and obligations under those documents.
(b) Certified copy of Borrower's certificate of incorporation filed with the Delaware Secretary of State.
(c) Certificate of foreign qualification (or authorization to do business) for Borrower from the Secretary of State of the following jurisdictions:
(i) Ohio, and
(ii) South Carolina.
(d) Certificate of good standing for Borrower from the Secretary of State of the following jurisdictions:
(i) Delaware,
(ii) Ohio, and
(iii) South Carolina.
(e) Copy of Borrower's bylaws certified by the Borrower's secretary.
(f) Certified corporate resolution of Borrower approving the Loan and authorizing an officer of Borrower to execute this agreement and all of the Loan Documents on behalf of Borrower.
(g) A written opinion of counsel for Borrower in form and substance satisfactory to Lender.
SECTION 16. PROCEDURE FOR BORROWING UNDER LOAN. Provided all conditions described in the following paragraph are satisfied, Borrower may borrow under the Loan on any Business Day (meaning a day other than a Saturday, Sunday or other day on which commercial banks in Columbus, Ohio, are authorized or required by law to close) provided that the Borrower gives the Lender telephonic or written notice (each, a "Notice of Borrowing") which must be received by the Lender prior to 1:00 p.m., Columbus, Ohio, time, on the requested Borrowing Date for each Loan disbursement, specifying (i) the requested Borrowing Date of such borrowing, which shall be a Business Day and (ii) the aggregate amount of such requested Borrowing. Each borrowing pursuant to the Loan shall be in an aggregate principal amount equal to $50,000 plus whole multiples of $5,000. Upon receipt of each such Notice of Borrowing from the Borrower, the Lender shall deposit such requested borrowing for the benefit of the Borrower on the requested Borrowing Date, subject to the satisfaction of the terms and conditions of this agreement, by crediting the loan account on the books of the Lender in the amount of such requested borrowing. Lender is hereby authorized, and may at its option, but shall have no obligation, to record the date and amount of each borrowing made in connection with the Loan, and the date and the amount of each payment or prepayment of principal thereof, on its separate written or electronic records maintained in the ordinary course of its business, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded; however, the failure of the Lender to make such recordations shall not effect the obligations of the Borrower to repay outstanding principal, interest or any other amounts due hereunder or under the Note in accordance with the terms hereof and thereof.
The obligation of Lender to make disbursements of the Loan to Borrower pursuant to the Note and this agreement is subject to the full satisfaction, in the opinion of Lender, of each of the following conditions:
(a) The representations, warranties and covenants made by Borrower in this agreement or any other Loan Document, and any representations, warranties and covenants made by Borrower which are contained in any certificate, document or financial or other statement furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects as of the date the Lender makes a disbursement to Borrower pursuant to the Revolving Note (the "Borrowing Date").
(b) No Event of Default shall have occurred and be continuing on the Borrowing Date.
(c) All resolutions, certificates, corporate and other proceedings and all other documents and legal matters in connection with the transactions contemplated by this agreement and the Loan Documents, shall all have been provided, and shall be in form and substance reasonably satisfactory to Lender prior to the Borrowing Date.
(d) No petition for voluntary or involuntary bankruptcy or insolvency or for reorganization, arrangement, adjustment, liquidation, dissolution or composition or for the appointment of a receiver, guardian, or trustee has been filed by or against Borrower.
Each time Lender provides a loan to Borrower under the Note pursuant to a request by Borrower, it shall constitute a representation, warranty and covenant by each Borrower that as of the Borrowing Date the conditions contained in paragraphs (a), (b), (c) and (d) of this ss.16 have been fully satisfied.
SECTION 17. ASSIGNMENT. No rights under this agreement nor in or to the proceeds of the Loan may be assigned by Borrower without the prior written consent of Lender.
SECTION 18. NON-WAIVER. No failure by either party to insist upon strict compliance with any term of this agreement or to exercise any option, enforce any right, or seek any remedy upon any default of the other party shall affect, or constitute a waiver of, the first party's right to insist upon that strict compliance, exercise that option, enforce that right, or seek that remedy with respect to that default or any prior, contemporaneous, or subsequent default. No custom or practice of the parties at variance with any provision of this agreement shall affect, or constitute a waiver of, either party's right to demand strict compliance with the provisions of this agreement.
Section 19. NOTICES. All notices and other communications under this agreement to be made to either Lender or Borrower shall be in writing and shall be deemed given when delivered personally, telecopied (which is confirmed electronically), or mailed by certified mail (return receipt requested) or sent by Federal Express, UPS, or other nationally recognized overnight delivery service for overnight delivery to that party at the address for that party (or at such other address for such party as such party shall have specified in notice to the other party):
(a) If to Lender:
KeyBank, National Association 88 East Broad Street Columbus, Ohio 43215 Attention: Roger D. Campbell Telecopy No. (614) 460-3469
With a copy to:
Baker & Hostetler LLP 65 East State Street, Suite 2100 Columbus, Ohio 43215 Attention: Kevin H. Connor, Esq.
Telecopy No. (614) 462-2616
(b) If to Borrower:
Core Materials Corporation 800 Manor Park Drive Post Office Box 28183 Columbus, Ohio 43228 Attention: Kevin L. Barnett Telecopy No. (614) 870-4028
With a copy to:
Vorys, Sater, Seymour & Pease 52 East Gay Street Columbus, Ohio 43216-1008 Attention: Phil Johnston, Esq.
Telecopy No. (614) 464-6350
SECTION 20. GOVERNING LAW. All questions concerning the validity or meaning of this agreement or relating to the rights and obligations of the parties with respect to performance under this agreement shall be construed and resolved under the laws of Ohio.
SECTION 21. VENUE. The parties to this agreement hereby designate the Court of Common Pleas of Franklin County, Ohio, as a court of proper jurisdiction and exclusive venue for any actions or proceedings relating to this agreement; hereby irrevocably consent to such designation, jurisdiction, and venue; and hereby waive any objections or defenses relating to jurisdiction or venue with respect to any action or proceeding initiated in the Court of Common Pleas of Franklin County, Ohio.
SECTION 22. SEVERABILITY. It is the intention of the parties to comply fully with all laws and public policies, and this agreement shall be construed consistently with such laws and public policies to the extent possible. If and to the extent that any court of competent jurisdiction is unable to so construe any provision of this agreement and holds that provision to be invalid, that invalidity shall not affect the remaining provisions of this agreement, which shall remain in full force and effect.
SECTION 23. TIME IS OF THE ESSENCE. Time is of the essence relating to this agreement and with respect to all other obligations to be performed under this agreement, but delay in the exercise by Lender of its rights hereunder shall not be deemed a waiver of such right by Lender.
SECTION 24. CAPTIONS. The captions at the beginning of the sections and several subsections of this agreement are not part of the context of this agreement, but are only labels to assist in locating those sections and subsections, and shall be ignored in construing this agreement.
SECTION 25. JURY TRIAL WAIVER. Borrower, after consulting or having the opportunity to consult with legal counsel, knowingly, voluntarily and intentionally waives any right it may have to a trial by jury in any action or proceeding based upon or arising out of this agreement or any of the Loan Documents or any course of conduct, dealings, statements, whether oral or written, or actions of either party. Borrower shall not seek to consolidate, by counterclaim or otherwise, any action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived.
SECTION 26. NO THIRD PARTY BENEFIT. This agreement is intended for the exclusive benefit of the parties and their respective heirs, successors and assigns. Nothing contained in this agreement shall be construed as creating any rights or benefits in or to any third party.
SECTION 27. COMPLETE AGREEMENT. This document, along with the Loan Documents, contains the entire agreement among the parties and supersedes any prior discussions, negotiations, representations, or agreements among them respecting
the subject matter. No additions or other changes to this agreement shall be made or be binding unless made in writing and signed by each party to this agreement.
CORE MATERIALS CORPORATION KEYBANK, NATIONAL ASSOCIATION
By: /S/ KEVIN L. BARNETT By: /s/ ROGER D. CAMPBELL
--------------------------------- ---------------------------
Kevin L. Barnett, Vice President Roger D. Campbell, Senior
and Chief Financial Office Vice President
|
$7,500,000.00 December _____ , 1997
For value received, the undersigned, Core Materials Corporation, a Delaware corporation, with offices at 800 Manor Park Drive, Columbus, Ohio 43228 (hereinafter referred to as "Maker") promises to pay to the order of KeyBank, National Association, a national banking association (hereinafter referred to as "Payee," which term shall include any holder hereof), at its principal place of business at 88 East Broad Street, Columbus, Ohio 43215, or at such other place as Payee may designate, the principal sum of Seven Million Five Hundred Thousand Dollars ($7,500,000), or so much thereof as may be advanced by Payee to Maker from time to time, together with all charges herein provided and interest on the unrepaid advances of said principal sum from date of disbursement by Payee, payable in cash at the rates and in the manner hereinafter set forth.
1.1 The following terms wherever used in this Note shall have the following meanings:
"Collateral" shall mean all accounts receivable, equipment, inventory and mortgage-backed securities owned by Maker, as more particularly described in the Security Agreement.
"Default Rate of Interest" shall mean the rate equal to two percent per annum plus the applicable rate of interest being charged hereunder.
"Designated LIBOR Rate" shall mean the applicable LIBOR Rate elected by Maker in the applicable Interest Rate Notice of Election.
"Designated LIBOR Rate Amount" shall mean the amount of outstanding principal designated by Maker in an Interest Rate Notice of Election to be converted from being charged interest hereunder from the variable Rate to a LIBOR rate; provided that such amount designated by Maker shall not be less than $250,000.
"Interest Rate Conversion Option" shall mean the option of Maker to convert the interest rate being charged hereunder on a Designated LIBOR Rate Amount for the LIBOR Period from the variable Rate to a LIBOR Rate.
"Interest Rate Conversion Date" shall mean that date which is the first day of the first month immediately following receipt by Payee of an applicable Interest Rate Notice of Election.
"Interest Rate Notice of Election" shall mean the written or oral
(provided written confirmation is received by Payee by the next business day)
statement of maker to Payee informing Payee of Maker's election to exercise the
Interest Rate Conversion Option and containing such additional information as is
required to permit Payee to effectively convert the rate of interest, including
without limitation the Designated LIBOR Rate Amount.
"LIBOR Business Days" shall mean business days in which dealings in dollars are carried out in the London Interbank Market.
"LIBOR Period" shall mean a period of time equal in duration to 30 days, but in no event a period extending beyond the Maturity Date.
"LIBOR Rate" shall mean the rate per annum equal to (i) two percent, plus (ii) a rate determined pursuant to the following formula:
"LIBOR Reserve Percentage" shall mean the reserve requirement including any supplemental and emergency reserves (expressed as a percentage) applicable to member banks of the Federal Reserve System in respect of "Eurocurrency Liabilities" under Regulation D of the Board of Governors of the Federal Reserve System, or any substituted or amended reserve requirement hereinafter applicable to member banks of the Federal Reserve System, which is in effect as of the applicable Interest Rate Conversion Date and taking into account any transitional requirements thereto becoming effective during the applicable LIBOR Period.
"Loan Agreement" shall mean that certain Loan Agreement dated December ___, 1997, pursuant to which the principal amount of this Note is to be disbursed, by which Payee agrees to loan funds to Maker pursuant to the terms and conditions stated therein.
"Loan Documents" shall collectively mean this Note, the Security Agreement, Loan Agreement and any other instrument, affidavit, certificate or document heretofore, now or hereafter given by Maker in connection with the closing of the loan evidenced by this Note.
"London Interbank Market" shall mean the buying and selling of dollar deposits payable outside the United States of America between Payee and other financial institutions in the ordinary course of Payee's business.
"London Interbank Rate" shall mean the per annum rate of interest (rounded upward to the nearest 1/8 of 1%) at which United States dollar deposits in immediately available and freely transferable funds, would be offered to Payee on the applicable Interest Rate Conversion Date as of 10:00 a.m. New York City time (or at such time on the next LIBOR Business Day closest to the Interest Rate Conversion Date), which deposits are in immediately available funds, for a period comparable to the applicable LIBOR Period and in an amount comparable to the specified Designated LIBOR Rate Amount.
"Maturity Date" shall mean November 30, 1999.
"Note" shall mean this Variable Rate Cognovit Promissory Note.
"Prime Rate" shall mean the interest rate established and announced from time to time by Maker as its prime rate, based upon its consideration of economic, money market, business and competitive factors, and it is not necessarily the most favorable rate of Maker. Each change in said Prime Rate shall, without notice, automatically and immediately change the rate of interest due hereon.
"Rate Quote" shall mean any rate quoted to Maker by Payee in response to a Rate Quote Request, which response may be made either verbally or in writing and shall include the duration of the quote. If the quote is verbal, Payee's internal rate sheet on the date of such quote shall be conclusive evidence of the rate quoted. Unless specified otherwise, a Rate Quote shall be deemed valid for 24 hours.
"Rate Quote Request" shall mean a request by Maker to Payee to quote any rate of interest available hereunder pursuant to Maker's Interest Rate Conversion Option, which request shall be made either verbally or in writing and shall contain all necessary information required by Payee in order to give a Rate Quote.
"Reconversion Date" shall mean the first day immediately following the last day of the applicable LIBOR Period.
"Security Agreement" shall mean a certain Security Agreement dated December ___, 1997, pursuant to which Maker has granted to Payee a security interest in the Collateral to secure payment of this Note.
"Variable Rate" shall mean the rate equal to the Prime Rate.
2.1 From and after the date of this Note, interest on the unrepaid advances of the principal sum from date of disbursement by Payee at the Variable Rate shall be due and payable monthly on the first day of each month commencing January, 1998, and continuing on the first day of each month thereafter through the Maturity Date. Notwithstanding the foregoing, Maker shall have the option to convert the interest rate charged on all or portions of the outstanding principal balance to a LIBOR Rate as set forth in Section 2.2 hereof. In the event Maker shall effectively convert the interest charged on all or portions of the outstanding principal balance pursuant to Section 2.2, interest on such portions shall accrue and be due and payable as set forth in Section 2.2.
2.2 Maker may, at any time, exercise Maker's Interest Rate Conversion Option to convert the interest rate payable hereunder on a Designated LIBOR Rate Amount from the variable Rate to a LIBOR Rate for the LIBOR Period. Maker shall be entitled to request a Rate Quote from Payee by submitting a Rate Quote Request. In the event Maker desires to accept a Rate Quote, Maker shall deliver to Payee an Interest Rate Notice of Election. In the event Maker shall effectively elect a LIBOR Rate, commencing on the applicable Interest Rate Conversion Date, interest on the applicable Designated LIBOR Rate Amount shall accrue at the LIBOR Rate indicated in the applicable Rate Quote and interest payments shall be due and payable monthly at such LIBOR Rate for the applicable LIBOR Period, commencing on the first day of the first month next immediately following the applicable Interest Rate Conversion Date and continuing through the applicable Reconversion Date, at which time the interest rate payable hereunder on such Designated LIBOR Rate Amount shall automatically reconvert to the Variable Rate and monthly payments shall be due and payable in accordance with Section 2.1, above, thereafter throughout the balance of the term of this Note, unless reconverted by Maker's re-exercise of an Interest Rate Conversion Option, in which case a new LIBOR Rate and LIBOR Period shall then be determined.
2.3 All interest payable in accordance with this Note shall be calculated on the basis of the actual number of calendar days elapsed but computed on a daily basis as if each year consisted of 360 days.
2.4 All principal and all accrued and unpaid interest shall be due and payable in full on the Maturity Date.
2.5 In the event that any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect, or any interpretation
or administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by Payee with any
request or directive of any such authority (whether or not having the force of
law) (each of the foregoing being referred to as a "Regulatory Requirement"),
shall (a) affect the basis of taxation or payments to Payee of any Designated
LIBOR Rate Amount under this Note (other than taxes imposed on the overall net
income of Payee by the jurisdiction, or by any political subdivision or taxing
authority of any such jurisdictions in which Payee has its principal office), or
(b) shall impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by Payee, or (c) shall impose any other condition, requirement
or charge with respect to this Note or the Loan Documents (including, without
limitation, any capital adequacy requirement, any requirement which affects the
manner in which Payee allocates capital resources to its commitments or any
similar requirement), and the result of any of the foregoing change in external
conditions is to increase the actual cost to Payee of making or maintaining the
loan evidenced by this Note (the "Loan") or any advance hereunder, to reduce the
actual amount of any sum receivable by Payee thereon, or to reduce the actual
rate of return on the capital of Payee from the actual cost, sum receivable or
rate of return applicable on the date of this Note, then Maker shall pay to
Payee, from time to time, upon request of Payee, additional amounts sufficient
to compensate Payee for such increased cost, reduced sum receivable or reduced
rate of return (collectively, "Reduced Earnings") to the extent Payee is not
compensated therefor in the computation of the interest rates applicable to the
Loan. A detailed statement as to the amount of such increased cost, reduced sum
receivable or reduced rate of return, prepared in good faith and submitted by
Payee to Maker, shall be conclusive and binding for all purposes, absent
manifest error in determination. Payee shall promptly notify Maker of any event
occurring after the date of this Note that entitles Payee to additional
compensation pursuant to this Section. This provision is for the benefit of
Payee and is not intended to increase the yield to payee above the rates of
interest provided for in this Note.
2.6 Notwithstanding any other provision of this Note to the contrary,
if, upon receiving an Interest Rate Notice of Election (a) deposits in U.S.
dollars for periods comparable to the LIBOR Period are not available to Payee in
the London Interbank Market, or (b) the LIBOR Rate will not accurately cover the
cost to Payee of making or maintaining the related Designated LIBOR Rate Amount,
or (c) by reason of national or international financial, political or economic
conditions or by reason of any applicable Regulatory Requirement, including
without limitation exchange controls, it is unlawful, impossible or unduly
burdensome for Payee (i) to advance the relevant Designated LIBOR Rate Amount or
(ii) to continue any outstanding sum as a Designated LIBOR Rate Amount or (iii)
to convert any outstanding sum to a Designated LIBOR Rate Amount, then Maker
shall not be entitled, so long as such circumstances continue, to request a
Designated LIBOR Rate Amount or a continuation of or conversion to the LIBOR
Rate for any such outstanding sum from Payee. In the event that such
circumstances no longer exist, Payee shall again consider requests for
Designated LIBOR Rate Amounts and requests for continuation of and conversions
to such advances.
2.7 In the event that any Regulatory Requirement, including without limitation exchange controls, shall make it unlawful or impossible for Payee to maintain any Designated LIBOR Rate Amount under this Note, the Maker shall after receipt of notice thereof from Payee, repay in full the then-outstanding principal amount of all Designated LIBOR Rate Amounts together with all accrued interest thereon to the date of payment and all amounts due to the affected Payee under Section 2.8, (a) on the last day of the then-current LIBOR Period, if any, applicable to such Designated LIBOR Rate Amount, if Payee may lawfully continue to maintain such Designated LIBOR Rate Amount of such day, or (b) immediately if Payee may not continue to maintain such Designated LIBOR Rate Amount to such day. This provision is for the benefit of Payee and is not intended to increase the yield to Payee above the rates of interest provided for in this Note. This Section 2.7 shall apply only as long as such illegality exists. Payee shall use reasonable, lawful efforts to avoid the impact of such law, treaty, rule or regulation. As an alternative to the repayment obligation provided in this Section 2.7, Maker may, at its option, and at the time provided in this Section 2.7, convert any affected advance or a portion thereof to the Variable Rate or to any Designated LIBOR Rate Amount of a duration that remains unaffected by the foregoing external conditions, in each case accompanied by the payment of all accrued interest on the affected advance to the date of conversion and all amounts due to Payee under Section 2.8.
2.8 If Maker makes any payment of principal with respect to any Designated LIBOR Amount on any other date than the last day of a LIBOR Period applicable thereto or if Maker fails to borrow any Designated LIBOR Amount after notice has been given to Payee in accordance with Section 2.2, or fails to make any payment of principal or interest in respect of a Designated LIBOR Amount when due or at the Maturity Date, the Maker shall reimburse Payee on demand for any resulting actual and direct loss or expense incurred by Payee, determined in Payee's reasonable opinion, including without limitation any loss incurred in obtaining, liquidating or employing deposits from third parties. A detailed statement as to the amount of such loss or expense, prepared in good faith and submitted by Payee to Maker, shall be conclusive and binding for all purposes absent manifest error in determination. This provision is for the benefit of Payee and is not intended to increase the yield to Payee above the rates of interest provided for in this Agreement.
2.9 The provisions of sections 2.5 and 2.8 shall survive the termination and payment in full of this Note.
3.1 If any of said payments of principal or interest or any combination thereof are not paid in full within five days after such payment is due, then in addition to the amount of said payment there shall be due, and Maker promises to pay, a late charge in respect of each said payment in the amount of 5% which Maker agrees is a fair and reasonable charge for costs incurred by Payee in processing such late payment and shall not be deemed a penalty.
4.1 This Note evidences a loan in the form of a revolving line of credit, and Maker may, subject to the applicable provisions under this Note and the Loan Agreement, borrow, repay, and reborrow sums an unlimited number of times.
4.2 In the event the applicable rate of interest charged hereunder is the Variable Rate, the privilege is hereby reserved by Maker to prepay this Note in whole or in part at any time and from time to time without premium or penalty, provided that Payee shall receive written notice of Maker's intention to so prepay not less than three days prior to such prepayment and further provided that a payment of all accrued and unpaid interest applicable to the portion of the principal amount to be prepaid, to the date of such prepayment, is included with such prepayment.
4.3 In the event the applicable rate of interest charged hereunder is the LIBOR Rate, Maker may prepay this Note, provided that Payee shall receive written notice of Maker's intention to so prepay not less than three business days prior to such prepayment date ("LIBOR Prepayment Notice") and provided further that: (a) such prepayment shall be of one or more Designated LIBOR Rate Amount(s) in full (no partial prepayment of any Designated LIBOR Rate Amount is permitted); (b) Maker shall indicate on the LIBOR Prepayment Notice which Designated LIBOR Rate Amount(s) are to be prepaid ("Prepayment Amount"); and (c) concurrently with such prepayment Maker shall pay all accrued interest and any late charge or charges then due and owing on the Prepayment Amount. Maker may prepay this Note on the last day of a LIBOR Period in whole or in part without premium or penalty provided that Payee shall receive written or oral notice of Maker's. intention to so prepay not less than one business day prior to such prepayment and further provided that a payment of all accrued and unpaid interest applicable to the portion of the principal amount to be prepaid, to the date of such prepayment, is included with such prepayment.
5.1 The term "Event of Default" shall mean the occurrence of any one or more of the following:
(a) A failure by Maker to make any payment of principal or interest or any combination thereof under this Note within 5 days after the same is due.
(b) The material incorrectness of any representation or warranty made by Maker to Payee in any of the Loan Documents or any financial statement or other document delivered to Payee in connection with the Loan.
(c) The inability of Maker to satisfy any one or more of the conditions specified in the Loan Agreement as precedent to the obligation of Payee to make a loan disbursement after an application for a loan disbursement has been submitted by Maker to Payee.
(d) The failure of Maker to observe, perform or comply with any of the other terms, covenants or conditions of Maker set forth in the Loan Documents and to cure such failure within the time period, if any, specified therein.
5.2 Upon the occurrence of any Event of Default, the entire unpaid balance of principal and interest evidenced by this Note, together with all sums of money advanced by Payee in accordance with the terms of any one or more of the Loan Documents, and all sums due and owing for any late charge or charges hereunder (the foregoing being hereinafter collectively referred to as the "Indebtedness") shall thereupon bear interest at the Default Rate of Interest, and at the option of Payee, all the Indebtedness together with interest at the Default Rate of Interest shall immediately become due and payable ("Acceleration") without demand made therefor and without notice to any person, notice of the exercise of said option being hereby expressly waived, and Payee shall have all remedies of a secured party under law and equity to enforce the payment of all of the Indebtedness, time being of the essence of this Note. The Default Rate of Interest shall be charged to Maker upon the occurrence of any Event of Default notwithstanding any invoices or billing statements sent by Payee to Maker
indicating an interest rate to the contrary. In addition, any waiver of Payee's right to charge the Default Rate of Interest or to accelerate the Indebtedness must be made in writing and cannot be waived by oral representation or the submission to Maker of monthly billing statements.
6.1 The failure of Payee to exercise any option herein provided upon the occurrence of any Event of Default shall not constitute a waiver of the right to exercise such option in the event of any continuing or subsequent Event of Default. Maker hereby agrees that the maturity of all or any part of the Loan may be postponed or extended and that any covenants and conditions contained in this Note or in any of the other Loan Documents may be waived or modified without prejudice to the liability of Maker on said Note or Loan Documents.
6.2 When this Note becomes due, by Acceleration or otherwise, Payee may, at its option, demand, sue for, collect or make any compromise or settlement it deems desirable with reference to property held as security herefor. Payee shall not be bound to take any steps necessary to preserve any rights in the property held as security herefor against prior parties, which Maker hereby assumes to do. Maker expressly authorizes Payee to deal in any manner with any collateral and the security of every kind and character given to secure she payment of Maker's obligations under this Note, and without limiting the generality of the foregoing, Maker expressly authorizes Payee to waive any rights which Payee may have relative to requiring additional collateral or to surrendering or to releasing collateral held by Payee, or to substituting any Collateral held by Payee for other collateral of like kind, or of any kind, nor shall the obligations of Maker under this Note, nor the rights of Payee under the Loan Documents be diminished or in any manner affected by the failure of Payee to exercise its rights with reference to such collateral or in any manner failing to proceed against the collateral or security pledged or conveyed as security for the obligations of Maker under this Note. The provisions hereof shall apply and be controlling as to all properly which may at any time be security herefor.
6.3 Maker hereby authorizes Payee, in its sole discretion, upon the occurrence of an Event of Default, to apply all or any portion of the balance of any account maintained by Maker with Payee to the payment or reduction, in whole or in part, of any and all principal and interest then due, whether by acceleration or otherwise, to Payee under this Note. Upon the occurrence of any Event of Default, Payee shall have the right to setoff against all obligations of Maker to Payee hereunder, whether matured or unmatured, all amounts owing to Maker by Payee, whether or not then due and payable, and all other funds or property of Maker on deposit with or otherwise held in the custody of Payee or any of its affiliates, all without notice to or demand on Maker, such notice and demand being hereby waived.
6.4 Presentment for payment, notice of dishonor, protest, notice of protest and diligence in bringing suit against any party hereto are hereby waived by Maker.
6.5 Maker hereby waives all relief from any and all appraisement or exemption laws now in force or hereafter enacted.
6.6 The obligations evidenced or created by this Note, as well as all waivers of rights by Maker contained herein shall effectively bind and be the obligations and waivers of any and all others who may at any time become liable for the payment of all or any part of this Note, including, without limitation, all indorsers and guarantors.
6.7 Nothing herein contained, nor in any of the other Loan Documents or other documents relating hereto, shall be construed or so operate as to require Maker, or any person liable for the payment of the Loan, to pay interest in an amount or at a rate greater than the highest rate permissible under applicable law. Should any interest or other charges paid by Maker, or any parties liable for the payment of the Loan, result in the computation or earning of interest in excess of the highest rate permissible under applicable law, then any and all such excess shall be and the same is hereby waived by Payee, and all such excess shall be automatically credited against and in reduction of the principal balance, and any portion of said excess which exceeds the principal balance shall be paid by Payee to Maker and any parties liable for the payment of the loan made pursuant to this Note, it being the intent of the parties hereto that under no circumstances shall Maker or any parties
liable for the payment of the loan hereunder, be required to pay interest in excess of the highest rate permissible under applicable law. All Interest paid or agreed to be paid to Payee shall, to the extent permitted under applicable law, be amortized, prorated, allocated and spread throughout the full period until payment in full of this Note, including the period of any renewal or extension thereof, so that interest thereon for such full period shall not exceed the maximum amount permitted by applicable law.
Notwithstanding anything to the contrary herein contained, in the event that the Variable Rate should ever exceed the highest rate permissible under applicable law, thereby causing the interest accruing on the Indebtedness to be limited to such highest rate permissible under applicable law, then any subsequent reduction in the Prime Rate shall not reduce the rate of interest charged hereunder below the highest rate permissible under applicable law until the total amount of interest accrued on the Indebtedness equals the amount of interest which would have accrued on such indebtedness if the Variable Rate had been in effect at all times in the period during which the rate charged thereon was limited to the highest rate permissible under applicable law.
6.8 Maker acknowledges and agrees that all property pledged or assigned by Maker to Payee as security for this Note has been pledged or assigned as security for the entirety of all Indebtedness.
6.9 If any provision (or any part of any provision) contained in this Note shall for any reason be held or deemed to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision (or part thereof) had never been contained herein and the remaining provisions of this Note shall remain in full force and effect.
6.10 Maker hereby agrees to pay to Payee all costs of collecting and securing, and of attempting to collect and to secure this Note, and all costs of foreclosing the Mortgage, including, without limitation, reasonable attorneys' fees, appraisers' fees, court costs, notice charges and title insurance charges, whether such attempt by made by suit, in bankruptcy, or otherwise, and said costs and any other sums due Payee by virtue of this Note or the Mortgage may be included in any judgment or decree rendered.
This Note is delivered in the State of Ohio and is to be governed by and construed in accordance with the laws of the State of Ohio. In addition to any other appropriate jurisdiction determined by Payee, Maker hereby consents to, and by execution of this Note, submits to the personal jurisdiction of the Court of Common Pleas of Franklin County, Ohio and the United States District Court sitting in Columbus, Ohio for the purposes of any judicial proceedings which are instituted for the enforcement of this Note. Maker agrees that venue is proper in said jurisdiction.
CORE MATERIALS CORPORATION
EXHIBIT 10(e)(2)
MODIFICATION AND ALLONGE TO VARIABLE RATE
PROMISSORY NOTE AND LOAN AGREEMENT
This Modification and Allonge to Variable Rate Promissory Note and Loan Agreement ("Agreement") is made effective this 1st day of August, 2002 by and between Core Molding Technologies, Inc., a Delaware corporation formerly known as Core Materials Corporation, a Delaware corporation ("Borrower") and KeyBank National Association, a national banking association ("Lender").
BACKGROUND INFORMATION
A. Borrower delivered its Variable Rate Promissory Note to Lender, dated December 3, 1997 (as subsequently amended, "Note"), evidencing its agreement to repay advances made thereunder up to $7,500,000 and executed a Loan Agreement on even date therewith (as subsequently amended, "Loan Agreement"). The Note, Loan Agreement and other loan documents related thereto are collectively referred to as the "Loan Documents".
B. The Note and Loan Agreement were previously modified to extend the Maturity Date to August 1, 2002.
C. Borrower and Lender desire to amend further the Note and Loan Agreement as provided herein.
The parties hereto acknowledge the accuracy of the foregoing Background Information and for adequate consideration received hereby agree as follows:
AGREEMENT
SECTION 1. CAPITALIZED TERMS. Capitalized terms used herein and not otherwise defined herein shall have the meaning ascribed to them in the Note and/or Loan Agreement.
SECTION 2. MODIFICATION OF MATURITY DATE. The following term set forth in the Note and Loan Agreement shall have the meaning set forth below:
"Maturity Date" shall mean April 30, 2004.
SECTION 3. MODIFICATION OF NOTE. The following terms set forth in the Note shall have the meanings set forth below:
"Variable Rate" the rate equal to the Prime Rate.
SECTION 4. AMENDMENT OF LOAN AGREEMENT. The Loan Agreement is hereby amended as follows:
(a) Section 5, Fees. The second paragraph of Section 5 is hereby deleted in its entirety and replaced with the following:
"Borrower shall also pay a fee to Lender in connection with the Loan equal to 1/8% per annum of the unused portion of such Loan during the previous calendar quarter, which fee shall be due and payable within fifteen (15) days after receipt of an invoice from Lender."
(b) Section 11, paragraph (b) is hereby deleted in its entirety and replaced with the following:
"(b) Borrower shall not permit its Minimum Fixed Charge Coverage Ratio to be less than 1.15 to 1.00 as determined at the end of each fiscal quarter, commencing September 30, 2002. This ratio shall be tested quarterly on a rolling four (4) quarters basis. For purposes of this paragraph Borrower's fiscal quarter shall be deemed to end on March 31, June 30, September 30 and December 31."
(c) Section 11, paragraph (c) is hereby deleted in its entirety and replaced with the following:
"(c) Borrower shall not permit its Minimum Debt Service Coverage Ratio to be less than 1.25 to 1.00 as determined at the end of each fiscal quarter, commencing September 30, 2002. This ratio shall be tested quarterly on a rolling four (4) quarters basis. For purposes of this paragraph Borrower's fiscal quarter shall be deemed to end on March 31, June 30, September 30 and December 31."
(d) Section 11, paragraph (e) is hereby deleted in its entirety and replaced with the following:
"(e) Borrower shall maintain a Senior Funded Obligations to EBITDAL ratio not to exceed 3.75 to 1.00 as determined at the end of each fiscal quarter, commencing September 30, 2002. This ratio shall be tested quarterly on a rolling four (4) quarters basis. For purposes of this paragraph Borrower's fiscal quarter shall be deemed to end on March 31, June 30, September 30 and December 31."
(e) Section 11, paragraph (d), the following definitions are hereby substituted for the definitions set forth in the Loan Agreement::
"MINIMUM FIXED CHARGE COVERAGE RATIO" means:
(*"Interest Expense" excludes any accrued but not paid Subordinated Debt interest.)
"SENIOR FUNDED OBLIGATIONS TO EBITDAL" means:
(**discounted present value of 7.50% to be used in calculation of Future Lease Payment Stream.)
All other accounting terms used herein and in the Loan Agreement, unless otherwise defined, shall be construed in accordance with GAAP.
(f) The following financial reporting requirements are hereby added to the Loan Agreement:
(i) Within fifty (50) days of the last day of each month commencing September 30, 2002, Borrower shall provide Lender with Borrower's internally prepared financial statements certified as true and correct by Borrower:
(ii) Within ninety-five (95) days of the end of each fiscal year of Borrower, commencing with the fiscal year 2002, Borrower shall provide its annual,
audited financial statements prepared by an independent Certified Public Accountant, reasonably acceptable to Lender:
(iii) Within fifty (50) days of the end of each fiscal quarter commencing September 30, 2002 and within ninety-five (95) of the end of each fiscal year commencing with the fiscal year 2002, Borrower shall deliver to Lender a completed Covenant Compliance Certificate in the form reasonably acceptable to Lender; and
(iv) Such other financial information as may be reasonably be requested by Lender.
SECTION 5 CONDITIONS. The extension of the Maturity Date and the modifications set forth herein are conditioned upon Borrower's full satisfaction of the following conditions:
(a) Borrower shall deliver to Lender a fully-executed original of this Agreement;
(b) Borrower shall deliver to Lender certified copies of Borrower's corporate resolution authorizing the execution of this Agreement;
(c) Borrower shall pay to Lender at the time of the execution and delivery of this Agreement a fee of $10,000 (the "Renewal Fee"); and
(d) Borrower shall pay all expenses incurred by Lender in connection with this Agreement, including, but not limited to , attorney's fees and expenses.
SECTION 6 ALLONGE. The parties agree that this Agreement shall be firmly affixed to and become an allonge to the Note.
SECTION 7 EFFECT OF MODIFICATION. Except as expressly modified herein, all of the terms and condition of the Note, Loan Agreement and Loan Documents, as previously modified in writing, shall remain in full force and effect. All security given for the Loan and all guarantees of the Loan, if any, shall continue in full force and effect.
SECTION 8. REPRESENTATION AND WARRANTIES OF BORROWER. By execution of Agreement, Borrower represents and warrants to Lender that:
(a) Borrower has full right, power and authority to execute this Agreement and to perform all of its obligations thereunder;
(b) Upon execution of this Agreement by Borrower and Lender, no uncured event of default exists under the Note, Loan Agreement or Loan Documents;
(c) Borrower reaffirms its obligation to pay the Loan in full, the validity and enforceability of the Note, Loan Agreement and Loan Documents;
(d) Except to the extent otherwise disclosed to Lender, Borrower affirms that all representations, warranties and covenants of Borrower set forth in the Note, Loan Agreement and/or Loan Documents are true and accurate.
SECTION 9. WAIVER OF JURY TRIAL. Borrower, after consulting or having had the opportunity to consult with counsel, knowingly, voluntarily, and intentionally waives any right it may have to a trial by jury in any litigation based upon or arising out of this Agreement or any course of conduct, dealing, statements (whether oral or written), or actions of Lender. Borrower shall not seek to consolidate, by counterclaim or otherwise, any action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year set forth above.
LENDER:
KEYBANK NATIONAL ASSOCIATION
By: /s/ Roger D. Campbell
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Roger D. Campbell, Senior Vice President
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BORROWER:
CORE MOLDING TECHNOLOGIES, INC.
By: /s/ Herman F. Dick, Jr.
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Herman F. Dick, Jr., Treasurer and Chief Financial Officer
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THIS MASTER EQUIPMENT LEASE AGREEMENT is made and dated effective as of December 2, 1997 by and between KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC., a Michigan corporation with its principal place of business at 54 State Street, Albany, New York 12207 ("Lessor"), and CORE MATERIALS CORPORATION, a Delaware corporation, with its principal place of business at 800 Manor Park Drive, Columbus, Ohio 43228 ("Lessee").
TERMS AND CONDITIONS OF LEASE
1. LEASE. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Equipment, subject to and upon the terms and conditions set forth herein. Each Equipment Schedule shall constitute a separate and enforceable lease incorporating all the terms and conditions of this Master Equipment Lease Agreement as if such terms and conditions were set forth in full in such Equipment Schedule. In the event that any term or condition of any Equipment Schedule conflicts with or is inconsistent with any term or condition of this Master Equipment Lease Agreement, the terms and conditions of the Equipment Schedule shall govern.
2. DISCLAIMER OF WARRANTIES. LESSOR MAKES NO (AND SHALL NOT BE DEEMED TO HAVE MADE ANY) WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN, OPERATION OR CONDITION OF, OR THE QUALITY OF THE MATERIAL, EQUIPMENT OR WORKMANSHIP IN, THE EQUIPMENT, ITS MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE STATE OF TITLE THERETO OR ANY COMPONENT THERETO, THE ABSENCE OF LATENT OR OTHER DEFECTS (WHETHER OR NOT DISCOVERABLE), AND LESSOR HEREBY DISCLAIMS THE SAME; IT BEING UNDERSTOOD THAT THE EQUIPMENT IS LEASED TO LESSEE "AS IS" AND ALL SUCH RISKS, IF ANY, ARE TO BE BORNE BY LESSEE. NO DEFECT IN, OR UNFITNESS OF, THE EQUIPMENT, OR ANY OF THE OTHER FOREGOING MATTERS, SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR OF ANY OTHER OBLIGATION HEREUNDER. LESSEE HAS MADE THE SELECTION OF THE EQUIPMENT FROM THE SUPPLIER BASED ON ITS OWN JUDGMENT AND EXPRESSLY DISCLAIMS ANY RELIANCE UPON ANY STATEMENTS OR REPRESENTATIONS MADE BY LESSOR. LESSOR IS NOT RESPONSIBLE FOR ANY REPAIRS, SERVICE, MAINTENANCE OR DEFECT IN THE EQUIPMENT OR THE OPERATION THEREOF. IN NO EVENT SHALL LESSOR BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES (WHETHER UNDER THE UCC OR OTHERWISE), INCLUDING, WITHOUT LIMITATION, ANY LOSS, COST OR DAMAGE TO LESSEE OR OTHERS ARISING FROM ANY OF THE FOREGOING MATTERS, INCLUDING, WITHOUT LIMITATION, DEFECTS, NEGLIGENCE, DELAYS, FAILURE OF DELIVERY OR NON-PERFORMANCE OF THE EQUIPMENT. ANY WARRANTY BY THE SUPPLIER IS HEREBY ASSIGNED TO LESSEE BY LESSOR WITHOUT RECOURSE. SUCH WARRANTY SHALL NOT RELEASE LESSEE FROM ITS OBLIGATION TO LESSOR TO PAY RENT, TO PERFORM ALL OTHER OBLIGATIONS HEREUNDER AND TO KEEP, MAINTAIN AND SURRENDER THE EQUIPMENT IN THE CONDITION REQUIRED BY SECTIONS 12 AND 13 HEREOF. Lessee's execution and delivery of a Certificate of Acceptance shall be conclusive evidence as between Lessor and Lessee that the Items of Equipment described therein are in all of the foregoing respects satisfactory to Lessee, and Lessee shall not assert any claim of any nature whatsoever against Lessor based on any of the foregoing matters; PROVIDED, HOWEVER, that nothing contained herein shall in any way bar, reduce or defeat any claim that Lessee may have against the Supplier or any other person (other than Lessor).
3. NON-CANCELABLE LEASE. THIS LEASE IS A NET LEASE AND LESSEE'S OBLIGATION TO PAY RENT AND PERFORM ITS OBLIGATIONS HEREUNDER ARE ABSOLUTE, IRREVOCABLE AND UNCONDITIONAL UNDER ANY AND ALL CIRCUMSTANCES WHATSOEVER AND SHALL NOT BE SUBJECT TO ANY RIGHT OF SET OFF, COUNTERCLAIM, DEDUCTION, DEFENSE OR OTHER RIGHT, WHETHER BY STATUTE OR OTHERWISE, WHICH LESSEE MAY HAVE AGAINST THE SUPPLIER, LESSOR OR ANY OTHER PARTY. LESSEE SHALL HAVE NO RIGHT TO TERMINATE (EXCEPT AS EXPRESSLY PROVIDED HEREIN) OR
CANCEL THIS LEASE OR TO BE RELEASED OR DISCHARGED FROM ITS OBLIGATION HEREUNDER FOR ANY REASON WHATSOEVER, INCLUDING, WITHOUT LIMITATION, DEFECTS IN, DESTRUCTION OF, DAMAGE TO OR INTERFERENCE WITH ANY USE OF THE EQUIPMENT (FOR ANY REASON WHATSOEVER, INCLUDING, WITHOUT LIMITATION, WAR, ACT OF GOD, STRIKE OR GOVERNMENTAL REGULATION), THE INVALIDITY, ILLEGALITY OR UNENFORCEABILITY (OR ANY ALLEGATION THEREOF) OF THIS LEASE OR ANY PROVISION HEREOF, OR ANY OTHER OCCURRENCE WHATSOEVER, WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING, WHETHER FORESEEN OR UNFORESEEN.
4. DEFINITIONS. Unless the context otherwise requires, as used in this Lease, the following terms shall have the respective meanings indicated below and shall be equally applicable to both the singular and the plural forms thereof:
(a) "APPLICABLE LAW" shall mean all applicable Federal, state, local and foreign laws (including, without limitation, any Environmental Law, industrial hygiene and occupational safety or similar laws), ordinances, judgments, decrees, injunctions, writs and orders of any Governmental Authority and rules, regulations, orders, licenses and permits of any Governmental Authority.
(b) "APPRAISAL PROCEDURE" shall mean the following procedure for obtaining an appraisal of the Fair Market Sales Value or the Fair Market Rental Value. Lessor shall provide Lessee with the names of three independent Appraisers. Within ten (10) business days thereafter, Lessee shall select one of such Appraisers to perform the appraisal. If Lessor and Lessee cannot agree upon an Appraiser, each shall select one Appraiser, and the two selected Appraisers shall select a third Appraiser. The selected Appraiser(s) shall be instructed to perform its appraisal based upon the assumptions specified in the definition of Fair Market Sales Value or Fair Market Rental Value, as applicable, and shall complete its appraisal within twenty (20) business days after such selection. Any such appraisal shall be final, binding and conclusive on Lessee and Lessor and shall have the legal effect of an arbitration award. Lessee shall pay the fees and expenses of the selected Appraiser, and if more than one Appraiser is required, Lessee and Lessor shall each pay for the fees and expenses of the Appraiser each selected, and shall each pay one-half of the fees and expenses of the third Appraiser.
(c) "APPRAISER" shall mean a person engaged in the business of appraising property that has at least ten years' experience in appraising property similar to the Equipment.
(d) "AUTHORIZED SIGNER" shall mean those officers of Lessee, set forth on an incumbency certificate (in form and substance satisfactory to Lessor) delivered by Lessee to Lessor, who are authorized and empowered to execute this Lease, the Equipment Schedules and all other documents the execution of which is contemplated hereby.
(e) "CERTIFICATE OF ACCEPTANCE" shall mean a certificate of acceptance, in form and substance satisfactory to Lessor, executed and delivered by Lessee in accordance with Section 7 hereof indicating, among other things, that the Equipment described therein has been accepted by Lessee for all purposes of this Lease.
(f) "DEFAULT" shall mean any event or condition which, with the passage of time or the giving of notice, or both, would constitute an Event of Default.
(g) "ENVIRONMENTAL LAW" shall mean any federal, state, or local statute, law, ordinance, code, rule, regulation, or order or decree regulating, relating to or imposing liability upon a person in connection with the use, release or disposal of any hazardous, toxic or dangerous substance, waste, or material as same may relate to the Equipment or its operation.
(h) "EQUIPMENT" shall mean an item or items of personal property designated from time to time by Lessee which are described on an Equipment Schedule and which are being or will be leased by Lessee pursuant to this Lease, together with all replacement parts, additions and accessories incorporated therein or affixed thereto.
(i) "EQUIPMENT GROUP" shall consist of all Items of Equipment listed on a particular Equipment Schedule.
(j) "EQUIPMENT LOCATION" shall mean the location of the Equipment, as set forth on an Equipment Schedule, or such other location (approved by Lessor) as Lessee shall from time to time specify in writing.
(k) "EQUIPMENT SCHEDULE" shall mean each equipment lease schedule from time to time executed by Lessor and Lessee with respect to an Equipment Group, pursuant to and incorporating by reference all of the terms and conditions of this Master Equipment Lease Agreement.
(l) "EVENT OF DEFAULT" shall have the meaning specified in
Section 22 hereof.
(m) "FAIR MARKET RENTAL VALUE" or "FAIR MARKET SALE VALUE"
shall mean the value of each Item of Equipment for lease or sale, unless
otherwise specified herein as determined between Lessor and Lessee, or, if
Lessor and Lessee are unable to agree, pursuant to the Appraisal Procedure,
which would be obtained in an arms-length transaction between an informed and
willing lessor or seller (under no compulsion to lease or sell) and an informed
and willing lessee or buyer (under no compulsion to lease or purchase). In
determining the Fair Market Rental Value or Fair Market Sale Value of the
Equipment, (a) such Fair Market Rental Value or Fair Market Sale Value shall be
calculated on the assumption that the Equipment is in the condition and repair
required by Sections 12 and 13 hereof, and (b) there shall be excluded from the
calculation thereof the value of any upgrades and attachments made pursuant to
Section 14 hereof in which the Lessor does not own an interest; PROVIDED,
HOWEVER, that, unless otherwise provided in such Section 22, for purposes of
Section 22 of the Lease, Fair Market Sale Value of the Equipment shall be
determined based upon the actual facts and circumstances then prevailing without
regard to the assumptions in clause (a) above.
(n) "GOVERNMENTAL ACTION" shall mean all authorizations, consents, approvals, waivers, filings and declarations of any Governmental Authority, including, without limitation, those environmental and operating permits required for the ownership, lease, use and operation of the Equipment.
(o) "GOVERNMENTAL AUTHORITY" shall mean any foreign, Federal, state, county, municipal or other governmental authority, agency, board or court.
(p) "GUARANTOR" shall mean any guarantor of Lessee's obligations hereunder.
(q) "ITEM OF EQUIPMENT" shall mean each item of the Equipment.
(r) "LATE PAYMENT RATE" shall mean an annual interest rate equal to the lesser of 18% or the maximum interest rate permitted by Applicable Law.
(s) "LEASE", "HEREOF", "HEREIN and "HEREUNDER" shall mean, with respect to an Equipment Group, this Master Equipment Lease Agreement and the Equipment Schedule on which such Equipment Group is described, including all addenda attached thereto and made a part thereof.
(t) "Lien" shall mean all mortgages, pledges, security interests, liens, encumbrances, claims or other charges of any kind whatsoever.
(u) "PURCHASE AGREEMENT" shall mean any purchase agreement or other contract entered into between the Supplier and Lessee for the acquisition of the Equipment to be leased hereunder.
(v) "RELATED EQUIPMENT SCHEDULE" shall have the meaning set forth in Section 27 hereof.
(w) "RENEWAL NOTICE" shall have the meaning set forth in
Section 32 hereof.
(x) "RETURN NOTICE" shall have the meaning set forth in
Section 13 hereof.
(y) "RENT" shall mean the periodic rental payments due hereunder for the leasing of the Equipment, as set forth on the Equipment Schedules, and, where the context hereof requires, all such additional amounts as may from time to time be payable under any provision of this Lease.
(z) "RENT COMMENCEMENT DATE" shall mean, with respect to an Equipment Group, the date on which Lessor disburses funds for the purchase of such Equipment Group, as determined by Lessor in its sole discretion.
(aa) "RENT PAYMENT DATE" with respect to an Equipment Group, shall have the meaning set forth in the Equipment Schedule associated therewith.
(ab) "STIPULATED LOSS VALUE" shall mean, as of any Rent Payment Date and with respect to an Item of Equipment, the amount determined by multiplying the Total Cost for such Item of Equipment by the percentage specified in the applicable Stipulated Loss Value Supplement opposite such Rent Payment Date.
(ac) "STIPULATED LOSS VALUE SUPPLEMENT" with respect to an Equipment Group, shall have the meaning set forth in the Equipment Schedule associated therewith.
(ad) "SUPPLIER" shall mean the manufacturer or the vendor of the Equipment, as set forth on each Equipment Schedule.
(ae) "TERM" shall mean the Initial Term, as defined in Section 8 hereof, and any Renewal Term, as defined in Section 8 hereof.
(af) "TOTAL COST" shall mean, with respect to an Item of Equipment, (1) the acquisition cost of such Item of Equipment (including Lessor's capitalized costs), as set forth on the Equipment Schedule on which such Item of Equipment is described, or (2) if no such acquisition cost is specified, the Supplier's invoice price for such Item of Equipment plus Lessor's capitalized costs, or (3) if no such acquisition cost is specified and no such invoice price is obtainable, an allocated price for such Item of Equipment based on the Total Cost of all Items of Equipment set forth on the Equipment Schedule on which such Item of Equipment is described, as determined by Lessor in its sole discretion.
5. SUPPLIER NOT AN AGENT. LESSEE UNDERSTANDS AND AGREES THAT (i) NEITHER THE SUPPLIER, NOR ANY SALES REPRESENTATIVE OR OTHER AGENT OF THE SUPPLIER, IS (1) AN AGENT OF LESSOR OR (2) AUTHORIZED TO MAKE OR ALTER ANY TERM OR CONDITION OF THIS LEASE, AND (ii) NO SUCH WAIVER OR ALTERATION SHALL VARY THE TERMS OF THIS LEASE UNLESS EXPRESSLY SET FORTH HEREIN.
6. ORDERING EQUIPMENT. Lessee has selected and ordered the Equipment from the Supplier and, if appropriate, has entered into a Purchase Agreement with respect thereto. Lessor shall accept an assignment from Lessee of Lessee's rights, but none of Lessee's obligations, under any such Purchase Agreement. Lessee shall arrange for delivery of the Equipment so that it can be accepted in accordance with Section 7 hereof. If an Item of Equipment is subject to an existing Purchase Agreement between Lessee and the Supplier, Lessee warrants that such Item of Equipment has not been delivered to Lessee as of the date of the Equipment Schedule applicable thereto. If Lessee causes the Equipment to be modified or altered, or requests any additions thereto prior to the Rent Commencement Date, Lessee (i) acknowledges that any such modification, alteration or addition to an Item of Equipment may affect the Total Cost, taxes, purchase and renewal options, if any, Stipulated Loss Value and Rent with respect to such Item of Equipment, and (ii) hereby authorizes Lessor to adjust such Total Cost, taxes, purchase and renewal options, if any, Stipulated Loss Value and Rent as appropriate. Lessee hereby authorizes Lessor to complete each Equipment Schedule with the serial numbers and other identification data of the Equipment Group associated therewith, as such data is received by Lessor.
7. DELIVERY AND ACCEPTANCE. Upon acceptance for lease by Lessee of any Equipment delivered to Lessee and described in any Equipment Schedule, Lessee shall execute and deliver to Lessor a Certificate of Acceptance. LESSOR SHALL HAVE NO OBLIGATION TO ADVANCE FUNDS FOR THE PURCHASE OF THE EQUIPMENT UNLESS
AND UNTIL LESSOR SHALL HAVE RECEIVED A CERTIFICATE OF ACCEPTANCE RELATING
THERETO EXECUTED BY LESSEE. Such Certificate of Acceptance shall constitute
Lessee's acknowledgment that such Equipment (a) was received by Lessee, (b) is
satisfactory to Lessee in all respects and is acceptable to Lessee for lease
hereunder, (c) is suitable for Lessee's purposes, (d) is in good order, repair
and condition, (e) has been installed and operates properly, and (f) is subject
to all of the terms and conditions of this Lease (including, without limitation,
Section 2 hereof).
8. TERM; SURVIVAL. With respect to any Item of Equipment, unless otherwise specified thereon, the initial term of this Lease (the "Initial Term") shall commence on the date on which such Item of Equipment is delivered to Lessee, and, unless earlier terminated as provided herein, shall expire on the final Rent Payment Date for such Item of Equipment. With respect to an Item of Equipment, any renewal term of this Lease (individually, a "Renewal Term"), as contemplated hereby, shall commence immediately upon the expiration of the Initial Term or any prior Renewal Term, as the case may be, and, unless earlier terminated as provided herein, shall expire on the date on which the final payment of Rent is due and paid hereunder. All obligations of Lessee hereunder shall survive the expiration, cancellation or other termination of the Term hereof.
9. RENT. With respect to Each Item of Equipment, Lessee shall pay the Rent set forth on the Equipment Schedule applicable to such Item of Equipment, commencing on the Rent Commencement Date, and, unless otherwise set forth on such Equipment Schedule, on the same day of each payment period thereafter for the balance of the Term. Rent shall be due whether or not Lessee has received any notice that such payments are due. All Rent shall be paid to Lessor at its address set forth on the Equipment Schedule, or as otherwise directed by Lessor in writing.
10. LOCATION; INSPECTION; LABELS. The Equipment shall be delivered to the Equipment Location and shall not be removed therefrom without Lessor's prior written consent. Lessor shall have the right to enter upon the Equipment Location and inspect the Equipment upon 24 hours notice to Lessee and during normal business hours. At Lessor's request, Lessee shall affix labels stating that the Equipment is owned by Lessor permanently in a prominent place on the Equipment and shall keep such labels in good repair and condition.
11. USE; ALTERATIONS. Lessee shall use the Equipment lawfully and only in the manner for which it was designed and intended and so as to subject it only to ordinary wear and tear. Lessee shall comply with all Applicable Law. Lessee shall immediately notify Lessor in writing of any existing, pending or threatened investigation, inquiry, claim or action by any Governmental Authority in connection with any Applicable Law or Governmental Action which could adversely affect the Equipment or this Lease. Lessee, at its own expense, shall make such alterations, additions or modifications or improvements to the Equipment as may be required from time to time to meet the requirements of Applicable Law or Governmental Action. Except as otherwise permitted herein, Lessee shall not make any alterations, additions, modifications or improvements to the Equipment without Lessor's prior written consent.
12. REPAIRS AND MAINTENANCE. Lessee, at Lessee's own cost and expense, shall keep the Equipment in good repair, good operating condition and working order and in compliance with the manufacturer's specifications (reasonable wear and tear excepted), and maintain, service and repair the Equipment so as to keep the Equipment in as good operating condition and working order as it was when it first became subject to this Lease and in compliance with the manufacturer's specifications. Upon Lessor's request, Lessee shall furnish Lessor with an executed copy of third-party maintenance agreements, if any, with respect to any Item of Equipment. Lessee, at its own cost and expense and within a reasonable period of time, shall replace any part of any Item of Equipment that becomes worn out, lost, stolen, destroyed, or otherwise rendered permanently unfit or unavailable for use (whether or not such replacement is covered by the aforesaid maintenance agreement), with a replacement part of the same manufacture, value, remaining useful life and utility as the replaced part immediately preceding the replacement (assuming that such replaced part is in the condition required by this Lease). Such replacement part shall be free and clear of all Liens. Notwithstanding the foregoing, this paragraph shall not apply to any Loss or Damage (as defined in Section 16 hereof) of any Item of Equipment.
13. RETURN OF EQUIPMENT. Upon the expiration (subject to Section 32 hereof and except as otherwise provided in an Equipment Schedule) or earlier termination of this Lease, Lessee, at its sole expense, shall return the Equipment to Lessor by delivering such Equipment F.A.S. or F.O.B. to such location or such carrier (packed for shipping) as
Lessor shall specify, provided, however that such location shall be within the continental United States. Lessee agrees that the Equipment, when returned, shall be in the condition required by Section 12 hereof. All components of the Equipment shall have been properly serviced, following the manufacturer's written operating and servicing procedures, without Lessor's incurring any expense to repair or rehabilitate the Equipment. If, in the reasonable opinion of Lessor, any Item of Equipment fails to meet the standards set forth above, Lessee agrees to pay on demand all costs and expenses incurred in connection with repairing such Item of Equipment and restoring it so as to meet such standards, assembling and delivering such Item of Equipment. Lessee shall give Lessor ninety (90) days written notice (the "Return Notice") that Lessee is returning the Equipment as provided for above. If Lessee falls to return any Item of Equipment as required hereunder, then, all of Lessee's obligations under this Lease (including, without limitation, Lessee's obligation to pay Rent for such Item of Equipment at the rental then applicable under this Lease) shall continue in full force and effect until such Item of Equipment shall have been returned in the condition required hereunder.
14. EQUIPMENT UPGRADES/ATTACHMENTS. In addition to the requirements of
Section 11 hereof, Lessee, at its own expense, may from time to time add or
install upgrades or attachments to the Equipment during the Term; PROVIDED, that
such upgrades or attachments (a) are readily removable without causing material
damage to the Equipment, (b) do not materially adversely affect the Fair Market
Sale Value, the Fair Market Rental Value, residual value, productive capacity,
utility or remaining useful life of the Equipment, and (c) do not cause such
Equipment to become "limited use property" within the meaning of Revenue
Procedure 76-30, 1976-2 C.B. 647 (or such other successor tax provision), as of
the applicable delivery date or the time of such upgrade or attachment. Any such
upgrades or attachments which are not required by Section 11 hereof and which
can be removed without causing damage to or adversely affecting the condition of
the Equipment, or reducing the Fair Market Sale Value, the Fair Market Rental
Value, residual value, productive capacity, utility or remaining useful life of
the Equipment shall remain the property of Lessee; and upon the expiration or
earlier termination of this Lease and provided that no Event of Default exists,
Lessee may, at its option, remove any such upgrades or attachments and, upon
such removal, shall restore the Equipment to the condition required hereunder.
15. SUBLEASE AND ASSIGNMENT. (a) WITHOUT LESSOR'S PRIOR WRITTEN CONSENT (SUCH CONSENT NOT TO BE UNREASONABLY WITHHELD), LESSEE SHALL NOT (i) ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS LEASE, THE EQUIPMENT OR ANY INTEREST THEREIN, OR (ii) SUBLET OR LEND THE EQUIPMENT TO, OR PERMIT THE EQUIPMENT TO BE USED BY, ANYONE OTHER THAN LESSEE OR LESSEE'S QUALIFIED EMPLOYEES.
(b) Lessor, at any time with or without notice to Lessee, may sell, transfer, assign and/or grant a security interest in this Lease, any Equipment Schedule or any Item of Equipment. In any such event, any such purchaser, transferee, assignee or secured party shall have and may exercise all of Lessor's rights hereunder with respect to the items to which any such sale, transfer, assignment and/or security interest relates, and LESSEE SHALL NOT ASSERT AGAINST ANY SUCH PURCHASER, TRANSFEREE, ASSIGNEE OR SECURED PARTY ANY DEFENSE, COUNTERCLAIM OR OFFSET THAT LESSEE MAY HAVE AGAINST LESSOR. Lessee acknowledges that no such sale, transfer, assignment and/or security interest will materially change Lessee's duties hereunder or materially increase its burdens or risks hereunder. Lessee agrees that upon written notice to Lessee of any such sale, transfer, assignment and/or security interest, Lessee shall acknowledge receipt thereof in writing and shall comply with the directions and demands of Lessor's successor or assign.
16. LOSS OF OR DAMAGE TO EQUIPMENT. (a) Lessee shall bear the entire risk of loss, theft, destruction, disappearance of or damage to any and all Items of Equipment ("Loss or Damage") from any cause whatsoever during the Term hereof until the Equipment is returned to Lessor in accordance with Section 13 hereof. No Loss or Damage shall relieve Lessee of the obligation to pay Rent or of any other obligation under this Lease.
(b) In the event of Loss or Damage to any Item of Equipment, Lessee, at the option of Lessee so long as No Event of Default exists hereunder and is continuing, otherwise at Lessor's option, shall within thirty (30) days following such Loss or Damage: (1) place such Item of Equipment in good condition and repair, in accordance with the terms hereof; (2) replace such Item of Equipment with replacement equipment (acceptable to Lessor) in as good condition and repair, and with the same value, remaining useful economic life and utility, as such replaced Item of Equipment immediately preceding the Loss or Damage (assuming that such replaced Item of Equipment is the condition required by this
Lease), which replacement equipment shall be free and clear of all Liens; or (3) pay to Lessor the sum of (i) all Rent due and owing hereunder with respect to such Item of Equipment (at the time of such payment) plus (ii) the Stipulated Loss Value as of the Rent Payment Date next following the date of such Loss or Damage with respect to such Item of Equipment, as set forth on the Schedule applicable thereto. Upon Lessor's receipt of the payment required under subsection (3) above, Lessee shall be entitled to Lessor's interest in such Item of Equipment, in its then condition and location, "as is" and "where is", without any warranties, express or implied. If Lessee replaces the Item of Equipment pursuant to subsection (b) above, title to such replacement equipment shall immediately (and without further act) vest in Lessor and thereupon shall be deemed to constitute Items of Equipment and be fully subject to this Lease as if originally leased hereunder. If Lessee falls to either restore or replace the Item of Equipment pursuant to subsection (1) or (2) above, respectively, Lessee shall make the payment under subsection (3) above, provided, however, that in the event replacement of such Item of Equipment cannot reasonably be accomplished within such 30 day period, the period shall be extended to 90 days, provided that Lessee commences acts to replace such Item of Equipment within the 30 day period and thereafter diligently pursues completion of the replacement.
17. INSURANCE. (a) Lessee, at all times during the Term hereof (until the Equipment shall have been returned to Lessor) and at Lessee's own cost and expense, shall maintain (1) insurance against all risks of physical loss or damage to the Equipment (including theft and collision for Equipment consisting of motor vehicles) in an amount not less than the full replacement value thereof or the Stipulated Loss Value thereof, whichever is greater, and (2) commercial general liability insurance (including blanket contractual liability coverage and products liability coverage) for personal and bodily injury and property damage in an amount satisfactory to Lessor.
(b) All insurance policies required hereunder shall (1) require 30 days' prior written notice of cancellation or material change in coverage to Lessor (any such cancellation or change, as applicable, not being effective until the thirtieth (30th) day after the giving of such notice); (2) name "KeyCorp and its subsidiaries and affiliated companies, including KeyCorp Leasing Ltd." as an additional insured under the public liability policies and name Lessor as sole loss payee under the property insurance policies; (3) not require contributions from other policies held by Lessor; (4) waive any right of subrogation against Lessor; (5) in respect of any liability of any of Lessor, except for the insurers' salvage rights in the event of a Loss or Damage, waive the right of such insurers to set-off, to counterclaim or to any other deduction, whether by attachment or otherwise, to the extent of any monies due Lessor under such policies; (6) not require that Lessor pay or be liable for any premiums with respect to such insurance covered thereby; (7) be in full force and effect throughout any geographical areas at any time traversed by any Item of Equipment; and (8) contain breach of warranty provisions providing that, in respect of the interests of Lessor in such policies, the insurance shall not be invalidated by any action or inaction of Lessee or any other person (other than Lessor) and shall insure Lessor regardless of any breach or violation of any warranty, declaration or condition contained in such policies by Lessee or by any other person (other than Lessor). Prior to the first date of delivery of any Item of Equipment hereunder, and thereafter not less than 15 days prior to the expiration dates of the expiring policies theretofore delivered pursuant to this Section, Lessee shall make available to Lessor at Lessee's offices an original of all policies issued by the insurers thereunder for the insurance maintained pursuant to this Section, and Lessee shall deliver to Lessor certificates of insurance for such insurance coverage.
18. GENERAL TAX INDEMNIFICATION. Lessee shall pay when due and shall indemnify and hold Lessor harmless from and against (on an after-tax basis) any and all taxes, fees, withholdings, levies, imposts, duties, assessments and charges of any kind and nature (together with interest and penalties thereon) (including, without limitation, sales, use, gross receipts, personal property, ad valorem, business and occupational, franchise, value added, leasing, leasing use, documentary, stamp or other taxes) imposed upon or against Lessor, Lessor's assigns, Lessee or any Item of Equipment by any Governmental Authority with respect to any Item of Equipment or the manufacturing, ordering, sale, purchase, shipment, delivery, acceptance or rejection, ownership, titling, registration, leasing, subleasing, possession, use, operation, removal, return or other dispossession thereof or upon the rents, receipts or earnings arising therefrom or upon or with respect to this Lease, excepting only all Federal, state and local taxes on or measured by Lessor's net income, net worth, or capital (other than such taxes resulting from making any alterations, improvements, modifications, additions, upgrades, attachments, replacements or substitutions by Lessee). Whenever this Lease terminates as to any Item of Equipment, Lessee shall, upon written request by Lessor, advance to Lessor the amount determined by Lessor to be the personal property or other taxes on said item which are not yet payable, but for which Lessee is responsible, provided Lessor provides Lessee with copies of tax bills supporting Lessor's request.
19. LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee fails to perform or comply with any of its obligations contained herein, Lessor may (but shall not be obligated to do so) itself perform or comply with such obligations, and the amount of the reasonable costs and expenses of Lessor incurred in connection with such performance or compliance, together with interest on such amount at the Late Payment Rate, shall be payable by Lessee to Lessor upon demand. No such performance or compliance by Lessor shall be deemed a waiver of the rights and remedies of Lessor or any assignee of Lessor against Lessee hereunder or be deemed to cure the default of Lessee hereunder.
20. DELINQUENT PAYMENTS; INTEREST. If Lessee fails to pay any Rent or other sums under this Lease within ten (10) days of when the same becomes due, Lessee shall pay to Lessor a late charge equal to five percent (5%) of such delinquent amount. Such late charge shall be payable by Lessee upon demand by Lessor and shall be deemed Rent hereunder. In no event shall such late charge exceed the maximum amounts permitted under Applicable Law.
21. PERSONAL PROPERTY; LIENS. Lessor and Lessee hereby agree that the Equipment is, and shall at all times remain, personal property notwithstanding the fact that any Item of Equipment may now be, or hereafter become, in any manner affixed or attached to real property or any improvements thereon. Lessee shall at all times keep the Equipment free and clear from all Liens. Lessee shall (i) give Lessor immediate written notice of any such Lien, (ii) promptly, at Lessee's sole cost and expense, take such action as may be necessary to discharge any such Lien, and (iii) indemnify and hold Lessor, on an after-tax basis, harmless from and against any loss or damage caused by any such Lien.
22. EVENTS OF DEFAULT; REMEDIES. (a) As used herein, the term "Event of Default" shall mean any of the following events: (1) Lessee fails to pay any Rent within ten (10) days after the same shall have become due; (2) Lessee or any Guarantor becomes insolvent or makes an assignment for the benefit of its creditors; (3) a receiver, trustee, conservator or liquidator of Lessee or any Guarantor or of all or a substantial part of Lessee's or such Guarantor's assets is appointed with or without the application or consent of Lessee or such Guarantor, respectively; (4) a voluntary petition is filed by Lessee or any Guarantor under any bankruptcy, insolvency or similar legislation, or an involuntary petition is filed by against Lessee or any Guarantor under any bankruptcy, insolvency or similar legislation and is not dismissed within 60 days; (5) Lessee or any Guarantor violates or fails to perform any material provision of either this Lease or any other loan, lease or credit agreement or any acquisition or purchase agreement with Lessor or KeyBank National Association or its or their affiliates and assigns; (6) Lessee violates or fails to perform any material covenant or representation made by Lessee herein; (7) any representation or warranty made herein or in any Lease, certificate, financial statement or other statement furnished to Lessor shall prove to be false or misleading in any material respect as of the date on which the same was made; (8) Lessee makes a bulk transfer of furniture, furnishings, fixtures or other equipment or inventory; or (9) Lessee fails to comply with the financial covenants agreed upon by Lessor and Lessee in any document executed in connection herewith. An Event of Default with respect to any Equipment Schedule hereunder shall, at Lessor's option, constitute an Event of Default for all Equipment Schedules hereunder and any other agreements between Lessor and Lessee.
(b) Upon the occurrence of an Event of Default and Lessee's
failure to cure the default within thirty (30) days of Lessor's notice to Lessee
thereof (except an unremedied default under Subsection (a)(5) above as to which
no additional notice shall be required), or failure of Lessee to cure within ten
(10) days of Lessor's notice to Lessee of a payment default, Lessor may do one
or more of the following as Lessor in its sole discretion shall elect: (1)
proceed by appropriate court action or actions, either at law or in equity, to
enforce performance by Lessee of the applicable covenants of this Lease or to
recover damages for the breach thereof; (2) sell any Item of Equipment at public
or private sale; (3) hold, keep idle or lease to others any Item of Equipment as
Lessor in its sole discretion may determine; (4) by notice in writing to Lessee,
terminate this Lease, without prejudice to any other remedies hereunder; (5)
demand that Lessee, and Lessee shall, upon written demand of Lessor and at
Lessee's expense forthwith return all Items of Equipment to Lessor or its order
in the manner and condition required by, and otherwise in accordance with all of
the provisions of this Lease, except those provisions relating to periods of
notice; (6) enter upon the premises of Lessee or other premises where any Item
of Equipment may be located and, without notice to Lessee and with or without
legal process, take possession of and remove all or any such Items of Equipment
without liability to Lessor by reason of such entry or taking possession, and
without such action constituting a termination of this Lease unless Lessor
notifies Lessee in writing to such effect; (7) by written notice to Lessee
specifying a payment date, demand that Lessee pay to Lessor, and Lessee shall
pay to Lessor, on the payment date specified in such notice, as liquidated
damages for loss of a bargain and not as a penalty, any unpaid Rent due prior to
the
payment date specified in such notice plus whichever of the following amounts
Lessor, in its sole discretion, shall specify in such notice (together with
interest on such amount at the Late Payment Rate from the payment date specified
in such notice to the date of actual payment): (i) an amount, with respect to an
Item of Equipment, equal to the Rent payable for such Item of Equipment for the
remainder of the then current Term thereof, after discounting such Rent to
present worth as of the payment date specified in such notice on the basis of a
per annum rate of discount equal to five percent (5%) from the respective dates
upon which such Rent would have been paid had this Lease not been terminated; or
(ii) the Stipulated Loss Value, computed as of the payment date specified in
such notice or, if such payment date is not a Rent Payment Date, the Rent
Payment Date next following the payment date specified in such notice (provided,
however, that, with respect to any Item of Equipment returned to or repossessed
by Lessor, the amount recoverable under this clause (ii) shall be reduced (but
not below zero) by an amount equal to the Fair Market Sales Value (taking into
account its actual condition) of such Item of Equipment; (8) cause Lessee, at
its expense, to promptly assemble any and all Items of Equipment and return the
same to Lessor at such place as Lessor may designate in writing; and (9)
exercise any other right or remedy available to Lessor under applicable law or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof or to rescind this Lease. In addition, Lessee
shall be liable, except as otherwise provided above, for any and all unpaid Rent
due hereunder before or during the exercise of any of the foregoing remedies,
and for legal fees and other costs and expenses incurred by reason of the
occurrence of any Event of Default or the exercise of Lessor's remedies with
respect thereto, including without limitation the repayment in full of any costs
and expenses necessary to be expended in repairing any Item of Equipment in
order to cause it to be in compliance with all maintenance and regulatory
standards imposed by this Lease. If an Event of Default occurs, to the fullest
extent permitted by law, Lessee hereby waives any right to notice of sale and
further waives any defenses, rights, offsets or claims against Lessor because of
the manner or method of sale or disposition of any Items of Equipment. None of
Lessor's rights or remedies hereunder are intended to be exclusive of, but each
shall be cumulative and in addition to any other right or remedy referred to
hereunder or otherwise available to Lessor or its assigns at law or in equity.
No express or implied waiver by Lessor of any Event of Default shall constitute
a waiver of any other Event of Default or a waiver of any of Lessor's rights.
23. NOTICES. All notices and other communications hereunder shall be in writing and shall be transmitted by hand, overnight courier or certified mail (return receipt requested), postage prepaid. Such notices and other communications shall be addressed to the respective party at the address set forth above or at such other address as any party may from time to time designate by notice duly given in accordance with this Section. Such notices and other communications shall be effective upon receipt.
24. GENERAL INDEMNIFICATION. Lessee shall pay, and shall indemnify and hold Lessor harmless on an after-tax basis from and against, any and all liabilities, causes of action, claims, suits, penalties, damages, losses, costs or expenses (including attorneys' fees), obligations, liabilities, demands and judgments, and Liens, of any nature whatsoever (collectively, a "Liability") arising out of or in any way related to: (a) this Lease or any other written agreement entered into in connection with the transactions contemplated hereby and thereby (including, without limitation, a Purchase Agreement, if any) or any amendment, waiver or modification of any of the foregoing or the enforcement of any of the terms hereof or any of the foregoing, (b) the manufacture, purchase, ownership, selection, acceptance, rejection, possession, lease, sublease, operation, use, maintenance, documenting, inspection, control, loss, damage, destruction, removal, storage, surrender, sale, use, condition, delivery, nondelivery, return or other disposition of or any other matter relating to any Item of Equipment or any part or portion thereof (including, in each case and without limitation, latent or other defects, whether or not discoverable, any claim for patent, trademark or copyright infringement and any and all Liabilities in any way relating to or arising out of injury to persons, properties or the environment or any and all Liabilities based on strict liability in tort, negligence, breach of warranties or violations of any regulatory law or requirement, (c) a failure to comply fully with any Environmental Law with respect to the Equipment or its operation or use, and (d) Lessee's failure to perform any covenant, or breach of any representation or warranty, hereunder; provided that the foregoing indemnity shall not extend to the Liabilities to the extent resulting solely from the gross negligence or willful misconduct of Lessor. Lessee shall deliver promptly to Lessor (i) copies of any documents received from the United States Environmental Protection Agency or any state, county or municipal environmental or health agency and (ii) copies of any documents submitted by Lessee or any of its subsidiaries to the United States Environmental Protection Agency or any state, county or municipal environmental or health agency concerning material claims, violations, regulations or enforcement relating to the Equipment or its operation.
25. SEVERABILITY; CAPTIONS. Any provision of this Lease or any Equipment Schedule which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability shall not invalidate or render unenforceable such provision in any other jurisdiction. Captions are intended for convenience or reference only, and shall not be construed to define, limit or describe the scope or intent of any provisions hereof.
26. LESSOR'S EXPENSE. Lessee shall pay all costs and expenses of Lessor, including attorneys' fees and the fees of any collection agencies, incurred by Lessor in enforcing any of the terms, conditions or provisions hereof.
27. RELATED EQUIPMENT SCHEDULES. In the event that any Item of Equipment covered under any Equipment Schedule hereunder may become attached or affixed to, or used in connection with, Equipment covered under another Equipment Schedule hereunder (a "Related Equipment Schedule"), Lessee agrees that, if Lessee elects to exercise a purchase or renewal option under any such Equipment Schedule, or if Lessee elects to return the Equipment under any such Equipment Schedule pursuant to Section 13 hereof, then Lessor, in its sole discretion, may require that all Equipment leased under all Related Equipment Schedules be similarly disposed of.
28. FINANCIAL AND OTHER DATA. During the Term hereof, Lessee shall furnish Lessor, as soon as available and in any event within 60 days after the end of each quarterly period (except the last) of each fiscal year, and, as soon as available and in any event within 120 days after the last day of each fiscal year, copies of Lessee's Securities Exchange Commission filings including financial statements of Lessee and each Guarantor, in the case of fiscal year end financial statements audited by an independent public accountant, and upon Lessor's request, copies of all reports submitted by Lessee and each Guarantor to KeyBank National Association under any credit agreements. Lessee shall also furnish such other financial reports, information or data as Lessor may reasonably request from time to time.
29. COMMITMENT FEE REQUIREMENT. An amount equal to the first periodic payment of Rent must accompany each Lessee proposal for an Equipment Schedule hereunder. THIS COMMITMENT FEE IS NON-REFUNDABLE; provided, however, that, upon Lessor's acceptance of Lessee's proposal to enter into such Equipment Schedule, such commitment fee shall be applied to the first periodic payment of Rent thereunder.
30. NO AFFILIATION WITH THE SUPPLIER. Lessee hereby represents and warrants to Lessor that, except as previously disclosed in writing to Lessor, neither Lessee nor any of its officers or directors (if a corporation) or partners (if a partnership) has, directly or indirectly, any financial interest in the Supplier.
31. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee represents and warrants that: (a) Lessee is a corporation duly organized and validly existing in good standing under the laws of the state of its incorporation; (b) the execution, delivery and performance of this Lease and all related instruments and documents: (1) have been duly authorized by all necessary corporate action on the part of Lessee, (2) do not require the approval of any stockholder, partner, trustee, or holder of any obligations of Lessee except such as have been duly obtained, and (3) do not and will not contravene any law, governmental rule, regulation or order now binding on Lessee, or the charter or by-laws of Lessee, or contravene the provisions of, or constitute a default under, or result in the creation of any lien or encumbrance upon the property of Lessee under, any indenture, mortgage, contract or other agreement to which Lessee is a party or by which it or its property is bound; (c) this Lease and all related instruments and documents, when entered into, will constitute legal, valid and binding obligations of Lessee enforceable against Lessee in accordance with the terms thereof; (d) there are no pending actions or proceedings to which Lessee is a party, and there are no other pending or threatened actions or proceedings of which Lessee has knowledge, before any court, arbitrator or administrative agency, which, either individually or in the aggregate, would adversely affect the financial condition of Lessee, or the ability of Lessee to perform its obligations hereunder; (e) Lessee is not in default under any obligation for the payment of borrowed money, for the deferred purchase price of property or for the payment of any rent under any lease agreement which, either individually or in the aggregate, would have the same such effect; (f) under the laws of the state(s) in which the Equipment is to be located, the Equipment consists solely of personal property and not fixtures; (g) the financial statements of Lessee (copies of which have been furnished to Lessor) have been prepared in accordance with generally acceptable accounting principles consistently applied ("GAAP"), and fairly present Lessee's financial condition and the results of its operations as of the date of and for the period covered by such statements,
and since the date of such statements there has been no material adverse change in such conditions or operations; (h) the address stated above is the chief place of business and chief executive office, or in the case of individuals, the primary residence, of Lessee; (i) Lessee does not conduct business under a trade, assumed or fictitious name; and (j) the Equipment is being leased hereunder solely for business purposes and that no item of Equipment will be used for personal, family or household purposes.
32. RENEWAL AND PURCHASE OPTIONS. With respect to an Equipment Schedule
and the Equipment Group set forth thereon, so long as no Default or Event of
Default shall have occurred and is continuing, then, upon not less than ninety
(90) days prior written notice to Lessor, (the "Renewal Notice") Lessee may (a)
at the expiration of the Initial Term, or any Renewal Term, purchase all, but
not less than all, of the Equipment Group for the Fair Market Sale Value of such
Equipment Group, payable in cash to Lessor upon the expiration of the Initial
Term or any Renewal Term, as the case may be, (b) at the expiration of the
Initial Term, renew this Lease on a month to month basis at the same Rent
payable at the expiration of the Initial Term, or (c) at the expiration of the
Initial Term, renew this Lease for a minimum period of not less than twelve (12)
consecutive months at the then current Fair Market Rental Value. If Lessee fails
to give Lessor the Return Notice or the Renewal Notice at least ninety (90) days
before the expiration of the Initial Term, Lessee shall be deemed to have chosen
option (b) above. If Lessee exercises option (a) above, Lessee shall purchase
the Equipment "as is" and "where is" and without any warranties, express or
implied, by Lessor.
33. LESSEE'S WAIVERS. To the extent permitted by Applicable Law, Lessee
hereby waives (a) any and all rights and remedies which it may now have or which
at any time hereafter may be conferred upon it by statute (including, without
limitation, Article 2A of the Uniform Commercial Code, as applicable) or
otherwise, (1) which may limit or modify Lessor's rights or remedies hereunder,
(2) to terminate, cancel, quit, repudiate or surrender this Lease, except as
expressly provided herein; (3) to reject, revoke acceptance or accept partial
delivery of the Equipment; (4) to recover damages from Lessor for any breach of
warranty PROVIDED, HOWEVER, that no such waiver shall preclude Lessee from
asserting any such claim against Lessor in a separate cause of action; or
against Lessor's assignee in a separate cause of action relating to such
assignee's own conduct.
34. UCC FILINGS. LESSEE HEREBY APPOINTS LESSOR OR ITS ASSIGNEE AS ITS TRUE AND LAWFUL ATTORNEY IN FACT, IRREVOCABLY AND COUPLED WITH AN INTEREST, TO EXECUTE AND FILE ON BEHALF OF LESSEE ALL UCC FINANCING STATEMENTS WHICH IN LESSOR'S SOLE DISCRETION ARE NECESSARY OR PROPER TO SECURE LESSOR'S INTEREST IN THE EQUIPMENT IN ALL APPLICABLE JURISDICTIONS.
35. MISCELLANEOUS. Time is of the essence with respect to this Lease.
Any failure of Lessor to require strict performance by Lessee or any waiver by
Lessor of any provision herein shall not be construed as a consent or waiver of
any provision of this Lease. Neither this Lease nor any Equipment Schedule may
be amended except by a writing signed by Lessor and Lessee. This Lease and each
Equipment Schedule shall be binding upon, and inure to the benefit of, the
parties hereto, their permitted successors and assigns. This Lease will be
binding upon Lessor only if executed by a duly authorized officer or
representative of Lessor at Lessor's principal place of business as set forth
above. This Lease, and all other documents (the execution and delivery of which
by Lessee is contemplated hereunder), shall be executed on Lessee's behalf by
Authorized Signers of Lessee. THIS LEASE IS BEING DELIVERED IN THE STATE OF NEW
YORK AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.
36. JURY TRIAL WAIVER. LESSOR AND LESSEE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH LESSOR OR LESSEE MAY BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS LEASE. THIS WAIVER IS MADE KNOWINGLY, WILLINGLY AND VOLUNTARILY BY THE LESSOR AND THE LESSEE WHO EACH ACKNOWLEDGE THAT NO REPRESENTATIONS HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT.
37. MORE THAN ONE LESSEE. If more than one person or entity executes this Lease, each Equipment Schedule, and all addenda or other documents executed in connection herewith or therewith, as "Lessee," the obligations of "Lessee" contained herein and therein shall be deemed joint and several and all references to "Lessee" shall apply both individually and jointly.
38. QUIET ENJOYMENT. So long as no Event of Default has occurred and is continuing, Lessee shall peaceably hold and quietly enjoy the Equipment without interruption by Lessor or any person or entity claiming through Lessor.
39. ENTIRE AGREEMENT. This Lease, together with all Equipment
Schedules, riders and addenda executed by Lessor and Lessee collectively
constitute the entire understanding or agreement between Lessor and Lessee with
respect to the leasing of the Equipment, and there is no understanding or
agreement, oral or written, which is not set forth herein or therein. By
initialing below, Lessee hereby further acknowledges the conditions of this
Section 39.
Lessee's Initials: /S/ KB
40. EXECUTION IN COUNTERPARTS. This Master Equipment Lease Agreement
may be executed in several counterparts, each of which shall be an original and
all of which shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the day and year first above written.
LESSOR: LESSEE:
KEYCORP LEASING, CORE MATERIALS CORPORATION
A Division of Key Corporate
Capital, Inc.
By:/s/ DONALD C. DAVIS By: /s/ KEVIN L. BARNETT
--------------------------------- ------------------------------------
Donald C. Davis, Vice President Kevin L. Barnett, Vice President,
Treasurer and CFO
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THIS AMENDMENT dated effective as of December 2, 1997 amends that certain Master Equipment Lease Agreement dated effective as of December 2, 1997 between KEYCORP LEASING, A DIVISION OF KEY CORPORATE CAPITAL INC., as Lessor, and CORE MATERIALS CORPORATION, as Lessee (the "Master Lease"). Unless otherwise specified herein, all capitalized terms shall have the meanings ascribed to them in the Master Lease or in the Credit Agreement between Lessee as Borrower and KeyBank National Association as Lender dated December 2, 1997 ("Credit Agreement").
For good and valuable consideration, the receipt of which is acknowledged, Lessor and Lessee hereby agree that the Security Agreement will be amended as follows:
LESSEE'S FINANCIAL COVENANTS. Lessee hereby covenants with Lessor as follows:
On a continuing basis, from the date of the Master Lease until the date on which Lessee's obligations thereunder are fully paid and performed, Lessee hereby covenants and agrees that:
I. It shall not permit the Maximum Senior Funded Debt to EBITDA Ratio (as defined below) to exceed 4.00:1.00 as determined at the end of each fiscal quarter, commencing December 31, 1998, calculated for the four quarters then ended.
II. It shall not permit the Minimum Fixed Charge Coverage Ratio (as defined below) to be less than 1.10:1.00 as determined at the end of each fiscal quarter, commencing with the quarter ending December 31, 1999, calculated for the four quarters then ended.
III. It shall not permit the Minimum Debt Service Coverage Ratio (as defined below) to be less than 1.50:1.00 as determined at the end of each fiscal quarter, commencing March 31, 1998, for the fiscal quarter then ended; June 30, 1998, for the two quarters then ended; September 30, 1998, for the three quarters then ended; and December 31, 1998, and each fiscal quarter thereafter for the four quarters then ended.
IV. It shall not incur Unfunded Capital Expenditures (as defined below) in excess of $5,500,000 during the fiscal year ended December 31, 1998.
V. For the purposes of this section:
A. "Maximum Senior Funded Debt to EBITDA Ratio" shall mean the
(1) sum of the commitment amount of the Loan ($7,500,000 as of
the date hereof), the total of Sale/Leaseback obligations, and
the outstanding principal balances of the Industrial
Development Revenue Bonds and any other permitted debt (other
than the Subordinated Debt) divided by (2) EBITDA (as defined
below).
B. "Minimum Fixed Charge Coverage Ratio" shall mean the sum of
EBITDA and rent (lease) expense, including without limitation
rent payments in connection with the Sale/Leaseback and the
Operating Lease, for a given period, divided by the sum of (1)
interest expense (which shall not include interest on the
Subordinated Debt which is deferred and not paid), (2) rent
(lease) expense, including without limitation rent payments in
connection with the Sale/Leaseback and Operating Lease, (3)
principal payments on the Subordinated Debt, the Bonds, and
any other permitted debt, and (4) Unfunded Capital
Expenditures in the amounts disclosed by Lessee in its
financial statements, for such period.
C. "Minimum Debt Service Coverage Ratio" shall mean the sum of
EBITDA and rent (lease) expense, including without limitation
rent payments in connection with the Sale/Leaseback and the
Operating Lease, for a given period, divided by the sum of (1)
interest expense (which shall not include interest on the
Subordinated Debt which is deferred and not paid), (2) rent
(lease) expense, including without limitation rent payments in
connection with the Sale/Leaseback and Operating Lease, and
(3) principal payments on the Subordinated Debt, The Bonds and
any other permitted debt, for such period.
D. "EBITDA" shall mean, for any period, (1) the sum of the
amounts for such period of (a) net income, (b) interest
expense, (c) charges for federal, state, local and foreign
income taxes, (d) depreciation and amortization expense, and
(e) extraordinary losses (and any unusual losses arising
outside the ordinary course of business not included in
extraordinary losses determined in accordance with generally
accepted accounting principles) minus (2) the sum of the
amounts for such period of (a) extraordinary gains (and any
unusual gains arising outside the ordinary course of business
not included in extraordinary gains determined in accordance
with generally accepted accounting principles) and (b) to the
extent not deducted from total interest expense, any net
payments received during such period under interest rate
contracts and any interest income received in respect of cash
investments.
E. "Unfunded Capital Expenditures" shall mean any capital expenditure made for which no long-term funding source is specifically available.
Except as modified hereby, all of the terms, covenants and conditions of the Master Lease shall remain in full force and effect and are in all respects hereby ratified and affirmed.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment as of the date first above written.
LESSOR: LESSEE:
KEYCORP LEASING, CORE MATERIALS CORPORATION
A Division of Key Corporate
Capital, Inc.
By:/s/ DONALD C. DAVIS By: /s/ KEVIN L. BARNETT
--------------------------------- ----------------------------------
Donald C. Davis, Vice President Kevin L. Barnett, Vice President,
Treasurer and CFO
|
EXHIBIT 10(m)
CORE MOLDING TECHNOLOGIES, INC.
INFORMAL CASH PROFIT SHARING PLAN
Core Molding has an informal cash profit sharing plan for its management and salaried employees which is calculated as follows:
A profit sharing pool is created after a reasonable return is provided to stockholders.
The Company's Board of Directors established thresholds for Earnings Before Taxes ("EBT") to provide such return to the stockholders for each fiscal year ended December 31.
A profit sharing pool will be created based upon percentages of EBT for each fiscal year ended December 31, above the thresholds which will be shared with the permanent salaried employees in the form of profit sharing.
A total profit sharing pool is limited to a maximum percentage of EBT as established by the Board of Directors.
The salaried profit sharing pool is split into two groups, an "executive" group and a "salary" group. The executive group consists of the Chief Executive Officer, the Chief Financial Officer, the Vice President of Sales and Marketing, the Vice President of Operations - Columbus, and each locations' plant manager.
The executive group shares in 20% of the pool while the remaining salary group shares in 80% of the pool.
Employees must have been employed as of December 31 of each year to be eligible to participate. There is no pro-rating for terminated employees.
The Board of Directors reserves the right to change the plan as deemed necessary.
EXHIBIT 23
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the incorporation by reference in Registration Statements No. 333-29203 and No. 333-60909 of Core Molding on Form S-8 of our report dated March 7, 2003, appearing in the Annual Report on Form 10-K of Core Molding Technologies, Inc. for the year ended December 31, 2002.
Deloitte & Touche LLP
Columbus, Ohio
March 27, 2003
EXHIBIT 24
POWERS OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Core Molding Technologies, Inc., a Delaware corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 2002, hereby constitutes and appoints James L. Simonton and Kevin L. Barnett, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 27th day of March 2003.
/s/ Ralph O. Hellmold ------------------------------------------- Ralph O. Hellmold Director |
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Core Molding Technologies, Inc., a Delaware corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 2002, hereby constitutes and appoints James L. Simonton and Kevin L. Barnett, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 27th day of March 2003.
/s/ James F. Crowley ------------------------------------- James F. Crowley Director |
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Core Molding Technologies, Inc., a Delaware corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 2002, hereby constitutes and appoints James L. Simonton and Kevin L. Barnett, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 27th day of March 2003.
/s/ Thomas M. Hough ----------------------------------------- Thomas M. Hough Director |
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Core Molding Technologies, Inc., a Delaware corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 2002, hereby constitutes and appoints James L. Simonton and Kevin L. Barnett, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 27th day of March 2003.
/s/ Malcolm M. Prine --------------------------------------- Malcolm M. Prine Director |
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Core Molding Technologies, Inc., a Delaware corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended December 31, 2002, hereby constitutes and appoints James L. Simonton and Kevin L. Barnett, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 27th day of March 2003.
/s/ Thomas R. Cellitti ----------------------------------------- Thomas R. Cellitti Director |
EXHIBIT 99(a)
CORE MOLDING TECHNOLOGIES, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Core Molding Technologies, Inc.
(the "Company") on Form 10-K for the period ending December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, James L. Simonton, President, Chief Executive Officer and Director of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ James L. Simonton ----------------------------------------------- James L. Simonton President, Chief Executive Officer and Director March 31, 2003 |
EXHIBIT 99(b)
CORE MOLDING TECHNOLOGIES, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Core Molding Technologies, Inc. (the "Company") on Form 10-K for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Herman F. Dick, Jr., Treasurer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Herman F. Dick, Jr. ------------------------------------- Herman F. Dick, Jr. Treasurer and Chief Financial Officer March 31, 2003 |