10-Q 1 a3311910-q.htm 10-Q Q1 2019 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019
OR

o | 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 incorporation or organization) |  | (I.R.S. Employer Identification No.)

800 Manor Park Drive, Columbus, Ohio |  | 43228-0183
(Address of principal executive office) |  | (Zip Code)

Registrant’s telephone number, including area code (614) 870-5000
N/A
_______________________________________________________________
Former name, former address and former fiscal year, if changed since last report.
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 þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company,” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o |  | Accelerated filer þ |  | Non-accelerated filer o |  | Smaller reporting company þ
|  |  |  | (Do not check if a smaller reporting company) |  | Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No þ
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Name of each exchange on which registered |  | Trading Symbol
Common Stock, par value $0.01 |  | NYSE American LLC |  | CMT

As of May 8, 2019, the latest practicable date, 8,145,366 shares of the registrant’s common stock were issued and outstanding.

Table of Contents

Part I — Financial Information |
Item 1. Financial Statements |
Consolidated Statements of Income | 3
Consolidated Statements of Comprehensive Income | 4
Consolidated Balance Sheets | 5
Consolidated Statement of Stockholders’ Equity | 6
Consolidated Statements of Cash Flows | 7
Notes to Consolidated Financial Statements | 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 27
Item 4. Controls and Procedures | 28
Part II — Other Information | 29
Item 1. Legal Proceedings | 29
Item 1A. Risk Factors | 29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 29
Item 3. Defaults Upon Senior Securities | 29
Item 4. Mine Safety Disclosures | 29
Item 5. Other Information | 29
Item 6. Exhibits | 29
Signatures | 30
Index to Exhibits | 31

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Item 1. Financial Statements
Part I — Financial Information
Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Income (Loss)
(Unaudited)

| Three Months Ended
| March 31,
| 2019 |  | 2018
Net sales | $ | 72,266,000 |  |  | $ | 63,046,000 |
Cost of sales | 69,117,000 |  |  | 55,161,000 |
Gross margin | 3,149,000 |  |  | 7,885,000 |
Selling, general and administrative expense | 7,166,000 |  |  | 6,760,000 |
Operating income (loss) | (4,017,000 | ) |  | 1,125,000 |
Other income and expense |  |  |
Interest expense | 896,000 |  |  | 449,000 |
Net periodic post-retirement benefit | (24,000 | ) |  | (12,000 | )
Total other income and expense | 872,000 |  |  | 437,000 |
Income (loss) before taxes | (4,889,000 | ) |  | 688,000 |
Income tax expense (benefit) | (1,044,000 | ) |  | 170,000 |
Net income (loss) | $ | (3,845,000 | ) |  | $ | 518,000 |
Net income (loss) per common share: |  |  |
Basic | $ | (0.49 | ) |  | $ | 0.07 |
Diluted | $ | (0.49 | ) |  | $ | 0.07 |
Weighted average shares outstanding: |  |  |
Basic | 7,779,000 |  |  | 7,711,000 |
Diluted | 7,779,000 |  |  | 7,800,000 |

See notes to unaudited consolidated financial statements.
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Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

| Three Months Ended
| March 31,
| 2019 |  | 2018
Net income (loss) | $ | (3,845,000 | ) |  | $ | 518,000 |
Other comprehensive income (loss): |  |  |
Foreign currency hedging derivatives: |  |  |
Unrealized hedge gain | 524,000 |  |  | 769,000 |
Income tax expense | (134,000 | ) |  | (162,000 | )
Interest rate swaps: |  |  |
Unrealized hedge loss | (254,000 | ) |  | — |
Income tax benefit | 58,000 |  |  | — |
Post retirement benefit plan adjustments: |  |  |
Net actuarial loss | 29,000 |  |  | 43,000 |
Prior service costs | (124,000 | ) |  | (124,000 | )
Income tax benefit | 20,000 |  |  | 17,000 |
Comprehensive income (loss) | $ | (3,726,000 | ) |  | $ | 1,061,000 |

See notes to unaudited consolidated financial statements.
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Core Molding Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets

| March 31, 2019 |  | December 31,
| (Unaudited) |  | 2018
Assets: |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 790,000 |  |  | $ | 1,891,000 |
Accounts receivable, net | 51,312,000 |  |  | 45,468,000 |
Inventory, net | 26,115,000 |  |  | 25,765,000 |
Contract assets | 1,757,000 |  |  | 3,915,000 |
Prepaid expenses and other current assets | 4,528,000 |  |  | 3,263,000 |
Total current assets | 84,502,000 |  |  | 80,302,000 |
Deferred tax asset | 1,153,000 |  |  | 1,153,000 |
Right of use asset | 4,017,000 |  |  | — |
Property, plant and equipment, net | 82,182,000 |  |  | 80,657,000 |
Goodwill | 21,476,000 |  |  | 21,476,000 |
Intangibles, net | 14,926,000 |  |  | 15,413,000 |
Other non-current assets | 1,764,000 |  |  | 2,197,000 |
Total Assets | $ | 210,020,000 |  |  | $ | 201,198,000 |
Liabilities and Stockholders’ Equity: |  |  |
Current liabilities: |  |  |
Current portion of long-term debt | $ | 3,110,000 |  |  | $ | 3,230,000 |
Accounts payable | 33,029,000 |  |  | 25,450,000 |
Contract liabilities | 2,404,000 |  |  | 1,686,000 |
Compensation and related benefits | 6,232,000 |  |  | 5,154,000 |
Accrued other liabilities | 5,120,000 |  |  | 4,671,000 |
Total current liabilities | 49,895,000 |  |  | 40,191,000 |
Lease liability | 2,929,000 |  |  | — |
Long-term debt | 36,677,000 |  |  | 37,784,000 |
Revolving debt | 18,059,000 |  |  | 17,375,000 |
Post retirement benefits liability | 6,907,000 |  |  | 6,919,000 |
Total Liabilities | $ | 114,467,000 |  |  | $ | 102,269,000 |
Commitments and Contingencies | — |  |  | — |
Stockholders’ Equity: |  |  |
Preferred stock — $0.01 par value, authorized shares — 10,000,000; no shares outstanding at March 31, 2019 and December 31, 2018 | — |  |  | — |
Common stock — $0.01 par value, authorized shares – 20,000,000; outstanding shares: 7,785,161 at March 31, 2019 and 7,776,164 December 31, 2018 | 78,000 |  |  | 78,000 |
Paid-in capital | 33,558,000 |  |  | 33,208,000 |
Accumulated other comprehensive income, net of income taxes | 2,236,000 |  |  | 2,117,000 |
Treasury stock - at cost, 3,790,308 at March 31, 2019 and December 31, 2018 | (28,403,000 | ) |  | (28,403,000 | )
Retained earnings | 88,084,000 |  |  | 91,929,000 |
Total Stockholders’ Equity | 95,553,000 |  |  | 98,929,000 |
Total Liabilities and Stockholders’ Equity | $ | 210,020,000 |  |  | $ | 201,198,000 |

See notes to unaudited consolidated financial statements.
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Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statement of Stockholders’ Equity
(Unaudited)
For the three months ended March 31, 2018:

| Common Stock Outstanding |  | Paid-In Capital |  | Accumulated Other Comprehensive Income |  | Treasury Stock |  | Retained Earnings |  | Total Stockholders’ Equity
| Shares |  | Amount |  |  |  |
Balance at December 31, 2017 | 7,711,277 |  |  | $ | 77,000 |  |  | $ | 31,465,000 |  |  | $ | 2,070,000 |  |  | $ | (28,153,000 | ) |  | $ | 96,434,000 |  |  | $ | 101,893,000 |
Impact of change in accounting policy |  |  |  |  |  |  |  |  |  |  | 1,069,000 |  |  | 1,069,000 |
Balance at January 1, 2018 | 7,711,277 |  |  | 77,000 |  |  | 31,465,000 |  |  | 2,070,000 |  |  | (28,153,000 | ) |  | 97,503,000 |  |  | 102,962,000 |
Net income |  |  |  |  |  |  |  |  |  |  | 518,000 |  |  | 518,000 |
Cash dividends paid |  |  |  |  |  |  |  |  |  |  | (393,000 | ) |  | (393,000 | )
Change in post retirement benefits, net of tax benefit of $17,000 |  |  |  |  |  |  | (64,000 | ) |  |  |  |  |  | (64,000 | )
Unrealized hedge gain, net of tax of $162,000 |  |  |  |  |  |  | 607,000 |  |  |  |  |  |  | 607,000 |
Restricted stock vested | 211 |  |  |  |  |  |  |  |  |  |  |  |  | — |
Share-based compensation |  |  |  |  | 331,000 |  |  |  |  |  |  |  |  | 331,000 |
Balance at March 31, 2018 | 7,711,488 |  |  | $ | 77,000 |  |  | $ | 31,796,000 |  |  | $ | 2,613,000 |  |  | $ | (28,153,000 | ) |  | $ | 97,628,000 |  |  | $ | 103,961,000 |

For the three months ended March 31, 2019:

| Common Stock Outstanding |  | Paid-In Capital |  | Accumulated Other Comprehensive Income |  | Treasury Stock |  | Retained Earnings |  | Total Stockholders’ Equity
| Shares |  | Amount |  |  |  |
Balance at December 31, 2018 | 7,776,164 |  |  | $ | 78,000 |  |  | $ | 33,208,000 |  |  | $ | 2,117,000 |  |  | $ | (28,403,000 | ) |  | $ | 91,929,000 |  |  | $ | 98,929,000 |
Net loss |  |  |  |  |  |  |  |  |  |  | (3,845,000 | ) |  | (3,845,000 | )
Change in post retirement benefits, net of tax benefit of $20,000 |  |  |  |  |  |  | (75,000 | ) |  |  |  |  |  | (75,000 | )
Unrealized foreign currency hedge gain, net of tax of $134,000 |  |  |  |  |  |  | 390,000 |  |  |  |  |  |  | 390,000 |
Change in interest rate swaps, net of tax benefit of $58,000 |  |  |  |  |  |  | (196,000 | ) |  |  |  |  |  | (196,000 | )
Restricted stock vested | 8,997 |  |  |  |  |  |  |  |  |  |  |  |  | — |
Share-based compensation |  |  |  |  | 350,000 |  |  |  |  |  |  |  |  | 350,000 |
Balance at March 31, 2019 | 7,785,161 |  |  | $ | 78,000 |  |  | $ | 33,558,000 |  |  | $ | 2,236,000 |  |  | $ | (28,403,000 | ) |  | $ | 88,084,000 |  |  | $ | 95,553,000 |

See notes to unaudited consolidated financial statements.
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Core Molding Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)

| Three Months Ended
| March 31,
| 2019 |  | 2018
Cash flows from operating activities: |  |  |
Net income (loss) | $ | (3,845,000 | ) |  | $ | 518,000 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |  |
Depreciation and amortization | 2,562,000 |  |  | 2,309,000 |
Share-based compensation | 350,000 |  |  | 331,000 |
(Gain) loss on foreign currency translation | (19,000 | ) |  | 6,000 |
Change in operating assets and liabilities, net of effects of acquisition: |  |  |
Accounts receivable | (5,844,000 | ) |  | (15,135,000 | )
Inventories | (350,000 | ) |  | 365,000 |
Prepaid and other assets | 1,396,000 |  |  | (115,000 | )
Accounts payable | 7,441,000 |  |  | 2,209,000 |
Accrued and other liabilities | 1,300,000 |  |  | 2,143,000 |
Post retirement benefits liability | (106,000 | ) |  | (82,000 | )
Net cash provided by (used in) operating activities | 2,885,000 |  |  | (7,451,000 | )
Cash flows from investing activities: |  |  |
Purchase of property, plant and equipment | (3,404,000 | ) |  | (1,580,000 | )
Purchase of assets of Horizon Plastics | — |  |  | (62,457,000 | )
Net cash used in investing activities | (3,404,000 | ) |  | (64,037,000 | )
Cash flows from financing activities: |  |  |
Gross repayments on revolving line of credit | (51,277,000 | ) |  | (13,174,000 | )
Gross borrowings on revolving line of credit | 51,961,000 |  |  | 24,174,000 |
Proceeds from term loan | — |  |  | 45,000,000 |
Payment of principal on term loans | (844,000 | ) |  | (7,594,000 | )
Payment of deferred loan costs | (422,000 | ) |  | (723,000 | )
Cash dividends paid | — |  |  | (393,000 | )
Net cash provided by (used in) financing activities | (582,000 | ) |  | 47,290,000 |
Net change in cash and cash equivalents | (1,101,000 | ) |  | (24,198,000 | )
Cash and cash equivalents at beginning of period | 1,891,000 |  |  | 26,780,000 |
Cash and cash equivalents at end of period | $ | 790,000 |  |  | $ | 2,582,000 |
Cash paid for: |  |  |
Interest (net of amounts capitalized) | $ | 858,000 |  |  | $ | 378,000 |
Income taxes | $ | 808,000 |  |  | $ | — |
Non Cash: |  |  |
Fixed asset purchases in accounts payable | $ | 1,028,000 |  |  | $ | 381,000 |

See notes to unaudited consolidated financial statements.
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Core Molding Technologies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by accounting principles generally accepted in the United States of America for interim reporting, which are less than those required for annual reporting. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (all of which are normal and recurring in nature) necessary to present fairly the financial position of Core Molding Technologies, Inc. and its subsidiaries (“Core Molding Technologies” or the “Company”) at March 31, 2019, and the results of operations and cash flows for the three months ended March 31, 2019. The Company has reclassified certain prior-year amounts to conform to the current-year's presentation. The “Notes to Consolidated Financial Statements” contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, should be read in conjunction with these consolidated financial statements.
Core Molding Technologies is a manufacturer of sheet molding compound ("SMC") and molder of thermoset and thermoplastic products. The Company produces high quality molded products, assemblies and SMC materials for varied markets, including medium and heavy-duty trucks, automotive, marine, home improvement, water management, agriculture, construction and other commercial markets. The Company offers customers a wide range of manufacturing processes to fit various program volume and investment requirements. These processes include compression molding of SMC, bulk molding compounds (BMC), resin transfer molding (RTM), liquid molding of dicyclopentadiene (DCPD), spray-up and hand-lay-up, glass mat thermoplastics (GMT), direct long-fiber thermoplastics (D-LFT) and structural foam and structural web injection molding (SIM). Core Molding Technologies has its headquarters in Columbus, Ohio, and operates production facilities in Columbus and Batavia, Ohio; Gaffney, South Carolina; Winona, Minnesota; Matamoros and Escobedo, Mexico; and Cobourg, Ontario, Canada.
2. CRITICAL ACCOUNTING POLICIES AND ESTIMATES
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. 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.
Revenue Recognition: The Company recognizes revenue from two streams, product revenue and tooling revenue. Product revenue is earned from the manufacture and sale of sheet molding compound and thermoset and thermoplastic products. Revenue from product sales is generally recognized as products are shipped, as the Company transfers title and risk of ownership to the customer and is entitled to payment. In limited circumstances, the Company recognizes revenue from product sales when products are produced and the customer takes title and risk of ownership at our production facility.
Tooling revenue is earned from manufacturing multiple tools, molds and assembly equipment as part of a tooling program for a customer. Given that the Company is providing a significant service of producing highly interdependent component parts of the tooling program, each tooling program consists of a single performance obligation to provide the customer the capability to produce a single product. Based on the arrangement with the customer, the Company recognizes revenue either at a point in time or over time. When the Company does not have an enforceable right to payment, the Company recognizes tooling revenue at a point in time. In such cases, the Company recognizes revenue upon customer acceptance, which is when the customer has legal title to the tools.
Certain tooling programs include an enforceable right to payment. In those cases, the Company recognizes revenue over time based on the extent of progress towards completion of its performance obligation. The Company uses a cost-to-cost measure of progress for such contracts because it best depicts the transfer of value to the customer and also correlates with the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services to the customer. Under the cost-to-cost measure of progress, progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred.
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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 recorded an allowance for doubtful accounts of $47,000 and $25,000 at March 31, 2019 and December 31, 2018, respectively.
Management also records an allowance for estimated customer chargebacks for returns, price discounts and adjustments, premium freight and expediting costs and customer production line disruption costs resulting from late deliveries. At times, customers have asserted a right to significant production line disruption charges to recover damages as a result of late delivery. The Company typically works with its customers to minimize disruption charges, validate damages and negotiate resolution. The Company records accruals for customer chargebacks when a valid charge is probable and the amount of the charge can be reasonably estimated. Should customer chargebacks fluctuate from the estimated amounts, additional allowances may be necessary. The Company reduced accounts receivable for chargebacks by $2,952,000 at March 31, 2019 and $2,344,000 at December 31, 2018.
Inventories: Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or net realizable value. The inventories are accounted for using the first-in, first-out (FIFO) method of determining inventory costs. Inventory quantities on-hand are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based on historical and anticipated usage. The Company has recorded an allowance for slow moving and obsolete inventory of $928,000 at March 31, 2019 and $957,000 at December 31, 2018.
Contract Assets/Liabilities: Contract assets and liabilities represent the net cumulative customer billings, vendor payments and revenue recognized for tooling programs. For tooling programs where net revenue recognized and vendor payments exceed customer billings, the Company recognizes a contract asset. For tooling programs where net customer billings exceed revenue recognized and vendor payments, the Company recognizes a contract liability. Customer payment terms vary by contract and can range from progress payments based on work performed or one single payment once the contract is completed. Contract assets are generally classified as current. The Company has recorded contract assets in prepaid expenses and other current assets on the Consolidated Balance Sheet. During the three months ended March 31, 2019, the Company recognized no impairments on contract assets. Contract liabilities are also generally classified as current. The Company has recorded contract liabilities in other current liabilities on the Consolidated Balance Sheet. For the three months ended March 31, 2019, the Company did not recognize a material amount of revenue to settle contract liabilities.
Income taxes: The Company’s consolidated balance sheets include a net non-current deferred tax asset of $1,153,000 at March 31, 2019 and December 31, 2018. The Company evaluates the balance of deferred tax assets that will be realized based on the premise that the Company is more likely than not to realize deferred tax benefits through the generation of future taxable income. For more information, refer to Note 13 of the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.
Derivative instruments: Derivative instruments are utilized to manage exposure to fluctuations in foreign currency exchange rates and interest rates on long term debt obligations. All derivative instruments are formally documented as cash flow hedges and are recorded at fair value at each reporting period. Gains and losses related to currency forward contracts and interest rate swaps are deferred and recorded as a component of Accumulated Other Comprehensive Income in the Consolidated Statement of Stockholders' Equity and then subsequently recognized in the Consolidated Statement of Income when the hedged item affects net income. The ineffective portion of the change in fair value of a hedge, if any, is recognized in income immediately. For additional information on derivative instruments, see Note 15.
Long-Lived Assets: Long-lived assets consist primarily of property, plant and equipment and definite-lived intangibles. The recoverability of long-lived assets is evaluated by an analysis of operating results and consideration of other significant events or changes in the business environment. The Company evaluates whether impairment exists for property, plant and equipment on the basis of undiscounted expected future cash flows from operations before interest. There was no impairment of the Company's long-lived assets for the three months ended March 31, 2019 or March 31, 2018.
Goodwill and Other Intangibles: The Company evaluates goodwill annually on December 31 to determine whether impairment exists, or at interim periods if an indicator of possible impairment exists. As a result of the Horizon Plastics acquisition on January 16, 2018 and the status of its integration, the Company established two reporting units, Core Traditional and Horizon Plastics. The annual impairment tests of goodwill may be completed through qualitative assessments, however the Company may elect to bypass the qualitative assessment and proceed directly to a quantitative impairment test for any reporting unit in any period. The Company may resume the qualitative assessment for any reporting unit in any subsequent period.
The Company’s annual impairment assessment at December 31, 2018 consisted of a quantitative analysis for both its Core Traditional and Horizon Plastics reporting units. It concluded that the carrying value of Core Traditional was greater than the fair value, which resulted in a goodwill impairment charge of $2,403,000, representing all the goodwill related to the Core Traditional
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reporting unit. The analysis of the Company’s other reporting unit, Horizon Plastics, indicated no goodwill impairment charge as the excess of the estimated fair value over the carrying value of its invested capital was approximately 23% of the book value of its net assets at December 31, 2018.
There were no indicators of impairment for the three months ended March 31, 2019 that would trigger additional analysis.
Self-Insurance: The Company is self-insured with respect to its Columbus and Batavia, Ohio, Gaffney, South Carolina, Winona, Minnesota and Brownsville, Texas medical, dental and vision claims and Columbus and Batavia, Ohio workers’ compensation claims, all of which are subject to stop-loss insurance thresholds. The Company is also self-insured for dental and vision with respect to its Cobourg, Canada location. The Company has recorded an estimated liability for self-insured medical, dental, vision and worker’s compensation claims incurred but not reported at March 31, 2019 and December 31, 2018 of $1,034,000 and $960,000, respectively.
Post-retirement benefits: Management records an accrual for post-retirement costs associated with the health care plan sponsored by Core Molding Technologies. 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 effect on Core Molding Technologies’ operations. The effect of a change in healthcare costs is described in Note 11 of the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2018. Core Molding Technologies had a liability for post retirement healthcare benefits based on actuarially computed estimates of $8,064,000 at March 31, 2019 and $8,076,000 at December 31, 2018.
3. RECENT ACCOUNTING PRONOUNCEMENTS
In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842). This update requires organizations to recognize lease assets and lease liabilities on the balance sheet and also disclose key information about leasing arrangements. This ASU is effective for annual reporting periods beginning on or after December 15, 2018, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual period.
In accordance with ASU 2016-02, the Company elected not to recognize lease assets and lease liabilities for leases with a term of twelve months or less. The ASU requires a modified retrospective transition method, or a transition method option under further described within ASU 2018-11, with the option to elect a package of practical expedients that permits the Company to: (1) not reassess whether expired or existing contracts contain leases, (2) not reassess lease classification for existing or expired leases and (3) not consider whether previously capitalized initial direct costs would be appropriate under the new standard. The Company elected to apply the package of practical expedients.
The Company adopted ASU No. 2016-02 as of January 1, 2019, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at adoption without restating previously reported periods. In addition, we elected the practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification.
In addition, the Company elected the practical expedient to determine the lease term for existing leases. In the application of practical expedient, the Company evaluated the buildings leased and the current financial performance of the plant associated, which resulted in the determination that most renewal options would be reasonably certain in determining the expected lease term.
Adoption of the new standard resulted in the recording of additional net right of use assets and lease liabilities of $4,490,000 and $4,428,000, respectively, as of January 1, 2019. The present value of lease liabilities has been measured using the Company’s revolving loan borrowing rates as of December 31, 2018 (one day prior to initial application). Additionally, ROU assets for these operating leases have been measured as the initial measurement of applicable lease liabilities adjusted for any unamortized initial prepaid/accrued rent and any ASC Topic 420 liabilities. The standard did not materially impact the Company's consolidated statement of income (loss) or statement of cash flows.
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4. NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share is computed based on the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed similarly but includes the effect of the assumed exercise of restricted stock under the treasury stock method.
The computation of basic and diluted net income (loss) per common share is as follows:

| Three Months Ended
| March 31,
| 2019 |  | 2018
Net income (loss) | $ | (3,845,000 | ) |  | $ | 518,000 |
Weighted average common shares outstanding — basic | 7,779,000 |  |  | 7,711,000 |
Effect of dilutive securities | — |  |  | 89,000 |
Weighted average common and potentially issuable common shares outstanding — diluted | 7,779,000 |  |  | 7,800,000 |
Basic net income (loss) per common share | $ | (0.49 | ) |  | $ | 0.07 |
Diluted net income (loss) per common share | $ | (0.49 | ) |  | $ | 0.07 |

5. MAJOR CUSTOMERS
Core Molding Technologies has three major customers, Navistar, Inc. (“Navistar”), Volvo Group North America, LLC (“Volvo”), and PACCAR, Inc. (“PACCAR”). Major customers are defined as customers whose sales individually consist of more than ten percent of total sales during any reporting period in the current year. The following table presents sales revenue for the above-mentioned customers for the three months ended March 31, 2019 and 2018:

| Three Months Ended
| March 31,
| 2019 |  | 2018
Navistar product sales | $ | 14,253,000 |  |  | $ | 10,951,000 |
Navistar tooling sales | 39,000 |  |  | — |
Total Navistar sales | 14,292,000 |  |  | 10,951,000 |
Volvo product sales | 14,515,000 |  |  | 10,197,000 |
Volvo tooling sales | 107,000 |  |  | — |
Total Volvo sales | 14,622,000 |  |  | 10,197,000 |
PACCAR product sales | 11,812,000 |  |  | 6,763,000 |
PACCAR tooling sales | 173,000 |  |  | 3,203,000 |
Total PACCAR sales | 11,985,000 |  |  | 9,966,000 |
Other product sales | 30,871,000 |  |  | 31,801,000 |
Other tooling sales | 496,000 |  |  | 131,000 |
Total other sales | 31,367,000 |  |  | 31,932,000 |
Total product sales | 71,451,000 |  |  | 59,712,000 |
Total tooling sales | 815,000 |  |  | 3,334,000 |
Total sales | $ | 72,266,000 |  |  | $ | 63,046,000 |

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6. INVENTORY
Inventories consisted of the following:

| March 31, 2019 |  | December 31, 2018
Raw materials | $ | 16,646,000 |  |  | $ | 17,278,000 |
Work in process | 1,993,000 |  |  | 2,034,000 |
Finished goods | 7,476,000 |  |  | 6,453,000 |
| $ | 26,115,000 |  |  | $ | 25,765,000 |

Inventory quantities on-hand are regularly reviewed, and where necessary, provisions for excess and obsolete inventory are recorded based on historical and anticipated usage.
7. LEASES
The Company has operating leases with fixed payment terms for certain buildings and warehouses. The Company's leases have remaining lease terms of less than one year to four years, some of which include options to extend the lease for five years. Operating leases are included in operating lease right-of-use ("ROU") assets, and operating lease liabilities in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
The Company used the applicable incremental borrowing rate at implementation date to measure lease liabilities and ROU assets. The incremental borrowing rate used by the Company was based on baseline rates and adjusted by the credit spreads commensurate with the Company’s secured borrowing rate. At each reporting period when there is a new lease initiated, the Company will utilize its incremental borrowing rate to perform lease classification tests on lease components and to measure ROU assets and lease liabilities.
The components of lease expense were as follows:

| March 31, 2019 |
Operating lease cost | $ | 429,000 |
Total net lease cost | $ | 429,000 |

Other supplemental balance sheet information related to leases was as follows:

| March 31, 2019
Operating Leases: |
Current operating lease right of use assets(A) | $ | 131,000 |
Noncurrent operating lease right of use assets | 4,017,000 |
Total operating lease right of use assets | $ | 4,148,000 |
Current operating lease liabilities(A) | $ | 1,158,000 |
Noncurrent operating lease liabilities | 2,929,000 |
Total operating lease liabilities | $ | 4,087,000 |
Weighted average remaining lease term (in years): |
Operating leases | 4.5 |
Weighted average discount rate: |
Operating leases | 4.4 | %

(A)Current operating lease right of use assets is included in prepaid expenses and other current assets on the Consolidated Balance Sheet. Current operating lease liabilities is included in accrued other liabilities on the Consolidated Balance Sheet.
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Other information related to leases were as follows:

| March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities |
Operating cash flows from operating leases | 429,000 |

As of March 31, 2019, maturities of lease liabilities were as follows:

| Operating Leases
2019 | $ | 935,000 |
2020 | 1,099,000 |
2021 | 839,000 |
2022 | 766,000 |
2023 | 661,000 |
2024 and thereafter | 331,000 |
Total lease payments | 4,631,000 |
Less: imputed interest | (544,000 | )
Total lease obligations | 4,087,000 |
Less: current obligations | (1,158,000 | )
Long-term lease obligations | $ | 2,929,000 |

As of December 31, 2018, maturities of lease liabilities were as follows:

| Operating Leases
2019 | $ | 1,291,000 |
2020 | 1,099,000 |
2021 | 838,000 |
2022 | 766,000 |
2023 | 661,000 |
2024 and thereafter | 331,000 |
Total lease payments | $ | 4,986,000 |

8. PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment consisted of the following for the periods specified:

| March 31, 2019 |  | December 31, 2018
Property, plant and equipment | $ | 167,696,000 |  |  | $ | 164,145,000 |
Accumulated depreciation | (85,514,000 | ) |  | (83,488,000 | )
Property, plant and equipment — net | $ | 82,182,000 |  |  | $ | 80,657,000 |

Property, plant, and equipment are recorded at cost, unless obtained through acquisition, then assets are recorded at estimated fair value at the date of acquisition. 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 an adjustment to the depreciation period or to the unamortized balance is warranted. Depreciation expense for the three months ended March 31, 2019 and 2018 was $2,026,000 and $1,833,000, respectively. Amounts invested in capital additions in progress were $7,164,000 and $5,014,000 at March 31, 2019 and December 31, 2018, respectively. At March 31, 2019 and December 31, 2018, purchase commitments for capital expenditures in progress were $2,705,000 and $3,461,000, respectively.
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9. HORIZON PLASTICS ACQUISITION
On January 16, 2018, the Company entered into an Asset Purchase Agreement (the "Agreement") with Horizon Plastics International Inc., 1541689 Ontario Inc., 2551024 Ontario Inc. and Horizon Plastics de Mexico, S.A. de C.V. (collectively "Horizon Plastics"). Pursuant to the terms of the Agreement the Company acquired substantially all of the assets and assumed certain specified liabilities of Horizon Plastics for a cash purchase of $62,457,000. The purchase price was subject to working capital adjustments resulting in an increase in the purchase price of $548,000.
The acquisition was funded through a combination of cash on hand and borrowings under the Amended and Restated Credit Agreement ("A/R Credit Agreement"), further described in Note 12, entered into with KeyBank National Association as administrative agent and various other financial institutions on January 16, 2018.
The purpose of the acquisition was to increase the Company's process capabilities to include structural foam and structural web molding, expand its geographical footprint, and diversify the Company's customer base.
Consideration was allocated to assets acquired and liabilities assumed based on their fair values as of the acquisition date as follows:

Accounts Receivable |  | $ | 7,677,000 |
Inventory |  | 6,523,000 |
Other Current Assets |  | 832,000 |
Property and Equipment |  | 12,994,000 |
Intangibles |  | 16,770,000 |
Goodwill |  | 21,476,000 |
Accounts Payable |  | (3,181,000 | )
Other Current Liabilities |  | (86,000 | )
|  | $ | 63,005,000 |

The purchase price included consideration for strategic benefits, including an assembled workforce, operational infrastructure and synergistic revenue opportunities, which resulted in the recognition of goodwill. The goodwill is deductible for income tax purposes.
The Company incurred $1,283,000 of expense for the three months ended March 31, 2018 associated with the acquisition, which was recorded in selling, general and administrative expense.
The amount allocated to intangible assets has been attributed to the following categories and will be amortized over the useful lives of each individual asset identified on a straight-line basis as follows:

Acquired Intangible Assets | Estimated Fair Value | Estimated Useful Life (Years)
Non-competition Agreement | $ | 1,810,000 |  | 5
Trademarks | 1,610,000 |  | 10
Developed Technology | 4,420,000 |  | 7
Customer Relationships | 8,930,000 |  | 12
Total | $ | 16,770,000 |  |

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Pro Forma Information
The unaudited pro forma information for the combined results of the Company has been prepared as if the 2018 acquisitions had taken place on January 1, 2017. The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transactions actually taken place on January 1, 2017 and the unaudited pro forma information does not purport to be indicative of future financial operating results.

| Pro forma for the three months ended March 31,
| 2018
Net revenue | $ | 65,715,000 |
Net income | 1,250,000 |
Basic and diluted net income per share | $ | 0.16 |

The unaudited pro forma net income includes the following adjustments that would have been recorded had the 2018 acquisition taken place on January 1, 2017.

| Pro forma for the three months ended March 31,
| 2018
Non-recurring transaction costs | $ | (1,283,000 | )
Depreciation expense | 55,000 |
Amortization expense | 78,000 |
Interest expense | 17,000 |
Income tax expense | 285,000 |

10. GOODWILL AND INTANGIBLES
Goodwill activity for the three months ended March 31, 2019 consisted of the following:

Balance at December 31, 2018 |  | $ | 21,476,000 |
Additions |  | — |
Impairment |  | — |
Balance at March 31, 2019 |  | $ | 21,476,000 |

Intangible assets at March 31, 2019 were comprised of the following:

Definite-lived Intangible Assets |  | Amortization Period |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Trade Name |  | 25 Years |  | $ | 250,000 |  |  | $ | (40,000 | ) |  | $ | 210,000 |
Trademarks |  | 10 Years |  | 1,610,000 |  |  | (195,000 | ) |  | 1,415,000 |
Non-competition Agreement |  | 5 Years |  | 1,810,000 |  |  | (436,000 | ) |  | 1,374,000 |
Developed Technology |  | 7 Years |  | 4,420,000 |  |  | (765,000 | ) |  | 3,655,000 |
Customer Relationships |  | 10-12 Years |  | 9,330,000 |  |  | (1,058,000 | ) |  | 8,272,000 |
Total |  |  |  | $ | 17,420,000 |  |  | $ | (2,494,000 | ) |  | $ | 14,926,000 |

The aggregate intangible asset amortization expense was $487,000 and $404,000 for the three months ended March 31, 2019 and 2018, respectively.
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Intangible assets at December 31, 2018 were comprised of the following:

Definite-lived Intangible Assets |  | Amortization Period |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net Carrying Amount
Trade Name |  | 25 Years |  | $ | 250,000 |  |  | $ | (37,000 | ) |  | $ | 213,000 |
Trademarks |  | 10 Years |  | 1,610,000 |  |  | (86,000 | ) |  | 1,524,000 |
Non-competition Agreement |  | 5 Years |  | 1,810,000 |  |  | (360,000 | ) |  | 1,450,000 |
Developed Technology |  | 7 Years |  | 4,420,000 |  |  | (605,000 | ) |  | 3,815,000 |
Customer Relationships |  | 10-12 Years |  | 9,330,000 |  |  | (919,000 | ) |  | 8,411,000 |
Total |  |  |  | $ | 17,420,000 |  |  | $ | (2,007,000 | ) |  | $ | 15,413,000 |

11. POST RETIREMENT BENEFITS
The components of expense for Core Molding Technologies’ post-retirement benefit plans for the three months ended March 31, 2019 and 2018 are as follows:

| Three Months Ended
| March 31,
| 2019 |  | 2018
Pension expense: |  |  |
Multi-employer plan | $ | 231,000 |  |  | $ | 178,000 |
Defined contribution plan | 261,000 |  |  | 259,000 |
Total pension expense | 492,000 |  |  | 437,000 |
Health and life insurance: |  |  |
Interest cost | 71,000 |  |  | 69,000 |
Amortization of prior service costs | (124,000 | ) |  | (124,000 | )
Amortization of net loss | 29,000 |  |  | 43,000 |
Net periodic benefit cost | (24,000 | ) |  | (12,000 | )
Total post retirement benefits expense | $ | 468,000 |  |  | $ | 425,000 |

The Company made payments of $342,000 to pension plans and $84,000 for post-retirement healthcare and life insurance during the three months ended March 31, 2019. For the remainder of 2019, the Company expects to make approximately $1,628,000 of pension plan payments, of which $710,000 was accrued at March 31, 2019. The Company also expects to make approximately $1,073,000 of post-retirement healthcare and life insurance payments for the remainder of 2019, all of which were accrued at March 31, 2019.
12. DEBT
Debt consists of the following:

| March 31, 2019 |  | December 31, 2018
Term loans, interest at a variable rate (5.25% at March 31, 2019 and 4.34% at December 31, 2018) with quarterly payments of interest and principal through January 2023 | $ | 40,781,000 |  |  | $ | 41,625,000 |
Revolving loans, interest at a variable rate (5.13% at March 31, 2019 and 3.36% at December 31, 2018) | 18,059,000 |  |  | 17,375,000 |
Total | 58,840,000 |  |  | 59,000,000 |
Less deferred loan costs | (994,000 | ) |  | (611,000 | )
Less current portion | (3,110,000 | ) |  | (3,230,000 | )
Long-term debt | $ | 54,736,000 |  |  | $ | 55,159,000 |

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Credit Agreement
On January 16, 2018, the Company entered into an Amended and Restated ("A/R") Credit Agreement with KeyBank National Association as administrative agent and various financial institutions party thereto as lenders (the "Lenders"). Pursuant to the terms of the A/R Credit Agreement (i) the Company may borrow revolving loans in the aggregate principal amount of up to $40,000,000 (the “US Revolving Loans”) from the Lenders and term loans in the aggregate principal amount of up to $32,000,000 from the Lenders, (ii) the Company's wholly-owned subsidiary, Horizon Plastics International, Inc., (the "Subsidiary") may borrow revolving loans in an aggregate principal amount of up to $10,000,000 from the Lenders (which revolving loans shall reduce the availability of the US Revolving Loans to the Company on a dollar-for-dollar basis) and term loans in an aggregate principal amount of up to $13,000,000 from the Lenders, (iii) the Company obtained a Letter of Credit Commitment of $250,000, of which $160,000 has been issued and (iv) the Company repaid the outstanding term loan balance of $6,750,000. The Credit Agreement is secured by a guarantee of each U.S. and Canadian subsidiary of the Company, and by a lien on substantially all of the present and future assets of the Company and its U.S. and Canadian subsidiaries, except that only 65% of the stock issued by Corecomposites de Mexico, S. de R.L. de C.V. has been pledged.
Concurrent with the closing of the A/R Credit Agreement the Company borrowed the $32,000,000 term loan and $2,000,000 from the US Revolving loan and the Subsidiary borrowed the $13,000,000 term loan and $2,500,000 from revolving loans to provide $49,500,000 of funding for the acquisition of Horizon Plastics. Interest is payable monthly at one month LIBOR plus a basis point margin ranging from 175 to 400 basis points based on the Company's leverage ratio. The margin was set at 275 basis points as of March 31, 2019.
On March 14, 2019, the Company entered into the first amendment (“First Amendment”) to the A/R Credit Agreement (as amended by the First Amendment, the "Amended Credit Agreement") with the Lenders. Pursuant to the terms of the First Amendment, the Company and Lenders agreed to modify certain terms of the A/R Credit Agreement. These modifications included (1) implementation of an availability block on the U.S. Revolving Loans reducing availability from $40,000,000 to $32,500,000, (2) modification to the definition of EBITDA to add back certain one-time expenses, (3) waiver of non-compliance with the leverage covenant as of December 31, 2018 and modification of the leverage ratio definition and covenant to eliminate testing of the leverage ratio until December 31, 2019, (4) waiver of non-compliance with the fixed charge covenant as of December 31, 2018 and modification of the fixed charge coverage ratio definition and covenant requirement, (5) implementation of a capital expenditure spend limit of $7,500,000 during the first six months of 2019 and $12,500,000 for the full year 2019, (6) an increase of the applicable interest margin spread for existing term and revolving loans, and (7) an increase in the commitment fees on any unused U.S. Revolving Loans.
The Company has available $32,500,000 of variable rate revolving loans of which $18,059,000 is outstanding as of March 31, 2019. These revolving loans are scheduled to mature on January 1, 2023 and are classified as long term on the balance sheet.
Bank Covenants
The Company is required to meet certain financial covenants included in the Amended Credit Agreement with respect to leverage ratios and fixed charge ratios and capital expenditures, as well as other customary affirmative and negative covenants. As of March 31, 2019, the Company was in compliance with its financial covenants associated with the loans made under the Amended A/R Credit Agreement as described above. While management believes it will be able to meet its future covenants as established in the First Amendment, the ability to meet these covenants relies on certain operational and financial improvements consistent with our planned turn around and expected timetable. Should these improvements not materialize in the time frame planned, it could impact our ability to meet future covenants.
Interest Rate Swaps
The Company entered into two interest rate swap agreements that became effective January 18, 2018 and continue through January 2023, one of which was designated as a cash flow hedge for $25,000,000 of the $32,000,000 term loan to the Company mentioned above and the other designated as a cash flow hedge for $10,000,000 of the $13,000,000 term loan to the Subsidiary mentioned above. Under these agreements, the Company will pay a fixed rate of approximately 2.49% to the counterparty and receives one month LIBOR resulting in a total initial fixed rate of approximately 4.49% for both cash flow hedges. The fair value of the interest rate swap was a liability of $318,000 and $65,000 at March 31, 2019 and December 31, 2018, respectively. While the Company is exposed to credit loss on its interest rate swaps in the event of non-performance by the counter party to the swap, management believes that such non-performance is unlikely to occur given the financial resources of the counter party.
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13. INCOME TAXES
The Company’s consolidated balance sheets include a net non-current deferred tax asset of $1,153,000 at March 31, 2019 and December 31, 2018. The Company evaluates the balance of deferred tax assets that will be realized based on the premise that the Company is more likely than not to realize deferred tax benefits through the generation of future taxable income. As of March 31, 2019 and December 31, 2018, the Company had no liability for unrecognized tax benefits. The Company does not anticipate that unrecognized tax benefits will significantly change within the next twelve months.
Income tax benefit for the three months ended March 31, 2019 is estimated to be $1,044,000, approximately 21% of the loss of $4,889,000 before income taxes. Income tax expense for the three months ended March 31, 2018 was estimated to be $170,000, or approximately 25% of income before income taxes.
The Company files income tax returns in the U.S., Mexico, Canada and various state jurisdictions. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to 2015, and is no longer subject to Mexican income tax examinations by Mexican authorities for years prior to 2013. As a result of the Horizon Plastics acquisition on January 16, 2018, the Company now has filing requirements in Canada, and is not subject to Canadian tax examinations by Canadian authorities for years prior to 2018.
14. STOCK BASED COMPENSATION
The Company has a Long Term Equity Incentive Plan (the “2006 Plan”), as approved by the Company’s stockholders in May 2006 and as amended in May 2015. The 2006 Plan allows for grants to directors and employees of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, performance shares, performance units and other incentive awards (“Stock Awards”) up to an aggregate of 3,000,000 awards, each representing a right to buy a share of Core Molding Technologies common stock. Stock Awards can be granted under the 2006 Plan through the earlier of December 31, 2025, or the date the maximum number of available awards under the 2006 Plan have been granted.
Restricted Awards
The Company grants shares of its common stock to certain directors, officers, key managers and employees in the form of unvested stock and units (“Restricted Awards”). These awards are recorded at the market value of Core Molding Technologies’ common stock on the date of issuance and amortized ratably as compensation expense over the applicable vesting period, which is typically three years. The Company adjusts compensation expense for actual forfeitures, as they occur.
The following summarizes the status of Restricted Stock and changes during the three months ended March 31, 2019:

| Number of Shares |  | Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2018 | 349,885 |  |  | $ | 10.62 |
Granted | 19,317 |  |  | 7.77 |
Vested | (8,997 | ) |  | 17.97 |
Forfeited | (670 | ) |  | 22.68 |
Unvested balance at March 31, 2019 | 359,535 |  |  | $ | 10.26 |

At March 31, 2019 and 2018, there was $2,349,000 and $2,021,000, respectively, of total unrecognized compensation expense, net of estimated forfeitures, related to Restricted Awards granted under the 2006 Plan. That cost is expected to be recognized over the weighted-average period of 1.6 years. Total compensation cost, net of estimated forfeitures, related to restricted award grants for the three months ended March 31, 2019 and 2018 was $350,000 and $331,000, respectively, all of which was recorded to selling, general and administrative expense.
During the three months ended March 31, 2019 and 2018, employees surrendered zero shares of the Company's common stock to satisfy income tax withholding obligations in connection with the vesting of restricted awards.
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15. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants as of the measurement date. Fair value is measured using the fair value hierarchy and related valuation methodologies as defined in the authoritative literature. This guidance provides a fair value framework that requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment.
The three levels are defined as follows:

Level 1 - | Quoted prices in active markets for identical assets and liabilities.

Level 2 - | Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.

Level 3 - | Significant unobservable inputs reflecting management's own assumptions about the inputs used in pricing the asset or liability.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, debt, interest rate swaps and foreign currency derivatives. Cash and cash equivalents, accounts receivable and accounts payable carrying values as of March 31, 2019 and December 31, 2018 approximate fair value due to the short-term maturities of these financial instruments. The carrying amounts of long-term debt and the revolving line of credit approximate fair value as of March 31, 2019 and December 31, 2018 due to the short term nature of the underlying variable rate LIBOR agreements. The Company had Level 2 fair value measurements at March 31, 2019 and December 31, 2018 relating to the Company’s interest rate swaps and foreign currency derivatives.
Derivative and hedging activities
Foreign currency derivatives
The Company conducted business in foreign countries and paid certain expenses in foreign currencies; therefore, the Company was exposed to foreign currency exchange risk between the U.S. Dollar and foreign currencies, which could impact the Company’s operating income and cash flows. To mitigate risk associated with foreign currency exchange, the Company entered into forward contracts to exchange a fixed amount of U.S. Dollars for a fixed amount of foreign currency, which will be used to fund future foreign currency cash flows. At inception, all forward contracts are formally documented as cash flow hedges and are measured at fair value each reporting period.
Derivatives are formally assessed both at inception and at least quarterly thereafter, to ensure that derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged item. If it is determined that a derivative ceases to be a highly effective hedge, or if the anticipated transaction is no longer probable of occurring, hedge accounting is discontinued, and any future mark-to-market adjustments are recognized in earnings. The effective portion of gain or loss is reported in other comprehensive income and the ineffective portion is reported in earnings. The impacts of these contracts were largely offset by gains and losses resulting from the impact of changes in exchange rates on transactions denominated in the foreign currency. As of March 31, 2019, the Company had no ineffective portion related to the cash flow hedges.
Interest Rate Swaps
The Company entered into interest rate swap contracts to fix the interest rate on an initial aggregate amount of $35,000,000 thereby reducing exposure to interest rate changes. The interest rate swap pays a fixed rate of 4.49% to the counterparty and receives 30 day LIBOR for both cash flow hedges. At inception, all interest rate swaps were formally documented as cash flow hedges and are measured at fair value each reporting period. See Note 12, "Debt", for additional information.
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Financial statements impacts
The following tables detail amounts related to our derivatives designated as hedging instruments:

| Fair Value of Derivative Instruments
| March 31, 2019
| Asset Derivatives |  | Liability Derivatives
| Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
Foreign exchange contracts | Prepaid expense other current assets |  | $ | — |  |  | Accrued other liabilities |  | $ | 226,000 |
Notional contract values |  |  | $ | — |  |  |  |  | $ | 27,385,000 |
Interest rate swaps | Prepaid expense other current assets |  | $ | — |  |  | Accrued other liabilities |  | $ | 318,000 |
Notional swap values |  |  | $ | — |  |  |  |  | $ | 31,718,750 |
| December 31, 2018
| Asset Derivatives |  | Liability Derivatives
| Balance Sheet Location |  | Fair Value |  | Balance Sheet Location |  | Fair Value
Foreign exchange contracts | Prepaid expense other current assets |  | $ | — |  |  | Accrued other liabilities |  | $ | 750,000 |
Notional contract values |  |  | $ | — |  |  |  |  | $ | 27,588,000 |
Interest rate swaps | Prepaid expense other current assets |  | $ | — |  |  | Accrued other liabilities |  | $ | 65,000 |
Notional swap values |  |  | $ | — |  |  |  |  | $ | 32,375,000 |

The following tables summarize the amount of unrealized / realized gain and loss recognized in Accumulated Other Comprehensive Income (AOCI) for the three months ended March 31, 2019 and 2018:

Derivatives in subtopic 815-20 Cash Flow Hedging Relationship |  | Amount of Unrealized Gain or (Loss) Recognized in Accumulated Other Comprehensive Income on Derivative |  | Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income(A) |  | Amount of Realized Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income
|  | 2019 | 2018 |  |  | 2019 | 2018
Foreign exchange contracts |  | $ | 701,000 |  | $ | 913,000 |  |  | Cost of goods sold |  | $ | 148,000 |  | $ | 146,000 |
|  | Selling, general and administrative expense |  | $ | 31,000 |  | $ | 22,000 |
Interest rate swaps |  | $ | (252,000 | ) | $ | 24,000 |  |  | Interest expense |  | $ | 1,000 |  | $ | — |

(A) The foreign currency derivative activity reclassified from Accumulated Other Comprehensive Income is allocated to cost of goods sold and selling, general and administrative expense based on the percentage of foreign currency spend.
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16. ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table presents changes in Accumulated Other Comprehensive Income, net of tax, for the three months ended March 31, 2019 and 2018:

2018: | Hedging Derivative Activities(A) | Post Retirement Benefit Plan Items(B) | Accumulated Other Comprehensive Income
Balance at December 31, 2017 | $ | (197,000 | ) | $ | 2,267,000 |  | $ | 2,070,000 |
Other Comprehensive Income before reclassifications | 937,000 |  | — |  | 937,000 |
Amounts reclassified from accumulated other comprehensive income | (168,000 | ) | (81,000 | ) | (249,000 | )
Income tax benefit (expense) | (162,000 | ) | 17,000 |  | (145,000 | )
Balance at March 31, 2018 | $ | 410,000 |  | $ | 2,203,000 |  | $ | 2,613,000 |
2019: |  |  |
Balance at December 31, 2018 | $ | (612,000 | ) | $ | 2,729,000 |  | $ | 2,117,000 |
Other Comprehensive Income before reclassifications | 449,000 |  | — |  | 449,000 |
Amounts reclassified from accumulated other comprehensive income | (179,000 | ) | (95,000 | ) | (274,000 | )
Income tax benefit (expense) | (76,000 | ) | 20,000 |  | (56,000 | )
Balance at March 31, 2019 | $ | (418,000 | ) | $ | 2,654,000 |  | $ | 2,236,000 |

(A) The effect of post-retirement benefit items reclassified from Accumulated Other Comprehensive Income is included in total cost of sales on the Consolidated Statements of Income. These Accumulated Other Comprehensive Income components are included in the computation of net periodic benefit cost (see Note 11 "Post Retirement Benefits" for additional details). The tax effect of post-retirement benefit items reclassified from Accumulated Other Comprehensive Income is included in income tax expense on the Consolidated Statements of Income.
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Part I — Financial Information

Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of the federal securities laws. As a general matter, forward-looking statements are those focused upon future plans, objectives or performance as opposed to historical items and include statements of anticipated events or trends and expectations and beliefs relating to matters not historical in nature. Such forward-looking statements involve known and unknown risks and are subject to uncertainties and factors relating to Core Molding Technologies' operations and business environment, all of which are difficult to predict and many of which are beyond Core Molding Technologies' control. Words such as “may,” “will,” “could,” “would,” “should,” “anticipate,” “predict,” “potential,” “continue,” “expect,” “intend,” “plans,” “projects,” “believes,” “estimates,” “encouraged,” “confident” and similar expressions are used to identify these forward-looking statements. These uncertainties and factors could cause Core Molding Technologies' actual results to differ materially from those matters expressed in or implied by such forward-looking statements.
Core Molding Technologies believes that the following factors, among others, could affect its future performance and cause actual results to differ materially from those expressed or implied by forward-looking statements made in this report: business conditions in the plastics, transportation, marine and commercial product industries (including changes in demand for truck production); federal and state regulations (including engine emission regulations); general economic, social, regulatory (including foreign trade policy) and political environments in the countries in which Core Molding Technologies operates; safety and security conditions in Mexico and Canada; dependence upon certain major customers as the primary source of Core Molding Technologies’ sales revenues; efforts of Core Molding Technologies to expand its customer base; the ability to develop new and innovative products and to diversify markets, materials and processes and increase operational enhancements; the actions of competitors, customers, and suppliers; failure of Core Molding Technologies’ suppliers to perform their obligations; the availability of raw materials; inflationary pressures; new technologies; regulatory matters; labor relations; labor availability; the loss or inability of Core Molding Technologies to attract and retain key personnel; the Company's ability to successfully identify, evaluate and manage potential acquisitions and to benefit from and properly integrate any completed acquisitions, including the recent acquisition of Horizon Plastics; the risk that the integration of Horizon Plastics may be more difficult, time-consuming or costly than expected; expected revenue synergies and cost savings from the acquisition of Horizon Plastics may not be fully realized within the expected timeframe; revenues following the acquisition of Horizon Plastics may be lower than expected; customer and employee relationships and business operations may be disrupted by the acquisition of Horizon Plastics; federal, state and local environmental laws and regulations; the availability of capital; the ability of Core Molding Technologies to provide on-time delivery to customers, which may require additional shipping expenses to ensure on-time delivery or otherwise result in late fees and other customer charges; risk of cancellation or rescheduling of orders; management’s decision to pursue new products or businesses which involve additional costs, risks or capital expenditures; inadequate insurance coverage to protect against potential hazards; equipment and machinery failure; product liability and warranty claims; and other risks identified from time to time in Core Molding Technologies’ other public documents on file with the Securities and Exchange Commission, including those described in Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2018.
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Description of the Company
Core Molding Technologies, Inc. is a manufacturer of sheet molding compound (SMC) and molder of thermoset and thermoplastic products. The Company produces high quality molded products, assemblies and SMC materials for varied markets, including medium and heavy-duty trucks, automotive, marine, home improvement, water management, agriculture, construction and other commercial markets. The Company offers customers a wide range of manufacturing processes to fit various program volume and investment requirements. These processes include compression molding of SMC, bulk molding compounds (BMC), resin transfer molding (RTM), liquid molding of dicyclopentadiene (DCPD), spray-up and hand-lay-up, glass mat thermoplastics (GMT), direct long-fiber thermoplastics (D-LFT) and structural foam and web injection molding. Core Molding Technologies has its headquarters in Columbus, Ohio, and operates production facilities in Columbus and Batavia, Ohio; Gaffney, South Carolina; Winona, Minnesota; Matamoros and Escobedo, Mexico; and Cobourg, Ontario, Canada. The demand for Core Molding Technologies’ products is primarily affected by economic conditions in the United States, Canada, and Mexico. Core Molding Technologies’ manufacturing operations have a significant fixed cost component. Accordingly, during periods of changing demand, the profitability of Core Molding Technologies’ operations may change proportionately more than revenues from operations.
In 1996, Core Molding Technologies acquired substantially all of the assets and assumed certain liabilities of Columbus Plastics, a wholly-owned operating unit of Navistar’s truck manufacturing division since its formation in late 1980. Columbus Plastics, located in Columbus, Ohio, was a compounder and compression molder of SMC. In 1998, Core Molding Technologies began operations at its second facility in Gaffney, South Carolina, and in 2001, the Company established a manufacturing presence in Mexico by acquiring certain assets of Airshield Corporation. As a result of this acquisition, Core Molding Technologies expanded its fiberglass molding capabilities to include the spray up, hand-lay-up open mold processes and RTM closed molding. In 2004, the Company acquired substantially all the operating assets of Keystone Restyling Products, Inc., a privately-held manufacturer and distributor of fiberglass reinforced products for the automotive-aftermarket industry. In 2005, Core Molding Technologies acquired certain assets of the Cincinnati Fiberglass Division of Diversified Glass, Inc., a Batavia, Ohio-based, privately held manufacturer and distributor of fiberglass reinforced plastic components supplied primarily to the heavy-duty truck market. In 2009, the Company completed construction of a production facility in Matamoros, Mexico that replaced its leased facility. The Company also acquired in 2015 substantially all of the assets of CPI Binani, Inc. ("CPI"), a wholly-owned subsidiary of Binani Industries Limited, located in Winona, Minnesota, which expanded the Company's process capabilities to include D-LFT and diversified its customer base. Most recently in 2018, the Company acquired substantially all of the assets and assumed certain specified liabilities of Horizon Plastics, which added manufacturing facilities in Cobourg, Canada and Escobedo, Mexico. The purpose of the acquisition was to increase the Company's process capabilities to include structural foam and structural web molding, expand its geographical footprint, and diversify the Company's customer base.
Business Overview
General
The Company’s business and operating results are directly affected by changes in overall customer demand, operational costs and performance and leverage of our fixed cost and selling, general and administrative ("SG&A") infrastructure.
Product sales fluctuate in response to several factors including many that are beyond the Company’s control, such as general economic conditions, interest rates, government regulations, consumer spending, labor availability, and our customers’ production rates and inventory levels. Product sales consist of demand from customers in many different markets with different levels of cyclicality and seasonality. The North American truck market, which is highly cyclical, accounted for 60% and 51% of the Company’s product revenue for the three months ended March 31, 2019 and 2018, respectively.
Operating performance is dependent on the Company’s ability to manage changes in input costs for items such as raw materials, labor, and overhead operating costs. Performance is also affected by manufacturing efficiencies, including items such as on time delivery, quality, scrap, and productivity. Market factors of supply and demand can impact operating costs. In periods of rapid increases or decreases in customer demand, the Company is required to ramp operations activity up or down quickly which may impact manufacturing efficiencies more than in periods of steady demand.
Operating performance is also dependent on the Company’s ability to effectively launch new customer programs, which are typically extremely complex in nature. The start of production of a new program is the result of a process of developing new molds and assembly equipment, validation testing, manufacturing process design, development and testing, along with training and often hiring employees. Meeting the targeted levels of manufacturing efficiency for new programs usually occurs over time as the Company gains experience with new tools and processes. Therefore, during a new program launch period, start-up costs and inefficiencies can affect operating results.
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Three Months of 2019 Overview
Product sales for the three months ended March 31, 2019 increased 20% compared to the same period in 2018. Operating income decreased from $1,125,000 to a loss of $4,017,000 for the three months ended March 31, 2019 compared to the same period a year ago. Higher demand from our truck customers was the primary driver of the sales increase, while the decrease in operating income was largely due to increased manufacturing inefficiencies at several of the Company's facilities and higher operating and SG&A costs.
For the three months ended March 31, 2019, product sales to truck customers increased by 40% compared to the same period in 2018, as the increased production in the truck market continued. According to ACT Research, North American heavy-duty truck production increased approximately 22% for the three months ended March 31, 2019 compared to the same period in 2018.
The Company continues to experience manufacturing inefficiencies as a result of the significant production demand in the heavy-duty truck market. Given the current high demand levels, the Company has experienced extreme difficulty hiring, training and retaining labor in a tightening labor market at several manufacturing facilities. This, coupled with asset capacity and reliability constraints, has resulted in increased manufacturing inefficiencies and the inability to consistently meet customers' delivery and quality requirements, including for several of the Company's major customers.
The Company's operating results in 2019 continue to be adversely affected by ongoing manufacturing inefficiencies and increased manufacturing costs as compared to the same period in 2018. Additional expenses realized as a result of these inefficiencies and higher operating costs include increased hiring, training, wages and overtime, scrap, rework, expedited premium shipping, outsourced molding production, and repairs and maintenance costs.
For the three months ended March 31, 2019, the Company recorded a net loss of $3,845,000, or $(0.49) per basic and diluted share, compared with net income of $518,000, or $0.07 per basic and diluted share for the three months ended March 31, 2018.
Looking forward, the Company anticipates continued higher product sales through the first half of 2019 compared to the first half of 2018, due to higher demand from truck customers. ACT Research is forecasting first half of 2019 heavy-duty truck production of 180,000 units which is an increase of approximately 18.6% compared to 2018. While management continues to aggressively implement the Company's turnaround plan, the Company continues to experience certain operational inefficiencies, primarily driven by our customers’ significant order volumes and higher labor costs. Our turnaround plan is progressing and we are seeing improvements that we believe will continue to benefit operational performance and begin to drive financial improvement.
Results of Operations
Three Months Ended March 31, 2019, as Compared to Three Months Ended March 31, 2018
Net sales for the three months ended March 31, 2019 and 2018 totaled $72,266,000 and $63,046,000, respectively. Included in total sales were tooling project sales of $815,000 and $3,334,000 for the three months ended March 31, 2019 and 2018, respectively. These sales are sporadic in nature and fluctuate in regard to scope and related revenue on a period-to-period basis. Product sales, excluding tooling project sales, for the three months ended March 31, 2019 were approximately $71,451,000 compared to $59,712,000 for the same period in 2018. This increase in sales is primarily the result of higher demand from truck customers and new program sales to a recreational vehicle customer of $12,453,000.
Gross margin was approximately 4.4% of sales for the three months ended March 31, 2019, compared with 12.5% for the three months ended March 31, 2018. The gross margin percentage decline was due to an unfavorable net change in product mix and manufacturing efficiency, primarily higher labor, benefits, scrap and overhead costs, of 8.6%, of which 2.0% was related to higher Matamoros union employee annual contract renewal payments. These reductions were offset by favorable net change in selling price and material costs of 0.5%.
Selling, general and administrative expense (“SG&A”) was $7,166,000 for the three months ended March 31, 2019, compared to $6,760,000 for the three months ended March 31, 2018. In the three months ending March 31, 2018, the company incurred one-time acquisition fees of $1,283,000. The increase in SG&A expense primarily resulted from higher costs from outside service and professional fees of $905,000 primarily incurred to provide resources to accelerate the implementation of turnround efforts and higher labor and benefit costs of $477,000.
Interest expense totaled $896,000 for the three months ended March 31, 2019, compared to interest expense of $449,000 for the three months ended March 31, 2018. The increase in interest expense was due to a higher average outstanding debt balance and higher interest rates during the three months ended March 31, 2019, when compared to the same period in 2018.
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Income tax benefit for the three months ended March 31, 2019 was 21% of total loss before income taxes and income tax expense for the three months ended March 31, 2018 was 25% of total income before income taxes, respectively.
The Company recorded a net loss for the three months ended March 31, 2019 of $3,845,000, or $(0.49) per basic and diluted share, compared with net income of $518,000, or $0.07 per basic and diluted share, for the three months ended March 31, 2018.
Comprehensive losses totaled $3,726,000 for the three months ended March 31, 2019, compared to comprehensive income of $1,061,000 for the same period ended March 31, 2018. The decrease was primarily related to lower net income of $4,363,000.
Liquidity and Capital Resources
The Company’s primary sources of funds have been cash generated from operating activities and borrowings from third parties. Primary cash requirements are for operating expenses, increases in working capital, capital expenditures, repayment of long-term debt and business acquisitions. The Company from time to time will enter into foreign exchange contracts and interest rate swaps to mitigate risk of foreign exchange and interest rate volatility. As of March 31, 2019, the Company had outstanding foreign exchange contracts with notional amounts totaling $27,385,000, compared to $27,588,000 outstanding as of December 31, 2018. As of March 31, 2019, the Company also had outstanding interest rate swaps with notional amounts totaling $31,718,750, compared to $32,375,000 outstanding as of December 31, 2018.
Cash provided by operating activities for the three months ended March 31, 2019 totaled $2,885,000. Net loss of $3,845,000 negatively impacted operating cash flows. Non-cash deductions of depreciation and amortization included in net loss amounted to $2,562,000. Changes in working capital increased cash provided by operating activities by $3,943,000, which primarily related to increases in accounts payable and other accrued liabilities, offset by higher accounts receivable and inventory due to increased sales levels.
At March 31, 2019, the Company had $790,000 cash on hand, and an available balance on the revolving line of credit of $14,441,000. Subject to compliance with ongoing loan covenant requirements, management believes that cash flow from operating activities and available borrowings under the Amended Credit Agreement will be sufficient to meet the Company’s liquidity needs for the next 12 months.
Cash used in investing activities for the three months ended March 31, 2019 was $3,404,000, which primarily related to purchases of property, plant and equipment. The Company anticipates spending up to $8,000,000 during the remainder of 2019 on property, plant and equipment purchases for all of the Company's operations.
At March 31, 2019, purchase commitments for capital expenditures in progress were $2,705,000. The Company anticipates using cash from operations and its available revolving line of credit to fund capital investments.
Cash used in financing activities for the three months ended March 31, 2019 totaled $582,000, which primarily consisted of net scheduled repayments of principal on outstanding term loans of $844,000, payment of deferred loan costs of $422,000 associated with entering into the First Amendment to the A/R Credit Agreement, offset by net revolving loan borrowings of $684,000.
The Company is required to meet certain financial covenants included in the Amended Credit Agreement with respect to leverage ratios and fixed charge ratios and capital expenditures, as well as other customary affirmative and negative covenants. As of March 31, 2019, the Company was in compliance with its financial covenants.
Management regularly evaluates the Company’s ability to meet its debt covenants. These evaluations consider the Company’s forecasts, which are based on industry analysts’ estimates of heavy and medium-duty truck production volumes, customers' forecasts, current operating performance and expected future performance as well as other assumptions. While management believes it will be able to meet its future covenants as established in the First Amendment, the ability to meet these covenants relies on certain operational and financial improvements consistent with our planned turn around and expected timetable. Should these improvements not materialize in the time frame planned, it could impact our ability to meet future covenants.
Should the Company not be in compliance with its loan covenants in the future management would likely seek a waiver of default, attempt to reset covenants or refinance existing obligations. If the Company were unable to obtain this relief, the outstanding obligations would be in default and become payable on demand, which could have a material adverse effect on the Company. Additionally, the Company's liquidity and ability to obtain further financing to fund future operating and capital requirements could be negatively impacted.
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Off-Balance Sheet Arrangements
The Company did not have any significant off-balance sheet arrangements as of March 31, 2019 or December 31, 2018.
The Company did not have or experience any material changes outside the ordinary course of business as to contractual obligations, including long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities reflected on the Company’s balance sheet under GAAP, as of March 31, 2019 or December 31, 2018.
Critical Accounting Policies and Estimates
For information on critical accounting policies and estimates, see Note 2 "Critical Accounting Policies and Estimates," to the consolidated financial statements included herein.
Recent Accounting Pronouncements
For information on the impact of recently issued accounting pronouncements, see Note 3 "Recent Accounting Pronouncements," to the consolidated financial statements included herein.
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Part I — Financial Information

Item 3. | Quantitative and Qualitative Disclosures About Market Risk

Core Molding Technologies’ primary market risk results from changes in the price of commodities used in its manufacturing operations. Core Molding Technologies is also exposed to fluctuations in interest rates and foreign currency fluctuations associated with the Mexican peso and Canadian Dollar. Core Molding Technologies does not hold any material market risk sensitive instruments for trading purposes. The Company may use derivative financial instruments to hedge exposure to fluctuations in foreign exchange rates and interest rates.
Core Molding Technologies has the following three items that are sensitive to market risks: (1) Revolving Loans and Term Loans under the Amended and Restated Credit Agreement, some of which bear a variable interest rate; (2) foreign currency purchases in which the Company purchases Mexican pesos and Canadian dollars with United States dollars to meet certain obligations; and (3) raw material purchases in which Core Molding Technologies purchases various resins and fiberglass for use in production. The prices and availability of these materials are affected by the prices of crude oil, natural gas and other feedstocks as well as processing capacity versus demand.
Assuming a hypothetical 10% change in short-term interest rates, interest paid on the Term Loan would have been impacted, as the interest rate on these loans is based upon LIBOR. It would not, however, have a material effect on earnings before tax.
Assuming a hypothetical 10% decrease in the United States dollar to Mexican peso and Canadian dollar exchange rate, the Company would be impacted by an increase in operating costs, which would have an adverse effect on operating margins.
Assuming a hypothetical 10% increase in commodity prices, Core Molding Technologies would be impacted by an increase in raw material costs, which would have an adverse effect on operating margins.
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Part I — Financial Information

Item 4. | Controls and Procedures

As of the end of the period covered by this report, the Company has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based upon this evaluation, the Company’s management, including its Chief Executive Officer and its Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were (i) effective to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act was accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure, and (ii) effective to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
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Part II — Other Information

Item 1. | Legal Proceedings

From time to time, the Company is involved in litigation incidental to the conduct of its business. The Company is presently not involved in any legal proceedings which in the opinion of management are likely to have a material adverse effect on the Company's consolidated financial position or results of operations.

Item 1A. | Risk Factors

There have been no material changes in Core Molding Technologies' risk factors from those previously disclosed in Core Molding Technologies' Annual Report on Form 10-K for the year ended December 31, 2018.

Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. | Defaults Upon Senior Securities

None.

Item 4. | Mine Safety Disclosures

None.

Item 5. | Other Information

None.
Item 6. Exhibits
See Index to Exhibits.
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SIGNATURES
Pursuant to the requirements 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.
Date: | May 9, 2019 | By: | /s/ David L. Duvall |
|  |  | David L. Duvall |
|  |  | President, Chief Executive Officer, and Director
Date: | May 9, 2019 | By: | /s/ John P. Zimmer |
|  |  | John P. Zimmer |
|  |  | Vice President, Secretary, Treasurer and Chief Financial Officer

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INDEX TO EXHIBIT

Exhibit No. |  | Description |  | Location
2(a)(1) |  | Asset Purchase Agreement dated as of September 12, 1996, as amended October 31, 1996, between Navistar and RYMAC Mortgage Investment Corporation1 |  | Incorporated by reference to Exhibit 2-A to Registration Statement on Form S-4 (Registration No. 333-15809)
2(a)(2) |  | Second Amendment to Asset Purchase Agreement dated December 16, 19961 |  | Incorporated by 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 dated as of November 1, 1996, between Core Molding Technologies, Inc. and RYMAC Mortgage Investment Corporation |  | Incorporated by reference to Exhibit 2-B to Registration Statement on Form S-4 (Registration No. 333-15809)
2(b)(2) |  | First Amendment to Agreement and Plan of Merger dated as of December 27, 1996 between Core Molding Technologies, Inc. and RYMAC Mortgage Investment Corporation |  | Incorporated by reference to Exhibit 2(b)(2) to Annual Report on Form 10-K for the year ended December 31, 2002
2(c) |  | Asset Purchase Agreement dated as of October 10, 2001, between Core Molding Technologies, Inc. and Airshield Corporation |  | Incorporated by reference to Exhibit 1 to Current Report on Form 8-K filed October 31, 2001
2(d) |  | Asset Purchase Agreement dated as of March 20, 2015, between Core Molding Technologies, Inc and CPI Binani, Inc. |  | Incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed March 23, 2015
2(e) |  | Asset Purchase Agreement dated as of January 16, 2018 between 1137952 B.C. Ltd., Horizon Plastics International, Inc., 1541689 Ontario Inc., 2551024 Ontario Inc., Horizon Plastics de Mexico, S.A. de C.V., and Brian Read |  | Incorporate by reference to Exhibit 2.1 to Current Report on Form 8-K filed January 19, 2018
3(a)(1) |  | Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996 |  | Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-8 (Registration No. 333-29203)
3(a)(2) |  | Certificate of Amendment of Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on November 6, 1996 |  | Incorporated by reference to Exhibit 4(b) to Registration Statement on Form S-8 (Registration No. 333-29203)
3(a)(3) |  | Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002 |  | Incorporated by reference to Exhibit 3(a)(4) to Quarterly Report on Form 10-Q for the quarter ended September 30, 2002
3(a)(4) |  | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on July 18, 2007 |  | Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed July 19, 2007
3(a)(5) |  | Certificate of Elimination of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware on April 2, 2015. |  | Incorporated by reference to Exhibit 3(a)(5) to Current Report on Form 8-K filed April 2, 2015
3(b) |  | Amended and Restated By-Laws of Core Molding Technologies, Inc. |  | Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed January 4, 2008
3(b)(1) |  | Amendment No. 1 to the Amended and Restated By-Laws of Core Molding Technologies, Inc. |  | Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed December 17, 2013
4(a)(1) |  | Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996 |  | Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-8 (Registration No. 333-29203)

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Exhibit No. |  | Description |  | Location
4(a)(2) |  | Certificate of Amendment of Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on November 6, 1996 |  | Incorporated by reference to Exhibit 4(b) to Registration Statement on Form S-8 (Registration No. 333-29203)
4(a)(3) |  | Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002 |  | Incorporated by reference to Exhibit 3(a)(4) to Quarterly Report on Form 10-Q for the quarter ended September 30, 2002
4(a)(4) |  | Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on July 18, 2007 |  | Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed July 19, 2007
4(a)(5) |  | Certificate of Elimination of Series A Junior Participating Preferred Stock, as filed with the Secretary of State of the State of Delaware on April 2, 2015 |  | Incorporated by reference to Exhibit 3(a)(5) to Current Report on Form 8-K filed April 2, 2015
10(a) |  | First Amendment of A/R Credit Agreement dated March 14, 2019, among among Core Molding Technologies, Inc., Horizon Plastics International, Inc., the Lenders Named Therein, and KeyBank National Association |  | Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed March 18, 2019
11 |  | Computation of Net Income per Share |  | Exhibit 11 omitted because the required information is Included in Notes to Financial Statement
31(a) |  | Section 302 Certification by David L. Duvall, President, Chief Executive Officer, and Director |  | Filed Herein
31(b) |  | Section 302 Certification by John P. Zimmer, Vice President, Secretary, Treasurer, and Chief Financial Officer |  | Filed Herein
32(a) |  | Certification of David L. Duvall, Chief Executive Officer of Core Molding Technologies, Inc., dated May 9, 2019, pursuant to 18 U.S.C. Section 1350 |  | Filed Herein
32(b) |  | Certification of John P. Zimmer, Chief Financial Officer of Core Molding Technologies, Inc., dated May 9, 2019, pursuant to 18 U.S.C. Section 1350 |  | Filed Herein
101.INS |  | XBRL Instance Document |  | Filed Herein
101.SCH |  | XBRL Taxonomy Extension Schema Document |  | Filed Herein
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase |  | Filed Herein
101.LAB |  | XBRL Taxonomy Extension Label Linkbase |  | Filed Herein
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase |  | Filed Herein
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase |  | Filed Herein

1. | The Asset Purchase Agreement, as filed with the Securities and Exchange Commission as 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.

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