Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

Summary of Significant Accounting Policies

Principles of Consolidation

Principles of Consolidation

 - The accompanying consolidated financial statements include the accounts of all subsidiaries after

elimination of all intercompany accounts, transactions, and profits.

Use of Estimates

Use of Estimates

 - The preparation of financial statements in conformity with accounting principles generally accepted in the

United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities, disclosures of contingent assets and liabilities, and reported amounts of revenues and expenses during the reporting

period. Significant estimates relate to allowances for doubtful accounts, inventory reserves, self-insurance reserves related to

healthcare and workers compensation, deferred taxes, post retirement benefits, progress billings for tooling, goodwill and long-

lived assets. Actual results could differ from those estimates

, due to the uncertainty around the magnitude and duration of the

COVID-19 pandemic, as well as other factors.

Revenue Recognition

Revenue Recognition

- The Company historically has recognized 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 control to the

customer and is entitled to payment upon shipment. In certain circumstances, the Company recognizes revenue from product

sales when products are produced and the customer takes control 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.

Cash and Cash Equivalents

Cash and Cash Equivalents

 -

The Company considers all highly liquid investments purchased with an original maturity of three

months or less to be cash equivalents. Cash is held primarily in three banks in 3 separate jurisdictions. The Company had

$

4,131,000

 cash on hand at December 31, 2020 and had $

1,856,000

 cash on hand at December

31, 2019.

Accounts Receivable Allowances

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

has determined that a $

41,000

 allowance for doubtful accounts is needed at December

31, 2020 and $

50,000

 at December 31,

2019. Management also records estimates for customer returns and deductions, discounts offered to customers, and for price

adjustments. Should customer returns and deductions, discounts, and price adjustments fluctuate from the estimated amounts,

additional allowances may be required. The Company had an allowance for estimated chargebacks of $

179,000

 at December 31,

2020 and $

476,000

 at December

31, 2019. There have been no material changes in the methodology of these calculations.

Inventories

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 $

546,000

 at December 31, 2020 and $

898,000

 at December

31, 2019.

Contract Assets/Liabilities

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. During the

years ended December

31, 2020 and December

31, 2019, the Company recognized

no impairments on contract assets. Contract liabilities are also generally classified as current. The Company recognized

$

6,828,000

 at December 31, 2020 and $

1,240,000

 at December

31, 2019, corresponding with revenue from contract liabilities

related to jobs outstanding as of December 31, 2019 and December 31, 2018, respectively.

Property, Plant, and Equipment

Property, Plant, and Equipment

 - Property, plant, and equipment are recorded at cost. Depreciation is provided on a straight-

line method over the estimated useful lives of the assets. The carrying amount of long-lived assets is evaluated annually to

determine if adjustment to the depreciation period or to the unamortized balance is warranted.

Ranges of estimated useful lives for computing depreciation are as follows:

Land improvements

20

 years

Buildings and improvements

20

 -

40

 years

Machinery and equipment

3

 -

15

 years

Tools, dies and patterns

3

 -

5

 years

Long-Lived Assets

Long-Lived Assets

- Long-lived assets consist primarily of property, plant and equipment and finite -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 long-lived assets 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 years ended December

31, 2020, 2019 and 2018.

Goodwill

Goodwill

- The purchase consideration of acquired businesses have been allocated to the assets and liabilities acquired based on

the estimated fair values on the respective acquisition dates. Based on these values, the excess purchase consideration over the

fair value of the net assets acquired was allocated to goodwill. The Company accounts for goodwill in accordance with FASB

ASC Topic 350,

Intangibles - Goodwill and Other.

FASB ASC Topic 350 prohibits the amortization of goodwill and requires

these assets be reviewed for impairment at each reporting unit. 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.

Under a qualitative and quantitative approach, the impairment test for goodwill consists of an assessment of whether it is more-

likely-than-not that a reporting unit’s fair value is less than its carrying amount. As part of the qualitative assessment, the Company

considers relevant events and circumstances that affect the fair value or carrying amount of the Company. Such events and

circumstances could include changes in economic conditions, industry and market conditions, cost factors, overall financial

performance, reporting unit specific events and capital markets pricing. The Company places more weight on the events and

circumstances that most affect the Company's fair value or carrying amount. These factors are all considered by management in

reaching its conclusion about whether to perform step one of the impairment test. If the Company elects to bypass the qualitative

assessment for any reporting unit, or if a qualitative assessment indicates it is more-likely-than -not that the estimated carrying

value of a reporting unit exceeds its fair value, the Company proceeds to a quantitative approach.

The company performed a qualitative analysis for the year end December 31, 2020 and determined there was no impairment of

the Company’s goodwill. 

Due to the Company's financial performance and depressed stock price, the Company performed a quantitative analysis for both

of its reporting units at September

30, 2019. During 2019, the Company incurred a loss of margin in its Horizon Plastics reporting

unit caused by selling price decreases that the Company has not been able to fully offset with material cost reductions. As a result

of the quantitative analysis, the Company concluded that the carrying value of Horizon Plastics was greater than the fair value,

which resulted in a goodwill impairment charge of

$

4,100,000

at September

30, 2019 representing

19

%

of the goodwill related

to the Horizon Plastics reporting unit. The company performed a qualitative assessment at December

31, 2019, indicating no

additional goodwill impairment related to the Horizon Plastics reporting unit.

The Company’s annual impairment assessment at December

31, 2018 consisted of a quantitative analysis for both 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 reporting unit. The analysis of the Company’s

other reporting unit, Horizon Plastics, indicated no goodwill impairment charge, based on historical performance and financial

projections at that time, 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.

Income Taxes

Income Taxes

- The Company records deferred income taxes for differences between the financial reporting basis and income

tax basis of assets and liabilities. A detailed breakout is located in

Note 11 - Income Taxes

.

Self-Insurance

Self-Insurance

- The Company is self -insured with respect to Columbus and Batavia, Ohio; Gaffney, South Carolina; Winona,

Minnesota and Brownsville, Texas for medical, dental and vision claims and Columbus and Batavia, Ohio for 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 and vision claims incurred but not reported and worker’s compensation claims incurred but not reported at December

31,

2020 and December

31, 2019 of $

933,000

 and $

1,203,000

, respectively.

Post Retirement Benefits

Post Retirement Benefits

- Management records an accrual for post retirement costs associated with the health care plan

sponsored by the Company for certain employees. 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 the Company's operations. The effect of a change in healthcare costs is described in

Note 12 - Post

Retirement Benefits

. Core Molding Technologies had a liability for post retirement healthcare benefits based on actuarially

computed estimates of $

9,109,000

 at December

31, 2020 and $

9,160,000

 at December

31, 2019.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

- The Company's financial instruments consist of long-term debt, revolving loans, interest

rate swaps, foreign currency hedges, accounts receivable, and accounts payable. The carrying amount of these financial

instruments approximated their fair value. Further detail is located in

Note 14 - Fair Value of Financial Instruments.

Concentration Risks

Concentration Risks

 - The Company has concentration risk related to significant amounts of sales and accounts receivable with

certain customers. The Company had five major customers during the year end December 31, 2020,

Navistar, Volvo, PACCAR,

BRP and UFP

. Major customers are defined as customers whose current year sales individually consist of more than ten percent

of total sales during any annual or interim reporting period in the current year. Sales to five major customers comprised

70

%,

70

% and

70

% of total sales in 2020, 2019 and 2018, respectively (see

Note 4 - Major Customers

). Concentrations of accounts

receivable balances with five customers accounted for

64

% and

56

% of accounts receivable at December

31, 2020 and 2019,

respectively. The Company performs ongoing credit evaluations of its customers' financial condition. The Company maintains

reserves for potential bad debt losses, and such bad debt losses have been historically within the Company's expectations. Sales

to all customers' manufacturing and service locations in Mexico and Canada totaled

35

%,

34

% and

32

% of total sales for 2020,

2019 and 2018, respectively.

As of December 31, 2020, the Company employed a total of

1,617

 employees, which consisted of

679

 employees in its United

States operations,

722

 employees in its Mexican operations and

216

 employees in its Canadian operation. Of these

1,617

employees,

518

 employees at the Company’s Columbus, Ohio facility are covered by a collective bargaining agreement with the

International Association of Machinists and Aerospace Workers (“IAM”), which extends to August 7, 2022,

534

 employees at

the Company ’s Matamoros, Mexico facility are covered by a collective bargaining agreement with Sindicato de Jorneleros y

Obreros, which extends to January 21, 2022,

191

 employees at the Company's Cobourg, Canada facility are covered by a

collective bargaining agreement with United Food & Commercial Workers Canada ("UFCW"), which extends to November 1,

2021, and

73

 employees at the Company's Escobedo, Mexico facility are covered by a collective bargaining agreement with

Sindicato de trabajadores de la industria metalica y del comercio del estado de Nuevo Leon Presidente Benito Juarez Garcia

C.T.M., which extends to February 1, 2021. The Company is currently negotiating an extension to the Escobedo, Mexico

collective bargaining agreement.

Earnings Per Common Share

Earnings per Common Share

- Basic earnings per common share is computed based on the weighted average number of

common shares outstanding during the period. Diluted earnings per common share are computed similarly but include the effect

of the assumed exercise of dilutive stock options and vesting of restricted stock under the treasury stock method. The Company's

restricted shares are entitled to receive dividends and voting rights applicable to the Company's common stock, irrespective of

any vesting requirement. The restricted shares are considered a participating security and the Company is required to apply the

two-class method to consider the impact of the restricted shares on the calculation of basic and diluted earnings per share. A

detailed computation of earnings per share is located in

Note 3 - Net Income (Loss) per Common Share

.

Research and Development

Research and Development

 - Research and development activities focus on developing new material formulations, new

products, new production capabilities and processes, and improving existing products and manufacturing processes. The

Company does not maintain a separate research and development organization or facility, but uses its production equipment, as

necessary, to support these efforts and cooperates with its customers and its suppliers in research and development efforts. 

Likewise, manpower to direct and advance research and development is integrated with the existing manufacturing, engineering,

production, and quality organizations. Research and development costs, which are expensed as incurred, totaled approximately

$

1,168,000

, $

1,171,000

 and $

1,032,000

 in 2020, 2019 and 2018.

Foreign Currency Adjustments

Foreign Currency Adjustments

 - The functional currency for the Mexican and Canadian operations is the United States Dollar. 

All foreign currency asset and liability amounts are remeasured into United States Dollars at end-of-period exchange rates. 

Income statement accounts are translated at the weighted monthly average rates. Gains and losses resulting from translation of

foreign currency financial statements into United States Dollars and gains and losses resulting from foreign currency transactions

are included in current results of operations. Net foreign currency translation and transaction activity is included in selling, general

and administrative expense. This activity resulted in an expense of $

214,000

, $

229,000

 and $

88,000

 in 2020, 2019 and 2018,

respectively.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Current expected credit loss (CECL)

In June 2016, the FASB issued ASU

2016-13

, “Financial Instruments-Credit Losses,” which changes the impairment model for

most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and

other instruments, entities will be required to use a new forward-looking “expected loss” model that will replace today’s “incurred

loss” model and generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with

unrealized losses, entities will measure credit losses in a manner similar to current practice, except that the losses will be

recognized as an allowance. Subsequent to issuing ASU 2016 -13, the FASB issued ASU 2018-19, “Codification Improvements

to Topic 326, Financial Instruments - Credit Losses,” for the purpose of clarifying certain aspects of ASU 2016 -13. ASU 2018-

19 has the same effective date and transition requirements as ASU 2016 -13. In April 201 9, the FASB issued ASU 2019 -04,

“Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic

825, Financial Instruments, ” which is effective with the adoption of ASU 2016-13. In May 2019, the FASB issued ASU 2019-

05, “Financial Instruments - Credit Losses (Topic 326),” which is also effective with the adoption of ASU 2016-13. In October

2019, the FASB voted to delay the implementation date for certain companies, including those that qualify as a smaller reporting

company under SEC rules, until January

1, 2023, with revised ASU’s expected to be issued in November 2019. We will adopt

this ASU on its effective date of January

1, 2023. We

do not expect the adoption of this ASU to have a material impact

 on our

consolidated financial position, results of operations, cash flows, or presentation thereof.

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU

2019-12

, Income Taxes – Simplifying the Accounting for Income Taxes. This guidance

is intended to simplify various aspects of income tax accounting including the elimination of certain exceptions related to the

approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of

deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise

taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis

of goodwill. The Company adopted the new standard effective

January 1, 2020

 during the third quarter with

no material impact

on our consolidated financial statements. Adoption of this guidance requires certain changes to primarily be made prospectively,

with some changes to be made retrospectively.

Facilitation of the Effects of Reference Rate Reform

In March 2020, the FASB issued ASU No.

2020-04

, Facilitation of the Effects of Reference Rate Reform on Financial Reporting

(Topic 848). The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference

rate(e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or

recognizing the effects of) reference rate reform on financial reporting. The ASU is effective as of

March 12, 2020

 through

December 31, 2022. We will evaluate transactions or contract modifications occurring as a result of reference rate reform and

determine whether to apply the optional guidance on an ongoing basis.