UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from ____________ to

Commission File Number 001-12505

CORE MOLDING TECHNOLOGIES, INC.

_______________________________________________________________

(Exact name of registrant as specified in its charter)

Delaware	31-1481870
(State or other jurisdiction 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 ☒ No ¨

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 ☒ No ¨

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 ¨	Accelerated filer ¨	Non-accelerated Filer ¨	Smaller reporting company	☒
		(Do not check if a smaller reporting company)	Emerging growth company	☐

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. ¨

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ☐ No ☒

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 November 7, 2022, the latest practicable date, 8,920,402 shares of the registrant’s common stock were issued, which includes 506,747 shares of unvested restricted common stock.

Table of Contents

Part I — Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations	3
Consolidated Statements of Comprehensive Income (Loss)	4
Consolidated Balance Sheets	5
Consolidated Statement of Stockholders’ Equity	6
Consolidated Statements of Cash Flows	8
Notes to Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	31
Item 4. Controls and Procedures	32
Part II — Other Information
Item 1. Legal Proceedings	33
Item 1A. Risk Factors	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3. Defaults Upon Senior Securities	33
Item 4. Mine Safety Disclosures	33
Item 5. Other Information	33
Item 6. Exhibits	33
Signatures	34
Index to Exhibits	35

2

Part I — Financial Information

Item 1. Financial Statements

Core Molding Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(In thousands, except for per share data)

(Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net sales	$	101,606	$	81,025	$	290,933	$	234,315
Cost of sales	88,303		74,610		250,015		201,446
Gross margin	13,303		6,415		40,918		32,869
Selling, general and administrative expense	8,671		8,808		25,889		23,744
Operating income (loss)	4,632		(2,393)		15,029		9,125
Other income and expense
Loss from extinguishment of debt	1,582		—		1,582		—
Interest expense	511		563		1,511		1,725
Net periodic post-retirement benefit	(31)		(40)		(93)		(120)
Total other expense	2,062		523		3,000		1,605
Income (loss) before taxes	2,570		(2,916)		12,029		7,520
Income tax expense	1,251		396		4,658		3,290
Net income (loss)	$	1,319	$	(3,312)	$	7,371	$	4,230
Net income (loss) per common share:
Basic	$	0.16	$	(0.41)	$	0.87	$	0.50
Diluted	$	0.16	$	(0.41)	$	0.87	$	0.50

See notes to unaudited consolidated financial statements.

3

Core Molding Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	1,319	$	(3,312)	$	7,371	$	4,230
Other comprehensive income (loss):
Foreign currency hedging derivatives:
Unrealized hedge loss	(626)		—		(626)		—
Income tax benefit	159		—		159		—
Interest rate swaps:
Unrealized hedge gain	767		—		767		—
Income tax expense	(166)		—		(166)		—
Post-retirement benefit plan adjustments:
Amortization of net actuarial loss	43		43		130		130
Amortization of prior service credits	(124)		(124)		(372)		(372)
Income tax benefit	17		18		51		51
Comprehensive income (loss)	$	1,389	$	(3,375)	$	7,314	$	4,039

See notes to unaudited consolidated financial statements.

4

Core Molding Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except for share data)

	September 30, 2022		December 31, 2021
	(Unaudited)
Assets:
Current assets:
Cash and cash equivalents	$	509	$	6,146
Accounts receivable, net	54,297		35,261
Inventories, net	26,854		25,129
Prepaid expenses and other current assets	6,980		8,606
Total current assets	88,640		75,142
Right of use asset	4,317		5,577
Property, plant and equipment, net	81,443		75,897
Goodwill	17,376		17,376
Intangibles, net	8,106		9,567
Other non-current assets	2,602		3,133
Total Assets	$	202,484	$	186,692
Liabilities and Stockholders’ Equity:
Current liabilities:
Current portion of long-term debt	$	1,205	$	3,943
Revolving debt	4,052		4,424
Accounts payable	34,277		22,695
Contract liability	3,120		6,256
Compensation and related benefits	8,187		7,532
Accrued other liabilities	8,186		8,202
Total current liabilities	59,027		53,052
Other non-current liabilities	3,725		4,605
Long-term debt	23,295		21,251
Post-retirement benefits liability	7,765		7,689
Total Liabilities	93,812		86,597
Commitments and Contingencies	—		—
Stockholders’ Equity:
Preferred stock — $0.01 par value, authorized shares — 10,000,000; no shares outstanding at September 30, 2022 and December 31, 2021	—		—
Common stock — $0.01 par value, authorized shares – 20,000,000; outstanding shares: 8,413,655 at September 30, 2022 and 8,235,740 at December 31, 2021	84		82
Paid-in capital	39,718		38,013
Accumulated other comprehensive income, net of income taxes	1,056		1,075
Treasury stock - at cost, 3,866,451 shares at September 30, 2022 and 3,818,166 shares at December 31, 2021	(29,099)		(28,617)
Retained earnings	96,913		89,542
Total Stockholders’ Equity	108,672		100,095
Total Liabilities and Stockholders’ Equity	$	202,484	$	186,692

See notes to unaudited consolidated financial statements.

5

Core Molding Technologies, Inc. and Subsidiaries

Consolidated Statement of Stockholders’ Equity

(In thousands, except for share data)

(Unaudited)

For the three months ended September 30, 2021:

	Common Stock Outstanding			Paid-In Capital		Accumulated Other Comprehensive Income		Treasury Stock		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
Balance at June 30, 2021	8,040,748	$	80	$	36,931	$	1,247	$	(28,568)	$	92,413	$	102,103
Net loss										(3,312)		(3,312)
Change in post-retirement benefits, net of tax $18						(63)						(63)
Purchase of treasury stock	(3,363)							(49)				(49)
Restricted stock vested	45,894	1										1
Share-based compensation				612								612
Balance at September 30, 2021	8,083,279	$	81	$	37,543	$	1,184	$	(28,617)	$	89,101	$	99,292

For the nine months ended September 30, 2021:

	Common Stock Outstanding			Paid-In Capital		Accumulated Other Comprehensive Income		Treasury Stock		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2020	7,980,516	$	80	$	36,127	$	1,375	$	(28,521)	$	84,871	$	93,932
Net income										4,230		4,230
Change in post-retirement benefits, net of tax $51						(191)						(191)
Purchase of treasury stock	(7,237)							(96)				(96)
Restricted stock vested	110,000	1										1
Share-based compensation				1,416								1,416
Balance at September 30, 2021	8,083,279	$	81	$	37,543	$	1,184	$	(28,617)	$	89,101	$	99,292

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For the three months ended September 30, 2022:

	Common Stock Outstanding			Paid-In Capital		Accumulated Other Comprehensive Income		Treasury Stock		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
Balance at June 30, 2022	8,413,655	$	84	$	39,095	$	948	$	(29,099)	$	95,594	$	106,622
Net income										1,319		1,319
Change in post-retirement benefits, net of tax of $17						(64)						(64)
Change in foreign currency hedge, net of tax of $159						(467)						(467)
Change in interest rate swaps, net of tax of $166						639						639
Share-based compensation				623								623
Balance at September 30, 2022	8,413,655	$	84	$	39,718	$	1,056	$	(29,099)	$	96,913	$	108,672

For the nine months ended September 30, 2022:

	Common Stock Outstanding			Paid-In Capital		Accumulated Other Comprehensive Income		Treasury Stock		Retained Earnings		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2021	8,235,740	$	82	$	38,013	$	1,075	$	(28,617)	$	89,542	$	100,095
Net income										7,371		7,371
Change in post-retirement benefits, net of tax of $51						(191)						(191)
Change in foreign currency hedge, net of tax of $159						(467)						(467)
Change in interest rate swaps, net of tax of $166						639						639
Purchase of treasury stock	(48,286)							(482)				(482)
Restricted stock vested	226,201	2										2
Share-based compensation				1,705								1,705
Balance at September 30, 2022	8,413,655	$	84	$	39,718	$	1,056	$	(29,099)	$	96,913	$	108,672

See notes to unaudited consolidated financial statements.

7

Core Molding Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine months ended September 30,
	2022		2021
Cash flows from operating activities:
Net income	$	7,371	$	4,230
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	9,406		9,273
Loss on disposal of property, plant and equipment	—		625
Deferred income tax	—		(595)
Share-based compensation	1,705		1,416
Loss from extinguishment of debt	1,234		—
Losses on foreign currency remeasurement	178		214
Change in operating assets and liabilities:
Accounts receivable	(19,036)		(11,843)
Inventories	(1,725)		(4,050)
Prepaid and other assets	1,940		(1,829)
Accounts payable	10,355		6,841
Accrued and other liabilities	(2,773)		1,085
Post-retirement benefits liability	(166)		(319)
Net cash provided by operating activities	8,489		5,048
Cash flows from investing activities:
Purchase of property, plant and equipment	(12,284)		(8,301)
Net cash used in investing activities	(12,284)		(8,301)
Cash flows from financing activities:
Gross repayments on revolving line of credit	(120,357)		(19,465)
Gross borrowings on revolving line of credit	119,985		21,365
Payments related to the purchase of treasury stock	(482)		(96)
Payment of deferred loan costs	(402)		(2)
Proceeds from term loan	25,000		—
Payment of principal on term loans	(25,586)		(2,065)
Net cash used in financing activities	(1,842)		(263)
Net change in cash and cash equivalents	(5,637)		(3,516)
Cash and cash equivalents at beginning of period	6,146		4,131
Cash and cash equivalents at end of period	$	509	$	615
Cash paid for:
Interest	$	1,320	$	1,376
Income taxes	$	5,378	$	4,313
Non-cash investing activities:
Fixed asset purchases in accounts payable	$	1,058	$	123
Non-cash financing activities:
Deposit used in payment of principal on term loans	$	1,200	$	—

See notes to unaudited consolidated financial statements.

8

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 September 30, 2022, and the results of operations and cash flows for the nine months ended September 30, 2022. 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, 2021, should be read in conjunction with these consolidated financial statements.

Core Molding Technologies and its subsidiaries operate in the engineered materials market as one operating segment as a molder of thermoplastic and thermoset structural products. The Company produces and sells molded products for varied markets, including medium and heavy-duty trucks, power sports, building products, industrial and utilities and other commercial markets. Core Molding Technologies has its headquarters in Columbus, Ohio, and operates six production facilities in the United States, Canada and Mexico.

2. CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Principles of Consolidation: 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.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. 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 and conditions.

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 compounds and thermoset and thermoplastic products. Revenue from product sales is generally recognized when 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 a given period. 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 titled 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.

9

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 three separate jurisdictions. The Company had $509,000 cash on hand at September 30, 2022 and had $6,146,000 cash on hand at December 31, 2021.

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 $37,000 allowance for doubtful accounts is needed at September 30, 2022 and $90,000 at December 31, 2021. 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 $129,000 at September 30, 2022 and $222,000 at December 31, 2021. There have been no material changes in the methodology of these calculations.

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 $281,000 at September 30, 2022 and $362,000 at December 31, 2021.

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. The Company has recorded contract assets of $807,000 at September 30, 2022, and $17,000 at December 31, 2021. Contract assets are generally classified as current within prepaid expenses and other current assets on the Consolidated Balance Sheets. For the nine months ended September 30, 2022, the Company recognized no impairments on contract assets. For the nine months ended September 30, 2022, the Company recognized $4,382,000 of revenue from contract liabilities related to open jobs outstanding as of December 31, 2021.

Income Taxes: 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.

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 were no impairment charges of the Company’s long-lived assets for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Goodwill: The purchase consideration of acquired businesses has 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.

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 period. The Company may resume the qualitative assessment 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 the 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, 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, or if a qualitative assessment indicates it is more-likely-than-not that the estimated carrying value exceeds its fair value, the Company proceeds to a

10

quantitative approach. There were no impairment charges of the Company's goodwill for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Self-Insurance: The Company is self-insured with respect to its facilities in Columbus, Ohio; Gaffney, South Carolina; Winona, Minnesota; and Brownsville, Texas for medical, dental and vision claims and Columbus, 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 September 30, 2022 and December 31, 2021 of $973,000 and $916,000, 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 12, "Post Retirement Benefits", of the Notes to Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Core Molding Technologies had a liability for post-retirement healthcare benefits based on actuarial computed estimates of $9,156,000 at September 30, 2022 and $9,080,000 at December 31, 2021.

3. 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 2019, 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 November 2019, the FASB voted to delay the implementation date for certain companies, including those that qualify as a smaller reporting company under the U.S. Securities and Exchange Commission rules, until fiscal years beginning after December 15, 2022. 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.

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4. NET INCOME PER COMMON SHARE

Net income per common share is computed based on the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed similarly but includes the effect of the assumed exercise of dilutive stock appreciation rights and restricted stock under the treasury stock method.

On May 13, 2021, the Company's shareholders approved the 2021 Long Term Equity Incentive Plan (the “2021 Plan”) that replaced the 2006 Long Term Equity Incentive Plan (the “2006 Plan”) approved in May 2006 and amended in May 2015. The 2021 Plan provides restricted stock award recipients voting rights equivalent to the Company's common stock and accrual of dividends but not receipt of dividends until all conditions or restrictions related to such award have been satisfied. Accordingly, the restricted shares are not considered participating shares. The 2006 Plan provides restricted stock award recipients voting rights equivalent to the Company’s common stock and accrual and receipt of dividends irrespective of any conditions or restrictions related to such award being satisfied. Accordingly, the restricted shares granted from the 2006 Plan 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.

The computation of basic and diluted net income per common share (in thousands, except for per share data) is as follows:

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net income (loss)	$	1,319	$	(3,312)	$	7,371	$	4,230
Less: net income allocated to participating securities	13		—		122		234
Net income (loss) available to common shareholders	$	1,306	$	(3,312)	$	7,249	$	3,996
Weighted average common shares outstanding — basic	8,414,000		8,053,000		8,337,000		8,015,000
Effect of weighted average dilutive securities	4,000		—		1,000		32,000
Weighted average common and potentially issuable common shares outstanding — diluted	8,418,000		8,053,000		8,338,000		8,047,000
Basic net income per common share	$	0.16	$	(0.41)	$	0.87	$	0.50
Diluted net income per common share	$	0.16	$	(0.41)	$	0.87	$	0.50

The computation of basic and diluted net income per participating share is as follows (in thousands, except for per share data):

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Net income allocated to participating securities	$	13	$	—	$	122	$	234
Weighted average participating shares outstanding — basic	82,000		—		140,000		470,000
Effect of dilutive securities	—		—		—		—
Weighted average common and potentially issuable common shares outstanding — diluted	82,000		—		140,000		470,000
Basic net income per participating share	$	0.16	$	0.00	$	0.87	$	0.50
Diluted net income per participating share	$	0.16	$	0.00	$	0.87	$	0.50

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5. MAJOR CUSTOMERS

The Company had five major customers during the nine months ended September 30, 2022, BRP, Inc. ("BRP"), Navistar, Inc. ("Navistar"), PACCAR, Inc. ("PACCAR"), Universal Forest Products, Inc. ("UFP") and Volvo Group North America, LLC ("Volvo"). Major customers are defined as customers whose sales individually consist of more than ten percent of the Company's total sales during any annual or interim reporting period in the current year. The loss of a significant portion of sales to these customers could have a material adverse effect on the Company.

The following table presents sales revenue for the above-mentioned customers for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
BRP product sales	$	12,203	$	6,907	$	38,908	$	25,896
BRP tooling sales	1,119		124		1,456		362
Total BRP sales	13,322		7,031		40,364		26,258
Navistar product sales	16,536		10,027		44,667		30,933
Navistar tooling sales	285		6,656		2,555		6,962
Total Navistar sales	16,821		16,683		47,222		37,895
PACCAR product sales	10,066		6,872		27,971		27,056
PACCAR tooling sales	—		715		185		1,547
Total PACCAR sales	10,066		7,587		28,156		28,603
UFP product sales	5,099		7,551		29,642		33,323
UFP tooling sales	—		—		—		—
Total UFP sales	5,099		7,551		29,642		33,323
Volvo product sales	15,468		7,804		38,268		25,359
Volvo tooling sales	128		70		215		117
Total Volvo sales	15,596		7,874		38,483		25,476
Other product sales	32,968		28,482		96,102		73,327
Other tooling sales	7,734		5,817		10,964		9,433
Total other sales	40,702		34,299		107,066		82,760
Total product sales	92,340		67,643		275,558		215,894
Total tooling sales	9,266		13,382		15,375		18,421
Total sales	$	101,606	$	81,025	$	290,933	$	234,315

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6. INVENTORY

Inventories, net consisted of the following (in thousands):

	September 30, 2022		December 31, 2021
Raw materials	$	18,429	$	17,160
Work in process	2,685		1,976
Finished goods	5,740		5,993
Total	$	26,854	$	25,129

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, accrued other liabilities and other non-current liabilities in the Consolidated Balance Sheets. ROU assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's 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 (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Operating lease cost	$	419	$	390	$	1,265	$	1,145

Other supplemental balance sheet information related to leases was as follows (in thousands):

	September 30, 2022		December 31, 2021
Operating lease right of use assets	$	4,317	$	5,577
Current operating lease liabilities(A)	$	1,346	$	1,489
Noncurrent operating lease liabilities(B)	2,923		4,024
Total operating lease liabilities	$	4,269	$	5,513

(A)Current operating lease liabilities are included in accrued other liabilities in the Consolidated Balance Sheets.

(B)Noncurrent operating lease liabilities are included in other non-current liabilities in the Consolidated Balance Sheets.

The following table presents certain information related to lease terms and discount rates for leases:

Operating leases	September 30, 2022		December 31, 2021
Weighted average remaining lease term (in years):	3.5		4.2
Weighted average discount rate:	3.9	%	4.1	%

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Other information related to leases were as follows (in thousands):

	Nine months ended September 30,
Cash paid for amounts included in the measurement of lease liabilities	2022		2021
Operating cash flows from operating leases(C)	$	1,265	$	1,145

(C)Cash flow from operating leases are included in prepaid and other assets in the Consolidated Statements of Cash Flows.

Maturities of operating lease liabilities were as follows (in thousands):

	September 30, 2022		December 31, 2021
2022 (remainder of year)	$	371	$	1,567
2023	1,442		1,468
2024	1,447		1,473
2025	797		783
2026	712		698
Total lease payments	4,769		5,989
Less: imputed interest	(500)		(476)
Total lease obligations	4,269		5,513
Less: current obligations	(1,346)		(1,489)
Long-term lease obligations	$	2,923	$	4,024

8. PROPERTY, PLANT & EQUIPMENT

Property, plant and equipment, net consisted of the following for the periods specified (in thousands):

	September 30, 2022		December 31, 2021
Property, plant and equipment	$	196,731	$	183,500
Accumulated depreciation	(115,288)		(107,603)
Property, plant and equipment — net	$	81,443	$	75,897

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 September 30, 2022 and 2021 was $2,683,000 and $2,471,000, respectively. Depreciation expense for the nine months ended September 30, 2022 and 2021 was $7,685,000 and $7,414,000, respectively. Amounts invested in capital additions in progress were $13,019,000 and $6,605,000 at September 30, 2022 and December 31, 2021, respectively. At September 30, 2022 and December 31, 2021, purchase commitments for capital expenditures in progress were $1,078,000 and $5,315,000, respectively.

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9. GOODWILL AND INTANGIBLES

Goodwill activity for the nine months ended September 30, 2022 consisted of the following (in thousands):

Balance at December 31, 2021	$	17,376
Additions	—
Impairment	—
Balance at September 30, 2022	$	17,376

Intangibles, net at September 30, 2022 were comprised of the following (in thousands):

Definite-lived Intangible Assets	Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trade name	25 Years	$	250	$	(75)	$	175
Trademarks	10 Years	1,610		(758)		852
Non-competition agreement	5 Years	1,810		(1,705)		105
Developed technology	7 Years	4,420		(2,973)		1,447
Customer relationships	10-12 Years	9,330		(3,803)		5,527
Total		$	17,420	$	(9,314)	$	8,106

Intangibles, net at December 31, 2021 were comprised of the following (in thousands):

Definite-lived Intangible Assets	Amortization Period	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trade name	25 Years	$	250	$	(68)	$	182
Trademarks	10 Years	1,610		(637)		973
Non-competition agreement	5 Years	1,810		(1,433)		377
Developed technology	7 Years	4,420		(2,499)		1,921
Customer relationships	10-12 Years	9,330		(3,216)		6,114
Total		$	17,420	$	(7,853)	$	9,567

The aggregate intangible asset amortization expense was $487,000 and $488,000 for the three months ended September 30, 2022 and 2021, respectively. The aggregate intangible amortization expense was $1,461,000 and $1,462,000 for the nine months ended September 30, 2022 and 2021, respectively.

10. POST-RETIREMENT BENEFITS

The components of expense for the Company’s post-retirement benefit plans are as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2022		2021		2022		2021
Pension expense:
Multi-employer plan	$	221	$	179	$	682	$	600
Defined contribution plan	371		263		1,122		881
Total pension expense	592		442		1,804		1,481
Health and life insurance:
Interest cost	50		41		149		122
Amortization of prior service credits	(124)		(124)		(372)		(372)
Amortization of net loss	43		43		130		130
Net periodic benefit credit	(31)		(40)		(93)		(120)
Total post-retirement benefits expense	$	561	$	402	$	1,711	$	1,361

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The Company made payments of $2,349,000 to pension plans and $467,000 for post-retirement healthcare and life insurance during the nine months ended September 30, 2022. For the remainder of 2022, the Company expects to make approximately $741,000 of pension plan payments, of which $259,000 was accrued at September 30, 2022. The Company also expects to make approximately $924,000 of post-retirement healthcare and life insurance payments for the remainder of 2022, all of which were accrued at September 30, 2022.

11. DEBT

Debt consists of the following (in thousands):

	September 30, 2022		December 31, 2021
Wells Fargo term loans payable	$	—	$	13,992
FGI term loans payable	—		12,561
Huntington term loans payable	24,792		—
Leaf Capital term loan payable	93		119
Total	24,885		26,672
Less deferred loan costs	(385)		(1,478)
Less current portion	(1,205)		(3,943)
Long-term debt	$	23,295	$	21,251

Huntington Credit Agreement

On July 22, 2022, the Company entered into a credit agreement (the “Huntington Credit Agreement”) with The Huntington National Bank (“Huntington”), as the sole lender, administrative agent, lead arranger and book runner, and the lenders from time to time thereto. Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company secured loans (the “Huntington Loans”) in the maximum aggregate principal amount of $75,000,000 ($38,689,000 of which was advanced to the Company on July 22, 2022), comprised of three $25,000,000 commitments: a term loan commitment, a CapEx loan commitment and a revolving loan commitment.

The initial proceeds from the Huntington Credit Agreement were used in part to (i) repay all existing outstanding indebtedness of the Company owing to Wells Fargo Bank, National Association, and FGI Equipment Finance LLC (“FGI”) and (ii) pay certain fees and expenses associated with entering the Huntington Credit Agreement.

At the option of the Company, the Huntington Loans shall be comprised of Alternative Base Rate (ABR) Loans or Secure Overnight Financing Rate (SOFR) Loans.

ABR Loans bear interest at a per annum rate equal to ABR plus a margin of 280 to 380 basis points determined based on the Company’s leverage ratio. ABR is the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50% per annum and (c) Daily Simple SOFR for such day (taking into account any floor set forth in the definition of “Daily Simple SOFR”) plus 1.00% per annum; provided, that if the ABR shall be less than 0.00%, then ABR shall be deemed to be 0.00%.

SOFR Loans bear interest at a per annum rate equal to Daily Simple SOFR plus a margin of 180 to 230 basis points determined based on the Company’s leverage ratio. Daily Simple SOFR means, for any day (a “SOFR Rate Day”), a rate per annum equal to the greater of (a) SOFR for the day (such day, the “SOFR Determination Date”) that is five (5) U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website, and (b) 0.00%.

The Company’s obligations under the Huntington Credit Agreement are secured by all of the U.S. and Canadian assets of the Company, including all of its equity interests in each of the Company’s U.S. and Canadian subsidiaries and 65% of the Company’s equity interest in its Mexican subsidiaries, and are unconditionally guaranteed by certain subsidiaries of the Company.

The Huntington Credit Agreement contains certain customary representations and warranties, conditions, affirmative and negative covenants and events of default. The Company is in compliance with such covenants as of September 30, 2022.

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Voluntary prepayments of amounts outstanding under the Huntington Loans are permitted at any time without premium or penalty.

The interest rate for the Huntington Revolving Loan and Huntington Term Loan was 4.08% and 4.75% as of September 30, 2022, respectively.

Huntington Term Loan

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a Term Loan commitment (the “Huntington Term Loan”) of $25,000,000 ($25,000,000 of which was advanced to the Company on July 22, 2022). The Huntington Term Loan is to be repaid in monthly installments beginning August 2022 of $104,000 per month for the first 24 months, $156,000 per month for the next 24 months, $208,000 for the next 12 months and the remaining balance to be paid on July 22, 2027.

Huntington Capex Loan

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company secured Capex loan (the “Huntington Capex Loan”) in the maximum aggregate principal amount of $25,000,000 (none of which was advanced to the Company on July 22, 2022 and through September 30, 2022). Proceeds of the Huntington Capex Loan will be used to finance the ongoing capital expenditure needs of the Company.

Any borrowings from the Huntington Capex Loan will be converted to new term loans annually each February, beginning February 2025, and will have monthly principal repayments based on a sixty-month amortization period with all amounts outstanding on the Huntington Capex Loan being fully due on July 22, 2027.

Huntington Revolving Loan

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a revolving loan commitment (the “Huntington Revolving Loan”) of $25,000,000 ($13,689,000 of which was advanced to the Company on July 22, 2022). The Company has $25,000,000 of available revolving loans of which $4,052,000 is outstanding as of September 30, 2022.

The Huntington Credit Agreement makes available to the Company a revolving commitment in the maximum amount of $25,000,000 at the Company’s option at any time during the five-year period following the closing. The revolving loan commitment terminates, and all outstanding borrowings thereunder must be repaid on July 22, 2027.

Leaf Capital Funding

On April 24, 2020 the Company entered into a finance agreement with Leaf Capital Funding of $175,000 for equipment. The parties agreed to a fixed interest rate of 5.50% and a term of 60 months.

Wells Fargo Loan

On December 31, 2021, the Company had term loans ("the WF Term Loans") and a revolving loan (the "WF Revolving loan") with Wells Fargo Bank, National Association, with balances of $13,992,000 and $4,424,000, respectively. The Company’s term and revolving loans had variable interest rates on December 31, 2021 of 3.77% and 4.25%, respectively. On July 22, 2022, all existing outstanding indebtedness of the Company owed to Wells Fargo Bank, National Association was repaid in full as part of the Huntington Credit Agreement.

FGI Equipment Finance LLC Term Loan

On December 31, 2021, the Company had a term loan (the "FGI Term Loan"), evidenced by a promissory note (the "FGI Note") with FGI, with a balance of $12,561,000. The Company’s term loan had a fixed interest rate of 8.25% at December 31, 2021. On July 22, 2022, all existing outstanding indebtedness of the Company owed to FGI was repaid in full as part of the Huntington Credit Agreement.

At September 30, 2022, the company recorded losses of $1,234,000 from writing off outstanding deferred loan costs and approximately $348,000 from prepayment fees associated with the FGI Term Loan.

Interest Rate Swap Agreement

The Company entered into an interest rate swap agreement that became effective July 22, 2022 and continues through July 2027, which was designed as a cash flow hedge for $25,000,000 of the Huntington Term Loan. Under this agreement, the Company will pay a fixed SOFR rate of 2.95% to the swap counterparty in exchange for the Term Loans daily variable SOFR. The fair value of the interest rate swap was an asset of $805,000 at September 30, 2022.

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12. INCOME TAXES

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. Management makes assumptions, judgments, and estimates to determine the deferred tax assets and liabilities. The Company evaluates provisions and deferred tax assets quarterly to determine if adjustments to our valuation allowance are required based on the consideration of all available evidence.

The Company’s Consolidated Balance Sheets include net deferred tax assets of $252,000 for the Canadian and $841,000 for the Mexican tax jurisdictions and a net deferred tax liability of $718,000 for the U.S. tax jurisdiction at September 30, 2022. The deferred tax asset is classified in other non-current assets and deferred tax liabilities are in other non-current liabilities. At September 30, 2022, the Company's net deferred tax liability included a valuation allowance of $4,257,000, due to cumulative losses over the last three years and uncertainty related to the Company's ability to realize United States deferred tax assets. The Company believes that the deferred tax assets associated with the Canadian and Mexican tax jurisdictions are more-likely-than-not to be realizable based on estimates of future taxable income.

Income tax expense for the three months ended September 30, 2022 is estimated to be $1,251,000, approximately 48.7% of income before income taxes, and includes tax expense for the Canadian and Mexican tax jurisdictions. U.S. operations incurred a net loss for the three months ended September 30, 2022 and the net loss tax benefit was offset with a full valuation reserve. Income tax expense for the three months ended September 30, 2021 was estimated to be $396,000, approximately 13.6% of loss before income taxes.

The Company files income tax returns in the United States, Mexico, Canada and various state and local jurisdictions. The Company is subject to federal income tax examinations for tax years 2014 through 2017 but the scope of examination is limited to adjustments resulting from Net Operating Loss carry back claims from the 2018, 2019, and 2020 tax years. The Company is subject to federal income tax examinations for years 2018 through 2021 with unlimited scope. The Company is not subject to state examinations for years before 2017. The Company is not subject to Mexican income tax examinations by Mexican authorities for the years before 2017 and is not subject to Canadian income tax examinations by Canadian authorities for the years before 2018.

13. STOCK BASED COMPENSATION

On May 13, 2021, The Company's shareholders approved the 2021 Long Term Equity Incentive Plan (the “2021 Plan”) that replaced the 2006 Long Term Equity Incentive Plan (the “2006 Plan”) approved in May 2006 and amended in May 2015. The 2021 Plan allows for grants to employees, officers, non-employee directors, consultants, independent contractors and advisors of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards (“stock awards”) up to an aggregate of 436,530 awards. Awards can be granted under the 2021 Plan through the earlier of May 13, 2031, or the date the maximum number of available awards under the 2021 Plan have been granted. No new awards may be granted from the 2006 Plan.

Awards under the 2021 Plan vest over one to three years and shares previously awarded and currently unvested under the 2006 Plan vest over three years. Shares granted under both the 2006 and 2021 Plans vest upon the date of a participant’s death, disability or change in control.

Restricted Stock

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 Stock”). These awards are measured at the fair value of the Company's common stock on the date of issuance and recognized 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.

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The following summarizes the status of Restricted Stock and changes during the nine months ended September 30, 2022:

	Number of Shares	Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2021	459,420	$	9.79
Granted	287,485	10.39
Vested	(226,201)	9.01
Forfeited	(13,957)	11.28
Unvested balance at September 30, 2022	506,747	$	10.43

At September 30, 2022 and 2021, there was $4,199,000 and $3,664,000, respectively, of total unrecognized compensation expense, related to Restricted Stock grants. The unrecognized compensation expense at September 30, 2022 is expected to be recognized over the weighted-average period of 2.0 years. Total compensation cost related to Restricted Stock grants for the three months ended September 30, 2022 and 2021 was $623,000 and $578,000, respectively. Total compensation cost related to Restricted Stock grants for the nine months ended September 30, 2022 and 2021 was $1,660,000 and $1,322,000, respectively, all of which was recorded to selling, general and administrative expense.

During the nine months ended September 30, 2022 employees surrendered 48,286 shares of the Company's common stock to satisfy income tax withholding obligations in connection with the vesting of restricted awards. Employees surrendered 7,237 shares for the nine months ended September 30, 2021.

Stock Appreciation Rights

As part of the Company's 2019 annual grant, Stock Appreciation Rights ("SARs") were granted with a grant price of $10. These awards have a contractual term of five years and vest ratably over a period of three years or immediately vest if the recipient is over 65 of age. These awards are valued using the Black-Scholes option pricing model, and are recognized ratably as compensation expense over three years.

A summary of the Company's stock appreciation rights activity for the nine months ended September 30, 2022 is as follows:

	Number of Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2021	177,016	$	2.57
Granted	—	—
Exercised	—	—
Forfeited	—	—
Outstanding at end of the period ended September 30, 2022	177,016	$	2.57
Exercisable at end of the period ended September 30, 2022	177,016	$	2.57

The average remaining contractual term for SARs outstanding at September 30, 2022 is 1.8 years with no aggregate intrinsic value. There was no unrecognized compensation expense, related to SARs at September 30, 2022. For the three months ended September 30, 2022, there was no compensation cost. Total compensation cost related to SARs for the three months ended September 30, 2021 was $34,000. Total Compensation cost related to SARs for the nine months ended September 30, 2022 and 2021 was $45,000 and $94,000, respectively, all of which was recorded to selling, general and administrative expense.

14. 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 hierarchical valuation methodology provides a fair value framework that describes the categorization of assets and liabilities in 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.

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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 September 30, 2022 and December 31, 2021 approximate fair value due to the short-term maturities of these financial instruments. As of September 30, 2022, the carrying amounts of the Huntington Term Loan and Huntington Revolving Loan approximated fair value due to the short-term nature of the underlying variable rate SOFR agreements. As of December 31, 2021, the carrying amounts of the WF Term Loans and WF Revolving Loan approximated fair value due to the short-term nature of the underlying variable rate LIBOR agreements. The FGI Term Loan approximated fair value as of December 31, 2021 due to the immaterial movement in interest rates since the Company entered into the FGI Note on October 20, 2020. The Company had Level 2 fair value measurements at September 30, 2022 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 September 30, 2022, the Company had no ineffective portion related to the cash flow hedges.

Interest Rate Swap

The Company entered into an interest rate swap contract to fix the interest rate on an initial aggregate amount of $25,000,000 thereby reducing exposure to interest rate changes. The interest rate swap pays a fixed rate of 2.95% to the swap counterparty in exchange for daily SOFR. At inception, all interest rate swaps were formally documented as cash flow hedges and are measured at fair value each reporting period. See Note 11, "Debt", for additional information.

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Financial statement impacts

The following table detail amounts related to our derivatives designated as hedging instruments (in thousands):

	Fair Value of Derivative Instruments September 30, 2022
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Foreign exchange contracts	Prepaid expenses other current assets	$	—	Accrued other liabilities	$	542
	Other non-current assets	$	—	Other non-current liabilities	$	84
Notional Contract values		$	—		$	19,560
Interest rate swaps	Prepaid expenses other current assets	$	40	Accrued other liabilities	$	—
	Other non-current assets	$	765	Other non-current liabilities	$	—
Notional Contract values		$	24,792		$	—

At December 31, 2021 the Company had no derivatives designated as hedging instruments.

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The following tables summarize the amount of unrealized and realized gain (loss) recognized in Accumulated Other Comprehensive Income ("AOCI") for the three months ended September 30, 2022 and 2021 (in thousands):

Derivatives in subtopic 815-20 Cash Flow Hedging Relationship:	Amount of Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Income on Derivative				Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income(A)	Amount of Realized Gain (Loss) Reclassified from Accumulated Other Comprehensive Income
	2022		2021			2022		2021
Foreign exchange contracts	$	(626)	$	—	Cost of goods sold	$	—	$	—
					Selling, general and administrative expense	$	—	$	—
Interest rate swaps	$	767	$	—	Interest expense	$	(38)	$	—

The following tables summarize the amount of unrealized and realized gain (loss) recognized in Accumulated Other Comprehensive Income ("AOCI") for the nine months ended September 30, 2022 and 2021 (in thousands):

Derivatives in subtopic 815-20 Cash Flow Hedging Relationship:	Amount of Unrealized Gain (Loss) Recognized in Accumulated Other Comprehensive Income on Derivative				Location of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income(A)	Amount of Realized Gain (Loss) Reclassified from Accumulated Other Comprehensive Income
	2022		2021			2022		2021
Foreign exchange contracts	$	(626)	$	—	Cost of goods sold	$	—	$	—
					Selling, general and administrative expense	$	—	$	—
Interest rate swaps	$	767	$	—	Interest expense	$	(38)	$	—

(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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15. ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents changes in Accumulated Other Comprehensive Income, net of tax, for the nine months ended September 30, 2022 and 2021 (in thousands):

2021:	Derivative Hedging Activities		Post Retirement Benefit Plan Items(A)		Accumulated Other Comprehensive Income (Loss)
2021:
Balance at December 31, 2020	$	—	$	1,375	$	1,375
Amounts reclassified from accumulated other comprehensive income	—		(242)		(242)
Income tax benefit	—		51		51
Balance at September 30, 2021	$	—	$	1,184	$	1,184
2022:
Balance at December 31, 2021	$	—	$	1,075	$	1,075
Other comprehensive income before reclassifications	141		—		141
Amounts reclassified from accumulated other comprehensive income	38		(242)		(204)
Income tax benefit (expense)	(7)		51		44
Balance at September 30, 2022	$	172	$	884	$	1,056

(A)The effect of post-retirement benefit items reclassified from Accumulated Other Comprehensive Income is included in other income and expense on the Consolidated Statements of Operations. These Accumulated Other Comprehensive Income components are included in the computation of net periodic benefit cost (see Note 10, "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 Operations.

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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,” “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 Quarterly Report on Form 10-Q: business conditions in the plastics, transportation, power sports, utilities 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; the adverse impact of the coronavirus (COVID-19) global pandemic on our business, results of operations, financial position, liquidity or cash flow, as well as impact on customers and supply chains; safety and security conditions in Mexico and Canada; fluctuations in foreign currency exchange rates; 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; ability to accurately quote and execute manufacturing processes for new business; 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; a work stoppage or labor disruption at one of our union locations or one of our customer or supplier locations; 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; federal, state and local environmental laws and regulations; the availability of sufficient 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 Core Molding Technologies' Annual Report on Form 10-K for the year ended December 31, 2021.

Description of the Company

Core Molding Technologies and its subsidiaries operate in the engineered materials market as one operating segment as a molder of thermoplastic and thermoset structural products. The Company produces and sells molded products for varied markets, including medium and heavy-duty trucks, power sports, building products, industrial and utilities and other commercial markets. Core Molding Technologies has its headquarters in Columbus, Ohio, and operates six production facilities in the United States, Canada and Mexico.

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, raw material cost inflation, labor availability, and our customers’ production rates and inventory levels. The Company's customers operate in many different markets with different cyclicality and seasonality.

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. The Company has certain contractual commitments that restrict its ability to pass through

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changes in input costs to certain customers. As a result, during periods of significant increases or decreases in input costs operating results may be impacted.

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 operational 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 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.

Forward Looking

Looking forward, based on our customers' forecasts, new program launches and price increases, the Company expects sales for the fourth quarter of 2022 to increase as compared to the fourth quarter of 2021. Customers in the medium and heavy-duty truck market are forecasting higher demand in the fourth quarter of 2022. New programs launched in the power sports and utilities markets in 2021 as well as anticipated launches of previously awarded new programs during the remainder of 2022 are also expected to increase sales. We are continuing to monitor ongoing customer supply chain disruptions and higher interest rates and would anticipate some unfavorable impact on customer demand, although we cannot estimate the timing for when any such supply chain disruptions and higher interests rates may impact demand.

The Company’s supply chains have become more stable, but the Company continues to experience higher raw material costs and anticipates most raw material costs to remain elevated in 2022 compared to historical levels, including thermoset resins and fiberglass. The Company was able to recover certain raw material cost increases in the first three quarters of 2022 and is continuing to pursue cost recoveries through raw material adjustment arrangements with customers.

Labor market constraints in all Company locations have been improving compared to the first half of 2022. We anticipate the labor constraints to continue to improve, subject to any pandemic challenges, although we anticipate ongoing wage inflation.

Results of Operations

Three Months Ended September 30, 2022, as Compared to Three Months Ended September 30, 2021

Net sales for the three months ended September 30, 2022 and 2021 totaled $101,606,000 and $81,025,000, respectively. Included in net sales were tooling project sales of $9,266,000 and $13,382,000 for the three months ended September 30, 2022 and 2021, respectively. Tooling 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 September 30, 2022 were $92,340,000 compared to $67,643,000 for the same period in 2021. The increase in sales is primarily the result of higher demand from the medium and heavy-duty truck and power sports markets, and price increases related to raw material and labor cost inflation and launch of new programs. The Company's product sales for the three months ended September 30, 2022 compared to the same period in 2021 by market are as follows (in thousands):

	Three months ended September 30,
	2022		2021
Medium and heavy-duty truck	$	44,951	$	26,317
Power sports	19,963		14,105
Building products	6,779		9,331
Industrial and utilities	6,087		8,717
All other	14,560		9,173
Net product revenue	$	92,340	$	67,643

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Gross margin was approximately 13.1% of sales for the three months ended September 30, 2022, compared with 7.9% for the three months ended September 30, 2021. The gross margin percentage increase was positively impacted by net changes in selling price and raw material costs of 7.2% and higher fixed cost leverage of 0.7%, offset by product mix and production inefficiencies of 2.7%.

Included in selling general and administrative expense ("SG&A") for the three months ended September 30, 2021 were closure costs of $1,768,000 related to the manufacturing facility in Batavia, Ohio. SG&A was $8,671,000 for the three months ended September 30, 2022, compared to the remaining SG&A costs of $7,040,000 for the three months ended September 30, 2021. Increased SG&A expenses resulted primarily from higher labor and benefits costs of $1,004,000 and higher professional fees of $326,000.

During the third quarter of 2022, the Company refinanced its existing credit facility. As a result, the Company recorded one-time losses of $1,234,000 from writing off outstanding deferred loan costs and $348,000 from prepayment fees associated with the repayment of the FGI Term Loan.

Interest expense totaled $511,000 for the three months ended September 30, 2022, compared to interest expense of $563,000 for the three months ended September 30, 2021. The decrease in interest expense was primarily due to lower interest rates resulting from the Company refinancing its credit facility during the three months ended September 30, 2022, when compared to the same period in 2021.

Income tax expense for the three months ended September 30, 2022 is estimated to be $1,251,000, approximately 48.7% of income before income taxes, and includes tax expense in Canadian and Mexican tax jurisdictions. U.S. operations incurred a net loss for the three months ended September 30, 2022 and the net loss tax benefit was offset with a full valuation reserve. Income tax expense for the three months ended September 30, 2021 was estimated to be $396,000, approximately 13.6% of loss before income taxes.

The Company recorded net income for the three months ended September 30, 2022 of $1,319,000 or $0.16 per basic and diluted share, compared with a net loss of $3,312,000, or $(0.41) per basic and diluted share, for the three months ended September 30, 2021.

Comprehensive income totaled $1,389,000 for the three months ended September 30, 2022, compared to comprehensive loss of $3,375,000 for the same period ended September 30, 2021. The increase was related to the increase in net income of $4,631,000.

Nine Months Ended September 30, 2022, as Compared to Nine Months Ended September 30, 2021

Net sales for the nine months ended September 30, 2022 and 2021 totaled $290,933,000 and $234,315,000, respectively. Included in net sales were tooling project sales of $15,375,000 and $18,421,000 for the nine months ended September 30, 2022 and 2021, respectively. Tooling 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 nine months ended September 30, 2022 were $275,558,000 compared to $215,894,000 for the same period in 2021. The increase in sales is primarily the result of higher demand from the medium and heavy-duty truck and power sports, price increases related to raw material and labor cost inflation and launch of new programs. The Company's product sales for the nine months ended September 30, 2022 compared to the same period in 2021 by market are as follows (in thousands):

	Nine months ended September 30,
	2022		2021
Medium and heavy-duty truck	$	116,864	$	87,785
Power sports	62,133		44,509
Building products	36,219		38,489
Industrial and utilities	19,814		19,171
All other	40,528		25,940
Net product revenue	$	275,558	$	215,894

Gross margin was approximately 14.1% of sales for the nine months ended September 30, 2022, compared with 14.0% for the nine months ended September 30, 2021. The gross margin percentage increase was positively impacted by net changes in

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selling price and raw material costs of 1.4% and higher fixed cost leverage of 1.0%, offset by product mix and production inefficiencies of 2.3%.

Included in SG&A for the nine months ended September 30, 2021 were closure costs of $2,027,000 related to the manufacturing facility in Batavia, Ohio. SG&A was $25,889,000 for the nine months ended September 30, 2022, compared to the remaining SG&A costs, excluding closing costs, of $21,717,000 for the nine months ended September 30, 2021. Increased SG&A expenses resulted primarily from higher labor and benefits costs of $2,295,000, higher professional fees of $936,000 and higher insurance costs of $448,000.

During the third quarter of 2022, the Company refinanced its existing credit facility. As a result, the Company recorded one-time losses of $1,234,000 from writing off outstanding deferred loan costs and $348,000 from prepayment fees associated with the repayment of the FGI Term Loan.

Interest expense totaled $1,511,000 for the nine months ended September 30, 2022, compared to interest expense of $1,725,000 for the nine months ended September 30, 2021. The decrease in interest expense was primarily due to a lower interest rates resulting from the Company refinancing its credit facility during the nine months ended September 30, 2022, when compared to the same period in 2021.

Income tax expense for the nine months ended September 30, 2022 is estimated to be $4,658,000, approximately 38.7% of income before income taxes, and includes tax expense in Canadian and Mexican tax jurisdictions. U.S. operations incurred a net loss for the nine months ended September 30, 2022 and the net loss tax benefit was offset with a full valuation reserve. Income tax expense for the nine months ended September 30, 2021 was estimated to be $3,290,000, approximately 43.8% of income before income taxes.

The Company recorded net income for the nine months ended September 30, 2022 of $7,371,000 or $0.87 per basic and diluted share, compared with a net income of $4,230,000, or $0.50 per basic and diluted share, for the nine months ended September 30, 2021.

Comprehensive income totaled $7,314,000 for the nine months ended September 30, 2022, compared to comprehensive income of $4,039,000 for the same period ended September 30, 2021. The increase was related to the increase in net income of $3,141,000.

Liquidity and Capital Resources

Historically, 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, capital expenditures, repayments of debt, and 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 September 30, 2022, the Company had outstanding foreign exchange contracts with notional amounts totaling $19,560,000. As of September 30, 2022, the Company also had outstanding interest rate swaps with notional amounts totaling $24,792,000.

Cash provided by operating activities for the nine months ended September 30, 2022 totaled $8,489,000. Net income of $7,371,000 positively impacted operating cash flows. Non-cash deductions of depreciation and amortization, and share-based compensation included in net income amounted to $9,406,000 and $1,705,000, respectively. Increased working capital decreased cash provided by operating activities by $11,405,000. The increase in working capital was primarily related to changes in accounts receivable, offset by a change in accounts payable.

Cash used in investing activities for the nine months ended September 30, 2022 was $12,284,000, which related to purchases of property, plant and equipment. The Company anticipates spending approximately $18,000,000 during 2022 on property, plant and equipment purchases for all of the Company's operations. The Company anticipates increasing production capacity through the completion of its DLFT capacity expansion in Matamoros, Mexico, which started in 2021, and the addition of one press in each of its Winona, Minnesota and Cobourg, Ontario Canada facilities. At September 30, 2022, purchase commitments for capital expenditures in progress were $1,078,000. The Company anticipates using cash from operations, its available revolving line of credit or its capex line to fund capital investments.

Cash used for financing activities for the nine months ended September 30, 2022 totaled $1,842,000, which consisted of repayment of long-term debt of $25,586,000, payments related to the purchase of treasury stock of $482,000, payments of deferred loan costs of $402,000 and net revolving loan payments of $372,000, offset by proceeds from the Company's new

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credit facility with Huntington National Bank of $25,000,000. The Company's deposit with FGI of $1,200,000 was utilized to repay long-term debt.

At September 30, 2022, the Company had $509,000 cash on hand, a $25,000,000 revolving loan facility of which $4,052,000 is outstanding, and $25,000,000 Capex loan facility with no outstanding balance.

The Company is required to meet certain financial covenants included in the Credit Agreement (defined below), which covenants include a net debt leverage and a fixed charge coverage ratio. As of September 30, 2022, the Company was in compliance with its financial covenants associated with the loans made under the Credit Agreement as described below.

Management believes cash on hand, cash flow from operating activities and available borrowings under the Company's credit agreement will be sufficient to meet the Company's current liquidity needs.

Huntington Credit Agreement

On July 22, 2022, the Company entered into a credit agreement (the “Huntington Credit Agreement”) with The Huntington National Bank (“Huntington”), as the sole lender, administrative agent, lead arranger and book runner, and the lenders from time to time thereto. Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company secured loans (the “Huntington Loans”) in the maximum aggregate principal amount of $75,000,000 ($38,689,000 of which was advanced to the Company on July 22, 2022), comprised of three $25,000,000 commitments: a term loan commitment, a CapEx loan commitment and a revolving loan commitment.

The initial proceeds from the Huntington Credit Agreement were used in part to (i) repay all existing outstanding indebtedness of the Company owing to Wells Fargo Bank, National Association, and FGI Equipment Finance LLC (“FGI”) and (ii) pay certain fees and expenses associated with entering the Huntington Credit Agreement.

At the option of the Company, the Huntington Loans shall be comprised of Alternative Base Rate (ABR) Loans or Secure Overnight Financing Rate (SOFR) Loans.

ABR Loans bear interest at a per annum rate equal to ABR plus a margin of 280 to 380 basis points determined based on the Company’s leverage ratio. ABR is the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus 0.50% per annum and (c) Daily Simple SOFR for such day (taking into account any floor set forth in the definition of “Daily Simple SOFR”) plus 1.00% per annum; provided, that if the ABR shall be less than 0.00%, then ABR shall be deemed to be 0.00%.

SOFR Loans bear interest at a per annum rate equal to Daily Simple SOFR plus a margin of 180 to 230 basis points determined based on the Company’s leverage ratio. Daily Simple SOFR means, for any day (a “SOFR Rate Day”), a rate per annum equal to the greater of (a) SOFR for the day (such day, the “SOFR Determination Date”) that is five (5) U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website, and (b) 0.00%.

The Company’s obligations under the Huntington Credit Agreement are secured by all of the U.S. and Canadian assets of the Company, including all of its equity interests in each of the Company’s U.S. and Canadian subsidiaries and 65% of the Company’s equity interest in its Mexican subsidiaries, and are unconditionally guaranteed by certain subsidiaries of the Company.

The Huntington Credit Agreement contains certain customary representations and warranties, conditions, affirmative and negative covenants and events of default. The Company is in compliance with such covenants as of September 30, 2022.

Voluntary prepayments of amounts outstanding under the Huntington Loans are permitted at any time without premium or penalty.

The interest rate for the Huntington Revolving Loan and Huntington Term Loan was 4.08% and 4.75% as of September 30, 2022, respectively.

Huntington Term Loan

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a Term Loan commitment (the “Huntington Term Loan”) of $25,000,000 ($25,000,000 of which was advanced to the Company on July 22, 2022). The Huntington Term Loan is to be repaid in monthly installments beginning August 2022 of $104,000 per month for the first 24 months, $156,000 per month for the next 24 months, $208,000 for the next 12 months and the remaining balance to be paid on July 22, 2027.

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Huntington Capex Loan

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company secured Capex loan (the “Huntington Capex Loan”) in the maximum aggregate principal amount of $25,000,000 (none of which was advanced to the Company on July 22, 2022 and through September 30, 2022). Proceeds of the Huntington Capex Loan will be used to finance the ongoing capital expenditure needs of the Company.

Any borrowings from the Huntington Capex Loan will be converted to new term loans annually each February, beginning February 2025, and will have monthly principal repayments based on a sixty-month amortization period with all amounts outstanding on the Huntington Capex Loan being fully due on July 22, 2027.

Huntington Revolving Loan

Pursuant to the terms of the Huntington Credit Agreement, Huntington made available to the Company a revolving loan commitment (the “Huntington Revolving Loan”) of $25,000,000 ($13,689,000 of which was advanced to the Company on July 22, 2022). The Company has $25,000,000 of available revolving loans of which $4,052,000 is outstanding as of September 30, 2022.

The Huntington Credit Agreement makes available to the Company a revolving commitment in the maximum amount of $25,000,000 at the Company’s option at any time during the five-year period following the closing. The revolving loan commitment terminates, and all outstanding borrowings thereunder must be repaid on July 22, 2027.

Leaf Capital Funding

On April 24, 2020 the Company entered into a finance agreement with Leaf Capital Funding of $175,000 for equipment. The parties agreed to a fixed interest rate of 5.50% and a term of 60 months.

Wells Fargo Loan

On December 31, 2021, the Company had term loans ("the WF Term Loans") and a revolving loan (the "WF Revolving loan") with Wells Fargo Bank, National Association, with balances of $13,992,000 and $4,424,000, respectively. The Company’s term and revolving loans had variable interest rates on December 31, 2021 of 3.77% and 4.25%, respectively. On July 22, 2022, all existing outstanding indebtedness of the Company owed to Wells Fargo Bank, National Association was repaid in full as part of the Huntington Credit Agreement.

FGI Equipment Finance LLC Term Loan

On December 31, 2021, the Company had a term loan (the "FGI Term Loan"), evidenced by a promissory note (the "FGI Note") with FGI, with a balance of $12,561,000. The Company’s term loan had a fixed interest rate of 8.25% at December 31, 2021. On July 22, 2022, all existing outstanding indebtedness of the Company owed to FGI was repaid in full as part of the Huntington Credit Agreement.

At September 30, 2022, the company recorded losses of $1,234,000 from writing off outstanding deferred loan costs and approximately $348,000 from prepayment fees associated with the FGI Term Loan.

Interest Rate Swap Agreement

The Company entered into an interest rate swap agreement that became effective July 22, 2022 and continues through July 2027, which was designed as a cash flow hedge for $25,000,000 of the Huntington Term Loan. Under this agreement, the Company will pay a fixed SOFR rate of 2.95% to the swap counterparty in exchange for the Term Loans daily variable SOFR. The fair value of the interest rate swap was an asset of $805,000 at September 30, 2022.

Off-Balance Sheet Arrangements

The Company did not have any significant off-balance sheet arrangements as of September 30, 2022 or December 31, 2021.

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 in the Company’s Consolidated Balance Sheet under GAAP, as of September 30, 2022 and December 31, 2021.

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.

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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.

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 uses 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) non-hedged loans under the Huntington Credit Agreement, all of which bear a variable interest rate; (2) non-hedged 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, fiberglass, and metal components for use in production. The prices and availability of these materials are affected by the prices of crude oil, natural gas and other feedstocks, tariffs, as well as processing capacity versus demand.

Assuming a hypothetical 10% change in short-term interest rates, interest paid on the Term Loan would be impacted, as the interest rate on these loans is based upon SOFR. It would not, however, have a material effect on earnings before tax as the Company has entered into hedge to offset changes in SOFR.

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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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. There were no changes in internal controls over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f)) that occurred in the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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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, 2021.

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

The Company repurchased zero shares of our common stock during the three months ended September 30, 2022.

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:	November 8, 2022	By:	/s/ David L. Duvall
			David L. Duvall
			President, Chief Executive Officer, and Director
Date:	November 8, 2022	By:	/s/ John P. Zimmer
			John P. Zimmer
			Executive Vice President, Secretary, Treasurer and Chief Financial Officer

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INDEX TO EXHIBIT

Exhibit No.	Description	Location
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 B Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on April 21, 2020	Incorporated by reference to Exhibit 3.1 to Form 8-K filed April 22, 2020
3(a)(5)	Certificate of Elimination of the Series A Junior Participant Preferred Stock as filed with the Delaware Sec. of State on April 1, 2021	Incorporated by reference to Exhibit 3(a)(5) to Form 8-K filed April 6, 2021
3(b)(1)	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)(2)	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
10(a)	Credit Agreement, dated July 22, 2022, between Core Molding Technologies, Inc. and the Huntington National Bank, as administrative agent, sole leader arranger and sole book runner, and the lenders from time to time thereto.	Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed July 28, 2022
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, Executive 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 November 9, 2022, pursuant to 18 U.S.C. Section 1350	Filed Herein
32(b)	Certification of John P. Zimmer, Executive Vice President, Secretary, Treasurer and Chief Financial Officer of Core Molding Technologies, Inc., dated November 9, 2022, 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
104	Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)	Filed Herein

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