Core Materials Reports Results for Second Quarter 2000
9 August 2000
Core Materials Reports Results for Second Quarter 2000
COLUMBUS, Ohio - Core Materials Corporation today announced results for the
second quarter ended June 30, 2000.
Net income for the second quarter of 2000 was $415,000, or $.04 per
diluted share, an increase of $265,000, or 177%, over the earnings for the
second quarter of 1999 of $150,000, or $.02 per diluted share. Net sales for
the three months ended June 30, 2000, totaled $23,207,000, down 4%, from the
$24,236,000 for the same period a year-ago.
For the six months ended June 30, 2000, net income was $1,237,000, or $.13
per diluted share, remaining essentially flat when compared to $1,320,000, or
$.13 per diluted share, reported for the six month period of the prior year.
Net sales for the six months were $49,120,000, an increase of $2,452,000, or
5%, over the $46,668,000 reported for the first six months of 1999.
Core Materials has approximately $20 million of operating tax loss
carryforwards that are available to offset income taxes on future earnings.
These tax loss carryforwards do not begin to expire until the year 2007. If
the benefit of the Company's operating tax loss carryforwards were recorded as
a reduction in income tax expense, which is reflective of the actual cash
treatment, net income for the six months ended June 30, 2000, would have been
increased by $530,000, or $.05 per diluted share to a total of $1,767,000, or
$.18 per diluted share. The comparable 1999 net income would have been
increased by $562,000, or $.06 per diluted share, to a total of $1,882,000, or
$.19 per diluted share.
The second quarter also saw Core Materials announce an agreement with Lear
Corporation, one of the world's largest Tier I automotive suppliers, to supply
sheet molding composite (SMC) products for three new sport utility/pick up
truck models to be introduced by an automotive original equipment
manufacturer. Core Materials will produce SMC seat bottoms and seat backs for
these vehicles. The products manufactured by Core Materials will be shipped
to Lear Corporation, which will produce full seat assemblies for the
automotive original equipment manufacturer.
As announced earlier, Core Materials' estimated revenues, based on
planning volumes released by the automotive original equipment manufacturer
and Lear Corporation, would approach $25 million annually at peak levels;
however, volumes are not guaranteed. Production of two of the models is
expected to begin in early 2001 with the third model starting later that year.
"This represents a major piece of new business for Core Materials as it
enables us to aggressively compete for market share in the structural end of
the automotive market and strategically diversify our customer base," said
James L. Simonton, president and chief executive officer, Core Materials.
"This will be particularly important for the company as we work to offset the
expected continued softness in the heavy truck manufacturing market."
Core Materials also announced that it had completed its review of
production facility alternatives during the second quarter and will integrate
the manufacture of the Lear parts at its existing manufacturing facilities,
enabling the company to make greater utilization of its current capacity.
Management stated that the improvement in earnings for the second quarter
of 2000 is the result of operational improvements achieved from the Company's
Profitability Improvement Plan announced late last year. Management has
worked aggressively since last year to realign the Company's manufacturing
plants and processes by focusing on continuous improvement in three areas:
reducing manufacturing costs, achieving superior customer satisfaction and
strengthening the Company's employee development systems.
Operations Review
The second quarter's revenue decrease was primarily the result of reduced
sales to Core Materials Truck Original Equipment customers as a result of a
general decline in truck orders. Sales to International Truck and Engine
Corporation decreased by about 12 percent compared to revenues for the three
months ended June 30, 1999. A 21 percent increase in year-over-year second
quarter sales to Core Material's other major customer, Yamaha Motor
Manufacturing Corporation, as well as a 4% increase in year-over-year second
quarter sales to its other customers, helped partially offset the declining
production demand from International.
Gross margin as a percentage of sales was approximately 15% for the three
months ended June 30, 2000, which compares favorably to the margin percentage
of nearly 12% experienced in the second quarter of 1999. Improvements
resulted from reduced scrap, improved labor utilization, lower overtime costs,
reduced repairs, improved supply usage and product mix refinements.
Selling, general and administrative expenses were higher in the second
quarter of 2000 compared with the same period of the previous year. The
increase was primarily due to the addition of key personnel and associated
recruiting and relocation costs related to the reorganization of Core
Materials' management and salaried workforce. Travel expenses were also
higher to support the various growth and operational improvement programs.
Looking Forward
Going forward, management will continue to extend its efforts in the
development and expansion of the Company's customer base to temper, to the
degree possible, anticipated lower sales caused from production cutbacks at
its major truck original equipment manufacturers. In addition, management is
working aggressively to implement the necessary fourth quarter start-up
activities associated with new business from both Lear and Mack Trucks, Inc.
The company anticipates the revenue impact of these orders to begin in early
2001.
Core Materials Corporation is a compounder and compression molder of sheet
molding composites (SMC). The company produces high quality fiberglass
reinforced, molded products and SMC materials for varied markets, including
transportation, marine, agricultural and commercial products. Core Materials,
with its headquarters in Columbus, Ohio, operates plants in Columbus and
Gaffney, South Carolina.
CORE MATERIALS CORPORATION
Condensed Income Statement
(in thousands, except per share data)
Three Months Ended Six Months Ended
06/30/00 06/30/99 06/30/00 06/30/99
(Unaudited) (Unaudited)
Net Sales $23,207 $24,236 $49,120 $46,668
Cost of Sales 19,800 21,392 41,245 39,486
Gross Margin 3,407 2,844 7,875 7,182
Selling, General and
Admin. Expense 2,342 2,193 5,017 4,215
Income before Interest
and Taxes 1,065 651 2,858 2,967
Interest Expense - Net 354 396 744 714
Income before Taxes 711 255 2,114 2,253
Net Income* $415 $150 $1,237 $1,320
Net Income per
Common Share:*
Basic $0.04 $0.02 $0.13 $0.13
Diluted $0.04 $0.02 $0.13 $0.13
Weighted Average Shares
Outstanding:
Basic 9,779 9,779 9,779 9,779
Diluted 9,779 9,843 9,779 9,862
* If the benefit of the Company's operating tax loss carryforwards were
recorded as a reduction in income tax expense, the Company's net income for
the six months ended 06/30/00 and 06/30/99 would have been $1,767,000 or $.18
per diluted share, and $1,882,000, or $.19 per diluted share, respectively.
Condensed Balance Sheets
(in thousands)
As of As of
06/30/00 12/31/99
(Unaudited)
Assets
Cash and Investments $5,427 $1,129
Accounts Receivable 15,167 19,715
Inventories 4,051 5,443
Other Current Assets 1,730 1,254
Property, Plant & Equipment - net 26,867 26,206
Deferred Tax Asset - net 11,362 11,891
Other assets 2,297 2,344
Total Assets $66,901 $67,982
Liabilities and Stockholders' Equity
Current Portion of Long Term Debt $315 $305
Accounts Payable 7,916 11,068
Accrued Liabilities and Other 5,164 4,171
Long-term Debt 26,540 26,700
Deferred Long Term Gain 2,689 2,916
Post Retirement Benefits Liability 4,116 3,900
Stockholders' Equity 20,161 18,922
Total Liabilities and
Stockholders' Equity $66,901 $67,982