SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission File Number 001-12505

CORE MOLDING TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Delaware		31-1481870
(State or other jurisdiction		(I.R.S. Employer Identification No.)
incorporation or organization)
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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer,” and “smaller reporting company,” in Rule 12b-2 of the Exchange Act (Check one).

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

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

As of November 13, 2009, the latest practicable date, 7,001,106 shares of the registrant’s common stock were issued and outstanding.

 

 

Table of Contents

Part I — Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets			3
Consolidated Statements of Operations			4
Consolidated Statement of Stockholders’ Equity			5
Consolidated Statements of Cash Flows			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Not required for smaller reporting company
Item 4T. Controls and Procedures			23
Part II — Other Information			24
Item 1. Legal Proceedings			24
Item 1A. Risk Factors			24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			24
Item 3. Defaults Upon Senior Securities			24
Item 4. Submission of Matters to a Vote of Security Holders			24
Item 5. Other Information			24
Item 6. Exhibits			24
Signatures			25
Index to Exhibits			26
Exhibit 31(a)
Exhibit 31(b)
Exhibit 32(a)
Exhibit 32(b)

Part 1 — Financial Information
Core Molding Technologies, Inc. and Subsidiaries

		September 30,				December 31,
		2009				2008
Assets
Current Assets:
Cash		$	841,004			$	—
Accounts receivable (less allowance for doubtful accounts:
September 30, 2009 and December 31, 2008 - $109,000)			14,391,492				15,435,103
Inventories:
Finished goods			1,257,238				3,533,246
Work in process			1,214,718				1,458,602
Stores			4,297,981				4,740,375
Total inventories			6,769,937				9,732,223
Current portion of deferred tax asset			1,869,198				1,869,198
Foreign sales tax receivable			623,995				584,230
Income tax receivable			84,604				—
Prepaid expenses and other current assets			1,332,660				876,094
Total current assets			25,912,890				28,496,848
Property, plant and equipment			81,456,271				71,970,638
Accumulated depreciation			(35,796,500	)			(33,155,187	)
Property, plant and equipment -net			45,659,771				38,815,451
Deferred tax asset			5,297,840				5,318,623
Goodwill			1,097,433				1,097,433
Other assets			46,336				102,737
Total		$	78,014,270			$	73,831,092
Liabilities and Stockholders’ Equity
Liabilities:
Current liabilities
Current portion of long-term debt		$	3,660,005			$	2,905,716
Notes payable line of credit			—				1,193,965
Current portion of postretirement benefit liability			520,000				520,000
Accounts payable			4,355,224				6,866,388
Tooling in progress			978,292				212,065
Accrued liabilities:
Compensation and related benefits			3,898,063				4,715,884
Interest payable			125,670				96,103
Taxes			—				427,972
Other			825,433				928,080
Total current liabilities			14,362,687				17,866,173
Long-term debt			18,657,842				11,129,184
Interest rate swaps			309,247				502,381
Postretirement benefit liability			16,101,864				15,357,897
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock — $0.01 par value, authorized shares — 10,000,000; Outstanding shares: September 30, 2009 and December 31, 2008 - 0			—				—
Common stock — $0.01 par value, authorized shares - 20,000,000; Outstanding shares: 6,794,005 at September 30, 2009 and 6,765,790 at December 31, 2008			67,940				67,658
Paid-in capital			23,268,988				23,002,472
Accumulated other comprehensive loss, net of income tax benefit			(1,052,634	)			(1,092,977	)
Treasury stock			(26,179,054	)			(26,179,054	)
Retained earnings			32,477,390				33,177,358
Total stockholders’ equity			28,582,630				28,975,457
Total		$	78,014,270			$	73,831,092

See notes to unaudited consolidated financial statements.

Core Molding Technologies, Inc. and Subsidiaries

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Net sales:
Products		$	19,801,193			$	29,497,102			$	54,275,278			$	84,875,561
Tooling			4,624,339				533,461				5,834,479				4,179,133
Total sales			24,425,532				30,030,563				60,109,757				89,054,694
Total cost of sales			20,441,551				23,992,701				53,568,170				73,079,663
Gross margin			3,983,981				6,037,862				6,541,587				15,975,031
Total selling, general and administrative expense			2,131,030				3,186,040				6,886,771				8,994,194
Income (loss) before interest and taxes			1,852,951				2,851,822				(345,184	)			6,980,837
Interest expense			(516,904	)			(179,395	)			(657,298	)			(540,866	)
Income (loss) before income taxes			1,336,047				2,672,427				(1,002,482	)			6,439,971
Income tax expense (benefit)			509,026				984,500				(302,514	)			2,171,630
Net income (loss)		$	827,021			$	1,687,927			$	(699,968	)		$	4,268,341
Net income (loss) per common share:
Basic		$	0.12			$	0.25			$	(0.10	)		$	0.63
Diluted		$	0.12			$	0.24			$	(0.10	)		$	0.61
Weighted average shares outstanding:
Basic			6,794,005				6,748,590				6,768,467				6,740,225
Diluted			6,838,815				7,048,520				6,811,515				7,054,157

See notes to unaudited consolidated financial statements.

Core Molding Technologies, Inc. and Subsidiaries

																		Accumulated
		Common Stock																Other								Total
		Outstanding								Paid-In				Retained				Comprehensive				Treasury				Stockholders’
		Shares				Amount				Capital				Earnings				Income (Loss)				Stock				Equity
Balance at January 1, 2009			6,765,790			$	67,658			$	23,002,472			$	33,177,358			$	(1,092,977	)		$	(26,179,054	)		$	28,975,457
Net loss			—				—				—				(699,968	)			—				—				(699,968	)
Hedge accounting effect of the interest rate swaps, net of deferred income tax expense of $18,424			—				—				—				—				40,343				—				40,343
Comprehensive loss			—				—				—				—				—				—				(659,625	)
Restricted stock			28,215				282				145,365				—				—				—				145,647
Share-based compensation			—				—				121,151				—				—				—				121,151
Balance at September 30, 2009			6,794,005			$	67,940			$	23,268,988			$	32,477,390			$	(1,052,634	)		$	(26,179,054	)		$	28,582,630

See notes to unaudited consolidated financial statements.

Core Molding Technologies, Inc. and Subsidiaries

		Nine Months Ended
		September 30,
		2009				2008
Cash flows from operating activities:
Net (loss) income		$	(699,968	)		$	4,268,341
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			2,858,169				2,683,383
Deferred income taxes			2,359				(42,162	)
Changes in fair value of swaps			(134,365	)			54,573
Share based compensation			266,797				254,154
Loss on disposal of assets			31,405				—
Gain on translation of foreign currency financial statements			(70,908	)			(26,077	)
Change in operating assets and liabilities:
Accounts receivable			1,043,611				(7,436,212	)
Inventories			2,962,286				380,083
Prepaid and other assets			(335,728	)			(172,882	)
Accounts payable			(2,295,039	)			(185,845	)
Accrued and other liabilities			(637,250	)			2,304,415
Postretirement benefits liability			743,967				1,078,013
Net cash provided by operating activities			3,735,336				3,159,784
Cash flows from investing activities:
Purchase of property, plant and equipment			(9,776,993	)			(7,794,907	)
Proceeds from sale of property, plant and equipment			18,000				—
Net cash used in investing activities			(9,758,993	)			(7,794,907	)
Cash flows from financing activities:
Financing costs for new credit agreement			(224,321	)			—
Gross repayments on line of credit			(34,389,061	)			(33,752,230	)
Gross borrowings on line of credit			33,195,096				39,691,140
Payments of principal on long term debt			(1,995,716	)			(1,394,287	)
Borrowing on construction loans			10,278,663				—
Proceeds from issuance of common stock			—				90,500
Net cash provided by financing activities			6,864,661				4,635,123
Net change in cash and cash equivalents			841,004				—
Cash and cash equivalents at beginning of period			—				—
Cash and cash equivalents at end of period		$	841,004			$	—
Cash paid for:
Interest		$	738,121			$	463,650
Income taxes (net of tax refunds)		$	275,884			$	1,561,622
Non Cash:
Fixed asset purchases in accounts payable		$	58,218			$	143,827

See notes to unaudited consolidated financial statements.

Core Molding Technologies, Inc. and Subsidiaries

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, 2009, the results of operations for the three and nine months ended September 30, 2009, and the cash flows for the nine months ended September 30, 2009. The “Notes to Consolidated Financial Statements,” which are contained in the 2008 Annual Report to Shareholders, should be read in conjunction with these consolidated financial statements.

Core Molding Technologies and its subsidiaries operate in the plastics market in a family of products known as “reinforced plastics”. Reinforced plastics are combinations of resins and reinforcing fibers (typically glass or carbon) that are molded to shape. Core Molding Technologies operates four production facilities in Columbus, Ohio; Batavia, Ohio; Gaffney, South Carolina; and Matamoros, Mexico. The Columbus and Gaffney facilities produce reinforced plastics by compression molding sheet molding compound (“SMC”) in a closed mold process. The Batavia facility produces reinforced plastic products by a robotic spray-up open mold process and resin transfer molding (“RTM”) closed mold process utilizing multiple insert tooling (“MIT”). The Matamoros facility utilizes spray-up and hand lay-up open mold processes as well as RTM and SMC closed mold processes to produce reinforced plastic products.

2. Net Income (Loss) per Common Share

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

The computation of basic and diluted net income (loss) per common share is as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Net income (loss)		$	827,021			$	1,687,927			$	(699,968	)		$	4,268,341
Weighted average common shares outstanding			6,794,005				6,748,590				6,768,467				6,740,225
Plus: dilutive options assumed exercised			85,600				550,225				—				550,225
Less: shares assumed repurchased with proceeds from exercise			(82,114	)			(283,037	)			—				(281,788	)
Plus: dilutive effect of nonvested restricted stock grants			41,324				32,742				43,048				45,495
Weighted average common and potentially issuable common shares outstanding			6,838,815				7,048,520				6,811,515				7,054,157
Basic net income (loss) per common share		$	0.12			$	0.25			$	(0.10	)		$	0.63
Diluted net income (loss) per common share		$	0.12			$	0.24			$	(0.10	)		$	0.61

At September 30, 2009 and 2008, 558,825 and 25,000, respectively, of outstanding stock options were not included in diluted earnings per share as they were anti-dilutive.

3. Sales

Core Molding Technologies currently has three major customers, Navistar, Inc. (“Navistar”) formerly known as International Truck & Engine Corporation, PACCAR, Inc. (“PACCAR”) and Daimler Trucks North America LLC (“Daimler”). Major customers are defined as customers whose sales individually consist of more than ten percent of total sales. The following table presents sales revenue for the above-mentioned customers for the three and nine months ended September 30, 2009 and 2008:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Navistar product sales		$	10,435,844			$	17,434,140			$	29,472,716			$	47,533,592
Navistar tooling sales			1,985,183				74,750				2,459,931				2,868,221
Total Navistar sales			12,421,027				17,508,890				31,932,647				50,401,813
PACCAR product sales			6,638,196				7,350,397				16,312,744				22,424,684
PACCAR tooling sales			281,200				380,818				488,020				840,964
Total PACCAR sales			6,919,396				7,731,215				16,800,764				23,265,648
Daimler product sales			1,055,855				1,969,850				2,808,550				6,063,210
Daimler tooling sales			1,790,805				16,500				1,790,805				101,650
Total Daimler sales			2,846,660				1,986,350				4,599,355				6,164,860
Other product sales			1,671,298				2,742,715				5,681,268				8,854,075
Other tooling sales			567,151				61,393				1,095,723				368,298
Total other sales			2,238,449				2,804,108				6,776,991				9,222,373
Total product sales			19,801,193				29,497,102				54,275,278				84,875,561
Total tooling sales			4,624,339				533,461				5,834,479				4,179,133
Total sales		$	24,425,532			$	30,030,563			$	60,109,757			$	89,054,694

4. Comprehensive Income (Loss)

Comprehensive income (loss) represents net income (loss) plus the results of certain equity changes not reflected in the Consolidated Statements of Operations. The components of comprehensive income (loss), net of tax, are as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Net income (loss)		$	827,021			$	1,687,927			$	(699,968	)		$	4,268,341
Hedge accounting effect of interest rate swaps, net of deferred income tax expense of $8,394 and $18,424 for the three and nine months ended September 30, 2009 and deferred income tax expense of $11,996 and $9,209 for the three and nine months ended September 30, 2008, respectively			19,729				23,286				40,343				17,877
Amortization of previously unrecognized postretirement plan loss, net of deferred income tax benefit of $11,361 and $34,083 for the three and nine months ended September 30, 2008, respectively.			—				20,639				—				61,916
Comprehensive income (loss)		$	846,750			$	1,731,852			$	(659,625	)		$	4,348,134

5. Postretirement Benefits

The components of expense for all of Core Molding Technologies’ postretirement benefit plans for the three and nine months ended September 30, 2009 and 2008 are as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Pension expense:
Defined contribution plan contributions		$	77,000			$	66,000			$	253,000			$	315,000
Multi-employer plan contributions			109,000				126,000				304,000				389,000
Total pension expense			186,000				192,000				557,000				704,000
Health and life insurance:
Service cost			152,000				159,000				456,000				477,000
Interest cost			237,000				263,000				711,000				788,000
Amortization of net loss			—				32,000				—				96,000
Net periodic benefit cost			389,000				454,000				1,167,000				1,361,000
Total postretirement benefits expense		$	575,000			$	646,000			$	1,724,000			$	2,065,000

Core Molding Technologies has made contributions of approximately $707,000 to pension plans and $423,000 of postretirement healthcare payments through September 30, 2009 and expects to make approximately $102,000 of pension payments through the remainder of 2009. The Company also expects to make approximately $97,000 of postretirement healthcare payments through the remainder of 2009, all of which are accrued at September 30, 2009.

6. Debt

Credit Agreement; Amendments

In December of 2008, the Company and its subsidiary, Corecomposites de Mexico, S. de R.L. de C.V., entered into a Credit Agreement (the “Credit Agreement”) with KeyBank National Association (“KeyBank”) as a lender, lead arranger, sole book runner and administrative agent. Under the Credit Agreement, KeyBank has made certain loans, which include (i) a $12,000,000 construction loan, (ii) an $8,000,000 construction loan, (iii) an $8,000,000 revolving credit commitment, (iv) a $2,678,563 term loan to refinance a previous term loan with KeyBank, and (v) a letter of credit in an undrawn face amount of $3,332,493 with respect to the Company’s existing industrial development revenue bond financing.

On March 31, 2009, the Company entered into the first amendment to the Credit Agreement with KeyBank (the “First Amendment”). Pursuant to the terms of the First Amendment, the lender agreed to modify certain terms of the Credit Agreement. These modifications included (1) modification of the definition of EBITDA to add back transition costs up to $3,200,000 associated with the transition and startup of the new production facility in Matamoros and add back certain non-cash compensation expense (2) modification of the fixed charge definition to exclude from consolidated interest expense any measure of ineffectiveness from interest rate swaps and amortization of loan origination and issuance costs (3) modification of the leverage ratio from 3.0x to 3.2x at June 30, 2009, 3.4x at September 30, 2009, and 3.2x at December 31, 2009 (4) increase the applicable margin for interest rates applicable to LIBOR loans effective March 31, 2009 to 400 basis points for both construction loans and the revolving line of credit; all rates decrease 25 basis points upon reaching a leverage ratio of less than 2.25 to 1.00 (5) increase the letter of credit fee on the Industrial Revenue Bond to 300 basis points (6) increase the 100 basis point LIBOR floor on the $8,000,000 construction loan and revolving line of credit to 150 basis points and (7) implement a 150 basis point LIBOR floor on the $12,000,000 construction loan.

On June 30, 2009, the Company entered into the second amendment (the “Second Amendment”) to the Credit Agreement, dated as of December 9, 2008, with KeyBank. Pursuant to the terms of the Second Amendment, the parties agreed to modify certain terms of the Credit Agreement. These modifications included (1) an increase in the applicable margin for interest rates applicable to LIBOR loans to 450 basis points, effective June 30, 2009, for both construction loans and the revolving line of credit; with all rates other than rates applicable to the term loan decreasing by 25 basis points upon reaching a leverage ratio of less than 2.25 to 1.00, (2) a decrease in the applicable margin for the interest rate applicable to the term loan to 200 basis points in excess of LIBOR or the Base Rate, (3) a change in the definition of consolidated EBITDA to add back non-cash post-retirement expenses minus retirement benefits paid in cash, (4) the deletion of the 150 basis point interest rate floor from the LIBOR rates applicable to the $8,000,000 and $12,000,000 construction loans and the revolving line of credit, and (5) the extension of the commitment for the revolving line of credit to April 30, 2011.

Bank Covenants

The Company is required to meet certain financial covenants included in the Credit Agreement with respect to leverage ratios, fixed charge ratios, capital expenditures as well as other customary affirmative and negative covenants. As of September 30, 2009, the Company was in compliance with its financial covenants associated with the loans made under the Credit Agreement as described above, as well as financial covenants contained in certain equipment leases to which the Company is a party.

Based upon the Company’s forecasts, which are primarily based on industry analysts’ estimates of 2009 and 2010 heavy and medium-duty truck production volumes as well as other assumptions management believes to be reasonable, management believes that the Company will be able to maintain compliance with the financial covenants set forth in the Credit Agreement, as amended by the First Amendment and Second Amendment, for the next 12 months. Management believes that cash flow from operating activities together with available borrowings under the Credit Agreement will be sufficient to meet Core Molding Technologies liquidity needs. However, if a material adverse change in the financial position of Core Molding Technologies should occur, or if actual sales or expenses are substantially different than what has been forecasted, Core Molding Technologies’ liquidity and ability to obtain further financing to fund future operating and capital requirements could be negatively impacted.

Interest Rate Swaps

In conjunction with its variable rate Industrial Revenue Bond (“IRB”) the Company has entered into an interest rate swap agreement, which is designated as a cash flow hedging instrument. Under this agreement, the Company pays a fixed rate of 4.89% to the counterparty and receives 76% of the 30-day commercial paper rate. The swap term and notional amount matches the payment schedule on the IRB with final maturity in April 2013. The difference paid or received varies as short-term interest rates change and is accrued and recognized as an adjustment to interest expense. While the Company is exposed to credit loss on its interest rate swap in the event of non-performance by the counterparty to the swap, management believes such non-performance is unlikely to occur given the financial resources of the counterparty. The effectiveness of the swap is assessed at each financial reporting date by comparing the commercial paper rate of the swap to the benchmark rate underlying the variable rate of the IRB. Any ineffectiveness of the swap is recorded as an adjustment to interest expense and historically has not been material. Interest income of $34,264 and interest expense of $54,574 was recorded for the nine months ended September 30, 2009 and 2008, respectively, related to ineffectiveness of the swap. The fair value of the swap was recorded as a liability of $228,049 and $322,108 as of September 30, 2009 and December 31, 2008, respectively. None of the changes in fair value of the interest rate swap have been excluded from the assessment of hedge effectiveness.

Effective January 1, 2004, the Company entered into an interest rate swap agreement, which is designated as a cash flow hedge of the Company’s bank term loan. Under this agreement, the Company pays a fixed rate of 5.75% to the counterparty and receives LIBOR plus 200 basis points. The swap term and notional amount match the payment schedule on the bank note payable with final maturity in January 2011. The interest rate swap is a highly effective hedge because the amount, benchmark interest rate index, term, and repricing dates of both the interest rate swap and the hedged variable interest cash flows are exactly the same. The fair value of the swap was recorded as a liability of $40,195 and $79,973 as of September 30, 2009 and December 31, 2008 respectively. While the Company is exposed to credit loss on its interest rate swap in the event of non-performance by the counterparty to the swap, management believes that such non-performance is unlikely to occur given the financial resources of the counterparty.

Effective December 18, 2008, the Company entered into an interest rate swap agreement that became effective May 1, 2009, which was designated as a cash flow hedge of the $12,000,000 construction loan. Under this agreement, the Company pays a fixed rate of 2.295% to the counterparty and receives LIBOR. Effective March 31, 2009, the interest terms in the Company’s Credit Agreement related to the $12,000,000 construction loan were amended. The Company calculated an effectiveness test for the interest rate swap after this amendment and determined that the interest rate swap was no longer highly effective. As a result, the Company discontinued the use of hedge accounting effective March 31, 2009 related to this swap, and began recording mark-to-market adjustments within interest expense in the Company’s Consolidated Statement of Operations. The pre-tax amount previously recognized in Accumulated Other Comprehensive Loss, totaling $145,684 as of March 31, 2009, is being amortized as an increase to interest expense of $1,145 per month, net of tax, over the remaining term of the interest rate swap agreement beginning June 2009. The fair value of the swap as of September 30, 2009 and December 31, 2008 was recorded as a liability of $41,003 and $100,300, respectively. The Company recorded a reduction to interest expense of $104,681 for a mark-to-market adjustment of swap fair value for the nine months ended September 30, 2009 related to this swap.

Line of Credit

At September 30, 2009, the Company had available under the Credit Agreement an $8,000,000 variable rate bank revolving line of credit scheduled to mature on April 30, 2011. The line of credit bears interest at LIBOR plus 450 basis points. The line of credit is collateralized by all of the Company’s assets. At September 30, 2009 there was no balance on the Company’s line of credit and at December 31, 2008, the line of credit had a balance of $1,194,000.

7. Income Taxes

Income tax benefit for the nine months ended September 30, 2009 is estimated to be approximately 30% of total loss before income taxes. For the nine months ended September 30, 2008, income taxes were estimated to be 34% of total income before income taxes. The change in the effective tax rate is primarily due to certain expenses being non-deductible in the Company’s Mexican subsidiary.

As of September 30, 2009, the Company had no liability for unrecognized tax positions.

The Company files U.S. federal and state income tax returns as well as income tax returns in Mexico. The Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2005 and is subject to income tax examinations by Mexican authorities since the Company began business in Mexico in 2001. The Company does not anticipate that its unrecognized tax benefits will significantly change within the next twelve months. The Company’s 2006 U.S. federal income tax return was previously subject to an audit by the Internal Revenue Service (“IRS”). The audit was completed in March 2009 with no findings and the Company received a statement of no change from the IRS. There are currently no income tax audits in process.

8. Stock Based Compensation

The Company has a Long Term Equity Incentive Plan (the “2006 Plan”), as approved by the Company’s stockholders in May 2006. This 2006 Plan replaced the Long Term Equity Incentive Plan (the “Original Plan”) as originally approved by the stockholders in May 1997 and as amended in May 2000. The 2006 Plan allows for grants to directors and key employees of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, performance shares, performance units and other incentive awards (“Stock Awards”) up to an aggregate of 3,000,000 awards, each representing a right to buy a share of Core Molding Technologies common stock. Stock Awards can be granted under the 2006 Plan through the earlier of December 31, 2015, or the date the maximum number of available awards under the 2006 Plan have been granted.

Stock Options

The following summarizes the activity relating to stock options under the plans mentioned above for the nine months ended September 30, 2009:

		Number				Weighted
		of				Average
		Shares				Exercise Price
Outstanding at December 31, 2008			570,225			$	3.30
Exercised			—				—
Granted			—				—
Forfeited			(11,400	)			3.21
Outstanding at September 30, 2009			558,825			$	3.30
Exercisable at September 30, 2009			487,115			$	3.29

The following summarizes the status of, and changes to, unvested options during the nine months ended September 30, 2009:

		Number				Weighted
		of				Average
		Shares				Exercise Price
Unvested at December 31, 2008			88,830			$	3.37
Granted			—				—
Vested			(17,120	)			3.24
Forfeited			—				—
Unvested at September 30, 2009			71,710			$	3.40

At September 30, 2009 and 2008, there was $78,884 and $170,208, respectively, of total unrecognized compensation expense, related to unvested stock options granted under the plans. Total compensation cost related to incentive stock options for the nine months ended September 30, 2009 and 2008 was $66,895 and, $93,220, respectively. This compensation expense is allocated such that $59,028 and $66,977 is included in selling, general and administrative expense and $7,867 and $26,243 is recorded in cost of sales for the nine months ended September 30, 2009 and 2008, respectively.

Restricted Stock

In May of 2006, Core Molding Technologies began granting shares of its common stock to certain directors, officers, and key managers in the form of unvested stock (“Restricted Stock”). These awards are recorded at the market value of Core Molding Technologies’ common stock on the date of issuance and amortized ratably as compensation expense over the applicable vesting period.

The following summarizes the status of Restricted Stock grants as of September 30, 2009 and changes during the nine months ended September 30, 2009:

						Weighted
		Number				Average
		of				Grant Date
		Shares				Fair Value
Unvested balance at December 31, 2008			85,106			$	7.01
Granted			150,210				2.56
Vested			(28,215	)			5.16
Forfeited			—				—
Unvested at September 30, 2009			207,101			$	4.04

As of September 30, 2009 and 2008, there was $480,269 and $421,954, respectively, of total unrecognized compensation expense related to Restricted Stock granted under the 2006 Plan. The total compensation costs related to Restricted Stock grants for the nine months ended September 30, 2009 and 2008 was $199,902 and $160,934, respectively, all of which was recorded to selling, general and administrative expense.

9. Fair Value of Financial Instruments

The Company’s financial instruments consist of long-term debt, interest rate swaps, accounts receivable, and accounts payable. The carrying amount of these financial instruments approximated their fair value.

In September 2006, the Financial Accounting Standards Board, (“FASB”) issued a standard to define fair value, establish a framework for measuring fair value and to expand disclosures about fair value measurements. This standard does not change the requirements to apply fair value in existing accounting standards. Under this standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. The standard clarifies that fair value should be based on the assumptions market participants would use when pricing the asset or liability.

To increase consistency and comparability in fair value measurements, this standard establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy disclosed is based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy are as follows:

	•		Level 1 inputs are quoted prices (unadjusted) in active markets for identical asset or liabilities that the company has the ability to access as of the reporting date.
	•		Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly through corroboration with observable market data.
	•		Level 3 inputs are unobservable inputs, such as internally developed pricing models for the asset or liability due to little or no market activity for the asset or liability.

The following table presents financial liabilities measured and recorded at fair value on the Company’s Consolidated Balance Sheet (unaudited) on a recurring basis and their level within the fair value hierarchy as of September 30, 2009 and December 31, 2008:

		Quoted Prices in				Significant
		Active Markets				Other				Significant
		for Identical				Observable				Unobservable				Balance as of
		Assets				Inputs				Inputs				September 30,
Recurring Fair Value Measurements		(Level 1)				(Level 2)				(Level 3)				2009
Liabilities
Interest rate swaps		$	—			$	309,247			$	—			$	309,247
Total		$	—			$	309,247			$	—			$	309,247
														December 31,
		(Level 1)				(Level 2)				(Level 3)					2008
Liabilities
Interest rate swaps		$	—			$	502,381			$	—			$	502,381
Total		$	—			$	502,381			$	—			$	502,381

There were no non-recurring fair value measurements for the quarter ended September 30, 2009.

In March 2008, the FASB issued a standard to amend and expand the disclosure requirements of derivative instruments with the intent to provide users of the financial statements with an enhanced understanding of how and why an entity uses derivative instruments, how these derivatives are accounted for and how the respective reporting entity’s financial statements are affected. This standard is effective for fiscal years and interim periods beginning after November 15, 2008, and earlier application is encouraged. The Company adopted this standard on January 1, 2009.

Core Molding Technologies derivative instruments located on the Consolidated Balance Sheets (unaudited) were as follows:

						September 30,				December 31,
						2009				2008
		Balance Sheet Location				Fair Value				Fair Value
Derivatives designated as hedging instruments
Interest rate risk activities		Interest rate swaps				$	268,244			$	502,381
Derivatives not designated as hedging instruments
Interest rate risk activities		Interest rate swap				$	41,003			$	—
Total Derivatives						$	309,247			$	502,381

The effect of derivative instruments on the Consolidated Statements of Operations (unaudited) was as follows:

Derivatives in Cash Flow Hedging Relationships

										Location of Gain (Loss)
Derivatives in		Amount of Gain (Loss)								Reclassified from				Amount of Gain (Loss)
Cash Flow Hedging		Recognized in OCI on								AOCI into Income				Reclassified from AOCI into
Relationships		Derivative (Effective Portion)								(Effective Portion)				Expense (Effective Portion)
		September 30,				September 30,								September 30,				September 30,
Three months ended		2009				2008								2009				2008
Interest rate swaps		$	27,363			$	(7,741	)		Interest expense, net				$	(50,705	)		$	(39,269	)
		September 30,				September 30,								September 30,				September 30,
Nine months ended			2009				2008								2009				2008
Interest rate swaps		$	88,453			$	(27,488	)		Interest expense, net				$	(159,745	)		$	(87,400	)

Location of Gain (Loss)

Amount of Gain (Loss) Recognized

Recognized in Income on

in Income of Derivative

Derivative (Ineffective Portion

(Ineffective Portion and Amount

Derivatives in Cash Flow Hedging

and Amount Excluded from

Excluded from Effectiveness

Relationships

Effectivness Testing)

Testing)

September 30,

September 30,

Three months ended

2009

2008

Interest rate swaps

Interest income (expense)

$

2,673

$

(43,022

)

September 30,

September 30,

Nine months ended

2009

2008

Interest rate swaps

Interest income (expense)

$

34,264

$

(54,574

)

Derivatives not designated as hedging instruments

						Amount of
						Realized/Unrealized Gain
Derivatives Not Designated as Hedging		Location of Gain (Loss) Recognized in				(Loss) Recognized in Income
Instruments		Income on Derivatives				on Derivatives
						September 30,				September 30,
Three months ended						2009				2008
Interest rate swap		Interest income (expense)				$	(120,769	)		$	—
						September 30,				September 30,
Nine months ended							2009				2008
Interest rate swap		Interest income (expense)				$	100,102			$	—

During first nine months of 2009 and 2008, the Company did not reclassify any amounts related to its cash flow hedges from accumulated other comprehensive loss to earnings due to the probability that certain forecasted transactions would not occur. As discussed in Note 6 above, the Company discontinued the use of hedge accounting for one of its interest rate swaps effective March 31, 2009, and began recording all mark-to-market adjustments related to this interest rate swap within interest expense in the Company’s Consolidated Statement of Operations. It is anticipated that during the next twelve months the expiration and settlement of cash flow hedge contracts along with the amortization of losses on discontinued hedges will result in income statement recognition of amounts currently classified in accumulated other comprehensive loss of approximately $13,736, net of taxes.

10. Recent Accounting Pronouncements

In June 2009, the FASB issued a standard regarding the FASB Accounting Standards Codification^TM (the “Codification”), and the hierarchy of generally accepted accounting principles, which replaces the standard previously issued by the FASB regarding the hierarchy of generally accepted accounting principles (“GAAP”) in the United States. This standard identifies the source of accounting principles and the framework for selecting the principles used in the preparation of financial statements of non-governmental entities that are presented in conformity with GAAP (the “GAAP hierarchy”). In addition, this standard establishes the Codification as the single source of authoritative GAAP recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. All guidance contained in the Codification carries an equal level of authority. This standard was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this standard during the third quarter of 2009, and its adoption did not have a significant impact on its financial statements.

In December 2008, the FASB issued a standard to amend guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This standard is effective for fiscal years ending after December 15, 2009 with earlier adoption permitted. The Company is currently reviewing the additional disclosure requirements to determine the impact on the Consolidated Financial Statements and Notes to Consolidated Financial Statements.

In February 2008, the FASB issued a standard, which delayed the effective date of accounting for all nonrecurring fair value measurements of non-financial assets and liabilities until fiscal years beginning after November 15, 2008. The Company has not recorded any nonrecurring fair value measurements of non-financial assets and liabilities since adopting this standard on January 1, 2009.

In April 2009, the FASB issued a standard to provide additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. This standard is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted. The adoption of this standard did not have a material impact on the Consolidated Financial Statements.

In May 2009, the FASB issued a standard for the disclosure of subsequent events. This standard does not require significant changes regarding recognition or disclosure of subsequent events, but does require disclosure of the date through which subsequent events have been evaluated for purposes of disclosure and accounting recognition. The standard was effective for financial statements issued after June 15, 2009. The adoption of this standard on April 1, 2009 did not have a material impact on the Consolidated Financial Statements. Management has performed an evaluation of subsequent events through November 13, 2009, which is the date the financial statements were issued.

In June 2009, the FASB issued a standard to amend certain requirements of accounting for consolidation of variable interest entities, to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on the first fiscal year that begins after November 15, 2009, with early adoption prohibited. The Company is currently reviewing the additional requirements to determine the impact on the Consolidated Financial Statements and Notes to Consolidated Financial Statements.

Part I — Financial Information

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. These uncertainties and factors could cause Core Molding Technologies’ actual results to differ materially from those matters expressed in or implied by such forward-looking statements.

Core Molding Technologies believes that the following factors, among others, could affect its future performance and cause actual results to differ materially from those expressed or implied by forward-looking statements made in this report: business conditions in the plastics, transportation, watercraft and commercial product industries; federal and state regulations (including engine emission regulations); general economic conditions in the countries in which Core Molding Technologies operates; dependence upon three major customers as the primary source of Core Molding Technologies’ sales revenues; recent efforts of Core Molding Technologies to expand its customer base; the actions of competitors; failure of Core Molding Technologies’ suppliers to perform their contractual obligations; the availability of raw materials; inflationary pressures; new technologies; regulatory matters; labor relations; the loss or inability of Core Molding Technologies to attract and retain key personnel; changes to federal, state and local environmental laws and regulations; the availability of capital; the ability of Core Molding Technologies to provide on-time delivery to customers, which may require additional shipping expenses to ensure on-time delivery or otherwise result in late fees; risk of cancellation or rescheduling of orders; inefficiencies related to the transfer and start up of Core Molding Technologies new Matamoros production facility; management’s decision to pursue new products or businesses which involve additional costs, risks or capital expenditures; and other risks identified from time-to-time in Core Molding Technologies other public documents on file with the Securities and Exchange Commission, including those described in Item 1A of the 2008 Annual Report to Shareholders on Form 10-K.

Overview

Core Molding Technologies is a compounder of sheet molding composite (“SMC”) and molder of fiberglass reinforced plastics. Core Molding Technologies produces high quality fiberglass reinforced molded products and SMC materials for varied markets, including light, medium, and heavy-duty trucks, automobiles and automotive aftermarkets, personal watercraft, and other commercial products. The demand for Core Molding Technologies’ products is affected by economic conditions in the United States, Canada and Mexico, the cyclicality of markets we serve, regulatory requirements, interest rates and other factors. Core Molding Technologies’ manufacturing operations have a significant fixed cost component. Accordingly, during periods of changing demands, the profitability of Core Molding Technologies’ operations may change proportionately more than revenues from operations.

On December 31, 1996, Core Molding Technologies acquired substantially all of the assets and assumed certain liabilities of Columbus Plastics, a wholly owned operating unit of Navistar’s truck manufacturing division since its formation in late 1980. Columbus Plastics, located in Columbus, Ohio, was a compounder and compression molder of SMC. In 1998 Core Molding Technologies began compression molding operations at its second facility in Gaffney, South Carolina, and in October 2001, Core Molding Technologies acquired certain assets of Airshield Corporation. As a result of this acquisition, Core Molding Technologies expanded its fiberglass molding capabilities to include the spray up, hand-lay-up open mold processes and resin transfer (“RTM”) closed mold process. In September 2004, Core Molding Technologies acquired substantially all the operating assets of Keystone Restyling Products, Inc., a privately held manufacturer and distributor of fiberglass reinforced products for the automotive-aftermarket industry. In August 2005, Core Molding Technologies acquired certain assets of the Cincinnati Fiberglass Division of Diversified Glass, Inc. a Batavia, Ohio-based, privately held manufacturer and distributor of fiberglass reinforced plastic components supplied primarily to the heavy-duty truck market. The Batavia, Ohio facility produces reinforced plastic products by a robotic spray-up open mold process and resin transfer molding (“RTM”) utilizing multiple insert tooling (“MIT”) closed mold process. In June of 2009, the Company completed construction and took full occupancy of its new 437,000 square foot production facility in Matamoros, Mexico that replaced its old leased facility.

Core Molding Technologies recorded a net loss for the nine months ended September 30, 2009 of $700,000 or $0.10 per basic and diluted share, compared with net income of $4,268,000, or $0.63 per basic and $0.61 per diluted share, for the nine months ended September 30, 2008. During the nine months ended September 30, 2009, the Company has recorded approximately $2,022,000 of expense for transfer and start-up costs associated with the construction of the Company’s new production facility in Mexico. The Company has also experienced a 36% decrease in product sales in the first nine months of 2009 as compared to the same period in 2008. While industry analysts are forecasting an increase in truck orders for the end of 2009 and into 2010, the Company recognizes that this expectation should be considered in light of the uncertain economy.

Results of Operations

Three Months Ended September 30, 2009, As Compared To Three Months Ended September 30, 2008

Net sales for the three months ended September 30, 2009, totaled $24,426,000, representing an approximate 19% decrease from the $30,031,000 reported for the three months ended September 30, 2008. Included in total sales were tooling project sales of $4,624,000 and $533,000 for the three months ended September 30, 2009 and September 30, 2008, respectively. Tooling project sales result from billings to customers for molds and assembly equipment built specifically for their products. These sales are sporadic in nature. Total product sales, excluding tooling project sales, were approximately 33% lower for the three months ended September 30, 2009, as compared to the same period a year ago. The primary reason for the decrease in product sales was the continued downturn in the North American medium and heavy-duty truck market caused by the overall economic conditions.

Sales to Navistar totaled $12,421,000 for the three months ended September 30, 2009, decreasing 29% from $17,509,000 in sales for the three months ended September 30, 2008. Included in total sales was $1,985,000 of tooling sales for the three months ended September 30, 2009 compared to $75,000 for the same three months in 2008. Product sales to Navistar decreased by 40% for the three months ended September 30, 2009 versus the same period of the prior year. The primary reasons for the decrease in product sales were the continued downturn in the North American medium and heavy-duty truck market as noted above as well as fewer orders for Navistar’s military product line.

Sales to PACCAR totaled $6,919,000 for the three months ended September 30, 2009, decreasing 11% from $7,731,000 in sales for the three months ended September 30, 2008. Included in total sales was $281,000 of tooling sales for the three months ended September 30, 2009 compared to $381,000 for the same three months in 2008. Product sales to PACCAR decreased by 10% for the three months ended September 30, 2009 as compared to the same period of the prior year. The decrease in total product sales was primarily due to market conditions as noted above. The decrease in product sales was partially offset by a shift in PACCAR’s production to truck models for which the Company provides higher content.

Sales to Daimler totaled $2,847,000 for the three months ended September 30, 2009, increasing 43% from $1,986,000 in sales for the three months ended September 30, 2008. Included in total sales was $1,791,000 of tooling sales for the three months ended September 30, 2009 compared to $17,000 for the same three months in 2008. Product sales to Daimler decreased by 46% for the three months ended September 30, 2009 as compared to the same period of the prior year. The decrease in total product sales was primarily due to market conditions as noted above.

Sales to other customers for the three months ended September 30, 2009 decreased 20% to $2,238,000 compared to $2,804,000 for the three months ended September 30, 2008. This decrease was primarily due to a decrease in product sales to a customer in the marine industry of approximately $445,000.

Gross margin was approximately 16% of sales for the three months ended September 30, 2009, compared with 20% for the three months ended September 30, 2008. The decrease in gross margin was due to lower overhead cost absorption as result of lower production volumes. Our manufacturing operations have significant overhead costs such as certain labor, energy, depreciation, lease expense and certain benefit costs, including post retirement healthcare costs, that do not change proportionately with production. Partially offsetting the decrease in gross margin was no profit sharing expense due to lower earnings.

Selling, general and administrative expenses (“SG&A”) totaled $2,131,000 for the three months ended September 30, 2009, decreasing from $3,186,000 for the three months ended September 30, 2008. The primary reasons for the decrease were no profit sharing expense for the three months ended September 30, 2009, as well as lower labor costs and professional fees due to cost reduction actions.

Net interest expense increased to $517,000 for the three months ended September 30, 2009, as compared to net interest expense of $179,000 for the three months ended September 30, 2008. Included in net interest expense for the three months ended September 30, 2009 is $118,000 of interest expense from ineffectiveness related to the Company’s interest rate swaps as compared to $43,000 of interest expense recorded for the same period ended September 30, 2008. The increase in interest expense was also attributed to additional borrowings used to finance the new manufacturing facility in Mexico. Interest expense related to these borrowings totaled $266,000 for the three months ended September 30, 2009. These amounts were partially offset due lower interest expense related to reductions on other debt due to regularly scheduled principal payments.

Income tax expense for the three months ended September 30, 2009, is estimated to be approximately 38% of total earnings before taxes. In the three months ended September 30, 2008, income taxes were estimated to be 37% of total earnings before taxes.

Core Molding Technologies recorded net income for the three months ended Sept 30, 2009 of $827,000 or $0.12 per basic and diluted share, compared with net income of $1,688,000, or $0.25 per basic and $0.24 per diluted share, for the three months ended September 30, 2008.

Nine Months Ended September 30, 2009, As Compared To Nine Months Ended September 30, 2008

Net sales for the nine months ended September 30, 2009, totaled $60,110,000, representing an approximate 33% decrease from the $89,055,000 reported for the nine months ended September 30, 2008. Included in total sales were tooling project sales of $5,834,000 and $4,179,000 for the nine months ended September 30, 2009 and September 30, 2008, respectively. Tooling project sales result from billings to customers for molds and assembly equipment built specifically for their products. These sales are sporadic in nature. Total product sales, excluding tooling project sales, decreased by 36% to $54,275,000 for the nine months ended September 30, 2009 as compared to $84,876,000 for the nine months ended September 30, 2008. The primary reason for the decrease in product sales was the continued downturn in the North American medium and heavy-duty truck market caused by the overall economic conditions that have existed over the past year.

Sales to Navistar totaled $31,933,000 for the nine months ended September 30, 2009, as compared to $50,402,000 for the nine months ended September 30, 2008. Included in total sales was $2,460,000 of tooling sales for the nine months ended September 30, 2009 compared to $2,868,000 for the nine months ended September 30, 2008. Total product sales to Navistar decreased by 38% for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. The primary reasons for the decrease in product sales were the continued downturn in the North American medium and heavy-duty truck market and the overall economic conditions as noted above as well as fewer orders for Navistar’s military product line.

Sales to PACCAR totaled $16,801,000 for the nine months ended September 30, 2009, as compared to $23,266,000 reported for the nine months ended September 30, 2008. Included in total sales was $488,000 of tooling sales for the nine months ended September 30, 2009 compared to $841,000 for the nine months ended September 30, 2008. Total product sales to PACCAR decreased by 27% for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. The decrease in total product sales was also due to the above noted market conditions.

Sales to Daimler totaled $4,599,000 for the nine months ended September 30, 2009, as compared to $6,165,000 reported for the nine months ended September 30, 2008. Included in total sales was $1,791,000 of tooling sales for the nine months ended September 30, 2009 compared to $102,000 for the nine months ended September 30, 2008. Total product sales to Daimler decreased by 54% for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. The decrease in total product sales was due to the above noted market conditions.

Sales to other customers for the nine months ended September 30, 2009, decreased approximately 27% to $6,777,000 from $9,222,000 for the nine months ended September 30, 2008. This decrease is primarily due to decreases in product sales for a customer in the marine industry of approximately $1,372,000 and decreases in demand for products manufactured for other North American medium and heavy-duty truck manufacturers of $1,344,000.

Gross margin was approximately 11% of sales for the nine months ended September 30, 2009, compared with 18% for the nine months ended September 30, 2008. The decrease in gross margin was due to lower overhead cost absorption which was due to lower production volumes. Our manufacturing operations have significant overhead costs such as certain labor, energy, depreciation, lease expense and certain benefit costs, including post retirement healthcare costs, that do not change proportionately with sales. Also impacting gross margin was approximately $1,804,000 of transition and start up costs incurred during the nine months ended September 30, 2009 associated with the Company’s new production facility in Matamoros Mexico. Partially offsetting the decrease in gross margin was no profit sharing expense due to lower earnings.

Selling, general and administrative expenses (“SG&A”) totaled $6,887,000 for the nine months ended September 30, 2009, decreasing from $8,994,000 for the nine months ended September 30, 2008. The primary reasons for the decrease were no profit sharing expense, for the nine months ended September 30, 2009, along with lower labor and benefit costs and lower professional fees as a result of the Company’s ongoing cost reduction actions. Partially offsetting these reductions was approximately $218,000 of transition and start-up costs incurred in 2009 associated with the Company’s new production facility in Mexico.

Net interest expense totaled $657,000 for the nine months ended September 30, 2009, as compared to net interest expense of $541,000 for the nine months ended September 30, 2008. Included in net interest expense for the nine months ended September 30, 2009 is income of $134,000 from ineffectiveness related to the Company’s interest rate swaps as compared to $55,000 of interest expense recorded for the same period ending September 30, 2008. Net interest expense was also impacted by additional borrowings related to the Company’s new facility in Mexico. The Company capitalized interest of approximately $167,000 in 2009 related to this facility in Mexico which was placed into service in June 2009.

Income tax benefit for the nine months ended September 30, 2009, is estimated to be approximately 30% of total earnings before taxes. In the nine months ended September 30, 2008 income taxes were estimated to be 34% of total earnings before taxes. The change in the effective tax rate is primarily due to certain expenses being non-deductible in the Company’s Mexican subsidiary.

The Company recorded a net loss for the nine months ended September 30, 2009 of $700,000 or $0.10 per basic and diluted share, compared with net income of $4,268,000, or $0.63 per basic and $0.61 per diluted share, for the nine months ended September 30, 2008.

Liquidity and Capital Resources

The Company’s primary sources of funds have been cash generated from operating activities and borrowings from third parties. Primary cash requirements are for operating expenses and capital expenditures.

As widely reported, financial markets in the United States, Europe and Asia continue to experience disruption including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. Governments have taken unprecedented actions intended to address extreme market conditions that include severely restricted credit and declines in real estate values. While currently these conditions have not precluded the Company’s ability to access credit markets and finance operations, there can be no assurance that there will not be a further deterioration in financial markets and confidence in major economies, which may impact the Company’s ability to borrow in the future.

Cash provided by operating activities for the nine months ended September 30, 2009 totaled $3,735,000. Net operating losses of $700,000 negatively impacted operating cash flows. Non-cash deductions of depreciation and amortization contributed $2,858,000 to operating cash flow. In addition, the increase in the postretirement healthcare benefits liability of $744,000 is not a current cash obligation, and this item will not be a cash obligation until additional employees retire and begin to utilize these benefits. Changes in working capital increased cash provided by operating activities by $738,000. Changes in working capital primarily relate to a decrease in inventory levels as well as lower accounts receivable due to decreased product sales and better collection efforts for the nine months ended September 30, 2009. These were offset by lower accounts payable and accrued balances as of September 30, 2009 as compared to December 31, 2008 which was also due to lower volumes.

Cash used in investing activities for the nine months ended September 30, 2009 was $9,759,000, primarily representing purchases related to the construction of the Company’s new production facility in Mexico. The Company currently plans an additional $400,000 of capital expenditures for the remainder of the 2009. These capital additions will be funded by cash from operations and borrowings from the Company’s available line of credit. The Company may also undertake other capital improvement projects in the future as deemed necessary and appropriate.

Financing activities contributed cash of $6,865,000. This increase is related to borrowings on the Company’s construction loans of $10,279,000. This amount is partially offset by net repayments on the line of credit of $1,194,000, and other loan payments of $1,996,000.

At September 30, 2009, the Company had cash on hand of $841,000 and an available line of credit of $8,000,000, with a scheduled maturity of April 30, 2011. At September 30, 2009, Core Molding Technologies had no outstanding borrowings on this line of credit.

The Company is required to meet certain financial covenants included in the Credit Agreement with respect to leverage ratios, fixed charge ratios, capital expenditures as well as other customary affirmative and negative covenants. As of September 30, 2009, the Company was in compliance with its financial debt covenants associated with the loans made under the Credit Agreement as described above, as well as financial covenants contained in certain equipment leases.

On March 31, 2009, the Company entered into the First Amendment to the Credit Agreement with KeyBank. Pursuant to the terms of the First Amendment, the lender agreed to modify certain terms of the Credit Agreement. These modifications included (1) modification of the definition of EBITDA to add back transition costs up to $3,200,000 associated with the transition and startup of the new production facility in Matamoros and add back certain non-cash compensation expense (2) modification of the fixed charge definition to exclude from consolidated interest expense any measure of ineffectiveness from interest rate swaps and amortization of loan origination and issuance costs (3) modification of the leverage ratio from 3.0x to 3.2x at June 30, 2009, 3.4x at September 30, 2009, and 3.2x at December 31, 2009 (4) increase the applicable margin for interest rates applicable to LIBOR loans effective March 31, 2009 to 400 basis points for both construction loans and the revolving line of credit; all rates decrease 25 basis points upon reaching a leverage ratio of less than 2.25 to 1.00 (5) increase the letter of credit fee on the Industrial Revenue Bond to 300 basis points (6) increase the 100 basis point LIBOR floor on the $8,000,000 construction loan and revolving line of credit to 150 basis points and (7) implement a 150 basis point LIBOR floor on the $12,000,000 construction loan.

On June 30, 2009, the Company entered into the Second Amendment to the Credit Agreement, dated as of December 9, 2008, with KeyBank. Pursuant to the terms of the Second Amendment, the parties agreed to modify certain terms of the Credit Agreement. These modifications included (1) an increase in the applicable margin for interest rates applicable to LIBOR loans to 450 basis points, effective June 30, 2009, for both construction loans and the revolving line of credit; with all rates other than rates applicable to the term loan decreasing by 25 basis points upon reaching a leverage ratio of less than 2.25 to 1.00, (2) a decrease in the applicable margin for the interest rate applicable to the term loan to 200 basis points in excess of the LIBOR or the Base Rate, (3) a change in the definition of consolidated EBITDA to add back non-cash post-retirement expenses minus retirement benefits paid in cash, (4) the deletion of the 150 basis point interest rate floor from the LIBOR rates applicable to the $8,000,000 and $12,000,000 construction loans and the revolving line of credit, and (5) the extension of the commitment for the revolving line of credit to April 30, 2011.

Based on the Company’s forecasts, which are primarily based on industry analysts’ estimates of 2009 and 2010 heavy and medium-duty truck production volumes as well as other assumptions management believes to be reasonable, management believes that the Company will be able to maintain compliance with the covenants as amended under the First Amendment and the Second Amendment to the Credit Agreement for the next 12 months. Management believes that cash flows from operating activities together with available borrowings under the Credit Agreement will be sufficient to meet Core Molding Technologies liquidity needs. However, if a material adverse change in the financial position of Core Molding Technologies should occur, or if actual sales or expenses are substantially different than what has been forecasted, Core Molding Technologies’ liquidity and ability to obtain further financing to fund future operating and capital requirements could be negatively impacted.

Recent Accounting Pronouncements

In June 2009, FASB issued a standard regarding the FASB Accounting Standards Codification^TM (the “Codification”), and the hierarchy of generally accepted accounting principles, which replaces the standard previously issued by the FASB regarding the hierarchy of generally accepted accounting principles (“GAAP”) in the United States. This standard identifies the source of accounting principles and the framework for selecting the principles used in the preparation of financial statements of non-governmental entities that are presented in conformity with GAAP (the “GAAP hierarchy”). In addition, this standard establishes the Codification as the single source of authoritative GAAP recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. All guidance contained in the Codification carries an equal level of authority. This standard was effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this standard during the third quarter of 2009 and its adoption did not have a significant impact on its financial statements.

In December 2008, the FASB issued a standard to amend guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. This standard is effective for fiscal years ending after December 15, 2009 with earlier adoption permitted. The Company is currently reviewing the additional disclosure requirements to determine the impact on the Consolidated Financial Statements and Notes to Consolidated Financial Statements.

In February 2008, the FASB issued a standard, which delayed the effective date of accounting for all nonrecurring fair value measurements of non-financial assets and liabilities until fiscal years beginning after November 15, 2008. The Company has not recorded any nonrecurring fair value measurements of non-financial assets and liabilities since adopting this standard on January 1, 2009.

In April 2009, the FASB issued a standard to provide additional guidance for estimating fair value when the volume and level of activity for the asset or liability have significantly decreased. This standard is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted. The adoption of this standard did not have a material impact on the Consolidated Financial Statements.

In May 2009, the FASB issued a standard for the disclosure of subsequent events. This standard does not require significant changes regarding recognition or disclosure of subsequent events, but does require disclosure of the date through which subsequent events have been evaluated for purposes of disclosure and accounting recognition. The standard was effective for financial statements issued after June 15, 2009. The adoption of this standard on April 1, 2009 did not have a material impact on the Consolidated Financial Statements. Management has performed an evaluation of subsequent events through November 13, 2009, which is the date the financial statements were issued.

In June 2009, the FASB issued a standard to amend certain requirements of accounting for consolidation of variable interest entities, to improve financial reporting by enterprises involved with variable interest entities and to provide more relevant and reliable information to users of financial statements. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on the first fiscal year that begins after November 15, 2009 with early adoption prohibited. The Company is currently reviewing the additional requirements to determine the impact on the Consolidated Financial Statements and Notes to Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations discuss the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to accounts receivable, inventories, post retirement benefits, and income taxes. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Accounts receivable allowances: Management maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The Company recorded an allowance for doubtful accounts of $109,000 at September 30, 2009 and at December 31, 2008. 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 has reduced accounts receivable for customer returns and deductions, discounts offered to customers and for price adjustments by $820,000 at September 30, 2009 and $740,000 at December 31, 2008.

Inventories: Inventories, which include material, labor and manufacturing overhead, are valued at the lower of cost or market. 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.

Goodwill and Long-Lived Assets: Management evaluates whether impairment exists for goodwill and long-lived assets annually on December 31 or at interim periods if an indicator of impairment exists. Should actual results differ from the assumptions used to determine impairment, additional provisions may be required. If there is a sustained downturn in the economy or the disruption of the financial and credit markets continues, demand for our products could fall below our current expectations and our forecasts of revenues and operating results could decline. Impairment charges of our goodwill or long-lived assets may be required in the future if our expected future cash flows decline. The Company has not recorded any impairment to goodwill or long-lived assets for the nine months ended September 30, 2009 or the year ended December 31, 2008.

Self-Insurance: The Company is self-insured with respect to most of its Columbus and Batavia, Ohio and Gaffney, South Carolina medical and dental claims and its Columbus and Batavia, Ohio workers’ compensation claims. The Company has recorded an estimated liability for self-insured medical and dental claims incurred but not reported and worker’s compensation claims incurred but not reported at September 30, 2009 and December 31, 2008 of $995,000 and $1,109,000, respectively.

Postretirement benefits: Management records an accrual for postretirement health care costs for benefits provided for certain employees under a plan sponsored by the Company. Should actual results differ from the assumptions used to determine the reserves, additional provisions may be required. In particular, increases in future healthcare costs above the assumptions could have an adverse effect on the Company’s operations. The effect of a change in healthcare costs is described in Note 10 of the Consolidated Notes to Financial Statements, which are contained in the 2008 Annual Report to Shareholders. The Company recorded a liability for postretirement healthcare benefits based on actuarially computed estimates of $16,622,000 at September 30, 2009 and $15,878,000 at December 31, 2008.

Revenue Recognition: Revenue from product sales is recognized at the time products are shipped and title transfers. Allowances for returned products and other credits are estimated and recorded as revenue is recognized. Tooling revenue is recognized when the customer approves the tool and accepts ownership. Progress billings and expenses are shown net as an asset or liability on the Company’s balance sheet. Tooling in progress can fluctuate significantly from period to period and is dependent upon the stage of tooling projects and the related billing and expense payment timetable for individual projects and therefore does not necessarily reflect projected income or loss from tooling projects. At September 30, 2009 the Company has recorded a net liability related to tooling in progress of $978,000, which represents approximately $3,019,000 of progress tooling billings and $2,041,000 of progress tooling expenses. At December 31, 2008 the Company had recorded a net liability related to tooling in progress of $212,000, which represents approximately $3,555,000 of progress tooling billings and $3,343,000 of progress tooling expenses.

Income taxes: The Consolidated Balance Sheet at September 30, 2009 and December 31, 2008, includes a deferred tax asset of $7,167,000 and $7,188,000, respectively. The Company performs analyses to evaluate the balance of deferred tax assets that will be realized. Such analyses are based on the premise that the Company is, and will continue to be, a going concern and that it is more likely than not that deferred tax benefits will be realized through the generation of future taxable income. For more information, refer to Note 9 in Core Molding Technologies 2008 Annual Report to Shareholders.

Part I — Financial Information

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 Commissions rules and forms.

There were no changes in internal control 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 control over financial reporting.

Part II — Other Information

Item 1.		Legal Proceedings

None

Item 1A.		Risk Factors

There have been no material changes in Core Molding Technologies’ risk factors from those previously disclosed in Core Molding Technologies 2008 Annual Report on Form 10-K.

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

None

Item 3.		Defaults Upon Senior Securities

None

Item 4.		Submission of Matters to a Vote of Security Holders

None

Item 5.		Other Information

None

Item 6.		Exhibits

See Index to Exhibits

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.

INDEX TO EXHIBITS

Exhibit No.				Description		Location
	2(a	)(1)		Asset Purchase Agreement Dated as of September 12, 1996, As amended October 31, 1996, between Navistar and RYMAC Mortgage Investment Corporation1		Incorporated by reference to Exhibit 2-A to Registration Statement on Form S-4 (Registration No. 333-15809)
	2(a	)(2)		Second Amendment to Asset Purchase Agreement dated December 16, 19961		Incorporated by reference to Exhibit 2(a)(2) to Annual Report on Form 10-K for the year-ended December 31, 2001
	2(b	)(1)		Agreement and Plan of Merger dated as of November 1, 1996, between Core Molding Technologies, Inc. and RYMAC Mortgage Investment Corporation		Incorporated by reference to Exhibit 2-B to Registration Statement on Form S-4 (Registration No. 333-15809)
	2(b	)(2)		First Amendment to Agreement and Plan of Merger dated as of December 27, 1996 Between Core Molding Technologies, Inc. and RYMAC Mortgage Investment Corporation		Incorporated by reference to Exhibit 2(b)(2) to Annual Report on Form 10-K for the year ended December 31, 2002
	2	(c)		Asset Purchase Agreement dated as of October 10, 2001, between Core Molding Technologies, Inc. and Airshield Corporation		Incorporated by reference to Exhibit 1 to Form 8-K filed October 31, 2001
	3(a	)(1)		Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996		Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-8 (Registration No. 333-29203)
	3(a	)(2)		Certificate of Amendment of Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on November 6, 1996		Incorporated by reference to Exhibit 4(b) to Registration Statement on Form S-8 (Registration No. 333-29203)
	3(a	)(3)		Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002		Incorporated by reference to Exhibit 3(a)(4) to Quarterly Report on Form 10-Q for the quarter ended September 30, 2002
	3(a	)(4)		Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on July 18, 2007		Incorporated by reference to Exhibit 3.1 to Form 8-k filed July 19, 2007
	3	(b)		Amended and Restated By-Laws of Core Molding Technologies, Inc.		Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed January 4, 2008

Exhibit No.				Description		Location
	4(a	)(1)		Certificate of Incorporation of Core Molding Technologies, Inc. as filed with the Secretary of State of Delaware on October 8, 1996		Incorporated by reference to Exhibit 4(a) to Registration Statement on Form S-8 (Registration No. 333-29203)
	4(a	)(2)		Certificate of Amendment of Certificate of Incorporation of Core Materials Corporation as filed with the Secretary of State of Delaware on November 6, 1996		Incorporated by reference to Exhibit 4(b) to Registration Statement on Form S-8 (Registration No. 333-29203)
	4(a	)(3)		Certificate of Amendment of Certificate of Incorporation as filed with the Secretary of State of Delaware on August 28, 2002		Incorporated by reference to Exhibit 3(a)(4) to Quarterly Report on Form 10-Q for the quarter ended September 30, 2002
	4(a	)(4)		Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as filed with the Secretary of State of Delaware on July 18, 2007		Incorporated by reference to Exhibit 3.1 to Form 8-K filed July 19, 2007
	4	(b)		Stockholder Rights Agreement dated as of July 18, 2007, between Core Molding Technologies, Inc. and American Stock Transfer & Trust Company		Incorporated by reference to Exhibit 4.1 to Current Report From 8-k filed July 19, 2007
	10	(a)		First Amendment Agreement, dated March 31, 2009, to the Credit Agreement dated December 9, 2008, among Core Molding Technologies, Inc., Core Composites de Mexico, S. De R.L. de C.V. and Keybank National Association.		Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed April 2, 2009
	10	(b)		Second Amendment Agreement, dated June 30, 2009, to the Credit Agreement dated December 9, 2008, among Core Molding Technologies, Inc., Core Composites de Mexico, S. De R.L. de C.V. and Keybank National Association.		Incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed July 2, 2009
	11			Computation of Net Income per Share		Exhibit 11 omitted because the required information is Included in Notes to Financial Statements
	31	(a)		Section 302 Certification by Kevin L. Barnett, President, Chief Executive Officer, and Director		Filed Herein
	31	(b)		Section 302 Certification by Herman F. Dick, Jr., Vice President, Secretary, Treasurer, and Chief Financial Officer		Filed Herein
	32	(a)		Certification of Kevin L. Barnett, Chief Executive Officer of Core Molding Technologies, Inc., dated November 13, 2009, pursuant to 18 U.S.C. Section 1350		Filed Herein
	32	(b)		Certification of Herman F. Dick, Jr., Chief Financial Officer of Core Molding Technologies, Inc., dated November 13, 2009, pursuant to 18 U.S.C. Section 1350		Filed Herein