28 March 2002
28 March 2002
Core Materials Corporation announced results for the fourth quarter and year ended December 31, 2001.
For the year 2001, the net loss totalled $1,860,000, compared with net income of $715,000 in 2000. Net sales for 2001 decreased 18% to $68,365,000 from $83,545,000 for full year 2000. Excluding the effect of the acquisition, 2001 sales were off 22% from 2000.
""This was a tough year,"" said James L. Simonton, president and chief executive officer. ""As a result of aggressive cost containment measures, we managed a small profit in the first half of the year despite adverse conditions in all our markets. The third quarter is typically a slow sales period due to customer vacation shutdowns, but sales this year were even lower than we anticipated and remained weak through the fourth quarter. The second half of 2001 was the lowest six-month sales period we have ever experienced, even including the added revenue from the acquisition.""
The general economic weakness continued to depress demand for new medium- and heavy-duty trucks, resulting in lower product orders from Core Materials' truck customers. Sales to truck customers declined 30% from 2000, excluding the effect of the acquisition.
Demand for personal watercraft products, another important market, also declined sharply as consumers cut discretionary spending. Sales to Yamaha of components for personal watercraft decreased by 27% compared with 2000. The Company also experienced a $6 million drop in sales to an agricultural equipment manufacturer and a residential door manufacturer as a result of the previously announced re-sourcing of this business to other suppliers.
The sharp downturn in demand in the Company's primary markets overshadowed a number of positive developments during 2001. The Company launched two new truck programs for International and one each for Mack Trucks and Peterbilt. Three of these programs were launched in the second half amidst slack demand and so did not add much to 2001 revenues. The Company also launched a new program with an automotive Tier 1 supplier that added $10 million in revenue in 2001. In October, Core Materials acquired substantially all the assets of a privately held manufacturer of fiberglass reinforced plastic parts for the truck and automotive-aftermarket industries. The operation, newly incorporated as Core Composites Corporation, is based in Matamoros, Mexico.
""Integration of the Core Composites acquisition is proceeding as planned,"" said Simonton. ""The acquisition brought us a good book of business, expanded relationships within the truck industry, access to new markets and some valuable new manufacturing processes. We expect the acquisition to add approximately $17 million in sales in 2002. With this acquisition and our new relationship with Mack Trucks, Core Materials now serves every heavy-duty truck manufacturer in the country.""
For the year, gross margin as a percentage of sales declined from 14.3% in 2000 to 11.5% in 2001. The decrease was primarily due to fixed costs associated with excess capacity, production inefficiencies associated with reduced order flow, and new product startup issues, mostly affecting the Columbus plant. Gross margins improved at the Gaffney plant compared with last year due to improved productivity and a better product mix. Selling, general and administrative expenses declined 12%, 17% excluding the effect of the acquisition, from 2000 to 2001 primarily as a result of cost containment initiatives and reductions in personnel.
Simonton said the current forecast for 2002 anticipates continued softness in the markets served. ""We will continue to focus our efforts on our strategic growth initiatives and improvements in our operations to position ourselves for long-term growth over cycle of the markets we serve.""
Core Materials Corporation is a compounder of sheet molding composites (SMC) and molder of fiberglass reinforced plastics. The Company's processing capabilities include the compression molding of SMC, vacuum assisted resin infusion molding, spray up and lay up processes. The Company produces high quality fiberglass reinforced, molded products and SMC materials for varied markets, including medium and heavy duty trucks, automotive, recreational vehicles and other commercial products. Core Materials, with its headquarters in Columbus, Ohio, operates plants in Columbus, in Gaffney, South Carolina, and in Matamoros, Mexico.
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