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Unique Fabricating, Inc. Reports Third Quarter 2016 Financial Results

Revenue Increases 13.1% to $44.8 million; Diluted EPS of $0.25 vs. $0.12 in Q3 2015

Nov 15, 2016

AUBURN HILLS, Mich., Nov. 15, 2016 /PRNewswire/ -- Unique Fabricating, Inc. ("Unique" or the "Company")(NYSE MKT: UFAB), which engineers and manufactures multi-material foam, rubber, and plastic components utilized in noise, vibration and harshness management and air/water sealing applications for the automotive and industrial appliance market, today announced its financial results for the third quarter and nine months ended October 2, 2016.

Second Quarter Highlights

  • Revenue of $44.8 million in the third quarter 2016, up 13.1% compared to the $39.6 million in the third quarter of 2015
  • Net income of $2.5 million, or $0.26 and $0.25 per basic and diluted share, respectively, in the third quarter of 2016, compared to $1.1 million, or $0.12 per basic and diluted share, in the third quarter of 2015
  • Adjusted EBITDA of $5.9 million in the third quarter of 2016, including $1.5 million for non-cash charges specifically related to depreciation and amortization and non-cash stock awards, versus $4.3 million in the third quarter of 2016, including $1.2 million for non-cash charges specifically related to depreciation and amortization and non-cash stock awards(1)
  • Adjusted diluted earnings per share of $0.26 in the third quarter of 2016 versus $0.21 in the third quarter of 2015(1)
  • Declared a quarterly cash dividend of $0.15 per share payable on December 7, 2016 for stockholders of record as of November 30, 2016
  • Awarded a new program order by a major German OEM for its TwinShape® foam duct to be installed in a popular mid-size SUV beginning in the first quarter of 2017

(1) For a reconciliation of GAAP to Non-GAAP results for Adjusted EBITDA and Adjusted diluted earnings per share please refer to the financial tables below.

"We delivered strong financial results in the third quarter and advanced new product launches and programs  according to plan, that support our near- and long-term outlook," said John Weinhardt, Chief Executive Officer. "As expected, the investments we made to scale production and enhance labor productivity earlier in the year benefited our operations during the quarter and positively impacted our margins, a trend we anticipate continuing."

"We are increasingly encouraged by the opportunities we are seeing as a result of the integration of Intasco into our business," Weinhardt added. "During the third quarter we capitalized on cross-selling opportunities and launched new programs within our combined customer bases. These opportunities capitalize on the operating leverage inherent in our business model, which we believe will enable meaningful profitability expansion and increased free cash flow over time."

Weinhardt concluded, "Looking forward, we remain confident in our outlook and are reaffirming our full-year guidance. Our visibility is supported by an increasing number of new program launches and opportunities which have not been impacted by the slight automotive industry slowdown indicated from the reported industry production data."

Third Quarter Financial Summary

In the third quarter of 2016, Unique's results were for a 13 week quarter period ended October 2, 2016, compared to a 14 week quarter period ended October 4, 2015. As a result, the two periods may not be directly comparable.

Total revenue for the quarter ended October 2, 2016 increased to $44.8 million, up 13.1%, or $5.6 million from $39.6 million during the same period last year. The increase was driven by the acquisitions of Intasco which closed on April 29, 2016 and Great Lakes Foam Technologies, Inc. which closed on August 31, 2015, as well as from the introduction of new products and increased market penetration.

Gross profit for the quarter period ended October 2, 2016 was $11.3 million, or 25.1% of total revenue, compared to $9.3 million, or 23.5% of total revenues, for the corresponding period last year. The increase in gross margin as a percentage of sales was primarily due to favorable product mix, manufacturing efficiencies at existing facilities, and from beginning to capitalize on the investment we made in the second quarter of 2016 in equipment, labor and continuous improvement related costs in order to meet future demand.

Net income for the quarter ended October 2, 2016 was $2.5 million, or $0.26 and $0.25 per basic and diluted share, respectively, compared to $1.1 million, or $0.12 per basic and diluted share, in the third quarter of 2015. The increase in net income was primarily due to higher sales quarter over quarter, and higher gross profit as a percentage of sales described above.

Adjusted EBITDA for the quarter ended October 2, 2016 was $5.9 million compared to $4.3 million in the third quarter of 2015. The increase is primarily a result of earnings generated from higher sales. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.

Adjusted diluted earnings per share for the quarter ended October 2, 2016 was $0.26 compared to $0.21 in the third quarter of 2015. The increase is primarily a result of higher earnings, partially offset by large one-time addbacks in the third quarter of 2015 from the Great Lakes acquisition and IPO of the Company, and the increase in shares outstanding as a result of the Company's initial public offering in July 2015. The diluted weighted average shares outstanding increased from approximately 9.7 million in the third quarter last year to approximately 9.9 million this year. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.

Further non-cash purchase accounting impacts associated with the Company's acquisitions are detailed in the Purchase Accounting Impacts and Other Effects table below accompanying this release.

Year to Date Financial Summary

Total revenue for the first nine months of 2016 increased to $126.8 million, up 17.7%, or $19.1 million from $107.7 million during the same period last year. The increase was primarily related to the acquisitions of Intasco which closed on April 29, 2016 and Great Lakes Foam Technologies, Inc. which closed on August 31, 2015, as well as from the introduction of new products and increased market penetration.

Gross profit for the first nine months of 2016 was $29.9 million, or 23.6% of total revenues, compared to $25.7 million, or 23.8% of total revenues, in the comparable period last year. The decrease in gross margin as a percentage of  sales is mainly due to increases in health insurance claims paid under Unique's self-insured benefits plan, and increased depreciation and labor costs as the Company adds capacity and makes investments to meet expected future demand, and continuous improvement related costs that management expects to benefit Unique in future quarters.

Net income for the first nine months of 2016 was $5.0 million, or $0.51 per basic and  $0.50 per diluted share, respectively, compared to $4.0 million, or $0.52 per basic and $0.51 per diluted share, in the comparable period last year.

Adjusted EBITDA for the first nine months of 2016 was $14.7 million compared to $12.1 million in the same period last year. The increase is primarily a result of earnings generated from higher sales in this year, partially offset by the increases in operating expenses noted above. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.

Adjusted diluted earnings per share for the first nine months of 2016 was $0.61 compared to $0.62 in the same period last year. The decrease is primarily a result an increase in shares outstanding as a result of the Company's initial public offering in July 2015. The diluted weighted average shares outstanding increased from approximately 8.0 million in the first nine months last year to approximately 9.9 million this year. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.

Further non-cash purchase accounting impacts associated with the Company's acquisitions are detailed in the Purchase Accounting Impacts and Other Effects table below accompanying this release.

Balance Sheet Summary

As of October 2, 2016, the Company had approximately $1.5 million in cash and cash equivalents, as compared to January 3, 2016, when the Company had $727,000 in cash and cash equivalents.

Total debt outstanding as of October 2, 2016 was $53.2 million compared to $31.0 million as of January 3, 2016.

As of October 2, 2016, the Company had $7.4 million of available unused capacity, further subject to borrowing base restrictions and outstanding letters of credit, under its $30.0 million revolving credit facility.

2016 Outlook

Management reaffirms expectations for:

  • Full year 2016 revenue of $169 million to $172 million
  • Full year 2016 adjusted diluted earnings per share of $0.88 to $0.91
  • Full year 2016 adjusted EBITDA of $19.5 million to $20.0 million

Declaration of Dividends

Unique's Board of Directors approved payment of a quarterly cash dividend of $0.15 per share on November 15, 2016. The dividend will be paid on December 7, 2016 to stockholders of record as of the close of business on November 30, 2016.

Quarterly Results Conference Call

Unique Fabricating will host a conference call and live webcast to discuss these results today at 9:00 a.m. Eastern Time. To access the call, please dial 1-877-705-6003 (toll-free) or 1-201-493-6725 and reference conference ID 13649214. The conference call will also be webcast live on the Investor Relations section of the company's website at http://uniquefab.investorroom.com      

Following the conclusion of the live call, a replay of the webcast will be available on the Investor Relations section of the Company's website for at least 90 days. A telephonic replay of the conference call will also be available from 12:00PM ET on November 15, 2016 until 11:59PM ET on November 22, 2016 by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (international) and using the pin number 13649214.

About Unique Fabricating, Inc.

Unique Fabricating, Inc. (NYSE MKT: UFAB) engineers and manufactures components for customers in the automotive and industrial appliance market.  The Company's solutions are comprised of multi-material foam, rubber, and plastic components and utilized in noise, vibration and harshness (NVH) management, acoustical management, water and air sealing, decorative and other functional applications. Unique leverages proprietary manufacturing processes including die cutting, thermoforming, compression molding, fusion molding, and reaction injection molding to manufacture a wide range of products including air management products, heating ventilating and air conditioning (HVAC), seals, fender stuffers, air ducts, acoustical insulation, door water shields, gas tank pads, light gaskets, topper pads, mirror gaskets and glove box liners. The Company is headquartered in Auburn Hills, Michigan. For more information, visit http://www.uniquefab.com/.

About Non-GAAP Financial Measures

We present Adjusted EBITDA and Adjusted Diluted Earnings Per Share in this press release to provide a supplemental measure of our operating performance. We define Adjusted EBITDA as earnings before interest expense, income tax expense, depreciation and amortization expense, non-recurring integration expense, non-cash stock awards, transaction fees related to our acquisitions, and restructuring expenses. We calculate Adjusted Diluted Earnings Per Share based upon earnings before non-cash stock awards, non-recurring expenses, transaction fees, and restructuring expenses, including the tax impact associated with these adjusting items. We believe that Adjusted EBITDA and Adjusted Diluted Earnings Per Share are useful performance measures used by us to facilitate a comparison of our operating performance and earnings on a consistent basis from period-to-period and to provide for a more complete understanding of factors and trends affecting our business than measures under generally accepted accounting principles in the United States of America (GAAP) can provide alone. Our board and management also use Adjusted EBITDA as one of the primary methods for planning and forecasting overall expected performance and for evaluating on a quarterly and annual basis actual results against such expectations, and as a performance evaluation metric in determining achievement of certain compensation programs and plans for Company management. In addition, the financial covenants in our senior secured credit facility are based on Adjusted EBITDA, as presented in this press release, subject to dollar limitations on certain adjustments and certain other addbacks permitted by our senior secured credit facility. These non-GAAP financial measures may have limitations as analytical tools, and these measures should not be considered in isolation as a substitute for analysis of Unique Fabricating's results as reported under GAAP.

Safe Harbor Statement

Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. Forward-looking statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause the Company's or the Company's industry's actual results, levels of activity, performance or achievements including statements relating to the Company's 2016 Outlook to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by this press release.  Words such as "may," "will," "could," "would," "should," "anticipate," "predict," "potential," "continue," "expects," "intends," "plans," "projects," "believes," "estimates," "outlook," and similar expressions are used to identify these forward looking statements.  Such forward-looking statements include statements regarding, among other things, our expectations about revenue, Adjusted EBITDA, and adjusted diluted earnings per share.  All such forward-looking statements are based on management's present expectations and are subject to certain factors, risks and uncertainties that may cause actual results, outcome of events, timing and performance to differ materially from those expressed or implied by such statements.  These risks and uncertainties include, but are not limited to, those discussed in our Annual Report on Form 10-K, for the year ended January 3, 2016 filed with the Securities and Exchange Commission and in particular the Section entitled "Risk Factors" in the Annual Report on Form 10-K, as well as any updates to those risk factors filed from time to time in our periodic and current reports filed with the Securities and Exchange Commission.  All statements contained in this press release are made as of the date of this press release, and Unique Fabricating does not intend to update this information, unless required by law.  Reference to the Company's website above does not constitute incorporation of any of the information thereon into this press release.

Investor Contact:
Hayden IR
Brett Maas/Rob Fink
646-536-7331/646-415-8972
ufab@haydenir.com

 

UNIQUE FABRICATING, INC.
Consolidated Statements of Operations (Unaudited)

 
 

Thirteen Weeks
Ended October 2,
2016

 

Fourteen Weeks
Ended October 4,
2015

 

Thirty-Nine
Weeks Ended
October 2, 2016

 

Thirty-Nine Weeks
Ended October 4,
2015

Net sales

$

44,753,565

   

$

39,579,502

   

$

126,784,289

   

$

107,682,183

 

Cost of sales

33,503,217

   

30,280,834

   

96,842,757

   

82,031,708

 

Gross profit

11,250,348

   

9,298,668

   

29,941,532

   

25,650,475

 

Selling, general, and administrative expenses

6,949,034

   

6,934,785

   

20,668,621

   

17,267,099

 

Restructuring expenses

       

35,054

   

 

Operating income

4,301,314

   

2,363,883

   

9,237,857

   

8,383,376

 

Non-operating income (expense)

             

Investment income

   

   

   

230

 

Other income (expense), net

(1,511)

   

4,468

   

(25,203)

   

18,789

 

Interest expense

(525,167)

   

(724,414)

   

(1,739,243)

   

(2,437,103)

 

Total non-operating expense, net

(526,678)

   

(719,946)

   

(1,764,446)

   

(2,418,084)

 

Income – before income taxes

3,774,636

   

1,643,937

   

7,473,411

   

5,965,292

 

Income tax expense

1,254,437

   

504,846

   

2,520,389

   

1,941,564

 

Net income

$

2,520,199

   

$

1,139,091

   

$

4,953,022

   

$

4,023,728

 

Net income per share

             

Basic

$

0.26

   

$

0.12

   

$

0.51

   

$

0.52

 

Diluted

$

0.25

   

$

0.12

   

$

0.50

   

$

0.51

 

Cash dividends declared per share

$

0.15

   

$

0.15

   

$

0.45

   

$

0.15

 
 

 

UNIQUE FABRICATING, INC.
Consolidated Balance Sheets

 
 

(Unaudited)

   
 

October 2,
2016

 

January 3,
2016

Assets

     

Current assets

     

Cash and cash equivalents

$

1,505,093

   

$

726,898

 

Accounts receivable – net

29,573,080

   

20,480,186

 

Inventory – net

16,801,522

   

14,585,611

 

Prepaid expenses and other current assets:

     

Prepaid expenses and other

1,700,320

   

1,494,697

 

Refundable taxes

84,340

   

55,477

 

Deferred tax asset

   

1,063,721

 

Assets held for sale

2,033,327

   

2,033,327

 

Total current assets

51,697,682

   

40,439,917

 

Property, plant, and equipment – net

20,754,580

   

18,761,178

 

Goodwill

28,871,179

   

19,213,958

 

Intangible assets– net

24,789,481

   

20,139,213

 

Other assets

     

Investments – at cost

1,054,120

   

1,054,120

 

Deposits and other assets

154,971

   

120,742

 

Deferred tax asset

193,625

   

 

Total assets

$

127,515,638

   

$

99,729,128

 

Liabilities and Stockholders' Equity

     

Current liabilities

     

Accounts payable

$

15,606,440

   

$

11,430,662

 

Current maturities of long-term debt

2,410,303

   

2,519,069

 

Accrued compensation

3,229,512

   

2,283,833

 

Other accrued liabilities

1,015,236

   

1,159,028

 

 Other liabilities

135,307

   

 

Total current liabilities

22,396,798

   

17,392,592

 

Long-term debt – net of current portion

28,613,415

   

13,906,993

 

Line of credit-net

22,184,397

   

14,595,093

 

Other long-term liabilities

     

Deferred tax liability

4,492,570

   

5,774,452

 

Other liabilities

94,970

   

46,874

 

Total liabilities

77,782,150

   

51,716,004

 

Stockholders' Equity

     

Common stock, $0.001 par value – 15,000,000 shares authorized and 9,711,465 and 9,591,860 issued and outstanding at October 2, 2016 and January 3, 2016, respectively

9,711

   

9,592

 

Additional paid-in-capital

45,473,517

   

44,352,188

 

Retained earnings

4,250,260

   

3,651,344

 

Total stockholders' equity

49,733,488

   

48,013,124

 

Total liabilities and stockholders' equity

$

127,515,638

   

$

99,729,128

 
 

 

UNIQUE FABRICATING, INC.
Consolidated Condensed Statements of Cash Flows

 
 

Thirty-Nine Weeks
Ended October 2, 2016

 

Thirty-Nine Weeks
Ended October 4, 2015

Cash flows from operating activities

     

Net income

$

4,953,022

   

$

4,023,728

 

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation and amortization

3,996,472

   

2,762,624

 

Amortization of debt issuance costs

94,537

   

216,930

 

Loss on sale of assets

13,867

   

39,712

 

Loss on extinguishment of debt

60,202

   

386,552

 

Bad debt expense

(168,830)

   

32,893

 

Loss on derivative instrument

183,402

   

1,520

 

Stock option expense

126,733

   

160,764

 

Deferred income taxes

(509,408)

   

(428,118)

 

Changes in operating assets and liabilities that provided (used) cash:

     

Accounts receivable

(6,777,982)

   

(4,226,320)

 

Inventory

269,870

   

(3,359,815)

 

Prepaid expenses and other assets

(194,521)

   

(444,421)

 

Accounts payable

3,186,895

   

2,333,067

 

Accrued and other liabilities

209,308

   

440,365

 

Net cash provided by operating activities

5,443,567

   

1,939,481

 

Cash flows from investing activities

     

Purchases of property and equipment

(2,443,251)

   

(2,988,278)

 

Proceeds from sale of property and equipment

12,181

   

51,347

 

Acquisition of Intasco, net of cash acquired

(21,030,795)

   

 

Acquisition of Great Lakes Foam Technologies, Inc.

   

(11,819,991)

 

Working capital adjustment from acquisition of Intasco

212,823

   

 

Net cash used in investing activities

(23,249,042)

   

(14,756,922)

 

Cash flows from financing activities

     

Net change in bank overdraft

846,220

   

273,152

 

Proceeds from debt

32,000,000

   

 

Payments on debt

(1,839,212)

   

(14,646,409)

 

Debt issuance costs

(514,441)

   

 

Proceeds from revolving credit facilities

7,716,220

   

6,715,347

 

Pay-off of old senior credit facility term debt

(15,375,000)

   

 

Post acquisition payments for Unique Fabricating

   

(755,018)

 

Proceeds from the issuance of common stock pursuant to initial public offering

   

25,673,750

 

Payment of initial public offering costs

   

(3,439,836)

 

Proceeds from exercise of stock options and warrants

103,989

   

397,070

 

Distribution of cash dividends

(4,354,106)

   

(1,438,938)

 

Net cash provided by financing activities

18,583,670

   

12,779,118

 

Net increase (decrease) in cash and cash equivalents

778,195

   

(38,323)

 

Cash and cash equivalents – beginning of period

726,898

   

756,044

 

Cash and cash equivalents – end of period

$

1,505,093

   

$

717,721

 

Supplemental disclosure of cash flow Information – cash paid for

     

Interest

$

1,304,890

   

$

2,260,430

 

Income taxes

$

2,519,010

   

$

1,247,143

 

Supplemental disclosure of cash flow Information – non cash activities for:

     

Common stock issued for purchase of Intasco USA, Inc.

$

890,726

   

$

 

Accretion on redeemable common stock

$

   

$

1,364,031

 

Accounts payable on working capital for Great Lakes Foam Technologies, Inc. acquisition

$

   

$

127,401

 
 

 

UNIQUE FABRICATING, INC.
Reconciliation of GAAP Net Income to Adjusted EBITDA

 
 

Thirteen Weeks
Ended October 2,
2016

 

Fourteen Weeks
Ended October 4,
2015

 

Thirty-Nine
Weeks Ended
October 2, 2016

 

Thirty-Nine
Weeks Ended
October 4, 2015

GAAP Net income

$

2,520,199

   

$

1,139,091

   

$

4,953,022

   

$

4,023,728

 

Plus: Interest expense, net

525,167

   

724,414

   

1,739,243

   

2,437,103

 

Plus: Income tax expense

1,254,437

   

504,846

   

2,520,389

   

1,941,564

 

Plus: Depreciation and amortization

1,488,722

   

1,023,083

   

3,996,472

   

2,762,624

 

Plus: Non-cash stock award

40,736

   

148,455

   

126,733

   

160,764

 

Plus: Non-recurring integration expenses

35,744

   

32,187

   

104,913

   

32,187

 

Plus: Non-recurring step-up of inventory basis to fair market value

39,352

   

90,043

   

318,518

   

90,043

 

Plus: Non-recurring IPO costs

   

230,000

   

   

230,000

 

Plus: Transaction fees

10,437

   

415,849

   

858,688

   

415,849

 

Plus: Restructuring expenses

   

   

35,054

   

 

Adjusted EBITDA

$

5,914,794

   

$

4,307,968

   

$

14,653,032

   

$

12,093,862

 
 

 

UNIQUE FABRICATING, INC.
Reconciliation of GAAP Net Income to Adjusted Diluted Earnings Per Share

 
 

Thirteen Weeks
Ended October 2,
2016

 

Fourteen Weeks
Ended October 4,
2015

 

Thirty-Nine
Weeks Ended
October 2, 2016

 

Thirty-Nine
Weeks Ended
October 4, 2015

GAAP Net income

$

2,520,199

   

$

1,139,091

   

$

4,953,022

   

$

4,023,728

 

Plus: Non-cash stock award

40,736

   

148,455

   

126,733

   

160,764

 

Plus: Non-recurring integration expenses

35,744

   

32,187

   

104,913

   

32,187

 

Plus: Non-recurring step-up of inventory basis to fair market value

39,352

   

90,043

   

318,518

   

90,043

 

Plus: Non-recurring IPO costs

   

230,000

   

   

230,000

 

Plus: Transaction fees

10,437

   

415,849

   

858,688

   

415,849

 

Plus: Debt extinguishment costs

   

386,552

   

60,202

   

386,552

 

Plus: Restructuring expenses

   

   

35,054

   

 

Less: Tax impact

(39,531)

   

(400,172)

   

(437,502)

   

(428,131)

 

Adjusted Net income

$

2,606,937

   

$

2,042,005

   

$

6,019,628

   

$

4,910,992

 
               

Diluted weighted average shares outstanding

9,918,956

   

9,662,118

   

9,885,949

   

7,959,948

 

Net income per share

             

Diluted - GAAP

$

0.25

   

$

0.12

   

$

0.50

   

$

0.51

 

Diluted - Adjusted

$

0.26

   

$

0.21

   

$

0.61

   

$

0.62

 
 

 

UNIQUE FABRICATING, INC.
Purchase Accounting Impacts and Other Effects

 
 

Thirteen Weeks
Ended October 2,
2016

 

Fourteen Weeks 
Ended October 4,
2015

 

Thirty-Nine
Weeks Ended
October 2, 2016

 

Thirty-Nine
Weeks Ended
October 4, 2015

Non-cash purchase accounting impacts

             

Customer relationships amortization

$

837,520

   

$

552,339

   

$

2,208,223

   

$

1,462,837

 

Trade name amortization

72,926

   

59,945

   

196,204

   

166,991

 

Non-compete amortization

44,162

   

65,554

   

132,486

   

152,285

 

Unpatented technology

76,529

   

   

129,511

   

 

Less: Tax impact

(322,481)

   

(208,008)

   

(861,745)

   

(576,833)

 

Net income effect

$

708,656

   

$

469,830

   

$

1,804,679

   

$

1,205,280

 
               

Net income per share impact

             

GAAP - Basic

$

0.07

   

$

0.05

   

$

0.19

   

$

0.16

 

GAAP - Diluted

$

0.07

   

$

0.05

   

$

0.18

   

$

0.15

 
 

 

SOURCE Unique Fabricating, Inc.


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