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Unique Fabricating, Inc. Reports Third Quarter 2019 Financial Results

Nov 7, 2019

AUBURN HILLS, MI / ACCESSWIRE / November 7, 2019 / Unique Fabricating, Inc. ("Unique Fabricating" or the "Company") (NYSE American: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 market, today announced its financial results for the third quarter ended September 29, 2019.

Third Quarter 2019 Financial Results

  • Net sales of $38.5 million in the third quarter of 2019, compared to $42.1 million in the third quarter of 2018
  • $1.7 million inventory allowance and $1.0 million in restructuring charges primarily related to the closing of the Evansville, Indiana plant
  • Net loss of ($1.3) million, or $(0.13) per basic and diluted share in the third quarter of 2019 compared to net income of $0.6 million, or $0.06 per basic and diluted share in the third quarter of 2018
  • Adjusted EBITDA of $2.6 million in the third quarter of 2019, including $1.0 million in restructuring expense, compared to $3.4 million in the third quarter of 2018, including $0.2 million in restructuring expense (1)

(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.

As previously announced, Doug Cain joined Unique Fabricating as President and CEO on September 30th. In the six weeks since joining Unique Fabricating, he has visited all but two of the Company's manufacturing facilities and met personally with all levels of the organization. In addition, he held meetings with many of our stakeholders and service providers to make a comprehensive assessment of the business and the organization. Richard Baum, Chairman of Unique Fabricating stated; "We are delighted to have a person of Doug's caliber join the team. With his extensive experience in efficiently and effectively executing turnarounds and driving profitable growth, we are confident Unique Fabricating will return to its historic track record of successful top and bottom-line performance." When asked to comment on his new role, Cain stated "When I took on this role a short while ago, I knew that there was a clear match between the needs of the Company and my results driven leadership in high volume manufacturing operations. I am very pleased with the positive reactions from all involved to the changes underway. I believe our team has identified significant opportunities in many areas to drive operational and financial improvements across the entire organization."

Baum concluded "Our core automotive and industrial markets remain strong and our customer relationships are sound, even as these industries see continued volatility and end customer demand challenges. I am confident that we will continue to play a vital role in the auto industry efforts to reduce weight and noise while improving fuel efficiency and battery range in vehicles. "

Third Quarter Financial Summary

Net sales for the quarter ended September 29, 2019 decreased to $38.5 million, down 8.3%, or $3.5 million from $42.1 million during the same period last year. The decrease was primarily driven by the end of life of certain vehicle platforms, business loss associated with the on-going plant closure at Evansville, Indiana and the prior year plant closure of Ft. Smith, Arkansas, and the United Auto Workers (UAW) strike at General Motors. Gross profit for the quarter ended September 29, 2019 was $7.2 million, or 18.6% of total revenue, compared to $8.5 million, or 20.3% of net sales, for the corresponding period last year. The decrease in gross profit was primarily related to the decline in net sales combined with the inventory allowance of $1.7 million taken during the current quarter. Restructuring expense for the quarter ended September 29, 2019 of $1.0 million was primarily related to the previously announced closure of the Evansville plant and compares to $0.2 million in the same period last year. Net loss for the quarter ended September 29, 2019 was $(1.3) million, or $(0.13) per basic and diluted share, compared to net income of $0.6 million, or $0.06 per basic and diluted share, in the third quarter of 2018. The net loss for the period was primarily due to lower net sales coupled with the inventory allowance and restructuring expenses described above.

Adjusted EBITDA for the quarter ended September 29, 2019 was $2.6 million compared to $3.4 million in the third quarter of 2018. The decrease is primarily the result of lower sales and gross profit as a percentage of sales, as well as the inventory allowance and restructuring expenses described above. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.

Year to Date Financial Summary

Net sales for the first nine months of 2019 was $116.9 million, down 13.5%, or $18.2 million, from $135.1 million during the same period last year. The decrease was primarily driven by the end of life of certain vehicle platforms, business loss associated with the on-going plant closure at Evansville, Indiana and the prior year plant closure of Ft. Smith, Arkansas, and the UAW strike at a General Motors coupled with an overall decline in North American vehicle production of 1.3%. Gross profit for the first nine months of 2019 was $23.7 million, or 20.3% of net sales, compared to $30.8 million, or 22.8% of net sales, for the corresponding period last year. The decrease in gross profit was primarily related to the decline in net sales combined with the $1.7 million inventory allowance, while the decline in gross profit margin percentage was primarily the result of the $1.7 million inventory allowance recorded in cost of goods sold. Restructuring expense for the first nine months of 2019 was $1.8 million and is primarily related to the closing of the Evansville, Indiana plant, $0.9 million, and salaried restructuring activities, $0.9 million, during Q1 and Q2 2019 and compares to $1.2 million of restructuring activities related to the closure of Fort Smith, Arkansas and Port Huron, Michigan plants in the same period last year.

Inclusive of the $9.3 million in non-recurring charges, net loss for first nine months of 2019 was $(9.1) million, or $(0.93) per basic and diluted share, compared to net income of $3.9 million, or $0.40 per basic share and $0.39 diluted share, in the corresponding period last year. The net loss for the period was primarily due to the goodwill impairment, $6.7 million, and restructuring expense described above, as well as lower sales during the year resulting in a gross profit decline, combined with higher interest expense due to a non-cash unfavorable mark-to-market on an interest rate swap and higher interest rates.

Adjusted EBITDA for the first nine months of 2019 was $8.5 million compared to $13.9 million in the same period last year. The decrease is primarily a result of lower sales and the corresponding contribution margin combined with the inventory allowance. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.

Balance Sheet Summary

As of September 29, 2019, the Company had approximately $1.5 million in cash and cash equivalents, as compared to December 30, 2018 when the Company had $1.4 million in cash and cash equivalents. Total debt outstanding as of September 29, 2019 was $50.8 million compared to $55.9 million as of December 30, 2018, as the Company utilized operating cash to pay down outstanding debt during the year.

As of September 29, 2019, the Company had $10.0 million of available unused capacity, which includes a reduction for an outstanding letter of credit and a reduction in borrowing base capacity to $24.9 million under its Revolving Line of Credit.

Quarterly Results Conference Call

Unique Fabricating will host a conference call and live webcast to review the quarterly results and provide a corporate update today at 9 a.m. Eastern Time. To access the call, please dial 844-407-9500 (toll-free) or 862-298-0850 and if requested, reference conference ID 55678. 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 p.m. ET on November 7, 2019 until 9 a.m. ET on November 21, 2019 by dialing 877-481-4010 (United States) or 919-882-2331 (international) and using the pin number 55678.

About Unique Fabricating, Inc.

Unique Fabricating, Inc. (NYSE American: UFAB) engineers and manufactures components for customers in the automotive and industrial appliance markets. 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 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-cash stock awards, goodwill impairment, non-recurring integration expense, transaction fees related to our acquisitions, restructuring expenses, and one-time consulting and licensing ERP system implementation costs as we implement a new ERP system at all locations. We believe that Adjusted EBITDA is a useful performance measure 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 result 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 2019 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 December 30, 2018 filed with the Securities and Exchange Commission and in particular the Section entitled "Risk Factors", 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.

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

 
  Thirteen Weeks Ended September 29, 2019     Thirteen Weeks Ended September 30, 2018     Thirty-Nine Weeks Ended September 29, 2019     Thirty-Nine Weeks Ended September 30, 2018  
Net sales
  38,549,844     42,051,968     116,905,831     135,098,491  
Cost of sales
    31,375,421       33,528,457       93,219,296       104,305,811  
Gross profit
    7,174,423       8,523,511       23,686,535       30,792,680  
Selling, general, and administrative expenses
    6,538,005       7,226,204       21,234,250       22,571,692  
Impairment of goodwill
    -       -       6,760,397       -  
Restructuring expenses
    990,649       175,526       1,815,188       1,155,910  
Operating (loss) income
    (354,231 )     1,121,781       (6,123,300 )     7,065,078  
Non-operating (expense) income
                               
Other (expense) income, net
    (13,496 )     21,166       29,303       (43,167 )
Interest expense
    (1,148,700 )     (836,887 )     (3,580,434 )     (2,433,360 )
Total non-operating expense, net
    (1,162,196 )     (815,721 )     (3,551,131 )     (2,476,527 )
(Loss) income - before income taxes
    (1,516,427 )     306,060       (9,674,431 )     4,588,551  
Income tax (benefit) expense
    (252,270 )     (320,763 )     (597,862 )     698,830  
Net (loss) income
  (1,264,157 )   626,823     (9,076,569 )   3,889,721  
Net (loss) income per share
                               
Basic
  (0.13 )   0.06     (0.93 )   0.40  
Diluted
  (0.13 )   0.06     (0.93 )   0.39  
Cash dividends declared per share
  -     0.15     0.05     0.45  

UNIQUE FABRICATING, INC.
Condensed Consolidated Balance Sheets (Unaudited)

 
  September 29, 2019     December 30,
2018
 
Assets
           
Current assets
           
Cash and cash equivalents
  1,527,065     1,409,593  
Accounts receivable - net
    27,852,600       30,831,182  
Inventory - net
    14,532,549       16,285,507  
Prepaid expenses and other current assets:
               
Prepaid expenses and other
    2,606,478       2,511,486  
Refundable taxes
    1,405,034       983,073  
Total current assets
    47,923,726       52,020,841  
Property, plant, and equipment - net
    24,991,472       25,077,745  
Goodwill
    22,110,782       28,871,179  
Intangible assets- net
    12,598,169       15,568,383  
Other assets
               
Investments - at cost
    1,054,120       1,054,120  
Deposits and other assets
    225,057       198,854  
Deferred tax asset
    744,920       496,181  
Total assets
  109,648,246     123,287,303  
Liabilities and Stockholders' Equity
               
Current liabilities
               
Accounts payable
  12,805,366     11,465,222  
Current maturities of long-term debt
    2,947,498       3,350,000  
Income taxes payable
    -       40,634  
Accrued compensation
    2,329,549       2,848,282  
Other accrued liabilities
    1,731,984       1,432,109  
Total current liabilities
    19,814,397       19,136,247  
Long-term debt - net of current portion
    33,432,062       34,667,768  
Line of credit-net
    14,453,598       17,904,869  
Other long-term liabilities
    1,037,994       395,154  
Deferred tax liability
    1,470,413       2,295,105  
Total liabilities
    70,208,464       74,399,143  
Stockholders' Equity
               
Common stock, $0.001 par value - 15,000,000 shares authorized and 9,779,147 and 9,779,147 issued and outstanding at September 29, 2019 and December 30, 2018, respectively
    9,780       9,780  
Additional paid-in-capital
    45,998,996       45,881,848  
Retained earnings
    (6,568,994 )     2,996,532  
Total stockholders' equity
    39,439,782       48,888,160  
Total liabilities and stockholders' equity
  109,648,246     123,287,303  

UNIQUE FABRICATING, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)

 
  Thirty-Nine Weeks Ended September 29, 2019     Thirty-Nine Weeks Ended September 30, 2018  
Cash flows from operating activities
           
Net (loss) income
  (9,076,569 )   3,889,721  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Impairment of goodwill
    6,760,397       -  
Inventory allowance
    1,741,924       -  
Depreciation and amortization
    5,139,638       4,947,495  
Amortization of debt issuance costs
    133,112       106,609  
Loss on sale of assets
    4,959       5,179  
Bad debt adjustment
    191,363       (52,483 )
Loss (gain) on derivative instrument
    745,803       (5,645 )
Stock option expense
    117,148       98,621  
Deferred income taxes
    (1,073,431 )     27,797  
Changes in operating assets and liabilities that provided (used) cash:
               
Accounts receivable
    2,787,219       (3,902,083 )
Inventory
    11,034       (1,176,587 )
Prepaid expenses and other assets
    (646,119 )     (445,198 )
Accounts payable
    336,821       2,708,213  
Accrued and other liabilities
    (259,492 )     614,747  
Net cash provided by operating activities
    6,913,807       6,816,386  
Cash flows from investing activities
               
Purchases of property and equipment
    (2,129,658 )     (4,691,424 )
Proceeds from sale of property and equipment
    41,548       28,205  
Net cash used in investing activities
    (2,088,110 )     (4,663,219 )
Cash flows from financing activities
               
Net change in bank overdraft
    1,003,323       (364,849 )
Payments on term loans and note payable
    (3,012,500 )     (2,962,477 )
Proceeds from capital expenditure line
    1,300,000       -  
(Repayment) proceeds from revolving credit facilities, net
    (3,510,091 )     5,088,039  
Proceeds from exercise of stock options and warrants
    -       34,000  
Distribution of cash dividends
    (488,957 )     (4,395,904 )
Net cash used in financing activities
    (4,708,225 )     (2,601,191 )
Net increase (decrease) in cash and cash equivalents
    117,472       (448,024 )
Cash and cash equivalents - beginning of period
    1,409,593       1,430,937  
Cash and cash equivalents - end of period
  1,527,065     982,913  
Supplemental disclosure of cash flow Information - cash paid for
               
Interest
  3,442,309     2,304,312  
Income taxes
  356,964     1,178,482  

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

 
  Thirteen Weeks Ended September 29, 2019     Thirteen Weeks Ended September 30, 2018     Thirty-Nine Weeks Ended September 29, 2019     Thirty-Nine Weeks Ended September 30, 2018  
GAAP Net income
  (1,264,157 )   626,823     (9,076,569 )   3,889,721  
Plus: Interest expense, net
    1,148,702       836,887       3,580,436       2,433,360  
Plus: Income tax expense (benefit)
    (252,270 )     (320,763 )     (597,862 )     698,830  
Plus: Depreciation and amortization
    1,735,357       1,661,677       5,139,638       4,947,495  
Plus: Non-cash stock award
    18,735       32,681       117,146       98,621  
Plus: Non-recurring expenses
    14,333       127,981       82,664       127,981  
Plus: Transaction fees
    -       26,717       -       26,717  
Plus: Restructuring expenses
    990,649       175,526       1,815,188       1,155,910  
Plus: One-time consulting and licensing ERP system implementation costs
    254,829       202,572       649,505       522,256  
Plus: Goodwill impairment
    -       -       6,760,397       -  
Adjusted EBITDA
  2,646,178     3,370,101     8,470,543     13,900,891  

Investor Contact:

FNK IR
Rob Fink
646-809-0408
rob@fnkir.com