Unique Fabricating, Inc. Reports Third Quarter 2018 Financial Results

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SOURCE Unique Fabricating, Inc.

Company Revises Full-Year Revenue and Profitability Guidance to Account for Current Market Outlook

AUBURN HILLS, Mich., Nov. 9, 2018 /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 ended September 30, 2018.

Third Quarter 2018 Financial Highlights

  • Revenue of $42.1 million in the third quarter of 2018, up 2.0% compared to $41.2 million in the third quarter of 2017
  • Net income of $0.6 million, or $0.06 per basic and diluted share in the third quarter of 2018, compared to $0.7 million, or $0.07 per basic and diluted share in the third quarter of 2017
  • Adjusted EBITDA of $3.4 million in the third quarter of 2018, including $1.7 million for non-cash charges specifically related to depreciation and amortization and non-cash stock awards, compared to $3.7 million in the third quarter of 2017, including $1.6 million for non-cash charges specifically related to depreciation and amortization and non-cash stock awards(1)
  • Adjusted diluted earnings per share of $0.11 in the third quarter of 2018 versus $0.10 in the third quarter of 2017(1)
  • Declared a quarterly cash dividend of $0.15 per share payable on December 7, 2018 for stockholders of record as of November 30, 2018

(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.

“Third quarter automotive production remained flat versus an industry projected increase, resulting in a shortfall in our revenues versus expectations,” commented John Weinhardt, Chief Executive Officer. “Despite this challenge, we still delivered revenue growth in the third quarter. A positive trend for Unique is the continued change in new vehicle mix, from traditional passenger cars to light trucks. We continue to grow our presence in this segment as larger vehicles offer multiple opportunities for our products. We secured several new awards on SUV’s and pickup trucks in the third quarter that support this trend.”

“In addition to enhancing our vehicle mix, we have continued to focus on improving our operational efficiencies and maximizing the synergies between our production facilities,” added Weinhardt. “We have added significant depth to our continuous improvement efforts and identifying centers of excellence for our various capabilities. This will help us better leverage our geographic footprint and strengthen our key core competencies. We believe the combined emphasis on operational excellence and improved vehicle mix will allow us to better respond to changing market conditions.”

“Given the continued flat to modestly declining independent industry forecasts for automotive vehicle production, coupled with our expectations for the fourth quarter, we are revising our guidance for the full year 2018,” continued Weinhardt. “While we expect to continue to grow in excess of the overall automotive market, industry forecasts point to a fourth quarter that will not replace lower than projected underlying vehicle sales experienced in the first half of the year.  We remain optimistic about our long-term outlook, given the new program launches we have under contract and the level of new business quote activity we are engaged in with both existing and new customers. Our pipeline of new program launches builds on the solid foundation for our business as we look beyond 2018.”

“The shift from combustion engine to battery electric vehicles continues to accelerate, and we are well-positioned and actively engaged with customers to be a primary source for acoustic content for new models,” concluded Weinhardt. “We were recently awarded a new program for our TwinShape ducts by a start-up producer of battery electric vehicles that has successfully been demonstrating concept vehicles and is poised to launch into production late next year and accelerate as we enter 2020. Electric vehicles typically include more acoustic content than traditional vehicles, which plays directly to our offerings. We are encouraged by the trends we are seeing in this segment of the market and the opportunities it represents for our business.”

Third Quarter Financial Summary

Total revenue for the quarter ended September 30, 2018 increased to $42.1 million, up 2.0%, or $0.9 million from $41.2 million during the same period last year. The increase was primarily driven by an increase in North American auto production of 4.2% quarter over quarter.

Gross profit for the quarter ended September 30, 2018 was $8.5 million, or 20.3% of total revenue, compared to $9.0 million, or 21.8% of total revenues, for the corresponding period last year. The decrease in gross profit was primarily related to short-term operational inefficiencies that arose when Unique shifted production from its Ft. Smith, Arkansas facility to other Company facilities, as well as from excessive labor turnover in some production facilities due to tight labor markets.

Restructuring expense for the quarter ended September 30, 2018 of $0.2 million was related to the previously announced manufacturing facility closure in Fort Smith, Arkansas and compares to $0 in the same period last year.

Net income for the quarter ended September 30, 2018 was $0.6 million, or $0.06 per basic and diluted share, compared to $0.7 million, or $0.07 per basic and diluted share, in the third quarter of 2017. The decrease in net income was primarily due to the gross profit decreases and the restructuring expenses described above, partially offset by higher sales.

Adjusted EBITDA for the quarter ended September 30, 2018 was $3.4 million compared to $3.7 million in the third quarter of 2017. The decrease is primarily a result of the lower margins as a percentage of sales described above, offset somewhat by 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 September 30, 2018 was $0.11 compared to $0.10 in the third quarter of 2017. 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 2018 increased to $135.1 million, up 1.1%, or $1.5 million from $133.6 million during the same period last year. The increase was primarily driven by increased market penetration, partially offset by a decline in North American auto production of 0.4% year over year.

Gross profit for the first nine months of 2018 was $30.8 million, or 22.8% of total revenue, compared to $30.7 million, or 23.0% of total revenues, for the corresponding period last year. The decrease in gross profit as a percentage of sales was primarily related to the operational inefficiencies experienced during the third quarter.

Restructuring expense for the first nine months of 2018 of $1.2 million was related to previously announced manufacturing facility closures in Port Huron, Michigan and Fort Smith, Arkansas and compares to $0 in the same period last year.

Net income for first nine months of 2018 was $3.9 million, or $0.40 per basic and $0.39 per diluted share, respectively, compared to $4.4 million, or $0.45 per basic and diluted share, in the corresponding period last year. The decrease in net income was primarily due to the restructuring expenses and gross profit decreases described above, partially offset by the higher sales.

Adjusted EBITDA for the first nine months of 2018 was $13.9 million compared to $14.1 million in the same period last year. The decrease is primarily a result of the lower margins described above, partially offset by the higher sales so far this year. 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 2018 was $0.54 compared to $0.52 in the same period last 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 September 30, 2018, the Company had approximately $1.0 million in cash and cash equivalents, as compared to December 31, 2017 when the Company had $1.4 million in cash and cash equivalents. Total debt outstanding as of September 30, 2018 was $55.8 million compared to $53.6 million as of December 31, 2017.

As of September 30, 2018, the Company had $4.6 million of available unused capacity, further subject to borrowing base restrictions and outstanding letters of credit, under its $32.5 million Revolving Line of Credit.

Amended and Restated Credit Agreement

On November 8, 2018, subsequent to the end of the third quarter, Unique Fabricating NA, Inc. and Unique-Intasco Canada, Inc. entered into an Amended and Restated Credit Agreement (the “Agreement”), which amended and restated its existing Credit Agreement. The Agreement increases the principal amount of two current US Term Loans to a combined total of $26.0 million by retiring a portion of the borrowings currently outstanding on the Revolving Line of Credit, while continuing to provide for borrowings of up to $30.0 million under the Revolving Line of Credit (subject to availability), as well as creating a new two year $5.0 million line of credit to fund capital expenditures. Furthermore, the Agreement extends the maturity dates of all borrowings from April 28, 2021 to November 7, 2023 and revises the amortization schedule of both the new US Term Loan and the current Canadian Term Loan.

2018 Outlook

For the full year 2018, Unique Fabricating is updating its outlook based on its results for the first nine months of the year and industry production forecasts of light vehicles manufactured for the year, based on independent industry research published in October, and the mix of production by light vehicle platform contained in such research.

Previous Guidance

Updated Guidance

Revenue

$181 million to $185 million

$171 million to $175 million

Adjusted diluted earnings per share

$0.82 to $0.86

$0.58 to $0.62

Adjusted EBITDA

$20.0 million to $21.0 million

$17.0 million to $18.0 million

The Company does not present a quantitative reconciliation of its forward-looking non-GAAP financial measures to the most directly comparable GAAP measures due to the inherent difficulty, without unreasonable efforts, in forecasting and quantifying with reasonable accuracy significant items required for this reconciliation.

Dividend

Unique’s Board of Directors approved payment of a quarterly cash dividend of $0.15 per share on November 9, 2018. The dividend will be payable on December 7, 2018 to stockholders of record as of the close of business on November 30, 2018.

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 13684545. 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 9, 2018 until 11:59PM ET on November 16, 2018 by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (international) and using the pin number 13684545.

About Unique Fabricating, Inc.

Unique Fabricating, Inc. (NYSE MKT: 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 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-cash stock award, 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 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 2018 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 31, 2017 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.

Investor Contact:
Hayden IR
Brett Maas/Rob Fink
646-536-7331/646-415-8972
[email protected]

UNIQUE FABRICATING, INC.

Consolidated Statements of Operations (Unaudited)

Thirteen Weeks
Ended September
30, 2018

Thirteen Weeks
Ended October 1,
2017

Thirty-Nine Weeks
Ended September
30, 2018

Thirty-Nine Weeks
Ended October 1,
2017

Net sales

$

42,051,968

$

41,231,366

$

135,098,491

$

133,606,501

Cost of sales

33,528,457

32,256,440

104,305,811

102,858,323

Gross profit

8,523,511

8,974,926

30,792,680

30,748,178

Selling, general, and administrative expenses

7,226,204

7,268,812

22,571,692

22,455,833

Restructuring expenses

175,526

1,155,910

Operating income

1,121,781

1,706,114

7,065,078

8,292,345

Non-operating (expense) income

Other (expense) income, net

21,166

39,673

(43,167)

83,748

Interest expense

(836,887)

(770,149)

(2,433,360)

(2,089,056)

Total non-operating expense, net

(815,721)

(730,476)

(2,476,527)

(2,005,308)

Income – before income taxes

306,060

975,638

4,588,551

6,287,037

Income tax (benefit) expense

(320,763)

260,532

698,830

1,856,684

Net income

$

626,823

$

715,106

$

3,889,721

$

4,430,353

Net income per share

Basic

$

0.06

$

0.07

$

0.40

$

0.45

Diluted

$

0.06

$

0.07

$

0.39

$

0.45

Cash dividends declared per share

$

0.15

$

0.15

$

0.45

$

0.45

UNIQUE FABRICATING, INC.

Consolidated Balance Sheets (Unaudited)

September 30,
2018

December 31,
2017

Assets

Current assets

Cash and cash equivalents

$

982,913

$

1,430,937

Accounts receivable – net

31,157,862

27,203,296

Inventory – net

17,506,671

16,330,084

Prepaid expenses and other current assets:

Prepaid expenses and other

3,928,197

3,962,012

Refundable taxes

1,258,080

646,253

Asset held for sale

733,059

Total current assets

55,566,782

49,572,582

Property, plant, and equipment – net

25,027,850

22,975,401

Goodwill

28,871,179

28,871,179

Intangible assets– net

16,560,818

19,635,782

Other assets

Investments – at cost

1,054,120

1,054,120

Deposits and other assets

226,550

353,719

Deferred tax asset

529,099

342,552

Total assets

$

127,836,398

$

122,805,335

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable

$

14,051,539

$

11,708,175

Current maturities of long-term debt

4,399,998

3,799,998

Income taxes payable

86,987

348,910

Accrued compensation

3,524,586

2,840,559

Other accrued liabilities

1,220,132

1,027,489

Total current liabilities

23,283,242

19,725,131

Long-term debt – net of current portion

23,780,796

27,288,846

Line of credit-net

27,616,745

22,476,525

Deferred tax liability

2,647,098

2,432,754

Total liabilities

77,327,881

71,923,256

Stockholders’ Equity

Common stock, $0.001 par value – 15,000,000 shares authorized and 9,771,587 and 9,757,563 issued and outstanding at September 30, 2018 and December 31, 2017, respectively

9,772

9,758

Additional paid-in-capital

45,845,175

45,712,568

Retained earnings

4,653,570

5,159,753

Total stockholders’ equity

50,508,517

50,882,079

Total liabilities and stockholders’ equity

$

127,836,398

$

122,805,335

UNIQUE FABRICATING, INC.

Consolidated Statements of Cash Flows (Unaudited)

Thirty-Nine Weeks
Ended September 30,
2018

Thirty-Nine Weeks
Ended October 1,
2017

Cash flows from operating activities

Net income

$

3,889,721

$

4,430,353

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization

4,947,495

4,703,909

Amortization of debt issuance costs

106,609

113,412

Loss on sale of assets

5,179

12,442

Bad debt adjustment

(52,483)

96,531

Gain on derivative instrument

(5,645)

(188,054)

Stock option expense

98,621

115,245

Deferred income taxes

27,797

(77,446)

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

Accounts receivable

(3,902,083)

(2,180,715)

Inventory

(1,176,587)

(300,347)

Prepaid expenses and other assets

(445,198)

(1,829,809)

Accounts payable

2,708,213

758,356

Accrued and other liabilities

614,747

(12,831)

Net cash provided by operating activities

6,816,386

5,641,046

Cash flows from investing activities

Purchases of property and equipment

(4,691,424)

(3,466,432)

Proceeds from sale of property and equipment

28,205

29,347

Net cash used in investing activities

(4,663,219)

(3,437,085)

Cash flows from financing activities

Net change in bank overdraft

(364,849)

(806,075)

Payments on term loans

(2,962,477)

(2,574,545)

Proceeds from revolving credit facilities, net

5,088,039

5,837,324

Proceeds from exercise of stock options and warrants

34,000

37,001

Distribution of cash dividends

(4,395,904)

(4,386,893)

Net cash (used in) provided by financing activities

(2,601,191)

(1,893,188)

Net increase (decrease) in cash and cash equivalents

(448,024)

310,773

Cash and cash equivalents – beginning of period

1,430,937

705,535

Cash and cash equivalents – end of period

$

982,913

$

1,016,308

Supplemental disclosure of cash flow Information – cash paid for

Interest

$

2,304,312

$

1,953,206

Income taxes

$

1,178,482

$

1,793,316

UNIQUE FABRICATING, INC.

Reconciliation of GAAP Net Income to Adjusted EBITDA

Thirteen Weeks
Ended September
30, 2018

Thirteen Weeks
Ended October 1,
2017

Thirty-Nine Weeks
Ended September
30, 2018

Thirty-Nine Weeks
Ended October 1,
2017

GAAP Net income

$

626,823

$

715,106

$

3,889,721

$

4,430,353

Plus: Interest expense, net

836,887

770,149

2,433,360

2,089,056

Plus: Income tax expense

(320,763)

260,532

698,830

1,856,684

Plus: Depreciation and amortization

1,661,677

1,596,272

4,947,495

4,703,909

Plus: Non-cash stock award

32,681

40,229

98,621

115,245

Plus: Non-recurring integration expenses

127,981

27,415

127,981

30,794

Plus: Transaction fees

26,717

26,717

23,235

Plus: Restructuring expenses

175,526

1,155,910

Plus: One-time consulting and licensing ERP system implementation costs

202,572

276,312

522,256

815,307

Adjusted EBITDA

$

3,370,101

$

3,686,015

$

13,900,891

$

14,064,583

UNIQUE FABRICATING, INC.

Reconciliation of GAAP Net Income to Adjusted Diluted Earnings Per Share

Thirteen Weeks
Ended September
30, 2018

Thirteen Weeks
Ended October 1,
2017

Thirty-Nine Weeks
Ended September
30, 2018

Thirty-Nine Weeks
Ended October 1,
2017

GAAP Net income

$

626,823

$

715,106

$

3,889,721

$

4,430,353

Plus: Non-cash stock award

32,681

40,229

98,621

115,245

Plus: Non-recurring integration expenses

127,981

27,415

127,981

30,794

Plus: Transaction fees

26,717

26,717

23,235

Plus: Restructuring expenses

175,526

1,155,910

Plus: One-time consulting and licensing ERP system implementation costs

202,572

276,312

522,256

815,307

Less: Tax impact

(104,259)

(91,850)

(426,384)

(290,766)

Adjusted Net income

$

1,088,041

$

967,212

$

5,394,822

$

5,124,168

Diluted weighted average shares outstanding

9,918,625

9,898,273

9,916,000

9,903,240

Net income per share

Diluted – GAAP

$

0.06

$

0.07

$

0.39

$

0.45

Diluted – Adjusted

$

0.11

$

0.10

$

0.54

$

0.52

UNIQUE FABRICATING, INC.

Purchase Accounting Impacts and Other Effects

Thirteen Weeks
Ended September
30, 2018

Thirteen Weeks
Ended October 1,
2017

Thirty-Nine Weeks
Ended September
30, 2018

Thirty-Nine Weeks
Ended October 1,
2017

Non-cash purchase accounting impacts

Customer relationships amortization

$

836,796

$

837,522

$

2,510,390

$

2,510,570

Trade name amortization

72,926

72,926

218,778

218,779

Non-compete amortization

27,885

44,162

116,209

132,486

Unpatented technology

76,529

76,529

229,587

229,587

Less: Tax impact

(187,007)

(272,326)

(661,667)

(896,001)

Net income effect

$

827,129

$

758,813

$

2,413,297

$

2,195,421

Net income per share impact

GAAP – Basic

$

0.08

$

0.08

$

0.25

$

0.23

GAAP – Diluted

$

0.08

$

0.08

$

0.24

$

0.22

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