Net income of $1.0 million from $35.6 million third quarter net sales, a $20.8 million increase from second quarter net sales

AUBURN HILLS, MI / ACCESSWIRE / November 12, 2020 / Unique Fabricating, Inc. (NYSE American:UFAB), a leader in engineering and manufacturing multi-material foam, rubber, and plastic components utilized in noise, vibration, and harshness management and air/water sealing applications for the transportation, appliance, medical, and consumer markets, today announced its financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial Results

  • Net sales of $35.6 million compared to $38.5 million in the third quarter of 2019.
  • Net income of $1.0 million or $0.10 per basic and diluted share compared to a net loss of $1.3 million or $0.13 per basic and diluted share in the third quarter of 2019.
  • Net debt(1) decreased $2.1 million to $47.2 million as of September 30, 2020, inclusive of $2.3 million of cash and cash equivalents, compared to $49.3 million as of September 30, 2019, inclusive of $1.5 million of cash and cash equivalents.
  • Interest expense decreased $0.4 million to $0.7 million compared to prior year of $1.1 million.

"We delivered a $20.8 million sequential increase in net sales with the corresponding positive impact on gross profit and operating income." said Doug Cain, President and Chief Executive Officer. "Our October net sales of $13.4 million continues this positive trend as we progress through the fourth quarter noting the traditionally slower sales months of November and December."

"During this quarter, we continued winning new business with both near and mid-term impacts as well as increasing our plant productivity and efficiencies." added Cain. "The latest independent forecasts for North America light vehicle production, combined with the positive market trends for home building and home remodeling that drive our appliance business, support our view of a profitable fourth quarter of 2020 and a positive start to 2021."

Cain concluded "As I have completed my first year at the helm of Unique, I believe we are now well-positioned with a talented and motivated team to efficiently and profitably grow the business by providing innovative, optimized, and sustainable solutions for our customers."

Third Quarter 2020 Financial Summary

Net sales for the quarter were $35.6 million, down 8% or $3.0 million from $38.5 million during the same period last year. The decrease was attributable to the end of certain transportation programs, lost sales resulting from our previous facility closures, and decontented components for two transportation customer platforms.

Gross profit for the quarter was $8.1 million, or 22.7% of net sales, compared to $7.2 million, or 18.6% of net sales, for the same period last year. The $1.7 million inventory valuation allowance increase in the third quarter of 2019 did not reoccur in 2020. This benefit was partially offset by the loss of contribution margin on the $3.0 million lower sales in the third quarter of 2020 as compared to the same period last year and COVID-19 related costs.

Net income of $1.0 million or $0.10 per basic and diluted share compared to a net loss of $1.3 million or $0.13 per basic and diluted share in the third quarter of 2019. The increase in net income is the result of the $1.7 million previously noted inventory charge, a $0.3 million reduction in selling, general and administrative expenses, $1.0 million lower restructuring charges, and $0.4 million lower interest expense. These improvements were partially offset by the impact of the $3.0 million decrease in net sales year-over-year, $0.4 million higher tax expense, and COVID-19 related costs.

Balance Sheet Summary

As of September 30, 2020, the Company had approximately $2.3 million in cash and cash equivalents, compared to September 29, 2019 and December 29, 2019 when the Company had $1.5 million and $0.6 million, respectively, in cash and cash equivalents. Total debt outstanding as of September 30, 2020 was $49.5 million compared to $50.8 million as of September 29, 2019 and $47.5 million as of December 29, 2019. Included in total debt at September 30, 2020 is the $6.0 million Paycheck Protection Program (PPP) loan received in the second quarter of 2020. We have begun the PPP loan forgiveness application process.

2020 Outlook

The latest North American independent automotive production forecasts for the second half of the year increased the previous forecasts by 10% and are now at approximately 97% of initial 2020 volumes. If this automotive production forecast level for the fourth quarter (approximately 94% of the third quarter 2020) holds, management expects to generate continued operating profits and improved operating cash flows, reflecting cost-reduction and efficiency related actions taken to date. Supporting this level of activity, the Company's October sales were approximately $13.4 million. Management notes that projected results are subject to substantial uncertainty regarding the continuing impact of the COVID-19 pandemic on the economy and our industry, as well as other factors referenced in "Forward Looking Statements." There can be no assurance that our results will not vary significantly from current expectations.

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 conference call, please dial (877) 407-9500 (toll free) or (862) 298-0850 and if requested, reference conference ID 38306. The conference call will also be webcast live on the Investor Relations section of the Company's website at http://ir.uniquefab.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 12, 2020 until 11:59 p.m. ET on November 26, 2020 by dialing (877) 481-4010 (United States) or (919) 882-2331 (international) and using the passcode 38306.

About Unique Fabricating, Inc.

Unique Fabricating, Inc. (NYSE American: UFAB) engineers and manufactures components for customers in the transportation, appliance, medical, and consumer 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, engine covers, fender stuffers, air ducts, acoustical insulation, door water shields, gas tank pads, light gaskets, topper pads, mirror gaskets, glove box liners, personal protection equipment, and packaging. The Company is headquartered in Auburn Hills, Michigan. For more information, visit http://www.uniquefab.com.

About Non-GAAP Financial Measures

We present Net Debt, a non-GAAP financial measure, in this press release to provide a supplemental measure of our financial position. We believe that Net Debt is a useful measure of the Company's credit position and progress toward reducing leverage. The calculation is limited in that the company may not always be able to use cash to repay debt on a dollar-for-dollar basis.

We present Consolidated EBITDA (defined as "Consolidated EBITDA" in our Credit Agreement, as amended), a non-GAAP financial measure, in this press release to evaluate our covenant compliance in accordance with our Credit Agreement. Consolidated EBITDA, as defined in our Credit Agreement, is defined as earnings before interest expense, income tax expense (benefit), depreciation and amortization expenses, management fees, non-cash stock compensation expenses, restructuring expenses, goodwill impairment charges, and consulting and licensing costs from our ongoing enterprise resource planning ("ERP") system implementation. There may be additional adjustments allowed and there are dollar limitations on certain adjustments and add backs, please refer to our Credit Agreement, as amended, for a complete understanding of all adjustments and add backs allowed to Consolidated EBITDA as well as our financial covenants. The Company is presenting Consolidated EBITDA to measure our covenant compliance, not as a supplemental performance measurement. Certain of the allowable adjustments and add backs to Consolidated EBITDA are recurring in nature and cash expenses, which we believe limits the usefulness of Consolidated EBITDA as a measurement of the Company's performance.

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 results for the second quarter of 2020 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 net sales, Consolidated 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 29, 2019, as amended, 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.

(1) Net debt, a non-GAAP financial measure, is defined as debt minus cash and cash equivalents. Please refer to the Reconciliation of Non-GAAP Financial measures included in the tables included with this press release for a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure.

Investor Inquiries:

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

UNIQUE FABRICATING INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited - dollars in thousands)

 
  September 30,
2020
    December 29,
2019
 
Assets
           
Current assets
           
Cash and cash equivalents
  2,271     650  
Accounts receivable, net of reserves of approximately $0.7 million and $0.9 million at September 30, 2020 and December 29, 2019, respectively
    27,001       24,701  
Inventory, net
    12,481       13,047  
Prepaid expenses and other current assets:
               
Prepaid expenses and other
    4,395       2,108  
Refundable taxes
    1,391       1,049  
Assets held for sale
    -       1,003  
Total current assets
    47,539       42,558  
Property, plant, and equipment, net
    22,779       23,415  
Goodwill
    22,111       22,111  
Intangible assets
    8,624       11,625  
Other assets
               
Operating leases
    10,373       -  
Investments, at cost
    1,054       1,054  
Deposits and other assets
    227       226  
Deferred tax asset
    893       679  
Total assets
  113,600     101,668  
Liabilities and Stockholders' Equity
               
Current liabilities:
               
Accounts payable
  12,598     9,324  
Current maturities of long-term debt
    4,175       2,847  
Accrued compensation
    1,296       1,225  
Other accrued liabilities
    5,208       1,979  
Total current liabilities
    23,277       15,375  
Long-term debt, net of current maturities
    35,622       33,220  
Line of credit
    9,706       11,418  
Other long-term liabilities:
               
Deferred tax liability
    -       1,324  
Other liabilities
    9,920       871  
Total liabilities
    78,525       62,208  
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 30, 2020 and December 29, 2019, respectively
    10       10  
Additional paid-in-capital
    46,099       46,011  
Accumulated deficit
    (11,034 )     (6,561 )
Total stockholders' equity
    35,075       39,460  
Total liabilities and stockholders' equity
  113,600     101,668  
                 

UNIQUE FABRICATING INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - dollars in thousands, except per share amounts)

 
  Three Months Ended September 30, 2020     Three Months Ended September 29, 2019     Nine Months Ended September 30, 2020     Nine Months Ended September 29, 2019  
Net sales
  35,550     38,549     85,286     116,905  
Cost of sales
    27,474       31,375       68,395       93,219  
Gross profit
    8,076       7,174       16,891       23,686  
Selling, general, and administrative expenses
    6,251       6,538       18,397       21,234  
Impairment
    -       -       -       6,760  
Restructuring expenses
    -       990       1,193       1,815  
Operating income (loss)
    1,825       (354 )     (2,699 )     (6,123 )
Other income (expense):
                               
Other, net
    32       (13 )     26       29  
Interest expense
    (711 )     (1,149 )     (3,000 )     (3,580 )
Other expense, net
    (679 )     (1,162 )     (2,974 )     (3,551 )
Income (loss) before income tax (benefit)
    1,146       (1,516 )     (5,673 )     (9,674 )
Income tax (benefit)
    166       (252 )     (1,200 )     (597 )
Net income (loss)
  980     (1,264 )   (4,473 )   (9,077 )
Net income (loss) per share:
                               
Basic
  0.10     (0.13 )   (0.46 )   (0.93 )
Diluted
  0.10     (0.13 )   (0.46 )   (0.93 )
Dividends declared per share
  -     -     -     0.05  
                                 

UNIQUE FABRICATING INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - dollars in thousands)

 
  Nine Months Ended September 30, 2020     Nine Months Ended September 29, 2019  
Cash Flows from Operating Activities
           
Net loss
  (4,473 )   (9,077 )
Adjustments to reconcile net loss to net cash provided by operating activities:
               
Impairment of goodwill
    -       6,760  
Inventory allowance
    -       1,742  
Depreciation and amortization
    5,211       5,140  
Amortization of debt issuance costs
    111       133  
Loss on sale of assets
    118       5  
Loss on derivative instrument
    469       746  
Stock option expense
    88       117  
Deferred income taxes
    (1,538 )     (1,073 )
Accounts receivable
    (2,300 )     2,978  
Inventory
    635       11  
Prepaid expenses and other assets
    (2,629 )     (646 )
Accounts payable
    3,563       336  
Accrued and other liabilities
    (395 )     (259 )
Other, net
    1,789       -  
Net cash provided by operating activities
    649       6,913  
Cash Flows from Investing Activities
               
Capital expenditures
    (1,533 )     (2,129 )
Proceeds from sale of property, plant and equipment
    883       41  
Net cash used in investing activities
    (650 )     (2,088 )
Cash Flows from Financing Activities
               
Net change in bank overdraft
    (289 )     1,003  
Payments on term loans
    (2,186 )     (3,012 )
Proceeds from capital expenditure line
    -       1,300  
Payments on revolving credit facilities
    (19,281 )     (21,998 )
Proceeds from revolving credit facilities
    17,530       18,488  
Distribution of cash dividends
    -       (489 )
Debt issuance costs
    (151 )     -  
Proceeds from PPP loan
    5,999       -  
Net cash provided by (used in) financing activities
    1,622       (4,708 )
Cash and cash equivalents:
               
Net increase in cash and cash equivalents
    1,621       117  
Cash and cash equivalents at beginning of period
    650       1,410  
Cash and cash equivalents at end of period
  2,271     1,527  
Supplemental disclosure of cash flow information:
               
Cash paid for interest
  3,034     3,442  
Cash paid for Income taxes
  329     357  
                 

UNIQUE FABRICATING INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited - dollars in thousands)

RECONCILIATION OF NET INCOME TO CONSOLIDATED EBITDA

The following is a reconciliation of net income, as reported, which is a U.S. GAAP measure of our operating results, to Consolidated EBITDA, as defined in our Credit Agreement, a non-GAAP measure:

 
  Three Months Ended September 30, 2020  
Net Income
  980  
Plus:
       
Interest expense, net
    711  
Income tax expense
    166  
Depreciation and amortization
    1,753  
Management fees
    56  
Non-cash stock awards
    33  
ERP system implementation consulting and licensing costs (a)
    74  
Consolidated EBITDA, as defined
  3,773  
 
       
 
  September 30, 2020  
Total Consolidated Indebtedness, as defined (b)
  43,504  
Consolidated EBITDA, as defined
  3,773  
Total leverage ratio (c)
    2.88 x
Covenant requirement
    3.75 x
         

(a) Represents costs incurred with respect to the purchase and implementation of the Company's enterprise resource planning system, in an aggregate amount under the definition, not to exceed (i) $200,000 during each of the Company's fiscal quarters in 2020, (ii) $100,000 during each of the Company's fiscal quarters in 2021, and (iii) $0 with respect to any calculation thereafter.

(b) Total Consolidated Indebtedness, as defined, excludes the $6.0 million PPP loan for covenant purposes until final determination by the SBA and Lender on forgiveness.

(c) Ratio of Consolidated EBITDA to Total Consolidated Indebtedness, as defined, divided by Consolidated EBITDA, as defined. To calculate the Total Leverage Ratio at September 30, 2020, the Consolidated EBITDA for the quarter ended September 30, 2020 is annualized by multiplying it by 4.

RECONCILIATION OF NET DEBT TO DEBT

 
  September 30,
2020
    December 29,
2019
    September 30,
2019
 
Current maturities of long-term debt
  4,175     2,847     2,947  
Long-term debt, net of current maturities
    35,622       33,220       33,432  
Line of credit
    9,706       11,418       14,454  
Debt
    49,503       47,485       50,833  
Less: Cash and cash equivalents
    2,271       650       1,527  
Net debt
  47,232     46,835     49,306  
                         

 

SOURCE: Unique Fabricating, Inc.



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