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Unique Fabricating, Inc. Reports Fourth Quarter and Full Year 2018 Financial Results

AUBURN HILLS, Mich., March 7, 2019 /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 fourth quarter and 12 months ended December 30, 2018.

Full Year 2018 Financial Highlights and Subsequent Events

  • Revenue of $174.9 million in the full year 2018, down 0.2% compared to $175.3 million in the full year 2017
  • Net income of $3.7 million, or $0.38 per basic and $0.37 per diluted share in the full year 2018, compared to $6.5 million, or $0.67 per basic and $0.66 per diluted share in the full year 2017
  • Adjusted EBITDA of $17.1 million in the full year 2018, including $6.8 million for non-cash charges specifically related to depreciation and amortization and non-cash stock awards, compared to $18.0 million in the full year 2017, including $6.5 million for non-cash charges specifically related to depreciation and amortization and non-cash stock awards(1)
  • Adjusted diluted earnings per share of $0.55 in the full year 2018 versus $0.69 in the full year 2017(1)
  • Declared a quarterly cash dividend of $0.05 per share payable on March 7, 2019 for stockholders of record as of February 28, 2019

(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.

"Unique grew sales in the fourth quarter and reached the higher-end of our revised revenue guidance range for the year despite lower than expected North American production volumes, as manufacturers continue to adjust production schedules to correspond with the continued consumer preferences for light trucks versus traditional passenger cars," commented John Weinhardt, Chief Executive Officer. "Our growing presence in the light truck segment combined with the actions we took earlier in the year to enhance our operating efficiency enabled us to better respond to the changing market conditions. These moves were overshadowed by an increase in federal income tax on foreign sourced income as a result of the U.S. Tax Cuts and Jobs Act of 2017 and the timing of an interest rate swap we had entered into in accordance with the terms of the senior secured credit facility that we amended in November, both of which negatively impacted our earnings."

"Subsequent to the fourth quarter, the Board decided to reduce the quarterly dividend to provide the Company with additional financial resources and to more aggressively reduce our long-term debt. We believe this decision to adjust our allocation to help decrease our financial leverage gives us greater flexibility, and enhanced operational and strategic options going forward," Weinhardt added. "Our business continues to generate strong cash from operations with more than $9.4 million generated in 2018, a 25% increase over 2017. During 2019, we expect to significantly reduce our debt, thereby reducing our interest expense."

"We continue to pursue operating initiatives that will reduce our costs, while improving our flexibility," Weinhardt concluded. "We are cognizant of the challenges that our business and industry have faced over the last 12 months, and the negative impact it had on our performance, but we believe the adjustments we made in the second half of 2018 put us in a much better position to address any continued challenges in 2019. Based on our current visibility of awarded programs scheduled to launch in 2019 and 2020, we expect to continue to outperform the industry by leveraging our strong backlog and capturing ongoing incremental revenue opportunities."

Fourth Quarter Financial Summary

Total revenue for the quarter ended December 30, 2018 decreased to $39.8 million, down 4.4%, or $1.8 million from $41.7 million during the same period last year. The decrease was primarily driven by the loss of business at two major non-automotive customers as a result of our decision to close our Ft. Smith, Arkansas facility, as well as extended plant holiday shutdowns by some of our customers to reduce vehicle inventory levels.

Gross profit for the quarter ended December 30, 2018 was $8.5 million, or 21.5% of total revenue, compared to $9.3 million, or 22.3% of total revenues, for the corresponding period last year. The decrease in gross profit was primarily related to the decline in revenues.

Net income for the quarter ended December 30, 2018 was $(0.2) million, or $(0.02) per basic and diluted share, compared to $2.1 million, or $0.21 per basic and diluted share, in the fourth quarter of 2017. The decrease in net income was primarily due to the lower sales resulting in a gross profit decline, higher interest expense due to higher outstanding debt balances and interest rates, as well as a non-cash unfavorable mark-to-market on a new interest rate swap, and unfavorable tax expense related to the GILTI provisions of the Tax Cuts on Jobs Act.

Adjusted EBITDA for the quarter ended December 30, 2018 was $3.2 million compared to $4.0 million in the fourth quarter of 2017. The decrease is primarily a result of the lower sales and gross margins as a percentage of sales described above. 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 December 30, 2018 was $0.00 compared to $0.17 in the fourth 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 full year 2018 decreased to $174.9 million, down 0.2%, or $0.4 million from $175.3 million during the same period last year. The decrease was primarily driven by an overexposure to the traditional passenger car segment as well as a modest decline in North American auto production year over year of approximately 1%. The loss of business at two of our non-automotive customers reference earlier was also a contributing factor. Despite the decline in auto production during 2018 when compared to 2017 however, our sales to the automotive market increased by 2 percent year-over-year.

Gross profit for the full year 2018 was $39.3 million, or 22.5% of total revenue, compared to $40.1 million, or 22.9% 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 from moving the manufacturing of products previously produced in the Ft. Smith, Arkansas facility to other manufacturing facilities of the Company during the third quarter, partially offset by savings realized from the plant closures we completed during 2018.

Restructuring expense for the full year 2018 of $1.2 million was related to the 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 full year 2018 was $3.7 million, or $0.38 per basic and $0.37 per diluted share, respectively, compared to $4.4 million, or $0.67 per basic and $0.66 per diluted share, respectively, in the corresponding period last year. The decrease in net income was primarily due to the restructuring expenses, gross profit decreases described above, and higher interest expense due to higher interest rates and higher average outstanding debt balances in the fifty-two weeks ended December 30, 2018, as well as the unfavorable mark-to-market on the new interest rate swap entered into during the fourth quarter.

Adjusted EBITDA for the full year 2018 was $17.1 million compared to $18.0 million in the same period last year. The decrease is primarily a result of the lower margins described above. Please refer to the financial tables below for a reconciliation of GAAP to Non-GAAP results.

Adjusted diluted earnings per share for the full year 2018 was $0.55 compared to $0.69 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 December 30, 2018 and December 31, 2017, the Company had approximately $1.4 million in cash and cash equivalents. Total debt outstanding as of December 30, 2018 was $55.9 million compared to $53.6 million as of December 31, 2017.

As of December 30, 2018, the Company had $11.6 million of available unused capacity, further subject to borrowing base restrictions and outstanding letters of credit, under its $30.0 million Revolving Line of Credit.

2019 Outlook

For the full year 2019, Unique Fabricating is updating its outlook based on current North American industry production forecasts published in February 2019, and the mix of production by light vehicle platform contained in such research.

Revenue

$167.0 million to $172.0 million

Adjusted diluted earnings per share

$0.45 to $0.55

Adjusted EBITDA

$16.6 million to $18.1 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 paid a quarterly cash dividend of $0.05 per share on March 7, 2019 to its stockholders of record as of the close of business on February 28, 2019. This compares to $0.15 per share paid in the previous quarter.

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 13687665. 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 March 7, 2019 until 11:59PM ET on March 14, 2019 by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (international) and using the pin number 13687665.

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 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.

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

 

UNIQUE FABRICATING, INC.
Consolidated Statements of Operations



Fifty-Two Weeks
Ended December
30, 2018


Fifty-Two Weeks
Ended December
31, 2017


Fifty-Two Weeks
Ended January 1,
2017

Net Sales

$

174,909,741



$

175,287,982



$

170,462,953


Cost of Sales

135,575,004



135,234,448



130,918,486


Gross Profit

39,334,737



40,053,534



39,544,467


Selling, General, and Administrative Expenses

29,780,956



29,766,864



27,524,453


Restructuring Expenses

1,155,910





35,054


Operating Income

8,397,871



10,286,670



11,984,960


Non-operating Income (Expense)






Investment income

50,169






Other income

(109,142)



78,805



91,755


Interest expense

(3,778,328)



(2,745,904)



(2,134,976)


Total non-operating expense

(3,837,301)



(2,667,099)



(2,043,221)


Income – Before income taxes

4,560,570



7,619,571



9,941,739


Income Tax Expense

861,969



1,132,880



3,257,619


Net Income

$

3,698,601



$

6,486,691



$

6,684,120


Net Income per share






Basic

$

0.38



$

0.67



$

0.69


Diluted

$

0.37



$

0.66



$

0.68


Cash dividends declared per share

$

0.60



$

0.60



$

0.60


 

UNIQUE FABRICATING, INC.
Consolidated Balance Sheets



December 30,
 2018


December 31,
 2017

Assets




Current Assets




Cash and cash equivalents

$

1,409,593



$

1,430,937


Accounts receivable – net

30,831,182



27,203,296


Inventory – net

16,285,507



16,330,084


Prepaid expenses and other current assets:




Prepaid expenses and other

2,511,486



3,962,012


Refundable taxes

983,073



646,253


Total current assets

52,020,841



49,572,582


Property, Plant, and Equipment – Net

25,077,745



22,975,401


Goodwill

28,871,179



28,871,179


Intangible Assets

15,568,383



19,635,782


Other assets




Investments – at cost

1,054,120



1,054,120


Deposits and other assets

198,854



353,719


Deferred tax asset

496,181



342,552


Total assets

$

123,287,303



$

122,805,335


Liabilities and Stockholders' Equity




Current Liabilities




Accounts payable

$

11,465,222



$

11,708,175


Current maturities of long-term debt

3,350,000



3,799,998


Income taxes payable

40,634



348,910


Accrued compensation

2,848,282



2,840,559


Other accrued liabilities

1,432,109



1,027,489


Total current liabilities

19,136,247



19,725,131


Long-term debt – net of current portion

34,667,768



27,288,846


Line of credit

17,904,869



22,476,525


Other long-term liabilities

395,154




Deferred tax liability

2,295,105



2,432,754


Total liabilities

74,399,143



71,923,256


Stockholders' Equity




Common stock, $0.001 par value – 15,000,000 shares authorized and 9,779,147 and 9,757,563 issued and outstanding at December 30, 2018 and December 31, 2017, respectively

9,780



9,758


Additional paid-in-capital

45,881,848



45,712,568


Retained earnings

2,996,532



5,159,753


Total stockholders' equity

48,888,160



50,882,079


Total liabilities and stockholders' equity

$

123,287,303



$

122,805,335


 

UNIQUE FABRICATING, INC.
Consolidated Statements of Cash Flows



Fifty-Two Weeks
Ended December
30, 2018


Fifty-Two Weeks
Ended December
31, 2017


Fifty-Two Weeks
Ended January 3,
2016

Cash Flows from Operating Activities






Net income

$

3,698,601



$

6,486,691



$

6,684,120


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






Depreciation and amortization

6,630,142



6,319,975



5,501,674


Amortization of debt issuance costs

147,291



148,948



127,556


(Gain) loss on sale of assets

(137,793)



63,013



(126,631)


Loss on extinguishment of debt

59,110





60,202


Bad debt adjustment

12,939



128,475



(274,364)


Loss (gain) on derivative instruments

451,511



(228,387)



22,193


Stock option expense

131,302



150,368



166,476


Deferred income taxes

(291,278)



(1,552,502)



(1,165,649)


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






Accounts receivable

(3,640,825)



(443,826)



(3,987,313)


Inventory

44,577



401,524



339,784


Prepaid expenses and other assets

1,212,214



(1,765,990)



(1,291,654)


Accounts payable

1,008,447



(1,705,663)



1,329,599


Accrued and other liabilities

104,067



(193,762)



375,280


Net cash provided by operating activities

9,430,305



7,808,864



7,761,273


Cash Flows from Investing Activities






Purchases of property and equipment

(5,393,817)



(4,140,135)



(3,362,014)


Proceeds from sale of property and equipment

904,237



51,847



2,187,366


Acquisition of Intasco, net of cash acquired





(21,030,795)


Working capital adjustment from acquisition of Intasco





212,823


Net cash used in investing activities

(4,489,580)



(4,088,288)



(21,992,620)


Cash Flows from Financing Activities






Net change in bank overdraft

(1,251,400)



(37,978)



548,892


Proceeds from debt

10,131,574





32,000,000


Payments on term loans

(2,962,477)



(3,374,545)



(2,444,071)


Payments on (proceeds from) revolving credit facilities, net

(4,421,908)



6,230,892



5,690,487


Debt issuance costs

(634,036)





(514,441)


Pay-off of old senior credit facility term debt





(15,375,000)


Proceeds from exercise of stock options and warrants

38,000



37,001



115,975


Distribution of cash dividends

(5,861,822)



(5,850,544)



(5,811,858)


Net cash (used in) provided by financing activities

(4,962,069)



(2,995,174)



14,209,984


Net Decrease in Cash and Cash Equivalents

(21,344)



725,402



(21,363)


Cash and Cash Equivalents – Beginning of period

1,430,937



705,535



726,898


Cash and Cash Equivalents – End of period

$

1,409,593



$

1,430,937



$

705,535


Supplemental Disclosure of Cash Flow Information – Cash paid for






Interest

$

3,575,279



$

2,566,956



$

1,552,619


Income taxes

$

1,339,290



$

2,231,901



$

3,750,845


Supplemental Disclosure of Cash Flow Information –

Non cash investing and financing activities for






Common stock issued for purchase of Intasco USA, Inc.

$



$



$

890,726


 

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



Thirteen
Weeks Ended
December 30,
2018


Thirteen
Weeks Ended
December 31,
2017


Thirteen
Weeks Ended
January 1,
2017


Fifty-Two
Weeks Ended
December 30,
2018


Fifty-Two
Weeks Ended
December 31,
2017


Fifty-Two
Weeks Ended
January 1,
2017

GAAP Net income

$

(191,120)



$

2,056,338



$

1,731,098



$

3,698,601



$

6,486,691



$

6,684,120


Plus: Interest expense, net

1,344,968



656,848



395,733



3,778,328



2,745,904



2,134,796


Plus: Income tax expense

163,139



(723,804)



737,230



861,969



1,132,880



3,257,619


Plus: Depreciation and amortization

1,682,647



1,616,066



1,505,202



6,630,142



6,319,975



5,501,674


Plus: Non-cash stock award

32,681



35,122



39,743



131,302



150,368



166,476


Plus: Non-recurring integration expenses

71,483



126,811



68,257



199,464



157,604



173,170


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











318,518


Plus: Transaction fees





8,118



26,717



23,235



866,806


Plus: Restructuring expenses







1,155,910





35,054


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

201,919



199,973





724,175



1,015,280




Plus: debt extinguishment costs

59,110







59,110






Less: Gain on sale of building

(142,973)





(147,414)



(142,973)





(147,414)


Adjusted EBITDA

$

3,221,854



$

3,967,354



$

4,337,967



$

17,122,745



$

18,031,937



$

18,990,819


 

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



Thirteen
Weeks Ended
December 30,
2018


Thirteen
Weeks Ended
December 31,
2017


Thirteen
Weeks Ended
January 1,
2017


Fifty-Two
Weeks Ended
December 30,
2018


Fifty-Two
Weeks Ended
December 31,
2017


Fifty-Two
Weeks Ended
January 1,
2017

GAAP Net income

$

(191,120)



$

2,056,338



$

1,731,098



$

3,698,601



$

6,486,691



$

6,684,120


Plus: Non-cash stock award

32,681



35,122



39,743



131,302



150,368



166,476


Plus: Non-recurring integration expenses

71,483



126,811



68,257



199,464



157,604



173,170


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











318,518


Plus: Transaction fees





8,118



26,717



23,235



866,806


Plus: Debt extinguishment costs

59,110







59,110





60,202


Plus: Restructuring expenses







1,155,910





35,054


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

201,919



199,973





724,175



1,015,280




Less: One-time tax reform adjustments



(720,400)







(720,400)




Less: Gain on sale of building

(142,973)





(147,414)



(142,973)





(147,414)


Less: Tax impact



9,410



9,411



(426,384)



(281,356)



(428,091)


Adjusted Net income

$

31,100



$

1,707,254



$

1,709,213



$

5,425,922



$

6,831,422



$

7,728,841














Diluted weighted average shares outstanding

9,886,790



9,888,059



9,927,716



9,908,698



9,899,418



9,896,283


Net income per share












Diluted - GAAP

$

(0.02)



$

0.21



$

0.17



$

0.37



$

0.66



$

0.68


Diluted - Adjusted

$



$

0.17



$

0.17



$

0.55



$

0.59



$

0.78


 

UNIQUE FABRICATING, INC.
Purchase Accounting Impacts and Other Effects



Thirteen
Weeks Ended
December 30,
2018


Thirteen
Weeks Ended
December 31,
2017


Thirteen
Weeks Ended
January 1,
2017


Fifty-Two
Weeks Ended
December 30,
2018


Fifty-Two
Weeks Ended
December 31,
2017


Fifty-Two
Weeks Ended
January 1,
2017

Non-cash purchase accounting impacts












Customer relationships amortization

$

836,797



$

837,250



$

837,523



$

3,347,187



$

3,348,091



$

3,045,746


Trade name amortization

72,926



72,926



72,926



291,704



291,705



269,130


Non-compete amortization

6,183



44,162



44,162



122,392



176,648



176,648


Unpatented technology

76,529



76,529



76,529



306,116



306,116



206,040


Less: Tax impact



473,831



(303,881)



(661,667)



(422,170)



(1,165,626)


Net income effect

$

992,435



$

1,504,698



$

727,259



$

3,405,732



$

3,700,390



$

2,531,938














Net income per share impact












GAAP - Basic

$

0.10



$

0.15



$

0.07



$

0.25



$

0.35



$

0.26


GAAP - Diluted

$

0.10



$

0.15



$

0.07



$

0.24



$

0.34



$

0.26


 

Cision

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