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Unique Fabricating, Inc. Reports Third Quarter 2020 Financial Results

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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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