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Uniroyal Global Engineered Products, Inc. Reports Financial Results for the Third Quarter Ended September 29, 2019

SARASOTA, Fla., Nov. 04, 2019 (GLOBE NEWSWIRE) -- Uniroyal Global Engineered Products, Inc. (UNIR) today reported its third quarter financial results for the three months ended September 29, 2019.

Financial Summary For the Quarter

Net Sales declined 9.4% to $22.0 million versus $24.3 million in the prior year.

Net Income declined to $277,374 versus $759,569 in the prior year.

Loss per Common Share of $0.03 versus breakeven in the prior year.

Overview

The third quarter of this year was negatively impacted by two significant factors.  The first was the continuing sluggishness of sales at our European operation particularly as it relates to our automotive business. The second is the negative impact on margins due to the manufacturing restructuring in Europe. Also, the negative currency effect weighed on our financials this quarter.

Automotive sales comprised 88.3% of our total European operations this quarter which declined 11.4% from the same quarter of the previous year.  While we don’t believe we lost any share of market with our customers, the sluggishness of the European economy continues to be a headwind for us.

To improve on Gross Profit Margins, we undertook a major restructuring of manufacturing equipment in Europe, targeted to drive higher margin product offerings.  We shut down equipment generating low margin product offerings and transitioned alternate higher margin product offerings, where possible, to that customer base. During this transition, we lost some sales and incurred startup costs in the short term but we believe the positive long-term effects on margins will be very beneficial. Virtually all the transition expenses and related capital expenditures were incurred in the previous year and the first nine months of this year.

As we move into the fourth quarter of this year, we are confident that the operational improvements we have put in place at our manufacturing facilities will ultimately lead to margin improvement. This, coupled with the significant reduction in Operating Expenses we have realized this year versus last, will lead to improved profitability in areas within our control.

Net Sales

Net Sales for the three months ended September 29, 2019 were $22,033,539 versus $24,322,532 for the third quarter of the previous year, a decline of $2,288,993 or 9.4%.  The two major businesses of the Company, Automotive and Industrial, were down 10.0% and 8.3% respectively versus the same period of the previous year. Excluding the negative currency effect of approximately $540,000, total Net Sales would have declined by approximately $1.7 million or 7.2%

Automotive sales which represent 64.1% of the total Net Sales of the Company or $14,133,223, declined $1,571,760 or 10.0% with most of the decline ($1,251,952 or 79.7%) coming from our European operations which are navigating through a sluggish economy. 

Industrial sales which represent 35.9% of the total Net Sales of the Company or $7,900,316, declined 8.3% or $717,233.  Approximately 83.8% of total Industrial sales come from our US operations.  A decline in sales to contract customers primarily due to a major non-recurring customer in the prior year offset an increase in sales to major equipment manufacturers for seating applications.

Operating Income

Operating Income for the third quarter was $749,012 or 3.4% of Net Sales compared to $1,138,760 or 4.7% of Net Sales for the same quarter of the previous year, a decline of $398,748 or 34.2%.  The primary reason for the decline in Operating Income was the overall lower Net Sales combined with the manufacturing restructuring at our UK operations which resulted in certain non-recurring costs and the delay in passing on raw material costs incurred to automotive customers due to the sluggish economy in Europe.  The net effect was a decline in Gross Profit Margins to 16.2% for the third quarter ended September 29, 2019 from 17.3% recorded in the third quarter of last year.

Following a strategic effort to reduce overall Operating Expenses, for the third quarter, expenses were reduced $258,088 or 8.4% to $2,812,888 primarily due to a reduction in employment costs and professional fees as compared to the same period of last year.

Net Loss Allocable to Common Shareholders

Net Loss Allocable to Common Shareholders for the third quarter was $499,998 or a loss of $0.03 per common share as compared to a loss of $10,118 or a breakeven for the same period of the prior year.  Impacting on the comparability of the two third quarter periods was a Tax Provision of $12,022 this year versus a Tax Benefit of $132,670 for the prior year period.

Weighted average shares outstanding as of September 29, 2019 were 18,680,030 as compared to 18,690,030 as of September 30, 2018.

For further details, see the Company’s Form 10-Q filed as of November 4, 2019.

About Uniroyal Global Engineered Products, Inc.

Uniroyal Global Engineered Products, Inc. (UNIR) is a leading manufacturer of vinyl-coated fabrics that are durable, stain resistant, cost-effective alternatives to leather, cloth and other synthetic fabric coverings. Uniroyal Global Engineered Products, Inc.’s revenue in 2018 was derived 66.2% from the automotive industry and approximately 33.8% from the recreational, industrial, indoor and outdoor furnishings, hospitality and healthcare markets. Our primary brand names include Naugahyde®, BeautyGard®, Flame Blocker™, Spirit Millennium®, Ambla®, Amblon®, Velbex®, Cirroflex®, Plastolene® and Vynide®.

Forward-Looking Statements:

Except for statements of historical fact, certain information contained in this press release constitutes forward-looking statements, including, without limitation, statements containing the words “believe,” “expect,” “anticipate,” “intend,” “should,” “planned,” “estimated” and “potential” and words of similar import, as well as all references to the future. These forward-looking statements are based on Uniroyal Global Engineered Products, Inc.’s current expectations. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance and that a variety of factors could cause the Company´s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company´s forward-looking statements. The risks and uncertainties which may affect the operations, performance, development and results of the Company´s business include, but are not limited to, the following: uncertainties relating to economic conditions, uncertainties relating to customer plans and commitments, the pricing and availability of equipment, materials and inventories, currency fluctuations, technological developments, performance issues with suppliers, economic growth, delays in testing of new products, the Company’s ability to successfully integrate acquired operations, the Company’s dependence on key personnel, the Company’s ability to protect its intellectual property rights, the effectiveness of cost-reduction plans, rapid technology changes and the highly competitive environment in which the Company operates. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

Uniroyal Global Engineered Products, Inc. Public Relations:

TTC Group, Inc.

Vic Allgeier, 646-290-6400

vic@ttcominc.com

Uniroyal Global Engineered Products, Inc.
Consolidated Balance Sheets
       
  (Unaudited)    
ASSETS September 29,
2019
  December 30,
2018
CURRENT ASSETS      
Cash and cash equivalents $ 818,289     $ 1,028,841  
Accounts receivable, net   13,410,069       12,422,330  
Inventories, net   19,293,442       19,460,260  
Other current assets   626,065       965,520  
Related party receivable   33,217       20,118  
Total Current Assets   34,181,082       33,897,069  
 

PROPERTY AND EQUIPMENT, NET
  25,177,807       18,878,949  
       
 OTHER ASSETS      
Intangible assets   3,148,983       3,217,997  
Goodwill   1,079,175       1,079,175  
Other long-term assets   3,485,996       3,693,367  
Total Other Assets   7,714,154       7,990,539  
 

TOTAL ASSETS
$ 67,073,043     $ 60,766,557  
       
 LIABILITIES AND STOCKHOLDERS' EQUITY      
       
CURRENT LIABILITIES      
Checks issued in excess of bank balance $ 752,485     $ 855,210  
Lines of credit   20,936,172       19,325,116  
Current maturities of long-term debt   1,502,555       1,369,967  
Current maturities of finance lease liabilities   177,190       388,862  
Accounts payable   9,332,977       9,335,235  
Accrued expenses and other liabilities   4,059,081       3,326,291  
Related party obligation   179,858       84,154  
Current portion of postretirement benefit liability - health and life   139,095       139,095  
Total Current Liabilities   37,079,413       34,823,930  
       
 LONG-TERM LIABILITIES      
Long-term debt, less current portion   3,462,188       3,967,754  
Finance lease liabilities, less current portion   18,477       109,446  
Related party lease financing obligation   2,679,989       2,613,717  
Long-term debt to related parties   3,190,655       2,990,655  
Postretirement benefit liability - health and life, less current portion   2,083,684       2,101,892  
Other long-term liabilities   6,531,063       653,653  
Total Long-Term Liabilities   17,966,056       12,437,117  
Total Liabilities   55,045,469       47,261,047  
       
 STOCKHOLDERS' EQUITY      
Preferred units, Series A UEP Holdings, LLC, 200,000 units issued and outstanding ($100 issue price)   617,571       617,571  
Preferred units, Series B UEP Holdings, LLC, 150,000 units issued and outstanding ($100 issue price)   463,179       463,179  
Preferred stock, Uniroyal Global (Europe) Limited, 50 shares issued and outstanding ($1.51 stated value)   75       75  
Common stock, 95,000,000 shares authorized ($.001 par value) 18,680,030 and 18,690,030 shares issued and outstanding as of September 29, 2019 and December 30, 2018, respectively   18,680       18,690  
Additional paid-in capital   35,275,646       35,244,770  
Accumulated deficit   (23,202,469 )     (22,136,130 )
Accumulated other comprehensive loss   (1,145,108 )     (702,645 )
Total Stockholders' Equity   12,027,574       13,505,510  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 67,073,043     $ 60,766,557  
               


Uniroyal Global Engineered Products, Inc.
Consolidated Statements of Operations
(Unaudited)
       
  Three Months Ended
  September 29, 2019   September 30, 2018
       
NET SALES $ 22,033,539     $ 24,322,532  
COST OF GOODS SOLD   18,471,639       20,112,796  
Gross Profit   3,561,900       4,209,736  
OPERATING EXPENSES:      
Selling   1,061,781       1,075,064  
General and administrative   1,373,118       1,587,656  
Research and development   377,989       408,256  
               
 OPERATING EXPENSES   2,812,888       3,070,976  
Operating Income   749,012       1,138,760  
OTHER EXPENSE:      
Interest and other debt related expense   (509,829 )     (488,905 )
Other income (expense)   50,213       (22,956 )
Net Other Expense   (459,616 )     (511,861 )
INCOME BEFORE TAX PROVISION   289,396       626,899  
TAX PROVISION (BENEFIT)   12,022       (132,670 )
NET INCOME   277,374       759,569  
Preferred stock dividend   (777,372 )     (769,687 )
NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS $ (499,998 )   $ (10,118 )
LOSS PER COMMON SHARE:      
Basic $ (0.03 )   $ (0.00 )
Diluted $ (0.03 )   $ (0.00 )
       
 WEIGHTED AVERAGE SHARES OUTSTANDING:      
Basic   18,680,030       18,690,030  
Diluted   18,680,030       18,690,030  
               


Uniroyal Global Engineered Products, Inc.
Consolidated Statements of Operations
(Unaudited)
       
  Nine Months Ended
  September 29, 2019   September 30, 2018
       
NET SALES $ 71,523,182     $ 76,775,452  
COST OF GOODS SOLD   59,434,689       63,184,044  
Gross Profit   12,088,493       13,591,408  
OPERATING EXPENSES:      
Selling   3,348,622       3,624,145  
General and administrative   4,332,978       5,194,622  
Research and development   1,302,707       1,260,784  
Other operating expenses   343,003       -  
               
 OPERATING EXPENSES   9,327,310       10,079,551  
Operating Income   2,761,183       3,511,857  
OTHER EXPENSE:      
Interest and other debt related expense   (1,547,343 )     (1,418,932 )
Other income (expense)   53,396       (8,894 )
Net Other Expense   (1,493,947 )     (1,427,826 )
INCOME BEFORE TAX PROVISION   1,267,236       2,084,031  
TAX PROVISION (BENEFIT)   (6,287 )     (89,670 )
NET INCOME   1,273,523       2,173,701  
Preferred stock dividend   (2,339,862 )     (2,330,250 )
NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS $ (1,066,339 )   $ (156,549 )
LOSS PER COMMON SHARE:      
Basic $ (0.06 )   $ (0.01 )
Diluted $ (0.06 )   $ (0.01 )
       
WEIGHTED AVERAGE SHARES OUTSTANDING:      
Basic   18,684,938       18,690,030  
Diluted   18,684,938       18,690,030