Unique Fabricating, Inc. Reports Third Quarter 2017 Financial Results
AUBURN HILLS, Mich., Nov. 9, 2017 /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 October 1, 2017.
Third Quarter 2017 Financial Highlights
-- Revenue of $41.2 million in the third quarter 2017, down 7.9% compared
to $44.8 million in the third quarter 2016
-- Net income of $0.7 million, or $0.07 per basic and diluted share in the
third quarter 2017, compared to $2.5 million, or $0.26 per basic and
$0.25 per diluted share in the third quarter 2016
-- Adjusted EBITDA of $3.7 million in the third quarter 2017, including
$1.6 million for non-cash charges specifically related to depreciation
and amortization and non-cash stock awards, compared to $5.9 million in
the third quarter 2016, including $1.5 million for non-cash charges
specifically related to depreciation and amortization and non-cash stock
awards((1))
-- Adjusted diluted earnings per share of $0.10 in the third quarter 2017
versus $0.26 in the third quarter 2016((1))
-- Declared a quarterly cash dividend of $0.15 per share payable on
December 7, 2017 for stockholders of record as of November 30, 2017
(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.
"The third quarter highlighted the continued shift in customer preference from passenger cars to light trucks and SUV's,", commented John Weinhardt, Chief Executive Officer. "The shift resulted in a larger than anticipated decline in overall production levels in the third quarter as production capacity was adjusted to align with this new sales trend. Our financial results are trending with the broader automotive industry, and our outlook has been adjusted to account for the most recent revisions in independent forecast projections that reflect a further production decline this year and a return to growth in 2018. Our third quarter results were also negatively impacted by the shutdown of an automotive assembly plant due to a labor impasse in Canada where we provide a significant amount of content for a major SUV."
"While we were not satisfied with our top-line sales, we booked a significant amount of new business in the third quarter," added Weinhardt. "We expanded our customer base and much of our new business was our higher value-added molded products. We anticipate that these new bookings will positively impact our performance in 2018 & 2019. These bookings also give us increased confidence and visibility in our growth prospects over the next 18-24 months."
"The underlying fundamentals of our business remain strong, and we are well-positioned to grow in excess of the automotive market, while continuing to generate cash and pay a healthy dividend," Weinhardt added. "The ongoing and increasing desire of automakers to elevate the driving experience with quieter, more comfortable vehicles, while reducing vehicle weight is bolstering our business, creating robust demand for our solutions. I am very encouraged by our recent business awards that incrementally add to our book of business for 2018 and beyond and reinforce our confidence over the next two years."
Third Quarter Financial Summary
Total revenue for the quarter ended October 1, 2017 declined to $41.2 million, down 7.9%, or $3.6 million from $44.8 million during the same period last year. The decrease was primarily driven by a decline in North American auto production of almost 12% quarter compared to the same quarter last year, partially offset by increased market penetration.
Gross profit for the quarter period ended October 1, 2017 was $9.0 million, or 21.8% of total revenue, compared to $11.3 million, or 25.1% of total revenues, for the corresponding period last year. The decrease in gross profit as a percentage of sales was primarily a result of lower than planned revenues due to the less than anticipated vehicle production volumes during the third quarter, manufacturing inefficiencies caused by excessive turnover at some plant locations, and an increase in direct and temporary labor hours incurred as a result of an unfavorable product mix.
Net income for the quarter ended October 1, 2017 was $0.7 million, or $0.07 per basic and diluted share, compared to $2.5 million, or $0.26 per basic and diluted share, in the third quarter of 2016. The decrease in net income was primarily due to lower sales quarter over quarter as well as lower gross profit as a percentage of sales as described above.
Adjusted EBITDA for the quarter ended October 1, 2017 was $3.7 million compared to $5.9 million in the third quarter of 2016. The decrease is primarily a result of lower sales and gross 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 quarter ended October 1, 2017 was $0.10 compared to $0.26 in the third quarter of 2016. The decrease is primarily a result of lower earnings, as described above. 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 2017 increased to $133.6 million, up 5.4%, or $6.8 million from $126.8 million during the same period last year. The increase was driven by the acquisition of Intasco which closed on April 29, 2016, as well as from the introduction of new products and increased market penetration, but was offset by an almost 4% drop in overall North American auto production levels during 2017.
Gross profit for the first nine months of 2017 was $30.7 million, or 23.0% of total revenue, compared to $29.9 million, or 23.6% of total revenues, for the corresponding period last year. The decrease in gross profit as a percentage of sales was primarily the result of lower revenues due to lower than anticipated vehicle production volumes during the first nine months, and the manufacturing impacts described above.
Net income for the first nine months of 2017 was $4.4 million, or $0.45 per basic and diluted share, compared to $5.0 million, or $0.51 and $0.50 per basic and diluted share, respectively, in the comparable period last year.
Adjusted EBITDA for the first nine months of 2017 was $14.1 million compared to $14.7 million in the same period last year. The decrease is primarily a result of lower gross 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 first nine months of 2017 was $0.52 compared to $0.61 in the same period last year. The decrease is primarily a result of the margin decrease described above. 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 October 1, 2017 the Company had approximately $1.0 million in cash and cash equivalents, as compared to January 1, 2017 when the Company had $706,000 in cash and cash equivalents. Total debt outstanding as of October 1, 2017 was $53.9 million compared to $50.6 million as of January 1, 2017.
As of October 1, 2017, the Company had $7.6 million of available unused capacity, further subject to borrowing base restrictions and outstanding letters of credit, under its $30.0 million revolving credit facility.
2017 Outlook
For the full year 2017, Unique Fabricating is updating its outlook based on revised industry production projections of 17.2 million light vehicles for the year, based on independent industry research published in October, and the mix of production by light vehicle platform contained in such research. This production estimate compares to a July industry projection of 17.55 million light vehicles:
Previous Guidance Updated Guidance
----------------- ----------------
Revenue $177 million to $181 million $173 million to $177 million
Adjusted diluted earnings per share $0.76 to $0.80 $0.64 to $0.68
Adjusted EBITDA $19.5 million to $20.5 million $18.0 million to $19.0 million
Declaration of Dividends
Unique's Board of Directors approved payment of a quarterly cash dividend of $0.15 per share on November 9, 2017. The dividend will be paid on December 7, 2017 to stockholders of record as of the close of business on November 30, 2017.
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 13672929. 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, 2017 until 11:59PM ET on November 16, 2017 by dialing 1-844-512-2921 (United States) or 1-412-317-6671 (international) and using the pin number 13672929.
About Unique Fabricating, Inc.
Unique Fabricating, Inc. (NYSE MKT: UFAB) engineers and manufactures components for customers in the automotive and industrial appliance market. 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, non-recurring step-up of inventory basis to fair market value, 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 2017 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 January 1, 2017 filed with the Securities and Exchange Commission and in particular the Section entitled "Risk Factors" in the Annual Report on Form 10-K, 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 (Unaudited)
Thirteen Weeks Thirteen Weeks Thirty-Nine Weeks Thirty-Nine Weeks
Ended October 1, Ended October 2, Ended October 1, Ended October 2,
2017 2016 2017 2016
---- ---- ---- ----
Net sales $41,231,366 $44,753,565 $133,606,501 $126,784,289
Cost of sales 32,256,440 33,503,217 102,858,323 96,842,757
---------- ---------- ----------- ----------
Gross profit 8,974,926 11,250,348 30,748,178 29,941,532
Selling, general,
and administrative
expenses 7,268,812 6,949,034 22,455,833 20,668,621
Restructuring
expenses - - - 35,054
--- --- --- ------
Operating income 1,706,114 4,301,314 8,292,345 9,237,857
--------- --------- --------- ---------
Non-operating income (expense)
Other income, net 39,673 (1,511) 83,748 (25,203)
Interest expense (770,149) (525,167) (2,089,056) (1,739,243)
-------- -------- ---------- ----------
Total non-operating
expense, net (730,476) (526,678) (2,005,308) (1,764,446)
-------- -------- ---------- ----------
Income - before
income taxes 975,638 3,774,636 6,287,037 7,473,411
Income tax expense 260,532 1,254,437 1,856,684 2,520,389
------- --------- --------- ---------
Net income $715,106 $2,520,199 $4,430,353 $4,953,022
======== ========== ========== ==========
Net income per share
Basic $0.07 $0.26 $0.45 $0.51
===== ===== ===== =====
Diluted $0.07 $0.25 $0.45 $0.50
===== ===== ===== =====
Cash dividends
declared per share $0.15 $0.15 $0.45 $0.45
===== ===== ===== =====
UNIQUE FABRICATING, INC.
Consolidated Balance Sheets (unaudited)
October 1, January 1,
2017 2017
---- ----
Assets
Current assets
Cash and cash equivalents $1,016,308 $705,535
Accounts receivable - net 28,972,129 26,887,945
Inventory - net 17,031,955 16,731,608
Prepaid expenses and other current assets:
Prepaid expenses and other 3,771,880 2,087,069
Refundable taxes 900,767 783,139
Total current assets 51,693,039 47,195,296
Property, plant, and
equipment - net 22,959,606 21,197,922
Goodwill 28,871,179 28,871,179
Intangible assets- net 20,666,921 23,758,342
Other assets
Investments - at cost 1,054,120 1,054,120
Deposits and other assets 312,913 266,369
Deferred tax asset 399,405 193,577
------- -------
Total assets $125,957,183 $122,536,805
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $13,404,097 $13,451,816
Current maturities of
long-term debt 3,506,248 2,405,446
Income taxes payable 84,383 610,825
Accrued compensation 3,195,607 2,734,155
Other accrued liabilities 1,117,899 1,065,740
Other liabilities - 168,880
--- -------
Total current liabilities 21,308,234 20,436,862
Long-term debt - net of
current portion 28,364,454 28,029,041
Line of credit-net 22,065,563 20,176,058
Deferred tax liability 3,964,663 3,836,281
---------
Total liabilities 75,702,914 72,478,242
Stockholders' Equity
Common stock, $0.001 par
value - 15,000,000 shares
authorized and 9,757,563
and 9,719,772 issued and
outstanding at October 1,
2017 and January 1, 2017,
respectively 9,758 9,720
Additional paid-in-
capital 45,677,445 45,525,237
Retained earnings 4,567,066 4,523,606
--------- ---------
Total stockholders' equity 50,254,269 50,058,563
---------- ----------
Total liabilities and
stockholders' equity $125,957,183 $122,536,805
============ ============
UNIQUE FABRICATING, INC.
Consolidated Statements of Cash Flows (Unaudited)
Thirty-Nine Weeks Thirty-Nine Weeks
Ended October 1, 2017 Ended October 2, 2016
--------------------- ---------------------
Cash flows from operating activities
Net income $4,430,353 $4,953,022
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 4,703,909 3,996,472
Amortization of debt issuance costs 113,412 94,537
Loss on sale of assets 12,442 13,867
Loss on extinguishment of debt - 60,202
Bad debt adjustment 96,531 (168,830)
(Gain) loss on derivative
instrument (188,054) 183,402
Stock option expense 115,245 126,733
Deferred income taxes (77,446) (509,408)
Changes in operating assets and liabilities that provided
(used) cash:
Accounts receivable (2,180,715) (6,777,982)
Inventory (300,347) 269,870
Prepaid expenses and other assets (1,829,809) (194,521)
Accounts payable 758,356 3,186,895
Accrued and other liabilities (12,831) 209,308
------- -------
Net cash provided by operating
activities 5,641,046 5,443,567
--------- ---------
Cash flows from investing activities
Purchases of property and equipment (3,466,432) (2,443,251)
Proceeds from sale of property and
equipment 29,347 12,181
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 (3,437,085) (23,249,042)
---------- -----------
Cash flows from financing activities
Net change in bank overdraft (806,075) 846,220
Proceeds from debt - 32,000,000
Payments on term loans (2,574,545) (1,839,212)
Debt issuance costs - (514,441)
Proceeds from revolving credit
facilities, net 5,837,324 7,716,220
Pay-off of old senior credit
facility term debt - (15,375,000)
Proceeds from exercise of stock
options and warrants 37,001 103,989
Distribution of cash dividends (4,386,893) (4,354,106)
Net cash provided by financing
activities (1,893,188) 18,583,670
---------- ----------
Net increase (decrease) in cash and
cash equivalents 310,773 778,195
Cash and cash equivalents -
beginning of period 705,535 726,898
------- -------
Cash and cash equivalents - end of
period $1,016,308 $1,505,093
========== ==========
Supplemental disclosure of cash flow Information - cash
paid for
Interest $1,953,206 $1,304,890
Income taxes $1,793,316 $2,519,010
Supplemental disclosure of cash flow Information - non
cash 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 Thirteen Weeks Thirty-Nine Weeks Thirty-Nine Weeks
Ended October 1, Ended October 2, Ended October 1, Ended October 2,
2017 2016 2017 2016
---- ---- ---- ----
GAAP Net income $715,106 $2,520,199 $4,430,353 $4,953,022
Plus: Interest expense, net 770,149 525,167 2,089,056 1,739,243
Plus: Income tax expense 260,532 1,254,437 1,856,684 2,520,389
Plus: Depreciation and
amortization 1,596,272 1,488,722 4,703,909 3,996,472
Plus: Non-cash stock award 40,229 40,736 115,245 126,733
Plus: Non-recurring
integration expenses 27,415 35,744 30,794 104,913
Plus: Non-recurring step-
up of inventory basis to
fair market value - 39,352 - 318,518
Plus: Transaction fees - 10,437 23,235 858,688
Plus: Restructuring
expenses - - - 35,054
Plus: One-time consulting
and licensing ERP system
implementation costs 276,312 - $815,307 -
Adjusted EBITDA $3,686,015 $5,914,794 $14,064,583 $14,653,032
========== ========== =========== ===========
UNIQUE FABRICATING, INC.
Reconciliation of GAAP Net Income to Adjusted Diluted Earnings Per Share
Thirteen Weeks Thirteen Weeks Thirty-Nine Weeks Thirty-Nine Weeks
Ended October 1, Ended October 2, Ended October 1, Ended October 2,
2017 2016 2017 2016
---- ---- ---- ----
GAAP Net income $715,106 $2,520,199 $4,430,353 $4,953,022
Plus: Non-cash stock award 40,229 40,736 115,245 126,733
Plus: Non-recurring
integration expenses 27,415 35,744 30,794 104,913
Plus: Non-recurring step-
up of inventory basis to
fair market value - 39,352 - - 318,518
Plus: Transaction fees - 10,437 23,235 858,688
Plus: Debt extinguishment
costs - - - 60,202
Plus: Restructuring
expenses - - - 35,054
Plus: One-time consulting
and licensing ERP system
implementation costs 276,312 - 815,307 -
Less: Tax impact (91,850) (39,531) (290,766) (437,502)
Adjusted Net income $967,212 $2,606,937 $5,124,168 $6,019,628
======== ========== ========== ==========
Diluted weighted average
shares outstanding 9,898,273 9,918,956 9,903,240 9,885,949
Net income per share
Diluted - GAAP $0.07 $0.25 $0.45 $0.50
===== ===== ===== =====
Diluted - Adjusted $0.10 $0.26 $0.52 $0.61
===== ===== ===== =====
UNIQUE FABRICATING, INC.
Purchase Accounting Impacts and Other Effects
Thirteen Weeks Thirteen Weeks Thirty-Nine Weeks Thirty-Nine Weeks
Ended October 1, Ended October 2, Ended October 1, Ended October 2,
2017 2016 2017 2016
---- ---- ---- ----
Non-cash purchase accounting impacts
Customer relationships
amortization $837,522 $837,520 $2,510,570 $2,208,223
Trade name
amortization 72,926 72,926 218,779 196,204
Non-compete
amortization 44,162 44,162 132,486 132,486
Unpatented technology 76,529 76,529 229,587 129,511
Less: Tax impact (272,326) (322,481) (896,001) (861,745)
Net income effect $758,813 $708,656 $2,195,421 $1,804,679
======== ======== ========== ==========
Net income per share impact
GAAP - Basic $0.08 $0.07 $0.23 $0.19
===== ===== ===== =====
GAAP - Diluted $0.08 $0.07 $0.22 $0.18
===== ===== ===== =====
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SOURCE Unique Fabricating, Inc.
