Unique Fabricating, Inc. Reports Third Quarter 2021 Financial Results
Unique Fabricating (UFAB) reported a net loss of $1.9 million for Q3 2021, compared to a net income of $1.0 million during the same period in 2020. Net sales declined to $29.9 million, down from $35.6 million in Q3 2020, primarily due to supply chain disruptions and labor shortages. Gross profit also decreased to 11.0% of net sales. On a positive note, net debt reduced to $46.4 million and the company successfully issued 1,954,000 shares for approximately $4.4 million. However, compliance issues with financial covenants pose a risk to future borrowing.
- Net debt decreased to $46.4 million.
- Successful issuance of 1,954,000 shares raised approximately $4.4 million.
- Net loss of $1.9 million compared to net income of $1.0 million in Q3 2020.
- Net sales fell to $29.9 million from $35.6 million in Q3 2020.
- Gross profit margin decreased to 11.0% from 23.1% year-over-year.
- Non-compliance with financial covenants may affect future borrowing.
AUBURN HILLS, MI / ACCESSWIRE / November 15, 2021 / 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, 2021.
Third Quarter 2021 Financial Results
- Net sales of
$29.9 million compared to$35.6 million in the third quarter of 2020. - Net loss of
$1.9 million or$0.19 per basic and diluted share compared to net income of$1.0 million or$0.10 per basic and diluted share in the third quarter of 2020. - Net debt (1) decreased
$3.2 million to$46.4 million as of September 30, 2021, from$49.6 million as of December 31, 2020. - Interest expense increased
$0.1 million to$0.8 million compared to the prior year period of$0.7 million .
"Unique Fabricating continues to navigate the significant supply chain, labor, and customer demand fluctuation challenges, while maintaining our ability to service our customers well," commented Doug Cain, Unique Fabricating's Chief Executive Officer. "As we all weather these challenges, we have taken clear steps to remain flexible and improve capability so our customers and suppliers can continue to rely on Unique Fabricating as an important partner in the value chain. The supply chain issues have driven our costs higher and continue to disrupt manufacturing volumes. When combined with the ongoing labor shortages throughout the supply chain, our customers are continuing to reduce volumes and near-term visibility is limited. We believe that comprehensive commercial and manufacturing challenges are creating opportunities for us to take over current business from competitors who have been significantly challenged to meet customer requirements and to benefit from other potential strategic initiatives."
"To date, we have been able to manage the supply chain issues and labor situation to ensure continued timely supply of customer requirements and are maintaining inventory availability to service higher volumes albeit at higher costs," added Mr. Cain. "Ongoing production shutdowns by OEM and Tier 1 customers and extreme volatility of altered production schedules from our automotive customers, often on short notice, are creating incremental challenges and have had a negative impact on our financial results for the third quarter. That said, we have been managing these impacts, and are positioned to emerge as one of the stronger players when this situation abates."
Mr. Cain continued, "We continue to maintain productive dialogues with our lending syndicate. While the industry production forecasts for next year are encouraging, we remain somewhat skeptical regarding the timing of the ramp increase in 2022 but do believe that the strong pent-up demand will lead to higher production volumes in 2022 and beyond. Based on the latest third-party forecasts, the automotive industry is expected to have experienced two consecutive years with production levels of only 13 million units, after average production levels of 17 million units for the preceding four years, resulting in depleted inventory and substantial pent-up demand. Our skepticism concerning the previous third-party forecasted automotive production third quarter volumes, as discussed in the second quarter earnings release, proved somewhat prescient, though volumes were even worse than our discounted outlook. We are managing these turbulent times until production levels increase."
Third Quarter 2021 Financial Summary
Net sales for the quarter were
Net loss was
Balance Sheet Summary
As of September 30, 2021, the Company had approximately
Private Placement of Securities
On September 21, 2021, the Company issued 1,954,000 shares of common stock at a price of
Forbearance Agreement
As of September 30, 2021, the Company was not in compliance with one of the financial covenants set forth by its Forbearance Agreement, as amended. Failure to be in compliance with the financial covenants constitutes an event of default. The Company has been working with its lending group to enter into an amendment and waiver to cure the covenant default; however, there is no assurance that the lenders will waive the default or agree to an amendment to the current provisions set forth in the Forbearance Agreement. As of the date of this press release, the lending group has not exercised its rights as set forth by the Forbearance Agreement and the Company has been able to continue to borrow on its revolving line of credit; however, there is no assurance that the lenders will not exercise their rights, which they may do at any time, including discontinuing the Company's ability to borrow on its revolving line of credit.
Results Conference Call
Unique Fabricating will host a conference call and live webcast today at 4:30 p.m. Eastern Time to review the quarterly results and provide a corporate update. To access the call, please dial (877) 545-0523 (toll free) or (973) 528-0016 and if requested, reference conference ID 497686. The conference call will also be webcast live on the Investor Relations section of Unique Fabricating's web site 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 7 p.m. ET on November 15, 2021 until 11:59 p.m. ET on November 29, 2021 by dialing (877) 481-4010 (United States) or (919) 882-2331 (international) and using the passcode 43524.
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 Amended and Restated Credit Agreement, as amended, including by the forbearance agreement), a non-GAAP financial measure, in this press release to allow evaluation of our covenant compliance in accordance with our Amended and Restated Credit Agreement. Consolidated EBITDA, as defined in our Credit Agreement, is 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 by the Amended and Restated Credit Agreement and there are dollar limitations on certain adjustments and add backs. Please refer to our Amended and Restated Credit Agreement, as amended, including by the forbearance agreement, 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 illustrate our covenant, not as a supplemental performance measurement. Certain of the allowable adjustments and add backs to Consolidated EBITDA, as defined, are recurring in nature and cash expenses, which we believe limits the usefulness of Consolidated EBITDA as a measurement of the Company's performance. As of December 31, 2020 and March 31, 2021, we were not in compliance with our financial covenants and, as a result, in default under the Amended and Restated Credit Agreement.
We entered into a Forbearance Agreement with our lenders under which, during a period commencing on April 9, 2021 and through and including June 15, 2021, the Company was able to borrow on its Revolver, subject to the terms and conditions to making a revolving credit advance, including availability, and the Lenders agreed, subject to the terms of the Forbearance Agreement, to forbear from enforcing their rights or seeking to collect payment of the Company's debt or disposing of the collateral securing the debt.
On June 14, 2021, the Company entered into the First Amendment to the Forbearance Agreement, which among other things, extended the forbearance period from June 15, 2021 to February 28, 2022, suspended the testing of the Total Leverage Ratio and the Debt Service Ratio and included revised requirements for Minimum Liquidity and Minimum Consolidated EBITDA for the monthly periods through and including February 28, 2022, beginning with the month ending July 31, 2021.
On September 21, 2021, the Company entered into the Second Amendment to Forbearance Agreement, which among other things, makes changes to the calculations of financial covenants, contains revised requirements for Minimum Liquidity and Minimum Consolidated EBITDA, as defined, for the monthly periods through and including February 28, 2022, and revises the Revolving Credit Aggregate Commitment from
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 third quarter of 2021 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, 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 31, 2020 as filed with the Securities and Exchange Commission and in particular the Section entitled "Risk Factors", as well as any updates to those risk factors included 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.
| UNIQUE FABRICATING INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited - dollars in thousands) | ||||||||
| September 30, 2021 | December 31, 2020 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 1,146 | $ | 760 | ||||
Accounts receivable, net of reserves of approximately | 25,582 | 23,759 | ||||||
Inventory, net | 16,982 | 11,951 | ||||||
Prepaid expenses and other current assets: | ||||||||
Prepaid expenses and other | 2,591 | 5,643 | ||||||
Refundable taxes | 4,486 | 4,027 | ||||||
Total current assets | 50,787 | 46,140 | ||||||
Property, plant, and equipment, net | 22,393 | 22,383 | ||||||
Goodwill | 16,996 | 22,111 | ||||||
Intangible assets | 5,668 | 7,605 | ||||||
Other assets | ||||||||
Operating leases | 10,360 | 10,415 | ||||||
Investments, at cost | 1,054 | 1,054 | ||||||
Deposits and other assets | 564 | 579 | ||||||
Deferred tax asset | 1,572 | 893 | ||||||
Total assets | $ | 109,394 | $ | 111,180 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 13,306 | $ | 10,892 | ||||
Current maturities of long-term debt | 30,373 | 35,864 | ||||||
Income taxes payable | 421 | 204 | ||||||
Revolver, current maturities | 17,156 | 11,494 | ||||||
Accrued compensation | 1,263 | 792 | ||||||
Other accrued liabilities | 4,288 | 4,551 | ||||||
Total current liabilities | 66,807 | 63,797 | ||||||
Long-term debt, net of current maturities | - | 2,999 | ||||||
Other long-term liabilities: | ||||||||
Other liabilities | 9,987 | 10,519 | ||||||
Total liabilities | 76,794 | 77,315 | ||||||
Stockholders' equity: | ||||||||
Common stock, | 12 | 10 | ||||||
Additional paid-in-capital | 50,293 | 46,126 | ||||||
Accumulated deficit | (17,705 | ) | (12,271 | ) | ||||
Total stockholders' equity | 32,600 | 33,865 | ||||||
Total liabilities and stockholders' equity | $ | 109,394 | $ | 111,180 | ||||
| UNIQUE FABRICATING INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited - dollars in thousands, except per share amounts) | |||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
Net sales | $ | 29,909 | $ | 35,550 | $ | 95,603 | $ | 85,186 | |||||||
Cost of sales | 26,629 | 27,342 | 81,845 | 69,546 | |||||||||||
Gross profit | 3,280 | 8,208 | 13,758 | 15,640 | |||||||||||
Selling, general, and administrative expenses | 5,741 | 6,381 | 17,636 | 18,608 | |||||||||||
Impairment | 5,115 | - | 5,115 | - | |||||||||||
Restructuring expenses | - | - | - | 1,193 | |||||||||||
Operating income (loss) | (7,576 | ) | 1,827 | (8,993 | ) | (4,161 | ) | ||||||||
Other income (expense): | |||||||||||||||
Other, net | 6,041 | 32 | 6,080 | 26 | |||||||||||
Interest expense | (843 | ) | (711 | ) | (2,305 | ) | (3,000 | ) | |||||||
Other expense, net | 5,198 | (679 | ) | 3,775 | (2,974 | ) | |||||||||
Income (Loss) before income taxes | (2,378 | ) | 1,148 | (5,218 | ) | (7,135 | ) | ||||||||
Income tax expense (benefit) | (522 | ) | 152 | 216 | (1,507 | ) | |||||||||
Net income (loss) | $ | (1,856 | ) | $ | 996 | $ | (5,434 | ) | $ | (5,628 | ) | ||||
Net income (loss) per share: | |||||||||||||||
Basic | $ | (0.19 | ) | $ | 0.10 | $ | (0.55 | ) | $ | (0.58 | ) | ||||
Diluted | $ | (0.19 | ) | $ | 0.10 | $ | (0.55 | ) | $ | (0.58 | ) | ||||
| UNIQUE FABRICATING INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited - dollars in thousands) | |||||||
| Nine Months Ended September 30, | |||||||
| 2021 | 2020 | ||||||
Cash Flows from Operating Activities: | |||||||
Net loss | $ | (5,434 | ) | $ | (5,628 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Impairment of goodwill | 5,115 | - | |||||
Depreciation and amortization | 4,271 | 5,211 | |||||
Amortization of debt issuance costs | 158 | 111 | |||||
Loss on sale of assets | (12 | ) | 118 | ||||
Bad debt adjustment | (197 | ) | - | ||||
Loss (gain) on derivative instrument | (412 | ) | 469 | ||||
Gain on forgiveness of debt | (6,000 | ) | - | ||||
Stock option expense | 332 | 88 | |||||
Accrued in-kind interest on long term debt | 25 | - | |||||
Deferred income taxes | (679 | ) | (1,845 | ) | |||
Changes in operating assets and liabilities that provided (used) cash: | |||||||
Accounts receivable | (1,626 | ) | (2,300 | ) | |||
Inventory | (5,031 | ) | 781 | ||||
Prepaid expenses and other assets | 2,608 | (2,576 | ) | ||||
Accounts payable | 3,125 | 3,563 | |||||
Other assets and liabilities, net | 154 | 1,867 | |||||
Net cash provided by (used for) operating activities | (3,603 | ) | (141 | ) | |||
Cash Flows from Investing Activities: | |||||||
Capital expenditures | (2,432 | ) | (1,382 | ) | |||
Proceeds from sale of property, plant and equipment | 100 | 883 | |||||
Net cash provided by (used for) investing activities | (2,332 | ) | (499 | ) | |||
Cash Flows from Financing Activities: | |||||||
Net change in bank overdraft | (710 | ) | (289 | ) | |||
Payments on term loans and capital expenditure line | (2,597 | ) | (2,186 | ) | |||
Payments on revolving credit facilities | (30,087 | ) | (19,281 | ) | |||
Proceeds from revolving credit facilities | 35,671 | 17,530 | |||||
Proceeds from the issuance of common stock and warrants | 4,044 | - | |||||
Debt issuance costs | - | (151 | ) | ||||
Proceeds from PPP Note | - | 5,999 | |||||
Net cash provided by financing activities | 6,321 | 1,622 | |||||
Cash and cash equivalents: | |||||||
Net increase in cash and cash equivalents | 386 | 982 | |||||
Cash and cash equivalents at beginning of period | 760 | 650 | |||||
Cash and cash equivalents at end of period | $ | 1,146 | $ | 1,632 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 2,178 | $ | 3,034 | |||
Cash paid for income taxes | $ | 761 | $ | 329 | |||
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, as amended, a non-GAAP measure, for the nine months ended September 30, 2021:
| Nine Months Ended September 30, 2021 | |||
Net income (loss) | $ | (5,434 | ) |
Plus: | |||
Interest expense | 2,305 | ||
Income tax expense | 216 | ||
Depreciation and amortization | 4,271 | ||
Impairment of goodwill | 5,115 | ||
Non-cash stock awards | 332 | ||
Non-recurring expenses (a) | 14 | ||
Severance costs (b) | 155 | ||
Gain on extinguishment of debt | (6,072 | ) | |
Forbearance agreement fees (c) | 731 | ||
Consolidated EBITDA, as defined | $ | 1,633 | |
(a) Represents any other non-recurring, non-cash gains during such period, including without limitation, (i) gains from the sale or exchange of assets other than in the ordinary course of business, and (ii) gains from early extinguishment of Indebtedness or Hedging Agreements
(b) Represents costs incurred with respect to employee severance payments made to terminated employees in aggregate amount not to exceed Four Hundred Fifty Thousand and 00/100 Dollars (
(c) Represents costs and expenses incurred in connection with the forbearance agreement, the First Amendment to forbearance agreement, Second Amendment to forbearance agreement, and risk mitigation costs in an aggregate amount not to exceed
| RECONCILIATION OF NET DEBT TO DEBT | |||||||
| September 30, 2021 | December 31, 2020 | ||||||
Current maturities of long-term debt | $ | 30,373 | $ | 35,864 | |||
Revolver, current maturities | 17,156 | 11,494 | |||||
Long-term debt, net of current maturities | - | 2,999 | |||||
Line of credit | - | - | |||||
Debt | 47,529 | 50,357 | |||||
Less: Cash and cash equivalents | 1,146 | 760 | |||||
Net debt | $ | 46,383 | $ | 49,597 | |||
Investor Inquiries:
Rob Fink, FNK IR
(646) 809-0408
rob@fnkir.com
SOURCE: Unique Fabricating, Inc.
View source version on accesswire.com:
https://www.accesswire.com/672963/Unique-Fabricating-Inc-Reports-Third-Quarter-2021-Financial-Results
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