Sypris Reports Third Quarter Results

  Sypris Reports Third Quarter Results

                    Gross Margins Expand on Lower Revenue

Business Wire

LOUISVILLE, Ky. -- November 06, 2012

Sypris Solutions, Inc. (Nasdaq/NM: SYPR) today reported financial results for
its third quarter ended September30,2012.

                                  HIGHLIGHTS

                            ─────────────────────

For the Third Quarter:

  *Revenue decreased 13.6% from the third quarter of last year.
  *Gross margin increased 60 basis points to 11.9%.
  *Earnings from continuing operations were $0.03 per diluted share.
  *Free cash flow was $4.2million, or $0.22 per diluted share.

For the Nine Months:

  *Revenue increased 8.8% compared to the first nine months of last year.
  *Gross profit increased 32.4% compared to the prior year period.
  *Gross margin increased to 12.8% from 10.5% over the same period.
  *Earnings from continuing operations increased to $0.55 per diluted share,
    up from $0.35 per diluted share for the prior year period.

                            ─────────────────────

The Company reported revenue of $78.8million for the third quarter compared
to $91.2million for the prior year period. The Company’s income from
continuing operations for the three months ended September30, 2012 was
$0.6million, or $0.03 per diluted share, as compared to income from
continuing operations of $6.1million, or $0.30 per diluted share, for the
prior year period.

Income from continuing operations for the third quarter of 2012 included a
foreign currency translation loss of $0.6 million and a gain of $1.3 million
in connection with the sale of marketable securities, while income from
continuing operations for the prior year period included a gain of $3.6
million from the disposition of idle assets and a foreign currency translation
gain of $2.8 million.

The Company’s net loss for the third quarter of 2012 was $5.7million, or
$0.29 per diluted share, which included a $6.3 million expense in discontinued
operations for the settlement of an arbitration case associated with the 2009
divestiture of Sypris Test & Measurement. Net income for the prior year
quarter was $6.1million, or $0.30per diluted share, and included the gain of
$3.6 million from the disposition of idle assets and the foreign currency
translation gain of $2.8 million mentioned earlier.

For the nine months ended September30, 2012, the Company reported revenue of
$274.1million compared to $252.0million for the prior year period and income
from continuing operations of $11.1million, or $0.55 per diluted share, as
compared to $7.0million, or $0.35per diluted share, for the prior year
period.

Income from continuing operations for the nine months ended September 30, 2012
included a foreign currency translation loss of $0.9 million, a gain of $2.6
million on the sale of idle assets and a gain of $1.9 million in connection
with the sale of marketable securities, while income from continuing
operations for the prior year period included gains of $3.0 million in
connection with a customer settlement, $4.2 million from the disposition of
idle assets and a foreign currency translation gain of $2.1 million.

The Company’s net income for the nine months ended September30,2012 was
$4.0million, or $0.18 per diluted share, and included one-time expenses of
$7.1million in discontinued operations related to the resolution of the
arbitration case mentioned earlier. Net income for the prior year period was
$6.6 million, or $0.33 per diluted share, and included a loss of $0.5 million
associated with the arbitration case and the positive impact of the gains
mentioned previously.

“Our Industrial Group responded well to the unexpected reduction in the
production of commercial vehicles, which resulted in a 21.3% sequential
decline in quarterly revenue,” said Jeffrey T. Gill, President and Chief
Executive Officer. "We now expect the production of commercial vehicles to
remain soft in the short-term as OEMs work to rebalance inventory with
demand.”

“However, with an estimated 70% of the vehicles on the road today being of an
age that is in excess of eight years, the eventual replacement cycle is
expected to be robust for an extended period of time. In the interim, we
believe that our improved cost profile and strong operational performance,
which resulted in a 60 basis point increase in gross margin during the most
recent quarter when compared to the same period last year, will enable us to
sustain the profitability of this business.”

“Our Aerospace and Defense business continues to be affected by budgetary and
funding uncertainties within the U.S. Department of Defense that are not
expected to be eliminated until Congress successfully addresses the fiscal
cliff and its related issues. Despite the recent quarterly drop in revenue,
our improved product mix resulted in a 260 basis point expansion of gross
margin when compared to the third quarter of last year.”

“In the long-term, we will continue to invest in new products and programs to
further improve the attractiveness of our business portfolio, with a specific
emphasis on trusted solutions for identity management, cryptographic key
distribution and cyber analytics. We believe that our product mix going
forward should help us to maintain our margin in the face of what is likely to
be lumpy revenue until the many macroeconomic and policy issues are
successfully resolved.”

The Industrial Group

Revenue for our Industrial Group decreased 10.3% to $65.2million in the third
quarter compared to $72.6million for the prior year period and 21.3%
sequentially, primarily as a result of a recent move by commercial vehicle
OEM’s to rebalance inventory with lower levels of demand. Gross profit for the
quarter was $6.6million, or 10.1% of revenue, compared to $6.9million, or
9.5% of revenue for the same period in 2011, reflecting our ability to protect
margins despite lower volumes.

The Electronics Group

Revenue for our Electronics Group was $13.6million in the third quarter
compared to $18.5million in the prior year period, primarily due to the
completion of certain electronic manufacturing and engineering services. Gross
profit for the quarter was $2.8million, or 20.6% of revenue, compared to
$3.3million, or 18.0% of revenue for the same period in 2011, reflecting
improved product mix.

Outlook

Mr. Gill added, “We will continue to concentrate on the daily execution of our
business. We expect recent investments in production cells and automation by
our Industrial Group to contribute to further margin expansion going forward
once volumes return to full replacement levels later next year. Our
Electronics Group will continue to face near-term revenue challenges that we
expect to be ongoing until the outlook for defense spending is clarified and
authorized.”

Sypris Solutions is a diversified provider of outsourced services and
specialty products. The Company performs a wide range of manufacturing,
engineering, design and other technical services, typically under multi-year,
sole-source contracts with corporations and government agencies in the markets
for truck components and assemblies and aerospace and defense electronics. For
more information about Sypris Solutions, visit its Web site at www.sypris.com.

Each “forward-looking statement” herein is subject to serious risks and should
not be relied upon, as detailed in our most recent Form 10-K and Form 10-Q and
subsequent SEC filings. Briefly we currently believe that such risks also
include: declining revenues and backlog in our aerospace and defense business
lines as we attempt to transition from legacy products and services into new
market segments and technologies; potential impairments, non-recoverability or
write-offs of goodwill, assets or deferred costs, including capitalized
pre-contract costs related to the development of a replacement for certain
aerospace and defense products; dependence on, recruitment or retention of key
employees; reliance on major customers or suppliers, especially in the
automotive or aerospace and defense electronics sectors including Dana Holding
Corporation, Meritor, Sistemas, Eaton, and the Australian government; U.S.
government spending on products and services that our Electronics Group
provides, including the timing of budgetary decisions; our ability to develop
new products and programs within the Electronics Group especially in new
market segments and technologies; volatility of our customers’ forecasts,
financial conditions, market shares, product requirements or scheduling
demands; cyber security threats and disruptions; our ability to adequately
finance current operations, future growth or expenses and potential
acquisitions due to the cost and availability of debt, equity capital, or
insurance; regulatory actions or sanctions (in each case including FCPA, OSHA
and Federal Acquisition Regulations, among others); product liability and
warranty expenses caused by our inability to effectively limit contractual
obligations or defects in products or services; inventory valuation risks
including obsolescence, shrinkage, theft, overstocking or underbilling; our
inability to successfully launch or sustain new or next generation programs or
product features, especially in accordance with budgets or committed delivery
schedules; the costs of compliance with our auditing, regulatory or
contractual obligations; breakdowns, relocations or major repairs of machinery
and equipment; pension valuation, health care or other benefit costs; labor
relations; strikes; union negotiations; changes in licenses, security
clearances, or other legal rights to operate, manage our work force or import
and export as needed; changes or delays in government or other customer
budgets, funding or programs; potential weaknesses in internal controls over
financial reporting and enterprise risk management; the cost, efficiency and
yield of our operations and capital investments, including working capital,
production schedules, cycle times, scrap rates, injuries, wages, overtime
costs, freight or expediting costs; disputes or litigation involving customer,
supplier, lessor, landlord, creditor, stockholder, product liability or
environmental claims; fees, costs or other dilutive effects of refinancing;
compliance with covenants; cost and availability of raw materials such as
steel, component parts, natural gas or utilities; adverse impacts of new
technologies or other competitive pressures which increase our costs or erode
our margins; failure to adequately insure against or to identify environmental
or other insurable risks; revised contract prices or estimates of major
contract costs; risks of foreign operations; currency exchange rates; war,
terrorism, or political uncertainty; unanticipated or uninsured disasters,
losses or business risks; inaccurate data about markets, customers or business
conditions; other unknown risks and uncertainties.

Non-GAAP Measures

In addition to the results reported in accordance with accounting principles
generally accepted in the United States ("GAAP") included in this press
release, the company has provided information regarding free cash flow, which
is a non-GAAP financial measure.

Free cash flow is defined as cash provided by operating activities less
capital expenditures. Free cash flow is useful in analyzing the company’s
ability to service and repay its debt. Management uses this non-GAAP measure
in planning and forecasting for future periods.

This non-GAAP measure should not be considered a substitute for our reported
results prepared in accordance with GAAP.


Reconciliation of Three and Nine Months Ended Free Cash Flow
(in thousands)

                    Three Months Ended          Nine Months Ended
                      September 30,  October 2,   September 30,  October 2,
                      2012            2011         2012            2011
                      (Unaudited)                  (Unaudited)
                                                                   
Consolidated Cash
Flow Statement:
                                                                   
Cash flows from
operating
activities:
Net cash provided
by operating          $  5,918        $ 7,749      $  1,087        $ 9,644
activities
                                                                   
Cash flows from
investing
activities:
Capital                  (1,676  )      (929   )      (4,106  )      (3,827  )
expenditures
Proceeds from
sale of                  1,271          —             1,271          —
marketable
securities
Proceeds from            —              4,062         4,542          4,637
sale of assets
Other                   —            10          —            44      
Net cash provided
by (used in)             (405    )      3,143         1,707          854
investing
activities
                                                                   
Cash flows from
financing
activities:
Net cash used in
financing               (6,981  )     (9,525 )     (3,886  )     (11,563 )
activities
                                                                   
Net (decrease)
increase in cash         (1,468  )      1,367         (1,092  )      (1,065  )
and cash
equivalents
                                                                   
Cash and cash
equivalents at          18,549       14,160      18,173       16,592  
beginning of
period
                                                                   
Cash and cash
equivalents at        $  17,081      $ 15,527    $  17,081      $ 15,527  
end of period
                                                                   
Free Cash Flow:
                                                                   
Net cash provided
by operating          $  5,918        $ 7,749      $  1,087        $ 9,644
activities
Capital                 (1,676  )     (929   )     (4,106  )     (3,827  )
expenditures
                                                                   
Free cash flow        $  4,242       $ 6,820     $  (3,019  )    $ 5,817   
                                                                   
Diluted shares           19,567         19,024        19,423         18,999
outstanding
                                                                   
Free cash flow        $  0.22         $ 0.36       $  (0.16   )    $ 0.31
per share
                                                                   


SYPRIS SOLUTIONS, INC.
Financial Highlights
(In thousands, except per share amounts)

                                          Three Months Ended
                                            September 30,  October 2,
                                            2012            2011
                                            (Unaudited)
Revenue                                     $  78,763       $ 91,177
Net (loss) income                           $  (5,739   )   $ 6,082
Basic income (loss) per common share:
Continuing operations                       $  0.03         $ 0.30
Discontinued operations                       (0.33    )    -       
Net (loss) income per share                 $  (0.30    )   $ 0.30    
Diluted income (loss) per common share:
Continuing operations                       $  0.03         $ 0.30
Discontinued operations                       (0.32    )    -       
Net (loss) income per share                 $  (0.29    )   $ 0.30    
Weighted average shares outstanding:
Basic                                          19,074         18,844
Diluted                                        19,567         19,024

                                                            
                                                            
                                                            
                                            Nine Months Ended
                                            September 30,   October 2,
                                            2012            2011
                                            (Unaudited)
Revenue                                     $  274,138      $ 252,045
Net income                                  $  3,987        $ 6,584
Basic income (loss) per common share:
Continuing operations                       $  0.56         $ 0.35
Discontinued operations                       (0.37    )    (0.02   )
Net income per share                        $  0.19        $ 0.33    
Diluted income (loss) per common share:
Continuing operations                       $  0.55         $ 0.35
Discontinued operations                       (0.37    )    (0.02   )
Net income per share                        $  0.18        $ 0.33    
Weighted average shares outstanding:
Basic                                          19,038         18,813
Diluted                                        19,423         18,999
                                                                      


Sypris Solutions, Inc.
Consolidated Statements of Operations
(in thousands, except for per share data)

                    Three Months Ended          Nine Months Ended
                      September 30,  October 2,   September 30,  October 2,
                      2012            2011         2012            2011
                      (Unaudited)                  (Unaudited)
Net revenue:
Industrial Group      $  65,176       $ 72,647     $  230,548      $ 201,082
Electronics Group       13,587       18,530      43,590       50,963  
Total net revenue        78,763         91,177        274,138        252,045
Cost of sales:
Industrial Group         58,602         65,716        205,146        181,939
Electronics Group       10,787       15,198      33,881       43,584  
Total cost of            69,389         80,914        239,027        225,523
sales
Gross profit:
Industrial Group         6,574          6,931         25,402         19,143
Electronics Group       2,800        3,332       9,709        7,379   
Total gross              9,374          10,263        35,111         26,522
profit
Selling, general
and                      7,633          7,232         22,926         20,905
administrative
Research and             1,084          1,097         2,513          2,637
development
Amortization of          22             24            66             80
intangible assets
Nonrecurring
(income) expense,        -              -             -              (3,000  )
net
Restructuring           -            356         -            233     
expense, net
Operating income         635            1,554         9,606          5,667
Interest expense,        98             153           320            1,608
net
(Gain) on sale of
marketable               (1,313  )      -             (1,850   )     -
securities
Other (income)          561          (6,489 )     (1,970   )    (5,983  )
expense, net
Income from
continuing               1,289          7,890         13,106         10,042
operations before
taxes
Income tax              697          1,808       1,989        3,008   
expense
Income from
continuing               592            6,082         11,117         7,034
operations
Loss from
discontinued            (6,331  )     -           (7,130   )    (450    )
operations, net
of tax
Net (loss) income     $  (5,739  )    $ 6,082     $  3,987       $ 6,584   
Basic income
(loss) per share:
Income per share
from continuing       $  0.03         $ 0.30       $  0.56         $ 0.35
operations
Loss per share
from discontinued       (0.33   )     -           (0.37    )    (0.02   )
operations
Net (loss) income     $  (0.30   )    $ 0.30      $  0.19        $ 0.33    
per share
Diluted income
(loss) per share:
Income per share
from continuing       $  0.03         $ 0.30       $  0.55         $ 0.35
operations
Loss per share
from discontinued       (0.32   )     -           (0.37    )    (0.02   )
operations
Net (loss) income     $  (0.29   )    $ 0.30      $  0.18        $ 0.33    
per share
Dividends
declared per          $  0.02         $ -          $  0.06         $ -
common share
Weighted average
shares
outstanding:
Basic                    19,074         18,844        19,038         18,813
Diluted                  19,567         19,024        19,423         18,999
                                                                   


Sypris Solutions, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)

                                                September 30,  December 31,
                                                  2012            2011
                                                  (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents                         $  17,081       $  18,173
Restricted cash - current                            3,000           —
Accounts receivable, net                             44,243          42,984
Inventory, net                                       35,876          33,621
Other current assets                                 3,335           3,468
Assets held for sale                                —             1,739   
Total current assets                                 103,535         99,985
Restricted cash                                      —               3,000
Investment in marketable securities                  —               1,749
Property, plant and equipment, net                   53,344          56,891
Goodwill                                             6,900           6,900
Other assets                                        8,106         7,200   
Total assets                                      $  171,885     $  175,725 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                  $  45,807       $  51,303
Accrued liabilities                                 30,434        23,569  
Total current liabilities                            76,241          74,872
Long-term debt                                       8,000           10,000
Other liabilities                                   23,281        30,385  
Total liabilities                                    107,522         115,257
Stockholders’ equity:
Preferred stock, par value $0.01 per share,          —               —
975,150 shares authorized; no shares issued
Series A preferred stock, par value $0.01 per
share, 24,850 shares authorized; no shares           —               —
issued
Common stock, non-voting, par value $0.01 per
share, 10,000,000 shares authorized; no              —               —
shares issued
Common stock, par value $0.01 per share,
30,000,000 shares authorized; 20,204,247
shares issued and 20,113,800 outstanding in          202             201
2012 and 20,108,635 shares issued and
19,995,401 outstanding in 2011
Additional paid-in capital                           149,404         149,160
Retained deficit                                     (63,938  )      (66,722 )
Accumulated other comprehensive loss                 (21,304  )      (22,170 )
Treasury stock, 90,447 and 113,234 shares in        (1       )     (1      )
2012 and 2011, respectively
Total stockholders’ equity                          64,363        60,468  
Total liabilities and stockholders’ equity        $  171,885     $  175,725 
                                                                             


Sypris Solutions, Inc.
Consolidated Cash Flow Statements
(in thousands)

                                                 Nine Months Ended
                                                                 
                                                   September 30,   October 2,
                                                   2012            2011
                                                   (Unaudited)
Cash flows from operating activities:
Net income                                         $  3,987        $ 6,584
Loss from discontinued operations                    (7,130  )     (450    )
Income from continuing operations                     11,117         7,034
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization                         9,141          10,791
Gain on the sale of marketable securities             (1,850  )      —
Stock-based compensation expense                      1,331          754
Deferred revenue recognized                           (5,919  )      (5,163  )
Deferred loan costs recognized                        58             153
Write-off of debt issuance costs                      —              277
Gain on the sale of assets                            (2,625  )      (4,189  )
Provision for excess and obsolete inventory           629            564
Other noncash items                                   1,514          (2,186  )
Contributions to pension plans                        (1,312  )      (753    )
Changes in operating assets and liabilities:
Accounts receivable                                   (887    )      (12,632 )
Inventory                                             (3,035  )      (6,346  )
Prepaid expenses and other assets                     (638    )      1,138
Accounts payable                                      (5,507  )      17,793
Accrued and other liabilities                        (930    )     2,409   
Net cash provided by operating activities             1,087          9,644
Cash flows from investing activities:
Capital expenditures                                  (4,106  )      (3,827  )
Proceeds from sale of marketable securities           1,271          —
Proceeds from sale of assets                          4,542          4,637
Other                                                —            44      
Net cash provided by investing activities             1,707          854
Cash flows from financing activities:
Repayment of former Revolving Credit Agreement        —              (10,000 )
Repayment of former Senior Notes                      —              (13,305 )
Net proceeds from Credit Facility                     (2,000  )      12,500
Payments for deferred loan costs                      —              (387    )
Common stock repurchases                              (575    )      —
Indirect repurchase of shares for minimum             (511    )      (435    )
statutory tax withholdings
Cash dividends paid                                   (801    )      —
Proceeds from issuance of common stock               1            64      
Net cash used in financing activities                (3,886  )     (11,563 )
Net decrease in cash and cash equivalents             (1,092  )      (1,065  )
Cash and cash equivalents at beginning of            18,173       16,592  
period
Cash and cash equivalents at end of period         $  17,081      $ 15,527  
                                                                             

Contact:

Sypris Solutions, Inc.
Brian A. Lutes, 502-329-2000
Chief Financial Officer
 
Press spacebar to pause and continue. Press esc to stop.