Sypris Reports 2012 Results ───────────────────── Margins and EPS Expand over Prior Year Business Wire LOUISVILLE, Ky. -- March 12, 2013 Sypris Solutions, Inc. (Nasdaq/NM: SYPR) today reported financial results for its fourth quarter and full year ended December31,2012. HIGHLIGHTS ───────────────────── For the Full Year: *Revenue increased to $342 million. *Gross profit increased 24% to $44 million compared to the prior year. *Gross margin increased to 12.8%, up 230 basis points from the prior year. *Earnings per share from continuing operations increased 16% to $0.50 per diluted share, up from $0.43 per diluted share in 2011. *The Company reinstated its common dividend in March of 2012. *The Company was added to the Russell 2000 Index effective June of 2012. ───────────────────── The Company reported revenue of $341.6million for 2012 compared to $335.6million for the prior year period and income from continuing operations of $10.3million, or $0.50per diluted share, as compared to $8.4million, or $0.43per diluted share, for the prior year. “Our Industrial Group responded well to the reduction in the production of commercial vehicles during the second half of 2012,” said Jeffrey T. Gill, president and chief executive officer. “We now expect the commercial vehicle market to remain stable at current levels in the short-term, as OEMs focus on the introduction of the new model year vehicles and engine technologies early in 2013.” “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 an 80 basis point increase in gross margin for our Industrial Group during the year when compared to 2011, 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 in the near term. Despite the decline in revenue in 2012, our improved product mix resulted in a 61.9% increase in gross profit when compared to 2011." “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.” Consolidated income from continuing operations for the full year ended December31,2012 included a foreign currency related loss of $0.8million, a gain of $2.6million on the sale of idle assets, a gain of $1.9million in connection with the sale of marketable securities and a $1.7million write-off of deferred contract costs, while income from continuing operations for the prior year included gains of $3.0million in connection with a customer settlement, $4.5million from the disposition of idle assets and a foreign currency related gain of $2.6million. The Company reported revenue of $67.5million for the fourth quarter compared to $83.6million for the prior year period. The Company’s loss from continuing operations for the three months ended December31,2012 was $0.9million, or $0.04 per diluted share, as compared to income from continuing operations of $1.4million, or $0.07 per diluted share, for the prior year period. The loss from continuing operations for the three months ended December31,2012 included a $1.7million non-cash write-off of deferred contract costs, as mentioned above, due to the current uncertainty surrounding sequestration. The Industrial Group Revenue for our Industrial Group decreased 23.2% to $55.5million in the fourth quarter compared to $72.2million for the prior year period and 14.8% 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 $5.6million, or 10.1% of revenue, compared to $8.2million, or 11.4% of revenue for the same period in 2011. The Electronics Group Revenue for our Electronics Group was $12.0million in the fourth quarter compared to $11.4million in the prior year period, reflecting higher revenue within our space business. Gross profit for the quarter was $3.1million, or 25.6% of revenue, compared to $0.5million, or 4.5% of revenue for the same period in 2011, reflecting improved product mix, including increase product sales to overseas customers, which typically carry higher margins. 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 this 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 the following: 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; dependence on, recruitment or retention of key employees; our ability to successfully develop, launch or sustain new products and programs within the Electronics Group especially in new market segments and technologies; reliance on major customers or suppliers, especially in the automotive or aerospace and defense electronics sectors; adverse impacts of new technologies or other competitive pressures which increase our costs or erode our margins; potential impairments, non-recoverability or write-offs of goodwill, assets or deferred costs; inventory valuation risks including obsolescence, shrinkage, theft, overstocking or underbilling; 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; potential weaknesses in internal controls over financial reporting and enterprise risk management; U.S. government spending on products and services that our Electronics Group provides, including the timing of budgetary decisions; potential liabilities associated with discontinued operations; fees, costs or other dilutive effects of refinancing, or compliance with covenants; the costs of compliance with our auditing, regulatory or contractual obligations; regulatory actions or sanctions (including FCPA, OSHA and Federal Acquisition Regulations, among others); breakdowns, relocations or major repairs of machinery and equipment; pension valuation, health care or other benefit costs; labor relations; strikes; union negotiations; cyber security threats and disruptions; 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 customer budgets, funding or programs; disputes or litigation involving customer, supplier, lessor, landlord, creditor, stockholder, product liability or environmental claims; the costs and supply of debt, equity capital, or insurance; cost and availability of raw materials such as steel, component parts, natural gas or utilities; volatility of our customers’ forecasts, financial conditions, market shares, product requirements or scheduling demands; failure to adequately insure 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; or unknown risks and uncertainties. SYPRIS SOLUTIONS, INC. Financial Highlights (In thousands, except per share amounts) Three Months Ended December 31, 2012 2011 (Unaudited) Revenue $ 67,466 $ 83,580 Net (loss) income $ (940 ) $ 1,323 Basic income (loss) per common share: Continuing operations $ (0.04 ) $ 0.07 Discontinued (0.01 ) - operations Net income per share $ (0.05 ) $ 0.07 Diluted income (loss) per common share: Continuing operations $ (0.04 ) $ 0.07 Discontinued (0.01 ) - operations Net (loss) income per $ (0.05 ) $ 0.07 share Weighted average shares outstanding: Basic 19,172 18,850 Diluted 19,172 19,032 Years Ended December 31, 2012 2011 (Unaudited) (Note) Revenue $ 341,604 $ 335,625 Net income $ 3,047 $ 7,907 Basic income (loss) per common share: Continuing operations $ 0.51 $ 0.43 Discontinued (0.38 ) (0.03 ) operations Net income per share $ 0.13 $ 0.40 Diluted income (loss) per common share: Continuing operations $ 0.50 $ 0.43 Discontinued (0.37 ) (0.03 ) operations Net income per share $ 0.13 $ 0.40 Weighted average shares outstanding: Basic 19,050 18,823 Diluted 19,415 19,008 Note: The selected data at December 31, 2011 has been derived from the audited consolidated financial statements at that date and does not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements. Sypris Solutions, Inc. Consolidated Statements of Operations (in thousands, except for per share data) Three Months Ended Years Ended December 31, December 31, 2012 2011 2012 2011 (Unaudited) (Unaudited) (Note) Net revenue: Industrial $ 55,498 $ 72,223 $ 286,046 $ 273,305 Group Electronics 11,968 11,357 55,558 62,320 Group Total net 67,466 83,580 341,604 335,625 revenue Cost of sales: Industrial 49,919 64,023 255,065 245,962 Group Electronics 8,909 10,850 42,790 54,434 Group Total cost of 58,828 74,873 297,855 300,396 sales Gross profit: Industrial 5,579 8,200 30,981 27,343 Group Electronics 3,059 507 12,768 7,886 Group Total gross 8,638 8,707 43,749 35,229 profit Selling, general and 7,871 7,410 30,797 28,315 administrative Research and 1,303 760 3,816 3,397 development Amortization of intangible 23 22 89 102 assets Nonrecurring (income) - - - (3,000 ) expense, net Restructuring - (2 ) - 231 expense, net Operating (559 ) 517 9,047 6,184 income Interest 117 124 437 1,732 expense, net (Gain) on sale of marketable - - (1,850 ) - securities Other (income), (85 ) (621 ) (2,055 ) (6,604 ) net (Loss) income from continuing (591 ) 1,014 12,515 11,056 operations before taxes Income tax expense 259 (387 ) 2,248 2,621 (benefit), net (Loss) income from continuing (850 ) 1,401 10,267 8,435 operations Loss from discontinued (90 ) (78 ) (7,220 ) (528 ) operations, net of tax Net (loss) $ (940 ) $ 1,323 $ 3,047 $ 7,907 income Basic income (loss) per share: (Loss) income per share from $ (0.04 ) $ 0.07 $ 0.51 $ 0.43 continuing operations Loss per share from (0.01 ) - (0.38 ) (0.03 ) discontinued operations Net (loss) income per $ (0.05 ) $ 0.07 $ 0.13 $ 0.40 share Diluted income (loss) per share: (Loss) income per share from $ (0.04 ) $ 0.07 $ 0.50 $ 0.43 continuing operations Loss per share from (0.01 ) - (0.37 ) (0.03 ) discontinued operations Net (loss) income per $ (0.05 ) $ 0.07 $ 0.13 $ 0.40 share Dividends declared per $ 0.02 $ - $ 0.08 $ - common share Weighted average shares outstanding: Basic 19,172 18,850 19,050 18,823 Diluted 19,172 19,032 19,415 19,008 Note: The statement of operations at December 31, 2011 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements. Sypris Solutions, Inc. Consolidated Balance Sheets (in thousands, except for share data) December 31, December 31, 2012 2011 (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 18,664 $ 18,173 Accounts receivable, net 38,530 42,984 Inventory, net 33,958 33,621 Other current assets 4,946 3,468 Assets held for sale — 1,739 Total current assets 96,098 99,985 Restricted cash — 3,000 Investment in marketable — 1,749 securities Property, plant and 53,050 56,891 equipment, net Goodwill 6,900 6,900 Other assets 4,920 7,200 Total assets $ 160,968 $ 175,725 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 36,267 $ 51,303 Accrued liabilities 21,988 23,569 Total current liabilities 58,255 74,872 Long-term debt 19,000 10,000 Other liabilities 20,780 30,385 Total liabilities 98,035 115,257 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; 20,190,116 shares issued and 202 201 20,155,268 outstanding in 2012 and 20,108,635 shares issued and 19,995,401 outstanding in 2011 Additional paid-in capital 149,576 149,160 Retained deficit (65,282 ) (66,722 ) Accumulated other (21,562 ) (22,170 ) comprehensive loss Treasury stock, 34,848 and 113,234 shares in 2012 and (1 ) (1 ) 2011, respectively Total stockholders’ equity 62,933 60,468 Total liabilities and $ 160,968 $ 175,725 stockholders’ equity Note: The balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements. Sypris Solutions, Inc. Consolidated Cash Flow Statements (in thousands) Year Ended December 31, 2012 2011 (Unaudited) (Note) Cash flows from operating activities: Net income $ 3,047 $ 7,907 Loss from discontinued (7,220 ) (528 ) operations Income from continuing 10,267 8,435 operations Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and 12,251 14,216 amortization Deferred income taxes 871 508 Gain on the sale of (1,850 ) — marketable securities Stock-based compensation 1,826 979 expense Deferred revenue (7,892 ) (6,884 ) recognized Deferred loan costs 78 172 recognized Write-off of pre-contract 1,113 — costs Write-off of debt issuance — 277 costs Gain on the sale of assets (2,590 ) (4,523 ) Provision for excess and 928 945 obsolete inventory Other noncash items 1,209 (2,545 ) Contributions to pension (1,598 ) (753 ) plans Changes in operating assets and liabilities: Accounts receivable 4,307 (1,509 ) Inventory (1,191 ) (4,302 ) Prepaid expenses and other (1,350 ) 564 assets Accounts payable (15,193 ) 11,747 Accrued and other (6,106 ) 100 liabilities Net cash (used in) provided by operating (4,920 ) 17,427 activities Cash flows from investing activities: Capital expenditures (7,082 ) (6,848 ) Proceeds from sale of 1,914 — marketable securities Proceeds from sale of 4,595 5,032 assets Other — 33 Net cash used in investing (573 ) (1,783 ) activities Cash flows from financing activities: Repayment of former — (10,000 ) Revolving Credit Agreement Repayment of former Senior — (13,305 ) Notes Net proceeds from Credit 9,000 10,000 Facility Payments for deferred loan — (387 ) costs Common stock repurchases (660 ) — Indirect repurchase of shares for minimum (750 ) (435 ) statutory tax withholdings Cash dividends paid (1,607 ) — Proceeds from issuance of 1 64 common stock Net cash provided by (used 5,984 (14,063 ) in) financing activities Net increase in cash and 491 1,581 cash equivalents Cash and cash equivalents 18,173 16,592 at beginning of period Cash and cash equivalents $ 18,664 $ 18,173 at end of period Note: The cash flow statement at December 31, 2011 has been derived from the audited consolidated financial statements at that date but does not include all information and footnotes required by accounting principles generally accepted in the United States for a complete set of financial statements. Contact: Sypris Solutions, Inc. Brian A. Lutes, 502-329-2000 Chief Financial Officer
Sypris Reports 2012 Results ─────────────────────
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