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Sypris Reports Second Quarter Results



  Sypris Reports Second Quarter Results

       Revenue Increases Sequentially on Strong Industrial Performance

Business Wire

LOUISVILLE, Ky. -- August 6, 2013

Sypris Solutions, Inc. (Nasdaq/NM: SYPR) today reported financial results for
its second quarter ended June 30, 2013.

                                  HIGHLIGHTS

For the Second Quarter:

  * Revenue for the Company increased 5% sequentially to $82.2 million, while
    gross profit increased 3% to $8.3 million.
  * Revenue for the Industrial Group increased 5% sequentially to
    $74.4 million, while gross profit increased 9% to $8.9 million.
  * Revenue for the Electronics Group increased 6% to $7.7 million, while
    gross profit declined to a loss of $0.5 million.

For the Six Months:

  * Revenue for the Company increased 10% sequentially to $160.6 million as
    compared to the second half of 2012.
  * Revenue for the Industrial Group increased 21% sequentially to
    $145.6 million, while gross profit increased 40% to $17.0 million,
    compared to the second half of 2012.
  * Revenue and gross profit for the Electronics Group declined sequentially
    to $15.0 million and a loss of $0.6 million, respectively, reflecting the
    impact of sequestration and other Defense-related spending delays.

The Company reported revenue of $82.2 million for the second quarter compared
to $78.4 million for the first quarter of 2013 and $98.9 million for the
second quarter of last year. Additionally, the Company reported a net loss of
$1.5 million, or $0.08 per share, as compared to a net loss of $6.5 million,
or $0.34 per share, for the first quarter of 2013 and compared to net income
of $4.4 million, or $0.22 per diluted share, for the prior year comparable
period.

For the six months ended June 30, 2013, the Company reported revenue of
$160.6 million compared to $146.2 million for the second half of 2012 and
$195.4 million for the prior year comparable period. The Company reported a
net loss for the six months ended June 30, 2013 of $8.0 million, or $0.41 per
share, as compared to income of $9.7 million, or $0.49 per diluted share, for
the prior year period comparable period.

The results for the first half of 2013 included a $6.9 million non-cash
impairment of goodwill, a foreign currency related loss of $0.4 million,
partially offset by a gain of $1.7 million from the sale of idle assets. Net
income for the six months ended July 1, 2012 included a gain of $2.6 million
in connection with the sale of idle assets, a gain of $0.5 million from the
sale of marketable securities, partially offset by a loss from discontinued
operations of $0.8 million.

“Our Industrial Group responded well to the continued demand from our
commercial vehicle customers,” said Jeffrey T. Gill, president and chief
executive officer. “We expect the commercial vehicle demand to remain healthy
at or above current levels throughout the remainder of 2013, as OEMs focus on
the introduction of the new model year vehicles and engine technologies that
offer far greater fuel efficiency than previous models.

“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. For the longer term, we are
continuing to invest in R&D in order to position the business and its product
offerings for future growth and profitability, with a specific emphasis on
trusted solutions for identity management, cryptographic key distribution and
cyber analytics.”

The Industrial Group

Revenue for our Industrial Group was $74.4 million in the second quarter
compared to $71.1 million for the first quarter of 2013 and $82.9 million for
the second quarter of last year. Gross profit for the second quarter was
$8.9 million, or 11.9% of revenue, compared to $8.1 million, or 11.4% of
revenue for the first quarter of 2013 and $8.9 million, or 10.7% of revenue
for the second quarter of 2012.

The Electronics Group

Revenue for our Electronics Group was $7.7 million in the second quarter of
2013 compared to $7.3 million for the first quarter of 2013 and $16.1 million
in the second quarter of last year, reflecting a number of factors including
budgetary and funding uncertainties within the U.S. Department of Defense.
Gross profit for the quarter was a loss of $0.5 million, compared to breakeven
for the first quarter of 2013 and profit of $4.3 million for the same period
in 2012, primarily reflecting the lower sales volume and change in 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 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.”

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.

Forward Looking Statements

This press release contains “forward-looking” statements within the meaning of
the federal securities laws. Each forward-looking statement herein is subject
to risks and uncertainties, as detailed in our most recent Form 10-K and Form
10-Q and other 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; our ability to
successfully develop, launch or sustain new products and programs within the
Electronics Group especially in new market segments and technologies;
dependence on, retention or recruitment of key employees especially in
challenging markets; reliance on major customers or suppliers, especially in
the automotive or aerospace and defense electronics sectors, including the
risk of negative outcomes in contract renewal negotiations; adverse impacts of
new technologies or other competitive pressures which increase our costs or
erode our margins; the costs of compliance with our auditing, regulatory or
contractual obligations; potential impairments, non-recoverability or
write-offs of assets or deferred costs; inventory valuation risks including
obsolescence, shrinkage, theft, overstocking or underbilling; volatility of
our customers’ forecasts, production levels, financial conditions, market
shares, product requirements or scheduling demands; the cost, quality,
timeliness, 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; regulatory
actions or sanctions (including FCPA, OSHA and Federal Acquisition
Regulations, among others); 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; changes in licenses, security clearances, or
other legal rights to operate, manage our work force or import and export as
needed; 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
or delays in customer budgets, funding or programs; disputes or litigation
involving customer, supplier, employee, lessor, landlord, creditor,
stockholder, product liability or environmental claims; the costs and supply
of, or access to, debt, equity capital, or insurance; cost and availability of
raw materials such as steel, component parts, natural gas or utilities;
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. There can be no assurance that our expectations,
projections or views expressed in any forward-looking statements will come to
pass, and undue reliance should not be placed on these forward-looking
statements. We undertake no obligation to update these statements, except as
required by law.

 
 
 
SYPRIS SOLUTIONS, INC.
Financial Highlights
(In thousands, except per share amounts)
                                                       
                                          Three Months Ended
                                          June 30,      July 1,
                                          2013          2012
                                          (Unaudited)
Revenue                                   $ 82,166      $ 98,912
Net (loss) income                         $ (1,494  )   $ 4,438
Basic income (loss) per common share:
        Continuing operations             $ (0.08   )   $ 0.25
        Discontinued operations             -             (0.03   )
        Net income per share              $ (0.08   )   $ 0.22     
Diluted income (loss) per common share:
        Continuing operations             $ (0.08   )   $ 0.25
        Discontinued operations             -             (0.03   )
        Net (loss) income per share       $ (0.08   )   $ 0.22     
Weighted average shares outstanding:
        Basic                               19,347        19,068
        Diluted                             19,347        19,433
                                                         
                                                         
                                                         
                                                         
                                          Six Months Ended
                                          June 30,      July 1,
                                          2013          2012
                                          (Unaudited)
Revenue                                   $ 160,577     $ 195,375
Net (loss) income                         $ (7,953  )   $ 9,726
Basic (loss) income per common share:
        Continuing operations             $ (0.41   )   $ 0.53
        Discontinued operations             -             (0.04   )
        Net (loss) income per share       $ (0.41   )   $ 0.49     
Diluted (loss) income per common share:
        Continuing operations             $ (0.41   )   $ 0.52
        Discontinued operations             -             (0.04   )
        Net (loss) income per share       $ (0.41   )   $ 0.48     
Weighted average shares outstanding:
        Basic                               19,255        19,020
        Diluted                             19,255        19,361

 
 
 
Sypris Solutions, Inc.
Consolidated Statements of Operations
(in thousands, except for per share data)
                                                                  
                           Three Months Ended        Six Months Ended
                           June 30,     July 1,      June 30,      July 1,
                           2013         2012         2013          2012
                           (Unaudited)               (Unaudited)
Net revenue:
Industrial Group           $ 74,432     $ 82,850     $ 145,581     $ 165,372
Electronics Group            7,734        16,062       14,996        30,003   
Total net revenue            82,166       98,912       160,577       195,375
Cost of sales:
Industrial Group             65,574       73,944       128,613       146,544
Electronics Group            8,256        11,745       15,552        23,094   
Total cost of sales          73,830       85,689       144,165       169,638
Gross profit (loss):
Industrial Group             8,858        8,906        16,968        18,828
Electronics Group            (522   )     4,317        (556    )     6,909    
Total gross profit           8,336        13,223       16,412        25,737
Selling, general and         7,598        7,698        14,756        15,293
administrative
Research and development     1,419        1,035        2,296         1,429
Amortization of              8            22           30            44
intangible assets
Impairment of goodwill       -            -            6,900         -        
Operating (loss) income      (689   )     4,468        (7,570  )     8,971
Interest expense, net        120          105          266           222
(Gain) on sale of            -            (537   )     -             (537    )
marketable securities
Other (income), net          (259   )     (457   )     (1,454  )     (2,531  )
(Loss) income from
continuing operations        (550   )     5,357        (6,382  )     11,817
before taxes
Income tax expense, net      944          343          1,571         1,292    
(Loss) income from           (1,494 )     5,014        (7,953  )     10,525
continuing operations
Loss from discontinued       -            (576   )     -             (799    )
operations, net of tax
Net (loss) income          $ (1,494 )   $ 4,438      $ (7,953  )   $ 9,726    
Basic (loss) income per
share:
(Loss) income per share
from continuing            $ (0.08  )   $ 0.25       $ (0.41   )   $ 0.53
operations
Loss per share from          -            (0.03  )     -             (0.04   )
discontinued operations
Net (loss) income per      $ (0.08  )   $ 0.22       $ (0.41   )   $ 0.49     
share
Diluted (loss) income
per share:
(Loss) income per share
from continuing            $ (0.08  )   $ 0.25       $ (0.41   )   $ 0.52
operations
Loss per share from          -            (0.03  )     -             (0.04   )
discontinued operations
Net (loss) income per      $ (0.08  )   $ 0.22       $ (0.41   )   $ 0.48     
share
Dividends declared per     $ 0.02       $ 0.02       $ 0.04        $ 0.04
common share
Weighted average shares
outstanding:
Basic                        19,347       19,068       19,255        19,020
Diluted                      19,347       19,433       19,255        19,361

 
 
 
Sypris Solutions, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)
                                                      
                                June 30,                  December 31,
                                2013                      2012
                                (Unaudited)               (Note)
ASSETS
Current assets:
Cash and cash equivalents       $    18,391               $    18,664
Accounts receivable, net             52,909                    38,530
Inventory, net                       38,160                    33,958
Other current assets                 4,087                     4,946       
Total current assets                 113,547                   96,098
Property, plant and                  47,675                    53,050
equipment, net
Goodwill                             -                         6,900
Other assets                         4,501                     4,920       
Total assets                    $    165,723              $    160,968     
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                $    52,077               $    36,267
Accrued liabilities                  22,491                    21,988      
Total current liabilities            74,568                    58,255
Long-term debt                       20,000                    19,000
Other liabilities                    16,078                    20,780      
Total liabilities                    110,646                   98,035
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; 20,417,420
shares issued and                    204                       202
20,383,055 outstanding in
2013 and 20,190,116 shares
issued and 20,155,268
outstanding in 2012
Additional paid-in capital           150,022                   149,576
Retained deficit                     (74,038    )              (65,282    )
Accumulated other                    (21,110    )              (21,562    )
comprehensive loss
Treasury stock, 34,365 and
34,848 shares in 2013 and            (1         )              (1         )
2012, respectively
Total stockholders’ equity           55,077                    62,933      
Total liabilities and           $    165,723              $    160,968     
stockholders’ equity
                                                           
Note: The balance sheet at December 31, 2012 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)
                                                                  
                                                     Six Months Ended
                                                                    
                                                     June 30,      July 1,
                                                     2013          2012
                                                     (Unaudited)
Cash flows from operating activities:
Net (loss) income                                    $ (7,953  )   $ 9,726
Loss from discontinued operations                      -             (799    )
(Loss) income from continuing operations               (7,953  )     10,525
Adjustments to reconcile net (loss) income to net
cash used in operating activities:
Depreciation and amortization                          6,168         6,128
Gain on the sale of marketable securities              -             (537    )
Stock-based compensation expense                       1,002         925
Deferred revenue recognized                            (4,000  )     (3,946  )
Deferred loan costs recognized                         39            39
Gain on the sale of assets                             (1,682  )     (2,625  )
Provision for excess and obsolete inventory            926           610
Goodwill impairment                                    6,900         -
Other noncash items                                    472           358
Contributions to pension plans                         (217    )     (446    )
Changes in operating assets and liabilities:
Accounts receivable                                    (14,375 )     (20,375 )
Inventory                                              (5,121  )     (6,393  )
Prepaid expenses and other assets                      931           (972    )
Accounts payable                                       16,101        10,777
Accrued and other liabilities                          (144    )     1,101    
Net cash used in operating activities                  (953    )     (4,831  )
Cash flows from investing activities:
Capital expenditures                                   (1,526  )     (2,430  )
Proceeds from sale of assets                           2,160         4,542    
Net cash provided by investing activities              634           2,112
Cash flows from financing activities:
Net proceeds (payments) on Credit Facility             1,000         4,000
Common stock repurchases                               -             (46     )
Indirect repurchase of shares for minimum              (554    )     (462    )
statutory tax withholdings
Cash dividends paid                                    (400    )     (397    )
Net cash provided by financing activities              46            3,095    
Net (decrease) increase in cash and cash               (273    )     376
equivalents
Cash and cash equivalents at beginning of period       18,664        18,173   
Cash and cash equivalents at end of period           $ 18,391      $ 18,549   

Contact:

Sypris Solutions, Inc.
Brian A. Lutes, Chief Financial Officer, 502-329-2000
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