Sypris Reports Third Quarter Results Industrial Margins Expand Business Wire LOUISVILLE, Ky. -- November 12, 2013 Sypris Solutions, Inc. (Nasdaq/NM:SYPR) today reported financial results for its third quarter ended September 29,2013. HIGHLIGHTS For the Third Quarter: *Revenue for the Company decreased 3% from the third quarter of last year. *Revenue for the Industrial Group increased 2% from the third quarter of last year to $66.7million, while gross profit increased 13% to $7.4 million. *While revenue for the Electronics Group decreased from the third quarter of last year to $9.6million, revenue increased 24% sequentially. For the Nine Months: *Revenue for the Company decreased 14% compared to the first nine months of last year. *Despite an 8% decline in revenue for our Industrial Group as compared to the first nine months of last year, gross margin increased 50 basis points to 11.5%. *Revenue and gross profit for the Electronics Group declined to $24.6million and a loss of $0.7million, respectively, reflecting the impact of sequestration and other defense-related spending delays. The Company reported revenue of $76.3million for the third quarter compared to $78.8million for prior year period. Additionally, the Company reported a net loss of $2.0million, or $0.10per share, as compared to a net loss of $5.7million, or $0.29per diluted share, for the prior year comparable period. For the nine months ended September29,2013, the Company reported revenue of $236.9million compared to $274.1million for the prior year comparable period. The Company reported a net loss for the nine months ended September29,2013 of $9.9million, or $0.52pershare, as compared to income of $4.0million, or $0.18 per diluted share, for the prior year period comparable period. The results for the first nine months of 2013 included a $6.9million non-cash impairment of goodwill, a foreign currency related loss of $0.5million, partially offset by a gain of $1.6million from the sale of idle assets. Net income for the nine months ended September30,2012 included a gain of $2.6million in connection with the sale of idle assets, a gain of $1.9million from the sale of marketable securities, offset by a loss from discontinued operations of $7.1million and a foreign currency translation loss of $0.9million. “Our Industrial Group responded well to the reduction in production of commercial vehicles, which resulted in a 10% sequential decline in quarterly revenue,” said Jeffrey T. Gill, president and chief executive officer. “We expect the demand in the overall commercial vehicle market to remain flat throughout the remainder of 2013, before rebounding in the second quarter of 2014 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 $66.7million in the third quarter compared to $74.4million for the second quarter of 2013 and $65.2million for the third quarter of last year. Gross profit for the third quarter was $7.4million, or 11.1% of revenue, compared to $8.9million, or 11.9% of revenue for the second quarter of 2013 and $6.6million, or 10.1% of revenue for the third quarter of 2012. The Electronics Group Revenue for our Electronics Group was $9.6million in the third quarter of 2013 compared to $7.7million for the second quarter of 2013 and $13.6million in the third 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 $0.2million, compared to a loss of $0.5million for the second quarter of 2013 and profit of $2.8million for the third quarter of 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. 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; reliance on major customers or suppliers, especially in the automotive or aerospace and defense electronics sectors, including the risk of potentially adverse outcomes in ongoing contract renewal negotiations with Dana Holding Corporation and Meritor Inc.; our ability to successfully develop, launch or sustain new products and programs within the Electronics Group; dependence on, retention or recruitment of key employees especially in challenging markets; 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 excessive or obsolescent valuations; 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; the costs and supply of, or access to, debt, equity capital, or insurance; fees, costs or other dilutive effects of refinancing, or compliance with covenants; disputes or litigation involving customer, supplier, employee, lessor, landlord, creditor, stockholder, product liability or environmental claims; U.S. government spending on products and services that our Electronics Group provides, including the timing of budgetary decisions; 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; 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 September 29, September 30, 2013 2012 (Unaudited) Revenue $ 76,278 $ 78,763 Net loss $ (1,995 ) $ (5,739 ) Basic (loss) income per common share: Continuing operations $ (0.10 ) $ 0.03 Discontinued operations - (0.33 ) Net (loss) income per share $ (0.10 ) $ (0.30 ) Diluted (loss) income per common share: Continuing operations $ (0.10 ) $ 0.03 Discontinued operations - (0.32 ) Net loss per share $ (0.10 ) $ (0.29 ) Weighted average shares outstanding: Basic 19,373 19,074 Diluted 19,373 19,567 Nine Months Ended September 29, September 30, 2013 2012 (Unaudited) Revenue $ 236,855 $ 274,138 Net (loss) income $ (9,948 ) $ 3,987 Basic (loss) income per common share: Continuing operations $ (0.52 ) $ 0.56 Discontinued operations - (0.37 ) Net (loss) income per share $ (0.52 ) $ 0.19 Diluted (loss) income per common share: Continuing operations $ (0.52 ) $ 0.55 Discontinued operations - (0.37 ) Net (loss) income per share $ (0.52 ) $ 0.18 Weighted average shares outstanding: Basic 19,303 19,038 Diluted 19,303 19,423 Sypris Solutions, Inc. Consolidated Statements of Operations (in thousands, except for per share data) Three Months Ended Nine Months Ended September September September September 29, 30, 29, 30, 2013 2012 2013 2012 (Unaudited) (Unaudited) Net revenue: Industrial $ 66,650 $ 65,176 $ 212,231 $ 230,548 Group Electronics 9,628 13,587 24,624 43,590 Group Total net 76,278 78,763 236,855 274,138 revenue Cost of sales: Industrial 59,233 58,602 187,846 205,146 Group Electronics 9,784 10,787 25,336 33,881 Group Total cost of 69,017 69,389 213,182 239,027 sales Gross profit (loss): Industrial 7,417 6,574 24,385 25,402 Group Electronics (156 ) 2,800 (712 ) 9,709 Group Total gross 7,261 9,374 23,673 35,111 profit Selling, general and 7,689 7,633 22,445 22,926 administrative Research and 547 1,084 2,843 2,513 development Amortization of intangible - 22 30 66 assets Impairment of - - 6,900 - goodwill Operating (975 ) 635 (8,545 ) 9,606 (loss) income Interest 124 98 390 320 expense, net (Gain) on sale of marketable - (1,313 ) - (1,850 ) securities Other expense 38 561 (1,416 ) (1,970 ) (income), net (Loss) income from continuing (1,137 ) 1,289 (7,519 ) 13,106 operations before taxes Income tax 858 697 2,429 1,989 expense, net (Loss) income from continuing (1,995 ) 592 (9,948 ) 11,117 operations Loss from discontinued - (6,331 ) - (7,130 ) operations, net of tax Net (loss) $ (1,995 ) $ (5,739 ) $ (9,948 ) $ 3,987 income Basic (loss) income per share: (Loss) income per share from $ (0.10 ) $ 0.03 $ (0.52 ) $ 0.56 continuing operations Loss per share from - (0.33 ) - (0.37 ) discontinued operations Net (loss) income per $ (0.10 ) $ (0.30 ) $ (0.52 ) $ 0.19 share Diluted (loss) income per share: (Loss) income per share from $ (0.10 ) $ 0.03 $ (0.52 ) $ 0.55 continuing operations Loss per share from - (0.32 ) - (0.37 ) discontinued operations Net (loss) income per $ (0.10 ) $ (0.29 ) $ (0.52 ) $ 0.18 share Dividends declared per $ 0.02 $ 0.02 $ 0.06 $ 0.06 common share Weighted average shares outstanding: Basic 19,373 19,074 19,303 19,038 Diluted 19,373 19,567 19,303 19,423 Sypris Solutions, Inc. Consolidated Balance Sheets (in thousands, except for share data) September 29, December 31, 2013 2012 (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 9,613 $ 18,664 Accounts receivable, net 46,454 38,530 Inventory, net 37,600 33,958 Other current assets 4,483 4,946 Total current assets 98,150 96,098 Property, plant and 46,138 53,050 equipment, net Goodwill - 6,900 Other assets 4,630 4,920 Total assets $ 148,918 $ 160,968 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 46,001 $ 36,267 Accrued liabilities 23,025 21,988 Total current liabilities 69,026 58,255 Long-term debt 13,026 19,000 Other liabilities 13,698 20,780 Total liabilities 95,750 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; 20,410,940 shares issued and 20,376,575 outstanding in 2013 and 20,190,116 shares issued and 20,155,268 outstanding in 204 202 2012 Additional paid-in 150,452 149,576 capital Retained deficit (76,440 ) (65,282 ) Accumulated other (21,047 ) (21,562 ) comprehensive loss Treasury stock, 34,365 and 34,848 shares in 2013 (1 ) (1 ) and 2012, respectively Total stockholders’ 53,168 62,933 equity Total liabilities and $ 148,918 $ 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) Nine Months Ended September 29, September 30, 2013 2012 (Unaudited) Cash flows from operating activities: Net (loss) income $ (9,948 ) $ 3,987 Loss from discontinued operations - (7,130 ) (Loss) income from continuing operations (9,948 ) 11,117 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 9,355 9,141 Gain on the sale of marketable securities - (1,850 ) Stock-based compensation expense 1,452 1,331 Deferred revenue recognized (6,000 ) (5,919 ) Deferred loan costs recognized 58 58 Gain on the sale of assets (1,645 ) (2,625 ) Provision for excess and obsolete 1,021 629 inventory Goodwill impairment 6,900 - Other noncash items 549 1,514 Contributions to pension plans (477 ) (1,312 ) Changes in operating assets and liabilities: Accounts receivable (7,931 ) (887 ) Inventory (4,656 ) (3,035 ) Prepaid expenses and other assets 535 (638 ) Accounts payable 9,888 (5,507 ) Accrued and other liabilities 31 (930 ) Net cash (used in) provided by operating (868 ) 1,087 activities Cash flows from investing activities: Capital expenditures (3,092 ) (4,106 ) Proceeds from sale of marketable - 1,271 securities Proceeds from sale of assets 2,265 4,542 Net cash (used in) provided by investing (827 ) 1,707 activities Cash flows from financing activities: Net payments on Credit Facility (5,974 ) (2,000 ) Common stock repurchases (9 ) (575 ) Indirect repurchase of shares for minimum (565 ) (511 ) statutory tax withholdings Cash dividends paid (808 ) (801 ) Proceeds from issuance of common stock - 1 Net cash used in financing activities (7,356 ) (3,886 ) Net decrease in cash and cash equivalents (9,051 ) (1,092 ) Cash and cash equivalents at beginning of 18,664 18,173 period Cash and cash equivalents at end of period $ 9,613 $ 17,081 Contact: Sypris Solutions, Inc. Brian A. Lutes, 502-329-2000 Chief Financial Officer
Sypris Reports Third Quarter Results
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