Sypris Reports Third Quarter Results

  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
 
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