Sypris Reports 72% Increase in Third Quarter Revenue; Net Orders Rise 52% to $109 Million
LOUISVILLE, Ky.--(BUSINESS WIRE)--Oct. 21, 2004--Sypris Solutions, Inc. (Nasdaq/NM:SYPR) today reported revenue increased 72% to a record $118.5 million for the third quarter in 2004 compared to $68.9 million for the prior year period. Net income for the third quarter increased to $3.5 million compared to $0.7 million for the same quarter in 2003, while earnings per share increased to $0.19 per diluted share compared to $0.05 per diluted share for the third quarter of 2003. The financial results for the third quarter of 2004 reflected the impact of a 24% increase in the number of fully diluted shares outstanding compared to the prior year period, or approximately $0.05 per share, and the favorable resolution of a federal tax audit, which approximated $0.02 per share.
For the nine months ended September 30, 2004, the Company reported revenue increased 53% to a record $303.7 million compared to $198.4 million for the prior year period. Net income increased 87% to $8.9 million compared to $4.7 million for the same period in 2003, while earnings per share increased 55% to $0.51 per diluted share compared to $0.33 per diluted share for the prior year period. The results for the first nine months of 2004 reflected the impact of a 20% increase in the number of fully diluted shares outstanding compared to the prior year period, or approximately $0.10 per diluted share, and the favorable resolution of the federal tax audit previously mentioned, which approximated $0.02 per share.
"We are pleased with the financial results for the quarter," said Jeffrey T. Gill, president and chief executive officer. "The rapid growth of the Company's top line reflected the positive impact of shipments under recently-announced long-term contracts with Dana and ArvinMeritor, and the continued growth of the commercial vehicle market. The Company's operating margins expanded on both a year over year and on a sequential basis, driven in large part by the increased volume and improved performance of our Industrial Group."
"Net orders increased 52% during the quarter to $109.4 million when compared to the prior year quarter, while the Company's backlog climbed 36% to $242.1 million, reflecting the impact of the new contract awards and a 35% increase in the production of commercial vehicles from year ago levels. The Company's balance sheet remains strong, with approximately $110 million of potentially available credit and cash to support additional growth initiatives."
"We believe the outlook remains positive, despite growing indications that constraints in the commercial vehicle supply chain may restrain production rates over the near term. As we move into 2005, the Company expects to benefit from production related to several new customer programs, while the Company's operating performance is expected to benefit from the increasing volumes with margins targeted to improve sequentially throughout the year if and when capacity constraints and supply chain issues are resolved."
The Industrial Group
Revenue for our Industrial Group increased 250% to a record $78.4 million in the third quarter compared to $22.4 million for the prior year period, and increased 35% sequentially from the second quarter of this year. Gross profit increased 531% to $8.9 million compared to $1.4 million for the same period in 2003, and increased 60% sequentially from the second quarter of this year.
For the nine months ended September 30, 2004, revenue for our Industrial Group increased 162% to a record $185.1 million from $70.7 million in the prior year period. Gross profit for the first nine months increased 184% to $21.0 million compared to $7.4 million for the same period in 2003. The financial results were driven primarily by an increase in demand from the commercial vehicle market and the commencement of shipments to Dana and ArvinMeritor under recently announced contract awards.
Gill continued, "The performance of our Industrial Group continued to reflect the stronger market for commercial vehicle production. Bookings increased 229% for the quarter to $76.2 million compared to the prior year period, and increased 190% to $230.0 million for the first nine months of this year when compared to the same period for 2003, while backlog increased 149% to $117.9 million when compared to last year. Margins improved on both a year over year and on a sequential basis, but continued to reflect the impact of capacity constraints and supply issues, albeit on a somewhat lesser scale than earlier this year."
The Electronics Group
Revenue for our Electronics Group was $40.0 million in the third quarter compared to $46.5 million for the prior year period and $37.7 million for the second quarter of this year. Gross profit for the quarter was $6.8 million compared to $8.2 million in the same period in 2003 and $7.5 million for the second quarter of 2004, primarily as a result of a change in mix reflecting increased sales of lower margin circuit card assemblies and reduced sales of higher margin products to certain government agencies.
For the nine months ended September 30, 2004, revenue for our Electronics Group was $118.6 million compared to $127.7 million for the prior year period. Gross profit for the first nine months was $22.2 million compared to $25.2 million for the prior year period, primarily reflecting the lower level of shipments for the period and the change in mix mentioned above.
"Net orders for our Electronics Group declined during the quarter to $33.1 million, but backlog remained solid at $124.0 million," said Jeffrey T. Gill. "In the short-term, we believe the outlook for growth in this segment of our business will remain somewhat constrained at least until such time as the delays in program funding to accommodate our current military operations are successfully resolved. For the long-term, we remain optimistic that we are well-positioned on a series of major programs that should contribute to the Company's growth in the future."
Outlook
Gill added, "Our outlook for the balance of the year remains appropriately cautious, with revenue for the fourth quarter expected to be in the range of $120.0 to $124.0 million versus $78.2 million for the prior year period, which represents an increase of 53% at the midpoint of the range. We believe that supply chain issues impacting our Industrial Group will continue to exert pressure on production efficiencies throughout the quarter, thereby restraining the potential for meaningful margin expansion in the short-term. As a result, earnings for the fourth quarter are forecast to be in the range of $0.17 to $0.20 per diluted share, assuming 18.4 million weighted average shares outstanding, compared to the $0.23 per diluted share on 14.9 million weighted average shares outstanding for the prior year quarter."
"For the full year 2004, we now expect revenue to be in the range of $423 to $427 million compared to our prior forecast of $405 to $415 million and $276.6 million for 2003, which represents an increase of 54% at the midpoint of the range compared to 2003. Earnings are forecast to be in the range of $0.68 to $0.71 per diluted share, assuming 17.7 million weighted average shares outstanding, compared to prior guidance of $0.70 to $0.80 per diluted share and $0.56 per diluted share for 2003, based on 14.7 million weighted average shares outstanding."
"As we look forward to 2005, we have increased our top line expectations for the full year as a result of the continued strength of new contract awards, with revenue now forecast to be in the range of $500 to $520 million compared to our prior forecast of $480 to $500 million and guidance of $423 to $427 million for 2004. The outlook for earnings remains unchanged, with earnings per share forecast to be in the range of $1.00 to $1.10, assuming 19.0 million weighted average shares outstanding, compared to guidance of $0.68 to $0.71 per diluted share for 2004, which represents an increase of 51% at the midpoint of the range. We expect our Industrial Group to serve as the primary source for revenue growth in 2005 with both revenue and earnings expected to increase sequentially throughout the year as new programs booked during 2004 enter production during 2005."
Sypris Solutions is a diversified provider of technology-based outsourced services and specialty products. The Company performs a wide range of manufacturing and technical services, typically under multi-year, sole-source contracts with major corporations and government agencies in the markets for aerospace and defense electronics, truck components and assemblies, and for users of test and measurement equipment. For more information about Sypris Solutions, visit its Web site at www.sypris.com.
This release, and oral statements referring hereto, contain "forward-looking statements," from which actual results may differ materially due to factors such as: cost and supply of raw materials such as steel, components, or utilities; growth, reduction or competitive pressures in our markets; cost, efficiency and yield of our operations; our ability to improve results of acquired businesses; inventory valuation risks; product mix; changes in government or other customer programs; reliance on major customers or suppliers; revised estimates of major contract costs; dependence on management; labor relations; risks of foreign operations; currency exchange rates; costs and supply of debt, equity capital, or insurance; pension valuation risks; changes in licenses, security clearances, or other legal rights to operate, manage our work force or import and export as needed; compliance costs; regulatory actions or sanctions; litigation, including customer, creditor, stockholder, environmental or asbestos-related claims; war, terrorism or political uncertainty; disasters; unknown risks and uncertainties; or risk factors in our SEC filings.
SYPRIS SOLUTIONS, INC.
FINANCIAL HIGHLIGHTS
(In thousands, except per share amounts)
Three Months Ended
-----------------------
Sept. 30, Sept. 28,
2004 2003
----------- -----------
Revenue $ 118,457 $ 68,898
Net income $ 3,487 $ 686
Earnings per common share:
Basic $ 0.19 $ 0.05
Diluted $ 0.19 $ 0.05
Weighted average shares outstanding:
Basic 17,888 14,241
Diluted 18,306 14,799
Nine Months Ended
-----------------------
Sept. 30, Sept. 28,
2004 2003
----------- -----------
Revenue $ 303,729 $ 198,434
Net income $ 8,870 $ 4,744
Earnings per common share:
Basic $ 0.53 $ 0.33
Diluted $ 0.51 $ 0.33
Weighted average shares outstanding:
Basic 16,765 14,221
Diluted 17,504 14,562
SYPRIS SOLUTIONS, INC.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except for per share data)
Three Months Ended Nine Months Ended
------------------- -------------------
September September September September
30, 28, 30, 28,
2004 2003 2004 2003
--------- --------- --------- ---------
(Unaudited) (Unaudited)
Net revenue:
Electronics Group $ 40,028 $ 46,468 $118,627 $127,701
Industrial Group 78,429 22,430 185,102 70,733
--------- --------- --------- ---------
Total net revenue 118,457 68,898 303,729 198,434
Cost of sales:
Electronics Group 33,201 38,304 96,439 102,515
Industrial Group 69,569 21,025 164,130 63,358
--------- --------- --------- ---------
Total cost of sales 102,770 59,329 260,569 165,873
--------- --------- --------- ---------
Gross profit 15,687 9,569 43,160 32,561
Selling, general and
administrative 8,915 6,925 25,701 20,110
Research and development 1,084 1,030 2,483 3,118
Amortization of intangible
assets 145 67 411 109
--------- --------- --------- ---------
Operating income 5,543 1,547 14,565 9,224
Interest expense, net 646 384 1,161 1,417
Other expense (income), net 15 65 (91) 217
--------- --------- --------- ---------
Income before income
taxes 4,882 1,098 13,495 7,590
Income tax expense 1,395 412 4,625 2,846
--------- --------- --------- ---------
Net income $ 3,487 $ 686 $ 8,870 $ 4,744
========= ========= ========= =========
Earnings per common share:
Basic $ 0.19 $ 0.05 $ 0.53 $ 0.33
Diluted $ 0.19 $ 0.05 $ 0.51 $ 0.33
Dividends declared per common
share $ 0.03 $ 0.03 $ 0.09 $ 0.09
Weighted average shares
outstanding:
Basic 17,888 14,241 16,765 14,221
Diluted 18,306 14,799 17,504 14,562
SYPRIS SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
September 30, December 31,
2004 2003
------------- -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 10,332 $ 12,019
Accounts receivable, net 93,820 45,484
Inventory, net 93,606 61,932
Other current assets 11,120 11,370
------------- -------------
Total current assets 208,878 130,805
Property, plant and equipment, net 153,262 106,683
Goodwill 14,277 14,277
Other assets 13,525 11,730
------------- -------------
$ 389,942 $ 263,495
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 62,155 $ 29,598
Accrued liabilities 21,876 17,491
Current portion of long-term debt 8,150 3,200
------------- -------------
Total current liabilities 92,181 50,289
Long-term debt 72,500 53,000
Other liabilities 15,992 15,425
------------- -------------
Total liabilities 180,673 118,714
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; 17,903,622
and 14,283,323 shares issued and
outstanding in 2004 and 2003,
respectively 179 143
Additional paid-in capital 140,712 83,541
Retained earnings 70,724 63,443
Accumulated other comprehensive income
(loss) (2,346) (2,346)
------------- -------------
Total stockholders' equity 209,269 144,781
------------- -------------
$ 389,942 $ 263,495
============= =============
SYPRIS SOLUTIONS, INC.
CONSOLIDATED CASH FLOW STATEMENTS
(in thousands)
Nine Months Ended
---------------------------
September 30, September 28,
2004 2003
------------- -------------
(Unaudited)
Cash flows from operating activities:
Net income $ 8,870 $ 4,744
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities:
Depreciation and amortization 13,564 9,387
Other noncash charges 1,108 685
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable (49,139) (4,494)
Inventory (26,946) 1,031
Other current assets (1,435) 1,424
Accounts payable 35,488 1,517
Accrued liabilities 4,436 858
------------ ------------
Net cash (used in) provided by
operating activities (14,054) 15,152
Cash flows from investing activities:
Capital expenditures (38,245) (16,983)
Purchase of the net assets of acquired
entities (29,399) (1,520)
Proceeds from sale of assets -- 15
Changes in nonoperating assets and
liabilities (33) 172
------------ ------------
Net cash used in investing
activities (67,677) (18,316)
Cash flows from financing activities:
Net (decrease) increase in debt under
revolving credit agreements (30,550) 4,000
Proceeds from long-term debt 55,000 --
Cash dividends paid (1,486) (1,275)
Proceeds from issuance of common stock 57,080 677
------------ ------------
Net cash provided by financing
activities 80,044 3,402
------------ ------------
Net (decrease) increase in cash and cash
equivalents (1,687) 238
Cash and cash equivalents at beginning of
period 12,019 12,403
------------ ------------
Cash and cash equivalents at end of period $ 10,332 $ 12,641
============ ============
CONTACT: Sypris Solutions, Inc.
David D. Johnson, 502-329-2000
SOURCE: Sypris Solutions, Inc.