Sypris Reports First Quarter Results
"The Company's financial results exceeded our expectations for the first quarter of 2007," said Jeffrey T. Gill, president and chief executive officer. "The cyclical downturn in demand for commercial vehicles impacted the Company's top line, but the implementation of cost containment measures, combined with better pricing, and higher than forecasted sales from our Industrial and Test & Measurement businesses, improved our gross margin rate despite the lower volumes."
Gill continued, "We expect revenue to decline further during the second quarter of this year in line with the cycle for commercial vehicle production, while the 34% increase in orders for our Electronics Group during the period provides the Company with important momentum moving into the second half of the year. In addition, Sypris Electronics announced the award of a multi-year, $400 million IDIQ contract from the Department of Defense during the quarter. This contract, which will serve as the platform for the purchase of digital cryptographic security equipment from Sypris and one other vendor, is expected to contribute to the Company's financial results as early as the third quarter of 2007."
The Industrial Group
Revenue for our Industrial Group was $79.1 million in the first quarter compared to $92.5 million for the prior year period. Gross profit for the quarter was $5.3 million compared to $6.0 million for the prior year period and increased 155% sequentially from the fourth quarter of last year. Volumes in the Heavy and Light vehicle markets exceeded our expectation while our energy-related products continued to experience strong demand. Improved pricing also contributed to a stronger performance.
The Electronics Group
Revenue for our Electronics Group was $32.3 million in the first quarter compared to $37.5 million in the prior year period, but increased $3.4 million sequentially from the fourth quarter of last year. Gross profit for the quarter was $6.7 million, which was consistent with the prior year period. Net orders increased 34% to $41.2 million for the quarter when compared to prior year period. Strong bookings were realized from the EMS, data recorder and calibration businesses. As a result, backlog for the Electronics Group rose by $9.0 million or 9% sequentially from fourth quarter of last year.
Revenue for the Aerospace & Defense segment was $19.7 million compared to $26.0 million for the prior year period. Revenue for the Test & Measurement segment was $12.6 million compared to $11.5 million for the prior year period. Gross profit for the Aerospace & Defense segment was $3.2 million compared to $4.0 million for the prior year period. Gross profit for the Test & Measurement segment increased 30% to $3.5 million from $2.7 million in the prior year period.
Outlook
Gill added, "As a result of the Company's performance during the first quarter, we have revised our guidance upward for the full year. This latest outlook largely recognizes the upside from the first quarter, but does not assume a change in our outlook for the balance of the year at this time. Consequently, revenue for 2007 is now forecast to be in the range of $420 to $430 million, up from the previous guidance of $410 to $420 million, while the outlook for earnings for the full year has improved to a loss of $0.30 to $0.35 per diluted share compared to previous guidance of $0.40 to $0.45 loss per diluted share. We continue to expect free cash flow to be positive, although we have adjusted our expectations to be in the range of $10.0 to $15.0 million, as a result of necessary working capital investments related to the previously announced restructuring program in our Industrial Group.
"Looking forward to the second quarter of 2007, we expect revenue to be in the range of $100 to $105 million compared to $132 million for the prior year period. Losses for the second quarter are forecast to be in the range of $0.11 to $0.13 per diluted share compared to $0.02 per diluted share for the prior year period."
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 test and measurement services. 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 subsequent SEC filings. Briefly, such risks also include: cost and availability of raw materials such as steel, components, freight, natural gas or utilities; cost and inefficiencies associated with increasing our manufacturing capacity and launching new programs; stability and predictability of our costs and margins or our customers' forecasts, financial conditions (including bankruptcies or other restructurings), late payments, low-margin product mix, market shares, changing product requirements or scheduling demands; costs associated with breakdowns or repairs of machinery and equipment; growth beyond our productive capacity, cyclical or other downturns, adverse impacts of new technologies or other competitive pressures which erode our margins; cost, efficiency and yield of our operations including capital investments, working capital, scrap rates, cycle times, injuries, self-insured risks, wages, freight, production schedules, overtime costs, expediting costs or scrap rates; failure to make strategic acquisitions or to integrate and improve results of acquired businesses or to identify and adequately insure environmental or other risks in due diligence; inventory valuation risks due to obsolescence, shrinkage, price, overstocking or underbilling; changes in government funded or other customer programs (including the failure to appropriate funds for IDIQ contracts); reliance on major customers or suppliers; revised contract prices or estimates of major contract costs; dependence on, recruitment or retention of management or other key employees; union negotiations; pension valuation, health care or other benefit costs; labor relations; strikes; risks of foreign operations; currency exchange rates; costs and supply of debt, equity capital, or insurance due to poor operating or financial results, new business risks, credit ratings, debt covenants (including those regarding our creditors' secured interests), contract claims, insurance conditions or regulatory developments; impairments or write-offs of goodwill or fixed assets; changes in licenses, security clearances, or other legal rights to operate, manage our work force or import and export as needed; completion of the internal control assessment process; costs of compliance with auditing, regulatory or contractual obligations; regulatory actions or sanctions; contract terminations or other disputes or litigation, involving customer, supplier, creditor, stockholder, product liability, environmental or asbestos-related claims; 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
---------------------
April 1, March 31,
2007 2006
---------------------
(Unaudited)
Revenue $111,439 $129,997
Net (loss) income $(245) $857
(Loss) income per common share:
Basic $(0.01) $0.05
Diluted $(0.01) $0.05
Weighted average shares outstanding:
Basic 18,107 18,042
Diluted 18,107 18,289
Sypris Solutions, Inc.
Consolidated Statements of Operations
(in thousands, except for per share data)
Three Months Ended
-------------------
April 1, March 31,
2007 2006
-------- ----------
(Unaudited)
Net revenue:
Industrial Group $79,119 $92,499
Aerospace & Defense 19,671 26,011
Test & Measurement 12,649 11,487
-------- ----------
Electronics Group 32,320 37,498
-------- ----------
Total net revenue 111,439 129,997
Cost of sales:
Industrial Group 73,799 86,550
Aerospace & Defense 16,516 22,056
Test & Measurement 9,117 8,772
-------- ----------
Electronics Group 25,633 30,828
-------- ----------
Total cost of sales 99,432 117,378
Gross profit:
Industrial Group 5,320 5,949
Aerospace & Defense 3,155 3,955
Test & Measurement 3,532 2,716
-------- ----------
Electronics Group 6,687 6,670
-------- ----------
Total gross profit 12,007 12,619
Selling, general and administrative 10,902 9,919
Research and development 679 334
Amortization of intangible assets 164 159
-------- ----------
Operating income 262 2,207
Interest expense, net 719 1,159
Other income, net (20) (250)
-------- ----------
(Loss) income before income taxes (437) 1,298
Income tax (benefit) expense (192) 441
-------- ----------
Net (loss) income $(245) $857
======== ==========
(Loss) earnings per common share:
Basic $(0.01) $0.05
Diluted $(0.01) $0.05
Dividends declared per common share $0.03 $0.03
Weighted average shares outstanding:
Basic 18,107 18,042
Diluted 18,107 18,289
Sypris Solutions, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)
April 1, December 31,
2007 2006
----------- ------------
(Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $24,751 $32,400
Restricted cash 1,002 1,002
Accounts receivable, net 60,374 59,876
Inventory, net 82,174 74,146
Other current assets 33,149 34,014
----------- ------------
Total current assets 201,450 201,438
Property, plant and equipment, net 149,096 155,341
Goodwill 14,277 14,277
Other assets 7,877 7,977
----------- ------------
Total assets $372,700 $379,033
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $71,824 $76,291
Accrued liabilities 23,957 19,430
Current portion of long-term debt -- 5,000
----------- ------------
Total current liabilities 95,781 100,721
Long-term debt 55,000 55,000
Other liabilities 13,130 13,426
----------- ------------
Total liabilities 163,911 169,147
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;
18,901,875 shares issued and 18,898,116
outstanding in 2007 and
18,342,243 shares issued and 18,338,484
outstanding in 2006 and 189 183
Additional paid-in capital 143,956 143,537
Retained earnings 69,003 69,816
Accumulated other comprehensive loss (4,343) (3,634)
Treasury stock, 3,759 shares (16) (16)
----------- ------------
Total stockholders' equity 208,789 209,886
----------- ------------
Total liabilities and stockholders'
equity $372,700 $379,033
=========== ============
Note: The balance sheet at December 31, 2006 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)
Three Months Ended
----------------------
April 1, March 31,
2007 2006
------------ ---------
(Unaudited)
Cash flows from operating activities:
Net (loss) income $(245) $857
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating
activities:
Depreciation and amortization 7,134 6,819
Other noncash items (149) (38)
Changes in operating assets and
liabilities:
Accounts receivable (534) (3,167)
Inventory (3,900) 938
Other current assets (3,384) (236)
Accounts payable (4,432) (4,145)
Accrued liabilities 4,685 6,131
------------ ---------
Net cash (used in) provided by
operating activities (825) 7,159
Cash flows from investing activities:
Capital expenditures (697) (3,862)
Proceeds from sale of assets 22 10
Changes in nonoperating assets and
liabilities (598) (650)
------------ ---------
Net cash used in investing
activities (1,273) (4,502)
Cash flows from financing activities:
Net change in debt under revolving credit
agreements (5,000) --
Cash dividends paid (551) (545)
Proceeds from issuance of common stock -- 140
------------ ---------
Net cash used in financing
activities (5,551) (405)
------------ ---------
Net (decrease) increase in cash and cash
equivalents (7,649) 2,252
Cash and cash equivalents at beginning of
period 32,400 12,060
------------ ---------
Cash and cash equivalents at end of period $24,751 $14,312
============ =========
SOURCE: Sypris Solutions, Inc.
Sypris Solutions, Inc.
T. Scott Hatton, 502-329-2000
Chief Financial Officer