LOUISVILLE, Ky.--(BUSINESS WIRE)--Mar. 31, 2009-- Sypris Solutions, Inc. (Nasdaq/NM: SYPR) today reported revenue of $94.5 million for the fourth quarter compared to $103.7 million for the prior year period. The Company reported a net loss of $10.6 million, or $0.58 per share, before special charges and non-cash impairments, compared to a net loss of $2.2 million, or $0.12 per share for the fourth quarter of 2007, before special charges and non-cash impairments.

For the full year ended December 31, 2008, the Company reported revenue of $411.3 million compared to $435.9 million for the prior year period and a net loss of $18.3 million, or $0.99 per share, before special charges and non-cash impairments, compared to a net loss of $3.7 million, or $0.20 per share in 2007, before special charges and non-cash impairments.

In addition to the financial results reported above, the Company’s results for the year included $45.1 million of charges associated with the implementation of the Company’s previously announced restructuring program, non-cash charges of $66.8 million to reflect a reduction in the carrying value of certain marketable securities held by the Company, and the impairment of $0.4 million of goodwill. Including the special charges and non-cash impairments, the Company’s net loss for the fourth quarter and full year 2008 was $122.3 million, or $6.65 per share and $130.6 million, or $7.11 per share, respectively.

“The Company’s restructuring initiatives are now ahead of schedule,” said Jeffrey T. Gill, president and chief executive officer. “When completed during the second half of 2009, we expect to benefit from an estimated $25.0 million per year of cost savings, with 75% to 80% of those benefits expected to be realized as early as 2010. These savings will be generated across the Company’s platform and are expected to have a positive impact on all businesses going forward.”

The restructuring plans, which include the consolidation of three North American plants into other existing Sypris facilities, a reduction of approximately 12.5% of the Company’s domestic workforce, the cost reduction of certain high-volume secure communications products, and lean initiatives to reduce operating inefficiencies and scrap, among others, were previously detailed by the Company during 2008.

“As expected, the quarter was extremely challenging, with the rapid contraction in the economy impacting our Industrial Group. Continued growth in our Electronics Group was not sufficient to offset the decline in sales to customers in the automotive and commercial vehicle markets. To their credit, our management team in this segment responded superbly to market conditions by aggressively right sizing the business and accelerating our restructuring plans.”

“Our Electronics Group continued to make important progress. Orders for our Aerospace & Defense segment increased 37% during the quarter when compared to the prior year period, while revenue for our Test & Measurement segment increased 7% during the quarter when compared to the fourth quarter of 2007. Revenue from our Electronics Group represents approximately 41% of total portfolio revenue as compared to 36% for the prior year.”

The Industrial Group

Revenue for our Industrial Group was $47.3 million in the fourth quarter compared to $58.9 million for the prior year period as a result of declines in commercial vehicle, trailer and light truck sales. Gross profit for the quarter was a loss of $1.6 million as compared to profit of $3.8 million for the same period in 2007 reflecting the 19.7% decline in revenue.

During the quarter, the Company exited a supply agreement with Ford Motor Company for the production of drive axle components for automotive and light truck applications, resulting in the non-cash write off of certain production assets associated with the contract. As a result, the Company’s future exposure to the automobile industry has been reduced to less than 3% of consolidated sales.

The Electronics Group

Revenue for our Electronics Group increased 5.5% to $47.3 million in the fourth quarter compared to $44.8 million in the prior year period. Gross profit for the quarter decreased to $3.4 million compared to $5.8 million for the same period in 2007, primarily as a result of $2.8 million of non-cash charges incurred to reflect program closeouts and physical inventory adjustments.

Revenue for the Aerospace & Defense segment increased 4.8% to $33.4 million in the fourth quarter compared to $31.9 million for the prior year period on sales of link encryption products. Gross profit for the Aerospace & Defense segment decreased to a loss of $0.1 million compared to gross profit in the prior year of $2.6 million due to the non-cash expenses mentioned above.

Revenue for the Test & Measurement segment increased 7.1% to $13.9 million compared to $13.0 million for the prior year period. Gross profit for the Test & Measurement segment increased 5.6% to $3.4 million from $3.2 million in the prior year period due to increased sales volume during the quarter.

Outlook

Mr. Gill added, “The outlook for our Electronics Group remains positive, with year-over-year performance improvements expected to continue despite the challenging economic environment. Over the longer term, the development and implementation of technology utilizing biometric, wireless and embedded solutions is expected to result in a higher mix of product-driven revenue, while the results of the restructuring and the application of continuous improvement techniques are expected to improve efficiency, productivity and operating results, thereby significantly increasing the group’s overall profit contribution to the Company.”

“The outlook for our Industrial Group remains quite challenging despite the significant actions initiated by our management team to date. According to American Commercial Transportation Research, the North American production of Class 4-8 commercial vehicles is forecast to decline further during the first quarter of 2009, falling 29% to 63,000 units during the period from 88,000 units in the fourth quarter of 2008. And while these conditions continue to create a forecasting challenge, we do expect to begin realizing the benefits of the restructuring program beginning as early as the second quarter of this year.”

“In February, we concluded decisional bargaining with the union at our Marion, Ohio facility and have decided to close that facility. The closure of the 255,000 square foot plant and the relocation of its operations to other Sypris locations should be completed during 2009. This will reduce costs in our Industrial Group and reflects the aggressiveness and sense of urgency with which we are focused on improving the Company’s competitiveness and future profitability.”

“As a result, we expect the Company to generate positive free cash flow, before restructuring, for the full year 2009. We expect to complete most restructuring activities during the year, the result of which should position the Company for substantially improved operating results in 2010 without regard to any potential improvement in the overall economy.”

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 Form 10-Q and subsequent SEC filings. Briefly, we currently believe that such risks also include: the effects of a continuing economic downturn which could reduce our revenues, negatively impact our customers or suppliers and materially, adversely affect our financial results; our ability to liquidate our equity interests in Dana Holding Corporation at satisfactory valuation levels; potential impairments, non-recoverability or write-offs of goodwill, assets or deferred costs, including deferred tax assets in the U.S.; fees, costs or other dilutive effects of refinancing, compliance with covenants in, or acceleration of, our loan and other debt agreements; costs and inefficiencies of restructuring our manufacturing capacity; breakdowns, relocations or major repairs of machinery and equipment; our inability to successfully launch new or next generation programs; the cost, 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; cost and availability of raw materials such as steel, component parts, natural gas or utilities; volatility of our customers’ forecasts, financial conditions, market shares, product requirements or scheduling demands; adverse impacts of new technologies or other competitive pressures which increase our costs or erode our margins; failure to adequately insure or to identify environmental or other insurable risks; inventory valuation risks including obsolescence, shrinkage, theft, overstocking or underbilling; changes in government or other customer programs; reliance on major customers or suppliers, especially in the automotive or aerospace and defense electronics sectors; revised contract prices or estimates of major contract costs; dependence on, recruitment or retention of key employees; union negotiations; pension valuation, health care or other benefit costs; labor relations; strikes; risks of foreign operations; currency exchange rates; the costs and supply of debt, equity capital, or insurance (including the possibility that our common stock could cease to qualify for listing on the NASDAQ Stock Market due to a sustained decline in prices per share, or that any reverse stock split or other restructuring of our debt or equity financing could be accompanied by the deregistration of our common stock or other “going private” transactions); changes in licenses, security clearances, or other legal rights to operate, manage our work force or import and export as needed; weaknesses in internal controls; the costs of compliance with our auditing, regulatory or contractual obligations; regulatory actions or sanctions; disputes or litigation, involving customer, supplier, creditor, stockholder, product liability, asbestos-related or environmental 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.

Non-GAAP Measures

In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP") included throughout this press release, the company has provided information regarding free cash flow and net loss before special charges and non-cash impairments, which are non-GAAP financial measures.

Free cash flow is useful in analyzing the company’s ability to service and repay its debt. Net loss before special charges and non-cash impairments is useful in understanding the company’s base operations. Further, management uses free cash flow in planning and forecasting for future periods.

These non-GAAP measures should not be considered a substitute for our reported results prepared in accordance with GAAP. Net loss before special charges and non-cash impairments should not be considered as an alternative to net income as an indicator of our operating performance. Free cash flow should not be considered a substitute for cash provided by operating activities or other cash flow statement data prepared in accordance with GAAP or as a measure of liquidity. In addition, the calculation of free cash flow does not reflect cash used to service debt or cash received from the divestitures or businesses or sales of other assets and thus does not reflect funds available for investment or other discretionary uses.

Source: Sypris Solutions, Inc.

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