Sypris Reports Third Quarter Earnings; Revenue Increases 19%
LOUISVILLE, Ky.--(BUSINESS WIRE)--Oct. 27, 2005--Sypris Solutions, Inc. (Nasdaq/NM: SYPR) today reported revenue increased 19% to a record $140.8 million for the third quarter compared to $118.5 million for the prior year period. Net income for the period was $3.0 million, or $0.16 per diluted share, compared to $3.8 million, or $0.21 per diluted share, for the third quarter of 2004.
For the nine months ended September 30, 2005, the Company reported revenue increased 29% to a record $390.7 million compared to $303.7 million for the prior year period. Net income was $5.6 million compared to $9.1 million for the same period in 2004, while earnings per share were $0.30 per diluted share compared to $0.52 per diluted share.
"The results for the third quarter reflected a continued improvement in the Company's operating performance," said Jeffrey T. Gill, president and chief executive officer. "Revenue continued to increase while operating margins expanded sequentially as the result of improved efficiencies and volume. Cash flow from operations reached a record $24.5 million during the period, resulting in free cash flow of $17.8 million as several major capital projects neared completion."
"Net orders for the quarter reached a record $139.2 million, driven by an 83% increase in bookings from our Electronics Group. The outlook for our markets in general remains positive, though we believe the significant increase in energy costs and rising interest rates will have a dampening effect on both demand and margins. In response to these factors, we will maintain a stringent focus on process improvement and cost containment throughout the Company."
The Industrial Group
Revenue for our Industrial Group increased 20% to $94.5 million in the third quarter from $78.4 million for the prior year period, and increased 5.4% sequentially from the second quarter of this year. Gross profit for the quarter was $7.3 million compared to $9.3 million for the same period in 2004 and decreased 2.6% sequentially from the second quarter of this year as a result of extended customer shutdowns early in the period to rebalance inventories.
"Net orders were $78.8 million for the quarter, while backlog increased 12% to $131.9 million compared to the prior year quarter," said Gill. "Orders and revenue were in line with our expectations for the quarter. We believe that we have now reached the top of the current truck market cycle and expect shipments during the coming quarters to remain relatively stable, subject to the number of workdays in a quarter and any impact on the demand for commercial vehicles related to rising energy costs and interest rates, or reductions in construction spending and consumer demand, among others. Nevertheless, we continue to believe that we are well positioned to benefit from the continued trend in outsourcing by many of the Tier 1 suppliers as these customers implement initiatives to improve efficiencies and reduce investments in non-core operations."
The Electronics Group
Revenue for our Electronics Group increased 16% to $46.3 million in the third quarter compared to $40.0 million for the prior year period, and improved 29% sequentially from the second quarter of this year. Gross profit for the quarter increased 21% to $8.3 million compared to $6.8 million for the same period in 2004, reflecting improvements in data systems shipments and test and measurement margins.
Revenue for the Aerospace & Defense segment increased 19% to $33.9 compared to $28.4 million for the prior year period and increased 41% from the second quarter of 2005. Revenue for the Test & Measurement segment increased 7% from that of the prior year period at $12.4 million, and increased 5% sequentially from the second quarter of this year. Gross profit for the Aerospace & Defense segment increased 21% to $5.4 million from $4.5 million for the prior year period, and increased 59% from the second quarter of 2005. Gross profit for the Test & Measurement segment increased 22% to $2.9 million from $2.4 million for the same period in 2004, but decreased slightly on a sequential basis from the second quarter of this year.
"Net orders for our Electronics Group increased 83% to $60.4 million for the quarter, while backlog remained firm at $121.0 million," said Gill. "The increase in bookings for our Electronics Group represented a substantial improvement over recent quarters and while we believe the opportunity for growth in this important segment is improving, we will remain somewhat cautious in our outlook until such time as we see a more defined trend in contract awards."
Outlook
Gill added, "Looking forward, we expect revenue for the fourth quarter of 2005 to be in the range of $135 to $140 million compared to $122 million for the prior year period, which represents a 13% increase at the midpoint of our guidance. Earnings for the fourth quarter are forecast to be in the range of $0.12 to $0.15 per diluted share compared to a loss of $0.04 per diluted share for the prior year. The revenue outlook reflects an increased degree of conservatism regarding year-end shipments and the potential for customer shutdowns during the holidays, while the earnings outlook incorporates the impact of the reduced shipments, higher energy prices and rising interest rates."
"Revenue for 2005 is forecast to be in the range of $525 to $530 million compared to $425 million for 2004, which represents a 24% increase in revenue for 2005 at the midpoint of the range. Earnings for 2005 are forecast to be in the range of $0.42 to $0.45 per diluted share compared to $0.47 per diluted share for 2004. As we look beyond the current year, we plan to issue guidance for 2006 on Thursday, December 15, 2005, at which time we will convene a conference call to field questions and address any comments."
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.
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 availability of raw materials such as steel, components, freight, or utilities; cost and inefficiencies associated with increasing our manufacturing capacity and launching new programs; stability and predictability of customers' forecasts, backlogs or scheduling demands; costs associated with breakdowns or repairs of machinery and equipment; growth beyond our productive capacity, reductions, cyclical downturns or competitive pressures in our markets; cost, efficiency and yield of our operations including overtime costs, expediting costs or scrap rates; our ability to improve results of acquired businesses and associated costs; inventory valuation risks; product mix; changes in government or other customer programs; reliance on major customers or suppliers; revised contract prices or 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; significant increases in working capital; impairments or write-offs of goodwill or fixed assets; pension valuation risks; 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 regulatory or contractual obligations; 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.
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SYPRIS SOLUTIONS, INC.
Financial Highlights
(In thousands, except per share amounts)
Three Months Ended
---------------------
Sept. 30, Sept. 30,
2005 2004
--------- ---------
Restated(1)
Revenue $140,811 $118,457
Net income $3,001 $3,791
Earnings per common share:
Basic $0.17 $0.21
Diluted $0.16 $0.21
Weighted average shares outstanding:
Basic 18,036 17,889
Diluted 18,423 18,306
Nine Months Ended
---------------------
Sept. 30, Sept. 30,
2005 2004
--------- ---------
Restated(1)
Revenue $390,654 $303,729
Net income $5,572 $9,100
Earnings per common share:
Basic $0.31 $0.54
Diluted $0.30 $0.52
Weighted average shares outstanding:
Basic 18,009 16,851
Diluted 18,328 17,504
(1) On January 1, 2005, the Company changed its accounting policy
for inventory and cost of sales at one manufacturing facility. Prior
year amounts have been restated as required for comparability. The
change increased previously reported earnings for the third quarter
and first nine months of 2004 by $304,000, or $0.02 per diluted share
and $230,000, or $0.01 per diluted share, respectively.
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Sypris Solutions, Inc.
Consolidated Income Statements
(in thousands, except for per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
2004 2004
2005 Restated(1) 2005 Restated(1)
-------------------- ---------------------
(Unaudited) (Unaudited)
Net revenue:
Industrial Group $94,504 $78,429 $272,867 $185,102
Aerospace & Defense 33,866 28,350 81,957 83,715
Test & Measurement 12,441 11,678 35,830 34,912
----------- -------- ----------- ---------
Electronics Group 46,307 40,028 117,787 118,627
----------- -------- ----------- ---------
Total net revenue 140,811 118,457 390,654 303,729
Cost of sales:
Industrial Group 87,161 69,082 251,586 163,762
Aerospace & Defense 28,498 23,899 70,829 69,011
Test & Measurement 9,546 9,302 27,386 27,428
----------- -------- ----------- ---------
Electronics Group 38,044 33,201 98,215 96,439
----------- -------- ----------- ---------
Total cost of sales 125,205 102,283 349,801 260,201
Gross profit:
Industrial Group 7,343 9,347 21,281 21,340
Aerospace & Defense 5,368 4,451 11,128 14,704
Test & Measurement 2,895 2,376 8,444 7,484
----------- -------- ----------- ---------
Electronics Group 8,263 6,827 19,572 22,188
----------- -------- ----------- ---------
Total gross profit 15,606 16,174 40,853 43,528
Selling, general and
administrative 8,492 8,915 26,158 25,701
Research and development 767 1,084 2,384 2,483
Amortization of intangible
assets 161 145 474 411
----------- -------- ----------- ---------
Operating income 6,186 6,030 11,837 14,933
Interest expense, net 1,797 646 4,566 1,161
Other (income) expense, net (89) 15 (856) (91)
----------- -------- ----------- ---------
Income before income taxes 4,478 5,369 8,127 13,863
Income tax expense 1,477 1,578 2,555 4,763
----------- -------- ----------- ---------
Net income $3,001 $3,791 $5,572 $9,100
=========== ======== =========== =========
Earnings per common share:
Basic $0.17 $0.21 $0.31 $0.54
Diluted $0.16 $0.21 $0.30 $0.52
Dividends declared per
common share $0.03 $0.03 $0.09 $0.09
Weighted average shares
outstanding:
Basic 18,036 17,889 18,009 16,851
Diluted 18,423 18,306 18,328 17,504
(1) On January 1, 2005, the Company changed its accounting policy
for inventory and cost of sales at one manufacturing facility. Prior
year amounts have been restated as required for comparability. The
change increased previously reported earnings for the third quarter
and first nine months of 2004 by $304,000, or $0.02 per diluted share
and $230,000, or $0.01 per diluted share, respectively.
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Sypris Solutions, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)
Dec. 31,
Sept. 30, 2004
2005 Restated(1)
----------- ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $22,505 $14,060
Accounts receivable, net 109,595 104,637
Inventory, net 98,997 92,016
Other current assets 17,790 21,566
----------- ---------
Total current assets 248,887 232,279
Property, plant and equipment, net 180,870 166,940
Goodwill 14,277 14,277
Other assets 22,996 17,682
----------- ---------
Total assets $467,030 $431,178
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $92,036 $61,778
Accrued liabilities 26,651 20,378
Current portion of long-term debt -- 7,000
----------- ---------
Total current liabilities 118,687 89,156
Long-term debt 112,000 110,000
Other liabilities 21,856 23,083
----------- ---------
Total liabilities 252,543 222,239
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; 18,164,058
and 17,920,500 shares issued and outstanding
in 2005 and 2004, respectively 182 179
Additional paid-in capital 143,336 140,898
Unearned compensation (1,335) --
Retained earnings 74,172 70,227
Accumulated other comprehensive loss (1,868) (2,365)
----------- ---------
Total stockholders' equity 214,487 208,939
----------- ---------
Total liabilities and stockholders' equity $467,030 $431,178
=========== =========
(1) On January 1, 2005, the Company changed its accounting policy
for inventory and cost of sales at one manufacturing facility. Prior
year amounts have been restated as required for comparability. The
change increased previously reported inventory, retained earnings and
other liabilities balances at December 31, 2004 by $2,224,000,
$1,503,000 and $721,000, respectively.
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Sypris Solutions, Inc.
Consolidated Cash Flow Statements
(in thousands)
Nine Months Ended
September 30,
--------------------
2004
2005 Restated(1)
---------- --------
(Unaudited)
Cash flows from operating activities:
Net income $5,572 $9,100
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 18,698 13,564
Other noncash charges 1,714 1,108
Changes in operating assets and liabilities,
net of acquisitions in 2004:
Accounts receivable (5,095) (49,139)
Inventory (8,006) (25,949)
Accounts payable 30,809 35,488
Accrued liabilities 6,542 4,574
Other (2,108) (2,800)
---------- --------
Net cash provided by (used in) operating
activities 48,126 (14,054)
Cash flows from investing activities:
Capital expenditures (32,776) (38,245)
Purchase of net assets of acquired entities -- (29,399)
Changes in nonoperating assets and liabilities (1,330) (33)
---------- --------
Net cash used in investing activities (34,106) (67,677)
Cash flows from financing activities:
Net repayments under revolving credit agreements (5,000) (30,550)
Proceeds from long-term debt -- 55,000
Cash dividends paid (1,619) (1,486)
Proceeds from issuance of common stock 1,044 57,080
---------- --------
Net cash (used in) provided by
financing activities (5,575) 80,044
Net increase (decrease) in cash and cash
equivalents 8,445 (1,687)
Cash and cash equivalents at beginning of period 14,060 12,019
---------- --------
Cash and cash equivalents at end of period $22,505 $10,332
========== ========
(1) On January 1, 2005, the Company changed its accounting policy
for inventory and cost of sales at one manufacturing facility. Prior
year amounts have been restated as required for comparability. The
change increased previously reported earnings for the third quarter
and first nine months of 2004 by $304,000, or $0.02 per diluted share
and $230,000, or $0.01 per diluted share, respectively.
CONTACT: Sypris Solutions, Inc.
T. Scott Hatton, 502-329-2000
SOURCE: Sypris Solutions, Inc.