LOUISVILLE, Ky., Nov 16, 2010 (BUSINESS WIRE) -- Sypris Solutions, Inc. (Nasdaq/NM: SYPR) today reported financial results for its third quarter ended October 3, 2010. The results of the Company's Test & Measurement segment, which was divested on October 26, 2009, have been excluded from historical results from continuing operations and reclassified as discontinued operations.

HIGHLIGHTS

------------------------------------------

• Revenue increased 16.3% sequentially to $73.4million during the period, up from $63.1million for the second quarter as a result of a 25.0% increase in A&D revenue and a 13.2% increase in Industrial sales.
• Gross profit increased 55.3% sequentially to $7.7million, up from $4.9million in the second quarter, driven primarily by a 101.3% increase in A&D gross profit.
• Gross margin increased to 10.4% of revenue, up from 7.8% sequentially and up from 8.3% for the third quarter of last year, reflecting the impact of A&D margin expansion to 25.8% during the quarter.
• EBITDA increased to $3.0million, up from $0.9million sequentially and up from a loss of $0.2million for the third quarter of last year.
• Net debt declined sequentially to $5.2million.
• The Company was awarded $3.1million of funding by the Department of Energy to develop a centralized cryptographic key management system to protect the nation's electric power grids from cyber attacks. The Company's partners include Purdue University, Oak Ridge National Laboratory and the Electric Power Research Institute.
• Subsequent to quarter end, the Company announced the formation of an international strategic alliance with Cassidian, formerly EADS Defence & Security, to jointly pursue software and hardware solutions to address the growing need for information security across the global cyber domain.
• After the period ended, the Company also announced plans to develop an International Cyber Range for use by the U.S. and its partners to accelerate revolutionary advances in cyber security and cyber warfare initiatives. The range is expected to be operational by the first quarter of 2011.

The Company reported revenue from continuing operations of $73.4 million for the third quarter compared to $62.7 million for the prior year period. The Company reported a net loss from continuing operations of $1.7 million, or $0.09 per share, for the third quarter compared to a net loss of $1.9 million, or $0.10 per share, for the prior year period. The net loss for the quarter ended October 3, 2010 included $0.6 million of charges associated with the Company's previously announced restructuring program. The net loss for the quarter ended October 4, 2009 included $1.5 million of charges associated with the restructuring program and an income tax benefit of $3.8 million. Including the results of discontinued operations, the Company's net loss for the third quarter was $1.9 million, or $0.10 per share, as compared to a net loss of $1.8 million, or $0.09 per share, for the prior year period.

For the nine months ended October 3, 2010, the Company reported revenue from continuing operations of $199.4 million compared to $199.8 million for the prior year period and a loss from continuing operations of $8.1 million, or $0.43 per share, compared to a loss of $20.1 million, or $1.09 per share, for the same period in 2009. The loss for the period included $2.0 million of charges associated with the restructuring program. The net loss for the nine months ended October 4, 2009 included $5.2 million of charges associated with the restructuring program and an income tax benefit of $3.0 million. Including the results of discontinued operations, the Company's net loss for the nine months ended October 3, 2010 was $8.6 million, or $0.46 per share, as compared to a net loss of $19.9 million, or $1.08 per share, for the prior year period.

"Our Industrial Group continued to show important signs of progress during the quarter, with revenue and gross profit increasing on a year-over-year basis," said Jeffrey T. Gill, president and chief executive officer. "And perhaps even more importantly, the Industrial Group's EBITDA improved to $3.3 million from $0.4 million for the prior year period, while the segment reported positive operating income before restructuring charges of $0.1 million during the quarter, reflecting the positive impact of last year's restructuring activities.

"Revenue for our Electronics Group increased 25.0% sequentially for the quarter, reflecting the resumption of shipments that had been previously delayed by the Department of Defense, while gross margins expanded to 25.8% of revenue, up from 16.0% sequentially. The Company continued showing improvement as a result of the restructuring efforts executed throughout last year, and the cost structures of both business segments remain well positioned to capitalize on the improving economy."

The Industrial Group

Revenue for our Industrial Group increased 41.9% to $52.7 million in the third quarter compared to $37.2 million for the prior year period as a result of the improvement in the commercial vehicle and trailer markets, and represents the fifth consecutive quarterly increase in revenue. Gross profit for the quarter was $2.3 million compared to $0.1 million for the same period in 2009, reflecting the positive conversion associated with the increase in revenue combined with restructuring savings and aggressive cost containment activities.

The Electronics Group

Revenue for our Electronics Group was $20.7 million in the third quarter compared to $25.6 million in the prior year period, primarily as a result of the completion of certain older low-margin programs within our Electronic Manufacturing Services business. This was partially offset by the resumption of shipments on one of our secure communication programs. Gross profit for the quarter increased to $5.3 million, or 25.8%, compared to $5.1 million, or 20.0%, for the same period in 2009, primarily reflecting the impact of the increased sales of higher margin products and improvements resulting from our Lean and Six Sigma quality programs.

Outlook

Mr. Gill added, "In the long-term, the outlook for our Electronics Group is expected to benefit materially from further gross margin expansion as a result of new program launches, process improvements, increased productivity and lower costs driven by Lean and Six Sigma quality programs.

"We expect to see incremental improvement in the performance of our Industrial Group going forward, subject to a recovery of the commercial vehicle market and our ability to profitably respond to the expected increase in demand. However, this business is expected to continue to generate positive improvements in comparable period EBITDA even at the current low volumes due to the continuing positive impact of our restructuring activities that were substantially completed during 2009.

"The Company is well-positioned and our team is focused on delivering improved operational and financial results during the year."

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 and truck components and assemblies. 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: our inability to successfully launch or sustain new or next generation programs or product features, especially in accordance with budgets or committed delivery schedules; potential liabilities associated with discontinued operations, including post-closing indemnifications or claims related to business or asset dispositions; breakdowns, relocations or major repairs of machinery and equipment; 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; pension valuation, health care or other benefit costs; labor relations; strikes; dependence on, recruitment or retention of key employees; union negotiations; changes in government or other customer budgets, funding or programs; reliance on major customers or suppliers, especially in the automotive or aerospace and defense electronics sectors; disputes or litigation, involving customer, supplier, lessor, landlord, creditor, stockholder, product liability or environmental claims; the costs and supply of debt, equity capital, or insurance; fees, costs or other dilutive effects of refinancing, compliance with covenants in, or acceleration of, our loan and other debt agreements; potential impairments, non-recoverability or write-offs of goodwill, assets or deferred costs, including deferred tax assets in the U.S. or Mexico; 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; 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; failure to adequately insure or to identify environmental or other insurable risks; inventory valuation risks including obsolescence, shrinkage, theft, overstocking or underbilling; revised contract prices or estimates of major contract costs; risks of foreign operations; currency exchange rates; 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; 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 net debt to total capital and EBITDA, which are non-GAAP financial measures.

Net debt is defined as the sum of short-term and long-term debt less cash and cash equivalents and restricted cash. Net debt to total capital is defined as the ratio of net debt to the sum of total stockholder's equity and net debt. EBITDA is defined as earnings before interest, taxes, depreciation and amortization.

Net debt and net debt to total capital ratio are used by management to analyze the Company's financial structure and its reliance on debt financing for funding its operational requirements. Management believes EBITDA is a meaningful measure of performance as it is commonly utilized by management, investors and financial institutions to analyze operating performance and entity valuation. Further, management uses these non-GAAP measures 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. EBITDA should not be considered as an alternative to net income as an indicator of our operating performance or to cash flows as a measure of liquidity.

Note: The balance sheet at December 31, 2009 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.

SOURCE: Sypris Solutions, Inc.

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