Sypris Reports Third Quarter Results; Declares Quarterly Dividend
Aerospace and Defense Orders Increase 35%
LOUISVILLE, Ky.--(BUSINESS WIRE)--Oct. 25, 2007--Sypris Solutions, Inc. (Nasdaq/NM: SYPR) today reported revenue of $104.5 million for the third quarter compared to $126.0 million for the prior year period. The Company reported net income of $2.6 million, or $0.14 per diluted share for the third quarter compared to a net loss of $0.8 million, or $0.04 per diluted share for the prior year period. The results for the quarter reflect the previously announced settlement agreement with Dana, which contributed $5.4 million to net income, or $0.29 per diluted share.
On October 23, 2007, the Company's Board of Directors also declared a regular quarterly cash dividend of $0.03 per share. The dividend will be payable on January 10, 2008 to shareholders of record as of December 21, 2007. Sypris Solutions currently has 19.1 million shares outstanding.
For the nine months ended September 30, 2007, the Company reported revenue of $332.2 million compared to $388.2 million for the prior year period and net income of $0.1 million, or $0.00 per diluted share compared to a net loss of $0.4 million, or $0.02 per diluted share for the same period in 2006. Net income for the nine months ended September 30, 2007 includes the impact of the Dana settlement agreement (net of litigation expenses incurred in the first six months) of $4.5 million, net of taxes, or $0.24 per diluted share.
"The Company's financial results were largely in line with our expectations for the third quarter of 2007," said Jeffrey T. Gill, president and chief executive officer. "Continued margin improvement served to offset the impact of lower than expected revenue, which was driven by a softening in the trailer market and a delay in shipments in our Electronics Group due to the extension of the certification process for certain key, classified defense electronic product programs."
"Orders for our Electronics Group increased 30% compared to the prior year period and 47% sequentially, driven by a 35% year over year increase in bookings in our Aerospace and Defense segment. The strength of this order pattern provides us with important support for achieving double digit growth in the top line of this business during the coming years. Our Test & Measurement segment also posted strong bookings with orders increasing 17% compared to the prior year."
The Industrial Group
Revenue for our Industrial Group was $67.6 million in the third quarter compared to $93.0 million for the prior year period as a result of the forecasted decline in heavy truck production. Gross profit for the quarter decreased to $4.7 million from $5.2 million for the same period in 2006, as a result of lower volumes, partially offset by price improvements and the impact of the Dana settlement.
The Electronics Group
Revenue for our Electronics Group increased 12.1% to $36.9 million in the third quarter compared to $32.9 million in the prior year period. Gross profit for the quarter was $5.8 million compared to $5.1 million for the same period in 2006, reflecting higher margin conversion in our Test and Measurement segment.
Revenue for the Aerospace & Defense segment increased 11.5% to $23.6 million in the third quarter compared to $21.2 million for the prior year period primarily as a result of an increase in contract manufacturing service activity. Revenue for the Test & Measurement segment increased 13.2% to $13.3 million compared to $11.8 million for the prior year period as a result of growth in our component screening and calibration markets. Gross profit for the Aerospace & Defense segment was $2.5 million compared to $2.6 million for the prior year period. Gross profit for the Test & Measurement segment increased 32.6% to $3.3 million from $2.5 million in the prior year period due to new business wins in calibration and a favorable product mix in test services.
Outlook
Mr. Gill added, "Looking forward, we believe the balance of 2007 will remain challenging for Sypris as demand for commercial vehicle and trailer components is expected to be lower than previously forecast. Additionally, certification requirements for certain key, classified defense electronic product programs will reduce the short-term outlook for revenue and margin in the Aerospace & Defense segment, while the Test & Measurement segment is expected to continue to show strength."
"As a result, we have revised our revenue guidance slightly for the full year. Revenue for 2007 is now forecast to be in the range of $435 to $440 million, down from the previous guidance of $443 to $453 million. Similarly, our outlook for earnings for the full year is reduced to a range of $0.00 to a loss of $0.05 per diluted share from a net profit of $0.01 to $0.06 per diluted share. Additionally, we expect a use of free cash flow in the range of $8.0 to $13.0 million, down from a use of $0.0 million to $5.0 million, as a result of lower volume and increased capital investment. The outlook for free cash flow assumes that the Company does not liquidate the $89.9 million unsecured claim with Dana."
"Consistent with this total year outlook, we expect fourth quarter revenue to be in the range of $107 to $112 million compared to $109 million for the prior year period. Earnings for the fourth quarter are forecast to be in the range of $0.00 to a net loss of $0.05 per diluted share compared to a net loss of $0.05 per diluted share for the prior year period. Consistent with our past practice, we will issue a press release and host a conference call on December 20th at 9:00 EST to discuss the Company's financial outlook for 2008."
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: our ability to liquidate our unsecured claims against the Dana bankruptcy estates at satisfactory valuations; costs and inefficiencies of restructuring our manufacturing capacity or breakdowns, relocations or major repairs of machinery and equipment; our inability to successfully launch new or next generation programs; impairments, non-recoverability or write-offs of goodwill, assets or deferred costs; cost, efficiency and yield of our operations including capital investments, 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; cyclical or other downturns; 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 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; costs and supply of debt, equity capital, or insurance; 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; costs of compliance with auditing, regulatory or contractual obligations; regulatory actions or sanctions; disputes or litigation, involving customer, supplier, creditor, stockholder, product liability or environmental claims including potential, pre-existing product liability and unknown warranty claims that were preserved in our settlement agreement with Dana; 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
September 30,
------------------
2007 2006
-------- ---------
(Unaudited)
Revenue $104,520 $125,955
Net income (loss) $2,637 $(802)
Earnings (loss) per common share:
Basic $0.14 $(0.04)
Diluted $0.14 $(0.04)
Weighted average shares outstanding:
Basic 18,314 18,094
Diluted 18,548 18,094
Nine Months Ended
September 30,
------------------
2007 2006
-------- ---------
(Unaudited)
Revenue $332,206 $388,185
Net income (loss) $91 $(389)
Income (loss) per common share:
Basic $- $(0.02)
Diluted $- $(0.02)
Weighted average shares outstanding:
Basic 18,196 18,071
Diluted 18,351 18,071
Note: The selected data at December 31, 2006 has been derived from the
audited consolidated financial statements at that date and 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 Statements of Operations
(in thousands, except for per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
2007 2006 2007 2006
--------- -------- --------- ---------
(Unaudited) (Unaudited)
Net revenue:
Industrial Group $67,595 $93,021 $220,186 $283,974
Aerospace & Defense 23,604 21,166 72,655 69,094
Test & Measurement 13,321 11,768 39,365 35,117
--------- -------- --------- ---------
Electronics Group 36,925 32,934 112,020 104,211
--------- -------- --------- ---------
Total net revenue 104,520 125,955 332,206 388,185
Cost of sales:
Industrial Group 62,882 87,871 206,404 268,384
Aerospace & Defense 21,133 18,559 66,252 59,185
Test & Measurement 10,033 9,289 29,370 27,327
--------- -------- --------- ---------
Electronics Group 31,166 27,848 95,622 86,512
--------- -------- --------- ---------
Total cost of sales 94,048 115,719 302,026 354,896
Gross profit:
Industrial Group 4,713 5,150 13,782 15,590
Aerospace & Defense 2,471 2,607 6,403 9,909
Test & Measurement 3,288 2,479 9,995 7,790
--------- -------- --------- ---------
Electronics Group 5,759 5,086 16,398 17,699
--------- -------- --------- ---------
Total gross profit 10,472 10,236 30,180 33,289
Selling, general and
administrative 10,369 9,600 29,740 28,474
Research and development 608 427 2,001 1,132
Amortization of intangible
assets 129 163 457 480
Non-recurring items (4,835) 575 (3,281) 1,252
--------- -------- --------- ---------
Operating income (loss) 4,201 (529) 1,263 1,951
Interest expense, net 991 820 2,624 3,062
Other (income) expense, net (26) 12 15 (246)
--------- -------- --------- ---------
Income (loss) before
income taxes 3,236 (1,361) (1,376) (865)
Income tax expense (benefit) 599 (559) (1,467) (476)
--------- -------- --------- ---------
Net income (loss) $2,637 $(802) $91 $(389)
========= ======== ========= =========
Earnings (loss) per common
share:
Basic $0.14 $(0.04) $- $(0.02)
Diluted $0.14 $(0.04) $- $(0.02)
Dividends declared per common
share $0.03 $0.03 $0.09 $0.09
Weighted average shares
outstanding:
Basic 18,314 18,094 18,196 18,071
Diluted 18,548 18,094 18,351 18,071
Note: The statement of operations 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 Balance Sheets
(in thousands, except for share data)
September 30, December 31,
2007 2006
------------- ------------
(Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $16,345 $32,400
Restricted cash 883 1,002
Accounts receivable, net 58,473 59,876
Inventory, net 82,284 74,146
Other current assets 109,761 34,014
------------- ------------
Total current assets 267,746 201,438
Property, plant and equipment, net 139,388 155,341
Goodwill 14,277 14,277
Other assets 13,626 7,977
------------- ------------
Total assets $435,037 $379,033
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $67,283 $76,291
Accrued liabilities 47,241 19,430
Current portion of long-term debt 5,000 5,000
------------- ------------
Total current liabilities 119,524 100,721
Long-term debt 50,000 55,000
Other liabilities 55,546 13,426
------------- ------------
Total liabilities 225,070 169,147
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; 19,185,179
shares issued and 19,075,441 outstanding
in 2007 and 18,342,243 shares issued and
18,338,484 outstanding in 2006 192 183
Additional paid-in capital 145,826 143,537
Retained earnings 68,202 69,816
Accumulated other comprehensive loss (4,056) (3,634)
Treasury stock, 109,738 and 3,759 shares
in 2007 and 2006, respectively (197) (16)
------------- ------------
Total stockholders' equity 209,967 209,886
------------- ------------
Total liabilities and stockholders'
equity $435,037 $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)
Nine Months Ended
September 30,
-----------------
2007 2006
-------- --------
(Unaudited)
Cash flows from operating activities:
Net income (loss) $91 $(389)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization 21,738 21,272
Noncash compensation expense 1,276 724
Deferred income taxes (13,735) --
Other noncash items (9,624) 690
Changes in operating assets and liabilities:
Accounts receivable (5,377) 18,334
Inventory (3,916) 1,657
Other current assets (3,414) (4,142)
Accounts payable (3,221) 9,288
Accrued liabilities 12,897 (4,238)
-------- --------
Net cash (used in) provided by operating
activities (3,285) 43,196
Cash flows from investing activities:
Capital expenditures (5,118) (7,852)
Proceeds from sale of assets 22 71
Changes in nonoperating assets and liabilities (1,152) 85
-------- --------
Net cash used in investing activities (6,248) (7,696)
Cash flows from financing activities:
Net change in debt under revolving credit
agreements 20,000 (20,000)
Payments on Senior Notes (25,000) --
Cash dividends paid (1,690) (1,643)
Proceeds from issuance of common stock 168 321
-------- --------
Net cash used in financing activities (6,522) (21,322)
-------- --------
Net (decrease) increase in cash and cash equivalents (16,055) 14,178
Cash and cash equivalents at beginning of period 32,400 12,060
-------- --------
Cash and cash equivalents at end of period $16,345 $26,238
======== ========
Note: The cash flow statement 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.
CONTACT: Sypris Solutions, Inc.
T. Scott Hatton
Chief Financial Officer
502-329-2000
SOURCE: Sypris Solutions, Inc.