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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 22, 2007
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Sypris Solutions, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-24020 61-1321992
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
101 Bullitt Lane, Suite 450
Louisville, Kentucky 40222
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (502) 329-2000
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under
any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Section 2 - Financial Information
Item 2.02 Results of Operations and Financial Condition.
On February 22, 2007, Sypris Solutions, Inc. (the "Company")
announced its financial results for the fourth quarter and
fiscal year ended December 31, 2006. The full text of the press
release is set forth in Exhibit 99 hereto.
The information in this Form 8-K and the attached Exhibit is
being furnished pursuant to Item 2.02 "Results of Operations and
Financial Condition" and shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934 or
otherwise subject to the liabilities of that section, nor shall
it be deemed incorporated by reference in any filing under the
Securities Act of 1933, except as shall be expressly set forth
by specific reference in such filing.
Section 7 - Regulation FD
Item 7.01 Regulation FD Disclosure.
On February 22, 2007, Sypris Solutions, Inc. (the "Company")
announced its financial results for the fourth quarter and
fiscal year ended December 31, 2006. The full text of the press
release is set forth in Exhibit 99 hereto.
The information in this Form 8-K and the attached Exhibit is
being furnished pursuant to Item 7.01 "Regulation FD Disclosure"
and shall not be deemed "filed" for purposes of Section 18 of
the Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that section, nor shall it be deemed incorporated
by reference in any filing under the Securities Act of 1933,
except as shall be expressly set forth by specific reference in
such filing.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number Description of Exhibit
-------------- ----------------------
99 Press release issued February 22, 2007.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 22, 2007 Sypris Solutions, Inc.
By: /s/ T. Scott Hatton
-------------------------------------
T. Scott Hatton
Vice President and Chief Financial
Officer
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
99 Registrant's press release dated February 22, 2007.
Exhibit 99
Sypris Reports Fourth Quarter Results
Cash Flow Remains Strong
LOUISVILLE, Ky.--(BUSINESS WIRE)--Feb. 22, 2007--Sypris Solutions,
Inc. (Nasdaq/NM: SYPR) today reported revenue of $109.5 million for
the fourth quarter compared to $132.1 million for the prior year
period. The Company reported a net loss of $1.0 million, or $0.05 per
diluted share for the fourth quarter compared to a loss of $0.3
million, or $0.01 per diluted share for the prior year period. Free
cash flow for the fourth quarter reached $7.1 million.
For the full year ended December 31, 2006, the Company reported
revenue of $497.7 million compared to $522.8 million for the prior
year period and a net loss of $1.4 million, or $0.08 per diluted share
compared to net income of $5.3 million, or $0.29 per diluted share for
the same period in 2005. The net loss for 2006 included the impact of
adopting SFAS No. 123R, Share-Based Payment, which approximated $0.6
million, net of taxes, or $0.04 per diluted share. Free cash flow
increased 17% to $42.5 million for 2006 compared to 2005.
"The Company's fourth quarter earnings performance was in line
with our expectations despite lower than expected shipments in each of
our Industrial and Electronics groups," said Jeffrey T. Gill,
president and chief executive officer. "Softening orders from our
commercial vehicle customers reflected an early commencement of the
expected 2007 down cycle for the industry, while our Electronics Group
experienced lower levels of revenue as a result of the
previously-announced rescheduling of shipments for certain classified
military and intelligence programs into 2007."
Gill continued, "The year 2006 proved to be more difficult than
anyone expected. Record demand in the commercial vehicle market
exceeded the Company's demonstrated capacity and resulted in
significant inefficiencies, including excessive overtime, punitive
logistics costs, and higher levels of scrap, while the bankruptcy
filing of a major customer had a significant impact on managerial time
and outside advisory fees. When combined with the effects of the
reconfiguration and delay of two major programs in our Electronics
Group, the results were clearly less than anticipated going into the
year."
"Despite these headwinds, the Company continued to generate record
levels of free cash flow, which reduced net debt to less than 12% of
total capital. As we go forward into 2007, we plan to use this
financial strength to reposition the Company for profitable growth in
the future. The first step will be to rebalance production in our
Industrial Group to increase efficiencies, improve logistics and
reduce the cost of the delivered product to our customers. The
short-term reduction in demand for commercial vehicles will provide us
with a brief window in which to complete this reconfiguration, which
is expected to have a meaningful impact on the Company's profitability
beginning as early as 2008."
The Industrial Group
Revenue for our Industrial Group was $80.6 million in the fourth
quarter compared to $86.7 million for the prior year period. Gross
profit for the quarter increased to $2.1 million from $1.6 million for
the same period in 2005, as a result of year over year productivity
improvements.
"The near-term outlook for the production of light trucks and
sport utility vehicles remains uncertain at best," said Gill. "We have
reduced headcount at each of our plants that have been impacted by the
announced changes in production outlook, but our sense is that this
market will remain challenging for some time to come. We will continue
to aggressively pursue initiatives that will enable the Company to
succeed in this difficult environment."
The Electronics Group
Revenue for our Electronics Group was $28.9 million in the fourth
quarter compared to $45.4 million for the prior year period. Gross
profit for the quarter was $5.7 million compared to $8.9 million for
the same period in 2005. The declines in revenue and gross profit
reflect a decline in product shipments under certain classified
programs with the U.S. Government and the delayed launch of a
successor product to mid 2007.
Revenue for the Aerospace & Defense segment was $18.4 million
compared to $33.9 million for the prior year period, as prior year
programs ended and new programs were rescheduled to early 2007.
Revenue from the Test & Measurement segment was $10.5 million compared
to $11.5 million for the prior year period. Despite strong growth in
calibration services, softness in our test services market more than
offset calibration gains. Gross profit for the Aerospace & Defense
segment was $3.8 million, as compared to $6.4 million for the prior
year period reflecting the lower volumes, while gross profit for the
Test & Measurement segment was $2.0 million compared to $2.5 million
for the same period in 2005, due to the aforementioned decline in
testing services.
"Net orders for our Electronics Group approximated $32.1 million
for the quarter, while backlog grew 3% sequentially from third quarter
to $99.5 million," said Gill. "Despite the short-term delay in the
launch of two new classified programs, the outlook remains strong for
our A&D segment in 2007 when an additional key classified program is
scheduled to resume shipment. As a result, we expect our Electronics
Group to resume its top line growth during the coming year."
Outlook
Gill added, "The short-term decline in commercial vehicle
production during 2007 is expected to reduce revenue in our Industrial
Group by approximately $100 million when compared to 2006, while
growth in our Electronics Group is forecast to begin offsetting a
portion of this reduction as early as the third and fourth quarters of
this coming year. Since the commercial vehicle market is forecast to
increase significantly during 2008, we have initiated actions to
rebalance production among the Company's various plants to lower costs
and increase efficiencies in preparation for the coming upturn."
As a result of the commercial vehicle downturn and the investments
we are making to rebalance production, we expect revenue for the first
quarter of 2007 to be in the range of $98 to $102 million compared to
$130 million for the first quarter of 2006, while our net loss for the
first quarter of 2007 is forecast to be in the range of $0.13 to $0.15
per diluted share compared to earnings of $0.05 per diluted share for
the first quarter of 2006, and are consistent with the assumptions
reflected in our January outlook."
"The revenue forecast for the full year 2007 remains unchanged and
is expected to be in the range of $410 to $420 million compared to
$497.8 million for 2006, which represents a 17% decrease in revenue
for 2007 at the midpoint of the range. Net loss is forecast to be in
the range of $0.40 to $0.45 per diluted share compared to a loss of
$0.08 per diluted share for 2006 and reflect the inefficiencies
associated with the downturn and the short-term impact of the
restructuring costs and investments being made to rebalance
production. We continue to expect free cash flow to be positive and in
the range of $15 to $20 million, which reflects a higher level of
capital investment for 2007 when compared to the prior 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, 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: 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, 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, or expediting costs; 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, theft, price, overstocking or underbilling; changes in
government funded or other customer programs; reliance on major
customers or suppliers, especially in the automotive sector where
bankruptcies (such as Dana Corporation's recent filing) could result
in the rejection or modification of our contracts; 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 covenant violations, 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; 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; 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
December 31,
---------------------
2006 2005
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(Unaudited)
Revenue $109,479 $132,112
Net loss $(973) $(251)
Loss per common share:
Basic $(0.05) $(0.01)
Diluted $(0.05) $(0.01)
Weighted average shares outstanding:
Basic 18,084 18,037
Diluted 18,084 18,037
Year Ended
December 31,
---------------------
2006 2005
----------- ---------
(Unaudited) (Note)
Revenue $497,664 $522,766
Net (loss) income $(1,362) $5,321
(Loss) earnings per common share:
Basic $(0.08) $0.30
Diluted $(0.08) $0.29
Weighted average shares outstanding:
Basic 18,079 18,016
Diluted 18,079 18,323
Note: The selected data at December 31, 2005 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 Year Ended
December 31, December 31,
-------------------- ---------------------
2006 2005 2006 2005
----------- -------- ----------- ---------
(Unaudited) (Unaudited) (Note)
Net revenue:
Industrial Group $80,596 $86,735 $364,570 $359,602
Aerospace & Defense 18,397 33,906 87,491 115,863
Test & Measurement 10,486 11,471 45,603 47,301
----------- -------- ----------- ---------
Electronics Group 28,883 45,377 133,094 163,164
----------- -------- ----------- ---------
Total net revenue 109,479 132,112 497,664 522,766
Cost of sales:
Industrial Group 78,510 85,100 346,894 336,686
Aerospace & Defense 14,647 27,538 73,832 98,367
Test & Measurement 8,521 8,989 35,848 36,375
----------- -------- ----------- ---------
Electronics Group 23,168 36,527 109,680 134,742
----------- -------- ----------- ---------
Total cost of sales 101,678 121,627 456,574 471,428
Gross profit:
Industrial Group 2,086 1,635 17,676 22,916
Aerospace & Defense 3,750 6,368 13,659 17,496
Test & Measurement 1,965 2,482 9,755 10,926
----------- -------- ----------- ---------
Electronics Group 5,715 8,850 23,414 28,422
----------- -------- ----------- ---------
Total gross profit 7,801 10,485 41,090 51,338
Selling, general and
administrative 8,866 9,511 38,592 35,669
Research and development 856 449 1,988 2,833
Amortization of intangible
assets 165 140 645 614
----------- -------- ----------- ---------
Operating (loss) income (2,086) 385 (135) 12,222
Interest expense, net 646 1,413 3,708 5,979
Other income, net (141) (469) (387) (1,325)
----------- -------- ----------- ---------
(Loss) income before
income taxes (2,591) (559) (3,456) 7,568
Income tax (benefit)
expense (1,618) (308) (2,094) 2,247
----------- -------- ----------- ---------
Net (loss) income $(973) $(251) $(1,362) $5,321
=========== ======== =========== =========
(Loss) earnings per common
share:
Basic $(0.05) $(0.01) $(0.08) $0.30
Diluted $(0.05) $(0.01) $(0.08) $0.29
Dividends declared per
common share $0.03 $0.03 $0.12 $0.12
Weighted average shares
outstanding:
Basic 18,084 18,037 18,079 18,016
Diluted 18,084 18,037 18,079 18,323
Note: The statement of operations at December 31, 2005 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)
December 31, December 31,
2006 2005
------------ ------------
(Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $32,400 $12,060
Restricted cash 1,002 --
Accounts receivable, net 59,876 95,432
Inventory, net 74,146 79,724
Other current assets 34,014 26,020
------------ ------------
Total current assets 201,438 213,236
Property, plant and equipment, net 155,341 176,719
Goodwill 14,277 14,277
Other assets 7,977 13,392
------------ ------------
Total assets $379,033 $417,624
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $76,291 $76,567
Accrued liabilities 19,430 24,904
Current portion of long-term debt 5,000 --
------------ ------------
Total current liabilities 100,721 101,471
Long-term debt 55,000 80,000
Other liabilities 13,426 22,419
------------ ------------
Total liabilities 169,147 203,890
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;
18,342,243 shares issued and 18,338,484
outstanding in 2006 and
18,165,658 shares issued and outstanding
in 2005 183 182
Additional paid-in capital 143,537 142,111
Retained earnings 69,816 73,375
Accumulated other comprehensive loss (3,634) (1,934)
Treasury stock (16) --
------------ ------------
Total stockholders' equity 209,886 213,734
------------ ------------
Total liabilities and stockholders'
equity $379,033 $417,624
============ ============
Note: The balance sheet at December 31, 2005 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)
Year Ended December 31,
-----------------------
2006 2005
-------------- --------
(Unaudited) (Note)
Cash flows from operating activities:
Net (loss) income $(1,362) $5,321
Adjustments to reconcile net (loss) income
to net cash provided by operating
activities:
Depreciation and amortization 28,782 25,909
Other noncash items (2,630) 597
Contributions to pension plans (1,122) (79)
Changes in operating assets and
liabilities:
Accounts receivable 35,112 8,595
Inventory 5,123 11,555
Other current assets (7,113) 3,363
Accounts payable 35 15,119
Accrued liabilities (4,019) 2,208
-------------- --------
Net cash provided by operating
activities 52,806 72,588
Cash flows from investing activities:
Capital expenditures (10,326) (36,264)
Proceeds from sale of assets 92 649
Changes in nonoperating assets and
liabilities (335) (625)
-------------- --------
Net cash used in investing
activities (10,569) (36,240)
Cash flows from financing activities:
Net change in debt under revolving credit
agreements (20,000) (37,000)
Cash dividends paid (2,193) (2,164)
Proceeds from issuance of common stock 296 816
-------------- --------
Net cash used in financing activities (21,897) (38,348)
-------------- --------
Net increase (decrease) in cash and cash
equivalents 20,340 (2,000)
Cash and cash equivalents at beginning of
period 12,060 14,060
-------------- --------
Cash and cash equivalents at end of period $32,400 $12,060
============== ========
Note: The cash flow statement at December 31, 2005 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, 502-329-2000
Chief Financial Officer