Sypris Reports Earnings of $0.30 Per Share for 2016
HIGHLIGHTS
For the Fourth Quarter:
-
The Company reported revenue of
$20.0 million for the quarter, which represented the first full quarterly reporting period following the divestiture of the Cyber Security Solutions business (“CSS”) ofSypris Electronics inAugust 2016 . -
Sypris Electronics completed its facility relocation during the quarter, which is expected to significantly reduce its annual operating costs going forward.
For the Full Year:
-
Consolidated revenue was
$91 .8 million, reflecting a reduction of revenue associated with the divestiture of the CSS business inAugust 2016 . -
The Company received
$42.0 million of cash from the divestiture of the CSS business and used certain of the proceeds to (i) eliminate all commercial debt, (ii) invest in working capital in support of the Company’s future, and (iii) initiate actions to reduce$26.3 million of expenses when compared to 2016 actual results. -
The Company reported earnings of
$0.30 per diluted share as compared to a loss of$1.38 for the prior year.
Recent Developments:
-
$18.2 Million 2017 Cost Reduction Goal Over 80% Complete. The Company has completed all actions required to achieve an estimated$14 .8 million, or 81%, of its$18.2 million year-over-year cost reduction goal for 2017. The measures required to realize the remaining cost improvements for the year are expected to be completed by mid-2017. -
$8.1 Million of Additional Savings Forecast for 2018. The Company expects to realize an additional$8.1 million of cost improvements in 2018 relative to 2016 as a result of the full-year impact of these measures, bringing the estimated two-year total to$26.3 million . -
Completion of Transition Milestones. With the transfer of
certain forging and machining operations from the Company’s
Louisville, Kentucky , operations (the “Broadway Plant”) to other Sypris locations in mid-2017, the Company’s transition activities of the past 30 months will be substantially complete. The Board recently approved a modified exit or disposal plan with respect to these operations, with the Broadway Plant now expected to operate on a reduced basis into 2018, while certain of its assets are divested or relocated to other Sypris facilities. - Final Phase to be Cash Positive. Management expects the proceeds from the sale of certain idle and or underutilized non-core assets located at Sypris facilities to exceed the costs to be incurred for the completion of the Broadway Plant transition during the first half of 2017, including the transfer of equipment and related production.
- Change in 2017 Customer Concentration and Markets Served. The Company expects long-term benefits from a significant change in customer concentration and markets served, with no single customer representing more than 12% of revenue in 2017, while the top five customers are forecast to represent less than 50% of revenue. The Company’s top markets served for 2017 are now balanced, with heavy truck approximating 32% of revenue, oil and gas 29%, aerospace and defense 23%, telecommunications 6% and light truck 6%.
- 2017 Financial Outlook. The Company forecasts gross margin to be 5-7% of revenue for the first half of 2017, while the outlook improves to 15-17% of revenue for the second half of the year, reflecting the completion of the Company’s cost performance initiatives and improved revenue mix.
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“Significant progress has been made during this past year,” commented
“The completion of the sale of the CSS business to
Mr. Gill added, “As a result of our transitional efforts to exit or dispose of the Broadway Plant, together with our sale of the CSS business, the elimination of commercial debt and our other cost reduction initiatives, the Company’s cost structure has been significantly streamlined and its competitiveness has been significantly improved.
“We have implemented a two-year plan to achieve
The following table and related discussion provides additional detail on the estimated year-over-year changes to the Company’s cost and expense structure ($ in millions).
2017 |
2018 |
Total |
||||||||
Cost of sales | $(6.3) | $(5.5) | $(11.8) | |||||||
Selling, general and administrative | $(7.2) | $(1.8) | $(9.0) | |||||||
Research and development | $(0.3) | No change | $(0.3) | |||||||
Severance, equipment relocation and other | $1.1 | $(0.8) | $0.3 | |||||||
Interest and loss on extinguishment of debt | $(5.5) | No change | $(5.5) | |||||||
Total | $(18.2) | $(8.1) | $(26.3) | |||||||
Cost of Sales. The Company expects to reduce cost of sales in
2017 as compared to 2016 by an estimated
-
During the fourth quarter of 2016, the Company completed the
relocation of its
Sypris Electronics facility inTampa , streamlining its footprint by approximately 83%, or 250,000 square feet, thereby reducing rent and related facility operating expenses. - The Company’s plan to transition operations from the Broadway Plant to other manufacturing facilities will result in reduced headcount and lower employment cost expected to begin late in the second quarter of 2017.
- The Company recognized amortization expense during 2016 on certain specific assets divested in the CSS sale, thereby eliminating this expense going forward.
The Company expects to reduce cost of sales in 2018 as compared to 2017
by an estimated
Selling, General and Administrative. The Company expects to
reduce SG&A expense in 2017 by an estimated
-
The Company incurred cash and non-cash expenses related to the
Sypris Electronics facility relocation completed in the fourth quarter of 2016 and no further costs are expected in 2017. -
The sales, program management, engineering support, senior leadership
structure and certain shared service functions of
Sypris Electronics were reduced in connection with and following the CSS sale, resulting in lower SG&A in terms of both absolute dollars spent and as a percent of its reduced revenue forecasts following the CSS sale. - The Company incurred costs related to consulting, legal and other professional services in connection with its senior secured debt in 2016 and no further costs are expected in 2017.
- The Company recognized certain compensation costs during 2016 for various retention and incentive awards, including awards in connection with the completion of the CSS sale.
The Company expects to reduce further SG&A expense in 2018 as compared
to 2017 by an estimated
Research and Development. The Company incurred research and development expense during 2016 on certain programs divested in the CSS sale, thereby eliminating this expense going forward.
Severance and Equipment Relocation Costs. In connection with the
Company’s plans to end most of the production in its Broadway Plant by
mid-2017, the Company incurred
Interest Expense and Loss on Extinguishment of Debt. The Company
repaid in full all senior secured debt outstanding in
Fourth Quarter and Year End Results
The Company reported revenue of
For the full year ended December 31, 2016, the Company reported revenue
of
Sypris Technologies
Revenue for Sypris Technologies was
Revenue for
Outlook
Commenting on the future, Mr. Gill added, “The combination of the significant cost savings, improved revenue mix and the elimination of high-cost commercial debt, among other items, is expected to have a positive, material impact on the Company’s financial performance in 2017. The second half of the year is expected to benefit from significantly lower fixed overhead and production costs at Sypris Technologies, as well as from the elimination of severance and other expenses.
“As a result, we expect gross margin to be in the range of 5-7% of
revenue for the first half of 2017, increasing to 15-17% of revenue
beginning with the third quarter of the year. SG&A is expected to
approximate 17-19% of revenue during the first six months, before
falling to 16-18% during the second half of the year. Revenue for the
first six months is forecast to be
Forward Looking Statements
This press release contains “forward-looking” statements within
the meaning of the federal securities laws. Forward-looking
statements include our plans and expectations of future financial and
operational performance. Each forward-looking statement
herein is subject to risks and uncertainties, as detailed in our most
recent Form 10-K and Form 10-Q and other
SYPRIS SOLUTIONS, INC. | |||||||||||
Financial Highlights | |||||||||||
(In thousands, except per share amounts) | |||||||||||
Three Months Ended | |||||||||||
December 31, | |||||||||||
2016 | 2015 | ||||||||||
(Unaudited) | |||||||||||
Revenue | $ | 19,971 | $ | 29,121 | |||||||
Net loss | $ | (4,648 | ) | $ | (5,493 | ) | |||||
Loss per common share: | |||||||||||
Basic | $ | (0.23 | ) | $ | (0.28 | ) | |||||
Diluted | $ | (0.23 | ) | $ | (0.28 | ) | |||||
Weighted average shares outstanding: | |||||||||||
Basic | 20,165 | 19,702 | |||||||||
Diluted | 20,165 | 19,702 | |||||||||
Year Ended | |||||||||||
December 31, | |||||||||||
2016 | 2015 | ||||||||||
(Unaudited) | |||||||||||
Revenue | $ | 91,797 | $ | 145,323 | |||||||
Net income (loss) | $ | 6,043 | $ | (27,216 | ) | ||||||
Income (loss) per common share: | |||||||||||
Basic | $ | 0.30 | $ | (1.38 | ) | ||||||
Diluted | 0.30 | (1.38 | ) | ||||||||
Weighted average shares outstanding: | |||||||||||
Basic | 19,861 | 19,688 | |||||||||
Diluted | 19,861 | 19,688 | |||||||||
Sypris Solutions, Inc. | |||||||||||||||||||||
Consolidated Statements of Operations | |||||||||||||||||||||
(in thousands, except for per share data) | |||||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||||||
Net revenue: | |||||||||||||||||||||
Sypris Technologies | $ | 15,932 | $ | 20,230 | $ | 63,324 | $ | 108,134 | |||||||||||||
Sypris Electronics | 4,039 | 8,891 | 28,473 | 37,189 | |||||||||||||||||
Total net revenue | 19,971 | 29,121 | 91,797 | 145,323 | |||||||||||||||||
Cost of sales: | |||||||||||||||||||||
Sypris Technologies | 14,907 | 19,470 | 63,578 | 108,924 | |||||||||||||||||
Sypris Electronics | 5,232 | 8,610 | 27,470 | 36,081 | |||||||||||||||||
Total cost of sales | 20,139 | 28,080 | 91,048 | 145,005 | |||||||||||||||||
Gross profit (loss): | |||||||||||||||||||||
Sypris Technologies | 1,025 | 760 | (254 | ) | (790 | ) | |||||||||||||||
Sypris Electronics | (1,193 | ) | 281 | 1,003 | 1,108 | ||||||||||||||||
Total gross profit (loss) | (168 | ) | 1,041 | 749 | 318 | ||||||||||||||||
Selling, general and administrative | 4,867 | 5,431 | 22,008 | 27,845 | |||||||||||||||||
Research and development | 12 | 132 | 330 | 779 | |||||||||||||||||
Severance, relocation and other costs | 647 | 315 | 1,169 | 1,338 | |||||||||||||||||
Operating loss | (5,694 | ) | (4,837 | ) | (22,758 | ) | (29,644 | ) | |||||||||||||
Interest expense, net | 214 | 952 | 4,882 | 4,223 | |||||||||||||||||
Loss on extinguishment of debt | - | - | 1,521 | - | |||||||||||||||||
Other income, net | (1,339 | ) | (48 | ) | (35,505 | ) | (8,643 | ) | |||||||||||||
Loss (income) before taxes | (4,569 | ) | (5,741 | ) | 6,344 | (25,224 | ) | ||||||||||||||
Income tax expense (benefit), net | 79 | (248 | ) | 301 | 1,992 | ||||||||||||||||
Net (loss) income | $ | (4,648 | ) | $ | (5,493 | ) | $ | 6,043 | $ | (27,216 | ) | ||||||||||
Loss (income) per common share: | |||||||||||||||||||||
Basic | $ | (0.23 | ) | $ | (0.28 | ) | $ | 0.30 | $ | (1.38 | ) | ||||||||||
Diluted | $ | (0.23 | ) | $ | (0.28 | ) | $ | 0.30 | $ | (1.38 | ) | ||||||||||
Dividends declared per common share | $ | - | $ | - | $ | - | $ | - | |||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 20,165 | 19,702 | 19,861 | 19,688 | |||||||||||||||||
Diluted | 20,165 | 19,702 | 19,861 | 19,688 | |||||||||||||||||
Sypris Solutions, Inc. | |||||||||||
Consolidated Balance Sheets | |||||||||||
(in thousands, except for share data) | |||||||||||
December 31, | December 31, | ||||||||||
2016 | 2015 | ||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 15,270 | $ | 1,349 | |||||||
Restricted cash - current | 1,500 | - | |||||||||
Accounts receivable, net | 8,010 | 12,394 | |||||||||
Inventory, net | 14,558 | 20,192 | |||||||||
Other current assets | 2,730 | 4,459 | |||||||||
Assets held for sale | 832 | 3,230 | |||||||||
Total current assets | 42,900 | 41,624 | |||||||||
Property, plant and equipment, net | 17,943 | 22,178 | |||||||||
Other assets | 1,794 | 3,090 | |||||||||
Total assets | $ | 62,637 | $ | 66,892 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 6,973 | $ | 11,311 | |||||||
Accrued liabilities | 10,541 | 11,661 | |||||||||
Revolving credit facility | - | 2,132 | |||||||||
Current portion of long-term debt and capital lease obligations | 208 | 1,714 | |||||||||
Total current liabilities | 17,722 | 26,818 | |||||||||
Long-term debt and capital lease obligations | 2,950 | 8,965 | |||||||||
Note payable - related party | 6,375 | 5,315 | |||||||||
Other liabilities | 9,492 | 6,082 | |||||||||
Total liabilities | 36,539 | 47,180 | |||||||||
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; 21,330,882 shares issued and 21,329,690 outstanding in 2016 and 20,826,236 shares issued and 20,776,544 outstanding in 2015 |
213 | 208 | |||||||||
Additional paid-in capital | 153,252 | 152,077 | |||||||||
Accumulated deficit | (100,769 | ) | (106,812 | ) | |||||||
Accumulated other comprehensive loss | (26,598 | ) | (25,760 | ) | |||||||
Treasury stock, 1,192 and 49,692 shares in 2016 and 2015, respectively | - | (1 | ) | ||||||||
Total stockholders’ equity | 26,098 | 19,712 | |||||||||
Total liabilities and stockholders’ equity | $ | 62,637 | $ | 66,892 | |||||||
Sypris Solutions, Inc. | |||||||||||
Consolidated Cash Flow Statements | |||||||||||
(in thousands) | |||||||||||
Year Ended | |||||||||||
December 31, | |||||||||||
2016 | 2015 | ||||||||||
(Unaudited) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | 6,043 | $ | (27,216 | ) | ||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|||||||||||
Depreciation and amortization | 6,288 | 9,035 | |||||||||
Deferred income taxes | - | 2,230 | |||||||||
Stock-based compensation expense | 1,372 | 842 | |||||||||
Deferred revenue recognized | - | (4,200 | ) | ||||||||
Deferred loan costs recognized | 2,261 | 2,333 | |||||||||
Loss on extinguishment of debt | 1,521 | - | |||||||||
Net gain on the sale of assets | (33,626 | ) | (7,480 | ) | |||||||
Provision for excess and obsolete inventory | 880 | 1,069 | |||||||||
Other noncash items | (1,440 | ) | (1,289 | ) | |||||||
Contributions to pension plans | - | (315 | ) | ||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | 4,072 | 24,700 | |||||||||
Inventory | (1,809 | ) | 5,432 | ||||||||
Prepaid expenses and other assets | (81 | ) | (4,470 | ) | |||||||
Accounts payable | (4,330 | ) | (13,388 | ) | |||||||
Accrued and other liabilities | (455 | ) | (730 | ) | |||||||
Net cash used in operating activities | (19,304 | ) | (13,447 | ) | |||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (1,763 | ) | (1,825 | ) | |||||||
Proceeds from sale of assets | 51,581 | 15,741 | |||||||||
Change in restricted cash | (1,500 | ) | - | ||||||||
Net cash provided by investing activities | 48,318 | 13,916 | |||||||||
Cash flows from financing activities: | |||||||||||
Repayment of former Revolving Credit Agreement | - | (17,000 | ) | ||||||||
Repayment of note payable - Meritor | - | (3,779 | ) | ||||||||
Proceeds from issuance of Term Loan | - | 12,000 | |||||||||
Payments on term loan | (11,714 | ) | (286 | ) | |||||||
Payments/Proceeds of New Revolving Credit Agreement | (2,132 | ) | 2,132 | ||||||||
Payment penalty on early extinguishment of debt | (1,521 | ) | - | ||||||||
Proceeds from related party note payable | 1,000 | 5,500 | |||||||||
Capital lease payments | (156 | ) | - | ||||||||
Debt issuance and modification costs | (379 | ) | (4,203 | ) | |||||||
Indirect repurchase of shares for minimum statutory tax withholdings | (191 | ) | (77 | ) | |||||||
Cash dividends paid | - | (410 | ) | ||||||||
Net cash used in financing activities | (15,093 | ) | (6,123 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | 13,921 | (5,654 | ) | ||||||||
Cash and cash equivalents at beginning of period | 1,349 | 7,003 | |||||||||
Cash and cash equivalents at end of period | $ | 15,270 | $ | 1,349 | |||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170328005456/en/
Source:
Sypris Solutions, Inc.
Anthony C. Allen, 502-329-2000
Chief
Financial Officer