Sypris Reports Fourth Quarter Earnings; Revenue Increases 56%
LOUISVILLE, Ky.--(BUSINESS WIRE)--Feb. 10, 2005--Sypris Solutions, Inc. (Nasdaq/NM:SYPR) today reported revenue increased 56% to a record $121.7 million for the fourth quarter compared to $78.2 million for the prior year period. The Company reported a loss for the period of $1.5 million, or $0.08 per diluted share, compared to a profit of $3.4 million, or $0.23 per diluted share, for the fourth quarter of 2003. The results for the quarter reflect a 20% increase in weighted average shares outstanding to 17.9 million shares compared to 14.9 million shares for the prior year period, or approximately $0.02 per diluted share.
For the full year 2004, revenue increased 54% to a record $425.4 million from $276.6 million for the year-earlier period. Net income for the year was $7.4 million, or $0.42 per diluted share, compared to $8.1 million, or $0.56 per diluted share, for 2003. The results for 2004 reflect a 21% increase in weighted average shares outstanding to 17.7 million shares for 2004 compared to 14.7 million shares for the prior year, or approximately $0.09 per diluted share.
In addition, while the Company has not fully completed the internal control assessment process with the related auditor attestation under Section 404 of the Sarbanes-Oxley Act, the Company has no reason to believe that the results of that assessment process will result in the identification of any material weaknesses.
"The fourth quarter proved to be extremely difficult," said Jeffrey T. Gill, president and chief executive officer. "The record increase in revenue was overshadowed by cost overruns that were incurred to increase manufacturing capacity, launch new programs and respond to shortages in material during a period of escalating customer demand. We expect the cost overruns to decrease over the first half of 2005 as the new manufacturing cells are completed and new programs enter full production, after which we expect margins to gradually return to historical levels."
"The outlook for continued growth remains positive, with net orders increasing 30% to $129.7 million during the quarter, resulting in an increase in net orders of 48% to a record $476.4 million when compared to 2003. Backlog increased as well, rising 26% to $249.8 million at the end of 2004, while new contract awards increased to a record $1.5 billion from $639 million for the prior year. Execution will be key and will ultimately determine our future level of success."
The Industrial Group
Revenue for our Industrial Group increased 200% to $75.3 million in the fourth quarter from $25.1 million for the prior year period, but decreased 4% sequentially from the third quarter of 2004 due primarily to the fewer number of work days in the period. Gross profit for the quarter increased 17% to $2.8 million from $2.4 million for the same period in 2003, but declined sequentially from $8.8 million in the third quarter of 2004, primarily due to excessive overtime and other expenses to accommodate late material deliveries and rapidly changing demand, changes in product mix, costs associated with the installation of new manufacturing cells and inefficiencies associated with the ramp up of new programs.
For the full year 2004, revenue for our Industrial Group increased 172% to a record $260.4 million from $95.9 million in the prior year period, primarily as a result of increased shipments under new long-term contracts with Dana and ArvinMeritor, and a 33% increase in commercial vehicle production during the year. Gross profit for 2004 increased 144% to $23.7 million from $9.7 million for the prior year period as a result of the increase in shipments to Dana and ArvinMeritor mentioned previously.
Gill added, "Our business expanded rapidly during 2004, with revenue growth supported by a 145% increase in orders during the year to a record $318.8 million. Unfortunately, we experienced additional complexity and cost associated with the installation of new manufacturing cells and the launch of a number of new programs at a time when material deliveries and customer needs were changing rapidly. We expect these costs to abate throughout the first half of the year, however, which should set the stage for a meaningful improvement in 2005."
The Electronics Group
Revenue for our Electronics Group declined 13% to $46.4 million in the fourth quarter from $53.0 million for the prior year, but increased 16% sequentially from the third quarter of 2004 primarily due to the start up of new programs for certain aerospace and defense customers. Gross profit for the quarter declined to $6.2 million from $11.1 million in the same period in 2003, and 8% sequentially from the third quarter of this year as a result of costs associated with a program cancellation and changes in product mix from higher-margin new product sales to lower-margin manufacturing services.
For the full year, revenue for our Electronics Group declined 9% to $165.0 million from $180.7 million for the prior year, primarily reflecting lower shipments of data storage products to various agencies of the US government and of circuit card assemblies for an attack helicopter program and an end-of-life missile program, offset by a 17% increase in revenue from test and measurement services. Gross profit for the year declined to $28.4 million from $36.3 million reflecting the lower levels of revenue and the change in mix described above.
Gill continued, "The performance of our Electronics Group during the quarter and year was impacted by a material reduction in orders for data storage products as a result of the reprioritization of spending by our defense and intelligence agencies to support the needs of our troops abroad. These highly technical systems, while not significant in terms of revenue dollars, typically involve significant intellectual property and therefore yield a higher gross margin than our manufacturing services. Net orders for the quarter declined from the prior year but increased 23% sequentially to $40.8 million, while backlog declined to $118.3 from $125.8 million for the prior year."
Outlook
Gill added, "Even though the first quarter traditionally represents the Company's seasonally lowest period, we expect revenue for the first quarter of 2005 to be in the range of $120 to $125 million compared to $89.4 million for the prior year period, which represents a 37% increase at the midpoint of our guidance. Earnings for the first quarter of 2005 are forecast to be in the range of $0.02 to $0.06 per diluted share, based upon 18.5 million weighted average shares outstanding, compared to $0.22 per diluted share and 15.6 million weighted average shares outstanding for the first quarter of 2004. The earnings outlook reflects certain short-term costs in our Industrial Group for the completion of new manufacturing cells, the launch of several new programs, and the continuation of certain supply chain issues, as well as the change in mix experienced by our Electronics Group."
"We have increased our revenue guidance for the full year 2005 to reflect the scheduled ramp up of new programs from Dana and ArvinMeritor, but have tempered our earnings guidance to reflect a more cautions outlook for the resolution of supply chain issues. Revenue for 2005 is now forecast to be in the range of $525 to $545 million compared to $425.4 million for 2004, which represents a 26% increase in revenue for 2005 at the midpoint of the range. Earnings are expected to increase fairly significantly on a sequential basis beginning with the second quarter as a result of the new automated capacity, shipments under new programs and the elimination of start-up and overtime costs associated with the above. As a result, we expect earnings of $0.65 to $0.85 per diluted share, based upon 18.6 million weighted average shares outstanding, compared to $0.42 per diluted share for 2004, which represents a 79% increase for 2005 at the midpoint of the range."
Gill continued, "As we move forward, we expect the top line to benefit from the estimated $1.5 billion of new contract awards received during this past year, the continued growth in the commercial vehicle market and the commencement of several new program launches. The Company's earnings outlook remains subject to our ability to complete the installation of the new manufacturing cells in accordance with plan, the timely launch of the new component programs and the stabilization of the global supply chain for steel and steel-related component parts."
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 for users of test and measurement equipment. 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' scheduling demands; costs associated with breakdowns or repairs of machinery and equipment; growth, reduction or competitive pressures in our markets; cost, efficiency and yield of our operations including overtime costs; 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; compliance costs; 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.
SYPRIS SOLUTIONS, INC.
FINANCIAL HIGHLIGHTS
(In thousands, except per share amounts)
Three Months Ended
----------------------
Dec. 31, Dec. 31,
2004 2003
----------------------
Revenue $121,673 $ 78,171
Net (loss) income $ (1,463) $ 3,391
(Loss) earnings per common share:
Basic $ (0.08) $ 0.24
Diluted $ (0.08) $ 0.23
Weighted average shares outstanding:
Basic 17,916 14,267
Diluted 17,916 14,868
Years Ended
----------------------
Dec. 31, Dec. 31,
2004 2003
----------------------
Revenue $425,402 $276,605
Net income $ 7,407 $ 8,135
Earnings per common share:
Basic $ 0.43 $ 0.57
Diluted $ 0.42 $ 0.56
Weighted average shares outstanding:
Basic 17,119 14,237
Diluted 17,745 14,653
SYPRIS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
Three Months Ended Year Ended
------------------ ------------------
December 31, December 31,
2004 2003 2004 2003
-------- ------- -------- --------
(Unaudited) (Unaudited)
Net revenue:
Electronics Group $ 46,365 $53,032 $164,992 $180,733
Industrial Group 75,308 25,139 260,410 95,872
-------- ------- -------- --------
Total net revenue 121,673 78,171 425,402 276,605
Cost of sales:
Electronics Group 40,118 41,952 136,557 144,467
Industrial Group 72,560 22,768 236,690 86,126
-------- ------- -------- --------
Total cost of sales 112,678 64,720 373,247 230,593
Gross profit:
Electronics Group 6,247 11,080 28,435 36,266
Industrial Group 2,748 2,371 23,720 9,746
-------- ------- -------- --------
Total gross profit 8,995 13,451 52,155 46,012
Selling, general and
administrative 9,547 6,601 35,248 26,711
Research and development 1,214 1,048 3,697 4,166
Amortization of intangible
assets 185 85 596 194
-------- ------- -------- --------
Operating (loss) income (1,951) 5,717 12,614 14,941
Interest expense, net 939 276 2,100 1,693
Other (income) expense, net (47) 13 (138) 230
-------- ------- -------- --------
(Loss) income before income
taxes (2,843) 5,428 10,652 13,018
Income tax (benefit) expense (1,380) 2,037 3,245 4,883
-------- ------- -------- --------
Net (loss) income $ (1,463) $ 3,391 $ 7,407 $ 8,135
======== ======= ======== ========
(Loss) earnings per common share:
Basic $ (0.08) $ 0.24 $ 0.43 $ 0.57
Diluted $ (0.08) $ 0.23 $ 0.42 $ 0.56
Dividends declared per common
share $ 0.03 $ 0.03 $ 0.12 $ 0.12
Weighted average shares
outstanding:
Basic 17,916 14,267 17,119 14,237
Diluted 17,916 14,868 17,745 14,653
SYPRIS SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
December 31,
-------------------
2004 2003
-------- ---------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 14,060 $ 12,019
Accounts receivable, net 104,637 45,484
Inventory, net 94,252 61,932
Other current assets 21,566 11,370
-------- --------
Total current assets 234,515 130,805
Property, plant and equipment, net 166,940 106,683
Goodwill 14,277 14,277
Other assets 13,222 11,730
-------- --------
$428,954 $263,495
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 61,778 $ 29,598
Accrued liabilities 20,378 17,491
Current portion of long-term debt 7,000 3,200
-------- --------
Total current liabilities 89,156 50,289
Long-term debt 110,000 53,000
Other liabilities 22,362 15,425
-------- --------
Total liabilities 221,518 118,714
Stockholders' equity:
Preferred stock, par value $.01 per share,
975,150 shares authorized; no shares issued -- --
Series A preferred stock, par value $.01 per
share, 24,850 shares authorized; no shares
issued -- --
Common stock, non-voting, par value $.01 per
share, 10,000,000 shares authorized; no shares
issued -- --
Common stock, par value $.01 per share,
30,000,000 shares authorized; 17,920,500 and
14,283,323 shares issued and outstanding in
2004 and 2003, respectively 179 143
Additional paid-in capital 140,898 83,541
Retained earnings 68,724 63,443
Accumulated other comprehensive income (loss) (2,365) (2,346)
-------- --------
Total stockholders' equity 207,436 144,781
-------- --------
$428,954 $263,495
======== ========
SYPRIS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2004 2003
-------- --------
(Unaudited)
Cash flows from operating activities:
Net income $ 7,407 $ 8,135
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 19,066 12,831
Other noncash charges 6,377 7,292
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (60,995) (7,724)
Inventory (28,495) 6,219
Other assets (7,196) (2,427)
Accounts payable 33,947 3,154
Accrued liabilities 2,479 (205)
-------- --------
Net cash (used in) provided by operating
activities (27,410) 27,275
Cash flows from investing activities:
Capital expenditures (55,900) (22,521)
Purchase of the net assets of acquired entities (29,648) (23,300)
Proceeds from sale of assets 47 175
Changes in nonoperating assets and liabilities (640) (171)
-------- --------
Net cash used in investing activities (86,141) (45,817)
Cash flows from financing activities:
Net increase in debt under revolving credit
agreements 5,800 19,200
Proceeds from long-term debt 55,000 --
Cash dividends paid (2,023) (1,709)
Proceeds from issuance of common stock 56,815 667
-------- --------
Net cash provided by financing activities 115,592 18,158
-------- --------
Net increase (decrease) in cash and cash
equivalents 2,041 (384)
Cash and cash equivalents at beginning of period 12,019 12,403
-------- --------
Cash and cash equivalents at end of period $ 14,060 $ 12,019
======== ========
CONTACT: Sypris Solutions, Inc., Louisville
David D. Johnson, 502-329-2000
SOURCE: Sypris Solutions, Inc.