Sypris Reports Third Quarter Results
Sypris Electronics Posts 19% Growth, 17% Gross Margin
HIGHLIGHTS
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- Revenue for the Company was consistent with the prior-year comparable period, while gross margin improved to 3.1% from a negative 2.6% last year.
-
Revenue for
Sypris Electronics increased 18.8% over the prior-year comparable period, while gross margin increased to 16.8% from a negative 3.0% for the prior-year period. - Revenue for Sypris Technologies declined from the prior year as increased shipments for energy and heavy truck components were offset by the completion of a program earlier this year.
- Selling, general and administrative expense declined 41.4% compared with the prior-year period, reflecting the positive impact of the Company’s previously announced two-year cost improvement target.
-
During the quarter, the Company announced the receipt of multiple
contract awards from
Harris Corporation to manufacture a variety of mission-critical electronic assemblies for U.S. Military and Space programs. -
The Company confirmed its revenue guidance, with revenue for the
fourth quarter expected to range between
$20.0-$22.0 million . Additionally, gross margin is expected to improve sequentially to 10%-12% in the fourth quarter. -
The Company’s initial outlook for 2018 includes revenue of
$86-$92 million and gross margin of 15%-17%, with both business segments registering solid profitability.
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“We were pleased with the year-over-year revenue growth and margin
expansion at
“Production issues and delayed shipments at Sypris Technologies
contributed to a
“We produced at higher than expected levels at our Broadway Plant to support customer delivery schedules as Toluca was ramping up in the third quarter. We have since announced that all production at this facility will end in November, whereas we previously expected limited production to continue through 2018. The production issues faced in the third quarter have been substantially resolved, and with the closure of the Broadway Plant this month, the mix issues will also have been addressed.
“The product launch efforts in Sypris Technologies’ Toluca plant continued during the quarter as well as work to complete the rebuild of certain manufacturing assets to support increased volumes, which were up nearly 70% sequentially from the second quarter. We experienced lower-than-planned labor productivity during the period partly attributable to employee hiring and training costs, and we incurred excess overtime and utilized contract labor to fill skill gaps. We reduced these costs beginning in October as our workforce stabilized and the equipment returned to operation.
“At the request of our customer, we also had a delay on a large energy product shipment, which was reduced to a partial shipment in the third quarter. The remaining deliveries on this order are now expected to occur during the fourth quarter of 2017 and the first quarter of 2018. Although the shipment was partially delayed, the costs incurred for certain supplies, inspection and other outsourced services related to the order were charged to expense during the quarter.
“As we complete production at the Broadway Plant in November, the major
actions we planned with regard to our two-year,
“We expect that the progress made last year and during the nine months
of 2017 will enable the Company’s operations to return to profitability
by the end of the first half of 2018,” Mr. Gill added. “The Company’s
total manufacturing overhead costs are being reduced, our
underperforming and underutilized assets are being divested, significant
liquidity has been created and important new business continues to be
secured, the most recent of which included the award of four new
contracts with
Concluding, Mr. Gill said, “With the closure of the Broadway Plant in
November, we will be taking 450,000 square feet out of our operating
footprint, our year-to-date SG&A expense is down
Transition Plan Status Update
The transition of the
The lower cost profile combined with a more favorable revenue mix is expected to drive an increase in overall margin performance going forward. The Company expects margins to reach 15-17% of revenue beginning in 2018, which is nearly a 50% increase as compared to 2014 when we had significantly higher customer volume and market concentration.
Third Quarter Results
The Company reported revenue of
For the nine months ended October 1, 2017, the Company reported revenue
of
The results for the three and nine months ended
Sypris Technologies
Revenue for Sypris Technologies was
Revenue for
Outlook
Commenting on the future, Mr. Gill added, “The combination of 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 going forward. The fourth quarter of 2017 and the full fiscal year 2018 approaching are 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.
“Our outlook for revenue for 2018 is in the range of
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 | ||||||||||
October 1, | October 2, | |||||||||
2017 | 2016 | |||||||||
(Unaudited) | ||||||||||
Revenue | $ | 21,371 | $ | 21,384 | ||||||
Net (loss) income | $ | (3,133 | ) | $ | 20,993 | |||||
(Loss) income per common share: | ||||||||||
Basic | $ | (0.15 | ) | $ | 1.02 | |||||
Diluted | $ | (0.15 | ) | $ | 1.02 | |||||
Weighted average shares outstanding: | ||||||||||
Basic | 20,397 | 19,834 | ||||||||
Diluted | 20,397 | 19,834 | ||||||||
Nine Months Ended | ||||||||||
October 1, | October 2, | |||||||||
2017 | 2016 | |||||||||
(Unaudited) | ||||||||||
Revenue | $ | 60,805 | $ | 71,826 | ||||||
Net (loss) income | $ | (9,588 | ) | $ | 10,691 | |||||
(Loss) income per common share: | ||||||||||
Basic | $ | (0.47 | ) | $ | 0.52 | |||||
Diluted | (0.47 | ) | 0.52 | |||||||
Weighted average shares outstanding: | ||||||||||
Basic | 20,305 | 19,761 | ||||||||
Diluted | 20,305 | 19,761 |
Sypris Solutions, Inc. | |||||||||||||||||||||
Consolidated Statements of Operations | |||||||||||||||||||||
(in thousands, except for per share data) | |||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
October 1, | October 2, | October 1, | October 2, | ||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||||||
Net revenue: | |||||||||||||||||||||
Sypris Technologies | $ | 13,547 | $ | 14,796 | $ | 40,366 | $ | 47,392 | |||||||||||||
Sypris Electronics | 7,824 | 6,588 | 20,439 | 24,434 | |||||||||||||||||
Total net revenue | 21,371 | 21,384 | 60,805 | 71,826 | |||||||||||||||||
Cost of sales: | |||||||||||||||||||||
Sypris Technologies | 14,208 | 15,159 | 41,524 | 48,671 | |||||||||||||||||
Sypris Electronics | 6,509 | 6,784 | 17,727 | 22,238 | |||||||||||||||||
Total cost of sales | 20,717 | 21,943 | 59,251 | 70,909 | |||||||||||||||||
Gross profit (loss): | |||||||||||||||||||||
Sypris Technologies | (661 | ) | (363 | ) | (1,158 | ) | (1,279 | ) | |||||||||||||
Sypris Electronics | 1,315 | (196 | ) | 2,712 | 2,196 | ||||||||||||||||
Total gross profit | 654 | (559 | ) | 1,554 | 917 | ||||||||||||||||
Selling, general and administrative | 3,147 | 5,370 | 10,161 | 17,141 | |||||||||||||||||
Research and development | 5 | 104 | 36 | 318 | |||||||||||||||||
Severance and equipment relocation costs | 357 | - | 2,235 | 522 | |||||||||||||||||
Operating loss | (2,855 | ) | (6,033 | ) | (10,878 | ) | (17,064 | ) | |||||||||||||
Interest expense, net | 208 | 2,828 | 602 | 4,668 | |||||||||||||||||
Loss on extinguishment of debt | - | 1,521 | - | 1,521 | |||||||||||||||||
Other expense (income), net | 15 | (31,595 | ) | (1,962 | ) | (34,166 | ) | ||||||||||||||
(Loss) income before taxes | (3,078 | ) | 21,213 | (9,518 | ) | 10,913 | |||||||||||||||
Income tax expense, net | 55 | 220 | 70 | 222 | |||||||||||||||||
Net (loss) income | $ | (3,133 | ) | $ | 20,993 | $ | (9,588 | ) | $ | 10,691 | |||||||||||
(Loss) income per common share: | |||||||||||||||||||||
Basic | $ | (0.15 | ) | $ | 1.02 | $ | (0.47 | ) | $ | 0.52 | |||||||||||
Diluted | $ | (0.15 | ) | $ | 1.02 | $ | (0.47 | ) | $ | 0.52 | |||||||||||
Dividends declared per common share | $ | - | $ | - | $ | - | $ | - | |||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 20,397 | 19,834 | 20,305 | 19,761 | |||||||||||||||||
Diluted | 20,397 | 19,834 | 20,305 | 19,761 |
Sypris Solutions, Inc. | |||||||||
Consolidated Balance Sheets | |||||||||
(in thousands, except for share data) | |||||||||
October 1, | December 31, | ||||||||
2017 | 2016 | ||||||||
(Unaudited) | (Note) | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 9,245 | $ | 15,270 | |||||
Restricted cash | - | 1,500 | |||||||
Accounts receivable, net | 10,451 | 8,010 | |||||||
Inventory, net | 22,121 | 14,558 | |||||||
Other current assets | 2,460 | 2,730 | |||||||
Assets held for sale | 884 | 832 | |||||||
Total current assets | 45,161 | 42,900 | |||||||
Property, plant and equipment, net | 17,027 | 17,943 | |||||||
Other assets | 1,422 | 1,794 | |||||||
Total assets | $ | 63,610 | $ | 62,637 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 12,595 | $ | 6,973 | |||||
Accrued liabilities | 13,699 | 10,541 | |||||||
Current portion of capital lease obligations | 244 | 208 | |||||||
Total current liabilities | 26,538 | 17,722 | |||||||
Long-term capital lease obligations | 2,764 | 2,950 | |||||||
Note payable - related party | 6,420 | 6,375 | |||||||
Other liabilities | 9,805 | 9,492 | |||||||
Total liabilities | 45,527 | 36,539 | |||||||
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; 21,438,269 shares issued and 21,422,077 outstanding in 2017 and 21,330,882 shares issued and 21,329,690 outstanding in 2016 |
214 | 213 | |||||||
Additional paid-in capital | 153,691 | 153,252 | |||||||
Accumulated deficit | (110,357 | ) | (100,769 | ) | |||||
Accumulated other comprehensive loss | (25,465 | ) | (26,598 | ) | |||||
Treasury stock, 16,192 and 1,192 shares in 2017 and 2016, respectively | - | - | |||||||
Total stockholders’ equity | 18,083 | 26,098 | |||||||
Total liabilities and stockholders’ equity | $ | 63,610 | $ | 62,637 | |||||
Note: The balance sheet at December 31, 2016 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 | |||||||||||
October 1, | October 2, | ||||||||||
2017 | 2016 | ||||||||||
(Unaudited) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net loss (income) | $ | (9,588 | ) | $ | 10,691 | ||||||
Adjustments to reconcile net loss (income) to net cash used in operating activities: |
|||||||||||
Depreciation and amortization | 2,929 | 5,086 | |||||||||
Stock-based compensation expense | 563 | 1,027 | |||||||||
Deferred loan costs recognized | 45 | 1,810 | |||||||||
Loss on extinguishment of debt | - | 1,521 | |||||||||
Gain on the sale of assets | (2,664 | ) | (33,630 | ) | |||||||
Provision for excess and obsolete inventory | 145 | 132 | |||||||||
Other noncash items | 622 | (178 | ) | ||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | (2,552 | ) | 3,635 | ||||||||
Inventory | (7,713 | ) | (1,637 | ) | |||||||
Prepaid expenses and other assets | 658 | (554 | ) | ||||||||
Accounts payable | 5,617 | (1,833 | ) | ||||||||
Accrued and other liabilities | 3,392 | 1,069 | |||||||||
Net cash used in operating activities | (8,546 | ) | (12,861 | ) | |||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (1,457 | ) | (1,404 | ) | |||||||
Proceeds from sale of assets | 2,750 | 50,414 | |||||||||
Change in restricted cash | 1,500 | (1,500 | ) | ||||||||
Net cash provided by investing activities | 2,793 | 47,510 | |||||||||
Cash flows from financing activities: | |||||||||||
Capital lease payments | (149 | ) | (103 | ) | |||||||
Repayment of term loan | - | (11,714 | ) | ||||||||
Repayment of revolving credit agreement | - | (2,132 | ) | ||||||||
Penalty paid on early extinguishment of debt | - | (1,521 | ) | ||||||||
Proceeds from related party note payable | - | 1,000 | |||||||||
Debt issuance and modification costs | - | (379 | ) | ||||||||
Indirect repurchase of shares for minimum statutory tax withholdings | (123 | ) | (49 | ) | |||||||
Net cash used in financing activities | (272 | ) | (14,898 | ) | |||||||
Net (decrease) increase in cash and cash equivalents | (6,025 | ) | 19,751 | ||||||||
Cash and cash equivalents at beginning of period | 15,270 | 1,349 | |||||||||
Cash and cash equivalents at end of period | $ | 9,245 | $ | 21,100 | |||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20171114005524/en/
Source:
Sypris Solutions, Inc.
Anthony C. Allen, 502-329-2000
Chief
Financial Officer