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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): July 27, 2006
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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
================================================================================
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 July 27, 2006, Sypris Solutions, Inc. (the "Company")
announced its financial results for the second quarter ended
June 30, 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 July 27, 2006, Sypris Solutions, Inc. (the "Company")
announced its financial results for the first quarter ended June
30, 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 July 27, 2006.
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: July 27, 2006 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 July 27, 2006.
Exhibit 99
Sypris Reports Second Quarter Results; Cash Flow Remains Strong
LOUISVILLE, Ky.--(BUSINESS WIRE)--July 27, 2006--Sypris Solutions,
Inc. (Nasdaq/NM: SYPR) today reported revenue increased 5% to a record
$132.2 million for the second quarter compared to $125.6 million for
the prior year period. Net income for the second quarter of 2006
declined from $2.0 million, or $0.11 per diluted share in the prior
period to a net loss of $0.4 million, or $0.02 per diluted share. Free
cash flow for second quarter reached a record $21.4 million.
For the six months ended June 30, 2006, the Company reported
revenue increased 5% to a record $262.2 million compared to $249.8
million for the prior year period. Net income was $0.4 million
compared to $2.6 million for the same period in 2005, while earnings
per share were $0.02 per diluted share compared to $0.14 per diluted
share. Earnings per share included the impact of adopting SFAS No.
123R, Share-Based Payment, which approximated $0.4 million, or $0.02
per diluted share in the first half of 2006. Free cash flow for the
first half of 2006 was $24.7 million.
"Our Industrial Group experienced unplanned equipment downtime
that resulted in significant overtime, labor inefficiencies and
increased material consumption during a period in which record demand
required the business to be at full operational capacity. All systems
have since been returned to service, but the cost of doing so under
these conditions had a material impact on margins," said Jeffrey T.
Gill, president and chief executive officer.
"In addition to the headwinds experienced by our Industrial Group,
our Electronics Group was impacted by a delay in shipments under
certain classified programs with the U.S. Government. Unfortunately,
these delays are expected to continue through the balance of this year
as the various agencies work to complete the required certification
processes. Once certified, we expect demand to be robust, with
preliminary customer feedback indicating that initial estimates of
demand are likely to be exceeded."
"The results for the quarter and the year continue to reflect the
strain and expense of working with a major customer that has filed for
court protection under bankruptcy law. While we have been fortunate
and have successfully collected a substantial amount of our
pre-petition accounts receivable, we continue to experience program
launch delays, pricing disputes and excessive external costs that are
impacting both the top and bottom line. The silver lining remains the
Company's strong free cash flow, which has reached a record $63.5
million over the past four quarters."
The Industrial Group
Revenue for our Industrial Group increased 10% to $98.5 million in
the second quarter from $89.7 million for the prior year period, and
increased 6.4% sequentially from the first quarter of this year. Gross
profit for the quarter decreased to $4.5 million from $7.5 million for
the same period in 2005, as a result of unplanned equipment downtime
that resulted in significant overtime, labor inefficiencies and
increased material consumption.
The Electronics Group
Revenue for our Electronics Group was $33.8 million in the second
quarter compared to $35.9 million for the prior year period. Gross
profit for the quarter was $5.9 million compared to $6.3 million for
the same period in 2005, reflecting a decline in product shipments
under certain classified programs with the U.S. Government.
Revenue for the Aerospace & Defense segment was $21.9 million
compared to $24.1 million for the prior year period, as program
activity slowed. Revenue from the Test & Measurement segment increased
to $11.9 million compared to $11.8 million for prior year period, and
increased over 3% sequentially from the first quarter of this year.
Gross profit for the Aerospace & Defense segment was $3.3 million, as
compared to $3.4 million for the prior year period. Gross profit for
the Test & Measurement segment decreased to $2.6 million from $3.0
million for the same period in 2005, due to an unfavorable shift in
sales mix from product sales with higher margins to technical services
sales.
"Net orders for our Electronics Group approximated $30.7 million
for the quarter, while backlog was $91.2 million," said Gill. "Despite
delays inherent in the certification process for two new classified
programs, the outlook remains strong for our A&D segment in 2007."
Outlook
Gill added, "Looking forward, we believe that it is prudent to
establish a more conservative outlook for the remainder of 2006. Until
we demonstrate that our Industrial Group can operate for sustained
periods at capacity, our forecast for operating margins will remain at
current levels. The delay in the certification of the classified
programs in our Electronics Group is expected to shift as much as $20
million of shipments from 2006 into 2007, the result of which is
forecast to impact revenue and earnings during the second half of
2006."
Gill added, "We are reiterating our prior guidance from July 13,
2006 with expected revenue during the second half of 2006 in the range
of $275 to $285 million and earnings are forecast to be in the range
of $0.10 to $0.15 per diluted share during the second half of 2006.
For the full year 2006, the revenue outlook is expected to a range of
$537 to $548 million, while earnings are now forecast to be in the
range of $0.12 to $0.17 per diluted share. We continue to expect free
cash flow to remain strong for 2006 and consistent with the lower end
of our prior guidance, which was $30 to $40 million for the 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, expediting costs or scrap rates; 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
June 30,
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2006 2005
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(Unaudited)
Revenue $ 132,233 $ 125,602
Net (loss) income $ (444) $ 1,981
(Loss) earnings per common share:
Basic $ (0.02) $ 0.11
Diluted $ (0.02) $ 0.11
Weighted average shares outstanding:
Basic 18,065 18,028
Diluted 18,065 18,261
Six Months Ended
June 30,
----------------------
2006 2005
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(Unaudited)
Revenue $ 262,228 $ 249,843
Net income $ 412 $ 2,571
Earnings per common share:
Basic $ 0.02 $ 0.14
Diluted $ 0.02 $ 0.14
Weighted average shares outstanding:
Basic 18,055 17,996
Diluted 18,237 18,279
Sypris Solutions, Inc.
Consolidated Income Statements
(in thousands, except for per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ---------------------
2006 2005 2006 2005
--------- -------- -------- --------
(Unaudited) (Unaudited)
Net revenue:
Industrial Group $ 98,454 $ 89,673 $190,952 $178,363
Aerospace & Defense 21,917 24,095 47,927 48,091
Test & Measurement 11,862 11,834 23,349 23,389
-------- -------- -------- --------
Electronics Group 33,779 35,929 71,276 71,480
-------- -------- -------- --------
Total net revenue 132,233 125,602 262,228 249,843
Cost of sales:
Industrial Group 93,963 82,132 180,513 164,425
Aerospace & Defense 18,570 20,726 40,626 42,331
Test & Measurement 9,266 8,856 18,038 17,840
-------- -------- -------- --------
Electronics Group 27,836 29,582 58,664 60,171
-------- -------- -------- --------
Total cost of sales 121,799 111,714 239,177 224,596
Gross profit:
Industrial Group 4,491 7,541 10,439 13,938
Aerospace & Defense 3,347 3,369 7,301 5,760
Test & Measurement 2,596 2,978 5,311 5,549
-------- -------- -------- --------
Electronics Group 5,943 6,347 12,612 11,309
-------- -------- -------- --------
Total gross profit 10,434 13,888 23,051 25,247
Selling, general and
administrative 9,632 9,113 19,551 17,666
Research and development 371 944 704 1,617
Amortization of intangible
assets 158 175 317 313
-------- -------- -------- --------
Operating income 273 3,656 2,479 5,651
Interest expense, net 1,083 1,508 2,242 2,769
Other income, net (8) (586) (258) (767)
-------- -------- -------- --------
(Loss) income before
income taxes (802) 2,734 495 3,649
Income tax (benefit) expense (358) 753 83 1,078
-------- -------- -------- --------
Net (loss) income $ (444) $ 1,981 $ 412 $ 2,571
======== ======== ======== ========
(Loss) earnings per common
share:
Basic $ (0.02) $ 0.11 $ 0.02 $ 0.14
Diluted $ (0.02) $ 0.11 $ 0.02 $ 0.14
Dividends declared per
common share $ 0.03 $ 0.03 $ 0.06 $ 0.06
Weighted average shares
outstanding:
Basic 18,065 18,028 18,055 17,996
Diluted 18,065 18,261 18,237 18,279
Sypris Solutions, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)
June 30, December 31,
2006 2005
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 26,348 $ 12,060
Accounts receivable, net 97,168 95,432
Inventory, net 73,460 79,724
Other current assets 29,468 26,020
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Total current assets 226,444 213,236
Property, plant and equipment, net 168,349 176,719
Goodwill 14,277 14,277
Other assets 12,015 13,392
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Total assets $ 421,085 $ 417,624
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 92,283 $ 76,567
Accrued liabilities 24,624 24,904
Current portion of long-term debt 15,000 --
----------- -----------
Total current liabilities 131,907 101,471
Long-term debt 55,000 80,000
Other liabilities 22,248 22,419
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Total liabilities 209,156 203,890
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; 18,317,524
and 18,165,658 shares issued and
outstanding in 2006 and 2005, respectively 183 182
Additional paid-in capital 142,761 142,111
Retained earnings 72,688 73,375
Accumulated other comprehensive loss (3,702) (1,934)
----------- -----------
Total stockholders' equity 211,930 213,734
----------- -----------
Total liabilities and stockholders' equity $ 421,085 $ 417,624
=========== ===========
Sypris Solutions, Inc.
Consolidated Cash Flow Statements
(in thousands)
Six Months Ended June 30,
-------------------------
2006 2005
----------- -----------
(Unaudited)
Cash flows from operating activities:
Net income $ 412 $ 2,571
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,678 11,900
Other noncash items (1,072) 1,068
Changes in operating assets and
liabilities:
Accounts receivable (1,814) (6,517)
Inventory 6,161 (22,490)
Other current assets (3,448) (565 )
Accounts payable 15,827 35,993
Accrued liabilities (156) 1,230
----------- -----------
Net cash provided by operating
activities 29,588 23,190
Cash flows from investing activities:
Capital expenditures (4,903) (26,090)
Proceeds from sale of assets 57 29
Changes in nonoperating assets and
liabilities 431 (797)
----------- -----------
Net cash used in investing activities (4,415) (26,858)
Cash flows from financing activities:
Net change in debt under revolving credit
agreements (10,000) 7,500
Cash dividends paid (1,094) (1,078)
Proceeds from issuance of common stock 209 1,030
----------- -----------
Net cash used in financing activities (10,885) 7,452
----------- -----------
Net increase in cash and cash equivalents 14,288 3,784
Cash and cash equivalents at beginning of
period 12,060 14,060
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Cash and cash equivalents at end of period $ 26,348 $ 17,844
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CONTACT: Sypris Solutions, Inc.
T. Scott Hatton, 502-329-2000