Sypris Reports Second Quarter Results

Sypris Reports Second Quarter Results

Revenue Increases Sequentially on Strong Industrial Performance

LOUISVILLE, Ky.--(BUSINESS WIRE)-- Sypris Solutions, Inc. (Nasdaq/NM: SYPR) today reported financial results for its second quarter ended June 30, 2013.


HIGHLIGHTS

For the Second Quarter:

  • Revenue for the Company increased 5% sequentially to $82.2 million, while gross profit increased 3% to $8.3 million.

  • Revenue for the Industrial Group increased 5% sequentially to $74.4 million, while gross profit increased 9% to $8.9 million.

  • Revenue for the Electronics Group increased 6% to $7.7 million, while gross profit declined to a loss of $0.5 million.

For the Six Months:

  • Revenue for the Company increased 10% sequentially to $160.6 million as compared to the second half of 2012.

  • Revenue for the Industrial Group increased 21% sequentially to $145.6 million, while gross profit increased 40% to $17.0 million, compared to the second half of 2012.

  • Revenue and gross profit for the Electronics Group declined sequentially to $15.0 million and a loss of $0.6 million, respectively, reflecting the impact of sequestration and other Defense-related spending delays.

The Company reported revenue of $82.2 million for the second quarter compared to $78.4 million for the first quarter of 2013 and $98.9 million for the second quarter of last year. Additionally, the Company reported a net loss of $1.5 million, or $0.08 per share, as compared to a net loss of $6.5 million, or $0.34 per share, for the first quarter of 2013 and compared to net income of $4.4 million, or $0.22 per diluted share, for the prior year comparable period.

For the six months ended June 30, 2013, the Company reported revenue of $160.6 million compared to $146.2 million for the second half of 2012 and $195.4 million for the prior year comparable period. The Company reported a net loss for the six months ended June 30, 2013 of $8.0 million, or $0.41 per share, as compared to income of $9.7 million, or $0.49 per diluted share, for the prior year period comparable period.

The results for the first half of 2013 included a $6.9 million non-cash impairment of goodwill, a foreign currency related loss of $0.4 million, partially offset by a gain of $1.7 million from the sale of idle assets. Net income for the six months ended July 1, 2012 included a gain of $2.6 million in connection with the sale of idle assets, a gain of $0.5 million from the sale of marketable securities, partially offset by a loss from discontinued operations of $0.8 million.

"Our Industrial Group responded well to the continued demand from our commercial vehicle customers," said Jeffrey T. Gill, president and chief executive officer. "We expect the commercial vehicle demand to remain healthy at or above current levels throughout the remainder of 2013, as OEMs focus on the introduction of the new model year vehicles and engine technologies that offer far greater fuel efficiency than previous models.

"Our Aerospace and Defense business continues to be affected by budgetary and funding uncertainties within the U.S. Department of Defense that are not expected to be eliminated in the near term. For the longer term, we are continuing to invest in R&D in order to position the business and its product offerings for future growth and profitability, with a specific emphasis on trusted solutions for identity management, cryptographic key distribution and cyber analytics."

The Industrial Group

Revenue for our Industrial Group was $74.4 million in the second quarter compared to $71.1 million for the first quarter of 2013 and $82.9 million for the second quarter of last year. Gross profit for the second quarter was $8.9 million, or 11.9% of revenue, compared to $8.1 million, or 11.4% of revenue for the first quarter of 2013 and $8.9 million, or 10.7% of revenue for the second quarter of 2012.

The Electronics Group

Revenue for our Electronics Group was $7.7 million in the second quarter of 2013 compared to $7.3 million for the first quarter of 2013 and $16.1 million in the second quarter of last year, reflecting a number of factors including budgetary and funding uncertainties within the U.S. Department of Defense. Gross profit for the quarter was a loss of $0.5 million, compared to breakeven for the first quarter of 2013 and profit of $4.3 million for the same period in 2012, primarily reflecting the lower sales volume and change in product mix.

Outlook

Mr. Gill added, "We will continue to concentrate on the daily execution of our business. We expect recent investments in production cells and automation by our Industrial Group to contribute to further margin expansion going forward once volumes return to full replacement levels later this year. Our Electronics Group will continue to face near-term revenue challenges that we expect to be ongoing until the outlook for defense spending is clarified."

Sypris Solutions is a diversified provider of outsourced services and specialty products. The Company performs a wide range of manufacturing, engineering, design and other technical services, typically under multi-year, sole-source contracts with corporations and government agencies in the markets for truck components and assemblies and aerospace and defense electronics. For more information about Sypris Solutions, visit its Web site at www.sypris.com.

Forward Looking Statements

This press release contains "forward-looking" statements within the meaning of the federal securities laws.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 SEC filings. Briefly, we currently believe that such risks also include the following: declining revenues and backlog in our aerospace and defense business lines as we attempt to transition from legacy products and services into new market segments and technologies; our ability to successfully develop, launch or sustain new products and programs within the Electronics Group especially in new market segments and technologies; dependence on, retention or recruitment of key employees especially in challenging markets; reliance on major customers or suppliers, especially in the automotive or aerospace and defense electronics sectors, including the risk of negative outcomes in contract renewal negotiations; adverse impacts of new technologies or other competitive pressures which increase our costs or erode our margins; the costs of compliance with our auditing, regulatory or contractual obligations; potential impairments, non-recoverability or write-offs of assets or deferred costs; inventory valuation risks including obsolescence, shrinkage, theft, overstocking or underbilling; volatility of our customers' forecasts, production levels, financial conditions, market shares, product requirements or scheduling demands; the cost, quality, timeliness, efficiency and yield of our operations and capital investments, including working capital, production schedules, cycle times, scrap rates, injuries, wages, overtime costs, freight or expediting costs; regulatory actions or sanctions (including FCPA, OSHA and Federal Acquisition Regulations, among others); potential weaknesses in internal controls over financial reporting and enterprise risk management; U.S. government spending on products and services that our Electronics Group provides, including the timing of budgetary decisions; potential liabilities associated with discontinued operations; fees, costs or other dilutive effects of refinancing, or compliance with covenants; changes in licenses, security clearances, or other legal rights to operate, manage our work force or import and export as needed; breakdowns, relocations or major repairs of machinery and equipment; pension valuation, health care or other benefit costs; labor relations; strikes; union negotiations; cyber security threats and disruptions; changes or delays in customer budgets, funding or programs; disputes or litigation involving customer, supplier, employee, lessor, landlord, creditor, stockholder, product liability or environmental claims; the costs and supply of, or access to, debt, equity capital, or insurance; cost and availability of raw materials such as steel, component parts, natural gas or utilities; failure to adequately insure or to identify environmental or other insurable risks; revised contract prices or estimates of major contract costs; risks of foreign operations; currency exchange rates; 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. There can be no assurance that our expectations, projections or views expressed in any forward-looking statements will come to pass, and undue reliance should not be placed on these forward-looking statements. We undertake no obligation to update these statements, except as required by law.

SYPRIS SOLUTIONS, INC.

Financial Highlights

(In thousands, except per share amounts)

Three Months Ended

June 30,

July 1,

2013

2012

(Unaudited)

Revenue

$

82,166

$

98,912

Net (loss) income

$

(1,494

)

$

4,438

Basic income (loss) per common share:

Continuing operations

$

(0.08

)

$

0.25

Discontinued operations

-

(0.03

)

Net income per share

$

(0.08

)

$

0.22

Diluted income (loss) per common share:

Continuing operations

$

(0.08

)

$

0.25

Discontinued operations

-

(0.03

)

Net (loss) income per share

$

(0.08

)

$

0.22

Weighted average shares outstanding:

Basic

19,347

19,068

Diluted

19,347

19,433

Six Months Ended

June 30,

July 1,

2013

2012

(Unaudited)

Revenue

$

160,577

$

195,375

Net (loss) income

$

(7,953

)

$

9,726

Basic (loss) income per common share:

Continuing operations

$

(0.41

)

$

0.53

Discontinued operations

-

(0.04

)

Net (loss) income per share

$

(0.41

)

$

0.49

Diluted (loss) income per common share:

Continuing operations

$

(0.41

)

$

0.52

Discontinued operations

-

(0.04

)

Net (loss) income per share

$

(0.41

)

$

0.48

Weighted average shares outstanding:

Basic

19,255

19,020

Diluted

19,255

19,361

Sypris Solutions, Inc.

Consolidated Statements of Operations

(in thousands, except for per share data)

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

2013

2012

2013

2012

(Unaudited)

(Unaudited)

Net revenue:

Industrial Group

$

74,432

$

82,850

$

145,581

$

165,372

Electronics Group

7,734

16,062

14,996

30,003

Total net revenue

82,166

98,912

160,577

195,375

Cost of sales:

Industrial Group

65,574

73,944

128,613

146,544

Electronics Group

8,256

11,745

15,552

23,094

Total cost of sales

73,830

85,689

144,165

169,638

Gross profit (loss):

Industrial Group

8,858

8,906

16,968

18,828

Electronics Group

(522

)

4,317

(556

)

6,909

Total gross profit

8,336

13,223

16,412

25,737

Selling, general and administrative

7,598

7,698

14,756

15,293

Research and development

1,419

1,035

2,296

1,429

Amortization of intangible assets

8

22

30

44

Impairment of goodwill

-

-

6,900

-

Operating (loss) income

(689

)

4,468

(7,570

)

8,971

Interest expense, net

120

105

266

222

(Gain) on sale of marketable securities

-

(537

)

-

(537

)

Other (income), net

(259

)

(457

)

(1,454

)

(2,531

)

(Loss) income from continuing operations before taxes

(550

)

5,357

(6,382

)

11,817

Income tax expense, net

944

343

1,571

1,292

(Loss) income from continuing operations

(1,494

)

5,014

(7,953

)

10,525

Loss from discontinued operations, net of tax

-

(576

)

-

(799

)

Net (loss) income

$

(1,494

)

$

4,438

$

(7,953

)

$

9,726

Basic (loss) income per share:

(Loss) income per share from continuing operations

$

(0.08

)

$

0.25

$

(0.41

)

$

0.53

Loss per share from discontinued operations

-

(0.03

)

-

(0.04

)

Net (loss) income per share

$

(0.08

)

$

0.22

$

(0.41

)

$

0.49

Diluted (loss) income per share:

(Loss) income per share from continuing operations

$

(0.08

)

$

0.25

$

(0.41

)

$

0.52

Loss per share from discontinued operations

-

(0.03

)

-

(0.04

)

Net (loss) income per share

$

(0.08

)

$

0.22

$

(0.41

)

$

0.48

Dividends declared per common share

$

0.02

$

0.02

$

0.04

$

0.04

Weighted average shares outstanding:

Basic

19,347

19,068

19,255

19,020

Diluted

19,347

19,433

19,255

19,361

Sypris Solutions, Inc.

Consolidated Balance Sheets

(in thousands, except for share data)

June 30,

December 31,

2013

2012

(Unaudited)

(Note)

ASSETS

Current assets:

Cash and cash equivalents