EPS Increases 75%; Gross Margin Expands 350
Basis Points
Sypris Solutions, Inc. (Nasdaq/GM: SYPR) today reported
financial results for its second quarter ended June 30, 2019.
Having completed a series of strategic initiatives over the past
several years, Sypris Solutions is now better positioned to achieve
long-term growth and a return to profitable operations for the full
year 2019. These steps have included reducing and realigning its
cost structure while diversifying its book of business in terms of
both customers and markets.
HIGHLIGHTS
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- The Company’s second quarter
2019 consolidated revenue increased 6.4% to $24.4 million compared
with the prior-year quarter and increased 24.9%
sequentially.
- The Company’s gross margin
increased 350 basis points to 16.3% for the second quarter of 2018
and up from 4.4% in the first quarter of 2019. Gross profit
increased 36.0% to $4.0 million, up from $2.9 million from the
prior-year.
- The Company’s EPS increased
75% to $0.07 per share, up from $0.04 per share for the prior-year
period.
- Revenue for Sypris
Technologies increased 10.1% to $16.9 million during the quarter
compared to the prior-year period.
- Gross margin for Sypris
Technologies increased 500 basis points to 17.6% from the second
quarter of 2018 and increased 330 basis points from 14.3% in the
first quarter of 2019.
- Revenue for Sypris
Electronics was flat with the year-earlier quarter at $7.6 million,
while gross margin improved 50 basis points to 13.6% when compared
to the prior-year period.
- Orders for Sypris Electronics
were up 200% on both a comparable period and sequential basis, with
approximately 40% of the new bookings targeted for shipment in 2019
and the balance in 2020 and 2021.
- The Company updated its
outlook for 2019. The Company now expects to achieve revenues of
$95-$105 million for the year, representing 14% year-over-year
growth at the midpoint, and gross margin of 14%-16%, with both
business segments forecasted to register solid profitability over
the second half of the year.
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“We are pleased to report profitable results for the second
quarter of 2019,” commented Jeffrey T. Gill, president and chief
executive officer. “This represents a milestone we have been
focused on over the past several years and while a great amount of
work remains before us to achieve a consistent and higher level of
profitability, we are delighted with what we have accomplished to
this point.
“Shipment volumes at Sypris Technologies remained strong in the
quarter to support demand coming from the automotive and commercial
vehicle markets. Energy products also performed well during the
period, with orders increasing 58% during the quarter reflecting
strong demand from domestic as well as international customers.
“Shipments at Sypris Electronics were generally in line with
expectations for the quarter, reflecting the resolution of some of
the challenges we have faced with shortages of certain electronic
components. We expect to see progressively higher levels of
shipments through the remainder of the year, with a full recovery
to normal deliveries during the second half of the year.”
Concluding, Mr. Gill said, “We continue to see strong demand in
each of our primary markets to support our revenue outlook for the
balance of the year. Our customer base and the markets we serve
remain resilient and are considerably more diversified than at any
point in our recent history. The combination of additional revenue
growth and improved mix are expected to drive further margin
expansion during the second half of 2019.”
Second Quarter Results
The Company reported revenue of $24.4 million for the second
quarter, compared to $23.0 million for the prior-year period.
Additionally, the Company reported net income of $1.5 million, or
$0.07 per share, compared to net income of $0.8 million, or $0.04
per share, for the prior-year period. Results for the quarter ended
June 30, 2019, include a gain of $1.5 million in connection with a
contract settlement with one of its customers. The results for the
quarter ended July 1, 2018, included an insurance recovery gain of
$2.3 million, which was partially offset by a net loss of $0.5
million from the sale of excess equipment by Sypris
Technologies.
For the six months ended June 30, 2019, the Company reported
revenue of $44.0 million compared with $42.9 million for the first
half of 2018. The Company reported a net loss for the six month
period of $1.5 million, or $0.07 per share, compared with a net
loss of $1.0 million, or $0.05 per share, for the prior-year
period. Results for the six months ended June 30, 2019, include a
gain of $1.5 million in connection with a contract settlement with
one of its customers. Results for the six months ended July 1,
2018, included an insurance recovery gain of $2.3 million, which
was partially offset by a net loss of $0.2 million on the sale of
excess equipment.
Sypris Technologies
Revenue for Sypris Technologies was $16.9 million in the second
quarter compared to $15.3 million for the prior-year period,
primarily reflecting an increase in demand from customers in the
oil and gas, automotive and commercial vehicle industries. Gross
profit for the quarter was $3.0 million, or 17.6% of revenue,
compared to $1.9 million, or 12.6% of revenue, for the same period
in 2018. Gross profit also increased 28.6% sequentially as a result
of the increase in volume, improved mix and productivity
growth.
Sypris Electronics
Revenue for Sypris Electronics was flat with the prior-year
period at $7.6 million. Revenue for the quarter was affected by
shortages of certain electronic components and extensive lead-time
issues in the electronics manufacturing industry. Gross profit for
the quarter was also equal to that of the prior-year period at $1.0
million, though much improved from the first quarter of 2019 when
shipments were severely impacted by the shortage of certain
electronic components and other delays.
Outlook
Commenting on the future, Mr. Gill added, “Our markets are
poised to provide Sypris with the opportunity for healthy,
double-digit revenue growth during 2019. We anticipate new contract
awards and market expansion in each of our targeted markets for
energy, automotive, commercial vehicle, and aerospace and defense
products as well as new electronics programs.
“Demand from the commercial vehicle market is expected to
continue to drive production at historically high levels during the
second half of 2019. The energy market also continues to benefit
from strong demand and higher oil prices. Both the House and Senate
versions of the Fiscal Year 2020 National Defense Authorizations
Act would provide over $700 billion of funding for the Department
of Defense. Maintaining defense spending at this level is expected
to support program growth and market expansion for aerospace and
defense participants during the coming year.
“As a result, we are pleased to update our guidance for 2019,
with full-year revenue expected to be in the range of $95-$105
million, which primarily reflects strong market conditions for the
commercial vehicle and energy markets, and our expectation that
headwinds from component availability will improve in the aerospace
and defense market allowing shipments to increase sequentially
through the year.
“We expect to see further expansion of our gross margin during
the second half of 2019, resulting in gross margin of 14%-16% for
the full year. The positive results are expected to be supported by
the continuation of top line growth and an improved mix of sales
during the second half of 2019.”
Sypris Solutions is a diversified provider of truck components,
oil and gas pipeline components and aerospace and defense
electronics. The Company performs a wide range of manufacturing
services, often under multi-year, sole-source contracts. 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.
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 SEC filings. Briefly, we currently believe that
such risks also include the following: the quantitative effects of
the restatement of our previously issued unaudited consolidated
interim financial statements as of and for the quarter ended March
31, 2019; the effectiveness of our internal control over financial
reporting and our disclosure controls and procedures; our failure
to achieve targeted gains and cash proceeds from the anticipated
sale of certain equipment; dependence on, retention or recruitment
of key employees; our failure to return to profitability on a
timely basis by steadily increasing our revenues from profitable
contracts with a diversified group of customers, which would cause
us to continue to use existing cash resources or other assets to
fund operating losses; the cost, quality, timeliness, efficiency
and yield of our operations and capital investments, including the
impact of tariffs, product recalls or related liabilities, employee
training, working capital, production schedules, cycle times, scrap
rates, injuries, wages, overtime costs, freight or expediting
costs; cost, quality and availability of raw materials such as
steel, component parts (especially electronic components), natural
gas or utilities; inventory valuation risks including excessive or
obsolescent valuations or price erosions of raw materials or
component parts on hand or other potential impairments,
non-recoverability or write-offs of assets or deferred costs; other
potential weaknesses in internal controls over financial reporting
and enterprise risk management; disputes or litigation involving
governmental, supplier, customer, employee, creditor, stockholder,
product liability or environmental claims; the fees, costs and
supply of, or access to, debt, equity capital, or other sources of
liquidity; our reliance on a few key customers, third party vendors
and sub-suppliers; continued shortages and extensive lead-times for
electronic components; failure to adequately insure or to identify
environmental or other insurable risks; unanticipated or uninsured
disasters, losses or business risks; breakdowns, relocations or
major repairs of machinery and equipment, especially in our Toluca
Plant; our failure to successfully complete final contract
negotiations with regard to our announced contract “orders”, “wins”
or “awards”; volatility of our customers’ forecasts, scheduling
demands and production levels which negatively impact our
operational capacity and our effectiveness to integrate new
customers or suppliers, and in turn cause increases in our
inventory and working capital levels; the costs of compliance with
our auditing, regulatory or contractual obligations; our inability
to develop new or improved products or new markets for our
products; labor relations; strikes; union negotiations; pension
valuation, health care or other benefit costs; our inability to
patent or otherwise protect our inventions or other intellectual
property from potential competitors; adverse impacts of new
technologies or other competitive pressures which increase our
costs or erode our margins; our inability to regain compliance with
the NASDAQ listing standards minimum closing bid price in a timely
manner; U.S. government spending on products and services that
Sypris Electronics provides, including the timing of budgetary
decisions; changes in licenses, security clearances, or other legal
rights to operate, manage our work force or import and export as
needed; risks of foreign operations; currency exchange rates; war,
terrorism, or political uncertainty; cyber security threats and
disruptions; 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, July 1,
2019
2018
(Unaudited) Revenue
$
24,444
$
22,971
Net income
$
1,503
$
814
Income per common share: Basic
$
0.07
$
0.04
Diluted
$
0.07
$
0.04
Weighted average shares outstanding: Basic
20,875
20,541
Diluted
20,875
20,855
Six Months Ended June 30,
July 1,
2019
2018
(Unaudited) Revenue
$
44,008
$
42,913
Net loss
$
(1,533
)
$
(981
)
Loss per common share: Basic
$
(0.07
)
$
(0.05
)
Diluted
(0.07
)
(0.05
)
Weighted average shares outstanding: Basic
20,772
20,468
Diluted
20,772
20,468
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,
2019
2018
2019
2018
(Unaudited) (Unaudited) Net revenue:
Sypris Technologies
$
16,878
$
15,327
$
33,019
$
29,834
Sypris Electronics
7,566
7,644
10,989
13,079
Total net revenue
24,444
22,971
44,008
42,913
Cost of sales: Sypris Technologies
13,915
13,397
27,752
25,797
Sypris Electronics
6,540
6,640
11,407
12,151
Total cost of sales
20,455
20,037
39,159
37,948
Gross profit (loss): Sypris
Technologies
2,963
1,930
5,267
4,037
Sypris Electronics
1,026
1,004
(418
)
928
Total gross profit
3,989
2,934
4,849
4,965
Selling, general and administrative
3,604
3,171
7,058
6,319
Severance, relocation and other costs
103
305
201
814
Operating income (loss)
282
(542
)
(2,410
)
(2,168
)
Interest expense, net
232
221
449
434
Other (income), net
(1,493
)
(1,623
)
(1,442
)
(1,707
)
Income (loss) before taxes
1,543
860
(1,417
)
(895
)
Income tax expense, net
40
46
116
86
Net income (loss)
$
1,503
$
814
$
(1,533
)
$
(981
)
Income (loss) per common share: Basic
$
0.07
$
0.04
$
(0.07
)
$
(0.05
)
Diluted
$
0.07
$
0.04
$
(0.07
)
$
(0.05
)
Dividends declared per common share
$
-
$
-
$
-
$
-
Weighted average shares outstanding:
Basic
20,875
20,541
20,772
20,468
Diluted
20,875
20,855
20,772
20,468
Sypris Solutions, Inc. Consolidated
Balance Sheets (in thousands, except for share data)
June 30, December
31,
2019
2018
(Unaudited) (Note) ASSETS
Current assets: Cash and cash equivalents
$
4,462
$
10,704
Accounts receivable, net
11,108
9,881
Inventory, net
19,919
18,584
Other current assets
6,031
4,755
Assets held for sale
1,212
1,474
Total current assets
42,732
45,398
Property, plant and equipment, net
14,073
14,655
Operating lease right-of-use assets
7,368
-
Other assets
1,606
1,515
Total assets
$
65,779
$
61,568
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
$
10,997
$
13,427
Accrued liabilities
14,797
14,965
Operating lease liabilities, current portion
800
-
Finance lease obligations, current portion
649
593
Total current liabilities
27,243
28,985
Note payable - related party
6,456
6,449
Operating lease liabilities, net of current portion
7,353
-
Finance lease obligations, net of current portion
2,715
2,804
Other liabilities
6,907
8,496
Total liabilities
50,674
46,734
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; 21,345,900 shares issued and 21,329,708 outstanding in
2019 and 21,414,374 shares issued and 21,398,182 outstanding in
2018
214
214
Additional paid-in capital
154,538
154,388
Accumulated deficit
(115,017
)
(114,926
)
Accumulated other comprehensive loss
(24,630
)
(24,842
)
Treasury stock, 16,192 in 2019 and 2018
-
-
Total stockholders’ equity
15,105
14,834
Total liabilities and stockholders’ equity
$
65,779
$
61,568
Note: The balance sheet at December 31, 2018,
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) Three
Months Ended June 30, July 1,
2019
2018
(Unaudited) Cash flows from operating activities:
Net loss
$
(1,533
)
$
(981
)
Adjustments to reconcile net loss to net cash used in operating
activities: Depreciation and amortization
1,407
1,310
Stock-based compensation expense
283
348
Deferred loan costs recognized
7
7
Net (gain) loss on the sale of assets
(477
)
225
Insurance recovery gain
-
(2,275
)
Provision for excess and obsolete inventory
283
(31
)
Other noncash items
281
20
Contributions to pension plans
(45
)
(11
)
Changes in operating assets and liabilities: Accounts
receivable
(1,248
)
(2,807
)
Inventory
(1,581
)
(969
)
Prepaid expenses and other assets
(1,179
)
(2,053
)
Accounts payable
(2,415
)
3,368
Accrued and other liabilities
449
1,132
Net cash used in operating activities
(5,768
)
(2,717
)
Cash flows from investing activities: Capital
expenditures
(671
)
(1,206
)
Proceeds from sale of assets
634
1,358
Insurance proceeds for recovery of property damage, net
-
2,275
Net cash (used in) provided by investing activities
(37
)
2,427
Cash flows from financing activities: Capital lease
payments
(304
)
(556
)
Indirect repurchase of shares for minimum statutory tax
withholdings
(133
)
(107
)
Net cash used in financing activities
(437
)
(663
)
Net decrease in cash and cash equivalents
(6,242
)
(953
)
Cash and cash equivalents at beginning of period
10,704
8,144
Cash and cash equivalents at end of period
$
4,462
$
7,191
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190814005189/en/
Anthony C. Allen Chief Financial Officer (502)
329-2000
Sypris Solutions (NASDAQ:SYPR)
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