Revenue and Margin Continue to Expand;
Confirms Second Half Guidance
Sypris Solutions, Inc. (Nasdaq/GM: SYPR) today reported
financial results for its second quarter ended
July 1, 2018. Sypris Solutions recently completed several
strategic initiatives to better align its current revenue and cost
structure and diversify the Company’s book of business, both in
terms of customers and markets. With a now-stabilized revenue base
and these strategic initiatives accomplished, the Company is
positioned to achieve attractive top-line growth in 2018, along
with higher gross profit and a return to profitable operations.
HIGHLIGHTS
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- The Company’s revenue increased 15.2%
sequentially from the first quarter of 2018, while gross margin
increased to 12.8% of revenue, up 260 basis points sequentially and
up 520 basis points from the second quarter of 2017. Earnings
improved to $0.04 per share from a loss of $0.15 for the prior-year
period.
- Revenue for Sypris Technologies
increased 9.0% during the quarter compared with the prior-year
period, reflecting the impact of new contract awards and favorable
market conditions.
- Gross margin for Sypris Technologies
increased to 12.6% of revenue, up from 2.3% for the prior-year
period, reflecting the impact of increased revenue and
significantly lower operating costs.
- Revenue for Sypris Electronics
increased 40.6% sequentially and 6.3% compared with the prior-year
period, reflecting strong backlog and an improvement in the timely
receipt of certain electronic components.
- Gross margin for Sypris Electronics
increased to 13.1% of revenue for the quarter, up sequentially from
a loss of 1.4% for the first quarter of 2018, reflecting the
positive conversion on the increase in shipments.
- The Company’s performance for the first
half of 2018 was strong compared with the prior-year period, with
revenue, gross profit and gross margin increasing by 8.8%, 361.4%,
and 890 basis points, respectively.
- The Company confirmed its financial
guidance for the second half of 2018, with revenue forecasted to be
in the range of $47.0-$51.0 million, representing top-line growth
of 14% at the midpoint on a year-over-year basis, and gross profit
forecasted to be in the range of 16.0%-18.0% of revenue.
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“We are pleased to report another solid quarter of growing
revenue and a rebuilding bottom line, underscoring positive
operating income of Sypris Technologies for the third consecutive
quarter. Our performance reflects the benefits of our previously
announced cost-reduction efforts alongside our work to target more
strategic marketing opportunities,” commented Jeffrey T. Gill,
president and chief executive officer. “With all of our
cost-reduction programs now complete, we look forward to seeing the
full impact of these actions roll into our 2018 results, with
further meaningful improvements in gross margin expected to be
reported over the balance of the year.
“The financial results of Sypris Electronics rebounded during
the second quarter as the timely receipt of electronic components
began to improve. Importantly, we expect to see higher levels of
shipments going forward, supported by our backlog and the continued
timely receipt of components. We want to extend our thanks to our
many customers who were instrumental in collaborating with us to
improve the availability of these parts.”
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 our expected
revenue growth and lower fixed manufacturing overhead costs, driven
by our cost-reduction actions, will contribute to our return to
profitability for 2018.”
Second Quarter Results
The Company reported revenue of $23.0 million for the
second quarter compared with $21.2 million for the prior-year
period. Additionally, the Company reported net income of
$0.8 million, or $0.04 per diluted share, compared with a
loss of $3.1 million, or $0.15 per share, for the
prior-year period. 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 and costs of $0.3 million related to preparing
the Broadway facility for sale or other use. Results for the
quarter ended July 2, 2017, included a gain of
$0.1 million from the sale of excess equipment by Sypris
Technologies, a foreign exchange translation loss of $0.2 million,
and severance and relocation costs of $0.9 million related to
the Broadway transition.
For the six months ended July 1, 2018, the Company reported
revenue of $42.9 million compared with $39.4 million for
the first half of 2017. The Company reported a net loss for the six
months ended of $1.0 million, or $0.05 per share, compared
with a net loss of $6.5 million, or $0.32 per share, for the
prior-year period. 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 and costs of
$0.8 million related to preparing the Broadway facility for
sale or other use. Results for the six months ended
July 2, 2017, included net gains of $2.5 million
related to the sale of excess equipment, which was partially offset
by severance, relocation and other costs of $1.9 million.
Sypris Technologies
Revenue for Sypris Technologies was $15.3 million in the
second quarter compared with $14.1 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 $1.9 million, or 12.6% of
revenue, compared with $0.3 million, or 2.3% of revenue, for
the same period in 2017. Gross profit was positively affected by
the increase in volume and productivity as well as cost
improvements realized following the transfer of production from our
Broadway Plant, which was completed as of the end of 2017.
Sypris Electronics
Revenue for Sypris Electronics was $7.6 million in the
second quarter of 2018 compared with $7.2 million for the
prior-year period. 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 $1.0 million compared with $1.3 million
for the prior-year period, primarily reflecting changes in revenue
mix, which included the start-up of new programs and shortages of
certain electronic components.
Outlook
Commenting on the future, Mr. Gill added, “Alongside current
volume growth, we are poised to capitalize on additional
opportunities across our markets for healthy, double-digit revenue
expansion during the balance of 2018. New contract awards and
market expansion are expected to occur in each of our targeted
markets for energy, automotive, commercial vehicle, and aerospace
and defense products.
“Third-party forecasts for the Class 8 commercial vehicle market
indicate production will be up significantly in 2018 compared with
2017. The energy market continues to benefit from increased demand
and higher oil prices. The National Defense Authorization Act for
Fiscal Year 2018 provides nearly $700 billion in funding for
the U.S. Department of Defense, which is expected to support
program growth and market expansion for Aerospace and Defense
participants during the coming year. And, from a cost standpoint,
we expect to benefit from significantly lower fixed overhead and
production costs at Sypris Technologies, as well as from the
elimination of severance and other expenses.
“As a result, we are pleased to confirm our guidance for the
second half of 2018, with revenue and gross margin expected to be
in the range of $47.0-$51.0 million and 16.0%-18.0%,
respectively.
“We expect selling, general and administrative spending to be in
the range of 12.0%-13.5% of revenue for the second half of 2018,
subject to actual top-line performance. The net result is that we
expect to be profitable on a consolidated basis for the full year
2018.”
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: our estimated income and
cash flows includes significant gains and proceeds from the
anticipated sale of certain equipment, but there can be no
assurances that such sales will be achieved as planned; our failure
to return to profitability on a timely basis, 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, working capital, production schedules, cycle
times, scrap rates, injuries, wages, overtime costs, freight or
expediting costs; cost 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; 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”;
dependence on, retention or recruitment of key employees; disputes
or litigation involving governmental, supplier, customer, employee,
creditor, stockholder, product liability or environmental claims;
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 fees, costs and supply of, or access to, debt, equity
capital, or other sources of liquidity; the costs of compliance
with our auditing, regulatory or contractual obligations; changes
in licenses, security clearances, or other legal rights to operate,
manage our work force or import and export as needed; labor
relations; strikes; union negotiations; pension valuation, health
care or other benefit costs; potential weaknesses in internal
controls over financial reporting and enterprise risk management;
our inability to patent or otherwise protect our inventions or
other intellectual property from potential competitors; our
reliance on third party vendors and sub-suppliers; adverse impacts
of new technologies or other competitive pressures which increase
our costs or erode our margins; U.S. government spending on
products and services that Sypris Electronics provides, including
the timing of budgetary decisions; risks of foreign operations;
currency exchange rates; war, terrorism, or political uncertainty;
cyber security threats and disruptions; failure to adequately
insure or to identify environmental or other insurable risks;
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 July
1, July 2, 2018 2017
(Unaudited) Revenue $ 22,971 $ 21,249 Net income (loss) $
814 $ (3,147 ) Income (loss) per common share: Basic $ 0.04 $ (0.15
) Diluted $ 0.04 $ (0.15 ) Weighted average shares outstanding:
Basic 20,541 20,350 Diluted 20,855 20,350
Six Months Ended July 1, July 2,
2018 2017 (Unaudited) Revenue $ 42,913 $
39,434 Net loss $ (981 ) $ (6,455 ) Loss per common share: Basic $
(0.05 ) $ (0.32 ) Diluted (0.05 ) (0.32 ) Weighted average shares
outstanding: Basic 20,468 20,261 Diluted 20,468 20,261
Sypris Solutions, Inc. Consolidated Statements of
Operations (in thousands, except for per share data)
Three Months Ended
Six Months Ended July 1, July 2,
July 1, July 2, 2018 2017
2018 2017 (Unaudited) (Unaudited) Net
revenue: Sypris Technologies $ 15,327 $ 14,059 $ 29,834 $ 26,819
Sypris Electronics
7,644
7,190 13,079
12,615 Total net revenue 22,971 21,249 42,913
39,434 Cost of sales: Sypris Technologies 13,397 13,736 25,797
27,140 Sypris Electronics
6,640
5,890 12,151
11,218 Total cost of sales 20,037 19,626 37,948
38,358 Gross profit (loss): Sypris Technologies 1,930 323 4,037
(321 ) Sypris Electronics
1,004
1,300 928
1,397 Total gross profit 2,934 1,623 4,965
1,076 Selling, general and administrative 3,171 3,581 6,319 6,991
Research and development - 9 - 31 Severance and equipment
relocation costs
305
880 814
1,878 Operating loss (542 ) (2,847 ) (2,168 )
(7,824 ) Interest expense, net 221 206 434 394 Other (income)
expense, net
(1,623 )
70 (1,707 )
(1,778 ) Income (loss) before
taxes 860 (3,123 ) (895 ) (6,440 ) Income tax expense, net
46 24
86 15 Net income
(loss)
$ 814 $
(3,147 ) $ (981
) $ (6,455 )
Income (loss) per common share: Basic $ 0.04 $ (0.15 ) $ (0.05 ) $
(0.32 ) Diluted $ 0.04 $ (0.15 ) $ (0.05 ) $ (0.32 ) Dividends
declared per common share $ - $ - $ - $ - Weighted average shares
outstanding: Basic 20,541 20,350 20,468 20,261 Diluted 20,855
20,350 20,468 20,261
Sypris Solutions, Inc.
Consolidated Balance Sheets (in thousands, except for
share data) July 1,
December 31, 2018 2017
(Unaudited) (Note) ASSETS Current assets: Cash
and cash equivalents $ 7,191 $ 8,144 Accounts receivable, net
12,124 9,317 Inventory, net 17,555 17,641 Other current assets
5,552 2,003 Assets held for sale
2,141
2,898 Total current assets 44,563 40,003
Property, plant and equipment, net 14,840 15,574 Other assets
750 1,578
Total assets
$ 60,153
$ 57,155 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $
13,832 $ 10,465 Accrued liabilities 11,294 10,330 Current portion
of capital lease obligations
562
829 Total current liabilities 25,688 21,624
Long-term capital lease obligations 3,109 3,397 Note payable
- related party 6,442 6,435 Other liabilities
8,652 8,769 Total
liabilities 43,891 40,225 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; 21,414,374 shares issued and
21,398,182 outstanding in 2018 and 21,438,269 shares issued and
21,422,077 outstanding in 2017
214 214 Additional paid-in capital 154,099 153,858 Accumulated
deficit (112,402 ) (111,591 ) Accumulated other comprehensive loss
(25,649 ) (25,551 ) Treasury stock, 16,192 in 2018 and 2017
- - Total
stockholders’ equity
16,262
16,930 Total liabilities and stockholders’
equity
$ 60,153 $
57,155
Note: The balance sheet at December 31,
2017 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)
Six Months Ended July 1, July
2, 2018 2017 (Unaudited) Cash flows from
operating activities: Net loss $ (981 ) $ (6,455 )
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 1,310 1,972 Stock-based compensation
expense 348 395 Deferred loan costs recognized 7 30 Net loss (gain)
on the sale of assets 225 (2,537 ) Insurance recovery gain (2,275 )
-
Provision for excess and obsolete inventory (31 ) 109 Other noncash
items 20 596 Contributions to pension plans (11 ) - Changes in
operating assets and liabilities: Accounts receivable (2,807 )
(2,915 ) Inventory (969 ) (9,451 ) Prepaid expenses and other
assets (2,053 ) 1,232 Accounts payable 3,368 8,518 Accrued and
other liabilities
1,132
2,548
Net cash used in operating activities
(2,717 ) (5,958 ) Cash flows from investing activities: Capital
expenditures (1,206 ) (997 ) Proceeds from sale of assets 1,358
2,623 Insurance proceeds for recovery of property damage
2,275
-
Net cash provided by investing activities 2,427 1,626 Cash
flows from financing activities: Capital lease payments (556 ) (92
) Indirect repurchase of shares for minimum statutory tax
withholdings
(107 )
(108 ) Net cash used in financing
activities
(663 )
(200 ) Net decrease in cash and cash
equivalents (953 ) (4,532 ) Cash and cash equivalents at beginning
of period
8,144
15,270 Cash and cash equivalents at end of
period
$ 7,191 $
10,738
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version on businesswire.com: https://www.businesswire.com/news/home/20180814005139/en/
Sypris Solutions, Inc.Anthony C. Allen, 502-329-2000Chief
Financial Officer
Sypris Solutions (NASDAQ:SYPR)
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