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Sypris Reports Fourth Quarter Results

Dépèche transmise le 15 mars 2011 par Business Wire

Sypris Reports Fourth Quarter Results

Sypris Reports Fourth Quarter Results

LOUISVILLE, Ky.--(BUSINESS WIRE)--Sypris Solutions, Inc. (Nasdaq/NM: SYPR) today reported financial results for its fourth quarter ended December 31, 2010. The results of the Company’s Test & Measurement segment, which was divested on October 26, 2009, have been excluded from historical results from continuing operations and reclassified as discontinued operations.

“Our Industrial Group continued to show important signs of progress during the quarter, with revenue and gross profit increasing on a year-over-year basis”

HIGHLIGHTS

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  • Revenue increased to $67.2 million during the period, up from $66.1 million for the prior year quarter.
  • Gross profit increased 30.2% to $7.6 million, up from $5.8 million in the fourth quarter of last year, while gross margin increased to 11.2% of revenue, up from 8.8% for the fourth quarter of 2009.
  • Electronics Group gross margin increased to 28.8% of revenue, up from 20.4% for the prior year quarter.
  • R&D spending increased dramatically during the quarter to accelerate new product introductions, culminating in eight new patent applications by year-end.
  • Industrial Group gross margin increased to 4.0% of revenue, up from 1.4% for the prior year quarter.
  • Profit conversion on incremental revenue growth for the Industrial Group reached 17.8% during the quarter as compared to the prior year period.
  • Net debt declined sequentially to $3.7 million.
  • The Company expects to generate positive earnings in 2011.

The Company reported revenue of $67.2 million and an operating loss of $2.0 million for the fourth quarter compared to revenue of $66.1 million and an operating loss of $3.6 million for the prior year period. For the full year, the Company reported revenue of $266.7 million and an operating loss of $7.4 million compared to revenue of $265.9 million and an operating loss of $22.8 million for the prior year.

Including the results of discontinued operations, the Company’s net loss for the fourth quarter was $1.6 million, or $0.09 per share, as compared to net income of $22.6 million, or $1.15 per diluted share, for the prior year period. Including the results of discontinued operations, the Company’s net loss for the year ended December 31, 2010 was $10.2 million, or $0.55 per share, as compared to net income of $2.7 million, or $0.14 per diluted share, for the prior year. The fourth quarter and full year results for 2009 included a gain of $18.3 million from the sale of marketable securities.

“Our Industrial Group continued to show important signs of progress during the quarter, with revenue and gross profit increasing on a year-over-year basis,” said Jeffrey T. Gill, president and chief executive officer. “And perhaps even more importantly, we expect the vastly improved cost profile and strong operational performance of this group to make a material contribution to the growth and profitability of the Company’s financial results during 2011 as the commercial vehicle and trailer markets continue to recover.”

“In our Electronics Group, the continued strength of our gross margins was accompanied by a dramatic increase in R&D spending during the quarter in an effort to accelerate the introduction of new key management and Cyber Security-related products, culminating in the filing of eight patent applications by year-end. We expect these new products to contribute to the Company’s financial results as early as 2012, while our R&D efforts going forward will continue to drive the expansion of the Company’s product and intellectual property portfolios."

The Industrial Group

Revenue for our Industrial Group increased 18.1% to $47.7 million in the fourth quarter compared to $40.4 million for the prior year period, primarily as a result of increased demand from customers in the commercial vehicle and trailer markets. Gross profit for the quarter was $1.9 million compared to $0.6 million for the same period in 2009, reflecting the positive conversion associated with the increase in revenue and productivity.

The Electronics Group

Revenue for our Electronics Group was $19.5 million in the fourth quarter compared to $25.7 million in the prior year period, primarily as a result of the completion of certain programs. This was partially offset by the launch of a new secure communication program. Gross profit for the quarter increased to $5.6 million, or 28.8% of revenue, compared to $5.2 million, or 20.4% of revenue, for the same period in 2009, reflecting the impact of increased sales of higher margin products and improvements resulting from our Lean and Six Sigma quality programs.

Outlook

Mr. Gill added, “We look forward to returning to profitability in 2011 now that we have successfully restructured the business. We expect to see strong double digit comparable period growth in the top line of our Industrial Group going forward, as the recovery of the commercial vehicle market continues. Our team remains acutely focused on increasing the rate of profit conversion from each revenue dollar, thereby driving further margin expansion and earnings during the year.”

“For our Electronics Group, we expect the number of patent applications to increase by 50% during 2011, as we drive to further expand our product and intellectual property portfolios. R&D investment is planned to approximate 6.0% of revenue, as we focus on delivering solutions for our Nation’s rapidly expanding Cyber Security needs. The impact of these new products and technologies is expected to contribute to the Company’s financial results as early as 2012.”

“The Company is well-positioned and our team is focused on delivering improved operational and financial results during 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 and truck components and assemblies. 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: our inability to successfully launch or sustain new or next generation programs or product features, especially in accordance with budgets or committed delivery schedules; declining revenues in our aerospace and defense business lines as we transition from legacy products and services into new market segments and technologies; potential liabilities associated with discontinued operations, including post-closing indemnifications or claims related to business or asset dispositions; breakdowns, relocations or major repairs of machinery and equipment; the cost, 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; pension valuation, health care or other benefit costs; labor relations; strikes; dependence on, recruitment or retention of key employees; union negotiations; changes in government or other customer budgets, funding or programs; reliance on major customers or suppliers, especially in the automotive or aerospace and defense electronics sectors; disputes or litigation, involving customer, supplier, lessor, landlord, creditor, stockholder, product liability or environmental claims; the costs and supply of debt, equity capital, or insurance; fees, costs or other dilutive effects of refinancing, compliance with covenants in, or acceleration of, our loan and other debt agreements; potential impairments, non-recoverability or write-offs of goodwill, assets or deferred costs, including deferred tax assets in the U.S. or Mexico; cost and availability of raw materials such as steel, component parts, natural gas or utilities; volatility of our customers’ forecasts, financial conditions, market shares, product requirements or scheduling demands; adverse impacts of new technologies or other competitive pressures which increase our costs or erode our margins; the effects of a continuing economic downturn which could reduce our revenues, negatively impact our customers or suppliers and materially, adversely affect our financial results; failure to adequately insure or to identify environmental or other insurable risks; inventory valuation risks including obsolescence, shrinkage, theft, overstocking or underbilling; revised contract prices or estimates of major contract costs; risks of foreign operations; currency exchange rates; 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; the costs of compliance with our auditing, regulatory or contractual obligations; regulatory actions or sanctions; war, terrorism, computer hacking or other cyber attacks, or political uncertainty; unanticipated or uninsured disasters, losses or business risks; inaccurate data about markets, customers or business conditions; or unknown risks and uncertainties.

Non-GAAP Measures

In addition to the results reported in accordance with accounting principles generally accepted in the United States ("GAAP") included in this press release, the company has provided information regarding net debt and profit conversion on incremental revenue, which are non-GAAP financial measures.

Net debt is defined as the sum of short-term and long-term debt less cash and cash equivalents and restricted cash and is used by management to analyze the Company's financial structure and its reliance on debt financing for funding its operational requirements. Profit conversion is defined as the change in gross profit as a percentage of the change in net revenue. Management uses these non-GAAP measures in planning and forecasting for future periods.

These non-GAAP measures should not be considered a substitute for our reported results prepared in accordance with GAAP.

 

RECONCILIATION OF NET DEBT

(in thousands)

 

December 31,

2010

   

2009

(Unaudited)

Current portion of long-term debt $ 2,000 $ 4,000
Long-term debt 21,305 19,305
Less cash and cash equivalents (16,592 ) (15,608 )
Less restricted cash - current (3,000 ) (74 )
Less restricted cash (3,000 )
Net debt $ 3,713 $ 4,623  
 

RECONCILIATION OF PROFIT CONVERSION ON INCREMENTAL REVENUE

(in thousands, except for percent data)

 

Three Months Ended

December 31,

2010

2009

(Unaudited)

Net revenue:
Industrial Group $ 47,739 $ 40,418
Electronics Group   19,494     25,679  
Total net revenue $ 67,233 $ 66,097  
 
Gross profit:
Industrial Group $ 1,929 $ 567
Electronics Group   5,624   5,232  
Total gross profit $ 7,553 $ 5,799  
 
Net revenue Industrial Group Q4 2009 $ 40,418
Net revenue Industrial Group Q4 2010   47,739  
Net increase in revenue $ 7,321  
 
Gross profit Industrial Group Q4 2009 $ 567
Gross profit Industrial Group Q4 2010   1,929  
Net increase in gross profit $ 1,362  
 
Net increase in gross profit $ 1,362
Net increase in revenue   7,321  
Profit conversion   18.6 %
 

         
SYPRIS SOLUTIONS, INC.
Financial Highlights
(In thousands, except per share amounts)
 
Three Months Ended
December 31,
 
  2010     2009  
(Unaudited)
Revenue $ 67,233 $ 66,097
Net income (loss) $ (1,625 ) $ 22,582
Basic income (loss) per common share:
Continuing operations $ (0.09 ) $ 0.74
Discontinued operations   -     0.42  
Net income (loss) per share $ (0.09 ) $ 1.16  
Diluted income (loss) per common share:
Continuing operations $ (0.09 ) $ 0.73
Discontinued operations   -     0.42  
Net income (loss) per share $ (0.09 ) $ 1.15  
Weighted average shares outstanding:
Basic 18,638 18,565
Diluted 18,638 18,698
 
 
Years Ended
December 31,
 
  2010     2009  
(Unaudited)
Revenue $ 266,654 $ 265,900
Net income (loss) $ (10,204 ) $ 2,690
Basic income (loss) per common share:
Continuing operations $ (0.52 ) $ (0.29 )
Discontinued operations   (0.03 )   0.43  
Net income (loss) per share $ (0.55 ) $ 0.14  
Diluted income (loss) per common share:
Continuing operations $ (0.52 ) $ (0.29 )
Discontinued operations   (0.03 )   0.43  
Net income (loss) per share $ (0.55 ) $ 0.14  
Weighted average shares outstanding:
Basic 18,605 18,473
Diluted 18,605 18,514
 
Note: The selected data at December 31, 2009 has been derived from the audited consolidated financial statements at that date and 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 Statements of Operations
(in thousands, except for per share data)
 
Three Months Ended Years Ended
December 31, December 31,
  2010     2009     2010     2009  
(Unaudited) (Unaudited) (Note)
Net revenue:
Industrial Group $ 47,739 $ 40,418 $ 191,153 $ 152,021
Electronics Group   19,494     25,679     75,501     113,879  
Total net revenue 67,233 66,097 266,654 265,900
Cost of sales:
Industrial Group 45,810 39,851 182,150 155,682
Electronics Group   13,870     20,447     58,637     94,200  
Total cost of sales 59,680 60,298 240,787 249,882
Gross profit (loss):
Industrial Group 1,929 567 9,003 (3,661 )
Electronics Group   5,624     5,232     16,864     19,679  
Total gross profit 7,553 5,799 25,867 16,018
Selling, general and administrative 7,043 6,591 27,721 28,192
Research and development 2,181 334 3,150 2,801
Amortization of intangible assets 28 30 113 114
Restructuring expense, net   255     2,455     2,296     7,696  
Operating loss (1,954 ) (3,611 ) (7,413 ) (22,785 )
Interest expense, net 583 300 2,379 4,289
Gain on sale of marketable securities - (18,255 ) - (18,255 )
Other income, net   (689 )   (267 )   (1,088 )   (351 )
Income (loss) from continuing operations before taxes (1,848 ) 14,611 (8,704 ) (8,468 )
Income tax expense (benefit)   (223 )   (151 )   1,004     (3,160 )
Income (loss) from continuing operations (1,625 ) 14,762 (9,708 ) (5,308 )
Income (loss) from discontinued operations, net of tax   -     7,820     (496 )   7,998  
Net income (loss) $ (1,625 ) $ 22,582   $ (10,204 ) $ 2,690  
Basic income (loss) per share:
Income (loss) per share from continuing operations $ (0.09 ) $ 0.74 $ (0.52 ) $ (0.29 )
Income (loss) per share from discontinued operations   -     0.42     (0.03 )   0.43  
Net income (loss) per share $ (0.09 ) $ 1.16   $ (0.55 ) $ 0.14  
Diluted income (loss) per share:
Income (loss) per share from continuing operations $ (0.09 ) $ 0.73 $ (0.52 ) $ (0.29 )
Income (loss) per share from discontinued operations   -     0.42     (0.03 )

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