Sypris Reports Second Quarter Results
Raises Second Half Revenue Guidance; Confirms 15%-17% Margin Outlook
HIGHLIGHTS
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- Revenue for the Company increased 16.8% sequentially to
$21 .2 million for the quarter, while gross margin expanded to 7.5% from a loss of 3.8% in the first quarter of 2017. - Revenue for
Sypris Electronics increased 32.5% sequentially for the second quarter of 2017, while gross margin increased to 18.1% from 1.8% for the first quarter. - Revenue for Sypris Technologies increased 10.2% sequentially for the quarter, while gross margin expanded to 2.1% from a loss of 6.2% in the first quarter of 2017.
- Selling, general and administrative expense was reduced by 31.8% when compared to the prior-year period, reflecting the positive impact of the Company’s previously announced
$26.3 million , two-year cost improvement target. - Subsequent to quarter end, the Company announced the receipt of multiple contract awards from
Harris Corporation to manufacture a variety of mission-critical electronic assemblies for U.S. Military and Space programs. - As a result of recent contract awards in both business units, the Company expects to benefit from
$20.7 million of new sales in 2018 and$24.8 million of new sales in 2019. - The Company raised its revenue guidance for the second half of 2017 to
$42.0-$44 .0 million and confirmed its margin outlook, with gross margin of 15.0% to 17.0% and EBITDA margin of 7.0%-9.0%, reflecting the benefit of the substantial completion of the Company’s cost improvement initiatives, increased sales and improved revenue mix during the second half of 2017.
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“We are pleased to announce that all major actions have now been completed as of August with regard to our two-year,
“We expect that the progress made last year and during the first half of 2017 will enable the Company’s operations to return to profitability by the second half of 2017,” Mr. Gill said. “The Company’s total manufacturing overhead costs are being reduced, our underperforming and underutilized assets are being divested, significant liquidity has been created and important new business continues to be secured, the most recent of which included the award of four new contracts with
Mr. Gill added, “As a result of our transitional efforts to exit or dispose of the Broadway Plant, together with our sale of the CSS business in 2016, the elimination of commercial debt and our other cost reduction initiatives, we have streamlined our cost structure significantly and have significantly improved the Company’s competitiveness.”
Transition Plan Status Update
The transition of the
The lower cost profile combined with a more favorable revenue mix is expected to drive an increase in overall margin performance going forward. The Company expects margins to reach 15-17% of revenue for the second half of 2017, which is nearly a 50% increase as compared to 2014 when we had significantly higher customer volume and market concentration.
New Program Awards
“The Company’s commitment to cost, quality and on-time delivery continues to drive significant new business opportunities within both of our segments,” stated Mr. Gill. “During the past 12 months, the award of new, multi-year programs has been very positive. We now expect revenue from new programs of
“The new program awards are balanced across customers, markets and products and provide a solid multi-year foundation for growth. The new awards fit within our existing capacity with only incremental capital needs.”
Second Quarter Results
The Company reported revenue of
For the six months ended July 2, 2017, the Company reported revenue of
Sypris Technologies
Revenue for Sypris Technologies was
Revenue for
Outlook
Commenting on the future, Mr. Gill added, “The combination of significant cost savings, improved revenue mix and the elimination of high-cost commercial debt, among other items, is expected to have a positive, material impact on the Company’s financial performance in 2017. The second half of the year is expected 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 expect gross margin to increase to 15.0%-17.0% of revenue for the second half of the year. Selling, general and administrative expense is expected to fall to 15.0%-16.0% during the second half of the year. We are raising our expected revenue outlook for the second half of 2017, which is now expected to range from
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
SYPRIS SOLUTIONS, INC. | |||||||||||
Financial Highlights | |||||||||||
(In thousands, except per share amounts) | |||||||||||
Three Months Ended | |||||||||||
July 2, | July 3, | ||||||||||
2017 | 2016 | ||||||||||
(Unaudited) | |||||||||||
Revenue | $ | 21,249 | $ | 23,504 | |||||||
Net loss | $ | (3,147 | ) | $ | (5,203 | ) | |||||
Loss per common share: | |||||||||||
Basic | $ | (0.15 | ) | $ | (0.26 | ) | |||||
Diluted | $ | (0.15 | ) | $ | (0.26 | ) | |||||
Weighted average shares outstanding: | |||||||||||
Basic | 20,350 | 19,749 | |||||||||
Diluted | 20,350 | 19,749 | |||||||||
Six Months Ended | |||||||||||
July 2, | July 3, | ||||||||||
2017 | 2016 | ||||||||||
(Unaudited) | |||||||||||
Revenue | $ | 39,434 | $ | 50,442 | |||||||
Net loss | $ | (6,455 | ) | $ | (10,302 | ) | |||||
Loss per common share: | |||||||||||
Basic | $ | (0.32 | ) | $ | (0.52 | ) | |||||
Diluted | (0.32 | ) | (0.52 | ) | |||||||
Weighted average shares outstanding: | |||||||||||
Basic | 20,261 | 19,725 | |||||||||
Diluted | 20,261 | 19,725 |
Sypris Solutions, Inc. | |||||||||||||||||||||
Consolidated Statements of Operations | |||||||||||||||||||||
(in thousands, except for per share data) | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
July 2, | July 3, | July 2, | July 3, | ||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||||||
Net revenue: | |||||||||||||||||||||
Sypris Technologies | $ | 14,059 | $ | 14,769 | $ | 26,819 | $ | 32,596 | |||||||||||||
Sypris Electronics | 7,190 | 8,735 | 12,615 | 17,846 | |||||||||||||||||
Total net revenue | 21,249 | 23,504 | 39,434 | 50,442 | |||||||||||||||||
Cost of sales: | |||||||||||||||||||||
Sypris Technologies | 13,769 | 15,029 | 27,316 | 33,512 | |||||||||||||||||
Sypris Electronics | 5,890 | 7,726 | 11,218 | 15,454 | |||||||||||||||||
Total cost of sales | 19,659 | 22,755 | 38,534 | 48,966 | |||||||||||||||||
Gross profit (loss): | |||||||||||||||||||||
Sypris Technologies | 290 | (260 | ) | (497 | ) | (916 | ) | ||||||||||||||
Sypris Electronics | 1,300 | 1,009 | 1,397 | 2,392 | |||||||||||||||||
Total gross profit | 1,590 | 749 | 900 | 1,476 | |||||||||||||||||
Selling, general and administrative | 3,591 | 5,268 | 7,014 | 11,771 | |||||||||||||||||
Research and development | 9 | 90 | 31 | 214 | |||||||||||||||||
Severance and equipment relocation costs | 880 | 38 | 1,878 | 522 | |||||||||||||||||
Operating loss | (2,890 | ) | (4,647 | ) | (8,023 | ) | (11,031 | ) | |||||||||||||
Interest expense, net | 206 | 964 | 394 | 1,840 | |||||||||||||||||
Other income, net | 27 | (409 | ) | (1,977 | ) | (2,571 | ) | ||||||||||||||
Loss before taxes | (3,123 | ) | (5,202 | ) | (6,440 | ) | (10,300 | ) | |||||||||||||
Income tax expense, net | 24 | 1 | 15 | 2 | |||||||||||||||||
Net loss | $ | (3,147 | ) | $ | (5,203 | ) | $ | (6,455 | ) | $ | (10,302 | ) | |||||||||
Loss per common share: | |||||||||||||||||||||
Basic | $ | (0.15 | ) | $ | (0.26 | ) | $ | (0.32 | ) | $ | (0.52 | ) | |||||||||
Diluted | $ | (0.15 | ) | $ | (0.26 | ) | $ | (0.32 | ) | $ | (0.52 | ) | |||||||||
Dividends declared per common share | $ | - | $ | - | $ | - | $ | - | |||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 20,350 | 19,749 | 20,261 | 19,725 | |||||||||||||||||
Diluted | 20,350 | 19,749 | 20,261 | 19,725 |
Sypris Solutions, Inc. | |||||||||
Consolidated Balance Sheets | |||||||||
(in thousands, except for share data) | |||||||||
July 2, | December 31, | ||||||||
2017 | 2016 | ||||||||
(Unaudited) | (Note) | ||||||||
ASSETS | |||||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 10,738 | $ | 15,270 | |||||
Restricted cash | 1,500 | 1,500 | |||||||
Accounts receivable, net | 10,801 | 8,010 | |||||||
Inventory, net | 23,895 | 14,558 | |||||||
Other current assets | 1,886 | 2,730 | |||||||
Assets held for sale | 1,040 | 832 | |||||||
Total current assets | 49,860 | 42,900 | |||||||
Property, plant and equipment, net | 17,635 | 17,943 | |||||||
Other assets | 1,423 | 1,794 | |||||||
Total assets | $ | 68,918 | $ | 62,637 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current liabilities: | |||||||||
Accounts payable | $ | 15,491 | $ | 6,973 | |||||
Accrued liabilities | 12,962 | 10,541 | |||||||
Current portion of capital lease obligations | 238 | 208 | |||||||
Total current liabilities | 28,691 | 17,722 | |||||||
Long-term capital lease obligations | 2,828 | 2,950 | |||||||
Note payable - related party | 6,405 | 6,375 | |||||||
Other liabilities | 9,885 | 9,492 | |||||||
Total liabilities | 47,809 | 36,539 | |||||||
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; 21,446,580 shares issued and 21,436,388 outstanding in 2017 and 21,330,882 shares issued and 21,329,690 outstanding in 2016 |
214 | 213 | |||||||
Additional paid-in capital | 153,537 | 153,252 | |||||||
Accumulated deficit | (107,224 | ) | (100,769 | ) | |||||
Accumulated other comprehensive loss | (25,418 | ) | (26,598 | ) | |||||
Treasury stock, 10,192 and 1,192 shares in 2017 and 2016, respectively | - | - | |||||||
Total stockholders’ equity | 21,109 | 26,098 | |||||||
Total liabilities and stockholders’ equity | $ | 68,918 | $ | 62,637 | |||||
Note: The balance sheet at December 31, 2016 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 2, | July 3, | ||||||||||
2017 | 2016 | ||||||||||
(Unaudited) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | (6,455 | ) | $ | (10,302 | ) | |||||
Adjustments to reconcile net loss to net cash used in operating activities: |
|||||||||||
Depreciation and amortization | 1,972 | 3,678 | |||||||||
Stock-based compensation expense | 395 | 703 | |||||||||
Deferred loan costs recognized | 30 | 435 | |||||||||
Gain on the sale of assets | (2,537 | ) | (2,391 | ) | |||||||
Provision for excess and obsolete inventory | 109 | 86 | |||||||||
Other noncash items | 596 | (505 | ) | ||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | (2,915 | ) | 151 | ||||||||
Inventory | (9,451 | ) | (494 | ) | |||||||
Prepaid expenses and other assets | 1,232 | (215 | ) | ||||||||
Accounts payable | 8,518 | (369 | ) | ||||||||
Accrued and other liabilities | 2,548 | 2,288 | |||||||||
Net cash used in operating activities | (5,958 | ) | (6,935 | ) | |||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (997 | ) | (115 | ) | |||||||
Proceeds from sale of assets | 2,623 | 11,086 | |||||||||
Change in restricted cash | - | (6,000 | ) | ||||||||
Net cash provided by investing activities | 1,626 | 4,971 | |||||||||
Cash flows from financing activities: | |||||||||||
Capital lease payments | (92 | ) | (51 | ) | |||||||
Principal payments on Term Loan | - | (857 | ) | ||||||||
Proceeds from related party note payable | - | 1,000 | |||||||||
Net change in debt under New Revolving Credit Agreement | - | 2,721 | |||||||||
Debt issuance and modification costs | - | (379 | ) | ||||||||
Indirect repurchase of shares for minimum statutory tax withholdings | (108 | ) | - | ||||||||
Net cash (used in) provided by financing activities | (200 | ) | 2,434 | ||||||||
Net (decrease) increase in cash and cash equivalents | (4,532 | ) | 470 | ||||||||
Cash and cash equivalents at beginning of period | 15,270 | 1,349 | |||||||||
Cash and cash equivalents at end of period | $ | 10,738 | $ | 1,819 | |||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170815005323/en/
Source:
Sypris Solutions, Inc.
Anthony C. Allen, 502-329-2000
Chief Financial Officer