Sypris Reports Third Quarter Results
Gross Margin Expands 220 Basis Points
HIGHLIGHTS
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- The Company’s gross margin increased to 5.7% of revenue, up 220 basis points from the third quarter of 2017.
- Revenue for Sypris Technologies increased 9.6% 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 8.9% of revenue, up from a loss of 4.2% for the prior-year period, reflecting the impact of increased revenue and significantly lower operating costs.
-
Revenue for
Sypris Electronics declined compared with the prior-year period, reflecting program delays and the short-term impact on sales from the delay in the receipt of certain electronic components. -
Subsequent to quarter-end, the Company entered into a series of supply
agreements with
Sistemas Automotrices de Mexico, S.A. de C.V. (“Sisamex”), to supply Sisamex with a variety of driveline components for use in the commercial vehicle, agricultural and all-terrain markets. -
The Company announced its financial guidance for the fourth quarter of
2018, with revenue forecasted to be in the range of
$24-$26 million , representing top-line growth of 16% at the midpoint on a year-over-year basis, and gross profit forecasted to be in the range of 13%-15% of revenue. -
The Company’s initial outlook for 2019 includes revenue of
$105-$110 million , representing 20% year-over-year growth at the midpoint, and gross margin of 15%-17%, with both business segments registering solid profitability.
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“We were pleased with the year-over-year revenue growth and margin
expansion at Sypris Technologies,” commented
“We also experienced substantial strength in demand for our energy-related products, where orders increased 50% on a year-over-year basis. The strength in customer demand, however, did not translate into increased shipments during the quarter, which actually declined sequentially during the period as we confronted a number of production, supply and other issues that resulted in shipments being delayed into the fourth quarter.”
“Subsequent to quarter end, the Company entered into a series of agreements to continue to supply axle shafts to Sisamex, in addition to the introduction of new driveline products for use in the commercial vehicle, agricultural and all-terrain markets. Sisamex is a long-term strategic partner and expanding the range of products we supply further strengthens this relationship. We expect to begin production on the new products early in 2019,” he continued.
“We were challenged by continued customer delays on certain programs and
material availability at
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 and into 2019. Our customer base and the markets we serve remain resilient and are considerably more diversified than at any point in our recent history. We are confident that 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 going forward.”
Third Quarter Results
The Company reported revenue of
For the nine months ended
Sypris Technologies
Revenue for Sypris Technologies was
Revenue for
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, revenue expansion as we close 2018 and head into 2019. 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, as well as new electronics programs.
“Third-party forecasts for the Class 8 commercial vehicle market
indicate freight volumes are now expected to be strong well into the
second half of 2019. The energy market continues to benefit from
increased demand and higher oil prices. The National Defense
Authorization Act for Fiscal Year 2019 provides nearly
“Our revenue outlook for the fourth quarter is forecasted to be in the
range of
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 | |||||||||||
September 30, | October 1, | ||||||||||
2018 | 2017 | ||||||||||
(Unaudited) | |||||||||||
Revenue | $ | 21,101 | $ | 21,371 | |||||||
Net loss | $ | (2,336 | ) | $ | (3,133 | ) | |||||
Loss per common share: | |||||||||||
Basic | $ | (0.11 | ) | $ | (0.15 | ) | |||||
Diluted | $ | (0.11 | ) | $ | (0.15 | ) | |||||
Weighted average shares outstanding: | |||||||||||
Basic | 20,555 | 20,397 | |||||||||
Diluted | 20,555 | 20,397 | |||||||||
Nine Months Ended | |||||||||||
September 30, | October 1, | ||||||||||
2018 | 2017 | ||||||||||
(Unaudited) | |||||||||||
Revenue | $ | 64,014 | $ | 60,805 | |||||||
Net loss | $ | (3,317 | ) | $ | (9,588 | ) | |||||
Loss per common share: | |||||||||||
Basic | $ | (0.16 | ) | $ | (0.47 | ) | |||||
Diluted | (0.16 | ) | (0.47 | ) | |||||||
Weighted average shares outstanding: | |||||||||||
Basic | 20,497 | 20,305 | |||||||||
Diluted | 20,497 | 20,305 | |||||||||
Sypris Solutions, Inc. | |||||||||||||||||||||
Consolidated Statements of Operations | |||||||||||||||||||||
(in thousands, except for per share data) | |||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
September 30, | October 1, | September 30, | October 1, | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||||||||
Net revenue: | |||||||||||||||||||||
Sypris Technologies | $ | 14,852 | $ | 13,547 | $ | 44,686 | $ | 40,366 | |||||||||||||
Sypris Electronics | 6,249 | 7,824 | 19,328 | 20,439 | |||||||||||||||||
Total net revenue | 21,101 | 21,371 | 64,014 | 60,805 | |||||||||||||||||
Cost of sales: | |||||||||||||||||||||
Sypris Technologies | 13,523 | 14,121 | 39,320 | 41,261 | |||||||||||||||||
Sypris Electronics | 6,376 | 6,509 | 18,527 | 17,727 | |||||||||||||||||
Total cost of sales | 19,899 | 20,630 | 57,847 | 58,988 | |||||||||||||||||
Gross profit (loss): | |||||||||||||||||||||
Sypris Technologies | 1,329 | (574 | ) | 5,366 | (895 | ) | |||||||||||||||
Sypris Electronics | (127 | ) | 1,315 | 801 | 2,712 | ||||||||||||||||
Total gross profit | 1,202 | 741 | 6,167 | 1,817 | |||||||||||||||||
Selling, general and administrative | 2,942 | 3,134 | 9,261 | 10,125 | |||||||||||||||||
Research and development | - | 5 | - | 36 | |||||||||||||||||
Severance, relocation and other costs | 274 | 357 | 1,088 | 2,235 | |||||||||||||||||
Operating loss | (2,014 | ) | (2,755 | ) | (4,182 | ) | (10,579 | ) | |||||||||||||
Interest expense, net | 231 | 208 | 665 | 602 | |||||||||||||||||
Other expense (income), net | 56 | 115 | (1,651 | ) | (1,663 | ) | |||||||||||||||
Loss before taxes | (2,301 | ) | (3,078 | ) | (3,196 | ) | (9,518 | ) | |||||||||||||
Income tax expense | 35 | 55 | 121 | 70 | |||||||||||||||||
Net loss | $ | (2,336 | ) | $ | (3,133 | ) | $ | (3,317 | ) | $ | (9,588 | ) | |||||||||
Loss per common share: | |||||||||||||||||||||
Basic | $ | (0.11 | ) | $ | (0.15 | ) | $ | (0.16 | ) | $ | (0.47 | ) | |||||||||
Diluted | $ | (0.11 | ) | $ | (0.15 | ) | $ | (0.16 | ) | $ | (0.47 | ) | |||||||||
Dividends declared per common share | $ | - | $ | - | $ | - | $ | - | |||||||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 20,555 | 20,397 | 20,497 | 20,305 | |||||||||||||||||
Diluted | 20,555 | 20,397 | 20,497 | 20,305 | |||||||||||||||||
Sypris Solutions, Inc. | |||||||||||
Consolidated Balance Sheets | |||||||||||
(in thousands, except for share data) | |||||||||||
September 30, | December 31, | ||||||||||
2018 | 2017 | ||||||||||
(Unaudited) | (Note) | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 8,623 | $ | 8,144 | |||||||
Accounts receivable, net | 11,471 | 9,317 | |||||||||
Inventory, net | 18,856 | 17,641 | |||||||||
Other current assets | 6,020 | 2,003 | |||||||||
Assets held for sale | 2,016 | 2,898 | |||||||||
Total current assets | 46,986 | 40,003 | |||||||||
Property, plant and equipment, net | 14,766 | 15,574 | |||||||||
Other assets | 881 | 1,578 | |||||||||
Total assets | $ | 62,633 | $ | 57,155 | |||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 14,472 | $ | 10,465 | |||||||
Accrued liabilities | 15,027 | 10,330 | |||||||||
Current portion of capital lease obligations | 577 | 829 | |||||||||
Total current liabilities | 30,076 | 21,624 | |||||||||
Long-term capital lease obligations | 2,959 | 3,397 | |||||||||
Note payable - related party | 6,446 | 6,435 | |||||||||
Other liabilities | 8,686 | 8,769 | |||||||||
Total liabilities | 48,167 | 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 | 154,244 | 153,858 | |||||||||
Accumulated deficit | (114,738 | ) | (111,591 | ) | |||||||
Accumulated other comprehensive loss | (25,254 | ) | (25,551 | ) | |||||||
Treasury stock, 16,192 in 2018 and 2017 | - | - | |||||||||
Total stockholders’ equity | 14,466 | 16,930 | |||||||||
Total liabilities and stockholders’ equity | $ | 62,633 | $ | 57,155 | |||||||
Note: The balance sheet at
Sypris Solutions, Inc. | |||||||||||
Consolidated Cash Flow Statements | |||||||||||
(in thousands) | |||||||||||
Nine Months Ended | |||||||||||
September 30, | October 1, | ||||||||||
2018 | 2017 | ||||||||||
(Unaudited) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | (3,317 | ) | $ | (9,588 | ) | |||||
Adjustments to reconcile net loss to net cash used in operating activities: |
|||||||||||
Depreciation and amortization | 1,988 | 2,929 | |||||||||
Stock-based compensation expense | 493 | 563 | |||||||||
Deferred loan costs recognized | 11 | 45 | |||||||||
Net loss (gain) on the sale of assets | 241 | (2,664 | ) | ||||||||
Insurance recovery gain | (2,275 | ) | - | ||||||||
Provision for excess and obsolete inventory | (125 | ) | 145 | ||||||||
Other noncash items | 127 | 622 | |||||||||
Contributions to pension plans | (77 | ) | - | ||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | (2,164 | ) | (2,552 | ) | |||||||
Inventory | (2,184 | ) | (7,713 | ) | |||||||
Prepaid expenses and other assets | (2,681 | ) | 658 | ||||||||
Accounts payable | 4,007 | 5,617 | |||||||||
Accrued and other liabilities | 4,891 | 3,392 | |||||||||
Net cash used in operating activities | (1,065 | ) | (8,546 | ) | |||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (1,321 | ) | (1,457 | ) | |||||||
Proceeds from sale of assets | 1,388 | 2,750 | |||||||||
Insurance proceeds for recovery of property damage, net | 2,275 | - | |||||||||
Change in restricted cash | - | 1,500 | |||||||||
Net cash provided by investing activities | 2,342 | 2,793 | |||||||||
Cash flows from financing activities: | |||||||||||
Capital lease payments | (691 | ) | (149 | ) | |||||||
Indirect repurchase of shares for minimum statutory tax withholdings | (107 | ) | (123 | ) | |||||||
Net cash used in financing activities | (798 | ) | (272 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | 479 | (6,025 | ) | ||||||||
Cash and cash equivalents at beginning of period | 8,144 | 15,270 | |||||||||
Cash and cash equivalents at end of period | $ | 8,623 | $ | 9,245 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20181113005305/en/
Source:
Sypris Solutions, Inc.
Anthony C. Allen, 502-329-2000
Chief
Financial Officer