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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 29, 2004
Sypris Solutions, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-24020 61-1321992
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
101 Bullitt Lane, Suite 450
Louisville, Kentucky 40222
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (502) 329-2000
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
99 Registrant's press release dated July 29, 2004.
Item 12. Results of Operations and Financial Conditions
The Registrant's press release dated July 29, 2004, reporting its 2004
second quarter results of operations and financial condition is furnished as
Exhibit 99 and incorporated by reference herein.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 29, 2004 Sypris Solutions, Inc.
By: /s/ David D. Johnson
------------------------------------------
David D. Johnson
Vice President and Chief Financial Officer
INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
99 Registrant's press release dated July 29, 2004.
Exhibit 99
Sypris Reports 36% Increase in Second Quarter Revenue;
Net Orders Rise 58% to Record $133 Million
LOUISVILLE, Ky.--(BUSINESS WIRE)--July 29, 2004--Sypris Solutions,
Inc. (Nasdaq/NM:SYPR) today reported revenue increased 36% to a record
$95.9 million for the second quarter compared to $70.6 million for the
prior year period. Net income for the second quarter was $2.0 million
compared to $2.7 million for the same quarter in 2003, while earnings
per share were $0.11 per diluted share compared to $0.19 per diluted
share for the second quarter of 2003. The results for the quarter
reflected the impact of a 29% increase in the number of fully diluted
shares outstanding compared to the prior year period, or roughly $0.03
per diluted share.
For the six months ended June 30, 2004, the Company reported
revenue increased 43% to a record $185.3 million compared to $129.5
million for the prior year period. Net income increased 33% to $5.4
million compared to $4.1 million for the same period in 2003, while
earnings per share increased 14% to $0.32 per diluted share compared
to $0.28 per diluted share. The results for the first six months
reflected the impact of an 18% increase in the number of fully diluted
shares outstanding compared to the prior year period, or roughly $0.04
per diluted share.
"The shortfall in earnings for the second quarter overshadowed a
number of important achievements that were otherwise accomplished
during the period," said Jeffrey T. Gill, president and chief
executive officer. "In our Industrial Group, the rapidly escalating
demand from truck component customers resulted in considerable
manufacturing inefficiencies as we worked to adjust production
schedules and capacity to coincide with steel allocations and customer
needs. In our Electronics Group, Honeywell's request to delay planned
shipments under the Apache helicopter program to accommodate the
upgrade of certain avionics software further impacted the results."
"Despite this shortfall, demand for the Company's services
continued to strengthen, with an estimated $1.5 billion of new
multi-year contracts having been announced during the past six months.
Net orders increased 58% during the quarter to a record $132.8 million
when compared to the prior year quarter, driven by a 299% increase in
orders for our Industrial Group, while the Company's backlog climbed
43% to a record $251.1 million. The Company's balance sheet remains in
excellent shape, with approximately $120 million of potentially
available credit and cash to support additional growth initiatives and
a net debt to total capital ratio of 14%."
"The outlook for further revenue growth during 2004 remains quite
positive, with the Company expected to realize the increasing
contribution of shipments under new contracts, including transactions
closed during the quarter with ArvinMeritor in Kenton, Ohio and with
Dana in Toluca, Mexico. Margins are targeted to improve gradually
through the balance of the year under the Company's plan to address
capacity constraints and as steel delivery issues are resolved. These
actions should enable the Company to reduce overtime and the need for
short production runs and expedited shipments in order to support
customer schedules."
The Industrial Group
Revenue for our Industrial Group increased 132% to a record $58.2
million in the second quarter compared to $25.1 million for the prior
year period, and increased 20% sequentially from the first quarter of
this year. Gross profit increased 67% to $5.5 million compared to $3.3
million for the same period in 2003, but declined 16% sequentially
from the first quarter of this year primarily as a result of the
production inefficiencies mentioned earlier.
For the six months ended June 30, 2004, revenue for our Industrial
Group increased 121% to a record $106.7 million from $48.3 million in
the prior year period. Gross profit for the first six months increased
103% to $12.1 million compared to $6.0 million for the prior year
period. The financial results were driven primarily by an increase in
demand from the commercial truck market and the commencement of
shipments to Dana and ArvinMeritor under recently announced contract
awards.
"Our Industrial Group responded vigorously to the various steel
and capacity related challenges in an effort to meet the needs of our
customers in a timely manner. The costs of doing so were reflected in
the financial results for the quarter, but we were able to maintain
customer schedules. Bookings increased 299% to a record $96.2 million
from $24.1 million for the prior year quarter, and increased 67%
sequentially from the first quarter of 2004. Backlog increased 158% to
a record $120.1 million when compared to the prior year period, and
increased 46% sequentially from the first quarter of this year."
The Electronics Group
Revenue for our Electronics Group was $37.7 million in the second
quarter compared to $45.5 million for the prior year period and $40.9
million for the first quarter of this year. Gross profit for the
quarter was $7.5 million compared to $9.7 million in the same period
in 2003 and $7.9 million for the first quarter of 2004, primarily as a
result of lower than expected revenue due to the delay in shipments to
Honeywell under the Apache attack helicopter program.
For the six months ended June 30, 2004, revenue for our
Electronics Group was $78.6 million compared to $81.2 million for the
prior year period. Gross profit for the first six months was $15.4
million compared to $17.0 million for the prior year period, primarily
reflecting the impact of the delayed shipments to Honeywell.
"Net orders for our Electronics Group declined during the quarter
to $36.6 million, but backlog remained solid at near record levels of
$131.0 million," said Jeffrey T. Gill. "In the short-term, we believe
the outlook for growth in this segment of our business will remain
somewhat constrained at least until such time as the delays in program
funding to accommodate our current military operations are
successfully resolved. For the long-term, we remain optimistic that we
are well-positioned on a series of major programs that should
contribute to the Company's growth in the future."
Outlook
Gill added, "We believe that it is prudent to approach the outlook
for the balance of the year with some caution. We are therefore
forecasting earnings for the third quarter of 2004 to be in the range
of $0.17 to $0.19 per diluted share, assuming 18.7 million weighted
average shares outstanding, compared to the $0.05 per diluted share on
14.8 million weighted average shares outstanding for the prior year
quarter. Revenue for the period is expected to be in the range of
$108.0 to $112.0 million versus $68.9 million for the third quarter of
2003, which represents an increase of 60% at the midpoint of the
range."
"For the full year 2004, we now expect earnings to be in the range
of $0.70 to $0.80 per diluted share, assuming 17.9 million weighted
average shares outstanding, compared to $0.56 per diluted share for
2003 on 14.7 million weighted average shares outstanding, which
represents an increase of 34% at the midpoint of the range. Revenue
for 2004 is expected to be in the range of $405 to $415 million
compared to $276.6 million for 2003."
"As we look beyond this year, the impact of the new contract
awards with Dana and ArvinMeritor are anticipated to fuel the growth
of the Company's top line, with preliminary revenue targeted in the
range of $480 to $500 million for 2005. From an earnings standpoint,
we are targeting margins in our Industrial Group to increase during
2005, which should boost the Company's earnings into the range of
$1.00 to $1.10 per diluted share, assuming 19.0 million weighted
average shares outstanding, and represents an increase of 40% when
compared to 2004 at the midpoint of our guidance."
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, truck components and assemblies, and for users of test
and measurement equipment. For more information about Sypris
Solutions, visit its Web site at www.sypris.com.
This press release, and any oral statements made with reference to
this cautionary guidance, includes "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934, as
they relate to, or may affect, the Company's future results. These
statements only reflect management's current opinions, and no
assurance can be given that any of these results will actually occur.
Important factors could cause performance to differ materially from
projected results contained in, or based upon, these statements,
including: the ability to successfully manage growth or contraction in
the economy, or the commercial vehicle or electronics markets; access
to capital on favorable terms as needed for operations or growth;
availability of funds under our credit facility; the ability to
achieve expected annual savings and synergies from past and future
business combinations or otherwise to successfully integrate such
combinations; competitive factors and price pressures; availability of
raw materials such as steel or third party component parts on a timely
basis at reasonable prices; inventory risks due to shifts in market
demand and/or price erosion of purchased components; changes in
product mix; program changes, delays, or cancellations by the
government or other customers; concentrated reliance on major
customers or suppliers; cost and yield issues associated with the
Company's manufacturing facilities; revisions in estimated costs
related to major contracts; labor relations; risks inherent in
operating abroad, including foreign currency exchange rates;
performance of our pension fund portfolios; changes in applicable law
or in the Company's regulatory authorizations, security clearances, or
other legal rights to conduct its business, deal with its work force
or export goods and services; adverse regulatory actions, or other
governmental sanctions; risks of litigation, including litigation with
respect to environmental or asbestos-related matters, customer or
supplier claims, or stockholders; the effects (including possible
increases in the cost of doing business) resulting from future war and
terrorists activities or political uncertainties; natural disasters,
casualties, utility disruptions, or the failure to anticipate unknown
risks and uncertainties present in the Company's businesses;
dependence on current management; as well as other factors included in
the Company's reports filed with the Securities and Exchange
Commission.
SYPRIS SOLUTIONS, INC.
FINANCIAL HIGHLIGHTS
(In thousands, except per share amounts)
Three Months Ended
------------------
June 30, June 29,
2004 2003
--------- --------
Revenue $95,896 $70,621
Net income $ 1,984 $ 2,679
Earnings per common share:
Basic $ 0.11 $ 0.19
Diluted $ 0.11 $ 0.19
Weighted average shares outstanding:
Basic 17,827 14,213
Diluted 18,552 14,430
Six Months Ended
------------------
June 30, June 29,
2004 2003
--------- --------
Revenue $185,272 $129,536
Net income $ 5,383 $ 4,058
Earnings per common share:
Basic $ 0.33 $ 0.29
Diluted $ 0.32 $ 0.28
Weighted average shares outstanding:
Basic 16,326 14,205
Diluted 17,072 14,425
SYPRIS SOLUTIONS, INC.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except for per share data)
Three Months Ended Six Months Ended
------------------ ------------------
June 30, June 29, June 30, June 29,
2004 2003 2004 2003
------- ------- -------- --------
(Unaudited) (Unaudited)
Net revenue:
Electronics Group $37,674 $45,544 $ 78,599 $ 81,233
Industrial Group 58,222 25,077 106,673 48,303
------- ------- -------- --------
Total net revenue 95,896 70,621 185,272 129,536
Cost of sales:
Electronics Group 30,214 35,821 63,238 64,211
Industrial Group 52,686 21,759 94,561 42,333
------- ------- -------- --------
Total cost of sales 82,900 57,580 157,799 106,544
------- ------- -------- --------
Gross profit 12,996 13,041 27,473 22,992
Selling, general and
administrative 8,628 7,036 16,786 13,185
Research and development 875 1,066 1,399 2,088
Amortization of intangible
assets 140 21 266 42
------- ------- -------- --------
Operating income 3,353 4,918 9,022 7,677
Interest expense, net 227 547 515 1,033
Other (income) expense, net (48) 85 (106) 152
------- ------- -------- --------
Income before income taxes 3,174 4,286 8,613 6,492
Income tax expense 1,190 1,607 3,230 2,434
------- ------- -------- --------
Net income $ 1,984 $ 2,679 $ 5,383 $ 4,058
======= ======= ======== ========
Earnings per common share:
Basic $ 0.11 $ 0.19 $ 0.33 $ 0.29
Diluted $ 0.11 $ 0.19 $ 0.32 $ 0.28
Dividends declared per common
share $ 0.03 $ 0.03 $ 0.06 $ 0.06
Weighted average shares
outstanding:
Basic 17,827 14,213 16,326 14,205
Diluted 18,552 14,430 17,072 14,425
SYPRIS SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
June 30, Dec. 31,
2004 2003
-------- --------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 12,539 $ 12,019
Accounts receivable, net 71,915 45,484
Inventory, net 78,487 61,932
Other current assets 7,899 11,370
-------- --------
Total current assets 170,840 130,805
Property, plant and equipment, net 139,131 106,683
Goodwill 14,277 14,277
Other assets 13,320 11,730
-------- --------
$337,568 $263,495
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,780 $ 29,598
Accrued liabilities 22,790 17,491
Current portion of long-term debt 5,000 3,200
-------- --------
Total current liabilities 74,570 50,289
Long-term debt 41,000 53,000
Other liabilities 16,030 15,425
-------- --------
Total liabilities 131,600 118,714
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; 17,868,435 and
14,283,323 shares issued and outstanding in
2004 and 2003, respectively 179 143
Additional paid-in capital 140,353 83,541
Retained earnings 67,782 63,443
Accumulated other comprehensive income (loss) (2,346) (2,346)
-------- --------
Total stockholders' equity 205,968 144,781
-------- --------
$337,568 $263,495
======== ========
SYPRIS SOLUTIONS, INC.
CASH FLOW STATEMENTS
(in thousands)
Six Months Ended
------------------
June 30, June 29,
2004 2003
-------- --------
(Unaudited)
Cash flows from operating activities:
Net income $ 5,383 $ 4,058
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,516 6,186
Other noncash charges 693 393
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (26,816) (4,589)
Inventory (11,431) 1,911
Other current assets 1,786 1,291
Accounts payable 20,113 (1,764)
Accrued liabilities 5,062 1,259
-------- --------
Net cash provided by operating activities 3,306 8,745
Cash flows from investing activities:
Capital expenditures (19,214) (10,687)
Purchase of the net assets of acquired entities (29,399) (800)
Proceeds from sale of assets -- 2
Changes in nonoperating assets and liabilities 247 295
-------- --------
Net cash used in investing activities (48,366) (11,190)
Cash flows from financing activities:
Net (decrease) increase in debt under revolving
credit facility (37,700) 3,000
Proceeds from long-term debt 27,500 --
Cash dividends paid (950) (850)
Proceeds from issuance of common stock 56,730 211
-------- --------
Net cash provided by financing activities 45,580 2,361
-------- --------
Net increase (decrease) in cash and cash
equivalents 520 (84)
Cash and cash equivalents at beginning of period 12,019 12,403
-------- --------
Cash and cash equivalents at end of period $ 12,539 $ 12,319
======== ========
CONTACT: Sypris Solutions Inc., Louisville
David D. Johnson, 502-329-2000
www.sypris.com