Sypris Reports Fourth Quarter and Full Year Results
Sypris Solutions reported its fourth quarter and full-year results for 2020, demonstrating resilience amid the COVID-19 pandemic. Despite a 6.3% revenue decline, consolidated gross margin improved to 14.0%, and operating income surged by 102.1% compared to 2019. Sypris Electronics saw a 41.3% revenue increase, reflecting strong backlog and electronic component availability. The company anticipates a 20% revenue growth in 2021, supported by new contract awards in defense, communications, and energy sectors, alongside positive market recovery.
- Gross margin increased 280 basis points to 14.0% despite a 6.3% revenue decrease.
- Operating income rose by 102.1% compared to 2019.
- Earnings per diluted share improved to $0.08 from a loss of $0.19 per share in 2019.
- Revenue for Sypris Electronics rose 41.3%, with gross margin improving to 14.6%.
- Forecasted 20% revenue growth and 200-300 basis point margin expansion for 2021.
- Fourth quarter revenue declined to $20.6 million from $21.6 million year-over-year.
- Net loss in the fourth quarter was $1.2 million compared to a $0.9 million loss in the prior-year period.
- Revenue for Sypris Technologies fell to $12.1 million in Q4 2020 from $13.0 million in Q4 2019.
Sypris Solutions, Inc. (Nasdaq/GM: SYPR) today reported financial results for its fourth quarter and full-year ended December 31, 2020. Having completed a series of strategic initiatives over the past several years, Sypris Solutions is now well positioned to achieve long-term growth and increasing margins. These initiatives have included reducing and realigning the Company’s cost structure while diversifying its book of business in terms of both customers and markets.
The Company’s results for 2020 fundamentally reflected these expectations, highlighted by the improved performance of Sypris Electronics. The essential nature of the defense and communication programs served by Sypris Electronics continued to enable this segment to sustain operations at planned levels throughout the year. The commercial vehicle and automotive markets served by Sypris Technologies recovered during the second half of 2020 from the sharp reduction in demand during the second quarter, as the global economic impact of the COVID-19 pandemic continued to lessen. Favorable market conditions for both segments are forecasted in 2021, positioning the Company for top line growth and expanding margins.
HIGHLIGHTS
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-
Consolidated gross margin for the full year 2020 increased 280 basis points from 2019 to
14.0% despite a6.3% decrease in revenue primarily attributable to the impact of COVID-19 in the second quarter. -
Consolidated gross profit for the full year 2020 improved
17.0% from 2019 and, when combined with lower spending for selling, general and administrative expenses, contributed to a102.1% increase in operating income compared to 2019. -
Earnings per diluted share for the full year 2020 increased to
$0.08 compared to a loss of$0.19 per share for the prior year, reflecting the improvement in operating income and the release of a valuation allowance on certain foreign deferred tax assets. -
Full year 2020 revenue for Sypris Electronics increased
41.3% from the prior year, reflecting its strong backlog and improved electronic component availability. Gross margin improved 1,420 basis points from the prior year to14.6% in 2020. - Subsequent to quarter-end, Sypris Electronics announced a contract award to manufacture and test a variety of electronic power supply modules for a mission-critical, long-range, precision-guided anti-ship missile system, with production to begin during 2021.
- Subsequent to quarter-end, Sypris Technologies announced a long-term contract extension with a leading commercial vehicle manufacturer. The new contract continues the existing product lines and includes the award of two additional axle shaft model lines to begin production in 2021 and the adoption of certain Sypris Ultra® series lightweight axle shaft design features.
- Subsequent to quarter-end, Sypris Technologies also announced awards from two high-pressure energy projects. The contracts, which provide for the use of closures in the Anchor Field development project in the Gulf of Mexico and the planned upgrade of a natural gas pipeline system in North America, call for shipments to begin prior to year-end 2021.
-
The impact of these recent contract wins, when combined with current positive market conditions, is forecast to fuel an increase of
20% in revenue, a 200 to 300 basis point expansion of margins and strong double-digit percentage growth in cash flow from operations for the year.
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“While the economic headwinds and disruptions in 2020 had an impact on our results, we are pleased with our performance during the year. Our operations performed extremely well during 2020 and returned to profitability, despite the adverse conditions incurred during the second quarter, which continued during the course of the year,” commented Jeffrey T. Gill, President and Chief Executive Officer. “Last year presented historic challenges brought on by the pandemic, yet our businesses pulled together to protect our employees, while balancing the needs of our customers, communities and business partners during these difficult times. The effort and execution by our people resulted in a strong performance for the year.
“Full year revenue for Sypris Electronics increased
“Demand from customers serving the automotive, commercial vehicle, sport utility, and off-highway markets recovered in the second half of 2020, with Class 8 North American production up almost
“The energy markets faced unprecedented pressures in 2020, with the COVID-19 outbreak driving depressed demand, uncertainty and spending reductions for the entire oil and gas industry. We have remained vigilant in our pursuit of new opportunities in these markets, which has resulted in recent contract awards. While we expect activity levels in this market to remain challenging during the first half of 2021, steadily improving commodity prices, gradually reopening economies and increasing pipeline activity is anticipated to lead to year-over-year growth.
“Gross profit for 2020 was
Concluding, Mr. Gill said, “Our customer base and the markets we serve are considerably more diversified than at any point in our recent history. As an essential business, we have a responsibility to ensure that our defense, communications, energy, and transportation sectors remain vibrant. We will continue to monitor developments, act promptly to mitigate risks and take the necessary steps required to ensure deliveries continue to be made to our customers in a timely manner.”
Fourth Quarter and Full-Year Results
The Company reported revenue of
For the full-year 2020, the Company reported revenue of
Sypris Technologies
Revenue for Sypris Technologies was
Sypris Electronics
Revenue for Sypris Electronics was
Outlook
Commenting on the future, Mr. Gill added, “First and foremost, we remain focused on the health and safety of our employees, their families and our customers. While the future potential impact of the pandemic remains unknown, we are optimistic regarding the current economic outlook for 2021.
“Demand has strengthened significantly from customers serving the automotive, commercial vehicle and sport utility markets, with Class 8 forecasts showing year-over-year production increases of over
“The continuing momentum of new contract awards, when combined with increasingly positive market conditions, provide important support for our financial outlook for 2021, which includes
“As we prepare for 2021, we remain focused on meeting the important needs of our customers who serve defense, communications, energy, transportation, and other critical infrastructure industries. With a strong backlog and recovering markets, we believe that the outlook for the coming year has the potential to be very positive for Sypris and we approach our new fiscal year with optimism.”
About Sypris Solutions
Sypris Solutions is a diversified provider of truck components, oil and gas pipeline components and aerospace and defense electronics. The Company produces a wide range of manufactured products, 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. Such statements may relate to projections of the company’s revenue, earnings, and other financial and operational measures, our liquidity, our ability to mitigate or manage disruptions posed by the current coronavirus disease (“COVID-19”), and the impact of COVID-19 and economic conditions on our future operations, among other matters. In March 2020, the President of the United States declared the COVID-19 outbreak a national emergency. COVID-19 continues to spread throughout the United States and other countries across the world, and the duration and severity of its effects are currently unknown. The COVID-19 pandemic has resulted, and is likely to continue to result, in significant economic disruption and has and will likely adversely affect our business. The Company has continued to operate at each location and sought to remain compliant with government regulations imposed due to the COVID-19 pandemic.
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: the impact of COVID-19 and economic conditions on our future operations; possible public policy response to the pandemic, including legislation or restrictions that may impact our operations or supply chain; our failure to successfully complete final contract negotiations with regard to our announced contract “orders”, “wins” or “awards”; our failure to successfully win new business; the termination or non-renewal of existing contracts by customers; our failure to achieve and maintain profitability on a timely basis by steadily increasing our revenues from profitable contracts with a diversified group of customers, which would cause us to continue to use existing cash resources or require us to sell assets to fund operating losses; breakdowns, relocations or major repairs of machinery and equipment, especially in our Toluca Plant; the cost, quality, timeliness, efficiency and yield of our operations and capital investments, including the impact of tariffs, product recalls or related liabilities, employee training, working capital, production schedules, cycle times, scrap rates, injuries, wages, overtime costs, freight or expediting costs; dependence on, retention or recruitment of key employees and distribution of our human capital; disputes or litigation involving governmental, supplier, customer, employee, creditor, stockholder, product liability, warranty or environmental claims; our failure to achieve targeted gains and cash proceeds from the anticipated sale of certain equipment; the fees, costs and supply of, or access to, debt, equity capital, or other sources of liquidity; our ability to comply with the requirements of the SBA and seek forgiveness of all or a portion of our Paycheck Protection Program loan; our inability to develop new or improved products or new markets for our products; cost, quality and availability or lead times of raw materials such as steel, component parts (especially electronic components), natural gas or utilities; our ability to maintain compliance with the NASDAQ listing standards minimum closing bid price; our reliance on a few key customers, third party vendors and sub-suppliers; inventory valuation risks including excessive or obsolescent valuations or price erosions of raw materials or component parts on hand or other potential impairments, non-recoverability or write-offs of assets or deferred costs; other potential weaknesses in internal controls over financial reporting and enterprise risk management; failure to adequately insure or to identify product liability, environmental or other insurable risks; unanticipated or uninsured disasters, public health crises, losses or business risks; unanticipated or uninsured product liability 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 costs of compliance with our auditing, regulatory or contractual obligations; labor relations; strikes; union negotiations; pension valuation, health care or other benefit costs; costs associated with environmental claims relating to properties previously owned; our inability to patent or otherwise protect our inventions or other intellectual property from potential competitors; 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; changes in licenses, security clearances, or other legal rights to operate, manage our work force or import and export as needed; risks of foreign operations; currency exchange rates; war, terrorism, or political uncertainty; cyber security threats and disruptions; inaccurate data about markets, customers or business conditions; risk related to owning our common stock including increased volatility; or unknown risks and uncertainties. We undertake no obligation to update our forward-looking statements, except as may be required by law.
| SYPRIS SOLUTIONS, INC. | |||||||
| Financial Highlights | |||||||
| (In thousands, except per share amounts) | |||||||
| Three Months Ended | |||||||
| December 31, | |||||||
|
2020 |
|
|
2019 |
|
||
| (Unaudited) | |||||||
| Revenue | $ |
20,614 |
|
$ |
21,624 |
|
|
| Net loss | $ |
(1,174 |
) |
$ |
(859 |
) |
|
| Loss per common share: | |||||||
| Basic | $ |
(0.06 |
) |
$ |
(0.04 |
) |
|
| Diluted | $ |
(0.06 |
) |
$ |
(0.04 |
) |
|
| Weighted average shares outstanding: | |||||||
| Basic |
|
21,259 |
|
|
20,974 |
|
|
| Diluted |
|
21,259 |
|
|
20,974 |
|
|
| Year Ended | |||||||
| December 31, | |||||||
|
2020 |
|
|
2019 |
|
||
| (Unaudited) | |||||||
| Revenue | $ |
82,346 |
|
$ |
87,891 |
|
|
| Net income (loss) | $ |
1,668 |
|
$ |
(3,949 |
) |
|
| Income (loss) per common share: | |||||||
| Basic | $ |
0.08 |
|
$ |
(0.19 |
) |
|
| Diluted |
|
0.08 |
|
|
(0.19 |
) |
|
| Weighted average shares outstanding: | |||||||
| Basic |
|
21,084 |
|
|
20,865 |
|
|
| Diluted |
|
21,086 |
|
|
20,865 |
|
|
| Sypris Solutions, Inc. | ||||||||||||
| Consolidated Statements of Operations | ||||||||||||
| (in thousands, except for per share data) | ||||||||||||
| Three Months Ended | Year Ended | |||||||||||
| December 31, | December 31, | |||||||||||
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
| (Unaudited) | (Unaudited) | |||||||||||
| Net revenue: | ||||||||||||
| Sypris Technologies | $ |
12,087 |
|
$ |
13,010 |
|
$ |
45,321 |
|
$ |
61,683 |
|
| Sypris Electronics |
|
8,527 |
|
|
8,614 |
|
|
37,025 |
|
|
26,208 |
|
| Total net revenue |
|
20,614 |
|
|
21,624 |
|
|
82,346 |
|
|
87,891 |
|
| Cost of sales: | ||||||||||||
| Sypris Technologies |
|
10,552 |
|
|
11,006 |
|
|
39,157 |
|
|
51,898 |
|
| Sypris Electronics |
|
7,512 |
|
|
7,910 |
|
|
31,624 |
|
|
26,110 |
|
| Total cost of sales |
|
18,064 |
|
|
18,916 |
|
|
70,781 |
|
|
78,008 |
|
| Gross profit: | ||||||||||||
| Sypris Technologies |
|
1,535 |
|
|
2,004 |
|
|
6,164 |
|
|
9,785 |
|
| Sypris Electronics |
|
1,015 |
|
|
704 |
|
|
5,401 |
|
|
98 |
|
| Total gross profit |
|
2,550 |
|
|
2,708 |
|
|
11,565 |
|
|
9,883 |
|
| Selling, general and administrative |
|
2,721 |
|
|
3,474 |
|
|
11,351 |
|
|
13,680 |
|
| Severance, relocation and other costs |
|
- |
|
|
118 |
|
|
124 |
|
|
509 |
|
| Operating (loss) income |
|
(171 |
) |
|
(884 |
) |
|
90 |
|
|
(4,306 |
) |
| Interest expense, net |
|
202 |
|
|
227 |
|
|
838 |
|
|
903 |
|
| Other expense (income), net |
|
658 |
|
|
(100 |
) |
|
544 |
|
|
(1,256 |
) |
| Loss before income taxes |
|
(1,031 |
) |
|
(1,011 |
) |
|
(1,292 |
) |
|
(3,953 |
) |
| Income tax expense (benefit), net |
|
143 |
|
|
(152 |
) |
|
(2,960 |
) |
|
(4 |
) |
| Net (loss) income | $ |
(1,174 |
) |
$ |
(859 |
) |
$ |
1,668 |
|
$ |
(3,949 |
) |
| (Loss) income per common share: | ||||||||||||
| Basic | $ |
(0.06 |
) |
$ |
(0.04 |
) |
$ |
0.08 |
|
$ |
(0.19 |
) |
| Diluted | $ |
(0.06 |
) |
$ |
(0.04 |
) |
$ |
0.08 |
|
$ |
(0.19 |
) |
| Dividends declared per common share | $ |
- |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
| Weighted average shares outstanding: | ||||||||||||
| Basic |
|
21,259 |
|
|
20,974 |
|
|
21,084 |
|
|
20,865 |
|
| Diluted |
|
21,259 |
|
|
20,974 |
|
|
21,086 |
|
|
20,865 |
|
| Sypris Solutions, Inc. | ||||||
| Consolidated Balance Sheets | ||||||
| (in thousands, except for share data) | ||||||
| December 31, | December 31, | |||||
|
2020 |
|
|
2019 |
|
|
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ |
11,606 |
|
$ |
5,095 |
|
| Accounts receivable, net |
|
7,234 |
|
|
7,444 |
|
| Inventory, net |
|
16,236 |
|
|
20,784 |
|
| Other current assets |
|
3,948 |
|
|
4,282 |
|
| Assets held for sale |
|
412 |
|
|
2,233 |
|
| Total current assets |
|
39,436 |
|
|
39,838 |
|
| Property, plant and equipment, net |
|
10,161 |
|
|
11,675 |
|
| Operating lease right-of-use assets |
|
6,103 |
|
|
7,014 |
|
| Other assets |
|
5,008 |
|
|
1,529 |
|
| Total assets | $ |
60,708 |
|
$ |
60,056 |
|
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ |
6,734 |
|
$ |
9,346 |
|
| Accrued liabilities |
|
13,409 |
|
|
12,495 |
|
| Operating lease liabilities, current portion |
|
965 |
|
|
841 |
|
| Finance lease obligations, current portion |
|
393 |
|
|
684 |
|
| Note payable - PPP loan, current portion |
|
1,186 |
|
|
- |
|
| Total current liabilities |
|
22,687 |
|
|
23,366 |
|
| Operating lease liabilities, net of current portion |
|
5,941 |
|
|
6,906 |
|
| Finance lease obligations, net of current portion |
|
1,927 |
|
|
2,351 |
|
| Note payable - related party |
|
6,477 |
|
|
6,463 |
|
| Note payable - PPP Loan, net of current portion |
|
2,372 |
|
|
- |
|
| Other liabilities |
|
6,529 |
|
|
7,539 |
|
| Total liabilities |
|
45,933 |
|
|
46,625 |
|
| Stockholders’ equity: | ||||||
| Preferred stock, par value |
|
- |
|
|
- |
|
| Series A preferred stock, par value |
|
- |
|
|
- |
|
| Common stock, non-voting, par value |
|
- |
|
|
- |
|
| Common stock, par value |
|
213 |
|
|
213 |
|
| Additional paid-in capital |
|
155,025 |
|
|
154,702 |
|
| Accumulated deficit |
|
(115,765 |
) |
|
(117,433 |
) |
| Accumulated other comprehensive loss |
|
(24,698 |
) |
|
(24,051 |
) |
| Treasury stock, 1,236 and 26,192 in 2020 and 2019 |
|
- |
|
|
- |
|
| Total stockholders’ equity |
|
14,775 |
|
|
13,431 |
|
| Total liabilities and stockholders’ equity | $ |
60,708 |
|
$ |
60,056 |
|
| Sypris Solutions, Inc. | ||||||
| Consolidated Cash Flow Statements | ||||||
| (in thousands) | ||||||
| Year Ended, | ||||||
| December 31, | ||||||
|
2020 |
|
|
2019 |
|
|
| (Unaudited) | ||||||
| Cash flows from operating activities: | ||||||
| Net income (loss) | $ |
1,668 |
|
$ |
(3,949 |
) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||
| Depreciation and amortization |
|
2,503 |
|
|
2,671 |
|
| Deferred income taxes |
|
(3,070 |
) |
|
(260 |
) |
| Stock-based compensation expense |
|
426 |
|
|
469 |
|
| Deferred loan costs recognized |
|
14 |
|
|
11 |
|
| Net gain on the disposal or abandonment of assets |
|
(236 |
) |
|
(654 |
) |
| Provision for excess and obsolete inventory |
|
222 |
|
|
616 |
|
| Non-cash lease expense |
|
911 |
|
|
650 |
|
| Other noncash items |
|
(1 |
) |
|
52 |
|
| Contributions to pension plans |
|
(862 |
) |
|
(382 |
) |
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable |
|
214 |
|
|
2,425 |
|
| Inventory |
|
4,230 |
|
|
(2,621 |
) |
| Prepaid expenses and other assets |
|
(204 |
) |
|
756 |
|
| Accounts payable |
|
(2,591 |
) |
|
(4,100 |
) |
| Accrued and other liabilities |
|
424 |
|
|
(1,537 |
) |
| Net cash provided by (used in) operating activities |
|
3,648 |
|
|
(5,853 |
) |
| Cash flows from investing activities: | ||||||
| Capital expenditures |
|
(1,542 |
) |
|
(859 |
) |
| Proceeds from sale of assets |
|
1,969 |
|
|
1,858 |
|
| Net cash provided by investing activities |
|
427 |
|
|
999 |
|
| Cash flows from financing activities: | ||||||
| Principal payments on finance lease obligations |
|
(715 |
) |
|
(632 |
) |
| Proceeds from Paycheck Protection Program loan |
|
3,558 |
|
|
- |
|
| Indirect repurchase of shares for minimum statutory tax withholdings |
|
(103 |
) |
|
(156 |
) |
| Net cash provided by (used in) financing activities |
|
2,740 |
|
|
(788 |
) |
| Effect of exchange rate changes on cash balances |
|
(304 |
) |
|
33 |
|
| Net increase (decrease) in cash and cash equivalents |
|
6,511 |
|
|
(5,609 |
) |
| Cash and cash equivalents at beginning of period |
|
5,095 |
|
|
10,704 |
|
| Cash and cash equivalents at end of period | $ |
11,606 |
|
$ |
5,095 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20210318005188/en/
FAQ
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