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Sypris Solutions, Inc. today reported financial results for its second quarter ended July 3, 2016.
For the Second Quarter:
- Revenue for the Company was $23.5 million, reflecting a reduction in demand for commercial vehicles and the rebalancing of inventory by certain customers.
- Gross profit increased $0.8 million, reflecting an improvement in product mix within Sypris Electronics.
- Revenue for Sypris Electronics remained flat while gross profit increased $1.6 million from the second quarter of 2015.
- Sypris Electronics entered into a new manufacturing facility lease agreement during the second quarter, which is expected to significantly reduce its operating facility costs beginning in 2017.
Subsequent to quarter end, the Company:
- Announced the sale of the Cyber Security Solutions business (“CSS”) of Sypris Electronics to Analog Devices, Inc. (“ADI”) for $42 million of cash.
- The all-cash transaction was structured as a purchase of assets, including intellectual property and know-how, and included a long-term agreement for Sypris to supply circuit card assemblies to ADI for certain CSS products.
- Proceeds from the sale after expenses and escrow are expected to be in the range of $37.5 million and will be used to reduce debt and reinvest in the Company going forward.
- The CSS business supplies secure communications equipment, identity authentication, key management and encryption services for various agencies and services of the US Government, as well as for foreign allies.
Commenting on the transaction, Jeffrey T. Gill, President and Chief Executive Officer of Sypris Solutions stated, “We are pleased to complete this transaction with Analog Devices. Analog is a global leader in its markets and as a result, will have the ability to accelerate the introduction of the new, ground-breaking cybersecurity technologies and capabilities that we have developed in recent years into a variety of automotive, industrial, aerospace, healthcare, IoT and safe cities applications.”
The transaction included the intellectual property and know-how for SiOMetricsTM, SypherTM, the Sypris Cyber Range and the Data Systems product line. Approximately 67 people, or 33% of the headcount employed by Sypris Electronics, will be transferring to ADI, including people located in Tampa, Florida; Columbia, Maryland; West Lafayette, Indiana; and Copenhagen, Denmark.
Gill continued, “Going forward, Sypris Electronics will continue to be based in Tampa, Florida and will focus on building upon its core capabilities as a trusted manufacturer for customers such as Harris, Lockheed Martin, Northrop Grumman, Rockwell Collins, TE SubCom and now Analog Devices. The proceeds from the sale will be used to repay the Company’s senior debt and will be available to reinvest in the business to support future growth initiatives. In this regard, the transaction represents an important milestone for all parties.”
“We are delighted to welcome Sypris’ CSS employees, expertise and products to the ADI family,” said Dick Meaney, Senior Vice President, Industrial and Healthcare Group, Analog Devices, Inc. “We believe the combination of Sypris capabilities in ADI silicon, sensors and services will fundamentally change the levels of trust that can be achieved in the next generation of cybersecurity.”
John Walsh, President of Sypris Electronics also commented, “Our CSS capabilities coupled with ADI’s solutions have the potential to transform the levels of trust that can be achieved in the next generation of secure solutions at the intersection of the physical and digital worlds.”
Second Quarter and Six Month Results
The Company reported revenue of $23.5 million for the second quarter compared to $40.8 million for the prior year period. Additionally, the Company reported a net loss of $5.2 million, or $0.26 per share, as compared to a loss of $8.4 million, or $0.43 per share, for the prior year comparable period.
For the six months ended July 3, 2016, the Company reported revenue of $50.4 million compared to $77.8 million for the first half of 2015. The Company reported a net loss for the six months ended July 3, 2016, of $10.3 million, or $0.52 per share, as compared to a net loss of $21.4 million or $1.09 per share in the prior year comparable period.
“During the second quarter of 2016, Sypris Electronics saw significant year-over-year improvement in gross profit despite flat sales,” said Jeffrey T. Gill, president and chief executive officer. “With the proceeds generated from the sale to ADI, we will be able to focus on our trusted manufacturing services platform going forward, which is poised for meaningful growth in the future.”
“Sypris Technologies continues to adjust manpower and overhead expenses to reflect the continued softness in the commercial vehicle market that started during the fourth quarter of 2015. We have worked diligently to control our costs while taking actions to rebuild and diversify our customer base,” Mr. Gill continued.
Revenue for Sypris Technologies decreased 53.9% to $14.8 million in the second quarter of 2016 compared to $32.0 million for the prior year period, primarily as a result of softness in the commercial vehicle industry and the divestiture of the Morganton, North Carolina facility in July 2015. Gross profit for the quarter was a loss of $0.3 million, compared to profit of $0.6 million for the same period in 2015.
Revenue for Sypris Electronics was $8.7 million in the second quarter of 2016, reflecting an increase in product sales and billings under a new engineering services contract offset by a decrease in electronic manufacturing services due to the completion of a program in 2015. Gross profit for the quarter was $1.0 million, compared to a loss of $0.6 million for the prior year period, primarily reflecting a favorable mix in sales of higher margin products and services in addition to a reduction in the overhead structure.
Mr. Gill added, “We will continue to concentrate on daily execution within both of our businesses. The Company is working to adjust manpower and overhead expenses to align with projected levels of customer demand and market requirements, while optimizing our ability to bring in potential new business. Sypris Electronics will continue to provide electronic manufacturing and design support services to customers in the aerospace, defense, medical and severe environment markets, among others, as we work to expand this business in the future.”
About Sypris Solutions
Sypris Solutions is a diversified provider of outsourced services and specialty products. The Company performs a wide range of manufacturing, engineering and other technical services, typically under multi-year, sole-source contracts with corporations and government agencies in the markets for truck components and assemblies and aerospace and defense electronics.