UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended June 29, 2003.
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from to .
Commission File Number: 0-24020
SYPRIS SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 61-1321992 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
101 Bullitt Lane, Suite 450
Louisville, Kentucky 40222
(Address of principal executive offices, including zip code)
(502) 329-2000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨.
As of July 31, 2003, the Registrant had 14,222,238 shares of common stock outstanding.
Table of Contents
1
| PART I. | FINANCIAL INFORMATION |
| ITEM 1. | FINANCIAL STATEMENTS |
SYPRIS SOLUTIONS, INC.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except for per share data)
| Three Months Ended |
Six Months Ended |
|||||||||||||
| June 29, 2003 |
June 30, 2002 |
June 29, 2003 |
June 30, 2002 |
|||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||
| Net revenue: |
||||||||||||||
| Outsourced services |
$ | 58,852 | $ | 61,082 | $ | 109,067 | $ | 113,743 | ||||||
| Products |
11,769 | 12,427 | 20,469 | 22,299 | ||||||||||
| Total net revenue |
70,621 | 73,509 | 129,536 | 136,042 | ||||||||||
| Cost of sales: |
||||||||||||||
| Outsourced services |
50,585 | 52,556 | 93,962 | 97,369 | ||||||||||
| Products |
6,995 | 8,071 | 12,582 | 14,662 | ||||||||||
| Total cost of sales |
57,580 | 60,627 | 106,544 | 112,031 | ||||||||||
| Gross profit |
13,041 | 12,882 | 22,992 | 24,011 | ||||||||||
| Selling, general and administrative |
7,036 | 7,188 | 13,185 | 13,702 | ||||||||||
| Research and development |
1,066 | 932 | 2,088 | 1,763 | ||||||||||
| Amortization of intangible assets |
21 | 3 | 42 | 54 | ||||||||||
| Operating income |
4,918 | 4,759 | 7,677 | 8,492 | ||||||||||
| Interest expense, net |
547 | 660 | 1,033 | 1,742 | ||||||||||
| Other expense (income), net |
85 | (31 | ) | 152 | (60 | ) | ||||||||
| Income before income taxes |
4,286 | 4,130 | 6,492 | 6,810 | ||||||||||
| Income tax expense |
1,607 | 1,325 | 2,434 | 2,180 | ||||||||||
| Net income |
$ | 2,679 | $ | 2,805 | $ | 4,058 | $ | 4,630 | ||||||
| Earnings per common share: |
||||||||||||||
| Basic |
$ | 0.19 | $ | 0.20 | $ | 0.29 | $ | 0.38 | ||||||
| Diluted |
$ | 0.19 | $ | 0.19 | $ | 0.28 | $ | 0.36 | ||||||
| Dividends declared per common share |
$ | 0.03 | $ | — | $ | 0.06 | $ | — | ||||||
| Weighted average shares outstanding: |
||||||||||||||
| Basic |
14,213 | 13,971 | 14,205 | 12,081 | ||||||||||
| Diluted |
14,430 | 14,696 | 14,425 | 12,736 | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
2
SYPRIS SOLUTIONS, INC.
(in thousands, except for share data)
| June 29, 2003 |
December 31, 2002 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 12,319 | $ | 12,403 | ||||
| Accounts receivable, net |
42,405 | 37,951 | ||||||
| Inventory, net |
62,444 | 64,443 | ||||||
| Other current assets |
8,038 | 9,187 | ||||||
| Total current assets |
125,206 | 123,984 | ||||||
| Property, plant and equipment, net |
80,263 | 75,305 | ||||||
| Goodwill |
14,277 | 14,277 | ||||||
| Other assets |
10,186 | 10,039 | ||||||
| $ | 229,932 | $ | 223,605 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 21,525 | $ | 23,356 | ||||
| Accrued liabilities |
16,682 | 16,035 | ||||||
| Current portion of long-term debt |
7,000 | 7,000 | ||||||
| Total current liabilities |
45,207 | 46,391 | ||||||
| Long-term debt |
33,000 | 30,000 | ||||||
| Other liabilities |
10,809 | 10,179 | ||||||
| Total liabilities |
89,016 | 86,570 | ||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, par value $.01 per share, 981,600 shares authorized; no shares issued |
— | — | ||||||
| Series A preferred stock, par value $.01 per share, 18,400 shares authorized; no shares issued |
— | — | ||||||
| Common stock, non-voting, par value $.01 per share, 10,000,000 shares authorized; no shares issued |
— | — | ||||||
| Common stock, par value $.01 per share, 30,000,000 shares authorized; 14,215,844 and 14,158,077 shares issued and outstanding in 2003 and 2002, respectively |
142 | 142 | ||||||
| Additional paid-in capital |
82,957 | 82,575 | ||||||
| Retained earnings |
60,224 | 57,017 | ||||||
| Accumulated other comprehensive income (loss) |
(2,407 | ) | (2,699 | ) | ||||
| Total stockholders’ equity |
140,916 | 137,035 | ||||||
| $ | 229,932 | $ | 223,605 | |||||
The accompanying notes are an integral part of the consolidated financial statements.
3
SYPRIS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Six Months Ended |
||||||||
| June 29, 2003 |
June 30, 2002 |
|||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 4,058 | $ | 4,630 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
6,186 | 5,423 | ||||||
| Other noncash charges |
393 | 558 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(4,589 | ) | (4,212 | ) | ||||
| Inventory |
1,911 | 1,020 | ||||||
| Other current assets |
1,291 | 1,753 | ||||||
| Accounts payable |
(1,764 | ) | 903 | |||||
| Accrued liabilities |
1,259 | (1,673 | ) | |||||
| Net cash provided by operating activities |
8,745 | 8,402 | ||||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
(10,687 | ) | (14,478 | ) | ||||
| Purchase of the net assets of acquired entity |
(800 | ) | — | |||||
| Proceeds from sale of assets |
2 | 72 | ||||||
| Changes in nonoperating assets and liabilities |
295 | (323 | ) | |||||
| Net cash used in investing activities |
(11,190 | ) | (14,729 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net increase (decrease) in debt under revolving credit agreements |
3,000 | (47,500 | ) | |||||
| Cash dividends paid |
(850 | ) | — | |||||
| Proceeds from issuance of common stock |
211 | 56,233 | ||||||
| Net cash provided by financing activities |
2,361 | 8,733 | ||||||
| Net (decrease) increase in cash and cash equivalents |
(84 | ) | 2,406 | |||||
| Cash and cash equivalents at beginning of period |
12,403 | 13,232 | ||||||
| Cash and cash equivalents at end of period |
$ | 12,319 | $ | 15,638 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
4
SYPRIS SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| (1) | Nature of Business |
Sypris is a diversified provider of outsourced services and specialty products. The Company performs a wide range of manufacturing, engineering, design, testing, and other technical services, typically under multi-year, sole-source contracts with corporations and government agencies in the markets for aerospace and defense electronics, truck components and assemblies, and for users of test and measurement equipment.
| (2) | Basis of Presentation |
The accompanying unaudited consolidated financial statements include the accounts of Sypris Solutions, Inc. and its wholly-owned subsidiaries (collectively, “Sypris” or the “Company”), Sypris Electronics, LLC, Sypris Test & Measurement, Inc., Sypris Data Systems, Inc., and Sypris Technologies, Inc., and have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission. All significant intercompany transactions and accounts have been eliminated. These unaudited consolidated financial statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to fairly state the res