UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q/A
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
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Securities Exchange Act of 1934. For the quarterly period ended
March 31, 2002.
or
Transition report pursuant to Section 13 or 15(d) of the
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Securities Exchange Act of 1934. For the transition period from
to .
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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 (I.R.S. Employer
Incorporation or Organization) 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____.
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As of April 24, 2002 the registrant had 14,060,126 shares of common stock
outstanding.
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Income Statements for the Three Months Ended March 31, 2002 and
April 1, 2001 ....................................................................... 2
Consolidated Balance Sheets at March 31, 2002 and December 31, 2001 ................... 3
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002
and April 1, 2001 ................................................................... 4
Notes to Consolidated Financial Statements ............................................ 5
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ...................................................... 9
SIGNATURES .................................................................................................. 10
CERTIFICATIONS .............................................................................................. 11
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
-----------------------------
March 31, April 1,
2002 2001
----------- -------------
(Unaudited)
Net revenue:
Outsourced services ......................... $ 52,661 $ 46,018
Products .................................... 9,872 12,017
----------- -----------
Total net revenue ........................ 62,533 58,035
Cost of sales:
Outsourced services ......................... 44,813 39,991
Products .................................... 6,591 7,880
----------- -----------
Total cost of sales ....................... 51,404 47,871
----------- -----------
Gross profit .............................. 11,129 10,164
Selling, general and administrative ............ 6,514 6,575
Research and development ....................... 831 677
Amortization of intangible assets .............. 51 335
----------- -----------
Operating income .......................... 3,733 2,577
Interest expense, net .......................... 1,082 1,129
Other income, net .............................. (29) (152)
----------- -----------
Income before income taxes ................ 2,680 1,600
Income tax expense ............................. 855 581
----------- -----------
Net income ................................ $ 1,825 $ 1,019
=========== ===========
Earnings per share:
Basic ..................................... $ 0.18 $ 0.10
Diluted ................................... $ 0.17 $ 0.10
Weighted average shares outstanding:
Basic ..................................... 10,169 9,723
Diluted ................................... 10,742 9,900
The accompanying notes are an integral part of the consolidated
financial statements.
2
Sypris Solutions, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)
March 31, December 31,
2002 2001
----------- -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents ........................................................ $ 27,247 $ 13,232
Accounts receivable, net ......................................................... 42,930 39,758
Inventory, net ................................................................... 63,012 60,574
Other current assets ............................................................. 8,465 7,991
----------- -----------
Total current assets ........................................................... 141,654 121,555
Property, plant and equipment, net .................................................. 73,457 70,452
Intangible assets, net .............................................................. 15,875 15,926
Other assets ........................................................................ 4,018 3,511
----------- -----------
$ 235,004 $ 211,444
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ................................................................. $ 26,188 $ 26,828
Accrued liabilities .............................................................. 18,137 19,902
Current portion of long-term debt ................................................ -- 7,500
----------- -----------
Total current liabilities ...................................................... 44,325 54,230
Long-term debt ...................................................................... 62,500 80,000
Other liabilities ................................................................... 6,824 7,094
----------- -----------
Total liabilities .............................................................. 113,649 141,324
Stockholders' equity:
Preferred stock, par value $.01 per share, 989,000 shares authorized;
no shares issued ............................................................... -- --
Series A preferred stock, par value $.01 per share, 11,000 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, 20,000,000 shares authorized;
13,547,853 and 9,898,675 shares issued and outstanding in 2002 and 2001,
respectively ................................................................... 135 99
Additional paid-in capital ....................................................... 74,697 25,490
Retained earnings ................................................................ 48,252 46,427
Accumulated other comprehensive income (loss) .................................... (1,729) (1,896)
----------- -----------
Total stockholders' equity ..................................................... 121,355 70,120
----------- -----------
$ 235,004 $ 211,444
=========== ===========
The accompanying notes are an integral part of the
consolidated financial statements.
3
SYPRIS SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
---------------------------
March 31, April 1,
2002 2001
----------- -----------
(Unaudited)
Cash flows from operating activities:
Net income ....................................................................... $ 1,825 $ 1,019
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization ................................................. 2,680 2,328
Other noncash charges ......................................................... 257 150
Changes in operating assets and liabilities:
Accounts receivable ......................................................... (3,290) (259)
Inventory ................................................................... (2,470) (4,108)
Other assets ................................................................ (483) 2,330
Accounts payable ............................................................ 1,002 5,135
Accrued liabilities ......................................................... (1,635) 98
----------- -----------
Net cash (used in) provided by operating activities ........................ (2,114) 6,693
Cash flows from investing activities:
Capital expenditures ............................................................. (7,602) (8,114)
Proceeds from sale of assets ..................................................... - 66
Changes in nonoperating assets and liabilities ................................... (433) (254)
----------- -----------
Net cash used in investing activities ...................................... (8,035) (8,302)
Cash flows from financing activities:
Net (decrease) increase in debt under revolving credit agreements ................ (25,000) 625
Proceeds from issuance of common stock ........................................... 49,164 139
----------- -----------
Net cash provided by financing activities .................................. 24,164 764
----------- -----------
Net increase (decrease) in cash and cash equivalents ................................ 14,015 (845)
Cash and cash equivalents at beginning of period .................................... 13,232 14,674
----------- -----------
Cash and cash equivalents at end of period .......................................... $ 27,247 $ 13,829
=========== ===========
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 major companies and government agencies in the
markets for aerospace & defense electronics, truck components & assemblies, and
for users of test & 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 (the "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 results of operations, financial
position and cash flows for the periods presented, and the disclosures herein
are adequate to make the information presented not misleading. Preparing
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue and expenses. Actual
results for the three months ended March 31, 2002 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2002. These
unaudited consolidated financial statements should be read in conjunction with
the consolidated financial statements, and notes thereto, for the year ended
December 31, 2001 as presented in the Company's annual report on Form 10-K.
(3) Earnings Per Share
There were no adjustments required to be made to net income for
purposes of computing basic and diluted earnings per share. A reconciliation of
the weighted average shares outstanding used in the calculation of basic and
diluted earnings per share is as follows (in thousands):
Three Months Ended
---------------------------
March 31, April 1,
2002 2001
----------- -----------
(Unaudited)
Shares used to compute basic earnings per share ................... 10,169 9,723
Dilutive effect of stock options .................................. 573 177
----------- -----------
Shares used to compute diluted earnings per share ................. 10,742 9,900
=========== ===========
5
(4) Inventory
Inventory consists of the following (in thousands):
March 31, December 31,
2002 2001
----------- -----------
(Unaudited)
Raw materials .............................................................. $ 16,036 $ 19,003
Work in process ............................................................ 14,306 9,661
Finished goods ............................................................. 3,645 5,450
Costs relating to long-term contracts and programs, net of
amounts attributed to revenue recognized to date ......................... 38,234 37,908
Progress payments related to long-term contracts and programs .............. (3,902) (6,540)
LIFO reserve ............................................................... (1,126) (987)
Reserve for excess and obsolete inventory .................................. (4,181) (3,921)
----------- -----------
$ 63,012 $ 60,574
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(5) Segment Data
The Company's operations are conducted in two reportable business
segments: the Electronics Group and the Industrial Group. There was no
intersegment net revenue recognized in either of the periods presented. The
following table presents financial information for the reportable segments of
the Company for the three months ended March 31, 2002 and April 1, 2001 (in
thousands):
Three Months Ended
---------------------------
March 31, April 1,
2002 2001
----------- -----------
(Unaudited)
Net revenue from unaffiliated customers:
Electronics Group ......................................................... $ 44,076 $ 50,081
Industrial Group .......................................................... 18,457 7,954
----------- -----------
$ 62,533 $ 58,035
=========== ===========
Gross profit:
Electronics Group ......................................................... $ 8,688 $ 9,300
Industrial Group .......................................................... 2,441 864
----------- -----------
$ 11,129 $ 10,164
=========== ===========
Operating income:
Electronics Group ......................................................... $ 3,150 $ 3,233
Industrial Group .......................................................... 1,458 398
General, corporate and other .............................................. (875) (1,054)
----------- -----------
$ 3,733 $ 2,577
=========== ===========
(6) Commitments and Contingencies
The Company's Sypris Technologies subsidiary is a co-defendant in two
lawsuits arising out of an explosion at a coker plant owned by Exxon Mobil
Corporation located in Baton Rouge, Louisiana. In each of these lawsuits, it is
alleged that a carbon steel pipe elbow that Sypris Technologies manufactured was
improperly installed and the failure of which caused the explosion. One of the
actions was brought by Exxon Mobil in 1994 in state district court in Louisiana
and claims damages for destruction of the plant, which Exxon Mobil estimates
exceed one hundred million dollars. Sypris Technologies is a co-defendant in
this action with the fabricator who built the pipeline into which the elbow was
incorporated and with the general contractor for the plant. The second action is
a class action suit also filed in 1994 in federal
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court in Louisiana on behalf of the residents living around the plant and claims
unspecified damages. Sypris Technologies is a co-defendant in this action with
Exxon Mobil, the contractor and the fabricator. In both actions, the Company
maintains that the carbon steel pipe elbow at issue was appropriately marked as
carbon steel and was improperly installed, without Sypris Technologies'
knowledge, by the fabricator and general contractor in circumstances that
required the use of a chromium steel elbow. Although the Company believes these
defenses to be meritorious, there can be no assurance that the Company will not
be found liable for some or all of the alleged damages. If the Company was to be
found liable and the damages exceeded available insurance coverage, the impact
could materially and adversely affect the Company's financial condition and
results of operations.
The Company is involved in certain litigation and contract issues
arising in the normal course of business. While the outcome of these matters
cannot, at this time, be predicted in light of the uncertainties inherent
therein, management does not expect that these matters will have a material
adverse effect on the consolidated financial position or results of operations
of the Company.
(7) Adoption of Recently Issued Accounting Standard
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets."
Under SFAS No. 142, goodwill and indefinite lived intangible assets are no
longer amortized but will be reviewed at least annually for impairment.
Separable intangible assets that are not deemed to have an indefinite life will
continue to be amortized over their useful lives. The Company completed the
first of the required impairment tests of goodwill and indefinite lived
intangible assets during the three months ended March 31, 2002 and no adjustment
to the carrying value of goodwill was required.
The nonamortization of goodwill has increased the Company's net income
and earnings per share. Following are pro forma results assuming goodwill had
not been amortized prior to January 1, 2002 (in thousands, except for per share
data):
Three Months Ended
---------------------------
March 31, April 1,
2002 2001
----------- -----------
(Unaudited)
Reported net income ....................................................... $ 1,825 $ 1,019
Adjustment for amortization of goodwill ................................... - 183
----------- -----------
Adjusted net income ....................................................... $ 1,825 $ 1,202
=========== ===========
Basic earnings per share as reported ...................................... $ 0.18 $ 0.10
Adjustment for amortization of goodwill ................................... - 0.02
----------- -----------
Adjusted basic earnings per share ......................................... $ 0.18 $ 0.12
=========== ===========
Diluted earnings per share as reported .................................... $ 0.17 $ 0.10
Adjustment for amortization of goodwill ................................... - 0.02
----------- -----------
Adjusted diluted earnings per share ....................................... $ 0.17 $ 0.12
=========== ===========
There has been no change to the carrying value of the Company's
goodwill since January 1, 2002. Goodwill at March 31, 2002 for the Electronics
Group and the Industrial Group was $13,818,000 and $440,000, respectively. The
Company's intangible assets subject to amortization and the related amortization
expense are not material to the Company's consolidated financial position or
results of operations, respectively.
7
(8) Issuance of Common Stock
On March 26, 2002, the Company completed a public stock offering of
3,600,000 shares of its common stock at $14.50 per share and generated proceeds,
after underwriting discounts and estimated expenses, of approximately
$48,844,000. On April 19, 2002, an over-allotment option was exercised for
500,000 shares at $14.50 per share and generated proceeds, after underwriting
discounts and estimated expenses, of approximately $6,785,000. The proceeds of
the offering were used to repay debt of $30,000,000 during March 2002 and
$22,500,000 during April 2002.
(9) Income Taxes
The Company's effective tax rate for the three months ended March 31,
2002 was 31.9%. Reconciling items between the federal statutory income tax rate
and the effective tax rate include management's estimate for 2002 of research
and development tax credits, state income tax benefits and certain other
permanent differences.
(10) Accumulated Other Comprehensive Income
The aggregate fair market value of all interest rate swap agreements
decreased from $728,000 at December 31, 2001 to $461,000 at March 31, 2002 and
was included in other liabilities on the consolidated balance sheet. The change
in fair market value, net of tax of $100,000, was recorded as other
comprehensive income during the three months ended March 31, 2002.
8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Note Description
3.2 (1) Bylaws of the Company.
10.20 (1) Underwriting Agreement dated March 20, 2002 among Sypris
Solutions, Inc., Needham & Company, Inc. and A.G. Edwards &
Sons, Inc.
10.21 (1) Sypris Solutions, Inc. Executive Bonus Plan, effective as
of January 2, 2002, executed on or after April 1, 2002.
99.1 Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
______________
(1) Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended March 31, 2002 filed on April 29, 2002.
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the three months ended
March 31, 2002.
9
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 thereunto duly authorized.
SYPRIS SOLUTIONS, INC.
(Registrant)
Date: September 23, 2002 By: /s/ David D. Johnson
------------------------ --------------------------------------------
David D. Johnson
Vice President & Chief Financial Officer
Date: September 23, 2002 By: /s/ Anthony C. Allen
------------------------ --------------------------------------------
Anthony C. Allen
Vice President, Controller & Chief Accounting
Officer
10
CERTIFICATIONS
I, Jeffrey T. Gill, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Sypris
Solutions, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
Date: September 23, 2002 By: /s/ Jeffrey T. Gill
------------------------ --------------------------------------------
Jeffrey T. Gill
President & Chief Executive Officer
I, David D. Johnson, certify that:
1. I have reviewed this quarterly report on Form 10-Q/A of Sypris
Solutions, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
Date: September 23, 2002 By: /s/ David D. Johnson
------------------------ --------------------------------------------
David D. Johnson
Vice President & Chief Financial Officer
11