sypr20211003

sypr20211003_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
For the quarterly period ended October 3, 2021

☐ 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	(I.R.S. Employer
of incorporation or organization)	Identification No.)

101 Bullitt Lane, Suite 450
Louisville, Kentucky 40222	(502) 329-2000
(Address of principal executive	(Registrant’s telephone number,
offices) (Zip code)	including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SYPR	Nasdaq

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐ Large accelerated filer	☐ Accelerated filer	☒ Non-accelerated filer	☒ Smaller reporting company
☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of November 5, 2021, the Registrant had 21,849,724 shares of common stock outstanding.

Table of Contents

Part I. Financial Information

	Item 1.	Financial Statements

		Consolidated Statements of Operations for the Three and Nine Months Ended October 3, 2021 and October 4, 2020	2

		Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended October 3, 2021 and October 4, 2020	3

		Consolidated Balance Sheets at October 3, 2021 and December 31, 2020	4

		Consolidated Cash Flow Statements for the Nine Months Ended October 3, 2021 and October 4, 2020	5

		Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended October 3, 2021 and October 4, 2020	6

		Notes to Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26

	Item 4.	Controls and Procedures	26

Part II. Other Information

	Item 1.	Legal Proceedings	27

	Item 1A.	Risk Factors	27

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

	Item 3.	Defaults Upon Senior Securities	27

	Item 4.	Mine Safety Disclosures	27

	Item 5.	Other Information	27

	Item 6.	Exhibits	28

Signatures			29

Part I. Financial Information

Item 1. Financial Statements

Sypris Solutions, Inc.

Consolidated Statements of Operations

(in thousands, except for per share data)

	Three Months Ended					Nine Months Ended
	October 3,		October 4,			October 3,			October 4,
	2021		2020			2021			2020
	(Unaudited)					(Unaudited)

Net revenue	$	25,683	$	22,154		$	71,634		$	61,732
Cost of sales		21,705		18,615			61,531			52,347
Gross profit		3,978		3,539			10,103			9,385
Selling, general and administrative		3,007		2,695			9,305			9,124
Operating income		971		844			798			261
Interest expense, net		211		216			644			636
Other expense (income), net		132		372			498			(114	)
Forgiveness of PPP loan and related interest		0		0			(3,599	)		0
Income (loss) before taxes		628		256			3,255			(261	)
Income tax expense (benefit), net		334		(3,239	)		768			(3,103	)
Net income	$	294	$	3,495		$	2,487		$	2,842
Income per share:
Basic	$	0.01	$	0.17		$	0.12		$	0.14
Diluted	$	0.01	$	0.17		$	0.11		$	0.14

Weighted average shares outstanding:
Basic		21,536		21,064			21,522			21,026
Diluted		22,940		21,080			22,994			21,026
Dividends declared per common share	$	0.00	$	0.00		$	0.00		$	0.00

The accompanying notes are an integral part of the consolidated financial statements.

Sypris Solutions, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

	Three Months Ended					Nine Months Ended
	October 3,			October 4,		October 3,			October 4,
	2021			2020		2021			2020
	(Unaudited)					(Unaudited)

Net income	$	294		$	3,495	$	2,487		$	2,842
Other comprehensive income (loss)
Foreign currency translation adjustments		(378	)		108		(429	)		(1,373	)
Comprehensive income (loss)	$	(84	)		3,603	$	2,058		$	1,469

The accompanying notes are an integral part of the consolidated financial statements.

Sypris Solutions, Inc.

Consolidated Balance Sheets

(in thousands, except for share data)

	October 3,			December 31,
	2021			2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	11,101		$	11,606
Accounts receivable, net		11,463			7,234
Inventory, net		27,438			16,236
Other current assets		5,780			4,360
Total current assets		55,782			39,436
Property, plant and equipment, net		11,239			10,161
Operating lease right-of-use assets		5,439			6,103
Other assets		4,169			5,008
Total assets	$	76,629		$	60,708
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	12,855		$	6,734
Accrued liabilities		16,215			13,409
Operating lease liabilities, current portion		1,037			965
Finance lease obligations, current portion		453			393
Equipment financing obligations, current portion		307			0
Note payable – PPP Loan, current portion		0			1,186
Note payable – related party, current portion		2,500			0
Total current liabilities		33,367			22,687
Operating lease liabilities, net of current portion		5,152			5,941
Finance lease obligations, net of current portion		1,712			1,927
Equipment financing obligations, net of current portion		760			0
Note payable – PPP Loan, net of current portion		0			2,372
Note payable – related party, net of current portion		3,983			6,477
Other liabilities		14,874			6,529
Total liabilities		59,848			45,933
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 975,150 shares authorized; no shares issued		0			0
Series A preferred stock, par value $0.01 per share, 24,850 shares authorized; no shares issued		0			0
Common stock, non-voting, par value $0.01 per share, 10,000,000 shares authorized; no shares issued		0			0
Common stock, par value $0.01 per share, 30,000,000 shares authorized; 21,743,567 shares issued and 21,743,548 outstanding in 2021 and 21,302,194 shares issued and 21,300,958 outstanding in 2020		217			213
Additional paid-in capital		154,969			155,025
Accumulated deficit		(113,278	)		(115,765	)
Accumulated other comprehensive loss		(25,127	)		(24,698	)
Treasury stock, 19 and 1,236 shares in 2021 and 2020, respectively		0			0
Total stockholders’ equity		16,781			14,775
Total liabilities and stockholders’ equity	$	76,629		$	60,708

The accompanying notes are an integral part of the consolidated financial statements.

Sypris Solutions, Inc.

Consolidated Cash Flow Statements

(in thousands)

	Nine Months Ended
	October 3,			October 4,
	2021			2020
	(Unaudited)
Cash flows from operating activities:
Net income	$	2,487		$	2,842
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,944			1,883
Forgiveness of PPP Loan and related interest		(3,599	)		0
Deferred income taxes		755			(3,257	)
Stock-based compensation expense		351			335
Deferred loan costs recognized		5			11
Net loss (gain) on the sale of assets		11			(813	)
Provision for excess and obsolete inventory		134			222
Non-cash lease expense		664			699
Other noncash items		93			72
Contributions to pension plans		(283	)		(34	)
Changes in operating assets and liabilities:
Accounts receivable		(4,256	)		(1,158	)
Inventory		(11,312	)		2,409
Prepaid expenses and other assets		(1,197	)		(983	)
Accounts payable		6,355			(1,036	)
Accrued and other liabilities		10,005			(1,114	)
Net cash provided by operating activities		2,157			78

Cash flows from investing activities:
Capital expenditures		(1,829	)		(1,151	)
Proceeds from sale of assets		10			1,969
Net cash (used in) provided by investing activities		(1,819	)		818

Cash flows from financing activities:
Principal payments on finance lease obligations		(359	)		(623	)
Principal payments on equipment financing obligations		(132	)		0
Proceeds from Paycheck Protection Program loan		0			3,558
Indirect repurchase of shares for minimum statutory tax withholdings		(405	)		(33	)
Net cash (used in) provided by financing activities		(896	)		2,902

Effect of exchange rate changes on cash balances		53			(599	)
Net (decrease) increase in cash and cash equivalents		(505	)		3,199
Cash and cash equivalents at beginning of period		11,606			5,095
Cash and cash equivalents at end of period	$	11,101		$	8,294

Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for finance lease obligations	$	168		$	0
Capital expenditures purchased through equipment financing obligations		1,237			0

The accompanying notes are an integral part of the consolidated financial statements.

Sypris Solutions, Inc.

Consolidated Statements of Stockholders’ equity

(in thousands)

	Three Months Ended October 3, 2021
											Accumulated
					*Additional*						*Other*
	*Common Stock*				*Paid-In*			*Accumulated*			*Comprehensive*			*Treasury*
	*Shares*		*Amount*		*Capital*			*Deficit*			*Loss*			*Stock*

July 4, 2021 balance		21,514,945	$	215	$	154,804		$	(113,572	)	$	(24,749	)	$	0
Net income		0		0		0			294			0			0
Issuance of restricted common stock		197,500		2		(2	)		0			0			0
Foreign currency translation adjustment		0		0		0			0			(378	)		0
Exercise of stock options		13,603		0		(21	)		0			0			0
Noncash compensation		17,500		0		188			0			0			0
Retire treasury stock		0		0		0			0			0			0
October 3, 2021 balance		21,743,548	$	217	$	154,969		$	(113,278	)	$	(25,127	)	$	0

	Three Months Ended October 4, 2020
												Accumulated
						*Additional*						*Other*
	*Common Stock*					*Paid-In*			*Accumulated*			*Comprehensive*			*Treasury*
	*Shares*			*Amount*		*Capital*			*Deficit*			*Loss*			*Stock*

July 5, 2020 balance		21,369,580		$	213	$	154,923		$	(118,086	)	$	(25,532	)	$	0
Net income		0			0		0			3,495			0			0
Foreign currency translation adjustment		0			0		0			0			108			0
Noncash compensation		10,000			0		107			0			0			0
Retire treasury stock		(62,828	)		0		(26	)		0			0			0
October 4, 2020 balance		21,316,752		$	213	$	155,004		$	(114,591	)	$	(25,424	)	$	0

Nine Months Ended October 3, 2021

Accumulated

Additional

Other

Common Stock

Paid-In

Accumulated

Comprehensive

Treasury

Shares

Amount

Capital

Deficit

Loss

Stock

SEC Form 10-Q filed by Sypris Solutions, Inc.