Slide 1: Second Quarter 2009 Earnings Conference Call
Second Quarter 2009 Earnings Conference Call August 18, 2009 Jeffrey T. Gill President and CEO Brian A. Lutes Vice President & CFO Anthony C. Allen Vice President & Treasurer
Slide 2: Safe Harbor Disclaimer
Safe Harbor Disclaimer Non-GAAP Financial Measures Any non-GAAP measures, and their related reconciliation to GAAP measures, are provided and available on the company’s website: www.sypris.com Each “forward-looking statement” herein is subject to serious risks and should not be relied upon, as detai
Slide 3: Table of Contents
Table of Contents • Overview • Initiatives Update • Segment Review • Q2 2009 Financial Review • Summary • Q&A Session 3
Slide 4: Overview
Overview • Key Highlights for Q2 – Consolidated results improved on a sequential basis • Revenue increased slightly to $82 million • Gross profit increased 75% • Gross margin increased to 9.3% from 5.3% • Working capital turns increased to 13.2 times • Free cash flow, before restructuring expense, e
Slide 5: Overview
Overview • Key Highlights for Q2 – Aerospace & Defense • Revenue increased 20% from 2Q08 • Gross profit increased 158% • Gross margin increased to 18.7% versus 8.7% for 2Q08 – Test & Measurement results softened, but full year operating income expected to continue record of year over year growth – I
Slide 6: Initiatives Update
Initiatives Update • Objectives – Eliminate unnecessary waste – Reduce fixed overhead – Accelerate, where possible, integration efficiencies – Eliminate roadblocks to consolidation savings • Key Components – Facilities Rationalization – Operational Efficiencies – Product Costing – Quality • Expected
Slide 7: Status
Status Original Plan Annual Completion Target Target Savings Status Date Date Facilities Closings $ 12.5 90% Q2; Q4 Q1; Q3 Operational Efficiencies 7.5 75% Q3 Q3 Product Costing 3.0 100% Q1 Q1 Quality 2.0 100% Q4 Q2 $ 25.0 Savings Savings Expected Expected to to be be Lasting Lasting and and Signifi
Slide 8: Expected Results
Expected Results • Elimination of three facilities with a total of 830,000 square feet – Industrial Group • 40% reduction in facilities and overhead • 20% reduction in the average cost of direct labor • Net headcount reductions of close to 200 people, or 12.5% of domestic workforce • No expected los
Slide 9: Industrial Group
Industrial Group • Market Conditions – 2009 remains extremely challenging – Outlook is for progressive improvement in 2010 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Class 5-7 24,050 20,496 22,341 22,650 20,904 24,771 28,168 30,676 Class 8 28,488 24,845 27,398 30,898 33,701 31,300 39,001 48,551 Total 52,538
Slide 10: Industrial Group
Industrial Group • Plans in place to manage difficult 2009 – Complete closure of two plants – 40% of rooftops • Kenton facility closed • Marion facility targeted for closure in September – Inventory reduced 15% sequentially and 37% from year-end – Inventory turns increasing despite lower volumes and
Slide 11: Electronics Group
Electronics Group • 2009 Market Conditions – Remain positive; manage challenges related to program timing – Working opportunities across the board • Items of Note: – The Electronics Group represented 55% of consolidated revenue in 2Q09, compared to 37% for 2Q08 – Aerospace & Defense • Quoting activi
Slide 12: Electronics Group
Electronics Group • Items of Note: – Aerospace & Defense • Continuous improvement activities continue to drive productivity improvements – annualized revenue per employee reached $350,000 in Q2, up 58% from the prior year period • Important progress made in the development of the new key load device
Slide 13: Electronics Group
Electronics Group • Items of Note: – Test & Measurement • Revenue softened during the quarter for the first time in several years – Driven in part by reduction in component testing services for commercial avionics; automotive summer shutdowns • Expect the pull back to be temporary – New contracts aw
Slide 14: Financial Review – Q2 Results
Financial Review – Q2 Results 2nd Quarter Highlights ($ in thousands) 2008 2009 Revenue 110,350 82,096 Lower SIG revenues Gross Profit 11,454 7,615 Driven by SIG revenue decline EBIT (1) (48) (4,155) SIG restructuring ($1,461); Nonrecurring Expenses 1,732 A&D restructuring ($271) Depreciation 6,233
Slide 15: Financial Review – Q2 Results - Sequential
Financial Review – Q2 Results - Sequential Sequential Highlights ($ in thousands) 1Q09 2Q09 Revenue 81,691 82,096 Higher SEG; SIG stable Gross Profit 4,355 7,615 Significant cost reduction impact EBIT (1) (9,601) (4,155) Nonrecurring Expenses 1,981 1,732 Depreciation 4,873 4,771 Amortization 28 28 (
Slide 16: Financial Review – EBITDAR
(1) Financial Review – EBITDAR ($M) Despite ~ 13% revenue decline from Q4, Q4 Q1 Q2 operating losses were substantially 2008 2009 2009 reduced by completed restructuring actions Revenue $94.5 $81.7 $82.1 Acceleration of the Marion plant closure from Q4 to Q3 will drive additional savings during
Slide 17: Financial Review
Financial Review Q1 – Q2 ($ in millions) Q4 2008 Q1 2009 Q2 2009 % Change Accounts Receivable $ 44.7 $ 46.1 $ 45.4 (2%) Inventory $ 48.4 $ 41.7 $ 35.8 (14%) Accounts Payable ($44.6) ($39.4) ($40.0) 1% Strong cash management everywhere; maintaining strong balance between A/R and A/P on stable reven
Slide 18: Q2 Summary
Q2 Summary • Sequential results reflect a 75% increase in gross profit on stable revenue, despite the continuance of a very tough environment, particularly within our Industrial Group • Strategic restructuring initiatives are ahead of plan in terms of execution and cost: – Expect to be completed thi
Slide 19: Q&A Session
Earnings Conference Call Q&A Session 19