Slide 1: First Quarter 2009 Earnings Conference Call
First Quarter 2009 Earnings Conference Call May 14, 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 • Q1 2009 Financial Review • Summary • Q&A Session 3
Slide 4: Overview
Overview • Very challenging period, especially for our Industrial Group • Rapid contraction of the economy impacted truck and automotive sectors – Industrial revenue declined 46% year over year and 21% sequentially • Inventory reduced by 26% sequentially • Headcount reduced by 19% - December to Apri
Slide 5: 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 6: Status
Status Original New Annual Completion Target Target Savings Status Date Date Facilities Closings $ 12.5 75% Q2; Q4 Q1; Q2 Operational Efficiencies 7.5 50% Q3 Q3 Product Costing 3.0 100% Q1 Q1 Quality 2.0 33% Q4 Q4 $ 25.0 $25 $25 Million Million of of Annual Annual Cost Cost Savings Savings 6
Slide 7: Expected Results
Expected Results • Elimination of three facilities with a total of 830,000 square feet – Industrial Group • 40% reduction in facilities and overhead • 20% reduction in the average cost of direct labor • Net headcount reductions of close to 200 people, or 12.5% of domestic workforce • No expected los
Slide 8: Industrial Group
Industrial Group • 2009 Market Conditions – Remain extremely challenging – Signs of cyclical trough – inventory balancing and risk aversion to restrain build 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 Class 8 build per day (1) 845 785 528 438 483 593 Sequential change -6.3% -7.1% -32.7% -17.0% 10.3% 22.8% Class
Slide 9: Industrial Group
Industrial Group • Plans in place to manage difficult 2009 – Complete closure of two plants – 40% of rooftops • Kenton facility closed • Marion facility closure targeted to be completed by June 30 – Inventory reduced 26% in Q1 from year-end balances – Workforce reduced by 19% through April from 12/3
Slide 10: Electronics Group
Electronics Group • 2009 Market Conditions – Remain positive – Expect opportunities to increase across the board • Items of Note: – The Electronics Group represented 54% of consolidated revenue in 1Q09, compared to 34% for 1Q08 – Aerospace & Defense • Revenue increased 29% • Awarded additional follo
Slide 11: Electronics Group
Electronics Group • Items of Note: – Test & Measurement • Revenue increased 7% during the quarter – Ninth consecutive quarter of comparable period growth • Gross margin expanded to 27% in 1Q09 from 24% in 4Q08 – Further expansion forecast for 2009 • Quoting activity increasing substantially – Trend
Slide 12: Financial Review – Q1 Results
Financial Review – Q1 Results 1st Quarter Highlights ($ in thousands) 2009 2008 Revenue 81,691 106,262 Lower SIG revenues Gross Profit 4,355 13,066 Driven by SIG revenue decline SG&A 10,472 10,492 Legal and professional fees R&D 1,168 995 A&D program investments Amortization 28 71 Operating (Loss) I
Slide 13: Financial Review – EBITDAR
Financial Review – EBITDAR ($M) Despite ~ 14% revenue decline from Q4, operating losses were substantially Q4 Q1 % reduced by completed restructuring 2008 2009 Change actions Consolidated Revenue $94.5 $81.6 (14%) Acceleration of the Marion plant closure from Q4 to Q2 will drive additional savin
Slide 14: Financial Review – Restructuring Budget
Financial Review – Restructuring Budget Implementation Budget To Date Current Remaining 2008 - 2010 Budget Estimate Outlook 2009 Capital Investments $ 6.0 $ 1.0 $ 4.3 $ 2.1 - PP&E Cash Expense $ 16.0 $ 10.5 $ 13.8 $ 3.3 - Severance and Transfers - Equipment Relocations - Environmental Non-Cash Charg
Slide 15: Financial Review – Q1 Liquidity
Financial Review – Q1 Liquidity • Credit facility amended 3/31 and extended its maturity to 1/15/2010 in a tough, unprecedented credit environment • Net cash used in operating activities totaled $7.9M; Cash usage consistent with what we had forecast for the quarter – Partially driven by Q4 customer
Slide 16: Financial Review – Lean/Productivity
Financial Review – Lean/Productivity ($ in millions) Q1 2009 Q4 2008 % Change Key Initiatives Accounts Receivable $ 46.1 $ 44.7 3% • Net Working Capital Inventory $ 41.7 $ 48.4 (14%) • LEAN/Six Sigma Accounts Payable ($39.4) ($44.6) (12%) • SIG and A&D Segment Restructurings Total Headcount 1,676 1,
Slide 17: Summary
Summary • Important achievements completed during Q1 throughout Sypris, despite the continuance of a very tough environment, particularly for our Industrial Group • Strategic restructuring initiatives are ahead of plan in terms of execution and cost – Expect to be completed this year with 75%, perha
Slide 18: Q&A Session
Earnings Conference Call Q&A Session 18