Slide 1: Second Quarter 2010 Earnings Conference Call
Second Quarter 2010 Earnings Conference Call August 17, 2010 Jeffrey T. Gill President and CEO Brian A. Lutes Vice President & CFO Anthon C. Anthony C Allen Vice President & Treasurer
Slide 2: Safe Harbor Disclosure
Safe Sa e Harbor a bo Disclosure sc osu e 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 re
Slide 3: Table of Contents
Table ab e o of Co Contents te ts • Overview • S Segment t Review R i • Q2 Financial Review • Summary • Q&A Session 3
Slide 4: Overview
O e e Overview • Key Highlights for Q2: – Gross profit increased to $4 $4.9 9 million million, or 7 7.8% 8% of revenue revenue, up from 6 6.4% 4% for the prior year on a 9.0% decrease in revenue. – Industrial gross profit increased by $3.9 million and EBITDA increased by $5.6 million on a $9.6 milli
Slide 5: Industrial: Market Conditions
Industrial dust a • Market Conditions – ACT Research, August 9, 2010: – Second half recovery still expected – with Trailers leading the way May 2010 Report 4Q09 Q1 Q2 Q3 Q4 2010 2010 Class 5 5-7 7 27 5 27.5 27.1 27 1 28.6 28 6 25.3 25 3 28.3 28 3 109.3 109 3 116 4 116.4 Change -1.5% 5.5% -11.5% 11.9
Slide 6: Industrial
Industrial dust a • For the quarter, inventory was reduced by 5% and drove continued improvement in inventoryy turns on a yyear-over-year y basis despite p a 26% increase in revenue. • Critical metrics for quality and delivery continue to achieve world class levels, with PPMs of 96 and on-time deliv
Slide 7: Aerospace & Defense
Aerospace & Defense • Last call, we discussed the delay of certain government program shipments during the q quarter and the resulting g impact p on revenue – The issue was related to the product’s performance with other instruments and systems under certain conditions and resulted in a $6.9 million
Slide 8: Aerospace & Defense
Aerospace p & Defense • Cyber Warfare activities continued: – Teamed with Honeywell on a major Information Assurance support services proposal. – Selected as part of the winning team to provide information assurance services for the Rapid Response-Third Generation (R2-3G) contract award. – S Submitt
Slide 9: Aerospace & Defense
Aerospace p & Defense • Market outlook remains positive: – Quoting activity continued to increase – spacecraft, spacecraft satellite satellite, other other. – Quality and delivery remain at world-class levels. – Qualified by ITT, Goodrich and Tyco for future work. – IIncreasing i recognition iti as
Slide 10: Q2 Financial Results – Consolidated
Q2 Financial Results – Consolidated Q ($ in thousands) Fav/ 2Q09 2Q10 (Unfav) Highlights Revenue 69,378 63,106 (6,272) SIG improvement offset by lower A&D revenue Gross Profit 4,443 4,931 488 Reduced fixed overhead; LEAN/CI; Mix Gross Margin 6.4% 7.8% 1.4% Margin expansion over PY expected longer te
Slide 11: Q2 Financial Results – Industrial
Q2 Financial Results – Industrial Q ($ in thousands) Fav/ 2Q09 2Q10 (Unfav) Highlights Revenue 36,941 46,571 9,630 Heavy truck, trailer volumes up over last year Gross Profit (1,630) 2,286 3,916 Volumes, productivity, lower fixed costs Gross Margin (4.4%) 4.9% 9.3% Lowered breakeven, efficiencies dr
Slide 12: Sequential Industrial Results
Sequential q Industrial Results ($ in thousands) 4Q09 1Q10 2Q10 Highlights Revenue 40,418 44,106 46,571 Stabilized; Expect 4-5 years of growth Gross Profit 567 2,453 2,286 Revenue leveraging lower fixed cost basis Gross Margin 1.4% 5.6% 4.9% Margin expansion with volume increase, lower fixed cost, o
Slide 13: Q2 Financial Results – Aerospace & Defense
Q2 Financial Results – Aerospace Q p & Defense ($ in thousands) Fav/ 2Q09 2Q10 (Unfav) Highlights Revenue 32,437 16,535 (15,902) Exit of low-margin legacy programs; Delay of government program shipments Gross Profit 6,073 2,645 (3,428) Delay of government program shipments Gross Margin 18.7% 16.0% (
Slide 14: Q2 Summary
Q2 Summary Q Su ay • Gross margins increased to 7.8% of revenue, up from 6.4% in the second quarter of last year, despite a 9.0% decrease in revenue: – Underscores the impact of the necessary restructuring and cost actions undertaken last year to make meaningful, lasting changes to our cost structur