Slide 1: Fourth Quarter and Full-Year 2008 Earnings Conference Call
Fourth Quarter and Full-Year 2008 Earnings Conference Call March 31, 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 • Q4/Full Year 2008 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 • Continued growth in Electronics Group helped to offset the effects • Key items of note: – Responded aggressively to right size workforce – Aerospace & De
Slide 5: Overview
Overview • Key items of note: – Important progress made on execution of strategic initiatives • Relocation of production initiated from two plants • $45 million of charges incurred – Asset impairments, contract termination, severance, environmental, etc. – $1.9 million of cash required in Q4 • $25 m
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 Annual Completion Savings Status Date Facilities Closings $ 12.5 Underway Q2; Q4 Operational Efficiencies 7.5 Underway Q3 Product Costing 3.0 Achieved Q1 Quality 2.0 Underway Q4 Total Savings $ 25.0 $25 $25 Million Million of of Annual Annual Cost Cost Savings Savings 7
Slide 8: Implementation Budget
Implementation Budget • 2008 - 2010 Budget Outlook – $6.0 million of capital investment • PP&E, etc. On Plan – $16.0 million of cash expense • Severance and transfers Positive • Equipment relocations Positive • Environmental Positive – Non-cash charges under review • Property, plant & equipment 95%
Slide 9: 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 10: Industrial Group
Industrial Group • 2009 Market Conditions – Remain extremely challenging – Economy and credit crisis impacting demand for commercial vehicles and trailers – Truck and trailer production forecasts and volatility show weakness ACT Production Forecast 2009 Q4 Q1 Change Q2 Change Q3 Change Q4 Change Cla
Slide 11: Industrial Group
Industrial Group • Plans in place to manage difficult 2009 – Complete closure of two plants – 40% of rooftops – Manage material deliveries to insure inventory alignment – Reduce workdays, combine with periodic shutdowns to retain workforce – Drive continuous improvement to increase efficiencies – Cl
Slide 12: Electronics Group
Electronics Group • Market Conditions – Remain positive – Expect opportunities to increase across the board • Items of Note: – The Electronics Group represented 41% of revenue in 2008, compared to 36% and 27% for 2007 and 2006, respectively – Aerospace & Defense • 8% increase in engineering services
Slide 13: Electronics Group
Electronics Group • Items of Note: – Aerospace & Defense • Expect 2009 growth for several key programs – Apache helicopter – F-16 Fighting Falcon – Cobra Judy ship-based radar missile detection suite – Viper multi-band infrared missile defense laser – Bradley Fighting Vehicle turret management contr
Slide 14: Electronics Group
Electronics Group • Items of Note: – Test & Measurement • Year-over-year increase in sales for all business lines • Extended calibration services contract with FAA into 2013 – Over 400 airports in US, Caribbean and Guam • Expanded calibration operations into Guadalajara, Mexico • New contract awards
Slide 15: Financial Review – Q4 2008 Results
Financial Review – Q4 2008 Results Q4 Ended December 31, ($ in thousands) 2008 2007 Revenue $ 94,549 $ 103,709 Gross Profit 1,711 9,616 SG&A 9,965 10,777 R&D 1,175 820 Amortization 42 70 Operating Loss (9,471) (2,051) (Before Special Charges/Non-Cash Impairments) Impairment Of Marketable Securities
Slide 16: Financial Review – Full Year 2008 Results
Financial Review – Full Year 2008 Results Years Ended December 31, ($ in thousands) 2008 2007 Revenue $ 411,318 $ 435,915 Gross Profit 32,169 39,796 SG&A 41,450 40,517 R&D 4,197 2,821 Amortization 213 527 Operating Loss (13,691) (4,069) (Before Special Charges/Non-Cash Impairments) Impairment Of Mar
Slide 17: Financial Review – 2008 Charges
Financial Review – 2008 Charges ($M) Nonrecurring Charges: Non-cash impairments and other special charges – Deferred contract costs – Asset/Inventory related impairments $45.1 $41.9 Severance and benefit related costs Contract termination costs Asset retirement obligations Non-cash Marketabl
Slide 18: Financial Review – Lean/Productivity
Financial Review – Lean/Productivity ($ in millions) 12/31/07 12/31/08 % Change Key Initiatives Accounts Receivable $ 59.1 $ 44.7 (24%) • Net Working Capital Inventory $ 71.8 $ 48.4 (33%) • Lean/Six Sigma Accounts Payable ($54.1) ($44.6) (18%) • SIG and A&D Segment Restructurings Total Headcount 2,1
Slide 19: Summary
Summary • Important achievements made in 2008 despite very difficult climate • Electronics business is poised for continued expansion, while plans are in place to address the volatility of the truck and trailer markets – Additional changes will be made as and when required • Strategic restructuring
Slide 20: Q&A Session
Earnings Conference Call Q&A Session 20