The company cited equipment downtime in its Industrial Group and shipment delays in its Electronics Group for U.S. Government programs. The latter delays are expected to continue through the balance of the year but will ultimately generate even more business than originally thought, Sypris said.
Electronics Group revenue was $33.8 million in the quarter, down 5.8% from the prior year. Gross profit was off 6.3% to $5.9 million. Net orders were $30.7 million and backlogs were $91.2 million. "Despite delays inherent in the certification process for two new classified programs, the outlook remains strong for our Aerospace and Defense segment in 2007," said CEO Jeff Gill.Gill gave a cautious forecast for the rest of the year. "Looking forward, we believe that it is prudent to establish a more conservative outlook for the remainder of 2006. Until we demonstrate that our Industrial Group can operate for sustained periods at capacity, our forecast for operating margins will remain at current levels. The delay in the certification of the classified programs in our Electronics Group is expected to shift as much as $20 million of shipments from 2006 into 2007, the result of which is forecast to impact revenue and earnings during the second half of 2006."
The company reiterated its previous July guidance of second half revenue of $275 million to $285 million and earnings of $0.10 to $0.15 per diluted share.
CTS maintaied prior full-year guidance of 6 to
8% sales growth.
For the quarter capital expenditures were $3.4 million, or 2% of sales, and free cash flow was $11.4 million. The full-year capital expenditures are expected to be $18 million to $20 million. Free cash flow was $20,000 in the first quarter, and $10.8 million in the second quarter last year.
The new Czech Republic facility of CTS began operations during the quarter. Production will be increased gradually throughout the year to meet business growth and better serve automotive OEMs in that region.
EMS sales were $94.2 million, up $2.4 million year-on-year and $11.3 million sequentially. Operating income from EMS operations were $2.5 million.The Fremont plant, which Solectron operates under the name FinePitch, is the seventh company site to gain the certification. The others are Charlotte,NC; Scotland; Quebec; Suzhou, China; and two in Singapore.