LOUISVILLE, KY -- Sypris Solutions today reported third-quarter net income fell 21% to $3 million despite record revenue. Net orders for the quarter reached a record $139.2 million, driven by an 83% increase in bookings for electronics.
For the quarter ended Sept. 30, sales rose 19% over last year to a record $140.8 million. Cash flow from operations reached a record $24.5 million during the period, resulting in free cash flow of $17.8 million as several major capital projects neared completion.

Year-to-date, sales are up 29% to a record $390.7 million, although net income is off 39% to $5.6 million.

Sypris performs a range of manufacturing and technical services for aerospace and defense electronics, truck components and assemblies, and test and measurement services.

In a press release, Jeffrey T. Gill, president and chief executive officer, said, "The outlook for our markets in general remains positive, though we believe the significant increase in energy costs and rising interest rates will have a dampening effect on both demand and margins."

Electronics group sales rose 16% to $46.3 million in the third quarter versus last  year and 29% sequentially. Gross profit increased 21% to $8.3 million due to improvements in data systems shipments and test and measurement margins. Backlogs remained firm at $121.0 million.

Industrial group sales increased 20% to $94.5 million in the third quarter from a year ago and 5.4% sequentially. Gross profit was $7.3 million, down 21.5% from 2004 and down 2.6% sequentially. Backlog increased 12% to $131.9 million compared to the prior year quarter. Aerospace and defense rose 19% to $33.9 million, and test and measurement rose 7% to $12.4 million versus last year.

"The increase in bookings for our Electronics Group represented a substantial improvement over recent quarters and while we believe the opportunity for growth in this important segment is improving, we will remain somewhat cautious in our outlook until such time as we see a more defined trend in contract awards," Gill said.

Sypris guided for fourth quarter revenue of $135 million to $140 million compared to $122 million for the prior year period. "The revenue outlook reflects an increased degree of conservatism regarding year-end shipments and the potential for customer shutdowns during the holidays, while the earnings outlook incorporates the impact of the reduced shipments, higher energy prices and rising interest rates."

Sypris forecast 2005 revenue in the range of $525 million to $530 million compared to $425 million for 2004.

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