Sypris Solutions, Inc. (NASDAQ: SYPR) Has Plans For Its $37.5 Million Windfall


Sypris Solutions, Inc. (NASDAQ: SYPR) has reached a decision to monetize its cybersecurity solutions (CSS) business, which has been a part of Sypris Electronics division. The CSS business is being sold to Analog Devices, Inc. (NASDAQ:ADI) for $42 million in cash.

However, because of expenses related to the transaction, net proceeds are expected to be $37.5 million. It is worth pointing out that know-how and intellectual property are included in the sale of the CSS business.

Long-supply deal

Though Sypris Solutions, Inc. (NASDAQ: SYPR) is eliminating its CSS operation, the company has negotiated a long-term supply deal with Analog. As such, Sypris expects to continue making money in CSS market because it will be supplying Analog with circuit cards that will be used on certain CSS products.

Putting the money to use

Sypris has already drawn a budget for the $37.5 million in net proceeds from the sale of the CSS operation. The company has prioritized debt repayment as it works to strengthen its balance sheet.

Keep in mind that Sypris has been active in paying down its debt. The company finished the latest quarter (2Q2016) with net debt of $17.7 million, down from $23.7 million in the same period last year.

After repaying debt, Sypris Solutions, Inc. (NASDAQ: SYPR) intends to funnel the balance of the asset monetization proceeds to investments that will drive future growth. However, the management didn’t elaborate on the specific areas where it will target for the investment.

What changes for SYPR?

Other than the cash windfall, Sypris did not say what kind of financial impact it expects after selling the CSS business. But the removal of the operation is likely to lower the company’s cost burden considering that it will be moving some 67 employees to Analog.

What transpired in 2Q for Sypris Solutions, Inc. (NASDAQ: SYPR)?

Sypris Solutions, Inc. (NASDAQ: SYPR) posted EPS loss of $0.26 in 2Q2016, which was in-line with the consensus estimate. However, revenue of $23.5 million for the quarter fell by 42.3% YoY and missed the consensus expectation of $27.1 million.


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