Sypris Solutions
Annual Report 2006

Plain-text annual report

planning for the future 2322 06 one step at a time ® 2006 Annual Report Revenue (in millions) Revenue Per Employee (USA) (in thousands) Earnings Per Diluted Share 3 2 5 $ 8 9 4 $ 5 2 4 $ 3 7 2 $ 7 7 2 $ 6 0 2 $ 8 9 1 $ 0 9 1 $ 5 8 1 $ 7 7 1 $ 4 8 . 0 $ 6 5 . 0 $ 7 4 . 0 $ 9 2 . 0 $ ) 8 0 . 0 ( $ 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 Modified Working Capital(*) (in millions) Free Cash Flow(*) (in millions) Net Debt / Total Capital Percentage(*) 6 3 1 $ 0 0 1 $ 3 7 $ 3 7 $ 2 7 $ 2 4 $ 6 3 $ 5 $ ) 3 8 ( $ ) 6 ( $ % 3 3 % 3 2 % 4 2 % 5 1 % 1 1 02 03 04 05 06 02 03 04 05 06 02 03 04 05 06 * Reconciliation of non-GAAP financial measures is available in the financial summary on page 7. Sypris Solutions is a diversified provider of technology-based outsourced services and specialty products. We perform a wide range of manufacturing and technical services, typically under multi-year, sole-source contracts with corporations and government agencies in the markets for aerospace & defense electronics, truck components & assemblies, and test & measurement services. DEAR FELLOW SHARE OWNERS: The year 2006 certainly was a challenge, with both our Industrial and Electronics groups negatively impacted by a variety of issues. Cash flow generation reached record levels, however, while sales and profitability fell short of expectations. Despite the mixed headlines, 2006 provided many bright spots and improvements and we are optimistic about the future. Demand for our products and services remains strong. Individual business units, such as our Tube Turns division and our Calibration Services division, experienced considerable success, while our international operations were expanded at a rapid rate. We continued to invest in the future through the addition of new products, market segments and managerial talent. When confronted with specific issues, the organization moved aggressively to resolve the problems, learn from the experiences and improve operational execution, thereby benefiting our customers as well as the business. As we look forward, our Industrial Group will utilize the anticipated down market for commercial vehicle production in 2007 to reposition its operations for success throughout future business cycles. We expect our Aerospace & Defense segment to benefit from the much anticipated full production of two new classified programs. And finally, we are pleased to note that our Test & Measurement segment enters 2007 with a strong backlog that should position it for continued growth at a rate that is in excess of the industry average. FINANCIAL RESULTS Revenue for the year declined 5.0% to $498 million from $523 million in 2005. Planned shipments in our Electronics Group were impacted by a delay in the full production of two new classified programs, pushing past year end and resulting in an 18% revenue decline. Revenue from our Industrial Group increased 1.0% from the prior year and reflected the combination of a record demand for commercial vehicles and a large decline in SUV and light truck production in the face of higher fuel prices during 2006. The Company reported a net loss for the year of $1.4 million, or $0.08 per fully diluted share, driven by the volume decline in our Electronics Group and the significant operating inefficiencies experienced in our Industrial Group that were the result of operating in excess of capacity during most of the year. The Company also incurred significant expense increases in the areas of stock options and advisory fees as a result of the implementation of new accounting rules and the bankruptcy of a key customer, respectively. Cash flow generation — the ultimate measure of value — hit record levels during the year, with free cash flow up 17% to $42 million, demonstrating the results from our working capital initiatives. Our drive for asset efficiency resulted in a 27% working capital reduction, with turns increasing 33% to 6.9 times for the year. The generation of record free cash flow also benefited from the reduction of capital investment during 2006 from that of prior years as the investment cycle came to a conclusion. OUR INITIATIVES In last year’s report, we outlined a number of key initiatives to drive change throughout our business. And while we are pleased to inform you that much progress was made during the year, it is important to note that much work remains and the experience to date has only deepened our commitment and resolve. Please join us for a brief review of these efforts. Operational Excellence Driving excellence in everything we do has always been important at Sypris. Our Operational Excellence initiative continues that legacy by putting into action tools and techniques to improve key operating performance metrics, such as efficiency and material yield. The LEAN, Continuous Improvement, Six Sigma, and Total Productive Maintenance techniques we are deploying are focused on eliminating all sources of waste, reducing costs and improving delivery and quality — unlocking the margin potential and increasing the effective capacity of our value streams. Setup times, equipment downtime, material handling, material yields, product defects, late deliveries and safety incidents are all being targeted throughout our operations as we move beyond isolated pilots to a wider deployment across the business. During 2006, we created a comprehensive plan and initiated a three-year restructuring program in our Industrial Group that will transition the current manufacturing footprint to a Center of Excellence model, with component manufacturing standardized and manufacturing flows reconfigured to reduce manufacturing and logistics costs. This effort follows the lead of our major customers and is expected to benefit both Sypris and its customers. Organizational Effectiveness Regardless of the strength of our processes and systems, our people are the key ingredient to our future success. During 2006, we continued to increase the organizational strength of the Company by top grading personnel and selectively investing in leadership talent, with key roles filled during the year with proven managerial expertise from companies such as General Electric, ArvinMeritor, Benteler Automotive, Lockheed Martin and British Aerospace, among others. Sypris Solutions 2006 Annual Report 1 In 2006, we continued to improve our internal organizational communication through the expanded use of our SYPR.InSide web portal and through the launch of the Sypris Dashboard, which provides managerial personnel with real time access to critical operational and financial performance metrics. These efforts help to ensure that the execution and achievement of commitments remain critical components of the Sypris culture. Investing for Growth We continued to invest in the Company’s product and service offerings and the processes by which they are delivered. In our Electronics Group, we have invested in new secured communication programs over the past few years that are scheduled to begin full production during 2007. One of these new classified programs represents the next generation of an existing, highly successful product family, while the other program will introduce a completely new product and functionality. Both programs are expected to be important contributors to the group’s financial results for years to come. Our data systems business developed new partnerships during the year to expand its platform into the intelligence receiver market, which we believe will provide the opportunity for this business unit to double in size over the next three years. Our Electronics Group invested to accommodate the unique requirements and certifications of space-related manufacturing contracts, the result of which led to key contract wins during the year. If successful, these programs could increase our Space-related electronic manufacturing business four-fold within the next few years. Our calibration business posted another solid year of growth during 2006, with revenue increasing 6.5% from 2005. Our success in North America is prompting customers to request our services globally and we are responding with partnerships and investments that will provide geographic growth, increased content and new platforms for expansion beyond our current customer base. Redefining our Portfolio These investments in and resulting growth of our Electronics Group will also serve to increase the group’s impact on the financial results of Sypris and reduce the cyclical influence of the commercial vehicle industry on the Company’s consolidated financial results. The further reshaping of our portfolio will be implemented upon the completion of our customer and product line profitability analysis that underlies our commitment to redefine the Industrial Group portfolio. These efforts will continue to be centered on increasing our higher value- added, more profitable business, as we prepare for the return of the commercial vehicle market in 2008. When combined with a strong energy market to support the continued growth of our high-pressure closure business, we expect these portfolio redefinition efforts to yield significant margin improvements in the future. Maximizing Cash Flow The generation of substantial free cash flow continued during 2006 with the Company delivering $53 million in operating cash flow and $42 million in free cash flow during the year. Over the last two years, operating cash flow has exceeded $125 million, working capital turns are up 123%, and net debt is down to a recent low of 11% of total capital. These efforts require painstaking execution and diligence, but free cash flow provides the funds necessary to reinvest in new products, processes, technologies, services and facilities to support future growth and margin expansion. THE FUTURE We continue to see a future for Sypris that is bright. As previously announced, we expect 2007 to be challenging as we take advantage of the cyclical downturn in the commercial vehicle market by investing to restructure our Industrial Group in preparation for the market rebound in 2008 and beyond. We will also continue to invest in our Electronics Group to support double-digit organic growth and a further rebalancing of the overall Sypris portfolio. Collectively, we are confident that these initiatives represent strategies that will transform our business model and guide us to improved operational and financial results. THANK YOU As always, we close with notes of thanks. We appreciate the dedication and commitment of our fellow employees, many of whom are also share owners. We count on their passion for excellence in all that they do to help Sypris grow and to achieve ever higher levels of success. We also want to thank our customers and investors, who place their trust in Sypris and count on us to deliver. We sincerely appreciate your confidence and encourage you to contact us. We welcome your comments and would be pleased to answer your questions. Sincerely, Jeffrey T. Gill President & CEO Robert E. Gill Chairman of the Board 2 Sypris Solutions 2006 Annual Report We invite you to walk through a few of the steps we are taking to pave the way for future growth. 1. operational excellence 2. organizational effectiveness We are migrating to a commodity-management supply chain organization We are migrating to a commodity-management supply chain organization structure that will be managed at the corporate level. Under this initiative, structure that will be managed at the corporate level. Under this initiative, we will be consolidating and where practical, standardizing the specifi cations we will be consolidating and where practical, standardizing the specifi cations of our buy to generate savings. We are also implementing a functional approach of our buy to generate savings. We are also implementing a functional approach to our Information Systems to reduce the cost-to-serve for this important to our Information Systems to reduce the cost-to-serve for this important component of our infrastructure. component of our infrastructure. 3. investing for growth A number of initiatives are under way to drive Sypris toward operational excellence. We are developing an integrated sales forecasting, production planning and inventory-management process throughout our organization. We are deploying LEAN, Continuous Improvement and Total Productive Maintenance to enhance effi ciency, cost reduction, quality and delivery performance. As part of a longer-term strategic initiative, our Industrial Group is launching a multi-year restructuring to transition to a Center of Excellence model. We are continuing to invest in growth initiatives for our business, particularly for the Electronics Group. During 2007, we will be launching full production of two new secure communications products and will continue to invest in research and development activities to meet our customers’ needs. We are pursuing new opportunities to gain entry into the intelligence receiver market and to grow our volume in the Space market through turnkey solutions designed in cooperation with our customers. We are looking to expand into international markets to maintain the growth momentum of our calibration business. 4. redefining our portfolio We expect to achieve double-digit growth in our Electronics Group in 2007 and further expect to sustain that level of growth in subsequent years. Our customer requirements are projected to increase and we are making the investments in research and development as well as market presence to meet these needs. Our Industrial Group is facing challenges arising from a temporary market decline in 2007 and we will use the coming year as an opportunity to rationalize our business by investing in our higher value-added business areas. 5. maximizing cash flow We have been successful in improving cash fl ow by changing our culture with respect to cash management, including the implementation of “quick response” mechanisms utilizing real-time operational dashboard data to improve cash management. We are broadening these actions to new areas of the cash-conversion cycle, including the implementation of business-to-business e-commerce solutions for effi ciency and cash management. Our goal is to achieve and sustain working capital turns of eight to ten times. FINANCIAL SUMMARY (In thousands, except per share data) 2006(1) 2005 2004(2)(3) 2003(3) 2002 Years ended December 31, Consolidated Statement of Operations Data: Net revenue Gross profit Operating (loss) income Net (loss) income (Loss) earnings per common share: Basic Diluted Cash dividends per common share $ 497,664 41,090 (135) (1,362) $ $ 522,766 51,338 12,222 $ 5,321 $ 425,402 53,439 13,898 8,299 $ $ 276,605 45,945 14,874 8,091 $ $ 273,477 49,541 18,976 11,453 $ $ $ $ $ (0.08) $ (0.08) 0.12 $ 0.30 0.29 0.12 $ $ $ 0.48 0.47 0.12 $ $ $ 0.57 0.56 0.12 $ $ $ 0.87 0.84 0.06 (In thousands) 2006(1) 2005 2004(2)(3) 2003(3) 2002 December 31, Consolidated Balance Sheet Data: Cash and cash equivalents Working capital Total assets Long-term debt, net of current portion Total stockholders’ equity $ 32,400 100,717 379,033 55,000 209,886 $ 12,060 111,765 417,624 80,000 213,734 $ 14,060 143,123 431,178 110,000 208,939 $ 12,019 81,456 264,435 53,000 145,392 $ 12,403 78,600 224,612 30,000 137,690 (1) Effective January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment” under the modifi ed prospective method. We also adopted SFAS No. 158, “Employers’ Accounting for Defi ned Benefi t Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R).” See Note 1 of our consolidated fi nancial statements. (2) On May 3, 2004 and June 30, 2004, respectively, we completed the acquisition of the net assets of ArvinMeritor’s Kenton, Ohio facility and Dana’s Toluca, Mexico facility and their results of operations and related purchased assets are included from those dates forward. (3) On December 31, 2003, we completed the acquisition of the net assets of Dana’s Morganton, North Carolina facility and its results of operations and related purchased assets are included from that date forward. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (In thousands) 2006(1) 2005 2004(2)(3) 2003(3) 2002 December 31, Modified working capital: Working capital Less: Cash & cash equivalents Less: Restricted cash Plus: Current portion of long term debt Modified working capital Net debt to total capital percentage: Net debt: Long-term debt Current portion of long-term debt less: Cash and cash equivalents less: Restricted cash Net debt Capital: Total stockholders’ equity Net debt Total capital Net debt to total capital % $ 100,717 32,400 1,002 5,000 $ 72,315 $ 111,765 12,060 - - $ 99,705 $ 143,123 14,060 - 7,000 $ 136,063 $ 81,456 12,019 - 3,200 $ 72,637 $ 55,000 5,000 32,400 1,002 26,598 $ 80,000 - 12,060 - 67,940 $ 110,000 7,000 14,060 - 102,940 $ 53,000 3,200 12,019 - 44,181 $ $ $ 78,600 12,403 - 7,000 73,197 30,000 7,000 12,403 - 24,597 209,886 26,598 $ 236,484 11.2% 213,734 67,940 $ 281,674 24.1% 208,939 102,940 $ 311,879 33.0% 145,392 44,181 $ 189,573 23.3% 137,690 24,597 $ 162,287 15.2% (In thousands) 2006(1) 2005 2004(2)(3) 2003(3) 2002 Years ended December 31, Free Cash Flow: Net cash provided by (used in) operating activities Less: Capital expenditures Free cash flow $ 52,806 10,326 $ 42,480 $ 72,588 36,264 $ 36,324 $ (27,410) 55,900 $ (83,310) $ 27,275 22,521 4,754 $ $ $ 13,601 19,747 (6,146) Sypris At A Glance Market-Focused Businesses Business Summary Applications and Uses Select Customers Truck Components and Assemblies Manufacturing Services Automated forging, machining, induction hardening, cold extrusion, heat-treating, testing and fabrication of products, production tooling and prototypes. Axle shafts, steer axles, trailer axle beams, carriers, full-float tubes, ring gears, pinions, knuckles, input shafts, helical gears, housings and other drive train components for use in light, medium and heavy-duty trucks, pickup trucks and automobiles. ArvinMeritor, Axle Alliance, Dana, DaimlerChrysler and Ford Motor Co. Products High-pressure closures, transition joints and insulated joints. Pipeline and chemical systems in the energy and chemical industries. Chevron, ExxonMobil and Shell Oil. Aerospace and Defense Electronics Manufacturing Services Engineering Services Products Test and Measurement Services Calibration and Repair Testing Products Integrated design and engineering services, component selection, sourcing and procurement, automated assembly, design and implementation of product testing, systems assembly, and repair and warranty services. Software design services for data and communications security products and contract design services, network security vulnerability assessment, design and certification. Network encryption and secure key loading devices, communication intelligence receivers, real-time networkcentric analog and digital data acquisition and storage systems. Calibration, repair and certification of electrical, electronic, physical and dimensional test equipment. Installation, execution and turn-key management of customer “Permanent On-Site” Calibration Programs. Testing of digital, linear, discrete, passive and hybrid components, RF device testing, EMI testing, environmental testing, dynamics testing, NEMA Traffic Systems testing and transportation testing on packaging, products, systems and subassemblies. Hall generators, current sensors, autoprobes and gaussmeters. Electronic assemblies and subsystems for use in military cockpit control and display systems, missile guidance systems, commercial avionics, satellite communications systems, ruggedized hand-held computers, and secure communications networks and products. Boeing, Eaton, General Dynamics, Honeywell, L3, Lockheed Martin, U.S. Department of Defense, Northrop Grumman, Raytheon, U.S. Army and ViaSat. Secured transmission of voice and data for intelligence and surveillance applications. General Services Administration, U.S. Department of Defense and U.S. Army. Network and communications security, collection and storage of data for aerospace applications, weapons test and evaluation, and acquisition of signal data from targets of interest for the intelligence gathering community. General Dynamics, Government of Israel, Johnson Space Center, Lockheed Martin, NASA, U.S. Department of Defense, Northrop Grumman, Raytheon, Titan Corporation, TRW, U.S. Air Force, U.S. Army and U.S. Navy. Telecommunications systems, air traffic control systems, electronic component manufacturing, automotive, process control, weather radar systems, aerospace and defense, medical device manufacturing and power generation and distribution. Military, aerospace, satellite and launch systems, missile systems, avionics, medical, telecommunications semiconductor manufacturing, automotive and transportation. Current measurement applications in mass transit systems, elevators, automotive diagnostic systems and laboratory diagnostic systems. Magnetic measurement of components used in military, aerospace and medical applications, and for research and development and quality control. AT&T, Bombardier, Bose, Delphi Automotive, Eaton, FAA, General Dynamics, Hamilton Sundstrand, Honeywell, ITT, Kodak, Lucent Technologies, Motorola, National Weather Service, Nokia, Siemens, Square D, Texas Instruments, Tyco Electronics, TRW Automotive and Underwriters Laboratories Arrow Electronics, Avnet, BAE Systems, Boeing, Bose, Eldec, General Dynamics, GE Infrastructure Security, Goodrich, Hamilton Sundstrand, Harris, Honeywell, iRobot, Jabil Circuit, JPL, L-3, Lockheed Martin, Merrimac Industries, NASA, Northrop Grumman, Raytheon, Reckitt Benckiser, Sawtek, Suntron and Teledyne Electro-Motive Diesel, Hamilton Sundstrand, Ithaco, Lockheed Martin, Science and Engineering Services and Toyo 8 Sypris Solutions 2006 Annual Report Sypris Solutions 2006 Annual Report 9 EXECUTIVE OFFICERS BOARD OF DIRECTORS T. SCOTT HATTON Vice President and CFO JOHN R. MCGEENEY General Counsel and Secretary RICHARD L. DAVIS Senior Vice President ANTHONY C. ALLEN Vice President, Treasurer and Assistant Secretary ROBERT E. GILL (1†) (5) Chairman of the Board SIDNEY R. PETERSEN (1) (3†) Retired Chairman & CEO Getty Oil, Inc. JOHN F. BRINKLEY (2) (4) Retired General Manager North American Automotive Operations Export Sales Ford Motor Company JEFFREY T. GILL (1) (5) President & CEO JOHN M. KRAMER Group Vice President, Sypris Solutions, and President, Sypris Technologies ROBERT B. SANDERS Group Vice President and President, Sypris Electronics KATHY SMITH BOYD Vice President, Sypris Solutions, and President, Sypris Test & Measurement G. DARRELL ROBERTSON Vice President, Sypris Solutions, and President, Sypris Data Systems WILLIAM G. FERKO (3) (4†) Vice President & CFO Genlyte Group, Inc. R. SCOTT GILL (1) Managing Member Astor & Longwood, LLC WILLIAM L. HEALEY (2) (4) Private Investor & Consultant ROBERT SROKA (2†) (3) Managing Director Corporate Solutions Group 10 Sypris Solutions 2006 Annual Report Sypris Solutions 2006 Annual Report 11 (1) Member of Executive Committee (2) Member of Compensation Committee (3) Member of Audit and Finance Committee (4) Member of Nominating and Governance Committee (5) Executive Officer † Committee Chairman COMPANY LOCATIONS INVESTOR INFORMATION ALABAMA Sypris Data Systems 3322 S. Memorial Parkway Suite 505 Huntsville, AL 35801 Phone: (256) 881-2231 ARIZONA Sypris Test & Measurement 2320 West Peoria Avenue Building D-133 Phoenix, AZ 85029 Phone: (602) 395-5900 CALIFORNIA Sypris Data Systems Subsidiary Headquarters 160 E. Via Verde San Dimas, CA 91773 Phone: (909) 962-9400 Sypris Test & Measurement 16340 Roscoe Boulevard Suite 100 Van Nuys, CA 91406 Phone: (818) 830-9111 Sypris Test & Measurement 615 N. Mary Avenue Sunnyvale, CA 94085 Phone: (408) 720-0006 COLORADO Sypris Data Systems 7307 S. Revere Parkway Centennial, CO 80112 Phone: (303) 773-4700 Sypris Test & Measurement 8020 Southpark Circle Suite 300 Littleton, CO 80120 Phone: (303) 798-2243 FLORIDA Sypris Test & Measurement Subsidiary Headquarters 6120 Hanging Moss Road Orlando, FL 32807 Phone: (407) 678-6900 Sypris Electronics Subsidiary Headquarters 10901 North McKinley Drive Tampa, FL 33612 Phone: (813) 972-6000 Sypris Data Systems 2460 N. Courtney Parkway Suite 107 Merritt Island, FL 32953 Phone: (321) 449-9243 GEORGIA Sypris Test & Measurement 1000 Cobb Place Boulevard Building 200, Suite 240 Kennesaw, GA 30144 Phone: (770) 795-8092 ILLINOIS Sypris Test & Measurement 2055 Army Trail Road Suite 108 Addison, IL 60101 Phone: (630) 620-5800 KENTUCKY Sypris Solutions Corporate Headquarters 101 Bullitt Lane Suite 450 Louisville, KY 40222 Phone: (502) 329-2000 Sypris Technologies Subsidiary Headquarters 101 Bullitt Lane Suite 205 Louisville, KY 40222 Phone: (502) 420-1222 Sypris Technologies 2820 West Broadway Louisville, KY 40211 Phone: (502) 774-6011 Sypris Technologies Tube Turns Division 2612 Howard Street Louisville, KY 40211 Phone: (502) 774-6011 MARYLAND Sypris Data Systems 9020 Junction Drive Suite 3 Annapolis Junction, MD 20701 Phone: (301) 470-0110 Sypris Electronics 9020 Junction Drive Suite 3 Annapolis Junction, MD 20701 Phone: (301) 490-4397 MASSACHUSETTS Sypris Test & Measurement 53 Second Avenue Burlington, MA 01803 Phone: (781) 272-9050 Sypris Test & Measurement 7 Sterling Road North Billerica, MA 01862 Phone: (978) 663-2137 MICHIGAN Sypris Test & Measurement 24301 Catherine Industrial Road Suite 116 Novi, MI 48375 Phone: (248) 305-5200 NEW JERSEY Sypris Test & Measurement 2500 Main Street Extension Suite 2 Sayreville, NJ 08872 Phone: (732) 721-6116 Sypris Test & Measurement 1133 Route 23 South Wayne, NJ 07470 Phone: (973) 628-1363 NEW YORK Sypris Test & Measurement 135 Calkins Road Suite R Rochester, NY 14623 Phone: (585) 334-6570 NORTH CAROLINA Sypris Technologies 105 Wamsutta Mill Road Morganton, NC 28655 Phone: (828) 433-4600 OHIO Sypris Technologies 13267 State Route 68 South Kenton, OH 43326 Phone: (419) 674-4051 Sypris Technologies 1550 Marion Agosta Road Marion, OH 43302 Phone: (740) 383-2111 Sypris Test & Measurement 950 Keynote Circle Brooklyn Heights, OH 44131 Phone: (216) 741-7040 Sypris Test & Measurement 3148 Presidential Drive Fairborn, OH 45324 Phone: (937) 427-3444 TEXAS Sypris Test & Measurement 254 East Arapaho Road Suite 101 Richardson, TX 75081 Phone: (972) 231-4443 Sypris Data Systems 8500 Dyer Street Suite 65 El Paso, TX 79904 Phone: (915) 757-2547 MEXICO Sypris Technologies Alberto Einstein No. 401 Zona Industrial Toluca, Mexico C.P. 50071 Phone: (52) (722) 279-3906 12 Sypris Solutions 2006 Annual Report CORPORATE ADDRESS Sypris Solutions, Inc. 101 Bullitt Lane Suite 450 Louisville, KY 40222 Phone: (502) 329-2000 Fax: (502) 329-2050 ANNUAL MEETING The Annual Meeting of Stockholders will be held on Tuesday, April 24, 2007, at 10:00 a.m. at 101 Bullitt Lane, Lower Level Seminar Room, Louisville, Kentucky. FOR MORE INFORMATION To learn more about Sypris Solutions, Inc., visit our site on the World Wide Web at www.sypris.com. INVESTOR MATERIALS The Sypris web page – www.sypris.com – is your entry point for a vast array of information about Sypris, including its products, financial information, real-time stock quotes, links to each of its subsidiary operations, corporate governance information and other useful information. For investor information, including additional annual reports, 10-Ks, 10-Qs or any other financial literature, please contact Lynn W. Boon, Corporate Services Manager, 101 Bullitt Lane, Suite 450, Louisville, KY 40222. SYPRIS ON NASDAQ The common stock of Sypris trades on the NASDAQ Global Market under the symbol SYPR. TRANSFER AGENT LaSalle Bank N.A. 135 South LaSalle Street Suite 1946 Chicago, IL 60603 Phone: (800) 246-5761 Fax: (312) 904-7024 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP 400 West Market Street Suite 2100 Louisville, KY 40202 Phone: (502) 585-1400 Fax: (502) 584-4221 CORPORATE COUNSEL Wyatt, Tarrant & Combs, LLP 500 West Jefferson Street Suite 2800 Louisville, KY 40202 Phone: (502) 589-5235 Fax: (502) 589-0309 Our 2006 Form 10-K, which accompanies this document, is incorporated herein as an integral part of our 2006 Annual Report. Forward-Looking Statements This report includes non-historical or “forward-looking” statements concerning future events or conditions. Important risk factors, which could cause actual results to differ materially from these statements, are set forth in Item 1A. Risk Factors in the accompanying Form 10-K. ® 101 Bullitt Lane, Suite 450 Louisville, Kentucky 40222 Phone (502) 329-2000 Fax (502) 329-2050 www.sypris.com 

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