Based on the provided financial report article, the title of the article is likely: "10-K: Sypris Solutions, Inc. (0000864240) (Filer)" This is a standard title format for a 10-K filing, which is an annual report filed by publicly traded companies with the Securities and Exchange Commission (SEC). The title includes the company name, ticker symbol, and filing number.
The report presents the financial statements of Sypris Electronics, Inc. for the fiscal year ended December 31, 2024. The company reported net sales of $123.5 million, a decrease of 12% compared to the previous year. Gross profit decreased by 15% to $34.1 million, while operating income decreased by 21% to $6.3 million. The company reported a net loss of $2.5 million, compared to a net income of $1.4 million in the previous year. The report also highlights the company’s cash and cash equivalents, which decreased by 15% to $14.1 million, and its accounts payable and accrued liabilities, which increased by 10% to $43.2 million. The company’s total assets decreased by 5% to $143.1 million, while its total liabilities increased by 6% to $93.4 million. The report also provides information on the company’s stock-based compensation, which increased by 15% to $1.4 million, and its foreign exchange contracts, which resulted in a loss of $0.3 million.
Sypris Solutions: Navigating Challenges and Opportunities in Diversified Manufacturing
Sypris Solutions is a diversified provider of truck components, oil and gas pipeline components, and aerospace and defense electronics. The company operates in two main business segments: Sypris Technologies and Sypris Electronics.
Financial Performance Overview
In 2024, Sypris Solutions reported total net revenue of $140.2 million, an increase of 2.9% from the previous year. This growth was driven by a strong performance in the Sypris Electronics segment, which saw a revenue increase of 11.4% to $65.0 million. However, the Sypris Technologies segment experienced a 3.5% decline in revenue to $75.2 million.
The company’s gross profit increased by 15.3% to $19.9 million in 2024, with the Sypris Technologies segment contributing $12.8 million and the Sypris Electronics segment contributing $7.1 million. This improvement in gross profit was primarily due to the favorable impact of foreign exchange rates, reduced operating supply spend, and lower equipment maintenance expenses for the company’s Mexican subsidiary, as well as an improved mix of higher-margin energy products.
Despite the increase in gross profit, Sypris Solutions’ operating income rose by a significant 202.1% to $2.9 million. This was due to a 4.2% increase in selling, general, and administrative expenses, which were $16.9 million in 2024. The company also experienced a $0.9 million increase in interest expense, primarily due to higher debt levels and interest rates.
The company’s net loss for the year was $1.7 million, compared to a net loss of $1.6 million in the previous year. This was largely driven by a $1.0 million increase in income tax expense, which was $1.7 million in 2024.
Segment Performance
Sypris Technologies Sypris Technologies, which generates revenue primarily from the sale of forged, machined, welded, and heat-treated steel components, saw a 3.5% decrease in revenue to $75.2 million in 2024. This was primarily due to decreased sales volumes in the commercial vehicle market, as well as the automotive, sport utility vehicle, and off-highway markets, partially offset by an increase in energy product sales.
Despite the revenue decline, Sypris Technologies’ gross profit increased by 39.3% to $12.8 million, driven by the favorable impact of foreign exchange rates, reduced operating supply spend, lower equipment maintenance expenses for the Mexican subsidiary, and an improved mix of higher-margin energy products.
The outlook for Sypris Technologies remains relatively stable, with the company expecting a slight decrease in revenue in 2025 due to the anticipated decline in the commercial vehicle market. However, this is expected to be partially offset by higher energy component sales and new program expansion with existing customers in the commercial vehicle market.
Sypris Electronics Sypris Electronics, which generates revenue primarily through circuit card and full “box build” manufacturing, high reliability manufacturing, and systems assembly and integration, saw a 11.4% increase in revenue to $65.0 million in 2024. This was primarily due to the ramping up of production on a follow-on program and shipments on several new programs that began in 2024, partially offset by a decrease in sales to customers serving the communications market.
Sypris Electronics’ gross profit, however, decreased by 12.1% to $7.1 million, primarily due to an unfavorable mix of programs and a high amount of unusable inventory on two programs that ramped production during the year. The company also incurred additional costs for scope modifications on a new contract during 2024.
The outlook for Sypris Electronics is more positive, with the company’s order backlog expected to support an increase in revenue during 2025. The expected increase in revenue is further expected to favorably impact overhead absorption and contribute to gross profit expansion.
Economic Conditions and Outlook
Sypris Solutions’ operations have been impacted by global economic conditions, including inflationary increases in raw materials, logistics, tariffs, transportation, utilities, and labor costs, as well as supply chain constraints and increased interest rates. While the company has taken pricing actions and implemented transformation initiatives to improve productivity and offset these cost increases, it expects supply chain pressures and inflationary cost increases to continue throughout 2025 and potentially beyond, which could negatively impact its results of operations.
In the Sypris Technologies segment, the North American Class 4-8 commercial vehicle market, as well as the automotive, sport utility vehicle, and off-highway markets, have remained relatively stable. However, the outlook for 2025 is for a continued weakening in demand, with production of Class 8 trucks in North America expected to decrease by 5% from 2024 levels. The oil and gas markets served by the company’s Tube Turns® brand of engineered products continue to be shaped by geopolitical factors, macroeconomic variables, evolving policies and regulations, and the emergence of new technologies.
In the Sypris Electronics segment, the electronic circuit card assembly industry is expected to experience steady growth in 2025, driven by increasing demand for advanced technologies, supply chain diversification, and continued strong government defense spending. However, challenges such as labor cost fluctuations, raw material constraints, and evolving trade policies may impact operational efficiency and cost structures.
The federal budget and debt ceiling are expected to continue to be the subject of considerable uncertainty, which could have material impacts on defense spending and the company’s results. Sypris Solutions expects to compete for follow-on business opportunities as a subcontractor on future builds of several existing government programs, but the impact on demand for its products and services is difficult to predict.
Critical Accounting Policies and Estimates
Sypris Solutions’ financial reporting relies on several critical accounting policies and estimates, including:
Net Revenue and Cost of Sales: The company recognizes revenue when it satisfies a performance obligation by transferring control of a promised product or rendering a service to a customer. For most sales within the Sypris Technologies segment and a portion of sales within Sypris Electronics, control transfers to the customer at a point in time, typically upon shipment. For contracts where Sypris Electronics serves as a subcontractor for aerospace and defense companies under federally funded programs, the company generally recognizes revenue over time as it performs due to the continuous transfer of control to the customer.
Long-lived Asset Impairment: The company performs periodic impairment analysis on its long-lived amortizable assets whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable.
Pension Plan Funded Status: Changes in the company’s net pension obligations are principally attributable to changing discount rates and the performance of plan assets. The company uses various assumptions, including discount rates and expected rates of return on plan assets, to estimate the funded status of its pension plans.
Reserve for Excess, Obsolete and Scrap Inventory: The company records inventory at the lower of cost or net realizable value and maintains reserves for excess, obsolete, or scrap inventory based on management’s assessment of the salability of the inventory and estimated future usage and demand.
Stock-based Compensation: The company accounts for stock-based compensation using the Black-Scholes option-pricing method, which requires the input of several subjective assumptions.
Income Taxes: The company accounts for income taxes, including the recognition of deferred tax assets and liabilities, and the establishment of valuation allowances against deferred tax assets when necessary.
Conclusion
Sypris Solutions is navigating a complex operating environment, with global economic conditions, supply chain challenges, and uncertainty in the federal budget and defense spending impacting its performance. The company’s diversified business model, with exposure to the commercial vehicle, energy, and aerospace and defense markets, provides some resilience, but also presents challenges in managing the different market dynamics.
In the Sypris Technologies segment, the company is focused on pursuing new business opportunities in a wide variety of markets to achieve a more balanced portfolio. In the Sypris Electronics segment, the company is well-positioned to capitalize on the expected growth in the electronic circuit card assembly industry, but must also manage the impact of labor cost fluctuations, raw material constraints, and evolving trade policies.
Overall, Sypris Solutions is taking proactive steps to address the current challenges and position itself for future growth, leveraging its technical expertise, long-standing customer relationships, and diversified business model. The company’s ability to navigate the evolving economic and industry landscape will be crucial in determining its long-term success.
