<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
---
Exchange Act of 1934. For the quarterly period ended July 2, 2000.
or
___ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from _____ to _______.
Commission file number: 0-24020
SYPRIS SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 61-1321992
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
101 Bullitt Lane, Suite 450
Louisville, Kentucky 40222
(Address of principal executive offices, including zip code)
(502) 585-5544
(Registrant's telephone number, including area code)
_______________________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
---
As of July 21, 2000, the Registrant had 9,662,990 shares of Common Stock
outstanding.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Part I. Financial Information
<S> <C>
Item 1. Financial Statements
Consolidated Income Statements for the Three and
Six Months Ended July 2, 2000 and June 27, 1999................................. 2
Consolidated Balance Sheets at July 2, 2000 and
December 31, 1999............................................................... 3
Consolidated Statements of Cash Flows for the Six
Months Ended July 2, 2000 and June 27, 1999..................................... 4
Notes to Consolidated Financial Statements....................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................... 8
Part II. Other Information
Item 4 Submission of Matters to a Vote of Security Holders.............................. 12
Item 6 Exhibits and Reports on Form 8-K................................................. 12
Signatures........................................................................................... 13
</TABLE>
1
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Sypris Solutions, Inc.
Consolidated Income Statements
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- -------------------
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
---------- -------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net revenue......................................... $52,118 $49,331 $102,815 $94,229
Cost of sales....................................... 40,765 37,597 80,708 72,775
------- ------- -------- -------
Gross profit.................................... 11,353 11,734 22,107 21,454
Selling, general and administrative expense......... 6,726 5,929 13,029 11,371
Research and development............................ 794 1,857 1,961 3,460
Amortization of intangible assets................... 362 244 724 487
Special charges..................................... 732 -- 2,472 --
------- ------- -------- -------
Operating income................................ 2,739 3,704 3,921 6,136
Interest expense, net............................... 929 329 1,860 627
Other income, net................................... (144) (142) (149) (247)
------- ------- -------- -------
Income before income taxes.......................... 1,954 3,517 2,210 5,756
Income tax expense.................................. 586 1,058 663 1,764
------- ------- -------- -------
Net income.......................................... $ 1,368 $ 2,459 $ 1,547 $ 3,992
======= ======= ======== =======
Net income per common share:
Basic........................................... $ 0.14 $ 0.26 $ 0.16 $ 0.42
Diluted......................................... $ 0.14 $ 0.25 $ 0.15 $ 0.41
Shares used in computing per common share amounts:
Basic........................................... 9,659 9,488 9,647 9,472
Diluted......................................... 10,052 9,815 10,018 9,781
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
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Sypris Solutions, Inc.
Consolidated Balance Sheets
(in thousands, except for share data)
<TABLE>
<CAPTION>
July 2, December 31,
2000 1999
---------- -----------
(Unaudited)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................................... $ 10,421 $ 10,406
Accounts receivable, net................................................................................ 32,488 23,793
Inventory, net.......................................................................................... 53,580 49,462
Other current assets.................................................................................... 2,221 4,279
-------- --------
Total current assets................................................................................. 98,710 87,940
Property, plant and equipment, net........................................................................ 48,813 40,192
Intangible assets, net.................................................................................... 17,236 18,038
Other assets.............................................................................................. 2,353 2,394
-------- -------
$167,112 $148,564
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable........................................................................................ $ 17,638 $ 11,022
Accrued liabilities..................................................................................... 16,117 17,813
Current portion of long-term debt....................................................................... 7,800 5,400
-------- --------
Total current liabilities............................................................................ 41,555 34,235
Long-term debt............................................................................................ 59,000 49,000
Other liabilities......................................................................................... 3,966 4,509
-------- --------
Total liabilities.................................................................................... 104,521 87,744
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized; no shares issued............................ -- --
Common stock, non-voting, par value $.01 per share, 10,000,000 shares authorized; no shares issued...... -- --
Common stock, par value $.01 per share, 20,000,000 shares authorized; 9,662,990 and 9,589,214 shares
issued and outstanding in 2000 and 1999, respectively................................................... 96 96
Additional paid-in capital.............................................................................. 24,145 23,921
Retained earnings....................................................................................... 38,423 36,876
Accumulated other comprehensive income (loss)........................................................... (73) (73)
-------- --------
Total shareholders' equity........................................................................... 62,591 60,820
-------- --------
$167,112 $148,564
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
Sypris Solutions, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended
--------------------
July 2, June 27,
2000 1999
-------- -------
(Unaudited)
Cash flows from operating activities:
Net income........................................... $ 1,547 $ 3,992
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization..................... 4,825 3,696
Other noncash charges............................. 119 202
Changes in operating assets and liabilities:
Accounts receivable.............................. (8,704) (3,183)
Inventory........................................ (4,200) (5,192)
Other current and noncurrent assets.............. 2,058 (373)
Accounts payable................................. 5,931 626
Accrued and other liabilities.................... (2,136) (6,331)
-------- -------
Net cash used in operating activities........... (560) (6,563)
Cash flows from investing activities:
Capital expenditures................................. (12,046) (4,665)
Other................................................ (3) (268)
-------- -------
Net cash used in investing activities........... (12,049) (4,933)
Cash flows from financing activities:
Net borrowings under revolving credit agreements..... 12,400 10,627
Principal payments on long-term debt................. -- (859)
Proceeds from issuance of common stock............... 224 300
-------- -------
Net cash provided by financing activities....... 12,624 10,068
-------- -------
Net increase (decrease) in cash and cash equivalents.. 15 (1,428)
Cash and cash equivalents at beginning of period...... 10,406 12,387
-------- -------
Cash and cash equivalents at end of period............ $ 10,421 $10,959
======== =======
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
Sypris Solutions, Inc.
Notes to Consolidated Financial Statements
(1) Organization
Sypris Solutions, Inc. is a diversified provider of technology-based
outsource services and specialized industrial products. The Company performs a
wide range of manufacturing and technical services, typically under long-term
contracts with major manufacturers. The Company also manufactures and sells
complex data storage systems, magnetic instruments, current sensors, high-
pressure closures and a variety of other industrial products.
(2) Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of Sypris Solutions, Inc. and its wholly-owned subsidiaries
(collectively, "Sypris" or the "Company"), Bell Technologies, Inc. ("Bell"),
Group Technologies Corporation ("GroupTech"), Metrum-Datatape, Inc. ("Metrum-
Datatape"), and Tube Turns Technologies, Inc. ("Tube Turns"), and have been
prepared by the Company in accordance with the rules and regulations of the
Securities and Exchange Commission (the "Commission"). All significant
intercompany transactions and accounts have been eliminated. These unaudited
consolidated financial statements reflect, in the opinion of management, all
material adjustments (which include only normal recurring adjustments) necessary
to fairly state the results of operations, financial position and cash flows for
the periods presented, and the disclosures herein are adequate to make the
information presented not misleading. Preparing financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses. Certain amounts in the Company's 1999
consolidated financial statements have been reclassified to conform with the
2000 presentation. Actual results for the three and six months ended July 2,
2000 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. These unaudited consolidated financial statements
should be read in conjunction with the consolidated financial statements, and
notes thereto, for the year ended December 31, 1999 as presented in the
Company's annual report on Form 10-K.
(3) Net Income per Common Share
There were no adjustments required to be made to net income for purposes of
computing basic and diluted net income per common share. A reconciliation of the
average number of common shares outstanding used in the calculation of basic and
diluted net income per common share is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------- ----------------
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Shares used to compute basic net income per common share..................... 9,659 9,488 9,647 9,472
Dilutive effect of stock options............................................. 393 327 371 309
-------- ------- ------- --------
Shares used to compute diluted net income per common share................... 10,052 9,815 10,018 9,781
======== ======= ======= ========
</TABLE>
5
<PAGE>
(4) Inventory
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
July 2, December 31,
2000 1999
---- ----
<S> <C> <C>
Raw materials................................................................ $ 14,633 $ 12,640
Work-in-process.............................................................. 8,516 9,649
Finished goods............................................................... 1,455 1,673
Costs relating to long-term contracts and programs, net of amounts
attributed to revenue recognized to date.................................... 42,584 29,637
Progress payments related to long-term contracts and programs................ (10,229) (1,038)
LIFO reserve................................................................. (729) (430)
Reserve for excess and obsolete inventory.................................... (2,650) (2,669)
-------- --------
$ 53,580 $ 49,462
======== ========
</TABLE>
(5) Special Charges
Special charges of $732,000 and $2,472,000 were recognized during the three
and six months ended July 2, 2000, respectively, for activities related to the
consolidation of certain operations within the Electronics Group. The special
charges incurred for these activities include workforce reductions, facilities
rearrangement and relocation expenses, and employment costs related to the
transfer of production.
6
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(6) Segment Data
The Company's operations are conducted in two reportable business segments:
the Electronics Group and the Industrial Group. There was no intersegment net
revenue recognized for all periods presented. The following table presents
financial information for the reportable segments of the Company for the three
and six months ended July 2, 2000 and June 27, 1999 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------- -------------------
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue from unaffiliated customers:
Electronics Group......................... $42,774 $40,257 $ 84,084 $75,778
Industrial Group.......................... 9,344 9,074 18,731 18,451
------- ------- -------- -------
$52,118 $49,331 $102,815 $94,229
======= ======= ======== =======
Gross profit:
Electronics Group......................... $ 9,874 $10,176 $ 19,061 $18,059
Industrial Group.......................... 1,479 1,558 3,046 3,395
------- ------- -------- -------
$11,353 $11,734 $ 22,107 $21,454
======= ======= ======== =======
Operating income:
Electronics Group......................... $ 2,631 $ 3,636 $ 3,524 $ 5,452
Industrial Group.......................... 951 941 1,989 2,275
General, corporate and other.............. (843) (873) (1,592) (1,591)
------- ------- -------- -------
$ 2,739 $ 3,704 $ 3,921 $ 6,136
======= ======= ======== =======
</TABLE>
(7) Commitments and Contingencies
Tube Turns is a co-defendant in two separate lawsuits filed in 1993 and
1994, one pending in federal court and one pending in state district court in
Louisiana, arising out of an explosion in a coker plant owned by Exxon
Corporation located in Baton Rouge, Louisiana. The suits are being defended for
Tube Turns by its insurance carrier, and the Company intends to vigorously
defend its case. The Company believes that a settlement or related judgment
would not result in a material loss to Tube Turns or the Company.
More specifically, according to the complaints, Tube Turns is the alleged
manufacturer of a carbon steel pipe elbow which failed, causing the explosion
which destroyed the coker plant and caused unspecified damages to surrounding
property owners. One of the actions was brought by Exxon and claims damages for
destruction of the plant, which Exxon estimates exceed one hundred million
dollars. In this action, Tube Turns is a co-defendant with the fabricator who
built the pipe line in which the elbow was incorporated and with the general
contractor for the plant. The second action is a class action suit filed on
behalf of the residents living around the plant and claims damages in an amount
as yet undetermined. Exxon is a co-defendant with Tube Turns, the contractor and
the fabricator in this action. In both actions, Tube Turns maintains that the
carbon steel pipe elbow at issue was appropriately marked as carbon steel and
was improperly installed, without the knowledge of Tube Turns, by the fabricator
and general contractor in a part of the plant requiring a chromium steel elbow.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following table sets forth certain financial data, expressed as a
percentage of net revenue, from the Company's Consolidated Income Statements for
the three and six months ended July 2, 2000 and June 27, 1999.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ---------------------
July 2, June 27, July 2, June 27,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenue.................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales................................ 78.2 76.2 78.5 77.2
----- ----- ----- -----
Gross profit................................. 21.8 23.8 21.5 22.8
Selling, general and administrative expense.. 12.9 12.0 12.7 12.1
Research and development..................... 1.5 3.8 1.9 3.7
Amortization of intangible assets............ 0.7 0.5 0.7 0.5
Special charges.............................. 1.4 -- 2.4 --
----- ----- ----- -----
Operating income............................. 5.3% 7.5% 3.8% 6.5
===== ===== ===== =====
Net income................................... 2.6% 5.0% 1.5% 4.2%
===== ===== ===== =====
</TABLE>
For reporting purposes, the operations of Bell, GroupTech and Metrum-
Datatape are included in the Electronics Group, and Tube Turns' operations are
included in the Industrial Group. Segment discussion is included in the
following discussion and analysis of the Company's consolidated results of
operations.
Net revenue for the second quarter of 2000 was $52.1 million, an increase
of $2.8 million, or 5.6%, from $49.3 million for the second quarter of 1999. Net
revenue for the first six months of 2000 was $102.8 million, an increase of $8.6
million, or 9.1%, from $94.2 million for the first six months of 1999. The
revenue growth came primarily from the Electronics Group, which increased net
revenue by $2.5 million and $8.3 million for the second quarter and six-month
periods, respectively. Within the Electronics Group, the revenue growth was
generated primarily from new contracts for manufacturing services and the
expansion of the calibration business due to an acquisition completed in the
fourth quarter of 1999. Together these two areas increased net revenue by $4.8
million and $12.9 million for the second quarter and six-month periods,
respectively. The increase in the Electronics Group's net revenue for both
periods was partially offset by reduced sales quantities for certain product
offerings, partly due to production delays experienced during the consolidation
of two facilities. Shortages and extended purchase lead times are currently
being experienced on certain electronic components utilized in the Electronics
Group's manufacturing services' contracts. While the Company believes
sufficient component purchase contracts exist to enable it to substantially meet
its customer delivery schedules for the next twelve months, the Company's
results of operations or financial position could be impacted by these component
market conditions. The Electronics Group's backlog increased by $30.2 million
during the second quarter to $136.7 million, which includes the effect of a
$23.4 million multi-year order from one customer. The Industrial Group reported
an increase in net revenue of $0.3 million for both the second quarter and six-
month periods. Shipments of axles to customers in the automotive market and
other forged product lines generated net revenue consistent with the prior year,
while sales of other product offerings to customers in the oil and gas industry
increased over the prior year. The trend in the Company's year-to-year revenue
and order growth is expected to continue during 2000.
8
<PAGE>
Gross profit for the second quarter of 2000 was $11.4 million, or 21.8% of
net revenue, as compared to $11.7 million, or 23.8% of net revenue for the
second quarter of 1999. Gross profit for the first six months of 2000 was $22.1
million, or 21.5% of net revenue, as compared to $21.5 million, or 22.8% of net
revenue for the first six months of 1999. The Electronics Group's gross profit
for the second quarter of 2000 was $9.9 million, a decrease of $0.3 million, or
3.0%, compared to $10.2 million for the second quarter of 1999. The Electronics
Group's gross profit for the first six months of 2000 was $19.1 million, an
increase of $1.0 million, or 5.5%, compared to $18.1 million for the first six
months of 1999. Although net revenue in the Electronics Group increased for
both the second quarter and six-month periods, the second quarter decline in
gross profit resulted from a change in revenue mix and reduced margins on
certain product offerings. During the first six months of 2000, the Company's
revenue mix consisted of a higher percentage of manufacturing services revenue
and a lower percentage of product revenue as compared to the year-earlier
period. This change in revenue mix reduced gross margin since margins are
typically lower on manufacturing services revenue than product sales. The
impact on gross margin for the comparable second quarter periods was compounded
by product manufacturing inefficiencies primarily related to the reduced product
sales volume. The Electronics Group's gross profit percentage decreased to
23.1% in the second quarter of 2000 from 25.3% in the comparable period of 1999.
The gross profit percentage of the Electronics Group for the first six months of
2000 and 1999 was 22.7% and 23.8%, respectively. The Industrial Group's gross
profit for the second quarter of 2000 was $1.5 million, a decrease of $0.1
million, or 5.1%, compared to $1.6 million for the second quarter of 1999. The
Industrial Group's gross profit for the first six months of 2000 was $3.0
million, a decrease of $0.4 million, or 10.3%, compared to $3.4 million for the
first six months of 1999. The decrease in the Industrial Group's gross profit
for the second quarter and first six months was primarily attributable to
additional costs related to building the production capacity and organizational
infrastructure to support the business currently in backlog and the order
forecast for the year 2000 and beyond. The Electronics Group is making similar
investments, primarily to support new business opportunities with its
manufacturing services customers. Both groups expect that the additional costs
incurred to strengthen the Company's operations will continue to have an impact
on gross profit for the balance of the year 2000 and will result in a lower
gross profit percentage as compared to 1999. The Company anticipates the impact
on gross profit will decline as the expected growth in revenue is achieved
during the remaining two quarters of the year 2000.
Selling, general and administrative expense for the second quarter of 2000
was $6.7 million, or 12.9% of net revenue, as compared to $5.9 million, or 12.0%
of net revenue for the second quarter of 1999. Selling, general and
administrative expense for the first six months of 2000 was $13.0 million, or
12.7% of net revenue, as compared to $11.4 million, or 12.1% of net revenue for
the first six months of 1999. The Electronics Group reported an increase of $0.9
million and $1.7 million for the second quarter and six-month periods,
respectively. The increase in the Company's net revenue and orders resulted in
increased selling expense. The investments the Company is making in
organizational infrastructure referred to in the gross profit discussion above
also include certain selling, general and administrative expenses, the majority
of which are within the Electronics Group.
Research and development expense for the second quarter of 2000 was $0.8
million, or 1.5% of net revenue, as compared to $1.9 million, or 3.8% of net
revenue for the second quarter of 1999. Research and development expense for the
first six months of 2000 was $2.0 million, or 1.9% of net revenue, as compared
to $3.5 million, or 3.7% of net revenue for the first six months of 1999. This
decrease was attributable to the Electronics Group, and relates to the timing of
new product releases for the data acquisition, storage and analysis product
lines and the utilization of strategic alliances with suppliers for product
development.
Amortization of intangible assets for the second quarter of 2000 was $0.3
million, an increase of $0.1 million, or 48.4% compared to $0.2 million for the
second quarter of 1999. Amortization of
9
<PAGE>
intangible assets for the first six months of 2000 was $0.7 million, an increase
of $0.2 million, or 48.7% compared to $0.5 million for the first six months of
1999. This increase resulted from the amortization of goodwill recorded in
connection with the December 1999 calibration business acquisition by the
Electronics Group.
Special charges of $0.7 million were recognized during the second quarter
of 2000 for activities related to the consolidation of certain operations within
the Electronics Group. Operations for the Electronics Group's data acquisition,
storage and analysis product lines have been conducted at two facilities since
the November 1997 acquisition that expanded this business. Although several
consolidation actions were implemented immediately following this acquisition,
management identified a number of additional synergies that could be realized
through the elimination of redundant manufacturing operations and staffing of
functional areas between the two facilities. The majority of these consolidation
activities were substantially completed during the first six months of 2000 and
it is anticipated that an additional $0.2 million in special charges will be
recognized in the second half of 2000 in connection with these consolidation
activities. The special charges incurred for these activities include workforce
reductions, facilities rearrangement and relocation expenses, and employment
costs related to the transfer of production.
Interest expense for the second quarter of 2000 was $0.9 million, an
increase of $0.6 million, or 182.4%, from $0.3 million for the comparable period
of 1999. Interest expense for the first six months of 2000 was $1.8 million, an
increase of $1.2 million, or 196.7%, from $0.6 million for the comparable period
of 1999. This increase was primarily due to an increase in the weighted average
debt outstanding coupled with an increase in interest rates. The Company's
weighted average debt outstanding more than doubled to approximately $52.0
million in the second quarter of 2000 from approximately $23.0 million in the
second quarter of 1999. This increase resulted primarily from the December 1999
acquisition by the Electronics Group, working capital funding related to the
increase in revenue and order backlog and capital expenditures during 1999 and
the first six months of 2000 to support the Company's new business
opportunities. The weighted average interest rate for the second quarter of 2000
was approximately 7.81% as compared to approximately 5.76% for the prior year
quarter.
Income tax expense, on an interim basis, is provided for at the anticipated
effective tax rate for the year.
Liquidity, Capital Resources and Financial Condition
Net cash used in operating activities was $0.6 million for the first six
months of 2000 as compared to $6.6 million for the comparable period of 1999.
During the first six months of 2000, the Company's accounts receivable and
inventory balances increased by $8.7 million and $4.2 million, respectively. The
$8.7 million increase in accounts receivable resulted from a high volume of
shipments occurring late in the second quarter as compared to the low volume of
shipments immediately prior to December 31,1999, principally related to Year
2000 issues and related concerns by customers. During the first six months of
2000, inventory increased by $4.9 million in the Electronics Group and decreased
by $0.7 million in the Industrial Group. The increase in the Electronics Group's
inventory was primarily attributable to requirements resulting from startup
programs for manufacturing services and for expected shipments on certain
contracts scheduled during the second half of 2000. Accounts payable increased
by $5.9 million for the first six months of 2000 due to the increase in
inventory requirements and the timing of payments to vendors.
Net cash used in investing activities was $12.0 million for the first six
months of 2000 as compared to $4.9 million for the comparable period of 1999.
This change primarily resulted from the increased levels of capital expenditures
in both the Electronics Group and the Industrial Group, which totaled $3.8
million and $7.9 million, respectively. Capital expenditures for the Electronics
Group were
10
<PAGE>
principally comprised of facilities improvements and manufacturing, assembly and
test equipment. The Industrial Group's capital expenditures included facilities
improvements and new forging and machining equipment to increase and expand the
range of production capabilities.
Net cash provided by financing activities was $12.6 million during the
first six months of 2000 as compared to $10.1 million during the comparable
period of 1999. During the first six months of 2000, the Company's net
borrowings under its revolving credit facilities increased $12.4 million in
order to fund its operating and investing needs.
Under the terms of the credit agreement between the Company and its bank,
the Company had total availability for borrowings and letters of credit under
its revolving credit facility of $33.2 million at July 2, 2000, which, when
combined with the cash balance of $10.4 million, provides for total cash and
borrowing capacity of $43.6 million. Maximum borrowings on the revolving credit
facility are $100.0 million, subject to a $15.0 million limit for letters of
credit.
The Company recently entered into a letter of intent for the acquisition of
certain assets, including inventory, a manufacturing facility and related
equipment to be utilized in the Industrial Group's operations. The Company
intends to fund the acquisition with proceeds from its existing credit
agreement. Although, the acquisition, if completed, will increase the Company's
outstanding borrowings, the Company believes the total borrowing capacity under
its Revolving Credit Agreement will continue to provide the Company with
sufficient liquidity for its existing operations.
The Company believes earnings before depreciation and amortization,
existing cash reserves and available borrowings under its existing credit
facility will satisfy the Company's working capital and capital expenditure
requirements for at least the next twelve months. Cash requirements for periods
beyond the next twelve months depend on the Company's profitability, its ability
to manage working capital requirements and its rate of growth. If the Company
completes the proposed acquisition as discussed above and makes additional
significant acquisitions or if working capital and capital expenditure
requirements exceed expected levels during 2000 or in the foreseeable future, it
may require additional external sources of capital.
Forward-looking Statements
This Form 10-Q contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Similar forward looking
statements are made periodically in reports to the Commission, press releases,
reports and documents and in written and oral presentations to investors,
shareholders, analysts and others, regarding future results or expected
developments. Words such as "anticipates," "believes," "estimates," "expects,"
"is likely," "predicts," and variations of such words and similar expressions
are intended to identify such forward-looking statements. Although Sypris
believes that its expectations are based on reasonable assumptions, it cannot
assure that the expectations contained in such statements will be achieved. Such
statements involve risks and uncertainties which may cause actual future
activities and results of operations to be materially different from those
suggested in this report, including, among others: the Company's dependence on
its current management; the risks and uncertainties present in the Company's
business; business conditions and growth in the general economy and the
electronics and industrial markets served by the Company; competitive factors
and price pressures; availability of third party component parts at reasonable
prices; inventory risks due to shifts in market demand and/or price erosion of
purchased components; changes in product mix; cost and yield issues associated
with the Company's manufacturing facilities; as well as other factors described
elsewhere in this report and in the Company's other filings with the Commission.
11
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 2, 2000 in
Louisville, Kentucky. At the meeting, stockholders elected a Board of eight
directors pursuant to the following votes:
Votes in Votes
Director Favor Withheld
-------- ----- --------
Robert E. Gill..................... 9,312,875 4,308
Jeffrey T. Gill.................... 9,313,536 3,647
R. Scott Gill...................... 9,313,536 3,647
Henry F. Frigon.................... 9,312,950 4,233
William L. Healey.................. 9,313,700 3,483
Roger W. Johnson................... 9,312,950 4,233
Sidney R. Petersen................. 9,312,950 4,233
Robert Sroka....................... 9,313,700 3,483
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Description
------ -----------
27 Financial Data Schedule.
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the three months ended July
2, 2000.
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