10q10k10q10k.net

What changed in SYPRIS SOLUTIONS INC's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of SYPRIS SOLUTIONS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+177 added−154 removedSource: 10-K (2024-04-01) vs 10-K (2023-03-16)

Top changes in SYPRIS SOLUTIONS INC's 2023 10-K

177 paragraphs added · 154 removed · 115 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

26 edited+15 added−13 removed64 unchanged
Biggest changeWe may face new competitors in the future as the outsourcing industry evolves and existing or start-up companies develop capabilities similar to ours. In addition, we will face new competitors as we attempt to increase and expand our business.
Biggest changeIn the aerospace and defense electronics market, we compete primarily against other component suppliers such as Celestica Inc., Jabil Circuit, Inc. and Spartronics. We may face new competitors in the future as the outsourcing industry evolves and existing or start-up companies develop capabilities similar to ours.
Pursue the Strategic Acquisition of Assets . Over the long-term, we may consider the strategic acquisition of assets to consolidate our position in our core markets, expand our presence outside the U.S., create or strengthen our relationships with leading companies and expand our range of products in return for multi-year supply agreements.
Over the long-term, we may consider the strategic acquisition of assets to consolidate our position in our core markets, expand our presence outside the U.S., create or strengthen our relationships with leading companies and expand our range of products in return for multi-year supply agreements.
We will consider assets that can be integrated with our core businesses and that can be used to support other customers, thereby improving asset utilization and achieving greater productivity, flexibility and economies of scale. 3 Grow Through the Addition of New Value-Added Manufacturing Capabilities.
We will consider assets that can be integrated with our core businesses and that can be used to support other customers, thereby improving asset utilization and achieving greater productivity, flexibility and economies of scale. Grow Through the Addition of New Value-Added Manufacturing Capabilities.
Patents, Trademarks and Licenses We own or license a number of patents and trademarks, but our business as a whole is not materially dependent upon any one patent, trademark, license or technologically related group of patents or licenses. 5 We regard our manufacturing processes and certain designs as proprietary trade secrets and confidential information.
Patents, Trademarks and Licenses We own or license a number of patents and trademarks, but our business as a whole is not materially dependent upon any one patent, trademark, license or technologically related group of patents or licenses. We regard our manufacturing processes and certain designs as proprietary trade secrets and confidential information.
However, for a meaningful part of our business, we arrange our own suppliers and assume the additional risks of price increases, quality concerns and production delays. Raw steel and fabricated steel parts are a major component of our cost of sales and net revenue for the industrial manufacturing business.
However, for a meaningful part of our business, we arrange our own suppliers and assume the additional risks of price increases, quality concerns and production delays. 5 Raw steel and fabricated steel parts are a major component of our cost of sales and net revenue for the industrial manufacturing business.
Our ability to deliver on this commitment over time is expected to have a significant impact on customer satisfaction, loyalty and follow‑on business. 4 We have signed long-term supply agreements with Detroit Diesel, Volvo, Tremec and Sistemas.
Our ability to deliver on this commitment over time is expected to have a significant impact on customer satisfaction, loyalty and follow‑on business. We have signed long-term supply agreements with Detroit Diesel, Volvo, Tremec and Sistemas.
Customer Concentration Our five largest customers in 2022 were Sistemas Automotrices de Mexico, S.A de C.V. (Sistemas), Detroit Diesel, Northrop Grumman, ADI and SubCom, LLC (SubCom), which in the aggregate accounted for 70% of net revenue.
Customer Concentration Our five largest customers in 2023 were Sistemas Automotrices de Mexico, S.A de C.V. (Sistemas), Northrop Grumman, Detroit Diesel, SubCom, LLC (SubCom) and ADI, which in the aggregate accounted for 70% of net revenue.
Our manufacturing processes frequently involve the fabrication or assembly of a product or subassembly according to specifications provided by our customers. We strive to enhance our manufacturing capabilities by advanced quality and manufacturing techniques, lean manufacturing, just-in-time procurement and continuous flow manufacturing, six sigma, total quality management, stringent and real-time engineering change control routines and total cycle time reduction techniques.
Our manufacturing processes frequently involve the fabrication or assembly of a product or subassembly according to specifications provided by our customers. We strive to enhance our manufacturing capabilities by advanced quality and manufacturing techniques, lean manufacturing, continuous flow manufacturing, six sigma, total quality management, stringent and real-time engineering change control routines and total cycle time reduction techniques.
Sypris Technologies represented approximately 63% of our net revenues in 2022. 1 Sypris Electronics. Sypris Electronics generates revenue primarily through circuit card and full box build manufacturing, high reliability manufacturing, systems assembly and integration, design for manufacturability and design to specification, for customers in the aerospace and defense electronics markets.
Sypris Technologies represented approximately 57% of our net revenues in 2023. 1 Sypris Electronics. Sypris Electronics generates revenue primarily through circuit card and full box build manufacturing, high reliability manufacturing, systems assembly and integration, design for manufacturability and design to specification, for customers in the aerospace and defense electronics markets.
Department of Defense has challenged Sypris Electronics over the past several years. During 2021 and 2022, we announced new program awards for Sypris Electronics, with certain programs continuing into 2024.
Department of Defense has challenged Sypris Electronics over the past several years. During 2022 and 2023, we announced new program awards for Sypris Electronics, with certain programs continuing into 2025.
Our Mexican subsidiary is a part of Sypris Technologies and manufacture and sell a number of products similar to those Sypris Technologies produces or previously produced in the U.S.
Our Mexican subsidiary is a part of Sypris Technologies and manufactures and sells a number of products similar to those Sypris Technologies produces or previously produced in the U.S.
In 2022, net income from our Mexican operations was $2.2 million, as compared to our consolidated net loss of $2.5 million. In 2021, net income from our Mexican operations was $2.5 million, as compared to our consolidated net income of $2.9 million.
In 2023, net income from our Mexican operations was $1.9 million, as compared to our consolidated net loss of $1.6 million. In 2022, net income from our Mexican operations was $2.2 million, as compared to our consolidated net loss of $2.5 million.
For each of the years ended December 31, 2022 and 2021, “other expense, net” included foreign currency translation losses of less than $0.1 million. Net revenues from our Mexican operations were $51.2 million, or 47%, and $45.4 million, or 47%, of our consolidated net revenues in 2022 and 2021, respectively.
For each of the years ended December 31, 2023 and 2022, “other expense, net” included foreign currency translation losses of less than $0.2 million. Net revenues from our Mexican operations were $56.8 million, or 42%, and $51.2 million, or 47%, of our consolidated net revenues in 2023 and 2022, respectively.
In 2021, Sistemas, Detroit Diesel and Northrop Grumman, represented approximately 21%, 18% and 16% of our net revenue, respectively. No other customer accounted for more than 10% of our net revenue in 2021. Geographic Areas and Currency Fluctuations Our operations are located in the U.S. and Mexico.
In 2022, Sistemas, Detroit Diesel and Northrop Grumman, represented approximately 22%, 18% and 14% of our net revenue, respectively. No other customer accounted for more than 10% of our net revenue in 2023 or 2022. Geographic Areas and Currency Fluctuations Our operations are located in the U.S. and Mexico.
Human Capital As of December 31, 2022, we had a total of 719 employees, of which 538 were engaged in manufacturing, 11 were engaged in sales and marketing, 52 were engaged in engineering and 118 were engaged in administration. Approximately 415 of our employees were covered by collective bargaining agreements with various unions that expire on various dates through 2025.
Human Capital As of December 31, 2023, we had a total of 752 employees, of which 550 were engaged in manufacturing, 16 were engaged in sales and marketing, 51 were engaged in engineering and 135 were engaged in administration. Approximately 406 of our employees were covered by collective bargaining agreements with various unions that expire on various dates through 2025.
We have a Code of Conduct (“Code of Conduct”) applicable to all of our employees, our officers and directors and others (such as contractors) performing services for the Company.
We are focused on harmonizing our approach to talent to provide seamless opportunities and better experiences to our employees. We have a Code of Conduct (“Code of Conduct”) applicable to all of our employees, our officers and directors and others (such as contractors) performing services for the Company.
In the industrial manufacturing markets, we compete primarily against other component suppliers such as Ramkrishna Forgings Limited, Mid-West Forge, Inc., GNA Axles Limited, Brunner International, Inc., Bharat Forge, Commercial Forged Products, Spencer Forge and Machine, Inc., Traxle, SPX Flow, Inc., T.D.
In the industrial manufacturing markets, we compete primarily against other component suppliers such as Ramkrishna Forgings Limited, Mid-West Forge, Inc., GNA Axles Limited, Brunner International, Inc., Bharat Forge, Commercial Forged Products, Spencer Forge and Machine, Inc., Traxle, T.D. Williamson Inc. and National Oilwell Varco, Inc., certain of which serve as suppliers to many Tier I and smaller companies.
Although we believe overall that relations with our labor unions are positive, there can be no assurance that present and future issues with our unions will be resolved favorably, that negotiations will be successful or that we will not experience a work stoppage, which could adversely affect our consolidated results of operations.
Although we believe overall that relations with our labor unions are positive, there can be no assurance that present and future issues with our unions will be resolved favorably, that negotiations will be successful or that we will not experience a work stoppage, which could adversely affect our consolidated results of operations. 6 Throughout our Company’s history, we always recognized that people drive the strength of our business and our ability to effectively serve our customers and sustain our competitive position.
The health and wellness of our employees are critical to our success. For information on the risks related to our human capital resources, see Item 1A – Risk Factors.
For information on the risks related to our human capital resources, see Item 1A – Risk Factors.
We may not be successful in addressing these shortages and other issues. Sypris Electronics accounted for approximately 37% of net revenue in 2022. Our Markets Sypris Technologies. The industrial manufacturing markets of this segment include automotive, truck and off-highway components and assemblies and specialty closures.
Sypris Electronics accounted for approximately 43% of net revenue in 2023. Our Markets Sypris Technologies. The industrial manufacturing markets of this segment include automotive, truck and off-highway components and assemblies and specialty closures.
We will continue to prioritize our resources to support the needs of industry leaders that embrace multi-year contractual relationships as a strategic component of their supply chain management and have the potential for long-term growth. We prefer contracts that are sole-source by part number so we can work closely with the customer to the mutual benefit of both parties.
We will continue to prioritize our resources to support the needs of industry leaders that embrace multi-year contractual relationships as a strategic component of their supply chain management and have the potential for long-term growth.
Our five largest customers in 2021 were Sistemas, Detroit Diesel, Northrop Grumman, ADI and Tremec, which in the aggregate accounted for 68% of net revenue. In 2022, Sistemas, Detroit Diesel and Northrop Grumman, represented approximately 22%, 18% and 14% of our net revenue, respectively. No other customer accounted for more than 10% of our net revenue in 2022.
Our five largest customers in 2022 were Sistemas, Detroit Diesel, Northrop Grumman, ADI and SubCom, which in the aggregate accounted for 70% of net revenue. In 2023, Sistemas, Northrop Grumman, Detroit Diesel and ADI, represented approximately 22%, 17%, 13% and 10% of our net revenue, respectively.
We also utilize engineering specialists to facilitate the sales process by working with potential customers to reduce the cost of the products they need.
We supplement these selling efforts with a variety of sales literature, advertising in trade media and participating in trade shows. We also utilize engineering specialists to facilitate the sales process by working with potential customers to reduce the cost of the products they need.
On March 28, 2022, President Biden's Administration submitted to Congress the President’s Fiscal Year (FY) 2023 budget request, which proposed $813.4 billion in total national defense spending, of which $773 billion was for the base budget of the DoD.
On March 9, 2023, President Biden's Administration submitted to Congress the President’s Fiscal Year (FY) 2024 budget request, which proposed $886 billion in total national defense spending, of which $842 billion was for the base budget of the DoD. On June 3, 2023, the President signed H.R. 3746 “The Fiscal Responsibility Act” (FRA) into law.
You can find more information about our regional operating results, including our export sales, in Note 20 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.
You can find more information about our regional operating results, including our export sales, in Note 20 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. 4 Sales and Business Development Our principal sources of new business originate from the expansion of existing relationships, referrals and direct sales through senior management, direct sales personnel, domestic and international sales representatives, distributors and market specialists.
We expect to compete for follow-on business opportunities as a subcontractor on future builds of several existing government programs.
We expect to compete for follow-on business opportunities as a subcontractor on future builds of several existing government programs. However, the federal budget and debt ceiling are expected to continue to be the subject of considerable uncertainty and the impact on demand for our products and services and our business are difficult to predict.
Removed
On December 29, 2022, the President signed the FY 2023 Omnibus Appropriations Act into law, which provides $858 billion in total national defense funding, of which $816.7 billion is for the DoD base budget. This reflects a $44.6 billion increase over the FY 2023 request for national defense spending, and a $43.7 billion increase for the DoD.
Added
The legislation suspended the debt ceiling until January 1, 2025, and, among other provisions, capped national defense spending at $886 billion for FY 2024 (President’s Budget Request level) and $895 billion for FY 2025. Supplemental funding legislation is not subject to the budget caps.
Removed
The FY 2023 Omnibus Appropriations Act also provided separate and additional funding of $47 billion for Ukraine, the fourth supplemental since March of 2022, bringing the total amount of supplemental funding authority provided to $113 billion.
Added
If a continuing resolution is enacted and still in effect and Congress does not pass all twelve defense and non-defense discretionary appropriations bills by April 30, 2024, the FRA will result in a decrease in government spending for FY 2024 by one percent from FY 2023 enacted levels.
Removed
The President’s FY 2024 budget request is anticipated to be submitted to Congress in March 2023, initiating the FY 2024 defense authorization and appropriations legislative process. In addition to the FY 2024 budget process, Congress will have to contend with the legal limit on U.S. debt, commonly known as the debt ceiling.
Added
The United States House of Representatives (House) and Senate continue the legislative process on the FY 2024 budget. On December 22, 2023, the President signed the FY 2024 National Defense Authorization Act (NDAA) into law. The NDAA authorizes funding at the FRA cap of $886 billion for National Defense.
Removed
The current statutory limit of $31.4 trillion was reached in January 2023, requiring the Treasury Department to take accounting measures to continue normally financing U.S. government obligations while avoiding exceeding the debt ceiling. It is expected, however, the U.S. government will exhaust these measures by June 2023.
Added
Recently, the President signed a continuing resolution that extends funding of six appropriations bills to March 22, 2024 and the remaining six to September 30, 2024. This will provide Congress additional time to work on enacting all twelve FY 2024 appropriations bills based on the overarching U.S.
Removed
If the debt ceiling is not raised, the U.S. government may not be able to fulfill its funding obligations and there could be significant disruption to all discretionary programs and wider financial and economic repercussions. The federal budget and debt ceiling are expected to continue to be the subject of considerable congressional debate.
Added
Government spending agreement reached by House and Senate leaders on January 7, 2024 which comports with the FRA cap of $886 billion for national defense in FY 2024. Under the continuing resolution, funding at amounts consistent with appropriated levels for FY 2023 are available, subject to certain restrictions, but new contract and program starts are not authorized.
Removed
Although we believe DoD, intelligence, and homeland security programs will continue to receive consensus support for increased funding and would likely receive priority if this scenario came to fruition, the effect on individual programs or our results cannot be predicted at this time.
Added
We expect our key programs will continue to be supported and funded under the continuing resolution. However, during periods covered by continuing resolutions, we may experience delays in new awards of our products and services, and those delays may adversely affect our results of operations.
Removed
However, the federal budget and debt ceiling are expected to continue to be the subject of considerable uncertainty and the impact on demand for our products and services and our business are difficult to predict. 2 During 2022, the COVID-19 pandemic, supply chain challenges and increased demand caused global electronic component shortages, extended lead times and pricing escalations.
Added
On October 20, 2023, the President submitted a $106 billion supplemental funding request to Congress for assistance to Ukraine, Israel and the Indo-Pacific, related U.S. restock of capacity transfers to Ukraine and Israel, and U.S. border security. Congress has not yet acted on this request, which is part of the broader debate on FY 2024 U.S.
Removed
This had a negative impact on our production schedules and margin performance in 2022 for Sypris Electronics. The majority of the government aerospace and defense programs that we support require specific components that are sole-sourced to specific suppliers; therefore, the resolution of supplier constraints requires coordination with our customers or the end-users of the products.
Added
Government funding and border security policy. Supplemental and emergency funding are not subject to the FRA cap.
Removed
We have partnered with our customers to qualify alternative components or suppliers and will continue to focus on our supply chain to attempt to mitigate the impact of supply component shortages on our business. We expect that global delays of raw materials will impact overall component availability in 2023.
Added
If enacted, this could ease DoD funding limits under the FRA or other limiting scenarios such as a prolonged continuing resolution. 2 On March 11, 2024, the President’s FY 2025 budget request was submitted to Congress, initiating the FY 2025 defense authorization and appropriations legislative process, which proposed $850 billion for the base budget of the DoD.
Removed
Sales and Business Development Our principal sources of new business originate from the expansion of existing relationships, referrals and direct sales through senior management, direct sales personnel, domestic and international sales representatives, distributors and market specialists. We supplement these selling efforts with a variety of sales literature, advertising in trade media and participating in trade shows.
Added
If Congress is not able to enact FY 2024 appropriations bills or extend the continuing resolution, the U.S. Government will enter a whole or partial shutdown. The impact of any government shutdown is uncertain.
Removed
Williamson Inc. and National Oilwell Varco, Inc., certain of which serve as suppliers to many Tier I and smaller companies. In the aerospace and defense electronics market, we compete primarily against other component suppliers such as Celestica Inc., Jabil Circuit, Inc. and Spartronics.
Added
However, if a government shutdown were to occur and were to continue for an extended period, we could be at risk of reduced orders, program cancellations, schedule delays, production halts and other disruptions and nonpayment, which could adversely affect our results of operations.
Removed
Throughout our Company’s history, we always recognized that people drive the strength of our business and our ability to effectively serve our clients and sustain our competitive position. We are focused on harmonizing our approach to talent to provide seamless opportunities and better experiences to our employees.
Added
Further, if any one of the 12 appropriations bills is under a continuing resolution as of April 30, 2024, USG funding levels will reset to FY 2023 enacted levels minus 1% for the remainder of FY 2024 or until all 12 appropriations are enacted.
Removed
This succession planning exercise is conducted annually and reviewed with the Board of Directors. 6 In response to the COVID-19 pandemic and in an effort to keep our employees safe and to maintain operations, we sought to comply with government orders in all the states and countries where we operate and in some instances required and enforced stricter protocols than were required by the governing authorities to minimize the risks to our employees.
Added
We prefer contracts that are sole-source by part number so we can work closely with the customer to the mutual benefit of both parties. 3 Pursue the Strategic Acquisition of Assets .
Added
In addition, we will face new competitors as we attempt to increase and expand our business.
Added
This succession planning exercise is conducted annually and reviewed with the Board of Directors. Through our safety and health program we seek to optimize our operations with targeted safety, health and wellness opportunities designed to provide safe work conditions, and a healthy work environment. The health and wellness of our employees are critical to our success.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

27 edited+14 added−3 removed119 unchanged
Biggest changeIn the past, we have experienced power outages which reduced our ability to deliver products and meet our customers’ demand for those products. If we or our customers experience future interruptions in service from these providers, our production and/or delivery of products could be negatively affected.
Biggest changeWe and our customers depend on a constant supply of electricity and natural gas from utility providers for the operation of our respective businesses and facilities. In the past, we have experienced power outages which reduced our ability to deliver products and meet our customers’ demand for those products.
We may be unable fully to exploit or adequately to protect intellectual property rights resulting from our development efforts, which could materially affect our ability to compete, our reputation and our financial position, results of operations and/or cash flows. Labor Relations Risks We must attract and retain qualified employees while successfully managing related costs.
We may be unable fully to exploit or adequately to protect intellectual property rights resulting from our development efforts, which could materially affect our ability to compete, our reputation and our financial position, results of operations and/or cash flows. 14 Labor Relations Risks We must attract and retain qualified employees while successfully managing related costs.
If insurance coverage, customer indemnifications and/or other legal protections are not available or are not sufficient to cover risks or losses, it could have a material adverse effect on our financial position, results of operations and/or cash flows. We face other factors which could seriously disrupt our operations.
If insurance coverage, customer indemnifications and/or other legal protections are not available or are not sufficient to cover risks or losses, it could have a material adverse effect on our financial position, results of operations and/or cash flows. 17 We face other factors which could seriously disrupt our operations.
As we expand our customers and our products, we must also effectively manage a more diverse production schedule to avoid slowing our production output. As we are awarded new products with new customers, we must onboard new operational processes in an effective and efficient manner.
As we work to expand our customers and our products, we must also effectively manage a more diverse production schedule to avoid slowing our production output. As we are awarded new products with new customers, we must onboard new operational processes in an effective and efficient manner.
The Company entered into a promissory note with BMO Harris Bank National Association (“BMO”), effective May 1, 2020, that provides for a loan in the amount of $3.6 million (the “PPP Loan”) pursuant to expansion of the Small Business Administration (“SBA”) 7(a) loan program (the “Paycheck Protection Program” or “PPP”), established under the CARES Act. The U.S.
The Company entered into a promissory note with BMO Harris Bank National Association (“BMO”), effective May 1, 2020, that provided for a loan in the amount of $3.6 million (the “PPP Loan”) pursuant to expansion of the Small Business Administration (“SBA”) 7(a) loan program (the “Paycheck Protection Program” or “PPP”), established under the CARES Act. The U.S.
We cannot guarantee that any particular contract with a customer will result in the anticipated level of revenue or profitability. We depend on a few key customers in challenging industries for most of our revenues. Our five largest customers in 2022 were Sistemas, Detroit Diesel, Northrop Grumman, ADI and SubCom, which in the aggregate accounted for 70% of net revenue.
We cannot guarantee that any particular contract with a customer will result in the anticipated level of revenue or profitability. We depend on a few key customers in challenging industries for most of our revenues. Our five largest customers in 2023 were Sistemas, Northrop Grumman, Detroit Diesel, SubCom and ADI, which in the aggregate accounted for 70% of net revenue.
Unexpected changes in our customers’ demand levels and our ability to execute our production efficiently have harmed our operating results in the past and could do so in the future. Many of our customers will not commit to firm production or delivery schedules.
Unexpected changes in our customers’ demand levels and our inability to execute our production efficiently have harmed our operating results in the past and could do so in the future. Many of our customers will not commit to firm production or delivery schedules.
Additionally, though we believe we are eligible recipients of the PPP Loan under the PPP and our use of PPP Loan proceeds has been in compliance with PPP rules and guidance, our receipt of the PPP Loan and the use of PPP Loan proceeds could result in negative publicity, or expose us to claims or potential liability under the federal False Claims Act, which prohibits the known filing of a false claim or the known use of false statements to obtain payment from the federal government, if it is determined that we were in fact not eligible to take the PPP Loan in the first instance.
Additionally, though we believe we were eligible recipients of the PPP Loan under the PPP and our use of PPP Loan proceeds was in compliance with PPP rules and guidance, our receipt of the PPP Loan and the use of PPP Loan proceeds could result in negative publicity, or expose us to claims or potential liability under the federal False Claims Act, which prohibits the known filing of a false claim or the known use of false statements to obtain payment from the federal government, if it is determined that we were in fact not eligible to take the PPP Loan in the first instance.
We routinely experience cyber security threats, threats to our information technology infrastructure and attempts to gain access to our sensitive information, as do our customers, vendors, suppliers and subcontractors, including the threat of ransomware attacks on our systems and the systems of third-party vendors and other parties with which we conduct business, all of which may become more pronounced in the event of geopolitical events and other uncertainties, such as the war in Ukraine.
We routinely experience cyber security threats, threats to our information technology infrastructure and attempts to gain access to our sensitive information, as do our customers, vendors, suppliers and subcontractors, including the threat of ransomware attacks on our systems and the systems of third-party vendors and other parties with which we conduct business, all of which may become more pronounced in the event of geopolitical events and other uncertainties, such as the war in Ukraine or the Israel and Gaza conflict.
Congressional budgetary constraints or reallocations could reduce our government related sales. Sypris Electronics serves as a contractor for large aerospace and defense companies such as Northrop Grumman, BAE Systems and Collins Aerospace, typically under federally funded programs, which represented approximately 28% and 29% of net revenue in 2022 and 2021, respectively. Budget uncertainty, the potential for U.S.
Congressional budgetary constraints or reallocations could reduce our government related sales. Sypris Electronics serves as a contractor for large aerospace and defense companies such as Northrop Grumman, BAE Systems and Collins Aerospace, typically under federally funded programs, which represented approximately 31% and 28% of net revenue in 2023 and 2022, respectively. Budget uncertainty, the potential for U.S.
Certain Mexico employees are covered by an annually ratified collective bargaining agreement. These employees in Mexico represented approximately 55% of the Company’s workforce, or 394 employees at December 31, 2022. Our ability to maintain our workforce depends on our ability to attract and retain new and existing customers as well as maintain good relations with our employees and labor unions.
Certain Mexico employees are covered by an annually ratified collective bargaining agreement. These employees in Mexico represented approximately 51% of the Company’s workforce, or 382 employees at December 31, 2023. Our ability to maintain our workforce depends on our ability to attract and retain new and existing customers as well as maintain good relations with our employees and labor unions.
Many of these risk factors are also identified in connection with the more specific descriptions of our business and results of operations contained throughout this report. Customers and Revenue Growth Risks We seek to generate new business revenues to support our ongoing operations. We had a net loss of $2.5 million in 2022.
Many of these risk factors are also identified in connection with the more specific descriptions of our business and results of operations contained throughout this report. Customers and Revenue Growth Risks We seek to generate new business revenues to support our ongoing operations. We had a net loss of $1.6 million in 2023.
Disputes with labor unions could disrupt our business plans. As of December 31, 2022, we had collective bargaining agreements covering approximately 415 employees (all of which were in Sypris Technologies), or 58% of our total employees. Excluding certain Mexico employees covered under an annually ratified agreement, there are no collective bargaining agreements expiring within the next 12 months.
Disputes with labor unions could disrupt our business plans. As of December 31, 2023, we had collective bargaining agreements covering approximately 406 employees (all of which were in Sypris Technologies), or 54% of our total employees. Excluding certain Mexico employees covered under an annually ratified agreement, there are no collective bargaining agreements expiring within the next twelve months.
We cannot assure you that we will be successful in maintaining or increasing our revenues with new and existing customers to a level necessary to achieve and maintain profitability.
We cannot assure you that we will be successful in maintaining or increasing our revenues with new and existing customers to a level necessary to support our working capital requirements or to achieve profitability.
If we were to be audited and receive an adverse outcome in such an audit, we could be required to return the full amount of the PPP Loan and may potentially be subject to civil and criminal fines and penalties.
If we were to be audited and receive an adverse outcome in such an audit, we could be required to return the full amount of the PPP Loan and may potentially be subject to civil and criminal fines and penalties. We may not have the resources to repay the PPP Loan if required to do so by the federal government.
In addition, our global operations expose us to risks associated with public health crises, such as pandemics, epidemics, and quarantines or shutdowns related to public health crisis and other catastrophic events, which could harm our business and cause our operating results to suffer. For example, the COVID-19 pandemic resulted in travel disruption, trade disruption and adversely affected our operations.
In addition, our global operations expose us to risks associated with public health crises, such as pandemics, epidemics, and quarantines or shutdowns related to public health crisis and other catastrophic events, which could harm our business and cause our operating results to suffer.
On June 28, 2021, the Company received notice from BMO that BMO had received confirmation from the SBA that the application for forgiveness of the PPP Loan had been approved.
On November 24, 2020, the Company submitted an application for forgiveness of the entire amount due on the PPP Loan. On June 28, 2021, the Company received notice from BMO that BMO had received confirmation from the SBA that the application for forgiveness of the PPP Loan had been approved.
If such insurance is not available or not available on economically acceptable terms, our business could be materially and adversely affected. 16 Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks, which could adversely affect our profitability and overall financial position.
Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks, which could adversely affect our profitability and overall financial position.
We believe that we need to increase our revenues through new business generation in order to operate profitably. We are working to increase our revenues with new and existing customers.
We also generated negative operating cash flows of $11.1 million in 2023. We believe that we need to increase our revenues through new business generation in order to operate profitably. We are working to increase our revenues with new and existing customers.
Changes in interest rates and asset returns could increase our pension funding obligations and reduce our profitability. We have unfunded obligations under certain of our defined benefit pension plans.
For example, the COVID-19 pandemic resulted in travel disruption, trade disruption and adversely affected our operations. 15 Changes in interest rates and asset returns could increase our pension funding obligations and reduce our profitability. We have unfunded obligations under certain of our defined benefit pension plans.
We have experienced increased costs due to the heavy consumption of energy in our production process, which have been offset through revised production schedules. However, if the cost of energy continues to increase, our results of operations and those of certain customers could be negatively impacted.
If we or our customers experience future interruptions in service from these providers, our production and/or delivery of products could be negatively affected. We have experienced increased costs due to the heavy consumption of energy in our production process, which have been offset through revised production schedules.
If we fail to comply with present or future regulations, we could be forced to alter, suspend or discontinue our manufacturing processes and pay substantial fines or penalties. 14 Groundwater and other contamination has occurred at certain of our current and former facilities during the operation of those facilities by their former owners, and this contamination may occur at future facilities we operate or acquire.
Groundwater and other contamination has occurred at certain of our current and former facilities during the operation of those facilities by their former owners, and this contamination may occur at future facilities we operate or acquire.
It is likely that the tight insurance market will continue into the foreseeable future. Our business requires that we maintain various types of insurance.
It is likely that the tight insurance market will continue into the foreseeable future. Our business requires that we maintain various types of insurance. If such insurance is not available or not available on economically acceptable terms, our business could be materially and adversely affected.
We are subject to a variety of environmental regulations relating to the use, storage, discharge and disposal of hazardous chemicals and substances used in our operations.
We are subject to a variety of environmental regulations relating to the use, storage, discharge and disposal of hazardous chemicals and substances used in our operations. If we fail to comply with present or future regulations, we could be forced to alter, suspend or discontinue our manufacturing processes and pay substantial fines or penalties.
Access to Capital and Acquisitions Risks Until we have returned to sustained levels of consistent profitability, our access to capital may be limited. Until the Company is able to achieve and maintain consistent profitability, there can be no assurances that the Company will succeed in attracting new, acceptable sources of debt or equity capital.
Until we have returned to sustained levels of consistent profitability, our access to capital may be limited. Until the Company is able to achieve and maintain consistent profitability, we may not be able to obtain financing.
Furthermore, even if we are successful in defending against a claim relating to our products, claims of this nature could cause our customers to lose confidence in our products and us. 15 General Risks Risks associated with climate change and other environmental impacts, and increased focus and evolving views of our customers, shareholders and other stakeholders on climate change issues, could negatively affect our business and operations.
Furthermore, even if we are successful in defending against a claim relating to our products, claims of this nature could cause our customers to lose confidence in our products and us. General Risks Fluctuations in foreign currency exchange rates have increased, and could continue to increase, our operating costs. We have manufacturing operations located in Mexico.
If we are unable to achieve and maintain profitability, we may need to use existing cash resources or other assets to fund operating losses. While we have borrowed from Gill Family Capital Management, Inc.
If we are unable to achieve and maintain profitability, we will need to use existing cash resources or liquidate other assets to fund operating losses. While we have borrowed from GFCM on acceptable terms in the past, there can be no assurances that any additional debt financing from GFCM will be available in the future.
Removed
Each of these factors could adversely affect operating results. Shortages or increased costs of utilities could harm our business and our customers. We and our customers depend on a constant supply of electricity and natural gas from utility providers for the operation of our respective businesses and facilities.
Added
Each of these factors could adversely affect operating results. The conflict in Ukraine has increased global tensions and instability, highlighted threats and increased global demand, as well as further disrupted global supply chains. We may not be able to fully offset any cost increases or price increases of our products due to delays in production.
Removed
(“GFCM”), an entity controlled by the Gill family that beneficially owns approximately 14.8% of our common stock, on acceptable terms in the past, there can be no assurances that such debt financing would be available in the future.
Added
More recently, the hostilities in Israel and the Gaza Strip have further heightened global tensions and instability. At this time, it is unknown whether hostilities in this region will escalate into an even larger conflict. We do not have a significant business presence in the region, and therefore do not anticipate significant adverse financial impacts directly from the current conflict.
Removed
We may not have the resources to repay the PPP Loan if required to do so by the federal government. 13 On November 24, 2020, the Company submitted an application for forgiveness of the entire amount due on the PPP Loan.
Added
Further, as discussed below, the Company experienced a liquidity shortfall in the fourth quarter of 2023 and the first quarter of 2024. Suppliers may not sell to us given our liquidity position.
Added
If we are unable to purchase components from our suppliers, we may not be able to continue to service our customers which could adversely affect our financial position, results of operations and/or cash flows. Shortages or increased costs of utilities could harm our business and our customers.
Added
However, if the cost of energy continues to increase, our results of operations and those of certain customers could be negatively impacted. Access to Capital and Liquidity Risks We may require additional financing to conduct our operations and to repay our outstanding debt obligations.
Added
We cannot be certain that additional capital will be available on terms acceptable to us, or at all. As reflected in the consolidated financial statements, the Company reported a net loss of $1.6 million and cash used in operations of $11.1 million for the year ended December 31, 2023.
Added
The Company’s net inventory increased from $42.1 million to $77.3 million as of December 31, 2022 and 2023, respectively, primarily related to contracts with Sypris Electronics’ aerospace and defense customers.
Added
Shipments to customers on certain of these contracts were delayed beyond the initial delivery dates, which negatively impacted the cycle time to convert inventory to cash during the year ended December 31, 2023. As a result, the Company experienced a liquidity shortfall in the fourth quarter of 2023 and the first quarter of 2024.
Added
The Company received the benefit of additional loans of $5.0 million from Gill Family Capital Management, Inc.
Added
(“GFCM”), an entity controlled by the Gill family that beneficially owns approximately 14.6% of our common stock, to help the Company manage its liquidity during those periods. 13 Our ability to service our current liabilities and satisfy our debt obligations will require a significant amount of cash.
Added
If we are unable to achieve our forecasted revenue, or if our costs are higher than expected, we may be required to revise our plans to provide for additional cost-cutting measures, seek additional financing or to consider other strategic alternatives. We may not be able to secure additional financing on favorable terms, if at all.
Added
Excluding the cost of steel used in production, a significant portion of our operating expenses are denominated in the Mexican Peso. Currency exchange rates fluctuate daily as a result of a number of factors, including changes in a country's political and economic policies.
Added
Volatility in the currencies of our entities and the United States dollar, as well as inflationary costs, could seriously harm our business, operating results and financial condition. The primary impact of currency exchange fluctuations is on the cash, payables and expenses of our Mexican operating entities. The Company does not currently hedge our Mexican Peso denominated expenses.
Added
Unexpected losses have occurred from increases in the value of the Mexican Peso relative to the United States dollar and further unexpected losses could occur, which could be material to our business, financial results, or operations. 16 Risks associated with climate change and other environmental impacts, and increased focus and evolving views of our customers, shareholders and other stakeholders on climate change issues, could negatively affect our business and operations.

Item 2. Properties

Properties — owned and leased real estate

4 edited+2 added−1 removed3 unchanged
Biggest changeISO 9001 A certification process comprised of quality system requirements to ensure quality in the areas of design, development, production, installation and servicing of products. 18 Certification/Specification Description NADCAP accredited The National Aerospace and Defense Contractors Accreditation Program is a global cooperative accreditation program for aerospace engineering, defense and related industries.
Biggest changeISO 14001 A set of standards and procedures relating to environmental compliance management. 19 Certification/Specification Description ISO 9001 A certification process comprised of quality system requirements to ensure quality in the areas of design, development, production, installation and servicing of products.
Location Segment (Market Served) Own or Lease (Expiration) Approximate Square Feet Certifications Corporate Office: Louisville, Kentucky Lease (2024) 13,800 Manufacturing Facilities: Louisville, Kentucky Sypris Technologies (Oil & Gas Pipeline Components) Own 57,000 ISO 9001 Tampa, Florida Sypris Electronics (Aerospace & Defense Electronics) Lease (2027) 50,000 ISO 9001 AS 9100 NASA-STD-8739 IPC-A-610, Class 3 J-STD-001, Class 3 NADCAP accredited Toluca, Mexico Sypris Technologies (Truck Components and Oil & Gas Pipeline Components) Lease (2026) 215,000 IS 14001 TS 16949 ASME Certified Clean Industry Certified Below is a listing and description of the various manufacturing certifications or specifications that we utilize at various of our facilities.
Location Segment (Market Served) Own or Lease (Expiration) Approximate Square Feet Certifications Corporate Office: Louisville, Kentucky Lease (2024) 13,800 Manufacturing Facilities: Louisville, Kentucky Sypris Technologies (Oil & Gas Pipeline Components) Own 57,000 ISO 9001 ASME Certified Tampa, Florida Sypris Electronics (Aerospace & Defense Electronics) Lease (2027) 50,000 ISO 9001 AS 9100 NASA-STD-8739 IPC-A-610, Class 3 J-STD-001, Class 3 NADCAP accredited Toluca, Mexico Sypris Technologies (Truck Components and Oil & Gas Pipeline Components) Lease (2026) 215,000 ISO 14001 TS 16949 ASME Certified Clean Industry Certified PED Certified Below is a listing and description of the various manufacturing certifications or specifications that we utilize at various of our facilities.
NASA-STD-8739 A specification for space programs designated by the National Aeronautics and Space Administration. TS 16949 A quality certification system developed within the automotive sector. Using ISO 9001:2000 as its foundation, ISO/TS 16949:2002 specifies the quality management system (QMS) requirements for the design, development, production, installation and servicing of automotive related products.
Using ISO 9001:2000 as its foundation, ISO/TS 16949:2002 specifies the quality management system (QMS) requirements for the design, development, production, installation and servicing of automotive related products.
IPC-A-610 A certification process for electronics assembly manufacturing which describes materials, methods and verification criteria for producing high quality electronic products. Class 3 specifically includes high performance or performance-on-demand products where equipment downtime cannot be tolerated, end-use environment may be uncommonly harsh, and the equipment must function when required.
Class 3 specifically includes high performance or performance-on-demand products where equipment downtime cannot be tolerated, end-use environment may be uncommonly harsh, and the equipment must function when required. J-STD-001 A family of voluntary standards of industry-accepted workmanship criteria for electronic assemblies.
Removed
J-STD-001 A family of voluntary standards of industry-accepted workmanship criteria for electronic assemblies. ISO 14001 A set of standards and procedures relating to environmental compliance management.
Added
PED Certified The Pressure Equipment Directive (PED) is a product directive issued by the European Community that sets the standards for the design, fabrication, installation, and use of pressure equipment. IPC-A-610 A certification process for electronics assembly manufacturing which describes materials, methods and verification criteria for producing high quality electronic products.
Added
NADCAP accredited The National Aerospace and Defense Contractors Accreditation Program is a global cooperative accreditation program for aerospace engineering, defense and related industries. NASA-STD-8739 A specification for space programs designated by the National Aeronautics and Space Administration. TS 16949 A quality certification system developed within the automotive sector.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed3 unchanged
Biggest changeThe information set forth in Note 15 to the consolidated financial statements in this Annual Report on Form 10-K is incorporated by reference into this Item 3. Item 4. Mine Safety Disclosures Not applicable. 19 PART II
Biggest changeThe information set forth in Note 15 to the consolidated financial statements in this Annual Report on Form 10-K is incorporated by reference into this Item 3.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed1 unchanged
Biggest changeWe do not anticipate paying dividends in 2023. There were no shares of common stock repurchased during the three months ended December 31, 2022. Item 6. [Reserved] 20
Biggest changeWe do not anticipate paying dividends in 2024. There were no shares of common stock repurchased during the three months ended December 31, 2023.
Our common stock is traded on the Nasdaq Global Market under the symbol “SYPR.” As of March 1, 2023, there were 573 holders of record of our common stock. No cash dividends were declared during 2022 or 2021. Dividends may be paid on common stock only when, as and if declared by our Board of Directors in its sole discretion.
Our common stock is traded on the Nasdaq Global Market under the symbol “SYPR.” As of March 15, 2024, there were 554 holders of record of our common stock. No cash dividends were declared during 2023 or 2022. Dividends may be paid on common stock only when, as and if declared by our Board of Directors in its sole discretion.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

54 edited+31 added−22 removed45 unchanged
Biggest changeIn addition, as used in the table, “NM” means “not meaningful.” Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Year Over Year Over Year Results as Percentage of Year Ended Year Percentage Net Revenue for the December 31, Change Change Year Ended Favorable Favorable December 31, 2022 2021 (Unfavorable) (Unfavorable) 2022 2021 (in thousands, except percentage data) Net revenue: Sypris Technologies $ 69,259 $ 61,737 $ 7,522 12.2 % 62.9 % 63.4 % Sypris Electronics 40,862 35,697 5,165 14.5 37.1 36.6 Total net revenue 110,121 97,434 12,687 13.0 100.0 100.0 Cost of sales: Sypris Technologies 60,709 53,622 (7,087 ) (13.2 ) 87.7 86.9 Sypris Electronics 34,559 29,306 (5,253 ) (17.9 ) 84.6 82.1 Total cost of sales 95,268 82,928 (12,340 ) (14.9 ) 86.5 85.1 Gross profit: Sypris Technologies 8,550 8,115 435 5.4 12.3 13.1 Sypris Electronics 6,303 6,391 (88 ) (1.4 ) 15.4 17.9 Total gross profit 14,853 14,506 347 2.4 13.5 14.9 Selling, general and administrative 14,489 12,596 (1,893 ) (15.0 ) 13.2 12.9 Operating income 364 1,910 (1,546 ) (80.9 ) 0.3 2.0 Interest expense, net 1,110 868 (242 ) (27.9 ) 1.0 0.9 Other expense, net 800 645 (155 ) (24.0 ) 0.7 0.7 Forgiveness of PPP Loan and related interest — (3,599 ) (3,599 ) NM — (3.7 ) (Loss) income before income taxes (1,546 ) 3,996 (5,542 ) NM (1.4 ) 4.1 Income tax expense, net 948 1,073 125 11.6 0.9 1.1 Net (loss) income $ (2,494 ) $ 2,923 $ (5,417 ) NM (2.3 )% 3.0 % 25 Net Revenue .
Biggest changeIn addition, as used in the table, “NM” means “not meaningful.” Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Year Over Results as Percentage of Year Over Year Net Revenue for the Year Ended Year Percentage Year Ended December 31, Change Change December 31, Favorable Favorable 2023 2022 (Unfavorable) (Unfavorable) 2023 2022 (in thousands, except percentage data) Net revenue: Sypris Technologies $ 77,920 $ 69,259 $ 8,661 12.5 % 57.2 % 62.9 % Sypris Electronics 58,303 40,862 17,441 42.7 42.8 37.1 Total net revenue 136,223 110,121 26,102 23.7 100.0 100.0 Cost of sales: Sypris Technologies 68,712 60,709 (8,003 ) (13.2 ) 88.2 87.7 Sypris Electronics 50,263 34,559 (15,704 ) (45.4 ) 86.2 84.6 Total cost of sales 118,975 95,268 (23,707 ) (24.9 ) 87.3 86.5 Gross profit: Sypris Technologies 9,208 8,550 658 7.7 11.8 12.3 Sypris Electronics 8,040 6,303 1,737 27.6 13.8 15.4 Total gross profit 17,248 14,853 2,395 16.1 12.7 13.5 Selling, general and administrative 16,279 14,489 (1,790 ) (12.4 ) 12.0 13.2 Operating income 969 364 605 166.2 0.7 0.3 Interest expense, net 777 1,110 333 30.0 0.6 1.0 Other expense, net 1,125 800 (325 ) (40.6 ) 0.8 0.7 Loss before income taxes (933 ) (1,546 ) 613 39.7 (0.7 ) (1.4 ) Income tax expense, net 663 948 285 30.1 0.5 0.9 Net loss $ (1,596 ) $ (2,494 ) $ 898 36.0 (1.2 )% (2.3 )% Net Revenue .
The following discussion of accounting estimates is intended to supplement the Summary of Significant Accounting Policies presented as Note 1 to our consolidated financial statements in Item 8. 22 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.
The following discussion of accounting estimates is intended to supplement the Summary of Significant Accounting Policies presented as Note 1 to our consolidated financial statements in Item 8. 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.
An improper assessment of salability or improper estimate of future usage or demand, or significant changes in usage or demand could result in significant changes in the reserves and a positive or a negative impact on our consolidated results of operations in the period the change occurs. Stock-based Compensation.
An improper assessment of salability or improper estimate of future usage or demand, or significant changes in usage or demand could result in significant changes in the reserves and a positive or a negative impact on our consolidated results of operations in the period the change occurs. 25 Stock-based Compensation.
Sales in this market are dependent on, among other things, the level of worldwide oil and gas drilling, the price of crude oil and natural gas and capital spending by exploration and production companies and drilling contractors.
Sales in this market are dependent on, among other things, the level of worldwide oil and natural gas demand, the price of crude oil and natural gas and capital spending by exploration and production companies and drilling contractors.
Under this measure of progress, the extent of progress towards completion is measured based on the ratio of labor hours incurred to date to the total estimated labor hours at completion of the performance obligation. Long-lived asset impairment.
Under this measure of progress, the extent of progress towards completion is measured based on the ratio of labor hours incurred to date to the total estimated labor hours at completion of the performance obligation. 24 Long-lived asset impairment.
Significant changes from our current forecasts, including, but not limited to: (i) meaningful shortfalls in our projected revenues, (ii) unexpected costs or expenses, and/or (iii) operating difficulties which cause unexpected delays in scheduled shipments, could require us to seek additional funding or force us to make further reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned programs.
Significant changes from our current forecasts, including, but not limited to: (i) meaningful shortfalls in our projected revenues, (ii) unexpected costs or expenses, and/or (iii) operating difficulties which cause unexpected delays in scheduled shipments, could require us to seek additional financing or force us to make further reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned programs.
A considerable amount of management judgment and assumptions are required in performing the impairment test, principally in determining whether an adverse event or circumstance has triggered the need for an impairment review. The Company did not have any long-lived assets measured at fair value on a nonrecurring basis as of December 31, 2022 or 2021. Pension Plan Funded Status.
A considerable amount of management judgment and assumptions are required in performing the impairment test, principally in determining whether an adverse event or circumstance has triggered the need for an impairment review. The Company did not have any long-lived assets measured at fair value on a nonrecurring basis as of December 31, 2023 or 2022. Pension Plan Funded Status.
Our U.S. defined benefit pension plans are closed to new entrants and an insignificant amount of service-related cost was recorded in 2022 related to a small number of participants who are still accruing benefits in the Louisville Hourly and Salaried Plans. Changes in our net obligations are principally attributable to changing discount rates and the performance of plan assets.
Our U.S. defined benefit pension plans are closed to new entrants and an insignificant amount of service-related cost was recorded in 2023 related to a small number of participants who are still accruing benefits in the Louisville Hourly and Salaried Plans. Changes in our net obligations are principally attributable to changing discount rates and the performance of plan assets.
If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase net income in the period that such determination is made. 24 Results of Operations We operate in two segments, Sypris Technologies and Sypris Electronics.
If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase net income in the period that such determination is made. 26 Results of Operations We operate in two segments, Sypris Technologies and Sypris Electronics.
We have partnered with our customers to qualify alternative components or suppliers and will continue to focus on our supply chain to attempt to mitigate the impact of supply component shortages on our business. Electronic component shortages may continue to be a challenge during 2023. We may not be successful in addressing these shortages and other supply chain issues.
We have partnered with our customers to qualify alternative components or suppliers and will continue to focus on our supply chain to attempt to mitigate the impact of component supply shortages on our business. Electronic component shortages may continue to be a challenge during 2024. We may not be successful in addressing these shortages and other supply chain issues.
Declining discount rates increase the present value of future pension obligations; a 25 basis point decrease in the discount rate would increase our U.S. pension liability by about $0.5 million.
Declining discount rates increase the present value of future pension obligations; a 25 basis point decrease in the discount rate would increase our U.S. pension liability by about $0.4 million.
This caused major pipeline developers to significantly scale back near-term capital investments in new pipeline infrastructure, which resulted in reduced demand for our products for the oil and gas markets during 2021 and 2022.
This caused major pipeline developers to significantly scale back near-term capital investments in new pipeline infrastructure, which resulted in reduced demand for our products for the oil and gas markets in early 2022.
We expect existing cash and cash flows from operations to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as capital expenditures, for at least the next 12 months and beyond.
We expect existing cash and cash flows from operations to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as capital expenditures, for at least the next twelve months.
In addition to contract awards from Department of Defense (“DoD”) prime contractors related to weapons systems, electronic warfare and infrared countermeasures in our traditional aerospace and defense markets, we have also been awarded subcontracts related to the communication and navigation markets, which align with our advanced capabilities for delivering products for complex, high cost of failure platforms.
In addition to contract awards from Department of Defense (“DoD”) prime contractors related to weapons systems, electronic warfare and infrared countermeasures in our traditional aerospace and defense markets, we have also been awarded subcontracts for manufacturing services to the communication and navigation markets, which require our advanced capabilities for delivering products for complex, high cost of failure platforms.
The table presented below compares our segment and consolidated results of operations from 2022 to 2021.
The table presented below compares our segment and consolidated results of operations from 2023 to 2022.
A change in the assumed rate of return on plan assets of 100 basis points would result in a $0.2 million change in the estimated 2023 pension expense. 23 At December 31, 2022, we have $10.0 million of unrecognized losses relating to our U.S. pension plans.
A change in the assumed rate of return on plan assets of 100 basis points would result in a $0.2 million change in the estimated 2024 pension expense. At December 31, 2023, we have $8.8 million of unrecognized losses relating to our U.S. pension plans.
Plan liabilities at December 31, 2022 are based upon a discount rate of 5.40% which reflects the Above Mean Mercer Yield Curve rate as of December 31, 2022 rounded to the nearest 5th basis point.
Plan liabilities at December 31, 2023 are based upon a discount rate of 5.10% which reflects the Above Mean Mercer Yield Curve rate as of December 31, 2023 rounded to the nearest 5th basis point.
Net cash used in financing activities in 2021 included principal payments on finance lease and equipment financing obligations of $0.7 million and payments of $0.6 million for minimum statutory tax withholdings on stock-based compensation.
Net cash used in financing activities in 2023 included principal payments on finance lease and equipment financing obligations of $1.7 million and payments of $0.1 million for minimum statutory tax withholdings on stock-based compensation.
As of December 31, 2022, the Company had $3.6 million outstanding under finance lease obligations for both property and machinery and equipment with maturities through 2026 and a weighted average interest rate of 8.5%. Equipment Financing Obligations.
As of December 31, 2023, the Company had $3.2 million outstanding under finance lease obligations for both property and machinery and equipment with maturities through 2026 and a weighted average interest rate of 8.8%. Equipment Financing Obligations.
A significant portion of the inventory receipts were funded through prepayments from customers of Sypris Electronics in 2022, which are recorded as contract liabilities and are the primary component of the $20.4 million increase in accrued and other liabilities during 2022.
A significant portion of the inventory receipts were funded through prepayments from customers of Sypris Electronics in 2022 and 2023, which are recorded as contract liabilities and are the primary component of the $13.6 million increase in accrued and other liabilities during 2023.
Net cash used in investing activities was comprised of capital expenditures of $3.0 million and $2.8 million in 2022 and 2021, respectively. Financing Activities. Net cash used in financing activities was $1.4 million in 2022 as compared to $1.3 million in 2021.
Net cash used in investing activities was comprised of capital expenditures of $2.1 million and $3.0 million in 2023 and 2022, respectively. Financing Activities. Net cash used in financing activities was $0.6 million in 2023 as compared to $1.4 million in 2022.
Based on the current funded status of our U.S. plans, we expect to contribute less than $0.1 million during 2023, which represents the minimum funding amounts required by federal law. Reserve for Excess, Obsolete and Scrap Inventory.
Based on the current funded status of our U.S. plans, we expect to contribute $0.8 million during 2024, which represents the minimum funding amounts required by federal law. Reserve for Excess, Obsolete and Scrap Inventory.
The 2022 income tax provision consists of current tax expense of $0.6 million and deferred tax expense of $0.3 million. The 2021 income tax provision consists of current tax expense of $0.1 million and a deferred tax expense of $1.0 million.
The 2023 income tax provision consists of current tax expense of $0.6 million and deferred tax expense of $0.1 million. The 2022 income tax provision consists of current tax expense of $0.6 million and deferred tax expense of $0.3 million.
Based on the most recent analysis of projected portfolio returns, we concluded that the use of 2.35% for the Louisville Hourly Plan, 3.40% for the Marion Plan and 2.65% for the Louisville Salaried Plan as the expected return on our U.S. pension plan assets for 2022 was appropriate.
Based on the most recent analysis of projected portfolio returns, we concluded that the use of 3.3% for the Louisville Hourly Plan, 3.55% for the Marion Plan and 2.95% for the Louisville Salaried Plan as the expected return on our U.S. pension plan assets for 2023 was appropriate.
While there is growing evidence of a slowing North American economy, we believe that the market diversification Sypris Technologies has accomplished over recent years by adding new programs in the automotive, sport-utility and off-highway markets has benefited and will continue to benefit the Company as the demand cycles for our products in these markets differs from than the Class 8 commercial vehicle market, thereby reducing volatility in our revenue profile.
We believe that the market diversification Sypris Technologies has accomplished over recent years by adding new programs in the automotive, sport-utility and off-highway markets has benefited and will continue to benefit the Company as the demand cycles for our products in these markets differs from than the Class 8 commercial vehicle market, thereby reducing volatility in our revenue profile.
Until an appropriate level and characterization of profitability is attained, the Company expects to continue to maintain a valuation allowance on its net deferred tax assets related to future U.S. tax benefits.
Based on its current forecast, the Company has established a valuation allowance against all U.S. deferred tax assets. Until an appropriate level and characterization of profitability is attained, the Company expects to continue to maintain a valuation allowance on its net deferred tax assets related to future U.S. tax benefits.
At December 31, 2022, we had approximately $21.6 million of cash and cash equivalents, of which $3.6 million was held in jurisdictions outside of the U.S. that, if repatriated, could result in withholding taxes.
At December 31, 2023, we had approximately $7.9 million of cash and cash equivalents, of which $6.1 million was held in jurisdictions outside of the U.S. that, if repatriated, could result in withholding taxes.
Sypris Technologies derives its revenue from the sale of forged and finished steel components and subassemblies and high-pressure closures and other fabricated products. Net revenue for Sypris Technologies increased $7.5 million from the prior year to $69.3 million in 2022.
Sypris Technologies derives its revenue from the sale of forged and finished steel components and subassemblies and high-pressure closures and other fabricated products. Net revenue for Sypris Technologies increased $8.7 million from the prior year to $77.9 million in 2023.
Prepaid expenses and other current assets increased during 2022 resulting in a cash use of $3.1 million primarily as a result of an increase in taxes refundable in Mexico, increased capitalized costs associated with programs in the startup phase of production at Sypris Electronics and increased contract assets. 27 Investing Activities.
Prepaid expenses and other current assets increased during 2023 resulting in a cash use of $1.1 million primarily as a result of increased contract assets and capitalized costs associated with programs in the startup phase of production at Sypris Electronics partially offset by a decrease in taxes refundable in Mexico. Investing Activities.
During 2021 and 2022, we announced new program awards for Sypris Electronics, with certain programs continuing into 2024.
During 2022 and 2023, we announced new program awards and releases for Sypris Electronics, with certain programs continuing into 2025.
Accounts payable also increased during 2022, primarily associated with the inventory additions, providing a source of cash of $5.6 million.
Accounts payable also increased during 2023, primarily associated with the inventory additions, providing a source of cash of $9.0 million.
The majority of the government aerospace and defense programs that we support require specific components that are sole-sourced to specific suppliers; therefore, the resolution of supplier constraints requires coordination with our customers or the end-users of the products.
Sypris Electronics Outlook Supply chain challenges and delays continued to impact business in 2023. The majority of the government aerospace and defense programs that we support require certain specific components that are sole-sourced to specific suppliers; therefore, the resolution of supplier constraints requires coordination with our customers or the end-users of the products.
The current tax expense in 2022 and 2021 includes taxes paid by our Mexican subsidiary and domestic state income taxes and adjustments.
The current tax expense in 2023 and 2022 includes taxes paid by our Mexican subsidiary and domestic state income taxes and adjustments. The 2023 and 2022 deferred tax expense includes net changes in the foreign deferred tax assets during the year.
Other expense, net, was $0.8 million in 2022 as compared to $0.6 million for 2021. During the year ended December 31, 2022, the Company recognized pension expense of $0.6 million. Foreign currency related expenses were not material for the year ended December 31, 2022. During the year ended December 31, 2021, the Company pension expense of $0.6 million.
Foreign currency related expenses were not material for the year ended December 31, 2023. During the year ended December 31, 2022, the Company recognized pension expense of $0.6 million. Foreign currency related expenses were not material for the year ended December 31, 2022. Income Taxes.
We expect to compete for follow-on business opportunities as a subcontractor on future builds of several existing government programs. However, the federal budget and debt ceiling are expected to continue to be the subject of considerable uncertainty and the impact on demand for our products and services and our business are difficult to predict.
However, the federal budget and debt ceiling are expected to continue to be the subject of considerable uncertainty and the impact on demand for our products and services and our business are difficult to predict.
As of December, 2022, the Company had $1.1 million outstanding under equipment financing facilities, with effective interest rates ranging from 4.4% to 8.1% and payments due through 2028. Purchase Commitments. We had purchase commitments totaling approximately $68.9 million at December 31, 2022, primarily for inventory. Cash Flows from Operating, Investing and Financing Activities Operating Activities.
As of December 31, 2023, the Company had $2.0 million outstanding under equipment financing facilities, with payments due through 2028, and a weighted average interest rate of 6.8%. Purchase Commitments. We had purchase commitments totaling approximately $39.8 million at December 31, 2023, primarily for inventory, which are due through 2025. Cash Flows from Operating, Investing and Financing Activities Operating Activities.
Additionally, the Company experienced higher employee medical insurance claim expense and an increase in headcount to support the increase in volumes for Sypris Technologies. Selling, general and administrative expense increased as a percentage of revenue to 13.2% for the year ended December 31, 2022 from 12.9% for the year ended December 31, 2021. Other Expense, Net.
The increase in selling general and administrative expense for the year ended December 31, 2023 was primarily as a result of an increase in headcount to support the increase in volumes for Sypris Electronics and increased insurance costs. Additionally, the Company experienced higher employee medical insurance claim expense during 2023.
If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase net income in the period that such determination is made. Liquidity and Capital Resources Cash Balance.
If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase net income in the period that such determination is made. 28 Liquidity and Capital Resources As reflected in the consolidated financial statements, the Company reported a net loss of $1.6 million and cash used in operating activities of $11.1 million for the year ended December 31, 2023.
The Company evaluates its deferred tax position on a quarterly basis and valuation allowances are provided as necessary. During this evaluation, the Company reviews its forecast of income in conjunction with other positive and negative evidence surrounding the realizability of its deferred tax assets to determine if a valuation allowance is needed.
During this evaluation, the Company reviews its forecast of income in conjunction with other positive and negative evidence surrounding the realizability of its deferred tax assets to determine if a valuation allowance is needed. Based on its current forecast, the Company believes it will have sufficient future taxable income to realize the deferred tax assets recorded by its Mexican subsidiary.
On March 28, 2022, President Biden's Administration submitted to Congress the President’s Fiscal Year (FY) 2023 budget request, which proposed $813.4 billion in total national defense spending, of which $773 billion was for the base budget of the DoD.
On March 9, 2023, President Biden's Administration submitted to Congress the President’s Fiscal Year (FY) 2024 budget request, which proposed $886 billion in total national defense spending, of which $842 billion was for the base budget of the DoD. On June 3, 2023, the President signed H.R. 3746 “The Fiscal Responsibility Act” (FRA) into law.
The order backlog for Sypris Electronics is expected to support an increase in revenue during 2023, but revenue could continue to be negatively impacted by material availability. Gross Profit. Sypris Technologies’ gross profit increased $0.4 million to $8.5 million in 2022 as compared to $8.1 million in the prior year.
Additionally, material availability improved compared to the prior year period, which resulted in an increase in sales. The order backlog for Sypris Electronics is expected to support an increase in revenue during 2024. Gross Profit. Sypris Technologies’ gross profit increased $0.7 million to $9.2 million in 2023 as compared to $8.6 million in the prior year.
Net cash provided by operating activities was $13.8 million in 2022, as compared to $4.2 million in 2021. The increase in inventory in 2022 resulted in a usage of cash of $11.8 million. The increase in inventory is primarily in support of new program revenue growth for Sypris Electronics.
Net cash used in operating activities was $11.1 million in 2023, as compared to cash provided by operating activities of $13.8 million in 2022. The aggregate increase in accounts receivable in 2023 resulted in a usage of cash of $1.1 million as a result of the increase in revenue for Sypris Technologies and Sypris Electronics over the prior year.
Additional engineering costs were also incurred in 2022 on certain programs that have not yet reached full rate production. The expected increase in revenue during 2023 attributable to order backlog is expected to favorably impact overhead absorption and the contribution margin from higher volumes is further expected to generate gross profit expansion. Selling, General and Administrative.
The expected increase in revenue during 2024 attributable to order backlog is expected to favorably impact overhead absorption and the contribution margin from higher volumes is further expected to generate gross profit expansion. Selling, General and Administrative. Selling, general and administrative expense increased $1.8 million to $16.3 million in 2023 as compared to $14.5 million in 2022.
The 2022 and 2021 deferred tax expense includes net changes in the foreign deferred tax assets during the year. 26 Deferred tax assets and liabilities are determined separately for each tax jurisdiction in which we conduct our operations or otherwise incur taxable income or losses.
Deferred tax assets and liabilities are determined separately for each tax jurisdiction in which we conduct our operations or otherwise incur taxable income or losses. The Company evaluates its deferred tax position on a quarterly basis and valuation allowances are provided as necessary.
Market conditions have improved since then for commercial vehicles in addition to the automotive, sport utility vehicle and off-highway markets also served by Sypris Technologies.
Sypris Technologies Outlook Conditions have remained relatively stable for the North American Class 4-8 commercial vehicle market in addition to the automotive, sport utility vehicle and off-highway markets also served by Sypris Technologies. During 2023, production of Class 8 trucks in North America increased 8% over 2022.
GFCM is an entity controlled by the Company’s Chairman, President and Chief Executive Officer, Jeffrey T. Gill and one of our directors, R. Scott Gill. GFCM, Jeffrey T. Gill and R. Scott Gill are significant beneficial stockholders of the Company.
The Company has received the benefit of loans from GFCM in the form of secured promissory note obligations totaling $6.5 million in principal as of December 31, 2023 and 2022. GFCM is an entity controlled by the Company’s Chairman, President and Chief Executive Officer, Jeffrey T. Gill and one of our directors, R. Scott Gill. GFCM, Jeffrey T.
Sypris Electronics’ gross profit decreased $0.1 million to $6.3 million as compared to $6.4 million in the prior year. The decrease in gross profit for the year ended December 31, 2022 was primarily the result of lower margins on new programs ramping during the period compared to margins on mature programs completed during 2021.
Sypris Electronics’ gross profit increased $1.7 million to $8.0 million as compared to $6.3 million in the prior year. The increase in gross profit for the year ended December 31, 2023 was primarily a result of the increase in revenue which also had a positive impact on overhead absorption.
The productivity and innovation that can result from such investments helps to differentiate us from our competition when it comes to cost, quality, reliability and customer service.
The productivity and innovation that can result from such investments helps to differentiate us from our competition when it comes to cost, quality, reliability and customer service. Economic Conditions Our operations are impacted by global economic conditions, including inflationary increases of certain raw materials, as well as logistics, transportation, utilities and labor costs, supply chain constraints and increased interest rates.
The increase in revenue for the year ended December 31, 2022 was primarily related to the ramping of production during the year for two follow-on programs that began shipments during the fourth quarter of 2021. Results for the year ended December 31, 2022 and 2021, were impacted by material availability.
Net revenue for Sypris Electronics increased $17.4 million to $58.3 million in 2023. The increase in revenue for the year ended December 31, 2023 was primarily related to the ramping of production during the year for two follow-on programs and an increase in sales to customers serving the communications market.
The net increase in volumes contributed to an increase in gross profit of $2.6 million for the year ended December 31, 2022 from the prior year. Partially offsetting this increase were inflationary cost increases, unfavorable product mix, increased operating supply spend, additional equipment maintenance expenses in support of the increase in revenue in 2022.
The net increase in volumes contributed to an increase in gross profit of $3.1 million for the year ended December 31, 2023 from the prior year. Partially offsetting this increase was the unfavorable impact of foreign exchange rates for our Mexican subsidiary, resulting in a decrease in gross profit of $2.4 million.
Any of these actions could materially harm our business, results of operations and future prospects. Material Cash Requirements Gill Family Capital Management Note . The Company has received the benefit of cash infusions from GFCM in the form of secured promissory note obligations totaling $6.5 million in principal as of December 31, 2022 and 2021 (the “Note”).
Any of these actions could materially harm our business, results of operations and future prospects. And as noted above, additional financing may not be available to us. Material Cash Requirements Gill Family Capital Management Note .
Sypris Electronics derives its revenue primarily from circuit card and full “box build” manufacturing, high reliability manufacturing and systems assembly and integration. Net revenue for Sypris Electronics increased $5.2 million to $40.9 million in 2022.
Revenue for Sypris Technologies is expected to decrease slightly in 2024, due to the anticipated decline in the commercial vehicle market, partially offset by higher energy component sales and new program expansion with existing customers in the commercial vehicle market. 27 Sypris Electronics derives its revenue primarily from circuit card and full “box build” manufacturing, high reliability manufacturing and systems assembly and integration.
In connection with the supply chain challenges described above, we have experienced inflationary increases of certain raw materials, as well as logistics, transportation, utilities and labor costs. While we have taken pricing actions and we strive for productivity improvements that could help offset these inflationary cost increases, we expect inflationary cost increases to continue throughout 2023.
While we have taken pricing actions and implemented transformation initiatives that we expect to improve productivity and offset these cost increases, we expect supply chain pressures and inflationary cost increases to continue throughout 2024, which may continue thereafter and could negatively impact our results of operations.
The President’s FY 2024 budget request is anticipated to be submitted to Congress in March 2023, initiating the FY 2024 defense authorization and appropriations legislative process. In addition to the FY 2024 budget process, Congress will have to contend with the legal limit on U.S. debt, commonly known as the debt ceiling.
On March 11, 2024, the President’s FY 2025 budget request was submitted to Congress, initiating the FY 2025 defense authorization and appropriations legislative process, which proposed $850 billion for the base budget of the DoD. 23 If Congress is not able to enact FY 2024 appropriations bills or extend the continuing resolution, the U.S.
Removed
Impact of COVID-19, Inflation and Supply Chain Challenges on Our Business The COVID-19 pandemic negatively impacted the Company’s results of operations, cash flows and financial position in 2021 and to a lesser extent in 2022.
Added
The outlook for 2024 is for continued strong demand for production during the first quarter of 2024 with a significant decrease starting in the second quarter of 2024.
Removed
We have also continued to experience various degrees of supply chain challenges in 2022, including increased lead times for raw materials due to availability constraints and high demand.
Added
As production activity increased in 2022, particularly in liquefied natural gas shipments to Europe, customer demand in this market increased and remained at a higher level in 2023 compared to early 2022.
Removed
While we have elevated our engagement with our suppliers and used secondary suppliers and new methods of procurement where available to mitigate the supply chain pressures, we expect supply chain challenges to continue throughout 2023.
Added
However, the escalating conflict in the Middle East, the war between Russia and Ukraine and recessionary fears have also led to disruption, instability and volatility in global markets and industries that could negatively impact our operations. 22 We will continue to pursue new business in a wide variety of markets from light automotive to new pressure vessel and pipeline applications to achieve a more balanced portfolio across our customers, markets and products.
Removed
Sypris Technologies Outlook Demand in the North American Class 4-8 commercial vehicle market began to recover in the second half of 2020 following an anticipated market decline in the first half of 2020 that was deepened by the impact of the COVID-19 pandemic.
Added
The legislation suspended the debt ceiling until January 1, 2025, and, among other provisions, capped national defense spending at $886 billion for FY 2024 (President’s Budget Request level) and $895 billion for FY 2025. Supplemental funding legislation is not subject to the budget caps.
Removed
The U.S. average land rig count continues to be below pre-pandemic levels but rose 33% in the fourth quarter of 2022 compared to the fourth quarter of 2021. As commodity prices improve and activity increases, particularly in liquefied natural gas (“LNG”) shipments to Europe, we currently expect customer demand in this market to increase in 2023 compared 2022.
Added
If a continuing resolution is enacted and still in effect and Congress does not pass all twelve defense and non-defense discretionary appropriations bills by April 30, 2024, the FRA will result in a decrease in government spending for FY 2024 by one percent from FY 2023 enacted levels.
Removed
However, the war between Russia and Ukraine has led to disruption, instability and volatility in global markets and industries that could negatively impact our operations. 21 Sypris Electronics Outlook As noted above, the COVID-19 pandemic continued to contribute to business impacts in 2022 including supply chain challenges and delays.
Added
The House and Senate continue the legislative process on the FY 2024 budget. On December 22, 2023, the President signed the FY 2024 National Defense Authorization Act (NDAA) into law. The NDAA authorizes funding at the FRA cap of $886 billion for National Defense.
Removed
On December 29, 2022, the President signed the FY 2023 Omnibus Appropriations Act into law, which provides $858 billion in total national defense funding, of which $816.7 billion is for the DoD base budget. This reflects a $44.6 billion increase over the FY 2023 request for national defense spending, and a $43.7 billion increase for the DoD.
Added
Recently, the President signed a continuing resolution that extends funding of six appropriations bills to March 22, 2024 and the remaining six to September 30, 2024. This will provide Congress additional time to work on enacting all twelve FY 2024 appropriations bills based on the overarching U.S.
Removed
The FY 2023 Omnibus Appropriations Act also provided separate and additional funding of $47 billion for Ukraine, the fourth supplemental since March of 2022, bringing the total amount of supplemental funding authority provided to $113 billion.
Added
Government spending agreement reached by House and Senate leaders on January 7, 2024, which comports with the FRA cap of $886 billion for national defense in FY 2024. Under the continuing resolution, funding at amounts consistent with appropriated levels for FY 2023 are available, subject to certain restrictions, but new contract and program starts are not authorized.
Removed
The current statutory limit of $31.4 trillion was reached in January 2023, requiring the Treasury Department to take accounting measures to continue normally financing U.S. government obligations while avoiding exceeding the debt ceiling. It is expected, however, the U.S. government will exhaust these measures by June 2023.
Added
We expect our key programs will continue to be supported and funded under the continuing resolution. However, during periods covered by continuing resolutions, we may experience delays in new awards of our products and services, and those delays may adversely affect our results of operations.
Removed
If the debt ceiling is not raised, the U.S. government may not be able to fulfill its funding obligations and there could be significant disruption to all discretionary programs and wider financial and economic repercussions. The federal budget and debt ceiling are expected to continue to be the subject of considerable congressional debate.
Added
On October 20, 2023, the President submitted a $106 billion supplemental funding request to Congress for assistance to Ukraine, Israel and the Indo-Pacific, related U.S. restock of capacity transfers to Ukraine and Israel, and U.S. border security. Congress has not yet acted on this request, which is part of the broader debate on FY 2024 U.S.
Removed
Although we believe DoD, intelligence, and homeland security programs will continue to receive consensus support for increased funding and would likely receive priority if this scenario came to fruition, the effect on individual programs or our results cannot be predicted at this time.
Added
Government funding and border security policy. Supplemental and emergency funding are not subject to the FRA cap. If enacted, this could ease DoD funding limits under the FRA or other limiting scenarios such as a prolonged continuing resolution.
Removed
The increase in net revenue for the period includes price adjustments for increases in the market price of steel over the past year, which is contractually passed through to customers under certain contracts. The steel price adjustments totaled approximately $4.1 million for the year ended December 31, 2022.
Added
Government will enter a whole or partial shutdown. The impact of any government shutdown is uncertain. However, if a government shutdown were to occur and were to continue for an extended period, we could be at risk of reduced orders, program cancellations, schedule delays, production halts and other disruptions and nonpayment, which could adversely affect our results of operations.
Removed
Additionally, the Company also had higher shipment volumes of sport utility and energy components in 2022 as compared to 2021. Revenue for Sypris Technologies is expected to increase in 2023, primarily attributable to higher energy component sales and new program expansion with existing customers in the commercial vehicle market.
Added
Further, if any one of the 12 appropriations bills is under a continuing resolution as of April 30, 2024, USG funding levels will reset to FY 2023 enacted levels minus 1% for the remainder of FY 2024 or until all 12 appropriations are enacted. Overall congressional sentiment remains strong for supporting the DOD’s National Defense Strategy and defense spending.

… 27 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K and thus are not required to provide the quantitative and qualitative disclosures about market risk specified in Item 305 of Regulation S-K. 28
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K and thus are not required to provide the quantitative and qualitative disclosures about market risk specified in Item 305 of Regulation S-K. 30

Other SYPR 10-K year-over-year comparisons