We are pleased
to report that 1999 marked a year of continued progress for Sypris Solutions.
Employees throughout the Company worked diligently to accomplish a series
of wide-ranging goals that were designed to create a stronger, more competitive,
increasingly profitable corporation. It is our pleasure to report that
they were successful.
Earnings per share increased 28 percent to $0.97 per share in 1999 from
$0.76 per share for the prior year. Revenue declined slightly, as expected,
to $202 million from $212 million in 1998. Backlog increased 20 percent
to $127 million from $106 million for the prior year, while shareholders'
equity increased 23 percent to $61 million from $49 million at year-end
1998. The Company's stock price reflected this progress and increased
52 percent to $9.00 per share as of the end of December 1999 from just
under $6.00 per share at the end of 1998.
The important news, however, is that we believe the Company is now positioned
to resume profitable top line growth. The trend toward outsourcing in
the United States continues to accelerate, which should play well to our
strengths since we derive approximately 75 percent of our revenue from
an array of sophisticated manufacturing and technical services that are
provided primarily to large original equipment manufacturers. We believe
this positive business environment will be of particular benefit to our
Manufacturing Services business, which encompasses a variety of value-added
activities, ranging from the assembly of complex circuit card assemblies
to the production of heavy-duty truck axles.
The significant growth in contract awards and backlog during the year
was reflective of the Company's successful efforts to become a leader
in certain segments of the rapidly growing market for outsourcing services.
For example, during 1999 we announced two important, multi-year programs
with Raytheon with a total estimated value of $71 million. These contracts
extend through the year 2003 and provide for the Company to produce circuit
card assemblies that will be integrated into a number of digital communications
systems for use by satellites and aircraft.
In addition, we entered into a three-year contract with Allied Signal
with a total estimated value of $35 million, including options, for the
production of circuit card assemblies that will be used in the cockpit
display units of the AH64 Apache Longbow attack helicopter. We also secured
an $11 million contract to manufacture secure communications equipment
for the United States Navy Space and Naval Warfare Systems Command, and
a $6 million contract to produce complex circuit card assemblies for use
in a ruggedized, hand-held computer produced by Litton Data Systems.
This momentum has carried forward into the new year. In January of 2000,
we announced an accord to expand and extend our strategic partnership
with Meritor Automotive. The contract, with an estimated value of $120
million over five years, calls for Sypris to serve as the sole-source
provider of Class V-VIII truck axles in the United States for Meritor
through the year 2004. In addition to the Meritor agreement, we also announced
four new contracts with Raytheon during January and February of 2000 with
a total value of more than $21 million.
of these and other contracts represent a significant milestone in our
efforts to construct a strong, dependable platform on which to build the
business in the future. The successful pursuit of multi-year, sole-source
agreements is an important part of our strategy to increase the dependability
and reliability of the Company's future financial results. The security
and visibility provided by these types of long-term contracts enables
us to invest with confidence in productivity-enhancing equipment that
will benefit the Company for years to come.
On the acquisition front, the Company completed the purchase of Terametrix
in September and the purchase of the Calibration and Repair Service division
of Lucent Technologies in December. The Lucent transaction is of particular
note, since it added AT&T, Lucent, the Federal Aviation Administration
and the National Weather Service to the Company's growing list of valuable
customers. As a result of this acquisition, we believe that we are now
positioned to become the leading independent outsource provider of calibration
and repair services in the United States.
We are pleased with the progress we have made to date and we are optimistic
as we look toward the future. More specifically, we believe that Sypris
Solutions is now poised to take advantage of the increasingly rapid consolidation
of the automotive and truck components market, as well as the accelerating
trend toward outsourcing in the aerospace and defense markets. We believe
that we possess the special engineering and manufacturing skills that
are required to meet the high-reliability, complex requirements of customers
in these sectors. As we address the opportunities in both of these markets,
we will invest to support the needs of those future customers who value
long-term partnerships and are willing to enter into firm, multi-year
During the latter part of the year, the Company entered into a new $100
million revolving credit agreement with a bank syndicate led by Bank One,
with Bank of America, LaSalle Bank and SunTrust Bank serving as participants.
The new agreement replaced the Company's former $40 million credit facility
and should provide us with the necessary financial resources to support
our near-term growth initiatives.
In closing, we want to thank our employees for their dedication over this
past year. The achievements of 1999 would not have been possible without
their hard work and commitment. We also want to thank our customers for
giving us the opportunity to serve them and we look forward to playing
an increasingly important role for each of them in the future.
We sincerely appreciate your investment in Sypris Solutions and we encourage
you to contact us. We would be pleased to answer your questions and look
forward to your comments.