Fellow Stockholders

We are pleased to report that 2001 marked a year of accomplishment for Sypris Solutions across a number of very important fronts. Revenue and earnings posted solid double-digit increases, the Company improved its position of leadership in each of its core markets, we entered into a number of key long-term contracts and we continued to increase our investment in the future.

Improved Financial Results. Revenue for the year increased almost 18% to $255 million from $217 million in 2000. The increase was driven by growth in demand for the Company's manufacturing services. Roughly 70% of the improvement came from higher shipments of electronic assemblies to the Company's aerospace and defense customers, while the balance was primarily derived from a new contract with Dana Corporation.

Operating income increased 138% to $13 million as a result of improved operating leverage and strict cost containment, while earnings per share increased 97% to $0.63 from $0.32 in 2000. Stockholder's equity increased to $70 million and book value per share reached $6.99 by year end.

The price of the Company's stock reflected the strength of this financial performance, increasing 89% to $13.02 per share by the end of December. We were pleased with these results, especially in light of the challenging economic environment that characterized most of 2001.

Key Contract Awards. The year was notable for our continued success in booking new contracts, including important multi-year agreements with Honeywell, the National Security Agency, the National Weather Service and Raytheon. In late May, we also signed a seven-year, sole-source agreement with Dana to supply all of its requirements for certain components in North America.

The Dana contract, which was part of a larger transaction that included the purchase of certain manufacturing assets from Dana, provides for Sypris to supply manufacturing services for the forging and machining of medium and heavy-duty drive train components for use in assemblies sold to the leading truck manufacturers in the world, including Freightliner, Mack, Navistar, PACCAR and Volvo.

The agreement runs through 2008 and has an estimated value of $300 million over the term of the contract, based upon current market volumes. The contract is significant for two very important reasons in addition to the dollar value and length of the commitment.

First, with the advent of the Dana contract, Sypris is now the principal supplier of medium and heavy-duty truck axle shafts in North America, since we also supply the needs of ArvinMeritor, the other primary supplier of drive train assemblies in this market. The length and nature of the Dana and ArvinMeritor contracts will enable us to continue to invest to support these two important customers for years to come.

Second, the contract marks the addition of Dana as a new customer for Sypris. Dana has long been recognized as one of the premier automotive and truck component suppliers in the world, with approximately 300 plants in 34 countries. We believe that we can be of significant service to Dana and will work hard to further develop this new relationship.

In February 2002, we announced that Sypris had been awarded a new manufacturing services contract to produce light axle shafts for Visteon Corporation, which represents an important new segment of the market for us. Under the terms of the agreement, we will initially support Visteon's requirements to supply Ford Motor Company with drive train assemblies for the F-150 pickup truck, the Ford Expedition and the Lincoln Navigator sport utility vehicles. Beginning in January 2004, we will supply light axle shafts for the Ford F-250, F-350 and Ranger series pickup trucks, and the Mustang GT as well. The contract has an estimated value of $100 million over the term of the agreement and runs through 2006.

Investing for the Future. During the year, we maintained our steadfast commitment to the future by increasing capital investment 16% to almost $28 million from $24 million in 2000. The investments, which were primarily made to support the requirements of new contracts, should begin to contribute to revenue and earnings during 2002.

In addition, we also invested $11.5 million in the purchase of manufacturing assets from Dana in conjunction with the new supply agreement mentioned above. The transaction added valuable forging and machining capacity, increased our range of value-added services and added significant depth and valuable experience to our management team.

During 2001, we began the installation of sophisticated material tracking capabilities and advanced scheduling systems at certain of our manufacturing operations. We expect these installations to be complete and operational during the first half of 2002, the result of which should further enhance our ability to offer our customers advanced manufacturing solutions.

Providing Customers with Solutions. Our job is to provide customers with solutions to succeed in a rapidly changing and increasingly competitive business environment. During the year, we completed the installation of new, state-of-the-art machining capabilities. The integration of these new activities with our existing operations will enable us to reduce labor and shipping costs, and minimize cycle times for our customers.

We also developed a data encryption notebook that delivers the most advanced, technically available solution for security in field communications products. Our customer, the National Security Agency, is currently evaluating the potential deployment of this technology for use by our armed services.

One Name, One Company. Last year, we announced plans to change the name of our four major subsidiaries to incorporate the Sypris brand name and logo. The purpose of the name change was to improve brand recognition with common customers and suppliers, as well as with employees and investors.

As a result of the dedicated effort of a small group of employees, we are pleased to announce that effective January 2002, Bell Technologies has become Sypris Test & Measurement, Group Technologies has become Sypris Electronics, Metrum-Datatape has become Sypris Data Systems and Tube Turns has become Sypris Technologies.

The Importance of Leadership. Our mission is to become the leading supply chain partner in each of our core markets. We want to do so because we believe the result will generate superior returns for the Company's stockholders and will create a positive, dynamic and growth-oriented culture for our employees.

We believe we are off to a good start. We have been a leading supplier of manufacturing and technical services to major aerospace and defense companies and agencies of the U.S. Government for over 35 years, we are the principle supplier of medium and heavy-duty truck axle shafts in North America, and we are the sole supplier of calibration, certification and repair services for equipment used by the FAA to maintain its radar systems and directional beacons at each of the airports it serves in the U.S., the Caribbean and the South Pacific.

We would not be able to build upon these positions of strength were it not for the dedication, strength, creativity, commitment and leadership of our employees. We are pleased to have the opportunity to recognize a number of these leaders this year on the cover and throughout this annual report. We truly believe that our employees really do make a difference and we are thrilled to be able to showcase some of their accomplishments.

Thank You. In closing, we want to thank our employees for their dedication and hard work over this past year. The achievements of 2001 would not have been possible without their commitment. We also want to thank our customers for the opportunity to serve them. We are dedicated to providing each of them with solutions to improve their competitiveness in the marketplace.

We sincerely appreciate your investment in Sypris Solutions and encourage you to contact us. We would be pleased to answer your questions and look forward to your comments.