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.

The award 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 contractual arrangements.

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.


/s/ Jeffrey T. Gill
Jeffrey T. Gill
President & CEO

/s/ Robert E. Gill
Robert E. Gill