SYPRIS SOLUTIONS INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

Overview

We are a diversified provider of truck components, oil and gas pipeline
components and aerospace and defense electronics. We offer a wide range of
manufactured products, often under multi-year sole-source contracts.




We are organized into two business segments, Sypris Technologies and Sypris
Electronics. Sypris Technologies, which is comprised of Sypris Technologies,
Inc. and its subsidiaries, generates revenue primarily from the sale of forged,
machined, welded and heat-treated steel components primarily for the heavy
commercial vehicle and high-pressure energy pipeline applications. Sypris
Electronics, which is comprised of Sypris Electronics, LLC, 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 work.



We focus on those markets where we believe we have the expertise, qualifications
and leadership position to sustain a competitive advantage. We target our
resources to support the needs of industry participants that embrace
technological innovation and flexibility, coupled with multi-year contractual
relationships, as a strategic component of their supply chain management. These
contracts, many of which are sole-source by part number, have historically
created opportunities to invest in leading-edge processes or technologies to
help our customers remain competitive. 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.



Impact of COVID-19 on Our Business




The COVID-19 pandemic negatively impacted the Company's results of operations,
cash flows and financial position in 2020 and 2021, and in the first half of
2022. We have also continued to experience various degrees of supply chain
challenges in the first half of 2022, including increased lead times for raw
materials due to availability constraints and high demand. 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 2022.



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 2022.

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.
Market conditions have improved since then for commercial vehicles in addition
to the automotive, sport utility vehicle and off-highway markets served by
Sypris Technologies. While there is growing evidence of a slowing North American
economy, the outlook for the remainder of 2022 for the commercial vehicle market
indicates strong demand with Class 8 production expected to be up 15% over 2021
due to pent-up demand, capacity shortfalls and carrier profitability.
Additionally, 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 demand for our products in these markets has experienced less
volatility than the Class 8 commercial vehicle market.



Reduced travel, business closures, and other economic impacts related to the
COVID-19 pandemic suppressed oil and natural gas demand, which had adversely
impacted the oil and gas markets served by our Tube Turns® brand of engineered
product lines. 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 the
first half of 2022. 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. The U.S. land average rig count continues to be below pre-pandemic
levels, but rose 13% in the second quarter of 2022 compared to the first quarter
of 2022. As commodity prices improve and activity increases, we currently expect
customer demand in this market to increase in 2022 compared to 2021. However,
the conflict between Russia and Ukraine has led to disruption, instability and
volatility in global markets and industries that could negatively impact our
operations.



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We will continue to pursue new business in a wide variety of markets from light
automotive to new energy related product lines to achieve a more balanced
portfolio across our customers, markets and products.



Sypris Electronics Outlook



As noted above, the COVID-19 pandemic continued to cause business impacts in the
first half of 2022 including supply chain challenges and delays. 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. 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
the remainder of 2022. We may not be successful in addressing these shortages
and other supply chain issues.



During 2021 and the first half of 2022, we announced new program awards for
Sypris Electronics, with certain programs continuing into 2024. 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.



On March 15, 2022, President Biden signed the Consolidated Appropriations Act,
2022, providing annual funding for the DoD and other government departments and
agencies. The appropriation provided $781 billion for national defense, which
includes the DoD, Department of Energy (DoE) nuclear weapons-related activities,
and the national security activities of the Coast Guard, Federal Bureau of
Investigation, and others. The DoD portion was $742.3 billion, $25 billion more
than the President's Fiscal Year (FY) 2022 request. Additionally, the
legislation included $13.6 billion in supplemental funding to support Ukraine,
including $3.5 billion for defense articles and $650 million in Foreign Military
Financing (FMF) for Ukraine and other Eastern European allies. An additional $40
billion in emergency supplemental appropriations was approved by Congress in May
2022.



On March 28, 2022, President Biden's Administration submitted to Congress the
President's FY 2023 budget request, which proposes $813 billion for national
defense. The DoD portion of this request is $773 billion, a 4% increase above
the FY 2022 enacted amount. On July 18, 2022, the Senate Armed Services
Committee released its annual defense bill, which authorizes $847 billion in
defense spending, an increase over President Biden's Administration's budget
request. It is difficult to predict the specific course of future defense
budgets. However, we believe the ongoing conflict in Ukraine has highlighted
some of the national security threats to our nation and our allies, and the need
for strong deterrence and a robust defense capability, as well as impacting our
political and economic environment. More generally, the threat to U.S. national
security remains very substantial and we believe that our capabilities should
help our customers defend against current and future threats and, as a result,
continue to allow for long-term profitable business growth.



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.



See also the discussion of Congressional budgetary constraints or reallocations
risks within “Item 1A, Risk Factors” included in our 2021 Form 10-K.

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Results of Operations



The tables below compare our segment and consolidated results for the three and
six month periods of operations of 2022 to the three and six month periods of
operations of 2021. The tables present the results for each period, the change
in those results from 2021 to 2022 in both dollars and percentage change and the
results for each period as a percentage of net revenue.



? The first two columns in each table show the absolute results for each period

    presented.



? The columns entitled “Year Over Year Change” and “Year Over Year Percentage

Change” show the change in results, both in dollars and percentages. These two

columns show favorable changes as positive and unfavorable changes as

negative. For example, when our net revenue increases from one period to the

next, that change is shown as a positive number in both columns. Conversely,

when expenses increase from one period to the next, that change is shown as a

negative number in both columns.

? The last two columns in each table show the results for each period as a

percentage of net revenue. In these two columns, the cost of sales and gross

profit for each are given as a percentage of that segment’s net revenue. These

    amounts are shown in italics.



In addition, as used in the table, “NM” means “not meaningful.”

Three Months Ended July 3, 2022 Compared to Three Months Ended July 4, 2021




                                                                                  Year Over
                                                              Year Over             Year              Results as Percentage of
                                                                Year             Percentage           Net Revenue for the Three
                                Three Months Ended,            Change              Change                   Months Ended
                                July 3,       July 4,         Favorable           Favorable          July 3,             July 4,
                                 2022           2021        (Unfavorable)       (Unfavorable)         2022                2021
                                                             (in thousands, except percentage data)
Net revenue:
Sypris Technologies           $    17,951     $ 17,139     $           812                 4.7 %          61.8 %              66.0 %
Sypris Electronics                 11,093        8,830               2,263                25.6            38.2                34.0
Total                              29,044       25,969               3,075                11.8           100.0               100.0

Cost of sales:
Sypris Technologies                15,820       14,630              (1,190 )              (8.1 )          88.1                85.4
Sypris Electronics                  9,444        7,030              (2,414 )             (34.3 )          85.1                79.6
Total                              25,264       21,660              (3,604 )             (16.6 )          87.0                83.4

Gross profit:
Sypris Technologies                 2,131        2,509                (378 )             (15.1 )          11.9                14.6
Sypris Electronics                  1,649        1,800                (151 )              (8.4 )          14.9                20.4
Total                               3,780        4,309                (529 )             (12.3 )          13.0                16.6

Selling, general and
administrative                      3,737        3,416                (321 )              (9.4 )          12.9                13.2
Operating income                       43          893                (850 )             (95.2 )           0.1                 3.4

Interest expense, net                 263          211                 (52 )             (24.6 )           0.9                 0.8
Other expense, net                    104          145                  41                28.3             0.4                 0.6
Forgiveness of PPP Loan and
related interest                        0       (3,599 )            (3,599 )                NM             0.0               (13.9 )

(Loss) income before taxes           (324 )      4,136              (4,460 )                NM            (1.1 )              15.9
Income tax expense, net               305          313                   8                 2.6             1.1                 1.2

Net (loss) income             $      (629 )   $  3,823     $        (4,452 )                NM            (2.2 )%             14.7 %




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Six Months Ended July 3, 2022 Compared to Six Months Ended July 4, 2021.





                                                                                Year Over
                                                            Year Over             Year              Results as Percentage of
                                                              Year             Percentage            Net Revenue for the Six
                                Six Months Ended,            Change              Change                   Months Ended
                               July 3,      July 4,         Favorable           Favorable          July 3,             July 4,
                                2022          2021        (Unfavorable)       (Unfavorable)         2022                2021
                                                            (in thousands, except percentage data)
Net revenue:
Sypris Technologies           $  35,106     $ 30,329     $         4,777                15.8 %          63.6 %              66.0 %
Sypris Electronics               20,104       15,622               4,482                28.7            36.4                34.0
Total                            55,210       45,951               9,259                20.1           100.0               100.0

Cost of sales:
Sypris Technologies              29,843       26,649              (3,194 )             (12.0 )          85.0                87.9
Sypris Electronics               17,078       13,177              (3,901 )             (29.6 )          84.9                84.3
Total                            46,921       39,826              (7,095 )             (17.8 )          85.0                86.7

Gross profit:
Sypris Technologies               5,263        3,680               1,583                43.0            15.0                12.1
Sypris Electronics                3,026        2,445                 581                23.8            15.1                15.7
Total                             8,289        6,125               2,164                35.3            15.0                13.3

Selling, general and
administrative                    7,126        6,298                (828 )             (13.1 )          12.9                13.7
Operating income (loss)           1,163         (173 )             1,336                  NM             2.1                (0.4 )

Interest expense, net               511          433                 (78 )             (18.0 )           0.9                 0.9
Other expense, net                  273          366                  93                25.4             0.5                 0.8
Forgiveness of PPP Loan and
related interest                      0       (3,599 )            (3,599 )                NM             0.0                (7.8 )

Income before taxes                 379        2,627              (2,248 )             (85.6 )           0.7                 5.7
Income tax expense, net             771          434                (337 )             (77.6 )           1.4                 0.9

Net (loss) income             $    (392 )   $  2,193     $        (2,585 )                NM            (0.7 )%              4.8 %




Net Revenue. 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 for the three and
six-month periods ended July 3, 2022 increased $0.8 million and $4.8 million,
respectively, from the prior year comparable periods. The comparison of net
revenue for the three and six month periods 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 $1.3 million and $2.4 million for the
three and six month periods, respectively. The increase is partially offset by
lower shipment volume to the commercial vehicle market. Production of Class 8
commercial vehicles in North America continues to be impacted by supply chain
constraints unrelated to the availability of the drive axle shafts and other
components we manufacture. This in turn has trickled down into our shipment
volume, as our customers adjust their inventory levels to align with the end
market build rates. Higher shipments of automotive, sport utility and energy
components contributed to the revenue increase for the comparable six month
periods.



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 $2.3 million and
$4.5 million, respectively, for the three and six months ended July 3, 2022,
from the prior year comparable periods. The increase in revenue for the three
and six months ended July 3, 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. Additionally, the prior year was impacted by
material availability, as receipts of a limited number of specific parts
necessary to complete the build of products were delayed or, in other instances,
required us to resource and obtain alternative parts or use alternative
suppliers. While certain programs continue to be impacted by material
availability during the current year, the impact has been less significant than
in the prior year.



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Gross Profit. Sypris Technologies' gross profit decreased $0.4 million and
increased $1.6 million for the three and six months ended July 3, 2022,
respectively, from the prior year comparable periods. Revenue mix was slightly
unfavorable for the three months ended July 3, 2022 contributing to the decrease
in gross profit. Variable manufacturing costs also increased during the current
year as inflationary pressure increased spend for consumable supplies and
tooling, and natural gas and electricity rates increased from the prior year.
The gross profit variance for both the three and six month periods also includes
additional costs incurred during 2022 to support the increase in demand driven
by the commercial vehicle market anticipated over the balance of 2022 and 2023.
For the six months ended July 3, 2022, increased revenue from our higher value
add components for the sport utility, automotive and energy markets contributed
to the increase in gross profit.



Sypris Electronics' gross profit decreased $0.2 million and increased
$0.6 million for the three and six months ended July 3, 2022, respectively, from
the prior year comparable periods. The decrease in gross profit for the three
months ended July 3, 2022 was primarily a result of lower margins on new
programs ramping during the period compared to margins on mature programs
completed during 2021. Additional engineering costs were also incurred in 2022
on certain programs that have not yet reached full rate production. The increase
in gross profit for the six months ended July 3, 2022 was primarily a result of
the increase in revenue, which also had a positive impact on overhead
absorption. The order backlog for Sypris Electronics is expected to support a
stable revenue rate during the balance of 2022.



Selling, General and Administrative. Selling, general and administrative expense
increased by $0.3 million and $0.8 million for the three and six month periods
ended July 3, 2022, respectively, as compared to the same periods in 2021,
primarily as a result of a reinstatement of compensation for our Chairman,
President and CEO and certain other senior leadership and corporate personnel
and our Board of Directors, which had been reduced in 2020 across the Company
amid the onset of the COVID-19 pandemic. Selling, general and administrative
expense decreased as a percentage of revenue to 12.9% for the three and six
months ended July 3, 2022, respectively from 13.2% and 13.7% for the three and
six months ended July 4, 2021, respectively.



Forgiveness of PPP Loan and related interest. On June 28, 2021, the Company
received notice from BMO Harris Bank National Association ("BMO") that BMO had
received confirmation from the Small Business Administration ("SBA") that the
Company's application for forgiveness of a loan in the amount of $3.6 million
(the "PPP Loan") pursuant to expansion of the SBA 7(a) loan program, established
under the CARES Act had been approved. The loan forgiveness request in the
amount of $3.6 million was applied to the Company's entire outstanding PPP Loan
balance with BMO. During the three and six months ended July 4, 2021, the
Company recorded a gain on the forgiveness of the PPP Loan and accrued interest
in the amount of $3.6 million.



Income Taxes. The Company’s income tax expense for the three and six months
ended July 3, 2022 and July 4, 2021 consists primarily of foreign income taxes
on its Mexican subsidiaries.




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. 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 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. 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, Capital Resources



Cash Balance. As of July 3, 2022, we had approximately $7.5 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.



We have projected that our cash and cash equivalents will be sufficient to allow
us to continue operations for the next 12 months. Significant changes from our
current forecasts, including, but not limited to: (i) the impact of the COVID-19
pandemic and changes in worldwide and U.S. economic conditions (ii) meaningful
shortfalls in projected revenue or sales proceeds from underutilized or non-core
equipment, (iii) unexpected costs or expenses, (iv) operating difficulties which
cause unexpected delays in scheduled shipments, and/or (v) inflation, 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. Any of these actions could
materially harm our business, results of operations and future prospects.



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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 July 3, 2022 and December 31, 2021 (the
"Note"). 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. As of July 3, 2022, our principal commitment under
the Note was $2.5 million due on April 1, 2023, $2.0 million on April 1, 2024
and the balance on April 1, 2026. Interest on the Note is reset on April 1 of
each year, at the greater of 8.0% or 500 basis points above the five-year
Treasury note average during the preceding 90-day period, in each case, payable
quarterly. The Note allows for up to an 18-month deferral of payment for up to
60% of the interest due on the portion of the notes maturing in April of 2023
and 2024.



Finance Lease Obligations. As of July 3, 2022, the Company had $4.0 million
outstanding under finance lease obligations for both property and machinery and
equipment at its Sypris Technologies locations with maturities through 2025 and
a weighted average interest rate of 8.5%.



Equipment Financing Obligations. As of July 3, 2022, the Company had
$1.0 million outstanding under equipment financing facilities, with fixed
interest rates ranging from 4.4% to 8.1% and payments due through 2026.

Purchase Commitments. We had purchase commitments totaling approximately
$61.9 million at July 3, 2022, primarily for inventory and manufacturing
equipment, which are due through 2025.



Cash Flows



Operating Activities. Net cash used in operating activities was $2.0 million in
the first six months of 2022 as compared to cash provided of $8.6 million in the
same period of 2021. The aggregate increase in accounts receivable in 2022
resulted in a usage of cash of $1.2 million as a result of the increase in
revenue for Sypris Technologies and Sypris Electronics over the prior year
comparable period. Accrued and other liabilities decreased during the first six
months of 2022, resulting in a use of cash of $3.9 million, primarily as a
result of a decrease in contract liabilities. Inventory decreased during the
period, providing a source of cash of $0.7 million. Additionally, there was an
increase in accounts payable during the first six months of 2022, providing a
source of cash of $0.8 million. Prepaid expenses and other current assets
increased during the first six months of 2022 resulting in a cash use of
$0.8 million primarily as a result of increased capitalized costs associated
with programs in the startup phase of production at Sypris Electronics.



Investing Activities. Net cash used in investing activities was $1.8 million for
the first six months of 2022 as compared to $1.2 million for the first six
months of 2021. Net cash used in investing activities for the first six months
of 2022 was comprised of capital expenditures of $1.8 million. Net cash used in
investing activities for the first six months of 2021 was comprised of capital
expenditures of $1.2 million.



Financing Activities. Net cash used in financing activities was $0.7 million for
the first six months of 2022 as compared to $0.7 million for the first six
months of 2021. Net cash used in financing activities in the first six months of
2022 included principal payments on finance leases and equipment financing
obligations of $0.6 million and payments of $0.1 million for minimum statutory
tax withholdings on stock based compensation. Net cash used in financing
activities in the first six months of 2021 included principal payments on
finance leases and equipment financing obligations of $0.3 million and payments
of $0.4 million for minimum statutory tax withholdings on stock based
compensation.



Critical Accounting Policies



See the information concerning our critical accounting policies included under
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operation - Critical Accounting Policies and Estimates" in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2021. There have been no
significant changes in our critical accounting policies during the six months
ended July 3, 2022.



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Forward-looking Statements



This Quarterly Report on Form 10-Q, and our other oral or written
communications, may contain "forward-looking" statements. These statements may
include our expectations or projections about the future of our business,
industries, business strategies, prospects, potential acquisitions, liquidity,
financial condition or financial results and our views about developments beyond
our control, including domestic or global economic conditions, including
inflation, supply chain conditions, government spending, industry trends and
market developments. These statements are based on management's views and
assumptions at the time originally made, and, except as required by law, we
undertake no obligation to update these statements, even if, for example, they
remain available on our website after those views and assumptions have changed.
There can be no assurance that our expectations, projections or views will come
to pass, and undue reliance should not be placed on these forward-looking
statements.



A number of significant factors could materially affect our specific business
operations and cause our performance to differ materially from any future
results projected or implied by our prior statements. Many of these factors are
identified in connection with the more specific descriptions contained
throughout this report. Other factors which could also materially affect such
future results currently include: our failure to achieve and maintain
profitability on a timely basis by steadily increasing our revenues from
profitable contracts with a diversified group of customers, which would cause us
to continue to use existing cash resources or require us to sell assets to fund
operating losses; our failure to successfully complete final contract
negotiations with regard to our announced contract "orders", "wins" or "awards";
dependence on, retention or recruitment of key employees and highly skilled
personnel and distribution of our human capital; cost, quality and availability
or lead times of raw materials such as steel, component parts (especially
electronic components), natural gas or utilities including increased cost
relating to inflation; our failure to successfully win new business or develop
new or improved products or new markets for our products; breakdowns,
relocations or major repairs of machinery and equipment, especially in our
Toluca Plant; volatility of our customers' forecasts especially in the
commercial truck markets and our contractual obligations to meet current
scheduling demands and production levels (especially in our Toluca Plant), which
may negatively impact our operational capacity and our effectiveness to
integrate new customers or suppliers, and in turn cause increases in our
inventory and working capital levels; the fees, costs and supply of, or access
to, debt, equity capital, or other sources of liquidity; the impact of COVID-19
and economic conditions on our future operations; possible public policy
response to the pandemic, including U. S or foreign government legislation or
restrictions that may impact our operations or supply chain; the cost, quality,
timeliness, efficiency and yield of our operations and capital investments,
including the impact of inflation, tariffs, product recalls or related
liabilities, employee training, working capital, production schedules, cycle
times, scrap rates, injuries, wages, overtime costs, freight or expediting
costs; the termination or non-renewal of existing contracts by customers;
inaccurate data about markets, customers or business conditions; disputes or
litigation involving governmental, supplier, customer, employee, creditor,
stockholder, product liability, warranty or environmental claims; our reliance
on a few key customers, third party vendors and sub-suppliers; inventory
valuation risks including excessive or obsolescent valuations or price erosions
of raw materials or component parts on hand or other potential impairments,
non-recoverability or write-offs of assets or deferred costs; failure to
adequately insure or to identify product liability, environmental or other
insurable risks; unanticipated or uninsured product liability claims, disasters,
public health crises, losses or business risks; the costs of compliance with our
auditing, regulatory or contractual obligations; labor relations; strikes; union
negotiations; costs associated with environmental claims relating to properties
previously owned; pension valuation, health care or other benefit costs; our
inability to patent or otherwise protect our inventions or other intellectual
property from potential competitors; adverse impacts of new technologies or
other competitive pressures which increase our costs or erode our margins; our
reliance on revenues from customers in the oil and gas and automotive markets,
with increasing consumer pressure for reductions in environmental impacts
attributed to greenhouse gas emissions and increased vehicle fuel economy; U.S.
government spending on products and services that Sypris Electronics provides,
including the timing of budgetary decisions; changes in licenses, security
clearances, or other legal rights to operate, manage our work force or import
and export as needed; risks of foreign operations; currency exchange rates;
inflation; war, geopolitical conflict, terrorism, or political uncertainty,
including disruptions resulting from the conflict between Russia and Ukraine
arising out of international sanctions, foreign currency fluctuations and other
economic impacts; cyber security threats and disruptions, including 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 conflicts and other uncertainties, such as the conflict in
Ukraine; our ability to maintain compliance with the Nasdaq listing standards
minimum closing bid price; risks related to owning our common stock, including
increased volatility; or unknown risks and uncertainties and the risk factors
disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2021.



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