UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark one)
| x | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 2004. |
| ¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from to . |
Commission file number 0-24020
SYPRIS SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 61-1321992 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
101 Bullitt Lane, Suite 450
Louisville, Kentucky 40222
(Address of principal executive offices, including zip code)
(502) 329-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
As of June 30, 2004, shares of the registrant’s common stock held by non-affiliates (based upon the closing sale price of the registrant’s common stock reported for such date on the Nasdaq National Market), had an aggregate market value of approximately $178,150,998. As of February 28, 2005 the registrant had 17,980,914 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Stockholders to be held April 26, 2005 are incorporated by reference into Part III to the extent described therein.
Note: This Amendment No. 1 to Form 10-K is being filed to amend Item 9A of the Form 10-K filed by Sypris Solutions, Inc. on March 11, 2005 and to file Exhibits 31.1, 31.2 and 32.
Item 9A. Controls and Procedures
As of the end of the period covered by this annual report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer (the “CEO”) and the Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
The management of Sypris Solutions, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management’s report on internal control over financial reporting is included in Part II, Item 8 of this Form 10-K. Additionally, Ernst & Young LLP, our independent auditors and a registered public accounting firm, has issued an attestation report on our assessment of Sypris Solutions, Inc.’s internal control over financial reporting, which is included in Part II, Item 8 of this Form 10K.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2004, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 15. Exhibits and Financial Statement Schedules
| (a) | The following documents are filed as part of this Report: |
| 1. | Financial Statements |
The financial statements as set forth under Item 8 of this report on Form 10-K are included.
| 2. | Financial Statement Schedules |
Schedule II - Valuation and Qualifying Accounts
All other consolidated financial statement schedules have been omitted because the required information is shown in the consolidated financial statements or notes thereto or they are not applicable.
2
| 3. | Exhibits |
| Exhibit |
Description | |
| 3.1 |
Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q for the quarterly period ended June 30, 2004 filed on August 3, 2004 (Commission File No. 000-24020)). | |
| 3.2 |
Bylaws of the Company (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed May 9, 2002 (No. 333-87880)). | |
| 4.1 |
Specimen common stock certificate (incorporated by reference to Exhibit 4.1 to the Company’s Form 10-K for the fiscal year ended December 31, 1998 filed on March 5, 1999). | |
| 4.2 |
Rights Agreement dated as of October 23, 2001 between the Company and LaSalle Bank National Association, as Rights Agent, including as Exhibit A the Form of Certificate of Designation and as Exhibit B the Form of Right Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on October 23, 2001 (Commission File No. 000-24020)). | |
| 10.1 |
Purchase and Sale Agreement among Honeywell Inc., Defense Communications Products Corporation (prior name of Group Technologies Corporation) and Group Financial Partners, Inc. dated May 21, 1989 (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S-1 filed May 18, 1994 (Registration No. 33-76326)). | |
| 10.2 |
Purchase and Sale Agreement among Alliant Techsystems Inc., MAC Acquisition I, Inc. and Group Technologies Corporation dated December 31, 1992 (incorporated by reference to Exhibit 10.16 to the Company’s Registration Statement on Form S-1 filed May 18, 1994 (Registration No. 33-76326)). | |
| 10.3 |
Purchase and Sale Agreement among Philips Electronic North America Corporation and Group Technologies Corporation dated June 25, 1993 (incorporated by reference to Exhibit 10.17 to the Company’s Registration Statement on Form S-1 filed May 18, 1994 (Registration No. 33-76326). | |
| 10.4 |
Asset Purchase Agreement dated April 6, 2001 by and between Tube Turns Technologies, Inc. and Dana Corporation as amended by a First Amendment dated May 4, 2001 and as amended by a Second Amendment on May 15, 2001 (incorporated by reference to Exhibit 2.1 to the Company’s Form 10-Q for the quarterly period ended June 30, 2001 filed on July 30, 2001 (Commission File No. 000-24020)). | |
| 10.5 |
Asset Purchase Agreement between Sypris Technologies, Inc. and Dana Corporation dated December 8, 2003 (incorporated by reference to Exhibit 10.7 to the Company’s Form 10-K for the fiscal year ended December 31, 2003 filed on February 12, 2004 (Commission File No. 000-24020)). | |
3
| Exhibit Number |
Description | |
| 10.6 | 1999 Amended and Restated Loan Agreement between Bank One, Kentucky, NA, Sypris Solutions, Inc., Bell Technologies, Inc., Tube Turns Technologies, Inc., Group Technologies Corporation and Metrum-Datatape, Inc. dated October 27, 1999 (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-K for the fiscal year ended December 31, 1999 filed on February 25, 2000 (Commission File No. 000-24020)). | |
| 10.6.1 | 2000A Amendment to Loan Documents between Bank One, Kentucky, NA, Sypris Solutions, Inc., Bell Technologies, Inc., Tube Turns Technologies, Inc., Group Technologies Corporation and Metrum-Datatape, Inc. dated November 9, 2000 (incorporated by reference to Exhibit 10.6.1 to the Company’s Form 10-K for the fiscal year ended December 31, 2000 filed on March 2, 2001 (Commission File No. 000-24020)). | |
| 10.6.2 | 2001A Amendment to Loan Documents between Bank One, Kentucky, NA, Sypris Solutions, Inc., Bell Technologies, Inc., Tube Turns Technologies, Inc., Group Technologies Corporation and Metrum-Datatape, Inc. dated February 15, 2001 (incorporated by reference to Exhibit 10.6.2 to the Company’s Form 10-Q for the quarterly period ended April 1, 2001 filed on April 30, 2001 (Commission File No. 000-24020)). | |
| 10.6.3 | 2002A Amendment to Loan Documents between Bank One, Kentucky, NA, Sypris Solutions, Inc., Sypris Test & Measurement, Inc., Sypris Technologies, Inc., Sypris Electronics, LLC, Sypris Data Systems, Inc. and Sypris Technologies Marion, LLC dated December 21, 2001 (incorporated by reference to Exhibit 10.6.3 to the Company’s Form 10-K for the fiscal year ended December 31, 2001 filed on January 31, 2002 (Commission File No. 000-24020)). | |
| 10.6.4 | 2002B Amendment to Loan Documents between Bank One, Kentucky, NA, Sypris Solutions, Inc., Sypris Test & Measurement, Inc., Sypris Technologies, Inc., Sypris Electronics, LLC, Sypris Data Systems, Inc. and Sypris Technologies Marion, LLC dated July 3, 2002 (incorporated by reference to Exhibit 10.25 to the Company’s Form 10-Q for the quarterly period ended June 30, 2002 filed on July 29, 2002 (Commission File No. 000-24020)). | |
| 10.6.5 | 2003A Amendment to Loan Documents between Bank One, Kentucky, NA, Sypris Solutions, Inc., Sypris Test & Measurement, Inc., Sypris Technologies, Inc., Sypris Electronics, LLC, Sypris Data Systems, Inc. and Sypris Technologies Marion, LLC dated October 16, 2003 (incorporated by reference to Exhibit 99.1 to the Company’s Form 10-Q for the quarterly period ended September 28, 2003 filed on October 29, 2003 (Commission File No. 000-24020)). | |
| 10.6.6** | 2005A Amendment to Loan Documents between JP Morgan Chase Bank, NA, Sypris Solutions, Inc., Sypris Test & Measurement, Inc., Sypris Technologies, Inc., Sypris Electronics, LLC, Sypris Data Systems, Inc., Sypris Technologies Marion, LLC and Sypris Technologies Kenton, Inc. dated March 10, 2005. | |
| 10.7 | Note Purchase Agreement between The Guardian Life Insurance Company of America, Connecticut General Life Insurance Company, Life Insurance Company of North America, Jefferson Pilot Financial Insurance Company, Jefferson-Pilot Life Insurance Company, Jefferson Pilot LifeAmerica Insurance Company, and Sypris Solutions, Inc. dated as of June 10, 2004 (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarterly period ended June 30, 2004 filed on August 3, 2004 (Commission File No. 000-24020)) | |
| 10.8 | Lease between John Hancock Mutual Life Insurance Company and Honeywell, Inc. dated April 27, 1979; related Notice of Assignment from John Hancock Mutual Life Insurance Company to Sweetwell Industrial Associates, L.P., dated July 10, 1986; related Assignment and Assumption of Lease between Honeywell, Inc. and Defense Communications Products Corporation (prior name of Group Technologies Corporation) dated May 21, 1989; and related Amendment I to Lease Agreement between Sweetwell Industries Associates, L.P. and Group Technologies Corporation dated October 25, 1991, regarding Tampa industrial park property (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 filed May 18, 1994 (Registration No. 33-76326)). | |
4
| Exhibit |
Description | |
| 10.8.1 | Agreement related to Fourth Renewal of Lease between Sweetwell Industries Associates, L.P. and Group Technologies Corporation dated November 1, 2000, regarding Tampa industrial park property (incorporated by reference to Exhibit 10.8.1 to the Company’s Form 10-K for the fiscal year ended December 31, 2000 filed on March 2, 2001 (Commission File No. 000-24020)). | |
| 10.9 | Lease between Metrum-Datatape, Inc. (assignee of Metrum, Inc.) and Alliant Techsystems, Inc. dated March 29, 1993 and amended July 29, 1993, May 2, 1994, November 14, 1995, December 4, 1996 and February 12, 1998 regarding 4800 East Dry Creek Road Property (incorporated by reference to Exhibit 10.25 to the Company’s Form 10-Q for the quarterly period ended June 28, 1998 filed on August 4, 1998 (Commission File No. 000-24020)). | |
| 10.10 | Lease between Sypris Data Systems, Inc. and Via Verde Venture, LLC. dated September 24, 2003 regarding 160 East Via Verde, San Dimas, California (incorporated by reference to Exhibit 10.11 to the Company’s Form 10-K for the fiscal year ended December 31, 2003 filed on February 12, 2004 (Commission File No. 000-24020)). | |
| 10.11* | Sypris Solutions, Inc. 1994 Stock Option Plan for Key Employees as Amended and Restated effective February 26, 2002 (incorporated by reference to Exhibit 4.5 to the Company’s Form S-8 filed on May 9, 2002 (Registration No. 333-87880)). | |
| 10.12* | Sypris Solutions, Inc. Share Performance Program For Stock Option Grants dated July 1, 1998 (incorporated by reference to Exhibit 10.28 to the Company’s Form 10-Q for the quarterly period ended June 28, 1998 filed on August 4, 1998 (Commission File No. 000-24020)). | |
| 10.13* | Sypris Solutions, Inc. Independent Directors’ Stock Option Plan as Amended and Restated effective February 26, 2002 (incorporated by reference to Exhibit 4.5 to the Company’s Form S-8 filed on May 9, 2002 (Registration No. 333-87882)). | |
| 10.14* | Sypris Solutions, Inc., Directors Compensation Program As Amended and Restated Effective February 24, 2004 and as amended December 15, 2004, (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 21, 2004 (Commission File No. 000-24020)). | |
| 10.15* | Sypris Solutions, Inc. Directors Compensation Program adopted on September 1, 1995 Amended and Restated on March 1, 2005 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 3, 2005 (Commission File No. 000-24020)). | |
| 10.16* | Sypris Solutions, Inc. Executive Bonus Plan, effective as of January 1, 2003 (incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q for the quarterly period ended March 30, 2003 filed on April 30, 2003 (Commission File No. 000-24020)). | |
| 10.17*, ** | Sypris Solutions, Inc. Incentive Bonus Plan, effective as of January 1, 2004. | |
| 10.18* | Sypris Solutions, Inc. Incentive Bonus Plan, effective as of January 1, 2005 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on March 3, 2005 (Commission File No. 000-24020)). | |
| 10.19* | 2004 Sypris Equity Plan effective as of April 27, 2004 (incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q for the quarterly period ended March 31, 2004 filed on April 30, 2004 (Commission File No. 000-24020)). | |
| 10.20* | Form of non-qualified stock option award agreement for non-employee directors (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on December 21, 2004 (Commission File No. 000-24020)). | |
| 10.21* | Form of non-qualified stock option award agreement for grants to executive officers and other key employees (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on December 21, 2004 (Commission File No. 000-24020)). | |
| 10.22* | Form of performance-based stock option award agreement for grants to executive officers and other key employees (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on December 21, 2004 (Commission File No. 000-24020)). | |
5
| Exhibit Number |
Description | |
| 10.23* | Form of Restricted Stock Award Agreement for grants to executive officers and other key employees (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on March 3, 2005 (Commission File No. 000-24020)). | |
| 10.24* | Form of Non-Qualified Stock Option Award Agreement for Six-Year Stock Option for grants to executive officers and other key employees (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on March 3, 2005 (Commission File No. 000-24020)). | |
| 10.25*,** | Form of Amendment to Stock Option Agreements to Accelerate Vesting Periods for Certain “Underwater” Options for grants to executive officers and other key employees. | |
| 10.26* | Employment Agreement by and between Metrum-Datatape, Inc. and G. Darrell Robertson dated February 28, 2000 (incorporated by reference to Exhibit 10.20 to the Company’s Form 10-K for the fiscal year ended December 31, 2000 filed on March 2, 2001 (Commission File No. 000-24020)). | |
| 10.27 | Underwriting Agreement dated March 20, 2002 among Sypris Solutions, Inc., Needham & Company, Inc. and A.G. Edwards & Sons, Inc. (incorporated by reference to Exhibit 10.20 to the Company’s Form 10-Q for the quarterly period ended March 31, 2002 filed on April 29, 2002 (Commission File No. 000-24020)). | |
| 10.28 | Underwriting Agreement dated March 11, 2004 among Sypris Solutions, Inc. and Needham & Company, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the quarterly period ended March 31, 2004 filed on April 30, 2004 (Commission File No. 000-24020)). | |
| 21** | Subsidiaries of the Company | |
| 23** | Consent of Ernst & Young LLP | |
| 31.1 | CEO certification pursuant to Section 302 of Sarbanes - Oxley Act of 2002. | |
| 31.2 | CFO certification pursuant to Section 302 of Sarbanes - Oxley Act of 2002. | |
| 32 | CEO and CFO certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002. | |
| * | Management contract or compensatory plan or arrangement |
| ** | Previously filed. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized, on April 14, 2005.
| SYPRIS SOLUTIONS, INC. |
| (Registrant) |
| /s/ Anthony C. Allen |
| (Anthony C. Allen) |
| Vice President and Treasurer |
6
Exhibit 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002
I, Jeffrey T. Gill, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Sypris Solutions, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 14, 2005 | By: | /s/ Jeffrey T. Gill | ||
| Jeffrey T. Gill | ||||
| President & Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002
I, David D. Johnson, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Sypris Solutions, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: April 14, 2005 | By: | /s/ David D. Johnson | ||
| David D. Johnson | ||||
| Vice President & Chief Financial Officer |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Sypris Solutions Inc. (the “Company”) on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Sypris Solutions Inc., that to his knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: April 14, 2005 | By: | /s/ Jeffrey T. Gill | ||
| Jeffrey T. Gill | ||||
| President & Chief Executive Officer | ||||
| Date: April 14, 2005 | By: | /s/ David D. Johnson | ||
| David D. Johnson | ||||
| Vice President & Chief Financial Officer | ||||
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Sypris Solutions Inc. and will be retained by Sypris Solutions Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-K and shall not be considered filed as part of the Form 10-K.
April 14, 2005
Mr. Martin F. James
Senior Assistant Chief Accountant
United States Securities and Exchange Commission
Division of Corporation Finance
Mail Stop 0306
450 Fifth Street, N.W.
Washington DC 20549
| Re: | Sypris Solutions Inc. |
Form 10-K for the year ended December 31, 2004
File No. 000-24020
Dear Mr. James:
We confirm Sypris Solutions, Inc.’s (Sypris) receipt of the letter from the United States Securities and Exchange Commission (Commission) dated April 1, 2005 regarding the Commission staff’s comments on the Form 10-K of Sypris for the fiscal year ended December 31, 2004. In connection with the letter, we acknowledge the following:
| • | Sypris is responsible for the adequacy and accuracy of the disclosures in our filing; |
| • | Staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and |
| • | Sypris may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. |
We also wish to confirm that we have read the staff’s comments and have provided our response to each question below. We have also included your comments for ease of review.
Staff Comment #1 – Revenue Recognition – Page 38
| 1. | We note many instances where you use the word “generally” when describing your accounting policies in this note and in the critical accounting estimates discussion on page 16. In future filings, please disclose your policies for recognizing revenues for outsourced services and the percentage of completion method as well as your policies for applying the percentage of completion under all known circumstances. For example, you could describe the various arrangements or circumstances and explain how the differences in the arrangements impact the timing of revenue recognition. |
Sypris Response
We agree with the staff’s comments and will revise our disclosure in future filings to more specifically describe our policies for revenue recognition. We will eliminate the use of the word “generally” in future filings and will modify our disclosure to add clarity to the presentation. The additional disclosures points to be considered by Sypris in future filings in response to this comment include:
Mr. Martin F. James
April 14, 2005
Page 2 of 4
In the notes to consolidated financial statements and in management’s discussion and analysis:
| • | The percentage of completion method is used by our Aerospace & Defense segment for multi-year, fixed price contracts with aerospace & defense companies and agencies of the U.S. Government. |
| • | Our policy is to apply units of delivery as the basis for percentage of completion revenue when the contract billing terms are based on product shipments. |
| • | Our policy is to apply milestones or cost-to-cost as the basis for percentage of completion revenue when the contract billing terms are based on performance milestones. |
| • | Our Industrial Group recognizes revenue for outsourced services when we ship the products, at which time title passes to the customer. |
| • | Our Test & Measurement segment recognizes revenue for outsourced services when the services are provided to the customer. |
| • | Each segment recognizes revenue for product sales when we ship the products, at which time title passes to the customer. |
In management’s discussion and analysis:
| • | If different methods of revenue recognition other than the percentage of completion method were used for the Aerospace & Defense segment’s outsourced services, or if different basis were applied to the percentage of completion method, it is possible that materially different amounts could be reported in our consolidated financial statements. |
Staff Comment #2– Inventory – Page 37
| 2. | Tell us and revise the note in future filings to identify the “certain other inventory” the cost of which is determined using the LIFO method. In addition, revise the last sentence of Note 4 to identify the captions of the preceding table which include inventory valued using LIFO. |
Sypris Response
We agree with the staff’s comments and will make the appropriate disclosures related to “certain other inventory” valued using the LIFO method in future filings. The Louisville plant in our Industrial Group was the only Company location using LIFO at December 31, 2004. We are currently considering a change from the LIFO method of valuing inventory to the FIFO method for this portion of our inventory, and accordingly, in the event a change in accounting principle is made, such change and all related disclosures will be made in accordance with the applicable authoritative guidance.
Staff Comment #3 – Inventory – Page 37
| 3. | In future filings revise the note to comply fully with item 5-02.6(d) of Regulation S-X. |
Mr. Martin F. James
April 14, 2005
Page 3 of 4
The disclosures required by item 5-02.6(d) of Regulation S-X were made in our Form 10-K for the year ended December 31, 2004. These disclosure requirements pertain to our Aerospace and Defense segment, which is the only segment that uses the percentage of completion method or the completed contract basis of accounting. Neither our Industrial Group nor our Test and Measurement segment recognize revenue using these methods. We note that the disclosure of costs in excess of amounts billed that would not be absorbed in cost of sales based on existing firm orders as required by item 5-02.6(d)(i) and any claims as required by item 5-02.6(d)(ii) were not made as we did not have such items at the respective balance sheet dates. We will continue to ensure our inventory disclosures fully comply with Item 5-02.6(d) of Regulation S-X in future filings.
Staff Comment #4 – Note 2. Acquisitions – Page 41
| 4. | Revise the note in future filings to include the pro-forma financial information required by paragraph 54 of SFAS 141 for your acquisitions consummated during 2003 and 2004, or disclose why the information was not provided. |
Sypris Response
We agree with the staff’s comment and will add the following statement to future filings, “Subsequent to the closure of each acquisition, we performed an evaluation of the acquisition pro forma disclosure requirements and determined that pro forma information was not required as the acquisitions were not material, individually or in the aggregate, as applicable.”
Staff Comment #5 – Item 9A. Controls and Procedures – Page 57
| 5. | We note the statement that your chief executive officer and chief financial officer have concluded that the company’s disclosure controls and procedures are effective with the exception of the operations acquired in Kenton, Ohio and Toluca, Mexico. Please note that an assessment of the effectiveness of disclosure and controls and procedures under Item 307 of Regulation S-K does not permit the exclusion of acquisitions that were made during the fiscal year. Given the exceptions noted, it therefore remains unclear whether your chief executive officer and chief financial officer have concluded that your disclosure controls and procedures are effective. |
| • | Please amend your filing to state, in clear and unqualified language, the conclusions reached by your chief executive officer and chief financial officer on the effectiveness of your disclosure controls and procedures. For example, if true, you can state that your disclosure controls and procedures are effective including the operations acquired during 2004 in Kenton, Ohio and Toluca, Mexico. Otherwise, you can state that your disclosure controls and procedures are not effective and explain why. |
We note that you have also excluded these acquisitions from managements’ assessment of the effectiveness of internal control over financial reporting, as permitted by Question 3 of Frequently Asked Questions: Management’s Report on Internal Control over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports dated October 6, 2004.
Mr. Martin F. James
April 14, 2005
Page 4 of 4
Sypris Response
We agree with the staff’s comment. The first paragraph of our disclosure in Item 9A has been amended in a Form 10-K/A filed on April, 14, 2005 to read as follows:
As of the end of the period covered by this annual report, an evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer (the “CEO”) and the Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective.
We appreciate your thorough review of the Company’s filing and your comments regarding the filing. An amendment to the Company’s Form 10-K for 2004 has been filed to amend Item 9A as described above.
| Very truly yours, |
| /s/ David D. Johnson |
| David D. Johnson |
| Vice President and CFO |