Production and Market Demand - North American Class 8 truck production increased by 8% in 2023 compared to 2022, with strong demand expected in Q1 2024 before a significant decrease in Q2 2024[156] - Sales in the oil and gas market improved in 2023 compared to early 2022, driven by increased production activity, particularly in liquefied natural gas shipments to Europe[157] - Sypris Technologies has diversified its market presence, which has helped reduce revenue volatility by aligning with different demand cycles across automotive and off-highway markets[156] Financial Performance - Total net revenue increased by 23.7% to $136.2 million in 2023 from $110.1 million in 2022[187] - Sypris Technologies' net revenue rose by 12.5% to $77.9 million, driven by increased sales volumes in the commercial vehicle market[188] - Sypris Electronics' net revenue surged by 42.7% to $58.3 million, attributed to ramped production and improved material availability[191] - Gross profit for Sypris Technologies increased by 7.7% to $9.2 million, while Sypris Electronics' gross profit rose by 27.6% to $8.0 million[192][193] - Selling, general and administrative expenses increased by 12.4% to $16.3 million, but decreased as a percentage of revenue from 13.2% to 12.0%[194] - Interest expense decreased by 30.0% to $0.8 million due to a reduction in average debt outstanding[195] - The company reported a net loss of $1.6 million in 2023, an improvement from a net loss of $2.5 million in 2022[188] Cash Flow and Liquidity - Cash used in operating activities was $11.1 million for the year ended December 31, 2023, indicating liquidity challenges[200] - Net cash used in operating activities was $11.1 million in 2023, a decrease from cash provided by operating activities of $13.8 million in 2022, primarily due to a $34.7 million increase in inventory[209] - The company received an additional $5.0 million loan from GFCM to manage liquidity during periods of shortfall[200] - As of December 31, 2023, the company had approximately $7.9 million in cash and cash equivalents, with $6.1 million held outside the U.S. that may incur withholding taxes if repatriated[203] - The company expects existing cash and cash flows from operations to be sufficient to fund operating activities and cash commitments for at least the next twelve months[203] - The company may need to seek additional financing or implement cost-cutting measures if there are significant shortfalls in projected revenues or unexpected costs[202] Supply Chain and Operational Challenges - Supply chain challenges and electronic component shortages are expected to continue impacting Sypris Electronics in 2024, with potential delays in new awards and program starts[159] - The company expects supply chain pressures and inflationary cost increases to persist throughout 2024, potentially negatively impacting operations[155] - Net inventory increased from $42.1 million to $77.3 million, primarily due to delays in shipments to aerospace and defense customers[200] Pension and Funding - The company anticipates a $0.8 million contribution to its U.S. pension plans in 2024, reflecting minimum funding requirements[178] - The company has $8.8 million of unrecognized losses related to its U.S. pension plans, primarily due to changes in discount rates and asset return assumptions[177] Defense Budget and Contracts - The U.S. Department of Defense proposed a budget of $886 billion for FY 2024, which includes $842 billion for the base budget, impacting funding for defense-related contracts[161] - The Fiscal Responsibility Act caps national defense spending at $886 billion for FY 2024, with potential implications for future funding and program execution[162] Financing and Debt - The company amended a secured promissory note with Gill Family Capital Management, increasing the principal amount from $6.5 million to $9.0 million, with maturity dates extended to 2027[206] - The company reported a net cash used in financing activities of $0.6 million in 2023, compared to $1.4 million in 2022, including principal payments on finance lease and equipment financing obligations[211] - The company had $3.2 million outstanding under finance lease obligations with a weighted average interest rate of 8.8% as of December 31, 2023[207] - The company had $2.0 million outstanding under equipment financing facilities, with payments due through 2028 and a weighted average interest rate of 6.8%[208] Business Strategy - The company is pursuing new business opportunities across various markets to achieve a more balanced portfolio[158] - The increase in accounts receivable in 2023 resulted in a cash usage of $1.1 million due to increased revenue for Sypris Technologies and Sypris Electronics[209] - The company had purchase commitments totaling approximately $39.8 million as of December 31, 2023, primarily for inventory due through 2025[208]
Sypris Solutions(SYPR) - 2023 Q4 - Annual Report