(

)

Exit and Disposal Activities

November 22, 2016,

the Board of Directors of the Company approved moving forward with the exploration of a range of strategic options for the Broadway Plant, including the divestiture of the plant, the transitional reduction in its operations to accommodate lower volumes, the relocation of production to other Company facilities, as needed, and/or the closure of the plant. Accordingly, management explored various exit or disposal options for the Broadway Plant with the input of our salaried and unionized employees, our customers and others within the industry. On

February 21, 2017,

with the benefit of management’s analysis, the Board of Directors approved a modified exit or disposal plan with respect to the Broadway Plant, which is now expected to continue certain transitional operations into

2018.

The Company has begun relocating certain assets from the Broadway Plant to other manufacturing facilities, as needed, to serve its existing and target customer base and to identify underutilized or non-core assets for disposal. Management expects to use proceeds from the sale of any underutilized or non-core assets to fund costs incurred in the transfer of equipment from the Broadway Plant and the transition of the related production. Management will evaluate options for the real estate and any remaining assets in the Broadway Plant following the completion of production at that facility.

As a result of these initiatives, the Company recorded charges of

$645,000,

$0.03

per share in

2016.

For the

three

and

six

months ended

July

2017,

the Company recorded charges of

$880,000,

$0.04

per share, and

$1,878,000

$0.09

per share, respectively, related to the transition of production from the Broadway Plant, which is included in severance, relocation and other costs in the Condensed Consolidated Statement of Operations. A summary of the pre-tax charges is as follows (in thousands):

			Recognized		Remaining
	Total		as of		Costs to be
	Program		July 2, 2017		Recognized
Severance and benefit-related costs	$	1,432	$	1,432	$	0
Asset impairments		188		188		0
Equipment relocation costs		2,602		873		1,729
Other		680		30		650
	$	4,902	$	2,523	$	2,379

Severance and benefit-related costs tied to workforce reductions were recorded in accordance with ASC

420,

Exit or Disposal Cost Obligations (ASC

420

) and ASC

712,

Compensation – Nonretirement Postemployment Benefits. Under ASC

420,

one

-time termination benefits that are conditioned on employment through a certain transition period are recognized ratably between the date employees are communicated the details of the

one

-time termination benefit and their final date of service. Accordingly, the Company recorded severance and benefit-related costs of

$427,000

2016

and

$1,005,000

in the

first

six

months of

2017.

additional severance and benefit-related costs are expected to be recorded.

The Company evaluates its long-lived assets for impairment when events or circumstances indicate that the carrying value

may

not

be recoverable in accordance with ASC

360,

Impairment and Disposal of Long-Lived Asset. The Company’s strategic decision to transition production from the Broadway Plant led to a

$188,000

non-cash impairment charge in the

fourth

quarter of

2016.

The charge was based on the excess of carrying value of certain assets

not

expected to be redeployed over their respective fair value. Fair values for these assets were determined based on discounted cash flow analyses.

A summary of costs and related reserves for the transition of production from the Broadway Plant at

July

2017

is as follows (in thousands):

	Accrued				Cash			Accrued
	Balance at				Payments			Balance at
	Dec. 31,		2017		or Asset			July 2,
	2016		Charge		Write-Offs			2017
Severance and benefit-related costs	$	427	$	1,005	$	(712	)	$	720
Equipment relocation costs		0		873		(873	)		0
	$	427	$	1,878	$	(1,585	)	$	720

The Company expects to incur additional pre-tax costs of approximately

$2,379,000

within Sypris Technologies, all of which are expected to be cash expenditures.

As noted above, management expects to use proceeds from the sale of underutilized or non-core assets to fund costs incurred on the transfer of equipment from the Broadway Plant and the transition of the related production. The following assets have been segregated and included in assets held for sale in the condensed consolidated balance sheets (in thousands):

	July 2,			December 31,
	2017			2016
	(Unaudited)
Machinery, equipment, furniture and fixtures	$	7,671		$	6,673
Accumulated depreciation		(6,631	)		(5,841	)
Property, plant and equipment, net	$	1,040		$	832