Good day and welcome to the Sypris Solutions, Inc. Conference Call. Today’s call is being recorded. At this time, for opening remarks, I would like to turn the call over to President and Chief Executive Officer, Mr. Jeffrey Gill. Please go ahead.

Thank you, Kayla and good morning everyone. Tony Allen and I would like to welcome you to this call, purpose of which is to review the company’s financial results for the fourth quarter and full year 2016. For those of you, who have access to our PowerPoint presentation this morning, please advance to Slide 2 now. We always begin these calls with a note that some of what we might discuss here today may include projections and other forward-looking statements. No assurance can be given that these projections and statements will be achieved and actual results could differ materially from those projected as a result of several factors. These factors are included in the company’s filings with the Securities and Exchange Commission. And in compliance with Regulation G, you can access our website at sypris.com to review the definitions of any non-GAAP financial measures that maybe discussed during this call. With these qualifications in mind, we would now like to proceed with the business discussion. Please advance to Slide 3. I will lead you to the first half of our presentation this morning, starting with an overview of the highlights for the year, to be followed by an update on the status of our transition plan implementation. Tony will then provide you with a more detailed review of our financial results for the quarter and full year 2016 as well as to walk you through the significant savings we expect to realize in 2017 and 2018 when compared to the year just completed. Now, let’s begin with the overview on Slide 4. The year 2016 was without question a period of significant accomplishment for the company. We reported earnings of $0.30 per diluted share for the year, which reflected the gains on sale associated with our various divestitures and underperforming…

Thanks Jeff. Good morning everyone. I would like to discuss with you some of the highlights of our fourth quarter and full year 2016 financial results. And then I will spend most of my time providing additional color on our forward outlook. Please advance to Slide 12. Q4 consolidated revenue totaled $20 million with Sypris Technologies and Sypris Electronics contributing 80% and 20% respectively. Q4 was the first full quarterly period that excludes the CSS business sold in August 2016. Sypris Electronics’ revenue was impacted during the quarter by program delays arising from – primarily from component issues and the efforts around completing the relocation of our facility which wrapped up in December. Gross profit and EBITDA during the quarter benefited from improved results from Sypris Technologies, which recorded its best quarterly performance of the year in Q4, but the inverse was true for Sypris Electronics, which was pressured by lower volumes, cost incurred during the quarter for the facility relocation, the write-off of certain assets associated with the prior facility and certain inventory on completed programs and higher SG&A spend due to severance costs and professional fees. The previously announced plan to transition operations from our Broadway Plant gave rise to the recognition of approximately $600,000 of severance and other costs associated with this action during the fourth quarter. Full year consolidated revenues totaled nearly $92 million with Sypris Technologies and Sypris Electronics contributing 69% and 31% respectively. As expected, revenue declined in both segments in 2016 from 2015 contributing to a 37% decline from the prior year. During 2016, Sypris Technologies experienced lower demand in the commercial vehicle and oil and gas markets and lower revenue from the reduction of unit sales prices for certain components based on our contractual rebuild terms for steel prices. We also sold…

Thank you. [Operator Instructions] We will take our first from Jim Ricchiuti with Needham & Company.

Thanks. Good morning. Wanted to just ask about the revenue levels you were exiting Q4 at in both technologies and the electronics businesses, you saw a nice step-up in the Sypris Technologies business, is that something normally you will see some sequentially lower revenues in Q1, how should we think about where you are starting the year off in this part of the business?

Jim, I think you will see a step-down in Q1 in revenue in the technologies business from Q4 levels. It should not fall significantly below kind of where we were trending in the middle of the year in ‘16, but it will decline from Q4.

Got it. And the increase you saw sequentially in that part of the business in Q4, was there anything unusual that drove that improvement or is that just – was that somewhat anticipated?

It wasn’t anything unusual. It was a mix of oil and gas and truck components. But no single big item hit us in Q4.

Okay. And on the electronics side, some way we are at the bottom here, is that a fair characterization and how do you see that beginning to move up just given the order activity backlog you alluded to?

Yes. It will move up. We do expect it to move up in Q1, but really more significantly in Q2. Some of the programs, the component issue that I referred to earlier is getting resolved as move through Q1. But the ramp in revenue that we expect on the electronics business really begins more significantly in the second quarter.

Okay. And I realized the mix of revenues is a key determining factor in margins, but you are looking at a pretty significant increase and anticipating a significant improvement in gross margins in the second half of the year, some of that is clearly under your control, I assume a lot of that got quite a bit with all the cost initiatives you are taking, but as we think about the improved revenue mix that you are anticipating is what I am trying to get an idea is what kind of quarterly revenue level you need to be at to get to breakeven?

As we look forward Jim, I think what you will see and you are right there is a lot of the margin enhancement that is in our control and a lot of that is baked in because of the changes that we have made to our cost structure thus far. We do still have actions to complete on the technologies business, but over the next two months to three months we expect those to wrap up. So it will start to drive margin improvements late Q2, but certainly more significantly in Q3. In terms of breakeven, I think as you see, it’s really not growth in revenue that’s going to drive it at this point. The mix that we have in the business today that we referred to between oil and gas, truck components, aerospace and defense, even within the truck components the mix of customers that we have, it – with what we have today from a revenue base, we have the opportunity to reach those margins and to return to breakeven. It’s execution on the cost side that’s primarily going to drive that in the second half of the year.

Okay, that’s helpful. Tony and just with respect to some of the equipment transfers to Toluca, how might we – how should we think about the risk associated potential for disruption, as you move that – as you ship more production there?

It’s – you have to plan for that and expect it and you will have some. But we have one of the things certainly in our favors. We have an outstanding team in Toluca. And they have – they are very experienced in dealing with asset transfers, launching new productions, launching new programs. And we have the benefit of the legal team that has been through this before with Marion, with Kenton, with Morganton. So yes, there is risk, but we don’t anticipate any major disruptions at all to production. We don’t expect any disruptions to our customers in terms of deliveries. We are doing everything that we need to do from a bank build standpoint to support that and provide some insurance, if you will. But it’s – thus far everything has proceeded on plan and we expect that to continue.

Okay. Two final questions, I have been hearing some big things in terms of DoD orders, what are your defense customers telling you in terms of the expectations, you had some, I think decent bookings that you alluded to again, but just more broadly in terms of expectations in light of the political developments in Washington?

Jim, this is Jeff. Good morning. The outlook seems to be reasonably positive. And we are not getting our hopes up and thinking that this is going to be some boon. But clearly we have some programs now that have longer legs that are multi-year that give us the ability to get into more of a rhythm on these things and that’s been a real plus.

Okay. A lot of noise in Washington about potential for border tax, how are you guys thinking about that relative to the transfer and increased production that you are anticipating in Toluca?

Well, there has been a lot of conversation about that. And our observation is that the automobile, light truck, even increasingly the heavy truck business is global. And so whether it’s importation from Mexico or India or China or Eastern Europe or South America, if taxes start to be imposed, I think eventually that gets passed through to consumer, I am guessing. But I can’t imagine that what it’s going to do is cause companies to relocate huge amounts of productive capacity back from these lower costs geographic regions to the U.S., because the capacity does not exist in the U.S. so.

Okay. Thanks a lot guys. Good luck.

Yes. Thanks Jim.

And we have no further questions in queue at this time.

Okay. Well, thank you, Kayla.

I apologize, gentlemen. We do have one from Joel Cahill, The Jameson Companies.

Hi guys. Thanks for the call and the information this morning [indiscernible] the cost reductions and all of the heavy lifting you guys have done, that’s excellent, on that, it looks like the estimates are around $5 million kind of the total severance costs and transportation of assets, do you see much risk around that, it looks like it’s just come a little bit from when you probably amended 8-K, I guess in February, so first part is that. And then the next part is given what Tony what you said on those there is an asset sale going to happen in this week hopefully to be closing on Friday, you continue to say that there is a – it’s likely that the asset sales are going to be larger than the cost of this transition, is that potentially considerably larger. My next question after this will be on what the assets looks like?

Yes. In terms of the estimate of what we expect to incur for severance and relo, I think the numbers that we have out there are the best estimates that we have at this time. We don’t see any significant variance to that. We will certainly update those on a quarterly basis as we move forward, but we think that’s a pretty good number for what we will incur. And is it going to be materially different, will the proceeds be materially different, we will see. There is opportunity there. But it’s a selective process with the assets and what we will be divesting. We want to be smart about it and take our time as we look at our capacity and our growth plans and identify those that are truly strategic and those there aren’t. So there is opportunity, but I can’t really quantify it.

Sure. And I am assuming that there are brokers who marketed this stuff in the space, is that who is handling these sales generally or is it much more relational with former or past or current customers?

It’s a lot of relation. We certainly work with those brokers, as they contacted us following the 8-K announcements. It doesn’t take long for those calls to start coming in. But the majority of what we have been doing is relational and using some internal resources to handle that.

Okay. I think Jeff you mentioned that there could be some – that you are still having to get approvals from customers who are getting production out of Kentucky to have those actually out of the Toluca facility, what kind of risk is there around that, say, one of your customer is saying, no we are not able to actually receive production out of Mexico, is that realistic?

No, Joe, I think the risk I was talking about was really getting the production launch approval and so each of our customers is already – are supporting us in the relocation. And so now it’s a matter of factoring the production part process off in Toluca, submitting samples to the customers so that they can verify that they meet the quality requirements and then turn to for full production.

And the Toluca facility, have you ever had any those kinds of any of those concerns, of quality of production relative to Kentucky, I mean I know you guys seems to really like your team down there?

Yes. No, we haven’t. In fact, our Toluca facility is, quite frankly, widely viewed as being probably the top performer out of the plants that we have had. And it has a long history, quite frankly, Joel of launching program successfully going all the way back to 2004.

Well, that’s certainly encouraging. I appreciate the outlook guys, again you have done a lot of heavy lifting and starting to really show. So I don’t have any further questions here.

Great. Thank you, Joel.

Thank you, guys.

And no further questions in queue at this time.

Thank you, Kayla. And thank everyone. Tony and I would like to thank you for joining this on the call. We welcome your continued interest and of course, your questions about our business. Hope you have a great day. Thank you.