Good day everyone and welcome to the Sypris Solutions Second Quarter 2017 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks, I would like to turn the call over to the President and Chief Executive Officer, Mr. Jeffrey Gill. Please go ahead, sir.

Thank you, Kim and good morning everyone. Tony Allen and I would like to welcome you to this call, the purpose of which is to review the Company's financial results for the second quarter of 2017. 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 may be discussed during this call. With these qualifications in mind, we would now like to proceed with 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 quarter, to be followed by an update on the status of our transition plan implementation and our new business awards. Tony will then provide you with a more detailed review of our financial results for the quarter 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. We are pleased to report that revenue for the quarter came in at the higher end of our expectations, increasing by almost 17% sequentially to $21.2 million, up from $18.2 million in the first quarter of this year.…

Thanks, Jeff. Good morning, everyone. I'd like to discuss with you some of the highlights of our second quarter financial results and provide an update on the transition plan and related cost-reduction initiatives, we discussed earlier this year. Please advance to Slide 15. Q2 consolidated revenue closed at $21.2 million, an increase of $3 million or 16.8% from the first quarter. This resulted in total first half revenue of $39.4 million, which was in line with our outlook. The revenue split between Sypris Technologies and Sypris Electronics was $14.1 million and $7.2 million, respectively as both segments reported an increase in revenue. Our gross profit for Q2 increased $2.3 million over Q1 on the sequential revenue increase of $3 million, primarily reflecting the contribution margin on program ramps for Sypris Electronics, improved mix at Sypris Technologies and a favorable impact of cost reduction actions in both segments, beginning to drive improved profitability. Consolidated gross margins for the quarter of 7.5%, increased 1,130 basis points from the first quarter and represents the highest gross margin performance for the Company since Q4 of 2014. Our second quarter results include the impact of additional investments for labor and equipment rebuilds by Sypris Technologies to support customer deliveries and the transition of production from the Broadway Plant. We made the decision to extend production beyond the end of the second quarter at this facility, which will impact our cost targets for 2017 but it doesn't change our two-year goal, as we have now completed the actions necessary to continue with limited production at Broadway until remaining equipment relocations are complete. Our SG&A expense in Q2 was $3.6 million or 16.9% of revenue, down from 18.8% of revenue in the first quarter. We reduced our adjusted operating loss on a sequential basis by $2.1 million…

Thank you. [Operator Instructions] Our first question today comes from Jim Ricchiuti from Needham & Company.

Hi, good morning.

Good morning, Jim.

Question on the gross margins, still you're looking for a fairly significant step up in the second half and presumably it's coming mainly from the industrial business. But I was wondering, is there much improvement that you would anticipate coming from the electronic side of the business?

Jim, not so much improvement from Q2, we had the big bump from Q1 to Q2 for the electronics business. So I think what you noted regarding the improvement in Sypris Technologies driving a big piece of the second half is correct.

Got it. And with respect to the outlook you bumped up your revenue estimate modestly for the second half of the year. Is that coming from both sides of the business? Or are you anticipating more of an increase on that versus where you were coming perhaps from the electronics side?

It's really both segments are contributing as you noted, it is a relatively modest increase, but with the strength that we had in Q2 in electronics with the backlog we have on both sides of the business, there each contributing to that gain.

And on the slide where you talk about returning to profitability in the second half that seems to leave the door open to possibly getting to profitability as early as Q3 and I’m wondering is that a function of just the timing of shipments.

That will drive the measure – the metric as we move between Q3 and Q4. As we look at it in the aggregate, we believe that – we can get there for the second half. The key part will be the timing of shipments really on both sides of the business.

And Tony, just want to be clear, is that include any type of potential gains from any equipment sales. Or is that strictly just an operating number that you’re looking at, in terms of…

We're looking at I guess what we call the adjusted operating income, Jim, which is operating income you'll see it in our non-GAAP measures. It's the operating income excluding the severance and relo.

Got it. And then last question for me and I'll jump back in the queue. You guys have done a real nice job in terms of diversifying not only the customer base, but the end markets and so as I look at that pie chart on 21. That has the vertical market exposure. Wanted to get your sense is to what you're seeing in any energy related portion of the business and just given all the portion of the business and just given all the volatility in that market. Is that a case where you just winning new business and you're somewhat – you don't have quite that kind of exposure to price volatility.

Yes Jim, that's correct. And without knowing exactly, how much of our business comes from MRO. We think it is in the neighborhood of 40% to 50% of our ongoing businesses from maintenance and repairing operations. And so our backlog in the energy side is probably as high as it's ever been. And so we've been very fortunate.

Okay, thanks very much.

[Operator Instructions] And it appears there are no further questions today. Speakers I'll turn the conference back to you for additional or closing remarks.

Thank you, Kim. Tony and I would like to thank you for joining us on this call. We certainly welcome your continued interest and of course your questions about our business. Thank you and hope you have a great day.

And that concludes our conference today. Thank you for your participation. You may now disconnect.