Good day everyone and welcome to the Sypris Solutions, Inc. Fourth Quarter 2017 Conference. Just a reminder that today's call is being recorded. And at this time, it's my pleasure to turn the conference over to President and Chief Executive Officer, Mr. Jeffrey Gill. Please go ahead sir.

Thank you, Lori 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 fourth quarter and full year 2017. For those of you who have access to our PowerPoint presentation this morning, please advance to slide two 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'd now like to proceed with the business discussion. Please advance to slide three. 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 and year as well as to provide you with a view into 2018 and the significant progress that we have made in terms of our cost structure. Now, let's begin with the overview on slide four. During the quarter, we continued to make important progress across a number of fronts, the most significant of which was the closure of our 450,000 square foot Broadway Plant in November of last year.…

Thanks Jeff. Good morning everyone. I'd like to discuss with you some of the highlights of our fourth quarter and full year 2017 financial results. Please advance to slide 13. Q3 consolidated revenue closed at $21.5 million, an increase of $1.5 million over the prior year period and at the upper end of our Q4 revenue target. The revenue split between Sypris Technologies and Sypris Electronics was $14.5 million and $7 million respectively. Revenue for Sypris Electronics increased by $2.9 million compared to the prior year fourth quarter, which was partially offset by a decrease for Sypris Technologies of $1.4 million. Sypris Technologies experienced year-over-year declines in each quarterly period during 2017, primarily due to the completion of a contract at the end of 2016. However, we expect this trend to reverse in 2018 based on new program launches and strong market conditions. Our gross profit for Q4 was $1.4 million, which represents a $1.6 million improvement over the prior year period. Both segments contributed to the increase as Sypris Technologies was up $500,000 and Sypris Electronics was up $1.1 million. Consolidated gross margin for the quarter of 6.6%, reflected an increase of 740 basis points from the prior year, but was short of expectations as Sypris Electronics was affected during the fourth quarter by an unfavorable revenue mix partly related to the electronic component shortages and extensive lead-time issues that are becoming prevalent in the electronic manufacturing industry, which will be discussed more on following slide. Sypris Technologies performed well during the fourth quarter, as the benefits of the transfer of production from the Broadway Plant to Toluca are starting to flow into our financial performance. Gross margin for Sypris Technologies for the fourth quarter was 10.7%, which was the first double-digit gross margin result for this segment since…

Thank you. [Operator Instructions] And we'll go first to Jim Ricchiuti at Needham & Company. Please go ahead sir.

Just a couple of questions. The -- in rough terms, Jeff and Tony, can you talk a little bit about the sequential decline in the electronics margins? Maybe just, again, in rough terms, what were the biggest contributing factors? Because you highlighted a couple of things; mix, the component shortages. And I'd be curious what -- specifically, what types of components have you seen in short supply? And I think you also alluded to some inventory charges that might have impacted margins in that business. Thanks.

Thanks Jim. The mix issues, if I break it down in terms of the fourth quarter, I see the mix issues accounting for about half of the decline sequentially. And I see the inventory adjustments and some of the charges related to material quality and the closing out of contracts accounting for the other half. So, in rough terms, I would say, as a percentage, about 8% of margin on both of those buckets. On the component side, we're seeing shortages in the industry. It's everything from the integrated circuits to passive components. It's across all of the electronic components in the industry. Our issue, in particular, relates to some of the components that we have to sole-source with specific suppliers. So, we've been able to overcome a lot of these challenges. But on the sole-source parts, it's caused us additional headwinds.

Got it. Now, just with respect to the pipeline of business in the electronics side, I mean, we -- it looks like we have -- finally have a budget, although, I'd be curious, are you seeing -- things just still seem to be sliding a little bit to the right. So, I don't know if that -- if you anticipate that impacting the actual flow of orders that you might see in the second half of the year. What -- generally, what's your visibility in that part of the business?

Jim, this is Jeff. For 2018, a large percentage of our business is in backlog. And so we don't see that being impacted by any issues going on with funding and that type of thing. And as we entered 2018, we probably had the smallest amount of book in turn business to fill the year that we've had in many, many years. So, I think all of us feel very good about the outlook at least from a top line standpoint for this business.

Got it. And then final question for me. I'll jump back in the queue. Just on Sypris Technologies, the data would seem to suggest that we are seeing a recovery in demand in that area. How much visibility do you have in that business? What are you seeing? Are you seeing the uptick in orders? I mean Q4 looked a little bit better than expected.

Yes, the market is strong. And I think increasingly, we'll be hearing about capacity issues and supply base issues and those things because the order rates have been incredible in terms of OEMs and new orders that they're receiving. So, our anticipation is that 2018 and 2019 will be at, I think, high levels of shipment.

Okay. Thanks a lot.

Yes, thank you Jim.

[Operator Instructions] And we'll go next to Joel Cahill at Jameson Company at Jameson Companies.

Jeff and Tony, hey thank you for the call this morning.

Good morning Joel.

Good morning Joel.

He'd guy Glad to see revenue guidance going up and margin starting to allow for some bottom-line dollars here. We've -- you've -- as you were just speaking on -- with Jim that you've got pretty good visibility into 2018 margin expansion, if we could just kind of keep that chart on slide 21 going that same way would be beautiful. And so I want to see what are your thoughts. 2018 looks like potentially can generate some positive income. And then 2019 as far as now being rightsized and cost effective and things. Do you have insights out to that -- that far at this point?

Sure, Joel. As shown on the slide 21, we do expect to see an uplift in margin as we move into the first half of this year. And a lot of that will be driven by the fact that, with Broadway behind us and the cost reductions, the fixed overhead structure, the difference in employment costs there, we expect to see that business continue to ramp as we go through not only the first half of 2018, but also into the second half. So, that's really the -- as we said, the last big piece of our cost improvement actions was getting that taken care of. And with that behind us, we expect to see some improvement. We also expect, as the chart shows, the second half to be better than the first half. And we see the components and the constraints impacting us thus far in Q1. So we're looking at that and seeing improvements as we look into the second quarter based upon our backlog and ability to ship. But we do have some hurdles to overcome there, and that's why we're looking at more notable improvement from half one to half two for the electronics business. Going into 2019, yes, we continue to see an uplift, not only in revenue, but also in margins. So, it's going out that far. We're looking forward to it. But first and foremost, we want to get through 2018 and meet our targets that we have set for the coming year.

Sure. And the -- your family's note that -- is that supposed to come up at the beginning of 2019? And have there been any decisions on where you would go with that?

The family notes now have been said to restructure -- they've been restructured and the maturities range from 2021 to 2025.

Got it. And has interest rate stayed the same and payment is just interest only and through those terms?

Yes.

Do you have any additional assets that you guys are looking to sell? I mean, I know we talked about some of the things at Broadway and then also that Broadway facility itself.

Yes. Yes, we do. And in fact, we have number of heavy upset forge presses that we're going to be looking at either selling or, on a specific basis, moving to Toluca. We'll be going through and doing our work to eventually liquidate the real property and the improvements. And so our objective during the coming period is to eventually be completely out of the ownership of the Broadway facility.

Do you see that generating material cash?

Well, we would certainly hope so, Joel. But we'll have to see with regard to timing and that type of thing. But we don't expect it to be immaterial, let's put it that way.

Okay. And now I'll drop back if anybody else has any questions. Thank you guys.

Thank you, Joel.

[Operator Instructions] And gentlemen, it appears I have no additional questions at this time. I'll turn the program back over to you.

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

And ladies and gentlemen, once again, that does conclude today's conference. Again, I'd like to thank everyone for joining us today.