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

Thank you, April, 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 third quarter of 2018. 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 www.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 through 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 outlook for each of our primary markets. Tony will then provide you with a more detailed review of our financial results for the quarter, as well as a walk you through our financial guidance for 2018. Now, let's begin with an overview on slide four. The third quarter of 2018 turned out to be our own, a tale of two cities, with a thrill of strong orders across all markets being offset by a variety of supplier and production related issues that suppress shipments and margins, thereby interrupting at least briefly our quarterly trend of margin expansion. Revenue generated from…

Thank you, Jeff. Good morning everyone. I would like to discuss with you some of the highlights of our third quarter financial results. Please advance to slide 10. Q3 consolidated revenue was $21.1 million, a decrease of 1.3% from the third quarter of last year. The revenue split between Sypris Technologies and Sypris Electronics was $14.9 million, and $6.2 million respectively. The primary demand driver for Sypris Technologies continues to be the strong market conditions for our customers serving the commercial vehicle, automotive and energy markets. Our revenue for Q3 was up 9.6% from the prior year, and we see further upside in these markets as we enter the fourth quarter. Revenue for Sypris Electronics declined during the third quarter as we faced headwinds on existing programs, with electronic component availability constraining shipment levels on certain of our higher running programs in the quarter. We are also working through a series of design changes on another keep program that caused lower than expected shipment and the launch of a new program shifted to the right as we did not receive approval to begin shipments until late in Q3. The supply chain team for Sypris Electronics continues to work closely with our customer base, to resolve the challenges of component availability in the markets that are impacting some of our programs. We will continue to pursue a variety of solutions, including identifying alternative sources of supply and qualifying alternative components. While the component shortages are expected to continue in the industry, we expect to resolve some of the near term challenges which should allow us to more efficiently balance production during the fourth quarter. Consolidated gross margin improved 220 basis points to 5.7% compared with 3.5% in Q3 of ‘17. In early 2017 we announced plans for transferring production from our…

Thank you. [Operator Instructions]. We’ll first hear from Jim Ricchiuti of Needham & Company.

Hi, good morning Jeff and Tony. Bear with me a second, I joined the call a little bit late, but I just want to try to understand a little better the factors that led to the uneven quarterly performance. Was the revenue shortfall more in the Electronics portion of the business and on the Sypris Technologies side? You were dealing more with some supply chain issues and labor productivity issues?

Yes Jim, the shortfall that we had come from the electronics at first, and that was as we mentioned related to components and the timing of some programs that we expected to launch in the quarter. We also saw lighter demand on the energy side for technologies. That impacted our revenues somewhat during the quarter, but the issues otherwise is on technologies that we pointed out were more on the productivity and cost challenges as opposed to our top line.

Okay, and then Tony, I assume the issue also with the energy side also contributed to the margin weakness given that's higher margin business.

Yes, absolutely.

Okay. So at this point going forward, it sounds like you feel that you have resolved some of the – a bulk of the issues on the technology side in terms of being able to make whatever necessary adjustments to workforce, productivity, etcetera.

Yeah, we do Jim. You know it's a journey and quite frankly you know some of the things that happened in the quarter weren't anticipated. But what was good coming out of that was the response for our team that really identified some of the key problem areas during the quarter, focused on those and we were able to see improvement as we exited September in the majority of those areas.

Okay we should we assume a gradual improvement in margins in this part of the business, assuming the volumes are what they are and you know the current mix of business or do you assume more of a significant step-up.

Yeah, it's more gradual than we had anticipated coming into the second half of the year and that's why we tempered our fourth quarter guidance somewhat in terms of overall gross margins for the business. So we expect to see improvements. I think they'll be notable, but it doesn't – you know it's not getting us back to the levels that we had previously expected.

Okay, and then on the electronic side, I mean we've all heard a lot about component shortages. For the most part, where do you stand with having this behind you just – I assume you’ve been able to leverage your relationships with your larger customers?

Yes, we have and it's helped quite a bit and I know Jeff noted in his comments and I captured it and tried to capture it in mine as well. But you know the issues aren't that we are having currently aren't as widespread. There are specific components on specific programs that limit the amount of production we can run on those programs. So we are narrowing the bandwidth of the component problems, but we still face those in the third quarter and we do expect based upon the outlook we have now with our suppliers, that we’ll see better results in that area in the fourth quarter.

Okay, and last question form me, and it looks like you are laying out a pretty positive outlook for growth next year, and it sounds like you feel you got pretty good visibility given the bookings levels you are seeing, the backlog. Is that fair to say, that’s given you the confidence in putting that kind of an outlook at this point in the year.

It is Jim. You know starting with the Class 8 market continuing to look strong and the strength of the orders that the industry is seeing, we believe that market is going to continue to support our outlook for next year and we are actually launching some new programs for some new components in that area. So there's a lot of momentum there; the backlog on the industrial side and -- I'm sorry, to backlog on the aerospace and defense programs gives us a lot of visibility into what to expect for 2019 and you know again, the energy business we think is going to continue to be strong. So it's – you know 20% is a big number, but we think it’s within reach.

Okay. Well, thanks a lot guys.

Thank you, Jim.

[Operator Instructions]. Next we’ll hear from Joel Cahill of the Jameson Companies.

Good morning, Jeff and Tony. Thanks for the call this morning.

Good morning, Joel.

Good morning Joel.

Hey, so next year looks exciting. Obviously this quarter was a little bit disappointing from the way that you've portrayed it with various different slowdowns and bottlenecks and things. So Jim had some great questions, which I appreciate, to lay out next year. I'm interested in whether or not there are additional asset sales or anything to sort of lighting up the balance sheet that are in the foreseeable future?

Joel, this is Jeff. Yes, we plan to continue to liquidate excess assets that we have left over in our Broadway facility that we closed at the end of 2017, and we anticipate that will go on through much of 2019 as we work to wrap that up.

And then if we turn a little bit over to, obviously next year going to be generating probability, that’s a beautiful thing. You know, if we turn over to the electronics side of the business, is it -- you know I understand where you know the answer is going to be, but I think it's still helpful to ask the question. Is it best – is that business best held under Sypris Solutions overall, given its relative size and some of the headaches that you’ve seen? I would imagine there’s considerable value to the accreditations and just the length of service of those government contracts.

Well, let me see if I can answer your question Joel. If I miss it, please just ask again or phrase it a different way. We think that there are a number of common characteristics that exists between our electronics business and the other two markets that we serve, and it's primarily in the fact that we are in a unique niche and we have a pedigree and a history of doing things that are often times more challenging and difficult than run of the mill commodity type work. And so we found that that there's a specific segment in the electronics business that's very similar to what we do for example in energy and I think there is a lot of opportunity quite frankly as we look forward into ‘19 and ‘20 in that business. So did I hit what you were looking for or did I miss it. Ask me another question and we'll see if we can...

Yeah, that does it. I appreciate it. You know understanding those the synergies is helpful, you know just making sure that I understand from the perspective that there are a lot of really great things happening on the ST side, which that in itself can really take the business back to – can take the company back to you know some of its previous levels and then making sure that it makes sense on the SC I guess, are helping for me to understand how it makes sense on the SC side. And then forecasting, now that you've got a great – you know it's quite a tight revenue expectation, you know you tightened up your guides for margins and SG&A and things. Next year you should start producing some cash. If those forecasts come true, there should be some cash produced. Do you guys have any ideas on things that you'd like to be doing with that cash?

Well yes, I think you are right in both aspects, that one, we expect to generate free cash as we go into 2019 and we are going to be looking to do Joel, is how do we invest wisely to continue to grow the business. We are substantially reduced in footprint if you will from what we used to be and once we've established ourselves operationally and can demonstrate that we are solidly profitable, our objective is going to be to resume growing the business.

And you see those growth areas continuing in the core businesses?

Yes. I think there are a number of opportunities that we have to expand our footprint in ways where we can have a larger share with some of our customers, where we can grow into some adjacencies that recognize the unique kind of benefits that we bring to the table and it could be very, very interesting.

Okay, great. That's all I got, guys.

Okay, thanks Joel.

[Operator Instructions]. It appears there are no further questions at this time. I’ll turn the conference back over to our presenters for any additional or closing comments.

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

That does conclude today's conference. Thank you all for your participation. You may now disconnect.