Good day and welcome to the Sypris Solutions 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, Kevin, and good afternoon, 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 first quarter of 2019. For those of you who have access to our PowerPoint presentation this afternoon, 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 also included in the company's filings with the Securities and Exchange Commission. And in compliance with Regulation G, you can access our Web site 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 afternoon, 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 walk you through our financial guidance for 2019. Now, let's begin with the overview on slide four. Revenue for the first quarter approximated that of the prior year at $19.6 million, but was down sequentially due to lower levels of shipments during the period from Sypris Electronics. Sales in our automotive and commercial vehicle business increased 11.3% on a year-over-year basis reflecting the positive environment for our commercial vehicle, automotive, and energy…

Thanks, Jeff. Good afternoon, everyone. I'd like to discuss with you some of our highlights of the first quarter financial results. Q1 consolidated revenue was $19.6 million, a decrease of 1.9%. From the first quarter of last year, the revenue split between Sypris Technologies and Sypris Electronics, with $16.1 million and $3.4 million respectively. Sypris Technologies reported another solid quarter in Q1. Revenue of $16.1 million is the highest quarter since Q1 of 2016. And gross profit of $2.3 million is the best of any quarter since 2014. Revenue increased 11.3% on a year-over-year basis and was up 6.7% sequentially from Q4. We continue to benefit from favorable market conditions and customer demand for our products and the commercial vehicle, automotive and energy markets. Shipments to the commercial vehicle market, which accounted for approximately 39% of consolidated revenue in 2018, are expected to be stable through the balance of the year, with some upside coming from the launch of new programs. Energy product shipments, which accounted for approximately 25% of consolidated revenue in 2018, are expected to increase over the balance of the year. Although energy product shipments increased sequentially about 10%, certain shipments slipped out of the quarter, which dampen the growth and profitability of Q1. Gross margin of 14.3% for Sypris Technologies was in line with both the prior year and sequential quarters. We reported 12.6% gross margin for the full-year 2018 and we are targeting to drive margins for this segment into the upper teens for the balance of the year. We are in the process of launching several new programs with new and existing customers and certain of the costs incurred are charged to expense as incurred. During the first quarter, our costs of sales included items related to program launches totaling approximately 2% of revenue…

Thank you. [Operator Instructions] We will take our first question from Mr. Jim Ricchiuti of Needham & Company. Please go ahead, sir.

Thanks. Thank you. Good afternoon. Tony, just a point of clarification, you're anticipating growth in electronics, is that year-over-year for Q2, or are you just assuming that it's up from Q1 levels, which obviously was a very low level?

Yes, it's certainly going to be up from Q1 levels, Jim, and where we're looking at right now would be -- would have some year-over-year growth as well.

Okay. So, you're actually seeing a pretty good step up. If we think about the impact in Q1 from component availability and the delay on the program that you alluded to, can you give us a little bit more color on how big that impact was? And which -- whether the component availability issue, I assume, was a smaller issue than the program ramp.

Yeah, the program ramp in the quarter was, it probably held us back up to, I would say, $2 million in total for volumes during the quarter. And the component availability given that it was on some -- a couple of specific programs, had a lesser impact.

Got it. Question on SG&A, there were some moving parts, I guess, in that. I think in the press release, you alluded to some one-time charges, severance charges, did that 0.5 million hit the SG&A line in the quarter, the severance relocation and other costs you alluded to. I'm sorry. That was a year ago.

Yeah, that was the prior year number.

Got it. So then ERP is the only item that impacted you in Q1 because based on the way you're talking about SG&A, as a percent of revenues, we should see a step down in the SG&A in absolute dollars in Q2, right, from Q1?

Yes. And from Q2 to Q1, we should see that, Jim. The number we cut year-over-year, the SG&A was up about 300. The biggest element, the single largest element in that was the ERP fees. We did have, as also noted, slightly higher benefit costs on some of our claim activity. But we're expecting that to taper in the second quarter,

And then I just had a question on technologies. And I'll jump back in the queue. But looks like you're seeing some nice broad base demand in that market and it -- you called out, I think a piece of business in the energy market that slipped from Q1 into Q2, was that meaningful?

Well, in that business, even though it's -- it may be a relatively smaller top line impact of -- in the $1 million range, the margins on that are more meaningful.

Okay, so dollar wise, you may not have been that meaningful, but it would have impacted you think your margins. Okay.

Yes.

Hey, Jeff, I think in the last call, you mentioned that what you're hearing from your customers in a commercial vehicle market, it sounds like folks are pretty much booked through the year. Has there been any change there in terms of what you're hearing from customers? And is any of that visibility? I don't know if it's expanding at all into 2020. But it sounds like it's still fairly healthy.

Yes, Jim. It's -- I think the consensus for 2019 is that we're going to run pretty much at this level through the year, and then we're starting to hear things about 2020 and it's range from -- it may continue through the first half and then start cycling in the second half. But I don't think there's a consensus yet on the longer view yet.

We will now take our next question from Mr. Joel Cahill of The Jameson Companies.

I don’t know if we talked specifically on tariffs, but is there anything that's as -- obviously it's still in flux, but are there anything -- any notable concerns on the horizon for you on tariffs that would have a meaningful effect, the Chinese tariffs specifically?

Joe, there's nothing. Yeah, there's nothing that we're aware of today that’s having a meaningful effect on our business.

And Jim just had mentioned it too, but you mentioned that 2018 was record in trucking and we're going to see cyclical things in the energy markets. Do you have any sort of contingency plans in case things do slow down? I mean, it appears that the company's still losing money and having another disappointing quarter after when economic activity has been strong for some time and potentially starting to weaken. We obviously don't know which way it goes. But is there any contingency plan? Are there any ways that you can actually reduce overhead in any quick way? Because it seems that there's, right now, things could bleed very fast if they were a meaningful slow down in the economy?

Well, Joel, I think that's a good question. I think in the electronic side of our business, we see that is being fairly resilient to, let's call it, the industrial economy. And the programs that we’re on ranging from Joint Strike Fighter to some of the others are long term funded programs. So in terms of the electronic side, we wouldn't expect to see a short term cycle there. In the energy field, again, the amount of demand that's taking place, the construction of LNG pipelines from Alberta to the West Coast, pipelines being constructed in the Permian Basin to the Gulf Coast, these types of things, again, they're long term projects that are related to infrastructure and we wouldn't foresee a short term cycle in that area either. When it comes to the commercial vehicle market, which has traditionally been more of a leading indicator for the economy, we continue to see strong demand that the OEMs are operating at capacity. If that were to turn in the short term, we've been fortunate in that, we can respond fairly quickly because most of our costs, as we've been in our cycle from 2017 on, have been of a variable nature. And so we haven't had to invest a lot of money in capital equipment to meet the demands. We've done that more through continuous improvement and other initiatives to increase output without increasing our capital base. And so I think we can cycle that pretty readily. Separately, the seven new programs we're launching are primarily in areas that are unrelated to the commercial vehicle industry, and ranging from refrigeration to all terrain to off highway. And so I think that in the near term, if we were to see a cycle down in the commercial vehicle market, we would offset, I think, a great piece of that with the ramp up of the new programs that are currently in place. So, I think there's -- the exposure that we at Sypris have is therefore somewhat mitigated by both the aerospace and the energy areas. And in commercial vehicle area, I think we both have the ability to reduce variable costs quickly if we need to, and we also have the benefit of the ramp up of the new programs.

And on the -- just looking at the balance sheet, there's a $7.5 million on the operating lease. I don't know if you mentioned it, but could you just give a little color on what that is.

Yeah, the majority of that, from the new lease accounting standard, Joel, is tied to our leases for real estate, the property that we have in Tampa and Mexico are the two largest components of that. And our office lease here and the corporate office, from a manufacturing equipment standpoint, the numbers are smaller. So it's primarily real estate related.

Okay, that's nothing new. That was just the accounting change?

Yes.

[Operator Instructions] It appears we have no further questions at this time.

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

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.