Jeffrey Gill - CEO Tony Allen - CFO.

Jim Ricchiuti - Needham & Company Alan Weber - Robotti & Company Justyn Putnam - Talanta Investment Group.

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

Thank you, Doug 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 2014. 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'd now like to proceed with the business discussion. Please advance to Slide 3. I will lead you through the first half of our presentation this morning, starting with an overview of the highlights for the year to be followed by a brief discussion of each of our two business segments.

Tony will then provide you with a more detailed review of our financial results for the quarter and year. Now let's begin with the overview on Slide 4. The financial results for 2014 reflected the continued strong operational performance of Sypris Technologies offset by challenges faced by Sypris Electronics during the year.

Revenue, gross profit and operating income were each increased by double-digits when compared to the prior year period, while earnings improved to a loss of $0.06 per share from a loss of $0.51 per share for the prior year.

The year had a number of bright spots with cash flow generated from operations moving into positive territory, up from breakeven for 2013. We continue to make investments in research and development and capital equipment to support our future operations.

Our balance sheet will certainly serve as an important asset as we look to diversify and grow the business profitably going forward.

Our investments in process improvements as well as the initial positive results from our highly productive partnership with Toyota and the Toyota production system have already increased our baseline manufacturing efficiencies and improved equipment uptime while simultaneously reducing cycle times and increasing capacity.

During 2015 we plan to further increase Toyota’s involvement in our operations, expanding TPS activities into other component manufacturing cells. We remain optimistic that the company will realize substantial additional benefits as we continue to implement the tools and the culture of TPS throughout our organization.

In summary, 2014 marks an important improvement in performance for the company when compared to the prior year, but still fell short of our plans and expectations primarily because of the continued headwinds inside this Electronics.

Turning to Slide 5, the continuing impacts of sequestration, program delays and other DoD funding-related issues turned out to be longer lasting than we had expected. Uncertainty became our new norm during the year with the turning points seemingly only a quarter to or two away.

As a result, the team made some changes at yearend closing facilities in California and Colorado and reducing headcount and other expenses to confirm with more conservative expectations going forward.

On the positive side, we successfully completed the demonstration of our new SIOMETRIC Software, which we now believe to be a potential game changer in the development of security architecture, but we believe that SIOMETRICS eliminates many of the vulnerabilities inherent in existing public key infrastructure systems, the architecture used today for the majority of commercial security applications.

The technologies are costly, highly scalable. We have demonstrated its ability to successfully scale to one million end points and we believe that is capable being integrated seamlessly with existing systems across industrial, financial, commercial, healthcare and government sectors.

The technology can be used in a wide variety of applications ranging from securing mobile payments, enterprise computing and social networking infrastructures to missile defense systems. We received two patents to date with nine additional patent applications pending.

Another technology platform that benefitted from continued investment in 2014 was the Sypris Cyber Range, which is now in Version 3.2. The range is being developed into a critical platform for organizations to train their personnel to expertly identify, prioritize and respond to the inevitable breach from today’s increasingly complex cyber attacks.

Turning to Slide 6, interest in the range continued to develop during the year with plans to commission a range for the Ministry of Home Affairs in Singapore in the second quarter of this year. The team is looking forward to even more success in 2015 with sales discussions now exceeding $25 million of potential business.

2014 also closed out on a positive note for EMS sales to customers with applications in severe environments including Northrop Grumman, ITT, Lockheed Martin, L-3 and TE Subcom. Business activity continued to grow in this area during the year thereby positioning this business for further potential expansion in 2015.

Turning now to Slide 7, our cash moving forward is to generate positive financial results and return for the time and investments we've made over the past couple of years. We believe that there are four items worth noting as we look forward to different results in 2015 from what we've achieved in the past.

Number one, newly released shipments to Northrop Grumman and the commissioning of the Cyber Range in Singapore are expected to provide over $8 million of revenue lift in the first half of 2015.

Number two, the reduction of fixed overhead and SG&A savings implemented late last year are targeted to provide $5 million of benefit to our P&L during the year. Number three, we anticipate strong year-over-year growth in both EMS and Cyber, reflecting the current maturity of our business development pipeline.

And four, we’re meeting with potential customers and venture capital firms including Kleiner Perkins, Khosla Ventures and Madrone Capital among others to explore avenues to accelerate the introduction of SIOMETRICS in the commercial markets.

Time to market will be critical, but if we can find the right venue and partners the results could be quietly rewarding. We will keep you posted. Now let's take a quick look at Sypris Technologies beginning with Slide 8. Revenue increased 17% to $322 million from the prior year, reflecting increased demand across most of our markets.

Gross profit for the year increased 33% to $42 million reflecting the 150 basis point improvement in gross margin. The increase in gross margin to 13% provides ample testimony to the impact of the investments made and process improvements and TPS during the year, as well as a growing mix of shipments to new markets.

The strength of this segment's performance during 2014 is evident in a wide range and metrics. EBITDA was $36 million or just over 11% of sales while free cash flow increased 19% from the prior year to $19 million. Return on net assets was 49% which is impressive and important I might add for a capital intensive business.

2014 experienced the continued expansion of our shipments to customer serving the global natural gas, oil and petrochemical markets where demand for the company's branded closures, joints and other products continued to be quite positive. We also expanded safety training in all of our locations using this as a part stop behavior safety program.

Turning to slide nine, the segment continued to perform at world-class levels in terms of customer performance with quality and delivery metrics for the year reaching all time best.

We continued to make investments during the year in production technology and product engineering resulting in patent applications for new drive train component designs that are expected to reduce the weight of certain parts by as much 16% when compared to current customer designs. We hope to introduce these parts to the marketplace later this year.

The potential benefits are meaningful in terms of material savings for the customer and weight savings for the end user who will benefit from fuel savings and/or greater load capacity.

With all of the operational progresses that have been made in recent years, it should be of no surprise that our coding activity for new business with both existing customers and with new potential customers is quite active.

At yearend we reached an agreement in principle to form a joint venture in India to serve the light truck market with a well respected partner. We’re very excited about the future prospects for this initiative and look forward to formalizing this partnership during the second quarter of 2015.

During the fourth quarter we announced the execution of a non-binding letter of intent for the purchase of a business that we plan to merge with our existing operations. The transaction remains subject to satisfactory completion to due diligence among other items.

If all continues to go well, we would plan to complete the transaction during the second quarter of this year with the expectation that it would be accretive to earnings in 2015.

Turning now to Slide 10, the year was not without its disappointments however, and by yearend it became apparent that our contractual dispute with Dana was not likely to be resolved or settled through the continuation of our long-term supply agreement.

Our discussions continued through the holidays and spilled over into 2015 that have been ultimately unsuccessful. As a result we have not had demand from nor have we shipped product to Dana since December of 2014. In response to this development we’ve taken a number of actions to reduce cost and provide support for the transition from Dana.

We've also made decisions that are designed to protect the strategic core of Sypris Technologies by not reducing headcount to the extent current volume would otherwise dictate.

In the short term, we're deploying these valuable people to prepare our plans for new programs, expand our TPS and five best initiatives and perform preventive maintenance on all material pieces of equipment. Our objective is for these people to become fully utilized by new business as additional programs are launched.

We expect the brunt of the financial impact beefed up during the first half of 2015 after which the combined contribution from reduced costs and new program launches is anticipated to have an increasingly positive impact on the company's financial results. We’re fortunate in our markets for our products remain strong.

Several of our continuing customers also appear to be gaining market share, which has led to opportunities for the company to land new business for many of the product families that we formally produced for Dana.

With regard to our dispute with Dana, we believe that the lawsuit is likely to take years to resolve with any potential outcome in favor of the company to be of a financial nature. Now let's wrap up on Slide 11.

As we mentioned a moment ago, the outlooks for the market served by Sypris Technologies appear to be in good shape for the coming year with orders for new heavy-duty commercial vehicles forecast to reach levels not seen since 2006.

Demand for Class 4 through 7 medium duty trucks continues to recover along with the housing markets where the outlooks for light trucks and trailer markets as well as for our off-highway and agricultural markets also appear to be in good shape for the coming year.

We’re looking forward to another solid year from our natural gas, oil and petrochemical markets despite the recent uncertainties in the energy field. Most of our products are used for transmission, processing and storage, which we hope will be less subject to the pressures emanating from recent events.

We're also introducing several new products in 2015, which we believe will further increase our book of business for the existing customers. Our priorities for 2015 are clear. We must successfully ramp up the new programs that we’ve been awarded in recent months.

We must close on those additional programs that are close to above and that can utilize our productive capacity effectively. Now that the ultra-series light-weight axle shaft has passed testing, we must launch this product successfully so that we can benefit from its cost efficiencies and broad market appeal.

We will strive to complete the remaining task associated with the successful consummation of our joint venture in India and the acquisition of the business here in North America, each of which will provide another important building block for us as we move forward.

And finally, we will continue to invest to increase productivity and efficiency, driving process improvements through the use of TPS techniques to reduce cycle times and increase reliability.

In summary, the wonderful performance turned in by our team at Sypris Technologies during 2014 was unfortunately marred by our inability to successfully find a common ground for moving forward with our largest customer. The door is still open and the possibility though remote, remains that we may yet find ways in which to work together.

So we've moved forward and implemented plans that assume this will not be the case. We're fortunate that we have vibrant markets and outstanding operations, the results of which will enable us to recover as we move through the year with new customers and business, some of which we'll be launching as early as Q2.

The transition is underway and with any luck, we will have more diversified, stronger business by the time we're finished. Turning now to Slide 12, Tony Allen will lead you through the balance of our presentation this morning.

Tony?.

Thanks Jeff and good morning, everyone. I would like to discuss with you some of the highlights of our fourth quarter and full year 2014 financial results. I'll start with our consolidated fourth quarter results and ask you to advance to Slide 13.

Q4 consolidated revenues totaled $87.2 million up $13.4 million or 18.1% from the prior year driven by a 25% increase for Sypris Technologies. We generated $9.2 million of gross profit up $2.9 million from the prior year quarter, primarily reflecting the increase in revenue for Sypris Technologies.

Gross margin for Q4 came in at 10.6%, an increase of 200 basis points over 8.6% for the prior year, led by Sypris Technologies reporting gross margin of 12.7% in the current period. EPS came in at negative $0.11 per share versus breakeven in Q4 2013. The prior year included a $2.4 million non-cash tax benefit that did not repeat this year.

Let me now shift to our consolidated 2014 full year financial results and ask you to please advance to Slide 14. 2014 full year consolidated revenues totaled $354.8 million, an increase of $44 million or 14.2% from 2013 driven by Sypris Technologies, which increased 16.7% from the prior year.

Gross profit increased $8.8 million to $38.8 million, primarily from the increase in volume for Sypris Technologies. Full year gross margin came in at 10.9% up from 9.7% as Sypris Technologies improved its gross margin by a 150 basis points over 2013.

Earnings per share for the year came in at a loss of $0.06 per share, compared to a loss of $0.51 per share in 2013. The loss in 2013 included a $6.9 million non-cash impairment of goodwill that was partially offset by the $2.4 million non-cash income tax benefit previously discussed for Q4.

Let me now shift our attention to our segments and start with Sypris Electronics on Slide 15. Revenue decreased 29% to $7.1 million for the quarter, down from $10 million for the fourth quarter 2013. Revenue for the full year decreased 6% to $32.5 million, compared to $34.6 million in 2013.

The fourth quarter and full year were negatively impacted by lower sales of certain secure communication products to foreign customers in 2014. Revenue from Data Systems products also declined during 2014 as one of our larger foreign customers for this product offering deferred certain orders into 2015.

Although we successfully on boarded new EDMS customers for commercial and defense applications during 2014, our sales in the severe applications market declined from 2013. Q4 gross margin performance came in at a negative 13.5%, primarily reflecting the impact of the decline in revenue.

Full year 2014 gross margin dropped to a negative 9.8%, reflecting the decline in revenue from the prior year and the impact of having less product and severe EDMS volume in our revenue mix in the current year.

Although Sypris Electronics began consolidating work from two leased facilities into its main plant in Tampa in the fourth quarter to reduce fixed operating cost, the benefit from this transition will not be recognized until 2015.

We also incurred engineering charges in 2014 for software enhancements to two of our more profitable product offering, which is expected to benefit margin performance in future periods on sales of these upgraded products. Moving on to Sypris Technologies, please advance to Slide 16.

Fourth quarter revenue came in at $80.2 million up $16.3 million or 25% from the prior year quarter. Full year 2014 revenue was $322.3 million, an increase of 16.7% from 2013. The revenue growth primarily reflects the current strength of the commercial vehicle market.

Industry reports indicate production in the Class-8 market and increased nearly 21% in 2014 over 2013 and further suggest that the Class 8 market will grow almost 15% in 2015 over 2014.

Although Sypris is not anticipating any shipments to Dana in 2015, we are pursuing several opportunities to win new business that will be sourced from the facilities formerly dedicated to Dana.

We expect our capacity and capabilities will be utilized to support the strong market conditions and the demand we're seeing from our current and potential customers.

Shifting to the right side of the page, Q4 gross margin expanded to -- expanded a 140 basis points on the 25% revenue increase or the full year 2014 industrial gross margin expanded a 150 basis points to 13%.

Gross profit was $10.2 million for the fourth quarter and $42 million for the full year of 2014, which is the highest gross profit in the segment's history, reflecting the benefits of our continuous improvement, lean and the deployment of Toyota production systems tools and problem solving among other things.

Following up on just comments regarding the events taking place after yearend, I ask you to please advance to Slide 17. We've taken a number of actions in response to the termination of shipments to Dana at the end of 2014. We made the difficult, but necessary decision to reduce our workforce in January at two of our facilities.

In addition to the headcount reductions, we also reduced the scheduled work week for our salaried and hourly employees at those facilities. On a broader scale we made adjustments to our competition and benefit plans that reduced costs and differed the timing of certain payments to improve short term cash flow.

We also implemented strict controls over all variable operating expenses on the Plant 4 as well as in our administrative departments. We’ve retained as much of our skilled workforce as possible to support our business going forward. We're using this talent to prepare our facilities and equipment for the new customer opportunities we're pursuing.

We've expanded the deployment of the Toyota production system and the related 5S initiatives and we're taking the opportunity to increase our preventive maintenance program on our equipment while the utilization rate is below historical levels.

The impact on our financial performance from the absence of Dana volume will be felt most significantly during the first half of 2015 and in particular during the first quarter.

We will encourage severance and other -- and certain other non-recurring charges in Q1 with additional cost to be incurred in the second quarter at levels that will reflect our success rate in wining and ramping production on new programs.

One of our facilities was not impacted at all by the drop in revenue and a second facility felt a modest impact; therefore, limiting the significant impact to two of our existing facilities.

Recent awards for new business and the pipeline of opportunities in various stages of proposal and negotiation provide the foundation for a recovery plan for the two facilities impacted by this event.

Our progress toward recovery will be odd as we move through the first half of the year; however the time required to win and launch new programs is expected to result in most of the benefit from new business as well as the cost reduction actions to be recognized in the second half of 2015.

We expect our labor and equipment utilization rates will improve sequentially throughout 2015 as programs begin to ramp with the backdrop of a very strong commercial vehicle market in need of capacity. On the next slide, I will highlight certain items in our capital structure and ask that you please advance to Slide 18.

The events just discussed required us to revise our forecast for 2015 and to work with our lender to align the terms of our credit facility with the updated view of the business. We ended 2014 with the net debt position of $10 million and equity of nearly $47 million.

We successfully completed two amendments to our credit facilities in the first quarter of 2015, the most recent of which was executed on March 12. Our financial covenants were revised to reflect our updated forecast for 2015, which includes no volume with Dana during the year.

We also agreed to suspend the payment of dividends to our shareholders to maintain cash to support our operations during this period of recovery.

We issued $4 million in subordinated debt to provide additional capital and boost liquidity and we will continue to evaluate options to improve our capital structure as we move forward, including but not limited to additional subordinated debt.

We're taking additional steps to ensure that we have ample liquidity including the potential sale of a portion of the real estate we own in Mexico, which is currently unoccupied and is located in a very attractive area for industrial manufacturing operations in Toluca. This property was formerly leased to Dana through December 2014.

We also met with potential partners to discuss the opportunity to accelerate the introduction of our SIOMETRICS Technology into commercial market applications.

We expect cash flow from operations will be negative during the first and second quarters of 2015 following the flow of revenue and cost discussed on the previous slides as we execute the actions to preserve the long-term potential of our business.

As we move through the year, we anticipate cash flow from operations will show sequential quarterly improvement. Let me now wrap-up with a brief summary of 2014 and ask you to please advance to Slide 19. Sypris made important progress during 2014 that is reflected in our operational and financial metrics.

Revenue increased $44 million, gross profit increased $8.8 million, EBITDA increased $11 million and earnings per share improved from a loss of $0.51 per share in 2013 to a loss of $0.06 per share in 2014. Appropriate adjustments were made to the fixed overhead structure and SG&A expenses for Sypris Electronics that will benefit future period.

We had the building blocks in place for both segments to achieve our targeted results for 2015. Sypris Electronics will benefit from the launch of a sizable EDMS program in the first quarter of 2015 that have been delayed due to technical issues between our customers and the end user.

The issues were resolved in Q1 clearing the way for Sypris Electronics to begin production and shipments starting in Jan and February.

This EDMS program will continue into the second quarter during which we also anticipate the commissioning of our Cyber Lab for the Ministry of Home Affairs in Singapore will occur and generate revenue recognition in the second quarter.

We reduced overhead in this segment of the business by consolidating offside operations into our main facility, combined with targeted shifts in the revenue mix in 2015 compared to 2014. The gross margin and cash flow for this segment is anticipated to improve during 2015.

We’re exploring opportunities to develop partnerships to commercialize our SIOMETRICS Technology as Jeff described earlier. In Sypris Technologies, we're focused on managing the transition of our business as we proceed without any volume projected from Dana in 2015.

We must successfully launch the new business we have under contract and remain competitive in price and remain at best of class levels in our quality and delivery metrics, which will improve our probability of winning the new contracts we're pursuing.

The launch of our internally developed ultra-series light-weight axle shaft during 2015 is anticipated to generate interest from a number of our existing customers and also appeal to potential customers. We also have the opportunity to expand the business externally through the joint venture and acquisition opportunities Jeff discussed.

We're pursuing multiple strategies targeted at maintaining the financial elasticity needed to respond to the opportunities we have for both segments of our business and we're dedicating all of our resources to deliver results that will enable us to build the profitability of the company.

This concludes our call today and at this point, I’d like to turn it back over to Doug to answer any questions you might for us at this time. Thank you..

[Operator Instructions] And we’ll now take our first question from Jim Ricchiuti with Needham & Company..

Hi good morning..

Good morning, Jim..

Good morning, Jim..

I wonder if we could start with such technologies and maybe talk about how we might think about the potential for you to replace some of the Dana revenues.

First of all, can you say what Dana represented in Q4 and when the shipments stopped? Was it early in December?.

It was at the end of December Jim actually December 30 and the revenue, the aggregate revenue from Dana in Q4 is just over $50 million..

Okay.

And so if we think about the second half of 2015 just given what you're working on in terms of new programs is there any way for you to provide some range of revenues that you might see as replacing some of this Dana business in the second half?.

Yeah it is going to be more of a second half replacement as compared to the first half. We do -- obviously the contract with Meritor that was announced at the end of the year gives us some opportunity in the first half. But it’s not as material and so as we look to the second half of the year, we’ve modeled a number of different scenarios obviously.

And we have some very real opportunities in front of us. I think what a reasonable range Jim would be to look at something in the back half of the year where we’re in the -- where we’re replacing let’s call it 15% to 30% of the Dana volume on a quarterly basis as we move through the back part of the year..

Okay. And does that assume completion of this acquisition that you are….

No that was -- anything external would be incremental to those numbers..

Okay, great and….

Yeah if you want to size the acquisition Jim it’s -- you’re looking at a $40 million run rate on an annual basis..

Right, okay and that’s and I believe that you alluded to that in the last call is there much -- can you talk a little bit about the customer overlap with this acquisition or the end market overlap? And again it would be early you haven’t completed it I don’t know what the timeline is as to when you think you could if you control it for that?.

Sure Jim this is Jeff. The customer concentration is very similar to the customers we currently have in the commercial vehicle industry and as part of our due diligence we’ve been meeting with the major customers on that side. And they’re very excited about the prospect of our completing this transaction.

From a timeline standpoint, if the remaining elements of due diligence go well we would anticipate bringing this to a close in Q2..

Okay, and just to switch gears for a second looking at the Electronics business I may have miss heard, I wasn’t sure if you’re anticipating, to what extent you might be anticipating growth in this business? It sounds like you see scenarios that are going to up in 2015 versus 2014.

At this point can you think the business is going to be up?.

Yeah certainly as we grew sequentially from Q4 to Q1and with the program that Jeff and I mentioned on the EDMS side, it's one that you probably recall hearing us just talk about, throughout 2014, where we had the delays and we finally launched that in Q1. So it will contribute in Q1 and Q2 certainly.

And we expect that to provide some sequential lift as we exit Q4 and then in Q2 with the commissioning of the Cyber Range has incremental revenue and the other opportunities that we're pursuing, we expect to see sequential improvement there as well..

Okay and is it possible for you to size the Cyber business right now and the potential for that business in 2015?.

Well, let’s see Jim, there would be two pieces to it..

Right, you just named government piece right?.

Well, yeah and more particularly the Cyber Range for example and the Cyber Range is what we're installing as part of the Cyber Lab in Singapore and so our current funnel and additional ranges to a variety of agencies and countries is in the $25 million to $30 million.

And depending upon the specification and the kind of how the range is put together you can figure on a price that runs as low as 750,000 for a particular application that's very basic and simple to in excess of $3 million for an installation that’s much more complex.

On the SIOMETRICS side, we don’t have a -- I think a good way to size that at this point because it's truly -- it's called a technology that we’ve now demonstrated and we’ve taken it to different locations such as MIT, Purdue as I mentioned in the prepared part of our speech, we've been at and visited with Kleiner Perkins and Khosla and others and it’s a technology that has the opportunity to be very disputative.

What we’re trying to figure out is what is the best way to get it to market because we don’t have in our organization either the knowledge or the channels of distribution into many of the end markets that everyone sees as being highly applicable for this technology.

So I guess that’s a long winded way of saying without when -- we don’t have the ability to size for you in terms of let's call it revenue, but we see the opportunity intrinsically as being substantial..

Jeff, do you see a point this year where you're going to have more to say about how you're going to proceed in terms of commercializing this technology? It sound like you’re investigating a number of different options and avenues..

Jim, I would certainly say by the time we get to the middle of this year we would hope to have a plan and a process in place to bring it to market in part because everyone we’ve talked to agrees it's disruptive and so it's time to market.

And in order for us to be able to become the thought leader if you will in this area, we need to get it to market and get it established with some broad users. So yes, the answer to your question by the middle of the year..

Got it, and one final question Tony, any way of sizing the charges that we would expect you -- expect in Q1, Q2?.

No, it's difficult -- certainly the Q2 number more difficult than Q1 at this point, but we're still rolling those numbers up as we exit Q1..

Okay. Thank you..

Thank you, Jim..

And we’ll take our next question from Alan Weber with Robotti & Company..

Oh! Good morning..

Good morning, Alan..

Good morning.

Can you talk about in this quarter and the year SG&A was quite a bit higher and why that was in the fourth quarter?.

Yes, theSG&A Alan includes our fees, professional fees, legal and otherwise associated with our Dana matters. So that is the single largest factor in the variant..

Okay and for the first quarter since it’s basically completed, what do you think the cash charges will be related to the whole Dana contract like that?.

Yes and that’s kind of follows Jim’s question just Jim’s previous question regarding the Q1 charges and we -- as I said to Jim, we're in the process of rolling those numbers up.

There is a component of that, that you would consider non-recurring as well as a component of that cost that reflects the activities that we’re doing to preserve our skilled workforce that won’t be classified as non-recurring.

So there are two elements to that at the end of the day and we’re kind of in the process Alan of analyzing those numbers and not in a position to disclose that today..

Okay.

And does the -- getting out of Dana the contract, does it open you up to some of their competitors?.

Alan this is Jeff. Yes. It certainly has..

Okay. I think the first I think you covered most of my other questions. Thank you very much..

Okay. Thank you, Alan..

[Operator Instructions] And we'll now go to Justyn Putnam with Talanta Investment Group..

Good morning. Thank you for taking my questions..

Good morning, Justyn..

Good morning, Justyn..

I just want to follow-up on a couple of other questions you already that have already asked this morning, particularly with R&D loss of the Dana business, I guess just trying to figure out how this is layering in? Is the existing business that you have now doing the Dana business is that going to be profitable going forward even including additional overhead that just absorbed?.

As we exit Q4, certainly going to have an impact because of the fixed cost structure that we have Justyn. So as we in our presentation as we talked about the sequential improvement that we see from bringing on new contracts and the timing of those layering in during 2015, we expect that business to be profitable in the second half of the year.

But it’s going to take us the time to rebuild and replace the volume as we move forward..

Okay.

I was just kind of with the business before you layered on a new business, so excluding one-time cost unless you're going to have during this transition, the existing business it’s just not enough with some of the overhead that you have, you really are depending on this one to pick up this new business in the second half, is that correct?.

That’s correct and it also reflects what we are doing Justyn to really build for the future because our strategy was as we discussed is to retain the workforce, to retain the talent, to rebuild and our guys have done a remarkable job at the locations to spend that have been impacted by the Dana volume.

They’ve done a remarkable job to put themselves in the best possible position to be successful.

Their plans for showpiece, the equipment is in its good a shape as it’s ever been, it's received the extra TLC that you might expect during a period like this and so we really are in a position to grow out of this and we think that as we ramp through the first half of the year, we’ll see the results..

Okay. Thank you.

And then just changing gears real quick on the electronics business, certainly have a lot going on in that business, a lot of things there, but I think we talked in the last couple of calls about interest paying in that business and existing, is that still contract?.

Yes it is. Yes it is..

Okay. That all of my questions. Thank you..

Thank you, Justyn..

It appears we have no further questions at this time..

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

This concludes today's conference. Thank you for your participation..