Good morning and welcome to the Broadwind Energy Q3 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please also note today’s event is being recorded. I would now like to turn the conference over to Joni Konstantelos, Director of Investor Relations. Please, go ahead.

Thank you. Good morning and welcome to Broadwind Energy’s third quarter 2016 earnings conference call. With me today are Broadway’s President and CEO, Stephanie Kushner and Broadwind’s Vice President and Corporate Controller, Jason Bonfigt. This morning’s earnings news release is available on our website at bwen.com. Second slide, please. Before we begin today, I would like to caution you that this call will include some forward-looking statements regarding our plans and market outlook and also will reference some non-GAAP financial measures. Actual results may differ materially from these forward-looking statements. Please refer to our SEC filings and consider the incorporated risks and uncertainties disclosed there, including our Form 8-K and the attached news release filed with the SEC this morning and our Form 10-Q, which will be filed later today. We assume no obligation to update any forward-looking statements or information. Having said that, I will turn the call over to Stephanie Kushner.

Thanks, Joni and good morning. We performed well against our plans this quarter. We reported revenue of $43 million, which was on plan and consistent with guidance. We saw a nice uptick in our gross profit margin, 12.5% in the quarter. This reflects good execution in towers and better manufacturing equipment and expense management in gearing. Our cost reduction efforts were on track. In the quarter, we generated $1.2 million of income from continuing operations or $0.08 a share. Our cash position spiked in the quarter, rising to $24 million. I should caution that cash balances have declined in October and are expected to end the year closer to $15 million because we're making some significant disbursements to support our capital investments. Our credit line remains undrawn. In a release yesterday, we announced that we’ve closed on a new credit facility with private bank, which provides us good liquidity to support our working capital needs and growth investments. The initial credit line is $20 million with a $5 million accordion that we should be able to access early next year. This new credit line replaces the one we have previously, which has been retired. On the next slide, at the beginning of this year I laid out three near-term priorities. First, to double order intake. To-date, we’ve booked $243 million of new orders more than the total for the last two years combined. Our backlog contains orders that extend into 2019. Our second priority was to maintain consistent tower production. We are ahead of our delivery schedule on both locations and we're continuing to make solid progress with improvements to our production efficiencies. The final priority was cost management. As I said, our year-over-year savings totaled $6.5 million as of September 30. Of the total, $3 million was from lower…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Angie Storozynski of Macquarie. Please go ahead.

Thank you. So we’ve been hearing from a couple of wind tower developers that actually contrary to our expectations they are starting to accept deliveries of high wind turbines ahead of the start of construction of new wind farms in order to capture the PTC benefit at 100% rate. I mean we had expected that they would be just making prepayments, but now they're talking about actually accepting deliveries. Do you feel like this is going to maybe inflate your orders come at the first half of 2017 or are you hearing some commentary about OEMs making advanced purchases for our equipment in general?

Yes, I think that for safe harbor purposes there are a number of components that are getting a little bit of a surge between now and April and they actually have until April to take delivery. So I’d say a couple of things, they don’t actually take physical delivery. So, in our case, for example, we have laid down yards and it's not unusual for us to have tower sections that are on hold for a customer that they've – that they were holding for them that they have paid for. I don't think it’s an ordinance surge, but I think what will happen as the PPC steps down is there will always be a desire to be qualifying for the highest level of PTC you can. So I think it will probably keep pulling until the – and you know keep pulling things forward a little. But it's not really different from what we've seen in the past.

Okay.

It's sort of like rushing to get your RD tax credit. It’s the same thing you kind of – things tend to be kind of strong as you're coming to one of those break points.

Okay. But – so two questions here. So, one, the 30% expansion of your production capacity at the Abilene plants. Is this supported already by some visible contracts or basically it's more of a market expectation or your expectation in the market going to grow and hence you'll be able to sell this capacity? And then, two, as you know start producing more and deliveries take some time, does it significantly boost your working capital needs about the ones not necessarily from the last quarter, but just from previous couple of quarters?

Let’s see – I will answer your last question first. I think our working capital is distorted today and as you can see from that chart, however, it is pretty volatile. And it can be volatile high because it has in the past been volatile high because we've had operational problem or because difficulties with the supply chain and so on. And it’s kind of volatile low right now because of customer deposits. So as – in our financial management role we want to make sure we always have good flexibility that's one of the reasons we put in the new credit line and it’s got a little bit more flexibility. Having said that, I don't see anything that's going to take us kind of above the top end of that band and probably not even that high for the foreseeable future. Sorry, I’m trying to remember exactly the phrasing you earlier...

Yeah, the expansion of the Abilene facility by far it depends? – you have orders?

I think as we’ve announced we have kind of a minimum of a third of our production booked or we had as of maybe a little bit earlier this year that continues to build and we continue to be negotiating actively. When we look at – if you go back to that Bloomberg chart, there are a lot of projects that are announced and we know that the market in the Texas region is very strong, so that was really what gave us confidence. And if you remember, it's not only a capacity expansion, but it also puts in a second coatings line, which gives us more operational flexibility, gives us the ability to handle multiple model. And you know frankly prevents the recurrence of any sort of production snafu similar to the one we experienced last year. So there were certainly some insurance in that investment as well as capitalizing on what is going to be probably a several year quite strong market in that region.

And so following this expansion what will be your annual maximum capacity for the tower? And I know that probably --- this depends on the type of towers, but…?

Yeah, so for three-section towers, we are basically going from 500 to 550.

And that's – is that typical, it has to be – section tower is the difficult tower now?

Well, last year it was the typical power, this year we are seeing some force action. The wind market is getting – the turbine manufacturers are getting more sophisticated, so there is a little more variability in the section count. But we're also getting more effective at building turbines that work well in lower wind regimes, which tend to be shorter. I guess the answer is I don't quite know. We haven't seen anything more than a four-section tower, but we're still doing predominantly three-section towers.

Okay. And margin wise, is there – do you feel like for instance the market is getting together as far as the supply of towers and as such would give you a little bit more of a pricing power?

That’s a tough one. So it’s erratic and it’s regional and it’s project driven. So certainly projects that are close to our plans, we have more pricing power, projects that are further away, we start having transport cost differences. So we cannot control that very well. So really what we are doing, we're working very hard, we're taking advantage of having some good visibility and we're spending a lot of time on engineering out costs and improving our overall productivity and profit and cost profile. So we’re controlling what we can control, we're trying to be as savvy as we can about the market and most importantly take advantage of this multiyear visibility that we have.

Great, thank you.

Thanks, Angie.

And our next question today comes from Jeff Osborne of Cowen and Company. Please go ahead.

Hi, Jeff.

Hi, good morning and congratulations on the strong margin profile. I just want to focus on the gearing segment if we could, you mentioned the coating activities picked up here in the quarter and you expected an increase in the fourth quarter. Can you just talk about particular end markets that you might see some strength in?

We are seeing – well, we are actually seeing just a little bit of uptick in the markets that have been down the most, the oil and gas and mining and then we're still making good progress on the wind replacement gearing side. On the steel side, we think a lot of those customers tend to have annual capital budgets and as the year progresses, they use up their capital dollars. So in Q4, they are starting to look again at kind of reloading that capital plan for 2017 deliveries, so maybe some improvements coming through there as well.

Got it. And just on the wind gearing side, for example, NextEra, I think, two months ago talked about evaluating that it commit to this sort of evaluating -- repowering 3 gigawatts to 4 gigawatts of wind turbines that are somewhat older. And I think given the new IRS rules, if you have 80% of the fair value of being replaced, you can kind of reapp for the PTC. Most of the folks that I’ve talked to suggest that putting in new plate and gears would accomplish that financial hurdle. Are you seeing any of your partners like your Gearbox Express or anyone else starting to see repowering as an opportunity or are these just kind of planned maintenance in terms of the wind carrying projects?

We're sure talking about it a lot, but I can't say that we have seen any material orders coming out of them.

Got it.

But I think that’s a good observation.

So potential upside for next year then?

Perhaps yeah.

And then should we still think about the incremental margins in gearing in that kind of 30%, 35% range or is that trending higher with some of the cost actions that you’ve taken. I'm just trying to get a sense of as that market hopefully improves in 2017, 2018, what the profitability profiled will be?

I think those are still good incremental margins, a lot of the cost work we've done is below the variable margin level, it’s more in our manufacturing overhead and operating expenses. So I think you can still use that.

Perfect. I might have missed in response to the prior questioner’s question, but did you actually update what the coverage ratio is for 2017 at this point? I know you said it was a third earlier in the year, so a ballpark-ish figure, are you at more than 50% covered for 2017 in terms of that that capacity that you have between the two locations?

Let’s see – I'm trying to think – I don't think we've updated it per se, we had, I think, we said we’re at a third with the big order we got earlier this year and then we’ve booked another $20 million to $24 million, probably closer to 40%.

Okay. Thank you very much. Appreciate it, Stephanie.

All right. Thanks, Jeff.

[Operator Instructions] I’m showing no further questions. I’d like to turn the conference back over to Stephanie Kushner for any closing remarks.