Broadwind, Inc. (BWEN) Q3 2018 Earnings Report, Transcript and Summary

Good morning, and welcome to the Broadwind Energy Q3 2018 Earnings Conference Call. [Operator Instructions]. Please note this 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, Brandon. Good morning, and welcome to Broadwind Energy's Third Quarter 2018 Earnings Conference Call. With me today are Broadwind President and CEO, Stephanie Kushner; Broadwind Chief Operating Officer and President of Broadwind Towers, Eric Blashford; and Broadwind Vice President and CFO, Jason Bonfigt. This morning's earnings news release is available on our website at bwen.com. 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 10-Q and our Form 8-K in the attached news release filed with the SEC this morning. 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 booked strong Gearing and Heavy Fabrications orders in Q3, with total orders up 12% from last year. Our customer diversification efforts remain on track. We finished the quarter with $31.4 million of revenue and slightly positive EBITDA. This was in line with the preannouncement we made in early September, and reflects the decision to slow down our tower production mid-quarter because of a delay in obtaining steel to meet the scheduled production mix. Outside of Towers, our other businesses operated as planned. Steel tariffs are continuing to present operating challenges for towers and are causing cost escalation for our other businesses with high-steel content. We, and the rest of our industry, are adjusting to the higher prices, and we expect something closer to business as usual next year. Our Gearing business delivered a profitable quarter, with heavy - with healthy EBITDA margins and good consistent production. We've strengthened the management team and improved core processes. And our supply chain has performed much better as demand has stabilized at the current run rate. As we look into 2019, Broadwind's order book and production schedule are firming up for a more consistent year, with quarterly revenue averaging back above the $40 million range, and consistent quarterly positive EBITDA generation. Through September 30, we booked $67 million of orders, and are closing the gap versus last year. In Towers and Heavy Fabrications, we booked $3.8 million in the quarter. We have nearly $70 million of tower orders in backlog to be delivered over the next 12 months, but finalizing new tower orders has been slow because we and our customers work through the implications of the spike in domestic steel. Outside of towers, demand from Heavy Fabrications customers remained strong. For these products, the steel content is significant, but less so than for wind towers. For Gearing, third quarter orders were strong, and for the nine months, orders are up about 10% from last year, with a book-to-bill of 1.2. Process systems orders totaled $12.4 million for the nine months, down about $1 million from last year due to nearly 50% lower orders for components to support new gas turbine builds, which have been weak for our principal customer. Aftermarket sales for gas turbines and other industrial orders have increased slightly to offset, resulting in an overall year-to-date 2018 book-to-bill near one. As shown on the right-hand scale, our backlog totaled $107 million at September 30, including about $75 million for the towers of heavy segment, $26 million for gears, which represents about 2.5 quarters of production and $7 million for process systems, which will be delivered in the next 3 to 4 months. Next slide, please. As shown on the left, we've made consistent progress against our customer diversification target. We booked more than $30 million of orders from diverse customers during the first nine months. I'm pleased to report that Red Wolf had some important customer wins in the third quarter and has made some progress expanding their customer base, including an initial order from a second gas turbine OEM as well as adding customers in other industries. While the sales dollars were modest during the quarter, we are building a broader customer base, which we will expand over time. On the right-hand side chart, the run rate for orders outside of the wind industry dipped slightly on a trailing 12-month basis to about $60 million. Some of our oil and gas customers for Gearing reduced purchases in the third quarter because of the slowdown in fracking in the Permian basin. However, upstream drilling pump orders have strengthened, mining customer offtake has expanded and other industrial purchases have been steady. We will continue to monitor and report on this diversification process, which is so important to the long-term health of the company. Having said that, the fundamentals of the U.S. wind market remains strong, the development pipeline for new wind installation remained stable in the third quarter and is in excess of 38 gigawatts. As shown on the right, the expectation is for new wind capacity installations in 2018 to exceed 8 gigawatts and to rise to 10 gigawatts in 2019 and 12 gigawatts in 2020. The dip in 2021 reflects lower economics from the production tax credit, which is scheduled to phase-out completely between now and 2023. The demand for U.S. manufactured gearing has continued to be strong this year, with the overall market growing at a compound annual growth rate of more than 7%. We expect that strength to continue into 2019. The fastest-growing gearing markets have been for oil and gas field equipment, up nearly 50% this year and projected to raise double digits again in 2019. Our growth has benefited from this demand recovery, as we have expanded our customer base significantly and now produce gears and gearboxes for more than 10 core customers linked to the oil and gas industry. Our priorities are unchanged for the rest of the year. We are continuing to build momentum with customer diversification and are targeting to book $40 million or more of orders from diverse customers for the year. To date, we have added more than 20 new customers in 2018. During the third quarter, we made good progress on our manufacturing footprint reduction. We closed on the sale of an ideal gearing plant and extinguished the new market tax credit loan, which removed $2.6 million of debt and cleared the way to exit an expensive plant in Abilene, Texas. We continue to focus on expanding our use of systems to improve all elements of our business processes. During the quarter, we implemented new payroll system that will improve the tracking and simplicity of tracking our labor orders. This will help us continue to improve the accuracy of our coating and also raise our labor productivity. Also, we are launching a new scheduling system this quarter, which will improve the efficiency and scalability of our Heavy Fabrications product line. We had some big wins with our continuous improvement efforts significantly reducing the manufacturing cost for serial production of certain gears and heavy fabrication, and we continue to manage through the complicated and volatile raw material pricing environment. We are putting in place some new procurement approaches, specifically for tower steel, which should also help us in an accelerating tower market for 2019. I'll turn it over to Eric to talk about our businesses in more detail.

Thank you, Stephanie. Hello, everyone. Moving on to our Towers and Heavy Fabrication segments. Orders for the quarter were $3.8 million, more than double and unusually low Q3 2017. The order improvement comes mainly from our growing heavy fabrications product line. Our Heavy Fabrications line, which operates in mining, construction and other industrial markets, is seeing increasing demand in all markets served, and we're expanding our flexible manufacturing resources to meet this demand. Requirements in this product line averaged - leveraged many of the process capabilities and skill sets as those used in our towers business. Our opportunities within the markets served continue to expand, and we are considering strategic investments to support further growth and diversification. We sold 132 tower sections during the quarter, up 5% from the 126 sections sold in the prior year quarter. Year-to-date, tower sections sold are down nearly 40% versus 2017, as our largest tower customer continues to reduce inventories. Our efforts to add new tower customers continue, and we're confident that these efforts will bear fruit, especially given our multi-plant footprint and our practical experience in producing towers for nearly all turbine OEMs in the U.S. market. As a result, Q3 sales were $17.3 million versus $16 million in Q3 2017, and EBITDA was $600,000 positive versus a $200,000 loss in Q3 '17. The improvement reflects our progress in growing the heavy fabrications product line, combined with the effectiveness of our operational improvement efforts, which have yielded better plant utilization, reduced overhead and lower operating expenses. Our 2018 priorities remain consistent with the previous call. We are working with our primary tower customer to schedule planned production and secure additional orders with them, as well as continuing to work to diversify our tower customer base. As we've discussed, the pricing pressure resulting from the PTC runoff, new PPAs and upward pricing pressure on steel and other components continues. We have been able to pass most of these cost increases on to our customers. We continue to have resources focused on offsetting this pressure through process improvements, and our teams have made nice progress in Q3, building on a strong Q2. However, the reduced availability of tower plate steel has delayed some orders until early 2019. Looking forward to 2019, increased coating activity, combined with capacity planning discussions from multiple tower customers, indicate a much stronger 2019 in terms of Broadwind's tower plant capacity utilization. We remain enthusiastic about the fabrication product line and are focused on driving profitable growth and improving our capabilities. We restructured our project plan - project management organization and improved our scheduling processes to accommodate the growing demand. We researched and purchased a shop scheduling software system, which, when fully implemented, will give our operation's group excellent visibility over all projects running through our plants. A large horizontal machining center, which went online in Q1, is now fully booked and still we are evaluating means to increase its throughput by support equipment and tooling. As I mentioned last quarter, the combination of this machine, which is the largest of its kind in the region, led by high-capacity, high-hook high crane system with on-site deepwater port access in Manitowoc, Wisconsin, makes Broadwind uniquely attractive. In the fourth quarter, we expect revenues to be in the $10 million, reflecting lower tower production with an EBITDA loss of $1 million to $1.5 million. Next slide, please, Gearing. Q3 2018 orders exceeded Q3 '17 by 9%, including a notable aftermarket order in the wind segment and are up 12% on a year-to-date basis. Oil and gas markets remain strong, while our efforts to diversify our business are yielding positive results with our industrial and mining segment customers. As you can see on the graph that highlights our revenue by market, Q3 oil and gas revenue remains at the $5 million quarterly pace, sustaining the increase we first saw early in 2017. The serial nature of production in this segment affords us greater opportunity to refine the production process and leverage continuous improvement efforts. Our Q3 improved financial results are indicative of these impacts. We remain actively focused on further diversification and expansion into other markets, with notable increases in mining and other industrial as mentioned earlier. Our order book remains robust for frac gearing, and we are seeing improved demand in the drilling segments of the oil and gas market as well. Q3 revenue was up 33% as compared to the prior year quarter, and we earned $1 million of EBITDA on $10.1 million of revenue. In Q3, we executed two significant CI events, focusing on serial gear production and gearbox value streams, in which quick hit teams were able to reduce assembly and machining hours by improving floor layout, machine programming and tooling. These efforts also reduced our dependence on constraining outsourced operations through modification of existing Brad Foote machining centers. Further operational improvement is expected during Q4 as more CI actions are completed and continue to improve our productivity. This is very important for us as we work to reduce customer lead times, reduce costs and leverage our highly skilled workforce in the tight labor market. As I mentioned during our Q2 earnings call, we made a number of changes in our organization structure to more clearly align resources and responsibilities with business needs. The Brad Foote custom gearbox division formed last quarter works directly with our customers to optimize product design and manufacturability. The custom gearbox division has made strong progress in improved machine utilization, throughput and productivity. Based on these improvements and reputation for high-quality, we won a large multiunit gearbox order, which we will be producing through Q2 2019. We expect revenues in Q4 to remain in the $10 million range, with EBITDA at or above the 10% range. Next slide, please, Process Systems. Orders for the quarter were $4.4 million, up nearly 50% sequentially from the prior quarter. Although, demand for new gas turbines remains weak, orders for aftermarket natural gas-driven parts improved and have returned to 2017 levels. Our effort to diversify orders is beginning to have success, which is reflected in the graph in the lower left of the slide. Year-to-date, our diverse orders have grown to nearly 30% of our total bookings, a trend which we expect to continue. We remain focused on expanding the business by marketing our core competencies of supply chain management, kitting, fabrication and assembly to customers that are growing quickly, especially those with remote field operations. To that end, in Q3, we completed a detailed strategic planning initiative that identified and analyzed key target markets, which aligned with our unique capabilities. Using the data gathered in this project, we are finalizing our value proposition and go-to-market strategy, selecting key target accounts and will launch this campaign later this quarter. In Q4, we expect it to be in the $5 million range with breakeven EBITDA. I'll now turn it over to Jason for his comments.

Thank you, Eric. Consolidated sales were $31.4 million during the quarter, within our guidance range and a 6% year-over-year improvement. As Eric mentioned, we are capitalizing on the end market strength in our Gearing segment, notably in oil and gas and mining, and our gearing backlog is healthy and diversified. Gearing business is now operating at a $40 million annualized revenue run rate. We're encouraged by our progress, leveraging our welding and fabrication competencies outside of tower production. We have made recent low dollar, but strategic capital investments in this product line. As a result, our order book is approaching a $14 million to $15 million annual run rate, up from only $6 million in 2017. The year-over-year tower production was six sections higher, but the impacts of delayed second half steel availability drove us to spread Q3 production into Q4. This lowered revenues by approximately $2 million to $2.5 million during the quarter. However, it allowed us to retain our key workforce in preparation for healthier 2019 production levels. Year-over-year gross margins improved from 3.4% to 4.7%. This improvement was driven by greater leveraging our gearing business, a result of increased productivity, better material management and overall improved operational performance. Encouragingly, gearing has also seen lower manufacturing variances, a result of ongoing continuous improvement programs, focused on machine uptime, reduction of scrap and rework and cost control, however, positively impacting Broadwind's gross margin is the ability to flex our manufacturing resources between producing towers to other fabrications. This not only allows us to offset margin pressure during periods of tower - lower tower production, but helps us retain our core workforce and leverage our competencies in adjacent markets. Despite the volatile nature of steel pricing from the introduction of tariffs earlier in the year, material margins have not been squeezed. In general, across each of our businesses, we have been able to pass-through material price escalation. Operating expenses were $4.1 million during the quarter. After excluding a $1.4 million one-time benefit in the prior year, associated with the release of the year one Red Wolf earn out, year-over-year operating expenses were down 3%. This year-over-year change is a result of reduced salaries and benefits, primarily in our corporate office, partially offset by increased commission expenses that support higher gearing sales. We generated $200,000 of EBITDA, in line with our guidance and a $700,000 improvement year-over-year after we adjust out the impact of one-time items. We had a $0.05 loss during the current year quarter after recording a one-time $0.14 gain associated with the extinguishment of a $2.6 million new market tax credit liability. Next slide, please. Our cash conversion cycle increased to 54 days in Q3, mainly driven by a few items, including increase in day sales outstanding as customers delayed payments near quarter end and due to the timing of the receipt of deposits. This was partially offset by corresponding increases in our payable balances. Inventory turns decreased to 5.1 during the quarter. Inventory turns in our gearing business continued to be strong, however, the deferral of tower production into Q4 and early receipt of steel for future production impacted our turns negatively. Following the steel tariff announcements earlier this year, domestic steel prices have escalated. Under an expiring agreement, we purchased plate steel at retail prices for tower design that will be produced in the future. A portion of this steel was received in late Q3, with the balance to follow in Q4. We are continuing to work with our customers and production schedules and timing for using the steel. Operating working capital increased by $3.8 million during the quarter. Our operating working capital cents per dollar of sales increased to $0.14 during the quarter, however, this is an improvement compared to $0.16 at year-end. We expect Q4 to further improve as multimillion dollar deposits are received that will support 2019 production. We are placing an emphasis on collecting advanced deposits for other custom gearbox and fabrication orders. These products are often more working capital intense due to longer design and/or production cycles. Additionally, we're focused on other working capital management programs, including more continuous improvement initiatives in each of our businesses that will drive improvements in our cash conversion cycle over the long run. Moving to our balance sheet. Our total debt balance was $23.2 million as of 9/30, up modestly over Q3 due to the higher working capital. Partially offsetting was the maturity and corresponding forgiveness of the $2.6 million new market tax credit transaction. This is a key milestone for us as it - extinguishment of this debt allows us to exit an underutilized facility at the end of this year, saving $600,000 of annual operating cost. During the quarter, we also sold our ideal gearing manufacturing plant, which will eliminate approximately $200,000 of annual operating expenses. As a result of exiting these two facilities, we will have met our goal of a reduction of 50% of our operating footprint, an initiative we undertook several years ago to rightsize our footprint, in which total cumulative reduction is of 700,000 square feet of operating space. Our line of credit balance rose to $18.8 million at 9/30, up from $14.5 million at 6/30, driven primarily by the build in operating working capital. We had an additional $6 million of availability under our $25 million credit line with CIBC. We continue to have collateral well in excess of our $25 million borrowing capacity. And we are assessing other debt instruments to more efficiently utilize this collateral in Q4, which would support working capital requirements associated with our revenue growth in 2019. Additionally, we renegotiated our bank covenants during the quarter moving to a single, more flexible trailing 12-month EBITDA covenant. Year-to-date, we have effectively financed 100% of our $2 million of CapEx purchases in 2018. We do not have any significant capital investments planned for the balance of 2018, and I'd expect CapEx to be minimal in Q4. We do expect to make higher capital investments in our gearing business in 2019 after several years of lower investment, while the business was rebuilding and core processes were being upgraded. We have made investments to support fabrication product lines in the past year, notably with adding a large machining center. This is a product line we plan to grow organically in the short run, and we are developing plants to expand our offerings. With that being said, future CapEx should remain in a normalized range in 2019 between 2% to 3% of sales. As we discussed on our last conference call, we filed a $10 million ATM in July. As of today, we've only sold 15,000 shares with proceeds of $33,000, more or less to understand the mechanics of the program. We do not currently have plans to utilize the ATM to a greater extent given that our stock is trading at a 30% discount to our tangible book value. Next slide, please. Thank you for your interest in Broadwind. Our third quarter was consistent with our reduced guidance. The progress in gears offset much of the weakness in towers, as we slowed down our production schedule in response to an unplanned gap in steel deliveries. Our fourth quarter will be impacted by the same factor, with revenue declining to $25 million to $26 million and an EBITDA loss of $1 million to $2 million. Although, this is down sequentially, this will be significant improvement over a relatively easy 2017 Q4 comp. 2019 orders support a much stronger year, with quarterly revenues approaching $40 million in Q1 and rising thereafter, consistent with our tower delivery schedule. We expect quarterly revenues to average $40 million and more and to be able to deliver consistent quarterly positive EBITDA. We will provide more guidance at year-end when our 2019 budget is finalized and when our delivery schedule is more firm. Thank you. And this concludes our prepared remarks.

[Operator Instructions]. Our first question comes from Justin Clare with Roth Capital Partners.

This is Phil on for Justin. I wanted to get your view on 2019. And I know you talked about increased, I think, coating activity and you have a number of discussions to secure additional orders. I was wondering if you could give us just the touch more visibility there? For example, what is the potential to add a new customer incrementally from this quarter relative to last quarter? How do you feel incrementally better or worse? And then for your primary customer, what is the gating factor to secure more orders? Is steel the primary issue? Or is there another issue for us to think about?

Phil, this is Eric. I'll take that question. But first of all, we are confident going into 2019. We have about $60 million of scheduled backlog today. We're finalizing another project that should be worth about $14 million on top of that. And that would be announceable once that order is locked in. We do have heavy coating activity, both with that customer and with other customers that we feel confident it is going to yield us some wins in 2019. So with that - with the - with what we have in backlog, what we know are in discussions right now with our primary customer in heavy coating and capacity discussions with other customers, we feel much more confident about 2019.

And so Eric, this quarter relative to last quarter, would you - could you say that it's incrementally more visible and better as it relates to, especially the activity with new customers as well?

Okay. So you're saying, our knowledge right now in this quarter versus last quarter, yes, it's greater and more positive than we knew last quarter. We're getting more visibility and that's encouraging.

And what is the driving factor there besides just being - besides time? Did any other variables or things changed? Or is it just that maybe with steel prices kind of hovering where they are, the OEMs realized this is the reality that they have to face and they are just going to lock in the orders now?

Well, well, steel cost does have an impact, of course, on project valuation. But the OEMs that we're working with understand the market dynamics and that they do have to pass those steel increases on to their customers. So with regards to the timing of orders, it has a lot to do with when the projects are let and when the projects are announced by the developers and when the turbine OEMs are able to secure their projects. Once they have a secure project they begin working with us on supply.

And I will just add to that Phil, that comment I made in my opening remarks was, it's feeling more like business as usual. I think probably a quarter ago, and maybe the quarter before that people were just almost waiting to see what was going to happen.

Good. And that's kind of what I am trying to get at so that's good to hear. Shifting back to steel for a bit. You talked about in your prepared remarks, new procurement approaches, can you share kind of what you're doing to that might be new, number one? And then number two, how do you ensure the steel supply for 2019? I know you can pass it all along, but what kind of - how much risk is there that you're not able to supply all the steel that you would need to be able to supply your 2019 or service year 2019 outlook?

I'll start and then Eric will probably add. So in terms of changes, we are expanding the number of steel suppliers that we deal with, both within the U.S. and outside. We have actually made some changes in our organization as well. I think with respect to the certainty of getting this deal, once the deal has been struck and the purchase has been made, the lead times have lengthened, but deliveries are still happening to those agreed longer lead times. So I don't think it's a risk of whether we will get the steel once it's all been agreed and purchased. It's just as things were changing during 2017 that caused some disruption.

Q3 and Q4 was an unusual dynamic and that the tariffs increased, allowed the steel companies in the U.S. to increase their prices significantly. And as those prices were being increased, other customers from other industries were taking advantage of that available capacity to lock in orders. And if we didn't have project for which we needed to purchase steel immediately, which we did not, other customers and other industries were able to take that capacity from our domestic steel mills.

As it relates to the competitive dynamics, are you seeing any new market entrants? Or perhaps maybe not new, but market players that weren't able to access the U.S. from Asia or abroad in the past? Are they actually getting in here now, are they winning orders at all? I wonder how that's - earlier, Stephanie, you mentioned that it's feeling more like business as usual that would suggest to me that the competitive dynamics are not coming in, but to what degree are you seeing those competitive forces?

Well, again, I'll start. I think that imports are definitely more competitive further into the U.S. than they were a year ago just because of a gap between the domestic and the Asian steel price. And we're seeing certainly, more pressure, as a result of that, more pricing pressure. Again, depending on the geography. In terms of new entrants right now, as we look, we're seeing - we're seeing more towers coming from Asia. But that data is reported with somewhat of a lag. So we're not certain how much that's - how much more that might be increasing kind of as we speak.

So Phil, if you were referring to tower producers, Stephanie answered that question, but if you were referring to turbine OEMs we're seeing some announcements, public announcements from companies like Nordex and Senvion that are not really new entrants into The United States, but they are starting to gain a foothold in addition to the big three, Siemens Gamesa, GE, and Vestas.

Eric, I was referring more to the towers. But that's helpful as well. So as a follow-up to that, when you think about your 2019 demand for towers, can you quantify how much of it might be coastal regions that could be served by imports, assuming steel tariffs remain in place versus no more in land where you guys may have an advantage or - a pricing advantage there?

I didn't know if we know that number. I don't know if we know how the distribution is. We are seeing more projects moving up north, but there's still significant activity down in the Gulf coast area.

Just as a reminder, we have a plant in Wisconsin and a plant in Texas, so we have the wind belt covered, but as it gets closer to the coast, obviously the transportation costs are less for imports and the competition is stiffer. But we just don't know where the projects are necessarily going to be won at this time Phil.

Okay. So when you lock in your tower orders, you don't necessarily know where that tower is going. You don't know if it's the West Coast or somewhere around?

Yes. Sorry, there was a - yes, sorry. There was a time when we didn't know, but now that the tower orders are coming in project by project, we tend to know. We definitely have better visibility than we once did.

Assuming the final question then on that count then when you look at especially the backlog that you have for next year, would you say the majority of those orders are within the wind belt and there is very few along the coast or are you also winning your fair share of the coast business as well?

So what I should explain is, when you refer to the coast, are you referring to Southern Texas, we consider that within the wind belt, Central U.S.

I'm referring more to the West Coast, yes, sorry.

If you're referring to the West Coast, it's very unlikely that we would win a project across the Rockies because it is very expensive to ship a tower from our plants across the Rocky Mountain.

[Operator Instructions]. Our next question comes from Hailey Xu with Macquarie.

Hi, this is Hailey Xu, filling in for Angie. We're just wondering if you could provide more color on your cash and liquidity situation. Because it looks you're getting tied with liquidity with the $6 million left of the $25 million credit line. So if you could talk more about that, it would be great?

Sure. I'll take that. We are expecting our working capital requirements to come down in Q4. Really what's that's going to be driven by is the number of deposits that we are expected to receive in Q4 under our main tower supply agreement for 2019 production. So we're looking at kind of this $18.8 million kind of line of credit balances being a higher point for us in 2018, and we expect that to improve through the balance of the year and into early next year. We're also looking at, I mentioned in the prepared remarks that we're looking at other debt instruments that we're going to be kind of reviewing in Q4 here that should help us with probably additional working capital requirements as we move into next year that comes with higher tower production levels. So we feel this is a high point for our line of credit balances.

That's very helpful. Another question, I don't want to repeat the question on foreign competition, but just given that competitive pressure from foreign tower manufacturers, we are just wondering what are your plans for the updated tower manufacturing capacity at Abilene? Are you going to maybe reduce staffing levels or are you hoping that in 2019 and '20 you will see so much growth in wind you will be able to get all tower manufacturers with the tower orders?

Well, we do balance our workforce with our production levels. We do feel like the production levels we have now are at a low point. And so we have been able to retain our core workforce that was part of the plan to move some production out of Q3 into Q4. So we're retaining those core competencies and, yes, we do feel that more business will come to both of our plants, in early 2019, we will be able to recover that workforce and read that demand. So, no, I don't expect we will be reducing our production capabilities further than we already have.

This concludes our question-and-answer session. I'd like to turn the conference back over to Stephanie Kushner for any closing remarks.

Thanks, very much. And thanks for attending our call, we look forward to speaking to you again, in about three months. Bye-bye.