Universal Stainless & Alloy Products Inc (USAP) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Universal Stainless Third Quarter 2017 Conference Call and Webcast. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to June Filingeri. You may begin.

Thank you, Leanne. Good morning, this is June Filingeri of Comm-Partners, and I'd also like to welcome you to the Universal Stainless Conference Call and Webcast. We are here to discuss the Company's third quarter 2017 results, reported this morning. With us from management are Denny Oates, Chairman, President, and Chief Executive Officer; Larry Pollock, Executive Vice President and Chief Manufacturing Officer; Chris Zimmer, Executive Vice President and Chief Commercial Officer; Paul McGrath, Vice President of Administration and General Counsel; and Ross Wilkin, Vice President Finance, Chief Financial Officer, and Treasurer.

Before I turn the call over to management, let me quickly review procedures. After management has made formal remarks, we will take your questions. Our conference coordinator will instruct you on procedures at that time.

Also please note that in this morning's call, management will make forward-looking statements. Under the Private Securities Litigation Reform Act of 1995, I would like to remind you of the risks related to these statements, which are more fully described in today's press release and in the company's filings with the Securities and Exchange Commission. With these formalities out of the way, I would now like to turn the call over to Denny Oates. Denny, we are ready to begin.

Thank you, June. Good morning everyone. Thank you for joining us today. Our third quarter results were in line with our preliminary forecast on October 18th. Sales remain strong at $50.9 million and included record premium alloy sales, which reached 14.5% of total net sales. The market recovery that began for Universal in the first half of the year continued to benefit our third quarter. However, unexpected and temporary operating challenges at the end of the third quarter took a sharp toll on our profitability and resulted in a net loss of $0.04 per share for the quarter.

To be more specific, and as noted last week, unplanned maintenance issues, primarily in the hot working areas of our mills, compounded by ramp-up challenges that developed in the quarter, restrained our final shipment volume and increased our spending for maintenance and outsourced resources, as we strive to meet customer commitments. Our production ramp-up has been in response to our continued strong levels of backlog. Also impacting our bottom line were two plant fires, one in our Dunkirk facility, which we announced last month, as well as a much smaller fire in Bridgeville that, in combination with the Dunkirk fire, shaved 50 basis points off our gross margin and reduced earnings by $0.03 per share. It is worth emphasizing that we view all of these setbacks as very temporary. Most have already been resolved, and we expect to get back on our growth plan as we move through the fourth quarter and into 2018.

Looking more closely at our third quarter performance, sales of $50.9 million represented an increase of 28.3% from the third quarter of 2016, although they were 3.3% lower sequentially. Year-to-date sales totaled $152.4 million, which is up 26.7% from the same period last year, and just $2 million shy of our total revenues for all of 2016. For the third consecutive quarter, sales of premium alloys reached a record high, totaling $7.4 million, or 14.5% of sales, compared with $6.8 million, or 12.9% of sales in the second quarter of 2017, and $3.4 million, or 8.6% of total sales in the third quarter last year. International sales also were strong in the quarter at $5.1 million, or 9.9% of sales, versus 7% of sales in 2017's second quarter and 8.9% of sales in the third quarter of 2016.

Our backlog before surcharges in the third quarter continued to grow, reaching $66.2 million at September 30, up 4.3% from June 30, and up 68.1% from September 30 of last year. Order entry picked up in August and September, and is stronger than normal seasonal expectations thus far in October.

Gross margin for the third quarter of 2017 was $5.5 million, over 10.7% of sales, which was below our target of the mid-teens for the quarter, due to the operating issues and unusual items we've cited. I'll come back to those issues here in a few minutes.

At the bottom line, we incurred a net loss of $0.04 per share for the third quarter, although there was a net profit of $0.02 per diluted share, excluding unusual, fire-related expenses and some discrete tax items that Ross Wilkin will discuss in his remarks. EBITDA for the third quarter totaled $5.6 million, which is below $7.3 million in 2017's second quarter, but still the second-highest level in the past seven quarters. Year-to-date, EBITDA is up a noteworthy 68.2% from the same period of 2016.

Let me return to the operating issues in the third quarter and where we stand on resolving them. A major issue was the failure of the main work roll drive system in our Bridgeville hot mill, necessitating outside maintenance, engineering, and operating support to diagnose the problem, execute repairs, and engineer modifications to mitigate future occurrences. This work is complete, and the mill is now current from a production standpoint. The hot mill failure occurred just as activity was ramping up to meet our growing backlog during a period of high vacation time, peak overtime, and new employee training. The lost production during a period of ramping activity created late customer orders and downstream bottlenecks as the hot mill recovered. Striving to meet our customer commitments led us to temporarily add outsourced resources to break bottlenecks. The in-plant resources were reduced in recent weeks and will be eliminated by month-end.

We also experienced a seal failure in the Radial Forge in North Jackson, requiring immediate repairs in the third quarter. We elected to pull a planned outage from the fourth quarter into the third quarter and took the forge down for a week. All repairs have been completed, and obviously, no outage is required in the fourth quarter.

In Dunkirk, we wrestled with several spindle failures on a bar mill and control issues on the bar and rod mill, generating a spike in maintenance costs. Both issues have been remedied.

Lastly, we incurred disruptions from two fires, which we've already called out. Both facilities are now repaired and running normally. There will be some additional cost in the fourth quarter to cover outsourcing in early October, and we will have insurance recoveries either late in the fourth quarter or early in the first quarter of 2018.

In spite of these challenges, there were a number of developments in the third quarter that are positives, as we look at the fourth quarter and 2018. The base price increase of 5% that we announced in September on all stainless products for non-contract new orders went into effect on orders booked on or after October 1st.

Regarding commodity prices, on the last call I mentioned that our surcharges will be modestly lower in July and August and recover to June levels by September. That was in fact the case, and beginning in August, commodity prices began to strengthen. At the end of September, nickel, moly, and chrome all had reached their highest levels in two years. The latest quotes for these commodities indicate that prices are continuing to trend upward, with nickel, for example, trading between $5.25 and $5.50 per pound in recent days.

Speaking of surcharges, as we've noted in the past, many in the industry expect electrode costs to increase substantially in 2018. Over the past couple of months, there have been announcements by some industry players, instituting a surcharge mechanism to cover the inflationary pressure of electrode increases. We are in the process of assessing this action as a possible remedy to increase electrode costs, should they occur.

We continued to earn customer approvals, expand relationships, and develop new products in the third quarter. In the category of expanding aerospace relationships, our new five-year contract with Rolls Royce that I mentioned previously has now been signed and takes effect in January 2019. It adds several more alloys, in addition to the six alloys we already have with Rolls Royce. During the third quarter, we earned two new product approvals, commercialized five new products, and our new product pipeline remains strong, with 15 products currently under development.

On the financing front, we announced earlier this week that we obtained an amendment to our credit agreement, which immediately reduces the rate on our senior debt borrowings by 75 basis points and saves Universal about $433,000 per year at our current borrowing level. Ross will expand on this in a few moments. One potential positive that has been deferred to 2018 is action on a Section 232 investigation by the Commerce Department. We do feel some form of trade relief is needed and will occur, but not until well into 2018.

Let me spend a few minutes on our end markets, beginning with aerospace. Aerospace totaled $27.7 million in the third quarter of 2017, representing 54% of quarterly sales, versus 55% in the 2017 second quarter, and 60% of sales in the third quarter of last year. Aerospace sales increased 17.3% from the third quarter of 2016 and were 4.4% lower than 2017's second quarter. Aerospace sales typically dip sequentially in the third quarter. The good news here is that it was much less of a dip than we normally would have expected. Overall, the aerospace market is healthy, our customers' businesses are healthy, and they continue to be positive about the remainder of 2017 and next year.

The positive drivers in aerospace remain the same: the multi-year backlogs at Boeing and Airbus are supporting aerospace market fundamentals, and both are increasing production rates on their narrow-body airplanes. Meanwhile, world passenger traffic and air freight traffic has been exceptionally strong this year, growing over 2016 by 7.2% and 11% respectively, all fueling a robust aftermarket.

The defense market is also seeing growth. The announcement last week regarding the Airbus plan to acquire a majority stake in the Bombardier C Series aircraft limited partnership, which manufactures and sells the C Series airplane; this airplane is roughly a 100- to 150-seat airplane. As to the implications for Universal, the deal, which is not expected to close until the second half of 2018, is generally a positive, as we now have Bombardier approval and a positive relationship with them, along with the fact that we have been doing business in the Boeing and Airbus supply chain for a considerable amount of time.

The heavy equipment market remained our second-largest market in the third quarter, representing 19% of total sales, compared to 17% in the second quarter of 2017 and 12% in the third quarter of 2016. Heavy equipment sales totaled $9.7 million in the third quarter, an increase of 8.4% from the second quarter of 2017, and double their level in the third quarter of 2016. As we've discussed, our tool steel plate sales are the main component of this heavy equipment category. Tool steel demand is benefitting from the fact that manufacturing activity is up overall.

In automotive, we are continuing to see solid vehicle production numbers, and the forecast for automotive model changeovers is trending up, reaching an expected 42 in 2019. Off-road equipment makers have also continued to gain traction, as described in Caterpillar's release on Monday. In fact, channel checks for the machinery group continue to be upbeat, with lead times extending. Universal is benefitting from this continuing ramp in demand, coupled with the shorter lead times we can offer as a domestic supplier.

The oil and gas end market represented 9% of third quarter 2017 sales, which is in line with our second quarter of 2017, and compares with 8% of third quarter of 2016. Our oil and gas sales totaled $4.6 million in the second quarter, down 4.6 from the second quarter of -- excuse me; let me go back and do that again. Our oil and gas sales totaled $4.6 million in the 2017 third quarter, down 4.6% from the second quarter, but up 49.8% from a year ago third quarter. Among the oil service leaders, (inaudible) oil prices led to mixed commentary this earnings season. Generally, land-based activity in North America was solid, and the Gulf of Mexico remains weak. It is worth noting the growing consensus that the oil market is in balance, based on the reduction in third quarter global oil inventories. Further, the continuation of this trend and further global inventory drawdown will create the foundation for higher oil prices and subsequent increases in exploration and production spend. We are seeing increasing optimism and greater visibility from our customers, as they slowly recover from the poor conditions in 2015 and 2016.

The power gen market represented 6% of third quarter sales, versus 9% in the second quarter and 10% of sales in the third quarter of 2016. Our power generations sales totaled $3.3 million in the 2017 third quarter, compared with $4.8 million in the second quarter and $4 million in the third quarter of 2016, were down 18.7% and 31.7% respectively. There was considerable attention paid on GE's earnings call last week to issues in their power business, which offset generally strong performance in most of the other segments. Their power business includes heavy-duty gas turbines, a business which their new CEO noted as undergoing major market changes. The absence of new build business for Universal and our customers over the past several years is consistent with his overall observation. Our opportunity and focus has been on the maintenance business, on installed turbines, which saw a pick-up in activity in the second quarter but slowed in the third quarter, which is not unusual, as there is less maintenance during the summer months. Overall, we expect the fundamentals and opportunities in our power generation business to remain the same over the next few quarters.

Our general industrial market sales were 9% of sales in the third quarter of 2017, which is in line with the 2017 second quarter and compares with 8% of sales in the third quarter of last year. Third quarter general industrial sales totaled $4.6 million, also in line with the second quarter, but up 39.6% from the third quarter of 2016. We are continuing to benefit from our new products for infrastructure-related projects, as well as business development activities for domestic manufacturing. As I noted on the last call, we continue to expect growth in this market to continue into 2018, subject to normal project seasonality, and any federal infrastructure bill will just be an added plus.

Before I turn the call over to Ross for his financial report, I would like to take a moment to acknowledge the substantial contribution he has made to Universal since he joined us a couple years ago. On our first earnings call together, I commented that Ross was getting a real baptism of fire, given the poor industry conditions at that time, but that he hit the ground running. Ross, on behalf of all us on the Universal team, as well as our entire board, we want to thank you for your service to Universal since then and wish you all the best as you pursue your next career opportunity. On a personal note, I want to especially thank you for the advice and counsel you provided to me during some very challenging times in the industry, and the outstanding financial team you have assembled here at Universal over the past few years.

Let me now turn the call over to Ross for his financial report. Ross?

Thank you, Denny, for the kind words. I just want to say, before I jump into the financial report, I have enjoyed my time at Universal Stainless very much, and it is with mixed emotions that I depart for another opportunity. A new opportunity was brought to my attention unexpectedly, as I was not actively seeking other employment. I will be watching closely, with interest, the expected continued progress of Universal, and I am confident that Universal is on solid footing and has a bright future. On a personal note, I've enjoyed working with Denny and learning from his wealth of industry knowledge and company experience. Even after I leave, I will remain available to Denny and the Universal finance team to ensure a seamless transition. I am confident the transition will not be a problem. I wish Denny, the board, and the rest of the Universal team the best going forward, and I look forward to being a shareholder of Universal for the foreseeable future. For those of you on this call, including shareholders, analysts, bankers, colleagues and others, I have enjoyed meeting many of you and working with you regarding Universal over the last couple of years, and I look forward to staying in touch, and I wish you all continued success.

Now for my financial report. As Denny already noted, third quarter 2017 sales of $50.9 million were up 28.3%, compared with the third quarter of 2016, and down 3.3% sequentially. For the first nine months of 2017, sales of $152.4 million were up 26.7%, compared with the first nine months of 2016. The year-to-date increase in sales versus prior year was broad based across all end markets.

Gross margin in the third quarter was $5.5 million, or 10.7% of sales, including approximately $300,000 of charges related to the fires in our facilities during the quarter. Adjusting for the fires, underlying gross margin was 11.2% of sales, down from third quarter of 2016, which was 11.9 percent, and down sequentially from the second quarter of 2017, which was 13.6%. During the third quarter of 2017, increased costs associated with higher maintenance activities, along with increased reliance on more expensive outsourced resources to deliver our ramp-up in production negatively impacted our gross margin performance. In addition, less favorable alignment of surcharges and input commodity costs contributed to the sequential decline in gross margin. As we enter the fourth quarter and plan for 2018, we anticipate that these greater-than-normal maintenance and outsourcing costs are temporary in nature and will be reduced going forward. In addition, with recently higher nickel prices, surcharges have increased starting in October. Given this, we anticipate having favorable alignment of surcharges and commodity input costs in the fourth quarter, relative to the third quarter.

Regarding the impact of the previously-announced fire at our Dunkirk, New York, facility, we expect to incur a maximum of $200,000 in charges in the fourth quarter, associated with remediation and outsourcing, which has now been completed, now that we're back, operating as normal. These charges will be classified within our gross margin in the fourth quarter. The timing of the expected insurance recoveries are likely to be late fourth quarter or early 2018 and will be classified within other income and expense, once recovery is agreed.

Looking at selling, general, and administrative costs for the third quarter, SG&A was $4.4 million, approximately flat with both the prior quarter and the prior year. Our tax rate for the third quarter of 2017 was a negative 212%, reflecting the inclusion of approximately $200,000 of discrete tax expense items primarily related to the new stock comp accounting guidance in 2017. Excluding the discrete tax items, our underlying tax rate for the third quarter was 30.1%. From a cash tax standpoint, we continue to pay little or no taxes, and this will remain so for the foreseeable future, given the existence of a significant amount of loss carry-forwards, which were $53 million at the end of 2016.

Bottom line net loss for the third quarter was approximately $300,000, or $0.04 per diluted share. This includes a $0.03 loss per share impact of the unusual charges for facility fires, and a $0.03 loss per share of discrete tax expense items noted earlier. Excluding these items, third quarter was net income of $0.02 per diluted share, compared with net loss of $0.07 per diluted share in the third quarter of 2016, and net income of $0.17 per diluted share in the second quarter of 2017.

Looking at EBITDA, third quarter EBITDA was $5.6 million, an increase of $900,000, or 19.2%, compared with the third quarter of 2016. Adjusting for non-cash share comp expense, EBITDA was $6 million in the third quarter of 2017. It is important to note that EBITDA and adjusted EBITDA were both negatively impacted by approximately $300,000 for the facility fires in the third quarter of 2017. EBITDA for the first nine months of 2017 totaled $17.1 million and an increase of $6.9 million, or 68.2%, from the same period in 2016. EBITDA and adjusted EBITDA calculations are in the tables to the press release.

Turning our attention to the balance sheet, during the third quarter, managed working capital of $101.5 million increased by $1.4 million, compared with the second quarter of 2017, driven by higher inventory, partially offset by favorable movements in accounts receivable and accounts payable. The increase in inventory is primarily to support the higher backlog noted earlier, combined with a greater mix of more expensive stainless grades.

Capital expenditures for the third quarter of 2017 were $1.6 million, compared with $1.7 million in the second quarter of 2017 and $1.4 million in the third quarter of 2016. Year-to-date 2017 capital expenditures were $4.7 million, compared with $3.1 million in the first nine months of 2016. For full-year 2017, we expect capital expenditures to be approximately $8 million, including initial down payments associated with the new bar cell automation line at our Dunkirk facility, which is expected to be operational by the second half of 2018. As has been noted in the past, capital expenditures continue to be less than our ongoing depreciation and amortization expense, which is $18.7 million annualized, reflecting the fact that we largely have the assets in place investments previously made to support growth in the business.

Total debt was reduced by $600,000 during the third quarter to $77.1 million. Regarding our ABL bank credit facility, as was announced on Monday, we have secured a favorable amendment, providing us an immediate reduction to interest rates by 75 basis points. At current borrowing levels, this is equal to approximately $430,000 per annum of interest savings. In addition, the amendment further improves borrowing availability and provides us with additional stability and flexibility to execute our growth plans. There were no changes to our covenants as part of the recent amendment, and we remain in compliance with all covenants at the end of the quarter.

Lastly, regarding our $19 million subordinated convertible notes, as of October 17, 2017, the convertible feature of the notes expired. Going forward, the notes are simply a fixed interest rate note with no convertible rights. Additionally, as previously agreed, the fixed interest rate of the notes increased from 5% to 6%, effective August 17, and this rate will remain at 6% until final maturity, March 2021.

This concludes my financial report. Denny, I'll turn the call back to you.

Okay, thanks, Ross. In summary, then, our team delivered strong top line results in third quarter of 2017, with net sales of $50.8 million and record premium alloy sales, which reached $14.5% of revenues. The market recovery this year continued in the third quarter, and we are currently seeing further signs of it, with stronger-than-seasonal order entry and additional increases in backlog in the fourth quarter. However, we faced several unexpected and temporary operating issues late in the third quarter that hit our gross margins hard and resulted in a reported loss of $0.04 per share. We have resolved most of those issues, and getting back to our growth plan as we move through the balance of this year and into 2018 is certainly what we are involved in currently.

There are a number of positive factors supporting our optimism. First, the continued strong fundamentals of our largest end market, aerospace, along with our new five-year contract with Rolls Royce; second, the ongoing high demand for our tool steel plate, due to the continued strong pace of vehicle changeovers and a pickup in overall manufacturing activity. We are also seeing higher interest from our oil and gas customers, and while we expect power generation demand to be driven by maintenance rather than new builds, we do see further opportunity from our new products for infrastructure. Add to these factors the recent base price increase, the current strength and level of commodity prices, and the savings we will realize from our new credit amendment, and we have a strong foundation for moving forward with our plan.

That concludes our formal remarks. Operator, let's take some questions.

(Operator Instructions) Your first question is from Michael Gallo with C.L. King. Your line is open.

Hi, good morning, and congratulations, Ross, on the next phase here.

Thank you, Mike.

Good morning, Mike.

Good morning. A couple questions; I want to just parse out a little bit on the gross margins. Obviously, you had a number of extraneous factors in the third quarter. Some of those will carry through October into the fourth quarter, and then there will be others, such as the surcharge alignment that sound like they're going to flip. So, can we parse out kind of each of the factors in terms of what the impact was? I know the fire was 50 basis points, but what was outsourcing? How much was the headwind from misalignment, and how do you think that will flip in the fourth quarter, and how we should expect, I guess, margins to trend and what you expect, kind of as you head into 2018. You're obviously going to have some pricing rolling in as well, and presumably you'll be through some of these issues. Thanks.

Let me ask Ross to kind of do the parsing of the third quarter, and I'll pick up the outlook. Ross?

Yes, so the impacts on the third quarter, you already mentioned the fire being 50 basis points. The negative misalignment was about 100 basis points relative to Q2, and from the additional maintenance activities and outsourcing activities, approximately a 100-basis-point impact to Q3.

So you take a look at that, if we're looking at the fourth quarter, Mike, and where we're at, we will have some costs roll over into the fourth quarter, given our average costing system. But our expectation would be that our margins will be north of 14% in the fourth quarter, probably in that 14% to 15% range.

Okay, so it sounds like the vast majority of it you really should be through. Well, the misalignment, I think you note we (inaudible) get a positive benefit as you kind of (inaudible) through the inventory, so the --

That's kind of a wild card. We would estimate that to be about 1% to 1.5%, so that's why I give you the range of 14% to 15%, to see how that plays out. But that's roughly what we would expect, looking at the fourth quarter. So that will be positive, relative to the negative.

Just to clarify, is that relative to the third quarter, where you had a 100-basis-point headwind, or you expect it will be a 100-basis-point benefit?

It should be a 150-basis-points benefit relative to 3rd quarter.

Okay, that was good to clarify.

And as far as the pricing agreement --

And in terms of -- yes.

Let me just finish up on the price increase. That was on orders received after October 1st, so we'll start to see the benefit of that as we move into the first quarter of 2018. Might be a little bit late in the year, but most will be 2018.

Okay. Just to come back to the demand side of things, I mean obviously, the teams continue to grow. As you've gone through this now, it seems you had a little bit of trouble with the ramp; obviously, a litany of issues that kind of arose in one quarter. Are you confident in terms of the CapEx plan that you have everything where it needs to be and these are one-offs, or will you have to spend some capital, perhaps to de-bottleneck as you ramp for increased demand? Thanks.

I am very confident that we have the capital spending plan well laid out for the next couple years. There are some minor capitals that will spring from some of the problems we had in the third quarters. We've had some engineering work that I mentioned in my prepared remarks, which we're assessing right now, that will probably lead to some capital spending, for example on our hot mill here in Bridgeville. But we're not talking gazillions of dollars there, Mike. We're talking about relatively minor things. Most of the instances, things that happened in the third quarter were what I would characterize as one-off maintenance issues.

Great. Thanks very much.

You're welcome.

(Operator Instructions) Your next question is from Tyler Kenyon with KeyBanc Capital. Your line is open.

Hey, good morning.

Good morning, Tyler.

Good morning.

Denny, any sense you could provide us on kind of where you see the topline shaking out in the fourth quarter?

Well, if you take a look at what happened in the third quarter, we will have some spillover into the fourth quarter, and as I indicated, bookings are holding up relatively strong, so I would be surprised if it isn't north of $50 million, probably in that same range as the third quarter. And depending upon how things play out at the end of the year with the balance sheet dressing that many customers do, it could be a little bit higher than that or a little bit lower. But if you ask me, try to pin me to a number, I'd say around $50 million.

Okay, great.

I will say, customers that I talk to now are beginning to evaluate that trade-off between cash flow, inventory levels, and business volumes and inventory requirements for the first quarter. And it's been a while since people were worried about having enough inventory in the first quarter, so I'm hopeful we will not see as big an adjustment here late in the year in terms of customers' willingness to accept orders.

Okay, great; thank you. And then, just given some of the impacts that we saw in the third quarter, any sense just kind of on network and capital progression as we close the year here?

If you look at that, what I just said, you would expect receivables to be roughly flat. If you look at inventory, it should be flat. Payables is a little bit of a wild card, depending upon what kind of production we're running, primarily in our melt shop at the end of the year. Given where we're at with bookings and backlog, I would expect this to continue to run through the end of the year. So, all in all, I would expect working capital to be roughly the same level they were at the end of September, at the end of December.

Okay, got it. And then, just any other updates you can provide just on some of the momentum that you're seeing North Jackson right now?

Well, we've seen the last two or three quarters in a row, we've seen a noticeable uptick in our production coming out of the vacuum induction melting furnace. We are operating in higher activity levels as a part of that. On the demand side, I think my takeaway from it, personally, is that the strategy that we've been executing over a number of years is beginning to gain traction. Timing is everything in life, right, and 2015 and 2016 were horrendous years. The downturn in the oil industry had a significant impact on the pace at which we could ramp that facility up. But with the current situation out in the marketplace, we are basically proving to people that we can make these products, do it well, do it very competitively, and we're starting to see the benefit of that here as business levels, in general, recover.

Great. Thanks for taking our questions.

Any time, Tyler.

(Operator Instructions) And I'm showing no further questions. I would now like to turn the call back to Dennis Oates for any further remarks.

Okay, thank you. Once again, I want to thank everybody for joining us this morning. We sincerely appreciate your support and interest in Universal Stainless and we'll be looking forward to updating you on our progress here in early 2018. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program, and you may all disconnect. Everyone have a great day.