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Aaon Inc (AAON 1.16%)
Q3Â 2018 Earnings Conference Call
Nov. 01, 2018, 4:15 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Hello, my name is Philip and I'll be your conference operator today. At this time, I would like to welcome everyone to the AAON Inc. Third Quarter Sales and Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).
Thank you. And I'd now like to turn the call over to your host Mr. Gary Fields. Sir, please ahead.
Gary Fields -- President & Director
Good afternoon. I'd like to read the forward looking disclaimer. To the extent any statement presented herein deals with information that is not historical, including the outlook for the remainder of the year, such statement is necessarily forward-looking and made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. As such, it is subject to the occurrence of many events outside AAON's control that could cause AAON's results to differ materially from those anticipated. Please see the risk factors contained in our most recent SEC filings including the annual report on Form 10-K and the quarterly report on Form 10-Q.
So, now I'd like to turn it over Scott Asbjornson, CFO to discuss some of the financial details.
Scott Asbjornson -- Chief Financial Officer
Welcome to our conference call. I'd like to begin by discussing the comparative results of the three-months ended September 30, 2018 versus September 30, 2017. Net sales were down 0.6% to $112.9 million from $113.7 million. Net sales for the quarter are mainly due to decreases in rooftop unit sales.
Our gross profit decreased 8.1% to $32.8 million from $35.7 million. As a percentage of sales, gross profit was 29% in the quarter just ended compared to 31.4% in 2017. The company saw improvements in its gross profit in the third quarter compared to previous quarters in 2018. The company continues to experience increases in raw material costs due to tariffs and trade restrictions.
Selling, general and administrative expenses increased 1.2% to $13.2 million from $13.0 million in 2017. As a percentage of sales, SG&A increased to 11.7% of total sales in the quarter just ended from 11.5% in 2017.
Income from operations decreased 13.5% to $19.6 million or 17.3% of sales from $22.6 million or 19.9% of sales. Our effective tax rate decreased to 28.2% from 35.3%. The company's estimated annual 2018 effective tax rate excluding discrete events is expected to be approximately 26%. The decrease in our effective rate was due to the Tax Cuts and Jobs Act that was enacted on December 22, 2017 lowering the federal corporate tax rate to 21%.
Net income decreased to $14.1 million or 12.5% of sales compared to $14.7 million or 12.9% of sales in 2017. Diluted earnings per share decreased by 3.6% to $0.27 per share from $0.28 per share. Diluted earnings per share were based on 52,628,000 shares versus 53,14,000 shares in the same quarter a year ago.
The results for the nine-months ended September 30, 2018 versus September 30, 2017. Net sales were up 6.8% to $321.6 million from $301.1 million. Net sales for the nine-months ended are up mainly due to the increase in our water-source heat pump line, which has a lower profit margin causing the percentage of net sales to not increase in proportion to the percentage increase in total units.
Our gross profit decreased 18% to $75.7 million from $92.3 million. As a percentage of sales gross profit was 23.5% as compared to 30.7% in 2017. In January 2018, the company paid all employees a one-time bonus of $1,000 per employee as a result of the Tax Cuts and Jobs Act, the act which lowered the federal corporate tax rate from 35% to 21%. This bonus increased cost of sales by $1.9 million, excluding taxes and benefit.
Additionally, the company typically have seasonality in its sales and workforce, with the fourth and first quarter being lower in production. The company maintained a higher level of workforce through the end of 2017 and beginning of 2018 in anticipation of our growing business. While significant improvements have occurred in the second and third quarters of 2018, the company's gross profit is still recovering from the events that occurred in the first quarter.
Selling, general and administrative expenses increased 2.7% to $36.5 million from $35.5 million in 2017. As a percentage of sales, SG&A decreased to 11.3% of total sales as compared to 11.8% in 2017. The overall decrease as a percentage of sales in SG&A was primarily due to the decrease in profit sharing, which is just the result of lower earnings for the year.
Income from operations decreased 30.8% to $39.3 million or 12.2% of sales from $56.7 million or 18.8% of sales. Our effective tax rate decreased to 23.8% from 32.1%. The company's estimated annual 2018 effective tax rate, excluding discrete events, is expected to be approximately 26%. The decrease in our effective rate was due to the Tax Cuts and Jobs Act that was enacted on December 22, 2017, lowering the federal corporate tax rate to 21%.
Net income decreased to $30.0 million or 9.3% of sales compared to $38.7 million or 12.9% of sales in 2017. Diluted earnings per share decreased by 16% to $0.57 per share from $0.73 per share. Diluted earnings per share was based on 52,715,000 shares versus 53,107,000 shares in the same period a year ago.
Looking at the balance sheet, you'll see that back we had a working capital balance of $91.0 million versus $103.7 million at December 31, 2017. Cash and investments totaled $10.7 million at September 30, 2018, the investments and maturities ranging from one month to two months. Our current ratio is approximately 2.7:1. Our capital expenditures were $34.3 million. We expect capital expenditures for the year to be approximately $40 million. The company had stock repurchases of $18.4 million year-to-date. Shareholders' equity per diluted share is $4.50 at September 30, 2018, compared to $4.70 at December 31, 2017. We continue to remain debt-free.
I'd now like to turn the call over to Gary Fields, our President, who will discuss our results in further detail along with new products and the outlook for the remainder of the year.
Gary Fields -- President & Director
Good afternoon. So, net sales decreased 0.6% for the quarter. They are up 6.8% year-to-date. We've had price increases that have gone into effect and are becoming effective on the actual equipment shipped, the related impact to that is that we are gaining -- regaining our margin percentages. At the same time we've had market pressures from increased steel cost due to the tariff, increased aluminum costs and now component cost.
The price increases that we've put into effect are beginning to offset all of those other price increases and we look for this to be somewhat accretive over the next quarter.
Water-Source Heat Pump business is beginning to gain some momentum. We achieved our AHRI certification a few months ago. Orders coming in the door are increasing at a rate that's what we expected. We have been redesigning some of our legacy products to gain efficiencies and to gain some other operational strategies. One of those operational strategies that we had not previously participated in is the grow business, as many of you know, medical marijuana and so forth has been legalized in many states, and this has prompted demand for these facilities that have very specialized environments. Aaon was very well equipped to make some small modifications to our products and gain a very substantial foothold in a new and emerging business. Our replacement market versus new construction remains fairly steady at about 50-50.
We've had continued growth in our large tonnage products gaining market share as well as just an increase in overall production of those machines. The Water-Source Heat Pump as I mentioned previously, is coming up to speed, beginning to get on track with our expectations, still lagging behind somewhat but it's gaining.
The various market segments remained fairly steady, commercial and retail, office building, medical, healthcare, education, manufacturing, lodging, municipalities are not seeing any material changes in those. Two markets that we have gained some -- as I mentioned, the growth facilities and another one is the data center support business. So while we don't typically furnish equipment in the core of the data center, there's many support areas that have UPS, equipment that needs to be cooled and pressurization for quarters in order to maintain temperature and humidity in those. So we've gained some really nice accounts with that as a focus.
Our backlog at September 30 was $126.8 million versus $73.8 million a year ago. So this reflects the strong order intake that we've achieved this year while we've been struggling to get the production rates to increase. We are making some headway with that, but it's not been as rapid as the ascension of the order intake. So the remainder of 2018, we'll see increasing Water-Source Heat Pump production. We are about to complete our R&D lab. We have certain aspects of that lab that are usable right now that we've begun to utilize this lab. We had a big national sales meeting on October 1st and brought in approximately 700 of our sales channel partner individuals and introduced them to this new lab. This is going to be a real game changer for our business.
The gross profit has been improving quarter-over-quarter throughout the year and we look for further improvement in the upcoming quarters, getting back to near if not at historical levels. The capital expenditures for 2018, we have revised that to be approximately $40 million at this time. I think, we had spent up-to-date $34,300,000, which was completing the lab and completing our Water-Source Heat Pump manufacturing facilities. The few things left to do are upcoming yet.
We had one time talked about a new site for air handling units. We're going to keep our finger on the pause button on that for a while, it's still an exciting development that we'll be able to utilize here, but I think it's prudent for us to get the Water-Source Heat Pump business gain a little maturity in that business and get some other things streamlined around here. And also, as you saw, our cash position has gone down a little bit and so I'd like to strengthen our cash position before we pursue any other major expansions like an air handling unit business.
With that, I'll open it up to questions.
Questions and Answers:
Operator
(Operator Instructions) Your first question is from the line of Joe Mondillo.
Gary Fields -- President & Director
Hello, Joe.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Hi guys, good afternoon.
Gary Fields -- President & Director
Good afternoon.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
I wanted to ask you guys about -- so lower productivity, I imagine lower productivity sort of costs, sales to only increase from the second quarter by about 3%. So sequentially, you saw a 3% revenue growth despite the strong backlog and that's because of lower productivity. On the other hand, you saw your margin sequentially improved by like 400 basis points and that sort of because of productivity. So I'm just wondering if you could sort of distinguish why revenue was not very good because of productivity, but margin was good because of productivity. If you could clear that up.
Gary Fields -- President & Director
Well, there's two factors there. One of them is, we had some price increase from back in November that finally found its way onto the plant floor. That was a, I believe that was a 3% price increase across the board that went into effect in November and just due to backlog and lead times. It took all the way to the third quarter to get that fully enabled. So that helped part of it.
The other part of it is, that we, in the second quarter, we ramped up and added a considerable number of people to the plant staff and these actually ended up being disruptive because the people while they came in with little knowledge of how to do what we do, they distracted almost an equal number of people that we're trying to train them, so in the -- throughout the third quarter, as attrition took place for various reasons, we allowed that attrition to shrink our staff on the plant floor somewhat, so that helped us with that efficiency because we weren't paying those people for doing nothing. Yet this smaller staff was able to build like, you said, almost exactly the same amount of equipment that they did in the previous quarter.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay and then, so with this improvement that we're making here should we anticipate daily sales to improve at the same time that productivity improvement is taking place. And then on top of that, you get price increases that -- the June price increase that starts hitting. So, it seems like price increase and maybe productivity should boost the gross margins a good amount in the fourth quarter?
Gary Fields -- President & Director
Joe, I agree with both of those. First off, we had a second price increase that went into effect on June 15th for orders coming in the door, due to the backlog and lead time. We will get about 75% to 80% of everything we build in the fourth quarter will be at that new price. So that was a 5% price increase across the Board in June. If we do the math and we call it 80% of what we build, that gets you a net gain of 4%.
Now, their are other things to keep note of, is we had steel contracted for that, that got us all the way through third quarter without having any real impact from the tariff on steel. That ended, so in fourth quarter we'll be purchasing steel at the new price, the inflated price. We have had pressures from aluminum all along. So now, we'll be able to offset that some more. We've had pressures from increased component prices. The most recent tariff went into effect, I'd say in the last 30, 45 days, 60 days, something like that. It was another 10% on small components like contactors and capacitors and kind of accessory items not big items.
So in summary, we'll have about 4% useable of the price increase in the fourth quarter and I think that the increased materials will take up about half of that. Then in December, give me the exact date on wage rate changes. December 3rd, we'll have some escalating wage rates. So the very last month of the quarter, we'll have some wage rate increases, that salaries and wages. So those will absorb a bit more of that, but we are now on top of the curve with regards to our price increases versus our rising cost. So, I think, it's a very valid statement that our margins will continue to improve.
Now, on a daily basis, in the month of October, we have seen on a daily basis, an increase in productivity. As far as dollars per day going out the door. It's not been drastic, but it's been improving. And so it tells us that a lot of the things that we did, to correct these actions and get more production out the door are effective. We did that through multiple things, one of which was a revised and enhanced on-boarding process and training program for these plant workers. So all of this being said, I'm very confident that fourth quarter we'll see some marginal improvement as well.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. And then I wanted to ask this is, I guess sort of a product mix question and it sort of two par. Roof, I noticed rooftop units were down year-over-year in the third quarter and chillers and air handlers were actually up. Could you comment on product mix. And then also, I know in the beginning of the year, you were talking about how large, lower margin type units were somewhat of an issue and I think maybe the December and November price increase was going to try to compare(ph) that, so it's sort of a two-par product mix -- pricing question.
Gary Fields -- President & Director
Sure. Okay, so let's address rooftop units first. We have a range of rooftop units that go from 2 tons to 210 tons. So our two-ton through approximately 20-ton units have been very steady. Very slight change, but nothing material as far as number of units. What has increased has been the larger tonnage units, while those were in equal dollars. So the dollars didn't change much. We went from $113,668 down to $112,937. So there wasn't much dollar change. Yet, those units were down by 450, 480 units. So, the units are larger and more expensive. I'm going to tell you the 50 to 70 ton range, those units have increased in their market share and their number of units, but at the same time, sort of the mid-sized units went down for the quarter. So, that product mix change -- the units that -- well, really, they go from about 40 tons to 70 tons. Those are a very nice margin unit. The units that are above 70 tons are the ones that we've had the lower margin on. However, our price increases have been aggressive on those units. And while there still lower than the benchmark margin, we've actually improved them a good bit.
Now, another thing with total number of units going on from 6,258 up to 6,547, you'll notice that we've built almost twice as many heat pumps. That's the new water source heat pumps that we've been talking about. So, in 2017 in the same three-month period, we built 614 units. In 2018, we built 1,161 and if you look at it on a year-to-date basis, it's 3,780 compared to the same nine-month period last year, 1,510. So, we've more than doubled our production rate on water source heat pumps.
We're seeing the orders coming in at a rate of expansion that supports that growth on a continued basis, since our AHRI approval, we've seen what we expected that the order rates have increased substantially.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. Thanks. I appreciate that. Lastly, I'll allow someone else to have a shot. The warranty expense, last year, I remember this bouncing up to over $3 million a quarter, and it seemed like it was going to be sort of temporary. And then it's sort of fell down in the first quarter to, maybe a $1.5 million, in the first quarter and it seemed like that was sort of temporary in nature, but then in the second quarter, bounced again above $3 million -- and it was $3 million -- above $3 million in the third quarter. Could you sort of explain, sort of what's going on here? And, if you still do think that sort of settles back down to closer to historical levels?
Gary Fields -- President & Director
Yeah, it is settling down. So the actual spend for the three-months ending September 30, was 3.050 million(ph) versus 2017 was $3,277 million(ph). So we have had a slight decrease in the spend in that quarter -- oh, that's accrual, I'm sorry. Let me recorrect that. The spend was $2,355 million(ph) versus $2,281 million(ph). So it was a very modest increase in actual spend. However, this has oscillated, like you say, it went down for a bit and then it came back up. Some of it was due to some seasonal repairs. We had actually began to accrue for some that -- that we knew occurred that we couldn't actually spend the money to do the repairs and until the weather got right.
We identified two major areas that we had concern. One (Technical Difficulty) and another one was a component supplier. And we have remedied both of those, so that's why we are confident that we will have a declining rate in warranty expense.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. So when you say -- just a follow-up and clarify. When you say, declining rate, do you anticipate as a percent of sales it's going to decline? Or will it declined from, I mean, historically the warranty expense was closer to a $1 million a quarter. So will it decline closer to the historical levels? Or are you just saying, as a percent of sales, it's going to remain elevated for whatever reason, but as a percent of sales, it's going to decline, but absolutely it will remain elevated.
Gary Fields -- President & Director
Well, I think, first off, as a percent of sales, I think it will decline because we're going to have increasing sales and I don't think we'll have an acceleration in the current(ph). Now, the absolute dollars spent to your point there, I also believe that, that's going to begin to curtail here pretty quickly actually because some of those items were resolved and paid for. And our primary one was that the paint issues, we had a paint process that -- that failed on us, that was in early to mid-2017.
And then, we had a slight reoccurrence in January, a very slight, we'll call it a whiplash. But we, by and large resolved the issue with paint in the fall last year, so there was, like I said, just a very small reoccurrence, and it was actually kind of a strange situation, how it reoccurred. But we identified what that was and corrected that as well. So the paint issue was fairly substantial in actual dollars spent. And that is absolutely resolved. We've had no reoccurrence since the one isolated incident that was back in January. Then we had a component manufacturer that we had an issue with that really manifest itself early last year.
Two things occurred there. One was, we issued a service bulletin, a procedure that could be done that would enable this component to have a more expected -- life expectancy. And so that, service bulletin procedure, we had to pay for those and those trickled in as our field service reps were able to apply the -- the cure if you will. And so that's also largely completed. Now, that -- both of those things took long -- longer to get completed than what I thought they would. The total dollar spend was what we thought it would be. It just took longer because of the seasonality in the workforce out there to actually resolve the problems.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
And going forward, whatever warranty reserves that you're reserving are related to that issue as well as the paint should subside, I guess?
Gary Fields -- President & Director
Well, it will, but the warranty reserve, there is an accrual method there, and it's a little slower to respond in the actual accrual. So it takes more historical data to support a change.
Scott Asbjornson -- Chief Financial Officer
You've got a couple of years where this -- what has happened over the last 12 months is going to flow through the calculation, and it's going to take a little while for that to flush out. If you go back and you look at when did the unit ship versus when did you incur the warranty costs, and you then you're making projections. So we've got to wait for that same amount of time to go past in the future without having those problems. Before that we'll fall out of the calculation.
So, as we teach several products for improving for -- as if that's going to happen, again, when we really don't. We anticipate we have resolved the problem, it's not going to reappear. But through our process, we're saying on the half chance that it does, we've got a reserve for it.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
I see. And in terms of that anniversary or future time period, is that something like 12-months or how does that unit start to decline?
Scott Asbjornson -- Chief Financial Officer
I'd say most -- most of the units that we shipped out, we found the problems within about 12 to 18 months.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. All right. Thank you. Appreciate it. I'll hop back in queue.
Operator
Your next question is from the line of Brent Thielman.
Gary Fields -- President & Director
Hello, Brent.
Brent Thielman -- D.A. Davidson -- Analyst
Good afternoon. Gary, how much of the $53 million odd increase in backlog, could you kind of parse it out for us? How much of it's kind of the traditional HVAC products versus heat pump products. Do you feel for where that growth is coming from?
Gary Fields -- President & Director
In the backlog, I would say a preponderance served it in legacy product, while the water-source heat pump is accruing a backlog that's beginning to register on the meter. It's not the preponderance of that backlog.
Brent Thielman -- D.A. Davidson -- Analyst
Okay. And you talked about some of the new -- newer market opportunities out there. What kind of feedback, I mean, do you get from field, just in terms of commercial market overall? Do you feel like, an absolutely nice bump in backlog, looks like a lot of it's reflective kind of traditional business. Does it feel like, it was year-end markets are accelerating the pace?
Gary Fields -- President & Director
It's feels like that we began to see an acceleration in May. Our sales channel actually started forecasted and acceleration clear back that was supposed to have occurred in January. There was factors that we've still not identified as to why January, February and March were all below their forecast. But if I take it in some total, the first nine-months of the year, were at 97% of what they forecast for year-to-date. So their forecast was quite accurate within 3% of being perfect. That being said, the -- what they had forecast was about a 15% to 16% growth this year, in orders coming in the door versus 2017. So there's been strength there.
Beginning in May, we began to see that here, of course, June was a little artificial for us, because of the price increase. Now, as all of this has occurred, we determine that about $35 million of the $156 million backlog at the end of the second quarter was pull forward because we looked at the forecast and then how it actually occurred throughout the third quarter and believe that that $35 million what if just occurred in the third quarter as far as orders coming in the door.
Now, if I look at architectural billing index, I find it other than the Northeast region, every region is recently reported above the benchmark of $50 million, which in -- indicates growth. The overall -- I don't have the exact number in front of me, but it seems to me, it was around $52 million --
Scott Asbjornson -- Chief Financial Officer
I believe so.
Gary Fields -- President & Director
I believe the number right now is around $52 million for this latest report. What we've had billed is 11 months in a row that have been above $50 million. So that is a firm indicator for our style of business telling us what's going to occur for the next nine months. So each month that rolls on, I look nine-months out and say it's going to be steady. Our sales channel partners were in here last month for a sales meeting on a National Sales Meeting, we had approximately 700 individuals that came in. And before they saw what we were doing at the sales meeting, they were all very excited about the market opportunities and what was going on. When they saw the new product additions and the new product enhancements we've done along with our laboratory, the tenor of the Group went to high pitch scream of excitement.
So, when you've got your sales channel partners this involved, this excited about what we're doing, I think that's going to support firm growth for us for a long time somewhat irregardless of what the market does. Because if we get more of their time, then the other manufacturers that are on their line sheet get less of their time. And so more of their time results in more sales for us.
Brent Thielman -- D.A. Davidson -- Analyst
That's great color. I appreciate that. And we talked before just about some of the challenges in labor constraints in the toll(ph) some market. I mean it looks like you kind of work through those issues. I guess my question is with this sort of gross in the business, do you foresee a need that kind of go on another tranche of hiring here in the near term, do you feel like you have what you need in place, factories to support the growth -- that looks like it's coming?
Gary Fields -- President & Director
Well, I think that we need to have some incremental growth in those personnel in mind at all times. What we did was because the forecast came up so short in the first quarter and it damaged our first quarter results as a result of that. I was a little bit hesitant to add people on an incremental basis because it seem that I might be over staffed. Well, then this huge swing in orders came in and we tried to staff up somewhat to meet that swing in orders. So that made an incremental percentage and it was just out of control. I don't know what the exact -- do we had over 20%?
Scott Asbjornson -- Chief Financial Officer
At the peak, it was over 20%.
Gary Fields -- President & Director
Yes, we had it over 20% at one time. The task of onboarding those people effectively, we weren't up to the task. We just, we couldn't do it. So what we've done is gone back to a more managed approach where we are onboarding people at a more reasonable rate, something that we can be effective with and we proved that in the third quarter with the improved margins and then further with what I'm looking at that just occurred in October, we've improved again. In October, we are down 230 individuals versus our peak, which is about roughly 10% I guess. And we are producing more dollars per day than we've ever produced. So that gave us clarity on the fact that yes, we need to add people. But we have to do it at a more controlled rate in order to get the effectiveness out of them and not be so disruptive to the other existing workers.
Brent Thielman -- D.A. Davidson -- Analyst
Okay, that's great. And then maybe one more from me. With the pump orders coming in, the certifications behind you. It sort of seems like everything's in order here, for all systems go. Are you comfortable kind of helping frame for us a target, you're thinking about for pump revenue over the next 12-months?
Gary Fields -- President & Director
I am not yet comfortable declaring anything there because two things. We went from 40 hours a week which was five, eight hour days. And we just about three weeks ago, turn this onto a seven days a week. And there are 3.5 days each shift 12 hours. When we did that we spread some of the experienced personnel between the two shifts and we actually went backwards a little on the number of units per week that we were producing. So until I get a little more maturity on that workforce, I'm a little reluctant to give any kind of a firm production schedule on the dollars. What I will tell you is that in October, our orders were up coming in the door, were up 30% over September. So we have got to get this resolved. I think that we're on track to get it resolved. But it remains a substantial challenge.
Brent Thielman -- D.A. Davidson -- Analyst
Okay, understood. I appreciate your color. (Multiple Speakers)
Gary Fields -- President & Director
I guess we could add the final color on that. We can get the orders. We got to approve, we can build them. And that's what we're working on.
Brent Thielman -- D.A. Davidson -- Analyst
Okay, understood. Thanks guys.
Operator
Your next question is from the line of Brian Gustafson.
Brian Gustafson -- -- Analyst
Hey, guys. Just coming in at a different way, can you maybe talk about capacity utilization and where you were this quarter and where you think it can get to?
Gary Fields -- President & Director
Well, from a facility standpoint, we've already determined that we have the facilities currently in place with no modifications to run $60 million a month. We have the ability to get orders here not quite at that rate yet, but we've got the ability to get the orders in. What we don't have is the qualified trained personnel to get those orders built. So the facilities here, the equipments, the manufacturing equipment in place to do that as we get more maturity on these people and then bear in mind, we're in the range of 3% unemployment rate. So when you add people, even when you get them trained, you're not talking about the cream of the crop people.
So, on a per head basis what we put out, we may have some new metrics to consider and as time goes by, our training programs that we're putting in place should help us to utilize these people to the best of their ability. But I just -- I don't see any constraints from a facility standpoint or from a manufacturing equipment standpoint, it's all from a personnel standpoint. And I'm talking about personnel on the plant floor. From engineering -- manufacturing engineering, production control, all of these other aspects of the business, we have a great staff right now that is capable of handling quite a lot more business than what we've actually been able to produce. So from the supervisory and management positions up, I think we're in good shape. It's just the basic manufacturing workers themselves that we've got to get in better shape to increase this volume.
Brian Gustafson -- -- Analyst
Got it, but it sounds like you're improving back capacity utilization that -- they are becoming more efficient as the -- from over the summer into this quarter.
Gary Fields -- President & Director
Very much so and like I said earlier, October has shown us some other key improvements that we've achieved, so a lot of the things that Scott and I have been working on together with his HR Group and with our production control group are beginning to manifest themselves. So once you understand what these successful strategies are, then you just begin to utilize it more broadly.
Brian Gustafson -- -- Analyst
But just thinking like, what do you think the max revenue per quarter is that you could do with this workforce situation you have now. Is that -- plus or minus --
Gary Fields -- President & Director
You just saw pretty close to it with what I've got now.
Brian Gustafson -- -- Analyst
(inaudible)110 and 150?
Gary Fields -- President & Director
Yes. We might be able to improve that 5% or something like that through efficiencies, but we've got to be able to onboard more people effectively in order to really get the rate moving in the right direction.
Scott Asbjornson -- Chief Financial Officer
I think also what where you want to say is that it depends as well how effectively we onboard those people and then increase the total number of people that we have. So, it really is, it's about getting them on our staff and trained and we can raise that number beyond that 5% higher than where we're at. It's just an issue of getting enough of these people in and stabilized.
Brian Gustafson -- -- Analyst
Okay. Great, thank you guys.
Operator
(Operator Instructions) You have a follow-up from the line of Joe Mondillo.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Hi, guys.
Gary Fields -- President & Director
Hello Joe.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Just couple of follow-up questions. Just wondering sort of what you're hearing from your customers related to maybe the delays in production and longer lead times, any cancellations or any -- anything related to that, any thoughts?
Gary Fields -- President & Director
Yeah, we've had zero cancellations and it was interesting. One of my Board members asked me the other day, if the weather had had any impact on us because there had been heavy rain on the East Coast, heavy rain in Texas, there been a hurricane. So on and so forth, and I said thankfully, yes. What that did was some of those people that were affected by that have called and said, hey, can you postpone my order for a bit. So, that allowed us to shuffle somebody else's order in front of them that was more critical that by chronology, they would have been later. So we have spent an inordinate amount of effort, managing the relationship with our customers and their expectations. We're very aggressive at publishing what our lead times are, we update that frequently to make sure that they understand where we're at with lead times. I don't want to tell you that we take this lightly at all, but I want to tell you that it's been more manageable then what I expected under the circumstances.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. And in terms of publishing the higher lead times, do you think any of the slowdown in order rates is related to that at all. I know some of it most definitely was a pull forward before the price increases, but do you think there's any customers going anywhere else or waiting future period of time to put in an order or anything like that? Related to that?
Gary Fields -- President & Director
No, Joe, I don't believe so. Because I'm looking at it October bookings orders that came in the door and their 20% higher than September bookings.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. You don't happen to have the year-over-year improvement in October, do you?
Gary Fields -- President & Director
I can tell you that we're within ear shot right now booking exactly what we booked all of last year. So, we got like two months left to go for what we're going to increase on bookings. I can let you hold on -- I might be (Multiple Speakers).
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
You're saying -- year-to-date, bookings through October is about similar so after until last year?
Gary Fields -- President & Director
All of 2017, really close.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
All of 2017?
Gary Fields -- President & Director
Hold on -- no, I'm just handed it to me here, it's pretty detailed. Let me look through it. Yes, so our year-to-date bookings are in the range of -- $9 million. Let me look at that was, just tells, let me pull together along here real quick, because I think they're pretty steady, I don't think they've changed at all. Yeah. So our total -- our total right now, we're in range, were just a few million dollars short of what we booked the entire year 2017, that as at the report that came out first thing this morning. So we've got November and December yet to book in our forecast for those are very strong, much stronger than we've ever had for November and December before.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. So you're anticipating November-December to be up year-over-year from November-December 2017?
Gary Fields -- President & Director
Absolutely. And so our backlog finishing out the year is going to be extraordinary comparatively.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. Also I wanted to just clarify the price increases in the future that you have in place. Is it just the December, I think, I want to say 10 price increases that all you have in place. Is there anything else?
Gary Fields -- President & Director
Okay. So we had a price increase June 15, of 5% across the board due to lead time and backlog about 80% of that price increase will actually be effective on product built in the fourth quarter. So, it obviously would be a 100% in the first quarter, that 5%. The next price increase goes into effect on December 5th, again, due to lead time and backlog I would not expect any of the December 5th, equipment to hit the plant floor sooner than about the middle of the second quarter. There might be a little tiny bit hit in the tail end of the first quarter, but the vast majority had a little hit in the second quarter, predominantly the middle of the second quarter.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
And that's across the board price increase or more selective?
Gary Fields -- President & Director
It was 4% across the board.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay.
Gary Fields -- President & Director
Hold on, hold on, wait a minute, I just -- the products that we build in Longview, we did not have an additional price increase. When we went back to June we changed some multipliers and we effectively had a 8.5% price increase on the Longview products in June. So that was cumulatively all we needed.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. And then lastly, just two things, probably for Scott. The tax rate, did you say -- did you say, you anticipate the go forward tax rate even into 2019 to be 26%. Did I hear that right?
Scott Asbjornson -- Chief Financial Officer
That's what we estimated at this point. Yes.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. And then, the CapEx was a little -- seems to be a little lower than you originally anticipating with --
Scott Asbjornson -- Chief Financial Officer
That's correct.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Is anything being pushed into 2019, and sort of what kind of budget, ballpark are you thinking for 2019 or is it too early to tell?
Gary Fields -- President & Director
We're still putting together 2019 at this point. And really, we always overestimate what we're going to get done, and this year is really no different just a number were maybe a little bit bigger at the beginning of the year. So we haven't purposefully pushed off anything of significance into next year, it's just been the management of the projects. And I'm trying to get everything completed.
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Okay. All right. Well, I appreciate it guys. Thanks for taking my questions.
Gary Fields -- President & Director
Thank you.
Scott Asbjornson -- Chief Financial Officer
Thank you.
Operator
And there are no further questions at this time.
Scott Asbjornson -- Chief Financial Officer
Okay. Well, we thank you for all your calls and questions. So we'll speak to you again in February for our year-end results. Good day.
Operator
That does conclude today's conference. Thank you for participating. You may now disconnect.
Duration: 53 minutes
Call participants:
Gary Fields -- President & Director
Scott Asbjornson -- Chief Financial Officer
Joe Mondillo -- Sidoti & Company, LLC -- Analyst
Brent Thielman -- D.A. Davidson -- Analyst
Brian Gustafson -- -- Analyst
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