L.B. Foster Company
Q2 2009 Earnings Call Transcript

Published: 28 Jul 2009

[Operator:]

Good day ladies and gentlemen, and welcome to the second quarter 2009 L.B. Foster earnings conference call. My name is Patrice; I will be your coordinator for today’s conference. At this time, all participants will be in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference (Operator Instructions). At this time, I would like to turn the call over to your host for today’s conference, Mr. David Russo, CFO.

[David Russo:]

Thank you, Patrice. Good morning ladies and gentlemen. Thank you for joining us for L.B. Foster Company’s earnings conference call, to review the company’s second quarter 2009 operating results. My name is David Russo, and I am the Chief Financial Officer of L.B. Foster. Hosting the call today is Mr. Stan Hasselbusch, L.B. Foster’s President and CEO. This morning, Stan will provide an overview of the company’s second quarter performance, give an update on critical business issues and discuss market conditions. Afterward, I will review the earnings press release issued earlier this morning, and then we will open up the session for questions. Means to access this conference call via webcast were disclosed in our earnings press release, and were posted on the L.B. Foster company website under the Investor Relations page. This web cast will be archived and available for seven days. Today’s call includes forward-looking statements and information within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and include known and unknown risks and uncertainties. Future actual results may differ greatly from these statements and expectations that are expressed today. All participants are encouraged to refer to L.B. Foster’s annual report on Form 10-K for the year ended, December 31, 2008, as well as to other documents filed with the Securities and Exchange Commission for additional information about L.B. Foster. Additionally, while forward-looking statements will be made today, it is L.B. Foster Company’s policy to not provide specific earnings guidance. With that, we will commence our discussion. I will turn it over to Stan Hasselbusch.

[Stan Hasselbusch:]

Good morning. Thank you David and thanks to all of you for attending our second quarter 2009 earnings call and web cast. This morning we announced the results for the second quarter. Sales were $93.8 million, down 27.8% compared to prior year sales and net income was $2.7 million compared to $7.7 million in the second quarter of 2008. The quarter’s result were negatively impacted by a $1.1 million warranty charge related to concrete ties and an additional $2.6 million of unfavorable gross profit adjustments related to a separate concrete tie issue. During my prepared comments this morning, I will include discussion in these three areas. Number one, quality issues related to concrete dye; number two, market conditions; and number three, product performance and expectations. Let’s start with the concrete tie issues. First, the $1.1 million warranty charge is actually a continuation, and we believe is a finalization of the $1.6 million charge we took in the first quarter. As you recall, we indicated at that time the problem was related to one tie bed in our Grand Island, Nebraska facility. This bed was removed and scraped when we retrofitted the plant with upgraded equipment in 2005. We’ve worked closely with the UP in identifying the cracked ties and track. We believe all of the problem ties have been identified, and we will begin manufacturing replacement ties later this year. In a separate issue, we’ve identified a raw material problem. Approximately 62,000 ties were impacted, certain material used in the production was out of spec, which has forced us to take the ties back from our customers and write them down there to expected realizable value. The result of this was a gross profit reversal of $2.6 million. Needless to say, we are demanding reimbursement from our supplier. In our product review, let’s begin with coated pipe where the downturn in the energy market is playing havoc with this product. Total production for the year is expected to be under 15 million square feet, down 40% from last year, which was down 20% from 2007, a direct result of the 60% reduction in natural gas, drill rigs during that timeframe. However, we still remain bullish on natural gas being a necessary source of energy in the future. In our construction business, the overall market is off. Reed construction data, heavy construction starts were down 8% in the first half of 2009 and non-residential starts were off 28%. In construction products, revenues were $45.5 million, down 26% from last year with a drop-off exclusively in piling where revenues were off 40%. Corresponding booking for piling in the quarter were down 21% from the same period last year, an upside to piling I’d like to add, last week we awarded a $20 million sheet pile order from the Panama Canal Commission. Half of this 16,000 turn order is expected to ship between now and the end of the year. Revenue in the other two areas of construction, fair products and buildings are ahead of last year. Fair products growth is due to a strong backlog we carried into the year and buildings growth is due to the early release of money from the stimulus program. We’ve booked over $6.5 million in the quarter in buildings on Federal park projects related to the stimulus package. Speaking of the stimulus package, funds have been very slow to get obligated and spent. As of July the 10, of the $49 billion made available to the Department of Transportation, $21.1 billion has been obligated, but of that only $680 million or 3.2% has been spent. As the stimulus bill kicks in, a number of our products will benefit. In addition to piling and precast buildings, new rail and transit products will also see additional business. Transit products for example, booked $9.2 million in the first half based on the bidding activity, in part driven by stimulus funding, we expect that number to increase sharply in the second half, setting up a very strong backlog position for that product in 2010. The other major piece of federal legislation which we are tracking closely is the Surface Transportation Authorization Act of 2009, the successor to safety lieu, our current transportation bill which expires on September the 30. New legislation has been proposed which would increase the current $266 billion package to over $500 billion over six years. Specific spending proposals include $50 billion for high-speed rail, a $100 billion for transit and $340 billion for highway and bridge projects. Future funding for the project is problematic. The current mechanism falls short and will require an infusion of additional funds to remain viable. The House Ways & Means Committee has developed alternative funding, but has not yet unveiled their proposal due to the committee’s focus on the new healthcare bill. The likely outcome currently being proposed by the Obama administration will be to extend safety lieu up to 18 months and add $27 billion to the current program, while the new transportation bill is being fully developed and voted on by Congress. Should this delay occur, it will definitely offset the expected positive impact, which has been created for our industry by the stimulus program. In rail, the weak North America economy has caused the rail traffic volume to decrease significantly in 2009. In the second quarter, US car loadings were down 22%, intermodal traffic was up 18% and revenue ton miles were down 21%, compared to second quarter of 2008. Normally, Class I spending is in lock step with car loadings. Some of the announced CapEx declines in the quarter were 12% at the CN, 23% at CSX, 21% at UP. The Burlington Northern reported an 8% increase. Currently, we believe the maintenance wave and capital spending overall will be down 15% to 20% this year. As we’ve discussed in the past, our rail revenues closely track Class I spending. Overall, rail revenues in the quarter were down 27%. In the distribution sector, new and relay rail were down 33%, a combination of pricing and demand where the credit crunch continues to hamper the industrial business. A component of relay is scrap, which has seen pricing plummet 60% since July of last year and new rail which has seen price erosion of over 20% since the first of this year. In the manufacturing side of rail, overall sales were down 18%, largely due to the $2.6 million sales reversal in Concrete ties at Grand Island and overall market softness. A bright spot in the manufacturing sector was our Allegheny Rail products division, where revenues were up 14%, exclusively due to increased volume to the Burlington Northern of a 190% in the quarter. We at L.B. Foster, continue to focus on areas that are important to our business. In the quarter, we improved our safety DART rate to a record of 0.9 injuries per 100 employees. We continue to reap benefits from CSI, which is an acronym for Continuous Sustainable Improvement, our internal lean program. In the quarter, we generated a significant $22.9 million in positive cash flow from operations. In summary, our markets continue to be challenged. Most in the cases are that the United States economy will hit bottom in the next two quarters. We do not expect a classic V-style recovery. The economy will improve, but at a somewhat muted pace compared to prior recoveries. Based on the weak conditions we see in the economy and our key markets, as I look through the end of the year, I see continued pressure on both sales and margins. As always, I would like to extend sincere appreciation to our employees for their hard work and dedication to the L.B. Foster Company. Now I’d like to turn this back to David for our financial review.

[David Russo:]

Thank you, Stan. I would first like to take a minute to recap the charges taken in the second quarter of 2009. As you may have discerned from the release and Stan’s comments, there are two separate items addressed by these charges. The first is the concrete tie warranty issue, which was disclosed and discussed in the first quarter of this year. Our continued work on this issued reveled that we needed an additional charge of $1.1 million in addition to the $1.6 million recorded in the first quarter. As Stan discussed, we believe this issue has been finalized from evaluation standpoint, although we do still need to supply the UP with the ties. The second issue is also a concrete tie issue, and it relates to the usage of material that did not meet specification as Stan discussed. The ties in question were sold to our customer, but they were not yet installed in track. This allowed us to take them back and then write them down to their expected realizable value. The adjustments to reflect has reduced sales by $2.7 million, and also reduced gross profit by approximately $2.6 million. Over the past several years, we have traditionally excluded certain one-time items, but just the gains attributable to the DM&E as well as, last year sale and leaseback gain to give you all more meaningful comparative analysis of our results. However, since these charges are operating in nature, they will be inherent in my discussion unless otherwise indicated. So with that in mind, I will begin the financial review. Sales for the second quarter of 2009 were $93.8 million, compared to $129.84 million in the prior year, a 27.8% decrease. The sales decrease was due to a 27.2% decline in rail products sales, a 25.9% decrease in construction product sales, and a 44% reduction in tubular product sales, compared to last year’s second quarter. The construction product sales decline was due entirely to a decrease in piling sales, partially offset by an increase in fabricated products sales. Second quarter tubular reduction was almost equally attributable to coated products and threaded product sales decline. After both tubular divisions had strong years in 2007 and 2008, it has become clear that both will generate reduced profitability in 2009. The energy markets served by our coated division have been robust for the past several years, and while we anticipate continued longer-term strength, we are experiencing considerable softness in current market activity. Our threaded pipe division is likewise experiencing very slow activity, and pipe pricing has moved downward with scarp prices. The 27.2% reduction in rail sales was driven by across the board reductions in all product lines, with the exception of Allegheny Rail products. Second quarter, concrete tie sales declined primarily as a result of the ties return to our Grand Island facility. Our Grand Island and Tucson facilities were approximately 40% utilized for the Union Pacific Railroad, and we are actively marketing both heavy hull ties, as well as an industrial concrete tie from Grand Island. The new tie is currently being produced and sold into a very soft industrial market. Spokane, we continue to produce concrete ties for other Class I railroads, transit authorities, contractors and industrial customers and we continue to experience reduced inquiry in bidding activity. As a percentage of consolidated sales, tubular accounted for 5% of sales, construction was 48% and rail is 47%. As mentioned in our earnings release, backlog stood at $140.5 million at the end of the second quarter, down 26.9% from June 2008, bookings for the second quarter decreased by 32.2% to $111.3 million. As Stan mentioned, we continue to see weakness in all segments, but our markets are not without a few areas of upside opportunity, primarily as a result of basic infrastructure needs and of course the stimulus legislation. Gross profit margins were 13.7% in the second quarter, a decrease of 320 basis points from last year’s second quarter. This reduction in margin was due to the previously mentioned CXT tie charges of $3.7 million, increased unfavorable manufacturing variances of $2.1 million, partially offset by decreased LIFO cost of $4 million and decreased scrap and obsolesce cost. Second quarter, LIFO expense was actually a credit of $1.5 million, compared to expense of $2.5 million in the second quarter of 2008. SG&A expenses decreased by 13.5% to $8.6 million in the second quarter of 2009, due primarily to decreased cost related to incentive compensation, outside service costs and travel and entertainment expenses. SG&A represented 9.2% of sales in the second quarter of 2009 as compared to 7.7% of sales in the last year’s second quarter. As a result, second quarter operating income was $4.4 million, compared to $12.1 million in the last year’s second quarter, a 63.5% reduction. As a percentage of sales, operating income was 4% in this year’s quarter versus 9.3% last year. Interest expense was $333,000 in the second quarter of ‘09, a $155,000 or 31.8% less than the second quarter of last year. The decline was due to reduced borrowings and to lower interest rates on certain debt instruments. Investment income was $212,000, compared to $586,000 last year, a decrease of $374,000 or almost 64%. This is due to a significant decline in interest rates between the second quarter of 2008 and this year’s quarter. Second quarter pretax income was $4.3 million, compared to $12.2 million in last year’s second quarter, a $7.9 million or 64.8% decrease. As a percentage of sales, second quarter 2009 pretax income was 4.6% versus 9.4% in last year’s second quarter. If we did normalize pretax income by excluding the $1.1 million warranty charge, and the $2.6 million negative adjustments for the other concrete tie issue in this quarter, pretax income would have been approximately $8 million, which is still approximately 34% below last year’s pretax income of $12.2 million. Second quarter 2008 income tax rate was 38.1% compared to 37% last year. Net income decreased 65.4% to $2.7 million or $0.26 per diluted share, compared to $7.7 million or $0.69 per diluted share last year. Turning to the balance sheet, debt at the end of the second quarter was $24.5 million, compared to $26 million at the end of the first quarter 2009. Capital expenditures were $1.7 million for the second quarter compared to $1 million for the prior year quarter. The 2009 spend was principally for plant and equipment improvements as well as, technology infrastructure and application software. Depending on the timing of certain plan projects, we expect capital expenditures are likely to approximate $7 million in 2009 as opposed to the $4 million we anticipated last quarter. However, we expect to generate positive cash flow from operating activities in 2009, in excess of our capital expenditures, debt service costs and share repurchases. Thinking of share repurchases, for the first time since the company announced a share repurchase program in the second quarter of 2008. We did not purchase any L.B. Foster common stock back during this year’s second quarter. We do continue to believe however, that our share purchase strategy helps to provide a balanced approach to providing a long-term value for our shareholders. Debt as a percentage of capitalization was 9.9% at the end of June, compared to 10.6% at the end of March, and 11.2% at the end of December 2008. Our leverage ratio is just under 0.63

[Operator:]

(Operator Instructions) Your first question comes from Liam Burke - Janney Montgomery Scott.

[Liam Burke:]

Stan, there were several piling contracts announced during the quarter. How does that translate to revenue for the balance of the year?

[Stan Hasselbusch:]

Well, I believe the first and the second quarter we made a couple of announcements. The biggest one of course was the New Orleans core of engineer project, which we’ll begin shipping I believe in August. I don’t believe that that will be fully shipped through the balance of the year, but we’ll get the large part of that out. That was a $21 million contract. There was another one that we had a press release on the TRU 12 piling, I know. We expect that to get out, and as I said, the Panama Canal job which we were awarded last week, we expect to get about half of that out this year Liam.

[Liam Burke:]

You mentioned that margins will continue to be under pressure, but if I adjust for the unusual charges on the warranty and the inventory write downs on concrete ties, gross margins even with the LIFO adjustment are roughly 16%. Is there continued pressure beyond that or is that something that you are seeing now?

[Stan Hasselbusch:]

Well, we are starting to see some of it. I mean we really were very fortunate. Our main distribution products, new rail and piling were one of the last products to drop in pricing, and we are starting to services some of that take place in the second quarter. We think we are in the bottom for pricing and in piling, and we are not sure exactly where we will end up in rail, but as I think I said our prices are probably down about 20% from where they were in the first half of the year. That’s the main reason I think and you bid these large products, between the two of more for $40 million are less margins than what we’ve been realizing over the last couple of years in piling. The other situations, some of our pipe business which I didn’t tell, which I actually didn’t talk about, the threaded pipe business is down substantially, also because a large part of that is micropile and is being impacted by the non-residential building markets. We’ve had a large customer who’s been in Saudi Arabia, that’s been probably buying close to 15% of our piece counts for the year, hadn’t bought any through the first half and we’ve been in contact with them and we expect that to pick up in the fourth quarter. But we expect margin pressures along with sales pressure Liam, for the balance of the year.

[Liam Burke:]

Real quickly Dave, there’s a difference between your original forecast on CapEx and your new CapEx level, what’s the difference there?

[David Russo:]

We’ve got a project where we are going to pull together a rail yard in the midwest portion of the country Liam, and that’s where there’s going to be few a million dollars spend on that.

[Operator:]

Your next question comes from James Bank - Sidoti & Co.

[James Bank:]

In regard to the sales reversal and inventory write-down with some of the concrete ties, is this similar to the warranty charge where we might see some of this trickle out to the third and fourth quarter or is it really isolated to second quarter now?

[Stan Hasselbusch:]

We think we’ve got that behind us.

[David Russo:]

Yes, the warranty issue James, obviously came to our attention. We booked what we knew in the first quarter and we obviously found along with our customer more ties and actually went out and inspected before we would know enough to make those accruals. In this case, we believe it’s somewhat contained and we know what occurred and we can, with a lot more certainty than the warranty issue quantify this at the stage we are in. So we’re not expecting a whole lot more to change in future quarters.

[Stan Hasselbusch:]

Let me kind of get out in front of this also James. We bought CXT 10 years ago, and with the exception of when we started up at Tucson a few years ago, we had some quality issues with some of the components, but we haven’t had any major quality issues. What we’ve experienced in the first half of this year is truly unfortunate, but we think that we’ve got it behind this. We found a problem, we’ve addressed it, and we’ve remediated it. With this last issue in the reversal we’ve learned some things which would mitigate problems we believe in the future. We feel that we’ve got a very good case and we will as I said in my remarks aggressively go after the supplier in this case, and because of that I really don’t think there is anything else that we can talk about at this time regarding that subject.

[James Bank:]

Okay. Well, good luck with that, but what I was actually trying to get at to was, if you kind of pull this stuff out, and excuse me for eyeballing, but do you think you might have been able to hit 16% gross margin?

[David Russo:]

Without these charges, yes, it would have been right around there. Now, the last question from Liam Burke obviously took note of some rather substantial LIFO adjustments that we’ve made so far this year. It had helped that a little bit, but yes, I mean without those charges James, we would have been little in excess of 16%.

[James Bank:]

Okay. Now the pricing, Stan you mentioned in your remarks that piling more or less has hit bottom down 20% year-over-year, what was the impact of it?

[Stan Hasselbusch:]

I don’t think I said 20% on the piling, I think I said 20% on rail.

[James Bank:]

Oh, I’m sorry.

[Stan Hasselbusch:]

Piling, as pricing we think has bottomed out. We feel that we are at the bottom of that.

[James Bank:]

Well Dave, could you split up the volume versus the pricing in regard to the sales decline in the second quarter?

[David Russo:]

It’s really all over the map. I can tell you that with regard to CXT, things for actually fairly comparable to last year’s quarter with the exception of the sales reversal James. With regards to rail distribution, we have a production in tons of about 19%, with approximately a 10% to 15% increase in pricing quarter-to-quarter. If you look at last year, the pricing was going up sort of throughout the year, so we are still right now. Although it’s less than it was in the first quarter, pricing is still a little higher compared to the prior year. Similar to piling, except pilings volumes, the reductions in tons were a lot more significant once again with price increases.

[David Russo:]

Revenues were down approximately 40% in piling and I think tonnage was down about 45%.

[James Bank:]

Okay, very helpful. Switching gears, in regard to the piling business overall, beyond what you are seeing in New Orleans and well certainly beyond Panama, that’s not included in federal stimulus package, were there opportunities sort of market wise, are you guys seeing in regard to piling?

[Stan Hasselbusch:]

Very spotty, very spotty. I could say in conversations with Don Foster and our piling salesmen, we are not seeing the day-to-day business, we are not seeing the private business, the industrial work that we’ve seen, the truck load here, the two truck loads there; it’s mainly major project work and that’s really the tone of the business, and also the rental business. In the rental business a lot of that is tied in with private work during excavation of buildings and talked about the non-residential building being off 28% and that’s impacted that. Seeing some of the bigger projects, but the day-to-day business is off dramatically.

[James Bank:]

I guess what I’m getting at is roughly, oh boy, this could be a bit dated, it was sort of a single digit that more or less has been spent in the aggregate of the stimulus bill for the infrastructure stuff, and then roughly 20% of what was announced has only been approved. I mean not to get ahead of ourselves, is there any type of a windfall coming to Foster and the like in the back half of 2010 or something to that effect.

[Stan Hasselbusch:]

There’s going to be a lot of the stimulus. We talked about what was involved from the department of transportation which includes transits and bridges and highways and high speed rails. I believe there was total for the department of transportation, $48 billion. I believe only $21 million of that has been actually obligated and held is less than $1 billion that’s actually been spent, so there is a lot more coming up. I mean but as I said, one of the things that we are watching really closely is the new highway bill, and if we can’t get some passage on that really, that’s going to really blunt the effectiveness of what we’ve been able to see in the stimulus package.

[David Russo:]

The other thing we have said is, we certainly are expecting the activity of two things; number one, we have to go out and win these projects, and that’s when we started our margin compression discussion. That New Orleans project that Stan discussed, that was very competitively bid, and we expect that a lot of those, especially those big jobs will continue to be so and that will cause margin compression. The other thing that we’re not seeing today is the $2 million to $3 million order that we used to see very, very often from the states, as well as the industrial business and those have fallen off rather dramatically. So, we expect to see stimulus benefits, but as we mentioned in our release, we don’t expect it to make up for the shortfalls in the other areas, at least not this year.

[Operator:]

Your next question comes from Brian Rafn - Morgan Dempsey Capital.

[Brian Rafn:]

Give me a sense and you guys kind of talked too it, what type of a time horizon do you guys see from a standpoint of legal recourse with the concrete supplier?

[Stan Hasselbusch:]

Now idea at this point Brian; really we are talking with them and we haven’t even began any legal process with them.

[David Russo:]

They are going to do a little bit of their own testing, which we are cooperating with and then we’ll probably have a sit down and go from there.

[Brian Rafn:]

Is that a supplier that you guys are still using?

[David Russo:]

No, it is not.

[Brian Rafn:]

With the cash you have in the balance sheet, what are you guys seeing with these markets that’s kind of entered troughs; what are you seeing on the M&A front?

[David Russo:]

The activity for the first half has been really low. I think we’ve announced before a new Vice President of Global Business Development, and he’s been very active on the targeting side, and we are looking at a couple of small opportunities, but we do hope and we actually expect the second half to have some more opportunity.

[Stan Hasselbusch:]

I agree. We are looking at a couple of different things, we are looking at a couple of joint ventures which are quite interesting, and looking at a couple of opportunities, one of them being global possibility which would give us an entourage into the Asian markets. We are looking at a couple of domestic situations, but I would expect us to be in a position to make one or two announcements in this quarter.

[Brian Rafn:]

Kind of a question for you guys, relative to certainly at least the rail side. The Obama administration has been pretty strong with this high-speed rail. Of the different quarters where they are looking at putting in high-speed rail, to what amount of track change or upgrades, heavier track, give me a sense as to how much of that would affect demand on the track side.

[Stan Hasselbusch:]

There’s two major projects that keep coming up from time-to-time, and there are different situations; one of them is the line that runs from Las Vegas to Los Angeles, and that would be all new rail, everything would be new. The other major line that comes into play is the 300 mile corridor that runs from St. Louis to Chicago, which could be upgrading existing lines to high speed rail, once they define what the high speed rail really is. Is it 110 miles an hour, which I think there’s where they are pretty much right now. That would involve probably newer rail, continuous weld rail, possibility of concrete ties which we would be pretty excited about, but I think there’s couple of different things as they come up.

[Brian Rafn:]

Let me ask you guys from just the standpoint of just the concrete ties business. What is the application of the concrete ties versus your standard, your legacy timber ties. Is that just in yards; is it in heavier load bearing; is it more freight per passengers?

[Stan Hasselbusch:]

High speed heavier load applications and curves, but it’s a new construction. Most of the new construction that’s going into this country today, particularly in the Western lines is on concrete ties.

[Brian Rafn:]

Okay, and I maybe missed it guys. What’s the time of your capacity utilization at Grand Island and Spokane and that?

[Stan Hasselbusch:]

40%.

[David Russo:]

40% at Grand Island, a little more in Tucson and Spokane has higher utilization right now. The Spokane benefits from having a multitude of different customers.

[Operator:]

Your next question comes from Mark Zinski – 21st Century Equities. Mark Zinski – 21st Century Equities Most of my questions have been answered, but I was just wondering if you could provide any scope in terms of what kind of lean manufacturing opportunities still exist. You certainly did a nice job with working capital management additionally, but are you feeling confident that there’s still more cost that can be taken out on the manufacturing side?

[Stan Hasselbusch:]

Absolutely. We looked at it in the concrete side. We’ve had lean involved in our company for the last six years and we’ve really got a lot of benefits in the manufacturing side, but we are finding things everyday. I know that Steve Burgess has spent probably about 25% of his time out in Spokane working with the concrete group, different kinds of concrete, different applications, how to cut the cost, and we also have expanded it to the administrative side in the last year. We’ve got a six part program which are about two thirds of the way through on the order-to-cash concept. We expect to use it to work with us in reducing inventory, we just have got the applications and we’ve got long ways to go, but we are starting to get benefits.

[David Russo:]

As a matter of fact, we have a team here today Mark of about 18 employees working on a new customer interface [Kaisan] as we speak. If you guys are listening, get back to work. We would differ with you a little bit and we’ve actually I believe done a good job in our manufacturing facilities. Where we haven’t yet done a good enough job really is as Stan mentioned, we’ve been going on admin for about a year, but we still have ways to go with our working capital. Mark Zinski – 21st Century Equities Okay. Then just getting back to the bidding process for some of the stimulus related projects, would you describe the bidding environment to be a situation where everyone is just really, under cutting each other for this sort of precious stimulus money?

[Stan Hasselbusch:]

I don’t know that they are under cutting, it’s a very competitive market and it differs with the job. Some jobs we are bidding directly to major piling jobs. We bid direct, they are not necessarily stimulus related, but some of the work we are bidding direct, some of the work we are bidding through contractors. Surprisingly a lot of the jobs that we are seeing are coming considerably under estimates. Everybody is scrambling for what little work there is. Mark Zinski – 21st Century Equities Then just Dave a final question, the share repurchase program, is there about $10 million left on that?

[David Russo:]

No, I believe there is more than that. I think we’ve only spend $28 million of the $40 million, so there is about $12 million I think.

[Operator:]

Your next question comes from Tom Spiro - Spiro Capital Management.

[Tom Spiro:]

Stan, have either of our concrete tie problems caused any of our major customers to shift business elsewhere?

[Stan Hasselbusch:]

No. We have been working very closely. We have had capacity that fill their needs, no, not all.

[David Russo:]

Tom, one thing I would tell you is the product that we had an issue with the raw material, we actually went out and had been sourcing some other products as it was to have an alternative. We are one of their only suppliers that had already found an alternative product. So we are not saying we are way ahead of everything with everybody, but I think we have done a good job in that regard and we are looking to work with the UP as the loads get heavier and heavier, the requirements on the rail structure overall is getting more burdensome and we are looking for ways to make an even better tie.

[Tom Spiro:]

Thanks. On the New Orleans piling job, do we know how many other bidders there were for that work?

[Stan Hasselbusch:]

There were two other bidders I believe.

[Tom Spiro:]

Lastly the strength in fab product, I understood from your commentary that that was due to coming into this year with a strong backlog, how does this backlog stand today?

[Stan Hasselbusch:]

Backlog is still equally or a little bit better than what it was last year. We see we are becoming pretty active, there is some active work coming in the bridge side of it. In fact some of it’s going to be benefiting from the stimulus workout by you Tom. I believe they are going to be doing some extensive work on the approaches of the Brooklyn bridge starting later on this year, and that’s all going to be on bridge decking. So, we have had good fortune out your way in New York City over the last few years with that product, and there are some more things that are going on.

[Operator:]

Your final question comes from Brian Rafn - Morgan Dempsey Capital.

[Brian Rafn:]

Yes, just a follow-up question for you guys. On kind of your six sigma lean manufacture, is there any metrics that you guys can use relative to throughput efficiency and producing the concrete ties or decking or scrap salvage savings or labor per dollar of output?

[David Russo:]

Brian yes, it really does depend on the project we are working on, but what I would tell you is over the years with the lean progress in the facilities is we’ve reduced a lot of the efforts and procedures required to get our products produced, which has not only increased efficiencies and led us to be able to produce more product with the same people or even fewer people. It’s also had a lot of other benefits like the amazing reductions we have had in workplace accidents or safety records has just gone through the roof, and I think a lot of it is a byproduct of being enterprise. But it really does depend on, as Stan mentioned, we have pushed this into the admin side because we have some order entry issues with certain of our facilities, where it takes us a couple of days to make a product and sometimes it takes several weeks and longer to get that order to the floor. So we’ve been working on the front end as well, and when you can get something to the floor quick, you get it out of the door quicker. So there is a tremendous amount of different types of metrics depending on the project itself.

[Brian Rafn:]

Okay, is there anything from the standpoint, be it construction, if you look at some of the changes in infrastructure, for instance like the nuclear power plants, we haven’t built one in decades. As we look into wind turbine and solar and new plants, is there any demand for pilings or new construction or things that we haven’t seen that may utilize L.B. Foster products that maybe a new direction?

[Stan Hasselbusch:]

All those are applications for pilings and there’s bearing pile, there’s sheet piling, all of that, and our people are aware of that. I think our name is out in front of the industry from a supply standpoint in this particular product. If there is something that’s going to be built, it’s going to be utilizing piling. If there’s an opportunity for us to work with engineering, to design piling as we’ve done our piling programs or design programs in the last three to four years, we will be there Brian.

[Brian Rafn:]

One final for Dave, certainly some comment going forward, the adoption of International Accounting Standard, is that an issue Dave going forward for you guys?

[David Russo:]

Yes, it’s an issue for everybody. I mean there are a lot of similarities between US GAAP and International Accounting Standards, but there are areas of differences as well, and our accounting team is working on a timeline to get us from where we are to where we are going to need to be in a short period of time really. So, the issues for us aren’t insurmountable by any means. It’s probably more just what everybody else is facing in the six or seven areas where there are some significant differences.

[Operator:]

There are no further questions in queue at this time.

[Stan Hasselbusch:]

Thank you. Thanks to all of you and have a good day.

[Operator:]

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect and everyone have a great day.