L B Foster Co (FSTR) 2007 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2007 L.B. Foster earnings conference call.

(Operator instructions).

I would now like to turn the presentation over to your host for today's call, Mr. David Russo, Chief Financial Officer. Please proceed.

Thank you, Carissa. Good morning -- good afternoon, ladies and gentlemen. Thank you for joining us for L.B. Foster Company's earnings conference call to review the Company's fourth quarter 2007 operating results. My name is David Russo and I am the Chief Financial Officer of L.B. Foster. Also on the call today is Mr. Stan Hasselbusch, L.B. Foster's President and CEO, and Mr. Lee Foster, Chairman of the Board.

This morning, Stan will provide an overview of the Company's fourth 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, before we open 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 webcast 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, 2006, as well as to other documents filed with the Securities and Exchange Commission for additional information about L.B. Foster.

With that, we will commence our discussion and I will turn it over to Stan Hasselbusch.

Thank you, David, and thanks to all of you for attending our fourth quarter 2007 earnings call and webcast. This morning, we announced record earnings for both the fourth quarter and full year for 2007. Sales in the quarter were $114 million, up 3% over the fourth quarter 2006. Net income for the quarter was $86.2 million, or $7.79 per diluted share. Exclusive of the gain related to the sale of the Company's investment in the DM&E Railroad, earnings for the quarter were $0.81 a share, 200% ahead of the $0.27 per share earned in the fourth quarter 2006. David will discuss the financials in detail later, but first I'd like to talk about operational performance.

Let's start with Tubular where we concluded a record year at our Birmingham coated facility. We coated over 31 million square feet of pipe last year. The square footage coated in 2007 was 35% more than the best previous at Birmingham. While we continue to see considerable current bidding activity and a robust energy/gas transmission market well into the future, we will be challenged to replicate our record-breaking performance in 2007. Just a note on the success that we've enjoyed at Birmingham, there were a number of reasons for the accomplishments that we've attained in coated pipe recently, but none more significant than our valued relationship with the [CIPCO]. It's a true partnership in every sense of the word, one built on trust, integrity, and teamwork, the foundation of success.

In Threaded Pipes, sales were also up substantially compared to 2006, 34% for the quarter and 40% for the year, as we begin to hit stride in two key strategic product objectives, micropile and export sales.

Rail numbers were also solid. Overall, revenues were up 15% in the quarter with Rail and CXT leading the way. Relay rail sales were up 87% and CXT revenues were up 50%, due primarily to the contribution of the Tucson concrete tie facility. We expect the rail markets to remain robust as railroads continue to eliminate capacity constraints and drive operating improvements. Because of diminished competitiveness of the highway transportation in the forms of high fuel costs, driver shortage, and highway congestions, we feel long-term fundamentals still favor railroad transportation. As a result, capital spending by the Class Is will remain strong, though probably not at the double-digit growth rates we've enjoyed over the past five years.

Railroad Track & Structure Magazine, based on a survey of maintenance of way+ and infrastructure capital spending by the Class I railroads, is expecting a year-over-year increase spending improvement of 6% in 2008. While we expect another good overall in Rail, we do have a couple of challenges to overcome that I alluded to in the earnings release this morning.

First, due primarily to an inventory excess of 400,000 ties created by construction and permit delays on the Union Pacific Sunset line, we're expecting quantities to be down by over 300,000 ties at Tucson and Grand Island, combined. While this is disappointing, we've already been addressing mix design, cure times, and labor situations to help mitigate this problem. This also allows us to speed up marketing and production of a newly designed lightweight tie for industrial applications. We will have the ability to produce this tie at both our Grand Island and Tucson plant.

And, second, while the divestiture of the DM&E investment has added great overall value to the Company, we have essentially lost one of our best customers. Last year, the DM&E accounted for over $14 million in new rail sales. The challenge to our sales group is to replace this revenue with new business since the successor company, the Canadian Pacific Railroad, has a long history of buying directly from the producing mills.

On the Construction side of our business, 2007 was also an excellent year and data we track supports our position that 2008 will be more of the same. Reed Construction Service has forecasted non-residential spending will grow by 12% in 2008 on top of the 17% increase, which occurred in 2007, and has also forecast heavy civil construction spending will increase by 11% in 2008, which follows a 13% increase in 2007.

The largest segment of our construction group, Piling, had another outstanding year in 2007. Piling revenues, year over year, were up 24% in 2007. Individual segments did well, additionally, also. Bearing pile revenues were up 90% and pipe piling was up 57% for the year. And we continue to be pleased with our association with Gerdau Ameristeel, which, at this point, is equally as strong as the relationship as was with their predecessor, Chaparral Steel.

Overall, as a Company, we're optimistic about 2008. Our fundamentals are solid, our markets are strong, and our balance sheet is in excellent shape. We will see continued growth from businesses within our core competencies where there's organic development or pursuing synergistic, accretive acquisitions. We will compliment these efforts with an ongoing aggressive pursuit of a strategic execution and operational excellence. I would like to publicly both thank and congratulate the employees of L.B. Foster Company on another record-breaker performance. I would also like to assure the shareholders that these same hardworking, dedicated employees will strive for continuous improvement in our performance this year.

Thank you. And now, I'd like to turn it to David for the financial review.

Thank you, Stan. Before I begin the discussion on operating results, I would like to discuss the impact that the sale of our investment in the DM&E had on the fourth quarter and annual results. As you are all aware, the DM&E sale closed in October, so the gain on the sale of our investment of approximately $122.9 million was reflected in our fourth quarter results.

Due to the increased certainty of the timing of our dividend proceeds, we also recorded $8.5 million of incremental dividend income that had previously been deferred in the third quarter of 2007. This amount was in addition to the recurring $247,000 of dividend income that we have recorded on a quarterly basis for some time now. The estimated EPS for these transactions is as follows.

In the third quarter, the positive EPS impact of the incremental dividend was approximately $0.69 per diluted share, and in the fourth quarter, the EPS impact of the gain on the sale of our investment was approximately $6.98 per diluted share. In an effort to discuss meaningful comparative results, my discussion will exclude the impact of these one-time items.

Okay. So with that said, I will begin. Sales for the fourth quarter of 2007 were $114 million compared to $110.5 million in the prior year, a 3% increase, which was leveraged into 150% increase in pretax income, which represents a record income quarter for L.B. Foster. The sales increase was due to a 15% increase in Rail Product sales and an 89% increase in Tubular sales, offset, in part, by a 13% decline in Construction Product sales, compared to last year's fourth quarter.

Fourth quarter Tubular sales increased due to growth in both coated and threaded product sales. The energy market served by our coated division has been robust for the past two years and we expect that strength to continue into 2008 and beyond, although we move into 2008 with a considerably lower backlog than last year. Our threaded division has reconfigured its Houston facility, refurbished its critical equipment, and has entered the OCTG and micropile markets and continues to take advantage of opportunities in the irrigation market.

The Construction Products sales decrease was due to decreases in piling and concrete buildings, partially offset by a slight increase in our fabricated products business. Fourth quarter Rail sales increase was driven by CXT concrete ties, Allegheny rail products, and rail distribution, primarily relay route. Concrete Tie sales were 50% ahead of last year's fourth quarter, as Grand Island volumes were strong and Tucson set a new volume record again. But, as Stan has indicated, the volumes will be coming down at both of these facilities in 2008.

We continue to make functional cycle time and other improvements in Tucson, as well. Total CXT tie production for the fourth quarter increased 45% compared to last year's fourth quarter, while keeping in mind that Tucson just started production in the fourth quarter of last year. Excluding Tucson, tie production increased 18%, due primarily to a 21% increase at Grand Island.

In the fourth quarter, Grand Island produced approximately 50% more ties than the maximum capacity of the plant capacity before its equipment retrofit in late 2005. Our Grand Island team turned in another outstanding performance this quarter, resulting in the highest production quarter ever while keeping efficiency high.

We did produce almost 1.1 million ties in 2007, a little more than the 1 million we projected on the first quarter call at the beginning of the year. Our Grand Island and Tucson facilities were fully utilized for the Union Pacific Railroad through the end of 2007. But, as Stan has mentioned, that has changed, effective in January, and we have taken quick action to adjust for the recent decrease in volume for 2008. Unfortunately, it is with deep regret that one of those actions was to reduce the Grand Island and Tucson work force in January of this year to get both facilities down to one-shift operations for the most part.

We are also looking for other ways to reduce costs in these operations. In Spokane, we continue to produce concrete ties for other Class I railroads, transit authorities, contractors, and industrial customers, and we continue to experience reasonably active inquiry and bidding activity but not quite as strong as last year.

As a percentage of consolidated sales, Tubular accounted for 7% of sales, Construction, 43%, and Rail was 50% of sales. Fourth quarter results put our annual sales at $509 million, which is a 31% increase over 2006, and this, as you probably remember, was on top of a 20% year-over-year-over-year increased results going back to 2005.

Gross profit margins were 17.5% in the fourth quarter, an increase of 440 basis points over last year's fourth quarter. The positive margin expansion, this year, compared to the prior year, was due to an increase in gross profit at standard before manufacturing and other variances, decreased unfavorable manufacturing variances, decreased warranty costs, and decreased LIFO costs, partially offset by increased scrap and obsolescence expense.

The businesses that drove the margin improvement in the fourth quarter were Transit Products, Spokane Ties, New Rail, Tubular, and Piling. The decreased unfavorable manufacturing variances were primarily achieved by Spokane rail, Grand Island ties, Tucson ties, and Allegheny rail products. The great result in the fourth quarter put our annual gross profit margins at 15% for 2007, 180 basis points ahead of 2006.

SG&A expense increased 4% to $9.3 million in the fourth quarter of 2007, due primarily to personnel related costs, including salaries and benefits. SG&A represented 8.18% of sales in the fourth quarter 2007 as compared to 8.15% in last year's fourth quarter, a 30 basis point increase. For the year, SG&A was 7.4% of sales in '07 compared to 8.6% in 2006. As a result of the foregoing, fourth quarter operating income was $10.9 million compared to $5.5 million in last year's fourth quarter, a $5.4 million, or 97%, improvement. As a percentage of sales, operating income was 9.5% in this year's quarter versus 5% last year.

Interest expense was $700,000 in the fourth quarter of 2007, $0.3 million less than the fourth quarter of 2006. It is also substantially improved over the first three quarters of this year when interest ranged from $0.9 million to $1.2 million in the first quarter of this year. And the reason for the improvement is the $41 million of cash flow generated from operations this year. To clarify, the $41 million excludes the DM&E proceeds and dividends. None of the DM&E proceeds have been used to pay down debt as of yet. Since March 31, we've paid down just under $35 million of debt with internally-generated cash flows.

Fourth quarter pretax income from continuing operations was $11.3 million compared to $4.5 million in last year's fourth quarter, a $6.8 million, or 150%, increase. Included in the fourth quarter pretax income for 2007 is approximately $1.2 million of interest income, most of which is related to DM&E proceeds. As a percentage of sales, fourth quarter 2007 pretax was 9.9% versus 4.1% in last year's fourth quarter.

The fourth quarter 2007 income tax provision was 35.8% compared to 34.1% in last year's fourth quarter. Income from continuing operations increased 200% to $9 million, or $0.81 per diluted share, compared to $3 million, or $0.27 per diluted share, last year.

Turning to the balance sheet, debt at the end of the fourth quarter was $34.2 million compared to $58.1 million at the end of 2006. The $23.9 million decrease in debt during '07 was due to $41.4 million of cash generated from operations. Capital expenditures were $1.4 million for the fourth quarter and $5.3 million for the year compared to $17 million in 2006 and $15 million in 2005. We currently expect capital expenditures to be less than $8 million in 2008. We also expect to generate positive cash flow from operating activities well in excess of that capital estimate and produce meaningful cash flow.

Debt, as a percentage of capitalization, was 14% at the end of '07 compared to 37% at the end of '06. Our leverage ratio is approximately 0.7 to 1, down from 2.3 to 1 at the end of '06, and our interest coverage strengthened to 12 to 1. Cash at the end of '07 was $121.1 million and we had $114 million invested in tax-free money market funds, all rated AAA.

With regard to working capital, accounts receivable and inventory net of AP increased by approximately $1.3 million in the fourth quarter of '07 and actually decreased by $1.3 million compared to the end of '06. Accounts receivable decreased by $9.4 million during the quarter, which was 15%, primarily due to a 16% decrease in quarter-over-quarter sales, while holding DSO steady. DSO was 41 days at the end of the year compared to 40 days at the end of September '07 and compared to 46 days at the end of last year. We believe our AR portfolio to be in excellent condition. Our bad debt expense has consistently been below 0.1% of sales. Inventory increased $8.8 million during the fourth quarter of 2007 and this was due to increases in new rail and in piling.

In summary, we are pleased with the consistent improvement demonstrated by these fourth quarter results. We believe 2008 will be challenging but also rich with opportunities. Those opportunities lie both internally in the areas of process improvement, research and development, and customer focus, as well as externally, with regard to market expansion and acquisitions. And our employees have demonstrated that they can rise to any task and get the job done, and I would like to thank everyone for a very successful year in 2007 as their efforts and accomplishments are very much appreciated.

That concludes my comments on the fourth quarter. We will now open the session up to questions. Carissa?

(Operator instructions). And your first question comes from the line of Scott Blumenthal of L.B. Foster. Please proceed.

Emerald Advisors. Good afternoon, Stan, Dave.

Good afternoon. Who is this?

Hi, Scott.

Hi, Scott.

Scott Blumenthal, Emerald Advisors.

Go ahead.

Hey. Can you go through some of the CapEx opportunities? You did mention the $8 million and you talked about certain efficiencies that you're going to be working on, Grand Island and Tucson.

Well, CapEx opportunities in 2008, there's nothing in that $8 million, Scott, there's nothing huge. We're looking at some specialized weld trains to support a new rail mill in the Midwestern portion of the country and we're looking at some other projects to improve efficiency in some of our plants and there are some IT projects on the table, as well.

Yes, as far as efficiencies at Grand Island and at Tucson, as I mentioned, we're basically down to one shift at both plants. We have and we've implemented a couple of efficiency programs. One is looking at the cool cure, extending the cure time out to 12 to 13 hours as opposed to less than eight hours, which we had before, which we don't use as many additives. We've also looked at the labor situation and, as David alluded, I believe that we've cut back between Tucson and Grand Island a total of 56 people. At this point, that took place in January. So those are the measures that we're taking at those two facilities.

Since there is a bit of a buildup in the concrete rail tie inventory, are you carrying any of that? Does that show up in the inventory numbers?

No, it doesn't. Those ties are carried on the inventory by Union Pacific.

Okay. Thank you. And what are you hearing on the rail construction business and can you give us an idea as to when does a railroad get to be big enough to not go through distribution like Foster and go direct to the mills?

Most of the Class Is, Scott, go direct to the mills. Our specialty is in the regional railroads, the shoreline railroads, dealing with the contractors and the transit agencies, but every one of the Class I railroads go directly to the mills for pricing and the service.

Stan, I look at the American Road Transportation Builders Association numbers and if you look at the last three months, the amount of contracts for new rail builds has consistently been up 100%, year-over-year. So I was wondering if you could kind of maybe give us an idea as to what percentage of that might be some of the railroads that kind of fall into your wheelhouse and what percentage of that might be the Class Is?

Well, to begin with, that number, 100%, seems a little excessive. I believe that we track comps, we follow the Class Is, both their CapEx spending, and their maintenance of way spending. We're in the transit business and we didn't talk about that, but the SAFE-T bill is kicking in full throttle and the transit work is also benefiting our highway work. Some of the construction that we're seeing on the industrial side, because of some of the uncertainties with the economy, are starting to soften a little bit.

I believe that, last year, our industrial work was more robust than what it is, currently. We're seeing kind of a slowdown in the ethanol business, which we are seeing in the Midwest. That's slowed down a little bit but, overall, where we see on the industrial side of it, it is still somewhat -- it is slow. And I really haven't seen the article or the periodical that you're referring to, but the Class Is have had some really good builds out the last couple of years. We track that pretty closely. Their expectations, next year, it varies from road to road, but they're still looking for a good year, 5%, 6% over what they spent in '07.

Okay. Can you -- you did mention some softer outlook in the Concrete Tie business, Tubular and your Rail Distribution sales. What do you think you can do to make up for some of that through margin improvements, maybe new sales wins, customers? And, of course, eventually, we're going to have to ask the question about what you plan on doing with all of that money on the acquisition front.

Well, where do you want to start?

Wherever you'd like. How about maybe new sales wins, customers, the potential for that to make up for what happened with DM&E and what's happening in the softness in the other business?

I think that we do have, in the Rail business, we are working very closely with the mills to work from the supply standpoint and across the board with the other regionals and short-line railroads. I did mention that we are looking at, and we have under design, a new tie which will specifically address needs of the industrial usage. It's a tie, which is about 175 pounds less than the traditional tie, but it will be used for lighter weight applications.

We do have research that's going, ongoing. We're looking at new products, particularly in the transit businesses. We're working very hard in the coating business and the threading business. In the threading business, we've benefited this last year with increased sales to the micropile business and export. We also have our new facility up in Pueblo and are looking for more additional work for the insulated bonded joints. So we are looking at a number of new products.

Okay. And how is the acquisition pipeline looking? Because, obviously, you have a nice chunk of money, about $11 a share sitting out there, and it looks like that would be a pretty good opportunity here.

We've got three or four specific acquisitions that we're looking at and we're not in a position to comment on that right now but, as we've said all along, we expect these acquisitions to be, as you referred to, in our wheelhouse. We're looking for synergies from them that we can continue to build on and accretive companies that will benefit the income, going forward.

Okay, great. Thank you. I'll let someone else ask a question.

Your next question comes from the line of Rob Damron of 21st Century. Please proceed.

Good afternoon, guys, and excellent quarter. I wanted to get a little bit more color on this Union Pacific situation. I think you mentioned, Stan, there's in excess of 400,000 ties in their inventory and you're expecting a reduction this year. I guess, how long do you expect this to take in terms of this reduction? Is it going to have more of an impact in the first half of the year versus the second half? Maybe just a little bit more color on that situation.

Well, as I did say, we -- let's just take a look at the long term with this situation. We feel that this is an anomaly. We feel that they have a situation this year but every indication that we've had is they are very bullish on the product, going forward. We've had preliminary conversations with them on contracts beyond our current contract. So we hope this is an anomaly. Will it affect us? We're going to try to level load the plant, Rob, across the board for the year so I don't think there's going to be any direct impact on one quarter or one part of the year over the other is our intention right now.

Okay. And then, if I look at your margins, certainly, especially in Q4, but for the entire year, for '07, saw gross margins have a real nice improvement, partially due to the better utilization of your facilities. I guess if we look into '08 and what you've done with your two concrete tie facilities, would you anticipate gross margins to decline slightly from the strong performance we saw in '07?

Hi, Rob. It's Dave. There are -- we talked about a couple of items that are inherent in the fourth quarter margins that probably aren't something that are going to repeat, certainly, every quarter. There's some warranty adjustments, actually negative ones in last year's fourth quarter, and some positive adjustments in this year's fourth quarter. So probably a 75 to 80 basis point swing right there and a few other sort of one-timers that occurred that maybe amount to another 40, 50 basis points. So, and then, actually LIFO is lower this year, as well, and you never know where that's going to go.

But you're right. We ended the year at 15% and we would've been, save for a couple of these areas where we see some volumes decreasing somewhat, would've been very comfortable continuing with that 15% or even pointing to some areas where we continue to improve. But, right now, we're going to have to see, especially with Tucson and Grand Island, what we can do to mitigate the impact. There's a large amount of investment and depreciation that certainly is non-cash to us now, but it certainly does impact the P&L and it'll be difficult with those volumes to be able to, especially in Grand Island, absorb that cost the way they did in 2007.

But know what? We're not here to whine. We've got other opportunities and there's other initiatives we've had on the table and we're going to get to them. Stan mentioned that other tie. We're going to have a sales meeting next month and talk about that and we expect to have some success with that over the next couple of years. So I would not be at all afraid to say we're going to shoot for and hopefully achieve that 15% again this year.

Let me add onto that if I could, Rob. Let me just talk about what has happened. We're disappointed but, as David said, we've got some things that are going on and we're going to pick up and we're going to go at it. And we're going to go at it full throttle. We have been -- our hurdle that we're looking to overcome is not that high of a hurdle. We've been challenged, and we've talked about it for the last year and a half, about the struggles that we've had at Tucson. We've had problems with mix design, we've had problems with permitting, we've had problems with construction, we've had problems with labor. And the sad part about it really is right from an efficiency standpoint, we're right where we want to be.

[Mark Riley] and his group down there have just done a great job overcoming some of the adversities that they've been faced with and that's the disappointing part of it down there. At Grand Island, Dave Sanders and his work up there has gotten every one of the efficiencies that we've asked them to come after, whether it's labor, whether it's quality, whether it's production. We're making a great tie there. But those are some of the challenges. But the hurdle that we have to overcome, because we've had such a struggle this last year and a half down at Tucson, is going to have an impact but it's not -- what's disappointing to me is that we really had a chance to really pick up and grow that business this year and we're not looking for it to be down as much but we're looking for it to be flat and the growth opportunity's just not there this year.

The other thing, Rob, is that the ties for those two facilities are priced on a sliding scale, so the fewer ties that are sold, actually the higher per-tie price it is, so that'll help a little bit, as well.

Okay. A couple of other quick questions. The severance cost for Q1, what do you anticipate that to be?

It's going to be pretty much nominal. We did our best to give folks a little bit of notice but I don't believe there's going to be anything substantial there that it'll have a significant impact.

Okay. And then, what's the approximate rate that your cash is being invested in at this point?

We're in, as I mentioned before, tax-free munis, money market munis, and right now, they're at just under 3%.

Okay. That's helpful. Okay. Thank you.

Thanks, Rob.

(Operator instructions). And your next question comes from the line of Chris Terry of Hodges Capital. Please proceed.

My questions have all been answered. Thank you.

And your next question comes from the line of Scott Blumenthal of Emerald Advisors. Please proceed.

Just a couple of follow ups if I may. Dave, do you have a good handle at this point of what you think that the tax rate is going to be for 2008?

Yes, we're looking at right around 36%, Scott. We pretty much used up all of our state NOLs, we've used up our capital loss carry-forwards, so with the year we had this year, all that stuff's pretty much gone.

Okay. And do you expect SG&A for the year to be, again, in the 7.5%, 8% range?

You mean 7.5%, 8% of sales? Yes, it should be in that range.

Okay. Great. Thank you.

And your next question comes from the line of Tom Spiro. Please proceed.

Tom Spiro, Spiro Capital. Good afternoon.

Hey, Tom. How you doing?

Hi, Tom.

I'm fine, I'm fine. I missed a couple minutes of the call so sorry if this has already been asked, but could you give us a little insight into the fabricated products division, backlogs, and opportunities, those kinds of things?

Yes, I sure can talk about that. I think that we feel pretty upbeat about what we're looking at that product. I mean, the highway bill has kicked in and we're starting to see more work. Our precise business did $10 million last year and we've got a nice backlog, 11.2, I think, at the end of the year. And we've got a pretty good load on the plant. We're looking at right about at 9,000 hours per month throughout the year. Margins are up so we're pretty good there. We don't have as much backlog as we'd like to have at Bedford and in the bridge side of it, Tom, but we're tracking a couple jobs that we would like to land in this quarter and we think that we're in pretty good shape on them. They would give us a strong backlog well into 2009. So we're pretty upbeat about that.

Oh, great. Great. Stan, you mentioned a few moments ago, Tucson, and I just want to be sure I understood some of your comments. We've had manufacturing challenges there for some time. Apart from the volume issue we face now, have the manufacturing issues been resolved so that if the volume's there, you can manufacture at standard?

We feel very good about Tucson, as we do with Grand Island.

Oh, super. And Pueblo is a startup this year. Are we manufacturing at standard there?

Yes, we opened up there in the summer of '06. We had some startup problems but we've had very good contributions from Pueblo and we're getting to build a nice backlog. I think that we've got a very good accepted quality product there. We're picking up work from all the Class Is, pretty much. We've also done some work in the bonded joint division up at Niles. We're taking some work with some of the eastern roads up there and that seems to be doing real well. That's coming along. And the ARP, overall, we're expecting some real good things from that in '09.

Great, great. And, lastly, could you give us a flavor of the conversations you've had over the last few months with Gerdau? How's that relationship developing?

Very positive. I don't know where you came in, Tom, but I did make the comment that we feel that our relationship with Gerdau Ameristeel is as strong as it was with Chaparral and that was very good. We've got a very good relationship with them. Don Foster has worked with them very closely. Gary Wheeler, our Piling group, we had a meeting with them last week down at Petersburg and went through our strategic objectives for this year and through '09 and into '10, talked about some of the challenges that we have from some of the sections. We've got a great complement of sections but we're still looking for a couple of areas that would really fill out our portfolio of sheet piling and we're just about there. We had a great year in Piling, overall, last year, 24% over last year, and we expect things to proceed, going forward, just as well as what they were doing with Chaparral and that was a pretty high bar.

Super. And, lastly, on the acquisitions front, is your current thinking that you would rather, if possible, make one big acquisition? Or your preference, if feasible, is to have several smaller ones?

Tom, we really -- it really matters more on what the company does and the fundamentals it has as opposed to size. I mean, we've got a pretty wide range as far as the sales levels of the companies we're looking at so that's less of an issue than a lot of other issues. But, certainly, you do one big one, there's more risk there and we're certainly cognizant of that.

You're right. But, as David said, we're looking at them of all different sizes. You look at some of the smaller ones and there's as much work putting that together as there are the larger ones. But we look at how they're going to fit in with our Company, we look at their people. As we've been able to really drive growth over the last three years, we're looking for good people that are going to add on to what we're doing, internally, ourselves.

Well, thanks much, and spend that money wisely.

Thank you.

And at this time, there are no further questions. I'd now like to turn the call over to Stan Hasselbusch for closing remarks.

Again, thanks to all of you for attending and I appreciate your support that you've given us over the years and onwards toward '08. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.