L B Foster Co (FSTR) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2009 L.B. Foster earnings conference call. (Operator Instructions). At this time, I would like to turn the call over to your host for today's conference, Mr. David Russo, CFO. Please proceed, sir.

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'll 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 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, 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, and I will turn it over to Stan Hasselbusch.

Good morning. Thank you, David, and thanks to all of you for attending our second-quarter 2009 earnings call and Webcast. This morning, we announced 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 results were negatively impacted by a $1.1 million warranty charge related to [concretize] 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 tie; 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 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 scrapped when we retrofitted the plant with upgraded equipment in 2005.

We have worked closely with the UPN in identifying the cracked ties in track. We believe all the problem ties have been identified and we will begin manufacturing replacement ties later this year.

In a separate issue, we have 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 customer and write them down 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 15,000,000 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 notes heavy construction starts were down 8% in the first half of 2009 and nonresidential 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 bookings for piling in the quarter were down 21% from the same period last year. An upside to piling, I would like to add, last week we were awarded a $20 million sheet pile order from the Panama Canal commission. Half of this 16,000 ton order is expected to ship between now and the end of the year.

Revenue in the other two areas of construction, fab products and buildings, are ahead of last year. Fab 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 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 10, 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 pre-cast buildings, new rail and [transit] products will also see additional bids. Transit products, for example, booked $9.2 million in the first quarter -- in the first half based on the bidding activity, in part driven by stimulus funding. We expect the 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 Lube], our current transportation bill, which expires on September 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, $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 and Means Committee has developed alternative funding, but has not yet unveiled their proposal to the committees -- due to the Committee's focus on the new health-care bill.

The likely outcome, currently being proposed by the Obama administration, will be to extend Safety Lube 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 American 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 off 18% and revenue ton miles were down 21% compared to second quarter 2008.

Normally, Class I spending is in lockstep 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 way and capital spending overall will be down 15% to 20% this year. As we have 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 build -- 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 of 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 the increased volume to the Burlington Northern of 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, and 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 indications 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 market -- in 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. And I would like to turn this back to David for our financial review.

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 issue revealed 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 a valuation 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 this 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 such as the gains attributable to the DM&E, as well as last year's 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 $129.8 million in the prior year, a 27.8% decrease. The sales decrease was due to a 27.2% decline in rail product 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 fabricator product sales. Second-quarter tubular reduction was almost equally attributable to coated products and threaded product sales to clients.

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 long-term strength, we are experiencing considerable softness in the current market activity.

Our threaded pipe division is likewise experiencing very slow activity and pipe pricing has moved downward with scrap 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 ties 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 haul ties as well as an industrial concrete tie from Grand Island.

This new tie is currently being produced and sold into a very soft industrial market.

In Spokane, we continued to produce concrete ties for other Class I railroads, transit authorities, contractors, and industrial customers. And we continued to experience reduced inquiry and bidding activity. As a percentage of consolidated sales, tubular accounted for 5% of sales. Construction was 48% and rail was 47%.

As mentioned in our news 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 continued 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 increased LIFO costs of $4 million and decreased scrap obsolescence costs.

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 expense [decreased] by 13.5% to $8.6 million in the second quarter of 2009, due primarily to [decreased] costs 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 last year's second quarter.

As a result, second-quarter operating income was $4.4 million compared to $12.1 million in 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 2009, $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 $1.2 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 to 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 of 2009. Capital expenditures were $1.7 million for the second quarter compared to $1 million in the prior year quarter. The 2009 spend was principally for plant and equipment improvement, as well as technology infrastructure and application software.

Depending on the timing of certain planned 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.

Speaking of purchases, for the first time since the Company's announced its 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 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% to 1, up from 0.60 at March 31. And our interest coverage was more than 24 to 1.

Cash at June 30, 2009, was $118.1 million and we had $116.3 million invested, principally in AAA-rated money market funds, all of which today are guaranteed by the U.S. Treasury. With regard to working capital, accounts receivable and inventory, net of accounts payable, decreased by $17.7 million compared to the first quarter of 2009 and was lower by $6.2 million from December of 2008.

Accounts receivable decreased by $8.7 million during the quarter, primarily due to the $9.1 million sales decrease in June of 2009 as compared to March of 2009, while DSO increased to 49 days from 47 days at March 31, 2009. While payments related to a couple of large projects have pushed out a little, we believe our accounts receivable portfolio is in very good condition.

Inventory decreased by $3.8 million during the second quarter of 2009, adding to the $4.9 million reduction during the first quarter of this year and a $17.4 million decrease in the fourth quarter of 2008. Inventory levels were also down $11.2 million from June of last year.

Looking forward, we believe that the current recession, continued credit concerns and expected reductions in tax receipts by state and federal governments in upcoming months will present challenges to L.B. Foster. As a result of reduced demand for certain of our products, falling commodity prices over the last several quarters, and a heightened competitive environment, we expect to continue to battle margin compression for at least the next two quarters.

We have a talented team at Foster, however, and we continue to be impressed by the tenacity and creativity of our sales and product specialists as they pursue and oftentimes win jobs by -- like the one in Panama that Stan discussed earlier. We also expect additional opportunities to result from the stimulus bill as projects develop and funds are made available.

We will continue to run our business with a balance of opportunism while managing risk in this uncertain environment by proactively adjusting to what we see in our markets. We believe that when conditions do improve, the markets we participate in will be some of the first to benefit from such improvement.

I am quite sure that I sound like a broken record when I reiterate every quarter that L.B. Foster has a tremendous benefit of navigating through this period of uncertainty in extremely strong financial position. At June 30, we had $118 million of cash and over $76 million of available credit, giving us the ability to take advantage of opportunities and weather the storm, if need be, as future circumstances dictate.

That concludes my comments on the second quarter of 2009. We will now open up the session for questions.

(Operator Instructions). Liam Burke, Janney Montgomery Scott.

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

Well, I believe the second quarter we made a couple announcements. We announced the biggest one, of course, was the New Orleans Corps of Engineers Product which will be shipping, I believe, in August. I don't believe that that will continue to fully shift through the balance of the year, but we will get a large part of that out. That was a $21 million contract.

There was another one that was -- that we had a press release on on [truth while 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.

Great. Thank you. 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 were roughly 16%. Is there continued pressure beyond that, or is that something that you are seeing now?

Well, we are starting to see some of it. We really were very fortunate. Our products, our main distribution products, new rail and piling, were one of the last products to drop in pricing. And we are starting to see some of that take place in the second quarter.

And we expect that that will -- we think we are at the bottom for pricing and piling, and we think that we are not sure exactly where we are going to -- where we'll end up in rail. But as I think I said, our prices are probably down about 20% from where they were for the first half of the year.

But that is the main reason I think that -- and you bid these two large projects between the two of them over $40 million are less margins than what we have been realizing of the last couple of years in piling. Also, the other situation, 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 of -- a large part of that is in micro pile and is being impacted by the non-residential building market.

And we have had a large customer, who has been in Saudi Arabia, that has been probably buying close to 15% of our piece count through the year, hadn't bought any through the first half and we have been in contact with them and we expect that to pick up in the fourth quarter. But we expect margin pressures along with sales pressures for the balance of the year.

Okay, great. And real quickly, Dave, there's a difference between your original forecast on CapEx and your new CapEx level. What is the difference there?

We've got a project where we are going to pull together a rail yard in the Midwest portion of the country. And that is where there is going to be a few million dollars spent on that.

James Banks, Sidoti & Company.

In regard to the sales reversal [in] 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 in the second quarter now?

We think we've got that behind us.

Yes. That's not -- the warranty issue, James, it was -- 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 is somewhat contained. And we know what occurred and we can, with a lot more certainty than the warranty issue, quantify this at this stage we are in. We are not expecting a whole lot more to change in future quarters.

Let me kind of get out of front of us also, James. We bought CXT 10 years ago. And with the exception of when we started up at Tucson a few years ago trying to -- we had some quality issues with some of the components, we have not had any major quality issues.

And what we have experienced in the first half of this year is truly unfortunate but we think that we've got it behind us. We found the problem. We have addressed it. We've remediated it.

With this last issue in the reversal, we have 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's anything else we can talk about at this time regarding that subject.

Okay. Well, good luck with that. But I guess what I was actually trying to get at, too, 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 a 16% gross margin?

Without these charges, yes. It would've 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 that have helped out a little bit.

But, yes, without that those charges, we would have been a little in excess of 16%.

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 --?

I don't think I said 20% on piling. I think I said 20% on rail.

I'm sorry. Okay.

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

Can you -- Dave, could you split up the volume versus the pricing in regard to the sales declines in second quarter?

You know, it's really all over the map. I can tell you that in our -- well, with regard to CXT, things were actually fairly comparable to last year's quarter with the exception of the sales reversal.

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. We still, you look at last year, the pricing was going up sort of throughout the year.

So we are still right now, though it's less than it was the first quarter, pricing is still a little higher compared to the prior year. And similar to piling, except pilings volumes were much -- the reductions and tons were a lot more significant once again with price increases.

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

Okay. Okay, wow. 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 as that is not included in the federal stimulus package, were there opportunities sort of market wise, are you guys seeing in regard to piling?

Very spotty. Very spotty. I can say this much. In conversations with Don Foster and our piling salesman, we are not seeing the day-to-day business. We are not seeing the private business, the industrial work that we have seen, the truckload here the two truckloads there. It is mainly major project work.

And that is really the tone of the business which is --. And also the rental business. In the rental business, a lot of that is tied in with private work during excavation of buildings. And we've talked about the non-residential buildings being off 28%, and that has impacted that.

Okay.

It's -- we are seeing some of the bigger projects, but the day-to-day business is off dramatically.

Because I guess what I am getting at is that roughly -- 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 or -- 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?

There's going to be a lot of the stimulus that we talked about -- what was involved in the Department of Transportation, which includes transits and bridges and highways and high-speed rail. I believe there was a total for that -- Department of Transportation of $48 billion. I believe only 21 of that debt -- $21 million of that has been actually obligated and there's less than $1 billion that has actually been spent.

So there's a lot more coming up. So we think there -- 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 early, that is going to really blunt, we think, the effectiveness of what we have been able to see in the stimulus package.

I'm sorry. Go ahead, Dave.

The other thing we've said is, we certainly are expecting the activity -- two things. Number one, we've got to go out and win these projects. And that is when we started our margin compression discussion, the 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.

And the other thing that we are not seeing today, as you know, the $2 million to $3 million orders that we used to see very, very often from the States as well as the industrial business, those have fallen off rather dramatically. So we expect to see stimulus benefit, 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.

Fair enough. Thank you both for your time.

Brian Rafn, Morgan Dempsey Capital.

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

No idea at this point, Brian. We just, really, we are talking with them, and we haven't even began any legal process with them.

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

Okay. Is that a supplier that you guys are still using?

No, it is not.

Okay. With the cash you have on the balance sheet, what are you guys seeing with these markets as kind of at their troughs? What are you seeing on the M&A front?

The activity for the first half has been really low. We have a -- I think we have announced before -- a new Vice President of Global Business Development, and he has been very active on the target 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 opportunities.

I agree. We are looking at a couple of different things. We were looking at a couple of joint ventures, which are quite interesting and looking at a couple of opportunities, one of them being a global possibility which would give us an entre into the Asian market. And we are looking at a couple domestic situations.

But I would expect us to be in a position to make one or two announcements in this quarter.

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 corridors 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 trackside?

There's two major projects that keep coming up from time to time, and they are different situations. And one of them is the line that runs from Las Vegas to Los Angeles, and that would be all-new rail. It would be -- everything would be new. And 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 high-speed rail really is.

Is it 110 miles an hour -- which I think is where they are pretty much right now. And that would involve probably newer rail, continuous weld rail, possibility of concrete ties which we would be pretty excited about. But I think there is a couple of different things as they come out.

Let me ask you guys an example and just a concrete type business, what is the application of the concrete ties versus your standard -- your legacy timber ties? Is that just in yards? Is it in the heavier load bearing? Is it more freight versus passenger?

(multiple speakers) high-speed heavier load applications. And the curves, but it is a new construction. Most of the new construction is going into this country today, particularly in the Western lines is on concrete ties.

Okay. And I maybe missed it, guys. What is your capacity utilization at Grand Island and Spokane and back?

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

Okay. Thanks, guys.

Mark Zinski. 21st Century Equities.

Just had a -- 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 is still more costs that can be taken out of on the manufacturing side?

Absolutely. We have looked at it on the concrete side. We are looking at it -- we have had lean involved in our Company for the last six years, and we really get a lot of benefit in the manufacturing side. We are finding things every day. I know that Steve Burgess has spent 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 really -- we also have expanded it to the administrative side in the last year. We have got a six-part program which we 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 applications, and we have got a long ways to go.

But we are starting to get benefits and it's really, it's --.

As a matter of fact, we have a team here today of about 18 employees working on it and customer interface [ties] on as we speak.

If you guys are listening, get back to work. We would differ with you a little bit and that we have actually I believe done a good job in our manufacturing facilities, where we haven't yet done a good enough job really as, as Stan mentioned, we have been going on admin for about a year. But we still have a ways to go with our working capital.

Yes.

Okay. And then just getting back to the bidding process for some of the stimulus-related projects, would you describe the bidding environment to be in a situation where everyone is just really undercutting each other for this sort of precious stimulus money?

I don't know that they are undercutting. It is a very competitive market and it differs with the job. Some jobs we are bidding direct in two 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.

But competitive bidding is really -- surprisingly, a lot of jobs that we are seeing are coming considerably under estimates. Everybody is scrambling for what little work there is.

Great. And then just, Dave, final question. The share repurchase program, is there about $10 million left on that?

No. I believe there's more than that. I think we have only spent $28 million of the $40 million, so there's about $12 million, I think.

Okay, great. Okay. Thank you very much.

Tom Spiro. Spiro Capital.

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

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

Tom, one thing I would tell you is the product that we have an issue with -- the raw material -- we actually went out and had been sourcing some other product as it was to have an alternative. We were 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 to -- 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.

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

There were two other bidders, I believe.

I see. And lastly, the strength in fab product, I understood, Stan, from your commentary that was due coming into this year with a strong backlog area. How does this backlog stand today?

Backlog is still equally or a little bit better than what it was last year. We see it becoming pretty active. There's some active work coming in the bridge side of it. In fact, I think some of it is 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 to the Brooklyn Bridge starting later on this year, and that is all going to be on the bridge decking. 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.

When I see Mayor Bloomberg, I'll put in a good word for both of you. Thanks a lot.

Brian Rafn. Morgan Dempsey Capital.

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

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 reduced a lot of the effort 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 a few fewer people, but it has also had a lot of other benefits like the amazing reductions we have had in workplace accidents. Our safety record has just gone through the roof and I think a lot of it is a byproduct of lean enterprise.

But it really does depend on -- as Stan mentioned, we have pushed us 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 have been working on the front end as well. And when you get something to the floor quicker, you get it out the door quicker. So there's a tremendous amount of different types of metrics depending on the project itself.

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 may be a new direction?

You know, all those are applications for pilings. And they've got -- there's [varying] piles; there is sheet piling. All of that. And our people are out, where that, I think our name is out in front of the industry from a supply standpoint in this particular product.

And if there is something that is going to be built that's going to be utilizing piling or there's an opportunity for us to work with engineering to design piling as we have done with our piling programs, or design programs in the last three to four years, we will be there, Brian.

Okay. And 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?

It is an issue for everybody. I mean, there are a lot of similarities between US GAAP and International Accounting Standards. But there are areas of difference 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 are not insurmountable, by any means. It's probably more what everybody else is facing in the six or seven areas where there are some significant differences.

All right. Thanks, guys.

And there are no further questions in queue at this time.

Thanks to all of you and have a good day.

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