L B Foster Co (FSTR) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth-quarter 2009 L.B. Foster earnings conference call. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions).

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. David Russo, Chief Financial Officer. 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 fourth-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 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, 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 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 10K for the period 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 fourth-quarter 2009 earnings call and Webcast.

This morning we announced results for the fourth quarter. Sales were $98 million, down 31.8% from the fourth quarter in 2008, and earnings for the quarter were $0.38 per diluted share, down 30.9% from the previous year's fourth quarter.

Bookings in the quarter were $114.7 million, up 15.3% over last year's comparative quarter, and year-end backlog stood at $172.7 million, 30.2% ahead of year end 2008.

The booking increase in the quarter was primarily in the construction segment where our Piling group booked a $16.4 million sheet pile job with the Army Corps of Engineers in New Orleans. Our Bridge Products group entered a $10 million decking job in New York City for approach ramps to the Brooklyn Bridge. And our precast buildings flat out had a great quarter, bookings over $16.2 million compared to $5.8 million in the fourth quarter last year. A little bit more about that later.

But overall the downturn in our economy continues to wreak havoc on the steel industry in general and new construction in particularly, negatively impacting all of our products. The US steel industry in terms of raw steel production in 2009 dropped to its lowest level since 1939. Production was 63.9 million tons, down 37% in 2008.

At L.B. Foster in the fourth quarter, Tubular sales were down 38.9%, rail sales were down 36.8% and Construction Products were down 26.8%.

Let's take a look at the products and let's start with rail.

Both performance in the fourth quarter 2009 and expectations for 2010 are a mixed bag. Revenue ton miles which in a large part set the tone for class I spending were off 15% through the year. CapEx spending by the class I's in 2009 showed some a similar decrease of 16% for the year.

Initial indications are that capital spending will remain flat in 2010. As a result, we expect our concrete ties and Allegheny rail product groups which primarily serve the class I railroads to have a similar year to 2009.

Our new rail tonnage dropped 32% in the year as short line and industrial projects dried up, due to the economic downturn and tight credit. Overall, domestic rail consumption declined as well. Rail consumption in North America on a-12 month run rate ending November was 840,000 tons, down 15% from the same period in 2008.

In Tubular, for coated pipe entering 2010, backlog is down 85% from the previous year. While we are starting to see a rebound of key natural gas indicators, such as pricing and recounts, we feel any uptick in our coded business will begin late 2010 at the earliest as we have mentioned in past Webcast. Also in Tubular, I am happy to report that construction of our Houston coupling facility, a joint venture with Lally Pipe is complete and we began manufacturing couplings this month.

In Construction, while we expect the heavy civil markets to remain flat this year, and non-residential construction to be down 10 to 15%, we are in a much better position than last year because of a strong backlog in piling. Fourth quarter bookings put our year in piling backlog at $62 million, up $45 million from the year end 2008.

Another area of optimism is the positive impact of the awards we received in 2009 related to the American Recovery and Reinvestment Act, otherwise known as the Stimulus Package. That positive impact will have on the following three products in 2010.

In precast buildings, we are coming off the best year we have ever had. We booked $53 million last year, largely on the release of money from stimulus grants to Federal Park and the US Corps of Engineers infrastructure project.

Two in-transit products. Year-end backlog stood at $23.7 million nearly twice the total revenue build in 2009, again, largely based on the release of funds for various transit projects and three bridge fabrications.

Fourth-quarter bookings of two projects in New York at the Greenpoint Area Bridge and the Brooklyn Bridge, both partially funded by the Stimulus Package, have essentially booked our Bedford, PA Fab Shop for the entire year.

2009 was a very difficult year for both the US economy and L.B. Foster. While we see some positive signs entering 2010, challenges still remain, but we have a strong team in place here at L.B. Foster and I feel confident that we will continue to be successfully confronting those challenges as they come forward.

And now, I would like to turn this back to David for our financial review.

Thank you, Stan. Sales for the fourth quarter of 2009 were $98 million compared to $143.8 million in the prior year, 31.8% decrease. Sales decreased was was due to a 36.8 decline in Rail Products sales, a 26.8 decrease in Construction Products sales, and a 38.9 reduction in Tubular Product sales compared to last year's fourth quarter.

The Construction Products sales decline was due to a decrease in piling sales, partially offset by an increase in fabricated products and an increase in concrete building sales. Both the bridge and concrete buildings markets have benefited from stimulus funds and those businesses enter 2010 with strong backlog, as Stan mentioned.

The fourth-quarter Tubular decrease was due to sales reductions and coated products, partially offset by sales increase in threaded products. After two strong years in 2007 and 2008, 2009 was one of this segment's worst years in quite a while.

The energy markets served by our coded division have been robust for the past several years. And while we continue to anticipate strength over the longer term, 2009 was extremely weak, and we anticipate that weakness will continue into 2010.

Our Threaded Pipe division is also experiencing selectivity and type pricing has moved downward with steel prices. The 36.8% decrease in rail sales was driven by across-the-board reductions in all product lines with the exception of transit products. Rail distribution, which has been one of our more consistent performers over the past several years, was down 52% compared to last year's fourth quarter.

Our Allegheny Rail Products division revenues were flat in the fourth quarter of 2009 compared to the prior year to close out a very solid year by posting a year-to-date sales increase of 10.5%.

Concrete ties sales declined 18.9% in the fourth-quarter 2009 compared to 2008. Our Grand Island in Tucson facilities were approximately 45% utilized for the Union Pacific Railroad, and we are actively marketing both heavy haul size as well as an industrial concrete tie from Grand Island.

This new tie is currently being marketed into a very soft industrial market.

In Spokane, we continue to produce concrete ties for transit authorities, other class I railroads, contractors and industrial customers. We continue to experience stable but soft inquiry and bidding activity.

As a percentage of this quarter's consolidated sales, Tubular accounted for 5% of sales, Construction was 55% and Rail was 40%.

As mentioned in our earnings release, and as Stan discussed, backlog stood at $172.7 million at the end of the fourth quarter, up 30% from December 2008, and increased 10% over September of this year, the third consecutive quarterly increase.

Bookings for the fourth quarter increased by 15% to $114.7 million. Full-year 2009 booking totaled over $430 million, down 16% compared to last year.

Gross profit margins were 15.9% in the fourth quarter, an increase of 200 basis points from last year's fourth quarter. The improvement in margin was due principally to a favorable swing in LIFO adjustments of approximately $9.2 million, partially offset by an increase in unfavorable inventory valuation adjustments of $4.3 million, due principally to declining material costs.

Increased unfavorable manufacturing bearings was at $1.7 million and increased slow-moving scrap and obsolescence costs of $0.5 million. The unfavorable manufacturing costs are due to reduced production volumes at every facility with the exception of our bridge, concrete building and Allegheny Rail Products businesses.

SG&A expense decreased by 23.9% to $8.8 million in the fourth quarter of 2009, due primarily to decreased bad debt expense and decreased costs related to incentive compensation, and travel and entertainment expense. SG&A represented 9% of sales in the fourth quarter of '09 as compared to 8% of sales in last year's fourth quarter.

As a result of the above, fourth-quarter operating income was $6.8 million compared to $8.4 million in last year's fourth quarter, a $1.6 million or 18.9% reduction. As a percentage of sales, operating income was 6.9% in this year's quarter versus 5.8% last year.

Interest expense was $300,000 in the fourth quarter of 2009, approximately $150,000 or 33% less than in 2008. The decline was due to reduced borrowings and to lower interest rates on certain debt instruments. Interest income was $113,000 compared to $657,000 last year, a decrease of over $0.5 million or 83% due to a significant decline in interest rates from the fourth quarter of 2008 to this year's fourth quarter.

As you have heard us disclose the last several quarters, our cash has been invested principally in money market funds and bank certificates of deposit and other short-term instruments.

Pretax income for the fourth quarter was $6.6 million, compared to $8.6 million in last year's fourth quarter, a $2 million or 23% decline. As a percentage of sales, fourth-quarter pretax income was 6.7% compared to 6.0% in last year's fourth quarter.

Fourth-quarter income tax rate was 40.7% compared to 34% last year. The increase in the rate was principally due to lower manufacturing deduction and state return to provision adjustments. Net income, then, for the quarter decreased 30.8% to $3.9 million or $0.38 per diluted share compared to $5.7 million or $0.55 per diluted share last year.

Turning to the balance sheet, debt at the end of the fourth quarter was $18.6 million compared to $22 million at the end of the third quarter and $27.5 million at the end of 2008.

Capital expenditures for the quarter were $1.3 million compared to $0.8 million for the prior-year quarter. Full-year CapEx this year was $6.1 million compared to $4.8 million last year. Majority of the difference between the two years was principally for land and construction of a building for a joint venture we recently entered into.

Depending on the timing of certain planned projects, we expect capital expenditures likely to range between $6 million and $7 million in 2010. We certainly relayed our intention during the year of generating more cash from operations than we would spend on capital assets, debt service and share repurchases.

Though a summary of where we ended this year is as follows. Cash from operations was $25.7 million, capital expenditures were $6.1 million, scheduled debt payments were $5.8 million. We accelerated approximately $3.1 million of additional debt paydowns. Cash interest paid was $1.1 million and common stock repurchases were $1.9 million.

So the cash generated in excess of those items was $7.7 million.

We will reiterate that it is our expectation to repeat this in 2010. Cash from operations should exceed capital expenditures, debt service and share repurchases. Speaking of which, we did not repurchase any Foster common stock during the fourth quarter.

There was still a little less than $11.7 million left on the Board authorization. We continue to believe that our share purchase strategy helps provide a balanced approach to providing long-term value for our shareholders.

Getting a little bit into debt. Debt as a percentage of capitalization was 7.4% at the end of December compared to 8.8% at the end of the third quarter, and 11.2% at the end of last year. The large decrease starting this quarter was due to the early payment of approximately $2 million of debt that had no prepayment penalties.

Our leverage ratio is now about 0.72 to 1 up from 0.6 to 1 at September 30. Cash at September 30, 2009, -- I'm sorry at December 31, 2009, was $124.8 million and we had $124.1 million invested principally in the AAA-rated money market funds.

With regard to working capitals, accounts receivable and inventory, net of accounts payable decreased by $2.5 million compared to the third quarter and decreased $6.3 million from December of 2008. Accounts receivable actually increased by $9.4 million during the quarter, due partially to the $4 million increase in sales in December as compared to September, as well as the customers slowing their payments at the end of the year.

Despite this increase, DSO improved to 46 days at the end of December.

We believe that our accounts receivable portfolio remains in very good condition. Inventory increased by $2 million during the fourth quarter of '09, but decreased by $3.9 million from December of '08.

Looking forward, we believe that the current recession, continued credit concerns, and current and anticipated reductions in tax received by state governments in upcoming months will present challenges to L.B. Foster. As a result of reduced demand for certain of our products recently following prices over the past several quarters and a heightened competitive environment, we expect to continue to struggle with margin compression for at least the next six months.

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 poised for significant improvement.

L.B. Foster has a tremendous advantage of navigating through this period of uncertainty in extremely strong financial position as well. We ended the quarter with $124 million of cash and over $64 million of available credit, giving us the ability to take advantage of opportunities and -- as future circumstances develop.

That concludes my comments on the fourth quarter of 2009 and we'll now open the session up to questions.

(Operator Instructions). James Bank of Sidoti & Company.

Good morning. Just really quick on the LIFO credit. Dave, I was wondering if you could just let me know what the basis point benefit was from that?

For the --?

Just for the quarter.

It was a little under 800 basis points.

Okay.

Or as a comparative to last quarter -- to last year. So last year there was over a $4 million hit. This year it was a $4 million credit. So the swing is about 780 basis points.

Okay. And you don't break out on a per-share basis?

No we do not.

Save me some time. I will figure it out. Thanks.

I know you can do it.

Tubular division. You know, listening to your discussion on it in regard to backlog and what you guys were thinking going forward, I understand you said oil rigs are coming back. But US Steel really found some improvement already in their backlog and commentary on their recent call a few days back.

I was wondering is there something contradictory here or are you guys really just focused on different markets?

It's the markets that -- primarily that we are in. We -- you know our [threaded] division actually had a better quarter as far as topline than fourth quarter of last year. So there's certainly some opportunities there, but it's the coated division. We don't sell the pipe. We are just really selling the coating. So there's not a real good -- not an extreme tie-in there.

There have been a number of delays on projects that we participate in. I know that we've had a little bit of activity in January which is pretty much even the plant out at least through the first quarter, but we have been living hand to mouth down in Birmingham for about six months now. But the activity levels what's kind of concerning us. We are seeing some of the metrics turn favorable as I discussed and indicated, James, but we are just not seeing that coming in to us yet. The activity is picking up slightly, but you see the activity and then it is going to be into the bookings and then getting pipe rolled.

And we, as I said, don't really expect any pickup until later on in the year from our standpoint. We might see it earlier obviously in order entry and bookings and activity levels, but not from a revenue standpoint.

Okay. On the backlog, I guess, given the competitive pricing environment, you referenced in your press release that the margins are a bit lower. Is there -- I know you guys don't provide guidance, but is there any ballpark run rate we might be able to expect across each segment?

I think that -- we are seeing margin compression pretty much across the board. I think that primarily let's take a look at our distribution business is what you are pushing 60% of our overall volume.

One of the things we are seeing overall, James, is really because of the credit situation and because of the economic and we are seeing it in nonresidential spending, the day in day out jobs aren't coming along and we are not getting the truck load of rail and the truckload of piling orders which typically would have a higher gross profit. A lot of our jobs that we are reporting a lot of jobs in our backlog are the large jobs we talked about in the Corps of Engineers and we've talked about the big Panama job in the past.

And so those are going through our system in the first quarter. And so those margins are a little bit less. And with the reduced -- with the reduced amount of business, I mean, you are seeing, I mean our volumes overall last year I think our rail volumes were down I think I said 32%, but our piling revenues -- or not buying revenues, our piling tonnages were also down in that at 34%, I believe.

So there's more people going after less jobs which is pushing the margins down. Inventory, you know, our inventory is higher than what we would like to see it. We are not getting it out of the system as quickly as what we would like. And we are being reminded by our Board of Directors, rightfully so, that we need to be moving on this quickly.

And I know a large part of all of our incentive programs would be inventory turnover, but some of that inventory has been higher-priced. And we've got reduced pricing because we've seen transaction pricings in both piling and rail decrease 20 to 35% over last year. So putting all of those into context, it's been a very difficult -- very difficult to maintain margins.

I have got to give our product groups credit because they have done a very good job so far under the circumstances.

Yes. So in a nutshell, James, no real guidance on future run rates. You take a look at our full-year margins and they only move by 10 basis points. We have huge swings in individual items like LIFO (multiple speakers) and our manufacturing variances, and to Stan's point just our basic selling margins in this marketplace.

So there's no real strong type of guidance we can give you right now.

Okay. Fair enough. And I remember about a year ago you guys were on the hook for about $40 million of high-cost inventory but were successful in pushing that out. I guess to your recent point there, Stan, is there anything here? I mean I know steel has been inching up, but somewhat under control. Is there any risk in the inventory at this point?

I don't think so. I mean, I think we might have spot but I think that from an overall market transaction level, as I said, we had -- based on our various products, we've had decline in transaction pricing 20 to 35%.

We are starting to see some of the metrics that we follow like scrap prices are solidifying and actually moving up a little bit. So I don't think we are going to see any more bottoming out of our inventory and we have our monthly product review meetings and had them last month and that's one of the things that we reviewed very closely.

I don't think we have any inventories in our main distribution businesses that are underwater. I don't think that we have any risks associated with them.

You know, you take a look at -- you take a look at, for example, let's take a look at piling. I think we ended the year with about $42 million in piling. And that's quite a bit. But a large part of that is in our rental inventory and that is just for rental purposes.

But because of the jobs that we've got in Panama and in New Orleans with the Katrina reconstruction, we've got -- in piling alone, we've probably got $17 million to $19 million that's either in month-end accruals, it is in direct shipments or work in process which should flush through our inventory in the first 4 to 5 months of the year.

So we are working on it and like I said, we've got -- really, we've got marching orders from the Board of Directors on further reductions and we will continue to address that.

Okay and then, last question. The comment that you are anticipating a volume of new stimulus money basically to slow for you in 2010, somewhat actually very contradictory to what Caterpillar has said and even general consensus. So I didn't know if I was just reading that in terms of volume slowing from the peak or are you guys trying to impress that? You know, some -- it's just not going to be that great in 2010.

I know with the Highway Bill it's not easy to see and it is difficult to remain certain, but --.

Let's take a look at a couple. Let's look at it a couple of different ways. Take a look at the current Stimulus Package that's in place and I believe that there is a -- what products of that $787 billion there's about $53 billion that we are involved with. And from that I know that Obama yesterday announced the locations of his stimulus money to be spent on high-speed rail, $8 billion. So pretty much that has gone up to about 80% of that $53 billion which we will play in. About 80% of that has been obligated right now.

And we have seen that in bookings and we have seen that throughout the last half of last year. And there's still some that we expect to see this year, but a lot of the bookings will slow down on the Stimulus Package. But the revenues -- a lot of that should flow through this year.

Okay, great.

The Transportation Bill, that we don't really expect anything to be happening on that until probably later on in the year. I don't think we are going to see anything until sometime at the end of the third quarter, the first part of the fourth quarter.

And then the main -- he talked about it in his speech the other night, the Main Street America which has been passed by the House. What we look at in that would be an add-on, but I really don't know when the Senate is going to be addressing that. But I mean there's such consternation in Congress right now, it's just -- it's a moving target.

But we would have liked to see more from the Stimulus Package and you know I've talked about this in the last few Webcasts for the last year, but we really were hoping that -- there would have been more that would have affected us. I mean $787 billion and only $50 billion going to building highways and improving the roads and improving the railroads is less than what we expected.

And he addressed it in his State of the Union message the other night that we have to put people back to work. Well, you know what? Let's make it happen.

Right and don't forget I mean the last time I checked Build America bonds were over 60 billion and counting. That is something that certainly can be beneficial to you guys as well and I -- staying outside of California I have yet to see a state whack their infrastructure budget. So I know on a month-to-month basis it could be --.

I mean, running negative budgets, the last I saw 42 states were running negative budgets and you know there is a matching portion. There are certain projects that are just funded exclusively by the state government and they are getting whacked.

Right.

Not cutting them, but they are not spending it either.

Right. No, I understand. I think just more -- I'm more seeing education, age funding, senior citizen programs. I mean, these types of things are sort of on the highlights of state budget cuts, but let me defer to other callers. I do appreciate your time, Stan. Thank you.

Brent Thielman of D.A. Davidson. Please proceed.

Good morning. Just a question on -- you seem to sort of see cement prices, aggregate materials pulling back a little bit. And I'm wondering if you have been able to sustain prices for some of those products manufactured at CXT or if you are starting to see some more pressure there?

You know, we've had pressure -- there's competitive pressure I think as much as anything. I think that's really our concern. There have -- the overall amount of concrete ties has decreased in the last couple of years and our customer at the Union Pacific is looking at consumption next year similar to what they did in '07 and '08. And just that lack of business has really put a lot of pressure on pricing from us.

But from a cost standpoint, we continue to work the cost. I think that -- you know we brought in new suppliers of steel. We've really, we've reviewed our aggregate and our cement suppliers and really pushed the pricing down.

We've done a great job at our facilities as far as bringing in lean and processing improvements. And we are make you a better tie right now at very similar prices to what we were doing two years ago. So I really -- we are doing a good job there, but we watch that all the time.

Okay. And then you mentioned the high-speed rail earlier and obviously your announcement yesterday, I guess what the disbursement of the funds over multiple quarters or versus one or two, which I think had been discussed, possibly would be happening on previous calls and do you think that could actually serve to sort of extend the timing of these projects as the states are in need to find other ways to fill funding gaps? Just wanted to get your perspective.

You know, we are kind of groping to see it's interesting the lift and the various projects of what they do, I think that one of them that we are following very closely is what is going on between Chicago and St. Louis. That's a line that would probably on existing track and it's going to have a lot of ties on it and we hope that they will go concrete. We'd like to think they would.

But you know this is going to start to roll out. I think that project is very shovel-ready and ready to go and that's what they like to see. A couple of these new projects, what's going on in California -- a lot of what is going on to California and the Florida, the Tampa and Orlando corridor, are going to be new construction.

So we are really not sure how those are going to go and of course the monies are pretty well spread around. You take $8 billion and you spread it over seven or eight contracts that were [announced]. A lot of them are just going to get out of design. I mean there's really not a lot to fund it that will even get to the level of our product supply. So --.

Sure. Okay. And then lastly I mean I think you mentioned on the concrete ties, your expectation there and you did announce the contract the other day, [I think out of] Spokane.

So are you seeing an increase in inquiries from some of the industrial uses of the ties at least?

No.

Not at all? Okay.

No, really, we are scrambling after everything we can get. You know a lot of that is -- Spokane, in particular. Spokane is that Northwest corridor. We've really done a great job marketing our tie up there in the industrial small ports. Some of the small railroads up there in that they're struggling, but --.

Yes. Okay. I think that's all I had. I think you guys answered all of my questions. Thank you.

(Operator Instructions). Mark Zinski of 21st Century Equity.

Good morning. Just wanted to get back to the stimulus bill just briefly. Just wanted to get your opinion. There has been some discussion that states are really looking to allocate the funds for projects that are really going to sustain some employment. You know, meaning that they might be bypassing some of the road-paving projects which can be done somewhat expeditiously in favor of more structural-type projects which are longer-term and would sustain employment.

Are you seeing anything relating to that phenomenon? And I would think that that would bode well for your business.

Quite the contrary in our businesses. I mean, of the money that we talked about it's -- they are trying to put people back to work and putting people to work quickly. And a lot of it is in paving and widening and resurfacing.

Though we are seeing some work in transit. We are seeing the work as I mentioned earlier in New York in some of the pre-cast, but I haven't heard anything about them cutting back on paving and resurfacing and those kind of works. I --.

And we haven't seen any sort of a shift into the longer-term, heavy civil projects where we would play a bigger role. I mean they are certainly looking at some, but the focus in 2009 by far was the quick hitters which we had some really minimal participation.

Now when you get into the high-speed rail and some of those projects that were just announced, we knew that the $8 billion was going to be spent, but we weren't really sure where it's going to go. The tone of them is going to be longer-term projects and so that may be what you are picking up on.

Right. And then any -- have you guys heard anything new on the Freight Rail Infrastructure Act? Or is that still pretty much stuck in subcommittees at this point?

It seems to be right now still on the back burner.

Okay. And then I guess last question, in terms of the acquisition front and deal flow, what kinds of things you are saying out there. Does there seem to be some more activity these days?

There is, Mark, actually. I think we mentioned last quarter or the quarter before that the first half of 2009 was pretty dead. You know I mean, obviously, the valuations were at 24- and 48-month lows, some of them. And the credit markets were really backed up and very weak.

So we saw very little come through in the first half of 2009. It definitely -- I would say starting in the August-September timeframe, things loosened up a bit. And we have seen some things and we've actually been reviewing potential candidates, I would say, since August, September and there is some interesting stuff out there.

And do you -- and just related to that lastly, do you feel that you've done a nice job with managing working capital and managing expenses? Do you feel that you have sort of a tighter cost structure now that would really provide a good platform for a tuck-in acquisition here?

Yes. I mean, there's a couple different questions in there. Number one, on the cost-cutting, I mean we certainly have -- we took a fairly proactive look at this and especially our facilities as our volumes were cut that we've had reductions there. We've had salaried staff reduction this year which, obviously, was difficult. We've been for quite a while now implementing lean enterprise throughout the organization, most recently in the administrative groups, and we brought some resources on to help with that.

So I think we've done a pretty good job with that. And we've cut costs where we could. And what we very much hope for now is that, as volumes tend -- we're expecting to be especially the first half to be sort of a grind it out kind of a period. But as volumes grow post that grind it out, we expect to be able to take on that additional business without proportional increases in our cost.

As far as working capital goes, I mean, I think Stan said it the best. I mean we've done a decent job with our accounts receivable portfolio. We are behind the curve as far as dealing with our inventory balances. And I think that is going to be one of the priorities of 2010.

Okay. Great. Thanks a lot. That's it for me.

Tom Spiro of Spiro Capital Management.

Good morning. The year just ended, we had negative manufacturing variances of $5.2 million. If we look out to 2010 and we assume that it is a sluggish kind of year, perhaps it perks up a little bit in the second half.

Have our various cost cuts put us in a position where that we can bring that down to zero or are we still going to be running significant negative variances?

It will be reduced, Tom, but it's not going to go down to zero because of some of the --. We have some fixed costs in some of our facilities because of prior-years investments. We've got some pretty high D&A numbers at a couple of our facilities that you can't really do a whole lot about.

So the variable costs, we've been very proactive with. And to the extent that things were to even move further down, we could -- we would do more. But right now as far as the variable costs, those -- I think we are pretty much right-sized with our expectations for this year.

The physical plant that we have now is the physical plant we want for 2010 in terms of size and number of lines and that kind of thing?

I don't really see any changes on the horizon right now to reduce that. Of course we don't need that, but no I don't see any reductions.

And personnel, are we -- I'm sure we are not hiring. Are we still reducing the ranks or are we pretty much --?

Do you know we have reduced and gee, I think last year we reduced 150, 200 people at the plant level. I mean there's substantial reductions and I think we are, as David said, we are right-sized for our current business and we will hire as appropriate. But we have got a pretty good idea where we are the next couple of quarters as our plants, and except for at -- we've hired out at Bedford, I had mentioned earlier that we've got a strong backlog building in our bridge business out there. I think we've gone from right at about 30, 31 people and we are expecting to end up somewhere between 60 and 65 people out there at the end of this quarter.

So if it makes sense we are hiring. But for the most of our businesses are relatively flat or down and across the board, we've -- I think we are pretty much where we want to be.

And we had a couple of concrete tie warranty issues in 2009. Anything new to report on either one?

You know, we did. I think we absorbed over $5.5 million worth of charges between the two issues. We continue to review. There is nothing that is really outstanding that's right in front of us. But we continue to look at our quality.

I do -- I would like to say that between us and the UP railroad from working together and looking at our ties and looking at how we make --. I mean, we have got -- we are making a much better tie than we have ever made in the past and we think we've got that -- we think that we've got that controlled, but there's always going to be that issue out there with warranty and --.

As far as the issue from earlier this year, Tom, I mean we have jointly identified a specific number of ties that we obviously provided reserves for. And we have shipped a significant amount of ties as replacements already. And the UP continues to review their track and certainly their awareness is heightened and we tend -- we go back and forth.

But right now there's nothing of any new significance to report.

Okay. Many thanks and good luck.

Scott Blumenthal of Emerald Advisers.

Good morning. Well, all the smart people went before me and asked all of the good questions. So I've just got a couple of cleanup questions if I may?

Stan, I believe that when you are talking about the backlog, you mentioned $62 million in piling, $23.7 million or $24 million in transit products. Could you go through the precast buildings and the bridge fab for us again?

Yes. I can give you a rough idea on that. I believe our buildings, you know, we've got the two plants. I believe that our backlog at the end of the year was about $26 million and our backlog in bridge was right at about $23 million almost $24 million.

Okay. Thank you for that. And the order that was announced yesterday, the CXT order. Is that in this reported backlog or that's not in there?

Obviously it wouldn't be in there. I don't think it's in there. I mean I -- we will book upon an order, but some points it takes a little bit a while before we make the press release to get the final approvals. But I don't think it is. I mean I don't think it is in there.

But sometimes there is a month lag or a six-week lag between the time we order and book before we get final approval from the related parties to put the press release out.

Yes, I didn't think that it was, but I just wanted to make sure. And you gave us a number utilization numbers for Grand Island and Tucson. Does the 45% also apply to Spokane?

No, actually it is not. That's a whole -- that's a different animal and there's while primarily Tucson and Grand Island are doing all of their work for the UP, at least mostly, Spokane has a number of different things and projects going on. And they are as of -- well, for the fourth quarter, they were about 55 to 60% utilized.

Okay. And Stan, you did mention that we are up and running in the couplings business. Can you talk about order flow? If it has met your expectations?

The first thing that we intend to do with that JV is to especially for the first 3 to 4 months is that JV is going to service the partners only and that would be L.B. Foster and our partner, Lally Pipe & Tube.

So there is really no order flow except from us and our partner. Once they get a flow going and get any kinks worked out, we will open that up to a limited number of other customers, at least initially.

So right now, certainly we have orders into them and as well as our partner does. But they're going to get, especially in this marketplace. We want to make sure that they're supplying us with our needs as well as our partner's needs and the quality we're looking for, so we're looking really for this year for that JV break even to a small profit. And it is not going to be -- it's not going to have any real significance on our financial results this year.

And both of us are users of couplings and from a pricing standpoint as David said. And from a quality standpoint, we will be making them for our own consumption initially and then looking to outside markets and other products as we go out.

Okay. So as you get started this quarter, is that going to change or have a meaningful impact on the cost structure of the Company at all?

No.

No.

Okay. Terrific. Thank you.

At this time there are no further questions in the queue.

Well, we would like to thank you all for sitting in today and wish you all a very prosperous 2010 in a very difficult and challenging environment. We appreciate your support. Thank you.

Thank you for your participation in today's conference. This completes the presentation. You may now disconnect. Have a wonderful day.