L B Foster Co (FSTR) 2010 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the third-quarter 2010 L.B. Foster earnings conference call. My name is Carol and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question and answer session towards the end of this conference. (Operator Instructions). As a reminder, ladies and gentlemen, this conference is being recorded for replay purposes.

It is now my pleasure to turn your presentation over to today's host, Mr. David Russo, Chief Financial Officer. Sir, you may begin.

Thank you, Carol. Good morning, ladies and gentlemen. Thank you for joining us for L.B. Foster Company's earnings conference call to review the Company's third-quarter 2010 operating results. My name is David Russo, and I'm 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 third-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 10-K for the year ended December 31, 2009, 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 third-quarter 2010 earnings call and webcast. This morning, we announced sales for the third quarter of $125.6 million, up 28.3% from the third quarter 2009. Earnings for the quarter worth $0.63 per diluted share compared to $0.60 in the third quarter last year. Keep in mind that last year's earnings included a pretax gain on the sale of marketable securities of $1.2 million or $0.07 per diluted share.

Order entry in the quarter was just under $125 million, 9% ahead of last year. And the corresponding backlog at the end of the quarter stood at $205 million, which was relatively flat with our record second-quarter backlog, but 24% ahead of the third quarter in 2009.

Increased volumes and process improvement programs led to the best performance at our manufacturing facilities in over a decade. Plan expense variance was a positive $130,000 compared to a negative $1.3 million in the third quarter last year. And we continue to generate significant cash from operations. We added $16 million in the quarter, putting us over $32 million for the year.

With that said, let's take a look at the products and let's start with the distribution side, where new rail and piling have similar themes, increased tonnage and lower selling prices.

In new rail, tonnage shipped was up 70% from last year, but transaction pricing was down 27%. The net result was sales of $22.2 million, up 26% from the third quarter 2009. And in piling, on the strength of our Corps of Engineer job in New Orleans, tonnage ramped up 55% while pricing drop 15% compared to the third quarter 2009. And the result was sales of $37 million, an increase of 30% over last year.

In the manufacturing sector, we had a strong performance in our concrete businesses. Concrete buildings continue to benefit from projects related to the federal stimulus program. Sales in the quarter were $18.5 million, up 21% from last year; and in concrete ties, where total ties produced were up 40% from last year, largely on the increased volume by the Union Pacific at Tucson and Grand Island.

Also in rail, we continue to see strong activity in our Allegheny rail products businesses. Higher demand from the Class I's due to increased capital spending and positive train control projects drove our insulated bonded joint business at Pueblo.

On the construction side, the IDSI acquisition we completed earlier this year is working well as opportunities in our bridge fabrication business continue to escalate.

Bookings year to date are $19.6 million, 70% ahead of last year, and a backlog stands at $28.9 million, which is 99% ahead of last year. To ensure the uninterrupted production in bridge fabrication, over the next three years, we have done two things.

Number one, we worked with the Iron Workers Union at Bedford to open up the current contract and have a new agreement ratified and in place six months early.

And number two, we have installed welding fixtures at our Precise facility to add capacity required by the increase in demand.

In Tubular, coated products, coated 4.9 million square feet at our Birmingham facility. It's the best production level that we have had since the first quarter of last year. While activity in this product remains inconsistent, we are encouraged by this quarter's performance.

Overall, this was a solid quarter. With our current backlog, we expect to end this year strong and look forward to 2011. And we are also excited about completing the Portec merger and moving ahead with the integration.

However, as I look ahead, a number of challenges remain. Number one, stimulus spending is, for all practical purposes, complete. We have received considerable benefits in transit products, new rail, buildings, and fab products, but all the funds have been committed, and most of it will be spent on projects by the end of the first quarter of next year.

Number two, there remains an uncertainty about an extension of our contract with the Union Pacific at Grand Island, which expires at the end of this year.

Number three, the continued weak economy is playing havoc with non-residential construction. Spending was off over 10% last year, more than 20% this year and expected to be mixed in 2011.

And four, the absence of the Federal Transportation bill continues to negatively impact heavy civil construction. Our current expectations look for passage of this bill by the second quarter next year, but probably not in time for us to benefit in 2011. Unemployment in the construction sector remains, continues to run over 17%. Passage of an expanded transportation bill would surely help mitigate this problem.

And five, margins will continue to remain pressured in a number of our products due to inconsistent demand and soft pricing.

As you can see you what I have just discussed, we're faced with challenges. However, we have emerged from the most significant US recession since the Great Depression strong. We expect the economy and our key markets will post continuing growth next year. And I have the belief that our employees, who performed remarkably over the past two years given the very difficult situations and circumstances, will continue to do so in the future. And now I would like to turn back to David for our financial review.

Thank you, Stan. Sales for the third quarter of 2010 were $125.6 million compared to $97.9 million in the prior year, a 28.3% increase. Sales increase was due to a 28.3% increase in rail product sales; a 21.2% improvement in construction product sales; and a 141% increase in Tubular sales compared to last year's third quarter. The 28.3% increase in rail sales was driven by across-the-board increases in all of our major product categories, rail distribution, Allegheny rail products, concrete ties and transit products.

After a weak first quarter, rail distribution has rebounded nicely in the second and third quarters, and it's now the only category that has declined slightly on a year-to-date basis compared to 2009.

Our concrete ties sales increased by 41% and the Grand Island and Tucson facilities were approximately 80% utilized with the Union Pacific Railroad. We're actively marketing both heavy-held ties as well as an industrial concrete tie from Grand Island. This new tie is currently being sold into a soft industrial market.

In Spokane, we continue to produce concrete ties for transit authorities, other Class I railroads, contractors, and industrial customers, and we continue to experience stable inquiry and bidding activity. The construction product sales increase was due to a 29.7% increase in piling products and a 20.9% increase in precast concrete buildings.

Both the concrete buildings and bridge markets have benefited nicely from stimulus funding. Our concrete building business has a backlog consistent with last year. However, we expect the new orders from the federal side to decline over the next 12 months. Our bridge division has a backlog that is almost double that of last year, and we expect that division to experience continued robust activity over the next 12 months and beyond.

The third-quarter Tubular sales improvement was due to a very strong sales performance, as Stan mentioned, in our coated pipe business, as well as the strengthening in our threaded products business.

The energy markets served by our coated division were strong for the past several years, and then turned extremely weak in 2009.

After a very weak first quarter, second- and third-quarter coated product sales have recovered nicely. And while low natural gas prices have kept this market contained, business activity is reasonable and backlog continues ahead of last year.

As a percentage of sales, Tubular accounted for 6% of this quarter's sales; Construction was 50%; and Rail, 44%.

As mentioned in our earnings release and as Stan summarized, backlog stood at $204.9 million at the end of the third quarter, up 23.6% from September 2009, and slightly lower than last quarter.

Bookings for the third quarter increased by 9.2% to $124.8 million, compared to $114.3 million last year. For the first nine months of 2010, bookings were $351.5 million compared to $329.2 million in 2009, an increase of 6.8%. Gross profit margins were 16% in the third quarter, a decrease of 210 basis points from last year's third quarter. The decline in margin was due principally to a $4.2 million reduction in LIFO income compared to the third quarter of 2009, partially offset by improved manufacturing variances and decreased scrap and other variances.

SG&A expense increased by $0.8 million or 8.7% to $9.9 million in the third quarter of 2010 due to incentive compensation expense of $0.5 million and increased bad debt expense of $0.3 million.

As mentioned in our earnings release, the increase in bad debt has to do more -- has more to do with last year's quarter containing a $0.3 million bad debt credit as opposed to any significant expense in 2010. Deal costs for the quarter totaled $83,000, and $1.3 million on a year-to-date basis.

Excluding deal costs, SG&A represented 7.8% of sales in the third quarter of this year as compared to 9.3% of sales in last year's third quarter, the decrease being the result of the sales increase this quarter.

As a result of the foregoing, third-quarter operating income was $10.2 million compared to $8.8 million in last year's third quarter, a $1.4 million or 15.8% improvement. As a percentage of sales, operating income was 8.1% in this year's quarter versus 9% last year.

Year-to-date operating income was $22.5 million compared to $18 million last year, a 25.1% increase.

If you were to add back the 2009 concrete tie adjustments, operating income would be 3% lower this year. Interest expense was $211,000 in the third quarter of this year, $117,000 or 35.7% less than last year. The decline was due to reduced average borrowings and, to a lesser extent, lower average interest rates.

Interest income was $114,000 compared to $169,000 last year, a decrease of $55,000 or 32.5% due entirely to a significant decline in interest rates from the third quarter of 2009 to this year's third quarter.

Our cash has been invested principally in money market funds and other short-term investments where preservation of principal and quick access to funds has been the priority.

Third-quarter pretax income was $10.1 million compared to $9.8 million in last year's third quarter. Excluding the 2009 gain on the sale of marketable securities, pretax income increased by 16.8%. As a percentage of sales, third-quarter 2010 pretax income was 8% compared to the 8.8% in last year's third quarter.

The third-quarter 2010 effective income tax rate was 35.5% compared to 37.6% last year. The decrease in rate was principally due to an increased domestic manufacturing deduction.

Net income increased 6% to $6.5 million or $0.63 per diluted share compared to $6.1 million or $0.60 per diluted share last year. Once again, excluding last year's gain on the sale of securities, net income would have increased 20.6%.

Turning to the balance sheet, debt at the end of the third quarter was $16.4 million compared to $18.6 million at the end of 2009 and to $22 million at the end of the third quarter of 2009, which represents a $5.6 million reduction.

Capital expenditures were $1.4 million for the third quarter compared to $2.5 million in the prior-year quarter. The majority of this quarter's spend was principally for new yard upgrades and related production equipment.

Depending on the timing of certain planned projects, we expect capital expenditures are likely to range between $6 million and $7 million in 2010.

As mentioned in our earnings release, cash flow from operating activities has easily exceeded capital expenditures, scheduled debt service payments and share repurchases, and we expect the same at year end. Regarding share repurchases, we did not repurchase any Foster stock during the first nine months of 2010. There's still a little left on $11.7 million left on the Board authorization.

Debt as a percentage of capitalization was 6.2% at the end of September compared to 6.9% at the end of Q2 and 7.4% at the end of December 2009.

Cash at September 30, 2010 was $144.2 million, which was invested principally in AAA-rated money market funds. Working capital net of cash decreased by $5.8 million compared to June 30, 2010 and by $9.7 million compared to 12/31/2009.

Accounts Receivable increased by $0.5 million during the quarter, and DSO increased to 45 days from 44 days at the end of last quarter. We believe that our A/R portfolio remains in very good condition.

Inventory increased by $0.5 million during the third quarter of 2010 while accounts payable increased by $3.4 million during the same period.

The increase in inventory was due to small increases in our Construction and Tubular segments, partially offset by a reduction in Rail inventories.

Looking forward, we believe that the continued economic weakness and credit concerns, as well as weak tax receipts at the state level will preserve a continuing inconsistent market and as Stan mentioned, a heightened competitive environment for the next six months. We believe that as conditions improve, the markets we participate in will be poised for significant improvement as well.

L.B. Foster has a tremendous advantage of navigating through this period of uncertainty in extremely strong financial position. We ended up the quarter with $144.2 million of cash as we have mentioned, and approximately $70 million of available credit, giving us the ability to take advantage of opportunities as future circumstances develop.

That concludes my comments on the third quarter of 2010. We will now open up the session for questions. Carol?

Thank you, David. (Operator Instructions). Liam Burke, Janney Capital Markets.

On the fabricated bridge products, you mentioned the backlog is up 99%. It looks like the business is strong through 2011 and beyond. A lot of that business is stimulus related. What's -- and again, we've got some uncertainty in the municipal spend side. What's driving that growth?

I think the only job that was stimulus-related, Liam, were the approach spans to the Brooklyn Bridge. The rest of it is either state or federally funded projects. And that activity level still remains very strong. I know that there's the bidding -- the bidding activity as we look at it going into the next six months is very strong too.

We're looking at activity out there -- why we did some of this is really to ensure production levels that we think we're going to need over the next two to three years. But it's not -- there's only one project that was related that I could note. And David, I don't know -- I think there's only the one project in Brooklyn that was related to stimulus spend.

Okay. And then on the concrete tie business, you mentioned one of the plants for UP might not be renewed -- I guess, on that. And then what would be the utilization rate of the Spokane plant that is non-UP related?

A couple questions there. I think first, we do hope that we will be able to continue operations at Grand Island. That truly is our intent, but we are not at that point yet.

And, as far as Spokane is, they've had a reasonably good year. I think they expect to be somewhere between 200,000 and 225,000 ties out of there this year, but that will only be at about 75% of capacity levels.

Great. Thank you.

Brent Thielman, D.A. Davidson.

I guess first question, just relative to the gross margins in the quarter, you saw some sequential improvement in revenues, but your gross margins slipped a little bit. Is that just mix related?

You know, it is a little bit, Brent, but the biggest issue is how the LIFO and the timing of how LIFO bleeds into the margin. We had a huge amount of income in the third quarter of last year, of about $4.9 million related to LIFO. And, that certainly comes as product costs are declining. So we also had some negative variances offsetting that, but not on a 1-for-1 basis. So you have some benefit in the third quarter of last year that had a positive impact on margins, and we certainly did discuss that in third quarter of last year.

And now, we've got -- we're into a slightly declining still, but really prices haven't declined that much this year during the course of the year. It's just that when you look at average prices this year as opposed to last year, they are still down very significantly though. But, in the nine months this year, prices have only come down a little bit and we've only got a small amount of LIFO income that recognized those small price declines. So you've got a little bit of a mismatch on -- when you compare one quarter to another as opposed to a nine-month period or a year period.

But that's one of the larger issues that is causing that. Otherwise, the margins for most of our product lines were either consistent or improved compared to last year from an operated basis.

Okay. Fair enough. And then, I guess on the -- obviously another great quarter in terms of your backlog and visibility there. I think Q4 typically tends to see some seasonality. Do you think revenues continue to ramp from here into Q4? Or how are you sort of looking at sort of the timing of some of these projects?

It's going to be -- we expect some of that to start going through in the fourth quarter, and, it will carry into next year. But as we would expect that the fourth-quarter will be -- I think we are, as we said, I think we are expecting the fourth quarter and the year to end up strong.

Okay. And then I guess this level of bookings -- I appreciate the commentary and sort of what you are seeing in the broader environment, but I think Q4 as well, if I recall, tends to see some seasonality as well in terms of activity. Do you think this level of bookings is sustainable?

It's hard to say. I mean, typically the fourth quarter from a booking standpoint is normally one of our weaker. And, activity really tends to ramp up in the first quarter next year as projects hit the books. So, I would expect -- it's hard to say, Brent, but I would expect that the levels would be off somewhat in the fourth quarter from a booking standpoint.

Okay. Then actually just one more. On the distribution side, you talked about some of the pricing pressures out there Are you starting to see some stabilization there on new bookings?

Yes, a little bit, I think we are, but we still are running considerably behind where we were last year. The thing that really is -- that is really helping us in both of our distribution products, and I think again, the distribution new rail and piling were running about 50%, a little less than 50% of revenue. But, market share -- I know in the Rail group, we track market share and market share was up 10 percentage points over last year. And so that's really -- helping out a lot because the overall run rate of consumption on Rail is still down compared to where it was -- down considerably, I think 15%, 20% from where it was two years ago, Brent.

Yes, okay.

So we're picking up a little bit more share and that's been working out well for us.

Okay, great. Thanks, guys.

The other thing that really is -- that we're also seeing, and I mentioned this with the -- we don't do a lot in the non-residential buildings market, but what we do do is normally the truckload here and truckload there, and it's more profitable. And a lot of the work that we are seeing are big mega projects. And so, those tend to be a lot of pressure on margins and (multiple speakers)

Those are more competitively bid, certainly.

Brian Rafn, Morgan Dempsey.

Good morning, Stan and Dave. Give me a sense of what's your cost structure you are seeing? You certainly have talked about backlog and bookings. What are you seeing in steels, concrete, and then maybe wages, salary and insurance benefits.

Well, you know, the product costs -- our input costs right now are certainly lower than they have been in 2008 and even 2009, Brian. And we are -- commensurate with our selling prices. You see, except as we discussed earlier for our -- some of the LIFO adjustments we had last year, we've got -- X those kinds of things, our margins are pretty consistent with last year, even a tad higher in some areas. So, since margins are at or as good as last year, X LIFO, and our selling prices are down, certainly our input costs are down commensurately with those selling prices.

Some of our other operating costs -- I mean we've been I think pretty much market with regard to -- we had a wage freeze the entire year last year. We had headcount reductions. This year, we are going with the market and with a -- merit increase, but certainly modest ones, reasonable ones, though.

And our insurance costs are I think pretty typical on the health side. They've increased. I think our health care costs are up 8% to 9%. But our other -- our entity insurance costs, whether it's general liability, workers' comp, what have you, have declined year over year for the past several years.

Okay. Can you give us a sense what kind of shifts you are running or maybe capacity utilization at some of your other plants -- Bedford, Birmingham, Magnolia, X the concrete ties?

Well, X the concrete -- you know, I talked about what's going on at Bedford. I think that that, from a capacity utilization, that's going to play into Precise next year and that's going to keep those two operations going well. You know, we only -- we booked -- we ran through 5 million square feet as I said in Birmingham last quarter. Three years ago, we did 32 million for the entire year. So we do have capacity there.

I don't think that we have really any capacity constraints anywhere, but we are actively looking -- we will be able to figure out capacity, but there's not any constraints that we have at any of our facilities.

Okay. Give me a sense -- bench strength, engineers, estimators -- that type of thing -- would you have to see a pretty strong reflation in the economy for several quarters before you guys would have to be a net hiring position?

Well, we are hiring as we need it. I think that we have hired some of our engineers as business activities have picked up. We have surely added more people at the plants. As that activity levels have picked up and will continue to do so. So --

Okay. Give me your sense -- your sense of your adoption rates relative to concretize over the last several years, replacing some of the standard -- I'm assuming creosote wood ties. What do you see? Is that primarily in heavy haul routes? Or is it primarily in railroad yards? Where are you seeing the demand?

The ties -- the concrete ties are typically in either high-speed or heavy haul type of applications, Brian. And there's typically 20 million to 22 million ties consumed in North America annually. And concrete over the last two years has been less than 10% of that. So, there's obviously significant opportunities out there. But so far, concrete in North America has been used somewhat as a niche product with high-speed and heavy haul.

The heavy haul -- are you guys talking about -- it sounds like you're talking about routes. What about heavy haul like if you are in a railroad yard or whatever, where you are getting constant -- you know, there's a lot more, certainly, traffic volume?

We don't have the speed, and I think the speed and the -- really wears a lot on the ties. I (multiple speakers)

Okay.

Just to David's point, we're seeing a pickup in activity with some of the high-speed lines that are in planning right now, and we would expect that would continue as more high-speed rail develops. And, in the -- with the freight lines, it's normally on the high-speed -- not high-speed, but heavy haul applications. And where they do have higher speeds and it's used in new construction and double and triple tracking.

Okay. What -- if you guys -- you guys talked a little bit about the Highway Bill. We're certainly all waiting for that. High-speed rail -- would high-speed rail roll out in several projects across the US? Would that lift that concrete tie above 10% of total tie demand?

It could depending on how it goes. It could be slab track applications that are involved with that also, but, we would like to think it will.

Okay, okay. The Union Pacific -- the expiration of that in 2010 -- are they bidding that out with other vendors? Or is that something that you would assume that because of your previous supply chain with them, that that would be offered to you guys -- awarded?

You know, I think they're just taking a -- the UP is taking a look at their entire program, being where it makes sense to use concrete and where they want to get it from. Brian, we've got, obviously, other facilities in the United States as well that they can and do draw from. But right now, we are not aware that they are bidding that out to anyone else.

Okay. And then the short-term debt -- about $13 million. Is that paid off by year end? Or what's the timing on that?

No. That will be around. And we are currently refinancing our revolving credit agreements. And some of that will carry into the new agreement -- probably $9 million or $10 million of it will carry into the new agreement.

Okay. And then $6 million or $7 million CapEx for the year, Dave -- maintenance will be how much?

Maintenance is probably $2.5 million to $3 million.

$2.5 million to $3 million. Thanks, guys.

Tony [Ranier], Cantor Fitzgerald.

Hey, guys, and congrats so much on the quarter. Can you just give me a quick update on the divestiture process with the transaction please?

Well we're working with it very closely. It's coming along I guess just coming along well. I really -- can't really expand on it too much beyond that, but we expect that to continue and to complete in a timely fashion.

Okay. A timely fashion is timely I guess?

This year.

We need to close that this year, and that is still our plan. We've been --

It's actually going quite well, and it's on track. We set, certainly, an internal schedule out, Tony, and it's -- right now it's tracking well. We expect to get that done and complete the deal before the end of the year.

Any holiday hiccups timing-wise? Is that factored in? All due respect, but people take some time off. I wish I could.

That's not planned. I mean I don't think -- I think we've got plenty of time that's factored into it to get this done by the end of the year.

Okay. And if by some chance or something happens where you can't do the necessary divestitures, then what happens?

Then what happens is that everybody -- that we pay them off $2 million and everybody goes home.

Can you give a ballpark kind of thing, I mean odds of that?

We feel (multiple speakers)

(multiple speakers). We're not handicapping this, Tony.

We feel very strongly, Tony that we would be able to complete that (multiple speakers).

We would not have agreed to the extension if we weren't very confident that we could get this done.

Got you. I appreciate it. Thanks so much. Congrats again.

Tom Spiro, Spiro Capital.

Tom Spiro, Spiro Capital. Good morning. Congratulations on a nice quarter. As I recall a number of quarters ago, we had some concrete tie warranty issues with our primary customer. Anything new in that area over the last three months?

Well, we do continue to have ties that are -- with certain warranty issues, and we continue to work through that with them.

Was there anything of a material nature in the quarter?

No, nothing at all, Tom. What really occurred when the ties that did have problems last year, when that occurred, it certainly -- it certainly created a heightened sense of awareness at the customer base. And they started I guess, spending more time looking for problems. And it seems like, you know, there was a lot of time spent searching and every time that a customer would find a little hairline crack, they would think that they had a problem.

So, we've spent a lot of time working with the customers and getting sort of a meeting of the minds as to what a either a bad tie is or a failure is. And we're making progress in that regard. But there has hasn't been anything of any significant nature since -- that we have replaced or that we have recorded since second quarter of last year.

Thank you. Over on the Grand Island facility, am I right that the UP is the sole customer of Grand Island?

We -- the Union Pacific probably takes 80% of the ties out of there, Tom. We do manufacture ties for industrial applications, moving it east from there also.

And the existing UP contract expires December 31 of this year?

That's right.

I see. Okay. That's helpful. Thank you. How is our little joint venture down in Texas doing?

It's coming along well. We -- we had a small loss in the third quarter, but we report our earnings a month late. We lost money in July, but we've made money in -- we lost money in June which recorded -- which was reported in the third quarter, but we made money in July, August and September.

I see. And as I recall, we've been carrying a lot of -- a piling for the Army Corps of Engineers waiting for them to take delivery. It sounds like they began that process in Q3. Are they accelerating that into the end of the year, or will weather be a problem? How does that unfold?

Well, that -- some of those Army Corps projects, there's a couple of different sales going on in there, Tom, but that really started third quarter of last year. And it's been ongoing.

But what happens, because of the -- because of our contract with the Army Corps, there's a lag between the time we deliver the piling to the yard and the time we can recognize revenue. We don't recognize revenue until they actually take it out of this yard. Although what I would tell you is, by the time they take it, 80% to 90% of that inventory is already paid for.

And they will be taking it right in through second quarter of next year.

Okay, that's helpful. Thank you. And lastly, as we move from Q2 into Q3, did you notice much -- a change in any of your end markets -- the strengthening or weakening in a particular market that's worth discussing?

You know, we -- we've had some pickups. I think that as I discussed, our Allegheny rail products had a pickup, and there's some good moving parts going in that -- positive moving parts going into next year with that program.

The stimulus package, or the stimulus program really was a benefit to our buildings, concrete buildings. And they're going to have another record year, Tom, but that will slow down next year, so that's going the other direction.

Piling -- piling has been pretty constant. New rail has been somewhat constant also, but we had a larger market share, and so that's really helped drive that up. We've got some great things going on with fab products, and that will continue going into next year.

So there's been a -- it's kind of been a mixed bag, but I guess overall, we -- we expect continued growth and continued pickup and continued activity next year. And we are seeing this year compared to last year is surely a pickup. But, we're very pleased with our level of bookings and our ability to put books -- put orders on the books. Backlog is strong. Balance sheet is strong. So we are really -- and we expect to close on Portec. So we're excited about next year.

Well, that sounds great. Thanks much and good luck.

Scott Blumenthal, Emerald Advisers.

Good morning, Stan and Dave. Dave, the timely closing of Portec, does that mean that you don't plan or you don't believe that you're going to have to extend the tender again?

Well, there's -- there's two issues, Scott. One is, I would recommend to everyone on the line that we -- paying a lot of attention to the tender is -- the tender isn't as significant as the drop dead date with Portec, which is December 30 of this year.

We really -- we hesitate to put that tender out there too far because if we are able to get the divestiture done early, and get the DOJ's approval, we're going to want to close. So -- and if the tender gets pushed out past that time, then we have to sit and wait for the tender to expire. So my guess is, we're trying to be conservative with that tender so that it doesn't get in the way of a timely closing of the deal. So there will probably be one more extension of the tender would be my guess because I believe the current tender goes through November 15.

15th, right.

Right. Okay. That's helpful. And, with regard to the divestiture, have you or are you able to give us any idea as to what you think the proceeds are going to be from that?

No.

We're actually going through an auction process, and it's been going extremely well, but we are not going to start estimating a range of proceeds, Scott.

Well know, just knowing that there's an auction process going on is really helpful. I appreciate that.

And, not to beat a dead horse here, but, Sam, could you talk about maybe what you think are the range of possibilities with regard to what's going to happen at Grand Island and what you think is going to be the probable outcome?

No, I would like to think that we will conclude it very positively but I'm not going to speculate.

Okay. And, I was kind of intrigued by your comment, Stan, about positive train control as a driver in your insulated bond and rail business, product business. Can you talk about maybe the potential opportunity there and how quickly you think some of that might come through?

Well, I think that -- it's a $5 billion program that's been mandated by the FRA, which is to be completed by the end of 2015. And, I believe the railroads are all looking at it differently. But some of them are including the usage of insulated bonded joints. And so we think that there will be a pickup in demand particularly at our Pueblo, Colorado facility. We've seen some of it this year, and we expect to see it going forward the next couple years.

Okay. Is that -- I guess I could ask that later. With regard to the piling business, I understand that infrastructure projects, there's kind of a dearth of them historically. But, the government is planning on doing a heck of a lot of construction on the island of Guam to move the troops from Okinawa. And I was wondering if you are involved or if you have any contact with any of the consortia there and can be involved in --

Surprisingly, we have been doing work in Guam, in the last couple of years in preparation with some of this.

We have been looking at Guam. We've bid work over there. We have also -- we have done some nice work in the Panama Canal, and we've done work over in Iraq. But we have looked at work at Guam.

Okay. Perfect. Thank you.

(Operator Instructions). Abbott Keller, Kestrel.

What are your thoughts on share repurchase going forward?

We believe that there is a place for share repurchases. And, we've obviously done them in the past, Abbott.

We've obviously, with the potential acquisition of Portec right in front of us, we are hesitant to do a whole lot with regards to repurchases until we get this deal done and understand the impact, not only on purchase price, and what we might get as divestiture proceeds, but then, certainly the working capital model of that acquisition.

So, it's something that we have done in the past and we -- it's something that we would like to continue to do in the future. But, probably on a short-term basis, we're going to be on hold for a little bit.

Okay, thank you.

Ladies and gentlemen, this concludes the question-and-answer presentation today. I will now turn your presentation back to Stan Hasselbusch for his closing remarks. Sir?

I would like to thank you all for your positive support, and I think this is going to be the last scheduled session that we have this year, so I again thank you very much for your support and wish you all a very safe and happy year end. Thank you.

Thank you, gentlemen. Ladies and gentlemen, you may now disconnect. Your conference call has concluded. Have a great day.