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Edited Transcript of FSTR earnings conference call or presentation 5-May-20 9:00pm GMT

Q1 2020 L.B. Foster Co Earnings Call

PITTSBURGH May 23, 2020 (Thomson StreetEvents) -- Edited Transcript of L.B. Foster Co earnings conference call or presentation Tuesday, May 5, 2020 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* James P. Maloney

L.B. Foster Company - Senior VP & CFO

* Robert P. Bauer

L.B. Foster Company - CEO, President & Director

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Conference Call Participants

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* Brett Kearney

Morgan Group Holding Co. - Research Analyst

* Christopher Ralph Van Horn

B. Riley FBR, Inc., Research Division - Analyst

* Joichi Sakai

Singular Research, LLC - Equity Research Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to L.B. Foster's First Quarter 2020 Results Conference Call. (Operator Instructions) This conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Jim Maloney, Senior Vice President and Chief Financial Officer. Thank you. You may begin.

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James P. Maloney, L.B. Foster Company - Senior VP & CFO [2]

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Thank you, and good evening, everyone. Welcome to L.B. Foster's first quarter earnings call. I am Jim Maloney, Senior Vice President and CFO. Before I begin, I want to introduce 2 people you may encounter as you interact with us on investment research or other IR matters. Jim Kempton joined us as Controller and Principal Accounting Officer. Jim has been with us for a quarter and has been getting up to speed on our company very quickly. And we also have Stephanie Listwak, who will assume the responsibilities previously held by Judy Balog, who is returning to another role in our company.

This evening, I will review the company's first quarter financial results. Afterward, Bob Bauer, President and CEO, will review the company's first quarter performance and provide an update on significant business issues and market developments. We will then open the session up for questions. Today's slide presentation, along with our earnings release and financial disclosures, were posted on our website earlier today and can be accessed on our Investor Relations tab at lbfoster.com.

Some statements we are making are forward-looking and our best view of our markets and business today, including comments related to COVID-19. These forward-looking statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information, except as required by securities laws. For more detailed risks, uncertainties and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and presentation and our 10-K.

We will also discuss non-GAAP financial metrics, such as adjusted EBITDA and net debt, and encourage you to read our disclosures and reconciliation tables in the earnings release carefully as you consider these metrics.

I'm going to cover the first quarter results. But before I do that, I would like to discuss several actions we took, which we believe will improve our operating results and cash flows.

As we disclosed previously, we relocated a precast facility from Spokane, Washington to Boise, Idaho and closed 3 service centers in 2019 to reduce head count, cost and risk in our Test and Inspection division. In Q1, the company recorded a total charge of $881,000 for these actions, which are now completed. On April 30, 2020, the Board of Directors authorized closures of 3 additional test and inspection facilities and other cost-cutting measures, which were previously disclosed on Form 8-K. As a result, we expect to incur a charge ranging from $5.5 million to $7 million. These nonrecurring charges will be recorded during Q2 and the remainder of the year. We also are evaluating additional cost-cutting measures in our Test and Inspection division to offset the decline in crude oil demand due to the COVID-19 pandemic. Bob will be discussing the impact of the pandemic on our business in more detail later on in our presentation.

So with that, I will start my financial review, beginning with Q1 sales and gross profit. During the first quarter, our sales were $129 million compared to $150 million in Q1 of 2019, a $22 million or 14.4% decrease. Consolidated gross profit decreased $8 million over the prior year quarter. Gross profit margin of 16.8% was a reduction of 260 basis points from the prior year. The decrease in sales and gross profit in the quarter were due to several reasons. Even though the company was generally considered an essential business and allowed to operate during the pandemic, our operating results in Q1 were negatively affected. While the precise impact of the coronavirus is difficult to quantify, as stay-at-home orders were enacted in Q1, we experienced disruption in our supply chain and in customer acceptance of products and services as well as a general weakness in demand.

Our Rail segment was adversely impacted by our Rail Technologies business in North America and Europe. The Rail Technologies business had a 9.7% decline in revenue, which also negatively impacted gross margin. These results were driven by lower friction management consumable sales due to weakened demand for our solid consumable offerings in North America due to less movement of freight and transit, coupled with stay-at-home orders that delayed our services for the London Crossrail project.

From a Tubular and Energy segment perspective, the coronavirus pandemic and the associated reduction in energy demand due to reduced travel and movement of goods throughout the world caused U.S. exploration and production companies to decrease activity and implement spending cuts. These actions, in turn, decreased revenues in our Test and Inspection division by 37.1% compared to last year and had negatively impacted gross profit. The 32.4% decrease in Precision Measurement Systems revenue was due to projects being delayed by customers as pipeline capacity requirements are being reevaluated.

Finally, in Q1, our precast concrete Boise facility had a 45.6% less revenue when compared to Spokane, Washington facility last year, which depressed gross margins. This reduction in volume and revenue was expected when we made the decision to relocate our facility last year. The Boise facility in the overall precast concrete division is seeing enough demand that we still have a good chance to meet our 2020 expectations.

Now moving on to expenses. Our consolidated selling and administrative expenses decreased $592,000 or 2.7% to $21 million in the first quarter. Net interest expense was reduced by $538,000 or 39.7% for the first quarter due to a $26 million reduction in outstanding debt when compared to March 31, 2019. Our income tax benefit was $828,000 in Q1 with an effective tax rate of 30.7%. The 30.7% effective tax rate was higher than the statutory rate, primarily due to state income taxes and nondeductible expenses.

Our first quarter net loss was $2 million or $0.18 loss per diluted share compared to income of $4 million or $0.35 per diluted share last year. Adjusted EBITDA totaled $3 million in the first quarter, a decrease of $7 million compared to last year, mainly due to the decline in revenues and gross profit.

Now turning to the balance sheet. Over the last several years, we have strengthened our balance sheet, which we expect to help us get through these challenging times. Our trade working capital decreased $6 million compared to December 31, 2019, mainly due to a decrease in inventory of $6 million. The decrease in inventory in Q1 was due to better inventory management in our Rail Distribution business. Our current ratio as of March 31, 2020, is a very healthy 1.93.

Our net debt was $58 million at March 31, 2020, compared to $81 million in March of last year. Our trailing 12-month leverage ratio is 1.5 as of March 31, 2020. Our total available funding capacity, that is the available capacity under our revolving credit facility plus our cash, was approximately $105 million as of the end of the quarter, which gives me confidence that we can deal with the issues arising from these unprecedented events.

Now I will speak to our cash flow activities. Our cash used in operating activities in the first quarter was $7 million compared to a use of $14 million in 2019. The $7 million improvement in operating cash flow was primarily related to our continued focus on trade working capital improvements. During the first quarter, our capital expenditures were $4 million. The first quarter expenditures primarily relate to the purchase of a continuous welded train car and unloader within our Rail segment and continued investment in our Precast Concrete Products business, including our new Boise, Idaho facility. I would note that the continuous welded rail train car and unloader is a very infrequent capital requirement for the company, as these have a very long useful life associated with them. We are anticipating our capital spend to be between $8 million and $10 million for the entire year.

Now on to new orders and backlog. In Q1, overall orders were $137 million compared to $180 million last year. There were decreases within all 3 segments year-over-year. Historically, we see a ramp-up in orders in the month of March each year. However, this year, we did not see that trend. More than 50% of the quarter order decrease was in the month of March year-over-year. The order decline for the quarter was mainly due to the activity in Rail Distribution and transit and also in Tubular and Energy segment due to the decline in demand in the upstream and midstream markets we serve. Backlog stood at $238 million at the end of the first quarter, an increase of $8 million or 3.3% during the quarter. The backlog decreased by $12 million or 5% compared to March 31, 2019. Bob will provide more details on our orders and backlog activity as well as our market outlook for all our segments.

That concludes my comments on the first quarter. So with that, I will now turn it over to Bob.

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Robert P. Bauer, L.B. Foster Company - CEO, President & Director [3]

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Thank you, Jim, and hello, everyone. I appreciate everyone joining us today as we attempt to provide as much insight as possible around the recent quarter's results as well as how we see our markets being affected by the actions that have been taken around the world to stop the spread of the virus. Unfortunately, there is a lot of uncertainty, but we'll do our best to help you understand what we're seeing.

I want to start by giving you some insight into our operating environment and the changes that took place in March as news of the virus led to many countries declaring a state of emergency. Before I get into these details, I feel compelled to recognize all of those around us in the medical community that made it possible for us to operate and do our part in supporting the economies that depend on us.

During the month of March, the company reacted to several stay-at-home orders across North America and Europe as well as recommended preventive measures to help stop the spread of the virus. L.B. Foster was widely considered an essential business and allowed to continue operating under these orders. We took a number of steps to follow recommendations on social distancing and reduced close interaction among employees while continuing to operate. Our employees did a terrific job adapting to the circumstances, working remotely in some cases and also making adjustments in operations to respect the health and well-being of their coworkers. We are extremely proud of our people and the efforts they made to put us in a position to continue supplying products and services to our customers. I can't say enough about the efforts everyone has made.

Our people take great pride in continuing to operate for the very reasons we were deemed an essential business. Governments and people around the world depend on support from us to keep infrastructure operating and moving forward in our railways, highways, ports and pipelines, where people, products and commodities are transported every day, keeping our world moving. Assuming we will continue to operate while keeping our people safe, we believe we are also making a contribution to the health of the global economy, which is needed for the long-term well-being of everyone, not just our stakeholders. As I'm sure you've heard from so many other companies already, and we're no different, our top priority is the health and well-being of our employees and guarding against the risk of infection. We did not experience any sickness in the U.S. and Canada up to this point, and only a few cases emerged in the United Kingdom, which are headed toward a favorable outcome.

In order to give you a sense of the impact the stay-at-home orders had on our business, I'll begin with 4 anecdotal reports. One, we experienced minor disruption in our supply chains, typically in areas where we source circuit boards, controls, cameras and other sensors for railway automation solutions. A portion of these are sourced from China and did not meet delivery requirements for projects we had scheduled.

Second, we experienced some interruptions on customer acceptance of shipments as local governments called for a shutdown of the industry or customer type we were serving. Certain construction projects did not move as smoothly as they otherwise would have due to the adjustments being made to follow local orders or address local virus concerns.

Third, there have been some delays and cancellation of service work as customer willingness to have us work on-site changed. In some cases, customers were developing new procedures for accepting third-party service providers. And in other cases, customer opinion changed toward acceptable social distancing practices and the risk associated with third-party providers. Some of the service work was stopped, as in the case of London Underground, and some customers have delayed noncritical work as a way to cut back.

Fourth and finally, there was some general weakness in demand as customers did not get around to moving certain projects forward and, in some cases, were unable to conduct business in a work-from-home environment or with people unable to perform. There was also some decline in volume associated with markets that are experiencing lower volumes, such as the North American freight rail market.

To precisely quantify the impact from all of these virus-related issues is difficult. We estimate that sales revenue in the first quarter fell short of our expectations in the range of $10 million to $17 million, largely due to the impact the virus had from previously mentioned issues. This shortfall includes the impact from weakness in the energy markets, which started before any actions were taken to combat the spread of the virus, but were exacerbated as the demand for oil dropped substantially once the public around the world stopped traveling, driving to work and engaging in other activity that resulted in reduced mobility.

Looking ahead, we anticipate continued disruption through at least a portion of the second quarter. The second quarter is an important quarter for the company to see a ramp-up in orders and backlog as construction projects are planned and started. The Rail and Construction segments are currently experiencing good proposal activity despite pockets of weakness that are typically related to traffic volume or working conditions. We expect to experience continued shortfalls in service work that can't be performed. We have some customers that haven't gotten back to work, and there is likely to be some project deferrals for budget and schedule reasons.

The energy market does not have a favorable outlook, and the industry expects significant trouble funding ongoing development activity that drives demand for our services. We are revising our outlook for the energy market and forecast sales to decline significantly for this segment. The changes in supply and demand for oil, which had been changing very rapidly, have led to a supply-demand imbalance, causing our customers to make dramatic changes that are significantly impacting forecasts for our services.

As I discuss the quarter and what we expect to see unfold, there are striking differences among our reporting segments. New orders of $137 million declined $43 million or 24% from prior year. The largest percentage change is in the Tubular and Energy segment, with every division declining from widespread slowing across upstream and midstream operations. Customers we serve are reducing capital spending and deferring projects wherever they can. The Rail segment was driven by a reduction in transit rail project orders, a decline in services on track and a decline in certain consumable sales as railway traffic declined. We believe transit project investment should continue as these are projects with long-term planning. However, ridership volume is likely to remain low for some time and, therefore, could impact the timing to fund follow-on projects. Construction declined the least, the decline all driven by lower order input for bridge decking projects. We believe the bridge decking projects are being held up due to obstacles presented from stay-at-home orders.

The first quarter ended with a slow pace of order increase as we approached our typical seasonal peak period. Orders in March were well below expectations, accounting for more than half of the year-over-year first quarter decline. This leads us to believe that March was clearly impacted by lost days at work on the part of our customers, project delays and other virus-related matters, such as people adapting to working from home.

Under that backdrop, it's worth noting 2 positive items. First, our backlog sits at $238 million with roughly 1/2 of it scheduled for shipment in the second quarter. This includes Rail segment backlog that is up by $5 million and Construction segment backlog that is up by $10 million from the beginning of the year. And second, proposal activity has not deteriorated in many parts of the Construction and Rail segments. Construction projects in the U.S. have been affected by delays in some cases, but the overall projections for existing and new projects remain the same as it was earlier in the year. Similarly, the rail industry, both transit and freight rail, have projects that are expected to move forward. We have not received any indication yet that major rail and construction projects are being canceled at this point. We realize that it's still early, and the broad economic impact from the stay-at-home orders has yet to be fully understood. But at the moment, we are not getting signals from customers in these 2 segments that indicate a widespread reversal in direction from what was planned for 2020. I expect that if there is broad economic decline associated with rising unemployment, along with fear directed toward the transportation industry, then we may see some reversal in this activity in the months ahead.

We are revising our forecast for the Tubular segment for the year in anticipation of a very weak energy market. The Tubular backlog stood at $27 million at the end of March, down $7 million from the start of the year, as we completed pipeline projects in our Protective Coatings operations. The backlog is roughly where it was last year at the end of Q1, but the expected decline in future orders in 2020 leads us to estimate that sales revenue will decline by at least 25% in this reporting segment.

Our most challenging area is in the upstream market, where the Test and Inspection Services division had an EBITDA loss of $2.1 million in the first quarter. The magnitude of the loss illustrates how severely the upstream market has deteriorated. Last quarter, we announced actions we were taking to close certain operations in Oklahoma and Louisiana, where we did not expect to see the market recover in any way that would support continuing operations. We have added 2 more territories where we see little potential to return to promising sales levels. As a result, we plan to close the service centers we have in North Dakota and Nebraska, along with a satellite operation in Colorado. And as Jim noted, we will take charges in the second quarter for the closure of these facilities. We will continue to take action intended to eliminate losses associated with this division. Following the closure of these sites, we will have 1 site in Wyoming, 3 in Texas and 1 in West Virginia remaining.

Jim also mentioned the impact of moving our precast plant from Spokane, Washington to Boise, Idaho, which started in October last year. We also lost production time as we completed the start-up of our new facility in Boise, Idaho. Sales in Boise were about 1/2 of what sales in Spokane were in Q1 last year. In addition, we had start-up costs without the sales volume. This was forecasted, but it does weigh on first quarter results for the Construction segment.

As you review segment profit results, the year-over-year decline in segment profit in Construction was almost entirely due to the precast concrete division, and nearly all of that was associated with the Boise relocation. We expect that to change in the second quarter. And by the third quarter, we expect the Boise facility to be operating at much higher efficiency levels.

The segment profit for Rail Products and Services was the result of lower volume on new transit projects, a significant decline in consumable friction management materials related to declining rail customer traffic and reduced services at Class 1 U.S. carriers and London Underground. These conditions are likely to persist for at least a portion of the second quarter.

And in the Tubular segment, 1/2 of the segment profit decline was related to the Test and Inspection Services division. I just spoke about our plans to address that as quickly as possible. The Tubular segment accounted for $4.1 million of the $7 million consolidated decline in segment profit.

I'll close with a comment on our balance sheet strength. Jim spent time outlining the strength we have today and what our liquidity position looks like. We've worked hard to improve this position. We generated $29 million in operating cash flow in 2019. And on a trailing 12-month basis, from March of 2020, we generated $36 million of operating cash flow. We have some key projects we started last year requiring capital that we intend to complete. We do plan to defer other projects out to 2021. But whether you're looking at 2019 or our trailing 12-month results, our net debt-to-adjusted EBITDA is in the 1.0 to 1.5 range, again, supporting our position that our balance sheet does provide us with a good starting point from which to react to the anticipated weakness.

Our priority right now, from a business standpoint, is to act as quickly as possible to the new reality of the energy markets. The upstream segment will get significant attention on actions to mitigate the impact of this weakness, and the divisions serving pipeline applications are proactively planning for an expected decline in the second half of the year. Our other priority is to keep everyone in good health, get through the next quarter without any troubling illnesses and continue to support the economy by doing our part to support critical infrastructure.

I'll end my remarks there, and I'll go ahead and turn the call back over to the operator, and we'll be happy to take any questions you might have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Chris Van Horn with FBR.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [2]

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So thank you so much for all the color and some updates on kind of the real-time environment. Now how quickly is the environment changing for you? And it sounds like bid and proposal work is still happening. But kind of on a real-time basis, how quickly are things changing?

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Robert P. Bauer, L.B. Foster Company - CEO, President & Director [3]

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Well, I think the best way to say that is probably a 2-part answer. The parts that are being affected the most are changing rapidly. So for example, the changes that we're seeing in the Tubular and Energy segment, where demand for oil has dropped precipitously, and then the adjustments being made in that industry are being made at a very, very rapid pace. On the other hand, we have those areas in construction and in our Rail business, where many of the projects that we have been working on are continuing. This proposal activity that I spoke of is continuing. And so a number of things there almost feel like business as usual, except for the adjustments that everyone had to make for these stay-at-home orders. And they were enacted quickly, and people had to make adjustments to them quickly. So there's a lot of adjustments we're making pretty fast. But in terms of the market changes and the dynamics there, you got to judge that based on the ones that we're seeing that are being impacted the most by the pandemic. They're the ones where people are taking pretty quick action.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [4]

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Okay. Got it. And you mentioned a lot of deferrals or delays in activity. Is there a range in the timing? Are you seeing any consistency or anything jumping out at you in terms of when things might start to come back?

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James P. Maloney, L.B. Foster Company - Senior VP & CFO [5]

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I would say that consistency is probably the one thing that is lacking in all of this. My sense of what's going on in the marketplace is that companies are all reacting in different ways to this issue. The dynamics of operating a railroad versus a highway, a bridge and construction project versus an oil and gas pipeline, and the dynamics are very different between all of those operating environments and the issues that they face in order to meet the requirements recommended by the CDC to protect your people. So everybody is concerned with making sure that their people are safe. So what you find is, you find people taking different sorts of measures in order to make sure they can try to continue to operate in the new environment, if you will. So it's hard to say that there's any consistency with that.

And as it specifically relates to your question about delays, these are also companies that are dealing with funding, traffic issues, the manner in which they actually can pay for these projects differ greatly as well. And so for that reason, across all of our different segments, I mean, that's one reason why, from time to time, we're happy to be diversified and other times, it might not be your friend. But that's also why we see some varying circumstances across our landscape.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [6]

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Got it. Okay. How about from a competitive standpoint? I imagine -- I know you -- I know there's a lot of smaller competitors in your markets. Have you seen some of those competitors either fall off? Or are your customers coming to you for help due to some performance headwinds from some of their other providers?

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James P. Maloney, L.B. Foster Company - Senior VP & CFO [7]

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I wouldn't say that I could point to anything yet on that. I'm anxious in a few areas where we do compete against private companies that probably don't have the kind of credit facility or banking support that we have to see how they do. There are probably some competitors that we have that could even qualify for the small business loans, like the PPP support. And whether or not that's helping them get through this, we don't know at this point. So I haven't heard any new stories that I could share with you that might lead you to think that, that landscape is changing in any significant way. I really suspect it will probably be maybe at the end of next quarter where we might be able to maybe draw a picture of what has changed, if anything, but not at this point.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [8]

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Okay. Got it. And then I just wanted -- just from a mechanical perspective, just to make sure I heard you correctly. The $5.5 million to $7 million charge you're expecting, you're expecting that each of the -- in each of the next 3 quarters? Or is that a full year number? How does that kind of play out?

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James P. Maloney, L.B. Foster Company - Senior VP & CFO [9]

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Chris, this is Jim. That would be the total impact. So we were expecting the majority of it to be charged in Q2. Some will drag into Q3 and Q4.

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Christopher Ralph Van Horn, B. Riley FBR, Inc., Research Division - Analyst [10]

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Okay. Got it. And then just last for me. Really good working capital management. I'm wondering if you feel like the pieces are in place for that to continue throughout the year. And maybe any specific examples you could give us on how you were able to execute so well there.

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Robert P. Bauer, L.B. Foster Company - CEO, President & Director [11]

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Well, it has been an area of great focus for us for some time. I would tell you that the focus is getting to be more and more intense. We're particularly focused on our cash flow for the company in this quarter and in the coming quarters. So it's something that we work quite aggressively. Our collections team has done a terrific job. Some of the methods that they use have really helped us substantially here over the course of, I'd say, about the last 18 months. That's really gone fairly well for us. But then between -- well, actually, I guess, in all categories of working capital, I mean, we pay attention to each of them. So it's really a part of our business system and the reviews that we conduct routinely and the kinds of things that we ask all of our operating people to do. So we will continue to focus on that.

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Operator [12]

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Our next question comes from the line of Chris Sakai with Singular Research.

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Joichi Sakai, Singular Research, LLC - Equity Research Analyst [13]

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Just I wanted to comment or ask about -- as states are now slowly reopening, are you guys seeing an uptick in new orders? Can you provide some insight there?

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Robert P. Bauer, L.B. Foster Company - CEO, President & Director [14]

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Well, of course, that is just getting underway. And I think the first thing I would probably point to is that we haven't been able to really link our order input much to the closing or opening, maybe, of any given 1 state or 2 states here or there. Most of our end customers have been operating, right? So in the freight rail and transit rail space, they continue to operate. There were construction projects that were shut off in particular states, and that's a part of the disruption that I spoke about. So take our home state here for Pennsylvania, they shut down construction projects. And we had some trouble with deliveries and schedules in the Pennsylvania area, which has now opened construction but not other things. So I mean, it's a real mixed bag out there in terms of what states are doing. So it's very difficult to correlate that to what's going on with orders. But we've stayed in touch with most of our customers. They've continued to operate. The energy customers, they continue to go to work. So we're not dealing with anybody that is completely shut down, so to speak, like retail sectors and things like that. So most of them have tried to keep their projects moving along to the extent that they could. But it was disruption because of these stay-at-home orders that caused us the most heartburn that we're working around and will continue to work around.

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Joichi Sakai, Singular Research, LLC - Equity Research Analyst [15]

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Okay. And then can you shed some light on why did Construction Products, out of the 3 categories -- I mean, it seemed to hold up the best as far as new orders was concerned.

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James P. Maloney, L.B. Foster Company - Senior VP & CFO [16]

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Well, I would probably -- if you're comparing it to the other 3 segments, I'd point to Tubular and Energy first as a comparison. Obviously, that segment is hurting the most. So that's been a tough area for us. So that has everything to do with the demand for oil and how far that has declined. In comparison to the Rail business, I think the 2 of those, they weren't off from one another, I think, too much. Construction was down -- you're talking orders, I think you said, so construction was down year-over-year, 14%, I think I recall. We'll be looking at that, yes. And rail was down 24%.

Now the one thing that moves around a lot in there is the timing on some of these rail projects and when the transit projects kind of get spun up. But the other thing is our service orders. They come in right when we do that service work. And we did have a fair amount of service work stopped toward the end of the quarter, both in the U.S. and in the U.K.

But the other thing you got to look at is also the prior year. And so our Piling and our Bridge business didn't have as much of a change, Q1 to Q1. But also, precast concrete continues to do pretty well. And we had a pretty decent quarter, the quarter that just ended, for our Precast Concrete Products in Construction, which we expect for the year may be impacted among the least, among all of our divisions.

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Operator [17]

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Our next question comes from the line of Brett Kearney with GAMCO Investors.

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Brett Kearney, Morgan Group Holding Co. - Research Analyst [18]

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Could you guys just, I guess, help me think through -- back in 2009, 2010, when ultimately, we saw, I guess, the last major federal infrastructure program pass through, the American Recovery and Reinvestment Act, can you just help me think about, aside from the obvious ones, so I guess encompassing all of them, really the parts of your business that might be tied to, if we were to get any kind of large federal infrastructure program here?

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Robert P. Bauer, L.B. Foster Company - CEO, President & Director [19]

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Well, if you go back to that point in time, and there was money being thrown in a few areas, and they talked about shovel-ready projects and things like that at that point in time, it really depended on where you could deploy money quickly. We saw a boost in the Piling division and in our precast concrete division are the 2 that I would point to that were at the top of the list of those that benefited, that I think had more to do with the fact that there were some projects that they could put that stimulus money toward and get a pretty quick bang for the buck. The Bridge business would be the other one. But if I spoke more broadly about stimulus money, and it didn't quite take place back in '09 and '10 versus what would happen today, I think you would find that there would be, generally speaking, more highway bridge-type projects because of the aging of the infrastructure with another decade on it of falling behind in that investment. I think that you would see more go towards transit rail because of the pressures that we have around transit rail in many congested cities. We're actually seeing some of that in stimulus spending that is about to get underway in the U.K., where they're already pushing some of this forward. And we think we're going to benefit, which our business is predominantly transit rail there. But some of the solutions that go around that, the automation solutions, we're going to get some benefit from. So those are -- so in addition to, I think we'll get some Piling and Precast as well, I think those are other added areas where we would likely see some additional impact if there was any kind of bill put through for infrastructure.

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Operator [20]

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(Operator Instructions) Our next question comes from the line of [Peter Androssi], private investor.

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Unidentified Participant, [21]

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The last question was actually what I also wanted to ask, but I wanted to dip into oil reserves. And since we have a shortage of capacity, if you're seeing any possibility in the tubular section on increasing oil reserve capacity? And second, I wanted to ask about your relationship with Nippon Steel in Japan and if you had any projects upcoming in Japan.

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Robert P. Bauer, L.B. Foster Company - CEO, President & Director [22]

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As far as oil reserve capacity goes, if there were investments that were made in oil reserve capacity, if I think that's where you were going, that would not really directly benefit us in that we don't make any products that would serve in expanding that capacity. Now if there was additional capacity and that allowed production to continue flowing, right, and minimize the decline in production, then we would see some benefit to that because as production does decline, that means the drilling will decline. And where drilling of wells goes, that's where our business goes, in the upstream segment, at least. And then in the midstream segment, that is all tied to the amount of oil and gas flowing through the pipelines. So as that moves through the system, revenue for the midstream operators comes through. And depending on the amount of capacity they have, our business there is proportional to the need for capacity in the pipelines. So I think if you were watching something where somebody said there's going to be a bit of an increase in capacity for oil reserves here, short term, to store another, I'm not even sure what number to put on it anymore, I probably would not be pointing to much of an impact it would have on our business.

In terms of Nippon Steel, they're not a customer that we do a lot of work with. They, from time to time, do interact with us on some technologies that we provide. We do have some condition monitoring technologies in their system in Japan. It's not a large amount of work that we do. So it really is very, very small at this point.

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Unidentified Participant, [23]

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It's good to hear that your collections team is doing well. If you need one more, I got laid off. So I'm looking for work.

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Operator [24]

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(Operator Instructions) Since there are no further questions left at this time, I would like to turn the call back over to Mr. Bob Bauer for any closing remarks.

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Robert P. Bauer, L.B. Foster Company - CEO, President & Director [25]

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Good. Thank you, operator. Well, thank you, everyone, for joining us. We appreciate the questions as well. We tried to do our best to help you understand the quarter that's got a lot of dynamics associated with it. And I'm sure next quarter, we'll be talking about some of the same things. But we look forward to catching you then, and be safe and healthy in the meantime. Thank you very much.

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Operator [26]

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This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.