Greetings! Welcome to L.B. Foster Company’s Second Quarter 2020 Results Conference Call. [Operator Instructions]. Please note this conference is being recorded. At this time, I’ll turn the conference over to Jim Kempton, Controller and Principal Accounting Officer. You may begin sir.

Thank you, Operator. Good evening, everyone, and welcome to L.B. Foster’s Second Quarter Earnings Call. I am Jim Kempton, the Company’s Corporate Controller and Principal Accounting Officer. Also with me today is our President and CEO, Bob Bauer. I will be covering the Company’s second quarter financial highlights today following our previous CFO, Jim Maloney’s decision to leave the Company to pursue other opportunities. This evening, I will review the Company’s second quarter financial results. Afterward, Bob will review the Company’s second quarter performance and provide an update on significant business issues and market developments. Then, we will open up the session 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 page at lbfoster.com. Some statements that we are making are forward-looking and represent our current 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. 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 security laws. For more detailed risks, uncertainties, and assumptions related to our forward-looking statements, please see the disclosures in our earnings release and presentation. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables provided within today’s earnings release and within our accompanying earnings presentation carefully as you consider these metrics. I’m going to cover the second quarter results this evening. But before I do that, I would like to discuss several other items. At the end of June, we executed an amendment to our credit facility. The amendment provides for, among other changes, adjustments to…

Thank you, Jim, and hello, everyone. Jim covered a lot of ground in his report since this was a quarter where significant focus would be on our ability to navigate a difficult market and determine where the impact would be greatest as a result of the pandemic environment. We were closely watching order input rates to assess the impact of the pandemic and whether there were signals of how a recovery might unfold. As you’ll hear in our report, we saw new orders actually improving as the quarter progressed and helped by some key projects, as is typical. Among the other key results to discuss are the sequential improvement in profit from the first quarter and the significant difference in our underlying segment performance when comparing Rail and Construction to the Tubular and Energy segment. These changes helped shed light on the current environment and may be more relevant than the second quarter year-over-year comparisons that were expected to reflect a decline after many shutdown orders. You’ll see a distinct difference in the impact the pandemic is having on our Tubular and Energy segment, highlighting the fact that the energy related activity in the U.S. has been hit very hard and has taken a more significant toll on our results than the softness from transportation markets has. I’m not going to spend time talking about what I think investors already know as it relates to people all over the world exploring alternatives to public forms of transportation or avoiding them altogether and the subsequent severe decline in demand for oil that resulted. This is reflected in our second quarter year-over-year results, especially in our energy related businesses. What became more clear to us as the pandemic unfolded was that the impact from the big drop in demand for oil was…

Thank you. [Operator Instructions] Thank you. Our first question is from the line of Alex Rygiel with B. Riley. Please proceed with your questions.

Thank you. Good afternoon, gentlemen.

Hello, Alex. Thanks for joining us.

Absolutely. Could you give us a little bit more of an update on the London Crossrail project?

Yes. Well, I can tell you a little bit about -- maybe to start with what happened in the second quarter, of course, the outbreak over in that area was pretty severe, right there in the second quarter. And for pretty much the entire quarter, they asked us to send our field techs home. So that's a pretty significant project for us. I can't recite exactly the number of field techs we have on that project, but we're talking about a lot of people. And when I mean a lot of people, I'm talking about approaching 200 people that could be out in the field working on that project. So they were largely at home in the second quarter and they are now bringing them back on two sites. So those sites are the actual stations where all of the automation work is taking place in the London underground project. So we're doing a lot of systems integration work there, connecting a lot of systems that have to do with passenger information, as well as access control and video monitoring and a lot of the high-tech equipment that's there. So they're back, I can't say that everybody is back. Yet, we're ramping them up at this point, but we are getting back on to the site and we do anticipate that work is going to resume and hopefully get back to you know the rate at which we were once working there, but that's probably something we won't know until this third quarter is behind us.

And you also mentioned that you had a number of new product launches in the Rail business, can you go a little bit deeper into what those were?

Yes. They were actually across -- it was more than Rail, across the entire business. Maybe I'll start with some that weren't Rail and end with the Rail ones. Just add some examples, we've had a number in the Precast Concrete area. So these are adding to our Precast Concrete buildings, which is the marquee product line for that particular business. We've stepped into new product lines, have expanded some of our business in the area of bridge beams. We're in septic systems and other products that go with septic systems for residential and kind of light commercial duty applications. And we continue to work on our buildings product line as well. And -- in the Rail area, we've got some new technology that just rolled out in some of our Allegheny Rail products that are used to manage signaling systems. A number of new things in the area of disruption management in our controls and displays business. So these are -- these are product lines that are some of the newer ones that we have, where we have some installed now for rock fall detection, avalanche detection and some of our new display systems are used for disruption management in transit stations for passenger information. And it looks like they're finding their way into airports and some other applications, where we have some projects that we're pretty hopeful we're going to land here where these kinds of displays that are multi-functional and we provide both the software and the hardware for them are taking us into markets that we never served before.

And then as it relates to the new facility in Boise, you mentioned that it would be up to full operational efficiency in the third quarter. Help me to better understand that comment. Does that mean it's going to be up to full revenue generating piece in the quarter as well as profitability into a quarter as the Spokane facility was a number of quarters ago?

Well, yes. So you've got two things at play there, right. So the second quarter was running still well off the pace that Spokane was running. I think that was about a $4 million gap in year-over-year sales. But really, what we're talking about more than anything else is the productivity that we measure on manpower per unit of manufacturing. So we are not yet running at the rate that we had been running in Spokane on labor hours per unit of manufacturing for each of the products that we make there. So that's all a part of ramping up a new workforce that's entirely new to us. Virtually everybody that we've hired there is new to the company and so they are learning. And in the second quarter, we were ramping up at a pretty fast pace, I would say, in terms of that workforce learning what to do. So what we're really anticipating in the third quarter is that and I would say it will probably -- we're going to give ourselves probably till the end of this third quarter, but by that time that -- the labor that will be used per unit of manufacturing is going to reach what we see in our other facilities and what we had in the Spokane facility. Whether or not the sales will be exactly where we were is a little harder to predict and that's because business conditions right now are a little difficult to forecast at the moment. But the order rate there is picking up. Our backlog is improving and I feel pretty confident that we're going to be closing that gap at least.

That's great. One last question, could you give us a little bit of comment or color on cash flow expectations in the second half of the year and prioritize the uses?

Well, we don't normally forecast cash flow. We'll maybe do our best as we can from time-to-time when we put some presentations together to talk about what we think cash flow looks like, but I would stop short of forecasting cash flow for the second half of the year. Our priorities among our cash flow -- among that free -- the free cash flow. Well, maybe I'll start with operating cash flow. I did mention that most of our capital was in the first half of the year. So we will have a little bit more CapEx in the second half of the year, but the balance of what will be left is likely going to be used to pay down debt. That's continued to be a priority for us. We were pretty happy with the way that we've been able to bring our -- the debt on our balance sheet down and improve our leverage ratio here over the last couple of years. We'd like to keep doing that. But we do have our eye opened for a few other opportunities in there where maybe we can fund organic growth. There might be something small in the way of maybe a bolt-on acquisition maybe in the Precast Concrete area where we're kind of looking at something right there right now. And I'm talking about something small but that's likely what you'll see?

Yes. Just to add onto that, as Bob had touched on, on the CapEx spend, we were looking at about $7.5 million year-to-date -- $7.4 million year-to-date and we're anticipating, again, being between that $9 million to $11 million mark. So that CapEx spend will be down in the back half of the year. Also, wanted to note that we've been very focused on working capital management. We recently had our business reviews with all the business units here and that remains a high priority for us to really have the business units focus on that working capital management.

Very helpful, thank you gentlemen.

Thank you.

Yes. Thank you, Alex.

Thank you. [Operator Instructions] Thank you. Our next question comes from the line of Chris Sakai with Singular Research. Please proceed with your questions.

Hi. I just had a question. If you could shed some light on the Fabricated Bridge and Precast Concrete Products divisions. Just wanted to see what's going on there. Why are there strong -- why is there a strong backlog increases there?

Well, I'll start with Fabricated Bridge. We actually started the year with a decent backlog and it has improved since that time. We were actually anticipating that during the year, we were going to wind up seeing some big projects start to break. And one of them did break and we did book that project, so say second phase of the Newberg Beacon project. And so that was a really nice order for us that came a little later in the quarter. But that bridge decking business from time-to-time, it can be a little bit cyclical. And 2020 is looking like a really good year shaping up for that business where we're going to have a backlog right now that looks like it's going to keep us extremely busy through the balance of the year in that facility and a lot of the work is in Grid Decking, which is our premier product line. But our Bridge forms business is doing fairly well as well. So that's coming from funding for bridge rehabilitation projects. In the Precast area. Our Precast business has been one of our nicer growth areas over the last few years. I mentioned when Alex asked about some of the new products, I started with Precast Concrete. There is a number of product lines we've been adding there. We've been stepping into some new geographic territories. We've expanded our served market with some of these product lines. Markets that we haven't served before. Our eastern location that we established a little more than five years ago, continues to be a nice growth area for us. So Precast Concrete Products, of course, they're not connected as much to transportation, like so much of our other businesses. And so it hasn't been -- it hasn't been hit by some of those same impact. But I got to really point to our team that has really spun up some nice growth programs for that business. I think we're continuing to take share in that marketplace and we're continuing to find new markets to step into.

Okay, great. Thanks for that.

Yep. You're welcome.

[Operator Instructions] I would like to turn the floor back over to Mr. Bob Bauer for closing remarks.

All right. Well, thank you, operator. Well, thanks everyone for joining us today. We appreciate your interest and we look forward to catching up with you next quarter. Thank you very much. Bye-bye.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. And we thank you for your participation.