Good day. Thank you for standing by. Welcome to the L.B. Foster Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Stephanie Listwak, Manager of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to L.B. Foster's second quarter of 2021 earnings call. My name is Stephanie Listwak, the company's Investor Relations Manager. Our President and CEO, John Kasel; and our Chief Financial Officer, Bill Thalman, will be presenting our second quarter operating results, market outlook and business developments this morning. Bob Bauer, who recently stepped down as our CEO; and Jim Kempton, the company's Corporate Controller, are also joining us this morning. Bob will be making some opening comments, and then John will provide his perspective on the company's second quarter performance, and we'll update you on significant business matters and market development. Bill will then review the company's second quarter financial results. We will open the session up for questions at the conclusion of Bill's remarks. Today's slide presentation, along with our earnings release and financial disclosures were posted on our website this morning and can be accessed on our Investor Relations page at lbfoster.com. Our comments this morning will follow the slides in the earnings presentation. Some statements we are making are forward-looking and represent our current view of markets and businesses today, including comments related to COVID-19. These forward-looking statements reflect our opinion 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. 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 company's earnings presentation carefully as you consider these metrics. For the purpose of helping you understand the underlying performance of the company, we will be referring to adjusted EBITDA, adjusted net income, adjusted diluted EPS, net debt and net leverage ratio during the presentation today. While we did not have any adjustments to EBITDA, net income or diluted EPS during the second quarter of 2021, historic periods referred to in the presentation today have been adjusted, as reflected in the reconciliation table included in the appendix to the earnings presentation. Additionally, in September of 2020, we announced the equity sale of our IOS Test and Inspection Services division. As a result of this divestiture, we have presented the test and inspection services business as a discontinued operation in the second quarter financial statement, including within the earnings release and presentation and have recast prior periods to reflect this change. The comments today will be focused on our results from continuing operations. So with that, let me turn the call over to Bob for some opening remarks.

Thanks, Stephanie. Well, I have the pleasure of co-hosting the call this quarter for the last time as we announced my retirement last month, along with the appointment of John Kasel as the company's next CEO, which took effect two weeks ago. As we noted in the press release, when we announced the change, this appointment follows a well-planned and thorough succession planning process that the Board and I worked on for some time, and it turned out exactly as we hoped it would. I'm really pleased with the outcome because I'm leaving with a really good management team in place. And I know I can speak for the Board of Directors when I say that the company's development and succession planning process is regarded as one of the most important business processes and that we're all very pleased with how it's helping us develop the next-generation of leaders across the entire company. John, has been with the company for 18 years, and over the course of that time, has managed all of our factory operations and eventually managed all of our business groups before being appointed COO in 2019. He's very familiar with all areas of the company. And at one-time or another, is interfaced with our key suppliers, business partners and many of our customers. He doesn't really need my help as he takes on the added responsibility, but I'll be available to John whenever he needs me until the end of the year when I officially retire from the company. And until then, my goal is to help him and the management team in any way that I can. I know John is eager to meet those of you that he hasn't met already. And of course, we would be happy to schedule an introductory call with anyone that would like to do so, just reach out to Stephanie if you'd like to do that. But before I hand it off to John for his comments on highlights of the second quarter, I just want to say it's been an honor and a privilege to serve as the company's CEO for nearly a decade, and I look forward in the future to rooting for the company's success from a shareholder point of view. So with that, I'm going to turn it over to John for his first earnings call.

Thanks, Bob. Good morning, everybody. I'm very excited about the future of the company and honored to be chosen to succeed you as CEO. We have a great team of people at L.B. Foster and for 18 years I've been here. I've had the pleasure to work alongside many of them, witnessing firsthand the teamwork and dedication that has had such a positive impact on the company's performance. I'm particularly excited about the opportunities I see for growth and a more concentrated focus on directing capital towards our top priorities in the most attractive markets we serve. Over the course of last year, I sat in many investor meetings and had a chance to meet some of you. In the coming weeks and months, I'm looking forward to meeting more shareholders and discussing our plans going forward. Before I turn the call over to Bill Thalman to cover details on second quarter results, I want to cover some of the highlights and add some context to the market outlook commentary we have provided. This is this time of year, we expect to see increases in sales, and we're pleased with the 33% sequential volume improvement from Q1, exceeding the forecast we provided on last quarter's call. This turned out to be a 9% sales increase over Q2 of last year and includes several positive developments. Among them are an 18.5% increase in rail segment sales, with solid growth from our core rail products, significant increases in friction management products and increases in field service we've been very anxious to see, particularly in Europe, where service work is finally ramping up after many months of delays due to COVID restrictions. In addition, the fabricated steel and precast concrete business each grew at more than 20% over prior year as construction project…

Thanks, John, and good morning, everyone. I'll begin my review covering the second quarter results on Slide 10 of our presentation. As John mentioned, we were anticipating a significant sequential increase in results, both from seasonality as well as further recovery from the pandemic. In line with those expectations, second quarter sales were $154.5 million, up $38.4 million or 33% over the first quarter. Compared to last year, Q2 sales were up $13 million or 9.2%. The despite the significant year-over-year increase in revenue, Q2 gross profit decreased $2 million and the 16.9% gross profit margin was a 290 basis point decrease from last year's second quarter. This decrease was largely driven by the Infrastructure Solutions segment, which I'll discuss in more detail shortly. Second quarter selling and administrative expenses increased year-over-year by $900,000 or 4.8% to $19.8 million with the increase primarily driven by higher professional fees. The higher professional fees were related to a comprehensive strategic review of the business completed during the second quarter under John's leadership. We'll be discussing the results of that work in future calls. Selling and administrative expenses as a percentage of sales decreased to 12.8%, down 50 basis points from the prior year quarter. Second quarter net income from continuing operations was $2.9 million or $0.27 per diluted share compared to $7 million or $0.66 per diluted share last year. Adjusted net income from continuing operations for the quarter was also $2.9 million or $0.27 per diluted share compared to $6.5 million or $0.61 per diluted share last year. Second quarter adjusted EBITDA totaled $8.3 million, a decrease of $4.6 million compared to last year, driven primarily by the decline in gross profit in the Infrastructure Solutions segment, coupled with increases in selling and administrative expenses. I'll now cover our segment performance…

[Operator Instructions] Your first question comes from the line of Alex Rygiel from B. Riley.

A couple of quick questions here. You mentioned that your precast concrete business was near-capacity. Do you have any plans to expand capacity?

Alex, thanks for the question, John Kasel here. We're continuing to look at those efforts. In fact, what we're doing is trying to get off our existing properties and set up some satellite facilities right now, moving product into better geographic spaces for us.

Yes. And Alex, I'd add to that. We're currently in the process of investing in our facility down in Texas. And we're also -- when you're looking at the operations, making sure that we've got the labor in place to support the volume that we've got. So we did have a minor disruption in the quarter related to labor in the precast space. The activity in that business is very robust, and we're proactively managing that labor force to make sure that we can maximize the output.

Well, we think about the bigger picture as it relates to the second half of the year and in particular, as it relates to gross margin, you mentioned that there are some cost inflation that won't be fully offset by price increases. Are you suggesting that we should think about sort of gross margins comparable to 2Q levels in the second half of the year or slightly down?

I don't -- I wouldn't say slightly down. That's not what we're seeing at the moment. I think it's appropriate to say that the current run rate in terms of gross margins, the single biggest driver that we see impacting overall gross margins is the weakness in the Coatings and Measurement business. We continue to highlight that as a key driver of our performance. And we don't really go into disclosing future gross profit. But we would expect to see any challenges on the inflation front to be offset by improvements that we see in other areas of the business. Particularly, the strength in the precast business as well as improvements that we continue to see coming out of Europe.

Sure. And then, turning over to the Cross London project. I believe you were going to add back a number of your team members in the month of June. Are those team members -- are you back to 100% yet on that project? And if not, when might you be?

Yes. that was -- we're about 75% right now. So that will continue through Q3 to get up to 100%. But it's steadily improving and increasing by the day right now.

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

Just an overall question regarding the delta variant. Are you seeing any headwinds there?

I wouldn't say specifically from an L.B. Foster operational point of view. I think just as the general market is, we're watching the developments very closely. We are not having any operational impacts related to that. And I think as many industries are figuring out how to navigate it, we're watching its impact on the markets that we serve as well as any potential impact on the company. I will say that we've been able to manage the impact of the pandemic pretty successfully over the last 12 to 18 months, and we feel confident in our ability to continue to manage it going forward.

Okay, great. And then, on the Coatings and Measurement backlog increase, what's driving that? And do you see any -- do you see that increasing in the future?

Yes. I would say that it's centered in certain parts of the Coatings and Measurement business, more around the measurement side. And we saw some nice orders come in and a little bit of an uptick there. In terms of it continuing, that's not something that we're currently anticipating any significant improvement in. I would say that the pipeline infrastructure situation in the U.S. continues to be a headwind, and we're looking for any opportunities for improvement there. But at the moment, we're not seeing them.

Okay, great. And along -- or to go with Coatings and Measurement, would you ever consider divesting that business? And if so, when and what would it take?

Well, we certainly wouldn't divest it now. We think the business has a promising upside. There's, again, certain parts of the business that continue to be attractive, and we're also looking for opportunities to diversify the markets in which we participate. So I guess at the moment, we're really focused on improving the operational performance at the current level of the market demand and looking for the options that we have to expand the markets we participate in.

Our next question will come from John Bair from Ascend Wealth Advisors.

Bob, happy trails to you in the months ahead.

Thank you.

That's as for a happy retirement. You did address the last questioner there on the Coatings and Measurement. And I'm just wondering, are there other -- given the headwinds with the energy markets, what other areas can you expand into water infrastructure, for example, obviously, a huge problem in the southwestern U.S. and growing other areas. Is that something you're focused on?

Yes. So John, John Kasel here. Thanks for the question. And we -- I agree with the best wishes to Bob, and he's one of the reasons that we're continuing to look at our greater -- our portfolio. So to kind of give you a broad brush. We've taken a deep dive and looking at the return on capital that we have and our ability to drive value and profit improvement across all of our businesses today. And of course, energy is one of them that really jumps off the page. So on the Chemtec side, the measurement side, we absolutely have started to pivot and reshape ourselves and much more in the energy -- moving off energy into the water, water transmission, water metering business. That is also the case in our precast business. So instead of just modular buildings, we're also starting to move water through our concrete products that we're building. So we're always looking at opportunities moving into different spaces, different geographies and water moving off energy is one of those we're doing today.

Is the pre cash? Do you do conduit type products in for --

Was it conduit?

Conduit?

Yes, right. Right. Yes, the large diameter conduit.

We're in manholes of moving water into the septic sewer system type business today.

And then another question. Given the improved cash flow and expected cash coming in on tax refunds and so forth. Any consideration or thought about your share buybacks or a possible modest dividend implementation, maybe not necessarily this coming quarter by year-end, but is that something that you'd consider doing?

Yes. John, this is Bill. We have pretty active dialogues in this area related to capital allocation and the overall capital structure. And as we mentioned on the call, we've completed a pretty significant strategic review of the business that we'll be sharing more information on in the coming quarters. And as part of that, we're looking at the capital structure of the business. And given the cash that we expect to generate through the balance of the year and the different needs that we see in the future in alignment with that strategic road map, we'll be looking at capital structure and share buybacks and dividends could be a component of that overall implementation plan.

Okay, very good. And one last question is regarding the M&A landscape, are there particular areas of the business that you're more focused on in the M&A a possible M&A? Or is it sort of more of an opportunistic whatever comes along that fits the picture overall?

Really the first part of your statement. We are -- we really are honing in on what's core or noncore to the L.B. Foster Company. And so acquisitions be bolt-ons or nice low tuck-ins are in the rail space as well as the infrastructure side and namely the precast concrete side of the business there.

Yes. One of the things I'd like to also highlight there, John, is that we're looking specifically at the technology side of the rail space. So when you think about the different solutions that we offer to our customers when it comes to operating transit and freight rail systems more efficiently, more economical and more environmentally friendly. Those are the technologies that we're really focused on when we're thinking about investments or acquisitions in the rail space. And it also includes the potential for acquisitions that may be overseas as we look to opportunities that exist outside the U.S.

[Operator Instructions] And I'm currently showing no further questions in the queue. I'll turn it over to John Castle for any closing remarks.

Thank you, Victor. I'd again, like to thank Bob Bauer for his 9.5 years with the company, the support and dedication, commitment to myself as well as the entire management team. You will be missed, and we wish you all the best in the next chapter of your life so.

Thank you very much, John. Yes. Thank you to all the shareholders that have supported us over the years. It's been a great pleasure dealing with everybody out there.

And thanks for all of you for joining us. As I mentioned earlier in my comments, I'm very excited about the opportunity. I thank the directors and Bob, for their support. We're looking for shaping up Q3 and getting back to you with the results of that in the coming months. So take care, be safe, and we'll talk to you soon. Bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.