L.B. Foster Company

Ladies and gentlemen, thank you for standing by. Welcome to the LB Foster fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during a session, you need to press star 1 on your telephone. Please be advised that today's conference is being recorded, and if you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Bob Bauer. Please go ahead, sir.

Well, welcome, everyone. I wanted to start off today's call with an introduction before we get into some of the commentary that we're going to make for the day. I wanted to welcome Bill Tallman, who's with us today. Bill's our new Chief Financial Officer. You may have seen in the press release that we released in the last couple of weeks a pointing bill to that position. We're really glad he's here. He just started with us, and he's anxious to get up to speed and meet investors and others in the investment community. He brings a wealth of experience from a publicly traded industrial company that's specialized in materials and products for metal cutting applications, abrasives, and a number of other industrial products. He's had a number of assignments in finance and operations, and that background is really going to be helpful to us, and we're really excited about the fact that we finally have got him on board here. So he's joining us for the call for the first time. I also want to welcome John Castle. He's joining us this quarter as well. John's our chief operating officer. Of course, he's been with the company for over 17 years. And we're going to have John join us on more occasions in the future. So I wanted to make that introduction. Both gentlemen will be available during our question session when we get started later on in the call. So with that, what I'm going to do is turn it over to Jim Kempton to get the call started with his prepared comments. And then I'll come back and talk about some of the items that I have prepared to speak to. So Jim, you want to go ahead?

Thanks, Bob. 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 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 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 related to our forward-looking statements, please see the disclosures in our earnings release and presentations. 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. Before I start the review of the results, we'd like to briefly touch on a few items related to this evening's presentation. First, similar to the third quarter earnings call, we have presented the IOS test and inspection services business, which we sold in early September, as a discontinued operation in the financial statements, including within the earnings release and presentation, and have recast prior periods to reflect this change. My comments today will be focused on our results from continuing operations. Also, as you may have seen in our press release in 8K on February 16th, in the fourth quarter of 2020, We realigned our operating segments to more effectively and efficiently provide solutions to the infrastructure markets that the company serves. The rail technologies and services segment, consisting of businesses previously reported in the former rail products and services segment, reflects our current focus on serving transit and freight railway operators and related infrastructure. The former construction products segment and former tubular and energy segment were realigned into the infrastructure solution segment, as these businesses collectively provide a variety of products and services for infrastructure markets to support the efficient transportation of people, goods, and commodities for general civil works, primarily in the United States. Bob will be discussing this reorganization in more detail in his comments, and will be presenting the results based on this revised operating structure in this evening's presentation. So with that, I will start my financial review. For the purposes of helping you understand the underlying business performance, many of our comments today will be based on fourth quarter and four-year results, excluding certain non-recurring charges and benefits. As a result, I will refer to adjusted EBITDA, adjusted net income, and adjusted diluted EPS during the presentation. And we'll be discussing the results from continuing operations unless otherwise noted. During the fourth quarter, our sales were 115.6 million compared to 141.3 million in Q4 2019, a 25.8 million or 18.2% decrease. Consolidated gross profit decreased 6.5 million over the prior year quarter. Gross profit margin of 18.8% was a decrease of 120 basis points from Q4 of 2019. The decreases 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, COVID-19's resulting effect on the already weakened demand for crude oil continued to impact the infrastructure solution segment during the quarter. The pandemic also impacted the rail segment. causing reduced demand for our friction management consumables and delays in new rail and transit projects and services, all of which continue to influence our results during the fourth quarter. More specifically, our rail technologies and services segment was impacted in both our rail products and our rail technology businesses across the North America and Europe. The rail products business sales declined by approximately 2.7 million, impacted primarily by project delays. The rail technologies business had a decline of approximately 7 million in revenues. These results were primarily driven by a weak demand for solid consumable friction management offerings due to lower rail traffic volumes caused by the pandemic. The declines in revenues drove the decline in gross profit quarter over quarter, however, Margins in the rail segment were up versus Q4 of 2019 by 120 basis points, driven primarily by period-over-period margin improvements in our Canadian and UK operations. From an infrastructure solution segment perspective, the challenging dynamics in the oil and gas markets caused by the pandemic have continued to impact our businesses serving the midstream energy market. These events have driven the 25% decrease in revenue volumes quarter over quarter. The decreases in sales, coupled with margin erosion in the coatings and measurement business unit, resulted in the decline in gross profit of $5.3 million versus Q4 of 2019 in the infrastructure solutions segment. Now moving on to expenses. Our consolidated selling and administrative expenses decreased by over $2.3 million, or 11.6%, to approximately $17.4 million in the fourth quarter. The fourth quarter of 2020 also benefited from a quarter-over-quarter decrease of $1 million in stock-based compensation expense. Net interest expense was essentially flat quarter-over-quarter at approximately $920,000. Our income tax benefit from continuing operations was $140,000 in Q4 2020. In the fourth quarter of 2019, the income tax benefit was approximately $27.7 million, which was driven by the $29.6 million reversal of evaluation allowance on our deferred tax assets. Our fourth quarter net income from continuing operations was $2.3 million, or 21 cents per diluted share, compared to net income from continuing operations of $30.2 million, or $2.83 per diluted share, last year. Excluding the impact of restructuring costs incurred during the quarter of approximately $260,000 net of tax, adjusted net income from continuing operations for the quarter was $2.5 million, or $0.24 of adjusted net income per diluted share. compared to 3.5 million or 33 cents of adjusted net income per diluted share in Q4 of 2019. Adjusted EBITDA totaled 6.9 million in the fourth quarter, a decrease of 3.9 million compared to Q4 of 2019. Adjusted EBITDA excludes approximately 350,000 of restructuring costs incurred during the fourth quarter of 2020. For the year ended December 31st, 2020, our revenues were $497.4 million as compared to $616.4 million in 2019. This led to a gross profit of $95 million as compared to $120.9 million in 2019, with a 2020 gross profit margin of 19.1% versus 19.6% in 2019. SG&A declined by $8.9 million in 2020 to $73.6 million from $82.5 million in 2019 as a result of a cost containment program to navigate through the pandemic environment. Net interest expense was $3.8 million compared to $4.9 million in 2019. For 2020, net income from continuing operations was $25.8 million or $2.42 per diluted share compared to net income from continuing operations of $48 million, or $4.51 per diluted share last year. Excluding the impact of restructuring costs incurred of approximately $1.9 million net of tax, and the distribution from our unconsolidated partnership of $1.4 million net of tax, and the tax benefits resulting from the IOS divestiture of $15.8 million, adjusted net income from continuing operations for the year was $10.5 million, or $0.98 of adjusted net income per diluted share, compared to $21.3 million, or $2 of adjusted net income per diluted share in 2019. Adjusted EBITDA for 2020 was $32 million, excluding the impact of relocation and restructuring costs of $2.5 million and the distribution from our unconsolidated partnership of $1.9 million. Adjusted EBITDA for 2019 was $47.4 million, which excludes relocation and restructuring costs of $1.8 million and pension settlement costs of $2.2 million. Now turning to the balance sheet, our trade working capital decreased by $7.8 million compared to December 31, 2019, mainly due to a decrease in receivables of $15.3 million. This decrease was primarily attributable to the decline in sales during 2020 due to the pandemic. Our net debt was $37.5 million at December 31, 2020, compared to $44 million at December 31, 2019. Our adjusted net leverage ratio for the trailing 12-month period is 1.2 times as of December 31, 2020. Over the last several years, we have strengthened our balance sheet which should continue to help us manage through these challenging times in positions as well to execute on our strategic initiatives. Our current ratio as of December 31st, 2020 is a very healthy 2.05. Our total available funding capacity, that is the available capacity under a revolving credit facility plus our cash, was approximately 76.6 million as of the end of the year. In addition, As we discussed on the third quarter earnings call, we are anticipating a tax refund of approximately $9 million later this year as a result of the IOS Test and Inspection Services divestiture. We are also expecting that the approximately $19 million in tax benefits generated as part of the sale of the Test and Inspection Services business will reduce our cash outlays for taxes for the foreseeable future. To further expand our cash flows, our cash provided by continuing operating activities in the fourth quarter was $4.3 million compared to $16 million in 2019. However, on a year-to-date basis, cash flows from continuing operations is $20.5 million versus $26.2 million for the year ended December 31, 2019, a $5.7 million year-over-year decrease. Our capital expenditures during that time period were approximately $9.2 million, which derives free cash flow of approximately $11.4 million. Based on our closing stock price of $15.05 as of December 31st, that would imply a free cash flow yield of approximately 7.2%. During the fourth quarter, our capital expenditures were $1.5 million, The fourth quarter expenditures included the final installment on our continuous weld rail car and unloader within our rail segment of approximately $400,000. As I've previously noted, this is a very infrequent capital requirement for the company, as these assets have a very long useful life. In total, we spent $5.6 million on this rail car, of which $3.8 million was expended in 2020. The railcar has been placed into service during the fourth quarter. Now on to new orders and backlog. In Q4, overall orders were 134.4 million compared to 175.4 million last year. However, we did see a 3% sequential improvement in order activity compared to the third quarter. Order volume decreased in both the rail and infrastructure segments compared to the fourth quarter of 2019, by 13.7 million and 27.3 million, respectively. With regard to the decline in the infrastructure solutions segment, the coatings and measurement business unit, which primarily serves the midstream energy market, contributed 27.5 million of the quarter-over-quarter decrease. Backlog stood at 248.2 million as of the end of the fourth quarter, an increase of 19.2 million, or 8.4%, compared to December 31, 2019's backlog. Most notably, backlog increased in both segments versus December 31, 2019, which is a positive sign as these businesses move into 2021, despite the continuing challenges presented by the midstream energy market. That concludes my comments on these results. So with that, I will now turn it over to Bob. Thanks, Jim.

I wanted to start by pointing out that we put a lot of information in the exhibits we furnished with the press release to help investors understand how our business has been uniquely affected by the environment over the last few quarters. Unlike most challenging environments, this year was incredibly unique in that certain areas of our businesses were impacted more significantly than others. There have been pockets of resiliency, We have a strong backlog, up significantly in some areas, although some of the increase is due to pandemic-related issues that have delayed converting the backlog into sales revenue. We had to take significant actions this year in businesses that serve energy customers, including exiting the upstream test and inspection services business, which in our view had no path to acceptable returns. The severe decline in travel earlier this year and the subsequent impact it had on the energy sector was well documented. However, it's a bit more challenging to predict exactly how the various transportation modes will recover. During 2020, our primary concerns centered around the severe decline in transit rail ridership, as well as declining freight rail traffic volume, which was more short-lived. As the year came to a close, it turns out both rail sectors have been among the more resilient areas as projects kept moving forward all the way through the fourth quarter with the exception of certain onsite service work and weakness in solutions that are coupled to traffic volume. Before I get into more specifics on that though, I want to cover the organization changes we made that have also resulted in a change in how we're reporting results in two segments now. So, on February 16th, we announced a new reporting segment structure that's aligned with an organization structure intended to provide a clear line of sight around the opportunities for growth and asset leverage. During the past year, we've focused on ways to reduce cost and streamline operations. And our goal was to emerge stronger, leaner, and more focused on the actions that will create value for our shareholders. After we took steps in 2020 to restructure certain businesses and exit another, we identified greater benefits by consolidating our non-rail segment assets under one leader, that's Bill Tracy, and named that segment Infrastructure Solutions. Among our businesses in the Infrastructure Solutions segment are products and services with some common markets, customers, support functions, and facility capabilities. We see opportunities to share more tools and assets and expose untapped leverage opportunities with customers and back office support that should result in lower costs and improved return on capital. These businesses serve design, build, and contractor customers that manage the turnkey projects, and they need partners that can provide custom engineered solutions with make-to-order business models and experience dealing with large, complex infrastructure projects. Our businesses in this segment manage projects that span a wide range of transportation, energy, heavy civil, agricultural, commercial, and residential infrastructure needs, and they have several things in common, such as engineered solutions to address tailored customer specifications, unique design and application engineering skills, there's project management capabilities, and expertise in bid proposals that comply with government-funded projects. This change is an ideal way to create scale around the most attractive markets and products that will maximize returns on these assets in this segment. The same can be said for our rail technologies and services segment. Although the businesses in this segment have not changed, what is different is that all of the operations report to a single business line executive, Greg Lippard, that can focus on opportunities around integration and technology-based business development across our global footprint. In fact, three of our initiatives, one integrating new technologies to address longstanding industry problems, two, making our track products more resilient, and three, starting up new services are at the center of our strategy for growth in this segment. So, I'll turn now to talk a bit about the results for 2020. And the headline in our price release that, for me, best describes the year and the most recent quarter is that resiliency in rail and general infrastructure as projects continue while energy markets remain a significant challenge. Some of the best evidence of this is seen in our backlog growth, which highlights the resiliency from a broad range of businesses in rail and general infrastructure projects, but it also includes pockets of difficulty converting the backlog to sales as pandemic-related disruption on job sites in engineering departments and from government-ordered safety measures, including lockdowns, is causing delays and therefore keeping our sales volume somewhat depressed. I'll provide some data that supports our assessment of resiliency in this rail and general infrastructure projects area. So our fiscal year consolidated orders fell 16%. But if you exclude our coatings and measurement businesses that largely serve energy customers, orders were down only 6%. Our consolidated backlog increased 8.4%. But if you exclude the decline in backlog from the coatings and measurement divisions, the consolidated backlog increased 24%. More specifically, what you'll see behind the change is that the infrastructure solution segment backlog, which finished the year at 127 million, increasing 1.3 percent, was a combination of our coatings and measurement businesses declining by almost 28 million, and the balance of the segment increasing by 29 million. That's a 32 percent increase in backlog from the non-energy-related divisions in this segment. from projects such as bridge decking, civil and commercial construction, and transportation projects, both railway and highway, some using our precast concrete solutions as well. The order of magnitude of some of these increases is what gives us confidence in the current resiliency in the infrastructure segment. Turning to the rail segment, orders finished below prior year, down 11 percent. while backlog rose by 17%. Orders were fairly steady through the first three quarters, ranging between 69 and 75 million per quarter. And then they peaked at 81 million in the fourth quarter. But backlog has remained at elevated levels since around April, when the early shutdowns took place and pandemic protocols were enacted, and it peaked in the fourth quarter at 121 million. The peak at year end was driven by new orders for transit projects and increased service work in the U.S., but also by our inability to convert backlog to sales in Europe, where strict lockdowns have disrupted shipments and service work, and in North America, where various customer issues cause pockets of delays. These lingering issues and some headwinds we're dealing with is what has caused us to describe the environment as resilient rather than recovering, which we expect to use once we start to convert more backlog to sales and see an improving market environment in rail traffic and in energy pipeline projects. Another data point that will help you quantify the delays in shipping is the $13 million rise in backlog in the fourth quarter. We have far greater capacity than our sales of $115 million in the quarter. And under more normal circumstances, I would have expected additional sales volume in the quarter by at least the amount of the backlog increase. So let me turn now to a little bit more of the performance-oriented numbers. The order decline in 2020 drove the decline in sales of 119 million, as Jim stated, In light of the volume decline, I thought we did a pretty good job holding on to margins with only a 50 basis point decline in gross margins, particularly in light of the decline in some of our rail technologies products and services, which typically have higher margins. The loss of friction management, consumable sales, and certain field service work that stopped created a significant profit headwind for the rail segment as well. At the same time, this team did a great job holding expenses down and reducing costs that helped minimize the segment profit decline to approximately 20 basis points for the full year and finished very strong in the fourth quarter. The second part of the margin story is the decline that took place in the infrastructure segment. as a result of a significant decline in demand from energy customers. The pandemic created a substantial decline in demand for oil, which translated into significant cutbacks in capital programs for companies serving upstream and midstream markets. Often, midstream reductions lag the market changes and are not as severe as upstream volatility, but this was not a typical year. The severe reduction in travel resulted in approximately a 20 million barrel per day dislocation in supply and demand for a period that has had longer lasting impact on all suppliers to the industry as operators proceeded to shut down projects. The infrastructure solution segment loss in Q4 is entirely associated with the two divisions within the coatings and measurement business that served the midstream pipeline market. This is now the only energy exposure we have after selling the test and inspection business in September. Sales for these two divisions was $6 million in the fourth quarter. This compares to $19.6 million in the fourth quarter of 2019. And orders were only $4 million. in the fourth quarter for these two divisions. Our orders were relatively flat for protective coatings for the last three quarters of the year, and orders for measurement systems for pipelines hit a significant low point in the fourth quarter. Given the severity of the decline, both divisions are expected to see a modest improvement in orders in the first half of 2021. In the meantime, we'll be dealing with extraordinarily low volume that presents a headwind for profit margins near term. And I'll expand on that more in a moment. Wanted to turn to a couple of comments on cash flow and debt following what Jim told you. Capital spending increased in 2020 as we finalized the factory move previously planned in 2019. and replaced a rail delivery train that was retired. These were significant investments and very long-lived assets that don't occur very often. We're one of the unique companies in North America that has the capability to deliver 1,400-foot strings of continuously welded rail. And these two capital investments represented more than half of the capex in 2020. I expect the 2021 capital spending to be lower as we don't have very large projects like this planned. We completed the heavy restructuring actions that required capital, and we have manufacturing capacity well above current volume levels at all but a few locations where demand is strong. We plan on putting some capital toward our SAP rollout as we aim to turn off old legacy ERP systems in the near term. We have some working capital pressure right now as we bring in inventory to deal with the growing backlog. I expect this to be a short-term issue in most operations. I'm most concerned about our inability to finish projects in the UK where the current lockdown is creating several issues with closing out projects and eventually getting paid. We're also wrestling with shifting program priorities on the part of local governments making changes due to getting access to otherwise very contrasted transportation arteries. We're very pleased that we were able to reduce debt in 2020, bringing our net debt to $37.5 million at year end. I think further debt reduction is another attainable goal for 2021, assuming we see a reasonable recovery throughout 2021 with continued spending on transit programs and a stop to the pandemic lockdowns. From where we sit today, I think it's unlikely that we'll have an acquisition this year. unless it's at the very end of the year. We want to feel more assured of the future business climate before we take on any new businesses. So I'm going to move to kind of my last section of remarks here and talk a little bit about market outlook and some of the risks and opportunities we see, you know, in 2021. Of course, a continuing pandemic presents a risk, particularly if it results in continued disruption on site services. and a depressed market for transportation projects that we have exposure to. But today, we're optimistic that this risk is showing signs of subsiding. We expect profitability in Q1 for infrastructure solutions to remain low at approximately fourth quarter levels as a result of low sales volume from the energy pipeline focus divisions. These two divisions are operating near break-even levels at the current volume. But as volume improves, we expect to leverage our overhead and selling costs, and therefore profit margins should rise at a much faster rate than sales rise. Transit rail funding for U.S. operators needs increased federal government support beyond what has already been approved. If the gap between what's been requested and what's approved is anywhere near $30 to $40 billion in the U.S., that could create added pressure on spending. We expect upside to our outlook if an infrastructure program is approved in the U.S. We typically see an uplift from such programs as they often are directed toward transportation and general infrastructure projects that we serve. And finally, turning to how we anticipate 2021 unfolding, we expect first quarter sales volume to reflect continuing pandemic disruption, especially in the United Kingdom. And we haven't identified a lot of opportunity to ship more backlog to boost sales. The first quarter will likely also include very low volume from the divisions that serve energy customers putting pressure on profit margins as these businesses operate at close to break-even profit levels. We expect a significant change in this environment as we move into the second quarter. Our current forecast calls for a significant sequential increase in sales from Q1 to Q2. Specific projects in our backlog are expected to remain on track for second quarter delivery many of which are not struggling with pandemic-related issues on site. The second quarter increase in sales volume is expected to be broad-based and lift profit margins significantly from first quarter levels. And as we approach mid-year, we are expecting the elevated backlog to provide support for an even stronger second half. So hopefully that gives you some insight on how 2021 is going to start to unfold. I'm going to wrap up here. And before I wrap up, I want to conclude by thanking our teams across the world for everything they continue to do to keep us operating safely. We continue to face extraordinary circumstances. It's taken some extraordinary measures to deal with it. And I have a great deal of confidence that we'll keep operations running efficiently as we prepare for return to normalcy sometime this year. And hopefully it's sooner rather than later. So I'm going to stop there. And with that, we'll be happy to take any questions that anyone has. So I'll return it back to the operator.

Thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. And to withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question on the conference line of Alex Rigio from B. Reilly. You may begin.

Thanks, Bob and Jim. A couple of quick questions. I really liked your comment with regards to the business being resilient versus recovering. Your commentary about sort of the outlook over the next couple of quarters is interesting in that it's suggesting a recovery, but I'm kind of wondering, is the pickup in activity more sort of a function of a success in building your backlog during sort of a challenging period, or is it truly the anticipation of a stronger tailwind coming to drive that business in the second half of the year?

Hi, Alex. This is Bob. I'm glad to have you with us today. I'd say it's more of the latter. The fact that certain parts of our business have been resilient, part of the message with that is that they haven't really gotten that soft through this period of time. When you look at the portions that actually improved over the course of the four quarters of 2020, You know, we already saw an improving environment, at least from that low point around the first and second quarter. But they're still not as quite as strong as they could be because we still have service work we didn't complete in the rail segment. We still have sales of consumable products and other projects for friction management equipment that didn't go through. And even some of our new technology-based products, they were off to a bit of a slow start in 2020 because we just couldn't get access to customers through the year. So some of those things held back, I think, the opportunities that we had in 2020. And so from that standpoint, I look at 2021 and I think it's going to be better. I think that we'll also be able to execute on other programs we have underway, like growth projects in our precast concrete business, which has been one of the more exciting areas where we've introduced new products and stepped into new markets. And, again, it just feels like it comes at a time where it's just tougher to get some of these orders to ship. So, you know, this backlog is at a point where we're confident that, you know, we've got backlog that we're going to ship in 2021. I'm going to be anxious to see what it looks like in the second half of the year. But that will give us a tailwind, having that elevated backlog, and I think we're also going to get one from just an improving environment with which we can execute under.

Very helpful. And then, you know, Clearly, Congress is working on the American Rescue Plan right now, the $1.9 trillion sort of COVID relief plan. Can you discuss any opportunities that you might see in that that could help your end markets as well? Maybe draw a little bit of comparison to the proposed $2 trillion to $3 trillion infrastructure plan bill that might get discussed in Washington and how that could impact your business relative to maybe past infrastructure bills of five to 10 years ago?

Yeah, you know, let me start with the latter part of that. Because one of the things that we typically comment on is that whenever there is an infrastructure bill passed, we get an uplift from that. And the time that it was passed back after the financial crisis in the 2010-2011 time period, we saw an increase across a number of our different businesses as transportation projects got funding, but funding also went to what they called shovel-ready projects at the time and even other longer-term projects. Our precast concrete business saw benefit from it. We saw benefit in some other construction areas. So anytime something like that goes through, you know, our exposure to transportation and to general infrastructure, you know, is usually going to get some benefit. Well, now, when you scale that back to where you started with that question on, you know, what's going to come out of this $1.9 trillion spending package, I think we're a little bit less certain on that, but I can say that I know that there is transit rail funding in it. In fact, I saw highlights, for example, on how much is going to BART in San Francisco. That was, I think, one of the debates. So I think the transit rail agencies are going to get money. That's probably the most notable area that that package will help us with. But, you know, as money flows to states, states are going to be in a better position to also work on other projects, you know, whether those are highway and bridge projects or other kinds of just general infrastructure, you know, where we might even see some business, again, flow to our precast concrete business. Very helpful. Thank you very much. Yep. Thanks, Alex.

Our next question will come from Chris Sakai from Singular Research. You may begin.

Hi, Bob. I got a question on the London Crossrail project in the fourth quarter. Wanted to see your thoughts there, how it's progressing, and is it seeing similar COVID disruption as it saw in Q3?

I think that's probably a pretty fair statement to say similar disruption in the fourth quarter as the third quarter. We are operating well below the manpower that we had on that project prior to the pandemic emerging. So we have scaled back our headcount in our London-based services operation that is on that project. It does mean that some of this backlog we're carrying is partly attributable to Crossrail, and it's moving into 2021. So we're going to have more work on the Crossrail project in 2021 than we originally thought we would have. So on one hand, that's good. And we are currently projecting that based on the news coming out of the UK right now, that somewhere in this, I'm going to call a second quarter, sort of mid to late second quarter, they're really expected to allow for a lot more movement of people. But we still are operating. We're still an essential business in the UK. We still have people on that site. We're just running at a level that I would call about half of the workforce that we would normally be operating at otherwise.

Okay, great. And then as far as precast concrete goes, as we go into 2021, what are some of the drivers there that are going to increase orders and your backlog?

Well, I'll start with the fact that we are launching some new products. We continue to step into new products in our precast concrete business. every quarter, and most of those products are products outside of our precast concrete buildings. So these are products that are going into general infrastructure applications. We moved our SOCAN facility to Boise, Idaho, as we talked about last year, but we also acquired a small precaster in that area. that is bringing us new products into that market that we otherwise wouldn't have had for that particular marketplace. So we expect to see some market share gains and access to customers in that area that we wouldn't have had access to. Another example of this is we stepped into the market segment for secta tanks. You know, well, probably about two years ago now we probably got into that, mainly in the Texas region where there was a lot of growth in that area. These are tanks that are going both into commercial and residential applications. And we're now opening another satellite operation down in the Houston area as we speak. We're putting an organization together in that area that will be a satellite operation from our Hillsborough, Texas, facility that will now access another new market. So, you know, you've got a combination of new products, new regional markets that we're stepping into, and in some cases a hybrid of the two that is allowing us to expand our served market and, you know, step into product lines we haven't been in before.

I think the other thing to mention too, Bob, is there's the potential for the Great American Outdoors Act to be a potential catalyst for that business as well. So that's another thing that we're looking to see how those funds get deployed and how that might assist the precast concrete business.

Yeah, Jim's speaking about, if you haven't heard about that, he's speaking about a bill that was passed that allocated $5 billion to national parks in that Great American Outdoors Act. And, you know, a lot of that could go towards our precast concrete buildings that – They're in many of those parks. So, yeah, that's another good point. Thanks, Jim.

Okay, great. Well, thanks for that. And just one thing, you mentioned your business in Texas. Due to any of the recent weather-related issues, have you experienced any business delays there?

We have experienced some delays there two weeks ago when weather was at its worst point. We're in the process of catching up, and we don't expect any material impact from it this quarter. Okay. All right. Great. Thanks. Yep. Thank you. Thanks, Chris.

Our next question will come from John Bear from Ascend Wealth Advisors. You may begin.

Thank you. Good afternoon. Thanks for taking my call. Given the headwinds you have in the midstream business, coatings and measurement, I'm wondering whether you're giving any consideration to selling an entity off, and particularly given the, I'll use a strong term here, the hatred this administration has towards the hydrocarbon business. and obviously the first executive order being to cancel the Keystone Pipeline. I'm just wondering if you're thinking about difficulty in general about additional pipelines being built or whether or not you have the opportunity for, you know, retrofits as that particular infrastructure, you know, pretty extensive and old, and I'm sure there's plenty of sections and so forth that need to be revamped. So, could you kind of share your thoughts on that general concept?

Yeah, sure, John. Well, I'll start by saying that I'm not going to make any announcement here on today's phone call about some different direction that we're going to go in with those businesses. I will say before I comment on the future of it along the lines of where some of your color was going that we do have two businesses where we have some great core competencies in coatings that provide corrosion protection and in measurement systems that we're also currently looking into in terms of ways that we can diversify in those businesses into other markets. Other markets would be gas applications in addition to liquids, and there could be applications in water. We've actually already seen our first order in a water market application. So, there's some core competencies there that we think we can build off of to access some additional markets we're not serving today. Other than that...

I was going to say, the water order, is that a freshwater or saltwater? Because that kind of triggered a thought here with the push towards offshore wind turbine, you know, wind farms and so forth. That's a corrosive environment, obviously, being in the saltwater, and just wondering if that could be a diversification area for you, and if you've, you know, kind of been looking at that as well.

Yeah, it's not saltwater as in offshore applications or desalination-type applications. The first place that we're looking is just in fresh and wastewater that's in the domestic area. But we get most of our business from capital projects. We don't get a lot from retrofits, at least in our protective coatings business. There will be some more opportunities for retrofits and replacing old equipment when it comes to measurement systems because those are systems that from time to time we'll see more replacement than replacement of a pipeline. I guess maybe just to summarize for your thoughts on that question, we think about these things as we look at the company strategy on a continual basis. We understand the fact that there is on a long-term basis, and I mean long, that hydrocarbon-based fuels and energy may find its way into a less favorable environment, and there will be more renewables and other sources of energy that are used. This is a small part of the company at this point. So I think we're going to look for the opportunities where we can diversify. We're going to make the best out of businesses that have nice cash flow when they're operating at a good point in the market. And I'll refrain from speculating, you know, where we'll be with it three, five, or ten years from now.

Okay. Okay, very good. I don't think hydrocarbons are going away anytime soon, despite what... A lot of people think or would like to think. So, anyways, thank you very much for taking my questions and your thoughts.

Yeah, you're welcome. Yeah, I would agree with you. It's a long journey.

Yes, very much so. Thank you. Thank you so much. Sure thing.

Once again, that's star one for questions. Our next question comes from Brett Kearney from Gabriel Funds. You may begin.

Hey, guys. Good evening. Thanks for taking my questions. Hi, Brad. Hey, I wanted to ask about the bridge business. It sounds like that's one that continues to stand out as continuing to perform well. Is that one you would put into the category of a lot of funding was secured pre-pandemic and projects continue to move forward? Or how are you thinking about the outlook for that business, I guess, given your existing backlog and what you're seeing in from kind of customers, municipalities, uh, uh, in that market.

Yeah. Well, yeah, you, you're right about the fact that that backlog, uh, was climbing going into the year. Uh, we had already had a plan for, uh, for 2021, you know, that was based off of pretty strong order activity before the year started. And the pandemic really hasn't caused any disruption in that business other than early on in the year when we were running a little bit slower and had some problems with deliveries to sites. But we caught up mostly with that during 2020. And the outlook for this year is good. It's got one of the strongest backlogs that we've had. And we're just seeing what we've described over the years with this business. There are times when the big projects come, and it's just based on funding that emerges based on the condition of these bridges, well-suited for the kinds of approach that we used to put new decking in place. So it's going to be a good year for that business, and it's carrying a fair amount of the backlog that we have for that fabricated steel part of our infrastructure segment.

And I guess we're a ways away from this, but if we were to get a federal infrastructure bill and bridges was, you know, that's been called out by the American Society of Civil Engineers as needing significant investments, I guess given your backlog and kind of the duration that the work entails, do you anticipate you have a good amount of capacity as we think about the sequencing if a federal infrastructure bill were to come to pass and include meaningful bridge funding?

Yeah, I think we'd be fine with that. I think if they wanted bridge decking, you know, we're operating in our current bridge decking plant, which actually has two facilities, one of which is only partially utilized where we make forms for a variety of different bridge construction. But the bridge decking is in one primary facility where we have shift capacity that we could add. So as long as we can find labor, and we typically are successful at that, we would be able to expand capacity. And we also provide sometimes concrete bridge beams for some of this work as well. So our concrete business will occasionally benefit from some of this in terms of making concrete bridge beams. So, yeah, I would not be too concerned. I haven't seen this market provide an uplift where we have run out of capacity in the past. I'd be delighted if we had that problem.

Yep. All right. Terrific. Thanks so much, Bob. Yeah, sure thing, Brett.

Once again, that's star one for questions, star one. One more for questions. And currently I'm not showing any questions at this time. I'd like to turn the call back over to Bob for any final closing remarks.

All right. Well, thank you, everyone, for joining us today. We appreciate you spending time with us, and we'll look forward to talking with you around the end of April when we wrap up the first quarter. So thanks again for joining us.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.