Q1 2020 Earnings Call

Greetings and welcome to Ob Fosters first quarter 2020 results conference call. At this time all participants are in listen only mode. A question that just such a will follow the formal presentation.

I mean, what's required operators is just starting with <unk>. Please.

At least for stars or on your telephone keypad.

This conference call is being recorded.

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

Thank you and good evening, everyone welcome to L. be fosters first quarter earnings call I am Jim a learning senior Vice President and CFO.

Before I begin I want to introduce to people you may encounter as you interact with us on investment research, where 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 let's walk.

Who will assume the responsibilities previously held by Judy Bay log it was returning to another role in our company.

This evening I will review the company's first quarter financial results.

After word Biopower, President and CEO will review the company's first quarter performance and provide an update on significant business issues and market developments. We will all we we'll then open the session up for questions.

Today's slide presentation, along with our earnings release in financial disclosures were posted on our website earlier today.

And can be accessed on our Investor relations tab at L. B Foster dotcom.

Some statements we are making our forward looking and our best view of our markets and business today, including comments related to cope with 19.

These forward looking statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise where publicly released 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 in cash flows.

As we disclosed previously we were relocated a precast facility from Spokane, Washington, Boise, Idaho and closed three service centers in 2019 to reduce headcount cost and risk in our test and inspection division.

In Q1, the company recorded a total charge of $881000, where these actions which are now completed.

On April Thirtyth 2020, the board of directors authorize closures of three additional test and inspection facilities and our and other cost 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 due to the cobot 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 dollar 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 Corona buyers is difficult to quantify.

Stay at home orders weren't acted 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 that adversely impacted by our rail technologies business in North America in 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 weaken 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 Croswell project.

From a tubular and energy segment perspective, the Corona virus pandemic and the associated reduction in energy demand.

Due to reduced travel and movement of goods throughout the world.

Caused us 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 depress 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 onto expenses.

Our consolidated selling and administrative expenses decreased $592000 or 2.7% to $21 million in the first quarter.

Net interest expense was reduced by $538000 or 39.7% for the first quarter due to a 26 million dollar reduction in outstanding debt when compared to March 30, Onest 2019.

Our income tax benefit was $828000 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 18 cents loss per diluted share compared to income of $4 million or 35 cents 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 30, Onest 2019, mainly due to a decrease in inventory of $6 million. The decrease in inventory in Q1 was due to better inventory management and 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 30, Onest 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 ended the quarter, which gives me confidence that we can deal with the issues arising from these unprecedented events.

Now I always 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 dollar 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 well 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 weld 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 onto new orders and backlog.

In Q1, overall orders were $137 million compared to $180 million last year.

There were decreases within.

All three 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 ended the first quarter, an increase of $8 million or 3.3% during the quarter.

The backlog decreased by $12 million or five per cent compared to March 30, Onest 2019.

Bob will provide more details on our orders and backlog activity as well as our mass 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.

Thank you Jim.

Hello, everyone.

I appreciate everyone joining us today as we attempt to provide as much inside as possible around the recent quarters 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 a virus.

Unfortunately, theres a lot of uncertainty, but we'll do our best to help you understand what we're saying.

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.

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 and supporting the economies that depend on us.

During the month of March the company reacted to several stay at home orders across North America in Europe, as well as recommended preventative measures to help stop the spread of of Rs.

Ill be foster was widely considered an essential business and allowed to continue operating under these orders.

We took a number of steps to fall recommendations on social distancing and reduce 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 and operations to respect the health and wellbeing of their co workers.

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 and continuing to operate for their very reasons, we redeemed in a central 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 everyday 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 wellbeing of everyone.

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 to health and wellbeing of our employees and guarding against the risk of infection.

We did not experience any sickness in the us in 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 to stay at home orders had on our business.

I'll begin with four anecdotal reports.

One we experienced minor disruption in our supply chains typically in areas, where we serve source circuit boards controls cameras and other sensors for railway automation solutions.

Portion of these are sourced from China and did not meet delivery requirements for projects we had schedule.

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 borrowers concerns.

Third there have been some delays and cancellations 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 those service work was stopped as in the case of London underground and some customers have delayed non critical work as a way to cutback.

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.

Two 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 of borrowers 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 borrowers but were exacerbated as the demand for oil dropped substantially once the public around the world stopped traveling driving to work and engaging and.

The 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 isn't important quarter for the company to see a ramp up in orders and backlog as construction projects are planned and started.

The rail in 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 havent 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 expect 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 discussed the quarter and what we expect to see unfold there are striking differences among our reporting segments.

New orders of $137 million declined to $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 our reducing capital spending and deferring projects wherever they can.

But 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 decline beliefs, 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 viruses related matters, such as people adapting to working from home.

Under that backdrop, it's worth noting to positive items.

First our backlog sits at $238 million with roughly half 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 us 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.

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 realized that it's still early in the broad economic impact from the stayed home orders has yet to be fully understood.

But at the moment, we're not getting signals from customers in these two segments that indicate a widespread reversal in direction from what was planned for 2020.

I expected 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.

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 as 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 two more territories, where we see little potential to return to a promising sales levels.

As a result, we pay 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 one site in Wyoming.

Free in Texas, and one 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 half of what sales in Spokane were in Q1 last year.

In addition, we had startup 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.

A 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 the 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 we do services at class, one us carriers and London underground.

These conditions are likely to persist for at least a portion of the second quarter.

And then the tubular segment half for 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 consolidate.

The decline in segment profit.

I'll close with a comment on our balance sheet strength, Jim spend 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 on operating cash flow in 29 team and on a trailing 12 month basis for 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 29 team or our trailing 12 month results our net debt to adjusted EBIT da 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 intention on actions to mitigate the impact of this weakness.

And the division 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 continued 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.

Thank you at this time will be conducting a question and answer session. If you'd like to your question. Please press star one on your telephone keypad.

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Participants using speaker equipment and may be necessary to pick up your handset what presence start keys, one moment pieces and Coca questions.

Our first question comes from the line of Chris manner with FBR. Please proceed with your question.

Good afternoon, everyone. Thanks for taking my call and hope everyone as well.

Hi, Chris Thanks for joining us.

So thank you so much for all the color and.

Some updates in kind of the real time environment, how quickly as the environment changing for you and it sounds like bid and proposal work is still happening.

But you know we've kind of a real time basis, how quickly things changing.

Well I think the best way to say that is probably a two part answer.

The 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 Monday adjustments being made and then industry are being made at a very very rapid pace.

On the other Hamed, we have those areas in construction and in our in our rail business, where many of the projects that we had been working on our 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 the 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 theres a lot of adjustments were making.

Pretty fast, but in terms of the market changes in the dynamics there you've got a judge that based on on the ones that we're seeing that are being impacted the most by the pandemic, they're the ones where people are taken pretty quick action.

Okay got it and you mentioned you know a lot of deferrals or delays in activity.

You know is there a range in the timing are you seeing any consistency or anything jumping out are you in terms of when things might.

The start to come back.

Okay.

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 does that companies are all reacting in different ways to this issue.

The dynamics of operating a.

Railroad versus a highway bridge and construction project versus.

On 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 there are people are saved so so.

Did you find as you find people.

Taking different sorts of measures in order to make sure. They can try to continue to operate.

And the new environment, if you will.

So it's hard to say that.

Theres any consistency with that.

And as it specifically relates to your question about delays.

These are.

These are also companies that are dealing with funding.

Traffic issues.

So the manner in which they actually can pay for these projects that differ greatly as well and so for that reason you know across all of our different segments. Some and Thats. One reason wise from time to time, we're happy to be diversified than other times with might not be your friend.

But that that's also why we see some varying circumstances across our landscape.

Got it okay, how about from a competitive standpoint I imagine.

I know you I know theres a lot of smaller competitors in your markets have you seen some of those.

Competitors, either you know fall off or are you all your customers coming to you.

For help due to due to some performance.

Headwinds from from some of their other providers.

I wouldn't say that I could point to anything yet.

On that.

I'm I'm anxious spend a few areas, where we do compete against private companies.

That.

Probably don't have been 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 can share with you. The you know might might lead you to think that that landscape is changing in any significant way I I really suspected will probably be maybe at the end the next quarter, where we might be able to.

Maybe draw picture of what has changed if anything but not not not at this point.

Okay got it and then I just want to just from a.

Mechanical perspective, just make sure I heard you correctly, the 5.5 to 7 million charge you're expecting.

You are expecting that each of the in each of the next three quarters or is that a full year number how does that kind of play out.

Chris This is Jim.

I would be.

The total impact so okay, we were expecting the majority of it to be.

Charged in.

Q2.

Some will drag into Q3 in Q4.

Okay got it.

And then just last from 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 it and make me any specific examples you could you could give us on on how you'll be able to you were able to execute so while there.

Well it has been into an area of great focus for us for some time.

I would tell you that you know the focus is getting to be more and more intense.

We are particularly.

Based on our cash flow for the company.

This quarter and in the coming quarters.

So to so it's something that we work.

Quite aggressively our collections team has done.

Terrific job some of the methods that they use have really helped us substantially year over the course of I'd say about the last 18 months Thats really gone.

Fairly well for us but that between.

Well actually I guess in all categories of working capital when they would pay attention to each of them. So it's really it's really a part of our business system.

In 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 to focus on that.

Okay got it. Thank you so much for the time and stay safe and healthy.

Yes. Thank you you do the same group.

Our next question comes online Crystacomm with singular research please to the question.

Hi, everyone.

I wanted to comment on our ask about.

I States and states are now slowly reopening.

Are you guys seeing an uptick in new order.

Can you provide some insight there.

Well of course that is just getting underway.

I think the first thing I would probably point too.

Is.

We haven't been able to really link.

Our order input much to the closing are opening may be of any given no one state door to stays here or there.

The most of our end customers have been operating right. So when the 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 pick our home state here for Pennsylvania, They shut down construction projects and we had some trouble with deliveries in schedules when in the Pennsylvania area, which.

Has has now open construction, but not other things so I.

I mean, it's 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 what with orders, but we've stayed in touch with most of our customers. They've continued to operate you know 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 what was disruption because of the stay at home orders that caused us the most heartburn. It. We're we're working around and we'll continue to work around.

Okay. Thanks for that and then on can you.

Can you shed some light on law.

Why didnt construction products.

Out of the three categories in Munich seen seem to hold up the best as far as new orders.

Concern.

Okay.

Well I would probably for comparing it to the other three segments.

I would point to tubular and energy first as a comparison.

Obviously, Matt.

Segment is hurting the most.

So that's that's been a tough.

Area for us.

So that that has everything to do with the demand.

For for oil and how far that have saw that has declined.

In comparison to the rail business I think the two of those.

They weren't off of from one another I think to March construction was Don you are talking orders. So thank you said, so construction was down year over year, 14% I think I recall.

Right.

Yeah I am.

Rail was down 24%.

No one well one thing that moves a lot around the law than there is the timing on some of these rail projects and when the transit projects kind of get spawn up.

But 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 works thought toward the end of the quarter both in.

In the us.

And in the UK.

But.

The other thing you got to look edge is also prior year.

And so.

Our piling in 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 to quarter, but just ended for our precast concrete products in construction, which.

For the year may be impacted among the least among all of our divisions.

Okay.

[music].

Great well, a whole hopefully that everything shakes up better in coming quarters.

Yes. Thank you. Thanks appreciate it okay. Thanks.

Our next question comes along.

With gamco investors since it's a question.

Hi, guys. Good evening, Thanks for taking my question.

Thanks, Brad.

Could you guys just I guess.

Help me think through.

Back in 2009 2010, when ultimately we saw I missed the last major federal infrastructure program pass through the American recovery and Reinvestment Act can you just help me think about.

Our current obvious ones Argus encompassing all of them really the parts of your business that might be.

Todd.

Two if we were to get.

On the large federal.

Infrastructure program there.

Well, if you go back to that point in time and.

You know that there was money being thrown into few areas and they've talked about shovel ready projects and things like that at that point in time, I really depended on where you could deploy money quickly we saw boost in the piling division and our precast concrete division are the two that I would.

Point to that were to topped the list of those that benefited but I think have more to do with the fact that there were some projects that they could put that stimulus money toward.

And get a pretty quick you know bang for the Buck.

[music].

The bridge business would be the other one but if I spoke more broadly about stimulus money in the didnt quite take place back and nine 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 you know with another decade on it.

Have fallen behind the net 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 UK, where theyre already pushing some of this forward and we think we're going to benefit.

Which which our business is predominantly transit rail there, but some of the solutions that go a round out 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 in pre cast as well I think those or other added to areas, where where we would likely see some additional impact if if the there was any kind of bill put through for infrastructure.

Terrific. Thank you guys and I hope you in the whole team stays healthy insight. Thank.

Thank you. Thank you very much same to you.

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Our next question comes on line of Peter and rules.

And we'll see private Investor. Please proceed with your question.

Hello. Thank you for taking my call. 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 are 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.

As far as oil reserve capacity goes if there were investments that were made in oil reserve capacity. If I think thats, where you were going on that would not really directly benefit us in that we don't make any products that would serve in.

In expanding that capacity.

Now if there was additional capacity and that will allow the.

Production to continue flowing right and minimize the decline in production than we would see some benefit to that because as production does decline.

That means that drilling will decline and we're drilling of wells goes that's where our business goes.

And in the upstream segment at least and then in midstream segment that is all tied to the amount of oil and gas flowing through the pipelines you know so as that moves through the system revenue for the midstream operators comes through and depending on.

The amount of capacity they have in all our business. There is complete is proportional to the need for capacity in the pipelines.

So I think if you know if you were watching something where somebody said theres going to be a bit of an increasing capacity for oil reserves share short term to store another im not sure what number to put on it.

Anymore.

Yeah.

Yeah.

Probably would not be pointing to much of an impact it would have on our business.

In terms of Nippon steel.

You know there not a customer that we do a lot of work with.

They.

From time to time, you know do interact with us on some technologies that 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 does it really is very very small at this point.

Thank you so much for taking my call. 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.

Thank you for joining us on the call. Thanks.

Once again, if you like to ask question. Please press star one on your telephone keypad. Once again, if you like this question. Please press star one your telephone keypad.

Since our no further questions left at this time I would like to turn the call back over to Mr., Bob for any closing remarks.

So thank you operator, well. Thank you everyone for joining us we appreciate the questions as well.

Well, we tried to do our best to help you understand the quarter that's gone.

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 catch and you down and be safe and healthy in the meantime, thank you very much.

This concludes todays teleconference. You may now disconnect your lines at this time. Thank you for your participation have a wonderful day.

[music].

Wow.