Q2 2020 Northwest Pipe Co Earnings Call
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Good morning, welcome to the northwest pipe company's second quarter 2020, <unk> earnings Conference call.
All participants will be in listen only mode. So do you need assistance. Please ignore it conference specialist by pressing the star can you followed by zero.
After today's presentation, there will be an opportunity to ask questions.
Please note. This event is being recorded I would now like to turn the conference over to Scott Montross, President and CEO of the company. Please go ahead, good morning, and welcome to Northeast Type Company second quarter 2020 earnings Conference call. My name is Scotland, Trosch named President and CEO of the company I'm joint.
Today by Aaron Wilkins, our Chief Financial Officer by now all of you should have access to our earnings press release, which was issued yesterday August 4th 2020 at approximately four PM. Eastern time. This call is being webcast and it is available for replay.
As we begin I'd like to remind everyone that statements made on this call regarding our expectations for the future are forward looking statements and actual results could differ materially. Please refer to our most recent form 10-K for you ended December 31 2019.
And then our FCC filing for discussion of such risk factors that could cause actual results to differ materially more expectations. We undertake no obligation to update any forward looking statements.
Thank you for joining our call today to discuss our results.
Ill begin with a review of our second quarter 2020 performance.
Bidding activity has remained strong which resulted in an improved second quarter backlog versus first quarter in a strong free cash order book.
As of June Thirtyth, our backlog, including confirmed orders for the northwest pipe legacy business was 246 million compared to 224 million at the end of the first quarter of 2020, and 276 million at the end of the second quarter of 2019.
The current 246 million represents our eighth consecutive quarter of up 200 million remains very high by historic standards. In addition, our order book for the concrete pipe and precast business remains elevated as we progress through the busy time of the year.
Second quarter net sales of 70 million benefited from 12.4 million contribution from our acquisition of Geneva pipe and precast assets in late January.
Improved legacy pricing and positive contributions from Geneva helped drive a 57.7% year over year increase in our gross profit dollars to 13 million.
Legacy business in the second quarter of 2020 was negatively impacted by shifting job timing as well as the shutdown of our SLR see Mexico facility.
Strong performance by Geneva, Precast business helped elevate revenue and gross profit in the quarter that saw the legacy business more affected by covert 19 related factors the ability to offset temporary periods of choppiness in the legacy steel pressure pipe business is a very reason why we chose to enter the precast.
Great water space as part of our growth strategy, a business that is significantly more transactional nature.
Backlog after declining at the end of the first quarter 2020 grew through the end of the second quarter as the bidding schedule remains strong.
The structure of our business remains very solid as we move into the second half of 2020.
As we anticipated our revenue growth profit were negatively impacted by the government mandated shutdown of our water infrastructure manufacturing facility in San Luis Rio, Colorado, Mexico, or SLR see for short in the early April timeframe due to cope with 19 related shelter in place orders.
Thankfully, we were able to shift some of the jobs from Src over to our U.S plans given that we have more than enough capacity at those facilities, which helped partially offset some of the volume decline while the SL RC facility remained idle for the majority of the second quarter, we were authorized to resume partial operations.
At 30% staffing on June 1st and have since been able to steadily ramp up our operations back to pre covert banking production levels as of July 30, Onest, we're very pleased to be able to bring all of our affected employees back to work as safely as possible.
While covered 19 impacted the timing of some bidding activity is delayed some jobs, we have not experienced any major business interruptions at our plants in the us due to the essential nature of our operations in producing critical water infrastructure products. In addition to the designation as an essential business.
We believe we've been able to successfully navigate through this challenging in complex environment due to the proactive measures. We took in March to help protect the health safety and well being of our employees. This remains our number one priority.
In addition to improving sanitary measures throughout our facilities, we have continued to promote social discouraging.
Encourage working from home when possible or otherwise maintain staggered shift schedules and continue to offer additional hours of paid sick leave to help support those employees impacted by covered 19.
I'd now like to turn to a discussion of our two prong growth strategy, which remains a key area of focus.
First and foremost, we're maximizing our core steel pressure pipe water transmission business through ongoing cost reductions and mean lean manufacturing as well as pursuing limited, but known growth opportunities as many of you are aware given we currently have 50% of the market share in steel pressure pipe market.
Expansion in acquisition opportunities are fairly limited in this space as such the second component of our growth strategy is to grow in an adjacent water space.
As demonstrated by our recent acquisition of the Geneva pipe and pre cast on January 30, Onest 2020, we chose the precast concrete space, which we estimate is roughly a $3.5 billion to $4 billion market in the us.
We would characterize this market is having strong growth prospects with higher product margin opportunities and a quicker cash conversion cycle relative to our legacy business.
Demand in the precast concrete space has held up well in this environment as demonstrated by our strong progress revenue order book.
Despite the challenges in current environment presents from a broader macroeconomic perspective, we're continuing to evaluate various potential M&A opportunities, but we remain highly disciplined in our approach.
Our criteria is centered on organic growth potential strong margin characteristics solid asset efficiency in a positive cash flow profile.
Since working through the 100 day integration plan for Geneva, We've made significant progress in creating cost efficiencies lean manufacturing and inventory management.
From a product perspective, a geneva, we see strong potential for future organic growth opportunities through our expanded addressable market.
We're also in the process of commercializing new innovative concrete products for use in corrosive sewer applications in the second half of this year and look forward to sharing them with you in the following week in months ahead.
I will now turn to a look at current and upcoming water transmission projects.
In the Texas market. The Swift program has funded over 8 billion in projects over the last six years Swift is expected to continue funding major regional programs like the continuation of the surface water supply program in Houston Metropolitan area to ensure sustainable long term.
Water supplies for Texas.
The ongoing multiyear multi agency Houston surface water program is expected to bid multiple segments in 2020, representing 32000 tons of pipe for West and North Harris County regional water authorities.
We anticipate both authorities, having additional bids in 2021, representing 33000 tons of pipe.
The next new reservoir to be built in Texas is the Lake Ralph Hall for the Upper Trinity Regional Water District. This is another major program. Currently in design that includes a new dam and pipeline to move water into the Dallas Fort Worth region.
The project represents 17000 tons of pipe construction procurement is expected to begin in spring of 2021.
The Alliance regional water Authority program in Central Texas as another multi agency regional water program. The program includes a large pipeline pump stations and treatment facilities and represents 15000 tons of pipe.
Construction is expected to begin in 2021.
In the Western market, California, prop one $7.5 billion bond for water infrastructure has created a much needed funding for projects within the state.
According to the California Natural resources agency, 95% of the funds have been appropriated for various projects as of the 2000 2021 fiscal year.
We expect requirements for these projects to stretch out over the next several years.
Water reuse programs have generated new opportunities in the California market on which we expect to see bidding activity continue for the next year. The MWD is heading up a regional reuse pilot project in conjunction with L.A. sanitation District, This reuse program, which tree and recycled.
Water from one of the largest reclamation facilities in southern California, and involves 60 plus miles of large diameter pipe.
The current demonstration facility has been operating for six months in construction of the full scale treatment in conveyance facilities could begin as early as 2025.
The PCCP rehabilitation programs will result in about 10000 tons annually over the next two to three years currently some of the owners undertaking rehabilitation programs have slowed reschedules. These are not cancellation of projects, but simply work shifting to later this year.
The city of Phoenix has begun procurement and construction activities under zones three d. in foray improvement program.
This program safeguards the city's water supply against curtailments in Colorado River water allocations. The projects identified represent over 8000 tons of new pipelines pump stations and treatment facilities.
The sites reservoir as a water storage project that has received funding from prop one it will evolve over 30 miles of 144 inch pipe. The project is forecasted to begin in 2024 25.
Southern Nevada water authority has began moving forward in earnest with an expansion of the southern part of their water delivery system. This program, which has recently started preliminary design activity will include approximately 25 miles of 78 inch steel pipe with construction Teva tentatively scheduled for 2020.
For.
In North Dakota progress has slowed on the 140 mile 87000 tonne Red River Valley water supply project, a two mile demonstration project has been forecast the bid in the third quarter of 2020 with the bulk of the project being dependent upon a 2021 legislative session.
Action to commit to full funding plans.
In Colorado, we are tracking a late 2020 final record of decision by the US Army Corps of engineers for the Northern integrated supply project is favorable construction of up to 150 miles of pipeline is expected to start in 2023. The project is located says.
80 miles north of Denver in the Fort Collins area.
We continue to believe our business is very well positioned to operate through the pandemic due to the essential nature of our operations to provide critical water infrastructure systems in the U.S., our backlog, which remains very high by historic standards in the bidding activity for two to 22020 that to produce.
Acted to remain strong further we have a strong balance sheet ample liquidity position to execute our strategic growth priorities over the last two years alone. We've completed over 88 million worth of acquisitions, primarily funded by our balance sheet and have continued to generate positive cash.
In addition, while we are cautiously optimistic our backlog will continue to grow the variable nature of our cost structure provides us with the flexibility to be in a position to quickly react to changing market conditions should we need to do so in the future.
Before I conclude I'd like to also welcome Amanda Tulisa, who was selected to our board of directors as an independent director on July 9th Amanda's experienced an organizational development in working with global 500 organizations to help maximize leadership effectiveness and value creation will be.
Essential as we continue on our path of growing the company.
In summary, while the challenges the pit pandemic has created for the broader economy in our business might have caused a few issues in the short run our bidding volume has only continue to improve accordingly, we continue to estimate a current market size of roughly 209000 tons and a job count of two four.
For fiscal 2021st is 242 in fiscal 2019.
As we move forward, we will remain focused on one taking every precaution to keep our employee safety during the covert 19 pandemic too.
The ongoing integration of the Geneva assets three a persistent focus on margin over volume for continued implement cost reductions inefficiencies at all levels of the company and lastly, five identifying strategic opportunities to grow the company.
Ill now turn the call over the air and who will walk through our second quarter financial results in greater detail.
Thank you Scott and good morning, everyone. I Hope you are all staying safe and healthy now, let's discuss our financial results.
Adjusted net income for the second quarter of 2020 was 4.4 million or 45 cents per diluted share compared to adjusted net income of 5.4 million or 55 cents per diluted share for the second quarter 2019.
Adjusted net income excludes unique an unusual items and has provided for comparability purposes.
The most significant adjustment was 2.7 million in recoveries on the now closed insurance claim associated with the fire at our second our facility in April 2019.
This was partially offset by 0.5 million and amortization of intangible assets acquired with Geneva, and 0.5 million an estimated tax expense for these items.
Our second quarter of 2019 results included 3.2 million in incremental production costs as a result of the fire as well as the associated estimate tax impact of those charges.
Please refer to the reconciliation of non-GAAP financial measures in our earnings release for a full accounting of the aforementioned items.
Our second quarter sales increased 1.1% to 70 million compared to 69.2 million in the second quarter of 2019 due to a 12.4 million contribution from Geneva pipe and precast.
Legacy revenues declined from the year ago quarter due to a 31% decrease in tons produced primarily related to short term project delays and the shutdown of our Src water infrastructure manufacturing facility in Mexico, which was partially offset by 20% increase in selling price per ton.
Gross profit increased 57.7% to 13 million or 18.5% of sales compared to 8.2 million or 11.9% of sales in the second quarter of 2019.
Both quarters margins were impacted by timing differences caused by the second our fire.
The second quarter of 2020 was elevated by a 1.8 million in recoveries associated with the business interruption portion of that insurance claim.
While the second quarter of 2019 was reduced by 3.2 million of incremental production costs associated with redeploying projects effected by the fire.
In addition, the second quarter of 2020 included zero point $3 million of amortization expense associated with Geneva.
When adjusting for these items gross profit as a percentage of sales would have been 16.4% for the second quarter of 2020 compared to 16.7% for the year ago quarter.
The addition of Geneva helped offset some of the second quarter headwinds created by the closure of RF ESL RC facility.
Scott mentioned restrictions at that plant have been lifted and we're now operating Src at normal production levels.
Selling general and administrative expenses were 5.6 million in the second quarter of 2020 compared to $4.7 million in the second quarter of 2019.
The increase was primarily due to higher professional fees amortization and compensation expenses due to the addition of Geneva.
We continue to expect quarterly SGN expenses to be between five and five and a half million for the balance of the year.
We had an income tax rate of 26.7% in the second quarter 2020, compared to an unusually low income tax rate of 13.1% in the second quarter of 2019, which was impacted by estimated changes in our valuation allowance.
For the full year 2020, we continue expect our income tax rate to be approximately 27%.
Now turning to our balance sheet and cash flow.
Total available liquidity at June Thirtyth was approximately 74 million, which comprised over 19 million in cash and cash equivalents and 55 million from our line of credit.
Total debt at June Thirtyth was 15.4 million.
At recent profitability levels, we have continued to easily comply with our debt covenants and expect to remain in compliance for the remainder of the year.
Our balance sheet remains strong and we have not experienced any adverse impacts from broader economic downturn affecting collections of our accounts receivable.
We generated strong cash flows from operations of 13.8 million during the second quarter 2020, compared to 6.9 million in the second quarter of 2019.
Depreciation and amortization totaled $3.8 million for the quarter.
While depreciation varies with quarterly production levels, we expect amortization to be approximately 0.6 million per quarter for the balance of the year.
Capital expenditures totaled 3.6 million for the quarter, which were primarily used for ongoing maintenance capex.
For the remainder of 2020, we expect our capital expenditures to be in a range of 12 to 14 million.
In summary in spite of short term setbacks, we encountered with a shutdown of our Src facility, we achieved solid second quarter financial results due to strong operational leadership and plant level execution in a highly complex environment.
We're very pleased to have all our facilities back up and running.
Thank you to all of our employees for their ongoing dedication through these unprecedented times and for making northwest pipe company, a safe place to work.
Now I'll turn it over to the operator to begin question answer session.
I will now begin the question and answer session.
Good question you May Press Star then one on your Touchtone phone. If you are using these speakerphone. Please pick up your handset before Preston keys to withdraw your question. Please press Star then to at this time, we will pause momentarily to assemble Laura.
The first question today comes from Brent Thielman D.A. Davidson. Please go ahead.
Great. Thank you good morning.
Good morning more in rent.
You guys generated really nice cash flow this quarter frankly in the first half I didn't see all the details of that I'm, just wondering what what's been driven by.
But any sort of working capital windfall from that the legacy business that you might have to invest back later versus.
Contributions from continue that.
Well I guess.
I would start by saying that is we've talked in previous calls Brent we have been pretty focused on on collections in a are in the marketplace right now in our percent current a our is probably more than doubled over the last year and a half which is a big driver when.
And when the businesses. This large as we as we start moving forward and we see this this cash continue to collect on the balance sheet and as we sit here now it's actually even higher than what we ended the second quarter with.
We expect based on the bidding activity and the backlog business to be higher specifically in the legacy business in the second half of the year. So certainly we would expect some of that additional cash to be pulled into working capital at that point into the current assets, but but the way it looks right now our cash.
Generation.
Should continue as we go forward it will probably fluctuate based on size of the legacy business both.
I think we are doing pretty good job of collecting cash and I'll, let Jerry talked a little bit about the the cash as a result of getting some of the cash back on the Socgen off our.
Yes, and that actually is going to be a Q3 events. It's good to be clear about that we did book over the amounts for the second how far in the second quarter, but those aren't affected caseloads, yet really it's been the working capital. In addition to the profitability and adjusting for some of those noncash items. We've just had.
Pretty good start to book to Bill to the first half of this year and we're doing investor keep keeping wrong, but like Scott said.
I haven't seen a falloff and anything on that on our front and things are going to humming along right now.
And Aaron can you remind me that that cash you expect from there the second our fire and I guess in Threeq.
He asked about $2.8 million.
About a million dollars of it will will record red down in the investment section or investing section and the rest of it up and operations.
Falls on the lineup of cost of sales versus below the line accounting for this settlement.
Okay great.
And then you guys saw I mean, a really strong lift in pricing with year on year this quarter, 20%.
How much of that as you look at that how much of that as determined by.
Next project mix versus steel versus.
Stronger bed margin than maybe more rational competitive behavior, just trying to parse that out.
Well I think some of it is.
As steel, obviously, we've seen steel moderate down.
Now for a period of time and it appears to be based being significantly affected by coated.
In the present term, but I think the the pricing in most regions has held up pretty well, which ultimately helps positively impact those margins.
I think the bidding environment for the most part is relatively solid.
With with the competitive landscape. So I think we're in a situation where as we go forward with the amount of work that we see bidding.
Not only in the second half of this year, but as we look at our three year plan 21 22 in 23, So I think it bodes well for reason even further further price raising and increases in further impact on the margin not only from the perspective of moving price up but the higher levels of production.
Okay.
Higher absorption within the plants continue into the margin Sue So I think we're on a good track with what's going out in the marketplace for a little while Brent win.
When the decoded crisis hit we saw a little bit of panic bidding by a couple of our competitors that seeming to subside a little bit based on the amount of jobs that are actually coming at us. So we feel pretty good about pricing levels and a positive impact on margin as we move outs.
The next several quarters.
Okay, that's great maybe one more and I'll pass it on in Geneva, It seems like.
Housing and kind of nonresidential backdrop at least in the mountain states.
Has held up really well.
And I know you don't have that much of a hard dollar backlog visibility there, but can you just talk about Scott what the business leaders see.
For the rest of the year and perhaps even into 2021.
We.
We've seen based on like you said the housing market.
In that region.
Economic.
Okay.
Not only in Utah, which some of the surrounding states like.
So.
In Nevada, certainly certainly the housing market has held up better there.
Obviously in total in the United States, we saw a little bit of a dip in housing starts after the January February timeframe, but it seems like it's starting to recover a little bit is we're going into the June timeframe. So the feeling is from the Geneva business that we're on a pretty good track for what we.
We thought that business was going to look like when we acquired and when we added discussion back in January that looks pretty solid. We're currently working on those innovative products that.
Help us stop the corrosion factor on concrete Jane sanitary sewer applications that we think is going to provide really good organic growth. So I think all those factors and that region point to a good rest of 2020 and actually as we go into 2020.
One we feel that the end of the innovative products, we're actually going to add to that organic growth and continue to push both the top line in margins up.
Okay. Thank you for all the color appreciate it I'll get back in Q.
Thanks.
Operator, we're from Gus Richard.
Glenn Please go ahead.
Yes, thanks for taking the question just real quickly you had some delays in.
Q2 have those projects restarted and.
What is the the environment for your year end customers in terms of getting Stockton.
Well, yes, we have seen some of them restart.
Some of the think the delays are relatively short gas.
Part of the third the issue is is it's the same as we see going on across really business environment across the us we've got a lot of people working from home.
At this point is even as far as customers utilities, and what happens as you get a situation where it slows down getting the permitting done and things like that so I think people are getting a little bit more used to.
Working at home and having to go through the process. So it's getting a little bit easier with getting those things done but the reality is we'll probably continue to see things push around.
For a period of time, but it looks like it's starting to stabilize and not getting better so.
With the amount of work that like I said before we see coming at us.
I think those delays probably get less noticeable as we progress during this year into 2021.
Okay and.
Just as a follow up the funding for problem projects are working on that's all solid.
Any.
Disruption there either yes, we started looking at our three year plan gas, though a few weeks ago.
2021 in 2021, 20 to 23 and what we found is a significant amount of demand out there over that timeframe and what we're seeing right now other funding mechanisms in place on those but probably 75% to 80% of those projects are ready so.
We are we are seeing funding.
We continue to stay stable and have not seen any issues related to having jobs funding and having jobs get pulled out.
Got it and then just one housekeeping question for me what was Geneva his contribution in Q1.
Well I tell you about Geneva.
Is that if you look it's the margin profile, we've seen most recently in the legacy business, we're seeing a range right now of of somewhere between 15 and 21% over the last several quarters, depending on delays and things of that nature.
In Geneva is towards the high side of that range as we sit right now and leave.
It's we've talked about where we see revenue in the second quarter somewhere in there of about 12.3 or 12.4 million I think that probably gives you really pretty good idea.
Yes, absolutely and just to follow up.
The revenue contribution in Q1, how much was that it will only a partial quarter.
Yes, the partial quarter I want to say it was around 8.3 million.
Got it thank you.
Sure. Thanks, just.
Your next question comes from David Wright of Henry Investment Trust. Please go ahead.
Scott during good morning.
Good morning, David.
Scott at the end of your.
Prepared remarks, you gave.
Commentary on tons in jobs can you cannot probably to repeat those numbers.
Oh, yes for 2020, we're looking at a total of about 209000 tons and about 240 jobs in two.
2019, we saw about 242 jobs.
And how many tons.
Oh I want to say it was probably in the area of about 219 or 220000.
Okay.
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In Geneva.
Were you talk about strong precast order book.
Can you can you break that down into actual product areas like just.
What was in demand, yes carrier right.
Yeah, the biggest product demand that we see it Geneva is reinforced concrete pipe and manhole.
Applications.
Mental applications, including demand whole base in riser up to the street really represent a pretty substantial amount of the business that we're doing in Geneva right now.
Theres a lot of smaller products like clover, and and things like that that add to the total but a big piece of our businesses is RCP in Manhattan.
Okay. Thanks, and then lastly.
Just in the press release, you talk about.
The backlog and.
Yes.
With the bidding.
The progress of bidding opportunities.
Was there any delay as a result of covert was it harder to get bid submitted or more or less bids requested et cetera.
I think that.
There are some delay in the bidding as a result of cobot anemic. It's it's similar to what we talked about a little bit earlier. It's the fact that we have a good deal is a good amount of people in this business working remotely and a lot of times little slow down the permitting process.
And ultimately getting the job tumor shovel ready and that's really what we're seeing delays were really not seeing anything with people, saying well there's covert going on in we're just going to we're just going to push this job way out into 2022, we havent seen that.
We see that these jobs have funding in place and momentum behind them and the jobs that we see now.
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Yes.
Going through year, we expect this momentum even with the the cobot situation.
To carry out the next 18 months to three years and that doesn't even include any kind of bump up in the business that we would see with an infrastructure package, which looks like it's starting to get more legs under it.
Especially related to the Army Corps of engineered projects in reservoirs and things like that so we see a pretty significant amount of work coming for the next few years.
Well, that's great a very good quarter. Thanks much.
Thank you.
Okay.
The next question as a follow up from Brent Thielman of D.A. Davidson. Please go ahead.
Hi, guys. Thanks for taking my follow up.
Scott to try and put kind of the commentary around 2021 and in 2022 in sort of context.
You sat here a year ago and in August.
We do you feel like you had at similar level of visibility looking out. This I'm just trying to kind of think about how the next couple of years luck for year based on where you can see today relative to.
You can point in time in the past the I don't I don't think it's any less visibility I think that the the co. Good thing covenant, we recovered virus coated 19 makes it a little bit more variable in nature, not meaning that jobs, you're going to get cancelled, but meaning that they can actually move around so.
So what were what we're seeing as we've looked at this this next three year plan is.
Pretty pretty large levels of demand in some of the traditional markets that we've seen large levels of demand in and then some growing demand in some of the other markets and it's it's certainly as we look at it we try to throttle back our enthusiasm.
Some for the amount of work that we see coming at us that we've all been talking about for a number of years, but the demand across multiple regions.
Just to be substantial in the 21 20 to 23 time period, the central region. The northeast region. The Western region, all seem to have substantial demand as we go forward.
Got it and then on SLR C.
I understand it has some cost advantages to that facility can you can you kind of quantify or work.
At least qualitatively talk about the profitability profile that asset maybe relative to the less that rest of the legacy platform yet it yes, it's a it's as good as the as the rest of the legacy platform is a profitability wise in some cases, it's a little bit better some of the one of the advantages of.
SLR see Brent that I think you and I have talked about before is the ability to really work on some of the some of the smaller dynamic so somewhat smaller diameter projects that before we had src.
We wouldn't have had really good shot at so I think that adds a big piece to it. So we've actually seen some quarters, where SLR see margins are are significantly higher than what we've seen some of our legacy business, but it fluctuates around based on the mix what we see in the products.
Okay, great. Thank you plan on holiday.
No problem.
Next question comes from.
Tom Spiro Spiro capital. Please go ahead, and Tom Spiro Spiro capital good morning.
Good morning, Tom how are you.
Well. Thank you I hope you are too.
One question with the Scotland weakness in the oil patch.
I had oil and gas prices. So low do you see any effort by some of the energy type guys to try to get into your business or do you anticipate that.
We haven't seen any of that.
Since the last.
Real downturn in the oil business I think there was some lessons learned.
By the the people from the the energy business and getting individually to significantly different business, obviously, when you're looking at a large diameter oil and gas pipe transmission lines, you're looking at.
Running 610, 12 15000 tons at the time and putting together 50 50 car unit trains to ship and not all the businesses like that in in the water transmission side. Yes. We do have projects that are 2020 to 24000 tons, but there's a lot of you know three.
2000 ton project 600 ton projects. So it's a significantly different business with a lot of different testing requirements. The the hydro testing for the CPI products significantly different.
We do in the water products in the water products.
There's a lot of fabrication that has to be done when we build out one of these engineered systems like we do in this business, which the energy guys don't do that kind of fabrication. So I think that.
The people that moved into that business before learn some lessons and right now we don't see anybody picking at getting into the business does it doesn't mean somebody want eventually dry but I think.
It's a it's a lot different business and I think the view of the the marketplaces, it's a lot different so.
I think theres more caution going forward in the future before doing something like that.
Thats very helpful. Many thanks. Thank you thanks Tom.
Thanks, guys that question and answer session I would like to turn the conference back over to Scott Montross for any closing remarks.
Thank you again for everybody joining the call today I'd like to conclude also by thanking all of our employees for their dedication and commitment to make northwest pipe company safe place to work. We're pleased now to be operating all of our production facilities through the pandemic. In addition bidding activity has remained strong result.
Things improved backlog in precast order book.
Due to the complex nature of the impact of covert 19 on the economy, it's difficult to make forward looking projections on our revenue margins at this time. So we firmly believe the structure of our business remains solid we ended the quarter with our eighth consecutive quarter of continued strong backlog over 200 million at.
Trend that we expect to continue through the balance of the year. We look forward to speak with you again on our third quarter call November until then everyone stay safe. Thank you.
The conference has now concluded thank you for attending today's presentation.
No.