Q1 2021 L.B. Foster Co Earnings Call
Good day, and thank you for standing by and welcome to the Q1, 2020 One L. B Foster earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the especially and need to press star one on your telephone.
You require any further assistance. Please press Star then zero I would now like to turn the call over to your host Stephanie Whistler you may begin.
Thank you operator.
Morning, everyone and welcome to the L. B Foster's first quarter 2021 and earnings call My name and Stephanie, Let's walk the Companys Investor Relations manager, our President and CEO, Bob Bauer, and our Chief Financial Officer.
Well the provision will be presenting our first quarter operating results market outlook and business developments. This morning.
Also joining us on the call are John Castle, our Chief operating officer, and Jim Kempton, Our company's corporate controller and principal accounting officer.
Probably making some opening comments and then Bill will review the company's first quarter financial results.
Afterward, Bob will provide his perspective on the company's first quarter performance and will update you on significant business matters and market development.
And then open the session up for questions.
Today's slide presentation, along with our earnings release and financial disclosures were posted on our website yesterday evening and can be accessed on our Investor Relations page at L. B Foster dotcom.
And a change from past practice our comments. This morning will follow the slides and the earnings presentation.
Some statements, we're making are forward looking and represent our current view of our markets and business today, including COVID-19 comments related to COVID-19.
These forward looking statements reflect our opinions only as of the day of this presentation and we undertake no obligation to revise our 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 and our earnings release and presentation.
We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables provided in today's earnings release and within our accompanying earnings presentation carefully as you consider these metrics.
For the purpose of helping you understand the underlying performance of the company, we will be referring to adjusted EBITDA. Adjusted net income adjusted diluted EPS net debt net leverage ratio and free cash flow yield during the presentation today.
While we did not have any adjustments to EBITDA that is net income or diluted EPS. During the first quarter of 2020, one historic periods referred to and the presentation today have been adjusted as reflected in the reconciliation tables included in the appendix to the earnings presentation. Additionally.
Additionally, in September of 'twenty, and 'twenty, we announced the equity sale of our ILS test and inspection services Division as a result of this divestiture, we have presented the test and inspection services business as a discontinued operation and the first quarter financial statements, including within the earnings release and presentation and have recast prior periods to reflect this.
Change the comments today will be focused on our results from continuing operations.
So with that let me turn the call over to Bob for some opening remarks.
Thank you Stephanie.
I'm going to take a few minutes to walk through some highlights before turning it over to bill to cover their financial summary.
If youre following along with our presentation and I'll be starting on page for with the quarterly results.
The first quarter was generally in line with our expectations with revenue of $116 million.
There are three messages you'll hear the most about that had the greatest impact on our Q1 results.
First the quarter experienced typical seasonality with very low volume in January and February and then finished strong with a considerable rise in sales and March 47 per cent of the Q1 sales came in March which is also a confidence builder for the anticipated rise and sales.
As expected and the second quarter, which I'll speak to later.
Second we had some deliveries that were interrupted by weather and ongoing pandemic related disruption that kept more backlog from converting to sales.
These are some of the same pandemic related struggles we've had for the last few quarters, most notably in Europe and across our service related businesses.
We believe this environment is about to get a lot better, especially in North America, and the United Kingdom.
And third the continuing weakness and our coatings and measurement business is primarily what led to the year over year decline and sales and gross profit and and earnings.
Sales from these divisions declined $13 million from last year, which drove all of the year over year consolidated sales decline as the rest of the company was up seven 4% year over year and sales, which speaks to the resiliency and strength and the majority of our other businesses.
The pressure on margins from the coatings and measurement weakness is what drove the year over year decline and consolidated gross margins, while the rest of the businesses performed reasonably well with gross margins that were only 20 basis points below prior year.
A similar story applies to our consolidated orders, which increased three 7% over prior year driven by the fact that non energy market orders increased by 6% over last year and this led to our third straight quarter of sequentially, increasing backlog, which rose 24.
Millions sequentially and the quarter and that's a 15% increase over prior year.
So we have a solid 272 million backlog to start the second quarter and and equally good outlook will describe throughout the call and.
We also had a really good quarter for cash flow, we managed to generate cash from working capital performance and we kept inventory levels just about flat from the start of the year.
Debt also declined in the quarter, our balance sheet continues to look strong and bill will comment more on cash flow and our balance sheet and liquidity and his remarks. So we're looking forward to the second quarter, which will start with a strong backlog and a more optimistic outlook based on changing market conditions.
Comment on these market conditions.
And rail there are encouraging signs of passenger traffic, increasing and many world markets and freight traffic is also strengthening and both commodities and intermodal sectors. Excluding some of the weather related delays that were experienced in the U S and the first quarter.
Friction management consumable sales increased in Q1, which is a traffic sensitive product and a good indicator that customers are.
Experiencing or anticipating volume increases.
In addition, there is a lot of support for infrastructure projects and the U S. From recently funded bills that include rail projects as well as general infrastructure projects and we expect much less pandemic related disruption on construction projects.
The recent report card on America's infrastructure by the association of Civil Engineers highlighted the need to spend significant money and general infrastructure and areas, where L. B Foster can benefit.
So overall, our served markets look pretty good other than the midstream energy pipeline market, which is expected to deferred capital projects for the foreseeable future given the current capacity outlook. However, I expect we may begin to see some improvement and the energy pipeline area as the year unfolds.
Given the very low volume levels for the last few quarters.
So when we combine this outlook with our strong backlog and it has led us to describe our second quarter, where we expect a significant increase in volume over the first quarter, which I'll expand on more after bill makes his remarks. So at this point and we'll turn the call over to Bill.
Thanks, Bob and good morning, everyone.
My opening comments will cover our key financial results in the quarter reflected on page seven of the presentation.
As Bob mentioned, the first quarter has historically been our softest quarter due to seasonality effects and several of our divisions.
However, we are encouraged by some of the improvements that developed in the quarter.
First quarter sales were $116 1 million compared to $121 9 million and the first quarter last year.
$5 $8 million decrease or for 8%.
Consolidated gross profit decreased $4 $3 million from the prior year quarter.
And the 16, 2% gross profit margin was down 280 basis points year over year.
I'll provide some additional color on segment sales and gross profit and a minute.
Our selling and administrative expenses and the first quarter were $18 million, a decrease of $2 3 million or 11, 4%.
The decrease was primarily driven by a $1 8 million dollar reduction and personnel related costs, including travel expenses.
Selling and administrative expenses as a percentage of net sales decreased to 15, 5% and improvement of 120 basis points versus the prior year quarter.
First quarter net loss from continuing operations was $1 3 million.
Representing a 12 per diluted share.
Compared to a negligible net loss from continuing operations last year, resulting in no earnings per diluted share in the prior year quarter.
Adjusted net loss from continuing operations for the quarter was also $1 3 million or <unk> 12 per diluted share.
This was a reduction of $1 $8 million versus last year's comparable result of $500000 or five cents per diluted share.
Adjusted EBITDA totaled $2 $7 million and the first quarter, a $2 $1 million decrease versus last year with the decline driven by lower gross profit and the infrastructure solutions segment, partially offset by lower selling and administrative expenses.
Operating cash flow performance was very strong during the quarter at $7 6 million.
A $12 $5 million increase year over year.
Order activity also increased year over year, producing $135 $6 million and new orders and the first quarter.
Helping to drive a backlog of $271 9 million at quarter end.
I'll provide additional details on cash flow orders and backlog and a few minutes, but first I will cover segment revenue and gross profit reflected on slide number eight.
While revenue was down in both segments year over year. The decline in gross profit was driven entirely by the infrastructure solutions segment.
Rail segment revenue was down $4 million year over year with the decline attributable to the rail products unit, which was impacted by timing of deliveries and customer delays, including certain orders that didnt ship due to poor weather.
Despite the revenue decline year over year rail segment gross profit increased by $300000, resulting in a 150 basis point improvement and gross profit margin.
The improved gross profit margin was due primarily to increases and friction management consumable sales within the rail technologies business.
As Bob touched on earlier, the underlying business line performance within infrastructure solutions varied significantly.
So I'll unpack these results and a bit more detail.
Yes.
Slide nine provides a breakdown of the infrastructure sales and gross profit with the year over year impact of each business unit highlighted.
Infrastructure solutions revenue was down $1 9 million with a decline wholly attributable to the coatings and measurement business unit, which continues to face a challenging environment and the midstream energy market due to excess capacity.
Partially offsetting this decline was a substantial increase in revenue and both fabricated steel and precast concrete business lines.
Revenues have increased and these units as demand has improved with greater activity and general infrastructure projects.
It should be noted that the Boise facility was fully operational in the first quarter of 2021.
Recall last year that the facility was in startup mode. After its relocation from Spokane.
While pre cast concrete gross profit more than doubled year over year on increased volume coupled with the stabilization of our Boise facility.
Infrastructure solutions overall gross profit declined $4 $6 million with the decline driven primarily by lower revenues in the coatings and measurement business line.
In addition, despite the increased revenue year over year fabricated steel products gross profit was down due to unfavorable sales mix and temporary cost headwinds.
Infrastructure solutions gross profit margin was down 850 basis points year over year.
Okay.
I'll now cover segment orders on slide number 10.
Consolidated orders in Q1 were $135 6 million compared to $130 8 million last year with the increase driven by our infrastructure solutions segment.
Order activity was also up sequentially with new orders in Q1, increasing $1 2 million over Q4 of 2020.
The growth and the infrastructure solutions order activity was favorably impacted by robust demand and the precast concrete business line, both on a year over year and sequential basis.
Our book to Bill ratios continue to trend favorably with the consolidated ratio of 1.09 for the trailing 12 month period, driven primarily by infrastructure solutions infrastructure solutions at 111.
Turning to slide number 11 as noted on my opening slide we had a strong cash flow generation and the quarter with $7 6 million of operating cash flow and and improvement of $12 5 million versus last years for $9 million operating use of cash.
The primary driver of the year over year improvement was a decrease and working capital investment and this year's first quarter.
Our trade working capital decreased $11 9 million and this year's first quarter due primarily to increases in accounts payable of $11 4 million and deferred revenue of $8 2 million, partially offset by increased accounts receivable of $7 2 million.
The significant increase in deferred revenues, which more than doubled in the quarter was primarily driven by the receipt of several significant advanced project payments collected in both segments.
Our strong operating cash flow performance in the quarter resulted in operating cash flow from continuing operations of $33 1 million for the trailing 12 month period.
Capital spending during this period totaled $7 7 million, resulting in free cash flow of $25 4 million.
Based on our closing stock price of $17 90 per share at quarter and our implied free cash flow yield was 13, 4% for the trailing 12 month period up substantially from both 2020 and 2019.
Yes.
During the first quarter, our capital expenditures were $1 3 million with the.
Spending primarily related to the expansion of our precast concrete business and line in Texas.
We also had modest spending for our ongoing SAP implementation as we continue to progress toward retiring two of our legacy ERP systems.
We estimate the total capital expenditures in 2020, one will be in the range of $6 million to $8 million.
In line with our capital light business model.
We believe our free cash flow generation over the last two years highlights our ability to proactively manage our business during challenging times.
Referring to our liquidity on page number 12.
Total available funding capacity defined as available capacity under our revolving credit facility plus our cash was $82 6 million at quarter end.
Our net debt was $31 8 million on March 31, 2021 down $26 million versus the end of Q1 last year.
Resulting in an adjusted net leverage ratio of one one for the trailing 12 month period.
We're very pleased with continuing to delever during the quarter, reducing our net debt by $5 $7 million.
This was achieved and a quarter when we typically see our debt levels increase due to working capital needs.
Page 13 reflects our adjusted net leverage ratio over the last for years.
Over this time, we've strengthened our balance sheet and overall financial flexibility by systematically paying down debt, including during the height of the pandemic last year.
Our strong financial condition, coupled with our demonstrated ability to generate significant free cash flow positions us well to take advantage of improving market to market conditions and business opportunities.
Yes.
We're anticipating further debt reduction during 2021 based on our assumption that we will see a reasonable recovery throughout this year with no new restrictions related to the pandemic and improving and market conditions.
And we're still anticipating approximately $9 million of income tax refunds. This year with 500000 already received and the first quarter.
These refunds coupled with the free cash flow that we typically generate should allow us to continue to drive down debt. This year.
Having said that we do expect to increase working capital investment and our second quarter as we anticipated and improved commercial outlook exiting Q1.
We will continue to assess our opportunities for select bolt on acquisitions, and the rail technologies and precast concrete markets.
However, its unlikely we will complete any significant M&A transactions this year.
My final comments are on the backlog reflected on page 14.
Consolidated backlog stood at $271 9 million at the end of the first quarter and increase of $34 $7 million or 14, 6% compared to March 31 of 2020.
This also represents a sequential increase of $23 7 million or nine 6% from December 31, 'twenty 'twenty.
With the increase in activity we saw in March we believe we're beginning to see projects move forward and anticipate and improvement and the pace of backlog conversion and the second quarter.
Thank you for your attention and I'll now turn it back to Bob for some additional perspective on our own.
Alright, Thanks, Bill so I'm going to focus on our outlook for the coming quarter and beyond and the best way to start this day.
Built on the on what.
What Bill just said about our backlog position.
On page 16 of our exhibit package Youll see how the 15% increase and backlog is spread across both reporting segments.
Each one increasing double digits over last year.
A solid 12% increase for rail.
And a 17% increase for infrastructure solutions, which was driven by a 40% rise from the fabricated steel and pre cast concrete divisions, both of which increased approximately $20 million.
This really highlights the strength outside of the energy markets.
Strength is coming from orders related to heavy civil projects transportation related projects, including bridge decking reconstruction residential construction and rail projects that deliver supply chain efficiency and improved mobility.
Looking forward, we believe the company is well positioned to benefit from post pandemic trends and the need for further infrastructure investment that addresses systems that are in need of repair or modernization.
Among the key trends supporting our positive outlook for the rail industry.
The need to modernize mass transit systems.
The need for more efficient supply chains, including heavy freight and intermodal, but supports and online sales economy.
For the benefit that rail brings from lower fuel consumption per ton of freight moved with less impact from emissions compared to alternative forms of transport.
And the reduced emissions from transit rail systems, which are recognized as an environmentally cleaner way to move people through congested cities.
And the U S ridership levels on rail are back to about 35% of pre pandemic levels and they are rising.
And the U K they haven't rebounded as much as restrictions remain in place, but that's expected to begin changing and the second quarter.
In addition transit rail was among the sector's receiving funding from recently passed legislation and the U S. More than $80 billion was passed recently, including the cares Act. The consolidated Appropriations Act and the American Rescue Act to support Transit rail.
Similar actions are being taken by certain European countries to provide some form of backstop funding for their rail transit agencies, especially in the U K, which is important to us.
Class, one freight railroads and the U S had been reporting improving traffic since last year and they are forecasting and increase in capex in 2020 one.
And at least 4% with a focus on intermodal growth and technology to improve efficiency and on time delivery and this all bodes well for us.
If you Havent seen the report card from the American Society of Civil Engineers on U S infrastructure, it's worth taking a look at it had several recommendations on the need for increased spending needed to improve a number of infrastructure categories that we could benefit from.
For example, the report card suggested that a 58% increase and annual spending on the nations bridges is needed to catch up to the $125 billion backlog of mainly structurally deficient or obsolete bridges.
And this is good for our fabricated steel businesses.
The report can be found and infrastructure report card Dot org.
And it gives us C minus grade to America's infrastructure that goes well beyond roads and bridges, there's 18 categories and the report covering areas such as water ways ports storm water and wastewater levies freight and transit rail public parks and more.
Many of these applications, where our solutions are sold.
So looking at some of the new legislation that has gone through its outlined on page 18 of our charged the great American Outdoors Act was already passed and the U S. Providing 1.9 billion annually and spending for U S national parks to address deferred maintenance and other infrastructure needs.
These parks are key destinations for our precast concrete buildings for.
The last two U S bills passed around COVID-19 relief provided much needed support for transit rail agencies together the bills provided transit rail support and the neighborhood of $50 billion, including dedicated Amtrak funds Theres, an additional 87 billion headed to the department of.
<unk> for other non rail transportation programs and.
And should the American jobs Act be passed later this year, we would expect momentum to build further around transportation and general infrastructure projects.
Keep in mind that we're not likely to see that much impact in 2021 as many of these programs will take some time to get through the design phase. However, I would expect a portion to be directed towards some immediate needs as well as current projects that may not be adequately funded.
We're not in a position to size the impact from this proposal yet, but it should provide a tailwind and boost our growth rate depending on where the specific spending is targeted if it's approved.
We're not forecasting a return to pre pandemic levels from our coatings and measurement business anytime soon.
Although orders for the divisions and the business group did rise over the fourth quarter.
Last quarter, I mentioned that orders for the group fell to a low point of $6 million. This quarter, they were 10 million and.
And that's obviously, a little better, but it's a long way from the $20 million to $30 million per quarter order pace, we were once on.
This could be a sign that we may have reached the trough and we are seeing new projects being planned again by midstream pipeline operators.
There is clearly still and atmosphere are proceeding with caution, but as travel resumes and demand improves further for oil and the energy pipeline sector should improve from current levels.
So let me finish up with the market outlook on page 19, and talk a little bit about how all of this activity combined to generate a positive outwork and more specifically how do we see the second quarter unfolding.
Customer schedules for the second quarter, coupled with the rate of vaccinations and expected easing of COVID-19 related restrictions and our major served markets.
And as us confidence that we are going to convert more of our backlog to sales.
We're expecting an improved environment for on site services work and much less disruption on construction projects the.
The combination of and improving market outlook less disruption from COVID-19 and a strong backlog has led us to forecast day sequential increase and second quarter sales of 20% or more.
This takes into account and the continued deferral of energy pipeline projects.
And if coatings and measurement divisions remain weak. This is expected to keep some pressure on profit margins. Although we still expect gross profit to improve sequentially in Q2 with solid leverage from the added volume over the first quarter.
We have had a sharp focus on expenses for a year now and that carried into Q1 results, we will likely see some increase in spending as travel resumes and other customer facing expenses rise on a return to normalcy, but this isn't expected to have an unfavorable impact on operating margins.
Finally, the outlook for our cash flow. This year continues to look good we're expecting a significant tax refund as bill mentioned working capital performance is off to a good start and capital spending still looks favorable to last year.
So with that I'm going to wrap up my comments.
Very much appreciate everybody joining us on the call today and I'm going to return the call back to the operator and we'd be happy to take any questions you might have.
Ladies and gentlemen, if you have a question or a comment at this time. Please press. The Star then the one key on your Touchtone telephone for your question has been answered or you are seeing with yourself from the queue. Please press the pound key.
Our first question comes from Alex Rygiel with B Riley.
Alex Your line is open and you can ask your question.
Your line is muted could you please on mute the line.
Sorry about that good morning, guys.
Hey, good morning, Alex.
Couple of quick questions as revenues rebound can you discuss the variables that will impact SG&A over the next few quarters.
Yes, I would say the first thing that will point to.
As you went on.
What I mentioned is a bit of a return to normalcy for our business as our sales people move about them a little bit more than they have over the last year.
As some business travel resumes.
We don't have too much debt will be connected to revenues.
As you've followed us over the years when our sales start to increase we can leverage SG&A fairly well and then some of it will move with volume.
But it's likely to move a little bit more just as business activity rises and.
And we have a pretty reasonable control over that.
So as conditions improve and the marketplace, we expect to.
It starts to loosen up some of what we have and the expense area, but it's largely in an effort to get out there and interface more with customers.
And then secondly.
Very solid backlog at the end of the quarter, So I totally appreciate and understand.
And the improved confidence and visibility into revenue in the second quarter.
Does that improved confidence also carryover into the order activity in second quarter in third quarter debt, you see developing out there and the marketplace.
Yes, generally I would say the same thing.
And.
This backlog has been strong now for for a few quarters right. So third third straight quarter of sequential increase.
And Thats driven.
A lot by order staying at.
And at a pretty good level.
But everything that we see in terms of spending on the part of freight rail companies to looks like it's going up.
Transit rail projects continued to stay on the drawing board.
They've been funded and some cases for a couple of years with some of the support that they've received.
And that's largely a U S environment, but we see the same thing and key European markets.
And when you take a look at what's driven the backlog up and infrastructure solutions.
<unk> energy.
So our fabricated steel business and our precast concrete business I mean, that's.
And that's really strong orders that had been behind that.
That has drove a net backlog up.
And some 40% and those categories. So everything looks looks pretty good for those so I would anticipate second and third quarter kind of orders when we normally see pretty good order activity to generally be in line with the outlook that we've talked about and then as we get.
Toward the end of the year, we'll always look at whether or not there is going to be typical seasonality and the fourth quarter.
That wouldn't be unusual, but I'm not sure of this year's going to unfold in a and a typical manner, but we're anxious to see how strong this market and the economy is.
And.
And it gets a little hard to gauge steel right now as to how the second half might unfold from on order standpoint.
Very helpful. Thank you.
Yes.
Our next question comes from John Bair, with ascend wealth advisors.
Yes.
Hello, Good morning.
Hello, John.
How are you all doing.
Doing good thanks.
And.
And number of my questions I think you addressed somewhat I, just one of them, which.
Yes.
The tax refund and you said, you've got 500000 and the first quarter.
Is there any.
<unk>.
Yeah.
What is the sequence of of what triggers that refund coming back in other words is it going to be kind of a piecemeal type situation or might you get a big lump sum and.
How does that work.
Yes, John This is bill maybe I'll take that so.
And I indicated and my comment.
Expecting about $9 million to be recovered in the fiscal year.
It's a combination of procedures some is carrying back.
On an amended tax returns and then theres other adjustments and other filings that we have to make debt will result, and it being a piecemeal recovery, we got a half a million dollars and in Q1, we're anticipating about half of the remaining amount in Q2 towards the end of <unk>.
Q2, and then the balance would be expected either at the end of Q3 or early Q4.
And a lot of it frankly has to do with the processing capacity that they have and the IRS to get through the paper. It's actually has to be a pay per filing so they have to get through that filing and then we.
We expect to get the refunds and once they are processed so work, we're still expecting about half of that that remaining balance at the end of Q2 and then the.
Residual towards the end of Q3 early Q4, but certainly all within fiscal year 'twenty one.
Okay and is that part of that.
I was reading and the Q.
<unk> from previous quarter.
There was something about a net operating loss cash.
GAAP lifted is that in combination with this that gets you to the nine and.
9 million roughly.
Yes.
Sure Yes.
Yes.
It has to do with the iOS divestiture and our ability to go back and recoup payments that were made in the past by carrying back operating losses that.
Allow us to recover that tax.
And then going forward, obviously, we still have additional Nols available to us, which will also help to temper cash taxes on a go forward basis. So theres. Some thats real cash that we can get immediately as well as reduction of future tax burden.
Cause of the Nols that are available.
Okay. Okay very good so nine millions kind of your your cap rate I mean, it's not above and beyond that there's not two separate.
Situations here right now and that $9 million is the amount that were recovering and Jim Jim Kempton here, our controller raises a good point. The cares Act is what one of the things that allows us to go back and secure a greater refund this year.
Okay and that.
Must be what I was reading and the and the filing price filing them okay.
And when would those funds and then be used to further reduce debt do you think or a combination of debt and.
Working capital or what.
What's your game plan on that.
Yes, so from a timing point of view.
We expect to get a portion of that refund. This this quarter and that will be used to pay down debt I did say in my prepared remarks that the second quarter, we anticipate that being a working capital needs to increase given the improvement and the commercial outlook.
We are seeing for the second quarter and going in and beyond the second quarter. So there'll be a working capital investment and Q2.
It will net net.
Be a use of cash within the quarter, but ultimately for the full fiscal year, we fully anticipate to be able to generate cash through our normal free cash flow generation, coupled with the $9 million and refund that we expect we should be able to pay down debt within the fiscal year.
<unk> with the combination of those factors.
Right, Okay very good.
Got a number of other questions I'll ask one more and then I'll jump back in the queue in case somebody else's coming in can you speak to what youre seeing on the raw material cost side of things and cement prices going up and.
And certainly a lot of demand for commodities in general so could you speak to that.
Yeah.
Well I'll take that John.
There is.
There are certainly some prices rising in the marketplace and our particular category. There are there are rising steel prices that we see out and the market.
That's both on it.
Input costs for us on certain manufactured products that we have but also and our distribution businesses.
We have we manage movements and steel prices, all the time and and our distribution businesses. The key is to always maintain the spread.
And for our gross margins in that area.
And.
So that's what we do whether whether the prices are moving up and the market are whether they're moving downward.
And so theres not really in our opinion going to be any significant material impact to talk about and our distribution businesses because of rising steel prices.
And then where they are input costs on some of our fabricated other fabricated steel businesses.
We wind up.
Managing those with our suppliers.
And put.
We've put index pricing from time to time and.
And certain projects that we bid and the marketplace. So we take on and our purchase orders there is for.
From time to time indexes that will allow us to change the pricing going forward.
And that's that.
The most significant one that we manage and and I would say that the summary on that is.
At the moment. This is not something that is creating margin compression for us, but it is something that we're going to be watching very carefully.
When you look across.
At the rest of our materials.
And the area of things such as.
Free cash concrete.
And other materials that go into some of our rail products.
And even in the area of electronics for certain condition monitoring products that we might have for other rail technologies and our friction management product line to a significant product line there.
There isn't significant inflation and those areas right now we're not sourcing.
And from other parts of the world and some of those things and there are few components that are an exception to that.
But by and large we're not seeing significant and.
Inflation there are some lead times that are going out, but not not something that we'd point to that at the moment.
<unk> for us from an inflationary standpoint.
Okay, that's great I'll get back in the queue and if.
Get back and Thats, great otherwise, maybe ill catch up with you off.
And then okay. Thanks.
Again, ladies and gentlemen, if you have a question or comment at this time. Please press. The Star then the one key on your Touchtone telephone.
And it looks like you'll be right back.
And.
And I'm not showing any further questions at this time I'd like to turn the call back over to Bob for any closing remarks.
Alright, well I felt maybe Joel and jump back and there, but if not John you can always reach out to us will be happy to take any questions you might have on a follow up conversation.
So thanks for everyone for.
Pardon me Bob.
Yeah Alright.
John This is Scott.
Go ahead, yes.
Yes, yes, yes, yes, yes, yes, yes, yes. Thank you.
And just thought maybe somebody else is going to kick in there so.
One on one of the questions and another question I had was you indicated pretty and you're in your press release real strong.
<unk> in March of.
I believe it was order.
New orders coming in and I was wondering how much if you had much of the impact on.
The freeze and and the weather related stuff and the.
That was going on that deferred perhaps at the time, and that's kicked in and and actually whether or not.
The impact of those storms on rail systems, and so forth may.
You may have.
And then ended up being a benefit with that.
Repair type.
Or upgrades or whatever you're seeing any sense.
That might have helped out.
Yeah, So I'll take those and two part so what we said and the press release was actually about sales.
And not orders nor comment and there was that for.
47% of the sales and the first quarter came and came in March and we'd normally look to turn the corner somewhere around that timeframe with our seasonality and begin to ramp up and.
For the second quarter.
But but sales and $116 million of sales we had in Q1 and our opinion would have been higher had we not had.
A few deliveries impacted by weather.
That was.
What impacted us on delivery of some of our new rail products.
And some of our precast concrete products, while you do have some significant operations in Texas.
Both and the kind of the Dallas and the Houston area and those operations were significantly affected by weather.
During the ice storm that was there so we lost a number of production days.
And those operations and that would have a net would have helped us.
And I think move a little bit more of the backlog out in Q1.
So some of that is.
Moving into the into the second quarter.
With regard to the second part of your question on upgrades and I don't think that we can probably point to anything significant there.
The weather impact.
For us when it comes to weather and you look at the rails.
And they really know how to take care of things and bad weather, we don't typically get orders on on site services.
We do need to make sure that our friction management equipment is working out there and we have service contracts to do those sorts of things, but it doesn't result in and really extra work from a services standpoint, and then into construction and kind of project areas for us and that's not really much of a service.
<unk> business model.
Weather tends to stop those things from moving forward as opposed to give us any kind of added service activity. So there's really nothing to speak up there and the way of upgrades.
Okay, Okay very good.
With regards to the coding and measurement area.
Roughly what would you say the breakout of your percentage of sales it goes.
To the oil and gas pipeline midstream versus other areas for example, water infrastructure and.
And do you see a way going forward, where perhaps you have more opportunity and the ladder.
Those given that.
The difficulties that the energy markets have been experiencing and obviously the.
And administration and.
Others.
<unk> two expanding pipeline throughout the United States, but certainly has got to be some repair and upgrades there as well so I don't know how and how much that might affect you positively.
Yes, so when and when you look at what we report on.
<unk> coatings and measurement and as you look through our Qs and Ks Youll see coatings and measurement and there.
And where we report sales.
And that the far and away the majority of that is going into the energy industry.
On the large majority being and midstream pipeline applications.
So we're either putting corrosive coatings on pipes that are going into the ground or we're building measurement.
Systems and there are some other business work on net coatings and measurement business group as well.
But far and away the majority is in and the oil and gas.
And our energy segment and.
When I say far and away the majority I mean, youre typically going to look at to say more than 80% going to ballpark that but when I say you know more than 80% of the sales are typically going to be going into energy related infrastructure.
Well do you see opportunity or are you looking at ways to expand that operation into other markets I E like water related or.
Or is that even applicable I mean no. It is it is we are looking at those but I would tell you that.
And we're early and those stages.
And particularly.
It's suitable for drug for a small portion of our protective coatings business.
And as well as our.
Measurement systems.
We also have a portion of some of those sales and those product lines that actually go into the agricultural market as well.
I think we're real early and the real early innings of trying to establish a more significant position and markets like water or even other applications and gas.
There are some petrochemical applications that we haven't served and the past them and Thats still energy both from those energy related but they are applications that are beyond what we have traditionally served in the form of the liquids market.
And I know and oil and gas.
We think there is going to be continued investment, we think and natural gas liquids.
And we're actually seeing some activity right now on increased activity with.
With regard to the need to support more capacity for Ngls and getting those ngls from out of the ground and to the petrochemical facilities and you know.
And we're exporting Ngls. These days so the more of there is a an export market.
On the more we continue to push gas.
These are these are applications that we still have an opportunity to expand into.
But what water will be on either one of those markets, but I would say, it's kind of early right now and.
That's not going to have a meaning that meaningful of an impact on 2021.
Alright.
And im thinking longer term, there and certainly the water infrastructure has.
On a great need for for upgrades, whether it's removing lead pipe type stuff or whatever so anyway very good I will I will cut it off there and reach.
Reach out to you.
Offline. Thank you very much for taking my questions and your time and thank you John.
Thank you.
And I'm not showing any further questions and I'll turn it back over to Bob.
And we go.
All right Kevin Thank you.
I appreciate your handle on the call for US today, Thanks to everyone for joining and we appreciate your time and we'll look forward to catching up with you next quarter.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.