Good day, ladies and gentlemen, and welcome to the third quarter L. B. Foster earnings conference call. My name is Emanuel and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Mr. David Russo, Chief Financial Officer. Please proceed sir.

Thank you, Emanuel. Good afternoon, ladies and gentlemen. Thank you for joining us for L.B. Foster Company's earnings conference call to review the company's third quarter 2008 operating results. My name is David Russo and I am the Chief Financial Officer of L.B. Foster. Also on the call today is Mr. Stan Hasselbusch, L.B. Foster's President and CEO. This afternoon, Stan will provide an overview of the company's third quarter performance, give an update on critical business issues and discuss market conditions. Afterward, I will review the earnings press release issued earlier this morning before we open up the session for questions. Means to access this conference call via webcast were disclosed in our earnings press release and were posted on the L.B. Foster Company website under the Investor Relations page. This webcast will be archived and available for seven days. Today's call includes forward-looking statements and information within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and include known and unknown risks and uncertainties. Future actual results may differ greatly from these statements and expectations that are expressed today. All participants are encouraged to refer to L.B. Foster's annual report on Form 10-K for the year ended December 31, 2007 as well as to other documents filed with the Securities and Exchange Commission for additional information about L.B. Foster. With that, we will commence our discussion and I will turn it over to Stan Hasselbusch.

Thank you, David. And thanks to all of you for attending our third quarter 2008 earnings call and webcast. This morning, we announced increased sales and increased adjusted operating results for the third quarter 2008. Sales were $145.6 million for the quarter, compared to $135.8 million in the third quarter of 2007. Income from continuing operations was $8.1 million or $0.76 per diluted share. This compares favorably to adjusted income of $7 million, or $0.64 per diluted share in the third quarter of 2007, after excluding incremental dividend income related to the sale of our investment in the DM&E railroad. David will discuss the financials in detail later. But first, I would like to talk about operational performance. Let us begin with Rail products. Overall revenues were up 7%, led by new rail, in which revenues were up 50%. This increase was a result of both higher transaction pricing and a 26% increase in tonnage shipped. Concrete tie sales were down 25% in the quarter. Comparisons for the year in concrete ties remain unfavorable, almost exclusively because of the volume drop-off at the Union Pacific railroad. We currently expect production between Grand Island and Tucson for the Union Pacific to be approximately 400,000 ties this year, which is down from 775,000 produced at those two facilities in 2007. Our expectations are that consumption levels by the UP will increase in 2009. While the number of carloads shipped remain flat, Class-I railroads continue to report record earnings, benefitting from improved operating efficiencies, strong revenue per unit growth, and increased fuel cost recoveries. Capital expenditure gross will again exceed double digits with the Class-Is this year. This is a paradigm shift, because a leveling or drop-off carload shipments has historically led to a corresponding drop in the level of spending. This clearly…

Thank you, Stan. Before I begin the discussion on operating results, I would like to remind everyone about the impact that the sale of our investment in the DM&E railroad had on last year’s third quarter results. As most of you are aware, the DM&E sale closed in October of last year, and the resulting gain of approximately $122.9 million was reflected in our fourth quarter results. We did however report incremental dividend income in the third quarter of $8.5 million that had previously been deferred. This amount was in addition to the normal recurring $247,000 of dividend income that we had been reporting on a quarterly basis. In an effort to discuss meaningful comparative results, my discussion will exclude this incremental income all the way down the income statement. Again, the amount was just under $8.5 million, the tax provided on that dividend was approximately $900,000, so that the net amount was approximately $7.6 million, with a corresponding diluted EPS of approximately $0.69 per share. Okay, so with that long-winded introduction, I will begin. Sales for the third quarter of 2008 were $145.6 million compared to $135.8 million in the prior year, a 7.2% increase, which we leveraged into a 22% increase in pretax income. The sales increase was due to a 6.8% increase in rail product sales, and a 12% increase in construction product sales, partially offset by a 15.8% decrease in tubular product sales, compared to last year’s third quarter. The construction product sales increase was due to increases in our pre-cast buildings, fabricated products, and piling divisions. Third quarter tubular sales decreased due to a decline in coated product sales; partially offset by an increase in threaded product sales. Coated product sales decline was due more to the record performance turned in by this division last…

Ladies and gentlemen, (Operator instructions) And your first question comes from the line of James Bank. Please proceed.

Hi, good afternoon.

Hi, James.

I understand LIBOR has come down a little bit, but the majority of the debt you guys have outstanding is going to be based on that. Is there any risk at all there to consider going forward?

Well, we obviously don’t have much debt change. I think the variable based on LIBOR is about $16 million, and so no, I mean, we always look for a little bit of a mix between fixed and floating and with the low amount of debt we have, we really don’t view that as any kind of a risk at all.

Could you split the billing margin improvement with the positive variance from manufacturing improvement in the quarter?

Manufacturing was a little more than 50 basis points.

Okay. And the balance was billing margins?

Billing margins and price variances.

Okay, great. And the LIFO expense in the third quarter, that $5 million, is that run rate maybe for the fourth quarter?

The fourth quarter is not going to be as – we don’t expect at least at this point in time for the fourth quarter to be as high as the third. We have really recorded LIFO year to date to reflect our full year forecast. So the nine months is expected to be three-fourths of the full year.

Okay. And how much on your inventory with regard to piling and rail are you hanging on to that has been older than August let us say, the month of August.

Let me just say this, James, our inventory at the end of the quarter was $120 million, which was about $25 million compared to last quarter last year. 77% of that inventory is in new rail and piling, and of that inventory, which totals a little over $90 million, we feel that 75% of the new rail inventory, which is $27 million is committed, it has been sold or it is either work in process or waiting to be released. We also think that in the piling side of our business, which has got approximately $65 million in new piling, that over half of that is either committed, it is work in process, part of our rental pool, or has actually shipped and we have not been able to recognize the revenue. So, those two products, where we have got $93 million in inventory, for the most $55 million of that inventory is committed and we probably have $38 million of risk, which is really quite low overall. I think that when we talk about inventory and there is no doubt about it, inventory is a concern as we go forward, we do have a little risk in there. I think we have got a little risk in relay rail, which is driven exclusively by scrap pricing and scrap pricing, as we have talked about and we have seen in the last two months has dropped considerably. We have about $3 million in relay rails and there is some risk there. We have known that bearing pile, which we don’t carry a lot of inventory; announcements have come out as far as an $80 a ton drop in there. We don’t feel we have got much exposure, but there is a little bit there. And the other side of it where we are doing very good is in threaded pipe and we have seen some of the pipe prices, which are driven by flat rule, are down approximately $100 a ton and so we have got a little bit of risk there. So, we have got $120 million on the balance sheet, and I think that overall, there is risk out there; and don’t get me wrong. I mean, it is something that we are on the product mix about everyday, and they are really watching what we buy and really watching how we go forward and our cost that we are paying, but $120 million with the bulk of it probably committed.

In addition to that, James, one other thing I would tell you is, even though, to Stan’s point, we do have $120 million on the balance sheet, about $15 million has already been paid for, it just hasn’t shipped.

Okay, Stan, thank you for that detailed explanation, very helpful. What is your outlook on steel? I mean, what would be your position if you guys had to –

You know, (inaudible) I mean, it has been up and down this year, we really don’t know where it is going. I mean, it would be unfair for anybody to speculate, and you will hear that pretty much across the board in the industry.

Okay, and then one last one and then I'll jump back in line. If you are able to, can you split your piling sales in the construction segment? Are you able to split that between Federal work and state work?

No. But I'll tell you this much, that most of it is state work or private work. I mean, we don’t do a lot of direct Federal work. Federal monies are used in the state projects, but they are mostly bid through the states and they are federally supported is how that works.

Okay.

Highways (inaudible) fund the state governments and almost all of that exclusively goes to the state and it is bit to the state.

Okay, I understand. Okay, so the next Highway Act, should there be one coming out in 2009; that is really pivotal then to the piling.

(inaudible) is the only area that really is really direct with the Federal government as we do a lot, we have a lot of work in the last couple of years (inaudible).

Okay. Great, thank you.

Thanks, James.

And your next question comes from the line of Mark Kuzinski. Please proceed sir.

Good afternoon, gentlemen. (inaudible) equities. Continuing in this same vein of state versus Federal, are you seeing a large (inaudible) in terms of regional activity in your construction segment?

Not anything in particular, no. I mean, the popular states get the money and that is how that pretty much goes, Mark. But I think that what we talked about a little earlier, what we are seeing some because of the drop-off in tax received that state-only bids that had dropped off. You know, there are some jobs that are out there that we are very much aware of because of the economic and financial situation, which have been delayed, postponed. We haven’t seen a lot of cancellations, but you know, there is that concern that we have out there about the future.

And, do your products, do they have applications to high speed rail?

Absolutely.

Okay.

As a products unit, Mark.

So, would that, assuming – well, I thought it is sort of a pipe dream, but you know California is kind of contemplating high-speed rail again. Would the existing infrastructure there need to be upgraded significantly or how exactly might that potentially play into your hands?

It would have to be upgraded. I believe that they could use some of the existing lines, but they would significantly have to be upgraded as far as the type of rail, the application, the connectors, and how that is installed, that would all be new.

Okay. And then in terms of the tubular –

You know that is one of the many projects, I think that is a status on the budget. I think when I talked about 12 trends of projects, they have a – of the state budget in Rhode Island in California along with 10 individual cities and that California program I believe is around $10 billion. So –

I believe you termed the upcoming referendum?

It is on the November ballot.

In terms of the tubular products division, do you guys compete at all with fiberglass piping products?

No.

No? Okay.

We have got two products, we have got a threaded steel product, which is in the pump column for well drilling and then we also are in the micropile smaller diameter threaded pile application, and then we coat pipe for the gas transmission industry at Birmingham, the coated pipe industry. We don’t compete with fiberglass, no.

Okay. And then, I'm just curious, in terms of the mindset people have regarding rail freight and oil prices and the compelling economics of rail freight, are you seeing any sort of significant paradigm shift, where people are saying ‘Gee, oil prices are kind of – although they have come down recently, there is going to be pricing pressure there going forward and investing in the rail system at this point in time makes more prudent sense’?

I'm not sure that I totally understand what you are saying, but as we discussed in my earlier remarks, I mean, this is times that you have not seen before in the rail industry. I mean I note that the rail industry are coming out in the last couple of days with again, record profits, and they are spending record levels. They have got really an opportunity to really to continue to leverage their position against the truck transportation. You know, the profits are being driven – a big part of is being driven because of oil pricing that they are passing on to the customers.

Right. And then, this is the last question. In terms of the – what kind of acquisition environment are you seeing out there in terms of the pricing of companies and just the general environment?

Mark, I think the amount of activity has certainly slowed down, and we have seen valuations fall to a certain extent. We would like to see them fall a little further at least in some of the areas we are looking at. But, I think there is certainly to our buyers out there today than what there was 8 or 9 months ago, or even quite honestly, 3 or 4 months ago, but the folks that are out there selling have fewer opportunities, there is a lot of private equity firms that really just running what they have and they are not in the market today. So, we don’t view that a long term scenario certainly, but if you are asking recently within the last couple of months, it has slowed substantially and you see mostly strategics in the marketplace on the buy side.

Okay, great. Thanks a lot.

And your next question will come from the line of Liam Burke. Please proceed.

Thank you. David, how are you?

Good, Liam, how are you doing?

Fine, thank you. Could you give me a free cash flow number for the first nine months of the year?

Yes. Free cash flow was a little over $8 million – $8.5 million.

Okay, and then you had expected to be strong in the third quarter, fourth quarter as well?

We do expect a good fourth quarter from cash flow, yes.

Okay, great. Thank you. And in terms of the Alleghany insulated bonded joints, is that business just chugging along?

We have had a good year. We are having, really getting some benefits out of the efficiencies of the move that we could (inaudible) and it is – we are having a good year.

Great. Thank you.

And your next question will come from the line of Scott Blumenthal. Please proceed.

Good afternoon, Stan and Dave.

Hi, Scott.

Does the backlog number contain October 1 announce for the L. A. County Metro?

No it doesn’t. No, that is in the October numbers.

Okay. And have you disclosed the revenue impact of that order to us?

I thought there was a press release on that.

Yes, we have.

Yes, there was a tonnage number there, but I don’t think that it had any financial figures, maybe I might have missed it.

I think it was a tonnage disclosure. We don’t have it in front of us.

Whatever was in the release, Scott, we don’t have it in front of us, but that is all we have announced about it and that is probably how we will announce about it.

Okay, fair enough Dave. Then, if there is anything that we should read into the bookings, is Q3 usually a quarter in which we have a kind of a book to bill of less than 1 or was this particularly weak?

No, that actually is fairly typical if you take a look at last year, it was fairly close to what we did last year, and if you take a look, you know typically backlog comes down. If you take a look at how backlog came down this year from Q2 to Q3, it came down to just about the same percentage rate last year.

As you go through the year, our best booking quarter is normally first quarter and it kind of drops off. I think that our bookings are more flat in the third quarter and they would drop – are expected to be dropped off in the fourth quarter, which is typically our slowest month from a bookings standpoint.

Okay, that is very helpful.

That could be the other question that the previous question about the overall year-to-year comp for Alleghany billings, we are at about $17 million overall for the first three quarters, which is about 15% ahead of last year.

Okay, and Stan, if you would, and I apologize for this, could you go through the rail side of the inventory again?

I was talking about new rail, and we have got $27 million in new rail, of which about 75% of that is committed. In relay rail, we are sitting on about $3 million, which part of that is committed.

The other significant inventory is really in our tie division, Scott.

Okay. Alright, great, thank you.

And your next question will come from the line of Tom Spiro. Please proceed.

Hello, everybody.

Hey, Tom, how are you doing today?

I'm okay, nice quarter.

Thank you.

I had a couple of questions. One, I'm not sure whether Stan or Dave mentioned anecdotally signs of strength and signs of weakness. I wonder if you might share with us a couple of those anecdotes.

You know what, Tom; they relate to customer and vendor situations and we really don’t want to disclose specific to the customers or vendors, but let us say that we have heard some news here and there that there is some mills that are turning product away because they don’t want to sit on a whole lot of scrap rate now given the environment in the scrap. We have got some customers that are more upbeat when I say that we expected for next year. So it is a variety that we really don’t want to get into specific names or even product lines.

And the customer delays at the end of Q3, which segment were they in, construction or tubular?

Piling.

I'm sorry?

Piling.

Did those orders get shipped early in this quarter or are they still being delayed?

They will ship this quarter, they have not as of yet.

I see. Certainly, there is a potential for business for Foster and for lots of folks to slow over the next few quarters. Have you folks begun contingency planning as to SG&A and those kinds of things if business does slow?

We are in the middle of our AOP right now. Our Annual Operating Plan is in the process right now and that is a point of discussion.

Lastly, lots have changed in the last couple of months. The financial environment, obviously is radically different and Foster’s stock has come down a long way as well, and I was curious whether these developments have caused you folks to think differently about acquisitions, more aggressive, less aggressive about acquisitions versus stock repurchase? How do these major changes inform your own thinking?

Tom, I will tell you, they had an impact in that – you know, our stock price has certainly come down along with most other companies. So, in general, valuations have come down, and we would expect to – on the buy side, be able to take advantage of that when we are looking at acquisitions, but that is certainly not scaring us away from looking at acquisitions. You know, this significant reduction we have seen in market values, we don’t know whether it is going to continue or it is going to reverse itself soon or what the future really holds. But, you know, if you look at longer term points of view, there are some attractive multiples out there today that for the right company, we would take advantage of. So it hasn’t stopped us, but we certainly do look at value and risk is certainly ever present on our minds as we look at some of these things.

Does that cause you to reduce the size of the targets you might consider, (inaudible) for such a big one?

No, because that is not really how we target to begin with. If it is a larger company that we are looking at, obviously, we are cognizant of the higher amount of risk and we take that into consideration when we value and when we perform due diligence.

And when you are trying to decide what is best use of the cash, stock repurchase versus acquisition, has your thinking there changed?

Not substantially, because it is sort of an ongoing process, there is a balance to it. we look at share repurchases sort of in light of what kind of operating cash flow we are putting down. We want to provide a nice balance of value to the shareholder, and when we see significant reductions in our share prices like we did this most recent period, we took advantage of it. Having said all that, during my little chat, I mentioned that our current authorization is principally full, so right now, we are not really authorized to buy back more than a couple of hundred thousand dollars worth of stock at this point of time.

Okay. Well, thanks so much.

Thank you.

And your next question will come from the line of James Bank. Please proceed.

Hi, guys; just a quick follow up. Stan I don’t know if you had just run over this too quickly, but Dave, could you just give me the segment sales increase for the third quarter again?

Be happy to. Tubular was down 15.8%. Rail was up 6.8%, and construction was up 12%.

What was up 44% in the tubular space?

That was threaded pipe, in operations we have done in Houston. It is one of the two pipe businesses we have.

Right. Alright, perfect. That is all I have. Thank you.

And your next question will come from the line of Brian Riesman. Please proceed.

Good afternoon, guys. Question for you on your free cash flow allocation; can you talk one, what your budgets are maybe next year, I think you said $6 million for this year on property plant equipment CapEx, what are you looking for next year and what is your thoughts on deleveraging the balance sheet with internal cash flow?

Well, Brian, the number one, we are actually right now just in the midst of budgeting for next year, we are trying to finalize some of those, but we are certainly going to be, as a company, looking at capital projects, obviously with some discrimination as far as the best projects will win and we certainly want to keep that number down in this environment. But as far as deleveraging with cash flow, that is not out of the question, but we – in this environment today with equity valuations as low as they are, we would probably air towards maybe looking towards another equity repurchase as opposed to a debt reduction, but it really depends on what the future holds. We do want to keep enough powder out there for acquisitions, should one really look very attractive.

Okay, can you give us kind of a ballpark as to what – historically, you have done a lot of questions as to the size of deals you would look at, given the current asset base for sales revenue size, what is your sweet spot per se?

Well, as I mentioned, we typically don’t target by size, but I would say that our sweet spot would be in the $40 million to $120 million range.

Okay. Specifically, can you give us a sense of the dimensions of one of your plans? What kind of capacity utilization are you running across your different divisions?

I would have to give you a report by division, because it varies rather – the variances are so large by division. We talked about our concrete tie divisions that serve the UP being at 50%, our Spokane facility is higher than 50% or probably closer to 70% and our tubular products divisions are in that same range. They are being utilized higher.

We are for a gap, in coated, we think that we are – we have got about 50% total capacity available through the balance of this year and we are booked pretty much through the first quarter of next year on one shift. So there is really – there is the capacity availability there and that is pretty similar to the other thread and I think we have met capacity available at our fab plants, you know, I think that is not a challenge for us next year and we are looking and we continue to work on our process improvements at our plants, and we are really starting to get the traction this year of lean, which we have had in place now for close to five years and we are really starting to get the benefit of that across the board. We have had winning situations and we are getting it as we strive for operational excellence in our plants and our next move is to be a total lean enterprise and we have got that in place going forward also. So that is going to help with some of the capacity constraints that we thought we may have had a couple of years, we are getting the benefits of that across the board.

Okay. What are you guys seeing relative, and you mentioned in the SG&A line as far as kind of wage and salary inflation, what are you guys seeing relative to your healthcare costs?

Actually, we have had very good experience on our healthcare costs. This year, they have been lower than they have been in the past couple of years.

Actually, the last two years have been down I think, last year was down over the previous year and this year right now is – through September that I saw was trending down also, so –

Okay. (inaudible) wages and salary growth low single digits give us a sense payroll wise?

Low single digits.

Okay, alright. Thanks, guys, appreciate it. Good job.

Thank you.

And at this time, there are no more questions in the queue.

Well, thank you all very much and hope you will have a good Thanksgiving holiday season coming and look forward to talking to you after the first of the year. Thanks again.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.