Good day, ladies and gentlemen and welcome to the Second Quarter 2015 L.B. Foster Earnings Conference Call. My name is Jasmine, and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to your host for today Mr. David Russo, L.B. Foster Chief Financial Officer. Please proceed.

Thank you, Jasmine. Good morning, ladies and gentlemen. Thank you for joining us for L.B. Foster Company's earnings conference call to review the company's second quarter 2015 operating results. My name is David Russo and I am the Chief Financial Officer of L.B. Foster. Hosting the call today is Mr. Robert Bauer, L.B. Foster's President and CEO. This morning, Bob will review the company's second quarter performance and provide an update on significant business issues as well as company and market developments. Afterward, I will review the company's second quarter financial performance and then we will 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 30 days. During today's call, our commentary and responses to your questions may contain forward-looking statements, including items such as the company's outlook for our businesses and markets, cash flows, margins, operating costs, capital expenditures and other key business metrics and issues. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from statements we make today. These forward-looking statements reflect our opinions only as of the date of this presentation and we undertake no obligation to revise or publicly release the results of any revisions to these statements in light of new information or future events, except as required by law. All participants are encouraged to refer to L.B. Foster's Annual Report on Form 10-K for the year ended December 31, 2014, as updated by any subsequent Form 10-Qs or other pertinent items filed with the Securities and Exchange Commission for additional information about L.B. Foster and to learn more about the risk factors that may affect our results. In addition to the results provided in accordance with United States Generally Accepted Accounting Principles, our commentary includes certain non-GAAP statements including earnings before interest, taxes, depreciation and amortization as well as results that exclude certain charges related to the Union Pacific Railroad and warranty claim and lawsuit. A reconciliation of U.S. GAAP to these non-GAAP measurements have been included within the company's 8-K filing. Statements referring to EBITDA or adjusted EBITDA are considered non-GAAP measurements and while they are not intended to replace the presentation of our financial results in accordance with GAAP, the company believes that the presentation of the EBITDA, especially after the recent acquisitions will provide additional meaningful information to investors to facilitate the comparison of past, present and forecasted operating results. With that, we will commence our discussion and I will turn it over to Bob Bauer.

Thank you, Dave, good morning, everyone. Thank you for joining us today. We’ve quite a bit to cover today as there are number of points to make to help you understand what affected the quarter in the year-to-date results. Two of the more significant topics that I'll speak to are the impact on earnings from the energy acquisitions and the change in the overall outlook for 2015. Before I cover those I'll comment on the overall results and performance of the company as mentioned in our press release. Sales were up 3% for the quarter and up 11% for the first six months, acquisitions were the key contributors to the increases our Tubular and Energy Services segment more than doubled sales on a year-to-date basis and the bulk of the acquisitions are in there. Construction is up 21% for the first half of the year and 18% in the second quarter. Our Precast business is really been going well and our Piling business was also up. These increases helped us overcome declines in the Rail business segment which were driven by first greatly reduced volume from Union Pacific Railroad and two what were expected sales declines from transit products, our rail distribution business and our European business, which also included some headwinds from currency. Our gross margins continue to improve they were up 70 basis points in the quarter and 60 basis points on a year-to-date basis when comparing to the prior year results. And those again are adjusted for concrete tie related charges that they’ve spoke of in both years for comparison purposes. When I look at the marketplace and take into consideration that pressure on steel prices persisted through the quarter. I feel like we've been managing through this environment fairly well right now, still content varies considerably…

Thank you, Bob. As discussed in our earnings press release L.B. Foster's operating results included certain costs related to the Union Pacific product warranty claims and lawsuit. In the second quarter of 2015 we incurred charges of approximately $4,000 related to the write-down of certain assets in Tucson, Arizona attributable to the receipt of a termination notice from Union Pacific regarding our concrete tie supply agreement. We also incurred just over a $150,000 of litigation costs in the second quarter. In the second quarter of 2014 as we have discussed previously, we incurred a $4.6 million pretax warranty charge related to concrete railroad ties. There will be times during my discussion when I specifically exclude these costs to facilitate more meaningful comparison of operating results. With that net sales for the second quarter of 2015 were $171.4 million compared to $166.8 million in the prior year a 2.7% increase. The sales increase was due to a 99.7% increase in tubular and energy services segment sales and an 18.4% improvement in construction segment sales partially offset by 19.2% decline in rail products and services segment sales. The tubular and energy segment sales increase was due to the sales contributions made by the December 2014 Chemtec Energy Services acquisition and the March 2015 Inspection Oilfield Services acquisition partially offset by a decline in coded and threaded product sales. The construction product segment sales increase was due to increased sales in our precast concrete products division, which includes the third quarter 2014 Carr Concrete products acquisition as well as to an increase in piling product sales. The decrease in rail products and services segment sales was due to reduced sales in the Rail Distribution, Allegheny Rail Products, transit products and rail technologies businesses partially offset by sales contribution from our January 2015 TEW…

[Operator Instructions] And our first question comes from the line of Brent Thielman from D.A. Davidson. Please [Technical Difficulty].

Hi, good morning.

Hello Brent.

I guess within that new EBITDA guidance what you are building in for the energy acquisitions and can you remind us what you are kind of assuming for EBITDA?

You’re talking about…

For the energy acquisitions is what you are - what you are building in for the year for EBITDA?

There are so many different acquisitions that we have that are you know starting in Q3 of last year with Carr Concrete all the way through IOS in March of this year that we’re just not going necessarily break them out right now. And especially to provide the deltas as far as what we originally expected and what we expect currently.

Okay, but I guess I mean just thinking about the energy business in general, kind of going to the second half of just kind of a quarterly run rate we should think about I mean in terms of profit contribution?

Yes, I mean obviously we - coming into the year we expected the energy acquisitions to be accretive and we’ve certainly based on recent run rate of the quarter Brent, have changed our focus on that they obviously struggled more than we originally anticipated. So while there is obviously still positive EBITDA coming in future quarters the expectations of the energy acquisitions especially have declined substantially from Q1 to where we are right now.

Okay and then just on the rail side I mean your 19% decline in sales that the margins are holding up fairly nicely is there an anomaly in there or and as we this pressure into the second half but do you expect that slip a bit more.

There's no anomaly in the gross profit numbers if you are kind of asking whether or not there was sort of a one-time impact or something that made the number favorable when you might have expected it to be less favorable given the volume loss there is you know there is some favorable mix in there. We do have a more product sales and the little less distribution sales that’s helping gross profit margins. But we basically have a lot of cost reductions that have been coming through we've got some restructuring in facilities that are helping we’re consolidating some products into some of our existing factories we’ve been moving a factory from my Montréal into Niles Ohio, those things are leading to just better management of our cost of goods sold. So there's clearly an impact in there from that.

And then I guess just lastly I know you're still digesting these deal to an extent love to get your thoughts I guess on appetite to look at maybe more aggressive buyback at this point any color there?

Yes, buyback of shares.

That’s right.

Yes, we are approved to do that. We are continuing to have some conversations along those lines and given where the stock price is I'm sure that we’re going to have more discussions about pulling the trigger on some of that.

Okay, thank you.

We don’t have a number to put out there right now, can’t tell you anything specific about it, but it's certainly an attractive point.

Okay, understood. Thank you.

And our next question comes from the line of Mike Baudendistel from Stifel. Please proceed.

Thank you. First with the reduced guidance for the acquisitions does that change your thinking at all as far as having to pay the earn out associated with IOS acquisition?

Yes absolutely. I can't tell you exactly where it's going to land until we have a little bit more time under our belt. But it is - it just isn't likely to be very much if anything at all. But you got to wait for a more definitive answer on that, but it's going to be awful difficult to do anything significant there given the way 2015 is shaping up.

Okay that's helpful. And then I just want to make sure I understand your rationale for the reduction in the guidance for the acquisitions. And it sounds like that lower energy prices should not have been unexpected because the lower energy prices were already there before the acquisitions were completed and negotiated. And was a more of the markets responded more negatively to lower energy prices than you were anticipating or was it some mostly other factors that you described in the midstream et cetera.

Now, you hit it with them, I think your middle point there the market reaction in the anticipated level of business that we thought we were going to see, it just didn't come in. So we had clearly lowered our forecasts for all of the energy related acquisitions. The one that we knew would be impacted most was IOS. It’s I guess, I’d say I can it is the forecast that we are missing the most. And so while we thought we had it lowered to the point that we were in any pretty safe area, we didn't lower it enough. And so it's just been a bit more severe and it hit us a little faster than we had anticipated.

Okay. And then on the Union Pacific business, I guess it was under the impression that there was a longer-term contract in place with Union Pacific where they would by a specified number of concrete ties. Was I right about that and so that they walk away from that contract completely?

You were right about that and that is precisely what happened, may have chosen to send us a termination of our supply agreement to provide concrete ties, which they have claimed was a result of our breach of contract and we would claim that we are not in breach of the contract.

Okay. And then the last one from me I guess the data has been about whether the Union Pacific is fully surprising of the shares at this point. I mean can you help me quantify some of the risks from here in terms of legal costs you are expected to incur or what they're suing you for or anything that might be helpful there?

Well, I'll state what I believe I can that we have adjusted the forecast now for the company sales to appropriately reflect going forward the fact that we are not doing business with Union Pacific. So for example there are concrete ties sales that are no longer in our forecasts. So we've made the adjustments in that new outlook that take that into consideration. We also have in our reported results for the quarter in the first half litigation costs that we have experienced and we have litigation costs and everything associated with that litigation, we have costs for that in our second half forecast for 2015. I think beyond that I'm not sure that I could comment on anything else related to that litigation outcome other than the fact that there is still a reserve that is on our box for warranty related charges for concrete ties the we believe is appropriate under the current circumstances.

Okay. Great, thanks very much.

That’s okay.

That’s helpful.

Okay. Thanks Mike.

And our next question comes from the line of Beth Lilly from GAMCO Investors. Please proceed.

Good morning.

Good morning.

I have several questions so the reduced guidance I'm trying to understand part of it is due to your acquisitions, but and part of it’s due to the loss of the Union Pacific business right?

Correct.

Okay. So can you split out - can you divide up in terms of what’s due to the acquisitions and what’s due to the UK?

Those are numbers that we decided to not provide that level of detail on this call at this point.

Okay. So let's talk more about the UP. So in terms of the UP and several different levels of questions here. What’s the number of ties that are still in dispute with that?

Well, you're going to go into a lot of details and I think what we have to do is we got to use our 10-Q which has a lot of that information in it. If I start to answer that we’re are going to be on here for a while. We are providing that in our 10-Q filing, we’ve listed the 2013 dispute, the 2014 dispute essentially to put those numbers out there to help people understand where the dispute stands at this point.

Okay, because I have the queue in front of me and it doesn't - it only talks about one and a half million ties that you had your original supply contract. I mean so I'm trying to figure out the original dispute was resolved and then they came back and said there were more ties and so is it 3 million ties now been earned in dispute I mean I’m looking for the numbers and I can't find them here?

Yes, okay. Yes, well I guess it was the 10-K that we had outlined more of those disputes in there, let me put it into two categories for you. There are disputes over the ties that have been submitted on warranty claims. What that refers to is the fact that there were claims that they made four ties to be replaced under warranty that we are stating are not eligible for warranty for a variety of reasons. The second part of your question I think then has to be put into a category of how many ties are in the field still and what made the claim that is a number I can provide you the latter one and so it’s something that we just can't say the number to. We furnish them originally 3 million ties that are far less than that in track now because many have been replaced and we just - I didn't bring those numbers into this call with me on the ones that have been submitted already because we have been putting them out there and print before and they are not in this queue, but they are in prior document.

Okay.

We are happy to furnish those as the follow-up because we have furnished them in the past and writing and so that's nothing that we can’t dig up from prior correspondence.

Yes. Okay. So is there any way that you can quantify the potential liability then with UP.

I cannot quantify that for you we have a dispute its underway it is now moved into a category of litigation and we are basically telling anyone that were defending our position because we believe were doing the right thing for the company and for the shareholders.

Okay. So the second question I have been is - so that the UP has basically they have what’s that they're terminating the supply contract. So you will know are you disputing that there was a contract are you just letting them walk away.

They have chosen to terminate the supply agreement that pertains to concrete ties that we sell them.

Okay.

And so there were other products that we have sold them as well they're not all under contract.

Okay.

We are just disputing that we are not in breach of the contract, but that is not changing the direction that this is taken.

Got it, got it, Okay. And have you talked about what's the total amount of revenue, you gave us the revenue with the UP this quarter which was five point with it strictly ties that you supply to them this quarter of $5.7 million.

No, no that is sale all of the numbers that we are quoting our total sales of rail products.

Got it.

Because we're essentially moving down the path where all of those sales are going away concrete ties and other products. So we mentioned what happened - the difference in the quarter from prior years it down $4 million from last year to this year. And then I also quote effected in the second half of 2014 we sold them approximately $24 million worth of all rail products which are not now expected in the second half of 2015.

Okay. Okay.

So that’s a headwind comparison for the second half of 2015.

Got it. Okay, okay. And then one last question about so it sounds like then you're just expecting the UP to go ways the customer that?

That is the position that Union Pacific has taken with us we’ve coursed didn't want to see a move in that direction, but once they move forward with their decision to take our concrete tie dispute toward litigation they also have taken the decision to end our commercial relationship at this point.

Yes, is it far to go and replace that concrete tie business with another customer or can you go find some can you go to the other Tier 2 or the other Tier 1 railroads and try to fill that capacity?

Our sales to Union Pacific for concrete ties were in the neighborhood of $10 million per year. It is not easy to replace that with other customers because the concrete tie market is not that large today nor easy to take share. There is a possibility that we can replace some of that including in the transit market and other areas but it's not something would be able to do you know in a short period of time. But I would say you know we’re talking about $10 million of sales in a $700 million of annual sales company.

Yes, okay great. Thank you I appreciate the answering all my questions.

Thank you.

And our next question comes from the line of [indiscernible] with Macquarie Capital. Please proceed.

Good morning and thank you for your time. I wanted to pick up on rail sales to get back to the detail about sales decline year-on-year about $20 million of declines you have been about $8 million the Union Pacific and transit, but what are the other big drivers of the remaining $20 million in revenue from that going forward? Thank you.

Well, that the areas that we mentioned you mentioned transit. So you're aware of that one there is our rail distribution business. Our distribution business compared to prior years not quite running at the same pace that really means base rail product that we sell to the short lines and to the transits is off. And we are seeing some decline in our Allegheny Rail Product business as well. And again I'm speaking of non-Union Pacific impact here. It’s been just a little bit softer than where we were at this time last year. So volume is down in the area of freight rail if you listen into what's going on in the freight rail market. So we’re seeing some of that but the other area that I mentioned to was Europe. And we have plan to be down in Europe, because we just - we had a great year there last year in our automation handling business. And it was just going to be difficult for us to have a repeat performance. So that's one of the other areas that’s off.

So in the $12 million, which would be the first remaining the third biggest level of the decline year-on-year? Next to Union Pacific…

It would be our rail distribution piece.

Okay, appreciate that.

Yes, that would be more than half.

Is that Union Pacific just maybe get back to the prior questions, it’s make get easy for us you would seem like the sales under dispute about $50 million order of magnitude of which you placed the warranty for half is that fair and processes is there that potential litigation the cost of additional replacement it should be other half of $25 million. I also point that 10-Q that Union Pacific is not saying ties out of the Tucson facility also. So can you frame for us, how much you still going to get out of there and then maybe add to this $5 million total ties estimate? Thank you.

Just a moment. Maybe we would just compare. I'm not sure we’re getting the right sense of what your question is?

I am asking if you can compare this broad calculation at the value of sales in Union Pacific for the period under this year it’s about $60 dollars and you've already replaced warranty from reserve usage. But half of that though your total maximum exposure would be the remaining half. If that’s there and then what is the extra potential ability from this Tuscon new allegation from Union Pacific that sales from that facility are also - come up in the 10-Q this morning?

So it sounds like you are asking about the reserve but also about sales. So hopefully we provided enough information on the sales so that you can, you know understand how much sales are coming out. There is no impact with that on the reserve. We believe we make an excellent product at our existing concrete tie facilities, which includes Tucson and Spokane. And that any issues related to the Tucson facility with Union Pacific we’re taking up with Union Pacific we have always stated that our products in Tucson and Spokane are in compliance with any customer specifications including Union Pacific's. So I think I might just leave that one there. And that the on the subject of litigation I wouldn't confuse litigation costs with the reserve, it sits on our books for warranty, and that reserve is for the replacement of ties in the field and not for pending or future litigation costs,

Right, right. So I was wondering about the reserve that you set up, how much more that reserve could be increased. If you have to replace all of the ties in the field?

That is speculating on something that we continually mentioned that we won't do when we have a reserve on the books, that reserve on the books we believe is accurately sized for what we think is the future exposure that we are truly obligated to replace based on the agreement that we have with the customer.

Okay. I appreciate that. And then just few follow-up, on goodwill right, you mentioned in your Q that you think that there is a possibility the results for the acquisitions may come below your expectations compared to the filing book. So is it possible that we’ll see an impairment before the fourth quarter and any impact on covenants. It seems there is no capital structure covenant in your agreement which you can confirm that and any potential impact on cash taxes. And you could tie that up maybe just remind us you said you continue to believe in the long-term outlook. So are you telling us you are seeing a lot only just for this year for this acquisition whereas your longer term has remained probably unchanged?

There were a lot of questions in there I’m not sure I got them all, but your first question related to the Q and evaluation of the intangible assets. What we were basically saying there is that we bought obviously we are not a private equity firm, but we buy companies for the long-term. We still strongly believe in the strategy behind the acquisition of the energy companies and we certainly would hope that short-term hit in actual versus where our original expectations were wouldn't have a significant impact, but given what the rules are we will certainly - probably be reviewing the evaluation and the intangible assets in the third quarter of this year to really take a hard look at that and we just finished some strategic planning at the companies that we have what we believe our fresh outlooks on a lot of our businesses and will be incorporating that information, but other than that we certainly can't predict how that will come out.

Okay. I appreciate that and then my last question would you say that based on litigation expenses from the current quarter is the reasonable for [indiscernible] going forward?

We think that will probably increase some which is - that was part of why our guidance changed so the lawsuit wasn't really - we really didn’t commenced anything the lawsuit wasn’t even served to the company until the second quarter so that’s when we started incurring costs and depending on how we - the aggressiveness of schedule and depositions and interrogatories and what have you will impact how they mounts, but we expected to increase in the third and fourth quarter compared to the second.

Appreciated. Thank you very much.

There are no remaining questions at this time.

Okay. Thank you everyone. We appreciate the questions. We know there is a lot of things for you to sort through here and we will continue to do our best to give you as much visibility into the results as we can and including the forecast and outlook for the business. So thanks for joining us and we will talk to you next quarter.