L.B. Foster Company

Thank you, Derek. Good morning, ladies and gentlemen, and thank you for joining us for L.B.

Foster Company's earnings conference call to review the company's first quarter 2014 operating results. My name is David Russo, and I'm 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 provide an overview of the company's first quarter performance, an update on key business issues and discuss market conditions. Afterward, I will review the company's first quarter financial performance and then turn it back to Bob so that he can discuss our full year outlook 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 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 business and markets in 2014, cash flows, margins and capital expenditures and other key performance measures. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from statements made 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, 2013, as well as to other documents 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.

With that, we will commence our discussion, and I will turn it over to Bob Bauer.

Thank you, Dave, and good morning, everyone. Thank you for joining us.

I'll start with the headlines and a summary of the first quarter.

Today, we reported diluted earnings per share of $0.35 for the first quarter on sales of $111.4 million, which was weaker than expected for the start of the year.

In mid-February, we thought we had good visibility of how the quarter would look as we forecasted sales would be at least $123 million. This is a good example of why the project business we're in can be challenging to forecast from one quarter to the next.

While this might look on the surface like weakness in our business, I can tell you that bookings in the quarter were not weak and our project pipeline and quote activity looks pretty good. We had a number of projects and orders delayed toward the end of the quarter.

And as we managed to get through the worst of the winter, we thought we would come through with little impact, but it appeared to finally catch up to us as it did with, I think, many other people this winter.

We saw delays in installation of concrete buildings. There were delays of transportation projects in rail and construction.

And we did experience supply chain issues, which did turn out to be significant. The supply chain issues were both operational and weather-related and it's really difficult for us to quantify exactly how much of that can be attributed to each factor.

The good news is that these shipments that we missed are now being forecast in our second quarter and we've lifted our Q2 sales forecast to reflect this. I'll talk more about the full year forecast later.

I was particularly encouraged though by the solid bookings in Q1, with nearly $180 million in new orders. That was up 10% over prior year.

Our backlog in the quarter rose $70 million, bringing the Q1 ending backlog up to over $253 million. So this puts us in a good position from which to begin the second and third quarters, which are seasonally our strongest.

Two of the other real highlights for the first quarter include our gross profit margins and our operating cash flow performance. We were very pleased with gross profit margins, which finished the quarter at 21.7%.

The continued improvement in our Construction business, coupled with the good product mix and solid performance in our Rail business, resulted in an excellent gross profit result given the sales volume that we saw in the quarter. And cash flow, it was expected to improve dramatically and it did.

We resolved several slow payment issues that impacted our 2013 year-end results, helping us bring working capital down to a more reasonable level, and resulting in $32 million of operating cash flow in Q1. I felt like we did a good job holding inventory levels down despite the shortfall in sales in the quarter, and the need to begin ramping up for second quarter production levels.

So let me turn to a few comments on the business segments. There are a few points I want to make with regard to each of the business segment performance to help you understand the Q1 results.

Starting with Rail. The Rail business, we will continue to work off backlog from the Honolulu transit project during the year.

This will affect year-over-year comparisons in a meaningful way as we don't see another project of this magnitude being planned.

I expect our Transit Products division to have negative year-over-year comps in 2014, although I am encouraged by the pipeline of the Transit projects in general from around North America and the United Kingdom. Rail distribution was the more significant decline in our Q1 sales, but I have every reason to believe this division will see modest growth in 2014.

Our Rail technologies business had a great first quarter and was among the most significant of the drivers to increase gross profit margins year-over-year. We were very happy to see that.

And crude by rail continues to drive growth in the industry, with BNSF and anyone connected to them really being the big winners. Coal has stabilized and the significant declines we were seeing year-over-year look like they're behind us.

I believe the industry will expect something closer to flat year-over-year performance for coal in the near future.

Now looking at Construction. Construction sales are where we had the largest miss compared to our prior Q1 forecast.

These sales were impacted by the supply chain issues that I mentioned, particularly in piling, where incoming deliveries of sheet pile were low enough to result in some order losses and shipment delays in the quarter, which added to an already challenging environment. Concrete buildings did miss sales as well due to some installation delays.

But a real bright spot was our fabricated bridge business, which is doing very well. The division has been a solid contributor to strengthening gross profit margins this year already, and I'll speak more to that positive outlook a little bit later.

Finally, our Tubular product margins were impacted by both the low volume and some startup costs in our field services unit, with volume really being the more significant reason for low Q1 gross margins. I look forward to seeing our strengthening backlog turn that around.

So overall, I'd say while there was a shortfall in our sales plan, I feel like we operated very efficiently, as reflected by our gross margins and the decline in working capital, which helped our strong cash flow results. Bookings were the real highlight of the quarter and our backlog is at a healthy level as we approach our peak seasonal period.

So with that summary, I'll turn it back over to Dave. He'll comment more on the actual Q1 results, and then we'll come back and talk about 2014.

Dave?

Thank you, Bob. I'll cover some of the key items in our earnings press release at this point.

Sales for the first quarter of 2014 were $111.4 million, compared to $129.3 million in the prior year, a 13.8% decrease. The sales decline was due to a 25.6% decrease in Construction segment sales; a 9.7% reduction in Rail segment sales; and a 5.2% drop in Tubular sales.

The Construction segment sales reduction was due to a decrease in sales of Piling Products and, to a lesser extent, the concrete buildings, partially offset by an increase in fabricated bridge products.

The Rail segment sales decline was due principally to a reduction in rail distribution sales, as Bob mentioned, as well as Transit Products sales and, to a lesser extent, a reduction in concrete tie sales, partially offset by increased sales turned in by our rail technologies division.

The Tubular segment sales decrease was due principally to the volume-related declines in our Coated Products division and, to a lesser extent, price reductions. As Bob has indicated, like so many other transportation and construction companies, we experienced weather-related project and supply chain delays.

As a percentage of first quarter 2014 sales, Tubular sales accounted for 9%, Construction was 25% and Rail totaled 66% of total sales.

As mentioned in our earnings press release, backlog stood at $253.3 million at the end of the first quarter of 2014, up $5.2 million or 2.1% from the first quarter of prior year. The year-over-year increase was due to a 61.1% increase in Tubular segment backlog and a 37.9% strengthening in our Construction segment backlog, partially offset by a 14.4% decline in Rail segment backlog, which was primarily Transit Products-related.

Compared to December 31, 2013, backlog increased by 38.3%, which was driven by double-digit increases across all 3 segments. Tubular backlog increased 109%; Rail backlog grew by 22.5%; and Construction backlog increased by 64%.

First quarter bookings were $179.9 million, up 10.1% compared to last's year first quarter. Bookings improved over last year's first quarter in our Tubular segment by almost 88% and by 51.5% in our Construction segment, but declined in the Rail segment by 12.3%.

Gross profit margin was 21.7% in the first quarter of 2014, 245 basis points stronger than the prior-year quarter. The improvement was driven principally by expanded margins in the Construction segment and, to a lesser extent, improved Rail margins -- Rail segment margins.

These were partially offset by lower Tubular segment margins. The improved Construction segment margins were due to expanded margins across all businesses in this segment, especially fabricated bridge products, as well as a favorable product mix.

The improved Rail margins were due to improvements in the rail technologies business, as well as concrete ties. The decrease in Tubular segment margins was due principally to decreased Coated Product margins caused by volume-related deleveraging, as well as lower Threaded Product margins.

Selling and administrative expenses increased by $0.9 million or 5.2% to $18 million in the first quarter of 2014, due to the continuation of increases we enacted in 2013 as we invested in people and programs.

SG&A expense represented 16.2% of sales in the first quarter of 2014 as compared to 13.3% of sales in the prior-year quarter. The increase is due mostly to the previously discussed Q1 sales decline in the first quarter of this year.

First quarter pretax income was $5.3 million or 4.8% of sales, compared to $7.4 million or 5.8% of sales in the prior year. As mentioned in our earnings press release, the effective tax rate for the first quarter of 2014 was 31.4%, compared to 33.5% in the first quarter of 2013.

The current year rate compares favorably to the prior-year quarter as the current year was favorably impacted by certain state income tax matters.

First quarter diluted earnings per share from continuing operations was $0.35 per diluted share compared to $0.48 in the prior-year quarter.

Turning to the balance sheet. Working capital net of cash decreased by $24.7 million in the current year.

Accounts receivable decreased by $31.7 million or 32.2%, which we anticipated during our discussion in late February as we successfully focused on action plans to resolve certain slow collection projects and customers that we incurred in the second half of 2013.

Our DSO at March 31, 2014 increased to 55 days from 52 days at December 31, 2013, despite the significant reduction in accounts receivable. This was due to average accounts receivable remaining high for the quarter augmented by weak first quarter sales.

We expect DSO to improve significantly by the end of the second quarter.

Inventory increased by less than $700,000 while accounts payable and deferred revenue declined by $1.6 million during the quarter. Cash generated by continuing operating activities in the first quarter was $32.1 million compared to a $17.2 million use of cash in the prior-year quarter.

The significant year-to-year improvement in cash generation was principally due to changes in working capital, which was favorably impacted by a $44.4 million swing in changes in AR from year-to-year. Also adding to the favorable comparison were decreased income tax payments.

As we prepare for a traditionally busy summer construction season that impacts all of our 3 segments, our goal is to maintain the positive improvement achieved this quarter. Our improved cash flow comes at an opportune time as we intend to accelerate capital spending in 2014, which will be targeted at several growth and profit improvement initiatives.

We anticipate spending approximately $18 million to $22 million in capital programs in 2014 that we anticipate will improve our performance in future years. That said, we continue to expect that cash generated from operating activities will exceed capital expenditures, debt service payments, dividends and share repurchases this year.

Our first quarter 2014 capital expenditures were $3.5 million compared to $1 million last year. Expenditures this year have been predominantly for equipment, providing new manufacturing capabilities, as well as efficiency and for plant improvements.

Cash at March 31, 2014 was $91.1 million, up $26.5 million from December 31 of last year. Our cash was invested principally in AAA-rated money market funds and other short-term instruments, where preservation of principal and quick access to funds has been the priority.

Looking forward, we believe that the strong booking activity in the first quarter will continue and will convert into improved sales and profitability in future quarters this year. It already appears that our customers and supply chain partners have shaken off the temporary impact of the extreme weather conditions experienced in the first quarter, and we look forward to a strong remainder of the year.

The capital programs I referred to a moment ago are inherent in all 3 business segments and are all under an umbrella of growth and profit improvement that we believe will improve shareholder value on a longer-term basis.

That concludes my comments on the first quarter of 2014. And I'll now turn it back over to Bob, for his comments regarding our 2014 outlook.

Thank you, Dave. I'm going to start by talking about how we see 2014 unfolding and more specifically, what our current forecast looks like.

Let me first say that as the economic picture continues to improve, we feel very good about our strategy that is positioning the company and products and services for transportation and energy infrastructure. The underlying dynamics in both of these market segments are driving demand in our businesses, and we continue to build our confidence in investing in these 2 segments.

The freight rail companies have now released capital spending plans, with most guiding to higher levels of spending. Investment in their network is being driven by an improving outlook in agriculture, expected strong shipments in oil and gas commodities and a continued very strong intermodal environment.

The freight railroads have been announcing solid financial performance and we believe they'll continue to boost capital spending, particularly for solutions that will benefit their network performance.

Transit is also in pretty good shape as the number of projects around North America and the U.K. remained at high levels.

As I said earlier, there isn't anything the size of the Honolulu transit project that we worked on over the last 2 years, but all other agencies we typically watch have a solid pipeline of expansion or refurbishment projects.

Construction, specifically piling, has greatly improved from this time last year. The project pipeline has a favorable outlook.

We're trying to improve product availability to capitalize on quick-turn projects. Today, we do have a shortage of inventory for short deliveries, and we will look to continue to improve this situation and capitalize on opportunistic business throughout the year.

Our Concrete Buildings business grew nicely last year, and we have every reason to believe this market should remain healthy in 2014. And our bridge business will have a very good year this year.

We ended 2013 with a very nice backlog and have already booked some significant projects that we'll ship this year.

So as a result, the company is forecasting full year sales in the range of $620 million to $630 million. This is taken into consideration the volume that has moved from Q1 to Q2 and the small amount of sales that we lost in Q1 due to the supply chain issues.

So that means that about 60% of full year sales are going to be in Q2 and Q3 combined.

We expect the pretax income to be in the range of between $43 million and $47 million. Expect us to keep our expenses in line with sales during the year.

And while we're not forecasting a cash flow number for the year, we do expect to have a good year with operating cash flow, and we're off to a good start, as Dave described, with $32 million in Q1 alone.

Capital spending in 2014 is still anticipated to reach approximately $18 million to $22 million as we ramp-up for growth programs across several business areas. This spending is aimed at supporting new product development, expanding into new markets, improving our cost position.

I want to mention once again that this should not be viewed as a new level of annual spending in that we started a number of new initiatives in the last year, and we have several programs that are coinciding with investment needs. And obviously, we believe these plans will ultimately reward our shareholders.

I hope this gives you better insight into both the current business conditions as well as what we expect for 2014. Before I turn it back to the operator for questions, I wanted to thank the entire L.B.

Foster team for everything they've been doing as we take on several new growth initiatives. And I'd like to specifically recognize the operations team at our Hillsboro, Texas, facility for achieving 1 million man hours worked without a lost time injury, a significant accomplishment and one of those that contributes to the great safety reputation that we have.

So with that, I will turn it back to the operator who can open up the line for questions.

I was wondering if you can just a little -- provide a little bit more color about the supply chain issues that you saw?

Well, the supply chain issues were largely in our piling business. We ran into some operational issues, that was largely in the area of steel production for our Piling Products.

There was a part of that came from pure operational issues and there was a part of it that did have a weather element to it. It is not a problem that I would go into describing in-depth detail because it's not one that's, I'd say, systemic or long-term.

In fact, it's currently behind us. So they were fixed.

But it did contribute to some of the interruption in shipments in Q1 and I didn't want to lead everybody to believe that all of our problems were purely weather-related.

Okay, that's helpful. So it's in the rearview mirror, though, from where we sit right now, right?

It is in the rearview mirror, and it was in the piling segment. That is correct.

Okay. And then also staying with Construction, was there any big bridge projects in there?

Because I know the margins were very strong and the actual gross dollar margins were very strong as well. And I'm wondering if you could talk a little bit more about -- if there's any one-time large contract that were delivered that was in there?

And also just give us a better idea how the margin profile does shape out for kind of a longer-term time horizon.

Well, I'll say that there wasn't a single project in the quarter that was an overwhelming influence on the bridge business. The bridge business did have an excellent Q1, up over prior year and the margins in that business are among our best in the Construction business segment.

So the backlog that we see today in that business is very healthy. The one project that is in the backlog is the Newburgh-Beacon project, which was, I think, that was $17 million, yes, that we booked, maybe a little bit less than that.

We booked that last year. That's not shipping in any 1 quarter, so that will be spread throughout the year and some of that has already started to ship.

Okay. And then as far as any growth on the -- I believe the corrugated side of the business?

Is that still ramping up?

It is still ramping up. Still somewhat at a low rate, but we're continuing to win some projects in the corrugated segment, and we believe that will certainly grow in 2014.

Okay. But the upside wasn't necessarily all that?

It was also the core or legacy business as well?

The upside was, for the most part, the legacy business, not the corrugated piece. That would be correct.

Okay. And then thank you for framing how big Q2 and Q3 could be.

Should we still look for Q3 to be bigger than Q2 like historically is the case? Or was the push-forward of orders enough to put those at parity?

Yes. No, I would -- if you took that 60% of our full year and divided it between the 2 quarters, that Q3 will be just a bit bigger, a little bit bigger than Q2.

Yes, just back on the Construction products margin. It sounds like mix did have a nice impact here.

And I guess I'm just trying to get a sense, as we go forward, should we be thinking about something better than a mid-teens margin range for that segment?

It -- the first quarter was certainly favorably impacted a bit by mix but one of the big things was the improvement that we had just across the board in all of the products, spread [ph] piling, bridge, as well as Concrete Buildings. They were all up.

So it really does depend a bit on product mix, but yes, I mean, the mid-teens for the entire segment is certainly a reasonable target.

Okay. And then certainly great job on the cash generation side.

How should we be thinking about working capital contributions to cash flow for the remainder of the year? And given the strong start, are you anticipating free cash can exceed earnings for the year?

Well we are -- certainly, the wildcard is always how we -- how working capital ramps up for the busy time, which we're entering as we speak. So I'm sure you will see a little bit of that working capital tempering in Q2 as inventory ramps a little bit for construction projects.

And is certainly, we had a -- we did have a lower sales quarter in Q1, so as sales ramp-up, even though our DSO is going to improve substantially, AR will increase for a time period. We always expect some of that to come back to us in Q4 as things tend to moderate a little bit as well.

But we're not forecasting a cash flow number to -- certainly to compare it to income, but we certainly expect cash flow from operations to be better than last year. And, as we said, to certainly cover all of our CapEx, our dividends and any of our other share initiatives that we may or may not do this year.

So we think it's going to be a very strong cash flow year.

Okay, fair enough. And then -- and on the Tubular backlog, how much did Ball Winch contribute this quarter?

Very little. They're not a backlog-driven entity, really.

Yes, they -- in that business, we book and ship for the most part within the same quarter. So the bulk of that increase was in the large projects area for the straight line pipe.

Okay, great. And then Bob, can you give us kind of a recap of the growth initiatives again this year?

And, I guess, in particular, anything new added since you last discussed the CapEx expectations?

On the second part of that, I would say no, but I don't -- I can't think of anything that's new that's been added. The focus for a lot of that capital, we have a number of new product development initiatives in the Rail business.

Those are new products that would be for core track infrastructure. We're starting up a field service business in Rail, which is largely in rail technologies for wayside refilling, replenishment and servicing of friction modifiers and lubricant products.

In the Construction segment, it is largely going into equipment to ramp up that corrugated bridge-form business and step into that market along with opening the new service center, our Midwest service center, which will then be our third supercenter that we'll have around the country, East Coast, Midwest and West Coast, serve all of our Construction customers in piling. And we expect to add to the product lines there.

And then the balance is really in some new technologies in operations and capacity for the Coated Products market to ramp up our gas pipeline Coated Products capacity and the startup of the field service business in Coated Products for coating gas pipelines out in the field.

Very helpful. One last one, if I could.

Any update to the last disclosure regarding Union Pacific in [indiscernible]?

No, we didn't have anything in this press release because there wasn't really an update. The discrepancies that we talked about for 2013 in the last quarter still have not yet been resolved, but we continue to work through that.

We're working on the 2014 program. We have put our new recommended process in place.

It is going very well. We're very happy with it.

I think I can say that Union Pacific is happy with it because they have embraced it, and we're already working through the 2014 projects with some success. So we still have some things to sort out from what we talked about last quarter, but it's not preventing us from continuing to work through the process.

Give me a sense, you guys talked a little bit about you've had a pretty good run in bookings. How do you guys see kind of the relationship in the big quote activity to maybe close your business?

Are you seeing kind of big quote activity ramp up with bookings? Or are you getting better at closing a more tepid amount of big quote activity?

I'm just getting -- trying to get a sense between the big quote activity and what you actually are looking at sales bookings.

I would say that it is largely a result of project activity ramping up, particularly in the Construction segment. And as much also from the Coated Products or energy segment.

More so than it is us doing something significantly different in going out and taking a lot of share and our [indiscernible] rate improving a substantial amount.

I would say, in the bridge business, I'd say that we are clearly taking market share and winning more than our fair share that we had in the past.

Okay. You kind of dove tailed on my next question.

When you look at -- you guys added decking in that to the fabricated bridge products. How much differentiation is there?

Are you -- can you create product with a quality specification where you're a supplier of choice? Or is it about partnering with some of the big will [ph] builders, the Peter Kiewits and Branits [ph] and that?

How do you look at building that fabricated bridge business? Or is it just everything's one-off?

No, it's about both of those. You can differentiate yourself by product, and particularly by quality and expertise, and project management.

Our customers, both the construction companies, as well as the end users, the government entities, like to see projects come off successfully, so when you have a reputation of doing that, it helps. So you can differentiate yourself on that.

And sometimes get a specification to go your way. But it also takes good relationships and caring with those construction companies, who can make a choice at the end of the day and want to make sure that suppliers are competitive, so they clearly are effective at creating enough tension to get prices to be as sharp as they can get them.

Okay, okay. You talked a little bit about -- certainly, everyone north of the Mason-Dixon Line had the blizzards and sub-0 polar vortexes.

How much of that -- and I'm assuming that the projects that were delayed were not necessarily canceled. Although you did say something a little bit about -- it sounded like you had some piling projects that you missed delivery and those would not be something that would be delayed?

That's right, because we needed inventory in stock in the quarter. Because we didn't get as much supply as we wanted to on some sheet piling, we did miss out on some opportunities.

Those would be the losses that I was describing. Other than that, the shipments have really moved into Q2.

Okay, all right. Also, the backlog, you guys talked about $25.3 million.

Which kind of the delivery of that backlog over 2014? How much of that?

Oh boy, I don't know if I can take the $25.3 million and break it up. I would -- we look at that at the end of each quarter, Brian, with some more at year-end, but about 90% of that will go this year.

Okay. All right.

That's fair, that's fair. That's fair.

We haven't talked about it in a while any outlook and maybe a very forward outlook relative to discussions on high-speed rail?

Yes, we haven't, usually don't talk about that, particularly on this call, because there isn't really anything that's that newsworthy. We continue to monitor that environment.

It does not move very fast. We continue to watch the projects in California, which are always leading the way.

That one significant project out there got stuck in court again, so it's kind of an on-again, off-again environment, and it continues to evolve but at a very slow pace.

Okay, all right. You guys talked about specific strength in what you -- your railroad technology.

Can you give us a little more visibility on the types of products that are doing well in that area?

It is our friction management business. That is the core component of rail technologies.

It's the area where we make friction modifiers that are used to maintain both traction and lubrication to reduce wear and tear on the rail. And those products, we currently sell largely to the Class 1 freight railroads in the U.S.

and in all parts of the world. It is our more global business, and we're serving customers probably on every front, I think, with that product line.

Okay. What are you guys -- and this is just maybe a question of ignorance.

When you guys look at the railroad tracks side, whether it be short line or -- how much new track from the entire U.S. freight system is being laid?

I mean, like we had a situation going into the Bakken, where that was developed and we needed more rail up there. Is most of that track business just refurb or you did see any new organic growth?

I don't have a specific number I can give you, but I can tell you that there is new track going in and that it is in the extensions as you're describing in an area like the Bakken. There are also new industrial facilities and energy facilities that need rail access so the new track work that we do is largely in areas where you need an extension for access, not in long haul.

And of course, in the long haul, that is essentially refurbishment projects and there is a large number of those underway.

Okay, okay. And then Dave, just a question, you talked a little bit about having to nudge along some of those little slower accounts receivables and you certainly did a good job in cash collection.

Is that an ongoing situation? Or is that highlighted in a specific area of your business?

Or with a specific customer? And is that something reoccurring that you're going to have to kind of mitigate that into 2014?

Yes. It was -- I would tell you that it wasn't relegated to one customer, Brian, but it certainly was present in a few of our larger projects last year.

I think we've touched on it really briefly, where we actually created some couple of issues on our own with some administrative noncompliance, if you will. It's nothing related to the product itself, but the way we supply information and certification of certain products, so it slowed things down.

And certainly, there's -- when things slow down like that, it creates problems and red tape, and it took quite a bit of effort from our operating folks in -- especially our Rail and Construction businesses. So they really went to task to clean that up.

And I think we're in good shape now, and I do not expect a re-occurrence this year.

Okay. And then just one more.

Dave, you kind of SG&A-ed payroll cost. I won't ask you on health care, because it is such a wildcard.

And then maybe what's your kind of headcount employment in hiring at L.B. Foster and if you see any bottlenecks in any specific engineers or something, as you go into 2014?

So the increases are primarily headcount-related, for the most part, anyway. We've got some other costs in R&D and a few areas.

But headcount is around 875 people. We are not looking to continue to expand that significantly this year.

A lot of what we did was programs and people that we put into place during the course of the year last year, Brian, so not all of that was seen in Q1 of last year. So the comp Q1 to this year to Q1 last year, it's a little more pronounced.

As far as bottlenecks, though, I'm not sure I understand what you're -- where you're going there.

Well, I did -- we've seen in a lot of -- in some of the industrials, they're saying we can't get engineering design guys. If we had more engineering [indiscernible] design guys, we could put more product on.

I'm just wondering if there's anything from a specific job specification, where you're looking to recruit or hire and you just can't find the people? Welders or pick your specialty.

But it sounds like you guys think that's not an issue.

No, that's not holding us back.

Okay. And then Dave, on the -- like payroll, wage and salary inflation, for this year are kind of normal.

I would imagine low single-digit or anything?

Yes, low single-digit.

Very low single-digit.

Okay. Any overtime, guys?

You're kind of -- what's your projection for '14 as you look at maybe how labor shifts and what overtime you might be looking at?

We certainly look at that, and when things tend to ramp up, as we expect this year, we -- the first -- the short-term reaction is some overtime, Brian, but then we tend to add a couple of folks or even, when necessary, we'll add a second shift, so we keep that well below 10%.

All right. Good.

Well, thank you, everyone, for joining us. We'll look forward to catching up with you here in the summer after the second quarter closes, and as I've said earlier, it looks like it's -- it will be a good one for us.

So we'll look forward to having a good conversation with you then. Thanks for joining us today.

Bye-bye.