L.B. Foster Reports Second Quarter Operating Results
August 03 2017 - 4:01PM
L.B. Foster Company (NASDAQ:FSTR), a leading manufacturer and
distributor of products and services for transportation and energy
infrastructure, today reported second quarter 2017 net income of
$3.0 million, or $0.29 per diluted share, which includes:
- A sales increase of 6.5% from the prior year
quarter.
- Gross profit margin of 19.1% compared to 20.5% in the prior
year.
- A decrease in new orders by 8.3% from the prior year quarter,
while year to date new orders totaled $291.2 million, or an
increase of 12.8% over the prior year.
- An increase in backlog of 17.9% from the prior year to $176.0
million.
- Net cash provided by operating activities for the quarter
totaled $19.2 million compared to $11.7 million in the prior year
quarter.
- A $17.3 million reduction in total outstanding debt.
Second Quarter Results
- Second quarter net sales of $144.9 million increased by $8.9
million, or 6.5%, compared to the prior year quarter due to
increases in each of the three segments. Construction Products
(Construction) segment sales increased 12.7%, Tubular and Energy
Services (Tubular) segment sales increased 6.8%, and Rail Products
and Services (Rail) segment sales increased 2.7%.
- Gross profit margin was 19.1%, 140 basis points lower than the
prior year quarter. Rail segment gross margins declined year over
year as a result of lower prices on Rail Distribution projects, and
lower margin Transit Products sales, including some trailing costs
associated with supporting prior installations. In addition, we are
still experiencing some start-up costs for new service contracts
which are just beginning to generate revenue. Partially offsetting
the Rail segment decrease was a 430 basis point improvement in
Tubular segment gross profit margins, driven by improvements in
Protective Coatings and Test and Inspection Services.
- Net income for the second quarter 2017 was $3.0 million, or
$0.29 per diluted share, compared to a net loss of $92.0 million,
or $8.96 per diluted share, last year. Our prior year quarter
earnings included impairment charges totaling $128.9 million ($90.9
million net of tax). Excluding the prior year impairment charge1,
the 2016 net loss would have totaled $1.1 million or $0.11 per
diluted share.
- Second quarter Adjusted EBITDA (earnings before interest,
taxes, depreciation, amortization, and asset impairments) was $10.6
million compared to $7.5 million in the second quarter of
2016.
- Selling and administrative expenses in the second quarter
decreased by $2.7 million, or 11.7%. The decrease was primarily
comprised of personnel-related costs of $2.1 million and $0.5
million reduction in litigation costs for the Union Pacific Rail
Road (UPRR) matter.
- Amortization expense was $1.7 million in the current quarter,
compared to $2.8 million in the prior year quarter. The reduction
was primarily due to the 2016 impairment of definite-lived
intangible assets.
- Interest expense was $2.1 million in the second quarter of
2017, compared to $1.6 million in the prior year quarter. The
increase was attributable to an increase in interest
rates.
- Net cash provided by operating activities for the quarter
totaled $19.2 million compared to $11.7 million in the prior year
quarter, a $7.5 million improvement.
- Second quarter new orders were $128.4 million, an 8.3% decrease
from the prior year quarter, due to a 22.1% decrease in
Construction orders and a 10.4% decrease in Rail orders which are
partially offset by a 26.1% increase in Tubular orders. Our prior
year second quarter Construction new orders included $15.0 million
related to the Peace Bridge contract.
- The Company’s income tax expense for the second quarter was
$0.5 million, which was primarily related to income taxes in
foreign jurisdictions. The Company has a full valuation allowance
against its U.S. deferred tax assets; therefore, no tax benefit was
recorded on domestic operations.
- Total debt was reduced by $17.3 million, or 11.1%, in the
second quarter to $138.0 million as of June 30, 2017. Primary
factors contributing to the current quarter reduction included $9.9
million federal income tax refund proceeds that were applied to our
term loan. Additionally, our revolving credit facility was reduced
by $7.0 million due to continued favorable operations and working
capital management.
1See non-GAAP reconciliation tables at the end of this press
release for information regarding the non-GAAP measures (including
reconciliation of Net loss to Adjusted EBITDA and measures
excluding the impairment charge) used in this release.
CEO Comments
Bob Bauer, President and Chief Executive Officer,
commented, “The Company's second quarter results reflect the
actions we have taken to improve profitability along with improving
market conditions. Net sales of $144.9 million and an ending
backlog of $176.0 million for the second quarter are the result of
strong first-half new orders driven by recovering rail and energy
markets as well as significant wins across a number of product
divisions. The U.S. energy markets continue to improve, and our
actions to restore profitability in the Tubular and Energy Services
segment led to a 430 basis point improvement in segment gross
profit in the second quarter. Selling and administrative expenses
were well below prior year levels, helping drive a $3.1 million
improvement in second quarter Adjusted EBITDA."
Mr. Bauer added, "We made remarkable progress in
strengthening our balance sheet as operating cash flow reached
$19.2 million in the second quarter, and we reduced debt by $17.3
million bringing the total debt reduction for the first-half to
$21.6 million. Operating cash flow of $29.9 million for the first
half of the year is a substantial improvement over prior year and
provides a great start to achieving 2017 free cash flow goals."
Six Month Results
- Net sales for the first six months of 2017 of $263.6 million
increased by $1.3 million, or 0.5%, compared to the prior year
period due to a 14.6% increase in Construction sales, partially
offset by a 5.7% decrease in Tubular sales and a 4.5% decline in
Rail sales.
- Gross profit margin was 18.6%, 110 basis points lower than the
prior year period. The reduction was due to declines in Rail and
Construction, partially offset by increases in Tubular. Year to
date Rail gross profit margins were negatively impacted by lower
margins in our Transit and Rail Distribution businesses. These
reductions were partially offset by an increase in our Test and
Inspection division within Tubular.
- Net income for the first six months of 2017 was $0.6 million,
or $0.06 per diluted share, compared to a net loss of $94.8
million, or $9.25 per diluted share, last year. Excluding the prior
year impairment charge, the net loss would have been $3.9 million
or $0.38 per diluted share.
- Adjusted EBITDA for the first six months of 2017 was $15.7
million compared to $11.5 million in the first six months of
2016.
- Selling and administrative expense decreased by $6.3 million,
or 13.7%. The decrease was primarily comprised of personnel-related
costs of $4.9 million and $1.0 million in lower litigation costs
for the UPRR matter.
- Amortization expense was $3.5 million for the first six months
ended June 30, 2017, compared to $6.1 million in the prior year
period. The reduction was primarily due to the 2016 impairment of
definite-lived intangible assets.
- Net interest expense was $4.2 million in the first six months
of 2017, compared to $2.7 million in the prior year period. The
increase was attributable to an increase in interest
rates.
- Net cash provided by operating activities for the six months
ended June 30, 2017 totaled $29.9 million compared to $6.6 million
in the prior year period, a $23.4 million improvement.
- New orders were $291.2 million for the first six months of
2017, a 12.8% increase from the prior year period, due to a 22.4%
increase in Rail and a 28.6% increase in Tubular which were
partially offset by a 7.5% reduction in Construction
orders.
- The Company’s income tax expense for the first six months of
2017 was $0.9 million, which was primarily related to income taxes
in foreign jurisdictions. The Company has a full valuation
allowance against its U.S. deferred tax assets; therefore, no tax
benefit was recorded on domestic operations.
- Total debt was reduced by $21.6 million, or 13.5%, in the first
six months of 2017 to $138.0 million as of June 30, 2017.
L.B. Foster Company will conduct a conference call and webcast
to discuss its second quarter 2017 operating results on Thursday,
August 3, 2017 at 5:00 pm ET. The call will be hosted by Mr.
Robert Bauer, President, and Chief Executive Officer. Listen via
audio and access the slide presentation on the L.B. Foster web
site: www.lbfoster.com, under the Investor Relations page. The
conference call can also be accessed by dialing 855-327-6837 (U.S.
& Canada) or 631-891-4304 (International) and providing access
code 10003319.
About L.B. Foster CompanyL.B.
Foster is a leading manufacturer and distributor of products and
services for transportation and energy infrastructure with
locations in North America and Europe. For more information,
please visit www.lbfoster.com.
This release may contain forward-looking statements that involve
risks and uncertainties. Statements that do not relate strictly to
historical or current facts are forward-looking. When we use the
words “believe,” “intend,” “expect,” “may,” “should,” “anticipate,”
“could,” “estimate,” “plan,” “predict,” “project,” or their
negatives, or other similar expressions of a future or
forward-looking nature generally should be considered
forward-looking statements. Actual results could differ materially
from the results anticipated in any forward-looking
statement. Accordingly, investors should not place undue
reliance on forward-looking statements as a prediction of actual
results. The Company has based these forward-looking statements on
current expectations and assumptions about future events. While the
Company considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks and
uncertainties, most of which are difficult to predict and many of
which are beyond the Company’s control. The risks and uncertainties
that may affect the operations, performance and results of the
Company’s business and forward-looking statements include, but are
not limited to, environmental matters, including any costs
associated with any remediation and monitoring; a resumption of the
economic slowdown we have experienced the previous two years in the
markets that we serve; the risk of doing business in international
markets; our ability to effectuate our strategy, including cost
reduction initiatives, and our ability to effectively integrate new
businesses and realize anticipated benefits; costs of and impacts
associated with shareholder activism; a decrease in freight or
passenger rail traffic; the timeliness and availability of material
from our major suppliers; labor disputes; our ability to extend the
term of the lease for our Birmingham, Alabama facility, which
expired July 31, 2017, and any costs associated with such
extension; the effective implementation of an enterprise resource
planning system; changes in current accounting estimates and their
ultimate outcomes; the adequacy of internal and external sources of
funds to meet financing needs; the Company’s ability to manage its
working capital requirements and indebtedness; domestic and
international taxes; foreign currency fluctuations; inflation;
domestic and foreign government regulations; economic conditions
and regulatory changes caused by the United Kingdom’s pending exit
from the European Union; sustained declines in energy prices; a
lack of state or federal funding for new infrastructure projects;
increased domestic and foreign government regulation; an increase
in manufacturing or material costs; the ultimate number of concrete
ties that will have to be replaced pursuant to the previously
disclosed product warranty claim of the (“UPRR”) and an overall
resolution of the related contract claims as well as the possible
costs associated with the outcome of the lawsuit filed by the UPRR;
risks inherent in litigation and those matters set forth in Item 8,
Footnote 19, "Commitments and Contingent Liabilities" and in Item
1A, “Risk Factors” of the Company’s Form 10-K for the year ended
December 31, 2016 and any updates to such disclosures in subsequent
Form 10-Qs. The Company urges all interested parties to read these
reports to gain a better understanding of the many business and
other risks that the Company faces. The forward-looking statements
contained in this press release are made only as of the date
hereof, and the Company assumes no obligation and does not intend
to update or revise these statements, whether as a result of new
information, future events or otherwise, except as required by
securities laws.
|
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|
|
|
|
|
|
L.B. FOSTER COMPANY AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(In thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
(Unaudited) |
|
(Unaudited) |
Sales of goods |
|
$ |
117,727 |
|
|
$ |
118,070 |
|
|
$ |
215,356 |
|
|
$ |
225,985 |
|
Sales of services |
|
|
27,133 |
|
|
|
17,924 |
|
|
|
48,206 |
|
|
|
36,319 |
|
Total net sales |
|
|
144,860 |
|
|
|
135,994 |
|
|
|
263,562 |
|
|
|
262,304 |
|
Cost of goods sold |
|
|
94,291 |
|
|
|
92,638 |
|
|
|
173,692 |
|
|
|
179,031 |
|
Cost of services
sold |
|
|
22,833 |
|
|
|
15,543 |
|
|
|
40,882 |
|
|
|
31,500 |
|
Total cost of
sales |
|
|
117,124 |
|
|
|
108,181 |
|
|
|
214,574 |
|
|
|
210,531 |
|
Gross profit |
|
|
27,736 |
|
|
|
27,813 |
|
|
|
48,988 |
|
|
|
51,773 |
|
Selling and
administrative expenses |
|
|
20,578 |
|
|
|
23,317 |
|
|
|
39,805 |
|
|
|
46,134 |
|
Amortization
expense |
|
|
1,695 |
|
|
|
2,789 |
|
|
|
3,454 |
|
|
|
6,055 |
|
Asset impairments |
|
|
— |
|
|
|
128,938 |
|
|
|
— |
|
|
|
128,938 |
|
Interest expense |
|
|
2,181 |
|
|
|
1,652 |
|
|
|
4,289 |
|
|
|
2,822 |
|
Interest income |
|
|
(54 |
) |
|
|
(52 |
) |
|
|
(110 |
) |
|
|
(107 |
) |
Equity in (income) loss
of nonconsolidated investments |
|
|
(145 |
) |
|
|
487 |
|
|
|
55 |
|
|
|
683 |
|
Other (income)
expense |
|
|
(18 |
) |
|
|
107 |
|
|
|
(13 |
) |
|
|
822 |
|
|
|
|
24,237 |
|
|
|
157,238 |
|
|
|
47,480 |
|
|
|
185,347 |
|
Income (loss) before
income taxes |
|
|
3,499 |
|
|
|
(129,425 |
) |
|
|
1,508 |
|
|
|
(133,574 |
) |
Income tax expense
(benefit) |
|
|
475 |
|
|
|
(37,429 |
) |
|
|
906 |
|
|
|
(38,746 |
) |
Net income (loss) |
|
$ |
3,024 |
|
|
$ |
(91,996 |
) |
|
$ |
602 |
|
|
$ |
(94,828 |
) |
Basic earnings (loss)
per common share |
|
$ |
0.29 |
|
|
$ |
(8.96 |
) |
|
$ |
0.06 |
|
|
$ |
(9.25 |
) |
Diluted earnings (loss)
per common share |
|
$ |
0.29 |
|
|
$ |
(8.96 |
) |
|
$ |
0.06 |
|
|
$ |
(9.25 |
) |
Dividends paid per
common share |
|
$ |
— |
|
|
$ |
0.04 |
|
|
$ |
— |
|
|
$ |
0.08 |
|
Average number of
common shares outstanding — Basic |
|
|
10,335 |
|
|
|
10,263 |
|
|
|
10,327 |
|
|
|
10,248 |
|
Average number of
common shares outstanding — Diluted |
|
|
10,483 |
|
|
|
10,263 |
|
|
|
10,527 |
|
|
|
10,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L.B. FOSTER COMPANY AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(In thousands) |
|
|
|
|
|
|
|
June 30, 2017 |
|
December 31, 2016 |
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
35,457 |
|
|
$ |
30,363 |
|
Accounts
receivable - net |
|
|
77,041 |
|
|
|
66,632 |
|
Inventories - net |
|
|
84,588 |
|
|
|
83,243 |
|
Prepaid
income tax |
|
|
1,150 |
|
|
|
14,166 |
|
Other
current assets |
|
|
6,648 |
|
|
|
5,200 |
|
Total current assets |
|
|
204,884 |
|
|
|
199,604 |
|
Property,
plant, and equipment - net |
|
|
101,553 |
|
|
|
103,973 |
|
Other assets: |
|
|
|
|
Goodwill |
|
|
19,431 |
|
|
|
18,932 |
|
Other
intangibles - net |
|
|
60,611 |
|
|
|
63,519 |
|
Investments |
|
|
3,976 |
|
|
|
4,031 |
|
Other
assets |
|
|
2,555 |
|
|
|
2,964 |
|
Total assets |
|
$ |
393,010 |
|
|
$ |
393,023 |
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
57,161 |
|
|
$ |
37,744 |
|
Deferred
revenue |
|
|
5,830 |
|
|
|
7,597 |
|
Accrued
payroll and employee benefits |
|
|
8,444 |
|
|
|
7,497 |
|
Accrued
warranty |
|
|
9,168 |
|
|
|
10,154 |
|
Current
maturities of long-term debt |
|
|
10,051 |
|
|
|
10,386 |
|
Other
accrued liabilities |
|
|
8,823 |
|
|
|
8,953 |
|
Total current liabilities |
|
|
99,477 |
|
|
|
82,331 |
|
Long-term
debt |
|
|
127,933 |
|
|
|
149,179 |
|
Deferred
tax liabilities |
|
|
11,187 |
|
|
|
11,371 |
|
Other
long-term liabilities |
|
|
16,911 |
|
|
|
16,891 |
|
Stockholders'
equity: |
|
|
|
|
Class A
Common Stock |
|
|
111 |
|
|
|
111 |
|
Paid-in
capital |
|
|
43,952 |
|
|
|
44,098 |
|
Retained
earnings |
|
|
134,270 |
|
|
|
133,667 |
|
Treasury
stock |
|
|
(18,678 |
) |
|
|
(19,336 |
) |
Accumulated other comprehensive loss |
|
|
(22,153 |
) |
|
|
(25,289 |
) |
Total stockholders' equity |
|
|
137,502 |
|
|
|
133,251 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
393,010 |
|
|
$ |
393,023 |
|
|
|
|
|
|
This earnings release discloses earnings before interest,
taxes, depreciation, and amortization (“EBITDA”) adjusted for asset
impairments ("Adjusted EBITDA") which
are non-GAAP financial measures. The Company believes
that EBITDA is useful to investors in order to provide a more
complete understanding of the ongoing operations of the Company’s
business. Similarly, Adjusted EBITDA displays the performance of
the Company without the impact of asset impairments in order to
enhance investors' understanding of our day to day operations. In
addition, management believes that
these non-GAAP financial measures are useful to investors
in the assessment of the use of our assets without regard to
financing methods, capital structure, or historical cost basis.
Additionally, EBITDA is a financial measurement that management and
the Board of Directors use in the determination of certain
compensation programs. Adjusted diluted earnings (loss) per share
in this earnings release exclude asset impairment charges and are
non-GAAP measures used for management reporting purposes.
Management believes that these measures provide useful information
to investors because they will assist investors in evaluating
earnings performance on a comparable year-over-year basis. |
|
|
|
|
|
|
|
|
|
Non-GAAP financial measures are not a substitute for GAAP
financial results and should only be considered in conjunction with
the Company’s financial information that is presented in accordance
with GAAP. Quantitative reconciliations of the GAAP measures are
presented below (in thousands, except per share data): |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
(Unaudited) |
|
(Unaudited) |
Adjusted EBITDA
Reconciliation |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
3,024 |
|
$ |
(91,996 |
) |
|
$ |
602 |
|
$ |
(94,828 |
) |
Interest expense,
net |
|
|
2,127 |
|
|
1,600 |
|
|
|
4,179 |
|
|
2,715 |
|
Income tax expense
(benefit) |
|
|
475 |
|
|
(37,429 |
) |
|
|
906 |
|
|
(38,746 |
) |
Depreciation
expense |
|
|
3,245 |
|
|
3,598 |
|
|
|
6,527 |
|
|
7,325 |
|
Amortization
expense |
|
|
1,695 |
|
|
2,789 |
|
|
|
3,454 |
|
|
6,055 |
|
Total
EBITDA |
|
$ |
10,566 |
|
$ |
(121,438 |
) |
|
$ |
15,668 |
|
$ |
(117,479 |
) |
Asset impairments |
|
|
— |
|
|
128,938 |
|
|
|
— |
|
|
128,938 |
|
Adjusted
EBITDA |
|
$ |
10,566 |
|
$ |
7,500 |
|
|
$ |
15,668 |
|
$ |
11,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
(Unaudited) |
|
(Unaudited) |
Adjusted
Diluted Earnings (Loss) Per Share Reconciliation |
|
|
|
|
|
|
|
|
Net income (loss), as
reported |
|
$ |
3,024 |
|
$ |
(91,996 |
) |
|
$ |
602 |
|
$ |
(94,828 |
) |
Asset impairments, net
of tax benefits of $38,038 |
|
|
— |
|
|
90,900 |
|
|
|
— |
|
|
90,900 |
|
Adjusted net income
(loss) |
|
$ |
3,024 |
|
$ |
(1,096 |
) |
|
$ |
602 |
|
$ |
(3,928 |
) |
Average number of
common shares outstanding - Diluted |
|
|
10,483 |
|
|
10,263 |
|
|
|
10,527 |
|
|
10,248 |
|
Diluted earnings (loss)
per common share, as reported |
|
$ |
0.29 |
|
$ |
(8.96 |
) |
|
$ |
0.06 |
|
$ |
(9.25 |
) |
Diluted earnings (loss)
per common share, as adjusted |
|
$ |
0.29 |
|
$ |
(0.11 |
) |
|
$ |
0.06 |
|
$ |
(0.38 |
) |
|
|
|
|
|
|
|
|
|
Investor Relations:
Judith Balog
(412) 928-3417
investors@lbfoster.com
L.B. Foster Company
415 Holiday Drive
Pittsburgh, PA 15220
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