L.B. Foster Company (Nasdaq:FSTR), a leading manufacturer,
fabricator, and distributor of products and services for rail,
construction, energy and utility markets, today reported its first
quarter 2015 operating results, including:
- Sales increased by 23.8% to $137.9 million
- Diluted EPS increased by 17.1% to $0.41 per diluted share
- Gross profit margin improved to 22.2%, an increase of 60 basis
points
- Recent acquisitions contributed $20.0 million of sales at 22.9%
gross profit margins in the first quarter
- Due to the recent acquisitions of Chemtec Energy Services
("Chemtec"), Inspection Oilfield Services ("IOS") and TEW
Engineering (TEW), the Company has renamed its Tubular and Rail
segments to Tubular and Energy Services and Rail Products and
Services, respectively.
First Quarter Results
- First quarter net sales of $137.9 million increased by $26.5
million, or 23.8%, compared to the prior year quarter due to a
146.2% increase in Tubular and Energy Services ("Tubular") segment
sales, a 5.7% improvement in Rail Products and Services ("Rail")
segment sales and a 25.2% increase in Construction segment
sales. The improvement in Tubular sales was due to a 74.0%
increase in our coatings sales as well as contributions from our
recent acquisitions, partially offset by a decline in Threaded
Products sales. The Rail segment sales increase was driven
principally by increases in our Rail Distribution, Allegheny Rail
Products and concrete rail products businesses. The
Construction segment sales improvement was due to increased sales
in our Piling and concrete construction products businesses.
- Gross profit margin was 22.2%, 60 basis points higher than the
prior year quarter. This improvement was due principally to
increased specialty coatings product margins, improved Rail margins
as well as a positive contribution from our March 2015 IOS
acquisition. Gross margin declined in the Construction
Products segment due principally to a reduction in our Bridge
Products division as 2014 was a record year for this business.
- First quarter net income was $4.3 million, or $0.41 per diluted
share, compared to $3.6 million, or $0.35 per diluted share, last
year.
- Selling and administrative expense increased by $4.2 million,
or 23.4%, due principally to costs of businesses acquired after the
first quarter of 2014 as well as acquisition-related activity
costs.
- Earnings before interest, taxes, depreciation and amortization1
("EBITDA") was $12.0 million in the first quarter of 2015 compared
to $8.2 million in the prior year quarter, a 46.3% increase.
- First quarter bookings were $163.3 million, a 9.2% decrease
from the prior year first quarter, due to 6.1% and 30.3% declines
in Rail and Construction segment orders, respectively, driven by
Rail Distribution and Piling reductions. This was partially
offset by a 43.9% increase in Tubular and Energy Services segment
orders which were fueled by orders generated by our newly acquired
energy businesses.
- The Company's effective income tax rate for the first quarter
was 35.7% compared to 31.4% in the prior year quarter. The
increase in the rate was principally due to the recognition of
favorable uncertain state tax positions during the prior year
quarter.
- Cash flow from operating activities for the first quarter of
2015 used $7.4 million of cash compared to $32.2 million of cash
provided in the first quarter of 2014. The first quarter of
2014 was favorably impacted by improved working capital management
that largely corrected issues encountered in the second half of
2013.
CEO Comments
Robert P. Bauer, L.B. Foster Company's President and Chief
Executive Officer, commented, "Operating results in Q1 were driven
by solid gross margin performance. We realized year over year
gross margin improvements in our Tubular and Rail Products
businesses which helped drive the 60 basis point improvement to
22.2%. Operating expenses in the quarter were impacted by
acquisition costs related to TEW Engineering and IOS, and to a
lesser extent Chemtec Energy Services. These three
acquisitions were completed in a 90 day period requiring
considerable resources for evaluation and closing, with less than a
full quarter impact on Q1 sales. Despite the increased
expenses, EPS improved 17% to $0.41 per share."
Mr. Bauer went on to say, "We are very anxious to begin working
on the growth programs that these new businesses can
bring. Also, the Company restructured its credit facility in
Q1 providing the necessary borrowing capacity to complete the
acquisitions, while still providing financial flexibility. As
such, we finished the quarter with over $218 million of
debt. The financial picture of the company is now beginning to
reflect the anticipated changes driven by our strategic plan
including a more aggressive acquisition strategy and the move into
adjacent markets that will provide attractive growth and value
creation."
Q1 Business Segment
Highlights
($000's)
Rail Products and Services Segment
Rail sales increased 5.7% due principally to increases in our
Rail Distribution, Allegheny Rail Products and Concrete Tie
businesses, partially offset by a decline in Transit Products
sales. The 2015 gross profit margin was favorably impacted by
improvements in our Rail Distribution, Transit and Allegheny Rail
Products businesses.
|
2015 |
2014 |
Variance |
Sales |
$77,676 |
$73,496 |
5.7% |
Gross Profit |
$18,143 |
$16,430 |
|
Gross Profit % |
23.4% |
22.4% |
|
Construction Products Segment
Construction sales increased by 25.2% in the quarter due to
sales improvements across all divisions except for the Bridge
Products business. Gross profit margins declined 180 basis
points due to reductions in the Bridge Products and Piling
divisions.
|
2015 |
2014 |
Variance |
Sales |
$34,290 |
$27,383 |
25.2% |
Gross Profit |
$6,562 |
$5,712 |
|
Gross Profit % |
19.1% |
20.9% |
|
Tubular and Energy Services Segment
Sales for this segment increased by 146.2% in the quarter due
principally to increased revenues from recent acquisitions as well
as improved sales of our coatings businesses. Tubular gross
profit margins increased due principally to volume-related leverage
in our specialty coatings business as well as our recent
acquisitions of higher margin businesses.
|
2015 |
2014 |
Variance |
Sales |
$25,941 |
$10,535 |
146.2% |
Gross Profit |
$6,034 |
$2,130 |
|
Gross Profit % |
23.3% |
20.2% |
|
2015 Outlook
Overall market conditions are expected to be favorable across
our business segments in 2015 with the exception of certain areas
in the energy market which are likely to experience short term
volatility. Capital spending plans for many of the pipeline
customers we serve have remained in place, while the E&P firms
reduced capital spending aimed at drilling operations appear to
have reached a conclusion for 2015. We are also reducing
expectations for sales to Union Pacific Railroad based on the
ongoing litigation over concrete tie warranty claims. In
addition, headwinds from a strong dollar are likely to have a
negative impact on sales.
The Company expects 2015 sales to be in the range of $770.0
million to $780.0 million. Pretax income is expected to range
between $51.5 million to $53.0 million while diluted EPS is
expected to range from $3.20 to $3.30. We forecast EBITDA to be in
the range of $84.5 to $86.0 million for the year.
L.B. Foster Company will conduct a conference call and webcast
to discuss its first quarter 2015 operating results on Wednesday
May 6, 2015 at 11:00 am ET. The call will be hosted by Mr.
Robert Bauer, President and Chief Executive Officer. Listen
via audio on the L.B. Foster web site: www.lbfoster.com, by
accessing the Investor Relations page. The conference call can
be accessed by dialing 800-299-9086 and providing access code
11643536.
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, the statements which
include those words are usually 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, an economic slowdown in the
markets we serve; the risk of doing business in international
markets; our ability to effectuate our strategy including
evaluating potential opportunities such as strategic acquisitions,
joint ventures, and other initiatives, and our ability to
effectively integrate new businesses and realize anticipated
benefits; a decrease in freight or passenger rail traffic; the
timeliness and availability of material from our major suppliers;
labor disputes; 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; sustained declines in
energy prices; a lack of state or federal funding for new
infrastructure projects; increased regulation including conflict
minerals; 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
Union Pacific Railroad and an overall resolution of the related
contract claims as well as the outcome of the lawsuit filed by the
UPRR and a reduction of future business with the UPRR; risks
inherent in litigation and those matters set forth in Item 8,
Footnote 20, "Commitments and Contingent Liabilities" and in Item
1A, "Risk Factors" of the Company's Form 10-K for the year ended
December 31, 2014 as updated by any 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.
1 Reconciliations of non-GAAP amounts are set forth on the
attached financial tables.
L.B. FOSTER COMPANY AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(In thousands, except per share
data) |
|
|
|
|
Three Months Ended |
|
March 31, |
|
2015 |
2014 |
|
(Unaudited) |
|
|
|
Net sales |
$ 137,907 |
$ 111,414 |
Cost of goods sold |
107,254 |
87,287 |
Gross profit |
30,653 |
24,127 |
|
|
|
Selling and administrative expenses |
22,251 |
18,025 |
Amortization expense |
2,157 |
1,141 |
Interest expense |
613 |
123 |
Interest income |
(57) |
(144) |
Equity in income of nonconsolidated
investments |
(173) |
(204) |
Other income |
(803) |
(135) |
|
23,988 |
18,806 |
|
|
|
Income before income taxes |
6,665 |
5,321 |
|
|
|
Income tax expense |
2,380 |
1,672 |
|
|
|
Net income |
4,285 |
3,649 |
|
|
|
Basic earnings per common share |
$ 0.42 |
$ 0.36 |
|
|
|
Diluted earnings per common share |
$ 0.41 |
$ 0.35 |
|
|
|
Dividends paid per common share |
$ 0.04 |
$ 0.03 |
|
|
|
Average number of common shares outstanding -
Basic |
10,259 |
10,197 |
|
|
|
Average number of common shares outstanding -
Diluted |
10,359 |
10,292 |
|
L.B. FOSTER COMPANY AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In thousands) |
|
|
|
|
March 31, |
December 31, |
|
2015 |
2014 |
|
(Unaudited) |
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 37,550 |
$ 52,024 |
Accounts receivable - net |
93,468 |
90,178 |
Inventories - net |
105,686 |
95,089 |
Current deferred tax
assets |
4,440 |
3,497 |
Prepaid income tax |
3,190 |
2,790 |
Other current assets |
8,334 |
4,101 |
Total current
assets |
252,668 |
247,679 |
|
|
|
Property, plant and equipment -
net |
125,141 |
74,802 |
|
|
|
Other assets: |
|
|
Goodwill |
215,130 |
82,949 |
Other intangibles - net |
93,646 |
82,134 |
Investments |
5,907 |
5,824 |
Other assets |
3,234 |
1,733 |
Total
Assets |
$ 695,726 |
$ 495,121 |
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
Accounts payable |
$ 56,764 |
$ 67,166 |
Deferred revenue |
8,010 |
8,034 |
Accrued payroll and employee
benefits |
9,984 |
13,419 |
Accrued warranty |
10,344 |
11,500 |
Current maturities of long-term
debt |
675 |
676 |
Current deferred tax
liabilities |
77 |
77 |
Other accrued liabilities |
11,892 |
7,899 |
Total current
liabilities |
97,746 |
108,771 |
|
|
|
Long-term debt |
217,560 |
25,752 |
Deferred tax liabilities |
27,990 |
10,945 |
Other long-term
liabilities |
16,934 |
13,765 |
|
|
|
Stockholders' equity: |
|
|
Class A Common Stock |
111 |
111 |
Paid-in capital |
46,966 |
48,115 |
Retained earnings |
326,541 |
322,672 |
Treasury stock |
(21,932) |
(23,118) |
Accumulated other comprehensive
loss |
(16,190) |
(11,892) |
Total stockholders'
equity |
335,496 |
335,888 |
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY |
$ 695,726 |
$ 495,121 |
This earnings release contains certain non-GAAP financial
measures. These financial measures include earnings before
interest, taxes, depreciation and amortization. The Company
believes that these non-GAAP measures are useful to investors in
order to provide a better understanding of the ongoing operations
of the Company's business. These supplemental financial measures
are useful to management and external users to assess financial
performance of our assets without regard to financing methods,
capital structure or historical cost basis. EBITDA is also a
financial measurement that is utilized in the determination of
certain compensation programs.
These 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:
L.B. FOSTER COMPANY AND
SUBSIDIARIES |
Reconciliation of
Non-GAAP Financial Measures |
(In
Thousands) |
|
|
|
|
Three months
ended |
|
March
31, |
|
2015 |
2014 |
Net income |
$ 4,285 |
$ 3,649 |
Interest |
556 |
(21) |
Provision for income taxes |
2,380 |
1,672 |
Depreciation |
2,619 |
1,761 |
Amortization |
2,157 |
1,141 |
Total EBITDA |
$ 11,997 |
$ 8,202 |
CONTACT: David Russo
Phone: 412.928.3417
Email: Investors@Lbfoster.com
Website: www.lbfoster.com
L.B. Foster Company
415 Holiday Drive
Pittsburgh, PA 15220
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