L.B. Foster Reports Second Quarter Operating Results
July 31 2018 - 7:29AM
L.B. Foster Company (NASDAQ: FSTR), a leading manufacturer and
distributor of products and services for transportation and energy
infrastructure, today reported second quarter 2018 operating
results, which included the following performance highlights:
- Net income of $4.9 million, or $0.47
per diluted share, compared to net income of $3.0 million, or $0.29
per diluted share in the prior year quarter.
- Sales increased by 19.3% from the prior year quarter to $172.9
million.
- Gross profit of $32.5 million increased $4.8 million, or 17.2%,
from the prior year quarter. Gross profit margin of 18.8% was 30
basis points lower compared to the prior year quarter.
- New orders increased by 46.0% over the prior year
quarter.
- An increase in backlog of 31.4% from June 30, 2017 to
$231.3 million.
- Debt was reduced by $3.4 million from March 31, 2018 to
$99.0 million.
- Net cash provided by operating activities for the quarter
totaled $5.3 million.
Second Quarter Results
- Second quarter net sales of $172.9 million increased by $28.0
million, or 19.3%, compared to the prior year quarter due to
increases in Rail Products and Services (Rail) sales of 32.5% and
Tubular and Energy Services (Tubular) sales of 29.1%. These
increases were partially offset by a reduction in Construction
Products (Construction) sales of 7.2%.
- Second quarter gross profit was $32.5 million, a $4.8 million,
or 17.2%, improvement over the prior year. Gross profit margin of
18.8% was 30 basis points lower compared to the prior year quarter.
The Tubular segment increased 750 basis points over the prior year
period due to strength in the midstream and upstream markets we
serve. This increase was offset by reductions within the
Construction segment of 310 basis points and the Rail segment of
230 basis points compared to the prior year quarter.
- Second quarter new orders were $187.5 million, a 46.0% increase
from the prior year quarter, primarily due to an increase in
Rail.
- Backlog was $231.3 million at June 30, 2018, a 31.4%
increase over the prior year period. Rail backlog increased $48.4
million, or 61.7%, and Construction backlog increased $6.9 million,
or 9.1%.
- Net income for the second quarter 2018 was $4.9 million, or
$0.47 per diluted share, compared to net income of $3.0 million, or
$0.29 per diluted share, in the prior year quarter.
- Second quarter EBITDA1 (earnings before interest, taxes,
depreciation, and amortization) was $12.0 million which increased
13.2% compared to the second quarter of 2017.
- Selling and administrative expenses in the second quarter
increased by $2.8 million, or 13.6%, largely driven by increases in
personnel-related expenses of $2.0 million and litigation costs of
$1.6 million related to the Union Pacific Rail Road (UPRR)
matter.
- Interest expense was $1.7 million in the second quarter of
2018, compared to $2.2 million in the prior year quarter. The
decrease was attributable to a reduction in debt levels as well as
achieving the lowest tier within the interest rate spread
associated with our credit facility agreement.
- Net cash provided by operating activities for the quarter
totaled $5.3 million compared to $19.2 million in the prior year
quarter. The $13.9 million decline is primarily a result of an
increase in trade working capital used to support the second
quarter new order activity and outstanding backlog. The second
quarter of 2017 included $10.0 million of operating cash provided
by an income tax refund.
- The Company’s income tax expense for the second quarter was
$0.7 million, which primarily related to income taxes in foreign
jurisdictions.
- Total debt decreased by $3.4 million, or 3.3%, in the second
quarter to $99.0 million as compared to $102.4 million at
March 31, 2018.
1 See "Non-GAAP Disclosures" at the end of this press release
for information regarding the following non-GAAP measures used in
this release: EBITDA.
CEO Comments
Bob Bauer, President and Chief Executive
Officer, commented, “The Company's second quarter results reflect
continued momentum in new orders, which drove a 31.4% increase in
backlog over the prior year period. Spending directed toward
transit rail infrastructure in North America and Europe drove a
significant portion of the increase. The Company's backlog going
into the second half of the year stands at $231.3 million.”
Mr. Bauer added, “Operating performance
continued to improve as net income for the quarter and six-month
period were well above prior year. Our working capital increase has
been minimal to cope with the sales growth helping produce $7.9
million of operating cash flow year-to-date, while capital spending
was limited to $1.8 million. This allowed continuation of our
initiative to reduce debt, bringing our total debt to $99.0
million, a decrease of $119.4 million since June 30, 2015.
"Our balance sheet has improved considerably
over the last 18 months. It has put the Company in a position to
lower borrowing costs and deploy capital to growth initiatives that
are attractive.”
First Half 2018 Results
- Net sales of $295.3 million for the first six months of 2018
increased by $31.8 million, or 12.1%, compared to the prior year
due to increases in Tubular sales of 27.7% and Rail sales of 22.4%.
These increases were partially offset by a reduction in
Construction sales of 14.1%.
- For the first six months of 2018, gross profit was $54.5
million, a $5.6 million, or 11.3%, increase from the prior year
period. Gross profit margin was 18.5%, a reduction of 10 basis
points compared to the first six months of the prior year. The
Tubular segment increased 550 basis points over the prior year
period from strength within the midstream and upstream markets we
serve. This increase was offset by reductions within the
Construction segment of 260 basis points and the Rail segment of
160 basis points compared to the prior year.
- New orders during the first six months of 2018 were $363.5
million, a 24.8% increase from the prior year period. Rail new
orders increased 49.2%, while Tubular new orders increased 4.9%
over the prior year period. The increases were partially offset by
a 1.0% decline in Construction new orders compared to the prior
year period.
- Net income for the first six months of 2018 was $2.9 million,
or $0.28 per diluted share, compared to net income of $0.6 million,
or $0.06 per diluted share, last year.
- EBITDA for the first six months of 2018 was $17.1 million, a
$1.4 million increase over the prior year period.
- Selling and administrative expenses in the first half of 2018
increased by $4.0 million, or 10.1%, largely driven by increases in
personnel-related expenses of $2.9 million and litigation costs of
$2.8 million related to the UPRR matter compared to the prior
year.
- Interest expense was $3.6 million for the first six months of
2018, compared to $4.3 million in the prior period. The decrease
was attributable to a reduction in debt levels.
- Net cash provided by operating activities for the first six
months of 2018 totaled $7.9 million compared to $29.9 million in
the prior year period. The $22.0 million decline is primarily a
result of an increase in trade working capital used to support the
current year new order activity and outstanding backlog. The 2017
period included $11.8 million of operating cash provided by income
tax refunds.
- The Company’s income tax expense for the first half of 2018 was
$1.2 million, which 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 decreased by $31.0 million, or 23.9%, in the first
six months of 2018 to $99.0 million as compared to $130.0 million
at December 31, 2017. The decrease was primarily related to
the $24.7 million repatriation of international cash that was
applied against the debt balance.
L.B. Foster Company will conduct a conference call and webcast
to discuss its second quarter 2018 operating results on Tuesday,
July 31, 2018 at 8:30 am 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 10005283.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. Forward-looking statements provide current
expectations of future events based on certain assumptions and
include any statement that does not directly relate to any
historical or current fact. Sentences containing words such as
“believe,” “intend,” “plan,” “may,” “expect,” “should,” “could,”
“anticipate,” “estimate,” “predict,” “project,” or their negatives,
or other similar expressions of a future or forward-looking nature
generally should be considered forward-looking statements.
Forward-looking statements in this release may concern, among other
things, L.B. Foster Company’s (the “Company’s”) expectations
relating to our strategy, goals, projections, and plans regarding
our financial position, liquidity, capital resources, and results
of operations; the outcome of litigation and product warranty
claims; decisions regarding our strategic growth initiatives,
market position, and product development; all of which are based on
current estimates that involve inherent risks and uncertainties.
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 Company cautions readers that various
factors could cause the actual results of the Company to differ
materially from those indicated by forward-looking statements.
Accordingly, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. Among
the factors that could cause the actual results to differ
materially from those indicated in the forward-looking statements
are risks and uncertainties related to: environmental matters,
including any costs associated with any remediation and monitoring;
a resumption of the economic slowdown we experienced in previous
years in the markets 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 acquired 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 materials from our major suppliers
as well as the impact on our access to supplies of customer
preferences as to the origin of such supplies, such as customers'
concerns about conflict minerals; labor disputes; the continuing
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, including our ability to negotiate any
additional necessary amendments to our credit agreement; the
Company’s ability to manage its working capital requirements and
indebtedness; domestic and international taxes, including estimates
that may impact these amounts, including as a result of any
interpretations, regulatory actions, and amendments to the Tax Cuts
and Jobs Act (the “Tax Act”); foreign currency fluctuations;
inflation; domestic and foreign government regulations, including
tariffs; 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; 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 (“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; the loss of future revenues from current customers; and
risks inherent in litigation. Should one or more of these risks or
uncertainties materialize, or should the assumptions underlying the
forward-looking statements prove incorrect, actual outcomes could
vary materially from those indicated. Significant 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, those set forth under Item 1A,
“Risk Factors,” and elsewhere in our Annual Report on Form 10-K for
the year ending December 31, 2017 and our other periodic
filings with the Securities and Exchange Commission.
Investor Relations:Judith Balog(412)
928-3417investors@lbfoster.com
L.B. Foster Company415 Holiday DrivePittsburgh, PA 15220
|
L.B. FOSTER COMPANY AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In
thousands, except per share data) |
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
Sales of
goods |
|
$ |
127,093 |
|
|
$ |
117,727 |
|
|
$ |
218,904 |
|
|
$ |
215,356 |
|
Sales of
services |
|
45,797 |
|
|
27,133 |
|
|
76,440 |
|
|
48,206 |
|
Total net
sales |
|
172,890 |
|
|
144,860 |
|
|
295,344 |
|
|
263,562 |
|
Cost of
goods sold |
|
105,846 |
|
|
94,291 |
|
|
181,146 |
|
|
173,692 |
|
Cost of
services sold |
|
34,530 |
|
|
22,833 |
|
|
59,656 |
|
|
40,882 |
|
Total cost
of sales |
|
140,376 |
|
|
117,124 |
|
|
240,802 |
|
|
214,574 |
|
Gross
profit |
|
32,514 |
|
|
27,736 |
|
|
54,542 |
|
|
48,988 |
|
Selling and
administrative expenses |
|
23,368 |
|
|
20,578 |
|
|
43,826 |
|
|
39,805 |
|
Amortization expense |
|
1,775 |
|
|
1,695 |
|
|
3,560 |
|
|
3,454 |
|
Interest
expense |
|
1,654 |
|
|
2,181 |
|
|
3,612 |
|
|
4,289 |
|
Interest
income |
|
(24 |
) |
|
(54 |
) |
|
(95 |
) |
|
(110 |
) |
Equity in
(income) loss of nonconsolidated investments |
|
— |
|
|
(145 |
) |
|
3 |
|
|
55 |
|
Other
expense (income) |
|
128 |
|
|
(18 |
) |
|
(480 |
) |
|
(13 |
) |
|
|
26,901 |
|
|
24,237 |
|
|
50,426 |
|
|
47,480 |
|
Income
before income taxes |
|
5,613 |
|
|
3,499 |
|
|
4,116 |
|
|
1,508 |
|
Income tax
expense |
|
673 |
|
|
475 |
|
|
1,198 |
|
|
906 |
|
Net
income |
|
$ |
4,940 |
|
|
$ |
3,024 |
|
|
$ |
2,918 |
|
|
$ |
602 |
|
Basic
earnings per common share |
|
$ |
0.48 |
|
|
$ |
0.29 |
|
|
$ |
0.28 |
|
|
$ |
0.06 |
|
Diluted
earnings per common share |
|
$ |
0.47 |
|
|
$ |
0.29 |
|
|
$ |
0.28 |
|
|
$ |
0.06 |
|
Average
number of common shares outstanding — Basic |
|
10,365 |
|
|
10,335 |
|
|
10,358 |
|
|
10,327 |
|
Average
number of common shares outstanding — Diluted |
|
10,484 |
|
|
10,483 |
|
|
10,477 |
|
|
10,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
L.B. FOSTER COMPANY AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In
thousands) |
|
|
|
June 30, 2018 |
|
December 31, 2017 |
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
13,271 |
|
|
$ |
37,678 |
|
Accounts receivable - net |
|
96,310 |
|
|
76,582 |
|
Inventories - net |
|
101,343 |
|
|
97,543 |
|
Prepaid income tax |
|
347 |
|
|
188 |
|
Other current assets |
|
12,090 |
|
|
9,120 |
|
Total current assets |
|
223,361 |
|
|
221,111 |
|
Property, plant, and equipment - net |
|
89,467 |
|
|
96,096 |
|
Other
assets: |
|
|
|
|
Goodwill |
|
19,566 |
|
|
19,785 |
|
Other intangibles - net |
|
53,675 |
|
|
57,440 |
|
Investments |
|
159 |
|
|
162 |
|
Other assets |
|
1,416 |
|
|
1,962 |
|
TOTAL ASSETS |
|
$ |
387,644 |
|
|
$ |
396,556 |
|
LIABILITIES
AND STOCKHOLDERS' EQUITY |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts payable |
|
$ |
73,667 |
|
|
$ |
52,404 |
|
Deferred revenue |
|
12,221 |
|
|
10,136 |
|
Accrued payroll and employee benefits |
|
10,007 |
|
|
11,888 |
|
Accrued warranty |
|
8,705 |
|
|
8,682 |
|
Current maturities of long-term debt |
|
631 |
|
|
656 |
|
Other accrued liabilities |
|
9,208 |
|
|
9,764 |
|
Total current liabilities |
|
114,439 |
|
|
93,530 |
|
Long-term debt |
|
98,406 |
|
|
129,310 |
|
Deferred tax liabilities |
|
8,231 |
|
|
9,744 |
|
Other long-term liabilities |
|
17,352 |
|
|
17,493 |
|
Stockholders' equity: |
|
|
|
|
Class A Common Stock |
|
111 |
|
|
111 |
|
Paid-in capital |
|
46,129 |
|
|
45,017 |
|
Retained earnings |
|
140,393 |
|
|
137,780 |
|
Treasury stock |
|
(18,180 |
) |
|
(18,662 |
) |
Accumulated other comprehensive loss |
|
(19,237 |
) |
|
(17,767 |
) |
Total stockholders' equity |
|
149,216 |
|
|
146,479 |
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
387,644 |
|
|
$ |
396,556 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP Disclosures
This earnings release discloses earnings before interest, taxes,
depreciation, and amortization (“EBITDA”) which is
a non-GAAP financial measure. 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
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. 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 EBITDA is presented
below (in thousands):
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
EBITDA
Reconciliation |
|
|
|
|
|
|
|
|
Net income,
as reported |
|
$ |
4,940 |
|
|
$ |
3,024 |
|
|
$ |
2,918 |
|
|
$ |
602 |
|
Interest
expense, net |
|
1,630 |
|
|
2,127 |
|
|
3,517 |
|
|
4,179 |
|
Income tax
expense |
|
673 |
|
|
475 |
|
|
1,198 |
|
|
906 |
|
Depreciation expense |
|
2,938 |
|
|
3,245 |
|
|
5,882 |
|
|
6,527 |
|
Amortization expense |
|
1,775 |
|
|
1,695 |
|
|
3,560 |
|
|
3,454 |
|
Total EBITDA |
|
$ |
11,956 |
|
|
$ |
10,566 |
|
|
$ |
17,075 |
|
|
$ |
15,668 |
|
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