L.B. Foster Reports First Quarter Operating Results
May 09 2019 - 4:01PM
L.B. Foster Company (NASDAQ: FSTR), a leading manufacturer and
distributor of products and services for transportation and energy
infrastructure, today reported its first quarter 2019 operating
results, which included the following performance highlights:
- Net income of $3.7 million, or $0.35 per diluted share, an
increase of $0.53 per diluted share over the prior year
quarter.
- Sales of $150.5 million, an increase of 22.9% over the prior
year quarter.
- Gross profit of $29.2 million, an increase of 31.4% from the
prior year quarter.
- New orders increased by 2.5% from the prior year
quarter.
- Backlog ended at $250.1 million, an increase of 13.5% over the
prior year quarter.
- Net cash used in operating activities for the quarter totaled
$13.5 million.
- Debt increased by $15.2 million from December 31, 2018 to
$90.2 million.
First Quarter Results
- First quarter net sales of $150.5 million increased by $28.0
million, or 22.9%, compared to the prior year quarter, which
includes increases in each of our three business segments.
Construction Products (Construction) sales increased 29.2%, Rail
Products and Services (Rail) sales increased 21.8%, and Tubular and
Energy Services (Tubular) sales increased 19.3% over the prior year
quarter.
- First quarter gross profit of $29.2 million increased by $7.0
million, or 31.4%, over the prior year quarter. The increase was
supported by growth in each of our three segments. Gross profit
margin of 19.4% was 130 basis points higher compared to the prior
year quarter. The gross profit margin was favorably impacted by a
510 and 90 basis point improvement within our Tubular and
Construction segments, respectively.
- First quarter new orders were $180.3 million, a 2.5% increase
from the prior year quarter, driven primarily by strong activity
within the Tubular segment and, to a lesser extent, our Rail
segment. New orders were $692.6 million for the trailing twelve
months ended March 31, 2019, an increase of 22.5% from the
prior twelve months ended March 31, 2018.
- Backlog was $250.1 million at March 31, 2019, a 13.5%
increase from the prior year. Construction backlog increased $15.3
million, or 17.8%, while Rail backlog increased $16.6 million, or
15.8%. The increases were partially offset by a $2.1 million, or
7.0%, reduction in Tubular backlog.
- Net income for the first quarter 2019 was $3.7 million, or
$0.35 per diluted share, compared to a net loss of $1.9 million, or
$0.18 loss per diluted share, in the prior year quarter.
- First quarter EBITDA1 (earnings before interest, taxes,
depreciation, and amortization) was $10.2 million, an increase of
92.4% compared to the prior year quarter.
- Selling and administrative expenses in the first quarter
increased by $1.5 million, or 7.1%, over the prior year period,
largely driven by increased personnel-related expenses. Selling and
administrative expenses as a percent of net sales were reduced by
210 basis points from the prior year quarter to 14.6%.
- Net interest expense was $1.4 million in the first quarter of
2019, compared to $1.9 million in the prior year quarter. The
decrease was attributable to a reduction in debt levels. On
April 30, 2019, we amended our revolving credit facility
agreement to provide for a maturity date of April 30, 2024 and
improve the interest rate spreads associated with the facility. The
facility was modified to $140.0 million in order to better align
the facility with our anticipated needs as well as to reduce
borrowing costs, and provides for additional term loan borrowings
of up to $25.0 million. Please refer to our Current Report on Form
8-K dated May 2, 2019 for additional information.
- Net cash used in operating activities for the quarter totaled
$13.5 million compared to providing $2.6 million in the prior year
quarter. The $16.1 million reduction in net operating cash flow is
primarily a result of the funding of working capital requirements
through trade accounts receivable and inventory due to increased
sales and providing for delivery of our significant backlog to be
satisfied in future quarters.
- Total debt increased by $15.2 million, or 20.3%, in the first
quarter to $90.2 million as compared to $75.0 million at
December 31, 2018. The increase in debt is primarily a result
of funding our working capital needs to support our significant
backlog which will be delivered in future quarters.
- The Company’s income tax expense for the first quarter was $0.6
million, compared to $0.5 million in the prior year quarter. Our
current year effective tax rate of 14.7% was lower than the federal
statutory tax rate primarily due to the realization of certain tax
benefits for U.S. deferred tax assets that were previously offset
by a valuation allowance.
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 CommentsBob Bauer, President and Chief
Executive Officer, commented, “The Company's first quarter results
reflect continued momentum from 2018, which drove a 22.9% increase
in sales and a 31.4% increase in gross profit over the prior year
period. These increases were supported by growth in each of our
three segments resulting from the record backlog that we had as of
the beginning of the year. Bookings remained strong during the
quarter, resulting in a backlog of $250.1 million as we enter the
second quarter.”
Mr. Bauer added, “Operating performance continued to improve
resulting in net income for the quarter that was well above the
prior year period. We are pleased to report profit margin
improvement over the prior year, which continues to demonstrate our
progress resulting from our focus on improved gross margins and
expense control. Our credit facility provided cash in the quarter
used to fund trade working capital needs due to the higher levels
of backlog and corresponding sales growth. Capital expenditures
were $1.8 million above prior year levels due to the attractive
growth and productivity projects underway in the current year.”
L.B. Foster Company will conduct a conference call and webcast
to discuss its first quarter 2019 operating results on Thursday,
May 9, 2019 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 877-407-0784 (U.S.
& Canada) or 201-689-8560 (International) and providing access
code 13689632.
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 within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended.
Forward-looking statements provide management's 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 earnings release are based on
current expectations and assumptions about future events that
involve inherent risks and uncertainties and 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. 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 or the
terms of a new credit agreement, and reforms regarding the use of
LIBOR as a benchmark for establishing applicable interest rates;
the Company’s ability to manage its working capital requirements
and indebtedness; domestic and international taxes, including
estimates that may impact these amounts; 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, including the possibility of a “no-deal Brexit;”
sustained declines in energy prices; a lack of state or federal
funding for new infrastructure projects; an increase in
manufacturing or material costs; 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 ended
December 31, 2018, or as updated and amended by Item 1A “Risk
Factors,” in Part II of our Quarterly Reports on Form 10-Q filed
with the Securities and Exchange Commission.
Investor Relations:Judith Balog(412)
928-3417investors@lbfoster.com
L.B. Foster Company415 Holiday DriveSuite 100Pittsburgh, PA
15220
L.B. FOSTER COMPANY AND SUBSIDIARIESCONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per
share data)
|
Three Months Ended March 31, |
|
2019 |
|
|
2018 |
|
|
|
|
|
|
(Unaudited) |
Sales of goods |
$ |
113,083 |
|
|
$ |
91,811 |
|
Sales of services |
37,386 |
|
|
30,643 |
|
Total net sales |
150,469 |
|
|
122,454 |
|
Cost of goods sold |
92,331 |
|
|
75,136 |
|
Cost of services sold |
28,976 |
|
|
25,126 |
|
Total cost of sales |
121,307 |
|
|
100,262 |
|
Gross profit |
29,162 |
|
|
22,192 |
|
Selling and administrative
expenses |
21,917 |
|
|
20,458 |
|
Amortization expense |
1,712 |
|
|
1,785 |
|
Interest expense - net |
1,355 |
|
|
1,887 |
|
Other income |
(150 |
) |
|
(605 |
) |
Total expenses |
24,834 |
|
|
23,525 |
|
Income (loss) before income
taxes |
4,328 |
|
|
(1,333 |
) |
Income tax expense |
638 |
|
|
525 |
|
Net income (loss) |
$ |
3,690 |
|
|
$ |
(1,858 |
) |
Basic earnings (loss) per common
share |
$ |
0.36 |
|
|
$ |
(0.18 |
) |
Diluted earnings (loss) per
common share |
$ |
0.35 |
|
|
$ |
(0.18 |
) |
Average number of common
shares outstanding — Basic |
10,384 |
|
|
10,351 |
|
Average number of common
shares outstanding — Diluted |
10,447 |
|
|
10,351 |
|
|
|
|
|
|
|
L.B. FOSTER COMPANY AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS(In thousands)
|
March 31, 2019 |
|
December 31, 2018 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
9,039 |
|
|
$ |
10,282 |
|
Accounts receivable - net |
99,518 |
|
|
86,123 |
|
Inventories - net |
142,714 |
|
|
124,504 |
|
Other current assets |
7,752 |
|
|
5,763 |
|
Total current assets |
259,023 |
|
|
226,672 |
|
Property, plant, and equipment - net |
85,870 |
|
|
86,857 |
|
Operating lease right-of-use assets - net |
13,116 |
|
|
— |
|
Other assets: |
|
|
|
Goodwill |
19,422 |
|
|
19,258 |
|
Other intangibles - net |
48,298 |
|
|
49,836 |
|
Other assets |
488 |
|
|
626 |
|
TOTAL ASSETS |
$ |
426,217 |
|
|
$ |
383,249 |
|
LIABILITIES AND STOCKHOLDERS'
EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
90,419 |
|
|
$ |
78,269 |
|
Deferred revenue |
14,168 |
|
|
6,619 |
|
Accrued payroll and employee benefits |
7,598 |
|
|
12,993 |
|
Accrued warranty |
1,715 |
|
|
2,057 |
|
Current portion of accrued settlement |
8,000 |
|
|
10,000 |
|
Current maturities of long-term debt |
609 |
|
|
629 |
|
Other accrued liabilities |
14,964 |
|
|
13,624 |
|
Total current liabilities |
137,473 |
|
|
124,191 |
|
Long-term debt |
89,573 |
|
|
74,353 |
|
Deferred tax liabilities |
5,142 |
|
|
5,287 |
|
Long-term portion of accrued settlement |
40,000 |
|
|
40,000 |
|
Long-term operating lease liabilities |
9,812 |
|
|
— |
|
Other long-term liabilities |
16,959 |
|
|
17,299 |
|
Stockholders' equity: |
|
|
|
Common stock |
111 |
|
|
111 |
|
Paid-in capital |
47,400 |
|
|
48,040 |
|
Retained earnings |
118,647 |
|
|
114,324 |
|
Treasury stock |
(17,196 |
) |
|
(18,165 |
) |
Accumulated other comprehensive loss |
(21,704 |
) |
|
(22,191 |
) |
Total stockholders' equity |
127,258 |
|
|
122,119 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY |
$ |
426,217 |
|
|
$ |
383,249 |
|
|
|
|
|
|
|
|
|
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 as a supplemental way to evaluate the
ongoing operations of the Company’s business since EBITDA enhances
investors’ ability to compare historical periods as it adjusts for
the impact of financing methods, tax law and strategy changes, and
depreciation and amortization. In addition, EBITDA is a
financial measurement that management and the Company’s Board of
Directors use in their financial and operational decision-making
and in the determination of certain compensation programs.
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 March 31, |
|
2019 |
|
2018 |
|
|
|
|
|
|
(Unaudited) |
EBITDA
Reconciliation |
|
|
|
Net income (loss), as reported |
$ |
3,690 |
|
$ |
(1,858 |
) |
Interest expense, net |
1,355 |
|
1,887 |
|
Income tax expense |
638 |
|
525 |
|
Depreciation expense |
2,772 |
|
2,944 |
|
Amortization expense |
1,712 |
|
1,785 |
|
Total EBITDA |
$ |
10,167 |
|
$ |
5,283 |
|
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