L.B. Foster Reports Third Quarter Operating Results
November 01 2018 - 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 third quarter 2018 operating
results, which included the following performance highlights:
- Net income of $5.0 million, or $0.47 per diluted share, a 54.3%
increase over the prior year quarter.
- Sales of $167.1 million, an increase of 27.1% over the prior
year quarter.
- Gross profit of $29.6 million increased 12.3%, from the prior
year quarter.
- New orders increased by 27.8% from the prior year
quarter.
- Backlog ended at $251.6 million, an increase of 32.7% over the
prior year.
- Debt reduction of $22.6 million from June 30, 2018 to
$76.5 million.
- Net cash provided by operating activities for the quarter
totaled $14.5 million.
Third Quarter Results
- Third quarter net sales of $167.1 million increased by $35.6
million, or 27.1%, compared to the prior year quarter, which
includes increases in each of our three business segments. Rail
Products and Services (Rail) sales increased 36.1%, Tubular and
Energy Services (Tubular) sales increased 35.5%, and Construction
Products (Construction) sales increased 6.2% over the prior year
quarter.
- Third quarter gross profit increased by $3.2 million, or 12.3%,
over the prior year, to $29.6 million. Gross profit margin of 17.7%
was 240 basis points lower compared to the prior year quarter. The
gross profit margin was negatively impacted by distribution product
mix within our Construction and Rail segments.
- Third quarter new orders were $186.0 million, a 27.8% increase
from the prior year quarter, driven primarily by strong activity
within the Construction segment and to a lesser extent, our Tubular
segment.
- Backlog was $251.6 million at September 30, 2018, a 32.7%
increase over the prior year period. Construction backlog increased
$42.7 million, or 57.1%, while Rail backlog increased $23.1
million, or 26.9%.
- Net income for the third quarter 2018 was $5.0 million, or
$0.47 per diluted share, compared to net income of $3.2 million, or
$0.31 per diluted share, in the prior year quarter.
- Third quarter EBITDA1 (earnings before interest, taxes,
depreciation, and amortization) was $10.6 million, an increase of
6.6% compared to the prior year quarter.
- Selling and administrative expenses in the third quarter
increased by $1.4 million, or 7.1%, over the prior year period,
largely driven by increased personnel-related expenses of $0.8
million, as well as increased external service costs of $0.8
million. Litigation costs related to the Union Pacific Railroad
(UPRR) matter were approximately $0.6 million in the current year
period and $0.5 million in the prior year period.
- Net interest expense was $1.3 million in the third quarter of
2018, compared to $2.0 million in the prior year quarter. The
decrease was attributable to a reduction in debt levels as well as
maintaining the lowest tier interest rate spread associated with
our credit facility.
- Net cash provided by operating activities for the quarter
totaled $14.5 million compared to use of $2.4 million in the prior
year quarter. The $16.9 million increase is primarily a result of
improvements in trade accounts receivable and inventory compared to
the prior year quarter.
- Total debt decreased by $22.6 million, or 22.8%, in the third
quarter to $76.5 million as compared to $99.0 million at
June 30, 2018.
- The Company’s income tax benefit for the third quarter was $0.2
million, primarily related to changes in the estimated annual
effective tax rate resulting from the realization of a portion of
U.S. deferred tax assets 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 Comments
Bob Bauer, President and Chief Executive
Officer, commented, “The Company's third quarter results reflect
continued momentum in new orders, which drove a 32.7% increase in
backlog over the prior year period. Spending directed toward
transit rail infrastructure and civil construction projects drove a
significant portion of the increase. The Company's backlog going
into the fourth quarter stands at $251.6 million.”
Mr. Bauer added, “Operating performance
continued to improve as net income for the quarter and nine-month
period were well above prior year. Operating cash flow in the third
quarter was strong, helping us reach $22.4 million year-to-date.
Working capital performance stands out as trade working capital
balances are below prior year level on 17.1% sales growth. Couple
this with capital spending at $3.2 million year-to-date, and it
allowed further reduction of debt, bringing our total debt to $76.5
million.
"We expect to increase the pace of capital
spending over the next year as attractive growth opportunities are
emerging.”
Nine Month Results
- Net sales of $462.4 million for the first nine months of 2018
increased by $67.4 million, or 17.1%, compared to the prior year
period due to increases in Tubular sales of 30.5% and Rail sales of
27.0%. These increases were partially offset by a reduction in
Construction sales of 7.6%.
- For the first nine months of 2018, gross profit was $84.1
million, a $8.8 million, or 11.7%, increase from the prior year
period. Gross profit margin was 18.2%, a reduction of 90 basis
points compared to the first nine months of the prior year. Gross
profit margin was negatively impacted by distribution product mix
within the Rail and Construction segments. The reduction was
partially offset by increased volume within the Tubular
segment.
- New orders during the first nine months of 2018 improved by
$112.8 million, or 25.8%, from the prior year period, with
increases in each of our three segments. Rail new orders increased
by 31.6%, Construction new orders increased by 28.6%, and Tubular
new orders increased by 10.1% over the prior year
period.
- Net income for the first nine months of 2018 was $7.9 million,
or $0.75 per diluted share, compared to net income of $3.8 million,
or $0.37 per diluted share, last year.
- EBITDA for the first nine months of 2018 was $27.7 million, a
$2.1 million increase over the prior year period.
- Selling and administrative expenses in the first nine months of
2018 increased by $5.5 million, or 9.1%, largely driven by
increases in personnel-related expenses of $3.3 million and
litigation costs of $3.0 million related to the UPRR matter
compared to the prior year period. Litigation costs related to the
UPRR matter were approximately $4.5 million in the current year
period and $1.5 million in the prior year period.
- Net interest expense was $4.8 million for the first nine months
of 2018, compared to $6.1 million in the prior year period. The
decrease was primarily attributable to a reduction in debt levels
as well as maintaining the lowest tier interest rate spread
associated with our credit facility.
- Net cash provided by operating activities for the first nine
months of 2018 totaled $22.4 million compared to $27.5 million in
the prior year period. Excluding the $11.8 million of operating
cash provided by income tax refunds in the 2017 period, 2018
operating cash increased by $6.7 million over the prior year
period.
- Total debt decreased by $53.5 million, or 41.4%, in the first
nine months of 2018 to $76.5 million as compared to $130.0 million
at December 31, 2017. The $31.5 million repatriation of
international cash in 2018 as well as operating and investing cash
flow activities contributed to the debt balance
reduction.
- The Company’s income tax expense for the first nine months of
2018 was $1.0 million. The Company's estimated annual
effective tax rate was primarily related to income taxes in foreign
jurisdictions, but partially offset by a benefit from the
realization of a portion of U.S. deferred tax assets previously
offset by a valuation allowance.
L.B. Foster Company will conduct a conference call and webcast
to discuss its third quarter 2018 operating results on Thursday,
November 1, 2018 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 13684304.
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, as updated and amended by
Item 1A, "Risk Factors," in 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 DrivePittsburgh, PA 15220
|
L.B. FOSTER COMPANY AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In
thousands, except per share data) |
|
|
|
Three Months Ended September
30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
Sales of goods |
|
$ |
120,272 |
|
|
$ |
103,058 |
|
|
$ |
339,176 |
|
|
$ |
318,414 |
|
Sales of services |
|
46,822 |
|
|
28,434 |
|
|
123,262 |
|
|
76,640 |
|
Total net sales |
|
167,094 |
|
|
131,492 |
|
|
462,438 |
|
|
395,054 |
|
Cost of goods sold |
|
100,746 |
|
|
82,460 |
|
|
281,892 |
|
|
256,152 |
|
Cost of services sold |
|
36,746 |
|
|
22,667 |
|
|
96,402 |
|
|
63,549 |
|
Total cost of sales |
|
137,492 |
|
|
105,127 |
|
|
378,294 |
|
|
319,701 |
|
Gross profit |
|
29,602 |
|
|
26,365 |
|
|
84,144 |
|
|
75,353 |
|
Selling and administrative expenses |
|
21,662 |
|
|
20,218 |
|
|
65,488 |
|
|
60,023 |
|
Amortization expense |
|
1,762 |
|
|
1,764 |
|
|
5,322 |
|
|
5,218 |
|
Interest expense |
|
1,367 |
|
|
2,026 |
|
|
4,979 |
|
|
6,315 |
|
Interest income |
|
(71 |
) |
|
(56 |
) |
|
(166 |
) |
|
(166 |
) |
Equity in loss (income) of nonconsolidated investments |
|
4 |
|
|
(50 |
) |
|
7 |
|
|
5 |
|
Other expense (income) |
|
153 |
|
|
(551 |
) |
|
(327 |
) |
|
(564 |
) |
|
|
24,877 |
|
|
23,351 |
|
|
75,303 |
|
|
70,831 |
|
Income before income taxes |
|
4,725 |
|
|
3,014 |
|
|
8,841 |
|
|
4,522 |
|
Income tax (benefit) expense |
|
(246 |
) |
|
(208 |
) |
|
952 |
|
|
698 |
|
Net income |
|
$ |
4,971 |
|
|
$ |
3,222 |
|
|
$ |
7,889 |
|
|
$ |
3,824 |
|
Basic earnings per common share |
|
$ |
0.48 |
|
|
$ |
0.31 |
|
|
$ |
0.76 |
|
|
$ |
0.37 |
|
Diluted earnings per common share |
|
$ |
0.47 |
|
|
$ |
0.31 |
|
|
$ |
0.75 |
|
|
$ |
0.37 |
|
Average number of common shares outstanding — Basic |
|
10,365 |
|
|
10,341 |
|
|
10,361 |
|
|
10,332 |
|
Average number of common shares outstanding — Diluted |
|
10,489 |
|
|
10,479 |
|
|
10,481 |
|
|
10,435 |
|
|
L.B. FOSTER COMPANY AND SUBSIDIARIESCONDENSED
CONSOLIDATED BALANCE SHEETS(In thousands) |
|
|
|
|
|
|
|
September 30, 2018 |
|
December 31, 2017 |
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
9,586 |
|
|
$ |
37,678 |
|
Accounts receivable - net |
|
85,615 |
|
|
76,582 |
|
Inventories - net |
|
107,200 |
|
|
97,543 |
|
Prepaid income tax |
|
725 |
|
|
188 |
|
Other current assets |
|
7,402 |
|
|
9,120 |
|
Total current assets |
|
210,528 |
|
|
221,111 |
|
Property, plant, and equipment - net |
|
87,894 |
|
|
96,096 |
|
Other assets: |
|
|
|
|
Goodwill |
|
19,449 |
|
|
19,785 |
|
Other intangibles - net |
|
51,801 |
|
|
57,440 |
|
Investments |
|
155 |
|
|
162 |
|
Other assets |
|
719 |
|
|
1,962 |
|
TOTAL ASSETS |
|
$ |
370,546 |
|
|
$ |
396,556 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
72,355 |
|
|
$ |
52,404 |
|
Deferred revenue |
|
12,384 |
|
|
10,136 |
|
Accrued payroll and employee benefits |
|
11,052 |
|
|
11,888 |
|
Accrued warranty |
|
9,363 |
|
|
8,682 |
|
Current maturities of long-term debt |
|
630 |
|
|
656 |
|
Other accrued liabilities |
|
9,157 |
|
|
9,764 |
|
Total current liabilities |
|
114,941 |
|
|
93,530 |
|
Long-term debt |
|
75,840 |
|
|
129,310 |
|
Deferred tax liabilities |
|
7,864 |
|
|
9,744 |
|
Other long-term liabilities |
|
16,813 |
|
|
17,493 |
|
Stockholders' equity: |
|
|
|
|
Class A Common Stock |
|
111 |
|
|
111 |
|
Paid-in capital |
|
47,042 |
|
|
45,017 |
|
Retained earnings |
|
145,364 |
|
|
137,780 |
|
Treasury stock |
|
(18,165 |
) |
|
(18,662 |
) |
Accumulated other comprehensive loss |
|
(19,264 |
) |
|
(17,767 |
) |
Total stockholders' equity |
|
155,088 |
|
|
146,479 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
|
$ |
370,546 |
|
|
$ |
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 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 September
30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
EBITDA Reconciliation |
|
|
|
|
|
|
|
|
Net income, as reported |
|
$ |
4,971 |
|
|
$ |
3,222 |
|
|
$ |
7,889 |
|
|
$ |
3,824 |
|
Interest expense, net |
|
1,296 |
|
|
1,970 |
|
|
4,813 |
|
|
6,149 |
|
Income tax (benefit) expense |
|
(246 |
) |
|
(208 |
) |
|
952 |
|
|
698 |
|
Depreciation expense |
|
2,803 |
|
|
3,178 |
|
|
8,685 |
|
|
9,705 |
|
Amortization expense |
|
1,762 |
|
|
1,764 |
|
|
5,322 |
|
|
5,218 |
|
Total EBITDA |
|
$ |
10,586 |
|
|
$ |
9,926 |
|
|
$ |
27,661 |
|
|
$ |
25,594 |
|
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