L.B. Foster Reports Second Quarter Operating Results
(Thomson Reuters ONE) -
Records Non-Cash Impairment Charge
PITTSBURGH, Aug. 09, 2016 (GLOBE NEWSWIRE) -- 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 second
quarter 2016 operating results which include:
* A sales decrease of 20.7% from the prior year quarter to $136.0 million.
* Gross profit margin of 20.5% compared to 21.6% in the prior year.
* A $128.9 million ($90.9 million net of tax or $8.86 per share) non-cash
impairment charge related to the write-down of goodwill, definitive lived
intangible assets and property, plant and equipment at four of the Company's
reporting units within our Tubular and Energy Services ("Tubular") and Rail
Products and Services ("Rail") segments.
* Cash flow provided by operating activities of $11.7 million compared to $5.5
million provided in the prior year quarter, the majority of which was used
to reduce borrowings.
Second Quarter Results
* Second quarter net sales of $136.0 million decreased by $35.4 million, or
20.7%, compared to the prior year quarter due to a 19.6% decrease in Tubular
and Energy Services ("Tubular") segment sales, a 22.3% decline in Rail
Products and Services ("Rail") segment sales and an 18.5% decrease in
Construction segment sales. Our rail distribution and piling distribution
businesses together declined by $17.0 million, or 27.5% in the second
quarter, accounting for nearly half of the decline.
* Gross profit margin was 20.5%, 120 basis points lower than the prior year
quarter. The reduction was due to decreased Tubular and Rail segment
margins, partially offset by increased Construction segment margins.
* Second quarter net loss was $92.0 million or $8.96 per diluted share
compared to net income of $5.4 million, or $0.52 per diluted share, last
year. Excluding the impairment charge1, the net loss would have been $1.1
million, or $0.11 per diluted share.
* Second quarter Adjusted EBITDA was $7.5 million compared to $16.7 million in
the second quarter of 2015.
* Selling and administrative expense decreased by $1.0 million, or 4.0%, due
principally to cost reduction initiatives and prior year costs related to
acquisition and integration activities. These reductions were partially
offset by increased litigation expenses of $0.9 million related to the UPRR
lawsuit as well as $0.8 million of increased ERP related costs.
* Interest expense was $1.7 million in the second quarter of 2016 compared to
$1.3 million in the prior year quarter, the increase being attributable to a
$0.3 million write-off of deferred financing costs resulting from the second
quarter 2016 amendment to the credit agreement.
* Second quarter bookings were $140.1 million, a 14.1% decrease from the prior
year quarter, due to a 38.0% decline in Tubular segment orders and a 18.2%
reduction in Rail segment orders, partially offset by a 12.7% increase in
Construction segment orders.
* The Company's income tax rate was 28.9% compared to 31.5% in the prior year
quarter. The Company's effective income tax rate was significantly impacted
by the asset impairment charge, which related to both tax deductible and
nondeductible assets.
* Cash flow from operating activities for the second quarter of 2016 generated
$11.7 million compared to $5.5 million of cash generated in the second
quarter of 2015. The current year quarter was favorably impacted by
improved working capital management.
Impairment Charge
As a result of weaker than anticipated performance and downward revisions to
projected results of the Tubular and Rail segments, as well as a significant
reduction in the Company's market value in the second quarter, the Company
determined that an impairment analysis was required. The Company's second
quarter impairment analyses indicated that four different reporting units within
these segments had carrying values in excess of fair value and required the
following impairment charges:
Tubular segment (millions)
Precision measurement systems (Chemtec) $ 26.1
Test and inspection services (IOS) 57.9
Coated Products & Services 16.6
Rail segment
Rail Technologies 28.3
----------------
Total $ 128.9
CEO Comments
Robert P. Bauer, L.B. Foster Company's President and Chief Executive Officer,
commented, "In response to weak energy and rail markets, we have been working
diligently to reduce costs through the first half of this year, continuously
examining ways to maximize cash flow and restore profitability. Our gross
profit margins have held up very well as several actions we've taken improved
operational efficiency. Certain investments we made over the last two years
have improved productivity in several factories that have enabled gross profit
margins to remain strong despite lower volume. During the first half of 2016,
we have taken actions to reduce our salaried workforce costs that will produce
$6 million of annualized savings. In addition, discretionary spending cuts will
result in $1 million of annual savings. We have already identified additional
actions to reduce expenses further in 2017.
"During the quarter, we also divested our rail car repair fixtures division,
eliminating a business that was not strategic and was not accretive to results.
We are continuing to evaluate other operating units that are not earning
acceptable returns on capital."
Mr. Bauer concluded by saying, "60% of our business activity has been adversely
impacted by freight rail and energy market weakness. When business conditions
improve in those sectors, the cost actions we have taken will leave us better
positioned to capitalize on the recovery. Our businesses which comprise the
other 40% of sales continue to perform well and are positioned to win more
business."
First Half 2016 Results
* Net sales for the first six months of 2016 decreased by $47.0 million, or
15.2%, due to a 19.9% decline in Rail segment sales, a 13.8% decrease in
Construction segment sales and a 4.4% decline in Tubular segment sales. The
Rail sales decline was driven by reductions across all product categories
with the exception of Transit Products while the Construction decrease was
due to piling and bridge products reductions. The Tubular decline was due
principally to test and inspection services sales declines.
* Net sales in the first half of 2016 for the Rail segment were adversely
affected by the reduction in inventory on the part of freight rail
carriers.
* Gross profit margin was 19.7%, down 220 basis points from the prior year
period. The margin decline was due to declines in the Rail and Tubular
segment margins, while Construction margins were flat with the prior year.
* Selling and administrative expense decreased by $0.4 million, due
principally to cost reduction initiatives and prior year costs related to
acquisition and integration activities. These reductions were partially
offset by increased costs of acquired businesses, increased litigation
expenses related to the UPRR lawsuit as well as increased ERP related
costs.
* Interest expense was $2.8 million in the first half of 2016 compared to $1.9
million in the comparable prior year period. The increase was attributable
to higher average borrowings for the six-month period as well as a $0.3
million write-off of deferred financing costs resulting from the second
quarter 2016 amendment to the credit agreement.
* Net loss was $94.8 million, or $9.25 per diluted share, compared to net
income of $9.7 million, or $0.93 per diluted share, last year. Excluding
the previously discussed impairment charge, the net loss would have been
$3.9 million or $0.38 per diluted share.
* Adjusted EBITDA for the first half of 2016 was $11.5 million compared to
$28.7 million in the prior year, a decrease of $17.2 million or 60.0%.
* The Company's income tax rate from continuing operations was 29.0%, compared
to 33.4% in the prior year six-month period. The Company's effective income
tax rate was significantly impacted by the asset impairment charges, which
related to both tax deductible and nondeductible assets.
* Cash provided by operating activities was $6.6 million for the first half of
2016, compared to a $1.9 million use of cash in the prior year period. The
favorable variance from the prior year is due principally to improved
working capital management in 2016. Capital expenditures were $5.1 million
in the first half of 2016 compared to $8.2 million in the prior year.
L.B. Foster Company will conduct a conference call and webcast to discuss its
second quarter 2016 operating results on Tuesday, August 9, 2016 at 8:00 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 be accessed by dialing 877-407-0784 and providing access code 13641064.
About L.B. Foster Company
L.B. Foster is a leading manufacturer, fabricator, and distributor of products
and services for the rail, construction, energy and utility markets 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, 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 or a continuation of the current 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; 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; 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 likely exit from the European Union; continued
and 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 ("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, 2015 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 See 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.
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
2016 2015 2016 2015
-------------- ------------- -------------- ------------
(Unaudited) (Unaudited)
Sales of goods $ 118,070 $ 146,780 $ 225,985 $ 269,576
Sales of
services 17,924 24,639 36,319 39,750
-------------- ------------- -------------- ------------
Total net sales 135,994 171,419 262,304 309,326
Cost of goods
sold 92,638 114,793 179,031 210,987
Cost of
services sold 15,543 19,537 31,500 30,596
-------------- ------------- -------------- ------------
Total cost of
sales 108,181 134,330 210,531 241,583
-------------- ------------- -------------- ------------
Gross profit 27,813 37,089 51,773 67,743
-------------- ------------- -------------- ------------
Selling and
administrative
expenses 23,317 24,278 46,134 46,528
Amortization
expense 2,789 3,456 6,055 5,613
Asset
impairments 128,938 - 128,938 -
Interest
expense 1,652 1,288 2,822 1,901
Interest income (52 ) (37 ) (107 ) (94 )
Equity in loss
of
nonconsolidated
investments 487 186 683 13
Other expense
(income) 107 95 822 (708 )
-------------- ------------- -------------- ------------
157,238 29,266 185,347 53,253
-------------- ------------- -------------- ------------
(Loss) income
before income
taxes (129,425 ) 7,823 (133,574 ) 14,490
Income tax
(benefit)
expense (37,429 ) 2,461 (38,746 ) 4,841
-------------- ------------- -------------- ------------
Net (loss)
income $ (91,996 ) $ 5,362 $ (94,828 ) $ 9,649
-------------- ------------- -------------- ------------
Basic (loss)
earnings per
common share $ (8.96 ) $ 0.52 $ (9.25 ) $ 0.94
-------------- ------------- -------------- ------------
Diluted (loss)
earnings per
common share $ (8.96 ) $ 0.52 $ (9.25 ) $ 0.93
-------------- ------------- -------------- ------------
Dividends paid
per common
share $ 0.04 $ 0.04 $ 0.08 $ 0.08
-------------- ------------- -------------- ------------
Average number
of common
shares
outstanding -
Basic 10,263 10,284 10,248 10,272
-------------- ------------- -------------- ------------
Average number
of common
shares
outstanding -
Diluted 10,263 10,370 10,248 10,385
-------------- ------------- -------------- ------------
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December
June 30, 31,
2016 2015
------------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 32,805 $ 33,312
Accounts receivable - net 81,396 78,487
Inventories - net 95,150 96,396
Prepaid income tax 5,197 1,131
Other current assets 6,779 5,148
------------- ------------
Total current assets 221,327 214,474
Property, plant and equipment - net 108,625 126,745
Other assets:
Goodwill 23,972 81,752
Other intangibles - net 70,420 134,927
Deferred tax assets 37,794 226
Investments 4,638 5,321
Other assets 3,240 3,215
------------- ------------
Total Assets $ 470,016 $ 566,660
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 58,280 $ 55,804
Deferred revenue 9,154 6,934
Accrued payroll and employee benefits 7,612 10,255
Accrued warranty 8,749 8,755
Current maturities of long-term debt 1,335 1,335
Other accrued liabilities 11,380 8,563
------------- ------------
Total current liabilities 96,510 91,646
Long-term debt 167,030 167,419
Deferred tax liabilities 6,968 8,926
Other long-term liabilities 15,447 15,837
Stockholders' equity:
Class A Common Stock 111 111
Paid-in capital 44,003 46,681
Retained earnings 180,914 276,571
Treasury stock (19,747 ) (22,591 )
Accumulated other comprehensive loss (21,220 ) (17,940 )
------------- ------------
Total stockholders' equity 184,061 282,832
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 470,016 $ 566,660
------------- ------------
This earnings release discloses earnings before interest, taxes, depreciation,
and amortization ("EBITDA") adjusted for asset impairments ("Adjusted EBITDA")
and adjusted diluted earnings per share, 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 and adjusted diluted earnings
per share 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 and the significant asset impairment. Additionally, EBITDA is a
financial measurement that management and the board of directors use 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 the GAAP measures are presented below:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
Adjusted EBITDA
Reconciliation 2016 2015 2016 2015
-------------- ------------ -------------- ------------
Net (loss) income $ (91,996 ) $ 5,362 $ (94,828 ) $ 9,649
Interest expense, net 1,600 1,251 2,715 1,807
Income tax (benefit)
expense (37,429 ) 2,461 (38,746 ) 4,841
Depreciation 3,598 4,156 7,325 6,775
Amortization 2,789 3,456 6,055 5,613
-------------- ------------ -------------- ------------
Total EBITDA (121,438 ) 16,686 (117,479 ) 28,685
-------------- ------------ -------------- ------------
Asset impairments 128,938 - 128,938 -
-------------- ------------ -------------- ------------
Adjusted EBITDA $ 7,500 $ 16,686 $ 11,459 $ 28,685
-------------- ------------ -------------- ------------
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
Adjusted Diluted (Loss)
Earnings Per Share
Reconciliation 2016 2015 2016 2015
-------------- ------------ -------------- ------------
Net (loss) income, as
reported $ (91,996 ) $ 5,362 $ (94,828 ) $ 9,649
Asset impairments, net
of tax benefits of
$38,038 90,900 - 90,900 -
-------------- ------------ -------------- ------------
Adjusted net (loss)
income $ (1,096 ) $ 5,362 $ (3,928 ) $ 9,649
-------------- ------------ -------------- ------------
Average number of
common shares
outstanding - Diluted 10,263 10,370 10,248 10,385
-------------- ------------ -------------- ------------
Diluted (loss) earnings
per common share, as
reported $ (8.96 ) $ 0.52 $ (9.25 ) $ 0.93
-------------- ------------ -------------- ------------
Diluted (loss) earnings
per common share, as
adjusted
Investor Relations:
David Russo
(412) 928-3417
investors(at)lbfoster.com
L.B. Foster Company
415 Holiday Drive
Pittsburgh, PA 15220 $ (0.11 ) $ 0.52 $ (0.38 ) $ 0.93
-------------- ------------ -------------- ------------
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Source: L.B. Foster Company via GlobeNewswire
[HUG#2033935]
Datum: 09.08.2016 - 13:00 Uhr
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