2014

L.B. Foster Reports First Quarter Results Highlighted By Strong Cash Flow Company Provides 2014 Outlook

PITTSBURGH, May 5, 2014 /PRNewswire/ -- 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 2014 operating results, which included income from continuing operations of $0.35 per diluted share, a 27.1% decrease from the first quarter of 2013.  The Company reported that new orders increased by 10.1% and year over year backlog improved, while sales were below expectations due to project delays in all business segments.  Cash flow provided by continuing operations was very strong at $32.1 million.

First Quarter Results

  • First quarter net sales of $111.4 million declined by $17.9 million or 13.8% compared to the prior year quarter due to a 25.6% decrease in Construction segment sales, a 9.7% reduction in Rail segment sales and a 5.2% decline in Tubular segment sales.  All three business segments were impacted by customer delays as many struggled with weather issues.

  • Gross profit margin was strong at 21.7%, 245 basis points higher than the prior year quarter.  Gross profit margin improved in the Construction and Rail segments, which was partially offset by a decline in the Tubular segment.

  • First quarter income from continuing operations was $3.6 million or $0.35 per diluted share
    compared to $5.0 million or $0.48 per diluted share last year.  First quarter 2014 income from continuing operations was unfavorably affected by lower sales across all business segments as well as lower Tubular gross profit margins.  These unfavorable items were partially offset by improved gross profit margins in the Construction and Rail segments.

  • First quarter bookings were $179.9 million, a 10.1% increase over the prior year first quarter, due to improvements in Tubular and Construction segment orders, including strong activity in Coated Products and Piling Products.  March 2014 backlog was $253.3 million, 2.1% higher than March 2013 and 38.3% higher than December 31, 2013.

  • Selling and administrative expense increased by $0.9 million or 5.2%, due principally to cost increases related to salaried headcount.

  • The Company's income tax rate from continuing operations was 31.4% compared to 33.5% in the prior year quarter.  The income tax rate from continuing operations compares favorably to the prior year quarter as the current year was positively impacted by certain state income tax matters.

  • Cash flow from continuing operating activities for the first quarter of 2014 provided $32.1 million compared to a $17.2 million use of cash in the first quarter of 2013.  The current year quarter was favorably impacted due to a significant reduction in accounts receivable, which was anticipated as we focused on action plans to resolve slow receivable collections in the second half of 2013.

CEO Comments
Robert P. Bauer, L.B. Foster Company's President and Chief Executive Officer, commented, "As our customers struggled with weather related problems in the first quarter, our shipments were adversely affected.  Several planned shipments have moved from Q1 to Q2 as our backlog in the quarter increased.  Order activity was strong, and we were very pleased with the first quarter gross profit margins and the improvements made in working capital management.  I am also encouraged by the strong customer inquiry activity and order entry in the first quarter which has continued through April.  The strong Tubular segment bookings and backlog should result in improved performance by that segment in the second half of 2014.  In addition, our Construction segment continues to see a favorable market outlook and we anticipate 2014 gross profit margins to continue to exceed those generated in 2013."  Mr. Bauer concluded by saying, "We continue to see strength in our markets and expect our customers that were negatively impacted by the severe weather conditions in the first quarter to recover during the remainder of the year.  Our full year outlook is positive for all three business segments, and our full year forecast has not been affected by the slow start to the year."

Q1 Business Segment Highlights
($000's)

Rail Segment
Rail sales decreased 9.7% due to sales reductions in our Rail Distribution and Transit businesses, partially offset by stronger sales in our Rail Technology division.  First quarter gross profit margins improved due to improved execution and leverage from the increase in sales in our rail technologies business.







2014

2013

  Variance






Sales

$73,496

$81,399

(9.7%)






Gross Profit

$16,430

$17,033







Gross Profit  %

22.4%

20.9%


Construction Segment
Construction sales declined by 25.6% in the quarter due principally to weak Piling Products sales, partially offset by improved sales in Fabricated Bridge Products.  Gross profit margins improved significantly due to margin improvement in all businesses in this segment as well as a favorable product mix.







2014

2013

  Variance






Sales

$27,383

$36,811

(25.6%)






Gross Profit

$5,712

$4,972







Gross Profit  %

20.9%

13.5%


Tubular Segment
Tubular sales declined by 5.2% in the quarter due to softer Coated Products sales and lower Threaded Products sales, partially offset by sales of our Ball Winch acquisition, which closed in the fourth quarter of 2013.  While Coated Products bookings and backlog have improved substantially, production and sales activity did not accelerate in the first quarter. Tubular gross profit margins declined due principally to volume related de-leveraging.







2014

2013

  Variance






Sales

$10,535

$11,111

(5.2%)






Gross Profit

$2,130

$3,215







Gross Profit  %

20.2%

28.9%


2014 Outlook
We anticipate that overall market conditions will be favorable across all three of our business segments in 2014 and expect to see continually increasing investment in transportation and energy infrastructure.  During 2014, L.B. Foster expects to see most businesses grow and will continue to work off the Honolulu project related backlog in our Transit business.  The favorable order patterns seen in the latter part of 2013 and the first quarter of 2014 for Piling and Coated Products are expected to continue as the construction and gas pipeline markets grow.  The net result should be a positive year for sales growth. 

The Company expects 2014 sales to be in the range of $620 million to $630 million.  Pretax income is expected to range between $43 million and $47 million and we anticipate diluted EPS to be between $2.80 and $3.00.

As previously mentioned, the Company is planning to increase capital spending in 2014 to a range of $18.0 million to $22.0 million.  This is a substantial increase over the normal rate of annual spending as a result of several growth programs that are launching simultaneously.  This does not represent a new level of ongoing annual spending. 

We anticipate the increased capital spending in 2014 will be offset by improved cash flow from operating activities as demonstrated by our first quarter success derived from programs focused on working capital improvement.

L.B. Foster Company will conduct a conference call and webcast to discuss its first quarter 2014 operating results on Monday, May 5, 2014 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 800-299-8538 and providing access code 24084416.

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; a decrease in freight or passenger rail traffic; 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 and an overall resolution of the related contract claims; 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, 2013.  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.

Contact:





David Russo



Phone:

412.928.3417



L.B. Foster Company     




Email:

Investors@Lbfoster.com



415 Holiday Drive




Website:

www.lbfoster.com



Pittsburgh, PA  15220

 

 

L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

(In thousands, except per share data)








Three Months Ended



March 31,



2014


2013



(Unaudited)






Net sales

$

111,414

$

129,321

Cost of goods sold


87,287


104,473

Gross profit


24,127


24,848






Selling and administrative expenses


18,025


17,130

Amortization expense


1,141


701

Interest expense


123


133

Interest income


(144)


(206)

Equity in income of nonconsolidated investment


(204)


(176)

Other income


(135)


(178)



18,806


17,404






Income from continuing operations before income taxes


5,321


7,444






Income tax expense


1,672


2,493






Income from continuing operations


3,649


4,951






Discontinued operations:





Loss from discontinued operations before income taxes


-


(39)

Income tax benefit


-


(15)

Loss from discontinued operations


-


(24)






Net income

$

3,649

$

4,927






Basic earnings per common share:





From continuing operations

$

0.36

$

0.49

From discontinued operations


-


(0.00)

Basic earnings per common share

$

0.36

$

0.49






Diluted earnings per common share:





From continuing operations

$

0.35

$

0.48

From discontinued operations


-


(0.00)

Diluted earnings per common share

$

0.35

$

0.48






Dividends paid per common share

$

0.03

$

0.03






Average number of common shares outstanding - Basic


10,197


10,158






Average number of common shares outstanding - Diluted


10,292


10,247

 

 

L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)








March 31,


December 31,



2014


2013



(Unaudited)



ASSETS










Current assets:





Cash and cash equivalents

$

91,131

$

64,623

Accounts receivable - net


66,771


98,437

Inventories - net


77,644


76,956

Current deferred tax assets


461


461

Prepaid income tax


3,977


4,741

Other current assets


4,445


2,000

Current assets of discontinued operations


88


149

Total current assets


244,517


247,367






Property, plant and equipment - net


51,478


50,109






Other assets:





Goodwill


57,781


57,781

Other intangibles - net


50,705


51,846

Investments


5,204


5,090

Other assets


1,480


1,461

Total Assets

$

411,165

$

413,654






LIABILITIES AND STOCKHOLDERS' EQUITY










Current liabilities:





Accounts payable

$

43,617

$

46,620

Deferred revenue


7,130


5,715

Accrued payroll and employee benefits


5,753


8,927

Accrued warranty


7,010


7,483

Current maturities of long-term debt


114


31

Current deferred tax liabilities


179


179

Other accrued liabilities


7,013


6,501

Liabilities of discontinued operations


26


26

Total current liabilities


70,842


75,482






Long-term debt


319


25

Deferred tax liabilities


11,591


11,798

Other long-term liabilities


10,472


9,952






Stockholders' equity:





Class A Common Stock


111


111

Paid-in capital


46,565


47,239

Retained earnings


301,701


298,361

Treasury stock


(24,144)


(24,731)

Accumulated other comprehensive loss


(6,292)


(4,583)

Total stockholders' equity


317,941


316,397

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

411,165

$

413,654

 

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SOURCE L.B. Foster Company



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