L.B. Foster Reports First Quarter Operating Results
- New orders totaling
$135.4 million for the 2022 first quarter increased 17.7% over the prior year quarter and 42.2% sequentially. Backlog totaling$244.6 million increased by$4.7 million , or 1.9%, compared to the prior year quarter, as adjusted for the Piling divestiture, and grew$34.4 million , or 16.4%, in the quarter. - Net sales for the 2022 first quarter were
$98.8 million , a$17.3 million decrease, or 14.9%, from the first quarter of 2021. Excluding the divested Piling division, net sales1 increased$3.5 million , or 3.7%, over the prior year quarter. - Gross profit for the 2022 first quarter was
$16.4 million , a$2.4 million decline, or 12.7%, from the prior year quarter. The 2022 first quarter gross profit margin was 16.6% versus 16.2% in last year's quarter. Excluding the Piling division, gross profit1 decreased$1.2 million , or 6.7%, and gross profit margin decreased 190 basis points excluding Piling1. - Selling and administrative expenses for the 2022 first quarter were
$17.3 million , a$0.7 million decrease, or 4.0%, from the prior year quarter. Excluding the Piling division, selling and administrative expenses1 increased$0 .2 million. - Net loss for the 2022 first quarter was
$1.6 million , or$0.15 per diluted share, an increased loss of$0.03 per diluted share from the prior year quarter. - EBITDA1 for the 2022 first quarter was
$1.7 million , a$1 .1 million decrease versus the prior year quarter. Excluding the Piling division, EBITDA1 decreased$0.8 million from the prior year quarter. - Net operating cash flow used in the first quarter totaled
$7.6 million compared to net cash provided by operations of$7.6 million in the prior year quarter. - Net debt1 as of
March 31, 2022 was$29.4 million , down$2.4 million from last year. The Company's adjusted net leverage ratio1 was 1.7x as ofMarch 31, 2022 .
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, adjusted EBITDA, net debt, adjusted net leverage ratio, and financial information excluding Piling.
CEO Comments
First Quarter Results
- Net sales for the first quarter of 2022 were
$98.8 million , a$17.3 million decrease, or 14.9%, compared to the prior year quarter due to a 3.8% decrease in the Rail, Technologies, and Services segment ("Rail"), an 18.4% increase in thePrecast Concrete Products segment ("Precast"), and a 46.0% decrease in Steel Products and Measurement segment net sales. Excluding the divested Piling division, net sales1 increased 3.7% over the prior year quarter. The$2.5 million decrease in the Rail segment was attributable to the Rail Products business unit. The$2.3 million increase in the Precast segment resulted from increased building sales in our southernU.S. region. The$17.1 million decrease in the Steel Products and Measurement segment was driven entirely by the Piling divestiture inSeptember 2021 , with$20.8 million in sales in last year's first quarter. The Steel Products and Measurement segment sales grew by 22.6% excluding the Piling division. - Gross profit for the 2022 first quarter was
$16.4 million , a$2.4 million decrease, or 12.7%, from the prior year quarter. Rail and Steel Products and Measurement gross profit declined from the prior year quarter by$0.3 million and$2.1 million , respectively, while Precast gross profit was flat compared to the prior year quarter. The consolidated gross profit margin of 16.6% increased by 40 basis points versus last year, with the increase attributable to the Rail segment, which increased by 40 basis points during the current quarter due primarily to the Rail Products andTechnology Solutions and Services business units. The decline in gross profit margin in Precast, which was down 330 basis points compared to the prior year period, is principally attributable to continued higher raw material and labor costs, coupled with more significant production disruptions compared to last year's quarter. The 220 basis point reduction in Steel Products and Measurement was primarily due to higher raw material costs for bridge products and continued market weakness impacting Coatings and Measurement. Excluding the Piling business, gross profit1 for the Company decreased$1.2 million , or 6.7%, and gross profit margin decreased 190 basis points. - Selling and administrative expenses in the first quarter decreased
$0.7 million , or 4.0%, from the prior year quarter, primarily attributable to the Piling divestiture. Excluding the Piling division, selling and administrative expenses increased$0 .2 million, or 1.2%. Selling and administrative expenses as a percent of net sales increased to 17.5%, a 200-basis point increase from the prior year quarter as a result of the decline in sales from the Piling divestiture. Excluding the Piling division, selling and administrative expenses as a percent of net sales decreased 40 basis points. - Net loss for the 2022 first quarter was
$1.6 million , or a loss of$0.15 per diluted share, compared to a net loss of$1.3 million , or a loss of$0.12 per diluted share in the prior year quarter. - EBITDA1 for the 2022 first quarter was
$1.7 million , a 39.7% decrease compared to the prior year quarter. Excluding the Piling division, EBITDA1 decreased 33.1% from the prior year quarter. - During the first quarter of 2022, net debt1 increased from
$20.9 million to$29.4 million , an$8.5 million increase, while net debt1 was down$2.4 million year over year. The Company's adjusted net leverage ratio1 was 1.7x, with total available funding capacity of$100.1 million as ofMarch 31, 2022 , subject to covenant restrictions. - First quarter new orders were
$135.4 million , a decrease of$0.2 million from the prior year quarter. Excluding Piling Products, new orders were up$20.4 million , or 17.7%, from the prior year quarter. New orders in the Rail segment increased by$22.7 million and Steel Products and Measurement, excluding Piling, increased by$9.3 million , or 59.6%, compared to the prior year quarter. These increases were partially offset by an$11.6 million decrease in orders in the Precast segment. Backlog totaling$244.6 million increased by$4.7 million , or 1.9%, compared to the prior year quarter, as adjusted for the Piling divestiture, and grew$34.4 million in the quarter.
Market Outlook
During the 2022 first quarter, the Company’s backlog grew by
First Quarter Conference Call
A conference call replay will be available through
About
Founded in 1902,
Non-GAAP Financial Measures
This press release contains financial measures that are not calculated and presented in accordance with generally accepted accounting principles in
Forward-Looking Statements
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 management's current expectations and assumptions about future events that involve inherent risks and uncertainties and may concern, among other things, the Company’s expectations relating to our strategy, goals, projections, and plans regarding our financial position, liquidity, capital resources, and results of operations and 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: the COVID-19 pandemic, and any future global health crises, and the related social, regulatory, and economic impacts and the response thereto by the Company, our employees, our customers, and national, state, or local governments; volatility in the prices of oil and natural gas and the related impact on the midstream energy markets, which could result in cost mitigation actions, including shutdowns or furlough periods; a continuation or worsening of the adverse economic conditions in the markets we serve, whether as a result of the current COVID-19 pandemic, including its impact on labor markets, supply chains, and other inflationary costs, travel and demand for oil and gas, the continued deterioration in the prices for oil and gas, governmental travel restrictions, project delays, and budget shortfalls, or otherwise; volatility in the global capital markets, including interest rate fluctuations, which could adversely affect our ability to access the capital markets on terms that are favorable to us; restrictions on our ability to draw on our credit agreement, including as a result of any future inability to comply with restrictive covenants contained therein; a continuing decrease in freight or transit rail traffic, including as a result of the ongoing COVID-19 pandemic; environmental matters, including any costs associated with any remediation and monitoring of such matters; the risk of doing business in international markets, including compliance with anti-corruption and bribery laws, foreign currency fluctuations and inflation, and trade restrictions or embargoes; our ability to effectuate our strategy, including cost reduction initiatives, and our ability to effectively integrate acquired businesses or to divest businesses, such as the recent dispositions of the Piling and IOS Test and Inspection Services businesses and acquisition of the LarKen Precast business and to realize anticipated benefits; costs of and impacts associated with shareholder activism; continued customer restrictions regarding the on-site presence of third party providers due to the COVID-19 pandemic; the timeliness and availability of materials from our major suppliers, including any continuation or worsening of the disruptions in the supply chain experienced as a result of the COVID-19 pandemic, 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; cyber-security risks such as data security breaches, malware, ransomware, “hacking,” and identity theft, which could disrupt our business and may result in misuse or misappropriation of confidential or proprietary information, and could result in the disruption or damage to our systems, increased costs and losses, or an adverse effect to our reputation; the continuing effectiveness of our ongoing 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 any 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 taxes; domestic and foreign government regulations, including tariffs; economic conditions and regulatory changes caused by the United Kingdom’s exit from the
The forward-looking statements in this release are made as of the date of this release and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by the federal securities laws.
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L.B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended |
||||||||
2022 | 2021 | |||||||
Sales of goods | $ | 84,421 | $ | 100,546 | ||||
Sales of services | 14,373 | 15,534 | ||||||
Total net sales | 98,794 | 116,080 | ||||||
Cost of goods sold | 69,845 | 84,125 | ||||||
Cost of services sold | 12,502 | 13,125 | ||||||
Total cost of sales | 82,347 | 97,250 | ||||||
Gross profit | 16,447 | 18,830 | ||||||
Selling and administrative expenses | 17,298 | 18,026 | ||||||
Amortization expense | 1,436 | 1,465 | ||||||
Operating loss | (2,287 | ) | (661 | ) | ||||
Interest expense - net | 370 | 871 | ||||||
Other (income) expense - net | (563 | ) | 59 | |||||
Loss before income taxes | (2,094 | ) | (1,591 | ) | ||||
Income tax benefit | (508 | ) | (321 | ) | ||||
Net loss | (1,586 | ) | (1,270 | ) | ||||
Net loss attributable to noncontrolling interest | (20 | ) | (12 | ) | ||||
Net loss attributable to |
$ | (1,566 | ) | $ | (1,258 | ) | ||
Basic loss per common share | $ | (0.15 | ) | $ | (0.12 | ) | ||
Diluted loss per common share | $ | (0.15 | ) | $ | (0.12 | ) | ||
Average number of common shares outstanding - Basic | 10,685 | 10,583 | ||||||
Average number of common shares outstanding - Diluted | 10,685 | 10,583 |
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
2022 |
2021 |
|||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 6,239 | $ | 10,372 | ||||
Accounts receivable - net | 59,135 | 55,911 | ||||||
Contract assets - net | 34,268 | 36,179 | ||||||
Inventories - net | 67,799 | 62,871 | ||||||
Other current assets | 19,623 | 14,146 | ||||||
Total current assets | 187,064 | 179,479 | ||||||
Property, plant, and equipment - net | 57,579 | 58,222 | ||||||
Operating lease right-of-use assets - net | 14,374 | 15,131 | ||||||
Other assets: | ||||||||
19,904 | 20,152 | |||||||
Other intangibles - net | 29,487 | 31,023 | ||||||
Deferred tax assets | 37,721 | 37,242 | ||||||
Other assets | 1,283 | 1,346 | ||||||
TOTAL ASSETS | $ | 347,412 | $ | 342,595 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 45,483 | $ | 41,411 | ||||
Deferred revenue | 19,310 | 13,411 | ||||||
Accrued payroll and employee benefits | 5,330 | 9,517 | ||||||
Current portion of accrued settlement | 8,000 | 8,000 | ||||||
Current maturities of long-term debt | 80 | 98 | ||||||
Other accrued liabilities | 11,593 | 13,757 | ||||||
Total current liabilities | 89,796 | 86,194 | ||||||
Long-term debt | 35,531 | 31,153 | ||||||
Deferred tax liabilities | 3,659 | 3,753 | ||||||
Long-term portion of accrued settlement | 16,000 | 16,000 | ||||||
Long-term operating lease liabilities | 11,558 | 12,279 | ||||||
Other long-term liabilities | 9,171 | 9,606 | ||||||
Stockholders' equity: | ||||||||
Common stock | 111 | 111 | ||||||
Paid-in capital | 42,153 | 43,272 | ||||||
Retained earnings | 167,167 | 168,733 | ||||||
(9,200 | ) | (10,179 | ) | |||||
Accumulated other comprehensive loss | (19,117 | ) | (18,845 | ) | ||||
181,114 | 183,092 | |||||||
Noncontrolling interest | 583 | 518 | ||||||
Total stockholders’ equity | 181,697 | 183,610 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 347,412 | $ | 342,595 |
Non-GAAP Disclosures
(Unaudited)
This earnings release discloses earnings before interest, taxes, depreciation, and amortization (“EBITDA”), adjusted EBITDA, net debt, adjusted net leverage ratio, and adjustments to continuing operations reflecting the Piling Products divestiture, which are non-GAAP financial measures. 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 may enhance 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 measure 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. Adjusted EBITDA adjusts for certain charges to EBITDA from continuing operations that the Company believes are unusual, non-recurring, unpredictable, or non-cash.
In the trailing twelve months ended
The Company views net debt, which is total debt less cash and cash equivalents, and the adjusted net leverage ratio, which is the ratio of net debt to the trailing twelve-month adjusted EBITDA, as important metrics of the operational and financial health of the organization and believe they are useful to investors as indicators of its ability to incur additional debt and to service its existing debt.
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, adjusted EBITDA from continuing operations, net debt, adjusted net leverage ratio, and adjustments to exclude the divested Piling business are presented below (in thousands, except per share and ratio):
Three Months Ended |
Trailing Twelve Months Ended |
|||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Adjusted EBITDA Reconciliation | ||||||||||||||||
Net (loss) income, as reported | $ | (1,586 | ) | $ | (1,270 | ) | $ | 3,155 | $ | 24,558 | ||||||
Interest expense - net | 370 | 871 | 2,455 | 3,820 | ||||||||||||
Income tax expense (benefit) | (508 | ) | (321 | ) | 932 | (12,104 | ) | |||||||||
Depreciation expense | 1,938 | 1,990 | 7,999 | 7,905 | ||||||||||||
Amortization expense | 1,436 | 1,465 | 5,807 | 5,764 | ||||||||||||
Total EBITDA | $ | 1,650 | $ | 2,735 | $ | 20,348 | $ | 29,943 | ||||||||
Relocation and restructuring costs | — | — | — | 1,868 | ||||||||||||
Distribution from unconsolidated partnership | — | — | — | (1,874 | ) | |||||||||||
Gain on divestiture of Piling Products | — | — | (2,741 | ) | — | |||||||||||
Adjusted EBITDA | $ | 1,650 | $ | 2,735 | $ | 17,607 | $ | 29,937 |
2022 |
2021 |
2021 |
||||||||||
Net Debt Reconciliation | ||||||||||||
Total debt | $ | 35,611 | $ | 31,251 | $ | 36,793 | ||||||
Less cash and cash equivalents | (6,239 | ) | (10,372 | ) | (5,015 | ) | ||||||
Net debt | $ | 29,372 | $ | 20,879 | $ | 31,778 |
2022 |
2021 |
|||||
Adjusted Net Leverage Ratio Reconciliation | ||||||
Net debt | $ | 29,372 | $ | 31,778 | ||
Trailing twelve month adjusted EBITDA from continuing operations | 17,607 | 29,937 | ||||
Adjusted net leverage ratio | 1.7x | 1.1x |
Three Months Ended |
||||||
2022 | 2021 | |||||
New Orders Reconciliation | ||||||
New orders | $ | 135,405 | $ | 135,620 | ||
Less: Piling Products | — | 20,575 | ||||
New orders excluding Piling Products | $ | 135,405 | $ | 115,045 |
2022 |
2021 |
|||||
Backlog Reconciliation | ||||||
Backlog | $ | 244,618 | $ | 271,944 | ||
Less: Piling Products | — | 32,004 | ||||
Backlog excluding Piling Products | $ | 244,618 | $ | 239,940 |
Three Months Ended |
|||||||
2022 | 2021 | ||||||
Adjusted Results Of Operations For The Piling Divestiture Reconciliation | |||||||
Net sales, as reported | $ | 98,794 | $ | 116,080 | |||
Less: Piling Products net sales | — | (20,797 | ) | ||||
Net sales, as adjusted | 98,794 | 95,283 | |||||
Gross profit, as reported | $ | 16,447 | $ | 18,830 | |||
Less: Piling Products gross profit | — | (1,193 | ) | ||||
Gross profit, as adjusted | 16,447 | 17,637 | |||||
Selling and administrative expense, as reported | $ | 17,298 | $ | 18,026 | |||
Less: Piling Products selling and administrative expense | — | (938 | ) | ||||
Selling and administrative expense, as adjusted | 17,298 | 17,088 | |||||
EBITDA, as reported | $ | 1,650 | $ | 2,735 | |||
Less: Piling Products EBITDA | — | (267 | ) | ||||
EBITDA, as adjusted | 1,650 | 2,468 |
Three Months Ended |
||||||||
2022 | 2021 | |||||||
Adjusted Segment Results For The Piling Divestiture Reconciliation | ||||||||
Steel Products and Measurement net sales, as reported | $ | 20,074 | $ | 37,170 | ||||
Less: Piling Products net sales | — | (20,797 | ) | |||||
Steel Products and Measurement net sales, as adjusted | 20,074 | 16,373 | ||||||
Steel Products and Measurement gross profit, as reported | $ | 1,474 | $ | 3,536 | ||||
Less: Piling Products gross profit | — | (1,193 | ) | |||||
Steel Products and Measurement gross profit, as adjusted | 1,474 | 2,343 | ||||||
Steel Products and Measurement operating loss, as reported | $ | (2,148 | ) | $ | (928 | ) | ||
Less: Piling Products operating profit | — | (255 | ) | |||||
Steel Products and Measurement operating loss, as adjusted | (2,148 | ) | (1,183 | ) |
Source: L.B. Foster Company