L.B. Foster Company | ||||
(Exact name of registrant as specified in its charter) | ||||
Pennsylvania | 000-10436 | 25-1324733 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
415 Holiday Drive, Pittsburgh, Pennsylvania | 15220 | |||
(Address of principal executive offices) | (Zip Code) | |||
Registrant’s telephone number, including area code (412) 928-3400 | ||||
(Former name or former address, if changed since last report.) | ||||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): | ||||
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). | ||||
☐ Emerging growth company | ||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ |
L.B. FOSTER COMPANY | |||
(Registrant) | |||
Date: | August 3, 2017 | /s/ Christopher T. Scanlon | |
Christopher T. Scanlon | |||
Controller and Chief Accounting Officer | |||
(Duly Authorized Officer of Registrant) |
Exhibit Number | Description |
99.1 | Press Release dated August 3, 2017, of L.B. Foster Company. |
• | A sales increase of 6.5% from the prior year quarter. |
• | Gross profit margin of 19.1% compared to 20.5% in the prior year. |
• | A decrease in new orders by 8.3% from the prior year quarter, while year to date new orders totaled $291.2 million, or an increase of 12.8% over the prior year. |
• | An increase in backlog of 17.9% from the prior year to $176.0 million. |
• | Net cash provided by operating activities for the quarter totaled $19.2 million compared to $11.7 million in the prior year quarter. |
• | A $17.3 million reduction in total outstanding debt. |
• | Second quarter net sales of $144.9 million increased by $8.9 million, or 6.5%, compared to the prior year quarter due to increases in each of the three segments. Construction Products (Construction) segment sales increased 12.7%, Tubular and Energy Services (Tubular) segment sales increased 6.8%, and Rail Products and Services (Rail) segment sales increased 2.7%. |
• | Gross profit margin was 19.1%, 140 basis points lower than the prior year quarter. Rail segment gross margins declined year over year as a result of lower prices on Rail Distribution projects, and lower margin Transit Products sales, including some trailing costs associated with supporting prior installations. In addition, we are still experiencing some start-up costs for new service contracts which are just beginning to generate revenue. Partially offsetting the Rail segment decrease was a 430 basis point improvement in Tubular segment gross profit margins, driven by improvements in Protective Coatings and Test and Inspection Services. |
• | Net income for the second quarter 2017 was $3.0 million, or $0.29 per diluted share, compared to a net loss of $92.0 million, or $8.96 per diluted share, last year. Our prior year quarter earnings included impairment charges totaling $128.9 million ($90.9 million net of tax). Excluding the prior year impairment charge1, the 2016 net loss would have totaled $1.1 million or $0.11 per diluted share. |
• | Second quarter Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and asset impairments) was $10.6 million compared to $7.5 million in the second quarter of 2016. |
• | Selling and administrative expenses in the second quarter decreased by $2.7 million, or 11.7%. The decrease was primarily comprised of personnel-related costs of $2.1 million and $0.5 million reduction in litigation costs for the Union Pacific Rail Road (UPRR) matter. |
• | Amortization expense was $1.7 million in the current quarter, compared to $2.8 million in the prior year quarter. The reduction was primarily due to the 2016 impairment of definite-lived intangible assets. |
• | Interest expense was $2.1 million in the second quarter of 2017, compared to $1.6 million in the prior year quarter. The increase was attributable to an increase in interest rates. |
• | Net cash provided by operating activities for the quarter totaled $19.2 million compared to $11.7 million in the prior year quarter, a $7.5 million improvement. |
• | Second quarter new orders were $128.4 million, an 8.3% decrease from the prior year quarter, due to a 22.1% decrease in Construction orders and a 10.4% decrease in Rail orders which are partially offset by a 26.1% increase in Tubular orders. Our prior year second quarter Construction new orders included $15.0 million related to the Peace Bridge contract. |
• | The Company’s income tax expense for the second quarter was $0.5 million, which was primarily related to income taxes in foreign jurisdictions. The Company has a full valuation allowance against its U.S. deferred tax assets; therefore, no tax benefit was recorded on domestic operations. |
• | Total debt was reduced by $17.3 million, or 11.1%, in the second quarter to $138.0 million as of June 30, 2017. Primary factors contributing to the current quarter reduction included $9.9 million federal income tax refund proceeds that were applied to our term loan. Additionally, our revolving credit facility was reduced by $7.0 million due to continued favorable operations and working capital management. |
• | Net sales for the first six months of 2017 of $263.6 million increased by $1.3 million, or 0.5%, compared to the prior year period due to a 14.6% increase in Construction sales, partially offset by a 5.7% decrease in Tubular sales and a 4.5% decline in Rail sales. |
• | Gross profit margin was 18.6%, 110 basis points lower than the prior year period. The reduction was due to declines in Rail and Construction, partially offset by increases in Tubular. Year to date Rail gross profit margins were negatively impacted by lower margins in our Transit and Rail Distribution businesses. These reductions were partially offset by an increase in our Test and Inspection division within Tubular. |
• | Net income for the first six months of 2017 was $0.6 million, or $0.06 per diluted share, compared to a net loss of $94.8 million, or $9.25 per diluted share, last year. Excluding the prior year impairment charge, the net loss would have been $3.9 million or $0.38 per diluted share. |
• | Adjusted EBITDA for the first six months of 2017 was $15.7 million compared to $11.5 million in the first six months of 2016. |
• | Selling and administrative expense decreased by $6.3 million, or 13.7%. The decrease was primarily comprised of personnel-related costs of $4.9 million and $1.0 million in lower litigation costs for the UPRR matter. |
• | Amortization expense was $3.5 million for the first six months ended June 30, 2017, compared to $6.1 million in the prior year period. The reduction was primarily due to the 2016 impairment of definite-lived intangible assets. |
• | Net interest expense was $4.2 million in the first six months of 2017, compared to $2.7 million in the prior year period. The increase was attributable to an increase in interest rates. |
• | Net cash provided by operating activities for the six months ended June 30, 2017 totaled $29.9 million compared to $6.6 million in the prior year period, a $23.4 million improvement. |
• | New orders were $291.2 million for the first six months of 2017, a 12.8% increase from the prior year period, due to a 22.4% increase in Rail and a 28.6% increase in Tubular which were partially offset by a 7.5% reduction in Construction orders. |
• | The Company’s income tax expense for the first six months of 2017 was $0.9 million, which was primarily related to income taxes in foreign jurisdictions. The Company has a full valuation allowance against its U.S. deferred tax assets; therefore, no tax benefit was recorded on domestic operations. |
• | Total debt was reduced by $21.6 million, or 13.5%, in the first six months of 2017 to $138.0 million as of June 30, 2017. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Sales of goods | $ | 117,727 | $ | 118,070 | $ | 215,356 | $ | 225,985 | ||||||||
Sales of services | 27,133 | 17,924 | 48,206 | 36,319 | ||||||||||||
Total net sales | 144,860 | 135,994 | 263,562 | 262,304 | ||||||||||||
Cost of goods sold | 94,291 | 92,638 | 173,692 | 179,031 | ||||||||||||
Cost of services sold | 22,833 | 15,543 | 40,882 | 31,500 | ||||||||||||
Total cost of sales | 117,124 | 108,181 | 214,574 | 210,531 | ||||||||||||
Gross profit | 27,736 | 27,813 | 48,988 | 51,773 | ||||||||||||
Selling and administrative expenses | 20,578 | 23,317 | 39,805 | 46,134 | ||||||||||||
Amortization expense | 1,695 | 2,789 | 3,454 | 6,055 | ||||||||||||
Asset impairments | — | 128,938 | — | 128,938 | ||||||||||||
Interest expense | 2,181 | 1,652 | 4,289 | 2,822 | ||||||||||||
Interest income | (54 | ) | (52 | ) | (110 | ) | (107 | ) | ||||||||
Equity in (income) loss of nonconsolidated investments | (145 | ) | 487 | 55 | 683 | |||||||||||
Other (income) expense | (18 | ) | 107 | (13 | ) | 822 | ||||||||||
24,237 | 157,238 | 47,480 | 185,347 | |||||||||||||
Income (loss) before income taxes | 3,499 | (129,425 | ) | 1,508 | (133,574 | ) | ||||||||||
Income tax expense (benefit) | 475 | (37,429 | ) | 906 | (38,746 | ) | ||||||||||
Net income (loss) | $ | 3,024 | $ | (91,996 | ) | $ | 602 | $ | (94,828 | ) | ||||||
Basic earnings (loss) per common share | $ | 0.29 | $ | (8.96 | ) | $ | 0.06 | $ | (9.25 | ) | ||||||
Diluted earnings (loss) per common share | $ | 0.29 | $ | (8.96 | ) | $ | 0.06 | $ | (9.25 | ) | ||||||
Dividends paid per common share | $ | — | $ | 0.04 | $ | — | $ | 0.08 | ||||||||
Average number of common shares outstanding — Basic | 10,335 | 10,263 | 10,327 | 10,248 | ||||||||||||
Average number of common shares outstanding — Diluted | 10,483 | 10,263 | 10,527 | 10,248 |
June 30, 2017 | December 31, 2016 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 35,457 | $ | 30,363 | ||||
Accounts receivable - net | 77,041 | 66,632 | ||||||
Inventories - net | 84,588 | 83,243 | ||||||
Prepaid income tax | 1,150 | 14,166 | ||||||
Other current assets | 6,648 | 5,200 | ||||||
Total current assets | 204,884 | 199,604 | ||||||
Property, plant, and equipment - net | 101,553 | 103,973 | ||||||
Other assets: | ||||||||
Goodwill | 19,431 | 18,932 | ||||||
Other intangibles - net | 60,611 | 63,519 | ||||||
Investments | 3,976 | 4,031 | ||||||
Other assets | 2,555 | 2,964 | ||||||
Total assets | $ | 393,010 | $ | 393,023 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 57,161 | $ | 37,744 | ||||
Deferred revenue | 5,830 | 7,597 | ||||||
Accrued payroll and employee benefits | 8,444 | 7,497 | ||||||
Accrued warranty | 9,168 | 10,154 | ||||||
Current maturities of long-term debt | 10,051 | 10,386 | ||||||
Other accrued liabilities | 8,823 | 8,953 | ||||||
Total current liabilities | 99,477 | 82,331 | ||||||
Long-term debt | 127,933 | 149,179 | ||||||
Deferred tax liabilities | 11,187 | 11,371 | ||||||
Other long-term liabilities | 16,911 | 16,891 | ||||||
Stockholders' equity: | ||||||||
Class A Common Stock | 111 | 111 | ||||||
Paid-in capital | 43,952 | 44,098 | ||||||
Retained earnings | 134,270 | 133,667 | ||||||
Treasury stock | (18,678 | ) | (19,336 | ) | ||||
Accumulated other comprehensive loss | (22,153 | ) | (25,289 | ) | ||||
Total stockholders' equity | 137,502 | 133,251 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 393,010 | $ | 393,023 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Adjusted EBITDA Reconciliation | ||||||||||||||||
Net income (loss) | $ | 3,024 | $ | (91,996 | ) | $ | 602 | $ | (94,828 | ) | ||||||
Interest expense, net | 2,127 | 1,600 | 4,179 | 2,715 | ||||||||||||
Income tax expense (benefit) | 475 | (37,429 | ) | 906 | (38,746 | ) | ||||||||||
Depreciation expense | 3,245 | 3,598 | 6,527 | 7,325 | ||||||||||||
Amortization expense | 1,695 | 2,789 | 3,454 | 6,055 | ||||||||||||
Total EBITDA | $ | 10,566 | $ | (121,438 | ) | $ | 15,668 | $ | (117,479 | ) | ||||||
Asset impairments | — | 128,938 | — | 128,938 | ||||||||||||
Adjusted EBITDA | $ | 10,566 | $ | 7,500 | $ | 15,668 | $ | 11,459 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Adjusted Diluted Earnings (Loss) Per Share Reconciliation | ||||||||||||||||
Net income (loss), as reported | $ | 3,024 | $ | (91,996 | ) | $ | 602 | $ | (94,828 | ) | ||||||
Asset impairments, net of tax benefits of $38,038 | — | 90,900 | — | 90,900 | ||||||||||||
Adjusted net income (loss) | $ | 3,024 | $ | (1,096 | ) | $ | 602 | $ | (3,928 | ) | ||||||
Average number of common shares outstanding - Diluted | 10,483 | 10,263 | 10,527 | 10,248 | ||||||||||||
Diluted earnings (loss) per common share, as reported | $ | 0.29 | $ | (8.96 | ) | $ | 0.06 | $ | (9.25 | ) | ||||||
Diluted earnings (loss) per common share, as adjusted | $ | 0.29 | $ | (0.11 | ) | $ | 0.06 | $ | (0.38 | ) |