PITTSBURGH, Feb. 25, 2020 (GLOBE NEWSWIRE) -- L.B. Foster Company (NASDAQ: FSTR), a leading manufacturer and distributor of products and services for transportation and energy infrastructure, today reported its fourth quarter and full year 2019 operating results, which included the following performance highlights:
Deferred Tax Asset
Operating results for 2019 include a reversal of the Company’s valuation allowance previously recorded against a substantial portion of its U.S. deferred tax assets. The reversal resulted in a $29.6 million income tax benefit.
The Company performs an evaluation of its deferred tax asset valuation allowance on a quarterly basis. During the fourth quarter of 2019, the Company concluded that it is more likely than not that the Company will generate sufficient future taxable income to realize most of its domestic deferred tax assets. This conclusion, and the resulting valuation allowance reversal, was based upon consideration of a number of factors, including the Company's cumulative financial income over the past three years and projected future income. The Company's income from recurring operations has improved over the past three years, and that this improvement provides a solid foundation for its forecast of profitability in future years.
Fourth Quarter Results
1 See "Non-GAAP Disclosures" at the end of this press release for a description of and information regarding adjusted EBITDA, adjusted net income, adjusted earnings per share, net debt (total debt less cash and cash equivalents), and related reconciliations to the comparable GAAP financial measures.
CEO Comments
Bob Bauer, President and Chief Executive Officer, commented, “The Company's success in key markets, coupled with continued actions to improve efficiency during 2019 resulted in another year of profit improvement and strengthened balance sheet. Sales growth of 4.5% in 2019 helped drive a gross profit increase of 3.6% and an adjusted EBITDA increase of 10.2% over the prior year. Each of our three reporting segments had year-over-year increases in both sales and gross profit. After adjusting for nonrecurring expenses intended to reduce long-term cost, each of the three segments also increased segment profit over prior year. We continued to focus on control of expenses, which resulted in a reduction of selling and administrative expenses by 60 basis points as a percentage of sales.
“Our increased profitability and working capital management combined to drive operating cash flow for the year of $29.3 million. The focus on working capital efficiency was instrumental, led by an improvement in inventory while supporting a $28.1 million increase in sales. These results helped strengthen our balance sheet, reducing debt by $16.8 million resulting in net debt1 of $44.0 million.”
Mr. Bauer added, “Throughout the year we were challenged with areas of weaker demand and project delays, both of which were reflected in our 2019 booking activity. We are particularly excited to have won several key projects to wrap up the year after experiencing project delays in the third quarter. We forecasted a backlog increase in the fourth quarter, but were pleasantly surprised when a 31.5% increase in fourth quarter year-over-year bookings helped propel the ending backlog to $230.1 million, up 18.5% since the end of the third quarter. We are continuing to invest in expanding our service and solutions offerings in the more attractive segments we serve. Coupled with our modernization programs, these efforts are a key component of our value creation strategy.”
Full Year Results
L.B. Foster Company will conduct a conference call and webcast to discuss its fourth quarter and year end 2019 operating results on Tuesday, February 25, 2020 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 13698563.
About L.B. Foster Company
L.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 within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Forward-looking statements 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 are based on management's current expectations and assumptions about future events that involve inherent risks and uncertainties and 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 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: a resumption of the economic slowdown we experienced in previous years in the markets we serve; a decrease in freight or passenger rail traffic; environmental matters, including any costs associated with any remediation and monitoring; the risk of doing business in international markets; global health epidemics; 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; 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; cyber-security risks such as data security breaches, malware, ransomware, “hacking,” and identity theft, a failure of 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 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 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 these amounts; foreign currency fluctuations; inflation; domestic and foreign government regulations, including tariffs; economic conditions and regulatory changes caused by the United Kingdom’s exit from the European Union in January 2020; sustained declines in energy prices; a lack of state or federal funding for new infrastructure projects; an increase in manufacturing or material costs; the loss of future revenues from current customers; and risks inherent in litigation and the outcome of litigation and product warranty claims. 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 ended December 31, 2018, or as updated and amended by our other periodic filings with the Securities and Exchange Commission.
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.
Investor Relations:
Judith Balog
(412) 928-3417
investors@lbfoster.com
L.B. Foster Company
415 Holiday Drive
Suite 100
Pittsburgh, PA 15220
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Unaudited | Unaudited | |||||||||||||||||||
Sales of goods | $ | 115,938 | $ | 123,989 | $ | 508,504 | $ | 463,165 | ||||||||||||
Sales of services | 33,441 | 40,542 | 146,553 | 163,804 | ||||||||||||||||
Total net sales | 149,379 | 164,531 | 655,057 | 626,969 | ||||||||||||||||
Cost of goods sold | 94,316 | 100,917 | 416,748 | 380,395 | ||||||||||||||||
Cost of services sold | 27,673 | 33,013 | 116,937 | 129,415 | ||||||||||||||||
Total cost of sales | 121,989 | 133,930 | 533,685 | 509,810 | ||||||||||||||||
Gross profit | 27,390 | 30,601 | 121,372 | 117,159 | ||||||||||||||||
Selling and administrative expenses | 20,950 | 22,191 | 87,986 | 87,679 | ||||||||||||||||
Amortization expense | 1,531 | 1,776 | 6,577 | 7,098 | ||||||||||||||||
Concrete Tie Settlement expense | — | 43,400 | — | 43,400 | ||||||||||||||||
Interest expense - net | 889 | 1,341 | 4,920 | 6,154 | ||||||||||||||||
Other expense (income) - net | 5,315 | (141 | ) | 4,492 | (461 | ) | ||||||||||||||
Total expenses | 28,685 | 68,567 | 103,975 | 143,870 | ||||||||||||||||
(Loss) income before income taxes | (1,295 | ) | (37,966 | ) | 17,397 | (26,711 | ) | |||||||||||||
Income tax (benefit) expense | (27,545 | ) | 3,186 | (25,171 | ) | 4,457 | ||||||||||||||
Net income (loss) | $ | 26,250 | $ | (41,152 | ) | $ | 42,568 | $ | (31,168 | ) | ||||||||||
Basic earnings (loss) per common share | $ | 2.52 | $ | (3.97 | ) | $ | 4.09 | $ | (3.01 | ) | ||||||||||
Diluted earnings (loss) per common share | $ | 2.46 | $ | (3.97 | ) | $ | 4.00 | $ | (3.01 | ) | ||||||||||
Average number of common shares outstanding - Basic | 10,422 | 10,366 | 10,410 | 10,362 | ||||||||||||||||
Average number of common shares outstanding - Diluted | 10,680 | 10,366 | 10,644 | 10,362 |
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, 2019 | December 31, 2018 | |||||||||
Unaudited | ||||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 14,178 | $ | 10,282 | ||||||
Accounts receivable - net | 78,575 | 86,123 | ||||||||
Inventories - net | 119,301 | 124,504 | ||||||||
Other current assets | 4,610 | 5,763 | ||||||||
Total current assets | 216,664 | 226,672 | ||||||||
Property, plant, and equipment - net | 82,314 | 86,857 | ||||||||
Operating lease right-of-use assets - net | 13,274 | — | ||||||||
Other assets: | ||||||||||
Goodwill | 19,565 | 19,258 | ||||||||
Other intangibles - net | 43,514 | 49,836 | ||||||||
Deferred tax assets | 28,638 | — | ||||||||
Other assets | 1,202 | 626 | ||||||||
TOTAL ASSETS | $ | 405,171 | $ | 383,249 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||
Current liabilities: | ||||||||||
Accounts payable | $ | 66,361 | $ | 78,269 | ||||||
Deferred revenue | 8,446 | 6,619 | ||||||||
Accrued payroll and employee benefits | 14,096 | 12,993 | ||||||||
Accrued warranty | 1,222 | 2,057 | ||||||||
Current portion of accrued settlement | 8,000 | 10,000 | ||||||||
Current maturities of long-term debt | 2,905 | 629 | ||||||||
Other accrued liabilities | 15,714 | 13,624 | ||||||||
Total current liabilities | 116,744 | 124,191 | ||||||||
Long-term debt | 55,288 | 74,353 | ||||||||
Deferred tax liabilities | 4,751 | 5,287 | ||||||||
Long-term portion of accrued settlement | 32,000 | 40,000 | ||||||||
Long-term operating lease liabilities | 10,268 | — | ||||||||
Other long-term liabilities | 16,258 | 17,299 | ||||||||
Stockholders' equity: | ||||||||||
Class A Common Stock | 111 | 111 | ||||||||
Paid-in capital | 49,204 | 48,040 | ||||||||
Retained earnings | 157,525 | 114,324 | ||||||||
Treasury stock | (16,795 | ) | (18,165 | ) | ||||||
Accumulated other comprehensive loss | (20,183 | ) | (22,191 | ) | ||||||
Total stockholders' equity | 169,862 | 122,119 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 405,171 | $ | 383,249 |
Non-GAAP Disclosures
This earnings release discloses earnings before interest, taxes, depreciation, and amortization (“EBITDA”), adjusted EBITDA, adjusted net income, adjusted net income per share ("adjusted EPS"), and net debt, 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 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. Additionally, adjusted EBITDA, adjusted net income, and adjusted EPS include certain adjustments to EBITDA and reported GAAP net income (loss) and diluted EPS. In 2019, the Company made adjustments to exclude the impact of relocation and closure costs, pension settlement expense, and the income tax benefit from the release of the U.S. deferred tax asset valuation allowance. In 2018, the Company made adjustments to exclude the impact of the Union Pacific Railroad Concrete Tie Settlement expense. The Company made these adjustments to EBITDA, net income, and EPS because it believes that the adjusted items are unusual, non-recurring, unpredictable, or non-cash and their exclusion may enhance investors' ability to assess the Company's performance. The Company views net debt, which is total debt less cash and cash equivalents, as an important metric of the operational and financial health of the organization and useful to investors as an indicator of our ability to incur additional debt and to service our 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, net income, EPS, and debt to the non-GAAP financial measures are presented below (in thousands, except per share amounts):
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||
Net income (loss) | $ | 26,250 | $ | (41,152 | ) | $ | 42,568 | $ | (31,168 | ) | ||||||||||
Interest expense, net | 889 | 1,341 | 4,920 | 6,154 | ||||||||||||||||
Income tax (benefit) expense | (27,545 | ) | 3,186 | (25,171 | ) | 4,457 | ||||||||||||||
Depreciation expense | 2,759 | 2,810 | 11,054 | 11,495 | ||||||||||||||||
Amortization expense | 1,531 | 1,776 | 6,577 | 7,098 | ||||||||||||||||
Total EBITDA | $ | 3,884 | $ | (32,039 | ) | $ | 39,948 | $ | (1,964 | ) | ||||||||||
Relocation and closure costs | 3,484 | — | 3,484 | — | ||||||||||||||||
U.S. pension settlement expense | 2,210 | — | 2,210 | — | ||||||||||||||||
Concrete Tie Settlement expense | — | 43,400 | — | 43,400 | ||||||||||||||||
Adjusted EBITDA | $ | 9,578 | $ | 11,361 | $ | 45,642 | $ | 41,436 |
Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Adjusted Diluted Earnings Per Share Reconciliation | ||||||||||||||||||||
Net income (loss), as reported | $ | 26,250 | $ | (41,152 | ) | $ | 42,568 | $ | (31,168 | ) | ||||||||||
Relocation and closure costs, net of tax of $847 | 2,637 | — | 2,637 | — | ||||||||||||||||
U.S. pension settlement expense, net of tax of $563 | 1,647 | — | 1,647 | — | ||||||||||||||||
Deferred tax asset valuation allowance reversal | (29,648 | ) | — | (29,648 | ) | — | ||||||||||||||
Concrete Tie Settlement expense, net of tax of $0 | — | 43,400 | — | 43,400 | ||||||||||||||||
Adjusted net income | $ | 886 | $ | 2,248 | $ | 17,204 | $ | 12,232 | ||||||||||||
Average number of common shares outstanding - Diluted, as reported | 10,680 | 10,366 | 10,644 | 10,362 | ||||||||||||||||
Diluted earnings (loss) per common share, as reported | $ | 2.46 | $ | (3.97 | ) | $ | 4.00 | $ | (3.01 | ) | ||||||||||
Average number of common shares outstanding - Diluted, as adjusted | 10,680 | 10,480 | 10,644 | 10,479 | ||||||||||||||||
Diluted earnings per common share, as adjusted | $ | 0.08 | $ | 0.21 | $ | 1.62 | $ | 1.17 |
December 31, | ||||||||||
2019 | 2018 | |||||||||
Net Debt Reconciliation | ||||||||||
Total debt | $ | 58,193 | $ | 74,982 | ||||||
Less: cash and cash equivalents | (14,178 | ) | (10,282 | ) | ||||||
Net debt | $ | 44,015 | $ | 64,700 |