L.B. Foster Reports Second Quarter Operating Results
- Net sales for the 2021 second quarter were
$154.5 million , a$38.4 million sequential increase, or 33.1%, over the first quarter, and a$13.0 million increase, or 9.2%, year-over-year. - Gross profit for the 2021 second quarter was
$26.2 million , a$7.3 million sequential improvement, or 38.9%, over the first quarter. This year's second quarter gross profit declined$2.0 million , or 7.0%, from the prior year quarter. The 2021 second quarter gross profit margin was 16.9% versus 19.9% in last year's comparable quarter. - Selling and administrative expenses for the 2021 second quarter were
$19.8 million , a$1.7 million increase, or 9.7%, from the first quarter of 2021. This was also a$0.9 million increase, or 4.8%, over the prior year quarter. Selling and administrative expenses as a percent of net sales decreased to 12.8% compared to 13.3% last year. - Net income from continuing operations for the 2021 second quarter was
$2.9 million , or$0.27 per diluted share, an increase of$0.39 per diluted share from the first quarter and a decrease of$0.39 per diluted share from the prior year quarter. - Adjusted EBITDA from continuing operations1 for the 2021 second quarter was
$8.3 million , a$5.6 million sequential increase compared to this year's first quarter and a$4.6 million decrease versus the prior year comparable quarter. - Net operating cash flow used in the second quarter totaled
$0.8 million , a decrease of$13 .8 million from the prior year quarter. - Net debt1 as of
June 30, 2021 was$33.1 million , a$4.4 million decrease fromDecember 31, 2020 . Over the last four quarters, the Company reduced its net debt1 by$15.1 million . The Company's adjusted net leverage ratio1 was 1.3x as ofJune 30, 2021 and 2020. - Backlog increased by 12.4% to
$253.2 million compared to the prior year quarter, driven by the significant increase in the Infrastructure Solutions segment of$31.6 million . New orders for the second quarter of 2021 were$138.6 million , an increase of 3.5% from the prior year quarter.
1 See "Non-GAAP Disclosures" at the end of this press release for information regarding the following non-GAAP measures from continuing operations used in this release: EBITDA, adjusted EBITDA, net debt, adjusted net leverage ratio, free cash flow, adjusted net income, and adjusted earnings per diluted share.
CEO Comments
"Second quarter orders were
Second Quarter Results
- Net sales for the second quarter of 2021 were
$154.5 million , a$13.0 million increase, or 9.2%, compared to the prior year quarter due to an 18.5% increase in the Rail Technologies and Services segment ("Rail"). This increase was partially offset by a$0.9 million reduction, or 1.3%, in the Infrastructure Solutions segment net sales. The$13.8 million increase in the Rail segment was attributable to both the Rail Products and Rail Technologies business units. The$0.9 million decline in the Infrastructure Solutions segment is wholly attributable to the Coatings and Measurement business unit, which continued to face a challenging environment in the midstream energy market due to excess pipeline infrastructure capacity. - Gross profit for the 2021 second quarter was
$26.2 million , a$2.0 million decrease, or 7.0%, from the prior year quarter. The consolidated gross profit margin of 16.9% decreased by 300 basis points versus last year, with the decline largely attributable to the Infrastructure Solutions segment. Infrastructure Solutions gross profit declined from the prior year quarter by$3.6 million , while Rail gross profit increased$1.6 million . The overall decline in gross profit margin was attributable to Infrastructure Solutions' gross margin, which was down 520 basis points compared to the prior year period, driven by the decline in revenues in the Coatings and Measurement business unit. Rail segment gross profit margin declined by 120 basis points due primarily to higher sales volume in Rail's distribution business during the current quarter. - Selling and administrative expenses in the second quarter increased
$0.9 million , or 4.8%, over the prior year quarter, primarily attributable to increases in professional services costs. Selling and administrative expenses as a percent of net sales decreased to 12.8%, a 50 basis point decline from the prior year quarter. - Net income from continuing operations for the 2021 second quarter was
$2.9 million , or$0.27 per diluted share, a$4.1 million reduction, or$0.39 per diluted share, from the prior year quarter. - Adjusted EBITDA from continuing operations1 for the 2021 second quarter was
$8.3 million , a 35.4% decrease compared to the prior year quarter. - Over the last four quarters, the Company reduced its net debt1 from
$48.2 million to$33.1 million as ofJune 30, 2021 , a$15.1 million reduction. The Company's adjusted net leverage ratio1 was 1.3x, with total available funding capacity of$81.6 million as ofJune 30, 2021 . - Second quarter new orders were
$138.6 million , up$4.6 million , or 3.5%, from the prior year quarter. New orders in the Infrastructure Solutions segment increased by$7.6 million compared to the prior year quarter, partially offset by a$2.9 million decline in Rail segment orders.
First Six Months Results
- Net sales for the six months ended
June 30, 2021 were$270.6 million , a$7.1 million increase, or 2.7%, compared to the prior year period. The sales increase was attributable to the Rail segment, which increased 6.8% from the prior year period, partially offset by a 2.3% decrease in Infrastructure Solutions. - Gross profit for the six months ended
June 30, 2021 was$45.0 million , a$6.3 million decrease, or 12.2%, from the prior year period. The consolidated gross profit margin of 16.6% decreased by 290 basis points compared to the prior year period, with the decline attributable to Infrastructure Solutions. Gross profit increased$2.0 million in the Rail segment. In Infrastructure Solutions, gross profit declined from the prior year by$8.2 million , driven by the decline in revenues in the Coatings and Measurement business unit. Infrastructure Solutions' gross profit margin was down by 670 basis points compared to the prior year period. - Selling and administrative expenses for the six months ended
June 30, 2021 decreased$1.4 million , or 3.6%, from the prior year period, primarily driven by decreases in personnel related costs, including travel-related costs. Selling and administrative expenses as a percent of net sales decreased to 14.0%, a 90 basis point decline from the prior year period. - Net income from continuing operations for the six months ended
June 30, 2021 was$1.6 million , or$0.15 per diluted share, a$5.3 million reduction, or$0.51 per diluted share, from the prior year period. - Adjusted EBITDA from continuing operations1 for the six months ended
June 30, 2021 was$11.1 million , a 37.4% decrease compared to the prior year period. - Free cash flow1 for the period was
$4.6 million , as compared to$2.4 million for the prior year. The$2.2 million increase in free cash flow was primarily as a result a reduction in capital expenditures when compared to the prior year period. - New orders were
$274.2 million for the six months endedJune 30, 2021 , a$9.4 million increase, or 3.6%, over the prior year period. New orders in Infrastructure Solutions increased$19.0 million , partially offset by a$9.6 million decline in the Rail segment compared to the prior year period.
Market Outlook
The Company’s backlog was at
Second Quarter Conference Call
A conference call replay will be available through
About
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, including the impact of any worsening of the pandemic, or the emergence of new variants of the virus, on our financial condition or results of operations, 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; a continued deterioration in the prices of oil and natural gas and the related impact on the upstream and midstream energy markets, which could result in further cost mitigation actions, including additional 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 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 COVID-19 pandemic; environmental matters, including any costs associated with any remediation and monitoring; 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 2020 disposition of the IOS Test and Inspection Services business and acquisition of
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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 |
Six Months Ended |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Sales of goods | $ | 138,309 | $ | 122,879 | $ | 238,855 | $ | 219,267 | ||||||||
Sales of services | 16,213 | 18,684 | 31,747 | 44,203 | ||||||||||||
Total net sales | 154,522 | 141,563 | 270,602 | 263,470 | ||||||||||||
Cost of goods sold | 115,087 | 100,177 | 199,212 | 180,656 | ||||||||||||
Cost of services sold | 13,274 | 13,248 | 26,399 | 31,554 | ||||||||||||
Total cost of sales | 128,361 | 113,425 | 225,611 | 212,210 | ||||||||||||
Gross profit | 26,161 | 28,138 | 44,991 | 51,260 | ||||||||||||
Selling and administrative expenses | 19,767 | 18,870 | 37,793 | 39,207 | ||||||||||||
Amortization expense | 1,470 | 1,413 | 2,935 | 2,843 | ||||||||||||
Interest expense - net | 861 | 1,089 | 1,732 | 1,901 | ||||||||||||
Other expense (income) - net | 70 | (2,306 | ) | 129 | (1,700 | ) | ||||||||||
Income from continuing operations before income taxes | 3,993 | 9,072 | 2,402 | 9,009 | ||||||||||||
Income tax expense from continuing operations | 1,139 | 2,102 | 818 | 2,044 | ||||||||||||
Income from continuing operations | 2,854 | 6,970 | 1,584 | 6,965 | ||||||||||||
Net loss attributable to noncontrolling interest | (22 | ) | — | (34 | ) | — | ||||||||||
Income from continuing operations attributable to |
2,876 | 6,970 | 1,618 | 6,965 | ||||||||||||
Loss from discontinued operations before income taxes | — | (7,456 | ) | — | (10,087 | ) | ||||||||||
Income tax benefit from discontinued operations | — | (1,009 | ) | — | (1,779 | ) | ||||||||||
Loss from discontinued operations | — | (6,447 | ) | — | (8,308 | ) | ||||||||||
Net income (loss) attributable to |
$ | 2,876 | $ | 523 | $ | 1,618 | $ | (1,343 | ) | |||||||
Basic income (loss) per common share: | ||||||||||||||||
From continuing operations | $ | 0.27 | $ | 0.66 | $ | 0.15 | $ | 0.66 | ||||||||
From discontinued operations | 0.00 | (0.61 | ) | 0.00 | (0.79 | ) | ||||||||||
Basic income (loss) per common share | $ | 0.27 | $ | 0.05 | $ | 0.15 | $ | (0.13 | ) | |||||||
Diluted income (loss) per common share: | ||||||||||||||||
From continuing operations | $ | 0.27 | $ | 0.66 | $ | 0.15 | $ | 0.66 | ||||||||
From discontinued operations | 0.00 | (0.61 | ) | 0.00 | (0.79 | ) | ||||||||||
Diluted income (loss) per common share | $ | 0.27 | $ | 0.05 | $ | 0.15 | $ | (0.13 | ) | |||||||
Average number of common shares outstanding - Basic | 10,619 | 10,557 | 10,601 | 10,518 | ||||||||||||
Average number of common shares outstanding - Diluted | 10,734 | 10,623 | 10,729 | 10,518 |
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
2021 |
2020 |
|||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 4,140 | $ | 7,564 | ||||
Accounts receivable - net | 78,356 | 58,298 | ||||||
Inventories - net | 114,236 | 116,460 | ||||||
Other current assets | 13,737 | 12,997 | ||||||
Total current assets | 210,469 | 195,319 | ||||||
Property, plant, and equipment - net | 60,526 | 62,085 | ||||||
Operating lease right-of-use assets - net | 15,010 | 16,069 | ||||||
Other assets: | ||||||||
20,428 | 20,340 | |||||||
Other intangibles - net | 34,038 | 36,897 | ||||||
Deferred tax assets | 38,452 | 38,481 | ||||||
Other assets | 1,018 | 1,204 | ||||||
TOTAL ASSETS | $ | 379,941 | $ | 370,395 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 65,837 | $ | 54,787 | ||||
Deferred revenue | 17,322 | 7,144 | ||||||
Accrued payroll and employee benefits | 7,714 | 9,182 | ||||||
Current portion of accrued settlement | 8,000 | 8,000 | ||||||
Current maturities of long-term debt | 124 | 119 | ||||||
Other accrued liabilities | 12,888 | 15,740 | ||||||
Current liabilities of discontinued operations | 77 | 330 | ||||||
Total current liabilities | 111,962 | 95,302 | ||||||
Long-term debt | 37,121 | 44,905 | ||||||
Deferred tax liabilities | 4,010 | 4,085 | ||||||
Long-term portion of accrued settlement | 22,000 | 24,000 | ||||||
Long-term operating lease liabilities | 12,482 | 13,516 | ||||||
Other long-term liabilities | 11,474 | 11,757 | ||||||
Stockholders' equity: | ||||||||
Common stock | 111 | 111 | ||||||
Paid-in capital | 43,650 | 44,583 | ||||||
Retained earnings | 166,725 | 165,107 | ||||||
(11,104 | ) | (12,703 | ) | |||||
Accumulated other comprehensive loss | (18,873 | ) | (20,268 | ) | ||||
180,509 | 176,830 | |||||||
Noncontrolling interest | 383 | — | ||||||
Total stockholders’ equity | 180,892 | 176,830 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 379,941 | $ | 370,395 |
Non-GAAP Disclosures
(Unaudited)
This earnings release discloses earnings before interest, taxes, depreciation, and amortization (“EBITDA”) from continuing operations, adjusted EBITDA from continuing operations, net debt, adjusted net leverage ratio, free cash flow, adjusted net income from continuing operations, and adjusted diluted earnings per share, which are non-GAAP financial measures. The Company believes that EBITDA from continuing operations 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, adjusted net income, and adjusted diluted earnings per share from continuing operations adjusts for certain charges to EBITDA from continuing operations that the Company believes are unusual, non-recurring, unpredictable, or non-cash. The Company believes that adjusted net income from continuing operations is useful to investors as a supplemental way to compare historical periods without regard to various charges that the Company believes are unusual, non-recurring, unpredictable, or non-cash. In 2020, the Company made adjustments to exclude the impact of a non-recurring benefit from a distribution associated with the Company’s interest in an unconsolidated partnership and restructuring activities and site relocation. In 2019, the Company made adjustments to exclude the impact of the
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 from continuing operations, adjusted EBITDA from continuing operations, net debt, adjusted net leverage ratio, and free cash flow are presented below (in thousands, except per share and ratio):
Three Months Ended |
Six Months Ended |
Trailing Twelve Months Ended |
Three Months Ended |
||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | |||||||||||||||||||||
Adjusted EBITDA From Continuing Operations Reconciliation | |||||||||||||||||||||||||||
Net income (loss) from continuing operations, as reported | $ | 2,854 | $ | 6,970 | $ | 1,584 | $ | 6,965 | $ | 20,442 | $ | 40,920 | $ | (1,270 | ) | ||||||||||||
Interest expense - net | 861 | 1,089 | 1,732 | 1,901 | 3,592 | 3,860 | 871 | ||||||||||||||||||||
Income tax expense (benefit) | 1,139 | 2,102 | 818 | 2,044 | (13,067 | ) | (24,838 | ) | (321 | ) | |||||||||||||||||
Depreciation expense | 2,018 | 1,963 | 4,008 | 3,898 | 7,960 | 7,866 | 1,990 | ||||||||||||||||||||
Amortization expense | 1,470 | 1,413 | 2,935 | 2,843 | 5,821 | 5,963 | 1,465 | ||||||||||||||||||||
Total EBITDA from continuing operations | 8,342 | 13,537 | $ | 11,077 | $ | 17,651 | $ | 24,748 | $ | 33,771 | $ | 2,735 | |||||||||||||||
Relocation and restructuring costs | — | 1,245 | — | 1,922 | 623 | 3,690 | — | ||||||||||||||||||||
Distribution from unconsolidated partnership | — | (1,874 | ) | — | (1,874 | ) | — | (1,874 | ) | — | |||||||||||||||||
— | — | — | — | — | 2,210 | — | |||||||||||||||||||||
Adjusted EBITDA from continuing operations | $ | 8,342 | $ | 12,908 | $ | 11,077 | $ | 17,699 | $ | 25,371 | $ | 37,797 | $ | 2,735 |
2021 |
2021 |
2020 |
||||||||||
Net Debt Reconciliation | ||||||||||||
Total debt | $ | 37,245 | $ | 36,793 | $ | 55,568 | ||||||
Less cash and cash equivalents | (4,140 | ) | (5,015 | ) | (7,387 | ) | ||||||
Net debt | $ | 33,105 | $ | 31,778 | $ | 48,181 |
2021 |
2020 |
|||||||
Adjusted Net Leverage Ratio Reconciliation | ||||||||
Net debt | $ | 33,105 | $ | 48,181 | ||||
Trailing twelve month adjusted EBITDA from continuing operations | 25,371 | 37,797 | ||||||
Adjusted net leverage ratio | 1.3x | 1.3x |
2021 |
2020 |
|||||||
Free Cash Flow Reconciliation | ||||||||
Net cash provided by continuing operating activities | $ | 6,842 | $ | 8,122 | ||||
Less capital expenditures on property, plant, and equipment | (2,248 | ) | (5,711 | ) | ||||
Free cash flow | $ | 4,594 | $ | 2,411 |
Three Months Ended |
Six Months Ended |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Adjusted Diluted Earnings Per Share From Continuing Operations Reconciliation | ||||||||||||||||
Net income from continuing operations, as reported | $ | 2,854 | $ | 6,970 | $ | 1,584 | $ | 6,965 | ||||||||
Relocation and restructuring costs, net of tax benefit of |
— | 927 | — | 1,438 | ||||||||||||
Distribution from unconsolidated partnership, net of tax expense of |
— | (1,428 | ) | — | (1,428 | ) | ||||||||||
Adjusted net income from continuing operations | $ | 2,854 | $ | 6,469 | $ | 1,584 | $ | 6,975 | ||||||||
Average number of common shares outstanding - Diluted, as reported | 10,734 | 10,623 | 10,729 | 10,518 | ||||||||||||
Diluted earnings per common share from continuing operations, as reported | $ | 0.27 | $ | 0.66 | $ | 0.15 | $ | 0.66 | ||||||||
Average number of common shares outstanding - Diluted, as reported | 10,734 | 10,623 | 10,729 | 10,518 | ||||||||||||
Diluted earnings per common share from continuing operations, as adjusted | $ | 0.27 | $ | 0.61 | $ | 0.15 | $ | 0.66 |
Source: L.B. Foster Company