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L.B. Foster Reports Fourth Quarter Operating Results
PITTSBURGH, March 01, 2016 (GLOBE NEWSWIRE) -- 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 fourth quarter 2015 operating results, which included diluted earnings per share of $0.32 and cash flow provided by operating activities of $42.5 million. Other noteworthy items in the fourth quarter were:
Robert P. Bauer, L.B. Foster Company's President and Chief Executive Officer, commented, "Our operating results for the quarter continued to reflect the unfavorable impact the commodity cycle has had on the markets we serve. The weaker revenues and resulting deleveraging masked some outstanding work performed in our various business units. As we navigated through the challenges of weak market conditions coupled with the loss of business from Union Pacific Railroad ("UPRR"), our team did a great job of acting on working capital and manufacturing efficiency programs. We are acting with a sense of urgency as we enter new markets and look for ways to improve our processes to enhance efficiency and continue cost reductions. Improved working capital management produced strong cash flow which we used to pay down more than $38.7 million of debt. In addition, we sold our Tucson concrete tie manufacturing equipment following the decision to close the facility, which resulted in $2.8 million in cash and significant cost savings as we avoided having to dismantle and move the equipment."
Mr. Bauer continued, "Due to continued weakness in the North American freight rail market and upstream energy markets, our attention will remain on opportunities for business integration and reducing costs. The outlook for steel prices is also indicating little expected recovery in 2016 as well. This will lead to competitive pressure particularly in our rail and piling distribution businesses for another year. Consequently, we will begin 2016 by reducing capital spending plans as we remain focused on free cash flow. On the other hand, I'm very pleased to see that we're beginning the year with significantly higher backlog in our precision measurement systems and coated pipe services driven by midstream energy customers. We have shipments scheduled through the second quarter with production rates that are near capacity."
Mr. Bauer concluded by remarking, "As part of the Company's facility modernization and business efficiency program, we anticipate a second quarter 2016 "go-live" date for the new Enterprise Resource Planning system. Two manufacturing divisions have been thoroughly tested and meet the criteria for transition from our previous ERP system. The Company has dedicated a team of subject matter experts to this program to maximize the benefits of this powerful system. We are looking forward to getting this transition underway and to the benefits it will bring in the future."
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Rail Products and Services Segment
Rail sales decreased 16.5% due to lower sales across our rail product lines, with the exception of transit products, as a result of reduced volumes and lower steel prices. Reduced sales to UPRR accounted for more than half of the decline. Reduced sales volumes and lower steel prices in 2015 negatively impacted margins, however, gross profit margin was still buoyed by manufacturing efficiencies and cost reductions.
Construction Products Segment
Construction sales declined 35.6% in the quarter due to a significant reduction in piling product sales, partially offset by increased sales in our concrete products group. Gross profit margins improved due to increased margins for fabricated bridge products and concrete products, partially offset by a decline in margins for piling products.
Tubular and Energy Services Segment
Tubular sales improved by 145.1% in the quarter due to sales from our acquired energy businesses, partially offset by softer sales of threaded products. Tubular gross profit margins declined due principally to lower margins reported by the acquired businesses.
We expect global Rail segment sales will be flat to down 5% in 2016. The North American Class One railroads are projecting a 15% reduction in capital spending in 2016 as compared to 2015. The rail business must also overcome approximately $15.0 million in sales to UPRR that will not repeat in 2016. There is strength forecasted for the European rail business as investment resumes in our primary markets in 2016.
Construction segment sales are anticipated to be flat to up 5% in 2016. Our Construction segment is expecting another good year for concrete buildings and fabricated bridge products. Piling sales lagged in 2015 as a result of declining steel prices. These circumstances are putting pressure on non-sheet piling projects, and we anticipate this environment continuing into 2016.
The Tubular and Energy Services segment primarily participates in midstream and upstream sectors of the energy markets. The volatility in the upstream sector has resulted in most operators announcing deeper capital spending cuts to cope with the lower than expected price of oil. Most industry forecasts project the upstream market, where our test and inspection services acquisition participates, will remain weak in the first half and improve modestly in the second half. Backlog at the beginning of 2016 was up nearly 150% over the prior year in coated pipe services and precision measurement systems which primarily serve the midstream market. As a result, the Tubular and Energy Services segment, excluding the test and inspection services acquisition, are forecast to drive 5% to 15% sales growth. Test and inspection services sales are forecast to experience a 10% decline to a 10% increase, assuming no further erosion in the price of gas and oil.
As a result, the consolidated sales forecast for 2016 is expected to be between $610.0 million to $640.0 million. We anticipate EBITDA to range from $48.0 million to $52.0 million and diluted EPS is expected to be between $1.00 and $1.40. We expect our working capital performance to be on par with 2015 performance, and when combined with capital spending reductions, will lead to another year of solid free cash flow performance. Lastly, we are encouraged by the passage of the Fixing America's Surface Transportation ("FAST") Act in December 2015 as it provides more certainty regarding transportation funding, thereby allowing state and local governments to plan major projects. This five year $305 billion legislation should provide increased opportunities within the Rail and Construction segments, however, the opportunities derived from FAST may not present themselves until the second half of 2016 and beyond.
We anticipate the first quarter to be soft as our seasonally weak first quarter will be more effected than the full year by the weak upstream energy market that is negatively impacting our test and inspection services acquisition. Sales for the first quarter are forecast to be approximately $130.0 million. EBITDA is expected to be approximately $7.0 million and EPS is forecast to be a loss of between $0.05 and $0.10.
L.B. Foster Company will conduct a conference call and webcast to discuss its fourth quarter 2015 operating results on Tuesday, March 1, 2016 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 888-713-4214 and providing access code 93383958#.
See non-GAAP reconciliations below with respect to adjusted and other non-GAAP measures
Contact:
David Russo
Phone: 412.928.3417
Email: Investors@Lbfoster.com
Website: www.lbfoster.com
L.B. Foster Company
415 Holiday Drive
Pittsburgh, PA 15220
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