L.B. Foster pany(FSTR) - 2021 Q3 - Quarterly Report

PART I. Financial Information Financial Statements This section presents L.B. Foster Company's unaudited condensed consolidated financial statements as of September 30, 2021, highlighting increased quarterly revenue, decreased net income due to a prior-year tax benefit, and minor shifts in assets and equity Condensed Consolidated Balance Sheets The balance sheet as of September 30, 2021, shows total assets of $359.8 million, a slight decrease from $370.4 million at year-end 2020, primarily driven by a reduction in inventories, while total stockholders' equity increased to $182.4 million from $176.8 million over the same period Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $194,613 | $195,319 | | Total Assets | $359,803 | $370,395 | | Total Current Liabilities | $97,938 | $95,302 | | Total Liabilities | $177,429 | $193,565 | | Total Stockholders' Equity | $182,374 | $176,830 | Condensed Consolidated Statements of Operations For the third quarter of 2021, total net sales increased to $130.1 million from $118.4 million in Q3 2020, but income from continuing operations fell sharply to $2.2 million from $16.6 million, largely due to a significant income tax benefit recorded in the prior-year quarter, resulting in diluted earnings per share from continuing operations of $0.21, compared to $1.56 in Q3 2020 Q3 and Nine Months Statement of Operations (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Net Sales | $130,053 | $118,365 | $400,655 | $381,835 | | Gross Profit | $22,276 | $22,061 | $67,267 | $73,321 | | Income from Continuing Operations | $2,240 | $16,578 | $3,824 | $23,543 | | Net Income Attributable to L.B. Foster | $2,342 | $6,830 | $3,960 | $5,487 | | Diluted EPS (Continuing Operations) | $0.21 | $1.56 | $0.36 | $2.21 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2021, net cash used in continuing operating activities was $6.8 million, a significant shift from the $16.2 million provided by operations in the same period of 2020, while net cash provided by investing activities was $18.9 million, driven by proceeds from an asset divestiture, compared to a use of $8.7 million in the prior year, and financing activities used $13.0 million, primarily for debt repayment Nine Months Cash Flow Summary (in thousands) | Cash Flow Activity | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by continuing operating activities | $(6,810) | $16,201 | | Net cash provided by (used in) continuing investing activities | $18,910 | $(8,688) | | Net cash used in continuing financing activities | $(13,030) | $(11,147) | | Net decrease in cash and cash equivalents | $(1,159) | $(4,867) | Notes to Condensed Consolidated Financial Statements The notes provide detailed disclosures on accounting policies and specific financial statement items, covering the company's two business segments (Rail Technologies and Services, Infrastructure Solutions), revenue recognition, discontinued operations from the 2020 sale of the Test and Inspection Services business, details on the new credit agreement, and commitments including a settlement with Union Pacific Railroad - The company now operates under two segments: Rail Technologies and Services and Infrastructure Solutions, following operational changes implemented at the end of 2020[25][27] Segment Performance - Q3 2021 vs Q3 2020 (in thousands) | Segment | Net Sales (Q3 2021) | Segment Profit (Q3 2021) | Net Sales (Q3 2020) | Segment Profit (Q3 2020) | | :--- | :--- | :--- | :--- | :--- | | Rail Technologies and Services | $73,942 | $3,555 | $63,988 | $3,742 | | Infrastructure Solutions | $56,111 | $3,484 | $54,377 | $2,375 | - As of September 30, 2021, the company's backlog of remaining performance obligations was approximately $231.7 million[40] - In August 2021, the company entered into a new credit agreement, increasing its revolving credit facility to $130 million and extending the maturity to August 2026[60] - The company is making installment payments to Union Pacific Railroad (UPRR) under a settlement agreement, with $28 million remaining to be paid from Q4 2021 through 2024[94][95] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's Q3 and nine-month 2021 financial performance, highlighting a 9.9% increase in Q3 net sales, a 150 basis point decline in gross profit margin, and the sale of the Piling Products division, while noting inflationary pressures and supply chain disruptions Results of the Quarter Q3 2021 net sales increased 9.9% driven by the Rail segment, but gross profit margin contracted by 150 basis points, selling and administrative expenses rose, and a $2.7 million gain from the Piling Products division sale was recorded, leading to a significant net income drop due to tax rate changes - On September 24, 2021, the company sold its Piling Products division for expected proceeds of $23.9 million, resulting in a net gain of $2.7 million[105][125] Q3 2021 vs Q3 2020 Performance Summary | Metric | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $130,053 | $118,365 | 9.9% | | Gross Profit | $22,276 | $22,061 | 1.0% | | Gross Profit Margin | 17.1% | 18.6% | -150 bps | | S&A Expenses | $20,056 | $17,066 | 17.5% | | Income from Continuing Operations | $2,240 | $16,578 | -86.5% | - The Rail Technologies and Services segment sales increased 15.6% YoY, driven by higher rail distribution sales and increased service revenue in Europe as pandemic restrictions eased[121] - The Infrastructure Solutions segment sales increased 3.2% YoY, though this was offset by a sales reduction in the Coatings and Measurement business unit due to unfavorable conditions in the midstream energy market[126] Liquidity and Capital Resources The company's primary liquidity sources are cash on hand, operating cash flow, and its $130 million revolving credit facility, with total debt decreasing to $32.5 million at September 30, 2021, from $45.0 million at year-end 2020, and net available borrowing capacity of $97.1 million, while cash used in operations for the first nine months of 2021 was $6.8 million, a reversal from cash provided in the prior year, mainly due to working capital fluctuations Available Funding Capacity as of Sep 30, 2021 (in thousands) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $6,405 | | Net availability under the revolving credit facility | $97,067 | | Total available funding capacity | $103,472 | - Total debt decreased to $32.5 million at September 30, 2021, from $45.0 million at December 31, 2020, primarily due to debt repayments following the Piling Products division divestiture[148][156] - Capital expenditures for the first nine months of 2021 were $3.6 million, a significant decrease from $7.7 million in the prior-year period[155] Quantitative and Qualitative Disclosures about Market Risk The company has omitted this section, stating that it is not applicable as L.B. Foster is a smaller reporting company - This item is not applicable to a smaller reporting company[163] Controls and Procedures Based on an evaluation as of September 30, 2021, the company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective, with no material changes to the company's internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[164] - No changes occurred during the nine months ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[165] PART II. Other Information Legal Proceedings This section refers to Note 16 of the Notes to Condensed Consolidated Financial Statements for information regarding legal proceedings - For details on legal proceedings, the report refers to Note 16 of the financial statements, which discusses the UPRR settlement and the Portland Harbor Superfund Site matter[168][93][97] Unregistered Sales of Equity Securities and Use of Proceeds The company reports minimal purchases of its own equity securities during the third quarter of 2021, with 20 shares purchased in September at an average price of $15.06 Equity Securities Purchases (Q3 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2021 | 0 | N/A | | August 2021 | 0 | N/A | | September 2021 | 20 | $15.06 |