L.B. Foster pany(FSTR) - 2021 Q4 - Annual Report

Part I Business Overview L.B. Foster Company provides engineered products and services for infrastructure, operating across three realigned segments - The company realigned its operating segments in Q4 2021 into three new reporting structures: Rail, Technologies, and Services; Precast Concrete Products; and Steel Products and Measurement[15] - As of December 31, 2021, the company had 991 employees, with 721 in the U.S., 72 in Canada, and 192 in Europe[51] - In 2022, the company created a new full-time role to focus on and enhance its sustainability and environmental, social, and governance (ESG) initiatives[44] Net Sales by Business Segment (as a percentage of total) | Segment | 2021 | 2020 | | :--- | :--- | :--- | | Rail, Technologies, and Services | 58% | 56% | | Precast Concrete Products | 14% | 13% | | Steel Products and Measurement | 28% | 31% | | Total | 100% | 100% | Rail, Technologies, and Services - This segment provides products, solutions, and services for freight and passenger railroads globally through three business units[17] - The Global Friction Management unit manufactures products to reduce fuel consumption and extend asset life for rail customers[22] - The Technology Services and Solutions unit provides railroad condition monitoring systems to enable the 'digital railway'[23] Precast Concrete Products - This segment manufactures precast concrete products for the North American civil infrastructure market under its CXT® brand[24] Steel Products and Measurement - This segment provides custom engineered solutions for civil and energy infrastructure, including bridge products and pipeline measurement systems[25] - On September 24, 2021, the Company completed the sale of its Piling Products division, which was part of this segment[30] Risk Factors The company faces risks from the COVID-19 pandemic, operations, competition, finance, regulations, and international trade - COVID-19 Risks: The pandemic continues to adversely affect operations, supply chains, and demand, particularly in the midstream energy markets[69][70] - Business and Operational Risks: Key risks include managing acquisitions and divestitures, negative economic conditions, rising inflation and labor costs, and cybersecurity threats[71][76][77][78] - Financial Risks: The company's indebtedness could affect its business, and a decline in stock price could lead to write-downs of long-lived and intangible assets[90][92] - Legal, Tax, and Regulatory Risks: The company is dependent on governmental funding for infrastructure projects and is subject to various environmental and anti-corruption regulations[99][101][102] - International Risks: A portion of sales comes from international operations, exposing the company to currency fluctuations, political conditions, and trade restrictions[106][108] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[110] Properties The company owns or leases 39 facilities globally for sales, manufacturing, and warehousing operations Principal Owned and Leased Properties | Location | Function | Business Segment | Ownership | | :--- | :--- | :--- | :--- | | Bedford, PA | Bridge component fabricating plant | Steel Products and Measurement | Owned | | Birmingham, AL | Protective coatings facility | Steel Products and Measurement | Leased (exp. 2022) | | Columbia City, IN | Rail processing facility | Rail, Technologies, and Services | Owned | | Hillsboro, TX | Precast concrete facility | Precast Concrete Products | Owned | | Nampa, ID | Precast concrete facility | Precast Concrete Products | Leased (exp. 2029) | | Sheffield, United Kingdom | Track component facility | Rail, Technologies, and Services | Leased (exp. 2030) | | Spokane, WA | Concrete tie plant | Rail, Technologies, and Services | Leased (exp. 2025) | | Willis, TX | Protective coatings & measurement facilities | Steel Products and Measurement | Owned | Legal Proceedings Legal proceeding details are incorporated by reference from the Consolidated Financial Statements - Details on legal proceedings are incorporated by reference from Note 18 of the financial statements[114] Mine Safety Disclosures This item is not applicable to the company - Not applicable to the Company[115] Part II Market for Common Equity and Related Matters The company's stock (FSTR) trades on NASDAQ, with no dividends paid in 2021 and share repurchases in Q4 - The company's common stock is traded on the NASDAQ Global Select Market under the symbol FSTR with 287 common shareholders of record as of February 23, 2022[117] - No quarterly dividends were declared during 2021 and 2020[118] - In 2021, the company withheld 45,288 shares, valued at $732 thousand, to satisfy employee tax withholding obligations upon the vesting of restricted stock[121] Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | October 2021 | 356 | $15.50 | | November 2021 | — | — | | December 2021 | 13,027 | $13.75 | | Total | 13,383 | $13.80 | Management's Discussion and Analysis (MD&A) In 2021, sales grew 3.3% but gross profit and net income declined due to margin pressure and a prior-year tax benefit Executive Level Overview - Divested the Piling Products division, resulting in cash proceeds of $22.7 million and a pretax gain of $2.7 million[124] - Consolidated backlog as of December 31, 2021, was $210.2 million, a decrease of 15.3% from the prior year, primarily due to the Piling Products divestiture[130] 2021 Financial Highlights vs. 2020 | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $513.6M | $497.4M | +3.3% | | Net Income (cont. ops) | $3.5M | $25.8M | -86.6% | | Diluted EPS (cont. ops) | $0.33 | $2.42 | -86.4% | | Adjusted EBITDA | $18.7M | $32.0M | -41.6% | | Total Debt | $31.3M | $45.0M | -30.5% | | Net Debt | $20.9M | $37.5M | -44.3% | Results of Operations - The effective income tax rate was 24.4% in 2021, compared to (84.7)% in 2020, with the prior year impacted by a $15.8 million tax benefit[138] Net Sales by Segment (in thousands) | Segment | 2021 | 2020 | % Change | | :--- | :--- | :--- | :--- | | Rail, Technologies, and Services | $299,749 | $276,447 | 8.4% | | Precast Concrete Products | $70,990 | $63,314 | 12.1% | | Steel Products and Measurement | $142,881 | $157,650 | (9.4)% | | Total net sales | $513,620 | $497,411 | 3.3% | Gross Profit by Segment (in thousands) | Segment | 2021 | 2020 | % Change | 2021 Margin | 2020 Margin | | :--- | :--- | :--- | :--- | :--- | :--- | | Rail, Technologies, and Services | $57,249 | $55,263 | 3.6% | 19.1% | 20.0% | | Precast Concrete Products | $12,491 | $11,395 | 9.6% | 17.6% | 18.0% | | Steel Products and Measurement | $16,562 | $28,348 | (41.6)% | 11.6% | 18.0% | | Total gross profit | $86,302 | $95,006 | (9.2)% | 16.8% | 19.1% | Liquidity and Capital Resources - In August 2021, the company entered into a new five-year, $130 million revolving credit facility, extending the maturity to August 2026[163] Available Funding Capacity as of Dec 31, 2021 (in thousands) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $10,372 | | Net availability under revolving credit facility | $98,356 | | Total available funding capacity | $108,728 | Cash Flow Summary (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by continuing operating activities | $(810) | $20,549 | | Net cash provided by (used in) continuing investing activities | $17,822 | $(10,319) | | Net cash used in continuing financing activities | $(13,904) | $(15,277) | Critical Accounting Policies and Estimates - Income Taxes: Management judgment is required to assess the future realization of deferred tax assets and determine if a valuation allowance is needed[171] - Revenue Recognition: For long-term contracts, revenue is recognized over time using input or output measures, which involves significant estimates[177][179] - Goodwill: Goodwill is tested for impairment annually by comparing the fair value of a reporting unit to its carrying value[181][182] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements and the independent auditor's report for 2021 and 2020 - The independent auditor's report from Ernst & Young LLP expressed an unqualified opinion on the financial statements and internal controls[190][191][194] Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $179,479 | $195,319 | | Total Assets | $342,595 | $370,395 | | Total Current Liabilities | $86,194 | $95,302 | | Long-Term Debt | $31,153 | $44,905 | | Total Stockholders' Equity | $183,610 | $176,830 | | Total Liabilities & Equity | $342,595 | $370,395 | Consolidated Statement of Operations Highlights (in thousands) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Total Net Sales | $513,620 | $497,411 | | Gross Profit | $86,302 | $95,006 | | Operating Profit | $4,471 | $15,633 | | Income from Continuing Operations | $3,471 | $25,823 | | Net Income Attributable to L.B. Foster | $3,626 | $7,582 | Controls and Procedures Management concluded that the company's disclosure controls, procedures, and internal controls were effective as of year-end 2021 - Based on an evaluation as of December 31, 2021, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective[385] - Management assessed the effectiveness of internal control over financial reporting using the COSO framework and concluded that it was effective as of December 31, 2021[387] Part III Directors, Executive Officers, Compensation, and Corporate Governance Information on directors, compensation, and governance is incorporated by reference from the 2022 Proxy Statement - Information required by Items 10, 11, 12, 13, and 14 is incorporated by reference from the Company's 2022 Proxy Statement[7][400][402][404][405] - Information regarding the executive officers of the Company is set forth in Part I of this Annual Report on Form 10-K[400] Part IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the Form 10-K report - This section lists all financial statements, schedules (including Schedule II – Valuation and Qualifying Accounts), and exhibits filed with the report[407][408] Form 10-K Summary The company has elected not to include a voluntary summary of the Form 10-K report - The Company has elected not to include a summary under this item[412]