L.B. Foster pany(US:FSTR)2021-11-02 20:32Financial Data and Key Metrics Changes - Third quarter sales were $130.1 million, up $11.7 million or 9.9% over Q3 of last year [27] - Net income from continuing operations was $2.2 million or $0.21 per diluted share, compared to $16.6 million or $1.56 per diluted share last year [29] - Adjusted EBITDA totaled $4.4 million in the third quarter, a decrease of $3 million compared to Q3 of last year [29] - Year-to-date revenues were $400.7 million, compared to $381.8 million last year, representing an $18.8 million increase or 4.9% [33] Business Line Data and Key Metrics Changes - Rail segment revenues increased by $10 million year-over-year, primarily due to new rail deliveries and improved European operations [30] - Infrastructure Solutions segment's revenues were up $1.7 million, driven by increases in fabricated steel and precast concrete business units [31] - Coatings and Measurement business continued to face challenges, with a decline in gross profit margins [32] Market Data and Key Metrics Changes - New orders increased by almost $20 million compared to Q3 of 2020, with rail segment showing strong performance [20] - Backlog stood at $232 million, an increase of over $20 million compared to September 30, 2020 [25] - The company is experiencing inflationary pressures impacting raw material costs and wages, leading to margin erosion [17] Company Strategy and Development Direction - The company completed a comprehensive strategy reassessment, focusing on divesting non-core businesses and reallocating resources to growth areas [13][14] - The divestiture of the Piling Products business generated approximately $24 million in proceeds, which will be redeployed into stronger competitive positions [15] - The company aims to transform into a more innovation-focused provider of products and services to build and support infrastructure [57] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about long-term growth despite current challenges such as supply chain disruptions and inflation [59] - The Coatings and Measurement business is expected to remain weak, with no meaningful recovery projected in the near future [19] - The backlog continues to rise and stands well above pre-pandemic levels, indicating positive future demand [61] Other Important Information - The company revised its credit facility to provide more capacity and lower interest costs, positioning it for continued investment [16] - Cash flows used for operations totaled $6.8 million year-to-date, reflecting increased working capital needs [37] - The company anticipates further debt reduction during the fourth quarter due to seasonal reductions in working capital needs [46] Q&A Session Summary Question: Organic growth targets and cash flow targets - Management indicated that specific targets would be discussed in detail during the upcoming analyst meeting, but they have a good understanding of where value will come from [68] Question: Margin profile in new backlog work - Management confirmed that the divestiture of the piling business will improve margins moving forward, with significant backlog growth noted [70][72] Question: Decline in gross margin quantification - Management explained that the decline was primarily due to supply chain disruptions and inflation, with specific impacts from the Coatings and Measurement business [78][84] Question: Protecting against future supply chain disruptions - The company is actively assessing vulnerabilities in its supply chain and building up inventories to mitigate risks [86][88]