L.B. Foster pany(US:FSTR)2021-08-08 04:42Financial Data and Key Metrics Changes - Second quarter sales were $154.5 million, up $38.4 million or 33% from Q1 and up $13 million or 9.2% year-over-year [21] - Q2 gross profit decreased by $2 million, with a gross profit margin of 16.9%, a 290 basis point decrease from the previous year [21] - Net income from continuing operations was $2.9 million or $0.27 per diluted share, compared to $7 million or $0.66 per diluted share last year [22] - Adjusted EBITDA totaled $8.3 million, a decrease of $4.6 million compared to last year [22] Business Line Data and Key Metrics Changes - Rail segment revenue increased by $13.8 million year-over-year, driven by new rail deliveries and improved European operations [23] - Infrastructure Solutions revenue decreased by $900,000, primarily due to the Coatings and Measurement business facing challenges in the midstream energy market [24] - Precast concrete and fabricated steel businesses saw significant revenue increases, with precast concrete business at near-record levels, up 33% year-over-year [13][24] Market Data and Key Metrics Changes - Total company backlog declined by $19 million during the quarter, finishing at $253 million, which is 12% above last year [13] - The backlog for precast concrete business is at near-record levels, while the Coatings and Measurement business backlog has more than doubled since December [14][34] - The consolidated backlog stood at $253.2 million at the end of Q2, an increase of $28 million or 12.4% compared to a year ago [34] Company Strategy and Development Direction - The company is focusing on directing capital towards top priorities in attractive markets, particularly in infrastructure solutions [11] - There is an ongoing assessment of opportunities for bolt-on acquisitions in Rail Technologies and precast concrete, with a focus on core business areas [31][59] - The company is also exploring diversification into water infrastructure, moving away from energy-focused markets [53] Management's Comments on Operating Environment and Future Outlook - The company anticipates continued recovery from the pandemic, with expectations for infrastructure investment trends to benefit precast concrete and fabricated steel businesses [36] - Management remains cautious about the Coatings and Measurement business due to ongoing challenges in the midstream energy market [36] - The outlook for cash flow remains strong, with expected tax refunds and disciplined working capital management [37] Other Important Information - The company has a strong balance sheet, with net debt at $33 million, down from $48.2 million a year ago [29] - Selling and administrative expenses increased year-over-year by $900,000, primarily due to higher professional fees related to a strategic review [22] - The company is facing inflationary pressures, particularly in materials for bridge products, and is taking pricing actions to mitigate these impacts [17] Q&A Session Summary Question: Plans to expand capacity in precast concrete business - The company is exploring efforts to set up satellite facilities and investing in the Texas facility to support volume [40][41] Question: Expectations for gross margins in the second half of the year - Management indicated that the weakness in the Coatings and Measurement business is the primary driver affecting overall gross margins, but improvements in other areas may offset some challenges [42][43] Question: Status of the Cross London project team members - The project team is currently at about 75% capacity and is expected to reach 100% by Q3 [44] Question: Impact of the delta variant on operations - There have been no operational impacts from the delta variant, and the company is managing the pandemic's effects effectively [46] Question: Future of the Coatings and Measurement business - The company sees potential in certain parts of the Coatings and Measurement business but is cautious about significant improvements in the near term [47][48] Question: Consideration of share buybacks or dividends - The company is actively discussing capital allocation and may consider share buybacks or dividends as part of its overall capital structure strategy [56][57] Question: Focus areas for potential M&A - The company is focusing on core areas such as rail technologies and precast concrete for potential acquisitions [58][59]