L.B. Foster Reports Fourth Quarter Operating Results of $0.65 Per Share On Sales Growth of 5.2%

PITTSBURGH, Feb. 8, 2013 /PRNewswire/ -- 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 2012 operating results which included a 5.2% increase in sales compared to the prior year fourth quarter and diluted earnings per share from continuing operations of $0.65.

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Fourth Quarter Results

• Fourth quarter net sales of $140.7 million increased by $7.0 million or 5.2% due to a 23.2% increase in Rail segment sales and a 48.6% improvement in Tubular segment sales, partially offset by a 27.8% decline in Construction segment sales.
• Gross profit margin was 19.6%, 20 basis points lower than the prior year, due principally to sales of lower cost inventory in the fourth quarter of 2011 that resulted in higher margins, partially offset by an incremental warranty charge in the fourth quarter of 2011 and by favorable LIFO adjustments in the fourth quarter of 2012 as compared to the prior year quarter.
• Fourth quarter income from continuing operations increased by 14.2% to $6.6 million or $0.65 per diluted share compared to income from continuing operations of $5.8 million or $0.57 per diluted share last year. 
• The December 2012 backlog was $210.9 million, 50.3% higher than December 2011.  Fourth quarter bookings were $115.6 million compared to $124.0 million last year, a decrease of 6.7%. 
• Selling and administrative expenses decreased by $0.4 million or 2.4% from the prior year, due principally to a reduction in costs related to concrete tie testing.
• The Company's income tax rate from continuing operations was 38.6% compared to 36.0% in the prior year.  The rate increase compared to the prior year was due to the mix of earnings attributable to higher rate jurisdictions in 2012 and certain discrete items recorded in 2012.
• Cash provided from continuing operating activities for the fourth quarter of 2012 was $1.6 million compared to $20.8 million in the fourth quarter of 2011.  The lower 2012 result was due principally to an increase in inventory that was related to a few key projects the Company was working on during the fourth quarter of 2012.

CEO Comments
Robert P. Bauer, L.B. Foster's President and Chief Executive Officer, had the following comments on the fourth quarter results, "The fourth quarter turned out to be a strong finish for the year.  I am particularly encouraged by the 19% increase in pretax income and our ability to reach 7.7% pretax profit margins in a quarter with just under $141 million in net sales.  This is a nice way to finish a year in which we recorded some substantial quality costs in the second and third quarters. Excluding those quality costs in both years, the Company would have reported full year pretax income from continuing operations of $45.0 million, an increase of 13.6% over 2011. This has put us in a position where I believe the Company has substantially improved its profitability, is generating nice cash flow, and is in a position to fund the strategic plans aimed at increasing our growth rate over the next five years." 

Fourth Quarter Business Segment Highlights

Rail  Segment
Rail segment sales increased 23.2% driven by strong sales in our rail distribution and transit products businesses.  We recognized approximately $15.0 million of sales from the $60 million Honolulu, HI elevated transit system project.  Gross profit margin declined principally due to sales of lower cost inventory in the fourth quarter of 2011 that resulted in a higher margin as well as a less favorable mix of product in 2012.  These items benefitting the prior year quarter were partially offset by an incremental warranty charge in the prior year quarter.

Construction Segment
Construction sales declined 27.8% in the quarter.  This was due principally to the piling product line and, to a lesser extent, the fabricated bridge business.  The lower margin was due principally to sales of lower cost inventory in the fourth quarter of 2011 that resulted in a higher margin.

Tubular Segment
Tubular products closed the year with strong fourth quarter sales and a backlog in line with the prior year.  Gross profit margins expanded slightly on the higher sales volume. 

Full Year Results

• Net sales for 2012 were $588.5 million, an increase of $13.2 million or 2.3%, due to a 17.5% increase in Rail segment sales and a 50.8% improvement in Tubular segment sales, partially offset by a 25.7% decline in Construction segment sales.
• Gross profit margin was 15.7%, 140 basis points lower than the prior year period due to $22.0 million ($1.28 per diluted share) of concrete tie warranty charges recorded in the second and third quarters of 2012 to reflect management's estimate of the cost it expects to incur to fulfill warranty claims related to concrete railroad ties, all of which were manufactured in our Grand Island, NE facility that was shut down in February 2011.  Gross profit in 2011 included $7.0 million ($0.45 per diluted share) of warranty charges and other unfavorable concrete tie gross profit adjustments.  Excluding the warranty and other costs from both years would result in gross profit margins of 19.4% in 2012 and 18.3% in 2011.
• Selling and administrative expenses increased $1.8 million or 2.8% from the prior year due primarily to increased concrete tie testing costs as well as salaries and benefits expense, partially offset by favorable bad debt expense. 
• The Company's year-to-date income tax rate from continuing operations was 38.0% compared to 32.4% in the prior year.  The rate increase compared to the prior year was due to the mix of earnings attributable to higher rate jurisdictions in 2012, certain discrete items recorded in 2012 and the receipt of state tax refunds in the prior year.
• Income from continuing operations was $14.8 million or $1.44 per diluted share compared to $22.1 million or $2.14 per diluted share in 2011. Excluding concrete tie charges from both years, earnings from continuing operations per diluted share would have been $2.72 and $2.59 in 2012 and 2011, respectively.
• Cash provided from continuing operating activities was $26.2 million for the twelve month period ended December 31, 2012 compared to $31.5 million in the prior year comparable period.  Capital expenditures were $7.2 million in 2012 as compared to $11.7 million in 2011.

2013 Outlook
The Company expects 2013 to be a year in which the construction business will turn positive.  Following a number of difficult quarters, order trends indicate that an upturn is likely despite continued pressures on government budgets.  Rail and tubular markets will grow with end customer demand varying depending on specific company strategies.  We expect our sales growth to be in the range of 5% to 6.5% for 2013.  This will be comprised of double digit growth for construction and low to mid-single digit growth for rail and tubular.

The Company is also planning to increase spending on capital projects for capacity and new product programs as well as for adding resources for new products and addressing under-served markets.  These investments support the company's strategic plan and address opportunities for growth and creating shareholder value.  Pre-tax margins are expected to be in the 7.6% to 7.8% range as increases in gross profit margins are directed toward strategic programs that will result in increases in selling and administrative expenses.

Robert Bauer will discuss more about the 2013 outlook during the Company's earnings conference call.

L.B. Foster Company will conduct a conference call and webcast to discuss its fourth quarter 2012 operating results on Friday, February 8, 2013 at 11:00am 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 replay can also be heard via telephone at +1-888-286-8010 by entering pass code 88397718.

This release may contain forward-looking statements that involve risks and uncertainties. Statements that do not relate strictly to historical or current facts are forward-looking. When we use the words "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. Actual results could differ materially from the results anticipated in any forward-looking statement.  Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company has based these forward-looking statements on current expectations and assumptions about future events. While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company's control. The risks and uncertainties that may affect the operations, performance and results of the Company's business and forward-looking statements include, but are not limited to, an economic slowdown in the markets we serve; a decrease in freight or passenger rail traffic; a lack of state or federal funding for new infrastructure projects; an increase in manufacturing or material costs; the ultimate number of concrete ties that will have to be replaced pursuant to the product claim; the outcome of the Inspector General subpoena; and those matters set forth in Item 8, Footnote 21, "Commitments and Contingent Liabilities" and in Item 1A, "Risk Factors" of the Company's Form 10-K for the year ended December 31, 2011, as updated by any subsequent Form 10-Qs.  The Company urges all interested parties to read these reports to gain a better understanding of the many business and other risks that the Company faces.  The forward-looking statements contained in this press release are made only as of the date hereof, and the Company assumes no obligation and does not intend to update or revise these statements, whether as a result of new information, future events or otherwise.