L.B. Foster Q4 net sales of $139.1 million down 13.7%
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Fourth quarter net sales of $139.1 million decreased by $22 million, or 13.7%, compared to the prior year quarter due to a 16.5% decrease in Rail Products and Services segment sales and a 35.6% decline in Construction segment sales, partially offset by a 145.1% increase in Tubular and Energy Services segment sales driven by recent acquisitions.
Gross profit margin was 21.5% compared to 19.6% in the prior year quarter, an increase of 190 basis points. The increase was due to a fourth quarter 2014 $4.8 million warranty charge related to concrete railroad ties manufactured in our Grand Island, Nebraska facility which closed in February 2011.
Excluding this charge, fourth quarter 2014 gross profit would have been 22.6%. The resulting 110 basis point decline in gross profit margin was due principally to lower Tubular and Rail segment margins, partially offset by improved Construction segment margins.
Fourth quarter net income was $3.3 million, or $0.32 per diluted share, compared to $6.0 million, or $0.58 per diluted share, last year.
Excluding the previously mentioned gain on the sale of Tucson concrete tie manufacturing assets and the fourth quarter 2014 warranty charge, adjusted EPS would have been $0.19 per share in 2015 compared to $0.85 in 2014.
Selling and administrative expense increased by $3.0 million, or 13.8%, due entirely to the costs of businesses acquired after the third quarter of 2014.
Excluding acquired company costs, selling and administrative costs were lower by $0.6 million or 2.8% due principally to reductions in incentive compensation expense.
Interest expense was $1.2 million in the fourth quarter of 2015 compared to $0.1 million in the prior year quarter, the increase being attributable to borrowings related to the recent acquisitions.
Amortization expense increased by $2.1 million or 176.7% due to the acquisitions purchased after the third quarter of 2014.
Other income was $4.3 million compared to $0.4 million in the fourth quarter of the prior year. The increase is attributable principally to the gain on sale of the Tucson concrete tie manufacturing assets as well as foreign exchange gains.
Fourth quarter bookings were $114.7 million, a 0.3% decrease from the prior year fourth quarter, due to 2.4% and 46.4% declines in Rail and Construction segment orders, respectively, partially offset by a 233.2% increase in Tubular segment orders.
The increase in Tubular segment orders was due to orders generated by our recently acquired energy businesses.
The Company’s effective income tax rate was 35.2%, compared to 37.5% in the prior year quarter. The Company’s effective income tax rate compares favorably to the prior year quarter principally due to decreased non-deductible expenses and rate reductions in foreign jurisdictions.
Cash flow from operating activities for the fourth quarter of 2015 generated $42.5 million compared to $17.0 million in the fourth quarter of 2014.
Over $30.0 million of the 2015 cash flow related to working capital improvement, a portion of which represents a proportionate reduction in the Q3 to Q4 sequential sales decline. The remainder was due to improved working capital performance which underperformed in the first half of 2015.
Full year results
Net sales for 2015 increased by $17.3 million, or 2.9%, due to a 121.8% increase in Tubular segment sales, partially offset by a 12.2% decline in Rail segment sales and a 1.4% decline in Construction segment sales. The Tubular sales increase was due to the recent energy related acquisitions.
The Construction segment decrease was driven principally by the Piling Products division, partially offset by increases in the concrete products businesses.
Gross profit margin was 21.4%, 140 basis points higher than the prior year period. Included in the full year results are warranty-related charges of $1.1 million and $9.4 million in 2015 and 2014, respectively related to concrete railroad ties.
Excluding the charges incurred in both years, gross profit would have been 21.6% in both 2015 and 2014.
Selling and administrative expense increased by $12.8 million, or 16.1%, due entirely to costs from businesses recently acquired. Excluding the acquired businesses, selling and administrative expense declined by 1.0% due principally to reductions in incentive compensation expense.
Interest expense was $4.4 million in 2015 compared to $0.5 million in the comparable prior year period, the increase being attributable to borrowings related to the recent acquisitions.
Amortization expense increased by $7.6 million, or 160.8%, compared to the prior year due to several acquisitions transacted in 2014 and 2015.
In the third quarter of 2015, the Company recognized a non-cash goodwill impairment charge of $80.3 million, $69.9 million of which represented the full carrying value of goodwill related to the IOS acquisition and the remaining $10.4 million related to the Chemtec acquisition.
Net loss was $44.4 million or $4.33 per diluted share, compared to net income of $25.7 million, or $2.48 per diluted share, last year.
Excluding the impairment charge and the gain on the sale of concrete tie manufacturing assets in 2015 as well as the warranty related costs in both 2015 and 2014, net income would have been $18.7 million, or $1.81 per diluted share in 2015 compared to $31.3 million, or $3.02 per diluted share in 2014.
Adjusted EBITDA for 2015 was $59.0 million compared to $60.3 million, a decrease of $1.3 million or 2.1%, due to the operations of the Company’s core business, partially offset by contributions from recent acquisitions. Core business results were negatively impacted by lower steel prices and volume related deleveraging.
The Company’s effective income tax rate from continuing operations was 12.1%, compared to 34.3% in the prior year period.
The Company’s effective income tax rate was significantly impacted by the goodwill impairment charge, which related to both tax deductible and nondeductible goodwill. Excluding the impairment charge, the Company's effective tax rate for the current year period would have been 34.7%.
Cash generated by operating activities in 2015 was $56.2 million compared to $66.7 million of cash provided in the prior year. Capital expenditures were $14.9 million in 2015, compared to $17.1 million in the prior year.
the consolidated sales forecast for 2016 is expected to be between $610.0 million to $640.0 million. The company anticipates EBITDA to range from $48.0 million to $52.0 million and diluted EPS is expected to be between $1.00 and $1.40. ■