L.B. Foster (NASDAQ: FSTR) reported Q4 EPS of ($3.97), versus $0.32 reported last year. Revenue for the quarter came in at $106.6 million versus the consensus estimate of $104 million.

• Fourth quarter net sales of $106.6 million decreased by $32.6 million, or 23.4%, compared to the prior year quarter due to a 27.2% decrease in Tubular segment sales and a 34.0% decline in Rail Products and Services (Rail) segment sales. Our United States-based rail track components businesses reported a combined sales reduction of $24.4 million in the fourth quarter, which accounted for 75% of the decline.
• Gross profit margin was 17.6%, 380 basis points lower than the prior year quarter. The reduction was due to declines across all segments, the most significant being the reduced Rail segment margin which was largely a result of inventory rationalization and a transit related warranty charge.
• Fourth quarter EBITDA1 (earnings before interest, taxes, depreciation, and amortization) was $3.0 million compared to $13.4 million in the fourth quarter of 2015.
• Selling and administrative expense decreased by $4.5 million, or 18.3%. The decrease was comprised of $1.9 million in cost reduction initiatives related to personnel and travel costs, $1.5 million related to incentive compensation and other strategic spending reductions of approximately $2.3 million. These reductions were partially offset by a $0.9 million charge related to the anticipated settlement of an employment dispute within the Tubular segment, and $0.3 million of increased litigation costs for the Union Pacific Rail Road (UPRR) matter.
• Interest expense was $2.2 million in the fourth quarter of 2016 compared to $1.2 million in the prior year quarter, the increase being attributable to an increase in interest rates in the current year period and a $0.4 million write-off of deferred financing costs resulting from the fourth quarter 2016 amendment.
• The Company’s income tax expense for the fourth quarter was $36.6 million. The Company recorded a valuation allowance of $29.7 million on its deferred tax assets. The Company also recorded deferred U.S. income taxes and foreign withholding taxes of $7.9 million in 2016, as management no longer intends to permanently reinvest a significant portion of its unremitted foreign earnings outside of the United States.
• Fourth quarter net loss was $40.9 million or $3.97 per diluted share compared to net income of $3.3 million, or $0.32 per diluted share, last year.
• Fourth quarter bookings were $113.4 million, a 1.2% decrease from the prior year quarter, due to a 36.3% decline in Tubular segment orders and an 8.2% reduction in Rail segment orders, partially offset by a 68.2% increase in Construction Products (Construction) segment orders.
• Cash flow provided by operating activities for the fourth quarter of 2016 generated $8.0 million compared to $42.5 million of cash generated in the fourth quarter of 2015. Over $30.0 million of the 2015 cash flow related to working capital improvement which was largely due to initiatives put in place to address underperformance in the first half of the year.
• In the fourth quarter, the Company repaid $26.0 million of cash that it had borrowed via short-term subsidiary advances in the third quarter to pay down debt as of September 30, 2016.
• In the fourth quarter, the Company executed a second amendment to its credit agreement that, among other items, reduced the capacity of the facility from $275 million to $225 million, which includes a $30 million term loan with a straight line amortization feature through maturity; the elimination of the leverage ratio through the second quarter of 2018; the creation of a Minimum EBITDA (as defined) covenant which gradually increases through the second quarter of 2018, after which, it is eliminated; the creation of a Fixed Charge Coverage Ratio of 1.0:1.0 which steps up to 1.25:1.0 in the first quarter of 2018.

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