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PITTSBURGH, Nov. 07, 2024 (GLOBE NEWSWIRE) -- L.B. Foster Company (Nasdaq: FSTR), a global technology solutions provider of products and services for the rail and infrastructure markets (the "Company"), today reported its 2024 third quarter operating results2.
CEO Comments
John Kasel, President and Chief Executive Officer, commented "As expected, we started the second half of the year with a strong quarter of profitability expansion and cash generation. These results are a clear indication that our strategy to transform the profitability profile of our business portfolio remains on track. While sales were down 5.4% year over year, gross margins improved to 23.8%, the highest level we've seen in over 10 years. Net income in the quarter was $35.9 million and reflected a $30.0 million benefit as we released our tax valuation allowance in line with the improving profitability trends and outlook, and adjusted EBITDA grew 16.4% to $12.3 million. We also had an exceptional cash generation quarter, with cash provided by operations totaling $24.7 million, up from $18.6 million last year. The operating cash was deployed to fund $3.1 million in capital programs supporting our growth initiatives and $2.6 million to repurchase 126,688 common shares in the quarter. This level of repurchases represents a 262% increase versus the average of the two previous quarters in 2024. Remaining funds were used to reduce our net debt by $17.7 million to $65.4 million at quarter end and down $3.3 million from $68.7 million last year. The lower borrowings and improved profitability translated into gross leverage per our credit facility of 1.9x at quarter end, which was improved compared to both 2.7x at the start of the quarter and 2.0x last year."
Mr. Kasel continued, "Turning to our segment results, the sales decline in the quarter was realized primarily in the Rail segment, with continuing commercial softness in the domestic rail market adversely impacting both sales and margins in our Rail Products business. However, in line with our strategy, we delivered solid growth and margin expansion in our Rail Technologies growth platforms, including sales growth of 21.2% for Global Friction Management and 49.1% for Total Track Monitoring. Our UK services and solutions business also continued to recover from a challenging commercial environment in 2023, contributing to improved Rail segment sales and margin growth year over year. Infrastructure organic sales were also down slightly versus last year after considering the impact of the bridge grid deck product line exit announced in the 2023 third quarter. Despite the organic sales decline, Infrastructure margins improved versus last year's adjusted margins as strong growth and margin expansion in our Precast Concrete business offset the margin impact of lower sales in Steel Products, the latter being primarily driven by weaker demand for Protective Coatings. Overall, we're pleased with the improved results driven by our strategy to invest in our growth platforms of Rail Technologies and Precast Concrete which is delivering improved profitability and returns."
Mr. Kasel concluded, "While we saw a modest uptick in our trailing-twelve-month book-to-bill ratio in the quarter, market conditions remain choppy across the portfolio. Demand in our Precast Concrete and Rail Technologies growth platforms is robust, highlighted by a 41.3% increase in third quarter Global Friction Management orders versus last year. The recovery of market conditions for our UK business remains on track, and we're starting to see increased quoting and project activity in the domestic rail market which should translate to improved demand for Rail Products moving into 2025. However, demand within Steel Products remains constrained in the short term, specifically for bridge and pipeline coating work. Accordingly, we've reduced our sales guidance slightly for 2024 while maintaining the mid-point of our adjusted EBITDA outlook reflecting the improved portfolio efficiency. The mid-point of our guidance implies slightly lower sales in the fourth quarter versus last year, with adjusted EBITDA growth of approximately 50% year over year. We also increased our free cash flow outlook for the year, and now expect to generate approximately $30 million to $35 million in the second half of the year on an improved working capital outlook and slightly lower capital spending. The improved cash generation comes even as we fund restructuring, pension settlement and growth capital spending initiatives as well as the final $4.0 million of our annual $8.0 million Union Pacific settlement payment. We look forward to a strong finish to the year, as we continue to build momentum focusing on profitable growth and returns moving into 2025."
1See "Non-GAAP Financial Measures" and "Non-GAAP Disclosures" at the end of this press release for a description of and information regarding adjusted sales, adjusted organic sales, adjusted gross profit, adjusted EBITDA, Gross Leverage Ratio per the Company's credit agreement, net debt, new orders, backlog, book-to-bill ratio, free cash flow, and related reconciliations to their most comparable GAAP financial measure.
2As reported in the Company's form 8-K filed on October 8, 2024, the Company corrected certain errors in previously reported 2024 quarterly financials, and certain immaterial errors in 2023 previously reported financials. All comparisons are based on the corrected historical results.
2024 Financial Guidance Update:
The Company's financial guidance follows:
| Updated | Previous | |||||||||||||||
| $ in thousands, unless otherwise noted: | Low | High | Low | High | ||||||||||||
| Net sales | $ | 530,000 | $ | 540,000 | $ | 525,000 | $ | 550,000 | ||||||||
| Adjusted EBITDA | $ | 34,500 | $ | 36,500 | $ | 34,000 | $ | 37,000 | ||||||||
| Capital spending as a percent of sales | 2.0 | % | 2.5 | % | 2.5 | % | 2.5 | % | ||||||||
| Free cash flow1 | $ | — | $ | 5,000 | Breakeven | |||||||||||
Third Quarter Consolidated Highlights
The Company’s third quarter performance highlights are reflected below:
| Three Months Ended September 30, | Change | Percent Change | ||||||||||||||
| 2024 | 2023 | 2024 vs. 2023 | 2024 vs. 2023 | |||||||||||||
| $ in thousands, unless otherwise noted: | (Unaudited) | |||||||||||||||
| Net sales | $ | 137,466 | $ | 145,345 | $ | (7,879 | ) | (5.4 | ) | % | ||||||
| Gross profit | 32,758 | 27,417 | 5,341 | 19.5 | ||||||||||||
| Gross profit margin | 23.8 | % | 18.9 | % | 490 bps | 26.0 | ||||||||||
| Selling and administrative expenses | $ | 24,289 | $ | 24,421 | $ | (132 | ) | (0.5 | ) | |||||||
| Selling and administrative expenses as a percent of sales | 17.7 | % | 16.8 | % | 90 bps | 5.4 | ||||||||||
| Amortization expense | 1,146 | 1,379 | (233 | ) | (16.9 | ) | ||||||||||
| Operating income | $ | 7,323 | $ | 1,617 | $ | 5,706 | ** | |||||||||
| Net income attributable to L.B. Foster Company | 35,905 | 515 | 35,390 | ** | ||||||||||||
| Adjusted EBITDA | 12,327 | 10,593 | 1,734 | 16.4 | ||||||||||||
| New orders | 95,973 | 100,263 | (4,290 | ) | (4.3 | ) | ||||||||||
| Backlog | 209,005 | 243,219 | (34,214 | ) | (14.1 | ) | ||||||||||
**Results of this calculation not considered meaningful.
Third Quarter Business Results by Segment
Rail, Technologies, and Services Segment
| Three Months Ended September 30, | Change | Percent Change | ||||||||||||||
| $ in thousands, unless otherwise noted: | 2024 | 2023 | 2024 vs. 2023 | 2024 vs. 2023 | ||||||||||||
| Net sales | $ | 79,498 | $ | 86,866 | $ | (7,368 | ) | (8.5 | ) | % | ||||||
| Gross profit | $ | 18,471 | $ | 17,229 | $ | 1,242 | 7.2 | |||||||||
| Gross profit margin | 23.2 | % | 19.8 | % | 340 bps | 17.1 | ||||||||||
| Segment operating income | $ | 4,933 | $ | 3,866 | $ | 1,067 | 27.6 | |||||||||
| Segment operating income margin | 6.2 | % | 4.5 | % | 170 bps | 39.4 | ||||||||||
| New orders | $ | 52,675 | $ | 49,818 | $ | 2,857 | 5.7 | |||||||||
| Backlog | $ | 88,663 | $ | 93,632 | $ | (4,969 | ) | (5.3 | ) | |||||||
Infrastructure Solutions Segment
| Three Months Ended September 30, | Change | Percent Change | ||||||||||||||
| $ in thousands, unless otherwise noted: | 2024 | 2023 | 2024 vs. 2023 | 2024 vs. 2023 | ||||||||||||
| Net sales | $ | 57,968 | $ | 58,479 | $ | (511 | ) | (0.9 | ) | % | ||||||
| Gross profit | $ | 14,287 | $ | 10,188 | $ | 4,099 | 40.2 | |||||||||
| Gross profit margin | 24.6 | % | 17.4 | % | 720 bps | 41.5 | ||||||||||
| Segment operating income | $ | 5,110 | $ | 799 | $ | 4,311 | ** | |||||||||
| Segment operating income margin | 8.8 | % | 1.4 | % | 740 bps | ** | ||||||||||
| New orders | $ | 43,298 | $ | 50,445 | $ | (7,147 | ) | (14.2 | ) | |||||||
| Backlog | $ | 120,342 | $ | 149,587 | $ | (29,245 | ) | (19.6 | ) | |||||||
**Results of this calculation not considered meaningful.
First Nine Months Consolidated Highlights
The Company's first nine months performance highlights are presented below.
| Nine Months Ended September 30, | Change | Percent Change | ||||||||||||||
| 2024 | 2023 | 2024 vs. 2023 | 2024 vs. 2023 | |||||||||||||
| $ in thousands, unless otherwise noted: | (Unaudited) | |||||||||||||||
| Net sales | $ | 402,582 | $ | 408,867 | $ | (6,285 | ) | (1.5 | ) | % | ||||||
| Gross profit | 89,447 | 83,335 | 6,112 | 7.3 | ||||||||||||
| Gross profit margin | 22.2 | % | 20.4 | % | 180 bps | 8.8 | ||||||||||
| Selling and administrative expenses | $ | 71,977 | $ | 70,360 | $ | 1,617 | 2.3 | |||||||||
| Selling and administrative expenses as a percent of sales | 17.9 | % | 17.2 | % | 70 bps | 4.1 | ||||||||||
| (Gain) on sale of former joint venture facility | (3,477 | ) | — | (3,477 | ) | ** | ||||||||||
| Amortization expense | 3,486 | 4,119 | (633 | ) | (15.4 | ) | ||||||||||
| Operating income | $ | 17,461 | $ | 8,856 | $ | 8,605 | 97.2 | |||||||||
| Net income attributable to L.B. Foster Company | 43,188 | 1,894 | 41,294 | ** | ||||||||||||
| Adjusted EBITDA | 26,338 | 25,676 | 662 | 2.6 | ||||||||||||
| New orders | 399,351 | 423,521 | (24,170 | ) | (5.7 | ) | ||||||||||
| Backlog | 209,005 | 243,219 | (34,214 | ) | (14.1 | ) | ||||||||||
**Results of this calculation not considered meaningful.
Third Quarter Conference Call
L.B. Foster Company will conduct a conference call and webcast to discuss its third quarter 2024 operating results on Thursday, November 7, 2024 at 11:00 AM ET. The call will be hosted by Mr. John Kasel, President and Chief Executive Officer. Listen via audio and access the slide presentation on the L.B. Foster website: www.lbfoster.com, under the Investor Relations page. A conference call replay will be available through November 14, 2024 via webcast through L.B. Foster’s Investor Relations page of the company’s website.
Those interested in participating in the question-and-answer session may register for the call at https://register.vevent.com/register/BIc2109af233784d59b00d7032ced0b660 to receive the dial-in numbers and unique PIN to access the call. The registration link will also be available on the Company’s Investor Relations page of its website.
About L.B. Foster Company
Founded in 1902, L.B. Foster Company is a global technology solutions provider of engineered, manufactured products and services that builds and supports infrastructure. The Company’s innovative engineering and product development solutions address the safety, reliability, and performance needs of its customers' most challenging requirements. The Company maintains locations in North America, South America, Europe, and Asia. For more information, please visit www.lbfoster.com.
Non-GAAP Financial Measures
This press release contains financial measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States ("GAAP"). These non-GAAP financial measures are provided as additional information for investors. The presentation of this additional information is not meant to be considered in isolation or as a substitute for GAAP measures. For definitions of the non-GAAP financial measures used in this press release and reconciliations to the most directly comparable respective GAAP measures, see the “Non-GAAP Disclosures” section below.
The Company has not reconciled the forward-looking adjusted EBITDA and free cash flow to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability and low visibility with respect to certain costs, the most significant of which are acquisition and divestiture-related costs, impairment expense, and changes in operating assets and liabilities. These underlying expenses and others that may arise during the year are potential adjustments to future earnings. The Company expects the variability of these items to have a potentially unpredictable, and a potentially significant, impact on our future GAAP financial results.
The Company believes free cash flow is useful information to investors as it provides insight on cash generated by operations, less capital expenditures, which we believe to be helpful in assessing the Company's long-term ability to pursue growth and investment opportunities as well as service its financing obligations and generate capital for shareholders. Additionally, the Company's annual incentive plans for management provide for the utilization of free cash flow as a metric for measuring cash-generation performance in determining annual variable incentive achievement.
The Company defines new orders as a contractual agreement between the Company and a third-party in which the Company will, or has the ability to, satisfy the performance obligations of the promised products or services under the terms of the agreement. The Company defines backlog as contractual commitments to customers for which the Company’s performance obligations have not been met, including with respect to new orders and contracts for which the Company has not begun any performance. Management utilizes new orders and backlog to evaluate the health of the industries in which the Company operates, the Company’s current and future results of operations and financial prospects, and strategies for business development. The Company believes that new orders and backlog are useful to investors as supplemental metrics by which to measure the Company’s current performance and prospective results of operations and financial performance. The Company defines book-to-bill ratio as new orders divided by revenue. The Company believes this is a useful metric to assess supply and demand, including order strength versus order fulfillment.
The Company views its Gross Leverage Ratio per its credit agreement, as defined in the Second Amendment to its Fourth Amended and Restated Credit Agreement dated August 12, 2022, as an important indication of the Company's financial health and believes it is useful to investors as an indicator of the Company's ability to service its existing indebtedness and borrow additional funds for its investing and operational needs.
Forward-Looking Statements
This release may contain “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Forward-looking statements provide management's current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Sentences containing words such as “believe,” “intend,” “plan,” “may,” “expect,” “should,” “could,” “anticipate,” “estimate,” “predict,” “project,” or their negatives, or other similar expressions of a future or forward-looking nature generally should be considered forward-looking statements. Forward-looking statements in this earnings release are based on management's currentexpectations and assumptions about future events that involve inherent risks and uncertainties and may concern, among other things, the Company’s expectations relating to our strategy, goals, projections, and plans regarding our financial position, liquidity, capital resources, and results of operations and decisions regarding our strategic growth initiatives, market position, and product development. 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 Company cautions readers that various factors could cause the actual results of the Company to differ materially from those indicated by forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Among the factors that could cause the actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties related to: a continuation or worsening of the adverse economic conditions in the markets we serve, including recession, the continued volatility in the prices for oil and gas, project delays, and budget shortfalls, or otherwise; volatility in the global capital markets, including interest rate fluctuations, which could adversely affect our ability to access the capital markets on terms that are favorable to us; restrictions on our ability to draw on our credit agreement, including as a result of any future inability to comply with restrictive covenants contained therein; a decrease in freight or transit rail traffic; environmental matters and the impact of recently-finalized environmental regulations, including any costs associated with any remediation and monitoring of such matters; the risk of doing business in international markets, including compliance with anti-corruption and bribery laws, foreign currency fluctuations and inflation, global shipping disruptions, and trade restrictions or embargoes; our ability to effectuate our strategy, including cost reduction initiatives, and our ability to effectively integrate acquired businesses or to divest businesses, such as the recent dispositions of the Track Components, Chemtec, and Ties businesses, and acquisitions of the Skratch Enterprises Ltd., Intelligent Video Ltd., VanHooseCo Precast LLC, and Cougar Mountain Precast, LLC businesses and to realize anticipated benefits; costs of and impacts associated with shareholder activism; the timeliness and availability of materials from our major suppliers, as well as the impact on our access to supplies of customer preferences as to the origin of such supplies, such as customers’ concerns about conflict minerals; labor disputes; cybersecurity risks such as data security breaches, malware, ransomware, “hacking,” and identity theft, which could disrupt our business and may result in misuse or misappropriation of confidential or proprietary information, and could result in the disruption or damage to our systems, increased costs and losses, or an adverse effect to our reputation, business or financial condition; the continuing effectiveness of our ongoing implementation of an enterprise resource planning system; changes in current accounting estimates and their ultimate outcomes; the adequacy of internal and external sources of funds to meet financing needs, including our ability to negotiate any additional necessary amendments to our credit agreement or the terms of any new credit agreement, the Company’s ability to manage its working capital requirements and indebtedness; domestic and international taxes, including estimates that may impact taxes; domestic and foreign government regulations, including tariffs; our ability to maintain effective internal controls over financial reporting (“ICFR”) and disclosure controls and procedures, including our ability to remediate any existing material weakness in our ICFR and the timing of any such remediation, as well as our ability to reestablish effective disclosure controls and procedures; the results of the UK’s 2024 parliamentary election, uncertainties related to the U.S. 2024 Presidential election and any corresponding changes to policy or other changes that could affect UK or U.S. business conditions; other geopolitical conditions, including the ongoing conflicts between Russia and Ukraine, conflicts in the Middle East, and increasing tensions between China and Taiwan; a lack of state or federal funding for new infrastructure projects; an increase in manufacturing or material costs; the loss of future revenues from current customers; any future global health crises, and the related social, regulatory, and economic impacts and the response thereto by the Company, our employees, our customers, and national, state, or local governments, including any governmental travel restrictions; and risks inherent in litigation and the outcome of litigation and product warranty claims. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated. Significant 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, those set forth under Item 1A, “Risk Factors,” and elsewhere in our Annual Report on Form 10-K/A for the year ended December 31, 2023, as amended on November 1, 2024, or as updated and/or amended by our other current or periodic filings with the Securities and Exchange Commission.
The forward-looking statements in this release are made as of the date of this release and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by the federal securities laws.
Investor Relations:
Lisa Durante
(412) 928-3400
investors@lbfoster.com
L.B. Foster Company
415 Holiday Drive
Suite 100
Pittsburgh, PA 15220
| L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) | ||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Sales of goods | $ | 119,322 | $ | 131,065 | $ | 346,202 | $ | 361,770 | ||||||||
| Sales of services | 18,144 | 14,280 | 56,380 | 47,097 | ||||||||||||
| Total net sales | 137,466 | 145,345 | 402,582 | 408,867 | ||||||||||||
| Cost of goods sold | 89,286 | 103,868 | 264,543 | 282,627 | ||||||||||||
| Cost of services sold | 15,422 | 14,060 | 48,592 | 42,905 | ||||||||||||
| Total cost of sales | 104,708 | 117,928 | 313,135 | 325,532 | ||||||||||||
| Gross profit | 32,758 | 27,417 | 89,447 | 83,335 | ||||||||||||
| Selling and administrative expenses | 24,289 | 24,421 | 71,977 | 70,360 | ||||||||||||
| (Gain) on sale of former joint venture facility | — | — | (3,477 | ) | — | |||||||||||
| Amortization expense | 1,146 | 1,379 | 3,486 | 4,119 | ||||||||||||
| Operating income | 7,323 | 1,617 | 17,461 | 8,856 | ||||||||||||
| Interest expense - net | 1,358 | 1,442 | 3,976 | 4,404 | ||||||||||||
| Other (income) expense - net | (188 | ) | (151 | ) | (525 | ) | 2,782 | |||||||||
| Income before income taxes | 6,153 | 326 | 14,010 | 1,670 | ||||||||||||
| Income tax benefit | (29,745 | ) | (121 | ) | (29,110 | ) | (99 | ) | ||||||||
| Net income | 35,898 | 447 | 43,120 | 1,769 | ||||||||||||
| Net loss attributable to noncontrolling interest | (7 | ) | (68 | ) | (68 | ) | (125 | ) | ||||||||
| Net income attributable to L.B. Foster Company | $ | 35,905 | $ | 515 | $ | 43,188 | $ | 1,894 | ||||||||
| Per share data attributable to L.B. Foster shareholders: | ||||||||||||||||
| Basic earnings per common share | $ | 3.35 | $ | 0.05 | $ | 4.01 | $ | 0.18 | ||||||||
| Diluted earnings per common share | $ | 3.27 | $ | 0.05 | $ | 3.91 | $ | 0.17 | ||||||||
| Average number of common shares outstanding - Basic | 10,718 | 10,813 | 10,757 | 10,804 | ||||||||||||
| Average number of common shares outstanding - Diluted | 10,992 | 10,973 | 11,059 | 10,895 | ||||||||||||
| L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) | ||||||||
| September 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 3,135 | $ | 2,560 | ||||
| Accounts receivable - net | 66,718 | 53,484 | ||||||
| Contract assets - net | 20,186 | 29,489 | ||||||
| Inventories - net | 73,877 | 73,111 | ||||||
| Other current assets | 9,538 | 8,711 | ||||||
| Total current assets | 173,454 | 167,355 | ||||||
| Property, plant, and equipment - net | 75,732 | 75,579 | ||||||
| Operating lease right-of-use assets - net | 12,604 | 14,905 | ||||||
| Other assets: | ||||||||
| Goodwill | 32,880 | 32,587 | ||||||
| Other intangibles - net | 16,020 | 19,010 | ||||||
| Deferred tax assets | 30,045 | — | ||||||
| Other assets | 3,809 | 2,965 | ||||||
| TOTAL ASSETS | $ | 344,544 | $ | 312,401 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 40,008 | $ | 39,500 | ||||
| Deferred revenue | 9,720 | 12,479 | ||||||
| Accrued payroll and employee benefits | 11,243 | 16,978 | ||||||
| Current portion of accrued settlement | 4,000 | 8,000 | ||||||
| Current maturities of long-term debt | 167 | 102 | ||||||
| Other accrued liabilities | 11,251 | 17,442 | ||||||
| Total current liabilities | 76,389 | 94,501 | ||||||
| Long-term debt | 68,377 | 55,171 | ||||||
| Deferred tax liabilities | 1,134 | 1,232 | ||||||
| Long-term operating lease liabilities | 9,923 | 11,865 | ||||||
| Other long-term liabilities | 6,285 | 6,797 | ||||||
| Stockholders' equity: | ||||||||
| Common stock | 111 | 111 | ||||||
| Paid-in capital | 43,385 | 43,111 | ||||||
| Retained earnings | 167,821 | 124,633 | ||||||
| Treasury stock | (8,994 | ) | (6,494 | ) | ||||
| Accumulated other comprehensive loss | (20,472 | ) | (19,250 | ) | ||||
| Total L.B. Foster Company stockholders’ equity | 181,851 | 142,111 | ||||||
| Noncontrolling interest | 585 | 724 | ||||||
| Total stockholders’ equity | 182,436 | 142,835 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 344,544 | $ | 312,401 | ||||
Non-GAAP Disclosures
(Unaudited)
This earnings release discloses earnings before interest, taxes, depreciation, and amortization (“EBITDA”), adjusted EBITDA, net debt, and organic results adjusted for the impact of 2024 and 2023 divestiture and product line exit activity. The Company believes that EBITDA is useful to investors as a supplemental way to evaluate the ongoing operations of the Company’s business since EBITDA may enhance investors’ ability to compare historical periods as it adjusts for the impact of financing methods, tax law and strategy changes, and depreciation and amortization. In addition, EBITDA is a financial measure that management and the Company’s Board of Directors use in their financial and operational decision-making and in the determination of certain compensation programs. Adjusted EBITDA adjusts for certain charges to EBITDA from continuing operations that the Company believes are unusual, non-recurring, unpredictable, or non-cash.
In the three and nine months ended September 30, 2024, the Company made adjustments to exclude gains on asset sales, restructuring costs, and a legal settlement. In the three and nine months ended September 30, 2023, the Company made adjustments to exclude the loss on a divestiture, expenses from the exit of the bridge grid deck product line, bad debt provision for customer bankruptcy, and contingent consideration adjustments associated with the VanHooseCo acquisition. The Company believes the results adjusted to exclude these items are useful to investors as these items are non-routine in nature.
The Company views net debt, which is total debt less cash and cash equivalents, as an important metric of the operational and financial health of the organization and believes it is useful to investors as indicators of its ability to incur additional debt and to service its existing debt.
The Company excluded the impact of certain non-routine costs during the three and nine months ended September 30, 2023 as adjusting for these items provides visibility to the performance of its base business that is useful to investors.
Organic sales growth (decline) is a non-GAAP financial measure of sales growth (decline) (which is the most directly comparable GAAP measure) excluding the effects of divestiture and product line exit activities. Management believes this measure provides investors with a supplemental understanding of underlying trends by providing sales growth on a consistent basis. Management provides organic sales growth (decline) at the consolidated and segment levels. Portfolio changes are considered based on their comparative impact over the last three months, to determine the differences in 2023 versus 2024 results due to these transactions.
Non-GAAP financial measures are not a substitute for GAAP financial results and should only be considered in conjunction with the Company’s financial information that is presented in accordance with GAAP. Quantitative reconciliations of EBITDA, adjusted EBITDA, net debt, and adjustments to segment results to exclude portfolio actions and one-time adjustments made (in thousands, except for percentages and ratios) are as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Adjusted EBITDA Reconciliation | ||||||||||||||||
| Net income, as reported | $ | 35,898 | $ | 447 | $ | 43,120 | $ | 1,769 | ||||||||
| Interest expense - net | 1,358 | 1,442 | 3,976 | 4,404 | ||||||||||||
| Income tax benefit | (29,745 | ) | (121 | ) | (29,110 | ) | (99 | ) | ||||||||
| Depreciation expense | 2,339 | 2,460 | 7,076 | 7,449 | ||||||||||||
| Amortization expense | 1,146 | 1,379 | 3,486 | 4,119 | ||||||||||||
| Total EBITDA | $ | 10,996 | $ | 5,607 | $ | 28,548 | $ | 17,642 | ||||||||
| Gain on asset sale | — | — | (4,292 | ) | — | |||||||||||
| Restructuring costs | 909 | — | 909 | — | ||||||||||||
| Legal expense | 422 | — | 1,173 | — | ||||||||||||
| Loss on divestiture | — | — | — | 3,074 | ||||||||||||
| VanHooseCo contingent consideration | — | — | — | (26 | ) | |||||||||||
| Bridge grid deck exit impact | — | 4,120 | — | 4,120 | ||||||||||||
| Bad debt provision | — | 866 | — | 866 | ||||||||||||
| Adjusted EBITDA | $ | 12,327 | $ | 10,593 | $ | 26,338 | $ | 25,676 | ||||||||
| September 30, 2024 | June 30, 2024 | September 30, 2023 | ||||||||||
| Net Debt Reconciliation | ||||||||||||
| Total debt | $ | 68,544 | $ | 87,173 | $ | 71,689 | ||||||
| Less: cash and cash equivalents | (3,135 | ) | (4,021 | ) | (2,969 | ) | ||||||
| Net debt | $ | 65,409 | $ | 83,152 | $ | 68,720 | ||||||
| Change in Consolidated Sales | Three Months Ended September 30, | Percent Change | Nine Months Ended September 30, | Percent Change | ||||||||||||
| 2023 net sales, as reported | $ | 145,345 | $ | 408,867 | ||||||||||||
| Increase (decrease) from divestitures and exit | 638 | 0.4 | % | (12,234 | ) | (3.0 | ) | % | ||||||||
| Change due to organic sales | (8,517 | ) | (5.9 | ) | % | 5,949 | 1.5 | % | ||||||||
| 2024 net sales, as reported | $ | 137,466 | $ | 402,582 | ||||||||||||
| Total sales change, 2023 vs 2024 | $ | (7,879 | ) | (5.4 | ) | % | $ | (6,285 | ) | (1.5 | ) | % | ||||
| Change in Adjusted Consolidated Sales | Three Months Ended September 30, | Percent Change | Nine Months Ended September 30, | Percent Change | ||||||||||||
| 2023 net sales, as reported | $ | 145,345 | $ | 408,867 | ||||||||||||
| 2023 bridge grid deck exit impact | 1,977 | 1,977 | ||||||||||||||
| 2023 net sales, as adjusted | 147,322 | 410,844 | ||||||||||||||
| Decrease due to divestitures and exit | (1,339 | ) | (0.9 | ) | % | (14,211 | ) | (3.5 | ) | % | ||||||
| Change due to adjusted organic sales | (8,517 | ) | (5.8 | ) | % | 5,949 | 1.4 | % | ||||||||
| 2024 net sales, as reported | $ | 137,466 | (6.7 | ) | % | $ | 402,582 | (2.0 | ) | % | ||||||
| Total adjusted sales change, 2023 vs 2024 | $ | (9,856 | ) | (6.7 | ) | % | $ | (8,262 | ) | (2.0 | ) | % | ||||
| Change in Infrastructure Solutions Sales | Three Months Ended September 30, | Percent Change | Nine Months Ended September 30, | Percent Change | ||||||||||||
| 2023 net sales, as reported | $ | 58,479 | $ | 166,001 | ||||||||||||
| Increase (decrease) due to divestiture and exit | 638 | 1.1 | % | (10,120 | ) | (6.1 | ) | % | ||||||||
| Change due to organic sales | (1,149 | ) | (2.0 | ) | % | (1,014 | ) | (0.6 | ) | % | ||||||
| 2024 net sales, as reported | $ | 57,968 | $ | 154,867 | ||||||||||||
| Total sales change, 2023 vs 2024 | $ | (511 | ) | (0.9 | ) | % | $ | (11,134 | ) | (6.7 | ) | % | ||||
| Change in Adjusted Infrastructure Solutions Sales | Three Months Ended September 30, | Percent Change | Nine Months Ended September 30, | Percent Change | ||||||||||||
| 2023 net sales, as reported | $ | 58,479 | $ | 166,001 | ||||||||||||
| 2023 bridge grid deck exit impact | 1,977 | 1,977 | ||||||||||||||
| 2023 net sales, as adjusted | 60,456 | 167,978 | ||||||||||||||
| Decrease due to divestiture and exit | (1,339 | ) | (2.2 | ) | % | (12,097 | ) | (7.2 | ) | % | ||||||
| Change due to adjusted organic sales | (1,149 | ) | (1.9 | ) | % | (1,014 | ) | (0.6 | ) | % | ||||||
| 2024 net sales, as reported | $ | 57,968 | $ | 154,867 | ||||||||||||
| Total adjusted sales change, 2023 vs. 2024 | $ | (2,488 | ) | (4.1 | ) | % | $ | (13,111 | ) | (7.8 | ) | % | ||||
| Change in Adjusted Gross Profit | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
| 2023 net sales, as adjusted | $ | 147,322 | $ | 410,844 | ||||
| 2023 gross profit, as reported | 27,417 | 83,335 | ||||||
| 2023 bridge grid deck exit impact | 3,858 | 3,858 | ||||||
| 2023 gross profit, as adjusted | $ | 31,275 | $ | 87,193 | ||||
| 2023 gross profit margin, as reported | 18.9 | % | 20.4 | % | ||||
| 2023 gross profit margin, as adjusted | 21.2 | % | 21.2 | % | ||||
| 2024 gross profit as reported | $ | 32,758 | $ | 89,447 | ||||
| 2024 gross profit margin, as reported | 23.8 | % | 22.2 | % | ||||
| Change in adjusted gross profit, 2023 vs. 2024 | $ | 1,483 | $ | 2,254 | ||||
| Percent change in adjusted gross profit, 2023 vs. 2024 | 4.7 | % | 2.6 | % | ||||
| Change in adjusted gross profit margin, 2023 vs. 2024 | 260 | bps | 100 | bps | ||||
| Change in Infrastructure Solutions Adjusted Gross Profit | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
| 2023 net sales, as adjusted | $ | 60,456 | $ | 167,978 | |||||
| 2023 gross profit, as reported | 10,188 | 31,631 | |||||||
| 2023 bridge grid deck exit impact | 3,858 | 3,858 | |||||||
| 2023 gross profit, as adjusted | $ | 14,046 | $ | 35,489 | |||||
| 2023 gross profit margin, as reported | 17.4 | % | 19.1 | % | |||||
| 2023 gross profit margin, as adjusted | 23.2 | % | 21.1 | % | |||||
| 2024 gross profit as reported | $ | 14,287 | $ | 34,530 | |||||
| 2024 gross profit margin, as reported | 24.6 | % | 22.3 | % | |||||
| Change in adjusted gross profit, 2023 vs. 2024 | $ | 241 | $ | (959 | ) | ||||
| Percent change in adjusted gross profit, 2023 vs. 2024 | 1.7 | % | (2.7 | ) | % | ||||
| Change in adjusted gross profit margin, 2023 vs. 2024 | 140 | bps | 120 | bps | |||||
Note percentages may not foot due to rounding.