EX-99 2 exh991.txt THIRD QUARTER 2007 EARNINGS PRESS RELEASE -------------------------------------------------------------------------------- PRESS RELEASE L.B. Foster Company 415 Holiday Drive, Pittsburgh, PA 15220 Contact: Stan L. Hasselbusch Phone: (412) 928-3417 FAX: (412) 928-7891 Email: investors@LBFosterCo.com FOR IMMEDIATE RELEASE L.B. FOSTER REPORTS RECORD THIRD QUARTER EARNINGS SALES INCREASE 42% PITTSBURGH, PA, October 25, 2007 - 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 that its third quarter earnings per diluted share from continuing operations increased to $1.32. These results include an incremental $8.5 million of dividend income recorded in the third quarter related to the DM&E Railroad. Excluding this incremental income, earnings per diluted share from continuing operations were $0.64 compared to $0.32 in last year's third quarter, a 100% increase. This marks the eleventh consecutive quarter the Company has recorded an earnings increase over the prior year quarter. The incremental dividend income recorded in the third quarter was related to previously unrecorded preferred stock dividends payable by the DM&E to the Company that had not been recognized due to the uncertainty as to when they might be paid. This uncertainty was eliminated when the DM&E agreed to be acquired by the Canadian Pacific Railway on September 4, 2007. The Company received approximately $148.8 million when the transaction eventually closed on October 5, 2007. The gain on the sale of the Company's investment in the DM&E (which is expected to be approximately $122.9 million) will be recorded in the fourth quarter. 2007 Third Quarter Results In the third quarter of 2007, L.B. Foster had income from continuing operations of $14.5 million or $1.32 per diluted share compared to income from continuing operations of $3.4 million or $0.32 per diluted share in the third quarter of 2006. The Company reported no income from discontinued operations in the third quarter of 2007, compared to $0.3 million ($0.02 per diluted share) in last year's third quarter, which relates to its former Geotechnical Division that was sold in the first quarter of 2006. Net income was $14.5 million or $1.32 per diluted share in 2007 compared to $3.7 million or $0.34 per diluted share in 2006. Net sales increased 42% to $135.8 million compared to $95.9 million in the prior year quarter. Gross profit margin was 15.5%, up 100 basis points from the prior year quarter primarily as a result of increased billing margins before manufacturing and other variances and, to a lesser extent, decreased unfavorable manufacturing variances. Selling and administrative expenses increased $1.6 million or 20% over last year's quarter due primarily to increased employee related costs including salaries and incentive compensation. Third quarter interest expense was $0.9 million, a 4% increase over the prior year quarter due to slightly increased borrowings, however, interest expense has decreased 24% and 22% from the first and second quarters, respectively, of this year as the Company has generated strong positive cash flow in the second and third quarter of 2007. The Company's income tax rate from continuing operations was 22.8% in the third quarter compared to 32.2% in the prior year quarter. The low tax rate in this year's third quarter was due primarily to the incremental $8.5 million of dividend income as only 30% of this dividend income was taxable. "Overall, Rail, Tubular and Construction Products sales were very strong and bottom line results as well as operating margins increased across all segments. We should note, however that Rail sales, as expected, were lower than the second quarter of this year, primarily due to decreased new rail sales," commented Stan Hasselbusch, President and Chief Executive Officer. CXT Concrete Tie sales increased considerably over the prior year due to higher volumes at our Tucson tie facility and increased production at our Grand Island tie facility. The employee turnover issues in Tucson that we referred to in our second quarter release have improved and we are working toward an accelerated training schedule designed to mitigate the risk of a similar occurrence in the future. We are also pleased to announce that our Spokane workforce represented by the United Steelworkers Local number 338 have ratified a new four year agreement," remarked Mr. Hasselbusch. Mr. Hasselbusch concluded by adding, "To create additional value for our organization and our stakeholders, it is our strategy to continually improve our existing businesses while we work at identifying and evaluating potentially synergistic acquisitions." 2007 Year-to-Date Results For the nine months ended September 30, 2007, L.B. Foster reported income from continuing operations of $24.5 million or $2.24 per diluted share compared to $7.7 million or $0.72 per diluted share in 2006. As mentioned above, these results include an incremental $8.5 million of dividend income recorded in the third quarter related to the DM&E Railroad. Excluding this incremental income, earnings per diluted share from continuing operations were $1.55 compared to $0.72 in last year's third quarter, a 115% increase. Income from discontinued operations in 2006 was $2.8 million or $0.26 per diluted share and included the gain on the sale of our former Geotechnical Division of $3.0 million. Net income in 2007 was $24.5 million or $2.24 per diluted share in 2007 compared to $10.6 million or $0.98 per diluted share in 2006. Net sales for the first nine months of 2007 increased 41% to $395.0 million compared to $279.3 million in 2006. Gross profit margin was 14.3%, up 100 basis points from 2006, primarily as a result of increased billing margins before manufacturing and other variances. Selling and administrative expenses increased $3.4 million or 14% over the prior year due primarily to employee related costs including salaries and incentive compensation. Interest expense increased $0.9 million over the prior year due to increased average borrowings. The Company's income tax rate from continuing operations was 28.6% compared to 31.3% in the prior year. Cash provided from operations was approximately $24.3 million for the third quarter of 2007 and $29.0 million on a year-to-date basis, compared to cash used by operations of $7.0 million for the first nine months of 2006. Capital expenditures were $3.8 million for the first nine months of 2007 compared to $12.8 million during the prior year period. "We expect to continue to generate positive cash from operations in the fourth quarter of 2007 and anticipate capital expenditures to be below $7 million for the year," commented Mr. Hasselbusch, who concluded by reporting, "Overall business activity remains favorable and is reflected in our order bookings. Bookings for the first nine months of 2007 were $413.9 million, 20% higher than last year. While third quarter bookings were $119.3 million, 19% higher than last year's third quarter, our backlog at September 30, 2007 was $165.8 million, 2.9% lower than last year as third quarter sales exceeded the prior year quarter by almost $40 million. L.B. Foster Company will conduct a conference call and webcast to discuss its third quarter 2007 operating results and general market activity and business conditions on Thursday, October 25, 2007 at 11:00am ET. The call will be hosted by Mr. Stan Hasselbusch, 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 Company wishes to caution readers that various factors could cause the actual results of the Company to differ materially from those indicated by forward-looking statements in news releases, and other communications, including oral statements, such as references to future profitability, made from time to time by representatives of the Company. Specific risks and uncertainties that could affect the Company's profitability include, but are not limited to, general economic conditions, adequate funding for infrastructure projects, production delays or problems encountered at our manufacturing facilities, and the availability of existing and new piling and rail products. There are also no assurances that the Canadian Pacific Railway will proceed with the Powder River Basin project and trigger any contingent payments to L.B. Foster. Matters discussed in such communications are forward-looking statements that involve risks and uncertainties. Sentences containing words such as "anticipates," "expects," or "will," generally should be considered forward-looking statements. More detailed information on these and additional factors which could affect the Company's operating and financial results are described in the Company's Forms 10-K, 10-Q and other reports, filed or to be filed with the Securities and Exchange Commission. 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 undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. CONDENSED STATEMENTS OF CONSOLIDATED INCOME L. B. FOSTER COMPANY AND SUBSIDIARIES (In Thousands, Except Per Share Amounts)

Three Months Ended Nine Months Ended September 30, September 30, -------------------------------- ------------------------------ 2007 2006 2007 2006 -------------------------------- ------------------------------ (Unaudited) (Unaudited) NET SALES $135,753 $95,868 $394,966 $279,336 COSTS AND EXPENSES: Cost of goods sold 114,759 81,978 338,544 242,197 Selling and administrative expenses 9,890 8,245 28,081 24,661 Interest expense 926 892 3,331 2,415 Dividend income (8,719) (247) (9,214) (742) Other (income) expense 47 (75) (62) (444) ----------- ----------- ----------- ----------- 116,903 90,793 360,680 268,087 ----------- ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 18,850 5,075 34,286 11,249 INCOME TAXES 4,301 1,635 9,796 3,524 ----------- ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS, NET OF TAX 14,549 3,440 24,490 7,725 DISCONTINUED OPERATIONS: (LOSS) INCOME FROM DISCONTINUED OPERATIONS (26) 495 (45) 3,196 INCOME TAX (BENEFIT) EXPENSE (8) 237 (16) 357 ----------- ----------- ----------- ----------- (LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX (18) 258 (29) 2,839 NET INCOME $14,531 $3,698 $24,461 $10,564 =========== =========== =========== =========== BASIC EARNINGS PER COMMON SHARE: FROM CONTINUING OPERATIONS $1.37 $0.33 $2.31 $0.75 FROM DISCONTINUED OPERATIONS (0.00) 0.02 (0.00) 0.27 ----------- ----------- ----------- ----------- BASIC EARNINGS PER COMMON SHARE $1.36 $0.35 $2.31 $1.02 =========== =========== =========== =========== DILUTED EARNINGS PER COMMON SHARE: FROM CONTINUING OPERATIONS $1.32 $0.32 $2.24 $0.72 FROM DISCONTINUED OPERATIONS (0.00) 0.02 (0.00) 0.26 ----------- ----------- ----------- ----------- DILUTED EARNINGS PER COMMON SHARE $1.32 $0.34 $2.24 $0.98 =========== =========== =========== =========== AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC 10,654 10,510 10,601 10,360 =========== =========== =========== =========== AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED 10,990 10,872 10,941 10,780 =========== =========== =========== ===========

L. B. Foster Company and Subsidiaries Consolidated Balance Sheet (In thousands)

September 30, December 31, 2007 2006 ---------- ---------- ASSETS (Unaudited) CURRENT ASSETS: Cash and cash items $5,746 $1,309 Accounts and notes receivable: Trade 62,821 60,771 Other 196 779 Inventories 93,680 99,803 Current deferred tax assets 2,653 2,653 Other current assets 1,121 1,133 Prepaid income tax - 836 ---------- ---------- Total Current Assets 166,217 167,284 ---------- ---------- OTHER ASSETS: Property, plant & equipment-net 47,426 49,919 Goodwill 350 350 Other intangibles - net 53 62 Investments 25,890 16,676 Deferred tax assets 1,297 1,149 Other non-current assets 361 393 ---------- ---------- Total Other Assets 75,377 68,549 ---------- ---------- $241,594 $235,833 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities on long-term debt $5,900 $3,105 Short-term borrowings - 726 Accounts payable-trade and other 55,457 57,446 Accrued payroll and employee benefits 10,666 6,892 Current deferred tax liabilities 3,153 3,203 Other accrued liabilities 6,965 4,215 Current liabilities of discontinued operations 233 235 ---------- ---------- Total Current Liabilities 82,374 75,822 ---------- ---------- LONG-TERM BORROWINGS - 39,161 ---------- ---------- LONG-TERM DEBT, TERM LOAN 16,905 - ---------- ---------- OTHER LONG-TERM DEBT 12,698 15,112 ---------- ---------- DEFERRED TAX LIABILITIES 2,163 1,853 ---------- ---------- OTHER LONG-TERM LIABILITIES 3,247 5,852 ---------- ---------- STOCKHOLDERS' EQUITY: Class A Common stock 107 105 Paid-in capital 41,825 39,696 Retained earnings 83,082 58,843 Accumulated other comprehensive loss (807) (611) ---------- ---------- Total Stockholders' Equity 124,207 98,033 ---------- ---------- $241,594 $235,833 ========== ==========