L. B. Foster Company is engaged in the manufacture fabrication and distribution of rail and trackwork piling highway products and tubular products. For rail markets Foster provides a full line of new and usedrail trackwork and accessories to railroads mines and industry. Foster also sells and rents steel sheet piling and H-bearing pile for foundation and earth retention requirements for the construction industry. For tubular markets foster supplies pipe and pipe coatings for pipelines and produces pipe-related products for special markets. L.B. Foster Company has a market cap of $331.1 million; its shares were traded at around $32.38 with a P/E ratio of 14.3 and P/S ratio of 0.7. L.B. Foster Company had an annual average earning growth of 78.6% over the past 5 years.
Highlight of Business Operations:Net income for the first quarter of 2009 was $0.29 per diluted share which compares to net income for the first quarter of 2008 of $0.57 per diluted share. Included in net income for the prior year quarter were pre-tax gains from the receipt of escrow proceeds related to the sale of our investment in the DM&E Railroad ($2.0 million) and the sale-leaseback of our Houston, TX facility ($1.5 million). Excluding these gains, net income for the prior year period was $0.36 per diluted share.
During the first quarter of 2009, cash flows from operations used $12.1 million, an unfavorable increase of $2.9 million compared to the first quarter of 2008. Net income and adjustments to net income provided $5.2 million for the 2009 period. Offsetting this amount was cash used by certain operating activities of $17.3 million. The pay down of trade accounts payable, notably in our rail distribution business, was the primary cause of the reduction in cash for the three months ended March 31, 2009. Partially offsetting this cash reduction were the positive impacts from collections of trade accounts receivable and the utilization of inventories.
Capital expenditures were $0.6 million for the first three months of 2009 compared to $2.1 million for the same 2008 period. Current period expenditures were for plant and equipment improvements as well as technology infrastructure and application software. We anticipate total capital spending in 2009 will be approximately $4.0 million and funded by cash flow from operations.
Cash flows provided by investing activities for the three months ended March 31, 2008 included proceeds of $6.5 million and $2.0 million from the aforementioned threaded products facility and DM&E investment sale respectively.
We also have a revolving credit agreement which expires in May 2011 and provides for up to $90.0 million in borrowings to support our working capital and other liquidity requirements. Borrowings under this agreement are secured by substantially all the trade receivables and inventory owned by us, and are limited to 85% of eligible receivables and 60% of eligible inventory. Additionally, the revolving credit agreement provided for a $20.0 million term loan that was immediately applied to pay down existing drawings on the revolving credit facility. If average availability should fall below $10.0 million over a 30-day period, the loans become immediately secured by a lien on the Companys equipment that is not encumbered by other liens.
We do, however, continue in this period of uncertainty in an extremely strong financial position. As noted, as of March 31, 2009, we had approximately $99.0 million in cash and short-term instruments and a $90.0 million revolving credit facility with approximately $85.1 million of availability and $26.0 million in long-term debt. We believe this capacity will afford us the flexibility to take advantage of opportunities that we may encounter or weather the current economic downturn, if need be, as future circumstances dictate.
Read the The complete ReportFSTR is in the portfolios of John Keeley of Keeley Fund Management.