Bob Bauer shifts the focus from products to solutions at L.B. Foster

The returns on invested capital, cash flow and profitability are the most important factors to consider, especially when private equity buyers become aggressive and are ready to settle for lower returns. First and foremost, L.B. Foster is trying to improve the profit margins of its core company.

“I can’t identify a market that we have that doesn’t have private equity companies that are looking around whenever opportunities to acquire businesses surface. They’re involved in almost every sale out there,” Bauer says. “There’s a lot of money that private equity companies are trying to put to work today, and there aren’t enough opportunities for the funds that exist.”

But L.B. Foster also considers size, aiming for businesses with markets in the $500 million to $1 billion range. The other component of the filter weighs the opportunities that could be created with the new company. For example, could it help insulate L.B. Foster from commodity cycles?

This strategic priority became even more imperative when commodity prices dropped in 2016. Customers connected to oil, steel and coal changed the way they behaved, so L.B. Foster had to pause its growth plans. The company lost $200 million in sales over the course of six quarters, and while cash flow remained positive, it had to cut costs and reduce the workforce.

“I like to tell people that we’re pretty good operators in this company,” Bauer says. “We’ve got good operations people and we’re disciplined. When the going gets tough, we hunker down and know how to get our costs in line and take the kinds of actions that are necessary to make sure that we can preserve the business for the future.”

L.B. Foster has worked hard to recover from the downturn. It didn’t quite make up the losses by the end of 2017, but by the end of accounting for 2018, the company will have it all back and more, he says.

“We are on a very nice growth trajectory right now,” Bauer says. “Our orders are up 28 percent year over year, and our backlog is up 31 percent year over year, nine months through 2018 — so the results that we have been publishing in 2018 look pretty significant, and we’re quite pleased.”

Takeaways:

  • Regularly mine your organization for ideas.
  • Service offerings are worthwhile, if you do them right.
  • Stay disciplined within your acquisition process.

The file:

Name: Bob Bauer
Title: President and CEO
Company: L.B. Foster Co.

Born: Pittsburgh
Education: Bachelor’s in materials science and engineering, Pennsylvania State University

Did you learn your business management skills on the job? I came up through product management, marketing and new product development. I was an engineer who gravitated to the commercial side of the business, in companies that hired engineers to do that because they make technical products. Rather than go down the design and engineering route, I wound up going down the business route — and liked it.

I was with Westinghouse until it started shrinking. Then I went to work for Allen-Bradley, which is now Rockwell Automation, for almost 10 years, and then another 18 with Emerson Network Power. So I was with two companies where you could learn how to run a business very well.

What was your first job? I mowed lawns and had a paper route, but the first job where I had to punch a time clock was stocking shelves in a grocery store.

Where would someone find you on the weekend? Depending on the weather, I could be playing golf or cycling. I’m both a runner and a cycler. I might also be on my other bike, which is a Harley.

Is there anything people might find surprising about you? I’ve got a couple of muscle cars — an old Corvette and an old Mustang that I work on. People who only see me as a CEO are sometimes surprised by that.

I’m driving a ’65 Mustang with 400 horsepower right now.