What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-10 · 193 added, 85 removed, 158 unchanged (64% of the section changed)

11 unchanged sentences

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:

the COVID-19 pandemic, and 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;

volatility in the prices of oil and natural gas and the related impact on the midstream energy markets, which could result in cost mitigation actions, including shutdowns or furlough periods;

a continuation or worsening of the adverse economic conditions in the markets we serve, including recession, whether as a result of the current COVID-19 pandemic or otherwise, including its impact on labor markets, supply chains, and other inflationary costs, travel and demand for oil and gas, the continued volatility in the prices for oil and gas, governmental travel restrictions, project delays, and budget shortfalls, or otherwise;

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;

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, governmental travel restrictions, 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 continuing decrease in freight or transit rail traffic, including as a result of the ongoing COVID-19 pandemic, strikes, or labor stoppages;

a decrease in freight or transit rail traffic;

environmental matters, 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, 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 Piling, Track Components, and Chemtec businesses, and acquisitions of the Skratch Enterprises Ltd., Intelligent Video Ltd., and VanHooseCo Precast LLC businesses and to realize anticipated benefits;

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., and VanHooseCo Precast LLC businesses and to realize anticipated benefits;

costs of and impacts associated with shareholder activism;

continued customer restrictions regarding the on-site presence of third party providers due to the COVID-19 pandemic;

the timeliness and availability of materials from our major suppliers, including any continuation or worsening of the disruptions in the supply chain experienced as a result of the COVID-19 pandemic, 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;

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;

18 unchanged sentences

Three Months Ended

March 31, Percent

June 30, Percent

Change Percent of Total Net Sales

6 unchanged sentences

Amortization expense 1,375 1,419 (3.1) 0.9 1.1

Operating profit (loss) 503 (2,287) 122.0 0.4 (2.3)

Operating profit 6,349 2,480 156.0 4.3 1.9

Interest expense - net 1,574 384 ** 1.1 0.3

Other expense (income) - net 719 (701) 202.6 0.5 (0.5)

Loss before income taxes (2,712) (2,094) (29.5) (2.3) (2.1)

Income tax benefit (541) (508) (6.5) (0.5) (0.5)

Net loss (2,171) (1,586) (36.9) (1.9) (1.6)

Income before income taxes 4,056 2,797 45.0 2.7 2.1

Income tax expense 563 821 (31.4) 0.4 0.6

Net income 3,493 1,976 76.8 2.4 1.5

Net loss attributable to noncontrolling interest (38) (34) 11.8 (0.0) (0.0)

Net loss attributable to L.B.

Net income attributable to L.B.

Foster Company $ 3,531 $ 2,010 75.7 % 2.4 % 1.5 %

Diluted loss per common share $ (0.20) $ (0.15)

Diluted earnings per common share $ 0.32 $ 0.18

** Results of the calculation are not considered meaningful for presentation purposes.

5 unchanged sentences

Acquisition and Divestiture Summary

On August 12, 2022, the Company acquired the operating assets of VanHooseCo Precast, LLC (“VanHooseCo”), a business specializing in precast concrete walls, water management products, and forms for the commercial and residential infrastructure markets for $52,146 net of cash acquired.

VanHooseCo has been included in the Company’s Precast Concrete Products segment.

On June 21, 2022, the Company acquired the stock of Skratch Enterprises Ltd.

2 unchanged sentences

Skratch is reported within the Technology Services and Solutions business unit in the Rail, Technologies, and Services segment.

On August 1, 2022, the Company divested the assets of its Track Components business.

On August 1, 2022, the Company sold substantially all the operating assets of its Track Components business.

Cash proceeds from the transaction were $7,795, subject to indemnification obligations and working capital adjustments and a loss on sale of $467 was recorded in “Other expense (income) - net.” The Track Components business was reported in the Rail Products business unit within the Rail, Technologies, and Services segment.

VanHooseCo has been included in the Company’s Precast Concrete Products segment.

On March 30, 2023, the Company sold substantially all the operating assets of its Chemtec Energy Services LLC (“Chemtec”) business for $5,344 in proceeds, subject to final working capital adjustments, generating a $2,065 loss on sale, recorded in “Other expense (income) - net.” The Chemtec business was reported in the Coatings and Measurement business unit within the Steel Products and Measurement segment.

On June 30, 2023, the Company sold substantially all the operating assets of the prestressed concrete railroad tie business operated by its wholly-owned subsidiary, CXT Incorporated (“Ties”), located in Spokane, WA, for $2,368 in proceeds, subject to final working capital adjustments, generating a $1,009 loss on the sale, which was recorded in “Other expense (income) - net”.

The Ties business was reported in the Rail Products business unit within the Rail, Technologies, and Services segment.

Results Summary

Net sales of $115,488 for the three months ended March 31, 2023 increased by $16,694, or 16.9%, over the prior year quarter.

The change in sales is due in part to the acquisitions of Skratch and VanHooseCo offset by the divestiture of the Track Components business.

Net sales of $148,034 for the three months ended June 30, 2023 increased by $16,519, or 12.6%, over the prior year quarter.

The change in sales is due in part to the acquisitions of Skratch and VanHooseCo offset by the divestiture of the Track Components and Chemtec businesses.

Organic growth and acquisitions drove a 13.3% and 6.0% increase in sales over the prior year quarter, respectively, with an offsetting 6.8% decline from divestitures.

Gross profit for the three months ended March 31, 2023 was $23,291, an increase of $6,844 over the prior year quarter, or 41.6%, and gross profit margins expanded by 360 basis points to 20.2%.

The improvement in gross profit is due to the portfolio changes that are a part of the Company’s strategic transformation plan along with improved product mix and pricing.

Selling and administrative expenses for the three months ended March 31, 2023 increased by $4,125, or 23.8%, from the prior year quarter, due in part to the acquisition of VanHooseCo and Skratch, as well as higher personnel expenses.

Selling and administrative expenses as a percent of net sales were 18.5% versus 17.5% in the prior year quarter, a 100 basis point increase.

The recent acquisitions have a higher margin portfolio and higher selling and administrative costs.

Other expense - net for the three months ended March 31, 2023 was $1,827 while other income - net was $563 in the prior year quarter.

Other expense - net for the three months ended March 31, 2023 was due to the $2,033 loss on the sale of Chemtec during the quarter.

The Company’s effective income tax rate for the three months ended March 31, 2023 was 19.9%, compared to 24.3% in the prior year quarter.

Due to the full valuation allowance on domestic deferred tax assets, the Company’s tax provision for the three months ended March 31, 2023 does not reflect any tax benefit for domestic pre-tax losses, and is primarily comprised of taxes related to our Canadian and United Kingdom operations.

Net loss for the three months ended March 31, 2023 attributable to the Company was $2,152, or $0.20 per diluted share, unfavorable by $586, or $0.05 per diluted share, from the prior year quarter.

The loss was primarily driven by the $2,033 loss on the sale of Chemtec during the three months ended March 31, 2023, which offset stronger comparable operating profit stemming from margin expansion.

The Company continues to execute its strategic transformation into a technology-focused, high growth infrastructure solutions provider, as evidenced by the number of recent portfolio actions taken, including the sale of Chemtec, which minimizes the Company's exposure to the energy market and allows for additional capacity to focus on its core growth platforms in Rail Technologies and Precast Concrete, and an increased focus on organic growth initiatives and debt reduction going into 2023.

Proceeds from the Chemtec sale have contributed to the pay down of debt during the quarter and increased capacity under the credit agreement to further support its strategic initiatives.

Gross profit for the three months ended June 30, 2023, was $32,252, an increase of $8,959 over the prior year quarter, or 38.5%, and gross profit margins expanded by 410 basis points to 21.8%.

The improvement in gross profit is due to the portfolio changes that are a part of the Company’s strategic transformation plan along with increased sales volumes, product mix, and pricing.

Selling and administrative expenses for the three months ended June 30, 2023 increased by $5,134, or 26.5%, from the prior year quarter, due primarily to increased personnel costs as well as the net impact from business portfolio actions.

Selling and administrative expenses as a percent of net sales were 16.6% versus 14.7% in the prior year quarter.

Other expense - net for the three months ended June 30, 2023 was $719 while other income - net was $701 in the prior year quarter.

Other expense - net for the three months ended June 30, 2023 was due to the $1,041 loss on the divestitures of Ties and Chemtec, and other income - net for the three months ended June 30, 2022 was due to a $489 divestiture gain and $318 in insurance proceeds.

The Company’s effective income tax rate for the three months ended June 30, 2023 was 13.9%, compared to 29.4% in the prior year quarter.

The Company’s effective income tax rate for the three months ended June 30, 2023 differed from the federal statutory of 21% primarily due to the realization of a portion of its U.S.

deferred tax assets previously offset by a valuation allowance.

The Company continues to maintain a full valuation allowance against its U.S.

deferred tax assets, which is likely to result in significant variability of the effective tax rate in the current year.

Net income for the three months ended June 30, 2023 attributable to the Company was $3,531, or $0.32 per diluted share, favorable by $1,521, or $0.14 per diluted share, from the prior year quarter.

Net income for the three months ended June 30, 2023 was primarily driven by stronger comparable operating profit stemming from margin expansion despite the $1,041 loss on divestitures.

The Company continues to execute its strategic transformation into a technology-focused, high growth infrastructure solutions provider, as evidenced by the number of recent portfolio actions taken, including the sale of Ties, which further reduces the Company’s commoditized offering to allow for increased focus on its core growth platforms, Rail Technologies and Precast Concrete, as well as organic growth initiatives, debt reduction, and improving shareholder value.

Results of Operations - Segment Analysis

First Quarter 2023 Compared to First Quarter 2022

Second Quarter 2023 Compared to Second Quarter 2022

Rail, Technologies, and Services

Three Months Ended

March 31, Change Percent

June 30, Change Percent

2023 2022 2023 vs.

5 unchanged sentences

Segment operating profit percentage 7.2 % 4.9 % 2.3 % 46.9 %

The Rail, Technologies, and Services segment sales for the three months ended March 31, 2023 increased by $674, or 1.1%, compared to the prior year quarter.

The Rail, Technologies, and Services segment sales for the three months ended June 30, 2023 increased by $9,819, or 12.0%, compared to the prior year quarter.

Net sales increased by 17.0% organically and by 0.8% from the acquisition of Skratch, offset by a 5.8% decrease from the divestiture of Track Components.

T he Global Friction Management business unit increase in sales was offset by sales decreases in the Technology Services and Solutions business unit.

The Friction Management sales increase was driven by strength in domestic markets served.

The sales decrease in the Technology Services and Solutions business unit was driven by the completion of the multi-year Crossrail project in late 2022.

The Rail Products and Global Friction Management business units increase in sales was offset by sales decreases in the Technology Services and Solutions business unit.

The Rail Products and Global Friction Management sales increase was driven by strength in domestic markets served.

The sales decrease in the Technology Services and Solutions business unit was driven by weak economic conditions in the Company’s U.K.

based businesses.

The Rail, Technologies, and Services segment gross profit increased by $4,186, or 26.7% over the prior year quarter, and gross profit margins expanded 260 basis points to 21.7%.

Gross profit increases in Rail Products and Global Friction Management were commensurate with higher sales levels, while weaker sale in Technology Services and Solutions drove a partially offsetting gross profit decline.

Gross profit increases in Rail Products and Global Friction Management were commensurate with higher sales levels, while weaker sales in Technology Services and Solutions partially offset the increased gross

The improvement in gross profit is due to the portfolio changes that are a part of the Company’s strategic transformation along with increased sales in the higher margin Global Friction Management business along with improved pricing.

Operating profit was $6,627, a $2,629 increase over the prior year quarter, due primarily to higher gross profit levels.

During the current quarter, the Rail, Technologies, and Services segment had a decrease in new orders of $17,664, or 19.3%, compared to the prior year period.

The decrease is due primarily to differences in customer order timing in the Rail Distribution business, as well as an unfavorable impact of $4,805 due to the Track Components divestiture.

Backlog as of March 31, 2023 was $113,593, a decrease of $9,325, or 7.6%, versus the prior year quarter, $2,531 of which is related to the divested Track Components division.

During the current quarter, the Rail, Technologies, and Services segment had an increase in new orders of $23,048, or 24.8%, compared to the prior year period.

The increase is due to tailwinds from government infrastructure investment programs, despite a $3,114 decrease due to the divested Track Components business.

Backlog as of June 30, 2023 was $132,451, an increase of $434, or 0.3%, versus the prior year quarter, despite a $6,960 and $832 reduction due to the Ties and Track Components divestitures, respectively.

Precast Concrete Products

Three Months Ended

March 31, Change Percent

June 30, Change Percent

2023 2022 2023 vs.

3 unchanged sentences

Gross profit percentage 22.7 % 14.2 % 8.5 % 59.9 %

Segment operating loss $ (348) $ (791) $ 443 56.0 %

Segment operating loss percentage (1.4) % (5.3 %) 3.9 % 73.6 %

The Precast Concrete Products segment sales for the three months ended March 31, 2023 increased by $9,278, or 61.8%, compared to the prior year quarter.

Segment operating profit (loss) $ 1,296 $ (125) $ 1,421 **

Segment operating profit (loss) percentage 3.8 % (0.5 %) 4.3 % **

** Results of the calculation are not considered meaningful for presentation purposes.

The Precast Concrete Products segment sales for the three months ended June 30, 2023 increased by $10,254, or 43.4%, compared to the prior year quarter.

The VanHooseCo acquisition contributed $7,230, or 30.6%, of the increase in sales over the prior year quarter.

Organic sales increased by $3,024, or 12.8%, which is a continued reflection of the strong demand environment in the southern and northeastern United States markets.

The Precast Concrete Products segment's gross profit for the three months ended March 31, 2023 increased by $3,076, and gross profit margins expanded by 640 basis points to 22.7%.

The Precast Concrete Products segment's gross profit for the three months ended June 30, 2023 increased by $4,329, and gross profit margins expanded by 850 basis points to 22.7%.

The improvement in gross profit is due to the VanHooseCo acquisition as well as overall sales volumes and stronger margins from the legacy precast business, including the impact of improved pricing.

Operating loss for the first quarter of 2023 was $348, a $443 improvement over the prior year quarter, due to higher gross profit levels, which was partially offset by an increase in selling and administrative expenses from the VanHooseCo acquisition, as well as increased personnel expenses.

Operating profit for the second quarter of 2023 was $1,296, a $1,421 improvement over the prior year quarter, due to higher gross profit levels, which was partially offset by an increase in selling and administrative expenses from the VanHooseCo acquisition, as well as increased personnel expenses.

During the quarter, the Precast Concrete Products segment had an increase in new orders and backlog of 65.0% and 28.2%, respectively, compared to the prior year quarter.

The increase in new orders and backlog is due to the VanHooseCo acquisition and strong demand in the legacy business.

The increase in new orders and backlog is due primarily to the VanHooseCo acquisition.

Steel Products and Measurement

Three Months Ended

March 31, Change Percent

June 30, Change Percent

2023 2022 2023 vs.

3 unchanged sentences

Gross profit percentage 21.0 % 16.4 % 4.6 % 27.8 %

Segment operating loss $ (8) $ (2,148) $ 2,140 99.6 %

Segment operating loss percentage 0.0 % (10.7) % 10.7 % 100.0 %

The Steel Products and Measurement segment sales for the three months ended March 31, 2023 increased by $6,742, or 33.6%, compared to the prior year quarter.

The increase in sales for the first quarter of 2023 was attributable to the $8,819 increase in Coatings and Measurement sales over the prior year quarter, due to increased activity in both traditional and adjacent market applications.

This increase was partially offset by a decrease in Fabricated Steel Products business unit sales of $2,087.

Steel Products and Measurement gross profit for the three months ended March 31, 2023 increased by $2,012, and gross profit margins increased 570 basis points to 13.0%.

Segment operating profit $ 1,456 $ 762 $ 694 91.1 %

Segment operating profit percentage 6.5 % 2.9 % 3.6 % 124.1 %

The Steel Products and Measurement segment sales for the three months ended June 30, 2023 decreased by $3,554, or 13.6%, compared to the prior year quarter.

The decrease in sales for the second quarter of 2023 was attributable to the $4,176 decrease due to the divestiture of the Chemtec business during the first quarter of 2023 and a decline in the Fabricated Steel Products business, driven by soft demand for bridge grid decking.

This decline was offset by increased activity in both traditional and adjacent market applications in the Protective Coatings business unit within Coatings and Measurement.

Steel Products and Measurement gross profit for the three months ended June 30, 2023 increased by $444, and gross profit margins increased 460 basis points to 21.0%.

The increase in gross profit is primarily due to stronger margins in the Protective Coatings division attributable to higher volumes.

The segment operating loss was reduced $2,140 from the prior year quarter, due to higher gross profit levels.

The segment operating profit increased by $694 from the prior year quarter, due to higher gross profit levels.

During the quarter, the Steel Products and Measurement segment had an increase in new orders and backlog of $4,360, or 17.0%, and $18,635, or 39.4%, respectively, compared to the prior year quarter.

The increase is a result of improved order levels in the Fabricated Steel Products business unit and the Protective Coatings division due to strong demand in both traditional and adjacent market applications.

The increase is a result of improved order levels in the Protective Coatings division due to strong demand in both traditional and adjacent market applications which was offset by a $6,023 decline from the Chemtec divestiture.

The backlog increase was partially offset by a $7,503 decrease due to the Chemtec divestiture.

Six Month Results

Six Months Ended

June 30, Percent

Change Percent of Total Net Sales

Six Months Ended

2023 2022 2023 vs.

2022 2023 2022

Net sales $ 263,522 $ 230,309 14.4 % 100.0 % 100.0 %

Gross profit 55,543 39,740 39.8 21.1 17.3

Selling and administrative expenses 45,951 36,692 25.2 17.4 15.9

Amortization expense 2,740 2,855 (4.0) 1.0 1.2

Operating profit 6,852 193 ** 2.6 0.1

Interest expense - net 2,962 754 ** 1.1 0.3

Other expense (income) - net 2,546 (1,264) ** 1.0 (0.5)

Income before income taxes $ 1,344 $ 703 91.2 % 0.5 % 0.3 %

Income tax expense 22 313 (93.0) — 0.1

Net income 1,322 390 239.0 0.5 0.2

Net loss attributable to noncontrolling interest (57) (54) 5.6 — —

Net income attributable to L.B.

Foster Company 1,379 444 210.6 0.5 0.2

Diluted earnings per common share $ 0.12 $ 0.04

** Results of the calculation are not considered meaningful for presentation purposes.

Results Summary

Net sales of $263,522 for the six months ended June 30, 2023 increased by $33,213, or 14.4%, over the prior year quarter.

The change in sales is due in part to the acquisitions of Skratch and VanHooseCo offset by the divestitures of the Track Components and Chemtec businesses.

Organic growth and acquisitions drove a 10.8% and 7.4% increase in sales over the prior year quarter, respectively, with an offsetting 3.7% decline from divestitures.

Gross profit for the six months ended June 30, 2023 was $55,543, an increase of $15,803 over the prior year quarter, or 39.8%, and gross profit margins expanded by 380 basis points to 21.1%.

The improvement in gross profit is due to the portfolio changes that are a part of the Company’s strategic transformation plan along with higher sales volume, improved product mix, input costs, and pricing.

Selling and administrative expenses for the six months ended June 30, 2023 increased by $9,259, or 25.2%, from the prior year quarter, due in part to the acquisitions of VanHooseCo and Skratch, as well as higher personnel expenses.

Selling and administrative expenses as a percent of net sales were 17.4 % versus 15.9 % in the prior year quarter, a 150 basis point increase.

Other expense - net for the six months ended June 30, 2023 was $2,546 while other income - net was $1,264 in the prior year quarter.

Other expense - net for the six months ended June 30, 2023 was due primarily to the $3,074 loss on the divestitures of Ties and Chemtec, and other income - net for the six months ended June 30, 2022 was due to a $489 divestiture gain and $790 in insurance proceeds.

The Company’s effective income tax rate for the six months ended June 30, 2023 was 1.6%, compared to 44.5% in the prior year quarter.

The Company’s effective tax rate for the six months ended June 30, 2023 differed from the federal statutory rate of 21% primarily due to the realization of a portion of its U.S.

deferred tax assets previously offset by a valuation allowance.

The Company continues to maintain a full valuation allowance against its U.S.

deferred tax assets, which is likely to result in significant variability of the effective tax rate in the current year.

Net income for the six months ended June 30, 2023 attributable to the Company was $1,379, or $0.12 per diluted share, favorable by $935, or $0.08 per diluted share, from the prior year quarter.

Net income was primarily driven stronger operating profit stemming

from margin expansion during the six months ended June 30, 2023, which was offset by a $3,074 loss on the divestitures of the Chemtec and Ties.

The Company continues to execute its strategic transformation into a technology-focused, high growth infrastructure solutions provider, as evidenced by the number of recent portfolio actions taken, including the sale of Ties, which further reduces the Company’s commoditized offering to allow for increased focus on its core growth platforms, Rail Technologies and Precast Concrete, as well as organic growth initiatives, debt reduction, and improving shareholder value.

Results of Operations - Segment Analysis

First Six Months 2023 Compared to First Six Months 2022

Rail, Technologies, and Services

Six Months Ended

June 30, Change Percent

2023 2022 2023 vs.

2022 2023 vs.

Net sales $ 156,000 $ 145,507 $ 10,493 7.2 %

Gross profit $ 34,131 $ 28,188 $ 5,943 21.1 %

Gross profit percentage 21.9 % 19.4 % 2.5 % 12.9 %

Segment operating profit $ 9,015 $ 5,037 $ 3,978 79.0 %

Segment operating profit percentage 5.8 % 3.5 % 2.3 % 66.9 %

The Rail, Technologies, and Services segment sales for the six months ended June 30, 2023 increased by $10,493, or 7.2%, compared to the prior year quarter.

Net sales increased by 12.1% organically and by 1.0% from the acquisition of Skratch, offset by a 5.9% decrease from the divestiture of Track Components.

The Rail Products and Global Friction Management business unit increase in sales were offset by sales decreases in the Technology Services and Solutions business unit.

The Rail Products and Global Friction Management sales increases were driven by strength in domestic markets served.

The sales decrease in the Technology Services and Solutions business unit was driven by the completion of the multi-year Crossrail project in late 2022 and weak economic conditions in the United Kingdom.

The Rail, Technologies, and Services segment gross profit increased by $5,943, or 21.1% over the prior year quarter, and gross profit margins expanded 250 basis points to 21.9%.

Operating profit was $9,015, a $3,978 increase over the prior year quarter, due primarily to higher gross profit levels.

During the current quarter, the Rail, Technologies, and Services segment had an increase in new orders of $5,385, or 2.9%, compared to the prior year period.

The increase is due primarily to increases in the Global Friction Management business unit, which was offset by an unfavorable impact of $7,918 due to the Track Components divestiture.

Backlog as of June 30, 2023 was $132,451, an increase of $434, or 0.3%, versus the prior year quarter, despite a $6,960 and $832 reduction due to the Ties and Track Components sales, respectively.

Precast Concrete Products

Six Months Ended

June 30, Change Percent

2023 2022 2023 vs.

2022 2023 vs.

Net sales $ 58,153 $ 38,621 $ 19,532 50.6 %

Gross profit $ 13,197 $ 5,792 $ 7,405 127.8 %

Gross profit percentage 22.7 % 15.0 % 7.7 % 51.3 %

Segment operating profit (loss) $ 948 $ (916) $ 1,864 203.5 %

Segment operating profit (loss) percentage 1.6 % (2.4) % 4.0 % 168.7 %

The Precast Concrete Products segment sales for the six months ended June 30, 2023 increased by $19,532, or 50.6%, compared to the prior year quarter.

The VanHooseCo acquisition contributed $15,530, or 40.2% of the increase in sales over the prior year quarter.

Organic sales increased by $4,002, or 10.4%, which is a continued reflection of the strong demand environment in the southern and northeastern United States markets.

The Precast Concrete Products segment's gross profit for the six months ended June 30, 2023 increased by $7,405, and gross profit margins expanded by 770 basis points to 22.7%.

The improvement in gross profit is due to the VanHooseCo acquisition as well as overall sales volumes and stronger margins from the legacy precast business, including the impact of improved pricing.

Operating profit for the six months ended June 30, 2023 was $948, a $1,864 improvement over the prior year quarter, due to higher gross profit levels, which was partially offset by an increase in selling and administrative expenses from the VanHooseCo acquisition, as well as increased personnel expenses.

During the quarter, the Precast Concrete Products segment had an increase in new orders and backlog of 76.0% and 28.2%, respectively, compared to the prior year quarter.

The increase in new orders and backlog is due to the VanHooseCo acquisition and strong demand in the legacy business.

Steel Products and Measurement

Six Months Ended

June 30, Change Percent

2023 2022 2023 vs.

2022 2023 vs.

Net Sales $ 49,369 $ 46,181 $ 3,188 6.9 %

Gross profit $ 8,215 $ 5,760 $ 2,455 42.6 %

Gross profit percentage 16.6 % 12.5 % 4.1 % 33.4 %

Segment operating profit (loss) $ 1,448 $ (1,386) $ 2,834 204.5 %

Segment operating profit (loss) percentage 2.9 % (3.0) % 5.9 % 197.7 %

The Steel Products and Measurement segment sales for the six months ended June 30, 2023 increased by $3,188, or 6.9%, compared to the prior year quarter.

The increase in sales for the second quarter of 2023 was attributable to the increase in Coatings and Measurement sales over the prior year quarter, due to increased activity in both traditional and adjacent market applications.

This increase was partially offset by a decrease in Fabricated Steel Products business unit sales, driven by soft demand for bridge grid decking.

Steel Products and Measurement gross profit for the six months ended June 30, 2023 increased by $2,455, and gross profit margins increased 410 basis points to 16.6%.

The increase in gross profit is primarily due to stronger margins in the Protective Coatings division attributable to higher volumes.

The segment operating profit increased by $2,834 from the prior year quarter, due to higher gross profit levels.

During the quarter, the Steel Products and Measurement segment had an increase in new orders and backlog of $9,057, or 17.9%, and $18,635, or 39.4%, respectively, compared to the prior year quarter.

The backlog increase was partially offset by a $7,503 decrease due to the Chemtec divestiture.

Liquidity and Capital Resources

The Company’s principal sources of liquidity are its existing cash and cash equivalents, cash generated by operations, and the available capacity under the revolving credit facility, which provides for a total commitment of up to $130,000, of which $49,091 was available for borrowing as of March 31, 2023, subject to covenant restrictions.

The Company’s principal sources of liquidity are its existing cash and cash equivalents, cash generated by operations, and the available capacity under the revolving credit facility, which provides for a total commitment of up to $130,000, of which $39,547 was available for borrowing as of June 30, 2023, subject to covenant restrictions.

The Company’s primary needs for liquidity relate to working capital requirements for operations, capital expenditures, debt service obligations, payments related to the Union Pacific Railroad Settlement, and acquisitions.

The Company’s total debt, including finance leases, was $80,096 and $91,879 as of March 31, 2023 and December 31, 2022, respectively, and was primarily comprised of borrowings under its revolving credit facility.

The following table reflects available funding capacity, subject to covenant restrictions, as of March 31, 2023:

March 31, 2023

The Company’s total debt, including finance leases, was $89,505 and $91,879 as of June 30, 2023 and December 31, 2022, respectively, and was primarily comprised of borrowings under its revolving credit facility.

The following table reflects available funding capacity, subject to covenant restrictions, as of June 30, 2023:

June 30, 2023

Cash and cash equivalents $ 3,880

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The Company regularly assesses its receivables and contract assets for collectability and realization, and provides allowances for credit losses where appropriate.

The Company believes that its reserves for credit losses are appropriate as of March 31, 2023, but adverse changes in the economic environment and adverse financial conditions of its customers may impact certain of its customers’ ability to access capital and pay the Company for its products and services, as well as impact demand for its products and services.

The changes in cash and cash equivalents for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended March 31,

Net cash provided by (used in) operating activities $ 6,932 $ (7,636)

The Company believes that its reserves for credit losses are appropriate as of June 30, 2023, but adverse changes in the economic environment and adverse financial conditions of its customers may impact certain of its customers’ ability to access capital and pay the Company for its products and services, as well as impact demand for its products and services.

The changes in cash and cash equivalents for the six months ended June 30, 2023 and 2022 were as follows:

Six Months Ended June 30,

Net cash used in operating activities $ (3,333) $ (13,382)

Net cash provided by (used in) investing activities 7,716 (7,328)

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Effect of exchange rate changes on cash and cash equivalents 178 (477)

Net decrease in cash and cash equivalents $ (243) $ (4,133)

Net increase (decrease) in cash and cash equivalents $ 998 $ (2,711)

Cash Flow from Operating Activities

During the three months ended March 31, 2023, net cash provided by operating activities was $6,932, compared to cash used in operating activities of $7,636 during the prior year period.

For the three months ended March 31, 2023, net loss and adjustments to reconcile net loss from operating activities provided $3,352, compared to $1,408 in the prior year period.

Working capital and other assets and liabilities provided $3,580 in the current period, compared to using $9,044 in the prior year period.

The Company received $2,967 during the three months ended March 31, 2023 associated with its federal income tax refund claims, which have now been collected in full.

During the six months ended June 30, 2023, net cash used by operating activities was $3,333, compared to cash used by operating activities of $13,382 during the prior year period.

For the six months ended June 30, 2023, net income and adjustments to reconcile net income from operating activities provided $11,862, compared to $7,277 in the prior year period.

Working capital and other assets and liabilities used $15,195 in the current period, compared to using $20,659 in the prior year period.

The Company received $2,973 during the six months ended June 30, 2023 associated with its federal income tax refund claims, which have now been collected in full.

Cash Flow from Investing Activities

Capital expenditures for the three months ended March 31, 2023 and 2022 were $699 and $1,764, respectively.

The current period expenditures primarily relate to general plant and operational improvements throughout the Company, including corporate system and facility improvements.

Expenditures for the three months ended March 31, 2022 primarily related to the implementation of the enterprise resource planning system at additional Company divisions and general plant and operational improvements throughout the Company.

On March 30, 2023, the Company divested the assets of its Chemtec business, generating a cash inflow of $5,344 during the three months ended March 31, 2023.

Capital expenditures for the six months ended June 30, 2023 and 2022 were $1,495 and $3,048, respectively.

The current period expenditures primarily relate to general plant and operational improvements throughout the Company, including corporate system and facility improvements and organic growth initiatives.

Expenditures for the six months ended June 30, 2022 primarily related to general plant and operational improvements throughout the Company, as well as organic growth initiatives.

During the six months ended June 30, 2023, the Company divested the assets of its Chemtec and Ties businesses, generating a cash inflow of $7,706.

During the six months ended June 30, 2023 the Company received proceeds of $966 from final working capital adjustments related to prior year acquisitions.

During the six months ended June 30, 2022 the Company had $5,712 in cash outflows for the acquisition of Skratch.

Cash Flow from Financing Activities

During the three months ended March 31, 2023 and 2022, the Company had a decrease in outstanding debt of $12,047 and an increase of $4,409, respectively.

The decrease in debt for the three months ended March 31, 2023 was due to both stronger operating cash flows as well as proceeds received from the Chemtec divestiture during the quarter.

During the six months ended June 30, 2023 and 2022, the Company had a decrease in outstanding debt of $2,920 and an increase of $18,877, respectively.

The decrease in debt for the six months ended June 30, 2023 was primarily due to the proceeds received from the Ties and Chemtec divestiture during the period, which were used to pay down debt, partially offset by increased working capital needs.

The increase in debt for the 2022 period was the result of funding working capital and other assets and liabilities.

Treasury stock acquisitions of $309 and $397 for the three months ended March 31, 2023 and 2022, respectively, represent stock repurchases from employees to satisfy their income tax withholdings in connection with the vesting of stock awards.

Treasury stock acquisitions of $977 and $401 for the six months ended June 30, 2023 and 2022, respectively, represent stock repurchases from employees to satisfy their income tax withholdings in connection with the vesting of stock awards.

During the first quarter of 2023, the Company’s Board of Directors authorized the repurchase of up to $15,000 of the Company’s common stock in open market transactions through February 2026.

Repurchases are limited to up to $5,000 in any trailing 12-month period, with unused amounts carrying forward to future periods through the end of the authorization.

Any repurchases will be subject to the Company’s liquidity, including availability of borrowings and covenant compliance under its revolving credit facility, and other capital needs of the business.

No shares were repurchased in the first quarter of 2023 as part of the stock repurchase program.

Any repurchases will be subject

to the Company’s liquidity, including availability of borrowings and covenant compliance under its revolving credit facility, and other capital needs of the business.

In connection with the stock repurchase program, 51,241 shares valued at $662 were repurchased during the six months ended June 30, 2023.

Repurchases of shares of the Company’s common stock may be made from time to time in the open market or in such other manner as determined by the Company.

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Financial Condition

As of March 31, 2023, the Company had $2,639 in cash and cash equivalents.

As of June 30, 2023, the Company had $3,880 in cash and cash equivalents.

The Company’s cash management priority continues to be short-term maturities and the preservation of its principal balances.

As of March 31, 2023, approximately $2,136 of the Company’s cash and cash equivalents were held in non-domestic bank accounts.

As of June 30, 2023, approximately $2,418 of the Company’s cash and cash equivalents were held in non-domestic bank accounts.

The Company principally maintains its cash and cash equivalents in accounts held by major banks and financial institutions.

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The Company views its liquidity as being dependent on its results of operations, changes in working capital needs, and its borrowing capacity.

As of March 31, 2023, the Company's revolving credit facility had $49,091 of net availability, while the Company had $80,096 in total debt.

On August 13, 2021, the Company entered into the Credit Agreement, which increased the total commitments under the revolving credit facility to $130,000 from $115,000, extended the maturity date from April 30, 2024 to August 13, 2026, and provided more favorable covenant terms.

As of June 30, 2023, the Company's revolving credit facility had $39,547 of net availability, while the Company had $89,505 in total debt.

On August 13, 2021, the Company entered into the Credit Agreement, which increased the total commitments under the revolving credit facility to $130,000, extended the maturity date from April 30, 2024 to August 13, 2026, and provided more favorable covenant terms.

Borrowings under the Credit Agreement bear interest rates based upon either the base rate or SOFR rate plus applicable margins.

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2023 December 31,

2022 March 31,

2022 June 30,

Rail, Technologies, and Services $ 132,451 $ 105,241 $ 132,017

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis