What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-06 compared with 2024-05-07 · 229 added, 101 removed, 163 unchanged (67% of the section changed)

10 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:

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;

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;

1 unchanged sentence

a decrease in freight or transit rail traffic;

environmental matters, including any costs associated with any remediation and monitoring of such matters;

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;

6 unchanged sentences

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, and reforms regarding the use of SOFR as a benchmark for establishing applicable interest rates;

the Company’s ability to manage its working capital requirements and indebtedness;

1 unchanged sentence

domestic and foreign government regulations, including tariffs;

economic conditions and regulatory changes caused by the United Kingdom’s exit from the European Union;

geopolitical conditions, including the ongoing conflicts between Russia and Ukraine and Israel and Hamas;

the results of the United Kingdom'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 United Kingdom or U.S.

business conditions;

other geopolitical conditions, including the ongoing conflicts between Russia and Ukraine and Israel and Hamas;

a lack of state or federal funding for new infrastructure projects;

1 unchanged sentence

the loss of future revenues from current customers;

and risks inherent in litigation and the outcome of litigation and product warranty claims.

10 unchanged sentences

As such, the Company has restated segment information for the historical periods presented herein to conform to the current presentation.

The Infrastructure Solutions business comprises both the historic Precast Concrete Products and Steel Products and Measurement (since renamed “Steel Products”) reporting segments.

The Infrastructure business comprises both the historic Precast Concrete Products and Steel Products and Measurement (since renamed “Steel Products”) reporting segments.

Acquisitions, Divestitures, and Product Line Exit

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 generating a $2,065 loss on sale, recorded in “Other (income) expense - net” for the three months ended March 31, 2023.

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 generating a $2,065 loss on sale, recorded in “Other expense (income) - net” for the six months ended June 30, 2023.

The Chemtec business was reported in the Steel Products business unit in the Infrastructure segment.

2 unchanged sentences

On August 30, 2023, the Company announced the discontinuation of its Bridge Products grid deck product line (“Bridge Exit”) which was reported in the Steel Products business unit within the Infrastructure segment.

The decision to exit the bridge grid deck product line was a result of a weak bridge grid deck market condition and outlook due to customer adoption of newer technologies replacing the grid deck solution.The Bedford, PA based operations supporting the product line expects to complete any remaining customer obligations during 2024.

For the three months ended March 31, 2024 and 2023, the product line had $810 and $1,491 in sales, respectively.

On November 17, 2023, the Company acquired the operating assets of Cougar Mountain Precast, LLC (“Cougar”), located in Caldwell, Idaho, which is a licensed manufacturer of Redi-Rock and natural concrete products for $1,644, subject to hold back payments, to be paid over the next twelve months or utilized to satisfy post-close working capital adjustments or indemnity claims.

The Company continues to operate its bridge forms product line which is a newer technology and not subject to the same challenging market conditions.

The Bedford, PA based operations supporting the discontinued product line expects to complete any remaining customer obligations during 2025.

For the three months ended June 30, 2024 and 2023, the discontinued product line had $1,157 and $1,975 in sales, respectively, and for the six months ended June 30, 2024 and 2023, the discontinued product line had $1,967 and $3,466 in sales, respectively.

On November 17, 2023, the Company acquired the operating assets of Cougar Mountain Precast, LLC (“Cougar”), located in Caldwell, Idaho, which is a licensed manufacturer of Redi-Rock and natural concrete products for $1,644, subject to hold back payments, to be paid over the twelve months following the closing or utilized to satisfy post-close working capital adjustments or indemnity claims.

Cougar has been included in the Precast Concrete Products business unit within the Infrastructure segment.

Results of Operations

First Quarter 2024 Compared to First Quarter 2023

Second Quarter 2024 Compared to Second Quarter 2023

Three Months Ended

March 31, Change

June 30, Change

2024 2023 2024 vs.

6 unchanged sentences

Amortization expense 1,123 1,375 (252)

Operating profit $ 2,283 $ 503 $ 1,780

Operating profit margin 1.8 % 0.4 % 140 bps

Operating income $ 4,504 $ 6,349 $ (1,845)

Operating income margin 3.2 % 4.3 % (110) bps

Interest expense - net $ 1,493 $ 1,574 $ (81)

Other (income) expense - net (152) 719 (871)

Income (loss) before income taxes $ 4,694 $ (2,712) $ 7,406

Income tax expense (benefit) 289 (541) 830

Net income (loss) $ 4,405 $ (2,171) $ 6,576

Income before income taxes $ 3,163 $ 4,056 $ (893)

Income tax expense 346 563 (217)

Net income $ 2,817 $ 3,493 $ (676)

Net loss attributable to noncontrolling interest (30) (38) 8

Net income (loss) attributable to L.B.

Net income attributable to L.B.

Foster Company $ 2,847 $ 3,531 $ (684)

Diluted earnings (loss) per common share $ 0.40 $ (0.20) $ 0.60

Diluted earnings per common share $ 0.26 $ 0.32 $ (0.06)

Results Summary

Net sales of $124,320 for the three months ended March 31, 2024, increased by $8,832, or 7.6%, over the prior year quarter.

The increase in sales is due to organic sales growth of $19,474 or 16.9%, partially offset by the divestiture of the Ties and Chemtec businesses as well as the Bridge Exit which reduced sales by $10,642 or 9.2%.

Gross profit for the three months ended March 31, 2024 increased $2,958 or 12.7%, over the prior year quarter and gross profit margins expanded by 90 basis points to 21.1%.

The improvement in gross profit is due primarily to the portfolio changes that are a part of the Company’s strategic transformation, as well as uplift from increased sales volumes and product mix.

Selling and administrative expenses for the three months ended March 31, 2024 increased by $1,326, or 6.2%, over the prior year quarter, due primarily to increased personnel costs and professional services expenditures.

Selling and administrative expenses as a percent of net sales decreased to 18.3% from 18.5% in the prior year quarter.

Net interest expense decreased $263 due to lower outstanding debt, on average, for the three months ended March 31, 2024 compared to the prior year quarter.

The Company's outstanding debt balance was $78,085 as of March 31, 2024, compared to $80,096 as of March 31, 2023.

Other income for the three months ended March 31, 2024 was $3,536 and was primarily attributable to a gain of $3,477 on the sale of the Company’s former joint venture facility and land in Magnolia, Texas.

Other expense - net for the three months ended March 31, 2023 was $1,827 and was primarily due to the $2,033 loss on the sale of Chemtec during the prior year quarter.

The Company’s effective income tax rate for the three months ended March 31, 2024 was 6.2%, compared to 19.9% in the prior year quarter.

The Company’s effective income tax rate for the three months ended March 31, 2024 differed from the federal statutory rate of 21% primarily due to the realization of a portion of its U.S.

Net sales for the three months ended June 30, 2024, decreased by $7,238, or 4.9%, over the prior year quarter.

The decrease in sales is due to a decrease in organic sales of $5,007, or 3.4%, and the Ties divestiture and the Bridge Exit which reduced sales by $2,231, or 1.5%.

The decline in organic sales was primarily in the Rail segment.

Gross profit for the three months ended June 30, 2024 decreased by $1,729, or 5.4%, from the prior year quarter and gross profit margins decreased by 10 basis points.

The decline in gross profit was driven primarily by volumes and softer market prices in the domestic Rail Distribution business within Rail Products.

Margins within the Infrastructure segment improved year over year due to our portfolio transformation activities and a $815 gain on the sale of ancillary property within the Steel Products business unit.

Selling and administrative expenses for the three months ended June 30, 2024 increased by $368, or 1.5%, over the prior year quarter.

The increase was primarily attributed to $751 in corporate legal expense associated with an ongoing legal matter and $473 in professional services expenditures.

Selling and administrative expenses as a percent of net sales increased to 17.7% from 16.6% in the prior year quarter.

Net interest expense decreased $81 for the three months ended June 30, 2024 compared to the prior year quarter.

The Company’s outstanding debt balance was $87,173 as of June 30, 2024, compared to $89,505 as of June 30, 2023.

Other income - net for the three months ended June 30, 2024 was $152 and was primarily attributable to rental income received.

Other expense - net for the three months ended June 30, 2023 was $719 and was primarily due to the $1,041 loss on the sale of Ties during the prior year quarter.

The Company’s effective income tax rate for the three months ended June 30, 2024 was 10.9%, compared to 13.9% in the prior year quarter.

The Company’s effective income tax rate for the three months ended June 30, 2024 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.

1 unchanged sentence

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

Net income attributable to the Company for the three months ended March 31, 2024 was $4,436, or $0.40 per diluted share, compared to a net loss in the prior year quarter of $2,152, or $0.20 per diluted share.

Net income for the three months ended March 31, 2024 was

primarily driven by increased sales volumes, gross profit expansion and the gain on the sale of the Company’s former joint venture facility and land in Magnolia, Texas, partially offset by an increase in selling and administrative expenses.

Net income attributable to the Company for the three months ended June 30, 2024 decreased by $684, or $0.06 per diluted share, from the prior year quarter.

The change in net income attributable to the Company was due to lower operating income partially offset by lower other expense - net.

Results of Operations - Segment Analysis

1 unchanged sentence

Three Months Ended

March 31, Change Percent

June 30, Change Percent

2024 2023 2024 vs.

3 unchanged sentences

Gross profit margin 20.9 % 21.7 % (80) bps (3.6)

Segment operating profit $ 6,778 $ 2,388 $ 4,390 183.8

Segment operating profit margin 8.2 % 3.7 % 450 bps 121.2

The Rail segment sales for the three months ended March 31, 2024 increased by $18,239, or 28.3%, compared to the prior year quarter.

Segment operating income $ 5,431 $ 6,627 $ (1,196) (18.0)

Segment operating income margin 6.3 % 7.2 % (90) bps (12.3)

Note percentages may not foot due to rounding.

The Rail segment sales for the three months ended June 30, 2024 decreased by $6,022, or 6.6%, compared to the prior year quarter.

Organic sales declined by $4,609, or 5.0%, and the divestiture of Ties resulted in lower sales of $1,413, or 1.5%.

Rail Products sales decreased by $7,923, including the divestiture of Ties, due to lower volumes and softer market prices.

Technology Services and Solutions sales increased by $2,143 due to strength in the domestic rail safety markets served, as well as improvement in United Kingdom markets.

Global Friction management sales decreased $242, driven by a decline in domestic sales.

The Rail segment gross profit decreased by $1,972, or 9.9%, compared to the prior year quarter, and gross profit margins decreased 80 basis points to 20.9%.

The decline in gross profit was driven by Rail Products which decreased by $3,293 from the prior year quarter due to lower volumes and softer market prices.

This was partially offset by the Technology Services and Solutions business unit where gross profit improved by $831 from the prior year quarter due to higher volumes and improved mix.

Improved mix in the Global Friction Management business resulted in a increase in gross profit of $490 from the prior year quarter.

Segment operating income decreased $1,196 compared to the prior year quarter, and operating income margins decreased 90 basis points to 6.3%.

The decrease was driven primarily by lower gross profit, partially offset by a $751 improvement in selling and administrative expense compared to the prior year quarter.

During the current quarter, new orders within the Rail segment were $116,996, an increase of $1,011, or 0.9%, compared to the prior year quarter.

The increase in new orders was attributable to a $4,040 increase in Rail Products orders, which includes offsets arising from the order declines associated with the Ties divestiture which reduced orders by $3,376.

Strength in Rail Products offset order declines in the Technology Services and Solutions business unit and Global Friction Management.

Segment backlog as of June 30, 2024 decreased by $17,657, or 13.3%, compared to the prior year quarter.

The decrease is attributed to the Rail Products and Technology Services and Solutions businesses decreasing 13.4% and 21.5%, respectively, partially offset by a 17.0% increase in backlog with Global Friction Management associated with strong order rates in the three months ended March 31, 2024.

Infrastructure Solutions

Three Months Ended

June 30, Change Percent

2024 2023 2024 vs.

2023 2024 vs.

Net sales $ 55,202 $ 56,418 $ (1,216) (2.2) %

Gross profit $ 12,648 $ 12,405 $ 243 2.0

Gross profit margin 22.9 % 22.0 % 90 bps 4.2

Segment operating income $ 3,618 $ 2,752 $ 866 31.5

Segment operating income margin 6.6 % 4.9 % 170 bps 34.9

Note percentages may not foot due to rounding.

The Infrastructure segment sales for the three months ended June 30, 2024 decreased by $1,216, or 2.2%, compared to the prior year quarter.

The decrease in sales for the second quarter of 2024 was due primarily to the Bridge Exit, which decreased sales by $818 or 1.4%.

O rganic sales decreased by $398, or 0.7%, attributable to the Steel Products business unit.

The Infrastructure segment gross profit for the three months ended June 30, 2024, increased by $243, or 2.0%, and gross profit margins increased 90 basis points driven by Steel Products, which included a $815 gain associated with the sale of ancillary property

in the Steel Products business.

The increase in gross profit margin was partially offset by lower margins in the Precast Concrete Products business.

Segment operating income for the second quarter of 2024 increased by $866 compared to the prior year quarter due primarily to higher gross profit, as well as a $398 improvement in selling and administrative expense.

During the quarter, the Infrastructure segment had new orders of $53,997, a decrease of $13,760, or 20.3%, compared to the prior year quarter.

This decrease was driven entirely by the Steel Products business unit, specifically the Protective Coatings business, which is experiencing a comparative decline in orders due to large non-recurring orders received in 2023.

Backlog as of June 30, 2024 decreased by $22,614, or 14.3%, versus the prior year quarter, driven entirely by Steel Products which decreased $24,634 overall, including a reduction of $6,931 related to the Bridge Exit and softness in the Steel Products group of $17,703, offsetting an increase of $2,020 in Precast Concrete Products.

Three Months Ended

June 30, Change Percent

2024 2023 2024 vs.

2023 2024 vs.

Public company costs $ (1,621) $ (1,217) $ (404) 33.2 %

Corporate executive management costs (1,885) (1,155) (730) 63.2

Corporate management stock-based compensation (880) (604) (276) 45.7

Other (159) (54) (105) **

Total unallocated corporate expenses $ (4,545) $ (3,030) $ (1,515) 50.0 %

**Results of this calculation not considered meaningful

Unallocated corporate expenses increased in 2024 compared with 2023 primarily due to an increase of $751 in corporate legal costs associated with an ongoing legal matter, $473 in professional services expenditures, and to a lesser extent stock-based compensation and insurance expenditures.

Results of Operations

First Six Months 2024 Compared to First Six Months 2023

Six Months Ended

June 30, Change

2024 2023 2024 vs.

Net sales $ 265,116 $ 263,522 $ 1,594

Gross profit 56,772 55,543 1,229

Gross profit margin 21.4 % 21.1 % 30 bps

Selling and administrative expenses $ 47,645 $ 45,951 $ 1,694

Selling and administrative expenses as a percent of sales 18.0 % 17.4 % 60 bps

Amortization expense 2,340 2,740 (400)

Operating income $ 6,787 $ 6,852 $ (65)

Operating income margin 2.6 % 2.6 % 0 bps

Interest expense - net $ 2,618 $ 2,962 $ (344)

Other (income) expense - net (3,688) 2,546 (6,234)

Income before income taxes $ 7,857 $ 1,344 $ 6,513

Income tax expense 635 22 613

Net income $ 7,222 $ 1,322 $ 5,900

Net loss attributable to noncontrolling interest (61) (57) (4)

Net income attributable to L.B.

Foster Company $ 7,283 $ 1,379 $ 5,904

Diluted earnings per common share $ 0.66 $ 0.12 $ 0.54

Results Summary

Net sales for the six months ended June 30, 2024 increased by $1,594, or 0.6%, over the prior year period.

The change in sales is due to organic sales growth of $14,465 or 5.5%, partially offset by a decrease due to divestitures and the Bridge Exit of $12,871, or 4.9%.

Organic sales growth was driven by the Rail, Technologies, and Services segment.

Gross profit for the six months ended June 30, 2024 increased by $1,229, or 2.2%, over the prior year period and gross profit margins increased 30 basis points.

The improvement in gross profit is due to the business portfolio changes in line with the Company's strategic transformation along with higher sales volume and a $815 gain on the sale of ancillary property within the Steel Products business unit.

Selling and administrative expenses for the six months ended June 30, 2024 increased by $1,694, or 3.7%, from the prior year period, due primarily to increased corporate legal costs and $783 professional services expenditures.

Selling and administrative expenses as a percent of net sales increased to 18.0% from 17.4% in the prior year period, a 60 basis point increase.

Other income - net for the six months ended June 30, 2024 was $3,688 while other expense - net was $2,546 in the prior year period.

Other income - net for the six months ended June 30, 2024 was primarily attributable to a gain of $3,477 on the sale of the Company’s former joint venture facility and land in Magnolia, Texas, and 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.

Net interest expense for the six months ended June 30, 2024 decreased by $344, or 11.6%, from the prior year period.

The Company’s effective income tax rate for the six months ended June 30, 2024 was 8.1%, compared to 1.6% in the prior year period.

The Company’s effective tax rate for the six months ended June 30, 2024 differed from the federal statutory rate of 21% primarily due to the Company’s 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 attributable to the Company for the six months ended June 30, 2024 was favorable by $5,904, or $0.54 per diluted share, over the prior year period.

The increase in net income was primarily driven by other income - net of $3,688 recorded in the six months ended June 30, 2024 compared to other expense - net of $2,546 recorded in the six months ended June 30, 2023.

Results of Operations - Segment Analysis

Rail, Technologies, and Services

Six Months Ended

June 30, Change Percent

2024 2023 2024 vs.

2023 2024 vs.

Net sales $ 168,217 $ 156,000 $ 12,217 7.8 %

Gross profit $ 36,446 $ 34,131 $ 2,315 6.8

Gross profit margin 21.7 % 21.9 % (20) bps (1.0)

Segment operating income $ 12,209 $ 9,015 $ 3,194 35.4

Segment operating income margin 7.3 % 5.8 % 150 bps 25.6

The Rail segment sales for the six months ended June 30, 2024 increased by $12,217, or 7.8 %, compared to the prior year period.

The increase was due to higher organic sales of $14,331, or 9.2%, partially offset by a $2,114, or 1.4% decrease from the divestiture of Ties.

Rail Products sales increased $12,810 driven by strength in domestic markets served.

Rail Products sales increased by $4,886 driven by strength in domestic markets served, despite the Ties divestiture.

Technology Services and Solutions sales increased by $9,371 due to strength in domestic rail safety markets served, as well as improvement in United Kingdom markets.

Global Friction management sales declined $1,798 driven by the timing of orders which have increased from the 2023 fourth quarter by 29.6% .

The Rail segment gross profit increased by $4,287, or 30.0% compared to the prior year quarter, and gross profit margins expanded 30 basis points to 22.5%.

Global Friction Management sales declined by $2,040 driven by both domestic and international markets served.

The Rail segment gross profit increased by $2,315, or 6.8%, compared to the prior year period, and gross profit margins decreased 20 basis points.

Technology Services and Solutions business unit gross profit improved by $4,917 due to higher volume and improved mix.

Higher volumes in Rail Products resulted in gross profit increasing by $1,369.

Lower volumes and unfavorable product mix in the Global Friction Management business result in a decline in gross profit of $1,168.

Segment operating profit increased $4,390 compared to the prior year, and operating profit margins expanded 450 basis points to 8.2%.

The increase was driven by improvement in gross profit levels as a result of increased sales volume and favorable business mix, particularly in the Technology Services and Solutions business unit.

During the current quarter, new orders within the Rail segment increased by $10,019, or 13.6%, compared to the prior year quarter.

The increase in new orders was attributable to the Rail Products and Global Friction Management businesses, which was offset in part by the Ties divestiture which reduced orders by $2,729 as well as lower overall order rates in the Technology Services and Solutions business unit.

Segment backlog as of March 31, 2024 was $86,038, a decrease of $27,555, or 24.3%, versus the prior year quarter.

The decrease is attributed to the Rail Products business, including a reduction of $3,549 related to the divestiture of Ties, partially offset by a 27.7% increase in Global Friction Management backlog.

Unfavorable mix and price pressure in Rail Products resulted in gross profit decreasing by $1,962.

Lower volumes in the Global Friction Management business resulted in a decline in gross profit of $640.

Segment operating income increased by $3,194, or 35.4%, compared to the prior year period, and operating income margins expanded 150 basis points.

The increase was driven by improvement in gross profit levels as a result of increased sales volume, as well as a $917 improvement in selling and administrative expense.

During the six months ended June 30, 2024, new orders within the Rail segment were $200,737, an increase of $11,029, or 5.8%, compared to the prior year period.

Rail Products had an $18,540 increase in new orders, including the offset of the Ties divestiture which reduced orders by $6,105.

Technology Services and Solutions business unit had a decline of $8,167 in overall orders related to the United Kingdom business.

Infrastructure Solutions

Three Months Ended

March 31, Change Percent

Six Months Ended

June 30, Change Percent

2024 2023 2024 vs.

3 unchanged sentences

Gross profit margin 21.0 % 19.9 % 110 bps 5.3

Segment operating loss $ (1,393) $ (356) $ (1,037) (291.3)

Segment operating loss margin (3.3) % (0.7) % (260) bps (373.2)

The Infrastructure segment sales for the three months ended March 31, 2024 decreased by $9,407, or 18.4%, compared to the prior year quarter.

The decrease in sales for the first quarter of 2024 was attributable to the divestiture of Chemtec and the Bridge Exit, which decreased sales by $9,260 and $681, respectively.

O rganic sales increased by $534, or 1.0%, while being adversely affected by weather conditions that impacted customer project execution in our Precast Concrete Products business.

The Infrastructure segment gross profit for the three months ended March 31, 2024, decreased by $1,329, or 14.8%, due primarily to the divestiture of Chemtec which reduced gross profit by $888 and softness in margins in our Precast Concrete Products business.

Gross profit margins of 18.4% increased by 80 basis points over the prior year, driven by the favorable impact of portfolio changes.

Segment operating loss for the first quarter of 2024 was $1,393 compared to an operating loss in the prior year of $356.

The segment operating loss was due to lower gross profit levels, which was partially offset by a decrease in amortization expense and selling and administrative expenses.

During the quarter, the Infrastructure segment had a decrease in new orders of $17,149, or 26.1%, compared to the prior year quarter.

The decrease is due to an $8,538 impact associated with the divestiture of Chemtec and the Bridge Exit as well as decreases in orders in the Precast Concrete Products and Protective Coatings businesses.

Backlog as of March 31, 2024 was $136,223, a decrease of $10,065, or 6.9%, versus the prior year quarter, driven primarily by a reduction of $8,509 related to the Bridge Exit.

Three Months Ended March 31, Change Percent

Segment operating income $ 2,225 $ 2,396 $ (171) (7.1)

Segment operating income margin 2.3 % 2.2 % 10 bps 4.5

The Infrastructure segment sales for the six months ended June 30, 2024 decreased by $10,623, or 9.9%, compared to the prior year period.

The decrease in sales for the six months ended June 30, 2024 was attributable to the divestiture of Chemtec and the Bridge Exit, which decreased sales by $9,258 and $1,499, respectively.

Organic sales decreased by $134, or 0.1%.

The Infrastructure segment gross profit for the six months ended June 30, 2024, decreased by $1,086, or 5.1 %, due to the divestiture of Chemtec which reduced gross profit by $861 and lower sales volumes in our Precast Concrete Products business unit.

Margins improved year over year due to an $815 gain on the sale of ancillary property within the Steel Products business unit.

Gross profit margins increased by 110 basis points over the prior year period.

Segment operating income for the six months ended June 30, 2024 decreased by $171 from the prior year period.

The decline in segment operating income was due to lower gross profit which was partially offset by a $478 decrease in selling and administrative costs and a $438 decrease in amortization expense.

For the six months ended June 30, 2024, the Infrastructure segment had new orders of $102,641 a decrease of $30,909, or 23.1%, compared to the prior year period.

The decrease is due to an $7,842 impact associated with the divestiture of Chemtec and the Bridge Exit as well as decreases in both the Precast Concrete Products and Steel Products business units.

Six Months Ended

June 30, Change Percent

2024 2023 2024 vs.

2023 2024 vs.

Corporate expense and other unallocated charges $ 3,102 $ 1,529 $ 1,573 102.9 %

Unallocated corporate expenses increased in 2024 compared with 2023 primarily due to personnel costs and professional services expenditures.

Public company costs $ (2,840) $ (1,873) $ (967) 51.6 %

Corporate executive management costs (3,292) (1,521) (1,771) 116.4

Corporate management stock-based compensation (1,479) (1,148) (331) 28.8

Other (36) (17) (19) **

Total corporate expense and other unallocated charges $ (7,647) $ (4,559) $ (3,088) 67.7 %

**Results of this calculation not considered meaningful

Unallocated corporate expenses increased in 2024 compared with 2023 primarily due to an increase of $751 in corporate legal costs associated with an ongoing legal matter, $783 in professional services expenditures, and to a lesser extent stock-based compensation and insurance expenditures.

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 $50,071 was available for borrowing as of March 31, 2024, 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, tax obligations, outstanding purchase obligations, acquisitions and to support the share repurchase program.

The Company’s total debt, including finance leases, was $78,085 and $55,273 as of March 31, 2024 and December 31, 2023, respectively, and was primarily comprised of borrowings under its revolving credit facility.

The following table reflects available funding capacity as of March 31, 2024:

March 31, 2024

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 $41,301 was available for borrowing as of June 30, 2024, subject to covenant restrictions.

The Company’s total debt, including finance leases, was $87,173 and $55,273 as of June 30, 2024 and December 31, 2023, respectively, and was primarily comprised of borrowings under its revolving credit facility.

The following table reflects available funding capacity as of June 30, 2024:

June 30, 2024

Cash and cash equivalents $ 4,021

5 unchanged sentences

Total available funding capacity $ 45,322

As of March 31, 2024 we were in compliance with all covenants of the Credit Agreement and have $53,219 available funding capacity.

As of June 30, 2024, the Company was in compliance with all covenants of the Credit Agreement and has $45,322 available funding capacity, subject to covenant restrictions.

The Company’s operating cash flows are impacted from period to period by fluctuations in working capital needs, as well as its overall profitability.

While the Company places an emphasis on working capital management in its operations, factors such as its contract mix, commercial terms, days sales outstanding (“DSO”), and market conditions as well as seasonality may impact its working capital.

While the Company places an emphasis on working capital management in its operations, factors such as its contract mix, commercial and collection terms, collection patters, and market conditions as well as seasonality may impact its working capital.

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, 2024, 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, 2024 and 2023 were as follows:

Three Months Ended March 31,

Net cash (used in) provided by operating activities $ (21,864) $ 6,932

Net cash provided by investing activities 1,209 4,661

The Company believes that its reserves for credit losses are appropriate as of June 30, 2024, 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.

On May 23, 2024, the Company’s Board of Directors approved the termination of our frozen L.B.

Foster Company Merged Retirement Plan (the “US DB Plan”) and the Portec Rail Products (UK) Limited Pension Scheme (the “UK DB Plan”).

The transfer of plan assets and obligations to insurers, and subsequent termination is expected to be completed by June 30, 2025.

The Company’s US DB Plan is underfunded as of June 30, 2024, and will require cash payments of approximately $2,000 to $3,000 to effectuate the termination.

The estimated cash payments are subject to change due to changes in market conditions that can impact the return on plan assets that are held by the US DB Plan and the UK DB Plan.

The UK DB Plan is fully funded as of June 30, 2024, and we do not expect any additional contributions to be required during the termination process.

The changes in cash and cash equivalents for the six months ended June 30, 2024 and 2023 were as follows:

Six Months Ended

Net cash used in operating activities $ (26,818) $ (3,333)

Net cash (used in) provided by investing activities (465) 7,716

Net cash provided by (used in) financing activities 28,815 (3,563)

Effect of exchange rate changes on cash and cash equivalents (71) 178

Net increase (decrease) in cash and cash equivalents $ 588 $ (243)

Net increase in cash and cash equivalents $ 1,461 $ 998

Cash Flow from Operating Activities

During the three months ended March 31, 2024, net cash used in operating activities was $21,864, compared to cash provided operating activities of $6,932 during the prior year quarter.

For the three months ended March 31, 2024, net income and adjustments to reconcile net income from operating activities provided $5,414, compared to $3,352 in the prior year quarter.

Working capital and other assets and liabilities were a use of $27,278 in the current period, compared to a source of $3,580 in the prior year quarter.

The change in operating cash flow for the three months ended March 31, 2024 versus the three months ended March 31, 2023 was largely driven by accounts receivable, which was a use of $4,042 during the current quarter compared to the $26,239 provided in the prior year quarter.

During the six months ended June 30, 2024, net cash used in operating activities was $26,818, compared to cash used in operating activities of $3,333 during the prior year.

For the six months ended June 30, 2024, net income and adjustments to reconcile net income from operating activities provided $12,178, compared to $11,862 in the prior year.

Working capital and other assets and liabilities were a use of $38,996 in the current period, compared to a use of $15,195 in the prior year.

The change in operating cash flow for the six months ended June 30, 2024 versus the six months ended June 30, 2023 was largely driven by accounts receivable, which was a use of $22,532 during the six months ended June 30, 2024 compared to the $6,584 provided in the six months ended June 30, 2023.

Order execution and collection timing can impact accounts receivables in any given quarter.

Cash Flow from Investing Activities

Capital expenditures for the three months ended March 31, 2024 and 2023 were $2,292 and $699, respectively.

Capital expenditures for the six months ended June 30, 2024 and 2023 were $4,346 and $1,495, respectively.

Capital expenditures in both periods primarily relate to general plant and operational improvements throughout the Company, as well as organic growth initiatives.

During the three months ended March 31, 2024, the Company divested the facility and land of its former joint venture in Magnolia, Texas generating a cash inflow of $3,501.

During the three months ended March 31, 2023 the Company received cash proceeds from the Chemtec divestiture totaling $5,344.

During the six months ended June 30, 2024, the Company divested the facility and land of its former joint venture in Magnolia, Texas and fixed assets associated with the Bridge Exit generating a cash inflow of $3,881.

During the six months ended June 30, 2023 the Company received cash proceeds from the Chemtec and Ties divestitures totaling $7,706.

Cash Flow from Financing Activities

During the three months ended March 31, 2024 the Company had an increase in outstanding debt of $22,911 compared to March 31, 2023 in which the Company has a decrease in debt of $12,047.

The increase in debt for the three months ended March 31, 2024 was primarily due to cash used in operating activities due to organic growth initiatives and higher seasonal working capital needs.

The decrease in debt for the 2023 period was due to lower working capital as well as proceeds received from the Chemtec divestiture during the quarter.

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.

For the three months ended March 31, 2024 the Company repurchased 16,555 shares of its stock for $385 under this program.

During the six months ended June 30, 2024 the Company had an increase in outstanding debt of $31,955 compared to the six months ended June 30, 2023 in which the Company had a decrease in outstanding debt of $2,920.

The increase in debt for the six months ended June 30, 2024 was primarily due to an increase in cash used in operating activities due to higher working capital needs.

The decrease in debt for the 2023 period was due to lower working capital as well as proceeds received from the Chemtec divestiture during the six month period.

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.

For the six months ended June 30, 2024 the Company repurchased 70,080 shares of its stock for $1,707 under this program.

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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The stock repurchase program does not obligate the Company to acquire any particular amount of common stock and may be suspended or discontinued at any time.

On August 5, 2024, the Board of Directors approved the modification of the Company’s stock repurchase program.

The modifications include revising the repurchase program expiration date from February 2026 to February 2025.

Additionally, the Board of Directors removed the restriction which previously limited repurchases to $5,000 in any trailing 12-month period.

The authorized repurchase amount was unchanged at $15,000.

As of June 30, 2024, the Company has repurchased stock of $4,021, leaving $10,979 of the original $15,000 authorized remaining.

Any repurchases will continue to 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.

Financial Condition

As of March 31, 2024, the Company had $3,148 in cash and cash equivalents and $50,071 of availability under its revolving credit facility, subject to covenant restrictions.

As of March 31, 2024, approximately $2,729 of the Company’s cash and cash equivalents were held in non-domestic bank accounts.

As of June 30, 2024, the Company had $4,021 in cash and cash equivalents and $41,301 of availability under its revolving credit facility, subject to covenant restrictions.

As of June 30, 2024, approximately $3,319 of the Company’s cash and cash equivalents were held in non-domestic bank accounts.

The Company’s principal uses of cash in recent years have been to fund its operations, including capital expenditures, repurchase of shares, acquisitions, funding the UPRR Settlement Agreement, and service indebtedness.

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dollars that is available to the Canadian and United Kingdom borrowers in the aggregate.

The Credit Agreement’s incremental loan feature permits the Company to increase the available commitments under the facility by up to an additional $50,000 subject to the

Company’s receipt of increased commitments from existing or new lenders and the satisfaction of certain conditions.

The Credit Agreement’s incremental loan feature permits the Company to increase the available commitments under the facility by up to an additional $50,000 subject to the Company’s receipt of increased commitments from existing or new lenders and the satisfaction of certain conditions.

On August 12, 2022, the Company entered into a second amendment to its Credit Agreement (the “Second Amendment”) which added an additional tier to the pricing grid and provided for the conversion from LIBOR-based to SOFR-based borrowings.

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2024 December 31,

2023 March 31,

2023 June 30,

Rail, Technologies, and Services $ 114,794 $ 84,418 $ 132,451

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Backlog decreased $40,271 compared to the prior year quarter due to $6,931 from businesses that were divested and a discontinued product line.

The remaining decline is associated with the timing of large orders for the Rail Products business.

The remaining decline is associated with the timing of large orders for the Rail Products business, as well as a backlog decrease in Steel Products.

Critical Accounting Estimates

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Change in Consolidated Sales Three Months Ended

March 31, Percent

June 30, Percent

Change Six Months Ended

June 30, Percent

2023 net sales, as reported $ 148,034 $ 263,522

4 unchanged sentences

Change in Rail, Technologies, and Services Sales Three Months Ended

March 31, Percent

June 30, Percent

Change Six Months Ended

June 30, Percent

2023 net sales, as reported $ 91,616 $ 156,000

4 unchanged sentences

Change in Infrastructure Solutions Sales Three Months Ended

March 31, Percent

June 30, Percent

Change Six Months Ended

June 30, Percent

2023 net sales, as reported $ 56,418 $ 107,522

7 unchanged sentences

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