FOSTER L B CO 10-Q/A

Item 1. Financial Statements L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) March 31, 2024 December 31, 2023 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,148 $ 2,560 Accounts receivable - net (Note 5) 57,871 53,484 Contract assets - net (Note 3) 24,141 29,489 Inventories - net (Note 6) 85,761 73,111 Other current assets 12,063 8,711 Total current assets 182,984 167,355 Property, plant, and equipment - net 76,133 75,579 Operating lease right-of-use assets - net 14,098 14,905 Other assets: Goodwill (Note 4) 31,995 32,587 Other intangibles - net (Note 4) 18,198 19,010 Other assets 2,993 2,965 TOTAL ASSETS $ 326,401 $ 312,401 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 43,368 $ 39,500 Deferred revenue (Note 3) 11,458 12,479 Accrued payroll and employee benefits 5,340 16,978 Current portion of accrued settlement (Note 13) 8,000 8,000 Current maturities of long-term debt (Note 7) 159 102 Other accrued liabilities 15,856 17,442 Total current liabilities 84,181 94,501 Long-term debt (Note 7) 77,926 55,171 Deferred tax liabilities (Note 9) 1,191 1,232 Long-term operating lease liabilities 11,178 11,865 Other long-term liabilities 6,648 6,797 Stockholders’ equity: Common stock, par value $ 0.01 , authorized 20,000,000 shares; shares issued at March 31, 2024 and December 31, 2023, 11,115,779 ; shares outstanding at March 31, 2024 and December 31, 2023, 10,789,231 and 10,733,935 , respectively 111 111 Paid-in capital 41,866 43,111 Retained earnings 129,069 124,633 Treasury stock - at cost, 326,548 and 381,844 common stock shares at March 31, 2024 and December 31, 2023, respectively ( 5,829 ) ( 6,494 ) Accumulated other comprehensive loss ( 20,616 ) ( 19,250 ) Total L.B. Foster Company stockholders’ equity 144,601 142,111 Noncontrolling interest 676 724 Total stockholders’ equity 145,277 142,835 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 326,401 $ 312,401 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 2 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three Months Ended March 31, 2024 2023 (As Restated) Sales of goods $ 104,463 $ 98,538 Sales of services 19,857 16,950 Total net sales 124,320 115,488 Cost of goods sold 81,542 78,049 Cost of services sold 16,602 14,132 Total cost of sales 98,144 92,181 Gross profit 26,176 23,307 Selling and administrative expenses 22,870 21,417 (Gain) on sale of former joint venture facility ( 3,477 ) — Amortization expense 1,217 1,365 Operating income 5,566 525 Interest expense - net 1,125 1,388 Other (income) expense - net ( 253 ) 1,849 Income (loss) before income taxes 4,694 ( 2,712 ) Income tax expense (benefit) 289 ( 541 ) Net income (loss) 4,405 ( 2,171 ) Net loss attributable to noncontrolling interest ( 31 ) ( 19 ) Net income (loss) attributable to L.B. Foster Company $ 4,436 $ ( 2,152 ) Per share data attributable to L.B. Foster shareholders: Basic earnings (loss) per common share $ 0.41 $ ( 0.20 ) Diluted earnings (loss) per common share $ 0.40 $ ( 0.20 ) Basic weighted average shares outstanding 10,762 10,792 Diluted weighted average shares outstanding 10,985 10,792 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (In thousands) Three Months Ended March 31, 2024 2023 Net income (loss) $ 4,405 $ ( 2,171 ) Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment ( 1,497 ) 1,247 Unrealized gain (loss) on cash flow hedges, net of tax expense of $ 0 106 ( 418 ) Reclassification of pension liability adjustments to earnings, net of tax expense of $ 4 and $ 2 , respectively* 25 40 Total comprehensive income (loss) 3,039 ( 1,302 ) Less comprehensive (loss) income attributable to noncontrolling interest: Net loss attributable to noncontrolling interest ( 31 ) ( 19 ) Foreign currency translation adjustment ( 17 ) 4 Amounts attributable to noncontrolling interest ( 48 ) ( 15 ) Comprehensive income (loss) attributable to L.B. Foster Company $ 3,087 $ ( 1,287 ) * Reclassifications out of “Accumulated other comprehensive loss” for pension obligations are charged to “Selling and administrative expenses” within the Condensed Consolidated Statements of Operations. The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended March 31, 2024 2023 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 4,405 $ ( 2,171 ) Adjustments to reconcile net income (loss) to cash used in operating activities: Deferred income taxes ( 41 ) ( 1,233 ) Depreciation 2,374 2,505 Amortization 1,217 1,365 Equity in income of nonconsolidated investments — ( 17 ) Gain on sales and disposals of property, plant, and equipment ( 3,574 ) ( 14 ) Stock-based compensation 1,033 884 Loss on asset divestitures — 2,033 Change in operating assets and liabilities: Accounts receivable ( 4,042 ) 26,239 Contract assets 5,136 ( 860 ) Inventories ( 12,756 ) ( 15,564 ) Other current assets ( 3,262 ) ( 791 ) Other noncurrent assets 675 ( 1,439 ) Accounts payable 3,200 4,921 Deferred revenue ( 1,008 ) ( 707 ) Accrued payroll and employee benefits ( 11,599 ) ( 6,386 ) Other current liabilities ( 1,807 ) ( 2,981 ) Other long-term liabilities ( 1,395 ) 1,148 Net cash (used in) provided by operating activities ( 21,444 ) 6,932 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of property, plant, and equipment 3,501 16 Capital expenditures on property, plant, and equipment ( 2,712 ) ( 699 ) Proceeds from business dispositions — 5,344 Net cash provided by investing activities 789 4,661 CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of debt ( 55,835 ) ( 55,133 ) Proceeds from debt 78,746 43,086 Treasury stock acquisitions ( 1,613 ) ( 309 ) Investment of noncontrolling interest — 334 Net cash provided by (used in) financing activities 21,298 ( 12,022 ) Effect of exchange rate changes on cash and cash equivalents ( 55 ) 186 Net increase (decrease) in cash and cash equivalents 588 ( 243 ) Cash and cash equivalents at beginning of period 2,560 2,882 Cash and cash equivalents at end of period $ 3,148 $ 2,639 Supplemental disclosure of cash flow information: Interest paid $ 992 $ 1,425 Income taxes paid (received) $ 303 $ ( 1,564 ) The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2024 Common Stock Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Noncontrolling Interest Total Stockholders’ Equity Balance, December 31, 2023 $ 111 $ 43,111 $ 124,633 $ ( 6,494 ) $ ( 19,250 ) $ 724 $ 142,835 Net income (loss) — — 4,436 — — ( 31 ) 4,405 Other comprehensive income, net of tax: Pension liability adjustment — — — — 25 — 25 Foreign currency translation adjustment — — — — ( 1,497 ) ( 17 ) ( 1,514 ) Unrealized derivative gain on cash flow hedges — — — — 106 — 106 Purchase of 16,555 common shares for treasury — — — ( 385 ) — — ( 385 ) Issuance of 71,851 common shares, net of shares withheld for taxes — ( 2,278 ) — 1,050 — — ( 1,228 ) Stock-based compensation — 1,033 — — — — 1,033 Balance, March 31, 2024 $ 111 $ 41,866 $ 129,069 $ ( 5,829 ) $ ( 20,616 ) $ 676 $ 145,277 Three Months Ended March 31, 2023 Common Stock Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Noncontrolling Interest Total Stockholders’ Equity Balance, December 31, 2022 $ 111 $ 41,303 $ 123,169 $ ( 6,240 ) $ ( 21,165 ) $ 420 $ 137,598 Net loss — — ( 2,152 ) — — ( 19 ) ( 2,171 ) Other comprehensive loss, net of tax: Pension liability adjustment — — — — 40 — 40 Foreign currency translation adjustment — — — — 1,247 4 1,251 Unrealized derivative loss on cash flow hedges — — — — ( 418 ) — ( 418 ) Issuance of 32,884 common shares, net of shares withheld for taxes — ( 1,236 ) — 1,066 — — ( 170 ) Stock-based compensation — 884 — — — — 884 Balance, March 31, 2023 $ 111 $ 40,951 $ 121,017 $ ( 5,174 ) $ ( 20,296 ) $ 405 $ 137,014 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands, except share data) Note 1. Basis of Presentation The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all estimates and adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. This Quarterly Report on Form 10-Q/A should be read in conjunction with the consolidated financial statements and footnotes thereto included in L.B. Foster Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023. In this Quarterly Report on Form 10-Q/A, references to “we,” “us,” “our,” and the “Company” refer collectively to L.B. Foster Company and its consolidated subsidiaries. Recently Issued Accounting Standards In November 2023, the FASB issued Accounting Standards Update 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires enhanced disclosures regarding significant segment expenses that are regularly reviewed by the chief operating decision maker (“CODM”) and included in each reported measure of segment profit or loss, including an amount for “other segment items” by reportable segment and a description of its composition. ASU 2023-07 also requires entities to disclose the title and position of the CODM and an explanation of how the CODM uses reported measures of segment profit or loss to assess performance and allocate resources. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted. The Company expects ASU 2023-07 to only impact its disclosures with no impacts to its consolidated financial condition, results of operations, and cash flows. In December 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires entities to disclose additional information with respect to the effective tax rate reconciliation and disaggregation of income tax expense and income taxes paid by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-09, but expects this ASU to only impact its disclosures with no impacts to its consolidated financial condition, results of operations, and cash flows. Restatement of Previously Issued Condensed Consolidated Financial Statements The Company identified an error related to the classification of the $ 3,477 gain on the sale of the former joint venture facility located in Magnolia, Texas, which sale was completed in the first quarter of 2024 (the “Magnolia Sale”) and reflected in the Company’s Unaudited Condensed Consolidated Statement of Operations for the three month period ended March 31, 2024. Upon completion of the Magnolia Sale, the Company recorded the $ 3,477 gain in “Other (income) expense - net” in the Unaudited Condensed Consolidated Statement of Operations. The Company had previously concluded that such classification was appropriate. However, in accordance with ASC 360-10-45-5, the $ 3,477 gain on the Magnolia Sale should have been recorded as a component of “Operating income” and not “Other (income) expense - net.” As a result of this classification error, “Operating income” was understated by $ 3,477 and “Other (income) expense - net” was overstated by $ 3,477 in the Company’s Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2024. 7 Table of Contents The Company also made other immaterial error corrections to the Company’s Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 (together with the Magnolia Sale adjustment, the “Restatement Adjustments”) and for the three months ended March 31, 2023. The impact of these corrections are shown in the tables below. Note only line items that were impacted by the Restatement Adjustments and immaterial error corrections are included below. Three Months Ended March 31, 2024 As Previously Reported Restatement Adjustments As Restated Cost of goods sold $ 81,469 $ 73 $ 81,542 Total cost of sales 98,071 73 98,144 Gross profit 26,249 ( 73 ) 26,176 Selling and administrative expenses 22,749 121 22,870 (Gain) on sale of former joint venture facility — ( 3,477 ) ( 3,477 ) Operating income 2,283 3,283 5,566 Other income - net ( 3,536 ) 3,283 ( 253 ) Three Months Ended March 31, 2023 As Previously Reported Adjustments As Revised Cost of goods sold $ 78,065 $ ( 16 ) $ 78,049 Total cost of sales 92,197 ( 16 ) 92,181 Gross profit 23,291 16 23,307 Selling and administrative expenses 21,423 ( 6 ) 21,417 Operating income 503 22 525 Other expense - net 1,827 22 1,849 The Restatement Adjustments to the Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2024 and the immaterial error corrections made to the Unaudited Condensed Consolidated Statement of Operations for three months ended March 31, 2023 did not change “Income (loss) before income taxes,” “Income tax expense (benefit)” or “Net income.” The Restatement Adjustments did not have an impact on the Unaudited Condensed Consolidated Balance Sheet as of March 31, 2024. However, immaterial error corrections were made to the Consolidated Balance Sheet as of December 31, 2023 in the Company’s Annual Report on Form 10-K/A as filed on November 1, 2024, as shown in the table below. Note only line items that were impacted by the immaterial error corrections are included below. 8 Table of Contents Year Ended December 31, 2023 As Previously Reported Adjustments As Revised ASSETS Current assets: Inventories - net $ 73,496 $ ( 385 ) $ 73,111 Other current assets 8,961 ( 250 ) 8,711 Total current assets 167,990 ( 635 ) 167,355 Property, plant, and equipment - net 75,999 ( 420 ) 75,579 Other assets: Other assets 2,715 250 2,965 TOTAL ASSETS 313,206 ( 805 ) 312,401 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 40,305 $ ( 805 ) $ 39,500 Total current liabilities 95,306 ( 805 ) 94,501 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 313,206 ( 805 ) 312,401 As a result of the immaterial error corrections to the Consolidated Balance Sheet as of December 31, 2023, the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2024 contained herein was adjusted as follows. Note only line items that were impacted by the immaterial error corrections are included below. Three Months Ended March 31, 2024 As Previously Reported Adjustments As Revised CASH FLOWS FROM OPERATING ACTIVITIES: Inventories $ ( 12,371 ) $ ( 385 ) $ ( 12,756 ) Other current assets ( 3,012 ) ( 250 ) ( 3,262 ) Other noncurrent assets 425 250 675 Accounts payable 2,395 805 3,200 Net cash used in operating activities ( 21,864 ) 420 ( 21,444 ) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures on property, plant, and equipment $ ( 2,292 ) $ ( 420 ) $ ( 2,712 ) Net cash provided by investing activities 1,209 ( 420 ) 789 There was no impact on “Net cash provided by financing activities” and no change in “Net increase in cash and cash equivalents” for the three months ended March 31, 2024. Where appropriate, the financial disclosures in the footnotes to the Unaudited Condensed Consolidated Financial Statements impacted by the Restatement Adjustments and correction of immaterial errors have been updated. Note 2. Business Segments The Company is a global technology solutions provider of engineered, manufactured products and services that builds and supports infrastructure. The Company’s segments represent components of the Company (a) that engage in activities from which revenue is generated and expenses are incurred, (b) whose operating results are regularly reviewed by the Chief Operating Decision Maker, who uses such information to make decisions about resources to be allocated to the segments, and (c) for which discrete financial information is available. Operating segments are evaluated on their segment operating income contribution to the Company’s consolidated results. Other income and expenses, interest, income taxes, and certain other items are managed on a consolidated basis. The Company’s segment accounting policies are described in Note 2 Business Segments of the Notes to the Company’s Consolidated Financial Statements contained in its Annual Report on Form 10-K/A for the year ended December 31, 2023. The Company is organized and operates in two reporting segments: Rail, Technologies, and Services (“Rail”), and Infrastructure Solutions (“Infrastructure”). Effective for the quarter and year ended December 31, 2023, the Company made certain organizational changes that led to the conclusion that it will operate under two reporting segments as opposed to the three reporting segments it has operated under historically. As such, the Company has restated segment information for the historical periods presented herein to 9 Table of Contents 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 operating results of the Company’s reportable segments were as follows for the periods presented: Three Months Ended March 31, 2024 Three Months Ended March 31, 2023 Net Sales Segment Operating Income (Loss) Net Sales Segment Operating Income (Loss) (As Restated) Rail, Technologies, and Services $ 82,623 $ 6,778 $ 64,384 $ 2,394 Infrastructure Solutions 41,697 ( 1,388 ) 51,104 ( 340 ) Total $ 124,320 $ 5,390 $ 115,488 $ 2,054 Segment operating income (loss), as shown above, includes allocated corporate operating expenses. Allocated corporate operating expenses include costs associated with central services such as quality, logistics, environmental health and safety, information technology, insurance, and human resources. Other corporate functional costs that are associated with the operating segments are also allocated to the segments such as finance, marketing, credit and collections, and treasury functions. Operating expenses related to corporate headquarter functions were allocated to each segment based on segment headcount, revenue contribution, or activity of the business units within the segments, based on the corporate activity type provided to the segment. Management believes the allocation of corporate operating expenses provides an accurate presentation of how the segments utilize corporate support activities. This provides the CODM meaningful segment profitability information to support operating decisions and the allocation of resources. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies found in Note 1 Significant Accounting Policies of the Notes to the Company’s Consolidated Financial Statements contained in its Annual Report on Form 10-K/A for the year ended December 31, 2023. Certain corporate costs are separately managed on a consolidated basis and are not allocated to the operating segments. These corporate costs include public company costs such as listing fees, audit fees, compliance costs, and Board of Directors fees. Additionally, certain corporate executive management costs, including costs of the corporate executive leadership team, and corporate management stock-based compensation expenses are not allocated to the operating segments. Finally, interest expense, income taxes, and certain other items included in other income and expense which are managed on a consolidated basis are not allocated to the operating segments. During the three months ended March 31, 2024, the Company completed the Magnolia Sale generating a $ 3,477 gain on sale recorded in “(Gain) on sale of former joint venture facility” which is included as a component of corporate operating income. 10 Table of Contents The following table demonstrates a reconciliation of reportable segment net operating income to the Company’s consolidated total for the periods presented: Three Months Ended March 31, 2024 2023 (As Restated) Income from operations: Total segment operating income $ 5,390 $ 2,054 Gain on sale of former joint venture facility 3,477 — Interest expense - net ( 1,125 ) ( 1,388 ) Other income (expense) - net 253 ( 1,849 ) Public company costs ( 1,219 ) ( 656 ) Corporate executive management costs ( 1,407 ) ( 366 ) Corporate management stock-based compensation ( 599 ) ( 544 ) Other ( 76 ) 37 Income (loss) before income taxes $ 4,694 $ ( 2,712 ) Depreciation/Amortization: Total segment depreciation/amortization $ 3,133 $ 3,429 Corporate depreciation/amortization 458 441 Depreciation/amortization $ 3,591 $ 3,870 Expenditures for Long-Lived Assets: Total segment expenditures for long-lived assets $ 2,569 $ 358 Corporate expenditures for long-lived assets 143 341 Expenditures for long-lived assets $ 2,712 $ 699 The following table illustrates assets of the Company by reportable segment for the periods presented: March 31, 2024 December 31, 2023 Rail, Technologies, and Services $ 167,565 $ 156,638 Infrastructure Solutions 129,852 130,247 Unallocated corporate assets 28,984 25,516 Total $ 326,401 $ 312,401 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. The Chemtec business was reported in the Steel Products business unit in the Infrastructure 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 $ 2,362 in proceeds, generating a $ 1,009 loss on the sale, which was recorded in “Other expense (income) - net” for the three months ended June 30, 2023. The Ties business was reported in the Rail Products business unit within the Rail segment. 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 expect 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. During the three months ended March 31, 2024, the Company incurred $ 73 of exit costs recorded in “Cost of goods sold,” all of which were personnel expenses. The Company expects to incur an additional $ 111 of personnel expenses associated with the exit through 2024. Cumulatively, the Company has incurred a total of $ 1,476 in exit costs for the Bridge Exit, which included $ 474 in inventory write-downs and $ 740 in personnel expenses, which were recorded in “Cost of goods sold,” and $ 262 in other exit costs which were recorded in “Selling and administrative expenses.” The majority of cash payments were made in early 2024. 11 Table of Contents 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. Cougar has been included in the Precast Concrete Products business unit within the Infrastructure segment. Note 3. Revenue The following table summarizes the Company’s sales by major product and service line for the periods presented: Three Months Ended March 31, 2024 2023 Rail Products $ 53,038 $ 40,228 Global Friction Management 14,022 15,820 Technology Services and Solutions 15,563 8,336 Rail, Technologies, and Services 82,623 64,384 Precast Concrete Products 21,091 24,288 Steel Products 20,606 26,816 Infrastructure Solutions 41,697 51,104 Total net sales $ 124,320 $ 115,488 The majority of the Company’s revenue is from products transferred and services rendered to customers at a point in time. The Company recognizes revenue at the point in time at which the customer obtains control of the product or service, which is generally when the product title passes to the customer upon shipment or the service has been rendered to the customer. In limited cases, title does not transfer and revenue is not recognized until the customer has received the products at a designated physical location. Net sales by the timing of the transfer of goods and services was as follows for the periods presented: Three Months Ended March 31, 2024 Rail, Technologies, and Services Infrastructure Solutions Total Point in time $ 65,539 $ 29,657 $ 95,196 Over time 17,084 12,040 29,124 Total net sales $ 82,623 $ 41,697 $ 124,320 Three Months Ended March 31, 2023 Rail, Technologies, and Services Infrastructure Solutions Total Point in time $ 53,834 $ 29,128 $ 82,962 Over time 10,550 21,976 32,526 Total net sales $ 64,384 $ 51,104 $ 115,488 The Company’s performance obligations under long-term agreements with its customers are generally satisfied over time. Over time revenue is primarily comprised of transit infrastructure and technology services and solutions projects within the Rail segment, precast concrete buildings within the Precast Concrete Products division in the Infrastructure segment, and long-term bridge projects and custom precision metering systems within the Steel Products division in the Infrastructure segment. Revenue under these long-term agreements is generally recognized over time, either using an input measure based upon the proportion of actual costs incurred to estimated total project costs or an input measure based upon actual labor costs as a percentage of estimated total labor costs, depending upon which measure the Company believes best depicts the Company’s performance to date under the terms of the contract, or an output method, specifically units delivered, based upon certain customer acceptance and delivery requirements. The use of an input or an output measure to recognize revenue is determined based on what is most appropriate given the nature of the work performed and terms of the associated agreement. Accounting for these long-term agreements involves the use of various techniques to estimate total revenues and costs. The Company estimates profit on these long-term agreements as the difference between total estimated revenues and expected costs to complete a contract and recognizes that profit over the life of the contract. As a result of management’s reviews of contract-related estimates the Company makes adjustments to contract estimates that impact our revenue and profit totals. Changes in estimates are primarily attributed to updated considerations, including economic conditions and historic contract patterns, resulting in changes to anticipated revenue from existing contracts. During the three months ended March 31, 2024, reductions to net sales stemming from changes in actual and expected values of certain commercial contracts and settlements of such contracts were immaterial . Such adjustments were 12 Table of Contents $ 393 during the three months ended March 31, 2023. The Company’s estimates related to these long-term agreements are further described in Note 4 Revenue of the Notes to the Company’s Consolidated Financial Statements contained in its Annual Report on Form 10-K/A for the year ended December 31, 2023. Revenue recognized over time was as follows for the periods presented: Three Months Ended March 31, Percentage of Total Net Sales Three Months Ended March 31, 2024 2023 2024 2023 Over time input method $ 13,143 $ 16,211 10.6 % 14.0 % Over time output method 15,981 16,315 12.9 14.1 Total over time sales $ 29,124 $ 32,526 23.4 % 28.2 % The timing of revenue recognition, billings, and cash collections results in billed receivables, costs in excess of billings (included in “Contract assets - net”), and billings in excess of costs (contract liabilities), included in “Deferred revenue” within the Condensed Consolidated Balance Sheets. The following table sets forth the Company’s contract assets: Contract Assets Balance as of December 31, 2023 $ 29,489 Net additions to contract assets 4,212 Transfers from contract asset balance to accounts receivable ( 9,560 ) Balance as of March 31, 2024 $ 24,141 The following table sets forth the Company’s contract liabilities: Contract Liabilities Balance as of December 31, 2023 $ 2,189 Revenue recognized from contract liabilities ( 1,467 ) Increase in billings in excess of cost, excluding revenue recognized 1,850 Other adjustments 317 Balance as of March 31, 2024 $ 2,889 The Company has established policies regarding allowance for credit losses associated with contract assets, which includes standalone reserve assessments for its long term, complex contracts as needed as well as detailed regular review and updates to contract margins, progress, and value. A standard reserve threshold is applied to contract assets related to short term, less complex contracts. Management also regularly reviews collection patterns and future expected collections and makes necessary revisions to allowance for credit losses related to contract assets. As of March 31, 2024, the Company had approximately $ 222,261 of remaining performance obligations, which is also referred to as backlog. Approximately 10.5 % of the March 31, 2024 backlog was related to projects that are anticipated to extend beyond March 31, 2025. Note 4. Goodwill and Other Intangible Assets The following table presents the changes in goodwill balance by reportable segment for the period presented: Rail, Technologies, and Services Infrastructure Solutions Total Balance as of December 31, 2023 $ 20,466 $ 12,121 $ 32,587 Cougar purchase accounting adjustment — ( 445 ) ( 445 ) Foreign currency translation impact ( 147 ) — ( 147 ) Balance as of March 31, 2024 $ 20,319 $ 11,676 $ 31,995 On November 17, 2023, the Company acquired Cougar Mountain Precast, LLC., for which all purchase accounting adjustments were finalized as of March 31, 2024. Purchase accounting finalization during the three months ended March 31, 2024 included adjustments to record $ 429 of gross intangible assets for customer relationships with a weighted average amortization period of 5 years. 13 Table of Contents The Company performs goodwill impairment tests annually during the fourth quarter, and also performs interim goodwill impairment tests if it is determined that it is more likely than not that the fair value of a reporting unit is less than the carrying amount. Qualitative factors are assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount, which included the impacts of current economic conditions, including but not limited to labor markets, supply chains, and other inflationary costs. However, these factors can be unpredictable and are subject to change. No interim goodwill impairment test was required as a result of the evaluation of qualitative factors as of March 31, 2024. However, future impairment charges could result if future projections diverge unfavorably from current expectations. The following table sets forth the components of the Company’s intangible assets for the periods presented: March 31, 2024 Weighted Average Amortization Period In Years Gross Carrying Value Accumulated Amortization Net Carrying Amount Patents 10 $ 328 $ ( 203 ) $ 125 Customer relationships 16 28,048 ( 17,903 ) 10,145 Trademarks and trade names 15 7,979 ( 4,755 ) 3,224 Technology 9 32,632 ( 28,164 ) 4,468 Favorable lease 6 327 ( 91 ) 236 $ 69,314 $ ( 51,116 ) $ 18,198 December 31, 2023 Weighted Average Amortization Period In Years Gross Carrying Value Accumulated Amortization Net Carrying Amount Patents 10 $ 335 $ ( 199 ) $ 136 Customer relationships 16 27,712 ( 17,236 ) 10,476 Trademarks and trade names 16 7,989 ( 4,593 ) 3,396 Technology 9 32,658 ( 27,906 ) 4,752 Favorable lease 6 327 ( 77 ) 250 $ 69,021 $ ( 50,011 ) $ 19,010 Note 5. Accounts Receivable Changes in reserves for uncollectible accounts are recorded as part of “Selling and administrative expenses” in the Condensed Consolidated Statements of Operations, and an expense of $ 396 and $ 155 for the three months ended March 31, 2024 and 2023, respectively. The Company established the allowance for credit losses by calculating the amount to reserve based on the age of a given trade receivable and considering historical collection patterns, bad debt expense experience, expected future trends of collections, current and expected market conditions, and any other relevant subjective adjustments as needed. Management maintains high-quality credit review practices and positive customer relationships that mitigate credit risks. The Company’s reserves are regularly reviewed and revised as necessary. The following table sets forth the Company’s allowance for credit losses: Allowance for Credit Losses Balance as of December 31, 2023 $ 809 Current period provision 396 Write-off against allowance ( 35 ) Balance as of March 31, 2024 $ 1,170 14 Table of Contents Note 6. Inventory Inventory is valued at average cost or net realizable value, whichever is lower. The Company’s components of inventory are summarized in the following table for the periods presented: March 31, 2024 December 31, 2023 Finished goods $ 57,550 $ 44,518 Work-in-process 1,432 4,675 Raw materials 26,779 23,918 Inventories - net $ 85,761 $ 73,111 Note 7. Long-Term Debt and Related Matters Long-term debt consisted of the following: March 31, 2024 December 31, 2023 Revolving credit facility $ 77,497 $ 55,060 Finance leases and financing agreements 588 213 Total 78,085 55,273 Less current maturities ( 159 ) ( 102 ) Long-term portion $ 77,926 $ 55,171 On August 13, 2021, the Company, its domestic subsidiaries, and certain of its Canadian and United Kingdom subsidiaries (collectively, the “Borrowers”), entered into the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) with PNC Bank, N.A., Citizens Bank, N.A., Wells Fargo Bank, National Association, Bank of America, N.A., and BMO Harris Bank, National Association. The Credit Agreement, as amended, modifies the prior amended revolving credit facility, on terms more favorable to the Company and extends the maturity from April 30, 2024 to August 13, 2026. The Credit Agreement provides for a five-year , revolving credit facility that permits aggregate borrowings of the Borrowers up to $ 130,000 with a sublimit of the equivalent of $ 25,000 U.S. 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. 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. Borrowings under the Credit Agreement, as amended, will bear interest at rates based upon either the base rate or SOFR rate plus applicable margins. The Credit Agreement includes two financial covenants: (a) Maximum Gross Leverage Ratio, defined as the Company’s consolidated Indebtedness (as defined in the Credit Agreement) divided by the Company’s consolidated EBITDA, which must not exceed (i) 3.25 to 1.00 for all testing periods other than during an Acquisition Period (as defined in the Credit Agreement), and (ii) 3.50 to 1.00 for all testing periods occurring during an Acquisition Period, and (b) Minimum Consolidated Fixed Charge Coverage Ratio, defined as the Company’s consolidated EBITDA divided by the Company’s Fixed Charges (as defined in the Credit Agreement), which must be more than 1.05 to 1.00. As of March 31, 2024, the Company was in compliance with the covenants in the Credit Agreement, as amended, and had outstanding letters of credit of approximately $ 2,432 . 15 Table of Contents Note 8. Earnings Per Common Share (Share amounts in thousands) The following table sets forth the computation of basic and diluted earnings (loss) per common share for the periods indicated: Three Months Ended March 31, 2024 2023 Numerator for basic and diluted earnings (loss) per common share: Net income (loss) attributable to L.B. Foster Company $ 4,436 $ ( 2,152 ) Denominator: Weighted average shares outstanding 10,762 10,792 Denominator for basic earnings (loss) per common share 10,762 10,792 Effect of dilutive securities: Stock compensation plans 223 — Dilutive potential common shares 223 — Denominator for diluted earnings (loss) per common share - adjusted weighted average shares outstanding 10,985 10,792 Basic earnings (loss) per common share $ 0.41 $ ( 0.20 ) Diluted earnings (loss) per common share $ 0.40 $ ( 0.20 ) There were 0 and 101 anti-dilutive shares for the three months ended March 31, 2024 and March 31, 2023, respectively. Note 9. Income Taxes For the three months ended March 31, 2024 and 2023, the Company recorded an income tax expense of $ 289 on pre-tax income of $ 4,694 and an income tax benefit of $ 541 on pre-tax losses of $ 2,712 , respectively, for an effective income tax rate of 6.2 % and 19.9 %, respectively. 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. 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. Changes in pre-tax income projections, combined with the seasonal nature of our businesses, could also impact the effective income tax rate each quarter. Note 10. Stock-Based Compensation The Company recorded stock-based compensation expense of $ 1,033 and $ 884 for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, unrecognized compensation expense for awards that the Company expects to vest approximated $ 4,711 . The Company will recognize this unrecognized compensation expense over the upcoming 1.9 years through March 1, 2026. As of March 31, 2024, the Company had stock awards issued pursuant to the 2022 Equity and Incentive Compensation Plan (the “Equity and Incentive Plan”) and its predecessor, the 2006 Omnibus Incentive Compensation Plan (the “Omnibus Plan”). No stock options are outstanding under either the Omnibus Plan or Equity and Incentive Plan and, as such, there was no stock-based compensation expense related to stock options recorded for the March 31, 2024 and 2023. Non-Employee Director Fully-Vested and Restricted Stock Awards Since May 2018, non-employee directors have been awarded shares of the Company’s common stock on each date the non-employee directors were elected at the annual shareholders’ meeting to serve as directors, subject to a one-year vesting requirement. The Deferred Compensation Plan for Non-Employee Directors under the Omnibus Plan and, by amendment, under the Equity and Incentive Compensation Plan, which permits non-employee directors of the Company to defer receipt of earned cash and/or stock compensation for service on the Board into deferred stock units. Restricted Stock and Performance-Based Stock and Share Units Under the Equity and Incentive Compensation Plan and Omnibus Plan, the Company grants certain employees restricted stock and performance-based stock and share units. The forfeitable restricted stock awards granted generally time-vest ratably over a three-year period, unless indicated otherwise by the underlying restricted stock award agreement. Performance unit awards are offered annually under separate three-year long-term incentive programs, unless indicated otherwise by the underlying performance unit award agreement. Performance units are subject to forfeiture and will be converted into common stock based upon the Company’s performance relative to performance measures and conversion multiples as defined in the underlying program. 16 Table of Contents The following table summarizes the restricted stock, deferred stock units, and performance-based stock and share unit activity for the periods presented: Restricted Stock Deferred Stock Units Performance-Based Stock and Share Units Weighted Average Grant Date Fair Value Outstanding as of December 31, 2023 264,970 12,404 560,338 $ 14.10 Granted 13,064 — — 23.03 Vested ( 103,286 ) — ( 19,782 ) 13.92 Adjustment for incentive awards expected to vest — — 110 11.63 Cancelled and forfeited ( 1,000 ) — ( 437 ) 11.62 Outstanding as of March 31, 2024 173,748 12,404 540,229 $ 13.81 Note 11. Fair Value Measurements The Company determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions of what market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below. Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. The classification of a financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. SOFR-based interest rate swaps - To reduce the impact of interest rate changes on outstanding variable-rate debt, the Company amended and entered into forward-starting SOFR-based interest rate swaps with notional values totaling $ 20,000 and $ 20,000 effective August 12, 2022 and August 31, 2022, respectively. The fair value of the interest rate swaps are based on market-observable forward interest rates and represents the estimated amount that the Company would pay to terminate the agreements. As such, the swap agreements are classified as Level 2 within the fair value hierarchy. As of March 31, 2024 and December 31, 2023, the interest rate swaps were recorded in “ Other current assets ” when the interest rate swaps’ fair market value are in an asset position, and “Other accrued liabilities” when in a liability position within our Condensed Consolidated Balance Sheets. Fair Value Measurements at Reporting Date Fair Value Measurements at Reporting Date March 31, 2024 Level 1 Level 2 Level 3 December 31, 2023 Level 1 Level 2 Level 3 Interest rate swaps $ 1,331 $ — $ 1,331 $ — $ 1,225 $ — $ 1,225 $ — Total assets $ 1,331 $ — $ 1,331 $ — $ 1,225 $ — $ 1,225 $ — The $ 20,000 interest rate swap agreements that became effective August 2022 are accounted for as cash flow hedges and the objective of the hedges is to offset the expected interest variability on payments associated with the interest rate on our debt. The gains and losses related to the interest rate swaps are reclassified from “Accumulated other comprehensive loss” in our Condensed Consolidated Balance Sheets and included in “Interest expense - net” in our Condensed Consolidated Statements of Operations as the interest expense from our debt is recognized. For the three months ended March 31, 2024 and 2023, the Company recognized interest income of $ 337 and $ 245 , respectively, from interest rate swaps. Note 12. Retirement Plans The Company has three retirement plans that cover its hourly and salaried employees in the United States: one defined benefit plan, which is frozen, and two defined contribution plans. Employees are eligible to participate in the appropriate plan based on employment classification. The Company’s contributions to the defined benefit and defined contribution plans are governed by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Company’s policy and investment guidelines 17 Table of Contents applicable to each respective plan. The Company’s policy is to contribute at least the minimum in accordance with the funding standards of ERISA. The Company maintains one defined contribution plan for its employees in Canada. In the United Kingdom, the Company maintains two defined contribution plans and a defined benefit plan, which is frozen. These plans are discussed in further detail below. United States Defined Benefit Plan Net periodic pension costs were as follows for the periods presented: Three Months Ended March 31, 2024 2023 Interest cost $ 66 $ 71 Expected return on plan assets ( 68 ) ( 64 ) Recognized net actuarial loss 15 16 Net periodic pension cost $ 13 $ 23 The Company has made contributions to its United States defined benefit plan of $ 100 during the three months ended March 31, 2024 and expects to make total contributions of approximately $ 370 during 2024. United Kingdom Defined Benefit Plan Net periodic pension costs were as follows for the periods presented: Three Months Ended March 31, 2024 2023 Interest cost $ 56 $ 55 Expected return on plan assets ( 94 ) ( 83 ) Amortization of prior service costs and transition amount 6 6 Recognized net actuarial loss 8 3 Net periodic pension income $ ( 24 ) $ ( 19 ) United Kingdom regulations require trustees to adopt a prudent approach to funding required contributions to defined benefit pension plans. For the three months ended March 31, 2024, the Company contributed approximately $ 79 to the plan. The Company anticipates total contributions of approximately $ 315 to the United Kingdom pension plan during 2024. Defined Contribution Plans The Company sponsors five defined contribution plans for hourly and salaried employees across its domestic and international facilities. The following table summarizes the expense associated with the contributions made to these plans for the periods presented: Three Months Ended March 31, 2024 2023 United States $ 551 $ 614 Canada 76 62 United Kingdom 281 261 $ 908 $ 937 Note 13. Commitments and Contingent Liabilities Product Liability Claims The Company is subject to product warranty claims that arise in the ordinary course of its business. For certain manufactured products, the Company maintains a product warranty accrual, which is adjusted on a monthly basis as a percentage of cost of sales. In addition, the product warranty accrual is adjusted periodically based on the identification or resolution of known individual product warranty claims. 18 Table of Contents Union Pacific Railroad (“UPRR”) Concrete Tie Matter On March 13, 2019, the Company and its subsidiary, CXT Incorporated (“CXT”), entered into a Settlement Agreement (the “Settlement Agreement”) with UPRR to resolve the then-pending litigation in the matter of Union Pacific Railroad Company v. L.B. Foster Company and CXT Incorporated , Case No. CI 15-564, in the District Court for Douglas County, Nebraska. Under the Settlement Agreement, the Company and CXT will pay UPRR the aggregate amount of $ 50,000 without pre-judgment interest, which began with a $ 2,000 immediate payment, and with the remaining $ 48,000 paid in installments over a six-year period commencing on the effective date of the Settlement Agreement through December 2024 pursuant to a Promissory Note. Additionally, commencing in January 2019 and through December 2024, UPRR agreed to purchase and has been purchasing from the Company and its subsidiaries and affiliates, a cumulative total amount of $ 48,000 of products and services, targeting $ 8,000 of annual purchases per year beginning March 13, 2019, per letters of intent under the Settlement Agreement. During the third quarter of 2021, in connection with the Company’s divestiture of its Piling Products division, the targeted annual purchases per year have been reduced to $ 6,000 for 2021 through 2024. The Settlement Agreement also includes a mutual release of all claims and liability regarding or relating to all CXT pre-stressed concrete railroad ties with no admission of liability and dismissal of the litigation with prejudice. The expected payment under the UPRR Settlement Agreement for the remainder of the year ending December 31, 2024 is $ 8,000 , upon which the obligation for the Settlement Agreement will be satisfied. Environmental and Legal Proceedings The Company is subject to national, state, foreign, provincial, and/or local laws and regulations relating to the protection of the environment. The Company’s efforts to comply with environmental regulations may have an adverse effect on its future earnings. On June 5, 2017, a General Notice Letter was received from the United States Environmental Protection Agency (“EPA”) indicating that the Company may be a potentially responsible party (“PRP”) regarding the Portland Harbor Superfund Site cleanup along with numerous other companies. More than 140 other companies received such a notice. The Company and a predecessor owned and operated a facility near the harbor site for a period prior to 1982. The net present value and undiscounted costs of the selected remedy throughout the harbor site are estimated by the EPA to be approximately $ 1.1 billion and $ 1.7 billion, respectively, and the remedial work is expected to take as long as 13 years to complete. These costs may increase given that the remedy will not be initiated or completed for several years. The Company is reviewing the basis for its identification by the EPA and the nature of the historic operations of a Company predecessor near the site. Additionally, the Company executed a PRP agreement which provides for a private allocation process among almost 100 PRPs in a working group whose work is ongoing and involves a process that will ultimately conclude a proposed allocation of liability for cleanup of the site and various sub-areas. The Company does not have any individual risk sharing agreements in place with respect to the site, and was only associated with the site from 1976 to when it purchased the stock of a company whose assets it sold in 1982 and which was dissolved in 1994. On March 26, 2020, the EPA issued a Unilateral Administrative Order to two parties requiring them to perform remedial design work for that portion of the Harbor Superfund Site that includes the area closest to the facility; the Company was not a recipient of this Unilateral Administrative Order. The Company cannot predict the ultimate impact of these proceedings because of the large number of PRPs involved throughout the harbor site, the size and extent of the site, the degree of contamination of various wastes, varying environmental impacts throughout the harbor site, the scarcity of data related to the facility once operated by the Company and a predecessor, potential comparative liability between the allocation parties and regarding non-participants, and the speculative nature of the remediation costs. Based upon information currently available, management does not believe that the Company’s alleged PRP status regarding the Portland Harbor Superfund Site or other compliance with the present environmental protection laws will have a material adverse effect on the financial condition , results of operations, cash flows, competitive position, or capital expenditures of the Company. As more information develops and the allocation process is completed, and given the resolution of factors like those described above, an unfavorable resolution could have a material adverse effect. As of March 31, 2024 and December 31, 2023, the Company maintained environmental reserves approximating $ 2,398 and $ 2,417 , respectively. The Company is also subject to other legal proceedings and claims that arise in the ordinary course of its business. Legal actions are subject to inherent uncertainties, and future events could change management’s assessment of the probability or estimated amount of potential losses from pending or threatened legal actions. Based on available information, it is the opinion of management that the ultimate resolution of pending or threatened legal actions, both individually and in the aggregate, will not result in losses having a material adverse effect on the Company’s financial position or liquidity as of March 31, 2024. If management believes that, based on available information, it is at least reasonably possible that a material loss (or additional material loss in excess of any accrual) will be incurred in connection with any legal actions, the Company discloses an estimate of the possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate can be made, or discloses that an estimate cannot be made. Based on the Company’s assessment as of March 31, 2024, no such disclosures were considered necessary. 19 Table of Contents