FOSTER L B CO 10-Q/A

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in thousands, except share data) Forward-Looking Statements This Quarterly Report on Form 10-Q/A contains “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Many of the forward-looking statements provide management's current expectations and assumptions about future events that involve inherent risks and uncertainties and may concern, among other things, the Company’s expectations relating to our strategy, goals, projections, and plans regarding our financial position, liquidity, capital resources, and results of operations and decisions regarding our strategic growth initiatives, market position, and product development. While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory, and other risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company’s control. The Company cautions readers that various factors could cause the actual results of the Company to differ materially from those indicated by forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. 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: 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; restrictions on our ability to draw on our credit agreement, including as a result of any future inability to comply with restrictive covenants contained therein; a decrease in freight or transit rail traffic; 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; our ability to effectuate our strategy, including cost reduction initiatives, and our ability to effectively integrate acquired businesses or to divest businesses, such as the recent dispositions of the Track Components, Chemtec, and Ties businesses, and acquisitions of the Skratch Enterprises Ltd., Intelligent Video Ltd., VanHooseCo Precast LLC, and Cougar Mountain Precast, LLC businesses and to realize anticipated benefits; costs of and impacts associated with shareholder activism; the timeliness and availability of materials from our major suppliers, as well as the impact on our access to supplies of customer preferences as to the origin of such supplies, such as customers’ concerns about conflict minerals; labor disputes; cybersecurity risks such as data security breaches, malware, ransomware, “hacking,” and identity theft, which could disrupt our business and may result in misuse or misappropriation of confidential or proprietary information, and could result in the disruption or damage to our systems, increased costs and losses, or an adverse effect to our reputation, business or financial condition; the continuing effectiveness of our ongoing implementation of an enterprise resource planning system; 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, the Company’s ability to manage its working capital requirements and indebtedness; domestic and international taxes, including estimates that may impact taxes; domestic and foreign government regulations, including tariffs; our ability to maintain effective internal controls over financial reporting (“ICFR”) and disclosure controls and procedures, including our ability to remediate any existing material weakness in our ICFR and the timing of any such remediation, as well as our ability to reestablish effective disclosure controls and procedures; the results of the UK’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 UK or U.S. business conditions; other geopolitical conditions, including the ongoing conflicts between Russia and Ukraine, conflicts in the Middle East, and increasing tensions between China and Taiwan; a lack of state or federal funding for new infrastructure projects; an increase in manufacturing or material costs; the loss of future revenues from current customers; 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, including any governmental travel restrictions; and risks inherent in litigation and the outcome of litigation and product warranty claims. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated. Significant risks and uncertainties that may affect the operations, performance, and results of the Company’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors,” and elsewhere in our Annual Report on Form 10-K/A for the year ended December 31, 2023, as amended on November 1, 2024, or as updated and/or amended by our other current or periodic filings with the Securities and Exchange Commission. The forward-looking statements in this report are made as of the date of this report and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by the federal securities laws. 20 Table of Contents Restatement of Previously Issued Unaudited Condensed Consolidated Financial Statements In this Quarterly Report on Form 10-Q/A, we have restated our previously issued Unaudited Condensed Consolidated Financial Statements as of and for the three months ended March 31, 2024. Refer to the “Explanatory Note” preceding “Item 1. Financial Statements (unaudited)” for background on the restatement, the fiscal periods impacted, internal control over financial reporting considerations, and other information. As a result, we have also restated certain previously reported financial information as of and for the three months ended March 31, 2024 in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” including, but not limited to, information within the “ Results of Operations ” section to conform the discussion with the appropriate restated amounts. See “Item 1. Financial Statements (unaudited) - Notes to Condensed Consolidated Financial Statements - Note 1. Basis of Presentation” for additional information related to the restatement. General Overview and Business Update L.B. Foster Company is a global technology solutions provider of engineered, manufactured products and services that builds and supports infrastructure. The Company’s innovative engineering and product development solutions address the safety, reliability, and performance needs of its customers’ most challenging requirements. The Company maintains locations in North America, South America, Europe, and Asia. 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 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. 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. 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. 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. 21 Table of Contents Results of Operations First Quarter 2024 Compared to First Quarter 2023 Three Months Ended March 31, Change 2024 2023 2024 vs. 2023 Net sales $ 124,320 $ 115,488 $ 8,832 Gross profit 26,176 23,307 2,869 Gross profit margin 21.1 % 20.2 % 90 bps Expenses: Selling and administrative expenses $ 22,870 $ 21,417 $ 1,453 Selling and administrative expenses as a percent of sales 18.4 % 18.5 % (10) bps (Gain) on sale of former joint venture facility (3,477) — (3,477) Amortization expense 1,217 1,365 (148) Operating income 5,566 525 5,041 Operating income margin 4.5 % 0.5 % 400 bps Interest expense - net 1,125 1,388 (263) Other (income) expense - net (253) 1,849 (2,102) 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 Net loss attributable to noncontrolling interest (31) (19) (12) Net income (loss) attributable to L.B. Foster Company $ 4,436 $ (2,152) $ 6,588 Diluted earnings (loss) per common share $ 0.40 $ (0.20) $ 0.60 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 $2,869 or 12.3%, 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 $1,453, or 6.8%, 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 18.4% from 18.5% in the prior year quarter. The $3,477 gain on sale of the former joint venture facility for the three months ended March 31, 2024 was attributed to the Company’s facility and land in Magnolia, Texas. 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 - net for the three months ended March 31, 2024 was $253 compared to other expense - net for the three months ended March 31, 2023 of $1,849, which 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. 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. 22 Table of Contents 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 in Magnolia, Texas, partially offset by an increase in selling and administrative expenses. Results of Operations - Segment Analysis Rail, Technologies, and Services Three Months Ended March 31, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Net sales $ 82,623 $ 64,384 $ 18,239 28.3 % Gross profit $ 18,571 $ 14,284 $ 4,287 30.0 Gross profit margin 22.5 % 22.2 % 30 bps 1.3 Segment operating income $ 6,778 $ 2,394 $ 4,384 183.1 Segment operating income margin 8.2 % 3.7 % 450 bps 120.6 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. The increase was due to higher organic sales of $18,940, or 29.4%, partially offset by a $701, or 1.1%, decrease from the divestiture of Ties. Rail Products sales increased $12,810 driven by strength in domestic markets served. Technology Services and Solutions sales increased by $7,227 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%. Technology Services and Solutions business unit gross profit improved by $4,086 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 income increased $4,384 compared to the prior year, and operating income 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. Infrastructure Solutions Three Months Ended March 31, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Net sales $ 41,697 $ 51,104 $ (9,407) (18.4) % Gross profit $ 7,605 $ 9,023 $ (1,418) (15.7) Gross profit margin 18.2 % 17.7 % 50 bps 3.3 Segment operating loss $ (1,388) $ (340) $ (1,048) ** Segment operating loss margin (3.3) % (0.7) % (260) bps ** ** Results are not considered meaningful. 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. 23 Table of Contents The Infrastructure segment gross profit for the three months ended March 31, 2024, decreased by $1,418, or 15.7%, 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 18.2% increased by 50 basis points over the prior year, driven by the favorable impact of portfolio changes. Segment operating loss for the first quarter of 2024 was $1,388 compared to an operating loss in the prior year of $340. 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. Corporate Three Months Ended March 31, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 (Gain) on sale of former joint venture facility $ (3,477) $ — $ (3,477) ** Public company costs 1,219 656 563 85.8 % Corporate executive management costs 1,407 366 1,041 ** Corporate management stock-based compensation 599 544 55 10.1 % Other 76 (37) 113 ** Unallocated corporate (income) expense - net $ (176) $ 1,529 $ (1,705) (111.5) % ** Results are not considered meaningful Unallocated corporate expense - net for the three months ended March 31, 2024 changed by $1,705 over the prior year quarter due to the $3,477 gain on the Magnolia Sale offset by increased personnel and professional services 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 Cash and cash equivalents $ 3,148 Credit agreement: Total availability under the credit agreement 130,000 Outstanding borrowings on revolving credit facility (77,497) Letters of credit outstanding (2,432) Net availability under the revolving credit facility 50,071 Total available funding capacity $ 53,219 As of March 31, 2024 we were in compliance with all covenants of the Credit Agreement and have $53,219 available funding capacity. 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. 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 24 Table of Contents 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, 2024 2023 Net cash (used in) provided by operating activities $ (21,444) $ 6,932 Net cash provided by investing activities 789 4,661 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 Flow from Operating Activities During the three months ended March 31, 2024, net cash used in operating activities was $21,444, compared to cash provided by 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 $26,858 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. 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 $2,712 and $699, 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 sold 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. 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. 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. The timing of the repurchases and the actual amount repurchased will depend on a variety of factors, including the market price of the Company’s shares, general market and economic conditions, and other factors. 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. 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. 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. The Company views its short and long-term liquidity as being dependent on its results of operations, changes in working capital needs, and its borrowing capacity. 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 25 Table of Contents 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. For a discussion of the terms and availability of the credit facilities, please refer to Note 7 of the Notes to Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q/A. To reduce the impact of interest rate changes on outstanding variable-rate debt, the Company amended and entered into SOFR-based interest rate swaps with notional values totaling $20,000 and $20,000, effective August 12, 2022 and August 31, 2022, respectively, at which point the agreements effectively converted a portion of the debt from variable to fixed-rate borrowings during the term of the swap contract. Backlog Although backlog is not necessarily indicative of future operating results, the following table provides the backlog by segment: Backlog March 31, 2024 December 31, 2023 March 31, 2023 Rail, Technologies, and Services $ 86,038 $ 84,418 $ 113,593 Infrastructure Solutions 136,223 129,362 146,288 Total backlog $ 222,261 $ 213,780 $ 259,881 While a considerable portion of the Company’s business is backlog driven, certain businesses, including the Global Friction Management business unit, are not driven by backlog and therefore have insignificant levels of backlog throughout the year. Backlog decreased $37,620 compared to the prior year quarter due to $12,058 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. Critical Accounting Estimates The Condensed Consolidated Financial Statements have been prepared in conformity with US GAAP. The preparation of the Condensed Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amount of assets, liabilities, revenues, and expenses, and the related disclosure of contingent assets and liabilities. As a result, actual results could differ from these estimates. The Company has concluded that there have been no significant changes to its critical accounting policies or estimates as described in its Annual Report on Form 10-K/A for the year ended December 31, 2023. Non-GAAP Financial Measures In accordance with SEC rules, the Company provides descriptions of the non-GAAP financial measures included in this filing and reconciliations to the most closely related GAAP financial measures. The Company believes that these measures provide useful perspective on underlying business trends and results and a supplemental measure of year-over-year results. The non-GAAP financial measures described below are used by management in making operating decisions, allocating financial resources and for business strategy purposes and may, therefore, also be useful to investors as they are a view of our business results through the eyes of management. These non-GAAP financial measures are not intended to be considered by the user in place of the related GAAP financial measure, but rather as supplemental information to our business results. These non-GAAP financial measures may not be the same as similar measures used by other companies due to possible differences in method and in the items or events being adjusted. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “organic sales” refer to sales calculated in accordance with GAAP, adjusted to exclude divestiture, exit, and acquisition-related sales. Management evaluates the Company’s sales performance based on organic sales growth. Organic sales growth is a non-GAAP financial measure of sales growth (which is the most directly comparable GAAP measure), adjusted to exclude the effects of divestiture, exit, and acquisition-related sales from year-over-year comparisons. The Company believes this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. The Company reports organic sales growth at the consolidated and segment levels. The Company defines new orders as a contractual agreement between the Company and a third-party in which the Company will, or has the ability to, satisfy the performance obligations of the promised products or services under the terms of the agreement. The Company defines backlog as contractual commitments to customers for which the Company’s performance obligations have not been met, including with respect to new orders and contracts for which the Company has not begun any performance. Management utilizes new orders and backlog to evaluate the health of the industries in which the Company operates, the Company’s current and future 26 Table of Contents results of operations and financial prospects, and strategies for business development. The Company believes that new orders and backlog are useful to investors as supplemental metrics by which to measure the Company’s current performance and prospective results of operations and financial performance. Non-GAAP financial measures are not a substitute for GAAP financial results and should only be considered in conjunction with the Company’s financial information that is presented in accordance with GAAP. A reconciliation of organic sales growth to its most directly comparable respective US GAAP financial measure is presented below. Change in Consolidated Sales Three Months Ended March 31, Percent Change 2023 net sales, as reported $ 115,488 Decrease due to divestitures and exit (10,642) (9.2) % Change due to organic sales 19,474 16.9 % 2024 net sales, as reported $ 124,320 Total sales change, 2023 vs 2024 $ 8,832 7.6 % Change in Rail, Technologies, and Services Sales Three Months Ended March 31, Percent Change 2023 net sales, as reported $ 64,384 Decrease due to divestiture (701) (1.1) % Change due to organic sales 18,940 29.4 % 2024 net sales, as reported $ 82,623 Total sales change, 2023 vs 2024 $ 18,239 28.3 % Change in Infrastructure Solutions Sales Three Months Ended March 31, Percent Change 2023 net sales, as reported $ 51,104 Decrease due to divestiture and exit (9,941) (19.5) % Change due to organic sales 534 1.0 % 2024 net sales, as reported $ 41,697 Total sales change, 2023 vs 2024 $ (9,407) (18.4) % Note percentages may not foot due to rounding. Item 3. Quantitative and Qualitative Disclosures about Market Risk This item is not applicable to a smaller reporting company.