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 release are made as of the date of this release 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. 28 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 June 30, 2024 and for the six month period ended June 30, 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 revised certain previously reported financial information as of June 30, 2024 and for the three- and six-month periods ended June 30, 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 Unaudited 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 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 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. 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 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 expect 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. 29 Table of Contents Results of Operations Second Quarter 2024 Compared to Second Quarter 2023 Three Months Ended June 30, Change 2024 2023 2024 vs. 2023 Net sales $ 140,796 $ 148,034 $ (7,238) Gross profit 30,513 32,611 (2,098) Gross profit margin 21.7 % 22.0 % (30) bps Expenses: Selling and administrative expenses $ 24,818 $ 24,522 $ 296 Selling and administrative expenses as a percent of sales 17.6 % 16.6 % 100 bps Amortization expense 1,123 1,375 (252) Operating income $ 4,572 $ 6,714 $ (2,142) Operating income margin 3.2 % 4.5 % (130) bps Interest expense - net $ 1,493 $ 1,574 $ (81) Other (income) expense - net (84) 1,084 (1,168) 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 attributable to L.B. Foster Company $ 2,847 $ 3,531 $ (684) Diluted earnings per common share $ 0.26 $ 0.32 $ (0.06) Results Summary 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 $2,098, or 6.4%, from the prior year quarter and gross profit margins decreased by 30 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 $296, or 1.2%, 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 17.6% 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 $84 compared to other expense - net for the three months ended June 30, 2023 was $1,084 which 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. 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 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. 30 Table of Contents Results of Operations - Segment Analysis Rail, Technologies, and Services Three Months Ended June 30, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Net sales $ 85,594 $ 91,616 $ (6,022) (6.6) % Gross profit $ 17,875 $ 20,191 $ (2,316) (11.5) Gross profit margin 20.9 % 22.0 % (110) bps (5.2) Segment operating income $ 5,501 $ 6,971 $ (1,470) (21.1) Segment operating income margin 6.4 % 7.6 % (120) bps (15.5) 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 $2,316, or 11.5%, compared to the prior year quarter, and gross profit margins decreased 110 basis points to 20.9%. The decline in gross profit was driven by Rail Products which decreased by $3,637 from the prior year quarter due to lower volumes and softer market prices in the current quarter and due to gains on the sale of fixed assets of $344 recorded in the prior year quarter. 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 $1,470 compared to the prior year quarter, and operating income margins decreased 120 basis points to 6.4%. The decrease was driven primarily by lower gross profit, partially offset by a $820 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 Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Net sales $ 55,202 $ 56,418 $ (1,216) (2.2) % Gross profit $ 12,638 $ 12,420 $ 218 1.8 Gross profit margin 22.9 % 22.0 % 90 bps 4.0 Segment operating income $ 3,623 $ 2,773 $ 850 30.7 Segment operating income margin 6.6 % 4.9 % 170 bps 34.6 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 $218, or 1.8%, 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. 31 Table of Contents Segment operating income for the second quarter of 2024 increased by $850 compared to the prior year quarter due primarily to higher gross profit, as well as a $407 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. Corporate Three Months Ended June 30, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 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 166 54 112 207.4 Unallocated corporate expense - net $ 4,552 $ 3,030 $ 1,522 50.2 % **Results of this calculation not considered meaningful Unallocated corporate expense - net 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. 2023 Net sales $ 265,116 $ 263,522 $ 1,594 Gross profit 56,689 55,918 771 Gross profit margin 21.4 % 21.2 % 20 bps Expenses: Selling and administrative expenses $ 47,688 $ 45,939 $ 1,749 Selling and administrative expenses as a percent of sales 18.0 % 17.4 % 60 bps (Gain) on sale of former joint venture facility (3,477) — (3,477) Amortization expense 2,340 2,740 (400) Operating income $ 10,138 $ 7,239 $ 2,899 Operating income margin 3.8 % 2.7 % 110 bps Interest expense - net $ 2,618 $ 2,962 $ (344) Other (income) expense - net (337) 2,933 (3,270) 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 32 Table of Contents 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 $771, or 1.4%, over the prior year period and gross profit margins increased 20 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 $1,749, or 3.8%, 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. The $3,477 gain on sale of the former joint venture facility for the six months ended June 30, 2024 was attributed to the Company’s facility and land in Magnolia, Texas. Other income - net for the six months ended June 30, 2024 was $337 while other expense - net was $2,933 in the prior year period which 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 the $3,477 gain on the sale of the Company’s joint venture facility recorded in the six months ended June 30, 2024 compared to other expense - net of $2,933 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 Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Net sales $ 168,217 $ 156,000 $ 12,217 7.8 % Gross profit $ 36,446 $ 34,475 $ 1,971 5.7 Gross profit margin 21.7 % 22.1 % (40) bps (2.0) Segment operating income $ 12,279 $ 9,365 $ 2,914 31.1 Segment operating income margin 7.3 % 6.0 % 130 bps 21.6 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 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 by $2,040 driven by both domestic and international markets served. The Rail segment gross profit increased by $1,971, or 5.7%, compared to the prior year period, and gross profit margins decreased 40 basis points. Technology Services and Solutions business unit gross profit improved by $4,917 due to higher volume and improved mix. Unfavorable mix and price pressure in Rail Products resulted in gross profit decreasing by $2,306. Lower volumes in the Global Friction Management business resulted in a decline in gross profit of $640. 33 Table of Contents Segment operating income increased by $2,914, or 31.1%, compared to the prior year period, and operating income margins expanded 130 basis points. The increase was driven by improvement in gross profit levels as a result of increased sales volume, as well as a $981 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 Six Months Ended June 30, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Net sales $ 96,899 $ 107,522 $ (10,623) (9.9) % Gross profit $ 20,243 $ 21,443 $ (1,200) (5.6) Gross profit margin 20.9 % 19.9 % 100 bps 4.8 Segment operating income $ 2,235 $ 2,433 $ (198) (8.1) Segment operating income margin 2.3 % 2.3 % — bps — 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 $1,200, or 5.6 %, 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 100 basis points over the prior year period. Segment operating income for the six months ended June 30, 2024 decreased by $198 from the prior year period. The decline in segment operating income was due to lower gross profit which was partially offset by a $565 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. Corporate Six Months Ended June 30, 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 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 242 17 225 ** Unallocated corporate expense - net $ 4,376 $ 4,559 $ (183) (4.0) % **Results of this calculation not considered meaningful Unallocated corporate expense - net for the six months ended June 30, 2024 decreased from the prior year period primarily due to the $3,477 gain on the Magnolia Sale offset by 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 $41,301 was available for borrowing as of June 30, 2024, subject to covenant restrictions. The Company’s primary needs for liquidity relate to 34 Table of Contents working capital requirements for operations, capital expenditures, debt service obligations, payments related to the Union Pacific Railroad Settlement, tax obligations, outstanding purchase obligations, acquisitions, payments related to the termination of the US DB Plan, restructuring payments, and to support the share repurchase program. 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 Credit agreement: Total availability under the credit agreement 130,000 Outstanding borrowings on revolving credit facility (86,615) Letters of credit outstanding (2,084) Net availability under the revolving credit facility 41,301 Total available funding capacity $ 45,322 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 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 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 June 30, 2024 2023 Net cash used in operating activities $ (26,398) $ (3,333) Net cash (used in) provided by investing activities (885) 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 in cash and cash equivalents $ 1,461 $ 998 Cash Flow from Operating Activities During the six months ended June 30, 2024, net cash used in operating activities was $26,398, 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 $38,576 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 35 Table of Contents Capital expenditures for the six months ended June 30, 2024 and 2023 were $4,766 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 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 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. 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. 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 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. 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 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: 36 Table of Contents Backlog June 30, 2024 December 31, 2023 June 30, 2023 Rail, Technologies, and Services $ 114,794 $ 84,418 $ 132,451 Infrastructure Solutions 135,011 129,362 157,625 Total backlog $ 249,805 $ 213,780 $ 290,076 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 $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, as well as a backlog decrease in Steel Products. 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 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. 37 Table of Contents Change in Consolidated Sales Three Months Ended June 30, Percent Change Six Months Ended June 30, Percent Change 2023 net sales, as reported $ 148,034 $ 263,522 Decrease due to divestitures and exit (2,231) (1.5) % (12,871) (4.9) % Change due to organic sales (5,007) (3.4) % 14,465 5.5 % 2024 net sales, as reported $ 140,796 $ 265,116 Total sales change, 2023 vs 2024 $ (7,238) (4.9) % $ 1,594 0.6 % Change in Rail, Technologies, and Services Sales Three Months Ended June 30, Percent Change Six Months Ended June 30, Percent Change 2023 net sales, as reported $ 91,616 $ 156,000 Decrease due to divestiture (1,413) (1.5) % (2,114) (1.4) % Change due to organic sales (4,609) (5.0) % 14,331 9.2 % 2024 net sales, as reported $ 85,594 $ 168,217 Total sales change, 2023 vs 2024 $ (6,022) (6.6) % $ 12,217 7.8 % Change in Infrastructure Solutions Sales Three Months Ended June 30, Percent Change Six Months Ended June 30, Percent Change 2023 net sales, as reported $ 56,418 $ 107,522 Decrease due to divestiture and exit (818) (1.4) % (10,757) (10.0) % Change due to organic sales (398) (0.7) % 134 0.1 % 2024 net sales, as reported $ 55,202 $ 96,899 Total sales change, 2023 vs 2024 $ (1,216) (2.2) % $ (10,623) (9.9) % 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.