What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-06 · 197 added, 157 removed, 235 unchanged (60% of the section changed)

23 unchanged sentences

changes in current accounting estimates and their ultimate outcomes;

the adequacy of internal and external sources of funds to meet financing needs, including our ability to negotiate any additional necessary amendments to our credit agreement or the terms of any new credit agreement;

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;

the results of the United Kingdom's 2024 parliamentary election, uncertainties related to the U.S.

2024 Presidential election, and any corresponding changes to policy or other changes that could affect United Kingdom or U.S.

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 and Israel and Hamas;

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;

4 unchanged sentences

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 for the year ended December 31, 2023, or as updated and/or amended by our other current or periodic filings with the Securities and Exchange Commission.

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.

Correction of Immaterial Errors in Previously Issued Condensed Consolidated Financial Statements

In this Quarterly Report on Form 10-Q, we have revised our previously issued Unaudited Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2023 to correct certain immaterial errors.

As a result, we have also revised certain previously reported financial information for the three and nine months ended September 30, 2023 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 revised amounts.

Refer to “Item 1.

Financial Statements (unaudited) - Notes to Unaudited Condensed Consolidated Financial Statements - Note 1.

Basis of Presentation” as well as our Annual Report on Form 10-K/A as filed with the SEC on November 1, 2024 for additional information related to the correction of these immaterial errors.

General Overview and Business Update

8 unchanged sentences

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.

2 unchanged sentences

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

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

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

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

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

For the three months ended September 30, 2024 and 2023, the discontinued product line had $921 and $283 in sales, respectively, and for the nine months ended September 30, 2024 and 2023, the discontinued product line had $2,888 and $3,749 in sales, respectively.

On November 17, 2023, the Company acquired the operating assets of Caldwell, Idaho based Cougar Mountain Precast, LLC (“Cougar”), a licensed manufacturer and seller of Redi-Rock® products for $1,644, subject to hold back amount equal to $160 to be paid twelve months following the closing or utilized to satisfy post-close working capital adjustments or indemnity claims.

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

Results of Operations

Second Quarter 2024 Compared to Second Quarter 2023

Third Quarter 2024 Compared to Third Quarter 2023

Three Months Ended

June 30, Change

September 30, Change

2024 2023 2024 vs.

9 unchanged sentences

Interest expense - net $ 1,358 $ 1,442 $ (84)

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

Other income - net (188) (151) (37)

Income before income taxes $ 6,153 $ 326 $ 5,827

Income tax expense 346 563 (217)

Income tax benefit (29,745) (121) (29,624)

Net income $ 35,898 $ 447 $ 35,451

4 unchanged sentences

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 $1,729, or 5.4%, from the prior year quarter and gross profit margins decreased by 10 basis points.

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

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

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

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

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

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

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

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

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

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

The Company’s effective income tax rate for the three months ended June 30, 2024 differed from the federal statutory rate of 21% primarily due to the realization of a portion of its U.S.

deferred tax assets previously offset by a valuation allowance.

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.

Net sales for the three months ended September 30, 2024 decreased by $7,879, or 5.4%, from the prior year quarter.

The decrease in sales was driven by organic sales declines in the Rail and Infrastructure segments.

Additionally, net sales for the third quarter of 2023 included an adverse impact from the Bridge Exit related to long-term contract changes within the Infrastructure segment.

This impact reduced sales in the three months ended September 30, 2023 by $1,977 and gross profit by $3,051.

Gross profit for the three months ended September 30, 2024 increased by $5,341, or 19.5%, over the prior year quarter and gross profit margins increased by 490 basis points.

The improvement in gross profit was due to prior year reductions in gross profit, which included reductions of $3,051 related to changes in expected value of certain commercial projects and $807 of exit costs both associated with the Bridge Exit in the Infrastructure segment.

Additionally, the improvement in gross profit was attributed to portfolio transformation activities along with improved product mix.

Selling and administrative expenses for the three months ended September 30, 2024 decreased by $132, or 0.5%, from the prior year quarter.

The decrease in selling and administrative expenses was due to $817 in lower employment costs and $732 in lower bad debt expense, partially offset by $422 in higher legal costs associated with a resolved matter and $840 in restructuring costs.

Net interest expense decreased $84 for the three months ended September 30, 2024 compared to the prior year quarter.

The Company’s outstanding debt balance was $68,544 as of September 30, 2024, compared to $71,689 as of September 30, 2023.

Other income - net for the three months ended September 30, 2024 was $188 compared to other income - net for the three months ended September 30, 2023 of $151.

The Company’s effective income tax rate for the three months ended September 30, 2024 was (483.4%), compared to (37.1%) in the prior year quarter.

The Company’s effective income tax rate for the three months ended September 30, 2024 differed from the federal statutory rate of 21% primarily due to a $30,045 income tax benefit comprised of both a discrete tax benefit and change in the Company's estimated annual effective tax rate arising from a change in valuation allowance previously recorded against certain U.S.

federal and state deferred tax assets, including those related to net operating loss carryforwards.

The Company continued to maintain a valuation allowance against deferred tax assets related to net operating loss carryforwards in certain U.S.

state and foreign jurisdictions.

Net income attributable to the Company for the three months ended September 30, 2024 increased by $35,390, or $3.22 per diluted share, over the prior year quarter, primarily due to a change in income tax benefit of $29,624 that was driven by a favorable tax valuation allowance adjustment;

the balance of the increase was driven primarily by gross profit improvement.

Results of Operations - Segment Analysis

1 unchanged sentence

Three Months Ended

June 30, Change Percent

September 30, Change Percent

2024 2023 2024 vs.

6 unchanged sentences

Note percentages may not foot due to rounding.

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

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

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

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

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

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

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

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

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

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

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

The Rail segment sales for the three months ended September 30, 2024 decreased by $7,368, or 8.5%, compared to the prior year quarter, all of which represented a decrease in organic sales.

Rail Products sales decreased by $12,695 due to overall weaker domestic market conditions.

Despite overall weaker market conditions, Global Friction Management sales increased $3,423, driven primarily by an improvement in domestic sales.

Technology Services and Solutions sales increased by $1,904 due to improvement in United Kingdom (“UK”) markets, as well as continued strength in the domestic rail safety markets served.

The Rail segment gross profit increased by $1,242, or 7.2%, compared to the prior year quarter, and gross profit margins increased 340 basis points to 23.2%.

The improvement in gross profit was driven by higher volumes and improved mix in Global Friction Management and Technology Services and Solutions which improved by $2,521 and $1,944, respectively, over the prior year quarter.

This was partially offset by Rail Products, which decreased by $3,223 from the prior year quarter due to overall weaker domestic market conditions.

Segment operating income increased $1,067 compared to the prior year quarter, and operating income margins improved 170 basis points to 6.2%.

The improvement was driven primarily by expanded gross profit, partially offset by higher selling and administrative expenses.

During the three months ended September 30, 2024, the Company incurred $610 in restructuring costs associated with its recent restructuring program, as well as a $407 increase in personnel expenses.

These increases were offset by lower bad debt provision expense of $866 that was recorded in the prior year relating to a customer in the UK that filed for administrative protection.

During the current quarter, new orders within the Rail segment were $52,675, an increase of $2,857, or 5.7%, 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.

The increase in new orders was attributable to a $5,141 increase in Rail Products orders, as well as an increase of $6,041 in Global Friction Management orders, partially offset by a decline of $8,325 in Technology Services and Solutions as initiatives are scaled back in the UK market.

Segment backlog as of September 30, 2024 decreased by $4,969, or 5.3%, compared to the prior year quarter.

The decrease is attributed to the Technology Services and Solutions businesses decreasing $14,929 as we scale back initiatives in the UK market in line with our strategy.

This decrease was partially offset by an increase of $5,663 and $4,297 in Rail Products and Global Friction Management, respectively.

Infrastructure Solutions

Three Months Ended

June 30, Change Percent

September 30, Change Percent

2024 2023 2024 vs.

6 unchanged sentences

Note percentages may not foot due to rounding.

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

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

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

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

in the Steel Products business.

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

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

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

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

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

**Results of this calculation not meaningful.

The Infrastructure segment sales for the three months ended September 30, 2024 decreased by $511, or 0.9%, compared to the prior year quarter.

The decrease in sales for the third quarter of 2024 was driven by the Steel Products business unit decreasing by $4,557 from the prior year quarter due to soft market conditions.

Net sales for the third quarter of 2023 included an adverse impact from the

exit of the bridge grid deck product line related to long-term contract changes within the Steel Products business.

This impact reduced sales by $1,977 and gross profit by $3,051 during the third quarter last year.

Sales in the Precast Concrete Products business unit increased by $4,046 driven by strong market demand.

The Infrastructure segment gross profit for the three months ended September 30, 2024, increased by $4,099, or 40.2%, and gross profit margins increased 720 basis points.

The increase in gross profit was due to the prior year having a $3,051 reduction in profitability related to changes in the expected value of certain commercial projects and $807 of exit costs associated with the Bridge Exit in the Steel Products business.

Also contributing to the gross profit increase was a 360 basis point improvement in Precast Concrete Products margins.

Segment operating income for the third quarter of 2024 increased by $4,311 compared to the prior year quarter due to higher gross profit, including the comparative improvement from the unfavorable Bridge Exit impact of $3,858 in the prior year period, and lower amortization expense, while selling and administrative expenses were flat year over year.

During the third quarter, the Infrastructure segment had new orders of $43,298, a decrease of $7,147, or 14.2%, compared to the prior year quarter.

This decrease was driven entirely by the Steel Products business unit, specifically the Protective Coatings business, which is currently experiencing constrained demand.

Backlog as of September 30, 2024 decreased by $29,245, or 19.6%, versus the prior year quarter, driven entirely by Steel Products which decreased $30,836 overall, including a reduction of $4,533 related to the Bridge Exit, offsetting an increase of $1,591 in Precast Concrete Products.

Three Months Ended

June 30, Change Percent

September 30, Change Percent

2024 2023 2024 vs.

5 unchanged sentences

Total unallocated corporate expenses $ 2,720 $ 3,048 $ (328) (10.8) %

**Results of this calculation not considered meaningful

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

Note percentages may not foot due to rounding.

Unallocated corporate expenses decreased $328 in 2024 compared with 2023, primarily due to a decrease in corporate management stock-based compensation.

Corporate executive management costs increased due to a $422 expense for the resolution of a legal matter, partially offset by lower travel, entertainment and purchased services expenses.

Results of Operations

First Six Months 2024 Compared to First Six Months 2023

Six Months Ended

June 30, Change

First Nine Months 2024 Compared to First Nine Months 2023

Nine Months Ended

September 30, Change

2024 2023 2024 vs.

4 unchanged sentences

Selling and administrative expenses as a percent of sales 17.9 % 17.2 % 70 bps

(Gain) on sale of former joint venture facility (3,477) — (3,477)

Amortization expense 3,486 4,119 (633)

4 unchanged sentences

Income before income taxes $ 14,010 $ 1,670 $ 12,340

Income tax expense 635 22 613

Income tax benefit (29,110) (99) (29,011)

Net income $ 43,120 $ 1,769 $ 41,351

4 unchanged sentences

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%.

Net sales for the nine months ended September 30, 2024 decreased by $6,285, or 1.5%, from the prior year period.

The decrease in sales is due to divestitures and the Bridge Exit with a combined impact of of $12,234, or 3.0%, offset by organic sales growth of $5,949, or 1.5%.

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

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

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

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

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

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

Other income - net for the six months ended June 30, 2024 was primarily attributable to a gain of $3,477 on the sale of the Company’s former joint venture facility and land in Magnolia, Texas, and other expense - net for the six months ended June 30, 2023 was due primarily to the $3,074 loss on the divestitures of Ties and Chemtec.

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

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

The Company’s effective tax rate for the six months ended June 30, 2024 differed from the federal statutory rate of 21% primarily due to the Company’s realization of a portion of its U.S.

deferred tax assets previously offset by a valuation allowance.

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

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

Net income attributable to the Company for the six months ended June 30, 2024 was favorable by $5,904, or $0.54 per diluted share, over the prior year period.

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

Gross profit for the nine months ended September 30, 2024 increased by $6,112, or 7.3%, over the prior year period and gross profit margins increased 180 basis points.

The improvement in gross profit is due to the business portfolio changes in line with the Company’s strategic transformation along with improved mix.

The current year gross profit includes a $815 gain on the sale of an ancillary property within the Steel Products business unit.

The prior year gross profit includes a reduction of $3,051 related to changes in expected value of certain commercial projects and $807 of exit costs associated with the exit of the bridge grid deck product line in the Steel Products business unit.

Selling and administrative expenses for the nine months ended September 30, 2024 increased by $1,617, or 2.3%, over the prior year period.

The increase was due primarily to increased corporate legal costs of $1,173 associated with a resolved legal matter, $1,083 in professional services expenditures, including $783 associated with the announced enterprise restructuring, and $840 in restructuring expenses, partially offset by $1,065 in lower employment related costs and $645 in lower bad debt expense.

The $3,477 gain on sale of the former joint venture facility for the nine months ended September 30, 2024 was attributed to the Company’s facility and land in Magnolia, Texas.

Other income - net for the nine months ended September 30, 2024 was $525 while other expense - net was $2,782 in the prior year period.

Other expense - net for the nine months ended September 30, 2023 was due primarily to the $3,074 loss on the divestitures of Ties and Chemtec.

Net interest expense for the nine months ended September 30, 2024 decreased by $428, or 9.7%, from the prior year period due to lower debt levels during the year.

The Company’s effective income tax rate for the nine months ended September 30, 2024 was (207.8%), compared to (5.9%) in the prior year period.

The Company’s effective tax rate for the nine months ended September 30, 2024 differed from the federal statutory rate of 21% primarily due to a $30,045 income tax benefit comprised of both a discrete tax benefit and change in the Company’s estimated annual effective tax rate arising from a change in valuation allowance previously recorded against certain U.S.

state deferred tax assets, including those related to net operating loss carryforwards.

The Company continued to maintain a valuation allowance against deferred tax assets related to net operating loss carryforwards in certain U.S.

state and foreign jurisdictions.

Net income attributable to the Company for the nine months ended September 30, 2024 was favorable by $41,294, or $3.74 per diluted share, over the prior year period.

The increase was due to an income tax benefit of $29,110 that is primarily associated with a favorable tax valuation allowance adjustment, the gain on sale attributed to the Company’s facility and land in Magnolia, Texas, and an increase in gross profit, due in part to the unfavorable impact of $3,858 on gross profit from the Bridge Exit in the prior year.

Results of Operations - Segment Analysis

Rail, Technologies, and Services

Six Months Ended

June 30, Change Percent

Nine Months Ended

September 30, Change Percent

2024 2023 2024 vs.

5 unchanged sentences

Segment operating income margin 6.9 % 5.4 % 150 bps 27.5

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.

Note percentages may not foot due to rounding.

The Rail segment sales for the nine months ended September 30, 2024 increased by $4,849, or 2.0%, compared to the prior year period.

The increase was due to higher organic sales of $6,963, or 2.9%, partially offset by a $2,114, or 0.9% 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 $11,274 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 $2,315, or 6.8%, compared to the prior year period, and gross profit margins decreased 20 basis points.

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

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

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

Global Friction Management sales increased by $1,384 driven by domestic markets served.

Rail Products sales decreased by $7,809 driven by the divestiture of Ties and overall weaker domestic market conditions.

The Rail segment gross profit increased by $3,213, or 6.2%, compared to the prior year period, and gross profit margins improved 90 basis points.

The Technology Services and Solutions business unit gross profit improved by $6,860 due to higher volumes and improved mix, including a 910 basis point improvement in the margins of our UK business.

Higher Global Friction Management volumes resulted in an increase in gross profit of $1,882 from the prior year quarter.

Rail Products gross profit decreased by $5,529 due primarily to market pricing pressure.

Segment operating income increased by $3,981, or 30.1%, compared to the prior year period, and operating income margins expanded 150 basis points.

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

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

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

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

The increase was primarily driven by improvement in gross profit levels and lower selling and administrative expenses.

During the nine months ended September 30, 2024, new orders within the Rail segment were $253,412, an increase of $13,886, or 5.8%, compared to the prior year period.

Rail Products had an $23,681 increase in new orders, including the impact of the Ties divestiture which reduced orders by $6,105.

Global Friction Management orders increased $6,139 and Technology Services and Solutions business unit had a decline of $16,342 in overall orders as we scale back initiatives in the UK market in line with our strategy.

Infrastructure Solutions

Six Months Ended

June 30, Change Percent

Nine Months Ended

September 30, Change Percent

2024 2023 2024 vs.

5 unchanged sentences

Segment operating income margin 4.7 % 1.9 % 280 bps 143.8

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.

Note percentages may not foot due to rounding.

The Infrastructure segment sales for the nine months ended September 30, 2024 decreased by $11,134, or 6.7%, compared to the prior year period.

The decrease in sales for the nine months ended September 30, 2024 was attributable to the divestiture of Chemtec and the Bridge Exit, which decreased sales by $9,259 and $861, respectively.

Organic sales decreased by $1,014, or 0.6%.

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

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

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

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

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

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

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

Six Months Ended

June 30, Change Percent

The Infrastructure segment gross profit for the nine months ended September 30, 2024, increased by $2,899, or 9.2%.

This increase in gross profit was due to the prior year having a $3,051 reduction in profitability related to changes in the expected value of certain commercial projects and $807 of exit costs associated with the Bridge Exit included in the Steel Products business.

Also contributing to the gross profit increase was a 30 basis point improvement in Precast Concrete Products margins.

Additionally, the increase in gross profit for the nine months ended September 30, 2024 is due to an $815 gain on the sale of ancillary property offset by the divestiture of Chemtec which in the prior year period contributed $862 to gross profit.

Segment operating income for the nine months ended September 30, 2024 increased by $4,113 from the prior year period.

The improvement in segment operating income was due to higher gross profit, due in part to the unfavorable impact of $3,858 from the Bridge Exit in the prior year period, a $521 decrease in selling and administrative costs, and a $693 decrease in amortization expense.

For the nine months ended September 30, 2024, the Infrastructure segment had new orders of $145,939, a decrease of $38,056, or 20.7%, compared to the prior year period.

The decrease was driven primarily by the Steel Products business unit due to short term constrained demand as well as a $4,742 impact associated with the divestiture of Chemtec and the Bridge Exit.

Nine Months Ended

September 30, Change Percent

2024 2023 2024 vs.

2023 2024 vs.

(Gain) on sale of former joint venture facility

$ (3,477) $ — $ (3,477) **

Public company costs 4,167 3,244 923 28.5 %

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Other 457 347 110 31.7

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

**Results of this calculation not considered meaningful

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

Unallocated corporate expense - net $ 7,096 $ 7,607 $ (511) (6.7) %

Note percentages may not foot due to rounding.

**Results of this calculation not meaningful.

Unallocated corporate expense - net declined by $511 due to the gain of $3,477 on sale of former joint venture facility.

This was partially offset by public company costs, which increased due to increased Board of Director and insurance costs as well as corporate executive management costs, which increased due to legal fees and professional services.

Restructuring

In August 2024, the Company announced the continuation of its enterprise restructuring program aligned with its long-term strategy to reduce costs and enable investment in its growth platforms.

The restructuring action is expected to be completed in 2024, and is expected to provide annual run-rate pre-tax savings of approximately $4,500, $2,000 of which to be realized in 2024.

The following table sets forth restructuring costs by segment for the three and nine months ended September 30, 2024:

Rail, Technologies, and Services $ 651

Infrastructure Solutions 63

Corporate 195

There were no restructuring costs incurred prior to to the three months ended September 30, 2024.

The Company’s $909 restructuring expense relates to severance and an immaterial amount of legal costs.

Of the total restructuring costs incurred for the three and nine months ended September 30, 2024, $69 was reported in “Cost of goods sold” and $840 was reported in “Selling and administrative expense.” The Company expects approximately $471 in additional restructuring costs associated with this program in total.

The following table sets forth a reconciliation of the beginning and ending restructuring liability balance through September 30, 2024:

Balance as of June 30, 2024 $ —

Restructuring costs 909

Cash paid 767

Balance as of September 30, 2024 $ 142

The majority of the remaining liability of $142 is expected to be paid in 2024.

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 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

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 $59,707 was available for borrowing as of September 30, 2024, subject to covenant restrictions.

Foster Company Merged Retirement Plan, restructuring payments, and to support the share repurchase program.

The Company’s total debt, including finance leases, was $68,544 and $55,273 as of September 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 September 30, 2024:

September 30, 2024

Cash and cash equivalents $ 3,135

5 unchanged sentences

Total available funding capacity $ 62,842

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.

As of September 30, 2024, the Company was in compliance with all covenants of the Credit Agreement and has $62,842 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.

While the Company places an emphasis on working capital management in its operations, factors such as its contract mix, commercial and collection terms, collection patterns, 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.

The Company believes that its reserves for credit losses are appropriate as of September 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 terminations 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 transfer of plan assets and obligations to insurers and subsequent terminations are expected to be completed by December 31, 2024 for the US DB Plan and by June 30, 2025 for the UK DB Plan, subject to finalization of agreements with insurance companies.

The Company’s US DB Plan is underfunded as of September 30, 2024, and will require cash payments of approximately $2,000 to $2,500 to effectuate the termination.

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

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

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

Six Months Ended

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

The UK DB Plan is fully funded as of September 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 nine months ended September 30, 2024 and 2023 were as follows:

Nine Months Ended

September 30,

Net cash (used in) provided by operating activities $ (1,653) $ 15,310

Net cash (used in) provided by investing activities (3,953) 5,798

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Cash Flow from Operating Activities

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

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

During the nine months ended September 30, 2024, net cash used in operating activities was $1,653, compared to cash provided by operating activities of $15,310 during the prior year.

For the nine months ended September 30, 2024, net income and adjustments to reconcile net income from operating activities provided $22,264, compared to $16,850 in the prior year.

Working capital and other assets and liabilities were a use of $23,917 in the current period, compared to a use of $1,540 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.

The change in operating cash flow for the nine months ended September 30, 2024 versus the nine months ended September 30, 2023 was largely driven by accounts receivable, which was a use of $12,976 during the nine months ended September 30, 2024 compared to the $15,927 provided in the nine months ended September 30, 2023.

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

Cash Flow from Investing Activities

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

Capital expenditures for the nine months ended September 30, 2024 and 2023 were $7,834 and $2,784, 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.

During the nine months ended September 30, 2024, the Company sold 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 nine months ended September 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 nine months ended September 30, 2024 the Company had an increase in outstanding debt of $12,162 compared to the nine months ended September 30, 2023 in which the Company had a decrease in outstanding debt of $20,262.

The increase in debt for the nine months ended September 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 primarily due to cash provided by operations, as well as proceeds received from the Ties and Chemtec divestitures during the nine 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.

For the nine months ended September 30, 2024 the Company repurchased 196,768 shares of its stock for $4,330 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.

5 unchanged sentences

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.

As of September 30, 2024, the Company has repurchased stock of $6,644, with $8,356 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.

As of September 30, 2024, the Company had $3,135 in cash and cash equivalents and $59,707 of availability under its revolving credit facility, subject to covenant restrictions.

As of September 30, 2024, approximately $2,368 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.

9 unchanged sentences

Although backlog is not necessarily indicative of future operating results, the following table provides the backlog by segment:

September 30,

2024 December 31,

2023 June 30,

2023 September 30,

Rail, Technologies, and Services $ 88,663 $ 84,418 $ 93,632

2 unchanged sentences

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.

Backlog decreased $34,214 compared to the prior year quarter due to constrained demand in the Steel Products business unit, which declined $30,836, including $4,533 from a discontinued product line.

Critical Accounting Estimates

2 unchanged sentences

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 for the year ended December 31, 2023.

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

16 unchanged sentences

Change in Consolidated Sales Three Months Ended

June 30, Percent

Change Six Months Ended

June 30, Percent

September 30, Percent

Change Nine Months Ended

September 30, Percent

2023 net sales, as reported $ 145,345 $ 408,867

Decrease due to divestitures and exit (2,231) (1.5) % (12,871) (4.9) %

Increase (decrease) from divestitures and exit 638 0.4 % (12,234) (3.0) %

Change due to organic sales (8,517) (5.9) % 5,949 1.5 %

2 unchanged sentences

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

June 30, Percent

Change Six Months Ended

June 30, Percent

September 30, Percent

Change Nine Months Ended

September 30, Percent

2023 net sales, as reported $ 86,866 $ 242,866

4 unchanged sentences

Change in Infrastructure Solutions Sales Three Months Ended

June 30, Percent

Change Six Months Ended

June 30, Percent

September 30, Percent

Change Nine Months Ended

September 30, Percent

2023 net sales, as reported $ 58,479 $ 166,001

Decrease due to divestiture and exit (818) (1.4) % (10,757) (10.0) %

Increase (decrease) due to divestiture and exit 638 1.1 % (10,120) (6.1) %

Change due to organic sales (1,149) (2.0) % (1,014) (0.6) %

5 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis