FOSTER L B CO 10-Q

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 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 of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Sentences containing words such as “believe,” “intend,” “plan,” “may,” “expect,” “should,” “could,” “anticipate,” “estimate,” “predict,” “project,” or their negatives, or other similar expressions of a future or forward-looking nature generally should be considered forward-looking statements. Forward-looking statements in this Quarterly Report on form 10-Q are based on management's current expectations and assumptions about future events that involve inherent risks and uncertainties and may concern, among other things, the Company’s expectations relating to our strategy, goals, projections, and plans regarding our financial position, liquidity, capital resources, and results of operations and decisions regarding our strategic growth initiatives, market position, and product development. While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory, and other risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company’s control. The Company cautions readers that various factors could cause the actual results of the Company to differ materially from those indicated by forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Among the factors that could cause the actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties related to: a continuation or worsening of the adverse economic conditions in the markets we serve, including recession, the continued volatility in the prices for oil and gas, project delays, and budget shortfalls, or otherwise; volatility in the global capital markets, including interest rate fluctuations, which could adversely affect our ability to access the capital markets on terms that are favorable to us; restrictions on our ability to draw on our credit agreement, including as a result of any future inability to comply with restrictive covenants contained therein; a decrease in freight or transit rail traffic; environmental matters and the impact of recently-finalized environmental regulations, including any costs associated with any remediation and monitoring of such matters; the risk of doing business in international markets, including compliance with anti-corruption and bribery laws, foreign currency fluctuations and inflation, global shipping disruptions, and trade restrictions or embargoes; our ability to effectuate our strategy, including cost reduction initiatives, and our ability to effectively integrate acquired businesses or to divest businesses, such as the recent dispositions of the Track Components, Chemtec, and Ties businesses, and acquisitions of the Skratch Enterprises Ltd., Intelligent Video Ltd., VanHooseCo Precast LLC, and Cougar Mountain Precast, LLC businesses and to realize anticipated benefits; costs of and impacts associated with shareholder activism; the timeliness and availability of materials from our major suppliers, as well as the impact on our access to supplies of customer preferences as to the origin of such supplies, such as customers’ concerns about conflict minerals; labor disputes; cybersecurity risks such as data security breaches, malware, ransomware, “hacking,” and identity theft, which could disrupt our business and may result in misuse or misappropriation of confidential or proprietary information, and could result in the disruption or damage to our systems, increased costs and losses, or an adverse effect to our reputation, business or financial condition; the continuing effectiveness of our ongoing implementation of an enterprise resource planning system; changes in current accounting estimates and their ultimate outcomes; the adequacy of internal and external sources of funds to meet financing needs, including our ability to negotiate any additional necessary amendments to our credit agreement or the terms of any new credit agreement, the Company’s ability to manage its working capital requirements and indebtedness; domestic and international taxes, including estimates that may impact taxes; domestic and foreign government regulations, including tariffs; our ability to maintain effective internal controls over financial reporting (“ICFR”) and disclosure controls and procedures, including our ability to remediate any existing material weakness in our ICFR and the timing of any such remediation, as well as our ability to reestablish effective disclosure controls and procedures; the results of the UK’s 2024 parliamentary election, uncertainties related to the U.S. 2024 Presidential election and any corresponding changes to policy or other changes that could affect UK or U.S. business conditions; other geopolitical conditions, including the ongoing conflicts between Russia and Ukraine, conflicts in the Middle East, and increasing tensions between China and Taiwan; a lack of state or federal funding for new infrastructure projects; an increase in manufacturing or material costs; the loss of future revenues from current customers; any future global health crises, and the related social, regulatory, and economic impacts and the response thereto by the Company, our employees, our customers, and national, state, or local governments, including any governmental travel restrictions; and risks inherent in litigation and the outcome of litigation and product warranty claims. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated. Significant risks and uncertainties that may affect the operations, performance, and results of the Company’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors,” and elsewhere in our Annual Report on Form 10-K/A for the year ended December 31, 2023, as amended on November 1, 2024, or as updated and/or amended by our other current or periodic filings with the Securities and Exchange Commission. The forward-looking statements in this report are made as of the date of this report and we assume no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as required by the federal securities laws. 25 Table of Contents 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 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 nine months ended September 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 nine months ended September 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 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. 26 Table of Contents Results of Operations Third Quarter 2024 Compared to Third Quarter 2023 Three Months Ended September 30, Change 2024 2023 2024 vs. 2023 Net sales $ 137,466 $ 145,345 $ (7,879) Gross profit 32,758 27,417 5,341 Gross profit margin 23.8 % 18.9 % 490 bps Expenses: Selling and administrative expenses $ 24,289 $ 24,421 $ (132) Selling and administrative expenses as a percent of sales 17.7 % 16.8 % 90 bps Amortization expense 1,146 1,379 (233) Operating income $ 7,323 $ 1,617 $ 5,706 Operating income margin 5.3 % 1.1 % 420 bps Interest expense - net $ 1,358 $ 1,442 $ (84) Other income - net (188) (151) (37) Income before income taxes $ 6,153 $ 326 $ 5,827 Income tax benefit (29,745) (121) (29,624) Net income $ 35,898 $ 447 $ 35,451 Net loss attributable to noncontrolling interest (7) (68) 61 Net income attributable to L.B. Foster Company $ 35,905 $ 515 $ 35,390 Diluted earnings per common share $ 3.27 $ 0.05 $ 3.22 Results Summary 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. 27 Table of Contents 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 Rail, Technologies, and Services Three Months Ended September 30, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Net sales $ 79,498 $ 86,866 $ (7,368) (8.5) % Gross profit $ 18,471 $ 17,229 $ 1,242 7.2 Gross profit margin 23.2 % 19.8 % 340 bps 17.1 Segment operating income $ 4,933 $ 3,866 $ 1,067 27.6 Segment operating income margin 6.2 % 4.5 % 170 bps 39.4 Note percentages may not foot due to rounding. 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 $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 September 30, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Net sales $ 57,968 $ 58,479 $ (511) (0.9) % Gross profit $ 14,287 $ 10,188 $ 4,099 40.2 Gross profit margin 24.6 % 17.4 % 720 bps 41.5 Segment operating income $ 5,110 $ 799 $ 4,311 ** Segment operating income margin 8.8 % 1.4 % 740 bps ** Note percentages may not foot due to rounding. **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 28 Table of Contents 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. Corporate Three Months Ended September 30, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Public company costs $ 1,327 $ 1,371 $ (44) (3.2) % Corporate executive management costs 839 760 79 10.4 Corporate management stock-based compensation 339 587 (248) (42.2) Other 215 330 (115) (34.8) Total unallocated corporate expenses $ 2,720 $ 3,048 $ (328) (10.8) % 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 Nine Months 2024 Compared to First Nine Months 2023 29 Table of Contents Nine Months Ended September 30, Change 2024 2023 2024 vs. 2023 Net sales $ 402,582 $ 408,867 $ (6,285) Gross profit 89,447 83,335 6,112 Gross profit margin 22.2 % 20.4 % 180 bps Expenses: Selling and administrative expenses $ 71,977 $ 70,360 $ 1,617 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) Operating income $ 17,461 $ 8,856 $ 8,605 Operating income margin 4.3 % 2.2 % 210 bps Interest expense - net $ 3,976 $ 4,404 $ (428) Other (income) expense - net (525) 2,782 (3,307) Income before income taxes $ 14,010 $ 1,670 $ 12,340 Income tax benefit (29,110) (99) (29,011) Net income $ 43,120 $ 1,769 $ 41,351 Net loss attributable to noncontrolling interest (68) (125) 57 Net income attributable to L.B. Foster Company $ 43,188 $ 1,894 $ 41,294 Diluted earnings per common share $ 3.91 $ 0.17 $ 3.74 Results Summary 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 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. federal and 30 Table of Contents 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 Nine Months Ended September 30, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Net sales $ 247,715 $ 242,866 $ 4,849 2.0 % Gross profit $ 54,917 $ 51,704 $ 3,213 6.2 Gross profit margin 22.2 % 21.3 % 90 bps 4.1 Segment operating income $ 17,212 $ 13,231 $ 3,981 30.1 Segment operating income margin 6.9 % 5.4 % 150 bps 27.5 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. 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 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 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 Nine Months Ended September 30, Change Percent Change 2024 2023 2024 vs. 2023 2024 vs. 2023 Net sales $ 154,867 $ 166,001 $ (11,134) (6.7) % Gross profit $ 34,530 $ 31,631 $ 2,899 9.2 Gross profit margin 22.3 % 19.1 % 320 bps 17.0 Segment operating income $ 7,345 $ 3,232 $ 4,113 127.3 Segment operating income margin 4.7 % 1.9 % 280 bps 143.8 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%. 31 Table of Contents 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. Corporate Nine Months Ended September 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 4,167 3,244 923 28.5 % Corporate executive management costs 4,131 2,281 1,850 81.1 Corporate management stock-based compensation 1,818 1,735 83 4.8 Other 457 347 110 31.7 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 Total $ 909 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: 32 Table of Contents 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 $59,707 was available for borrowing as of September 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 L.B. 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 Credit agreement: Total availability under the credit agreement 130,000 Outstanding borrowings on revolving credit facility (68,029) Letters of credit outstanding (2,264) Net availability under the revolving credit facility 59,707 Total available funding capacity $ 62,842 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 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 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 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 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: 33 Table of Contents Nine Months Ended September 30, 2024 2023 Net cash (used in) provided by operating activities $ (1,653) $ 15,310 Net cash (used in) provided by investing activities (3,953) 5,798 Net cash provided by (used in) financing activities 6,420 (21,121) Effect of exchange rate changes on cash and cash equivalents (239) 100 Net increase in cash and cash equivalents $ 575 $ 87 Cash Flow from Operating Activities 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 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 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 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 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 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. 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 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 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. 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. 34 Table of Contents 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. To reduce the impact of interest rate changes on outstanding variable-rate debt, the Company amended and entered into SOFR-based interest rate swaps with notional values totaling $20,000 and $20,000, effective August 12, 2022 and August 31, 2022, respectively, at which point the agreements effectively converted a portion of the debt from variable to fixed-rate borrowings during the term of the swap contract. Backlog Although backlog is not necessarily indicative of future operating results, the following table provides the backlog by segment: Backlog September 30, 2024 December 31, 2023 September 30, 2023 Rail, Technologies, and Services $ 88,663 $ 84,418 $ 93,632 Infrastructure Solutions 120,342 129,362 149,587 Total backlog $ 209,005 $ 213,780 $ 243,219 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 $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 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. 35 Table of Contents 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. Change in Consolidated Sales Three Months Ended September 30, Percent Change Nine Months Ended September 30, Percent Change 2023 net sales, as reported $ 145,345 $ 408,867 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 % 2024 net sales, as reported $ 137,466 $ 402,582 Total sales change, 2023 vs 2024 $ (7,879) (5.4) % $ (6,285) (1.5) % Change in Rail, Technologies, and Services Sales Three Months Ended September 30, Percent Change Nine Months Ended September 30, Percent Change 2023 net sales, as reported $ 86,866 $ 242,866 Decrease due to divestiture — — % (2,114) (0.9) % Change due to organic sales (7,368) (8.5) % 6,963 2.9 % 2024 net sales, as reported $ 79,498 $ 247,715 Total sales change, 2023 vs 2024 $ (7,368) (8.5) % $ 4,849 2.0 % Change in Infrastructure Solutions Sales Three Months Ended September 30, Percent Change Nine Months Ended September 30, Percent Change 2023 net sales, as reported $ 58,479 $ 166,001 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) % 2024 net sales, as reported $ 57,968 $ 154,867 Total sales change, 2023 vs 2024 $ (511) (0.9) % $ (11,134) (6.7) % 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. 36 Table of Contents