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, valuations and impairments, 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, tariffs or trade wars, inflation, project delays, and budget shortfalls, or otherwise; the impact of the continued U.S. government shutdown; 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 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, the imposition of increased or new tariffs, and trade restrictions or embargoes, or uncertainties relating to the imposition of tariffs; our ability to effectuate our strategy, including cost reduction initiatives, and our ability to effectively integrate acquired businesses or to divest businesses, and to realize anticipated synergies and 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; emerging technologies, including those related to or arising from artificial intelligence, and resultant risks to our business and operations; 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 and disclosure controls and procedures, any change in policy or other change due to the results of the UK’s 2024 parliamentary election and the U.S. 2024 Presidential election 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 or delay in state or federal funding for infrastructure projects; an increase in manufacturing or material costs, including volatility in steel prices; 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 for the year ended December 31, 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. 22 Table of Contents General Overview and Business Update L.B. Foster Company is a global technology solutions provider of products and services for the rail and infrastructure markets. The Company’s innovative engineering and product development solutions address the safety, reliability, and performance needs of its customers' most challenging requirements. The Company is organized and operates in two reporting segments: Rail, Technologies, and Services (“Rail”) and Infrastructure Solutions (“Infrastructure”). Product Line Exits During the nine months ended September 30, 2025, the Company announced the discontinuation of its Automation and Materials Handling product line (“AMH Exit”) which was reported in the Technology Services and Solutions business unit within the Rail segment. AMH had net sales of $530 and $907 for the three months ended September 30, 2025 and 2024, respectively, and $1,750 and $4,230 for the nine months ended September 30, 2025 and 2024, respectively. The Company expects to complete any remaining customer obligations by the end of 2025. During the nine months ended September 30, 2025, the Company incurred a total of $1,351 in exit costs associated with the AMH Exit, which included $655 in inventory and fixed asset write-downs, $507 in personnel expenses, and $189 in other exit costs. Exit costs of $1,085 were recorded in “Cost of goods sold” and $266 were recorded in “Selling and administrative expenses” within our 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 Infrastructure. The Bedford, PA based operations supporting the product line expects to complete any remaining customer obligations in 2025. The product line had net sales of $94 and $921 for the three months ended September 30, 2025 and 2024, respectively, and $1,093 and $2,888 for the nine months ended September 30, 2025 and 2024, respectively. Results of Operations Third Quarter 2025 Compared to Third Quarter 2024 Three Months Ended September 30, Change 2025 2024 2025 vs. 2024 Net sales $ 138,286 $ 137,466 $ 820 Gross profit 31,066 32,758 (1,692) Gross profit margin 22.5 % 23.8 % (130) bps Expenses: Selling and administrative expenses $ 22,077 $ 24,289 $ (2,212) Selling and administrative expenses as a percent of sales 16.0 % 17.7 % (170) bps Amortization expense $ 694 $ 1,146 $ (452) Operating income $ 8,295 $ 7,323 $ 972 Operating income margin 6.0 % 5.3 % 70 bps Interest expense - net $ 1,254 $ 1,358 $ (104) Other income - net (96) (188) 92 Income before income taxes $ 7,137 $ 6,153 $ 984 Income tax expense (benefit) 2,812 (29,745) 32,557 Net income $ 4,325 $ 35,898 $ (31,573) Net loss attributable to noncontrolling interest (29) (7) (22) Net income attributable to L.B. Foster Company $ 4,354 $ 35,905 $ (31,551) Diluted earnings per common share $ 0.40 $ 3.27 $ (2.87) Results Summary Net sales for the three months ended September 30, 2025 increased $820, or 0.6%, over the prior year quarter. The increase was driven by sales growth in the Infrastructure segment, which improved $2,530, or 4.4%, over the prior year quarter. Partially offsetting these improvements were sales volume declines in the Rail segment which declined $1,710, or 2.2%, from the prior year quarter. Gross profit for the three months ended September 30, 2025 decreased $1,692, or 5.2%, from the prior year quarter. The decline in gross profit was due to the Rail segment which declined $725, or 3.9%, due to lower sales volumes and a decline in gross profit of 23 Table of Contents $967, or 6.8%, in the Infrastructure segment due to higher manufacturing costs and unfavorable sales mix. Gross profit margins declined 130 basis points to 22.5%. Selling and administrative expenses for the three months ended September 30, 2025 decreased $2,212, or 9.1%, from the prior year quarter, due primarily to lower personnel costs as a result of the restructuring programs and general administrative spending which decreased $424 and $526, respectively. Selling and administrative expenses for the prior year quarter includes $422 in legal costs associated with a resolved legal matter and $840 in employee-related restructuring costs. Selling and administrative expenses as a percentage of net sales decreased to 16.0% in the current quarter. Net interest expense for the three months ended September 30, 2025 decreased $104 from the prior year quarter. The Company's outstanding debt balance was $58,722 as of September 30, 2025, compared to $68,544 as of September 30, 2024. The Company’s effective income tax rate for the three months ended September 30, 2025 was 39.4%, compared to (483.4)% in the prior year quarter. The Company's effective income tax rate for the three months ended September 30, 2025 differed from the statutory rate of 21% primarily due to the impact of pre-tax losses in the United Kingdom, for which no income tax benefit was recognized due to a valuation allowance. Net income attributable to the Company for the three months ended September 30, 2025 was $4,354, or $0.40 per diluted share, compared to net income in the prior year quarter of $35,905, or $3.27 per diluted share. The decrease is due primarily to a $30,045 favorable tax valuation allowance adjustment recorded in the prior year quarter. Results of Operations - Segment Analysis Rail, Technologies, and Services Three Months Ended September 30, Change Percent Change 2025 2024 2025 vs. 2024 2025 vs. 2024 Net sales $ 77,788 $ 79,498 $ (1,710) (2.2 %) Gross profit $ 17,746 $ 18,471 $ (725) (3.9) Gross profit margin 22.8 % 23.2 % (40) bps (1.7) Segment operating income $ 5,895 $ 4,933 $ 962 19.5 Segment operating income margin 7.6 % 6.2 % 140 bps 22.6 Rail segment net sales for the three months ended September 30, 2025 decreased $1,710, or 2.2%, from the prior year quarter. The decline was primarily driven by a $2,814, or 5.9%, decline in Rail Products sales volumes, coupled with a decline in Technology Services and Solutions volumes, which declined $661 or 5.3%, due to continued right-sizing of the UK business partially offset by strength in Total Track Monitoring. Also offsetting these declines was an increase of $1,765, or 9.0%, in Global Friction Management. Rail segment gross profit for the three months ended September 30, 2025 decreased $725, or 3.9%, from the prior year quarter, and gross profit margins declined by 40 basis points to 22.8%. The primary driver of this decline was the Technology Services and Solutions business unit which decreased $860 due to lower volumes in the UK business and unfavorable business mix including commercial weakness in the UK. Partially offsetting these declines was an increase in Rail Products gross profit of $167 due to favorable business mix. Global Friction Management margins were down slightly from the prior year quarter. Rail segment operating income for the three months ended September 30, 2025 increased $962, or 19.5%, from the prior year quarter due primarily to declines in selling and administrative expenses and lower amortization expense. For the three months ended September 30, 2025, the Rail segment had new orders, net of $86,360, an increase of $33,685 over the prior year quarter, driven by improvement across all business units within the segment. Rail Products and Global Friction Management improved 35.9% and 4.3% over the prior year quarter, respectively. Technology Services and Solutions new orders, net improved $25,048 due to a large, multi-year order received in the UK business. Backlog as of September 30, 2025, was $140,233, a $51,570, or 58.2%, increase over the prior year. Infrastructure Solutions 24 Table of Contents Three Months Ended September 30, Change Percent Change 2025 2024 2025 vs. 2024 2025 vs. 2024 Net sales $ 60,498 $ 57,968 $ 2,530 4.4 % Gross profit $ 13,320 $ 14,287 $ (967) (6.8) Gross profit margin 22.0 % 24.6 % (260) bps (10.6) Segment operating income $ 4,147 $ 5,110 $ (963) (18.8) Segment operating income margin 6.9 % 8.8 % (190) bps (21.6) Infrastructure segment net sales for the three months ended September 30, 2025, increased $2,530 or 4.4%, over the prior year quarter. The increase was primarily due to the Steel Products business unit which increased $1,946, or 12.7%, due to sales volume growth in the Protective Coatings business. Additionally, Precast Concrete Products net sales increased $584, or 1.4%, over the prior year quarter. Infrastructure segment gross profit for the three months ended September 30, 2025 decreased $967, or 6.8%, from the prior year quarter. The decline in gross profit was due to the Precast Concrete business unit which declined $2,198 due to unfavorable sales mix and higher manufacturing costs. Gross profit for the three months ended September 30, 2025 includes $557 in costs associated with the startup of the Florida precast facility consistent with the Company's growth strategy. Steel Products gross profit improved $1,231 over the prior year quarter due to higher volumes and favorable business mix. Gross profit margins declined 260 basis points to 22.0% due to the Precast Concrete business. Infrastructure segment operating income for the three months ended September 30, 2025 was unfavorable by $963, or 18.8%, compared to the prior year quarter due to lower gross profit. For the three months ended September 30, 2025, Infrastructure had new orders, net of $28,416, a decrease of $14,882, from the prior year quarter due to order cancellations primarily in the Steel Products business unit. Steel Products new orders, net decreased by 148.1% which was partially offset by a 10.8% increase in the Precast Concrete business unit. Backlog as of September 30, 2025, was $107,183, a decrease of $13,159, or 10.9%, from the prior year quarter due to order cancellations in Steel Products offset in part by a $3,988 increase, or 4.9%, in backlog for Precast Concrete. Corporate Three Months Ended September 30, Change Percent Change 2025 2024 2025 vs. 2024 2025 vs. 2024 Public company costs $ 1,162 $ 1,327 $ (165) (12.4) % Corporate executive management costs 175 839 (664) (79.1) Corporate management stock-based compensation 672 339 333 98.2 Other (262) 215 (477) (221.9) Unallocated corporate expense - net $ 1,747 $ 2,720 $ (973) (35.8) % Unallocated corporate expense - net for the three months ended September 30, 2025 was $1,747 compared to $2,720 for the three months ended September 30, 2024. Corporate executive management costs decreased from the prior year quarter primarily due to a decrease of $422 in corporate legal costs associated with a resolved legal matter and lower professional service expenditures. 25 Table of Contents Results of Operations First Nine Months 2025 Compared to First Nine Months 2024 Nine Months Ended September 30, Change 2025 2024 2025 vs. 2024 Net sales $ 379,636 $ 402,582 $ (22,946) Gross profit 82,117 89,447 (7,330) Gross profit margin 21.6 % 22.2 % (60) bps Expenses: Selling and administrative expenses $ 65,411 $ 71,977 $ (6,566) Selling and administrative expenses as a percent of sales 17.2 % 17.9 % (70) bps (Gain) on sale of former joint venture facility $ — $ (3,477) $ 3,477 Amortization expense 2,656 3,486 (830) Operating income $ 14,050 $ 17,461 $ (3,411) Operating income margin 3.7 % 4.3 % (60) bps Interest expense - net $ 3,887 $ 3,976 $ (89) Other income - net (509) (525) 16 Income before income taxes $ 10,672 $ 14,010 $ (3,338) Income tax expense (benefit) 5,625 (29,110) 34,735 Net income $ 5,047 $ 43,120 $ (38,073) Net loss attributable to noncontrolling interest (82) (68) (14) Net income attributable to L.B. Foster Company $ 5,129 $ 43,188 $ (38,059) Diluted earnings per common share $ 0.47 $ 3.91 $ (3.44) Results Summary Net sales for the nine months ended September 30, 2025 decreased $22,946, or 5.7%, from the prior year period. Rail segment net sales decreased $39,939, or 16.1%, from the prior year period and was offset in part by higher sales in the Infrastructure segment which improved $16,993, or 11.0%, over the prior year period. Gross profit for the nine months ended September 30, 2025 decreased $7,330, or 8.2%, from the prior year period and gross profit margins declined 60 basis points to 21.6%. The decline in gross profit was primarily due to lower sales volumes in the Rail segment which declined $10,010 from the prior year period and includes $1,085 of AMH Exit costs. Partially offsetting this decline was gross profit improvement in the Infrastructure segment of $2,680 due to improved volumes offset in part by unfavorable business mix and increased manufacturing costs including $1,633 of costs associated with the start up of our Florida precast facility. Gross profit for the nine months ended September 30, 2024 includes a $815 gain on the sale of ancillary property. Selling and administrative expenses for the nine months ended September 30, 2025 decreased $6,566, or 9.1%, from the prior year period. The decline was primarily attributed to decreases of $2,202 in personnel costs as a result of our restructuring programs, $1,173 in legal costs, $783 in professional services expenditures, $574 in lower restructuring costs, and reduced travel and insurance costs. Selling and administrative expenses as a percentage of net sales decreased from the prior year period to 17.2%. Net interest expense decreased $89 for the nine months ended September 30, 2025 compared to the prior year period. The Company's outstanding debt balance was $58,722 as of September 30, 2025, compared to $68,544 as of September 30, 2024. The Company’s effective income tax rate for the nine months ended September 30, 2025 was 52.7%, compared to (207.8)% in the prior year period. The Company's effective income tax rate for the nine months ended September 30, 2025 differed from the statutory rate of 21% primarily due to the impact of pre-tax losses in the United Kingdom for which no income tax benefit was recognized due to a valuation allowance. Net income attributable to the Company for the nine months ended September 30, 2025 was $5,129, or $0.47 per diluted share, compared to net income in the prior year period of $43,188, or $3.91 per diluted share. Net income for the nine months ended September 30, 2024 included an income tax benefit of $29,110 associated with a favorable tax valuation adjustment and a $3,477 gain 26 Table of Contents on the sale of a former joint venture facility in Magnolia, Texas. The decrease in net income was also impacted by lower gross profit for the nine months ended September 30, 2025 partially offset by reductions in selling and administrative expenses and amortization expense. Results of Operations - Segment Analysis Rail, Technologies, and Services Nine Months Ended September 30, Change Percent Change 2025 2024 2025 vs. 2024 2025 vs. 2024 Net sales $ 207,776 $ 247,715 $ (39,939) (16.1 %) Gross profit $ 44,907 $ 54,917 $ (10,010) (18.2) Gross profit margin 21.6 % 22.2 % (60) bps (2.7) Segment operating income $ 9,786 $ 17,212 $ (7,426) (43.1) Segment operating profit margin 4.7 % 6.9 % (220) bps (31.9) Rail segment net sales for the nine months ended September 30, 2025 decreased $39,939, or 16.1 %, from the prior year period. The decrease was primarily due to the decline in the Rail Products business unit which declined $35,286, or 22.5%, due to the timing of large orders in the Rail Distribution product line. Technology Services and Solutions net sales decreased $10,952, or 27.4%, due to the Company scaling back initiatives in the United Kingdom. Global Friction Management net sales improved $6,299, or 12.3%, due to improved demand in domestic markets served. Rail segment gross profit for the nine months ended September 30, 2025 decreased $10,010, or 18.2%, from the prior year period, and gross profit margins declined 60 basis points to 21.6%. The Rail Products and Technology Services and Solutions business units gross profit declined $5,862 and $6,901, respectively, due to lower volumes and unfavorable business mix. The Technology Services and Solutions business unit gross profit decline was due in part to $1,085 of restructuring costs associated with the AMH Exit. Partially offsetting these declines was an improvement in the Global Friction Management gross profit of $2,753 due to higher volumes. Rail segment operating income for the nine months ended September 30, 2025 decreased $7,426, or 43.1%, from the prior year period. The decrease was driven by a decline in gross profit associated with lower sales volumes partially offset by decreases in selling and administrative expenses and amortization expense of $1,834 and $750, respectively. For the nine months ended September 30, 2025, new orders, net were $283,956, an increase of $30,544 from the prior year period. The increase was due to a 68.2% improvement in the Technology Services and Solutions business unit due to a large, multi-year order received in the UK business, a 6.2% improvement in the Global Friction Management business unit, and a 5.6% improvement in Rail Products business unit. Infrastructure Solutions Nine Months Ended September 30, Change Percent Change 2025 2024 2025 vs. 2024 2025 vs. 2024 Net sales $ 171,860 $ 154,867 $ 16,993 11.0 % Gross profit $ 37,210 $ 34,530 $ 2,680 7.8 Gross profit margin 21.7 % 22.3 % (60) bps (2.7) Segment operating income $ 10,469 $ 7,345 $ 3,124 42.5 Segment operating income margin 6.1 % 4.7 % 140 bps 29.8 Infrastructure segment net sales for the nine months ended September 30, 2025 increased $16,993, or 11.0%, over the prior year period. The increase in net sales was attributable to the Precast Concrete Products business unit which increased $19,920, or 20.4%, over the prior year period which was partially offset by the Steel Products business unit which decreased $2,927, or 5.1%, from the prior year period due to declines in the bridge forms product line and the Bridge Exit. Infrastructure segment gross profit for the nine months ended September 30, 2025 increased $2,680, or 7.8%, due to gross profit increases in both business units. Gross profit increased by $1,836, in the Precast Concrete business unit due primarily to higher sales volumes offset in part by higher manufacturing costs including $1,633 of costs associated with the start up of our Florida precast facility in line with the Company's strategic growth plan. Steel Products gross profit improved $844, over the prior year quarter due to favorable business mix and benefits associated with the Bridge Exit. Gross profit margins of 21.7% decreased 60 basis points from the 27 Table of Contents prior year period due to unfavorable sales mix and higher manufacturing costs in the Precast Concrete business. Gross profit for the nine months ended September 30, 2024 includes the $815 gain on sale of ancillary property. Infrastructure segment operating income for the nine months ended September 30, 2025 was favorable $3,124, or 42.5%, compared to the prior year period due to improvements in gross profit and a decrease in selling and administrative expenses. For the nine months ended September 30, 2025, the Infrastructure segment had new orders, net of $155,639, an increase of $9,700, over the prior year period. The increase is due to the Precast Concrete Products business unit which increased 19.7% over the prior year period. Partially offsetting this increase was a decrease in the Steel Products business unit of 24.8% from the prior year period due to order cancellations. Corporate Nine Months Ended September 30, Change Percent Change 2025 2024 2025 vs. 2024 2025 vs. 2024 (Gain) on sale of former joint venture facility $ — $ (3,477) $ 3,477 (100.0) % Public company costs 3,633 4,167 (534) (12.8) Corporate executive management costs 1,123 4,131 (3,008) (72.8) Corporate management stock-based compensation 1,711 1,818 (107) (5.9) Other (262) 457 (719) (157.3) Unallocated corporate expense - net $ 6,205 $ 7,096 $ (891) (12.6) % Unallocated corporate expense - net for the nine months ended September 30, 2025 was $6,205 compared to the nine months ended September 30, 2024 which was $7,096. The decrease was primarily due to a decline in corporate executive management costs of $3,008 due to a decrease in legal fees, professional service expenditures, and travel and insurance costs. This decline was offset in part by the $3,477 gain on the sale of the former joint venture facility in Magnolia, Texas in the nine months ended September 30, 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. The revolving credit facility provides for a total commitment of up to $150,000, of which $91,108 was available for borrowing as of September 30, 2025, subject to covenant restrictions. The Company’s primary needs for liquidity relate to working capital requirements for operations, capital expenditures, debt service obligations, tax obligations, outstanding purchase obligations, acquisitions, restructuring payments, and to support the share repurchase program. The Company’s total debt, including finance leases, was $58,722 and $46,940 as of September 30, 2025 and December 31, 2024, respectively, and was primarily comprised of borrowings under its revolving credit facility. The following table reflects available funding capacity as of September 30, 2025: September 30, 2025 Cash and cash equivalents $ 3,428 Credit agreement: Total availability under the credit agreement 150,000 Outstanding borrowings on revolving credit facility (58,122) Letters of credit outstanding (770) Net availability under the revolving credit facility 91,108 Total available funding capacity $ 94,536 As of September 30, 2025, we were in compliance with all covenants of the Credit Agreement and have $94,536 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 business mix, commercial terms, 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, 2025, but adverse changes in the economic 28 Table of Contents environment and adverse financial conditions of its customers may impact certain of its customers’ ability to access capital and compensate the Company for its products and services, as well as impact demand for its products and services. The changes in cash and cash equivalents for the nine months ended September 30, 2025 and 2024 were as follows: Nine Months Ended September 30, 2025 2024 Net cash provided by (used in) operating activities $ 13,447 $ (1,653) Net cash used in investing activities (8,004) (3,953) Net cash (used in) provided by financing activities (4,628) 6,420 Effect of exchange rate changes on cash and cash equivalents 159 (239) Net increase in cash and cash equivalents $ 974 $ 575 Cash Flow from Operating Activities During the nine months ended September 30, 2025, net cash provided by operating activities was $13,447, compared to cash used in operating activities of $1,653 during the prior year period. For the nine months ended September 30, 2025, net income and adjustments to reconcile net income from operating activities provided $23,380, compared to $22,264 in the prior year period. Working capital and other assets and liabilities were a use of $9,933 in the current period, compared to a use of $23,917 in the prior year period. The increase in operating cash flow for the nine months ended September 30, 2025 compared to the prior year period was largely driven by lower working capital needs associated with the lower Rail volumes. Changes in payment timing can impact accounts receivable in any given quarter due to the seasonality of our businesses. Cash Flow from Investing Activities Capital expenditures for the nine months ended September 30, 2025 and 2024 were $8,057 and $7,834, respectively. Capital expenditures in both periods primarily relate to general plant and operational improvements throughout the Company, as well as organic growth initiatives including investments in our new Precast Concrete facility in Lake County, Florida. During the nine months ended September 30, 2024, the Company divested the facility and land of its former joint venture in Magnolia, Texas and the fixed assets associated with the Bridge Exit generating a cash inflow of $3,881. Cash Flow from Financing Activities During the nine months ended September 30, 2025 the Company had an increase in outstanding debt of $9,963 compared to a $12,162 increase during the nine months ended September 30, 2024. Additionally, debt issuance costs of $706 were incurred during the nine months ended September 30, 2025 related to the June 27, 2025 Fifth Amended and Restated Credit Agreement. During the nine months ended September 30, 2025, the Company also made a $782 deferred payment related to the June 2022 acquisition of Skratch Enterprises Ltd. This payment was deferred at the date of the acquisition in accordance with the purchase agreement and was made during the second quarter of 2025. The Board of Directors previously authorized the repurchase of up to $15,000 of the Company’s common shares until February 2025, pursuant to the terms of the previously disclosed stock repurchase program adopted March 3, 2023, as amended August 5, 2024. During the first quarter of 2025, the Company repurchased 113,169 shares for $3,123 under this program through February 2025. Since the program's inception and continuing through February 2025, the Company repurchased a total of 547,679 shares of its stock for $12,241 under the program. On March 3, 2025, the Company's Board of Directors approved a new authorization to repurchase up to $40,000 of the Company's common stock in open market transactions and/or 10b5-1 trading plans through February 29, 2028. As of September 30, 2025, the Company repurchased 347,905 shares of its stock for $8,035 under this program. Under both programs, the Company repurchased a total of 461,074 shares for $11,158 during the nine months ended September 30, 2025. From February 2023 through September 30, 2025, the Company repurchased a total of 895,584 shares of its stock for $20,276 under both programs. 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. 29 Table of Contents Financial Condition As of September 30, 2025, the Company had $3,428 in cash and cash equivalents and $91,108 of availability under its revolving credit facility, subject to covenant restrictions. As of September 30, 2025, approximately $3,018 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 now complete UPRR Settlement Agreement, and service indebtedness. The Company views its short and long-term liquidity as being dependent on its results of operations, changes in working capital needs, and its borrowing capacity. On June 27, 2025, the Company, its domestic subsidiaries, and certain of its Canadian and United Kingdom subsidiaries (collectively, the “Borrowers”), entered into the Fifth Amended and Restated Credit Agreement (the “Credit Agreement”) with PNC Bank, N.A., Bank of America, N.A., Citizens Bank, N.A., and Wells Fargo Bank N.A. as Co-Syndication Agents, and Dollar Bank, Federal Savings Bank as a participant. The Credit Agreement, as amended, modifies the prior amended revolving credit facility, which had a maximum credit line of $130,000 and extends the maturity date from August 13, 2026 to June 27, 2030. The Credit Agreement provides for a five-year, revolving credit facility that permits aggregate borrowings of the Borrowers up to $150,000 with sublimits for (a) the issuance of Letters of Credit in Dollars and in Alternative Currencies in an amount not to exceed the Dollar Equivalent of $30,000, and (b) borrowings of Swing Loans in Dollars in an amount not to exceed $20,000; and with an incremental loan feature not to exceed $60,000. 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 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. The August 12, 2022 interest rate swap expired on March 1, 2025. The August 31, 2022 interest rate swap expires on August 13, 2026. Backlog Although backlog is not necessarily indicative of future operating results, the following table provides the backlog by segment: Backlog September 30, 2025 December 31, 2024 September 30, 2024 Rail, Technologies, and Services $ 140,233 $ 62,449 $ 88,663 Infrastructure Solutions 107,183 123,460 120,342 Total backlog $ 247,416 $ 185,909 $ 209,005 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 lower levels of backlog throughout the year. Backlog increased by $38,411 over the prior year period due primarily to increases throughout the Rail segment. 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 for the year ended December 31, 2024. 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. The Company defines new orders, net 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 net of order cancellations incurred during the period. The Company defines backlog as contractual commitments to customers for which the 30 Table of Contents 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, net 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, net 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. Item 3. Quantitative and Qualitative Disclosures about Market Risk This item is not applicable to a smaller reporting company.