L.B. Foster pany(FSTR) - 2024 Q2 - Quarterly Report

PART I. Financial Information Item 1. Financial Statements This section presents L.B. Foster Company's unaudited condensed consolidated financial statements and notes for the periods ended June 30, 2024 Condensed Consolidated Balance Sheets The balance sheet as of June 30, 2024, shows total assets of $333.3 million, an increase from $313.2 million at year-end 2023 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $191,469 | $167,990 | | Total Assets | $333,261 | $313,206 | | Total Current Liabilities | $80,429 | $95,306 | | Long-term Debt | $87,006 | $55,171 | | Total Liabilities | $185,609 | $170,371 | | Total Stockholders' Equity | $147,652 | $142,835 | | Total Liabilities & Equity | $333,261 | $313,206 | Condensed Consolidated Statements of Operations For Q2 2024, net sales decreased to $140.8 million, leading to a drop in net income to $2.8 million, while six-month net income surged to $7.2 million Statement of Operations Summary (in thousands) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Net Sales | $140,796 | $148,034 | $265,116 | $263,522 | | Gross Profit | $30,523 | $32,252 | $56,772 | $55,543 | | Operating Income | $4,504 | $6,349 | $6,787 | $6,852 | | Net Income | $2,817 | $3,493 | $7,222 | $1,322 | | Diluted EPS | $0.26 | $0.32 | $0.66 | $0.12 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities for the six months ended June 30, 2024, significantly increased to $26.8 million, primarily due to working capital changes Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(26,818) | $(3,333) | | Net cash (used in) provided by investing activities | $(465) | $7,716 | | Net cash provided by (used in) financing activities | $28,815 | $(3,563) | | Net increase in cash | $1,461 | $998 | Notes to Condensed Consolidated Financial Statements Key notes detail segment reorganization, revenue recognition, debt, and significant events including pension plan terminations and a new restructuring program - The Company reorganized its operations into two reporting segments: Rail, Technologies, and Services ("Rail") and Infrastructure Solutions ("Infrastructure") Historical segment information has been restated to conform to this new structure[30][96] - As of June 30, 2024, the Company had approximately $249.8 million of remaining performance obligations (backlog), with about 10.2% expected to extend beyond one year[53] - The Board of Directors approved the termination of the frozen US and UK defined benefit pension plans, which is expected to be completed by June 30, 2025 The US plan is underfunded and will require cash payments of approximately $2.0 to $3.0 million[77] - Subsequent to the quarter end, the company announced an enterprise restructuring program expected to incur charges of approximately $1.5 million and generate annual run-rate savings of about $4.5 million[91] Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q2 and YTD 2024 financial performance, highlighting segment results, liquidity, and strategic initiatives Results of Operations For Q2 2024, net sales fell 4.9% to $140.8 million, while six-month net sales rose 0.6% to $265.1 million, with diluted EPS surging to $0.66 Q2 2024 vs Q2 2023 Performance (in thousands) | Metric | Q2 2024 | Q2 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $140,796 | $148,034 | $(7,238) | (4.9)% | | Gross Profit | $30,523 | $32,252 | $(1,729) | (5.4)% | | Operating Income | $4,504 | $6,349 | $(1,845) | (29.1)% | | Net Income | $2,847 | $3,531 | $(684) | (19.4)% | | Diluted EPS | $0.26 | $0.32 | $(0.06) | (18.8)% | Six Months 2024 vs 2023 Performance (in thousands) | Metric | Six Months 2024 | Six Months 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $265,116 | $263,522 | $1,594 | 0.6% | | Gross Profit | $56,772 | $55,543 | $1,229 | 2.2% | | Operating Income | $6,787 | $6,852 | $(65) | (0.9)% | | Net Income | $7,283 | $1,379 | $5,904 | 428.1% | | Diluted EPS | $0.66 | $0.12 | $0.54 | 450.0% | - The significant increase in net income for the first six months of 2024 was primarily driven by a $3.5 million gain on the sale of a former joint venture facility and land, compared to a $3.1 million loss on divestitures in the same period of 2023[116][117] Segment Analysis In Q2 2024, Rail segment sales decreased 6.6% while Infrastructure Solutions sales declined 2.2% but saw operating income growth of 31.5% Q2 2024 Segment Performance (in thousands) | Segment | Net Sales | % Change YoY | Operating Income | % Change YoY | | :--- | :--- | :--- | :--- | :--- | | Rail, Technologies, and Services | $85,594 | (6.6)% | $5,431 | (18.0)% | | Infrastructure Solutions | $55,202 | (2.2)% | $3,618 | 31.5% | - The Rail segment's Q2 sales decline was driven by lower volumes and softer market prices in Rail Products, partially offset by strength in Technology Services and Solutions[106] - The Infrastructure segment's Q2 operating income improvement was driven by a $815,000 gain on the sale of an ancillary property within the Steel Products business unit[110] Liquidity and Capital Resources As of June 30, 2024, the company had $45.3 million in total available funding capacity, with increased debt to fund higher working capital needs Available Funding Capacity as of June 30, 2024 (in thousands) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $4,021 | | Net availability under revolving credit facility | $41,301 | | Total available funding capacity | $45,322 | - The increase in debt during the first half of 2024 was primarily to fund an increase in cash used in operating activities, which was driven by higher working capital needs, particularly accounts receivable[130][132] - The company repurchased 70,080 shares for $1.7 million in the first six months of 2024 Subsequent to quarter-end, the Board modified the repurchase program, removing a trailing 12-month limit and setting the expiration to February 2025, with $11.0 million remaining authorized[133][134] Quantitative and Qualitative Disclosures about Market Risk This item is not applicable as L.B. Foster Company qualifies as a smaller reporting company - The company has not provided quantitative and qualitative disclosures about market risk because this item is not applicable to a smaller reporting company[148] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of June 30, 2024[149] - No changes occurred during the six months ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[150] PART II. Other Information Legal Proceedings The company is subject to various legal proceedings, including the UPRR Settlement Agreement and its status as a PRP for the Portland Harbor Superfund Site - The final payment of $6.0 million under the UPRR Settlement Agreement is expected to be made by the end of 2024, satisfying the obligation[85] - The company is one of over 140 potentially responsible parties for the Portland Harbor Superfund Site cleanup As of June 30, 2024, the company maintained an environmental reserve of approximately $2.4 million for this and other matters[87][88] Risk Factors This item is not applicable as L.B. Foster Company qualifies as a smaller reporting company - The company has not provided an update on risk factors because this item is not applicable to a smaller reporting company[154] Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2024, the company repurchased 61,713 shares at an average price of $24.77, with $11.0 million remaining authorized for future repurchases Share Repurchases for Q2 2024 (in thousands) | Period | Total Shares Purchased | Avg. Price Paid | Shares Purchased Under Plan | Approx. Value Remaining Under Plan | | :--- | :--- | :--- | :--- | :--- | | Total Q2 2024 | 61,713 | $24.77 | 53,525 | $10,979 | Exhibits This section lists the exhibits filed with the Form 10-Q, including a retirement agreement, CEO and CFO certifications, and XBRL data files - Filed exhibits include certifications by the CEO and CFO as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[158]