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L.B. Foster pany(FSTR) - 2025 Q2 - Quarterly Report

PART I. Financial Information Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for L.B. Foster Company as of June 30, 2025, and for the three and six-month periods then ended, including balance sheets, statements of operations, comprehensive income, cash flows, stockholders' equity, and accompanying notes Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $349.9 million from $334.6 million at year-end 2024, driven by higher inventories and operating lease assets, while total liabilities also increased, primarily due to a significant rise in long-term debt to $81.4 million from $46.8 million, and total stockholders' equity slightly decreased to $175.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $349,925 | $334,550 | | Total current assets | $173,484 | $161,605 | | Goodwill | $33,315 | $31,907 | | Total Liabilities | $174,684 | $155,536 | | Total current liabilities | $68,611 | $88,296 | | Long-term debt | $81,446 | $46,773 | | Total Stockholders' Equity | $175,241 | $179,014 | Condensed Consolidated Statements of Operations For the second quarter of 2025, net sales increased slightly to $143.6 million, with net income attributable to the company remaining stable at $2.9 million, or $0.27 per diluted share, while for the six-month period, net sales decreased to $241.4 million from $265.1 million year-over-year, and net income dropped significantly to $0.8 million from $7.3 million, primarily due to lower gross profit and the absence of a gain on sale of a facility that occurred in the prior year Q2 2025 vs Q2 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total net sales | $143,558 | $140,796 | | Gross profit | $30,900 | $30,513 | | Operating income | $7,678 | $4,572 | | Net income attributable to L.B. Foster | $2,885 | $2,847 | | Diluted EPS | $0.27 | $0.26 | Six Months 2025 vs 2024 Performance (in thousands, except per share data) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Total net sales | $241,350 | $265,116 | | Gross profit | $51,051 | $56,689 | | Operating income | $5,755 | $10,138 | | Net income attributable to L.B. Foster | $775 | $7,283 | | Diluted EPS | $0.07 | $0.66 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $15.7 million, an improvement from the $26.4 million used in the same period of 2024, while net cash used in investing activities increased to $5.2 million due to higher capital expenditures, and net cash provided by financing activities was $22.5 million, primarily from increased debt proceeds, partially offset by treasury stock acquisitions Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15,734) | $(26,398) | | Net cash used in investing activities | $(5,199) | $(885) | | Net cash provided by financing activities | $22,468 | $28,815 | | Net increase in cash | $1,732 | $1,461 | Notes to Condensed Consolidated Financial Statements The notes provide detailed information on the company's accounting policies and financial results, including segment performance, revenue recognition, goodwill, debt, income taxes, and contingent liabilities, notably the discontinuation of the Automation and Materials Handling (AMH) product line, a new credit agreement, and ongoing environmental proceedings related to the Portland Harbor Superfund Site - The company is organized into two reportable segments: Rail, Technologies, and Services ('Rail') and Infrastructure Solutions ('Infrastructure')27 - Announced the discontinuation of the Automation and Materials Handling (AMH) product line within the Rail segment, incurring $1,351 thousand in total exit costs during the period35 - As of June 30, 2025, the company had approximately $269.9 million of remaining performance obligations (backlog)46 - On June 27, 2025, the company entered into a new Fifth Amended and Restated Credit Agreement, increasing its revolving credit facility to $150 million and extending the maturity to June 203053 - The company is a potentially responsible party (PRP) for the Portland Harbor Superfund Site cleanup, with estimated total remedy costs of $1.1 billion; the company maintained a reserve of $1.6 million for all environmental liabilities as of June 30, 202580 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for Q2 and the first half of 2025, highlighting a 2.0% YoY sales increase in Q2 driven by Infrastructure, offsetting a Rail segment decline, and a 9.0% YoY sales decrease for the first six months due to lower Rail volumes, along with details on the AMH product line exit, a new credit facility, liquidity, capital resources, and an increased backlog of $270 million Results of Operations - Second Quarter 2025 vs 2024 Net sales for Q2 2025 increased by 2.0% to $143.6 million, driven by a 22.4% increase in the Infrastructure segment, while the Rail segment declined by 11.2%, with gross profit stable at $30.9 million, operating income significantly improved to $7.7 million from $4.6 million due to a 9.8% decrease in selling and administrative expenses, and diluted EPS slightly up at $0.27 from $0.26 in the prior year Q2 2025 vs Q2 2024 Key Metrics (in thousands) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $143,558 | $140,796 | $2,762 | | Gross profit | $30,900 | $30,513 | $387 | | Operating income | $7,678 | $4,572 | $3,106 | | Diluted EPS | $0.27 | $0.26 | $0.01 | - The sales increase was driven by a $12.4 million (22.4%) improvement in the Infrastructure segment, partially offset by a $9.6 million (11.2%) decline in the Rail segment89 - Selling and administrative expenses decreased by $2.4 million (9.8%), primarily due to lower personnel costs and professional services expenditures92 Results of Operations - First Six Months 2025 vs 2024 For the first six months of 2025, net sales decreased 9.0% to $241.4 million, primarily due to a 22.7% decline in the Rail segment, with gross profit falling 9.9% to $51.1 million, and net income attributable to the company dropping sharply to $0.8 million from $7.3 million in the prior year, which had benefited from a $3.5 million gain on the sale of a former joint venture facility Six Months 2025 vs 2024 Key Metrics (in thousands) | Metric | Six Months 2025 | Six Months 2024 | Change | | :--- | :--- | :--- | :--- | | Net sales | $241,350 | $265,116 | $(23,766) | | Gross profit | $51,051 | $56,689 | $(5,638) | | Operating income | $5,755 | $10,138 | $(4,383) | | Net income attributable to L.B. Foster | $775 | $7,283 | $(6,508) | | Diluted EPS | $0.07 | $0.66 | $(0.59) | - The decrease in net income was primarily driven by lower gross profit, an increase in income tax expense, and the absence of a $3,477 thousand gain on sale of a former joint venture facility that was recognized in 2024113 Liquidity and Capital Resources As of June 30, 2025, the company had total available funding capacity of $72.3 million, including $4.2 million in cash and $68.1 million available under its new $150 million revolving credit facility, with net cash used in operating activities for the first six months at $15.7 million, and an active stock repurchase program, having repurchased $6.4 million of its common stock in the first half of 2025 Available Funding Capacity as of June 30, 2025 (in thousands) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $4,186 | | Net availability under revolving credit facility | $68,138 | | Total available funding capacity | $72,324 | - The company repurchased a total of 276,931 shares for $6.4 million during the six months ended June 30, 2025, under its authorized stock repurchase programs133 Backlog Total company backlog increased to $269.9 million as of June 30, 2025, up from $249.8 million a year prior, driven by growth in both the Rail, Technologies, and Services segment and the Infrastructure Solutions segment Backlog by Segment (in thousands) | Segment | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Rail, Technologies, and Services | $130,709 | $114,794 | | Infrastructure Solutions | $139,220 | $135,011 | | Total backlog | $269,929 | $249,805 | Item 3. Quantitative and Qualitative Disclosures about Market Risk This item is not applicable as the company qualifies as a smaller reporting company - The company states that this item is not applicable because it is a smaller reporting company145 Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no changes to the company's internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective146 - No changes were made to the internal control over financial reporting during the quarter ended June 30, 2025147 PART II. Other Information Item 1. Legal Proceedings This section refers to Note 13 of the financial statements for details on legal proceedings, which discusses the company's status as a potentially responsible party for the Portland Harbor Superfund Site cleanup, for which it maintains a reserve, and other ordinary course legal matters - The company refers to Note 13 of the Notes to Condensed Consolidated Financial Statements for information regarding legal proceedings149 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company details its stock repurchase activities, including a new $40 million repurchase authorization approved on March 3, 2025, valid through February 2028, and the repurchase of 116,308 shares for approximately $2.3 million during the second quarter of 2025 - On March 3, 2025, the Board of Directors approved a new stock repurchase program authorizing up to $40,000 thousand of common stock repurchases through February 29, 2028151 Share Repurchases for Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 82,175 | $19.61 | | May 2025 | 12,288 | $18.82 | | June 2025 | 21,845 | $21.48 | | Total | 116,308 | $19.88 | - As of June 30, 2025, approximately $36.7 million remained available for repurchase under the current program152 Item 5. Other Information The company reports that none of its directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the fiscal quarter ended June 30, 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter155