L.B. Foster pany(FSTR) - 2022 Q2 - Quarterly Report

PART I. Financial Information Item 1. Financial Statements This section presents the unaudited Condensed Consolidated Financial Statements for the quarterly period ended June 30, 2022, encompassing balance sheets, income statements, cash flows, and equity, with detailed explanatory notes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $202,878 | $179,479 | | Total Assets | $365,422 | $342,595 | | Total Current Liabilities | $96,604 | $86,194 | | Long-term Debt | $49,222 | $31,153 | | Total Liabilities | $184,383 | $158,985 | | Total Stockholders' Equity | $181,039 | $183,610 | | Total Liabilities and Stockholders' Equity | $365,422 | $342,595 | Condensed Consolidated Statements of Operations Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total net sales | $131,515 | $154,522 | $230,309 | $270,602 | | Gross profit | $23,293 | $26,161 | $39,740 | $44,991 | | Operating profit | $2,480 | $4,924 | $193 | $4,263 | | Net income attributable to L.B. Foster | $2,010 | $2,876 | $444 | $1,618 | | Diluted earnings per common share | $0.18 | $0.27 | $0.04 | $0.15 | Condensed Consolidated Statements of Comprehensive (Loss) Income - For the three months ended June 30, 2022, the company reported a total comprehensive loss of ($1,515) thousand, a significant shift from a comprehensive income of $3,620 thousand in the same period of 2021. This change was primarily driven by a negative foreign currency translation adjustment of ($3,688) thousand[13] Condensed Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(13,382) | $6,842 | | Net cash used in investing activities | $(7,328) | $(2,248) | | Net cash provided by (used in) financing activities | $18,476 | $(7,918) | | Net decrease in cash and cash equivalents | $(2,711) | $(3,424) | Condensed Consolidated Statements of Stockholders' Equity - Total stockholders' equity decreased from $183,610 thousand at December 31, 2021, to $181,039 thousand at June 30, 2022. The decrease was primarily due to a comprehensive loss, which included a significant negative foreign currency translation adjustment, partially offset by net income[20] Notes to Condensed Consolidated Financial Statements - Effective Q4 2021, the company reclassified its reporting segments into three new categories: Rail, Technologies, and Services; Precast Concrete Products; and Steel Products and Measurement. Prior period information has been revised to reflect this change[23] - On June 21, 2022, the Company acquired Skratch Enterprises Ltd. for $7,402 thousand, resulting in an increase of $5,343 thousand in goodwill. Skratch is included in the Rail, Technologies, and Services segment[38][39] - As of June 30, 2022, the company had approximately $250,845 thousand in backlog (remaining performance obligations)[37] - On August 1, 2022, the Company divested its rail spikes and anchors track components business in Canada for expected cash proceeds of $7,795 thousand[94] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a decrease in net sales and net income, improved gross profit margin, and strategic portfolio adjustments, alongside changes in liquidity and cash flow General Overview and Business Update - On June 21, 2022, the Company acquired Skratch Enterprises Ltd., a digital system integration leader, for $7,402 thousand. Skratch is reported within the Rail, Technologies, and Services segment[99] - Q2 2022 net sales decreased by 14.9% to $131.5 million compared to the prior year, with the divested Piling Products division accounting for a $22.1 million decline[101] - Consolidated gross profit margin increased by 80 basis points to 17.7% in Q2 2022, reflecting progress on pricing initiatives and favorable product mix, despite inflationary pressures[102] - The company's consolidated backlog was $250.8 million as of June 30, 2022, a slight decrease of 0.9% from the prior year, but this includes a $33.7 million decline from the divested Piling Products division[107] Results of the Quarter Q2 2022 vs Q2 2021 Performance (in thousands) | Metric | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Total net sales | $131,515 | $154,522 | (14.9%) | | Total gross profit | $23,293 | $26,161 | (11.0%) | | Operating profit | $2,480 | $4,924 | (49.6%) | | Net income attributable to L.B. Foster | $2,010 | $2,876 | (30.1%) | Q2 2022 Segment Net Sales (in thousands) | Segment | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Rail, Technologies, and Services | $81,797 | $88,782 | (7.9%) | | Precast Concrete Products | $23,611 | $20,073 | 17.6% | | Steel Products and Measurement | $26,107 | $45,667 | (42.8%) | Six Month Results H1 2022 vs H1 2021 Performance (in thousands) | Metric | H1 2022 | H1 2021 | % Change | | :--- | :--- | :--- | :--- | | Total net sales | $230,309 | $270,602 | (14.9%) | | Total gross profit | $39,740 | $44,991 | (11.7%) | | Operating profit | $193 | $4,263 | (95.5%) | | Net income attributable to L.B. Foster | $444 | $1,618 | (72.6%) | Liquidity and Capital Resources - The company's principal sources of liquidity are cash on hand, cash from operations, and its $130 million revolving credit facility[147] Available Funding Capacity as of June 30, 2022 (in thousands) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $7,661 | | Net availability under revolving credit facility | $80,123 | | Total available funding capacity | $87,784 | - For the six months ended June 30, 2022, cash used in operating activities was $13,382 thousand, a significant decrease from the $6,842 thousand provided by operating activities in the same period of 2021, primarily due to changes in working capital[149][150] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, L.B. Foster Company is not required to provide the information requested under this item - This item is not applicable to a smaller reporting company[159] Item 4. Controls and Procedures Management, including the CEO and CFO, conducted an evaluation of the company's disclosure controls and procedures as of June 30, 2022, and concluded that they were effective. There were no material changes to the company's internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective[160] - No changes occurred in the company's internal control over financial reporting during the six months ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, these controls[161] PART II. Other Information Item 1. Legal Proceedings The company refers to Note 15 for details on legal proceedings, including the UPRR concrete tie settlement and environmental liabilities, with management expecting no material adverse financial impact - For information on legal proceedings, the report refers to Note 15 of the Notes to Condensed Consolidated Financial Statements[164] Item 1A. Risk Factors As a smaller reporting company, L.B. Foster Company is not required to provide the information requested under this item - This item is not applicable to a smaller reporting company[165] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2022, the company withheld a total of 274 shares at an average price of $13.00 per share to satisfy tax obligations upon the vesting of employee restricted stock. These transactions were not part of a publicly announced repurchase plan Equity Security Purchases (Q2 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2022 | — | $— | | May 2022 | 274 | $13.00 | | June 2022 | — | $— | | Total | 274 | $13.00 | - The shares purchased reflect shares withheld by the Company to pay taxes upon the vesting of restricted stock[166] Item 6. Exhibits This section provides an index of the exhibits filed with the Form 10-Q. Key exhibits include the 2022 Equity and Incentive Compensation Plan, descriptions of other incentive plans, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act - The Exhibit Index lists several documents filed with the report, including: - 2022 Equity and Incentive Compensation Plan (10.1) - Strategy Transformation Plan Description (10.2) - CEO and CFO Certifications under Sarbanes-Oxley Sections 302 and 906 (31.1, 31.2, 32.0) - XBRL Interactive Data Files (101 series)[173]