FOSTER L B CO (FSTR)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except share data unless otherwise noted)

Our Business

L.B. Foster Company is innovating to solve global infrastructure challenges. Our technology innovations enable safety, improve information flow, keep things moving, monitor conditions, and enhance environments, improving the lives of people who rely on us to keep our world moving. We enjoy a market-leading reputation for high-quality, high-performance engineering solutions in rail and infrastructure. The Company is organized and operates in two reporting segments: Rail, Technologies, and Services (“Rail”) and Infrastructure Solutions (“Infrastructure”).

Our financial statements presented herein are prepared using accounting principles generally accepted in the United States of America (“US GAAP”). Throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”), we refer to measures used by management to evaluate performance. We also refer to a number of financial measures that are not defined under US GAAP, including organic sales growth (decline), earnings before interest, taxes, depreciation, and amortization (“EBITDA”), adjusted EBITDA, net debt, funding capacity, new orders, and backlog. The explanation at the end of the MD&A provides the definition of these non-GAAP financial measures. A reconciliation of EBITDA, adjusted EBITDA, organic sales growth (decline), net debt, and funding capacity to its most directly comparable respective US GAAP financial measure is presented below.

2024 Developments

During 2024, the Company:

•Produced net sales of $530,765, a decrease of $12,979, or 2.4%, from 2023, due to a 2.5% reduction from divestitures and product line exit activity;

•Reported gross profit margin of 22.2% for the year, a 160-basis point improvement over prior year;

•Generated net cash flow from operations in 2024 of $22,632;

•Reduced debt during 2024 by $8,333 to $46,940;

•Reported net income of $42,843, an increase of $41,544 compared to the prior year due to a $28,398 tax benefit which was primarily related to a favorable tax valuation allowance adjustment in 2024 as well as improved operating income;

•Reported adjusted EBITDA of $33,576; an increase of 5.7% compared to the prior year;

•Restructuring actions taken to reduce our cost structure by $4,500 on a run-rate basis;

•Repurchased 300,302 shares of the Company’s stock, or 2.7% of its outstanding shares, at a cost of $6,808.

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Note percentages may not foot due to rounding.

Acquisitions, Divestitures and Product Line Exit

On March 30, 2023, the Company sold substantially all the operating assets of its Chemtec business for $5,344 in proceeds, generating a $2,065 loss on sale, recorded in “Other expense - net” for the year ended December 31, 2023. The Chemtec business was reported in the Steel Products business unit within the Infrastructure segment. Chemtec’s net sales for the year ended December 31, 2023 were $9,259.

On June 30, 2023, the Company sold substantially all the operating assets of the Ties business, located in Spokane, WA, for $2,362 in proceeds, generating a $1,009 loss on the sale, which was recorded in “Other expense - net” for the year ended December 31, 2023. The Ties business was reported in the Rail Products business unit within the Rail segment. Ties' net sales for the year ended December 31, 2023 were $2,130.

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 Bedford, PA based operations supporting the product line expects to complete any remaining customer obligations in 2025. For the years ended December 31, 2024 and 2023, the product line had $3,700 and $6,146 in sales, respectively. The decision to exit the bridge grid deck product line is a result of a weak bridge grid deck market condition and outlook due to customer adoption of newer technologies replacing the grid deck solution. During the year ended 2023, the Company incurred $1,403 of Bridge Exit costs, of which $1,141 was recorded in “Cost

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of goods sold” and $262 was recorded in “Selling and administrative expenses.” These expenses included $474 in inventory write-downs, $667 in personnel related expenses, and $262 in other exit costs; the majority of cash payments were made in early 2024. During the year ended December 31, 2024, the Company incurred an immaterial amount of exit costs, all of which were personnel expenses. The Company does not expect to incur additional material exit costs in 2025. During 2023, the Company also recorded a $1,977 reduction in net sales and a $3,051 reduction in gross profit stemming from changes in expected value of certain commercial projects associated with the Bridge Exit.

On November 17, 2023, the Company acquired the operating assets of Cougar Mountain Precast, LLC (“Cougar”) which is a licensed manufacturer of Redi-Rock and natural concrete products for $1,644. Cougar has been included in the Precast Concrete Products business unit within the Infrastructure segment.

Full Year Results Comparison

Results of Operations

Fiscal 2024 Compared to Fiscal 2023 — Company Analysis

Net sales for the year ended December 31, 2024 decreased by $12,979, or 2.4%, from the prior year. The decrease in sales is due to divestitures and product line exits which declined $13,819, offset partially by an organic sales increase of $840. Net sales for the year ended December 31, 2023 included a $1,977 reduction stemming from changes in expected value of certain commercial projects associated with the Bridge Exit within the Infrastructure segment.

Gross profit increased by $6,018, or 5.4%, and gross profit margin expanded by 160 basis points to 22.2%. The improvement in gross profit is due primarily to the portfolio changes that are a part of the Company’s strategic transformation, as well as uplift from favorable business mix and recovery in our UK Technology Services and Solutions businesses. In 2024, gross profit also included an $815 gain on the sale of an ancillary property within the Steel Products business unit In 2023, gross profit was impacted by a reduction in profitability of $4,192 due to the Bridge Exit.

Selling and administrative expenses decreased by $1,225, or 1.3%, from the prior year. The decrease was primarily attributable to $2,919 of lower employment costs in the year ended December 31, 2024 and $1,862 of bad debt expense incurred in the year ended December 31, 2023 due to a customer filing for administrative protection. Partially offsetting these decreases were $1,173 of corporate legal costs associated with a resolved legal matter, $783 in professional services expenditures associated with the announced enterprise restructuring, and $608 in higher employee-related restructuring expense in 2024. Selling and administrative expenses as a percentage of net sales increased to 18.2% from 18.0% due to lower sales volumes.

The $3,477 gain on sale of the former joint venture facility for the year ended December 31, 2024 was attributed to the Company's facility and land in Magnolia, Texas.

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Net interest expense for the year ended December 31, 2024 decreased by $536, or 9.7%, due to declining interest rates and lower debt levels during the year.

Other expense - net decreased by $1,559 from the prior year. Other expense - net in for the year ended December 31, 2024 was primarily attributable to $1,722 of pension termination costs associated with the termination of the frozen L.B. Foster Company Merged Retirement Plan (the “US DB Plan”). Other expense - net for the year ended December 31, 2023 was attributable to a $3,074 loss on the divestitures of Ties and Chemtec.

The Company’s effective income tax rate for 2024 was (196.6)%, compared to (37.6)% in the prior year period. The Company's effective income tax rate differed from the federal statutory rate of 21% primarily due to the change in valuation allowance previously recorded against certain U.S. federal and state deferred tax assets. For further discussion on the valuation allowance, refer to Note 13 of the Notes to the Consolidated Financial Statements.

Net income attributable to the Company for the year ended December 31, 2024 was favorable by $41,482, or $3.76 per diluted share over the prior year. The increase was due to an income tax benefit of $28,398 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 $4,192 on gross profit from the Bridge Exit in the prior year.

Results of Operations — Segment Analysis

Rail, Technologies, and Services

The Rail segment sales increased by $14,709, or 4.7%, over the prior year. The increase was due to higher organic sales of $16,823, or 5.4%, partially offset by a $2,114, or 0.7%, decrease from the divestiture of Ties. Rail Products sales increased $1,899 driven by increased volumes partially offset by lower market prices as well as the Ties divestiture. Global Friction Management sales increased by $2,038 due to domestic markets served. Technology Services and Solutions sales increased by $10,772 due to strength in the domestic rail safety markets served, as well as recovery in the UK markets.

The Rail segment gross profit increased by $7,436, or 11.4%, over the prior year and gross margins improved 140 basis points. Higher volumes and improved mix attributed to the $2,653 improved gross profit in Global Friction Management over the prior year. The Technology Services and Solutions business unit gross profit improved by $8,079 over the prior year due to higher volumes and improved mix, including recovery in our UK business. Rail Products gross profit decreased by $3,296, due to market pricing pressure.

The Rail segment operating income increased by $9,606, or 78.1%, over the prior year. The increase was driven by the improvement in gross profit, as well as a decrease in selling and administrative expenses due primarily to the $1,862 of bad debt expense incurred in the year ended December 31, 2023 due to a UK customer filing for administrative protection.

During the year ended December 31, 2024, new orders within the Rail segment increased by 2.9% over the prior year. Rail Products had an increase in new orders of $17,172, despite a $6,105 decline from the Ties divestiture. Global Friction Management new orders increased by $6,618, while Technology Services and Solutions declined by $15,914 as the Company scales back initiatives in the UK market in line with our strategy. For the year ended December 31, 2024, the Rail segment backlog decreased by 26.0% from the prior year. The decrease is attributed to the Technology Services and Solutions businesses decreasing by $15,320, due to our UK businesses and the Rail Products business which declined $10,257 due to timing of orders. This decrease was partially offset by an increase of $3,848 in Global Friction Management.

Infrastructure Solutions

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The Infrastructure segment sales decreased by $27,688, or 12.0%, from the prior year. The decrease in net sales was attributable to an organic sales decline of 15,983, or 6.9%, driven by the Steel Products business and due to the divestiture of Chemtec and the Bridge Exit, which decreased sales by $9,259 and $2,446, respectively. Precast Concrete Products net sales were primarily flat from the prior year. Net sales for the year ended December 31, 2023 included a $1,977 reduction stemming from changes in expected value of certain commercial projects associated with the Bridge Exit within the Infrastructure segment.

The Infrastructure segment gross profit decreased by $1,418, or 3.0%, from the prior year. The decrease in gross profit was primarily attributable to lower volumes and unfavorable business mix of $4,751. Gross profit for the year ended December 31, 2023 was negatively impacted by $4,192 related to the Bridge Exit, including a $3,051 reduction in profitability related to changes in the expected value of certain commercial projects. The divestiture of Chemtec also decreased gross profit by $859 from the prior year. Gross margins improved 210 basis points over last year, driven by more favorable margins associated with portfolio changes and due to an $815 gain on ancillary property incurred in the year ended December 31, 2024.

The Infrastructure segment operating income increased by $753, or 8.7%, over the prior year. The increase in operating income was due to a $1,407 decrease in selling and administrative costs and a $763 decrease in amortization expense offset by lower gross profit.

For the year ended December 31, 2024, new orders within the Infrastructure segment had a decrease of 13.6%, from the prior year. The decrease was driven by the Steel Products business unit due to market challenges as well as a $4,489 impact associated with the divestiture of Chemtec. For the year ended December 31, 2024, the Infrastructure segment backlog decreased by 4.6%, from the prior year driven primarily by Steel Products which decreased $9,465 and includes a reduction of $2,685 related to the Bridge Exit, offsetting an increase of $3,563 in Precast Concrete Products.

Corporate

**Results of this calculation not meaningful.

Unallocated corporate expenses - net declined by $1,047 due to the gain of $3,477 on the sale of former joint venture facility. Public company costs include listing fees, audit fees, compliance costs, insurance costs, professional services, and Board of Director fees. The increase in public company costs was primarily due to an increase in insurance costs and professional services expenditures. Corporate executive management costs also increased due to legal fees associated with a resolved legal matter and professional services associated with the announced enterprise restructuring program. Corporate management stock-based compensation costs declined due to the net impact of adjustments to expected attainment levels across the Company's equity incentive plans.

Restructuring

In August 2024, the Company announced an enterprise restructuring program aligned with its strategy to reduce costs and enable investment in its growth platforms. The restructuring action has been completed as of December 31, 2024, and is expected to provide run-rate pre-tax savings of approximately $4,500, of which approximately $2,000 was recognized in 2024.

The following table sets forth restructuring costs by segment for the year ended December 31, 2024:

The Company's $1,456 restructuring expense relates primarily to severance. Of the total restructuring costs incurred for the year ended December 31, 2024, $245 was recorded in “Cost of goods sold” and $1,211 was reported in “Selling and administrative expense.” The Company does not anticipate any additional restructuring expense to be incurred associated with this program.

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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 its revolving credit facility, which provides for a total commitment of up to $130,000, of which $82,124 was available for borrowing as of December 31, 2024, 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 share repurchase programs. During 2024 and 2023, the Company paid $8,000 annually as a result of the Settlement Agreement (the “Settlement Agreement”) with Union Pacific Railroad Company (“UPRR”). As of December 31, 2024 the UPRR Settlement Agreement has been fully paid. The Company’s total debt, including finance leases, was $46,940 and $55,273 as of December 31, 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 December 31, 2024:

As of December 31, 2024, the Company was in compliance with all covenants of the Credit Agreement and has $84,578 available funding capacity, subject to covenant restrictions.

The Company’s operating cash flows are impacted from period to period by fluctuations in working capital, as well as its overall profitability. While the Company places an emphasis on working capital management in its operations, factors such as business mix, commercial terms, and market conditions as well as seasonality may impact 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 December 31, 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 compensate 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 termination of the 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”). At such time, the Company notified all plan participants of the Company's intentions to terminate and fully settle the obligations.

During the fourth quarter of 2024, the Company completed the termination of the US DB Plan by distributing all the assets of its US DB Plan and by making additional cash contributions of $1,806 to effectuate the termination of this plan. The settlement of these obligations resulted in the recognition of a charge of $1,722 which has been presented as a component of “Other expense - net” for the year ended December 31, 2024.

The Company's UK DB Plan is fully funded as of December 31, 2024. In January 2025, the Company entered into an insurance buy-in contract with a third party insurer which resulted in an exchange of plan assets for an annuity that covers our future projected benefit obligations. The Company expects the buy out of the plan and transfer of future benefit obligations of plan participants to be completed in early 2026. The Company does not expect to make any further contributions to the UK DB Plan.

The change in cash and cash equivalents for the years ended December 31, 2024 and 2023 were as follows:

Cash Flows from Operating Activities

During the year ended December 31, 2024, net cash provided by operating activities was $22,632, compared to $36,956 during the prior year. During 2024, cash flow provided by operating activities consisted of net income and non-cash items amounting to $27,195 and changes in certain assets and liabilities netting to a cash outflow of $4,563. In 2023, cash flow provided by operating activities consisted of net income and non-cash items amounting to $21,453 and changes in certain assets and liabilities netting to a

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cash inflow of $15,503. Both periods include payments of $8,000 for the UPRR Settlement, which was fully paid as of December 31, 2024.

Cash Flows from Investing Activities

For the year ended December 31, 2024, the Company had capital expenditures of $9,791, a $5,278 increase from 2023. Capital expenditures in both periods primarily relate to general plant and operational improvements throughout the Company, as well as organic growth initiatives. In 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 cash inflow of $3,895. In 2023, the Company received cash proceeds of $7,706 primarily from the sale of its Ties and Chemtec businesses.

Cash Flows from Financing Activities

The Company decreased its outstanding debt by $7,994 during the year ended December 31, 2024, primarily due to the proceeds from asset sales and operating cash flows. During the year ended December 31, 2023, the Company decreased outstanding debt by $37,260, primarily due to the proceeds from divestitures and improved operating cash flows.

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 year ended December 31, 2024 and 2023, the Company repurchased 300,302 shares of its stock for $6,808 and 134,208 shares for $2,310, respectively, under this program. For the year ended December 31, 2024 and 2023, the Company also purchased 59,577 and 24,886 of its stock, respectively, for $1,429 and $315 from employees to pay for withholding taxes in connection with the vesting of stock awards.

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 December 31, 2024, the Company has repurchased stock of $9,118, with $5,882 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.

On March 3, 2025, the Company's Board of Directors authorized the repurchase of up to $40,000 of the Company's common stock in open market transactions and/or 10b5-1 trading plans through February 29, 2028. Refer to “Part II, Item 8, Financial Statements and Supplementary Data, Note 20 to the Consolidated Financial Statements.”

Financial Condition

The Company generated $22,632 in cash flows from operations during 2024, which was utilized to pay down debt, fund capital expenditures, and repurchase shares. As of December 31, 2024, the Company had $2,454 in cash and cash equivalents and $82,124 of availability under its revolving credit facility, subject to covenant restrictions.

Principal uses of cash in recent years have been to fund operations, including capital expenditures, acquisitions, repurchase shares, and service indebtedness. The Company views its short and long-term liquidity as being dependent on its results of operations, changes in working capital, and borrowing capacity.

Non-domestic cash balances of $1,882 are held in various locations throughout the world. Should management determine that the cash balances of its foreign subsidiaries exceed its projected working capital needs, excess funds may be repatriated and subject to additional income taxes.

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 US 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 agreement, please refer to Note 9 of the Notes to Consolidated Financial Statements contained in this Annual Report on Form 10-K.

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 and expiring March 1, 2025 and August 13, 2026, respectively, at which point they effectively converted a portion of the debt from variable to fixed-rate borrowings during the term of the swap contract. As of December 31, 2024 and December 31, 2023 the swap asset was $430 and $1,225, respectively.

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The Company believes that the combination of its cash and cash equivalents, cash generated from operations, and the capacity under its revolving credit facility will provide sufficient liquidity to provide the flexibility to operate the business in a prudent manner, continue to service outstanding debt, repurchase shares and to selectively pursue accretive acquisitions to further the Company’s strategic initiatives.

Backlog

Although backlog is not necessarily indicative of future operating results, the following table provides the backlog by business segment:

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 $27,871 from the prior year stemming from the Rail Products business due to lower volumes, the UK Technology Services and Solutions businesses as the Company scales back initiatives in the UK market in line with our strategy, and the Steel Products business, including a $2,685 decline from a discontinued product line.

Critical Accounting Estimates

The accompanying Consolidated Financial Statements have been prepared in conformity with US GAAP. The preparation of the 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. The following critical accounting estimates, which are reviewed by the Company’s Audit Committee of the Board of Directors, are those management believes are the most critical to understand and evaluate our financial condition and results and require subjective or complex judgements. Actual results could differ from those estimates.

For a summary of the Company’s significant accounting policies, see Part II, Item 8, Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements, which is incorporated by reference into this Item 7.

Income Taxes - The recognition of deferred tax assets requires management to make judgments regarding the future realization of these assets. As prescribed by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740, “Income Taxes,” valuation allowances must be provided for those deferred tax assets for which it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. This guidance requires management to evaluate positive and negative evidence regarding the recoverability of deferred tax assets. The determination of whether the positive evidence outweighs the negative evidence and quantification of the valuation allowance requires management to make estimates and judgments of future financial results.

The Company evaluates all tax positions taken on its federal, state, and foreign tax filings to determine if the position is more likely than not to be sustained upon examination. For positions that meet the more likely than not to be sustained criteria, the largest amount of benefit to be realized upon ultimate settlement is determined on a cumulative probability basis. A previously recognized tax position is derecognized when it is subsequently determined that a tax position no longer meets the more likely than not threshold to be sustained. The evaluation of the sustainability of a tax position and the expected tax benefit is based on judgment, historical experience, and other assumptions. Actual results could differ from those estimates upon subsequent resolution of identified matters.

The Company’s income tax rate is significantly affected by the tax rate on global operations. In addition to local country tax laws and regulations, this rate depends on the extent earnings are indefinitely reinvested outside of the US. Indefinite reinvestment is determined by management’s judgment about and intentions concerning the future operations of the Company. There have been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period.

Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 13 which is incorporated by reference into this Item 7, for additional information regarding the Company’s deferred tax assets. The Company’s ability to realize these tax benefits may affect the Company’s reported income tax expense and net income.

Revenue Recognition - Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 1 and Note 3 which is incorporated by reference into this Item 7, for a complete discussion of our revenue recognition policies. The Company derives revenue from products and services provided under long-term agreements with its customers. The Company’s performance obligations under long-term agreements with its customers are generally satisfied over time. Revenue under these long-term agreements is generally recognized over time either using an input measure based upon the proportion of actual costs incurred to estimated total project costs or an input measure based upon actual labor costs as a percentage of estimated total labor costs, depending upon which measure the Company believes best depicts the Company’s performance to date under the terms of the contract. Accounting for these long-term agreements involves the use of various techniques to estimate total revenues and costs. The Company estimates profit on these long-term agreements as the difference between total estimated revenues and expected costs to complete a

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contract and recognizes that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that may span several years. These assumptions include, among other things, labor productivity, cost and availability of materials, and timing of project execution. The nature of these long-term agreements may give rise to several types of variable consideration, such as discounts and claims. Contract estimates may include additional revenue for submitted contract modifications, including at times unapproved change orders, if there exists an enforceable right to the modification, the amount can be reasonably estimated, and its realization is probable. These estimates are based on historical collection experience, anticipated performance, and the Company’s best judgment at that time. These amounts are generally included in the contract’s transaction price and are allocated over the remaining performance obligations. As a result of management’s reviews of contract-related estimates, the Company makes adjustments to contract estimates that impact our revenue and profit totals. Changes in estimates are primarily attributed to updated considerations, including economic conditions and historic contract patterns resulting in anticipated revenue from existing contracts.

Goodwill - We evaluate goodwill for impairment annually during the fourth quarter, or whenever events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. When evaluating for impairment the Company may first consider qualitative factors to assess whether there are indicators that it is more likely than not that the fair value of a reporting unit may not exceed its carrying amount. If we do not perform a qualitative assessment, or if we determine that it is more like than not that the fair value of the reporting unit does not exceed its carrying value, we perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss equal to the excess amount up to the goodwill balance is recorded as an impairment to goodwill of the reporting unit. The Company uses a combination of a discounted cash flow method and a market approach to determine the fair values of the reporting units.

A number of significant assumptions and estimates are involved in the estimation of the fair value of reporting units, including the identification of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, which may drive changes to revenue growth, EBITDA contribution, and market participant assumptions. The estimated fair value of a reporting unit is sensitive to changes in assumptions, including forecasted future operating cash flows, weighted-average cost of capital, terminal growth rates, and industry multiples.

The Company considers historical experience and available information at the time the fair values of its reporting units are estimated. The Company believes the estimates and assumptions used in estimating the fair value of its reporting units are reasonable and appropriate; however, different assumptions and estimates could materially impact the estimated fair value of its reporting units and the resulting determinations about goodwill impairment. This could materially impact the Company’s Consolidated Statements of Operations and Consolidated Balance Sheets. There have been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period. Future estimates may differ materially from current estimates and assumptions.

Additional information concerning the impairments is set forth in Part II, Item 8, Financial Statements and Supplementary Data, Note 4 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 7.

Intangible Assets and Long-Lived Assets - The Company tests intangible assets and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Recoverability of assets is determined by comparing the estimated undiscounted future cash flows of the asset or asset group to their carrying amount. If the carrying value of the assets exceeds their estimated undiscounted future cash flows, an impairment loss would be determined as the difference between the fair value of the assets and its carrying value. Typically, the fair value of the assets would be determined using a discounted cash flow model which would be sensitive to judgments of what constitutes an asset group and certain assumptions such as estimated future financial performance, discount rates, and other assumptions that marketplace participants would use in their estimates of fair value. There have been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period. The accounting estimate related to asset impairments is highly susceptible to change from period to period because it requires management to make assumptions about the existence of impairment indicators and cash flows over future years. These assumptions impact the amount of an impairment, which could materially adversely impact the Consolidated Statements of Operations.

Additional information concerning the impairments is set forth in Part II, Item 8, Financial Statements and Supplementary Data, Note 4 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 7.

Non-GAAP Financial Measures

In accordance with SEC rules, the Company provides descriptions of the non-GAAP financial measures included in this Annual Report 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.

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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 or acquisition-related sales. Management evaluates the Company’s sales performance based on organic sales growth (decline). Organic sales growth (decline) is a non-GAAP financial measure of sales (which is the most directly comparable GAAP measure), adjusted to exclude the effects of acquisitions and divestitures 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 (decline) at the consolidated and segment levels.

EBITDA is a non-GAAP financial measure that has been used in discussing the financial performance of the business for the years ended December 31, 2024 and 2023. EBITDA is a financial metric utilized by management to evaluate the Company’s performance on a comparable basis. The Company believes that EBITDA is useful to investors as a supplemental way to evaluate the ongoing operations of the Company’s business as many investors utilize EBITDA to enhance their ability to compare historical periods as it adjusts for the impact of financing methods, tax law and strategy changes, and depreciation and amortization. In addition, EBITDA is a financial measurement that management and the Company’s Board of Directors use in their financial and operational decision-making and in the determination of certain compensation programs. Adjusted EBITDA includes certain adjustments to EBITDA. In 2024, the Company made adjustments to exclude gains on asset sales, pension termination costs, restructuring costs, and costs associated with a resolved legal matter. In 2023, the Company made adjustments to exclude the loss on divestitures, expenses from the exit of the bridge grid deck product line, bad debt provision for customer bankruptcy, restructuring costs, and contingent consideration adjustments associated with the VanHooseCo acquisition.

The Company views net debt, which is total debt less cash and cash equivalents, as an important metric of the operational and financial health of the organization and useful to investors as an indicator of our ability to incur additional debt and to service our existing debt. The Company views funding capacity, which is the net availability under the revolving credit agreement plus cash and cash equivalents, as an important metric as it demonstrates the borrowing capacity of the Company.

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. Quantitative reconciliations of EBITDA, adjusted EBITDA, organic sales growth, funding capacity, and net debt to the non-GAAP financial measures are presented in this Item 7.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except share data unless otherwise noted)

Our Business

L.B. Foster Company is innovating to solve global infrastructure challenges. Our technology innovations enable safety, improve information flow, keep things moving, monitor conditions, and enhance environments, improving the lives of people who rely on us to keep our world moving. We enjoy a market-leading reputation for high-quality, high-performance engineering solutions in rail and infrastructure. The Company is organized and operates in two reporting segments: Rail, Technologies, and Services (“Rail”) and Infrastructure Solutions (“Infrastructure”).

Our financial statements presented herein are prepared using accounting principles generally accepted in the United States of America (“US GAAP”). Throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”), we refer to measures used by management to evaluate performance. We also refer to a number of financial measures that are not defined under US GAAP, including organic sales growth, earnings before interest, taxes, depreciation, and amortization (“EBITDA”), adjusted EBITDA, and net debt. The explanation at the end of the MD&A provides the definition of these non-GAAP financial measures. A reconciliation of each non-GAAP financial measure to its most directly comparable respective US GAAP financial measure is presented below.

2023 Developments

During 2023, the Company:

•Produced net sales of $543,744, an increase of $46,247, or 9.3%, over 2022, reflective of organic sales growth of 11.7% and growth due to acquisitions of 4.0%, which was partially offset by a 6.4% reduction due to divestitures;

•Reported gross profit margin of 20.7% for the year, a 270-basis point improvement over prior year;

•Continued its strategic transformation with the divestitures of the Chemtec and Ties businesses;

•Generated net cash flow from operations in 2023 of $37,376;

•Reduced net debt during 2023 by $36,284 to $52,713;

•Reported adjusted EBITDA of $31,775; an increase of 31.4% compared to the prior year;

•Announced that its Board of Directors has authorized the repurchase of up to $15,000 of its common stock through February 2026 and repurchased 134,208 shares of the Company’s stock, or 1.2% of its outstanding shares, at a cost of $2,310.

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Acquisitions, Divestitures and Product Line Exit

On June 21, 2022 and August 12, 2022, the Company acquired the stock of Skratch for $7,402, and acquired the operating assets of VanHooseCo for $52,146, net of cash acquired at closing, respectively. Skratch has been included in the Company’s Technology Services and Solutions business unit within the Rail segment and VanHooseCo has been included within the Precast Concrete Products business unit within the Infrastructure segment. Skratch and VanHooseCo’s net sales were $4,624 and $33,742, respectively, for the year ended December 31, 2023, and $2,975 and $17,788, respectively, for the year ended December 31, 2022.

On August 1, 2022, the Company divested the assets of its Track Components division for $7,795, subject to indemnification obligations and working capital adjustments, generating a $467 loss on sale, recorded in “Other expense (income) - net” for the year ended December 31, 2022. The Track Components division was included in the Rail Products business unit within the Rail segment. The Track Components division’s net sales were $9,244 for the year ended December 31, 2022.

On March 30, 2023, the Company sold substantially all the operating assets of its Chemtec business for $5,344 in proceeds, subject to final working capital adjustments, generating a $2,065 loss on sale, recorded in “Other expense (income) - net” for the year ended December 31, 2023. The Chemtec business was reported in the Steel Products business unit within the Infrastructure segment. Chemtec’s net sales for the year ended December 31, 2023 and December 31, 2022 were $9,259 and $21,119, respectively.

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On June 30, 2023, the Company sold substantially all the operating assets of the Ties business, located in Spokane, WA, for $2,362 in proceeds, subject to final working capital adjustments, generating a $1,009 loss on the sale, which was recorded in “Other expense (income) - net” for the year ended December 31, 2023. The Ties business was reported in the Rail Products business unit within the Rail segment. Net sales for Ties for the year ended December 31, 2023 and December 31, 2022 were $2,130 and $11,622, respectively.

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 Bedford, PA based operations supporting the product line expects to complete any remaining customer obligations in 2024. For the years ended December 31, 2023 and 2022, the product line had $6,146 and $15,120 in sales, respectively. The decision to exit the bridge grid deck product line is a result of a weak bridge grid deck market condition and outlook due to customer adoption of newer technologies replacing the grid deck solution. During 2023, the Company incurred $1,403 of exit costs recorded in “Other expense (income) - net,” which included $474 in inventory write-downs, $667 in personnel related expenses, and $262 in other exit costs. The Company expects to incur an additional $184 of personnel expenses associated with the exit through 2024. During 2023 the Company also recorded a $1,977 reduction in net sales and a $3,051 reduction in gross profit stemming from changes in expected value of certain commercial projects associated with the exit of the bridge grid deck product line.

On November 17, 2023, the Company acquired the operating assets of Cougar Mountain Precast, LLC (“Cougar”), located in Caldwell, Idaho, which is a licensed manufacturer of Redi-Rock and natural concrete products for $1,644, subject to hold back payments, to be paid over the next twelve months 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.

Full Year Results Comparison

Results of Operations

Fiscal 2023 Compared to Fiscal 2022 — Company Analysis

Net sales of $543,744 for the year ended December 31, 2023 increased by $46,247, or 9.3%, over the prior year. The increase in sales is due to organic sales growth of 11.7% and a 4.0%, or $19,834, increase from the acquisitions of Skratch and VanHooseCo, partially offset by a 6.4%, or $31,995, decline in sales due to the divestitures of Track Components, Chemtec, and Ties. Net sales for the year ended December 31, 2023 included a $1,977 reduction stemming from changes in expected value of certain commercial projects associated with the Bridge Exit within the Infrastructure segment. Net sales for the year ended December 31, 2022 included a $3,956 reduction from the settlement of certain long-term commercial contracts related to the multi-year Crossrail project (“Crossrail Settlement”) in the Company’s Technology Services and Solutions business in the United Kingdom. This settlement reduced both sales and gross profit in 2022.

Gross profit increased by $23,199, or 25.9%, and gross profit margin expanded by 270 basis points to 20.7%. The improvement in gross profit is due primarily to the portfolio changes that are a part of the Company’s strategic transformation, as well as uplift from increased sales volumes, product mix, and pricing. In 2023, gross profit was also impacted by a reduction in profitability of $3,051

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due to the Bridge Exit. In 2022, gross profit was negatively impacted by a $1,135 purchase accounting adjustment related to the VanHooseCo acquired inventory along with the $3,956 reduction from the Crossrail Settlement.

Selling and administrative expenses increased by $14,701, or 17.8%, over the prior year. The increase was primarily attributable $1,608 of increased costs associated with portfolio changes, higher personnel expenses including variable incentive costs that will rest in 2024, UK restructuring costs of $676 and a bad debt provision charge of $1,862 due to a customer in the United Kingdom who filed for administrative protection. Selling and administrative expenses as a percentage of net sales increased to 17.9% from 16.6% due to the increased spending.

Interest expense increased by $2,188, or 65.5%, due to higher outstanding debt, on average, throughout the year as well as the higher interest rate environment in 2023. Despite higher average debt levels throughout 2023, the Company’s outstanding debt balance decreased to $55,273 as of December 31, 2023, compared to $91,879 as of December 31, 2022. The proceeds of $5,344 and $2,362 from the divestiture of Chemtec and Ties, respectively, as well as stronger operating cash flows in 2023, were used to drive the decrease in debt.

Other expense for the year ended December 31, 2023 was $3,666 and was primarily attributable to a $3,074 loss on the divestitures of Ties and Chemtec and $1,403 of exit costs incurred related to the Bridge Exit. Other income for the year ended December 31, 2022 included pre-tax income of $489 from the 2021 sale of the Piling Products division, $790 in insurance proceeds, and $325 received to recover costs associated with environmental cleanup activities partially offset by a $467 loss related to the sale of the Track Components business.

The Company’s effective income tax rate for 2023 was (37.6)%, compared to (407.7)% in the prior year period. The Company's effective income tax rate differed from the federal statutory rate of 21% primarily due to the realization of domestic tax benefits previously offset by a valuation allowance. Such tax benefits were offset by an increase in the Company’s valuation allowance against its deferred tax assets in the UK and other foreign jurisdictions. For further discussion on the valuation allowance, refer to Note 14 of the Notes to the Consolidated Financial Statements.

Net income for the year ended December 31, 2023 was $1,299, or $0.13 per diluted share, compared to net loss for the 2022 year of $45,677, or $4.25 per diluted share. Net loss in 2022 was impacted by a $37,895 expense related to the increase in the Company’s valuation allowance against deferred tax assets, as well as non-cash impairment charges of $8,016.

Results of Operations — Segment Analysis

Rail, Technologies, and Services

Rail segment sales increased by $11,568, or 3.8%, over the prior year. The increase was due to higher organic sales of $26,040 or 8.7%, which includes the impact of the 2022 Crossrail Settlement. The acquisition of Skratch resulted in higher sales of $1,504, or 0.5% and the divestiture of the Track Components and Ties businesses reduced sales by $15,976, or 5.3%. Rail Products sales increased $3,238 driven by increased volumes partially offset by the Track Components and Ties divestitures. Global Friction Management volumes resulted in a sales increase of $9,135. Technology Services and Solutions sales decreased $805 due to continued weak commercial conditions in the UK, partially offset by $1,504 in higher sales from the Skratch acquisition and the Crossrail Settlement in impact 2022.

Segment gross profit increased by $5,190, or 8.7%, compared to the prior year. Higher volumes in Rail Products and the Crossrail Settlement impact recorded in 2022 resulted in gross profit increasing $6,530. Improved Global Friction Management volumes resulted in increased gross profit of $3,393. Technology Services and Solutions gross profit declined by $4,733 due to weaker commercial conditions in the UK. The net impact of acquisitions and divestitures reduced gross profit in 2023 by $1,752. The Rail segment gross profit margin increased by 90 basis points from the prior year due to improved volumes and pricing in Rail Products and Global Friction Management and the portfolio changes made; the acquired Skratch business reported higher margins than the divested Track Components and Ties businesses and higher margins realized in Rail Products. Such improvements were partially offset by declines in margins in the Technology Services and Solutions business unit driven by weak commercial conditions in the UK.

Segment operating profit increased by $486, or 4.2%, compared to the prior year. The increase was driven by the improvement in gross profit, which was partially offset by increased personnel costs as well as a 2023 bad debt provision charge of $1,862 due to a customer in the UK who filed for administrative protection and $676 in restructuring expense associated with the UK operations.

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During 2023, new orders within the Rail segment decreased by 4.7% compared to the prior year. The decrease in new orders was attributable to the divestitures of the Ties and Track Components businesses declining new orders by $2,089 and $8,224, respectively, and the Rail Distribution business declining in new orders by $26,597 compared to the prior year. The decline was partially offset by increases in the Global Friction Management and Technology Services and Solutions business units which included the Skratch acquisition increase of $2,735. Segment backlog decreased by 19.8% compared to the prior year, ending 2023 at $84,418. The decrease is attributed to Rail Distribution business reducing backlog by $29,717 from the prior year which was impacted by the timing of larger orders.

Infrastructure Solutions

The Infrastructure segment sales increased by $34,679, or 17.6%, compared to the prior year. The increase was due to organic sales of $32,368 or 16.4% and includes a $1,977 reduction in 2023 sales stemming from changes in expected value of certain commercial projects associated with the Bridge Exit. The acquisition of VanHooseCo contributed $18,330, or 9.3%, of the increase in sales year over year offset by the divestiture of Chemtec, which drove a sales decline of $16,019, or 8.1%. Strong organic sales were driven by the Precast Concrete Products business unit as well as the Protective Pipe Coatings line of business.

The Infrastructure segment gross profit increased by $18,009, or 59.8%, compared to the prior year. The improvement in gross profit dollars is due to higher volumes and improved pricing in the legacy business and the net impact of acquisitions and divestitures which increased gross profit dollars in 2023 by $3,627. Gross profit in 2023 was negatively impacted by an adjustment of $3,051 due to changes in expected value of certain commercial projects associated with the Bridge Exit. In 2022, gross profit included an unfavorable adjustment of $1,135 related to the purchase accounting of acquired inventory related to VanHooseCo. Gross profit margins of 20.8% increased 550 basis points over last year, driven by more favorable margins associated with portfolio changes, as well as higher overall sales volumes and gains from pricing initiatives.

The segment profit of $9,988 increased by $19,120 over the prior year. Segment profit in 2022 was negatively impacted by a goodwill impairment charge of $3,011 in the Fabricated Bridge business and a $5,005 impairment charge for intangible assets related to the Chemtec business. The other drivers of the increase in segment profit are the increase in gross profit, which was partially offset by higher selling and administrative expenses including the net impact of acquisitions and divestitures which increased selling and administrative costs by $1,628.

During 2023, the Infrastructure segment had a decrease in new orders and backlog of $8,117, or 3.4%, and $37,648, or 22.5%, respectively, compared to the prior year period. The divestiture of Chemtec during the first quarter of 2023 resulted in a reduction of new orders and backlog of $33,234 and $20,928, respectively, from the prior year period. Orders in the Precast business, including the acquisition of VanHooseCo, partially offset the decline in new orders from the Chemtec divestiture. Backlog was also impacted by $8,094 due to the Bridge Exit.

Corporate

Unallocated corporate expenses increased in 2023 compared with 2022 primarily due to higher compensation including variable compensation costs that will reset in 2024 and higher interest expense.

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 its revolving credit facility, which provides for a total commitment of up to $130,000, of which $72,133 was available for borrowing as of December 31, 2023, 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, and to support the share repurchase program. The Company’s total debt, including finance leases, was $55,273 and $91,879 as of December 31, 2023 and December 31, 2022, respectively, and was primarily comprised of borrowings under its revolving credit facility.

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The following table reflects available funding capacity as of December 31, 2023:

As of December 31, 2023 and December 31, 2022 we were in compliance with all covenants of the Credit Agreement and have $74,693 available funding capacity as of December 31, 2023.

The Company’s cash flows are impacted from period to period by fluctuations in working capital, 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 terms, days sales outstanding (“DSO”), 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 December 31, 2023, 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 compensate the Company for its products and services, as well as impact demand for its products and services.

The change in cash and cash equivalents for the years ended December 31, 2023 and 2022 were as follows:

Cash Flows from Operating Activities

During the year ended December 31, 2023, net cash provided by operating activities was $37,376, compared to a use of $10,576 during the prior year. During 2023, cash flow provided by operating activities consisted of net income and non-cash items amounting to $21,453 and changes in certain assets and liabilities netting to a cash inflow of $15,923. In 2022, working capital and other assets and liabilities were a use of $25,822. Both periods include payments of $8,000 for the Union Pacific Railroad Concrete Tie Settlement.

The Company’s calculation of DSO was 43 days as of December 31, 2023 compared to 48 days as of December 31, 2022.

Cash Flows from Investing Activities

For the year ended December 31, 2023, the Company had capital expenditures of $4,933, a $2,700 decrease from 2022. The expenditures for the year ended December 31, 2023 were primarily related to general plant and operational improvements throughout the Company, as well as organic growth initiatives. Expenditures for the year ended December 31, 2022 related to plant expansions within our Infrastructure segment, including those related to the second VanHooseCo operating location, implementations of the Company’s ERP system, and general plant and operational improvements throughout the Company. In 2023, the Company received cash proceeds of $7,706 from the sale of its Ties and Chemtec businesses. In 2022 the Company received cash proceeds of $8,800 primarily from the sale of its Track Components business. Cash used for investing activities for the year ended December 31, 2022 included cash paid of $57,852 for the acquisitions of VanHooseCo and Skratch.

Cash Flows from Financing Activities

The Company decreased its outstanding debt by $37,260 during the year ended December 31, 2023, primarily due to the proceeds from divestitures and improved operating cash flows. During the year ended December 31, 2022, the Company increased outstanding debt by $60,832, primarily from the borrowings used to fund the acquisitions of Skratch and VanHooseCo. During the year ended December 31, 2022, the Company paid financing fees of $182 related to its Credit Agreement (as defined below). For the year ended December 31, 2023 the Company repurchased 134,208 shares of its stock for $2,310 associated with the Company’s Board of Directors authorizing the purchase of up to $15,000 of the Company’s common stock through February of 2026. For the years ended December 31, 2023 and 2022, the Company also repurchased 24,886 and 27,636 shares of its stock, respectively, for $315 and $410 from employees to pay their withholding taxes in connection with the vesting of stock awards.

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Financial Condition

The Company generated $37,376 from cash flows from operations during 2023, which was utilized to pay down debt, fund capital expenditures and repurchase shares. As of December 31, 2023, the Company had $2,560 in cash and cash equivalents and $72,133 of availability under its revolving credit facility, subject to covenant restrictions.

Principal uses of cash in recent years have been to fund operations, including capital expenditures, repurchase shares and service indebtedness. The Company views its short and long-term liquidity as being dependent on its results of operations, changes in working capital, and borrowing capacity.

Non-domestic cash balances of $2,192 are held in various locations throughout the world. Should management determine that the cash balances of its foreign subsidiaries exceed its projected working capital needs, excess funds may be repatriated and subject to additional income taxes.

On August 13, 2021, the Company entered into the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”). The Credit Agreement modifies the prior revolving credit facility, as amended, to provide more favorable terms to the Company and extends the maturity date 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 US 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”) to obtain approval for the VanHooseCo acquisition and temporarily modify certain financial covenants to accommodate the transaction. The Second Amendment permitted the Company to acquire the operating assets of VanHooseCo and modified the Maximum Gross Leverage Ratio covenant through June 30, 2023 to accommodate the transaction. The Second Amendment also 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 agreement, please refer to Note 10 of the Notes to Consolidated Financial Statements contained in this Annual Report on Form 10-K. As of December 31, 2023, the Company was in compliance with the covenants in the Credit Agreement.

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 they effectively converted a portion of the debt from variable to fixed-rate borrowings during the term of the swap contract. Prior to the 2022 forward interest rate swaps, the Company had $50,000 of interest rate swaps that were accounted for on a mark-to-market basis. During February 2022, the $50,000 tranche of interest rate swaps expired. As of December 31, 2023 and December 31, 2022 the swap asset was $1,225 and $1,930, respectively.

On June 30, 2023, the Company sold substantially all the operating assets of the Ties business, located in Spokane, WA, for $2,362 in proceeds, subject to final working capital adjustments. The Ties business was reported in the Rail Products business unit within the Rail segment. On March 30, 2023, the Company sold substantially all the operating assets of its Chemtec business, for $5,344 in proceeds, subject to final working capital adjustments. The Chemtec business was reported in the Steel Products business unit within the Infrastructure segment. On August 1, 2022, the Company divested the assets of its rail spikes and anchors Track Components business located in St-Jean-sur-Richelieu, Quebec, Canada. Cash proceeds from the transaction were $7,795, subject to indemnification obligations and working capital adjustments, resulting in a pre-tax loss of $3,074. The Track Components business was reported in the Rail Products business unit within the Rail segment.

The Company believes that the combination of its cash and cash equivalents, cash generated from operations, and the capacity under its revolving credit facility will provide sufficient liquidity to provide the flexibility to operate the business in a prudent manner, continue to service outstanding debt, repurchase shares and to selectively pursue accretive acquisitions to further the Company’s strategic initiatives.

Backlog

Although backlog is not necessarily indicative of future operating results, the following table provides the backlog by business segment:

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 $58,471 compared to the prior year due to $31,270 from businesses that were divested and a discontinued product line. The remaining decline is associated with the timing of large orders for the Rail Distribution business.

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Critical Accounting Estimates

The accompanying consolidated financial statements have been prepared in conformity with US GAAP. The preparation of the 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. The following critical accounting estimates, which are reviewed by the Company’s Audit Committee of the Board of Directors, are those management believes are the most critical to understand and evaluate our financial condition and results and require subjective or complex judgements. Actual results could differ from those estimates.

For a summary of the Company’s significant accounting policies, see Part II, Item 8, Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements, which is incorporated by reference into this Item 7.

Income Taxes - The recognition of deferred tax assets requires management to make judgments regarding the future realization of these assets. As prescribed by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740, “Income Taxes,” valuation allowances must be provided for those deferred tax assets for which it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. This guidance requires management to evaluate positive and negative evidence regarding the recoverability of deferred tax assets. The determination of whether the positive evidence outweighs the negative evidence and quantification of the valuation allowance requires management to make estimates and judgments of future financial results.

The Company evaluates all tax positions taken on its federal, state, and foreign tax filings to determine if the position is more likely than not to be sustained upon examination. For positions that meet the more likely than not to be sustained criteria, the largest amount of benefit to be realized upon ultimate settlement is determined on a cumulative probability basis. A previously recognized tax position is derecognized when it is subsequently determined that a tax position no longer meets the more likely than not threshold to be sustained. The evaluation of the sustainability of a tax position and the expected tax benefit is based on judgment, historical experience, and other assumptions. Actual results could differ from those estimates upon subsequent resolution of identified matters.

The Company’s income tax rate is significantly affected by the tax rate on global operations. In addition to local country tax laws and regulations, this rate depends on the extent earnings are indefinitely reinvested outside of the US Indefinite reinvestment is determined by management’s judgment about and intentions concerning the future operations of the Company. There have been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period.

Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 14 which is incorporated by reference into this Item 7, for additional information regarding the Company’s deferred tax assets. The Company’s ability to realize these tax benefits may affect the Company’s reported income tax expense and net income.

Revenue Recognition - Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 1 and Note 4 which is incorporated by reference into this Item 7, for a complete discussion of our revenue recognition policies. The Company derives revenue from products and services provided under long-term agreements with its customers. The Company’s performance obligations under long-term agreements with its customers are generally satisfied over time. Revenue under these long-term agreements is generally recognized over time either using an input measure based upon the proportion of actual costs incurred to estimated total project costs or an input measure based upon actual labor costs as a percentage of estimated total labor costs, depending upon which measure the Company believes best depicts the Company’s performance to date under the terms of the contract. Accounting for these long-term agreements involves the use of various techniques to estimate total revenues and costs. The Company estimates profit on these long-term agreements as the difference between total estimated revenues and expected costs to complete a contract and recognizes that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that may span several years. These assumptions include, among other things, labor productivity, cost and availability of materials, and timing of project execution. The nature of these long-term agreements may give rise to several types of variable considerations, such as discounts and claims. Contract estimates may include additional revenue for submitted contract modifications, including at times unapproved change orders, if there exists an enforceable right to the modification, the amount can be reasonably estimated, and its realization is probable. These estimates are based on historical collection experience, anticipated performance, and the Company’s best judgment at that time. These amounts are generally included in the contract’s transaction price and are allocated over the remaining performance obligations. As a result of management’s reviews of contract-related estimates the Company makes adjustments to contract estimates that impact our revenue and profit totals. Changes in estimates are primarily attributed to updated considerations, including economic conditions and historic contract patterns resulting in anticipated revenue from existing contracts.

Goodwill - We evaluate goodwill for impairment annually during the fourth quarter, or whenever events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. When evaluating for impairment the Company may first consider qualitative factors to assess whether there are indicators that it is more likely than not that the fair value of a reporting unit may not exceed its carrying amount. If we do not perform a qualitative assessment, or if we determine that it is more like than not that the fair value of the reporting unit does not exceed its carrying value, we perform a quantitative assessment by comparing the fair value of a reporting unit to its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss equal to the excess amount up to the goodwill balance is recorded as an impairment to goodwill of the reporting unit. The Company uses a combination of a discounted cash flow method and a market approach to determine the fair values of the reporting units.

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A number of significant assumptions and estimates are involved in the estimation of the fair value of reporting units, including the identification of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, which may drive changes to revenue growth, EBITDA contribution, and market participant assumptions. The estimated fair value of a reporting unit is sensitive to changes in assumptions, including forecasted future operating cash flows, weighted-average cost of capital, terminal growth rates, and industry multiples.

The Company considers historical experience and available information at the time the fair values of its reporting units are estimated. The Company believes the estimates and assumptions used in estimating the fair value of its reporting units are reasonable and appropriate; however, different assumptions and estimates could materially impact the estimated fair value of its reporting units and the resulting determinations about goodwill impairment. This could materially impact the Company’s Consolidated Statements of Operations and Consolidated Balance Sheets. There have been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period. Future estimates may differ materially from current estimates and assumptions.

Additional information concerning the impairments is set forth in Part II, Item 8, Financial Statements and Supplementary Data, Note 5 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 7.

Intangible Assets and Long-Lived Assets - The Company tests intangible assets and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Recoverability of assets is determined by comparing the estimated undiscounted future cash flows of the asset or asset group to their carrying amount. If the carrying value of the assets exceeds their estimated undiscounted future cash flows, an impairment loss would be determined as the difference between the fair value of the assets and its carrying value. Typically, the fair value of the assets would be determined using a discounted cash flow model which would be sensitive to judgments of what constitutes an asset group and certain assumptions such as estimated future financial performance, discount rates, and other assumptions that marketplace participants would use in their estimates of fair value. There have been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period. The accounting estimate related to asset impairments is highly susceptible to change from period to period because it requires management to make assumptions about the existence of impairment indicators and cash flows over future years. These assumptions impact the amount of an impairment, which could materially adversely impact the Consolidated Statements of Operations.

Additional information concerning the impairments is set forth in Part II, Item 8, Financial Statements and Supplementary Data, Note 5 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 7.

Non-GAAP Financial Measures

In accordance with SEC rules, the Company provides descriptions of the non-GAAP financial measures included in this Annual Report 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 or 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 acquisitions and divestitures 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.

EBITDA is a non-GAAP financial measure that has been used in discussing the financial performance of the business for the years ended December 31, 2023 and 2022. EBITDA is a financial metric utilized by management to evaluate the Company’s performance on a comparable basis. The Company believes that EBITDA is useful to investors as a supplemental way to evaluate the ongoing operations of the Company’s business as many investors utilize EBITDA to enhance their ability to compare historical periods as it adjusts for the impact of financing methods, tax law and strategy changes, and depreciation and amortization. In addition, EBITDA is a financial measurement that management and the Company’s Board of Directors use in their financial and operational decision-making and in the determination of certain compensation programs. Adjusted EBITDA includes certain adjustments to EBITDA. In 2023, the Company made adjustments to exclude the loss on divestitures, VanHooseCo contingent consideration adjustments, the impact of the discontinuation of the bridge grid deck product line, and bad debt provision for a customer that filed for administrative protection in the UK. In 2022, the Company made adjustments to exclude acquisition and divestiture related costs, VanHooseCo acquisition-related inventory step-up amortization and contingent consideration expense, the gain from insurance proceeds, the Crossrail project settlement amount, impairment charges, and the loss (gain) on the sale of the Track Components and Piling Products businesses, respectively.

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The Company views net debt, which is total debt less cash and cash equivalents, as an important metric of the operational and financial health of the organization and useful to investors as an indicator of our ability to incur additional debt and to service our existing debt.

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. Quantitative reconciliations of EBITDA, adjusted EBITDA, organic sales growth, and net debt to the non-GAAP financial measures are presented in this Item 7.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except share data unless otherwise noted)

2022 Developments

During 2022, the Company:

•Produced net sales of $497,497, a decrease of $16,123, or 3.1%, over 2021, reflective of organic growth of 5.6% and growth due to acquisitions of 4.0%, which was offset by a 12.8% reduction due to divestitures;

•Reported gross profit margin of 18.0% for the year, a 120-basis point improvement over prior year;

•Continued its business transformation with the acquisitions of Skratch Enterprises Ltd. and VanHooseCo Precast LLC, for consideration of $7,402 and $52,146, respectively, which contributed to the $68,118 increase in its net debt;

•Divested the Track Components business, resulting in cash proceeds of $7,795;

•Incurred a net loss of $45,677 due to a $37,895 deferred tax asset valuation allowance, pre-tax asset impairment charges of $8,016, and an unfavorable impact from the settlement of long-term commercial contracts for $3,956;

•Reported adjusted EBITDA(a) (earnings before interest, taxes, depreciation, amortization, and certain adjustments), of $24,179; an increase of 29.4% compared to the prior year;

•Amended its Credit Agreement to obtain approval for the VanHooseCo acquisition and temporarily modify certain financial covenants to accommodate the transaction.

(a) The following tables display reconciliations of non-GAAP financial measures for the years ended December 31, 2022 and 2021. EBITDA is a financial metric utilized by management to evaluate the Company’s performance on a comparable basis. The Company believes that EBITDA is useful to investors as a supplemental way to evaluate the ongoing operations of the Company’s business as many investors utilize EBITDA to enhance their ability to compare historical periods as it adjusts for the impact of financing methods, tax law and strategy changes, and depreciation and amortization. In addition, EBITDA is a financial measurement that management and the Company’s Board of Directors use in their financial and operational decision-making and in the determination of certain compensation programs. Adjusted EBITDA includes certain adjustments to EBITDA. In 2022, the Company made adjustments to exclude acquisition and divestiture related costs, VanHooseCo acquisition-related inventory step-up amortization and contingent consideration expense, the gain from insurance proceeds, the Crossrail project settlement amount, impairment charges, and the loss (gain) on the sale of the Track Components and Piling Products businesses, respectively. In 2021, the Company made adjustments to exclude the gain associated with the sale of the Piling Products business. The Company views net debt, which is total debt less cash and cash equivalents, as an important metric of the operational and financial health of the organization and useful to investors as an indicator of our ability to incur additional debt and to service our existing debt. 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. Quantitative reconciliations of EBITDA, adjusted EBITDA, and debt to the non-GAAP financial measures are presented below.

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Acquisitions and Divestitures

On June 21, 2022 and August 12, 2022, the Company acquired the stock of Skratch for $7,402, and acquired the operating assets of VanHooseCo for $52,146, net of cash acquired at closing, respectively. Skratch has been included in the Company’s Technology Services and Solutions business unit within the Rail, Technologies, and Services segment and VanHooseCo has been included within the Precast Concrete Products segment. Skratch and VanHooseCo’s net sales were $2,975 and $17,788, respectively, for the year ended December 31, 2022.

On August 1, 2022, the Company divested the assets of its Track Components division for $7,795, subject to indemnification obligations and working capital adjustments. The Track Components division was included in the Rail Products business unit within the Rail, Technologies, and Services segment. The Track Components division's net sales were $9,244 and $14,139 for the year ended December 31, 2022 and 2021, respectively.

On September 24, 2021, the Company completed the sale of its Piling Products division for $23,902 in total proceeds. The Company retained all pre-closing receivables and liabilities associated with the division. The sale included substantially all inventory associated with the division, as well as the related fixed assets. The Piling Products division was included in the Fabricated Steel Products business unit within the Steel Products and Measurement segment. The Piling Products division net sales were $60,819 for the year ended December 31, 2021.

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Year-to-date Results Comparison

Results of Operations

** Data excluded as management believes it is not meaningful.

Fiscal 2022 Compared to Fiscal 2021 — Company Analysis

Net sales of $497,497 for the year ended December 31, 2022 decreased by $16,123, or 3.1%, compared to the prior year. The change in sales is due in part to the divestitures of the Track Components and Piling Products businesses. Declines from divestitures were partially offset by organic growth in all three segments and the acquisitions of Skratch and VanHooseCo in 2022. Divestitures drove a 12.8% decline in sales, while organic growth and acquisitions drove a 5.6% and 4.0% increase in sales, respectively. Included in the organic sales growth of 5.6% is a $3,956 reduction in sales related to the multi-year Crossrail project in the Company’s Technology Services and Solutions group in the United Kingdom (“Crossrail Settlement”). This settlement reduced both sales and gross profit in 2022.

Gross profit increased by $3,309, or 3.8%, and gross profit margin expanded by 120 basis points to 18.0% despite the impact of the $3,956 Crossrail Settlement. The improvement in gross profit is due to the portfolio changes that are a part of the Company’s strategic transformation. In 2021, the Company sold the Piling Products business and in 2022 it sold the Track Components business, both of which have a lower gross profit margin than the Skratch and VanHooseCo businesses that were acquired in 2022. Gross profit was also negatively impacted in 2022 by a $1,135 purchase accounting adjustment related to the VanHooseCo acquired inventory. In the Company’s legacy business, gross profit was negatively impacted by raw material and labor inflation which was mitigated by pricing actions in the latter part of 2022.

Selling and administrative expenses increased by $6,662, or 8.8%, over the prior year. The increase was primarily attributable to strategic transformation costs of $2,235 in 2022, an increase in personnel related costs of $2,676, including a $435 increase in stock-based compensation expense, and an increase in third-party supplies and services of $1,231 compared to the prior year. Selling and administrative expenses as a percentage of net sales increased to 16.6% from 14.8% due to the increased spending. The net impact of the acquisitions and divestitures was not significant to the change in selling and administrative expenses year over year; however, the 2022 expense included $526 of retention costs associated with the VanHooseCo acquisition.

The Company’s annual goodwill test included a quantitative analysis to determine whether it was more likely than not that the fair value of each reporting unit is less than its carrying value. During 2022, the Company recorded a non-cash impairment charge of $3,011 associated with the Fabricated Bridge reporting unit goodwill, which resides in the Steel Products and Measurement segment, as a result of its annual goodwill test. No other reporting units were impaired as a result of goodwill testing procedures.

The Company also recorded an impairment charge of $4,883 for intangible assets as a result of procedures performed. Such procedures determined that the carrying value of the long-lived asset group related to its Precision Measurement Products and Systems business would not be recoverable. The now fully impaired assets were part of the Steel Products and Measurement segment. For further discussion on the impairment charges, refer to Note 5 of the Notes to the Consolidated Financial Statements.

Interest expense increased by $384, or 13.0%, due to higher outstanding debt throughout the year. The outstanding debt balance increased to $91,879 as of December 31, 2022, compared to $31,251 as of December 31, 2021. The increase in debt was primarily to

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fund the acquisition of VanHooseCo, which had a purchase price of $52,146, net of cash acquired and the Skratch acquisition, which had a purchase price of $7,402.

Other income for the year ended December 31, 2022 included pre-tax income of $489 from the 2021 sale of the Piling Products division, $790 in insurance proceeds, and $325 received to recover costs associated with environmental cleanup activities. Other expense for the year ended December 31, 2022 included a $467 loss related to the sale of the Track Components business. In the prior year, the Company recorded pre-tax income of $2,741 from the gain on sale of the Piling Products division, all of which was recorded in “Other income-net.”

The Company’s effective income tax rate for 2022 was (407.7)%, compared to 24.4% in the prior year period. The Company’s current year income tax provision included $37,895 expense related to the increase in its valuation allowance against deferred tax assets. For further discussion on the valuation allowance, refer to Note 14 of the Notes to the Consolidated Financial Statements.

As a result of the pre-tax $8,016 impairment charges, the $3,956 pre-tax Crossrail Settlement, and the valuation allowance, the net loss for the year ended December 31, 2022 was $45,677, or $4.25 per diluted share, compared to net income for the 2021 year of $3,471, or $0.34 per diluted share.

Results of Operations — Segment Analysis

Rail, Technologies, and Services

Rail, Technologies, and Services segment sales increased by $843, or 0.3%, compared to the prior year. The acquisition of Skratch resulted in $2,975, or 1.0%, of the increase in sales and the divestiture of the Track Components business resulted in a reduction in sales of $4,895, or 1.6%. Organic sales represented $2,763, or 0.9%, of the total increase in sales year over year and were driven by the Rail Products and Global Friction Management business units, which had increases in sales of $4,041 and $3,642, respectively. The sales volume increase was primarily driven by the Company’s Rail Distribution business and increased demand for Friction Management in North American markets served. The Technology Services and Solutions business unit decreased by $6,633, or 12.9%, driven by the $3,956 Crossrail Settlement as well as an unfavorable foreign currency impact.

Segment gross profit increased by $2,250, or 3.9%, compared to the prior year. The improvement in gross profit dollars and margins is primarily due to the portfolio changes that were a part of our strategic transformation. The Track Components business, which was sold in 2022, had lower gross profit margins than the Skratch business that was acquired in 2022. Gross profit was also impacted in 2022 by the $3,956 Crossrail Settlement. The Rail, Technologies, and Services segment gross profit margin increased by 70 basis points from the prior year due to the portfolio changes made and higher gross profit margins realized in Rail Products.

Segment operating profit declined by $2,711, or 19.1%, compared to the prior year. The decline was driven by the $3,956 Crossrail Settlement and increased employment, travel and entertainment, and advertising costs from the prior year. Additionally, the Skratch acquisition contributed $619 more in selling and administrative expenses in 2022 than the Track Components business that was sold.

During 2022, new orders within the Rail, Technologies, and Services segment increased by 11.5% compared to the prior year. The increase in new orders was attributable to the Rail Products and Global Friction Management business units. Segment backlog increased by 9.0% compared to the prior year, ending 2022 at $105,241.

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Precast Concrete Products

The Precast Concrete Product segment sales increased by $33,222, or 46.8%, compared to the prior year. The acquisition of VanHooseCo contributed $17,788, or 25.1%, of the increase in sales year over year. Sales in the legacy business increased $15,434, or 21.7% year over year, due to a strong demand environment both in the southern and northeastern United States markets.

The Precast Concrete Products segment gross profit increased by $5,843, or 46.8%, compared to the prior year. The gross profit increase was primarily due to increased sales volume within the segment. The gross profit margin remained flat at 17.6%, driven by higher margins associated with the VanHooseCo business, offset by inflationary pressures, including raw material costs, and manufacturing inefficiencies in our legacy Precast business. Although the VanHooseCo margins were accretive to the Precast Concrete Products segment, the gross profit included a $1,135 purchase accounting adjustment related to acquired inventory that negatively impacted margins.

The segment profit of $1,692, increased by $147, compared to the prior year, and was 1.6% of net sales. Operating profit was driven by increased selling and administrative expenses associated with higher personnel costs of $2,647, and an increase in third-party supplies and services of $853, and an increase of $526 in retention costs associated with VanHooseCo from the prior year. The increases to selling and administrative expenses were partially driven by the acquired VanHooseCo business.

For 2022, the Precast Concrete Products segment had a 16.9% increase in new orders and the backlog also increased by 17.3% compared to the prior year. The increase in orders and backlog is attributed to the VanHooseCo acquisition.

Steel Products and Measurement

Sales for the Steel Products and Measurement segment in 2022 decreased by $50,188, or 35.1%, compared to the prior year. The decline is attributable to the divested Piling Products business, which drove a sales decrease of $60,819. The decline in sales was partially offset by a $10,631, or 17.5%, increase in the balance of the segment. The Coatings and Measurement business experienced a sales increase of $10,496, or 37.7%, primarily due to increased activity in both traditional markets served and adjacent market applications.

The Steel Products and Measurement segment 2022 gross profit decreased by $4,784, or 28.9%, compared to the prior year due to the sale of the Piling Products business. Gross profit margin increased 110 basis points due to the sale of the less profitable Piling Products business.

The segment operating loss of $10,824, up $8,422 over last year, was driven by a goodwill impairment charge of $3,011 in the Fabricated Bridge business unit and the $5,005 impairment charge for intangible assets related to its Precision Measurement Products and Systems business based in Willis, TX.

For 2022, the Steel Products and Measurement segment had a $4,427, or 3.3%, decrease in new orders compared to the prior year period driven by a $59,288 decline in orders due to the sale of the Piling Products business, offset in part, by strong increases in orders in all of the other businesses. The segment’s backlog as of December 31, 2022 was $86,509, a 92.3% increase compared to the prior year end driven by all business units but primarily the Coatings and Measurement business unit.

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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 its revolving credit facility, which provides for a total commitment of up to $130,000, of which $37,814 was available for borrowing as of December 31, 2022, 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, and acquisitions. The Company’s total debt, including finance leases, was $91,879 and $31,251 as of December 31, 2022 and December 31, 2021, respectively, and was primarily comprised of borrowings under its revolving credit facility.

The following table reflects available funding capacity as of December 31, 2022:

The Company’s cash flows are impacted from period to period by fluctuations in working capital, 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 terms, days sales outstanding (“DSO”), 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 December 31, 2022, but adverse changes in the economic environment and adverse financial conditions of its customers resulting from, among other things, pandemics including COVID-19, 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 change in cash and cash equivalents for the years ended December 31, 2022 and 2021 were as follows:

Cash Flows from Operating Activities

During the year ended December 31, 2022, net cash used in operating activities was $10,576, compared to $810 from continuing operations during the prior year. For the year ended December 31, 2022, net loss and adjustments to reconcile net loss from operating activities provided $15,246, compared to $16,745 in 2021. Working capital and other assets and liabilities used $25,822 in the current period compared to $17,555 during 2021, including payments of $8,000 in 2022 and 2021 related to the Union Pacific Railroad Concrete Tie Settlement.

The Company’s calculation of DSO was 48 days as of December 31, 2022 compared to 45 days as of December 31, 2021.

Cash Flows from Investing Activities

For the year ended December 31, 2022, the Company had capital expenditures of $7,633, a $3,013 increase from 2021. The expenditures were primarily related to plant expansions within our Precast segment, including those related to the second VanHooseCo operating location, implementations of the Company’s ERP system, and general plant and operational improvements throughout the Company. The capital expenditures during 2021 relate to plant expansions within our Precast segment, including expenditures related to the relocation of the Precast Boise facility in 2020, the implementations of the Company’s ERP system, and general plant and operational improvements throughout the Company. In 2022, the Company received cash proceeds of $8,800 primarily from the sale of its Track Components business. Cash used for investing activities for the year ended December 31, 2022 included cash paid of $57,852 for the acquisitions of VanHooseCo and Skratch in 2022. In 2021 the Company received cash proceeds of $22,707 from the sale of the Piling Products business.

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Cash Flows from Financing Activities

The Company increased its outstanding debt by $60,832 during the year ended December 31, 2022, primarily from the borrowings used to fund the acquisitions of Skratch and VanHooseCo. During the year ended December 31, 2021, the Company reduced outstanding debt by $13,735, primarily from the net proceeds from the sale of the Piling Products division. During the years ended December 31, 2022 and 2021, the Company paid financing fees of $182 and $406, respectively, related to its Credit Agreement (as defined below). For the years ended December 31, 2022 and 2021, the Company repurchased 27,636 and 45,288 shares of its stock, respectively, for $410 and $732, respectively, all of which were withheld from employees to pay their withholding taxes in connection with the vesting of stock awards.

Financial Condition

The Company used $10,576 from cash flows from operations during 2022, which was primarily utilized to fund working capital needs. As of December 31, 2022, the Company had $2,882 in cash and cash equivalents and $37,814 of availability under its revolving credit facility, subject to covenant restrictions.

Principal uses of cash in recent years have been to fund operations, including capital expenditures, and service indebtedness. The Company views its short and long-term liquidity as being dependent on its results of operations, changes in working capital, and borrowing capacity.

Non-domestic cash balances of $2,012 are held in various locations throughout the world. Should management determine that the cash balances of its foreign subsidiaries exceed its projected working capital needs, excess funds may be repatriated and subject to additional income taxes.

On August 13, 2021, the Company entered into the Fourth Amended and Restated Credit Agreement (as amended, modified and supplemented, the “Credit Agreement”). The Credit Agreement modifies the prior revolving credit facility, as amended, to provide more favorable terms to the Company and extends the maturity date 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 (as defined in the Credit Agreement) up to $130,000 (a $15,000 increase over the previous commitment) 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 amended its Credit Agreement to obtain approval for the VanHooseCo acquisition and temporarily modify certain financial covenants to accommodate the transaction. The Second Amendment permitted the Company to acquire the operating assets of VanHooseCo and modified the maximum gross leverage ratio covenant through June 30, 2023 to accommodate the transaction. The Second Amendment also 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 10 of the Notes to Consolidated Financial Statements contained in this Annual Report on Form 10-K. As of December 31, 2022, the Company was in compliance with the covenants in the Credit Agreement.

To reduce the impact of interest rate changes on outstanding variable-rate debt, the Company amended and entered into forward starting 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 they effectively converted a portion of the debt from variable to fixed-rate borrowings during the term of the swap contract. The Company also accounted for $50,000 of interest rate swaps that became effective February 2017 as cash flow hedges. During the year ended December 31, 2020, the Company dedesignated the cash flow hedges and now accounts for the $50,000 tranche of interest rate swaps on a mark-to-market basis with changes in fair value recorded in current period earnings. During February 2022, the $50,000 tranche of interest rate swaps expired. As of December 31, 2022 and December 31, 2021 the swap asset was $1,930 and $175, respectively. The swap liability was $159 as of December 31, 2021.

On August 1, 2022, the Company divested the assets of its rail spikes and anchors Track Components business located in St-Jean-sur-Richelieu, Quebec, Canada. Cash proceeds from the transaction were $7,795, subject to indemnification obligations and working capital adjustments, resulting in a pre-tax loss of $467. The Track Components business was reported in the Rail Products business unit within the Rail, Technologies, and Services segment. On September 24, 2021, the Company executed the sale of its Piling Products division for $23,902 in total proceeds, resulting in a pre-tax gain of $489. The Piling Products division was included in the Fabricated Steel business unit within the Steel Products and Measurement segment.

The Company believes that the combination of its cash and cash equivalents, cash generated from operations, and the capacity under its revolving credit facility will provide sufficient liquidity to provide the flexibility to operate the business in a prudent manner, continue to service outstanding debt, and to selectively pursue accretive acquisitions to further the Company’s strategic initiatives.

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Backlog

Although backlog is not necessarily indicative of future operating results, the following table provides the backlog by business segment:

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.

Critical Accounting Policies and Estimates

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. The preparation of the 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. The following critical accounting policies, which are reviewed by the Company’s Audit Committee of the Board of Directors, relate to the Company’s more significant estimates and judgments used in the preparation of its consolidated financial statements. Actual results could differ from those estimates.

For a summary of the Company’s significant accounting policies, see Part II, Item 8, Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements, which is incorporated by reference into this Item 7.

Income Taxes - The recognition of deferred tax assets requires management to make judgments regarding the future realization of these assets. As prescribed by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740, “Income Taxes,” valuation allowances must be provided for those deferred tax assets for which it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. This guidance requires management to evaluate positive and negative evidence regarding the recoverability of deferred tax assets. The determination of whether the positive evidence outweighs the negative evidence and quantification of the valuation allowance requires management to make estimates and judgments of future financial results.

The Company evaluates all tax positions taken on its federal, state, and foreign tax filings to determine if the position is more likely than not to be sustained upon examination. For positions that meet the more likely than not to be sustained criteria, the largest amount of benefit to be realized upon ultimate settlement is determined on a cumulative probability basis. A previously recognized tax position is derecognized when it is subsequently determined that a tax position no longer meets the more likely than not threshold to be sustained. The evaluation of the sustainability of a tax position and the expected tax benefit is based on judgment, historical experience, and other assumptions. Actual results could differ from those estimates upon subsequent resolution of identified matters.

The Company’s income tax rate is significantly affected by the tax rate on global operations. In addition to local country tax laws and regulations, this rate depends on the extent earnings are indefinitely reinvested outside of the U.S. Indefinite reinvestment is determined by management’s judgment about and intentions concerning the future operations of the Company. There has been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period.

Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 14 which is incorporated by reference into this Item 7, for additional information regarding the Company’s deferred tax assets. The Company’s ability to realize these tax benefits may affect the Company’s reported income tax expense and net income.

Revenue Recognition - We account for revenue in accordance with the ASC 606, “Revenue from Contracts with Customers,” whereby the unit of account is a performance obligation. The majority of the Company’s revenue is from products transferred and services rendered to customers at a point in time. The Company recognizes revenue at the point in time at which the customer obtains control of the product or service, which is generally when product title passes to the customer upon shipment or the service has been rendered to the customer. In limited cases, title does not transfer, and revenue is not recognized until the customer has received the products at its physical location.

The Company also derives revenue from products and services provided under long-term agreements with its customers. The transaction price of a long-term agreement is allocated to each distinct performance obligation. The majority of the Company’s long-term contracts have a single performance obligation as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products or providing services.

The Company’s performance obligations under long-term agreements with its customers are generally satisfied as over time. Revenue under these long-term agreements is generally recognized over time either using an input measure based upon the proportion of actual costs incurred to estimated total project costs or an input measure based upon actual labor costs as a percentage of estimated

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total labor costs, depending upon which measure the Company believes best depicts the Company’s performance to date under the terms of the contract. A certain portion of the Company’s revenue recognized over time under these long-term agreements is recognized using an output method, specifically units delivered, based upon certain customer acceptance and delivery requirements. Contract assets from over time contracts are recorded within the Consolidated Balance Sheets and contract liabilities from over time contracts are recorded in “Deferred revenue” within the Consolidated Balance Sheets.

Accounting for these long-term agreements involves the use of various techniques to estimate total revenues and costs. The Company estimates profit on these long-term agreements as the difference between total estimated revenues and expected costs to complete a contract and recognizes that profit over the life of the contract. Contract estimates are based on various assumptions to project the outcome of future events that may span several years. These assumptions include, among other things, labor productivity, cost and availability of materials, and timing of funding by customers. The nature of these long-term agreements may give rise to several types of variable considerations, such as claims, awards, and incentive fees. Historically, these amounts of variable consideration have not been considered significant. Contract estimates may include additional revenue for submitted contract modifications if there exists an enforceable right to the modification, the amount can be reasonably estimated, and its realization is probable. These estimates are based on historical collection experience, anticipated performance, and the Company’s best judgment at that time. These amounts are generally included in the contract’s transaction price and are allocated over the remaining performance obligations. As significant changes in the above estimates could impact the timing and amount of revenue and profitability of our long-term contracts, we review and update contract-related estimates regularly. In the event a contract loss becomes known, the entire amount of the estimated loss is recognized in the Consolidated Statements of Operations. There has been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period.

See Part II, Item 8, Financial Statements and Supplementary Data, Note 4 to the Consolidated Financial Statements, which is incorporated by reference into this Item 7.

Goodwill - Goodwill is the cost of an acquisition less the fair value of the identifiable net assets of the acquired business. Goodwill is required to be tested for impairment at least annually. The Company performs its annual impairment test in the fourth quarter, or whenever events or changes in circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

The Company may first consider qualitative factors to assess whether there are indicators that it is more likely than not that the fair value of a reporting unit may not exceed its carrying amount. The quantitative goodwill impairment analysis involves comparing the fair value of a reporting unit to its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss equal to the excess amount up to the goodwill balance is recorded as an impairment to goodwill of the reporting unit. The Company uses a combination of a discounted cash flow method and a market approach to determine the fair values of the reporting units.

A number of significant assumptions and estimates are involved in the estimation of the fair value of reporting units, including the identification of macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance. The estimated fair value of a reporting unit is sensitive to changes in assumptions, including forecasted future operating cash flows, weighted-average cost of capital, terminal growth rates, and industry multiples.

The Company considers historical experience and available information at the time the fair values of its reporting units are estimated. The Company believes the estimates and assumptions used in estimating the fair value of its reporting units are reasonable and appropriate; however, different assumptions and estimates could materially impact the estimated fair value of its reporting units and the resulting determinations about goodwill impairment. This could materially impact the Company’s Consolidated Statements of Operations and Consolidated Balance Sheets. There has been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period. Future estimates may differ materially from current estimates and assumptions.

Additional information concerning the impairments is set forth in Part II, Item 8, Financial Statements and Supplementary Data, Note 5 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 7.

Intangible Assets and Long-Lived Assets - The Company tests intangible assets and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Recoverability of assets is determined by comparing the estimated undiscounted future cash flows of the asset or asset group to their carrying amount. If the carrying value of the assets exceeds their estimated undiscounted future cash flows, an impairment loss would be determined as the difference between the fair value of the assets and its carrying value. Typically, the fair value of the assets would be determined using a discounted cash flow model which would be sensitive to judgments of what constitutes an asset group and certain assumptions such as estimated future financial performance, discount rates, and other assumptions that marketplace participants would use in their estimates of fair value. There has been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period. The accounting estimate related to asset impairments is highly susceptible to change from period to period because it requires management to make assumptions about the existence of impairment indicators and cash flows over future years. These assumptions impact the amount of an impairment, which would have an impact on the Consolidated Statements of Operations.

Additional information concerning the impairments is set forth in Part II, Item 8, Financial Statements and Supplementary Data, Note 5 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 7.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except share data unless otherwise noted)

Executive Level Overview

2021 Developments and 2022 Outlook

During 2021, the Company:

•Produced net sales of $513,620, an increase of $16,209, or 3.3%, over 2020;

•Generated net income from continuing operations of $3,471, or $0.33 per diluted share;

•Divested the Piling Products division from the Steel Products and Measurement segment, resulting in cash proceeds of $22,707 and a pretax gain on sale of $2,741;

•Reported adjusted EBITDA(a) (earnings before interest, taxes, depreciation, amortization, and certain income) of $18,692;

•Reduced the outstanding balance on its credit facility by $13,735, or 30.5%, to $31,251, resulting in net debt(a) of $20,879;

•Amended its credit agreement, resulting in an increase in the maximum capacity of its revolver from $115,000 to $130,000, improved pricing, and a more accommodating covenant package;

•Continued operations during the COVID-19 pandemic while working to minimize business interruptions and address safety concerns by monitoring through health, travel, and quarantine recommendations issued by the U.S. Centers for Disease Control and various national, state, provincial, and local departments of health where our facilities are located; and

•Appointed John F. Kasel President and Chief Executive Officer, William M. Thalman Senior Vice President and Chief Financial Officer, William F. Treacy Senior Vice President and Chief Growth Officer, and realigned the Company’s operating segments under four senior business leaders in connection with a refreshed enterprise strategy designed to leverage its growth and returns business platforms.

(a) The following tables display reconciliations of non-GAAP financial measures for the years ended December 31, 2021 and 2020. EBITDA is a financial metric utilized by management to evaluate the Company’s performance on a comparable basis. The Company believes that EBITDA is useful to investors as a supplemental way to evaluate the ongoing operations of the Company’s business as EBITDA enhances investors’ ability to compare historical periods as it adjusts for the impact of financing methods, tax law and strategy changes, and depreciation and amortization. In addition, EBITDA is a financial measurement that management and the Company’s Board of Directors use in their financial and operational decision-making and in the determination of certain compensation programs. Adjusted EBITDA includes certain adjustments to EBITDA. In 2021, the Company made adjustments to exclude the gain on the sale of the Piling Products division. In 2020, the Company made adjustments to exclude the impact of relocation and restructuring costs and the proceeds from an unconsolidated partnership.. The Company views net debt, which is total debt less cash and cash equivalents, as an important metric of the operational and financial health of the organization and useful to investors as an indicator of our ability to incur additional debt and to service our existing debt. 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. Quantitative reconciliations of EBITDA and debt to the non-GAAP financial measures are presented below.

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On September 24, 2021, the Company completed the sale of its Piling Products division for $23,902 in total expected proceeds, $1,195 of which is expected to be collected in 2022. The Company retained all pre-closing receivables and liabilities associated with the division. The sale included substantially all inventory held by the Company associated with the division, as well as the related fixed assets. The Piling Products division was included in the Fabricated Steel Products business unit within the Steel Products and Measurement segment. The Piling Products division revenues were $60,819 and $59,139 for the years ended December 31, 2021 and 2020, respectively.

Net sales for 2021 were $513,620, a $16,209 increase, or 3.3%, compared to the prior year. The sales increase was attributable to the Company’s Rail and Precast segments, which increased by 8.4% and 12.1%, respectively, over the prior year. The $23,302 increase in Rail was attributable to increases in Rail Products, Global Friction Management, and Technology Services and Solutions. The $7,676 increase in the Precast segment was attributable to increases in precast building revenue in its Boise, ID facility. Partially offsetting these increases, was a $14,769 decline in Steel Products and Measurement sales, which continues to face a challenging environment in the midstream energy market due to excess infrastructure pipeline capacity.

Gross profit for 2021 was $86,302, an $8,704 decrease, or 9.2%, from the prior year. The 16.8% consolidated gross profit margin decreased by 230 basis points when compared to the prior year. All three segments experienced declining gross profit margin versus last year. Gross profit increased in the Rail segment by $1,986, driven by the $23,302 increase in revenues. However, Rail gross profit margins declined 90 basis points due primarily attributable to raw material, labor, and production cost inflation, coupled with labor and supply chain disruptions impacting manufacturing and fulfillment of orders. This impact was most pronounced in the Rail Products business unit. Slightly lower margins in Global Friction Management were offset by slightly higher margins in Technology Services and Solutions. The Precast segment gross profit increased $1,096, or 9.6%, driven by the increased sales volume. Precast segment gross profit margin was reduced by 40 basis points due to raw material and labor inflation and disruption, coupled with a shortage of engineering services to support production design certifications. In the Steel Products and Measurement segment, gross profit declined from the prior year by $11,786, primarily driven by the decrease in revenues in the Coatings and Measurement business unit, which resulted from lower pipeline and measurement demand in the midstream energy market. Steel Products and Measurement gross profit margin was down 640 basis points compared to the prior year.

Selling and administrative expenses in 2021 increased by $2,351, or 3.2%, from the prior year, primarily driven by increases in personnel related costs, including stock-based compensation expense, as well as costs associated with the Company’s strategic initiatives. Selling and administrative expenses as a percent of net sales were flat compared to the prior year at 14.8%.

Net income from continuing operations for 2021 was $3,471, or $0.33 per diluted share, a reduction of $22,352, or $2.09 per diluted share, from the prior year. The current year was favorably impacted by a gain of $2,046, net of tax, on the sale of the Piling Products division. The prior year was favorably impacted by a non-recurring income tax benefit of $15,840 resulting from the sale of the IOS Test and Inspection Services business in September 2020.

The Company’s consolidated backlog(b) was $210,189 as of December 31, 2021, a decrease of $38,043, or 15.3%, from the prior year. The divestiture of the Piling Products business unit during 2021 resulted in a $32,042 decline in backlog versus last year. This backlog decline was partially offset by a $22,846 increase in the Precast segment, which continues to benefit from infrastructure investment and government-funded programs to rebuild national parks. The current inflationary cost environment, including labor rates, is expected to continue to put pressure on margins across our businesses. Actions to mitigate these impacts as much as possible are ongoing. In addition, the Company continues to take proactive steps to manage disruptions in raw materials, labor, supply chain, service partner, and other lingering COVID-19 related effects in an attempt to mitigate their adverse impact as much as possible. The Coatings and Measurement business unit continues to be affected by the ongoing depressed level of infrastructure investment in the midstream pipeline markets despite rising energy prices. Certain areas of this business have experienced some modest improvement. However, demand levels remain depressed compared to historical levels as pipeline projects continue to be deferred, and the outlook for this business unit remains weak for the foreseeable future. The Company will continue to adjust the cost structure of this business as appropriate to mitigate these negative market conditions as much as possible. While the Rail segment’s backlog declined year-over-year by $24,658 driven by the Rail Products business unit, freight rail activity and global transit ridership levels have improved, albeit well below pre-pandemic levels. With the federal infrastructure support programs announced in 2020 and 2021, the Company is maintaining its optimistic outlook regarding longer-term trends in the North American freight and transit markets given supply chain and transportation needs coupled with government-subsidized investment expected. While the challenging operating environment is expected to improve in 2022, it could persist throughout 2022 and possibly longer. Despite these potential short-term challenges, the Company expects that many of its businesses will continue to directly benefit from infrastructure investment activity, including funding benefits from U.S. Infrastructure Investment and Jobs Act passed in November 2021. Additionally, with the proceeds from the Piling business divestiture coupled with the additional flexibility and capacity resulting from the amendment and extension of our credit agreement in August 2021, the Company believes that it has significant capacity to pursue organic and acquisitive growth opportunities in 2022 and beyond.

(b) 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. The

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Company defines its book-to-bill ratio as new orders divided by revenue. Management uses the book-to-bill key performance indicator as a monitoring metric for the levels of backlog a business unit is building (greater than 1.0) or consuming (less than 1.0), which may provide management and investors an indication of current market activity.

Year-to-date Results Comparison

Results of Operations

Fiscal 2021 Compared to Fiscal 2020 — Company Analysis

Net sales of $513,620 for the year ended December 31, 2021 increased by $16,209, or 3.3%, compared to the prior year. Both the Rail and Precast segments contributed to the increase, with increases over the prior year of 8.4% and 12.1%, respectively. The sales increase was partially offset by a decline in the Steel Products and Measurement segment of 9.4%, which was primarily attributable to the circumstances around the COVID-19 pandemic, resulting in reduced demand most severely impacting the Coatings and Measurement business unit, which principally serves the midstream energy market, within the Steel Products and Measurement segment.

Gross profit decreased by $8,704 from the prior year to $86,302 for 2021. This decrease was attributable to the Steel Products and Measurement segment, which decreased by $11,786 from the prior year. Along with the decrease in gross profit, gross profit margin for 2021 was 16.8%, or 230 basis points lower than the prior year. The decrease in the current year margin was experienced in each of the three segments, which was primarily impacted by decreased sales volume within the Coatings and Measurement business unit, as well as raw material and labor inflation coupled with supply chain and manufacturing disruptions which impacted production and order fulfillment.

Selling and administrative expenses increased by $2,351, or 3.2%, over the prior year. The increase was primarily attributable to increases in personnel related expenses of $1,424 from the prior year, including an $809 increase in stock-based compensation

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expense, and an increase in third-party supplies and services of $1,135 compared to the prior year, largely related to the Company’s strategic assessment. As a result of the increased sales levels in 2021, selling and administrative expenses remained flat at 14.8% as a percentage of net sales as compared to the prior year.

For the year ended December 31, 2021, the Company recorded pretax income of $2,741 from the gain on sale of the Piling Products division. In the prior year, the Company recorded $673 in expense related to relocation and closure activities and income of $1,874 from an unconsolidated partnership distribution, all of which were recorded in “Other income - net.” Interest expense, net of interest income, for the year ended December 31, 2021 was reduced by $805 as a result of the $13,773 reduction in outstanding debt and favorable terms under the August 2021 credit agreement.

The Company’s effective income tax rate for 2021 was 24.4%, compared to (84.7)% in the prior year period. The Company’s income tax expense from continuing operations for 2021 included an income tax benefit of $2,130, net of valuation allowance, related to the disposition of the Test and Inspection Services business in addition to the income tax benefit of $15,840, net of valuation allowance, that was recorded in 2020. During 2021, the Company increased its valuation allowance provided against state deferred tax assets by $1,807, net of federal benefit, primarily related to forecasted expiration of state operating loss carryforwards. The positive evidence considered in evaluating U.S. deferred tax assets included cumulative financial income over the three-year period ended December 31, 2021, as well as the composition and reversal patterns of existing taxable and deductible temporary differences between financial reporting and tax. Based on our evaluation, the Company believed it was appropriate to rely on forecasted future taxable income to support its U.S. deferred tax assets. The amount of deferred tax assets considered to be realizable, however, could be adjusted in the future if negative evidence outweighs additional subjective evidence such as our projections for growth.

Net income from continuing operations for the year ended December 31, 2021 was $3,471, or $0.33 per diluted share, compared to net income from continuing operations for the 2020 period of $25,823, or $2.42 per diluted share.

Results of Operations — Segment Analysis

Rail, Technologies, and Services

Rail, Technologies, and Services segment sales increased by $23,302, or 8.4%, compared to the prior year. The sales increase was driven primarily by our Rail Products business unit, with year-over-year growth of $12,256, or 6.6%. The Global Friction Management and Technology Services and Solutions business units realized sales increases of $4,255, or 9.4%, and $6,791, or 15.2%, respectively. The sales volume increase was primarily driven by rises in demand due to more favorable market conditions in 2021 versus 2020, as the pandemic’s impact on freight, transit, and rail infrastructure project activity began to modestly improve.

Segment gross profit increased by $1,986, or 3.6%, which was driven by sales volume and improving demand in Global Friction Management and Technology Services and Solutions. Partially offsetting the increase were lower margins realized in Rail Products due to higher manufacturing input costs and supply chain disruptions. The Rail segment gross profit margin decreased by 90 basis points from the prior year due to the lower gross profit margins realized in Rail Products. The Rail segment profit for 2021 was $14,165, a segment profit margin of 4.7%, compared to $13,185, and a margin of 4.8% for 2020.

During 2021, the new orders within the Rail, Technologies, and Services segment decreased by 5.6% compared to the prior year. The decline in new orders was attributable to the Rail Products business unit, which was primarily related to declines in order activity for transit projects and concrete ties. Segment backlog decreased by 20.3% compared to the prior year, ending 2021 at $96,573.

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Precast Concrete Products