L.B. FOSTER COMPANY

(FSTR)
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FOSTER L B CO Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/03/2021 | 03:20pm EDT
(Dollars in thousands, except share data)
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking" statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
and Section 27A of the Securities Act of 1933, as amended. Many of the
forward-looking statements are located in "Management's Discussion and Analysis
of Financial Condition and Results of Operations" ("MD&A"). Forward-looking
statements provide management's current expectations of future events based on
certain assumptions and include any statement that does not directly relate to
any historical or current fact. Sentences containing words such as "believe,"
"intend," "plan," "may," "expect," "should," "could," "anticipate," "estimate,"
"predict," "project," or their negatives, or other similar expressions of a
future or forward-looking nature generally should be considered forward-looking
statements. Forward-looking statements in this Quarterly Report on Form 10-Q are
based on management's current expectations and assumptions about future events
that involve inherent risks and uncertainties and may concern, among other
things, the Company's expectations relating to our strategy, goals, projections,
and plans regarding our financial position, liquidity, capital resources, and
results of operations and decisions regarding our strategic growth initiatives,
market position, and product development. While the Company considers these
expectations and assumptions to be reasonable, they are inherently subject to
significant business, economic, competitive, regulatory, and other risks and
uncertainties, most of which are difficult to predict and many of which are
beyond the Company's control. The Company cautions readers that various factors
could cause the actual results of the Company to differ materially from those
indicated by forward-looking statements. Accordingly, investors should not place
undue reliance on forward-looking statements as a prediction of actual results.
Among the factors that could cause the actual results to differ materially from
those indicated in the forward-looking statements are risks and uncertainties
related to: the COVID-19 pandemic, including the impact of any worsening of the
pandemic, or the emergence of new variants of the virus, on our financial
condition or results of operations, and any future global health crises, and the
related social, regulatory, and economic impacts and the response thereto by the
Company, our employees, our customers, and national, state, or local
governments, including vaccine mandates; volatility in the prices of oil and
natural gas and the related impact on the upstream and midstream energy markets,
which could result in further cost mitigation actions, including additional
shutdowns or furlough periods; a continuation or worsening of the adverse
economic conditions in the markets we serve, whether as a result of the current
COVID-19 pandemic, including its impact on travel and demand for oil and gas,
the volatility in the prices for oil and gas, governmental travel restrictions,
project delays, and budget shortfalls, or otherwise; volatility in the global
capital markets, including interest rate fluctuations, which could adversely
affect our ability to access the capital markets on terms that are favorable to
us; restrictions on our ability to draw on our credit agreement, including as a
result of any future inability to comply with restrictive covenants contained
therein; a continuing decrease in freight or transit rail traffic, including as
a result of the COVID-19 pandemic; environmental matters, including any costs
associated with any remediation and monitoring; the risk of doing business in
international markets, including compliance with anti-corruption and bribery
laws, foreign currency fluctuations and inflation, and trade restrictions or
embargoes; our ability to effectuate our strategy, including cost reduction
initiatives, and our ability to effectively integrate acquired businesses or to
divest businesses, such as the third quarter of 2021 disposition of the Piling
Products business, 2020 disposition of the IOS Test and Inspection Services
business and acquisition of the LarKen Precast business, and to realize
anticipated benefits; costs of and impacts associated with shareholder activism;
continued customer restrictions regarding the on-site presence of third party
providers due to the COVID-19 pandemic; the timeliness and availability of
materials from our major suppliers, including any continuation or worsening of
the disruptions in the supply chain experienced as a result of the COVID-19
pandemic, as well as the impact on our access to supplies of customer
preferences as to the origin of such supplies, such as customers' concerns about
conflict minerals; labor disputes; cyber-security risks such as data security
breaches, malware, ransomware, "hacking," and identity theft, including as
experienced in 2020, which could disrupt our business and may result in misuse
or misappropriation of confidential or proprietary information, and could result
in the significant disruption or damage to our systems, increased costs and
losses, or an adverse effect to our reputation; the effectiveness of our
continued implementation of an enterprise resource planning system; changes in
current accounting estimates and their ultimate outcomes; the adequacy of
internal and external sources of funds to meet financing needs, including our
ability to negotiate any additional necessary amendments to our credit agreement
or the terms of any new credit agreement, and reforms regarding the use of LIBOR
as a benchmark for establishing applicable interest rates; the Company's ability
to manage its working capital requirements and indebtedness; domestic and
international taxes, including estimates that may impact taxes; domestic and
foreign government regulations, including tariffs; economic conditions and
regulatory changes caused by the United Kingdom's exit from the European Union;
a lack of state or federal funding for new infrastructure projects; an increase
in manufacturing or material costs; the loss of future revenues from current
customers; and risks inherent in litigation and the outcome of litigation and
product warranty claims. Should one or more of these risks or uncertainties
materialize, or should the assumptions underlying the forward-looking statements
prove incorrect, actual outcomes could vary materially from those indicated.
Significant risks and uncertainties that may affect the operations, performance,
and results of the Company's business and forward-looking statements include,
but are not limited to, those set forth under Item 1A, "Risk Factors," and
elsewhere in our Annual Report on Form 10-K for the year ended December 31,
2020, or as updated and/or amended by our other current or periodic filings with
the Securities and Exchange Commission.

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The forward-looking statements in this report are made as of the date of this
report and we assume no obligation to update or revise any forward-looking
statement, whether as a result of new information, future developments, or
otherwise, except as required by the federal securities laws.
General Overview and Business Update
L.B. Foster Company ("Company") provides products and services for the rail
industry and solutions to support critical infrastructure projects. The
Company's innovative engineering and product development solutions address the
safety, reliability, and performance of its customers' challenging requirements.
The Company maintains locations in North America, South America, Europe, and
Asia. The Company is organized and operates in two business segments: Rail
Technologies and Services ("Rail") and Infrastructure Solutions. The Rail
segment is comprised of several manufacturing and distribution businesses that
provide a variety of products and services for freight and passenger railroads
and industrial companies throughout the world. The Infrastructure Solutions
segment is composed of precast concrete products, fabricated bridge, protective
coating, threading, and precision measurement offerings across North America.

On September 24, 2021, the Company executed the sale of its Piling Products
division for $23,902 in total expected proceeds. 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 business unit within the Infrastructure
Solutions business segment. The Piling Products division revenues were $16,310
and $14,823 for the three months ended September 30, 2021 and 2020,
respectively, and $59,201 and $45,882 for the nine months ended September 30,
2021 and 2020, respectively.

Net sales for the third quarter of 2021 were $130,053, an $11,688 increase, or
9.9%, compared to the prior year quarter. The sales increase was primarily
attributable to the Company's Rail segment, which increased by 15.6% over the
prior year quarter. The $9,954 increase in the Rail segment was attributable to
an increase in rail distribution sales in the Rail Products business unit during
the quarter, coupled with an increase in revenues in the Company's European
operations as a result of increased service revenue following easing of pandemic
related restrictions in that region. The $1,734 increase in the Infrastructure
Solutions segment was attributable to increases in both its Precast Concrete
Products and Fabricated Steel Products business units, partially offset by the
Coatings and Measurement business unit, which continues to face a challenging
environment in the midstream energy market due to excess infrastructure pipeline
capacity.

Gross profit for the third quarter of 2021 was $22,276, a $215 increase, or
1.0%, from the prior year quarter. The 17.1% consolidated gross profit margin
decreased by 150 basis points when compared to the prior year quarter, with the
decline attributable to both segments. Gross profit increased in the Rail
segment by $971, driven by the $9,954 increase in revenues. The 140 basis point
decline in gross profit margin in the Rail segment was primarily attributable to
product mix in its Rail Technologies business unit during the quarter. In the
Infrastructure Solutions segment, gross profit declined from the prior year
quarter by $756, primarily driven by the decrease in revenues in the Coatings
and Measurement business line. Infrastructure Solution gross profit margin was
down 180 basis points compared to last year's third quarter.

Selling and administrative expenses in the third quarter of 2021 increased by
$2,990, or 17.5%, from the prior year quarter, primarily driven by increases in
personnel related costs, including travel and entertainment expenses, as well as
costs associated with the Company's strategic initiatives. Selling and
administrative expenses as a percent of net sales increased by 100 basis points
from the prior year quarter to 15.4%.

Net income from continuing operations for the third quarter of 2021 was $2,240,
or $0.21 per diluted share, a reduction of $14,338, or $1.35 per diluted share,
from the prior year quarter. The third quarter of 2021 was favorably impacted by
a gain of $2,046, net of tax, on the sale of the Piling Products division. The
prior year quarter was favorably impacted by a non-recurring income tax benefit
of $15,824 resulting from the sale of the IOS Test and Inspection Services
business.

The Company's consolidated backlog was $231,726 as of September 30, 2021, a
decrease of $3,464, or 1.5%, from the prior year period. The divestiture of the
Piling Products business unit during the quarter resulted in a $23,890 decline
in backlog versus last year. This backlog decline was partially offset by a
$20,867 increase in the Precast Concrete Products business unit, which continues
to benefit from infrastructure investment. The current inflationary cost
environment, including labor rates, is expected to continue to put pressure on
margins across our businesses, particularly in the Precast Concrete Products and
Fabricated Steel Products businesses. Actions to mitigate these impacts as much
as possible are on going. In addition, the Company continues to take proactive
steps to manage disruptions in raw materials, labor, supply chain, service
partner, and other lingering COVID-related effects in an attempt to mitigate
their adverse impact as much as possible. The Coatings and Measurement business
line continues to be affected by the ongoing deferral of infrastructure
investment in the midstream pipeline markets despite rising energy prices.
Certain areas of this business have experienced some modest improvement in the
current quarter with backlog increasing by $4,056 compared to September 30,
2020. 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
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structure of this business as appropriate to mitigate these negative market
conditions as much as possible. While the Rail segment's backlog increased
modestly year-over-year by $756 driven by increases in the Rail Products
business unit, new orders for this segment increased by 22.6% compared to the
prior year quarter. Global ridership has improved, but levels remain depressed
and well below pre-pandemic levels, a trend which is expected to continue to
adversely impact the Company's friction management consumable sales,
particularly in international markets. However, 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.

The Company expects its businesses will continue to directly benefit from
infrastructure investment activity, particularly if a U.S. Federal
infrastructure bill is passed by Congress. Additionally, with the proceeds from
the Piling Products division divestiture coupled with the additional flexibility
and capacity resulting from its recently amended credit agreement, the Company
believes that it has significant funding capacity to execute on organic and
acquisitive growth opportunities in 2022 and beyond.


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Results of the Quarter
                                                                                         Percent                    Percent of Total Net Sales
                                                  Three Months Ended                    Increase/                       Three Months Ended
                                                     September 30,                     (Decrease)                         September 30,
                                                2021               2020               2021 vs. 2020                 2021                  2020
Net Sales:
Rail Technologies and Services              $  73,942$  63,988                       15.6  %                 56.9  %               54.1  %
Infrastructure Solutions                       56,111             54,377                        3.2                    43.1                  45.9

Total net sales                             $ 130,053$ 118,365                        9.9  %                100.0  %              100.0  %

                                                                                         Percent                     Gross Profit Percentage
                                                  Three Months Ended                    Increase/                       Three Months Ended
                                                     September 30,                     (Decrease)                         September 30,
                                                2021               2020               2021 vs. 2020                 2021                  2020
Gross Profit:
Rail Technologies and Services              $  13,928$  12,957                        7.5  %                 18.8  %               20.2  %
Infrastructure Solutions                        8,348              9,104                       (8.3)                   14.9                  16.7

Total gross profit                          $  22,276$  22,061                        1.0  %                 17.1  %               18.6  %

                                                                                         Percent                    Percent of Total Net Sales
                                                  Three Months Ended                    Increase/                       Three Months Ended
                                                     September 30,                     (Decrease)                         September 30,
                                                2021               2020               2021 vs. 2020                 2021                  2020
Expenses:

Selling and administrative expenses $ 20,056$ 17,066

                   17.5  %                 15.4  %               14.4  %
Amortization expense                            1,462              1,428                        2.4                     1.1                   1.2

Interest expense - net                            722                940                      (23.2)                    0.6                   0.8

Other income - net                             (2,880)              (209)                            **                (2.2)                 (0.2)

Income from continuing operations
before income taxes                         $   2,916$   2,836                        2.8  %                  2.2  %                2.4  %
Income tax expense (benefit)                      676            (13,742)                     104.9                     0.5                 (11.6)
Income from continuing operations           $   2,240$  16,578                      (86.5  %)                 1.7  %               14.0  %
Net loss attributable to
noncontrolling interest                           (30)                 -                             **                (0.0)                    -
Income from continuing operations
attributable to L.B. Foster Company         $   2,270$  16,578                      (86.3  %)                 1.7  %               14.0  %



** Results of the calculation are not considered meaningful for presentation purposes.


Third Quarter 2021 Compared to Third Quarter 2020 - Company Analysis
Net sales of $130,053 for the three months ended September 30, 2021 increased by
$11,688, or 9.9%, compared to the prior year quarter. The sales growth was
attributable to a $9,954, or 15.6%, increase in the Rail Technologies and
Services segment and an increase in the Infrastructure Solutions segment of
$1,734, or 3.2%. The increased sales were driven by new rail delivery volume,
easing of pandemic restrictions in the U.K. leading to an uptick in operational
activity, and increased demand in our Fabricated Steel Products and Precast
Concrete Products business units.

Gross profit increased by $215 compared to the prior year quarter to $22,276 for
the three months ended September 30, 2021. The increase in gross profit was
attributable to the Rail Technologies and Services segment, which increased by
7.5% over the prior year quarter. The increase was partially offset by
Infrastructure Solutions segment, which decreased by 8.3%, driven primarily by
the year-over-year decline in sales in the Coatings and Measurement business
unit. Gross profit margin for the three months ended September 30, 2021 was
17.1%, or 150 basis points ("bps") lower than the prior year quarter, realized
in both segments.

Selling and administrative expenses increased by $2,990, or 17.5%, compared to
the prior year quarter. The increase in expense was primarily driven by an
increase of $1,698 in personnel expenses, including travel and entertainment,
and $898 in third-party professional service expenses primarily related to the
Company's strategic initiatives. As a percent of sales, selling and
administrative expenses increased by 100 bps compared to the prior year quarter.
Other income - net increased by $2,671 compared to the prior year quarter, due
to the $2,741 gain on sale of the Piling Products division in the current year
quarter.
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The Company's effective income tax rate for the three months ended September 30,
2021 was 23.2%, compared to (484.6 %) in the prior year quarter. The Company's
effective income tax rate for the quarter ended September 30, 2021 differed from
the federal statutory rate of 21% primarily due to state income taxes,
nondeductible expenses, and research tax credits. The Company's effective income
tax rate for the three months ended September 30, 2020 included a discrete
income tax benefit of $15,824 related to the disposition of the Test and
Inspection Services business.

Net income from continuing operations for the third quarter of 2021 was $2,240,
or $0.21 per diluted share, compared to $16,578, or $1.56 per diluted share, in
the prior year quarter. The decrease was driven by increases in selling and
administrative expense and the discrete income tax benefit realized in the prior
year quarter.
Results of Operations - Segment Analysis
Rail Technologies and Services
                                                        Three Months Ended                                                       Percent
                                                           September 30,                  Increase/(Decrease)              Increase/(Decrease)
                                                      2021               2020                2021 vs. 2020                    2021 vs. 2020
Net sales                                         $  73,942$  63,988          $          9,954                                   15.6  %
Gross profit                                      $  13,928$  12,957          $            971                                    7.5  %
Gross profit percentage                                18.8  %            20.2  %                   (1.4  %)                               (7.0  %)
Segment profit                                    $   3,555$   3,742          $           (187)                                  (5.0  %)
Segment profit percentage                               4.8  %             5.8  %                   (1.0  %)                              (17.2  %)



Third Quarter 2021 Compared to Third Quarter 2020
The Rail Technologies and Services segment sales for the three months ended
September 30, 2021 increased by $9,954, or 15.6%, compared to the prior year
quarter. The increase in sales was driven by both the Rail Products and Rail
Technologies business units, which increased by $7,853, or 19.4%, and $2,101, or
8.9%, respectively, from the prior year quarter. The increase in the Rail
Products business line was driven by the increase in rail distribution sales,
while the increase in the Rail Technologies business unit was related to
increases in our European operations attributable to increased contract service
revenue following the easing of pandemic related restrictions, as well as an
increase in North American friction management sales stemming from a modest
recovery in markets served.

The Rail Technologies and Services segment gross profit increased by $971, or
7.5%, from the prior year quarter. The increase was driven by increased sales
volume across both business units. Segment gross profit margin decreased by 140
bps as a result of revenue increases in our lower-margin distribution business
and inflationary cost pressure versus the prior year quarter. Segment profit was
$3,555, a $187 decrease over the prior year quarter. Selling and administrative
expenses incurred by the segment increased by $834 compared to the prior year
period, primarily attributable to increased personnel related costs, as well as
increased travel costs.

During the current quarter, the Rail Technologies and Services segment had an
increase in new orders of 22.6% compared to the prior year period, driven mostly
by the Rail Products business unit, although improvements were realized in both
business units. Backlog as of September 30, 2021 was $109,815, an increase of
$756, or 0.7%, from September 30, 2020, driven by increases in the Rail Products
business unit. Backlog remains strong, and was above pre-pandemic levels as of
September 30, 2021.

Infrastructure Solutions
                                                        Three Months Ended                                                       Percent
                                                           September 30,                  Increase/(Decrease)              Increase/(Decrease)
                                                      2021               2020                2021 vs. 2020                    2021 vs. 2020
Net sales                                         $  56,111$  54,377          $          1,734                                    3.2  %
Gross profit                                      $   8,348$   9,104          $           (756)                                  (8.3  %)
Gross profit percentage                                14.9  %            16.7  %                   (1.8  %)                              (11.1  %)
Segment profit                                    $   3,484$   2,375          $          1,109                                   46.7  %
Segment profit percentage                               6.2  %             4.4  %                    1.8  %                                42.2  %



Third Quarter 2021 Compared to Third Quarter 2020
On September 24, 2021, the Company completed the sale of its Piling Products
division. Proceeds expected from the sale were $23,902 and resulted in a net
gain of $2,741. The Company retained all pre-closing receivables and liabilities
associated with the division. The sale includes substantially all inventory held
by the Company associated with the division, as well as the related fixed
assets. The Piling Products division is included in the Fabricated Steel
business unit. The Piling Products division produced revenues of $16,310 and
$14,823 for the three months ended September 30, 2021 and 2020, respectively.
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The Infrastructure Solutions segment sales for the three months ended September
30, 2021 increased by $1,734, or 3.2%, compared to the prior year quarter. The
increase in revenues for the third quarter of 2021 was attributable to increases
in both its Fabricated Steel and Precast Concrete Products business units, which
had increases in sales compared to the prior year quarter of $3,672, or 16.6%,
and $2,227, or 14.1%, respectively. These increases in revenues were partially
offset by the Coatings and Measurement business unit, which experienced a sales
reduction of $4,165 compared to the quarter ended September 30, 2020, driven by
unfavorable conditions in the midstream energy market, which has resulted from
the current excess capacity in U.S. pipeline infrastructure and general lack of
pipeline infrastructure investment.

Infrastructure Solutions gross profit decreased by $756, or 8.3%, from the prior
year quarter. The decline was primarily attributable to decreases in sales
volume in the Coatings and Measurement business unit, which accounted for a
significant portion of the overall segment gross profit decline, and was also
the primary driver of segment gross profit margin decline of 180 bps for the
third quarter of 2021 when compared to the prior year quarter. Additionally,
inflationary cost pressure in the current quarter negatively impacted the gross
profit margins of the Precast Concrete Products and Fabricated Steel Products
businesses. Other income for the third quarter of 2021 increased by $2,671 when
compared to the prior quarter, primarily due to the Piling Products division
sale in the current quarter which resulted in a gain of $2,741. The segment
profit of $3,484 was an improvement of $1,109 from the prior year quarter
segment profit of $2,375.

During the quarter, the Infrastructure Solutions segment had an decrease in new
orders of 11.5% compared to the prior year quarter, driven by a decrease in
Fabricated Steel Products, which was partially offset by an increase in Precast
Concrete Products. Backlog as of September 30, 2021 was $121,911, a decrease of
$4,220, or 3.3%, from September 30, 2020 driven entirely by Fabricated Steel
Products, with the decrease in backlog related to the divested Piling Products
division representing $23,890 of the decrease. The decline in the Fabricated
Steel Products backlog was partially offset by increases in both Precast
Concrete Products and Coatings and Measurement backlog compared to September 30,
2020. Adjusting for the Piling Products division divestiture, Infrastructure
Solutions backlog was up $19,670, or 19.6%.

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Nine Month Results
                                                                                         Percent                    Percent of Total Net Sales
                                                   Nine Months Ended                    Increase/                       Nine Months Ended
                                                     September 30,                     (Decrease)                         September 30,
                                                2021               2020               2021 vs. 2020                 2021                  2020
Net Sales:
Rail Technologies and Services              $ 228,956$ 209,131                        9.5   %                57.1  %               54.8  %
Infrastructure Solutions                      171,699            172,704                       (0.6)                   42.9                  45.2

Total net sales                             $ 400,655$ 381,835                        4.9   %               100.0  %              100.0  %

                                                                                         Percent                     Gross Profit Percentage
                                                   Nine Months Ended                    Increase/                       Nine Months Ended
                                                     September 30,                     (Decrease)                         September 30,
                                                2021               2020               2021 vs. 2020                 2021                  2020
Gross Profit:
Rail Technologies and Services              $  43,393$  40,470                        7.2   %                19.0  %               19.4  %
Infrastructure Solutions                       23,874             32,851                      (27.3)                   13.9                  19.0

Total gross profit                          $  67,267$  73,321                       (8.3  %)                16.8  %               19.2  %

                                                                                         Percent                    Percent of Total Net Sales
                                                   Nine Months Ended                    Increase/                       Nine Months Ended
                                                     September 30,                     (Decrease)                         September 30,
                                                2021               2020               2021 vs. 2020                 2021                  2020
Expenses:

Selling and administrative expenses $ 57,849$ 56,273

                    2.8   %                14.4  %               14.7  %
Amortization expense                            4,397              4,271                        3.0                     1.1                   1.1

Interest expense - net                          2,454              2,841                      (13.6)                    0.6                   0.7

Other income - net                             (2,751)            (1,909)                      44.1                    (0.7)                 (0.5)

Income from continuing operations
before income taxes                         $   5,318$  11,845                      (55.1  %)                 1.3  %                3.1  %
Income tax expense (benefit)                    1,494            (11,698)                     112.8                     0.4                  (3.1)
Income from continuing operations           $   3,824$  23,543                      (83.8  %)                 1.0  %                6.2  %
Net loss attributable to
noncontrolling interest                           (64)                 -                             **                (0.0)                    -
Income from continuing operations
attributable to L.B. Foster Company         $   3,888$  23,543                      (83.5  %)                 1.0  %                6.2  %



** Results of the calculation are not considered meaningful for presentation purposes.


First Nine Months 2021 Compared to First Nine Months 2020 - Company Analysis
Net sales of $400,655 for the nine months ended September 30, 2021 increased by
$18,820, or 4.9%, compared to the prior year period. The sales growth was
attributable to an increase of $19,825, or 9.5%, within the Rail Technologies
and Services segment. The increase was partially offset by a sales reduction in
the Infrastructure Solutions segment of $1,005, or 0.6%.

Gross profit decreased by $6,054 compared to the prior year period to $67,267
for the nine months ended September 30, 2021. The Rail Technologies and Services
segment's gross profit increased by 7.2%. The decline in the Company's gross
profit was attributable to the Infrastructure Solutions segment, which decreased
by 27.3%, driven by the year-over-year decline in the Coatings and Measurement
business unit. Gross profit margin for the nine months ended September 30, 2021
was 16.8%, or 240 bps lower than the prior year period, due primarily to
Infrastructure Solutions.

Selling and administrative expenses increased by $1,576, or 2.8%, compared to
the prior year period. The increase in expense was primarily driven by
third-party professional service expenses of $1,361. As a percent of sales,
selling and administrative expenses decreased 30 bps compared to the prior year
period. Other income - net increased by $842 compared to the prior year period
primarily from the gain on sale of the Piling Products division of $2,741 in the
nine months ended September 30, 2021, while a non-routine distribution from an
unconsolidated partnership of $1,874 was received in the prior year period.

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The Company's effective income tax rate for the nine months ended September 30,
2021 was 28.1%, compared to (98.8 %) in the prior year period. The Company's
effective income tax rate for the nine months ended September 30, 2021 differed
from the federal statutory rate of 21% primarily due to state income taxes,
nondeductible expenses, and research tax credits. The Company's effective income
tax rate for the nine months ended September 30, 2020 included a discrete income
tax benefit of $15,824 related to the disposition of the Test and Inspection
Services business.

Net income from continuing operations for the nine months ended September 30,
2021 was $3,824, or $0.36 per diluted share, compared to $23,543, or $2.21 per
diluted share, in the prior year period. The year-over-year reduction was driven
by the decrease in gross profit, increased selling and administrative expenses,
and the discrete income tax benefit realized in the prior year period. This was
partially offset by the increase in other income resulting from the divestiture
gain.
Results of Operations - Segment Analysis
Rail Technologies and Services
                                                         Nine Months Ended                                                      Percent
                                                           September 30,                 Increase/(Decrease)              Increase/(Decrease)
                                                      2021               2020               2021 vs. 2020                    2021 vs. 2020
Net sales                                         $ 228,956$ 209,131          $         19,825                                   9.5  %
Gross profit                                      $  43,393$  40,470          $          2,923                                   7.2  %
Gross profit percentage                                19.0  %            19.4  %                   (0.4  %)                              (2.1  %)
Segment profit                                    $  12,050$  10,729          $          1,321                                  12.3  %
Segment profit percentage                               5.3  %             5.1  %                    0.2  %                                2.6  %



First Nine Months 2021 Compared to First Nine Months 2020
The Rail Technologies and Services segment sales for the nine months ended
September 30, 2021 increased by $19,825, or 9.5%, compared to the prior year
period, driven by increases in the Rail Products and Rail Technologies business
units of $11,830, or 8.2%, and $7,996 or 12.4%, respectively. The sales increase
was primarily driven by rises in demand due to more favorable conditions in
markets served for the first nine months of 2021 versus the first nine months of
2020, as the pandemic impact on freight and transit activity began to modestly
improve.

The Rail Technologies and Services segment gross profit increased by $2,923, or
7.2%, from the prior year period. The increase was driven by increased sales
volume across both business units, including increases related to activity on
the London Crossrail project. Segment gross profit margin of 19.0% for the nine
months ended September 30, 2021 declined by 40 basis points when compared to the
prior year period, driven by volume increases in lower margin rail products
coupled with some inflationary cost pressures. Segment profit was $12,050, a
$1,321 increase over the prior year period. Selling and administrative expenses
incurred by the segment increased by $161 compared to the prior year period,
primarily attributable to personnel related costs. Other income declined $1,138
from the prior year period primarily from the reversal of an estimated disposal
liability in the prior year period.

During the nine months ended September 30, 2021, the Rail Technologies and
Services segment had an increase in new orders of 2.7% compared to the prior
year period. The increase was related to increased order activity within the
Company's Rail Technologies business unit.

Infrastructure Solutions
                                    Nine Months Ended                                    Percent
                                      September 30,                Decrease             Decrease
                                   2021            2020         2021 vs. 2020         2021 vs. 2020
Net sales                      $ 171,699$ 172,704$     (1,005)                  (0.6  %)
Gross profit                   $  23,874$  32,851$     (8,977)                 (27.3  %)
Gross profit percentage             13.9  %         19.0  %            (5.1  %)              (26.9  %)
Segment profit                 $   5,165$   8,836$     (3,671)                 (41.5  %)
Segment profit percentage            3.0  %          5.1  %            (2.1  %)              (41.2  %)



First Nine Months 2021 Compared to First Nine Months 2020
On September 24, 2021, the Company completed the sale of its Piling Products
division. Proceeds from the sale were $23,902 and resulted in a net gain of
$2,741. The Company is retaining all pre-closing receivables and liabilities
associated with the division. The sale includes substantially all inventory held
by the Company associated with the division, as well as the related fixed
assets. The
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Piling Products division is included in the Fabricated Steel business unit. The
Piling Products division produced revenues of $59,201 and $45,882 for the nine
months ended September 30, 2021 and 2020, respectively.

The Infrastructure Solutions segment sales for the nine months ended September
30, 2021 decreased by $1,005, or 0.6%, compared to the prior year period. The
decline was wholly attributable to the Coatings and Measurement business unit,
which experienced a sales reduction of $28,557 compared to the nine months ended
September 30, 2020, driven by unfavorable conditions in the midstream energy
market, which have resulted from excess capacity in U.S. pipeline infrastructure
and general lack of pipeline infrastructure investment. Partially offsetting the
sales decline, both the Fabricated Steel Products and Precast Concrete Products
business units had increases in sales compared to the prior year period of
$19,645 and $7,907, respectively.

Infrastructure Solutions gross profit for the nine months ended September 30,
2021 decreased by $8,977, or 27.3%, from the prior year period. The decrease was
primarily attributable to decreases in sales volume in the Coatings and
Measurement business unit, which accounted for the overall segment gross profit
decline, and was also the primary driver of segment gross profit margin decline
of 510 bps for the nine months ended September 30, 2021 when compared to the
prior year period. Additionally, inflationary cost pressure in the current
period negatively impacted the gross profit margins of the Precast Concrete
Products and Fabricated Steel Products businesses. Selling and administrative
expenses for the segment declined by $1,095 from the prior year period,
primarily from decreases in personnel related expenses, bad debt expense, and
general administrative expenses. Other income increased by $4,269 from the prior
year period primarily due to the Piling Products division sale in the current
period resulting in a gain of $2,741, while the prior year period was impacted
by relocation and restructuring costs. The segment profit of $5,165 was a
reduction of $3,671 from the prior year period segment profit of $8,836.

During the nine months ended September 30, 2021, the Infrastructure Solutions
segment had an increase in new orders of 6.7% compared to the prior year period,
driven primarily by an increase in Precast Concrete Products partially offset by
Fabricated Steel Products.

Other

Segment Backlog
Total Company backlog is summarized by business segment in the following table
for the periods indicated:
                                     September 30,       December 31,       September 30,
                                          2021               2020                2020
Rail Technologies and Services      $      109,815$     121,231$      109,059
Infrastructure Solutions                   121,911            127,001             126,131

Total backlog                       $      231,726$     248,232$      235,190

The backlog for Infrastructure Solutions includes $1,961, $32,042, and $25,851 related to the divested Piling Products division as of September 30, 2021, December 31, 2020, and September 30, 2020, respectively, in the above table.


The Company's backlog represents the sales price of received customer purchase
orders and any contracts for which the performance obligations have not been
met, and therefore are precluded from revenue recognition. Although the Company
believes that the orders included in backlog are firm, customers may cancel or
change their orders with limited advance notice; however, these instances have
been rare. Backlog should not be considered a reliable indicator of the
Company's ability to achieve any particular level of revenue or financial
performance. While a considerable portion of the Company's business is
backlog-driven, certain product lines within the Company are not driven by
backlog as the orders are fulfilled shortly after they are received.

Liquidity and Capital Resources
The Company's principal sources of liquidity are its existing cash and cash
equivalents, cash generated by operations, and the available capacity under the
revolving credit facility, which provides for a total commitment of up to
$130,000. The Company's primary needs for liquidity relate to working capital
requirements for operations, capital expenditures, debt service obligations, and
payments related to the Union Pacific Railroad Settlement. The Company's total
debt was $32,453 and $45,024 as of September 30, 2021 and December 31, 2020,
respectively, and was primarily comprised of borrowings under its revolving
credit facility.







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The following table reflects available funding capacity, subject to covenant
restrictions, as of September 30, 2021:
                                                              September 30, 2021
Cash and cash equivalents                                                $   6,405
Credit agreement:
Total availability under the credit agreement               130,000

Outstanding borrowings on revolving credit facility (32,268) Letters of credit outstanding

                                  (665)
Net availability under the revolving credit facility                        

97,067

Total available funding capacity                                         $ 

103,472




The Company's cash flows are impacted from period to period by fluctuations in
working capital. While the Company places an emphasis on working capital
management in its operations, factors such as its contract mix, commercial
terms, customer payment patterns, and market conditions as well as seasonality
may impact its working capital. The Company regularly assesses its receivables
and contract assets for collectability, and provides allowances for credit
losses where appropriate. The Company believes that its reserves for credit
losses are appropriate as of September 30, 2021, but adverse changes in the
economic environment and adverse financial conditions of its customers resulting
from, among other things, the COVID-19 pandemic, may impact certain of its
customers' ability to access capital and pay the Company for its products and
services, as well as impact demand for its products and services.

The changes in cash and cash equivalents for the nine months ended September 30, 2021 and 2020 were as follows:

                                                                         Nine Months Ended September
                                                                                     30,
                                                                            2021              2020

Net cash (used in) provided by continuing operating activities $ (6,810)$ 16,201 Net cash provided by (used in) continuing investing activities

             18,910            (8,688)
Net cash used in continuing financing activities                          (13,030)          (11,147)
Effect of exchange rate changes on cash and cash equivalents                   24              (571)
Net cash used in discontinued operations                                     (253)             (662)
Net decrease in cash and cash equivalents                               $  

(1,159) $ (4,867)




Cash Flow from Operating Activities
During the nine months ended September 30, 2021, cash flows used in continuing
operating activities were $6,810, compared to cash flows provided by continuing
operating activities of $16,201 during the prior year to date period. For the
nine months ended September 30, 2021, the net income from continuing operations
and adjustments to net income from continuing operating activities provided
$13,880, compared to $26,841 in the 2020 period. Working capital and other
assets and liabilities used $20,690 in the current period, compared to $10,640
in the prior year period. During the nine months ended September 30, 2021 and
2020, the Company made payments of $4,000 under the terms of the concrete tie
settlement agreement with Union Pacific Railroad.

The Company's calculation for days sales outstanding at September 30, 2021 and
December 31, 2020 was 46 and 51 days, respectively, and the Company believes it
has a high quality receivables portfolio.

Cash Flow from Investing Activities
Capital expenditures for the nine months ended September 30, 2021 and 2020 were
$3,568 and $7,650, respectively. The current period expenditures primarily
relate to the expansion of the Precast Concrete Products business line in Texas
and the implementation of the SAP ERP system at additional Company divisions.
Expenditures for the nine months ended September 30, 2020 related to the
purchase of a continuous welded rail car and unloader within the Rail
Technologies and Services segment, facility start-up expenditures within the
Infrastructure Solutions segment, and general plant and operational improvements
throughout the Company. During the nine months ended September 30, 2021, the
Company received proceeds of $22,707 from the disposition of the Piling Products
division.

Cash Flow from Financing Activities
During the nine months ended September 30, 2021 and 2020, the Company had a
reduction in outstanding debt of $12,519 and $9,033, respectively. The decrease
in debt for the nine months ended September 30, 2021 was the result of the
application of the proceeds of the Piling Products division, while the decrease
in 2020 was primarily attributable to the utilization of excess cash generated
through operating activities. Treasury stock acquisitions of $549 and $1,660 for
the nine months ended September 30, 2021
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and 2020, respectively, represent stock repurchases from employees to satisfy
their income tax withholdings in connection with the vesting of stock awards.

Financial Condition
As of September 30, 2021, the Company had $6,405 in cash and cash equivalents.
The Company's cash management priority continues to be short-term maturities and
the preservation of its principal balances. As of September 30, 2021,
approximately $3,141 of the Company's cash and cash equivalents were held in
non-domestic bank accounts. The Company principally maintains its cash and cash
equivalents in accounts held by major banks and financial institutions.

The Company's principal uses of cash in recent years have been to fund its
operations, including capital expenditures, and to service its indebtedness. The
Company views its liquidity as being dependent on its results of operations,
changes in working capital needs, and its borrowing capacity. As of
September 30, 2021, its revolving credit facility had $97,067 of net
availability, while the Company had $32,453 in total debt. The Company's current
ratio as of September 30, 2021 was 1.99 compared to 2.05 as of December 31,
2020.

On August 13, 2021, the Company entered into the Credit Agreement, which
increases the total commitments under the revolving credit facility to $130,000
from $115,000, extends the maturity from April 30, 2024 to August 13, 2026, and
provides more favorable covenant terms. Borrowings under the Credit Agreement
bear interest rates based upon either the base rate or LIBOR rate plus
applicable margins. The Company believes that the combination of its cash and
cash equivalents, cash generated from operations, and the capacity under its
revolving credit facility should provide the Company with sufficient liquidity
to provide the flexibility to operate the business in a prudent manner and
enable the Company to continue to service its outstanding debt. For a discussion
of the terms and availability of the credit facilities, please refer to Note 10
of the Notes to Condensed Consolidated Financial Statements contained in this
Quarterly Report on Form 10-Q.

To reduce the impact of interest rate changes on outstanding variable-rate debt,
the Company entered into forward starting LIBOR-based interest rate swaps with
notional values totaling $50,000 and $20,000, effective February 28, 2017 and
March 1, 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. During 2020, the Company dedesignated its 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. As of
September 30, 2021 and December 31, 2020, the swap liability was $445 and
$1,097, respectively.

Critical Accounting Policies
The Condensed Consolidated Financial Statements have been prepared in conformity
with accounting principles generally accepted in the United States. When more
than one accounting principle, or method of its application, is generally
accepted, management selects the principle or method that, in its opinion, is
appropriate in the Company's specific circumstances. Application of these
accounting principles requires management to reach opinions regarding estimates
about the future resolution of existing uncertainties. As a result, actual
results could differ from these estimates. In preparing these financial
statements, management has reached its opinions regarding the best estimates and
judgments of the amounts and disclosures included in the financial statements
giving due regard to materiality. A summary of the Company's critical accounting
policies and estimates is included in Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Critical Accounting
Policies and Estimates in the Company's Annual Report on Form 10-K for the year
ended December 31, 2020.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
This item is not applicable to a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
L.B. Foster Company carried out an evaluation, under the supervision and with
the participation of the Company's management, including the Chief Executive
Officer and the Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended) as of September 30, 2021. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective as of such date such that the
information required to be disclosed by the Company in reports filed under the
Exchange Act is (i) recorded, processed, summarized, and reported within the
time periods specified in the SEC's rules and forms and (ii) accumulated and
communicated to management, including the chief executive officer, chief
financial officer, or person performing such functions, as appropriate to allow
timely decisions regarding disclosure.



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Changes in Internal Control Over Financial Reporting
There were no changes to our "internal control over financial reporting" (as
such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the nine months ended September 30, 2021, and that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

Limitations on Effectiveness of Controls and Procedures
In designing and evaluating disclosure controls and procedures and internal
control over financial reporting, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives. In addition,
the design of disclosure controls and procedures and internal control over
financial reporting must reflect the fact that there are resource constraints
and that management is required to apply judgment in evaluating the benefits of
possible controls and procedures relative to their costs.

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