L.B. Foster - 10-Q quarterly report FY2022 Q2

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended June 30, 2022


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to

Commission File Number: 000-10436

L.B. Foster Company

(Exact name of registrant as specified in its charter)


Pennsylvania						25-1324733
(State of Incorporation)						(I. R. S. Employer Identification No.)


415 Holiday Drive, Suite 100, Pittsburgh, Pennsylvania						15220
(Address of principal executive offices)						(Zip Code)

(412) 928-3400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01

FSTR

NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 2, 2022, there were 10,929,468 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

L.B. FOSTER COMPANY AND SUBSIDIARIES

INDEX


			Page
PART I. Financial Information

Item 1. Financial Statements:

Condensed Consolidated Balance Sheets			3

Condensed Consolidated Statements of Operations			4

Condensed Consolidated Statements of Comprehensive (Loss) Income			5

Condensed Consolidated Statements of Cash Flows			6

Condensed Consolidated Statements of Stockholders’ Equity			7

Notes to Condensed Consolidated Financial Statements			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23

Item 3. Quantitative and Qualitative Disclosures about Market Risk			33

Item 4. Controls and Procedures			33

PART II. Other Information			33

Item 1. Legal Proceedings			34

Item 1A. Risk Factors			34

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			34

Item 3. Defaults Upon Senior Securities			34

Item 4. Mine Safety Disclosures			34

Item 5. Other Information			34

Item 6. Exhibits			35

Signature			36

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	June 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	7,661	$	10,372
Accounts receivable - net (Note 5)	72,252		55,911
Contract assets - net (Note 3)	31,023		36,179
Inventories - net (Note 6)	73,391		62,871


Other current assets	18,551		14,146

Total current assets	202,878		179,479
Property, plant, and equipment - net (Note 7)	56,900		58,222
Operating lease right-of-use assets - net (Note 8)	13,538		15,131
Other assets:
Goodwill (Note 4)	24,571		20,152
Other intangibles - net (Note 4)	29,540		31,023

Deferred tax assets (Note 11)	36,777		37,242
Other assets	1,218		1,346

TOTAL ASSETS	$	365,422	$	342,595
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	49,944	$	41,411
Deferred revenue	19,072		13,411
Accrued payroll and employee benefits	6,565		9,517

Current portion of accrued settlement (Note 15)	8,000		8,000
Current maturities of long-term debt (Note 9)	64		98
Other accrued liabilities	12,959		13,757

Total current liabilities	96,604		86,194
Long-term debt (Note 9)	49,222		31,153
Deferred tax liabilities (Note 11)	3,628		3,753
Long-term portion of accrued settlement (Note 15)	14,000		16,000
Long-term operating lease liabilities (Note 8)	10,785		12,279
Other long-term liabilities	10,144		9,606

Stockholders’ equity:
Common stock, par value $0.01, authorized 20,000,000 shares; shares issued at June 30, 2022 and December 31, 2021, 11,115,779; shares outstanding at June 30, 2022 and December 31, 2021, 10,730,950 and 10,670,343, respectively	111		111
Paid-in capital	42,201		43,272
Retained earnings	169,177		168,733
Treasury stock - at cost, 384,829 and 445,436 common stock shares at June 30, 2022 and December 31, 2021, respectively	(8,391)		(10,179)
Accumulated other comprehensive loss	(22,547)		(18,845)
Total L.B. Foster Company stockholders’ equity	180,551		183,092
Noncontrolling interest	488		518
Total stockholders’ equity	181,039		183,610
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	365,422	$	342,595

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021


Sales of goods	$	116,584	$	138,309	$	201,005	$	238,855
Sales of services	14,931		16,213		29,304		31,747
Total net sales	131,515		154,522		230,309		270,602
Cost of goods sold	95,331		115,087		165,176		199,212
Cost of services sold	12,891		13,274		25,393		26,399
Total cost of sales	108,222		128,361		190,569		225,611
Gross profit	23,293		26,161		39,740		44,991
Selling and administrative expenses	19,394		19,767		36,692		37,793
Amortization expense	1,419		1,470		2,855		2,935
Operating profit	2,480		4,924		193		4,263

Interest expense - net	384		861		754		1,732


Other (income) expense - net	(701)		70		(1,264)		129

Income before income taxes	2,797		3,993		703		2,402
Income tax expense	821		1,139		313		818
Net income	1,976		2,854		390		1,584
Net loss attributable to noncontrolling interest	(34)		(22)		(54)		(34)





Net income attributable to L.B. Foster Company	$	2,010	$	2,876	$	444	$	1,618



Basic earnings per common share	$	0.18	$	0.27	$	0.04	$	0.15



Diluted earnings per common share	$	0.18	$	0.27	$	0.04	$	0.15

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

(In thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021


Net income	$	1,976	$	2,854	$	390	$	1,584
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment	(3,688)		538		(4,568)		961
Unrealized gain on cash flow hedges, net of tax expense of $50, $0, $238,and $0, respectively	147		—		698		—
Cash flow hedges reclassified to earnings, net of tax expense of $0, $98, $66, and $196, respectively	—		137		93		273
Reclassification of pension liability adjustments to earnings, net of tax expense of $16, $24, $32, and $48, respectively*	50		91		99		182
Total comprehensive (loss) income	(1,515)		3,620		(3,288)		3,000
Less comprehensive income (loss) attributable to noncontrolling interest:
Net loss attributable to noncontrolling interest	(34)		(22)		(54)		(34)
Foreign currency translation adjustment	(61)		51		24		21
Amounts attributable to noncontrolling interest	(95)		29		(30)		(13)
Comprehensive (loss) income attributable to L.B. Foster Company	$	(1,420)	$	3,591	$	(3,258)	$	3,013


*			Reclassifications out of “Accumulated other comprehensive loss” for pension obligations are charged to “Selling and administrative expenses” within the Condensed Consolidated Statements of Operations.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

Table of Contents

L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2022		2021


CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	390	$	1,584
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Deferred income taxes	(173)		(93)
Depreciation	3,814		4,008
Amortization	2,855		2,935

Equity in income of nonconsolidated investments	(87)		—
(Gain) loss on sales and disposals of property, plant, and equipment	(214)		30
Stock-based compensation	1,183		1,213
Gain on asset divestiture	(491)		—


Change in operating assets and liabilities:
Accounts receivable	(17,327)		(19,876)
Contract assets	2,190		(2,653)
Inventories	(10,695)		5,473
Other current assets	(3,573)		(650)

Other noncurrent assets	1,715		1,215

Accounts payable	9,347		10,854
Deferred revenue	5,301		10,168
Accrued payroll and employee benefits	(2,943)		(1,506)
Accrued settlement	(2,000)		(2,000)
Other current liabilities	(1,748)		(2,561)
Other long-term liabilities	(926)		(1,299)
Net cash (used in) provided by continuing operating activities	(13,382)		6,842
Net cash used in discontinued operating activities	—		(253)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property, plant, and equipment	237		—
Capital expenditures on property, plant, and equipment	(3,048)		(2,248)
Proceeds from asset divestiture	1,195		—
Acquisition, net of cash acquired	(5,712)		—
Net cash used in continuing investing activities	(7,328)		(2,248)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt	(78,093)		(90,666)
Proceeds from debt	96,970		82,899



Treasury stock acquisitions	(401)		(547)

Investment of noncontrolling interest	—		396
Net cash provided by (used in) continuing financing activities	18,476		(7,918)

Effect of exchange rate changes on cash and cash equivalents	(477)		153
Net decrease in cash and cash equivalents	(2,711)		(3,424)
Cash and cash equivalents at beginning of period	10,372		7,564
Cash and cash equivalents at end of period	$	7,661	$	4,140
Supplemental disclosure of cash flow information:
Interest paid	$	662	$	1,439
Income taxes paid	$	389	$	898

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)


	Three Months Ended June 30, 2022
	Common Stock		Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Stockholders’ Equity
Balance, March 31, 2022	$	111	$	42,153	$	167,167	$	(9,200)	$	(19,117)	$	583	$	181,697

Net income	—		—		2,010		—		—		(34)		1,976
Other comprehensive loss, net of tax:
Pension liability adjustment	—		—		—		—		50		—		50
Foreign currency translation adjustment	—		—		—		—		(3,627)		(61)		(3,688)
Unrealized derivative gain on cash flow hedges	—		—		—		—		147		—		147


Issuance of 26,167 common shares, net of shares withheld for taxes	—		(877)		—		809		—		—		(68)
Stock-based compensation	—		925		—		—		—		—		925


Balance, June 30, 2022	$	111	$	42,201	$	169,177	$	(8,391)	$	(22,547)	$	488	$	181,039


	Three Months Ended June 30, 2021
	Common Stock		Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Stockholders’ Equity
Balance, March 31, 2021	$	111	$	43,943	$	163,849	$	(11,783)	$	(19,588)	$	354	$	176,886

Net income	—		—		2,876		—		—		(22)		2,854
Other comprehensive income, net of tax:
Pension liability adjustment	—		—		—		—		91		—		91
Foreign currency translation adjustment	—		—		—		—		487		51		538

Cash flow hedges reclassified to earnings	—		—		—		—		137		—		137

Issuance of 30,145 common shares, net of shares withheld for taxes	—		(679)		—		679		—		—		—
Stock-based compensation	—		386		—		—		—		—		386


Balance, June 30, 2021	$	111	$	43,650	$	166,725	$	(11,104)	$	(18,873)	$	383	$	180,892

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands)


	Six Months Ended June 30, 2022
	Common Stock		Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Stockholders’ Equity
Balance, December 31, 2021	$	111	$	43,272	$	168,733	$	(10,179)	$	(18,845)	$	518	$	183,610

Net income	—		—		444		—		—		(54)		390
Other comprehensive (loss) income, net of tax:
Pension liability adjustment	—		—		—		—		99		—		99
Foreign currency translation adjustment	—		—		—		—		(4,592)		24		(4,568)
Unrealized derivative gain on cash flow hedges	—		—		—		—		698		—		698
Cash flow hedges reclassified to earnings	—		—		—		—		93		—		93

Issuance of 60,607 common shares, net of shares withheld for taxes	—		(2,254)		—		1,788		—		—		(466)
Stock-based compensation	—		1,183		—		—		—		—		1,183


Balance, June 30, 2022	$	111	$	42,201	$	169,177	$	(8,391)	$	(22,547)	$	488	$	181,039


	Six Months Ended June 30, 2021
	Common Stock		Paid-in Capital		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Stockholders’ Equity
Balance, December 31, 2020	$	111	$	44,583	$	165,107	$	(12,703)	$	(20,268)	$	—	$	176,830

Net income	—		—		1,618		—		—		(34)		1,584
Other comprehensive income (loss), net of tax:													—
Pension liability adjustment	—		—		—		—		182		—		182
Foreign currency translation adjustment	—		—		—		—		940		21		961

Cash flow hedges reclassified to earnings	—		—		—		—		273		—		273

Issuance of 76,030 common shares, net of shares withheld for taxes	—		(2,146)		—		1,599		—		—		(547)
Stock-based compensation	—		1,213		—		—		—		—		1,213

Investment of noncontrolling interest	—		—		—		—		—		396		396
Balance, June 30, 2021	$	111	$	43,650	$	166,725	$	(11,104)	$	(18,873)	$	383	$	180,892

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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L.B. FOSTER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands, except share data)

Note 1. Financial Statements

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all estimates and adjustments (consisting of normal recurring accruals, unless otherwise stated herein) considered necessary for a fair presentation of the financial position and Condensed Consolidated Statements of Cash Flows of L.B. Foster Company and subsidiaries as of June 30, 2022 and December 31, 2021 and its Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive (Loss) Income, and Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021 have been included. However, actual results could differ from those estimates and changes in those estimates are recorded when known. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The Condensed Consolidated Balance Sheet as of December 31, 2021 was derived from audited financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes thereto included in L.B. Foster Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In this Quarterly Report on Form 10-Q, references to “we,” “us,” “our,” and the “Company” refer collectively to L.B. Foster Company and its consolidated subsidiaries.

Reclassifications

Certain accounts in the prior year consolidated financial statements have been reclassified for comparative purposes principally to conform to the presentation of the current year period. Effective for the quarter and year ended December 31, 2021, the Company implemented operational changes in how its Chief Operating Decision Maker (“CODM”) manages its businesses, including resource allocation and operating decisions. As a result of these changes, the Company has three reporting segments, representing the individual businesses that are run separately under the new structure: Rail, Technologies, and Services; Precast Concrete Products; and Steel Products and Measurement. The Company has revised the information for all periods presented in this Quarterly Report on Form 10-Q to reflect these reclassifications.

Recently Issued Accounting Standards

In March 2020 and as clarified in January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impacts of the provisions of ASU 2020-04 on its financial condition, results of operations, and cash flows.

Note 2. Business Segments

The Company is a global solutions provider of engineered, manufactured products and services that builds and supports infrastructure. The Company’s innovative engineering and product development solutions address the safety, reliability, and performance needs of its customers’ most challenging requirements. The Company maintains locations in North America, South America, Europe, and Asia. The Company’s segments represent components of the Company (a) that engage in activities from which revenue is generated and expenses are incurred, (b) whose operating results are regularly reviewed by the CODM, who uses such information to make decisions about resources to be allocated to the segments, and (c) for which discrete financial information is available. Operating segments are evaluated on their segment profit contribution to the Company’s consolidated results. Other income and expenses, interest, income taxes, and certain other items are managed on a consolidated basis. The Company’s segment accounting policies are described in Note 2 Business Segments of the Notes to the Company’s Consolidated Financial Statements contained in its Annual Report on Form 10-K for the year-ended December 31, 2021.

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The following table illustrates the Company’s revenues and profit (loss) from operations by segment for the periods indicated:


	Three Months Ended June 30, 2022				Three Months Ended June 30, 2021
	Net Sales		Segment Operating Profit (Loss)		Net Sales		Segment Operating Profit
Rail, Technologies, and Services	$	81,797	$	3,998	$	88,782	$	5,657
Precast Concrete Products	23,611		(125)		20,073		1,148
Steel Products and Measurement	26,107		762		45,667		814
Total	$	131,515	$	4,635	$	154,522	$	7,619


	Six Months Ended June 30, 2022				Six Months Ended June 30, 2021
	Net Sales		Segment Operating Profit (Loss)		Net Sales		Segment Operating Profit (Loss)
Rail, Technologies, and Services	$	145,507	$	5,037	$	155,014	$	7,879
Precast Concrete Products	38,621		(916)		32,751		1,031
Steel Products and Measurement	46,181		(1,386)		82,837		(113)
Total	$	230,309	$	2,735	$	270,602	$	8,797

Segment profit from operations, as shown above, includes allocated corporate operating expenses. Operating expenses related to corporate headquarter functions that directly support the segment activity are allocated based on segment headcount, revenue contribution, or activity of the business units within the segments, based on the corporate activity type provided to the segment. The expense allocation excludes certain corporate costs that are separately managed from the segments.

The following table provides a reconciliation of segment net profit to the Company’s consolidated total for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Operating profit for reportable segments	$	4,635	$	7,619	$	2,735	$	8,797
Interest expense - net	(384)		(861)		(754)		(1,732)

Other income (expense) - net	701		(70)		1,264		(129)


Unallocated corporate expenses and other unallocated charges	(2,155)		(2,695)		(2,542)		(4,534)
Income before income taxes	$	2,797	$	3,993	$	703	$	2,402

The following table illustrates assets of the Company by segment for the periods presented:


	June 30, 2022		December 31, 2021
Rail, Technologies, and Services	$	174,857	$	171,608
Precast Concrete Products	58,203		48,740
Steel Products and Measurement	60,267		58,377
Unallocated corporate assets	72,095		63,870
Total	$	365,422	$	342,595

Note 3. Revenue

Revenue from products or services provided to customers over time accounted for 27.5% and 27.9% of revenue for the three months ended June 30, 2022 and 2021, respectively, and 28.8% and 26.8% of revenue for the six months ended June 30, 2022 and 2021, respectively. The majority of revenue under these long-term agreements is 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 its performance to date under the terms of the contract. Revenue recognized over time using an input measure was $20,089 and $27,687 for the three months ended June 30, 2022 and 2021, respectively, and $39,411 and $48,795 for the six months ended June 30, 2022 and 2021, respectively. 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. Revenue recognized over

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time using an output measure was $16,013 and $15,487 for the three months ended June 30, 2022 and 2021, respectively, and $26,994 and $23,751 for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022 and December 31, 2021, the Company had contract assets of $31,023 and $36,179, respectively, that were recorded within the Condensed Consolidated Balance Sheets. As of June 30, 2022 and December 31, 2021, the Company had contract liabilities of $2,584 and $3,235, respectively, that were recorded in “Deferred revenue” within the Condensed Consolidated Balance Sheets.

The majority of the Company’s revenue is from products transferred and services rendered to customers at a point in time. Point in time revenue accounted for 72.5% and 72.1% of revenue for the three months ended June 30, 2022 and 2021, respectively, and 71.2% and 73.2% for six months ended June 30, 2022 . The Company recognizes revenue at the point in time at which the customer obtains control of the product or service, which is generally when the 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 a physical location.

The following table summarizes the Company’s net sales by major product and service category for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Rail Products and Global Friction Management	$	70,416	$	76,756	$	122,067	$	132,068
Technology Services and Solutions	11,381		12,026		23,440		22,946
Rail, Technologies, and Services	81,797		88,782		145,507		155,014
Precast Concrete Buildings	15,811		16,349		25,781		26,630
Other Precast Concrete Products	7,800		3,724		12,840		6,121
Precast Concrete Products	23,611		20,073		38,621		32,751
Fabricated Steel Products	17,967		32,223		30,571		59,944
Coatings and Measurement	8,140		13,444		15,610		22,893
Steel Products and Measurement	26,107		45,667		46,181		82,837
Total net sales	$	131,515	$	154,522	$	230,309	$	270,602

Net sales by the timing of the transfer of products and performance of services was as follows for the periods presented:


	Three Months Ended June 30, 2022
	Rail, Technologies, and Services		Precast Concrete Products		Steel Products and Measurement		Total
Point in time	$	65,872	$	8,577	$	20,964	$	95,413
Over time	15,925		15,034		5,143		36,102
Total net sales	$	81,797	$	23,611	$	26,107	$	131,515

	Three Months Ended June 30, 2021
	Rail, Technologies, and Services		Precast Concrete Products		Steel Products and Measurement		Total
Point in time	$	71,711	$	5,195	$	34,442	$	111,348
Over time	17,071		14,878		11,225		43,174
Total net sales	$	88,782	$	20,073	$	45,667	$	154,522

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	Six Months Ended June 30, 2022
	Rail, Technologies, and Services		Precast Concrete Products		Steel Products and Measurement		Total
Point in time	$	115,038	$	12,840	$	36,026	$	163,904
Over time	30,469		25,781		10,155		66,405
Total net sales	$	145,507	$	38,621	$	46,181	$	230,309

	Six Months Ended June 30, 2021
	Rail, Technologies, and Services		Precast Concrete Products		Steel Products and Measurement		Total
Point in time	$	123,755	$	9,931	$	64,370	$	198,056
Over time	31,259		22,820		18,467		72,546
Total net sales	$	155,014	$	32,751	$	82,837	$	270,602

The timing of revenue recognition, billings, and cash collections results in billed receivables, costs in excess of billings (included in “Contract assets”), and billings in excess of costs (contract liabilities, included in “Deferred revenue”) within the Condensed Consolidated Balance Sheets.

Significant changes in contract assets during the six months ended June 30, 2022 included transfers of $14,235 from the contract assets balance as of December 31, 2021 to accounts receivable. Significant changes in contract liabilities during the six months ended June 30, 2022 resulted from increases of $2,570 due to billings in excess of costs, excluding amounts recognized as revenue during the period. Contract liabilities were reduced due to revenue recognized during the three months ended June 30, 2022 and 2021 of $1,201 and $228, respectively, and revenue recognized during the six months ended June 30, 2022 and 2021 of $2,642 and $904, respectively, which were included in contract liabilities at the beginning of each period.

The Company records provisions related to the allowance for credit losses associated with contract assets. Provisions are recorded based upon a specific review of individual contracts as necessary, and a standard provision over any remaining contract assets pooled together based on similar risk of credit loss. The development of these provisions are based on historic collection trends, accuracy of estimates within contract margin reporting, as well as the expectation that collection patterns, margin reporting, and bad debt expense will continue to adhere to patterns observed in recent years. These expectations are formed based on trends observed as well as current and expected future conditions.

As of June 30, 2022, the Company had approximately $250,845 of obligations under new contracts and remaining performance obligations, which is also referred to as backlog. Approximately 5.3% of the June 30, 2022 backlog was related to projects that are anticipated to extend beyond June 30, 2023.

Note 4. Goodwill and Other Intangible Assets

The following table presents the changes in goodwill balance by reportable segment for the period presented:


	Rail, Technologies, and Services		Precast Concrete Products		Steel Products and Measurement		Total
Balance as of December 31, 2021	$	14,577	$	2,564	$	3,011	$	20,152
Skratch acquisition	5,343		—		—		5,343
Foreign currency translation impact	(924)		—		—		(924)


Balance as of June 30, 2022	$	18,996	$	2,564	$	3,011	$	24,571

The Company performs goodwill impairment tests annually during the fourth quarter, and also performs interim goodwill impairment tests if it is determined that it is more likely than not that the fair value of a reporting unit is less than the carrying amount. Qualitative factors are assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount, which included the impacts of COVID-19. However, the future impacts of COVID-19 are unpredictable and are subject to change. No interim goodwill impairment test was required as a result of the evaluation of qualitative factors as of June 30, 2022.

On June 21, 2022, the Company acquired the stock of Skratch Enterprises Ltd. (“Skratch”) for $7,402, which is inclusive of deferred payments withheld by the Company of $1,228, to be paid over the next five years or utilized to satisfy post closing working capital adjustments or indemnity claims under the purchase agreement. Located in Telford, United Kingdom, Skratch offers a single-point supply solution model for clients, and enabling large scale deployments. Skratch’s service offerings include design, prototyping and proof of concept, hardware and software, logistics and warehousing, installation, maintenance, content management, and managed monitoring. Skratch has been included in the Company’s Technology Services and Solutions business unit within the Rail,

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Technologies, and Services segment. The following table summarizes the estimates of the fair value of the goodwill and identified intangible assets acquired as of June 30, 2022:


	Skratch
Goodwill	$	5,343
Non-compete agreements	27
Customer relationships	1,335
Trademarks and trade names	370

The components of the Company’s intangible assets were as follows for the periods presented:


	June 30, 2022
	Weighted Average Amortization Period In Years	Gross Carrying Value		Accumulated Amortization		Net Carrying Amount
Non-compete agreements	1	$	27	$	—	$	27
Patents	10	385		(230)		155
Customer relationships	18	36,528		(18,689)		17,839
Trademarks and trade names	16	8,094		(4,930)		3,164
Technology	13	35,516		(27,161)		8,355
		$	80,550	$	(51,010)	$	29,540

	December 31, 2021
	Weighted Average Amortization Period In Years	Gross Carrying Value		Accumulated Amortization		Net Carrying Amount

Patents	10	$	385	$	(218)	$	167
Customer relationships	18	36,163		(18,222)		17,941
Trademarks and trade names	16	7,801		(4,702)		3,099
Technology	13	35,772		(25,956)		9,816
		$	80,121	$	(49,098)	$	31,023

The Company amortizes intangible assets over their useful lives, which range from 1 to 25 years, with a total weighted average amortization period of approximately 16 years as of June 30, 2022. Amortization expense was $1,419 and $1,470 for the three months ended June 30, 2022 and 2021, respectively, and was $2,855 and $2,935 for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, estimated amortization expense for the remainder of 2022 and thereafter was as follows:


	Amortization Expense
Remainder of 2022	$	3,050
2023	5,652
2024	4,634
2025	2,741
2026	2,092
2027 and thereafter	11,371
	$	29,540

Note 5. Accounts Receivable

The Company extends credit based upon an evaluation of the customer’s financial condition and, while collateral is not required, the Company periodically receives surety bonds that guarantee payment. Credit terms are consistent with industry standards and practices. The amounts of trade accounts receivable as of June 30, 2022 and December 31, 2021 have been reduced by an allowance for credit losses of $515 and $547, respectively. Changes in reserves for uncollectible accounts, which are recorded as part of “Selling and administrative expenses” within the Condensed Consolidated Statements of Operations, resulted in expense of $150 and $40 for the three months ended June 30, 2022 and 2021, respectively, and expense of $211 and $18 for the six months ended June 30, 2022 and 2021, respectively.

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The Company established the allowance for credit losses by calculating the amount to reserve based on the age of a given trade receivable and considering historical collection patterns and bad debt expense experience, in addition to any other relevant subjective adjustments to individual receivables made by management. The Company also considers current and expected future market and other conditions. Trade receivables are pooled within the calculation based on a range of ages, which we believe appropriately groups receivables of similar credit risk together.

The established reserve thresholds to calculate the allowance for credit loss are based on and supported by historic collection patterns and bad debt expense incurred by the Company, as well as the expectation that collection patterns and bad debt expense will continue to adhere to patterns observed in recent years, which was formed based on trends observed as well as current and expected future conditions, including the impacts of the COVID-19 pandemic. Management maintains stringent credit review practices and works to maintain positive customer relationships to further mitigate credit risk.

The following table sets forth the Company’s allowance for credit losses:


	Allowance for Credit Losses
Balance as of December 31, 2021	$	547
Current period provision	211
Write-off against allowance	(243)

Balance as of June 30, 2022	$	515

Note 6. Inventory

Inventories as of June 30, 2022 and December 31, 2021 are summarized in the following table:


	June 30, 2022		December 31, 2021
Finished goods	$	31,158	$	23,822

Work-in-process	10,923		10,738
Raw materials	31,310		28,311
Inventories - net	$	73,391	$	62,871

Inventories of the Company are valued at average cost or net realizable value, whichever is lower.

Note 7. Property, Plant, and Equipment

Property, plant, and equipment as of June 30, 2022 and December 31, 2021 consisted of the following:


	June 30, 2022		December 31, 2021
Land	$	6,182	$	6,224
Improvements to land and leaseholds	15,412		15,416
Buildings	26,760		27,206
Machinery and equipment, including equipment under finance leases	112,220		112,021
Construction in progress	2,708		1,194
Gross property, plant, and equipment	163,282		162,061
Less accumulated depreciation and amortization, including accumulated amortization of finance leases	(106,382)		(103,839)
Property, plant, and equipment - net	$	56,900	$	58,222

Depreciation expense was $1,876 and $2,018 for the three months ended June 30, 2022 and 2021, respectively, and $3,814 and $4,008 for the six months ended June 30, 2022 and 2021, respectively. The Company reviews its property, plant, and equipment for recoverability whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. The Company recognizes an impairment loss if it believes that the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. There were no impairments of property, plant, and equipment during the six months ended June 30, 2022 and 2021.

Note 8. Leases

The Company determines if an arrangement is a lease at its inception. Operating leases are included in “Operating lease right-of-use assets - net,” “Other accrued liabilities,” and “Long-term operating lease liabilities” within the Condensed Consolidated Balance

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Sheets. Finance leases are included within “Property, plant, and equipment - net,” “Current maturities of long-term debt,” and “Long-term debt” within the Condensed Consolidated Balance Sheets.

The Company has operating and finance leases for manufacturing facilities, corporate offices, sales offices, vehicles, and certain equipment. As of June 30, 2022, the Company’s leases had remaining lease terms of 2 to 12 years, some of which include options to extend the leases for up to 12 years, and some of which include options to terminate the leases within 1 year.

The balance sheet components of the Company’s leases were as follows as of June 30, 2022 and December 31, 2021:


	June 30, 2022		December 31, 2021
Operating leases
Operating lease right-of-use assets	$	13,538	$	15,131
Other accrued liabilities	$	2,753	$	2,852
Long-term operating lease liabilities	10,785		12,279
Total operating lease liabilities	$	13,538	$	15,131
Finance leases
Property, plant, and equipment	$	1,162	$	1,162
Accumulated amortization	(1,070)		(1,011)
Property, plant, and equipment - net	$	92	$	151
Current maturities of long-term debt	$	64	$	98
Long-term debt	28		53
Total finance lease liabilities	$	92	$	151

The components of lease expense within the Company’s Condensed Consolidated Statements of Operations were as follows for the six months ended June 30, 2022 and 2021:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Finance lease cost:
Amortization of finance leases	$	38	$	51	$	75	$	102
Interest on lease liabilities	6		20		14		42
Operating lease cost	726		694		1,483		1,336
Sublease income	(50)		(50)		(100)		(100)
Total lease cost	$	720	$	715	$	1,472	$	1,380

The cash flow components of the Company’s leases were as follows for the six months ended June 30, 2022 and 2021:


	Six Months Ended June 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases	$	(1,747)	$	(1,630)

Financing cash flows related to finance leases	(73)		(111)
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	—	$	279

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The weighted-average remaining lease term (in years) and discount rate related to the operating leases were as follows as of the dates presented:


	June 30,
	2022		2021
Operating lease weighted-average remaining lease term	6		7
Operating lease weighted-average discount rate	5.2	%	5.2	%
Finance lease weighted-average remaining lease term	1		1
Finance lease weighted-average discount rate	4	%	4.2	%

As of June 30, 2022, estimated annual maturities of lease liabilities remaining for the year ending December 31, 2022 and thereafter were as follows:


	Operating Leases		Finance Leases
Remainder of 2022	$	1,710	$	50
2023	3,277		42
2024	2,933		11
2025	2,360		—
2026	2,156		—
2027 and thereafter	3,120		—
Total undiscounted lease payments	15,556		103
Interest	(2,018)		(11)
Total	$	13,538	$	92

Note 9. Long-term Debt and Related Matters

Long-term debt consisted of the following:


	June 30, 2022		December 31, 2021
Revolving credit facility	$	49,194	$	31,100

Finance leases and financing agreements	92		151
Total	49,286		31,251
Less current maturities	(64)		(98)
Long-term portion	$	49,222	$	31,153

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 modifies the prior revolving credit facility, as amended, on more favorable terms 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 (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.

The obligation of the Company and its domestic, Canadian, and United Kingdom subsidiaries (the “Guarantors”) under the Credit Agreement will be secured by the grant of a security interest by the Borrowers and Guarantors in substantially all of the assets owned by such entities. Additionally, the equity interests in each of the loan parties, other than the Company, and the equity interests held by each loan party in their subsidiaries, will be pledged to the lenders as collateral for the lending obligations.

Borrowings under the Credit Agreement will bear interest at rates based upon either the base rate or LIBOR rate plus applicable margins. Applicable margins are dictated by the ratio of the Company’s total net indebtedness to the Company’s consolidated EBITDA for four trailing quarters, as defined in the Credit Agreement. The base rate is the highest of (a) the Overnight Bank Funding Rate plus 50 basis points, (b) the Prime Rate, or (c) the Daily LIBOR rate plus 100 basis points so long as the Daily LIBOR Rate is offered, ascertainable, and not unlawful (each as defined in the Credit Agreement). The base rate and LIBOR rate spreads range from 25 to 125 basis points and 125 to 225 basis points, respectively.

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The Credit Agreement includes two financial covenants: (a) Maximum Gross Leverage Ratio, defined as the Company’s consolidated Indebtedness (as defined in the Credit Agreement) divided by the Company’s consolidated EBITDA, which must not exceed (i) 3.25 to 1.00 for all testing periods other than during an Acquisition Period, and (ii) 3.50 to 1.00 for all testing periods occurring during an Acquisition Period (as defined in the Credit Agreement), and (b) Minimum Consolidated Fixed Charge Coverage Ratio, defined as the Company’s consolidated EBITDA divided by the Company’s Fixed Charges (as defined in the Credit Agreement), which must be more than 1.05 to 1.00.

The Credit Agreement permits the Company to pay dividends and make distributions and redemptions with respect to its stock provided no event of default or potential default (as defined in the Credit Agreement) has occurred prior to or after giving effect to the dividend, distribution, or redemption. Additionally, the Credit Agreement permits the Company to complete acquisitions so long as (a) no event of default or potential default has occurred prior to or as a result of such acquisition; (b) the liquidity of the Borrowers is not less than $15,000 prior to and after giving effect to such acquisition; and (c) the aggregate consideration for the acquisition does not exceed: (i) $50,000 per acquisition, so long as the Gross Leverage Ratio (as defined in the Credit Agreement) is less than or equal to 2.75 after giving effect to such acquisition; or (ii) $75,000 per acquisition, so long as the Gross Leverage Ratio is less than or equal to 1.75 after giving effect to such acquisition.

Other restrictions exist at all times including, but not limited to, limitations on the Company’s sale of assets and the incurrence by either the Borrowers or the non-borrower subsidiaries of the Company of other indebtedness, guarantees, and liens.

As of June 30, 2022, the Company was in compliance with the covenants in the Credit Agreement, as amended. As of June 30, 2022, the Company had outstanding letters of credit of approximately $683 and had net available borrowing capacity of $81,489, subject to covenant restrictions. The maturity date of the facility is August 13, 2026.

Note 10. Earnings Per Common Share

(Share amounts in thousands)

The following table sets forth the computation of basic and diluted earnings per common share for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Numerator for basic and diluted loss per common share:


Net income	$	1,976	$	2,854	$	390	$	1,584
Denominator:
Weighted average shares outstanding	10,715		10,619		10,700		10,601
Denominator for basic loss per common share	10,715		10,619		10,700		10,601
Effect of dilutive securities:

Dilutive potential common shares	99		115		109		128
Denominator for diluted income (loss) per common share - adjusted weighted average shares outstanding	10,814		10,734		10,809		10,729


Basic earnings per common share	$	0.18	$	0.27	$	0.04	$	0.15


Diluted earnings per common share	$	0.18	$	0.27	$	0.04	$	0.15

Note 11. Income Taxes

For the three months ended June 30, 2022 and 2021, the Company recorded an income tax expense of $821 and $1,139 on pre-tax income of $2,797 and $3,993 for an effective income tax rate of 29.4% and 28.5%, respectively. For the six months ended June 30, 2022 and 2021, the Company recorded an income tax expense of $313 and $818 on pre-tax income of $703 and $2,402 for an effective income tax rate of 44.5% and 34.1%, respectively. The Company’s effective tax rate for the three and six months ended June 30, 2022 and 2021 differs from the federal statutory rate of 21% primarily due to state income taxes, nondeductible expenses, and research tax credits. Changes in pre-tax income projections, combined with the seasonal nature of our businesses, could also impact the effective income tax rate.

Note 12. Stock-Based Compensation

The Company applies the provisions of the FASB’s Accounting Standards Codification (“ASC”) Topic 718, “Compensation – Stock Compensation,” to account for the Company’s stock-based compensation. Stock-based compensation cost is measured at the grant date based on the calculated fair value of the award and is recognized over the employees’ requisite service periods. The Company

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recorded stock-based compensation expense related to restricted stock awards and performance share units of $925 and $386 for the three months ended June 30, 2022 and 2021, respectively, and $1,183 and $1,213 for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, unrecognized compensation expense for unvested awards approximated $4,104. The Company expects to recognize this expense over the upcoming 3.5 years through March 2026.

Shares issued as a result of vested stock-based compensation awards generally will be from previously issued shares that have been reacquired by the Company and held as treasury stock or authorized and previously unissued common stock.

Restricted Stock Awards, Performance Share Units, and Performance-Based Stock Awards

Under the 2006 Omnibus Plan, the Company grants eligible employees restricted stock and performance share units. The forfeitable restricted stock awards granted generally time-vest ratably over a three-year period, unless indicated otherwise by the underlying restricted stock award agreement. Since May 2018, awards of restricted stock have been subject to a minimum one-year vesting period, including those granted to non-employee directors. Performance share units are offered annually under separate three-year long-term incentive programs. Performance share units are subject to forfeiture and will be converted into common stock of the Company based upon the Company’s performance relative to performance measures and conversion multiples, as defined in the underlying program. If the Company’s estimate of the number of performance share units expected to vest changes in a subsequent accounting period, cumulative compensation expense could increase or decrease. The change will be recognized in the current period for the vested shares and would change future expense over the remaining vesting period.

Since May 1, 2017, non-employee directors have been permitted to defer receipt of annual stock awards and equity elected to be received in lieu of quarterly cash compensation. If so elected, these deferred stock units will be issued as common stock six months after separation from their service on the Board of Directors. Since May 2018, no non-employee directors have elected the option to receive deferred stock units of the Company’s common stock in lieu of director cash compensation.

In February 2022, the Compensation Committee approved the 2022 Performance Share Unit Program and the 2022 Executive Incentive Compensation Plan (consisting of cash and equity components).

On June 2, 2022, the shareholders approved the new 2022 Equity and Incentive Compensation plan as the successor to the 2006 Omnibus Plan and contingent Strategic Transformation Plan.

The following table summarizes the restricted stock awards, deferred stock units, and performance share units activity for the six months ended June 30, 2022:


	Restricted Stock	Deferred Stock Units	Performance Share Units	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2021	135,704	74,950	116,571	$	19.75
Granted	125,162	5,730	110,600	14.88
Vested	(74,132)	—	(13,095)	17.99
Adjustment for incentive awards expected to vest	—	—	(66,757)	17.02
Cancelled and forfeited	(500)	—	—	18.57
Outstanding as of June 30, 2022	186,234	80,680	147,319	$	17.54

Note 13. Fair Value Measurements

The Company determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions of what market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The classification of a financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

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Cash equivalents - Included in “Cash and cash equivalents” within the Condensed Consolidated Balance Sheets are investments in non-domestic term deposits. The carrying amounts approximate fair value because of the short maturity of the instruments.

LIBOR-based interest rate swaps - To reduce the impact of interest rate changes on outstanding variable-rate debt, the Company entered into a forward starting LIBOR-based interest rate swaps with notional values totaling $50,000 and $20,000 effective February 2017 and March 2022, respectively. The fair value of the interest rate swaps are based on market-observable forward interest rates and represents the estimated amount that the Company would pay to terminate the agreements. As such, the swap agreements are classified as Level 2 within the fair value hierarchy. As of June 30, 2022 and December 31, 2021, the interest rate swaps were recorded in "Other current assets" when the interest rate swaps’ fair market value are in an asset position, and "Other accrued liabilities" when in a liability position within our Condensed Consolidated Balance Sheets.


	Fair Value Measurements at Reporting Date								Fair Value Measurements at Reporting Date
	June 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Term deposits	$	18	$	18	$	—	$	—	$	18	$	18	$	—	$	—
Interest rate swaps	1,111		—		1,111		—		175		—		175		—
Total assets	$	1,129	$	18	$	1,111	$	—	$	193	$	18	$	175	$	—
Interest rate swaps	$	—	$	—	$	—	$	—	$	159	$	—	$	159	$	—
Total liabilities	$	—	$	—	$	—	$	—	$	159	$	—	$	159	$	—

The $20,000 interest rate swaps that became effective March 2022 are accounted for as cash flow hedges and the objective of the hedges is to offset the expected interest variability on payments associated with the interest rate on our debt. The gains and losses related to the interest rate swaps are reclassified from “Accumulated other comprehensive loss” in our Condensed Consolidated Balance Sheets and included in “Interest expense - net” in our Condensed Consolidated Statements of Operations as the interest expense from our debt is recognized.

The Company accounted for the $50,000 of interest rate swaps that became effective February 2017 as cash flow hedges, these interest rate swaps expired February 2022.

For the three months ended June 30, 2022 and 2021, the Company recognized interest income of $19 and interest expense of $245, respectively, from interest rate swaps. For the six months ended June 30, 2022 and 2021, the Company recognized interest expense of $78 and $480, respectively, from interest rate swaps.

In accordance with the provisions of ASC Topic 820, “Fair Value Measurement,” the Company measures certain nonfinancial assets and liabilities at fair value, which are recognized and disclosed on a nonrecurring basis.

Note 14. Retirement Plans

Retirement Plans

The Company has three retirement plans that cover its hourly and salaried employees in the United States: one defined benefit plan, which is frozen, and two defined contribution plans. Employees are eligible to participate in the appropriate plan based on employment classification. The Company’s contributions to the defined benefit and defined contribution plans are governed by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Company’s policy and investment guidelines applicable to each respective plan. The Company’s policy is to contribute at least the minimum in accordance with the funding standards of ERISA.

The Company maintains two defined contribution plans for its employees in Canada, as well as one post-retirement benefit plan. The Company also maintains two defined contribution plans and one defined benefit plan for its employees in the United Kingdom.

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United States Defined Benefit Plan

Net periodic pension costs for the United States defined benefit pension plan for the three and six months ended June 30, 2022 and 2021 were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Interest cost	$	49	$	43	$	97	$	86
Expected return on plan assets	(66)		(62)		(132)		(124)
Recognized net actuarial loss	18		25		35		49
Net periodic pension cost	$	1	$	6	$	—	$	11

The Company has made contributions to its United States defined benefit pension plan of $230 during the six months ended June 30, 2022 and expects to make total contributions of $460 during 2022.

United Kingdom Defined Benefit Plan

Net periodic pension costs for the United Kingdom defined benefit pension plan for the three and six months ended June 30, 2022 and 2021 were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Interest cost	$	43	$	28	$	86	$	56
Expected return on plan assets	(76)		(65)		(152)		(130)
Amortization of prior service costs and transition amount	6		7		12		14
Recognized net actuarial loss	40		83		80		166
Net periodic pension cost	$	13	$	53	$	26	$	106

United Kingdom regulations require trustees to adopt a prudent approach to funding required contributions to defined benefit pension plans. For the six months ended June 30, 2022, the Company contributed approximately $156 to the plan. The Company anticipates total contributions of approximately $311 to the United Kingdom pension plan during 2022.

Defined Contribution Plans

The Company sponsors six defined contribution plans for hourly and salaried employees across its domestic and international facilities. The following table summarizes the expense associated with the contributions made to these plans for the periods presented:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
United States	$	390	$	408	$	695	$	772
Canada	45		40		105		86
United Kingdom	379		135		379		255
	$	814	$	583	$	1,179	$	1,113

Note 15. Commitments and Contingent Liabilities

Product Liability Claims

The Company is subject to product warranty claims that arise in the ordinary course of its business. For certain manufactured products, the Company maintains a product warranty accrual, which is adjusted on a monthly basis as a percentage of cost of sales. In addition, the product warranty accrual is adjusted periodically based on the identification or resolution of known individual product warranty claims.

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The following table sets forth the Company’s product warranty accrual:


	Warranty Liability
Balance as of December 31, 2021	$	1,042
Additions to warranty liability	53
Warranty liability utilized	(310)
Balance as of June 30, 2022	$	785

Union Pacific Railroad (“UPRR”) Concrete Tie Matter

On March 13, 2019, the Company and its subsidiary, CXT Incorporated (“CXT”), entered into a Settlement Agreement (the “Settlement Agreement”) with UPRR to resolve the pending litigation in the matter of Union Pacific Railroad Company v. L.B. Foster Company and CXT Incorporated, Case No. CI 15-564, in the District Court for Douglas County, Nebraska.

Under the Settlement Agreement, the Company and CXT will pay UPRR the aggregate amount of $50,000 without pre-judgment interest, which began with a $2,000 immediate payment, and with the remaining $48,000 paid in installments over a six-year period commencing on the effective date of the Settlement Agreement through December 2024 pursuant to a Promissory Note. Additionally, commencing in January 2019 and through December 2024, UPRR agreed to purchase and has been purchasing from the Company and its subsidiaries and affiliates, a cumulative total amount of $48,000 of products and services, targeting $8,000 of annual purchases per year beginning March 13, 2019 per letters of intent under the Settlement Agreement. During the third quarter of 2021, in connection with the Company’s divestiture of its Piling Products division, the targeted annual purchases per year have been reduced to $6,000 for 2021 through 2024. The Settlement Agreement also includes a mutual release of all claims and liability regarding or relating to all CXT pre-stressed concrete railroad ties with no admission of liability and dismissal of the litigation with prejudice.

The expected payments under the UPRR Settlement Agreement for the remainder of the year ending December 31, 2022 and thereafter are as follows:


Year Ending December 31,
Remainder of 2022	$	6,000
2023	8,000
2024	8,000



Total	$	22,000

Environmental and Legal Proceedings

The Company is subject to national, state, foreign, provincial, and/or local laws and regulations relating to the protection of the environment. The Company’s efforts to comply with environmental regulations may have an adverse effect on its future earnings.

On June 5, 2017, a General Notice Letter was received from the United States Environmental Protection Agency (“EPA”) indicating that the Company may be a potentially responsible party (“PRP”) regarding the Portland Harbor Superfund Site cleanup along with numerous other companies. More than 140 other companies received such a notice. The Company and a predecessor owned and operated a facility near the harbor site for a period prior to 1982. The net present value and undiscounted costs of the selected remedy throughout the harbor site are estimated by the EPA to be approximately $1.1 billion and $1.7 billion, respectively, and the remedial work is expected to take as long as 13 years to complete. These costs may increase given that the remedy will not be initiated or completed for several years. The Company is reviewing the basis for its identification by the EPA and the nature of the historic operations of a Company predecessor near the site. Additionally, the Company executed a PRP agreement which provides for a private allocation process among almost 100 PRPs in a working group whose work is ongoing. On March 26, 2020, the EPA issued a Unilateral Administrative Order to two parties requiring them to perform remedial design work for that portion of the Harbor Superfund Site that includes the area closest to the facility; the Company was not a recipient of this Unilateral Administrative Order. The Company cannot predict the ultimate impact of these proceedings because of the large number of PRPs involved throughout the harbor site, the size and extent of the site, the degree of contamination of various wastes, varying environmental impacts throughout the harbor site, the scarcity of data related to the facility once operated by the Company and a predecessor, potential comparative liability between the allocation parties and regarding non-participants, and the speculative nature of the remediation costs. Based upon information currently available, management does not believe that the Company’s alleged PRP status regarding the Portland Harbor Superfund Site or other compliance with the present environmental protection laws will have a material adverse effect on the financial condition, results of operations, cash flows, competitive position, or capital expenditures of the Company. As more information develops and the allocation process is completed, and given the resolution of factors like those described above, an unfavorable resolution could have a material adverse effect.

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As of June 30, 2022 and December 31, 2021, the Company maintained environmental reserves approximating $2,500 and $2,519, respectively. The following table sets forth the Company’s environmental obligation:


	Environmental liability
Balance as of December 31, 2021	$	2,519

Environmental obligations utilized	(19)
Balance as of June 30, 2022	$	2,500

The Company is also subject to other legal proceedings and claims that arise in the ordinary course of its business. Legal actions are subject to inherent uncertainties, and future events could change management’s assessment of the probability or estimated amount of potential losses from pending or threatened legal actions. Based on available information, it is the opinion of management that the ultimate resolution of pending or threatened legal actions, both individually and in the aggregate, will not result in losses having a material adverse effect on the Company’s financial position or liquidity as of June 30, 2022.

If management believes that, based on available information, it is at least reasonably possible that a material loss (or additional material loss in excess of any accrual) will be incurred in connection with any legal actions, the Company discloses an estimate of the possible loss or range of loss, either individually or in the aggregate, as appropriate, if such an estimate can be made, or discloses that an estimate cannot be made. Based on the Company’s assessment as of June 30, 2022, no such disclosures were considered necessary.

Note 16. Subsequent Events

On August 1, 2022, the Company divested the assets of its rail spikes and anchors track components business (“Track Components”) located in St-Jean-sur-Richelieu, Quebec, Canada. Cash proceeds from the transaction are expected to total $7,795, subject to indemnification obligations and working capital adjustment. The Track Components business was reported in the Rail Products business unit within the Rail, Technologies, and Services segment.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(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, 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; volatility in the prices of oil and natural gas and the related impact on the midstream energy markets, which could result in cost mitigation actions, including shutdowns or furlough periods; a continuation or worsening of the adverse economic conditions in the markets we serve, including possible recession in the markets we serve, whether as a result of the current COVID-19 pandemic, including its impact on labor markets, supply chains, and other inflationary costs, travel and demand for oil and gas, the continued deterioration 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 ongoing COVID-19 pandemic; environmental matters, including any costs associated with any remediation and monitoring of such matters; 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 recent disposition of the Piling business and Track Components business, and acquisitions of the Skratch Enterprises Ltd. and Intelligent Video Ltd. businesses 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, which could disrupt our business and may result in misuse or misappropriation of confidential or proprietary information, and could result in the disruption or damage to our systems, increased costs and losses, or an adverse effect to our reputation; the continuing effectiveness of our ongoing 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; geopolitical conditions, including the conflict in Ukraine; 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, 2021, or as updated and/or amended by our other current or periodic filings with the Securities and Exchange Commission.

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.

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General Overview and Business Update

L.B. Foster Company is a global solutions provider of engineered, manufactured products and services that builds and supports infrastructure. The Company’s innovative engineering and product development solutions address the safety, reliability, and performance needs of its customers’ most challenging requirements. The Company maintains locations in North America, South America, Europe, and Asia.

On June 21, 2022, the Company acquired the stock of Skratch Enterprises Ltd. (“Skratch”) for $7,402. Skratch is an industry leader in digital system integration with expertise in advanced digital display technologies and capabilities currently serving retail markets in the U.K. The Company has collaborated with Skratch on projects in the past and believes joining the two companies will unlock the broader market potential for our respective solutions in the visual communications space. Skratch is reported within the Technology Services and Solutions business unit in the Rail, Technologies, and Services segment.

Sequentially, sales increased 33.1% versus the 2022 first quarter, which is consistent with historic seasonal trends. Orders and backlog levels for the quarter ended June 30, 2022 also remained strong, a reflection of a robust demand environment in markets served.

Net sales for the second quarter of 2022 were $131,515, a $23,007, or 14.9%, decrease versus the prior year quarter. The now divested Piling Products division contributed $22,091 of the year over year sales decline. Net sales increased in the Precast Concrete Products segment by $3,538 and Steel Products and Measurement segment, as adjusted to exclude the Piling Products division of , by $2,531, which was partially offset by a $6,985 decrease in Rail, Technologies, and Services segment sales.

Gross profit for the three months ended June 30, 2022 was $23,293, a $2,868 decrease, or 11.0%, from the prior year quarter. The decline in gross profit was driven primarily by the Piling Products divestiture, coupled with lower volume and higher input costs, partially offset by favorable mix. Consolidated gross profit margin increased by 80 basis points to 17.7% when compared to the prior year quarter, and the Company is generally seeing progress on margin improvement through its recent pricing initiatives and favorable mix. Gross profit decreased in the Rail, Technologies, and Services segment by $999, driven by the $6,985 decrease in sales. Rail, Technologies, and Services gross profit margins increased 30 basis points due to increased sales in its higher margin Global Friction Management and Technology Services and Solutions business units which were partially offset by the lower margin Rail Products business unit. The Precast Concrete Products segment gross profit decreased $572, or 14.6%, despite increased sales volumes. The decline in gross profit margin in Precast Concrete Products, which was down 530 basis points compared to the prior year quarter, is principally attributable to continued higher raw material and labor costs, coupled with unfavorable building sales mix compared to last year’s quarter. The Steel Products and Measurement segment gross profit declined from the prior year by $1,297. This decline was primarily attributable to the sale of the Piling Products division of $2,056 and also due to inflationary pressure, particularly in the Bridge Products division. However, Steel Products and Measurement gross profit margin was up 420 basis points compared to the prior year, a reflection of a more favorable mix after the sale of the lower margin Piling Products business. The Company continues to focus on margin improvement measures to counteract inflationary pressures experienced.

Selling and administrative expenses for the three months ended June 30, 2022 decreased by $373, or 1.9%, from the prior year, primarily driven by decreases in expenses associated with the sale of the Piling Products division, partially offset by an increase related to strategic transformation plan and acquisition related expenses. Selling and administrative expenses as a percent of net sales were 14.7% versus 12.8% in the prior year quarter, a 190 basis points increase, due primarily to the decline in sales associated with the Piling Products divestiture.

Other income - net for the three months ended June 30, 2022 was $701 while Other expense - net was $70 in the prior year quarter. Insurance proceeds received in the current year quarter and a favorable $489 purchase price adjustment from the sale of Piling Products were the drivers of the increase.

The Company’s effective income tax rate for the three months ended June 30, 2022 was 29.4%, compared to 28.5% in the prior year quarter. The Company’s effective income tax rate for the quarter ended June 30, 2022 differed from the federal statutory rate of 21% primarily due to state income taxes, nondeductible expenses, and research tax credits.

Net income for the three months ended June 30, 2022 attributable to L.B. Foster Company was $2,010, or $0.18 per diluted share, a decrease of $866, or $0.09 per diluted share, from the prior year quarter. The decrease was primarily driven by lower overall sales volumes primarily associated with the sale of the Piling Products business and continued inflationary pressure.

The Company’s consolidated backlog(a) was $250,845 as of June 30, 2022, a decrease of $2,386, or 0.9%, from the prior year, with increases across the Company offset by the divested Piling Products division, which contributed $33,682 to the year over year decline. The Rail, Technologies, and Services and Precast Concrete Product segments reported a $29,437 and $9,094 backlog increase versus the prior year quarter, respectively, while the Steel Products and Measurement segment, adjusted for the Piling Products divestiture, reported a decrease of $7,235 versus the prior year quarter. Sequentially, consolidated backlog(a) increased $6,227, or 2.5% from

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March 31, 2022. Order levels(a) for three months ended June 30, 2022, when adjusted for the Piling Products sale, increased by $27,971, or 24.7%, from the prior year quarter.

While the current inflationary cost environment is expected to continue to put pressure on margins across our businesses throughout 2022, the sequential 110 basis point margin improvement versus the prior quarter is an indication of positive progress toward mitigating such pressures. Actions to continue to mitigate inflationary 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 partners, and other lingering COVID-19 related effects, and experienced an ease in these impacts during the quarter ended June 30, 2022.

With the federal infrastructure support programs announced in 2020 and 2021, such as the U.S. Infrastructure Investment and Jobs Act passed in November 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 expected government-subsidized investment. The Company believes that many of its businesses will continue to directly benefit from infrastructure investment activity. Additionally, with the proceeds from the Piling division 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. The Company continues to prioritize its portfolio transformation, as evidenced from the acquisitions of Skratch Enterprises Ltd. and Intelligent Video, Ltd. on June 21, 2022, and July 6, 2022, respectively, and the divested the assets of its rail spikes and anchors track components business on August 1, 2022.

(a) 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.

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Results of the Quarter


	Three Months Ended June 30,				Percent Increase/ (Decrease)		Percent of Total Net Sales Three Months Ended June 30,
	2022		2021		2022 vs. 2021		2022		2021
Net Sales:
Rail, Technologies, and Services	$	81,797	$	88,782	(7.9	%)	62.1	%	57.4	%
Precast Concrete Products	23,611		20,073		17.6		18.0		13.0
Steel Products and Measurement	26,107		45,667		(42.8)		19.9		29.6
Total net sales	$	131,515	$	154,522	(14.9	%)	100.0	%	100.0	%

	Three Months Ended June 30,				Percent Increase/ (Decrease)		Gross Profit Percentage Three Months Ended June 30,
	2022		2021		2022 vs. 2021		2022		2021
Gross Profit:
Rail, Technologies, and Services	$	15,661	$	16,660	(6.0	%)	19.1	%	18.8	%
Precast Concrete Products	3,347		3,919		(14.6)		14.2		19.5
Steel Products and Measurement	4,285		5,582		(23.2)		16.4		12.2
Total gross profit	$	23,293	$	26,161	(11.0	%)	17.7	%	16.9	%

	Three Months Ended June 30,				Percent Increase/ (Decrease)		Percent of Total Net Sales Three Months Ended June 30,
	2022		2021		2022 vs. 2021		2022		2021
Expenses:
Selling and administrative expenses	$	19,394	$	19,767	(1.9	%)	14.7	%	12.8	%
Amortization expense	1,419		1,470		(3.5)		1.1		1.0
Operating profit	2,480		4,924		(49.6)		1.9		3.2

Interest expense - net	384		861		(55.4)		0.3		0.6


Other (income) expense - net	(701)		70		**		(0.5)		—

Income before income taxes	2,797		3,993		(30.0)		2.1		2.6
Income tax expense	821		1,139		(27.9)		0.6		0.7
Net income	$	1,976	$	2,854	(30.8	%)	1.5	%	1.8	%
Net loss attributable to noncontrolling interest	(34)		(22)		**		(0.0)		(0.0)
Net income attributable to L.B. Foster Company	$	2,010	$	2,876	(30.1	%)	1.5	%	1.9	%

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

Results of Operations - Segment Analysis

Rail, Technologies, and Services


	Three Months Ended June 30,						(Decrease)/Increase			Percent (Decrease)/Increase
	2022			2021			2022 vs. 2021			2022 vs. 2021
Net sales	$	81,797		$	88,782		$	(6,985)		(7.9	%)
Gross profit	$	15,661		$	16,660		$	(999)		(6.0	%)
Gross profit percentage	19.1		%	18.8		%	0.3		%	2.0	%
Segment operating profit	$	3,998		$	5,657		$	(1,659)		(29.3	%)
Segment operating profit percentage	4.9		%	6.4		%	(1.5		%)	(23.4	%)

Second Quarter 2022 Compared to Second Quarter 2021

The Rail, Technologies, and Services segment sales for the three months ended June 30, 2022 decreased by $6,985, or 7.9%, compared to the prior year quarter. The decrease in the Rail Products business unit was driven by the timing of customer shipments versus the prior year quarter. The Rail Products business unit declined by $8,419, or 13.0%, offsetting a sales increase in the Global

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Friction Management business unit of $2,082, or 17.1%. The Technology Services and Solutions business unit had a more modest sales decrease of $648, or 5.4%, compared to the prior year quarter. The decrease in the Rail Products business unit was driven by timing of customer order fulfillment versus the prior year quarter. The sales increase in the Global Friction Management business unit is due to strength in North American markets served.

The Rail, Technologies, and Services segment gross profit decreased by $999, or 6.0%, from the prior year quarter. The decrease was driven by overall lower sales volumes. Segment gross profit margins increased by 30 basis points as a result of stronger sales in the higher margin Global Friction Management and Technology Services and Solutions business units. Operating profit was $3,998, a $1,659 decrease over the prior year quarter, due primarily to lower overall gross profit levels and higher selling and administrative expenses.

During the current quarter, the Rail, Technologies, and Services segment had an increase in new orders of 31.1% compared to the prior year period, driven almost entirely by the Rail Products business unit. Backlog as of June 30, 2022 was $132,017, an increase of $29,437, or 28.7%, versus June 30, 2021, continued to show strength.

On June 21, 2022, the Company entered into an agreement to purchase the stock of Skratch Enterprises Ltd. (“Skratch”) for $7,402.

Precast Concrete Products


	Three Months Ended June 30,						Increase/(Decrease)			Percent Increase/(Decrease)
	2022			2021			2022 vs. 2021			2022 vs. 2021
Net sales	$	23,611		$	20,073		$	3,538		17.6	%
Gross profit	$	3,347		$	3,919		$	(572)		(14.6	%)
Gross profit percentage	14.2		%	19.5		%	(5.3		%)	(27.4	%)
Segment operating (loss) profit	$	(125)		$	1,148		$	(1,273)		(110.9	%)
Segment operating (loss) profit percentage	(0.5)		%	5.7		%	(6.2		%)	(108.4	%)

Second Quarter 2022 Compared to Second Quarter 2021

The Precast Concrete Products segment sales for the three months ended June 30, 2022 increased by $3,538, or 17.6%, compared to the prior year quarter, which is a continued reflection of the strong demand environment both in the southern and northeastern United States markets served.

Precast Concrete Products gross profit decreased by $572, or 14.6%, from the prior year quarter. The decline is principally attributable to continued high raw material and labor costs, coupled with an unfavorable building sales mix compared to last year’s quarter. Segment gross profit margin declined by 530 bps for the second quarter of 2022. Operating loss for the second quarter of 2022 declined by $1,273 when compared to the operating profit in the prior year quarter, due to reduction in gross profit margin and increases in selling and administrative costs.

During the quarter, the Precast Concrete Products segment had an increase in new orders of 39.4% compared to the prior year quarter; another reflection of the strong demand environment. Backlog as of June 30, 2022 was $71,507, an increase of $9,094, or 14.6%, from June 30, 2021, remaining at historically high levels.

Steel Products and Measurement


	Three Months Ended June 30,						(Decrease)/Increase			Percent (Decrease)/Increase
	2022			2021			2022 vs. 2021			2022 vs. 2021
Net sales	$	26,107		$	45,667		$	(19,560)		(42.8)	%
Gross profit	$	4,285		$	5,582		$	(1,297)		(23.2)	%
Gross profit percentage	16.4		%	12.2		%	4.2		%	34.3	%
Segment operating profit	$	762		$	814		$	(52)		(6.4)	%
Segment operating profit percentage	2.9		%	1.8		%	1.1		%	61.7	%

Second Quarter 2022 Compared to Second Quarter 2021

The Steel Products and Measurement segment sales for the three months ended June 30, 2022 decreased by $19,560, or 42.8%, compared to the prior year quarter. The decrease in sales for the second quarter of 2022 was attributable to the $22,091 decline in year over year sales from the Piling Products division, which was divested September 2021. The decline was partially offset by an increase

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in Fabricated Steel Products, excluding the divested Piling Products division, of $1,705 and an increase of $784 in the Coatings and Measurement business unit.

Steel Products and Measurement gross profit decreased by $1,297, or 23.2%, from the prior year quarter, due to lower sales volume associated with the sale of the Piling Products business. The gross profit margin increased 420 basis points to 16.4%, as a result of a more favorable mix in 2022 due to the sale of the low margin of the divested Piling Products business. The segment operating profit was $762, a $52 decline from the prior year quarter. Selling and administrative expenses incurred by the segment decreased by $1,296 compared to the prior year quarter, primarily attributable to the Piling Products divestiture.

During the quarter, the Steel Products and Measurement segment new orders decreased by $25,661, or 50.1% compared to the prior year quarter, driven by a $25,089 decline from the divested Piling Products division. The Coatings and Measurement business unit experienced a decline in orders of $2,376, while Fabricated Steel Products, excluding the divested Piling Products division, experienced a slight increase. Backlog as of June 30, 2022 was $47,321, a decrease of $40,917, or 46.4%, from June 30, 2021 driven entirely by the Fabricated Steel Products business unit, $33,682 of which is related to the divested Piling Products division.

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Six Month Results


	Six Months Ended June 30,				Percent Increase/ (Decrease)		Percent of Total Net Sales Six Months Ended June 30,
	2022		2021		2022 vs. 2021		2022		2021
Net Sales:
Rail, Technologies, and Services	$	145,507	$	155,014	(6.1)	%	63.2	%	57.3	%
Precast Concrete Products	38,621		32,751		17.9		16.8		12.1
Steel Products and Measurement	46,181		82,837		(44.3)		20.1		30.6
Total net sales	$	230,309	$	270,602	(14.9)	%	100.1	%	100.0	%

	Six Months Ended June 30,				Percent Increase/ (Decrease)		Gross Profit Percentage Six Months Ended June 30,
	2022		2021		2022 vs. 2021		2022		2021
Gross Profit:
Rail, Technologies, and Services	$	28,188	$	29,465	(4.3)	%	19.4	%	19.0	%
Precast Concrete Products	5,792		6,409		(9.6)		15.0		19.6
Steel Products and Measurement	5,760		9,117		(36.8)		12.5		11.0
Total gross profit	$	39,740	$	44,991	(11.7)	%	17.3	%	16.6	%

	Six Months Ended June 30,				Percent Increase/ (Decrease)		Percent of Total Net Sales Six Months Ended June 30,
	2022		2021		2022 vs. 2021		2022		2021
Expenses:
Selling and administrative expenses	$	36,692	$	37,793	(2.9)	%	15.9	%	14.0	%
Amortization expense	2,855		2,935		(2.7)		1.2		1.1
Operating profit	193		4,263		(95.5)		0.1		2.8

Interest expense - net	754		1,732		(56.5)		0.3		0.6


Other (income) expense - net	(1,264)		129		**		(0.5)		—

Income tax expense	313		818		(61.7)		0.1		0.3
Net income	$	390	$	1,584	(75.4)	%	0.2	%	0.6	%
Net loss attributable to noncontrolling interest	(54)		(34)		**		(0.0)		—
Net income attributable to L.B. Foster Company	$	444	$	1,618	(72.6)	%	0.2	%	0.6	%

Results of Operations - Segment Analysis

Rail, Technologies, and Services


	Six Months Ended June 30,						(Decrease)/Increase			Percent (Decrease)/Increase
	2022			2021			2022 vs. 2021			2022 vs. 2021
Net sales	$	145,507		$	155,014		$	(9,507)		(6.1	%)
Gross profit	$	28,188		$	29,465		$	(1,277)		(4.3	%)
Gross profit percentage	19.4		%	19.0		%	0.4		%	1.9	%
Segment operating profit	$	5,037		$	7,879		$	(2,842)		(36.1	%)
Segment operating profit percentage	3.5		%	5.1		%	(1.6		%)	(31.9	%)

First Six Months 2022 Compared to First Six Months 2021

The Rail, Technologies, and Services segment sales for the six months ended June 30, 2022 decreased by $9,507, or 6.1%, compared to the prior year period. The decrease in sales was driven entirely by the Rail Products business unit, which declined by $12,357, or 11.4%, offsetting sales increases in both the Global Friction Management and Technology Services and Solutions business units of $2,359 and $491, respectively. The decrease in the Rail Products business unit was driven by the timing of customer shipments versus

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the prior year period. The sales increase in the Global Friction Management business unit is due to strength primarily in domestic markets served.

The Rail, Technologies, and Services segment gross profit decreased by $1,277, or 4.3%, from the prior year quarter. The decrease was driven by overall lower sales volumes, offset in part by improved business mix. Segment gross profit margins increased by 40 basis points as a result of stronger sales in the higher margin Global Friction Management and Technology Services and Solutions business units, versus the lower-margin Rail Products businesses. Operating profit was $5,037, a $2,842 decrease over the prior year period, due in part to lower overall gross profit levels and increases in selling and administrative expenses.

During the current quarter, the Rail, Technologies, and Services segment had an increase in new orders of 32.1% compared to the prior year period, driven by improvements in all business units.

Precast Concrete Products


	Six Months Ended June 30,						Increase/(Decrease)			Percent Increase/(Decrease)
	2022			2021			2022 vs. 2021			2022 vs. 2021
Net sales	$	38,621		$	32,751		$	5,870		17.9	%
Gross profit	$	5,792		$	6,409		$	(617)		(9.6)	%
Gross profit percentage	15.0		%	19.6		%	(4.6)		%	(23.4)	%
Segment operating (loss) profit	$	(916)		$	1,031		$	(1,947)		(188.8)	%
Segment operating profit percentage	(2.4)		%	3.1		%	(5.5)		%	(175.3)	%

First Six Months 2022 Compared to First Six Months 2021

The Precast Concrete Products segment sales for the six months ended June 30, 2022 increased by $5,870, or 17.9%, compared to the prior year period, which is a continued reflection of the strong demand environment in the southern United States market served.

Precast Concrete Products gross profit decreased by $617, or 9.6%, from the prior year quarter, due to continued inflationary pressure on raw material and labor costs, unfavorable building sales mix and, to a lesser extent, manufacturing inefficiencies due to supply chain disruption. Segment gross profit margin declined by 460 bps for the six months ended June 30, 2022 versus the prior year period. Operating loss for the six months ended June 30, 2022 of $916 reflects a $1,947 decline from the prior year period, due to margin degradation and increases in selling and administrative costs.

During the quarter, the Precast Concrete Products segment had a decrease in new orders of 10.9% compared to the prior year period. New orders and backlog continue to remain strong given the robust demand environment in markets served.

Steel Products and Measurement


	Six Months Ended June 30,						(Decrease)/Increase			Percent (Decrease)/Increase
	2022			2021			2022 vs. 2021			2022 vs. 2021
Net Sales	$	46,181		$	82,837		$	(36,656)		(44.3)	%
Gross profit	$	5,760		$	9,117		$	(3,357)		(36.8)	%
Gross profit percentage	12.5		%	11.0		%	1.5		%	13.3	%
Segment operating loss	$	(1,386)		$	(113)		$	(1,273)		**
Segment operating profit percentage	(3.0)		%	(0.1)		%	(2.9)		%	**

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

First Six Months 2022 Compared to First Six Months 2021

The Steel Products and Measurement segment sales for the six months ended June 30, 2022 decreased by $36,656, or 44.3%, compared to the prior year period, due entirely to the impact of the divested Piling Products business, which drove a sales decline of $42,889 versus the prior year period. The decline in sales was partially offset by sales increases in the balance of the business units including the Fabricated Steel Products business sales, excluding Piling, which increased $3,749, and Coatings and Measurement where sales increased $2,477 versus the prior year period.

Steel Products and Measurement gross profit decreased by $3,357, or 36.8%, from the prior year period, due to lower sales volumes and increased raw material costs in the Fabricated Bridge business. However, the gross profit margin for the segment increased 150 basis points to 12.5%, a result of a more favorable mix in 2022 given the divestiture of the low margin Piling Products business. The

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segment loss was $1,386, an increased loss of $1,273 from the prior year period. Selling and administrative expenses incurred by the segment decreased by $2,192 compared to the prior year period, primarily attributable to the Piling Products divestiture.

During the quarter, the Steel Products and Measurement segment new orders decreased by $36,949, or 42.3% compared to the prior year period, driven by a $45,664 decline from the divested Piling Products division. This decrease was partially offset by improvements in both Fabricated Steel Products, excluding the divested Piling Products division, and Coatings and Measurement.

Other

Segment Backlog

Total Company backlog is summarized by business segment in the following table for the periods indicated:



	June 30, 2022		December 31, 2021		June 30, 2021
Rail, Technologies, and Services	$	132,017	$	96,573	$	102,580
Precast Concrete Products	71,507		68,636		62,413
Steel Products and Measurement	47,321		44,980		88,238
Total backlog	$	250,845	$	210,189	$	253,231

The backlog for Steel Products and Measurement includes $33,682 related to the divested Piling Products division as of June 30, 2021 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 $49,286 and $31,251 as of June 30, 2022 and December 31, 2021, respectively, and was primarily comprised of borrowings under its revolving credit facility.

The following table reflects available funding capacity, subject to covenant restrictions, as of June 30, 2022:


	June 30, 2022
Cash and cash equivalents		$	7,661
Credit agreement:
Total availability under the credit agreement	130,000
Outstanding borrowings on revolving credit facility	(49,194)
Letters of credit outstanding	(683)
Net availability under the revolving credit facility		80,123
Total available funding capacity		$	87,784

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 June 30, 2022, 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.

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The changes in cash and cash equivalents for the six months ended June 30, 2022 and 2021 were as follows:


	Six Months Ended June 30,
	2022		2021
Net cash (used in) provided by continuing operating activities	$	(13,382)	$	6,842
Net cash used in continuing investing activities	(7,328)		(2,248)
Net cash provided by (used in) continuing financing activities	18,476		(7,918)
Effect of exchange rate changes on cash and cash equivalents	(477)		153
Net cash used in discontinued operations	—		(253)
Net decrease in cash and cash equivalents	$	(2,711)	$	(3,424)

Cash Flow from Operating Activities

During the six months ended June 30, 2022, cash flows used in operating activities were $13,382, compared to cash flows provided by continuing operating activities of $6,842 during the prior year to date period. For the six months ended June 30, 2022, the net income and adjustments to net income from continuing operating activities provided $7,277, compared to $9,677 in the 2021 period. Working capital and other assets and liabilities used $20,659 in the current period, compared to using $2,835 in the prior year period.

The Company’s calculation for days sales outstanding at June 30, 2022 and December 31, 2021 was 46 and 46 days, respectively, and the Company believes it has a high quality receivables portfolio.

Cash Flow from Investing Activities

Capital expenditures for the six months ended June 30, 2022 and 2021 were $3,048 and $2,248, respectively. The current period expenditures primarily relate to the implementation of the enterprise resource planning system at additional Company divisions and general plant and operational improvements throughout the Company. Expenditures for the six months ended June 30, 2021 primarily relate to the expansion of the Precast Concrete Products business line in Texas. On June 21, 2022, the Company entered into an agreement to purchase the stock of Skratch for $7,402, which included a cash outflow of $5,712 during the six months ended June 30, 2022. During the six months ended June 30, 2022, the Company received final proceeds from the 2021 Piling Products divestiture of $1,195.

Cash Flow from Financing Activities

During the six months ended June 30, 2022 and 2021, the Company had an increase in outstanding debt of $18,877 and a decrease of $7,767, respectively. The increase in debt for the six months ended June 30, 2022 was due in part to the acquisition of Skratch on June 21, 2022, which contributed $6,518 to the increase, as well as the funding working of capital and other assets and liabilities. The decrease in net debt for the 2021 period was primarily attributable to the utilization of excess cash generated through operating activities. Treasury stock acquisitions of $401 and $547 for the six months ended June 30, 2022 and 2021, respectively, represent stock repurchases from employees to satisfy their income tax withholdings in connection with the vesting of stock awards.

Financial Condition

As of June 30, 2022, the Company had $7,661 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 June 30, 2022, approximately $6,872 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 have been to fund its operations, including capital expenditures, acquisitions, 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 June 30, 2022, its revolving credit facility had $81,489 of net availability, while the Company had $49,286 in total debt. The Company’s current ratio as of June 30, 2022 and December 31, 2021 was 2.10 and 2.08, respectively.

On August 13, 2021, the Company entered into the Credit Agreement, which increased 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 9 of the Notes to Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

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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 1, 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 accounted 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 June 30, 2022 the swap asset was $1,111 and as of December 31, 2021 the swap asset and liability were $175 and $159, 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, 2021.

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 June 30, 2022. 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.

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 six months ended June 30, 2022, 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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PART II. OTHER INFORMATION

(Dollars in thousands, except share data)

Item 1. Legal Proceedings

See Note 15 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors

This item is not applicable to a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Company’s purchases of equity securities for the three months ended June 30, 2022 were as follows:


	Total number of shares purchased (1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Approximate dollar value of shares that may yet be purchased under the plans or programs
April 1, 2022 - April 30, 2022	—	$	—	—	$	—
May 1, 2022 - May 31, 2022	274	13.00		—	—
June 1, 2022 - June 30, 2022	—	—		—	—
Total	274	$	13.00	—	$	—

1.Reflects shares withheld by the Company to pay taxes upon vesting of restricted stock.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

This item is not applicable to the Company.

Item 5. Other Information

None.

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Item 6. Exhibits

See Exhibit Index below.

Exhibit Index


Exhibit Number						Description
*10.1						2022 Equity and Incentive Compensation Plan.

*10.2						Strategy Transformation Plan Description and Award (2022-2025).

*10.3						2022 Director Restricted Stock Award.

*31.1						Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2						Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.

*32.0						Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.

*101.INS						XBRL Instance Document-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

*101.SCH						XBRL Taxonomy Extension Schema Document.

*101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document.

*101.DEF						XBRL Taxonomy Extension Definition Linkbase Document.

*101.LAB						XBRL Taxonomy Extension Label Linkbase Document.

*101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document.

*104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)


*			Exhibits marked with an asterisk are filed herewith.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		L.B. FOSTER COMPANY
		(Registrant)

Date:	August 9, 2022	By: /s/ William M. Thalman
		William M. Thalman
		Senior Vice President
		and Chief Financial Officer
		(Duly Authorized Officer of Registrant)

L.B. Foster - 10-Q quarterly report FY2022 Q2

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