FOSTER L B CO 10-Q

Item 1. Financial Statements L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) September 30, 2022 December 31, 2021 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 4,943 $ 10,372 Accounts receivable - net (Note 6) 80,672 55,911 Contract assets - net (Note 4) 31,963 36,179 Inventories - net (Note 7) 85,146 62,871 Other current assets 13,664 14,146 Total current assets 216,388 179,479 Property, plant, and equipment - net (Note 8) 83,957 58,222 Operating lease right-of-use assets - net (Note 9) 12,701 15,131 Other assets: Goodwill (Note 5) 33,430 20,152 Other intangibles - net (Note 5) 29,195 31,023 Deferred tax assets (Note 12) 36,272 37,242 Other assets 1,249 1,346 TOTAL ASSETS $ 413,192 $ 342,595 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 51,231 $ 41,411 Deferred revenue 22,157 13,411 Accrued payroll and employee benefits 8,820 9,517 Current portion of accrued settlement (Note 16) 8,000 8,000 Current maturities of long-term debt (Note 10) 82 98 Other accrued liabilities 14,811 13,757 Total current liabilities 105,101 86,194 Long-term debt (Note 10) 98,837 31,153 Deferred tax liabilities (Note 12) 2,817 3,753 Long-term portion of accrued settlement (Note 16) 12,000 16,000 Long-term operating lease liabilities (Note 9) 10,001 12,279 Other long-term liabilities 8,735 9,606 Stockholders’ equity: Common stock, par value $ 0.01 , authorized 20,000,000 shares; shares issued at September 30, 2022 and December 31, 2021, 11,115,779 ; shares outstanding at September 30, 2022 and December 31, 2021, 10,731,555 and 10,670,343 , respectively 111 111 Paid-in capital 42,608 43,272 Retained earnings 167,100 168,733 Treasury stock - at cost, 384,224 and 445,436 common stock shares at September 30, 2022 and December 31, 2021, respectively ( 8,351 ) ( 10,179 ) Accumulated other comprehensive loss ( 26,206 ) ( 18,845 ) Total L.B. Foster Company stockholders’ equity 175,262 183,092 Noncontrolling interest 439 518 Total stockholders’ equity 175,701 183,610 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 413,192 $ 342,595 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Sales of goods $ 117,302 $ 112,813 $ 318,307 $ 351,668 Sales of services 12,713 17,240 42,017 48,987 Total net sales 130,015 130,053 360,324 400,655 Cost of goods sold 93,737 93,521 258,913 292,733 Cost of services sold 13,181 14,256 38,574 40,655 Total cost of sales 106,918 107,777 297,487 333,388 Gross profit 23,097 22,276 62,837 67,267 Selling and administrative expenses 22,618 20,056 59,310 57,849 Amortization expense 1,599 1,462 4,454 4,397 Operating (loss) profit ( 1,120 ) 758 ( 927 ) 5,021 Interest expense - net 993 722 1,747 2,454 Other expense (income) - net 168 ( 2,880 ) ( 1,096 ) ( 2,751 ) (Loss) income from continuing operations before income taxes ( 2,281 ) 2,916 ( 1,578 ) 5,318 Income tax (benefit) expense from continuing operations ( 176 ) 676 137 1,494 Net (loss) income from continuing operations ( 2,105 ) 2,240 ( 1,715 ) 3,824 Net loss attributable to noncontrolling interest ( 28 ) ( 30 ) ( 82 ) ( 64 ) (Loss) income from continuing operations attributable to L.B. Foster Company ( 2,077 ) 2,270 ( 1,633 ) 3,888 Discontinued operations: Income from discontinued operations before income taxes — 72 — 72 Income tax benefit from discontinued operations — — — — Income from discontinued operations — 72 — 72 Net (loss) income attributable to L.B. Foster Company $ ( 2,077 ) $ 2,342 $ ( 1,633 ) $ 3,960 Basic (loss) earnings per common share: From continuing operations $ ( 0.20 ) $ 0.21 $ ( 0.16 ) $ 0.36 From discontinued operations — 0.01 — 0.01 Basic (loss) earnings per common share $ ( 0.20 ) $ 0.22 $ ( 0.16 ) $ 0.37 Diluted (loss) earnings per common share: From continuing operations $ ( 0.20 ) $ 0.21 $ ( 0.16 ) $ 0.36 From discontinued operations — 0.01 — 0.01 Diluted (loss) earnings per common share $ ( 0.20 ) $ 0.22 $ ( 0.16 ) $ 0.37 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) (In thousands) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net (loss) income $ ( 2,105 ) $ 2,312 $ ( 1,715 ) $ 3,896 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment ( 4,341 ) ( 1,610 ) ( 8,933 ) ( 649 ) Unrealized gain (loss) on cash flow hedges, net of tax (expense) benefit of $( 217 ), $ 11 , $( 455 ),and $ 11 , respectively 632 ( 33 ) 1,330 ( 33 ) Cash flow hedges reclassified to earnings, net of tax expense of $ 0 , $ 99 , $ 66 , and $ 295 , respectively — 136 93 409 Reclassification of pension liability adjustments to earnings, net of tax expense of $ 8 , $ 23 , $ 40 , and $ 71 , respectively* 50 92 149 274 Total comprehensive (loss) income ( 5,764 ) 897 ( 9,076 ) 3,897 Less comprehensive (loss) income attributable to noncontrolling interest: Net loss attributable to noncontrolling interest ( 28 ) ( 30 ) ( 82 ) ( 64 ) Foreign currency translation adjustment ( 21 ) ( 31 ) 3 ( 10 ) Amounts attributable to noncontrolling interest ( 49 ) ( 61 ) ( 79 ) ( 74 ) Comprehensive (loss) income attributable to L.B. Foster Company $ ( 5,715 ) $ 958 $ ( 8,997 ) $ 3,971 * 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. 5 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Nine Months Ended September 30, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net (loss) income $ ( 1,715 ) $ 3,824 Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: Deferred income taxes ( 962 ) 526 Depreciation 6,083 6,049 Amortization 4,454 4,397 Equity in income of nonconsolidated investments ( 38 ) ( 5 ) (Gain) loss on sales and disposals of property, plant, and equipment ( 214 ) 30 Stock-based compensation 1,570 1,800 Gain on asset divestitures ( 44 ) ( 2,741 ) Change in operating assets and liabilities: Accounts receivable ( 23,760 ) ( 6,384 ) Contract assets ( 1,037 ) ( 3,321 ) Inventories ( 21,571 ) ( 9,344 ) Other current assets 2,309 ( 469 ) Other noncurrent assets 2,468 2,063 Accounts payable 12,307 ( 892 ) Deferred revenue 7,493 6,046 Accrued payroll and employee benefits ( 417 ) 852 Accrued settlement ( 4,000 ) ( 4,000 ) Other current liabilities 54 ( 3,461 ) Other long-term liabilities ( 1,816 ) ( 1,780 ) Net cash used in continuing operating activities ( 18,836 ) ( 6,810 ) Net cash used in discontinued operating activities — ( 253 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of property, plant, and equipment 259 — Capital expenditures on property, plant, and equipment ( 4,559 ) ( 3,568 ) Proceeds from asset divestitures 8,800 22,707 Acquisitions, net of cash acquired ( 58,561 ) ( 229 ) Net cash (used in) provided by continuing investing activities ( 54,061 ) 18,910 CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of debt ( 128,771 ) ( 147,224 ) Proceeds from debt 197,926 134,705 Debt issuance costs ( 182 ) ( 358 ) Treasury stock acquisitions ( 405 ) ( 549 ) Investment of noncontrolling interest — 396 Net cash provided by (used in) continuing financing activities 68,568 ( 13,030 ) Effect of exchange rate changes on cash and cash equivalents ( 1,100 ) 24 Net decrease in cash and cash equivalents ( 5,429 ) ( 1,159 ) Cash and cash equivalents at beginning of period 10,372 7,564 Cash and cash equivalents at end of period $ 4,943 $ 6,405 Supplemental disclosure of cash flow information: Interest paid $ 1,337 $ 2,205 Income taxes (received) paid $ ( 5,151 ) $ 1,215 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (Dollars in thousands) Three Months Ended September 30, 2022 Common Stock Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Noncontrolling Interest Total Stockholders’ Equity Balance, June 30, 2022 $ 111 $ 42,201 $ 169,177 $ ( 8,391 ) $ ( 22,547 ) $ 488 $ 181,039 Net loss — — ( 2,077 ) — — ( 28 ) ( 2,105 ) Other comprehensive loss, net of tax: Pension liability adjustment — — — — 50 — 50 Foreign currency translation adjustment — — — — ( 4,341 ) ( 21 ) ( 4,362 ) Unrealized derivative gain on cash flow hedges — — — — 632 — 632 Issuance of 605 common shares, net of shares withheld for taxes — 20 — 40 — — 60 Stock-based compensation — 387 — — — — 387 Balance, September 30, 2022 $ 111 $ 42,608 $ 167,100 $ ( 8,351 ) $ ( 26,206 ) $ 439 $ 175,701 Three Months Ended September 30, 2021 Common Stock Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Noncontrolling Interest Total Stockholders’ Equity Balance, June 30, 2021 $ 111 $ 43,650 $ 166,725 $ ( 11,104 ) $ ( 18,873 ) $ 383 $ 180,892 Net income (loss) — — 2,342 — — ( 30 ) 2,312 Other comprehensive loss, net of tax: Pension liability adjustment — — — — 92 — 92 Foreign currency translation adjustment — — — — ( 1,579 ) ( 31 ) ( 1,610 ) Unrealized derivative loss on cash flow hedges — — — — ( 33 ) — ( 33 ) Cash flow hedges reclassified to earnings — — — — 136 — 136 Issuance of 8,113 common shares, net of shares withheld for taxes — ( 189 ) — 187 — — ( 2 ) Stock-based compensation — 587 — — — — 587 Balance, September 30, 2021 $ 111 $ 44,048 $ 169,067 $ ( 10,917 ) $ ( 20,257 ) $ 322 $ 182,374 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 7 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED) (Unaudited) (Dollars in thousands) Nine Months Ended September 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 loss — — ( 1,633 ) — — ( 82 ) ( 1,715 ) Other comprehensive loss income, net of tax: Pension liability adjustment — — — — 149 — 149 Foreign currency translation adjustment — — — — ( 8,933 ) 3 ( 8,930 ) Unrealized derivative gain on cash flow hedges — — — — 1,330 — 1,330 Cash flow hedges reclassified to earnings — — — — 93 — 93 Issuance of 61,212 common shares, net of shares withheld for taxes — ( 2,234 ) — 1,828 — — ( 406 ) Stock-based compensation — 1,570 — — — — 1,570 Balance, September 30, 2022 $ 111 $ 42,608 $ 167,100 $ ( 8,351 ) $ ( 26,206 ) $ 439 $ 175,701 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 8 Table of Contents L.B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED) (Unaudited) (Dollars in thousands) Nine Months Ended September 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 (loss) — — 3,960 — — ( 64 ) 3,896 Other comprehensive income, net of tax: Pension liability adjustment — — — — 274 — 274 Foreign currency translation adjustment — — — — ( 639 ) ( 10 ) ( 649 ) Unrealized derivative loss on cash flow hedges — — — — ( 33 ) — ( 33 ) Cash flow hedges reclassified to earnings — — — — 409 — 409 Issuance of 114,288 common shares, net of shares withheld for taxes — ( 2,335 ) — 1,786 — — ( 549 ) Stock-based compensation — 1,800 — — — — 1,800 Investment of noncontrolling interest — — — — — 396 396 Balance, September 30, 2021 $ 111 $ 44,048 $ 169,067 $ ( 10,917 ) $ ( 20,257 ) $ 322 $ 182,374 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 9 Table of Contents 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 September 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 nine months ended September 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 reporting segments in 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 does not expect the provisions of ASU 2020-04 to have a significant impact on its financial condition, results of operations, or 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. 10 Table of Contents The following table illustrates the Company’s revenues and profit (loss) from operations by segment for the periods indicated: Three Months Ended September 30, 2022 Three Months Ended September 30, 2021 Net Sales Segment Operating Profit Net Sales Segment Operating Profit (Loss) Rail, Technologies, and Services $ 77,350 $ 539 $ 73,942 $ 3,091 Precast Concrete Products 28,856 1,245 17,972 144 Steel Products and Measurement 23,809 303 38,139 ( 27 ) Total $ 130,015 $ 2,087 $ 130,053 $ 3,208 Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021 Net Sales Segment Operating Profit (Loss) Net Sales Segment Operating Profit (Loss) Rail, Technologies, and Services $ 222,857 $ 5,576 $ 228,956 $ 10,970 Precast Concrete Products 67,477 329 50,723 1,175 Steel Products and Measurement 69,990 ( 1,083 ) 120,976 ( 140 ) Total $ 360,324 $ 4,822 $ 400,655 $ 12,005 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 September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Operating profit for reportable segments $ 2,087 $ 3,208 $ 4,822 $ 12,005 Interest expense - net ( 993 ) ( 722 ) ( 1,747 ) ( 2,454 ) Other (expense) income - net ( 168 ) 2,880 1,096 2,751 Unallocated corporate expenses and other unallocated charges ( 3,207 ) ( 2,450 ) ( 5,749 ) ( 6,984 ) (Loss) income from continuing operations before income taxes $ ( 2,281 ) $ 2,916 $ ( 1,578 ) $ 5,318 The following table illustrates assets of the Company by segment for the periods presented: September 30, 2022 December 31, 2021 Rail, Technologies, and Services $ 165,651 $ 171,608 Precast Concrete Products 116,519 48,740 Steel Products and Measurement 64,830 58,377 Unallocated corporate assets 66,192 63,870 Total $ 413,192 $ 342,595 Note 3. Acquisitions and Divestitures Skratch Enterprises Ltd. 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, Technologies, and Services segment. 11 Table of Contents VanHooseCo Precast LLC On August 12, 2022, the Company acquired the operating assets of VanHooseCo Precast LLC (“VanHooseCo”), a privately-held business headquartered in Loudon, Tennessee specializing in precast concrete walls, water management products, and traditional precast products for the industrial, commercial, and residential infrastructure markets. The Company acquired VanHooseCo for $ 52,203 , net of cash acquired at closing, subject to the finalization of net working capital adjustments. An amount equal to $ 2,500 of the purchase price was deposited in an escrow account in order to cover breaches of representations and warranties. The acquisition agreement includes two employment agreements whereby principals have the ability to earn up to an additional $ 1,000 dependent upon the successful completion of the principals’ employment agreements. VanHooseCo has been included in the Company’s Precast Concrete Products segment. Acquisition Summary Each transaction was accounted for under the acquisition method of accounting under U.S. GAAP which requires an acquiring entity to recognize, with limited exceptions, all of the assets acquired and liabilities assumed in a transaction at fair value as of the acquisition date. Goodwill primarily represents the value paid for each acquisition’s enhancement to the Company’s product and service offerings and capabilities, as well as a premium payment related to the ability to control the acquired assets, as well as the assembled workforce provided. VanHooseCo contributed net sales of $ 6,353 and operating profit of $ 397 to the Company’s consolidated results for the period from August 12, 2022 through September 30, 2022. The table below summarizes the Company’s results as though the VanHooseCo acquisition had been completed on January 1, 2022. Certain of VanHooseCo’s historical amounts were reclassified to conform to the Company’s financial presentation of operations, which included recording inventory and property, plant, and equipment at fair market value, to establish intangible assets, to remove deferred compensation expense, and to include interest expense for the additional borrowings. The following unaudited pro forma information is provided for informational purposes only and does not represent what consolidated results of operations would have been had the VanHooseCo acquisition occurred on January 1, 2022 nor are they necessarily indicative of future consolidated results of operations. The Company has omitted the prior year interim period from the table below due to the acquired company being a privately-held entity with limited interim financial information. Nine Months Ended September 30, 2022 Net sales $ 385,824 Net loss attributable to L.B. Foster Company ( 633 ) Diluted loss per share As reported $ ( 0.16 ) Pro forma $ ( 0.06 ) The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of the VanHooseCo and Skratch acquisitions. Due to the timing of the acquisitions, the Company is in the process of measuring the fair value of assets acquired and liabilities assumed, including intangible assets, and values for the allocations shown in the tables below are preliminary. Allocation of purchase price VanHooseCo Skratch Current assets, net of cash acquired on the acquisition date $ 10,825 $ 1,129 Property, plant, and equipment 30,001 174 Goodwill 9,674 5,549 Other intangibles 4,561 1,750 Liabilities assumed ( 2,521 ) ( 1,200 ) Total $ 52,540 $ 7,402 12 Table of Contents The following table summarizes the estimates of the fair values of the VanHooseCo and Skratch identifiable intangible assets acquired: Identifiable intangible assets VanHooseCo Skratch Non-compete agreements $ — 27 Customer relationships 1,537 1,349 Trademarks and trade names 2,697 374 Favorable lease 327 — Total $ 4,561 $ 1,750 The Company made a preliminary allocation of the purchase price for the VanHooseCo and Skratch acquisitions as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities. These nonrecurring fair value measurements are classified as Level 3 in the fair value hierarchy. See Note 14 for a description of the fair value hierarchy. Due to the timing of the acquisitions, values shown in the table above are preliminary. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement recognized for assets or liabilities assumed, the Company will retrospectively adjust the amounts recognized as of the acquisition date. Divestiture Summary 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 were $ 7,795 , subject to indemnification obligations and working capital adjustments. The Track Components business was reported in the Rail Products business unit within the Rail, Technologies, and Services segment. On September 24, 2021, the Company executed the sale of its Piling Products division for $ 23,902 in total proceeds. The sale included substantially all inventory held by the Company associated with the division. The Piling Products division was included in the Fabricated Steel business unit within the Steel Products and Measurement segment. Note 4. Revenue Revenue from products or services provided to customers over time accounted for 23.8 % and 35.8 % of revenue for the three months ended September 30, 2022 and 2021, respectively, and 27.0 % and 29.7 % of revenue for the nine months ended September 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 $ 14,380 and $ 30,314 for the three months ended September 30, 2022 and 2021, respectively, and $ 53,791 and $ 79,109 for the nine months ended September 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 time using an output measure was $ 16,520 and $ 16,262 for the three months ended September 30, 2022 and 2021, respectively, and $ 43,514 and $ 40,013 for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022 and December 31, 2021, the Company had contract assets of $ 31,963 and $ 36,179 , respectively, that were recorded within the Condensed Consolidated Balance Sheets. As of September 30, 2022 and December 31, 2021, the Company had contract liabilities of $ 4,606 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 76.2 % and 64.2 % of revenue for the three months ended September 30, 2022 and 2021, respectively, and 73.0 % and 70.3 % for nine months ended September 30, 2022 and 2021. The Company recognizes revenue at the point in time at which the customer obtains control of the product or service is performed, 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. 13 Table of Contents The following table summarizes the Company’s net sales by major product and service category for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Rail Products and Global Friction Management $ 69,161 $ 60,593 $ 191,228 $ 192,661 Technology Services and Solutions 8,189 13,349 31,629 36,295 Rail, Technologies, and Services 77,350 73,942 222,857 228,956 Precast Concrete Buildings 15,525 13,884 41,306 40,516 Other Precast Concrete Products 13,331 4,088 26,171 10,207 Precast Concrete Products 28,856 17,972 67,477 50,723 Fabricated Steel Products 15,250 30,512 45,821 100,233 Coatings and Measurement 8,559 7,627 24,169 20,743 Steel Products and Measurement 23,809 38,139 69,990 120,976 Total net sales $ 130,015 $ 130,053 $ 360,324 $ 400,655 Net sales by the timing of the transfer of products and performance of services was as follows for the periods presented: Three Months Ended September 30, 2022 Rail, Technologies, and Services Precast Concrete Products Steel Products and Measurement Total Point in time $ 64,913 $ 13,331 $ 20,871 $ 99,115 Over time 12,437 15,525 2,938 30,900 Total net sales $ 77,350 $ 28,856 $ 23,809 $ 130,015 Three Months Ended September 30, 2021 Rail, Technologies, and Services Precast Concrete Products Steel Products and Measurement Total Point in time $ 54,470 $ 4,088 $ 24,919 $ 83,477 Over time 19,472 13,884 13,220 46,576 Total net sales $ 73,942 $ 17,972 $ 38,139 $ 130,053 Nine Months Ended September 30, 2022 Rail, Technologies, and Services Precast Concrete Products Steel Products and Measurement Total Point in time $ 179,951 $ 26,171 $ 56,897 $ 263,019 Over time 42,906 41,306 13,093 97,305 Total net sales $ 222,857 $ 67,477 $ 69,990 $ 360,324 Nine Months Ended September 30, 2021 Rail, Technologies, and Services Precast Concrete Products Steel Products and Measurement Total Point in time $ 178,225 $ 10,209 $ 93,099 $ 281,533 Over time 50,731 40,514 27,877 119,122 Total net sales $ 228,956 $ 50,723 $ 120,976 $ 400,655 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 nine months ended September 30, 2022 included transfers of $ 14,293 from the contract assets balance as of December 31, 2021 to accounts receivable. Significant changes in contract liabilities during the nine months ended September 30, 2022 resulted from increases of $ 3,087 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 September 14 Table of Contents 30, 2022 and 2021 of $ 14 and $ 81 , respectively, and revenue recognized during the nine months ended September 30, 2022 and 2021 of $ 2,656 and $ 985 , 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 September 30, 2022, the Company had approximately $ 272,777 of obligations under new contracts and remaining performance obligations, which is also referred to as backlog. Approximately 10.1 % of the September 30, 2022 backlog was related to projects that are anticipated to extend beyond September 30, 2023. Note 5. 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 5,549 — — 5,549 VanHooseCo acquisition — 9,674 — 9,674 Foreign currency translation impact ( 1,945 ) — — ( 1,945 ) Balance as of September 30, 2022 $ 18,181 $ 12,238 $ 3,011 $ 33,430 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 and current economic conditions, including but not limited to labor markets, supply chains, and other inflationary costs. However, the future impacts of COVID-19 and market conditions 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 September 30, 2022. The components of the Company’s intangible assets were as follows for the periods presented: September 30, 2022 Weighted Average Amortization Period In Years Gross Carrying Value Accumulated Amortization Net Carrying Amount Non-compete agreements 1 $ 24 $ ( 8 ) $ 16 Patents 10 326 ( 182 ) 144 Customer relationships 16 32,941 ( 16,363 ) 16,578 Trademarks and trade names 15 9,542 ( 5,056 ) 4,486 Technology 14 34,855 ( 27,202 ) 7,653 Favorable lease 6 327 ( 9 ) 318 $ 78,015 $ ( 48,820 ) $ 29,195 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 15 Table of Contents 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 15 years as of September 30, 2022. Amortization expense was $ 1,599 and $ 1,462 for the three months ended September 30, 2022 and 2021, respectively, and was $ 4,454 and $ 4,397 for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, the Company’s gross carrying value of customer relationships and technology intangible assets were reduced by $ 5,448 and $ 471 , respectively, and the net carrying amount of customer relationships and technology intangible assets were reduced by $ 2,869 and $ 7 , respectively, as a result of the August 1, 2022 disposition of the Track Components business. As of September 30, 2022, estimated amortization expense for the remainder of 2022 and thereafter was as follows: Amortization Expense Remainder of 2022 $ 1,603 2023 6,036 2024 5,042 2025 3,219 2026 2,630 2027 and thereafter 10,665 $ 29,195 Note 6. 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 September 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 income of $ 40 and $ 145 for the three months ended September 30, 2022 and 2021, respectively, and expense of $ 171 and income of $ 127 for the nine months ended September 30, 2022 and 2021, respectively. 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 171 Write-off against allowance ( 203 ) Balance as of September 30, 2022 $ 515 Note 7. Inventory Inventories as of September 30, 2022 and December 31, 2021 are summarized in the following table: September 30, 2022 December 31, 2021 Finished goods $ 43,745 $ 23,822 Work-in-process 11,862 10,738 Raw materials 29,539 28,311 Inventories - net $ 85,146 $ 62,871 16 Table of Contents Inventories of the Company are valued at average cost or net realizable value, whichever is lower. Note 8. Property, Plant, and Equipment Property, plant, and equipment as of September 30, 2022 and December 31, 2021 consisted of the following: September 30, 2022 December 31, 2021 Land $ 5,256 $ 6,224 Improvements to land and leaseholds 20,762 15,416 Buildings 34,468 27,206 Machinery and equipment, including equipment under finance leases 122,935 112,021 Construction in progress 3,102 1,194 Gross property, plant, and equipment 186,523 162,061 Less accumulated depreciation and amortization, including accumulated amortization of finance leases ( 102,566 ) ( 103,839 ) Property, plant, and equipment - net $ 83,957 $ 58,222 Depreciation expense was $ 2,269 and $ 2,041 for the three months ended September 30, 2022 and 2021, respectively, and $ 6,083 and $ 6,049 for the nine months ended September 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 nine months ended September 30, 2022 and 2021. Note 9. 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 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 September 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 September 30, 2022 and December 31, 2021: September 30, 2022 December 31, 2021 Operating leases Operating lease right-of-use assets $ 12,701 $ 15,131 Other accrued liabilities $ 2,700 $ 2,852 Long-term operating lease liabilities 10,001 12,279 Total operating lease liabilities $ 12,701 $ 15,131 Finance leases Property, plant, and equipment $ 1,250 $ 1,162 Accumulated amortization ( 1,094 ) ( 1,011 ) Property, plant, and equipment - net $ 156 $ 151 Current maturities of long-term debt $ 82 $ 98 Long-term debt 74 53 Total finance lease liabilities $ 156 $ 151 17 Table of Contents The components of lease expense within the Company’s Condensed Consolidated Statements of Operations were as follows for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Finance lease cost: Amortization of finance leases $ 44 $ 50 $ 119 $ 152 Interest on lease liabilities 7 19 20 61 Operating lease cost 706 706 2,188 2,042 Sublease income ( 50 ) ( 50 ) ( 150 ) ( 150 ) Total lease cost $ 707 $ 725 $ 2,177 $ 2,105 The cash flow components of the Company’s leases were as follows for the nine months ended September 30, 2022 and 2021: Nine Months Ended September 30, 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows related to operating leases $ ( 2,568 ) $ ( 2,462 ) Financing cash flows related to finance leases ( 110 ) ( 166 ) Right-of-use assets obtained in exchange for new lease liabilities: Operating leases $ — $ 377 The weighted-average remaining lease term (in years) and discount rate related to the operating leases were as follows as of the dates presented: September 30, 2022 2021 Operating lease weighted-average remaining lease term 5 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 September 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 $ 845 $ 32 2023 3,234 77 2024 2,900 41 2025 2,351 20 2026 2,147 9 2027 and thereafter 3,092 — Total undiscounted lease payments 14,569 179 Interest ( 1,868 ) ( 23 ) Total $ 12,701 $ 156 Note 10. Long-Term Debt and Related Matters Long-term debt consisted of the following: 18 Table of Contents September 30, 2022 December 31, 2021 Revolving credit facility $ 98,763 $ 31,100 Finance leases and financing agreements 156 151 Total 98,919 31,251 Less current maturities ( 82 ) ( 98 ) Long-term portion $ 98,837 $ 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. 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. On August 12, 2022, the Company amended its Credit Agreement to obtain approval for the VanHooseCo acquisition and temporarily modify certain financial covenants to accommodate the transaction. The Second Amendment permitted the Company to acquire the operating assets of VanHooseCo and modified the Maximum Gross Leverage Ratio covenant through June 30, 2023 to accommodate the transaction. The Second Amendment also added an additional tier to the pricing grid and provided for the conversion from LIBOR-based to SOFR-based borrowings. 19 Table of Contents As of September 30, 2022, the Company was in compliance with the covenants in the Credit Agreement, as amended. As of September 30, 2022, the Company had outstanding letters of credit of approximately $ 564 and had net available borrowing capacity of $ 30,673 , subject to covenant restrictions. The maturity date of the facility is August 13, 2026. Note 11. 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 September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Numerator for basic and diluted (loss) earnings per common share: Net (loss) income from continuing operations $ ( 2,105 ) $ 2,240 $ ( 1,715 ) $ 3,824 Income from discontinued operations — 72 — 72 Net (loss) income $ ( 2,105 ) $ 2,312 $ ( 1,715 ) $ 3,896 Denominator: Weighted average shares outstanding 10,731 10,642 10,710 10,615 Denominator for basic loss per common share 10,731 10,642 10,710 10,615 Effect of dilutive securities: Stock compensation plans — 122 — 129 Dilutive potential common shares — 122 — 129 Denominator for diluted (loss) income per common share - adjusted weighted average shares outstanding 10,731 10,764 10,710 10,744 Continuing operations $ ( 0.20 ) $ 0.21 $ ( 0.16 ) $ 0.36 Discontinued operations — 0.01 — 0.01 Basic (loss) earnings per common share $ ( 0.20 ) $ 0.22 $ ( 0.16 ) $ 0.37 Continuing operations $ ( 0.20 ) $ 0.21 $ ( 0.16 ) $ 0.36 Discontinued operations — 0.01 — 0.01 Diluted (loss) earnings per common share $ ( 0.20 ) $ 0.22 $ ( 0.16 ) $ 0.37 There were 109 and 108 anti-dilutive shares for the three and nine months ended September 30, 2022, respectively, excluded from the calculation. Note 12. Income Taxes For the three months ended September 30, 2022 and 2021, the Company recorded an income tax benefit of $ 176 and expense of $ 676 , respectively, on pre-tax losses of $ 2,281 and pre-tax income of $ 2,916 , respectively, for an effective income tax rate of 7.7 % and 23.2 %, respectively. For the nine months ended September 30, 2022 and 2021, the Company recorded an income tax expense of $ 137 and $ 1,494 , respectively, on pre-tax losses of $ 1,578 and pre-tax income of $ 5,318 , respectively, for an effective income tax rate of 8.7 % and 28.1 %, respectively. The Company's provision for income taxes for the three- and nine-month periods ended September 30, 2022 included a discrete income tax expense of $ 330 for a change in our permanent reinvestment assertion with respect to the undistributed earnings in Canada, as a result of the divestiture of our Track Components business located in St-Jean-sur-Richelieu, Quebec, Canada. In addition to the impact of the discrete items, the Company’s effective tax rate for the three and nine months ended September 30, 2022 and 2021 differs from the federal statutory rate of 21% primarily due to state income taxes, nondeductible expenses, research tax credits and withholding taxes on excess cash available for repatriation from foreign affiliates. Changes in pre-tax income projections, combined with the seasonal nature of our businesses, could also impact the effective income tax rate. Note 13. 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 recorded stock-based compensation expense related to restricted stock awards and performance share units of $ 387 and $ 587 for the three months ended September 30, 2022 and 2021, respectively, and $ 1,570 and $ 1,800 for the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, unrecognized compensation expense for unvested awards approximated $ 3,254 . The Company expects to recognize this expense over the upcoming 3.4 years through March 2026. 20 Table of Contents 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 2022 Equity and Incentive Compensation Plan, predecessor to 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 nine months ended September 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 125,582 5,730 110,600 14.88 Vested ( 75,153 ) — ( 13,095 ) 17.98 Adjustment for incentive awards expected to vest — — ( 105,598 ) 16.67 Cancelled and forfeited ( 500 ) — — 18.57 Outstanding as of September 30, 2022 185,633 80,680 108,478 $ 17.70 Note 14. 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. 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. 21 Table of Contents SOFR-based interest rate swaps - To reduce the impact of interest rate changes on outstanding variable-rate debt, the Company amended and entered into forward-starting SOFR-based interest rate swaps with notional values totaling $ 20,000 and $ 20,000 effective August 12, 2022 and August 31, 2022, respectively. 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 September 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 September 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 $ 17 $ 17 $ — $ — $ 18 $ 18 $ — $ — Interest rate swaps 1,960 — 1,960 — 175 — 175 — Total assets $ 1,977 $ 17 $ 1,960 $ — $ 193 $ 18 $ 175 $ — Interest rate swaps $ — $ — $ — $ — $ 159 $ — $ 159 $ — Total liabilities $ — $ — $ — $ — $ 159 $ — $ 159 $ — The $ 20,000 interest rate swap agreements that became effective August 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. In the third quarter of 2020, the Company dedesignated the cash flow hedges and accounted for the $ 50,000 interest rate swaps on a mark-to-market basis with changes in fair value recorded in current period earnings. In connection with this dedesignation, the Company froze the balances recorded in “Accumulated other comprehensive loss” at June 30, 2020 and reclassifies balances to earnings as the underlying physical transactions occur, unless it is no longer probable that the physical transaction will occur at which time the related gains deferred in Other Comprehensive Income will be immediately recorded in earnings. The gains and losses related to the interest rate swaps are reclassified from “Accumulated other comprehensive loss” in the Condensed Consolidated Balance Sheets and included in “Interest expense - net” in the Condensed Consolidated Statements of Operations as the interest expense from the Company’s debt is recognized. These interest rate swaps expired February 2022. For the three months ended September 30, 2021, the Company recognized interest expense of $ 244 from interest rate swaps. For the nine months ended September 30, 2022 and 2021, the Company recognized interest expense of $ 78 and $ 724 , 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 15. 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 one defined contribution plan for its employees in Canada. The Company also maintains two defined contribution plans and one defined benefit plan for its employees in the United Kingdom. 22 Table of Contents United States Defined Benefit Plan Net periodic pension costs for the United States defined benefit pension plan for the three and nine months ended September 30, 2022 and 2021 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Interest cost $ 49 $ 43 $ 146 $ 129 Expected return on plan assets ( 66 ) ( 62 ) ( 198 ) ( 185 ) Recognized net actuarial loss 18 25 53 74 Net periodic pension cost $ 1 $ 6 $ 1 $ 18 The Company has made contributions to its United States defined benefit pension plan of $ 345 during the nine months ended September 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 nine months ended September 30, 2022 and 2021 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Interest cost $ 42 $ 28 $ 126 $ 84 Expected return on plan assets ( 74 ) ( 65 ) ( 222 ) ( 195 ) Amortization of prior service costs and transition amount 6 7 18 21 Recognized net actuarial loss 38 83 114 249 Net periodic pension cost $ 12 $ 53 $ 36 $ 159 United Kingdom regulations require trustees to adopt a prudent approach to funding required contributions to defined benefit pension plans. For the nine months ended September 30, 2022, the Company contributed approximately $ 226 to the plan. The Company anticipates total contributions of approximately $ 302 to the United Kingdom pension plan during 2022. Defined Contribution Plans The Company sponsors five 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 September 30, Nine Months Ended September 30, 2022 2021 2022 2021 United States $ 441 $ 400 $ 1,136 $ 1,172 Canada 83 33 143 119 United Kingdom 588 131 588 386 $ 1,112 $ 564 $ 1,867 $ 1,677 Note 16. 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. 23 Table of Contents 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 80 Warranty liability utilized ( 366 ) Balance as of September 30, 2022 $ 756 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 $ 4,000 2023 8,000 2024 8,000 Total $ 20,000 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. 24 Table of Contents As of September 30, 2022 and December 31, 2021, the Company maintained environmental reserves approximating $ 2,470 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 ( 49 ) Balance as of September 30, 2022 $ 2,470 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 September 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 September 30, 2022, no such disclosures were considered necessary. 25 Table of Contents