What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-08 compared with 2023-05-10 · 198 added, 91 removed, 399 unchanged (42% of the section changed)

35 unchanged sentences

Common stock, par value $ 0.01 , authorized 20,000,000 shares;

shares issued at March 31, 2023 and December 31, 2022, 11,115,779 ;

shares outstanding at March 31, 2023 and December 31, 2022, 10,809,711 and 10,776,827 , respectively

shares issued at June 30, 2023 and December 31, 2022, 11,115,779 ;

shares outstanding at June 30, 2023 and December 31, 2022, 10,816,902 and 10,776,827 , respectively

Paid-in capital 40,919 41,303

Retained earnings 124,548 123,169

Treasury stock - at cost, 306,068 and 338,952 common stock shares at March 31, 2023 and December 31, 2022, respectively

Treasury stock - at cost, 298,877 and 338,952 common stock shares at June 30, 2023 and December 31, 2022, respectively

( 4,846 ) ( 6,240 )

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Sales of goods $ 132,167 $ 116,584 $ 230,705 $ 201,005

7 unchanged sentences

Amortization expense 1,375 1,419 2,740 2,855

Operating profit (loss) 503 ( 2,287 )

Operating profit 6,349 2,480 6,852 193

Interest expense - net 1,574 384 2,962 754

Other expense (income) - net 719 ( 701 ) 2,546 ( 1,264 )

Loss before income taxes ( 2,712 ) ( 2,094 )

Income tax benefit ( 541 ) ( 508 )

Net loss ( 2,171 ) ( 1,586 )

Income before income taxes 4,056 2,797 1,344 703

Income tax expense 563 821 22 313

Net income 3,493 1,976 1,322 390

Net loss attributable to noncontrolling interest ( 38 ) ( 34 ) ( 57 ) ( 54 )

Net loss attributable to L.B.

Net income attributable to L.B.

Foster Company $ 3,531 $ 2,010 $ 1,379 $ 444

Basic loss per common share $ ( 0.20 ) $ ( 0.15 )

Diluted loss per common share $ ( 0.20 ) $ ( 0.15 )

Basic earnings per common share $ 0.32 $ 0.18 $ 0.12 $ 0.04

Diluted earnings per common share $ 0.32 $ 0.18 $ 0.12 $ 0.04

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

FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Three Months Ended

Net loss $ ( 2,171 ) $ ( 1,586 )

June 30, Six Months Ended

2023 2022 2023 2022

Net income $ 3,493 $ 1,976 $ 1,322 $ 390

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment 1,252 ( 3,688 ) 2,503 ( 4,568 )

Unrealized (loss) gain on cash flow hedges, net of tax benefit of $ 0 and $ 188 , respectively

Unrealized gain on cash flow hedges, net of tax expense of $ 0 , $ 50 , $ 0 , and $ 238 , respectively

496 147 78 698

Cash flow hedges reclassified to earnings, net of tax expense of $ 0 , $ 0 , $ 0 , and $ 66 , respectively

Reclassification of pension liability adjustments to earnings, net of tax expense of $ 2 , $ 16 , $ 4 , and $ 32 , respectively*

Total comprehensive loss ( 1,302 ) ( 1,773 )

Total comprehensive income (loss) 5,282 ( 1,515 ) 3,984 ( 3,288 )

Less comprehensive (loss) income attributable to noncontrolling interest:

2 unchanged sentences

Amounts attributable to noncontrolling interest ( 9 ) ( 95 ) ( 24 ) ( 30 )

Comprehensive loss attributable to L.B.

Comprehensive income (loss) attributable to L.B.

Foster Company $ 5,291 $ ( 1,420 ) $ 4,008 $ ( 3,258 )

4 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ ( 2,171 ) $ ( 1,586 )

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

Net income $ 1,322 $ 390

Adjustments to reconcile net income to cash used in operating activities:

Deferred income taxes ( 1,710 ) ( 173 )

2 unchanged sentences

Equity in income of nonconsolidated investments ( 16 ) ( 87 )

(Gain) loss on sales and disposals of property, plant, and equipment ( 14 ) 23

Gain on sales and disposals of property, plant, and equipment ( 366 ) ( 214 )

Stock-based compensation 1,829 1,183

Loss on asset divestitures 2,033 —

Loss (gain) on asset divestitures 3,074 ( 491 )

Change in operating assets and liabilities:

7 unchanged sentences

Accrued payroll and employee benefits ( 1,885 ) ( 2,943 )

Accrued settlement ( 2,000 ) ( 2,000 )

Other current liabilities ( 941 ) ( 1,748 )

Other long-term liabilities 172 ( 926 )

Net cash provided by (used in) operating activities 6,932 ( 7,636 )

Net cash used in operating activities ( 3,333 ) ( 13,382 )

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Proceeds from business dispositions 7,706 1,195

Acquisitions, net of cash acquired 966 ( 5,712 )

Net cash provided by (used in) investing activities 7,716 ( 7,328 )

6 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents 178 ( 477 )

Net decrease in cash and cash equivalents ( 243 ) ( 4,133 )

Net increase (decrease) in cash and cash equivalents 998 ( 2,711 )

Cash and cash equivalents at beginning of period 2,882 10,372

2 unchanged sentences

Interest paid $ 2,889 $ 662

Income taxes received $ ( 1,564 ) $ ( 44 )

Income taxes (received) paid $ ( 331 ) $ 389

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

2 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Stock Paid-in

4 unchanged sentences

Interest Total Stockholders’

Balance, December 31, 2022 $ 111 $ 41,303 $ 123,169 $ ( 6,240 ) $ ( 21,165 ) $ 420 $ 137,598

Net loss — — ( 2,152 ) — — ( 19 ) ( 2,171 )

Balance, March 31, 2023 $ 111 $ 40,951 $ 121,017 $ ( 5,174 ) $ ( 20,296 ) $ 405 $ 137,014

Net income (loss) — — 3,531 — — ( 38 ) 3,493

Other comprehensive income, net of tax:

1 unchanged sentence

Foreign currency translation adjustment — — — — 1,223 29 1,252

Unrealized derivative loss on cash flow hedges — — — — ( 418 ) — ( 418 )

Unrealized derivative gain on cash flow hedges — — — — 496 — 496

Purchase of 51,241 common shares for treasury

— — — ( 662 ) — — ( 662 )

Issuance of 58,432 common shares, net of shares withheld for taxes

1 unchanged sentence

Stock-based compensation — 945 — — — — 945

Balance, June 30, 2023 $ 111 $ 40,919 $ 124,548 $ ( 4,846 ) $ ( 18,536 ) $ 396 $ 142,592

Three Months Ended June 30, 2022

Stock Paid-in

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive Loss Noncontrolling

Interest Total Stockholders’

Balance, March 31, 2022 $ 111 $ 42,153 $ 167,167 $ ( 9,200 ) $ ( 19,117 ) $ 583 $ 181,697

Three Months Ended March 31, 2022

Net income (loss) — — 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

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

FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands)

Six Months Ended June 30, 2023

Stock Paid-in

5 unchanged sentences

Balance, December 31, 2022 $ 111 $ 41,303 $ 123,169 $ ( 6,240 ) $ ( 21,165 ) $ 420 $ 137,598

Net loss — — ( 1,566 ) — — ( 20 ) ( 1,586 )

Other comprehensive loss, net of tax:

Net income (loss) — — 1,379 — — ( 57 ) 1,322

Other comprehensive income, net of tax:

Pension liability adjustment — — — — 81 — 81

1 unchanged sentence

Unrealized derivative gain on cash flow hedges — — — — 78 — 78

Purchase of 51,241 common shares for treasury

— — — ( 662 ) — — ( 662 )

Issuance of 91,316 common shares, net of shares withheld for taxes

— ( 2,213 ) — 2,056 — — ( 157 )

Stock-based compensation — 1,829 — — — — 1,829

Balance, June 30, 2023 $ 111 $ 40,919 $ 124,548 $ ( 4,846 ) $ ( 18,536 ) $ 396 $ 142,592

Six Months Ended June 30, 2022

Stock Paid-in

Capital Retained

Earnings Treasury

Stock Accumulated Other

Comprehensive Loss Noncontrolling

Interest Total Stockholders’

Balance, December 31, 2021 $ 111 $ 43,272 $ 168,733 $ ( 10,179 ) $ ( 18,845 ) $ 518 $ 183,610

Net income (loss) — — 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

2 unchanged sentences

Stock-based compensation — 1,183 — — — — 1,183

Balance, March 31, 2022 $ 111 $ 42,153 $ 167,167 $ ( 9,200 ) $ ( 19,117 ) $ 583 $ 181,697

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

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

8 unchanged sentences

In the opinion of management, all estimates and adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

This Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes thereto included in L.B.

12 unchanged sentences

Three Months Ended

March 31, 2023 Three Months Ended

March 31, 2022

Net Sales Segment Operating Profit (Loss) Net Sales Segment Operating Profit (Loss)

June 30, 2023 Three Months Ended

June 30, 2022

Net Sales Segment Operating Profit Net Sales Segment Operating Profit (Loss)

Rail, Technologies, and Services $ 91,616 $ 6,627 $ 81,797 $ 3,998

2 unchanged sentences

Total $ 148,034 $ 9,379 $ 131,515 $ 4,635

Six Months Ended

June 30, 2023 Six Months Ended

June 30, 2022

Net Sales Segment Operating Profit Net Sales Segment Operating Profit (Loss)

Rail, Technologies, and Services $ 156,000 $ 9,015 $ 145,507 $ 5,037

Precast Concrete Products 58,153 948 38,621 ( 916 )

Steel Products and Measurement 49,369 1,448 46,181 ( 1,386 )

Total $ 263,522 $ 11,411 $ 230,309 $ 2,735

Segment profit (loss) from operations, as shown above, includes allocated corporate operating expenses.

1 unchanged sentence

The expense allocation excludes certain corporate costs that are separately managed from the segments.

A reconciliation of reportable segment net profit (loss) to the Company’s consolidated total for the periods presented:

A reconciliation of reportable segment net profit to the Company’s consolidated total for the periods presented:

Three Months Ended

Operating profit (loss) for reportable segments $ 2,032 $ ( 1,900 )

June 30, Six Months Ended

2023 2022 2023 2022

Operating profit for reportable segments $ 9,379 $ 4,635 $ 11,411 $ 2,735

Interest expense - net ( 1,574 ) ( 384 ) ( 2,962 ) ( 754 )

1 unchanged sentence

Unallocated corporate expenses and other unallocated charges ( 3,030 ) ( 2,155 ) ( 4,559 ) ( 2,542 )

Loss before income taxes $ ( 2,712 ) $ ( 2,094 )

Income before income taxes $ 4,056 $ 2,797 $ 1,344 $ 703

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

5 unchanged sentences

Total $ 351,568 $ 365,310

On March 30, 2023, the Company sold substantially all the operating assets of its Chemtec Energy Services LLC business (“Chemtec”) for $ 5,344 in proceeds, subject to final working capital adjustments, generating a $ 2,033 loss on sale, recorded in “Other expense (income) - net.” The Chemtec business was reported in the Coatings and Measurement business unit within the Steel Products and Measurement segment.

On June 30, 2023, the Company sold substantially all the operating assets of the prestressed concrete railroad tie business operated by its wholly-owned subsidiary, CXT Incorporated (“Ties”), located in Spokane, WA, for $ 2,368 in proceeds, subject to final working capital adjustments, generating a $ 1,009 loss on the sale, which was recorded in “Other expense (income) - net”.

The Ties business was reported in the Rail Products business unit within the Rail, Technologies, and Services segment.

On March 30, 2023, the Company sold substantially all the operating assets of its Chemtec Energy Services LLC business (“Chemtec”) for $ 5,344 in proceeds, subject to final working capital adjustments, generating a $ 2,065 loss on the sale, which was recorded in “Other expense (income) - net.” The Chemtec business was reported in the Coatings and Measurement business unit within the Steel Products and Measurement segment.

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

2023 2022 2023 2022

Rail Products and Global Friction Management $ 81,926 $ 70,416 $ 137,974 $ 122,067

2 unchanged sentences

Precast Concrete Buildings 19,325 15,811 30,211 25,781

Other Precast Concrete Products 13,402 5,040

Precast Infrastructure Products 14,540 7,800 27,942 12,840

Precast Concrete Products 33,865 23,611 58,153 38,621

7 unchanged sentences

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

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Rail, Technologies, and Services Precast Concrete Products Steel Products and Measurement Total

2 unchanged sentences

Total net sales $ 91,616 $ 33,865 $ 22,553 $ 148,034

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Rail, Technologies, and Services Precast Concrete Products Steel Products and Measurement Total

2 unchanged sentences

Total net sales $ 81,797 $ 23,611 $ 26,107 $ 131,515

Six Months Ended June 30, 2023

Rail, Technologies, and Services Precast Concrete Products Steel Products and Measurement Total

Point in time $ 129,757 $ 27,942 $ 36,133 $ 193,832

Over time 26,243 30,211 13,236 69,690

Total net sales $ 156,000 $ 58,153 $ 49,369 $ 263,522

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

The Company’s performance obligations under long-term agreements with its customers are generally satisfied over time.

Revenue under long-term agreements is generally recognized 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.

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 under long-term agreements is at times recognized 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.

The Company’s revenue recognized over time under long-term agreements is also at times recognized using an output method, specifically units delivered, based upon certain customer acceptance and delivery requirements.

The use of an input or an output measure to recognize revenue is determined based on what is most appropriate given the nature of the work performed and terms of the associated agreement.

Revenue recognized over time was as follows for the periods presented:

Three Months Ended March 31, Percentage of Total Net Sales

Three Months Ended March 31,

Three Months Ended

June 30, Percentage of Total Net Sales

Three Months Ended June 30,

2023 2022 2023 2022

2 unchanged sentences

Total over time sales $ 37,164 $ 36,102 25.1 % 27.5 %

Six Months Ended

June 30, Percentage of Total Net Sales

Six Months Ended June 30,

2023 2022 2023 2022

Over time input method $ 31,935 $ 39,411 12.1 % 17.1 %

Over time output method 37,755 26,994 14.3 11.7

Total over time sales $ 69,690 $ 66,405 26.4 % 28.8 %

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.

4 unchanged sentences

Transfers from contract asset balance to accounts receivable ( 4,399 )

Balance as of March 31, 2023 $ 31,207

Balance as of June 30, 2023 $ 34,011

The following table sets forth the Company’s contract liabilities:

4 unchanged sentences

Other adjustments, including business divestiture ( 1,938 )

Balance as of March 31, 2023 $ 3,243

Balance as of June 30, 2023 $ 4,319

The Company records provisions related to the allowance for credit losses associated with contract assets.

2 unchanged sentences

These expectations are formed based on trends observed, as well as current and expected future conditions.

As of March 31, 2023, the Company had approximately $ 259,881 of obligations under new contracts and remaining performance obligations, which is also referred to as backlog.

Approximately 8.9 % of the March 31, 2023 backlog was related to projects that are anticipated to extend beyond March 31, 2024.

As of June 30, 2023, the Company had approximately $ 290,076 of obligations under new contracts and remaining performance obligations, which is also referred to as backlog.

Approximately 12.0 % of the June 30, 2023 backlog was related to projects that are anticipated to extend beyond June 30, 2024.

Goodwill and Other Intangible Assets

2 unchanged sentences

Balance as of December 31, 2022 $ 19,948 $ 10,785 $ — $ 30,733

VanHooseCo acquisition — 242 — 242

Foreign currency translation impact 429 — — 429

Balance as of March 31, 2023 $ 20,078 $ 10,785 $ — $ 30,863

Balance as of June 30, 2023 $ 20,377 $ 11,027 $ — $ 31,404

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 current economic conditions, including but not limited to labor markets, supply chains, and

other inflationary costs.

However, these factors can be unpredictable and are subject to change.

No interim goodwill impairment test was required as a result of the evaluation of qualitative factors as of March 31, 2023.

No interim goodwill impairment test was required as a result of the evaluation of qualitative factors as of June 30, 2023.

However, future impairment charges could result if future projections diverge unfavorably from current expectations in the Rail Technologies and Precast Concrete Products reporting units.

As of March 31, 2023 and December 31, 2022, the components of the Company’s intangible assets were as follows:

March 31, 2023

As of June 30, 2023 and December 31, 2022, the components of the Company’s intangible assets were as follows:

June 30, 2023

Weighted Average

2 unchanged sentences

Amortization Net

Non-compete agreements 1 $ 27 $ ( 23 ) $ 4

Patents 10 $ 338 $ ( 197 ) $ 141

4 unchanged sentences

$ 68,610 $ ( 47,354 ) $ 21,256

During the six months ended June 30, 2023, certain fully amortized intangible assets of $ 28 related to non-compete agreements were eliminated from gross intangible assets and accumulated amortization.

December 31, 2022

10 unchanged sentences

$ 68,002 $ ( 44,171 ) $ 23,831

On June 21, 2022, the Company acquired the stock of Skratch Enterprises Ltd.

On August 12, 2022, the Company acquired the operating assets of VanHooseCo Precast LLC (“VanHooseCo”).

As of June 30, 2023, the purchase accounting for these transactions is final.

Accounts Receivable

Changes in reserves for uncollectible accounts, which are recorded as part of “Selling and administrative expenses” in the Condensed Consolidated Statements of Operations, were recorded as an expense of $ 155 and $ 61 for the three months ended March 31, 2023 and 2022, respectively.

Changes in reserves for uncollectible accounts, which are recorded as part of “Selling and administrative expenses” in the Condensed Consolidated Statements of Operations, were recorded as an expense of $ 256 and $ 150 for the three months ended June 30, 2023 and 2022, respectively, and an expense of $ 411 and $ 211 for the six months ended June 30, 2023 and 2022, respectively.

The Company establishes the allowance for credit losses based on historical collection patterns and other subjective conditions as necessary, including current and expected market conditions.

6 unchanged sentences

Write-off against allowance ( 197 )

Balance as of March 31, 2023 $ 868

Balance as of June 30, 2023 $ 1,027

Inventory is valued at average cost or net realizable value, whichever is lower.

The Company’s components of inventory as of March 31, 2023 and December 31, 2022 are summarized in the following table:

The Company’s components of inventory as of June 30, 2023 and December 31, 2022 are summarized in the following table:

2023 December 31,

13 unchanged sentences

The Credit Agreement, as amended, modifies the prior revolving credit facility, as amended, on terms more favorable to the Company and extends the maturity from April 30, 2024 to August 13, 2026.

The Credit Agreement provides for a five-year , revolving credit facility that permits aggregate borrowings of the Borrowers up to $ 130,000 (a $ 15,000 increase over the previous commitment) with a sublimit of the equivalent of $ 25,000 U.S.

The Credit Agreement provides for a five-year , revolving credit facility that permits aggregate borrowings of the Borrowers up to $ 130,000 with a sublimit of the equivalent of $ 25,000 U.S.

dollars that is available to the Canadian and United Kingdom borrowers in the aggregate.

3 unchanged sentences

(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 (as defined in the Credit Agreement), and (ii) 3.50 to 1.00 for all testing periods occurring during an Acquisition Period, 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.

On August 12, 2022, the Company entered into a second amendment to its Credit Agreement (“Second Amendment”) to obtain approval for the VanHooseCo acquisition (as defined below) and temporarily modify certain financial covenants to accommodate the transaction.

On August 12, 2022, the Company entered into a second amendment to its Credit Agreement (“Second Amendment”) to obtain approval for the acquisition of VanHooseCo Precast, LLC (“VanHooseCo”) 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 to 3.50 through June 30, 2023 to accommodate the transaction.

As of March 31, 2023, the Company was in compliance with the covenants in the Credit Agreement, as amended, and had outstanding letters of credit of approximately $ 1,084 .

As of June 30, 2023, the Company was in compliance with the covenants in the Credit Agreement, as amended, and had outstanding letters of credit of approximately $ 1,173 .

Earnings Per Common Share

(Share amounts in thousands)

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

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

Three Months Ended

Numerator for basic and diluted loss per common share:

Net loss $ ( 2,171 ) $ ( 1,586 )

June 30, Six Months Ended

2023 2022 2023 2022

Numerator for basic and diluted earnings per common share:

Net income $ 3,493 $ 1,976 $ 1,322 $ 390

Weighted average shares outstanding 10,807 10,715 10,800 10,700

Denominator for basic loss per common share 10,792 10,685

Denominator for diluted loss per common share - adjusted weighted average shares outstanding 10,792 10,685

Basic loss per common share $ ( 0.20 ) $ ( 0.15 )

Diluted loss per common share $ ( 0.20 ) $ ( 0.15 )

There were 101 and 122 anti-dilutive shares for the three months ended March 31, 2023 and 2022, respectively, excluded from the calculation.

For the three months ended March 31, 2023 and 2022, the Company recorded an income tax benefit of $ 541 and $ 508 , respectively, on pre-tax losses of $ 2,712 and $ 2,094 , respectively, for an effective income tax rate of 19.9 % and 24.3 %, respectively.

Due to the full valuation allowance on domestic deferred tax assets, the Company's tax provision for the three months ended March 31, 2023 does not reflect any tax benefit for domestic pre-tax losses, and is primarily comprised of taxes on our Canadian and United Kingdom operations.

The Company continued to maintain a full valuation allowance against its U.S.

Denominator for basic earnings per common share 10,807 10,715 10,800 10,700

Effect of dilutive securities:

Stock compensation plans 71 99 66 109

Dilutive potential common shares 71 99 66 109

Denominator for diluted earnings per common share - adjusted weighted average shares outstanding 10,878 10,814 10,866 10,809

Basic earnings per common share $ 0.32 $ 0.18 $ 0.12 $ 0.04

Diluted earnings per common share $ 0.32 $ 0.18 $ 0.12 $ 0.04

For the three months ended June 30, 2023 and 2022, the Company recorded an income tax expense of $ 563 and $ 821 , respectively, on pre-tax income of $ 4,056 and $ 2,797 , respectively, for an effective income tax rate of 13.9 % and 29.4 %, respectively.

For the six months ended June 30, 2023 and 2022, the Company recorded an income tax expense of $ 22 and $ 313 , respectively, on pre-tax income of $ 1,344 and $ 703 , respectively, for an effective income tax rate of 1.6 % and 44.5 %, respectively.

The Company's effective income tax rate for the three and six months ended June 30, 2023 differed from the federal statutory rate of 21% primarily due to the realization of a portion of its U.S.

deferred tax assets previously offset by a valuation allowance.

The Company continues to maintain a full valuation allowance against its U.S.

deferred tax assets, which is likely to result in significant variability of the effective tax rate in the current year.

1 unchanged sentence

Stock-Based Compensation

The Company recorded stock-based compensation expense of $ 884 and $ 258 for the three months ended March 31, 2023 and 2022, respectively, related to restricted stock awards and performance unit awards.

As of March 31, 2023, unrecognized compensation expense for awards that the Company expects to vest approximated $ 7,388 .

The Company recorded stock-based compensation expense of $ 945 and $ 925 for the three months ended June 30, 2023 and 2022, respectively, and $ 1,829 and $ 1,183 for the six months ended June 30, 2023 and 2022, respectively, related to restricted stock awards and performance unit awards.

As of June 30, 2023, unrecognized compensation expense for awards that the Company expects to vest approximated $ 7,026 .

The Company will recognize this unrecognized compensation expense over the upcoming 2.7 years through March 2026.

10 unchanged sentences

Since 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.

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 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 2023, the Compensation Committee approved the 2023-2025 Long Term Incentive Plan which includes grants of performance share units and restricted stock.

The following table summarizes the restricted stock, deferred stock units, and performance-based stock and share unit activity for the three months ended March 31, 2023:

The following table summarizes the restricted stock, deferred stock units, and performance-based stock and share unit activity for the six months ended June 30, 2023:

Stock Deferred

6 unchanged sentences

Adjustment for incentive awards expected to vest — — 20,104 15.36

Outstanding as of March 31, 2023 256,834 46,268 496,140 $ 14.61

Outstanding as of June 30, 2023 267,720 12,404 496,140 $ 14.44

Fair Value Measurements

5 unchanged sentences

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.

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 June 30, 2023 and December 31, 2022, 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

4 unchanged sentences

Total assets $ 2,025 $ 17 $ 2,008 $ — $ 1,947 $ 17 $ 1,930 $ —

For the three months ended March 31, 2023 and 2022, the Company recognized interest income of $ 245 and interest expense of $ 97 , respectively, from interest rate swaps.

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.

For the three months ended June 30, 2023 and 2022, the Company recognized interest income of $ 295 and $ 19 , respectively, from interest rate swaps.

For the six months ended June 30, 2023 and 2022, the Company recognized interest income and interest expense of $ 540 and $ 78 , respectively, from interest rate swaps.

Retirement Plans

9 unchanged sentences

United States Defined Benefit Plan

Net periodic pension costs for the United States defined benefit pension plan for the three months ended March 31, 2023 and 2022 were as follows:

Net periodic pension costs for the United States defined benefit pension plan for the three and six months ended June 30, 2023 and 2022 were as follows:

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Interest cost $ 71 $ 49 $ 143 $ 97

2 unchanged sentences

Net periodic pension cost $ 23 $ 1 $ 46 $ —

The Company expects to make total contributions of $ 400 to its to its United States defined benefit pension plan during 2023.

The Company has made contributions to its United States defined benefit plan of $ 176 during the six months ended June 30, 2023 and expects to make total contributions of $ 400 during 2023.

United Kingdom Defined Benefit Plan

Net periodic pension costs for the United Kingdom defined benefit pension plan for the three months ended March 31, 2023 and 2022 were as follows:

Net periodic pension costs for the United Kingdom defined benefit pension plan for the three and six months ended June 30, 2023 and 2022 were as follows:

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Interest cost $ 56 $ 43 $ 112 $ 86

4 unchanged sentences

United Kingdom regulations require trustees to adopt a prudent approach to funding required contributions to defined benefit pension plans.

For the three months ended March 31, 2023, the Company contributed approximately $ 84 to the plan.

For the six months ended June 30, 2023, the Company contributed approximately $ 170 to the plan.

The Company anticipates total contributions of approximately $ 340 to the United Kingdom pension plan during 2023.

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

United States $ 793 $ 390 $ 1,407 $ 695

Canada 32 45 94 105

United Kingdom 315 379 576 379

$ 1,140 $ 814 $ 2,077 $ 1,179

Commitments and Contingent Liabilities

4 unchanged sentences

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.

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 then-pending litigation in the matter of Union Pacific Railroad Company v.

Foster Company and CXT Incorporated , Case No.

CI 15-564, in the District Court for Douglas County, Nebraska.

commencing on the effective date of the Settlement Agreement through December 2024 pursuant to a Promissory Note.

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.

21 unchanged sentences

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.

As of March 31, 2023 and December 31, 2022, the Company maintained environmental reserves approximating $ 2,448 and $ 2,472 , respectively.

As of June 30, 2023 and December 31, 2022, the Company maintained environmental reserves approximating $ 2,447 and $ 2,472 , respectively.

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 March 31, 2023.

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 March 31, 2023, no such disclosures were considered necessary.

Based on the Company’s assessment as of June 30, 2023, no such disclosures were considered necessary.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements