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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended March 31, 2021
Or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from                      to                     
Commission File Number: 000-10436
L.B. Foster Company
(Exact name of registrant as specified in its charter)
Pennsylvania
25-1324733
(State of Incorporation)
(I. R. S. Employer Identification No.)

415 Holiday Drive, Suite 100, Pittsburgh, Pennsylvania
15220
(Address of principal executive offices)(Zip Code)
(412) 928-3400
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01FSTRNASDAQ Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Accelerated filer
Non-accelerated filer ☐
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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

As of April 28, 2021, there were 10,805,003 shares of the registrant’s common stock, par value $0.01 per share, outstanding.







L.B. FOSTER COMPANY AND SUBSIDIARIES
INDEX
 
Page

2

Table of Contents
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31,
2021
December 31,
2020
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents$5,015 $7,564 
Accounts receivable - net (Note 6)65,660 58,298 
Inventories - net (Note 7)117,378 116,460 
Other current assets13,716 12,997 
Total current assets201,769 195,319 
Property, plant, and equipment - net (Note 8)61,583 62,085 
Operating lease right-of-use assets - net (Note 9)15,426 16,069 
Other assets:
Goodwill (Note 5)20,373 20,340 
Other intangibles - net (Note 5)35,477 36,897 
Deferred tax assets (Note 12)38,770 38,481 
Other assets1,078 1,204 
TOTAL ASSETS$374,476 $370,395 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $66,398 $54,787 
Deferred revenue15,359 7,144 
Accrued payroll and employee benefits5,701 9,182 
Current portion of accrued settlement (Note 16)8,000 8,000 
Current maturities of long-term debt (Note 10)129 119 
Other accrued liabilities12,597 15,740 
Current liabilities of discontinued operations (Note 3)146 330 
Total current liabilities108,330 95,302 
Long-term debt (Note 10)36,664 44,905 
Deferred tax liabilities (Note 12)4,046 4,085 
Long-term portion of accrued settlement (Note 16)24,000 24,000 
Long-term operating lease liabilities (Note 9)12,938 13,516 
Other long-term liabilities11,612 11,757 
Stockholders’ equity:
Common stock, par value $0.01, authorized 20,000,000 shares; shares issued at March 31, 2021 and December 31, 2020, 11,115,779; shares outstanding at March 31, 2021 and December 31, 2020, 10,607,435 and 10,563,290, respectively
111 111 
Paid-in capital43,943 44,583 
Retained earnings163,849 165,107 
Treasury stock - at cost, 508,344 and 552,489 common stock shares at March 31, 2021 and December 31, 2020, respectively
(11,783)(12,703)
Accumulated other comprehensive loss(19,588)(20,268)
Total L.B. Foster Company stockholders’ equity176,532 176,830 
Noncontrolling interest354  
Total stockholders’ equity176,886 176,830 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$374,476 $370,395 
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
March 31,
20212020
Sales of goods$100,546 $96,388 
Sales of services15,534 25,519 
Total net sales116,080 121,907 
Cost of goods sold84,125 80,479 
Cost of services sold13,125 18,306 
Total cost of sales97,250 98,785 
Gross profit18,830 23,122 
Selling and administrative expenses18,026 20,337 
Amortization expense1,465 1,430 
Interest expense - net871 812 
Other expense - net59 606 
Loss from continuing operations before income taxes(1,591)(63)
Income tax benefit from continuing operations(321)(58)
Loss from continuing operations(1,270)(5)
Net loss attributable to noncontrolling interest(12) 
Loss from continuing operations attributable to L.B. Foster Company(1,258)(5)
Discontinued operations:
Loss from discontinued operations before income taxes (2,631)
Income tax benefit from discontinued operations (770)
Loss from discontinued operations (1,861)
Net loss attributable to L.B. Foster Company$(1,258)$(1,866)
Basic loss per common share:
From continuing operations$(0.12)$(0.00)
From discontinued operations (0.18)
Basic loss per common share$(0.12)$(0.18)
Diluted loss per common share:
From continuing operations$(0.12)$(0.00)
From discontinued operations (0.18)
Diluted loss per common share$(0.12)$(0.18)

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
(Unaudited)
(In thousands)
Three Months Ended
March 31,
20212020
Net loss$(1,270)$(1,866)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment453 (3,707)
Unrealized loss on cash flow hedges, net of tax benefit of $0 and $296, respectively
 (864)
Cash flow hedges reclassified to earnings, net of tax expense of $98 and $0, respectively
136  
Reclassification of pension liability adjustments to earnings, net of tax expense of $24 and $24, respectively*
91 58 
Total comprehensive loss(590)(6,379)
Less comprehensive loss attributable to noncontrolling interest:
Net loss attributable to noncontrolling interest(12) 
Foreign currency translation adjustment(30) 
Amounts attributable to noncontrolling interest(42) 
Comprehensive loss attributable to L.B. Foster Company$(548)$(6,379)
 
*
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)
Three Months Ended
March 31,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations$(1,270)$(5)
Adjustments to reconcile net loss from continuing operations to cash provided by (used in) operating activities:
Deferred income taxes(712)712 
Depreciation1,990 1,935 
Amortization1,465 1,430 
Loss on sales and disposals of property, plant, and equipment10  
Stock-based compensation827 680 
Change in operating assets and liabilities:
Accounts receivable(7,213)(1,221)
Inventories(429)3,611 
Other current assets(1,360)(3,921)
Prepaid income tax768 (2,258)
Other noncurrent assets451 (4,939)
Accounts payable11,435 1,080 
Deferred revenue8,152 2,262 
Accrued payroll and employee benefits(3,495)(5,678)
Other current liabilities(2,384)(3,094)
Other long-term liabilities(621)4,504 
Net cash provided by (used in) continuing operating activities7,614 (4,902)
Net cash used in discontinued operating activities(184)(1,988)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property, plant, and equipment 1 
Capital expenditures on property, plant, and equipment(1,327)(2,806)
Net cash used in continuing investing activities(1,327)(2,805)
Net cash used in discontinued investing activities (1,638)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt(43,321)(39,345)
Proceeds from debt35,026 45,362 
Treasury stock acquisitions(547)(1,657)
Investment of noncontrolling interest396  
Net cash (used in) provided by continuing financing activities(8,446)4,360 
Net cash used in discontinued financing activities (15)
Effect of exchange rate changes on cash and cash equivalents(206)(772)
Net decrease in cash and cash equivalents(2,549)(7,760)
Cash and cash equivalents at beginning of period7,564 14,178 
Cash and cash equivalents at end of period$5,015 $6,418 
Supplemental disclosure of cash flow information:
Interest paid$653 $807 
Income taxes paid$46 $1,173 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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L.B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands)

Three Months Ended March 31, 2021
Common
Stock
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Loss
Noncontrolling InterestTotal
Stockholders’
Equity
Balance, December 31, 2020$111 $44,583 $165,107 $(12,703)$(20,268)$ $176,830 
Net loss— — (1,258)— — (12)(1,270)
Other comprehensive income, net of tax:
Pension liability adjustment— — — — 91 — 91 
Foreign currency translation adjustment— — — — 453 (30)423 
Cash flow hedges reclassified to earnings— — — — 136 — 136 
Issuance of 76,030 common shares, net of shares withheld for taxes
— (1,467)— 920 — — (547)
Stock-based compensation— 827 — — — — 827 
Investment of noncontrolling interest— — — — — 396 396 
Balance, March 31, 2021$111 $43,943 $163,849 $(11,783)$(19,588)$354 $176,886 


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Three Months Ended March 31, 2020
Common
Stock
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Loss
Noncontrolling InterestTotal
Stockholders’
Equity
Balance, December 31, 2019$111 $49,204 $157,525 $(16,795)$(20,183)$ $169,862 
Net loss— — (1,866)— — — (1,866)
Other comprehensive loss, net of tax:
Pension liability adjustment— — — — 58 — 58 
Foreign currency translation adjustment— — — — (3,707)— (3,707)
Unrealized derivative loss on cash flow hedges— — — — (864)— (864)
Issuance of 131,088 common shares, net of shares withheld for taxes
— (5,556)— 3,899 — — (1,657)
Stock-based compensation— 680 — — — — 680 
Balance, March 31, 2020$111 $44,328 $155,659 $(12,896)$(24,696)$ $162,506 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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L.B. FOSTER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except share data)
Note 1. Financial Statements
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all estimates and adjustments (consisting of normal recurring accruals, unless otherwise stated herein) considered necessary for a fair presentation of the financial position of L.B. Foster Company and subsidiaries as of March 31, 2021 and December 31, 2020 and its Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Loss, Condensed Consolidated Statements of Cash Flows, and Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020 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, 2021. The Condensed Consolidated Balance Sheet as of December 31, 2020 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, 2020. In this Quarterly Report on Form 10-Q, references to “we,” “us,” “our,” and the “Company” refer collectively to L.B. Foster Company and its consolidated subsidiaries.

Reclassifications
Certain accounts in the prior year consolidated financial statements have been reclassified for comparative purposes principally to conform to the presentation of the current year period. Effective for the quarter ended September 30, 2020, the Company classified IOS Acquisitions, LLC and subsidiaries (“Test and Inspection Services”) as a discontinued operation. Effective for the quarter and year ended December 31, 2020, 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 now has two operating segments, representing the individual businesses that are run separately under the new structure. The Company has revised the information for all periods presented in this Quarterly Report on Form 10-Q to reflect these reclassifications.

Recently Issued Accounting Standards
In March 2020 and as clarified in January 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impacts of the provisions of ASU 2020-04 on its financial condition, results of operations, and cash flows.
Note 2. Business Segments
The Company provides products and services for the rail industry and solutions to support critical infrastructure projects. The Company’s innovative engineering and product development solutions inspire the safety, reliability, and performance of its customers’ 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 Chief Operating Decision Maker (“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, 2020.

The following table illustrates the Company’s revenues and profit from operations by segment for the periods indicated:
Three Months Ended
March 31, 2021
Three Months Ended
March 31, 2020
Net SalesSegment Profit (Loss)Net SalesSegment Profit
Rail Technologies and Services$66,232 $2,532 $70,204 $1,171 
Infrastructure Solutions49,848 (666)51,703 1,604 
Total$116,080 $1,866 $121,907 $2,775 
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Segment profit (loss) 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 from continuing operations to the Company’s consolidated continuing operations total for the periods presented:
Three Months Ended
March 31,
20212020
Profit for reportable segments$1,866 $2,775 
Interest expense - net(871)(812)
Other expense - net(59)(606)
Unallocated corporate expenses and other unallocated charges(2,527)(1,420)
Loss before income taxes from continuing operations$(1,591)$(63)

The following table illustrates assets of the Company by segment for the periods presented:
March 31,
2021
December 31,
2020
Rail Technologies and Services$174,782 $161,485 
Infrastructure Solutions136,649 137,519 
Unallocated corporate assets63,045 71,391 
Total$374,476 $370,395 

Note 3. Discontinued Operations
On September 4, 2020, the Company completed the sale of the issued and outstanding membership interests of its upstream oil and gas test and inspection business, Test and Inspection Services. Proceeds from the sale were $4,000 and resulted in a loss of $10,034, net of tax. The Company has reflected the results of operations of the Test and Inspection Services business as discontinued operations in the Condensed Consolidated Financial Statements for all periods presented. The Test and Inspection Services business was historically included in the legacy Tubular and Energy segment, whose remaining divisions are now included as part of the Infrastructure Solutions segment.

There was no activity regarding the Company’s discontinued operations during the three months ended March 31, 2021. The following table provides the net sales and losses from discontinued operations for the three months ended March 31, 2020:
Three Months Ended
March 31,
2020
Net sales$6,868 
Loss from discontinued operations(2,631)
Income tax benefit(770)
Loss from discontinued operations$(3,401)

Note 4. Revenue
Revenue from products or services provided to customers over time accounted for 25.3% and 26.9% of revenue for the three months ended March 31, 2021 and 2020, 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 the Company’s performance to date under the terms of the contract. Revenue recognized over time using an input measure was $21,108 and $24,432 for the three months ended March 31, 2021 and 2020, 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 $8,264 and $8,345 for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and December 31, 2020, the Company had contract assets of $37,673 and $37,843, respectively, that were recorded in “Inventories - net” within the Condensed
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Consolidated Balance Sheets. As of March 31, 2021 and December 31, 2020, the Company had contract liabilities of $6,030 and $1,324, 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 74.7% and 73.1% of revenue for the three months ended March 31, 2021 and 2020, respectively. The Company recognizes revenue at the point in time at which the customer obtains control of the product or service, which is generally when the product title passes to the customer upon shipment or the service has been rendered to the customer. In limited cases, title does not transfer and revenue is not recognized until the customer has received the products at a physical location.

The following table summarizes the Company’s net sales by major product and service category for the periods presented:
Three Months Ended
March 31,
20212020
Rail Products$43,810 $47,899 
Rail Technologies22,422 22,305 
Rail Technologies and Services66,232 70,204 
Fabricated Steel Products27,721 18,391 
Precast Concrete Products12,678 10,643 
Coatings and Measurement9,449 22,669 
Infrastructure Solutions49,848 51,703 
Total net sales$116,080 $121,907 

Net sales by the timing of the transfer of products and services was as follows for the periods presented:
Three Months Ended March 31, 2021
Rail Technologies
and Services
Infrastructure
Solutions
Total
Point in time$52,044 $34,664 $86,708 
Over time14,188 15,184 29,372 
Total net sales$66,232 $49,848 $116,080 
Three Months Ended March 31, 2020
Rail Technologies
and Services
Infrastructure
Solutions
Total
Point in time$54,888 $34,242 $89,130 
Over time15,316 17,461 32,777 
Total net sales$70,204 $51,703 $121,907 

The timing of revenue recognition, billings, and cash collections results in billed receivables, costs in excess of billings (contract assets, included in “Inventories - net”), 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 three months ended March 31, 2021 resulted from transfers of $11,310 from the contract assets balance as of December 31, 2020 to receivables. Significant changes in contract liabilities during the three months ended March 31, 2021 resulted from increases of $5,425 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 March 31, 2021 and 2020 of $676 and $2,614, respectively, which were included in contract liabilities at the beginning of each period.

As of March 31, 2021, the Company had approximately $271,944 of obligations under new contracts and remaining performance obligations, which is also referred to as backlog. Approximately 13.0% of the March 31, 2021 backlog was related to projects that are anticipated to extend beyond March 31, 2022.

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Note 5. Goodwill and Other Intangible Assets
The following table presents the goodwill balance by reportable segment:
Rail Technologies
and Services
Infrastructure
Solutions
Total
Balance as of December 31, 2020$14,743 $5,597 $20,340 
Foreign currency translation impact33  33 
Balance as of March 31, 2021$14,776 $5,597 $20,373 

The Company performs goodwill impairment tests annually during the fourth quarter, and also performs interim goodwill impairment tests if it is determined that it is more likely than not that the fair value of a reporting unit is less than the carrying amount. Qualitative factors are assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount, which included the impacts of COVID-19. However, the future impacts of COVID-19 are unpredictable and are subject to change. No interim goodwill impairment test was required as a result of the evaluation of qualitative factors as of March 31, 2021.

The components of the Company’s intangible assets were as follows for the periods presented:
March 31, 2021
Weighted Average
Amortization
Period In Years
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Amount
Patents10389 (213)176 
Customer relationships1836,353 (16,568)19,785 
Trademarks and trade names167,816 (4,283)3,533 
Technology1335,826 (23,843)11,983 
$80,384 $(44,907)$35,477 
December 31, 2020
Weighted Average
Amortization
Period In Years
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Amount
Patents10383 (206)177 
Customer relationships1836,269 (15,914)20,355 
Trademarks and trade names167,809 (4,135)3,674 
Technology1335,815 (23,124)12,691 
$80,276 $(43,379)$36,897 
The Company amortizes intangible assets over their useful lives, which range from 5 to 25 years, with a total weighted average amortization period of approximately 16 years as of March 31, 2021. Amortization expense was $1,465 and $1,430 for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, estimated amortization expense for the remainder of 2021 and thereafter was as follows:
Amortization Expense
Remainder of 2021$4,393 
20225,779 
20235,308 
20244,317 
20252,453 
2026 and thereafter13,227 
$35,477 

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 March 31, 2021 and December 31, 2020 have been reduced by an allowance for
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doubtful accounts of $744 and $944, 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 $22 and expense of $86 for the three months ended March 31, 2021 and 2020, 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 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. Management maintains high-quality credit review practices as well as positive customer relationships that further mitigate credit risk.

The following table sets forth the Company’s allowance for doubtful accounts:
Allowance for Doubtful Accounts
December 31, 2020$944 
Current period provision (release)(26)
Write-off against allowance(174)
March 31, 2021$744 

Note 7. Inventory
Inventories as of March 31, 2021 and December 31, 2020 are summarized in the following table:
March 31,
2021
December 31,
2020
Finished goods$50,125 $60,766 
Contract assets37,673 37,843 
Work-in-process7,651 5,143 
Raw materials21,929 12,708 
Inventories - net$117,378 $116,460 

Inventories of the Company are valued at average cost or net realizable value, whichever is lower. Contract assets consist of costs and earnings in excess of billings, retainage, and other unbilled amounts generated when revenue recognized exceeds the amount billed to the customer.

The Company records appropriate provisions related to the allowance for credit losses associated with contract assets, as these assets held in inventory will convert to trade receivables once the customer is billed under the contract to which they pertain. Provisions are recorded based on the specific review of individual contracts as necessary, and a standard provision is recorded over any remaining contract assets pooled together based on similar low 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 were formed based on trends observed as well as current and expected future conditions.

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Note 8. Property, Plant, and Equipment
Property, plant, and equipment as of March 31, 2021 and December 31, 2020 consisted of the following:
March 31,
2021
December 31,
2020
Land$6,632 $6,627 
Improvements to land and leaseholds17,573 17,573 
Buildings27,487 27,348 
Machinery and equipment, including equipment under finance leases117,272 116,175 
Construction in progress1,287 915 
Gross property, plant, and equipment170,251 168,638 
Less accumulated depreciation and amortization, including accumulated amortization of finance leases(108,668)(106,553)
Property, plant, and equipment - net$61,583 $62,085 

Depreciation expense was $1,990 and $1,935 for the three months ended March 31, 2021 and 2020, 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 three months ended March 31, 2021 and 2020.
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” in 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 March 31, 2021, 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 March 31, 2021 and December 31, 2020:
March 31,
2021
December 31, 2020
Operating leases
Operating lease right-of-use assets$15,426 $16,069 
Other accrued liabilities$2,488 $2,553 
Long-term operating lease liabilities12,938 13,516 
Total operating lease liabilities$15,426 $16,069 
Finance leases
Property, plant, and equipment$1,163 $1,116 
Accumulated amortization(908)(869)
Property, plant, and equipment - net$255 $247 
Current maturities of long-term debt$129 $119 
Long-term debt126 128 
Total finance lease liabilities$255 $247 


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The components of lease expense within the Company’s Condensed Consolidated Statements of Operations were as follows for the three months ended March 31, 2021 and 2020:
Three Months Ended
March 31,
20212020
Finance lease cost:
Amortization of finance leases$51 $177 
Interest on lease liabilities22 18 
Operating lease cost642 798 
Sublease income(50)(17)
Total lease cost$665 $976 

The cash flow components of the Company’s leases were as follows for the three months ended March 31, 2021 and 2020:
Three Months Ended
March 31,
20212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows related to operating leases$(792)$(1,009)
Financing cash flows related to finance leases(55)(184)
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases$ $5,981 

The weighted-average remaining lease term (in years) and discount rate related to the operating leases were as follows for the periods presented:
March 31,
20212020
Operating lease weighted-average remaining lease term77
Operating lease weighted-average discount rate5.2 %5.2 %
Finance lease weighted-average remaining lease term11
Finance lease weighted-average discount rate4.2 %4.3 %

As of March 31, 2021, estimated annual maturities of lease liabilities remaining for the year ending December 31, 2021 and thereafter were as follows:
Operating LeasesFinance Leases
Remainder of 2021$2,456 $142 
20222,862 115 
20232,636 42 
20242,591 11 
20252,389  
2026 and thereafter5,392  
Total undiscounted lease payments18,326 310 
Interest(2,900)(55)
Total$15,426 $255 


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Note 10. Long-term Debt and Related Matters
Long-term debt consisted of the following:
March 31,
2021
December 31,
2020
Revolving credit facility$36,538 $44,777 
Finance leases and financing agreements255 247 
Total36,793 45,024 
Less current maturities(129)(119)
Long-term portion$36,664 $44,905 

On June 26, 2020, the Company, its domestic subsidiaries, and certain of its Canadian and United Kingdom subsidiaries (collectively, the “Borrowers”), entered into the First Amendment (the “First Amendment”) to its its Third Amended and Restated Credit Agreement (the “Credit Agreement”) with PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., Citizens Bank, N.A., and BMO Harris Bank, N.A. The First Amendment modified the Credit Agreement, which had a maximum revolving credit line of $140,000 and provided for a $25,000 term loan of which $22,500 remained outstanding as of June 26, 2020. The First Amendment provides for a reduction in the revolving credit facility to permit aggregate borrowings of the Borrowers up to $120,000 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, and repaid and terminated the outstanding term loan by drawing funds on the revolving credit facility. The First Amendment provides additional $5,000 annual reductions to the revolving credit facility beginning on December 31, 2020 through the maturity of the facility on April 30, 2024.

Borrowings under the First Amendment bear interest at rates based upon either the base rate or Euro-rate plus applicable margins. The applicable margins have been adjusted as part of the First Amendment and are dictated by the ratio of the Company’s total net indebtedness to the Company’s consolidated earnings before interest, taxes, depreciation, and amortization (“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 Euro-rate plus 100 basis points (each as defined in the Credit Agreement) and an increase to the interest rate floor to 100 basis points. The base rate and Euro-rate spreads range from 100 to 200 basis points and 200 to 300 basis points, respectively.

The First Amendment further provides for modifications to the financial covenants as defined in the Credit Agreement. The First Amendment modified three financial covenants in the Credit Agreement: (a) Maximum Gross Leverage Ratio, defined as the Company’s Consolidated Indebtedness divided by the Company’s Consolidated EBITDA, which must not exceed, other than during a period of four consecutive fiscal quarters of the Company beginning with a fiscal quarter during which the Company consummates a permitted acquisition, and including such fiscal quarter and the immediately three succeeding fiscal quarters (the “Acquisition Period”), (i) 3.25 to 1.00 for the testing period ended June 30, 2020, 3.00 to 1.00 for the testing periods ending September 30, 2020 through March 31, 2022, and 2.75 to 1.00 for the testing periods June 30, 2022 and thereafter, and (ii) 3.50 to 1.00 for the testing period ended June 30, 2020, 3.25 to 1.00 for the testing periods ending September 30, 2020 through March 31, 2022, and 3.00 to 1.00 for the testing periods ending June 30, 2022 and thereafter occurring during an Acquisition Period; (b) Minimum Consolidated Fixed Charge Coverage Ratio, defined as the Company’s Consolidated EBITDA divided by the Company’s Fixed Charges, which must be a minimum of 1.00 to 1.00 for the testing period ended June 30, 2020, 1.05 to 1.00 for the testing periods ending September 30, 2020 through June 30, 2021, 1.15 to 1.00 for the testing periods ending September 30, 2021 through June 30, 2022, and 1.25 to 1.00 for the testing periods ending September 30, 2022 and thereafter; and (c) Minimum Working Capital to Revolving Facility Usage Ratio, defined as the sum of 50% of the inventory and 85% of the accounts receivable of the Borrowers and certain other Guarantors divided by the dollar equivalent sum of the outstanding revolving credit loans, the outstanding swing loans, and the letter of credit obligations (the “Revolving Facility Usage”), which must not be less than 1.50 to 1.00. In addition, the First Amendment modifies the definition of Consolidated EBITDA to allow for certain additional adjustments. The First Amendment also includes changes to the non-financial covenants as defined in the Credit Agreement by increasing the basket for dispositions from $25,000 to $40,000. The Credit Agreement’s incremental loan feature permits the Company to increase the available revolving borrowings 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 Company’s and the domestic, Canadian, and United Kingdom guarantors’ (the “Guarantors”) obligations under the Credit Agreement are secured by the grant of a security interest by the Borrowers and Guarantors in substantially all of the personal property 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 its respective domestic subsidiaries, have been pledged to the lenders as collateral for the lending obligations.

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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 $25,000 prior to and after giving effect to such acquisition; and (c) the aggregate consideration for the acquisition did not exceed: (i) $50,000 per acquisition; (ii) $50,000 in the aggregate for multiple acquisitions entered into during four consecutive quarters; and (iii) $100,000 in the aggregate over the term of the Credit Agreement.

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 January 29, 2021, the Company and the Borrowers entered into the Second Amendment (the “Second Amendment”) to the Credit Agreement, which permits the Company to incur indebtedness to finance insurance premiums in the ordinary course of business and allows for certain liens to secure the financing of insurance premiums. The Second Amendment also modifies the definition of Gross Leverage Ratio and Leverage Ratio in the Credit Agreement to exclude the Indebtedness permitted for the financing of insurance premiums in an aggregate amount not to exceed $3,000.

As of March 31, 2021, the Company was in compliance with the covenants in the Credit Agreement, as amended.

As of March 31, 2021, the Company had outstanding letters of credit of approximately $844 and had net available borrowing capacity of $77,618. The maturity date of the facility is April 30, 2024.
Note 11. 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:
Three Months Ended
March 31,
20212020
Numerator for basic and diluted loss per common share:
Loss from continuing operations$(1,270)$(5)
Loss from discontinued operations (1,861)
Net loss$(1,270)$(1,866)
Denominator:
Weighted average shares outstanding10,583 10,478 
Denominator for basic loss per common share10,583 10,478 
Effect of dilutive securities:
Stock compensation plans  
Dilutive potential common shares  
Denominator for diluted loss per common share - adjusted weighted average shares outstanding10,583 10,478 
Continuing operations$(0.12)$(0.00)
Discontinued operations (0.18)
Basic loss per common share$(0.12)$(0.18)
Continuing operations$(0.12)$(0.00)
Discontinued operations (0.18)
Diluted loss per common share$(0.12)$(0.18)

There were 140 and 190 anti-dilutive shares during the three months ended March 31, 2021 and 2020, respectively.
Note 12. Income Taxes
For the three months ended March 31, 2021 and 2020, the Company recorded an income tax benefit of $321 on pre-tax losses from continuing operations of $1,591 and an income tax benefit of $58 on pre-tax losses from continuing operations of $63, respectively, for effective income tax rates of 20.2% and 92.1%, respectively. The Company’s effective tax rate for the three months ended March 31, 2021 differed from the federal statutory rate of 21% primarily due to state income taxes, nondeductible expenses, and research tax credits.
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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 $827 and $680 for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, unrecognized compensation expense for unvested awards approximated $5,883. The Company expects to recognize this expense over the upcoming 4 years through February 2025.

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

Restricted Stock Awards, Performance Share Units, and Performance-based Stock Awards
Under the 2006 Omnibus Plan, the Company grants eligible employees restricted stock and performance share units. The forfeitable restricted stock awards granted generally time-vest ratably over a three-year period, unless indicated otherwise by the underlying restricted stock 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. Prior to May 2018, awards to non-employee directors were made in fully-vested shares. 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 Company̵