Asfalse2021Q20000060977December of31LYDALL ~~March 31,~~INC 2021, the Company’s equity compensation plans consisted of the 2003 Stock Incentive Compensation Plan (the “2003 Plan”), and the Amended and Restated 2012 Stock Incentive Plan, (the “2012 Plan” and together with the 2003 Plan, the “Plans”) under which incentive and non/DE/00000609772021-qualified stock options and time and performance based restricted shares have been granted to employees and directors from authorized but unissued shares of common stock or treasury shares. The 2003 Plan is not active, but continues to govern all outstanding awards granted under the plan until the awards themselves are exercised or terminate in accordance with their terms. The 2012 Plan, amended and approved by stockholders on April 24, 2020, authorizes 3.0 million shares of common stock for awards. The 2012 Plan also authorized an additional 19,720 shares of common stock to the extent awards granted under prior stock plans that were outstanding as of April 24, 2020 are forfeited. The 2012 Plan provides for the following types of awards01-012021-06-30xbrli: ~~options, restricted stock, restricted stock units and other stock~~shares00000609772021-based awards. During the fourth quarter of 2019, additional shares of common stock were issued pursuant to separate inducement share agreements with two individuals as material inducement to their employment with the Company (the "Inducement Grants"). The Inducement Grants awarded stock options and restricted stock to the two individuals. Amounts shown below are inclusive of the Plans and the Inducement 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The Company accounts for the expense of all share-based compensation by measuring the awards at fair value on the date of grant. The Company recognizes expense on a straight-line basis over the vesting period for awards that have cliff vesting, and on a graded vesting basis for time-restricted awards that have graded vesting. Options issued by the Company under its stock option plans have a term of ten years and generally vest ratably over a period of three to four years. Stock options issued under the current plan must have an exercise price that may not be less than the fair market value of the Company’s common stock on the date of grant.

Time-restricted stock awards are expensed over the vesting period of the award, which is typically two to three years. The number of performance-restricted shares that ultimately vest depends upon achievement of certain targets over a performance period, as more fully described under "Performance-Restricted Shares" below. Performance-restricted awards with a market condition are expensed over the performance period, which is typically three years. The Company estimates the grant date value of performance awards with a market condition using a Monte Carlo simulation model on the date of grant. Compensation expense for performance-restricted awards with a performance condition is recorded based upon the service period and management's assessment of the probability of achieving performance goals. The Company accounts for forfeitures as they occur. The Plans provide for automatic acceleration of vesting in the event of a change in control of the Company.

The Company incurred equity compensation expense of $1.0 million and $0.9 million for the three-month period ended March 31, 2021 and 2020, respectively, for the Plans, including restricted stock awards. The Company also incurred equity compensation expense of $0.2 million and $0.2 million for the three-month period ended March 31, 2021 and 2020, respectively, for stock awards granted to Directors. No equity compensation costs were capitalized as part of inventory.

Stock Options

The following table is a summary of outstanding and exercisable options for the three-month period ended March 31, 2021:

In thousands except per share amounts	Shares	Weighted-AverageExercise Price
Stock Options outstanding at the beginning of the period	488	$	22.03
Granted	6	$	32.19
Exercised	(28)	$	22.99
Forfeited or Expired	(5)	$	43.43
Stock Options outstanding at March 31, 2021	461	$	21.85
Exercisable at March 31, 2021	166	$	27.33
Unvested at March 31, 2021	295	$	18.78

There was $0.7 million and less than $0.1 million of cash received from exercise of stock options during three-month periods ended March 31, 2021 and 2020, respectively The intrinsic value of stock options exercised was $0.3 million with a tax benefit of less than $0.1 million and less than $0.1 million with a tax benefit of less than $0.1 million during the three-month periods ended March 31, 2021 and 2020, respectively.

At March 31, 2021, the total unrecognized compensation cost related to non-vested stock option awards was approximately $1.7 million, with a weighted average expected amortization period of 2.3 years.

Restricted Stock

Restricted stock includes both performance-based and time-based awards. The following is a summary of the Company's unvested time-based restricted shares for the three-month period ended March 31, 2021:

For the Three Months Ended March 31, 2021

In thousands

Unvested at the beginning of the period

177

Granted

173

Vested

(21)

Forfeited or Expired

(4)

Unvested at March 31, 2021

325

The following is a summary of the Company's unvested performance-based restricted shares for the three-month period ended March 31, 2021:

For the Three Months Ended March 31, 2021

In thousands

Unvested at the beginning of the period

142

Granted

Vested

—

Forfeited or Expired

(8)

Unvested at March 31, 2021

198

The following table is a summary of outstanding and exercisable options for the three-month period ended March 31, 2021:

In thousands except per share amounts	Shares	Weighted-AverageExercise Price
Stock Options outstanding at the beginning of the period	488	$	22.03
Granted	6	$	32.19
Exercised	(28)	$	22.99
Forfeited or Expired	(5)	$	43.43
Stock Options outstanding at March 31, 2021	461	$	21.85
Exercisable at March 31, 2021	166	$	27.33
Unvested at March 31, 2021	295	$	18.78

For the Three Months Ended March 31, 2021

In thousands

Unvested at the beginning of the period

177

Granted

173

Vested

(21)

Forfeited or Expired

(4)

Unvested at March 31, 2021

325

The following is a summary of the Company's unvested performance-based restricted shares for the three-month period ended March 31, 2021:

For the Three Months Ended March 31, 2021

In thousands

Unvested at the beginning of the period

142

Granted

Vested

—

Forfeited or Expired

(8)

Unvested at March 31, 2021

198

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~June 3130, 2021

☐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: 1-7665

Lydall, Inc.

(Exact name of registrant as specified in its charter)

Delaware

06-0865505

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

One Colonial Road

Manchester

Connecticut

06042

(Address of principal executive offices)

(zip code)

(860) 646-1233

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	LDL	New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§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, a 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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Total Shares outstanding ~~April~~July 15, 2021 18,~~018~~033,~~995~~012

LYDALL, INC.

TABLE OF CONTENTS

		PageNumber
Part I
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	4
	Condensed Consolidated Balance Sheets (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2224
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3741
Item 4.	Controls and Procedures	3741
Part II
Item 1.	Legal Proceedings	3842
Item 1A.	Risk Factors	3842
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3945
Item 5.	Other Information	4046
Item 6.	Exhibits	4147
Signatures		42
Signature		48

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

LYDALL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts) (Unaudited)

	For the Three Months Ended		~~For the Three Months Ended~~		For the Six Months Ended
					March 31, 2021		March 31, 2020
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net sales	$	221,744	$	146,160	$	~~227~~448,~~099~~843	$	~~200~~346,~~527~~687
Cost of sales	173,958		117,742		~~178~~352,~~550~~508		~~161~~279,~~959~~701
Gross profit	47,786		28,418		4896,~~549~~335		3866,~~568~~986
Selling, product development and administrative expenses	38,182		30,164		3573,~~633~~815		3363,~~027~~191
Impairment of goodwill and other long-lived assets	—		—		—		61,109
Restructuring expenses	190		—		~~777~~967		—
Operating income (loss)	9,414		(1,746)		1221,~~139~~553		(5557,~~568~~314)
(Gain) loss on the sale of a business	266		—		~~698~~964		—
Employee benefit plans settlement expenses	—		—		—		385
Interest expense	2,414		4,476		35,~~448~~862		27,~~857~~333
Other (income) expense, net	206		248		86292		(~~418~~170)
Income (loss) before income taxes	6,528		(6,470)		714,~~907~~435		(5864,~~392~~862)
Income tax expense (benefit)	905		(595)		23,~~821~~726		(2,~~015~~610)
(Income) loss from equity method investment	(157)		(18)		(8165)		4426
Net income (loss)	$	5,780	$	(5,857)	$	510,~~094~~874	$	(5662,~~421~~278)
Earnings (loss) per share:
Basic	$	0.33	$	(0.34)	$	0.2962	$	(3.2559)
Diluted	$	0.32	$	(0.34)	$	0.2861	$	(3.2559)
Weighted average number of common shares outstanding:
Basic	17,575		17,372		17,~~545~~560		17,~~336~~354
Diluted	17,977		17,372		17,~~888~~923		17,~~336~~354

See accompanying notes to condensed consolidated financial statements.

LYDALL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands) (Unaudited)

	For the Three Months Ended		~~For the Three Months Ended~~		For the Six Months Ended
					March 31, 2021		March 31, 2020
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net income (loss)	$	5,780	$	(5,857)	$	510,~~094~~874	$	(5662,~~421~~278)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	3,060		5,146		~~(3,014)~~46		(94,~~957~~811)
Pension liability adjustment, net of taxes of $0.1 million and $0.1 million, respectively					365		331
Pension liability adjustment, net of taxes of less than $0.1 million, $0.0 million, $0.1 million and $0.1 million, respectively	22		—		387		331
Unrealized gain (loss) on hedging activities, net of taxes of $0.9 million and $0.1 million, respectively					3,018		446
Unrealized gain (loss) on hedging activities, net of taxes of $0.4 million, $0.2 million, $0.9 million, and $0.1 million, respectively	(125)		(685)		2,893		(239)
Other comprehensive income (loss)	2,957		4,461		~~369~~3,326		(94,~~180~~719)
Total comprehensive income (loss)	$	8,737	$	(1,396)	$	514,~~463~~200	$	(6566,~~601~~997)

See accompanying notes to condensed consolidated financial statements.

LYDALL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts) (Unaudited)

	March 31, 2021		December 31, 2020
Assets	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	88102,~~717~~544	$	102,176
Accounts receivable, net of allowance for doubtful accounts of $2,313 and $2,402, respectively	135,464		116,947
Accounts receivable, net of allowance for doubtful accounts of $2,188 and $2,402, respectively	128,407		116,947
Contract assets	2522,~~959~~756		32,403
Inventories	8188,~~448~~226		78,996
Taxes receivable	1012,~~031~~687		6,652
Prepaid expenses	45,~~937~~066		4,870
Other current assets	7,~~922~~986		7,348
Total current assets	354,478		349,392
Assets of a business held-for-sale	1,233		—
Property, plant and equipment, at cost	505,573		506,509
Total current assets	368,905		349,392
Accumulated depreciation	(295,557)		(291,996)
Property, plant and equipment, at cost	515,393		506,509
Property, plant and equipment, net	210,016		214,513
Accumulated depreciation	(303,908)		(291,996)
Operating lease right-of-use assets	26,163		22,243
Property, plant and equipment, net	211,485		214,513
Goodwill	87,195		87,595
Operating lease right-of-use assets	25,798		22,243
Other intangible assets, net	90,796		95,121
Goodwill	87,842		87,595
Other assets, net	6,729		6,598
Other intangible assets, net	86,922		95,121
Total assets	$	775,377	$	775,462
Other assets, net	6,948		6,598
Total assets	$	787,900	$	775,462
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt	$	98,~~789~~609	$	9,789
Accounts payable	~~113~~116,~~416~~631		101,905
Accrued payroll and other compensation	2223,~~114~~177		24,589
Accrued taxes	86,~~339~~555		8,214
Derivative liabilities	78,~~966~~147		11,996
Restructuring liabilities	~~2,042~~36		9,431
Other accrued liabilities	2224,~~733~~442		21,705
Total current liabilities	186,399		187,629
Liabilities of a business held-for-sale	1,933		—
Long-term debt	251,202		260,649
Total current liabilities	189,530		187,629
Long-term operating lease liabilities	21,220		17,947
Long-term debt	251,477		260,649
Deferred tax liabilities	31,411		27,174
Long-term operating lease liabilities	20,973		17,947
Benefit plan liabilities	17,930		21,691
Deferred tax liabilities	30,913		27,174
Other long-term liabilities	2,665		2,676
Benefit plan liabilities	17,554		21,691
Commitments and Contingencies (Note 15)
Other long-term liabilities	2,254		2,676
Commitments and Contingencies (Note 16)
Stockholders' equity:
Preferred stock, $0.01 per share par value, 500 shares authorized (none issued or outstanding)	—		—
Common stock, $0.01 per share par value, 30,000 shares authorized (25,741 and 25,555 shares issued, respectively)	257		256
Common stock, $0.01 per share par value, 30,000 shares authorized (25,755 and 25,555 shares issued, respectively)	258		256
Capital in excess of par value	~~101~~103,~~361~~272		99,770
Retained earnings	~~271~~277,~~998~~778		266,904
Accumulated other comprehensive income (loss)	(1715,~~973~~016)		(18,342)
Less treasury stock, 7,722 and 7,717 shares of common stock, respectively, at cost	(91,093)		(90,892)
Total stockholders’ equity	264,550		257,696
Total stockholders' equity	275,199		257,696
Total liabilities and stockholders’ equity	$	~~775~~787,~~377~~900	$	775,462

See accompanying notes to condensed consolidated financial statements.

LYDALL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) (Unaudited)

	For the Three Months Ended
	For the Six Months Ended
	March 31, 2021		March 31, 2020
	June 30, 2021		June 30, 2020
Cash flows from operating activities:
Net income (loss)	$	510,~~094~~874	$	(5662,~~421~~278)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	1122,~~366~~794		1224,~~152~~035
Amortization of debt issuance costs	~~134~~252		78807
Impairment of goodwill and long-lived assets	—		61,109
Deferred income taxes	3,~~224~~094		(26,~~896~~048)
(Gain) loss on the sale of a business	~~698~~964		—
Employee benefit plans settlement expenses	—		385
Stock-based compensation	12,~~125~~695		~~914~~1,799
(Gain) loss on disposition of property, plant and equipment	—7		2025
(Gain) loss from equity method investment	(8165)		4426
Other, net	(~~106~~88)		—53
Changes in operating assets and liabilities:
Accounts receivable	(2116,~~817~~690)		(73,~~800)~~063
Contract assets	69,~~298~~594		~~1,313~~222
Inventories	(39,~~127~~508)		(~~2,026~~353)
Income taxes (receivable) payable	(36,~~424~~753)		~~(546)~~886
Prepaid expenses and other assets	(~~1,053~~648)		~~526~~(953)
Accounts payable	11,~~456~~415		218,~~127~~342
Accrued payroll and other compensation	(2,~~185~~378)		~~(68)~~2,974
Deferred revenue	21(768)		—1,850
Accrued taxes payable	~~245~~(105)		(15,~~447)~~833
Benefit plan liabilities	(3,~~517~~899)		(~~450~~434)
Other, net	(42,~~204~~190)		~~727~~(928)
Net cash provided by (used for) operating activities	~~220~~18,497		2640,~~741~~415
Cash flows from investing activities:
Capital expenditures	(813,~~119~~265)		(915,~~157~~472)
Collections of finance receivables	13,~~379~~111		13,~~658~~390
Payments from divestitures	(2,715)		—
Net cash provided by (used for) investing activities	(9,455)		(7,499)
Proceeds from the sale of property, plant and equipment	19		2
Net cash provided by (used for) investing activities	(12,850)		(12,080)
Cash flows from financing activities:
Proceeds from borrowings	—263,210		20,000
Debt repayments	(9274,~~499~~910)		(47,~~500~~001)
Proceeds from servicing receivables	4,~~557~~787		~~2,852~~458
Common stock issued	~~642~~793		3133
Common stock repurchased	(201)		(8)
Net cash provided by (used for) financing activities	(46,~~501~~321)		1813,~~375~~482
Effect of exchange rate changes on cash	~~277~~1,042		(~~1,121~~602)
Increase (decrease) in cash and cash equivalents	~~(13,459)~~368		3641,~~496~~215
Cash and cash equivalents at beginning of period	102,176		51,331
Cash and cash equivalents at end of period	$	88102,~~717~~544	$	8792,~~827~~546

See accompanying notes to condensed consolidated financial statements.

LYDALL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF FINANCIAL STATEMENT PRESENTATION

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements include the accounts of Lydall, Inc. and its subsidiaries (collectively, “Lydall”, "“the Company”, “we”, and “our”). All financial information is unaudited for the interim periods reported. All significant intercompany transactions have been eliminated in the Condensed Consolidated Financial Statements. The Company's Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The year-end Condensed Consolidated Balance Sheet amounts have been derived from the audited financial statements for the year ended December 31, 2020, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the condensed consolidated financial information reflects all adjustments necessary for a fair statement of the Company’s consolidated financial position, results of operations, and cash flows for the interim periods reported, but do not include all the disclosures required by U.S. GAAP. All such adjustments are of a normal recurring nature, unless otherwise disclosed in this report. Certain amounts in prior year financial statements and notes thereto have been reclassified to conform to current year presentation. The statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Merger Agreement

As previously announced, on June 21, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Unifrax Holding Co. (“Parent”), Outback Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), and solely with respect to certain payment obligations of Parent thereunder, Unifrax I LLC (“Unifrax”). Subject to the terms and conditions of the Merger Agreement, Merger Sub will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent. Unifrax is a global provider of specialty materials focused on thermal management, specialty filtration, battery materials, emission control, and fire protection applications and is backed by Clearlake Capital Group, L.P.

Subject to the terms and conditions of the Merger Agreement, each share of common stock, par value $0.01 per share, of the Company (the “common stock”) (other than shares of common stock held by the Company as treasury stock) issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) (other than dissenting shares) will be converted into the right to receive $62.10 per share in cash, without interest. If the Merger is consummated, the Company’s securities will be de-listed from the New York Stock Exchange (the “NYSE”) and de-registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as practicable following the Effective Time.

The completion of the Merger is subject to customary closing conditions, including, among others, (i) the approval of the Company’s stockholders holding a majority of the outstanding shares of common stock and (ii) the expiration or termination of any waiting period applicable to the consummation of the Merger under the Hart-Scott Rodino Antitrust Improvements Act of 1976, and the expiration of applicable waiting periods or clearances of the Merger, as applicable, under the antitrust and foreign investment laws of certain other jurisdictions. Subject to the satisfaction or (to the extent permissible) waiver of such conditions, the Merger is currently expected to close in the second half of 2021. However, the Company cannot assure completion of the Merger by any particular date, if at all or that, if completed, it will be completed on the terms set forth in the Merger Agreement. The Company’s Condensed Consolidated Financial Statements and related disclosures for the three and six-month periods ended June 30, 2021 and 2020 do not reflect any potential impacts or effects the Merger may have on the Company’s financial statements if the Merger is finalized.

Additional Cash Flow Information

Non-cash investing activities include non-cash capital expenditures of $14.62 million and $2.37 million that were included in Accounts payable ~~on the Company's Condensed Consolidated Statements of Cash Flows~~ at ~~March~~June 3130, 2021 and 2020, respectively.

Risks and Uncertainties

Worldwide economic cycles, political changes, and the COVID-19 pandemic affect the markets that the Company’s businesses serve, affect demand for the Company's products, and could impact profitability. Among other factors, disruptions in the global credit and financial markets, including diminished liquidity and credit availability, changes in international trade agreements, swings in consumer confidence and spending, and unstable economic growth, disruptions to the global automotive supply chain, and fluctuations in unemployment rates have caused economic instability and can have a negative impact on the Company’s results of operations, financial condition, and liquidity.

swings in consumer confidence and spending, and unstable economic growth, disruptions to the global automotive supply chain, and fluctuations in unemployment rates have caused economic instability and can have a negative impact on the Company’s results of operations, financial condition, and liquidity.

Transfers of Financial Assets

The Company accounts for transfers of financial assets as sold when it has surrendered control over the related assets. Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of the Company's continuing involvement with the assets transferred. Gains or losses and any expenditures stemming from the transfers are included in Other (income) expense, net on the Company's Condensed Consolidated Statements of Operations. Assets obtained and liabilities incurred in connection with transfers reported as sold are initially recognized on the Company's Condensed Consolidated Balance Sheets at fair value.

The Company maintains arrangements with banking institutions to sell trade accounts receivable balances for select customers. Under the programs, the Company has no risk of loss due to credit default and is charged a fee based on the nominal value of receivables sold ~~and~~between the time ~~between~~of the sale of the trade accounts receivables to banking institutions and collection of the trade accounts receivables from the customer. Under one of the programs, the Company services the trade receivables after the sale to the bank and receives 90.0% of the trade receivables in cash at the time of sale and the remaining 10.0% in cash, net of fees, when the customer pays. Total ~~trade~~activity ~~accounts receivable balances sold~~ under both arrangements ~~were $34.1 million and $32.7 million during the three-month periods ended March 31, 2021 and 2020, respectively. Total cash received~~ was ~~$31.2 million~~as and $30.2 million during the three-month periods ended March 31, 2021 and 2020, respectively. Total fees incurred were $0.1 million and $0.1 million during the three-month periods ended March 31, 2021 and 2020, respectively.follows:


	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Total trade accounts receivable balances sold	$	30,961	$	10,288	$	65,107	$	42,974
Total cash received	$	29,268	$	9,374	$	60,507	$	39,533
Total fees incurred	$	173	$	76	$	308	$	142

The Company's senior secured revolving credit agreement permits the Company to sell trade accounts receivable balances to approved third parties in connection with Receivable Purchases Agreements, or other similar agreements. At any given time, outstanding trade accounts receivable balances sold cannot exceed $10.0 million for a certain approved customer and $50.0 million in aggregate for any other approved group of customers.

2. RECENT ACCOUNTING STANDARDS

Recent Accounting Standards Adopted

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes". The new standard is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in Topic 740, and by clarifying and amending existing guidance in other areas of the same topic. This ASU was effective for fiscal years and interim periods beginning after December 15, 2020 with early adoption permitted. The Company adopted this ASU upon issuance and there was no material impact to the Company's Condensed Consolidated Financial Statements and disclosures ~~as of March 31, 2021~~.

In January 2020, the FASB issued ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).". The amendments in this update ~~are~~were intended to reduce diversity in practice and increase comparability of the accounting for interaction of equity securities, investments accounted for under the equity method of accounting, and the accounting for certain forward contracts and purchased options accounted for under Topic 815. This ASU was effective for fiscal years and interim periods beginning after December 15, 2020, with early adoption permitted. The Company adopted this ASU upon issuance and ~~notes~~there ~~that~~was itno ~~did not have a~~ material impact onto the Company's Condensed Consolidated Financial Statements and disclosures ~~as of March 31, 2021~~.

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.". The amendments in this update are elective, and provide optional expedients and exceptions in accounting for contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In January 2021, the FASB issued ASU 2021-01 to provide additional clarity around Topic 848. Specifically, certain provisions of Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The ~~guidance~~ASUs incan ~~this~~be ~~update~~adopted isno ~~effective~~later ~~for~~than ~~transactions~~December ~~entered into between March 12~~1, ~~2020~~2022 ~~and~~with ~~December~~early ~~31,~~adoption ~~2022~~permitted. The Company ~~adopted~~has ~~this~~reviewed ~~ASU~~the ~~upon~~guidance ~~issuance~~ and ~~there~~elected ~~was~~to noadopt ~~material~~the ~~impact~~use toof the ~~Company's~~expedients ~~Consolidated~~permitted, ~~Financial~~however ~~Statements~~there ~~and~~have ~~disclosures~~been asno ofmodifications ~~March 31, 2021.~~

In October 2020, the FASB issued ASU 2020-10, "Codification Improvements." The amendments in this update are intended to clarify the location of certain disclosure guidance within the ASC, as well as clarify certain guidance in cases where the original guidance may have been unclear. These amendments do not change U.S. GAAP. This ASU was effective for fiscal years and interim periods beginning after December 15, 2020. The Company adopted this ASU upon issuance and notes no impact to the Company's Consolidated Financial Statements and disclosures as of March 31, 2021.

Recent Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)." The amendments in this update are intended to simplify the accounting for convertible debt instruments and convertible preferred stock. This ASU is effective for fiscal years and interim periods beginning after December 15, 2021 with early adoption permitted. The Company does not expect the adoption of this update to have a material impact on its Consolidated Financial Statements and disclosures.

3. REVENUE FROM CONTRACTS WITH CUSTOMERS

The Company accounts for revenue in accordance with ASC 606, "Revenue from Contracts with Customers". Revenues are generated from the design and manufacture of specialty engineered filtration media, industrial thermal insulating solutions, automotive thermal and acoustical barriers for filtration/separation and thermal/acoustical applications. The Company’s revenue recognition policies require the Company to make significant judgments and estimates. In applying the Company’s revenue recognition policy, determinations must be made as to when the control of products passes to the Company’s customers which can be either at a point in time or over time. Revenue is generally recognized at a point in time when control passes to customers upon shipment of the Company’s products and revenue is generally recognized over time when control of the Company’s products transfers to customers during the manufacturing process. The Company analyzes several factors, including, but not limited to, the nature of the products being sold and contractual terms and conditions in contracts with customers to help the Company make such judgments about revenue recognition. Unfulfilled performance obligations are generally expected to be satisfied within one year.

or other changes to the Company’s contracts, hedging relationships or other transactions due to reference rate reform as of June 30, 2021.

In October 2020, the FASB issued ASU 2020-10, "Codification Improvements". The amendments in this update were intended to clarify the location of certain disclosure guidance within the ASC, as well as clarify certain guidance in cases where the original guidance may have been unclear. These amendments do not change U.S. GAAP. This ASU was effective for fiscal years and interim periods beginning after December 15, 2020. The Company adopted this ASU upon issuance and notes no impact to the Company's Condensed Consolidated Financial Statements and disclosures.

Recent Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)". The amendments in this update were intended to simplify the accounting for convertible debt instruments and convertible preferred stock. This ASU is effective for fiscal years and interim periods beginning after December 15, 2021 with early adoption permitted. The Company does not expect the adoption of this update to have a material impact on the Company's Condensed Consolidated Financial Statements and disclosures.

3. DIVESTITURE ACTIVITIES

During the third quarter of 2020, the Company undertook actions to consolidate global production facilities for sealing & advanced solutions products, a part of the Company's Performance Materials segment. In the first quarter of 2021, the Company entered into an agreement to sell a German facility, which closed on March 11, 2021. The Company agreed to pay $1.8 million (€1.5 million) to the buyer and provide $2.3 million (€1.9 million) in additional funding, net of cash and certain net working capital adjustments, to cover pension and restructuring liabilities recorded in 2020. As a result of the sale of the facility, the Company recorded a pre-tax loss of $0.3 million and $1.0 million for the three and six-month periods ended June 30, 2021, respectively. The final consideration and loss are subject to a working capital adjustment expected to be settled in 2022.

In the second quarter of 2021, the Company reached an agreement to sell an operating facility located in the Netherlands, which is a component of the Company’s Performance Materials segment. The transaction was completed on July 9, 2021. The assets and liabilities sold in connection with the transaction met the criteria for held-for-sale reporting as of June 30, 2021. The Company did not report the transaction as discontinued operations as it was not considered a strategic shift in the Company’s business. The Company expects to record a gain on the sale in the third quarter of 2021. The results of the operating facility are reflected in continuing operations for the three and six-month periods ended June 30, 2021. The assets and liabilities of the operating facility are reported as current “Assets of a business held-for-sale” and current “Liabilities of a business held-for-sale” as of June 30, 2021. The held-for-sale assets and liabilities of the operating facility were as follows:


In thousands	At June 30, 2021
Accounts receivable, net	$	912
Inventories	18
Taxes receivable	35
Prepaid expenses	22
Deferred tax assets	246
Total assets held-for-sale	$	1,233

Accounts payable	$	161
Accrued taxes	58
Accrued payroll & other compensation	300
Restructuring liabilities	1,414
Total liabilities held-for-sale	$	1,933

4. REVENUE FROM CONTRACTS WITH CUSTOMERS

recognition policies require the Company to make significant judgments and estimates. In applying the Company’s revenue recognition policy, determinations must be made as to when the control of products passes to the Company’s customers which can be either at a point in time or over time. Revenue is generally recognized at a point in time when control passes to customers upon shipment of the Company’s products and revenue is generally recognized over time when control of the Company’s products transfers to customers during the manufacturing process. The Company analyzes several factors, including, but not limited to, the nature of the products being sold and contractual terms and conditions in contracts with customers to help the Company make such judgments about revenue recognition. Unfulfilled performance obligations are generally expected to be satisfied within one year.

Contract Assets and Liabilities

The Company’s contract assets primarily include unbilled amounts typically resulting from sales under contracts when the ~~over~~overtime ~~time~~ method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. These unbilled accounts receivable in contract assets are transferred to accounts receivable upon invoicing, typically when the right to payment becomes unconditional, in which case payment is due based only upon the passage of time.

The Company’s contract liabilities primarily relate to billings and advance payments received from customers and deferred revenue. These contract liabilities represent the Company’s ~~obligation~~obligations to transfer its products to its customers for which the Company has received, or is owed, consideration from its customers. Contract liabilities are included in Other accrued liabilities in the Company's Condensed Consolidated Balance Sheets.

Contract assets and liabilities consisted of the following:

In thousands	At ~~March~~June 3130, 2021		At December 31, 2020		Dollar Change
Contract assets	$	2522,~~959~~756	$	32,403	$	(69,~~444~~647)
Contract liabilities	$	3,~~786~~251	$	3,686	$	~~100~~(435)

The $69.46 million decrease in contract assets from December 31, 2020 to ~~March~~June 3130, 2021 was primarily due to timing of tooling billings to customers and, to a lesser extent, the billings on last-time ~~buys~~sales of membrane-based filtration media initiated in December 2020 in the Company's Netherlands facility.

The $0.14 million ~~increase~~decrease in contract liabilities from December 31, 2020 to ~~March~~June 3130, 2021 was primarily due to ~~an increase in customer deposits, offset by~~ $12.47 million of revenue recognized in the first ~~three~~six months of 2021 related to contract liabilities at December 31, 2020, offset by an increase in customer deposits.

Disaggregated Revenue

The Company disaggregates revenue from customers by geographic region, as it believes this disclosure best depicts how the nature, amount, timing, and uncertainty of the Company's revenues and cash flows are affected by economic factors. Disaggregated revenue by geographical region for the three and six-month periods ended ~~March~~June 3130, 2021 and 2020 were as follows:

For the Three Months Ended March 31, 2021

For the Three Months Ended March 31, 2020

For the Three Months Ended June 30, 2021

For the Three Months Ended June 30, 2020

In thousands

North America

Europe

Asia

Total Net Sales

North America

Europe

Asia

Total Net Sales

Performance Materials

58,~~874~~195

1615,~~924~~272

3,~~535~~719

7977,~~333~~186

4540,~~917~~190

1716,~~275~~501

21,~~028~~782

6558,~~220~~473

Technical Nonwovens

3546,~~838~~443

1618,~~899~~077

87,~~938~~959

6172,~~675~~479

3531,~~731~~236

1615,~~938~~418

45,~~734~~353

5752,~~403~~007

Thermal Acoustical Solutions

6050,~~653~~709

2622,~~113~~673

43,~~278~~476

9176,~~044~~858

5722,~~101~~575

2311,~~540~~424

3,~~120~~449

8337,~~761~~448

Eliminations and Other

(4,~~678~~475)

(~~275~~304)

—

(4,~~953~~779)

(51,~~677~~668)

(~~180~~100)

—

(51,~~857~~768)

Total net sales

150,~~687~~872

5955,~~661~~718

1615,~~751~~154

~~227~~221,~~099~~744

~~133~~92,~~072~~333

5743,~~573~~243

910,~~882~~584

~~200~~146,~~527~~160

4. INVENTORIES

Inventories as of March 31, 2021 and December 31, 2020 were as follows:

In thousands	At March 31, 2021		At December 31, 2020
Raw materials	$	37,116	$	32,258
Work in process	16,504		17,087
Finished goods	27,828		29,651
Total inventories	$	81,448	$	78,996

Work in process includes net tooling inventory of $3.2 million and $2.8 million at March 31, 2021 and December 31, 2020, respectively.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The Company performs an assessment of its goodwill for impairment at least annually, in the fourth quarter, and whenever events or changes in circumstances indicate that the carrying value may exceed its fair value. There were no such events or changes in circumstances during the three-month period ended March 31, 2021.

The following table sets forth the change in carrying value of goodwill for each reportable segment and for the Company as of March 31, 2021:

In thousands	Performance Materials		Technical Nonwovens		Thermal Acoustical Solutions		Total
Gross balance at December 31, 2020	$	143,659	$	55,607	$	12,160	$	211,426
Accumulated impairment	(111,671)		—		(12,160)		(123,831)
Net balance at December 31, 2020	31,988		55,607		—		87,595
Foreign currency translation	(23)		(377)		—		(400)
Net balance at March 31, 2021	$	31,965	$	55,230	$	—	$	87,195

Other Intangible Assets

The table below presents the gross carrying amount and, as applicable, the accumulated amortization of the Company’s acquired intangible assets, other than goodwill, as of March 31, 2021 and December 31, 2020. These amounts are included in Other intangible assets, net on the Company's Condensed Consolidated Balance Sheets.

		At March 31, 2021				At December 31, 2020
In thousands	Amortization Period	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
Customer Relationships	10 - 14 years	$	143,184	$	(53,970)	$	143,479	$	(50,076)
Patents	28 years	650		(619)		650		(616)
Technology	15 years	2,500		(1,185)		2,500		(1,144)
Trade Names	3 - 5 years	7,446		(7,210)		7,495		(7,167)
License Agreements	10 years	—		—		185		(185)
Other	7 - 15 years	459		(459)		467		(467)
Total other intangible assets		$	154,239	$	(63,443)	$	154,776	$	(59,655)

Estimated amortization expense for total intangible assets is expected to be $16.5 million, $14.5 million, $12.8 million, $11.4 million, $9.8 million and $30.1 million, for each of the years ending December 31, 2021 through 2025 and thereafter, respectively.

6. LONG-TERM DEBT AND FINANCING ARRANGEMENTS


	For the Six Months Ended June 30, 2021								For the Six Months Ended June 30, 2020
In thousands	North America		Europe		Asia		Total Net Sales		North America		Europe		Asia		Total Net Sales

Performance Materials	$	117,069	$	32,196	$	7,254	$	156,519	$	86,107	$	33,776	$	3,810	$	123,693
Technical Nonwovens	82,281		34,976		16,897		134,154		66,967		32,356		10,087		109,410
Thermal Acoustical Solutions	111,362		48,786		7,754		167,902		79,676		34,964		6,569		121,209
Eliminations and Other	(9,153)		(579)		—		(9,732)		(7,345)		(280)		—		(7,625)
Total net sales	$	301,559	$	115,379	$	31,905	$	448,843	$	225,405	$	100,816	$	20,466	$	346,687

~~The~~5. long-term debt payable under the Company’s amended and restated 2018 senior secured revolving credit agreement (as amended to-date, the "2018 Amended Credit Agreement") at March 31, 2021 and December 31, 2020 consisted of:INVENTORIES

In thousands	Effective Rate		Maturity	At March 31, 2021		At December 31, 2020
Revolver loan	4.25	%	8/31/2023	$	127,500	$	134,500
Term loan, net of debt issuance costs	4.25	%	8/31/2023	133,491		135,938
				260,991		270,438
Less portion due within one year				(9,789)		(9,789)
Total long-term debt, net of debt issuance costs				$	251,202	$	260,649

Inventories as of June 30, 2021 and December 31, 2020 were as follows:

The weighted average interest rate on long-term debt was 5.1% and 4.4%, for the three-month periods ending March 31, 2021 and 2020, respectively.


In thousands	At June 30, 2021 (1)		At December 31, 2020
Raw materials	$	40,805	$	32,258
Work in process (2)	16,093		17,087
Finished goods	31,328		29,651


Total inventories	$	88,226	$	78,996

~~Total~~(1)Excludes ~~amortization~~inventories ~~expense~~at ofthe ~~debt~~Netherlands ~~issuance~~operating ~~costs~~facility ~~was~~that ~~$0.1 million~~is ~~and~~classified ~~$0.1 million~~as held-for-sale. ~~the~~See ~~three-month~~Note ~~periods~~3, ~~ending~~"Divestiture ~~March 31~~Activities," ~~2021~~in ~~and~~these ~~2020,~~Notes ~~respectively~~to Condensed Consolidated Financial Statements for additional information.

At(2) Work ~~March 31,~~in ~~2021,~~process ~~the~~includes ~~Company~~net ~~had~~tooling ~~amounts~~inventory ~~available for borrowing~~ of $401.7 4 million ~~under~~and ~~the 2018 Amended Credit Agreement, net of~~ $~~127~~2.5 8 million ~~outstanding~~at ~~under~~June 30, ~~the~~2021 ~~revolver facility~~ and ~~standby~~December 31, ~~letters~~2020, ~~of credit outstanding of $1~~respectively.~~8 million.~~

~~In addition to the amounts outstanding under the 2018 Amended Credit Agreement, the Company has various foreign credit facilities totaling approximately $10~~6.~~8 million.~~ AtGOODWILL ~~March~~AND ~~31,~~OTHER ~~2021~~INTANGIBLE ~~and December 31, 2020, the Company's foreign subsidiaries had $1.2 million and $1.4 million, respectively, in standby letters of credit outstanding under these foreign credit facilities.~~ASSETS

The Company has entered into an interest rate swap to convert a portion of the Company's borrowings from a variable rate to a fixed rate. See Note 7, "Derivatives," in these Notes to Condensed Consolidated Financial Statements for additional information.Goodwill

OnThe ~~April 26, 2021, the~~ Company ~~replaced~~performs ~~its~~an ~~2018~~assessment ~~Amended Credit Agreement with a newly executed Credit Agreement by and among the Company, as borrower, and certain direct and indirect subsidiaries as guarantors, and Bank~~ of ~~America,~~its ~~N.A.,~~goodwill asfor ~~Administrative~~impairment ~~Agent,~~at ~~Lender,~~least ~~L/C Issuer and Swingline Lender~~annually, ~~and~~in Wells Fargo Bank, N.A., JPMorgan Chase Bank, N.A., KeyBank N.A., Santander Bank, N.A., TD Bank, N.A., and Webster Bank, N.A., as Lenders, increasing total borrowings from $314.0 million to $346.0 million. The 2021 senior secured revolving credit agreement has a revolving facility of $170.0 million, which includes a $50.0 million sublimit for the ~~issuance~~fourth ~~of letters of credit~~quarter, ~~a $50.0 million sublimit for alternative currencies loans~~ and awhenever ~~$30.0 million~~events ~~sublimit~~or ~~for~~changes ~~swingline~~in ~~loans,~~circumstances ~~and~~indicate athat ~~term loan facility of $176.0 million (~~the ~~revolving~~carrying ~~facility~~value ~~and~~may ~~the~~exceed ~~term~~its ~~loan~~fair ~~facility are collectively referred to as the “2021 Credit Facility”)~~value. ~~The~~There ~~2021~~were ~~Credit~~no ~~Facility~~such ~~includes~~events anor ~~accordion~~changes ~~feature permitting the Company to request an increase of up to $150.0 million~~ in ~~the~~circumstances ~~aggregate.~~during ~~The proceeds of~~ the ~~2021~~six-month ~~Credit~~period ~~Facility~~ended ~~will be used to (a) refinance indebtedness and commitments outstanding under the existing 2018 Amended Credit Agreement~~June 30, ~~(b) pay fees and expenses incurred in connection with the~~ 2021 ~~Credit Facility, and (c) provide ongoing working capital and for other general corporate purposes~~. ~~The 2021 Credit Facility matures on April 26, 2026.~~

The ~~term~~following ~~loan~~table ~~facility~~sets ~~requires~~forth ~~quarterly payments of principal at~~ the ~~rate~~change ~~of $2.2 million, with the remaining balance due~~ in ~~the~~carrying ~~final~~value ~~quarter~~ of ~~the~~goodwill ~~2021~~for ~~Credit~~each ~~Facility’s~~reportable ~~term.~~segment ~~The~~and ~~Company~~for ~~is permitted to prepay amounts outstanding under~~ the ~~2021~~Company ~~Credit Facility, in whole or in part,~~ at ~~any time without premium or penalty~~June 30, ~~and the Company is generally permitted to irrevocably cancel unutilized portions of the revolving commitments.~~ 2021:

The Lenders have been granted a security interest in substantially all of Lydall Inc.'s and its domestic subsidiaries’ personal property and other assets (including intellectual property), including a pledge of 65% of the Company’s equity interest in certain foreign subsidiaries and 100% of the Company’s equity interest in its domestic subsidiaries, as collateral for the Company’s obligations under the 2021 Credit Facility.


In thousands	Performance Materials		Technical Nonwovens		Thermal Acoustical Solutions		Total
Gross balance at December 31, 2020	$	143,659	$	55,607	$	12,160	$	211,426
Accumulated impairment	(111,671)		—		(12,160)		(123,831)
Net balance at December 31, 2020	31,988		55,607		—		87,595

Foreign currency translation	(17)		264		—		247
Net balance at June 30, 2021	$	31,971	$	55,871	$	—	$	87,842

~~LIBOR~~Other ~~(adjusted~~Intangible daily) plus 1.00%, plus the Applicable Margin. The Applicable Margin is 2.00% per annum in the case of LIBOR and alternative currency loans and letters of credit and 1.00% per annum in the case of Base Rate loans for the first full fiscal quarter following the closing date of the 2021 Credit Facility. Thereafter, the Applicable Margin is determined based on the Company’s Consolidated Net Leverage Ratio (as defined in the 2021 Credit Facility), which ranges from 1.25% to 2.50% per annum for LIBOR and alternative currency loans and letters of credit, and ranges from 0.25% to 1.50% per annum for Base Rate loans. The Company will pay a quarterly commitment fee of 0.275% per annum on the unused portion of the revolving facility for the first full fiscal quarter following the closing date of the 2021 Credit Facility. Thereafter, the quarterly commitment fee ranges from 0.20% to 0.30% per annum. Assets

The ~~2021~~table ~~Credit~~below ~~Facility~~presents ~~contains~~the ~~customary~~gross ~~affirmative~~carrying amount and, ~~negative~~as ~~covenants~~applicable, ~~including~~the ~~covenants~~accumulated ~~limiting~~amortization of the Company’s ~~and~~acquired ~~its~~intangible ~~subsidiaries to~~assets, ~~among~~ other ~~things,~~than ~~incur debt~~goodwill, ~~grant~~at ~~liens~~June 30, ~~make~~2021 ~~certain~~and ~~investments~~December 31, ~~engage~~2020. inThese aamounts ~~line~~are ofincluded ~~business~~in ~~substantially~~Other ~~different~~intangible ~~from~~assets, ~~business~~net ~~conducted~~on by the Company,'s ~~transact~~Condensed ~~with~~Consolidated ~~affiliates,~~Balance ~~make restricted payments, and sell assets~~Sheets.

The 2021 Credit Facility contains financial covenants required of the Company and its subsidiaries. The Company is required to meet certain quarterly financial covenants, including:


		At June 30, 2021				At December 31, 2020
In thousands	Amortization Period	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
Customer Relationships	10 - 14 years	$	143,650	$	(58,187)	$	143,479	$	(50,076)
Patents	28 years	650		(623)		650		(616)
Technology	15 years	2,500		(1,227)		2,500		(1,144)
Trade Names	5 years	7,495		(7,336)		7,495		(7,167)
License Agreements	10 years	—		—		185		(185)
Other	7 - 15 years	464		(464)		467		(467)
Total other intangible assets		$	154,759	$	(67,837)	$	154,776	$	(59,655)

~~i.A~~Estimated ~~Minimum~~amortization ~~Consolidated~~expense ~~Fixed~~for ~~Charge~~total ~~Coverage~~intangible ~~Ratio,~~assets ~~which~~is ~~requires~~expected ~~that at the end of each fiscal quarter the ratio of (a) consolidated EBITDA~~ to ~~(b)~~be ~~the~~$16.5 million, ~~sum~~$14.5 million, ~~of consolidated interest charges~~$12.8 million, ~~redemptions~~$11.4 million, ~~non-financed maintenance capital expenditures~~$9.8 million, ~~restricted payments~~ and ~~taxes paid~~$30.1 million, for each asof ~~defined in~~ the ~~2021~~years ~~Credit~~ending ~~Facility~~December 31, ~~may~~2021 ~~not~~through be2025 ~~less~~and ~~than~~thereafter, 1respectively.~~25 to 1.00; and~~

ii7. A ~~Consolidated~~LONG-TERM ~~Net~~DEBT ~~Leverage~~AND ~~Ratio,~~FINANCING which requires that at the end of each fiscal quarter the ratio of consolidated funded indebtedness minus consolidated domestic cash to consolidated EBITDA, as defined in the 2021 Credit Facility, not be greater than 4.50:1.00 through the period ended December 31, 2021, stepping down to 4.00:1.00 through the period ending June 30, 2022, and 3.50:1.00 beginning with the period starting July 1, 2022 and thereafter.ARRANGEMENTS

~~Each of the financial ratios referred to above are calculated on a consolidated trailing twelve-month basis.~~ The ~~2021 Credit Facility, permits the Company to exclude certain non~~long-~~cash~~term ~~charges~~debt ~~and~~payable ~~certain~~at ~~restructuring and other expenses~~June 30, ~~as defined by the~~ 2021 ~~Credit~~and ~~Facility~~December 31, ~~from~~2020 ~~EBITDA~~consisted ~~in the calculation~~ of ~~the Company's financial covenants.~~ :

The Company was in compliance with all covenants set forth in the 2018 Amended Credit Agreement as of and for the quarter ended March 31, 2021, and in the 2021 Credit Facility as of the date hereof, and the Company does not anticipate noncompliance in the foreseeable future.


In thousands	Effective Rate		Maturity	At June 30, 2021		At December 31, 2020
Revolver loan	2.10	%	4/26/2026	$	87,210	$	134,500
Term loan, net of debt issuance costs	2.10	%	4/26/2026	172,876		135,938

Total debt				260,086		270,438
Less current portion due within one year				(8,609)		(9,789)
Total long-term debt, excluding current portion				$	251,477	$	260,649

7On August 31, 2018, the Company amended and restated its senior secured revolving credit agreement, which was further amended on February 14, 2020, May 11, 2020 and October 14, 2020 (collectively, the “2018 Amended Credit Agreement”). ~~DERIVATIVES~~ On April 26, 2021, the Company replaced its 2018 Amended Credit Agreement with a newly executed Credit Agreement by and among the Company, as borrower, and certain direct and indirect subsidiaries as guarantors, and Bank of America, N.A., as Administrative Agent, Lender, L/C Issuer and Swingline Lender, and Wells Fargo Bank, N.A., JPMorgan Chase Bank, N.A., KeyBank N.A., Santander Bank, N.A., TD Bank, N.A., and Webster Bank, N.A., as Lenders, which increased the Company's total available borrowings from $314.0 million to $346.0 million. This newly executed Credit Agreement has a revolving facility of $170.0 million, which includes a $50.0 million sublimit for the issuance of letters of credit, a $50.0 million sublimit for alternative currency loans and a $30.0 million sublimit for swingline loans, and a term loan facility of $176.0 million (the revolving facility and the term loan facility are collectively referred to as the “2021 Credit Facility”). The 2021 Credit Facility permits the Company to request an increase of up to $150.0 million in the aggregate. The proceeds of the 2021 Credit Facility were used, and will continue to be used throughout the duration of the term of the 2021 Credit Facility, to (a) refinance indebtedness and commitments outstanding under the existing 2018 Amended Credit Agreement, (b) pay fees and expenses incurred in connection with the 2021 Credit Facility, and (c) provide ongoing working capital and for other general corporate purposes. The 2021 Credit Facility matures on April 26, 2026.

The term loan feature of the 2021 Credit Facility requires quarterly payments of principal at the rate of $2.2 million, with the remaining balance due on the maturity date of the facility. The Company is permitted to prepay amounts outstanding under the 2021 Credit Facility, in whole or in part, at any time without premium or penalty, and the Company is generally permitted to irrevocably cancel unutilized portions of the revolving commitments.

At June 30, 2021, the Company had amounts available for borrowing of $81.0 million, net of $87.2 million outstanding under the revolving facility and standby letters of credit outstanding of $1.8 million under the 2021 Credit Facility.

The weighted average interest rate on long-term debt was 4.4% for the six-month period ended June 30, 2021 and 5.3% for the year ended December 31, 2020.

The Company has an interest rate swap converting a portion of the Company's borrowings from a variable rate to a fixed rate. See Note 8, "Derivatives", in these Notes to Condensed Consolidated Financial Statements for additional information.

Total amortization of debt issuance costs was $0.3 million and $0.8 million for the six-month period ended June 30, 2021 and 2020, respectively.

The Lenders have been granted a security interest in substantially all of Lydall Inc.'s and its domestic subsidiaries’ personal property and other assets (including intellectual property), including a pledge of 65% of the Company’s equity interest in foreign subsidiaries and 100% of the Company’s equity interest in its domestic subsidiaries, as collateral for the Company’s obligations under the 2021 Credit Facility.

Under the 2021 Credit Facility, interest is charged on borrowings, at the Company’s option, of either: (i) LIBOR (if LIBOR is not available for an alternative currency, such other interest rate customarily used by Bank of America for such alternative currency) plus the Applicable Margin, or (ii) for U.S. denominated loans, the Base Rate, which is a fluctuating rate equal to the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate as set by the Administrative Agent, and (c) the Eurocurrency Rate plus 1.00%, provided that if the Base Rate shall be less than zero, such rate shall be deemed zero. The Applicable Margin is 2.00% per annum in the case of LIBOR and alternative currency loans and letters of credit and 1.00% per annum in the case of Base Rate loans for the first full fiscal quarter following the closing date of the 2021 Credit Facility. Thereafter, the Applicable Margin is determined based on the Company’s Consolidated Net Leverage Ratio (as defined in the 2021 Credit Facility), which ranges from 1.25% to 2.50% per annum for LIBOR and alternative currency loans and letters of credit, and ranges from 0.25% to 1.50% per annum for Base Rate loans. The Company paid a quarterly commitment fee of 0.275% per annum on the unused portion of the revolving facility for the first full fiscal quarter following the closing date of the 2021 Credit Facility. Thereafter, the quarterly commitment fee ranges from 0.20% to 0.30% per annum based on the Company’s Consolidated Net Leverage Ratio in accordance with the terms of the 2021 Credit Facility.

The 2021 Credit Facility contains customary affirmative and negative covenants, including covenants limiting the Company's and its subsidiaries' ability to, among other things, incur debt, grant liens, make certain investments, engage in a line of business substantially different from the business conducted by the Company, transact with affiliates, make restricted payments, and sell assets.

The Company is required to meet certain quarterly financial covenants under the 2021 Credit Facility, including:

i.A Minimum Consolidated Fixed Charge Coverage Ratio, which requires that at the end of each fiscal quarter the ratio of (a) consolidated EBITDA to (b) the sum of consolidated interest charges, redemptions, non-financed maintenance capital expenditures, restricted cash payments and taxes paid in cash, each as defined in the 2021 Credit Facility, may not be less than 1.25 to 1.00; and

ii.A Consolidated Net Leverage Ratio, which requires that at the end of each fiscal quarter the ratio of consolidated funded indebtedness minus consolidated domestic cash to consolidated EBITDA (as defined in the 2021 Credit Facility) not be greater than 4.50:1.00 through the period ending September 30, 2021, stepping down to 4.00:1.00 through the period ending March 31, 2022, and 3.50:1.00 thereafter.

Each of the financial ratios referred to above are calculated on a consolidated trailing twelve-month basis. The 2021 Credit Facility permits the Company to exclude certain non-cash charges and certain restructuring and other expenses from EBITDA in the calculation of the Company's financial covenants.

The Company was in compliance with all covenants set forth in the 2021 Credit Facility as of the date hereof, and the Company does not anticipate noncompliance in the foreseeable future.

In addition to the amounts outstanding under the 2021 Credit Facility, the Company has various foreign credit facilities totaling approximately $10.9 million. At June 30, 2021 and December 31, 2020, the Company's foreign subsidiaries had $1.6 million and $1.4 million outstanding, respectively, in standby letters of credit under these foreign credit facilities.

8. DERIVATIVES

The Company selectively uses financial instruments to manage market risk associated with exposure to fluctuations in interest rates and foreign currency rates. These financial exposures are monitored and managed by the Company as an integral part of its risk management program.

Interest Rate Hedging

The Company’s interest rate exposure is most sensitive to fluctuations in interest rates in the United States and in certain countries throughout Europe, which impacts interest paid on its debt. The Company has debt with variable rates of interest based generally on LIBOR. From time to time, the Company enters into interest rate swap agreements to manage interest rate risk. These instruments are recorded at fair value. See Note 89, "Fair Value Measurements,", in these Notes to Condensed Consolidated Financial Statements for additional information.

In November 2018, the Company entered into a five-year interest rate swap agreement with a bank to convert the interest on a notional $139.0 million of the Company's borrowings under its 2018 Amended Credit Agreement from a variable rate, plus the borrowing spread, to a fixed rate of 3.09% plus the borrowing spread. The notional amount decreases quarterly by fluctuating amounts through August 2023. Prior to May 11, 2020, the Company's interest rate swap agreements were accounted for as cash flow hedges. Effectiveness of the remaining derivative agreement was assessed quarterly, or more frequently, if necessary, by ensuring that the critical terms of the swap continued to match the critical terms of the hedged debt in order to report gains or losses on the derivative instrument in ~~other~~Other ~~comprehensive~~Comprehensive ~~income~~Income. An amendment to the Company's 2018 Amended Credit Agreement on May 11, 2020 included, among other modifications, the establishment of a floor on the ~~base~~Base Rate and the Eurocurrency ~~rate~~Rate of 1%. As a result, the Company determined that the critical terms of the swap no longer matched the critical terms of the hedged debt and performed an assessment of the effectiveness of the interest rate swap agreement. The Company concluded the interest rate swap agreement was no longer effective. The Company also concluded that the hedged forecasted transaction (the occurrence of variable interest rate payments on the hedged debt) continues to be probable of occurring. Therefore, as of May 11, 2020, the Company discontinued hedge accounting. After May 11, 2020, any fair value gains or losses on the derivative agreement are recorded as interest expense on the Company's Condensed Consolidated Statement of Operations. The cumulative loss on the discontinued hedge relationship through May 11, 2020, which was recorded in Accumulated Other Comprehensive Income, is being amortized into earnings (loss) through August 31, 2023, the maturity date of the derivative instrument. The loss included in Accumulated Other Comprehensive Income related to the discontinued hedging relationship at June 30, 2021 was $2.6 million, net of tax. The amount reclassified out of other comprehensive income into Interest expense on the Company's Condensed Consolidated Statement of Operations for the three and six-month periods ended June 30, 2021 was $0.6 million and $1.2 million, net of tax, respectively. The Company expects $1.8 million, net of tax, to be reclassified from Accumulated Other Comprehensive Income over the next twelve months.

occurrence of variable interest rate payments on the hedged debt) continues to be probable of occurring. Therefore, as of May 11, 2020, the Company discontinued hedge accounting. After May 11, 2020, any fair value gains or losses on the derivative agreement are recorded as interest expense on the Company's Condensed Consolidated Statement of Operations. The cumulative loss on the discontinued hedge relationship through May 11, 2020, which was recorded in Accumulated Other Comprehensive Income, will be amortized into earnings (loss) through August 31, 2023, the maturity date of the hedged debt. The loss included in Accumulated Other Comprehensive Income related to the discontinued hedging relationship at March 31, 2021 was $3.3 million, net of tax. The amount reclassified out of other comprehensive income into Interest expense on the Company's Condensed Consolidated Statement of Operations for the three-month period ended March 31, 2021 was $0.6 million, net of tax. The Company expects $2.0 million, net of tax, to be reclassified from Accumulated Other Comprehensive Income over the next twelve months.

Net Investment Hedges

The Company’s operations are subject to certain risks, including foreign currency exchange rate fluctuations. From time to time, the Company enters into cross-currency swaps designated as hedges, which are recorded at fair value (see Note 89, "Fair Value Measurements,", in these Notes to Condensed Consolidated Financial Statements), to protect the Company's net investments in subsidiaries denominated in currencies other than the U.S. dollar.

In November 2019, the Company entered into three fixed-to-fixed cross-currency swaps with banking institutions with aggregate notional amounts totaling €67.8 million ($75.0 million U.S. dollar equivalent). These swaps hedge a portion of the Company's net investment in a Euro functional currency denominated subsidiary against the variability of exchange rate translation impacts between the U.S. dollar and Euro. These contracts require monthly cash interest exchanges over the life of the contracts with the Company recognizing a reduction to interest expense due to the favorable interest rate differential. Also, settlement of the notional €22.6 million ($25.0 million U.S. dollar equivalent) cross-currency swaps occur at maturity dates of August 2021, August 2022, and August 2023. The Company assesses hedge effectiveness of the cross-currency swaps quarterly by ensuring the critical terms of the swaps continue to match the critical terms of the designated net investment. The Company elected to assess effectiveness using the spot method, and as a result, records the interest rate differential monthly on the Company's Condensed Consolidated Statements of Operations.

Derivative instruments are ~~recognized~~recorded asat ~~either~~fair ~~assets~~value orand ~~liabilities~~recognized ~~depending~~as oneither ~~maturity. These amounts are included in Other current~~ assets ~~and~~or ~~Derivative~~ liabilities ~~on the Company's Condensed Consolidated Balance Sheets~~. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods in which the hedge transaction affects earnings. Any ineffective portion, or amounts related to contracts that are not designated as hedges, are recorded directly to earnings. The Company's policy for classifying cash flows from derivatives is to report the cash flows consistent with the underlying hedged item. The Company does not use derivatives for speculative or trading purposes.

The following table sets forth the fair value amounts of derivative instruments held by the Company presented on the Condensed Consolidated Balance Sheets as Derivative liabilities:

	At March 31, 2021				At December 31, 2020
	At June 30, 2021				At December 31, 2020
In thousands	Asset Derivatives		Liability Derivatives		Asset Derivatives		Liability Derivatives
Interest rate contracts	$	—	$	43,~~154~~430	$	—	$	5,063
Cross-currency swaps	—		34,~~812~~717		—		6,933
Total derivatives	$	—	$	78,~~966~~147	$	—	$	11,996

The following table sets forth the ~~income~~activity ~~(loss)~~ recorded in accumulated other comprehensive income (loss), net of tax, for the three and six-month periods ended ~~March~~June 3130, 2021 and 2020 for derivatives held by the Company and designated as hedging instruments:

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Cash flow hedges:
Interest rate contracts	$	~~618~~571	$	~~(2,173)~~11	$	1,189	$	(2,162)
Cross-currency swaps	~~2,400~~(696)		2(1,~~619~~093)		1,704		1,526
Total derivatives	$	~~3,018~~(125)	$	~~446~~(1,082)	$	2,893	$	(636)

139. FAIR VALUE MEASUREMENTS

8. FAIR VALUE MEASUREMENTS

Fair value is defined as 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 at the measurement date.

The Company uses a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•Level 1 - Quoted prices in active markets for identical assets or liabilities.

•Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

•Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The following table presents the carrying value and fair value of financial instruments that are not carried at fair value:

At March 31, 2021

At December 31, 2020

At June 30, 2021

At December 31, 2020

In thousands

Carrying Value

Fair Value

Carrying Value

Fair Value

Debt

261,~~500~~010

~~262~~280,~~394~~725

271,000

272,792

The fair values of the Company’s long-term debt outstanding were computed based on discounted future cash flows (observable inputs), as applicable, which falls under Level 2 of the fair value hierarchy. Differences from carrying values are attributable to interest rate changes subsequent to when the transactions occurred.

The fair values of cash and cash equivalents, accounts receivable, net and accounts payable approximate their carrying amounts due to the short-term maturities of these instruments.

Recurring Fair Value Measures

The Company holds derivative instruments for interest rate swap contracts and cross-currency swaps that are measured using observable market inputs such as forward rates and its counterparties' credit risks. Based on these inputs, the derivative instruments are classified within Level 2 of the valuation hierarchy. At March 31, 2021 and December 31, 2020, these derivative instruments were included in Derivative liabilities on the Company's Condensed Consolidated Balance Sheets. Based on the Company's continued ability to trade and enter into interest rate swaps and cross-currency swaps, the Company considers the markets for their fair value instruments to be open.

9. STOCK REPURCHASES

During the three-month period ended March 31, 2021, the Company purchased 5,646 shares of common stock valued at $0.2 million to satisfy payroll tax withholding obligations, pursuant to provisions in agreements with recipients of restricted stock granted under the Company’s equity compensation plans, in which the Company withholds the number of shares having fair value equal to each recipient’s minimum payroll tax withholding obligation.

On April 20, 2021, the Company announced that our Board of Directors approved a Share Repurchase Program authorizing the repurchase, from time to time at the Company's discretion, of up to an aggregate of $30.0 million of common stock, par value $0.01 per share, of the Company. The ability to repurchase the Company’s common stock will continue until the Board of Directors reaches a determination to discontinue share repurchases. The timing and actual amount of shares repurchased will depend on a variety of factors including stock price, market conditions, corporate and regulatory requirements, and capital availability, among other factors.

10. EMPLOYER SPONSORED BENEFIT PLANS

The Company maintains one domestic pension plan: the Retirement Income Plan for Employees of Interface Performance Materials, Inc. ("IPM Pension Plan"). During the three-month period ended March 31, 2020, the Company settled the pension obligation of the Interface Sealing Solutions, Inc. Pension Plan ("ISS Pension Plan") through lump sum distributions to

participants or by irrevocably transferring pension liabilities to an insurance company through the purchase of a group annuity contract. This purchase, funded with pension assets, resulted in a pre-tax settlement loss of $0.4 million in the three-month period ended March 31, 2020, related to the recognition of accumulated deferred actuarial losses. The settlement loss and expenses were included as non-operating expense on the Condensed Consolidated Statements of Operations.

The IPM Pension Plan covers a portion of Interface's union and non-union employees. The plan is closed to new employees and benefits are no longer accruing for the majority of participants. The Company expects to make contributions of approximately $0.7 million to the IPM Pension Plan during 2021. Contributions of $0.2 million were made during the three-month period ended March 31, 2021. Contributions of $0.4 million were made during the three-month period ended March 31, 2020, inclusive of contributions made to the ISS Pension Plan.

The following is a summary of the components of net periodic benefit cost for the domestic defined benefit pension plans for

the three-month periods ended March 31, 2021 and 2020:

	For the Three Months Ended March 31,
In thousands	2021		2020
Components of employer benefit cost
Service cost	$	29	$	40
Interest cost	304		430
Expected return on assets	(589)		(533)
Amortization of actuarial loss	4		2
Net periodic benefit cost (income)	$	(252)	$	(61)
Settlement loss	—		385
Total employer benefit plan cost	$	(252)	$	324

The Company reports the service cost component of net periodic benefit cost in the same line item as other compensation costs in operating expenses and the non-service cost components of net periodic benefit cost in other income.

11. RESTRUCTURING

During the third quarter of 2020, the Company’s Performance Materials segment undertook actions to discontinue production of a lower efficiency air filtration media product and, in turn, fully depreciated the supporting machinery and equipment in North America and consolidated certain product lines and began exiting underperforming facilities in Europe. These restructuring activities, which are projected to conclude in 2021, are expected to reduce operating costs, increase production efficiency, and enhance the Company’s flexibility by better aligning its manufacturing operations with the segment's customer base. Accordingly, the Company expects to record total pre-tax expenses of approximately $18.0 million, primarily related to severance and employee retention expenses in connection with these restructuring activities, of which approximately $12.3 million is expected to result in cash expenditures. The Company incurred a total of $16.7 million through March 31, 2021, of which approximately $5.7 million were non-cash expenditures, which consisted of fully depreciating and/or amortizing long-lived assets and, to a lesser extent, writing-off inventory.

The Company undertook actions to consolidate global production facilities for sealing & advanced solutions products from five facilities to four, which would have resulted in the closure a facility in Germany. In the first quarter of 2021, the Company entered into an agreement to sell the German facility, which closed on March 11, 2021. The Company agreed to pay $1.8 million (€1.5 million) to the buyer and provide $2.2 million (€1.9 million) in additional funding, net of cash and certain net working capital adjustments, to cover pension and restructuring liabilities recorded in 2020. As a result of the sale of the business, the Company recorded a pre-tax loss of $0.7 million. The final consideration and loss are subject to a working capital adjustment expected to be settled in 2022.

In the first quarter of 2021, the Company recorded pre-tax restructuring charges of $0.8 million primarily consisting of severance costs and legal expenses.

~~The~~instruments ~~following~~are ~~table~~classified ~~summarizes~~within Level 2 of the ~~total~~valuation ~~restructuring~~hierarchy. ~~charges~~At byJune 30, ~~cost~~2021 ~~type:~~and December 31, 2020, these derivative instruments were included in Derivative liabilities on the Company's Condensed Consolidated Balance Sheets. Based on the Company's continued ability to trade and enter into interest rate swaps and cross-currency swaps, the Company considers the markets for their fair value instruments to be open.

In thousands	Severance and Related Expenses		Legal and Administrative Expenses		Facility Exit and Asset Write-Off Expenses
Expense incurred during quarter ended:
March 31, 2021	$	777	$	—	$	—
Total pre-tax expense incurred	$	777	$	—	$	—

10. STOCK REPURCHASES

During the six-month period ended June 30, 2021, the Company purchased 5,646 shares of common stock valued at $0.2 million to satisfy payroll tax withholding obligations, pursuant to provisions in agreements with recipients of restricted stock granted under the Company’s equity compensation plans, in which the Company withholds the number of shares having fair value equal to each recipient’s minimum payroll tax withholding obligation.

On April 20, 2021, the Company announced that our Board of Directors approved a Share Repurchase Program authorizing the repurchase, from time to time at the Company's discretion, of up to an aggregate of $30.0 million of the Company's common stock, par value $0.01 per share. No shares were repurchased under this program during the three-month period ended June 30, 2021. The Company suspended the Share Repurchase Program due to the pending Merger.

11. EMPLOYER SPONSORED BENEFIT PLANS

The Company maintains one domestic pension plan, the Retirement Income Plan for Employees of Interface Performance Materials, Inc. ("IPM Pension Plan"). During the three-month period ended March 31, 2020, the Company settled the pension obligation of the Interface Sealing Solutions, Inc. Pension Plan ("ISS Pension Plan") through lump sum distributions to participants or by irrevocably transferring pension liabilities to an insurance company through the purchase of a group annuity contract. This purchase, funded with pension assets, resulted in a pre-tax settlement loss of $0.4 million in the six-month period ended June 30, 2020, related to the recognition of accumulated deferred actuarial losses. The settlement loss and expenses were included as non-operating expense on the Condensed Consolidated Statements of Operations.

The IPM Pension Plan covers a portion of Interface's union and non-union employees. The plan is closed to new employees and benefits are no longer accruing for the majority of participants. The Company expects to make contributions of approximately $0.7 million to the IPM Pension Plan during 2021. Contributions of $0.2 million and $0.4 million were made during the three and six-month periods ended June 30, 2021. Contributions of $0.4 million were made during the six-month period ended June 30, 2020. There were no contributions made during the three-month period ended June 30, 2020 because the Company took advantage of the deferral in minimum funding contribution due dates as permitted under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").

The following is a summary of the components of net periodic benefit cost for the domestic defined benefit pension plans for

the three and six-month periods ended June 30, 2021 and 2020:


	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Components of employer benefit cost
Service cost	$	29	$	40	$	58	$	80
Interest cost	304		428		608		857
Expected return on assets	(589)		(532)		(1,178)		(1,065)
Amortization of actuarial loss	4		—		8		2
Net periodic benefit cost (income)	$	(252)	$	(64)	$	(504)	$	(126)
Settlement loss	—		—		—		385
Total employer benefit plan cost	$	(252)	$	(64)	$	(504)	$	259

12. RESTRUCTURING

During the third quarter of 2020, the Company’s Performance Materials segment undertook actions to discontinue production of a lower efficiency air filtration media product and, in turn, fully depreciated the supporting machinery and equipment in North America and consolidated certain product lines. In addition, the Company began exiting underperforming facilities in Europe. These restructuring activities, which will be completed in the third quarter of 2021, are expected to reduce operating costs, increase production efficiency, and enhance the Company’s flexibility by better aligning its manufacturing operations with the segment's customer base. The Company expects to incur total pre-tax expenses of approximately $17.0 million. As a result of these restructuring activities, the Company incurred total pre-tax expenses of $16.9 million through June 30, 2021, of which approximately $11.2 million was related to cash expenditures primarily due to severance and employee retention expenses. Also contributing to total pre-tax expenses was $5.7 million of non-cash expenditures, which consisted of fully depreciating and/or amortizing long-lived assets and, to a lesser extent, writing-off inventory. See Note 3, "Divestiture Activities", in these Notes to Condensed Consolidated Financial Statements for additional information.

The following table summarizes the total restructuring expenses incurred, by cost type, for the three and six-month periods ended June 30, 2021:


	For the Three Months Ended		For the Six Months Ended
	June 30, 2021		June 30, 2021
Severance and Related Expenses	$	190	$	967


Total pre-tax expense incurred	$	190	$	967

The following table summarizes the change in the accrued liability balance for the restructuring actions:

In thousands	Total
Balance as of December 31, 2020	$	9,431
Pre-tax restructuring expenses, excluding asset write-off expenses	~~777~~967
Cash paid	(~~821~~1,642)
Accrued liability included with the sale of the German facility	(7,311)
Currency translation adjustments	~~(34)~~5
Balance as of March 31, 2021	$	2,042
Accrued liability included in Liabilities of a business held-for-sale	(1,414)
Balance as of June 30, 2021	$	36

The above accrued liability balances were included in Restructuring liabilities on the Company’s Condensed Consolidated Balance Sheets.

1213. INCOME TAXES

For the three-month period ended ~~March~~June 3130, 2021, the Company's effective tax rate was 3513.79% compared to an effective tax rate of 39.52% for the three-month period ended ~~March~~June 3130, 2020. For the three-month period ended ~~March~~June 3130, 2021, the rate was ~~negatively~~positively impacted by $0.54 million ~~due~~related to aaccounting ~~change~~method inchanges ~~assertion~~and ~~on unremitted foreign earnings,~~ $0.42 million related to foreign earnings taxed at higher rates,. ~~and~~These were partially offset by $0.23 million of valuation allowance activity. For the three-month period ended ~~March~~June 3130, 2020, the ~~Company~~rate ~~had~~was anegatively ~~pre-tax~~impacted ~~loss~~by ~~primarily~~valuation ~~resulting~~allowance ~~from~~activity ~~an impairment charge~~ of $610.15 million. ~~The~~and ~~impairment~~a ~~charge~~foreign ~~significantly~~withholding ~~impacted the Company's effective~~ tax ~~rate~~liability asof $480.74 million ~~of the impairment charge related to non-deductible goodwill~~, resulting in a lower effective tax rate ~~for the first quarter of 2020~~ when ~~the Company was~~ in a pre-tax loss position. ~~Additionally, the effective rate, for the first quarter of 2020, was negatively impacted by valuation allowance activity of $0.3 million.~~

~~The~~For ~~Company~~the ~~and~~six-month ~~its~~period ~~subsidiaries~~ended ~~file~~June 30, a2021, ~~consolidated~~the ~~federal~~Company's ~~income~~effective tax ~~return,~~rate aswas ~~well~~25.8% ascompared ~~returns~~to ~~required~~an byeffective ~~various~~tax ~~state~~rate ~~and~~of ~~foreign~~4.0% ~~jurisdictions~~for the six-month period ended June 30, 2020. InFor the ~~normal~~six-month ~~course~~period ofended ~~business~~June 30, 2021, the ~~Company~~rate iswas ~~subject~~negatively impacted by $0.6 million due to ~~examination~~a change in assertion on unremitted foreign earnings and $0.5 million of valuation allowance activity. These were partially offset by ~~taxing~~a ~~authorities,~~benefit ~~including~~of ~~such~~$0.4 million ~~major~~related ~~jurisdictions~~to asaccounting method changes. For the ~~United~~six-month ~~States,~~period ~~Canada,~~ended ~~China~~June 30, ~~France~~2020, ~~Germany,~~the ~~Hong~~Company ~~Kong,~~had ~~India,~~a ~~the~~pre-tax ~~Netherlands,~~loss ~~and~~primarily ~~the~~resulting ~~United~~from ~~Kingdom~~impairment charges of $61.1 million. The ~~With~~impairment ~~few~~charges ~~exceptions,~~significantly impacted the Company's iseffective notax ~~longer~~rate ~~subject~~because ~~to U~~$48.S.7 million ~~federal~~of ~~examinations~~the ~~for~~impairment ~~years~~charges ~~before~~related ~~2017~~to non-deductible goodwill, ~~state~~resulting ~~and~~in ~~local~~a ~~examinations~~low effective tax rate for ~~years~~the ~~before~~six-month ~~2016~~period ended June 30, ~~and~~2020 ~~non~~when in a pre-Utax loss position.S. Additionally, ~~income~~the ~~tax~~effective ~~examinations~~rate ~~for~~was ~~years~~negatively ~~before~~impacted ~~2013~~by valuation allowance activity of $0.7 million.

The Company and its United States subsidiaries file a consolidated federal income tax return, as well as returns required by various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing

authorities, including such major jurisdictions as the United States, Canada, China, France, Germany, Hong Kong, India, the Netherlands, and the United Kingdom. With few exceptions, the Company is no longer subject to U.S. federal examinations for years before 2017, state and local examinations for years before 2016, and non-U.S. income tax examinations for years before 2013.

The Company’s effective tax rates in future periods could be affected by an increase or decrease in earnings in countries where tax rates differ from the United States federal tax rate, the relative impact of permanent tax adjustments on earnings from domestic operations, changes in net deferred tax asset valuation allowances, including valuation allowances on loss carryforwards in which no tax benefit can be recognized, stock vesting, pension plan terminations, the completion of acquisitions or divestitures, changes in tax rates or tax laws and the completion of ongoing tax planning strategies and audits.

1314. EARNINGS (LOSS) PER SHARE

For the three and six-month periods ended ~~March~~June 3130, 2021 and 2020, basic earnings per share was computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Unexercised stock options and unvested restricted share awards, including awards subject to certain performance criteria, are excluded from the basic earnings per share calculation, but are included in the diluted earnings per share calculation using the treasury stock method in periods of net income, as long as their effect is not antidilutive. All potential shares of common stock from unexercised stock options and unvested restricted share awards are antidilutive in periods of net loss.

The following table provides a reconciliation of weighted-average shares used to determine basic and diluted earnings per share:

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	2021		2020
In thousands, except per share amounts	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Net income (loss)	$	5,~~094~~780	$	(565,~~421~~857)	$	10,874	$	(62,278)
Basic weighted-average common shares outstanding	17,~~545~~575		17,~~336~~372		17,560		17,354
Effect of dilutive options and restricted stock awards	~~343~~402		—		363		—
Diluted weighted-average common shares outstanding	17,~~888~~977		17,~~336~~372		17,923		17,354
Earnings (loss) per share:
Basic	$	0.2933	$	(30.2534)	$	0.62	$	(3.59)
Diluted	$	0.2832	$	(30.2534)	$	0.61	$	(3.59)

For the three and six-month periods ended ~~March~~June 3130, 2021 ~~and 2020~~, there were ~~129~~73,~~209~~464 and ~~736~~156,~~141~~709 shares excluded from the computation of diluted earnings per share, respectively. ~~For~~These ~~the three-month period ended March 31, 2021, these~~ included antidilutive stock options, antidilutive unvested restricted share awards for which requisite service has not yet been rendered, and antidilutive unvested performance share awards with contingently issuable shares. For the three-month period ended March 31, 2020, all outstanding, unvested awards were excluded from the calculation of diluted earnings per share because the Company had net loss during the period. These included all stock options, as well as unvested restricted share awards for which requisite service has not yet been rendered, and certain unvested performance share awards with contingently issuable shares.

For the three and six-month periods ended June 30, 2020, there were 736,944 and 734,756 shares excluded from the computation of diluted earnings per share, respectively. Because the Company had a net loss during the three and six-month periods ended June 30, 2020, the excluded shares included all outstanding, unvested restricted share awards for which requisite service has not yet been rendered, all stock options, and certain unvested performance share awards with contingently issuable shares.

A description of the Company's stock options and restricted share awards is included in Note, 13, "Equity Compensation Plans", in the Notes to Consolidated Financial Statements in Part II, Item 8 - Financial Statements and Supplemental Data of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

1415. SEGMENT INFORMATION

The Company is organized based on the nature of its products and is composed of three reportable segments each overseen by a segment manager. These segments are reflective of how the Company's Chief Executive Officer, who is its Chief Operating Decision Maker ("CODM"), reviews operating results for the purpose of allocating resources and assessing performance. The Company has not aggregated operating segments for purposes of identifying reportable segments. As of ~~March~~June 3130, 2021, the operating segments were Performance Materials, Technical Nonwovens, and Thermal Acoustical Solutions.

Performance Materials Segment

The Performance Materials segment is a worldwide leader in delivering innovative specialty filtration, sealing, and advanced materials solutions for demanding applications. Specifically, the segment’s offerings include: (1) specialty filtration media solutions for a variety of applications in the global air and liquid filtration market such as personal protective equipment (“PPE”), indoor air quality, life sciences, transportation, and industrial applications; (2) gasket materials and parts for a broad range of applications in the global sealing market for parts in large/heavy duty equipment for commercial, industrial, agriculture, and construction end markets; and, (3) advanced materials that include highly engineered insulation solutions for cryogenic storage of liquid hydrogen/nitrogen, energy storage, and advanced composite materials for aerospace and defense applications.

Technical Nonwovens Segment

The Technical Nonwovens segment is a global leader in engineered nonwoven materials for industrial filtration applications and advanced materials products. The primary industrial filtration markets include air pollution and emissions control, power generation, and liquid filtration solutions. Advanced materials products include geotextile felts for separation, reinforcement, filtration, drainage, and protection; thermal and acoustic insulation for transportation and automotive applications,; and highly customized and technical solutions for acoustic media, medical, building & construction, and safety apparel. Specifically, the segment’s offerings include needle punched nonwoven and highly engineered felts made from a variety of synthetic fibers. Automotive media is provided to Tier 1 and Tier 2 suppliers as well as the Company's Thermal Acoustical Solutions segment.

Thermal Acoustical Solutions Segment

The Thermal Acoustical Solutions segment designs, manufactures, and distributes a full range of innovative engineered products tailored for the transportation and industrial sectors. These products shield sensitive components from high temperature environments, assist in the reduction of harmful emissions and reduce noise and vibration. Within the transportation sector, the Company's products are found in the interior, underbody, and underhood of cars, trucks, SUVs, heavy duty trucks, and recreational vehicles.

Segment Results

Net sales by business segment is as follows:

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Performance Materials Segment (1),(2):
Filtration Products	$	34,~~346~~066	$	2529,~~887~~636	$	68,412	$	55,523
Sealing and Advanced Solutions Products	4443,~~987~~120		3928,~~333~~837		88,107		68,170
Performance Materials Segment net sales	7977,~~333~~186		6558,~~220~~473		156,519		123,693
Technical Nonwovens Segment:
Industrial Filtration Products	3635,~~401~~411		3129,~~369~~413		71,812		60,782
Advanced Materials Products (2)	2537,~~274~~068		2622,~~034~~594		62,342		48,628
Technical Nonwovens Segment net sales	6172,~~675~~479		5752,~~403~~007		134,154		109,410
Thermal Acoustical Solutions Segment:
Parts	8671,~~494~~222		7732,~~321~~448		157,716		109,769
Tooling	45,~~550~~636		65,~~440~~000		10,186		11,440
Thermal Acoustical Solutions Segment net sales	9176,~~044~~858		8337,~~761~~448		167,902		121,209
Eliminations and Other (2)	(4,~~953~~779)		(51,~~857~~768)		(9,732)		(7,625)
Consolidated Net Sales	$	~~227~~221,~~099~~744	$	~~200~~146,~~527~~160	$	448,843	$	346,687

Operating income (loss) by business segment is as follows:

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Performance Materials (1),(3)	$	1514,~~296~~853	$	~~(56~~5,~~941)~~443	$	30,149	$	(51,498)
Technical Nonwovens (4)	58,~~104~~765		36,~~813~~684		13,869		10,497
Thermal Acoustical Solutions	(1,~~674~~500)		5(6,~~628~~285)		174		(657)
Corporate Office Expenses	(912,~~935~~704)		(87,~~068~~588)		(22,639)		(15,656)
Consolidated Operating Income (Loss)	$	129,~~139~~414	$	(551,~~568~~746)	$	21,553	$	(57,314)

(1)~~The~~For the six-month period ended June 30, 2021, the Performance Materials segment includes the results of the ~~facility in~~ German facility that the Company sold on March 11, 2021.

(2)Included in the Performance Materials segment, Technical Nonwovens segment, and Eliminations and Other is the following:

•~~Technical~~Performance ~~Nonwovens~~Materials segment intercompany sales ~~of $3.9 million and $5.0 million~~ to the Thermal Acoustical Solutions segment ~~for~~were ~~the~~as ~~three-month periods ended March 31, 2021 and 2020, respectively.~~ follows:

~~•Performance Materials segment intercompany sales of~~ ◦$1.0 million and $0.93 million ~~to the Thermal Acoustical Solutions segment~~ for the three-month periods ended ~~March~~June 3130, 2021 and 2020, respectively.

◦$2.1 million and $1.2 million for the six-month periods ended June 30, 2021 and 2020, respectively.

•Technical Nonwovens segment intercompany sales to the Thermal Acoustical Solutions segment were as follows:

◦$3.6 million and $1.4 million for the three-month periods ended June 30, 2021 and 2020, respectively.

◦$7.5 million and $6.4 million for the six-month periods ended June 30, 2021 and 2020, respectively.

(3)Included in the operating results within the Performance Materials segment are the following:

•Impairment charges of $61.1 million ~~of impairment charges~~ related to goodwill and other long-lived assets for the ~~three~~six-month period ended ~~March~~June 3130, 2020.

•~~$3.0~~Intangible ~~million~~asset ~~and $4.0 million of intangible assets~~ amortization ~~for~~as ~~the three-month periods ended March 31, 2021 and 2020, respectively.~~follows:

18◦$3.0 million and $4.0 million for the three-month periods ended June 30, 2021 and 2020, respectively.

~~(4)Included~~◦$6.1 inmillion and $7.9 million for the ~~Technical~~six-month ~~Nonwovens~~periods ~~segment~~ended isJune 30, ~~the~~2021 ~~following:~~and 2020, respectively.

•(4)Included ~~$1.1~~in ~~million~~the ~~and~~Technical ~~$1.2~~Nonwovens ~~million~~segment ofis intangible assets amortization ~~for~~as ~~the three-month periods ended March 31, 2021 and 2020, respectively.~~follows:

15•$1.1 ~~COMMITMENTS~~million ~~AND~~and ~~CONTINGENCIES~~$1.2 million for the three-month periods ended June 30, 2021 and 2020, respectively.

•$2.1 million and $2.3 million for the six-month periods ended June 30, 2021 and 2020, respectively.

16. COMMITMENTS AND CONTINGENCIES

Environmental Remediation

In the fourth quarter of 2016, as part of a groundwater discharging permitting process, water samples collected from wells and process water basins at the Company’s Rochester New Hampshire manufacturing facility, within the Performance Materials segment, showed concentrations of Per and Polyfluorinated Substances (“PFAS”) in excess of state ambient groundwater quality standards. In January 2017, the Company received a notification from the State of New Hampshire Department of Environmental Services (“NHDES”) naming Lydall Performance Materials, Inc. a responsible party with respect to the discharge of regulated contaminants and, as such, is required to take action to investigate and remediate the impacts in accordance with standards established by the NHDES. The Company conducted a site investigation, the scope of which was reviewed by the NHDES, in order to assess the extent of potential soil and groundwater contamination and develop a remedial action plan. Based on input received from NHDES in March 2017 with regard to the scope of the site investigation, the Company recorded $0.2 million of expense. In 2018, the Company received a response from the NHDES to the site investigation report outlining proposed remedial actions. The Company recorded an additional $0.1 million of expense in 2018 associated with the expected costs to remediate the impacts of the discharge of regulated contaminants in accordance with standards established by the NHDES. During 2018, the environmental liability was fully reduced, reflecting payments made to vendors. Additionally, the Company incurred $0.2 million of capital expenditures in 2018, indue ~~relation~~ to the lining of the Company's ~~fresh~~freshwater ~~water~~ lagoons. During a building expansion in 2020, additional areas of concern were identified during excavation activities. An interim remedial action plan ("IRAP") that includes additional site characterization activities was submitted to the NHDES in March 2021. NoIn ~~comments~~June ~~from~~2021, additional site characterization activities were initiated following approval of the ~~NHDES~~IRAP ~~have~~by ~~been~~the ~~received~~NHDES. AsAdditionally, as part of ~~March 31~~the IRAP, excavation and disposal of areas of known PFAS contamination were initiated in July 2021,. ~~the~~The Company ~~has~~had no$0.3 million ~~amounts~~ accrued for these environmental remediation activities, all of which were recorded in the three-month period ended June 30, 2021. The Company cannot be sure that costs will not exceed the current estimates until this matter is closed with the NHDES, nor that any future corrective action at this location would not have a material effect on the Company’s financial condition, results of operations, or cash flows.

In December 2018, the New York State Department of Environmental Conservation (“NYDEC”) informed the Company that the newly acquired Interface site located at Hoosick Falls, NYNew York will be the subject of an investigation into the possibility of it being an inactive hazardous disposable waste site. The letter specifically references PFAS that have been detected in a nearby water supply, soil and/or surface water. Notably, the PFAS contamination has been identified in the Hoosick Falls area for some time and other large manufacturers in the area have previously been identified as a source. The NYDEC approved a site characterization plan in December 2019. Additional site characterization activities were completed in the fourth quarter of 2020. Results of the site characterization will be submitted in the second quarter of 2021. As of March 31, 2021, the Company has less than $0.1 million accrued for these environmental remediation activities. The Company does not know the scope or extent of any additional future obligations, if any, that may arise from the site investigation and therefore is unable to estimate the cost of any corrective action. Accordingly, the Company cannot assure that the costs of any future corrective at this location would not have a material effect on the Company's financial condition, results of operations, or cash flows.

of it being an inactive hazardous disposable waste site. The letter specifically references PFAS that have been detected in a nearby water supply, soil and/or surface water. Notably, the PFAS contamination has been identified in the Hoosick Falls area for some time and other large manufacturers in the area have previously been identified as a source. The NYDEC approved a site characterization plan in December 2019. Additional site characterization activities were completed in the fourth quarter of 2020. Results of the site characterization will be submitted in 2021. As of June 30, 2021, the Company has less than $0.1 million accrued for these environmental remediation activities. The Company does not know the scope or extent of any additional future obligations, if any, that may arise from the site investigation and, therefore, is unable to estimate the cost of any corrective action. Accordingly, the Company cannot assure that the costs of any future corrective actions at this location would not have a material effect on the Company's financial condition, results of operations, or cash flows.

Provisions for such matters are charged to expense when it is probable that a liability has been incurred and reasonable estimates of the liability can be made. Estimates of environmental liabilities are based on a variety of matters, including, but not limited to, the stage of investigation, the stage of the remedial design, evaluation of existing remediation technologies, and presently enacted laws and regulations. In future periods, a number of factors could significantly impact any estimates of environmental remediation costs.

Asset Retirement Obligations

The Company accounts for asset retirement obligations by recognizing the fair value of the related liability for an asset retirement obligation in the period in which it is incurred, if a reasonable estimate of fair value can be determined. At ~~March~~ June 3130, 2021, the Company had combined asset retirement obligations of $0.8 million, which are associated with the estimated costs to remove/remediate asbestos materials from various locations. The initial measurement of the asset retirement obligations was recorded as a liability at its fair value, with an offsetting asset retirement cost recorded as an increase to the related property and equipment, which is being depreciated using a systematic and rational method similar to the approach used for the associated property and equipment. The Company also has an asset retirement obligation with an offset to goodwill as the estimated costs were derived from known required remediation obligations as of the acquisition date of Interface Performance Materials on August 31, 2018. The Company has been performing ongoing remediation activity, which offsets the liability associated with the respective asset retirement obligations.

1917. STOCKHOLDERS' EQUITY AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

~~16.~~Changes ~~STOCKHOLDERS~~in stockholders' ~~EQUITY~~equity ~~AND~~for ~~ACCUMULATED~~the ~~OTHER~~three ~~COMPREHENSIVE~~and ~~INCOME~~six-month ~~(LOSS)~~periods ended June 30, 2021 and 2020 were as follows:

Changes in stockholders' equity for the three-month periods ended March 31, 2021 and 2020 were as follows:


	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Beginning Balance	$	264,550	$	253,577	$	257,696	$	318,420
Comprehensive income (loss)	8,737		(1,396)		14,200		(66,997)
Stock repurchased	—		—		(201)		(8)
Stock issued under employee plans	151		1		793		32
Stock-based compensation expense	1,363		720		2,313		1,455
Stock issued to directors	398		360		398		360




Ending Balance	$	275,199	$	253,262	$	275,199	$	253,262

	For the Three Months Ended March 31,
In thousands	2021		2020
Beginning Balance	$	257,696	$	318,420
Comprehensive income (loss)	5,463		(65,601)
Stock repurchased	(201)		(8)
Stock issued under employee plans	642		31
Stock-based compensation expense	950		735
Ending Balance	$	264,550	$	253,577

The components of accumulated other comprehensive income (loss) are shown below:

	For the Three Months Ended March 31,
In thousands	2021		2020
Foreign currency translation:
Beginning balance	$	(3,514)	$	(18,022)
Net gain (loss) on foreign currency translation	(4,048)		(9,957)
Amounts reclassified from accumulated other comprehensive income (loss) (1)	1,034		—
Other comprehensive income (loss), net of tax	(3,014)		(9,957)
Ending balance	(6,528)		(27,979)
Pension and other postretirement benefit plans:
Beginning balance	(5,608)		(3,080)
Amounts reclassified from accumulated other comprehensive income (loss) (2)	365		331
Other comprehensive income (loss), net of tax	365		331
Ending balance	(5,243)		(2,749)
Unrealized loss on derivative instruments:
Beginning balance	(9,220)		(4,877)
Net gain (loss) on derivative instruments (3)	2,400		446
Amounts reclassified from accumulated other comprehensive income (loss) (4)	618		—
Other comprehensive income (loss), net of tax	3,018		446
Ending balance	(6,202)		(4,431)
Total accumulated other comprehensive income (loss)	$	(17,973)	$	(35,159)

(1)For the three-month period ended March 31, 2021, the amount represents the recognition of the accumulated loss on foreign currency translation relating to the divestiture of the German Facility in the Performance Materials segment, net of tax impact of $0.2 million. This is included in (Gain) loss on the sale of a business on the Company’s Condensed Consolidated Statements of Operations.

(2)For the three-month period ended March 31, 2021, the amount primarily represents the recognition of the accumulated loss on the defined pension plan relating to the divestiture of the German Facility in the Performance Materials segment. This amount was $0.4 million, net of tax impact of $0.1 million, and is included in (Gain) loss on the sale of a business on the Company’s Condensed Consolidated Statements of Operations. For the three-month period ended March 31, 2020, the amount primarily represents the settlement of the ISS Pension Plan. This amount was $0.4 million, net of tax impact of $0.1 million. The amounts for the three-month periods ended March 31, 2021 and 2020 also include routine amortization of actuarial gains and losses in net periodic benefit cost of less than $0.1 million, net of tax impact of less than $0.1 million.

(3)Amount represents unrealized gains (losses) on the fair value of hedging activities, net of tax impact of $0.7 million and $0.1 million for the three-month periods ended March 31, 2021 and 2020, respectively.

(4)Amounts represents the impact of de-designation of the interest rate swap agreement, net of tax impact of $0.2 million, for the three-month period ended March 31, 2021.

17. SUBSEQUENT EVENTS

On April 20, 2021, the Company's Board of Directors approved a Share Repurchase Program authorizing the repurchase, from time to time at the Company's discretion, of up to an aggregate of $30.0 million of common stock, par value $0.01 per share, of the Company. See Note 9, "Stock Repurchases," in these Notes to Condensed Consolidated Financial Statements for additional information.

The components of accumulated other comprehensive income (loss) are shown below:


	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Foreign currency translation:
Beginning balance	$	(6,528)	$	(27,979)	$	(3,514)	$	(18,022)
Net gain (loss) on foreign currency translation	3,060		5,146		(988)		(4,811)
Amounts reclassified from accumulated other comprehensive income (loss) (1)	—		—		1,034		—
Other comprehensive income (loss), net of tax	3,060		5,146		46		(4,811)
Ending balance	(3,468)		(22,833)		(3,468)		(22,833)

Pension and other postretirement benefit plans:
Beginning balance	(5,243)		(2,749)		(5,608)		(3,080)
Amounts reclassified from accumulated other comprehensive income (loss) (2)	22		—		387		331
Other comprehensive income (loss), net of tax	22		—		387		331
Ending balance	(5,221)		(2,749)		(5,221)		(2,749)

Unrealized loss on derivative instruments:
Beginning balance	(6,202)		(4,431)		(9,220)		(4,877)
Net gain (loss) on derivative instruments (3)	(696)		(1,082)		1,704		(636)
Amounts reclassified from accumulated other comprehensive income (loss) (4)	571		397		1,189		397
Other comprehensive income (loss), net of tax	(125)		(685)		2,893		(239)
Ending balance	(6,327)		(5,116)		(6,327)		(5,116)

Total accumulated other comprehensive income (loss)	$	(15,016)	$	(30,698)	$	(15,016)	$	(30,698)

(1)For the six-month period ended June 30, 2021, the amount represents the recognition of the accumulated loss on foreign currency translation relating to the divestiture of the German Facility in the Performance Materials segment, net of tax impact of $0.2 million. This is included in (Gain) loss on the sale of a business on the Company’s Condensed Consolidated Statements of Operations.

(2)For the three-month period ended June 30, 2021, the amount represents routine amortization of actuarial gains and losses in net periodic benefit cost, net of tax impact of less than $0.1 million. For the six-month period ended June 30, 2021, the amount primarily represents the recognition of the accumulated loss on the defined pension plan relating to the divestiture of the German Facility in the Performance Materials segment. This amount was $0.4 million, net of tax impact of $0.1 million, and is included in (Gain) loss on the sale of a business on the Company’s Condensed Consolidated Statements of Operations. For the six-month period ended June 30, 2020, the amount primarily represents the settlement of the ISS Pension Plan. This amount was $0.4 million, net of tax impact of $0.1 million. The amounts for the six-month periods ended June 30, 2021 and 2020 also include routine amortization of actuarial gains and losses in net periodic benefit cost of less than $0.1 million, net of tax impact of less than $0.1 million.

(3)Amount represents unrealized gains (losses) on the fair value of hedging activities, net of tax impact of $0.2 million and $0.3 million for the three-month periods ended June 30, 2021 and 2020, respectively and $0.5 million and $0.2 million for the six-month periods ended June 30, 2021 and 2020, respectively.

(4)Amount represents the impact of de-designation of the interest rate swap agreement, net of tax impact of $0.6 million and $0.1 million for the three-month periods ended June 30, 2021 and 2020, respectively and $0.4 million and $0.1 million for the six-month periods ended June 30, 2021 and 2020, respectively.

18. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the issuance date of these financial statements. No material subsequent events were identified that require disclosure.


Item 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are not guarantees of future performance and involve risks and uncertainties that could cause actual results to materially differ from those projected. Refer to the "Forward-Looking Statements" section of this MD&A, Part II, Item 1A - Risk Factors of this Form 10-Q, and Part I, Item IA - Risk Factors of the Company's Annual Report on Form 10-K for the year ended December 31, 2020 for a discussion of these risks and uncertainties.

OVERVIEW AND OUTLOOK

Business

Lydall, Inc. and its subsidiaries (collectively, “Lydall”, "“the Company”, “we”, and “our”) design, manufacture, and market specialty filtration and advanced materials solutions that contribute to a cleaner, quieter, and safer world. The Company operates in a variety of attractive end markets supported by global megatrends such as the demand for indoor air quality and lower emissions, near sourcing of supply chains, and vehicle electrification redefining safety and sound. Lydall solves our customers' problems culminating in demanding applications, including: high performance air and liquid specialty filtration, molecular filtration, engineered fiber based sealing solutions, specialty insulation including high temperature and ultra-low temperature (cryogenic) insulation, needle punch nonwoven materials for industrial, geosynthetic, medical and other specialty applications; and thermal management and acoustical products and solutions to assist in the reduction of noise, vibration, and harshness. The Company principally conducts its business through three reportable segments: Performance Materials, Technical Nonwovens, and Thermal Acoustical Solutions.

The Performance Materials segment is a worldwide leader in delivering innovative specialty filtration, sealing, and advanced materials solutions for demanding applications. Specifically, the segment’s offerings include: (1) specialty filtration media solutions for a variety of applications in the global air and liquid filtration market such as personal protective equipment (“PPE”), indoor air quality, life sciences, transportation, and industrial applications; (2) gasket materials and parts for a broad range of applications in the global sealing market for parts in large/heavy duty equipment for commercial, industrial, agriculture and construction end markets; and, (3) advanced materials that include highly engineered insulation solutions for cryogenic storage of liquid hydrogen/nitrogen, energy storage, and advanced composite materials for aerospace and defense applications.

The Thermal Acoustical Solutions segment offers a full range of innovative engineered products tailored for the transportation and industrial sectors to shield sensitive components from high heat, improve exhaust gas treatment and lower harmful emissions as well as assist in the reduction of noise, vibration, and harshness (NVH).

Recent Developments

InMerger early 2020, the World Health Organization (“WHO”) characterized COVID-19 as a pandemic. In an effort to contain COVID-19 and slow its spread, governments throughout the world, including global and regional markets served by the Company, enacted various measures, including orders to close "non-essential" businesses, isolate residents in their places of residence, and practice social distancing. These actions and the global health crisis caused by COVID-19 has, and may continue to, adversely impact global business activity and our financial performance. Despite the recent administration of vaccines, the outbreak continues to have an adverse impact on parts of our business including cases of absenteeism and certain supply chain challenges. The Company has implemented changes to help ensure the safety and health of all its employees and continues to assess and update its business continuity plans in the context of this pandemic. The Company will continue its efforts to maintain a safe and healthy work environment, including and continuing to allow remote working arrangements where it is appropriate.Agreement

~~Stronger~~As ~~demand~~previously inannounced, on June 21, 2021, the ~~auto~~Company entered into an Agreement and ~~industrial~~Plan ~~markets~~of isMerger ~~causing~~(the ~~higher~~“Merger ~~commodity~~Agreement”) ~~prices~~by ~~for~~and ~~aluminum~~among the Company, ~~aluminized~~Unifrax ~~steel~~Holding Co. (“Parent”), ~~polypropylene~~Outback Merger Sub, Inc., a Delaware corporation and ~~microfiber~~wholly ~~glass~~owned subsidiary of Parent (“Merger Sub”), and solely with respect to certain payment obligations of Parent thereunder, Unifrax I LLC (“Unifrax”). ~~Supply~~Subject ~~chain~~to ~~issues~~the terms and conditions of the Merger Agreement, ~~including~~Merger ~~transportation~~Sub will be merged with and ~~logistics~~into ~~problems~~the Company (the “Merger”), ~~are~~with ~~causing~~the ~~periodic~~Company surviving the Merger as a wholly owned subsidiary of Parent. Unifrax is a global provider of specialty materials focused on thermal management, specialty filtration, battery materials, emission control, and fire protection applications and is backed by Clearlake Capital Group, L.P.

22Subject to the terms and conditions of the Merger Agreement, each share of common stock, par value $0.01 per share, of the Company (the “common stock”) (other than shares of common stock held by the Company as treasury stock) issued and outstanding immediately prior to the effective time of the Merger (the “Effective Time”) (other than dissenting shares) will be

supply chain disruptions, and in selected cases, material shortages in various markets served by the Company. Although the Company does not foresee a material adverse impact on the Company’s financial performance for the remainder of 2021, given the dynamic nature of this situation, we cannot estimate with certainty the future impacts from higher commodity prices and the COVID-19 pandemic on our financial condition, results of operations or cash flows.24

converted into the right to receive $62.10 per share in cash, without interest. If the Merger is consummated, the Company’s securities will be de-listed from the New York Stock Exchange (the “NYSE”) and de-registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as practicable following the Effective Time.

COVID-19 Pandemic

In early 2020, the World Health Organization (“WHO”) characterized COVID-19 as a pandemic. In an effort to contain COVID-19 and slow its spread, governments throughout the world enacted various measures, including orders to close "non-essential" businesses, for residents to shelter in place, and to practice social distancing. These actions and the global health crisis caused by COVID-19 has adversely impacted, and may continue to adversely impact, global business activity and the Company's financial performance. Despite the recent availability of vaccines, a level of risk and uncertainty remains that the residual effects of the pandemic, such as supply chain disruptions, could have an adverse impact in certain areas of our business. The Company has implemented changes to help ensure the safety and health of all its employees and continues to assess and update its business continuity plans in the context of this pandemic. The Company will continue its efforts to maintain a safe and healthy work environment, including the continuation of remote working arrangements, where deemed appropriate.

Among other factors, a strong rebound in demand in many end markets in conjunction with supply disruptions is causing higher commodity prices for certain of the Company's primary raw material inputs including, but not limited to, aluminum, aluminized steel, polypropylene, and microfiber glass. Supply chain issues, including transportation and logistics problems, are causing periodic supply chain disruptions, and in selected cases, material shortages in various markets served by the Company. These issues have caused an adverse impact on the Company’s financial performance. Given the dynamic nature of the situations, we cannot estimate with certainty the future impacts from higher commodity prices, supply chain issues and the COVID-19 pandemic on our financial condition, results of operations or cash flows.

Performance Materials Developments

COVID-19

The Performance Materials segment did not experience significant business disruption as a result of the COVID-19 pandemic during the first quarter of 2021. The segment’s facilities remain open in all regions in which the segment operates.

Market Trends

Demand for the Performance Materials segment’s filtration and sealing and advance solutions products continue to be strong. However, ~~however~~in the second quarter of 2021, the segment isexperienced ~~experiencing~~some supply chain challenges for ~~key~~select raw materials, ~~primarily~~used ~~impacting~~in ~~sealings~~sealing products~~. In addition~~, ~~the~~and ~~segment~~higher ~~is seeing significant~~ commodity ~~price~~prices ~~increases~~ for polypropylene and other fibers used in ~~its~~ filtration products. Although the Company expects this trend to continue through 2021, the Company ~~anticipates~~is ~~the~~working ~~ability~~ to ~~pass~~mitigate inflationary costs through ~~most~~customer ofpricing ~~the~~where ~~higher~~contracts ~~costs~~allow infor ~~customer~~such ~~pricing~~increases to be passed on to customers.

Other

As previously disclosed, the Performance Materials segment undertook actions to exit underperforming facilities in Europe. In ~~March~~June 2021, the Company ~~entered~~reached ~~into~~ an agreement to sell ~~its~~an ~~German~~operating facility in the Netherlands. The sale was completed inon ~~March~~July ~~2021 and~~9, ~~as a result, the Company recorded a loss in the amount of $0~~2021.~~7 million.~~ See Note 113, “~~Restructuring~~Divestiture Activities",” in the Notes to Condensed Consolidated Financial Statements for additional information.

Technical Nonwovens Developments

COVID-19

The Technical Nonwovens segment did not experience significant business disruptions as a result of the COVID-19 pandemic during the first quarter of 2021. The segment’s facilities remain open in all regions in which the segment operates. A small number of suppliers have issued force majeure notifications, however, the impact on the segment’s financial results have not been material.

Market Trends

Demand for the Technical Nonwovens segment’s geosynthetic, medical, and filtration products ~~are~~is strong. The segment has experienced lower demand in North America for nonwoven products used in automotive applications as global semiconductor chip shortages impact the automotive industry~~'s customers~~. However, the Company does not expect these issues to have a material adverse impact on the ~~Company~~segment’s financial performance in 2021. InThe ~~addition, the~~ segment iscontinues ~~seeing~~to see significant commodity price increases ~~for~~on polypropylene ~~used~~fibers inand ~~geosynthetic~~other ~~and~~raw ~~filtration~~material ~~products~~fibers as well as price increases around freight and logistics. Although the Company expects this trend to continue through 2021, the Company anticipates the ability to ~~pass~~mitigate ~~through~~these ~~the~~ higher costs inprimarily through increased customer pricing.

Thermal Acoustical Solutions Developments

COVID-19

As previously disclosed, the Thermal Acoustical Solutions segment’s North Carolina facility experienced labor shortages and operational inefficiencies directly related to COVID-19 in 2020. The segment has seen a decline in COVID-19 related illnesses during the first quarter of 2021 and, as a result, labor and overtime costs have begun to decline compared to the higher costs incurred in 2020. The segment’s facilities remain open in all regions in which the segment operates.

Market Trends

Customer demand continues to be strong for the Thermal Acoustical Solutions segment,. ~~however~~However, customer orders from month to month have been volatile as certain automotive ~~OEM~~ customers temporarily slow or halt production of certain vehicle models due to a global semiconductor chip shortage negatively impacting the automotive industry and its supply chain. As a result, customer orders have been delayed adversely impacting the segment's financial performance during the second quarter. Raw material shortages affecting the automotive industry could continue to have a negative impact on the segment's financial performance for the remainder of 2021.

23Consistent with the Company’s other segments, the Thermal Acoustical Solutions segment is experiencing higher commodity pricing, primarily for aluminum, aluminized steel, and polyester fiber. The segment is able to pass through the higher commodity costs for certain customers; however, commodity price increases have had, and could continue to have, an adverse impact on the segment’s financial performance in 2021 to the extent these costs cannot be passed on to customers.

~~models~~SECOND ~~due~~QUARTER to material supply shortages. Consistent with the Company’s other segments, the Thermal Acoustical Solutions segment is experiencing higher commodity pricing, specifically for aluminum, aluminized steel, and polyester fiber. The segment is able to pass through the higher commodity costs for certain customers; however, commodity price increases could have a moderate adverse impact on the segment’s financial performance in 2021 ~~to the extent these costs cannot be passed on to customers.~~ HIGHLIGHTS

~~FIRST~~Below ~~QUARTER~~are financial performance highlights for the three-month period ended June 30, 2021 ~~HIGHLIGHTS~~compared to the three-month period ended June 30, 2020:

Below are financial performance highlights for the three-month period ended March 31, 2021 compared to the three-month period ended March 31, 2020:

The chart below reflects the change in consolidated net sales by segment:

Consolidated net sales were $~~227~~221.17 million in the ~~first~~second quarter of 2021, compared to $~~200~~146.52 million in the ~~first~~second quarter of 2020, resulting in an increase of $2675.6 million, or 1351.37%,. The increase was primarily driven by $1439.14 million inof higher sales in the Company's ~~Performance~~Thermal ~~Materials~~Acoustical Solutions segment, ~~resulting~~mainly ~~from~~due ~~higher~~to improved demand infor ~~filtration~~ products ~~for~~across ~~face~~all ~~mask~~regions ~~media~~as ina ~~response~~result toof the ~~COVID-19 pandemic combined with strong demand in sealing markets. In addition, the Thermal Acoustical Solutions segment saw~~ continued ~~strength~~recovery infrom the ~~automotive~~COVID-19 ~~market led by higher parts sales of $9~~pandemic.2 ~~million~~Additionally, ~~partially offset by lower tooling sales, and~~ the Technical Nonwovens segment experienced ~~an increase in sales driven by higher demand in industrial filtration markets. The change in consolidated net sales is summarized in the following chart:~~

2426

~~(1)Parts~~an ~~volume~~increase ~~and~~in ~~pricing~~sales ~~change~~of ~~includes a~~ $020.64 million ~~decrease~~led by higher demand in ~~net~~industrial ~~sales~~filtration ~~from~~markets. ~~the~~The ~~German~~Performance ~~facility~~Materials ~~sold~~segment onexperienced ~~March~~an ~~11,~~increase ~~2021~~in ~~between~~sales ~~comparable~~of ~~periods~~$18.7 inmillion ~~the~~that ~~first~~was ~~quarters~~primarily ofattributable ~~2021~~to continued demand in sealing markets and ~~2020.~~specialty filtration products.

~~Consolidated~~The ~~operating~~change ~~income was $12.1 million for the three-month period ended March 31, 2021 compared to an operating loss of $(55.6) million~~ in ~~the~~consolidated ~~corresponding~~net ~~period~~sales inis ~~2020.~~summarized ~~Operating income for the three-month period ended March 31, 2020 was adversely impacted by goodwill and other long-lived asset impairment charges~~ in the ~~Performance~~following Materials segment of $61.1 million. After adjusting for the impairment charges, operating income increased $6.6 million primarily due to an increase in operating income of $11.1 million in the Performance Materials segment, driven by favorable product mix from continued demand for face mask media and stronger demand in the sealing and cryogenics markets. Operating income for the Technical Nonwovens segment increased $1.3 million primarily due to the absence of a $0.9 million inventory charge included in the first quarter of 2020 related to a flood in one of its European facilities. Offsetting these increases was a $4.0 million decrease in operating income in the Thermal Acoustical Solutions segment primarily due to higher labor and outsourcing costs as a result of workforce shortages related to COVID-19.chart:

(1) Includes Parts volume and pricing change of $69.2 million and Tooling Sales of $0.4 million between comparable periods in the second quarters of 2021 and 2020.

Consolidated operating income was $9.4 million for the three-month period ended June 30, 2021 compared to an operating loss of $(1.7) million in the corresponding period in 2020. Operating income for the three-month period ended June 30, 2020 was adversely impacted by COVID-19-related plant shutdowns in the Company's Thermal Acoustical Solutions business and lower production of the Company's industrial filtration products. The $11.1 million increase was primarily a result of higher operating income of $9.4 million in the Performance Materials segment, driven by a favorable product mix due to higher sales for specialty filtration products and sealing and insulation products. Operating income for the Thermal Acoustical Solutions segment increased $4.8 million mainly due to the recovery from COVID-19 related shutdowns during the second quarter of 2020. The Technical Nonwovens segment also experienced an increase in operating income with a $2.1 million improvement from the comparable period in 2020. The increase in Technical Nonwovens was primarily attributable to higher sales volume driven by the recovery from the COVID-19 pandemic.

The chart below reflects the change in consolidated operating income by segment:

Consolidated net income was $5.18 million, or $0.2832 per diluted share, for the three-month period ended ~~March~~June 3130, 2021 compared to a net loss of $(565.49) million, or $(30.2534) per diluted share, in the corresponding period in 2020.

CONSOLIDATED RESULTS OF OPERATIONS

All of the following tabular comparisons are for the three and six-month periods ended ~~March~~June 3130, 2021 and 2020, unless otherwise indicated.

Net Sales

	For the Three Months Ended March 31,
	For the Three Months Ended						For the Six Months Ended
In thousands	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Net sales	$	~~227~~221,~~099~~744		$	~~200~~146,~~527~~160		$	448,843		$	346,687
$ change	2675,~~572~~584			(1774,~~498~~651)			102,156			(92,149)
% change	1351.37		%	(833.08)		%	29.5		%	(21.0)		%

Net sales for the three-month period ended ~~March~~June 3130, 2021 increased by $2675.6 million, or 1351.37%, compared to the ~~first~~corresponding ~~quarter~~period ofin 2020. ~~This~~The increase was primarily driven by anhigher ~~increase~~net sales in ~~Performance~~the ~~Materials~~Thermal ~~segment~~Acoustical ~~sales~~Solutions segment of $1439.1 4 million, or 727.0%, of consolidated net sales, ~~related~~as toa ~~higher~~result ~~net~~of ~~sales~~improved indemand ~~the~~across ~~air~~all ~~filtration~~regions ~~market~~driven inby ~~response~~the toabsence ~~the~~of COVID-19-related ~~pandemic~~production ~~combined~~shutdowns ~~with~~in ~~strong~~the ~~demand~~prior ~~for advanced solutions and sealing products~~year. In addition, ~~Thermal~~the ~~Acoustical~~Technical ~~Solutions~~Nonwovens segment’s net sales increased $720.35 million, or 314.60%, of consolidated net sales, asmainly adue ~~result~~to ofhigher ~~stronger~~sales ~~automotive~~volume ~~demand.~~mostly Inseen ~~the~~in ~~first~~geosynthetics ~~quarter~~and ofindustrial ~~2020,~~air ~~the COVID-19 pandemic had a significant adverse impact on the Thermal Acoustical segment's sales~~filtration. The ~~Technical~~Company’s ~~Nonwovens~~Performance Materials segment net sales increased $418.3 7 million, or 212.18%, of consolidated net sales, ~~driven~~ primarily bydue ato ~~large~~favorable ~~increase~~product inmix, ~~China~~driven ~~sales~~by ~~due~~increased todemand ~~the~~for ~~absence~~sealing ofsolutions, ~~the~~higher ~~facility~~sales ~~ramp-downs~~for ~~that~~specialty ~~heavily~~filtration ~~impacted~~products, ~~the~~and ~~Company's~~stronger ~~China~~demand ~~operations~~for inspecialty ~~the first quarter of 2020~~insulation. Foreign currency translation ~~favorably~~positively impacted segment net sales by $79.5 8 million, or 36.87% ~~of consolidated net sales~~.

Net sales for the six-month period ended June 30, 2021 increased $102.2 million, or 29.5%, compared to the corresponding period in 2020. The increase was primarily driven by higher net sales in the Thermal Acoustical Solutions segment of $46.7 million, or 13.5%, of consolidated net sales. This increase was mainly due to higher sales volume driven by the continued recovery from the COVID-19 pandemic as the segment experienced temporary plant shutdowns across most of its operations during the comparable period in 2020. The Company’s Performance Materials segment net sales increased $32.8 million, or 9.5%, of consolidated net sales, primarily driven by higher sales for specialty filtration products and strong demand for sealing and specialty insulation products, as the segment continues to recover from the COVID-19 pandemic. In addition, the Technical Nonwovens segment’s net sales increased $24.7 million, or 7.1%, of consolidated net sales, mainly due to higher sales volume mostly in geosynthetics and industrial air filtration. Foreign currency translation positively impacted consolidated net sales by $17.3 million, or 5.0%.

Cost of Sales

	For the Three Months Ended March 31,
	For the Three Months Ended						For the Six Months Ended
In thousands	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Cost of sales	$	~~178~~173,~~550~~958		$	~~161~~117,~~959~~742		$	352,508		$	279,701
$ change	1656,~~591~~216			(1457,~~010~~794)			72,807			(71,804)
% change	1047.27		%	(832.09)		%	26.0		%	(20.4)		%

Cost of sales for the three-month period ended ~~March~~June 3130, 2021 increased by $1656.6 2 million, or 1047.27%, compared to the corresponding period in 2020. The increase was primarily driven by higher sales volume across all three segments., ~~The~~which ~~Company's~~was ~~Performance~~mainly ~~Materials~~attributable ~~segment~~to ~~experienced~~the anabsence ~~increase~~of inshutdowns ~~sales~~that ~~volume~~the Company endured during the comparable period in 2020 as a result of the ~~higher~~COVID-19 ~~demand~~pandemic. ~~for~~The ~~air~~Company's ~~filtration~~Thermal ~~and~~Acoustical ~~sealing~~Solutions ~~products~~segment inincurred ~~response~~higher tolabor ~~the~~costs ~~COVID-19~~due ~~pandemic~~to furloughs and anlayoffs ~~increase~~implemented during the comparable period in ~~labor~~2020 in addition to higher material costs, ~~principally~~primarily indriven ~~the~~by ~~Thermal~~aluminum ~~Acoustical~~prices. ~~Solutions~~The Performance Materials segment,’s cost of sales increased mainly as a result ~~COVID-19-related~~of ~~work~~higher ~~force~~sales ~~shortages~~volume coupled with an increase in labor and material costs. Similarly, the ~~early~~increase ~~part~~in ofthe ~~2021.~~Technical ~~These~~Nonwovens ~~increases~~segment’s ~~were~~cost ~~partially~~of ~~offset~~sales were driven by ~~favorable~~an ~~product~~increase ~~mix~~in sales volume mainly in ~~the~~geosynthetics ~~Performance~~and ~~Materials~~industrial ~~segment~~air filtration products in addition to higher material costs. Foreign currency translation increased cost of sales by $67.2 4 million, or 36.83%, in the ~~first~~three-month ~~quarter~~period ofended ~~2021~~June 30, ~~compared to the first quarter of 2020~~2021.

Cost of sales for the six-month period ended June 30, 2021 increased by $72.8 million, or 26.0%, compared to the corresponding period in 2020 as a result of the drivers noted above. Foreign currency translation increased cost of sales by $12.3 million, or 4.4%, in the six-month period ended June 30, 2021.

Gross Profit

	For the Three Months Ended March 31,
	For the Three Months Ended						For the Six Months Ended
In thousands	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Gross profit	$	4847,~~549~~786		$	3828,~~568~~418		$	96,335		$	66,986
$ change	919,~~981~~368			(316,~~488~~857)			29,349			(20,345)
% change	2568.92		%	(837.32)		%	43.8		%	(23.3)		%
% of net sales	21.46		%	19.24		%	21.5		%	19.3		%

Gross ~~margin~~profit for the three-month period ended ~~March~~June 3130, 2021 increased ~~220~~$19.4 million, ~~basis~~or ~~points~~68.2%, compared to the corresponding period in 2020. The Performance Materials segment favorably impacted consolidated gross ~~margin~~profit by ~~approximately 390 basis points~~$9.4 million, primarily due to ~~favorable product mix, driven by~~ higher ~~demand~~sales for ~~face~~specialty ~~mask~~filtration ~~media~~products inand ~~response~~strong todemand ~~the~~for ~~COVID-19 pandemic and higher~~ sealing and ~~advanced~~specialty ~~solutions~~insulation ~~sales~~products. ~~Lower~~The ~~fixed~~Thermal ~~costs~~Acoustical ~~driven~~Solutions bysegment ~~the 2020 restructuring activities~~ also ~~contributed~~drove topositive ~~the~~results ~~Performance~~with ~~Materials~~a ~~segment's gross margin improvement~~$6.7 million ~~The~~increase ~~Technical~~in ~~Nonwovens segment favorably impacted consolidated~~ gross ~~margin~~profit, bymostly ~~approximately~~attributable ~~20 basis points due~~ to the ~~absence~~continued ofrecovery afrom ~~$0.9 million inventory charge in~~ the ~~first~~COVID-19 ~~quarter~~pandemic, ofpartially ~~2020~~offset ~~related~~by tohigher amaterial ~~flood~~pricing mainly in ~~one~~aluminum ofand ~~its~~aluminized ~~European facilities~~steel. ~~The~~In ~~Thermal~~addition, ~~Acoustical~~the ~~Solutions~~Technical Nonwovens segment ~~adversely~~favorably impacted consolidated gross ~~margin~~profit by ~~approximately 190 basis points~~$3.4 million, primarily driven by ~~the~~ higher ~~labor~~demand ~~costs~~in ~~noted~~geosynthetics ~~above~~and industrial air filtration products.

26Gross profit for the six-month period ended June 30, 2021 increased $29.3 million, or 43.8%, compared to the corresponding period in 2020. The Performance Materials segment was the main driver with an increase of $20.6 million, resulting from higher sales driven by specialty filtration products and strong demand for sealing and specialty insulation products. The Technical Nonwovens and Thermal Acoustical Solutions segments also contributed favorably to consolidated gross profit with increases of $5.3 million and $3.7 million, respectively.

Selling, Product Development and Administrative Expenses

	For the Three Months Ended March 31,
	For the Three Months Ended						For the Six Months Ended
In thousands	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Selling, product development and administrative expenses	$	3538,~~633~~182		$	3330,~~027~~164		$	73,815		$	63,191
$ change	28,~~606~~018			21(1,932)			10,624			(1,911)
% change	726.96		%	0(6.10)		%	16.8		%	(2.9)		%
% of net sales	1517.72		%	1620.56		%	16.4		%	18.2		%

Selling, product development and administrative expenses for the three-month period ended March 31, 2021 increased $2.6 million, but decreased 80 basis points as a percentage of consolidated net sales, compared to the corresponding period in 2020. The increase in selling, product development and administrative expenses were driven by higher compensation-related expenses of $2.8 million, higher consulting costs of $2.1 million, and an increase in other general administrative costs of $0.6 million. These increases were partially offset by lower corporate strategic initiatives expenses of $1.8 million, and a decrease in intangible assets amortization expense of $1.1 million.29

Selling, product development and administrative expenses for the three-month period ended June 30, 2021 increased $8.0 million, or 26.6%, compared to the corresponding period in 2020. The increase was driven by higher compensation-related expenses of $4.2 million, higher expenses related to corporate strategic initiatives of $2.5 million, primarily relating to the pending merger, an increase in consulting costs of $0.8 million, and an increase in other general administrative costs of $1.5 million. These increases were partially offset by a decrease in intangible assets amortization expense of $1.0 million.

Selling, product development and administrative expenses for the six-month period ended June 30, 2021 increased $10.6 million, or 16.8%, compared to the corresponding period in 2020. The increase was driven by higher compensation-related expenses of $7.0 million, higher consulting expenses of $2.9 million, and increases of $0.7 million, $0.6 million, $1.5 million in corporate strategic initiatives expenses, computer maintenance and support, and other general administrative costs, respectively. These increases were partially offset by a decrease in intangible assets amortization expense of $2.1 million.

Impairment of Goodwill and Other Long-Lived Assets

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Impairment of goodwill and other long-lived assets	$	—	$	~~61,109~~—	$	—	$	61,109

The Company recorded a goodwill impairment charge of $48.7 million in the Performance Materials segment during the three-month period ended March 30, 2020 due to lower demand in automotive and other end markets as a result of the COVID-19 pandemic. In addition, as a result of the COVID 19 pandemic and the Company's action plan to address the associated risks, the Company accelerated certain strategic actions. One such action was a review of an underperforming European plant within the Performance Materials segment. As a result of a strategic shift regarding this plant, the Company performed an impairment assessment on the long-lived assets of the plant, which resulted in a long-lived asset impairment charge of $12.4 million during the three-month period ended March 31, 2020.

Restructuring Expenses

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Restructuring expenses	$	~~777~~190	$	—	$	967	$	—

In the ~~first~~three ~~quarter~~and ofsix-month periods ended June 30, 2021, the Company recorded pre-tax restructuring charges of $0.8 2 million and $1.0 million, respectively, primarily consisting of severance costs and legal expenses.

(Gain) Loss On The Sale Of A ~~Businesses~~Business

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
(Gain) loss on the sale of a business	$	~~698~~266	$	—	$	964	$	—

In the ~~first~~three-month ~~quarter~~period ofended March 31, 2021, the Company entered into an agreement to sell a facility in Germany, which closed on March 11, 2021. The Company agreed to pay $1.8 million (€1.5 million) to the buyer and provide $2.23 million (€1.9 million) in additional funding, net of cash and certain net working capital adjustments, to cover pension and restructuring liabilities recorded in 2020. As a result of the sale of the business, the Company recorded a pre-tax loss of $0.73 million and $1.0 million for the three-month and six-month periods ending June 30, 2021, respectively. The final consideration and loss are subject to a working capital adjustment expected to be settled in 2022.

Employee Benefit Plans Settlement Expenses

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Employee benefit plans settlement expenses	$	—	$	~~385~~—	$	—	$	385

In the first quarter of 2020, the Company settled the pension obligation of the Interface Sealing Solutions, Inc. Pension Plan through lump sum distributions to participants or by irrevocably transferring pension liabilities to an insurance company through the purchase of a group annuity contract. The settlement, funded with pension plan assets, resulted in a non-cash settlement expense of $0.4 million in the first quarter of 2020 related to the recognition of accumulated deferred actuarial losses.30

In the three-month period ended March 31, 2020, the Company settled the pension obligation of the Interface Sealing Solutions, Inc. Pension Plan through lump sum distributions to participants or by irrevocably transferring pension liabilities to an insurance company through the purchase of a group annuity contract. The settlement, funded with pension plan assets, resulted in a non-cash settlement expense of $0.4 million in the first quarter of 2020 related to the recognition of accumulated deferred actuarial losses.

Interest Expense

	For the Three Months Ended March 31,
	For the Three Months Ended						For the Six Months Ended
In thousands	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Interest expense	$	32,~~448~~414		$	24,~~857~~476		$	5,862		$	7,333
Weighted average interest rate during the year	54.14		%	45.42		%	3.7		%	4.8		%

The ~~increase~~decrease in interest expense for the three and six-month period ended ~~March~~June 3130, 2021 compared to the corresponding ~~period~~periods in 2020 was primarily due to ~~higher~~lower interest rates ~~related~~as toa ~~the~~result ~~amendment~~ of the ~~2018~~newly ~~Amended~~executed ~~Credit~~credit ~~Agreement~~agreement in the ~~second~~Company ~~quarter~~entered ofinto ~~2020,~~effective ~~partially~~April ~~offset~~26, by2021. ~~reduction~~For toadditional ~~interest~~information, ~~expense~~see ~~due~~Note to7, ~~the~~“Long-Term ~~favorable~~Debt ~~interest~~and ~~rate~~Financing ~~differential~~Arrangements,” ~~between~~in the ~~U.S.~~Notes ~~dollar and Euro related~~ to ~~the~~Condensed ~~net~~Consolidated ~~investment~~Financial ~~hedge the company entered into in 2019~~Statements.

Other Income and Expense

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Other expense (income), net	$	86206	$	~~(418)~~248	$	292	$	(170)

Other expense (income), net, was ~~unfavorable~~favorable for the three-month period ended ~~March~~June 3130, 2021 and unfavorable for the six-month period ended June 30, 2021, compared to the corresponding periods in 2020. The fluctuations of each period were primarily due to the impact of foreign currency ~~losses~~translation ~~recognized~~ on the revaluation of cash, trade payables and receivables, and intercompany loans denominated in currencies other than the functional currencies of the Company's subsidiaries.

Effective Income Tax Rate

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
	2021		2020
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Effective income tax rate	3513.79	%	39.52	%	25.8	%	4.0	%

For the three-month period ended ~~March~~June 3130, 2021, the Company's effective tax rate was 3513.79% compared to an effective tax rate of 39.52% for the three-month period ended ~~March~~June 3130, 2020. For the three-month period ended ~~March~~June 3130, 2021, the rate was ~~negatively~~positively impacted by $0.54 million ~~due~~related to aaccounting ~~change~~method inchanges ~~assertion~~and ~~on unremitted foreign earnings,~~ $0.42 million related to foreign earnings taxed at higher rates,. These ~~and~~were partially offset by $0.23 million of valuation allowance activity. For the three-month period ended ~~March~~June 3130, 2020, the ~~Company~~rate ~~had~~was anegatively ~~pre-tax~~impacted ~~loss~~by ~~primarily~~valuation ~~resulting~~allowance ~~from~~activity ~~an impairment charge~~ of $610.15 million. ~~The~~and ~~impairment~~a ~~charge~~foreign ~~significantly~~withholding ~~impacted the Company's effective~~ tax ~~rate~~liability asof $480.74 million ~~of the impairment charge related to non-deductible goodwill~~, resulting in a lower effective tax rate ~~for the first quarter of 2020~~ when ~~the Company was~~ in a pre-tax loss position. ~~Additionally, the effective rate, for the first quarter of 2020, was negatively impacted by valuation allowance activity of $0.3 million.~~

28For the six-month period ended June 30, 2021, the Company's effective tax rate was 25.8% compared to an effective tax rate of 4.0% for the six-month period ended June 30, 2020. For the six-month period ended June 30, 2021, the rate was negatively impacted by $0.6 million due to a change in assertion on unremitted foreign earnings and $0.5 million of valuation allowance activity. These were partially offset by a benefit of $0.4 million related to accounting method changes. For the six-month period ended June 30, 2020, the Company had a pre-tax loss primarily resulting from impairment charges of $61.1 million. The impairment charges significantly impacted the Company's effective tax rate because $48.7 million of the impairment charges related to non-deductible goodwill, resulting in a low effective tax rate for the six-month period ended June 30, 2020 when in a pre-tax loss position. Additionally, the effective rate was negatively impacted by valuation allowance activity of $0.7 million.

SEGMENT RESULTS

The following tables present segment net sales and operating income (loss) for the primary product categories for the three and six-month periods ended ~~March~~June 3130, 2021 and 2020.

Net sales by segment:

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Performance Materials Segment (1),(2):
Filtration Products	$	34,~~346~~066	$	2529,~~887~~636	$	68,412	$	55,523
Sealing and Advanced Solutions Products	4443,~~987~~120		3928,~~333~~837		88,107		68,170
Performance Materials Segment net sales	7977,~~333~~186		6558,~~220~~473		156,519		123,693
Technical Nonwovens Segment:
Industrial Filtration Products	3635,~~401~~411		3129,~~369~~413		71,812		60,782
Advanced Materials Products (2)	2537,~~274~~068		2622,~~034~~594		62,342		48,628
Technical Nonwovens Segment net sales	6172,~~675~~479		5752,~~403~~007		134,154		109,410
Thermal Acoustical Solutions Segment:
Parts	8671,~~494~~222		7732,~~321~~448		157,716		109,769
Tooling	45,~~550~~636		65,~~440~~000		10,186		11,440
Thermal Acoustical Solutions Segment net sales	9176,~~044~~858		8337,~~761~~448		167,902		121,209
Eliminations and Other (2)	(4,~~953~~779)		(51,~~857~~768)		(9,732)		(7,625)
Consolidated Net Sales	$	~~227~~221,~~099~~744	$	~~200~~146,~~527~~160	$	448,843	$	346,687

Operating income (loss) by segment:

	For the Three Months Ended March 31,
	For the Three Months Ended				For the Six Months Ended
In thousands	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Performance Materials (1),(3)	$	1514,~~296~~853	$	~~(56~~5,~~941)~~443	$	30,149	$	(51,498)
Technical Nonwovens (4)	58,~~104~~765		36,~~813~~684		13,869		10,497
Thermal Acoustical Solutions	(1,~~674~~500)		5(6,~~628~~285)		174		(657)
Corporate Office Expenses	(912,~~935~~704)		(87,~~068~~588)		(22,639)		(15,656)
Consolidated Operating Income (Loss)	$	129,~~139~~414	$	(551,~~568~~746)	$	21,553	$	(57,314)

Filing Compare · LYDALL INC /DE/