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 Quarter Ended June 30, 1996
Commission File Number 0-10436
L. B. Foster Company
(Exact name of registrant as specified in its charter)
Delaware 25-1324733
(State of Incorporation) (I.R.S. Employer Identification No.)
415 Holiday Drive, Pittsburgh, Pennsylvania 15220
(Address of principal executive offices) (Zip Code)
(412) 928-3417
(Registrant's telephone number, including area code)
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 X No
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable date.
Class Outstanding at July 24, 1996
Class A Common Stock, Par Value $.01 9,952,738 Shares
L. B. FOSTER COMPANY AND SUBSIDIARIES
INDEX
PART I. Financial Information Page
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of Income 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. Other Information
Item 4. Results of Votes of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 14
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
June 30, December 31,
1996 1995
ASSETS
Current Assets:
Cash and cash equivalents $1,537 $1,325
Accounts and notes receivable (Note 3):
Trade 49,642 48,166
Other 249 111
49,891 48,277
Inventories (Note 4) 43,577 40,304
Current deferred tax assets 1,005 1,005
Other current assets 598 831
Property held for resale 2,961 985
Total current assets 99,569 92,727
Property, Plant & Equipment-At Cost 41,855 43,561
Less Accumulated Depreciation (20,677) (20,956)
21,178 22,605
Property Held for Resale 1,227 4,545
Deferred Tax Assets 952 2,018
Other Assets 3,024 2,528
TOTAL ASSETS $125,950 $124,423
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt $1,287 1,266
Short-term borrowings (Note 5) 12,235 9,750
Accounts payable 17,633 18,065
Accrued payroll and employee benefits
payable 2,606 2,682
Other current liabilities 1,523 3,105
Total current liabilities 35,284 34,868
Long-Term Debt 24,505 25,034
Other Long-Term Liabilities 1,453 1,348
Stockholders' Equity:
Class A Common stock 102 102
Paid-in capital 35,208 35,148
Retained earnings 29,955 28,480
Treasury stock (577) (577)
Total stockholders' equity 64,708 63,173
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $125,950 $124,423
See notes to Condensed Consolidated Financial Statements.
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
Three Months Six Months
Ended Ended
June 30, June 30,
1996 1995 1996 1995
Net Sales $64,758 $72,564 $113,061 $128,020
Costs and Expenses:
Cost of Goods Sold 56,565 64,816 98,668 113,848
Selling and Administrative
Expenses 5,610 5,741 11,013 10,962
Interest Expense 611 756 1,175 1,336
Other (Income) Expense (209) (256) (336) (252)
62,577 71,048 110,520 125,894
Income Before Income Taxes and
Cumulative Effect of Change in
Accounting Method 2,181 1,516 2,541 2,126
Income Taxes 926 (208) 1,066
Income Before Cumulative Effect of
Change in Accounting Method 1,255 1,724 1,475 2,126
Cumulative Effect of Change in
Accounting Method (Note 2) (219)
Net Income $1,255 $1,724 $1,475 $1,907
Earnings Per Common Share Before
Cumulative Effect of Change in
Accounting Method $0.13 $0.17 $0.15 $0.21
Earnings Per Common Share From
Cumulative Effect of Change in
Accounting Method (0.02)
Earnings Per Common Share (Note 6) $0.13 $0.17 $0.15 $0.19
Average Number of Common Shares
Outstanding 9,944 9,923 9,939 9,923
Cash Dividend per Common Share $ $ $ $
See Notes to Condensed Consolidated Financial Statements.
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Six Months
Ended June 30,
1996 1995
Cash Flows from Operating Activities:
Net Income $1,475 $1,907
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Deferred income taxes 1,066
Depreciation and amortization 1,608 1,578
Gain on sale of property, plant and equipment (413) (164)
Cumulative effect of change in accounting method 219
Change in Operating Assets and Liabilities:
Accounts receivable (1,614) (10,751)
Inventories (3,273) (5,338)
Property held for resale 1,342
Other current asset 233 (49)
Other non-current assets (578) (128)
Accounts payable-trade (432) 5,240
Accrued payroll and employee benefits (76) (503)
Other current liabilities (1,582) (524)
Other liabilities 105 91
Net Cash Provided by Operating Activities (2,139) (8,422)
Cash Flows from Investing Activities:
Proceeds from sale of property, plant and
equipment 1,580 2,351
Capital expenditures on property, plant
and equipment (1,129) (2,724)
Net Cash Provided (Used) by Investing Activities 451 (373)
Cash Flows from Financing Activities:
Proceeds from issuance of revolving credit
agreement borrowings 2,485 9,240
Exercise of stock options 60
Repayments of long-term debt (645) (366)
Net Cash Used by Financing Activities 1,900 8,874
Net Increase (Decrease) in Cash and Cash Equivalents 212 79
Cash and Cash Equivalents at Beginning of Period 1,325 1,180
Cash and Cash Equivalents at End of Period $1,537 $1,259
Supplemental Disclosures of Cash Flow Information:
Interest Paid $1,201 $1,444
Income Taxes Paid $241 $132
During 1996 and 1995, the Company financed the purchase of
certain capital expenditures totaling $137,000 and $2,371,000,
respectively, through the issuance of capital leases.
See Notes to Condensed Consolidated Financial Statements.
L. B. FOSTER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all estimates and adjustments (consisting
of normal recurring accruals) considered necessary for a fair
presentation have been included, however, actual results could
differ from those estimates. Operating results for the six
months ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31,
1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December
31, 1995.
2. ACCOUNTING PRINCIPLES
The Company adopted the provisions of the Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," in its financial statements for the year ended
December 31, 1995. The cumulative effect as of January 1, 1995,
of adopting Statement 121 decreased net income by $219,000, or
$0.02 per share.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement is effective for
fiscal years beginning after December 15, 1995. The Company
will continue to record stock-based compensation under the
provisions of APB 25, and will provide the disclosures and pro
forma results mandated by SFAS 123, for year end reporting.
3. ACCOUNTS RECEIVABLE
Credit is extended on an evaluation of the customer's financial
condition and, generally, collateral is not required. Credit
terms are consistent with industry standards and practices.
Trade accounts receivable at June 30, 1996 and December 31, 1995
have been reduced by an allowance for doubtful accounts of
$1,770,000 and $1,800,000, respectively. Bad debt expense was
($30,000) and $71,000 for the six month periods ended June 30,
1996 and 1995, respectively.
4. INVENTORIES
Inventories of the Company at June 30, 1996 and December 31,
1995 are summarized as follows (in thousands):
June 30, December 31,
1996 1995
Finished goods $ 31,658 $33,570
Work-in-process 12,116 6,687
Raw materials 2,864 2,659
Total inventories at current
costs: 46,638 42,916
(Less):
Current costs over LIFO
stated values (2,461) (2,012)
Reserve for decline in
market value of inventories (600) (600)
$43,577 $40,304
Inventories of the Company are generally valued at the lower of
last-in, first-out (LIFO) cost or market. Other inventories of
the Company are valued at average cost or market, whichever is
lower. An actual valuation of inventory under the LIFO method
can be made only at the end of each year based on the inventory
levels and costs at that time. Accordingly, interim LIFO
calculations must necessarily be based on management's estimates
of expected year-end levels and costs.
5. SHORT-TERM BORROWINGS
During 1995, the Company entered into an Amended and Restated Loan
Agreement with its banks. The agreement increased the borrowing
commitment to $45 million from $40 million, slightly reduced interest
rates and extended the term of the agreement to July 1, 1999.
Borrowings under the agreement are secured by accounts receivable
and inventory.
The agreement includes financial covenants requiring a minimum
net worth, and minimum levels for the fixed charge coverage ratio, the
leverage ratio and the current ratio. The agreement also restricts
dividends, investments, capital expenditures, indebtedness and
sales of certain assets.
6. EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income by
the average number of Class A common shares and common stock
equivalents outstanding during the quarterly periods ending June
30, 1996 and 1995 of approximately 9,944,000 and 9,923,000,
respectively.
Common stock equivalents are the net additional number of shares
which would be issuable upon the exercise of the outstanding
common stock warrants and common stock options, assuming that
the Company used the proceeds to purchase additional shares at
market value. Common stock equivalents had no material effect on
the computation of earnings per share for the periods ending
June 30, 1996 and 1995.
7. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is subject to laws and regulations relating to the
protection of the environment and the Company's efforts to
comply with increasingly stringent environmental regulations may
have an adverse effect on the Company's future earnings. While
it is not possible to quantify with certainty the potential
impact of actions regarding environmental matters, particularly
any future remediation and other compliance efforts, in the
opinion of management, compliance with the present environmental
protection laws will not have a material adverse effect on the
financial position, competitive position, or capital
expenditures of the Company.
The Company is subject to legal proceedings and claims which
arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to
these actions will not materially affect the financial position
of the Company.
At June 30, 1996, the Company had outstanding letters of credit
of approximately $856,000.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(Dollars in thousands)
Net Sales:
Rail Products $25,109 $30,263 $48,628 $51,393
Construction Products 23,663 25,482 39,681 44,697
Tubular Products 15,986 16,819 24,752 31,930
Total Net Sales 64,758 72,564 113,061 128,020
Gross Profit:
Rail Products 3,549 3,623 7,063 6,373
Construction Products 3,294 2,713 5,371 4,839
Tubular Products 1,350 1,412 1,959 2,960
Total Gross Profit 8,193 7,748 14,393 14,172
Expenses:
Selling and adminisitrative
expenses 5,610 5,741 11,013 10,962
Interest expense 611 756 1,175 1,336
Other (income) expense (209) (265) (336) (252)
Total Expenses 6,012 6,232 11,852 12,046
Income Before Income Taxes 2,181 1,516 2,541 2,126
Income Tax Expense (Benefit) 926 (208) 1,066
Income Before Cumulative Effect
of Change in Accounting Method 1,255 1,724 1,475 2,126
Cumulative Effect of Change
in Accounting Method (219)
Net Income $1,255 $1,724 $1,475 $1,907
Second Quarter 1996 Results of Operations
The net income for the 1996 second quarter was $1.3 million or
$0.13 per share on net sales of $65 million. This compares to a
1995 second quarter net income of $1.7 million or $0.17 per
share on net sales of $73 million.
Rail products' net sales in the 1996 second quarter of $25.1
million decreased 17% from the comparable period last year due
to unanticipated delays in the shipments of certain rail
products. Despite a substantial increase in fabricated products' sales,
construction products' second quarter net sales decreased 7%. The
decline was primarily attributable to the continued reduced availability
of piling products. Tubular products' net sales in the quarter were
$16.0 million or a decrease of 5%. Increases in coated pipe activity
and fosterweld sales were offset by the Company's withdrawal
from the warehouse pipe market. Changes in net sales are
primarily the result of changes in volume rather than changes in
prices.
The gross margin percentage for the total company in the 1996
second quarter increased to 13% from 11% in the 1995 second
quarter. Rail products' gross margin percentage increased to
14% due to higher margins in all major product areas. Construction
products' gross margin percentage increased to 14% due to higher
margins on fabricated products and a reduction in the sale of lower
margin piling products. The gross margin percentage for tubular
products did not change from the prior year second quarter.
Selling and administrative expenses decreased 2% in the 1996
second quarter from the same period last year. Operating income before
taxes increased 44% to $2.2 million from $1.5 million.
First Six Months of 1996 Results of Operations
Net income for the first six months of 1996 was $1.5 million or
$0.15 per share. This compares to a 1995 first six months net
income of $1.9 million or $0.19 per share. The restated 1995
results included a charge of $0.2 million relating to the
adoption of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
Rail products' net sales in the first half of 1996 declined 5%
from the first half of 1995 due to decreased billings in all but
new rail products. Construction products' net sales decreased
11% primarily due to the lack of availability of piling
products. Tubular products' net sales decreased 23% which
reflects the Company's withdrawal from the warehouse pipe market.
Changes in net sales are primarily the result of changes in volume
rather than changes in prices.
The gross margin percentage for the Company was 13% in the first
half of 1996 compared to 11% in the 1995 first half. Rail
products' gross margin percentage increased to 15% due to higher
margins in all major product areas. Construction products'
gross profit margin increased to 14% from 11% as a result of
higher margins on fabricated products and a reduction in the sale of
lower margin piling products. The gross margin percentage for tubular
products decreased to 8% due to lower margins on coated pipe products.
Selling and administrative expenses for the first six months of
1996 were relatively unchanged from the first six months of 1995.
Liquidity and Capital Resources
The Company's ability to generate internal cash flow
("liquidity") results from the sale of inventory and the
collection of accounts receivable. During the first six months
of 1996, the average turnover rate for inventory was relatively
unchanged from the prior year. The turnover rate for accounts
receivable during the first six months of 1996 was slightly
higher than during the same period of the prior year. Working
capital at June 30, 1996 was $64.3 million compared to $57.9
million at December 31, 1995.
During the first six months of 1996, the Company had capital
expenditures of $1.1 million. Capital expenditures in 1996 are
not expected to exceed $3.0 million and are anticipated to be
funded by cash flows from operations.
Total revolving credit agreement borrowings at June 30, 1996
were $32.2 million or an increase of $2.4 million from the end
of the prior year. At June 30, 1996, the Company had
approximately $11.9 million in available unused borrowing
commitment. Management believes its internal and external
sources of funds are adequate to meet anticipated needs.
Other Matters
The Company owns stock in a privately held short-line railroad.
The railroad's financial statements indicate a book value of approximately
$2.7 million for the stock held by the Company. The market value of
the stock is not readily determinable and, therefore, the investment
is recorded in the Company's accounts at its historical cost of $0.2
million. The Company has been advised that the railroad intends eventually
to sell this business. Although no assurances can be given as to timing
or results of this sale, the Company believes that the potential sales
price of the stock could significantly exceed $2.7 million.
The Company had previously decided to divest its Fosterweld
operations and is engaged in exclusive discussions with a potential
buyer concerning the sale of these assets. Although the outcome of
these discussions is uncertain, and various issues remain unresolved,
management believes that this transaction should be completed in 1996
and the Company will recognize a gain on the sale. The amount of gain
is uncertain at this time.
The Company sold its facility at Windsor, New Jersey, which had
fixed assets with a carrying value of $1.0 million. In February 1996,
the Company leased its Navasota, Texas pipe coupling facility to a third
party, with an option to purchase at $0.8 million.
Outlook
The Company's future operating results may be affected by a
number of factors. The Company is dependent upon a number of
major suppliers. If a supplier had operational problems or
ceased making material available to the Company, operations
could be adversely affected. The Company's operations are in
part dependent on governmental funding of infrastructure
projects. Significant changes in the level of government funding
of these projects could have a favorable or unfavorable impact
on the operating results of the Company.
Additionally, governmental actions concerning taxation, tariffs, the
environment or other matters could impact the operating results
of the Company. The Company's operations results may also be
affected by the weather.
Although backlog is not necessarily indicative of future
operating results, total Company backlog at June 30, 1996, was
approximately $93 million or 14% higher than at December 31,
1995 and 15% lower than at June 30, 1995. The decline in the 1996 rail
backlog reflects the partial shipment of the $23 million Port of
Los Angeles modernization contracts. The following table provides
the backlog by business segment.
Backlog
June 30, December 31,
1996 1995 1995
(Dollars in thousands)
Rail Products $46,035 $61,169 $43,879
Construction Products 30,068 28,072 28,239
Tubular Products 16,403 19,064 8,857
Total Backlog $92,506 $108,305 $80,975
PART II. OTHER INFORMATION
Item 4. RESULTS OF VOTES OF SECURITY HOLDERS
At the Company's annual meeting on May 8, 1996, the
following individuals were elected to the Board of
Directors:
For Withheld
Name Election Authority
L. B. Foster II 7,996,950 55,695
J. W. Puth 7,996,850 55,795
W. H. Rackoff 7,996,850 55,795
R. L. Shaw 7,996,850 55,795
J. W. Wilcock 7,996,786 55,859
Additionally, the shareholders voted to approve Ernst &
Young as the Company's independent auditors for the fiscal
year ended December 31, 1996. The following table sets
forth the results of the vote for independent auditors:
Against
For Approval Approval Abstained
8,009,478 31,620 11,547
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
Unless marked by an asterisk, all exhibits are incorporated
herein by reference:
3.1 Restated Certificate of Incorporation as amended to date filed
as Exhibit 3.1 to Form 10-Q for the quarter ended March 31,
1987.
3.2 Bylaws of the Registrant, as amended to date, filed as
Exhibit 3.2 to Form 10-K for the year ended December 31, 1993.
4.1 Amended and Restated Loan Agreement by and among the
Registrant and Mellon Bank, N.A., NBD Bank, and Corestates
Bank, N.A. dated as of November 1, 1995 and filed as Exhibit
4.1 to Form 10-K for the year ended December 31, 1995.
10.15 Lease between the Registrant and Amax, Inc. for manufacturing
facility at Parkersburg, West Virginia, dated as of
October 19, 1978, filed as Exhibit 10.15 to Registration
Statement No. 2-72051.
10.16 Lease between Registrant and Greentree Building Associates for
Headquarters office, dated as of June 9, 1986, as amended to
date, filed as Exhibit 10.16 to Form 10-K for the year ended
December 31, 1988.
10.16.1 Amendment dated June 19, 1990 to lease between Registrant and
Greentree Building Associates, filed as Exhibit 10.16.1 to
Form 10-Q for the quarter ended June 30, 1990.
10.19 Lease between the Registrant and American Cast Iron Pipe
Company for Pipe Coating Facility in Birmingham, Alabama dated
December 11, 1991 and filed as Exhibit 10.19 to Form 10-K for
the year ended December 31, 1991.
10.33.2 Amended and Restated 1985 Long-Term Incentive Plan, as
amended and restated March 2, 1994 and filed as Exhibit
10.33.2 to Form 10-K for the year ended December 31, 1993. **
10.45 Medical Reimbursement Plan filed as Exhibit 10.45 to Form 10-K
for the year ended December 31, 1992. **
10.46 Leased Vehicle Plan as amended to date. Filed as Exhibit
10.46 to Form 10-K for the year ended
December 31, 1993. **
10.49 Lease agreement between Newport Steel Corporation and L.B.
Foster Company dated as of October 12, 1994 and filed as
Exhibit 10.49 to Form 10-Q for the quarter ended September
30, 1994.
10.50 L. B. Foster Company 1996 Incentive Compensation Plan.
Filed as Exhibit 10.50 to Form 10-K for the year ended
December 31, 1995. **
10.51 Supplemental Executive Retirement Plan. Filed as Exhibit
10.51 to Form 10-K for the year ended December 31, 1994. **
19 Exhibits marked with an asterisk are filed herewith.
** Identified management contract or compensatory plan or
arrangement required to be filed as an exhibit.
b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Registrant during the
three month period ended June 30, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
L. B. FOSTER COMPANY
(Registrant)
Date: August 7, 1996
By /s/ Roger F. Nejes
Roger F. Nejes
Sr. Vice President-
Finance and Administration
& Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer
of Registrant)
5
1000
6-MOS
DEC-31-1996
JUN-30-1996
1537
0
49891
1770
46577
99569
61597
33270
125950
35284
24505
0
0
102
65159
125950
113061
113061
98668
98668
0
0
1175
2541
1066
1475
0
0
0
1475
.15
.15
