UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2003
Commission File Number 0-10436
L. B. Foster Company
(Exact name of Registrant as specified in its charter)
Pennsylvania 25-1324733
(State of Incorporation) (I. R. S. Employer Identification No.)
415 Holiday Drive, 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 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 of each of the registrant's classes of common
stock as of the latest practicable date.
Class Outstanding at May 2, 2003
Common Stock, Par Value $.01 9,577,770 Shares
2
L.B. FOSTER COMPANY AND
SUBSIDIARIES
INDEX
PART I. Financial Information Page
- ------------------------------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 18
Item 4. Controls and Procedures 18
PART II. Other Information
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature 21
Certification of Chief Executive Officer under Section 302(a)
of the Sarbanes-Oxley Act of 2002 22
Certification of Chief Financial Officer under Section 302(a)
of the Sarbanes-Oxley Act of 2002 23
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, December 31,
2003 2002
- --------------------------------------------------------------------------------
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $3,927 $3,653
Accounts and notes receivable:
Trade 39,790 39,294
Other 154 69
- --------------------------------------------------------------------------------
39,944 39,363
Inventories 34,677 32,925
Current deferred tax assets 1,494 1,494
Other current assets 1,482 696
Current assets of discontinued operations 13 138
- --------------------------------------------------------------------------------
Total Current Assets 81,537 78,269
- --------------------------------------------------------------------------------
Property, Plant & Equipment - At Cost 72,485 72,023
Less Accumulated Depreciation (37,214) (35,940)
- --------------------------------------------------------------------------------
35,271 36,083
- --------------------------------------------------------------------------------
Other Assets:
Goodwill 350 350
Other intangibles - net 702 739
Investments 12,965 12,718
Deferred tax assets 4,443 4,454
Other assets 1,068 1,175
Assets of discontinued operations 1 196
- --------------------------------------------------------------------------------
Total Other Assets 19,529 19,632
- --------------------------------------------------------------------------------
TOTAL ASSETS $136,337 $133,984
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $781 $825
Accounts payable - trade 28,394 24,094
Accrued payroll and employee benefits 2,587 2,413
Current deferred tax liabilities 1,474 1,474
Other accrued liabilities 2,721 2,695
Liabilities of discontinued operations 156 74
- --------------------------------------------------------------------------------
Total Current Liabilities 36,113 31,575
- --------------------------------------------------------------------------------
Long-Term Borrowings 21,000 23,000
- --------------------------------------------------------------------------------
Other Long-Term Debt 3,829 3,991
- --------------------------------------------------------------------------------
Deferred Tax Liabilities 4,195 4,195
- --------------------------------------------------------------------------------
Other Long-Term Liabilites 5,274 5,210
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock 102 102
Paid-in capital 35,143 35,143
Retained earnings 35,042 35,208
Treasury stock (3,616) (3,629)
Accumulated other comprehensive loss (745) (811)
- --------------------------------------------------------------------------------
Total Stockholders' Equity 65,926 66,013
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $136,337 $133,984
================================================================================
See Notes to Condensed Consolidated Financial Statements.
4
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Three Months
Ended
March 31,
- --------------------------------------------------------------------------------
2003 2002
- --------------------------------------------------------------------------------
(Unaudited)
Net Sales $59,519 $63,173
Cost of Goods Sold 52,586 56,378
- --------------------------------------------------------------------------------
Gross Profit 6,933 6,795
Selling and Administrative Expenses 6,567 6,373
Interest Expense 579 674
Other Income (320) (280)
- --------------------------------------------------------------------------------
6,826 6,767
- --------------------------------------------------------------------------------
Income From Continuing Operations Before Income
Taxes and Cumulative Effect of Change in
Accounting Principle 107 28
Income Taxes 43 -
- --------------------------------------------------------------------------------
Income From Continuing Operations Before Cumulative
Effect of Change in Accounting Principle 64 28
Discontinued Operations:
Loss From Operations of Foster Technologies (380) (317)
Income Tax Benefit (150) -
- --------------------------------------------------------------------------------
Loss on Discontinued Operations (230) (317)
Cumulative Effect of Change in Accounting Principle,
Net of Tax - (4,390)
- --------------------------------------------------------------------------------
Net Loss ($166) ($4,679)
================================================================================
Basic & Diluted (Loss) Earnings Per Share:
From Continuing Operations Before Cumulative
Effect of Change in Accounting Principle $0.01 $ -
From Discontinued Operations, Net of Tax (0.02) (0.03)
Cumulative Effect of Change in Accounting
Principle, Net of Tax - (0.46)
- --------------------------------------------------------------------------------
Net Loss ($0.02) ($0.50)
================================================================================
See Notes to Condensed Consolidated Financial Statements.
5
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months
Ended March 31,
2003 2002
- --------------------------------------------------------------------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $64 $28
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 1,313 1,228
Loss on sale of property, plant and
equipment - 31
Unrealized (gain) loss on derivative
mark-to-market (11) -
Change in operating assets and liabilities:
Accounts receivable (581) 7,004
Inventories (1,752) 2,447
Other current assets (786) (350)
Other noncurrent assets (142) (345)
Accounts payable - trade 4,300 (1,320)
Accrued payroll and employee benefits 174 (116)
Other current liabilities 37 (570)
Other liabilities 85 (11)
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 2,701 8,026
- --------------------------------------------------------------------------------
Net Cash Provided (Used) by Discontinued
Operations 228 (326)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant
and equipment - 163
Capital expenditures on property, plant
and equipment (462) (1,675)
Acquisition of business - (2,214)
- --------------------------------------------------------------------------------
Net Cash Used by Investing Activities (462) (3,726)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of revolving credit agreement
borrowings (2,000) (5,000)
Exercise of stock options and stock awards 13 55
Repayments of long-term debt (206) (405)
- --------------------------------------------------------------------------------
Net Cash Used by Financing Activities (2,193) (5,350)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 274 (1,376)
Cash and Cash Equivalents at Beginning of Period 3,653 4,222
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $3,927 $2,846
================================================================================
Supplemental Disclosure of Cash Flow Information:
Interest Paid $543 $800
================================================================================
Income Taxes Paid $255 $314
================================================================================
During the first three months of 2003, the Company did not finance any capital
expenditures through the execution of capital leases. During the first three
months of 2002, the Company financed certain capital expenditures totaling
$618,000 through the execution of capital leases.
See Notes to Condensed Consolidated Financial Statements.
6
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. The results of operations for interim periods are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2003. Amounts included in the balance sheet as of December 31, 2002
were derived from our audited balance sheet. 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, 2002.
2. ACCOUNTING PRINCIPLES
In June 2001, the FASB issued Statement of Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations" (SFAS 143), effective for fiscal
years beginning after June 15, 2002. SFAS 143 provides accounting requirements
for retirement obligations associated with tangible long-lived assets. The
obligations affected are those for which there is a legal obligation to settle
as a result of existing or enacted law. The Company has adopted this standard
and it did not have a material effect on its consolidated financial statements.
In June 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" (SFAS 146), effective for exit or disposal
activities initiated after December 31, 2002, with earlier adoption encouraged.
This statement supercedes EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred, rather than at the date of an entity's
commitment to an exit plan. The Company has adopted this standard and it did not
have a material effect on its consolidated financial statements.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, and Interpretation of ARB No. 51", (FIN 46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied at the first interim or annual period
beginning after June 15, 2003. Management is currently evaluating the effect
that adoption of FIN 46 will have on its results of operations and financial
condition. The Company has not identified any off balance sheet arrangements for
which consolidation under FIN 46 is reasonably possible.
Stock-based compensation
- ------------------------
In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an amendment of FASB Statement No. 123" (SFAS 148) effective for fiscal years
ending after December 31, 2002 and for interim periods beginning after December
15, 2002. This statement amends Statement of Financial Accounting Standards No.
123, "Accounting for Stock Stock-Based Compensation" (SFAS 123), to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123 to require
7
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results.
The Company has adopted the disclosure provisions of SFAS 123 and applies the
intrinsic value method of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its stock option plans. Accordingly, no compensation expense
has been recognized.
The following table illustrates the effect on the Company's income from
continuing operations and earnings per share had compensation expense for the
Company's stock option plans been applied using the method required by SFAS 123.
Three Months Ended
March 31,
In thousands, except per share amounts 2003 2002
- --------------------------------------------------------------------------------
Net income from continuing operations,
as reported $64 $28
Add: Stock-based employee compensation
expense included in reported net
income, net of related tax effects - -
Deduct: Total stock-based employee
compensation expense determined under
fair value method for all awards, net
of related tax effects 62 58
- --------------------------------------------------------------------------------
Pro forma income (loss) from continuing
operations $2 ($30)
================================================================================
Earnings per share from continuing
operations:
Basic and diluted, as reported $0.01 $0.00
Basic and diluted, pro forma $0.00 $0.00
================================================================================
Pro forma information regarding net income and earnings per share for options
granted has been determined as if the Company had accounted for its employee
stock options under the fair value method of Statement No. 123. The fair value
of stock options used to compute pro forma net income and earnings per share
disclosures is the estimated present value at grant date using the Black-Scholes
option-pricing model. There were no stock options granted in the first quarter
of 2003 or 2002.
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 March 31, 2003 and
December 31, 2002 have been reduced by an allowance for doubtful accounts of
($1,081,000) and ($1,063,000), respectively. Bad debt expense was $59,000 and
$37,000 for the three-month periods ended March 31, 2003 and 2002, respectively.
4. INVENTORIES
Inventories of the Company at March 31, 2003 and December 31, 2002 are
summarized as follows in thousands:
8
March 31, December 31,
2003 2002
- --------------------------------------------------------------------------------
Finished goods $24,602 $21,700
Work-in-process 7,001 6,343
Raw materials 4,923 6,731
- --------------------------------------------------------------------------------
Total inventories at current costs 36,526 34,774
(Less):
LIFO reserve (1,249) (1,249)
Inventory valuation reserve (600) (600)
- --------------------------------------------------------------------------------
$34,677 $32,925
================================================================================
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. DISCONTINUED OPERATIONS
During the fourth quarter of 2002, the Company started negotiations and
committed to a plan to sell the assets related to its rail signaling and
communication device business and recorded a $660,000 non-cash impairment loss
to adjust these assets to their fair value. In February 2003, substantially all
of the assets of this business were sold for $300,000. The operations of the
rail signaling and communication device business qualify as a "component of an
entity" under Statement of Financial Accounting Standards No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets" and thus, the operations
have been classified as discontinued, and prior periods have been restated.
Future expenses related to this business as it winds down are expected to be
immaterial.
Net sales and loss from discontinued operations were as follows:
Three Months Ended
March 31,
In thousands 2003 2002
- --------------------------------------------------------------------------------
Net sales $ 1 $ -
- --------------------------------------------------------------------------------
Pretax operating loss (310) (317)
Pretax loss on disposal (70) -
Income tax benefit 150 -
- --------------------------------------------------------------------------------
Loss from discontinued operations $ (230) $ (317)
================================================================================
6. BORROWINGS
On September 26, 2002, the Company entered into a new credit agreement with a
syndicate of three banks led by PNC Bank, N.A. The agreement provides for a
revolving credit facility of up to $60,000,000 in borrowings to support the
Company's working capital and other liquidity requirements.
The revolving credit facility, which matures in September 2005, is secured by
substantially all of the inventory and trade receivables owned by the Company.
Availability under the agreement is limited by the amount of eligible inventory
and accounts receivable applied against certain advance rates. Proceeds from the
new facility were used to repay and retire the Company's previous credit
agreement, which was to
9
mature in July 2003. Interest on the new credit facility is based on LIBOR plus
a spread ranging from 1.75% to 2.5%.
The agreement includes financial covenants requiring a minimum net worth, a
minimum level for the fixed charge coverage ratio and a maximum level for
consolidated capital expenditures. The agreement also restricts investments,
indebtedness, and the sale of certain assets. As of March 31, 2003, the Company
was in compliance with all of the agreement's covenants.
7. LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per
common share:
Three Months Ended
March 31,
(in thousands, except earnings per share) 2003 2002
- -------------------------------------------------------------------------------
Numerator:
Numerator for basic and diluted
earnings per common share -
net (loss) income available to common
stockholders:
Income from continuing operations 64 28
Loss from discontinued operations (230) (317)
Cumulative effect of change in accounting principle - (4,390)
- --------------------------------------------------------------------------------
Net loss ($166) ($4,679)
================================================================================
Denominator:
Weighted average shares 9,524 9,441
- --------------------------------------------------------------------------------
Denominator for basic earnings
per common share 9,524 9,441
Effect of dilutive securities:
Contingent issuable shares 4 31
Employee stock options 71 189
- --------------------------------------------------------------------------------
Dilutive potential common shares 75 220
Denominator for diluted earnings
per common share - adjusted weighted
average shares and assumed conversions 9,599 9,661
================================================================================
Basic and diluted (loss) earnings per common
share:
Continuing operations 0.01 0.00
Discontinued operations (0.02) (0.03)
Cumulative effect of change in accounting principle 0.00 (0.46)
- --------------------------------------------------------------------------------
Basic and diluted loss per common share ($0.02) ($0.50)
================================================================================
8. 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 environmental regulations
may have an adverse effect on the Company's future earnings. In the opinion of
management, compliance with the present environmental protection laws will not
have a material adverse effect on the financial condition, results of
operations, cash flows, competitive position, or capital expenditures of the
Company.
10
The Company is subject to legal proceedings and claims that arise in the
ordinary course of its business. In the opinion of management, these proceedings
will not materially affect the financial position of the Company.
At March 31, 2003, the Company had outstanding letters of credit of
approximately $2,687,000.
9. BUSINESS SEGMENTS
The Company is organized and evaluated by product group, which is the basis for
identifying reportable segments. The Company is engaged in the manufacture,
fabrication and distribution of rail, construction and tubular products. The
following tables illustrate revenues and profits/(losses) of the Company by
segment:
Three Months Ended,
March 31, 2003 March 31, 2002
- ----------------------------------------------------------------------------------------------------
Net Segment Net Segment
(in thousands) Sales Profit/(Loss) Sales Profit/(Loss)
- ----------------------------------------------------------------------------------------------------
Rail products $31,626 $681 $29,955 ($384)
Construction products 23,964 (527) 30,034 107
Tubular products 3,929 365 3,184 145
- ----------------------------------------------------------------------------------------------------
Total $59,519 $519 $63,173 ($132)
====================================================================================================
Foster Technologies, the Company's rail signaling and communications device
business, was classified as a discontinued operation on December 31, 2002. Prior
period results have been adjusted to reflect this classification. See Note 5,
"Discontinued Operations".
Segment profits, as shown above, include internal cost of capital charges for
assets used in the segment at a rate of, generally, 1% per month.
The following table provides a reconciliation of reportable net profit/(loss) to
the Company's consolidated total:
Three Months Ended
March 31,
(in thousands) 2003 2002
- --------------------------------------------------------------------------------
Income (loss) for reportable segments $519 ($132)
Cost of capital for reportable segments 2,425 2,716
Interest expense (579) (674)
Other income 320 280
Corporate expense and other unallocated charges (2,578) (2,162)
- --------------------------------------------------------------------------------
Income from continuing operations, before income
taxes and cumulative effect of change in
accounting principle $107 $28
================================================================================
There has been no change in the measurement of segment profit/(loss) from
December 31, 2002. Construction segment inventory increased approximately $2.4
million from December 31, 2002, primarily due to an increase in inventories of
precast concrete buildings as a result of seasonal factors.
11
10. COMPREHENSIVE LOSS
Comprehensive loss represents net loss plus certain stockholders' equity changes
not reflected in the Condensed Consolidated Statements of Income. The components
of comprehensive loss, net of tax, were as follows:
Three Months Ended
March 31,
(in thousands) 2003 2002
- --------------------------------------------------------------------------------
Net loss ($166) ($4,679)
Unrealized derivative gains on cash flow
hedges (SFAS No. 133) 10 177
Foreign currency translation gains (losses) 8 (30)
Reclassification adjustment for foreign
currency translation losses included in
net loss 48 -
- --------------------------------------------------------------------------------
Comprehensive loss ($100) ($4,532)
================================================================================
12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three Months Ended
March 31,
- --------------------------------------------------------------------------------
2003 2002
- --------------------------------------------------------------------------------
(Dollars in thousands)
Net Sales:
Rail Products $31,626 $29,955
Construction Products 23,964 30,034
Tubular Products 3,929 3,184
- --------------------------------------------------------------------------------
Total Net Sales $59,519 $63,173
================================================================================
Gross Profit:
Rail Products $3,786 $2,852
Construction Products 2,806 3,647
Tubular Products 802 551
Other (461) (255)
- --------------------------------------------------------------------------------
Total Gross Profit 6,933 6,795
- --------------------------------------------------------------------------------
Expenses:
Selling and administrative expenses 6,567 6,373
Interest expense 579 674
Other income (320) (280)
- --------------------------------------------------------------------------------
Total Expenses 6,826 6,767
- --------------------------------------------------------------------------------
Income From Continuing Operations Before
Income Taxes and Cumulative Effect of
Change in Accounting Principle 107 28
Income Tax Expense 43 -
- --------------------------------------------------------------------------------
Income From Continuing Operations Before
Cumulative Effect of Change in
Accounting Principle 64 28
Discontinued Operations:
Loss From Operations of Foster Technologies (380) (317)
Income Tax Benefit (150) -
- --------------------------------------------------------------------------------
Loss on Discontinued Operations (230) (317)
Cumulative Effect of Change in Accounting
Principle, Net of Tax - (4,390)
- --------------------------------------------------------------------------------
Net Loss ($166) ($4,679)
================================================================================
Gross Profit %:
Rail Products 12.0% 9.5%
Construction Products 11.7% 12.1%
Tubular Products 20.4% 17.3%
Total Gross Profit 11.6% 10.8%
13
First Quarter 2003 Results of Operations
- ----------------------------------------
The Company's first quarter income from continuing operations was $64,000 ($0.01
per share) on net sales of $59.5 million. This compares favorably to the same
period a year ago when income from continuing operations was $28,000 ($0.00 per
share) on net sales of $63.2 million.
Including a net loss from discontinued operations (the Company's Foster
Technologies subsidiary), the net loss for the first quarter of 2003 was $0.2
million ($0.02 per share). During the same period a year ago, the Company had a
net loss of $4.7 million ($0.50 per share) which included a loss from
discontinued operations of $0.3 million ($0.03 per share) and a non-cash charge
of $4.4 million ($0.46 per share) from the cumulative effect of a change in
accounting principle as a result of the adoption of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets".
Sales for the first quarter of 2003 declined 5.8% when compared to the same
period in 2002. Rail products' 2003 first quarter sales were $31.6 million, an
increase of 5.6% from last year's first quarter. This was due primarily to an
increase in revenue recognized for transit products and an increase in sales of
used rail. Construction products' net sales declined 20.2% to $24.0 million.
Pricing pressures on H-bearing pile and lower piling volume had a negative
impact on the Construction segment's revenues. Tubular products' sales increased
23.4% compared to last year's first quarter due primarily to an increase in the
amount of pipe coated at the Birmingham, AL facility.
The gross profit margin for the total Company was 11.6% in the first quarter of
2003 compared to 10.8% in the same quarter last year. Rail products' profit
margin increased by 2.5 percentage points to 12.0% from the same period last
year due primarily to improvement in used rail and transit products margins.
Last year, used rail margins were low because this operation was being downsized
through the sell-off of certain inventory at lower than usual margins.
Construction products' margin remained relatively consistent with last year's
first quarter, declining only 0.4 percentage points due in part to low volume
inefficiencies at the precast concrete building facility in Spokane, WA. Tubular
products' 3.1 percentage point increase in gross margin was primarily the result
of higher volume efficiencies at the Birmingham, AL pipe coating facility.
Selling and administrative expenses increased $0.2 million, or 3% compared to
the same period of 2002, largely due to higher insurance costs. Other income
includes primarily accrued dividend income on DM&E preferred stock. Corporate
borrowings declined by $8.2 million resulting in a 14% reduction in interest
expense when compared to the prior year first quarter.
The Company is implementing certain tax planning strategies that will allow it
to reverse some portion of the $1.6 million valuation allowance against net
operating losses in its discontinued operations. While the results of this
effort will not be finalized until the third quarter, the Company believes that
the tax benefits derived from current year losses in its discontinued operations
will be utilized in the current year. As a result, the effective tax rate
utilized for the first quarter was 40%. No tax provision was recorded in the
first quarter of 2002.
Liquidity and Capital Resources
- -------------------------------
The Company generates operational cash flow from the sale of inventory and the
collection of accounts receivable. Management's continued emphasis on working
capital management contributed to positive cash flow from operations and a $2.2
million reduction in corporate borrowings from December 31, 2002. During the
first quarter of 2003, the average turnover rate for accounts receivable
improved over the same period a year ago. The average inventory turnover rate in
the current period improved slightly over the average rate for the 2002 first
quarter. Working capital at March 31, 2003 was $45.4 million compared to $46.7
million at December 31, 2002.
The Company's Board of Directors has authorized the purchase of up to 1,500,000
shares of its Common stock at prevailing market prices. No purchases have been
made since the first quarter of 2001. From August 1997 through March 2001, the
Company had repurchased 973,398 shares at a cost of
14
approximately $5.0 million. The timing and extent of future purchases will
depend on market conditions and options available to the Company for alternate
uses of its resources.
Capital expenditures were less than $0.5 million for the first quarter of 2003,
compared to $1.7 million for capital improvements and $2.2 million for the
Greulich acquisition in the same period of 2002. Capital expenditures, excluding
acquisitions, in 2003, are expected to be approximately $5.0 million and funded
by cash flow from operations and available external financing sources.
On September 26, 2002, the Company entered into a credit agreement with a
syndicate of three banks led by PNC Bank, N.A. This new agreement provides for a
revolving credit facility of up to $60.0 million in borrowings to support the
Company's working capital and other liquidity requirements. The revolving credit
facility, which matures in September 2005, is secured by substantially all of
the inventory and trade receivables owned by the Company. Availability under
this agreement is limited by the amount of eligible inventory and accounts
receivable applied against certain advance rates. Proceeds from the new facility
were used to repay and retire the Company's previous credit agreement, which was
to mature in July 2003. Interest on the new credit facility is based on LIBOR
plus a spread ranging from 1.75% to 2.5%.
The agreement includes financial covenants requiring a minimum net worth and a
minimum level for the fixed charge coverage ratio. The agreement also restricts
investments, indebtedness, and the sale of certain assets. As of March 31, 2003,
the Company was in compliance with all of the agreement's covenants.
Total revolving credit agreement borrowings at March 31, 2003 were $21.0
million, a decrease of $2.0 million from December 31, 2002. At March 31, 2003,
remaining available borrowings under this facility were approximately $18.3
million. Outstanding letters of credit at March 31, 2003 were approximately $2.7
million. The letters of credit expire annually and are subject to renewal.
Management believes its internal and external sources of funds are adequate to
meet anticipated needs.
Dakota, Minnesota & Eastern Railroad
- ------------------------------------
The Company maintains a significant investment in the Dakota, Minnesota &
Eastern Railroad Corporation (DM&E), a privately held, regional railroad, which
controls over 2,500 miles of track in eight states.
At March 31, 2003, the Company's investment was comprised of $0.2 million of
DM&E common stock, $1.5 million of Series B Preferred Stock and warrants, $6.0
million of Series C Preferred Stock and warrants, $0.8 million of Preferred
Series C-1 Stock and warrants, and $0.5 million of Series D Preferred Stock and
warrants. In addition, the Company has a receivable for accrued dividend income
on Preferred Stock of approximately $4.0 million.
On July 30, 2002, the DM&E announced the acquisition of a 1,400 mile regional
railroad formerly owned by the I&M Rail Link, LLC. The Company participated in
the financing of this acquisition with a $0.5 million investment in Series D
Preferred Stock and warrants. On a fully diluted basis, the Company's ownership
in the DM&E is approximately 13.6%.
In June 1997, the DM&E announced its plan to build an extension from the DM&E's
existing line into the low sulfur coal market of the Powder River Basin in
Wyoming and to rebuild approximately 600 miles of its existing track (the
Project). The estimated cost of this project is expected to be in excess of $2.0
billion. The Project received final approval by the Surface Transportation Board
(STB) in January 2002. Litigation has been initiated appealing the STB's
approval of the Project. In addition, the State of South Dakota has elected to
appeal a federal court decision to enjoin it from enforcing an eminent domain
statute. No time frame for a decision is yet known.
If the Project proves to be viable, management believes that the value of the
Company's investment in the DM&E could increase significantly. If the Project
does not come to fruition, management believes that the value of the Company's
investment is supported by the DM&E's existing business.
15
Other Matters
- -------------
During the first quarter of 2003, the Company finalized the sale of certain
assets and liabilities of its Foster Technologies subsidiary engaged in the rail
signaling and communication device business. The first quarter 2003 loss from
this business, which has been classified as a discontinued operation, was
principally due to losses incurred up to the sale date as well as certain
charges taken primarily related to employee severance costs and an accrual for
the remaining lease obligation. Future expenses related to the shutdown of this
business are expected to be immaterial.
Specialty trackwork sales of the Company's Rail segment depend primarily on one
supplier. In August 2000, the Company contributed a note, having a principal and
interest value of approximately $2.7 million, to a limited liability company
created by the Company and this trackwork supplier (the LLC) in exchange for a
30% ownership position. Of the $2.7 million initial investment, approximately
$1.7 million represented goodwill. At January 1, 2002, the Company's net equity
investment in the LLC, net of goodwill amortization, was approximately $1.9
million. During 2002, the Company recognized an impairment loss of the entire
$1.9 million. The loss in value of this investment was driven by the continued
deterioration of certain rail markets. Equity earnings from this investment have
been immaterial.
The Company has historically advanced progress payments to its principal
trackwork supplier for the purpose of supporting working capital requirements
and funding raw material purchases and product fabrication costs for Company
projects. The timing differential created by these advances resulted in an asset
of approximately $5.4 million at December 31, 2002. As a result of the operating
and financial issues experienced by the LLC, concerns regarding the
recoverability of the advances led management to conclude that a full reserve
was necessary. A charge for this reserve was recorded in the fourth quarter of
2002 and no additional advances were made to this supplier in the first quarter
of 2003. The Company acknowledges the risk of loss that exists relative to these
advances and believes that substantial uncertainty exists relative to the
Company's ability to realize any measurable amounts of these advances. During
the first quarter of 2003 and 2002, the volume of business the supplier
conducted with the Company was approximately $2.0 million and $2.4 million,
respectively. If, for any reason, this supplier is unable to perform, it could
have a further negative impact on earnings and cash flows.
Operations at the Company's Newport, KY pipe-coating facility were suspended in
1998 in response to unfavorable market conditions. In 1999, the Company recorded
an impairment loss to reduce these assets to their anticipated market value. The
anticipated 2002 sale of these assets did not materialize. Therefore, during the
fourth quarter of 2002, the Company removed the "held for resale" designation of
these assets, reclassified them as "in service", and in accordance with SFAS
144, immediately recorded a $0.8 million write-down to reflect depreciation not
recorded while under the "held for resale" designation. The Company's effort to
sell these assets continues.
Management continues to evaluate the overall performance of its operations. A
decision to downsize or terminate an existing operation could have a material
adverse effect on near-term earnings but would not be expected to have a
material adverse effect on the financial condition of the Company.
Outlook
- -------
The Company has an exclusive agreement with a steel mill to distribute steel
sheet piling in North America. Steel sheet piling production commenced in 2001
but the quantity produced has not materially impacted results. In December 2002,
the Company announced the availability of Z-pile sheet piling products. During
the first quarter of 2003, piling sales were lower than last year due to lower
volumes and lower prices for H-bearing pile. The Company expects an increase in
piling sales and profitability as it enters into the higher activity season.
The Company's CXT subsidiary and Allegheny Rail Products division are dependent
on a Class I railroad for a significant portion of their business. The Company
has a contract with this Class I railroad which provides for minimum quantities
of concrete ties per contract year expiring in September 2003. If this contract
is not renewed, it could have a negative impact on the operating results of the
Company. In addition, a
16
substantial portion of the Company's operations is heavily 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,
government actions concerning taxation, tariffs, the environment, or other
matters could impact the operating results of the Company. The Company's
operating results may also be affected by adverse weather conditions.
Although backlog is not necessarily indicative of future operating results,
total Company backlog at March 31, 2003, was approximately $127.5 million. The
following table provides the backlog by business segment:
Backlog
------------------------------------------------------
March 31, December 31, March 31,
(In thousands) 2003 2002 2002
- --------------------------------------------------------------------------------
Rail Products $52,317 $45,371 $65,353
Construction Products 71,721 59,774 67,027
Tubular Products 3,417 3,995 3,890
- --------------------------------------------------------------------------------
Total $127,455 $109,140 $136,270
================================================================================
The reduction in Rail segment backlog from March 31, 2002 reflects the weakness
in the current rail markets and the absence of firm renewal commitments on
contracts under negotiation.
Critical Accounting Policies
- ----------------------------
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States.
When more than one accounting principle, or method of its application, is
generally accepted, management selects the principle or method that is
appropriate in the Company's specific circumstances. Application of these
accounting principles requires management to make estimates about the future
resolution of existing uncertainties. As a result, actual results could differ
from these estimates. In preparing these financial statements, management has
made its best estimates and judgements of the amounts and disclosures included
in the financial statements giving due regard to materiality. There have been no
material changes in the Company's policies or estimates since December 31, 2002.
For more information regarding the Company's critical accounting policies,
please see the discussion in Management's Discussion & Analysis of Financial
Condition and Results of Operations in Form 10-K for the year ended December 31,
2002.
New Accounting Pronouncements
- -----------------------------
In June 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" (SFAS 146), effective for exit or disposal
activities initiated after December 31, 2002, with earlier adoption encouraged.
This statement supercedes EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred, rather than at the date of an entity's
commitment to an exit plan. The Company has adopted this standard and it did not
have a material effect on its consolidated financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123" (SFAS 148) effective for fiscal years ending after December 31, 2002. This
statement amends Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS 148 amends
the disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results.
17
The Company has adopted the disclosure provisions of SFAS 123, and applies the
intrinsic value method of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its stock option plans. However, the Company has adopted the
enhanced disclosure provisions as defined in SFAS 148 effective for the first
quarter ended March 31, 2003.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, and Interpretation of ARB No. 51", (FIN 46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied at the first interim or annual period
beginning after June 15, 2003. Management is currently evaluating the effect
that adoption of FIN 46 will have on its results of operations and financial
condition. The Company has not identified any off balance sheet arrangements for
which consolidation under FIN 46 is reasonably possible.
Market Risk and Risk Management Policies
- ----------------------------------------
The Company uses derivative financial instruments to manage interest rate
exposure on variable-rate debt, primarily by using interest rate collars and
variable interest rate swaps. In conjunction with the Company's debt refinancing
in the third quarter of 2002, the Company discontinued cash flow hedge
accounting treatment for its interest rate collars and has applied
mark-to-market accounting prospectively. Although these derivatives are not
deemed to be effective hedges of the new credit facility in accordance with the
provisions of SFAS 133, the Company has retained these instruments as protection
against interest rate risk associated with the new credit agreement and the
Company will continue to record the mark-to-market adjustments on the interest
rate collars, through 2006, in its consolidated income statement. The fair value
of the interest rate collars on March 31, 2003 was a $2.2 million liability and
the company recorded approximately $11,000 of other income in the first quarter
of 2003 on the Condensed Consolidated Statements of Income to adjust these
instruments to fair value. The Company continues to apply cash flow hedge
accounting to interest rate swaps.
The Company recognizes all derivative instruments on the balance sheet at fair
value. Fluctuations in the fair values of derivative instruments designated as
cash flow hedges are recorded in accumulated other comprehensive income, and
reclassified into earnings as the underlying hedged items affect earnings. To
the extent that a change in interest rate derivative does not perfectly offset
the change in value of the interest rate being hedged, the ineffective portion
is recognized in earnings immediately.
The Company's primary source of variable-rate debt comes from its revolving
credit agreement. While not specifically correlated with the revolving credit
agreement, the Company maintains an economic hedge of this variable rate through
the maintenance of two interest rate collar agreements with a weighted average
minimum annual interest rate of 4.99% to a maximum weighted average annual
interest rate of 5.42%. Since the interest rate on the debt floats with the
short-term market rate of interest, the Company is exposed to the risk that
these interest rates may decrease below the minimum annual interest rates on the
two interest rate collar agreements. The effect of a 1% decrease in rate of
interest below the 4.99% weighted average minimum annual interest rate on $21.0
million of outstanding floating rate debt would result in increased annual
interest costs of approximately $0.2 million.
The Company is not subject to significant exposures to changes in foreign
currency exchange rates.
See the Company's Annual Report on Form 10-K for more information on the
Company's derivative financial instruments.
18
Forward-Looking Statements
- --------------------------
Statements relating to the potential value or viability of the DM&E or the
Project, or management's belief as to such matters, are forward-looking
statements and are subject to numerous contingencies and risk factors. The
Company has based its assessment on information provided by the DM&E and has not
independently verified such information. In addition to matters mentioned above,
factors which can adversely affect the value of the DM&E, its ability to
complete the Project or the viability of the Project include the following:
labor disputes, the outcome of certain litigation, any inability to obtain
necessary environmental and government approvals for the Project in a timely
fashion, the DM&E's ability to continue to obtain interim funding to finance the
Project, the expense of environmental mitigation measures required by the
Surface Transportation Board, an inability to obtain financing for the Project,
competitors' response to the Project, market demand for coal or electricity and
changes in environmental laws and regulations.
The Company wishes to caution readers that various factors could cause the
actual results of the Company to differ materially from those indicated by
forward-looking statements made from time to time in news releases, reports,
proxy statements, registration statements and other written communications
(including the preceding sections of this Management's Discussion and Analysis),
as well as oral statements, such as references made to the future profitability,
made from time to time by representatives of the Company. Additional delays in a
Virginia steel mill's production of sheet piling products, or failure to produce
substantial quantities of sheet piling products could adversely impact the
Company's earnings. The inability to negotiate the sale of certain assets could
result in an impairment in future periods. The inability to successfully
negotiate a new sales contract with a current Class I railroad customer could
have a negative impact on the operating results of the Company. Except for
historical information, matters discussed in such oral and written
communications are forward-looking statements that involve risks and
uncertainties, including but not limited to general business conditions, the
availability of material from major suppliers, the impact of competition, the
seasonality of the Company's business, the adequacy of internal and external
sources of funds to meet financing needs, taxes, inflation and governmental
regulations. Sentences containing words such as "anticipates", "expects", or
"will" generally should be considered forward-looking statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
See the "Market Risk and Risk Management Policies" section under Item 2,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Item 4. CONTROLS AND PROCEDURES
-----------------------
a) Within the 90 days prior to the date of this report, L. B. Foster Company
(the Company) carried out an evaluation, under the supervision and with the
participation of the Company's management, including the President and
Chief Executive Officer along with the Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon
that evaluation, the President and Chief Executive Officer, along with the
Chief Financial Officer concluded that the Company's disclosure controls
and procedures are effective to timely alert them to material information
relating to the Company (including its consolidated subsidiaries) required
to be included in the Company's periodic SEC filings.
b) There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect internal controls
subsequent to the date the Company carried out this evaluation.
19
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
-----------------
See Note 8, "Commitments and Contingent Liabilities", to the Condensed
Consolidated Financial Statements.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) EXHIBITS
Unless marked by an asterisk, all exhibits are incorporated by reference:
* 3.1 Restated Certificate of Incorporation.
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, 2002.
4.0 Rights Amendment, dated as of May 15, 1997 between L. B.
Foster Company and American Stock Transfer & Trust Company,
including the form of Rights Certificate and the Summary of
Rights attached thereto, filed as Exhibit 4.0 to Form 10-K for
the year ended December 31, 2002.
* 4.0.1 Amended Rights Agreement dated as of May 14, 1998 between L.
B. Foster Company and American Stock Transfer and Trust
Company.
4.0.2 Revolving Credit and Security Agreement dated as of September
26, 2002, between L. B. Foster Company and PNC Bank, N. A.,
filed as Exhibit 4.0.2 to Form 10-Q for the quarter ended
September 30, 2002.
10.12 Lease between CXT Incorporated and Pentzer Development Corpor-
ation, dated April 1, 1993, filed as Exhibit 10.12 to Form
10-K for the year ended December 31, 1999.
10.12.1 Amendment dated March 12, 1996 to lease between CXT
Incorporated and Pentzer Corporation, filed as Exhibit 10.12.1
to Form 10-K for the year ended December 31, 1999.
10.12.2 Amendment dated November 7, 2002 to lease between CXT
Incorporated and Pentzer Development Corporation, filed as
Exhibit 10.12.2 to Form 10-K for the year ended December 31,
2002.
10.13 Lease between CXT Incorporated and Crown West Realty,
L. L. C., dated December 20, 1996, filed as Exhibit 10.13 to
Form 10-K for the year ended December 31, 1999.
10.13.1 Amendment dated June 29, 2001 between CXT Incorporated and
Crown West Realty, filed as Exhibit 10.13.1 to Form 10-K for
the year ended December 31, 2002.
10.14 Lease between CXT Incorporated and Pentzer Development Corpor-
ation, dated November 1, 1991 and filed as Exhibit 10.14 to
Form 10-K for the year ended December 31, 1999.
10.15 Lease between CXT Incorporated and Union Pacific Railroad
Company, dated February 13, 1998, and filed as Exhibit 10.15
to Form 10-K for the year ended December 31, 1999.
10.17 Lease between Registrant and the City of Hillsboro, TX dated
February 22, 2002, filed as Exhibit 10.17 to Form 10-K for the
year ended December 31, 2002.
20
10.19 Lease between Registrant and American Cast Iron Pipe Company
for pipe-coating facility in Birmingham, AL dated December 11,
1991, filed as Exhibit 10.19 to Form 10-K for the year ended
December 31, 2002.
10.19.1 Amendment to Lease between Registrant and American Cast Iron
Pipe Company for pipe-coating facility in Birmingham, AL dated
November 15, 2000, and filed as Exhibit 10.19.2 to Form 10-K
for the year ended December 31, 2000.
10.21 Stock Purchase Agreement, dated June 3, 1999 by and among the
Registrant and the shareholders of CXT Incorporated, filed as
Exhibit 10.0 to Form 8-K on July 14, 1999.
* 10.33.2 Amended and Restated 1985 Long-Term Incentive Plan as of
February 26, 1997. **
10.34 Amended and Restated 1998 Long-Term Incentive Plan as of
February 2, 2001, filed as Exhibit 10.34 to Form 10-K for the
year ended December 31, 2000. **
10.45 Medical Reimbursement Plan, filed as Exhibit 10.45 to Form
10-K for the year ended December 31, 2002. **
10.46 Leased Vehicle Plan as amended and restated on October 16,
2002, filed as Exhibit 10.46 to Form 10-Q for the quarter
ended September 30, 2002. **
10.51 Supplemental Executive Retirement Plan, filed as Exhibit 10.51
to Form 10-K for the year ended December 31, 2002. **
10.52 Outside Directors' Stock Award Plan, filed as Exhibit 10.52 to
Form 10-K for the year ended December 31, 2002. **
10.53 Directors' resolutions, under which directors' compensation
was established, dated October 15, 2002, filed as Exhibit
10.53 to Form 10-K for the year ended December 31, 2002. **
19 Exhibits marked with an asterisk are filed herewith.
* 99.1 Certification of Chief Executive Officer under Section 906 of
the Sarbanes-Oxley Act of 2002.
* 99.2 Certification of Chief Financial Officer under Section 906 of
the Sarbanes-Oxley Act of 2002.
** Identifies management contract or compensatory plan or
arrangement required to be filed as an Exhibit.
b) Reports on Form 8-K
On April 23, 2003, the Registrant filed a current report on Form
8-K under Item 9 FD disclosure announcing first quarter results.
21
SIGNATURE
Pursuant to the requirements of the Securities and 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: May 13, 2003 By:/s/David J. Russo
------------- ---------------------
David J. Russo
Senior Vice President,
Chief Financial Officer
and Treasurer
(Duly Authorized Officer of Registrant)
22
Form of Sarbanes-Oxley Section 302(a) Certification
---------------------------------------------------
I, Stan L. Hasselbusch, certify that:
1. I have reviewed this quarterly report on Form 10-Q of L. B. Foster
Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based in our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 13, 2003 /s/Stan L. Hasselbusch
--------------------------
Stan L. Hasselbusch
President and Chief Executive Officer
23
Form of Sarbanes-Oxley Section 302(a) Certification
---------------------------------------------------
I, David J. Russo, certify that:
1. I have reviewed this quarterly report on Form 10-Q of L. B. Foster Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based in our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003 /s/David J. Russo
-----------------
David J. Russo
Senior Vice President,
Chief Financial Officer and Treasurer
AMENDMENT DATED AS OF
MAY 14, 1998
TO
RIGHTS AGREEMENT DATED
AS OF MAY 15, 1997 BETWEEN
L.B. FOSTER COMPANY (A DELAWARE CORPORATION) AND
AMERICAN STOCK TRANSFER &
TRUST COMPANY, AS RIGHTS AGENT
Whereas, as of May 15, 1997 L.B. Foster Company, a Delaware corporation
("L.B. Foster- DE"), and American Stock Transfer & Trust Company, a New York
corporation ("Rights Agent"), entered into a Rights Agreement ("Rights
Agreement") setting forth the terms of certain Rights ("Rights") to be issued by
L.B. Foster-DE to purchase shares of Class A Common Stock, par value $.01 per
share, of L.B. Foster-DE; and
Whereas, by action of the board of directors of L.B. Foster-DE on May 15,
1997, a dividend distribution of one Right for each share of Class A Common
Stock outstanding on May 21, 1997 was made, and the board further authorized the
issuance of one Right for each share of Class A Common Stock issued between May
21, 1997 and the Distribution Date (as defined in the Rights Agreement), each
Right, when exercisable, entitling the registered holder thereof to purchase one
share of Class A Common Stock from L.B. Foster-DE for $30, subject to
adjustment; and
Whereas, at the close of business on May 14, 1998, L.B. Foster-DE was
merged ("Merger") into L.B. Foster Company, a Pennsylvania corporation ("L.B.
Foster-PA"), pursuant to a Plan of Merger whereby L.B. Foster-PA succeeded to
all the property, rights and obligations of L.B. Foster- DE, L.B. Foster-DE
ceased to exist as a Delaware corporation, and each outstanding share of Class A
Common Stock of L.B. Foster-DE (including shares held in the treasury) became
and was converted into one validly issued, fully paid and non-assessable share
of common stock, $.01 par value, of L.B. Foster-PA; and
Whereas, L.B. Foster-PA and the Rights Agent wish to amend the Rights
Agreement to reflect and confirm that L.B. Foster-PA has succeeded to all of the
rights and obligations of L.B. Foster-DE thereunder and to reflect and confirm
certain conforming changes therein.
Now, therefore, L.B. Foster-PA and the Rights Agent, intending to be
legally bound, agree as follows:
1. As of the time of the Merger, L.B. Foster-PA succeeded to all the rights
and obligations of L.B. Foster-DE under the Rights Agreement, and L.B. Foster-PA
replaced, and hereby does replace, L.B. Foster-DE as the "Company" under the
Rights Agreement.
2. As of the time of the Merger, each Right theretofore issued by L.B.
Foster-DE, and which attached to a share of Class A Common Stock of L.B.
Foster-DE, became, and hereby does become, a Right, when exercisable, to
purchase from L.B. Foster-PA one share of common stock of L.B. Foster-PA for
$30, subject to adjustment as provided in the Rights Agreement, such Right being
attached to the share of common stock of L.B. Foster-PA into which such share of
Class A Common Stock of L.B. Foster-DE has been converted.
3. As of the time of the Merger, all references in the Rights Agreement to
"Common Stock" became, and hereby do become, references to the common stock,
$.01 par value per share, of L.B. Foster-PA, and all references to other
securities of L.B. Foster-DE became, and hereby do become, references to other
securities of L.B. Foster-PA.
4. One Right (as such number may be adjusted pursuant to Section 11(p) of
the Rights Agreement) to purchase a share of common stock of L.B. Foster-PA for
$30, when exercisable and subject to adjustment as provided in the Rights
Agreement, shall be issued for and attach to each share of common stock of L.B.
Foster-PA issued after the time of the Merger, whether an originally- issued
share or a share delivered from the treasury to which a Right had not previously
attached, all in accordance with Section 3 of the Rights Agreement as hereby
amended.
5. Section 32 of the Rights Agreement is hereby amended by substituting
"Commonwealth of Pennsylvania" for "State of Delaware."
6. Except as amended herein, the Rights Agreement and all of its terms and
provisions shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.
L.B. FOSTER COMPANY
By: /s/David L. Voltz
Name: David L. Voltz
Title: Vice President
AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Rights Agent
By: /s/Herbert Lemmer
Name: Herbert Lemmer
Title: Vice President
L.B. FOSTER COMPANY 1985 LONG-TERM INCENTIVE PLAN AS AMENDED AND RESTATED * ARTICLE I PURPOSE, EFFECTIVE DATE AND AVAILABLE SHARES 1.1 Purpose. The purpose of the Plan is to provide financial incentives for selected key personnel and directors of L.B. Foster Company (the "Company") and its subsidiaries, thereby promoting the long-term growth and financial success of the Company by (i) attracting and retaining personnel and directors of outstanding ability, (ii) strengthening the Company's capability to develop, maintain and direct a competent management team, (iii) motivating key personnel to achieve long-range performance goals and objectives, and (iv) providing incentive compensation opportunities competitive with those of other corporations. 1.2 Effective Date and Expiration of Plan. The Plan is subject to approval by the Board of Directors of the Company, and, if so approved, shall be effective January 1, 1985. Unless earlier terminated by the Board pursuant to Section 5.3, the Plan shall terminate on the twentieth anniversary of its Effective Date. No Award shall be made pursuant to the Plan after its termination date, but Awards made prior to the termination date may extend beyond that date. 1.3 Shares Available Under the Plan. L.B. Foster Company stock to be offered under the Plan pursuant to Options and SARs may be authorized but unissued common stock or previously issued shares of common stock which have been reacquired by the Company and are held in its treasury. Subject to adjustment under Section 5.6, no more than 1,500,000 shares of common stock shall be issuable upon the exercise of Options or SARs. Any shares of stock subject to an Option which for any reason is cancelled (excluding shares subject to an Option cancelled upon the exercise of a related SAR) or terminated without having been exercised shall again be available for Awards under the Plan. Shares subject to an Option cancelled upon the exercise of an SAR shall not again be available for Awards under the Plan. * As amended July 30, 1997. ARTICLE II DEFINITIONS 2.1 "Award" means, individually or collectively, any Option or SAR under this Plan. 2.2 "Board" means the Board of Directors of L.B. Foster Company. 2.3 "Committee" means Directors, not to be less than two, appointed by the Board, each of whom is a "non-employee director" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. 2.4 "Company" means L.B. Foster Company and its successors and assigns. 2.5 "Director" means a director of the Company.
2.6 "Effective Date" means the date on which the Plan is effective as provided in Section 1.2. 2.7 "Fair Market Value" of the Stock as to a particular time or date means the last sales price of the Stock as reported in the NASDAQ National Market System or, if the Stock is listed on a securities exchange, the last reported sales price of the Stock on such exchange that shall be for consolidated trading if applicable to such exchange, or if neither so reported or listed, the last reported bid price of the Stock. 2.8 "Incentive Stock Option" means an option within the meaning of Section 422 of the Internal Revenue Code (i) of 1986, as amended, if granted after December 31, 1986 or (ii) of 1954, as amended, if granted before January 1, 1987. 2.9 "Key Personnel" means officers and employees of the Company and its Subsidiaries who occupy responsible executive, professional or administrative positions and who have the capacity to contribute to the success of the Company. Such term also includes directors of Subsidiaries. 2.10 "Nonqualified Stock Option" means a stock option granted under the Plan other than an Incentive Stock Option. 2.11 "Option" means both a Nonqualified Stock Option and an Incentive Stock Option to purchase common stock of the Company. 2.12 "Option Price" means the price at which common stock of the Company may be purchased under an Option as provided in Section 4.6. 2.13 "Participant" means a person to whom an Award is made under the Plan. 2.14 "Personal Representative" means the person or persons who, upon the death, disability or incompetency of a Participant, shall have acquired, by will or by the laws of descent and distribution or by other legal proceedings, the right to exercise an Option or SAR theretofore granted to such Participant. 2.15 "Plan" means the Company's 1985 Long-Term Incentive Plan as Amended and Restated, as amended. 2.16 "SAR" means a stock appreciation right under the Plan. 2.17 "Stock" means common stock of the Company. 2.18 "Stock Option Agreement" means an agreement entered into between a Participant and the Company under Section 4.5. 2.19 "Subsidiary" means a corporation or other business entity, domestic or foreign, the majority of the voting stock or other voting interests in which is owned directly or indirectly by the Company. ARTICLE III ADMINISTRATION 3.1 Committee to Administer. (a) The Plan shall be administered by the Committee. The Committee shall have full power and authority to interpret and administer the Plan and to establish and amend rules and regulations for its administration. The Committee's decisions shall be final and conclusive with respect to the interpretation of the Plan and any Award made under it.
(b) A majority of the members of the Committee shall constitute a quorum for the conduct of business at any meeting. The Committee shall act by majority vote of the members present at a duly convened meeting. Action may be taken without a meeting if written consent thereto is given in accordance with applicable law. 3.2 Powers of Committee. (a) Subject to the provisions of the Plan, the Committee shall have authority, in its discretion, to determine those Key Personnel and Directors who shall receive Awards, the time or times when each such Award shall be made and the type of Award to be made, whether an Incentive Stock Option or a Nonqualified Stock Option shall be granted and the number of shares to be subject to each Option. (b) A Director shall not participate in a vote granting himself an Option or SAR. (c) The Committee shall determine the terms, restrictions and provisions of the agreement relating to each Award, including such terms, restrictions and provisions as shall be necessary to cause certain Options to qualify as Incentive Stock Options. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan, or in any agreement relating to an Award, in such manner and to the extent the Committee shall determine in order to carry out the purposes of the Plan. The Committee may, in its discretion, accelerate the date on which an Option or SAR may be exercised, if the Committee determines that to do so will be in the best interests of the Company and the Participant. ARTICLE IV AWARDS 4.1 Awards. Awards under the Plan shall consist of Incentive Stock Options, Nonqualified Stock Options and/or SARs. All Awards shall be subject to the terms and conditions of the Plan and to such other terms and conditions consistent with the Plan as the Committee deems appropriate. Awards need not be uniform. 4.2 Eligibility for Awards. Awards may be made to Key Personnel and Directors. Employees must be in Grade Level 15 or above unless otherwise selected by the Committee. In selecting Participants and in determining the form and amount of the Award, the Committee may give consideration to his or her functions and responsibilities, his or her present and potential contributions to the success of the Company, the value of his or her services to the Company, and other factors deemed relevant by the Committee. 4.3 Award of Stock Options. The Committee may, from time to time, subject to Section 3.2(b) and other provisions of the Plan and such terms and conditions as the Committee may prescribe, grant Incentive Stock Options and Nonqualified Stock Options to any Key Personnel or Director. Awards of Incentive Stock Options and Nonqualified Stock Options shall be separate and not in tandem. 4.4 Period of Option. (a) Unless otherwise provided in the related Stock Option Agreement, an Option granted under the Plan shall be exercisable only after twelve (12) months have elapsed from the date of grant and, after such twelve-month waiting period, the Option may be exercised in cumulative installments in the following manner: (i) The Participant may purchase up to one-fourth (1/4) of the total optioned shares at any time after one year from the date of grant and prior to the termination of the Option. (ii) The Participant may purchase an additional one-fourth (1/4) of the total optioned shares at any time after two years from the date of grant and prior to the termination of the Option.
(iii)The Participant may purchase an additional one-fourth (1/4) of the total optioned shares at any time after three years from the date of grant and prior to the termination of the Option. (iv) The Participant may purchase an additional one-fourth (1/4) of the total optioned shares at any time after four years from the date of grant and prior to the termination of the Option. The duration of each Option shall not be more than ten (10) years from the date of grant. (b) Except as otherwise provided in the Stock Option Agreement, an Option may not be exercised by a Participant unless such Participant is then, and continually (except for sick leave, military service or other approved leave of absence) after the grant of an Option has been, an officer, director or employee of the Company or a Subsidiary. 4.5 Stock Option Agreement. Each Option shall be evidenced by a Stock Option Agreement, in such form and containing such provisions not inconsistent with the provisions of the Plan as the Committee from time to time shall approve. 4.6 Option Price and Exercise. (a) The Option Price of Stock under each Option shall be determined by the Committee but shall be not less than the Fair Market Value of the Stock on the trading day immediately preceding the date on which the Option is granted, as determined by the Committee. (b) Options may be exercised from time to time by giving written notice of exercise to the Company specifying the number of shares to be purchased. The notice of exercise shall be accompanied by (i) payment in full of the Option Price in cash, certified check or cashier's check or (ii) a copy of irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds sufficient to cover the Option Price. 4.7 Delivery of Option Shares. The Company shall not be obligated to deliver any shares upon the exercise of an Option unless and until, in the opinion of the Company's counsel, all applicable federal, state and other laws and regulations have been complied with. In the event the outstanding Stock is at the time listed on any stock exchange, no delivery shall be made unless and until the shares to be delivered have been listed or authorized to be added to the list upon official notice of issuance on such exchange. No delivery shall be made until all other legal matters in connection with the issuance and delivery of shares have been approved by the Company's counsel. Without limiting the generality of the foregoing, the Company may require from the Participant or other person purchasing shares of Stock under the Plan such investment representation or such agreement, if any, as counsel for the Company may consider necessary in order to comply with the Securities Act of 1933, as amended, and the regulations thereunder. Certificates evidencing the shares may be required to bear a restrictive legend. A stop transfer order may be required to be placed with the transfer agent, and the Company may require that the Participant or such other person agree that any sale of the shares will be made only on one or more specified stock exchanges or in such other manner as permitted by the Committee. The Participant shall notify the Company when any disposition of the shares, whether by sale, gift or otherwise, is made. The Company shall use its best efforts to effect any such compliance and listing, and the Participant or other person shall take any action reasonably requested by the Company in such connection. 4.8 Limitations on Incentive Stock Options. (a) The aggregate Fair Market Value (determined at the time the Option is granted) of the Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under all plans of the Participant's employer corporation and its parent and subsidiary corporations) shall not exceed $100,000. The foregoing sentence shall apply only to Incentive Stock Options granted after December 31, 1986.
(b) Each Incentive Stock Option granted prior to January 1, 1987 shall not be exercisable while there is outstanding any Incentive Stock Option that was previously granted to the Participant by the Company or a Subsidiary (determined as of the time such Option is granted) or a predecessor of any of such corporations. An Incentive Stock Option shall be treated as outstanding for this purpose until it is deemed exercised in full or expires by reason of lapse of time. (c) An Incentive Stock Option shall not be granted to any Key Personnel who, at the time of grant, own stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or any Subsidiary. (d) No Incentive Stock Option may be exercisable more than three months after termination of the Participant's employment with the Company or with a parent or Subsidiary of the Company, except that where such employment is terminated because of permanent and total disability, within the meaning of Section 22(e)(3) of the Internal Revenue Code of 1986 ("Permanent Disability"), or death, such period may be one year. 4.9 Termination of Service. Except as otherwise provided in this Plan, or in the applicable Stock Option Agreement, if the service of a Participant (i.e., as an officer, director or employee of the Company or a Subsidiary) terminates for any reason other than death, permanent disability or retirement with the consent of the Company, all Options held by the Participant shall expire and may not thereafter be exercised. For purposes of this section, the employment or other service in respect to Options held by a Participant shall be treated as continuing in tact while the participant is on military leave, sick leave, or other bona fide leave of absence (such as temporary employment with the Government) if the period of such leave does not exceed 90 days, or, if longer, so long as the Participant's right to reestablish his service with the Company is guaranteed either by statute or by contract. Where the period of leave exceeds 90 days and where the Participant's right to reestablish his service is not guaranteed by statute or by contract, his service shall be deemed to have terminated on the ninety-first day of such leave. Anything herein to the contrary notwithstanding and unless the Stock Option Agreement provides otherwise, if the service of a Participant terminates more than four years after the grant of the Option, other than due to a termination for Cause, the Participant may exercise such Option within 30 days of such termination. Except as so exercised, such Option shall expire at the end of such period. In no event, however, may any Option be exercised after the expiration of ten (10) years from the date of grant of such Option. For the purpose of the Plan, termination for Cause shall mean (i) termination due to (a) willful or gross neglect of duties or (b) willful misconduct in the performance of such duties, so as to cause material harm to the Company or any Subsidiary as determined by the Board of Directors, (ii) termination due to the Participant committing fraud, misappropriation or embezzlement in the performance of his or her duties or (iii) termination due to the Participant committing any felony he is convicted of and which, as determined in good faith by the Board of Directors, constitutes a crime involving moral turpitude and results in material harm to the Company or a Subsidiary. 4.10 Death. Except as otherwise provided in the applicable Stock Option Agreement, if a Participant dies at a time when his Option is not fully exercised, then at any time or times within such period after his death, not to exceed 12 months, as may be provided in the Stock Option Agreement, such Option may be exercised as to any or all of the shares which the Participant was entitled to purchase under the Option immediately prior to his death, by his executor or administrator or the person or persons to whom the Option is transferred by will or the applicable laws of descent and distribution. In no event, however, may any Option be exercised after the expiration of ten (10) years from the date of grant of such Option. 4.11 Retirement or Permanent Disability. Except as otherwise provided in the applicable Stock Option Agreement, if a Participant retires from service with the consent of the Company, or suffers Permanent Disability, at a time when he is entitled to exercise an Option, then at any time or times within three years after his termination of service because of such retirement or Permanent Disability the Participant may exercise such Option as to all or any of the shares which he was entitled to purchase under the Option
immediately prior to such termination. Except as so exercised, such Option shall expire at the end of such period. In no event, however, may any Option be exercised after the expiration of ten (10) years from the date of grant of such Option. The Committee shall have authority to determine whether or not a Participant has retired from service or has suffered Permanent Disability, and its determination shall be binding on all concerned. In the sole discretion of the Committee, a transfer of service to an affiliate of the Company other than a Subsidiary (the latter type of transfer not constituting a termination of service for purposes of the Plan) may be deemed to be a retirement from service with the consent of the Company so as to entitle the Participant to exercise the Option within 90 days after such transfer. 4.12 Stockholder Rights and Privileges. A Participant shall have no rights as a stockholder with respect to any Stock covered by an Option until the issuance of a stock certificate to the Participant representing such Stock. 4.13 Award of SARs. (a) At any time prior to six months before an Option's expiration date, the Committee may award to the Participant an SAR related to the Option. (b) The SAR shall represent the right to receive payment of an amount not greater than the amount, if any, by which the Fair Market Value of the Stock on the trading day immediately preceding the date of exercise of the SAR exceeds the Option Price. (c) SARs awarded under the Plan shall be evidenced by either the Stock Option Agreement or a separate agreement between the Company and the Participant. (d) An SAR shall be exercisable only at the same time and to the same extent and subject to the same conditions as the Option related thereto is exercisable, except that the Committee may prescribe additional conditions and limitations on the exercise of any SAR, including a maximum appreciation value. An SAR shall be transferable only when the related Option is transferable, and under the same conditions. The exercise of an SAR shall cancel the related Option. SARs may be exercised only when the Fair Market Value of a share of Stock subject to the related Option exceeds the Option Price. Such value shall be determined in the manner specified in Section 4.13(b). (e) An SAR shall be exercisable only by written notice to the Company and only to the extent that the related Option is exercisable. However, an SAR shall in no event be exercisable during the first six months of its term except in the event of death or Permanent Disability of the Participant prior to the expiration of such six-month period. (f) All SARs shall automatically be exercised on the last trading day prior to the expiration of the related Option, so long as the Fair Market Value of the Stock at the time of exercise exceeds the Option Price, unless prior to such day the holder instructs the Company otherwise in writing. (g) Payment of the amount to which a Participant is entitled upon the exercise of an SAR shall be made in cash, Company stock, or partly in cash and partly in Company stock, as the Committee shall determine at the time of the Award. To the extent that payment is made in Company stock, the shares shall be valued at their fair market value, as determined by the Committee. (h) At any time when a Participant is, in the judgment of counsel to the Company, subject to Section 16 of the Securities Exchange Act of 1934 with respect to any equity securities of the Company:
(i) any election by such Participant to receive cash in whole or in part upon the exercise of such SAR shall be made only during the period beginning on the third business day following the date of release by the Company for publication of any quarterly or annual summary statement of its sales and earnings and ending on the twelfth business day following such date of release, and (ii) in the event the Committee has not determined the form in which such SAR will be paid (i.e., cash, shares of Company stock, or any combination thereof), any election to exercise such right in whole or in part for cash shall be subject to the subsequent consent thereto, or disapproval thereof, by the Committee in its sole discretion. (i) Each SAR shall expire on a date determined by the Committee at the time of Award, or, if later, upon the termination of the related Option. ARTICLE V MISCELLANEOUS PROVISIONS 5.1 Nontransferability. No Award under the Plan shall be transferable by the Participant other than by will or the laws of descent and distribution. All Awards shall be exercisable during the Participant's lifetime only by such Participant or his Personal Representative. Any transfer contrary to this Section 5.1 will nullify the Award. 5.2 Amendments. The Committee may at any time discontinue granting Awards under the Plan. The Board may at any time amend the Plan or amend any outstanding Option for the purpose of satisfying the requirements of any changes in applicable laws or regulations or for any other purpose which may at the time be permitted by law; provided that no such amendment shall result in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, becoming inapplicable to any Options or without the approval of the stockholders of the Company (a) increase the maximum number of shares of Stock available under the Plan (subject to adjustment as provided in Section 5.6), (b) reduce the exercise price of Options below the prices provided for in the Plan, (c) extend the time within which Options or SARs may be granted, (d) extend the period of an outstanding Option beyond ten (10) years from the date of grant or (e) change the designation of the persons or classes of persons eligible to receive Awards under the Plan. No amendment shall adversely affect the right of any Participant under any Award theretofore granted to him except upon his written consent to such amendment. Amendments requiring the approval of stockholders may be effected by the Board subject to such approval. 5.3 Termination. The Board may terminate the Plan at any time prior to its scheduled expiration date but no such termination shall adversely affect the rights of any Participant under any Award theretofore granted without his written consent. 5.4 Nonuniform Determinations. The Committee's determinations under the Plan, including without limitation (i) the determination of the Key Personnel and Directors to receive Awards, (ii) the form, amount and timing of such Awards, (iii) the terms and provisions of such Awards and (iv) the Agreements evidencing the same, need not be uniform and may be made by it selectively among Key Personnel and Directors who receive, or who are eligible to receive, Awards under the Plan, whether or not such Key Personnel or Directors are similarly situated. 5.5 No Right to Employment. Neither the action of the Company in establishing the Plan, nor any action taken by it or by the Board or the Committee under the Plan, nor any provision of the Plan, shall be construed as giving to any person the right to be retained in the employ, or as an officer or director, of the Company or any Subsidiary. 5.6 Changes in Stock. In the event of a stock dividend, split-up, or a combination of shares, recapitalization or merger in which the Company is the surviving corporation or other similar capital change, the number and kind of shares of stock or securities of the Company to be subject to the Plan and to Options or SARs then outstanding or to be granted thereunder, the maximum number of shares of stock or security
which may be issued on the exercise of Options granted under the Plan, the Option Price and other relevant provisions shall be appropriately adjusted by the Board, whose determination shall be binding on all persons. In the event of a consolidation or a merger in which the Company is not the surviving corporation, or any other merger in which the stockholders of the Company exchange their shares of stock in the Company for stock of another corporation, or in the event of complete liquidation of the Company, or in the case of a tender offer accepted by the Board of Directors, all outstanding Options and SARs shall thereupon terminate, provided that the Board may, prior to the effective date of any such consolidation or merger, either (i) make all outstanding Options and SARs immediately exercisable or (ii) arrange to have the surviving corporation grant to the Participants replacement Options and SARs on terms which the Board shall determine to be fair and reasonable.
ARTICLES OF INCORPORATION
OF
L.B. FOSTER COMPANY
(A Pennsylvania Corporation)
ARTICLE 1. The name of the corporation is:
L.B. FOSTER COMPANY
ARTICLE 2. The address of the registered office of the corporation in
Pennsylvania (which is located in Allegheny County) is:
412 Holiday Drive, Pittsburgh, Pennsylvania 15220
ARTICLE 3. The corporation is incorporated under the provisions of the Business
Corporation Law of 1988.
ARTICLE 4. The aggregate number of shares that the corporation shall have
authority to issue is 25,000,000 shares, divided into 20,000,000 shares of
Common Stock, par value $0.01 each, and 5,000,000 shares of preferred stock. The
board of directors shall have the full authority permitted by law to divide the
authorized and unissued shares of preferred stock into classes or series, or
both, and to determine for any such class or series its designation and the
number of shares of the class or series and the voting rights, preferences,
limitations and special rights, if any, of the class or series.
ARTICLE 5. The following provisions of the Business Corporation Law of
1988 shall not be applicable to the corporation:
(i) Section 1715 (relating to exercise of powers generally).
(ii) Section 2538 (relating to approval of transactions with interested
shareholders). (iii) Subchapter 25E (relating to control transactions). (iv)
Subchapter 25F (relating to business combinations).
(v) Subchapter 25G (relating to control-share acquisitions).
(vi) Subchapter 25H (relating to disgorgement by certain controlling
shareholders following attempts to acquire control).
2
ARTICLE 6. The shareholders of the corporation shall not have the right to
cumulate their votes for the election of directors of the corporation.
ARTICLE 7. These Articles of Incorporation may be amended in the manner
prescribed at the time by statute, and all rights conferred upon shareholders in
these Articles of Incorporation are granted subject to this reservation.
ARTICLE 8. The name and address of the incorporator are:
L.B. Foster Company
(a Delaware Corporation)
415 Holiday Drive
Pittsburgh, Pennsylvania 15220
L.B. FOSTER COMPANY
(Incorporator)
By: /s/David L. Voltz
----------------------------
Name: David L. Voltz
Title: Vice President
Exhibit 99.1
CERTIFICATION UNDER SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned
certifies that this periodic report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
information contained in this periodic report fairly presents, in all material
respects, the financial condition and results of operations of L. B. Foster
Company.
/s/Stan L. Hasselbusch
Stan L. Hasselbusch
President and
Chief Executive Officer
May 13, 2003
Exhibit 99.2
CERTIFICATION UNDER SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned
certifies that this periodic report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that
information contained in this periodic report fairly presents, in all material
respects, the financial condition and results of operations of L. B. Foster
Company.
/s/David J. Russo
-----------------
David J. Russo
Senior Vice President,
Chief Financial Officer and Treasurer
May 13, 2003