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, 2004
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 by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Act). Yes [ ] No [X]
Indicate the number of shares of each of the registrant's classes of common
stock as of the latest practicable date.
Class Outstanding at April 28, 2004
----- -----------------------------
Common Stock, Par Value $.01 9,922,520 Shares
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 Operations 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 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Item 4. Controls and Procedures 21
PART II. Other Information
- -------- -----------------
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 21
Signature 24
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, December 31,
2004 2003
------------ ------------
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents ...................... $ 36 $ 4,134
Accounts and notes receivable:
Trade ........................................ 43,100 34,668
Other ........................................ 2,260 105
--------- ---------
45,360 34,773
Inventories .................................... 40,934 36,894
Current deferred tax assets .................... 1,413 1,413
Other current assets ........................... 1,500 877
Property held for resale ....................... -- 446
--------- ---------
Total Current Assets ............................. 89,243 78,537
--------- ---------
Property, Plant & Equipment - At Cost ............ 71,050 70,814
Less Accumulated Depreciation .................... (37,962) (37,679)
--------- ---------
33,088 33,135
--------- ---------
Other Assets:
Goodwill ....................................... 350 350
Other intangibles - net ........................ 547 585
Investments .................................... 13,955 13,707
Deferred tax assets ............................ 4,098 4,095
Other assets ................................... 455 750
--------- ---------
Total Other Assets ............................... 19,405 19,487
--------- ---------
TOTAL ASSETS ..................................... $ 141,736 $ 131,159
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt ........... $ 540 $ 611
Short-term borrowings .......................... 822 --
Accounts payable - trade ....................... 34,076 23,874
Accrued payroll and employee benefits .......... 2,852 2,909
Current deferred tax liabilities ............... 1,749 1,749
Other accrued liabilities ...................... 2,506 2,550
--------- ---------
Total Current Liabilities ........................ 42,545 31,693
--------- ---------
Long-Term Borrowings ............................. 16,000 17,000
--------- ---------
Other Long-Term Debt ............................. 3,740 3,858
--------- ---------
Deferred Tax Liabilities ......................... 3,653 3,653
--------- ---------
Other Long-Term Liabilites ....................... 4,472 4,411
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock ................................... 102 102
Paid-in capital ................................ 34,934 35,018
Retained earnings .............................. 38,286 38,399
Treasury stock ................................. (1,319) (2,304)
Accumulated other comprehensive loss ........... (677) (671)
--------- ---------
Total Stockholders' Equity ....................... 71,326 70,544
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....... $ 141,736 $ 131,159
========= =========
See Notes to Condensed Consolidated Financial Statements.
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Three Months
Ended
March 31,
------------------------
2004 2003
------------------------
(Unaudited)
Net Sales .......................................... $ 65,452 $ 59,519
Cost of Goods Sold ................................. 59,470 52,586
-------- --------
Gross Profit ....................................... 5,982 6,933
Selling and Administrative Expenses ................ 6,401 6,567
Interest Expense ................................... 463 579
Other Income ....................................... (694) (320)
-------- --------
6,170 6,826
-------- --------
(Loss) Income From Continuing Operations Before
Income Taxes ..................................... (188) 107
Income Taxes ....................................... (75) 43
-------- --------
(Loss) Income From Continuing Operations ........... (113) 64
Discontinued Operations:
Loss From Operations of Foster Technologies ........ -- (380)
Income Tax Benefit ................................. -- (150)
-------- --------
Loss on Discontinued Operations .................... -- (230)
-------- --------
Net Loss ........................................... ($ 113) ($ 166)
======== ========
Basic & Diluted (Loss) Earnings Per Share:
From Continuing Operations ....................... ($ 0.01) $ 0.01
From Discontinued Operations, Net of Tax ......... -- (0.02)
-------- --------
Net Loss ........................................... ($ 0.01) ($ 0.02)
======== ========
See Notes to Condensed Consolidated Financial Statements.
L. B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months
Ended March 31,
2004 2003
--------------- --------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
(Loss) income from continuing operations ................................................. ($ 113) $ 64
Adjustments to reconcile (loss) income to net cash (used) provided
by operating activities:
Depreciation and amortization ........................................................ 1,276 1,313
Gain on sale of property, plant and equipment ........................................ (493) --
Unrealized loss (gain) on derivative mark-to-market .................................. 42 (11)
Change in operating assets and liabilities:
Accounts receivable .................................................................. (9,648) (581)
Inventories .......................................................................... (4,040) (1,752)
Other current assets ................................................................. (623) (786)
Other noncurrent assets .............................................................. 47 (142)
Accounts payable - trade ............................................................. 10,202 4,300
Accrued payroll and employee benefits ................................................ (57) 174
Other current liabilities ............................................................ (86) 37
Other liabilities .................................................................... 51 85
-------- --------
Net Cash (Used) Provided by Operating Activities ....................................... (3,442) 2,701
-------- --------
Net Cash Provided by Discontinued Operations .......................................... -- 228
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment .................................. 41 --
Capital expenditures on property, plant and equipment ................................ (1,231) (462)
-------- --------
Net Cash Used by Investing Activities .................................................. (1,190) (462)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of revolving credit agreement borrowings .................................. (178) (2,000)
Exercise of stock options and stock awards ........................................... 901 13
Repayments of long-term debt ......................................................... (189) (206)
-------- --------
Net Cash Provided (Used) by Financing Activities ....................................... 534 (2,193)
-------- --------
Net (Decrease) Increase in Cash and Cash Equivalents ..................................... (4,098) 274
Cash and Cash Equivalents at Beginning of Period ......................................... 4,134 3,653
-------- --------
Cash and Cash Equivalents at End of Period ............................................... $ 36 $ 3,927
======== ========
Supplemental Disclosure of Cash Flow Information:
Interest Paid ........................................................................ $ 424 $ 543
======== ========
Income Taxes Paid .................................................................... $ 6 $ 255
======== ========
During the first three months of 2004 and 2003, the Company did not finance any
capital expenditures through the execution of capital leases.
See Notes to Condensed Consolidated Financial Statements.
L. B. FOSTER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
--------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all estimates and
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. However, actual results could differ from
those estimates. The results of operations for interim periods are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2004. Amounts included in the balance sheet as of December 31, 2003
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, 2003.
2. ACCOUNTING PRINCIPLES
---------------------
In December 2003, the FASB issued Statement of Financial Accounting Standard No.
132 (Revised 2003) - "Employers' Disclosures about Pensions and Other
Post-retirement Benefits" (SFAS 132R), that replaces existing FASB disclosure
requirements for pensions and other post-retirement benefit plans. SFAS 132R
requires companies to provide more complete details about their plan assets,
benefit obligations, cash flows, benefit costs and other relevant information.
In addition to expanded disclosures, the standard improves information available
to investors in interim financial statements. With certain exceptions, SFAS 132R
is effective for fiscal years ending after December 31, 2003 and for quarters
beginning after December 31, 2003. See Note 5 for the additional disclosures
required by SFAS 132R.
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 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 2004 2003
- -------------------------------------------------------------------------------------------------------------------
Net (loss) income from continuing operations, as reported ............................ ($113) $ 64
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 ....... 51 62
-----
Pro forma (loss) income from continuing operations ................................... ($164) $ 2
====== =====
(Loss) earnings per share from continuing operations:
Basic and diluted, as reported ..................................................... ($0.01) $0.01
Basic and diluted, pro forma ....................................................... ($0.02) $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 2004 or 2003.
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, 2004 and
December 31, 2003 have been reduced by an allowance for doubtful accounts of
($868,000) and ($827,000), respectively. Bad debt expense was $41,000 and
$59,000 for the three-month periods ended March 31, 2004 and 2003, respectively.
4. INVENTORIES
===========
Inventories of the Company at March 31, 2004 and December 31, 2003 are
summarized as follows in thousands:
March 31, December 31,
2004 2003
- --------------------------------------------------------------------------------
Finished goods ................................. $ 22,084 $ 20,216
Work-in-process ................................ 9,802 7,379
Raw materials .................................. 10,882 11,133
--------- ---------
Total inventories at current costs ............. 42,768 38,728
(Less):
LIFO reserve ................................... (1,234) (1,234)
Inventory valuation reserve .................... (600) (600)
--------- ---------
$ 40,934 $ 36,894
========= =========
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. PROPERTY HELD FOR RESALE
------------------------
In August 2003, the Company reached an agreement to sell, modify, and install
the Company's former Newport, KY pipe coating machinery and equipment and
reclassified these assets as "held for resale". During the first quarter of
2004, the Company completed the modifications and installation and recognized a
$493,000 gain from the sale of these assets.
6. RETIREMENT PLANS
----------------
Substantially all of the Company's hourly paid employees are covered by one of
the Company's noncontributory, defined benefit plans and defined contribution
plans. Substantially all of the Company's salaried employees are covered by a
defined contribution plan established by the Company.
The Company's funding policy for defined benefit plans is to contribute the
minimum required by the Employee Retirement Income Security Act of 1974. Net
periodic pension costs for the three months ended March 31, 2004 and 2003 are as
follows:
Three Months Ended
March 31,
(in thousands) 2004 2003
- --------------------------------------------------------------------------------
Service cost ....................................... $ 14 $ 15
Interest cost ...................................... 51 49
Expected return on plan assets ..................... (44) (34)
Amortization of prior service cost ................. 2 2
Amortization of net loss ........................... 13 13
---- ----
Net periodic benefit cost .......................... $ 36 $ 45
==== ====
The Company expects to contribute $360,000 to its defined benefit plans in 2004.
As of March 31, 2004, $22,000 of contributions have been made.
The Company's defined contribution plan for the salaried employees allows all
eligible participants to contribute up to 41% (30% maximum on a pre-tax basis
and 11% maximum on an after-tax basis, subject to IRS limitations) of their
compensation to the Plan. The Plan calls for the Company to contribute 1% of the
employee's compensation plus $0.50 for each $1.00 contributed by the employee,
subject to a maximum of from 4% to 6% of the employee's compensation, based on
the years of service.
The expense associated with the defined contribution plans for the three months
ended March 31 was $163,000 in 2004 and $133,000 in 2003.
7. 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. At March 31,
2004, the remaining available borrowings under this agreement were approximately
$25,075,000. Interest on the credit facility is based on LIBOR plus a spread
ranging from 1.75% to 2.50%.
The agreement includes financial covenants requiring a minimum net worth and a
minimum level for the fixed charge coverage ratio. The agreement also restricts
dividends, investments, indebtedness, and the sale of certain assets. On
September 8, 2003, the first amendment to this agreement allowed for the sale of
the Company's equity interest in a specialty trackwork supplier. For more
information regarding the transaction, see "Other Matters" in the Management's
Discussion and Analysis section of this report. As of March 31, 2004, the
Company was in compliance with all of the agreement's covenants.
8. DISCONTINUED OPERATIONS
-----------------------
In February 2003, substantially all of the assets of Rail segment's rail
signaling and communication device business were sold for $300,000. The
operations of the rail signaling and communication device business qualified 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 were classified as discontinued and prior periods have been
restated.
Net sales and loss from discontinued operations were as follows:
Three Months Ended
In thousands March 31, 2003
- ----------------------------------------------------------------------------
Net sales ........................................... $ 1
------
Pretax operating loss ............................... ($310)
Pretax loss on disposal ............................. (70)
Income tax benefit .................................. 150
------
Loss from discontinued operations ................... ($230)
======
9. EARNINGS (LOSS) PER COMMON SHARE
--------------------------------
The following table sets forth the computation of basic and diluted earnings
(loss) per common share:
Three Months Ended
March 31,
(in thousands, except earnings per share) 2004 2003
- --------------------------------------------------------------------------------
Numerator:
Numerator for basic and diluted
earnings (loss) per common share -
net (loss) income available to common
stockholders:
(Loss) income from continuing operations ....... ($ 113) $ 64
Loss from discontinued operations .............. -- (230)
--------- ---------
Net loss ......................................... ($ 113) ($ 166)
========= =========
Denominator:
Weighted average shares ........................ 9,806 9,524
--------- ---------
Denominator for basic earnings
per common share ............................... 9,806 9,524
Effect of dilutive securities:
Contingent issuable shares ..................... -- 4
Employee stock options ......................... 343 71
--------- ---------
Dilutive potential common shares ................. 343 75
Denominator for diluted earnings
per common share - adjusted weighted
average shares and assumed conversions ......... 10,149 9,599
========= =========
Basic and diluted (loss) earnings per
common share:
Continuing operations ............................ ($ 0.01) $ 0.01
Discontinued operations .......................... -- (0.02)
--------- ---------
Basic and diluted loss per common share ............ ($ 0.01) ($ 0.02)
========= =========
10. 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 its 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.
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, 2004, the Company had outstanding letters of credit of
approximately $2,952,000.
11. 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, 2004 March 31, 2003
Net Segment Net Segment
(in thousands) Sales Profit/(Loss) Sales Profit/(Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Rail products .................................... $35,587 $ 617 $31,626 $ 681
Construction products ............................ 26,775 (1,056) 23,964 (527)
Tubular products ................................. 3,090 3 3,929 365
-------- -------- -------- --------
Total .......................................... $65,452 ($ 436) $59,519 $ 519
======== ======== ======== ========
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. There has
been no change in the measurement of segment profit/(loss) from December 31,
2003. Accounts receivable for the Construction segment increased approximately
$4,900,000 from year-end, primarily related to an increase in piling sales.
The following table provides a reconciliation of reportable net profit/(loss) to
the Company's consolidated total:
Three Months Ended
March 31,
(in thousands) 2004 2003
- -----------------------------------------------------------------------------------------------------
(Loss) income for reportable segments ............................ ($ 436) $ 519
Cost of capital for reportable segments .......................... 2,398 2,425
Interest expense ................................................. (463) (579)
Other income ..................................................... 694 320
Corporate expense and other unallocated charges .................. (2,381) (2,578)
-------- --------
(Loss) income from continuing operations, before income taxes .... ($ 188) $ 107
======== ========
12. COMPREHENSIVE LOSS
------------------
Comprehensive loss represents net loss plus certain stockholders' equity changes
not reflected in the Condensed Consolidated Statements of Operations. The
components of comprehensive loss, net of tax, were as follows:
Three Months Ended
March 31,
(in thousands) 2004 2003
- ------------------------------------------------------------------------------------------------------
Net loss ................................................................. ($113) ($166)
Unrealized derivative gains on cash flow hedges ......................... 12 10
Foreign currency translation (losses) gains .............................. (18) 8
Reclassification adjustment for foreign currency translation losses
included in net loss .................................................. -- 48
------ ------
Comprehensive loss ....................................................... ($119) ($100)
====== ======
13. RISKS AND UNCERTAINTIES
-----------------------
The Company's CXT Rail operations and Allegheny Rail Products division are
dependent on a Class I railroad for a significant portion of their business. An
agreement to supply concrete ties to this railroad expired in September 2003 and
as a result, tie sales have decreased. The Company is still selling ties to this
customer, although there are no longer annual minimum quantity requirements. In
December 2003, the Company bid on a new concrete tie supply agreement that is
expected to be a 5 to 7 year commitment. If the bid is successful, the Company
will be required to establish one or more new facilities to service this
agreement, which would require a significant capital investment. If the Company
is unsuccessful in the bidding process, it may cause the value of its two
existing tie facilities with total net assets of approximately $7,725,000 to be
partially impaired. The Company expects to know the results of its bid in the
second quarter.
14. SUBSEQUENT EVENT
----------------
The Company had a LIBOR-based interest rate collar agreement, which became
effective in April 2001 and expired in April 2006, with a notional value of
$10,000,000, a maximum annual interest rate of 5.14%, and a minimum annual
interest rate of 4.97%. The counter-party to the collar agreement had the
option, on April 18, 2004, to convert the $10,000,000 collar to a two-year
fixed-rate instrument with interest payable at an annual rate of 5.48%. The fair
value of this collar agreement was a liability of $735,000 as of March 31, 2004.
In April 2004, prior to the counter-party option, the Company terminated the
$10,000,000 interest rate collar agreement by purchasing it for its fair value
of $707,000.
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
General
- -------
L. B. Foster Company is a manufacturer, fabricator and distributor of products
utilized in the transportation infrastructure, construction and utility markets.
The Company is comprised of three business segments: Rail products, Construction
products and Tubular products.
Recent Developments
- -------------------
The Company had previously reached an agreement to sell, modify and install
machinery and equipment related to its former Newport, KY pipe-coating facility.
During the first quarter of 2004, the Company completed the installation and
recognized a $0.5 million gain from the sale of these assets, which had been
classified as "held for resale".
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 judgments 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, 2003.
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,
2003.
NEW ACCOUNTING PRONOUNCEMENTS
In December 2003, the FASB issued Statement of Financial Accounting Standard No.
132 (Revised 2003) - "Employers' Disclosures about Pensions and Other
Post-retirement Benefits" (SFAS 132R), that replaces existing FASB disclosure
requirements for pensions and other post-retirement benefit plans. SFAS 132R
requires companies to provide more complete details about their plan assets,
benefit obligations, cash flows, benefit costs and other relevant information.
In addition to expanded disclosures, the standard improves information available
to investors in interim financial statements. With certain exceptions, SFAS 132R
is effective for fiscal years ending after December 31, 2003 and for quarters
beginning after December 31, 2003. See Note 5 to the consolidated financial
statements in this 10-Q which presents the additional disclosures required by
SFAS 132R.
RESULTS OF OPERATIONS
Three Months Ended
March 31,
-----------------------
2004 2003
-----------------------
(Dollars in thousands)
Net Sales:
Rail Products .................................. $ 35,587 $ 31,626
Construction Products .......................... 26,775 23,964
Tubular Products ............................... 3,090 3,929
--------- ---------
Total Net Sales ............................ $ 65,452 $ 59,519
========= =========
Gross Profit:
Rail Products .................................. $ 3,422 $ 3,786
Construction Products .......................... 2,533 2,806
Tubular Products ............................... 435 802
Other .......................................... (408) (461)
--------- ---------
Total Gross Profit ......................... 5,982 6,933
--------- ---------
Expenses:
Selling and administrative expenses ............ 6,401 6,567
Interest expense ............................... 463 579
Other income ................................... (694) (320)
--------- ---------
Total Expenses ............................. 6,170 6,826
--------- ---------
(Loss) Income From Continuing Operations
Before Income Taxes ............................ (188) 107
Income Tax (Benefit) Expense ......................... (75) 43
--------- ---------
(Loss) Income From Continuing Operations ............. (113) 64
Discontinued Operations:
Loss From Operations of Foster Technologies .... -- (380)
Income Tax Benefit ............................. -- (150)
--------- ---------
Loss on Discontinued Operations ...................... -- (230)
--------- ---------
Net Loss ............................................. ($ 113) ($ 166)
========= =========
Gross Profit %:
Rail Products .................................. 9.6% 12.0%
Construction Products .......................... 9.5% 11.7%
Tubular Products ............................... 14.1% 20.4%
Total Gross Profit ......................... 9.1% 11.6%
First Quarter 2004 Results of Operations
- ----------------------------------------
The Company had a first quarter net loss of $0.1 million ($0.01 per share) on
net sales of $65.5 million. Including a net loss from the discontinued
operations of the Company's Foster Technologies subsidiary, the first quarter of
2003 resulted in a net loss of $0.2 million ($0.02 per share) on net sales of
$59.5 million.
Net sales for the first quarter of 2004 improved 10.0% over the same period in
2003. This improvement came from our Rail and Construction segments. Rail
segment sales increased 12.5% due to an exceptionally strong quarter for our new
rail distribution business. Construction products' net sales increased 11.7% due
primarily to increases in H-beam prices and volume within our piling division.
The decline in Tubular products' sales can be attributed to a decline in major
pipeline installations, as higher steel costs have caused these projects to be
delayed.
The Company's gross profit margin was 9.1% in the first quarter of 2004 compared
to 11.6% in the same period last year. Rail products' profit margin dropped 2.4
percentage points primarily due to the fact that the sales increases were
experienced by our lower margin distribution businesses. Sales volumes were down
for higher margin manufactured rail products. The low volumes in our
manufacturing plants resulted in inefficiencies that further reduced margins.
The 2.2 percentage point decline in Construction products' margin was also due
to weaker sales of higher margin manufactured and fabricated products and
related plant inefficiencies. Our highway products rely on government spending
for infrastructure projects. Continued delays in passing legislation for these
projects and continued state budget deficits have created a competitive
environment for a smaller number of new government sponsored projects. This
environment continues to have an unfavorable impact on Construction segment
gross margin. Tubular products' 6.3 percentage point decline in gross margin is
related to plant inefficiencies from volume declines, as a result of the
above-mentioned delays in major pipeline projects.
Selling and administrative expenses declined $0.2 million, or 2.5% compared to
the first quarter of 2003. This decline was primarily due to lower insurance
costs realized in the current quarter. Interest expense declined 20% from the
prior year period due principally to a $4.5 million reduction in corporate debt.
Other income improved by $0.4 million as a result of the successful installation
and sale of the Company's former Newport, KY pipe-coating machinery and
equipment which had been classified as "held for resale".
The effective tax rate for the first quarters of 2004 and 2003 was approximately
40%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capitalization is as follows:
March 31, December 31,
(in thousands) 2004 2003
- --------------------------------------------------------------------------------
Debt:
Revolving credit facility ...................... $16,822 $17,000
Capital leases ................................. 1,443 1,616
Other (primarily revenue bonds) ................ 2,837 2,853
------- -------
Total Debt ................................... 21,102 21,469
------- -------
Equity ......................................... 71,326 70,544
------- -------
Total Capitalization ........................... $92,428 $92,013
======= =======
Debt as a percentage of capitalization (debt plus equity) remained at 23%.
Working capital was $46.7 million at March 31, 2004 compared to $46.8 million at
December 31, 2003.
The Company's liquidity needs arise from seasonal working capital requirements,
capital expenditures, acquisitions and debt service obligations. The following
table summarized the impact of these items:
March 31,
(in thousands) 2004 2003
- --------------------------------------------------------------------------------
LIQUIDITY NEEDS:
Working capital and other assets and liabilities ..... ($4,154) $ 1,335
Capital expenditures, net of asset sales ............. (1,190) (462)
Scheduled debt service obligations - net ............. (189) (206)
Cash interest ........................................ (424) (543)
-------- --------
Net liquidity (requirements) surplus ............... (5,957) 124
-------- --------
LIQUIDITY SOURCES (USES):
Internally generated cash flows before interest ...... 1,136 1,909
Credit facility activity ............................. (178) (2,000)
Equity transactions .................................. 901 13
Other ................................................ -- 228
-------- --------
Net liquidity sources .............................. 1,859 150
-------- --------
NET CHANGE IN CASH ................................... ($4,098) $ 274
======== ========
Capital expenditures were $1.2 million for the first quarter of 2004 compared to
$0.5 million in the same period of 2003. The amount of capital spending in 2004
will depend upon the outcome of the Company's bid on a concrete tie contract, as
a successful outcome will require the construction of one or more facilities.
Excluding business acquisitions and the potential concrete tie facilities,
capital expenditures for 2004 are expected to be approximately $4.0 million, and
funded by cash flow from operations and available external financing sources.
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 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.
The Company has an agreement that 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 Company's inventory and
trade receivables. Availability under this agreement is limited by the amount of
eligible inventory and accounts receivable applied against certain advance
rates. Interest on the credit facility is based on LIBOR plus a spread ranging
from 1.75% to 2.5%. Total revolving credit agreement borrowings at March 31,
2004 were $16.8 million, a decrease of $0.2 million from December 31, 2003. At
March 31, 2004, remaining available borrowings under this facility were
approximately $25.1 million. Outstanding letters of credit at March 31, 2004
were approximately $3.0 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.
The credit agreement includes financial covenants requiring a minimum net worth
and a minimum level for the fixed charge coverage ratio. The primary
restrictions to this agreement include investments, indebtedness, and the sale
of certain assets. On September 8, 2003, the first amendment to this agreement
allowed for the sale of the Company's equity interest in a specialty trackwork
supplier. For more information regarding the transaction, see "Other Matters".
As of March 31, 2004, the Company was in compliance with all of the agreement's
covenants.
OFF-BALANCE SHEET ARRANGEMENTS
The Company's off-balance sheet arrangements include operating leases, purchase
obligations and standby letters of credit. A schedule of the Company's required
payments under financial instruments and other commitments as of December 31,
2003 are included in "Liquidity and Capital Resources" section of the Company's
2003 Annual Report files on Form 10-K. There have been no significant changes to
the Company's contractual obligations relative to the information presented in
the Form 10-K. These arrangements provide the Company with increased flexibility
relative to the utilization and investment of cash resources.
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, 2004, 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 $5.0 million. The Company owns approximately
13.6% of the DM&E.
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 Surface Transportation Board (STB) approved the Project in January
2002. In October 2003, however, the 8th U.S. Circuit Court of Appeals remanded
the matter to the STB and instructed the STB to address, in its environmental
impact statement, the Project's effects on air quality, noise and vibration, and
preservation of historic sites. On January 30, 2004, the 8th U. S. Circuit Court
of Appeals denied petitions seeking a rehearing of the case.
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.
In December 2003, the DM&E received a Railroad Rehabilitation and Improvement
Financing (RRIF) Loan in the amount of $233.0 million from the Federal Railroad
Administration. Funding provided by the 25-year loan will be used to refinance
debt and upgrade infrastructure along parts of its existing route.
OTHER MATTERS
Specialty trackwork sales of the Company's Rail segment have declined since a
decision was made to terminate our relationship with a principal trackwork
supplier during the third quarter of 2002. In the third quarter of 2003, we
exchanged our minority ownership interest and advances to this supplier for a
$5.5 million promissory note from the supplier's owner, with principal and
accrued interest to be repaid beginning in January 2008. The value of this note
has been fully reserved and no gain or loss was recorded on this transaction.
During the first three months of 2004 and 2003, the volume of business the
supplier conducted with the Company was approximately $1.0 million and $3.4
million, respectively. Most of the combined order backlog was completed in 2003
and approximately $1.1 million remained at March 31, 2004. If this supplier is
unable to perform, it could have a further negative impact on earnings and cash
flows.
During the first quarter of 2003, the Company sold certain assets and
liabilities of its Foster Technologies subsidiary, engaged in the rail signaling
and communication device business, for $0.3 million. This subsidiary had been
classified as a discontinued operation in December 2002. The first quarter 2003
loss from this business was principally due to losses incurred up to the sale
date, as well as certain charges taken for employee severance costs and lease
obligations.
We continue to evaluate the overall performance of our operations. A decision to
down-size 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
Our CXT Rail operations and Allegheny Rail Products division are dependent on a
Class I railroad for a significant portion of their business. Our agreement to
supply concrete ties to this railroad expired in September 2003 and as a result,
tie sales have decreased. We are still selling ties to this customer, although
there are no longer annual minimum quantity requirements. In December 2003, we
bid on a new concrete tie supply agreement that is expected to be a 5 to 7 year
commitment. If our bid is successful, we will be required to establish one or
more new facilities to service this agreement, which would require a significant
capital investment. If we are unsuccessful in the bidding process, it may cause
the value of our two existing tie facilities with total net assets of
approximately $7.7 million to be partially impaired. We expect to know the
results of our bid in the second quarter.
Our business is dependent upon steel as a key component in the products that we
sell. In the past year, the price of scrap steel, which is a key ingredient used
by mini-mills to manufacture many steel products, has more than doubled.
Producers and other suppliers continue to quote high prices or are quoting
monthly price surcharges. Some of our suppliers are experiencing supply
problems. Since many of the Company's projects can be six months to twenty-four
months in duration, we find ourselves caught in the middle of some of these
pricing and availability issues. While we believe this highly unusual situation
to be temporary in nature, it could have a negative impact on the Company's
sales volumes, results of operations and cash flows until the market normalizes.
Although scrap prices have moderated over the last two months, we are uncertain
as to what a more medium-term "normalization" will look like with regard to
pricing and availability.
In 2003, we received an increased but still limited supply of sheet piling from
our exclusive supplier. The sheet piling supply is still not adequately
consistent and reliable for our piling business to grow profitably. We expect
this year to be pivotal in determining whether sheet piling will contribute to
the future growth of this business.
Last year we began the implementation of Lean Enterprise (Lean) across the
organization. Lean is a methodology as well as a mindset, utilized in managing a
business that focuses on the execution and continuous improvement of all
business processes with the objective of maximizing speed and flexibility at the
lowest cost. Proper implementation of Lean can lead to other benefits such as
better quality control and improved worker safety.
Lean has commenced at six of our manufacturing facilities and the preliminary
results have been positive, with significant improvement in productivity in
several manufacturing processes. For these improvements to make a significant
impact on our financial results, we must experience increased volumes at these
facilities.
A 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. An extension of the
Federal highway and transit bill (TEA-21) that was to expire April 30, 2004 has
been extended another two months, as reauthorization of a successive bill is
further delayed. A new highway and transit bill is important to the future
growth and profitability of many of the Company's businesses. 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 negatively by adverse weather conditions.
Although backlog is not necessarily indicative of future operating results,
total Company backlog at March 31, 2004, was approximately $118.6 million. The
following table provides the backlog by business segment:
Backlog
------------------------------------
March 31, December 31, March 31,
(In thousands) 2004 2003 2003
- --------------------------------------------------------------------------------
Rail Products .......................... $ 46,038 $ 37,529 $ 52,317
Construction Products .................. 67,886 67,100 71,721
Tubular Products ....................... 4,695 1,035 3,417
-------- -------- --------
Total ...... $118,619 $105,664 $127,455
======== ======== ========
The increase in Rail segment backlog from December 31, 2003, resulted primarily
from an increase in concrete tie orders. An increase in threaded pipe backlog
for products in the water well market and pipe coating services improved the
Tubular segment backlog.
The decline in Rail segment backlog from March 31, 2003 reflects a reduction in
specialty trackwork and transit products backlog and the expiration of a
concrete tie supply contract that included annual minimum sales volumes.
MARKET RISK AND RISK MANAGEMENT POLICIES
The Company does not purchase or hold any derivative financial instruments for
trading purposes. 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. The Company's primary source of
variable-rate debt comes from its revolving credit agreement. 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. The Company has a
LIBOR-based interest rate collar agreement, which became effective in March 2001
and expires in March 2006, with a notional value of $15,000,000, a maximum
annual interest rate of 5.60% and a minimum annual interest rate of 5.00%. The
counterparty to the collar agreement has the option, on March 6, 2005, to
convert the $15,000,000 collar to a one-year, fixed-rate instrument with
interest payable at an annual rate of 5.49%. The fair value of this collar
agreement was a liability of $999,000 as of March 31, 2004. The Company also has
a LIBOR-based interest rate collar agreement, which became effective in April
2001 and expires in April 2006, with a notional value of $10,000,000, a maximum
annual interest rate of 5.14%, and a minimum annual interest rate of 4.97%. The
counter-party to the collar agreement had the option, on April 18, 2004, to
convert the $10,000,000 collar to a two-year fixed-rate instrument with interest
payable at an annual rate of 5.48%. The fair value of this collar agreement was
a liability of $735,000 as of March 31, 2004.
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
retained these instruments as protection against interest rate risk associated
with the new credit agreement and the Company records the mark-to-market
adjustments on these interest rate collars in its consolidated statements of
operations. The fair value of the interest rate collars on March 31, 2004 was a
$1,734,000 liability and the company recorded approximately $42,000 of expense
in "other income" in the first quarter of 2004 on the Condensed Consolidated
Statements of Operations 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 an 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 two interest rate collar agreements have 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 revolving credit agreement 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 $16.0
million of outstanding floating rate debt would result in increased annual
interest costs of approximately $0.2 million.
In April 2004, prior to the counter-party option, the Company terminated the
$10,000,000 interest rate collar agreement by purchasing it for its fair value
of $707,000.
The Company is not subject to significant exposures to changes in foreign
currency exchange rates. The Company will, however, manage its exposure to
changes in foreign currency exchange rates on firm sales and purchase
commitments by entering into foreign currency exchange contracts. The Company's
risk management objective is to reduce its exposure to the effects of changes in
exchange rates on these transactions over the duration of the transaction.
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 cautions 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 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. The Company's businesses could be affected
adversely by continued price increases in the steel scrap market. 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) As of the end of the period covered by 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 Chief Executive
Officer and the Chief Financial Officer, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures pursuant
to Exchange Act Rules 13a - 15(e) and 15d - 15(e). Based upon that
evaluation, the Chief Executive Officer and 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
over financial reporting that occurred in the period covered by this report
that have materially affected or are likely to materially affect the
Company's internal controls over financial reporting.
PART II OTHER INFORMATION
-------------------------
Item 1. LEGAL PROCEEDINGS
-----------------
See Note 10, "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, filed as Exhibit 3.1 to Form
10-Q for the quarter ended March 31, 2003.
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, filed as
Exhibit 4.0.1 to Form 10-Q for the quarter ended March 31, 2003.
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.
4.0.3 First Amendment to Revolving Credit and Security Agreement dated
September 8, 2003, between the Registrant and PNC Bank, N.A, filed as
Exhibit 4.0.3 to Form 10-Q for the quarter ended September 30, 2003.
10.12 Lease between CXT Incorporated and Pentzer Development Corporation,
dated April 1, 1993, filed as Exhibit 10.12 to Form 10-K for the year
ended December 31, 1999.
10.12.1 Second Amendment dated March 12, 1996 to lease between CXT
Incorporated and Crown West Realty, LLC, successor, filed as Exhibit
10.12.1 to Form 10-K for the year ended December 31, 1999.
10.12.2 Third Amendment dated November 7, 2002 to lease between CXT
Incorporated and Crown West Realty, LLC, filed as Exhibit 10.12.2 to
Form 10-K for the year ended December 31, 2002.
10.12.3 Fourth Amendment dated December 15, 2003 to lease between CXT
Incorporated and Crown West Realty, LLC, filed as Exhibit 10.12.3 to
Form 10-K for the year ended December 31, 2003.
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.
10.15 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.
10.15.1 Renewal Rider for lease between CXT Incorporated, Union Pacific
Railroad Company and Nevada Railroad Materials, Inc., dated December
17, 2003, and filed as Exhibit 10.15.1 to Form 10-K for the year ended
December 31, 2003.
10.15.2 Renewal Rider for lease between CXT Incorporated and Union Pacific
Railroad Company dated December 17, 2003 and filed as Exhibit 10.15.2
to Form 10-K for the year ended December 31, 2003.
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.
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.
10.20 Equipment Purchase and Service Agreement by and between the
Registrant and LaBarge Coating LLC, dated July 31, 2003, and filed as
Exhibit 10.20 to Form 10-Q for the quarter ended September 30, 2003.
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, filed as Exhibit 10.33.2 to Form 10-Q for the quarter ended
March 31, 2003. **
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 effective January 1, 2004, filed as
Exhibit 10.45 to Form 10-K for the year ended December 31, 2003. **
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 dated May 13, 2003, under which directors'
compensation was established, filed as Exhibit 10.53 to Form 10-Q for
the quarter ended June 30, 2003. **
10.55 2004 Management Incentive Compensation Plan, filed as Exhibit 10.55
to Form 10-K for he year ended December 31, 2003.
19 Exhibits marked with an asterisk are filed herewith.
* 31.1 Certification of Chief Executive Officer under Section 302 of the
Sarbanes-Oxley Act of 2002.
* 31.2 Certification of Chief Financial Officer under Section 302 of the
Sarbanes-Oxley Act of 2002.
* 32.0 Certification of Chief Executive Officer and 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 20, 2004, the Registrant filed a current report on Form 8-K under Item
12 announcing first quarter results.
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 10, 2004 By: /s/David J.Russo
------------- --------------------
David J. Russo
Senior Vice President,
Chief Financial Officer and
Treasurer
(Duly Authorized Officer of Registrant)
Exhibit 31.1
Certification under Section 302 of the
Sarbanes-Oxley Act of 2002
I, Stan L. Hasselbusch, President and Chief Executive Officer of L. B. Foster
Company, 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 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-15(e) and 15d - 15(e)) for the
registrant and we have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 and presented in this quarterly report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based upon such evaluation; and
(c) Disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
function):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
May 10, 2004 /s/Stan L. Hasselbusch
--------------------------------------------
Name: Stan L. Hasselbusch
Title: President and Chief Executive Officer
Exhibit 31.2
Certification under Section 302 of the
Sarbanes-Oxley Act of 2002
I, David J. Russo, Senior Vice President, Chief Financial Officer and Treasurer
of L. B. Foster Company, 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 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-15(e) and 15d -
15(e)) for the registrant and we have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, 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 and presented in this quarterly
report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based upon such evaluation;
and
(c) Disclosed in this quarterly report any change in the
registrant's internal control over financial reporting that
occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's
internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent function):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
May 10, 2004 /s/David J. Russo
--------------------------
Name: David J. Russo
Title: Senior Vice President,
Chief Financial Officer and Treasurer
Exhibit 32.0
CERTIFICATE PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002 (18 U.S.C. SECTION 1350)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, (subsections (a) and
(b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the
undersigned officers of L. B. Foster Company does hereby certify to the best of
their knowledge and belief that:
(1) The quarterly report on Form 10-Q for the quarter ended March 31,
2004, which this statement accompanies, fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(2) The information contained in this quarterly report on Form 10-Q for
the quarter ended March 31, 2004, fairly presents, in all material
respects, the financial condition and results of operations of L. B.
Foster Company.
Date: May 10, 2004 By:/s/Stan L. Hasselbusch
-------------- -----------------------------------
Stan L. Hasselbusch
President and
Chief Executive Officer
Date: May 10, 2004 By:/s/David J. Russo
-------------- -----------------------------------
David J. Russo
Senior Vice President,
Chief Financial Officer and
Treasurer