Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended March 31, 2014

Or

 

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from                      to                     

Commission File Number: 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) 928-3400

(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 check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

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

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

 

Class

 

Outstanding at April 24, 2014

Common Stock, Par Value $.01   10,338,841 Shares

 

 

 


Table of Contents

L.B. FOSTER COMPANY AND SUBSIDIARIES

INDEX

 

     Page  

PART I. Financial Information

  

Item 1. Financial Statements (unaudited):

  

Condensed Consolidated Balance Sheets

     3   

Condensed Consolidated Statements of Operations

     4   

Condensed Consolidated Statements of Comprehensive Income

     5   

Condensed Consolidated Statements of Cash Flows

     6   

Notes to Condensed Consolidated Financial Statements

     8   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     23   

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     30   

Item 4. Controls and Procedures

     30   

PART II. Other Information

  

Item 1. Legal Proceedings

     31   

Item 1A. Risk Factors

     31   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     31   

Item 4. Mine Safety Disclosures

     31   

Item 6. Exhibits

     32   

Signature

     33   

Index to Exhibits

     34   

 

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Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

     March 31,     December 31,  
     2014     2013  
     (Unaudited)        

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 91,131      $ 64,623   

Accounts receivable—net

     66,771        98,437   

Inventories—net

     77,644        76,956   

Current deferred tax assets

     461        461   

Prepaid income tax

     3,977        4,741   

Other current assets

     4,445        2,000   

Current assets of discontinued operations

     88        149   
  

 

 

   

 

 

 

Total current assets

     244,517        247,367   

Property, plant, and equipment—net

     51,478        50,109   

Other assets:

    

Goodwill

     57,781        57,781   

Other intangibles—net

     50,705        51,846   

Investments

     5,204        5,090   

Other assets

     1,480        1,461   
  

 

 

   

 

 

 

Total Assets

   $ 411,165      $ 413,654   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 43,617      $ 46,620   

Deferred revenue

     7,130        5,715   

Accrued payroll and employee benefits

     5,753        8,927   

Accrued warranty

     7,010        7,483   

Current maturities of long-term debt

     114        31   

Current deferred tax liabilities

     179        179   

Other accrued liabilities

     7,013        6,501   

Liabilities of discontinued operations

     26        26   
  

 

 

   

 

 

 

Total current liabilities

     70,842        75,482   

Long-term debt

     319        25   

Deferred tax liabilities

     11,591        11,798   

Other long-term liabilities

     10,472        9,952   

Stockholders’ equity:

    

Common stock, par value $.01, authorized 20,000,000 shares; shares issued at March 31, 2014 and December 31, 2013, 11,115,779; shares outstanding at March 31, 2014 and December 31, 2013, 10,211,032 and 10,188,521

     111        111   

Paid-in capital

     46,565        47,239   

Retained earnings

     301,701        298,361   

Treasury stock—at cost, common stock, 904,747 shares at March 31, 2014 and 927,258 shares at December 31, 2013

     (24,144     (24,731

Accumulated other comprehensive loss

     (6,292     (4,583
  

 

 

   

 

 

 

Total stockholders’ equity

     317,941        316,397   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 411,165      $ 413,654   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

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Table of Contents

L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share data)

 

     Three Months Ended  
     March 31,  
     2014     2013  
     (Unaudited)  

Net sales

   $ 111,414      $ 129,321   

Cost of goods sold

     87,287        104,473   
  

 

 

   

 

 

 

Gross profit

     24,127        24,848   

Selling and administrative expenses

     18,025        17,130   

Amortization expense

     1,141        701   

Interest expense

     123        133   

Interest income

     (144     (206

Equity in income of nonconsolidated investment

     (204     (176

Other income

     (135     (178
  

 

 

   

 

 

 
     18,806        17,404   
  

 

 

   

 

 

 

Income from continuing operations before income taxes

     5,321        7,444   

Income tax expense

     1,672        2,493   
  

 

 

   

 

 

 

Income from continuing operations

     3,649        4,951   
  

 

 

   

 

 

 

Discontinued operations:

    

Loss from discontinued operations before income taxes

     —          (39

Income tax benefit

     —          (15
  

 

 

   

 

 

 

Loss from discontinued operations

     —          (24
  

 

 

   

 

 

 

Net income

   $ 3,649      $ 4,927   
  

 

 

   

 

 

 

Basic earnings per common share:

    

From continuing operations

   $ 0.36      $ 0.49   

From discontinued operations

     —          (0.00
  

 

 

   

 

 

 

Basic earnings per common share

   $ 0.36      $ 0.49   
  

 

 

   

 

 

 

Diluted earnings per common share:

    

From continuing operations

   $ 0.35      $ 0.48   

From discontinued operations

     —          (0.00
  

 

 

   

 

 

 

Diluted earnings per common share

   $ 0.35      $ 0.48   
  

 

 

   

 

 

 

Dividends paid per common share

   $ 0.03      $ 0.03   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

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L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

 

     Three Months Ended  
     March 31,  
     2014     2013  
     (Unaudited)  

Net income

   $ 3,649      $ 4,927   
  

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax:

    

Foreign currency translation adjustment

     (1,750     (1,823

Reclassification of pension liability adjustments to earnings, *
net of tax expense: $21 and $36

     41        69   
  

 

 

   

 

 

 

Other comprehensive loss, net of tax

     (1,709     (1,754
  

 

 

   

 

 

 

Comprehensive income

   $ 1,940      $ 3,173   
  

 

 

   

 

 

 

 

* Reclassifications out of accumulated other comprehensive income for pension obligations are charged to selling and administrative expense.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

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L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     Three Months Ended  
     March 31,  
     2014     2013  
     (Unaudited)  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Income from continuing operations

   $ 3,649      $ 4,951   

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:

    

Deferred income taxes

     (195     (221

Depreciation and amortization

     2,902        2,365   

Equity in income of nonconsolidated investment

     (204     (176

Loss (gain) on sales and disposals of property, plant, and equipment

     12        (8

Share-based compensation

     575        631   

Excess income tax benefit from share-based compensation

     (85     (189

Change in operating assets and liabilities, net of acquisitions:

    

Accounts receivable

     31,513        (12,852

Inventories

     (833     (295

Other current assets

     (1,755     (1,298

Prepaid income tax

     450        (1,593

Other noncurrent assets

     43        91   

Dividends from LB Pipe & Coupling Products, LLC

     90        378   

Accounts payable

     (2,568     (9,363

Deferred revenue

     1,401        4,660   

Accrued payroll and employee benefits

     (3,135     (3,940

Other current liabilities

     (330     (78

Other liabilities

     595        (301
  

 

 

   

 

 

 

Net cash provided (used) by continuing operating activities

     32,125        (17,238
  

 

 

   

 

 

 

Net cash provided by discontinued operations

     61        124   
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Proceeds from the sale of property, plant, and equipment

     184        8   

Capital expenditures on property, plant, and equipment

     (3,499     (1,031

Acquisition of business

     (495     —     
  

 

 

   

 

 

 

Net cash used by continuing investing activities

     (3,810     (1,023
  

 

 

   

 

 

 

 

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L.B. FOSTER COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

 

     Three Months Ended  
     March 31,  
     2014     2013  
     (In thousands)  

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Repayments of other long-term debt

     (19     (18

Proceeds from other long-term debt

     316        —     

Treasury stock acquisitions

     (747     (547

Cash dividends on common stock paid to shareholders

     (309     (310

Excess income tax benefit from share-based compensation

     85        189   
  

 

 

   

 

 

 

Net cash used by continuing financing activities

     (674     (686
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (1,194     (1,206
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     26,508        (20,029

Cash and cash equivalents at beginning of period

     64,623        101,464   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 91,131      $ 81,435   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Interest paid

   $ 87      $ 86   
  

 

 

   

 

 

 

Income taxes paid

   $ 1,480      $ 4,076   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

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L.B. FOSTER COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. FINANCIAL STATEMENTS

(Dollars in thousands, except share data)

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States 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 U.S. 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 ending December 31, 2014. Amounts included in the balance sheet as of December 31, 2013 were derived from our audited balance sheet. This Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In this Quarterly Report on Form 10-Q, references to “Foster,” “we,” “us,” “our,” and the “Company” refer collectively to L.B. Foster and its consolidated subsidiaries.

Reclassifications

Certain amounts in previously issued financial statements have been reclassified to conform to the current period presentation.

2. BUSINESS SEGMENTS

The Company is a leading manufacturer, fabricator, and distributor of products and services for rail, construction, energy, and utility markets. The Company is organized and evaluated by product group, which is the basis for identifying reportable segments. Each segment represents a revenue-producing component of the Company for which separate financial information is produced internally and is subject to evaluation by the Company’s chief operating decision maker in deciding how to allocate resources. Each segment is evaluated based upon their contribution to the Company’s consolidated results based upon segment profit.

The following table illustrates revenues and profits from continuing operations of the Company by segment for the periods indicated:

 

     Three Months Ended  
     March 31, 2014      March 31, 2013  
     Net      Segment      Net      Segment  
     Sales      Profit      Sales      Profit  

Rail Products

   $ 73,496       $ 5,316       $ 81,399       $ 6,201   

Construction Products

     27,383         1,216         36,811         462   

Tubular Products

     10,535         586         11,111         2,607   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 111,414       $ 7,118       $ 129,321       $ 9,270   
  

 

 

    

 

 

    

 

 

    

 

 

 

Segment profits from continuing operations, 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 from continuing operations from December 31, 2013. The internal cost of capital charges are eliminated during the consolidation process.

 

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The following table provides a reconciliation of reportable segment net profit from continuing operations to the Company’s consolidated total:

 

     Three Months Ended  
     March 31,  
     2014     2013  

Income for reportable segments

   $ 7,118      $ 9,270   

Interest expense

     (123     (133

Interest income

     144        206   

Other income

     135        178   

LIFO expense

     (4     (240

Equity in income of nonconsolidated investment

     204        176   

Corporate expense, cost of capital elimination, and other unallocated charges

     (2,153     (2,013
  

 

 

   

 

 

 

Income from continuing operations before income taxes

   $ 5,321      $ 7,444   
  

 

 

   

 

 

 

3. ACQUISITIONS

During the prior year, the Company acquired substantially all of the assets and liabilities of Ball Winch, LLC (Ball Winch). Cash payments totaling $37,500 were made during 2013 and a post-closing working capital adjustment of $495 was paid in February 2014 resulting in a total purchase price of $37,995. Included within the purchase price was $3,300 which is held in escrow to satisfy any indemnity claims under the purchase agreement. The results of operations for Ball Winch are included in the Company’s Tubular segment for the quarter ended March 31, 2014.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition:

 

Allocation of Purchase Price

   Fair Value  

Current assets

   $ 1,857   

Other assets

     64   

Property, plant, and equipment

     5,555   

Goodwill

     16,544   

Other intangibles

     14,682   

Current liabilities

     (707
  

 

 

 

Total

   $ 37,995   
  

 

 

 

The Company has concluded that intangible assets and goodwill values resulting from this transaction will be deductible for tax purposes.

 

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The following table summarizes the estimates of the fair values and amortizable lives of the identifiable intangible assets acquired:

 

Intangible Asset

   Fair Value      Weighted Average Amortizable
Life (years)
 

Trade name

   $ 723         0.5   

Technology

     11,129         7.5   

Non-competition agreements

     2,830         1.0   
  

 

 

    

Total identified intangible assets

   $ 14,682      
  

 

 

    

The Company continues to evaluate certain current liabilities assumed in the acquisition. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected their measurement, the Company will retrospectively adjust the amounts recognized as of the acquisition date.

4. GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying amount of goodwill at March 31, 2014 and December 31, 2013 was $57,781, of which $38,026 is attributable to the Company’s Rail Products segment, $16,544 to the Tubular Products segment, and $3,211 to the Construction Products segment.

The Company performs goodwill impairment tests at least annually if it is determined that it is more likely than not that the fair value of a reporting unit is less than the carrying amount. Qualitative factors are assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. No goodwill impairment test was required in connection with these evaluations for the three months ended March 31, 2014. The Company performs its annual evaluation of the carrying value of its goodwill during the fourth quarter.

As of March 31, 2014 and December 31, 2013, gross identified intangible assets of $44,455 are attributable to the Company’s Rail Products segment, $14,682 are attributable to the Tubular Products segment, and $1,830 are attributable to the Construction Products segment. The components of the Company’s intangible assets are as follows:

 

     March 31, 2014  
     Weighted Average    Gross            Net  
     Amortization Period    Carrying      Accumulated     Carrying  
     In Years    Value      Amortization     Amount  

Non-compete agreements

   5    $ 2,860       $ (260   $ 2,600   

Patents

   10      639         (213     426   

Customer relationships

   23      19,960         (3,846     16,114   

Supplier relationships

   5      350         (231     119   

Trademarks and trade names

   16      7,003         (1,460     5,543   

Technology

   15      30,155         (4,252     25,903   
     

 

 

    

 

 

   

 

 

 
      $ 60,967       $ (10,262   $ 50,705   
     

 

 

    

 

 

   

 

 

 

 

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     December 31, 2013  
     Weighted Average    Gross            Net  
     Amortization Period    Carrying      Accumulated     Carrying  
     In Years    Value      Amortization     Amount  

Non-compete agreements

   5    $ 2,860       $ (117   $ 2,743   

Patents

   10      639         (201     438   

Customer relationships

   23      19,960         (3,575     16,385   

Supplier relationships

   5      350         (213     137   

Trademarks and trade names

   16      7,003         (1,334     5,669   

Technology

   15      30,155         (3,681     26,474   
     

 

 

    

 

 

   

 

 

 
      $ 60,967       $ (9,121   $ 51,846   
     

 

 

    

 

 

   

 

 

 

Intangible assets are amortized over their useful lives ranging from 5 to 25 years, with a total weighted average amortization period of approximately 17 years. Amortization expense from continuing operations for the three-month periods ended March 31, 2014 and 2013 was $1,141 and $701, respectively.

Estimated amortization expense from continuing operations for the remainder of 2014 and the years 2015 and thereafter is as follows:

 

     Amortization Expense  

2014

   $ 3,402   

2015

     4,265   

2016

     4,107   

2017

     4,107   

2018

     4,003   

2019 and thereafter

     30,821   
  

 

 

 
   $ 50,705   
  

 

 

 

5. ACCOUNTS RECEIVABLE

Credit is extended based upon an evaluation of the customer’s financial condition and while collateral is not required, the Company often receives surety bonds that guarantee payment. Credit terms are consistent with industry standards and practices. Trade accounts receivable from continuing operations at March 31, 2014 and December 31, 2013 have been reduced by an allowance for doubtful accounts of $1,144 and $1,099, respectively.

6. INVENTORIES

Inventories of continuing operations of the Company at March 31, 2014 and December 31, 2013 are summarized in the following table:

 

     March 31,     December 31,  
     2014     2013  

Finished goods

   $ 61,853      $ 55,166   

Work-in-process

     7,520        11,332   

Raw materials

     17,302        19,485   
  

 

 

   

 

 

 

Total inventories at current costs

     86,675        85,983   

Less: LIFO reserve

     (9,031     (9,027
  

 

 

   

 

 

 
   $ 77,644      $ 76,956   
  

 

 

   

 

 

 

Inventories of the Company’s continuing operations 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 is made at the end of each year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s estimates of expected year-end levels and costs.

 

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7. INVESTMENTS

The Company is a member of a joint venture, LB Pipe & Coupling Products, LLC (JV), in which it maintains a 45% ownership interest. The JV manufactures, markets, and sells various precision coupling products for the energy, utility, and construction markets and is scheduled to terminate on June 30, 2019.

Under applicable guidance for variable interest entities in ASC 810, “Consolidation,” the Company determined that the JV is a variable interest entity. The Company concluded that it is not the primary beneficiary of the variable interest entity, as the Company does not have a controlling financial interest and does not have the power to direct the activities that most significantly impact the economic performance of the JV. Accordingly, the Company concluded that the equity method of accounting remains appropriate.

As of March 31, 2014 and December 31, 2013, the Company had a nonconsolidated equity method investment of $5,204 and $5,090, respectively.

The Company recorded equity in the income of the JV of approximately $204 and $176 for the three months ended March 31, 2014 and 2013, respectively. During the periods ending March 31, 2014 and 2013 the Company received cash distributions of $90 and $378, respectively. There were no changes to the Company’s 45% ownership interest as a result of the proportional distribution.

The Company’s exposure to loss results from its capital contributions, net of the Company’s share of the JV’s income or loss, and its net investment in the direct financing lease covering the facility used by the JV for its operations. The carrying amounts with the maximum exposure to loss of the Company at March 31, 2014 and December 31, 2013, respectively, are as follows:

 

     March 31,      December 31,  
     2014      2013  

Equity method investment

   $ 5,204       $ 5,090   

Net investment in direct financing lease

     1,197         1,224   
  

 

 

    

 

 

 
   $ 6,401       $ 6,314   
  

 

 

    

 

 

 

The Company is leasing five acres of land and two facilities to the JV over a period of 9.5 years, with a 5.5 year renewal period. In November 2012, the Company executed the first amendment to its lease with the JV. The amendment included the addition of a second facility built by the Company that is now leased to the JV. As a result of the amendment, monthly rent over the term of the lease increased by approximately $7. The current monthly lease payments approximate $17, with a balloon payment of approximately $488, which is required to be paid either at the termination of the lease, allocated over the renewal period, or during the initial term of the lease. This lease qualifies as a direct financing lease under the applicable guidance in ASC 840-30, “Leases.” The Company maintained a net investment in this direct financing lease of approximately $1,197 and $1,224 at March 31, 2014 and December 31, 2013, respectively.

The following is a schedule of the direct financing minimum lease payments for the remainder of 2014 and the years 2015 and thereafter:

 

     Minimum Lease Payments  

2014

   $ 87   

2015

     122   

2016

     131   

2017

     140   

2018

     150   

2019 and thereafter

     567   
  

 

 

 
   $ 1,197   
  

 

 

 

 

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8. DEFERRED REVENUE

Deferred revenue of $7,130 and $5,715 as of March 31, 2014 and December 31, 2013, respectively, consists of customer payments received for which the revenue recognition criteria have not yet been met. The Company has significantly fulfilled its obligations under the contracts and the customers have paid, but due to the Company’s continuing involvement with the material, revenue is precluded from being recognized until title passes to the customer.

9. BORROWINGS

United States

On May 2, 2011, the Company, its domestic subsidiaries, and certain of its Canadian subsidiaries entered into a new $125,000 Revolving Credit Facility Credit Agreement (Credit Agreement) with PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., and Citizens Bank of Pennsylvania. This Credit Agreement replaced a prior revolving credit facility with a maximum credit line of $90,000 and a $20,000 term loan. The Credit Agreement provides for a five-year, unsecured revolving credit facility that permits borrowing up to $125,000 for the U.S. borrowers and a sublimit of the equivalent of $15,000 U.S. dollars that is available to the Canadian borrowers. Provided no event of default exists, the Credit Agreement contains a provision that provides for an increase in the revolver facility of $50,000 that can be allocated to existing or new lenders if the Company’s borrowing requirements should increase. The Credit Agreement includes a sublimit of $20,000 for the issuance of trade and standby letters of credit.

Borrowings under the Credit Agreement will bear interest at rates based upon either the base rate or LIBOR-based rate plus applicable margins. Applicable margins are dictated by the ratio of the Company’s indebtedness less cash on hand to the Company’s consolidated EBITDA, as defined in the underlying Credit Agreement. The base rate is the highest of (a) PNC Bank’s prime rate, (b) the Federal Funds Rate plus 0.50% or (c) the daily LIBOR rate, as defined in the underlying Credit Agreement, plus 1.00%. The base rate spread ranges from 0.00% to 1.00%. LIBOR-based rates are determined by dividing the published LIBOR rate by a number equal to 1.00 minus the percentage prescribed by the Federal Reserve for determining the maximum reserve requirements with respect to any Eurocurrency funding by banks on such day. The LIBOR-based rate spread ranges from 1.00% to 2.00%.

The Credit Agreement includes two financial covenants: (a) the Leverage Ratio, defined as the Company’s Indebtedness less cash on hand divided by the Company’s consolidated EBITDA, which must not exceed 3.00 to 1.00 and (b) Minimum Interest Coverage, defined as consolidated EBITDA less Capital Expenditures divided by consolidated interest expense, which must be no less than 3.00 to 1.00.

The Credit Agreement permits the Company to pay dividends and distributions and make redemptions with respect to its stock provided no event of default or potential default (as defined in the Credit Agreement) has occurred prior to or after giving effect to the dividend, distribution, or redemption. Dividends, distributions, and redemptions are capped at $15,000 per year when funds are drawn on the facility. If no drawings on the facility exist, dividends, distributions, and redemptions in excess of $15,000 per year are subjected to a limitation of $75,000 in the aggregate. The $75,000 aggregate limitation also includes certain loans, investments, and acquisitions. The Company is permitted to acquire the stock or assets of other entities with limited restrictions, provided that the Leverage Ratio does not exceed 2.50 to 1.00 after giving effect to the acquisition.

Other restrictions exist at all times including, but not limited to, limitation of the Company’s sale of assets, other indebtedness incurred by either the borrowers or the non-borrower subsidiaries of the Company, guarantees, and liens.

As of March 31, 2014, the Company was in compliance with the Credit Agreement’s covenants.

The Company had no outstanding borrowings under the revolving credit facility at March 31, 2014 or December 31, 2013 and had available borrowing capacity of $124,186 at March 31, 2014.

Letters of Credit

At March 31, 2014, the Company had outstanding letters of credit of approximately $814.

 

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United Kingdom

A subsidiary of the Company has a working capital facility with NatWest Bank for its United Kingdom operations which includes an overdraft availability of £1,500 pounds sterling (approximately $2,500 at March 31, 2014). This credit facility supports the subsidiary’s working capital requirements and is collateralized by substantially all of the assets of its United Kingdom operations. The interest rate on this facility is the financial institution’s base rate plus 1.50%. Outstanding performance bonds reduce availability under this credit facility. The subsidiary of the Company had no outstanding borrowings under this credit facility as of March 31, 2014. There was approximately $31 and $60 in outstanding guarantees (as defined in the underlying agreement) at March 31, 2014 and December 31, 2013, respectively. This credit facility was renewed during the third quarter of 2013 with no significant changes to the underlying terms or conditions in the facility. The expiration date of this credit facility is July 31, 2014. It is the Company’s intention to renew this credit facility with NatWest Bank during the annual review of the credit facility in 2014.

The United Kingdom loan agreements contain certain financial covenants that require that subsidiary to maintain senior interest and cash flow coverage ratios. The subsidiary was in compliance with these financial covenants as of March 31, 2014. The subsidiary had available borrowing capacity of $2,469 at March 31, 2014.

10. DISCONTINUED OPERATIONS

On June 4, 2012, the Company sold substantially all of the assets and liabilities of its railway securement business, SSD, for $8,579, resulting in a pre-tax gain of approximately $3,508.

On August 30, 2012, the Company sold substantially all of the assets and liabilities of its precise structural products business, Precise, for $2,643, resulting in a pre-tax loss of approximately $315.

The operations of these divisions qualify as a “component of an entity” under FASB ASC 205-20, “Presentation of Financial Statements – Discontinued Operations” and thus, the operations are classified as discontinued for all periods presented. Future expenses of discontinued operations are not expected to be material.

The Company maintained current assets from discontinued operations of $88 and $149 and current liabilities of $26 for both March 31, 2014 and December 31, 2013. Sales from the discontinued businesses were not material to the three months ended March 31, 2014 and 2013.

 

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11. EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted earnings per common share:

 

     Three Months Ended  
     March 31,  
     2014      2013  

Numerator for basic and diluted earnings per common share -

     

Income available to common stockholders:

     

Income from continuing operations

   $ 3,649       $ 4,951   

Loss from discontinued operations

     —           (24
  

 

 

    

 

 

 

Net income

   $ 3,649       $ 4,927   
  

 

 

    

 

 

 

Denominator:

     

Weighted average shares

     10,197         10,158   
  

 

 

    

 

 

 

Denominator for basic earnings per common share

     10,197         10,158   

Effect of dilutive securities:

     

Employee stock options

     10         12   

Other stock compensation plans

     85         77   
  

 

 

    

 

 

 

Dilutive potential common shares

     95         89   
  

 

 

    

 

 

 

Denominator for diluted earnings per common share - adjusted weighted average shares and assumed conversions

     10,292         10,247   
  

 

 

    

 

 

 

Basic earnings per common share:

     

Continuing operations

   $ 0.36       $ 0.49   

Discontinued operations

     —           (0.00
  

 

 

    

 

 

 

Basic earnings per common share

   $ 0.36       $ 0.49   
  

 

 

    

 

 

 

Diluted earnings per common share:

     

Continuing operations

   $ 0.35       $ 0.48   

Discontinued operations

     —           (0.00
  

 

 

    

 

 

 

Diluted earnings per common share

   $ 0.35       $ 0.48   
  

 

 

    

 

 

 

Dividends paid per common share

   $ 0.03       $ 0.03   
  

 

 

    

 

 

 

There have been no changes to the February 2013 Board of Directors authorization of the $0.03 per common share regular quarterly dividend.

 

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12. STOCK-BASED COMPENSATION

The Company applies the provisions of FASB ASC 718, “Compensation – Stock Compensation,” to account for the Company’s share-based compensation. Share-based compensation cost is measured at the grant date based on the calculated fair value of the award and is recognized over the employees’ requisite service period. The Company recorded stock compensation expense of $575 and $631 for the three-month period ended March 31, 2014 and 2013, respectively, related to restricted stock awards and performance unit awards. As of March 31, 2014, unrecognized compensation expense for awards the Company expects to vest approximated $4,702. The Company will recognize this expense over the upcoming 4 year period through February 2018.

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

The excess income tax benefit realized for the tax deduction from stock-based compensation approximated $85 and $189 for the three months ended March 31, 2014 and 2013, respectively. This excess income tax benefit is included in cash flows from financing activities in the Condensed Consolidated Statements of Cash Flows.

Stock Option Awards

A summary of the option activity as of March 31, 2014 is presented below.

 

                   Weighted      Aggregate  
            Weighted      Average      Intrinsic  
            Average      Remaining      Value  
            Exercise      Contractual      (Dollars in  
     Shares      Price      Term      thousands)  

Outstanding and Exercisable at January 1, 2014

     18,750       $ 10.64         1.3      

Granted

     —           —           —        

Canceled

     —           —           —        

Exercised

     —           —           —        
  

 

 

    

 

 

    

 

 

    

 

 

 

Outstanding and Exercisable at March 31, 2014

     18,750       $ 10.64         1.0       $ 679   
  

 

 

    

 

 

    

 

 

    

 

 

 

At March 31, 2014, common stock options outstanding and exercisable under the Company’s equity plans had option prices ranging from $7.81 to $14.77, with a weighted average exercise price of $10.64. At March 31, 2013, common stock options outstanding and exercisable under the Company’s equity plans had option prices ranging from $7.81 to $14.77, with a weighted average exercise price of $10.41 per share.

The total intrinsic value of stock options outstanding and exercisable at March 31, 2013 was $762.

The weighted average remaining contractual life of the stock options outstanding at March 31, 2014 and 2013 was 1.0 and 2.0 years, respectively.

There were no stock options exercised during the three-month periods ending March 31, 2014 and 2013.

 

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Restricted Stock Awards and Performance Unit Awards

Under the amended and restated 2006 Omnibus plan, the Company grants eligible employees restricted stock and performance unit awards. The forfeitable Restricted Stock Awards generally time-vest after a four year holding period, unless indicated otherwise by the underlying Restricted Stock Agreement. Performance Unit Awards are offered annually under separate three-year long-term incentive plans. Performance units are subject to forfeiture and will be converted into common stock of the Company based upon the Company’s performance relative to performance measures and conversion multiples as defined in the underlying plan. If the Company’s estimate of the number of performance stock awards expected to vest changes in a subsequent accounting period, cumulative compensation expense could increase or decrease. The change will be recognized in the current period for the vested shares and would change future expense over the remaining vesting period.

The following table summarizes the Restricted Stock Award and Performance Unit Award activity for the period ended March 31, 2014:

 

                 Weighted  
                 Average  
     Restricted     Performance     Grant  
     Stock     Stock     Date  
     Units     Units     Fair Value  

Outstanding at January 1, 2014

     129,726        61,651      $ 34.00   

Granted

     19,051        34,652        44.07   

Vested

     (25,968     (13,588     33.92   

Adjustment for incentive awards expected to vest

     —          (9,923     43.83   

Canceled

     (960     (2,880     44.13   
  

 

 

   

 

 

   

 

 

 

Outstanding at March 31, 2014

     121,849        69,912      $ 36.13   
  

 

 

   

 

 

   

 

 

 

 

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13. RETIREMENT PLANS

Retirement Plans

The Company has five retirement plans which cover its hourly and salaried employees in the United States: three defined benefit plans (one active / two frozen) and two defined contribution plans. Employees are eligible to participate in the appropriate plan based on employment classification. The Company’s funding to the defined benefit and defined contribution plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA), applicable plan policy and investment guidelines. The Company’s policy is to contribute at least the minimum in accordance with the funding standards of ERISA.

The Company’s subsidiary, L.B. Foster Rail Technologies, Inc. (Rail Technologies), maintains two defined contribution plans for its employees in Canada, as well as a post-retirement benefit plan. In the United Kingdom, Rail Technologies maintains both a defined contribution plan and a defined benefit plan.

United States Defined Benefit Plans

Net periodic pension costs for the United States defined benefit pension plans for the three-month periods ended March 31, 2014 and 2013 are as follows:

 

     Three Months Ended  
     March 31,  
     2014     2013  

Service cost

   $ 6      $ 8   

Interest cost

     193        177   

Expected return on plan assets

     (242     (214

Recognized net actuarial loss

     16        53   
  

 

 

   

 

 

 

Net periodic pension (income) cost

   $ (27   $ 24   
  

 

 

   

 

 

 

The Company expects to contribute approximately $448 to its United States defined benefit plans in 2014. No contributions were made during the three months ended March 31, 2014.

United Kingdom Defined Benefit Plans

Net periodic pension costs for the United Kingdom defined benefit pension plan for the three-month periods ended March 31, 2014 and 2013 are as follows:

 

     Three Months Ended  
     March 31,  
     2014     2013  

Interest cost

   $ 99      $ 80   

Expected return on plan assets

     (94     (68

Amortization of transition amount

     (7     (11

Recognized net actuarial loss

     50        53   
  

 

 

   

 

 

 

Net periodic pension cost

   $ 48      $ 54   
  

 

 

   

 

 

 

United Kingdom regulations require trustees to adopt a prudent approach to funding required contributions to defined benefit pension plans. Employer contributions of $298 are anticipated to the United Kingdom L.B. Foster Rail Technologies, Inc. pension plan during 2014. For the three months ended March 31, 2014, the Company contributed approximately $75 to the plan.

 

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Defined Contribution Plans

The Company has a domestic defined contribution plan that covers all non-union hourly and all salaried employees (Salaried Plan). The Salaried Plan permits both pre-tax and after-tax employee contributions. Participants can contribute, subject to statutory limitations, between 1% and 75% of eligible pre-tax pay and between 1% and 100% of eligible after-tax pay. The Company’s employer match is 100% of the first 1% of deferred eligible compensation and up to 50% of the next 6%, based on years of service, of deferred eligible compensation, for a total maximum potential match of 4%. The Company may also make discretionary contributions to the Salaried Plan.

The Company also has a domestic defined contribution plan for union hourly employees with contributions made by both the participants and the Company based on various formulas (Union Plan).

Rail Technologies, maintains a defined contribution plan covering all non-union employees at its Montreal, Quebec, Canada location (Montreal Plan). Under the terms of the Montreal Plan, the employer may contribute 4% of each employee’s compensation as a non-elective contribution and may also contribute 30% of the first 6% of each employee’s compensation contributed to the Montreal Plan.

The subsidiary also maintains a defined contribution plan covering substantially all employees at its United Kingdom locations (U.K. Plan). Benefits under the U.K. Plan are provided under no formal written agreement. Under the terms of the defined contribution U.K. Plan, the employer may make non-elective contributions of between 3% and 10% of each employee’s compensation.

Finally, Rail Technologies maintains a defined contribution plan covering substantially all of the employees at its Burnaby, British Columbia, Canada location (Burnaby Plan). Under the terms of the Burnaby Plan, the employer may contribute 4% of each employee’s compensation as a non-elective contribution and may also contribute 30% of the first 6% of each employee’s compensation contributed to the Burnaby Plan.

The following table summarizes the expense associated with the contributions made to these plans.

 

     Three Months Ended  
     March 31,  
     2014      2013  

Salaried Plan

   $ 556       $ 449   

Union Plan

     17         16   

Montreal Plan

     25         35   

U.K. Plan

     38         33   

Burnaby Plan

     39         45   
  

 

 

    

 

 

 
   $ 675       $ 578   
  

 

 

    

 

 

 

14. FAIR VALUE MEASUREMENTS

The Company determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions of what market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The Company has an established process for determining fair value for its financial assets and liabilities, principally cash and cash equivalents and foreign currency exchange contracts. Fair value is based on quoted market prices, where available. If quoted market prices are not available, fair value is based on assumptions that use as inputs market-based parameters. The following sections describe the valuation methodologies used by the Company to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate the description includes details of the key inputs to the valuations and any significant assumptions.

 

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Cash equivalents. Included within “Cash and cash equivalents” are investments in money market funds with various underlying securities all of which maintain AAA credit ratings. Also included within cash equivalents are our highly liquid investments in non-domestic bank term deposits. The Company uses quoted market prices to determine the fair value of these investments and they are classified in Level 1 of the fair value hierarchy. The carrying amounts approximate fair value because of the short maturity of the instruments.

The following assets and liabilities of the Company were measured at fair value on a recurring basis subject to the disclosure requirements of ASC Topic 820 at March 31, 2014 and December 31, 2013:

 

            Fair Value Measurements at  
            Reporting Date Using  
     March 31,
2014
     Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Assets

           

Domestic money market funds

   $ 39,852       $ 39,852       $ —         $ —     

Non domestic bank term deposits

     31,828         31,828         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash equivalents at fair value

     71,680         71,680         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

   $ 71,680       $ 71,680       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 
            Fair Value Measurements at  
            Reporting Date Using  
     December 31,
2013
     Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
     Significant
Other
Observable
Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
 

Assets

           

Domestic money market funds

   $ 18,276       $ 18,276       $ —         $ —     

Non domestic bank term deposits

     32,947         32,947         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash equivalents at fair value

     51,223         51,223         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Assets

   $ 51,223       $ 51,223       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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15. COMMITMENTS AND CONTINGENT LIABILITIES

Product Liability Claims

The Company is subject to product warranty claims that arise in the ordinary course of its business. For certain manufactured products, the Company maintains a product warranty accrual which is adjusted on a monthly basis as a percentage of cost of sales. The product warranty accrual is periodically adjusted based on the identification or resolution of known individual product warranty claims. The following table sets forth the Company’s continuing operations product warranty accrual:

 

     Warranty Liability  

Balance at December 31, 2013

   $ 7,483   

Additions to warranty liability

     207   

Warranty liability utilized

     (680
  

 

 

 

Balance at March 31, 2014

   $ 7,010   
  

 

 

 

Included within the above table are concrete tie warranty reserves of approximately $6,050 and $6,462 as of March 31, 2014 and December 31, 2013, respectively. The reduction in the reserve balance relates to warranty claims satisfied through the replacement of concrete ties during the three month period ended March 31, 2014.

In July 2012, the Union Pacific Railroad (UPRR) notified the Company and its subsidiary, CXT Incorporated (CXT), of a warranty claim under CXT’s 2005 supply contract relating to the sale of pre-stressed concrete railroad ties to the UPRR. The UPRR asserted that a significant percentage of concrete ties manufactured in 2006 through 2011 at CXT’s former Grand Island, NE facility failed to meet contract specifications, had workmanship defects, and were cracking and failing prematurely. Of the 3.0 million ties manufactured between 1999 and 2011 from the Grand Island, NE facility, approximately 1.6 million relate to concrete ties sold to the UPRR during the period of their claim.

During 2012, as a result of testing the Company conducted on concrete ties manufactured at its former Grand Island, NE facility, the Company recorded pre-tax warranty charges of $22,000 in “Cost of Goods Sold” within its Rail Products segment. The accrual was based on the Company’s estimate of the number of defective concrete ties that will ultimately require replacement during the applicable warranty periods at an average cost of fifty dollars per concrete tie.

The Company continues to work with the UPRR to identify, replace, and reconcile defective ties related to the warranty claim asserted under CXT’s 2005 supply contract. The concrete tie warranty reserve is the best estimate of the expected value of defective ties that will be replaced as a result of our observation and analysis of ties in track. While the Company believes this is a reasonable estimate of these potential warranty claims, these estimates could change due to the receipt of new information and future events.

As of March 31, 2014, the Company and the UPRR have not been able to reconcile the disagreement related to the 2013 warranty replacement activity. The disagreement includes approximately 170,000 ties. The Company provided detailed documentation supporting its position including reasons that detail why these ties were not eligible for a warranty claim. In the event the UPRR continues to replace ties and assert warranty claims on an ongoing basis in the same manner as 2013, the Company is likely to have a disagreement relating to the number of ties eligible for warranty claim in future periods as well. In the event the Company is not able to resolve these claims to the Company’s satisfaction, these past and future claims may have a material impact on the Company’s financial condition and results of operations.

Additionally, the UPRR has claimed that the Company is in breach of the 2012 amended supply agreement for various reasons. The Company has denied the UPRR’s claim that it is in material breach of the 2012 amended supply agreement and intends to continue discussions with the UPRR in an effort to resolve these claims, including reconciling previously replaced ties as well as addressing the future warranty tie replacement process. In the event that the Company is found to be in material breach of the 2012 amended supply agreement, the UPRR may seek damages from the Company and/or terminate the agreement.

The Company will continue to assess the adequacy of its product warranty reserve as additional information becomes available. There can be no assurance at this point that future potential costs pertaining to these claims or other potential future claims will not have a material impact on the Company’s financial condition or results of operations.

 

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Environmental and Legal Proceedings

The Company is subject to national, state, foreign, provincial, and/or local laws and regulations relating to the protection of the environment. 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 also subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial condition or liquidity of the Company. The resolution, in any reporting period, of one or more of these matters could have a material effect on the Company’s results of operations for that period.

As of March 31, 2014 and December 31, 2013, the Company maintained environmental and litigation reserves approximating $2,173 and $2,190, respectively.

16. INCOME TAXES

The Company’s effective income tax rate from continuing operations for the quarter ended March 31, 2014 was 31.4%, compared to 33.5% for the quarter ended March 31, 2013. The Company’s effective tax rate for the quarter ended March 31, 2014 differed from the federal statutory rate of 35% primarily due to the recognition of $167 in previously unrecognized state tax benefits.

17. SUBSEQUENT EVENTS

Management evaluated all activity of the Company and concluded that no subsequent events have occurred that would require recognition in the Condensed Consolidated Financial Statements or disclosure in the Notes to the Condensed Consolidated Financial Statements.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Dollars in thousands, except share data)

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Many of the forward-looking statements are located in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Sentences containing words such as “believe,” “intend,” “may,” “expect,” “should,” “could,” “anticipate,” “plan,” “estimate,” “predict,” “project,” or their negatives, or other similar expressions generally should be considered forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q may concern, among other things, the Company’s expectations regarding our strategy, goals, projections and plans regarding our financial position, liquidity and capital resources, the outcome of litigation and product warranty claims, results of operations, decisions regarding our strategic growth initiatives, market position, and product development, all of which are based on current estimates that involve inherent risks and uncertainties. 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. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Among the factors that could cause the actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties related to: general business conditions, a decrease in freight or passenger rail traffic, a lack of state or federal funding for new infrastructure projects, the timeliness and availability of material from major suppliers, labor disputes, the impact of competition, variances in current accounting estimates and their ultimate outcomes, the seasonality of the Company’s business, the adequacy of internal and external sources of funds to meet financing needs, the Company’s ability to curb its working capital requirements, domestic and international income taxes, foreign currency fluctuations, inflation, the ultimate number of concrete ties that will have to be replaced pursuant to product warranty claims, an overall resolution of the related contract claims, and domestic and foreign governmental regulations. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated. The risks and uncertainties that may affect the operations, performance and results of the Company’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors” section of our Annual Report on Form 10-K and our other periodic filings with the Securities and Exchange Commission.

The forward looking statements in this report are made as of the date of this report and we assume no obligation to update or revise any forward looking statement, whether as a result of new information, future developments, or otherwise.

General Overview

L.B. Foster Company (Company) is a leading manufacturer, fabricator, and distributor of products and services for rail, construction, energy, and utility markets. The Company is comprised of three business segments: Rail Products, Construction Products, and Tubular Products.

The following discussion and analysis of financial condition and results of operations relates only to our continuing operations. More information regarding the results of discontinued operations can be found in Note 10 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

 

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Year-to-date Results of Continuing Operations

 

                 Percent of Total Net Sales        
     Three Months Ended     Three Months Ended     Percent  
     March 31,     March 31,     Increase/(Decrease)  
     2014     2013     2014     2013     2014 vs. 2013  

Net Sales:

          

Rail Products

   $ 73,496     $ 81,399       65.9     62.9     (9.7 )% 

Construction Products

     27,383       36,811       24.6       28.5       (25.6

Tubular Products

     10,535       11,111       9.5       8.6       (5.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total net sales

   $ 111,414     $ 129,321       100.0     100.0     (13.8 )% 
  

 

 

   

 

 

       
                 Gross Profit Percentage        
     Three Months Ended     Three Months Ended     Percent  
     March 31,     March 31,     Increase/(Decrease)  
     2014     2013     2014     2013     2014 vs. 2013  

Gross Profit:

          

Rail Products

   $ 16,430     $ 17,033       22.4     20.9     (3.5 )% 

Construction Products

     5,712       4,972       20.9       13.5       14.9  

Tubular Products

     2,130       3,215       20.2       28.9       (33.7

LIFO expense

     (4     (240     —          (0.2     **   

Other

     (141     (132     (0.1     (0.1     6.8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross profit

   $ 24,127     $ 24,848       21.7     19.2     (2.9 )% 
  

 

 

   

 

 

       
                 Percent of Total Net Sales        
     Three Months Ended     Three Months Ended     Percent  
     March 31,     March 31,     Increase/(Decrease)  
     2014     2013     2014     2013     2014 vs. 2013  

Expenses:

          

Selling and administrative expenses

   $ 18,025     $ 17,130       16.2     13.2     5.2

Amortization expense

     1,141       701       1.0       0.5       62.8  

Interest expense

     123       133       0.1       0.1       (7.5

Interest income

     (144     (206     (0.1     (0.2     (30.1

Equity in income of nonconsolidated investment

     (204     (176     (0.2     (0.1     15.9  

Other income

     (135     (178     (0.1     (0.1     (24.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

   $ 18,806     $ 17,404       16.9     13.5     8.1
  

 

 

   

 

 

       

Income from continuing operations before income taxes

   $ 5,321     $ 7,444       4.8     5.8     (28.5 )% 

Income tax expense

     1,672       2,493       1.5       1.9       (32.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

   $ 3,649     $ 4,951       3.3     3.8     (26.3 )% 
  

 

 

   

 

 

       

 

** Results of calculation are not considered meaningful for presentation purposes.

 

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First Quarter 2014 Compared to First Quarter 2013 – Company Analysis

Net sales of $111,414 for the period ended March 31, 2014 decreased by $17,907, or 13.8%, compared to the prior year quarter. The change was attributable to reductions of 9.7%, 25.6%, and 5.2% in Rail Products, Construction Products, and Tubular Products segment sales, respectively. Weather related project delays and supply chain issues within the Construction segment were the primary factors leading to the reduction in sales. Income from continuing operations for the first quarter of 2014 was $3,649, or $0.35 per diluted share, compared to income from continuing operations of $4,951, or $0.48 per diluted share, in the prior year quarter.

Gross profit margin for the quarter ended March 31, 2014 was 21.7% or 245 basis points higher than the prior year. The increase was due to a significant improvement in the Construction Products segment gross profit and to a lesser extent, improved Rail Products segment margins.

Selling and administrative expenses increased by $895 or 5.2% from the prior year, due principally to personnel related costs associated with salaried headcount.

The Company’s effective income tax rate from continuing operations in the 2014 first quarter was 31.4%, compared to 33.5% in the prior year quarter. The Company’s effective income tax rate for the quarters ended March 31, 2014 and 2013 differed from the federal statutory rate of 35% primarily due to the recognition of previously unrecognized state tax benefits.

Results of Continuing Operations – Segment Analysis

Rail Products

 

     Three Months Ended     (Decrease)     Percent  
     March 31,     /Increase     (Decrease)/Increase  
     2014     2013     2014 vs. 2013     2014 vs. 2013  

Net Sales

   $ 73,496      $ 81,399      $ (7,903     (9.7 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

   $ 16,430      $ 17,033      $ (603     (3.5 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit Percentage

     22.4     20.9     1.5     7.2
  

 

 

   

 

 

   

 

 

   

 

 

 

First Quarter 2014 Compared to First Quarter 2013

Rail Products segment sales decreased $7,903 or 9.7% compared to the prior year period. The sales decline within the Rail Products segment was primarily attributable to a combined 20.6% reduction in sales of the Rail Distribution, Concrete Tie, and Transit business. Partially offsetting this decline was a 12.8% sales increase from the Rail Technologies business.

Although net sales declined by 9.7%, the Rail Products segment increased its gross profit margin by 143 basis points. The increase was principally due to greater demand of higher margin manufactured products rather than distribution products during the current quarter.

 

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Table of Contents

Construction Products

 

     Three Months Ended     (Decrease)     Percent  
     March 31,     /Increase     (Decrease)/Increase  
     2014     2013     2014 vs. 2013     2014 vs. 2013  

Net Sales

   $ 27,383      $ 36,811      $ (9,428     (25.6 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

   $ 5,712      $ 4,972      $ 740        14.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit Percentage

     20.9     13.5     7.4     54.8
  

 

 

   

 

 

   

 

 

   

 

 

 

First Quarter 2014 Compared to First Quarter 2013

Construction Products segment sales decreased $9,428, or 25.6% compared to the prior year period. Weather related customer delays and supply chain issues contributed to the reduction in sales. Piling Products sales declined by 41.9% which was partially offset by a 111.1% increase in Fabricated Bridge product sales.

During the quarter, the Construction Products segment generated an increase in new orders of 51.5% compared to the prior year period. The increased orders led to a 37.9% increase in backlog compared to March 31, 2013.

Although net sales declined by $9,428, the gross profit percentage increased by 735 basis points due to gross margin improvements in all the Construction Products’ businesses as well as favorable product mix.

Tubular Products

 

     Three Months Ended           Percent  
     March 31,     Decrease             Decrease          
     2014     2013     2014 vs. 2013     2014 vs. 2013  

Net Sales

   $ 10,535      $ 11,111      $ (576     (5.2 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

   $ 2,130      $ 3,215      $ (1,085     (33.7 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit Percentage

     20.2     28.9     (8.7 )%      (30.1 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

First Quarter 2014 Compared to First Quarter 2013

Tubular Products segment sales decreased $576, or 5.2% compared to the prior year period. This decrease was due to reduced sales in both the Coated and Threaded Products businesses. The reduction in sales was partially offset by sales of our Ball Winch acquisition which closed during the fourth quarter of 2013. Tubular Products gross margins were unfavorably impacted by volume related de-leveraging, as well as reduced pricing.

While sales and profitability were down during the current quarter, the Tubular Products segment generated an increase in new orders of 87.8% compared to the prior year period. The increase in orders led to a 61.1% increase in backlog compared to March 31, 2013.

 

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Table of Contents

Other

Segment Backlog

Total Company backlog from continuing operations at March 31, 2014 was approximately $253,289 and is summarized by business segment in the following table for the periods indicated:

 

     Backlog  
     March 31,      December 31,      March 31,  
     2014      2013      2013  

Rail Products

   $ 149,221       $ 121,853       $ 174,376   

Construction Products

     87,792         53,483         63,645   

Tubular Products

     16,276         7,775         10,100   
  

 

 

    

 

 

    

 

 

 

Total Backlog from Continuing Operations

   $ 253,289       $ 183,111       $ 248,121   
  

 

 

    

 

 

    

 

 

 

Warranty

As of March 31, 2014, the Company maintained a total product warranty reserve of approximately $7,010 for its estimate of all potential product warranty claims. Of this total, $6,050 reflects the current estimate of the Company’s exposure for potential product warranty claims related to concrete tie production. While the Company believes this is a reasonable estimate of its potential contingencies related to identified concrete tie warranty matters, the Company may incur future charges associated with new customer claims or further development of information for existing customer claims. Thus, there can be no assurance that future potential costs pertaining to warranty claims will not have a material impact on the Company’s results of operations and financial condition.

The Company and the Union Pacific Railroad (UPRR) have been unable to reconcile the disagreement related to the 2013 warranty replacement activity. In the event the UPRR continues to replace ties and assert warranty claims in the same manner as 2013, the Company is likely to have a disagreement relating to the number of ties eligible for warranty claim.

The Company has denied the UPRR’s claim that it is in material breach of the 2012 amended supply agreement and intends to continue discussions with the UPRR in an effort to reconcile previously replaced ties as well as address the future warranty tie replacement process.

It is the Company’s intention to continue to work with the UPRR to reconcile previously replaced concrete ties, however, the Company acknowledges that the 2012 amended supply agreement could be terminated prior to the agreement’s expiration date. See Note 15 of the Notes to Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q for additional information.

 

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Liquidity and Capital Resources

Total debt related to capital lease obligations was $433 and $56 as of March 31, 2014 and December 31, 2013, respectively.

Our need for liquidity relates primarily to seasonal working capital requirements for continuing operations, capital expenditures, joint venture capital obligations, strategic investments or acquisitions, debt service obligations, share repurchases, and dividends.

The following table summarizes the year-to-date impact of these items:

 

     March 31,  
     2014     2013  

Liquidity needs:

    

Working capital and other assets and liabilities

   $ 25,381      $ (24,969

Capital expenditures

     (3,499     (1,031

Other long-term debt repayments

     (19     (18

Treasury stock acquisitions

     (747     (547

Dividends paid to common shareholders

     (309     (310

Acquisition of business

     (495     —     

Cash interest paid

     (87     (86
  

 

 

   

 

 

 

Net liquidity requirements

     20,225        (26,961
  

 

 

   

 

 

 

Liquidity sources:

    

Internally generated cash flows before interest paid

     6,741        7,439   

Dividends from LB Pipe & Coupling Products, LLC

     90        378   

Proceeds from asset sales

     184        8   

Equity transactions

     85        189   

Other long-term debt proceeds

     316        —     

Foreign exchange effects

     (1,194     (1,206
  

 

 

   

 

 

 

Net liquidity sources

     6,222        6,808   
  

 

 

   

 

 

 

Discontinued operations

     61        124   
  

 

 

   

 

 

 

Net Change in Cash

   $ 26,508      $ (20,029
  

 

 

   

 

 

 

Cash Flow from Continuing Operating Activities

During the current 2014 period, cash flows from continuing operations provided $32,125, an increase of $49,363, compared to the 2013 period. For the three months ended March 31, 2014, income, adjustments to income from continuing operating activities, and dividends from the joint venture provided $6,744 compared to $7,731 in the 2013 period. Working capital and other assets and liabilities provided $25,381 in the current period compared to use of $24,969 in the prior year period. The December 31, 2013 accounts receivable balance included certain large project receivables from customers with longer payment terms. Cash collections on these receivables led to the significant increase in cash flows from continuing operations for the period ended March 31, 2014.

The Company’s calculation for days sales outstanding at March 31, 2014 was 55 days compared to 52 days at December 31, 2013 and we believe our receivable portfolio is strong. The increase is attributable to the reduction in sales during the current quarter as well a larger average receivable balance compared to the March 31, 2014 ending balance.

 

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Cash Flow from Continuing Investing Activities

Capital expenditures were $3,499 for the first three months of 2014 compared to $1,031 for the same 2013 period. Current period expenditures related to improvements to our Birmingham, AL coated products facility, equipment costs to expand into adjacent markets within our bridge products and Ball Winch coated products businesses, and general plant and yard improvements. During the prior year, capital expenditures related to improvements to our machinery and equipment across each segment with no individually significant additions. During the quarter we also made a post closing working capital payment of $495 related to our acquisition of Ball Winch. We anticipate total capital spending in 2014 will range between $18,000 and $22,000 and will be funded by cash flow from continuing operations.

Cash Flow from Financing Activities

During the periods ended March 31, 2014 and 2013, we did not purchase any common shares of the Company under our existing share repurchase authorization. However, we withheld 17,045 and 12,057 shares for approximately $747 and $547 for the periods ended March 31, 2014 and 2013, respectively. These amounts were withheld from employees to pay their withholding taxes in connection with the exercise and/or vesting of options and restricted stock awards. Cash outflows related to dividends were approximately $309 and $310 for the periods ended March 31, 2014 and 2013, respectively. Funding for equipment debt of $316 was also included in proceeds from financing activities for the period ended March 31, 2014.

Cash Flow from Discontinued Operations

For the three-month periods ended March 31, 2014 and 2013, cash flows from discontinued operations provided $61 and $124 from operating activities, respectively.

Financial Condition

As of March 31, 2014, we had $91,131 in cash and cash equivalents and credit facilities with $126,655 of availability while carrying only $433 in total debt. As of March 31, 2014, we were in compliance with all of the Credit Agreements’ covenants. We believe this liquidity will provide the flexibility to take advantage of both organic and external investment opportunities.

Included within cash and cash equivalents are money market funds with various underlying securities. Our priority continues to be short-term maturities and the preservation of our principal balances. Approximately $48,690 of our cash and cash equivalents was held in non-domestic bank accounts, and is not available to fund domestic operations unless repatriated. It is management’s intent to indefinitely reinvest such funds outside of the United States, as the Company would need to accrue and pay additional income and withholding taxes if these funds were repatriated.

Borrowings under our Credit Agreement bear interest at rates based upon either the base rate or LIBOR-based rate plus applicable margins. Applicable margins are dictated by the ratio of our indebtedness less cash on hand to our consolidated EBITDA. The base rate is the highest of (a) PNC Bank’s prime rate or (b) the Federal Funds Rate plus .50% or (c) the daily LIBOR rate plus 1.00%. The base rate spread ranges from 0.00% to 1.00%. LIBOR-based rates are determined by dividing the published LIBOR rate by a number equal to 1.00 minus the percentage prescribed by the Federal Reserve for determining the maximum reserve requirements with respect to any Eurocurrency funding by banks on such day. The LIBOR-based rate spread ranges from 1.00% to 2.00%.

The Credit Agreement includes two financial covenants: (a) the Leverage Ratio, defined as the Company’s Indebtedness less cash on hand divided by the Company’s consolidated EBITDA, which must not exceed 3.00 to 1.00 and (b) Minimum Interest Coverage, defined as consolidated EBITDA less Capital Expenditures divided by consolidated interest expense, which must be no less than 3.00 to 1.00.

As of March 31, 2014, the Company was in compliance with the Credit Agreement’s covenants.

Critical Accounting Policies

The Condensed 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 critical accounting policies or estimates since December 31, 2013. A summary of the Company’s critical accounting policies and estimates is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

 

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Table of Contents

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, 2013 is included in the “Liquidity and Capital Resources” section of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. These arrangements provide the Company with increased flexibility relative to the utilization and investment of cash resources. There were no material changes to these arrangements during the three-month period ended March 31, 2014.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The Company does not purchase or hold any derivative financial instruments for trading purposes.

At contract inception, the Company designates its derivative instruments as hedges. 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 within other income as the underlying hedged items affect earnings. To the extent that a change in a derivative does not perfectly offset the change in value of the interest rate being hedged, the ineffective portion is recognized in earnings immediately.

Foreign Currency Exchange Rate Risk

The Company is subject to exposures to changes in foreign currency exchange rates. The Company manages its exposure to changes in foreign currency exchange rates on firm sale and purchase commitments by entering into foreign currency forward 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 transactions. The Company did not engage in foreign currency hedging transactions during the three-month period ended March 31, 2014.

Item 4. Controls and Procedures

 

  a) L.B. Foster 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 (as defined in Rules 13a—15(e) under the Securities and Exchange Act of 1934, as amended) as of March 31, 2014. 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 Securities and Exchange Commission filings.

 

  b) There have been no 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.

 

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Table of Contents

PART II. OTHER INFORMATION

(Dollars in thousands, except share data)

Item 1. Legal Proceedings

See Note 15, “Commitments and Contingent Liabilities,” to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

Item 1A. Risk Factors

In addition to the risk factors and other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on February 27, 2014, which could materially affect our business, financial condition, financial results, or future performance. The risks described in our Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known or that we currently deem to be immaterial may also materially affect our business, financial condition and/or results of operations.

We may be impacted by new regulations related to conflict minerals.

The SEC, as directed in The Dodd-Frank Wall Street Reform and Consumer Protection Act, adopted new rules establishing disclosure and reporting requirements regarding the use of certain minerals referred to as “conflict minerals” in products. These new rules require us to determine, disclose, and report whether or not such conflict minerals originate from the Democratic Republic of the Congo or adjoining countries. The requirements could affect the sourcing, availability, and cost of minerals used in the manufacture of certain of the products we sell, including some that we contract to manufacture. In addition, our customers may require that our products be free of conflict minerals and our revenues may be harmed if we are unable to procure conflict-free minerals at a reasonable price. We may face reputation challenges with our customers and other stakeholders if we are unable to verify sufficiently the origins of all minerals used in our products.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The Company’s purchases of equity securities for the three-month period ended March 31, 2014 were as follows:

 

                          Approximate  
                   Total Number      Dollar  
                   of Shares      Value of Shares  
            Average      Purchased as      that May Yet Be  
     Total Number      Price      Part of Publicly      Purchased Under  
     of Shares      Paid per      Announced Plans      the Plans or Programs  
     Purchased (1)      Share      or Programs      (in thousands)  

January 1, 2014—January 31, 2014

     —         $ —           —         $ 15,000   

February 1, 2014—February 28, 2014

     —           —           —           15,000   

March 1, 2014—March 31, 2014

     —           —           —           15,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     —         $ —           —         $ 15,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) On December 4, 2013, the Board of Directors authorized the repurchase of up to $15,000 of the Company’s common shares until December 31, 2016. This authorization became effective January 1, 2014.

While we did not purchase any common shares of the Company during the three month period ended March 31, 2014 under our existing share repurchase authorization, we did withhold 17,045 shares for approximately $747 from employees to pay their withholding taxes in connection with the exercise and/or vesting of options and restricted stock awards.

Item 4. Mine Safety Disclosures

This item is not applicable to the Company.

 

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Table of Contents

Item 6. Exhibits

All exhibits are incorporated herein by reference:

*10.1   2014 Executive Annual Incentive Compensation Plan.
*10.2   Form of 2014 Restricted Stock Agreement.
*10.3   2013 Executive Annual Incentive Compensation Plan.
*10.4   2012 Executive Annual Incentive Compensation Plan.
*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.
***101.INS   XBRL Instance Document.
***101.SCH   XBRL Taxonomy Extension Schema Document.
***101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document.
***101.DEF   XBRL Taxonomy Extension Definition Linkbase Document.
***101.LAB   XBRL Taxonomy Extension Label Linkbase Document.
***101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document.

 

* Exhibits marked with an asterisk are filed herewith.
** Identifies management contract or compensatory plan or arrangement required to be filed as an Exhibit.
*** In accordance with SEC Release 33-8238, the certifications contained in Exhibits 32 are being furnished and not filed.

 

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Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    L.B. FOSTER COMPANY
    (Registrant)
Date: May 5, 2014     By:   /s/ David J. Russo
    David J. Russo
    Senior Vice President,
    Chief Financial Officer and Treasurer
    (Duly Authorized Officer of Registrant)

 

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Table of Contents

Index to Exhibits

All exhibits are incorporated herein by reference:

 

Exhibit Number

 

Description

*10.1   2014 Executive Annual Incentive Compensation Plan.
*10.2   Form of 2014 Restricted Stock Agreement.
*10.3   2013 Executive Annual Incentive Compensation Plan.
*10.4   2012 Executive Annual Incentive Compensation Plan.
*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.
***101.INS   XBRL Instance Document.
***101.SCH   XBRL Taxonomy Extension Schema Document.
***101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document.
***101.DEF   XBRL Taxonomy Extension Definition Linkbase Document.
***101.LAB   XBRL Taxonomy Extension Label Linkbase Document.
***101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document.

 

* Exhibits marked with an asterisk are filed herewith.
** Identifies management contract or compensatory plan or arrangement required to be filed as an Exhibit.
*** In accordance with SEC Release 33-8238, the certifications contained in Exhibits 32 are being furnished and not filed.

 

34