Back to GetFilings.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITES
EXCHANGE ACT OF 1934 (No Fee Required)
For the Fiscal Year Ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
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)
Registrant's telephone number, including area code: (412) 928-3417
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
--------------------- ---------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III or this Form 10-K or any amendment to this
Form 10-K. [x]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-----
The aggregate market value on March 23, 2001 of the voting stock held by
nonaffiliates of the Company was $31,927,620. Indicate the number of shares
outstanding of each of the registrant's classes of common stock as of the latest
practicable date.
Class Outstanding at March 23, 2001
----- -----------------------------
Common Stock, Par Value $.01 9,438,112 Shares
Documents Incorporated by Reference:
Portions of the Proxy Statement prepared for the 2001 annual meeting of
stockholders are incorporated by reference in Items 10, 11, 12 and 13 of Part
III.
PART I
ITEM 1. BUSINESS
Summary Description of Businesses
L. B. Foster Company is engaged in the manufacture, fabrication and distribution
of products that serve the nation's surface transportation infrastructure. As
used herein, "Foster" or the "Company" means L. B. Foster Company and its
divisions and subsidiaries, unless the context otherwise requires.
For rail markets, Foster provides a full line of new and used rail, trackwork,
and accessories to railroads, mines and industry. The Company also designs and
produces concrete railroad products, insulated rail joints, power rail, track
fasteners, coverboards, signaling and communication devices, and special
accessories for mass transit and other rail systems worldwide.
For the construction industry, the Company sells and rents steel sheet,
H-bearing and pipe piling for foundation and earth retention requirements. In
addition, Foster supplies bridge decking, expansion joints, mechanically
stabilized earth wall systems, precast concrete products and other products for
highway construction and repair.
For tubular markets, the Company supplies pipe coatings for natural gas
pipelines and utilities. The Company also produces threaded products for
industrial water well and irrigation markets.
The Company classifies its activities into three business segments: Rail
products, Construction products, and Tubular products. Financial information
concerning the segments is set forth in Note 20 to the financial statements
included in the Company's Annual Report to Stockholders for 2000. The following
table shows for the last three fiscal years the net sales generated by each of
the current business segments as a percentage of total net sales.
Percentage of Net Sales
- --------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------
Rail Products 52% 59% 55%
Construction Products 40% 31% 24%
Tubular Products 8% 10% 21%
- --------------------------------------------------------------------------------
100% 100% 100%
================================================================================
As of January 1, 2000, the Company elected to change the reporting segment
of its Buildings division, acquired with the 1999 CXT Incorporated acquisition,
from rail to construction products. The 1999 results have been restated to
conform to the current presentation.
RAIL PRODUCTS
L. B. Foster Company's rail products include heavy and light rail, relay rail,
concrete ties, insulated rail joints, rail accessories, transit products and
signaling and communication devices. The Company is a major rail products
supplier to industrial plants, contractors, railroads, mines and mass transit
systems.
The Company sells heavy rail mainly to transit authorities, industrial
companies, and rail contractors for railroad sidings, plant trackage, and other
carrier and material handling applications. Additionally, the Company makes some
sales of heavy rail to railroad companies and to foreign buyers. The Company
sells light rail for mining and material handling applications.
Rail accessories include trackwork, ties, track spikes, bolts, angle bars and
other products required to install or maintain rail lines. These products are
sold to railroads, rail contractors and industrial customers and are
manufactured within the Company or purchased from other manufacturers.
The Company's Allegheny Rail Products (ARP) division engineers and markets
insulated rail joints and related accessories for the railroad and mass transit
industries, worldwide. Insulated joints are made in-house and subcontracted.
The Company's Transit Products division supplies power rail, direct fixation
fastener, coverboards and special accessories primarily for mass transit
systems. Most of these products are manufactured by subcontractors and are
usually sold by sealed bid to transit authorities or to rail contractors,
worldwide.
The Company's Mining division sells new and used rail, rail accessories,
trackwork from the Pomeroy, OH plant and iron clad ties from the Watson-Haas
Lumber division in St. Mary's, WV. The Pomeroy, OH plant also produces trackwork
for industrial and export markets.
The Company's Rail Technologies subsidiary develops rail signaling and
communication devices for North American railroads.
The Company's CXT subsidiary manufactures engineered concrete products for the
railroad and transit industries. CXT's product line includes prestressed
concrete railroad ties and grade railroad crossing panels.
CONSTRUCTION PRODUCTS
L. B. Foster Company's construction products consist of sheet and bearing
piling, fabricated highway products, and precast concrete buildings.
Sheet piling products are interlocking structural steel sections that are
generally used to provide lateral support at construction sites. Bearing piling
products are steel H-beam sections which, in their principal use, are driven
into the ground for support of structures such as bridge piers and high-rise
buildings. Sheet piling is sold or leased and bearing piling is sold principally
to contractors and construction companies.
Other construction products consist of precast concrete buildings, sold
principally to national parks, and fabricated highway products. Fabricated
highway products consist principally of bridge decking, aluminum bridge rail and
other bridge products, which are fabricated by the Company, as well as
mechanically stabilized earth wall systems. The major purchasers of these
products are contractors for state, municipal and other governmental projects.
Sales of the Company's construction products are partly dependent upon the level
of activity in the construction industry. Accordingly, sales of these products
have traditionally been somewhat higher during the second and third quarters
than during the first and fourth quarters of each year.
TUBULAR PRODUCTS
The Company provides fusion bond and other coatings for corrosion protection on
oil, gas and other pipelines. The Company also supplies special pipe products
such as water well casing, column pipe, couplings, and related products for
agricultural, municipal and industrial water wells.
MARKETING AND COMPETITION
L. B. Foster Company generally markets its rail, construction and tubular
products directly in all major industrial areas of the United States through a
national sales force of 46 salespeople. The Company maintains 19 sales offices
and 19 plants or warehouses nationwide. During 2000, less than 5% of the
Company's total sales were for export.
The major markets for the Company's products are highly competitive. Product
availability, quality, service and price are principal factors of competition
within each of these markets. No other company provides the same product mix to
the various markets the Company serves. There are one or more companies that
compete with the Company in each product line. Therefore, the Company faces
significant competition from different groups of companies.
RAW MATERIALS AND SUPPLIES
Most of the Company's inventory is purchased in the form of finished or
semifinished product. With the exception of relay rail which is purchased from
railroads or rail take-up contractors, the Company purchases most of its
inventory from domestic and foreign steel producers. There are few domestic
suppliers of new rail products and the Company could be adversely affected if a
domestic supplier ceased making such material available to the Company.
Additionally, the Company has become TXI Chaparral Steel's exclusive North
American distributor of steel sheet piling and H-bearing pile. See Note 18 to
the consolidated financial statements for additional information on this matter.
The Company's purchases from foreign suppliers are subject to the usual risks
associated with changes in international conditions and to United States laws
which could impose import restrictions on selected classes of products and
antidumping duties if products are sold in the United States below certain
prices.
BACKLOG
The dollar amount of firm, unfilled customer orders at December 31, 2000 and
1999 by segment follows:
(in thousands) December 31, 2000 December 31, 1999
- --------------------------------------------------------------------------------
Rail Products $ 86,351 $ 107,457
Construction Products 52,779 45,463
Tubular Products 2,219 2,012
- --------------------------------------------------------------------------------
$141,349 $ 154,932
================================================================================
The 1999 presentation has been restated to reflect the January 1, 2000 change in
reporting segment of the buildings division, acquired in the 1999 CXT
Incorporated acquisition, from rail to construction products. This change
resulted in a backlog shift of $3.6 million.
The reduction in Rail segment backlog reflects the effect of CXT long-term
production contracts. Total shipments under these contracts were $16.7 million
in 2000.
Aproximately 70% of the December 31, 2000 backlog is expected to ship in 2001.
RESEARCH AND DEVELOPMENT
The Company's expenditures for research and development are negligible.
ENVIRONMENTAL DISCLOSURES
While it is not possible to quantify with certainty the potential impact of
actions regarding environmental matters, particularly for future remediation and
other compliance efforts, in the opinion of management compliance with
environmental protection laws will not have a material adverse effect on the
financial condition, competitive position, or capital expenditures of the
Company. However, the Company's efforts to comply with stringent environmental
regulations may have an adverse effect on the Company's future earnings.
EMPLOYEES AND EMPLOYEE RELATIONS
The Company has 743 employees, of whom 439 are hourly production workers and 304
are salaried employees. Approximately 227 of the hourly paid employees are
represented by unions. The Company has not suffered any major work stoppages
during the past five years and considers its relations with its employees to be
satisfactory.
Substantially all of the Company's hourly paid employees are covered by one of
the Company's noncontributory, defined benefit plans and a defined contribution
plan. Substantially all of the Company's salaried employees are covered by a
defined contribution plan.
ITEM 2. PROPERTIES
The location and general description of the principal properties which are owned
or leased by L. B. Foster Company, together with the segment of the Company's
business using the properties, are set forth in the following table:
Business Lease
Location Function Acres Segment Expires
- -------- -------- ----- ------- -------
Birmingham,
Alabama Pipe coating. 32 Tubular 2007
Doraville,
Georgia Fabrication of 28 Tubular, Owned
components for Rail and
highways. Construction
Yard storage.
Niles, Ohio Rail fabrication. 35 Rail Owned
Yard storage.
Pomeroy, Ohio Trackwork manufac- 5 Rail Owned
turing.
Houston, Texas Casing, upset tub- 65 Tubular, Owned
ing, threading, Rail and
heat treating and Construction
painting. Yard
storage.
Bedford, Bridge component 10 Construction Owned
Pennsylvania fabricating plant.
Pittsburgh, Corporate Head- - Corporate 2007
Pennsylvania quarters.
Georgetown, Bridge component 11 Construction Owned
Massachusetts fabricating plant
Spokane, CXT concrete tie, 26 Rail 2003
Washington crossings and pre-
cast plants. Yard
storage.
Grand Island, CXT concrete tie 9 Rail 2003
Nebraska plant
Hillsboro, Precast concrete 9 Construction 2002
Texas facility
Including the properties listed above, the Company has 19 sales offices and 19
warehouse, plant and yard facilities located throughout the country. The
Company's facilities are in good condition and the Company believes that its
production facilities are adequate for its present and foreseeable requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company was convicted, after a jury trial in Houston, TX, of unlawful
disposal of used oil and hazardous waste at its facility in Houston, TX, and was
fined $170,000. The Company does not believe that these convictions are
justified and has appealed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
Stock Market Information
- ------------------------
The Company had 815 common shareholders of record on January 31, 2001. Common
stock prices are quoted daily through the National Association of Security
Dealers, Inc. in its over-the-counter NASDAQ quotation service (Symbol FSTR).
The quarterly high and low bid price quotations for common shares (which
represent prices between broker-dealers and do not include markup, markdown or
commission and may not necessarily represent actual transactions) follow:
2000 1999
- --------------------------------------------------------------------------------
Quarter High Low High Low
- --------------------------------------------------------------------------------
First $ 5 1/2 $ 4 $ 6 1/2 $ 4 9/16
- --------------------------------------------------------------------------------
Second 4 5/16 3 3/16 5 31/32 4 5/8
- --------------------------------------------------------------------------------
Third 4 3 3/16 5 15/16 4 13/16
- --------------------------------------------------------------------------------
Fourth 3 9/16 2 1/2 5 3/8 4 5/8
================================================================================
Dividends
- ---------
No cash dividends were paid on the Company's Common stock during 2000 and 1999.
================================================================================
ITEM 6. SELECTED FINANCIAL DATA
(All amounts are in thousands, except per share data)
Year Ended December 31,
Income Statement Data 2000 (1) 1999 1998 (2) 1997 1996
- --------------------------------------------------------------------------------
Net sales $264,614 $241,923 $219,449 $220,343 $243,071
- --------------------------------------------------------------------------------
Operating profit 6,920 9,327 8,478 7,912 8,195
- --------------------------------------------------------------------------------
Net income from
continuing operations 3,119 4,618 5,065 3,765 3,858
Income (loss) from
discontinued
operations,
net of tax 371 (2,115) (688) (478)
- --------------------------------------------------------------------------------
Net income 3,490 2,503 4,377 3,287 3,858
- --------------------------------------------------------------------------------
Basic earnings (loss)
per common share:
Continuing operations 0.33 0.48 0.51 0.37 0.39
Discontinued operations 0.04 (0.22) (0.07) (0.05)
- --------------------------------------------------------------------------------
Basic earnings per
common share 0.37 0.26 0.44 0.32 0.39
- --------------------------------------------------------------------------------
Diluted earnings (loss)
per common share:
Continuing operations 0.33 0.46 0.50 0.37 0.38
Discontinued operations 0.04 (0.21) (0.07) (0.05)
- --------------------------------------------------------------------------------
Diluted earnings per
common share 0.37 0.25 0.43 0.32 0.38
================================================================================
December 31,
Balance Sheet Data 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------
Total assets $177,147 $164,731 $119,434 $126,969 $123,004
- --------------------------------------------------------------------------------
Working capital 71,477 67,737 54,604 60,096 62,675
- --------------------------------------------------------------------------------
Long-term debt 43,484 44,136 13,829 17,530 21,816
- --------------------------------------------------------------------------------
Stockholders' equity 77,359 74,650 73,494 70,527 67,181
================================================================================
(1) 2000 includes pretax charges of approximately $1,349,000 related to the
Company's plan to consolidate sales and administrative functions and plant
operations, a pretax gain of approximately $800,000 on the sale of an
undeveloped 62-acre property located in Houston, TX, and an after-tax gain on
the sale of the Monitor Group, classified as a discontinued operation, of
$900,000.
(2) In 1998, the Company recognized a pretax gain on the sale of the Fosterweld
division of the tubular segment of approximately $1,700,000, a write-down of
approximately $900,000 on property subject to a sale negotiation, and a
provision for losses of approximately $900,000 relating to certain sign
structure contracts in the construction segment.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended Twelve Months Ended
December 31, December 31,
In thousands 2000 1999 2000 1999 1998
- --------------------------------------------------------------------------------
Net Sales:
Rail Products $ 31,215 $ 39,346 $138,635 $141,952 $121,271
Construction Products 23,184 23,299 106,280 75,010 51,870
Tubular Products 4,596 3,700 19,511 24,676 46,044
Other 10 27 188 285 264
- --------------------------------------------------------------------------------
Total Net Sales $ 59,005 $ 66,372 $264,614 $241,923 $219,449
================================================================================
Gross Profit:
Rail Products $ 3,629 $ 6,908 $ 16,762 $ 20,699 $ 18,675
Construction Products 4,440 3,918 18,157 13,412 9,440
Tubular Products 788 532 3,411 3,952 5,675
Other 267 (339) (496) (978) (578)
- --------------------------------------------------------------------------------
Total Gross Profit 9,124 11,019 37,834 37,085 33,212
- --------------------------------------------------------------------------------
Expenses:
Selling and Admin-
istrative Expenses 7,563 7,980 30,914 27,758 24,734
Interest Expense 1,097 1,072 4,227 3,230 1,631
Other Income (301) (293) (2,506) (1,184) (1,731)
- --------------------------------------------------------------------------------
Total Expenses 8,359 8,759 32,635 29,804 24,634
- --------------------------------------------------------------------------------
Income from Continuing
Operations,
Before Income Taxes 765 2,260 5,199 7,281 8,578
Income Tax Expense 306 859 2,080 2,663 3,513
- --------------------------------------------------------------------------------
Income from Continuing
Operations 459 1,401 3,119 4,618 5,065
Income (Loss) from
Discontinued Operations,
Net of Tax (1,448) 371 (2,115) (688)
- --------------------------------------------------------------------------------
Net Income (Loss) $ 459 $ (47) $ 3,490 $ 2,503 $ 4,377
================================================================================
Gross Profit %:
Rail Products 11.6% 17.6% 12.1% 14.6% 15.4%
Construction Products 19.2% 16.8% 17.1% 17.9% 18.2%
Tubular Products 17.1% 14.4% 17.5% 16.0% 12.3%
Total Gross Profit % 15.5% 16.6% 14.3% 15.3% 15.1%
================================================================================
As of January 1, 2000, the Company elected to change the reporting segment of
its Buildings division, acquired with the 1999 CXT acquisition, from rail to
construction products. The 1999 results have been restated to conform to the
current presentation.
FOURTH QUARTER OF 2000 VS. FOURTH QUARTER OF 1999
- ---------------------------------------------------------
The income from continuing operations for the current quarter was $0.46 million
or $0.05 per diluted share. This compares to a 1999 fourth quarter income from
continuing operations of $1.4 million or $0.14 per diluted share. Net sales in
2000 were $59.0 million or 11.1% lower than the comparable quarter last year.
The fourth quarter of 1999 included a nonrecurring, noncash charge of $1.2
million resulting from the Company's decision to classify the Monitor Group,
sold in September 2000, as a discontinued operation. Fourth quarter 1999 net
operating losses from the Monitor Group were $0.2 million.
Rail products' net sales of $31.2 million declined 20.7% from the 1999 fourth
quarter. This decline reflects the continuing downturn in the rail supply
industry as a result of reduced capital spending by the Class I railroads which
continues to adversely impact shipments and margins. Construction products' net
sales in the 2000 fourth quarter were consistent with the segment's sales in the
same period last year. Tubular products' net sales increased 24.2% from last
year's fourth quarter as threaded products shipments and pipe coating services
increased. Changes in net sales are primarily the result of changes in volume
rather than changes in pricing.
The gross margin percentage for the total Company declined to 15.5% in the 2000
fourth quarter from 16.6% in the same period last year. The gross margin
percentage for the rail products segment declined to 11.6% from 17.6% due to the
downturn in the rail supply industry which resulted in excess capacity and
pressure on margins throughout the rail supply industry. Construction products'
gross margin percentage increased to 19.2% from 16.8% due to increased margins
in Buildings division products and certain fabricated products. The gross margin
percentage for tubular products increased 2.7 percentage points in the fourth
quarter of 2000 from the same period last year primarily due to increased
utilization of the Birmingham plant.
Results for the fourth quarter of 2000 include a nonrecurring pretax charge of
$123,000 related to the Company's plan to improve its financial performance by
consolidating sales and administrative functions and plant operations. Selling
and administrative expenses declined 5.2% from the same period last year
principally due to a reduction in depreciation and amortization expense related
to the Monitor Group which was sold in September of 2000. The income tax
provision for the fourth quarter of 2000 was recorded at 40.0% compared to 38.0%
in the 1999 fourth quarter. See Note 13 to the consolidated financial statements
for more information regarding income taxes.
THE YEAR 2000 COMPARED TO THE YEAR 1999
- ---------------------------------------------
Income from continuing operations for 2000 was $3.1 million or $0.33 per diluted
share on net sales of $264.6 million. This compares to an income from continuing
operations of $4.6 million or $0.46 per diluted share on net sales of $241.9
million.
Net operating losses (net of tax) from the Monitor Group, classified as a
discontinued operation on December 31, 1999, were $0.5 million and $0.9 million
in 2000 and 1999, respectively. In September 2000, the Company sold the assets
of the Monitor Group for $1.5 million cash which resulted in a $0.9 million
gain, net of tax, reflected in discontinued operations.
Rail products' net sales declined 2.3% to $138.6 million despite the inclusion
of CXT Incorporated (CXT) results in 2000. Rail sales, excluding CXT results,
declined 14.5% from the prior year. The decline from the prior year reflects the
continuing downturn in the rail supply industry as a result of spending cutbacks
by the major railroads which continues to adversely impact shipments and
margins. Construction products' sales rose 41.7% as improved availability and
strong demand increased shipments of H-bearing pile and flat web sheet piling in
the first three quarters of 2000. Tubular products' sales declined 20.9% in 2000
versus 1999 as a result of a downturn in the pipe coating market during the
first nine months of 2000. Additionally, 1999 results included the sale of the
remaining coated pipe inventory from the Newport facility.
The gross margin percentages for the Company in 2000 and 1999 were 14.3% and
15.3%, respectively. Rail products' gross margin percentage declined to 12.1%
from 14.6% due to the continuing downturn in the rail supply industry which
resulted in excess capacity and pressure on margins throughout the rail supply
industry. The gross margin percentage for construction products declined 0.8
percentage points as improving results in the Buildings division offset lower
margins on sign structure projects. Tubular products' gross margin percentage
improved 1.5 percentage points due to more efficient operations at the
Langfield, TX pipe threading facility.
Results for 2000 include nonrecurring pretax charges totaling $1.35 million, of
the original $1.6 million estimate, related to the Company's plan to improve its
financial performance by consolidating sales and administrative functions and
plant operations. These charges are comprised of approximately $1.0 million
severance, of which $0.6 million had been paid prior to year-end, and $0.35
million asset impairments and other administrative costs. The Company expects to
record the balance as it implements the remaining portions of the plan during
2001 (see Other Matters). The costs accrued for the implemented programs were
based upon management estimates using the latest information available at the
time the accrual was established.
Selling and administrative expenses have increased 11.4% over last year due to
the inclusion of expenses associated with CXT operations and the special charges
previously mentioned. Interest expense increased over the prior year due to an
increase in outstanding borrowings associated with the acquisition of CXT in
June 1999. Other income in 2000 includes approximately $0.8 million from the
sale of a Houston, TX property, $0.8 million accrued dividend income on DM&E
Preferred Stock, $0.6 million DM&E interest income, and $0.3 million interest
collected on other receivables. The provision for income taxes was recorded at
40.0% in 2000 compared to 36.6% in 1999. The 1999 provision reflected the
implementation of certain one-time tax planning strategies. See Note 13 to the
consolidated financial statements for more information regarding income taxes.
THE YEAR 1999 COMPARED TO THE YEAR 1998
- ----------------------------------------------
Income from continuing operations for 1999 was $4.6 million or $0.48 per share
on net sales of $241.9 million. This compares to income from continuing
operations of $5.1 million or $0.51 per share for 1998 on net sales of $219.4
million.
Net operating losses from the Monitor Group, classified as a discontinued
operation on December 31, 1999, were $0.9 million in 1999 versus $0.7 million in
1998.
Rail products' 1999 net sales were $142.0 million compared to $121.3 million in
1998. This 17.1% increase was primarily due to sales by CXT. Additionally, new
rail and transit products' increased sales volumes offset lower volumes in
Allegheny Rail Products and relay rail products. Construction products' net
sales rose 44.6% to $75.0 million in 1999, as the Company benefitted from an
entire year of Foster geotechnical sales, as well as increased volume of
H-bearing pile, flat web sheet piling, and fabricated products shipments. Net
sales of tubular products declined 46.4% in 1999 as a result of the sale of the
Company's Fosterweld division and the closing of the Newport, KY pipe coating
facility.
The gross margin percentage for the Company was 15.3% in 1999 and 15.1% in 1998.
Rail products' gross margin percentage declined 0.8 percentage points from 1998,
primarily due to lower margins on certain relay rail, Allegheny Rail Products,
and transit projects. The gross profit percentage for construction products
remained at approximately 18.0% in 1999, as improved fabricated products and
geotechnical margins offset reduced piling margins. Tubular products' gross
margin percentage increased to 16.0% in 1999 from 12.3% in 1998 primarily due to
more efficient operations at the Langfield, TX pipe threading facility, and the
closure of the Newport, KY coated pipe facility.
Selling and administrative expenses for 1999 were 12.2% higher than in 1998. The
increase was primarily due to added expenses associated with the operation of
CXT, as well as an entire year of expenses related to the Company's Geotechnical
and Rail Technologies operations. Interest expense rose due to an increase in
outstanding borrowings, associated with the CXT acquisition. Other income in
1999 included dividend income and accrued interest on the DM&E stock owned by
the Company. The provision for income taxes in 1999 is recorded at 36.6% versus
41.0% in 1998. The decrease in the effective tax rate from 1998 is due primarily
to the effect of adjustments to prior year tax liabilities. See Note 13 to the
consolidated financial statements for more information regarding income taxes.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
The Company generates internal cash flow from the sale of inventory and the
collection of accounts receivable. During 2000, the average turnover rate for
accounts receivable was slightly higher than in 1999 due to the acquisition of
CXT. The average turnover rate for inventory was slower in 2000 than in 1999
particularly for relay rail and piling products. Working capital at December 31,
2000 was $71.5 million compared to $67.7 million in 1999.
During the first quarter of 1999, the Company announced a program to purchase up
to 1,000,000 shares of its common stock. As of December 31, 2000, 448,398 shares
had been purchased under this program at a cost of $2.2 million. The Company has
slowed its repurchasing activities, pending improved market conditions.
The Company had capital expenditures of approximately $4.1 million in 2000.
Capital expenditures for continuing operations in 2001 are expected to be at
similar levels, and are anticipated to be funded by cash flow from operations
and available external financing sources.
Total revolving credit agreement borrowings at December 31, 2000, were $46.5
million, an increase of $1.5 million from the end of the prior year. At December
31, 2000, the Company had $11.7 million in unused borrowing commitment.
Outstanding letters of credit at December 31, 2000, were $4.0 million.
Management believes its internal and external sources of funds are adequate to
meet anticipated needs.
In accordance with the original terms and conditions of the Company's revolving
credit agreement, the line of credit was reduced from $70.0 million to $64.0
million in September 2000 due to asset sales. The interest rate is, at the
Company's option, based on the Euro-bank rate (LIBOR), the domestic certificate
of deposit rate (CD rate), or the prime rate. The interest rates are established
quarterly based upon cash flow and the level of outstanding borrowings to debt
as defined in the agreement. Interest rates range from the LIBOR rate plus
0.575% to 1.8%, the CD rate plus 0.575% to 1.8%, and the prime rate to prime
plus 0.25%. Borrowings under the agreement, which expires July 1, 2003, are
secured by eligible accounts receivable, inventory, and the pledge of the
Company-held Dakota, Minnesota & Eastern Railroad Corporation Preferred Stock.
The agreement includes financial convenants requiring a minimum net worth, a
minimum level for the fixed charge coverage ratio, and a maximum level for the
consolidated total indebtedness to EBITDA ratio. The agreement also restricts
investments, indebtedness, and the sale of certain assets.
DAKOTA, MINNESOTA AND EASTERN RAILROAD
- ------------------------------------------
The Company maintains a significant investment in the Dakota, Minnesota &
Eastern Railroad Corporation (DM&E), a privately-held, regional railroad which
operates over 1,100 miles of track in five states.
At December 31, 2000, 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 and
$6.0 million of Series C Preferred Stock and warrants. On a fully diluted basis,
the Company owns approximately 16% of the DM&E's common stock. Although the
market value of the DM&E is not readily determinable, management believes that
this investment, regardless of the Powder River Basin project, is worth more
than its historical cost.
The DM&E announced in June 1997 that it plans 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 $1.5
billion.
The Project is subject to approval by the Surface Transportation Board (STB). In
December 1998, the STB made a finding that the DM&E had satisfied the
transportation aspects of applicable regulations. The STB issued a draft
environmental impact statement for the Project in September 2000, with a comment
period extending to March 6, 2001. New construction on this project may not
begin until the STB reaches a final decision.
The DM&E has stated that it could repay project debt and cover its operating
costs if it captures a 5% market share in the Powder River Basin. If the Project
proves to be viable, management believes that the value of the Company's
investment in the DM&E could increase dramatically.
OTHER MATTERS
- --------------
During the first quarter of 2001, the Company has committed to expand its
concrete products operations, primarily the fabrication of precast buildings. In
order to better serve the southwest and southern market areas, the Company has
entered into agreements to lease land, a building and production equipment in
Hillsboro, TX. The Company expects production to commence in the third quarter
of 2001.
Also in the first quarter of 2001, the Company made a decision to terminate
operations at its leased sign structure production facility in Ephrata, PA. The
backlog will be completed at the Company's Doraville, GA facility while
management evaluates the future of its sign structure operation. Costs related
to the closing of the Ephrata facility are expected to be immaterial.
The contemplated sale of the Doraville, GA location did not materialize and,
therefore, the buildings and approximately 28 acres of land at this location
have been reclassified from held for resale to property, plant and equipment.
The Company continues to use this facility in its operations.
In September 2000, the Company sold the assets of the Monitor Group for $1.5
million cash. Additional revenues may be derived from an earn-out agreement that
is based upon the buyer's future sales.
In August 2000, the Company contributed a note, having principal and interest of
approximately $2.7 million, to a limited liability company created by the
Company and its trackwork supplier in exchange for a 30% ownership position.
In March 2000, the Company sold an undeveloped 62-acre portion of a 127-acre
Houston, TX property for approximately $2.0 million. The pretax gain on the sale
was $0.8 million.
On June 30, 1999, the Company acquired all of the outstanding stock of CXT
Incorporated for approximately $17.5 million of which approximatley $4.2 million
was acquired goodwill. Based in Spokane, WA, CXT is a manufacturer of engineered
prestressed and precast concrete products primarily used in the railroad and
transit industries, and precast concrete buildings.
In September 1998, the Company suspended production at its Newport, KY pipe
coating facility due to unfavorable market conditions. During 2000, machinery
and equipment previously utilized in the facility were dismantled and
transferred to the Company's Birmingham, AL location. Management is actively
pursuing the sale of these assets.
In August 1998, the Company purchased assets primarily comprised of intellectual
properties related to the business of supplying rail signaling and communication
devices for approximately $1.7 million. Management is evaluating the performance
of this operation as product development has been slower than anticipated.
The Company continues to explore the divestiture of its Mining division, which
is comprised of facilities and inventory located at Pomeroy, OH and St Marys,
WV.
Management continues to evaluate the overall performance of its operations. A
decision to terminate an existing operation could have a material adverse effect
on near-term earnings but would not be expected to have a material adverse
effect on the financial condition of the Company.
OUTLOOK
- -------
The Company is TXI Chaparral's exclusive North American distributor of steel
sheet piling and H-bearing pile. Shipments of H-bearing pile began in the third
quarter of 1999 from Chaparral's Petersburg, VA facility. Current mill forecasts
indicate that production quantities of sheet piling will be available early in
the second quarter of 2001.
The Rail segment of the business depends on one source, in which the Company
currently maintains a 30% ownership position, for fulfilling certain trackwork
contracts. At December 31, 2000, the Company had inventory progress payments of
$6.1 million committed to this supplier. If, for any reason, this supplier is
unable to perform, the Company could experience a negative short-term effect on
earnings.
The Company's CXT subsidiary and Allegheny Rail Products division are dependent
on one Class I railroad customer for a significant portion of their business. In
addition, much of the Company's business depends on governmental funding of
infrastructure projects. Significant changes in the level of government funding
of these projects could have a favorable or unfavorable impact on the operating
results of the Company. Additionally, governmental actions concerning taxation,
tariffs, the environment or other matters could impact the operating results of
the Company. The Company's operating results may also be affected by adverse
weather conditions.
Although backlog is not necessarily indicative of future operating results,
total Company backlog at December 31, 2000, was approximately $141.3 million.
The following table provides the backlog by business segment:
December 31,
(in thousands) 2000 1999 1998
- --------------------------------------------------------------------------------
Backlog:
Rail Products $ 86,351 $ 107,457 $ 62,481
Construction Products 52,779 45,463 42,542
Tubular Products 2,219 2,012 3,541
- --------------------------------------------------------------------------------
Total Backlog $141,349 $ 154,932 $108,564
================================================================================
The 1999 presentation has been restated to reflect the January 1, 2000 change in
reporting segment of the Buildings division, acquired in the 1999 CXT
Incorporated acquisition, from rail to construction products. This change
resulted in a backlog shift of $3.6 million. The reduction in the Rail segment
backlog reflects the effect of CXT long-term production contracts. Total
shipments under these contracts were $16.7 million in 2000.
MARKET RISK AND RISK MANAGEMENT POLICIES
- ---------------------------------------------
The Company is not subject to significant exposure to change in foreign currency
exchange rates. The Company does, however, hedge the cash flows of the
operations of its Canadian subsidiary. The Company manages its exposures to
changes in foreign currency exchange rates on firm sales 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 sales
revenue over the duration of the transaction.
At year end, the Company had foreign currency forward contracts to purchase
$729,000 Canadian for approximately $488,000 US.
The Company has entered into an interest rate swap agreement as the fixed rate
payor to reduce the impact of changes in interest rates on a portion of its
revolving borrowings. At December 31, 2000, the swap agreement had a notional
value of $8,000,000 at 5.48%, which expired in January 2001. The swap
agreement's floating rate was based on LIBOR. Any amounts paid or received under
the agreement are recognized as adjustments to interest expense. Neither the
fair market value of the agreement nor the interest expense adjustments
associated with the agreement has been material. In addition, the Company has a
swap agreement to fix the interest rate of another financial transaction at
7.42%. The Company also agreed to pay additional interest for any period where
LIBOR exceeds 7.249%. At December 31, 2000, this swap agreement had a notional
value of $3,661,000 and expires in December 2004. The Company plans to enter
into additional swaps or other financial instruments to set all or a portion of
its borrowings at fixed rates.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative financial instruments and hedging activities.
In June 1999, FASB Statement No. 137, "Accounting for Derivative Instruments and
Hedging Activities: Deferral of Effective Date of the FASB Statement No. 133,"
was issued. This statement delayed the effective date to all fiscal years
beginning after June 15, 2000. This statement will be adopted by the Company in
2001 and will not have a material effect on the consolidated financial
statements.
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 assessments 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, any inability to obtain necessary environmental and governmental
approvals for the Project in a timely fashion, the expense of environmental
mitigation measures required by the Surface Transportation Board, an inability
to obtain financing for the Project, competitors' responses to the Project,
market demand for coal or electricity and changes in environmental and other
laws and regulations.
The Company wishes to caution readers that various factors could cause the
actual results of the Company to differ materially from those indicated by
forward-looking statements made from time to time in news releases, reports,
proxy statements, registration statements and other written communications
(including the preceding sections of this Management's Discussion and Analysis
of Financial Condition and Results of Operations), as well as oral statements
made from time to time by representatives of the Company. Additional delays in
TXI Chaparral's production of steel sheet piling would, for example, have an
adverse effect on the Company's performance. 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, taxes,
inflation and governmental regulations. Sentences containing words such as
"anticipates," "expects," or "will" generally should be considered
forward-looking statements.
/s/Roger F. Nejes
- -----------------------
Roger F. Nejes
Senior Vice President
Finance and Administration
Chief Financial Officer
/s/Linda K. Patterson
- -----------------------
Linda K. Patterson
Controller
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
In thousands 2000 1999
- --------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ - $ 1,558
Accounts receivable - net 57,606 53,112
Inventories - net 59,811 45,601
Current deferred tax assets 2,055 1,925
Other current assets 373 981
Property held for resale 1,333 2,856
- --------------------------------------------------------------------------------
Total Current Assets 121,178 106,033
- --------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT - NET 33,023 30,126
- --------------------------------------------------------------------------------
PROPERTY HELD FOR RESALE 1,089 4,203
- --------------------------------------------------------------------------------
OTHER ASSETS:
Goodwill and other intangibles - net 6,772 7,474
Investments 9,423 8,610
Deferred tax assets 1,242 1,720
Other assets 4,420 6,565
- --------------------------------------------------------------------------------
Total Other Assets 21,857 24,369
- --------------------------------------------------------------------------------
TOTAL ASSETS $177,147 $164,731
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
In thousands, except share data
- --------------------------------------------------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 926 $ 1,141
Short-term borrowings 6,500 5,000
Accounts payable - trade 33,008 24,446
Accrued payroll and employee benefits 3,503 3,619
Current deferred tax liabilities 1,947 1,857
Other accrued liabilities 3,817 2,233
- --------------------------------------------------------------------------------
Total Current Liabilities 49,701 38,296
- --------------------------------------------------------------------------------
LONG-TERM DEBT 43,484 44,136
- --------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES 5,413 6,293
- --------------------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES 1,190 1,356
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 17)
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock, issued 10,228,739
shares in 2000 and 1999 102 102
Paid-in capital 35,306 35,377
Retained earnings 45,995 42,505
Treasury stock - at cost,
Common stock, 765,627 shares
in 2000 and 590,133 shares in 1999 (4,009) (3,364)
Accumulated other comprehensive
(loss) income (35) 30
- --------------------------------------------------------------------------------
Total Stockholders' Equity 77,359 74,650
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $177,147 $164,731
================================================================================
See Notes to Consolidated Financial Statements.
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME FOR
THE THREE YEARS ENDED DECEMBER 31, 2000
In thousands, except per share data 2000 1999 1998
- --------------------------------------------------------------------------------
NET SALES $264,614 $241,923 $219,449
- --------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of goods sold 226,780 204,838 186,237
Selling and administrative expenses 30,914 27,758 24,734
Interest expense 4,227 3,230 1,631
Other income (2,506) (1,184) (1,731)
- --------------------------------------------------------------------------------
259,415 234,642 210,871
- --------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS,
BEFORE INCOME TAXES 5,199 7,281 8,578
INCOME TAX EXPENSE 2,080 2,663 3,513
- --------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 3,119 4,618 5,065
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAX 371 (2,115) (688)
- --------------------------------------------------------------------------------
NET INCOME $ 3,490 $ 2,503 $ 4,377
================================================================================
BASIC EARNINGS (LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.33 $ 0.48 $ 0.51
DISCONTINUED OPERATIONS 0.04 (0.22) (0.07)
- --------------------------------------------------------------------------------
BASIC EARNINGS PER COMMON SHARE $ 0.37 $ 0.26 $ 0.44
================================================================================
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.33 $ 0.46 $ 0.50
DISCONTINUED OPERATIONS 0.04 (0.21) (0.07)
- --------------------------------------------------------------------------------
DILUTED EARNINGS PER COMMON SHARE $ 0.37 $ 0.25 $ 0.43
================================================================================
See Notes to Consolidated Financial Statements.
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE THREE YEARS ENDED DECEMBER 31, 2000
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 3,119 $ 4,618 $ 5,065
Adjustment to reconcile net income
to net cash provided
by operating activities:
Deferred income taxes (442) (133) 581
Depreciation and amortization 5,386 4,493 2,825
(Gain) loss on sale of property,
plant and equipment (879) 76 (1,360)
Change in operating assets
and liabilities:
Accounts receivable (4,494) 2,243 1,766
Inventories (14,210) (5,839) 3,253
Other current assets 608 (208) (46)
Other noncurrent assets 1,258 (839) (2,673)
Accounts payable - trade 8,562 544 8,394
Accrued payroll and employee
benefits (156) (1,576) 1,490
Other current liabilities 1,001 862 1,731
Other liabilities (166) 249 (1,099)
- --------------------------------------------------------------------------------
Net Cash (Used) Provided by
Continuing Operations (413) 4,490 19,927
Net Cash Provided (Used) by
Discontinued Operations 954 (1,159) (968)
- --------------------------------------------------------------------------------
Net Cash Provided by Operat-
ing Activities 541 3,331 18,959
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property,
plant and equipment 2,428 4,410 1,269
Proceeds from the sale of
Fosterweld division 7,258
Capital expenditures on property,
plant and equipment (4,085) (5,031) (2,514)
Purchase of DM&E stock (6,000)
Acquisition of businesses (17,514) (3,774)
- --------------------------------------------------------------------------------
Net Cash (Used) Provided by
Investing Activities (1,657) (24,135) 2,239
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayments) of revolving
credit agreement borrowings 1,500 32,725 (20,836)
Proceeds from industrial revenue bond 2,045
Exercise of stock options and
stock awards 185 330 412
Treasury share transactions (901) (1,702) (1,808)
Repayments of long-term debt (1,207) (9,881) (1,293)
- --------------------------------------------------------------------------------
Net Cash (Used) Provided by
Financing Activities (423) 21,472 (21,480)
- --------------------------------------------------------------------------------
Effect of exchange rate changes
on cash (19) 16
- --------------------------------------------------------------------------------
Net (Decrease) Increase in Cash
and Cash Equivalents (1,558) 684 (282)
Cash and Cash Equivalents at
Beginning of Year 1,558 874 1,156
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at
End of Year $ - $ 1,558 $ 874
================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest Paid $ 4,266 $ 2,376 $ 1,839
================================================================================
Income Taxes Paid $ 1,932 $ 2,869 $ 2,136
================================================================================
During 2000, 1999 and 1998, the Company financed certain capital expenditures
totaling $340,000, $1,502,000 and $336,000, respectively, through the execution
of capital leases.
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
Accum-
ulated
Other
Compre-
Treas- hensive
In thousands, Common Paid-in Retained ury Income/
except share data Stock Capital Earnings Stock (Loss) Total
================================================================================
Balance,
January 1, 1998 $ 102 $35,434 $35,625 $ (653) $ 19 $70,527
================================================================================
Net income 4,377 4,377
Other comprehensive
loss net of tax:
Foreign currency
translation
adjustment (14) (14)
- --------------------------------------------------------------------------------
Comprehensive income 4,363
Exercise of options
to purchase 93,200
shares of Common
stock (3) 415 412
Treasury stock purch-
ases of 330,989
shares (1,808) (1,808)
================================================================================
Balance,
December 31, 1998 102 35,431 40,002 (2,046) 5 73,494
================================================================================
Net income 2,503 2,503
Other comprehensive
income net of tax:
Foreign currency
translation
adjustment 25 25
- --------------------------------------------------------------------------------
Comprehensive income 2,528
Exercise of options
to purchase 39,000
shares of Common
stock (54) 384 330
Treasury stock purch-
ases of 288,809
shares (1,702) (1,702)
================================================================================
Balance,
December 31, 1999 102 35,377 42,505 (3,364) 30 74,650
================================================================================
Net income 3,490 3,490
Other comprehensive
loss net of tax:
Foreign currency
translation
adjustment (45) (45)
Minimum pension
liability
adjustment (20) (20)
- --------------------------------------------------------------------------------
Comprehensive income 3,425
Exercise of options
to purchase 35,500
shares of Common stock (71) 256 185
Treasury stock purch-
ases of 223,100 shares (901) (901)
================================================================================
Balance,
December 31, 2000 $ 102 $35,306 $45,995 $(4,009) $(35) $77,359
================================================================================
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of financial statement presentation - The consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany transactions have been eliminated.
The term "Company" refers to L. B. Foster Company and its subsidiaries, as the
context requires.
Cash equivalents - The Company considers securities with maturities of three
months or less, when purchased, to be cash equivalents.
Inventories - Inventories are generally valued at the lower of the last-in,
first-out (LIFO) cost or market. Approximately 13% in 2000 and 14% in 1999, of
the Company's inventory is valued at average cost or market, whichever is lower.
Property, plant and equipment - Maintenance, repairs and minor renewals are
charged to operations as incurred. Major renewals and betterments which
substantially extend the useful life of the property are capitalized. Upon sale
or other disposition of assets, the cost and related accumulated depreciation
and amortization are removed from the accounts and the resulting gain or loss,
if any, is reflected in income. Depreciation and amortization are provided on a
straight-line basis over the estimated useful lives of 30 to 40 years for
buildings and 3 to 10 years for machinery and equipment. Leasehold improvements
are amortized over 2 to 7 years which represent the lives of the respective
leases or the lives of the improvements, whichever is shorter.
Goodwill and other intangible assets - The Company's intangible assets consist
primarily of goodwill and acquired intellectual property. Goodwill recorded by
the Company represents the excess of the purchase price over the estimated fair
value of the net assets acquired. The Company amortizes intangible assets on a
straight-line basis over periods of 8 to 25 years and establishes useful lives
on the acquisition date based upon the asset's estimated future benefit. When
factors indicate the potential impairment of these assets, the excess of the
unamortized asset over the asset's estimated fair value, determined using a
multiple cash flows model, will be charged to operations. Amortization expense
was $743,000, $660,000 and $513,000 in 2000, 1999 and 1998, respectively.
Interest rate agreements - To offset exposures to changes in interest rates on
variable rate debt, the Company enters into interest rate swap agreements. The
effects of movements in interest rates on these instruments are recognized as
they occur.
Environmental remediation and compliance - Environmental remediation costs are
accrued when the liability is probable and costs are estimable. Environmental
compliance costs, which principally include the disposal of waste generated by
routine operations, are expensed as incurred. Capitalized environmental costs
are depreciated, when appropriate, over their useful life.
Earnings per share - Basic earnings per share is calculated by dividing net
income by the weighted average of common shares outstanding during the year.
Diluted earnings per share is calculated by using the weighted average of common
shares outstanding adjusted to include the potentially dilutive effect of
outstanding stock options.
Revenue recognition - The Company's revenues are composed of product sales and
products and services provided under long-term contracts. The Company recognizes
revenues upon shipment of material from stock inventory or upon billing of
material shipped directly to the customer from a Company vendor. Title passes to
the customer upon shipment. Revenues from long-term contracts are generally
recognized using the percentage-of-completion method based upon the proportion
of actual labor and engineering costs to estimated total labor and engineering
costs. For certain products, the Company recognizes revenues based upon the
units delivered compared to total units ordered by the customer.
As certain long-term contracts extend over one or more years, revisions to
estimates of costs and profits are reflected in the accounting period in which
the facts that require the revisions become known. At the time a loss on a
contract becomes known, the entire amount of the estimated loss is recognized in
the financial statements. The Company has historically made reasonable
dependable estimates of the extent of progress towards completion, contract
revenues, and contract costs on its long-term contracts. However, due to
uncertainties inherent in the estimation process, actual results could differ
materially from those estimates.
Revenue from contract change orders and claims is recognized when the settlement
is probable and the amount can be reasonably estimated, and customer approval
has been obtained. Contract costs include all direct material, labor,
subcontract costs and those indirect costs related to contract performance.
Costs and estimated profits in excess of billings are classified as a current
asset. Amounts billed in excess of costs and estimated profits are classified as
a current liability.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements," which
clarifies certain conditions to be met in order to recognize revenue. The
Company implemented SAB 101 in the fourth quarter of 2000. Adoption did not
significantly impact the Company's results.
Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock-based compensation - The Company grants stock options for a fixed number
of shares to employees with an exercise price equal to the fair value of the
shares at the date of grant. The Company follows the requirements of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in
accounting for stock-based compensation, and, accordingly, recognizes no
compensation expense for stock option grants.
New accounting pronouncements - In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative financial
instruments and hedging activities. In June 1999, FASB Statement No. 137,
"Accounting for Derivative Instruments and Hedging Activities: Deferral of
Effective Date of the FASB Statement No. 133," was issued. This statement
delayed the effective date to all fiscal quarters of all fiscal years beginning
after June 15, 2000. This statement will be adopted by the Company in 2001 and
will not have a material effect on the consolidated financial statements.
Foreign currency translation - To avoid foreign exchange exposure whenever
possible, hedging techniques are used to protect transaction costs and profits.
NOTE 2.
ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 2000 and 1999 are summarized as follows:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Trade $58,036 $53,665
Allowance for doubtful accounts (1,564) (1,555)
Other 1,134 1,002
- --------------------------------------------------------------------------------
$57,606 $53,112
================================================================================
The Company's customers are principally in the rail, construction and tubular
segments of the economy. As of December 31, 2000 and 1999, trade receivables,
net of allowance for doubtful accounts, from customers in these markets were as
follows:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Rail $29,752 $33,278
Construction 23,722 17,116
Tubular 2,998 1,716
- --------------------------------------------------------------------------------
$56,472 $52,110
================================================================================
Credit is extended on an evaluation of the customer's financial condition and
generally collateral is not required.
NOTE 3.
INVENTORIES
Inventories at December 31, 2000 and 1999 are summarized as follows:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Finished goods $41,618 $28,755
Work-in-process 13,519 13,000
Raw materials 6,964 6,298
- --------------------------------------------------------------------------------
Total inventories at current costs 62,101 48,053
================================================================================
Less:
Current cost over LIFO
stated values (1,690) (1,852)
Inventory valuation reserve (600) (600)
- --------------------------------------------------------------------------------
$59,811 $45,601
================================================================================
At December 31, 2000 and 1999, the LIFO carrying value of inventories for book
purposes exceeded the LIFO value for tax purposes by approximately $4,524,000
and $3,966,000, respectively. A liquidation of certain LIFO inventory layers
occurred during 2000 and 1999. The majority of these quantities were carried at
costs which were higher than current purchases. The net effect of these
fluctuations in 2000 and 1999 was to increase cost of goods sold by $18,000 and
$531,000, respectively.
NOTE 4.
PROPERTY HELD FOR RESALE
Property held for resale at December 31, 2000 and 1999 consists of the
following:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Location:
Birmingham, AL $ 1,333 $ 1,345
Pomeroy, OH 653 665
St. Marys, WV 436 483
Doraville, GA 3,055
Houston, TX 1,511
- --------------------------------------------------------------------------------
Property held for resale 2,422 7,059
- --------------------------------------------------------------------------------
Less current portion 1,333 2,856
- --------------------------------------------------------------------------------
$1,089 $ 4,203
================================================================================
Operations at the Newport, KY facility were suspended in September 1998 in
response to unfavorable market conditions. In 1999, the Company recorded an
impairment loss of $183,000 to reduce these assets to their anticipated market
value. Machinery and equipment previously utilized in the Company's Newport, KY
pipe coating facility was dismantled and transferred to the Company's
Birmingham, AL location during 2000. Management is actively pursuing the sale of
these assets.
The Pomeroy, OH and St. Marys, WV locations, consisting of machinery and
equipment, buildings, land and land improvements which comprise the Company's
mining division of the rail products segment, were determined not to meet the
Company's long-range strategic goals. The Company continues to explore the
divestiture of these assets.
In 2000, the Company sold an undeveloped 62-acre portion of the 127-acre
Houston, TX property and recorded an approximate pretax gain of $800,000.
NOTE 5.
DISCONTINUED OPERATIONS
In the fourth quarter of 1999, the Company made the decision to discontinue the
operations of the Monitor Group, a developer of portable mass spectrometers, as
a discontinued operation, pending its sale. In September 2000, the Company sold
the assets of the Monitor Group for $1,500,000 cash. The decision to discontinue
the Monitor Group represents the disposal of a business segment under Accounting
Principles Board (APB) Opinion No. 30. Accordingly, results of this operation
have been classified as discontinued, and prior periods have been restated.
Net sales and income (loss) from the discontinued operations are as follows:
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
Net sales $ 1 $ 73 $ 26
- --------------------------------------------------------------------------------
Pretax operating loss $ (882) $ (1,347) $ (1,165)
Pretax provision for the
disposal of assets (1,984)
Pretax gain on disposal 1,500
Income tax (expense) benefit (247) 1,216 477
- --------------------------------------------------------------------------------
Income (loss) from
discontinued operations $ 371 $ (2,115) $ (688)
================================================================================
In 1999, the provision for the disposal of assets included a complete write-off
of all assets of the Monitor Group. The write-off consisted of the following
components, in thousands:
Intangibles $ 1,764
Inventory 209
Equipment 11
- --------------------------------------------------------------------------------
Total assets $ 1,984
================================================================================
NOTE 6.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 2000 and 1999 consists of the
following:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Land $ 6,312 $ 3,138
Improvements to land and leaseholds 6,019 4,777
Buildings 4,825 3,382
Machinery and equipment, including
equipment under capitalized
leases (see Note 14, Rental
and Lease Information) 41,008 38,703
Construction in progress 335 1,717
- --------------------------------------------------------------------------------
58,499 51,717
- --------------------------------------------------------------------------------
Less accumulated depreciation and
amortization, including accumulated
amortization of capitalized leases
(see Note 14, Rental and Lease
Information) 25,476 21,591
- --------------------------------------------------------------------------------
$33,023 $30,126
================================================================================
Prior year amounts have been reclassified to reflect adjustments in the fair
value estimate of assets acquired from CXT Incorporated.
NOTE 7.
OTHER ASSETS AND INVESTMENTS
The Company holds investments in the stock of the Dakota, Minnesota & Eastern
Railroad Corporation (DM&E), which is recorded at its historical cost at
December 31, 2000 and 1999 of $7,693,000. This investment is comprised of
$193,000 of DM&E Common Stock, $1,500,000 of DM&E Series B Preferred Stock and
Common Stock warrants, and $6,000,000 in DM&E Series C Preferred Stock and
Common Stock warrants. The Company has accrued dividend income on the Series B
and C Preferred Stock of $813,000 and $872,000 in 2000 and 1999, respectively.
Although the market value of the investments in DM&E stock are not readily
determinable, management believes the fair value of this investment exceeds its
carrying amount.
At December 31, 1999, other assets also included notes receivable and accrued
interest totaling $2,679,000 from investors in the DM&E. During 2000,
approximately $2,000,000 of the notes and interest were paid and the remaining
balance was reclassified to other accounts receivable in anticipation of the
repayment of the remaining balance during 2001.
In August 2000, the Company contributed a note, having a principal and interest
value of approximately $2,700,000, to a limited liability company created by the
Company and its trackwork supplier in exchange for a 30% ownership position. In
conjunction with the contribution, the Company recorded goodwill of
approximately $1,700,000, which is being amortized on a straight-line basis over
fifteen years.
NOTE 8.
BORROWINGS
During 2000, the Company reduced the revolving credit agreement to $64,025,000.
The interest rate is, at the Company's option, based on the Euro-bank rate
(LIBOR), the domestic certificate of deposit rate (CD rate) or the prime rate.
The interest rates are established quarterly based upon cash flow and the level
of outstanding borrowings to debt as defined in the agreement. Interest rates
range from the LIBOR rate plus 0.575% to 1.8%, the CD rate plus 0.575% to 1.8%,
and prime to prime plus 0.25%. Borrowings under the agreement, which expires
July 1, 2003, are secured by eligible accounts receivable, inventory, and the
pledge of the Company-held Dakota, Minnesota & Eastern Railroad Corporation
Preferred Stock.
The agreement includes financial covenants requiring a minimum net worth, a
minimum level for the fixed charge coverage ratio and a maximum level for the
consolidated total indebtedness to EBITDA ratio. The agreement also restricts
investments, indebtedness, and the sale of certain assets.
As of December 31, 2000, the Company was in compliance with all of the
agreement's covenants. At December 31, 2000, 1999 and 1998, the weighted average
interest rate on short-term borrowings was 8.12%, 6.78% and 6.95%, respectively.
At December 31, 2000, the Company had borrowed $46,500,000 under the agreement
of which $40,000,000 was classified as long-term (see Note 9). Under the
agreement, the Company had approximately $11,726,000 in unused borrowing
commitment at December 31, 2000.
NOTE 9.
LONG-TERM DEBT AND RELATED MATTERS
Long-term debt at December 31, 2000 and 1999 consists of the following:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Revolving Credit Agreement with
weighted average interest rate of
8.12% at December 31, 2000 and
6.78% at December 31, 1999,
expiring July 1, 2003 $40,000 $40,000
- --------------------------------------------------------------------------------
Lease obligations payable in
installments through 2004 with a
weighted average interest rate of
8.24% at December 31, 2000 and
8.07% at December 31, 1999 2,365 3,232
- --------------------------------------------------------------------------------
Massachusetts Industrial Revenue
Bond with an average interest
rate of 4.75% at December 31,
2000 and 3.53% at December 31,
1999, payable March 1, 2013 2,045 2,045
- --------------------------------------------------------------------------------
44,410 45,277
Less current maturities 926 1,141
- --------------------------------------------------------------------------------
$43,484 $44,136
================================================================================
The $40,000,000 revolving credit borrowings included in long-term debt were
obtained under the revolving loan agreement discussed in Note 8 and are subject
to the same terms and conditions. This portion of the borrowings is classified
as long-term because the Company does not anticipate reducing the borrowings
below $40,000,000 during 2001.
The Massachusetts Industrial Revenue Bond is secured by a $2,085,000 standby
letter of credit.
The Company has entered into an interest rate swap agreement as the fixed rate
payor to reduce the impact of changes in interest rates on a portion of its
revolving borrowings. At December 31, 2000, the swap agreement had a notional
value of $8,000,000 at 5.48%, which expired in January 2001. The swap
agreement's floating rate was based on LIBOR. Any amounts paid or received under
the agreement are recognized as adjustments to interest expense. Neither the
fair market value of the agreement nor the interest expense adjustments
associated with the agreement has been material. In addition, the Company has a
swap agreement to fix the interest rate of a financial transaction at 7.42%. The
Company also agreed to pay additional interest for any period where LIBOR
exceeds 7.249%. At December 31, 2000, this swap agreement had a notional value
of $3,661,000 and expires in December 2004. The Company plans to enter into
additional swaps or other financial instruments to set all or a portion of its
borrowings at fixed rates.
The maturities of long-term debt for each of the succeeding five years
subsequent to December 31, 2000 are as follows:
2001 - $926,000; 2002 - $778,000; 2003 - $40,506,000; 2004 - $155,000; 2005 and
after - $2,045,000.
NOTE 10.
STOCKHOLDERS' EQUITY
At December 31, 2000 and 1999, the Company had authorized shares of 20,000,000
in Common stock and 5,000,000 in Preferred stock. No Preferred Stock has been
issued. The Common stock has a par value of $.01 per share. No par value has
been assigned to the Preferred Stock.
The Company's Board of Directors authorized the purchase of up to 1,500,000
shares of its Common stock at prevailing market prices. The timing and extent of
the purchases will depend on market conditions. As of December 31, 2000, the
Company had repurchased 948,398 shares at a total cost of approximately
$4,941,800.
No cash dividends on Common stock were paid in 2000, 1999, or 1998.
NOTE 11.
STOCK OPTIONS
The Company has two stock option plans currently in effect under which future
grants may be issued: The 1985 Long-Term Incentive Plan (1985 Plan) and the 1998
Long-Term Incentive Plan (1998 Plan).
The 1985 Plan, as amended and restated in March 1994, provides for the award of
options to key employees and directors to purchase up to 1,500,000 shares of
Common stock at no less than 100% of fair market value on the date of the grant.
The 1998 Plan as amended and restated in February 1999, provides for the award
of options to key employees and directors to purchase up to 450,000 shares of
Common stock at no less than 100% of fair market value on the date of the grant.
Both Plans provide for the granting of "nonqualified options" and "incentive
stock options" with a duration of not more than ten years from the date of
grant. The Plans also provide that, unless otherwise set forth in the option
agreement, options are exercisable in installments of up to 25% annually
beginning one year from date of grant. Stock to be offered under the Plans may
be authorized from unissued Common stock or previously issued shares which have
been reacquired by the Company and held as Treasury shares. At December 31,
2000, 1999 and 1998, Common stock options outstanding under the Plans had option
prices ranging from $2.63 to $6.00, with a weighted average price of $4.26,
$4.24 and $3.96 per share, respectively.
The weighted average remaining contractual life of the stock options outstanding
for the three years ended December 31, 2000 are: 2000 - 7.1 years; 1999 - 6.3
years; and 1998 - 5.9 years.
The Option Committee of the Board of Directors which administers the Plans may,
at its discretion, grant stock appreciation rights at any time prior to six
months before an option's expiration date. Upon exercise of such rights, the
participant surrenders the exercisable portion of the option in exchange for
payment (in cash and/or Common stock valued at its fair market value) of an
amount not greater than the spread, if any, by which the average of the high and
low sales prices quoted in the Over-the-Counter Exchange on the trading day
immediately preceding the date of exercise of the stock appreciation right
exceeds the option price. No stock appreciation rights were issued or
outstanding during 2000, 1999 or 1998.
Options exercised during 2000, 1999 and 1998 totaled 35,500, 39,000 and 93,200
shares, respectively. The weighted average exercise price per share of the
options in 2000, 1999 and 1998 was $3.32, $3.35 and $3.31, respectively.
Certain information for the three years ended December 31, 2000 relative to
employee stock options is summarized as follows:
2000 1999 1998
- --------------------------------------------------------------------------------
Number of shares under
Incentive Plan:
Outstanding at
beginning of year 950,500 967,500 858,500
Granted 462,500 135,000 215,000
Canceled (190,000) (113,000) (12,800)
Exercised (35,500) (39,000) (93,200)
- --------------------------------------------------------------------------------
Outstanding at
end of year 1,187,500 950,500 967,500
================================================================================
Exercisable at
end of year 661,375 656,875 723,875
================================================================================
Number of shares available
for future grant:
Beginning of year 408,550 5,550 182,750
================================================================================
End of year 136,050 408,550 5,550
================================================================================
The weighted average fair value of options granted at December 31, 2000, 1999,
and 1998 was $2.26, $2.68 and $2.40, respectively.
The Company has adopted the disclose-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but applies Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock option plans. Accordingly, no
compensation expense has been recognized. Had compensation expense for the
Company's stock option plans been determined using the method required by SFAS
No. 123, the effect to the Company's income from continuing operations and
earnings per share would have been reduced to the pro forma amounts that follow:
In thousands, except
per share amounts 2000 1999 1998
- --------------------------------------------------------------------------------
Income from
continuing operations $2,804 $4,478 $4,887
================================================================================
Basic earnings per common
share from continuing
operations $ 0.29 $ 0.46 $ 0.49
================================================================================
Diluted earnings per
common share from
continuing operations $ 0.29 $ 0.45 $ 0.49
================================================================================
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-Sholes option-pricing model with the following weighted average
assumptions used for grants in 2000, 1999 and 1998, respectively: risk-free
interest rates of 6.02% , 6.14% and 4.77%; dividend yield of 0.0% for all three
years; volatility factors of the expected market price of the Company's Common
stock of .29, .30 and .31; and a weighted-average expected life of the option of
ten years.
Note 12.
Earnings Per Common Share
The following table sets forth the computation of basic and diluted earnings per
common share:
In thousands,except Years ended December 31,
per share amounts 2000 1999 1998
- --------------------------------------------------------------------------------
Numerator:
Numerator for basic
and diluted earnings
per common share -
net income available
to common stockholders:
Income from
continuing operations $ 3,119 $ 4,618 $ 5,065
Income (loss) from
discontinued operations 371 (2,115) (688)
- --------------------------------------------------------------------------------
Net income $ 3,490 $ 2,503 $ 4,377
================================================================================
Denominator:
Weighted average shares 9,490 9,664 9,988
- --------------------------------------------------------------------------------
Denominator for basic earnings
per common share 9,490 9,664 9,988
Effect of dilutive securities:
Contingent issuable shares
pursuant to the Company's
1999, 1998 & 1997 Bonus
Plan 53 51 15
Employee stock options 15 231 205
- --------------------------------------------------------------------------------
Dilutive potential common
shares 68 282 220
Denominator for diluted
earnings per common
share - adjusted weighted
average shares and
assumed conversions 9,558 9,946 10,208
================================================================================
Basic earnings (loss) per
common share:
Continuing operations $ 0.33 $ 0.48 $ 0.51
Discontinued operations 0.04 (0.22) (0.07)
- --------------------------------------------------------------------------------
Basic earnings per
common share $ 0.37 $ 0.26 $ 0.44
================================================================================
Diluted earnings (loss) per
common share:
Continuing operations $ 0.33 $ 0.46 $ 0.50
Discontinued operations 0.04 (0.21) (0.07)
- --------------------------------------------------------------------------------
Diluted earnings per
common share $ 0.37 $ 0.25 $ 0.43
================================================================================
Weighted average anti-
dilutive stock options 791 42 54
================================================================================
NOTE 13.
INCOME TAXES
At December 31, 2000 and 1999, the tax benefit of net operating loss
carryforwards available for foreign and state income tax purposes was
approximately $1,808,000 and $1,063,000, respectively. The Company also has
alternative minimum federal tax credit carryforwards at December 31, 2000 and
1999, of approximately $71,000 and $430,000, respectively. For financial
reporting purposes, a valuation allowance of $1,206,000 has been recognized to
offset the deferred tax assets related to the state and foreign income tax
carryforwards. The valuation allowance for deferred tax assets was increased by
$746,000 during 2000 and $335,000 during 1999. Deferred income taxes reflect the
net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for tax
purposes. Significant components of the Company's deferred tax liabilities and
assets as of December 31, 2000 and 1999, are as follows:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation $ 5,413 $ 5,537
Inventories 950 1,154
- --------------------------------------------------------------------------------
Total deferred tax liabilities 6,363 6,691
================================================================================
Deferred tax assets:
Accounts receivables 569 531
Net operating loss
carryforwards 1,808 1,063
Tax credit carryforwards 71 430
Other - net 1,058 622
- --------------------------------------------------------------------------------
Total deferred tax assets 3,506 2,646
Valuation allowance for
deferred tax assets 1,206 460
- --------------------------------------------------------------------------------
Deferred tax assets 2,300 2,186
- --------------------------------------------------------------------------------
Net deferred tax liability $ (4,063) $ (4,505)
================================================================================
Significant components of the provision for income taxes are as follows:
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
Current:
Federal $2,423 $2,746 $2,594
State 99 50 338
- --------------------------------------------------------------------------------
Total current 2,522 2,796 2,932
================================================================================
Deferred:
Federal (398) 8 507
Foreign 32 (106)
State (44) (173) 180
- --------------------------------------------------------------------------------
Total deferred (442) (133) 581
================================================================================
Total income tax
expense $2,080 $2,663 $3,513
================================================================================
The reconciliation of income tax computed at statutory rates to income tax
expense (benefit) is as follows:
2000 1999 1998
- --------------------------------------------------------------------------------
Statutory rate 34.0% 34.0% 34.0%
State income tax 0.8 (2.1) 4.6
Foreign income tax 5.1 8.4 1.3
Nondeductible expenses 0.1 3.9 1.8
Prior period tax (7.0) (0.3)
Other (0.6) (0.4)
- --------------------------------------------------------------------------------
40.0% 36.6% 41.0%
================================================================================
NOTE 14.
RENTAL AND LEASE INFORMATION
The Company has capital and operating leases for certain plant facilities,
office facilities, and equipment. Rental expense for the years ended December
31, 2000, 1999, and 1998 amounted to $4,256,000, $2,449,000 and $1,885,000,
respectively. Generally, the land and building leases include escalation
clauses.
On December 30, 1999, the Company entered into a $4,200,000 sale-leaseback
transaction whereby the Company sold and leased back the assets of the Grand
Island, NE facility. The resulting lease is being accounted for as an operating
lease. There was no gain or loss recorded on the sale. The lease base term is
five years with balloon payment options at amounts approximating fair value at
the end of the base term. The interest rate for this transaction is 7.42% with
escalation provisions if LIBOR exceeds 7.249%.
The following is a schedule, by year, of the future minimum payments under
capital and operating leases, together with the present value of the net minimum
payments as of December 31, 2000:
Capital Operating
In thousands Leases Leases
- --------------------------------------------------------------------------------
Year ending December 31,
2001 $ 1,084 $ 2,864
2002 862 2,782
2003 537 2,245
2004 159 1,680
2005 and thereafter 1,657
- --------------------------------------------------------------------------------
Total minimum lease payments 2,642 $11,228
Less amount representing interest 277
- --------------------------------------------------------------------------------
Total present value of minimum
payments 2,365
Less current portion of such
obligations 926
- --------------------------------------------------------------------------------
Long-term obligations with
interest rates ranging from
3.66% to 11.0% $ 1,439
================================================================================
Assets recorded under capital leases are as follows:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Machinery and equipment,
at cost $2,689 $4,117
Construction in progress 32 180
- --------------------------------------------------------------------------------
2,721 4,297
Less accumulated amortization 943 1,757
- --------------------------------------------------------------------------------
Net property, plant and
equipment 1,778 2,540
- --------------------------------------------------------------------------------
Machinery and equipment held
for resale, at cost 2,037 2,046
Less accumulated amortization/
valuation 828 843
- --------------------------------------------------------------------------------
Net property held for resale 1,209 1,203
Net prepaid expenses 98 121
- --------------------------------------------------------------------------------
Net capital lease assets $3,085 $3,864
================================================================================
NOTE 15.
ACQUISITIONS
On June 30, 1999, the Company acquired all of the outstanding stock of CXT
Incorporated, a Spokane, WA based manufacturer of engineered prestressed and
precast concrete products primarily used in the railroad and transit industries.
The acquisition has been recorded using the purchase method of accounting and
has been included in operations since the date of acquisition. The purchase
price of $17,514,000 has been allocated based on the fair values of the assets
acquired and liabilities assumed, as of the acquisition date. This allocation
has resulted in acquired goodwill of approximately $4,221,000, which is being
amortized on a straight-line basis over twenty years.
Had the CXT acquisition been made at the beginning of 1998, the Company's pro
forma unaudited results would have been:
Twelve Months Ended
In thousands except December 31,
per share amounts 1999 1998
- --------------------------------------------------------------------------------
Net sales $261,588 $251,553
Income from continuing
operations 4,762 4,213
Basic earnings per share
from continuing operations $0.49 $0.42
================================================================================
The unaudited pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations which would
have actually resulted had the acquisition been in effect on January 1, 1998, or
of future results of operations.
NOTE 16.
RETIREMENT PLANS
Substantially all of the Company's hourly paid employees are covered by one of
the Company's noncontributory, defined benefit plans and a defined contribution
plan. Substantially all of the Company's salaried employees are covered by a
defined contribution plan established by the Company.
The hourly plan assets consist of various mutual fund investments. The following
tables present a reconciliation of the changes in the benefit obligation, the
fair market value of the assets and the funded status of the plan, with the
accrued pension cost in other current liabilities in the Company's consolidated
balance sheets:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Changes in benefit obligation:
Benefit obligation at beginning
of year $ 2,452 $ 2,295
Service cost 61 77
Interest cost 179 155
Actuarial losses 186 8
Benefits paid (131) (83)
- --------------------------------------------------------------------------------
Benefit obligation at end
of year $ 2,747 $ 2,452
================================================================================
Change to plan assets:
Fair value of assets at
beginning of year $ 2,718 $ 2,287
Actual return on plan assets (204) 468
Employer contribution 46
Benefits paid (131) (83)
- --------------------------------------------------------------------------------
Fair value of assets at
end of year $ 2,383 $ 2,718
================================================================================
Funded status $ (364) $ 266
Unrecognized actuarial loss (gain) 143 (478)
Unrecognized net transition
asset (73) (83)
Unrecognized prior service
cost 64 73
Minimum pension liability (104) (18)
- --------------------------------------------------------------------------------
Net amount recognized $ (334) $ (240)
================================================================================
Amounts recognized in the
statement of financial
position consist of:
Accrued benefit cost $ (240) $ (213)
Accrued benefit liability (16) (27)
Other (78)
- --------------------------------------------------------------------------------
Net amount recognized $ (334) $ (240)
================================================================================
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 years ended December 31, 2000, are as
follows:
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
Components of net
periodic benefit cost:
Service cost $ 61 $ 77 $ 85
Interest cost 179 155 147
Actual return on
plan assets 204 (468) (212)
Amortization of prior
service cost (16) (2) 7
Recognized actuarial (loss) gain (420) 287 31
- --------------------------------------------------------------------------------
Net periodic
benefit cost $ 8 $ 49 $ 58
================================================================================
An assumed discount rate of 7% and an expected rate of return on plan assets of
8% were used to measure the projected benefit obligation and develop net
periodic pension costs for the three years ended December 31, 2000.
Amounts applicable to the Company's pension plans with accumulated benefit
obligations in excess of plan assets are as follows:
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
Projected benefit obligation $ 2,747 $ 657 $ 575
Accumulated benefit obligation 2,718 657 575
Fair value of plan assets 2,383 629 499
================================================================================
The Company's defined contribution plan, available to substantially all salaried
employees, contains a matched savings provision that permits both pretax and
after-tax employee contributions. Participants can contribute from 2% to 15% of
their annual compensation and receive a matching employer contribution on up to
3% of their annual compensation.
Further, the plan requires an additional matching employer contribution, based
on the ratio of the Company's pretax income to equity, up to 3% of the
employees' annual compensation. Additionally, the Company contributes 1% of all
salaried employees annual compensation to the plan without regard for employee
contribution. The defined contribution plan expense was $877,000 in 2000,
$863,000 in 1999, and $874,000 in 1998.
NOTE 17.
COMMITMENTS AND CONTINGENT LIABILITIES
The Company is subject to laws and regulations relating to the protection of the
environment, and the Company's efforts to comply with increasingly stringent
environmental regulations may have an adverse effect on the Company's future
earnings. 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 which arise in the
ordinary course of its business. In the opinion of management, the amount of
ultimate liability with respect to these actions will not materially affect the
financial position of the Company.
At December 31, 2000, the Company had outstanding letters of credit of
approximately $3,969,000.
NOTE 18.
RISKS AND UNCERTAINTIES
The Company's future operating results may be affected by a number of factors.
The Company is dependent upon a number of major suppliers. If a supplier had
operational problems or ceased making material available to the Company,
operations could be adversely affected.
The Company has become TXI Chaparral's exclusive North American distributor of
steel sheet piling and H-bearing pile. Shipments of H-bearing pile began very
late in the third quarter of 1999 from TXI Chaparral's new Petersburg, VA
facility. Current mill forecasts indicate that meaningful quantities of sheet
piling are expected early in the second quarter of 2001.
The rail segment of the business depends on one source, in which the Company
currently maintains a 30% ownership position, for fulfilling certain trackwork
contracts. At December 31, 2000, the Company had inventory progress payments of
$6,070,000 committed to this supplier. If, for any reason, this supplier is
unable to perform, the Company could experience a negative short-term effect on
earnings.
The Company's CXT subsidiary and Allegheny Rail Products division are dependent
on one customer for a significant portion of their business. In addition, a
substantial portion of the Company's operations are heavily dependent on
governmental funding of infrastructure projects. Significant changes in the
level of government funding of these projects could have a favorable or
unfavorable impact on the operating results of the Company. Additionally,
governmental actions concerning taxation, tariffs, the environment or other
matters could impact the operating results of the Company. The Company's
operating results may also be affected by adverse weather conditions.
NOTE 19.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of accounts receivable, accounts
payable, short-term and long-term debt, and interest rate swap agreements.
The carrying amounts of the Company's financial instruments at December 31, 2000
approximate fair value.
NOTE 20.
BUSINESS SEGMENTS
L. B. Foster 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 and was previously engaged in the development of portable mass
spectrometers.
The Company's rail segment provides a full line of new and used rail, trackwork
and accessories to railroads, mines and industry. The Company also designs and
produces concrete ties, bonded rail joints, power rail, track fasteners,
coverboards and special accessories for mass transit and other rail systems.
The Company's construction segment sells and rents steel sheet piling and
H-bearing pile for foundation and earth retention requirements. In addition, the
Company's Fabricated Products division sells bridge decking, heavy steel
fabrications, expansion joints, sign structures and other products for highway
construction and repair. The Company's Geotechnical division designs and
supplies mechanically-stabilized earth wall systems. The Company's Buildings
division produces concrete buildings.
The Company's tubular segment supplies pipe coatings for pipelines and
utilities. Additionally, the Company also produces pipe-related products for
special markets, including water wells and irrigation.
The Company markets its products directly in all major industrial areas of the
United States primarily through a national sales force.
The following table illustrates revenues, profits, assets,
depreciation/amortization and capital expenditures of the Company by segment.
Segment profit is the earnings before income taxes and includes internal cost of
capital charges for assets used in the segment at a rate of, generally, 1% per
month. The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies except that the
Company accounts for inventory on a First-In, First-Out (FIFO) basis at the
segment level compared to a Last-In, First-Out (LIFO) basis at the consolidated
level.
In thousands 2000
- ----------------------------------------------------------------------------------------------------------------
Expenditures
Net Segment Segment Depreciation/ for Long-Lived
Sales Profit/(Loss) Assets Amortization Assets
- ----------------------------------------------------------------------------------------------------------------
Rail Products $138,635 $ (1,060) $ 85,706 $ 2,614 $ 1,600
Construction Products 106,280 4,429 53,944 1,391 2,261
Tubular Products 19,511 1,531 9,058 630 211
- ----------------------------------------------------------------------------------------------------------------
Total $264,426 $ 4,900 $ 148,708 $ 4,635 $ 4,072
================================================================================================================
In thousands 1999
- ----------------------------------------------------------------------------------------------------------------
Expenditures
Net Segment Segment Depreciation/ for Long-Lived
Sales Profit Assets Amortization Assets
- ----------------------------------------------------------------------------------------------------------------
Rail Products $141,952 $ 4,120 $ 87,419 $ 700 $ 20,097
Construction Products 75,010 2,256 35,456 1,050 3,493
Tubular Products 24,676 1,889 8,270 772 323
- ----------------------------------------------------------------------------------------------------------------
Total $241,638 $ 8,265 $ 131,145 $ 2,522 $ 23,913
================================================================================================================
In thousands 1998
- ----------------------------------------------------------------------------------------------------------------
Expenditures
Net Segment Segment Depreciation/ for Long-Lived
Sales Profit Assets Amortization Assets
- ----------------------------------------------------------------------------------------------------------------
Rail Products $121,271 $ 6,320 $ 60,500 $ 470 $ 1,042
Construction Products 51,870 551 26,063 667 2,022
Tubular Products 46,044 1,698 13,437 1,043 771
- ----------------------------------------------------------------------------------------------------------------
Total $219,185 $ 8,569 $ 100,000 $ 2,180 $ 3,835
================================================================================================================
The 1999 results have been restated to reflect the January 1, 2000 change in
reporting segment classification of the Buildings division, acquired with the
1999 CXT acquisition, from rail to construction.
Sales to any individual customer do not exceed 10% of consolidated revenues.
Sales between segments are immaterial.
Reconciliations of reportable segment net sales, profit, assets, depreciation
and amortization, and expenditures for long-lived assets to the Company's
consolidated totals are illustrated as follows:
In thousands
- ----------------------------------------------------------------------------------------------------------------
Net Sales 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------
Total for reportable segments $ 264,426 $ 241,638 $ 219,185
Other net sales 188 285 264
- ----------------------------------------------------------------------------------------------------------------
$ 264,614 $ 241,923 $ 219,449
================================================================================================================
Net Profit
- ----------------------------------------------------------------------------------------------------------------
Total for reportable segments $ 4,900 $ 8,265 $ 8,569
Adjustment of inventory to LIFO 162 332 426
Unallocated other income 2,506 1,184 1,731
Other unallocated amounts (2,369) (2,500) (2,148)
- ----------------------------------------------------------------------------------------------------------------
Income from continuing operations,
before income taxes $ 5,199 $ 7,281 $ 8,578
================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------
Total for reportable segments $ 148,708 $ 131,145 $ 100,000
Unallocated corporate assets 23,913 27,527 13,919
LIFO and market value inventory reserves (2,290) (2,452) (2,784)
Unallocated property, plant and equipment 6,816 8,511 8,299
- ----------------------------------------------------------------------------------------------------------------
Total assets $ 177,147 $ 164,731 $ 119,434
================================================================================================================
Depreciation/Amortization
- ----------------------------------------------------------------------------------------------------------------
Total reportable for segments $ 4,635 $ 2,522 $ 2,180
Other 751 1,971 645
- ----------------------------------------------------------------------------------------------------------------
$ 5,386 $ 4,493 $ 2,825
================================================================================================================
Expenditures for Long-Lived Assets
- ----------------------------------------------------------------------------------------------------------------
Total for reportable segments $ 4,072 $ 23,913 $ 3,835
Expenditures included in acquisition of business (17,961) (1,069)
Expenditures financed under capital leases (340) (1,386)
Expenditures included in property held for sale (99) (30) (60)
Other unallocated expenditures 353 465 69
- ----------------------------------------------------------------------------------------------------------------
$ 3,986 $ 5,001 $ 2,775
================================================================================================================
Approximately 96% of the Company's total net sales were to customers in the
United States, and a majority of the remaining sales were to other North
American countries.
All of the Company's long-lived assets are located in North America and almost
100% of those assets are located in the United States.
NOTE 21.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended December 31, 2000 and 1999
is presented below:
In thousands, except per share amounts 2000
- ---------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter(1) (2) Quarter (1) Quarter (1)(2)(3) Quarter (1) Total
- ---------------------------------------------------------------------------------------------------------------------
Net sales $ 59,489 $ 71,692 $ 74,428 $ 59,005 $ 264,614
- ---------------------------------------------------------------------------------------------------------------------
Gross profit $ 8,311 $ 10,240 $ 10,159 $ 9,124 $ 37,834
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations $ 328 $ 950 $ 1,382 $ 459 $ 3,119
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations $ (176) $ (189) $ 736 $ 0 $ 371
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 152 $ 761 $ 2,118 $ 459 $ 3,490
=====================================================================================================================
Basic earnings (loss) per common share:
From continuing operations $ 0.04 $ 0.10 $ 0.15 $ 0.05 $ 0.33
From discontinued operations ( 0.02) (0.02) 0.08 0.00 0.04
- ---------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.02 $ 0.08 $ 0.23 $ 0.05 $ 0.37
=====================================================================================================================
Diluted earnings (loss) per common share:
From continuing operations $ 0.04 $ 0.10 $ 0.15 $ 0.05 $ 0.33
From discontinued operations (0.02) (0.02) 0.08 0.00 0.04
- ---------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.02 $ 0.08 $ 0.23 $ 0.05 $ 0.37
=====================================================================================================================
(1) The quarterly results include charges related to the Company's previously
announced plan of consolidating sales and administrative functions and plant
operations. For the first, second, third and fourth quarters, these pretax
charges were $503,000, $608,000, $115,000 and $123,000, respectively. (2) The
first quarter results include an estimated pre-tax gain of $100,000 on the sale
of an undeveloped 62-acre portion of property located in Houston, TX for
approximately $2,000,000. The sale was finalized in the third quarter and an
additional pre-tax gain of $700,000 was recognized at that time. (3) The third
quarter includes an after-tax gain on the sale of the Monitor Group of $900,000
which was classified as a discontinued operation.
In thousands, except per share amounts 1999
- --------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter(1) Quarter (1) Quarter (1)(2) Quarter(2) Total
- --------------------------------------------------------------------------------------------------------------------
Net sales $ 53,783 $ 58,743 $ 63,025 $ 66,372 $ 241,923
- --------------------------------------------------------------------------------------------------------------------
Gross profit $ 7,159 $ 8,945 $ 9,962 $ 11,019 $ 37,085
- --------------------------------------------------------------------------------------------------------------------
Income from continuing operations $ 694 $ 1,497 $ 1,026 $ 1,401 $ 4,618
- --------------------------------------------------------------------------------------------------------------------
Loss from discontinued operations $ (234) $ (259) $ (174) $ (1,448) $ (2,115)
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 460 $ 1,238 $ 852 $ (47) $ 2,503
====================================================================================================================
Basic earnings (loss) per common share:
From continuing operations $ 0.07 $ 0.15 $ 0.11 $ 0.15 $ 0.48
From discontinued operations (0.02) (0.03) (0.02) (0.15) (0.22)
- --------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.05 $ 0.12 $ 0.09 $ 0.00 $ 0.26
====================================================================================================================
Diluted earnings (loss) per common share:
From continuing operations $ 0.07 $ 0.15 $ 0.11 $ 0.14 $ 0.46
From discontinued operations (0.02) (0.03) (0.02) (0.14) (0.21)
- --------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.05 $ 0.12 $ 0.09 $ 0.00 $ 0.25
====================================================================================================================
(1) The first, second and third quarters were restated to reflect the
classification of the Monitor Group as a discontinued operation. (2) The second
half results reflect the June 30, 1999 acquisition of CXT, Incorporated which
accounted for the majority of the reported sales increase.
REPORT OF INDEPENDENT AUDITORS AND RESPONSIBILITY FOR FINANCIAL STATEMENTS
To the Board of Directors and Stockholders of L. B. Foster Company:
We have audited the accompanying consolidated balance sheets of L. B. Foster
Company and subsidiaries at December 31, 2000 and 1999, and the related
consolidated statements of income, cash flows and stockholders' equity for each
of the three years in the period ended December 31, 2000. Our audits also
included the financial statement schedule listed in the index at Item 14 (a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of L. B. Foster
Company and subsidiaries at December 31, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/Ernst & Young LLP
Pittsburgh, Pennsylvania
January 22, 2001
L. B. FOSTER COMPANY AND SUBSIDIARIES
To the Stockholders of L. B. Foster Company:
The management of L. B. Foster Company is responsible for the integrity of all
information in the accompanying consolidated financial statements and other
sections of the annual report. Management believes the financial statements have
been prepared in conformity with generally accepted accounting principles that
reflect, in all material respects, the substance of events and transactions, and
that the other information in the annual report is consistent with those
statements. In preparing the financial statements, management makes informed
judgments and estimates of the expected effects of events and transactions being
accounted for currently.
The Company maintains a system of internal accounting control designed to
provide reasonable assurance that assets are safeguarded and that transactions
are executed in accordance with management's authorization and are properly
recorded to permit the preparation of financial statements in accordance with
generally accepted accounting principles. Underlying the concept of reasonable
assurance is the evaluation of the costs and benefits derived from control. This
evaluation requires estimates and judgments by the Company. The Company believes
that its internal accounting controls provide an appropriate balance between
costs and benefits.
The Board of Directors pursues its oversight role with respect to the financial
statements through the Finance and Audit Committee which is composed of outside
directors. The Finance and Audit Committee meets periodically with management,
the internal auditing department and our independent auditors to discuss the
adequacy of the internal accounting control, the quality of financial reporting
and the nature, extent and results of the audit effort. Both the internal
auditing department and the independent auditors have free access to the Finance
and Audit Committee.
/s/Lee B. Foster
Lee B. Foster II
Chairman of the Board
and Chief Executive Officer
/s/ Roger F. Nejes
Roger F. Nejes
Senior Vice President
Finance and Administration
and Chief Financial Officer
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors is set forth under "Election of Directors"
in the Company's Proxy Statement for the 2001 annual meeting of stockholders
("2001 Proxy Statement"). Such information is incorporated herein by reference.
Information concerning the executive officers who are not directors of the
Company is set forth below. With respect to the period prior to August 18, 1977,
references to the Company are to the Company's predecessor, Foster Industries,
Inc.
Name Age Position
---- --- --------
Alec C. Bloem 50 Senior Vice President - Concrete Products
William S. Cook, Jr. 59 Vice President - Strategic Planning &
Acquisitions
Samuel K. Fisher 48 Senior Vice President - Rail Product
Management
Steven L. Hart 54 Vice President - Operations
Stan L. Hasselbusch 53 President and Chief Operating Officer
Monica L. Iurlano 43 Vice President - Human Resources
Gregory W. Lippard 32 Vice President - Rail Products Sales
David L. Minor 57 Vice President and Treasurer
Roger F. Nejes 58 Senior Vice President - Finance and
Administration and Chief Financial Officer
Linda K. Patterson 51 Controller
Gary E. Ryker 51 Executive Vice President - Rail Products
David L. Voltz 48 Vice President, General Counsel and
Secretary
Donald F. Vukmanic 49 Vice President - Piling Products
David J. A. Walsh 48 Vice President - Fabricated Products
Mr. Bloem was elected Senior Vice President - Concrete Products in March 2000,
having previously served as Vice President - Geotechnical and Precast Division
from October 1999, and President - Geotechnical Division from August 1998. Prior
to joining the Company in August 1998, Mr. Bloem served as Vice President- VSL
Corporation.
Mr. Cook was elected Vice President - Strategic Planning & Acquisitions in
October 1993. Prior to joining the Company in March 1993, Mr. Cook was President
of Cook Corporate Development, a business and financial advisory firm.
Mr. Fisher was elected Senior Vice President - Rail Product Management in June
2000, having previously served as Vice President - Rail Procurement since
October 1997. Prior to October 1997, he served in various other capacities with
the Company since his employment in 1977.
Mr. Hart was elected Vice President - Operations in October, 1998 having
previously served as Vice President from December 1997 to October 1998 and in a
variety of capacities prior to December 1997. Mr. Hart joined the Company in
1977.
Mr. Hasselbusch was elected President and Chief Operating Officer in March, 2000
having previously served as Executive Vice President and Chief Operating Officer
from January 1999, Vice President - Construction and Tubular Products from
December, 1996 to December 1998, Senior Vice President - Construction Products
from September 1995 to December 1996, and as Senior Vice President - Sales from
October 1993 to September 1995. Mr. Hasselbusch joined the Company in 1972.
Ms. Iurlano was elected Vice President - Human Resources in October 2000, having
previously served as Manager of Labor and Benefit Planning since November 1999.
Prior to 1999, Ms. Iurlano served in various positions at Highmark Blue
Cross/Blue Shield.
Mr. Lippard was elected Vice President - Rail Product Sales in June 2000. Prior
to re-joining the Company in 2000, Mr. Lippard served as Vice President -
International Trading for Tube City, Inc. from June 1998. Mr. Lippard served in
various other capacities with the Company since his initial employment in 1991.
Mr. Minor was elected Treasurer in February 1988 and was elected to the
additional office of Vice President in February 1997. Mr. Minor joined the
Company in 1983.
Mr. Nejes was elected Senior Vice President - Finance and Administration and
Chief Financial Officer in October 1993, previously having served as Vice
President - Finance and Chief Financial Officer from February 1988.
Ms. Patterson was elected Controller in February 1999, having previously served
as Assistant Controller since May 1997 and Manager of Accounting since March
1988. Prior to March 1988, she served in various other capacities with the
Company since her employment in 1977.
Mr. Ryker was elected Executive Vice President - Rail Products in March 2000.
Prior to joining the Company in March 2000, Mr. Ryker served from February 1999
as President of Motor Coils Manufacturing, a manufacturer of equipment for
locomotives, as President and Chief Executive Officer of Union Switch & Signal
Inc., a signaling company, from September 1997 to August 1998, and as Executive
Vice President of Harmon Industries, a signaling company, from April 1992 until
September 1997.
Mr. Voltz was elected Vice President, General Counsel and Secretary in December
1987. Mr. Voltz joined the Company in 1981.
Mr. Vukmanic was elected Vice President - Piling Products in August 2000. Prior
to August 2000, Mr. Vukmanic served as National Sales Manager - Piling from
February 1999, Vice President and Controller from February 1997, and Controller
from February 1988. Mr. Vukmanic joined the Company in 1977.
Mr. Walsh was elected Vice President - Fabricated Products in February 2001.
Prior to joining the Company in February 2001, Mr. Walsh served as General
Manager of IKG-Greulich, a business unit of Harsco Corp., from February 1998,
and as Vice President of Harris Specialty Chemicals Inc. from January 1995.
Officers are elected annually at the organizational meeting of the Board of
Directors following the annual meeting of stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under "Executive Compensation" in the 2001 Proxy
Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under "Ownership of Securities by Management" and
"Principal Stockholders" in the 2001 Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under "Certain Transactions" in the 2001 Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements
-----------------------
The following consolidated financial statements, accompanying notes and Report
of Independent Auditors in the Company's Annual Report to Stockholders for 2000
have been included in Item 8 of this Report:
Consolidated Balance Sheets at December 31, 2000 and 1999.
Consolidated Statements of Income For the Three Years Ended December 31, 2000,
1999 and 1998.
Consolidated Statements of Cash Flows For the Three Years Ended December 31,
2000, 1999 and 1998.
Consolidated Statements of Stockholders' Equity for the Three Years Ended
December 31, 2000, 1999 and 1998.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
2. Financial Statement Schedule
-------------------------------
Schedules for the Three Years Ended December 31, 2000, 1999 and 1998:
II - Valuation and Qualifying Accounts.
The remaining schedules are omitted because of the absence of the conditions
upon which they are required.
3. Exhibits
-----------
The exhibits marked with an asterisk are filed herewith. All exhibits are
incorporated herein by reference:
3.1 Restated Certificate of Incorporation as amended to date, filed
as Appendix B to the Company's April 17, 1998 Proxy Statement.
3.2 Bylaws of the Registrant, as amended to date, filed as Exhibit
3B to Form 8-K on May 21, 1997.
4.0 Rights Agreement, 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 4A to Form 8-A dated May 23,
1997.
4.0.1 Amended Rights Agreement dated as of May 14, 1998 between L. B.
Foster Company and American Stock Transfer & Trust Company,
filed as Exhibit 4.0.1 to Form 10-Q for the quarter ended June
30, 1998.
4.1 Third Amended and Restated Loan Agreement by and among the
Registrant and Mellon Bank, N.A., PNC Bank, National
Association and First Union National Bank, dated as of June 30,
1999 and filed as Exhibit 4.1 to Form 10-Q for the quarter
ended June 30, 1999.
10.12 Lease between CXT Incorporated and Pentzer Development Corpora-
tion, dated April 1, 1993, filed as Exhibit 10.12 to Form 10-K
for the year ended December 31, 1999.
10.12.1 Amendment dated March 12, 1996 to lease between CXT
Incorporated and Pentzer Corporation, filed as Exhibit 10.12.1
to Form 10-K for the year ended December 31, 1999.
10.13 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.
10.14 Lease between CXT Incorporated and Pentzer Development Corpora-
tion, dated November 1, 1991 and filed as Exhibit 10.14 to
Form 10-K for the year ended December 31, 1999.
10.15 Lease between CXT Incorporated and Union Pacific Railroad
Company, dated February 13, 1998, and filed as Exhibit 10.15 to
Form 10-K for the year ended December 31, 1999.
10.16 Lease between Registrant and Greentree Building Associates
for Headquarters office, dated as of June 9, 1986, as amended to
date, filed as Exhibit 10.16 to Form 10-K for the year ended
December 31, 1988.
10.16.1 Amendment dated June 19, 1990 to lease between Registrant and
Greentree Building Associates, filed as Exhibit 10.16.1 to Form
10-Q for the quarter ended June 30, 1990.
10.16.2 Amendment dated May 29, 1997 to lease between Registrant and
Greentree Building Associates, filed as Exhibit 10.16.2 to Form
10-Q for the quarter ended June 30, 1997.
* 10.17 Lease between Registrant and Hillsboro Loan Investors, L. P. for
property located in Hill County, TX, dated February 14, 2001.
10.19 Lease Between the Registrant and American Cast Iron Pipe Company
for Pipe-Coating Facility in Birmingham, Alabama dated December
11, 1991, filed as Exhibit 10.19 to Form 10-K for the year ended
December 31, 1991.
10.19.1 Amendment to Lease between the Registrant and American Cast Iron
Pipe Company for Pipe Coating Facility in Birmingham, Alabama
dated April 15, 1997, filed as Exhibit 10.19.1 to Form 10-Q for
the quarter ended March 31, 1997.
* 10.19.2 Amendment to Lease between the Registrant and American Cast Iron
Pipe Company for pipe coating facility in Birmingham, AL , dated
November 15, 2000.
10.20 Asset Purchase Agreement, dated June 5, 1998 by and among the
Registrant and Northwest Pipe Company, filed as Exhibit 10.0 to
Form 8-K on June 18, 1998.
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 amended
and restated February 26, 1997, filed as Exhibit 10.33.2 to Form
10-Q for the quarter ended June 30, 1997. **
* 10.34 Amended and Restated 1998 Long-Term Incentive Plan for
Officers and Directors, as amended and restated February 2,
2001. **
10.45 Medical Reimbursement Plan, filed as Exhibit 10.45 to Form
10-K for the year ended December 31, 1992. **
* 10.46 Leased Vehicle Plan, as amended to date. **
* 10.50 L. B. Foster Company 2001 Incentive Compensation Plan. **
10.51 Supplemental Executive Retirement Plan, filed as Exhibit
10.51 to Form 10-K for the year ended December 31, 1994. **
19 Exhibits marked with an asterisk are filed herewith.
* 23.7 Consent of Independent Auditors.
** Identifies management contract or compensatory plan or
arrangement required to be filed as an Exhibit.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 30, 2001
By /s/ Lee B. Foster
------------------------
(Lee B. Foster II, Chief
Executive Officer and
Chairman of the Board)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Position Date
By: /s/ Lee B. Foster Chief Executive Officer, March 30, 2001
- ---------------------------- Chairman of the Board
(Lee B. Foster II) and Director
By: /s/Henry J. Massman, IV Director March 30, 2001
- ----------------------------
(Henry J. Massman, IV)
By: /s/ Roger F. Nejes Senior Vice President - March 30, 2001
- ---------------------------- Finance & Administration
(Roger F. Nejes) and Chief Financial Officer
By: /s/Linda K. Patterson Controller March 30, 2001
- ----------------------------
(Linda K. Patterson)
By: /s/John W. Puth Director March 30, 2001
- ----------------------------
(John W. Puth)
By: /s/William H. Rackoff Director March 30, 2001
- ----------------------------
(William H. Rackoff)
By: /s/ Richard L. Shaw Director March 30, 2001
- ----------------------------
(Richard L. Shaw)
L. B. FOSTER COMPANY AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(In Thousands)
Additions
---------------------------
Balance at Charged to Balance
Beginning Costs and at End
of Year Expenses Other Deductions of Year
--------------- ------------- ---------- ----------- --------
2000
- ----
Deducted from assets to which they apply:
Allowance for doubtful accounts $ 1,555 $ 108 $ $ 99 (1) $ 1,564
=============== ============= =========== ============ =========
Provision for decline in market
value of inventories $ 600 $ $ $ $ 600
=============== ============= =========== ============ =========
Not deducted from assets:
Provision for special
termination benefits $ 5 $ 524 $ $ 138 (2) $ 391
=============== ============= =========== ============ =========
Provision for environmental
compliance & remediation $ 214 $ 49 $ $ 50 (2) $ 213
=============== ============= =========== ============ =========
1999
- ----
Deducted from assets to which they apply:
Allowance for doubtful accounts $ 1,438 $ 180 $ $ 63 (1) $ 1,555
=============== ============= =========== ============ =========
Provision for decline in market
value of inventories $ 600 $ $ $ $ 600
=============== ============= =========== ============ =========
Not deducted from assets:
Provision for special
termination benefits $ 5 $ $ $ $ 5
=============== ============= =========== ============ =========
Provision for environmental
compliance & remediation $ 329 $ 12 $ $ 127 (2) $ 214
=============== ============= =========== ============ =========
1998
- ----
Deducted from assets to which they apply:
Allowance for doubtful accounts $ 1,468 $ 10 $ $ 40 (1) $ 1,438
=============== ============= =========== ============ =========
Provision for decline in market
value of inventories $ 600 $ $ $ $ 600
=============== ============= =========== ============ =========
Not deducted from assets:
Provision for special
termination benefits $ 12 $ $ $ 7 (2) $ 5
=============== ============= =========== ============ =========
Provision for environmental
compliance & remediation $ 284 $ 184 $ $ 139 (2) $ 329
=============== ============= =========== ============ =========
(1) Notes and accounts receivable written off as uncollectible.
(2) Payments made on amounts accrued and reversals of accruals.
- S-1 -