UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2003
Commission File Number 0-10436
L. B. Foster Company
(Exact name of Registrant as specified in its charter)
Pennsylvania 25-1324733
(State of Incorporation) (I. R. S. Employer Identification No.)
415 Holiday Drive, Pittsburgh, Pennsylvania 15220
(Address of principal executive offices) (Zip Code)
(412) 928-3417
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate the number of shares of each of the registrant's classes of common
stock as of the latest practicable date.
Class Outstanding at May 2, 2003
Common Stock, Par Value $.01 9,577,770 Shares
2
L.B. FOSTER COMPANY AND
SUBSIDIARIES
INDEX
PART I. Financial Information Page
- ------------------------------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 18
Item 4. Controls and Procedures 18
PART II. Other Information
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature 21
Certification of Chief Executive Officer under Section 302(a)
of the Sarbanes-Oxley Act of 2002 22
Certification of Chief Financial Officer under Section 302(a)
of the Sarbanes-Oxley Act of 2002 23
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, December 31,
2003 2002
- --------------------------------------------------------------------------------
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $3,927 $3,653
Accounts and notes receivable:
Trade 39,790 39,294
Other 154 69
- --------------------------------------------------------------------------------
39,944 39,363
Inventories 34,677 32,925
Current deferred tax assets 1,494 1,494
Other current assets 1,482 696
Current assets of discontinued operations 13 138
- --------------------------------------------------------------------------------
Total Current Assets 81,537 78,269
- --------------------------------------------------------------------------------
Property, Plant & Equipment - At Cost 72,485 72,023
Less Accumulated Depreciation (37,214) (35,940)
- --------------------------------------------------------------------------------
35,271 36,083
- --------------------------------------------------------------------------------
Other Assets:
Goodwill 350 350
Other intangibles - net 702 739
Investments 12,965 12,718
Deferred tax assets 4,443 4,454
Other assets 1,068 1,175
Assets of discontinued operations 1 196
- --------------------------------------------------------------------------------
Total Other Assets 19,529 19,632
- --------------------------------------------------------------------------------
TOTAL ASSETS $136,337 $133,984
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $781 $825
Accounts payable - trade 28,394 24,094
Accrued payroll and employee benefits 2,587 2,413
Current deferred tax liabilities 1,474 1,474
Other accrued liabilities 2,721 2,695
Liabilities of discontinued operations 156 74
- --------------------------------------------------------------------------------
Total Current Liabilities 36,113 31,575
- --------------------------------------------------------------------------------
Long-Term Borrowings 21,000 23,000
- --------------------------------------------------------------------------------
Other Long-Term Debt 3,829 3,991
- --------------------------------------------------------------------------------
Deferred Tax Liabilities 4,195 4,195
- --------------------------------------------------------------------------------
Other Long-Term Liabilites 5,274 5,210
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock 102 102
Paid-in capital 35,143 35,143
Retained earnings 35,042 35,208
Treasury stock (3,616) (3,629)
Accumulated other comprehensive loss (745) (811)
- --------------------------------------------------------------------------------
Total Stockholders' Equity 65,926 66,013
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $136,337 $133,984
================================================================================
See Notes to Condensed Consolidated Financial Statements.
4
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
Three Months
Ended
March 31,
- --------------------------------------------------------------------------------
2003 2002
- --------------------------------------------------------------------------------
(Unaudited)
Net Sales $59,519 $63,173
Cost of Goods Sold 52,586 56,378
- --------------------------------------------------------------------------------
Gross Profit 6,933 6,795
Selling and Administrative Expenses 6,567 6,373
Interest Expense 579 674
Other Income (320) (280)
- --------------------------------------------------------------------------------
6,826 6,767
- --------------------------------------------------------------------------------
Income From Continuing Operations Before Income
Taxes and Cumulative Effect of Change in
Accounting Principle 107 28
Income Taxes 43 -
- --------------------------------------------------------------------------------
Income From Continuing Operations Before Cumulative
Effect of Change in Accounting Principle 64 28
Discontinued Operations:
Loss From Operations of Foster Technologies (380) (317)
Income Tax Benefit (150) -
- --------------------------------------------------------------------------------
Loss on Discontinued Operations (230) (317)
Cumulative Effect of Change in Accounting Principle,
Net of Tax - (4,390)
- --------------------------------------------------------------------------------
Net Loss ($166) ($4,679)
================================================================================
Basic & Diluted (Loss) Earnings Per Share:
From Continuing Operations Before Cumulative
Effect of Change in Accounting Principle $0.01 $ -
From Discontinued Operations, Net of Tax (0.02) (0.03)
Cumulative Effect of Change in Accounting
Principle, Net of Tax - (0.46)
- --------------------------------------------------------------------------------
Net Loss ($0.02) ($0.50)
================================================================================
See Notes to Condensed Consolidated Financial Statements.
5
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months
Ended March 31,
2003 2002
- --------------------------------------------------------------------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $64 $28
Adjustments to reconcile income to net
cash provided by operating activities:
Depreciation and amortization 1,313 1,228
Loss on sale of property, plant and
equipment - 31
Unrealized (gain) loss on derivative
mark-to-market (11) -
Change in operating assets and liabilities:
Accounts receivable (581) 7,004
Inventories (1,752) 2,447
Other current assets (786) (350)
Other noncurrent assets (142) (345)
Accounts payable - trade 4,300 (1,320)
Accrued payroll and employee benefits 174 (116)
Other current liabilities 37 (570)
Other liabilities 85 (11)
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 2,701 8,026
- --------------------------------------------------------------------------------
Net Cash Provided (Used) by Discontinued
Operations 228 (326)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant
and equipment - 163
Capital expenditures on property, plant
and equipment (462) (1,675)
Acquisition of business - (2,214)
- --------------------------------------------------------------------------------
Net Cash Used by Investing Activities (462) (3,726)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of revolving credit agreement
borrowings (2,000) (5,000)
Exercise of stock options and stock awards 13 55
Repayments of long-term debt (206) (405)
- --------------------------------------------------------------------------------
Net Cash Used by Financing Activities (2,193) (5,350)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 274 (1,376)
Cash and Cash Equivalents at Beginning of Period 3,653 4,222
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $3,927 $2,846
================================================================================
Supplemental Disclosure of Cash Flow Information:
Interest Paid $543 $800
================================================================================
Income Taxes Paid $255 $314
================================================================================
During the first three months of 2003, the Company did not finance any capital
expenditures through the execution of capital leases. During the first three
months of 2002, the Company financed certain capital expenditures totaling
$618,000 through the execution of capital leases.
See Notes to Condensed Consolidated Financial Statements.
6
L. B. FOSTER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all estimates and
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. However, actual results could differ from
those estimates. The results of operations for interim periods are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2003. Amounts included in the balance sheet as of December 31, 2002
were derived from our audited balance sheet. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 2002.
2. ACCOUNTING PRINCIPLES
In June 2001, the FASB issued Statement of Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations" (SFAS 143), effective for fiscal
years beginning after June 15, 2002. SFAS 143 provides accounting requirements
for retirement obligations associated with tangible long-lived assets. The
obligations affected are those for which there is a legal obligation to settle
as a result of existing or enacted law. The Company has adopted this standard
and it did not have a material effect on its consolidated financial statements.
In June 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" (SFAS 146), effective for exit or disposal
activities initiated after December 31, 2002, with earlier adoption encouraged.
This statement supercedes EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred, rather than at the date of an entity's
commitment to an exit plan. The Company has adopted this standard and it did not
have a material effect on its consolidated financial statements.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, and Interpretation of ARB No. 51", (FIN 46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied at the first interim or annual period
beginning after June 15, 2003. Management is currently evaluating the effect
that adoption of FIN 46 will have on its results of operations and financial
condition. The Company has not identified any off balance sheet arrangements for
which consolidation under FIN 46 is reasonably possible.
Stock-based compensation
- ------------------------
In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an amendment of FASB Statement No. 123" (SFAS 148) effective for fiscal years
ending after December 31, 2002 and for interim periods beginning after December
15, 2002. This statement amends Statement of Financial Accounting Standards No.
123, "Accounting for Stock Stock-Based Compensation" (SFAS 123), to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123 to require
7
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results.
The Company has adopted the disclosure provisions of SFAS 123 and applies the
intrinsic value method of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its stock option plans. Accordingly, no compensation expense
has been recognized.
The following table illustrates the effect on the Company's income from
continuing operations and earnings per share had compensation expense for the
Company's stock option plans been applied using the method required by SFAS 123.
Three Months Ended
March 31,
In thousands, except per share amounts 2003 2002
- --------------------------------------------------------------------------------
Net income from continuing operations,
as reported $64 $28
Add: Stock-based employee compensation
expense included in reported net
income, net of related tax effects - -
Deduct: Total stock-based employee
compensation expense determined under
fair value method for all awards, net
of related tax effects 62 58
- --------------------------------------------------------------------------------
Pro forma income (loss) from continuing
operations $2 ($30)
================================================================================
Earnings per share from continuing
operations:
Basic and diluted, as reported $0.01 $0.00
Basic and diluted, pro forma $0.00 $0.00
================================================================================
Pro forma information regarding net income and earnings per share for options
granted has been determined as if the Company had accounted for its employee
stock options under the fair value method of Statement No. 123. The fair value
of stock options used to compute pro forma net income and earnings per share
disclosures is the estimated present value at grant date using the Black-Scholes
option-pricing model. There were no stock options granted in the first quarter
of 2003 or 2002.
3. ACCOUNTS RECEIVABLE
Credit is extended on an evaluation of the customer's financial condition and,
generally, collateral is not required. Credit terms are consistent with industry
standards and practices. Trade accounts receivable at March 31, 2003 and
December 31, 2002 have been reduced by an allowance for doubtful accounts of
($1,081,000) and ($1,063,000), respectively. Bad debt expense was $59,000 and
$37,000 for the three-month periods ended March 31, 2003 and 2002, respectively.
4. INVENTORIES
Inventories of the Company at March 31, 2003 and December 31, 2002 are
summarized as follows in thousands:
8
March 31, December 31,
2003 2002
- --------------------------------------------------------------------------------
Finished goods $24,602 $21,700
Work-in-process 7,001 6,343
Raw materials 4,923 6,731
- --------------------------------------------------------------------------------
Total inventories at current costs 36,526 34,774
(Less):
LIFO reserve (1,249) (1,249)
Inventory valuation reserve (600) (600)
- --------------------------------------------------------------------------------
$34,677 $32,925
================================================================================
Inventories of the Company are generally valued at the lower of last-in,
first-out (LIFO) cost or market. Other inventories of the Company are valued at
average cost or market, whichever is lower. An actual valuation of inventory
under the LIFO method can be made only at the end of each year based on the
inventory levels and costs at that time. Accordingly, interim LIFO calculations
must necessarily be based on management's estimates of expected year-end levels
and costs.
5. DISCONTINUED OPERATIONS
During the fourth quarter of 2002, the Company started negotiations and
committed to a plan to sell the assets related to its rail signaling and
communication device business and recorded a $660,000 non-cash impairment loss
to adjust these assets to their fair value. In February 2003, substantially all
of the assets of this business were sold for $300,000. The operations of the
rail signaling and communication device business qualify as a "component of an
entity" under Statement of Financial Accounting Standards No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets" and thus, the operations
have been classified as discontinued, and prior periods have been restated.
Future expenses related to this business as it winds down are expected to be
immaterial.
Net sales and loss from discontinued operations were as follows:
Three Months Ended
March 31,
In thousands 2003 2002
- --------------------------------------------------------------------------------
Net sales $ 1 $ -
- --------------------------------------------------------------------------------
Pretax operating loss (310) (317)
Pretax loss on disposal (70) -
Income tax benefit 150 -
- --------------------------------------------------------------------------------
Loss from discontinued operations $ (230) $ (317)
================================================================================
6. BORROWINGS
On September 26, 2002, the Company entered into a new credit agreement with a
syndicate of three banks led by PNC Bank, N.A. The agreement provides for a
revolving credit facility of up to $60,000,000 in borrowings to support the
Company's working capital and other liquidity requirements.
The revolving credit facility, which matures in September 2005, is secured by
substantially all of the inventory and trade receivables owned by the Company.
Availability under the agreement is limited by the amount of eligible inventory
and accounts receivable applied against certain advance rates. Proceeds from the
new facility were used to repay and retire the Company's previous credit
agreement, which was to
9
mature in July 2003. Interest on the new credit facility is based on LIBOR plus
a spread ranging from 1.75% to 2.5%.
The agreement includes financial covenants requiring a minimum net worth, a
minimum level for the fixed charge coverage ratio and a maximum level for
consolidated capital expenditures. The agreement also restricts investments,
indebtedness, and the sale of certain assets. As of March 31, 2003, the Company
was in compliance with all of the agreement's covenants.
7. LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per
common share:
Three Months Ended
March 31,
(in thousands, except earnings per share) 2003 2002
- -------------------------------------------------------------------------------
Numerator:
Numerator for basic and diluted
earnings per common share -
net (loss) income available to common
stockholders:
Income from continuing operations 64 28
Loss from discontinued operations (230) (317)
Cumulative effect of change in accounting principle - (4,390)
- --------------------------------------------------------------------------------
Net loss ($166) ($4,679)
================================================================================
Denominator:
Weighted average shares 9,524 9,441
- --------------------------------------------------------------------------------
Denominator for basic earnings
per common share 9,524 9,441
Effect of dilutive securities:
Contingent issuable shares 4 31
Employee stock options 71 189
- --------------------------------------------------------------------------------
Dilutive potential common shares 75 220
Denominator for diluted earnings
per common share - adjusted weighted
average shares and assumed conversions 9,599 9,661
================================================================================
Basic and diluted (loss) earnings per common
share:
Continuing operations 0.01 0.00
Discontinued operations (0.02) (0.03)
Cumulative effect of change in accounting principle 0.00 (0.46)
- --------------------------------------------------------------------------------
Basic and diluted loss per common share ($0.02) ($0.50)
================================================================================
8. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is subject to laws and regulations relating to the protection of the
environment and the Company's efforts to comply with environmental regulations
may have an adverse effect on the Company's future earnings. In the opinion of
management, compliance with the present environmental protection laws will not
have a material adverse effect on the financial condition, results of
operations, cash flows, competitive position, or capital expenditures of the
Company.
10
The Company is subject to legal proceedings and claims that arise in the
ordinary course of its business. In the opinion of management, these proceedings
will not materially affect the financial position of the Company.
At March 31, 2003, the Company had outstanding letters of credit of
approximately $2,687,000.
9. BUSINESS SEGMENTS
The Company is organized and evaluated by product group, which is the basis for
identifying reportable segments. The Company is engaged in the manufacture,
fabrication and distribution of rail, construction and tubular products. The
following tables illustrate revenues and profits/(losses) of the Company by
segment:
Three Months Ended,
March 31, 2003 March 31, 2002
- ----------------------------------------------------------------------------------------------------
Net Segment Net Segment
(in thousands) Sales Profit/(Loss) Sales Profit/(Loss)
- ----------------------------------------------------------------------------------------------------
Rail products $31,626 $681 $29,955 ($384)
Construction products 23,964 (527) 30,034 107
Tubular products 3,929 365 3,184 145
- ----------------------------------------------------------------------------------------------------
Total $59,519 $519 $63,173 ($132)
====================================================================================================
Foster Technologies, the Company's rail signaling and communications device
business, was classified as a discontinued operation on December 31, 2002. Prior
period results have been adjusted to reflect this classification. See Note 5,
"Discontinued Operations".
Segment profits, as shown above, include internal cost of capital charges for
assets used in the segment at a rate of, generally, 1% per month.
The following table provides a reconciliation of reportable net profit/(loss) to
the Company's consolidated total:
Three Months Ended
March 31,
(in thousands) 2003 2002
- --------------------------------------------------------------------------------
Income (loss) for reportable segments $519 ($132)
Cost of capital for reportable segments 2,425 2,716
Interest expense (579) (674)
Other income 320 280
Corporate expense and other unallocated charges (2,578) (2,162)
- --------------------------------------------------------------------------------
Income from continuing operations, before income
taxes and cumulative effect of change in
accounting principle $107 $28
================================================================================
There has been no change in the measurement of segment profit/(loss) from
December 31, 2002. Construction segment inventory increased approximately $2.4
million from December 31, 2002, primarily due to an increase in inventories of
precast concrete buildings as a result of seasonal factors.
11
10. COMPREHENSIVE LOSS
Comprehensive loss represents net loss plus certain stockholders' equity changes
not reflected in the Condensed Consolidated Statements of Income. The components
of comprehensive loss, net of tax, were as follows:
Three Months Ended
March 31,
(in thousands) 2003 2002
- --------------------------------------------------------------------------------
Net loss ($166) ($4,679)
Unrealized derivative gains on cash flow
hedges (SFAS No. 133) 10 177
Foreign currency translation gains (losses) 8 (30)
Reclassification adjustment for foreign
currency translation losses included in
net loss 48 -
- --------------------------------------------------------------------------------
Comprehensive loss ($100) ($4,532)
================================================================================
12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Three Months Ended
March 31,
- --------------------------------------------------------------------------------
2003 2002
- --------------------------------------------------------------------------------
(Dollars in thousands)
Net Sales:
Rail Products $31,626 $29,955
Construction Products 23,964 30,034
Tubular Products 3,929 3,184
- --------------------------------------------------------------------------------
Total Net Sales $59,519 $63,173
================================================================================
Gross Profit:
Rail Products $3,786 $2,852
Construction Products 2,806 3,647
Tubular Products 802 551
Other (461) (255)
- --------------------------------------------------------------------------------
Total Gross Profit 6,933 6,795
- --------------------------------------------------------------------------------
Expenses:
Selling and administrative expenses 6,567 6,373
Interest expense 579 674
Other income (320) (280)
- --------------------------------------------------------------------------------
Total Expenses 6,826 6,767
- --------------------------------------------------------------------------------
Income From Continuing Operations Before
Income Taxes and Cumulative Effect of
Change in Accounting Principle 107 28
Income Tax Expense 43 -
- --------------------------------------------------------------------------------
Income From Continuing Operations Before
Cumulative Effect of Change in
Accounting Principle 64 28
Discontinued Operations:
Loss From Operations of Foster Technologies (380) (317)
Income Tax Benefit (150) -
- --------------------------------------------------------------------------------
Loss on Discontinued Operations (230) (317)
Cumulative Effect of Change in Accounting
Principle, Net of Tax - (4,390)
- --------------------------------------------------------------------------------
Net Loss ($166) ($4,679)
================================================================================
Gross Profit %:
Rail Products 12.0% 9.5%
Construction Products 11.7% 12.1%
Tubular Products 20.4% 17.3%
Total Gross Profit 11.6% 10.8%
13
First Quarter 2003 Results of Operations
- ----------------------------------------
The Company's first quarter income from continuing operations was $64,000 ($0.01
per share) on net sales of $59.5 million. This compares favorably to the same
period a year ago when income from continuing operations was $28,000 ($0.00 per
share) on net sales of $63.2 million.
Including a net loss from discontinued operations (the Company's Foster
Technologies subsidiary), the net loss for the first quarter of 2003 was $0.2
million ($0.02 per share). During the same period a year ago, the Company had a
net loss of $4.7 million ($0.50 per share) which included a loss from
discontinued operations of $0.3 million ($0.03 per share) and a non-cash charge
of $4.4 million ($0.46 per share) from the cumulative effect of a change in
accounting principle as a result of the adoption of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets".
Sales for the first quarter of 2003 declined 5.8% when compared to the same
period in 2002. Rail products' 2003 first quarter sales were $31.6 million, an
increase of 5.6% from last year's first quarter. This was due primarily to an
increase in revenue recognized for transit products and an increase in sales of
used rail. Construction products' net sales declined 20.2% to $24.0 million.
Pricing pressures on H-bearing pile and lower piling volume had a negative
impact on the Construction segment's revenues. Tubular products' sales increased
23.4% compared to last year's first quarter due primarily to an increase in the
amount of pipe coated at the Birmingham, AL facility.
The gross profit margin for the total Company was 11.6% in the first quarter of
2003 compared to 10.8% in the same quarter last year. Rail products' profit
margin increased by 2.5 percentage points to 12.0% from the same period last
year due primarily to improvement in used rail and transit products margins.
Last year, used rail margins were low because this operation was being downsized
through the sell-off of certain inventory at lower than usual margins.
Construction products' margin remained relatively consistent with last year's
first quarter, declining only 0.4 percentage points due in part to low volume
inefficiencies at the precast concrete building facility in Spokane, WA. Tubular
products' 3.1 percentage point increase in gross margin was primarily the result
of higher volume efficiencies at the Birmingham, AL pipe coating facility.
Selling and administrative expenses increased $0.2 million, or 3% compared to
the same period of 2002, largely due to higher insurance costs. Other income
includes primarily accrued dividend income on DM&E preferred stock. Corporate
borrowings declined by $8.2 million resulting in a 14% reduction in interest
expense when compared to the prior year first quarter.
The Company is implementing certain tax planning strategies that will allow it
to reverse some portion of the $1.6 million valuation allowance against net
operating losses in its discontinued operations. While the results of this
effort will not be finalized until the third quarter, the Company believes that
the tax benefits derived from current year losses in its discontinued operations
will be utilized in the current year. As a result, the effective tax rate
utilized for the first quarter was 40%. No tax provision was recorded in the
first quarter of 2002.
Liquidity and Capital Resources
- -------------------------------
The Company generates operational cash flow from the sale of inventory and the
collection of accounts receivable. Management's continued emphasis on working
capital management contributed to positive cash flow from operations and a $2.2
million reduction in corporate borrowings from December 31, 2002. During the
first quarter of 2003, the average turnover rate for accounts receivable
improved over the same period a year ago. The average inventory turnover rate in
the current period improved slightly over the average rate for the 2002 first
quarter. Working capital at March 31, 2003 was $45.4 million compared to $46.7
million at December 31, 2002.
The Company's Board of Directors has authorized the purchase of up to 1,500,000
shares of its Common stock at prevailing market prices. No purchases have been
made since the first quarter of 2001. From August 1997 through March 2001, the
Company had repurchased 973,398 shares at a cost of
14
approximately $5.0 million. The timing and extent of future purchases will
depend on market conditions and options available to the Company for alternate
uses of its resources.
Capital expenditures were less than $0.5 million for the first quarter of 2003,
compared to $1.7 million for capital improvements and $2.2 million for the
Greulich acquisition in the same period of 2002. Capital expenditures, excluding
acquisitions, in 2003, are expected to be approximately $5.0 million and funded
by cash flow from operations and available external financing sources.
On September 26, 2002, the Company entered into a credit agreement with a
syndicate of three banks led by PNC Bank, N.A. This new agreement provides for a
revolving credit facility of up to $60.0 million in borrowings to support the
Company's working capital and other liquidity requirements. The revolving credit
facility, which matures in September 2005, is secured by substantially all of
the inventory and trade receivables owned by the Company. Availability under
this agreement is limited by the amount of eligible inventory and accounts
receivable applied against certain advance rates. Proceeds from the new facility
were used to repay and retire the Company's previous credit agreement, which was
to mature in July 2003. Interest on the new credit facility is based on LIBOR
plus a spread ranging from 1.75% to 2.5%.
The agreement includes financial covenants requiring a minimum net worth and a
minimum level for the fixed charge coverage ratio. The agreement also restricts
investments, indebtedness, and the sale of certain assets. As of March 31, 2003,
the Company was in compliance with all of the agreement's covenants.
Total revolving credit agreement borrowings at March 31, 2003 were $21.0
million, a decrease of $2.0 million from December 31, 2002. At March 31, 2003,
remaining available borrowings under this facility were approximately $18.3
million. Outstanding letters of credit at March 31, 2003 were approximately $2.7
million. The letters of credit expire annually and are subject to renewal.
Management believes its internal and external sources of funds are adequate to
meet anticipated needs.
Dakota, Minnesota & Eastern Railroad
- ------------------------------------
The Company maintains a significant investment in the Dakota, Minnesota &
Eastern Railroad Corporation (DM&E), a privately held, regional railroad, which
controls over 2,500 miles of track in eight states.
At March 31, 2003, the Company's investment was comprised of $0.2 million of
DM&E common stock, $1.5 million of Series B Preferred Stock and warrants, $6.0
million of Series C Preferred Stock and warrants, $0.8 million of Preferred
Series C-1 Stock and warrants, and $0.5 million of Series D Preferred Stock and
warrants. In addition, the Company has a receivable for accrued dividend income
on Preferred Stock of approximately $4.0 million.
On July 30, 2002, the DM&E announced the acquisition of a 1,400 mile regional
railroad formerly owned by the I&M Rail Link, LLC. The Company participated in
the financing of this acquisition with a $0.5 million investment in Series D
Preferred Stock and warrants. On a fully diluted basis, the Company's ownership
in the DM&E is approximately 13.6%.
In June 1997, the DM&E announced its plan to build an extension from the DM&E's
existing line into the low sulfur coal market of the Powder River Basin in
Wyoming and to rebuild approximately 600 miles of its existing track (the
Project). The estimated cost of this project is expected to be in excess of $2.0
billion. The Project received final approval by the Surface Transportation Board
(STB) in January 2002. Litigation has been initiated appealing the STB's
approval of the Project. In addition, the State of South Dakota has elected to
appeal a federal court decision to enjoin it from enforcing an eminent domain
statute. No time frame for a decision is yet known.
If the Project proves to be viable, management believes that the value of the
Company's investment in the DM&E could increase significantly. If the Project
does not come to fruition, management believes that the value of the Company's
investment is supported by the DM&E's existing business.
15
Other Matters
- -------------
During the first quarter of 2003, the Company finalized the sale of certain
assets and liabilities of its Foster Technologies subsidiary engaged in the rail
signaling and communication device business. The first quarter 2003 loss from
this business, which has been classified as a discontinued operation, was
principally due to losses incurred up to the sale date as well as certain
charges taken primarily related to employee severance costs and an accrual for
the remaining lease obligation. Future expenses related to the shutdown of this
business are expected to be immaterial.
Specialty trackwork sales of the Company's Rail segment depend primarily on one
supplier. In August 2000, the Company contributed a note, having a principal and
interest value of approximately $2.7 million, to a limited liability company
created by the Company and this trackwork supplier (the LLC) in exchange for a
30% ownership position. Of the $2.7 million initial investment, approximately
$1.7 million represented goodwill. At January 1, 2002, the Company's net equity
investment in the LLC, net of goodwill amortization, was approximately $1.9
million. During 2002, the Company recognized an impairment loss of the entire
$1.9 million. The loss in value of this investment was driven by the continued
deterioration of certain rail markets. Equity earnings from this investment have
been immaterial.
The Company has historically advanced progress payments to its principal
trackwork supplier for the purpose of supporting working capital requirements
and funding raw material purchases and product fabrication costs for Company
projects. The timing differential created by these advances resulted in an asset
of approximately $5.4 million at December 31, 2002. As a result of the operating
and financial issues experienced by the LLC, concerns regarding the
recoverability of the advances led management to conclude that a full reserve
was necessary. A charge for this reserve was recorded in the fourth quarter of
2002 and no additional advances were made to this supplier in the first quarter
of 2003. The Company acknowledges the risk of loss that exists relative to these
advances and believes that substantial uncertainty exists relative to the
Company's ability to realize any measurable amounts of these advances. During
the first quarter of 2003 and 2002, the volume of business the supplier
conducted with the Company was approximately $2.0 million and $2.4 million,
respectively. If, for any reason, this supplier is unable to perform, it could
have a further negative impact on earnings and cash flows.
Operations at the Company's Newport, KY pipe-coating facility were suspended in
1998 in response to unfavorable market conditions. In 1999, the Company recorded
an impairment loss to reduce these assets to their anticipated market value. The
anticipated 2002 sale of these assets did not materialize. Therefore, during the
fourth quarter of 2002, the Company removed the "held for resale" designation of
these assets, reclassified them as "in service", and in accordance with SFAS
144, immediately recorded a $0.8 million write-down to reflect depreciation not
recorded while under the "held for resale" designation. The Company's effort to
sell these assets continues.
Management continues to evaluate the overall performance of its operations. A
decision to downsize or terminate an existing operation could have a material
adverse effect on near-term earnings but would not be expected to have a
material adverse effect on the financial condition of the Company.
Outlook
- -------
The Company has an exclusive agreement with a steel mill to distribute steel
sheet piling in North America. Steel sheet piling production commenced in 2001
but the quantity produced has not materially impacted results. In December 2002,
the Company announced the availability of Z-pile sheet piling products. During
the first quarter of 2003, piling sales were lower than last year due to lower
volumes and lower prices for H-bearing pile. The Company expects an increase in
piling sales and profitability as it enters into the higher activity season.
The Company's CXT subsidiary and Allegheny Rail Products division are dependent
on a Class I railroad for a significant portion of their business. The Company
has a contract with this Class I railroad which provides for minimum quantities
of concrete ties per contract year expiring in September 2003. If this contract
is not renewed, it could have a negative impact on the operating results of the
Company. In addition, a
16
substantial portion of the Company's operations is heavily dependent on
governmental funding of infrastructure projects. Significant changes in the
level of government funding of these projects could have a favorable or
unfavorable impact on the operating results of the Company. Additionally,
government actions concerning taxation, tariffs, the environment, or other
matters could impact the operating results of the Company. The Company's
operating results may also be affected by adverse weather conditions.
Although backlog is not necessarily indicative of future operating results,
total Company backlog at March 31, 2003, was approximately $127.5 million. The
following table provides the backlog by business segment:
Backlog
------------------------------------------------------
March 31, December 31, March 31,
(In thousands) 2003 2002 2002
- --------------------------------------------------------------------------------
Rail Products $52,317 $45,371 $65,353
Construction Products 71,721 59,774 67,027
Tubular Products 3,417 3,995 3,890
- --------------------------------------------------------------------------------
Total $127,455 $109,140 $136,270
================================================================================
The reduction in Rail segment backlog from March 31, 2002 reflects the weakness
in the current rail markets and the absence of firm renewal commitments on
contracts under negotiation.
Critical Accounting Policies
- ----------------------------
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States.
When more than one accounting principle, or method of its application, is
generally accepted, management selects the principle or method that is
appropriate in the Company's specific circumstances. Application of these
accounting principles requires management to make estimates about the future
resolution of existing uncertainties. As a result, actual results could differ
from these estimates. In preparing these financial statements, management has
made its best estimates and judgements of the amounts and disclosures included
in the financial statements giving due regard to materiality. There have been no
material changes in the Company's policies or estimates since December 31, 2002.
For more information regarding the Company's critical accounting policies,
please see the discussion in Management's Discussion & Analysis of Financial
Condition and Results of Operations in Form 10-K for the year ended December 31,
2002.
New Accounting Pronouncements
- -----------------------------
In June 2002, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" (SFAS 146), effective for exit or disposal
activities initiated after December 31, 2002, with earlier adoption encouraged.
This statement supercedes EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred, rather than at the date of an entity's
commitment to an exit plan. The Company has adopted this standard and it did not
have a material effect on its consolidated financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123" (SFAS 148) effective for fiscal years ending after December 31, 2002. This
statement amends Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), to provide alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. In addition, SFAS 148 amends
the disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results.
17
The Company has adopted the disclosure provisions of SFAS 123, and applies the
intrinsic value method of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its stock option plans. However, the Company has adopted the
enhanced disclosure provisions as defined in SFAS 148 effective for the first
quarter ended March 31, 2003.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities, and Interpretation of ARB No. 51", (FIN 46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied at the first interim or annual period
beginning after June 15, 2003. Management is currently evaluating the effect
that adoption of FIN 46 will have on its results of operations and financial
condition. The Company has not identified any off balance sheet arrangements for
which consolidation under FIN 46 is reasonably possible.
Market Risk and Risk Management Policies
- ----------------------------------------
The Company uses derivative financial instruments to manage interest rate
exposure on variable-rate debt, primarily by using interest rate collars and
variable interest rate swaps. In conjunction with the Company's debt refinancing
in the third quarter of 2002, the Company discontinued cash flow hedge
accounting treatment for its interest rate collars and has applied
mark-to-market accounting prospectively. Although these derivatives are not
deemed to be effective hedges of the new credit facility in accordance with the
provisions of SFAS 133, the Company has retained these instruments as protection
against interest rate risk associated with the new credit agreement and the
Company will continue to record the mark-to-market adjustments on the interest
rate collars, through 2006, in its consolidated income statement. The fair value
of the interest rate collars on March 31, 2003 was a $2.2 million liability and
the company recorded approximately $11,000 of other income in the first quarter
of 2003 on the Condensed Consolidated Statements of Income to adjust these
instruments to fair value. The Company continues to apply cash flow hedge
accounting to interest rate swaps.
The Company recognizes all derivative instruments on the balance sheet at fair
value. Fluctuations in the fair values of derivative instruments designated as
cash flow hedges are recorded in accumulated other comprehensive income, and
reclassified into earnings as the underlying hedged items affect earnings. To
the extent that a change in interest rate derivative does not perfectly offset
the change in value of the interest rate being hedged, the ineffective portion
is recognized in earnings immediately.
The Company's primary source of variable-rate debt comes from its revolving
credit agreement. While not specifically correlated with the revolving credit
agreement, the Company maintains an economic hedge of this variable rate through
the maintenance of two interest rate collar agreements with a weighted average
minimum annual interest rate of 4.99% to a maximum weighted average annual
interest rate of 5.42%. Since the interest rate on the debt floats with the
short-term market rate of interest, the Company is exposed to the risk that
these interest rates may decrease below the minimum annual interest rates on the
two interest rate collar agreements. The effect of a 1% decrease in rate of
interest below the 4.99% weighted average minimum annual interest rate on $21.0
million of outstanding floating rate debt would result in increased annual
interest costs of approximately $0.2 million.
The Company is not subject to significant exposures to changes in foreign
currency exchange rates.
See the Company's Annual Report on Form 10-K for more information on the
Company's derivative financial instruments.
18
Forward-Looking Statements
- --------------------------
Statements relating to the potential value or viability of the DM&E or the
Project, or management's belief as to such matters, are forward-looking
statements and are subject to numerous contingencies and risk factors. The
Company has based its assessment on information provided by the DM&E and has not
independently verified such information. In addition to matters mentioned above,
factors which can adversely affect the value of the DM&E, its ability to
complete the Project or the viability of the Project include the following:
labor disputes, the outcome of certain litigation, any inability to obtain
necessary environmental and government approvals for the Project in a timely
fashion, the DM&E's ability to continue to obtain interim funding to finance the
Project, the expense of environmental mitigation measures required by the
Surface Transportation Board, an inability to obtain financing for the Project,
competitors' response to the Project, market demand for coal or electricity and
changes in environmental laws and regulations.
The Company wishes to caution readers that various factors could cause the
actual results of the Company to differ materially from those indicated by
forward-looking statements made from time to time in news releases, reports,
proxy statements, registration statements and other written communications
(including the preceding sections of this Management's Discussion and Analysis),
as well as oral statements, such as references made to the future profitability,
made from time to time by representatives of the Company. Additional delays in a
Virginia steel mill's production of sheet piling products, or failure to produce
substantial quantities of sheet piling products could adversely impact the
Company's earnings. The inability to negotiate the sale of certain assets could
result in an impairment in future periods. The inability to successfully
negotiate a new sales contract with a current Class I railroad customer could
have a negative impact on the operating results of the Company. Except for
historical information, matters discussed in such oral and written
communications are forward-looking statements that involve risks and
uncertainties, including but not limited to general business conditions, the
availability of material from major suppliers, the impact of competition, the
seasonality of the Company's business, the adequacy of internal and external
sources of funds to meet financing needs, taxes, inflation and governmental
regulations. Sentences containing words such as "anticipates", "expects", or
"will" generally should be considered forward-looking statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
See the "Market Risk and Risk Management Policies" section under Item 2,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Item 4. CONTROLS AND PROCEDURES
-----------------------
a) Within the 90 days prior to the date of this report, L. B. Foster Company
(the Company) carried out an evaluation, under the supervision and with the
participation of the Company's management, including the President and
Chief Executive Officer along with the Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon
that evaluation, the President and Chief Executive Officer, along with the
Chief Financial Officer concluded that the Company's disclosure controls
and procedures are effective to timely alert them to material information
relating to the Company (including its consolidated subsidiaries) required
to be included in the Company's periodic SEC filings.
b) There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect internal controls
subsequent to the date the Company carried out this evaluation.
19
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
-----------------
See Note 8, "Commitments and Contingent Liabilities", to the Condensed
Consolidated Financial Statements.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) EXHIBITS
Unless marked by an asterisk, all exhibits are incorporated by reference:
* 3.1 Restated Certificate of Incorporation.
3.2 Bylaws of the Registrant, as amended to date, filed as Exhibit
3.2 to Form 10-K for the year ended December 31, 2002.
4.0 Rights Amendment, dated as of May 15, 1997 between L. B.
Foster Company and American Stock Transfer & Trust Company,
including the form of Rights Certificate and the Summary of
Rights attached thereto, filed as Exhibit 4.0 to Form 10-K for
the year ended December 31, 2002.
* 4.0.1 Amended Rights Agreement dated as of May 14, 1998 between L.
B. Foster Company and American Stock Transfer and Trust
Company.
4.0.2 Revolving Credit and Security Agreement dated as of September
26, 2002, between L. B. Foster Company and PNC Bank, N. A.,
filed as Exhibit 4.0.2 to Form 10-Q for the quarter ended
September 30, 2002.
10.12 Lease between CXT Incorporated and Pentzer Development Corpor-
ation, dated April 1, 1993, filed as Exhibit 10.12 to Form
10-K for the year ended December 31, 1999.
10.12.1 Amendment dated March 12, 1996 to lease between CXT
Incorporated and Pentzer Corporation, filed as Exhibit 10.12.1
to Form 10-K for the year ended December 31, 1999.
10.12.2 Amendment dated November 7, 2002 to lease between CXT
Incorporated and Pentzer Development Corporation, filed as
Exhibit 10.12.2 to Form 10-K for the year ended December 31,
2002.
10.13 Lease between CXT Incorporated and Crown West Realty,
L. L. C., dated December 20, 1996, filed as Exhibit 10.13 to
Form 10-K for the year ended December 31, 1999.
10.13.1 Amendment dated June 29, 2001 between CXT Incorporated and
Crown West Realty, filed as Exhibit 10.13.1 to Form 10-K for
the year ended December 31, 2002.
10.14 Lease between CXT Incorporated and Pentzer Development Corpor-
ation, dated November 1, 1991 and filed as Exhibit 10.14 to
Form 10-K for the year ended December 31, 1999.
10.15 Lease between CXT Incorporated and Union Pacific Railroad
Company, dated February 13, 1998, and filed as Exhibit 10.15
to Form 10-K for the year ended December 31, 1999.
10.17 Lease between Registrant and the City of Hillsboro, TX dated
February 22, 2002, filed as Exhibit 10.17 to Form 10-K for the
year ended December 31, 2002.
20
10.19 Lease between Registrant and American Cast Iron Pipe Company
for pipe-coating facility in Birmingham, AL dated December 11,
1991, filed as Exhibit 10.19 to Form 10-K for the year ended
December 31, 2002.
10.19.1 Amendment to Lease between Registrant and American Cast Iron
Pipe Company for pipe-coating facility in Birmingham, AL dated
November 15, 2000, and filed as Exhibit 10.19.2 to Form 10-K
for the year ended December 31, 2000.
10.21 Stock Purchase Agreement, dated June 3, 1999 by and among the
Registrant and the shareholders of CXT Incorporated, filed as
Exhibit 10.0 to Form 8-K on July 14, 1999.
* 10.33.2 Amended and Restated 1985 Long-Term Incentive Plan as of
February 26, 1997. **
10.34 Amended and Restated 1998 Long-Term Incentive Plan as of
February 2, 2001, filed as Exhibit 10.34 to Form 10-K for the
year ended December 31, 2000. **
10.45 Medical Reimbursement Plan, filed as Exhibit 10.45 to Form
10-K for the year ended December 31, 2002. **
10.46 Leased Vehicle Plan as amended and restated on October 16,
2002, filed as Exhibit 10.46 to Form 10-Q for the quarter
ended September 30, 2002. **
10.51 Supplemental Executive Retirement Plan, filed as Exhibit 10.51
to Form 10-K for the year ended December 31, 2002. **
10.52 Outside Directors' Stock Award Plan, filed as Exhibit 10.52 to
Form 10-K for the year ended December 31, 2002. **
10.53 Directors' resolutions, under which directors' compensation
was established, dated October 15, 2002, filed as Exhibit
10.53 to Form 10-K for the year ended December 31, 2002. **
19 Exhibits marked with an asterisk are filed herewith.
* 99.1 Certification of Chief Executive Officer under Section 906 of
the Sarbanes-Oxley Act of 2002.
* 99.2 Certification of Chief Financial Officer under Section 906 of
the Sarbanes-Oxley Act of 2002.
** Identifies management contract or compensatory plan or
arrangement required to be filed as an Exhibit.
b) Reports on Form 8-K
On April 23, 2003, the Registrant filed a current report on Form
8-K under Item 9 FD disclosure announcing first quarter results.
21
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
L.B. FOSTER COMPANY
(Registrant)
Date: May 13, 2003 By:/s/David J. Russo
------------- ---------------------
David J. Russo
Senior Vice President,
Chief Financial Officer
and Treasurer
(Duly Authorized Officer of Registrant)
22
Form of Sarbanes-Oxley Section 302(a) Certification
---------------------------------------------------
I, Stan L. Hasselbusch, certify that:
1. I have reviewed this quarterly report on Form 10-Q of L. B. Foster
Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based in our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 13, 2003 /s/Stan L. Hasselbusch
--------------------------
Stan L. Hasselbusch
President and Chief Executive Officer
23
Form of Sarbanes-Oxley Section 302(a) Certification
---------------------------------------------------
I, David J. Russo, certify that:
1. I have reviewed this quarterly report on Form 10-Q of L. B. Foster Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based in our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003 /s/David J. Russo
-----------------
David J. Russo
Senior Vice President,
Chief Financial Officer and Treasurer