10-Q 1 q2filing.txt L. B. FOSTER COMPANY SECOND QUARTER 10-Q 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 June 30, 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 by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [X] Indicate the number of shares of each of the registrant's classes of common stock as of the latest practicable date. Class Outstanding at August 1, 2003 Common Stock, Par Value $.01 9,590,770 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 Operations 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures about Market Risk 19 Item 4. Controls and Procedures 19 PART II. Other Information Item 1. Legal Proceedings 20 Item 4. Results of Votes of Security Holders 20 Item 6. Exhibits and Reports on Form 8-K 20 Signature 23 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
L. B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) June 30, December 31, 2003 2002 ---------------- ---------------- ASSETS (Unaudited) Current Assets: Cash and cash equivalents $2,319 $3,653 Accounts and notes receivable: Trade 44,047 39,294 Other 147 69 ---------------- ---------------- 44,194 39,363 Inventories 40,690 32,925 Current deferred tax assets 1,494 1,494 Other current assets 1,122 696 Current assets of discontinued operations 7 138 ---------------- ---------------- Total Current Assets 89,826 78,269 ---------------- ---------------- Property, Plant & Equipment - At Cost 72,937 72,023 Less Accumulated Depreciation (37,944) (35,940) ---------------- ---------------- 34,993 36,083 ---------------- ---------------- Other Assets: Goodwill 350 350 Other intangibles - net 663 739 Investments 13,213 12,718 Deferred tax assets 4,436 4,454 Other assets 1,026 1,175 Assets of discontinued operations 1 196 ---------------- ---------------- Total Other Assets 19,689 19,632 ---------------- ---------------- TOTAL ASSETS $144,508 $133,984 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $805 $825 Accounts payable - trade 34,354 24,094 Accrued payroll and employee benefits 2,602 2,413 Current deferred tax liabilities 1,474 1,474 Other accrued liabilities 3,591 2,695 Liabilities of discontinued operations 203 74 ---------------- ---------------- Total Current Liabilities 43,029 31,575 ---------------- ---------------- Long-Term Borrowings 21,000 23,000 ---------------- ---------------- Other Long-Term Debt 3,712 3,991 ---------------- ---------------- Deferred Tax Liabilities 4,195 4,195 ---------------- ---------------- Other Long-Term Liabilites 5,313 5,210 ---------------- ---------------- STOCKHOLDERS' EQUITY: Common stock 102 102 Paid-in capital 35,013 35,143 Retained earnings 36,128 35,208 Treasury stock (3,253) (3,629) Accumulated other comprehensive loss (731) (811) ---------------- ---------------- Total Stockholders' Equity 67,259 66,013 ---------------- ---------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $144,508 $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 Six Months Ended Ended June 30, June 30, --------------------------------- ---------------------------------- 2003 2002 2003 2002 --------------------------------- ---------------------------------- (Unaudited) (Unaudited) Net Sales $75,796 $70,806 $135,315 $133,979 Cost of Goods Sold 66,600 62,106 119,186 118,484 -------------- -------------- --------------- --------------- Gross Profit 9,196 8,700 16,129 15,495 Selling and Administrative Expenses 6,830 6,518 13,397 12,891 Interest Expense 578 633 1,157 1,307 Other Income (54) (230) (374) (510) -------------- -------------- --------------- --------------- 7,354 6,921 14,180 13,688 -------------- -------------- --------------- --------------- Income From Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle 1,842 1,779 1,949 1,807 Income Taxes 719 716 762 716 -------------- -------------- --------------- --------------- Income From Continuing Operations Before Cumulative Effect of Change in Accounting Principle 1,123 1,063 1,187 1,091 Discontinued Operations: Loss From Operations of Foster Technologies (60) (332) (440) (649) Income Tax Benefit (23) - (173) - -------------- -------------- --------------- --------------- Loss on Discontinued Operations (37) (332) (267) (649) Cumulative Effect of Change in Accounting Principle, Net of Tax - - - (4,390) -------------- -------------- --------------- --------------- Net Income (Loss) $1,086 $731 $920 ($3,948) ============== ============== =============== =============== Basic Earnings (Loss) Per Common Share: From Continuing Operations Before Cumulative Effect of Change in Accounting Principle $0.12 $0.11 $0.12 $0.12 From Discontinued Operations, Net of Tax - (0.03) (0.03) (0.07) Cumulative Effect of Change in Accounting Principle, Net of Tax - - - (0.46) -------------- -------------- --------------- --------------- Net Income (Loss) $0.11 $0.08 $0.10 ($0.42) ============== ============== =============== =============== Diluted Earnings (Loss) Per Common Share: From Continuing Operations Before Cumulative Effect of Change in Accounting Principle $0.12 $0.11 $0.12 $0.11 From Discontinued Operations, Net of Tax - (0.03) (0.03) (0.07) Cumulative Effect of Change in Accounting Principle, Net of Tax - - - (0.46) -------------- -------------- --------------- --------------- Net Income (Loss) $0.11 $0.08 $0.10 ($0.42) ============== ============== =============== ===============
See Notes to Condensed Consolidated Financial Statements. 5
L. B. FOSTER COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Six Months Ended June 30, 2003 2002 ------------- ------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Income from continuing operations $1,187 $1,091 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,597 2,444 Loss on sale of property, plant and equipment 6 19 Unrealized loss on derivative mark-to-market 110 - Change in operating assets and liabilities: Accounts receivable (4,831) 3,044 Inventories (7,765) 7,885 Other current assets (426) (333) Other noncurrent assets (347) (587) Accounts payable - trade 10,260 (2,111) Accrued payroll and employee benefits 189 (121) Other current liabilities 786 (532) Other liabilities 145 (20) ------------- ------------- Net Cash Provided by Operating Activities 1,911 10,779 ------------- ------------- Net Cash Provided (Used) by Discontinued Operations 245 (620) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment 2 238 Capital expenditures on property, plant and equipment (1,281) (2,929) Acquisition of business - (2,214) ------------- ------------- Net Cash Used by Investing Activities (1,279) (4,905) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of revolving credit agreement borrowings (2,000) (5,000) Exercise of stock options and stock awards 246 168 Repayments of long-term debt (457) (243) ------------- ------------- Net Cash Used by Financing Activities (2,211) (5,075) ------------- ------------- Net (Decrease) Increase in Cash and Cash Equivalents (1,334) 179 Cash and Cash Equivalents at Beginning of Period 3,653 4,222 ------------- ------------- Cash and Cash Equivalents at End of Period $2,319 $4,401 ============= ============= Supplemental Disclosure of Cash Flow Information: Interest Paid $1,071 $1,462 ============= ============= Income Taxes Paid $260 $729 ============= ============= During the first six months of 2003 and 2002, the Company financed certain capital expenditures totaling $158,000 and $618,000, respectively, 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 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. The Company has not identified any variable interest entities for which consolidation under FIN 46 is appropriate. In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," (SFAS 149). SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." It is effective for contracts entered into or modified after June 30, 2003, except as stated within the statement, and should be applied prospectively. The Company does not expect this statement to have a material effect on its consolidated financial statements. In June 2003, the FASB issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," (SFAS 150). This standard requires that certain financial instruments embodying an obligation to transfer assets or to issue equity securities be classified as liabilities. It is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective July 1, 2003. This standard has no impact on the Company's financial statements. Stock-based compensation ------------------------ In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123" (SFAS 148) effective for fiscal years ending after December 31, 2002 and for interim periods beginning after December 15, 2002. This statement amends Statement of Financial Accounting Standards No. 123, "Accounting for Stock Stock-Based Compensation" (SFAS 123), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. 7 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 Six Months Ended June 30, June 30, In thousands, except per share amounts 2003 2002 2003 2002 -------------------------------------------------------------------------------- Net income from continuing operations, as reported $1,123 $1,063 $1,187 $1,091 Add: Stock-based employee compensa- tion 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 79 93 141 151 -------------------------------------------------------------------------------- Pro forma income from continuing operations $1,044 $970 $1,046 $940 ================================================================================ Earnings per share from continuing operations: Basic, as reported $0.12 $0.11 $0.12 $0.12 Basic, pro forma $0.11 $0.10 $0.11 $0.10 Diluted, as reported $0.12 $0.11 $0.12 $0.11 Diluted, pro forma $0.11 $0.10 $0.11 $0.10 ================================================================================ 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 with the following weighted-average assumptions used for grants in the second quarter of 2003 and 2002, respectively: risk-free interest rates of 3.56% and 5.16%; dividend yield of 0.0% for both quarters; volatility factors of the expected market price of the Company's Common stock of .32 for both quarters; and a weighted-average expected life of the option of ten years. The weighted-average fair value of the options granted in the second quarter of 2003 and 2002 was $2.11 and $2.99, respectively. 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 June 30, 2003 and December 31, 2002 have been reduced by an allowance for doubtful accounts of ($1,072,000) and ($1,063,000), respectively. Bad debt expense was $85,000 and $82,000 for the six-month periods ended June 30, 2003 and 2002, respectively. 8 4. INVENTORIES Inventories of the Company at June 30, 2003 and December 31, 2002 are summarized as follows in thousands: June 30, December 31, 2003 2002 -------------------------------------------------------------------------- Finished goods $26,296 $21,700 Work-in-process 10,818 6,343 Raw materials 5,425 6,731 -------------------------------------------------------------------------- Total inventories at current costs 42,539 34,774 (Less): LIFO reserve (1,249) (1,249) Inventory valuation reserve (600) (600) -------------------------------------------------------------------------- $40,690 $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 Six Months Ended June 30, June 30, In thousands 2003 2002 2003 2002 -------------------------------------------------------------------------------- Net sales $ - $ 16 $ 1 $ 16 -------------------------------------------------------------------------------- Pretax operating loss (60) (332) (370) (649) Pretax loss on disposal - - (70) - Income tax benefit 23 - 173 - -------------------------------------------------------------------------------- Loss from discontinued operations $ (37) $ (332) $ (267) $ (649) ================================================================================ 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. 9 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 mature in July 2003. Interest on the new credit facility is based on LIBOR plus a spread ranging from 1.75% to 2.50%. The agreement includes financial covenants requiring a minimum net worth, 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 June 30, 2003, the Company was in compliance with all of the agreement's covenants. 7. EARNINGS (LOSS) PER COMMON SHARE The following table sets forth the computation of basic and diluted earnings (loss) per common share:
Three Months Ended Six Months Ended June 30, June 30, (in thousands, except earnings per share) 2003 2002 2003 2002 ---------------------------------------------------------------------------------------------------------------------------------- Numerator: Numerator for basic and diluted earnings per common share - net income (loss) available to common stockholders: Income from continuing operations $ 1,123 $ 1,063 $ 1,187 $ 1,091 Loss from discontinued operations (37) (332) (267) (649) Cumulative effect of change in accounting principle - - - (4,390) ---------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 1,086 $ 731 $ 920 $(3,948) ================================================================================================================================== Denominator: Weighted average shares 9,568 9,495 9,546 9,468 ---------------------------------------------------------------------------------------------------------------------------------- Denominator for basic earnings per common share 9,568 9,495 9,546 9,468 Effect of dilutive securities: Contingent issuable shares - 7 2 19 Employee stock options 103 220 85 205 ---------------------------------------------------------------------------------------------------------------------------------- Dilutive potential common shares 103 227 87 224 Denominator for diluted earnings per common share - adjusted weighted average shares and assumed conversions 9,671 9,722 9,633 9,692 ================================================================================================================================== Basic earnings (loss) per common share Continuing operations $ 0.12 $ 0.11 $ 0.12 $ 0.12 Discontinued operations - (0.03) (0.03) (0.07) Cumulative effect of change in accounting principle - - - (0.46) ---------------------------------------------------------------------------------------------------------------------------------- Basic earnings (loss) per common share $ 0.11 $ 0.08 $ 0.10 $ (0.42) ================================================================================================================================== Diluted earnings (loss) per common share Continuing operations $ 0.12 $ 0.11 $ 0.12 $ 0.11 Discontinued operations - (0.03) (0.03) (0.07) Cumulative effect of change in accounting principle - - - (0.46) ---------------------------------------------------------------------------------------------------------------------------------- Diluted earnings (loss) per common share $ 0.11 $ 0.08 $ 0.10 $ (0.42) ==================================================================================================================================
10 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. 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. The Company was convicted in December 2000, 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 $20,000 for used oil conviction and $150,000 for hazardous waste conviction. The Texas Court of Appeals reversed the Company's conviction for the unlawful disposal of hazardous waste and upheld the conviction for the unlawful disposal of used oil. The Company has filed a further appeal on the used oil conviction and the State has filed an appeal from the reversal of the hazardous waste conviction. At June 30, 2003, the Company had outstanding letters of credit of approximately $2,689,000. 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, Six Months Ended, June 30, 2003 June 30, 2003 -------------------------------------------------------------------------------- Net Segment Net Segment (in thousands) Sales Profit Sales Profit -------------------------------------------------------------------------------- Rail products $37,709 $1,195 $69,335 $1,876 Construction products 33,469 808 57,433 281 Tubular products 4,618 558 8,547 923 -------------------------------------------------------------------------------- Total $75,796 $2,561 $135,315 $3,080 ================================================================================ Three Months Ended, Six Months Ended, June 30, 2002 June 30, 2002 -------------------------------------------------------------------------------- Net Segment Net Segment (in thousands) Sales Profit Sales Profit/(Loss) -------------------------------------------------------------------------------- Rail products $34,300 $142 $64,255 ($242) Construction products 31,975 709 62,009 816 Tubular products 4,531 476 7,715 621 -------------------------------------------------------------------------------- Total $70,806 $1,327 $133,979 $1,195 ================================================================================ 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. There has been no change in the measurement of segment profit/(loss) from December 31, 2002. The following table provides a reconciliation of reportable net profit/(loss) to the Company's consolidated total: 11 Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2003 2002 2003 2002 ------------------------------------------------------------------------------- Income for reportable segments $2,561 $1,327 $3,080 $1,195 Cost of capital for reportable segments 2,662 2,546 5,087 5,262 Interest expense (578) (633) (1,157) (1,307) Other income 54 230 374 510 Corporate expense and other unallocated charges (2,857) (1,691) (5,435) (3,853) ------------------------------------------------------------------------------- Income from continuing oper- ations, before income taxes and cumulative effect of change in accounting principle $1,842 $1,779 $1,949 $1,807 =============================================================================== 10. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) represents net income (loss) plus certain stockholders' equity changes not reflected in the Condensed Consolidated Statements of Operations. The components of comprehensive income (loss), net of tax, were as follows: Three Months Ended Six Months Ended June 30, June 30, (in thousands) 2003 2002 2003 2002 ------------------------------------------------------------------------------- Net income (loss) $1,086 $731 $920 ($3,948) Unrealized derivative gains (losses) on cash flow hedges (SFAS No. 133) 14 (95) 24 82 Foreign currency translation gains - 30 8 - Reclassification adjustment for foreign currency translation losses included in net income - - 48 - ------------------------------------------------------------------------------- Comprehensive income (loss) $1,100 $666 $1,000 ($3,866) =============================================================================== The change in accumulated other comprehensive loss through June 30, 2003, is comprised solely of unrealized derivative gains on the Company's interest rate swap agreement. 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended Six Months Ended June 30, June 30, -------------------------------------------------------------------------------- 2003 2002 2003 2002 -------------------------------------------------------------------------------- (Dollars in thousands) Net Sales: Rail Products $37,709 $34,300 $69,335 $64,255 Construction Products 33,469 31,975 57,433 62,009 Tubular Products 4,618 4,531 8,547 7,715 -------------------------------------------------------------------------------- Total Net Sales $75,796 $70,806 $135,315 $133,979 ================================================================================ Gross Profit: Rail Products $4,222 $3,520 $8,008 $6,372 Construction Products 4,357 4,597 7,163 8,244 Tubular Products 1,050 930 1,852 1,481 Other (433) (347) (894) (602) -------------------------------------------------------------------------------- Total Gross Profit 9,196 8,700 16,129 15,495 -------------------------------------------------------------------------------- Expenses: Selling and admin- istrative expenses 6,830 6,518 13,397 12,891 Interest expense 578 633 1,157 1,307 Other income (54) (230) (374) (510) -------------------------------------------------------------------------------- Total Expenses 7,354 6,921 14,180 13,688 -------------------------------------------------------------------------------- Income From Continuing Operations Before Income Taxes and Cumulative Effect of Change in Accounting Principle 1,842 1,779 1,949 1,807 Income Tax Expense 719 716 762 716 -------------------------------------------------------------------------------- Income From Continuing Operations Before Cumulative Effect of Change in Accounting Principle 1,123 1,063 1,187 1,091 Discontinued Operations: Loss From Operations of Foster Technologies (60) (332) (440) (649) Income Tax Benefit (23) - (173) - -------------------------------------------------------------------------------- Loss From Discontinued Operations (37) (332) (267) (649) Cumulative Effect of Change in Accounting Principle, Net of Tax - - - (4,390) -------------------------------------------------------------------------------- Net Income (Loss) $1,086 $731 $920 ($3,948) ================================================================================ Gross Profit %: Rail Products 11.2% 10.3% 11.5% 9.9% Construction Products 13.0% 14.4% 12.5% 13.3% Tubular Products 22.7% 20.5% 21.7% 19.2% Total Gross Profit 12.1% 12.3% 11.9% 11.6% ================================================================================ 13 Second Quarter 2003 Results of Operations ----------------------------------------- The Company's second quarter income from continuing operations was $1.1 million ($0.12 per share) on net sales of $75.8 million. During the second quarter of 2002, income from continuing operations was $1.1 million ($0.11 per share) on net sales of $70.8 million. Including a minimal net loss from the discontinued operations of the Company's Foster Technologies subsidiary, net income for the second quarter of 2003 was $1.1 million ($0.11 per share). During the same period last year, the Company had net income of $0.7 million ($0.08 per share) which included a $0.3 million ($0.03 per share) loss from discontinued operations. Net sales for the second quarter of 2003 improved 7.0% compared to the same period in 2002. Sales in all segments of the Company improved in comparison to last year's second quarter. The greatest improvement was a 10% increase in Rail segment sales as revenue recognized for transit products and welded rail projects increased. Construction products' net sales increased 4.7% to $33.5 million, primarily due to an increase in revenue recognized for mechanically stabilized earth retention systems. Sheet piling sales also contributed to the Construction segment revenue increase. Tubular products' sales increased 1.9% compared to last year's second quarter due primarily to an improved energy market. The Company's gross profit margin was 12.1% in the second quarter of 2003 compared to 12.3% in the same period last year. Rail products' profit margin increased by 0.9 percentage points due primarily to an improvement in margin for concrete rail products. The 1.4 percentage point decline in Construction products' margin was due primarily to increased competition in the fabricated products market and lower margins on revenues recognized for mechanically stabilized earth wall systems. Tubular products' 2.2 percentage point increase in gross margin was primarily due to a decline in raw material cost for coated pipe products. Selling and administrative expenses increased $0.3 million, or approximately 5% compared to the second quarter of 2002, primarily due to additions to the sales force and related employee benefits, along with higher insurance costs. Second quarter interest expense declined 9% from the prior year due principally to an $8.4 million reduction in corporate debt. Other income declined $0.2 million primarily as a result of the mark-to-market adjustments recorded by the Company related to its interest rate collars. The second quarter 2003 effective tax rate for continuing operations was 39% compared to 40% in last year's second quarter. First Six Months of 2003 Results of Operations ---------------------------------------------- For the first six months of 2003, income from continuing operations was $1.2 million ($0.12 per diluted share) on net sales of $135.3 million. During the same period last year, income from continuing operations was $1.1 million ($0.11 per diluted share) on net sales of $134.0 million. Including a $0.3 million ($0.3 per share) net loss from the discontinued operations of Foster Technologies, net income for the six months ended June 30, 2003 was $0.9 million ($0.10 per share). This compares favorably to a net loss of $3.9 million ($0.42 per share) for the same period of 2002. The 2002 period included a loss from discontinued operations of $0.6 million ($0.07 per share) and a non-cash charge of $4.4 million ($0.46 per share) from the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets". Year to date sales increased $1.3 million compared to sales in the first half of 2002. Rail products' 2003 net sales increased 7.9% to $69.3 million compared to the same period of 2002. Many of the rail divisions had an increase in revenues, particularly the transit products division. Net sales of Construction products declined $4.6 million, or 7.4%, in the year to date comparison. A decline in government spending for infrastructure projects due to state budget shortfalls had a direct effect on the Fabricated Products division, while the late awarding of certain 2003 state contracts contributed to a decline in concrete building sales. 14 A weaker market for H-bearing pile in the first half of 2003 also had a negative impact on the Piling division's sales. Tubular products' sales increased 10.8% to $8.5 million due to a stronger energy market. The gross margin percentage for the Company was 11.9% in the first six months of 2003 compared to 11.6% in the same period of 2002. Rail products' margin improved to 11.5% from 9.9% due to favorable job close-outs in the relay rail division, and more efficient track panel, trackwork, and concrete rail operations. Construction product's margin declined to 12.5% due to the competitive market created by a reduction in state spending for infrastructure projects. Tubular products' gross margin percentage increased to 21.7% as a result of lower raw material costs and the mix of products sold. During the first six months of 2003, selling and administrative expenses increased $0.5 million or 4% over the prior year period. As mentioned previously, the increase can be attributed primarily to additions to the sales force and related employee benefits, along with increased insurance costs. Interest expense fell 11.5% as a result of the reduction in debt. The 2003 reduction of "other income" (comprised primarily of accrued dividend income on DM&E Preferred stock) resulted from losses on mark-to-market adjustments recorded by the Company related to its interest rate collars. Liquidity and Capital Resources ------------------------------- The Company generates operational cash flow from the sale of inventory and the collection of accounts receivable. Cash flow from operations remained positive for the six months ended June 30, 2003 and combined with cash on hand from 2002, was adequate enough to fund a $2.3 million reduction in corporate borrowings from December 31, 2002. During the first half of 2003, the average turnover rate for accounts receivable was higher than during the same period a year ago due to increased collections. The average inventory turnover rate in the current period declined slightly from the average rate for the same period of 2002 as a result of lower Construction segment sales related to the previously mentioned drop in government funding of infrastructure projects. Working capital at June 30, 2003 was $46.8 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 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 $1.3 million for the six months ended June 30, 2003, compared to $2.9 million for capital improvements and $2.2 million for the Greulich acquisition in the same period of 2002. Capital expenditures for 2003, excluding acquisitions, 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 June 30, 2003, the Company was in compliance with all of the agreement's covenants. Total revolving credit agreement borrowings at June 30, 2003 were $21.0 million, a decrease of $2.0 million from December 31, 2002. At June 30, 2003, remaining available borrowings under this facility were 15 approximately $21.4 million. Outstanding letters of credit at June 30, 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 June 30, 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 $4.2 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. The DM&E does not believe litigation enforcing an eminent domain statute will affect the Project. 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. 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. The second quarter loss from this business was immaterial, and future expenses related to the shutdown of this business are also expected to be immaterial. The Company has a $1.6 million valuation allowance related to prior net operating losses from this discontinued operation. The Company believes that the dissolution of this operation may result in the recognition of some portion of these net operating losses and the release of the associated valuation allowance. The final shutdown and dissolution of this subsidiary is expected in 2003. Specialty trackwork sales of the Company's Rail segment depend primarily on one supplier. In 2002, the Company wrote off a $1.9 million investment and $5.4 million of advances related to this supplier. During the first half of 2003 and 2002, the volume of business the supplier conducted with the Company was approximately $6.6 million and $6.8 million, respectively, although the Company expects future activity in this market to decrease significantly. 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 the assets related to this operation to their anticipated market value. The anticipated 2002 sale of these assets, which consist of machinery and equipment, did not 16 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. In August 2003, the Company reached an agreement to sell, modify and install the machinery and equipment. The Company expects to record a gain upon successful installation of this equipment and anticipates completing its obligations within the next six months. Outlook ------- The Company has an exclusive agreement with a steel mill to distribute steel sheet piling in North America. Sheet piling production commenced in 2001 but the quantity produced had not materially impacted results until the second quarter of 2003. Going forward, the Piling division expects earnings will improve from a consistent supply of sheet piling from this mill. 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. Although the contract is not expected to be renewed before its expiration, the Company anticipates it will continue to sell ties to the railroad at reduced volumes. A substantial portion of the Company's operations is heavily dependent on governmental funding of infrastructure projects. Significant changes in the level of government funding of these projects could have a favorable or unfavorable impact on the operating results of the Company. 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 June 30, 2003, was approximately $120.2 million. The following table provides the backlog by business segment: Backlog ---------------------------------------------------------- June 30, December 31, June 30, (In thousands) 2003 2002 2002 -------------------------------------------------------------------------------- Rail Products $41,023 $45,371 $58,829 Construction Products 74,780 59,774 69,262 Tubular Products 4,421 3,995 2,791 -------------------------------------------------------------------------------- Total $120,224 $109,140 $130,882 ================================================================================ The reduction in Rail segment backlog from June 30, 2002 reflects the absence of firm renewal commitments on contracts under negotiation and a reduction in specialty trackwork backlog. Critical Accounting Policies ---------------------------- The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. When more than one accounting principle, or method of its application, is generally accepted, management selects the principle or method that is appropriate in the Company's specific circumstances. Application of these accounting principles requires management to make estimates about the future resolution of existing uncertainties. As a result, actual results could differ from these estimates. In preparing these financial statements, management has made its best estimates and judgments of the amounts and disclosures included in the financial statements giving due regard to materiality. There have been no material changes in the Company's policies or estimates since December 31, 2002. For more information regarding the Company's critical accounting policies, please see the 17 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. 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. The Company has not identified any variable interest entities for which consolidation under FIN 46 is appropriate. In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities," (SFAS 149). SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." It is effective for contracts entered into or modified after June 30, 2003, except as stated within the statement, and should be applied prospectively. The Company does not expect this statement to have a material effect on its consolidated financial statements. In June 2003, the FASB issued Statement of Financial Accounting Standards No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," (SFAS 150). This standard requires that certain financial instruments embodying an obligation to transfer assets or to issue equity securities be classified as liabilities. It is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective July 1, 2003. This standard has no impact on the Company's financial statements. 18 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 June 30, 2003 was a $2,342,000 liability and the company recorded approximately $121,000 of expense in "other income" in the second quarter of 2003 on the Condensed Consolidated Statements of Operations to adjust these instruments to fair value. For the six months ended June 30, 2003, the Company has recorded $110,000 of expense in "other 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 (loss), 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. 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 19 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 satisfy the installation requirements of the sales agreement for the pipe coating equipment could have an adverse effect on future results. 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. 20 PART II OTHER INFORMATION ------------------------- Item 1. LEGAL PROCEEDINGS ------------------------- See Note 8, "Commitments and Contingent Liabilities", to the Condensed Consolidated Financial Statements. Item 4. RESULTS OF VOTES OF SECURITY HOLDERS -------------------------------------------- At the Company's annual meeting on May 13, 2003, the following individuals were elected to the Board of Directors: For Withheld Name Election Authority -------------------------------------------------------------------------------- Lee B. Foster II 8,894,056 591,933 Stan L. Hasselbusch 8,894,041 591,948 Henry J. Massman IV 9,394,302 91,687 Diane B. Owen 9,395,608 90,381 John W. Puth 9,370,520 115,469 William H. Rackoff 9,394,302 91,687 The stockholders voted to approve Ernst & Young LLP as the Company's independent auditors for the fiscal year ended December 31, 2003. The following table sets forth the results of the vote for independent auditors: For Against Approval Approval Abstained ------------------------------------------------------------------------------- 8,054,741 768,979 662,269 The stockholders also voted to approve the outside directors' stock award plan. The following table sets forth the results of the vote for the plan: For Against Approval Approval Abstained ------------------------------------------------------------------------------- 9,319,724 72,270 93,995 Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- a) EXHIBITS Unless marked by an asterisk, all exhibits are incorporated by reference: 21 3.1 Restated Certificate of Incorporation, filed as Exhibit 3.1 to Form 10-Q for the quarter ended March 31, 2003. 3.2 Bylaws of the Registrant, as amended to date, filed as Exhibit 3.2 to Form 10-K for the year ended December 31, 2002. 4.0 Rights Amendment, dated as of May 15, 1997 between L. B. Foster Company and American Stock Transfer & Trust Company, including the form of Rights Certificate and the Summary of Rights attached thereto, filed as Exhibit 4.0 to Form 10-K for the year ended December 31, 2002. 4.0.1 Amended Rights Agreement dated as of May 14, 1998 between L. B. Foster Company and American Stock Transfer and Trust Company, filed as Exhibit 4.0.1 to Form 10-Q for the quarter ended March 31, 2003. 4.0.2 Revolving Credit and Security Agreement dated as of September 26, 2002, between L. B. Foster Company and PNC Bank, N. A., filed as Exhibit 4.0.2 to Form 10-Q for the quarter ended September 30, 2002. 10.12 Lease between CXT Incorporated and Pentzer Development Corporation, dated April 1, 1993, filed as Exhibit 10.12 to Form 10-K for the year ended December 31, 1999. 10.12.1 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 Corporation, 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. 10.19 Lease between Registrant and American Cast Iron Pipe Company for a 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, filed as Exhibit 10.33.2 to Form 10-Q for the quarter ended March 31, 2003. ** 22 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 dated May 13, 2003, under which directors' compensation was established. ** * 10.54 Management Incentive Compensation Plan for 2003. ** 19 Exhibits marked with an asterisk are filed herewith. * 31.1 Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. * 31.2 Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. * 32.1 Certification of Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002. * 32.2 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. On July 23, 2003, the Registrant filed a current report on Form 8-K under Item 9 FD disclosure announcing second quarter results. 23 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: August 13, 2003 By:/s/David J. Russo ---------------- --------------------------------------- David J. Russo Senior Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer of Registrant)