L.B. Foster Company
Annual Report 2013

Plain-text annual report

T R O P E R L A U N N A 3 1 0 2 36515.indd 1 4/8/14 9:41 AM I S E C V R E S D N A S T C U D O R P E R U T C U R T S A R F N I Y G R E N E D N A N O I T A T R O P S N A R T I S E C V R E S D N A S T C U D O R P E R U T C U R T S A R F N I Y G R E N E D N A N O I T A T R O P S N A R T  FINANCIAL HIGHLIGHTS INCOME STATEMENT DATA 2013 (1) 2012 (2) 2011 (3) 2010 (4) 2009 (5) YEAR ENDED DECEMBER 31, Net Sales Income from Continuing Operations, Net of Tax Income from Discontinued Operations, Net of Tax Net Income Basic Earnings Per Common Share: Continuing Operations Discontinued Operations Basic Earnings Per Common Share Diluted Earnings Per Common Share: Continuing Operations Discontinued Operations Diluted Earnings Per Common Share Dividends Paid Per Common Share ALL AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA 597,963 588,541 575,337 467,058 392,071 41,571 22,657 30,812 31,217 22,853 29,276 14,764 22,067 20,006 14,799 14 1,424 828 486 928 29,290 16,188 22,895 20,492 15,727 2.88 0.00 2.88 2.85 0.00 2.85 0.12 1.46 0.14 1.60 1.44 0.14 1.58 0.10 1.96 1.46 0.05 0.09 2.01 1.55 1.93 1.44 0.05 0.09 1.98 1.53 2.16 0.08 2.24 2.14 0.08 2.22 0.10 $ $ $ $ $ $ $ $ $ $ $ $ Operating profit represents the gross profit less selling and administrative expenses and amortization expense. (1) (2) 2013 includes the results of L.B. Foster Ball Winch, Inc., which was formed for the purpose of acquiring assets of Ball Winch, LLC, beginning on November 7, 2013. 2012 includes a $22,000 warranty charge and a pre-tax gain of $3,193, from the dispositions of SSD and Precise, in income from discontinued operations, net of tax. More information about the warranty charge can be found in Part II, Item 8, Note 20 to the consolidated financial statements included herein, which is incorporated by reference into this Part II, Item 6 of Form 10-K. More information regarding the dispositions of SSD and Precise can be found in Part II, Item 8, Note 4 to the consolidated financial statements included herein, which is incorporated by reference into this Part II, Item 6 of Form 10-K. (3) 2011 includes a pre-tax gain of $577 associated with the early termination of the operating lease associated with the Company’s sale-leaseback transaction for our threaded products facility, formerly located in Houston, TX. (4) 2010 includes the results of Rail Technologies, beginning on December 15, 2010. (5) 2009 includes a pre-tax gain of $1,194 associated with the sale of available-for-sale marketable securities. L.B. FOSTER COMPANY L.B. Foster Company (NASDAQ: FSTR ) is a leading manufacturer, fabricator and distributor of products and services for the rail, construction, energy and utility markets with locations in North America and Europe. As the world’s infrastructure continues to expand, L.B. Foster will be hard at work with the products needed to build it strong. 36515.indd 2 4/8/14 9:42 AM STRONG POSITIONS IN TRANSPORTATION AND ENERGY MARKETS As 2013 progressed and infrastructure markets began to grow again, L.B. Foster was fully prepared to compete in the improving economy. Our company’s quality products and professional services were ready to be deployed in the rehabilitation and new construction of worldwide transportation and energy infrastructure. Last year, we sharpened our focus on future growth to help realize important corporate goals. We advanced and added management talent, updated facilities, invested in product development and participated in some of the year’s most signifi cant infrastructure projects. As in 2013, L.B. Foster continues to compete eff ectively in transportation and energy markets with a professional team, quality products and exciting acquisition initiatives. We have established key priorities for both organic growth and strategic expansion in infrastructure markets. L.B. Foster’s internal development is fueled by critical initiatives to continuously improve processes, encourage customer loyalty, bring further innovation to our quality products and maintain a world-class record for workplace safety. L.B. Foster’s acquisition strategy is designed to add well-aligned companies to our business that can expand existing market share and experience, while improving profi tability. L.B. Foster’s comprehensive catalog of infrastructure material and our team’s construction products expertise served us well as the economy advanced in the second half of 2013. We remain confi dent that the strong market positions we successfully managed last year will continue to off er great potential for company growth as we move further into 2014. NET SALES dollars in thousands NET INCOME dollars in thousands NEW ORDERS dollars in thousands BACKLOG dollars in thousands RETURN ON EQUITY RETURN ON INVESTED CAPITAL 5 36515.indd 3 4/8/14 9:42 AM TO OUR SHAREHOLDERS Th roughout 2013, we saw markets around the world strengthen with an ever improving economy that led to more confi dence for those investing in infrastructure. Increasing pressure in metropolitan areas from growth and congestion is causing governments to act on transportation needs. Growing interest in North American shale oil reserves and the technology enabling the success of shale geographies is creating an energy renaissance. Whether this oil is moved by rail or pipeline, L.B. Foster can play an important role in the development of infrastructure necessary to support both. Th e year also brought new productivity and service levels to intermodal rail transport that are now changing the way products are being imported, exported and transported across the USA. As demand for new transportation and energy infrastructure grows, L.B. Foster stands ready to assist customers and to take advantage of growth opportunities that will create value. L.B. Foster takes a long term view of these opportunities and we are confi dent the markets served off er outstanding potential for our company to grow and create shareholder value. We expect new opportunities will manifest from our ongoing investments in advanced product innovation, expansion of our served industries and development of adjacent markets. L.B. Foster is focused on growth initiatives that are expected to lead to bett er organic expansion while managing risk. Th e company is in a great position fi nancially to make investments in new programs as our core business generates cash. Th is year, we expect to increase capital spending for improvements to facilities, technology and equipment that support our growth. Our goal with organic programs is to fuel growth at above market rates and off set some of the cyclical nature of our diverse businesses that in 2013 led to only modest increases. Last year, L.B. Foster’s top line growth was limited by a poor fi rst half in construction markets and weak short term order patt erns for our tubular products. Additionally, we had some businesses working through large backlogs. I believe that the diversifi cation we have is good for L.B. Foster shareholders, but we will continue to seek improvement by establishing a more aggressive approach to organic growth that can off set periodic weakness in individual businesses. We are taking a similar approach to our acquisition strategy which is becoming a more signifi cant component of our growth plans. Our aim is for companies that will create a positive impact on L.B. Foster’s core growth rates and improve company profi tability. We will employ a determined approach in searching for businesses that add technology and capabilities to our existing products 36515.indd 4 4/8/14 9:42 AM and services. In 2013, our company acquired Ball Winch, LLC, a specialty pipe coating company, and increased our capacity and ability to address the needs of energy pipeline customers. Over the next few years, L.B. Foster will expand from a company that only coats straight line pipe up to 24" in diameter, to one that also applies protective custom coatings to specialty components, pipe sized up to 94" in diameter and infi eld pipeline joint applications. I expect our acquisitions to vary in size, but not in the value they bring to L.B. Foster. At the close of 2013, the company had a balance sheet that is very strong, a positive cash position and no debt. We have a strong track record of generating enough cash to fund capital spending, pay a dividend, service any debt and support working capital needs. In 2013, net profi t of 4.9% was an achievement, given our unfavorable product mix. It was a diffi cult year to overcome the headwinds presented by the loss of tubular products volume. As the year started, we did not have visibility to changing order patt erns that would impact tubular products. However, order rates have already improved and the backlog at the beginning of 2014 was $183 million. Our management team is committ ed to growing the company in a profi table manner and our strategic plan emphasizes improving profi tability by investing in higher margin products and highly profi table acquisitions. As I assess the needs to support an ambitious growth plan, I am aware of the requirements it will place on management and systems. We have created programs to support the additions we expect in key areas, especially the need for management talent. Our focus on organizational growth over the past year has resulted in a new leadership program and expanded training and development of management throughout the company. We are investing in selling skills, engineering talent and quality management systems as well. L.B. Foster’s continuous sustainable improvement program remains at the heart of our performance management process. It has helped our company to achieve several consecutive years with outstanding results in plant safety and productivity. As investors consider the return potential from L.B. Foster, they can be certain that the management team is focused on delivering long term value. Th e employees at L.B. Foster are not only committ ed to driving improvement, they are also dedicated to doing it in a way that promotes ethical business practices, and meets the highest standards of integrity and corporate governance. ROBERT P. BAUER PRESIDENT and CHIEF EXECUTIVE OFFICER 36515.indd 5 4/8/14 9:43 AM 36515.indd 6 4/8/14 9:43 AM TRANSPORTATION INFRASTRUCTURE PRODUCTS LEADER For more than 110 years, this nation’s manufactured products, energy supplies and busy commuters have traveled each day on L.B. Foster rail and bridge construction materials. In 2013, we strengthened our company’s position in the transportation market even further with our participation in many of North America’s most signifi cant infrastructure construction projects. Our Bridge Products unit designed and manufactured steel fabricated, precast decking for the rehabilitation of New York State Bridge Authority’s critical Newburgh-Beacon span. Th ese ready-to-install deck panels improved the strength-to-weight ratio and added structural integrity. Custom engineered decking, totaling 430,000 sq. ft ., was fabricated for specifi c roadway placement. Th e materials were shipped and staged at the jobsite to expedite installation, accommodate night work and minimize traffi c closures. In the fi rst quarter of 2013, L.B. Foster’s Piling team completed delivery of 2,600 tons of steel pipe for use as lateral shoring struts in the excavation of San Francisco’s new multi-billion dollar Transbay Transit Center. Th is specialty pipe required a unique wall thickness to support steel wide-fl ange beams inside the 60 foot deep excavation. Th e Transit Center will connect eight Bay Area counties with bus, transit and high speed rail systems. Last year, our Rail Business group began shipments of an extensive materials package for the new Honolulu Rail Transit system’s elevated track and maintenance yard. Th e L.B. Foster team developed a comprehensive combination of materials and logistics that maximizes purchasing effi ciencies and critical scheduling requirements. L.B. Foster rail, concrete ties, direct fi xation fasteners, power rail with accessories and special trackwork will be installed throughout the system. Our eff orts last year to improve and expand our position in the transportation infrastructure market were met with success. We continue in 2014 to develop new products and opportunities to add value to this market segment and continue our growth as an infrastructure materials leader. 1 3 2 4 1.Newburg Beacon Bridge Rehabilitation, 2. San Francisco Transbay Transit Center, 3. Rail Transit Project, 4. Friction Management Products 36515.indd 7 4/8/14 9:43 AM I . S E I T I N U T R O P P O H T W O R G E D V O R P S E D A R G P U M E T S Y S L I A R G N O G N O I TRANSPORTATION AND ENERGY INFRASTRUCTURE PRODUCTS AND SERVICES CLASS 1 RAILROADS INVEST IN INFRASTRUCTURE North American Class 1 railroads continue to invest heavily in their infrastructure with capital spending averaging in the range of $0.20 per dollar of sales revenue, more than any other American industry. Since the bott om of the recent recession, capital spending has grown by 11.5% per year. As railroads seek to improve their overall operating effi ciencies and safety performance, L.B. Foster is working to become the Total Track Management Company. Our Rail Business group is providing the new products, innovative technologies and unique services necessary to meet ambitious Class 1 plans. NA CLASS 1 CAPITAL SPENDING ($ billion) 18 16 14 12 10 8 6 4 2 0 2009 2010 2011 2012 2013 2014 Plan Source: Company Reports A critical need for North American Class 1 railroads is the improvement of fuel effi ciency as measured by revenue ton-miles per gallon of fuel consumed. L.B. Foster’s Friction Management products directly impact their operating costs by decreasing fuel consumption, reducing rail wear and minimizing track structure degradation. NA CLASS 1 REVENUE TON-MILES PER GALLON OF FUEL 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E Source: AAR and Company Reports 36515.indd 8 4/8/14 9:43 AM BRIDGE REHABILITATION CREATES OPPORTUNITIES While the inventory of both structurally defi cient and functionally obsolete bridges has been reduced, over 24% of all bridges, almost 150,000 in total, are still in need of repair or replacement. L.B. Foster Fabricated Bridge Products can off er several product solutions to help our nation work to reduce the backlog of critically impaired spans. In 2013, the company introduced a new line of corrugated decking products. 35% 30% 25% 20% 15% 10% 5% 0% STRUCTURALLY IMPAIRED BRIDGES (% of total bridges) % Structurally Deficient % Fuctionally Obsolete 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: US Department of Transportation RAIL TECHNOLOGY DRIVES REMOTE MONITORING L.B. Foster is a railway technology innovator with a comprehensive catalog of remote infrastructure and vehicle monitoring devices and software. Our products accurately measure and relay data to railroad operation centers as timely updates of critical rail/vehicle conditions and infield lubrication equipment status. IntelliTrack® real-time monitoring detects and reports rail breaks, track buckle conditions, vehicle weight, vehicle load imbalance, defective wheels and wheel undercarriage performance. L.B. Foster Remote Performance Monitoring (RPM) offers proactive management of on-track lubrication equipment by communicating uptime reports, maintenance concerns and refilling requirements. IntelliTrack® real-time monitoring of rail/vehicle conditions. Remote performance monitoring of infi eld friction management equipment. I . S T C E J O R P E G D R B L A C I T I R C F O G O L K C A B E V I S N E T X E N A S A H A S U E H T 36515.indd 9 4/8/14 9:43 AM 36515.indd 10 4/8/14 9:43 AM ENERGY INFRASTRUCTURE MARKET GROWTH Our company is benefi ting from the recent expansion in oil and gas production being realized from developments in hydraulic fracturing of shale. New technologies have now made it economical to extract vast oil, gas and gas liquids deposits from shale. Th ese energy reserves are located in geographic areas of North America that lack adequate pipeline infrastructure required to move new energy supplies to market. In 2013, much of the pipe coated in our Birmingham facility was associated with shale development. Coating projects included 16" diameter pipe for the Sterling III Pipeline. Th is order, our historical largest, was for 545 miles of pipe for a natural gas liquids pipeline connecting central Oklahoma with major processing facilities near Houston. Our Alabama plant also coated 255 miles of the 1,230 mile Atex Pipeline which was designed to transport natural gas from the Marcellus-Utica Shale region of Pennsylvania, West Virginia and Ohio to the Texas Gulf Coast. The demand for coated pipe is expected to continue as improvements in shale technology satisfy environmental concerns. The expansion of pipeline infrastructure required to meet our nation’s energy needs will help fuel growth in L.B. Foster’s tubular business. To capitalize on this opportunity L.B. Foster has begun a major expansion project at L.B. Foster’s Birmingham, Alabama pipe coating facility. Th e new plant development was necessitated by production improvements at American Steel Pipe, the company’s strategic partner. L.B. Foster is increasing pipe coating capacity to accommodate new world-class production levels anticipated by American. 1 3 2 4 1. Steel line pipe from L.B. Foster strategic partner, American Steel Pipe arrives via on site rail spur and is off loaded at L.B. Foster’s Birmingham, AL Coated Products facility. 2. Heated and blasted pipe enters the coating process. 3. Pipe exits coating process for cooling and detection. 4. Finished product is loaded on to a truck for shipment. Our expanded facility applies Fusion Bond Epoxy (FBE), Abrasion Resistant Overcoating (ARO) and internal linings on 10.75” to 24” diameter steel line pipe with up to .562” of wall thickness and 100’ of length. 36515.indd 11 4/8/14 9:43 AM TRANSPORTATION AND ENERGY INFRASTRUCTURE PRODUCTS AND SERVICES NEW ENERGY INFRASTRUCTURE FUELS GROWTH Since 2005, natural gas use has grown in the United States. According to recent forecasts by the Energy Information Administration, consumption will expand through the end of the decade. Th is growth will be supplied by shale reserves and L.B. Foster is expected to continue to benefi t from the expansion of these energy resources. 30 25 20 15 10 5 - NATURAL GAS PRODUCTION BY SOURCE (trillion cubic feet) Shale Gas All Other Sources 0 0 0 2 1 0 0 2 2 0 0 2 3 0 0 2 4 0 0 2 5 0 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 3 1 0 2 4 1 0 2 5 1 0 2 6 1 0 2 7 1 0 2 8 1 0 2 9 1 0 2 0 2 0 2 Source: Energy Information Administration New North American oil and natural gas developments have made the United States far less reliant on imports of petroleum. L.B. Foster Tubular Products is ideally positioned to grow as expanding natural gas transmission pipelines connect new U.S. reserves with the energy infrastructure. US PETROLEUM AND LIQUIDS CONSUMPTION (% share of consumption) US Production Net Imports 70% 60% 50% 40% 30% 20% 10% 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Energy Information Administration . E P I P L E E T S D E T A O C F O Y L P P U S E L B A I L E R A E R U Q E R S E V R E S E R E L A H S W E N I 36515.indd 12 4/8/14 9:43 AM L.B. Foster Ball Winch Field Services team provides state-of-the-art joint coating for infi eld pipeline construction. ENERGY MARKET ACQUISITION EXPANDS PIPE COATING L.B. Foster’s acquisition strategy was an integral part of our growth initiatives in 2013. At year’s end, the company acquired Ball Winch, LLC., a Houston area company that applies specialty pipe coatings and provides field services for the oil and gas, mining, water and waste water industries. Ball Winch’s unique position as a custom coater of pipe, specialty fittings and field connections, significantly expands L.B. Foster’s existing pipe coating capabilities. is a synergy of technologies, management Th ere experience and corporate strategies between L.B. Foster and Ball Winch. Both companies have built reputations for excellence in manufacturing, product quality and workplace safety. Th is acquisition demonstrates L.B. Foster’s disciplined approach to targeting fi rms that can be readily incorporated into the company’s current line of transportation and energy products and services. “Ball Winch is now a key component of our tubular products group and it also benefi ts from a close proximity to our other North Houston pipe products plant,” said Merry Brumbaugh, L.B. Foster Vice President, Tubular Products. Th e addition of this well-aligned business addresses unrealized opportunities for manufacturing, sales and product development. Our company has long maintained a strong position in the energy pipe market through its strategic relationship with American Steel Pipe. Th e Ball Winch acquisition opens new opportunities for L.B. Foster as the infrastructure products company moves into custom plant-applied and fi eld coating applications for major energy customers. Th is expansion of product experience and market share in the energy pipeline business is directly att ributed to a search for acquisitions that add production, innovation and management opportunities to our existing products and services. 36515.indd 13 4/8/14 9:43 AM TRANSPORTATION AND ENERGY INFRASTRUCTURE PRODUCTS L.B. Foster operates individual business units that specialize in rail, construction and tubular products. Th ese groups manage manufacturing, distribution and sales facilities worldwide. Th e company also functions as a distributor and service provider in strategic alliances with industry leading manufacturing and engineering fi rms. L.B. Foster manufacturing facilities are located in the United States, Canada and the United Kingdom. Tubular Products L.B. Foster Coated Products operates two pipe coating facilities that apply Fusion Bond Epoxy corrosion protection, Abrasion Resistant Overcoating and internal in advanced technology environments. The linings plants are located on the site of American Steel Pipe’s Birmingham, Alabama operations and in Willis, Texas. The Coated Products group also includes Ball Winch Field Services, an infield pipe coating unit. L.B. Foster Th readed Products has the experience required to deliver quality water well products in today’s rapidly changing environment. Our company has been a trusted supplier to the vertical pump industry for more than 30 years. Th e L.B. Foster team of professionals provide timely delivery, superior reliability, consistent quality and an ongoing commitment to customer satisfaction. Construction Products L.B. Foster Piling has supplied fl at, pipe, H beam and Z sheet pile to the construction industry for more than 80 years. L.B. Foster’s long experience in the distribution and application of sheet piling extends to today’s current line of quality sheet piling sections. A wide range of piling accessories, sheet piling and pipe piles are available nationally for sale or rent from convenient regional stocking locations. L.B. Foster Piling maintains a strategic relationship with Gerdau Long Steel North America. CXT Concrete Buildings is the leading U.S. manufacturer of precast concrete restroom, shower and concession buildings. Th ese durable structures are in use at federal, state, county, city and private recreational sites. L.B. Foster Fabricated Bridge Products provides steel grid bridge fl ooring, corrugated bridge forms, bridge drainage systems, bridge railing, custom pedestrian railing and complete bridge solutions. L.B. Foster bridge products can be found on signature spans in North and South America. Rail Products Th e Rail Products group is a leading, one source supplier and manufacturer of quality railroad products and services for mainline, transit, mining, port and industrial markets worldwide. Our company provides a wide range of railway products and services including new rail, used rail, insulated rail joints, rail lubrication systems, concrete ties, rail monitoring systems, transit products, trackwork materials and our professional rail project management services. Sales by Market Segment Rail 61 % Construction 32% Tubular 7% Rail Net Sales Gross Profi t $ $ 2013 2012 2011 363,667,000 370,322,000 315,133,000 74,986,000 52,533,000 57,613,000 Segment Profi t $ 28,692,000 9,074,000 18,724,000 Segment Assets $ 252,049,000 243,072,000 219,917,000 Construction Net Sales Gross Profi t $ $ 2013 2012 2011 191,751,000 169,253,000 227,734,000 29,224,000 25,080,000 35,372,000 Segment Profi t $ 10,206,000 7,859,000 16,323,000 Segment Assets $ 77,900,000 73,804,000 88,615,000 Tubular Net Sales Gross Profi t $ $ 2013 2012 2011 42,545,000 48,966,000 32,470,000 12,278,000 15,189,000 8,850,000 Segment Profi t $ 9,208,000 12,854,000 6,810,000 Segment Assets $ 37,107,000 13,573,000 11,758,000 36515.indd 14 4/8/14 9:44 AM UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) Í Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2013 ‘ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Or Commission File Number 0-10436 L.B. FOSTER COMPANY (Exact name of registrant as specified in its charter) Pennsylvania (State of Incorporation) 415 Holiday Drive, Pittsburgh, Pennsylvania (Address of principal executive offices) 25-1324733 (I.R.S. Employer Identification No.) 15220 (Zip Code) Registrant’s telephone number, including area code: (412) 928-3400 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, Par Value $0.01 Preferred Stock Purchase Rights Name of Each Exchange On Which Registered NASDAQ Global Select Market NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ‘ Yes È No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. ‘ Yes È No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. È Yes ‘ No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months such files). È Yes ‘ No required to submit and post shorter period that the registrant was for (or Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. ‘ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ‘ Smaller reporting company ‘ Non-accelerated filer ‘ Accelerated filer È Indicate by check mark whether Act). ‘ Yes È No (Do not check if a smaller reporting company) the registrant is a shell company (as defined in Rule 12b-2 of the Exchange The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $416,797,000. Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. Class Common Stock, Par Value $0.01 Outstanding at February 18, 2014 10,310,508 shares Documents Incorporated by Reference: Portions of the Proxy Statement prepared for the 2014 Annual Meeting of Shareholders are incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K. The 2014 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. 6515_Fin.pdf 1 TABLE OF CONTENTS PART I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 2. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 3. Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Executive Officers of the Registrant PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART III Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . Item 14. Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART IV Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Statement Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Certifications 4 9 12 13 13 13 14 16 19 20 36 37 78 78 80 80 80 80 80 80 81 81 82 83 84 2 6515_Fin.pdf 2 Forward-Looking Statements This Annual Report on Form 10-K contains “forward looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Many of the forward-looking statements are located in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any histor- ical or current fact. Sentences containing words such as “believe,” “intend,” “may,” “expect,” “should,” “could,” “anticipate,” “plan,” “estimate,” “predict,” “project,” or their negatives, or other similar expressions generally should be considered forward-looking statements. Forward-looking statements in this Annual Report on Form 10-K may concern, among other things, the Company’s expectations regarding our strategy, goals, projec- tions and plans regarding our financial position, liquidity and capital resources, the outcome of the Inspector General subpoena, the outcome of litigation and product warranty claims, results of operations, decisions regard- ing our strategic growth strategies, market position, and product development, all of which are based on current estimates that involve inherent risks and uncertainties. The Company cautions readers that various factors could cause the actual results of the Company to differ materially from those indicated by forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Among the factors that could cause the actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties related to: general business conditions, a decrease in freight or passenger rail traffic, a lack of state or federal funding for new infrastructure projects, the timeliness and availability of material from major suppliers, labor disputes, the impact of competition, variances in current accounting estimates and their ultimate outcomes, the seasonality of the Company’s business, the adequacy of internal and external sources of funds to meet financing needs, the Company’s ability to curb its working capital requirements, domestic and international income taxes, foreign currency fluctuations, inflation, the ultimate number of concrete ties that will have to be replaced pursuant to product warranty claims, and domestic and for- eign governmental regulations. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated. The risks and uncertainties that may affect the operations, performance and results of the Company’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors” and elsewhere in this Annual Report on Form 10-K. The forward looking statements in this report are made as of the date of this report and we assume no obliga- tion to update or revise any forward looking statement, whether as a result of new information, future develop- ments or otherwise. 3 6515_Fin.pdf 3 PART I ITEM 1. BUSINESS (Dollars in thousands, except share data unless otherwise noted) Summary Description of Businesses Formed in 1902, L.B. Foster Company is a Pennsylvania corporation with its principal office in Pittsburgh, PA. L.B. Foster Company is a leading manufacturer, fabricator and distributor of products and services for the rail, construction, energy and utility markets. As used herein, “Foster”, the “Company”, “we”, “us” and “our” or similar references refer collectively to L.B. Foster Company and its divisions and subsidiaries, unless the context otherwise requires. The Company classifies its activities into three business segments: Rail Products, Con- struction Products, and Tubular Products. Financial information concerning these segments is set forth in Part II, Item 8, Note 2 to the financial statements included herein, which is incorporated by reference into this Item 1. On November 7, 2013, the Company (through its wholly-owned subsidiary now named L.B. Foster Ball Winch, Inc.) acquired substantially all of the assets and liabilities of Ball Winch, LLC (Ball Winch) for $37,500 pursuant to an Asset Purchase Agreement (APA). This transaction was funded with cash on hand. Included within the purchase price was $3,300 which will be held in escrow to satisfy any indemnity claims under the APA. The purchase price was adjusted to $37,995 as a result of the post-closing working capital adjustment of $495, which was accrued within Accounts payable as of December 31, 2013. The results of operations for L.B. Foster Ball Winch, Inc. are included in our Tubular Products segment for the period of November 7, 2013 through December 31, 2013. More information regarding the current year acquisition is set forth in Part II, Item 8, Note 3 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 1. For rail markets, the Company provides a full line of new and used rail, trackwork, and accessories to rail- roads, mines and industry. The Company also designs and produces concrete railroad ties, insulated rail joints, power rail, track fasteners, coverboards and special accessories for mass transit and other rail systems worldwide. Additionally, the Company engineers, manufactures and assembles friction management products and railway wayside data collection and management systems. For the construction industry, the Company sells steel sheet piling, H-bearing piling, pipe piling, and pro- vides rental sheet piling for foundation requirements. In addition, the Company supplies precast concrete build- ings, bridge decking, bridge railing, expansion joints and other products for highway construction and repair. For tubular markets, the Company supplies pipe coatings for natural gas pipelines and utilities. The Com- pany also produces threaded pipe products for industrial water well and irrigation markets. L.B. Foster Ball Winch, Inc. will enhance our pipe coating capabilities and expand our business into the field service coating markets. Information concerning the Company’s liquidity and capital resources and the Company’s working capital requirements can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. The Company has a joint venture, L B Pipe & Coupling Products, LLC (JV), in which the Company main- tains a 45% ownership interest. The JV manufactures, markets and sells various precision couplings and other products for the energy, utility and construction markets. More information concerning the JV is set forth in Part II, Item 8, Note 9 to the Consolidated Financial Statements included herein, which is incorporated by refer- ence into this Item 1. During 2012, the Company sold the assets and liabilities of its railway securement business (Shipping Sys- tems Division (SSD)), and its precise structural products business (Precise) and as such the results of these busi- nesses are included within discontinued operations. Unless the context otherwise requires, this Annual Report on Form 10-K for the year ended December 31, 2013 relates only to the Company’s continuing operations. 4 6515_Fin.pdf 4 The following table shows, for the last three fiscal years, the net sales generated by each of the current busi- ness segments as a percentage of total net sales. Percentage of Net Sales 2012 2011 2013 Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tubular Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61% 63% 55% 32 29 7 8 40 5 100% 100% 100% RAIL PRODUCTS L.B. Foster Company’s Rail Products segment is comprised of several manufacturing and distribution busi- nesses that provide a variety of products for railroads, transit authorities, industrial companies and mining applications throughout North America and the United Kingdom. Our Rail Products segment has sales offices throughout the United States, Canada and the United Kingdom and frequently bids on rail projects where it can offer products manufactured by the Company or sourced from numerous suppliers. These products may be pro- vided as a package to rail lines, transit authorities and construction contractors which reduces the customer’s procurement efforts and provides value added, just in time delivery. The segment is composed of the following business units: rail manufacturing and distribution, rail technology and concrete products. The rail manufacturing and distribution business sells heavy and light new and used (relay) rail mainly to transit authorities, industrial companies, and rail contractors for railroad sidings, plant trackage, and other carrier and material handling applications. Rail accessories include trackwork, track spikes, bolts, angle bars and other products required to install or maintain rail lines. These products are sold to railroads, rail contractors, industrial customers, and transit agencies and are manufactured by the Company or purchased from other manufacturers. The Company produces rail anchors and track spikes at its manufacturing plant in St. Jean, Quebec, primar- ily for the Canadian railroads with some export sales. Through its United Kingdom subsidiary, the Company also designs and manufactures a complete line of rail joints including the epoxy insulated rail joints, nylon- encapsulated insulated joints, and also distributes a complete line of track fasteners to the United Kingdom rail- ways and to international customers. The Company’s Allegheny Rail Products (ARP) division engineers and markets insulated rail joints and related accessories for the railroad and mass transit industries. Insulated joints are manufactured at the Compa- ny’s facilities in Pueblo, CO and Niles, OH. The Company’s Transit Products division supplies power rail, direct fixation fasteners, coverboards and special accessories primarily for mass transit systems. Most of these products are manufactured by subcon- tractors and are usually sold by sealed bid to transit authorities or to rail contractors worldwide. The Company’s Trackwork division sells new and relay trackwork for industrial and export markets. The Company also has two facilities that design, test and fabricate rail products in Atlanta, GA and Niles, OH. L.B. Foster Rail Technologies, Corp. (Rail Technologies) engineers, manufactures and assembles friction management products, railway wayside data collection and management systems and related products. It also engineers and manufactures stick friction modifiers and related application systems. The Company’s friction management division provides products and services that control the friction at the rail/wheel interface, helping to lower fuel usage and improve train-operating efficiency, extend the life of operating assets such as rail and wheels, reduce track stresses and lower related maintenance and operating costs for customers. Friction management products include mobile and wayside application systems that distribute lubricants and solid and liquid friction modifiers. Friction management products also include a variety of field service and support capa- bilities including remote performance monitoring for wayside and mobile units. Friction management products are designed, engineered, manufactured and assembled in the United States and by certain wholly-owned sub- sidiaries located in Montreal, Quebec, and Burnaby, British Columbia, Canada and in Sheffield, United King- dom. 5 6515_Fin.pdf 5 The Rail Technology business also manufactures a variety of track component products at our manufactur- ing facilities in St. Jean, Quebec, Canada and the United Kingdom. In Canada, these products primarily include rail anchors and rail spikes, which are products that are used to secure rails to wooden ties to restrain the move- ment of the rail. These products are sold primarily to Canadian railroads, with some products exported to the United States and to other international customers. In the United Kingdom, we design and manufacture a com- plete line of rail joints including epoxy insulated rail joints and nylon-encapsulated insulated joints, and also dis- tribute a complete line of track fasteners to the United Kingdom railways and to other international customers. The concrete products business, through the Company’s subsidiary, CXT Incorporated, manufactures engineered concrete railroad ties for the railroad and transit industries at its facilities in Spokane, WA and Tucson, AZ. CONSTRUCTION PRODUCTS The Construction products segment is composed of the following business units: piling, fabricated products, and precast concrete buildings. Sheet piling products are interlocking structural steel sections that are generally used to provide lateral support at construction sites. Bearing piling products are steel H-beam sections which are driven into the ground for support of structures such as bridge piers and high-rise buildings. Piling is often used in water and land appli- cations including cellular coffer dams and open cell structures in inner river systems and ports. Piling products are sourced from various manufacturers and either sold or rented to project owners and con- tractors. The piling division, via a sales force deployed throughout the United States, markets and sells piling domestically and internationally. This division offers its customers various types and dimensions of structural beam piling, sheet piling, and pipe piling. The Company is the primary distributor of domestic steel sheet piling for its primary supplier. The fabricated products unit manufactures a number of fabricated steel and aluminum products primarily for the highway, bridge and transit industries including grid reinforced concrete deck and open steel grid flooring systems, guardrails, expansion joints and bridge forms. The CXT concrete buildings unit manufactures concrete buildings primarily for national, state and munici- pal parks. This unit manufactures restrooms, concession stands and other protective storage buildings available in multiple designs, textures and colors. The Company is a leading high-end supplier in terms of volume, product options and capabilities. The buildings are manufactured in Spokane, WA and Hillsboro, TX. Sales of the Company’s construction products are partly dependent upon the level of activity in the con- struction industry. Accordingly, sales of these products have traditionally been somewhat higher during the sec- ond and third quarters than during the first and fourth quarters of each year. TUBULAR PRODUCTS The Tubular products segment has two discrete business units: coated pipe and threaded products. There are two coated pipe locations that make up our pipeline services business unit. Our Birmingham, AL facility coats the outside diameter and, to a lesser extent, the inside diameter of pipe primarily for oil & gas transmission pipelines. This location partners with its primary customer, a pipe manufacturer, to market fusion bonded epoxy coatings, abrasion resistant coatings and internal linings for a wide variety of pipe diameters for pipeline projects throughout North America. We acquired our second location in Willis, TX through the November 7, 2013 acquisition of assets from Ball Winch, LLC. The L.B. Foster Ball Winch, Inc. facility applies specialty outside and inside diameter coatings for oil & gas transmission, mining and waste water pipelines. The Willis, TX location also provides custom coatings for specialty fittings and field service connections. The threaded products unit, located in Magnolia, TX, cuts, threads and paints pipe primarily for water well applications for the agriculture industry and municipal water authorities. 6 6515_Fin.pdf 6 JOINT VENTURE In May 2009, the Company completed the formation of a joint venture, L B Pipe & Coupling Products, in which the Company maintains a 45% ownership interest. The contractual life of the JV is 9.5 years. The Com- pany has made all of its mandatory capital contributions under the JV agreement, totaling $3,000. The JV commenced operations in 2010 and manufactures, markets and sells precision couplings and various products for the energy, utility and construction markets. MARKETING AND COMPETITION L.B. Foster Company generally markets its rail, construction and tubular products directly in all major industrial areas of the United States, Canada and the United Kingdom through a sales force of approximately 80 people. The Company also utilizes a network of agents across Europe, South America and Asia to supplement its internal sales force to reach current customers and cultivate potential customers in these areas. The Company maintains 24 sales offices and 20 warehouses, plant and yard facilities located throughout United States, Canada and the United Kingdom. For the years ended 2013, 2012 and 2011, approximately 17%, 18% and 16%, respectively, of the Company’s total sales were outside the United States. The major markets for the Company’s products are highly competitive. Product availability, quality, service and price are principal factors of competition within each of these markets. No other company provides the same product mix to the various markets the Company serves. There are one or more companies that compete with the Company in each product line, however. Therefore, the Company faces significant competition from different groups of companies. During 2013 and 2012 no single customer accounted for more than 10% of the Company’s consolidated net sales. In 2011, one customer accounted for approximately 10% of consolidated net sales. Sales to this customer were recorded in the Rail Products and Construction Products segments and were approximately $58,715 during 2011. RAW MATERIALS AND SUPPLIES Most of the Company’s inventory is purchased in the form of finished or semi-finished product. The Com- pany purchases most of its inventory from domestic and foreign steel producers. The Company has an agreement with a steel mill to distribute steel sheet piling in North America. The Company also purchases cement and aggregate used in its concrete railroad tie and precast concrete building businesses from various suppliers. The Company’s purchases from foreign suppliers are subject to the usual risks associated with changes in international conditions and to United States laws which could impose import restrictions on selected classes of products and for anti-dumping duties if products are sold in the United States below certain prices. BACKLOG The dollar amount of firm, unfilled customer orders at December 31, 2013 and 2012 by business segment is as follows: December 31, 2013 2012 Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tubular Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $121,853 53,483 7,775 $140,592 59,239 11,087 Total from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $183,111 $210,918 Approximately 1% of the December 31, 2013 backlog is related to projects that will extend beyond 2014. 7 6515_Fin.pdf 7 RESEARCH AND DEVELOPMENT Expenditures for research and development approximated $3,154, $2,926 and $1,899 in 2013, 2012 and 2011, respectively. These expenditures were predominately associated with the Company’s Rail Technologies business. PATENTS AND TRADEMARKS The Company owns a number of United States, Canadian and international patents and trademarks. The Company has several patents on its Rail Technologies products, such as the Protector® IV application system, along with a significant number of patents related to its friction modifier product lines at Rail Technologies, which are of material importance to the business as a whole. We believe that, in the aggregate, our patents and trademarks give us a competitive advantage. We also rely on a combination of trade secrets and other intellectual property laws, non-disclosure agreements and other protective measures to establish and protect our proprietary rights in intellectual property. ENVIRONMENTAL DISCLOSURES It is not possible to predict the outcome of actions regarding environmental matters, particularly for future remediation and other compliance efforts. The Company has recorded its estimate of the outcome of certain envi- ronmental matters. In the opinion of management, compliance with current environmental protection laws will not have a material adverse effect on the financial condition, competitive position, or capital expenditures of the Company. However, the Company’s efforts to comply with stringent environmental regulations may have an adverse effect on the Company’s future earnings. See Item 3, Legal Proceedings included herein, for information regarding the Company’s environmental reserves which is incorporated by reference into this Item I. EMPLOYEES AND EMPLOYEE RELATIONS As of December 2013, the Company had approximately 830 employees, 115 of whom were located in Canada, 60 of whom were located in the United Kingdom, with the remaining employees located in the United States. There were approximately 390 hourly production workers and 440 salaried employees. Of the hourly production workers, approximately 160 are represented by unions. The Company has not suffered any major work stoppages during the past five years and considers its relations with its employees to be satisfactory. Substantially all of the Company’s hourly paid employees are covered by one of the Company’s non- contributory, defined benefit plans or defined contribution plans. Substantially all of the Company’s salaried employees are covered by defined contribution plans. FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS Financial information about geographic areas is set forth in Part II, Item 8, Note 2 to the Consolidated Finan- cial Statements included herein, which is incorporated by reference into this Item 1. FINANCIAL INFORMATION ABOUT SEGMENTS Financial information about segments is set forth in Part II, Item 8, Note 2 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 1. AVAILABLE INFORMATION The Company makes certain filings with the Securities and Exchange Commission (SEC), including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amend- ments and exhibits to those reports, available free of charge through its website, www.lbfoster.com, as soon as reasonably practicable after they are filed with the SEC. These filings are also available at the SEC’s Public Reference Room at 100 F Street N.E. Washington, D.C. 20549 or by calling 1-800-SEC-0330. These filings are also available on the internet at www.sec.gov. The Company’s press releases and recent investor presentations are also available on its website. 8 6515_Fin.pdf 8 ITEM 1A. RISK FACTORS Risks and Uncertainties We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our business, financial condition, and results of operations. The following risks highlight some of the more significant factors that have affected us and could affect us in the future. We may also be affected by unknown risks or risks that we currently believe are immaterial. If any such events actually occur, our business, financial condition, and results of operations could be materially adversely affected. You should carefully consider the following factors and other information contained in this Annual Report on Form 10-K before deciding to invest in our common stock. We intend to pursue acquisitions, joint ventures and strategic alliances that involve a number of inherent risks, any of which may cause us not to realize anticipated benefits. We evaluate acquisition opportunities that have the potential to support and strengthen our business. We can give no assurances that any opportunities will arise or, if they do, that they will be consummated or that financing will be available. In addition, acquisitions involve inherent risks that the acquired business will not perform in accordance with our expectations. We may not be able to achieve the synergies and other benefits we expect from the integration as successfully or rapidly as projected, if at all. Our failure to integrate newly-acquired oper- ations could prevent us from realizing our expected rate of return on an acquired business and could have a mate- rial or adverse effect on our results of operations and financial condition. Prolonged unfavorable economic and market conditions could adversely affect our business. We could be adversely impacted by prolonged negative changes in economic conditions affecting either our suppliers or customers as well as the capital markets. Negative changes in government spending may result in delayed or permanent deferrals of existing or potential projects. No assurances can be given that we will be able to successfully mitigate various prolonged uncertainties including materials cost variability, delayed or reduced customer payments and access to available capital resources outside of operations. Our ability to maintain or improve our profitability could be adversely impacted by cost pressures including fluctuations in interest rates and foreign currency exchange rates. Our profitability is dependent upon the efficient use of our resources. Rising inflation, labor costs, labor disruptions and other increases in costs in the geographies where we operate could have a significant adverse impact on our profitability and results of operations. The majority of our products and services are sold in the United States, Canada and the United Kingdom. Fluctuations in the relative values of the United States dollar, Canadian dollar and British pound will require adjustments in reported earnings and operations to reflect exchange rate translation in our Canadian and United Kingdom sales and operations. If the United States dollar strengthens in value as compared to the value of the Canadian dollar or British pound, our reported earnings in dollars from sales in those currencies will be unfavorable. Conversely, a favorable result will be reported if the United States dollar weakens in value as com- pared to the value of the Canadian dollar or British pound. Our business operates in highly competitive industries and a failure to react to changing market conditions could adversely impact our business. We face strong competition in each of the markets in which we participate. A slow response to competitor pricing actions and new competitor entries into our product lines could negatively impact our overall pricing. Efforts to improve pricing could negatively impact our sales volume in all product categories. We may be required to invest more heavily to maintain and expand our product offerings. There can be no assurance that new product offerings will be widely accepted in the markets we serve. Significant negative developments in any of these areas could adversely affect our financial results and condition. 9 6515_Fin.pdf 9 If we are unable to protect our intellectual property and prevent its improper use by third parties, our ability to compete may be harmed. We own a number of patents and trademarks under the intellectual property laws of the United States, Canada, the United Kingdom and other countries where product sales are possible. However, we have not per- fected patent and trademark protection of our proprietary intellectual property for all products in all countries. The decision not to obtain patent and trademark protection in other countries may result in other companies copying and marketing products that are based upon our proprietary intellectual property. This could impede growth into new markets where we do not have such protections and result in a greater supply of similar products in such markets, which in turn could result in a loss of pricing power and reduced revenue. We are dependent upon key customers. We could be adversely affected by changes in the business or financial condition of a customer or custom- ers. A significant decrease in capital spending by our railroad customers could negatively impact our product revenue. Our CXT concrete rail products division and ARP division are dependent on the Union Pacific Railroad (UPRR) for a significant portion of their business. No assurances can be given that a significant downturn in the business or financial condition of a customer, or customers, would not impact our results of operations and/or financial condition. An adverse outcome in any pending or future litigation or pending or future warranty claim against the Company or its subsidiaries or our determination that a customer has a substantial product warranty claim could negatively impact our financial results and/or our financial condition. From time to time, we are party to various legal proceedings. In addition, from time to time our customers assert claims against us relating to the warranties which apply to products we sell. There is the potential that a result materially adverse to us or our subsidiaries in pending or future legal proceedings or pending or future product warranty claims could materially exceed any accruals we have established and adversely affect our financial results and/or financial condition. With respect to product warranty claims submitted by the UPRR, the UPRR asserted in November 2013 that we were in material breach of our 2012 amended supply agreement with the UPRR due to claimed failures to provide warranty ties to replace alleged defective concrete ties. See “Executive Level Overview” for additional information regarding the UPRR’s warranty claims. No assurances can be given that our current estimate of the number of defective concrete ties that need to be replaced will not increase and result in our having to take additional charges, or that UPRR will not terminate the 2012 amended supply agreement and seek damages, either of which could have a material adverse effect on our financial state- ments, results of operations, liquidity and capital resources. A portion of our sales are derived from our international operations, which exposes us to certain risks inherent in doing business on an international level. Doing business outside the United States subjects the Company to various risks, including changing econom- ic, climate and political conditions, work stoppages, exchange controls, currency fluctuations, armed conflicts and unexpected changes in United States and foreign laws relating to tariffs, trade restrictions, transportation regulations, foreign investments and taxation. Increasing sales to foreign countries exposes the Company to increased risk of loss from foreign currency fluctuations and exchange controls as well as longer accounts receivable payment cycles. We have little control over most of these risks and may be unable to anticipate changes in international economic and political conditions and, therefore, unable to alter its business practices in time to avoid the adverse effect of any of these possible changes. Violations of foreign governmental regulations, including the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws could result in fines, penalties and criminal sanctions against the Company, its officers or both and could adversely affect our business. Our foreign operations are subject to governmental regulations in the countries in which we operate as well as U.S. laws. These include regulations relating to currency conversion, repatriation of earnings, taxation of our earnings and the earnings of our personnel, and the increasing requirement in some countries to make greater use 10 6515_Fin.pdf 10 of local employees and suppliers, including, in some jurisdictions, mandates that provide for greater local partic- ipation in the ownership and control of certain local business assets. The U.S. Foreign Corrupt Practices Act and similar other worldwide anti-corruption laws, such as the U.K. Bribery Act, prohibit improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Although we have established an internal control structure, corporate policies, compliance and training processes to reduce the risk of violation, we cannot ensure that these procedures will protect us from violations of such policies by our employees or agents. Failure to comply with applicable laws or regulations could subject us to fines and penalties and suspension or debarment from contracting. Events of non-compliance could harm our reputation, reduce our revenues and profits and subject us to criminal and civil enforcement actions. Violations of such laws or allegations of violation could disrupt our business and result in material adverse results to our operating results or future profitability. Certain divisions of our business depend on a small number of suppliers. The loss of any such supplier could have a material adverse effect on our business, financial condition and result of operations. In our rail and piling distributed products businesses, we rely on a limited number of suppliers for key prod- ucts that we sell to our customers. No assurances can be given that a significant downturn in the business of one or more of these suppliers, a disruption in their manufacturing operations, an unwillingness to continue to sell to us or a disruption in the availability of existing and new piling and rail products would not adversely impact our financial results. Fluctuations in the price, quality and availability of the primary raw materials used in our business could have a material adverse effect on our operations and profitability. Most of our businesses utilize steel as a significant product component. The steel industry is cyclical and prices and availability are subject to these cycles as well as to international market forces. We also use significant amounts of cement and aggregate in our concrete railroad tie and our precast concrete building businesses. No assurances can be given that our financial results would not be adversely affected if prices or availability of these materials were to change in a significantly unfavorable manner. Our joint venture may require us to make future capital commitments that may be burdensome or have a material adverse effect on our operations and profitability. Our joint venture manufactures, markets and sells various precision couplings and other products for the energy, utility and construction markets. Under the JV agreement, we were required to make certain capital con- tributions. No assurances can be given that additional capital contributions will not be required or that the JV will perform in accordance with our expectations. Labor disputes may have a material adverse effect on our operations and profitability. Four of our manufacturing facilities are staffed by employees represented by labor unions. Approximately 160 employees employed at these facilities are currently working under three separate collective bargaining agreements. In October 2010, we negotiated the renewal of the collective bargaining agreement with our Bedford, PA workforce represented by the Shopman’s Local Union Number 527. This agreement, covering approximately 50 employees, expires in March 2014 and will be re-negotiated. In September 2011, we negotiated the renewal of the collective bargaining agreement with our Spokane, WA workforce represented by the United Steelworkers Local Number 338. This agreement, covering approx- imately 80 employees, expires in September 2014 and will be re-negotiated later this year. The bargaining unit in our St. Jean, Quebec, Canada workforce is represented by the Canadian Steel Work- ers Union Local Number 9443. This agreement, covering approximately 30 employees, was finalized in November 2013. A five year agreement was ratified that will expire in August 2018. These collective bargaining agreements forbid the respective labor organizations from endorsing any work stoppage during the life of the agreements. 11 6515_Fin.pdf 11 Our success is highly dependent on the continued service and availability of qualified personnel. Much of our future success depends on the continued availability and service of key personnel, including our Chief Executive Officer, the executive team and other highly skilled employees. Changes in demographics, training requirements and the availability of qualified personnel could negatively affect our ability to compete and lead to a reduction in our profitability. Future climate change regulation could result in increased operating costs, affecting the demand for our products or the ability of our critical suppliers to meet our needs. A number of governments or governmental bodies have introduced or are contemplating legislative and regulatory changes in response to the potential impacts of climate change, including pending U.S. legislation that, if enacted, would limit and reduce greenhouse gas emissions through a “cap and trade” system of allow- ances and credits, among other things. In addition, the U.S. Environmental Protection Agency has for the first time required large emitters of greenhouse gases to collect and report data with respect to their greenhouse gas emissions. The potential impact, both positive and negative, of future climate change legislation, regulation and international treaties and accords is uncertain, given that these regulatory mechanisms may be either voluntary or legislated and may impact our operations directly or indirectly through our suppliers or customers. Our future performance and market value could cause write-downs of intangible assets in future periods. We are required under U.S. generally accepted accounting principles to review intangible assets for impair- ment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may be considered to be a change in circum- stances indicating that the carrying value of our intangible assets may not be recoverable include, but are not limited to, a decline in stock price and market capitalization, a significant decrease in the market value of an asset or a significant decrease in operating or cash flow projections. No assurances can be given that we will not be required to record a significant adverse charge to earnings during the period in which any impairment of its goodwill or intangible assets occurs. We may not foresee or be able to control certain events that could adversely affect our business. Unexpected events including fires or explosions at our facilities, natural disasters, armed conflicts, unplanned outages, equipment failures, failure to meet product specifications, or a disruption in certain of our operations may cause our operating costs to increase or otherwise impact our financial performance. Shifting federal, state, local and foreign regulatory policies impose risks to our operations. We are subject to regulation from federal, state, local and foreign regulatory agencies. We are required to comply with numerous laws and regulations and to obtain numerous authorizations, permits, approvals and certificates from governmental agencies. Compliance with emerging regulatory initiatives, delays, discontinua- tions or reversals of existing regulatory policies in the markets in which we operate could have an adverse effect on our business, results of operations, cash flows and financial condition. A substantial portion of our operations are heavily dependent on governmental funding of infrastructure projects. Many of these projects have “Buy America” or “Buy American” provisions. Significant changes in the level of government funding of these projects could have a favorable or unfavorable impact on our operating results. Additionally, government actions concerning “Buy America” provisions, taxation, tariffs, the environ- ment, or other matters could impact our operating results. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 12 6515_Fin.pdf 12 ITEM 2. PROPERTIES The location and general description of the principal properties which are owned or leased by L.B. Foster Company, together with the segment of the Company’s business using such properties, are set forth in the following table: Location Function Bedford, PA . . . . . . . . . . . . . . . . . . . . Bridge component fabricating plant. Acres Business Segment Lease Expiration 10 Construction Owned Birmingham, AL . . . . . . . . . . . . . . . . Pipe coating facility. Burnaby, British Columbia, Canada . . . . . . . . . . . . . . . . . . . . . . Friction management products plant. Columbia City, IN . . . . . . . . . . . . . . . Rail processing facility and yard storage. Hillsboro, TX . . . . . . . . . . . . . . . . . . . Precast concrete facility. Leicester, United Kingdom . . . . . . . . Material handling manufacturing plant. Magnolia, TX . . . . . . . . . . . . . . . . . . Threading facility and joint venture manufacturing facility. Niles, OH . . . . . . . . . . . . . . . . . . . . . . Rail fabrication. Yard storage. Petersburg, VA . . . . . . . . . . . . . . . . . Piling storage facility. Pueblo, CO . . . . . . . . . . . . . . . . . . . . Rail joint manufacturing. Saint-Jean-sur-Richelieu, Quebec, Rail anchors and track spikes manufacturing plant. Canada . . . . . . . . . . . . . . . . . . . . . . 32 N/A Tubular Rail 22 Rail 9 N/A Construction Rail 35 35 35 9 17 Tubular Rail Construction Rail Rail Sheffield, United Kingdom . . . . . . . . Track component and friction management products facility. N/A Rail Spokane, WA . . . . . . . . . . . . . . . . . . . CXT concrete tie plant. Spokane, WA . . . . . . . . . . . . . . . . . . . Precast concrete facility. Tucson, AZ . . . . . . . . . . . . . . . . . . . . CXT concrete tie plant. Willis, TX . . . . . . . . . . . . . . . . . . . . . Pipe coating facility. 13 5 19 16 Rail Construction Rail Tubular 2017 2021 Owned Owned 2014* Owned Owned Owned Owned Owned 2019 2015 2015 2017 Owned Included in the table above are certain facilities leased by the Company for which there is no acreage included in the lease. For these properties a “N/A” has been included in the “Acres” column. * Leicester, United Kingdom lease expected to be renewed for an additional 5 year period. Including the properties listed above, the Company has a total of 24 sales offices, including its headquarters in Pittsburgh, PA and 20 warehouses, plant and yard facilities located throughout the United States, Canada and the United Kingdom. The Company’s facilities are in good condition and suitable for the Company’s business as currently conducted and as currently planned to be conducted. ITEM 3. LEGAL PROCEEDINGS The Company is not subject to any material environmental or legal proceedings. As of December 31, 2013 and 2012, the Company maintained environmental and litigation reserves approximating $2,190 and $2,141, respectively. Additional information regarding the Company’s other commitments and contingencies is set forth in Part II, Item 8, Note 20 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 3. ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the Company. 13 6515_Fin.pdf 13 EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning the executive officers of the Company is set forth below. Name Robert P. Bauer . . . . . . . . . . . . . . . . . . . . . . . . . . Merry L. Brumbaugh . . . . . . . . . . . . . . . . . . . . . . Samuel K. Fisher . . . . . . . . . . . . . . . . . . . . . . . . . Donald L. Foster . . . . . . . . . . . . . . . . . . . . . . . . . Patrick J. Guinee . . . . . . . . . . . . . . . . . . . . . . . . . John F. Kasel . . . . . . . . . . . . . . . . . . . . . . . . . . . . Brian H. Kelly . . . . . . . . . . . . . . . . . . . . . . . . . . . Gregory W. Lippard . . . . . . . . . . . . . . . . . . . . . . Konstantinos Papazoglou . . . . . . . . . . . . . . . . . . David J. Russo . . . . . . . . . . . . . . . . . . . . . . . . . . . David R. Sauder . . . . . . . . . . . . . . . . . . . . . . . . . Christopher T. Scanlon . . . . . . . . . . . . . . . . . . . . Age 55 56 61 58 44 48 54 45 61 55 43 38 Position President and Chief Executive Officer Vice President — Tubular Products Vice President — Rail Distribution Senior Vice President — Construction Products Vice President, General Counsel and Secretary Senior Vice President — Rail Products Vice President — Human Resources and Administration Vice President — Rail Sales and Products Vice President — Rail Technologies Senior Vice President, Chief Financial Officer and Treasurer Vice President — Global Business Development Controller and Chief Accounting Officer Mr. Bauer was elected President and Chief Executive Officer upon joining the Company in February 2012. Prior to joining the Company, Mr. Bauer previously served from June 2011 as President of the Refrigeration Division of the Climate Technologies business of Emerson Electric Co., a diversified global manufacturing and technology company. From January 2002 until May 2011, Mr. Bauer served as President of Emerson Network Power’s Liebert Division. Ms. Brumbaugh was elected Vice President — Tubular Products in November 2004, having previously served as General Manager, Coated Products since 1996. Ms. Brumbaugh has served in various capacities with the Company since her initial employment in 1980. Mr. Fisher’s title was changed to Vice President — Rail Distribution effective January 2011, as part of organizational changes within the Rail Products segment, having previously served as Senior Vice President —Rail since October 2002. From June 2000 until October 2002, Mr. Fisher served as Senior Vice President —Product Management. From October 1997 until June 2000, Mr. Fisher served as Vice President — Rail Procurement. Prior to October 1997, Mr. Fisher served in various other capacities with the Company since his employment in 1977. Mr. Foster was elected Senior Vice President — Construction Products in February 2005, after having served as Vice President — Piling Products since November 2004 and General Manager of Piling since September 2004. Prior to joining the Company, Mr. Foster was President of Metalsbridge. He served U.S. Steel Corporation as an officer from 1999 to 2003. During that time, Mr. Foster functioned as Vice President Interna- tional, President of UEC Technologies and President, United States Steel International, Inc. Mr. Guinee was elected Vice President, General Counsel and Secretary in February 2014. Prior to joining the Company, Mr. Guinee served as Vice President — Securities & Corporate and Assistant Secretary at Educa- tion Management Corporation from July 2013 to February 2014, and was employed by H. J. Heinz Company from November 1997 to June 2013, last serving as Vice President - Corporate Governance & Securities and Assistant Secretary. He began his career as an attorney in private practice in Pittsburgh, Pennsylvania in 1994. Mr. Kasel was elected Senior Vice President — Rail Products in August 2012 having previously served as Senior Vice President — Operations and Manufacturing since May 2005 and Vice President — Operations and Manufacturing since April 2003. Mr. Kasel served as Vice President of Operations for Mammoth, Inc., a Nortek company from 2000 to 2003. His career also included General Manager of Robertshaw Controls and Operations Manager of Shizuki America prior to 2000. 14 6515_Fin.pdf 14 Mr. Kelly was elected Vice President — Human Resources and Administration in August 2012 having pre- viously served as Vice President, Human Resources since October 2006 after joining the organization in September 2006. Prior to joining the Company, Mr. Kelly headed Human Resources for 84 Lumber Company from June 2004. Previously, he served as a Director of Human Resources for American Greetings Corp. from June 1994 to June 2004, and he began his career with Nabisco in 1984, serving in progressively responsible generalist human resources positions in both plants and headquarters. Mr. Lippard was elected Vice President — Rail Sales and Products in August 2012 having previously served as Vice President – Rail Product Sales since June 2000. Prior to re-joining the Company in 2000, Mr. Lippard served as Vice President – International Trading for Tube City, Inc. from June 1998. Mr. Lippard served in various other capacities with the Company since his initial employment in 1991. Mr. Papazoglou was elected Vice President — Rail Technologies in August 2012 having previously served as Vice President — Friction Management since March 2011. Prior to joining the Company in December 2010, Mr. Papazoglou served as Executive Vice President and Chief Operating Officer for Portec Rail Products, Inc. from October 2006. Mr. Papazoglou served in various other capacities with Portec since his initial employment in 1978. Mr. Russo is the Senior Vice President, Chief Financial Officer and Treasurer having resigned as Chief Accounting Officer in August 2012 upon the appointment of Mr. Scanlon as Controller and Chief Accounting Officer in August 2012. Mr. Russo was previously elected Senior Vice President, Chief Financial and Account- ing Officer and Treasurer in March 2010 having served previously as Senior Vice President, Chief Financial Officer and Treasurer since December 2002. From July 2002 to December 2002, Mr. Russo served as Vice President and Chief Financial Officer. Mr. Russo was Corporate Controller of WESCO International Inc. from 1999 until joining the Company in 2002. Prior to 1999, Mr. Russo served as Corporate Controller of Life Fitness Inc. Mr. Sauder was elected Vice President — Global Business Development upon joining the Company in November 2008. Prior to joining the Company, Mr. Sauder was Director, Global Business Development at Joy Mining Machinery where he was responsible for leading mergers and acquisitions and new business initiatives from December 2007. Prior to that, he was Manager, Business Development for Eaton Corporation from April 2006 to December 2007. He previously held various positions of increasing responsibility at Duquesne Light Company from August 1998 to April 2006 and PNC Bank from February 1993 to August 1998. Mr. Scanlon was elected Controller and Chief Accounting Officer in August 2012 after joining the Com- pany in July 2012. Prior to joining the Company, Mr. Scanlon served as the Online Higher Education Division Controller of Education Management Corporation from November 2009 to July 2012. Mr. Scanlon served as Manager of Central Accounting Services for Bayer Corporation, from May 2007 until November 2009. From April 2005 until May 2007, Mr. Scanlon served as a financial reporting analyst for Respironics, Inc. Officers are elected annually at the organizational meeting of the Board of Directors following the annual meeting of stockholders. Code of Ethics L.B. Foster Company has a legal and ethical conduct policy applicable to all directors and employees, includ- ing its Chief Executive Officer, Chief Financial Officer and Controller. This policy is posted on the Company’s website, www.lbfoster.com. The Company intends to satisfy the disclosure requirement regarding certain amendments to, or waivers from, provisions of its policy by posting such information on the Company’s website. In addition, our ethics hotline can also be used by employees and others for the anonymous communication of concerns about financial controls or reporting matters. 15 6515_Fin.pdf 15 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Stock Market Information The Company had 398 common shareholders of record on February 18, 2014. Common stock prices are quoted daily through the NASDAQ Global Select Market quotation service (Symbol: FSTR). The following table sets forth the range of high and low sales prices per share of our common stock for the periods indicated: Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . First Second . . . . . . . . . . . . . . . . . . . . . . . . Third . . . . . . . . . . . . . . . . . . . . . . . . . . Fourth . . . . . . . . . . . . . . . . . . . . . . . . . High $45.43 46.45 47.91 50.00 2013 Low $37.97 39.63 39.14 42.71 Dividends High $0.030 0.030 0.030 0.030 $33.98 29.49 35.52 43.85 2012 Low $27.18 25.05 27.27 31.48 Dividends $0.025 0.025 0.025 0.025 Dividends The Company’s credit facility permits it to pay dividends and distributions and make redemptions with respect to its stock providing no event of default or potential default (as defined in the facility agreement) has occurred prior to or after giving effect to the dividend, distribution, or redemption. Dividends, distributions, and redemptions are capped at $15,000 per year when funds are drawn on the facility. If no drawings on the facility exist, dividends, distributions, and redemptions in excess of $15,000 per year are subjected to a limitation of $75,000 in the aggregate over the life of the facility. The $75,000 aggregate limitation also includes certain loans, strategic investments, and acquisitions. In February 2013, the Company’s Board of Directors authorized an increase to the regular quarterly divi- dend to $0.03 beginning in 2013. 16 6515_Fin.pdf 16 Performance Graph The Company’s peer group is composed of Greenbrier Cos., Inc., AM Castle & Co., CIRCOR International, Inc., DXP Enterprises, Inc., Olympic Steel Inc., Alamo Group, Inc., Haynes International Inc., American Railcar Industries, Inc., Sterling Construction Co. Inc., Lawson Products Inc., RBC Bearings Inc., NN Inc., Houston Wire & Cable Company, Insteel Industries Inc., Skyline Corp. and Synalloy Corp. The following tables compare total shareholder returns for the Company over the last five years to the NASDAQ Composite Index and the peer group assuming a $100 investment made on December 31, 2008. Each of the four measures of cumulative total return assumes reinvestment of dividends. The stock performance shown on the graph below is not necessarily indicative of future price performance. $300 $250 $200 $150 $100 $50 $0 12/08 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among L.B. Foster Company, the NASDAQ Composite Index, and a Peer Group 12/09 12/10 12/11 12/12 12/13 L.B. Foster Company NASDAQ Composite Peer Group * $100 invested on 12/31/08 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. L.B. Foster Company NASDAQ Composite Peer Group 12/08 12/09 12/10 12/11 12/12 12/13 $100.00 $ 95.30 $130.88 $ 90.74 $139.78 $152.58 100.00 144.88 170.58 171.30 199.99 283.39 100.00 115.89 166.98 156.56 174.77 282.87 17 6515_Fin.pdf 17 Securities Authorized for Issuance Under Equity Compensation Plans The following table sets forth information as of December 31, 2013 with respect to compensation plans under which equity securities of the Company are authorized for issuance. Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities to be issued upon exercise of outstanding options, warrants or rights) 18,750 $10.64 557,655 Plan Category Equity compensation plans approved by shareholders . . . . . . . . . . . . Equity compensation plans not approved by shareholders . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . 18,750 — — $10.64 — 557,655 Under the 2006 Omnibus Incentive Plan, non-employee directors are automatically awarded up to 3,500 shares of the Company’s Common stock as determined by the Board of Directors at each annual shareholder meeting at which such non-employee director is elected or re-elected, commencing May 24, 2006. Through December 31, 2013, there were 100,460 fully vested shares issued under the 2006 Omnibus Incentive Plan to non-employee directors. Additionally, pursuant to the 2006 Omnibus Incentive Plan, during 2012 the Company issued 34,000 fully-vested shares in lieu of a cash payment earned under separate three year incentive plans. The Company will withhold shares of restricted stock when issued to pay for withholding taxes. During 2013, 2012 and 2011, the Company withheld 16,166, 23,562 and 5,813 shares, respectively, for this purpose. The value of the shares withheld were $708, $669 and $112 in 2013, 2012 and 2011, respectively. Issuer Purchases of Equity Securities The Company’s purchases of equity securities for the three-month period ended December 31, 2013 were as follows: Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) October 1, 2013 — October 31, 2013 . . . . . . . November 1, 2013 — November 30, 2013 . . . December 1, 2013 — December 31, 2013 . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — — $— — — $— — — — — $18,520 18,520 18,520 $18,520 (1) On May 23, 2011, the Board of Directors authorized the repurchase of up to $25,000 of the Company’s common shares until December 31, 2013. The Company did not purchase any of its equity securities, under this authorization during 2013. As of December 31, 2013, approximately $18,520 remained of our $25,000 share repurchase program that was announced in May 2011 and expired December 31, 2013. (2) On December 4, 2013, the Board of Directors authorized the repurchase of up to $15,000 of the Company’s common shares until December 31, 2016. This authorization is effective January 1, 2014. 18 6515_Fin.pdf 18 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data has been derived from our audited financial statements. The financial data presented below should be read in conjunction with the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements of the Company and the Notes thereto included elsewhere in this Annual Report on Form 10-K. Income Statement Data 2013(1) Year Ended December 31, 2011(3) 2012(2) 2010(4) 2009(5) Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $597,963 $588,541 $575,337 $467,058 $392,071 Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,571 $ 22,657 $ 30,812 $ 31,217 $ 22,853 Income from continuing operations,net of tax . . . . . . . . $ 29,276 $ 14,764 $ 22,067 $ 20,006 $ 14,799 928 Income from discontinued operations, net of tax . . . . . . 1,424 486 828 14 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,290 $ 16,188 $ 22,895 $ 20,492 $ 15,727 Basic earnings per common share: Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . $ Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . 2.88 $ 0.00 1.46 $ 0.14 2.16 $ 0.08 1.96 $ 0.05 Basic earnings per common share . . . . . . . . . . . . . . . . . $ 2.88 $ 1.60 $ 2.24 $ 2.01 $ Diluted earnings per common share: Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . $ Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . 2.85 $ 0.00 1.44 $ 0.14 2.14 $ 0.08 1.93 $ 0.05 Diluted earnings per common share . . . . . . . . . . . . . . . . $ 2.85 $ 1.58 $ 2.22 $ 1.98 $ 1.46 0.09 1.55 1.44 0.09 1.53 Dividends paid per common share . . . . . . . . . . . . . . . . . $ 0.12 $ 0.10 $ 0.10 $ — $ — Operating profit represents the gross profit less selling and administrative expenses and amortization expense. (1) 2013 includes the results of L.B. Foster Ball Winch, Inc., which was formed for the purpose of acquiring assets of Ball Winch, LLC, beginning on November 7, 2013. (2) 2012 includes a $22,000 warranty charge and a pre-tax gain of $3,193, from the dispositions of SSD and Precise, in income from discontinued operations, net of tax. More information about the warranty charge can be found in Part II Item 8, Note 20 to the consolidated financial statements included herein, which is incorporated by reference into this Part II Item 6. More information regarding the dispositions of SSD and Precise can be found in Part II, Item 8, Note 4 to the consolidated financial statements included herein, which is incorporated by reference into this Part II, Item 6. (3) 2011 includes a pre-tax gain of $577 associated with the early termination of the operating lease associated with the Company’s sale-leaseback transaction for our threaded products facility, formerly located in Hous- ton, TX. (4) 2010 includes the results of Rail Technologies, beginning on December 15, 2010. (5) 2009 includes a pre-tax gain of $1,194 associated with the sale of available-for-sale marketable securities. Balance Sheet Data 2013 2012 December 31, 2011 2010 2009 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . $413,654 171,885 25 316,397 $406,122 184,423 27 287,575 $379,894 155,261 51 269,815 $378,402 142,303 2,399 255,747 $331,594 210,332 13,197 232,592 19 6515_Fin.pdf 19 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands, except share data unless otherwise noted) Executive Level Overview 2013 Developments On November 7, 2013, the Company acquired substantially all of the assets of Ball Winch, LLC located in Willis, TX through its wholly-owned subsidiary, L.B. Foster Ball Winch, Inc. (Ball Winch). Ball Winch per- forms specialty pipe coatings which complements our existing Tubular Products segment coating business and enhances our market presence in the southern United States. L.B. Foster Ball Winch, Inc’s rapid project response and leadership team will expand the spectrum of our capabilities and will be an integral part in enabling us to strengthen our position in the oil and gas market. In addition to the recent acquisition, 2013 included many developments that will provide efficiencies and opportunities to expand our product lines. During 2013, we: ‰ Experienced our best safety performance on record reaching 1.4 million man hours without a lost time injury. ‰ Began delivery of our largest contract for steel grid bridge decking with the rehabilitation of the New York State Bridge Authority’s Newburgh-Beacon span. ‰ Responded to increased demand within our Construction Products segment as market fundamentals and economic conditions strengthened. ‰ Began centralizing our friction management operations in an effort to increase our product offerings while reducing our overhead costs. ‰ Utilized the changing market conditions impacting the Tubular segment during the second half of the year by commencing facility upgrades, which will increase our production capacity at our Birmingham, AL facility. ‰ Generated $18,500 in sales related to our $60,000 Honolulu, HI Transit System project. ‰ Entered into the corrugated bridge business which will quadruple the size of our served bridge market ‰ Invested in new equipment to develop and expand upon Ball Winch’s field service coating business. Union Pacific Railroad (UPRR) Product Warranty Claim On July 12, 2011, the UPRR notified (UPRR Notice) the Company and its subsidiary, CXT Incorporated (CXT), of a warranty claim under CXT’s 2005 supply contract relating to the sale of pre-stressed concrete rail- road ties to the UPRR. The UPRR asserted that a significant percentage of concrete ties manufactured in 2006 through 2011 at CXT’s Grand Island, NE facility failed to meet contract specifications, had workmanship defects and were cracking and failing prematurely. Approximately 1.6 million ties were sold from Grand Island, NE to the UPRR during the period the UPRR had claimed nonconformance. The 2005 contract called for each concrete tie which failed to conform to the specifications or had a material defect in workmanship to be replaced with 1.5 new concrete ties, provided, that UPRR within five years of the sale of a concrete tie, notified CXT of such fail- ure to conform or such defect in workmanship. The UPRR Notice did not specify how many ties manufactured during this period were defective nor the exact nature of the alleged workmanship defect. Additionally, UPRR notified the Company that a customer of the UPRR asserted that a representative sample of ties manufactured by the Company’s Grand Island, NE facility failed a test contained in the contract specification. At the customer’s request, UPRR removed approximately 115,000 concrete ties, which were a subset of the ties subject to the UPRR Notice. Beginning in July 2011 through the second quarter of 2012, the Company worked with material scientists and pre-stressed concrete experts to test a representative sample of Grand Island, NE concrete ties and assess 20 6515_Fin.pdf 20 warranty claims for certain concrete ties made in its Grand Island, NE facility between 1998 and 2011. The Company discontinued manufacturing operations in Grand Island, NE in early 2011. During 2012, the Company completed sufficient testing and analysis to further understand this matter. Addi- tionally, in a combined effort with UPRR, the Company analyzed Grand Island, NE concrete ties in track. Based upon these findings, the Company believed it discovered conditions, which largely related to the 2006 to 2007 manufacturing period, that can shorten the life of the concrete ties produced during this period. The Company also agreed on a process with the UPRR for identifying, prioritizing and replacing ties that meet the criteria for replacement. This process will be applied to the ties the Company shipped to the UPRR from its Grand Island, NE facility from 1998 to 2011. During most of this period the Company’s warranty policy for UPRR carried a 5 year warranty with a 1.5:1 replacement ratio for any defective ties. In order to accommodate the UPRR and other customer concerns, the Company reverted to a previously used warranty policy. This will result in all concrete ties with a 5 year warranty and a 1.5:1 replacement ratio, now having a 15 year warranty and a 1:1 replacement ratio. This change provided an additional 10 years of warranty protection. The 1:1 replacement ratio will furnish one tie for each tie replaced under the Company’s claims process. During the fourth quarter of 2012, the Com- pany reached agreement (2012 amended supply agreement) with the UPRR resulting in the Company and the UPRR working together to identify and replace defective ties. The process of planning and documenting will be done by both the Company and the UPRR to ensure this is done in an accurate and timely manner. In connection with this agreement, the Company and the UPRR agreed on a cash payment of $12,000 to the UPRR as compen- sation for concrete ties already replaced by the UPRR during the investigation period, including approximately 115,000 concrete ties mentioned previously. During 2012, as a result of testing the Company conducted on concrete ties manufactured at its former Grand Island, NE facility and of the related developments of the UPRR and other customer matters, the Company recorded pre-tax warranty charges of $22,000 in “Cost of Goods Sold” within its Rail Products segment based on the Company’s estimate of the number of defective concrete ties that will ultimately require replacement during the applicable warranty periods. Throughout 2013, at the UPRR’s request and under the terms of the 2012 amended supply agreement, the Company provided warranty replacement concrete ties for use across certain UPRR subdivisions. The Company attempted to reconcile the quantity of warranty claims for ties replaced and obtain supporting detail for the ties removed. The Company believes that the UPRR did not replace concrete ties in accordance with the amended agreement and has not furnished adequate documentation throughout the replacement process in these sub- divisions to support its full warranty claim. Based on the information received by the Company to date, the Company believes that a significant number of ties which the UPRR replaced in these subdivisions did not meet the criteria to be covered as warranty replacement ties under the 2012 amended supply agreement. To date, the two parties have been unable to properly reconcile the number of defective ties which have been replaced in these subdivisions. In late November 2013, the Company received notice from the UPRR asserting a material breach of the 2012 amended supply agreement. The UPRR’s notice asserted that the failure to honor its claims for warranty ties in these subdivisions was a material breach. Following receipt of this notice, the Company provided information to the UPRR to refute the UPRR’s claim of breach and included the reconciliation of warranty claims supported by substantial findings from the Company’s track observation team, all within the 90 day cure period. The Company also proposed further discussions to reach agreement on reconciliation for 2013 replace- ment activities and future replacement activities and a recommended process that will ensure future replacement activities are done with appropriate documentation and per the terms of our agreement. During the first quarter of 2014, the Company further responded within the 90 day cure period to the UPRR’s claim and presented a reconciliation for the subdivisions at issue. This proposed reconciliation is based on empirical data and visual observation from Company employees that were present during the replacement process for a substantial majority of the concrete ties replaced. The Company has spent considerable time doc- umenting facts related to concrete tie condition and track condition to assess whether the ties replaced met the criteria to be eligible for replacement under the terms of the 2012 amended supply agreement. During this same time period, the UPRR purchased several concrete ties for replacement of existing Grand Island ties that the UPRR deemed as their responsibility. 21 6515_Fin.pdf 21 The accrued concrete tie warranty reserve of $6,462 as of December 31, 2013 is the best estimate of the expected value of defective ties that will be replaced as a result of our observation and analysis of ties in track. While the Company believes this is a reasonable estimate of these potential warranty claims, these estimates could change due to the receipt of new information and future events. The disagreement related to the 2013 war- ranty replacement activity includes approximately 170,000 ties where we provided detailed documentation sup- porting our position with reason codes that detail why these ties are not eligible for a warranty claim. In the event the UPRR continues to replace ties and assert warranty claims in future years in the same manner as 2013, we are likely to have a disagreement in those future years relating to the number of ties eligible for warranty claim. The Company has denied it is in material breach of the 2012 amended supply agreement and intends to continue dis- cussions with the UPRR in an effort to resolve previously replaced ties as well as the future warranty tie replacement process. This dispute could jeopardize our 2012 amended supply agreement. For the years ended December 31, 2013, 2012 and 2011, sales to the UPRR from our Tucson, AZ facility were approximately $12,664, $25,441 and $22,395, respectively. Additionally, as of December 31, 2013 we had long-lived assets with a net book value of approximately $1,116 associated with the Tucson, AZ facility. There can be no assurance at this point that future potential costs pertaining to the UPRR’s claim or other potential future claims will not have a material impact on the Company’s results of operations and financial condition. 22 6515_Fin.pdf 22 Quarterly Results of Continuing Operations Three Months Ended December 31, 2013 2012 Percent of Total Net Sales Three Months Ended December 31, 2012 2013 Percent Increase/(Decrease) 2013 vs. 2012 Net Sales: Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . Construction Products . . . . . . . . . . . . . . . . . . . Tubular Products . . . . . . . . . . . . . . . . . . . . . . . $ 85,824 61,923 8,711 $ 91,329 37,080 12,315 54.8% 64.9 % 39.6 5.6 26.3 8.8 Total net sales . . . . . . . . . . . . . . . . . . . . . . . . $156,458 $140,724 100.0% 100.0% (6.0)% 67.0 (29.3) 11.2% Three Months Ended December 31, 2013 2012 Gross Profit Percentage Three Months Ended December 31, 2012 2013 Percent Increase/(Decrease) 2013 vs. 2012 Gross Profit: Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . Construction Products . . . . . . . . . . . . . . . . . . . Tubular Products . . . . . . . . . . . . . . . . . . . . . . . LIFO (expense) income . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,840 9,973 2,218 (262) (158) $ 17,217 5,875 4,054 785 (361) 22.0% 18.9% 16.1 25.5 (0.2) (0.1) 15.8 32.9 0.6 (0.3) Total gross profit . . . . . . . . . . . . . . . . . . . . . $ 30,611 $ 27,570 19.6% 19.6% 9.4% 69.8 (45.3) ** (56.2) 11.0% Three Months Ended December 31, 2013 2012 Percent of Total Net Sales Three Months Ended December 31, 2012 2013 Percent Increase/(Decrease) 2013 vs. 2012 Expenses: Selling and administrative expenses . . . . . . . . . Amortization expense . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . . . Equity in income of nonconsolidated investment . . . . . . . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,628 1,010 109 (165) $ 16,509 865 137 (133) 11.9% 11.7% 0.6 0.1 (0.1) 0.6 0.1 (0.1) (424) (101) (194) (431) (0.3) (0.1) (0.1) (0.3) 12.8% 16.8 (20.4) 24.1 ** (76.6) Total expenses . . . . . . . . . . . . . . . . . . . . . . . $ 19,057 $ 16,753 12.2% 11.9% 13.8% Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . $ 11,554 4,279 $ 10,817 4,174 7.4% 7.7% 2.7 3.0 Income from continuing operations . . . . . . . . . . . $ 7,275 $ 6,643 4.7% 4.7% 6.8% 2.5 9.5% ** Results of calculation are not considered meaningful for presentation purposes. 23 6515_Fin.pdf 23 Fourth Quarter 2013 Compared to Fourth Quarter 2012 — Company Analysis Income from continuing operations for the 2013 fourth quarter was $7,275, or $0.71 per diluted share, compared to income from continuing operations of $6,643, or $0.65 per diluted share, in the prior year quarter. Net sales for the three month period ended December 31, 2013 increased by $15,734, or 11.2%, which was attributable to a 67.0% increase in the Construction Products segment partially offset by 6.0% and 29.3% reduc- tions in the Rail and Tubular Products segments, respectively. The gross profit margin for the 2013 and 2012 periods was 19.6%. Selling and administrative expense increased by $2,119, or 12.8%, in the 2013 fourth quarter were primarily attributable to personnel related costs associated with salaried headcount and travel costs. The effective income tax rate from continuing operations in the fourth quarter of 2013 was 37.0% compared to 38.6% in the prior year quarter. The 2012 income tax rate from continuing operations was negatively impacted by certain discrete items. Results of Continuing Operations — Segment Analysis Rail Products Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $85,824 $91,329 $(5,505) Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,840 $17,217 $ 1,623 Three Months Ended December 31, 2013 2012 (Decrease) / Increase 2013 vs. 2012 Percent (Decrease)/ Increase 2013 vs. 2012 (6.0)% 9.4% Gross Profit Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.0% 18.9% 3.1% 16.4% Fourth Quarter 2013 Compared to Fourth Quarter 2012 The Rail Products sales decline was due principally to reduced sales volumes within our rail distribution business. During the current year quarter, our rail distribution business experienced a decline in sales related to our Honolulu, HI elevated transit system project due to a reduction in volumes compared to the increased deliv- ery requirements in the prior year quarter. Partially offsetting this decrease were increases in our transit and rail technologies divisions over the prior year quarter. Although sales were down for the Rail Products segment, gross profit increased due to an overall favorable product mix and a reduction in overhead costs in the fourth quarter of 2013. Construction Products Three Months Ended December 31, 2013 2012 Increase 2013 vs. 2012 Percent Increase 2013 vs. 2012 Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $61,923 $37,080 $24,843 Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,973 $ 5,875 $ 4,098 Gross Profit Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.1% 15.8% 0.3% 67.0% 69.8% 1.9% Fourth Quarter 2013 Compared to Fourth Quarter 2012 During the fourth quarter of 2013 all Construction Products businesses generated increased sales over the prior year quarter. The most significant growth resulted from the piling products business which benefited from improvements in public sector spending trends and projects related to transportation infrastructure. 24 6515_Fin.pdf 24 The added volume during the current year period as well as operational improvements in our CXT buildings business led to increases in gross profit and led to a 30 basis point improvement in our gross profit percentage over the prior year period. Tubular Products Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,711 $12,315 $(3,604) Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,218 $ 4,054 $(1,836) Three Months Ended December 31, 2013 2012 Decrease 2013 vs. 2012 Percent Decrease 2013 vs. 2012 (29.3)% (45.3)% Gross Profit Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.5% 32.9% (7.4)% (22.5)% Fourth Quarter 2013 Compared to Fourth Quarter 2012 The fourth quarter sales decline in our Tubular Products segment was primarily due to sales volume degrada- tion at our Birmingham, AL coating facility. Consistent with the trends that existed during the third quarter of 2013, the coated products business began the fourth quarter with a reduction in backlog compared to the prior year quarter. This decline was primarily driven by customers delaying their purchasing decisions due to changing market conditions. During the 2013 fourth quarter, the coated products business experienced a significant increase in order input relative to the prior year quarter. These orders improved the backlog as we entered 2014. As a result of the reduction in sales volumes and unfavorable product mix, gross profit eroded by 7.4 per- centage points compared to the prior period quarter. 25 6515_Fin.pdf 25 Year-to-date Results of Continuing Operations Twelve Months Ended December 31, 2012 2013 2011 Percent of Total Net Sales Twelve Months Ended December 31, 2012 2011 2013 Percent Increase/(Decrease) 2013 vs. 2012 2012 vs. 2011 Net Sales: Rail Products . . . . . . . . . . . . . . . . . . $363,667 $370,322 $315,133 227,734 Construction Products . . . . . . . . . . . 32,470 Tubular Products . . . . . . . . . . . . . . . 191,751 42,545 169,253 48,966 60.8% 62.9% 54.8% 32.1 28.8 7.1 8.3 39.6 5.6 (1.8)% 13.3 (13.1) Total net sales . . . . . . . . . . . . . . . . . $597,963 $588,541 $575,337 100.0% 100.0% 100.0% 1.6% 17.5% (25.7) 50.8 2.3% Twelve Months Ended December 31, 2012 2013 2011 Gross Profit Percentage Twelve Months Ended December 31, 2012 2013 Percent Increase/(Decrease) 2013 vs. 2012 2012 vs. 2011 2011 Gross Profit: Rail Products . . . . . . . . . . . . . . . . . . $ 74,986 $ 52,533 $ 57,613 35,372 Construction Products . . . . . . . . . . . 8,850 Tubular Products . . . . . . . . . . . . . . . (2,183) LIFO income (expense) . . . . . . . . . . (1,242) . . . . . . . . . . . . . . . . . . . . . . . . Other 25,080 15,189 1,118 (1,651) 29,224 12,278 37 (586) 20.6% 14.2% 18.3% 15.2 14.8 28.9 31.0 — 0.2 (0.1) (0.3) 15.5 27.3 (0.4) (0.2) Total gross profit . . . . . . . . . . . . . . . $115,939 $ 92,269 $ 98,410 19.4% 15.7% 17.1% Twelve Months Ended December 31, 2012 2013 2011 Percent of Total Net Sales Twelve Months Ended December 31, 2012 2013 2011 42.7% 16.5 (19.2) (96.7) (64.5) 25.7% (8.8)% (29.1) 71.6 ** 32.9 (6.2)% Percent Increase/ (Decrease) 2013 vs. 2012 2012 vs. 2011 Expenses: Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . $ 71,256 $ 66,651 $ 64,807 2,791 622 (321) 2,961 542 (452) 3,112 485 (659) Amortization expense . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . Equity in income of nonconsolidated . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . investment 11.9% 11.3% 11.3% 0.5 0.5 0.1 0.1 (0.1) (0.1) 0.5 0.1 (0.1) 6.9% 5.1 (10.5) 45.8 2.8% 6.1 (12.9) 40.8 18.4 (70.3) 4.1% (1,316) (1,054) (837) (426) (707) (1,434) (0.2) (0.2) (0.1) (0.1) (0.1) (0.2) 57.2 ** Total expenses . . . . . . . . . . . . . . . . . $ 71,824 $ 68,439 $ 65,758 12.0% 11.6% 11.4% 4.9% Income from continuing operations before income taxes . . . . . . . . . . . $ 44,115 $ 23,830 $ 32,652 10,585 Income tax expense . . . . . . . . . . . . . 14,839 9,066 7.4% 4.0% 2.5 1.5 5.7% 1.8 85.1% 63.7 (27.0)% (14.4) Income from continuing operations . . . . . . . . . . . . . . . . . . . $ 29,276 $ 14,764 $ 22,067 4.9% 2.5% 3.8% 98.3% (33.1)% ** Results of calculation are not considered meaningful for presentation purposes. The Year 2013 Compared to the Year 2012 — Company Analysis Income from continuing operations for 2013 was $29,276, or $2.85 per diluted share, which compares to income from continuing operations for 2012 of $14,764, or $1.44 per diluted share. Included in our 2012 results were charges related to concrete ties manufactured at our Grand Island, NE facility of $22,000. Net sales for the year increased by $9,422, or 1.6%, which was attributable to a 13.3% improvement in Construction Product segment sales, partially offset by 1.8% and 13.1% reductions in Rail Products and Tubular Products sales, respectively. 26 6515_Fin.pdf 26 The gross profit margin for 2013 was 19.4% compared to 15.7% in the prior year period. Excluding the prior year warranty charge, the Company would have generated a gross profit margin of 19.4%. Selling and administrative costs increased $4,605, or 6.9%, over the 2012 period primarily due to increases in personnel related costs associated with salaried headcount and travel partially offset by a reduction in concrete tie testing costs. Other income for the twelve months ended 2013 increased to $1,054 compared to $426 during 2012. The increase related to fluctuations in realized foreign currency transaction gains in the current year compared to losses in 2012 as well as the recovery of escrowed funds related to a 2005 real estate transaction which was pre- viously written off as uncollectible. The effective income tax rate from continuing operations for 2013 was 33.6% compared to 38.0% in the prior year. The 2013 income tax rate from continuing operations was favorably impacted by the resolution of certain state income tax matters while the 2012 rate was negatively affected by certain discrete tax items and their pronounced impact on comparatively lower pretax income in 2012. The Year 2012 Compared to the Year 2011 — Company Analysis Income from continuing operations for 2012 was $14,764, or $1.44 per diluted share, which compares to income from continuing operations for 2011 of $22,067, or $2.14 per diluted share. Included in our 2012 and 2011 results were charges related to concrete ties manufactured at our Grand Island, NE facility of $22,000 and $6,978, respectively. Included within gross profit in the 2011 period was a nonrecurring increase in cost of goods sold of approximately $2,272 related to the recognition of the inventory step-up to fair value from our 2010 acquisition of Rail Technologies. Approximately $700 of the total $1,844 of increased selling and administrative expenses in 2012 was for concrete tie testing expenses associated with the UPRR product warranty claim. The remainder of the increase over 2011 was due primarily to employee salaries. Foreign currency fluctuations in the exchange rate for the U.S. Dollar resulted in our recognizing foreign currency transaction losses during 2012 compared to foreign cur- rency transaction gains in 2011. We recognized decreased gains of approximately $300 within “Other Income” in 2012 related to the early termination of the operating lease associated with our former Houston, TX threading facility due to our move to Magnolia, TX. The effective income tax rate from continuing operations for 2012 was 38.0% compared to 32.4% in the prior year. The rate increase was primarily due to the mix of earnings attributable to higher rate jurisdictions in 2012, certain discrete items recorded in 2012 and the receipt of state tax refunds in 2011. Results of Continuing Operations — Segment Analysis Rail Products Twelve Months Ended December 31, 2012 2013 2011 (Decrease) /Increase 2013 vs. 2012 Increase/ (Decrease) Percent (Decrease)/ Increase 2012 vs. 2011 2013 vs. 2012 2012 vs. 2011 Percent Increase/ (Decrease) Net Sales . . . . . . . . . . . . . . . . $363,667 $370,322 $315,133 $ (6,655) $55,189 (1.8)% 17.5% Gross Profit . . . . . . . . . . . . . $ 74,986 $ 52,533 $ 57,613 $22,453 $ (5,080) 42.7% (8.8)% Gross Profit Percentage . . 20.6% 14.2% 18.3% 6.4% (4.1)% 45.1% (22.4)% The Year 2013 Compared to the Year 2012 The 2013 sales results reflect a year in which a number of product lines had an excellent year, but the growth was more than offset by expected declines in other product lines. The transit products, Allegheny rail products and friction management products all saw nice improvement year over year. The largest increase related to the transit products business. During 2013, transit products benefitted from the Honolulu, HI elevated transit system project awarded during 2012. Reductions related to CXT concrete ties, rail distribution and track compo- 27 6515_Fin.pdf 27 nents products drove the overall results in declining sales. Lower sales volume in CXT ties was planned as a result of the volume of warranty ties that consumed customer attention in 2013. Rail technologies sales in the U.K. had a positive impact on sales results in 2013. During 2012, warranty charges totaling $22,000 related to our former Grand Island, NE concrete tie facility adversely impacted our Rail Products segment gross profit. Without these charges, Rail Products’ gross profit margins would have been 20.1% for the period ended December 31, 2012. The Year 2012 Compared to the Year 2011 The growth leaders in our Rail Products segment were our rail distribution, CXT concrete tie and transit products divisions, while our Canadian and U.K. track components businesses reported decreased year over year sales. The growth in our rail distribution business was principally due to increased volumes and also due to a shift in product mix toward higher priced premium rail. Our concrete tie division delivered volume growth, sur- passing sales levels even from 2010 when we operated three plants. Warranty charges in the 2012 period totaling $22,000 and closure-related and warranty charges totaling $6,978 in the 2011 period related to our Grand Island, NE concrete tie facility adversely impacted our Rail Prod- ucts segment gross profit. In addition, 2011 gross profit was unfavorably impacted by a nonrecurring increase in cost of goods sold of approximately $2,272 related to recognition of the remaining portion of the inventory step- up to fair value from our allocation of the Rail Technologies’ purchase price. Without these charges, our gross profit margins would have been 20.1% and 21.2% for 2012 and 2011, respectively. Construction Products Twelve Months Ended December 31, 2012 2013 2011 Increase Decrease Percent Increase Percent Decrease 2013 vs. 2012 2012 vs. 2011 2013 vs. 2012 2012 vs. 2011 Net Sales . . . . . . . . . . . . . . . . $191,751 $169,253 $227,734 $22,498 $(58,481) 13.3% (25.7)% Gross Profit . . . . . . . . . . . . . . $ 29,224 $ 25,080 $ 35,372 $ 4,144 $(10,292) 16.5% (29.1)% Gross Profit Percentage . . . 15.2% 14.8% 15.5% 0.4% (0.7)% 2.7% (4.5)% The Year 2013 Compared to the Year 2012 Sales increases of $22,498, or 13.3%, related to stronger demand within our piling products business and increased sales within our buildings business which was partially offset by reduced fabricated bridge sales during 2013. The pace of piling orders and sales was slow to start the year, but ended with a much improved second half helping to contribute to the 13.3% overall increase. Concrete Buildings turned in similar results as a slow start in the first half of the year led to a full year in which sales grew at nearly a double digit pace. The outlook for Con- crete Buildings in early 2013 was hampered by uncertainty in government spending, only to finish the year with state spending making up for federal spending shortfalls. The fabricated bridge business was expected to decline as the operations started 2013 with lower backlog as key projects were approaching to completion. At the same time, order input activity saw some of the strongest activity in recent years resulting in an increase in backlog to start 2014. Volume related sales increases in piling along with solid project management helped improving gross profit margins. The Concrete Buildings business made significant progress in productivity while managing new growth opportunities. The combined efforts in these two product areas led to enhanced profitability of 40 basis points in gross profit in 2013 compared to the prior year results. The Year 2012 Compared to the Year 2011 Weak heavy civil construction markets and uncertain governmental funding in some states resulted in lower sales volumes for our piling products. These volume reductions and a heightened competitive environment led to gross profit erosion in our piling products. The remainder of our Construction Products divisions experienced market driven, volume-related sales and gross profit declines. 28 6515_Fin.pdf 28 Tubular Products Twelve Months Ended December 31, 2012 2013 2011 Decrease Increase Percent Decrease Percent Increase 2013 vs. 2012 2012 vs. 2011 2013 vs. 2012 2012 vs. 2011 Net Sales . . . . . . . . . . . . . . . . $42,545 $48,966 $32,470 $(6,421) $16,496 (13.1)% 50.8% Gross Profit . . . . . . . . . . . . . . $12,278 $15,189 $ 8,850 $(2,911) $ 6,339 (19.2)% 71.6% Gross Profit Percentage . . . 28.9% 31.0% 27.3% (2.1)% 3.7% (6.8)% 13.6% The Year 2013 Compared to the Year 2012 The Threaded products business turned in another year of positive growth and new customer acquisition. However, we experienced order delays from Coated products customers reacting to changing market conditions that led to a $6,421 reduction in 2013 sales compared to the prior year period. Although our threaded business was not impacted by the market uncertainty, our coated facility in Birmingham, AL entered the second half of 2013 with significantly reduced backlog levels compared to the prior year. We are accustomed to responding to rapidly changing order patterns in the energy market, and as a result, we utilized the lower production period to enhance our facilities in an effort to prepare for anticipated growth. Our long term view of this market remains bullish. Gross profit declined at a rate lower than anticipated given the rapid change in volume. The decline was largely attributed to overhead costs in place for a year in which we expected similar volume to the prior year. The Year 2012 Compared to the Year 2011 Strong demand driven by the energy markets served by our Birmingham, AL coating facility led the robust sales growth in our Tubular Products segment. This facility added a second shift during 2012 to satisfy this sig- nificantly increased demand. Our fully operational threaded products division in Magnolia, TX benefitted from improved demand in the agriculture markets. Growth in gross profit was due to the volume increases reported by both divisions. 29 6515_Fin.pdf 29 Liquidity and Capital Resources Total debt at December 31, 2013 and 2012 was $56 and $48, respectively, and was comprised of capital lease obligations. Our need for liquidity relates primarily to working capital requirements for continuing operating activities, capital expenditures, JV capital obligations, strategic acquisitions or alliances, share repurchases and dividends. The following table summarizes the impact of these items: 2013 December 31, 2012 2011 Liquidity needs: Working capital and other assets and liabilities . . . . . . . . . . . . . . . . Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury stock acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid to common shareholders . . . . . . . . . . . . . . . . . . . . . Capital contributions to equity method investment . . . . . . . . . . . . . . Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(29,964) (9,674) (6) (708) (1,240) — (37,500) (330) $ 2,900 (7,160) (2,373) (669) (1,029) — — (405) $ (5,841) (11,733) (2,366) (6,592) (1,022) (800) (8,952) (505) Net liquidity requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (79,422) (8,736) (37,811) Liquidity sources: Internally generated cash flows before interest paid . . . . . . . . . . . . . Dividends from L B Pipe & Coupling Products, LLC . . . . . . . . . . . Proceeds from asset sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign exchange effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,616 558 — 238 (2,106) Net liquidity sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,306 Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 24,464 — 24 321 940 25,749 10,724 37,953 — 41 632 (857) 37,769 (1,031) Net Change in Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(36,841) $27,737 $ (1,073) Cash Flow from Continuing Operating Activities During 2013, cash provided by continuing operating activities was $13,880 compared to $26,959 in 2012. During 2013, income, adjustments to income from continuing operating activities and dividends from the joint venture provided $43,844 compared to providing $24,059 in 2012. Working capital and other assets and liabilities used $29,964 in 2013 compared to working capital and other assets and liabilities providing $2,900 in 2012. Cash payments for taxes and changes in working capital, including warranty replacements, were the pri- mary drivers of the 2013 reductions. We expect the negative trend in working capital to turn positive in 2014 and contribute to cash flow from operations. During 2012, cash provided by continuing operating activities was $26,959 compared to $31,607 in 2011. During 2012, income and adjustments to income from continuing operating activities provided $24,059 com- pared to providing $37,448 in 2011. Working capital and other assets and liabilities provided $2,900 in 2012 compared to working capital and other assets and liabilities use of $5,841 in 2011. Increased inventory related to a few of our key projects, such as the Honolulu, HI elevated transit system and the $12,000 cash payment to the UPRR were the primary drivers of the reductions. Cash Flow from Continuing Investing Activities The primary investing activity in 2013 related to the $37,500 acquisition of assets from Ball Winch, LLC. Capital expenditures of $9,674 related to improvements to our machinery and equipment across each segment, 30 6515_Fin.pdf 30 leasehold improvements, plant upgrades at our Birmingham, AL facility. The 2012 capital expenditures were primarily used for our Burnaby, British Columbia, Canada Rail Technologies facility, moving into our new threaded products facility in Magnolia, TX, and other yard and plant upgrades. We anticipate 2014 capital expenditures to be in the $18,000 — $22,000 range. The final cash payment of $8,952 associated with our acquisition of Rail Technologies was paid in January 2011. We incurred capital expenditures of $11,733 in 2011 primarily for a new threading facility in Magnolia, TX, our new Burnaby, British Columbia, Canada Rail Technologies facility, plant and yard upgrades and information technology infrastructure. Also, we contributed an additional $800 to our JV under the amended agreement. Cash Flow from Continuing Financing Activities We paid quarterly dividends of $0.03 and $0.025 per share in 2013 and 2012, respectively. During 2013 and 2012, we did not purchase any common shares of the Company under the share repurchase authorization, how- ever, the Company withheld 16,166 and 23,562 shares for approximately $708 and $669 respectively, from employees to pay their withholding taxes in connection with the exercise and/or vesting of stock options and restricted stock awards. We declared our first regular quarterly dividend of $0.025 per share beginning in 2011. In 2011, we also spent approximately $6,480 to repurchase 278,655 common shares under the share repurchase program approved by our Board of Directors in May 2011. Additionally, $112, or 5,813 shares, were withheld from employees to pay their withholding taxes in connections with the exercise and or vesting of stock options and restricted stock awards. Financial Condition As of December 31, 2013, we had $64,623 in cash and cash equivalents and credit facilities with $126,610 of availability. As of December 31, 2013, we were in compliance with all of our credit agreements’ covenants. We believe this capacity will afford us the flexibility to take advantage of opportunities as we explore both organic and external growth opportunities. Included within cash and cash equivalents are highly liquid and highly rated domestic money market funds with various underlying securities. These money market funds all maintained AAA credit agency ratings during 2013. Our priority continues to be the preservation of our principal balances while investing our funds in a manner to maximize returns and maintain liquidity while seeking the highest yield available. Approximately $43,560 of our cash and cash equivalents is held in non-domestic bank accounts, and is not available to fund domestic operations unless repatriated. It is management’s intent to indefinitely reinvest such funds outside of the United States, as the Company would need to accrue and pay additional income and withholding taxes if these funds were repatriated. Borrowings under our U.S credit facility bear interest at rates based upon either the base rate or LIBOR based rate plus applicable margins. Applicable margins are dictated by the ratio of our indebtedness less cash on hand to our consolidated EBITDA. The base rate is the highest of (a) PNC Bank’s prime rate or (b) the Federal Funds Rate plus .50% or (c) the daily LIBOR rate plus 1.00%. The base rate spread ranges from 0.00% to 1.00%. LIBOR based rates are determined by dividing the published LIBOR rate by a number equal to 1.00 minus the percentage prescribed by the Federal Reserve for determining the maximum reserve requirements with respect to any Eurocurrency funding by banks on such day. The LIBOR based rate spread ranges from 1.00% to 2.00%. 31 6515_Fin.pdf 31 Tabular Disclosure of Contractual Obligations A summary of the Company’s required payments under financial instruments and other commitments at December 31, 2013 are presented in the following table: Contractual Cash Obligations Capital leases (1) . . . . . . . . . . . . . . . . . . . . . . . . Pension plan contributions . . . . . . . . . . . . . . . . Operating leases . . . . . . . . . . . . . . . . . . . . . . . . Purchase obligations not reflected in the Total Less than 1 year 1-3 years 4-5 years More than 5 years $ 56 746 19,123 $ 31 746 2,897 $ 25 — 4,023 $ — $ — — 9,219 — 2,984 financial statements . . . . . . . . . . . . . . . . . . . 30,496 30,496 — — — Total contractual cash obligations . . . . . . . . . . $50,421 $34,170 $4,048 $2,984 $9,219 Other Financial Commitments Standby letters of credit . . . . . . . . . . . . . . . . . . $ 815 $ 714 $ 101 $ — $ — (1) Capital lease obligations are payable in installments through 2016 and have interest rates, payable monthly, ranging from 3.75% to 8.46%. Interest obligations of $4 were excluded from the table. Other long-term liabilities include items such as income taxes which are not contractual obligations by nature. The Company cannot estimate the settlement years for these items and has excluded them from the above table. Management believes its internal and external sources of funds are adequate to meet anticipated needs, including those disclosed above, for the foreseeable future. Off Balance Sheet Arrangements The Company’s off-balance sheet arrangements include the operating leases, purchase obligations and standby letters of credit disclosed within the contractual obligations table above in the “Liquidity and Capital Resources” section. These arrangements provide the Company with increased flexibility relative to the utilization and investment of cash resources. Outlook Overall market conditions look favorable across all three of our business segments in 2014. We expect to see continually increasing investment in transportation and energy infrastructure. During 2014, L.B. Foster expects to see most businesses grow, while a few will experience expected declined due to specific customer activity. The declines are expected in (a) transit products where backlog will decline as a result of the completion of the Honolulu transit project, and (b) concrete ties as a result of planned activity at Union Pacific Railroad. The favorable order patterns seen in the latter part of 2013 for piling and coated products are expected to continue into 2014 as the construction and gas pipeline markets grow. The net result should be a positive year for sales growth. At this time we are not forecasting pre-tax margin expansion. This is the result of investments we plan to make in growth programs and ERP systems. As the year unfolds, we will provide an update on the expected pre-tax margin and EPS outlook. The Company expects Q1 sales to be in the range of $123,000 to $128,000. Net income should be in the range of $5,500 to $5,900. The Company’s sales in Q1 are typically among the lowest of the four quarters as a result of the seasonal construction trends. The Company is planning to increase capital spending in 2014 to a range of $18,000 to $22,000. This is a substantial increase over the normal rate of annual spending as a result of several growth programs that are launching simultaneously. The capital will be directed at facilities, land, service centers, new technology and equipment, and new products and supports our strategies to enter new markets and to improve our cost position on existing product lines. This does not represent a new level of ongoing annual spending. 32 6515_Fin.pdf 32 We anticipate the increased capital spending in 2014 will be offset by improved cash flow from operating activities due to programs focused on working capital improvement. We continue to collaborate with the UPRR in an effort to work through the existing product warranty claim. There can be no assurance at this point that our current estimate of the number of defective concrete ties that need to be replaced will not increase and result in our having to take additional charges which could have a mate- rial impact on the Company’s results of operations and financial condition. See “Executive Level Overview” for additional information. Certain of our businesses sell to markets that rely heavily on spending authorized by the federal trans- portation funding bill, Moving Ahead for Progress in the 21st Century Act (MAP-21), enacted in July 2012. This legislation, which expires in September 2014, authorized transportation spending over a two year period at levels similar to its predecessor bill, SAFETEA-LU. Although backlog is not necessarily indicative of future operating results, total Company backlog at December 31, 2013 was $183,111. The following table provides the backlog by business segment: Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tubular Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $121,853 53,483 7,775 December 31, 2013 Backlog December 31, 2012 $140,592 59,239 11,087 December 31, 2011 $ 66,434 63,121 10,784 Total Backlog from Continuing Operations . . . . . . . . . . . . $183,111 $210,918 $140,339 While a considerable portion of the Foster business is somewhat backlog driven, the Rail Technologies business is less sensitive to backlog at any given time. Critical Accounting Policies and Estimates The Company’s significant accounting policies are described in Part II, Item 8, Note 1 to the Consolidated Financial Statements. 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 the method of its application, is generally accepted, management selects the principle or method that is appro- priate in the Company’s specific circumstance. Application of these accounting principles requires management to make estimates that affect the reported amount of assets, liabilities, revenues, and expenses, and the related disclosure of contingent assets and liabilities. The following critical accounting policies relate to the Company’s more significant judgments and estimates used in the preparation of its consolidated financial statements. There can be no assurance that actual results will not differ from those estimates. Goodwill and Intangible Assets — We account for acquired businesses using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective estimated fair values. The cost to acquire a business is allocated to the underlying net assets of the acquired business based on estimates of their respective fair values. Intangible assets are amortized over the expected life of the asset. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of oper- ations. Fair values and useful lives are determined based on, among other factors, the expected future period of benefit of the asset, the various characteristics of the asset and projected cash flows. Because this process involves management making estimates with respect to future revenues and market conditions and because these estimates also form the basis for the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates. Goodwill is required to be tested for impairment at least annually. The Company performs its annual impair- ment test as of October 1st or more frequently when indicators of impairment are present. The goodwill impair- ment test involves comparing the fair value of a reporting unit to its carrying value, including goodwill. If the 33 6515_Fin.pdf 33 carrying amount of the reporting unit exceeds its fair value, a second step is required to measure the goodwill impairment loss. This step compares the implied fair value of the reporting unit’s goodwill to the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds the implied fair value of the goodwill, an impairment loss equal to the excess is recorded as a component of continuing operations. The Company uses a combination of market approach and a discounted cash flow model (DCF model) to determine the current fair value of the reporting unit. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including markets and market share, sales volume and pricing, costs to produce and working capital changes. The Company considers historical experience and available information at the time the fair values of its business are estimated. However, actual amounts realized may differ from those used to evaluate the impairment of goodwill. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, the Company may be exposed to impairment losses that could be material to our results of operations. There were no goodwill impairments recorded during the three years ended December 31, 2013. Asset Impairment — The Company is required to test for asset impairment whenever events or changes in circumstances indicate that the carrying value of an asset might not be recoverable. The applicable guidance requires that, if the sum of the future expected cash flows associated with an asset, undiscounted and without interest charges, is less than the carrying value, an asset impairment must be recognized in the financial state- ments. The amount of the impairment is the difference between the fair value of the asset and the carrying value of the asset. The accounting estimate related to asset impairment is highly susceptible to change from period to period and because it requires management to make assumptions about the existence of impairment indicators and cash flows over future years. These assumptions impact the amount of an impairment, which would have an impact on the income statement. There were no material asset impairments recorded during the three years ended December 31, 2013. Product Warranty — The Company maintains a current warranty for the repair or replacement of defective products. For certain manufactured products, an accrual is made on a monthly basis as a percentage of cost of sales. For long-term construction projects, a product warranty accrual is established when the claim is known and quantifiable. The product warranty accrual is periodically adjusted based on the identification or reso- lution of known individual product warranty claims. The underlying assumptions used to calculate the product warranty accrual can change from period to period and are dependent upon estimates of the amount and cost of future product repairs or replacements. At December 31, 2013 and 2012, the product warranty was $7,483 and $15,727, respectively. During the years ended December 31, 2013, 2012 and 2011, the Company recorded prod- uct warranty expense of $1,695, $24,252 and $4,437, respectively. For additional information regarding the Company’s product warranty, refer to Part II, Item 8, Note 20 to the Consolidated Financial Statements, “Commitments and Contingent Liabilities” included herein. Revenue Recognition — The Company’s revenues are comprised of product sales as well as products and services provided under long-term contracts. For product sales, the Company recognizes revenue upon transfer of title to the customer. Title generally passes to the customer upon shipment. In limited cases, title does not transfer and revenue is not recognized until the customer has received the products at its physical location. Revenue is recorded net of returns, allowances, customer discounts and incentives. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold. Revenues for products under long-term contracts are generally recognized using the percentage-of- completion method based upon the proportion of actual costs incurred to estimated total costs. For certain prod- ucts, the percentage of completion is based upon actual labor costs to estimated total labor costs. At the time a loss contract becomes known, the entire amount of the estimated loss is recognized in the Consolidated State- ment of Operations. Revenues recognized using percentage of completion are not material relative to the Company’s consolidated revenues. Pension Plans — The calculation of the Company’s net periodic benefit cost (pension expense) and benefit obligation (pension liability) associated with its defined benefit pension plans (pension plans) requires the use of a number of assumptions that the Company deems to be “critical accounting estimates.” Changes in these 34 6515_Fin.pdf 34 assumptions can result in a different pension expense and liability amounts, and future actual experience can differ significantly from the assumptions. The Company believes that the two most critical assumptions are the expected long-term rate of return on plan assets and the assumed discount rate. The expected long-term rate of return reflects the average rate of earnings expected on funds invested or to be invested in the pension plans to provide for the benefits included in the pension liability. The Company estab- lishes the expected long-term rate of return at the beginning of each fiscal year based upon information available to the Company at that time, including the plan’s investment mix and the forecasted rates of return on these types of securities. Any differences between actual experience and assumed experience are deferred as an unrecognized actuarial gain or loss. The unrecognized actuarial gains or losses are amortized in accordance with applicable accounting guidance. The weighted average expected long-term rate of return determined by the Company for its 2014 and 2013 domestic pension expense was 6.50%. The weighted average expected long-term rate of return determined by the Company for its 2014 and 2013 U.K. pension expense was 5.80% and 5.20%, respectively. Pension expense increases as the expected long-term rate of return decreases. The assumed discount rate reflects the current rate at which the pension benefits could effectively be settled. In estimating that rate, applicable guidance requires the Company utilize rates of return on high quality, fixed income investments. The Company’s pension liability increases as the discount rate is reduced. Therefore, a decline in the assumed discount rate has the effect of increasing the Company’s pension obligation and future pension expense. The weighted average assumed discount rate used by the Company was 4.90% and 4.00%, respectively, as of December 31, 2013 and 2012 for its domestic pension plans. The weighted average assumed discount rate used by the Company was 4.60% and 4.30%, as of December 31, 2013 and 2012 for its U.K. pen- sion plan. Income Taxes — The recognition of deferred tax assets requires management to make judgments regarding the future realization of these assets. As prescribed by FASB ASC 740, “Income Taxes,” valuation allowances must be provided for those deferred tax assets for which it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. This guidance requires management to evaluate positive and negative evidence regarding the recoverability of deferred tax assets. Determination of whether the positive evidence outweighs the negative evidence and quantification of the valuation allowance requires management to make estimates and judgments of future financial results. The Company evaluates all tax positions taken on its federal, state and foreign tax filings to determine if the position is more likely than not to be sustained upon examination. For positions that meet the more likely than not to be sustained criteria, the largest amount of benefit to be realized upon ultimate settlement is determined on a cumulative probability basis. A previously recognized tax position is derecognized when it is subsequently determined that a tax position no longer meets the more likely than not threshold to be sustained. The evaluation of the sustainability of a tax position and the expected tax benefit is based on judgment, historical experience and various other assumptions. Actual results could differ from those estimates upon subsequent resolution of identi- fied matters. The Company’s income tax rate is significantly affected by the tax rate on global operations. In addition to local country tax laws and regulations, this rate depends on the extent earnings are indefinitely reinvested outside the United States. Indefinite reinvestment is determined by management’s judgment about and intentions concerning the future operations of the Company. We do not intend to repatriate these earnings to fund U.S. operations. Should we decide to repatriate the foreign earnings, the Company would have to accrue income and withholding taxes in the period in which it is determined that the earnings will no longer be indefinitely invested outside the United States. Refer to Part II, Item 8, Note 15, “Income Taxes” included herein for additional information regarding the Company’s deferred tax assets. The Company’s ability to realize these tax benefits may affect the Company’s reported income tax expense and net income. 35 6515_Fin.pdf 35 Contingencies — The preparation of consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and also affect the amounts of revenues and expenses reported for each period. In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against the Company. When a probable, estimable exposure exists, the Company accrues the estimate of the probable costs for the resolution of these matters. These estimates have been developed in consultation with legal counsel involved in the defense of these matters and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. Future results of operations could be materially affected by changes in our assumptions or the outcome of these proceedings. The Company’s operations are subject to national, state, foreign, provincial, and/or local laws and regu- lations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal, and management of, regulated materials and waste. These regulations impose liability for the costs of investigation, remediation and damages resulting from, present and past spills, disposals, or other releases of hazardous substances or materials. Liabilities are recorded when remediation efforts are probable and the costs can be reasonably estimated. Estimates are not reduced by potential claims for recovery. Claims for recovery are recognized as agreements are reached with third parties or as amounts are received. Established reserves are periodically reviewed and adjusted to reflect current remediation progress, prospective estimates of required activity, and other factors that may be relevant, including changes in technology or regulations. As of December 31, 2013 and 2012, the Company maintained environmental and legal contingency reserves approx- imating $2,190 and $2,141, respectively. Refer to Part II, Item 8, Note 20 to the Consolidated Financial Statements, “Commitments and Contingent Liabilities” for additional information regarding the Company’s commitments and contingent liabilities. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk The Company does not purchase or hold any derivative financial instruments for trading purposes. At contract inception, the Company designates its derivative instruments as hedges. The Company recog- nizes all derivative instruments on the balance sheet at fair value. Fluctuations in the fair values of derivative instruments designated as cash flow hedges are recorded in accumulated other comprehensive income and reclassified into earnings within other income as the underlying hedged items affect earnings. To the extent that a change in a derivative does not perfectly offset the change in value of the interest rate being hedged, the ineffective portion is recognized in earnings immediately. The Company did not have any interest rate derivatives as of December 31, 2013, 2012 or 2011. Foreign Currency Exchange Rate Risk The Company is subject to exposures to changes in foreign currency exchange rates. The Company may manage its exposure to changes in foreign currency exchange rates on firm sale and purchase commitments by entering into foreign currency forward contracts. The Company’s risk management objective is to reduce its exposure to the effects of changes in exchange rates on these transactions over the duration of the transactions. The Company did not engage in significant foreign currency hedging transactions during the three-year period ended December 31, 2013, and no foreign currency hedges remained outstanding as of December 31, 2013. Real- ized gains or losses from foreign currency hedges did not exceed $100 in any of the three years ended December 31, 2013. 36 6515_Fin.pdf 36 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of L.B. Foster Company and Subsidiaries We have audited the accompanying consolidated balance sheets of L.B. Foster Company and Subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial state- ments and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assess- ing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the con- solidated financial position of L.B. Foster Company and Subsidiaries at December 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), L.B. Foster Company and Subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated February 27, 2014, expressed an unqualified opinion thereon. Pittsburgh, Pennsylvania February 27, 2014 /s/ Ernst & Young, LLP Ernst & Young LLP 37 6515_Fin.pdf 37 L. B. FOSTER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2013 AND 2012 ASSETS Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets: Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangibles — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued payroll and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stockholders’ equity: Common stock, par value $.01, authorized 20,000,000 shares; shares issued at December 31, 2013 and December 31, 2012, 11,115,779; shares outstanding at December 31, 2013 and December 31, 2012, 10,188,521 and 10,149,398 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury stock — at cost, common stock, 927,258 shares at December 31, 2013 and 966,381 2012 2013 (In thousands, except share data) $ 64,623 98,437 76,956 461 4,741 2,000 149 247,367 50,109 57,781 51,846 5,090 1,461 $413,654 $ 46,620 5,715 8,927 7,483 31 179 6,501 26 75,482 25 11,798 9,952 $101,464 59,673 107,108 4,585 1,195 1,903 464 276,392 42,333 41,237 40,165 4,332 1,663 $406,122 $ 50,454 7,447 9,604 15,727 35 — 8,596 106 91,969 27 12,140 14,411 111 47,239 298,361 111 46,290 270,311 shares at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,731) (4,583) 316,397 $413,654 (25,468) (3,669) 287,575 $406,122 The accompanying notes are an integral part of these Consolidated Financial Statements. 38 6515_Fin.pdf 38 L. B. FOSTER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in income of nonconsolidated investment . . . . . . . . . . . . . . . . . . . . . Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations before income taxes . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations: Income from discontinued operations before income taxes . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2011 2012 2013 (In thousands, except share data) $588,541 496,272 $575,337 476,927 $597,963 482,024 115,939 71,256 3,112 485 (659) (1,316) (1,054) 71,824 44,115 14,839 29,276 23 9 14 92,269 66,651 2,961 542 (452) (837) (426) 68,439 23,830 9,066 14,764 3,842 2,418 1,424 98,410 64,807 2,791 622 (321) (707) (1,434) 65,758 32,652 10,585 22,067 1,287 459 828 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 29,290 $ 16,188 $ 22,895 Basic earnings per common share: From continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . From discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted earnings per common share: From continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . From discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ $ $ 2.88 0.00 2.88 2.85 0.00 2.85 0.12 $ $ $ $ $ 1.46 0.14 1.60 1.44 0.14 1.58 0.10 $ $ $ $ $ 2.16 0.08 2.24 2.14 0.08 2.22 0.10 The accompanying notes are an integral part of these Consolidated Financial Statements. 39 6515_Fin.pdf 39 L. B. FOSTER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE YEARS ENDED DECEMBER 31, Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,290 2013 2012 (In thousands) $16,188 2011 $22,895 Other comprehensive (loss) income, net of tax: Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension and post-retirement benefit plans (net of tax expense (benefit): $1,199, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ($481) and ($1,333)) Reclassification of pension liability adjustments to earnings * (net of tax expense: $134, $125 and $78) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive (loss) income , net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . (3,475) 1,724 (1,306) 2,258 (1,043) (2,424) 303 (914) 278 959 170 (3,560) Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $28,376 $17,147 $19,335 * Reclassifications out of accumulated other comprehensive income for pension obligations are charged to selling and administrative expense. The accompanying notes are an integral part of these Consolidated Financial Statements. 40 6515_Fin.pdf 40 L. B. FOSTER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED DECEMBER 31, 2013 2012 (In thousands) 2011 $ 29,276 $ 14,764 $ 22,067 CASH FLOWS FROM OPERATING ACTIVITIES: Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile income from continuing operations to net cash provided by operating activities: Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity in income of nonconsolidated investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loss on sales and disposals of property, plant and equipment Deferred gain amortization on sale-leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Excess tax benefit from share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . Change in operating assets and liabilities, net of acquisitions: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends from L B Pipe & Coupling Products, LLC . . . . . . . . . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued payroll and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided by continuing operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided (used) by discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the sale of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital expenditures on property, plant and equipment Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital contributions to equity method investment . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used by continuing investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash provided (used) by discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . 3,244 10,002 (1,316) 127 — 2,156 (203) (37,057) 29,919 (310) (6,882) 264 558 (5,206) (1,805) (608) (7,561) (718) 13,880 275 — (9,674) (37,500) — (47,174) — (4,563) 12,973 (837) 388 (456) 1,989 (199) 6,823 (17,644) (243) 4,339 (194) — 1,241 1,467 75 6,655 381 26,959 176 24 (7,160) — — (7,136) 10,548 CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of other long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Proceeds from exercise of stock options and stock awards . . . . . . . . . . . . . . . . . . . . Treasury stock acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash dividends on common stock paid to shareholders . . . . . . . . . . . . . . . . . . . . . . Excess tax benefit from share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . Net cash used by continuing financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) 35 (708) (1,240) 203 (1,716) (2,106) (36,841) 101,464 $ 64,623 (2,373) 122 (669) (1,029) 199 (3,750) 940 27,737 73,727 $101,464 3,484 12,007 (707) 145 (1,081) 1,958 (425) 1,616 (1,932) 923 (2,141) (136) — 6,128 (9,609) (454) (2,161) 1,925 31,607 (825) 41 (11,733) (8,952) (800) (21,444) (206) (2,366) 207 (6,592) (1,022) 425 (9,348) (857) (1,073) 74,800 $ 73,727 Supplemental disclosure of cash flow information: Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 330 $ 405 $ 505 Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,697 $ 11,999 $ 9,395 The accompanying notes are an integral part of these Consolidated Financial Statements. 41 6515_Fin.pdf 41 L. B. FOSTER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY FOR THE THREE YEARS ENDED DECEMBER 31, 2013 Common Stock Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive (Loss) Income Balance, January 1, 2011 . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) net of tax: Pension liability adjustment . . . . . . . . . . Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . Purchase of 278,655 Common shares for Treasury . . . . . . . . . . . . . . . . . . . . . . . . . Issuance of 50,528 Common shares, net of shares withheld for taxes . . . . . . . . . . . . Stock based compensation and related excess tax benefit . . . . . . . . . . . . . . . . . . Cash dividends on common stock paid to shareholders . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2011 . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive (loss) income net of tax: Pension liability adjustment . . . . . . . . . . Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . Issuance of 75,995 Common shares, net of shares withheld for taxes . . . . . . . . . . . . Stock based compensation and related excess tax benefit . . . . . . . . . . . . . . . . . . Cash dividends on common stock paid to shareholders . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2012 . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) net of tax: Pension liability adjustment . . . . . . . . . . Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . Issuance of 39,123 Common shares, net of shares withheld for taxes . . . . . . . . . . . . Stock based compensation and related excess tax benefit . . . . . . . . . . . . . . . . . . Cash dividends on common stock paid to shareholders . . . . . . . . . . . . . . . . . . . . . . Balance, December 31, 2013 . . . . . . . . . . (In thousands, except share data) $233,279 22,895 $(23,861) $(1,068) (2,254) (1,306) (6,480) 2,172 $111 $47,286 (2,320) 2,383 111 47,349 (1,022) 255,152 16,188 (28,169) (4,628) (765) 1,724 (3,247) 2,188 2,701 111 46,290 (1,029) 270,311 29,290 (25,468) (3,669) Total $255,747 22,895 (2,254) (1,306) (6,480) (148) 2,383 (1,022) 269,815 16,188 (765) 1,724 (546) 2,188 (1,029) 287,575 29,290 2,561 2,561 (3,475) (3,475) (1,410) 2,359 737 $111 $47,239 (1,240) $298,361 $(24,731) $(4,583) (673) 2,359 (1,240) $316,397 The accompanying notes are an integral part of these Consolidated Financial Statements. 42 6515_Fin.pdf 42 L.B. FOSTER COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. (Dollars in thousands, except share data unless otherwise noted) Summary of Significant Accounting Policies Basis of financial statement presentation The consolidated financial statements include the accounts of the Company and its wholly owned sub- sidiaries, ventures and partnerships in which a controlling interest is held. Inter-company transactions have been eliminated. The Company utilizes the equity method of accounting for companies where its ownership is less than or equal to 50% and significant influence exists. Cash and cash equivalents The Company considers cash and other instruments with maturities of three months or less, when purchased, to be cash and cash equivalents. Cash equivalents principally consist of investments in money market funds and bank certificates of deposit at December 31, 2013 and 2012. The Company invests available funds in a manner to maximize returns, preserve investment principle and maintain liquidity while seeking the highest yield available. The following table summarizes the Company’s investment in money market funds at December 31: 2013 Cost Fair Value BlackRock Liquidity Temporary Fund — Institutional . . . . . . . . . . . . . . . . . . . . $18,276 $18,276 2012 Cost Fair Value BlackRock Liquidity Temporary Fund — Institutional . . . . . . . . . . . . . . . . . . . . $58,620 $58,620 The above investment is a domestic money market fund with various underlying securities all of which maintained AAA credit agency ratings. The carrying amounts approximate fair value because of the short maturity of the instruments. Cash and cash equivalents held in non-domestic accounts was approximately $43,560 and $38,731 at December 31, 2013 and 2012, respectively. Included in cash equivalents are investments in non-domestic bank term deposits of approximately $32,947 and $26,045 at December 31, 2013 and 2012, respectively. The carrying amounts approximated fair value because of the short maturity of the instruments. Inventories Certain inventories are valued at the lower of the last-in, first-out (LIFO) cost or market. Approximately 38% in 2013 and 37% in 2012, of the Company’s inventory is valued at average cost or market, whichever is lower. Slow-moving inventory is reviewed and adjusted regularly, based upon product knowledge, physical inventory observation, and the age of the inventory. Property, plant and equipment Maintenance, repairs and minor renewals are charged to operations as incurred. Major renewals and better- ments which substantially extend the useful life of the property are capitalized at cost. Upon sale or other dis- position of assets, the costs and related accumulated depreciation and amortization are removed from the accounts and the resulting gain or loss, if any, is reflected in income. 43 6515_Fin.pdf 43 Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of 25 to 40 years for buildings and 3 to 10 years for machinery and equipment. Leasehold improvements are amortized over 2 to 14 years which represent the lives of the respective leases or the lives of the improvements, whichever is shorter. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company did not record any material asset impairment charges during 2013, 2012 or 2011. Allowance for doubtful accounts The allowance for doubtful accounts is recorded to reflect the ultimate realization of the Company’s accounts receivable and includes assessment of the probability of collection and the credit-worthiness of certain customers. Reserves for uncollectible accounts are recorded as part of selling and administrative expenses on the Consolidated Statements of Operations. The Company records a monthly provision for accounts receivable that are considered to be uncollectible. In order to calculate the appropriate monthly provision, the Company reviews its accounts receivable aging and calculates an allowance through application of historic reserve factors to over- due receivables. This calculation is supplemented by specific account reviews performed by the Company’s credit department. As necessary, the application of the Company’s allowance rates to specific customers are reviewed and adjusted to more accurately reflect the credit risk inherent within that customer relationship. Investments Investments in companies in which the Company has the ability to exert significant influence, but not con- trol, over operating and financial policies (generally 20% to 50% ownership) are accounted for using the equity method. Under the equity method, investments are initially recorded at cost and adjusted for dividends and undis- tributed earnings and losses. The equity method of accounting requires a company to recognize a loss in the value of an equity method investment that is other than a temporary decline. Goodwill and other intangible assets Goodwill is tested annually for impairment or more often if there are indicators of impairment. The good- will impairment test involves comparing the fair value of a reporting unit to its carrying value, including good- will. If the carrying amount of the reporting unit exceeds its fair value, a second step is required to measure the goodwill impairment loss. This step compares the implied fair value of the reporting unit’s goodwill to the carry- ing amount of that goodwill. If the carrying amount of the goodwill exceeds the implied fair value of the good- will, an impairment loss equal to the excess is recorded as a component of continuing operations. The Company performs its annual impairment tests as of October 1st. No goodwill impairment was recognized during 2013, 2012 or 2011. The Company has no significant indefinite-lived intangible assets. All intangible assets are amortized over their useful lives ranging from 5 to 25 years, with a total weighted average amortization period of approximately 17 years, as of December 31, 2013. See Note 5, “Goodwill and Other Intangible Assets,” for additional information including regarding the Company’s goodwill and other intangible assets. Environmental remediation and compliance Environmental remediation costs are accrued when the liability is probable and costs are estimable. Environ- mental compliance costs, which principally include the disposal of waste generated by routine operations, are expensed as incurred. Capitalized environmental costs, when appropriate, are depreciated over their useful life. Reserves are not reduced by potential claims for recovery. Claims for recovery are recognized as agreements are reached with third parties or as amounts are received. Reserves are periodically reviewed throughout the year and adjusted to reflect current remediation progress, prospective estimates of required activity, and other factors that may be relevant, including changes in technology or regulations. As of December 31, 2013 and 2012, the Com- pany maintained environmental and litigation reserves approximating $2,190 and $2,141, respectively. 44 6515_Fin.pdf 44 Separately, the Company maintains liabilities for asset retirement obligations in conjunction with the leases of certain of our facilities. The obligations are included within “other long-term liabilities” and totaled $667 and $663 as of December 31, 2013 and 2012, respectively. The 2013 and 2012 activity related to settlements, revisions and accretion expense is not considered material. Earnings per share Basic earnings per share is calculated by dividing net income by the weighted average of common shares outstanding during the year. Diluted earnings per share is calculated by using the weighted average of common shares outstanding adjusted to include the potentially dilutive effect of outstanding stock options and restricted stock utilizing the treasury stock method. Revenue recognition The Company’s revenues are composed of product sales and products and services provided under long- term contracts. For product sales, the Company recognizes revenue upon transfer of title to the customer. Title generally passes to the customer upon shipment. In limited cases, title does not transfer and revenue is not recog- nized until the customer has received the products at its physical location. Revenue is recorded net of returns, allowances, customer discounts and incentives. Sales taxes collected from customers and remitted to gov- ernmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold. Revenues for products under long-term contracts are generally recognized using the percentage-of- completion method based upon the proportion of actual costs incurred to estimated total costs. For certain prod- ucts, the percentage of completion is based upon actual labor costs to estimated total labor costs. At the time a loss contract becomes known, the entire amount of the estimated loss is recognized in the Consolidated State- ment of Operations. Revenues recognized using percentage of completion are not material relative to the Company’s consolidated revenues. Revenues from contract change orders and claims are recognized when the settlement is probable and the amount can be reasonably estimated. Contract costs include all direct material, labor, subcontract costs and those indirect costs related to contract performance. Costs in excess of billings are classified as work-in-process inventory. Infrequently, project billings exceed costs incurred. Projects with billings in excess of costs are recorded within other accrued liabilities. Deferred Revenue Deferred revenue consists of customer payments received for which the revenue recognition criteria have not yet been met. The Company has significantly fulfilled its obligations under the contracts and the customers have paid, but due to the Company’s continuing involvement with the material, revenue is precluded from being recognized until title, ownership and risk of loss have passed to the customer. Fair value of financial instruments The Company’s financial instruments consist of cash equivalents, accounts receivable, accounts payable and short-term and long-term debt. The carrying amounts of the Company’s financial instruments at December 31, 2013 and 2012 approximate fair value. See Note 19, “Fair Value Measurements,” for additional information. Use of estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial state- ments and accompanying notes. Actual results could differ from those estimates. 45 6515_Fin.pdf 45 Stock-based compensation The Company applies the provisions of FASB ASC 718, “Compensation – Stock Compensation,” to account for the Company’s share-based compensation. Under the guidance, share-based compensation cost is measured at the grant date based on the calculated fair value of the award. The expense is recognized over the employees’ requisite service period, generally the vesting period of the award. Product warranty The Company maintains a current warranty liability for the repair or replacement of defective products. For certain manufactured products, an accrual is made on a monthly basis as a percentage of cost of sales. For long- term construction products, a warranty is established when the claim is known and quantifiable. The product warranty accrual is periodically adjusted based on the identification or resolution of known individual product warranty claims or due to changes in the Company’s historical warranty experience. At December 31, 2013 and 2012, the product warranty was $7,483 and $15,727, respectively. See Note 20, “Commitments and Con- tingencies” for additional information regarding the product warranty. Income taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred taxes are measured using enacted tax laws and rates expected to be in effect when such differences are recovered or settled. The effect of a change in tax rates on deferred taxes is recognized in income in the period that includes the enactment date of the change. The Company makes judgments regarding the recognition of deferred tax assets and the future realization of these assets. As prescribed by FASB ASC 740 “Income Taxes” and applicable guidance, valuation allowances must be provided for those deferred tax assets for which it is more likely than not (a likelihood more than 50%) that some portion or all of the deferred tax assets will not be realized. The guidance requires the Company to evaluate positive and negative evidence regarding the recoverability of deferred tax assets. Determination of whether the positive evidence outweighs the negative evidence and quantification of the valuation allowance requires the Company to make estimates and judgments of future financial results. The Company evaluates all tax positions taken on its federal, state and foreign tax filings to determine if the position is more likely than not to be sustained upon examination. For positions that meet the more likely than not to be sustained criteria, the largest amount of benefit to be realized upon ultimate settlement is determined on a cumu- lative probability basis. A previously recognized tax position is derecognized when it is subsequently determined that a tax position no longer meets the more likely than not threshold to be sustained. The evaluation of the sustain- ability of a tax position and the expected tax benefit is based on judgment, historical experience and various other assumptions. Actual results could differ from those estimates upon subsequent resolution of identified matters. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. Foreign currency translation The assets and liabilities of our foreign subsidiaries are measured using the local currency as the functional currency and are translated into U.S. dollars at exchange rates as of the balance sheet date. Income statement amounts are translated at the weighted-average rates of exchange during the year. The translation adjustment is accumulated as a separate component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are included in determining net income. Included in net income for the years ended December 31, 2013, 2012 and 2011 were foreign currency transaction gains of approximately $433, losses of $238 and gains of $237, respectively. Research and development The Company expenses research and development costs as costs are incurred. For the years ended December 31, 2013, 2012 and 2011, research and development expenses were $3,154, $2,926 and $1,899, respectively, and were principally related to the Company’s friction management and railroad monitoring system products. 46 6515_Fin.pdf 46 Reclassifications Certain accounts in the prior year consolidated financial statements have been reclassified for comparative purposes principally to conform to the presentation in the current year period. Subsequent Events We have evaluated all subsequent events through the date the financial statements were issued. No material recognized subsequent events were identified and all material non-recognizable subsequent events have been disclosed. Recently Adopted Accounting Guidance On January 1, 2013, the Company adopted changes issued by the Financial Accounting Standards Board to the reporting of amounts reclassified out of accumulated other comprehensive income. These changes require an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures that provide additional detail about those amounts. These requirements are to be applied to each component of accumulated other comprehensive income. The adoption of these changes is displayed in the Company’s Consolidated Statements of Compre- hensive Income. In March 2013, the FASB issued changes to a parent entity’s accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within a foreign entity or of an invest- ment in a foreign entity. A parent entity is required to release any related cumulative foreign currency translation adjustment from accumulated other comprehensive income into net income in the following circumstances: (i) a parent entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided; (ii) a partial sale of an equity method investment that is a foreign entity; (iii) a partial sale of an equity method investment that is not a foreign entity whereby the partial sale represents a complete or substantially complete liquidation of the foreign entity that held the equity method investment; and (iv) the sale of an investment in a foreign entity. These changes become effec- tive for the Company on January 1, 2014. Management has determined that the adoption of these changes will not have an impact on the Company’s Consolidated Financial Statements, unless the Company disposes of one of its foreign entities. Note 2. Business Segments The Company is a leading manufacturer, fabricator, and distributor of products and services for rail, con- struction, energy and utility markets. The Company is organized and evaluated by product group, which is the basis for identifying reportable segments. Each segment represents a revenue-producing component of the Company for which separate financial information is produced internally and is subject to evaluation by the Company’s chief operating decision maker in deciding how to allocate resources. Each segment is evaluated based upon their contribution to the Company’s consolidated results based upon segment profit. The Company markets its products directly in all major industrial areas of the United States, Canada and the United Kingdom, primarily through an internal sales force. The Company’s Rail Products segment provides a full line of new and used rail, trackwork and accessories to railroads, mines and industry. The Rail segment also designs and produces concrete railroad ties, insulated rail joints, power rail, track fasteners, coverboards and special accessories for mass transit and other rail systems. In addition, the Rail Products segment also engineers, manufactures and assembles friction management products and railway wayside data collection and management systems. 47 6515_Fin.pdf 47 The Company’s Construction Products segment sells and rents steel sheet piling, H-bearing pile, and other piling products for foundation and earth retention requirements. In addition, the Company’s Fabricated Products division sells bridge decking, bridge railing, structural steel fabrications, expansion joints, bridge forms and other products for highway construction and repair. The Buildings division produces precast concrete buildings. The Company’s Tubular Products segment supplies pipe coatings for natural gas pipelines and utilities. Additionally, this segment produces threaded pipe products for industrial water well and irrigation markets. L.B. Foster Ball Winch, Inc., which was acquired on November 7, 2013, will enhance our pipe coating capabilities and expand our business into the field service coating space. The following table illustrates net sales, profits, assets, depreciation/amortization and expenditures for long- lived assets of the Company by segment from continuing operations. Segment profit is the earnings from continuing operations before income taxes and includes internal cost of capital charges for net assets used in the segment at a rate of generally 1% per month. The internal cost of capital charges are eliminated during the con- solidation process. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies except that the Company accounts for inventory on a First-In, First- Out (FIFO) basis at the segment level compared to a Last-In, First-Out (LIFO) basis at the consolidated level. Net Sales Rail Products . . . . . . . . . . . . . . . . . Construction Products . . . . . . . . . . Tubular Products . . . . . . . . . . . . . . $363,667 191,751 42,545 2013 Segment Profit $28,692 10,206 9,208 Segment Assets Depreciation/ Amortization $252,049 77,900 37,107 $ 6,505 1,758 1,054 Total . . . . . . . . . . . . . . . . . . . . . $597,963 $48,106 $367,056 $ 9,317 Net Sales Rail Products . . . . . . . . . . . . . . . . . Construction Products . . . . . . . . . . Tubular Products . . . . . . . . . . . . . . $370,322 169,253 48,966 2012 Segment Profit $ 9,074 7,859 12,854 Segment Assets Depreciation/ Amortization $243,072 73,804 13,573 $ 9,736 2,119 599 Total . . . . . . . . . . . . . . . . . . . . . $588,541 $29,787 $330,449 $12,454 Net Sales Rail Products . . . . . . . . . . . . . . . . . Construction Products . . . . . . . . . . Tubular Products . . . . . . . . . . . . . . $315,133 227,734 32,470 2011 Segment Profit $18,724 16,323 6,810 Segment Assets Depreciation/ Amortization $219,917 88,615 11,758 $ 8,908 2,180 453 Total . . . . . . . . . . . . . . . . . . . . . $575,337 $41,857 $320,290 $11,541 Expenditures for Long-Lived Assets $ 3,383 1,805 2,460 $ 7,648 Expenditures for Long-Lived Assets $ 4,180 474 1,350 $ 6,004 Expenditures for Long-Lived Assets $ 5,894 1,049 3,995 $10,938 During 2013 and 2012, no single customer accounted for more than 10% of the Company’s consolidated net sales. In 2011, one customer accounted for approximately 10% of consolidated net sales. Sales to this customer were recorded primarily in the Rail Products segment and to a lesser degree the Construction Products segment. Net sales to this customer totaling $58,715 were recorded during 2011. Sales between segments are immaterial. 48 6515_Fin.pdf 48 Reconciliations of reportable segment net sales, profits, assets, depreciation/amortization, and expenditures for long-lived assets from continuing operations to the Company’s consolidated totals from continuing operations are illustrated as follows: 2013 2012 2011 Income from Continuing Operations: Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustment of inventory to LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated equity in income of nonconsolidated investments . . . Unallocated corporate amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,106 37 659 1,316 (6,003) $ 29,787 1,118 452 837 (8,364) $ 41,857 (2,183) 321 707 (8,050) Income from continuing operations, before income taxes . . . . . . . $ 44,115 $ 23,830 $ 32,652 Assets: Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Unallocated corporate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $367,056 55,625 (9,027) $330,449 84,737 (9,064) $320,290 69,787 (10,183) Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $413,654 $406,122 $379,894 2013 2012 2011 Depreciation/Amortization: Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,317 685 $ 12,454 519 $ 11,541 466 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,002 $ 12,973 $ 12,007 Expenditures for Long-Lived Assets: Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,648 2,026 $ 6,004 1,156 $ 10,938 795 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,674 $ 7,160 $ 11,733 The following table summarizes the Company’s sales from continuing operations by major geographic region in which the Company has operations: 2013 2012 2011 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $495,710 37,290 16,548 48,415 $485,111 40,892 18,698 43,840 $483,889 41,252 14,728 35,468 $597,963 $588,541 $575,337 The following table summarizes the Company’s long-lived assets from continuing operations by geographic region: 2013 2012 2011 United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,717 8,833 559 $31,961 9,773 599 $35,918 9,374 545 $50,109 $42,333 $45,837 49 6515_Fin.pdf 49 The following table summarizes the Company’s sales by major product line from continuing operations: 2013 2012 2011 Rail distribution products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Piling products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Rail Technologies products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CXT concrete tie products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transit products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CXT concrete building products . . . . . . . . . . . . . . . . . . . . . . . . . . Other products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $144,911 140,302 88,670 44,108 41,947 32,969 105,056 $155,832 114,070 92,826 58,182 22,215 30,195 115,221 $115,777 162,641 97,775 48,968 17,256 35,557 97,363 $597,963 $588,541 $575,337 Note 3. Acquisitions On November 7, 2013, the Company executed an Asset Purchase Agreement (“APA”) to acquire sub- stantially all of the assets and liabilities of Ball Winch, LLC (Ball Winch), a Texas based provider of custom coating services for steel pipe and fabricated steel products for the energy and utility industries, for cash consid- eration of $37,500. The purchases price was adjusted to $37,995 as a result of the post-closing working capital adjustment of $495, which was accrued within Accounts payable as of December 31, 2013. Included within the purchase price was $3,300 which will be held in escrow to satisfy any indemnity claims under the APA. The Company incurred $182 of acquisition-related costs which are included in the results of operations within selling and administrative costs for the quarter ended December 31, 2013. The transaction was accounted for under the acquisition method of accounting under U.S. generally accepted accounting principles which requires an acquiring entity to recognize, with limited exceptions, all of the assets acquired and liabilities assumed in a transaction at fair value as of the acquisition date. Goodwill primarily represented the value paid for Ball Winch’s enhancement of the Company’s service offerings and capabilities as well as a premium payment related to the right to control the acquired assets of Ball Winch, LLC. The Company has concluded that intangible assets and goodwill values resulting from this transaction will be deductible for tax purposes. The results of operations for Ball Winch are included in our Tubular segment for the period from November 7, 2013 through December 31, 2013. Ball Winch will enhance our pipe coating capabilities and expand our business into the field service coating markets. The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition: Allocation of Purchase Price Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair Value $ 1,857 64 5,555 16,544 14,682 (707) Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $37,995 50 6515_Fin.pdf 50 The following table summarizes the preliminary estimates of the fair values and amortizable lives of the identifiable intangible assets acquired: Intangible Asset Trade name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-competition agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair Value $ 723 11,129 2,830 Weighted Average Amortizable Life (years) 0.5 7.5 1.0 Total identified intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,682 The purchase price allocation is based on a preliminary valuation. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement recognized for assets or liabilities assumed, the Company will retrospectively adjust the amounts recognized as of the acquisition date. Note 4. Discontinued Operations On June 4, 2012, the Company sold substantially all of the assets and liabilities of its railway securement business, Shipping Systems Division (SSD), for $8,579, resulting in a pre-tax gain of approximately $3,508. On August 30, 2012, the Company sold substantially all of the assets and liabilities of its precise structural products business, Precise, for $2,643, resulting in a pre-tax loss of approximately $315. The operations of these divisions qualified as a “component of an entity” under FASB ASC 205-20, “Presentation of Financial Statements — Discontinued Operations”. The operations are classified as discontinued for all periods presented. Future expenses of discontinued operations are not expected to be material. SSD and Precise were previously reported in the Rail Products and Construction Products segments, respectively. Net sales and income, including the pre-tax gain of $3,193, from discontinued operations were as follows for the three years ended December 31: Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73 $8,705 $15,589 Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23 9 $3,842 2,418 $ 1,287 459 Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14 $1,424 $ 828 Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.1% 62.9% 35.7% 2013 2012 2011 Goodwill of $2,588 allocated to SSD for discontinued operations was not deductible for income tax pur- poses, resulting in a 62.9% effective tax rate for 2012. As of December 31, 2013 and 2012, the Company had $149 and $464 in current assets and $26 and $106 in current liabilities related to discontinued operations, respectively. Note 5. Goodwill and Other Intangible Assets As a result of the November 7, 2013 acquisition, the Company’s goodwill balance increased by $16,544. The carrying amount of goodwill at December 31, 2013 and 2012 was $57,781 and $41,237. During 2012, the Company divested $2,588 in goodwill and $177 in net carrying value of other intangibles attributed to the 51 6515_Fin.pdf 51 Rail Products segment in connection with the sale of its railway securement business. More information regard- ing this sale can be found in Note 4. The following table represents the goodwill balance by reportable segment. December 31, 2013 2012 Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tubular Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $38,026 3,211 16,544 $38,026 3,211 — $57,781 $41,237 Identified intangible assets related to continuing operations of $44,455 are attributable to the Company’s Rail Products segment, $1,830 are attributable to the Company’s Construction Products segment, and $14,682 are attributable to the Tubular Products segment at December 31, 2013. The December 31, 2012 carrying value of identified intangible assets was $46,811, of which $44,506 was attributable to the Company’s Rail Products segment and $2,305 was attributable to the Company’s Construction Products segment. The components of the Company’s intangible assets are as follows: Weighted Average Amortization Period In Years Non-compete agreements . . . . . . . . . . . . . . . . . . . . . . . Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . Supplier relationships . . . . . . . . . . . . . . . . . . . . . . . . . . Trademarks and trade names . . . . . . . . . . . . . . . . . . . . Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 10 23 5 16 15 Weighted Average Amortization Period In Years Non-compete agreements . . . . . . . . . . . . . . . . . . . . . . . Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . Supplier relationships . . . . . . . . . . . . . . . . . . . . . . . . . . Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 10 23 5 17 18 December 31, 2013 Gross Carrying Value $ 2,860 639 19,960 350 7,003 30,155 Accumulated Amortization $ (117) (201) (3,575) (213) (1,334) (3,681) Net Carrying Amount $ 2,743 438 16,385 137 5,669 26,474 $60,967 $(9,121) $51,846 December 31, 2012 Gross Carrying Value $ 380 815 19,960 350 6,280 19,026 Accumulated Amortization $ (367) (412) (2,488) (143) (879) (2,357) Net Carrying Amount $ 13 403 17,472 207 5,401 16,669 $46,811 $(6,646) $40,165 Intangible assets are amortized over their useful lives ranging from 5 to 25 years, with a total weighted average amortization period of approximately 17 years. Amortization expense from continuing operations for the years ended December 31, 2013, 2012 and 2011 was $3,112, $2,961 and $2,791, respectively. 52 6515_Fin.pdf 52 Estimated amortization expense from continuing operations for the years 2014 and thereafter is as follows: 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization Expense $ 4,543 4,265 4,107 4,107 4,003 30,821 $51,846 Note 6. Accounts Receivable Accounts receivable from continuing operations at December 31, 2013 and 2012 are summarized as follows: 2013 2012 Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $98,474 (1,099) $59,308 (899) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,375 1,062 58,409 1,264 $98,437 $59,673 Bad debt expense/(recovery) was $236, $(319) and $275 in 2013, 2012 and 2011, respectively. The Company’s customers are principally in the Rail, Construction and Tubular Products segments of the economy. As of December 31, 2013 and 2012, trade receivables, net of allowance for doubtful accounts, from customers in these markets were as follows: 2013 2012 Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tubular Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $57,342 35,711 4,322 $34,886 18,677 4,846 $97,375 $58,409 Credit is extended based upon an evaluation of the customer’s financial condition and while collateral is not required, the Company often receives surety bonds that guarantee payment. Credit terms are consistent with industry standards and practices. 53 6515_Fin.pdf 53 Note 7. Inventory Inventories of continuing operations of the Company at December 31, 2013 and 2012 are summarized in the following table: Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total inventories at current costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: LIFO reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2013 December 31, 2012 $55,166 11,332 19,485 85,983 (9,027) $ 78,715 17,693 19,764 116,172 (9,064) $76,956 $107,108 At December 31, 2013 and 2012, the LIFO carrying value of inventories for book purposes exceeded the LIFO value for tax purposes by approximately $12,241 and $11,686, respectively. As of December 31, 2013, and 2012, liquidation of certain LIFO inventory layers carried at costs which were higher than the costs of current purchases resulted in increases in cost of goods sold of $1,128 and $15, respectively. During 2011, liquidation of LIFO layers carried at costs that were lower than current purchases resulted in a decrease to cost of goods sold of $33. Note 8. Property, Plant and Equipment Property, plant and equipment of continuing operations at December 31, 2013 and 2012 consist of the fol- lowing: 2013 2012 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Improvements to land and leaseholds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Machinery and equipment, including equipment under capitalized leases . . . . . Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,862 24,903 15,834 88,803 3,567 $ 4,764 23,187 13,715 80,120 1,783 Less accumulated depreciation and amortization, including accumulated amortization of capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,860 81,236 $ 50,109 $ 42,333 137,969 123,569 Depreciation expense, leases, December 31, 2013, 2012 and 2011 amounted to $6,890, $9,979, and $9,182, respectively. including amortization of assets under capital for the years ended Note 9. Investments Investments of the Company consist of a nonconsolidated equity method investment of $5,090 and $4,332 at December 31, 2013 and 2012, respectively. The Company is a member of a joint venture, L B Pipe and Coupling Products, LLC (JV) in which it main- tains a 45% ownership interest. The JV manufactures, markets and sells various precision coupling products for the energy, utility and construction markets and is scheduled to terminate on June 30, 2019. Under the terms of 54 6515_Fin.pdf 54 the JV agreement, as amended, the Company was required to make capital contributions totaling approximately $3,000. The Company fulfilled these commitments during 2011. The other JV members are required to make proportionate contributions in accordance with the ownership percentages in the JV agreement. Under applicable guidance for variable interest entities in ASC 810, “Consolidation,” the Company determined that the JV is a variable interest entity, as the JV has not demonstrated that it has sufficient equity to support its operations without additional financial support. The Company concluded that it is not the primary beneficiary of the variable interest entity, as the Company does not have a controlling financial interest and does not have the power to direct the activities that most significantly impact the economic performance of the JV. Accordingly, the Company concluded that the equity method of accounting remains appropriate. During the year ended December 31, 2013, each of the JV members received a proportional distribution of equity from the JV. The Company’s 45% ownership interest resulted in a cash distribution of $558. There were no changes to the members’ ownership interests as a result of the distribution. The Company recorded equity in the income of the JV of approximately $1,316, $837 and $707 for the years ended December 31, 2013, 2012 and 2011, respectively. The Company’s exposure to loss results from its capital contributions, net of the Company’s share of the JV’s income or loss, and its net investment in the direct financing lease covering the facility used by the JV for its operations. The carrying amounts with the maximum exposure to loss of the Company at December 31, 2013 and December 31, 2012, respectively, are as follows: 2013 2012 Equity method investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net investment in direct financing lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,090 1,224 $4,332 1,327 $6,314 $5,659 The Company is leasing five acres of land and two facilities to the JV over a period of 9.5 years, with a 5.5 year renewal period. In November 2012, the Company executed the first amendment to its lease with the JV. The amendment included the addition of a second facility built by the Company that was leased to the JV. The current monthly lease payments, including interest, approximate $17, with a balloon payment of approximately $488, which is required to be paid either at the termination of the lease, allocated over the renewal period or during the initial term of the lease. This lease qualifies as a direct financing lease under the applicable guidance in ASC 840-30, “Leases.” The Company maintained a net investment in this direct financing lease of approximately $1,224 and $1,327 at December 31, 2013 and 2012, respectively. The following is a schedule of the direct financing minimum lease payments for the years 2014 and there- after 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Minimum Lease Payments $ 114 122 131 140 150 567 $1,224 55 6515_Fin.pdf 55 Note 10. Borrowings United States On May 2, 2011, the Company, its domestic subsidiaries, and certain of its Canadian subsidiaries entered into a new $125,000 Revolving Credit Facility Credit Agreement (Credit Agreement) with PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A. and Citizens Bank of Pennsylvania. This Credit Agreement replaced a prior revolving credit facility with a maximum credit line of $90,000 and a $20,000 term loan. The Credit Agreement provides for a five-year, unsecured revolving credit facility that permits borrowing up to $125,000 for the U.S. borrowers and a sublimit of the equivalent of $15,000 U.S. dollars that is available to the Canadian borrowers. Provided no event of default exists, the Credit Agreement contains a provision that provides for an increase in the revolver facility of $50,000 that can be allocated to existing or new lenders if the Compa- ny’s borrowing requirements should increase. The Credit Agreement includes a sublimit of $20,000 for the issu- ance of trade and standby letters of credit. Borrowings under the Credit Agreement will bear interest at rates based upon either the base rate or LIBOR- based rate plus applicable margins. Applicable margins are dictated by the ratio of the Company’s indebtedness less cash on hand in excess of $15,000 to the Company’s consolidated EBITDA, as defined in the underlying Credit Agreement. The base rate is the highest of (a) PNC Bank’s prime rate, (b) the Federal Funds Rate plus 0.50% or (c) the daily LIBOR rate, as defined in the underlying Credit Agreement, plus 1.00%. The base rate spread ranges from 0.00% to 1.00%. LIBOR-based rates are determined by dividing the published LIBOR rate by a number equal to 1.00 minus the percentage prescribed by the Federal Reserve for determining the maximum reserve requirements with respect to any Eurocurrency funding by banks on such day. The LIBOR-based rate spread ranges from 1.00% to 2.00%. The Credit Agreement includes two financial covenants: (a) the Leverage Ratio, defined as the Company’s Indebtedness less cash on hand in excess of $15,000 divided by the Company’s consolidated EBITDA, which must not exceed 3.00 to 1.00 and (b) Minimum Interest Coverage, defined as consolidated EBITDA less Capital Expenditures divided by consolidated interest expense, which must be no less than 3.00 to 1.00. The Credit Agreement permits the Company to pay dividends and distributions and make redemptions with respect to its stock provided no event of default or potential default (as defined in the Credit Agreement) has occurred prior to or after giving effect to the dividend, distribution, or redemption. Dividends, distributions, and redemptions are capped at $15,000 per year when funds are drawn on the facility. If no drawings on the facility exist, dividends, distributions, and redemptions in excess of $15,000 per year are subjected to a limitation of $75,000 in aggregate. The $75,000 aggregate limitation also includes certain loans, investments, and acquisitions. The Company is permitted to acquire the stock or assets of other entities with limited restrictions provided that the Leverage Ratio does not exceed 2.50 to 1.00 after giving effect to the acquisition. Other restrictions exist at all times including, but not limited to, limitation of the Company’s sale of assets, other indebtedness incurred by either the borrowers or the non-borrower subsidiaries of the Company, guaranties, and liens. On July 9, 2012, the Company amended the Credit Agreement to increase the limitation of the Company’s sale of assets from $10,000 to $25,000. As of December 31, 2013, the Company was in compliance with the Credit Agreement’s covenants. The Company had no outstanding borrowings under the revolving credit facility at December 31, 2013 or 2012 and had available borrowing capacity of $124,186 and $123,829 at December 31, 2013 and 2012, respectively. Letters of Credit At December 31, 2013 and 2012, the Company had outstanding letters of credit of approximately $814 and $1,171, respectively. 56 6515_Fin.pdf 56 United Kingdom A subsidiary of the Company has a working capital facility with NatWest Bank for its United Kingdom operations which includes an overdraft availability of £1,500 pounds sterling (approximately $2,484 at December 31, 2013). This credit facility supports the subsidiary’s working capital requirements and is collateral- ized by substantially all of the assets of its United Kingdom operations. The interest rate on this facility is the financial institution’s base rate plus 1.50%. Outstanding performance bonds reduce availability under this credit facility. The subsidiary of the Company had no outstanding borrowings under this credit facility as of December 31, 2013. There was $60 and $61 in outstanding guarantees (as defined in the underlying agreement) at December 31, 2013 and 2012, respectively. This credit facility was renewed during the third quarter of 2013 with no significant changes to the underlying terms or conditions in the facility. The expiration date of this credit facility is July 31, 2014. It is the Company’s intention to renew this credit facility with NatWest Bank during the annual review over the credit facility in 2014. The United Kingdom loan agreements contain certain financial covenants that require that subsidiary to maintain senior interest and cash flow coverage ratios. The subsidiary was in compliance with these financial covenants as of December 31, 2013. The subsidiary had available borrowing capacity of $2,424 and $2,376 at December 31, 2013 and 2012, respectively. Note 11. Long-Term Debt and Related Matters Long-term debt at December 31, 2013 and 2012 consists of the following: Lease obligations payable in installments through 2015 with a weighted average interest rate of 5.37% at December 31, 2013 and December 31, 2012 . . . . . . . . . . . . . . $56 $62 2013 2012 Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 31 62 35 $25 $27 The maturities of long-term debt for each of the succeeding three years subsequent to December 31, 2013 are as follows: 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31 17 8 $56 Note 12. Stockholders’ Equity The Company had authorized shares of 20,000,000 in common stock with 11,115,779 shares issued at December 31, 2013 and 2012. The common stock has a par value of $.01 per share and the current dividend as authorized by the Company’s Board of Directors is $0.12 per year or $0.03 per quarter. In February 2013, the Company’s Board of Directors authorized an increase to the regular quarterly dividend to $0.03 from $0.025. At December 31, 2013 and 2012, the Company had authorized shares of 5,000,000 in Preferred stock. No Preferred stock has been issued. No par value has been assigned to the Preferred stock. The Company’s Board of Directors authorized the purchase of up to $25,000 in shares of its common stock through a share repurchase program announced in May 2011 at prevailing market prices or privately negotiated transactions. There were no such repurchases of common stock under this program during 2013. This author- 57 6515_Fin.pdf 57 ization expired on December 31, 2013. On December 4, 2013 the Company’s Board of Directors authorized the purchase of up to $15,000 in shares of its common stock through a share repurchase program at prevailing market prices or privately negotiated transactions. This authorization is effective as of January 1, 2014 and will expire on December 31, 2016. As of December 31, 2013 and 2012, the Company withheld 16,166 and 23,562 shares for approximately $708 and $669, respectively, from employees to pay their withholding taxes in connection with the exercise and/ or vesting of stock options and restricted stock awards. Cash dividends of $1,240, $1,029 and $1,022 were paid in 2013, 2012 and 2011, respectively. Share Activity Common Stock Treasury Outstanding (Number of Shares) Balance at end of 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchased through share repurchase program . . . . . . . . . . . . . . . . . . . . . . . . . Issued for stock-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . 814,249 278,655 (50,528) 10,277,138 (278,655) 74,920 Balance at end of 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued for stock-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . 1,042,376 (75,995) 10,073,403 75,995 Balance at end of 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued for stock-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . 966,381 (39,123) 10,149,398 39,123 Balance at end of 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 927,258 10,188,521 Note 13. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss, net of tax, for the years ended December 31, 2013 and 2012, are as follows: 2013 2012 Pension and post-retirement benefit plan adjustments . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,643) (2,940) $(4,204) 535 $(4,583) $(3,669) Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indef- inite investments in non U.S. subsidiaries. See Note 15 “Income Taxes”. 58 6515_Fin.pdf 58 Note 14. Earnings Per Common Share The following table sets forth the computation of basic and diluted earnings per common share for the three years ended December 31: 2013 2012 2011 Numerator for basic and diluted earnings per common share — Income available to common stockholders: Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . . Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . $29,276 14 $14,764 1,424 $22,067 828 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,290 $16,188 $22,895 Denominator: Weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,175 Denominator for basic earnings per common share . . . . . . . . . . . . . 10,175 10,124 10,124 10,209 10,209 Effect of dilutive securities: Employee stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other stock compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . Dilutive potential common shares . . . . . . . . . . . . . . . . . . . . . . . . . . 11 74 85 16 94 110 29 74 103 Denominator for diluted earnings per common share -adjusted weighted average shares and assumed conversions . . . . . . . . . . . 10,260 10,234 10,312 Basic earnings per common share: Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.88 0.00 $ 1.46 0.14 $ 2.16 0.08 Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.88 $ 1.60 $ 2.24 Diluted earnings per common share: Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends paid per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ $ 2.85 0.00 2.85 0.12 $ $ $ 1.44 0.14 1.58 0.10 $ $ $ 2.14 0.08 2.22 0.10 There were no antidilutive shares in 2013, 2012 and 2011. 59 6515_Fin.pdf 59 Note 15. Income Taxes Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2013 and 2012 are as follows: Deferred tax liabilities: 2013 2012 Goodwill and other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Investment in joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(11,360) (3,369) (3,611) (587) (437) $(12,057) (2,745) (3,433) (582) (478) Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,364) (19,295) Deferred tax assets: Pension and post-retirement liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Warranty reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net operating loss / tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,033 2,689 1,525 388 662 569 139 843 7,848 2,787 5,752 1,161 358 657 592 188 245 11,740 Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(11,516) $ (7,555) Significant components of the provision for income taxes are as follows: 2013 2012 2011 Current: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,776 837 1,982 $ 9,742 1,977 1,910 $ 4,123 485 2,493 Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,595 13,629 7,101 Deferred: Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,200 273 (229) 3,244 (3,966) (155) (442) (4,563) 3,446 553 (515) 3,484 Total income tax expense from continuing operations . . . . . . . . . . . . $14,839 $ 9,066 $10,585 At December 31, 2013, the Company has not recorded deferred U.S. income taxes or foreign withholding taxes on $49,030 of undistributed earnings of its foreign subsidiaries. It is management’s intent and practice to indefinitely reinvest such earnings outside of the U.S. Determination of the amount of any unrecognized deferred income tax liability associated with these undistributed earnings is not practicable because of the complexities of the hypothetical calculation. 60 6515_Fin.pdf 60 Income before income taxes, as shown in the accompanying consolidated statements of operations, includes the following components: 2013 2012 2011 Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $37,283 6,832 $16,600 7,230 $23,433 9,219 Income from continuing operations, before income taxes . . . . . . . . . . $44,115 $23,830 $32,652 The reconciliation of income tax computed at statutory rates to income tax expense is as follows: Statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign tax rate differential State income taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in liability for unrecognized tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 2012 2011 35.0% 35.0% 35.0% (1.7) (2.3) (3.0) 2.6 2.2 4.5 0.6 0.7 1.4 (0.8) (2.0) (2.2) (1.9) (0.6) 0.9 (0.2) (0.5) 1.4 33.6% 38.0% 32.5% At December 31, 2013 and 2012, the tax benefit of net operating loss carryforwards available for state income tax purposes was $83 and $59, respectively. The net operating loss carryforwards will expire in 2019 through 2032. The Company has foreign tax credit carryforwards in the amount of $85 that will expire in 2022. The Company anticipates utilizing these operating loss and credit carryforwards prior to their expiration and, therefore, has not provided a valuation allowance for these amounts. The following table provides a reconciliation of unrecognized tax benefits as of December 31, 2013 and 2012: 2013 2012 Unrecognized tax benefits at beginning of period: . . . . . . . . . . . . . . . . . . . . . . . . . . . Increases based on tax positions for prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . Decreases based on tax positions for prior periods . . . . . . . . . . . . . . . . . . . . . . . . . . . Decreases related to settlements with taxing authorities . . . . . . . . . . . . . . . . . . . . . . Decreases as a result of a lapse of the applicable statute of limitations . . . . . . . . . . . $2,045 149 (89) (596) — $1,849 220 — — (24) Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,509 $2,045 The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $1,509 at December 31, 2013. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. At December 31, 2013, the Company had accrued interest and penalties related to unrecognized tax benefits of $342. As of December 31, 2013, it is reasonably possible that unrecognized tax benefits could decrease between $286 and $551 within the next 12 months related to state tax uncertainties. Ultimate realization of this decrease is dependent upon the occurrence of certain events, including the completion of audits by tax authorities and expiration of statutes of limitations. The Company files income tax returns in the United States and in various state, local and foreign juris- dictions. The Company is subject to federal income tax examinations for the period 2010 and forward. With respect to the state, local and foreign filings, certain entities of the Company is subject to income tax examina- tions for the periods 2007 and forward. 61 6515_Fin.pdf 61 Note 16. Stock-based Compensation The Company applies the provisions of FASB ASC 718, “Compensation – Stock Compensation,” to account for the Company’s share-based compensation. Share-based compensation cost is measured at the grant date based on the calculated fair value of the award and is recognized over the employees’ requisite service period. The Company recorded share-based compensation expense of $2,156, $1,989 and $1,958 for the years ended December 31, 2013, 2012 and 2011, respectively, related to fully-vested stock awards, restricted stock awards and performance unit awards as follows. As of December 31, 2013, unrecognized compensation expense for awards the Company expects to vest approximated $3,517. The Company will recognize this expense over the upcoming 3.2 year period through February 2017. Shares issued as a result of vested stock-based compensation generally will be from previously issued shares which have been reacquired by the Company and held as Treasury shares or authorized but previously unissued common stock. The excess tax benefit realized for the tax deduction from share-based compensation approximated $203, $199 and $425 for the years ended December 31, 2013, 2012 and 2011, respectively. This excess tax benefit is included in cash flows from financing activities in the Consolidated Statements of Cash Flows. Stock Option Awards The Company has two equity compensation plans: The 1998 Long-Term Incentive Plan for Officers and Directors, amended and restated in May 2006, (1998 Plan) and the 2006 Omnibus Incentive Plan, amended and restated in October 2013 (Omnibus Plan). The 1998 Plan provides for the award of stock options to key employees and directors to purchase up to 900,000 shares of common stock at no less than 100% of fair market value on the date of the grant. The 1998 Plan provides for the granting of “nonqualified options” and “incentive stock options” with a duration of not more than ten years from the date of grant. The 1998 Plan also provides that, unless otherwise set forth in the option agreement, stock options are exercisable in installments of up to 25% annually beginning one year from date of grant. Non-employee directors were automatically awarded fully vested, nonqualified stock options to acquire 5,000 shares of the Company’s common stock on each date the outside directors were elected at an annual shareholders’ meeting to serve as directors. The 1998 Plan was amended in May 2006 to remove the automatic awarding of stock options to outside directors. The Omnibus Plan allows for the issuance of 900,000 shares of common stock through the granting of stock options or stock awards (including performance units convertible into stock) to key employees and directors at no less than 100% of fair market value on the date of the grant. The Omnibus Plan provides for the granting of “nonqualified options” with a duration of not more than ten years from the date of grant. The Omnibus Plan also provides that, unless otherwise set forth in the option agreement, stock options are exercisable in installments of up to 25% annually beginning one year from the date of grant. No stock options have been granted under the Omnibus Plan and, as such, there was no share-based compensation expense related to stock options recorded in 2013, 2012 or 2011. 62 6515_Fin.pdf 62 Certain information for the three years ended December 31, 2013 relative to employee stock options is summarized as follows: 2013 2012 2011 Number of shares under the plans: Outstanding and exercisable at beginning of year . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,500 — — (3,750) 39,950 — — (17,450) 80,950 — — (41,000) Outstanding and exercisable at end of year . . . . . . . . . . . . . . . . . . . . . 18,750 22,500 39,950 Number of shares available for future grant: Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 561,655 315,840 391,881 End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557,655 561,655 315,840 The total intrinsic value of stock options outstanding and exercisable at December 31, 2013, 2012 and 2011 was $687, $743 and $773, respectively. At December 31, 2013, stock options outstanding and exercisable under the Company’s equity plans had option prices ranging from $7.81 to $14.77, with a weighted average exercise price of $10.64. At December 31, 2012, stock options outstanding and exercisable under the Company’s equity plans had option prices ranging from $7.81 to $14.77, with a weighted average exercise price of $10.41 per share. At December 31, 2011, stock options outstanding and exercisable under the Company’s equity plans had option prices ranging from $4.23 to $14.77, with a weighted average price of $8.94. The weighted average remaining contractual life of the stock options outstanding at December 31, 2013, 2012 and 2011 were 1.3, 2.2 and 2.8 years, respectively. The weighted average exercise price per share of the stock options exercised in 2013, 2012 and 2011 were $9.30, $7.03 and $5.02, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2013, 2012 and 2011 were $124, $457 and $1,112, respectively. Certain information for the year ended December 31, 2013 relative to stock options at respective exercise price ranges is summarized as follows: Range of Exercise Prices $7.81 - $8.97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9.29 - $14.77 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Options Outstanding and Exercisable Number of Shares Weighted Average Remaining Life Weighted Exercise Price 10,000 8,750 18,750 0.9 1.7 1.3 $ 8.39 13.20 $10.64 Fully-Vested Stock Awards Non-employee directors are automatically awarded 3,500 fully vested shares, or a lesser amount determined by the directors, of the Company’s common stock on each date the non-employee directors are elected at an annual shareholders’ meeting to serve as directors. The non-employee directors were granted a total of 9,960, 12,000 and 10,500 fully-vested shares for the years ended December 31, 2013, 2012 and 2011, respectively. Compensation expense recorded by the Company related to fully-vested stock awards to non-employee directors was approximately $450, $337 and $370 for the years ended December 31, 2013, 2012 and 2011, respectively. The weighted average fair value of all the fully-vested stock grants awarded was $45.16, $28.05 and $35.24 per share for 2013, 2012 and 2011, respectively. 63 6515_Fin.pdf 63 Restricted Stock Awards The Restricted Stock Awards granted under the Omnibus Plan generally have vesting requirements that are determined by the underlying Restricted Stock Agreement. These forfeitable Restricted Stock Awards time-vest after a four year holding period, unless indicated otherwise by the underlying Restricted Stock Agreement. For the periods ended December 31, 2013, 2012 and 2011, the Company granted approximately 12,973, 42,677 and 46,436 shares, respectively, of restricted stock under the Omnibus Plan. During 2012, the Company also granted approximately 66,000 shares of restricted stock to an employee director. A summary of restricted stock award activity follows: Grant Date March 15, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . July 21, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . August 29, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 1, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 6, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . May 23, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 11, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . February 27, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares 24,836 16,600 5,000 66,000 18,347 8,000 16,330 12,973 Grant Date Share Price Aggregate Grant Date Fair Value (Dollars in Thousands) $38.46 38.44 24.50 30.15 27.49 28.05 41.98 42.49 $ 955 638 123 1,990 504 224 686 551 These forfeitable Restricted Stock Awards time-vest after a four-year period, unless indicated otherwise by the underlying Restricted Stock Agreement. Certain awards of restricted stock included in the above table pro- vide for partial vesting over a period up to the vesting date listed. Performance Unit Awards Annually, under separate three-year long-term incentive plans, pursuant to the Omnibus Plan, the Company grants performance units. Performance units granted during the periods ended December 31, 2013, 2012 and 2011 are as follows: Incentive Plan Grant Date 2011 - 2013 . . . . . . . . . . . . . . . . . . March 15, 2011 2012 - 2014 . . . . . . . . . . . . . . . . . . March 6, 2012 2013 - 2015 . . . . . . . . . . . . . . . . . . February 27, 2013 Units 34,002 43,042 31,418 Grant Date Share Price Aggregate Grant Date Fair Value (Dollars in Thousands) $38.46 27.49 42.49 $1,308 1,183 1,335 In addition, on March 15, 2011 the Company awarded, pursuant to the Omnibus Plan, 1,500 special performance units to a former employee director and 1,000 special performance units to an executive officer. Based on the satisfaction of the underlying performance conditions, these special performance units were con- verted, net of shares withheld for applicable income tax purposes, into 1,436 and 957 shares, respectively, of the Company’s common stock on March 6, 2012. The grant date fair value of these awards was $38.46 and the aggregate fair value was $58 and $38, respectively. Performance units are subject to forfeiture and will be converted into common stock of the Company based upon the Company’s performance relative to performance measures and conversion multiples as defined in the underlying plan. The aggregate fair value in the above table is based upon achieving 100% of the performance targets as defined in the underlying plan. During 2012, the Company reversed $807 of incentive compensation recognized in prior years under its separate three-year long-term incentive plans caused by the impact of the product warranty charge on Company performance, as it related to the awards’ underlying performance con- ditions. More information on the product warranty charge can be found in Note 20, Commitments and Con- tingent Liabilities. 64 6515_Fin.pdf 64 The number of shares awarded under the respective three year long-term incentive plans was determined using an average grant date fair value as follows: Incentive Plan Average Grant date Fair Value 2011 - 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2012 - 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 - 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.25 31.80 43.57 Ten Day Period February 2011 February 2012 February 2013 Excluding the fully-vested stock awards granted to non-employee directors, the Company recorded compen- sation expense of $1,706, $1,652 and $1,588, respectively, for the periods ended December 31, 2013, 2012 and 2011 related to restricted stock and performance unit awards. The Company issued, pursuant to the Omnibus Plan, approximately 34,000 fully-vested shares during 2012 which were earned under the 2009 – 2011 three year long-term incentive plan. This non-cash transaction of $1,130 was reflected as a decrease to Treasury Stock in the Consolidated Balance Sheet at December 31, 2012. During 2011 the Company issued, pursuant to the Omnibus Plan, approximately 20,000 fully-vested shares which were earned under the 2008 – 2010 three year long-term incentive plan. This non-cash transaction of $670 was reflected as a decrease to Treasury Stock in the Consolidated Balance Sheet at December 31, 2011. Note 17. Retirement Plans The Company has five retirement plans which cover its hourly and salaried employees in the United States: three defined benefit plans (one active / two frozen) and two defined contribution plans. Employees are eligible to participate in the appropriate plan based on employment classification. The Company’s funding to the defined benefit and defined contribution plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA), applicable plan policy and investment guidelines. The Company policy is to contribute at least the minimum in accordance with the funding standards of ERISA. The Company’s subsidiary, L.B. Foster Rail Technologies (Rail Technologies), maintains two defined con- tribution plans for its employees in Canada, as well as a post-retirement benefit plan. In the United Kingdom, Rail Technologies maintains both a defined contribution plan and a defined benefit plan. These plans are dis- cussed in further detail below. 65 6515_Fin.pdf 65 United States Defined Benefit Plans The following tables present a reconciliation of the changes in the benefit obligation, the fair market value of the assets and the funded status of the plans: Changes in benefit obligation: Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 2012 $18,034 33 707 (1,924) (738) $16,986 31 748 980 (711) Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,112 $18,034 Change to plan assets: Fair value of assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actual gain on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,262 2,019 496 (738) $12,088 1,127 758 (711) Fair value of assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,039 13,262 Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,073) $ (4,772) Amounts recognized in the consolidated balance sheet consist of: Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,073) $ (4,772) Amounts recognized in accumulated other comprehensive income consist of: Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,375 4 $ 4,675 4 $ 1,379 $ 4,679 The actuarial loss included in accumulated other comprehensive loss that will be recognized in net periodic pension cost during 2014 is $65, before taxes. Net periodic pension costs for the three years ended December 31, 2013 are as follows: 2013 2012 2011 Components of net periodic benefit cost: Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33 707 (856) 1 212 $ 31 748 (810) 1 194 $ 30 799 (764) 1 111 Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97 $ 164 $ 177 The weighted average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year. 2013 2012 2011 Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.90% 4.00% 5.48% Expected rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.50% 6.50% 6.70% 66 6515_Fin.pdf 66 The expected long-term rate of return is based on numerous factors including the target asset allocation for plan assets, historical rate of return, long-term inflation assumptions, and current and projected market conditions. Amounts applicable to the Company’s pension plans with accumulated benefit obligations in excess of plan assets are as follows: 2013 2012 Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,513 12,513 11,321 $18,034 18,034 13,262 Plan assets consist primarily of various fixed income and equity investments. The Company’s primary investment objective is to provide long-term growth of capital while accepting a moderate level of risk. The investments are limited to cash and equivalents, bonds, preferred stocks and common stocks. The investment target ranges and actual allocation of pension plan assets by major category at December 31, 2013 and 2012 are as follows: Target 2013 2012 Asset Category Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total fixed income funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total mutual funds / equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 - 10% 25 - 50 50 - 70 4% 7% 27 69 31 62 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% In accordance with the fair value disclosure requirements with FASB ASC 820, “Fair Value Measurements and Disclosures,” the following assets were measured at fair value on a recurring basis at December 31, 2013 and 2012. Additional information regarding FASB ASC 820 and the fair value hierarchy can be found in Note 19, Fair Value Measurements. Asset Category Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fixed income funds Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total fixed income funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity funds and equities Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 2012 $ 568 $ 984 4,005 4,005 9,142 1,324 4,168 4,168 7,163 947 Total equity funds and equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total 10,466 $15,039 8,110 $13,262 Cash equivalents. The Company uses quoted market prices to determine the fair value of these investments in interest-bearing cash accounts and they are classified in Level 1 of the fair value hierarchy. The carrying amounts approximate fair value because of the short maturity of the instruments. Fixed income funds. Investments within the fixed income funds category consist of fixed income corporate debt. The Company uses quoted market prices to determine the fair value of these fixed income funds. These instruments consist of exchange-traded government and corporate bonds and are classified in Level 1 of the fair value hierarchy. Equity funds and equities. The valuation of investments in registered investment companies is based on the underlying investments in securities. Securities traded on security exchanges are valued at the latest quoted sales 67 6515_Fin.pdf 67 price. Securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the average of the last reported bid and ask quotations. These investments are classified in Level 1 of the fair value hierarchy. The Company expects to contribute approximately $448 to its United States defined benefit plans in 2014. The following benefit payments are expected to be paid: 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Years 2019 — 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension Benefits $ 759 773 802 878 912 5,394 United Kingdom Defined Benefit Plan During 2010, the Conveyors International Limited Pension Plan (Conveyors plan) was merged with the Portec Rail Products (UK) Limited Pension Plan (Portec Rail Plan) a defined benefit pension plan in the United Kingdom. The combined Portec Rail Plan covers some current employees, former employees and retirees of the original Portec Rail Plan along with former employees of the Conveyors plan. The Portec Rail Plan has been frozen to new entrants since April 1, 1997 and also covers the former employees of the Conveyors plan after January 2002. Benefits under the Portec Rail Plan, including the former Conveyors plan, were based on years of service and eligible compensation during defined periods of service. Our funding policy for the Portec Rail Plan is to make minimum annual contributions required by applicable regulations. Contributions of $303 and $297 were made to the plan on December 31, 2013 and 2012, respectively. 68 6515_Fin.pdf 68 The funded status of the United Kingdom defined benefit plan at year end is as follows: Changes in benefit obligation: Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 2012 $ 8,034 348 162 (247) 153 $ 6,964 338 652 (236) 316 Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,450 $ 8,034 Change to plan assets: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of assets at beginning of year Actual gain on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,051 545 303 (247) 117 $ 5,160 596 297 (236) 234 Fair value of assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,769 6,051 Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,681) $(1,983) Amounts recognized in the consolidated balance sheet consist of: Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,681) $(1,983) Amounts recognized in accumulated other comprehensive income consist of: Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 906 142 (50) $ 1,176 164 (96) $ 998 $ 1,244 Net periodic pension costs for the three years ended December 31, 2013 are as follows: 2013 2012 2011 Components of net periodic benefit cost: Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 348 (321) (46) 22 229 $ 338 (307) (49) 23 221 $ 331 (337) (47) 22 107 Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 232 $ 226 $ 76 The weighted average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year. 2013 2012 2011 Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6% 4.3% 4.7% Expected rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8% 5.2% 5.7% 69 6515_Fin.pdf 69 Amounts applicable to the Company’s pension plans with accumulated benefit obligations in excess of plan assets are as follows: 2013 2012 Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,450 8,450 6,769 $8,034 8,034 6,051 The Company has estimated the long-term rate of return on plan assets based primarily on historical returns on plan assets, adjusted for changes in target portfolio allocations and recent changes in long-term interest rates based on publicly available information. Plan assets are invested by the trustees in accordance with a written statement of investment principles. This statement permits investment in equities, corporate bonds, United Kingdom government securities, commercial property and cash, based on certain target allocation percentages. Asset allocation is primarily based on a strategy to provide steady growth without undue fluctuations. The target asset allocation percentages for 2013 are as fol- lows: Portec Rail Plan Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not to exceed 50% U.K. Government securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not to exceed 50% Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Up to 100% Up to 100% Plan assets held within the Portec Rail Plan consist of cash and marketable securities which have been classi- fied as Level 1 of the fair value hierarchy. All other plan assets have been classified as Level 2 of the fair value hierarchy. The plan assets by category for the years ended December 31, are as follows: 2013 2012 Asset Category Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commercial property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 369 2,803 1,468 2,129 — $ 520 2,250 1,529 1,636 116 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,769 $6,051 United Kingdom regulations require trustees to adopt a prudent approach to funding required contributions to defined benefit pension plans. The Company anticipates making contributions of $298 to the Portec Rail Plan during 2014. The following estimated future benefits payments are expected to be paid under the Portec Rail Plan: 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Years 2019 — 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pension Benefits $ 231 256 290 313 333 2,103 70 6515_Fin.pdf 70 Other Post-Retirement Benefit Plan Rail Technologies’ operation near Montreal, Quebec, Canada, maintains a post-retirement benefit plan, which provides retiree life insurance, health care benefits and, for a closed group of employees, dental care. Retiring employees with a minimum of 10 years of service are eligible for the plan benefits. The plan is not funded. Cost of benefits earned by employees is charged to expense as services are rendered. The expense related to this plan was not material for 2013 and 2012. Rail Technologies’ accrued benefit obligation was $1,080 and $1,130 as of December 31, 2013 and 2012, respectively. Benefit payments anticipated for 2013 are not material. This obligation is recognized within other long-term liabilities. The weighted average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year. 2013 2012 Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0% 4.4% Weighted average health care trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4% 6.6% The weighted average health care rate trends downward to an ultimate rate of 4.40% in 2032. A 1% increase in the assumed health care cost trend rate will increase the service and interest cost components of the expense by $6 and increase the accumulated post-retirement benefit obligation by approximately $63 for 2013. A 1% decrease in the assumed health care cost trend rate will decrease the service and interest cost compo- nents of the expense by $7 and decrease the accumulated post-retirement benefit obligation by $76 for 2013. Defined Contribution Plans The Company has a domestic defined contribution plan that covers all non-union hourly and all salaried employees (Salaried Plan). The Salaried Plan permits both pre-tax and after-tax employee contributions. Partic- ipants can contribute, subject to statutory limitations, between 1% and 75% of eligible pre-tax pay and between 1% and 100% of eligible after-tax pay. The Company’s employer match is 100% of the first 1% of deferred eligible compensation and up to 50% of the next 6%, based on years of service, of deferred eligible compensation, for a total maximum potential match of 4%. The Company may also make discretionary contributions to the Salaried Plan. The Company also has a domestic defined contribution plan for union hourly employees with contributions made by both the participants and the Company based on various formulas (Union Plan). The Company’s Rail Technologies subsidiary maintains a defined contribution plan covering all non-union employees at its Montreal, Quebec, Canada location (Montreal Plan). Under the terms of the Montreal Plan, Rail Technologies may contribute 4% of each employee’s compensation as a non-elective contribution and may also contribute 30% of the first 6% of each employee’s compensation contributed to the Montreal Plan. The subsidiary also maintains a defined contribution plan covering substantially all employees at its United Kingdom locations (U.K. Plan). Benefits under the U.K. Plan are provided under no formal written agreement. Under the terms of the defined contribution U.K. Plan, Rail Technologies may make non-elective contributions of between 3% and 10% of each employee’s compensation. Finally, Rail Technologies maintains a defined contribution plan covering substantially all of the employees of at its Burnaby, British Columbia, Canada location (Burnaby Plan). Under the terms of the Burnaby Plan, Rail 71 6515_Fin.pdf 71 Technologies makes a non-elective contribution of 4% of each employee’s compensation and may also contrib- ute 30% of the first 6% of each employee’s compensation contributed to the Burnaby Plan. 2013 2012 2011 Salaried Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Union Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Montreal Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K. Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Burnaby Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,077 74 123 136 143 $2,028 79 126 116 143 $1,846 62 101 122 106 $2,553 $2,492 $2,237 Note 18. Rental and Lease Information The Company has capital and operating leases for certain plant facilities, office facilities, and equipment. Rental expense for the years ended December 31, 2013, 2012 and 2011 amounted to $3,333, $3,762 and $4,367, respectively. Generally, land and building leases include escalation clauses. The following is a schedule, by year, of the future minimum payments under capital and operating leases, together with the present value of the net minimum payments as of December 31, 2013: Year ending December 31, Capital Leases Operating Leases 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total present value of minimum payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less current portion of such obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $34 17 9 — — — 60 4 56 31 Long-term obligations with interest rates ranging from 3.75% to 8.46% . . . . . . . . $25 $ 2,897 2,430 1,593 1,535 1,449 9,219 $19,123 Assets recorded under capital leases are as follows: Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Machinery and equipment at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2013 2012 $ 6,373 6,427 399 13,199 12,676 $ 6,373 6,395 399 13,167 12,556 Net capital lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 523 $ 611 Included in the Company’s 2012 and 2011 “Other income” in the Consolidated Statements of Operations are gains recognized in connection with the Company’s 2008 sale-leaseback transaction. During 2011, the Company provided the lessor of the Houston, TX property with written notice of the Company’s termination of the lease in its entirety effective April 30, 2012. As a result of this termination, during 2012 the Company recognized $577 of 72 6515_Fin.pdf 72 previously deferred gain which was recorded in other income in the Consolidated Statement of Operations. Including this amount, the Company recorded approximately $456 and $1,081 within “Other Income” related to this transaction for the periods ended December 31, 2012 and 2011, respectively. Note 19. Fair Value Measurements The Company determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assump- tions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions of what market participants would use. The fair value hierarchy includes three levels of inputs that may be used to meas- ure fair value as described below. Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. The Company has an established process for determining fair value for its financial assets and liabilities, principally cash and cash equivalents and foreign currency exchange contracts. Fair value is based on quoted market prices, where available. If quoted market prices are not available, fair value is based on assumptions that use as inputs market-based parameters. The following sections describe the valuation methodologies used by the Company to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate the description includes details of the key inputs to the valuations and any significant assumptions. Cash equivalents. Included within “Cash and cash equivalents” are investments in money market funds with various underlying securities all of which maintain AAA credit ratings. Also included within cash equivalents are our investments in non-domestic bank certificates of deposit. The Company uses quoted market prices to determine the fair value of these investments and they are classified in Level 1 of the fair value hierarchy. The carrying amounts approximate fair value because of the short maturity of the instruments. The following assets and liabilities of the Company were measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 at December 31, 2013 and December 31, 2012: Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2013 Assets Domestic money market funds . . . . . . . Non domestic bank term deposits . . . . . $18,276 32,947 Cash equivalents at fair value . . . . . . 51,223 Total Assets . . . . . . . . . . . . . . . . . . . . . . . . $51,223 $18,276 32,947 51,223 $51,223 $— — — $— $— — — $— 73 6515_Fin.pdf 73 Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) December 31, 2012 Assets Domestic money market funds . . . . . . . Non domestic bank term deposits . . . . . $58,620 26,045 Cash equivalents at fair value . . . . . . 84,665 Total Assets . . . . . . . . . . . . . . . . . . . . . . . . $84,665 $58,620 26,045 84,665 $84,665 $— — — $— $— — — $— Information regarding the fair value disclosures associated with the assets of the Company’s defined benefit plans can be found in Note 17, Retirement Plans. Note 20. Commitments and Contingent Liabilities Product Warranty Claims On July 12, 2011, the UPRR notified (UPRR Notice) the Company and its subsidiary, CXT Incorporated (CXT), of a warranty claim under CXT’s 2005 supply contract relating to the sale of pre-stressed concrete rail- road ties to the UPRR. The UPRR asserted that a significant percentage of concrete ties manufactured in 2006 through 2011 at CXT’s Grand Island, NE facility failed to meet contract specifications, had workmanship defects and were cracking and failing prematurely. Approximately 1.6 million ties were sold from Grand Island, NE to the UPRR during the period the UPRR had claimed nonconformance. The 2005 contract called for each concrete tie which failed to conform to the specifications or had a material defect in workmanship to be replaced with 1.5 new concrete ties, provided, that UPRR within five years of the sale of a concrete tie, notified CXT of such fail- ure to conform or such defect in workmanship. The UPRR Notice did not specify how many ties manufactured during this period were defective nor the exact nature of the alleged workmanship defect. Additionally, UPRR notified the Company that a customer of the UPRR asserted that a representative sample of ties manufactured by the Company’s Grand Island, NE facility failed a test contained in the contract specification. At the customer’s request, UPRR removed approximately 115,000 concrete ties, which were a subset of the ties subject to the UPRR Notice. Beginning in July 2011 through the second quarter of 2012, the Company worked with material scientists and pre-stressed concrete experts to test a representative sample of Grand Island, NE concrete ties and assess warranty claims for certain concrete ties made in its Grand Island, NE facility between 1998 and 2011. The Company discontinued manufacturing operations in Grand Island, NE in early 2011. During 2012, the Company completed sufficient testing and analysis to further understand this matter. Addi- tionally, in a combined effort with UPRR, the Company analyzed Grand Island, NE concrete ties in track. Based upon these findings, the Company believed it discovered conditions, which largely related to the 2006 to 2007 manufacturing period, that can shorten the life of the concrete ties produced during this period. The Company also agreed on a process with the UPRR for identifying, prioritizing and replacing ties that meet the criteria for replacement. This process will be applied to the ties the Company shipped to the UPRR from its Grand Island, NE facility from 1998 to 2011. During most of this period the Company’s warranty policy for UPRR carried a 5 year warranty with a 1.5:1 replacement ratio for any defective ties. In order to accommodate the UPRR and other customer concerns, the Company reverted to a previously used warranty policy. This will result in all concrete ties with a 5 year warranty and a 1.5:1 replacement ratio, now having a 15 year warranty and a 1:1 replacement ratio. This change provided an additional 10 years of warranty protection. The 1:1 replacement ratio will furnish one tie for each tie replaced under the Company’s claims process. During the fourth quarter of 2012, the Com- pany reached agreement (2012 amended supply agreement) with the UPRR resulting in the Company and the UPRR working together to identify and replace defective ties. The process of planning and documenting will be 74 6515_Fin.pdf 74 done by both the Company and the UPRR to ensure this is done in an accurate and timely manner. In connection with this agreement, the Company and the UPRR agreed on a cash payment of $12,000 to the UPRR as compen- sation for concrete ties already replaced by the UPRR during the investigation period, including approximately 115,000 concrete ties mentioned previously. During 2012, as a result of testing the Company conducted on concrete ties manufactured at its former Grand Island, NE facility and of the related developments of the UPRR and other customer matters, the Company recorded pre-tax warranty charges of $22,000 in “Cost of Goods Sold” within its Rail Products segment based on the Company’s estimate of the number of defective concrete ties that will ultimately require replacement during the applicable warranty periods. Throughout 2013, at the UPRR’s request and under the terms of the 2012 amended supply agreement, the Company provided warranty replacement concrete ties for use across certain UPRR subdivisions. The Company attempted to reconcile the quantity of warranty claims for ties replaced and obtain supporting detail for the ties removed. The Company believes that the UPRR did not replace concrete ties in accordance with the amended agreement and has not furnished adequate documentation throughout the replacement process in these sub- divisions to support its full warranty claim. Based on the information received by the Company to date, the Company believes that a significant number of ties which the UPRR replaced in these subdivisions did not meet the criteria to be covered as warranty replacement ties under the 2012 amended supply agreement. To date, the two parties have been unable to properly reconcile the number of defective ties which have been replaced in these subdivisions. In late November 2013, the Company received notice from the UPRR asserting a material breach of the 2012 amended supply agreement. The UPRR’s notice asserted that the failure to honor its claims for warranty ties in these subdivisions was a material breach. Following receipt of this notice, the Company provided information to the UPRR to refute the UPRR’s claim of breach and included the reconciliation of warranty claims supported by substantial findings from the Company’s track observation team, all within the 90 day cure period. The Company also proposed further discussions to reach agreement on reconciliation for 2013 replace- ment activities and future replacement activities and a recommended process that will ensure future replacement activities are done with appropriate documentation and per the terms of our agreement. During the first quarter of 2014, the Company further responded within the 90 day cure period to the UPRR’s claim and presented a reconciliation for the subdivisions at issue. This proposed reconciliation is based on empirical data and visual observation from Company employees that were present during the replacement process for a substantial majority of the concrete ties replaced. The Company has spent considerable time doc- umenting facts related to concrete tie condition and track condition to assess whether the ties replaced met the criteria to be eligible for replacement under the terms of the 2012 amended supply agreement. During this same time period, the UPRR purchased several concrete ties for replacement of existing Grand Island ties that the UPRR deemed as their responsibility. The accrued concrete tie warranty reserve of $6,462 as of December 31, 2013 is the best estimate of the expected value of defective ties that will be replaced as a result of our observation and analysis of ties in track. While the Company believes this is a reasonable estimate of these potential warranty claims, these estimates could change due to the receipt of new information and future events. The disagreement related to the 2013 war- ranty replacement activity includes approximately 170,000 ties where we provided detailed documentation sup- porting our position with reason codes that detail why these ties are not eligible for a warranty claim. In the event the UPRR continues to replace ties and assert warranty claims in future years in the same manner as 2013, we are likely to have a disagreement in those future years relating to the number of ties eligible for warranty claim. The Company has denied it is in material breach of the 2012 amended supply agreement and intends to continue dis- cussions with the UPRR in an effort to resolve previously replaced ties as well as the future warranty tie replacement process. This dispute could jeopardize our 2012 amended supply agreement. For the years ended December 31, 2013, 2012 and 2011, sales to the UPRR from our Tucson, AZ facility were approximately $12,664, $25,441 and $22,395, respectively. Additionally, as of December 31, 2013 we had long-lived assets with a net book value of approximately $1,116 associated with the Tucson, AZ facility. 75 6515_Fin.pdf 75 There can be no assurance at this point that future potential costs pertaining to the UPRR’s claim or other potential future claims will not have a material impact on the Company’s results of operations and financial condition. The Company is subject to product warranty claims that arise in the ordinary course of its business. For certain manufactured products, the Company maintains a product warranty accrual which is adjusted on a monthly basis as a percentage of cost of sales. This product warranty accrual is periodically adjusted based on the identification or resolution of known individual product warranty claims. The following table sets forth the Company’s continuing operations product warranty accrual: Warranty Liability Balance at December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions to warranty liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Warranty liability utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additions to warranty liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Warranty liability utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,632 24,252 (15,157) $ 15,727 1,695 (9,939) Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,483 Included within the above table are concrete tie warranty reserves of approximately $6,462 and $14,837, respectively, as of December 31, 2013 and 2012. For the periods ended December 31, 2013, 2012 and 2011, the Company recorded approximately $612, $23,019 and $3,469, respectively, in pre-tax concrete tie warranty charges within “Cost of Goods Sold” in the Company’s Rail Products segment primarily related to concrete ties manufactured at the Company’s former Grand Island, NE facility. Environmental and Legal Proceedings The Company is subject to national, state, foreign, provincial and/or local laws and regulations relating to the protection of the environment. The Company is monitoring its potential environmental exposure related to current and former Rail Technologies facilities. The Company’s efforts to comply with environmental regu- lations may have an adverse effect on its future earnings. In the opinion of management, compliance with the present environmental protection laws will not have a material adverse effect on the financial condition, results of operations, cash flows, competitive position or capital expenditures of the Company. The Company is also subject to legal proceedings and claims that arise in the ordinary course of its busi- ness. In the opinion of management, the amount of ultimate liability with respect to these actions will not materi- ally affect the financial condition or liquidity of the Company. The resolution, in any reporting period, of one or more of these matters could have a material effect on the Company’s results of operations for that period. As of December 31, 2013 and 2012, the Company maintained environmental and litigation reserves of $2,190 and $2,141, respectively. On January 11, 2012, CXT received a subpoena from the United States Department of Transportation Inspector General (IG) requesting records related to its manufacture of concrete railroad ties in Grand Island, NE. CXT and the Company have been cooperating fully with the IG. Note 21. Quarterly Financial Information (Unaudited) As more fully described in Note 3 of the Notes to the Consolidated Financial Statements, “Acquisitions” the Company acquired Ball Winch, LLC on November 7, 2013 and the results of this subsidiary’s operations are included from the acquisition date through December 31, 2013. As more fully described in Note 4 of the Notes to the Consolidated Financial Statements, “Discontinued Operations,” the Company sold its SSD and Precise businesses in June 2012 and August 2012, respectively. The 76 6515_Fin.pdf 76 operations of these divisions qualified as a “component of an entity” under FASB ASC 205-20 and thus, the operations are classified as discontinued. Quarterly financial information for the years ended December 31, 2013 and 2012 is presented below: First Quarter Second Quarter Net sales . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . $ (Loss) income from discontinued $129,321 $ 24,848 4,951 $149,936 $ 29,175 7,257 $ operations . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . Basic earnings per common share: From continuing operations . . . . . . . From discontinued operations . . . . . Basic earnings per common share . . . . Diluted earnings per common share: $ $ $ $ $ $ From continuing operations . . . . . . . $ From discontinued operations . . . . . Diluted earnings per common share . . . $ $ Dividends paid per common share . . . . (24) 4,927 0.49 (0.00) 0.49 0.48 (0.00) 0.48 0.03 $ $ $ $ $ $ $ $ $ 38 7,295 0.71 0.00 0.72 0.71 0.00 0.71 0.03 First Quarter Second Quarter(1) Net sales . . . . . . . . . . . . . . . . . . . . . . . . Gross profit . . . . . . . . . . . . . . . . . . . . . . Income from continuing operations . . . $ Income from discontinued $114,291 $ 21,652 2,979 $163,180 $ 12,334 $ (3,321) 390 3,369 $ 1,250 $ (2,071) operations . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . Basic earnings per common share: From continuing operations . . . . . . . From discontinued operations . . . . . Basic earnings per common share . . . . Diluted earnings per common share: $ $ $ $ $ 0.30 0.04 0.33 $ From continuing operations . . . . . . . $ From discontinued operations . . . . . Diluted earnings per common share . . . $ $ Dividends paid per common share . . . . 0.29 0.04 0.32 0.025 $ $ $ $ $ $ $ (0.33) 0.12 (0.20) (0.33) 0.12 (0.20) 0.025 $ $ $ $ $ $ $ $ $ 2.88 (0.00) 2.88 2.85 0.00 2.85 0.12 2013 Third Quarter $162,248 $ 31,305 9,793 $ Fourth Quarter $156,458 $ 30,611 7,275 $ Total $597,963 $115,939 $ 29,276 — $ 14 $ 29,290 7,275 — $ $ 9,793 0.96 $ — $ $ 0.96 0.71 $ — $ $ 0.71 0.95 $ — $ $ $ 0.95 0.03 0.71 $ — $ $ $ 0.71 0.03 2012 Third Quarter(2) $170,346 $ 30,713 8,463 $ $ $ $ $ $ $ $ $ $ (238) 8,225 0.83 (0.02) 0.81 0.83 (0.02) 0.81 0.025 Fourth Quarter $140,724 $ 27,570 6,643 $ Total $588,541 $ 92,269 $ 14,764 $ $ $ $ $ $ $ $ $ 22 6,665 $ 1,424 $ 16,188 0.65 0.00 0.66 $ $ $ 0.65 $ — $ $ $ 0.65 0.025 1.46 0.14 1.60 1.44 0.14 1.58 0.10 (1) Includes a pre-tax gain of approximately $3,508 from the Company’s sale of SSD. (2) Includes a pre-tax loss of approximately $315 from the Company’s sale of Precise. 77 6515_Fin.pdf 77 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures L.B. Foster Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effective- ness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a–15(e) under the Securities and Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. Managements’ Report on Internal Control Over Financial Reporting The management of L.B. Foster Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a–15(f). L.B. Foster Company’s internal control system is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. All internal control systems, no matter how well designed, have inherent limitations. Accordingly, even effective controls can pro- vide only reasonable assurance with respect to financial statement preparation and presentation. There were no significant changes in internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fourth quarter of 2013 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. L.B. Foster Company’s management assessed the effectiveness of the Company’s internal control over finan- cial reporting as of December 31, 2013. In making this assessment, management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (1992 Framework). Based on this assessment, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2013. The SEC’s general guidance permits the exclusion of an assessment of the effectiveness of a registrant’s disclosure controls and procedures as they relate to its internal controls over financial reporting for an acquired business during the first year following such acquisition, if among other circumstances and factors there is not adequate time between the acquisition date and the date of assessment. As previously discussed in Note 3 — Acquisitions of this Annual Report on Form 10-K, L.B. Foster Company completed the asset acquisition of Ball Winch, LLC (Ball Winch) on November 7, 2013. Ball Winch constituted approximately 9% of total assets as of December 31, 2013 and less than 1% of revenues and pre-tax income for the year then ended. Management’s assessment and conclusion on the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2013 excluded an assessment of the internal control over financial reporting of the assets and business acquired in the Ball Winch acquisition. Ernst & Young LLP, the independent registered public accounting firm that also audited the Company’s consolidated financial statements has issued an attestation report on the Company’s internal control over finan- cial reporting. Ernst & Young’s attestation report on the Company’s internal control over financial reporting appears in Part II, Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference. 78 6515_Fin.pdf 78 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of L.B. Foster Company and Subsidiaries We have audited L.B. Foster Company and Subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). L.B. Foster Company and Subsidiaries’ management is responsible for maintaining effective internal control over finan- cial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the compa- ny’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect mis- statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that con- trols may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As indicated in the accompanying Managements’ Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of L.B. Foster Ball Winch, Inc., which is included in the 2013 consolidated financial statements of L.B. Foster Company and Subsidiaries and constituted approximately 9% of total assets as of December 31, 2013 and less than 1% of revenues and pre-tax income for the year then ended. Our audit of internal control over financial reporting of L.B. Foster Company and Subsidiaries also did not include an evalua- tion of the internal control over financial reporting of L.B. Foster Ball Winch, Inc. In our opinion, L.B. Foster Company and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of L.B. Foster Company and Subsidiaries, as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2013 and our report dated February 27, 2014 expressed an unqualified opinion thereon. Pittsburgh, Pennsylvania February 27, 2014 /s/ Ernst & Young, LLP Ernst & Young LLP 79 6515_Fin.pdf 79 ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this Item regarding the directors of the Company is incorporated herein by refer- ence to the information included in the Company’s proxy statement for the 2014 annual meeting of stockholders (the “Proxy Statement”) under the caption “Election of Directors.” The information required by this Item regarding the executive officers of the Company is set forth in Part I of this Annual Report on Form 10-K under the caption “Executive Officers of the Registrant” and is incorporated herein by reference. The information required by this Item regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by reference to the information included in the Proxy Statement under the caption “Section 16(a) Beneficial Reporting Compliance.” The information required by this Item regarding our Code of Ethics is set forth in Part I of this Annual Report on Form 10-K under the caption “Code of Ethics” and is incorporated herein by reference. The information required by this Item regarding our audit committee and the audit committee financial expert(s) is incorporated herein by reference to the information included in the Proxy Statement under the caption “Corporate Governance — Board Committees — Audit Committee.” ITEM 11. EXECUTIVE COMPENSATION The information required by this Item regarding executive compensation is incorporated herein by reference to the information included in the Proxy Statement under the captions “Director Compensation — 2013,” “Executive Compensation,” “Summary Compensation Table (2013, 2012 and 2011),” “Grants of Plan-Based Awards in 2013,” “Outstanding Equity Awards At 2013 Fiscal Year-End,” “2013 Options Exercises and Stock Vested Table,” “2013 Nonqualified Deferred Compensation,” “Change-In-Control,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report.” ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item regarding the Company’s equity compensation plans is set forth in Part II, Item 5 of this Annual Report on Form 10-K under the caption “Securities Authorized for Issuance Under Equity Compensation Plans” and is incorporated herein by reference. The information required by this Item regarding the beneficial ownership of the Company is incorporated herein by reference to the information included in the Proxy Statement under the caption “Stock Ownership.” ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item regarding transactions with related persons is incorporated herein by reference to the information included in the Proxy Statement under the caption “Corporate Governance — Transactions with Related Parties.” The information required by this Item regarding director independence is incorporated herein by reference to information included in the Proxy Statement under the caption “Corporate Governance — The Board and Board Meetings.” ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this Item regarding principal accountant fees and services is incorporated herein by reference to information included in the Proxy Statement under the caption “Independent Registered Public Accountants’ Fees.” 80 6515_Fin.pdf 80 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES The following documents are filed as a part of this Report: PART IV (a)(1). Financial Statements The following Reports of Independent Registered Public Accounting Firm, consolidated financial state- ments, and accompanying notes are included in Item 8 of this Report: Reports of Independent Registered Public Accounting Firm. Consolidated Balance Sheets as of December 31, 2013 and 2012. Consolidated Statements of Operations for the Years Ended December 31, 2013, 2012 and 2011. Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2013, 2012 and 2011. Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011. Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2013, 2012 and 2011. Notes to Consolidated Financial Statements. (a)(2). Financial Statement Schedule Schedules for the Years Ended December 31, 2013, 2012 and 2011: II — Valuation and Qualifying Accounts. The remaining schedules are omitted because of the absence of conditions upon which they are required. (a)(3). Exhibits The exhibits listed on the accompanying index to exhibits are filed as part of this Annual Report on Form 10-K. 81 6515_Fin.pdf 81 L. B. FOSTER COMPANY AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 Additions Balance at Beginning of Year Charged to Costs and Expenses Other (1) Deductions Balance at End of Year 2013 Deducted from assets to which they apply: Allowance for doubtful accounts . . . . . . . . . . . . . . . . $ 899 $ 236 $— $ 36 $1,099 2012 Deducted from assets to which they apply: Allowance for doubtful accounts . . . . . . . . . . . . . . . . $1,725 $(319) $— $507 $ 899 2011 Deducted from assets to which they apply: Allowance for doubtful accounts . . . . . . . . . . . . . . . . $1,524 $ 275 $— $ 74 $1,725 (1) Notes and accounts receivable written off as uncollectible. 82 6515_Fin.pdf 82 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES L.B. FOSTER COMPANY Date: February 27, 2014 By: /s/ Robert P. Bauer (Robert P. Bauer, President and Chief Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Name Position Date By: /s/ Lee B. Foster II (Lee B. Foster II) By: /s/ Robert P. Bauer (Robert P. Bauer) By: /s/ Peter McIlroy II (Peter McIlroy II) By: /s/ G. Thomas McKane (G. Thomas McKane) By: /s/ Diane B. Owen (Diane B. Owen) By: /s/ William H. Rackoff (William H. Rackoff) By: /s/ Suzanne B. Rowland (Suzanne B. Rowland) By: /s/ David J. Russo (David J. Russo) Chairman of the Board and Director February 27, 2014 President, Chief Executive Officer and Director Director Director Director Director Director Senior Vice President, Chief Financial Officer and Treasurer February 27, 2014 February 27, 2014 February 27, 2014 February 27, 2014 February 27, 2014 February 27, 2014 February 27, 2014 By: /s/ Christopher T. Scanlon (Christopher T. Scanlon) Controller and Chief Accounting Officer February 27, 2014 83 6515_Fin.pdf 83 INDEX TO EXHIBITS The Exhibits marked with a single asterisk are filed herewith. All exhibits are incorporated herein by reference: 2.1 2.2 2.3 2.4 3.1 3.2 4.1 10.1 10.2 **10.3 *10.4 **10.5 **10.6 **10.7 Agreement and Plan of Merger, dated February 16, 2010, by and among L.B. Foster Company, Foster Thomas Company and Portec Rail Products, Inc., incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on February 17, 2010. First Amendment to Agreement and Plan of Merger, dated as of May 13, 2010, by and among Portec Rail Products, Inc., L.B. Foster Company and Foster Thomas Company, incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on May 13, 2010. Second Amendment to Agreement and Plan of Merger dated August 30, 2010, by and among Portec Rail Products, Inc., L.B. Foster Company and Foster Thomas Company, incorporated by reference to Exhibit (a)(5)(T) to Schedule TO-T/A filed by the Company on August 31, 2010. Asset Purchase Agreement between Interlocking Deck Systems International, LLC and L.B. Foster Company, dated March 23, 2010, incorporated by reference to Exhibit 10.25 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on March 29, 2010. Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, File No. 0-10436, filed on May 13, 2003. Bylaws of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, File No. 0-10436, filed on November 8, 2012. Rights Agreement, amended and restated as of November 19, 2012, between L.B. Foster Company and American Stock Transfer & Trust Company, including the form of Rights Certificate and the Summary of Rights attached thereto, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on November 20, 2012. $125,000,000 Revolving Credit Facility Credit Agreement dated May 2, 2011, between Registrant and PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., and Citizens Bank of Pennsylvania, incorporated by reference to Exhibit 10.0 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on May 4, 2011. First Amendment to Credit Agreement, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, File No. 0-10436, filed on November 8, 2012. Employment Agreement with Robert P. Bauer, dated January 18, 2012, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on January 23, 2012. 2006 Omnibus Incentive Plan, as amended and restated October 30, 2013.** Form of Restricted Stock Agreement (for grants made prior to December 23, 2011), incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on December 21, 2011. Amended Form of Restricted Stock Agreement (for grants made on or after December 23, 2011), incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on December 21, 2011. Restricted Stock Agreement between Registrant and Stan L. Hasselbusch dated May 28, 2010, incorporated by reference to Exhibit 10.61 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on June 1, 2010. 84 6515_Fin.pdf 84 **10.8 **10.9 **10.10 **10.10.1 **10.10.2 *10.10.3 **10.11 **10.12 **10.13 **10.14 **10.15 **10.16 **10.17 **10.18 **10.19 **10.20 *21 *23 Restricted Stock Agreement between Registrant and David J. Russo dated May 28, 2010, incorporated by reference to Exhibit 10.62 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on June 1, 2010. Retention Performance Share Unit Award Agreement between Registrant and David R. Sauder dated March 15, 2011, incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, File No. 0-10436, filed on March 15, 2012. Form of Performance Share Unit Award Agreement (2008 – 2011), incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, File No. 0-10436, filed on March 15, 2012. Form of Performance Share Unit Award Agreement (2012), incorporated by reference to Exhibit 10.15.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, File No. 0-10436, filed on March 15, 2012. Form of Performance Share Unit Award Agreement (2013), incorporated by reference to Exhibit 10.13.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, File No. 0-10436, filed on March 8, 2013. Form of Performance Share Unit Award Agreement (2014).** Executive Annual Incentive Compensation Plan (as Amended and Restated), incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A, filed on April 12, 2013. Amended and Restated Key Employee Separation Plan, incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, File No. 0-10436, filed on March 8, 2013. Restated Supplemental Executive Retirement Plan, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, File No. 0-10436, filed on August 9, 2012. Amended and Restated 1998 Long-Term Incentive Plan as of May 25, 2005, incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011. Amendment, effective May 24, 2006, to Amended and Restated 1998 Long-Term Incentive Plan as of May 25, 2005, incorporated by reference to Exhibit 10.34.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011. Medical Reimbursement Plan (MRP1) effective January 1, 2006, incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011. Medical Reimbursement Plan (MRP2) effective January 1, 2006, incorporated by reference to Exhibit 10.45.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011. Amendments to MRP2, incorporated by reference to Exhibit 10.45.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011. Leased Vehicle Plan as amended and restated on September 1, 2007, incorporated by reference to Exhibit 10.46 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011. Non-Employee Director Compensation, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, File No. 0-10436, filed on August 6, 2013. List of Subsidiaries Consent of Independent Registered Public Accounting Firm. 85 6515_Fin.pdf 85 *31.1 *31.2 *32.0 ***101.INS ***101.SCH ***101.CAL ***101.DEF ***101.LAB ***101.PRE * ** *** Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002. XBRL Instance Document. XBRL Taxonomy Extension Schema Document. XBRL Taxonomy Extension Calculation Linkbase Document. XBRL Taxonomy Extension Definition Linkbase Document. XBRL Taxonomy Extension Label Linkbase Document. XBRL Taxonomy Extension Presentation Linkbase Document. Exhibits marked with an asterisk are filed herewith. Identifies management contract or compensatory plan or arrangement required to be filed as an Exhibit. In accordance with SEC Release 33-8238, the certifications contained in Exhibits 32 are being furnished and not filed 86 6515_Fin.pdf 86 Certification under Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 31.1 I, Robert P. Bauer, President and Chief Executive Officer of L. B. Foster Company, certify that: 1. I have reviewed this Annual Report on Form 10-K of L. B. Foster Company; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining dis- closure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and proce- dures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over finan- cial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a sig- nificant role in the registrant’s internal control over financial reporting. Date: February 27, 2014 /s/ Robert P. Bauer Name: Robert P. Bauer Title: President and Chief Executive Officer 6515_Fin.pdf 87 Certification under Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 31.2 I, David J. Russo, Senior Vice President, Chief Financial Officer and Treasurer of L. B. Foster Company, certify that: 1. I have reviewed this Annual Report on Form 10-K of L. B. Foster Company; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining dis- closure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and proce- dures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over finan- cial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a sig- nificant role in the registrant’s internal control over financial reporting. Date: February 27, 2014 /s/ David J. Russo Name: David J. Russo Title: Senior Vice President, Chief Financial Officer and Treasurer 6515_Fin.pdf 88 Exhibit 32.0 CERTIFICATE PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of L. B. Foster Company (the “Company”) on Form 10-K for the period ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: February 27, 2014 Date: February 27, 2014 /s/ Robert P. Bauer Name: Robert P. Bauer Title: President and Chief Executive Officer /s/ David J. Russo Name: David J. Russo Title: Senior Vice President, Chief Financial Officer and Treasurer 6515_Fin.pdf 89 [THIS PAGE INTENTIONALLY LEFT BLANK] 6515_Fin.pdf 90 [THIS PAGE INTENTIONALLY LEFT BLANK] 6515_Fin.pdf 91 [THIS PAGE INTENTIONALLY LEFT BLANK] 6515_Fin.pdf 92 OFFICERS BOARD OF DIRECTORS Robert P. Bauer President and Chief Executive Officer Merry L. Brumbaugh Vice President, Tubular Products Steven R. Burgess Vice President, Concrete Products Samuel K. Fisher Vice President, Rail Products Donald L. Foster Senior Vice President, Construction Products Patrick J. Guinee Vice President, General Counsel and Corporate Secretary John F. Kasel Senior Vice President, Rail Business Brian H. Kelly Vice President, Human Resources and Administration Gregory W. Lippard Vice President, Rail Product Sales Konstantinos Papazoglou Vice President, Rail Technologies David J. Russo Senior Vice President Chief Financial Officer and Treasurer David R. Sauder Vice President, Global Business Development Christopher T. Scanlon Controller and Chief Accounting Officer CORPORATE HEADQUARTERS Lee B. Foster II Chairman of the Board L.B. Foster Company Robert P. Bauer President and Chief Executive Officer L.B. Foster Company Peter Mcllroy II Chairman and Chief Executive Officer Robroy Industries G. Thomas McKane Former Chairman of the Board and Chief Executive Officer A.M. Castle & Company Diane B. Owen Former Senior Vice President – Corporate Audit H.J. Heinz Company William H. Rackoff President and Chief Executive Officer ASKO, Inc. Suzanne B. Rowland Vice President and General Manager Global Special Hazards Tyco Fire Protection Products SHAREHOLDER INFORMATION Annual Meeting The annual meeting of shareholders will be held at the Corporate Headquarters, 415 Holiday Drive Pittsburgh, Pennsylvania 15220 on May 22, 2014 at 11:00 AM EDT. Form 10-K A copy of the Company’s Annual Report on Form 10-K to the Securities and Exchange Commission is available upon request from L.B. Foster’s Investor Relations Department or from the Company website at www.lbfoster.com.   415 Holiday Drive, Pittsburgh, PA 15220 412.928.3417 800.255.4500 (Toll-free nationwide sales number) lbfoster.com Stock Trading L.B. Foster Company’s common stock is traded on NASDAQ. The ticker symbol is FSTR. Transfer Agent: Broadridge Financial Solutions, Inc. 36515.indd 15 4/8/14 9:44 AM TRANSPORTATION AND ENERGY INFRASTRUCTURE PRODUCTS AND SERVICES lbfoster.com 36515.indd 16 4/8/14 9:44 AM 

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