annual report
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FINANCIAL HIGHLIGHTS
INCOME STATEMENT DATA
2014 (1)
2013 (2)
2012 (3)
2011 (4)
2010 (5)
YEAR ENDED DECEMBER 31,
Net Sales
Operating Profit
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
Cash provided by Continuing Operating Activities
ALL AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA
607,192
37,082
25,654
2
25,656
597,963
588,541
575,337
467,058
41,571
22,657
30,812
31,217
29,276
14,764
22,067
20,006
14
1,424
828
486
29,290
16,188
22,895
20,492
2.51
0.00
2.51
2.48
0.00
2.48
0.13
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
1.96
0.05
2.01
1.93
0.05
1.98
–
66,616
13,880
26,959
31,607
56,138
$
$
$
$
$
$
$
$
$
$
$
$
$
Operating profit represents the gross profit less selling and administrative expenses and amortization expense.
(1)
2014 includes CXT Concrete Tie warranty charges of $9,374 within the Rail Products segment. The 2014 results include the acquisitions of Carr
Concrete ( July 7), FWO (October 29), and Chemtec Energy Services, L.L.C. (December 30). More information about the warranty charges and
acquisition activity can be found in Part II Item 8, Note 20 and Note 3, respectively, to the consolidated financial statements included herein,
which is incorporated by reference into this Part II Item 6.
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.
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.
2010 includes the results of Rail Technologies, beginning on December 15, 2010.
(2)
(3)
(4)
(5)
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.
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OUR TEAM IS CREATING A PLATFORM FOR GROWTH
The year 2014 was a time of milestones as the company completed key acquisitions that are
expanding L.B. Foster’s energy and transportation offerings and adding highly qualified new
management talent to our team. This year continues to mark significant growth with the addition of
more best-in-market companies to our growing core businesses.
The addition of FWO in 2014 and TEW Engineering in 2015 brings advanced products and
engineering resources to L.B. Foster’s transit and international rail businesses. Chemtec Energy
Services increases our energy sector offerings with market-leading metering equipment for
midstream pipeline customers. Carr Concrete expands the product catalog and manufacturing
capacity of L.B. Foster’s CXT precast buildings team.
L.B. Foster continues to expand in 2015 with the strategic acquisition of Inspection Oilfield Services
(IOS) and moves into the upstream energy market. IOS provides a nationwide footprint and an
accomplished management team for L.B. Foster’s growth into energy production services.
Our business units recognize and drive shared product and service opportunities for best-in-class
customer solutions. This determined approach to leveraging our assets establishes L.B. Foster as a
leading material and service provider to energy and transportation markets.
$600,000
$500,000
$400,000
$300,000
$200,000
$10,000
0
$240,000
$200,000
$160,000
$120,000
$80,000
$40,000
0
$30,000
$20,000
$10,000
0
2012
2013
2014
2012
2013
2014
10%
5%
0%
2012
2013
2014
2012
2013
2014
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
0
15%
10%
5%
0%
2012
2013
2014
2012
2013
2014
39657.indd 3
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TO OUR SHAREHOLDERS
L.B. Foster has made substantial progress in 2014 toward creating the company we have described in
our strategic plans. We ended the year with record sales of $607 million, record cash fl ow from operating
activities of $66 million, and we had numerous operational achievements highlighted by several divisions
reaching pre-tax income margin records. Along the way, the management team focused on a number
of facility modernization programs which have resulted in operating effi ciencies. The implementation
of new manufacturing technologies, use of automation equipment, and consolidation of facilities has
created an environment that allows for added capacity and throughput improvements. Some of the
more signifi cant change during the year came from the momentum we created behind our acquisition
initiatives that are intended to bring growth by expanding our served markets and adding companies
that present opportunities for organic growth. While most of this activity did not make a contribution
toward 2014 sales, it has reshaped the company for 2015 with continuing emphasis on benefi ting from
transportation and energy infrastructure demand.
In the last three quarters, we acquired companies that put us ahead of pace to reach the fi ve
year goal outlined in our strategic plan. The new companies help us move into solutions-oriented
products tailored to meet customer requirements, and service businesses where unique customer
requirements create long lasting customer relationships. As the energy related business activity is
now anticipated to exceed 25% of total L.B. Foster Company sales, we are very comfortable with
the diversifi cation our current businesses provide. Each acquisition is also contributing toward L.B.
Foster having a greater mix of value added products, services, and solutions business models versus
distribution business models. This is intended to have a favorable impact on the company’s profi t
margins as we deliberately acquire companies with better profi t margins and cash conversion than
the core company. More importantly, we are extremely excited about the quality of people joining
L.B. Foster Company. Featured in this report are some of the key people who are leading the efforts
behind our building a more capable and valuable company. They are the real value creators and
critical component to our success. I am very pleased that we have been able to achieve a level of
excitement in each business that is motivating and rewarding.
As we have focused on growing in markets that benefi t from energy and transportation infrastructure
demand, it has led to expansion that is largely in the United States. This will reduce the risk of managing
new businesses and brings with it the opportunity for greater cooperation among them. However, the
acquisition of TEW Engineering in Nottingham, United Kingdom, will add signifi cant scale and capability
to our European business. Coupled with the recently acquired FWO operations in Germany, we found
businesses that will allow us to move into engineered solutions, leverage local manufacturing and
support capability, and build scale among our in house resources and management team. There is a
lot to gain from these businesses working together. We are already combining forces to create a stronger
organization that can leverage our assets and talent.
L.B. Foster utilized a new fi ve year credit facility to provide the borrowing capacity necessary for the recent
acquisitions while also providing for additional liquidity for other initiatives, if required. It has been our
intent to use debt as a means to fund our more aggressive acquisition strategy, particularly in light of
the low interest rate environment. We are maintaining conservative leverage and interest coverage ratios
in the current environment. Therefore, while our acquisition pace has accelerated, the use of debt to
Management Team pictured (L- R): David R. Sauder, Vice President, Global Business Development; David J. Russo, Sen
Brian H. Kelly, Vice President, Human Resources and Administration; Patrick J. Guinee, Vice President, General Counsel and Corp
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ROBERT P. BAUER
PRESIDENT and CHIEF EXECUTIVE OFFICER
fi nance them will remain reasonable. Because of the momentum that we
have built in fi nding good acquisition targets, I expect that the company
will have some level of debt for the foreseeable future. This is a great way
for us to continue building shareholder value.
Three year total shareholder returns from 2012 to 2014 rank in the 60th
percentile relative to our peers, with 3 year growth of 78%, or 28% CAGR. EPS
growth will continue to be a top priority for management and is thought to
be well aligned with shareholder interests. We will continue to emphasize
cash fl ow as an important metric for our business, and strive to improve
operating margins. During 2015, we plan on further promoting the people-
fi rst philosophy at L.B. Foster Company that drives our high performing
culture. Every day our people bring a spirit of teamwork and innovation to
work that creates opportunities for our company to thrive. Going forward,
we will share more of that story with our shareholders.
I’m very pleased to have a management team that is willing to take
on the challenge of building the L.B. Foster Company of the future;
a company with greater capabilities positioned to fuel profi table
growth. I am grateful for their enthusiasm and spirit around continuous
improvement that is making a difference.
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. The employees at L.B. Foster are not only committed to driving
improvement, they are committed to doing it in a way that promotes
ethical business practices, and meets the highest standards of integrity
and corporate governance.
sso, Senior Vice President, Chief Financial Of ficer and Treasurer; Rober t P. Bauer, President and Chief Executive Of ficer;
and Corporate Secretary; Merry L. Brumbaugh, Vice President, Tubular Products; John F. Kasel, Senior Vice President, Rail Business.
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L.B. FOSTER CULTURE DRIVES OUR PERFORMANCE
For over 100 years, L.B. Foster has made customer service a top priority. Our
people embrace a performance culture that places substantial value on
customer loyalty. Our team recognizes the importance of providing high quality
products and services to markets with demanding schedules and complex
project management.
As L.B. Foster has grown into a manufacturing, distribution and services
company with wide ranging capabilities in engineering and solutions design,
customers are depending on our people now more than ever. This is what L.B.
Foster thrives on.
Within the company lies a spirit of teamwork and innovation that drives a culture
of continuous improvement and high performance. These ideals shape the
way we think and guide us with a philosophy that says “its not only what you do,
but how you do it”.
Our future is with our people and this benefi ts our shareholders and customers.
New investments in employee training and career development are attracting
and building future leaders so we have the talent to create long term value.
Putting people fi rst has been a hallmark of the L.B. Foster Company and this will
become more important to our success as we develop ambitious plans.
L.B. Foster has the management and employees necessary to create a
profi table future as a high performance organization. Our experienced team
is committed to developing and sustaining the capabilities required to attain
best-in-class recognition as a worldwide market leader.
3
4
39657.indd 7
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“Going forward, our combined organizations will provide a strong
platform to achieve organic and inorganic growth objectives.”
— Dal Miller, President, Inspection Oilfi eld Services, an L.B. Foster Company
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NEW ACQUISITIONS EXPAND L.B. FOSTER MARKETS
Recent acquisitions by L.B. Foster emphasize the company’s commitment
to energy and transportation markets and create greater depth for our
platform of products and services. The new business units are opening
additional channels for organic growth and helping to better defi ne and
realize our market goals.
The integration of more products and services within our business segments
allows L.B. Foster to capitalize on a new breadth of customer offerings and
become a total solutions provider. The expansion of our product and service
lines offers opportunities to grow core services and target new geographies.
L.B. Foster is now uniquely positioned to help customers reduce costs in
environments where effi ciency is increasingly important.
The addition of Inspection Oilfi eld Services (IOS) provides L.B. Foster with a
nationwide footprint in all major U.S. energy production areas and offers new
opportunities for Ball Winch Field Services and Chemtec Energy Services to
expand their customer bases. Our company now has the scale and full-
service capabilities to address the needs of large national and independent
accounts. IOS and Chemtec maintain professional relationships with operators
and contractors that bring signifi cant opportunities for L.B. Foster to increase
turnkey services, strengthen market reach and expand into midstream and
upstream oil and gas operations.
The integration of rail expertise in our European businesses presents worldwide
railway customers with innovative new effi ciency-based solutions. L.B. Foster
gains technical and logistical advantages from its European assets to better
serve international customers with a highly skilled team and improved
manufacturing capabilities. The recent acquisitions bring new European
customers and offer opportunities to cross-sell L.B. Foster products and services
and increase our share of railway spending. Our expanded international rail
products and services organization provides a strong platform to achieve
organic growth objectives.
The FWO and TEW Engineering acquisitions bring exciting additions to our
existing friction management product line and provide market-leading
transit solutions for control room, passenger information and trackside
signaling applications. These companies are teaming with our UK-based
Rail Technologies business to build on the group’s combined international
experience and strong local management skills.
39657.indd 9
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“We are expanding our customer solutions for the UK and European
transit rail markets with the addition of TEW Engineering.”
— Peter Jones, Managing Director, L.B. Foster Rail Technologies (UK)
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EUROPEAN TEAM ADDS SCALE AND TECHNOLOGY
L.B. Foster is actively pursuing new acquisitions to add scale to our UK-based
international rail business and strengthen opportunities for organic growth.
Our team recently acquired two key European companies that expand L.B.
Foster’s rail products and services offerings and add new resources to our
existing rail business.
The company’s acquisition of FWO, a German rail products fi rm, and its
key personnel brings unique rail lubrication equipment and international
experience to L.B. Foster’s existing line of friction management and track
products. The FWO acquisition provides local support resources and
establishes L.B. Foster as a recognized presence in this major railway market.
FWO’s ESA Electronic Track Lubricating System and the German team’s
associated product knowledge of wheel/rail interaction fi t well with
L.B. Foster’s current solution portfolio, marketing expertise and R&D
competencies. The new business unit is currently based in Bochum
(Nordrhein-Westfalen, Germany).
L.B. Foster also acquired TEW Engineering, a Nottingham, UK company
that has demonstrated signifi cant growth in Great Britain’s transit products
market. The UK’s transit railways recognize TEW’s project-based engineering,
innovative products and exceptional level of service for the well-earned
quality threshold they have established.
TEW Engineering is an innovative provider of application engineering
solutions, control panels, mimic diagrams, dynamic displays, passenger
information systems and automation solutions for some of the world’s
leading rail and industrial organizations. The 100 year old fi rm specializes
in rail engineering solutions for control room, passenger information and
trackside signaling applications.
FWO and TEW join the L.B. Foster Rail Business team to form a catalyst for
rail market expansion in the UK, Europe and worldwide. These new business
units provide ideal platforms for organic growth and offer additional scale
with products and services in markets that were previously underserved or
unavailable to L.B. Foster.
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“The addition of Chemtec to the expanding energy team places L.B. Foster firmly
in the Midstream energy market as a more inclusive customer solutions provider.”
— Milton Page, President, Chemtec Energy Services, an L.B. Foster Company
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NEW CUSTOMER SOLUTIONS EXPAND PLATFORM
The current expansion of the L.B. Foster platform, which began in 2013 with
the acquisition of Ball Winch, has brought our company new engineering
products and services that increase our capabilities to offer turnkey
customer solutions. These advanced resources provide L.B. Foster with
opportunities to develop and deliver high quality integrated products and
services across all product lines.
Our new acquisitions help to create a total package of engineered
solutions for energy, railway and construction customers. The company’s
expansion opens new possibilities for collaborative product and service
development within our business groups.
The addition of TEW and its control room, passenger information and trackside
signaling solutions expands our transit product line for existing L.B. Foster rail
customers and underserved railway markets. The TEW engineering team
enhances our Rail group’s unique product application and automation
capabilities and increases L.B. Foster’s transit market presence.
Additions to the L.B. Foster team, such as IOS, are creating a company
platform with the experience and multiple locations to address the needs of
energy customers throughout North America. The acquisition of Chemtec
Energy Services adds expertise in fl ow technologies to L.B. Foster’s expanding
midstream energy products and services offerings. The company designs
and fabricates complete metering and custody transfer systems that
incorporate critical measurement and fl ow control capabilities.
L.B. Foster’s recent acquisitions fi rmly establish our company as a product
and service leader in the transit rail and energy services markets. Our
expanded offerings present new opportunities to work closely with railways
and energy operators as a larger and more inclusive solutions provider.
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L.B. FOSTER BUSINESS GROUPS
L.B. Foster operates individual business units that specialize in energy, transportation and
construction infrastructure products and services. These groups manage worldwide customer
support from manufacturing, distribution and sales facilities located in the United States,
Canada and the United Kingdom.
TUBULAR PRODUCTS AND ENERGY SERVICES GROUP
Coated Products operates two pipe coating facilities
CONSTRUCTION PRODUCTS GROUP
Piling Products supplies fl at, pipe, H beam and Z
that apply Fusion Bonded Epoxy corrosion protection,
sheet pile and piling accessories for sale or rent
Abrasion Resistant Overcoating and internal linings in
to the construction industry from convenient
advanced technology environments. The plants are
regional stocking locations. L.B. Foster Fabricated
located in Birmingham, Alabama and Willis, Texas.
Bridge Products provides steel grid bridge fl ooring,
The Coated Products group also includes Ball Winch
corrugated bridge
forms, bridge drainage
Field Services, an infi eld pipe coating business.
systems, bridge railing, custom pedestrian railing
Threaded Products provides quality threading of
and complete bridge solutions.
water well pipe from a state-of-the-art production
CXT, Inc., an L.B. Foster subsidiary, is a leading
facility in Magnolia, Texas. L.B. Foster also maintains a
manufacturer of precast concrete products,
joint venture operation, LB Pipe & Coupling Products,
including restrooms, showers and concession
LLC adjacent to our Magnolia threading plant.
buildings. These durable concrete structures are
Inspection Oilfi eld Services (IOS), a leader in non-
in use at federal, state, county, city and private
destructive tubular products testing and inspection
recreational sites nationwide. CXT’s Carr Concrete
for critical oil and gas applications, provides services
division also manufactures precast burial vaults,
from its facility in Houston, Texas and service centers
bridge beams, box culverts and other pre-stressed
throughout the U.S. Willis, Texas-based Chemtec
and precast concrete products.
Energy Services is a market-leading supplier of
metering and injection systems skids for energy
pipeline customers.
RAIL PRODUCTS AND SERVICES GROUP
The Rail Business group, which
includes Rail
Products, Rail Technologies, CXT Concrete Ties,
TUBULAR
Net Sales
Gross Profi t
$
$
2014
2013
2012
53,730,000
42,545,000
48,966,000
11,722,000
12,278,000
15,189,000
Segment Profi t $
5,350,000
9,208,000
12,854,000
Segment Assets $
130,289,000
51,497,000
13,573,000
TEW Engineering, FWO, Car Repair Products, and
RAIL
2014
2013
2012
Salient Systems, is a leading, one source supplier
and manufacturer of quality railroad products
Net Sales
Gross Profi t
$
$
374,615,000
363,667,000
370,322,000
77,235,000
74,986,000
52,533,000
and services for mainline, transit, mining, port and
Segment Profi t $
30,093,000
28,692,000
9,074,000
industrial markets worldwide.
Segment Assets $
239,951,000
252,049,000
243,072,000
Our company provides a wide range of railway
products and services including new rail, used rail,
CONSTRUCTION
2014
2013
2012
insulated rail joints, rail lubrication systems, concrete
Net Sales
ties, rail monitoring systems, transit products, trackside
Gross Profi t
$
$
178,847,000
191,751,000
169,253,000
32,391,000
29,224,000
25,080,000
signaling equipment, trackwork materials, control
Segment Profi t $
13,106,000
10,206,000
7,859,000
room and passenger information systems, and our
Segment Assets $
102,978,000
77,900,000
73,804,000
professional rail project management services.
39657.indd 14
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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, 2014
‘ 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 $526,238,000.
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 25, 2015
10,360,334 shares
Documents Incorporated by Reference:
Portions of the Proxy Statement prepared for the 2015 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 2015 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.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
11
15
16
16
16
17
20
21
40
41
81
81
83
83
83
83
83
83
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84
86
PART IV
2
Forward-Looking Statements
This Annual Report on Form 10-K contains “forward looking” statements within the meaning of Sec-
tion 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,
projections and plans regarding our financial position, liquidity and capital resources, the outcome of litigation
and product warranty claims, results of operations, decisions regarding our strategic growth 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, the risk of doing business in international markets, our
ability to effectuate our strategy including evaluation of potential opportunities such as strategic acquisitions,
joint ventures, and other initiatives, and our ability to effectively integrate new businesses and realize anticipated
benefits, a decrease in freight or passenger rail traffic, sustained declines in energy prices, 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 financ-
ing needs, the Company’s ability to curb its working capital requirements, domestic and international income
taxes, foreign currency fluctuations, inflation, the impact of new regulations including regarding conflict miner-
als, the ultimate number of concrete ties that will have to be replaced pursuant to product warranty claims, an
overall resolution of the related contract claims as well as the outcome of a lawsuit filed by Union Pacific Rail-
road, risk inherent in litigation, and domestic and foreign governmental regulations. Should one or more of these
risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove
incorrect, actual outcomes could vary materially from those indicated. The risks and uncertainties that may
affect the operations, performance, and results of the Company’s business and forward-looking statements
include, but are not limited to, those set forth under Item 1A, “Risk Factors” 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 obli-
gation to update or revise any forward looking statement, whether as a result of new information, future
developments, or otherwise, except as required by securities laws.
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.
Business Developments
On July 7, 2014, the Company acquired Carr Concrete Corporation (Carr) for $12,480. Carr is a provider of
pre-stressed and precast concrete products located in Waverly, WV. The transaction was funded with cash on
hand. The results of Carr’s operations from the acquisition date through December 31, 2014 are included in our
Construction Products segment and were not material to the periods presented.
On October 29, 2014, the Company acquired FWO, a business of Balfour Beatty Rail GmbH for $1,103 in
non-domestic cash. The German business provides track lubrication and switch roller equipment for international
railway applications. The results of FWO are included within the Rail Products segment from the acquisition date
through December 31, 2014 and were not material to the periods presented.
On December 30, 2014, the Company acquired Chemtec Energy Services, L.L.C. (Chemtec) for $66,719,
net of cash received, which is inclusive of a $1,867 preliminary working capital adjustment. Located in Willis,
TX, Chemtec is a manufacturer and turnkey provider of blending, injection, and metering equipment for the oil
and gas industry. The results of operations of this acquired business are included within our Tubular Products
segment from the acquisition date through December 31, 2014 and were not material to the periods presented.
Subsequent to year end, on January 13, 2015, the Company acquired the stock of Tew Holdings, LTD (Tew)
for approximately $26,600, subject to the finalization of net debt and net working capital adjustments. Head-
quartered in Nottingham, UK, Tew provides application engineering solutions primarily to the rail market and
other major industries. The transaction was funded with non-domestic cash.
More information regarding acquisitions 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.
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 appli-
cations throughout North America and Europe. Our Rail Products segment has sales offices throughout the
United States, Canada, and Europe and frequently bids on rail projects where it can offer products manufactured
by the Company or sourced from numerous suppliers. These products may be provided 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 Technologies, and pre-stressed CXT Concrete Tie products.
Rail manufacturing and distribution
The rail manufacturing and distribution business sells heavy and light new rail mainly to transit authorities,
industrial companies, and rail contractors for railroad sidings, plant trackage, and other carrier and material han-
dling applications. Rail accessories include trackwork, track spikes, bolts, angle bars, and other products required
4
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’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 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.
Rail Technologies
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 products 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 manage-
ment products are designed, engineered, manufactured, and assembled in the United States and by certain
wholly-owned subsidiaries located in Burnaby, British Columbia, Canada, Sheffield, United Kingdom, and
Dusseldorf, Germany.
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.
Our 2014 acquisition of the railroad tuning unit, FWO, a business of Balfour Beatty Rail GmbH enhances
our offerings to provide track lubrication and switch roller equipment for international railway applications.
Pre-stressed CXT Concrete Ties
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 Tuc-
son, AZ.
Construction Products
The Construction products segment is composed of the following business units: Piling Products, Fabricated
Bridge Products, and precast concrete buildings and products.
Piling Products
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 cofferdams and OPEN CELL® structures in inland 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
5
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.
Fabricated Bridge Products
The fabricated products facility in Bedford, PA manufactures a number of fabricated steel and aluminum
products primarily for the highway, bridge, and transit industries including concrete reinforced grid deck, open
steel grid deck, aluminum bridge railing, and stay-in-place bridge forms.
Concrete Products
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, prod-
uct options, and capabilities. The buildings are manufactured in Spokane, WA and Hillsboro, TX. The Compa-
ny’s 2014 acquisition of Carr Concrete enhances our presence in the concrete buildings market while increasing
our product portfolio to include burial vaults, bridge beams, box culverts, and other pre-stressed and precast
concrete products. Carr Concrete products are distributed from the Company’s Waverly, WV facility.
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 three discrete business units: Coated Pipe, Threaded Products, and meas-
urement products and systems.
Coated Pipe
There are two pipeline services locations that make up our Coated Pipe 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. The second location (Ball Winch), acquired on November 7, 2013,
is located in Willis, TX. The Willis facility applies specialty outside and inside diameter coatings for oil & gas
transmission, mining, and waste water pipelines. This location also provides custom coatings for specialty fit-
tings and field service connections.
Threaded Products
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. This location also provides threading
services for the Oil Country Tubular Goods markets.
Measurement Products and Systems
Our December 30, 2014 acquisition of Chemtec enhanced the Tubular product offering into an adjacent
market to include the manufacturing and provision of blending, injection, and metering equipment for the oil and
gas industry.
L.B. Pipe Joint Venture
The Company is a member of a joint venture, LB Pipe & Coupling Products, LLC (LB Pipe JV), in which it
maintains a 45% ownership interest. The LB Pipe JV manufactures, markets, and sells various precision cou-
plings and other tubular products for the energy, utility, and construction markets and is scheduled to terminate
on June 30, 2019. The Company has made all of its mandatory capital contributions under the JV agreement,
totaling $3,000. 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 reference into this Item 1.
6
Geographic and Segment Information
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
2013
2012
2014
Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tubular Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62% 61% 63%
29
32
9
7
29
8
100% 100% 100%
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.
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 Europe 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. For the years ended 2014,
2013, and 2012, approximately 18%, 17%, and 18%, 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. However, there are one or more companies that compete
with the Company in each product line. Therefore, the Company faces significant competition from different
groups of companies.
During 2014, 2013, and 2012, no single customer accounted for more than 10% of the Company’s con-
solidated net sales.
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 the majority 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. Should sheet piling from its present
supplier not be available for any reason, the Company risks not being able to provide product to its customers.
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, 2014 and 2013 by business segment is
as follows:
December 31,
2014
2013
Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tubular Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$104,821
65,843
13,686
$121,853
53,483
7,775
Total from Continuing Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$184,350
$183,111
7
Approximately 2% of the December 31, 2014 backlog is related to projects that will extend beyond 2015.
Backlog from businesses acquired during 2014 represented 6% of the total.
Research and Development
Expenditures for research and development approximated $3,096, $3,154, and $2,926 in 2014, 2013, and
2012, 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 European 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 31, 2014, the Company had approximately 1,113 employees, 118 of whom were located in
Canada, 70 of whom were located in Europe, with the remaining employees located in the United States. There
were 591 hourly production workers and 522 salaried employees. Of the hourly production workers, approx-
imately 190 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. No significant collective bargaining
agreements expire prior to 2017.
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.
8
Executive Officers of the Registrant
Information concerning the executive officers of the Company is set forth below.
Name
Age
Position
Robert P. Bauer . . . . . . . . . . . . . . . . . . . . . . . . . .
Merry L. Brumbaugh . . . . . . . . . . . . . . . . . . . . . .
Samuel K. Fisher . . . . . . . . . . . . . . . . . . . . . . . . .
Patrick J. Guinee . . . . . . . . . . . . . . . . . . . . . . . . .
John F. Kasel . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brian H. Kelly . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gregory W. Lippard . . . . . . . . . . . . . . . . . . . . . .
Konstantinos Papazoglou . . . . . . . . . . . . . . . . . .
David J. Russo . . . . . . . . . . . . . . . . . . . . . . . . . . .
David R. Sauder
. . . . . . . . . . . . . . . . . . . . . . . . .
Christopher T. Scanlon . . . . . . . . . . . . . . . . . . . .
56
57
62
45
49
55
46
62
56
44
39
President and Chief Executive Officer
Vice President — Tubular Products
Vice President — Rail Distribution
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 Company, a diversified global manufacturing
and technology company. From January 2002 until May 2011, Mr. Bauer served as President of Emerson Net-
work 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 was elected Vice President — Rail Distribution effective January 2011, as part of organiza-
tional 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 Man-
agement. 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. 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, PA 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.
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 Sep-
tember 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,
9
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, human resource concerns, and other reporting matters.
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.
10
ITEM 1A. RISK FACTORS
Risks and Uncertainties
We operate in a changing environment that involves numerous known and unknown risks and uncertainties
that could have a material adverse effect on our business, financial condition, and results of operations. The fol-
lowing 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 the opportunities 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 expect-
ations. We may not be able to achieve the synergies and other benefits we expect from the integration as success-
fully or rapidly as projected, if at all. Our failure to integrate newly-acquired operations could prevent us from
realizing our expected rate of return on an acquired business and could have a material 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 orders and payments, and access to available capital resources outside of operations.
In addition, current volatile market conditions and significant fluctuations in energy prices may continue for
an extended period, negatively affecting our business prospects. The oil and gas markets are currently very vola-
tile, and we cannot predict future oil and natural gas prices. Historically, oil and natural gas prices have been
volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty, and a
variety of additional factors that are beyond our control. Any prolonged substantial decline in the price of oil and
natural gas will likely have a material adverse effect on our operations, and financial condition.
Concentration of Credit Risk
The Company has financial instruments that are exposed to concentrations of credit risk and consist primar-
ily of cash and cash equivalents and trade accounts receivable. The Company routinely maintains cash and
temporary cash investments at certain financial institutions in amounts substantially in excess of Federal Deposit
Insurance Corporation (“FDIC”) and other jurisdictions insurance limits. Management believes that these finan-
cial institutions are of high quality and the risk of loss is minimal.
Our ability to maintain or improve our profitability could be adversely impacted by cost pressures as well as
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 Europe. Fluctuations in
the relative values of the United States dollar, Canadian dollar, British pound, and Euro will require adjustments
in reported earnings and operations to reflect exchange rate translation in our Canadian and European sales and
operations. If the United States dollar strengthens in value as compared to the value of the Canadian dollar,
11
British pound, or Euro, our reported earnings in dollars from sales in those currencies will be unfavorable. Con-
versely, a favorable result will be reported if the United States dollar weakens in value as compared to the value
of the Canadian dollar, British pound, or Euro.
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.
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, Europe, and other countries where product sales are possible. However, we have not perfected 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 market-
ing products that are based upon our proprietary intellectual property. This could impede growth into new mar-
kets 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 subject to cybersecurity risks and may incur increasing costs in an effort to minimize those risks.
Our business employs systems and websites that allow for the storage and transmission of proprietary or
confidential information regarding our customers, employees, job applicants, and other parties, including finan-
cial information, intellectual property, and personal identification information. Security breaches and other dis-
ruptions could compromise our information, expose us to liability, and harm our reputation and business. The
steps we take to deter and mitigate these risks may not be successful. We may not have the resources or technical
sophistication to anticipate or prevent current or rapidly evolving types of cyber-attacks. Data and security
breaches can also occur as a result of non-technical issues, including intentional or inadvertent breach by our
employees or by persons with whom we have commercial relationships. Any compromise or breach of our secu-
rity could result in a violation of applicable privacy and other laws, legal and financial exposure, negative
impacts on our customers’ willingness to transact business with us, and a loss of confidence in our security
measures, which could have an adverse effect on our results of operations and our reputation.
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 claims 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.
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
12
financial condition. In January 2015 the UPRR filed a lawsuit against the Company asserting that we were in
material breach of our 2012 amended supply agreement with the UPRR due to claimed failures to provide war-
ranty ties to replace alleged defective concrete ties. UPRR seeks various types of relief including incidental,
consequential, and other damages in amounts to be determined at trial under various legal theories. See
“Executive Level Overview” for additional information regarding the UPRR’s lawsuit. We continue to work with
UPRR in an attempt to reach a resolution on this matter. However, we cannot predict that such discussions will
be successful, the results of litigation, or whether any settlement or judgment amounts will be within the range of
our estimated accruals for loss contingencies. Consequently, while we believe the claims in the UPRR lawsuit
case are without merit, and we intend to vigorously defend ourselves, an adverse outcome could result in a sub-
stantial judgment against us that could have a material adverse effect on our financial condition. 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 recover damages under its lawsuit, which events could have a material adverse effect on
our financial statements, 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
economic climate and political conditions, work stoppages, exchange controls, currency fluctuations, armed con-
flicts, and unexpected changes in United States and foreign laws relating to tariffs, trade restrictions, trans-
portation 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 antici-
pate changes in international economic and political conditions and, therefore, unable to alter its business practi-
ces 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
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 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 allega-
tions 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.
13
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 products 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.
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
190 employees employed at these facilities are currently working under three separate collective bargaining
agreements.
In March 2014, 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 2017.
In September 2014, 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 110 employees, expires in September 2017.
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.
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.
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.
14
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.
We may be impacted by new regulations related to conflict minerals.
The SEC, as directed in The Dodd-Frank Wall Street Reform and Consumer Protection Act, adopted new
rules establishing disclosure and reporting requirements regarding the use of certain minerals referred to as
“conflict minerals” in products. These new rules require us to determine, disclose, and report whether or not such
conflict minerals originate from the Democratic Republic of the Congo or adjoining countries. The requirements
could affect the sourcing, availability, and cost of minerals used in the manufacture of certain of the products we
sell, including some that we contract to manufacture. In addition, our customers may require that our products be
free of conflict minerals and our revenues may be harmed if we are unable to procure conflict-free minerals at a
reasonable price. We may face reputation challenges with our customers and other stakeholders if we are unable
to verify sufficiently the origins of all minerals used in our products.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
15
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
16
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, friction
management products, and 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 . . . . . . . . . . . . . . . . . . . . . .
Sheffield, United Kingdom . . . . . . . . Track component and friction
management products facility.
Spokane, WA . . . . . . . . . . . . . . . . . . . CXT concrete tie plant.
Spokane, WA . . . . . . . . . . . . . . . . . . . Precast concrete facility.
Tucson, AZ . . . . . . . . . . . . . . . . . . . . CXT concrete tie plant.
Waverly, WV . . . . . . . . . . . . . . . . . . . Precast concrete facility.
Willis, TX (2)
. . . . . . . . . . . . . . . . . . Pipe coating and measurement
products and services facilities.
32
N/A
Tubular
Rail
22
Rail
9
N/A
Construction
Rail
35
35
35
9
17
Tubular
Rail
Construction
Rail
Rail
N/A
Rail
13
5
19
85
84
Rail
Construction
Rail
Construction
Tubular
2017
2021
Owned
Owned
2019
Owned
Owned
Owned
Owned
Owned
2019
2015*
2015*
2017
Owned
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.
*- Spokane lease is expected to be renewed during 2015.
Including the properties listed above, the Company has a total of 27 sales offices, including its headquarters
in Pittsburgh, PA and 22 warehouses, plant, and yard facilities located throughout the United States, Canada, and
Europe. 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
Information regarding the Company’s legal proceedings and 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.
16
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 375 common shareholders of record on February 25, 2015. 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
$48.41
54.68
56.72
54.41
2014
Low
$40.09
44.82
45.93
43.81
Dividends
High
$0.03
0.03
0.03
0.04
$45.43
46.45
47.91
50.00
2013
Low
$37.97
39.63
39.14
42.71
Dividends
$0.03
0.03
0.03
0.03
Dividends
The Company’s September 23, 2014 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 $25,000 per year when funds are drawn on the facility. If no draw-
ings on the facility exist, dividends, distributions, and redemptions in excess of $25,000 per year are subjected to
a limitation of $75,000 in the aggregate. The $75,000 aggregate limitation also permits certain loans, strategic
investments, and acquisitions.
In October 2014, the Company’s Board of Directors authorized an increase to the regular quarterly dividend
to $0.04 per share.
17
Performance Graph
In 2014, the Company changed its peer group to align it with the Company’s comparator group as used by
the Company’s compensation committee to evaluate the Company’s compensation practices. The Company’s
new peer group (2014 Peer Group) consists of Accuride Corporation, Alamo Group, Inc., AM Castle & Co.,
American Railcar Industries, Inc., CIRCOR International, Inc., Columbus McKinnon Corporation, Furmanite
Corporation, Gibraltar Industries, Inc., Houston Wire & Cable Company, Insteel Industries Inc., Lindsay Corpo-
ration, Lydall Inc., MYR Group, Inc., NN Inc., Northwest Pipe Co., Olympic Steel Inc., Orion Marine Group,
Inc., Quanex Building Products Corporation, Raven Industries Inc., and Sterling Construction Co. Inc.
Prior to 2014, the Company’s old peer group (2013 Peer Group) consisted of Alamo Group, Inc., AM Cas-
tle & Co., American Railcar Industries, Inc., CIRCOR International, Inc., DXP Enterprises, Inc., Greenbrier Cos.,
Inc., Haynes International Inc., Houston Wire & Cable Company, Insteel Industries Inc., Lawson Products Inc.,
NN Inc., Olympic Steel Inc., RBC Bearings Inc., Skyline Corp., Sterling Construction Co. Inc., 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 groups assuming a $100 investment made on December 31, 2009. 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.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among L.B. Foster Company, the NASDAQ Composite Index,
2013 Peer Group, and 2014 Peer Group
$300
$250
$200
$150
$100
$50
$0
12/09
12/10
12/11
12/12
12/13
12/14
L.B. Foster Company
NASDAQ Composite
2013 Peer Group
2014 Peer Group
* $100 invested on 12/31/09 in stock or index, including reinvestment of dividends. Fiscal year ending
December 31.
L.B. Foster Company
NASDAQ Composite
2013 Peer Group
2014 Peer Group
12/09
12/10
12/11
12/12
12/13
12/14
$100.00
$137.34
$95.22 $146.67
$160.11
$164.88
100.00
117.61
118.70
139.00
196.83
223.74
100.00
144.08
135.09
150.81
244.08
218.48
100.00
123.58
110.11
124.66
176.21
157.97
18
Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information as of December 31, 2014 with respect to compensation plans
under which equity securities of the Company are authorized for issuance.
Plan Category
Equity compensation plans
approved by
shareholders . . . . . . . . . . . .
Equity compensation plans not
approved by
shareholders . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . .
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)
7,500
$9.08
—
7,500
—
$9.08
469,840
—
469,840
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, 2014, there were 110,642 fully vested shares issued under the 2006 Omnibus Incentive Plan to
non-employee directors. Additionally, pursuant to the 2006 Omnibus Incentive Plan, during 2014 and 2012 the
Company issued approximately 14,000 and 34,000 fully-vested shares in lieu of a cash payment earned under
separate three year incentive plans, respectively.
The Company grants eligible employees Restricted Stock and Performance Unit Awards under the 2006
Omnibus Plan. The forfeitable Restricted Stock Awards generally time-vest after a four year holding period,
unless indicated otherwise by the underlying Restricted Stock Agreement. Performance Unit Awards are offered
annually under separate three-year long-term incentive programs. Performance units are subject to forfeiture and
will be converted into common stock of the Company based upon the Company’s performance relative to per-
formance measures and conversion multiples as defined in the underlying program.
The 1998 Plan expired by its terms in 2008 and no awards may be granted under that Plan, which currently
has outstanding stock option awards that expire in 2015.
The Company will withhold or employees may tender shares of restricted stock when issued to pay for
withholding taxes. During 2014, 2013, and 2012, the Company withheld 21,676, 16,166, and 23,562 shares,
respectively, for this purpose. The value of the shares withheld were $985, $708 and $669 in 2014, 2013, and
2012, respectively.
Issuer Purchases of Equity Securities
The Company’s purchases of equity securities for the three-month period ended December 31, 2014 were as
follows:
Total number
of shares
purchased(1)
October 1, 2014 — October 31, 2014 . . . . . . . .
November 1, 2014 — November 30, 2014 . . . .
December 1, 2014 — December 31, 2014 . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
1,375
1,375
Total number
of shares
purchased as
part of publicly
announced plans
or programs(2)
Approximate
dollar
value of shares
that may yet be
purchased under
the plans or programs
(in thousands)
—
—
—
—
$15,000
15,000
15,000
$15,000
Average
price
paid per
share
$ —
—
48.40
$48.40
(1) Reflects shares withheld by the Company to pay taxes upon vesting of restricted stock.
(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 became effective January 1, 2014.
19
The Company did not purchase any common shares under the share repurchase authorization, however, the
Company withheld shares for employee tax payments during the year. During the first quarter of 2014, the
Company withheld 17,045 shares at an average price of $43.86. During the second quarter of 2014, the Company
withheld 3,256 at an average price of $52.55. There were no share withholdings during the third quarter of 2014.
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
2014(1)
Year Ended December 31,
2012(3)
2013(2)
2011(4)
2010(5)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $607,192 $597,963 $588,541 $575,337 $467,058
Operating profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,082 $ 41,571 $ 22,657 $ 30,812 $ 31,217
Income from continuing operations, net of tax . . . . . . . $ 25,654 $ 29,276 $ 14,764 $ 22,067 $ 20,006
486
Income from discontinued operations, net of tax . . . . . .
1,424
828
14
2
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,656 $ 29,290 $ 16,188 $ 22,895 $ 20,492
Basic earnings per common share:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
2.51 $
0.00
2.88 $
0.00
1.46 $
0.14
2.16 $
0.08
Basic earnings per common share . . . . . . . . . . . . . . . . . $
2.51 $
2.88 $
1.60 $
2.24 $
Diluted earnings per common share:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
2.48 $
0.00
2.85 $
0.00
1.44 $
0.14
2.14 $
0.08
Diluted earnings per common share . . . . . . . . . . . . . . . . $
2.48 $
2.85 $
1.58 $
2.22 $
1.96
0.05
2.01
1.93
0.05
1.98
Dividends paid per common share . . . . . . . . . . . . . . . . . $
0.13 $
0.12 $
0.10 $
0.10 $ —
Operating profit represents the gross profit less selling and administrative expenses and amortization expense.
(1) 2014 includes CXT Concrete Tie warranty charges of $9,374 within the Rail Products segment. The 2014
results include the acquisitions of Carr Concrete (July 7), FWO (October 29), and Chemtec Energy Services,
L.L.C. (December 30). More information about the warranty charges and acquisition activity can be found in
Part II Item 8, Note 20 and Note 3, respectively, to the consolidated financial statements included herein,
which is incorporated by reference into this Part II Item 6.
(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.
(3) 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.
(4) 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.
(5) 2010 includes the results of Rail Technologies, beginning on December 15, 2010.
Balance Sheet Data
2014
2013
December 31,
2012
2011
2010
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . .
$495,121
138,908
25,752
335,888
$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
20
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
Recent Acquisitions by Segment
Construction Products Acquisition
On July 7, 2014, the Company acquired Carr Concrete Corporation (Carr) for $12,480. Carr is a provider of
pre-stressed and precast concrete products located in Waverly, WV and the transaction was funded with cash on
hand.
Rail Products Acquisitions
On October 29, 2014, the Company acquired FWO, a business of Balfour Beatty Rail GmbH for $1,103.
The German business provides track lubrication and switch roller equipment for international railway applica-
tions.
Subsequent to year end, on January 13, 2015, the Company acquired the stock of Tew Holdings, LTD (Tew)
for approximately $26,600, subject to the finalization of net debt and net working capital adjustments. Head-
quartered in Nottingham, UK, Tew provides application engineering solutions primarily to the rail market and
other major industries. The transaction was funded with non-domestic cash.
Tubular Products Acquisition
On December 30, 2014, the Company acquired Chemtec Energy Services, L.L.C. (Chemtec) for $66,719,
net of cash received, which is inclusive of a $1,867 preliminary working capital adjustment. Located in Willis,
TX, Chemtec is a manufacturer and turnkey provider of blending, injection, and metering equipment for the oil
and gas industry.
2014 Developments
In addition to the acquisitions, 2014 included many developments that will provide efficiencies and oppor-
tunities to expand our product lines. During 2014, we:
‰ Generated $66,616 in cash flows from operations to fund current year acquisitions and strategic capital
investments.
‰ Completed the centralization of our friction management operations to increase our product offerings
while reducing our overhead costs.
‰ Entered into the completion phase of our facility upgrades at our Birmingham, AL facility which will lead
to increased production capacity and efficiency.
‰ Completed a track expansion in the Columbia City, IN yard to significantly increase efficiency.
‰ Purchased an additional facility in Bedford, PA to support growth in our corrugated bridge business.
‰ Amended our credit agreement from a maximum credit line of $125,000 with a $50,000 accordion feature
to a maximum credit line of $200,000 with a $100,000 accordion feature.
‰ Increased the quarterly dividend 33% to $0.04 per share during the fourth quarter.
‰ Selected an enterprise resource planning system and acquired the software to begin the implementation.
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
21
through 2011 at CXT’s Grand Island, NE facility failed to meet contract specifications, had workmanship defects
and were cracking and failing prematurely. Of the 3.0 million ties manufactured between 1998 and 2011 from the
Grand Island, NE facility, approximately 1.6 million ties were sold 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 failure 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.
Following the UPRR Notice, 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.
2012
During 2012, the Company completed sufficient testing and analysis to further understand this matter.
Based upon testing results and expert analysis, 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. During the fourth quarter of 2012 and first quarter of 2013, the Company reached agreement with the
UPRR on several matters including a process for the Company and the UPRR to work together to identify, priori-
tize, and replace defective ties that meet the criteria for replacement. This process applies 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 also reverted to a previously
used warranty policy providing a 15 year warranty with a 1:1 replacement ratio. This change provided an addi-
tional 10 years of warranty protection. In the amended 2005 supply agreement, the Company and the UPRR also
extended the supply of Tucson ties by five years and agreed on a cash payment of $12,000 to the UPRR as com-
pensation for concrete ties already replaced by the UPRR during the investigation period.
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.
2013
Throughout 2013, at the UPRR’s request and under the terms of the amended 2005 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 amended 2005 supply agreement. The
disagreement related to the 2013 warranty replacement activity includes approximately 170,000 ties where the
Company provided detailed documentation supporting our position with reason codes that detail why these ties
are not eligible for a warranty claim.
In late November 2013, the Company received notice from the UPRR asserting a material breach of the
amended 2005 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
22
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 the amended 2005 supply agreement.
2014
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 was
based on empirical data and visual observation from Company employees that were present during the replace-
ment process for a substantial majority of the concrete ties replaced. The Company has spent considerable time
documenting 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 amended 2005 supply agreement.
During the second quarter of 2014, the Company increased its accrual by an additional $4,000 based on
revised estimates of ties to be replaced. The Company continued to work with UPRR to identify, replace, and
reconcile defective ties related to the warranty claim in accordance with the amended 2005 supply agreement.
The Company and UPRR met during the third quarter of 2014 to evaluate each other’s position in an effort to
work towards agreement on the unreconciled 2013 and 2014 replacement activity as well as the standards and
practices to be implemented for future replacement activity and warranty tie replacement. No agreement was
reached and the Company continues to endeavor to reconcile the replaced warranty ties with UPRR.
As of December 31, 2014, the Company and the UPRR have not been able to reconcile the disagreement
related to the 2013 and 2014 warranty replacement activity. The disagreement relating to the 2014 warranty
replacement activity includes approximately 90,100 ties that the Company believes are not warranty-eligible.
As a result of the current year replacement activity and related discussions with the UPRR, during the fourth
quarter of 2014 the Company recognized a $4,766 charge to increase the warranty obligation to reflect the
Company’s current expectations of tie failures, based upon scientific testing and other analysis, adjusted for ties
already provided to the UPRR. The accrued concrete tie warranty reserve of $10,331 as of December 31, 2014 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. In the event the
UPRR continues to replace ties and assert warranty claims in future years in the same manner as 2013 and 2014,
we are likely to have a disagreement in those future years relating to the number of ties eligible for warranty
claim.
In November and December of 2014, the Company received additional notices from the UPRR asserting
that ties manufactured in 2000 were defective and again asserting material breaches of the amended 2005 supply
agreement relating to warranty tie replacements as well as certain new ties provided to the UPRR being out of
specification. The Company again responded to the UPRR that it was not in material breach of the amended 2005
supply agreement relating to warranty tie replacements and that new ties being manufactured complied with the
specifications provided by the UPRR.
Although the Company has denied it is in material breach of the amended 2005 supply agreement, this dis-
pute could jeopardize our amended 2005 supply agreement. For the years ended December 31, 2014, 2013, and
2012, sales to the UPRR from our Tucson, AZ facility were approximately $15,297, $12,664, and $25,441,
respectively. Additionally, as of December 31, 2014 we had long-lived assets with a net book value of approx-
imately $978 associated with the Tucson, AZ facility.
On January 23, 2015, the UPRR filed a Complaint and Demand for Jury Trial in the District Court for Doug-
las County, NE against the Company and its subsidiary, CXT Incorporated, asserting among other matters that
the Company breached its express warranty, breached an implied covenant of good faith and fair dealing, antici-
patorily repudiated its warranty obligations, and that UPRR’s exclusive and limited remedy provisions in the
supply agreement have failed of their essential purpose which entitles UPRR to recover all incidental and con-
sequential damages. The complaint seeks to cancel all duties of UPRR under the contracts, to adjudge the Com-
pany as having no remaining rights under the contracts, and to recover damages in an amount to be determined at
trial for the value of unfulfilled warranty replacement ties and ties likely to become warranty eligible, for costs of
23
cover for replacement ties and for various incidental and consequential damages. The amended 2005 supply
agreement provides that UPRR’s exclusive remedy is to receive a replacement tie that meets the contract specifi-
cations for each tie that failed to meet the contract specifications or otherwise contained a material defect pro-
vided that the Company receives written notice of such failure or defect within 15 years after that tie was
produced. The amended 2005 supply agreement continues to provide that the Company’s warranty does not
apply to ties that (a) have been repaired or altered without the Company’s written consent in such a way as to
affect the stability or reliability thereof, (b) have been subject to misuse, negligence or accident, or (c) have been
improperly maintained or used contrary to the specifications for which such ties were produced. The amended
2005 supply agreement also continues to provide that the Company’s warranty is in lieu of all other express or
implied warranties and that neither party shall be subject to or liable for any incidental or consequential damages
to the other party. The dispute is largely based on (1) claims submitted which the Company believes are for ties
inaccurately rated that are not the responsibility of the Company and claims that do not meet the criteria of a
warranty replacement and (2) UPRR’s assertion, which the Company vigorously disputes, that UPRR in future
years will be entitled to warranty replacement ties for virtually all of the Grand Island ties. Many thousands of
Grand Island ties have been performing in track for over ten years. In addition, a significant amount of Grand
Island ties were rated by both parties in the excellent category of the rating system. The Company believes
UPRR’s claims are without merit and intends to vigorously defend itself.
The Company continues to engage in discussions in an effort to resolve this matter, however, we cannot
predict that such discussions will be successful, the results of the litigation with UPRR, or whether any settle-
ment or judgment amounts will be within the range of our estimated accruals for loss contingencies. Future
potential costs pertaining to UPRR’s claims and the outcome of the UPRR litigation could result in a material
adverse effect on our results of operations, financial condition, and cash flows.
24
Quarterly Results of Continuing Operations
Three Months Ended
December 31,
2014
2013
Percent of Total
Net Sales
Three Months
Ended
December 31,
2013
2014
Percent
Increase/(Decrease)
2014 vs. 2013
Net Sales:
Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . .
Tubular Products . . . . . . . . . . . . . . . . . . . . . . .
$ 91,530
59,747
9,872
$ 85,824
61,923
8,711
56.8% 54.8%
37.1
6.1
39.6
5.6
Total net sales . . . . . . . . . . . . . . . . . . . . . . . .
$161,149
$156,458
100.0% 100.0%
6.6%
(3.5)
13.3
3.0%
Three Months Ended
December 31,
2014
2013
Gross Profit
Percentage
Three Months
Ended
December 31,
2013
2014
Percent
Increase/(Decrease)
2014 vs. 2013
Gross Profit:
Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . .
Tubular Products . . . . . . . . . . . . . . . . . . . . . . .
LIFO income / (expense) . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 18,920
10,565
1,981
238
(99)
$ 18,840
9,973
2,218
(262)
(158)
20.7% 22.0%
17.7
20.1
0.1
(0.1)
16.1
25.5
(0.2)
(0.1)
Total gross profit
. . . . . . . . . . . . . . . . . . . . .
$ 31,605
$ 30,611
19.6% 19.6%
0.4%
5.9
(10.7)
**
(37.3)
3.2%
Three Months Ended
December 31,
2014
2013
Percent of Total
Net Sales
Three Months
Ended
December 31,
2013
2014
Percent
Increase/(Decrease)
2014 vs. 2013
Expenses:
Selling and administrative expenses . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in income of nonconsolidated
investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 21,546
1,191
137
(99)
$ 18,628
1,010
109
(165)
13.4% 11.9%
0.7
0.1
(0.1)
0.6
0.1
(0.1)
(459)
(377)
(424)
(101)
(0.3)
(0.2)
(0.3)
(0.1)
15.7%
17.9
25.7
(40.0)
8.3
**
Total expenses . . . . . . . . . . . . . . . . . . . . . . .
$ 21,939
$ 19,057
13.6% 12.2%
15.1%
Income from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . .
$
$
9,666
3,628
6,038
$ 11,554
4,279
$
7,275
6.0% 7.4%
2.3
2.7
3.7% 4.6%
(16.3)%
(15.2)
(17.0)%
** Results of calculation are not considered meaningful for presentation purposes.
25
Fourth Quarter 2014 Compared to Fourth Quarter 2013 — Company Analysis
Net sales for the three month period ended December 31, 2014 increased by $4,691, or 3.0%, which was
attributable to a 13.3% and 6.6% increase in the Tubular and Rail Products segments, respectively, partially off-
set by a 3.5% reduction in the Construction Products segment.
The gross profit margin for the 2014 and 2013 periods was 19.6%. The fourth quarter 2014 gross profit was
diluted by the impact of a $4,766 warranty charge related to CXT concrete ties manufactured in our former
Grand Island, NE facility which was closed in January 2011. Excluding the charge1, the gross profit margin
would have been 22.6%. The adjusted increase over prior year was primarily generated within the Rail Products
business and was attributable to a favorable sales mix and operational cost reduction programs.
Selling and administrative expense increased by $2,918, or 15.7%, in the 2014 fourth quarter and was pri-
marily attributable to increased personnel related costs associated with salaried headcount, costs related to the
preparation for and identification of a new enterprise resource planning system, and a quarter over quarter
increase of $1,373 in acquisition related costs. Included within the increased personnel expense are costs related
to acquired businesses.
The Company’s effective income tax rate from continuing operations in the 2014 fourth quarter was 37.5%,
compared to 37.0% in the prior year quarter. The increase in the Company’s effective tax rate compared to the
prior year quarter was primarily due to increased nondeductible acquisition-related expenses in the current year
quarter.
Net income from continuing operations for the 2014 fourth quarter was $6,038, or $0.58 per diluted share,
compared to income from continuing operations of $7,275, or $0.71 per diluted share, in the prior year quarter.
Results of Continuing Operations — Segment Analysis
Rail Products
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$91,530
$85,824
$5,706
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,920
$18,840
$
80
Three Months Ended
December 31,
2014
2013
Increase
(Decrease)
2014 vs. 2013
Percent
Increase/
(Decrease)
2014 vs. 2013
6.6%
0.4%
Gross Profit Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20.7%
22.0%
(1.3)%
(5.9)%
Fourth Quarter 2014 Compared to Fourth Quarter 2013
The Rail Products sales increase was due principally to volume growth in the Rail Distribution, CXT con-
crete tie, and Rail Technologies businesses. Partially offsetting this increase were reductions in our Transit Prod-
ucts division primarily related to the Honolulu, HI elevated transit project as it nears completion.
The Rail Products segment experienced a 28.7% decrease in new orders compared to the prior year quarter.
The reduction primarily related to the Concrete Tie division which was driven by several large transit orders that
were booked late in 2013.
The gross profit percentage declined due to a $4,766 warranty charge recognized during the fourth quarter
of 2014 related to concrete ties manufactured at our former Grand Island, NE facility. Excluding the impact of
the charge, the gross profit percentage would have been 25.9%. The adjusted margin compared to the prior year
relates to improvements in each of the Rail Products divisions with the exception of CXT concrete ties. During
the fourth quarter 2014, the Company benefited from an overall favorable product mix and the ongoing impact of
lower costs driven by internal cost reduction efforts.
1
All results excluding warranty charges are non-GAAP measures used for management reporting purposes.
Management believes that these measures provide useful information to investors because it is a profitability
measure used to evaluate earnings performance on a comparable year-over-year basis.
26
Construction Products
Three Months Ended
December 31,
2014
2013
(Decrease)
Increase
2014 vs. 2013
Percent
(Decrease)/Increase
2014 vs. 2013
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$59,747
$61,923
$(2,176)
(3.5)%
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,565
$ 9,973
$
592
Gross Profit Percentage . . . . . . . . . . . . . . . . . . . . . . .
17.7%
16.1%
1.6%
5.9%
9.9%
Fourth Quarter 2014 Compared to Fourth Quarter 2013
Construction Products segment sales declined by $2,176, or 3.5%, compared to the prior year quarter. The
reduction principally relates to a 16.1% decrease in Piling Products revenues driven by reduced volumes in the
2014 quarter. The decline in Piling was largely offset by increases within the Fabricated Bridge and concrete
products businesses. Included within concrete product sales were revenues related to the Company’s July 2014
acquisition of Carr Concrete.
The Construction Products segment experienced a 21.3% increase in new orders compared to the prior year
quarter. New orders from the 2014 acquisition of Carr Concrete represented 9.0% of current quarter orders.
The gross profit percentage increased by 158 basis points due primarily to a favorable shift in product mix
compared to the prior year period. Gross profit generated by the Fabricated Bridge Products and Piling divisions
led to the increase over the prior year quarter.
Tubular Products
Three Months Ended
December 31,
2014
2013
Increase
(Decrease)
2014 vs. 2013
Percent
Increase/(Decrease)
2014 vs. 2013
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$9,872
$8,711
$1,161
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,981
$2,218
$ (237)
Gross Profit Percentage . . . . . . . . . . . . . . . . . . . . . . . . .
20.1% 25.5%
(5.4)%
13.3%
(10.7)%
(21.2)%
Fourth Quarter 2014 Compared to Fourth Quarter 2013
Tubular Products segment sales increased by $1,161, or 13.3% was due to the effect of a full quarter of sales
for the November 7, 2013 acquisition of Ball Winch. Partially offsetting the increase was a reduction in the Bir-
mingham, AL coating facility sales as a result of a three week shutdown in December to upgrade the facility to
improve efficiency, quality, and capacity at the plant.
During the 2014 fourth quarter, the Tubular Products business experienced a reduction of 36.6% in order
input relative to the prior year quarter. The reduction in orders was driven by declines in the Coated Products
business.
Gross profit declined 540 basis points as a result of the previously mentioned shutdown at the Birmingham,
AL facility and to a lesser extent, costs incurred to develop additional infrastructure within the Coated Products
field service market.
27
Year-to-date Results of Continuing Operations
Twelve Months Ended
December 31,
2013
2014
2012
Percent of Total
Net Sales
Twelve Months
Ended December 31,
2013
2012
2014
Net Sales:
Rail Products . . . . . . . . . . . . . $374,615 $363,667 $370,322
169,253
Construction Products . . . . . .
48,966
Tubular Products . . . . . . . . . .
178,847
53,730
191,751
42,545
61.7% 60.8%
29.5
8.8
32.1
7.1
62.9%
28.8
8.3
Total net sales . . . . . . . . . . . $607,192 $597,963 $588,541
100.0% 100.0% 100.0%
Percent
Increase/(Decrease)
2014 vs. 2013 2013 vs. 2012
3.0%
(6.7)
26.3
1.5%
(1.8)%
13.3
(13.1)
1.6%
Twelve Months Ended
December 31,
2013
2014
2012
Gross Profit:
Rail Products . . . . . . . . . . . . . $ 77,235 $ 74,986 $ 52,533
25,080
Construction Products . . . . . .
15,189
Tubular Products . . . . . . . . . .
1,118
LIFO income . . . . . . . . . . . . .
(1,651)
Other . . . . . . . . . . . . . . . . . . . .
32,391
11,722
738
(495)
29,224
12,278
37
(586)
Gross Profit
Percentage
Twelve Months
Ended
December 31,
2013
2014
20.6% 20.6%
18.1
21.8
0.1
(0.1)
15.2
28.9
—
(0.1)
Total gross profit
. . . . . . . . $121,591 $115,939 $ 92,269
20.0% 19.4%
Percent
Increase/(Decrease)
2014 vs. 2013 2013 vs. 2012
2012
14.2%
14.8
31.0
0.2
(0.3)
15.7%
3.0%
10.8
(4.5)
**
(15.5)
4.9%
42.7%
16.5
(19.2)
(96.7)
(64.5)
25.7%
Twelve Months Ended
December 31,
2013
2014
2012
Expenses:
Selling and administrative
expenses . . . . . . . . . . . . . . . $ 79,814 $ 71,256 $ 66,651
2,961
542
(452)
4,695
512
(530)
3,112
485
(659)
Amortization expense . . . . . . .
Interest expense . . . . . . . . . . .
Interest income . . . . . . . . . . . .
Equity in income of
nonconsolidated
investments . . . . . . . . . . . . .
Other income . . . . . . . . . . . . .
Percent of Total Net Sales
Twelve Months
Ended
December 31,
2013
2014
2012
Percent
Increase/(Decrease)
2014 vs. 2013 2013 vs. 2012
13.1% 11.9%
0.8
0.1
(0.1)
0.5
0.1
(0.1)
11.3%
0.5
0.1
(0.1)
12.0%
50.9
5.6
(19.6)
6.9%
5.1
(10.5)
45.8
(1,282)
(674)
(1,316)
(1,054)
(837)
(426)
(0.2)
(0.1)
(0.2)
(0.2)
(0.1)
(0.1)
(2.6)
(36.1)
57.2
**
Total expenses . . . . . . . . . . $ 82,535 $ 71,824 $ 68,439
13.6% 12.0%
11.6%
14.9%
4.9%
Income from continuing
operations before income
taxes . . . . . . . . . . . . . . . . . . . . $ 39,056 $ 44,115 $ 23,830
9,066
Income tax expense . . . . . . . . . .
14,839
13,402
6.4%
2.2
7.4%
2.5
4.0%
1.5
(11.5)%
(9.7)
85.1%
63.7
Income from continuing
operations . . . . . . . . . . . . . . . . $ 25,654 $ 29,276 $ 14,764
4.2%
4.9%
2.5%
(12.4)%
98.3%
** Results of calculation are not considered meaningful for presentation purposes.
28
The Year 2014 Compared to the Year 2013 — Company Analysis
Net sales for the year increased by $9,229, or 1.5%, which was attributable to a 26.3% and 3.0% improve-
ment in Tubular and Rail Products segment sales, respectively, partially offset by 6.7% reduction in Construction
Products sales. Approximately 1.8%, 0.8% and 0.1% of the sales related to revenues from acquired businesses
within the Tubular, Construction and Rail Products segments, respectively.
The gross profit margin for 2014 was 20.0% compared to 19.4% in the prior year period. Excluding the
current year warranty charges, the Company would have generated a gross profit margin of 21.6%.
Selling and administrative costs increased $8,558, or 12.0%, compared to the prior year. Current year
increases were due to a variety of business developments including a sizeable increase to employee headcount.
Excluding current year acquisitions, the Company headcount increased by approximately 6.3% over the prior
year. The increase impacted personnel related costs associated with salaried headcount and travel. Additionally,
the Company incurred costs in 2014 related to the preparation for and identification of a new enterprise resource
planning system. Lastly, acquisition related cost increases of $2,058 as well as recurring selling and admin-
istrative costs related to businesses acquired in the current year impacted the increase.
Other income for the twelve months ended 2014 decreased to $674 compared to $1,054 during 2013. The
decrease related principally to a prior year recovery of escrowed funds related to a 2005 real estate transaction
which was previously written off as uncollectible.
The Company’s effective income tax rate from continuing operations for 2014 was 34.3%, compared to
33.6% in the prior year. The increase in the Company’s effective tax rate was due to increased nondeductible
acquisition-related expenses in the current year and the recognition of uncertain state tax positions during the
prior year, offset by greater U.S. domestic production activities deductions and a more favorable global mix of
income.
Income from continuing operations for 2014 was $25,654, or $2.48 per diluted share, which compares to
income from continuing operations for 2013 of $29,276, or $2.85 per diluted share. Included in our 2014 results
were $9,374 in pre-tax charges related to concrete ties manufactured at our former Grand Island, NE facility
which was closed in January 2011.
The Year 2013 Compared to the Year 2012 — Company Analysis
Net sales for 2013 increased by $9,422, or 1.6%, which was attributable to a 13.3% improvement in Con-
struction Product segment sales, partially offset by 1.8% and 13.1% reductions in Rail Products and Tubular
Products sales, respectively.
The gross profit margin for 2013 was 19.4% compared to 15.7% in 2012. Excluding the 2012 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.
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 the 2012 results
were charges related to concrete ties manufactured at our Grand Island, NE facility of $22,000.
29
Results of Continuing Operations — Segment Analysis
Rail Products
Twelve Months Ended
December 31,
2013
2014
2012
Increase
2014 vs. 2013
(Decrease)
/Increase
Percent
Increase
2013 vs. 2012 2014 vs. 2013 2013 vs. 2012
Percent
(Decrease)
/Increase
Net Sales . . . . . . . . . . . . . . . . $374,615 $363,667 $370,322
$10,948
$ (6,655)
Gross Profit
. . . . . . . . . . . . . $ 77,235 $ 74,986 $ 52,533
$ 2,249
$22,453
3.0%
3.0%
(1.8)%
42.7 %
Gross Profit Percentage . .
20.6% 20.6%
14.2%
—%
6.4%
—%
45.1%
The Year 2014 Compared to the Year 2013
Rail Products sales increased $10,948, or 3.0%, compared to the prior year. The 2014 performance was
highlighted by significant sales growth within the Rail Technologies business and to a lesser extent increases
within the Allegheny Rail Products and CXT Concrete Tie businesses. Partially offsetting these improvements
were declines in the Rail Distribution and Transit Products businesses.
Compared to the prior year, the Rail Products segment generated a 7.1% increase in new orders.
During 2014, the Rail segment incurred $9,374 in warranty charges related to our former Grand Island, NE
concrete tie facility. The charge adversely impacted our Rail Products segment gross profit. Without the charge,
Rail Products’ gross profit margins would have been 23.1% for the period ended December 31, 2014. The profit
increase largely relates to favorable sales mix.
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. Transit products, Allegheny Rail Prod-
ucts, 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-
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.
Construction Products
Twelve Months Ended
December 31,
2013
2014
2012
(Decrease)
Increase
Increase
Percent
(Decrease)
/Increase
Percent
Increase
2014 vs. 2013 2013 vs. 2012 2014 vs. 2013 2013 vs. 2012
Net Sales . . . . . . . . . . . . . . . . $178,847 $191,751 $169,253
$(12,904)
$22,498
(6.7)%
13.3%
Gross Profit . . . . . . . . . . . . . . $ 32,391 $ 29,224 $ 25,080
$ 3,167
$ 4,144
10.8%
16.5%
Gross Profit Percentage . . .
18.1% 15.2%
14.8%
2.9%
0.4%
19.1%
2.7%
30
The Year 2014 Compared to the Year 2013
Construction Products segment sales declined by $12,904, or 6.7%, compared to the prior period. The reduc-
tion was driven by a 20.8% reduction in Piling Product sales which was partially offset by significant growth in
the Fabricated Bridge Products business as well as revenues from the July 2014 acquisition of Carr Concrete. The
Piling shortfall was partially attributable to insufficient product supply which caused the segment to be unable to
meet demand levels during much of the year. During 2014, the Fabricated Bridge business experienced a record
year and generated $8,800 in revenues related to the Newburgh-Beacon bridge project compared to $4,360 in the
prior year. The project is expected to be completed during 2015.
Including orders from Carr Concrete, the Construction Products segment generated an increase in new
orders of 3.5% during 2014.
Leverage from engineered product sales created a favorable sales mix within the segment leading to a 287
basis point improvement over the prior year.
The Year 2013 Compared to the Year 2012
During 2013, 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. The pace of piling orders and sales was slow to start 2013, 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 2013 led to a full year in which sales grew at nearly a double digit pace. The outlook for
concrete 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 back-
log to start 2014.
Volume related sales increases in Piling Products along with solid project management helped improve
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.
Tubular Products
Twelve Months Ended
December 31,
2013
2014
2012
Increase /
(Decrease)
Decrease
Percent
Increase/
(Decrease)
Percent
Decrease
2014 vs. 2013 2013 vs. 2012
2014 vs. 2013 2013 vs. 2012
Net Sales . . . . . . . . . . . . . . . . $53,730 $42,545 $48,966
$11,185
$(6,421)
26.3%
(13.1)%
Gross Profit
. . . . . . . . . . . . . . $11,722 $12,278 $15,189
$ (556)
$(2,911)
(4.5)% (19.2)%
Gross Profit Percentage . . .
21.8% 28.9% 31.0%
(7.1)%
(2.1)% (24.6)%
(6.8)%
The Year 2014 Compared to the Year 2013
Tubular Products segment sales increased $11,185, or 26.3% compared to the prior year period. The
increase was principally due to a full year of sales from Ball Winch which was acquired in November 2013.
Adding to the improvement was a 6.2% increase in sales from the Birmingham, AL coated products business.
Compared to the prior year, the Tubular Products segment generated an increase in new orders of 31.2%.
New orders from the 2013 acquisition of Ball Winch represented 23.7% of current year orders.
Gross profit declines of 705 basis points were attributable to cost overruns on a Coated Products project
completed during the 2014 third quarter as well as the impact of a three week plant shutdown in Birmingham,
AL. The shutdown was completed in January 2015.
31
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.
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.
32
Liquidity and Capital Resources
Total debt at December 31, 2014 and 2013 was $26,428 and $56, respectively, and was comprised of pro-
ceeds from the revolving credit facility as well as assets funded through financing agreements.
Our need for liquidity relates primarily to working capital requirements for continuing operating activities,
debt service payments, capital expenditures, JV capital obligations, strategic acquisitions or alliances, share
repurchases, and dividends.
The following table summarizes the impact of these items:
Liquidity needs:
Working capital and other assets and liabilities . . . . . . . . . . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital contributions to equity method investments . . . . . . . . . . . . .
Other long-term debt repayments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing costs paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to common shareholders . . . . . . . . . . . . . . . . . . . . .
Acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
December 31,
2013
2012
$ 29,259
(17,056)
(82)
(125)
(473)
(985)
(1,345)
(80,797)
(362)
$(29,964)
(9,674)
—
(6)
—
(708)
(1,240)
(37,500)
(330)
$ 2,900
(7,160)
—
(2,373)
—
(669)
(1,029)
—
(405)
Net liquidity needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(71,966)
(79,422)
(8,736)
Liquidity sources:
Internally generated cash flows before interest paid . . . . . . . . . . . . .
Dividends from LB Pipe & Coupling Products, LLC . . . . . . . . . . . .
Proceeds from asset sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term debt proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,089
630
184
467
24,516
(3,642)
Net liquidity sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59,244
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
123
43,616
558
—
238
—
(2,106)
42,306
275
24,464
—
24
321
—
940
25,749
10,724
Net Change in Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(12,599)
$(36,841)
$27,737
Cash Flow from Continuing Operating Activities
During 2014, cash provided by continuing operating activities was $66,616 compared to $13,880 in 2013.
During 2014, income, adjustments to income from continuing operating activities, and dividends from the joint
venture provided $37,357 compared to providing $43,844 in 2013. Working capital and other assets and
liabilities provided $29,259 in 2014 compared to working capital and other assets and liabilities use of $29,964 in
2013. The significant
increase in cash flows primarily relates to additional emphasis on working capital
management throughout 2014.
The Company’s calculation for days sales outstanding at December 31, 2014 was 50 days compared to 52
days at December 31, 2013 and we believe our receivable portfolio continues to be strong.
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.
33
Cash Flow from Continuing Investing Activities
The primary investing activity in 2014 related to a cash use of $80,302 for the acquisitions of Chemtec, Carr
Concrete, and FWO as well a $495 working capital distribution related to the 2013 acquisition of Ball Winch.
Capital expenditures of $17,056 related to improvements to our machinery and equipment across each segment,
strategic land acquisitions to increase production capacity, leasehold improvements, and plant upgrades at our
Birmingham, AL facility. We anticipate 2015 capital expenditures to be in the $18,000 - $22,000 range.
The primary investing activity in 2013 related to the $37,500 acquisition of assets from Ball Winch. Capital
expenditures of $9,674 related to improvements to our machinery and equipment across each segment, leasehold
improvements, and 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 prod-
ucts facility in Magnolia, TX, and other yard and plant upgrades.
Cash Flow from Continuing Financing Activities
As a result of additional financing needs during the fourth quarter of 2014, the primary financing activity
related to the receipt of proceeds from our revolving credit facility of $24,200. Additionally, we paid dividends
of $0.04 per share during the fourth quarter of 2014 and $0.03 per share during each of the prior three quarters of
2014. During 2013, we paid quarterly dividends of $0.03 per share. We did not purchase any common shares of
the Company under the share repurchase authorization in 2014 or 2013, however, the Company withheld 21,676
and 16,166 shares to pay employee withholding taxes in connection with the vesting of restricted stock awards
for approximately $985 and $708, respectively.
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.
Financial Condition
As of December 31, 2014, we had $52,024 in cash and cash equivalents and credit facilities with $175,375
of availability. We believe this capacity will afford us the flexibility to take advantage of opportunities as we
explore both organic and external growth opportunities. As of December 31, 2014, we were in compliance with
all of our credit agreements’ covenants.
Our priority remains the preservation of our principal cash balances while investing our funds in a manner to
maximize returns and maintain liquidity while seeking the highest yield available. Approximately $49,233 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. The
Company utilized non-domestic funds totaling approximately $27,600 for the acquisitions of FWO and Tew in
October 2014 and January 2015, respectively. The Company is continuing to explore foreign acquisition oppor-
tunities and expects to utilize these non-domestic cash accounts to fund any such acquisitions.
Borrowings under the Amended Credit Agreement will bear interest at rates based upon either the base rate
or Euro-rate plus applicable margins. Applicable margins are dictated by the ratio of the Company’s indebtedness
less cash on hand to the Company’s consolidated EBITDA, as defined in the underlying Amended 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 Euro-rate (as defined in the Amended Credit Agreement) plus 1.00%. The base rate and Euro-rate
spreads range from 0.00% to 1.00% and 1.00% to 2.00%, respectively.
The Amended Credit Agreement includes two financial covenants: (a) 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 3.25 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.
34
The Amended Credit Agreement permits the Company to pay dividends, distributions, and make
redemptions with respect to its stock provided no event of default or potential default (as defined in the Amended
Credit Agreement) has occurred prior to or after giving effect to the dividend, distribution, or redemption. Divi-
dends, distributions, and redemptions are capped at $25,000 per year when funds are drawn on the facility. If no
drawings on the facility exist, dividends, distributions, and redemptions in excess of $25,000 per year are sub-
jected to a limitation of $75,000 in the aggregate. The $75,000 aggregate limitation also permits certain loans,
investments, and acquisitions.
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, guaran-
tees, and liens.
As of December 31, 2014, the Company was in compliance with the Amended Credit Agreement’s cove-
nants.
Tabular Disclosure of Contractual Obligations
A summary of the Company’s required payments under financial instruments and other commitments at
December 31, 2014 are presented in the following table:
Contractual Cash Obligations
Revolving credit facility (1) . . . . . . . . . . . . . .
Interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other debt . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
$24,200
3,874
2,228
280
17,108
$ — $ — $24,200
1,413
1,653
78
1,474
—
—
3,119
3,659
808
676
280
2,512
$ —
—
—
—
7,818
financial statements . . . . . . . . . . . . . . . . . .
44,499
44,499
—
—
—
Total contractual cash obligations . . . . . . . . .
$92,189
$48,775
$6,786
$28,810
$7,818
Other Financial Commitments
Standby letters of credit
. . . . . . . . . . . . . . . . .
$
425
$
425
$ — $ — $ —
(1) Repayments of outstanding loan balances are disclosed in Note 11 of the “Notes to Consolidated Financial
Statements” included in Part II, Item 8 of this report.
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
Market conditions for 2015 are expected to differ between the businesses that serve the transportation infra-
structure market and those that serve the energy infrastructure. Transportation infrastructure spending is expected
35
to have a favorable market environment. In particular, the rail industry, which is our primary market, continues to
forecast increases in capital spending from freight railroads and ongoing expansion of transit networks in the
United States and United Kingdom. Capital spending is expected to favor capacity expansions to support the
growing “crude-by-rail” activity, as well as intermodal network capacity. The freight rails are also investing in
hardening the track infrastructure and methods for improving velocity and throughput across their systems. These
are all favorable trends for the markets that L.B. Foster serves.
The energy markets have an uncertain outlook as many companies make adjustments in spending in reaction
to declining oil prices. While L.B. Foster primarily serves the midstream markets today which are typically less
impacted by the price of oil, we expect to see more widespread unfavorable impact as a result of the overall envi-
ronment. Most end users in the energy markets have already reduced operating and capital spending forecasts for
2015. Although we anticipate reduced spending in all energy markets in 2015 and into 2016, these markets
remain attractive to L.B. Foster on a long term basis.
Our construction businesses, which are primarily driven by transportation infrastructure spending are fore-
casting market conditions that are on par with 2014. Specifically, we will see fewer sales in our Fabricated
Bridge business as their backlog entering the year is lower than prior year, and we are in the process of complet-
ing the Newburgh-Beacon bridge project. There is opportunity for increases in Piling sales to offset this expected
decline, and our concrete products businesses are expected to improve as a result of benefits from the July 7,
2014 Carr Concrete acquisition.
In addition to the current market dynamics within each of our business segments, the ongoing concrete tie
warranty dispute with the UPRR may impact our sales and profitability within certain divisions of the Company
in the event that there is a reduction in UPRR orders.
The Company is also completing some significant projects in 2015 associated with the modernization of
facilities in Birmingham, AL and Niles, OH. These programs are intended to improve operational efficiency,
increase capacity, and lower costs for the Coated Products and rail businesses they serve. Throughout 2014 the
Company expanded operations in Bedford, PA as part of its initiative to enter the corrugated bridge form market.
As part of the Company’s strategic plan, a more aggressive acquisition program is supporting our objectives
to seek growth in existing and adjacent markets. In 2015, we will focus on the opportunities presented by four
recently completed acquisitions. Tew in the United Kingdom brings opportunities in automated solutions primar-
ily for rail and transportation industry customers. FWO in Germany expands our expertise in friction manage-
ment solutions for the rail industry and expands market coverage into the German transit market. Chemtec will
allow us to expand the products and solutions we offer to midstream market operators with highly engineered
metering and custody transfer systems. Lastly, Carr extends our precast concrete buildings presence into the
eastern United States and creates new precast products for the transportation market. Each of these companies
supports our strategic growth initiatives and brings valuable talent and market access necessary to succeed.
The Company plans to enter into the second phase of its Enterprise Resource Planning (ERP) modernization
project in 2015. This phase will begin the application development related to the implementation of software
configuration and process re-engineering that will start with a few divisions of our business. The program will
eventually support all operating units of L.B. Foster and is expected to yield operational benefits and customer
service improvements. The expected 2015 ERP related costs include approximately $7,000 of the 2015 capital
expenditure budget.
Although backlog is not necessarily indicative of future operating results, total Company backlog at
December 31, 2014 was $184,350. The following table provides the backlog by business segment:
Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tubular Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$104,821
65,843
13,686
December 31,
2014
Backlog
December 31,
2013
$121,853
53,483
7,775
December 31,
2012
$140,592
59,239
11,087
Total Backlog from Continuing Operations . . . . . . . . . . . .
$184,350
$183,111
$210,918
36
While a considerable portion of the Company’s business is somewhat backlog driven, the Rail Technologies
business is less sensitive to backlog at any given time. Backlog related to 2014 acquisitions represented 6% of
the total.
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
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, 2014.
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, 2014.
37
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, 2014 and 2013, the product warranty reserve was
$11,500 and $7,483, respectively. During the years ended December 31, 2014, 2013, and 2012, the Company
recorded product warranty expense of $10,957, $1,695 and $24,252, respectively. For additional information
regarding the Company’s product warranty, refer to Part II, Item 8, Note 20 to the Consolidated Financial State-
ments, “Commitments and Contingent Liabilities” included herein.
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, and/or local laws and regulations that
impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, dis-
posal, 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.
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.
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 when the fol-
lowing criteria have been satisfied; persuasive evidence of a sales arrangement exists, product delivery and trans-
fer of title to the customer has occurred, the price is fixed or determinable, and collectability is reasonably
assured. Within each segment, 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. Sales and gross profit are recognized as work is performed based upon the proportion of
actual costs incurred to estimated total project costs. Sales and gross profit are adjusted prospectively for
revisions in estimated total project costs and contract values. For certain products, the percentage of completion
is based upon actual labor costs as a percentage of estimated total labor costs. At the time a loss contract becomes
known, the entire amount of the estimated loss is recognized in the Consolidated Statement of Operations. Rev-
enues recognized using percentage of completion are not material relative to the Company’s consolidated rev-
enues.
38
Revenue recognition involves judgments, including assessments of expected returns, the likelihood of non-
payment and estimates of expected costs and profits on long-term contracts. In determining when to recognize
revenue, we analyze various factors,
the transaction, historical experience,
including the specifics of
creditworthiness of the customer, and current market and economic conditions. Changes in judgments on these
factors could impact the timing and amount of revenue recognized with a resulting impact on the timing and
amount of associated income.
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 assump-
tions can result in a different pension expense and liability amounts, and future actual experience can differ sig-
nificantly from the assumptions. During 2014, the Company adjusted its mortality assumption by adopting the
Society of Actuaries updated RP-2014 mortality tables. The Company believes that the two most critical assump-
tions 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 2015 and 2014
domestic pension expense was 5.50% and 6.50%, respectively. The weighted average expected long-term rate of
return determined by the Company for its 2015 and 2014 U.K. pension expense was 5.00% and 5.80%,
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 4.00% and 4.90%,
respectively, as of December 31, 2014 and 2013 for its domestic pension plans. The weighted average assumed
discount rate used by the Company was 3.60% and 4.60%, as of December 31, 2014 and 2013 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
identified 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
39
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
In the ordinary course of business, the Company is exposed to interest rate risks that may adversely affect
funding costs associated with its variable-rate debt. The Company does not purchase or hold any derivative
financial instruments for trading purposes and the Company did not have any interest rate derivatives as of
December 31, 2014, 2013 or 2012.
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, 2014, and no foreign currency hedges were outstanding as of December 31, 2014. Realized
gains or losses from foreign currency hedges did not exceed $100 in any of the three years ended December 31,
2014.
40
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 Sub-
sidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations, compre-
hensive income, stockholders’ equity and cash flows for each of the three years in the period ended
December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2).
These financial statements and schedule are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with 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, 2014 and 2013, and the
consolidated results of their operations and their cash flows for each of the three years in the period ended
December 31, 2014, 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, 2014, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
March 3, 2015, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 3, 2015
41
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
2013
2014
(In thousands, except
share data)
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:
$ 52,024
90,178
95,089
3,497
2,790
4,101
—
247,679
74,802
82,949
82,134
5,824
1,733
$495,121
$ 67,166
8,034
13,419
11,500
676
77
7,899
—
108,771
25,752
10,945
13,765
$ 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
Common stock, par value $.01, authorized 20,000,000 shares; shares issued at December 31, 2014
and December 31, 2013, 11,115,779; shares outstanding at December 31, 2014 and
December 31, 2013, 10,242,405 and 10,188,521, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock — at cost, common stock, shares at December 31, 2014 and December 31, 2013,
111
48,115
322,672
111
47,239
298,361
873,374 and 927,258, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(23,118)
(11,892)
335,888
$495,121
(24,731)
(4,583)
316,397
$413,654
The accompanying notes are an integral part of these Consolidated Financial Statements.
42
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 investments . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012
2013
2014
(In thousands, except share data)
$597,963
482,024
$588,541
496,272
$607,192
485,601
121,591
79,814
4,695
512
(530)
(1,282)
(674)
82,535
39,056
13,402
25,654
115,939
71,256
3,112
485
(659)
(1,316)
(1,054)
71,824
44,115
14,839
29,276
4
2
2
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
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 25,656
$ 29,290
$ 16,188
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
2.51
0.00
2.51
2.48
0.00
2.48
0.13
$
$
$
$
$
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
The accompanying notes are an integral part of these Consolidated Financial Statements.
43
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR
THE THREE YEARS ENDED DECEMBER 31,
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25,656
2014
2013
(In thousands)
$29,290
2012
$16,188
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment
Pension and post-retirement benefit plans, net of tax (benefit) expense:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
($1,383), $1,199, and ($481) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of pension liability adjustments to earnings, net of tax expense
of $63, $134 and $125 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,863)
(3,475)
1,724
(2,631)
2,258
(1,043)
185
303
(914)
278
959
Other comprehensive (loss) income, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,309)
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,347
$28,376
$17,147
* 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.
44
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE THREE YEARS ENDED DECEMBER 31,
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 investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sales and disposals of property, plant, and equipment . . . . . . . . . . . . . . . . .
Deferred gain amortization on sale-leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess income 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 LB 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 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, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital contributions to equity method investments . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used by continuing investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options and stock awards . . . . . . . . . . . . . . . . . . . .
Financing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends on common stock paid to shareholders . . . . . . . . . . . . . . . . . . . . . .
Excess income tax benefit from share-based compensation . . . . . . . . . . . . . . . . . . .
Net cash provided (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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental disclosure of cash flow information:
2014
2013
(In thousands)
2012
$ 25,654
$ 29,276
$ 14,764
(2,914)
12,577
(1,282)
21
—
3,007
(336)
15,188
(9,872)
(1,004)
2,530
(386)
630
16,285
591
2,542
2,732
653
66,616
123
184
(17,056)
(80,797)
(82)
(97,751)
—
(125)
24,516
131
(473)
(985)
(1,345)
336
22,055
(3,642)
(12,599)
64,623
$ 52,024
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
(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
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
362
$
330
$
405
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 14,617
$ 18,697
$ 11,999
Capital expenditures funded through financing agreements . . . . . . . . . . . . . . . . . . .
$ 1,981
$
— $
—
The accompanying notes are an integral part of these Consolidated Financial Statements.
45
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 2014
Common
Stock
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
(Loss) Income
Balance, January 1, 2012 . . . . . . . . . . . . . .
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 . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss net of tax:
Pension liability adjustment . . . . . . . . . .
Foreign currency translation
adjustment . . . . . . . . . . . . . . . . . . . . . .
Issuance of 53,884 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, 2014 . . . . . . . . . .
$111
$47,349
(In thousands, except share data)
$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
$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
25,656
(24,731)
(4,583)
(2,446)
(4,863)
(2,467)
3,343
1,613
$111
$48,115
(1,345)
$322,672
$(23,118)
$(11,892)
(673)
2,359
(1,240)
316,397
25,656
(2,446)
(4,863)
(854)
3,343
(1,345)
$335,888
The accompanying notes are an integral part of these Consolidated Financial Statements.
46
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 and
accounts 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. The Company invests available funds in a manner to maximize returns, preserve
investment principle, and maintain liquidity while seeking the highest yield available.
Cash and cash equivalents held in non-domestic accounts was approximately $49,233 and $43,560 at
December 31, 2014 and 2013, respectively. Included in non-domestic cash equivalents are investments in bank
term deposits of approximately $25 and $32,947 at December 31, 2014 and 2013, respectively. The carrying
amounts approximated fair value because of the short maturity of the instruments.
Domestic cash equivalents as of December 31, 2013 principally consisted of investments in money market
funds and bank certificates of deposit. Invested cash of $18,276 was held in an actively traded BlackRock
Liquidity Temporary Fund — Institutional account. This money market fund had various underlying securities all
of which maintained AAA credit agency ratings. The carrying amount approximates 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
44% in 2014 and 38% in 2013, 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.
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. Depreciation expense is appropriately recorded within “costs of sales” and “selling and administrative”
expenses based upon the assets’ use. 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 2014, 2013, or 2012.
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
47
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 2014,
2013, or 2012.
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
16 years, as of December 31, 2014.
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. See Note 20, “Commitments and Contingent
Liabilities,” for additional
information regarding the Company’s outstanding environmental and litigation
reserves.
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 $832 and
$667 as of December 31, 2014 and 2013, respectively. The 2014 and 2013 activity related to settlements,
revisions, and accretion expense was not 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.
48
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 when the following criteria have been sat-
isfied; persuasive evidence of a sales arrangement exists, product delivery and transfer of title to the customer has
occurred, the price is fixed or determinable, and collectability is reasonably assured. Within each segment, 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.
Costs in excess of billings are classified as work-in-process inventory. Projects with billings in excess of
costs are recorded within deferred revenue.
Deferred revenue
Deferred revenue consists of customer payments received for which the revenue recognition criteria have
not yet been met as well as billings in excess of costs on percentage of completion projects. Advanced payments
from customers typically relate to contracts that the Company has significantly fulfilled its obligations 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, 2014 and 2013 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.
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
49
warranty claims or due to changes in the Company’s historical warranty experience. At December 31, 2014 and
2013, the product warranty reserve was $11,500 and $7,483, 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 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
identified matters. The Company accrues interest and penalties related to unrecognized tax benefits in its provi-
sion 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, 2014, 2013, and 2012 were foreign currency transaction gains of approximately $422 and $433
and losses of $238, respectively.
Research and development
The Company expenses research and development costs as costs are incurred. For the years ended
December 31, 2014, 2013, and 2012, research and development expenses were $3,096, $3,154, and $2,926,
respectively, and were principally related to the Company’s friction management and railroad monitoring system
products.
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
On January 13, 2015, the Company acquired the stock of Tew Holdings, LTD (Tew) for approximately
$26,600, subject to a net debt and net working capital adjustment. Headquartered in Nottingham, UK, Tew pro-
vides application engineering solutions primarily to the rail market and other major industries. The transaction
was funded with non-domestic cash and the results of Tew’s operations will be included within the Rail Products
segment.
50
We have evaluated all other 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
In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update
No. 2014-08 (ASU 2014-08) “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equip-
ment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an
Entity.” ASU 2014-08 raises the threshold for a disposal to qualify as a discontinued operation and requires new
disclosures of both discontinued operations and certain other disposals that do not meet the definition of a dis-
continued operation. It is effective for annual periods beginning on or after December 15, 2014. Early adoption is
permitted but only for disposals that have not been reported in financial statements previously issued. We do not
expect the impact of the adoption of ASU 2014-08 to be material to our consolidated financial statements.
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update
(“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”), which supersedes
the revenue recognition requirements in Accounting Standards Codification 605, “Revenue Recognition.” ASU
2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to custom-
ers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those
goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of rev-
enue and cash flows arising from customer contracts, including significant judgments and changes in judgments
and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for fiscal years
beginning after December 15, 2016, including interim periods within that reporting period. The Company is cur-
rently evaluating its implementation approach and assessing the impact of ASU 2014-09 on our financial position
and results of operations.
In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements — Going Concern —
Disclosures of Uncertainties about an entity’s Ability to Continue as a Going Concern.” ASU 2014-15 provides
new guidance related to management’s responsibility to evaluate whether there is substantial doubt about an enti-
ty’s ability to continue as a going concern by incorporating and expanding upon certain principles that are cur-
rently in U.S. auditing standards and to provide related footnote disclosures. This new guidance is effective for the
annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The
requirements of ASU 2014-15 are not expected to have a significant impact on the consolidated financial state-
ments.
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
Europe, 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 engineers, manufactures, and assembles friction management products and
railway wayside data collection and management systems.
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. The Company’s Fabricated Products division
51
sells bridge decking, bridge railing, structural steel fabrications, expansion joints, bridge forms, and other prod-
ucts for highway construction and repair. The concrete products businesses produce precast concrete buildings
and a variety of specialty precast concrete products.
The Company’s Tubular Products segment supplies pipe coatings for natural gas pipelines and utilities,
blending, injection, and metering equipment for the oil and gas market, and produces threaded pipe products for
industrial water well and irrigation markets.
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 . . . . . . . . . . . . . .
$374,615
178,847
53,730
2014
Segment
Profit
$30,093
13,106
5,350
Segment
Assets
Depreciation/
Amortization
$239,951
102,978
130,289
$ 6,153
2,232
3,208
Total
. . . . . . . . . . . . . . . . . . . . .
$607,192
$48,549
$473,218
$11,593
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
51,497
$ 6,505
1,758
1,054
Total
. . . . . . . . . . . . . . . . . . . . .
$597,963
$48,106
$381,446
$ 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
Expenditures
for Long-Lived
Assets
$ 5,115
3,343
6,988
$15,446
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
During 2014, 2013, and 2012, no single customer accounted for more than 10% of the Company’s con-
solidated net sales. Sales between segments are immaterial.
52
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:
2014
2013
2012
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 . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 48,549
738
530
1,282
(12,043)
$ 48,106
37
659
1,316
(6,003)
$ 29,787
1,118
452
837
(8,364)
Income from continuing operations, before income taxes . . . . . . .
$ 39,056
$ 44,115
$ 23,830
Assets:
Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated corporate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$473,218
30,192
(8,289)
$381,446
41,235
(9,027)
$330,449
84,737
(9,064)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$495,121
$413,654
$406,122
Depreciation/Amortization:
Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 11,593
984
$
9,317
685
$ 12,454
519
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 12,577
$ 10,002
$ 12,973
Expenditures for Long-Lived Assets:
Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures funded through financing agreements . . . . . . . . . . .
Other expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 15,446
1,981
1,610
$
7,648
—
2,026
$
6,004
—
1,156
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 19,037
$
9,674
$
7,160
The following table summarizes the Company’s sales from continuing operations by major geographic
region in which the Company has operations:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$498,025
39,375
22,625
47,167
$495,710
37,290
16,548
48,415
$485,111
40,892
18,698
43,840
2014
2013
2012
$607,192
$597,963
$588,541
The following table summarizes the Company’s long-lived assets from continuing operations by geographic
region:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$66,905
7,440
457
$40,717
8,833
559
$31,961
9,773
599
2014
2013
2012
$74,802
$50,109
$42,333
53
The following table summarizes the Company’s sales by major product line from continuing operations:
2014
2013
2012
Rail distribution products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Piling products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rail Technologies products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CXT concrete tie products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allegheny Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concrete products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$139,529
111,182
109,053
52,562
45,008
36,396
113,462
$144,911
140,302
88,670
44,108
36,666
32,969
110,337
$155,832
114,070
92,826
58,182
33,046
30,195
104,390
$607,192
$597,963
$588,541
Note 3.
Acquisitions
Chemtec Energy Services, L.L.C.
On December 30, 2014, the Company acquired Chemtec Energy Services, L.L.C. (Chemtec) for $66,719,
net of cash received, which is inclusive of an estimated $1,867 related to working capital adjustments. The cash
payment included $5,000 which will be held in escrow to satisfy any indemnity claims under the purchase
agreement. Chemtec is a manufacturer and turnkey provider of blending, injection, and metering equipment for
the oil and gas industry. The acquired business is included within our Tubular Products segment from the acquis-
ition date through December 31, 2014, and was not material to the periods presented.
FWO
On October 29, 2014, the Company acquired FWO, a business of Balfour Beatty Rail GmbH for $1,103, net
of a $161 post-closing working capital receivable adjustment. FWO is engaged in the electronic track lubrication
and maintenance business and has been included in our Rail Products segment for the period October 29 through
December 31, 2014. FWO was not material to the periods presented.
Carr Concrete
On July 7, 2014, the Company acquired Carr Concrete Corporation (Carr) for $12,480, inclusive of a $189
post-closing purchase price adjustment. Carr is a provider of pre-stressed and precast concrete products located in
Waverly, WV and the transaction was funded with cash on hand. Included within the purchase price is $1,000
which will be held in escrow to satisfy any indemnity claims under the purchase agreement. The results of Carr’s
operations for the period July 7, 2014 through December 31, 2014 are included in our Construction Products
segment and were not material to the periods presented.
Ball Winch
During 2013, the Company acquired Ball Winch, LLC (Ball Winch). Cash payments totaling $37,500 were
made during 2013 and a post-closing working capital adjustment of $495 was paid in February 2014 resulting in
a total purchase price of $37,995. Included within the purchase price was $3,300 which is held in escrow to sat-
isfy any indemnity claims under the purchase agreement. The results of operations for Ball Winch are included in
the Company’s Tubular Products segment.
Acquisition Summary
Each 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 each acquisition’s enhancement of the Company’s service offerings and capa-
bilities as well as a premium payment related to the right to control the acquired assets. The Company has con-
cluded that intangible assets and goodwill values resulting from these transactions will be deductible for tax
purposes.
54
The Company incurred $2,240 and $182 of acquisition-related costs which are included in the results of
operations within selling and administrative costs for the years ended December 31, 2014 and 2013.
The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities
assumed at the date of the acquisition:
December 30,
2014 - Chemtec
October 29,
2014 - FWO
July 7,
2014 - Carr
November 7,
2013 - Ball Winch
Allocation of Purchase Price
Current assets . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . .
Property, plant, and equipment
. . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . .
$15,528
—
4,705
22,302
33,130
(6,756)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
$68,909
$ 131
—
—
971
419
(418)
$1,103
$ 3,180
45
7,648
1,936
1,348
(1,677)
$12,480
$ 1,857
64
5,555
16,544
14,682
(707)
$37,995
The following table summarizes the preliminary estimates of the fair values and amortizable lives of the
identifiable intangible assets acquired in 2014:
Intangible Asset
December 30,
2014 - Chemtec
October 29,
2014 - FWO
July 7,
2014 - Carr
November 7,
2013 - Ball Winch
Trade name . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . .
Non-competition agreements . . . . . . . .
Total identified intangible assets . . . . .
$ 3,149
23,934
4,930
1,117
$33,130
$ —
34
341
44
$419
$ 613
524
87
124
$1,348
$
723
—
11,129
2,830
$14,682
The purchase price allocations for Chemtec, FWO, and Carr are based on preliminary valuations. 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. Intangible asset values for the 2013 acquisition of Ball
Winch were finalized during 2014.
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 2012 pre-tax gain of $3,193, from discontinued operations were as fol-
lows for the three years ended December 31:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
2012
$
$
$
2
4
2
2
$ 73
$8,705
$ 23
9
$ 14
$3,842
2,418
$1,424
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50.0% 39.1%
62.9%
55
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.
Note 5.
Goodwill and Other Intangible Assets
The following table represents the goodwill balance by reportable segment:
Rail Products
Construction Products
Tubular Products
Total
Balance at December 31, 2012 . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . .
$38,026
—
Balance at December 31, 2013 . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . .
Foreign currency translation impact
38,026
971
(41)
Balance at December 31, 2014 . . . . . . . . . . .
$38,956
$3,211
—
3,211
1,936
—
$5,147
$ —
16,544
16,544
22,302
—
$41,237
16,544
57,781
25,209
(41)
$38,846
$82,949
The following table represents the gross intangible assets balance by reportable segment:
2014
Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tubular Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$44,781
3,178
47,812
2013
$44,455
1,830
14,682
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
19
5
14
14
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
$95,771
$60,967
2014
Gross
Carrying
Value
$ 4,143
564
44,450
350
10,765
35,499
Accumulated
Amortization
$
(705)
(189)
(4,679)
(268)
(1,855)
(5,941)
Net
Carrying
Amount
$ 3,438
375
39,771
82
8,910
29,558
$95,771
$(13,637)
$82,134
2013
Gross
Carrying
Value
$ 2,860
639
19,960
350
7,003
30,155
$60,967
Accumulated
Amortization
$ (117)
(201)
(3,575)
(213)
(1,334)
(3,681)
Net
Carrying
Amount
$ 2,743
438
16,385
137
5,669
26,474
$(9,121)
$51,846
Intangible assets are amortized over their useful lives ranging from 5 to 25 years, with a total weighted
average amortization period of approximately 16 years. Amortization expense from continuing operations for the
years ended December 31, 2014, 2013, and 2012 was $4,695, $3,112, and $2,961, respectively.
56
Estimated amortization expense from continuing operations for the years 2015 and thereafter is as follows:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization
Expense
$ 7,176
7,012
6,981
6,876
6,152
47,937
$82,134
Note 6.
Accounts Receivable
Accounts receivable from continuing operations at December 31, 2014 and 2013 are summarized as follows:
2014
2013
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$90,494
(1,036)
$98,474
(1,099)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
89,458
720
97,375
1,062
$90,178
$98,437
Bad debt expense/(recovery) was $462, $236 and $ (319) in 2014, 2013, and 2012, respectively.
The Company’s customers are principally in the Rail, Construction, and Tubular Products segments of the
economy. As of December 31, 2014 and 2013, trade receivables, net of allowance for doubtful accounts, from
customers in these markets were as follows:
2014
2013
Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tubular Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$45,931
33,760
9,767
$57,342
35,711
4,322
$89,458
$97,375
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.
Note 7.
Inventory
Inventories of continuing operations of the Company at December 31, 2014 and 2013 are summarized in the
following table:
2014
2013
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 65,335
16,188
21,855
$55,166
11,332
19,485
Total inventories at current costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: LIFO reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
103,378
(8,289)
85,983
(9,027)
$ 95,089
$76,956
57
At December 31, 2014 and 2013, the LIFO carrying value of inventories for book purposes exceeded the
LIFO value for tax purposes by approximately $11,697 and $12,241, respectively. As of December 31, 2014,
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 $6, $1,128 and $15 respectively.
Note 8.
Property, Plant, and Equipment
Property, plant, and equipment of continuing operations at December 31, 2014 and 2013 consist of the fol-
lowing:
2014
2013
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improvements to land and leaseholds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment, including equipment under capitalized leases . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
9,102
29,016
22,807
95,547
12,033
$
4,862
24,903
15,834
88,803
3,567
Less accumulated depreciation and amortization, including accumulated
amortization of capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
93,703
87,860
$ 74,802
$ 50,109
168,505
137,969
Depreciation expense,
leases,
December 31, 2014, 2013, and 2012 amounted to $7,882, $6,890 and $9,979, respectively.
including amortization of assets under capital
for
the years ended
Note 9.
Investments
The Company is a member of a joint venture, L B Pipe and Coupling Products, LLC (LB Pipe JV) in which
it maintains a 45% ownership interest. The LB Pipe JV manufactures, markets, and sells various precision cou-
pling products for the energy, utility, and construction markets and is scheduled to terminate on June 30, 2019.
Under applicable guidance for variable interest entities in ASC 810, “Consolidation,” the Company
determined that the LB Pipe JV is a variable interest entity. The Company concluded that it is not the primary
beneficiary of the variable interest entity, as the Company does not have a controlling financial interest and does
not have the power to direct the activities that most significantly impact the economic performance of the LB
Pipe JV. Accordingly, the Company concluded that the equity method of accounting remains appropriate.
During the years ended December 31, 2014 and 2013, each of the LB Pipe JV members received propor-
tional distributions of equity from the LB Pipe JV. The Company’s 45% ownership interest resulted in cash dis-
tributions of $630 and $558 as of December 31, 2014 and 2013, respectively. There were no changes to the
members’ ownership interests as a result of the distribution.
The Company recorded equity in the income of the LB Pipe JV of approximately $1,286, $1,316 and $837
for the years ended December 31, 2014, 2013, and 2012, respectively.
As of December 31, 2014 and 2013, the Company had a nonconsolidated equity method investment of
$5,746 and $5,090, respectively, in the LB Pipe JV and other investments totaling $78 as of December 31, 2014.
58
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, 2014
and 2013, respectively, are as follows:
2014
2013
LB Pipe JV equity method investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment in direct financing lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,746
1,117
$5,090
1,224
$6,863
$6,314
The Company is leasing five acres of land and two facilities to the JV over a period of 9.5 years, through
June 30, 2019, 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 pay-
ment 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 following is a schedule of the direct financing minimum lease payments for the years 2015 and there-
after
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minimum
Lease
Payments
$ 122
131
140
150
574
—
$1,117
Note 10.
Deferred Revenue
Deferred revenue of $8,034 and $5,715 as of December 31, 2014 and 2013, respectively, consists of
customer payments received for which the revenue recognition criteria have not yet been met as well as billings
in excess of costs on percentage of completion projects. Advanced payments from customers typically relate to
contracts that the Company has significantly fulfilled its obligations 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.
59
Note 11.
Long-Term Debt and Related Matters
Long-term debt at December 31, 2014 and 2013 consists of the following:
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing agreement payable in installments through July 1, 2017 with an interest
2014
$24,200
2013
$—
rate of 3.00% at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,781
Lease obligations payable in installments through 2019 with a weighted average
interest rate of 3.50% at December 31, 2014 and 5.37% December 31, 2013 . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
447
26,428
676
—
56
56
31
Long-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25,752
$25
The maturities of long-term debt for each of the succeeding five years subsequent to December 31, 2014 are
as follows:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
676
853
621
67
24,211
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$26,428
Borrowings
United States
On September 23, 2014, the Company, its domestic subsidiaries, and certain of its Canadian subsidiaries
entered into an amended and restated $200,000 Revolving Credit Facility Credit Agreement (“Amended Credit
Agreement”) with PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., and Citizens Bank of
Pennsylvania. This Amended Credit Agreement modifies the prior revolving credit facility which had a max-
imum credit line of $125,000. The Amended Credit Agreement provides for a five-year, unsecured revolving
credit facility that permits borrowing up to $200,000 for the U.S. borrowers and a sublimit of the equivalent of
$25,000 U.S. dollars that is available to the Canadian borrowers. The Amended Credit Agreement also modifies
the accordion feature in the prior revolving credit facility which permitted a maximum increase of $50,000. The
Amended Credit Agreement’s accordion feature permits the Company to increase the available revolving
borrowings under the facility by up to an additional $100,000 subject to the Company’s receipt of increased
commitments from existing lenders or new commitments from new lenders and to certain conditions being sat-
isfied. The Amended Credit Agreement also increases the sublimit for the issuance of trade and standby letters of
credit from $20,000 to $30,000.
Borrowings under the Amended Credit Agreement will bear interest at rates based upon either the base rate
or Euro-rate plus applicable margins. Applicable margins are dictated by the ratio of the Company’s indebtedness
less cash on hand to the Company’s consolidated EBITDA, as defined in the underlying Amended 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 Euro-rate (as defined in the Amended Credit Agreement) plus 1.00%. The base rate and Euro-rate
spreads range from 0.00% to 1.00% and 1.00% to 2.00%, respectively.
The Amended Credit Agreement includes two financial covenants: (a) Leverage Ratio, defined as the
Company’s indebtedness less cash on hand, in excess of $15,000, divided by the Company’s consolidated
60
EBITDA, which must not exceed 3.25 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 Amended Credit Agreement permits the Company to pay dividends, distributions, and make
redemptions with respect to its stock provided no event of default or potential default (as defined in the Amended
Credit Agreement) has occurred prior to or after giving effect to the dividend, distribution, or redemption. Divi-
dends, distributions, and redemptions are capped at $25,000 per year when funds are drawn on the facility. If no
drawings on the facility exist, dividends, distributions, and redemptions in excess of $25,000 per year are sub-
jected to a limitation of $75,000 in the aggregate. The $75,000 aggregate limitation also permits certain loans,
investments, and acquisitions.
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, guaran-
tees, and liens.
The Company had $24,200 outstanding borrowings under the Amended Credit Agreement at December 31,
2014 and had available borrowing capacity of $175,375 and at December 31, 2014. As of December 31, 2013,
the Company had no outstanding borrowings and an available borrowing capacity of $124,186 under the previous
$125,000 revolving facility.
As of December 31, 2014, the Company was in compliance with the Amended Credit Agreement’s cove-
nants.
Letters of Credit
At December 31, 2014 and 2013, the Company had outstanding letters of credit of approximately $425 and
$814, respectively.
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 $2,337 at
December 31, 2014). 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, 2014. There was $60 in outstanding guarantees (as defined in the underlying agreement) at
December 31, 2013. This credit facility was renewed during the third quarter of 2014 with no significant changes
to the underlying terms or conditions in the facility. It is the Company’s intention to renew this credit facility
with NatWest Bank during the annual review over the credit facility in 2015.
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, 2014 and 2013. The subsidiary had available borrowing capacity of $2,337 and
$2,424 at December 31, 2014 and 2013, respectively.
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, 2014 and 2013. The common stock has a par value of $.01 per share and the Company paid divi-
dends of $0.03 per quarter through September 30, 2014. During the 2014 fourth quarter, the Board approved an
increase to $0.04 per share per quarter.
At December 31, 2014 and 2013, 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.
61
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. There were no share repurchases during 2014, and the authorization will expire on December 31,
2016.
As of December 31, 2014 and 2013, the Company withheld 21,676 and 16,166 shares for approximately
$985 and $708, 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 $1,345, $1,240 and $1,029 were paid in 2014, 2013, and 2012, respectively.
Share Activity
Common Stock
Treasury
Outstanding
(Number of Shares)
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 . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued for stock-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . .
966,381
(39,123)
927,258
(53,884)
10,149,398
39,123
10,188,521
53,884
Balance at end of 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
873,374
10,242,405
Note 13.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, for the years ended December 31,
2014 and 2013, are as follows:
2014
2013
Pension and post-retirement benefit plan adjustments . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (4,089)
(7,803)
$(1,643)
(2,940)
$(11,892)
$(4,583)
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”.
62
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:
2014
2013
2012
Numerator for basic and diluted earnings per common share —
Income available to common stockholders:
Income from continuing operations . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . . .
$25,654
2
$29,276
14
$14,764
1,424
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$25,656
$29,290
$16,188
Denominator:
Weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,225
Denominator for basic earnings per common share . . . . . . . . . . . . .
10,225
10,175
10,175
10,124
10,124
Effect of dilutive securities:
Employee stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other stock compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive potential common shares . . . . . . . . . . . . . . . . . . . . . . . . . .
6
101
107
11
74
85
16
94
110
Denominator for diluted earnings per common share — adjusted
weighted average shares and assumed conversions . . . . . . . . . . .
10,332
10,260
10,234
Basic earnings per common share:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2.51
0.00
$
2.88
0.00
$
1.46
0.14
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2.51
$
2.88
$
1.60
Diluted earnings per common share:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
2.48
0.00
2.48
0.13
$
$
$
2.85
0.00
2.85
0.12
$
$
$
1.44
0.14
1.58
0.10
There were no antidilutive shares in 2014, 2013, and 2012.
63
Note 15.
Income Taxes
Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2014 and
2013 are as follows:
Deferred tax liabilities:
2014
2013
Goodwill and other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in LB Pipe joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(10,800)
(3,763)
(3,188)
(553)
(527)
$(11,360)
(3,369)
(3,611)
(587)
(437)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(18,831)
(19,364)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,147
4,180
1,755
369
667
660
883
645
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,306
1,033
2,689
1,525
388
662
569
139
843
7,848
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (7,525)
$(11,516)
Significant components of the provision for income taxes are as follows:
2014
2013
2012
Current:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,486
1,491
3,339
$ 8,776
837
1,982
$ 9,742
1,977
1,910
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16,316
11,595
13,629
Deferred:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,321)
(122)
(471)
(2,914)
3,200
273
(229)
3,244
(3,966)
(155)
(442)
(4,563)
Total income tax expense from continuing operations . . . . . . . . . . . .
$13,402
$14,839
$ 9,066
At December 31, 2014, the Company has not recorded deferred U.S. income taxes or foreign withholding
taxes on $56,266 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.
64
Income before income taxes, as shown in the accompanying consolidated statements of operations, includes
the following components:
2014
2013
2012
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$30,762
8,294
$37,283
6,832
$16,600
7,230
Income from continuing operations, before income taxes . . . . . . . . . .
$39,056
$44,115
$23,830
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 . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic production activities deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
2012
35.0% 35.0% 35.0%
(2.2)
(3.0)
(1.7)
2.7
4.5
2.6
1.8
1.4
0.6
(0.9)
(2.2)
(0.8)
(0.8)
0.9
(1.9)
(2.2)
(1.2)
(1.2)
0.9
2.6
1.0
34.3% 33.6% 38.0%
At December 31, 2014 and 2013, the tax benefit of net operating loss carryforwards available for state
income tax purposes was $74 and $83, respectively. The state net operating loss carryforwards will expire in
various years from 2019 through 2032. At December 31, 2014, the Company has foreign net operating loss
carryforwards of $162, which may be carried forward indefinitely. The Company has foreign tax credit
carryforwards in the amount of $780 that will expire in 2023 through 2025. 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, 2014 and
2013:
2014
2013
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 . . . . . . . . .
$1,509
18
(325)
(126)
(63)
$2,045
149
(89)
(596)
—
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,013
$1,509
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is
$1,013 at December 31, 2014. The Company accrues interest and penalties related to unrecognized tax benefits in
its provision for income taxes. At December 31, 2014 and 2013, the Company had accrued interest and penalties
related to unrecognized tax benefits of $335 and $342, respectively. As of December 31, 2014, the Company
does not expect any material increases or decreases to its unrecognized tax benefits within the next 12 months.
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 2011 and forward. With
respect to the state, local and foreign filings, certain entities of the Company are subject to income tax examina-
tions for the periods 2007 and forward.
65
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 $3,007, $2,156 and $1,989 for the years ended
December 31, 2014, 2013, and 2012, respectively, related to fully-vested stock awards, restricted stock awards,
and performance unit awards as follows. As of December 31, 2014, unrecognized compensation expense for
awards the Company expects to vest approximated $2,896. The Company will recognize this expense over the
upcoming 3.2 year period through February 2018.
Shares issued as a result of vested stock-based compensation generally will be from previously issued shares
which have been reacquired by the Company and held as Treasury shares or authorized but previously unissued
common stock.
The excess tax benefit realized for the tax deduction from share-based compensation approximated $336,
$203 and $199 for the years ended December 31, 2014, 2013, and 2012, respectively. This excess tax benefit is
included in cash flows from financing activities in the Consolidated Statements of Cash Flows.
As of December 31, 2014, the Company had outstanding stock option and other stock awards issued pur-
suant to two shareholder-approved plans: The 2006 Omnibus Incentive Plan, as amended and restated in October
2013 (Omnibus Plan), and the 1998 Long-Term Incentive Plan for Officers and Directors, amended and restated
in May 2006, (1998 Plan). The 1998 Plan expired by its terms in 2008 and no awards may be granted under that
Plan, which currently has outstanding stock option awards that expire in 2015. The Company currently makes
equity awards only under the Omnibus Plan.
The 1998 Plan provided 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 authorized 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 provided 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 share-
holders’ meeting to serve as directors. The 1998 Plan was amended in May 2006 to remove the automatic award-
ing of stock options to outside directors. As noted above, the 1998 Plan expired by its terms in 2008 and there are
remaining stock option awards outstanding which expire in 2015. The Company no longer issues awards under
the 1998 Plan.
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
2014, 2013, or 2012
66
Stock Option Awards
Certain information for the three years ended December 31, 2014 relative to employee stock options is
summarized as follows:
2014
2013
2012
Number of shares under the plans:
Outstanding and exercisable at beginning of year . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,750
—
—
(11,250)
22,500
—
—
(3,750)
39,950
—
—
(17,450)
Outstanding and exercisable at end of year . . . . . . . . . . . . . . . . . . . . . . .
7,500
18,750
22,500
Certain information for the three years ended December 31, 2014 relative to stock options at respective
exercise price ranges is summarized as follows:
December 31,
Range of Exercise Prices
2014 . . . . . . . . . . . . .
2013 . . . . . . . . . . . . .
2012 . . . . . . . . . . . . .
$ 8.97 - $9.29
$7.81 - $14.77
$7.81 - $14.77
Number
of Shares
7,500
18,750
22,500
Options Outstanding and Exercisable
Weighted Average
Remaining Life
Weighted
Exercise Price
0.3
1.3
2.2
$ 9.08
10.64
10.41
Intrinsic
Value
$296
687
743
The weighted average exercise price per share of the stock options exercised in 2014, 2013, and 2012 were
$11.67, $9.30, and $7.03, respectively. The total intrinsic value of stock options exercised during the years ended
December 31, 2014, 2013, and 2012 were $426, $124, and $457, respectively.
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 10,182, 9,960, and 12,000 fully-vested shares for the
years ended December 31, 2014, 2013, and 2012, respectively. Compensation expense recorded by the Company
related to fully-vested stock awards to non-employee directors was approximately $488, $450, and $337 for the
years ended December 31, 2014, 2013, and 2012, respectively.
The weighted average fair value of all the fully-vested stock grants awarded was $47.94, $45.16, and $28.05
per share for 2014, 2013, and 2012, respectively.
Restricted Stock Awards and Performance Unit Awards
Under the amended and restated 2006 Omnibus Plan, the Company grants eligible employees Restricted
Stock and Performance Unit Awards. The forfeitable Restricted Stock Awards generally time-vest after a four
year holding period, unless indicated otherwise by the underlying Restricted Stock Agreement. Performance Unit
Awards are offered annually under separate three-year long-term incentive programs. Performance units are
subject to forfeiture and will be converted into common stock of the Company based upon the Company’s per-
formance relative to performance measures and conversion multiples as defined in the underlying program. If the
Company’s estimate of the number of Performance Stock Awards expected to vest changes in a subsequent
accounting period, cumulative compensation expense could increase or decrease. The change will be recognized
in the current period for the vested shares and would change future expense over the remaining vesting period.
67
The following table summarizes the Restricted Stock Award and Performance Unit Award activity for the
period ended December 31, 2014:
Restricted
Stock Units
Performance
Stock Units
Weighted Average
Grant Date
Fair Value
Outstanding at January 1, 2012 . . . . . . . . . . . . . . . . . . . .
105,168
81,489
$31.24
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for incentive awards expected to vest . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
108,677
(36,599)
—
(600)
43,042
(33,508)
(31,298)
—
Outstanding at December 31, 2012 . . . . . . . . . . . . . . . . .
176,646
59,725
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for incentive awards expected to vest . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,973
(41,579)
—
(18,314)
31,418
—
(18,408)
(11,084)
Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . .
129,726
61,651
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for incentive awards expected to vest . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,051
(40,540)
—
—
34,652
(13,588)
(7,845)
(2,880)
30.24
27.38
31.79
38.44
31.65
42.49
29.18
35.84
33.55
34.00
44.07
34.59
43.59
44.13
Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . .
108,237
71,990
$36.25
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 2014 and 2012, the Company reversed $702 and $807,
respectively, of incentive compensation costs under its separate three-year long-term incentive plans caused by
the impact of the product warranty charges on Company performance, as it related to the awards’ underlying
performance conditions. More information on the product warranty charge can be found in Note 20, Commit-
ments and Contingent Liabilities.
Excluding the fully-vested stock awards granted to non-employee directors, the Company recorded compen-
sation expense of $2,519, $1,706, and $1,652, respectively, for the periods ended December 31, 2014, 2013, and
2012 related to restricted stock and performance unit awards.
2014
2013
2012
Number of shares available for future grant:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
513,280
517,280
271,465
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
469,840
513,280
517,280
The Company issued, pursuant to the Omnibus Plan, approximately 14,000 fully-vested shares during 2014
which were earned under the 2011 — 2013 three year long-term incentive plan. This non-cash transaction of
$454 was reflected as a decrease to Treasury Stock in the Consolidated Balance Sheet at December 31, 2014.
During 2012, approximately 34,000 fully-vested shares were issued 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.
68
Note 17.
Retirement Plans
The Company has six retirement plans which cover its hourly and salaried employees in the United States:
three defined benefit plans (one active / two frozen) and three 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.
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 loss (gain)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
$16,112
23
771
2,753
(734)
$18,034
33
707
(1,924)
(738)
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,925
$16,112
Change to plan assets:
Fair value of assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual gain on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,039
601
299
(734)
$13,262
2,019
496
(738)
Fair value of assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,205
15,039
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (3,720)
$ (1,073)
Amounts recognized in the consolidated balance sheet consist of:
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (3,720)
$ (1,073)
Amounts recognized in accumulated other comprehensive income consist of:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,429
3
$ 1,375
4
$ 4,432
$ 1,379
The actuarial loss included in accumulated other comprehensive loss that will be recognized in net periodic
pension cost during 2015 is $278, before taxes.
69
Net periodic pension costs for the three years ended December 31, 2014 are as follows:
2014
2013
2012
Components of net periodic benefit cost:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 23
771
(968)
1
65
$ 33
707
(856)
1
212
$ 31
748
(810)
1
194
Net periodic pension (income) cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(108)
$ 97
$ 164
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.
2014
2013
2012
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.0% 4.9% 4.0%
Expected rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.5% 6.5% 6.5%
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 con-
ditions. The decline in the expected rate of return on plan assets reflects a shift in the Plans’ investment strategy
toward a higher focus on fixed income investments.
Amounts applicable to the Company’s pension plans with accumulated benefit obligations in excess of plan
assets are as follows:
2014
2013
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,925
18,925
$15,205
$12,513
12,513
$11,321
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, 2014 and 2013 are
as follows:
Target
2014
2013
Asset Category
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total fixed income funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total mutual funds and equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0 - 10%
25 - 50
50 - 70
2% 4%
34
64
27
69
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100%
70
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, 2014 and
2013. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
$
347
$
568
5,194
5,194
3,566
6,098
4,005
4,005
9,142
1,324
Total mutual funds and equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
9,664
$15,205
10,466
$15,039
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
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 currently does not anticipate contributions to its United States defined benefit plans in 2015.
The following benefit payments are expected to be paid:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years 2020 — 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension
Benefits
$ 793
822
882
915
993
5,606
71
United Kingdom Defined Benefit Plan
The Portec Rail Products (UK) Limited Pension Plan covers certain current employees, former employees,
and retirees. The plan has been frozen to new entrants since April 1, 1997 and also covers the former employees
of a merged plan after January 2002. Benefits under the plan were based on years of service and eligible
compensation during defined periods of service. Our funding policy for the plan is to make minimum annual
contributions required by applicable regulations.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
$ 8,450
360
883
(397)
(499)
$ 8,034
348
162
(247)
153
Benefit obligation at end of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,797
$ 8,450
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,769
502
284
(397)
(401)
$ 6,051
545
303
(247)
117
Fair value of assets at end of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,757
6,769
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(2,040)
$(1,681)
Amounts recognized in the consolidated balance sheet consist of:
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(2,040)
$(1,681)
Amounts recognized in accumulated other comprehensive income consist of:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transition obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,413
112
—
$
906
142
(50)
$ 1,525
$
998
Net periodic pension costs for the three years ended December 31, 2014 are as follows:
2014
2013
2012
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 360
(370)
(50)
30
185
$ 348
(321)
(46)
22
229
$ 338
(307)
(49)
23
221
Net periodic pension cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 155
$ 232
$ 226
72
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.
2014
2013
2012
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.6% 4.6% 4.3%
Expected rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.0% 5.8% 5.2%
Amounts applicable to the Company’s pension plans with accumulated benefit obligations in excess of plan
assets are as follows:
2014
2013
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$8,797
8,797
6,757
$8,450
8,450
6,769
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 strat-
egy to provide steady growth without undue fluctuations. The target asset allocation percentages for 2014 are as
follows:
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:
2014
2013
Asset Category
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 218
2,156
1,899
2,484
$ 369
2,803
1,468
2,129
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,757
$6,769
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 $280 to the Portec Rail Plan
during 2015.
73
The following estimated future benefits payments are expected to be paid under the Portec Rail Plan:
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years 2020 — 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension
Benefits
$ 246
270
288
307
334
1,965
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 2014 and 2013. Rail Technologies’ accrued benefit obligation was $1,172 and
$1,080 as of December 31, 2014 and 2013, respectively. Benefit payments anticipated for 2015 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.
2014
2013
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.0% 5.0%
Weighted average health care trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2% 6.4%
The weighted average health care rate trends downward to an ultimate rate of 4.4% in 2032.
A 1% increase in the assumed health care cost trend rate will increase the service and interest cost compo-
nents of the expense by $5 and increase the accumulated post-retirement benefit obligation by approximately $66
for 2014. A 1% decrease in the assumed health care cost trend rate will decrease the service and interest cost
components of the expense by $7 and decrease the accumulated post-retirement benefit obligation by $77 for
2014.
Defined Contribution Plans
The Company sponsors six defined contribution plans for hourly and salaried employees across our domes-
tic and international facilities. The following table summarizes the expense associated with the contributions
made to these plans.
2014
2013
2012
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,425
227
158
$2,151
266
136
$2,107
269
116
$2,810
$2,553
$2,492
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, 2014, 2013, and 2012 amounted to $3,062, $3,333, and $3,762,
respectively. Generally, land and building leases include escalation clauses.
74
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, 2014:
Year ending December 31,
Capital
Leases
Operating
Leases
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less amount representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total present value of minimum payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current portion of such obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$156
149
91
68
11
—
475
28
447
142
Long-term obligations with interest rates ranging from 2.95% to 5.25% . . . . . . . .
$305
$ 2,512
1,850
1,809
1,635
1,484
7,818
$17,108
Assets recorded under capital leases are as follows:
Land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment at cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014
2013
—
638
—
638
181
6,373
6,427
399
13,199
12,676
Net capital lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$457
$
523
Included in the Company’s 2012 “Other income” in the Consolidated Statements of Operations are gains
totaling $577 which were recognized in connection with the Company’s 2008 sale-leaseback transaction. Includ-
ing this amount, the Company recorded approximately $456 within “Other Income” related to this transaction for
the period ended December 31, 2012.
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. Fair value is based on quoted market prices, where available. If quoted
75
market prices are not available, fair value is based on assumptions that use as inputs market-based parame-
ters. The following section describes 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. As of December 31,
2014, the Company utilized its domestic cash equivalents for acquisitions and transferred the majority of its non-
domestic cash equivalents to savings accounts.
The following assets of the Company were measured at fair value on a recurring basis subject to the dis-
closure requirements of ASC 820 at December 31, 2014 and December 31, 2013:
Fair Value Measurements at Reporting Date
Using
Fair Value Measurements at Reporting Date
Using
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
December 31,
2014
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
December 31,
2013
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Domestic money market
funds . . . . . . . . . . . . . . . . .
Non-domestic bank term
deposits . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . .
$—
25
$25
$—
25
$25
$—
—
$—
$—
—
$—
$18,276
$18,276
$—
32,947
32,947
$51,223
$51,223
—
$—
$—
—
$—
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. Of the 3.0 million ties manufactured between 1998 and 2011 from the
Grand Island, NE facility, approximately 1.6 million ties were sold 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 failure 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.
Following the UPRR Notice, 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.
76
2012
During 2012, the Company completed sufficient testing and analysis to further understand this matter.
Based upon testing results and expert analysis, 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. During the fourth quarter of 2012 and first quarter of 2013, the Company reached agreement with the
UPRR on several matters including a process for the Company and the UPRR to work together to identify, priori-
tize, and replace defective ties that meet the criteria for replacement. This process applies 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 also reverted to a previously
used warranty policy providing a 15 year warranty with a 1:1 replacement ratio. This change provided an addi-
tional 10 years of warranty protection. In the amended 2005 supply agreement, the Company and the UPRR also
extended the supply of Tucson ties by five years and agreed on a cash payment of $12,000 to the UPRR as com-
pensation for concrete ties already replaced by the UPRR during the investigation period.
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.
2013
Throughout 2013, at the UPRR’s request and under the terms of the amended 2005 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
ties under the amended 2005 supply agreement. The
the criteria to be covered as warranty replacement
disagreement related to the 2013 warranty replacement activity includes approximately 170,000 ties where the
Company provided detailed documentation supporting our position with reason codes that detail why these ties
are not eligible for a warranty claim.
In late November 2013, the Company received notice from the UPRR asserting a material breach of the
amended 2005 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 the amended 2005 supply agreement.
2014
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 was
based on empirical data and visual observation from Company employees that were present during the replace-
ment process for a substantial majority of the concrete ties replaced. The Company has spent considerable time
documenting 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 amended 2005 supply agreement.
During the second quarter of 2014, the Company increased its accrual by an additional $4,000 based on
revised estimates of ties to be replaced. The Company continued to work with UPRR to identify, replace, and
reconcile defective ties related to the warranty claim in accordance with the amended 2005 supply agreement.
77
The Company and UPRR met during the third quarter of 2014 to evaluate each other’s position in an effort to
work towards agreement on the unreconciled 2013 and 2014 replacement activity as well as the standards and
practices to be implemented for future replacement activity and warranty tie replacement. No agreement was
reached and the Company continues to endeavor to reconcile the replaced warranty ties with UPRR.
As of December 31, 2014, the Company and the UPRR have not been able to reconcile the disagreement
related to the 2013 and 2014 warranty replacement activity. The disagreement relating to the 2014 warranty
replacement activity includes approximately 90,100 ties that the Company believes are not warranty-eligible.
As a result of the current year replacement activity and related discussions with the UPRR, during the fourth
quarter of 2014 the Company recognized a $4,766 charge to increase the warranty obligation to reflect the
Company’s current expectations of tie failures, based upon scientific testing and other analysis, adjusted for ties
already provided to the UPRR. The accrued concrete tie warranty reserve of $10,331 as of December 31, 2014 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. In the event the
UPRR continues to replace ties and assert warranty claims in future years in the same manner as 2013 and 2014,
we are likely to have a disagreement in those future years relating to the number of ties eligible for warranty
claim.
In November and December of 2014, the Company received additional notices from the UPRR asserting
that ties manufactured in 2000 were defective and again asserting material breaches of the amended 2005 supply
agreement relating to warranty tie replacements as well as certain new ties provided to the UPRR being out of
specification. The Company again responded to the UPRR that it was not in material breach of the amended 2005
supply agreement relating to warranty tie replacements and that new ties being manufactured complied with the
specifications provided by the UPRR.
Although the Company has denied it is in material breach of the amended 2005 supply agreement, this dis-
pute could jeopardize our amended 2005 supply agreement. For the years ended December 31, 2014, 2013, and
2012, sales to the UPRR from our Tucson, AZ facility were approximately $15,297, $12,664, and $25,441,
respectively. Additionally, as of December 31, 2014 we had long-lived assets with a net book value of approx-
imately $978 associated with the Tucson, AZ facility.
On January 23, 2015, the UPRR filed a Complaint and Demand for Jury Trial in the District Court for Doug-
las County, NE against the Company and its subsidiary, CXT Incorporated, asserting among other matters that
the Company breached its express warranty, breached an implied covenant of good faith and fair dealing, antici-
patorily repudiated its warranty obligations, and that UPRR’s exclusive and limited remedy provisions in the
supply agreement have failed of their essential purpose which entitles UPRR to recover all incidental and con-
sequential damages. The complaint seeks to cancel all duties of UPRR under the contracts, to adjudge the Com-
pany as having no remaining rights under the contracts, and to recover damages in an amount to be determined at
trial for the value of unfulfilled warranty replacement ties and ties likely to become warranty eligible, for costs of
cover for replacement ties, and for various incidental and consequential damages. The amended 2005 supply
agreement provides that UPRR’s exclusive remedy is to receive a replacement tie that meets the contract specifi-
cations for each tie that failed to meet the contract specifications or otherwise contained a material defect pro-
vided that the Company receives written notice of such failure or defect within 15 years after that tie was
produced. The amended 2005 supply agreement continues to provide that the Company’s warranty does not
apply to ties that (a) have been repaired or altered without the Company’s written consent in such a way as to
affect the stability or reliability thereof, (b) have been subject to misuse, negligence or accident, or (c) have been
improperly maintained or used contrary to the specifications for which such ties were produced. The amended
2005 supply agreement also continues to provide that the Company’s warranty is in lieu of all other express or
implied warranties and that neither party shall be subject to or liable for any incidental or consequential damages
to the other party. The dispute is largely based on (1) claims submitted which the Company believes are for ties
inaccurately rated that are not the responsibility of the Company and claims that do not meet the criteria of a
warranty replacement and (2) UPRR’s assertion, which the Company vigorously disputes, that UPRR in future
years will be entitled to warranty replacement ties for virtually all of the Grand Island ties. Many thousands of
Grand Island ties have been performing in track for over ten years. In addition, a significant amount of Grand
Island ties were rated by both parties in the excellent category of the rating system. The Company believes
UPRR’s claims are without merit and intends to vigorously defend itself.
78
The Company continues to engage in discussions in an effort to resolve this matter, however, we cannot
predict that such discussions will be successful, the results of the litigation with UPRR, or whether any settle-
ment or judgment amounts will be within the range of our estimated accruals for loss contingencies. Future
potential costs pertaining to UPRR’s claims and the outcome of the UPRR litigation could result in a material
adverse effect on our results of operations, financial condition, and cash flows.
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, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to warranty liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty liability utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to warranty liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty liability utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty liabilities acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,727
1,695
(9,939)
$ 7,483
10,957
(6,992)
52
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,500
Included within the above table are concrete tie warranty reserves of approximately $10,331 and $6,462,
respectively, as of December 31, 2014 and 2013. For the periods ended December 31, 2014, 2013, and 2012, the
Company recorded approximately $9,854, $612, and $23,019, 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, and/or local laws and regulations relating to the pro-
tection of the environment. The Company is monitoring its potential environmental exposure related to current
and former facilities. The Company’s efforts to comply with environmental regulations may have an adverse
effect on its future earnings. In the opinion of management, compliance with the present environmental pro-
tection 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, 2014 and 2013, the Company maintained environmental and litigation reserves of
$3,344 and $2,190, respectively.
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 Carr, FWO, and Chemtec, and the results of the subsidiary’s operations are included from the
acquisition dates through December 31, 2014.
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
operations of these divisions qualified as a “component of an entity” under FASB ASC 205-20 and thus, the
operations are classified as discontinued.
79
Quarterly financial information for the years ended December 31, 2014 and 2013 is presented below:
2014
Third
Quarter
$167,797
$ 35,159
9,119
$
$
$
$
$
$
$
$
$
$
(3)
9,116
0.89
(0.00)
0.89
0.88
(0.00)
0.88
0.03
2013
Third
Quarter
$162,248
$ 31,305
9,793
$
Fourth
Quarter
$161,149
$ 31,605
6,038
$
Total
$607,192
$121,591
$ 25,654
$
$
$
$
$
$
$
$
$
(9)
6,029
$
2
$ 25,656
0.59
(0.00)
0.59
0.58
(0.00)
0.58
0.04
$
$
$
$
$
$
$
2.51
0.00
2.51
2.48
0.00
2.48
0.13
Fourth
Quarter
$156,458
$ 30,611
7,275
$
Total
$597,963
$115,939
$ 29,276
$
$
$
$
$
$
$
$
$
— $
$
9,793
— $
14
$ 29,290
7,275
0.96
$
— $
$
0.96
0.71
$
— $
$
0.71
0.95
$
— $
$
$
0.95
0.03
0.71
$
— $
$
$
0.71
0.03
2.88
0.00
2.88
2.85
0.00
2.85
0.12
First
Quarter
Second
Quarter
Net sales . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . $
Income (loss) from discontinued
$111,414
$ 24,127
3,649
$166,832
$ 30,700
6,848
$
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 . . . .
— $
$
3,649
14
6,862
0.36
$
— $
$
0.36
0.35
$
— $
$
$
0.35
0.03
0.67
0.00
0.67
0.66
0.00
0.67
0.03
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
80
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 con-
cluded 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 2014 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, 2014. 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 (2013 Framework). Based on this assessment, management concluded that the Company maintained
effective internal control over financial reporting as of December 31, 2014.
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 acquisition of FWO and
Chemtec, on October 29, 2014 and December 30, 2014, respectively. The acquired businesses constituted
approximately 16% of total assets as of December 31, 2014 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, 2014 excluded an assessment of the internal control over financial
reporting of the assets and business acquired for the FWO and Chemtec acquisitions.
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.
81
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders L. B. Foster Company and Subsidiaries
We have audited L.B. Foster Company and Subsidiaries’ internal control over financial reporting as of
December 31, 2014, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).
L. B. Foster Company and Subsidiaries’ management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying Managements’ 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 FWO and Chemtec Energy Services, L.L.C. (Chemtec) which are included in
the 2014 consolidated financial statements of L.B. Foster Company and Subsidiaries and constituted approx-
imately 16% of total assets as of December 31, 2014 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 evaluation of the internal control over financial reporting of FWO and Chemtec.
In our opinion, L. B. Foster Company and Subsidiaries maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2014, 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,
2014 and 2013, 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, 2014 and our report dated
March 3, 2015 expressed an unqualified opinion thereon.
Pittsburgh, Pennsylvania
March 3, 2015
/s/ Ernst & Young LLP
82
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 2015 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 — 2014,”
“Executive Compensation,” “Summary Compensation Table (2014, 2013, and 2012),” “Grants of Plan-Based
Awards in 2014,” “Outstanding Equity Awards At 2014 Fiscal Year-End,” “2014 Options Exercises and Stock
Vested Table,” “2014 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.”
83
ITEM 15. EXHIBITS, 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, 2014 and 2013.
Consolidated Statements of Operations for the Years Ended December 31, 2014, 2013, and 2012.
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2014, 2013,
and 2012.
Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013, and 2012.
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2014, 2013, and
2012.
Notes to Consolidated Financial Statements.
(a)(2). Financial Statement Schedule
Schedules for the Years Ended December 31, 2014, 2013, and 2012:
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 Index to Exhibits immediately following the signature page are filed as part of this Annual Report on
Form 10-K.
84
L. B. FOSTER COMPANY AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2014, 2013, AND 2012
Additions
Balance at
Beginning
of Year
Charged to
Costs and
Expenses
Other (1)
Deductions (2)
Balance
at End
of Year
2014
Deducted from assets to which they apply:
Allowance for doubtful accounts . . . . . . . . . . . .
$1,099
$ 462
$30
$555
$1,036
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
(1) Assumed allowance related to acquisitions
(2) Notes and accounts receivable written off as uncollectible.
85
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: March 3, 2015
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/ Robert S. Purgason
(Robert S. Purgason)
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
March 3, 2015
President, Chief Executive Officer
and Director
Director
Director
Director
Director
Director
Director
Senior Vice President,
Chief Financial Officer
and Treasurer
March 3, 2015
March 3, 2015
March 3, 2015
March 3, 2015
March 3, 2015
March 3, 2015
March 3, 2015
March 3, 2015
By:
/s/ Christopher T. Scanlon
(Christopher T. Scanlon)
Controller and Chief Accounting Officer
March 3, 2015
86
INDEX TO EXHIBITS
All exhibits are incorporated herein by reference:
3.1
3.2
4.1
10.0
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.9.1
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.
$200,000,000 Amended and Restated Credit Agreement dated September 23, 2014, 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 September 26, 2014.
$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
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.
to Credit Agreement,
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, incorporated by
reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended
December 31, 2013, File No. 0-10436, filed on February 27, 2014.
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 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.
incorporated by reference to
Form of Performance Share Unit Award Agreement (2012),
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.
87
10.9.2
10.9.3
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
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.
incorporated by reference to
Form of Performance Share Unit Award Agreement (2014),
Exhibit 10.10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31,
2013, File No. 0-10436, filed on February 27, 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.
incorporated by reference to Exhibit 10.1 to the
Non-Employee Director Compensation,
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, File
No. 0-10436, filed on August 6, 2013.
2014 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.1
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File
No. 0-10436, filed May 5, 2014.
Form of 2014 Restricted Stock Agreement, incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File
No. 0-10436, filed May 5, 2014.
2013 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.3
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File
No. 0-10436, filed May 5, 2014.
2012 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.4
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File
No. 0-10436, filed May 5, 2014.
88
10.24
10.25
*21
*23
*31.1
*31.2
*32.0
Retirement and Consulting Agreement and Non-Competition and Non-Solicitation Agreement
dated June 20, 2014 between L.B. Foster Company and Donald L. Foster, incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed
on June 20, 2014.
Release Agreement dated June 20, 2014 between L.B. Foster Company and Donald L. Foster,
incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, File
No. 0-10436, filed on June 20, 2014.
List of Subsidiaries
Consent of Independent Registered Public Accounting Firm.
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.
*101.INS
*101.SCH
*101.CAL
*101.DEF
*101.LAB
*101.PRE
*
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.
89
Certification under Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 31.1
I, Robert P. Bauer, 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: March 3, 2015
/s/ Robert P. Bauer
Name: Robert P. Bauer
Title: President and Chief Executive Officer
Certification under Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 31.2
I, David J. Russo, 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: March 3, 2015
/s/ David J. Russo
Name: David J. Russo
Title: Senior Vice President,
Chief Financial Officer and Treasurer
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, 2014, 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: March 3, 2015
Date: March 3, 2015
/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
OFFICERS
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
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
415 Holiday Drive, Pittsburgh, PA 15220
412.928.3417
800.255.4500 (Toll-free nationwide sales number)
lbfoster.com
BOARD OF DIRECTORS
Lee B. Foster II
Chairman of the Board
L.B. Foster Company
Robert P. Bauer
President and Chief Executive Officer
L.B. Foster Company
G. Thomas McKane
Former Chairman of the Board
and Chief Executive Officer
A.M. Castle & Company
Peter Mcllroy II
Chairman and Chief Executive Officer
Robroy Industries
Diane B. Owen
Former Senior Vice President – Corporate Audit
H.J. Heinz Company
Robert S. Purgason
Senior Vice President
Access Operating Area, Williams
Suzanne B. Rowland
Vice President and General Manager
Global Special Hazards
Tyco Fire Protection Products
William H. Rackoff
President and Chief Executive Officer
ASKO, Inc.
SHAREHOLDER INFORMATION
Annual Meeting
The annual meeting of shareholders will be held at
the Corporate Headquarters, 415 Holiday Drive
Pittsburgh, Pennsylvania 15220 on May, 29, 2015 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.
Stock Trading
L.B. Foster Company’s common stock is traded on
NASDAQ. The ticker symbol is FSTR.
Transfer Agent: Broadridge Financial Solutions, Inc.
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Transportation and Energy Infrastructure Products and Services
lbfoster.com
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