PRODUCT LEADER (cid:81) CUSTOMER FOCUS
(cid:81) CONTINUOUS IMPROVEMENT
(cid:81)
(cid:81)
RELIABILITY (cid:81) TEAMWORK (cid:81) SAFETY (cid:81) PROBLEM SOLVING (cid:81) VALUE
L.B. FOSTER 2015 ANNUAL REPORT
INNOVATION (cid:81) DEPENDABILITY (cid:81) INTEGRITY (cid:81) COLLABORATION
QUALITY (cid:81) PROFESSIONAL SERVICE (cid:81) RESEARCH (cid:81) DEVELOPMENT
OPPORTUNITY (cid:81) SOLUTION (cid:81) PRODUCT LEADER (cid:81) DEPENDABILITY
RELIABILITY (cid:81) TEAMWORK (cid:81) SAFETY (cid:81) PROBLEM SOLVING (cid:81) VALUE
INNOVATION (cid:81) DEPENDABILITY (cid:81) INTEGRITY (cid:81) COLLABORATION
QUALITY (cid:81) PROFESSIONAL SERVICE (cid:81) RESEARCH (cid:81) DEVELOPMENT
OPPORTUNITY (cid:81) SOLUTION PROVIDER (cid:81) DEPENDABILITY (cid:81) VALUE
CUSTOMER CENTRICITY (cid:81) FLEXIBILITY (cid:81) VALUE (cid:81) RESPONSIVENESS
CUTTING EDGE (cid:81) RESILIENCY (cid:81) HANDS-ON (cid:81) PROACTIVITY (cid:81) SAFETY
(cid:81) CONTINUOUS IMPROVEMENT
PRODUCT LEADER (cid:81) CUSTOMER FOCUS
(cid:81)
(cid:81)
RELIABILITY (cid:81) TEAMWORK (cid:81) SAFETY (cid:81) PROBLEM SOLVING (cid:81) VALUE
(cid:18)
INNOVATION (cid:81) DEPENDABILITY (cid:81) INTEGRITY (cid:81) COLLABORATION
(cid:16)
QUALITY (cid:81) PROFESSIONAL SERVICE (cid:81) RESEARCH (cid:81) DEVELOPMENT
(cid:17)
OPPORTUNITY (cid:81) SOLUTION (cid:81) PRODUCT LEADER (cid:81) DEPENDABILITY
(cid:21)
RELIABILITY (cid:81) TEAMWORK (cid:81) SAFETY (cid:81) PROBLEM SOLVING (cid:81) VALUE
INNOVATION (cid:81) DEPENDABILITY (cid:81) INTEGRITY (cid:81) COLLABORATION
QUALITY (cid:81) PROFESSIONAL SERVICE (cid:81) RESEARCH (cid:81) DEVELOPMENT
FINANCIAL HIGHLIGHTS
INCOME STATEMENT DATA
2015 (1)
2014 (2)
2013 (3)
2012 (4)
2011 (5)
YEAR ENDED DECEMBER 31,
Net Sales
Operating Profit
(Loss) Income from Continuing Operations, Net of Tax
Income from Discontinued Operations, Net of Tax
Net (Loss) Income
Basic (Loss) Earnings Per Common Share:
Continuing Operations
Discontinued Operations
Basic (Loss) Earnings Per Common Share
Diluted (Loss) Earnings Per Common Share:
Continuing Operations
Discontinued Operations
Diluted (Loss) Earnings Per Common Share
Dividends Paid Per Common Share
Cash provided by Continuing Operating Activities
$
$
$
$
$
$
$
$
$
$
$
$
$
ALL AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE DATA
624,523
607,192
597,963 588,541
575,337
28,760
37,082
41,571
22,657
30,812
(44,445)
25,656
29,290
14,764
22,067
–
–
–
1,424
828
(44,445)
25,656
29,290
16,188
22,895
(4.33)
2.51
–
–
(4.33)
2.51
(4.33)
2.48
–
(4.33)
0.16
–
2.48
0.13
2.88
–
2.88
2.85
–
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
56,172
66,739
14,155
26,959
31,607
Operating profit represents the gross profit less selling and administrative expenses and amortization expense.
(1)
2015 includes the results of the acquisitions of TEW Plus, LTD (“Tew Plus”) (November 23), IOS Holdings, Inc. (“IOS”)
(March 13), and TEW Holdings, LTD (“Tew”) (January 13). The results also include an $80,337 ($63,887 net of taxes)
impairment of goodwill related to the IOS and Chemtec Energy Services, LLC ("Chemtec") reporting units. More
information about the impairment can be found in Part II, Item 8, Note 4.
(2)
2014 includes CXT concrete tie warranty charges of $9,374 within the Rail Products and Services segment. The 2014
results also include the acquisitions of Carr Concrete Corporation (July 7), FWO (October 29), and Chemtec (December 30).
(3)
2013 includes the acquisition of Ball Winch, LLC (November 7).
(4)
2012 includes a $22,000 warranty charge and a pre-tax gain of $3,193 from the dispositions of SSD and Precise divisions,
in income from discontinued operations, net of tax.
(5)
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.
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.
SOLVING THE CHALLENGES
THAT MATTER MOST TO OUR CUSTOMERS
L.B. Foster is bringing to market products and solutions that meet the challenges that matter most
to our customers. Our innovative technology and new product offerings are defi ning L.B. Foster
as the solutions leader in energy and transportation markets. The integration of acquisitions with
our core businesses is driving our company’s development of advanced products and services.
Energy will continue to fuel our economy and L.B. Foster is positioned to provide many of
the pipeline products and services necessary to transport natural gas liquids (NGL), crude oil
and refi ned petroleum products. We anticipate a long-term demand for natural gas as a clean
alternative to other fuel sources and our team is participating in this transition by helping to
facilitate the effi cient transmission of energy products throughout North America. L.B. Foster’s
energy businesses offer state-of-the-art pipeline corrosion protection, precision fl ow metering,
and non-destructive safety inspection and testing for drilling operations.
As the world’s population increases, the use of passenger rail will grow as transit and long
distance railways become the effi cient and safe choice of travel. These systems require advanced
solutions that further automate passenger conveyance and improve safety monitoring of rail
infrastructure. The transport of freight by rail continues to be the least expensive way to move
commodity products. Our development of innovative products and services that improve safety
and effi ciency for mainline and regional freight railways places L.B. Foster at the forefront for new
and continuing rail opportunities.
The L.B Foster team is delivering the products and solutions necessary to satisfy our customer’s
most demanding challenges.
2
0
1
5
L.B. FOSTER IS COMMITTED TO CONTINUOUS
IMPROVEMENT IN THE WORKPLACE.
IndustryWeek Magazine selects L.B. Foster Vancouver, BC rail technologies plant as world-class manufacturing facility.
2015 CORPORATE CONSOLIDATED DATA
DOLLARS IN THOUSANDS
NET SALES
CASH PROVIDED BY
Continuing Operating Activities
NEW ORDERS
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
0
2013
2014
2015
BACKLOG
$200,000
$180,000
$160,000
$140,000
$120,000
$100,000
0
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
0
2013
2014
2015
RETURN ON
INVESTED CAPITAL
15%
10%
5%
0
-5%
-10%
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
0
2013
2014
2015
NET INCOME
$30,000
$20,000
$10,000
0
-$10,000
-$20,000
-$30,000
-$40,000
-$50,000
2013
2014
2015
2013
2014
2015
2013
2014
2015
TO OUR SHAREHOLDERS
The management team accomplished a lot in 2015 as we faced a challenging year navigating
market conditions that were vastly different from those that existed at the beginning of
the year. We delivered record sales of $625 million aided by acquisitions, and generated
operating cash flow of $56 million. However, weakness in several of our markets and
rapidly falling commodity prices in oil and steel put pressure on our results. Despite
making several adjustments to cope with lost sales and profit pressure, we were unable
to overcome the challenges, and total shareholder return and overall profitability for the
year fell well below our expectations. As a management team, we have always taken
pride in our resilience and ability to overcome difficult markets and circumstances that
put pressure on business results. We will continue to place priority on programs intended
to reduce cost, drive additional efficiency, and build upon our strong foundation. I remain
confident in the long term fundamentals of our business, and our ability to restore growth
and profitability aimed at delivering sustainable shareholder value.
Our record sales in 2015 were driven by the contribution of nearly $100 million from
companies acquired in 2014 and 2015, which offset the volume lost due to market
weakness and volatile commodity prices. The acquisitions brought new capabilities that
are service and solutions oriented in line with our stated acquisition strategy, and increase
our exposure to new markets. The acquisition of TEW Engineering, for example, brings
capabilities in automation solutions designed to help transit railway customers solve
complex problems, reduce cost, and provide better control of operations. We expect to
leverage these solutions to penetrate other transportation industry applications, thereby
providing us with the opportunity to grow by serving markets we were unable to access
in the past.
The acquisitions of Chemtec Energy Services and Inspection Oilfield Services supported
our strategy of adding exposure to the energy industry with service and solutions business
models. These acquisitions added capabilities in engineered precision measurement systems
and non-destructive test and inspection of tubular products which complemented our
existing position in tubular products and services. They also increased our presence in the
midstream energy services sector, and established a presence in the upstream exploration
and production market. We anticipate these acquisitions will position L.B. Foster to take
advantage of the secular shift in the United States toward natural gas as a preferred fuel
source and the future infrastructure requirements to transport oil and gas from resource rich
areas to end users and export facilities across the country.
2
0
1
5
Our desire to increase our exposure to energy is based on our long-term outlook that
recognizes the need for infrastructure to move more preferred hydrocarbon fuel sources from
enormous reserves found across North America as energy demand increases. Energy demand
has traditionally risen with economic growth and the need for traditional sources of energy is
expected to grow along with renewable sources. As we look to capitalize on this long term
trend, our strategy will focus on the transport of energy commodities and applications that
support energy delivery.
In 2015, the commodity cycle had far reaching impact on industrial markets across many
segments of the global economy. In the North American freight rail market, commodity car
loads declined year-over-year and crude-by-rail volume and projects slowed substantially
throughout the year. Our European transit rail business also experienced significant market
weakness as spending was curtailed by operators we serve. On the positive side, the North
American transit rail market continued to benefit from investment, and our transit rail division
has maintained a healthy backlog. Our view on the global transit rail market remains bullish going
forward as many metropolitan areas around the world explore ways to alleviate congestion
and search for more efficient ways to move people.
The global oversupply of steel capacity has driven steel prices to very low levels, making it
difficult for us to compete in certain segments of the rail, construction and tubular products
markets. There are entire market segments where our ability to compete is hampered by the
lack of profit in commodity steel products such as pipe piling. Against this backdrop, we
chose to remain disciplined with respect to our profit margin goals, which resulted in lower
sales. While lower steel prices do provide a benefit to our input costs in some divisions,
it is more influential to our selling price and our ability to compete if several suppliers are
approved.
Despite difficult market circumstances, we are committed to finding ways to replace the
lost sales volume and restore profit margins. Our strategy is driven by capitalizing on the
capabilities of our new businesses, expanding our served markets, and continuing to drive
solid operational efficiency in our operations. We will raise the priority on programs that
support companywide modernization and are intended to cut costs and drive operational
efficiency. Among our top priorities will be driving our acquisitions to reach their planned
profit margin levels. Additional emphasis will be placed on the test and inspection services
business which has the greatest exposure to upstream energy market weakness. This division
ended the year with losses despite many actions taken to reduce cost as volume declined
throughout the year. Its performance has had an unfavorable impact on the overall company
results and is driving the priority around continued restructuring as we prepare to be the
most effective supplier when the market recovers.
Finally, I want to remind our shareholders of the
key to our success. As a company that must find
markets where we can carve out a competitive
position, we depend on the people who work for
us around the world to make a difference. It is our
people who find ways to solve problems and take
on the challenges of today and the opportunities
of tomorrow. As part of the L.B. Foster business
system, which holds the key processes that drive
performance, talent management stands out as
a new initiative integrating the key processes that
recruit, retain and develop talent throughout the
company. It is a categor y that receives priority for
investment and keeps our management focused on
employee recognition and development as they
generate ideas for driving business performance.
Please be assured that creating shareholder value
remains the top priority for the company. We will
focus on devoting the necessar y resources to improve
our competitive position and restore performance
in the company’s financial results. I would like to
thank our shareholders, customers, and employees
for their dedication and support in 2015.
ROBERT P. BAUER
PRESIDENT and CHIEF EXECUTIVE OFFICER
2
0
1
5
4
THE DEMAND FOR CLEAN NATURAL GAS
FUELS ENERGY PIPELINE CONSTRUCTION.
Expansion of storage terminal and distribution facilities boosts energy infrastructure capabilities.
PRODUCT DEVELOPMENT FOCUSES ON RAIL
PASSENGER COMFORT AND TRACK SAFETY.
L.B. Foster designs control panels that enable interaction and control of the railway signal infrastructure.
CAPITALIZING ON INVESTMENT IN
TRANSPORTATION AND ENERGY INFRASTRUCTURE
L.B. Foster is developing engineered solutions to meet our transportation and energy customers’ new
operational challenges. As these two infrastructure markets advance, our company is expanding and
adapting to changing customer needs with industry-leading products and services.
International trends suggest continued growth of transit and freight rail in well-established markets such as
Europe and North America and new expansion in highly populated areas like China and India. Concerns
about traffi c congestion, climate, and the cost of energy are expected to keep the international focus on the
benefi ts of rail transportation and drive investment to these markets worldwide.
The transfer of goods and passengers between dense population centers requires new solutions to improve
rail automation and infrastructure monitoring. L.B. Foster has focused its product development on controls
and displays that enhance passenger convenience and advanced technology products to improve wheel
and track safety.
The installation of impaired rail wheel detection and track defect notifi cation equipment is expected to grow
globally as railways look to new technologies to improve rail safety. Our Wheel Impact Load Detector (WILD)
is the most widely used wheel monitoring system worldwide. Rail breaks and buckles are also a critical
concern for rail operators in all markets. L.B. Foster addresses this problem with the RailStress Monitor™, an
innovative system that provides rail break alerts and real-time warnings of potential rail buckle conditions.
The growth of intermodal shipping continues to expand as the effi ciencies and economies of rail
transport outdistance freight transferred by truck. This expansion provides opportunities for L.B.
Foster’s entire Rail Business unit as rail operators allocate spending for safety improvement, operating
effi ciency and other cost reductions. These are critical areas in which L.B. Foster maintains a strong
presence with new product development and advanced solutions.
Energy markets are adjusting to the abundance of natural gas and the opportunity to effi ciently deliver
NGL from upstream sources. This growth has produced increased interest in protective pipeline coatings,
precision measurement equipment and oilfi eld services. L.B. Foster is well-positioned for expansion in
these critical markets as the demand for well drilling and economical pipeline transportation increases.
In the past decade much of the need for natural gas pipelines was driven by the growth of unconventional
natural gas wells, due to the advent of horizontal drilling and hydraulic fracturing techniques, located
in regions with limited pipeline infrastructure. In addition, pipeline construction is projected to grow
as coal-fi red power plants are replaced with natural gas facilities. This growth and the modernization
of existing pipelines is anticipated to elevate maintenance and monitoring concerns for these energy
transport systems.
2
0
1
5
OUR TECHNICIANS DETERMINE EQUIPMENT
INTEGRITY IN ENERGY LOCATIONS NATIONWIDE.
IOS can log critical inspection results from any location simplifying paperwork and increasing data integrity.
L.B. FOSTER ENERGY GROUP MAINTAINS
ADVANCED ENGINEERING CAPABILITIES.
Engineered metering skids are delivered to the jobsite completely assembled, painted, and tested.
ACQUISITIONS ADD ENGINEERING CAPABILITIES,
EXPAND SERVED MARKETS
In 2015, L.B. Foster acquired companies that are today developing products and services that create new
opportunities in markets we had never before entered. These acquisitions employ innovative business
platforms designed to expand our served markets and grow our customer base with the development
of well-engineered technology solutions.
The addition of the TEW group of companies to L.B. Foster’s European rail products businesses increased
our company’s engineering capabilities in passenger rail operations. This new technology group also
expanded our potential for growth across multiple markets with the design of guided motion technology
systems for automotive and mobility applications.
TEW specializes in rail engineering for control room, passenger information, security and trackside
signaling applications. The TEW team has combined with L.B. Foster’s core rail businesses to
design and manufacture advanced products and systems that bring new solutions for our rail
customers growing challenges.
L.B. Foster also acquired Chemtec Energy Services, a major fabricator of metering skids for critical
uses in the oil and gas industry. The Chemtec team brings an engineering design component to
L.B. Foster’s energy products and services group and offers unique opportunities for expansion
in the pipeline market.
Chemtec supplies the midstream energy market with custody transfer metering systems that provide
precision measurements of crude and refi ned energy products during transport and storage. The
company has specialized fl ow technology engineering capabilities that are well-recognized in the
pipeline market. Chemtec is an industry leader with system-specifi c experience and pipeline and
refi ning customers across North America.
The 2015 acquisitions included the addition of Inspection Oilfi eld Services (IOS) to L.B. Foster’s energy
group. IOS is a leader in non-destructive testing and inspection services for tubular products used in Oil
Country Tubular Goods (OCTG) markets. The company provides a broad and diverse range of services
to oil and gas operators, drilling contractors, machine shops, pipe manufacturers and distributors.
The company fi elds skilled technicians in all major energy development locations to determine
asset integrity and safety assurance. The IOS national footprint creates expanded market reach
for all of L.B. Foster’s energy businesses and offers the potential distribution of new products and
services to a wider customer platform.
L.B. Foster’s 2015 acquisitions can help to satisfy many of our customers’ signifi cant challenges with
advanced engineered solutions.
2
0
1
5
L.B. FOSTER HAS THE TRAINED, MOTIVATED
PEOPLE NEEDED TO REALIZE OUR STRATEGIES.
Caption here Caption here Caption here Caption here Caption here Caption here Caption
Our team is of ten presented a complex challenge that we solve with an innovative solution.
OUR TEAM AND PROCESSES ALIGN TO
GENERATE IDEAS THAT DRIVE PERFORMANCE.
L.B. Foster team determines strategic execution of new Business System.
A BUSINESS SYSTEM
DESIGNED FOR PERFORMANCE
Our quest for business excellence employs a robust strategy to deliver customer satisfaction and
maximize company profi ts. We have set realistic and achievable goals for our team that are being met
with a performance culture. L.B. Foster’s people and key processes are fundamental to our success.
Having our team and processes align properly and work smoothly drives satisfaction and loyalty to our
customer base, and ultimately meets our shareholders’ fi nancial expectations.
Our business system begins with people fi rst and an ongoing team building process that leads to
customer centricity. The company launched a talent management initiative to ensure we have trained,
motivated individuals in the proper positions necessary to realize our strategies. As a team, we are often
offered a tough challenge that we answer with an innovative solution. These successes are borne from
the positive interactions between L.B. Foster professionals and our customers.
Behind the team is a business system that brings consistency and effectiveness to each customer
encounter and quality design to every product developed. Several of our key processes are being
enhanced to support strategic drivers of profi t improvement and successful execution of strategy.
Integrated into our process improvement philosophy are tools such as a new ERP system, performance
management, strategy execution, and a continuous sustainable improvement model which serves as a
capstone to driving the success of our company’s business system.
The effi ciency gains we are realizing from our investment in plant improvements, lean initiatives and
market-leading technologies are also helping L.B. Foster to build the scale and capability to maximize
profi ts. Our objective is to fully develop a business system from which we can drive effi ciency,
performance and shareholder value across all our businesses.
We are creating a performance culture that provides a clear path to the creation of customer satisfaction
and sustained shareholder value. Our investments in new products, people, and better platforms for
growth are driving profi tability and cash fl ow. L.B. Foster is developing more profi table business models
and using our unique business process system to drive performance.
2
0
1
5
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.
RAIL PRODUCTS and SERVICES
TUBULAR PRODUCTS and ENERGY SERVICES
The Rail Business group, which includes Rail Products,
Rail Technologies, CXT Concrete Ties, TEW Engineering,
FWO, Car Repair Products, and Salient Systems, is a
leading, one source supplier and manufacturer of
quality railroad products and services for mainline,
transit, mining, port and industrial markets worldwide.
Our company provides a wide range of railway
products and services including new rail, used rail,
insulated rail joints, rail lubrication systems, concrete
ties, rail monitoring systems, transit products, trackside
signaling equipment,
trackwork materials, control
room and passenger information systems, and our
professional rail project management services.
CONSTRUCTION PRODUCTS
Piling Products supplies flat, pipe, H beam and Z
sheet pile and piling accessories for sale or rent to the
Coated Products operates two pipe coating facilities that
apply Fusion Bonded Epoxy corrosion protection, Abrasion
Resistant Overcoating and internal linings in advanced
technology environments. The plants are
located
in
Birmingham, Alabama and Willis, Texas. The Coated Products
group also includes Ball Winch Field Services, an infi eld pipe
coating business.
Threaded Products provides quality threading of water well
pipe from a state-of-the-art production facility in Magnolia,
Texas. L.B. Foster also maintains a joint venture operation,
LB Pipe & Coupling Products, LLC adjacent to our Magnolia
threading plant. Inspection Oilfi eld Services (IOS), a leader
in non-destructive tubular products testing and inspection
for critical oil and gas applications, provides services from its
facility in Houston, Texas and service centers throughout the
U.S. Willis, Texas-based Chemtec Energy Services is a market-
leading supplier of metering and injection systems skids.
construction industry from convenient regional stocking
DOLLARS IN THOUSANDS
locations. L.B. Foster Fabricated Bridge Products
RAIL
2015
2014
2013
provides steel grid bridge flooring, corrugated bridge
forms, bridge drainage systems, bridge railing, custom
pedestrian railing and complete bridge solutions.
Net Sales
Gross Profi t
$
$
Segment Profi t $
328,982
374,615
363,667
75,276
27,037
77,235
30,093
74,986
28,692
Segment Assets $
241,222
239,951
252,049
CXT,
Inc., an L.B. Foster subsidiary,
is a
leading
CONSTRUCTION
2015
2014
2013
manufacturer of precast concrete products, including
restrooms, showers and concession buildings. These
durable concrete structures are in use at federal, state,
county, city and private recreational sites nationwide.
CXT’s Carr Concrete division also manufactures precast
burial vaults, bridge beams, box culverts and other pre-
Gross Profi t
stressed and precast concrete products.
Segment Profi t $
Segment Assets $
Net Sales
Gross Profi t
$
$
Segment Profi t $
Segment Assets $
176,394
178,847
191,751
34,169
12,958
86,335
32,391
13,106
102,978
29,224
10,206
77,900
TUBULAR
Net Sales
$
$
2015
2014
2013
119,147
22,481
-81,344
216,715
53,730
11,722
5,350
130,289
42,545
12,278
9,208
51,497
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, 2015
‘ Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
to
For the transition period from
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
(or
for
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 $338,114,276.
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 23, 2016
10,232,471 shares
Documents Incorporated by Reference:
Portions of the Proxy Statement prepared for the 2016 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 2016 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.
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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
10
15
16
16
16
17
20
21
36
38
79
79
81
81
81
81
81
81
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
84
PART IV
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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,” “plan,” “may,” “expect,”
“should,” “could,” “anticipate,” “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, L.B. Foster 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 initiatives, 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. Accord-
ingly, 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: an economic slowdown or a continuation of the current
economic slowdown in the markets we serve, the risk of doing business in international markets, a decrease in
freight or passenger rail traffic, continued and sustained declines in energy prices, a lack of state or federal
funding for new infrastructure projects, an increase in manufacturing or material costs, our ability to effectuate
our strategy including evaluating potential opportunities such as strategic acquisitions, joint ventures, and other
initiatives, and our ability to effectively integrate new businesses and realize anticipated benefits, costs of and
impacts associated with shareholder activism, the timeliness and availability of material from major suppliers,
labor disputes, the impact of competition, the effective implementation of an enterprise resource planning system,
variances in current accounting estimates and assumptions and their ultimate outcomes, the seasonality of the
Company’s business, the adequacy of internal and external sources of funds to meet financing needs, the
Company’s ability to curb its working capital requirements and manage indebtedness, domestic and interna-
tional income taxes, foreign currency fluctuations, inflation, 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, the costs
associated with and the outcome of a lawsuit filed by Union Pacific Railroad (“UPRR”), the loss of future rev-
enues from current customers, risks 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.
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(Dollars in thousands, except share data unless otherwise noted)
PART I
ITEM 1. BUSINESS
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.
As a result of recently completed acquisitions, during the first quarter of 2015, the Company renamed the
Rail Products and Tubular Products business segments to be Rail Products and Services and Tubular and Energy
Services, respectively. The name changes principally reflect the additional businesses conducted by those seg-
ments as a result of acquisitions that have enhanced our product and service offerings within the rail and energy
markets.
The following table shows, for the last three fiscal years, the net sales generated by each business segment
as a percentage of total net sales.
Percentage of Net Sales
2013
2014
2015
Rail Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tubular and Energy Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53% 62% 61%
29
28
9
19
32
7
100% 100% 100%
Financial information concerning these segments is set forth in Part II, Item 8, Note 2 to the financial state-
ments included herein, which is incorporated by reference into this Item 1.
Rail Products and Services
L.B. Foster Company’s Rail Products and Services (“Rail”) segment is comprised of several manufacturing
and distribution businesses that provide a variety of products and services for freight and passenger railroads and
industrial companies throughout the world. The Rail segment has sales offices throughout the Americas and
Europe, and frequently bids on rail projects where it offers products manufactured by the Company, or sourced
from numerous supply chain partners, and aftermarket services. The Rail segment is comprised of the following
business units: Rail Products, Rail Technologies, and CXT Concrete Ties.
Rail Products
The Rail Products business is comprised of the Company’s Rail Distribution, Allegheny Rail, Transit, and
Trackwork divisions.
Rail Distribution sells new rail mainly to passenger and shortline freight railroads, industrial companies, and
rail contractors for the replacement of existing lines or expansion of new lines. Rail accessories sold by the Rail
Distribution division include track spikes, bolts, angle bars, and other products required to install or maintain rail
lines. These products are manufactured by the Company or purchased from other manufacturers and distributed
accordingly.
The Company’s Allegheny Rail Products (“ARP”) division engineers and fabricates insulated rail joints and
related accessories for freight and passenger railroads and industrial customers. Insulated joints are manufactured
at the Company’s facilities in Pueblo, CO and Niles, OH.
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The Company’s Transit Products division supplies power rail, direct fixation fasteners, coverboards, and
special accessories primarily for passenger railroad systems. These products are fabricated at Company facilities
or by subcontractors and are usually sold by sealed bid to passenger railroads or to rail contractors.
The Company’s Trackwork division sells trackwork products to Class II and III railroads, industrial, and
export markets.
Rail Technologies
L.B. Foster Rail Technologies, Inc. (“Rail Technologies”) engineers, manufactures, and fabricates friction
management products and application systems, railroad condition monitoring equipment, wheel impact load
detection, railroad condition monitoring systems, rail anchors and spikes, wayside data collection and manage-
ment systems, epoxy and nylon-encapsulated insulated rail joints, track fasteners, and provides aftermarket serv-
ices. The Company’s friction management products control the friction at the rail/wheel interface, helping its
customers to reduce fuel consumption, improve operating efficiencies, extend the life of operating assets such as
rail and wheels, and reduce track stresses, and lower related maintenance and operating costs. Friction manage-
ment products include mobile and wayside systems that apply lubricants and liquid or solid friction modifiers.
These products and systems are designed, engineered, manufactured, and fabricated by certain wholly-owned
subsidiaries located in the United States, Canada, United Kingdom, and Germany.
CXT Concrete Ties
L.B. Foster manufactures engineered concrete railroad ties at its subsidiary, CXT Incorporated, for freight
and passenger railroads and industrial companies at its facility in Spokane, WA.
Construction Products
The Construction products segment is composed of the following product groups: Piling Products, Fab-
ricated Bridge Products, and Precast Concrete 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
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 steel grid deck,
open steel grid deck, aluminum bridge railing, and stay-in-place steel bridge forms.
Precast Concrete Products
The precast concrete products unit primarily manufactures concrete buildings 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 unit also manufactures various other precast products such as burial vaults,
bridge beams, box culverts, septic tanks, and other custom pre-stressed and precast concrete products. The prod-
ucts are manufactured in Spokane, WA, Hillsboro, TX, and Waverly, WV.
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Tubular and Energy Services
The Tubular and Energy Services segment has four primary product or service groups: Coated Pipe,
Threaded Products, precision measurement systems and upstream test and inspection services. The segment pro-
vides products and services predominantly to the mid and upstream oil and gas markets.
Coated Pipe
There are two pipeline services locations that make up the Coated Pipe business unit. The 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 is in Willis, TX. The Willis facility applies
specialty outside and inside diameter coatings for a wide variety of pipe diameters for oil & gas transmission,
mining, and waste water pipelines. This location also provides custom coatings for specialty fittings and field
service connections.
Threaded Products
The Company’s Magnolia, TX facility cuts, threads, and paints pipe primarily for water well applications
for the agriculture industry, municipal water authorities, and Oil Country Tubular Goods (“OCTG”) markets.
Precision Measurement Systems
The Company manufactures and provides a turnkey solution for metering and injection systems for the oil
and gas industry. The Willis, TX location operates a fabrication plant that builds metering systems for custody
transfer applications including crude oil and other petroleum-based products. These systems are used at well
sites, pipelines, refineries, chemical plants, and loading/unloading facilities. The Willis location also manu-
factures and installs additive and dye injection systems. These systems are used to inject performance additives
and/or dyes into petroleum products.
Upstream Test and Inspection Services
The Company provides inspection and tubular integrity management services for the upstream oil and gas
industry. Services include non-destructive testing, inspection, and other asset integrity services such as repair and
threading for OCTG and drill tools. Inspection and testing of these products, which includes replaceable and re-
usable products such as casing, production tubing, drill pipe, directional motors, drill collars, and related equip-
ment is a critical preventative measure to ensure personnel and well-site safety, enhance efficiency, and avoid
costly equipment failures and well-site shutdowns. The Company offers these services in every major oil and gas
producing region throughout the United States.
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. More information concerning the LB Pipe JV is set forth in Part II, Item 8, Note 8 to the Con-
solidated Financial Statements included herein, which is incorporated by reference into this Item 1.
Marketing and Competition
L.B. Foster Company generally markets its rail products directly in all major industrial areas of the United
States, Canada, and Europe. The construction and energy products and services are primarily marketed domes-
tically. The Company employs a sales force of approximately 100 people which is supplemented with a network
of agents across Europe, South America, and Asia to reach current customers and cultivate potential customers in
these areas. For the years ended 2015, 2014, and 2013, approximately 16%, 18%, and 17%, respectively, of the
Company’s total sales were outside the United States.
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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 2015, 2014, and 2013, 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 products are purchased in the form of finished or semi-finished products. The
Company purchases the majority of its supplies from domestic and foreign steel producers. Generally, the Com-
pany has a number of vendor options. However, the Company has an arrangement 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 and international laws that could impose import restrictions on
selected classes of products and for anti-dumping duties if products are sold in the United States at prices that are
below specified prices.
Backlog
The dollar amount of firm, unfilled customer orders at December 31, 2015 and 2014 by business segment is
as follows:
December 31,
2015
2014
Rail Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tubular and Energy Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 85,199
45,371
34,137
$104,821
65,843
13,686
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$164,707
$184,350
Approximately 4% of the December 31, 2015 backlog is related to projects that will extend beyond 2016.
Backlog from businesses acquired during 2015 represented 8% of the total at December 31, 2015.
Research and Development
Expenditures for research and development approximated $3,937, $3,096, and $3,154 in 2015, 2014, and
2013, respectively. These expenditures were predominately associated with expanding product lines and capa-
bilities within the Company’s Rail Technologies business.
Patents and Trademarks
The Company owns a number of domestic and international patents and trademarks primarily related to its
Rail Technologies products. Our business segments are not dependent upon any individual patent or related
group of patents, or any licenses or distribution rights. We believe that, in the aggregate, the rights under our
patents, trademarks, and licenses are generally important to our operations, but we do not consider any individual
patent, trademark, or any licensing or distribution rights related to a specific process or product to be of material
importance in relation to our total business.
Environmental Disclosures
Information regarding environmental matters is included in Part II, Item 8, Note 19, which is incorporated
by reference into this Item I.
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Employees and Employee Relations
At December 31, 2015, the Company had approximately 1,406 employees, 1,245 within the Americas and
161 of whom were located in Europe. There were 712 hourly production workers and 694 salaried employees. Of
the hourly production workers, approximately 177 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 Liquidity and Capital Resources
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.
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.
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.
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Executive Officers of the Registrant
Information concerning the executive officers of the Company is set forth below.
Name
Robert P. Bauer . . . . . . . . . . . . . . . . . . . . . . . . . .
Merry L. Brumbaugh . . . . . . . . . . . . . . . . . . . . . .
Samuel K. Fisher . . . . . . . . . . . . . . . . . . . . . . . . .
Patrick J. Guinee . . . . . . . . . . . . . . . . . . . . . . . . .
John F. Kasel . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Brian H. Kelly . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gregory W. Lippard . . . . . . . . . . . . . . . . . . . . . .
Konstantinos Papazoglou . . . . . . . . . . . . . . . . . .
David J. Russo . . . . . . . . . . . . . . . . . . . . . . . . . . .
David R. Sauder
. . . . . . . . . . . . . . . . . . . . . . . . .
Christopher T. Scanlon . . . . . . . . . . . . . . . . . . . .
Age
57
58
63
46
50
56
47
63
57
45
40
Position
President and Chief Executive Officer
Vice President — Tubular Products
Vice President — Rail Distribution
Vice President, General Counsel and Secretary
Senior Vice President — Rail Products and
Services
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 2012. Prior to
joining the Company, beginning in 2011, Mr. Bauer previously served as President of the Refrigeration Division
of the Climate Technologies business of Emerson Electric Company, a diversified global manufacturing and
technology company. From 2002 until 2011, Mr. Bauer served as President of Emerson Network Power’s Liebert
Division.
Ms. Brumbaugh was elected Vice President — Tubular Products in 2004, having previously served as Gen-
eral 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 2011, having previously served as
Senior Vice President — Rail since 2002. Mr. Fisher has served in various capacities within the Company since
his initial employment 1977.
Mr. Guinee was elected Vice President, General Counsel and Secretary in 2014. Prior to joining the Com-
pany, Mr. Guinee served as Vice President — Securities & Corporate and Assistant Secretary at Education
Management Corporation from 2013 to early 2014, and was employed by H. J. Heinz Company from 1997 to
2013, last serving as Vice President — Corporate Governance & Securities and Assistant Secretary.
Mr. Kasel was elected Senior Vice President — Rail Products and Services in 2012 having previously
served as Senior Vice President — Operations and Manufacturing since 2005 and Vice President — Operations
and Manufacturing since 2003. Mr. Kasel served as Vice President of Operations for Mammoth, Inc., a Nortek
company from 2000 to 2003.
Mr. Kelly was elected Vice President — Human Resources and Administration in 2012 having previously
served as Vice President, Human Resources since 2006. Prior to joining the Company, Mr. Kelly headed Human
Resources for 84 Lumber Company from 2004. Previously, he served as a Director of Human Resources for
American Greetings Corp. from 1994 to 2004.
Mr. Lippard was elected Vice President — Rail Sales and Products in 2012 having previously served as
Vice President — Rail Product Sales since 2000. Prior to re-joining the Company in 2000, Mr. Lippard served as
Vice President — International Trading for Tube City, Inc. from 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 2012 having previously served as Vice
President — Friction Management since 2011. Prior to joining the Company in 2010, Mr. Papazoglou served as
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Executive Vice President and Chief Operating Officer for Portec Rail Products, Inc. from 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 2012 upon the appointment of Mr. Scanlon as Controller and Chief Accounting Officer in
2012. Mr. Russo was previously elected Senior Vice President, Chief Financial and Accounting Officer and
Treasurer in 2010 having served previously as Senior Vice President, Chief Financial Officer and Treasurer since
2002. Mr. Russo was Corporate Controller of WESCO International Inc. from 1999 until joining the Company in
2002.
Mr. Sauder was elected Vice President — Global Business Development upon joining the Company in
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
2007.
Mr. Scanlon was elected Controller and Chief Accounting Officer in 2012. Prior to joining the Company,
Mr. Scanlon served as the Online Higher Education Division Controller of Education Management Corporation
from 2009 to 2012. Mr. Scanlon served as Manager of Central Accounting Services for Bayer Corporation, from
2007 until 2009.
Officers are elected annually at the organizational meeting of the Board of Directors following the annual
meeting of stockholders.
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.
Our inability to successfully identify, manage and execute acquisitions, joint ventures, divestitures, and
other significant transactions could harm our financial results, business, and prospects.
As part of our business strategy, we may acquire companies or businesses, divest businesses or assets, enter
into strategic alliances and joint ventures, and make investments to realize anticipated benefits, which actions
involve a number of inherent risks and uncertainties. We evaluate acquisition opportunities that have the poten-
tial to support and strengthen our business. We can give no assurances that the opportunities will be con-
summated or that financing will be available. In addition, acquisitions involve inherent risks that the acquired
business will not perform in accordance with our expectations. We may not be able to achieve the synergies and
other benefits we expect from the integration as successfully or rapidly as projected, if at all. Our failure to
integrate newly-acquired 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.
Our future performance and market value could cause additional write-downs of long-lived and 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. During the third quarter of 2015, we per-
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formed an interim goodwill test and concluded that the carrying amounts of the Inspection Oilfield Services, Inc.
(“IOS”) and Chemtec Energy Services, L.L.C. (“Chemtec”) reporting units’ goodwill exceeded the implied fair
values of that goodwill. We recognized a non-cash goodwill impairment charge of $80,337 ($63,887 net of taxes)
to write down the carrying values to the implied fair values, of which $69,908 represents the full carrying value
of goodwill related to the IOS acquisition and the remaining $10,429 relates to the Chemtec reporting unit. No
assurances can be given that we will not be required to record future significant charges related to tangible or
intangible asset impairments.
Our indebtedness could materially adversely affect our business, financial condition, and results of
operations and prevent us from fulfilling our indebtedness obligations.
Our indebtedness could materially adversely affect our business, financial condition, and results of oper-
ations. For example, it could:
‰ require us to dedicate a substantial portion of our cash flow from operations to payments of our indebted-
ness, which would reduce the availability of our cash flow to fund working capital, capital expenditures,
expansion efforts, and other general corporate purposes;
‰ limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we
operate;
‰ place us at a competitive disadvantage compared to our competitors that have less debt; and
‰ limit, among other things, our ability to borrow additional funds for working capital, capital expenditures,
general corporate purposes, or acquisitions.
Our inability to comply with covenants in place or our inability to make the required principal and interest
payments may cause an event of default, which could have a substantial adverse impact to our business, financial
condition, and results of operation. There is no assurance that refinancings or asset dispositions could be effected
on a timely basis or on satisfactory terms, if at all, particularly if credit market conditions deteriorate. Fur-
thermore, there can be no assurance that refinancings or asset dispositions would be permitted by the terms of our
credit agreements or debt instruments. Our existing credit agreements contain, and any future debt agreements
we may enter into may contain, certain financial tests and other covenants that limit our ability to incur indebted-
ness, acquire other businesses, and impose various other restrictions. Our ability to comply with financial tests
may be adversely affected by changes in economic or business conditions beyond our control, and these cove-
nants may limit our ability to take advantage of potential business opportunities as they arise. We cannot be cer-
tain that we will be able to comply with the financial tests and other covenants, or, if we fail to do so, that we will
be able to obtain waivers or amended terms from our lenders. An uncured default with respect to one or more of
the covenants could result in the amounts outstanding under one or more of the agreements being declared
immediately due and payable, which may also trigger an obligation to redeem our outstanding debt securities and
repay all other outstanding indebtedness. Any such acceleration of our indebtedness would have a material
adverse effect on our business, financial condition, and results of operations.
Prolonged low energy prices and other unfavorable changes in U.S., global, or regional 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 declines in energy prices may continue for an
extended period, which could continue to negatively affect our business prospects. 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. Sustained declines, such as began to
occur in 2015, in the price of oil and natural gas will likely continue to have a material adverse effect on our
operations and financial condition.
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Our ability to maintain or improve our profitability could be adversely impacted by cost pressures.
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.
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.
Our success is in part dependent on the accuracy and proper utilization of our management information
and communications systems.
We are currently working through an enterprise resource program (“ERP”) system upgrade and certain divi-
sions of our Company will be transitioned into the new ERP system during 2016. The system upgrade is intended
to enable us to better meet the information requirements of our users, increase our integration efficiencies, and
identify additional synergies in the future. The implementation of our ERP system is complex because of the
wide range of processes and systems to be integrated across our business. Project delays, business interruptions,
or loss of expected benefits could have a material adverse effect on our business, financial condition, or results of
operations. Any disruptions, delays, or deficiencies in the design, operation, or implementation of our various
systems, or in the performance of our systems, particularly any disruptions, delays, or deficiencies that impact
our operations, could adversely affect our ability to effectively run and manage our business, including our abil-
ity to receive, process, ship, and bill for orders in a timely manner or our ability to properly manage our
inventory or accurately present our inventory availability or pricing.
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 an 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.
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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. As a result of the ongoing litigation and termination of the amended 2005 concrete tie supply agreement
with Union Pacific Railroad (“UPRR”), our sales to, and new orders from UPRR have ceased which has
adversely affected our results during 2015. No assurances can be given that a significant downturn in the busi-
ness or financial condition of a current customer, or customers, or potential litigation with a current customer,
would not also 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
financial condition. In addition, we could suffer a significant loss of business from a customer who is dissatisfied
with the resolution of a warranty claim. For example, UPRR terminated our amended 2005 concrete tie supply
agreement over allegedly defective ties and ceased new orders for other products which negatively impacted our
2015 results.
In January 2015, UPRR filed a lawsuit against the Company asserting that we were in material breach of our
amended 2005 concrete tie supply agreement with UPRR due to claimed failures to provide warranty 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 Part II, Item 8, Note 19
for additional information regarding UPRR’s lawsuit. We continue to work with UPRR in an attempt to reach a
resolution on this matter. However, such discussions may not be successful, and the results of litigation and any
settlement or judgment amounts resulting from this matter may not be within the range of our estimated accrual.
Consequently, while we believe the claims in the UPRR lawsuit are without merit, and we intend to vigorously
defend ourselves and have asserted a counterclaim for damages in the UPRR lawsuit, an adverse outcome could
result in a substantial judgment against us that could have a material adverse effect on our financial condition,
results of operations, liquidity, and capital resources. No assurances can be given that prior to any settlement or
judgment, that we will not take additional material charges because our warranty reserve accrual for UPRR is
based upon our current estimate of the number of defective concrete ties that need to be replaced and facts could
emerge which would cause us to materially increase this estimate.
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.
Changes in exchange rates for foreign currencies may reduce international demand for our products or
increase our labor or supply costs in non-U.S. markets. 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, British pound, or Euro, our reported earn-
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ings in dollars from sales in those currencies will be unfavorable. Conversely, a favorable result will be reported
if the United States dollar weakens in value as compared to the value of the Canadian dollar, British pound, or
Euro.
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, 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 products businesses, we rely on a limited number of suppliers for key products that we sell to our
customers. In addition, our piling business is predominantly dependent upon one supplier for sheet piling. A sig-
nificant downturn in the business of one or more of these suppliers, a disruption in their manufacturing oper-
ations, an unwillingness to continue to sell to us, or a disruption in the availability of existing and new piling and
rail products may adversely impact our financial results.
Fluctuations in the price, quality, and availability of the primary raw materials used in our business could
have a material adverse effect on our operations and profitability.
Most of our businesses utilize steel as a significant product component. The steel industry is cyclical and
prices and availability are subject to these cycles as well as to international market forces. We also use significant
amounts of cement and aggregate in our concrete railroad tie and our precast concrete 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
177 employees employed at these facilities are currently working under three separate collective bargaining
agreements. Disputes with regard to the terms of these agreements or our potential inability to renegotiate
acceptable contracts with these unions could result in, among other things, strikes, work stoppages, slowdowns,
or lockouts, which could cause a disruption of our operations and have a material adverse effect on our results of
operations, financial condition, and liquidity.
Actions of activist shareholders could be disruptive and potentially costly and the possibility that activist
shareholders may seek changes that conflict with our strategic direction could cause uncertainty about the
strategic direction of our business.
In February 2016, the Company entered into an agreement with an activist investor, Legion Partners Asset
Management, LLC and various of its affiliates (collectively, “Legion Partners”) that had filed a Schedule 13D
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with the SEC with respect to the Company. Pursuant to that agreement, the Company agreed to appoint a repre-
sentative of Legion Partners to the Company’s Board of Directors and Legion Partners agreed to various stand-
still provisions and to vote for the Company’s director nominees at the Company’s 2016 Annual Meeting of
Shareholders.
Activist investors may attempt to effect changes in the Company’s strategic direction and how the Company
is governed, or to acquire control over the Company. Some investors seek to increase short-term stockholder
value by advocating corporate actions such as financial restructuring, increased borrowing, special dividends,
stock repurchases, or even sales of assets or the entire company. While the Company welcomes varying opinions
from all shareholders, activist campaigns that contest or conflict with our strategic direction could have an
adverse effect on the Company’s results of operations and financial condition as responding to proxy contests
and other actions by activist shareholders can disrupt our operations, be costly and time-consuming, and divert
the attention of the Company’s board and senior management from the pursuit of business strategies. In addition,
perceived uncertainties as to our future direction as a result of changes to the composition of our Board may lead
to the perception of a change in the direction of the business, instability or lack of continuity which may be
exploited by our competitors, may cause concern to our current or potential customers, may result in the loss of
potential business opportunities and may make it more difficult to attract and retain qualified personnel and busi-
ness partners. These types of actions could cause significant fluctuations in our stock price based on temporary or
speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and
prospects of our business.
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.
We may not foresee or be able to control certain events that could adversely affect our business.
Unexpected events including fires or explosions at our facilities, natural disasters, armed conflicts,
unplanned outages, equipment failures, failure to meet product specifications, or a disruption in certain of our
operations may cause our operating costs to increase or otherwise impact our financial performance.
Shifting federal, state, local, and foreign regulatory policies impose risks to our operations.
We are subject to regulation from federal, state, local, and foreign regulatory agencies. We are required to
comply with numerous laws and regulations and to obtain numerous authorizations, permits, approvals, and
certificates from governmental agencies. Compliance with emerging regulatory initiatives, delays, discontinua-
tions, or reversals of existing regulatory policies in the markets in which we operate could have an adverse effect
on our business, results of operations, cash flows, and financial condition.
A substantial portion of our operations are heavily dependent on governmental funding of infrastructure
projects. Many of these projects have “Buy America” or “Buy American” provisions. Significant changes in the
level of government funding of these projects could have a favorable or unfavorable impact on our operating
results. Additionally, government actions concerning “Buy America” provisions, taxation, tariffs, the environ-
ment, or other matters could impact our operating results.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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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
Birmingham, AL . . . . . . . . . . . . . . . Pipe coating facility
Burnaby, British Columbia,
Canada . . . . . . . . . . . . . . . . . . . .
Friction management products
plant
Channelview, TX . . . . . . . . . . . . . . Threading, test, and inspection
facility
Columbia City, IN . . . . . . . . . . . . . Rail processing facility and yard
storage
Hillsboro, TX . . . . . . . . . . . . . . . . . Precast concrete facility
Kimball, NE . . . . . . . . . . . . . . . . . . Threading, test, and inspection
facility
Leming, TX . . . . . . . . . . . . . . . . . . . Threading, test, and inspection
facility
Magnolia, TX . . . . . . . . . . . . . . . . . Threading facility and joint
venture manufacturing facility
Morgantown, WV . . . . . . . . . . . . . . Test, and inspection 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
Waverly, WV . . . . . . . . . . . . . . . . . Precast concrete facility
Willis, TX . . . . . . . . . . . . . . . . . . . . Pipe coating facility
Willis, TX . . . . . . . . . . . . . . . . . . . . Measurement services facility
Acres Business Segment
16 Construction
32 Tubular and Energy
N/A Rail
Lease
Expiration
Owned
2017
2021
73 Tubular and Energy Owned
22 Rail
Owned
9 Construction
Owned
145 Tubular and Energy Owned
63 Tubular and Energy Owned
35 Tubular and Energy Owned
N/A Tubular and Energy
35 Rail
35 Construction
9 Rail
17 Rail
N/A Rail
2018
Owned
Owned
Owned
Owned
2019
2020
13 Rail
2020
5 Construction
85 Construction
Owned
16 Tubular and Energy Owned
68 Tubular and Energy 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.
Including the properties listed above, the Company has a total of 28 sales offices, including its headquarters
in Pittsburgh, PA and 36 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 19 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.
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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 336 common shareholders of record on February 23, 2016. 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
$52.00
47.97
36.07
16.66
2015
Low
$37.00
33.96
12.10
10.10
Dividends
High
$0.04
0.04
0.04
0.04
$48.41
54.68
56.72
54.41
2014
Low
$40.09
44.82
45.93
43.81
Dividends
$0.03
0.03
0.03
0.04
Dividends
There have been no changes to the October 2014 Board of Directors authorization to increase the regular
quarterly dividend to $0.04 per share. The Company expects to continue its policy of paying regular cash divi-
dends, although there is no assurance as to future dividends because they depend on future earnings, capital
requirements, and financial condition.
The Company’s March 13, 2015 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 $25,000,000 per year when funds are drawn on the facility. If no
drawings on the facility exist, dividends, distributions, and redemptions in excess of $25,000,000 per year are
subjected to a limitation of $75,000,000 in the aggregate. The $75,000,000 aggregate limitation also permits cer-
tain loans, strategic investments, and acquisitions.
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Performance Graph
The Company’s peer group consists of Accuride Corporation, Alamo Group, Inc., AM Castle & Co., Ameri-
can Railcar Industries, Inc., CIRCOR International, Inc., Columbus McKinnon Corporation, Furmanite Corpo-
ration, Gibraltar Industries, Inc., Houston Wire & Cable Company, Insteel Industries Inc., Lindsay Corporation,
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.
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, 2010. Each
of the three 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, and a Peer Group
$250
$200
$150
$100
$50
$0
12/10
12/11
12/12
12/13
12/14
12/15
L.B. Foster Company
NASDAQ Composite
Peer Group
* $100 invested on 12/31/10 in stock or index, including reinvestment of dividends. Fiscal year ending
December 31.
L.B. Foster Company
NASDAQ Composite
2015 Peer Group
12/10
12/11
12/12
12/13
12/14
12/15
$100.00
$69.33
$106.80
$116.58
$120.05
$34.02
100.00
100.53
116.92
166.19
188.78
199.95
100.00
89.10
100.87
142.58
127.82
106.05
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Securities Authorized for Issuance Under Equity Compensation Plans
The following table sets forth information at December 31, 2015 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)
—
—
—
$—
—
$—
407,307
—
407,307
Under the 2006 Omnibus Incentive Plan, non-employee directors are automatically awarded 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, 2015,
there were 124,642 fully vested shares issued under the 2006 Omnibus Incentive Plan to non-employee directors.
During 2015, pursuant to the 2006 Omnibus Incentive Plan, the Company issued approximately 14,000 fully-
vested shares in lieu of a cash payment earned under separate three year incentive plans.
The Company grants eligible employees restricted stock and performance unit awards under the 2006
Incentive Omnibus Plan. The forfeitable restricted stock awards granted prior to March 2015 generally time-vest
after a four-year holding period, and those granted in March 2015 generally time-vest ratably over a three-year
period, unless indicated otherwise by the underlying restricted stock award agreement. Performance unit awards
are offered annually under separate three-year long-term incentive plans. Performance units are subject to for-
feiture and will be converted into common stock of the Company based upon the Company’s performance rela-
tive to performance measures and conversion multiples as defined in the underlying plan.
The Company will withhold or employees may tender shares of restricted stock when issued to pay for
withholding taxes. During 2015, 2014, and 2013, the Company withheld 25,340, 21,676, and 16,166 shares,
respectively, for this purpose. The value of the shares withheld were $1,114,000, $985,000, and $708,000 in
2015, 2014, and 2013, respectively.
Issuer Purchases of Equity Securities
The Company’s purchases of equity securities for the three-month period ended December 31, 2015 were as
follows:
Total number
of shares
purchased(1)
October 1, 2015 — October 31, 2015 . . . . . . .
November 1, 2015 — November 30, 2015 . . .
December 1, 2015 — December 31, 2015 . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
1,328
1,328
Total number
of shares
purchased as
part of publicly
announced plans
or programs(2),(3)
Approximate dollar
value of shares
that may yet be
purchased under
the plans or programs
(in thousands)
—
—
—
—
$13,413
13,413
13,413
$13,413
Average
price
paid per
share
$ —
—
11.09
$ —
(1) Reflects shares withheld by the Company to pay taxes upon vesting of restricted stock. These shares do not
impact the remaining authorization to repurchase shares under approved plans or programs.
(2) On December 4, 2013, the Board of Directors authorized the repurchase of up to $15,000,000 of the Compa-
ny’s common shares until December 31, 2016. This authorization became effective January 1, 2014.
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(3) On December 9, 2015, the Board of Directors authorized the repurchase of up to $30,000,000 of the Compa-
ny’s common shares until December 31, 2017. This authorization became effective January 1, 2016 and
replaces the prior authorization.
The Company purchased 80,512 common shares for $1,587,000 during the year ended December 31, 2015
under our previous share repurchase authorization.
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per share 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
2015(1)
Year Ended December 31,
2013(3)
2014(2)
2012(4)
2011(5)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $624,523 $607,192 $597,963 $588,541 $575,337
Operating profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28,760 $ 37,082 $ 41,571 $ 22,657 $ 30,812
(Loss) income from continuing operations, net of
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (44,445) $ 25,656 $ 29,290 $ 14,764 $ 22,067
828
Income from discontinued operations, net of tax . . . . . .
1,424
—
—
—
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (44,445) $ 25,656 $ 29,290 $ 16,188 $ 22,895
Basic (loss) earnings per common share:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
(4.33) $
—
2.51 $
—
2.88 $
—
1.46 $
0.14
Basic (loss) earnings per common share . . . . . . . . . . . . $
(4.33) $
2.51 $
2.88 $
1.60 $
Diluted (loss) earnings per common share:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . $
Discontinued operations . . . . . . . . . . . . . . . . . . . . . . .
(4.33) $
—
2.48 $
—
2.85 $
—
1.44 $
0.14
Diluted (loss) earnings per common share . . . . . . . . . . . $
(4.33) $
2.48 $
2.85 $
1.58 $
2.16
0.08
2.24
2.14
0.08
2.22
Dividends paid per common share . . . . . . . . . . . . . . . . . $
0.16 $
0.13 $
0.12 $
0.10 $
0.10
Operating profit represents the gross profit less selling and administrative expenses and amortization expense.
(1) 2015 includes the results of the acquisitions of TEW Plus, LTD (“Tew Plus”) (November 23), IOS Holdings,
Inc (“IOS”) (March 13), and TEW Holdings, LTD (“Tew”) (January 13). The results also include an $80,337
($63,887 net of taxes) impairment of goodwill related to the IOS and Chemtec reporting units. More
information about the impairment can be found in Part II, Item 8, Note 4.
(2) 2014 includes CXT Concrete Tie warranty charges of $9,374 within the Rail Products and Services segment.
The 2014 results also include the acquisitions of Carr Concrete Corporation (July 7), FWO (October 29), and
Chemtec (December 30).
(3) 2013 includes the acquisition of Ball Winch, LLC, (November 7).
(4) 2012 includes a $22,000 warranty charge and a pre-tax gain of $3,193, from the dispositions of SSD and
Precise divisions, in income from discontinued operations, net of tax.
(5) 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.
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Balance Sheet Data
2015
2014
December 31,
2013
2012
2011
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . .
$566,660
122,828
167,419
282,832
$491,717
135,488
25,752
335,888
$413,193
171,603
25
316,397
$401,537
179,838
27
287,575
$379,894
156,020
51
269,815
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
Current year acquisitions
Rail Products and Services Acquisitions
On November 23, 2015, the Company acquired the 75% balance of the remaining shares of Tew Plus for
$2,130, net of cash acquired. Headquartered in Nottingham, UK, Tew Plus provides telecommunications and
security systems to the railway and commercial markets. Their offerings include full installation services includ-
ing: design, project management, survey, and commissioning along with future maintenance.
On January 13, 2015, the Company acquired Tew for $26,467, net of cash acquired. Headquartered in Not-
tingham, UK, Tew provides application engineering solutions primarily to the rail market and other major
industries.
The Rail Products and Services segment acquisitions in the United Kingdom have enhanced our interna-
tional product and service offerings. We have consolidated our Leicester, UK facility with the acquired business
to establish a center of excellence in Nottingham, UK for engineering automation.
Tubular and Energy Services Acquisition
On March 13, 2015, the Company acquired IOS for $167,404, net of cash acquired and a net working capital
receivable adjustment of $2,363. IOS is a leading independent provider of tubular management services with
operations in every significant oil and gas producing region in the continental United States. See Part 1, Item 8,
Note 4 with respect to an impairment of the goodwill related to this acquisition.
The IOS acquisition provides the Company with a comprehensive footprint that we believe will generate
significant long-term benefit to the Company. Over the course of the current year, the IOS business has been
negatively impacted by a significant decline in oil prices and related drop in active rigs. Management has
implemented and continues to evaluate the necessary cost reductions to weather the current downturn, however,
we continue to believe that the business will generate substantial profits once the global oil and gas market sta-
bilizes and begins to recover.
2015 Developments and 2016 Outlook
During 2015, we:
‰ Generated adjusted EBITDA of $60,606 (a)
‰ Sold our Tucson, AZ concrete tie manufacturing assets for $2,750
‰ Reduced borrowings on our outstanding revolving debt facility by $51,261 from March 31, 2015
‰ Amended our credit agreement from a maximum credit line of $200,000 with a $100,000 accordion fea-
ture to a maximum credit line of $335,000 with a $100,000 accordion feature
‰ Repurchased $1,587 of common shares under the share repurchase authorization
‰ Continued application development work on a new Company-wide enterprise resource planning system
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(a) The following table displays a reconciliation of this non-GAAP measure for the three-year periods ended
December 31, 2015, 2014 and 2013. EBITDA adjusted for the current year goodwill impairment is a finan-
cial metric utilized by management to evaluate the Company’s performance on a comparable basis after
excluding the non-cash impact of the 2015 impairment of goodwill.
2015
2014
2013
Adjusted EBITDA Reconciliation
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense (income), net
Income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(44,445)
4,172
(6,132)
14,429
12,245
$25,656
(18)
13,404
7,882
4,695
Total EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill
$(19,731)
80,337
$51,619
—
$29,290
(174)
14,848
6,890
3,112
$53,966
—
EBITDA adjusted for impairment of goodwill . . . . . . . . . . . . . . . . . .
$ 60,606
$51,619
$53,966
During 2015, market conditions deteriorated as the year progressed. Our largest business segment that
serves transportation infrastructure markets experienced weakness that began in the second quarter. The Rail
Products and Services segment was largely impacted by reduced spending that persisted through the year in the
North American freight rail market. As the overall commodities markets experienced significant weakness, this
translated into declining commodity carloads for rail carriers and pressure on pricing. Rail carloads are being
adversely affected by the continuing shift away from coal to natural gas, declining crude by rail shipments, and
reductions in most other metals, ores, and agriculture products. Bright spots exist in intermodal freight and ship-
ments of passenger vehicles. North American freight rail companies began curtailing spending in the second half
of 2015 which impacted most of our rail divisions. Spending in 2016 by the large freight rail operators in North
America is expected to continue that trend according to their announcements. The European market was also
weak in 2015 as a result of reduced spending by Network Rail, our primary customer in the United Kingdom.
However, the outlook in the U.K. is more favorable for 2016. In the United States, passage of a new six year
transportation bill “Fixing America’s Surface Transportation (FAST) Act” will provide additional funds for U.S.
transit agencies to maintain and grow their systems.
As rail market conditions declined during 2015, and we experienced the loss of sales to UPRR, the manage-
ment team acted to maximize profit margins. In addition to the weakening freight rail market, we lost approx-
imately $26,000 in sales from UPRR versus the prior year (from $41,000 to $15,000). Management took several
actions to cut costs and delay capital to help offset the pressure from declining volume.
The spending that is getting priority among the freight rail operators is directed at safety improvement,
operating efficiency, and other cost reductions. The Company continues to target products and solutions that help
improve safety and operating efficiency as well as introduce services that help operators perform maintenance at
lower costs. We believe that the freight rail operators will continue to harden their network infrastructure to han-
dle the demanding loads and traffic expected in the coming decades. When imports and exports grow with the
global economy, freight rail operators are expected to benefit from the need for intermodal networks to effi-
ciently ship goods.
Funding for transit rail projects in North America continued at a steady pace in 2015. The Company’s rev-
enues from this market is always affected by swings in large projects from one year to the next. Our results in
2015 were relatively strong, and we continue to believe the transit market will grow over the long run, although
year to year sequential growth may not be consistent. Management believes that the global transit market repre-
sents a good opportunity for the Company. By focusing on products that can improve safety and efficiency, as
well as passenger comfort, we are attempting to partner with key end users and OEM’s to serve this market. In
addition, we have launched a broader set of automation solutions for passenger transit systems through our Tew
business acquired in 2015. Innovative solutions from our team of engineers will be focused on helping transit
system operations improve infrastructure and lower cost.
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Within our Construction Products segment, heavy civil construction projects remained steady through 2015.
The Company performed well in our core product areas of (a) bridge decking that provides new decking surfaces
intended largely for bridge rehabilitation projects, (b) sheet piling for railway, highway, bridges, and port proj-
ects, and (c) precast concrete buildings. The Company did not perform well in other piling products targeted at
(or utilized in) heavy civil projects that became very price competitive due to declining steel prices. Throughout
the year, lower scrap input prices and very low factory utilization rates kept steel prices very competitive. As a
result, the Company did not participate in some of the typical projects we serve with pipe pile and H-pile, result-
ing in lower annual volumes and sales.
Factory utilization in the steel industry is expected to remain at depressed levels into 2016. There is capacity
in many world areas to provide supply for projects at very competitive prices. This industry is also being affected
by the significant weakness in oil and gas exploration and development as well as other industrial markets where
the commodity cycle has led to pressure on costs and lower capital spending.
The precast concrete buildings business was a bright spot in 2015. The introduction of new products pro-
vided support for growth, particularly in the Southwest region of the U.S. The market for buildings typically
grows at a low pace, and we expect 2016 to mirror that trend.
The energy markets where our Tubular and Energy Services segment is focused, faced rapidly changing
spending patterns in 2015. This volatility could exist throughout 2016. As the upstream, and to a lesser extent,
midstream operators are adjusting capital spending plans, our orders have been difficult to forecast. Market con-
ditions deteriorated throughout 2015 as end users adjusted to fluctuating oil prices and reacted to a changing
climate around liquidity needs. The majority of our business is tied to investment in midstream pipeline infra-
structure. However, the Company has exposure to investment in drilling, including the need for tubulars in
hydraulic fracturing applications. Energy market weakness caused us to take restructuring actions mainly in the
upstream test and inspection services business. These actions included consolidation of facilities and closures in
markets that did not have sustainable demand.
It is our belief that there are widespread needs across the US for pipeline infrastructure in the long term, and
new demand will be driven by already developed wells, future exporting potential, and transition from coal to
natural gas plants. As a result of reduced forecasted capital spending across the energy industry, U.S. crude oil
production is expected to decline in 2016, setting up the potential for a market rebalance later in 2016. Therefore,
it is not clear as to whether 2016 will be the year that any measureable rebound will take place. We finished 2015
with a solid backlog for the coated pipe business and precision measurement systems, both aimed at pipeline
applications. The upstream test and inspection business exited the year at a recent low point in sales, and has yet
to experience a quarterly sequential increase in sales.
Management intends to stay focused on cost reduction actions and ways to streamline products and plant
efficiency. We will launch a new ERP system in Q2 of 2016 that will start with operations from two Rail Prod-
ucts and Services divisions. Our long term objective is to bring modernization needed to the entire Company and
develop a platform from which we can grow and leverage best in class business processes.
UPRR Product Warranty Claim
In 2015, UPRR filed a Complaint and Demand for Jury Trial in the District Court for Douglas 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, and anticipatorily
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 consequential
damages. The complaint seeks to cancel all duties of UPRR under the contracts, to adjudge the Company 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 dispute is largely based on (1) claims submitted that the Company believes are for ties claimed for
warranty replacement that are not the responsibility of the Company and claims that do not meet the criteria of a
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warranty replacement and (2) UPRR’s assertion, which the Company vigorously disputes, that in future years
UPRR will be entitled to warranty replacement ties for virtually all of the ties manufactured at the Company’s
former Grand Island, NE tie facility. 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 cat-
egory of the rating system. The Company believes UPRR’s claims are without merit and intends to vigorously
defend itself.
On June 16 and 17, 2015, UPRR issued formal notice of the termination of the concrete tie supply agree-
ment as well as the termination of the lease agreement that the Company had with UPRR for the Tucson, AZ
production facility and rejection and revocation of its prior acceptance of certain ties manufactured at the
Company’s Spokane, WA production facility.
On May 29, 2015, the Company and CXT filed an Answer, Affirmative Defenses and Counterclaims in
response to the Complaint, denying liability to UPRR. As a result of UPRR’s subsequent June 16-17, 2015
actions and certain related conduct, the Company on October 5, 2015 amended the pending Answer, Affirmative
Defenses and Counterclaims to add, among other things, assertions that UPRR’s conduct in question was wrong-
ful and unjustified and constituted additional grounds for the affirmative defenses to UPRR’s claims and also for
the Company’s counterclaims. By Scheduling Order dated September 3, 2015, a December 30, 2016 deadline for
the completion of fact discovery has been established and trial may proceed at some future date after March 3,
2017, although no trial date has been set. The parties are currently conducting discovery.
The Company continues to engage in discussions in an effort to resolve this matter, however, we cannot
predict that such discussions will be successful, or that the results of the litigation with UPRR, or any settlement
or judgment amounts relating to this matter will be within the range of our estimated accruals for loss con-
tingencies. 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. See Part II,
Item 8, Note 19, included herein, for information regarding the Company’s commitments and contingent
liabilities which is incorporated by reference into this Item 7.
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Results of Operations
Net Sales:
Twelve Months Ended
December 31,
Percent of Total
Net Sales
Twelve Months
Ended
December 31,
2015
2014
2013
2015
2014
2013
Percent
Increase/(Decrease)
2014 vs.
2015 vs.
2013
2014
Rail Products and Services . . . . . . . $328,982 $374,615 $363,667
191,751
Construction Products . . . . . . . . . .
42,545
Tubular and Energy Services . . . . .
178,847
53,730
176,394
119,147
52.7% 61.7% 60.8% (12.2)% 3.0%
28.2
19.1
(1.4)
121.8
(6.7)
26.3
32.1
7.1
29.5
8.8
Total net sales . . . . . . . . . . . . . . . $624,523 $607,192 $597,963 100.0% 100.0% 100.0%
2.9%
1.5%
Twelve Months Ended
December 31,
Gross Profit
Percentage
Twelve Months
Ended
December 31,
2015
2014
2013
2015
2014
2013
Percent
Increase/(Decrease)
2014 vs.
2015 vs.
2013
2014
Gross Profit:
Rail Products and Services . . . . . . . $ 75,276 $ 77,235 $ 74,986
29,224
Construction Products . . . . . . . . . .
12,278
Tubular and Energy Services . . . . .
37
LIFO income . . . . . . . . . . . . . . . . .
(586)
Other . . . . . . . . . . . . . . . . . . . . . . . .
32,391
11,722
738
(495)
34,169
22,481
2,468
(741)
22.9% 20.6% 20.6% (2.5)% 3.0%
19.4
18.9
0.4
(0.1)
10.8
(4.5)
**
(15.5)
18.1
21.8
0.1
(0.1)
15.2
28.9
—
(0.1)
5.5
91.8
**
49.7
Total gross profit
. . . . . . . . . . . . $133,653 $121,591 $115,939
21.4% 20.0% 19.4%
9.9%
4.9%
Twelve Months Ended
December 31,
Percent of Total
Net Sales
Twelve Months
Ended
December 31,
2015
2014
2013
2015
2014
2013
Percent
Increase/(Decrease)
2014 vs.
2015 vs.
2013
2014
Expenses:
Selling and administrative
expenses . . . . . . . . . . . . . . . . . . . $ 92,648 $ 79,814 $ 71,256
3,112
Amortization expense . . . . . . . . . . .
Impairment of goodwill . . . . . . . . .
Interest expense . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . .
Equity in loss (income) of
12,245
80,337
4,378
(206)
4,695
—
512
(530)
14.8% 13.1% 11.9% 16.1% 12.0%
0.8
2.0
—
— 12.9
485
0.1
0.7
(659) — (0.1)
0.5
160.8
— 100.0
**
0.1
(61.1)
(0.1)
50.9
—
5.6
(19.6)
nonconsolidated investments . . .
Other income . . . . . . . . . . . . . . . . .
413
(5,585)
(1,282)
(678)
(1,316)
(1,077)
0.1
(0.9)
(0.2)
(0.1)
(0.2)
(0.2)
(132.2)
**
(2.6)
(37.0)
Total expenses . . . . . . . . . . . . . . $184,230 $ 82,531 $ 71,801
29.5% 13.6% 12.0% 123.2% 14.9%
(Loss) Income before income
taxes . . . . . . . . . . . . . . . . . . . . . . . . $ (50,577) $ 39,060 $ 44,138
14,848
Income tax (benefit) expense . . . . . . .
(6,132)
13,404
(8.1)% 6.4% 7.4% (229.5)% (11.5)%
(1.0)
(145.7)
(9.7)
2.2
2.5
Net (loss) income . . . . . . . . . . . . . . . . $ (44,445) $ 25,656 $ 29,290
(7.1)% 4.2% 4.9% (273.2)% (12.4)%
** Results of calculation are not considered meaningful for presentation purposes.
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Fiscal 2015 Compared to Fiscal 2014 — Company Analysis
Net sales of $624,523 for the year ended December 31, 2015 increased by $17,331 or 2.9% compared to the
prior year period. Included within the 2015 sales are acquisition-related revenues of $93,411, which generated
20.9% margins. The sales increase was attributable to increases of 121.8% in Tubular and Energy Services,
which were partially offset by decreases of 12.2% and 1.4% in Rail Products and Services and Construction
Products segment sales, respectively.
Gross profit margin for 2015 was 21.4%, or 138 basis points higher than the prior year. The Rail Products
and Services segment recognized warranty-related charges of $1,092 and $9,374 in 2015 and 2014, respectively.
Excluding the impact of the charges1, the current year gross profit margin was consistent with the prior year at
21.6%. Included in the 2015 gross profit was $2,468 related to the LIFO income compared to $738 in the prior
year. The favorable change in LIFO primarily resulted from decreasing prices across our segments, as inventory
levels in the aggregate were down slightly.
Selling and administrative expenses increased by $12,834, or 16.1%, over the prior year period. The cost
increases for 2015 were attributable to costs from acquired businesses. Significant components of the acquired
costs are personnel-related costs and to a much lesser extent insurance and travel costs.
During the third quarter of 2015, the Company recorded a non-cash goodwill impairment charge of $80,337
($63,887 net of taxes) related to the IOS and Chemtec reporting units within the Tubular and Energy Services
segment. The charge was primarily due to the impact of the depressed energy markets on both reporting units as
well as the reduction in the active U.S. land oil rig count which specifically impacted the IOS reporting unit.
These businesses are being adversely affected by reduced capital spending and cost reduction priorities that oil
and gas developers and pipeline companies have implemented. These factors led to a reduction in demand caus-
ing the near term financial projections of the IOS and Chemtec reporting units to deteriorate. The Company per-
formed an interim test for impairment of goodwill, and the long-term forecast did not indicate a timely recovery
to support the carrying values of the goodwill, as further described in Part II, Item 8, Note 4 of this Annual
Report on Form 10-K.
Other income during the current year was favorably impacted by the sale of assets at our Tucson, AZ facility
resulting in a gain of $2,279 ($1,424 net of tax), realized and unrealized foreign exchange gains totaling $1,616,
and other less significant income items.
The Company’s effective income tax rate for 2015 was 12.1%, compared to 34.3% in the prior year period.
The Company’s effective income tax rate for 2015 differed from the federal statutory rate of 35% primarily due
to the discrete impact of the $80,337 goodwill impairment in the third quarter. The impairment related to both tax
deductible and nondeductible goodwill, and resulted in an income tax benefit of $16,450 during the current year
period.
Net loss for the year ended December 31, 2015 was $44,445, or $4.33 per diluted share, which compares to
net income for the 2014 period of $25,656, or $2.48 per diluted share. Excluding the current year impairment
charge of $63,887, net of income tax benefit, net income would have been $19,442 or $1.88 per diluted share.
This non-GAAP net income measure is inclusive of approximately 75,000 shares that were anti-dilutive on a
GAAP basis.
Fiscal 2014 Compared to Fiscal 2013 — Company Analysis
Net sales for the year ended December 31, 2014 increased by $9,229, or 1.5%, which was attributable to a
26.3% and 3.0% improvement in Tubular and Energy Services and Rail Products and Services 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 and Energy Services, Con-
struction and Rail Products and Services segments, respectively.
1
-All results in this Form 10-K that exclude warranty charges and/or goodwill impairment 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.
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The gross profit margin for 2014 was 20.0% compared to 19.4% in 2013. Excluding the 2014 warranty
charges of $9,374, the Company would have generated a gross profit margin of 21.6%.
Selling and administrative costs increased $8,558, or 12.0%, compared to fiscal 2013. Increases in 2014
were due to a variety of business developments including a sizeable increase in employee headcount. Excluding
2014 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 sys-
tem. Lastly, acquisition related cost increases of $2,058 as well as recurring selling and administrative costs
related to businesses acquired in 2014 led to the increase.
Other income for the year ended December 31, 2014 decreased to $678 compared to $1,077 during 2013.
The decrease was principally due to a recovery of escrowed funds during 2013 which related to a 2005 real estate
transaction that had previously been written off as uncollectible.
The Company’s effective income tax rate for 2014 was 34.3%, compared to 33.6% in 2013. The increase in
the Company’s effective tax rate was due to increased nondeductible acquisition-related expenses in 2014 and the
recognition of uncertain state tax positions during fiscal 2013, offset by greater U.S. domestic production activ-
ities deductions and a more favorable global mix of income.
Net income for 2014 was $25,656, or $2.48 per diluted share, which compares to net income for 2013 of
$29,290, or $2.85 per diluted share. Included in our 2014 results was $9,374 in pre-tax charges related to con-
crete ties manufactured at our former Grand Island, NE facility which was closed in January 2011.
Results of Operations — Segment Analysis
Rail Products and Services
Twelve Months Ended
December 31,
2014
2015
2013
(Decrease)
Increase
Increase
Percent
(Decrease)/
Increase
Percent
Increase
2015 vs. 2014 2014 vs. 2013 2015 vs. 2014 2014 vs. 2013
Net Sales . . . . . . . . . . . . . . . $328,982 $374,615 $363,667
$(45,633)
$10,948
(12.2)%
Gross Profit
. . . . . . . . . . . . . $ 75,276 $ 77,235 $ 74,986
$ (1,959)
$ 2,249
(2.5)%
Gross Profit Percentage . . . .
22.9%
20.6%
20.6%
2.3%
—%
11.2%
3.0%
3.0%
—%
Fiscal 2015 Compared to Fiscal 2014
Rail Products and Services segment sales decreased $45,633, or 12.2%, compared to the prior year period.
Included within the 2015 sales were revenues from acquired businesses of $16,715. During fiscal 2015, exclud-
ing an increase within the Transit Products business, all rail divisions experienced reductions in sales over the
prior year period. The sales decline was attributable to the loss of sales to UPRR, lower volumes from Rail Dis-
tribution and various track component businesses, international declines in the Rail Technologies division, and,
to a lesser extent, reductions in the price of steel.
During the year ended December 31, 2015, the Rail Products and Services segment had a reduction in new
orders of 16.5% compared to the prior year period. Contributing to the decline was the loss of business with
UPRR, which represented 55.2% of the reduction in new orders, as well as overall reductions in freight rail
spending.
The Rail Products and Services segment increased its 2015 gross profit margin by 226 basis points com-
pared to fiscal 2014. Gross profit was impacted by warranty-related charges of $1,092, and $9,374 in 2015 and
2014, respectively. Excluding the impact of the charges in 2015 and 2014, the gross profit margin was 23.2%, or
9 basis points higher than the prior year.
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Fiscal 2014 Compared to Fiscal 2013
Rail Products and Services sales increased $10,948, or 3.0%, compared to fiscal 2013. The 2014 perform-
ance 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 2013, the Rail Products and Services 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 and Services segment’s gross profit. With-
out the charge, Rail Products and Services’ gross profit margins would have been 23.1% for the period ended
December 31, 2014. The gross profit margin increase largely relates to favorable sales mix.
Construction Products
Twelve Months Ended
December 31,
2014
2015
2013
(Decrease)
Increase
(Decrease)
Increase
Percent
(Decrease)/
Increase
Percent
(Decrease)/
Increase
2015 vs. 2014 2014 vs. 2013
2015 vs. 2014 2014 vs. 2013
Net Sales . . . . . . . . . . . . . . . . . . $176,394 $178,847 $191,751
$(2,453)
$(12,904)
(1.4)%
(6.7)%
Gross Profit . . . . . . . . . . . . . . . . $ 34,169 $ 32,391 $ 29,224
$ 1,778
$ 3,167
Gross Profit Percentage . . . . .
19.4%
18.1%
15.2%
1.3%
2.9%
5.5%
7.2%
10.8%
19.1%
Fiscal 2015 Compared to Fiscal 2014
Construction Products segment sales decreased $2,453, or 1.4%, compared to the 2014 period. The decline
was primarily related to a 14.7% reduction in sales of piling products, which was partially offset by a 43.0%
increase in sales of precast construction products. The precast construction products business is experiencing
very strong state sales for buildings, which has helped the Construction Products segment offset the increased
competition and steel pricing pressures impacting the Piling Products business.
New orders booked during 2015 were down 19.0% over the prior year period. The decline related primarily
to the Piling Products business where heavy competition has led to a reduction in market share for pipe piling and
H-piling.
The gross profit percentage increased by 126 basis points due to gross margin improvements in piling and
fabricated bridge products divisions. The improvement was primarily driven by the sales mix caused by an
increase in sheet piling sales within the piling products business.
Fiscal 2014 Compared to Fiscal 2013
Construction Products segment sales declined by $12,904, or 6.7%, compared to fiscal 2013. The reduction
was driven by a 20.8% reduction in sales of piling products, 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 2014. 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 dur-
ing 2013. The project was 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 2013.
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Tubular and Energy Services
Twelve Months Ended
December 31,
2014
2015
2013
Increase
(Decrease)
Increase
(Decrease)
Percent
Increase/
(Decrease)
Percent
Increase/
(Decrease)
2015 vs. 2014 2014 vs. 2013 2015 vs. 2014 2014 vs. 2013
Net Sales . . . . . . . . . . . . . . . . . $119,147 $53,730 $42,545
$65,417
$11,185
121.8%
26.3%
Gross Profit
. . . . . . . . . . . . . . . $ 22,481 $11,722 $12,278
$10,759
$ (556)
91.8%
(4.5)%
Gross Profit Percentage . . . .
18.9% 21.8% 28.9%
(2.9)%
(7.1)% (13.3)%
(24.6)%
Fiscal 2015 Compared to Fiscal 2014
Tubular and Energy Services segment sales increased $65,417, or 121.8%, compared to the prior year
period. The increase relates to revenues from acquired businesses of $71,954, which were partially offset by
reductions of $6,537 in coated and threaded product sales. The 294 basis point decline in Tubular and Energy
Services gross margins was largely due to acquired businesses and the related impact on sales mix. In addition to
the new product mix, the divisions serving the upstream energy market are competing in the depressed oil and
gas market which is experiencing less demand leading to a more challenging pricing environment.
The Tubular and Energy Services segment generated an increase in new orders of 160.7% compared to the
prior year period principally due to orders from the acquisitions of Chemtec and IOS.
Fiscal 2014 Compared to Fiscal 2013
Tubular and Energy Services segment sales increased $11,185, or 26.3% compared to fiscal 2013. 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 2013, the Tubular and Energy Services segment generated an increase in new orders of 31.2%.
New orders from the 2013 acquisition of Ball Winch represented 23.7% of 2014 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.
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Liquidity and Capital Resources
Total debt at December 31, 2015 and 2014 was $168,754 and $26,428, respectively, and was comprised of
borrowings from the revolving credit facility to fund acquisitions as well as assets funded through financing
agreements.
Our need for liquidity relates primarily to working capital requirements for operating activities, debt service
payments, capital expenditures, JV capital obligations, share repurchases, and dividends.
The change in cash and cash equivalents for the three-year periods ended December 31 are as follows:
2015
2014
2013
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . .
Net cash used by investing activities . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided (used) by financing activities . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and cash equivalents . . .
$ 56,172
(205,575)
134,289
(3,598)
$ 66,739
(97,751)
22,055
(3,642)
$ 14,155
(47,174)
(1,716)
(2,106)
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . .
(18,712)
(12,599)
(36,841)
Cash Flow from Operating Activities
During the current 2015 period, cash flows from operating activities provided $56,172, a decrease of
$10,567, compared to the 2014 period. For the year ended December 31, 2015, income, adjustments to income
from operating activities, and dividends from the LB Pipe joint venture provided $47,061 compared to $37,359 in
the 2014 period. Working capital and other assets and liabilities provided $9,111 in the current period compared
to providing $29,380 in the prior year period. The reduction in cash flows from operations was largely impacted
by working capital movement.
During 2014, cash provided by operating activities was $66,739 compared to $14,155 in 2013. During 2014,
income, adjustments to income from operating activities, and dividends from the joint venture provided $37,359
compared to providing $43,858 in 2013. Working capital and other assets and liabilities provided $29,380 in
2014 compared to working capital and other assets and liabilities use of $29,703 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, 2015 was 56 days compared to 50
days at December 31, 2014. We believe our receivable portfolio continues to be of good quality.
Cash Flow from Investing Activities
Investing activities during the year ended December 31, 2015 related primarily to the acquisitions of Tew
Plus, Tew, and IOS. The total purchase price, net of cash acquired and working capital adjustments, was
$196,001. Other investing activities included capital expenditures of $14,913 during 2015. Current year
expenditures related primarily to the Birmingham, AL coated products facility upgrades, application develop-
ment of a new enterprise resource planning system, and general plant and yard improvements across each seg-
ment. We anticipate 2016 capital expenditures to be in the $6,000—$8,000 range. Other investing activities
related to cash proceeds of $5,339 from the sale of assets. The sale of the Tucson, AZ concrete tie facility con-
tributed $2,750 of the total proceeds.
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.
Investing activities during 2013 related to the $37,500 acquisition of Ball Winch as well as 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.
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Cash Flow from Financing Activities
During the year ended December 31, 2015, the Company had an increase in outstanding debt of $142,326
primarily related to drawings against the revolving credit facility to fund domestic acquisition activity. During
2015, the Company purchased 80,512 shares of common stock for $1,587 under our existing share repurchase
authorization. Additionally, the Company withheld 25,340 shares for approximately $1,114 during 2015. These
shares were withheld from employees to pay their withholding taxes in connection with the exercise and/or vest-
ing of options and restricted stock awards. Cash outflows related to dividends during 2015 were $1,656.
The primary financing activity during 2014 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 author-
ization 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.
Financial Condition
The Company generated $56,172 from cash flows from operations during 2015 that was utilized to fund
capital expenditures and make payments against our revolving credit facility. At December 31, 2015, we had
$33,312 in cash and cash equivalents and credit facilities with $171,668 of availability. We believe this liquidity
will provide the flexibility to operate the business in a prudent manner and weather a continued downturn in our
markets.
Approximately $29,700 of our cash and cash equivalents was 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. During 2015, the Company utilized non-domestic funds totaling $28,597
for the acquisitions of Tew and Tew Plus.
Borrowings under the March 13, 2015 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 consolidated 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 1.50% and 1.00% to 2.50%, respectively.
To reduce the impact of interest rate changes on outstanding variable-rate debt, the Company entered into
forward starting LIBOR-based interest rate swaps with notional values totaling $50,000. The swaps will become
effective in February 2017 at which point it will effectively convert a portion of the debt from variable to fixed-
rate borrowings during the term of the swap contract.
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.
As of December 31, 2015, the Company was in compliance with the Amended Credit Agreement’s cove-
nants. The agreement matures on March 13, 2020.
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 over the life of the facility. The $75,000 aggregate limitation
also permits certain loans, investments, and acquisitions.
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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.
Tabular Disclosure of Contractual Obligations
A summary of the Company’s required payments under financial instruments and other commitments at
December 31, 2015 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
$165,000
15,477
3,754
271
20,128
$ — $ — $165,000
4,268
7,616
740
1,679
—
—
3,109
6,109
3,593
1,335
271
4,310
$ —
—
—
—
6,600
financial statements . . . . . . . . . . . . . . .
40,698
40,698
—
—
—
Total contractual cash obligations . . . . . .
$245,328
$50,207
$15,404
$173,117
$6,600
Other Financial Commitments
Standby letters of credit
. . . . . . . . . . . . . .
$
526
$
526
$ — $
— $ —
(1) Repayments of outstanding loan balances are disclosed in Note 10 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.
Backlog
Although backlog is not necessarily indicative of future operating results, the following table provides the
backlog by business segment:
Rail Products and Services . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tubular and Energy Services . . . . . . . . . . . . . . . . . . . . . . .
$ 85,199
45,371
34,137
December 31,
2015
Backlog
December 31,
2014
$104,821
65,843
13,686
December 31,
2013
$121,853
53,483
7,775
Total Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$164,707
$184,350
$183,111
Backlog from acquired businesses represents approximately 8% of the Company’s total unfilled customer
orders at December 31, 2015. While a considerable portion of our business is backlog driven, certain businesses,
including the IOS acquisition in March 2015 and the Rail Technologies business, are not driven by backlog and
therefore have insignificant levels throughout the year.
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Critical Accounting Policies and Estimates
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 appropriate in the Compa-
ny’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 con-
tingent 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 assur-
ance that actual results will not differ from those estimates. For a summary of our significant accounting policies,
including those discussed below, see Part II, Item 8, Note 1 to the Consolidated Financial Statements.
Revenue Recognition — The Company’s revenues are comprised of product and service sales as well as
products and services provided under long-term contracts. For product and service sales, the Company recog-
nizes revenue when the following criteria have been satisfied; persuasive evidence of a sales arrangement exists,
product delivery and transfer of title to the customer has occurred or services have been rendered, the price is
fixed or determinable, and collectability is reasonably assured. Generally, product title 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 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 esti-
mated 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.
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
the transaction, historical experience,
including the specifics of
revenue, we analyze various factors,
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.
Business Combinations, 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. The purchase
price allocation process requires management to make significant estimates and assumptions, especially at the
acquisition date with respect to intangible assets. Although we believe the assumptions and estimates we have
made are reasonable, they are based in part on historical experience and information obtained from the manage-
ment of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of
the intangible assets we have acquired or may acquire in the future include but are not limited to: future expected
cash flows from customer relationships, the acquired company’s trade name and trademarks as well as assump-
tions about the period of time the acquired trade name and trademarks will continue to be used in the combined
company’s product portfolio, future expected cash flows from developed technology and discount rates.
Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assump-
tions, estimates, or actual results.
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 operations. 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
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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 operations. The Company uses a combination
of a discounted cash flow model (“DCF model”) and a market approach 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. In times of adverse economic conditions in the global economy, the
Company’s long-term cash flow projections are subject to a greater degree of uncertainty than usual. If we had
established different reporting units or utilized different valuation methodologies or assumptions, the impairment
test results could differ, and we could be required to record impairment charges.
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.
The Company recorded impairment charges of $80,337 ($63,887 net of taxes) during 2015 related to the
acquisitions of IOS in March 2015 and Chemtec in December 2014. There were no goodwill impairments
recorded during December 31, 2014 and 2013. Additional information concerning the impairments is set forth in
Part II, Item 8, Note 4 to the financial statements included herein, which is incorporated by reference into this
Item 7.
Intangible Assets, Long-Lived Assets, and Investments — 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. Once a triggering event has occurred, the impairment test employed is based on whether the intent is
to hold the asset for continued use or to hold the asset for sale. The applicable guidance for assets held for uses
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. For assets held for sale, to the extent the carrying value is greater than the asset’s fair value less costs
to sell, an impairment loss is recognized for the difference. The accounting estimate related to asset impairment
is highly susceptible to change from period to period 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 Consolidated Statements of Operations.
The fair value of the Company’s equity investments is dependent on the performance of the investee compa-
nies as well as volatility inherent in the external markets for these investments. In assessing potential impairment
of these investments, we consider these factors as well as the forecasted financial performance of the investees. If
these forecasts are not met and indicate an other-than-temporary decline in value, impairment charges may be
required.
There were no material impairments of intangible assets, long-lived assets, or investments for the years
ended December 31, 2015, 2014, or 2013.
Product Warranty — The Company maintains a current warranty for the repair or replacement of
defective products. For certain manufactured products, an accrual is made on a monthly basis as a percentage of
cost of sales. For long-term construction projects, a product warranty accrual is established when the claim is
known and quantifiable. The product warranty accrual is periodically adjusted based on the identification or reso-
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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, 2015 and 2014, the product warranty reserve was $8,755 and $11,500, respectively. Dur-
ing the years ended December 31, 2015, 2014, and 2013, the Company recorded product warranty expense of
$972, $10,957, and $1,695, respectively. For additional information regarding the Company’s product warranty,
refer to Part II, Item 8, Note 19 to the Consolidated Financial Statements, “Commitments and Contingent
Liabilities” included herein.
Contingencies and Litigation — 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 con-
tingent 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 an estimate
of the probable costs for the resolution of these matters. These estimates 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 19 to the Consolidated Financial Statements, “Commitments and Contingent
Liabilities,” for additional information regarding the Company’s commitments and contingent liabilities.
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. In 2015, the Company adjusted its mortality assumption to the Society of
Actuaries RP-2015 mortality tables.
Two critical assumptions impacting the Company’s pension obligation 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 establishes 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 domestic pen-
sion was 5.50% and the expected long-term rate of return for 2016 will be 5.20%. The weighted average expected
long-term rate of return determined by the Company for its 2015 U.K. pension was 5.00% and the expected long-term
rate of return for 2016 will be 5.21%. Pension expense increases as the expected long-term rate of return decreases.
The long-term rates of return are reflective of the investment strategies of the underlying pension plan.
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 to utilize rates of return on high quality, fixed
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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 4.30% and 4.00%,
respectively, as of December 31, 2015 and 2014 for its domestic pension plans. The weighted average assumed
discount rate used by the Company was 4.00% and 3.60%, as of December 31, 2015 and 2014 for its U.K. pen-
sion plan. For additional information regarding the Company’s pension obligations, refer to Part II, Item 8, Note
16 to the Consolidated Financial Statements, “Retirement Plans,” included herein.
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
concerning the future operations of the Company. At this time, we do not intend to repatriate any foreign earn-
ings 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 14, “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.
New Accounting Pronouncements — See Part II, Item 8, Note 1 to the Consolidated Financial Statements
for information regarding new accounting pronouncements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(Dollars in thousands)
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. At contract inception, the Company designates its derivative instru-
ments as hedges. The Company recognizes all derivative instruments on the balance sheet at fair value. Fluctua-
tions in the fair values of derivative instruments designated as cash flow hedges are recorded in accumulated
other comprehensive income and reclassified into earnings within other income as the underlying hedged items
affect earnings. To the extent that a change in a derivative does not perfectly offset the change in value of the
interest rate being hedged, the ineffective portion is recognized in earnings immediately.
During the year ended December 31, 2015, the Company entered into three forward starting LIBOR-based
interest rate swap agreements with notional values totaling $50,000. At December 31, 2015, the Company
recorded a long-term liability of $196 related to the swap agreements. The Company did not have any interest
rate derivatives at December 31, 2014 or 2013.
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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 foreign currency hedging transactions during the three-year period ended
December 31, 2015.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of L.B. Foster Company and Subsidiaries
We have audited the accompanying consolidated balance sheets of L.B. Foster Company and Subsidiaries as
of December 31, 2015 and 2014, 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, 2015. Our
audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial state-
ments and schedule are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assess-
ing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the con-
solidated financial position of L.B. Foster Company and Subsidiaries at December 31, 2015 and 2014, and the
consolidated results of their operations and their cash flows for each of the three years in the period ended
December 31, 2015, 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, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Com-
mittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
March 1, 2016, expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 1, 2016
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L.B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
(In thousands, except share data)
2015
2014
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant, and equipment — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles — net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity:
$ 33,312
78,487
96,396
1,131
5,148
214,474
126,745
81,752
134,927
226
5,321
3,215
$566,660
$ 55,804
6,934
10,255
8,755
1,335
8,563
91,646
167,419
8,926
15,837
$ 52,024
90,178
95,089
2,790
4,101
244,182
74,802
82,949
82,134
93
5,824
1,733
$491,717
$ 67,166
8,034
13,419
11,500
676
7,899
108,694
25,752
7,618
13,765
Common stock, par value $.01, authorized 20,000,000 shares; shares issued at December 31, 2015
and December 31, 2014, 11,115,779; shares outstanding at December 31, 2015 and
December 31, 2014, 10,221,006 and 10,242,405, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock — at cost, common stock, shares at December 31, 2015 and December 31, 2014,
111
46,681
276,571
111
48,115
322,672
894,773 and 873,374, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22,591)
(17,940)
282,832
$566,660
(23,118)
(11,892)
335,888
$491,717
The accompanying notes are an integral part of these Consolidated Financial Statements.
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L.B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THE THREE YEARS ENDED DECEMBER 31,
(In thousands, except share data)
2015
2014
2013
Sales of goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$537,214
87,309
$561,899
45,293
$559,846
38,117
Total sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
624,523
420,169
70,701
607,192
449,964
35,637
597,963
458,043
23,981
Total cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
490,870
485,601
482,024
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
133,653
121,591
115,939
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in loss (income) of nonconsolidated investments . . . . . . . . . . . . . . . .
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92,648
12,245
80,337
4,378
(206)
413
(5,585)
184,230
(50,577)
(6,132)
79,814
4,695
—
512
(530)
(1,282)
(678)
82,531
39,060
13,404
71,256
3,112
—
485
(659)
(1,316)
(1,077)
71,801
44,138
14,848
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (44,445)
$ 25,656
$ 29,290
Basic (loss) earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted (loss) earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
(4.33)
(4.33)
0.16
$
$
$
2.51
2.48
0.13
$
$
$
2.88
2.85
0.12
The accompanying notes are an integral part of these Consolidated Financial Statements.
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L.B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
THE THREE YEARS ENDED DECEMBER 31,
(In thousands)
2015
2014
2013
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(44,445)
$25,656
$29,290
Other comprehensive loss, net of tax:
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on cash flow hedges, net of tax benefit of $76 . . . . . . . . . . . . .
Pension and post-retirement benefit plans, net of tax expense (benefit): $208,
(6,947)
(121)
(4,863)
—
(3,475)
—
($1,383), and $1,199 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
631
(2,631)
2,258
Reclassification of pension liability adjustments to earnings, net of tax
expense of $160, $63 and $134 * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
389
185
Other comprehensive loss, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,048)
(7,309)
303
(914)
Comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(50,493)
$18,347
$28,376
* 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.
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L.B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE THREE YEARS ENDED DECEMBER 31,
(In thousands)
2015
2014
2013
$ (44,445)
$25,656
$ 29,290
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net (loss) income to cash provided by operating
activities:
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity loss (income) and remeasurement gain . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) loss on sales and disposals of property, plant, and equipment . . . . . . . . . . .
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 operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(14,582)
14,429
12,245
80,337
(167)
(2,064)
1,471
(253)
31,223
4,331
3,248
1,134
(909)
90
(17,204)
(2,279)
(5,136)
(4,189)
(1,108)
56,172
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 investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,339
(14,913)
(196,001)
—
(205,575)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from 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 financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(161,068)
301,063
68
(1,670)
(2,701)
(1,656)
253
134,289
(3,598)
(18,712)
52,024
$ 33,312
(2,914)
7,882
4,695
—
(1,282)
21
3,007
(336)
15,311
(9,872)
(1,004)
2,530
(386)
630
16,285
591
2,542
2,732
651
66,739
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
6,890
3,112
—
(1,316)
127
2,156
(203)
(36,782)
29,919
(310)
(6,882)
264
558
(5,206)
(1,805)
(608)
(7,561)
(732)
14,155
—
(9,674)
(37,500)
—
(47,174)
(6)
—
35
—
(708)
(1,240)
203
(1,716)
(2,106)
(36,841)
101,464
$ 64,623
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital expenditures funded through financing agreements . . . . . . . . . . . . . . . . . .
$
$
$
3,674
7,835
$
362
$
330
$ 14,617
$ 18,697
288
$ 1,981
$
—
The accompanying notes are an integral part of these Consolidated Financial Statements.
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L.B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 2015
Balance, January 1, 2013 . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive 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 . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of tax:
Pension liability adjustment
Foreign currency translation
. . . . . . .
adjustment . . . . . . . . . . . . . . . . . . .
Unrealized derivative loss on cash flow
hedges . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of 80,512 common shares for
treasury . . . . . . . . . . . . . . . . . . . . . . .
Issuance of 59,113 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, 2015 . . . . . . . . .
Common
Stock
Paid-in
Capital
$ 111
$ 46,290
Treasury
Stock
Retained
Earnings
(In thousands, except share data)
$ 270,311
29,290
$ (25,468)
Accumulated
Other
Comprehensive
(Loss) Income
$ (3,669)
Total
$ 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
(44,445)
(23,118)
(11,892)
(673)
2,359
(1,240)
316,397
25,656
(2,446)
(4,863)
(854)
3,343
(1,345)
335,888
(44,445)
1,020
1,020
(6,947)
(6,947)
(121)
(1,587)
2,114
(3,158)
1,724
$ 111
$ 46,681
(1,656)
$ 276,571
$ (22,591)
$ (17,940)
(121)
(1,587)
(1,044)
1,724
(1,656)
$ 282,832
The accompanying notes are an integral part of these Consolidated Financial Statements.
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L.B. FOSTER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data unless otherwise noted)
Note 1.
Summary of Significant Accounting Policies
Basis of financial statement presentation
The consolidated financial statements include the accounts of the Company and its wholly owned 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 principal, and maintain liquidity while seeking the highest yield available.
Cash and cash equivalents held in non-domestic accounts was approximately $29,700 and $49,233 at
December 31, 2015 and 2014, respectively. Included in non-domestic cash equivalents are investments in bank
term deposits of approximately $1,939 and $25 at December 31, 2015 and 2014, respectively. The carrying
amounts approximated fair value because of the short maturity of the instruments.
Inventories
Certain inventories are valued at the lower of the last-in, first-out (“LIFO”) cost or market. Approximately
43% in 2015 and 44% in 2014, 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
Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of 5 to 40
years for buildings and 2 to 10 years for machinery and equipment. Leasehold improvements are amortized over
3 to 13 years, which represent the lives of the respective leases or the lives of the improvements, whichever is
shorter. Depreciation expense is recorded within “cost of sales” and “selling and administrative” expenses based
upon the particular asset’s use. The Company reviews a long-lived asset for impairment whenever events or
changes in circumstances indicate that the carrying amount of the asset may not be recoverable. There were no
material asset impairments recorded for the years ended December 31, 2015, 2014, or 2013.
Maintenance, repairs, and minor renewals are charged to operations as incurred. Major renewals and better-
ments that 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.
Allowance for doubtful accounts
The allowance for doubtful accounts is recorded to reflect the ultimate realization of the Company’s
accounts receivable and includes assessment of the probability of collection and the credit-worthiness of certain
customers. Reserves for uncollectible accounts are recorded as part of selling and administrative expenses on the
Consolidated Statements of Operations. The Company records a monthly provision for accounts receivable that
are considered to be uncollectible. In order to calculate the appropriate monthly provision, the Company reviews
its accounts receivable aging and calculates an allowance through application of historic reserve factors to over-
due receivables. This calculation is supplemented by specific account reviews performed by the Company’s
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credit department. As necessary, the application of the Company’s allowance rates to specific customers is
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 operations. The Company performs its
annual impairment tests as of October 1st.
During 2015, the Company identified certain triggering events that indicated an interim impairment test was
required. As a result of the interim assessment as of September 1, 2015, the Company recorded impairment
charges of $80,337 ($63,887 net of taxes) during 2015 related to the acquisitions of IOS and Chemtec. The
measurement of goodwill impairment is a Level 3 fair value measurement, as the primary assumptions, including
estimates of future revenue growth, gross margin, and EBITDA margin, are not market observable and require
management to make judgements regarding future outcomes. Additional information concerning the impairments
is set forth in Note 4 to the financial statements. No additional charges were recorded as a result of the 2015
annual impairment test. No goodwill impairment was recognized during 2014 or 2013.
The Company has no indefinite-lived intangible assets. The Company reviews a long-lived intangible asset
for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may
not be recoverable. All intangible assets are amortized over their useful lives ranging from 5 to 25 years, with a
total weighted average amortization period of approximately 14 years, at December 31, 2015. See Note 4 for
additional information including regarding the Company’s 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 19, “Commitments and Contingent
Liabilities,” for additional
information regarding the Company’s outstanding environmental and litigation
reserves.
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.
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Revenue recognition
The Company’s revenues are comprised of product and service sales as well as products and services pro-
vided under long-term contracts. For product and service sales, the Company recognizes revenue when the
following criteria have been satisfied; persuasive evidence of a sales arrangement exists, product delivery and
transfer of title to the customer has occurred or services have been rendered, the price is fixed or determinable,
and collectability is reasonably assured. Generally, product title 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 and services under long-term contracts are 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 and services, the percentage of
completion is based upon actual labor costs as a percentage of estimated total labor costs. At the time a loss con-
tract becomes known, the entire amount of the estimated loss is recognized in the Consolidated Statement of
Operations.
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
the transaction, historical experience,
including the specifics of
revenue, we analyze various factors,
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.
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 with respect to which the Company has significantly fulfilled its
obligations, but due to the Company’s continuing involvement with the project, 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,
interest rate swap agreements, and debt.
The carrying amounts of the Company’s financial instruments at December 31, 2015 and 2014 approximate
fair value. See Note 18, “Fair Value Measurements,” for additional information.
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. See Note 15, “Stare-based
Compensation,” for additional information.
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 based upon
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historical experience. For long-lived construction products, a warranty is established when the claim is known
and quantifiable. The product warranty accrual is periodically adjusted based on the identification or resolution
of known individual product warranty claims or due to changes in the Company’s historical warranty experience.
At December 31, 2015 and 2014, the product warranty reserve was $8,755 and $11,500, respectively. See Note
19, “Commitments and Contingencies” 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codifica-
tion (“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, 2015, 2014, and 2013 were foreign currency transaction gains of approximately $1,616, $422, and
$433, respectively.
Research and development
The Company expenses research and development costs as costs are incurred. For the years ended
December 31, 2015, 2014, and 2013, research and development expenses were $3,937, $3,096, and $3,154,
respectively, and were principally related to the Company’s friction management and railroad monitoring system
products.
Use of estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
(“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from those estimates.
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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. These reclassifications include
separately presenting sales of services and cost of services sold to reflect the Company’s increased service offer-
ings attributable to the recent acquisitions disclosed in Note 3 and a change in GAAP, as further described below.
Recently issued accounting guidance
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 customers 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 revenue 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, 2017,
including interim periods within that reporting period. The Company is currently evaluating its implementation
approach and assessing the impact of ASU 2014-09 on our financial position and results of operations.
In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of
Inventory.” The pronouncement was issued to simplify the measurement of inventory and changes the measure-
ment from lower of cost or market to lower of cost and net realizable value. This pronouncement is effective for
reporting periods beginning after December 15, 2016. The adoption of ASU 2015-11 is not expected to have a
significant impact on our financial position or results of operations.
Recently adopted accounting guidance
In April 2015, the FASB issued ASU No. 2015-03, “Interest-Imputation of Interest (Topic 835-30): Sim-
plifying the Presentation of Debt Issuance Costs”, which requires that debt issuance costs related to a recognized
debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt
liability, consistent with debt discounts. Debt issuance costs related to line of credit arrangements may continue
to be reflected as an asset. The recognition and measurement guidance of debt issuance costs are not affected by
the amendments in this update. The standard is effective for financial statements issued for annual periods begin-
ning after December 15, 2015, and interim periods within those annual periods. The Company early adopted the
new guidance in the fourth quarter of 2015 and there was no impact to the consolidated financial statements from
the adoption of this guidance.
In September 2015, the FASB issued ASU No. 2015-16 “Business Combinations (Topic 805): Simplifying
the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”). ASU 2015-16 requires that an acquirer
recognize adjustments to provisional amounts that are identified during the measurement period in the reporting
period in which the adjustment amounts are determined. Prior to the issuance of the standard, entities were
required to retrospectively apply adjustments made to provisional amounts recognized in a business combination.
ASU 2015-16 is effective for fiscal years, and interim periods within those years, beginning after December 15,
2015, and early adoption is permitted. Accordingly, the standard is effective for the Company on January 1,
2016. The Company early adopted the new guidance in the fourth quarter of 2015 and there was no impact to the
consolidated financial statements from the adoption of this guidance.
In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classi-
fication of Deferred Taxes” (“ASU 2015-17”). This new guidance requires businesses to classify deferred tax
liabilities and assets on their balance sheets as noncurrent. Under existing accounting, a business must separate
deferred income tax liabilities and assets into current and noncurrent. ASU 2015-17 was issued as a way to sim-
plify the way businesses classify deferred tax liabilities and assets on their balance sheets. Public companies must
apply ASU 2015-17 to fiscal years beginning after December 15, 2016. Companies must follow the requirements
for interim periods within those fiscal years, but early adoption at the beginning of an interim or annual period is
allowed for all entities. The Company adopted this guidance during the fourth quarter of 2015 on a retrospective
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basis, which resulted in the reclassification of $3,497 current deferred tax assets and $77 current deferred tax
liabilities to non-current as of December 31, 2014.
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 that 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 segment profit contribution to the Company’s consolidated results.
As a result of recently completed acquisitions, during the first quarter of 2015, the Company renamed the
Rail Products and Tubular Products business segments to be Rail Products and Services and Tubular and Energy
Services, respectively. The name changes principally reflect the additional businesses conducted by those seg-
ments as a result of acquisitions that have enhanced our product and service offerings within the rail and energy
markets. Excluding the addition of current year acquisitions, there were no changes to the divisions that have
been aggregated within the segments nor were there changes to the historical reportable segment results.
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 and Services segment provides a full line of new and used rail, trackwork,
and accessories to railroads, mines, and other customers in the rail industry. The Rail segment also designs and
produces insulated rail joints, power rail, track fasteners, concrete railroad ties, coverboards, and special accesso-
ries for mass transit and other rail systems. In addition, the Rail Products and Services segment engineers, manu-
factures, 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
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 and Energy Services segment provides pipe coatings for natural gas pipelines and util-
ities, upstream test and inspection services, precision measurement systems for the oil and gas market, and produces
threaded pipe products for the oil and gas markets as well as industrial water well and irrigation markets.
The following table illustrates net sales, profit (loss), assets, depreciation/amortization, and expenditures for
long-lived assets of the Company by segment for the years ended or at December 31, 2015, 2014, and 2013.
Segment profit is the earnings from 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 excluding recently acquired businesses.
The internal cost of capital charges are eliminated during the consolidation 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.
Rail Products and Services . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . .
Tubular and Energy Services . . . . . . . . .
2015
Net Sales
$328,982
176,394
119,147
Segment
Profit (Loss)
Segment
Assets
Depreciation/
Amortization
$ 27,037
12,958
(81,344)*
$241,222
86,335
216,715
$ 8,098
2,720
14,857
Total
. . . . . . . . . . . . . . . . . . . . . . . . . .
$624,523
$(41,349)
$544,272
$25,675
Expenditures for
Long-Lived
Assets
$4,273
1,260
4,303
$9,836
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Rail Products and Services . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . .
Tubular and Energy Services . . . . . . . . . . .
Net Sales
$374,615
178,847
53,730
Segment
Profit
$30,093
13,106
5,350
$239,951
102,978
130,289
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
$607,192
$48,549
$473,218
$ 6,153
2,232
3,208
$11,593
$ 5,115
3,343
6,988
$15,446
2014
Segment
Assets
Depreciation/
Amortization
Expenditures for
Long-Lived
Assets
Rail Products and Services . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . .
Tubular and Energy Services . . . . . . . . . . .
Net Sales
$363,667
191,751
42,545
Segment
Profit
$28,692
10,206
9,208
$252,049
77,900
51,497
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
$597,963
$48,106
$381,446
*
- Segment loss includes impairment of goodwill as further described in Note 4.
2013
Segment
Assets
Depreciation/
Amortization
Expenditures for
Long-Lived
Assets
$ 6,505
1,758
1,054
$ 9,317
$ 3,383
1,805
2,460
$ 7,648
During 2015, 2014, and 2013, no single customer accounted for more than 10% of the Company’s con-
solidated net sales. Sales between segments are immaterial.
Reconciliations of reportable segment net sales, profits, assets, depreciation/amortization, and expenditures
for long-lived assets to the Company’s consolidated totals are illustrated as follows for the years ended and as of
December 31:
2015
2014
2013
(Loss) income from Operations:
Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment of inventory to LIFO . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated equity in (loss) income of nonconsolidated
investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated corporate amounts . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (41,349)
2,468
206
$ 48,549
738
530
$ 48,106
37
659
(413)
(11,489)
1,282
(12,039)
1,316
(5,980)
(Loss) income from operations, before income taxes . . . . . . . . . .
$ (50,577)
$ 39,060
$ 44,138
Assets:
Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unallocated corporate assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIFO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$544,272
28,209
(5,821)
$473,218
26,788
(8,289)
$381,446
40,774
(9,027)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$566,660
$491,717
$413,193
Depreciation/Amortization:
Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 25,675
999
$ 11,593
984
$
9,317
685
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 26,674
$ 12,577
$ 10,002
Expenditures for Long-Lived Assets:
Total for reportable segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenditures funded through financing agreements . . . . . . . . . . .
Other expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
9,836
288
5,077
$ 15,446
1,981
1,610
$
7,648
—
2,026
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 15,201
$ 19,037
$
9,674
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The following table summarizes the Company’s sales by major geographic region in which the Company
has operations for the years ended December 31:
2015
2014
2013
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$522,404
40,545
26,817
34,757
$498,025
39,375
22,625
47,167
$495,710
37,290
16,548
48,415
$624,523
$607,192
$597,963
The following table summarizes the Company’s long-lived assets by geographic region at December 31:
2015
2014
2013
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$118,053
6,186
2,506
$66,905
7,440
457
$40,717
8,833
559
$126,745
$74,802
$50,109
The following table summarizes the Company’s sales by major product line:
2015
2014
2013
Rail distribution products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rail Technologies products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Piling products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Concrete products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Test and inspection services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CXT concrete tie products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allegheny Rail Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$126,277
98,237
94,853
52,044
35,906
35,740
35,155
146,311
$139,529
109,053
111,182
36,396
—
52,562
45,008
113,462
$144,911
88,670
140,302
32,969
—
44,108
36,666
110,337
$624,523
$607,192
$597,963
Note 3.
Acquisitions
TEW Plus, LTD
On November 23, 2015, the Company acquired the 75% balance of the remaining shares of TEW Plus, LTD
(“Tew Plus”) for $2,130, net of cash acquired. Headquartered in Nottingham, UK, Tew Plus provides tele-
communications and security systems to the railway and commercial markets. Their offerings include full
installation services including: design, project management, survey, and commissioning along with future main-
tenance. The results of Tew Plus’ operations are included within the Rail Products and Services segment from the
date of acquisition.
Inspection Oilfield Services
On March 13, 2015, the Company acquired IOS Holdings, Inc. (“IOS”) for $167,404, net of cash acquired
and a net working capital receivable adjustment of $2,363. The purchase agreement includes an earn-out provi-
sion for the seller to generate an additional $60,000 of proceeds upon achieving certain levels of EBITDA during
the three year period beginning on January 1, 2015. The Company has not accrued an estimated earn-out obliga-
tion based upon a probability weighted valuation model of the projected EBITDA results, which indicates that
the minimum target will not be achieved. Approximately $7,600 of the purchase price relates to amounts held in
escrow to satisfy potential indemnity claims made under the purchase agreement. Headquartered in Houston, TX,
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IOS is a leading independent provider of tubular management services with operations in every significant oil
and gas producing region in the continental United States. The acquisition is included within our Tubular and
Energy Services segment from the date of acquisition. See Note 4 with respect to an impairment of the goodwill
related to this acquisition.
TEW Holdings, LTD
On January 13, 2015, the Company acquired TEW Holdings, LTD (“Tew”) for $26,467, net of cash
acquired, working capital, and net debt adjustments totaling $4,200. The purchase price includes approximately
$600 which is held in escrow to satisfy potential indemnity claims made under the purchase agreement. Head-
quartered in Nottingham, UK, Tew provides application engineering solutions primarily to the rail market and
other major industries. The results of Tew’s operations are included within the Rail Products and Services seg-
ment from the date of acquisition.
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 $1,867 related to working capital adjustments. The cash payment
included $5,000 which is held in escrow to satisfy potential indemnity claims made under the purchase agree-
ment. Headquartered in Willis, TX, Chemtec is a domestic manufacturer and turnkey provider of blending,
injection, and metering equipment for the oil and gas industry. The acquired business is included within our
Tubular and Energy Services segment. See Note 4 with respect to an impairment of the goodwill related to this
acquisition.
FWO
On October 29, 2014, the Company acquired FWO, a business of Balfour Beatty Rail GmbH for $1,103,
inclusive of a $161 post-closing working capital receivable adjustment. Headquartered in Germany, FWO is
engaged in the electronic track lubrication and maintenance business and has been included in our Rail Products
and Services segment.
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 specialty concrete products
located in Waverly, WV. Included within the purchase price is $1,000 which is held in escrow to satisfy potential
indemnity claims made under the purchase agreement. The results of Carr’s operations are included in our Con-
struction 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
represents the value paid for each acquisition’s enhancement to the Company’s product and service offerings and
capabilities, as well as a premium payment related to the ability to control the acquired assets. The Company has
concluded that intangible assets and goodwill values resulting from the Chemtec, FWO, and Carr transactions
will be deductible for tax purposes.
The Company incurred $760 and $2,240 of acquisition-related costs which are included in the results of
operations within selling and administrative costs for the years ended December 31, 2015 and 2014.
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The following unaudited pro forma consolidated income statement presents the Company’s results as if the
acquisitions of IOS, Tew, and Chemtec had occurred on January 1, 2014. The 2015 pro forma results include the
impact of the current year impairment of goodwill as further described in Note 4.
Twelve months ended
December, 31
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted (loss) earnings per share
2015
2014
$640,596
138,123
(44,399)
$806,384
183,163
41,745
As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
(4.33)
(4.32)
$
$
2.48
4.04
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at
the date of the acquisition:
Allocation of Purchase Price
Current assets . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . .
Property, plant, and equipment
. . .
. . . . . . . . . . . . . . . . . . . .
Goodwill
Other intangibles . . . . . . . . . . . . . .
Liabilities assumed . . . . . . . . . . . .
November 23,
2015 - Tew Plus
March 13,
2015 - IOS
January 13,
2015 - Tew
December 30,
2014 - Chemtec
October 29,
2014 - FWO
July 7,
2014 - Carr
$ 4,420
—
47
822
1,074
(3,597)
$ 19,877
708
51,453
69,908*
50,354
(23,596)
$12,125
—
2,398
8,772
14,048
(6,465)
$15,528
—
4,705
22,302*
33,130
(6,756)
$ 131
—
—
971
419
(418)
$ 3,180
45
7,648
1,936
1,348
(1,677)
Total . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,766
$168,704
$30,878
$68,909
$1,103
$12,480
*
- See Note 4 with respect to an impairment of the goodwill related to this acquisition.
The following table summarizes the estimates of the fair values and amortizable lives of the identifiable
intangible assets acquired:
Intangible Asset
November 23,
2015 - Tew Plus
March 13,
2015 - IOS
January 13,
2015 - Tew
December 30,
2014 - Chemtec
October 29,
2014 - FWO
July 7,
2014 - Carr
Trade name . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . .
Non-competition agreements . . . . .
$ —
817
203
54
$ 2,641
41,171
4,364
2,178
$
870
10,035
2,480
663
$ 3,149
23,934
4,930
1,117
$ —
34
341
44
$ 613
524
87
124
Total identified intangible
assets . . . . . . . . . . . . . . . . . . . . .
$1,074
$50,354
$14,048
$33,130
$419
$1,348
The purchase price allocation for Tew Plus is based on a preliminary valuation. If new information is
obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected
the measurement recognized for assets or liabilities assumed, the Company will recognize adjustments to provi-
sional amounts that are identified during the measurement period in the reporting period in which the adjustment
amounts are determined.
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Note 4.
Goodwill and Other Intangible Assets
The following table represents the goodwill balance by reportable segment:
Rail Products
and Services
Construction
Products
Tubular and Energy
Services
Balance at December 31, 2014 . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation impact
. . . . . . . . . . .
Impairment charges . . . . . . . . . . . . . . . . . . . . . . . .
$38,956
9,594
(362)
—
Balance at December 31, 2015 . . . . . . . . . . . . . . . .
$48,188
$5,147
—
—
—
$5,147
$ 38,846
69,908
—
(80,337)
$ 28,417
Total
$ 82,949
79,502
(362)
(80,337)
$ 81,752
The Company performs goodwill impairment tests annually during the fourth quarter, and also performs
interim goodwill impairment tests if it is determined that it is more likely than not that the fair value of a report-
ing unit is less than the carrying amount. Qualitative factors are assessed to determine whether it is more likely
than not that the fair value of a reporting unit is less than the carrying amount. During the third quarter of 2015,
the Company’s IOS and Chemtec reporting units underperformed against their projections and revised their fore-
casts downward. Additionally, in August 2015, the Company revised its full year outlook as a result of trends in
the energy market as well as the loss of sales to Union Pacific Railroad (“UPRR”). The impact of these factors
led to a decline in the Company’s market capitalization which fell below the shareholder’s equity value. The
Company concluded that the aggregation of these events were indications of potential impairments.
Based upon these indicators, with the assistance of an independent valuation firm, the Company performed
an interim test for impairment of goodwill as of September 1, 2015. The valuation included the use of both the
income and market approach. The Company applied greater weighting to the income approach as the Company
believes it is the most reliable indication of value as it captures forecasted revenues and earnings for the reporting
units in the projection period that the market approach may not directly incorporate.
The results of the test indicated that the IOS and Chemtec reporting units’ respective fair values were less
than their carrying values. The fair values of all other reporting units that maintain goodwill exceeded their
respective carrying values and were not at risk of impairment. As a result of the impact of the downturn within
the energy markets on both reporting units, the expectations of a prolonged period before recovery, and the
reduction in active U.S. land oil rig count, which specifically impacted the IOS reporting unit, the near term pro-
jections of these reporting units have deteriorated and the expected future growth of each of these reporting units
was insufficient to support the carrying values.
The Company compared the implied fair values of the IOS and Chemtec goodwill amounts to the carrying
amounts of that goodwill. The fair values of the IOS and Chemtec reporting units were allocated to all of the
assets and liabilities of the respective reporting unit as if IOS and Chemtec had been acquired in business combi-
nations as of the test date and the fair value was the purchase price paid to acquire each reporting unit. As a result
of this valuation, it was determined that the carrying amounts of IOS’s and Chemtec’s goodwill exceeded the
implied fair values of that goodwill. The Company recognized a non-cash goodwill impairment charge of
$80,337 ($63,887 net of taxes) to write down the carrying values to the implied fair values, of which $69,908
represents the full carrying value of goodwill related to the IOS acquisition and the remaining $10,429 relates to
the Chemtec reporting unit. No additional impairments were triggered as a result of the Company’s 2015 annual
impairment test.
The Company performed a recoverability test on the long-lived tangible and definite lived intangible assets
related to the IOS and Chemtec acquisitions and concluded that no impairment existed. The Company will con-
tinue to monitor these assets, including their respectful useful lives, in future periods.
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The following table represents the gross intangible assets balance by reportable segment at December 31:
2015
2014
Rail Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tubular and Energy Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 59,226
1,348
98,166
$44,781
3,178
47,812
$158,740
$95,771
The components of the Company’s intangible assets are as follows at:
December 31, 2015
Weighted Average
Amortization
In Years
Gross
Carrying
Value
Accumulated
Amortization
Non-compete agreements . . . . . . . . . . . . . . . . . . . . . .
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . .
Supplier relationships . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks and trade names . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
10
16
5
13
13
$
6,984
378
94,338
350
14,252
42,438
$ (2,495)
(124)
(8,441)
(335)
(3,025)
(9,393)
Net
Carrying
Amount
$
4,489
254
85,897
15
11,227
33,045
Weighted Average
Amortization
In Years
Non-compete agreements . . . . . . . . . . . . . . . . . . . . . . . .
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplier relationships . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks and trade names . . . . . . . . . . . . . . . . . . . . . .
Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
10
19
5
14
14
$158,740
$(23,813)
$134,927
December 31, 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
Intangible assets are amortized over their useful lives ranging from 5 to 25 years, with a total weighted
average amortization period of approximately 14 years. Amortization expense for the years ended December 31,
2015, 2014, and 2013 was $12,245, $4,695, and $3,112, respectively.
Estimated amortization expense for the years 2016 and thereafter is as follows:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization
Expense
$ 13,093
12,200
11,868
11,137
10,706
75,923
$134,927
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Note 5.
Accounts Receivable
Accounts receivable at December 31, 2015 and 2014 are summarized as follows:
2015
2014
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$79,100
(1,485)
$90,494
(1,036)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77,615
872
89,458
720
$78,487
$90,178
The Company’s customers are principally in the rail, construction, and energy sectors. At December 31,
2015 and 2014, trade receivables, net of allowance for doubtful accounts, from customers were as follows:
2015
2014
Rail Products and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tubular and Energy Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$43,155
20,489
13,971
$45,931
33,760
9,767
$77,615
$89,458
Credit is extended based upon an evaluation of the customer’s financial condition and, while collateral is not
required, the Company periodically receives surety bonds that guarantee payment. Credit terms are consistent
with industry standards and practices.
Note 6.
Inventory
Inventories at December 31, 2015 and 2014 are summarized in the following table:
2015
2014
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 62,547
20,178
19,492
$ 65,335
16,188
21,855
Total inventories at current costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: LIFO reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
102,217
(5,821)
103,378
(8,289)
$ 96,396
$ 95,089
At December 31, 2015 and 2014, the LIFO carrying value of inventories for book purposes exceeded the
LIFO value for tax purposes by approximately $5,046 and $11,697, respectively. At December 31, 2015, 2014,
and 2013 liquidation of certain LIFO inventory layers carried at costs that were higher than the costs of current
purchases resulted in increases in cost of goods sold of $115, $6 and $1,128, respectively.
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Note 7.
Property, Plant, and Equipment
Property, plant, and equipment at December 31, 2015 and 2014 consist of the following:
2015
2014
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improvements to land and leaseholds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment, including equipment under capitalized leases . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 17,054
16,590
39,366
118,677
11,844
$
9,102
29,016
22,807
95,547
12,033
Less accumulated depreciation and amortization, including accumulated
amortization of capitalized leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76,786
93,703
$126,745
$ 74,802
203,531
168,505
Depreciation expense,
including amortization of assets under capital
leases,
for
the years ended
December 31, 2015, 2014, and 2013 amounted to $14,429, $7,882 and $6,890, respectively.
Note 8.
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
coupling 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, 2015 and 2014, each of the LB Pipe JV members received propor-
tional distributions from the LB Pipe JV. The Company’s 45% ownership interest resulted in cash distributions of
$90 and $630 as of December 31, 2015 and 2014, respectively. There were no changes to the members’ owner-
ship interests as a result of the distribution.
The Company recorded equity in the (loss) income of the LB Pipe JV of approximately ($410), $1,286 and
$1,316 for the years ended December 31, 2015, 2014, and 2013, respectively.
As of December 31, 2015 and 2014, the Company had a nonconsolidated equity method investment of
in the LB Pipe JV and other investments totaling $75 and $78 as of
$5,246 and $5,746, respectively,
December 31, 2015 and 2014, respectively.
The Company’s exposure to loss results from its capital contributions, net of the Company’s share of the LB
Pipe JV’s income or loss, and its net investment in the direct financing lease covering the facility used by the LB
Pipe JV for its operations. The carrying amounts with the maximum exposure to loss of the Company at
December 31, 2015 and 2014, respectively, are as follows:
2015
2014
LB Pipe JV equity method investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment in direct financing lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,246
995
$5,746
1,117
$6,241
$6,863
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The Company is leasing five acres of land and two facilities to the LB Pipe JV through June 30, 2019, with
a 5.5 year renewal period. The current monthly lease payments, including interest, approximate $17, with a bal-
loon payment of approximately $488, which is required to be paid 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 2016 and there-
after
Minimum Lease Payments
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$131
140
150
574
$995
As a result of the November 23, 2015 acquisition of Tew Plus, the Company remeasured its 25% equity
investment in Tew Plus resulting in other income of $580 for the period ended December 31, 2015. Refer to Note
20, “Other Income,” for additional information on the gain.
Note 9.
Deferred Revenue
Deferred revenue of $6,934 and $8,034 at December 31, 2015 and 2014, 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
with respect to which the Company has significantly fulfilled its obligations, but due to the Company’s continu-
ing involvement with the project, revenue is precluded from being recognized until title, ownership, and risk of
loss have passed to the customer.
Note 10.
Long-Term Debt and Related Matters
Long-term debt at December 31, 2015 and 2014 consists of the following:
Revolving credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing agreement payable in installments through July 1, 2017 with an
2015
2014
$165,000
$24,200
interest rate of 3.00% at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . .
1,247
1,781
Lease obligations payable in installments through 2019 with a weighted
average interest rate of 3.09% at December 31, 2015 and
3.50% December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,507
168,754
1,335
447
26,428
676
Long-term portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$167,419
$25,752
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The maturities of long-term debt are as follows:
December 31, 2015
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,335
1,121
558
500
165,240
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$168,754
Borrowings
United States
On March 13, 2015, L.B. Foster Company, its domestic subsidiaries, and certain of its Canadian subsidiaries
(“L.B. Foster”) entered into an amended and restated $335,000 Revolving Credit Facility Credit Agreement
(“Amended Credit Agreement”) with PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., Citi-
zens Bank of Pennsylvania, and Branch Banking and Trust Company. This Amended Credit Agreement modifies
the prior revolving credit facility, which had a maximum credit line of $200,000. The Amended Credit Agree-
ment provides for a five-year, unsecured revolving credit facility that permits borrowings of up to $335,000 for
the U.S. borrowers and a sublimit of the equivalent of $25,000 U.S. dollars that is available to the Canadian bor-
rowers. The Amended Credit Agreement’s accordion feature permits L.B. Foster to increase the available revolv-
ing borrowings under the facility by up to an additional $100,000 subject to L.B. Foster’s receipt of increased
commitments from existing or new lenders and to certain conditions being satisfied.
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 L.B. Foster’s indebtedness
less consolidated cash on hand to L.B. Foster’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 1.50% and 1.00% to 2.50%, respectively.
The Amended Credit Agreement includes two financial covenants: (a) Leverage Ratio, defined as L.B. Fos-
ter’s Indebtedness less consolidated cash on hand, in excess of $15,000, divided by L.B. Foster’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.
The Amended Credit Agreement permits L.B. Foster 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. 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 over the life of the facility. 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 L.B. Foster’s sale of assets,
other indebtedness incurred by either the borrowers or the non-borrower subsidiaries of L.B. Foster, guarantees,
and liens.
The Company had $165,000 outstanding borrowings under the Amended Credit Agreement at December 31,
2015 and had available borrowing capacity of $169,474 at December 31, 2015. As of December 31, 2014, the
Company had $24,200 in outstanding borrowings and an available borrowing capacity of $175,375 under the
previous revolving facility with a borrowing capacity of $200,000.
At December 31, 2015, the Company was in compliance with the Amended Credit Agreement’s covenants.
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Letters of Credit
At December 31, 2015 and 2014, the Company had outstanding letters of credit of approximately $526 and
$425, respectively.
United Kingdom
A subsidiary of the Company has a credit facility with NatWest Bank for its United Kingdom operations
which includes an overdraft availability of £1,500 pounds sterling (approximately $2,210 at December 31, 2015).
This credit facility supports the United Kingdom’s working capital requirements and is collateralized by sub-
stantially 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.
There were no outstanding borrowings under this credit facility at December 31, 2015, however, there were $16
in outstanding guarantees (as defined in the underlying agreement) at December 31, 2015. This credit facility was
renewed and amended during the fourth quarter of 2015 to include Tew and Tew Plus as parties to the agreement.
All other underlying terms and conditions remained unchanged as a result of the renewal. It is the Company’s
intention to renew this credit facility with NatWest Bank during the annual review in 2016.
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 at December 31, 2015 and 2014. The subsidiary had available borrowing capacity of $2,194 and
$2,337 at December 31, 2015 and 2014, respectively.
Note 11.
Stockholders’ Equity
The Company had authorized shares of 20,000,000 in common stock with 11,115,779 shares issued at
December 31, 2015 and 2014. The common stock has a par value of $0.01 per share and the Company paid divi-
dends of $0.04 per quarter during 2015.
At December 31, 2015 and 2014, 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.
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. The Company repurchased 80,512 shares, for an aggregate price of $1,587, during 2015 under the
repurchase program. On December 9, 2015, the Board of Directors authorized the repurchase of up to $30,000 of
the Company’s common shares until December 31, 2017. This authorization became effective January 1, 2016
and replaces the prior authorization.
At December 31, 2015 and 2014, the Company withheld 25,340 and 21,676 shares for approximately $1,114
and $985, 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 $1,656, $1,345 and $1,240 were declared and paid in 2015, 2014, and 2013, respectively.
Share Activity
Common Stock
Treasury
Outstanding
(Number of Shares)
Balance at end of 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued for share-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
966,381
(39,123)
10,149,398
39,123
Balance at end of 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued for share-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
927,258
(53,884)
10,188,521
53,884
Balance at end of 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issued for share-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repurchased common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
873,374
(59,113)
80,512
10,242,405
59,113
(80,512)
Balance at end of 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
894,773
10,221,006
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Note 12.
Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, for the years ended December 31,
2015 and 2014, are as follows:
2015
2014
Pension and post-retirement benefit plan adjustments . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on interest rate swap contracts . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (3,069)
(121)
(14,750)
$ (4,089)
—
(7,803)
$(17,940)
$(11,892)
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”.
Note 13.
Earnings Per Common Share
(Share amounts in thousands)
The following table sets forth the computation of basic and diluted earnings per common share for the three
years ended December 31:
Numerator for basic and diluted earnings per common share —
(Loss) income available to common stockholders:
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator:
2015
2014
2013
$(44,445)
$25,656
$29,290
Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . .
10,254
Denominator for basic earnings per common share . . . . . . . . . . . .
10,254
10,225
10,225
10,175
10,175
Effect of dilutive securities:
Employee stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other stock compensation plans . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive potential common shares . . . . . . . . . . . . . . . . . . . . . . . . .
Denominator for diluted earnings per common share — adjusted
weighted average shares outstanding and assumed
conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic (loss) earnings per common share . . . . . . . . . . . . . . . . . . . . . . .
Diluted (loss) earnings per common share . . . . . . . . . . . . . . . . . . . . .
Dividends paid per common share . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
6
101
107
11
74
85
10,254
10,332
10,260
$
$
$
(4.33)
(4.33)
0.16
$
$
$
2.51
2.48
0.13
$
$
$
2.88
2.85
0.12
There were approximately 75 antidilutive shares in 2015 and no antidilutive shares in 2014 or 2013.
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Note 14.
Income Taxes
Significant components of the Company’s deferred tax liabilities and assets at December 31, 2015 and 2014
are as follows:
Deferred tax liabilities:
2015
2014
Goodwill and other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in LB Pipe joint venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (5,801)
(14,134)
—
(572)
(741)
$(10,800)
(3,763)
(3,188)
(553)
(527)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(21,248)
(18,831)
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,801
3,153
2,275
622
2,087
655
1,006
949
2,147
4,180
1,755
369
667
660
883
645
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,548
11,306
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (8,700)
$ (7,525)
Significant components of the provision for income taxes are as follows:
2015
2014
2013
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,571
1,540
1,339
$11,488
1,491
3,339
$ 8,785
837
1,982
Total current
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,450
16,318
11,604
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(12,016)
(2,014)
(552)
(2,321)
(122)
(471)
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(14,582)
(2,914)
3,200
273
(229)
3,244
Total income tax (benefit) expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (6,132)
$13,404
$14,848
At December 31, 2015, the Company has not recorded deferred U.S. income taxes or foreign withholding
taxes on $57,781 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.
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(Loss) income before income taxes, as shown in the accompanying consolidated statements of operations,
includes the following components:
2015
2014
2013
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(55,061)
4,484
$30,766
8,294
$37,306
6,832
(Loss) income from operations, before income taxes . . . . . . . . . . . . .
$(50,577)
$39,060
$44,138
The reconciliation of income tax computed at statutory rates to income tax (benefit) expense is as follows:
Statutory rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign tax rate differential
State income taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in liability for unrecognized tax benefits . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic production activities deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
2014
2013
35.0% 35.0% 35.0%
(2.2)
0.8
2.7
0.3
(25.2) —
1.8
(0.9)
(0.8)
0.4
(2.2)
1.0
—
0.7
(1.7)
2.6
—
0.6
(1.9)
(1.2)
0.2
12.1% 34.3% 33.6%
At December 31, 2015 and 2014, the tax benefit of net operating loss carryforwards available for state
income tax purposes was $324 and $74, respectively. The state net operating loss carryforwards will expire in
various years from 2024 through 2035. At December 31, 2015, the Company has foreign net operating loss
carryforwards of $1,320, which may be carried forward indefinitely. The Company has foreign tax credit
carryforwards in the amount of $272 that will expire in 2024 through 2026. 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 at December 31, 2015 and 2014:
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 . . . . . . . . .
2015
2014
$1,013
147
—
(578)
—
$1,509
18
(325)
(126)
(63)
Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 582
$1,013
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $582
at December 31, 2015. The Company accrues interest and penalties related to unrecognized tax benefits in its
provision for income taxes. At December 31, 2015 and 2014, the Company had accrued interest and penalties
related to unrecognized tax benefits of $443 and $335, respectively. At December 31, 2015, the Company does
not expect any material increases or decreases to its unrecognized tax benefits within the next 12 months. Ulti-
mate 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 2012 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 2011 and forward.
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Note 15.
Share-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 $1,471, $3,007 and $2,156 for the years ended
December 31, 2015, 2014, and 2013, respectively, related to fully-vested stock awards, restricted stock awards,
and performance unit awards. At December 31, 2015, unrecognized compensation expense for awards the Com-
pany expects to vest approximated $2,611. The Company will recognize this expense over the upcoming 3.5 year
period through June 2019.
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 stock or authorized but previously unissued
common stock.
The excess tax benefit realized for the tax deduction from share-based compensation approximated $253,
$336, and $203 for the years ended December 31, 2015, 2014, and 2013, respectively. This excess tax benefit is
included in cash flows from financing activities in the Consolidated Statements of Cash Flows.
At December 31, 2015, the Company had stock awards issued pursuant to the 2006 Omnibus Incentive Plan
as amended and restated in October 2013 (“Omnibus 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 2015, 2014, or 2013
The Company also had 7,500 outstanding stock option awards that were granted under the former 1998
Long-Term Incentive Plan for Officers and Directors, amended and restated in May 2006 (“1998 Plan”). During
2015, all 7,500 outstanding stock option awards were exercised prior to their expiration. No future grants are
permitted under the expired 1998 Plan and the Company currently makes equity awards under the Omnibus Plan.
Stock Option Awards
Certain information for the three years ended December 31, 2015 relative to employee stock options is
summarized as follows:
2015
2014
2013
Number of shares under the plans:
Outstanding and exercisable at beginning of year . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,500
—
—
(7,500)
18,750
—
—
(11,250)
22,500
—
—
(3,750)
Outstanding and exercisable at end of year . . . . . . . . . . . . . . . . . . . . . . . .
—
7,500
18,750
The weighted average exercise price per share of the stock options exercised in 2015, 2014, and 2013 were
$9.08, $11.67, and $9.30, respectively. The total intrinsic value of stock options exercised during the years ended
December 31, 2015, 2014, and 2013 was $253, $426, and $124, respectively.
Fully-Vested Stock Awards
Non-employee directors are automatically awarded fully vested shares of the Company’s common stock on
each date the non-employee directors are elected at the annual shareholders’ meeting to serve as directors.
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The non-employee directors were granted a total of 14,000, 10,182, and 9,960 fully-vested shares for the
years ended December 31, 2015, 2014, and 2013, respectively. Compensation expense recorded by the Company
related to fully-vested stock awards to non-employee directors was approximately $534, $488, and $450 for the
years ended December 31, 2015, 2014, and 2013, respectively.
The weighted average fair value of all the fully-vested stock grants awarded was $38.15, $47.94, and $45.16
per share for 2015, 2014, and 2013, 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 granted prior to March 2015 generally
time-vest after a four year holding period, and those granted in March 2015 generally time-vest ratably over a
three-year 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 sub-
ject to forfeiture and will be converted into common stock of the Company based upon the Company’s perform-
ance 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.
The following table summarizes the restricted stock award and performance unit award activity for the
three-year periods ended December 31, 2015, 2014, and 2013:
Restricted
Stock
Units
Performance
Stock
Units
Weighted Average
Grant Date
Fair Value
Outstanding at January 1, 2013 . . . . . . . . . . . . . . . . . . . . .
176,646
59,725
$31.65
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
Adjustment for incentive awards not expected to vest
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,973
(41,579)
—
(18,314)
31,418
—
(18,408)
(11,084)
42.49
29.18
35.84
33.55
Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . .
129,726
61,651
$34.00
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for incentive awards not expected to vest
. . .
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,051
(40,540)
—
—
34,652
(13,588)
(7,845)
(2,880)
44.07
34.59
43.59
44.13
Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . .
108,237
71,990
$36.25
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
Adjustment for incentive awards not expected to vest
Canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,656
(39,076)
—
(5,000)
41,114
(23,877)
(53,228)
—
44.93
32.35
43.26
44.84
Outstanding at December 31, 2015 . . . . . . . . . . . . . . . . . .
93,817
35,999
$39.66
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, the Company reversed $702 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 19, “Commitments and Contingent Liabilities”.
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Excluding the fully-vested stock awards granted to non-employee directors, the Company recorded compen-
sation expense of $937, $2,519, and $1,706, respectively, for the periods ended December 31, 2015, 2014, and
2013 related to restricted stock and performance unit awards.
2015
2014
2013
Number of shares available for future grant:
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
469,840
513,280
517,280
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
407,307
469,840
513,280
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.
Note 16.
Retirement Plans
The Company has seven retirement plans which cover its hourly and salaried employees in the United
States: three defined benefit plans (one active / two frozen) and four defined contribution plans. Employees are
eligible to participate in the appropriate plan based on employment classification. The Company’s contributions
to the defined benefit and defined contribution plans are governed by the Employee Retirement Income Security
Act of 1974 (“ERISA”), policy and investment guidelines of the applicable plan. The Company’s 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
contribution plans for its employees in Canada, as well as a post-retirement benefit plan. In the United Kingdom,
Rail Technologies maintains two defined contribution plans and a defined benefit plan. These plans are discussed
in further detail below.
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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, as of December 31, 2015 and 2014:
Changes in benefit obligation:
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
2014
$18,925
38
742
(1,148)
(798)
$16,112
23
771
2,753
(734)
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,759
$18,925
Change to plan assets:
Fair value of assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual (loss) gain on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,205
(172)
—
(798)
$15,039
601
299
(734)
Fair value of assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,235
15,205
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (3,524)
$ (3,720)
Amounts recognized in the consolidated balance sheet consist of:
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (3,524)
$ (3,720)
Amounts recognized in accumulated other comprehensive income consist of:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,993
—
$ 4,429
3
$ 3,993
$ 4,432
The actuarial loss included in accumulated other comprehensive loss that will be recognized in net periodic
pension cost during 2016 is $276, before taxes.
Net periodic pension costs for the three years ended December 31, 2015 are as follows:
2015
2014
2013
Components of net periodic benefit cost:
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognized net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 38
742
(816)
3
275
$ 23
771
(968)
1
65
$ 33
707
(856)
1
212
Net periodic pension cost (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 242
$(108)
$ 97
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.
2015
2014
2013
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.3% 4.0% 4.9%
Expected rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.2% 5.5% 6.5%
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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 at December 31:
2015
2014
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,759
17,759
$14,235
$18,925
18,925
$15,205
Plan assets consist primarily of various fixed income and equity investments. The Company’s primary invest-
ment objective is to provide long-term growth of capital while accepting a moderate level of risk. The investments
are limited to cash and cash equivalents, bonds, preferred stocks, and common stocks. The investment target ranges
and actual allocation of pension plan assets by major category at December 31, 2015 and 2014 are as follows:
2015
Target
2014
Asset Category
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total fixed income funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total mutual funds and equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0 - 10%
25 - 50
50 - 70
9%
35
56
2%
34
64
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100% 100%
In accordance with the fair value disclosure requirements with FASB ASC 820, “Fair Value Measurements
and Disclosures,” the following assets were measured at fair value on a recurring basis at December 31, 2015 and
2014. Additional information regarding FASB ASC 820 and the fair value hierarchy can be found in Note 18,
Fair Value Measurements.
2015
2014
Asset Category
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income funds
$ 1,248
$
347
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total fixed income funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity funds and equities
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,926
4,926
8,061
—
5,194
5,194
3,566
6,098
Total mutual funds and equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
8,061
$14,235
9,664
$15,205
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
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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 2016.
The following benefit payments are expected to be paid:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years 2021-2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension
Benefits
$ 823
879
907
974
1,015
5,611
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 December 31, 2015 and 2014 is as follows:
Changes in benefit obligation:
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency exchange rate changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015
2014
$ 8,797
295
(416)
(339)
(475)
$ 8,450
360
883
(397)
(499)
Benefit obligation at end of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,862
$ 8,797
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,757
307
302
(339)
(366)
$ 6,769
502
284
(397)
(401)
Fair value of assets at end of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,661
6,757
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,201)
$(2,040)
Amounts recognized in the consolidated balance sheet consist of:
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,201)
$(2,040)
Amounts recognized in accumulated other comprehensive income consist of:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost
$
$
706
85
791
$ 1,413
112
$ 1,525
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Net periodic pension costs for the three years ended December 31, 2015, 2014, and 2013 are as follows:
2015
2014
2013
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 295
(324)
—
27
225
$ 360
(370)
(50)
30
185
$ 348
(321)
(46)
22
229
Net periodic pension cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 223
$ 155
$ 232
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.
2015
2014
2013
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.0% 3.6% 4.6%
Expected rate of return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.2% 5.0% 5.8%
Amounts applicable to the Company’s pension plans with accumulated benefit obligations in excess of plan
assets are as follows at December 31:
2015
2014
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,862
7,862
6,661
$8,797
8,797
6,757
The Company has estimated the long-term rate of return on plan assets based primarily on historical returns
on plan assets, adjusted for changes in target portfolio allocations, and recent changes in long-term interest rates
based on publicly available information.
Plan assets are invested by the trustees in accordance with a written statement of investment principles. This
statement permits investment in equities, corporate bonds, United Kingdom government securities, commercial
property, and cash, based on certain target allocation percentages. Asset allocation is primarily based on a strategy
to provide steady growth without undue fluctuations. The target asset allocation percentages for 2015 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 that 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.
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The plan assets by category for the two years ended December 31, 2015 and 2014 are as follows:
2015
2014
Asset Category
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commercial property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 242
2,656
1,301
2,462
$ 218
2,156
1,899
2,484
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,661
$6,757
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 $271 to the Portec Rail Plan
during 2016.
The following estimated future benefits payments are expected to be paid under the Portec Rail Plan:
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Years 2021-2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension
Benefits
$ 247
268
286
303
321
1,939
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 2015 and 2014. Rail Technologies’ accrued benefit obligation was $823 and
$1,172 as of December 31, 2015 and 2014, respectively. This obligation is recognized within other long-term
liabilities. Benefit payments anticipated for 2016 are not material.
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.
2015
2014
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.2% 4.0%
Weighted average health care trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.0% 6.2%
The weighted average health care rate trends downward to an ultimate rate of 4.4% in 2035.
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Defined Contribution Plans
The Company sponsors eight 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.
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2014
$2,425
227
158
2015
$2,434
226
494
2013
$2,151
266
136
$3,154
$2,810
$2,553
Note 17.
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, 2015, 2014, and 2013 amounted to $4,611, $3,062, and $3,333,
respectively. Generally, land and building leases include escalation clauses.
The following is a schedule, by year, of the future minimum payments under capital and operating leases,
together with the present value of the net minimum payments at December 31, 2015:
Year ending December 31,
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital
Leases
$ 694
636
591
517
244
—
Operating
Leases
$ 4,310
3,680
2,429
1,702
1,407
6,600
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,682
$20,128
Less amount representing interest
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
175
Total present value of minimum payments with interest rates ranging from 3.00%
to 5.25% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,507
Assets recorded under capital leases are as follows:
Machinery and equipment at cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,157
450
638
181
Net capital lease assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,707
$457
2015
2014
Note 18.
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
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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 classification of a financial asset or liability within the hierarchy is determined based on the lowest
level input that is significant to the fair value measurement.
The Company has an established process for determining fair value for its financial assets and liabilities,
principally cash and cash equivalents and interest rate swaps. Fair value is based on quoted market prices, where
available. If quoted market prices are not available, fair value is based on assumptions that use as inputs market-
based parameters. The following 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 non-domestic term
deposits. The carrying amounts approximate fair value because of the short maturity of the instruments.
LIBOR-Based interest rate swaps. To reduce the impact of interest rate changes on outstanding variable-rate
debt, the Company entered into forward starting LIBOR-based interest rate swaps with notional values totaling
$50,000. The swaps will become effective in February 2017 at which point it will effectively convert a portion of
the debt from variable to fixed-rate borrowings during the term of the swap contract. The fair value of the interest
rate swaps is based on market-observable forward interest rates and represents the estimated amount that the
Company would pay to terminate the agreements. As such, the swap agreements have been classified as Level 2
within the fair value hierarchy.
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, 2015 and December 31, 2014:
Fair Value Measurements at Reporting Date
Using
Fair Value Measurements at Reporting Date
Using
December 31,
2015
Assets
Non-domestic bank term
deposits . . . . . . . . . . . . .
$1,939
Total Assets . . . . . . . . . . . . . .
$1,939
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
$1,939
$1,939
Liabilities
Interest rate swaps . . . . . . .
$ 196
$ —
Total Liabilities . . . . . . . . . . .
$ 196
$ —
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
December 31,
2014
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
$ —
$ —
$196
$196
$—
$—
$—
$—
$25
$25
$—
$—
$25
$25
$—
$—
$—
$—
$—
$—
$—
$—
$—
$—
Information regarding the fair value disclosures associated with the assets of the Company’s defined benefit
plans can be found in Note 16, Retirement Plans.
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Note 19.
Commitments and Contingent Liabilities
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 that is adjusted on a monthly
basis as a percentage of cost of sales. This product warranty accrual is periodically adjusted based on the identi-
fication or resolution of known individual product warranty claims.
The following table sets forth the Company’s product warranty accrual:
Warranty Liability
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to warranty liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty liability utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,500
1,794
(4,650)
111
Balance at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,755
Included within the above table are concrete tie warranty reserves of approximately $7,544 and $10,331,
respectively, at December 31, 2015 and 2014. For the periods ended December 31, 2015, 2014, and 2013, the
Company recorded approximately $972, $9,854 and $612, respectively, in pre-tax concrete tie warranty charges
within “Cost of Goods Sold” in the Company’s Rail Products and Services segment primarily related to concrete
ties manufactured at the Company’s former Grand Island, NE facility.
UPRR Warranty Claims
On July 12, 2011, UPRR notified (the “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 UPRR. 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 UPRR had claimed non-
conformance. 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, within five years of
the sale of a concrete tie, UPRR 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
UPRR on several matters including a process for the Company and UPRR to work together to identify, prioritize,
and replace defective ties that meet the criteria for replacement. This process applies to the ties the Company
shipped to UPRR from its Grand Island, NE facility from 1998 to 2011. During most of this period the Compa-
ny’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 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 additional
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10 years of warranty protection. In the amended 2005 supply agreement, the Company and UPRR also extended
the supply of Tucson ties by five years and agreed on a cash payment of $12,000 to UPRR as compensation for
concrete ties already replaced by UPRR during the investigation period.
During 2012, as a result of the testing that the Company conducted on concrete ties manufactured at its
former Grand Island, NE facility and the developments related to UPRR and other customer matters, the Com-
pany recorded pre-tax warranty charges of $22,000 in “Cost of Goods Sold” within its Rail Products and Services
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 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 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 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 pro-
vided 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 UPRR asserting a material breach of the
amended 2005 supply agreement. 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
UPRR to refute UPRR’s claim of breach and included the reconciliation of warranty claims supported by sub-
stantial 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 replacement 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 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 replacement proc-
ess for a substantial majority of the concrete ties replaced. The Company 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 2014, the Company increased its accrual by an additional $8,766 based on revised estimates of ties
to be replaced based upon scientific testing and other analysis, adjusted for ties already provided to UPRR. 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 replace-
ment activity and warranty tie replacement.
In November and December of 2014, the Company received additional notices from 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 UPRR being out of
specification.
As of December 31, 2014, the Company and UPRR had 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.
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2015
On January 23, 2015, UPRR filed a Complaint and Demand for Jury Trial in the District Court for Douglas
County, NE against the Company and its subsidiary, CXT, asserting, among other matters, that the Company
breached its express warranty, breached an implied covenant of good faith and fair dealing, anticipatorily repudi-
ated 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 consequential damages.
The Complaint seeks to cancel all duties of UPRR under the contract, to adjudge the Company 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 specifications for
each tie that failed to meet the contract specifications or otherwise contained a material defect provided that the
Company receives written notice of such failure or defect within 15 years after that tie was produced. The
amended 2005 supply agreement provides 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 con-
tinues 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 that the Company believes are for ties claimed for warranty replacement
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.
In June 2015, UPRR delivered an additional notice alleging defects in ties produced in the Company’s
Tucson and Spokane locations and other claimed material breaches which the Company contends are unfounded.
The Company again responded to UPRR that it was not in material breach of the amended 2005 supply agree-
ment relating to warranty tie replacements and that new ties being manufactured complied with the specifications
provided by UPRR.
On June 16 and 17, 2015, UPRR issued formal notice of the termination of the concrete tie supply agree-
ment as well as the termination of the lease agreement at the Tucson, AZ production facility and rejection and
revocation of its prior acceptance of certain ties manufactured at the Company’s Spokane, WA production
facility. Since that time, UPRR has discontinued submitting purchase orders to the Company for shipment of
warranty replacement ties.
On May 29, 2015, the Company and CXT filed an Answer, Affirmative Defenses and Counterclaims in
response to the Complaint, denying liability to UPRR. As a result of UPRR’s subsequent June 16-17, 2015
actions and certain related conduct, the Company on October 5, 2015 amended the pending Answer, Affirmative
Defenses and Counterclaims to add, among other things, assertions that UPRR’s conduct in question was wrong-
ful and unjustified and constituted additional grounds for the affirmative defenses to UPRR’s claims and also for
the Company’s counterclaims. By Scheduling Order dated September 3, 2015, a December 30, 2016 deadline for
the completion of fact discovery has been established and trial may proceed at some future date after March 3,
2017, although no trial date has been set. The parties are currently conducting discovery.
The Company continues to engage in discussions in an effort to resolve this matter. However, we cannot
predict that such discussions will be successful, or that the results of the litigation with UPRR, or any settlement
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.
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Other Legal Matters
The Company is also subject to other legal proceedings and claims that arise in the ordinary course of its
business. In the opinion of management, the amount of ultimate liability with respect to these actions will not
materially affect the financial 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.
Environmental Matters
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 following table sets forth the Company’s undiscounted environmental obligation:
Environmental liability
Balance at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions to environmental obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental obligations utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,344
50
(214)
3,460
$6,640
Note 20
Other Income
The following table summarizes the Company’s other income for the three years ended December 31, 2015,
2014, and 2013.
2015
2014
2013
Gain on Tucson, AZ asset sale(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Remeasurement gain on equity method investment(b) . . . . . . . . . . . . . . .
Legal settlement gain(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(2,279)
(1,616)
(580)
(460)
(650)
$ — $ —
(433)
(422)
—
—
—
—
(644)
(256)
$(5,585)
$(678)
$(1,077)
a) On December 23, 2015, the Company sold certain assets related to the former Tucson, AZ precast concrete
tie facility for $2,750 resulting in a pre-tax gain on sale of $2,279.
b) On November 23, 2015, the Company acquired the remaining 75% of shares of Tew Plus resulting in a gain
of $580, which is recorded within other income as of December 31, 2015. The gain is included in equity loss
(income) and remeasurement gain within the Consolidated Statements of Cash Flows.
c) During the fourth quarter the Company received $460 from the Steel Antitrust Settlement Fund related to a
claim regarding steel purchased by the Company between 2005 and 2007.
Note 21.
Quarterly Financial Information (Unaudited)
As more fully described in Note 3, “Acquisitions,” the Company acquired Tew, Tew Plus, and IOS during
2015 and Carr, FWO, and Chemtec during 2014. The results of the subsidiary’s operations are included from the
acquisition dates.
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Quarterly financial information for the years ended December 31, 2015 and 2014 is presented below:
2015
First
Quarter
Second
Quarter
Third
Quarter(1)
Fourth
Quarter(2)
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (loss) per common share . . . . . . . . . .
Diluted earnings (loss) per common share . . . . . . . .
Dividends paid per common share . . . . . . . . . . . . . .
$137,907
$ 30,653
4,285
$
0.42
$
0.41
$
0.04
$
$171,419
$ 37,089
5,362
$
0.52
$
0.52
$
0.04
$
$176,059
$ 36,038
$ (57,422)
(5.60)
$
(5.60)
$
0.04
$
$139,138
$ 29,872
3,328
$
0.33
$
0.32
$
0.04
$
Differences between the sum of quarterly results and Consolidated Statement of Operations due to rounding.
(1) - Third quarter 2015 includes $80,337 ($63,887 net of tax) impairment of goodwill related to the IOS and
Chemtec reporting units.
(2) - Fourth quarter 2015 includes $2,279 pre-tax gain on sale of Tucson, AZ concrete tie facility.
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per common share . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . .
Dividends paid per common share . . . . . . . . . . . . . .
First
Quarter
$111,414
$ 24,127
3,649
$
0.36
$
0.35
$
0.03
$
2014
Second
Quarter(1)
$166,832
$ 30,700
6,862
$
0.67
$
0.67
$
0.03
$
Third
Quarter
$167,797
$ 35,159
9,116
$
0.89
$
0.88
$
0.03
$
Fourth
Quarter(2)
$161,149
$ 31,605
6,029
$
0.59
$
0.58
$
0.04
$
(1) - Second quarter 2014 includes a $4,000 warranty charge related to UPRR warranty claim.
(2) - Fourth quarter 2014 includes a $4,766 warranty charge related to UPRR warranty claim.
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ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
L.B. Foster Company carried out an evaluation, under the supervision and with the participation of the
Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effective-
ness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule
13a-15(e) under the Securities and Exchange Act of 1934, as amended (“the Exchange Act”)) as of the end of the
period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company’s disclosure controls and procedures were effective at 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 2015 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, 2015. 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 at December 31, 2015.
The SEC’s general guidance permits the exclusion of an assessment of the effectiveness of a registrant’s
internal control 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 the consolidated financial statements included
in this Annual Report on Form 10-K, L.B. Foster Company completed the acquisition of IOS Holdings, Inc.
(“IOS”) on March 13, 2015 and Tew Plus, LTD (“Tew Plus”) on November 23, 2015. These acquired businesses
constituted approximately $110.2 million of the Company’s consolidated assets at December 31, 2015 and $37.2
million of the Company’s consolidated sales for the year ended December 31, 2015. In addition, these acquired
businesses contributed $5.3 million in pre-tax losses to the Company (which excludes goodwill impairment
charges of $69.9 million related to IOS) as compared to its consolidated pre-tax loss of $44.4 million for the year
ended December 31, 2015. Management’s assessment and conclusion on the effectiveness of the Company’s
disclosure controls and procedures and internal control over financial reporting at December 31, 2015 excluded
an assessment of the internal control over financial reporting of the assets and businesses acquired in the IOS and
Tew Plus 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.
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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, 2015, 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 finan-
cial 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 IOS Holdings, Inc. (IOS) and Tew Plus, LTD (Tew Plus), which are included
in the 2015 consolidated financial statements of L.B. Foster Company and Subsidiaries and constituted approx-
imately $110.2 million of consolidated assets as of December 31, 2015 and $37.2 million of consolidated sales
for the year then ended. In addition, these acquired businesses contributed $5.3 million in pre-tax losses to the
Company (which excludes goodwill impairment charges of $69.9 million related to IOS) as compared to its
consolidated pre-tax loss of $44.4 million for the year ended December 31, 2015. 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 IOS and Tew Plus.
In our opinion, L. B. Foster Company and Subsidiaries maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2015, 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,
2015 and 2014, 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, 2015 and our report dated
March 1, 2016 expressed an unqualified opinion thereon.
Pittsburgh, Pennsylvania
March 1, 2016
/s/ Ernst & Young LLP
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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 2016 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—2015,”
“Executive Compensation,” “Summary Compensation Table (2015, 2014, and 2013),” “Grants of Plan-Based
Awards in 2015,” “Outstanding Equity Awards At 2015 Fiscal Year-End,” “2015 Options Exercises and Stock
Vested Table,” “2015 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.”
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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, 2015 and 2014.
Consolidated Statements of Operations for the Years Ended December 31, 2015, 2014, and 2013.
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014,
and 2013.
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014, and 2013.
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2015, 2014, and
2013.
Notes to Consolidated Financial Statements.
(a)(2). Financial Statement Schedule
Schedules for the Years Ended December 31, 2015, 2014, and 2013:
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.
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L. B. FOSTER COMPANY AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2015, 2014, AND 2013
Balance at
Beginning
of Year
Additions
Charged to
Costs and
Expenses
Deductions (1)
Balance
at End
of Year
2015
Deducted from assets to which they apply:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . .
$1,036
$1,113
$664
$1,485
2014
Deducted from assets to which they apply:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . .
$1,099
$ 462
$525
$1,036
2013
Deducted from assets to which they apply:
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . .
$ 899
$ 236
$ 36
$1,099
(1) Notes and accounts receivable written off as uncollectible.
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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 1, 2016
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/ Dirk Jungé
(Dirk Jungé)
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/ Bradley S. Vizi
(Bradley S. Vizi)
By:
/s/ David J. Russo
(David J. Russo)
Chairman of the Board and Director
March 1, 2016
President, Chief Executive Officer
and Director
Director
Director
Director
Director
Director
Director
Director
Senior Vice President,
Chief Financial Officer
and Treasurer
March 1, 2016
March 1, 2016
March 1, 2016
March 1, 2016
March 1, 2016
March 1, 2016
March 1, 2016
March 1, 2016
March 1, 2016
By:
/s/ Christopher T. Scanlon
(Christopher T. Scanlon)
Controller and Chief Accounting Officer
March 1, 2016
84
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INDEX TO EXHIBITS
All exhibits are incorporated herein by reference:
2.1
3.1
3.2
4.1
10.1
10.2 **
10.3 **
10.4 **
10.5 **
10.6 **
10.7 **
10.8 **
10.9 **
Agreement and Plan of Merger dated March 13, 2015 among IOS Holdings, Inc., L.B. Foster
Company, L.B. Foster Raven Merger Company and IOS Holding Company LLC, solely in its
capacity as the representative of IOS’s shareholders is incorporated herein by reference to Exhibit 2.1
to the Current Report on Form 8-K/A, File No. 0-10436, filed on March 16, 2015.
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.
$335,000,000 Amended and Restated Credit Agreement dated March 13, 2015, between Registrant
and PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., Citizens Bank of
Pennsylvania, and Branch Banking and Trust Company is incorporated herein by reference to Exhibit
10.1 to the Current Report on Form 8-K/A, File No. 0-10436, filed on March 16, 2015.
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.
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
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.
(2013),
Form of Performance Share Unit Award Agreement
incorporated by reference to
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
(2014),
incorporated by
Executive Annual Incentive Compensation Plan (as Amended and Restated),
reference to Exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A, filed on April
12, 2013.
10.10 ** 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.
85
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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**
*10.24**
*10.25**
*10.26**
*10.27**
10.28
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.
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.
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.
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.
2015 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.2
to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed
May 6, 2015.
2015 Form of Restricted Stock Agreement, incorporated by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May 6,
2015.
2015 Performance Share Unit Program (2015-2017), incorporated by reference to Exhibit 10.4 to
the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May
6, 2015.
Long Term Incentive Performance Share Unit Program (2016-2018).
Form of Performance Share Unit Award Agreement (2016-2018).
Form of Restricted Stock Award Agreement (2016).
2016 Executive Annual Incentive Compensation Plan.
2016 Free Cash Flow Program.
Agreement dated February 12, 2016, among L. B. Foster Company, Legion Partners, L.P. I,
Legion Partners, L.P. II, Legion Partners Special Opportunities, L.P. II, Legion Partners
Holdings, LLC, Legion Partners Asset Management, LLC, Legion Partners Holdings, LLC,
Bradley S. Vizi, Christopher S. Kiper, and Raymond White, incorporated by reference to Exhibit
10.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on February 17,
2016.
86
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10.29
*21
*23
*31.1
*31.2
*32.0
*101.INS
*101.SCH
*101.CAL
*101.DEF
*101.LAB
*101.PRE
*
**
Confidentiality Agreement dated February 12, 2016, among L.B. Foster Company, Legion
Partners, L.P. I, Legion Partners, L.P. II, Legion Partners Special Opportunities, L.P. II, Legion
Partners Holdings, LLC, Legion Partners Asset Management, LLC, Legion Partners Holdings,
LLC, Bradley S. Vizi, Christopher S. Kiper, Raymond White, David A. Katz, and Justin Albert
incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, File
No. 0-10436, filed on February 17, 2016
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.
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 are filed herewith.
Exhibit represents a management contract or compensatory plan, contract or arrangement
required to be filed as Exhibits to this Annual Report on Form 10-K.
87
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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 1, 2016
/s/ Robert P. Bauer
Name: Robert P. Bauer
Title: President and Chief Executive Officer
7610_FIN.pdf 89
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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 1, 2016
/s/ David J. Russo
Name: David J. Russo
Title: Senior Vice President,
Chief Financial Officer and Treasurer
7610_FIN.pdf 90
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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, 2015, 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 1, 2016
Date: March 1, 2016
/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
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7610_FIN.pdf 92
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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
Christopher T. Scanlon
Controller, Chief Accounting Officer
SHAREHOLDER INFORMATION
Annual Meeting
The annual meeting of shareholders will be held at the
DoubleTree Hotel, 500 Mansfield Drive, Pittsburgh,
Pennsylvania 15205 on May 25, 2016 at 8:00 AM EDT.
Form 10-K
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
Dirk Jungé
Chairman
Pitcairn Company
G. Thomas McKane
Former Chairman of the Board
and Chief Executive Officer
A.M. Castle & Company
Diane B. Owen
Former Senior Vice President – Corporate Audit
H.J. Heinz Company
Robert S. Purgason
Senior Vice President,
Access Operating Area, Williams
Suzanne B. Rowland
Former Vice President and General Manager
Global Special Hazards
Tyco Fire Protection Products
William H. Rackoff
President and Chief Executive Officer
ASKO, Inc.
Bradley S. Vizi
Founder and Managing Director
Legion Partners Asset Management, LLC.
CORPORATE HEADQUARTERS
415 Holiday Drive, Pittsburgh, PA 15220
412.928.3417
A copy of the company’s Annual Report on Form 10-K
800.255.4500 (Toll-free nationwide sales number)
to
the Securities and Exchange Commission
is
lbfoster.com
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.
®
OPPORTUNITY (cid:81) SOLUTION (cid:81) PRODUCT LEADER (cid:81) DEPENDABILITY
RELIABILITY (cid:81) TEAMWORK (cid:81) SAFETY (cid:81) PROBLEM SOLVING (cid:81) VALUE
INNOVATION (cid:81) DEPENDABILITY (cid:81) INTEGRITY (cid:81) COLLABORATION
QUALITY (cid:81) PROFESSIONAL SERVICE (cid:81) RESEARCH (cid:81) DEVELOPMENT
OPPORTUNITY (cid:81) SOLUTION PROVIDER (cid:81) DEPENDABILITY (cid:81) VALUE
CUSTOMER CENTRICITY (cid:81) FLEXIBILITY (cid:81) VALUE (cid:81) RESPONSIVENESS
CUTTING EDGE (cid:81) RESILIENCY (cid:81) HANDS-ON (cid:81) PROACTIVITY (cid:81) SAFETY
PRODUCT LEADER (cid:81) CUSTOMER FOCUS
(cid:81) CONTINUOUS IMPROVEMENT
(cid:81)
(cid:81)
RELIABILITY (cid:81) TEAMWORK (cid:81) SAFETY (cid:81) PROBLEM SOLVING (cid:81) VALUE
INNOVATION (cid:81) DEPENDABILITY (cid:81) INTEGRITY (cid:81) COLLABORATION
QUALITY (cid:81) PROFESSIONAL SERVICE (cid:81) RESEARCH (cid:81) DEVELOPMENT
OPPORTUNITY (cid:81) SOLUTION (cid:81) PRODUCT LEADER (cid:81) DEPENDABILITY
RELIABILITY (cid:81) TEAMWORK (cid:81) SAFETY (cid:81) PROBLEM SOLVING (cid:81) VALUE
INNOVATION (cid:81) DEPENDABILITY (cid:81) INTEGRITY (cid:81) COLLABORATION
TRANSPORTATION and ENERGY INFRASTRUCTURE PRODUCTS and SERVICES
TRANSPORTATION and ENERGY INFRASTRUCTURE PRODUCTS and SERVICES
lbfoster.com