SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1996
Commission File Number 0-10436
L. B. Foster Company
(Exact name of registrant as specified in its charter)
Delaware 25-1324733
(State of Incorporation) (I.R.S. Employer Identification No.)
415 Holiday Drive, Pittsburgh, Pennsylvania 15220
(Address of principal executive offices) (Zip Code)
(412) 928-3417
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for 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.
Yes X No
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest
practicable date.
Class Outstanding at May 8, 1996
Class A Common Stock, Par Value $.01 9,937,738 Shares
<PAGE>
L. B. FOSTER COMPANY AND SUBSIDIARIES
INDEX
PART I. Financial Information Page
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of Income 3
Condensed Consolidated Statements of Cash Flows 4
Notes to Condensed Consolidated
Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signature 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
<S> March 31, December 31,
ASSETS 1996 1995
Current Assets: <C> <C>
Cash and cash equivalents $ 1,533 $ 1,325
Accounts and notes receivable (Note 3):
Trade 41,837 48,166
Other 274 111
42,111 48,277
Inventories (Note 4) 43,457 40,304
Current deferred tax assets 984 1,005
Other current assets 798 831
Property held for resale 985 985
Total current assets 89,868 92,727
Property, Plant & Equipment-At Cost 42,419 43,561
Less Accumulated Depreciation (20,876) (20,956)
21,543 22,605
Property Held for Resale 4,187 4,545
Deferred Tax Assets 1,899 2,018
Other Assets 2,816 2,528
TOTAL ASSETS $120,313 $124,423
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $1,279 $1,266
Short-term borrowings (Note 5) 5,085 9,750
Accounts payable 20,221 18,065
Accrued payroll and employee benefits
payable 2,206 2,682
Other current liabilities 1,866 3,105
Total current liabilities 30,657 34,868
Long-Term Debt 24,807 25,034
Other Long-Term Liabilities 1,441 1,348
Stockholders' Equity:
Class A Common stock 102 102
Paid-in capital 35,163 35,148
Retained earnings 28,700 28,480
Treasury stock (557) (557)
Total stockholders' equity 63,408 63,173
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $120,313 $124,423
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE> L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
<CAPTION> Three Months
Ended
March 31,
1996 1995
<S> <C> <C>
Net Sales $48,303 $55,456
Costs and Expenses:
Cost of Goods Sold 42,104 49,032
Selling and Administrative Expenses 5,403 5,221
Interest Expense 564 580
Other (Income) Expense (128) 13
47,943 54,846
Income Before Income Taxes and
Cumulative Effect of Change in
Accounting Method 360 610
Income Taxes 140 208
Income Before Cumulative Effect
of Change in Accounting Method 220 402
Cumulative Effect of Change in
Accounting Method (Note 2) (219)
Net Income $ 220 $ 183
Earnings Per Common Share Before
Cumulative Effect of Change
in Accounting Method $ 0.02 $ 0.04
Earnings Per Common Share from
Cumulative Effect of Change in
Accounting Method (0.02)
Earnings Per Common Share (Note 6) $ 0.02 $ 0.02
Average Number of Common
Shares Outstanding 9,934 9,923
Cash Dividend per Common Share - -
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE> L. B. FOSTER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<CAPTION> Three Months
Ended March 31,
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $220 $183
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) by Operating Activities:
Deferred income taxes 140 284
Depreciation and amortization 874 649
Gain on sale of property, plant and equipment (178) (46)
Cumulative effect of change in accounting method 219
Change in Operating Assets and Liabilities:
Accounts receivable 6,166 2,177
Inventories (3,153) (4,785)
Property held for resale 358
Other current asset 33 137
Other non-current assets (288) (80)
Accounts payable-trade 2,156 2,869
Accrued payroll and employee benefits (476) (606)
Other current liabilities (1,239) (529)
Other liabilities 93 34
Net Cash Provided by Operating Activities 4,706 506
Cash Flows from Investing Activities:
Proceeds from sale of property, plant
and equipment 1,079 182
Capital expenditures on property, plant
and equipment (596) (755)
Net Cash Used by Investing Activities 483 (573)
Cash Flows from Financing Activities:
Proceeds from issuance of revolving credit
agreement borrowings (4,665) 200
Exercise of stock options 15
Repayments of long-term debt (331) (207)
Net Cash Used by Financing Activities (4,981) (7)
Net Increase (Decrease) in Cash and Cash Equivalents 208 (74)
Cash and Cash Equivalents at Beginning of
Period 1,325 1,180
Cash and Cash Equivalents at End of Period $ 1,533 $ 1,106
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 602 $ 583
Income Taxes Paid $ 34 $ 30
During 1996, the Company financed the purchase of certain capital
expenditures totaling $117,000 through the issuance of capital leases.
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
L. B. FOSTER COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all estimates and adjustments (consisting
of normal recurring accruals) considered necessary for a fair
presentation have been included, however, actual results could
differ from those estimates. Operating results for the three
months ended March 31, 1996 are not necessarily indicative of
the results that may be expected for the year ended December 31,
1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December
31, 1995.
2. ACCOUNTING PRINCIPLES
The Company adopted the provisions of the Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," in its financial statements for the year ended
December 31, 1995. The cumulative effect as of January 1, 1995,
of adopting Statement 121 decreased net income by $219,000, or
$0.02 per share.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement is effective for
fiscal years beginning after December 15, 1995. The Company
will continue to record stock-based compensation under the
provisions of APB 25, and will provide the disclosures and pro
forma results mandated by SFAS 123, for year end reporting.
3. ACCOUNTS RECEIVABLE
Credit is extended on an evaluation of the customer's financial
condition and, generally, collateral is not required. Credit
terms are consistent with industry standards and practices.
Trade accounts receivable at March 31, 1996 and December 31,
1995 have been reduced by an allowance for doubtful accounts of
$1,857,000 and $1,800,000, respectively. Bad debt expense was
$57,000 and $67,000 for the three month periods ended March 31,
1996 and 1995, respectively.
<PAGE>
4. INVENTORIES
Inventories of the Company at March 31, 1996 and December 31,
1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION> March 31, December 31,
1996 1995
<S> <C> <C>
Finished goods $ 33,370 $ 33,570
Work-in-process 9,619 6,687
Raw materials 3,305 2,659
Total inventories at current costs: 46,294 42,916
(Less):
Current costs over LIFO
stated values (2,237) (2,012)
Reserve for decline in
market value of inventories (600) (600)
$43,457 $40,304
</TABLE>
Inventories of the Company are generally valued at the lower of
last-in, first-out (LIFO) cost or market. Other inventories of
the Company are valued at average cost or market, whichever is
lower. An actual valuation of inventory under the LIFO method
can be made only at the end of each year based on the inventory
levels and costs at that time. Accordingly, interim LIFO
calculations must necessarily be based on management's estimates
of expected year-end levels and costs.
5. SHORT-TERM BORROWINGS
During 1995, the Company executed a restated and amended
revolving credit agreement. The amended agreement increased the
borrowing commitment available to $45 million from $40 million,
slightly reduced interest rates and extended the term of the
agreement to July 1, 1999. Borrowings under the agreement are
secured by accounts receivable and inventory.
The agreement includes financial covenants requiring a minimum
net worth, a fixed charge coverage ratio, a leverage ratio and a
current ratio. The agreement also places restrictions on
dividends, investments, capital expenditures, indebtedness and
sales of certain assets.
6. EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income by
the average number of Class A common shares and common stock
equivalents outstanding during the quarterly periods ending
March 31, 1996 and 1995 of approximately 9,934,000 and
9,923,000, respectively.
<PAGE>
Common stock equivalents are the net additional number of shares
which would be issuable upon the exercise of the outstanding
common stock warrants and common stock options, assuming that
the Company used the proceeds to purchase additional shares at
market value. Common stock equivalents had no material effect on
the computation of earnings per share for the periods ending
March 31, 1996 and 1995.
7. COMMITMENTS AND CONTINGENT LIABILITIES
The Company is subject to laws and regulations relating to the
protection of the environment and the Company's efforts to
comply with increasingly stringent environmental regulations may
have an adverse effect on the Company's future earnings. While
it is not possible to quantify with certainty the potential
impact of actions regarding environmental matters, particularly
any future remediation and other compliance efforts, in the
opinion of management, compliance with the present environmental
protection laws will not have a material adverse effect on the
financial position, competitive position, or capital
expenditures of the Company.
The Company is subject to legal proceedings and claims which
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 position
of the Company.
At March 31, 1996, the Company had outstanding letters of credit
of approximately $650,000.
<PAGE>
Management's Discussion And Analysis Of Financial Condition
and Results of Operations
<TABLE>
<CAPTION> Three Months Ended
March 31,
1996 1995
(Dollars in thousands)
<S>
Net Sales: <C> <C>
Rail Products $ 23,519 $ 21,130
Construction Products 16,018 19,215
Tubular Products 8,766 15,111
Total Net Sales 48,303 55,456
Gross Profit:
Rail Products 3,514 2,751
Construction Products 2,076 2,125
Tubular Products 609 1,548
Total Gross Profit 6,199 6,424
Expenses:
Selling and adminsitrative expenses 5,403 5,221
Interest expense 564 580
Other (income) expense (128) 13
Total Expenses 5,839 5,814
Income Before Income Taxes 360 610
Income Tax Expense 140 208
Income Before Cumulative Effect
of Change in Accounting Principle 220 402
Cumulative Effect of Change in
Accounting Principle (219)
Net Income $ 220 $ 183
</TABLE>
Results of Operations for the Three Months Ended March 31, 1996
The net income for the 1996 first quarter was $0.2 million or
$0.02 per share on net sales of $48 million. This compares to a
1995 first quarter net income of $0.2 million or $0.02 per share
on net sales of $55 million. The restated 1995 results included
a charge of $0.2 million relating to the adoption of SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of".
<PAGE>
Rail products' net sales in the 1996 first quarter of $23.5
million increased 12% from the comparable period last year as a
result of increased sales of rail products primarily associated
with the Port of Los Angeles project. Construction products'
first quarter net sales decreased 16%. The decline was
attributable to severe winter weather and the continued reduced
availability of piling products due to decreased production by a
major supplier. Tubular products' net sales in the quarter were
$8.8 million or a decrease of 42% which reflects the Company's
previously planned strategy to withdraw from the warehouse pipe
market. Changes in net sales are primarily the result of
changes in volume rather than changes in prices.
The gross margin percentage for the total company in the 1996
first quarter increased to 13% from 12% in the 1995 first
quarter. Rail products' gross margin percentage increased to
15% due primarily to higher margins on transit and relay rail
products. Construction products' gross margin percentage
increased to 13% due to a reduction in the sale of lower margin
piling products. The gross margin percentage for tubular
products decreased to 7% due to lower margins on coated pipe
products as the result of a planned shutdown of the Birmingham
facility for selected equipment upgrades.
Selling and administrative expenses increased 3% in the 1996
first quarter from the same period last year.
Liquidity and Capital Resources
The Company's ability to generate internal cash flow
("liquidity") results from the sale of inventory and the
collection of accounts receivable. During the first three
months of 1996, the average turnover rate for inventory
increased slightly from the prior year. The turnover rate for
accounts receivable during the first three months of 1996 was
slightly lower than during the same period of the prior year.
Working capital at March 31,1996 was $59.2 million compared to
$57.9 million at December 31, 1995.
During the first three months of 1996, the Company had capital
expenditures of $0.6 million. Capital expenditures in 1996 are
not expected to exceed $3.0 million and are anticipated to be
funded by cash flows from operations.
During 1995, the Company executed a restated and amended
revolving credit agreement. The amended agreement increased the
borrowing commitment available to $45 million from $40 million,
slightly reduced interest rates and extended the term of the
agreement to July 1, 1999. Borrowings under the agreement are
secured by accounts receivable and inventory.
Total revolving credit agreement borrowings at March 31, 1996
were $25.1 million or a decrease of $4.7 million from the end
of the prior year. At March 31, 1996, the Company had
approximately $19.3 million in available unused borrowing
commitment. Management believes its internal and external
sources of funds are adequate to meet anticipated needs.
<PAGE>
Other Matters
The Company currently owns stock with a book value of
approximately $2.0 million in a privately-held corporation. The
market value of the stock is not readily determinable and,
therefore, the investment is recorded in the Company's accounts
at its historical cost of $0.2 million. The Company has been
advised that plans are being formulated to sell this business.
Although no assurances can be given as to timing or results of
these plans, the Company believes that the potential sale price
could significantly exceed the privately-held corporation's book
value.
The Company has made a decision to divest its Fosterweld
operations. Exclusive discussions with a potential buyer
concerning the Parkersburg, West Virginia facility, which has
fixed assets and working capital with carrying values of
approximately $3.0 and $4.1 million respectively, are currently
ongoing. The outcome of these discussions, however, is
uncertain at this time. Additionally, the Company has reached
an agreement to sell its facility at Windsor, New Jersey, which
has fixed assets with a carrying value of $1.0 million. These
fixed assets have been classified on the consolidated balance
sheet as property held for resale. In February 1996, the
Company leased its Navasota, Texas pipe coupling facility to a
third party, with an option to purchase at $0.8 million.
Outlook
The Company's future operating results may be affected by a
number of factors. The Company is dependent upon a number of
major suppliers. If a supplier had operational problems or
ceased making material available to the Company, operations
could be adversely affected. The Company's operations are in
part dependent on governmental funding of infrastructure
projects. Significant changes in the level of government funding
of these projects could have a favorable or unfavorable impact
on the operating results of the Company. Additionally,
governmental actions concerning taxation, tariffs, the
environment or other matters could impact the operating
results of the Company. The Company's operations results may
also be affected by the weather.
Although backlog is not necessarily indicative of future
operating results, total Company backlog at March 31, 1996, was
approximately $95 million or 18% higher than at December 31,
1995 and 11% lower than at March 31, 1995. The following table
provides the backlog by business segment.
<PAGE>
<TABLE>
<CAPTION> Backlog
March 31, December 31,
1996 1995 1995
(Dollars in thousands)
<S> <C> <C> <C>
Rail Products $43,722 $58,762 $43,879
Construction Products 37,562 30,434 28,239
Tubular Products 13,872 17,827 8,857
Total Backlog $95,156 $107,023 $80,975
</TABLE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
Unless marked by an asterisk, all exhibits are incorporated herein
by reference:
3.1 Restated Certificate of Incorporation as amended to date
filed as Exhibit 3.1 to Form 10-Q for the quarter ended
March 31, 1987.
3.2 Bylaws of the Registrant, as amended to date, filed as
Exhibit 3.2 to Form 10-K for the year ended December 31, 1993.
4.1 Amended and Restated Loan Agreement by and amoung the
Registrant and Mellon Bank, N.A., NBD Bank, and
Corestates Bank, N.A. dated as of November 1, 1995 and
filed as Exhibit 4.1 to Form 10-K for the year ended
December 31, 1995.
10.15 Lease between the Registrant and Amax, Inc. for
manufacturing facility at Parkersburg, West Virginia,
dated as of October 19, 1978, filed as Exhibit 10.15 to
Registration Statement No. 2-72051.
10.16 Lease between Registrant and Greentree Building
Associates for Headquarters office, dated as of June 9,
1986, as amended to date, filed as Exhibit 10.16 to Form
10-K for the year ended December 31, 1988.
10.16.1 Amendment dated June 19, 1990 to lease between Registrant
and Greentree Building Associates, filed as Exhibit 10.16.1
to Form 10-Q for the quarter ended June 30, 1990.
10.19 Lease between the Registrant and American Cast Iron Pipe
Company for Pipe Coating Facility in Birmingham, Alabama
dated December 11, 1991 and filed as Exhibit 10.19 to
Form 10-K for the year ended December 31, 1991.
10.33.2 Amended and Restated 1985 Long-Term Incentive Plan, as
amended and restated March 2, 1994 and filed as Exhibit
10.33.2 to Form 10-K for the year ended December 31, 1993. **
10.45 Medical Reimbursement Plan filed as Exhibit 10.45 to Form
10-K for the year ended December 31, 1992. **
10.46 Leased Vehicle Plan as amended to date. Filed as Exhibit
10.46 to Form 10-K for the year ended December 31, 1993. **
10.49 Lease agreement between Newport Steel Corporation and
L.B. Foster Company dated as of October 12, 1994 and
filed as Exhibit 10.49 to Form 10-Q for the quarter ended
September 30, 1994.
10.50 L. B. Foster Company 1996 Incentive Compensation Plan.
Filed as Exhibit 10.50 to Form 10-K for the year ended
December 31, 1995. **
10.51 Supplemental Executive Retirement Plan. Filed as exhibit
10.51 to Form 10-K for the year ended December 31, 1994. **
19 Exhibits marked with an asterisk are filed herewith.
** Identified management contract or compensatory plan or
arrangement required to be filed as an exhibit.
b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Registrant during the
three month period ended March 31, 1996.
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
L. B. FOSTER COMPANY
(Registrant)
Date: May 10, 1996
By /s/ Roger F. Nejes
Roger F. Nejes
Sr. Vice President-
Finance and Administration
& Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer
of Registrant)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1553
<SECURITIES> 0
<RECEIVABLES> 42111
<ALLOWANCES> 1857
<INVENTORY> 43457
<CURRENT-ASSETS> 89868
<PP&E> 60156
<DEPRECIATION> 33468
<TOTAL-ASSETS> 120313
<CURRENT-LIABILITIES> 30657
<BONDS> 24807
0
0
<COMMON> 102
<OTHER-SE> 63863
<TOTAL-LIABILITY-AND-EQUITY> 120313
<SALES> 48303
<TOTAL-REVENUES> 48303
<CGS> 42104
<TOTAL-COSTS> 42104
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 564
<INCOME-PRETAX> 360
<INCOME-TAX> 140
<INCOME-CONTINUING> 220
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 220
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
