UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITES
EXCHANGE ACT OF 1934 (No Fee Required)
For the Fiscal Year Ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the Transition Period from __________ to __________
Commission File Number 0-10436
L. B. FOSTER COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1324733
(State of Incorporation) (I.R.S. Employer Identification No.)
415 Holiday Drive, Pittsburgh, Pennsylvania 15220
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (412) 928-3417
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
--------------------- ---------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
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 or this Form 10-K or any amendment to this
Form 10-K. [x]
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
-----
The aggregate market value on March 23, 2001 of the voting stock held by
nonaffiliates of the Company was $31,927,620. 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 March 23, 2001
----- -----------------------------
Common Stock, Par Value $.01 9,438,112 Shares
Documents Incorporated by Reference:
Portions of the Proxy Statement prepared for the 2001 annual meeting of
stockholders are incorporated by reference in Items 10, 11, 12 and 13 of Part
III.
PART I
ITEM 1. BUSINESS
Summary Description of Businesses
L. B. Foster Company is engaged in the manufacture, fabrication and distribution
of products that serve the nation's surface transportation infrastructure. As
used herein, "Foster" or the "Company" means L. B. Foster Company and its
divisions and subsidiaries, unless the context otherwise requires.
For rail markets, Foster provides a full line of new and used rail, trackwork,
and accessories to railroads, mines and industry. The Company also designs and
produces concrete railroad products, insulated rail joints, power rail, track
fasteners, coverboards, signaling and communication devices, and special
accessories for mass transit and other rail systems worldwide.
For the construction industry, the Company sells and rents steel sheet,
H-bearing and pipe piling for foundation and earth retention requirements. In
addition, Foster supplies bridge decking, expansion joints, mechanically
stabilized earth wall systems, precast concrete products and other products for
highway construction and repair.
For tubular markets, the Company supplies pipe coatings for natural gas
pipelines and utilities. The Company also produces threaded products for
industrial water well and irrigation markets.
The Company classifies its activities into three business segments: Rail
products, Construction products, and Tubular products. Financial information
concerning the segments is set forth in Note 20 to the financial statements
included in the Company's Annual Report to Stockholders for 2000. The following
table shows for the last three fiscal years the net sales generated by each of
the current business segments as a percentage of total net sales.
Percentage of Net Sales
- --------------------------------------------------------------------------------
2000 1999 1998
- --------------------------------------------------------------------------------
Rail Products 52% 59% 55%
Construction Products 40% 31% 24%
Tubular Products 8% 10% 21%
- --------------------------------------------------------------------------------
100% 100% 100%
================================================================================
As of January 1, 2000, the Company elected to change the reporting segment
of its Buildings division, acquired with the 1999 CXT Incorporated acquisition,
from rail to construction products. The 1999 results have been restated to
conform to the current presentation.
RAIL PRODUCTS
L. B. Foster Company's rail products include heavy and light rail, relay rail,
concrete ties, insulated rail joints, rail accessories, transit products and
signaling and communication devices. The Company is a major rail products
supplier to industrial plants, contractors, railroads, mines and mass transit
systems.
The Company sells heavy rail mainly to transit authorities, industrial
companies, and rail contractors for railroad sidings, plant trackage, and other
carrier and material handling applications. Additionally, the Company makes some
sales of heavy rail to railroad companies and to foreign buyers. The Company
sells light rail for mining and material handling applications.
Rail accessories include trackwork, ties, track spikes, bolts, angle bars and
other products required to install or maintain rail lines. These products are
sold to railroads, rail contractors and industrial customers and are
manufactured within the Company or purchased from other manufacturers.
The Company's Allegheny Rail Products (ARP) division engineers and markets
insulated rail joints and related accessories for the railroad and mass transit
industries, worldwide. Insulated joints are made in-house and subcontracted.
The Company's Transit Products division supplies power rail, direct fixation
fastener, coverboards and special accessories primarily for mass transit
systems. Most of these products are manufactured by subcontractors and are
usually sold by sealed bid to transit authorities or to rail contractors,
worldwide.
The Company's Mining division sells new and used rail, rail accessories,
trackwork from the Pomeroy, OH plant and iron clad ties from the Watson-Haas
Lumber division in St. Mary's, WV. The Pomeroy, OH plant also produces trackwork
for industrial and export markets.
The Company's Rail Technologies subsidiary develops rail signaling and
communication devices for North American railroads.
The Company's CXT subsidiary manufactures engineered concrete products for the
railroad and transit industries. CXT's product line includes prestressed
concrete railroad ties and grade railroad crossing panels.
CONSTRUCTION PRODUCTS
L. B. Foster Company's construction products consist of sheet and bearing
piling, fabricated highway products, and precast concrete buildings.
Sheet piling products are interlocking structural steel sections that are
generally used to provide lateral support at construction sites. Bearing piling
products are steel H-beam sections which, in their principal use, are driven
into the ground for support of structures such as bridge piers and high-rise
buildings. Sheet piling is sold or leased and bearing piling is sold principally
to contractors and construction companies.
Other construction products consist of precast concrete buildings, sold
principally to national parks, and fabricated highway products. Fabricated
highway products consist principally of bridge decking, aluminum bridge rail and
other bridge products, which are fabricated by the Company, as well as
mechanically stabilized earth wall systems. The major purchasers of these
products are contractors for state, municipal and other governmental projects.
Sales of the Company's construction products are partly dependent upon the level
of activity in the construction industry. Accordingly, sales of these products
have traditionally been somewhat higher during the second and third quarters
than during the first and fourth quarters of each year.
TUBULAR PRODUCTS
The Company provides fusion bond and other coatings for corrosion protection on
oil, gas and other pipelines. The Company also supplies special pipe products
such as water well casing, column pipe, couplings, and related products for
agricultural, municipal and industrial water wells.
MARKETING AND COMPETITION
L. B. Foster Company generally markets its rail, construction and tubular
products directly in all major industrial areas of the United States through a
national sales force of 46 salespeople. The Company maintains 19 sales offices
and 19 plants or warehouses nationwide. During 2000, less than 5% of the
Company's total sales were for export.
The major markets for the Company's products are highly competitive. Product
availability, quality, service and price are principal factors of competition
within each of these markets. No other company provides the same product mix to
the various markets the Company serves. There are one or more companies that
compete with the Company in each product line. Therefore, the Company faces
significant competition from different groups of companies.
RAW MATERIALS AND SUPPLIES
Most of the Company's inventory is purchased in the form of finished or
semifinished product. With the exception of relay rail which is purchased from
railroads or rail take-up contractors, the Company purchases most of its
inventory from domestic and foreign steel producers. There are few domestic
suppliers of new rail products and the Company could be adversely affected if a
domestic supplier ceased making such material available to the Company.
Additionally, the Company has become TXI Chaparral Steel's exclusive North
American distributor of steel sheet piling and H-bearing pile. See Note 18 to
the consolidated financial statements for additional information on this matter.
The Company's purchases from foreign suppliers are subject to the usual risks
associated with changes in international conditions and to United States laws
which could impose import restrictions on selected classes of products and
antidumping duties if products are sold in the United States below certain
prices.
BACKLOG
The dollar amount of firm, unfilled customer orders at December 31, 2000 and
1999 by segment follows:
(in thousands) December 31, 2000 December 31, 1999
- --------------------------------------------------------------------------------
Rail Products $ 86,351 $ 107,457
Construction Products 52,779 45,463
Tubular Products 2,219 2,012
- --------------------------------------------------------------------------------
$141,349 $ 154,932
================================================================================
The 1999 presentation has been restated to reflect the January 1, 2000 change in
reporting segment of the buildings division, acquired in the 1999 CXT
Incorporated acquisition, from rail to construction products. This change
resulted in a backlog shift of $3.6 million.
The reduction in Rail segment backlog reflects the effect of CXT long-term
production contracts. Total shipments under these contracts were $16.7 million
in 2000.
Aproximately 70% of the December 31, 2000 backlog is expected to ship in 2001.
RESEARCH AND DEVELOPMENT
The Company's expenditures for research and development are negligible.
ENVIRONMENTAL DISCLOSURES
While it is not possible to quantify with certainty the potential impact of
actions regarding environmental matters, particularly for future remediation and
other compliance efforts, in the opinion of management compliance with
environmental protection laws will not have a material adverse effect on the
financial condition, competitive position, or capital expenditures of the
Company. However, the Company's efforts to comply with stringent environmental
regulations may have an adverse effect on the Company's future earnings.
EMPLOYEES AND EMPLOYEE RELATIONS
The Company has 743 employees, of whom 439 are hourly production workers and 304
are salaried employees. Approximately 227 of the hourly paid employees are
represented by unions. The Company has not suffered any major work stoppages
during the past five years and considers its relations with its employees to be
satisfactory.
Substantially all of the Company's hourly paid employees are covered by one of
the Company's noncontributory, defined benefit plans and a defined contribution
plan. Substantially all of the Company's salaried employees are covered by a
defined contribution plan.
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 the properties, are set forth in the following table:
Business Lease
Location Function Acres Segment Expires
- -------- -------- ----- ------- -------
Birmingham,
Alabama Pipe coating. 32 Tubular 2007
Doraville,
Georgia Fabrication of 28 Tubular, Owned
components for Rail and
highways. Construction
Yard storage.
Niles, Ohio Rail fabrication. 35 Rail Owned
Yard storage.
Pomeroy, Ohio Trackwork manufac- 5 Rail Owned
turing.
Houston, Texas Casing, upset tub- 65 Tubular, Owned
ing, threading, Rail and
heat treating and Construction
painting. Yard
storage.
Bedford, Bridge component 10 Construction Owned
Pennsylvania fabricating plant.
Pittsburgh, Corporate Head- - Corporate 2007
Pennsylvania quarters.
Georgetown, Bridge component 11 Construction Owned
Massachusetts fabricating plant
Spokane, CXT concrete tie, 26 Rail 2003
Washington crossings and pre-
cast plants. Yard
storage.
Grand Island, CXT concrete tie 9 Rail 2003
Nebraska plant
Hillsboro, Precast concrete 9 Construction 2002
Texas facility
Including the properties listed above, the Company has 19 sales offices and 19
warehouse, plant and yard facilities located throughout the country. The
Company's facilities are in good condition and the Company believes that its
production facilities are adequate for its present and foreseeable requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company was convicted, after a jury trial in Houston, TX, of unlawful
disposal of used oil and hazardous waste at its facility in Houston, TX, and was
fined $170,000. The Company does not believe that these convictions are
justified and has appealed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
Stock Market Information
- ------------------------
The Company had 815 common shareholders of record on January 31, 2001. Common
stock prices are quoted daily through the National Association of Security
Dealers, Inc. in its over-the-counter NASDAQ quotation service (Symbol FSTR).
The quarterly high and low bid price quotations for common shares (which
represent prices between broker-dealers and do not include markup, markdown or
commission and may not necessarily represent actual transactions) follow:
2000 1999
- --------------------------------------------------------------------------------
Quarter High Low High Low
- --------------------------------------------------------------------------------
First $ 5 1/2 $ 4 $ 6 1/2 $ 4 9/16
- --------------------------------------------------------------------------------
Second 4 5/16 3 3/16 5 31/32 4 5/8
- --------------------------------------------------------------------------------
Third 4 3 3/16 5 15/16 4 13/16
- --------------------------------------------------------------------------------
Fourth 3 9/16 2 1/2 5 3/8 4 5/8
================================================================================
Dividends
- ---------
No cash dividends were paid on the Company's Common stock during 2000 and 1999.
================================================================================
ITEM 6. SELECTED FINANCIAL DATA
(All amounts are in thousands, except per share data)
Year Ended December 31,
Income Statement Data 2000 (1) 1999 1998 (2) 1997 1996
- --------------------------------------------------------------------------------
Net sales $264,614 $241,923 $219,449 $220,343 $243,071
- --------------------------------------------------------------------------------
Operating profit 6,920 9,327 8,478 7,912 8,195
- --------------------------------------------------------------------------------
Net income from
continuing operations 3,119 4,618 5,065 3,765 3,858
Income (loss) from
discontinued
operations,
net of tax 371 (2,115) (688) (478)
- --------------------------------------------------------------------------------
Net income 3,490 2,503 4,377 3,287 3,858
- --------------------------------------------------------------------------------
Basic earnings (loss)
per common share:
Continuing operations 0.33 0.48 0.51 0.37 0.39
Discontinued operations 0.04 (0.22) (0.07) (0.05)
- --------------------------------------------------------------------------------
Basic earnings per
common share 0.37 0.26 0.44 0.32 0.39
- --------------------------------------------------------------------------------
Diluted earnings (loss)
per common share:
Continuing operations 0.33 0.46 0.50 0.37 0.38
Discontinued operations 0.04 (0.21) (0.07) (0.05)
- --------------------------------------------------------------------------------
Diluted earnings per
common share 0.37 0.25 0.43 0.32 0.38
================================================================================
December 31,
Balance Sheet Data 2000 1999 1998 1997 1996
- --------------------------------------------------------------------------------
Total assets $177,147 $164,731 $119,434 $126,969 $123,004
- --------------------------------------------------------------------------------
Working capital 71,477 67,737 54,604 60,096 62,675
- --------------------------------------------------------------------------------
Long-term debt 43,484 44,136 13,829 17,530 21,816
- --------------------------------------------------------------------------------
Stockholders' equity 77,359 74,650 73,494 70,527 67,181
================================================================================
(1) 2000 includes pretax charges of approximately $1,349,000 related to the
Company's plan to consolidate sales and administrative functions and plant
operations, a pretax gain of approximately $800,000 on the sale of an
undeveloped 62-acre property located in Houston, TX, and an after-tax gain on
the sale of the Monitor Group, classified as a discontinued operation, of
$900,000.
(2) In 1998, the Company recognized a pretax gain on the sale of the Fosterweld
division of the tubular segment of approximately $1,700,000, a write-down of
approximately $900,000 on property subject to a sale negotiation, and a
provision for losses of approximately $900,000 relating to certain sign
structure contracts in the construction segment.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended Twelve Months Ended
December 31, December 31,
In thousands 2000 1999 2000 1999 1998
- --------------------------------------------------------------------------------
Net Sales:
Rail Products $ 31,215 $ 39,346 $138,635 $141,952 $121,271
Construction Products 23,184 23,299 106,280 75,010 51,870
Tubular Products 4,596 3,700 19,511 24,676 46,044
Other 10 27 188 285 264
- --------------------------------------------------------------------------------
Total Net Sales $ 59,005 $ 66,372 $264,614 $241,923 $219,449
================================================================================
Gross Profit:
Rail Products $ 3,629 $ 6,908 $ 16,762 $ 20,699 $ 18,675
Construction Products 4,440 3,918 18,157 13,412 9,440
Tubular Products 788 532 3,411 3,952 5,675
Other 267 (339) (496) (978) (578)
- --------------------------------------------------------------------------------
Total Gross Profit 9,124 11,019 37,834 37,085 33,212
- --------------------------------------------------------------------------------
Expenses:
Selling and Admin-
istrative Expenses 7,563 7,980 30,914 27,758 24,734
Interest Expense 1,097 1,072 4,227 3,230 1,631
Other Income (301) (293) (2,506) (1,184) (1,731)
- --------------------------------------------------------------------------------
Total Expenses 8,359 8,759 32,635 29,804 24,634
- --------------------------------------------------------------------------------
Income from Continuing
Operations,
Before Income Taxes 765 2,260 5,199 7,281 8,578
Income Tax Expense 306 859 2,080 2,663 3,513
- --------------------------------------------------------------------------------
Income from Continuing
Operations 459 1,401 3,119 4,618 5,065
Income (Loss) from
Discontinued Operations,
Net of Tax (1,448) 371 (2,115) (688)
- --------------------------------------------------------------------------------
Net Income (Loss) $ 459 $ (47) $ 3,490 $ 2,503 $ 4,377
================================================================================
Gross Profit %:
Rail Products 11.6% 17.6% 12.1% 14.6% 15.4%
Construction Products 19.2% 16.8% 17.1% 17.9% 18.2%
Tubular Products 17.1% 14.4% 17.5% 16.0% 12.3%
Total Gross Profit % 15.5% 16.6% 14.3% 15.3% 15.1%
================================================================================
As of January 1, 2000, the Company elected to change the reporting segment of
its Buildings division, acquired with the 1999 CXT acquisition, from rail to
construction products. The 1999 results have been restated to conform to the
current presentation.
FOURTH QUARTER OF 2000 VS. FOURTH QUARTER OF 1999
- ---------------------------------------------------------
The income from continuing operations for the current quarter was $0.46 million
or $0.05 per diluted share. This compares to a 1999 fourth quarter income from
continuing operations of $1.4 million or $0.14 per diluted share. Net sales in
2000 were $59.0 million or 11.1% lower than the comparable quarter last year.
The fourth quarter of 1999 included a nonrecurring, noncash charge of $1.2
million resulting from the Company's decision to classify the Monitor Group,
sold in September 2000, as a discontinued operation. Fourth quarter 1999 net
operating losses from the Monitor Group were $0.2 million.
Rail products' net sales of $31.2 million declined 20.7% from the 1999 fourth
quarter. This decline reflects the continuing downturn in the rail supply
industry as a result of reduced capital spending by the Class I railroads which
continues to adversely impact shipments and margins. Construction products' net
sales in the 2000 fourth quarter were consistent with the segment's sales in the
same period last year. Tubular products' net sales increased 24.2% from last
year's fourth quarter as threaded products shipments and pipe coating services
increased. Changes in net sales are primarily the result of changes in volume
rather than changes in pricing.
The gross margin percentage for the total Company declined to 15.5% in the 2000
fourth quarter from 16.6% in the same period last year. The gross margin
percentage for the rail products segment declined to 11.6% from 17.6% due to the
downturn in the rail supply industry which resulted in excess capacity and
pressure on margins throughout the rail supply industry. Construction products'
gross margin percentage increased to 19.2% from 16.8% due to increased margins
in Buildings division products and certain fabricated products. The gross margin
percentage for tubular products increased 2.7 percentage points in the fourth
quarter of 2000 from the same period last year primarily due to increased
utilization of the Birmingham plant.
Results for the fourth quarter of 2000 include a nonrecurring pretax charge of
$123,000 related to the Company's plan to improve its financial performance by
consolidating sales and administrative functions and plant operations. Selling
and administrative expenses declined 5.2% from the same period last year
principally due to a reduction in depreciation and amortization expense related
to the Monitor Group which was sold in September of 2000. The income tax
provision for the fourth quarter of 2000 was recorded at 40.0% compared to 38.0%
in the 1999 fourth quarter. See Note 13 to the consolidated financial statements
for more information regarding income taxes.
THE YEAR 2000 COMPARED TO THE YEAR 1999
- ---------------------------------------------
Income from continuing operations for 2000 was $3.1 million or $0.33 per diluted
share on net sales of $264.6 million. This compares to an income from continuing
operations of $4.6 million or $0.46 per diluted share on net sales of $241.9
million.
Net operating losses (net of tax) from the Monitor Group, classified as a
discontinued operation on December 31, 1999, were $0.5 million and $0.9 million
in 2000 and 1999, respectively. In September 2000, the Company sold the assets
of the Monitor Group for $1.5 million cash which resulted in a $0.9 million
gain, net of tax, reflected in discontinued operations.
Rail products' net sales declined 2.3% to $138.6 million despite the inclusion
of CXT Incorporated (CXT) results in 2000. Rail sales, excluding CXT results,
declined 14.5% from the prior year. The decline from the prior year reflects the
continuing downturn in the rail supply industry as a result of spending cutbacks
by the major railroads which continues to adversely impact shipments and
margins. Construction products' sales rose 41.7% as improved availability and
strong demand increased shipments of H-bearing pile and flat web sheet piling in
the first three quarters of 2000. Tubular products' sales declined 20.9% in 2000
versus 1999 as a result of a downturn in the pipe coating market during the
first nine months of 2000. Additionally, 1999 results included the sale of the
remaining coated pipe inventory from the Newport facility.
The gross margin percentages for the Company in 2000 and 1999 were 14.3% and
15.3%, respectively. Rail products' gross margin percentage declined to 12.1%
from 14.6% due to the continuing downturn in the rail supply industry which
resulted in excess capacity and pressure on margins throughout the rail supply
industry. The gross margin percentage for construction products declined 0.8
percentage points as improving results in the Buildings division offset lower
margins on sign structure projects. Tubular products' gross margin percentage
improved 1.5 percentage points due to more efficient operations at the
Langfield, TX pipe threading facility.
Results for 2000 include nonrecurring pretax charges totaling $1.35 million, of
the original $1.6 million estimate, related to the Company's plan to improve its
financial performance by consolidating sales and administrative functions and
plant operations. These charges are comprised of approximately $1.0 million
severance, of which $0.6 million had been paid prior to year-end, and $0.35
million asset impairments and other administrative costs. The Company expects to
record the balance as it implements the remaining portions of the plan during
2001 (see Other Matters). The costs accrued for the implemented programs were
based upon management estimates using the latest information available at the
time the accrual was established.
Selling and administrative expenses have increased 11.4% over last year due to
the inclusion of expenses associated with CXT operations and the special charges
previously mentioned. Interest expense increased over the prior year due to an
increase in outstanding borrowings associated with the acquisition of CXT in
June 1999. Other income in 2000 includes approximately $0.8 million from the
sale of a Houston, TX property, $0.8 million accrued dividend income on DM&E
Preferred Stock, $0.6 million DM&E interest income, and $0.3 million interest
collected on other receivables. The provision for income taxes was recorded at
40.0% in 2000 compared to 36.6% in 1999. The 1999 provision reflected the
implementation of certain one-time tax planning strategies. See Note 13 to the
consolidated financial statements for more information regarding income taxes.
THE YEAR 1999 COMPARED TO THE YEAR 1998
- ----------------------------------------------
Income from continuing operations for 1999 was $4.6 million or $0.48 per share
on net sales of $241.9 million. This compares to income from continuing
operations of $5.1 million or $0.51 per share for 1998 on net sales of $219.4
million.
Net operating losses from the Monitor Group, classified as a discontinued
operation on December 31, 1999, were $0.9 million in 1999 versus $0.7 million in
1998.
Rail products' 1999 net sales were $142.0 million compared to $121.3 million in
1998. This 17.1% increase was primarily due to sales by CXT. Additionally, new
rail and transit products' increased sales volumes offset lower volumes in
Allegheny Rail Products and relay rail products. Construction products' net
sales rose 44.6% to $75.0 million in 1999, as the Company benefitted from an
entire year of Foster geotechnical sales, as well as increased volume of
H-bearing pile, flat web sheet piling, and fabricated products shipments. Net
sales of tubular products declined 46.4% in 1999 as a result of the sale of the
Company's Fosterweld division and the closing of the Newport, KY pipe coating
facility.
The gross margin percentage for the Company was 15.3% in 1999 and 15.1% in 1998.
Rail products' gross margin percentage declined 0.8 percentage points from 1998,
primarily due to lower margins on certain relay rail, Allegheny Rail Products,
and transit projects. The gross profit percentage for construction products
remained at approximately 18.0% in 1999, as improved fabricated products and
geotechnical margins offset reduced piling margins. Tubular products' gross
margin percentage increased to 16.0% in 1999 from 12.3% in 1998 primarily due to
more efficient operations at the Langfield, TX pipe threading facility, and the
closure of the Newport, KY coated pipe facility.
Selling and administrative expenses for 1999 were 12.2% higher than in 1998. The
increase was primarily due to added expenses associated with the operation of
CXT, as well as an entire year of expenses related to the Company's Geotechnical
and Rail Technologies operations. Interest expense rose due to an increase in
outstanding borrowings, associated with the CXT acquisition. Other income in
1999 included dividend income and accrued interest on the DM&E stock owned by
the Company. The provision for income taxes in 1999 is recorded at 36.6% versus
41.0% in 1998. The decrease in the effective tax rate from 1998 is due primarily
to the effect of adjustments to prior year tax liabilities. See Note 13 to the
consolidated financial statements for more information regarding income taxes.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
The Company generates internal cash flow from the sale of inventory and the
collection of accounts receivable. During 2000, the average turnover rate for
accounts receivable was slightly higher than in 1999 due to the acquisition of
CXT. The average turnover rate for inventory was slower in 2000 than in 1999
particularly for relay rail and piling products. Working capital at December 31,
2000 was $71.5 million compared to $67.7 million in 1999.
During the first quarter of 1999, the Company announced a program to purchase up
to 1,000,000 shares of its common stock. As of December 31, 2000, 448,398 shares
had been purchased under this program at a cost of $2.2 million. The Company has
slowed its repurchasing activities, pending improved market conditions.
The Company had capital expenditures of approximately $4.1 million in 2000.
Capital expenditures for continuing operations in 2001 are expected to be at
similar levels, and are anticipated to be funded by cash flow from operations
and available external financing sources.
Total revolving credit agreement borrowings at December 31, 2000, were $46.5
million, an increase of $1.5 million from the end of the prior year. At December
31, 2000, the Company had $11.7 million in unused borrowing commitment.
Outstanding letters of credit at December 31, 2000, were $4.0 million.
Management believes its internal and external sources of funds are adequate to
meet anticipated needs.
In accordance with the original terms and conditions of the Company's revolving
credit agreement, the line of credit was reduced from $70.0 million to $64.0
million in September 2000 due to asset sales. The interest rate is, at the
Company's option, based on the Euro-bank rate (LIBOR), the domestic certificate
of deposit rate (CD rate), or the prime rate. The interest rates are established
quarterly based upon cash flow and the level of outstanding borrowings to debt
as defined in the agreement. Interest rates range from the LIBOR rate plus
0.575% to 1.8%, the CD rate plus 0.575% to 1.8%, and the prime rate to prime
plus 0.25%. Borrowings under the agreement, which expires July 1, 2003, are
secured by eligible accounts receivable, inventory, and the pledge of the
Company-held Dakota, Minnesota & Eastern Railroad Corporation Preferred Stock.
The agreement includes financial convenants requiring a minimum net worth, a
minimum level for the fixed charge coverage ratio, and a maximum level for the
consolidated total indebtedness to EBITDA ratio. The agreement also restricts
investments, indebtedness, and the sale of certain assets.
DAKOTA, MINNESOTA AND EASTERN RAILROAD
- ------------------------------------------
The Company maintains a significant investment in the Dakota, Minnesota &
Eastern Railroad Corporation (DM&E), a privately-held, regional railroad which
operates over 1,100 miles of track in five states.
At December 31, 2000, the Company's investment was comprised of, $0.2 million of
DM&E common stock, $1.5 million of Series B Preferred Stock and warrants and
$6.0 million of Series C Preferred Stock and warrants. On a fully diluted basis,
the Company owns approximately 16% of the DM&E's common stock. Although the
market value of the DM&E is not readily determinable, management believes that
this investment, regardless of the Powder River Basin project, is worth more
than its historical cost.
The DM&E announced in June 1997 that it plans to build an extension from the
DM&E's existing line into the low sulfur coal market of the Powder River Basin
in Wyoming and to rebuild approximately 600 miles of its existing track (the
Project). The estimated cost of this project is expected to be in excess of $1.5
billion.
The Project is subject to approval by the Surface Transportation Board (STB). In
December 1998, the STB made a finding that the DM&E had satisfied the
transportation aspects of applicable regulations. The STB issued a draft
environmental impact statement for the Project in September 2000, with a comment
period extending to March 6, 2001. New construction on this project may not
begin until the STB reaches a final decision.
The DM&E has stated that it could repay project debt and cover its operating
costs if it captures a 5% market share in the Powder River Basin. If the Project
proves to be viable, management believes that the value of the Company's
investment in the DM&E could increase dramatically.
OTHER MATTERS
- --------------
During the first quarter of 2001, the Company has committed to expand its
concrete products operations, primarily the fabrication of precast buildings. In
order to better serve the southwest and southern market areas, the Company has
entered into agreements to lease land, a building and production equipment in
Hillsboro, TX. The Company expects production to commence in the third quarter
of 2001.
Also in the first quarter of 2001, the Company made a decision to terminate
operations at its leased sign structure production facility in Ephrata, PA. The
backlog will be completed at the Company's Doraville, GA facility while
management evaluates the future of its sign structure operation. Costs related
to the closing of the Ephrata facility are expected to be immaterial.
The contemplated sale of the Doraville, GA location did not materialize and,
therefore, the buildings and approximately 28 acres of land at this location
have been reclassified from held for resale to property, plant and equipment.
The Company continues to use this facility in its operations.
In September 2000, the Company sold the assets of the Monitor Group for $1.5
million cash. Additional revenues may be derived from an earn-out agreement that
is based upon the buyer's future sales.
In August 2000, the Company contributed a note, having principal and interest of
approximately $2.7 million, to a limited liability company created by the
Company and its trackwork supplier in exchange for a 30% ownership position.
In March 2000, the Company sold an undeveloped 62-acre portion of a 127-acre
Houston, TX property for approximately $2.0 million. The pretax gain on the sale
was $0.8 million.
On June 30, 1999, the Company acquired all of the outstanding stock of CXT
Incorporated for approximately $17.5 million of which approximatley $4.2 million
was acquired goodwill. Based in Spokane, WA, CXT is a manufacturer of engineered
prestressed and precast concrete products primarily used in the railroad and
transit industries, and precast concrete buildings.
In September 1998, the Company suspended production at its Newport, KY pipe
coating facility due to unfavorable market conditions. During 2000, machinery
and equipment previously utilized in the facility were dismantled and
transferred to the Company's Birmingham, AL location. Management is actively
pursuing the sale of these assets.
In August 1998, the Company purchased assets primarily comprised of intellectual
properties related to the business of supplying rail signaling and communication
devices for approximately $1.7 million. Management is evaluating the performance
of this operation as product development has been slower than anticipated.
The Company continues to explore the divestiture of its Mining division, which
is comprised of facilities and inventory located at Pomeroy, OH and St Marys,
WV.
Management continues to evaluate the overall performance of its operations. A
decision to terminate an existing operation could have a material adverse effect
on near-term earnings but would not be expected to have a material adverse
effect on the financial condition of the Company.
OUTLOOK
- -------
The Company is TXI Chaparral's exclusive North American distributor of steel
sheet piling and H-bearing pile. Shipments of H-bearing pile began in the third
quarter of 1999 from Chaparral's Petersburg, VA facility. Current mill forecasts
indicate that production quantities of sheet piling will be available early in
the second quarter of 2001.
The Rail segment of the business depends on one source, in which the Company
currently maintains a 30% ownership position, for fulfilling certain trackwork
contracts. At December 31, 2000, the Company had inventory progress payments of
$6.1 million committed to this supplier. If, for any reason, this supplier is
unable to perform, the Company could experience a negative short-term effect on
earnings.
The Company's CXT subsidiary and Allegheny Rail Products division are dependent
on one Class I railroad customer for a significant portion of their business. In
addition, much of the Company's business depends 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 operating results may also be affected by adverse
weather conditions.
Although backlog is not necessarily indicative of future operating results,
total Company backlog at December 31, 2000, was approximately $141.3 million.
The following table provides the backlog by business segment:
December 31,
(in thousands) 2000 1999 1998
- --------------------------------------------------------------------------------
Backlog:
Rail Products $ 86,351 $ 107,457 $ 62,481
Construction Products 52,779 45,463 42,542
Tubular Products 2,219 2,012 3,541
- --------------------------------------------------------------------------------
Total Backlog $141,349 $ 154,932 $108,564
================================================================================
The 1999 presentation has been restated to reflect the January 1, 2000 change in
reporting segment of the Buildings division, acquired in the 1999 CXT
Incorporated acquisition, from rail to construction products. This change
resulted in a backlog shift of $3.6 million. The reduction in the Rail segment
backlog reflects the effect of CXT long-term production contracts. Total
shipments under these contracts were $16.7 million in 2000.
MARKET RISK AND RISK MANAGEMENT POLICIES
- ---------------------------------------------
The Company is not subject to significant exposure to change in foreign currency
exchange rates. The Company does, however, hedge the cash flows of the
operations of its Canadian subsidiary. The Company manages its exposures to
changes in foreign currency exchange rates on firm sales 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 sales
revenue over the duration of the transaction.
At year end, the Company had foreign currency forward contracts to purchase
$729,000 Canadian for approximately $488,000 US.
The Company has entered into an interest rate swap agreement as the fixed rate
payor to reduce the impact of changes in interest rates on a portion of its
revolving borrowings. At December 31, 2000, the swap agreement had a notional
value of $8,000,000 at 5.48%, which expired in January 2001. The swap
agreement's floating rate was based on LIBOR. Any amounts paid or received under
the agreement are recognized as adjustments to interest expense. Neither the
fair market value of the agreement nor the interest expense adjustments
associated with the agreement has been material. In addition, the Company has a
swap agreement to fix the interest rate of another financial transaction at
7.42%. The Company also agreed to pay additional interest for any period where
LIBOR exceeds 7.249%. At December 31, 2000, this swap agreement had a notional
value of $3,661,000 and expires in December 2004. The Company plans to enter
into additional swaps or other financial instruments to set all or a portion of
its borrowings at fixed rates.
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative financial instruments and hedging activities.
In June 1999, FASB Statement No. 137, "Accounting for Derivative Instruments and
Hedging Activities: Deferral of Effective Date of the FASB Statement No. 133,"
was issued. This statement delayed the effective date to all fiscal years
beginning after June 15, 2000. This statement will be adopted by the Company in
2001 and will not have a material effect on the consolidated financial
statements.
FORWARD-LOOKING STATEMENTS
- ---------------------------
Statements relating to the potential value or viability of the DM&E or the
Project, or management's belief as to such matters, are forward-looking
statements and are subject to numerous contingencies and risk factors. The
Company has based its assessments on information provided by the DM&E and has
not independently verified such information. In addition to matters mentioned
above, factors which can adversely affect the value of the DM&E, its ability to
complete the Project or the viability of the Project include the following:
labor disputes, any inability to obtain necessary environmental and governmental
approvals for the Project in a timely fashion, the expense of environmental
mitigation measures required by the Surface Transportation Board, an inability
to obtain financing for the Project, competitors' responses to the Project,
market demand for coal or electricity and changes in environmental and other
laws and regulations.
The Company wishes to caution readers that various factors could cause the
actual results of the Company to differ materially from those indicated by
forward-looking statements made from time to time in news releases, reports,
proxy statements, registration statements and other written communications
(including the preceding sections of this Management's Discussion and Analysis
of Financial Condition and Results of Operations), as well as oral statements
made from time to time by representatives of the Company. Additional delays in
TXI Chaparral's production of steel sheet piling would, for example, have an
adverse effect on the Company's performance. Except for historical information,
matters discussed in such oral and written communications are forward-looking
statements that involve risks and uncertainties, including but not limited to
general business conditions, the availability of material from major suppliers,
the impact of competition, the seasonality of the Company's business, taxes,
inflation and governmental regulations. Sentences containing words such as
"anticipates," "expects," or "will" generally should be considered
forward-looking statements.
/s/Roger F. Nejes
- -----------------------
Roger F. Nejes
Senior Vice President
Finance and Administration
Chief Financial Officer
/s/Linda K. Patterson
- -----------------------
Linda K. Patterson
Controller
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
L.B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
In thousands 2000 1999
- --------------------------------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ - $ 1,558
Accounts receivable - net 57,606 53,112
Inventories - net 59,811 45,601
Current deferred tax assets 2,055 1,925
Other current assets 373 981
Property held for resale 1,333 2,856
- --------------------------------------------------------------------------------
Total Current Assets 121,178 106,033
- --------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT - NET 33,023 30,126
- --------------------------------------------------------------------------------
PROPERTY HELD FOR RESALE 1,089 4,203
- --------------------------------------------------------------------------------
OTHER ASSETS:
Goodwill and other intangibles - net 6,772 7,474
Investments 9,423 8,610
Deferred tax assets 1,242 1,720
Other assets 4,420 6,565
- --------------------------------------------------------------------------------
Total Other Assets 21,857 24,369
- --------------------------------------------------------------------------------
TOTAL ASSETS $177,147 $164,731
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
In thousands, except share data
- --------------------------------------------------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 926 $ 1,141
Short-term borrowings 6,500 5,000
Accounts payable - trade 33,008 24,446
Accrued payroll and employee benefits 3,503 3,619
Current deferred tax liabilities 1,947 1,857
Other accrued liabilities 3,817 2,233
- --------------------------------------------------------------------------------
Total Current Liabilities 49,701 38,296
- --------------------------------------------------------------------------------
LONG-TERM DEBT 43,484 44,136
- --------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES 5,413 6,293
- --------------------------------------------------------------------------------
OTHER LONG-TERM LIABILITIES 1,190 1,356
- --------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 17)
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock, issued 10,228,739
shares in 2000 and 1999 102 102
Paid-in capital 35,306 35,377
Retained earnings 45,995 42,505
Treasury stock - at cost,
Common stock, 765,627 shares
in 2000 and 590,133 shares in 1999 (4,009) (3,364)
Accumulated other comprehensive
(loss) income (35) 30
- --------------------------------------------------------------------------------
Total Stockholders' Equity 77,359 74,650
- --------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $177,147 $164,731
================================================================================
See Notes to Consolidated Financial Statements.
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME FOR
THE THREE YEARS ENDED DECEMBER 31, 2000
In thousands, except per share data 2000 1999 1998
- --------------------------------------------------------------------------------
NET SALES $264,614 $241,923 $219,449
- --------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of goods sold 226,780 204,838 186,237
Selling and administrative expenses 30,914 27,758 24,734
Interest expense 4,227 3,230 1,631
Other income (2,506) (1,184) (1,731)
- --------------------------------------------------------------------------------
259,415 234,642 210,871
- --------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS,
BEFORE INCOME TAXES 5,199 7,281 8,578
INCOME TAX EXPENSE 2,080 2,663 3,513
- --------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 3,119 4,618 5,065
- --------------------------------------------------------------------------------
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF TAX 371 (2,115) (688)
- --------------------------------------------------------------------------------
NET INCOME $ 3,490 $ 2,503 $ 4,377
================================================================================
BASIC EARNINGS (LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.33 $ 0.48 $ 0.51
DISCONTINUED OPERATIONS 0.04 (0.22) (0.07)
- --------------------------------------------------------------------------------
BASIC EARNINGS PER COMMON SHARE $ 0.37 $ 0.26 $ 0.44
================================================================================
DILUTED EARNINGS (LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS $ 0.33 $ 0.46 $ 0.50
DISCONTINUED OPERATIONS 0.04 (0.21) (0.07)
- --------------------------------------------------------------------------------
DILUTED EARNINGS PER COMMON SHARE $ 0.37 $ 0.25 $ 0.43
================================================================================
See Notes to Consolidated Financial Statements.
L. B. FOSTER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE THREE YEARS ENDED DECEMBER 31, 2000
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 3,119 $ 4,618 $ 5,065
Adjustment to reconcile net income
to net cash provided
by operating activities:
Deferred income taxes (442) (133) 581
Depreciation and amortization 5,386 4,493 2,825
(Gain) loss on sale of property,
plant and equipment (879) 76 (1,360)
Change in operating assets
and liabilities:
Accounts receivable (4,494) 2,243 1,766
Inventories (14,210) (5,839) 3,253
Other current assets 608 (208) (46)
Other noncurrent assets 1,258 (839) (2,673)
Accounts payable - trade 8,562 544 8,394
Accrued payroll and employee
benefits (156) (1,576) 1,490
Other current liabilities 1,001 862 1,731
Other liabilities (166) 249 (1,099)
- --------------------------------------------------------------------------------
Net Cash (Used) Provided by
Continuing Operations (413) 4,490 19,927
Net Cash Provided (Used) by
Discontinued Operations 954 (1,159) (968)
- --------------------------------------------------------------------------------
Net Cash Provided by Operat-
ing Activities 541 3,331 18,959
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property,
plant and equipment 2,428 4,410 1,269
Proceeds from the sale of
Fosterweld division 7,258
Capital expenditures on property,
plant and equipment (4,085) (5,031) (2,514)
Purchase of DM&E stock (6,000)
Acquisition of businesses (17,514) (3,774)
- --------------------------------------------------------------------------------
Net Cash (Used) Provided by
Investing Activities (1,657) (24,135) 2,239
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds (repayments) of revolving
credit agreement borrowings 1,500 32,725 (20,836)
Proceeds from industrial revenue bond 2,045
Exercise of stock options and
stock awards 185 330 412
Treasury share transactions (901) (1,702) (1,808)
Repayments of long-term debt (1,207) (9,881) (1,293)
- --------------------------------------------------------------------------------
Net Cash (Used) Provided by
Financing Activities (423) 21,472 (21,480)
- --------------------------------------------------------------------------------
Effect of exchange rate changes
on cash (19) 16
- --------------------------------------------------------------------------------
Net (Decrease) Increase in Cash
and Cash Equivalents (1,558) 684 (282)
Cash and Cash Equivalents at
Beginning of Year 1,558 874 1,156
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at
End of Year $ - $ 1,558 $ 874
================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest Paid $ 4,266 $ 2,376 $ 1,839
================================================================================
Income Taxes Paid $ 1,932 $ 2,869 $ 2,136
================================================================================
During 2000, 1999 and 1998, the Company financed certain capital expenditures
totaling $340,000, $1,502,000 and $336,000, respectively, through the execution
of capital leases.
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 2000
Accum-
ulated
Other
Compre-
Treas- hensive
In thousands, Common Paid-in Retained ury Income/
except share data Stock Capital Earnings Stock (Loss) Total
================================================================================
Balance,
January 1, 1998 $ 102 $35,434 $35,625 $ (653) $ 19 $70,527
================================================================================
Net income 4,377 4,377
Other comprehensive
loss net of tax:
Foreign currency
translation
adjustment (14) (14)
- --------------------------------------------------------------------------------
Comprehensive income 4,363
Exercise of options
to purchase 93,200
shares of Common
stock (3) 415 412
Treasury stock purch-
ases of 330,989
shares (1,808) (1,808)
================================================================================
Balance,
December 31, 1998 102 35,431 40,002 (2,046) 5 73,494
================================================================================
Net income 2,503 2,503
Other comprehensive
income net of tax:
Foreign currency
translation
adjustment 25 25
- --------------------------------------------------------------------------------
Comprehensive income 2,528
Exercise of options
to purchase 39,000
shares of Common
stock (54) 384 330
Treasury stock purch-
ases of 288,809
shares (1,702) (1,702)
================================================================================
Balance,
December 31, 1999 102 35,377 42,505 (3,364) 30 74,650
================================================================================
Net income 3,490 3,490
Other comprehensive
loss net of tax:
Foreign currency
translation
adjustment (45) (45)
Minimum pension
liability
adjustment (20) (20)
- --------------------------------------------------------------------------------
Comprehensive income 3,425
Exercise of options
to purchase 35,500
shares of Common stock (71) 256 185
Treasury stock purch-
ases of 223,100 shares (901) (901)
================================================================================
Balance,
December 31, 2000 $ 102 $35,306 $45,995 $(4,009) $(35) $77,359
================================================================================
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
subsidiaries. All significant intercompany transactions have been eliminated.
The term "Company" refers to L. B. Foster Company and its subsidiaries, as the
context requires.
Cash equivalents - The Company considers securities with maturities of three
months or less, when purchased, to be cash equivalents.
Inventories - Inventories are generally valued at the lower of the last-in,
first-out (LIFO) cost or market. Approximately 13% in 2000 and 14% in 1999, of
the Company's inventory is valued at average cost or market, whichever is lower.
Property, plant and equipment - Maintenance, repairs and minor renewals are
charged to operations as incurred. Major renewals and betterments which
substantially extend the useful life of the property are capitalized. Upon sale
or other disposition of assets, the cost and related accumulated depreciation
and amortization are removed from the accounts and the resulting gain or loss,
if any, is reflected in income. Depreciation and amortization are provided on a
straight-line basis over the estimated useful lives of 30 to 40 years for
buildings and 3 to 10 years for machinery and equipment. Leasehold improvements
are amortized over 2 to 7 years which represent the lives of the respective
leases or the lives of the improvements, whichever is shorter.
Goodwill and other intangible assets - The Company's intangible assets consist
primarily of goodwill and acquired intellectual property. Goodwill recorded by
the Company represents the excess of the purchase price over the estimated fair
value of the net assets acquired. The Company amortizes intangible assets on a
straight-line basis over periods of 8 to 25 years and establishes useful lives
on the acquisition date based upon the asset's estimated future benefit. When
factors indicate the potential impairment of these assets, the excess of the
unamortized asset over the asset's estimated fair value, determined using a
multiple cash flows model, will be charged to operations. Amortization expense
was $743,000, $660,000 and $513,000 in 2000, 1999 and 1998, respectively.
Interest rate agreements - To offset exposures to changes in interest rates on
variable rate debt, the Company enters into interest rate swap agreements. The
effects of movements in interest rates on these instruments are recognized as
they occur.
Environmental remediation and compliance - Environmental remediation costs are
accrued when the liability is probable and costs are estimable. Environmental
compliance costs, which principally include the disposal of waste generated by
routine operations, are expensed as incurred. Capitalized environmental costs
are depreciated, when appropriate, over their useful life.
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.
Revenue recognition - The Company's revenues are composed of product sales and
products and services provided under long-term contracts. The Company recognizes
revenues upon shipment of material from stock inventory or upon billing of
material shipped directly to the customer from a Company vendor. Title passes to
the customer upon shipment. Revenues from long-term contracts are generally
recognized using the percentage-of-completion method based upon the proportion
of actual labor and engineering costs to estimated total labor and engineering
costs. For certain products, the Company recognizes revenues based upon the
units delivered compared to total units ordered by the customer.
As certain long-term contracts extend over one or more years, revisions to
estimates of costs and profits are reflected in the accounting period in which
the facts that require the revisions become known. At the time a loss on a
contract becomes known, the entire amount of the estimated loss is recognized in
the financial statements. The Company has historically made reasonable
dependable estimates of the extent of progress towards completion, contract
revenues, and contract costs on its long-term contracts. However, due to
uncertainties inherent in the estimation process, actual results could differ
materially from those estimates.
Revenue from contract change orders and claims is recognized when the settlement
is probable and the amount can be reasonably estimated, and customer approval
has been obtained. Contract costs include all direct material, labor,
subcontract costs and those indirect costs related to contract performance.
Costs and estimated profits in excess of billings are classified as a current
asset. Amounts billed in excess of costs and estimated profits are classified as
a current liability.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements," which
clarifies certain conditions to be met in order to recognize revenue. The
Company implemented SAB 101 in the fourth quarter of 2000. Adoption did not
significantly impact the Company's results.
Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles 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.
Stock-based compensation - The Company grants stock options for a fixed number
of shares to employees with an exercise price equal to the fair value of the
shares at the date of grant. The Company follows the requirements of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in
accounting for stock-based compensation, and, accordingly, recognizes no
compensation expense for stock option grants.
New accounting pronouncements - In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards for derivative financial
instruments and hedging activities. In June 1999, FASB Statement No. 137,
"Accounting for Derivative Instruments and Hedging Activities: Deferral of
Effective Date of the FASB Statement No. 133," was issued. This statement
delayed the effective date to all fiscal quarters of all fiscal years beginning
after June 15, 2000. This statement will be adopted by the Company in 2001 and
will not have a material effect on the consolidated financial statements.
Foreign currency translation - To avoid foreign exchange exposure whenever
possible, hedging techniques are used to protect transaction costs and profits.
NOTE 2.
ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 2000 and 1999 are summarized as follows:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Trade $58,036 $53,665
Allowance for doubtful accounts (1,564) (1,555)
Other 1,134 1,002
- --------------------------------------------------------------------------------
$57,606 $53,112
================================================================================
The Company's customers are principally in the rail, construction and tubular
segments of the economy. As of December 31, 2000 and 1999, trade receivables,
net of allowance for doubtful accounts, from customers in these markets were as
follows:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Rail $29,752 $33,278
Construction 23,722 17,116
Tubular 2,998 1,716
- --------------------------------------------------------------------------------
$56,472 $52,110
================================================================================
Credit is extended on an evaluation of the customer's financial condition and
generally collateral is not required.
NOTE 3.
INVENTORIES
Inventories at December 31, 2000 and 1999 are summarized as follows:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Finished goods $41,618 $28,755
Work-in-process 13,519 13,000
Raw materials 6,964 6,298
- --------------------------------------------------------------------------------
Total inventories at current costs 62,101 48,053
================================================================================
Less:
Current cost over LIFO
stated values (1,690) (1,852)
Inventory valuation reserve (600) (600)
- --------------------------------------------------------------------------------
$59,811 $45,601
================================================================================
At December 31, 2000 and 1999, the LIFO carrying value of inventories for book
purposes exceeded the LIFO value for tax purposes by approximately $4,524,000
and $3,966,000, respectively. A liquidation of certain LIFO inventory layers
occurred during 2000 and 1999. The majority of these quantities were carried at
costs which were higher than current purchases. The net effect of these
fluctuations in 2000 and 1999 was to increase cost of goods sold by $18,000 and
$531,000, respectively.
NOTE 4.
PROPERTY HELD FOR RESALE
Property held for resale at December 31, 2000 and 1999 consists of the
following:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Location:
Birmingham, AL $ 1,333 $ 1,345
Pomeroy, OH 653 665
St. Marys, WV 436 483
Doraville, GA 3,055
Houston, TX 1,511
- --------------------------------------------------------------------------------
Property held for resale 2,422 7,059
- --------------------------------------------------------------------------------
Less current portion 1,333 2,856
- --------------------------------------------------------------------------------
$1,089 $ 4,203
================================================================================
Operations at the Newport, KY facility were suspended in September 1998 in
response to unfavorable market conditions. In 1999, the Company recorded an
impairment loss of $183,000 to reduce these assets to their anticipated market
value. Machinery and equipment previously utilized in the Company's Newport, KY
pipe coating facility was dismantled and transferred to the Company's
Birmingham, AL location during 2000. Management is actively pursuing the sale of
these assets.
The Pomeroy, OH and St. Marys, WV locations, consisting of machinery and
equipment, buildings, land and land improvements which comprise the Company's
mining division of the rail products segment, were determined not to meet the
Company's long-range strategic goals. The Company continues to explore the
divestiture of these assets.
In 2000, the Company sold an undeveloped 62-acre portion of the 127-acre
Houston, TX property and recorded an approximate pretax gain of $800,000.
NOTE 5.
DISCONTINUED OPERATIONS
In the fourth quarter of 1999, the Company made the decision to discontinue the
operations of the Monitor Group, a developer of portable mass spectrometers, as
a discontinued operation, pending its sale. In September 2000, the Company sold
the assets of the Monitor Group for $1,500,000 cash. The decision to discontinue
the Monitor Group represents the disposal of a business segment under Accounting
Principles Board (APB) Opinion No. 30. Accordingly, results of this operation
have been classified as discontinued, and prior periods have been restated.
Net sales and income (loss) from the discontinued operations are as follows:
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
Net sales $ 1 $ 73 $ 26
- --------------------------------------------------------------------------------
Pretax operating loss $ (882) $ (1,347) $ (1,165)
Pretax provision for the
disposal of assets (1,984)
Pretax gain on disposal 1,500
Income tax (expense) benefit (247) 1,216 477
- --------------------------------------------------------------------------------
Income (loss) from
discontinued operations $ 371 $ (2,115) $ (688)
================================================================================
In 1999, the provision for the disposal of assets included a complete write-off
of all assets of the Monitor Group. The write-off consisted of the following
components, in thousands:
Intangibles $ 1,764
Inventory 209
Equipment 11
- --------------------------------------------------------------------------------
Total assets $ 1,984
================================================================================
NOTE 6.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 2000 and 1999 consists of the
following:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Land $ 6,312 $ 3,138
Improvements to land and leaseholds 6,019 4,777
Buildings 4,825 3,382
Machinery and equipment, including
equipment under capitalized
leases (see Note 14, Rental
and Lease Information) 41,008 38,703
Construction in progress 335 1,717
- --------------------------------------------------------------------------------
58,499 51,717
- --------------------------------------------------------------------------------
Less accumulated depreciation and
amortization, including accumulated
amortization of capitalized leases
(see Note 14, Rental and Lease
Information) 25,476 21,591
- --------------------------------------------------------------------------------
$33,023 $30,126
================================================================================
Prior year amounts have been reclassified to reflect adjustments in the fair
value estimate of assets acquired from CXT Incorporated.
NOTE 7.
OTHER ASSETS AND INVESTMENTS
The Company holds investments in the stock of the Dakota, Minnesota & Eastern
Railroad Corporation (DM&E), which is recorded at its historical cost at
December 31, 2000 and 1999 of $7,693,000. This investment is comprised of
$193,000 of DM&E Common Stock, $1,500,000 of DM&E Series B Preferred Stock and
Common Stock warrants, and $6,000,000 in DM&E Series C Preferred Stock and
Common Stock warrants. The Company has accrued dividend income on the Series B
and C Preferred Stock of $813,000 and $872,000 in 2000 and 1999, respectively.
Although the market value of the investments in DM&E stock are not readily
determinable, management believes the fair value of this investment exceeds its
carrying amount.
At December 31, 1999, other assets also included notes receivable and accrued
interest totaling $2,679,000 from investors in the DM&E. During 2000,
approximately $2,000,000 of the notes and interest were paid and the remaining
balance was reclassified to other accounts receivable in anticipation of the
repayment of the remaining balance during 2001.
In August 2000, the Company contributed a note, having a principal and interest
value of approximately $2,700,000, to a limited liability company created by the
Company and its trackwork supplier in exchange for a 30% ownership position. In
conjunction with the contribution, the Company recorded goodwill of
approximately $1,700,000, which is being amortized on a straight-line basis over
fifteen years.
NOTE 8.
BORROWINGS
During 2000, the Company reduced the revolving credit agreement to $64,025,000.
The interest rate is, at the Company's option, based on the Euro-bank rate
(LIBOR), the domestic certificate of deposit rate (CD rate) or the prime rate.
The interest rates are established quarterly based upon cash flow and the level
of outstanding borrowings to debt as defined in the agreement. Interest rates
range from the LIBOR rate plus 0.575% to 1.8%, the CD rate plus 0.575% to 1.8%,
and prime to prime plus 0.25%. Borrowings under the agreement, which expires
July 1, 2003, are secured by eligible accounts receivable, inventory, and the
pledge of the Company-held Dakota, Minnesota & Eastern Railroad Corporation
Preferred Stock.
The agreement includes financial covenants requiring a minimum net worth, a
minimum level for the fixed charge coverage ratio and a maximum level for the
consolidated total indebtedness to EBITDA ratio. The agreement also restricts
investments, indebtedness, and the sale of certain assets.
As of December 31, 2000, the Company was in compliance with all of the
agreement's covenants. At December 31, 2000, 1999 and 1998, the weighted average
interest rate on short-term borrowings was 8.12%, 6.78% and 6.95%, respectively.
At December 31, 2000, the Company had borrowed $46,500,000 under the agreement
of which $40,000,000 was classified as long-term (see Note 9). Under the
agreement, the Company had approximately $11,726,000 in unused borrowing
commitment at December 31, 2000.
NOTE 9.
LONG-TERM DEBT AND RELATED MATTERS
Long-term debt at December 31, 2000 and 1999 consists of the following:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Revolving Credit Agreement with
weighted average interest rate of
8.12% at December 31, 2000 and
6.78% at December 31, 1999,
expiring July 1, 2003 $40,000 $40,000
- --------------------------------------------------------------------------------
Lease obligations payable in
installments through 2004 with a
weighted average interest rate of
8.24% at December 31, 2000 and
8.07% at December 31, 1999 2,365 3,232
- --------------------------------------------------------------------------------
Massachusetts Industrial Revenue
Bond with an average interest
rate of 4.75% at December 31,
2000 and 3.53% at December 31,
1999, payable March 1, 2013 2,045 2,045
- --------------------------------------------------------------------------------
44,410 45,277
Less current maturities 926 1,141
- --------------------------------------------------------------------------------
$43,484 $44,136
================================================================================
The $40,000,000 revolving credit borrowings included in long-term debt were
obtained under the revolving loan agreement discussed in Note 8 and are subject
to the same terms and conditions. This portion of the borrowings is classified
as long-term because the Company does not anticipate reducing the borrowings
below $40,000,000 during 2001.
The Massachusetts Industrial Revenue Bond is secured by a $2,085,000 standby
letter of credit.
The Company has entered into an interest rate swap agreement as the fixed rate
payor to reduce the impact of changes in interest rates on a portion of its
revolving borrowings. At December 31, 2000, the swap agreement had a notional
value of $8,000,000 at 5.48%, which expired in January 2001. The swap
agreement's floating rate was based on LIBOR. Any amounts paid or received under
the agreement are recognized as adjustments to interest expense. Neither the
fair market value of the agreement nor the interest expense adjustments
associated with the agreement has been material. In addition, the Company has a
swap agreement to fix the interest rate of a financial transaction at 7.42%. The
Company also agreed to pay additional interest for any period where LIBOR
exceeds 7.249%. At December 31, 2000, this swap agreement had a notional value
of $3,661,000 and expires in December 2004. The Company plans to enter into
additional swaps or other financial instruments to set all or a portion of its
borrowings at fixed rates.
The maturities of long-term debt for each of the succeeding five years
subsequent to December 31, 2000 are as follows:
2001 - $926,000; 2002 - $778,000; 2003 - $40,506,000; 2004 - $155,000; 2005 and
after - $2,045,000.
NOTE 10.
STOCKHOLDERS' EQUITY
At December 31, 2000 and 1999, the Company had authorized shares of 20,000,000
in Common stock and 5,000,000 in Preferred stock. No Preferred Stock has been
issued. The Common stock has a par value of $.01 per share. No par value has
been assigned to the Preferred Stock.
The Company's Board of Directors authorized the purchase of up to 1,500,000
shares of its Common stock at prevailing market prices. The timing and extent of
the purchases will depend on market conditions. As of December 31, 2000, the
Company had repurchased 948,398 shares at a total cost of approximately
$4,941,800.
No cash dividends on Common stock were paid in 2000, 1999, or 1998.
NOTE 11.
STOCK OPTIONS
The Company has two stock option plans currently in effect under which future
grants may be issued: The 1985 Long-Term Incentive Plan (1985 Plan) and the 1998
Long-Term Incentive Plan (1998 Plan).
The 1985 Plan, as amended and restated in March 1994, provides for the award of
options to key employees and directors to purchase up to 1,500,000 shares of
Common stock at no less than 100% of fair market value on the date of the grant.
The 1998 Plan as amended and restated in February 1999, provides for the award
of options to key employees and directors to purchase up to 450,000 shares of
Common stock at no less than 100% of fair market value on the date of the grant.
Both Plans provide for the granting of "nonqualified options" and "incentive
stock options" with a duration of not more than ten years from the date of
grant. The Plans also provide that, unless otherwise set forth in the option
agreement, options are exercisable in installments of up to 25% annually
beginning one year from date of grant. Stock to be offered under the Plans may
be authorized from unissued Common stock or previously issued shares which have
been reacquired by the Company and held as Treasury shares. At December 31,
2000, 1999 and 1998, Common stock options outstanding under the Plans had option
prices ranging from $2.63 to $6.00, with a weighted average price of $4.26,
$4.24 and $3.96 per share, respectively.
The weighted average remaining contractual life of the stock options outstanding
for the three years ended December 31, 2000 are: 2000 - 7.1 years; 1999 - 6.3
years; and 1998 - 5.9 years.
The Option Committee of the Board of Directors which administers the Plans may,
at its discretion, grant stock appreciation rights at any time prior to six
months before an option's expiration date. Upon exercise of such rights, the
participant surrenders the exercisable portion of the option in exchange for
payment (in cash and/or Common stock valued at its fair market value) of an
amount not greater than the spread, if any, by which the average of the high and
low sales prices quoted in the Over-the-Counter Exchange on the trading day
immediately preceding the date of exercise of the stock appreciation right
exceeds the option price. No stock appreciation rights were issued or
outstanding during 2000, 1999 or 1998.
Options exercised during 2000, 1999 and 1998 totaled 35,500, 39,000 and 93,200
shares, respectively. The weighted average exercise price per share of the
options in 2000, 1999 and 1998 was $3.32, $3.35 and $3.31, respectively.
Certain information for the three years ended December 31, 2000 relative to
employee stock options is summarized as follows:
2000 1999 1998
- --------------------------------------------------------------------------------
Number of shares under
Incentive Plan:
Outstanding at
beginning of year 950,500 967,500 858,500
Granted 462,500 135,000 215,000
Canceled (190,000) (113,000) (12,800)
Exercised (35,500) (39,000) (93,200)
- --------------------------------------------------------------------------------
Outstanding at
end of year 1,187,500 950,500 967,500
================================================================================
Exercisable at
end of year 661,375 656,875 723,875
================================================================================
Number of shares available
for future grant:
Beginning of year 408,550 5,550 182,750
================================================================================
End of year 136,050 408,550 5,550
================================================================================
The weighted average fair value of options granted at December 31, 2000, 1999,
and 1998 was $2.26, $2.68 and $2.40, respectively.
The Company has adopted the disclose-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but applies Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations in accounting for its stock option plans. Accordingly, no
compensation expense has been recognized. Had compensation expense for the
Company's stock option plans been determined using the method required by SFAS
No. 123, the effect to the Company's income from continuing operations and
earnings per share would have been reduced to the pro forma amounts that follow:
In thousands, except
per share amounts 2000 1999 1998
- --------------------------------------------------------------------------------
Income from
continuing operations $2,804 $4,478 $4,887
================================================================================
Basic earnings per common
share from continuing
operations $ 0.29 $ 0.46 $ 0.49
================================================================================
Diluted earnings per
common share from
continuing operations $ 0.29 $ 0.45 $ 0.49
================================================================================
The fair value of stock options used to compute pro forma net income and
earnings per share disclosures is the estimated present value at grant date
using the Black-Sholes option-pricing model with the following weighted average
assumptions used for grants in 2000, 1999 and 1998, respectively: risk-free
interest rates of 6.02% , 6.14% and 4.77%; dividend yield of 0.0% for all three
years; volatility factors of the expected market price of the Company's Common
stock of .29, .30 and .31; and a weighted-average expected life of the option of
ten years.
Note 12.
Earnings Per Common Share
The following table sets forth the computation of basic and diluted earnings per
common share:
In thousands,except Years ended December 31,
per share amounts 2000 1999 1998
- --------------------------------------------------------------------------------
Numerator:
Numerator for basic
and diluted earnings
per common share -
net income available
to common stockholders:
Income from
continuing operations $ 3,119 $ 4,618 $ 5,065
Income (loss) from
discontinued operations 371 (2,115) (688)
- --------------------------------------------------------------------------------
Net income $ 3,490 $ 2,503 $ 4,377
================================================================================
Denominator:
Weighted average shares 9,490 9,664 9,988
- --------------------------------------------------------------------------------
Denominator for basic earnings
per common share 9,490 9,664 9,988
Effect of dilutive securities:
Contingent issuable shares
pursuant to the Company's
1999, 1998 & 1997 Bonus
Plan 53 51 15
Employee stock options 15 231 205
- --------------------------------------------------------------------------------
Dilutive potential common
shares 68 282 220
Denominator for diluted
earnings per common
share - adjusted weighted
average shares and
assumed conversions 9,558 9,946 10,208
================================================================================
Basic earnings (loss) per
common share:
Continuing operations $ 0.33 $ 0.48 $ 0.51
Discontinued operations 0.04 (0.22) (0.07)
- --------------------------------------------------------------------------------
Basic earnings per
common share $ 0.37 $ 0.26 $ 0.44
================================================================================
Diluted earnings (loss) per
common share:
Continuing operations $ 0.33 $ 0.46 $ 0.50
Discontinued operations 0.04 (0.21) (0.07)
- --------------------------------------------------------------------------------
Diluted earnings per
common share $ 0.37 $ 0.25 $ 0.43
================================================================================
Weighted average anti-
dilutive stock options 791 42 54
================================================================================
NOTE 13.
INCOME TAXES
At December 31, 2000 and 1999, the tax benefit of net operating loss
carryforwards available for foreign and state income tax purposes was
approximately $1,808,000 and $1,063,000, respectively. The Company also has
alternative minimum federal tax credit carryforwards at December 31, 2000 and
1999, of approximately $71,000 and $430,000, respectively. For financial
reporting purposes, a valuation allowance of $1,206,000 has been recognized to
offset the deferred tax assets related to the state and foreign income tax
carryforwards. The valuation allowance for deferred tax assets was increased by
$746,000 during 2000 and $335,000 during 1999. Deferred income taxes reflect the
net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for tax
purposes. Significant components of the Company's deferred tax liabilities and
assets as of December 31, 2000 and 1999, are as follows:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation $ 5,413 $ 5,537
Inventories 950 1,154
- --------------------------------------------------------------------------------
Total deferred tax liabilities 6,363 6,691
================================================================================
Deferred tax assets:
Accounts receivables 569 531
Net operating loss
carryforwards 1,808 1,063
Tax credit carryforwards 71 430
Other - net 1,058 622
- --------------------------------------------------------------------------------
Total deferred tax assets 3,506 2,646
Valuation allowance for
deferred tax assets 1,206 460
- --------------------------------------------------------------------------------
Deferred tax assets 2,300 2,186
- --------------------------------------------------------------------------------
Net deferred tax liability $ (4,063) $ (4,505)
================================================================================
Significant components of the provision for income taxes are as follows:
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
Current:
Federal $2,423 $2,746 $2,594
State 99 50 338
- --------------------------------------------------------------------------------
Total current 2,522 2,796 2,932
================================================================================
Deferred:
Federal (398) 8 507
Foreign 32 (106)
State (44) (173) 180
- --------------------------------------------------------------------------------
Total deferred (442) (133) 581
================================================================================
Total income tax
expense $2,080 $2,663 $3,513
================================================================================
The reconciliation of income tax computed at statutory rates to income tax
expense (benefit) is as follows:
2000 1999 1998
- --------------------------------------------------------------------------------
Statutory rate 34.0% 34.0% 34.0%
State income tax 0.8 (2.1) 4.6
Foreign income tax 5.1 8.4 1.3
Nondeductible expenses 0.1 3.9 1.8
Prior period tax (7.0) (0.3)
Other (0.6) (0.4)
- --------------------------------------------------------------------------------
40.0% 36.6% 41.0%
================================================================================
NOTE 14.
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, 2000, 1999, and 1998 amounted to $4,256,000, $2,449,000 and $1,885,000,
respectively. Generally, the land and building leases include escalation
clauses.
On December 30, 1999, the Company entered into a $4,200,000 sale-leaseback
transaction whereby the Company sold and leased back the assets of the Grand
Island, NE facility. The resulting lease is being accounted for as an operating
lease. There was no gain or loss recorded on the sale. The lease base term is
five years with balloon payment options at amounts approximating fair value at
the end of the base term. The interest rate for this transaction is 7.42% with
escalation provisions if LIBOR exceeds 7.249%.
The following is a schedule, by year, of the future minimum payments under
capital and operating leases, together with the present value of the net minimum
payments as of December 31, 2000:
Capital Operating
In thousands Leases Leases
- --------------------------------------------------------------------------------
Year ending December 31,
2001 $ 1,084 $ 2,864
2002 862 2,782
2003 537 2,245
2004 159 1,680
2005 and thereafter 1,657
- --------------------------------------------------------------------------------
Total minimum lease payments 2,642 $11,228
Less amount representing interest 277
- --------------------------------------------------------------------------------
Total present value of minimum
payments 2,365
Less current portion of such
obligations 926
- --------------------------------------------------------------------------------
Long-term obligations with
interest rates ranging from
3.66% to 11.0% $ 1,439
================================================================================
Assets recorded under capital leases are as follows:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Machinery and equipment,
at cost $2,689 $4,117
Construction in progress 32 180
- --------------------------------------------------------------------------------
2,721 4,297
Less accumulated amortization 943 1,757
- --------------------------------------------------------------------------------
Net property, plant and
equipment 1,778 2,540
- --------------------------------------------------------------------------------
Machinery and equipment held
for resale, at cost 2,037 2,046
Less accumulated amortization/
valuation 828 843
- --------------------------------------------------------------------------------
Net property held for resale 1,209 1,203
Net prepaid expenses 98 121
- --------------------------------------------------------------------------------
Net capital lease assets $3,085 $3,864
================================================================================
NOTE 15.
ACQUISITIONS
On June 30, 1999, the Company acquired all of the outstanding stock of CXT
Incorporated, a Spokane, WA based manufacturer of engineered prestressed and
precast concrete products primarily used in the railroad and transit industries.
The acquisition has been recorded using the purchase method of accounting and
has been included in operations since the date of acquisition. The purchase
price of $17,514,000 has been allocated based on the fair values of the assets
acquired and liabilities assumed, as of the acquisition date. This allocation
has resulted in acquired goodwill of approximately $4,221,000, which is being
amortized on a straight-line basis over twenty years.
Had the CXT acquisition been made at the beginning of 1998, the Company's pro
forma unaudited results would have been:
Twelve Months Ended
In thousands except December 31,
per share amounts 1999 1998
- --------------------------------------------------------------------------------
Net sales $261,588 $251,553
Income from continuing
operations 4,762 4,213
Basic earnings per share
from continuing operations $0.49 $0.42
================================================================================
The unaudited pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations which would
have actually resulted had the acquisition been in effect on January 1, 1998, or
of future results of operations.
NOTE 16.
RETIREMENT PLANS
Substantially all of the Company's hourly paid employees are covered by one of
the Company's noncontributory, defined benefit plans and a defined contribution
plan. Substantially all of the Company's salaried employees are covered by a
defined contribution plan established by the Company.
The hourly plan assets consist of various mutual fund investments. 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 plan, with the
accrued pension cost in other current liabilities in the Company's consolidated
balance sheets:
In thousands 2000 1999
- --------------------------------------------------------------------------------
Changes in benefit obligation:
Benefit obligation at beginning
of year $ 2,452 $ 2,295
Service cost 61 77
Interest cost 179 155
Actuarial losses 186 8
Benefits paid (131) (83)
- --------------------------------------------------------------------------------
Benefit obligation at end
of year $ 2,747 $ 2,452
================================================================================
Change to plan assets:
Fair value of assets at
beginning of year $ 2,718 $ 2,287
Actual return on plan assets (204) 468
Employer contribution 46
Benefits paid (131) (83)
- --------------------------------------------------------------------------------
Fair value of assets at
end of year $ 2,383 $ 2,718
================================================================================
Funded status $ (364) $ 266
Unrecognized actuarial loss (gain) 143 (478)
Unrecognized net transition
asset (73) (83)
Unrecognized prior service
cost 64 73
Minimum pension liability (104) (18)
- --------------------------------------------------------------------------------
Net amount recognized $ (334) $ (240)
================================================================================
Amounts recognized in the
statement of financial
position consist of:
Accrued benefit cost $ (240) $ (213)
Accrued benefit liability (16) (27)
Other (78)
- --------------------------------------------------------------------------------
Net amount recognized $ (334) $ (240)
================================================================================
The Company's funding policy for defined benefit plans is to contribute the
minimum required by the Employee Retirement Income Security Act of 1974. Net
periodic pension costs for the three years ended December 31, 2000, are as
follows:
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
Components of net
periodic benefit cost:
Service cost $ 61 $ 77 $ 85
Interest cost 179 155 147
Actual return on
plan assets 204 (468) (212)
Amortization of prior
service cost (16) (2) 7
Recognized actuarial (loss) gain (420) 287 31
- --------------------------------------------------------------------------------
Net periodic
benefit cost $ 8 $ 49 $ 58
================================================================================
An assumed discount rate of 7% and an expected rate of return on plan assets of
8% were used to measure the projected benefit obligation and develop net
periodic pension costs for the three years ended December 31, 2000.
Amounts applicable to the Company's pension plans with accumulated benefit
obligations in excess of plan assets are as follows:
In thousands 2000 1999 1998
- --------------------------------------------------------------------------------
Projected benefit obligation $ 2,747 $ 657 $ 575
Accumulated benefit obligation 2,718 657 575
Fair value of plan assets 2,383 629 499
================================================================================
The Company's defined contribution plan, available to substantially all salaried
employees, contains a matched savings provision that permits both pretax and
after-tax employee contributions. Participants can contribute from 2% to 15% of
their annual compensation and receive a matching employer contribution on up to
3% of their annual compensation.
Further, the plan requires an additional matching employer contribution, based
on the ratio of the Company's pretax income to equity, up to 3% of the
employees' annual compensation. Additionally, the Company contributes 1% of all
salaried employees annual compensation to the plan without regard for employee
contribution. The defined contribution plan expense was $877,000 in 2000,
$863,000 in 1999, and $874,000 in 1998.
NOTE 17.
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. In the opinion of management, compliance with the present
environmental protection laws will not have a material adverse effect on the
financial condition, results of operations, cash flows, competitive position, or
capital expenditures of the Company.
The Company is subject to legal proceedings and claims 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 December 31, 2000, the Company had outstanding letters of credit of
approximately $3,969,000.
NOTE 18.
RISKS AND UNCERTAINTIES
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 has become TXI Chaparral's exclusive North American distributor of
steel sheet piling and H-bearing pile. Shipments of H-bearing pile began very
late in the third quarter of 1999 from TXI Chaparral's new Petersburg, VA
facility. Current mill forecasts indicate that meaningful quantities of sheet
piling are expected early in the second quarter of 2001.
The rail segment of the business depends on one source, in which the Company
currently maintains a 30% ownership position, for fulfilling certain trackwork
contracts. At December 31, 2000, the Company had inventory progress payments of
$6,070,000 committed to this supplier. If, for any reason, this supplier is
unable to perform, the Company could experience a negative short-term effect on
earnings.
The Company's CXT subsidiary and Allegheny Rail Products division are dependent
on one customer for a significant portion of their business. In addition, a
substantial portion of the Company's operations are heavily dependent on
governmental funding of infrastructure projects. Significant changes in the
level of government funding of these projects could have a favorable or
unfavorable impact on the operating results of the Company. Additionally,
governmental actions concerning taxation, tariffs, the environment or other
matters could impact the operating results of the Company. The Company's
operating results may also be affected by adverse weather conditions.
NOTE 19.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of accounts receivable, accounts
payable, short-term and long-term debt, and interest rate swap agreements.
The carrying amounts of the Company's financial instruments at December 31, 2000
approximate fair value.
NOTE 20.
BUSINESS SEGMENTS
L. B. Foster Company is organized and evaluated by product group, which is the
basis for identifying reportable segments. The Company is engaged in the
manufacture, fabrication and distribution of rail, construction and tubular
products and was previously engaged in the development of portable mass
spectrometers.
The Company's rail segment provides a full line of new and used rail, trackwork
and accessories to railroads, mines and industry. The Company also designs and
produces concrete ties, bonded rail joints, power rail, track fasteners,
coverboards and special accessories for mass transit and other rail systems.
The Company's construction segment sells and rents steel sheet piling and
H-bearing pile for foundation and earth retention requirements. In addition, the
Company's Fabricated Products division sells bridge decking, heavy steel
fabrications, expansion joints, sign structures and other products for highway
construction and repair. The Company's Geotechnical division designs and
supplies mechanically-stabilized earth wall systems. The Company's Buildings
division produces concrete buildings.
The Company's tubular segment supplies pipe coatings for pipelines and
utilities. Additionally, the Company also produces pipe-related products for
special markets, including water wells and irrigation.
The Company markets its products directly in all major industrial areas of the
United States primarily through a national sales force.
The following table illustrates revenues, profits, assets,
depreciation/amortization and capital expenditures of the Company by segment.
Segment profit is the earnings before income taxes and includes internal cost of
capital charges for assets used in the segment at a rate of, generally, 1% per
month. 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.
In thousands 2000
- ----------------------------------------------------------------------------------------------------------------
Expenditures
Net Segment Segment Depreciation/ for Long-Lived
Sales Profit/(Loss) Assets Amortization Assets
- ----------------------------------------------------------------------------------------------------------------
Rail Products $138,635 $ (1,060) $ 85,706 $ 2,614 $ 1,600
Construction Products 106,280 4,429 53,944 1,391 2,261
Tubular Products 19,511 1,531 9,058 630 211
- ----------------------------------------------------------------------------------------------------------------
Total $264,426 $ 4,900 $ 148,708 $ 4,635 $ 4,072
================================================================================================================
In thousands 1999
- ----------------------------------------------------------------------------------------------------------------
Expenditures
Net Segment Segment Depreciation/ for Long-Lived
Sales Profit Assets Amortization Assets
- ----------------------------------------------------------------------------------------------------------------
Rail Products $141,952 $ 4,120 $ 87,419 $ 700 $ 20,097
Construction Products 75,010 2,256 35,456 1,050 3,493
Tubular Products 24,676 1,889 8,270 772 323
- ----------------------------------------------------------------------------------------------------------------
Total $241,638 $ 8,265 $ 131,145 $ 2,522 $ 23,913
================================================================================================================
In thousands 1998
- ----------------------------------------------------------------------------------------------------------------
Expenditures
Net Segment Segment Depreciation/ for Long-Lived
Sales Profit Assets Amortization Assets
- ----------------------------------------------------------------------------------------------------------------
Rail Products $121,271 $ 6,320 $ 60,500 $ 470 $ 1,042
Construction Products 51,870 551 26,063 667 2,022
Tubular Products 46,044 1,698 13,437 1,043 771
- ----------------------------------------------------------------------------------------------------------------
Total $219,185 $ 8,569 $ 100,000 $ 2,180 $ 3,835
================================================================================================================
The 1999 results have been restated to reflect the January 1, 2000 change in
reporting segment classification of the Buildings division, acquired with the
1999 CXT acquisition, from rail to construction.
Sales to any individual customer do not exceed 10% of consolidated revenues.
Sales between segments are immaterial.
Reconciliations of reportable segment net sales, profit, assets, depreciation
and amortization, and expenditures for long-lived assets to the Company's
consolidated totals are illustrated as follows:
In thousands
- ----------------------------------------------------------------------------------------------------------------
Net Sales 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------
Total for reportable segments $ 264,426 $ 241,638 $ 219,185
Other net sales 188 285 264
- ----------------------------------------------------------------------------------------------------------------
$ 264,614 $ 241,923 $ 219,449
================================================================================================================
Net Profit
- ----------------------------------------------------------------------------------------------------------------
Total for reportable segments $ 4,900 $ 8,265 $ 8,569
Adjustment of inventory to LIFO 162 332 426
Unallocated other income 2,506 1,184 1,731
Other unallocated amounts (2,369) (2,500) (2,148)
- ----------------------------------------------------------------------------------------------------------------
Income from continuing operations,
before income taxes $ 5,199 $ 7,281 $ 8,578
================================================================================================================
Assets
- ----------------------------------------------------------------------------------------------------------------
Total for reportable segments $ 148,708 $ 131,145 $ 100,000
Unallocated corporate assets 23,913 27,527 13,919
LIFO and market value inventory reserves (2,290) (2,452) (2,784)
Unallocated property, plant and equipment 6,816 8,511 8,299
- ----------------------------------------------------------------------------------------------------------------
Total assets $ 177,147 $ 164,731 $ 119,434
================================================================================================================
Depreciation/Amortization
- ----------------------------------------------------------------------------------------------------------------
Total reportable for segments $ 4,635 $ 2,522 $ 2,180
Other 751 1,971 645
- ----------------------------------------------------------------------------------------------------------------
$ 5,386 $ 4,493 $ 2,825
================================================================================================================
Expenditures for Long-Lived Assets
- ----------------------------------------------------------------------------------------------------------------
Total for reportable segments $ 4,072 $ 23,913 $ 3,835
Expenditures included in acquisition of business (17,961) (1,069)
Expenditures financed under capital leases (340) (1,386)
Expenditures included in property held for sale (99) (30) (60)
Other unallocated expenditures 353 465 69
- ----------------------------------------------------------------------------------------------------------------
$ 3,986 $ 5,001 $ 2,775
================================================================================================================
Approximately 96% of the Company's total net sales were to customers in the
United States, and a majority of the remaining sales were to other North
American countries.
All of the Company's long-lived assets are located in North America and almost
100% of those assets are located in the United States.
NOTE 21.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended December 31, 2000 and 1999
is presented below:
In thousands, except per share amounts 2000
- ---------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter(1) (2) Quarter (1) Quarter (1)(2)(3) Quarter (1) Total
- ---------------------------------------------------------------------------------------------------------------------
Net sales $ 59,489 $ 71,692 $ 74,428 $ 59,005 $ 264,614
- ---------------------------------------------------------------------------------------------------------------------
Gross profit $ 8,311 $ 10,240 $ 10,159 $ 9,124 $ 37,834
- ---------------------------------------------------------------------------------------------------------------------
Income from continuing operations $ 328 $ 950 $ 1,382 $ 459 $ 3,119
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations $ (176) $ (189) $ 736 $ 0 $ 371
- ---------------------------------------------------------------------------------------------------------------------
Net income $ 152 $ 761 $ 2,118 $ 459 $ 3,490
=====================================================================================================================
Basic earnings (loss) per common share:
From continuing operations $ 0.04 $ 0.10 $ 0.15 $ 0.05 $ 0.33
From discontinued operations ( 0.02) (0.02) 0.08 0.00 0.04
- ---------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.02 $ 0.08 $ 0.23 $ 0.05 $ 0.37
=====================================================================================================================
Diluted earnings (loss) per common share:
From continuing operations $ 0.04 $ 0.10 $ 0.15 $ 0.05 $ 0.33
From discontinued operations (0.02) (0.02) 0.08 0.00 0.04
- ---------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.02 $ 0.08 $ 0.23 $ 0.05 $ 0.37
=====================================================================================================================
(1) The quarterly results include charges related to the Company's previously
announced plan of consolidating sales and administrative functions and plant
operations. For the first, second, third and fourth quarters, these pretax
charges were $503,000, $608,000, $115,000 and $123,000, respectively. (2) The
first quarter results include an estimated pre-tax gain of $100,000 on the sale
of an undeveloped 62-acre portion of property located in Houston, TX for
approximately $2,000,000. The sale was finalized in the third quarter and an
additional pre-tax gain of $700,000 was recognized at that time. (3) The third
quarter includes an after-tax gain on the sale of the Monitor Group of $900,000
which was classified as a discontinued operation.
In thousands, except per share amounts 1999
- --------------------------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter(1) Quarter (1) Quarter (1)(2) Quarter(2) Total
- --------------------------------------------------------------------------------------------------------------------
Net sales $ 53,783 $ 58,743 $ 63,025 $ 66,372 $ 241,923
- --------------------------------------------------------------------------------------------------------------------
Gross profit $ 7,159 $ 8,945 $ 9,962 $ 11,019 $ 37,085
- --------------------------------------------------------------------------------------------------------------------
Income from continuing operations $ 694 $ 1,497 $ 1,026 $ 1,401 $ 4,618
- --------------------------------------------------------------------------------------------------------------------
Loss from discontinued operations $ (234) $ (259) $ (174) $ (1,448) $ (2,115)
- --------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 460 $ 1,238 $ 852 $ (47) $ 2,503
====================================================================================================================
Basic earnings (loss) per common share:
From continuing operations $ 0.07 $ 0.15 $ 0.11 $ 0.15 $ 0.48
From discontinued operations (0.02) (0.03) (0.02) (0.15) (0.22)
- --------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.05 $ 0.12 $ 0.09 $ 0.00 $ 0.26
====================================================================================================================
Diluted earnings (loss) per common share:
From continuing operations $ 0.07 $ 0.15 $ 0.11 $ 0.14 $ 0.46
From discontinued operations (0.02) (0.03) (0.02) (0.14) (0.21)
- --------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.05 $ 0.12 $ 0.09 $ 0.00 $ 0.25
====================================================================================================================
(1) The first, second and third quarters were restated to reflect the
classification of the Monitor Group as a discontinued operation. (2) The second
half results reflect the June 30, 1999 acquisition of CXT, Incorporated which
accounted for the majority of the reported sales increase.
REPORT OF INDEPENDENT AUDITORS AND RESPONSIBILITY FOR FINANCIAL STATEMENTS
To the Board of Directors and Stockholders of L. B. Foster Company:
We have audited the accompanying consolidated balance sheets of L. B. Foster
Company and subsidiaries at December 31, 2000 and 1999, and the related
consolidated statements of income, cash flows and stockholders' equity for each
of the three years in the period ended December 31, 2000. Our audits also
included the financial statement schedule listed in the index at Item 14 (a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the 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 assessing 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 consolidated financial position of L. B. Foster
Company and subsidiaries at December 31, 2000 and 1999, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States. 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.
/s/Ernst & Young LLP
Pittsburgh, Pennsylvania
January 22, 2001
L. B. FOSTER COMPANY AND SUBSIDIARIES
To the Stockholders of L. B. Foster Company:
The management of L. B. Foster Company is responsible for the integrity of all
information in the accompanying consolidated financial statements and other
sections of the annual report. Management believes the financial statements have
been prepared in conformity with generally accepted accounting principles that
reflect, in all material respects, the substance of events and transactions, and
that the other information in the annual report is consistent with those
statements. In preparing the financial statements, management makes informed
judgments and estimates of the expected effects of events and transactions being
accounted for currently.
The Company maintains a system of internal accounting control designed to
provide reasonable assurance that assets are safeguarded and that transactions
are executed in accordance with management's authorization and are properly
recorded to permit the preparation of financial statements in accordance with
generally accepted accounting principles. Underlying the concept of reasonable
assurance is the evaluation of the costs and benefits derived from control. This
evaluation requires estimates and judgments by the Company. The Company believes
that its internal accounting controls provide an appropriate balance between
costs and benefits.
The Board of Directors pursues its oversight role with respect to the financial
statements through the Finance and Audit Committee which is composed of outside
directors. The Finance and Audit Committee meets periodically with management,
the internal auditing department and our independent auditors to discuss the
adequacy of the internal accounting control, the quality of financial reporting
and the nature, extent and results of the audit effort. Both the internal
auditing department and the independent auditors have free access to the Finance
and Audit Committee.
/s/Lee B. Foster
Lee B. Foster II
Chairman of the Board
and Chief Executive Officer
/s/ Roger F. Nejes
Roger F. Nejes
Senior Vice President
Finance and Administration
and Chief Financial Officer
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors is set forth under "Election of Directors"
in the Company's Proxy Statement for the 2001 annual meeting of stockholders
("2001 Proxy Statement"). Such information is incorporated herein by reference.
Information concerning the executive officers who are not directors of the
Company is set forth below. With respect to the period prior to August 18, 1977,
references to the Company are to the Company's predecessor, Foster Industries,
Inc.
Name Age Position
---- --- --------
Alec C. Bloem 50 Senior Vice President - Concrete Products
William S. Cook, Jr. 59 Vice President - Strategic Planning &
Acquisitions
Samuel K. Fisher 48 Senior Vice President - Rail Product
Management
Steven L. Hart 54 Vice President - Operations
Stan L. Hasselbusch 53 President and Chief Operating Officer
Monica L. Iurlano 43 Vice President - Human Resources
Gregory W. Lippard 32 Vice President - Rail Products Sales
David L. Minor 57 Vice President and Treasurer
Roger F. Nejes 58 Senior Vice President - Finance and
Administration and Chief Financial Officer
Linda K. Patterson 51 Controller
Gary E. Ryker 51 Executive Vice President - Rail Products
David L. Voltz 48 Vice President, General Counsel and
Secretary
Donald F. Vukmanic 49 Vice President - Piling Products
David J. A. Walsh 48 Vice President - Fabricated Products
Mr. Bloem was elected Senior Vice President - Concrete Products in March 2000,
having previously served as Vice President - Geotechnical and Precast Division
from October 1999, and President - Geotechnical Division from August 1998. Prior
to joining the Company in August 1998, Mr. Bloem served as Vice President- VSL
Corporation.
Mr. Cook was elected Vice President - Strategic Planning & Acquisitions in
October 1993. Prior to joining the Company in March 1993, Mr. Cook was President
of Cook Corporate Development, a business and financial advisory firm.
Mr. Fisher was elected Senior Vice President - Rail Product Management in June
2000, having previously served as Vice President - Rail Procurement since
October 1997. Prior to October 1997, he served in various other capacities with
the Company since his employment in 1977.
Mr. Hart was elected Vice President - Operations in October, 1998 having
previously served as Vice President from December 1997 to October 1998 and in a
variety of capacities prior to December 1997. Mr. Hart joined the Company in
1977.
Mr. Hasselbusch was elected President and Chief Operating Officer in March, 2000
having previously served as Executive Vice President and Chief Operating Officer
from January 1999, Vice President - Construction and Tubular Products from
December, 1996 to December 1998, Senior Vice President - Construction Products
from September 1995 to December 1996, and as Senior Vice President - Sales from
October 1993 to September 1995. Mr. Hasselbusch joined the Company in 1972.
Ms. Iurlano was elected Vice President - Human Resources in October 2000, having
previously served as Manager of Labor and Benefit Planning since November 1999.
Prior to 1999, Ms. Iurlano served in various positions at Highmark Blue
Cross/Blue Shield.
Mr. Lippard was elected Vice President - Rail Product Sales in June 2000. Prior
to re-joining the Company in 2000, Mr. Lippard served as Vice President -
International Trading for Tube City, Inc. from June 1998. Mr. Lippard served in
various other capacities with the Company since his initial employment in 1991.
Mr. Minor was elected Treasurer in February 1988 and was elected to the
additional office of Vice President in February 1997. Mr. Minor joined the
Company in 1983.
Mr. Nejes was elected Senior Vice President - Finance and Administration and
Chief Financial Officer in October 1993, previously having served as Vice
President - Finance and Chief Financial Officer from February 1988.
Ms. Patterson was elected Controller in February 1999, having previously served
as Assistant Controller since May 1997 and Manager of Accounting since March
1988. Prior to March 1988, she served in various other capacities with the
Company since her employment in 1977.
Mr. Ryker was elected Executive Vice President - Rail Products in March 2000.
Prior to joining the Company in March 2000, Mr. Ryker served from February 1999
as President of Motor Coils Manufacturing, a manufacturer of equipment for
locomotives, as President and Chief Executive Officer of Union Switch & Signal
Inc., a signaling company, from September 1997 to August 1998, and as Executive
Vice President of Harmon Industries, a signaling company, from April 1992 until
September 1997.
Mr. Voltz was elected Vice President, General Counsel and Secretary in December
1987. Mr. Voltz joined the Company in 1981.
Mr. Vukmanic was elected Vice President - Piling Products in August 2000. Prior
to August 2000, Mr. Vukmanic served as National Sales Manager - Piling from
February 1999, Vice President and Controller from February 1997, and Controller
from February 1988. Mr. Vukmanic joined the Company in 1977.
Mr. Walsh was elected Vice President - Fabricated Products in February 2001.
Prior to joining the Company in February 2001, Mr. Walsh served as General
Manager of IKG-Greulich, a business unit of Harsco Corp., from February 1998,
and as Vice President of Harris Specialty Chemicals Inc. from January 1995.
Officers are elected annually at the organizational meeting of the Board of
Directors following the annual meeting of stockholders.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under "Executive Compensation" in the 2001 Proxy
Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under "Ownership of Securities by Management" and
"Principal Stockholders" in the 2001 Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under "Certain Transactions" in the 2001 Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements
-----------------------
The following consolidated financial statements, accompanying notes and Report
of Independent Auditors in the Company's Annual Report to Stockholders for 2000
have been included in Item 8 of this Report:
Consolidated Balance Sheets at December 31, 2000 and 1999.
Consolidated Statements of Income For the Three Years Ended December 31, 2000,
1999 and 1998.
Consolidated Statements of Cash Flows For the Three Years Ended December 31,
2000, 1999 and 1998.
Consolidated Statements of Stockholders' Equity for the Three Years Ended
December 31, 2000, 1999 and 1998.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
2. Financial Statement Schedule
-------------------------------
Schedules for the Three Years Ended December 31, 2000, 1999 and 1998:
II - Valuation and Qualifying Accounts.
The remaining schedules are omitted because of the absence of the conditions
upon which they are required.
3. Exhibits
-----------
The exhibits marked with an asterisk are filed herewith. All exhibits are
incorporated herein by reference:
3.1 Restated Certificate of Incorporation as amended to date, filed
as Appendix B to the Company's April 17, 1998 Proxy Statement.
3.2 Bylaws of the Registrant, as amended to date, filed as Exhibit
3B to Form 8-K on May 21, 1997.
4.0 Rights Agreement, dated as of May 15, 1997, between L.B. Foster
Company and American Stock Transfer & Trust Company, including
the form of Rights Certificate and the Summary of Rights
attached thereto, filed as Exhibit 4A to Form 8-A dated May 23,
1997.
4.0.1 Amended Rights Agreement dated as of May 14, 1998 between L. B.
Foster Company and American Stock Transfer & Trust Company,
filed as Exhibit 4.0.1 to Form 10-Q for the quarter ended June
30, 1998.
4.1 Third Amended and Restated Loan Agreement by and among the
Registrant and Mellon Bank, N.A., PNC Bank, National
Association and First Union National Bank, dated as of June 30,
1999 and filed as Exhibit 4.1 to Form 10-Q for the quarter
ended June 30, 1999.
10.12 Lease between CXT Incorporated and Pentzer Development Corpora-
tion, dated April 1, 1993, filed as Exhibit 10.12 to Form 10-K
for the year ended December 31, 1999.
10.12.1 Amendment dated March 12, 1996 to lease between CXT
Incorporated and Pentzer Corporation, filed as Exhibit 10.12.1
to Form 10-K for the year ended December 31, 1999.
10.13 Lease between CXT Incorporated and Crown West Realty, L.L.C.,
dated December 20, 1996, filed as Exhibit 10.13 to Form 10-K
for the year ended December 31, 1999.
10.14 Lease between CXT Incorporated and Pentzer Development Corpora-
tion, dated November 1, 1991 and filed as Exhibit 10.14 to
Form 10-K for the year ended December 31, 1999.
10.15 Lease between CXT Incorporated and Union Pacific Railroad
Company, dated February 13, 1998, and filed as Exhibit 10.15 to
Form 10-K for the year ended December 31, 1999.
10.16 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.
10.16.2 Amendment dated May 29, 1997 to lease between Registrant and
Greentree Building Associates, filed as Exhibit 10.16.2 to Form
10-Q for the quarter ended June 30, 1997.
* 10.17 Lease between Registrant and Hillsboro Loan Investors, L. P. for
property located in Hill County, TX, dated February 14, 2001.
10.19 Lease Between the Registrant and American Cast Iron Pipe Company
for Pipe-Coating Facility in Birmingham, Alabama dated December
11, 1991, filed as Exhibit 10.19 to Form 10-K for the year ended
December 31, 1991.
10.19.1 Amendment to Lease between the Registrant and American Cast Iron
Pipe Company for Pipe Coating Facility in Birmingham, Alabama
dated April 15, 1997, filed as Exhibit 10.19.1 to Form 10-Q for
the quarter ended March 31, 1997.
* 10.19.2 Amendment to Lease between the Registrant and American Cast Iron
Pipe Company for pipe coating facility in Birmingham, AL , dated
November 15, 2000.
10.20 Asset Purchase Agreement, dated June 5, 1998 by and among the
Registrant and Northwest Pipe Company, filed as Exhibit 10.0 to
Form 8-K on June 18, 1998.
10.21 Stock Purchase Agreement dated June 3, 1999, by and among the
Registrant and the shareholders of CXT Incorporated, filed as
Exhibit 10.0 to Form 8-K on July 14, 1999.
10.33.2 Amended and Restated 1985 Long Term Incentive Plan, as amended
and restated February 26, 1997, filed as Exhibit 10.33.2 to Form
10-Q for the quarter ended June 30, 1997. **
* 10.34 Amended and Restated 1998 Long-Term Incentive Plan for
Officers and Directors, as amended and restated February 2,
2001. **
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. **
* 10.50 L. B. Foster Company 2001 Incentive Compensation Plan. **
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.
* 23.7 Consent of Independent Auditors.
** Identifies 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 during 2000.
SIGNATURES
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.
L. B. FOSTER COMPANY
March 30, 2001
By /s/ Lee B. Foster
------------------------
(Lee B. Foster II, Chief
Executive Officer and
Chairman of the Board)
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 Chief Executive Officer, March 30, 2001
- ---------------------------- Chairman of the Board
(Lee B. Foster II) and Director
By: /s/Henry J. Massman, IV Director March 30, 2001
- ----------------------------
(Henry J. Massman, IV)
By: /s/ Roger F. Nejes Senior Vice President - March 30, 2001
- ---------------------------- Finance & Administration
(Roger F. Nejes) and Chief Financial Officer
By: /s/Linda K. Patterson Controller March 30, 2001
- ----------------------------
(Linda K. Patterson)
By: /s/John W. Puth Director March 30, 2001
- ----------------------------
(John W. Puth)
By: /s/William H. Rackoff Director March 30, 2001
- ----------------------------
(William H. Rackoff)
By: /s/ Richard L. Shaw Director March 30, 2001
- ----------------------------
(Richard L. Shaw)
L. B. FOSTER COMPANY AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(In Thousands)
Additions
---------------------------
Balance at Charged to Balance
Beginning Costs and at End
of Year Expenses Other Deductions of Year
--------------- ------------- ---------- ----------- --------
2000
- ----
Deducted from assets to which they apply:
Allowance for doubtful accounts $ 1,555 $ 108 $ $ 99 (1) $ 1,564
=============== ============= =========== ============ =========
Provision for decline in market
value of inventories $ 600 $ $ $ $ 600
=============== ============= =========== ============ =========
Not deducted from assets:
Provision for special
termination benefits $ 5 $ 524 $ $ 138 (2) $ 391
=============== ============= =========== ============ =========
Provision for environmental
compliance & remediation $ 214 $ 49 $ $ 50 (2) $ 213
=============== ============= =========== ============ =========
1999
- ----
Deducted from assets to which they apply:
Allowance for doubtful accounts $ 1,438 $ 180 $ $ 63 (1) $ 1,555
=============== ============= =========== ============ =========
Provision for decline in market
value of inventories $ 600 $ $ $ $ 600
=============== ============= =========== ============ =========
Not deducted from assets:
Provision for special
termination benefits $ 5 $ $ $ $ 5
=============== ============= =========== ============ =========
Provision for environmental
compliance & remediation $ 329 $ 12 $ $ 127 (2) $ 214
=============== ============= =========== ============ =========
1998
- ----
Deducted from assets to which they apply:
Allowance for doubtful accounts $ 1,468 $ 10 $ $ 40 (1) $ 1,438
=============== ============= =========== ============ =========
Provision for decline in market
value of inventories $ 600 $ $ $ $ 600
=============== ============= =========== ============ =========
Not deducted from assets:
Provision for special
termination benefits $ 12 $ $ $ 7 (2) $ 5
=============== ============= =========== ============ =========
Provision for environmental
compliance & remediation $ 284 $ 184 $ $ 139 (2) $ 329
=============== ============= =========== ============ =========
(1) Notes and accounts receivable written off as uncollectible.
(2) Payments made on amounts accrued and reversals of accruals.
- S-1 -
Texas Association of Realtors
Improved Property Commercial Lease
Use of this form by persons who are not members of the Texas Association of
Realtors is not authorized.
1. PARTIES: The parties to this lease are the owner of the Property Hillsboro
Loan Investors, L.P. (Landlord) and the tenant L.B. Foster Company, a
Pennsylvania Corporation (Tenant).
2. LEASED PREMISES: Landlord leases to Tenant the following described real
property, known as the "leased premises," along with all its improvements: See
Rider to Section 2.
3. TERM:
A. Term: The term of this lease is fourteen (14) months, commencing on February
1, 2001 (Commencement Date) and ending on March 31, 2002 (Expiration Date).
B. Delay of Occupancy: Deleted
4. RENT AND EXPENSES:
A. Base Monthly Rent: See Rider to Section 4(A).
B. Prorated Rent: If the Commencement Date is on a day other than the first day
of a month, Tenant will pay Landlord as prorated rent, and amount equal to the
base monthly rent multiplied by the following fraction: the number of days from
the Commencement Date to the first day of the following month divided by the
number of days in the month in which this lease commences. The prorated rent is
due on or before the Commencement Date.
C. -
D. Place of Payment: Tenant will remit all amounts due Landlord under this lease
to Landlord at 7001 Preston Road, Suite 500, Dallas, Texas 75205 Attention:
James S. Ziegler or to such other person or at such other place as Landlord may
designate in writing.
E. Method of Payment: Tenant must pay all rent timely without demand, deduction,
or offset, except as permitted by law or this lease. Time is of the essence for
the payment of rent. If Tenant fails to timely pay any amounts due under this
lease or if any check of Tenant is returned to Landlord by the institution on
which it was drawn, Landlord may require Tenant to pay, in addition to any other
available remedy, all amounts due under this lease by certified funds providing
written notice to Tenant.
F. Late Charges: If Landlord does not actually receive a rent payment at the
designated place of payment within 5 days after the date the rent is due, Tenant
will pay Landlord a late charge equal to 5% of the base monthly rent. The
mailbox is not the agent for receipt for Landlord. The late charge is a cost
associated with the collection of rent and Landlord's acceptance of a late
charge does not waive Landlord's rights to exercise remedies under Paragraph 20.
G. -
5. SECURITY DEPOSIT: Upon execution of this lease, Tenant will pay a security
deposit to Landlord in the amount of $50,000,00. Landlord may apply the security
deposit to any amounts owed by Tenant under this lease. If Landlord applies any
part of the security deposit any time this lease is in effect to amounts owed by
Tenant, Tenant must, within 10 days after receipt of notice from Landlord,
restore the security deposit to the amount stated. Within a reasonable time
after this lease ends, Landlord will refund the security deposit to Tenant less
any amounts applied toward amounts owed by Tenant. See Rider to Section 5.
6. TAXES: See Rider to Section 6.
7. UTILITIES: Tenant will pay all charges for the use of all utility services to
the leased premises and any connection charges. NOTICE: Tenant should determine
if any and all necessary utilities (e.g., water, gas, exlectricity, telephone,
sewer, etc.) are available to the leased premises, are adequate for Tenant's
intended use, and the cost to provide necessary utilities.
8. TENANT'S INSURANCE:
A. During all times this lease is in effect, Tenant must maintain in full force
and effect:
(1) -
(2) -
(3) See Rider to Section 8(A) (3).
See Rider to Section 8(D).
See Rider to Section 8(E).
9. USE AND HOURS: Tenant may use the leased premises for the following purpose
and no other. Any lawful purpose.
10. LEGAL COMPLIANCE:
A. Tenant may not use or permit any part of the leased premises to be used for:
(1) any activity which is a nuisance or is offensive, noisy, or dangerous; (2)
any activity that interferes with Landlord's management of the Property;
(3) any activity that violates any applicable law, regulation, zoning ordinance,
restrictive covenant, governmental order, owner's association rules, tenant's
association rules,Landlord's rules or regulations, or this lease; (4) any
hazardous activity that would require any insurance premium on the Property or
leased premises to increase or that would void any such insurance; (5) any
activity that violates any applicable federal, state, or local law, including
but not limited to those laws related to air quality, water quality, hazardous
materials, wastewater, waste disposal, air emissions, or other environmental
matters.
B. "Hazardous material" means any pollutant, toxic substance, hazardous waste,
hazardous material, hazardous substance, solvent, or oil as defined by a
federal, state, or local environmental law, regulation or ordinance, or rule
existing as od the date of this lease or later enacted.
C. Landlord does not represent or warrant that the leased premises or Property
conform to applicable restrictions, zoning ordinanced, setback lines, parking
requirements, impervious ground cover ratio requirements, and other matters that
may relate to Tenant's intended use. Tenant must satisfy itself that the leased
premises may be used as Tenant intends by independently investigating all
matters related to the use of the leased premises or Property. Tenant agrees
that it is not relying on any warranty or representation made by Landlord,
Landlord's agent, or any broker concerning the use of the leased premises or
Property.
11. SIGNS: See Rider to Section 11(A).
12. ACCESS BY LANDLORD:
A. During Tenant's normal business hours Landlord may enter the leased premises
for any reasonable purpose, including but not limited to purposes for repairs,
maintenance, alterations, and showing the leased premises to prospective tenants
or purchasers. Landlord may access the leased premises after Tenant's normal
business hours with Tenant's permission or to complete emergency repairs.
Landlord will not unreasonably interfere with Tenant's business operations when
accessing the leased premises.
13. MOVE-IN CONDITION: Tenant has inspected the leased premises and accepts it
in its present as-is condition. Landlord and any agent have made no express or
implied warranties as to the condition or permitted use of the leased premises
or Property.
14. MOVE-OUT CONDITION AND FORFEITURE OF TENANT'S PERSONAL PROPERTY: See Rider
to Section 14 (A) See Rider to Section 14 (D)
15. MAINTENANCE AND REPAIRS:
A. Cleaning: Tenant must keep the leased premises clean and sanitary and
promptly dispose of all garbage in appropriate receptacles. Tenant will provide,
at its expense, reasonable janitorial services to the leased premises. B.
Repairs of Conditions Caused by a Party: Each party must promptly repair a
condition caused, either intentionally or negligently, by that party or party's
guests, patrons, invitees, contracotr or permitted subtenants.
C. Repair and Maintenance Responsibility: See Rider to Section 15 (C).
D. Repair Persons: Repairs must be completed by trained, qualified, and insured
repair persons.
E. Deleted
F. Deleted
G. Deleted
H. Failure to Repair: If Tenant fails to repair or maintain an item for which
Tenant is responsible within 10 days after Landlord provides Tenant written
notice of the needed repair or maintenance, Landlord may: (1) Repair or maintain
the item, without any liability for any damage or loss to Tenant, and Tenant
must immediately reimburse Landlord for the cost to repair or maintain; or (2)
exercise Landlord's remedies under Paragraph 20.
16. ALTERATIONS:
A. See Rider to 16(A).
B. Tenant may alter any locks or any security devices on the Property or the
leased premises without Landlord's consent. Tenant must immediately deliver the
new keys and access devices to the Landlord.
C. If a government order requires alteration or modification to the leased
premises, the party obligated to maintain or repair the item to be modified or
altered as designated in Paragraph 15 will, at its expense, modify or alter the
item in compliance with the order.
D. Any alterations, improvements, fixtures or additions to the Property or
leased premises installed during the term of this lease will become Landlord's
property and must be surrendered to Landlord at the time this lease ends.
17. LIENS: Tenant may not do anythind that will cause the title of the Property
or leased premises to be encumbered in any way. If Tenant causes a lien to be
filed against the Property or leased premises, Tenant will within 20 days after
the Landlord demands Tenant to take action to remove the lien, pay the lien or
take whatever action is necessary to cause the lien to be released of record.
Tenant will provide Landlord a copy of any release Tenant obtains pursuant to
this paragraph. See Rider to Section 17.
18. LIABILITY: To the extent permitted by law, Landlord it NOT responsible to
Tenant or Tenant's employees, patrons, guest, or invitees for any damages,
injuries, or losses to person or property caused by:
A. an act, omission, or neglect of : Tenant, Tenant's guest; Tenant's employees;
Tenant's patrons; Tenant's invitees; or any other tenant on the property;
B. Fire, flood, water leaks, ice, snow, hail, winds, explosion, smoke, riot,
strike, interruption of utilities, theft, burglary, robbery, assault, vandalism,
other persons, environmental contaminants, or other occurrences or casualty
losses.
19. INDEMNITY: Tenant will indemnify and hold Landlord harmless from any
property damage, personal injury, suits, actions, liabilities, damages, cost of
repairs or services to the leased premises or Property, or any other loss caused
negligently or otherwise, by Tenant or Tenant's employees, patrons, guests, or
invitees.
20. DEFAULT:
A. If Landlord fails to comply with this lease within 30 days after Tenant
notifies Landlord of Landlord's failure to comply, Landlord will be in default
and Tenant may seek any remedy provided by law. If, however, Landlord's
non-compliance reasonably requires more than 30 days to cure, Landlord will not
be in default if the cure is commenced within the 30 day period and is
diligently pursued.
B. If Landlord does not actually receive at the place designated for payment any
rent due under this lease See Rider to Section 20(B).
C. If Tenant is in default, Landlord may: (i) except as provided in Rider to
Section 20(C) to the contract terminate Tenant's right to occupy the leased
premises by providing Tenant with at least 3 days written notice; and (ii)
accelerate all rents which are payable during the remainder of this lease or any
renewal period without notice or demand. Landlord will attempt to mitigate any
damage or loss caused by Tenant's breach. If Tenant is in default, Tenant will
be liable for:
(1) any lost rent;
(2) Landlord's cost of reletting the leased premises, including brokerage fees,
advertising fees, and other fees necessary to relet the leased premises; (3)
repairs to the leased premises for use beyond normal wear and tear; (4) all
Landlord's costs associated with eviction of Tenant, such as attorney's fees,
court costs, and prejudgement interest; (5) all Landlord's costs associated with
collection of rent such as collection fees, late charges and return check
charges; (6) cost of removing any equipment and trade-fixtures left on the
leased premises by Tenant; (7) cost of removing any trash, debris, personal
property, hazardous materials,or environmental contaminants left by Tenant or
Tenant's employees, patrons, guests, or invitees in the leased premises or
Property; and (8) any other recovery to which Landlord may be entitled by law.
See rider to Section 20(C).
21. ABANDONMENT, INTERRUPTION OF UTILITIES, REMOVAL OF TENANT'S PROPERTY, AND
LOCKOUT: Chapter 93 of the Texas Property Code governs the rights and
obligations of the parties with regard to: (a) abandonment of the leased
premises; (b) interruption of utilities; (c) removel of Tenant's personal
property; and (d) lockout of Tenant.
22. HOLDOVER: Tenant fails to vacate the leased premises at the time this lease
ends, Tenant will become a tenant-at-will and must vacate the leased premises
immediately upon receipt of demand from Landlord. No holding over by Tenant,
with or without the consent of Landlord, will extend this lease. Tenant will
indemnify Landlord and any prospective tenants for any and all damages caused by
the holdover. Rent for any holdover period will be 2 times the base monthly rent
plus any additional rent calculated on a daily basis and will be immediately due
and payable daily without notice or demand.
23. LANDLORD'S LIEN AND SECURITY INTEREST: Deleted.
24. ASSIGNMENT AND SUBLETTING: Tenant may assign this lease or sublet any part
of the leased premises without Landlord's written consent. If Tenant assigns
this lease or sublets any part of the leased premises, Tenant will remain liable
for all of Tenant's obligations under this lease regardless if the assignment or
sublease is made with or without the consent of Landlord.
25. RELOCATION: Deleted.
26. SUBORDINATION: See Rider to Section 26.
27. ESTOPPEL CERTIFICATES: Deleted.
28. CASUALTY LOSS: See Rider to Section 28.
29. CONDEMNATION: See Rider to Section 29.
30. ATTORNEY'S FEES: Any person who is a prevailing party in any legal
proceeding brought under or related to the transaction described in this lease
is entitled to recover prejudgement interest, reasonable attorney's fees, and
all other costs of litigation from the nonprevailing party.
31. REPRESENTATIONS: Tenant's statements in this lease and any application for
rental are material representations relied upon by Landlord. Each party signing
this lease represents that he or she is of legal age to enter into a binding
contract and is authorized to sign the lease. If Tenant makes any
misrepresentation in this lease or in any application for rental, Tenant is in
default.
32. Deleted.
33. ADDENDA: Incorporated into this lease are the addenda, exhibits and other
information marked in the Addenda and Exhibit section of the Table of Contents.
If Landlord's Rules and Regulations are made part of this lease, Tenant agrees
to comply with the Rules and Regulations as Landlord may, at its descretion,
amend from time to time.
34. AGREEMENT OF PARTIES:
A. Entire Agreement: This lease contains the entire agreement between Landlord
and Tenant and may not be changed except by written agreement.
B. Binding Effect: This lease is binding upon and inures to the benefit of the
parties and their respective heirs, executors, administrators, successors, and
permitted assigns.
C. Joint and Several: All Tenants are jointly and severally liable for all
provisions of this lease. Any act of notice to, or refund to, or signature of,
any one or more of the Tenants regarding any term of this lease, its renewal, or
its termination is binding on all Tenants.
D. Controlling Law: The laws of the State of Texas govern the interpretation,
performance, and enforcement of this lease.
E. Severable Clauses: If any clause in this lease is found invalid or
unenforcable by a court of law, the remainder of this lease will not be affected
and all other provisions of this lease will remain valid and enforceable.
F. Waiver: Landlord's delay, waiver, or non-enforcement of acceleration,
contractural or statuatory lien, rental due date, or any other right will not be
deemed a waiver of any other or subsequent breach by Tenant or any other term in
this lease.
G. Quiet Enjoyment: Provided that Tenant is not in default of this lease,
Landlord covenants that Tenant will enjoy possession and use of the leased
premises free from serious interference.
H. Force Majeure: If Landlord's performance of a term in this lease is delayed
by strike, lock-out, shortage of material, governmental restriction, riot,
flood, or any cause outside Landlord's control, the time for Landlord's
performance will be abated until after the delay.
35. NOTICES: All notices under this lease must be in writing and are effective
when hand-delivered, sent by mail, or sent by facsimile transmission to:
Tenant Landlord:
at the address of the leased premises. At 7001 Preston Road, Suite 500 ATTN:
James S. Ziegle, Dallad, Texas 75205
Fax (214) 219-2080
with a copy to: Tenant (Attn: Chief
Executive Officer)
415 Holiday Drive
Pittsburgh, PA 15220
Fax: (412) 928-7891
36. SPECIAL PROVISIONS:
1. See Rider to Section 36(A) and Rider to Section 36(B).
2. The Addendum and Exhibits "A", "B" and "C" attached hereto are incorporated
Herein for all purposes.
Real estate brokers are not qualified to render legal advice, property
inspections, surveys, engineering studies (e.g. Studies of the structures,
drainage and soil conditions), environmental assessments, tax advice, financial
advice, or inspections to determine compliance with zoning, governmental
regulations, or any law (e.g., ADA, Texas Architectural Barriers Statute, etc.).
The parties should seek experts to render such services. Selection of such
experts is the responsibility of the parties and not the real estate broker. The
terms of this lease are negotiable among the parties. This is intended to be a
legal agreement binding upon final acceptance. READ IT CAREFULLY. If you do not
understand the effect of this Lease, consult your attorney BEFORE signing.
Hillsboro Loan Investors, L.P. L. B. Foster Company
- ------------------------------------------- --------------------------------
Landlord By: United Mortgage Services, Inc. Tenant
By /s/James Ziegle President By:/s/S.L. Hasselbusch 2/14/01
- ------------------------------------------- -------------------------------
As general partner of Landlord Date
ADDENDUM TO LEASE
BY AND BETWEEN
HILLSBORO LOAN INVESTORS, L.P. (the "LANDLORD")
AND
L.B. FOSTER COMPANY (the "TENANT")
1. Rider to Section 2. That certain 7.277 acre tract of land located in Hill
County, Texas, and more particularly described in Exhibit "A" attached
hereto and made part hereof for all purposes ("Tract A") and the building
(the "Building") and other improvements located thereon and Seller's
interest, if any, in that certain 1.356 acre tract of land located in
Hill County, Texas, and more particularly described in Exhibit "B"
attached hereto and made a part hereof for all purposes ("Tract B"),
together with any and all improvements situated thereon (together, Tract
A and Tract B together with the building and all other improvements
situated thereon are herein referred to as the "Property" or the "leased
premises").
2. Rider to Section 4(A). On or before the first day of each month during
the Term of this Lease, Tenant will pay to Landlord
Base Monthly Rental as follows:
(i) $7,000.00 per month, commencing on February 1, 2001 through August 31, 2001;
and (ii) $8,000.00 per month, commencing on September 1, 2001 through March 31,
2002.
3. Rider to Section 5. The $50,000.00 security deposit is the same
$50,000.00 which has been deposited as earnest money pursuant to the
terms of that certain Contract for the Purchase and Sale of Real Property
attached hereto as Exhibit "C" and made a part hereof for all purposes
(the "Purchase and Sale Agreement").
4. Rider to Section 6. Tenant shall pay all real property ad valorem taxes
assessed against the Property. At the time of execution of this Lease,
Landlord shall furnish Tenant with written notice ("Tax Notice") of the
amount of Taxes, together with a copy of the applicable tax bills, for the
calendar year 2000. Tenant shall pay to Landlord one-twelfth (1/12th) of
the aggregate amount of the Taxes at the time each Base Monthly Rental
payment is due during the Term of the Lease. At the time the actual Taxes
for the calendar year 2001 are available, Landlord will notify Tenant of
the actual amount of the Taxes and either (a) Tenant shall pay to Landlord,
upon demand, the deficit amount, if any, between the amount of Taxes paid
for the calendar year 2001, during the Term of the Lease based upon the
calendar year 2000 Taxes and the actual Taxes due and owing based upon the
calendar year 2001 Taxes, or (b) Landlord shall credit (the "Credit")
against the Tenant's obligation to pay Taxes for that portion of the
calendar year 2002, during the Term of the Lease, the amount of
overpayment, if any, between the amount of Taxes paid for the calendar year
2001, during the Term of this Lease based upon the calendar year 2000 Taxes
and the actual Taxes due and owing based upon the calendar year 2001 Taxes.
Commencing January 1, 2002, Tenant shall pay to Landlord one-twelfth
(1/12th) of the aggregate amount of the Taxes at the time each Base Monthly
Rent payment is due during the Term of the Lease based upon the actual
Taxes for the calendar year 2001 (less the Credit, if any). At the time the
actual Taxes for the calendar year 2002 are available, Landlord shall
notify Tenant of the actual amount of the Taxes and either (x) Tenant shall
pay to Landlord, upon demand, the deficit amount, if any, between the
amount of Taxes paid for the calendar year 2002, during the Term of the
Lease based upon the calendar year 2001 Taxes and the actual Taxes due and
owing based upon the calendar year 2002 Taxes, or (y) Landlord shall pay to
Tenant, upon demand, the amount of overpayment, if any, between the amount
of Taxes paid for the calendar year 2002, during the term of the Lease
based upon the calendar year 2001 Taxes and the actual Taxes due and owing
based upon the calendar year 2002 Taxes. The obligations to pay the deficit
amounts and/or to refund any overpayments shall survive the termination of
the Lease. The term ("Taxes") shall mean and include only all real property
and ad valorem taxes, assessments and other governmental charges, general
and special, ordinary and extraordinary, of any kind and nature whatsoever,
including, without limitation, assessments for public improvements or
benefits, which shall during the Term hereof be assessed, levied and
imposed upon the Property based upon its value. In addition, Tenant shall
pay, or caused to paid before delinquency all taxes, assessments, license
fees and other charges that are levied or assessed against Tenant's
personal property, trade fixtures, and leasehold improvements located in,
on, or at the Property. Tenant shall only be responsible for Taxes assessed
for the period within the term of the Lease and not for any Taxes which are
due and owing for any period of time prior to the term of the Lease.
5. Rider to Section 8(A)(3). In addition, Tenant must maintain in full force
and effect during the Term of the Lease the following:
(a) Contractual liability insurance coverage sufficient to cover
Tenant's indemnity obligations hereunder; (b) Insurance covering the
full value of the leasehold improvements in the leased premises and
other property of Tenant
and others in the leased premises; and
(c) Workmen's compensation insurance, containing a waiver of
subrogation endorsement reasonably acceptable to Landlord, at
the applicable statutory limits.
Landlord shall maintain any and all liability and fire and extended
coverage insurance policies that are insuring Landlord and/or the
Property and are in effect on the date of this Lease. In addition,
Landlord shall maintain casualty and property insurance coverage for the
replacement value of the Building (approximately 93,500 square feet).
Landlord shall furnish Tenant with satisfactory evidence of such
insurance policies promptly after the execution of this Lease, together
with a statement as to the premium costs thereof, which shall include a
breakdown based upon a monthly proration. Tenant shall pay to Landlord at
the time each Base Monthly Rental payment is due during the Term of the
Lease the monthly proration of premium costs. If, during the Term of the
Lease, the insurance expires, Landlord shall either renew or obtain new
insurance in the same amounts and the premium costs shall be
redetermined, if necessary, to reflect the actual costs of such renewed
or new policies, and the monthly proration shall be based thereon. Said
insurance shall name the Landlord as the sole insured thereunder.
6. Rider to Section 8(D). All insurance required under Section 8 shall be
issued by such good and reputable insurance companies qualified to do and
doing business in the State of Texas which shall be reasonably acceptable
to the Landlord. All insurance required to be maintained by Tenant
hereunder shall not be subject to a deductible in excess of $250,000.00.
7. Rider to Section 8(E). Tenant waives any and all rights to recover
against Landlord for any loss or damage to Tenant arising from any costs
covered by any insurance required to be carried by Tenant pursuant to
Section 8 or any other property insurance actually carried by Tenant to
the extent of the limits of such policy. Tenant will cause its respective
insurers to issue appropriate waiver of subrogation rights endorsements
to all property insurance policies carried in connection with the
Property or the contents of the Property.
8. Rider to Section 11(A). Tenant shall have the right to post or install
signs on the Property without the consent of the Landlord. All signs
installed by the Tenant must comply with all laws, restrictions, zoning
ordinances and any governmental order relating to signs on the Property.
Tenant shall not be required to remove any signs at the termination of
this Lease in the event that Tenant purchases the Property in accordance
with the provisions of the Rider to Section 36 hereof; otherwise, Tenant
shall be required, upon move out and at Tenant's expense, to remove,
without damage to the Property or the leased premises, any and all signs
that are placed on the Property by the Tenant, and, in such event, at
Landlord's option, the Landlord may require the Tenant to surrender the
signs to the Landlord.
9. Rider to Section 14(A). Notwithstanding anything contained in this Lease to
the contrary, Tenant shall not be responsible in this Lease for any
Pre-existing Condition (i.e., a condition of the leased premises which
existed prior to the Commencement Date of the Lease).
10. Rider to Section 14(D). Tenant shall have the right, upon termination of
the Lease, in the event Tenant is not in default under the Lease at such
time, to remove any and all equipment, leasehold improvements, fixtures and
non-moveable property of any kind or character, located on, attached to
and/or made in or upon the Property, provided that Tenant shall repair or,
at Landlord's action, shall pay Landlord to repair, any and all damage to
the Property, or any part thereof, caused by such removal. Tenant shall not
have the right to remove any structural alterations, structural additions
or structural improvements to the Building itself at the termination of the
Lease, and the same shall be the Landlord's property at the end of the Term
and shall remain on the Property without compensation to Tenant, subject to
the provisions of the Rider to Section 36 hereafter set forth.
11. Rider to Section 15(C). Tenant shall maintain and repair in good order
and operable condition (subject, however, to reasonable wear and tear),
the Building and all parts thereof, including but not limited to
mechanical, plumbing, electrical, air conditioning and heating systems,
structure, roof, foundation, parking areas and landscaping situated on
the land owned by the Landlord upon which the Building is situated and
used in connection with the Building, at Tenant's sole cost and expense.
Tenant is also responsible, at its sole cost and expense, for the repair
and maintenance of its personal property located at the leased premises.
Notwithstanding the foregoing, Tenant is not responsible for repairing
any Pre-existing Conditions of the leased premises.
12. Rider to Section 16 (A). Except as hereinafter provided to the contrary,
Tenant shall not make or permit any structural alterations, structural
additions or structural improvements of any kind or nature to the
Building without the prior written consent of the Landlord, which consent
shall not be unreasonably withheld or delayed. Notwithstanding the
foregoing, Tenant may modify existing structural support steel and
foundations as necessary to accommodate Tenant's bridge cranes. For these
purposes the term "structural" shall refer to the roof, foundation, and
structural walls of the Building or the demolition of all or any part of
the Building. Tenant shall have the right, however, to remove or add
internal, and non-structural walls within the Building without the
consent of the Landlord.
13. Rider to Section 17. If the lien is not removed within said twenty (20)
day period, then within said time period Tenant shall deliver to Landlord
a bond or other security reasonably satisfactory to Landlord in the
amount of 110% of the lien. If Tenant fails to timely take any such
action, then Landlord may pay the claim without inquiry as to the
validity thereof, and any amount so paid, including expenses and
interest, shall be paid by Tenant to Landlord upon demand after Landlord
has delivered to Tenant an invoice therefor.
14. Rider to Section 20(B). After the word "Lease" in the first sentence of
Section 20(B) and for the remainder of that paragraph, the following
language is substituted in lieu of the language which has been crossed out:
"within ten (10) days after Landlord provides Tenant with written notice
that it has not received the rent payment on the date the payment was due
under the Lease, Tenant will be in default. If Tenant fails to comply with
this Lease for any other reason within ten (10) days after Landlord
provides Tenant with written notice of its failure to comply, Tenant will
be in default. Notwithstanding anything contained in this Lease to the
contrary, Landlord shall not be required to give Tenant more than three (3)
such written notices of any default in rent within the Term of the Lease,
and once three (3) such written notices have been given, if Landlord does
not thereafter actually receive at the place designated for payment any
rent due on the lease within ten (10) days after it is due, Tenant will be
in default."
15. Rider to Section 20(C). Notwithstanding the foregoing, Landlord shall not
terminate Tenant's right to occupy the leased premises for any reason
other than non-payment of rent unless it provides Tenant with at least
thirty (30) days written notice setting forth therein the nature of the
default and Tenant does not cure the default to the reasonable
satisfaction of the Landlord within said thirty (30) day period of time;
provided, however, that if Tenant's non-compliance reasonably requires
more than thirty (30) days to cure, Tenant will not be in default if the
cure commences within the thirty (30) day period and is diligently
pursued.
16. Rider to Section 26. This Lease shall be subordinate to all matters which
constitute "Permitted Exceptions" under the Purchase and Sale Agreement.
17. Rider to Section 28. In the event the Property or any portion thereof shall
be destroyed by fire or any other casualty prior to the expiration of the
Term of this Lease, Tenant shall immediately notify Landlord thereof.
Within ten (10) days following Tenant's notification to Landlord, Landlord
and Tenant shall select a contractor (the "Contractor") who shall determine
the cost of such repair and restoration and the time period in which the
same can reasonably be expected to be completed. If Landlord and Tenant
cannot agree upon the Contractor within said period of time, then each
contractor selected by each party, if any, and as to which each party has
given the other party written notice, within said ten (10) day period if
time, shall, within five (5) days following the expiration of said ten (10)
day period, select a third contractor, who shall then become the Contractor
for the purposes hereunder, and the decision of that Contractor shall be
final and binding. If either party fails to so advise the other party of a
Contractor within said ten (10) day period of time, then the Contractor
shall be the contractor selected by the party who did provide such notice
to the other party within said ten (10) day period of time. If the repair
and restoration can reasonably be expected to be completed before the
expiration of the Term of the Lease, then Landlord shall, to the extent of
the insurance proceeds required to be carried by Tenant hereunder, and/or
which are carried by Landlord and paid for by Tenant hereunder
(collectively, the "Insurance Proceeds") which are available for use by the
Landlord, undertake to repair and/or restore the Property to the condition
which existed prior to such casualty. Landlord shall diligently and
expeditiously proceed to make such repair or restoration in a good and
workmanlike manner and to complete the same prior to the expiration of the
Term of the Lease, and the Lease shall be extended, if necessary, to enable
the Landlord to so complete the repair and restoration. Notwithstanding the
foregoing, Tenant shall have the right to undertake and restore the
Property, in which event Landlord and Tenant shall assign the Insurance
Proceeds to the Tenant, and the Tenant shall repair and restore the
Property to the extent of the Insurance Proceeds that are available. In
such event, Tenant shall diligently and expeditiously proceed to make such
repair or restoration in a good and workmanlike manner and complete the
same prior to the expiration of the Term of the Lease and the Lease shall
be extended, if necessary, to permit the Tenant to make such repair and/or
restoration. In the event, however, it is determined by the Contractor that
the Property cannot be repaired or restored in a good and workmanlike
manner prior to the expiration of the Term, then, within ten (10) days
following the receipt of such determination by the Contractor, Tenant shall
have the option, by written notice delivered to Landlord within said ten
(10) day period of time, of either: i) terminating this Lease by giving
notice thereof to Landlord and this Lease shall thereupon be of no further
force or effect and the parties hereto shall not have any further rights,
duties, obligations, liabilities hereunder; or (ii) requiring Landlord to
sell the Property to Purchaser pursuant to the terms of the Purchase and
Sale Agreement and to transfer and assign to Tenant at the closing all of
Landlord's right, title and interest in and to the Insurance Proceeds
and/or recoveries payable as a result of any such destruction. In the event
of any such fire or other casualty, Landlord shall not compromise or settle
any claim therefrom with any insurance company or any other party without
the prior written consent of Tenant provided Tenant is not in default of
this Lease and has elected to purchase the Property as herein provided.
18. Rider to Section 29. In the event the Property or any portion thereof shall
become the subject of any condemnation, eminent domain or other similar
proceedings or be taken or condemned by any governmental authority or
entity prior to the expiration of the Term of this Lease, Landlord shall
immediately notify Tenant thereof, and Tenant shall have the option of
either: i) terminating this Lease by giving written notice thereof to
Landlord, and this Lease shall thereupon be of no further force or effect
and no party hereto shall have any further rights, obligations or
liabilities hereunder; or ii) requiring Landlord to convey remaining
portion of the Property to Tenant pursuant to the terms and provisions of
the Sale and Purchase Agreement and to transfer and assign to Tenant at the
closing, all of Landlord's right, title and interest in and to any award
and/or compensation made or to be made by reason of such condemnation or
other proceeding. In the event Tenant has elected to purchase the Property
as provided above, Landlord shall not compromise or settle any claim
connected with any such proceeding without the prior written consent of
Tenant, and Landlord agrees, so long as Tenant is not in default, Tenant
shall have the right to join in and fully participate with Landlord in
connection with any such proceeding.
19. Rider to Section 36. Purchase and Sale Agreement.
A. Notwithstanding anything contained in this Lease to the contrary, on the
expiration date of the Term of this Lease (or the next business day
following such expiration date, as the case may be), Tenant shall be
obligated to close the purchase of the Property pursuant to the Purchase
and Sale Agreement, on the condition that the Tenant, as purchaser, is
required to close thereunder. In the event that Tenant, as purchaser, is
not required to close or, for any reason fails or refuses to close, unless
the closing thereunder is postponed in accordance with the provisions of
the Purchase and Sale Agreement, Tenant shall be a tenant from
month-to-month, and the provisions of Section 22 of this Lease shall
thereupon become applicable. If the Tenant fails to close the purchase of
the Property for any reason which shall not constitute an event of default
by Tenant under the Purchase and Sale Agreement and for which the Closing
may be postponed, this Lease shall continue, upon the same terms and
conditions and at the same rental herein set forth, until the date set for
Closing pursuant to the Purchase and Sale Agreement, whereupon Tenant shall
be required to close and this Lease shall terminate. In the event Tenant
fails or refuses to so close at that time, any holdover by Tenant hereunder
shall be subject to the provisions of Section 22 of this Lease.
Notwithstanding anything contained in this Lease to the contrary, in the
event the Tenant fails to close the purchase of the Property pursuant to
the terms and conditions of the Purchase and Sale Agreement due to a
default by the Landlord, as seller under the Purchase and Sale Agreement,
the base monthly rental for such holdover period shall be at the rate then
due and payable by the Tenant as the base monthly rent under the Lease and
not two (2) times the base monthly rent as provided in Section 22 of this
Lease. Notwithstanding anything contained in this Lease to the contrary,
the rights and remedies granted to Landlord and Tenant under this Lease
shall be in addition to, and not in lieu of, the applicable rights and
remedies granted to Landlord, as seller, and Tenant, as purchaser, under
the Purchase and Sale Agreement. The parties hereto agree that in the event
Tenant shall default under the terms and provisions of this Lease, and the
Landlord elects to terminate this Lease and/or in the event that Tenant, as
purchaser, should breach any of the terms and provisions of the Purchase
and Sale Agreement and the Landlord, as seller, shall elect to terminate
the Purchase and Sale Agreement, then, upon the happening of either or both
events, Landlord shall have the right to file of record an affidavit (the
"Affidavit") evidencing the termination of the Lease and/or the Purchase
and Sale Agreement, as the case may be; provided, however, Tenant shall
have the right to contest the filing of the Affidavit by bringing a suit in
the appropriate court in Dallas County, Texas, to have the filing of the
Affidavit removed, which lawsuit must be filed within sixty (60) days
following Tenant's receipt of written notice from the Landlord, together
with a copy of the filed Affidavit, stating that the Affidavit has been
filed of record and that a lawsuit must be filed within sixty (60) days
following Tenant's receipt of this notice in order to contest the same. If
the Tenant does not timely file a lawsuit in the appropriate court in
Dallas County, Texas, contesting the filing of the Affidavit, it shall be
presumed that the Affidavit was correct. This provision shall survive the
termination of the Lease and/or the Purchase and Sale Agreement.
B. Landlord and Tenant each agree that it shall perform the following
obligations hereinafter imposed upon it, as soon as practicable within
the Term of this Lease, which shall be completed on or before the date
that Tenant is required to close the purchase of the Property, as
purchaser, under the Purchase and Sale Agreement:
(i) Tenant will be responsible for filling in the underground
storage tank located in the center of the Building and will
also be responsible for performing all remediation recommended
by the environmental assessment performed for Tenant by T-2
Environmental except the remediation that will be necessary as
a result of leakage of the underground storage tank located in
the front (southeast corner) of the building (the "Front
Tank").
(ii) On or before July 1, 2001, Landlord will remove the Front Tank and perform
any remediation resulting therefrom or required in connection therewith and
restore the disturbed areas to their pre-existing condition all in
accordance with this Agreement and applicable laws of the State of Texas.
The Landlord shall provide Tenant advance notice two (2) business days
prior to taking final verification samples and shall obtain and deliver to
Tenant an original final report addressed to Landlord and Tenant from the
environmental contractor who removes the Front Tank stating that the tank
has been removed and cleaned up in accordance with Texas law; this report
shall have been signed by a professional engineer registered in the State
of Texas and shall include the engineer's unqualified professional opinion
that the Tank was removed and remedial action was completed in accordance
with the provisions of this Agreement and applicable laws. In addition,
Landlord will use all due diligence and commercially reasonable efforts to
obtain from the TNRCC an "LPST letter" with respect to the Front Tank.
(iii) Each of the parties agrees to indemnify and hold harmless the
other from and against any and all costs, damages,
liabilities, expenses and legal fees arising out of or
attributable to a breach by the indemnifying party of its
obligations under this Section 36B. The obligations hereunder
shall survive the purchase of the leased premises by Tenant or
its assignee.
C. Simultaneously with the execution of this Lease, Landlord is
executing and delivering to Tenant an assignment of all of Landlord's
right, title and interest in $175,783.00 in insurance proceeds owed to
Landlord by Royal & Sunalliance of Stockton, California. In addition,
Landlord will obtain from Royal & Sunalliance of Stockton, California a
consent to such assignment together with a description of the
requirements that must be satisfied before such insurance proceeds
become payable.
MEMORANDUM OF LEASE
This Memorandum of Lease (the "Memorandum") is made as of
______________________________, 2001, by and between Hillsboro Loan Investors,
L.P. (the "Landlord") and L.B. Foster Company (the "Tenant") to evidence of
record the execution of that certain unrecorded Lease by and between Landlord
and Tenant, dated _______________________, 2001 (the "Lease").
1. The real property which is the subject of this Memorandum and
of the Lease is described on Exhibit "A" attached hereto and
made a part hereof for all purposes (the "Property").
2. The term of the Lease is fourteen (14) months, commencing on February 1,
2001, and expiring on March 31, 2001. The Tenant has no option to extend
the Lease. The Tenant does have an obligation to purchase the Property
according to the terms and provisions of a Purchase and Sale Agreement
which is attached to the Lease; however, upon the happening of an event of
default under the Lease and/or the Purchase and Sale Agreement, Landlord
may file of record an affidavit (the "Affidavit") that all of Tenant's
rights pursuant to the Lease and/or the Purchase and Sale Agreement have
been terminated. Tenant shall have the right to contest the filing of the
Affidavit by bringing a suit in the appropriate court in Dallas County,
Texas, to have such filing removed. Unless said lawsuit is filed within
sixty (60) days following Tenant's receipt of notice that such Affidavit
has been filed, together with a copy of the Affidavit, it shall be presumed
that the Affidavit was correct.
3. The Lease provides that the Tenant shall not do anything that
will cause the title of the Property to be encumbered in any
way. Consequently, any person or entity providing labor and/or
materials on or with respect to the Property or any
improvements thereon, for or on behalf of the Tenant, whether
directly or indirectly, whether through contract, subcontract,
or otherwise, is advised that the Tenant has no right to
encumber the fee of the Property.
4. The terms and conditions of the Lease are incorporated herein
by reference. This Memorandum is prepared for the purpose of
recordation and in no manner modifies the terms and conditions
of the Lease. If there is any consistency between the terms
and conditions of this Memorandum and the terms and conditions
of the Lease, the terms and conditions of the Lease shall
control.
IN WITNESS WHEREOF, the parties executed this Memorandum as of the date
and year hereinbefore set forth.
HILLSBORO LOAN INVESTORS, L.P.,
By: United Mortgage Services, Inc., general partner
By:
Name:
Title:
LANDLORD
L.B. FOSTER COMPANY
By:
Name:
Title:
STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on
______________________________, 2001, by _____________________________,
___________________________ of United Mortgage Services, Inc., a
___________________________ corporation, on behalf of said corporation, and the
corporation acknowledged this instrument as partner on behalf of Hillsboro Loan
Investors, L.P., a partnership.
Notary Public, State of Texas
Notary's Name (printed):
Notary commission expires:
STATE OF )
)
COUNTY OF )
This instrument was acknowledged before me on
______________________________, 2001, by _____________________________,
___________________________ of L.B. Foster Company, a Pennsylvania corporation,
on behalf of said corporation.
Notary Public, State of
Notary's Name (printed):
Notary commission expires:
RJT/bac
Exhibit A
FIELD NOTES for a lot, tract, or parcel of land containing 7.277 acres lying and
situated in the J.E. Ross Survey A-750 in Hillsboro, Hill County, Texas. Said
land is that certain 7.285 acre tract described in a deed from Spartan Copper,
Incorporated to Hillsboro Loan Investors, L.P. as recorded in Volume 864, Page
134 of the Official Public Records of Hill County, and is more particularly
described by metes and bounds as follows:
BEGINNING at a 1/2" iron rod found in the northwest line of U.S. Highway 77 for
the south corner of said 7.285 acre tract, said point being the most easterly
corner of a tract described in a deed to Franklin Industries, Inc. as recorded
in Volume 928, Page 772 of the Official Public Records of Hill County:
THENCE: N 44 deg 53 min 0 sec W 599.95 feet along Franklin's northeast line to a
5/8" iron rod found for corner:
THENCE: N 35 deg 54 min 0 sec E 94.55 feet, and N 50 deg 17 min 15 sec W 82.27
feet and N 31 deg 49 min 30 sec E 259.24 feet along Franklin's line, 5/8" iron
rods found at all corners:
THENCE: S 85 deg 52 min 0 sec E 369.45 feet to a1/2" iron rod set for corner:
THENCE: S 42 deg 37 min 15 sec E 181.00 feet to a railroad spike found for
corner:
THENCE: S. 21 deg 51 min 0 sec 118.04 feet to a railroad spike found for corner
in the northwest line of said U.S. Highway 77;
THENCE: Around a curve to the left with radius 2024.86 feet an arc distance of
255.26 feet (Chord: S 26 deg 19 min 30 sec W 255.09 feet) to a1/2" iron rod set
for corner;
THENCE: S 29 deg 7 min 10 sec W 190.88 feet to a1/2" iron rod set for corner;
THENCE: S 17 deg 26 min 10 sec W 115.00 feet to the point of beginning,
containing 7.277 acres of land.
EXHIBIT B
FIELD NOTES for a lot, tract, or parcel of land containing 1.356 acres lying and
situated in the J.H. Ross Survey A-750 in Hillsboro, Hill County, Texas. Said
land is that certain 1.52 acre tract described in a deed from Hillsboro Lake
Park Association to Robintech, Inc. as recorded in Volume 507, Page 497 of the
Deed Records of Hill County. Said land is more particularly described by mete
and bounds as follows:
BEGINNING at railroad spike found for the most easterly corner of a tract
described in a deed to Hillsboro Loan Investors, L. P. as recorded in Volume
864, Page 134 of the Official Public Records of Hill County;
THENCE: N 21 deg 51 min 0 sec W 118.04 feet to a railroad spike found for
corner;
THENCE: N 42 deg 37 min 15 sec W 181.00 feet to a1/2" iron rod set for corner;
THENCE: N 85 deg 52 min 0 sec W 369.45 feet to a 5/8" iron rod found for corner;
THENCE: N 30 deg 43 min 0 sec E 99.95 feet to a1/2" iron rod found for corner;
THENCE: S 80 deg 18 min 55 sec E 299.57 feet and S 68 deg 39 min 37 sec E 327.05
fet along a fence, 5/8" iron rods found for corners;
THENCE: S 31 deg 57 min 50 sec W 219.12 feet to the point of beginning,
containing 1.356 acres of land.
AMENDMENT NO. 4
TO SUBLEASE AGREEMENT
THIS AMENDMENT TO SUBLEASE AGREEMENT (as originally dated December 11,
1991, and as subsequently amended the "Sublease") by and between AMERICAN CAST
IRON PIPE COMPANY, a Georgia corporation ("Landlord") and L.B. FOSTER COMPANY, a
Pennsylvania corporation ("Tenant") is made and entered into between Landlord
and Tenant on and as of this the 15 day of November, 2000 ("Amendment").
WITNESSETH:
WHEREAS, Landlord and Tenant desire to further amend the Sublease which
has heretofore been amended by Amendment No. 1 amending Exhibit "A" to the
Sublease, by Amendment No. 2 providing that the Commencement Date of the
Sublease is April 1, 1992 and extending the term of the Sublease; and by
Amendment No. 3 providing for the construction of certain improvements on the
"demised premises" and the payment of Supplemental Rent in connection therewith;
WHEREAS, Landlord and Tenant desire to further extend the term of the
Sublease, to limit the period with respect to which Supplemental Rent is payable
and to eliminate the formula for adjusting Additional Rent with respect to the
period prior to July 31, 2000.
NOW THEREFORE, in consideration of the premises and the mutual
undertakings, covenants, promises and agreements herein contained and for other
good and valuable consideration, receipt of which is acknowledged, Landlord and
Tenant agree as follows:
A. CERTAIN AGREEMENTS
1. Except as otherwise provided herein, all defined terms in the
Sublease are incorporated by
reference into this Amendment.
2. As used in the Sublease
a. the term, "Supplemental Commencement Date" is redefined to mean August
1, 1997. The definition herein supersedes the definition contained in Amendment
No. 3 to Lease Agreement dated on or about April 15, 1999 ("Amendment No. 3").
b. the term, Supplemental Sublease Year', means the
period of twelve (12) consecutive months commencing
on August 1, 1997 and on each anniversary of August
1, 1997, with the final Supplemental Sublease Year
commencing on August 1, 1999 and ending on July 31,
2000. The definition herein is supersedes the
definition contained in Amendment No. 3.
B. FURTHER AGREEMENTS AND AMENDMENTS
1. ARTICLE 1. PREMISES AND TERM. Article 1 (Premises and Term) is hereby
amended by changing and amending the second paragraph of Article 1 to read
in its entirety as follows:
TO HAVE AND TO HOLD the said demised premises, together with
all and singular the improvements thereunto belonging or in
any manner appertaining, unto Tenant for a term commencing on
the Commencement Date set forth in Article 3 hereof, and
continuing thereafter to and including July 31, 2007 subject,
however, to earlier termination as provided elsewhere in this
sublease.
2. Article 6(b)(ii) is hereby amended by changing and amending the second
paragraph of said Article to read in its entirety as follows:
"Commencing with the consecutive, 12 month period ending July
31, 2000 and for each consecutive, 12 month period thereafter
during the term of this Sublease, if Tenant and Landlord are
unable to agree upon a mutually acceptable percentage of gross
revenues to be paid by Tenant as Additional Rent at least
ninety (90) days prior to commencement of each succeeding
consecutive, 12 month period commencing on each August 1st
during the term of this Sublease after July 31, 2000 to which
such percentages shall apply, the following shall apply for
the following consecutive, 12 month period. If the Additional
Rent paid by Tenant to Landlord in the previous Sublease year
is less than $300,000.00 then the percentages set forth in
subparagraph (i) above shall increase by one-half of one
percent. If Additional Rent paid by Tenant to Landlord in the
previous consecutive, 12 month period is $300,000.00 or
greater, then the percentages shall be reduced by one-half of
one percent."
3. Article 6(b)(iii) is hereby amended by changing and amending said Article
to read in its entirety as follows:
"(iii) During each Supplemental Sublease Year or, in the event
of termination of this Sublease prior to the expiration of
twelve (12) months from the date of commencement of any such
Supplemental Sublease Year, the part of the Supplemental
Sublease Year remaining until July 31, 2000, Tenant shall, in
addition to the Additional Rent, pay the Landlord additional
rent for the demised premises ("Supplemental Rent") equal to
three-quarters of one percent (.075%) of "gross revenues" (as
defined in the Sublease) earned in the coating of pipe by
Tenant (regardless of pipe size) in the demised premises."
4. Article 6(e)(i) is hereby amended by changing and amending said Article to
read in its entirety as follows:
"(i) Within thirty (30) days after the end of each calendar
quarter during the Sublease term and after the expiration or
earlier termination of the Sublease term if such expiration or
termination shall occur during a calendar quarter, Tenant
shall furnish to Landlord a verified, detailed statement
certified as to its accuracy by an officer of Tenant, setting
forth the amount of gross revenues of Tenant from coating
operations during the preceding quarter or, if applicable,
part thereof, showing the amount of Additional Rent and, with
respect only to the period prior to August 1, 2000,
Supplemental Rent, required to be paid by Tenant for such
quarter or, if applicable, shorter period and providing a
breakdown of the calculations of the Additional Rent and
Supplemental Rent. Simultaneously with the delivery of such
statement, Tenant shall pay to landlord all such Additional
Rent and Supplemental Rent other than the Additional Rent and
Supplemental Rent to be deducted by Landlord from Tenant's
invoices. Tenant shall keep a full and accurate set of records
adequately showing the amount of gross revenues arising out of
operations conducted on the demised premises each month during
the Sublease term."
C. Except as amended hereby, all provisions of the Sublease shall remain in
full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed and affixed
their respective seals to this instrument, being duly authorized in the
premises, on the day and year first above written.
LANDLORD:
American Cast Iron Pipe Company,
a Georgia corporation
By: /s/ J. M. O'Brien
--------------------------------
Its: V. P. Sales
--------------------------------
TENANT:
L.B. Foster Company,
a Pennsylvania corporation
By: /s/Lee B. Foster
------------------------------
Its: Chief Executive Officer
------------------------------
L.B. FOSTER COMPANY
1998 LONG-TERM INCENTIVE PLAN
AS AMENDED AND RESTATED*
ARTICLE I
PURPOSE, EFFECTIVE DATE AND AVAILABLE SHARES
1.1 Purpose. The purpose of this Plan is to provide financial incentives for
selected key personnel and directors of L.B. Foster Company (the "Company") and
its subsidiaries, thereby promoting the long-term growth and financial success
of the Company by (i) attracting and retaining personnel and directors of
outstanding ability, (ii) strengthening the Company's capability to develop,
maintain and direct a competent management team, (iii) motivating officers to
achieve long-range performance goals and objectives, and (iv) providing
incentive compensation opportunities competitive with those of other
corporations.
1.2 Effective Date and Expiration of Plan. The Plan was initially adopted by the
Board of Directors of the Company on October 23, 1998 and was made effective as
of that date. An amended and restated Plan was approved by the Board of
Directors of the Company on February 24, 1999 and by the Company's shareholders
at the May 20, 1999 Annual Meeting of Shareholders. A subsequent amended and
restated Plan was approved by the Board of Directors of the Company on February
2, 2001, subject to the approval of the Company's shareholders at the May 9,
2001 Annual Meeting of Shareholders. Unless earlier terminated by the Board
pursuant to Section 5.3, the Plan shall terminate on October 22, 2008. No Award
shall be made pursuant to the Plan after its termination date, but Awards made
on or prior to the termination date may extend beyond that date.
1.3 Shares Available Under the Plan. L.B. Foster Company stock to be offered
under the Plan pursuant to Options and SARs may be authorized but unissued
common stock or previously issued shares of common stock which have been
reacquired by the Company and are held in its treasury. Subject to adjustment
under Section 5.6, no more than 900,000 shares of common stock shall be issuable
upon the exercise of Options or SARs. Any shares of stock subject to an Option
which for any reason is canceled (excluding shares subject to an Option canceled
upon the exercise of a related SAR) or terminated without having been exercised
shall again be available for Awards under the Plan. Shares subject to an Option
canceled upon the exercise of an SAR shall not again be available for Awards
under the Plan.
ARTICLE II
DEFINITIONS
2.1 "Award" means, individually or collectively, any Option or SAR under
this Plan.
2.2 "Board" means the Board of Directors of L.B. Foster Company.
2.3 "Committee" means directors of the Company, not to be less than two,
appointed by the Board, each of who is a "non-employee director" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. In
the absence of such a committee or if the Board, in its discretion, elects to
act, the term "Committee" shall mean the Board with respect to any such action.
2.4 "Company" means L.B. Foster Company and its successors and
assigns.
2.5 "Director" means a director of the Company or of a Subsidiary.
2.6 "Effective Date" means the date on which the Plan is effective as
provided in Section 1.2.
2.7 "Fair Market Value" of the Stock as to a particular time or date means the
last sale price of the Stock as reported in the NASDAQ National Market System
or, if the Stock is listed on a securities exchange, the last reported sale
price of the Stock on such exchange that shall be for consolidated trading if
applicable to such exchange, or if neither so reported or listed, the last
reported bid price of the Stock.
2.8 "Incentive Stock Option" means an option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended.
2.9 "Key Personnel" means officers and employees of the Company and its
Subsidiaries who occupy responsible executive, professional, sales or
administrative positions and who have the capacity to contribute to the success
of the Company.
2.10 "Nonqualified Stock Option" means a stock option granted under the Plan
other than an Incentive Stock Option.
2.11 "Option" means both a Nonqualified Stock Option and an Incentive Stock
Option to purchase common stock of the Company.
2.12 "Option Price" means the price at which common stock of the Company
may be purchased under an Option as provided in Section 4.6.
2.13 "Participant" means a person to whom an Award is made under the Plan.
2.14 "Personal Representative" means the person or persons who, upon the death,
disability or incompetency of a Participant, shall have acquired, by will or by
the laws of descent and distribution or by other legal proceedings, the right to
exercise an Option or SAR theretofore granted to such Participant.
2.15 "Plan" means this 1998 Long-Term Incentive Plan.
2.16 "SAR" means a stock appreciation right under the Plan.
2.17 "Stock" means common stock of the Company.
2.18 "Stock Option Agreement" means an agreement entered into between a
Participant and the Company under Section 4.5.
2.19 "Subsidiary" means a corporation or other business entity, domestic or
foreign, the majority of the voting stock or other voting interests in which is
owned directly or indirectly by the Company.
ARTICLE III
ADMINISTRATION
3.1 Committee to Administer.
(a) The Plan shall be administered by the Committee. The Committee
shall have full power and authority to interpret and administer the
Plan and to establish and amend rules and regulations for its
administration. The Committee's decisions shall be final and conclusive
with respect to the interpretation of the Plan and any Award made under
it.
(b) A majority of the members of the Committee shall constitute a
quorum for the conduct of business at any meeting. The Committee shall
act by majority vote of the members present at a duly convened meeting,
including a telephonic meeting in accordance with Section 1708 of the
Pennsylvania Business Corporation Law ("BCL"). Action may be taken
without a meeting if written consent thereto is given in accordance
with Section 1727 of the BCL.
3.2 Powers of Committee.
(a) Subject to the provisions of the Plan, the Committee shall have
authority, in its discretion, to determine those Key Personnel and
Directors who shall receive Awards, the time or times when each such
Award shall be made and the type of Award to be made, whether an
Incentive Stock Option or a Nonqualified Stock Option shall be granted
and the number of shares to be subject to each Option.
(b) A Director shall not participate in a vote granting himself an
Option or SAR.
(c) The Committee shall determine the terms, restrictions and
provisions of the agreement relating to each Award, including such
terms, restrictions and provisions as shall be necessary to cause
certain Options to qualify as Incentive Stock Options. The Committee
may correct any defect or supply any omission or reconcile any
inconsistency in the Plan, or in any agreement relating to an Award, in
such manner and to the extent the Committee shall determine in order to
carry out the purposes of the Plan. The Committee may, in its
discretion, accelerate the date on which an Option or SAR may be
exercised, if the Committee determines that to do so will be in the
best interests of the Company and the Participant.
ARTICLE IV
AWARDS
4.1 Awards. Awards under the Plan shall consist of Incentive Stock Options,
Nonqualified Stock Options and/or SARs. All Awards shall be subject to the terms
and conditions of the Plan and to such other terms and conditions consistent
with the Plan as the Committee deems appropriate. Awards need not be uniform.
4.2 Eligibility for Awards. Awards may be made to Key Personnel and Directors.
In selecting Participants and in determining the form and amount of the Award,
the Committee may give consideration to his or her functions and
responsibilities, his or her present and potential contributions to the success
of the Company, the value of his or her services to the Company, and other
factors deemed relevant by the Committee.
4.3 Award of Stock Options.
(a) The Committee may, from time to time, subject to Section 3.2(b) and
other provisions of the Plan and such terms and conditions as the
Committee may prescribe, grant Incentive Stock Options and Nonqualified
Stock Options to any Key Personnel or Directors. Awards of Incentive
Stock Options and Nonqualified Stock Options shall be separate and not
in tandem.
(b) Subject to adjustment in accordance with Section 5.6 and for the
period commencing after January 1, 2000, Nonqualified Stock Options to
acquire 5,000 shares of Stock shall be awarded to each Director who is
not an employee of the Company or subsidiary on each date such Director
is elected to serve as a Director at an annual meeting of the Company's
shareholders or such Director's term otherwise continues after the
adjournment of such annual meeting of shareholders. Awards under this
Section 4.3(b) shall be automatic and shall not require action by the
Committee. An SAR may not be awarded related to an Option granted under
this Section 3.2(b).
4.4 Period of Option.
(a) Unless otherwise provided in the related Stock Option Agreement, an
Option granted under the Plan, other than to a Director, shall be
exercisable only after twelve (12) months have elapsed from the date of
grant and, after such twelve-month waiting period, the Option may be
exercised in cumulative installments in the following manner:
(i) The Participant may purchase up to one-fourth (1/4) of
the total optioned shares at any time after one year from the
date of grant and prior to the termination of the Option.
(ii) The Participant may purchase an additional one- fourth
(1/4) of the total optioned shares at any time after two years
from the date of grant and prior to the termination of the
Option.
(iii) The Participant may purchase an additional one- fourth
(1/4) of the total optioned shares at any time after three
years from the date of grant and prior to the termination of
the Option.
(iv) The Participant may purchase an additional one- fourth
(1/4) of the total optioned shares at any time after four
years from the date of grant and prior to the termination of
the Option.
The duration of each Option shall not be more than ten (10)
years from the date of grant.
(b) Except as otherwise provided in the Stock Option Agreement or the
Plan, an Option may not be exercised by a Participant, other than a
Director, unless such Participant is then, and continually (except for
sick leave, military service or other approved leave of absence) after
the grant of an Option has been, an officer or employee of the Company
or a Subsidiary.
(c) An Option granted to a Director while a Director, whether pursuant
to Section 4.3(b) or otherwise, shall be immediately exercisable.
4.5 Stock Option Agreement. Each Option shall be evidenced by a Stock Option
Agreement, in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve.
4.6 Option Price and Exercise.
(a) The Option Price of Stock under each Option shall be determined by
the Committee but shall be not less than the Fair Market Value of the
Stock on the trading day immediately preceding the date on which the
Option is granted, as determined by the Committee; provided, however,
that the Option Price of Stock under each Option granted under Section
4.3(b) shall be the Fair Market Value of the Stock on the trading day
immediately preceding the date on which such Option is granted.
(b) Options may be exercised from time to time by giving written notice
of exercise to the Company specifying the number of shares to be
purchased. The notice of exercise shall be accompanied by (i) payment
in full of the Option Price in cash, certified check, cashier's check
or other medium accepted by the Company in its sole discretion or (ii)
a copy of irrevocable instructions to a broker to promptly deliver to
the Company the amount of sale or loan proceeds sufficient to cover the
Option Price. An option shall be deemed exercised upon the date the
Company receives the notice of exercise and all the requirements of
this Section 4.6(b) have been fulfilled.
4.7 Delivery of Option Shares. The Company shall not be obligated to deliver any
shares upon the exercise of an Option unless and until, in the opinion of the
Company's counsel, all applicable federal, state and other laws and regulations
have been complied with. In the event the outstanding Stock is at the time
listed on any stock exchange, no delivery shall be made unless and until the
shares to be delivered have been listed or authorized to be added to the list
upon official notice of issuance on such exchange. No delivery shall be made
until all other legal matters in connection with the issuance and delivery of
shares have been approved by the Company's counsel. Without limiting the
generality of the foregoing, the Company may require from the Participant or
other person purchasing shares of Stock under the Plan such investment
representation or such agreement, if any, as counsel for the Company may
consider necessary in order to comply with the Securities Act of 1933, as
amended, and the regulations thereunder. Certificates evidencing the shares may
be required to bear a restrictive legend. A stop transfer order may be required
to be placed with the transfer agent, and the Company may require that the
Participant or such other person agree that any sale of the shares will be made
only on one or more specified stock exchanges or in such other manner as
permitted by the Committee.
The Participant shall notify the Company when any disposition of the shares,
whether by sale, gift or otherwise, is made. The Company shall use its best
efforts to effect any such compliance and listing, and the Participant or other
person shall take any action reasonably requested by the Company in such
connection.
4.8 Limitations on Incentive Stock Options.
(a) The aggregate Fair Market Value (determined at the time the Option
is granted) of the Stock with respect to which Incentive Stock Options
are exercisable for the first time by a Participant during any calendar
year (under all plans of the Participant's employer corporation and its
parent and subsidiary corporations) shall not exceed $100,000.
(b) An Incentive Stock Option shall not be granted to any Key Personnel
or Director who, at the time of grant, owns stock possessing more than
ten percent of the total combined voting power of all classes of stock
of the Company or any Subsidiary.
(c) No Incentive Stock Option may be exercisable more than three months
after termination of the Participant's employment with the Company or
with a parent or Subsidiary of the Company, except that where such
employment is terminated because of permanent and total disability,
within the meaning of Section 22(e)(3) of the Internal Revenue Code of
1986 ("Permanent Disability"), or death, such period may be one year.
4.9 Termination of Service.
(a) Except as otherwise provided in this Plan or in the applicable
Stock Option Agreement, if the service of a Participant, other than as
a Director, terminates for any reason other than death, permanent
disability or retirement with the consent of the Company, all Options
held by the Participant shall expire and may not thereafter be
exercised 30 days after such termination. For purposes of this section,
the employment or other service in respect to Options held by a
Participant shall be treated as continuing intact while the participant
is on military leave, sick leave, or other bona fide leave of absence
(such as temporary employment with the Government) if the period of
such leave does not exceed 90 days, or, if longer, so long as the
Participant's right to reestablish his service with the Company is
guaranteed either by statute or by contract. Where the period of leave
exceeds 90 days and where the Participant's right to reestablish his
service is not guaranteed by statute or by contract, his service shall
be deemed to have terminated on the ninety-first day of such leave.
Except as so exercised, such Option shall expire at the end of such
period. In no event, however, may any Option be exercised after the
expiration of ten (10) years from the date of grant of such Option.
(b) A Director who has served as a director of the Company for 60
months or more and a Director whose services are terminated due to
death, Permanent Disability (as determined in Section 4.11), or
retirement with the consent of the Company (as determined in Section
4.11), shall be entitled to exercise his option until the expiration of
the full term of the Option, unless the Director has been terminated
for Cause. A Director who has served as a Director of the Company for
less than 60 months and whose services are not terminated due to death,
Permanent Disability (as determined in Section 4.11) or retirement with
the consent of the Company (as determined in Section 4.11) may exercise
such option within 365 days after termination of such Director's
services as a director. In the event that a Director is terminated for
Cause, all options held by such Director shall expire and shall not
thereafter be exercised.
(c) For the purpose of the Plan, termination for Cause shall mean (i)
termination due to (a) willful or gross neglect of duties or (b)
willful misconduct in the performance of such duties, so as to cause
material harm to the Company or any Subsidiary as determined by the
Board, (ii) termination due to the Participant committing fraud,
misappropriation or embezzlement in the performance of his or her
duties or (iii) termination due to the Participant committing any
felony of which he or she is convicted and which, as determined in good
faith by the Board, constitutes a crime involving moral turpitude and
results in material harm to the Company or a Subsidiary.
4.10 Death. Except as otherwise provided in the applicable Stock Option
Agreement and except with respect to Directors, if a Participant, dies at a time
when his Option is not fully exercised, then at any time or times within such
period after his death, not to exceed 12 months, as may be provided in the Stock
Option Agreement, such Option may be exercised as to any or all of the shares
which the Participant was entitled to purchase under the Option immediately
prior to his death, by his executor or administrator or the person or persons to
whom the Option is transferred by will or the applicable laws of descent and
distribution. In no event, however, may any Option be exercised after the
expiration of ten (10) years from the date of grant of such Option.
4.11 Retirement or Permanent Disability. Except as otherwise provided in the
applicable Stock Option Agreement and except with respect to Directors, if a
Participant retires from service with the consent of the Company, or suffers
Permanent Disability, at a time when he or she is entitled to exercise an
Option, then at any time or times within three years after his or her
termination of service because of such retirement or Permanent Disability the
Participant may exercise such Option as to all or any of the shares which he or
she was entitled to purchase under the Option immediately prior to such
termination. Except as so exercised, such Option shall expire at the end of such
period. In no event, however, may any Option be exercised after the expiration
of ten (10) years from the date of grant of such Option.
The Committee shall have authority to determine whether or not a Participant has
retired from service or has suffered Permanent Disability, and its determination
shall be binding on all concerned. In the sole discretion of the Committee, a
transfer of service to an affiliate of the Company other than a Subsidiary (the
latter type of transfer not constituting a termination of service for purposes
of the Plan) may be deemed to be a retirement from service with the consent of
the Company so as to entitle the Participant to exercise the Option within 90
days after such transfer.
4.12 Stockholder Rights and Privileges. A Participant shall have no rights as a
stockholder with respect to any Stock covered by an Option until the issuance of
a stock certificate to the Participant representing such Stock.
4.13 Award of SARs.
(a) At any time prior to six months before an Option's expiration date
and subject to Section 3.2, the Committee may award to the Participant
an SAR related to the Option.
(b) The SAR shall represent the right to receive payment of an amount
not greater than the amount, if any, by which the Fair Market Value of
the Stock on the trading day immediately preceding the date of exercise
of the SAR exceeds the Option Price.
(c) SARs awarded under the Plan shall be evidenced by either the Stock
Option Agreement or a separate agreement between the Company and the
Participant.
(d) An SAR shall be exercisable only at the same time and to the same
extent and subject to the same conditions as the Option related thereto
is exercisable, except that the Committee may prescribe additional
conditions and limitations on the exercise of any SAR, including a
maximum appreciation value. An SAR shall be transferable only when the
related Option is transferable, and under the same conditions. The
exercise of an SAR shall cancel the related Option. SARs may be
exercised only when the Fair Market Value of a share of Stock subject
to the related Option exceeds the Option Price. Such value shall be
determined in the manner specified in Section 4.13(b).
(e) An SAR shall be exercisable only by written notice to the Company
and only to the extent that the related Option is exercisable. However,
an SAR shall in no event be exercisable during the first six months of
its term except in the event of death or Permanent Disability of the
Participant prior to the expiration of such six-month period.
(f) All SARs shall automatically be exercised on the last trading day
prior to the expiration of the related Option, so long as the Fair
Market Value of the Stock at the time of exercise exceeds the Option
Price, unless prior to such day the holder instructs the Company
otherwise in writing.
(g) Payment of the amount to which a Participant is entitled upon the
exercise of an SAR shall be made in cash, Company stock, or partly in
cash and partly in Company stock, as the Committee shall determine at
the time of the Award. To the extent that payment is made in Company
stock, the shares shall be valued at their fair market value, as
determined by the Committee.
(h) At any time when a Participant is, in the judgment of counsel to
the Company, subject to Section 16 of the Securities Exchange Act of
1934 with respect to any equity securities of the Company:
(i) any election by such Participant to receive cash in whole
or in part upon the exercise of such SAR shall be made only
during the period beginning on the third business day
following the date of release by the Company for publication
of any quarterly or annual summary statement of its sales and
earnings and ending on the twelfth business day following such
date of release, and
(ii) in the event the Committee has not determined the form in
which such SAR will be paid (i.e., cash, shares of Company
stock, or any combination thereof), any election to exercise
such right in whole or in part for cash shall be subject to
the subsequent consent thereto, or disapproval thereof, by the
Committee in its sole discretion.
(i) Each SAR shall expire on a date determined by the Committee at the
time of Award, or, if later, upon the termination of the related
Option.
ARTICLE V
MISCELLANEOUS PROVISIONS
5.1 Nontransferability. No Award under the Plan shall be transferable by the
Participant other than by will or the laws of descent and distribution. All
Awards shall be exercisable during the Participant's lifetime only by such
Participant or his Personal Representative. Any transfer contrary to this
Section 5.1 will nullify the Award.
5.2 Amendments. The Committee may at any time discontinue granting Awards under
the Plan. The Board may at any time amend the Plan or amend any outstanding
Option for the purpose of satisfying the requirements of any changes in
applicable laws or regulations or for any other purpose which may at the time be
permitted by law; provided that no such amendment shall be permissible if it
shall result in Rule 16b-3 under the Securities Exchange Act of 1934, as
amended, becoming inapplicable to any Options. No amendment shall adversely
affect the right of any Participant under any Award theretofore granted to him
or her except upon his or her written consent to such amendment.
5.3 Termination. The Board may terminate the Plan at any time prior to its
scheduled expiration date but no such termination shall adversely affect the
rights of any Participant under any Award theretofore granted without his or her
written consent.
5.4 Nonuniform Determinations. The Committee's determinations under the Plan,
including without limitation (i) the determination of the Officers and Directors
to receive Awards, (ii) the form, amount and timing of such Awards, (iii) the
terms and provisions of such Awards and (iv) the Agreements evidencing the same,
need not be uniform and may be made by it selectively among Officers and
Directors who receive, or who are eligible to receive, Awards under the Plan,
whether or not such Officers or Directors are similarly situated.
5.5 No Right to Employment. Neither the action of the Board in establishing the
Plan, nor any action taken by the Committee under the Plan, nor any provision of
the Plan, shall be construed as giving to any person the right to be retained in
the employ, or as an officer or director, of the Company or any Subsidiary.
5.6 Changes in Stock. In the event of a stock dividend, split-up, or a
combination of shares, recapitalization or merger in which the Company is the
surviving corporation or other similar capital change, the number and kind of
shares of stock or securities of the Company to be subject to the Plan and to
Options or SARs then outstanding or to be granted thereunder, the maximum number
of shares of stock or security which may be issued on the exercise of Options
granted under the Plan, the Option Price and other relevant provisions shall be
appropriately adjusted by the Board, whose determination shall be binding on all
persons. In the event of a consolidation or a merger in which the Company is not
the surviving corporation, or any other merger in which the shareholders of the
Company exchange their shares of stock in the Company for stock of another
corporation, or in the event of complete liquidation of the Company, or in the
case of a tender offer accepted by the Board of Directors, all outstanding
Options and SARs shall thereupon terminate, provided that the Board may, prior
to the effective date of any such consolidation or merger, either (i) make all
outstanding Options and SARs immediately exercisable or (ii) arrange to have the
surviving corporation grant to the Participants replacement Options and SARs on
terms which the Board shall determine to be fair and reasonable.
5.7 Tax Withholding Whenever Stock is to be delivered to a Participant upon
exercise of an Option, the Company may (i) require such Participant to remit an
amount in cash sufficient to satisfy all federal, state and local tax
withholding requirements related thereto ("Required Withholding"), (ii) withhold
such Required Withholding from compensation otherwise due to such Participant,
or (iii) any combination of the foregoing.
5.8 Status A Participant's status as Key Personnel or a Director shall be
determined for each Option as of the date the Option is awarded to the
Participant.
- --------
*As amended and restated by the Board of Directors on
February 2, 2001, subject to shareholders' approval
at the May 9, 2001 Annual Meeting of Shareholders.
L.B. FOSTER COMPANY
STANDARD PRACTICE
HUMAN RESOURCES
COMPANY VEHICLE PLAN
DATE: October 1, 2000
STANDARD PRACTICE NO: SP-P-10
SUPERSEDES: SP-P-10 dated
March 1, 1999
1. GENERAL POLICY
It is the policy of the L.B. Foster Company to provide a
leased vehicle and/or car allowance to employees holding one
of the following positions:
Chairman and President;
Corporate officer;
District sales manager or product manager with a job level of 12
or above;
Other manager with a job level of 15 or above;
Outside sales person or sales manager with a job level between
6 and 10 or;
An employee who drives 12,000 business miles annually.
The Company intends to establish a leased vehicle safety
committee and the members of the committee will be responsible
for establishing an initial driver training program and a
retraining and/or refresher training for long term employees.
2. PURPOSE
The purpose of this program is to establish procedures for
complying with appropriate safety regulations and to minimize
L.B. Foster's accident frequency and severity. The Company is
100% committed to this policy and procedure.
To provide a competitive environment in the area of employee
benefits to attract and retain qualified personnel for
eligible management and sales positions and to reduce Company
expenses through the Leased Vehicle Plan by avoiding personal
automobile mileage reimbursement for high business mileage
use.
SP-P-10
Page 2
3. ELIGIBILITY
Monthly employee
Class:Group:Policy:deduction:
A Chairman & CEO $800.00 monthly car allowance N/A or
President & COO to purchase or lease a vehicle
based on criteria listed in 3A
B Corporate Officers $700.00 monthly car allowance N/A
to purchase or lease a vehicle based
on criteria listed in 3A
C Sales Managers $500.00 monthly car allowance N/A
and product managers to purchase or lease a vehicle
with a job level of 12 andbased on criteria listed in 3A.
above and other managers
with a job level of 15 and
above who drive less than
12,000 business miles annually
D Sales Managers Employees may select from $65.00 and
product managers the following standard equipped
with a job level of 12 and vehicles through the L.B.
Foster above and other managers lease program : with
a job level of 15 andDodge Intrepid ES above who
drive more Oldsmobile Intrigue GL than 12,000
business Pontiac Grand Prix miles annually
E Outside sales personnel, Employees may select from
$50.00 and sales managers the following standard
equipped with a job level between vehicles through
the L.B. Foster 6 and 10; other lease program :
participants who drive Chevrolet Malibu 12,000
business miles Ford Taurus SE annually Oldsmobile
Alero
SP-P-10
Page 3
At the driver's discretion, automobile options may be added
and are available at the invoice prices quoted at the time the
order is placed. The only options which a driver may add are
the options available for the make and models offered under
the leased vehicle program. The cost for driver paid options
must be paid by the employee to the leasing company (prior to
placing the order with the manufacturer) through the Human
Resources Department. The driver shall also be responsible for
any and all State Tax attributable to the options. Should the
driver fail to reimburse the Company for the sales tax within
60 days following the initial request for payment, such amount
will be deducted from the employee's pay check.
Should a 4 wheel drive vehicle be required due to the nature
or terrain of the driver's territory a special order form will
be provided by the Human Resources Department and will require
approval by the President. The only options which a driver may
add are the options available for the make and models offered
on the special order form.
The 4 wheel drive vechile will be as follows:
Ford Escape
The employee monthly contributions for the 4 wheel drive
vehicle will based on the class D or E deductions.
A. Employees who receive car allowance must purchase/lease
a vehicle based
on the following guidelines:
1) All vehicles must be 4 door vehicles.
2) No vehicle which is classified as a
convertible is allowed.
3) No after market paint or decals are allowed.
4) No vehicle may be retained beyond 5 model years
old or 75,000 miles, whichever comes first.
5) No spoilers are allowed.
As you select the vehicle to purchase/lease with the L.B.
Foster car allowance, it is incumbent upon you as an
officer/manager of the company to select a make/model that
represents the company in a favorable manner when you are
engaged in L.B. Foster business.
4. ELIGIBLE DRIVERS
Except in emergencies, driving of the leased vehicle shall be
limited to employee and the employee's spouse over the age of
twenty-five (25).
SP-P-10
Page 4
5. RESPONSIBILITY
A. Plan Participants
1. It shall be the responsibility of
each employee to monitor and report odometer
readings as of each November 1st and on the
date his/her vehicle is replaced to validate
the personal mileage assumption. These
odometer readings are to be turned into the
Payroll Department during the first week of
November on the Company Automobile Odometer
Form (attachment SP-P-10.1).
2. If a form is not received,
mileage will be reported at 100% personal
and reported as such on the employee's W-2.
It shall be the responsibility of each
employee to maintain records documenting all
business and personal mileage usage in
accordance with record keeping requirements
which may, from time to time, be required by
the Internal Revenue Service, and to
note this on the Company Automobile
Odometer Form
(attachment SP-P-10.1).
3. The driver is responsible for operating the
vehicle in a safe manner. The use of seat
belts is mandatory for the driver and all
passengers. The use of alcohol or drugs is
prohibited while
operating a motor vehicle.
4. If any driver of a company leased vehicle is
issued a citation for a DUI the individual will be
suspended from the use of such vehicle for one (1)
year. If any employee is issued a second DUI
citation, the privilege of a company leased vehicle
will be removed permanently.
5. All employees receiving a car allowance must show
proof of insurance annually by submitting a copy of
insurance document to Human
Resources. This must be done in January.
6. Leased vehicle participants are required to adhere
to the maintenance schedule under the leased vehicle
maintenance program.
7. All participant's under this program shall be
required to execute SP-P-10.3 on an annual basis.
B. Accounting and Payroll Departments
It shall be the responsibility of the
Accounting and Payroll Departments to maintain and
verify the records of all Leased Vehicle Plan
participants with regard to payroll deductions,
individual taxability calculations and W-2 reporting.
SP-P-10
Page 5
C. Human Resources Department
1. It shall be the responsibility of
the Human Resources Department to monitor
the fleet of Company leased automobiles in
service, to provide lease values, to ensure
that the appropriate forms are provided to
each driver, and to acquire and dispose of
all Company leased automobiles.
2. The Vice President, Human Resources shall be
responsible for the interpretation and
application of the provisions of the Leased Vehicle
Plan.
3. The Human Resources Department shall be
responsible for obtaining an application and
completing a reference check on all new hires which
will include obtaining a motor vehicle record on all
new hires. The Human Resources Department shall
obtain a copy of the new hire's drivers license prior
to authorizing the use of a company vehicle.
4. The Human Resources Department shall be
responsible for
obtaining a motor vehicle record on each leased
vehicle driver annually.
5. The Human Resources Department shall review motor
vehicle reports at time of hire and no less than
annually thereafter in accordance with
SP-P-10.2. Any driver found not in compliance
with SP-P-10.2 shall
immediately be suspended from driving a
company vehicle.
6. The Human Resources Department and the Risk Manager will
be responsible for investigating all accidents.
6. PRACTICE
A. Pursuant to the Tax Reform Act of 1984, the value of the personal use of an
employer provided automobile must be included in the employee's income and
subjected to withholding tax.
B. The annual lease value of an automobile shall be based on its fair market
value as determined through the Black Book New Car Invoice Guide, or for
vehicles with lease dates beginning in 1998 and thereafter, valued on the
manufacture's invoice price plus 4%.
C. The percentage of personal usage of the annual lease value shall represent
an additional non-cash item which shall be included as employee income.
SP-P-10
Page 6
D. The annual lease value shall include all maintenance and insurance but not
fuel.
E. Fuel shall be valued at $0.055 cents per personal mile driven for employees
driving company leased vehicles.
F. The driver of a company leased vehicle is to use the fuel and maintenance
card to charge fuel, maintenance, and repair expenses. Those expenses not
charged through this program shall be reimbursed through the Weekly Expense
Report. For body damage and repairs refer to 10(C).
G. Employees who receive a car allowance will be reimbursed via the Company
expense report at the per mile rate established by the IRS (2000 rate is
$0.325 cents).
H. Monthly deductions for Company automobiles shall be reclassified on the
employee pay stub as federal withholding tax.
I. The dollar value of the Company automobile personal use benefit will appear
as additional earnings on the employee pay stub and W-2.
7. TRANSFER
The transfer of any Company provided automobile between employees must be
authorized by the Human Resources Department.
8. REPLACEMENT
A. Company leased vehicles shall be eligible for replacement after fifty (50)
months of service or 60,000 miles, whichever comes first.
B. Automobiles ready for replacement may be purchased for 75% of the current
Automotive Market Report (AMR) "clean" value, adjusted proportionally for
any amount originally paid by the driver, plus any transfer taxes or other
costs.
C. The automobile may be purchased by the original assigned driver or a member
of his/her immediate family only (spouse and children). The original
assigned driver is not authorized to purchase the vehicle merely for the
purpose of selling the vehicle for profit to another individual.
D. Other employees may submit sealed bids for no less than 75% of the AMR
"clean" value should the original assigned driver refuse the purchase
opportunity. The highest bidder will be awarded the purchase.
SP-P-10
Page 7
Notwithstanding, the bids of participants in the Company Leased Vehicle Plan
will be considered only if no other employee bids for the vehicle. In the
event that there is more than one bidder, and the highest bidder purchased
a Company leased vehicle within a period of twelve months prior to
submission of the bid, then the next highest bidder will be awarded the
vehicle.
E. Automobiles not purchased by employees (for use by the employee or his/her
family) will be disposed of by the Human Resources Department.
F. An employee who purchases an automobile under this standard practice must
provide proof of ownership for one year following the purchase. If the
employee is unable to provide proof of ownership for one year then such
employee will be required to pay the Company the difference between the
purchase price and the Fair Market Value of the automobile at the time the
car was purchased. The employee will be required to pay the Company the
difference within 30 days or such amount will be deducted from his/her
paycheck.
9. TERMINATION
A. At the Company's option, terminating employees may be authorized by the
President or Vice President - Human Resources to purchase their assigned
vehicle for themselves or members of their immediate family for 85% of the
current AMR "clean" value, adjusted proportionally for any amount
originally paid by the driver, plus any transfer taxes or other costs.
B. The immediate supervisor of a terminated employee shall be responsible for
ensuring that the terminated employee deposits the leased vehicle and keys
at the Company facility prior to or on the day of termination. If the
employee wishes to purchase the automobile, he/she shall take possession of
the car only when the sale has been finalized.
C. The Human Resources Department shall be responsible for authorizing the
purchase price and release of the automobile to the terminated employee who
has elected to purchase the vehicle.
10. ACCIDENT/LOSS RESPONSIBILITY/INSURANCE
A. Personal property The Corporate Vehicle Insurance Plan does not cover
personal articles. Employees must secure their own insurance in the form of
a homeowner's policy attachment or specific policy to cover such articles.
SP-P-10
Page 8
B. Company property Samples, literature, equipment, and supplies which are in
the direct possession of an employee shall be the responsibility of the
employee if lost, stolen, or damaged.
C. Accident and loss reports All accidents regardless of fault or amount of
damage and property losses must be reported immediately to the employee's
manager and the Insurance Department by personal contact and by use of the
Preliminary Property Loss Report. Refer to SP-F-1.5 for the automobile
accident claim procedures and SP-F-1.6 for reporting property loss.
11. TRAFFIC VIOLATIONS
It shall be the responsibility of the employee assigned the leased vehicle at
the time of the traffic violation to pay any incurred traffic or parking
tickets and/or fines. Should the employee fail to reimburse the Company
(for any delinquent ticket) within 60 days following notification of the
amount due, such amount will be deducted from the employee's paycheck.
The maximum allowable points per assigned leased vehicle participant will be as
reflected on SP-P-10.2. Any participant, or driver, of any Company leased
or owned vehicle shall be prohibited from driving a Company vehicle if such
employee's points exceed 60.
Prepared by: Approved by:
/s/Monica Iurlano /s/Lee B. Foster
------------------------- -------------------------
Monica Iurlano Lee B. Foster II
Vice President - Human Resources Chairman & CEO
3/12/01
Final
L. B. FOSTER COMPANY 2001
MANAGEMENT INCENTIVE COMPENSATION PLAN
I. PURPOSE
To provide incentives and rewards to salaried non-sales managers based
upon overall corporate profitability and the performance of individual operating
units.
II. CERTAIN DEFINITIONS
The terms below shall be defined as follows for the purposes of the L. B.
Foster Company 2001 Management Incentive Compensation Plan. The definitions
shall be subject to such adjustments as, from time to time, may be, by the
Corporation's Chief Executive Officer.
2.1 Adjusted Operating Unit Target Award" shall be a Participant's
Operating Unit Target Award multiplied by the applicable Operating Unit
Performance Percentage determined under Section 3.5B(b).
2.2 "Base Compensation" shall mean the total base salary, rounded to
the nearest whole dollar, actually paid to a Participant during 2001, excluding
payment of overtime, incentive compensation, commissions, reimbursement of
expenses, severance, car allowances or any other payments not deemed part of a
Participant's base salary; provided, however, that the Participant's
contributions to the Corporation's Voluntary Investment Plan shall be included
in Base Compensation. Base Compensation for employees who die, retire or are
terminated shall include only such compensation paid to such employee during
2001 with respect to the period prior to death, retirement or termination.
2.3 "Base Fund" shall mean the aggregate amount of all cash payments to
be made pursuant to this Plan prior to adjustments pursuant to Article IV, which
amount shall be determined pursuant to Section 3.1 hereof.
2.4 "Committee" shall mean the Personnel and Compensation Committee of the
Board of Directors and any successors thereto.
2.5 "Corporation" shall mean L. B. Foster Company and those subsidiaries
thereof in which L.B. Foster Company owns 100% of the outstanding common stock,
excluding (except for the purpose of calculating "Pre-Incentive Income")
Natmaya, Inc., Fosmart, Inc. and Fexco, Ltd.
2.6 "Fund" shall mean the aggregate amount of all payments made to Plan
Participants under this Plan, after deducting all discretionary payments made
pursuant to Section 3.3 hereof and subject to Article IV.
2.7 "Individual Incentive Award" shall mean the amount paid to a
Participant pursuant to this Plan, which amount shall be determined pursuant to
Section 3.5 hereof and which award shall not exceed the lower of: (a) twice the
amount of a Participant's Target Award; or (b) the Participant's Target Award
allocable to the Product Pool multiplied by a percentage equal to twice the
percentage of Target Award paid to Participants in the General Pool. The
limitations herein shall not affect amounts distributed under Section 3.3.
2.8 "Operating Unit" shall mean the following units or divisions which
are reported in the Company's internal financial statements: CXT Rail, CXT
Buildings, Foster Coated Pipe, Threaded Products, Rail Products (excluding CXT
Rail), Piling, Fabricated Products and Geotech, subject to such adjustments as
may be made by the Chief Executive Officer.
2.9 Operating Unit Target Award" shall mean the portion of a
Participant's Target Award allocated to a specific Operating Unit pursuant to
Section 3.5B(a).
2.10 "Operating Unit Performance Percentage" shall mean the sum of the
percentages earned by the applicable Operating Unit pursuant to Section 3.5B(b)
and/or with respect to a Rail Business Unit under Section 3.5(B)(b)(iii) and
(iv).
2.11 "Participant" shall mean a salaried employee of the Corporation
who satisfies all of the eligibility requirements set forth in Article V hereof.
2.12 "Performance Percentage" shall be each of the Percentages earned
by an Operating Unit and/or Rail Business Unit under Section 3(B)(b) and which
together equal the Operating Unit Performance Percentage.
2.13 "Plan" shall mean the L. B. Foster Company 2001 Management Incentive
Compensation Plan, which Plan shall be in effect only with respect to the fiscal
year ending December 31, 2001.
2.14 "Pool" shall mean the Product Pool and the General Pool, as
calculated pursuant to Section 3.4 hereof, subject to such adjustments as may be
made by the Chief Executive Officer.
2.15 "Pre-Incentive Income" shall mean the audited pre-tax income,
after, inter alia, deductions for benefits payable under the 2001 Sales
Incentive Plan, of the Corporation for the fiscal year ending December 31, 2001
determined in accordance with generally-accepted accounting principles,
excluding (i) benefits payable under this Plan; and (ii) any portion of gains or
losses arising from transactions not in the ordinary course of business which
the Committee, in its sole discretion, determines to exclude.
2.16 " Pre-Tax Income" shall mean an Operating Unit's and/or a Rail
Business Unit's Pre-Tax Income as shown in the Corporation's financial
statements and subject to such adjustments as may be made by the Chief Executive
Officer, without taking into account incentive compensation under the 2001 Sales
Incentive Plan.
2.17 "Rail Business Units" shall mean any of the entire Rail Products
(excluding CXT) Operating Unit, New Rail Distribution, New Rail Projects, Relay
Rail, Transit Products, Allegheny Rail Products and Mining Division, subject to
such adjustments as may be approved by the Chief Executive Officer.
2.18 "Target Award" shall mean the product of a Participant's Base
Compensation multiplied by said Participant's Target Percentage.
2.19 "Target Percentage" shall mean those percentages assigned to
Participants pursuant to Section 3.2 hereof.
III. PLAN DESCRIPTION
3.1 Base Fund. Subject to Article IV, the amount of the Base Fund shall be
calculated by adding the flat rate contribution determined in 3.1A to the
marginal rate contributions determined in 3.1B.
3.1A Flat Rate Contribution. The flat rate contribution shall be determined
by multiplying the Corporation's Pre-Incentive Income by the following
percentages:
Pre-Incentive Income Percentage Flat Rate Contribution
$0 - $5,999,999 0 0
$6,000,000 and Over 13 $780,000 and Over
3.1B Marginal Rate Contribution. If the Corporation achieves any of the
following levels of Pre-Incentive Income, the marginal rate contribution shall
be determined by adding together the marginal rate contributions through the
level of Pre-Incentive Income actually achieved.
- ----------------------------- ------------------- -----------------------
Marginal Maximum Marginal Rate
Pre-Incentive Income Percentage Rate Contribution
- ----------------------------- ------------------- -----------------------
- ----------------------------- ------------------- -----------------------
- ----------------------------- ------------------- -----------------------
- ----------------------------- ------------------- -----------------------
$0 - $6,999,999 0 0
- ----------------------------- ------------------- -----------------------
- ----------------------------- ------------------- -----------------------
$7,000,000 - $7,999,999 2 $20,000
- ----------------------------- ------------------- -----------------------
- ----------------------------- ------------------- -----------------------
$8,000,000 - $8,999,999 4 $40,000
- ----------------------------- ------------------- -----------------------
- ----------------------------- ------------------- -----------------------
$9,000,000 - $9,999,999 6 $60,000
- ----------------------------- ------------------- -----------------------
- ----------------------------- ------------------- -----------------------
$10,000,000 and over 8 $80,000 and over
- ----------------------------- ------------------- -----------------------
Example: If the Corporation earned $11,500,000 in Pre-Incentive Income the Base
Fund would be $1,735,000, calculated as follows:
a. Calculate Flat Rate Contribution
$11,500,000 X 13% = $1,495,000
b. Calculate Marginal Rate Contribution
$20,000 + $40,000 + $60,000 + ($1,500,000 X 8%) = $240,000
c. Calculate Base Fund
$1,495,000+ $240,000 = $1,735,000
3.2 Target Percentages. Subject to adjustment as set forth below, each
Participant shall have a Target Percentage based upon the grade level of such
Participant, unless determined otherwise by the Chief Executive Officer, on July
1, 2001, as follows:
Result: % Of Base
Grade Levels Compensation
CXT - VP Sales 10.0
Grade 10, Plant Managers 12.5
Grade 10, Product Managers 12.5
Grade 11, Plant Managers 15.0
Grade 11, Product Managers 15.0
Grade 12, Management Positions 25.0
Grade 13, Management Positions 27.0
Result: % Of Base
Grade Levels Compensation
Grade 14, Management Positions 30.0
Grade 15, Management Positions 32.0
Grade 16, Management Positions 36.0
Grade 17, Management Positions 38.0
Grade 18, Management Positions 39.0
Grade 19, Management Positions 40.0
Grade 20, Management Positions 50.0
Grade 21, Management Positions 52.0
Grade 22, Management Positions 54.0
Grade 23 and Above 60.0
Other Employees selected, in writing, by L. B. Foster Company's Chairman of the
Board and Chief Executive Officer may also be made Participants in the Plan on
such terms as may be approved by the Chairman of the Board and Chief Executive
Officer.
The Committee may determine performance goals for the Chief Executive
Officer, the President and such other officers as the Committee may, in its
discretion, select and the Target Percentage for each such Participant will be
adjusted upward or downward based upon such Participant's achievement of such
goals. The precise method for determining such adjustments for each such
Participant shall be separately scheduled and deemed incorporated herein by
reference.
Those Participants who have retired or died prior to July 1, 2001 shall
have a Target Percentage based upon their grade level at death or retirement.
3.3 Discretionary Payments. Ten percent (10%) of the Base Fund, plus
amounts reallocated pursuant to Section 6, shall be reserved for discretionary
payments to employees of the Corporation. The recipients of all such awards and
the amounts of any such awards initially shall be selected by the Chief
Executive Officer, subject to final approval by the Committee. If any amounts
are not paid from the amount herein reserved, such remaining amount shall, at
the discretion of the Chief Executive Officer, either revert to the Corporation
or be allocated to Participants in proportion to their respective Individual
Incentive Awards prior to the allocation herein.
3.4 Calculation of Pools. Each Participant and all or any portion of
each Participant's Target Award shall be assigned to a Pool by the Chief
Executive Officer of the Company. The dollar amount of each Pool will be
determined by dividing the portion of the Target Awards assigned to the Pool by
the total Target Awards of all Participants and then multiplying such amount by
the Fund.
EXAMPLE 1:
THE CORPORATION'S PRE-INCENTIVE INCOME IS $7,100,000. THE TOTAL OF ALL TARGET
AWARDS FOR ALL PLAN PARTICIPANTS IS $2,100,000, WITH $1,000,000 ALLOCATED TO THE
GENERAL POOL AND $1,100,000 ALLOCATED TO THE PRODUCT POOL. THE DOLLAR AMOUNT OF
EACH POOL WOULD BE CALCULATED AS FOLLOWS:
(a) Determine Base Fund
($7,100,000) x 13%) + ($100,000 x 2%) = $925,000
(b) Calculate Fund By Deducting 10% For "Discretionary Awards"
$ 925,000 x 90% = $832,500
(c) Determine Amount of Each Pool
1. General Pool
$1,000,000
--------------- x $832,500 = $396,429
$2,100,000
2. Product Pool
$1,100,000
--------------- x $832,500 = $436,071
$2,100,000
3.5 Calculation of Individual Incentive Awards. The calculation of an
Individual Incentive Award shall be determined based on the Pool(s) to which a
Participant is assigned.
3.5A General Pool Individual Incentive Awards. A General Pool
Participant's Individual Incentive Award shall be calculated, subject to the
limitations in Section 2.9, as follows:
(a) Divide Participant's Target Award allocated to General Pool by the sum of
all Target Awards allocated to General Pool;
(b) Multiply (a) by amount of General Pool.
EXAMPLE 2:
THE GENERAL POOL IS $396,429. THE SUM OF ALL GENERAL POOL PARTICIPANTS' TARGET
AWARDS IS $1,000,000. MANAGER JONES HAS A TARGET AWARD OF $19,200:
$ 19,200
------------- x $396,429 = $7,611
$1,000,000 (Individual Incentive Award)
3.5B Product Pool Individual Incentive Awards
(a) The Chief Executive Officer shall assign all or any
portion of a Participant's Target Award to an Operating Unit and/or
with respect to Participants within the "Rail Products (excluding CXT)"
Operating Unit, the Chief Executive Officer shall assign, for purposes
of calculating percentages earned under 3.5(B)(b)(iii), and (b)(iv)
only, all or a portion of a Participant's Target Award to one or more
Rail Business Units, and may adjust such allocation(s) at any time (the
"Operating Unit Target Award"). The Participant's Individual Incentive
Award shall be calculated by: (i) multiplying each such Operating Unit
Target Award by the sum of the percentages (the "Operating Unit
Performance Percentage") earned by the Operating Unit (or, with respect
to (b)(iii) and(b)(iv), earned by a Rail Business Unit) under 3.5B(b),
with the resulting product being the "Adjusted Operating Unit Target
Award" and (ii) multiplying the amount in the Product Pool by a
fraction, the numerator of which is the Participant's Adjusted
Operating Unit Target Award and the denominator of which is the sum of
all Adjusted Operating Unit Target Awards of all Participants in the
Product Pool.
(b) The Operating Unit Performance Percentage with respect to
the applicable Operating Unit shall be the sum of the following
percentages:
(i) The single "Pre-Tax Income Performance
Percentage" set forth below opposite the
"Pre-Tax Income as % of the Operating Unit's
2001 Operating Plan" earned by the
applicable Operating Unit (subject to the
$5,000 thresholds set forth below and
subject to adjustment by the Chief Executive
Officer):
- --------------------------------------------- -----------------------
Pre-Tax Income as % of Operating Unit's Pre-Tax Income
2001 Operating Plan* Performance Percentage
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
75% 5%
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
80% 10%
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
85% 20%
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
90% 30%
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
95% 40%
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
100% 50%
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
110% 65%
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
120% 80%
- --------------------------------------------- -----------------------
- --------------------------------------------- -----------------------
130% and up 100%
- --------------------------------------------- -----------------------
* Once an Operating Unit has achieved 75% of the Operating Unit's 2001
Operating Plan Pre-Tax Income, the Operating Unit shall receive credit
for additional percentage points under the column on the left above
only to the extent each such percentage point represents at least
$5,000 in Pre-Tax Income.
EXAMPLE:
An Operating Unit's 2001 Operating Pre-Tax Income Plan is
$200,000 and in 2001 the Operating Unit achieves exactly $200,000 in
Operating Income.
Since $150,000 in Pre-Tax Income ($200,000 X 75%) was required
to meet the threshold for any Performance Percentage to be earned under
3.5(b)(i), the $50,000 "excess" ($200,000 - $150,000) will be used to
calculate additional Performance Percentages, i.e. $50,000 (M043)
$5,000 = 10. Accordingly, the Operating Unit would be considered to
have achieved 85% of the Operating Unit's 2001 Operating Plan (75% +
10%) and to have earned a 20% Performance Percentage instead of the 50%
Performance Percentage that otherwise would have been earned due to the
Operating Unit achieving 100% of its 2001 Operating Plan Pre-Tax
Income.
(ii) 25% if the Operating Unit met or exceeded its
Return on Investment set forth in such Operating Unit's 2001
Operating Plan (subject to adjustment by the Chief Executive
Officer), otherwise 0%.
(iii) 15% if the Operating Unit (or the applicable
Rail Business Unit) met or exceeded its 2001 Planned Operating
Owned Inventory Turnover (subject to adjustment by the Chief
Executive Officer), otherwise 0%. The Owned Inventory Turnover
shall be the turnover reported in the Corporation's internal
financial statements (subject to adjustment by the Chief
Executive Officer), which shall be calculated on a
twelve-month rolling average.
(iv) 10% if the Operating Unit's (or, the applicable
Rail Business Unit's) 2001 Days Sales Outstanding statistic,
as reported in the Corporation's internal financial
statements, averaged over the last eight months of 2001 is
equal or lower than its 2001 Plan for Days Sales Outstanding
averaged over the last eight months of the Operating Unit's
2001 Operating Plan (subject to adjustment by the Chief
Executive Officer), otherwise 0%.
(c) Notwithstanding any provision herein to the contrary, the
sum of all Individual Incentive Awards allocable to an Operating Unit
may not exceed 30% of such Operating Unit's Operating Unit Income. A
Participant assigned to an Operating Unit affected by this limit shall
receive a share of the available Operating Unit Income (i.e. 30% of the
Operating Unit's Operating Unit Income) equal to the Participant's
applicable Adjusted Operating Unit Target Award divided by the sum of
applicable Adjusted Operating Unit Target Awards for all applicable
Participants assigned to such Operating Units. Amounts not payable
because of this limitation shall be used for discretionary payments
under Section 3.3.
EXAMPLE 1:
The Product Pool is $436,071. Manager Smith's Target Award is $50,000
and IS ALLOCATED TO ALLEGHENY RAIL. THE ADJUSTED TARGET AWARD OF ALL
PARTICIPANTS IN THE PRODUCT POOL IS $800,000. THE RAIL GROUP, as a whole,
satisfied ONLY the requirements in (b)(ii), AND FAILED TO MEET THE REQUIREMENTS
OF (b)(i), (b)(iii) AND (b)(iv). ALLEGHENY RAIL MEETS THE REQUIREMENTS OF ALL
THOSE SECTIONS AND HAS ALSO EXCEEDED ITS PLANNED PRE-TAX INCOME BY 100% AND
$500,000. MANAGER SMITH'S BONUS WOULD BE CALCULATED AS FOLLOWS:
(a) Operating Performance Percentage
0% + 25% + 15% + 10% = 50%
(i) (ii) (iii) (iv)
(b) Determine Smith's Adjusted Operating Target Award
$50,000 X 50% = $25,000
(c) Determine Smith's Individual Award
$25,000 X $436,071 = $13,627
$800,000 (sum of all Adjusted
Operating Target Awards)
EXAMPLE 2:
The Product Pool is $436,071. Manager Jones' Target Award is $50,000,
with 50% being allocated to Geotech and 50% allocated to CXT Buildings.
Geotech's Operating Unit Income is 88% of its 2001 Planned Pre-Tax Income and
Geotech has attained the Return on Investment, Owned Inventory Turnover and Days
Sales Outstanding requirements set forth in 3B(b(ii), (iii) and (iv)
respectively. CXT Building's Operating Unit Income is both $1M above and 200% of
its 2001 Planned Pre-Tax Income and CXT Buildings has satisfied all requirements
under 3.5B(b) except Days Sales Outstanding under 3.5B(b)(iv). The sum of
Adjusted Operating Unit Target Awards for all Participants with respect to
Geotech is $100,000, for all Participants with respect to CXT Buildings is
$200,000 and for all Participants within all Operating Units is $800,000.
Disregarding the requirement that awards may not exceed 30% of the Operating
Unit Income for the applicable Operating Unit, Manager Jones' Individual
Incentive Award would be calculated as follows:
(a) Operating Unit Performance Percentage
For CXT Buildings:
100% + 25% + 15% + 0 = 140%
b(i) +b(ii) + b(iii) + b(iv)
For Geotech
20% + 25% + 15% + 10% = 70%
b(i) + b(ii) + b(iii) + b(iv)
(b) Determine Jones' Adjusted Operating Unit Target Awards
For CXT Buildings:
($50,000 X 50%) X 140% = $35,000
For Geotech:
($50,000 X 50%) X 70% = $17,500
(c) Determine Jones' Individual Incentive Award
For CXT Buildings:
$35,000 X $436,071= $19,078
$800,000 (Product Pool)
For Geotech:
$17,500 X $436,071= $9,539
$800,000
Total Individual Incentive Award $28,617
EXAMPLE 3:
Same facts as Example 2, except that CXT Building's Operating Unit
Income is $300,000 and the sum of CXT Building's Individual Incentive Awards
would be, but for the limits in 3.5B(c), $100,646.
(a) Determine Maximum Individual Incentive Awards for CXT
Building's Participants
30% X $300,000 = $90,000
(b) Determine Manager Jones' Share
Jones' Adjusted Operating Unit Target Award X Maximum Aggregate
Sum of All CXT Building Adjusted Operating CXT Building Incentive Awards
Unit Target Awards
$35,000 X $90,000 = $15,750
$200,000
(c) Determine Amount Available for Discretionary Payments
($100,646 - $90,000) = $10,646
(d) Notwithstanding any provision herein to the contrary, a
Participant's Individual Incentive Award from the Product Pool may not exceed
twice the applicable Performance Percentage for each Performance Percentage
earned by the Participant's applicable Operating Unit and/or Rail Business Unit
under each of 3(B)(b)(i), (ii), (iii) and (iv) multiplied by the Participant's
applicable Operating Unit Target Award. Amounts not payable because of this
limitation shall be available for discretionary payments under Section 3.3.
EXAMPLE:
The Product Pool is $436,071. Rail Products is the only Operating
Unit/Rail Business Unit which satisfies any of the criteria in 3.5(B) and Rail
Products satisfies only Owned Inventory Turnover in (b)(iii) and Days Sales
Outstanding under (b) (iv). Participants in the Rail Group have aggregate Target
Awards of $300,000. In the absence of the limitations in this Section 3.5(B)(d)
(and, if applicable, the limitations in Sections 2.7 and 3.5(B)(c)), the Rail
Group would receive the entire Product Pool of $436,071. Due to the limitations
(but without reference to any other limitations that may be applicable) of this
Section, however, each Participant in the Rail Group would receive 50% (twice
the 15% Performance Percentage in (b)(iii) and twice the 10% Performance
Percentage in (b)(iv)) of the Participant's Operating Unit Target Award, and the
balance of the Product Pool ($436,071 - $300,000) X 50% would be available for
discretionary payments under Section 3.3.
IV. STOCK IN LIEU OF CASH FOR EXECUTIVE OFFICERS
Notwithstanding any other provision of this Plan, the Corporation's
executive officers, as determined by the Committee, shall receive shares of the
Corporation's Common Stock ("Stock"), subject to such restrictions on
transferability as the Corporation's legal counsel may deem necessary or
appropriate (such restrictions shall provide for no less than a two-year
restriction on the voluntary transfer of such stock), in lieu of cash equal to
25% of the Individual Incentive Awards (without taking into account any
discretionary payments under Section 3.3) that would otherwise be payable to
such officers under the Plan. In the event such restriction on transferability
should be violated, all proceeds derived from such transaction shall be
forfeited to the Company. Such stock shall be forfeited and revert to the
Company in the event the Participant's employment with the Company should cease
within two (2) years after the date of grant, unless such forfeiture is waived
by the Committee or said termination is attributable to the Participant's death,
permanent disability, retirement with the consent of the Company's Chief
Executive Officer or in the event of a "Change of Control". The amount of stock
to be granted to an executive officer shall be calculated by: (a) dividing the
average closing price of the stock for the ten business days preceding the date
cash distributions are made under the Plan into a sum equal to 25% of the
Individual Incentive Award that, but for this Article IV, would have been
payable to such executive officer; and (b) multiplying the resulting quotient by
115% with fractional share interest being rounded to the nearest number of whole
shares. Stock shall be deemed distributed to the executive officers on the first
day of the calendar month following the date cash distributions are made or as
soon thereafter as is practicable but the corporation shall retain custody of
such shares until the Participant's risk of forfeiture has ended. Cash which
would have been payable to executive officers, but for this Article IV, shall
not be distributed and shall remain the property of the Corporation.
"Change of Control" shall mean: (i) any person or group of persons (as
used in Sections 13 and 14 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules and regulations thereunder) shall have
become the beneficial owner (as defined in Rules 13d-3 and 13d-5 promulgated by
the Securities and Exchange Commission (the "SEC") under the Exchange Act) of
20% or more of the combined voting power of all the outstanding voting
securities of the Corporation or, (ii) at any time following any merger,
consolidation, acquisition, sale of assets or other corporate restructuring of
Corporation, during any period of six consecutive calendar months, individuals
who were directors of the Corporation on the first day of such period, together
with individuals elected as directors by not less than two-thirds of the
individuals who were directors of the Corporation on the first day of such
period, shall cease to constitute a majority of the members of the board of
directors of the Corporation.
V. ELIGIBILITY
Unless changed or amended by the Committee, an employee shall be deemed
a Participant in the Plan only if all of the following requirements are
satisfied:
A. A Participant must be a salaried employee of the Corporation, at a grade
level set forth in Section 3.2 or as otherwise approved by L. B. Foster
Company's Chairman of the Board and Chief Executive Officer, for at least
six (6) months of the entire fiscal year, unless deceased or retired.
B. A Participant may not have: (i) been terminated for cause; (ii) voluntarily
have resigned (other than due to retirement with the Company's consent)
prior to the date Individual Incentive Awards are paid; or (iii), unless
the Corporation agrees in writing that the employee shall remain a
Participant in this Plan, been terminated for any reason whatsoever and
have received money from the Corporation in connection with said
termination.
C. A Participant's services may not primarily be provided to the Natmaya,
Inc., Fosmart, Inc. or Fexco, Ltd. unless otherwise approved by the Chief
Executive Officer.
D. A Participant may not, unless agreed to in writing by the Chief Executive
Officer, be a participant in any other incentive plan maintained by the
Corporation, other than the Corporation's stock option plans.
Notwithstanding the foregoing, Brian N. Southon, George H. Nelson and
Franklin B. Davis shall not be Participants in the Plan.
As used herein, "cause" to terminate employment shall exist upon (i)
the failure of an employee to substantially perform his duties with the
Corporation; (ii) the engaging by an employee in any criminal act or in other
conduct injurious to the Corporation; or (iii) the failure of an employee to
follow the reasonable directives of the employee's superior(s).
VI. REALLOCATIONS
Any portion of the Fund not otherwise distributed shall be available
for discretionary payments under Section 3.3.
VII. PAYMENT OF AWARDS
Payment of Individual Incentive Awards will be made on or before March
15, 2002, except that the timing of the distribution of stock pursuant to
Article IV shall be governed by Article IV.
VIII. ADMINISTRATION AND INTERPRETATION OF THE PLAN
The President, if there is a dispute, shall determine the Operating
Unit(s) that will receive credit for any sale and/or how credit for any sale is
to be allocated among any Operating Units. The President's decisions are subject
to final review by the Committee if the Chief Executive Officer requests such
review or if the Committee otherwise requests such review.
A determination by the Committee in carrying out, administering or
interpreting this Plan shall be final and binding for all purposes and upon all
interested persons and their heirs, successors and personal representatives.
The Committee may, from time to time, amend the Plan; provided,
however, that the Committee may not amend, terminate or suspend the Plan so as
to reduce the Base Fund payable under the Plan, subject to any reversions
permitted under Section 3.3.
The Chief Executive Officer may delegate any of his duties herein.
The Corporation's independent public accountants will review and verify
the Corporation's determination of Pre-Incentive Income. The Corporation's
Internal Audit Department will review and verify the calculation of Individual
Incentive Awards.
Employees are expected to act in the best interests of the Company and
in accordance with Company policies. Any actions that conflict with these
expectations may result in disciplinary action, up to and including termination.
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements Nos.
33-17073, 33-35152, 33-79450, 333-65885 and 333-81535 of L.B. Foster Company of
our report dated January 22, 2001, with respect to the consolidated financial
statements and schedule of L.B. Foster Company included in this Form 10-K for
the year ended December 31, 2000.
/s/Ernst & Young LLP
Pittsburgh, Pennsylvania
March 30, 2001