FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION L. B. Foster Company Voluntary Investment Plan Years ended December 31, 2001 and 2000 with Report of Independent AuditorsL. B. Foster Company Voluntary Investment Plan Financial Statements and Other Financial Information Years ended December 31, 2001 and 2000 Contents Report of Independent Auditors........................................... 1 Audited Financial Statements Statements of Net Assets Available for Benefits.......................... 2 Statement of Changes in Net Assets Available for Benefits................ 3 Notes to Financial Statements............................................ 4 Other Financial Information Schedule H, Line 4(i)--Schedule of Assets (Held at End of Year)........... 10
1 Report of Independent Auditors Plan Administrator L. B. Foster Company Voluntary Investment Plan We have audited the accompanying statements of net assets available for benefits of L. B. Foster Company Voluntary Investment Plan as of December 31, 2001 and 2000, and the related statement of changes in net assets available for benefits for the year ended December 31, 2001. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements 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 net assets available for benefits of the Plan at December 31, 2001 and 2000, and the changes in its net assets available for benefits for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets held at end of year as of December 31, 2001 is presented for purpose of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/Ernst & Young LLP June 10, 2002
2 L. B. Foster Company Voluntary Investment Plan Statements of Net Assets Available for Benefits December 31 2001 2000 - ------------------------------------------------------------------------------- Assets Investments at fair value $34,487,003 $38,458,799 Participant loans 498,971 448,625 - ------------------------------------------------------------------------------- 34,985,974 38,907,424 Receivables: Employee 78,006 81,165 Employer 104,921 370,690 Other 113 490 - ------------------------------------------------------------------------------- 183,040 452,345 - ------------------------------------------------------------------------------- Net assets available for benefits $35,169,014 $39,359,769 =============================================================================== See accompanying notes.
3 L. B. Foster Company Voluntary Investment Plan Statement of Changes in Net Assets Available for Benefits Year ended December 31, 2001 Additions: Investment (loss) income: Interest and dividends $ 806,512 Net realized/unrealized depreciation in investment fair value (3,952,936) - ------------------------------------------------------------------------------- Total investment loss (3,146,424) Contributions: Employee 1,608,347 Employer 577,999 - ------------------------------------------------------------------------------- Total contributions 2,186,346 - ------------------------------------------------------------------------------- (960,078) Deductions: Benefit payments 3,230,677 - ------------------------------------------------------------------------------- 3,230,677 - ------------------------------------------------------------------------------- Decrease in net assets available for benefits (4,190,755) Net assets available for benefits, beginning of year 39,359,769 - ------------------------------------------------------------------------------- Net assets available for benefits, end of year $35,169,014 =============================================================================== See accompanying notes.
4 L. B. Foster Company Voluntary Investment Plan Notes to Financial Statements December 31, 2001 1. Description of Plan The following brief description of the L. B. Foster Company Voluntary Investment Plan (the Plan) as amended effective January 1, 1999 is provided for general information purposes only. Participants should refer to the summary plan description for more complete information. General The Plan is a defined contribution plan extended to all eligible salaried employees of L. B. Foster Company (the Company) who have attained age 18. The L. B. Foster Company Employee Benefits Policy and Review Committee, appointed by the Board of Directors of the Company, collectively serves as the plan administrator. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) as amended. Contributions Contributions under the Plan are made by both the participants and the Company. A participant may elect to make pretax contributions ranging from 2% to 10% of annual compensation subject to Internal Revenue Code limitations. A participant who elects to make pretax contributions of at least the maximum amount subject to company matching can also elect to make additional voluntary contributions on an after-tax basis provided, however, that the sum of the pretax and voluntary employee contributions does not exceed 15% of the participant's annual compensation. Participant contributions and employer matching contributions are invested in accordance with participant elections. In the event that a participant does not make an investment election, contributions are invested in the Fidelity Freedom funds until such time as an election is made by the participant. The participant may transfer contributions defaulted to these funds into other investment options at the participant's discretion. Beginning the first of the month following twelve months of employment, the Company provides a 50% match of the participant's primary contribution on the first 4% to 6% of annual compensation, based on years of service, as defined by the Plan. Beginning the first of the month following twelve months of employment, the Company contributes a fixed amount equal to 1% of eligible employees' annual compensation regardless of whether the employee elects to contribute to the Plan. Company contributions may be reduced by forfeitures that accumulate.
5 1. Description of Plan (continued) The Plan also requires an additional matching employer contribution of up to $.50 for each $1.00 of eligible pretax contributions based on a target ratio of the Company's annual pretax income to equity as defined in the Plan. Additional matching employer contributions were not required in 2001. The Company, upon resolution of the Board of Directors, may make a discretionary additional contribution of an amount out of, but not in excess of, the Company's current or accumulated profits. Discretionary contributions of $70,000 were approved for 2001. The Company's contributions may be reduced by any forfeitures which accumulate from terminations of participants with nonvested employer contributions. No forfeitures were utilized to offset contributions in 2001. At December 31, 2001 and 2000, forfeitures of $109,800 and $12,348, respectively, were available to reduce future company contributions. Vesting A participant's vested interest in the Plan on any date is equal to the sum of the values of (a) that portion of the participant's account attributable to the participant's contributions and (b) that portion of the participant's account attributable to the Company's contributions multiplied by the applicable vesting percentage plus or minus related earnings (losses). Participants are 100% vested in the Company's contributions after five years of eligible service or after attaining age 65. Notwithstanding the above, a participant who terminates from the Plan by reason of retirement, disability, or death is fully vested in his participant account. Distributions Normal retirement age is 65. Early retirement age is 55, provided that the participant has at least five years of service. In addition, a participant may obtain an early retirement distribution prior to reaching age 55, provided that the participant will turn 55 in the year the distribution occurs and that the participant has at least five years of service. As provided by the Plan, the distribution to which a participant is entitled by reason of normal, early, late, or disability retirement, death, or termination of employment may be made in the form of direct rollover, annuity, cash, or partly in cash and partly as an annuity. The amount of such distribution is equal to the participant's vested account balance on the valuation date.
6 1. Description of Plan (continued) Withdrawals Under the Plan, a participant may elect to withdraw voluntary, after-tax contributions made to the Plan prior to January 1, 1987. Such withdrawals are subject to a $1,000 minimum. In the event of extreme hardship and subject to certain restrictions and limitations, a participant may withdraw his vested interest in the portion of his account attributable to matching, fixed and discretionary contributions, and related earnings. Participants' Accounts Each participant's account is credited with the participant's pretax and voluntary contributions, the participant's allocable share of company contributions, and related earnings of the funds. Participants' accounts may be invested in 10% increments into any of the mutual funds available under the Plan at the direction of the participant. Loans A participant may obtain a loan from the vested portion of his account, subject to spousal consent, if applicable. The loan proceeds (subject to a minimum of $1,000 and a maximum of $50,000) are deducted from the participant's account and are repaid by means of payroll deductions. Loans are required to be repaid within 60 months from the date on which the loan is originally granted and may be prepaid early without penalty. The repayment period for a loan that is obtained for purchasing a primary residence may be as long as 360 months. The loan carries an interest rate computed at the prime rate plus one-half percent. The interest rate is computed on the date the loan is requested and remains fixed for the full term of the loan. Plan Termination Although it has not expressed any intention to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. Should the Plan be terminated, participants will become fully vested in their accounts, and the assets of the Plan would be distributed to the participants based on their individual account balances as determined under the plan provisions.
7 2. Summary of Significant Accounting Policies Valuation of Investments Mutual fund values are based on the underlying investments in securities. Mutual fund securities traded on security exchanges are valued at the latest quoted sales price. Securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the plan year. Securities traded in the over-the-counter market and listed securities for which no sale was reported on that fixed rate date are valued at the average of the last reported bid and ask quotations. Loans receivable from participants are valued at cost which approximates fair value. Realized gain or loss includes recognized gains and losses on the sale of investments. Unrealized appreciation or depreciation represents changes in value from original cost. Dividend income is recorded on the ex-dividend date and interest income is accrued as earned. As described above, the assets of the Plan are concentrated in mutual funds consisting primarily of stocks and bonds. Realization of amounts disclosed as net assets available for benefits is dependent on the results of these markets. Basis of Accounting The financial statements of the Plan are maintained on the accrual basis. Contributions receivable are recorded among the available investment options based upon the participants' aggregate investment allocations in effect at the end of the plan year. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Expenses The Company, as provided by the Plan, pays expenses of the Plan. Expenses incurred to establish and maintain a loan are charged to the applicable participant.
8 3. Investments Effective January 1, 1999, the Plan was amended to establish an investment option in which employees may invest contributions in L. B. Foster Company common stock. All profit sharing contributions occurring after the effective date will be directed into the L. B. Foster Company Stock Fund. Participants may subsequently transfer profit sharing contributions into other plan funds at their discretion. During 2001, the Company converted the L. B. Foster Company Stock Fund into a unitized stock fund. The unitized fund will be comprised of a 95% to 99% investment in L. B. Foster Company common stock with the remaining 1% to 5% invested in a short-term investment fund. As a result of the conversion, participant accounts receive units of participation in the fund rather than common shares. The conversion grants participants the added flexibility of executing daily transactions to increase or decrease participation in the fund that was not present under the prior fund structure. For the year ended December 31, 2001, the Plan's investments (including investments bought, sold, and held during the year) appreciated (depreciated) in value as follows: Net Realized/ Fair Unrealized Market Appreciation Value (Depreciation) -------------------------------- Fidelity Investments: Magellan Fund $ 7,720,290 $ (1,202,459) Equity Income Fund 2,834,987 (287,734) Growth and Income Fund 5,046,509 (676,933) Government Income Fund 2,168,979 24,700 Asset Manager Fund 1,288,268 (109,329) Low Price Stock Fund 183,374 9,253 Freedom 2000 279 - Freedom 2010 136,415 (73) Freedom 2020 166,671 2,134 Freedom 2030 4,561 132 Freedom 2040 9,288 83 Managed Income Fund 927,999 - Retirement Government Money Market Fund 4,941,431 - Spartan U.S. Equity Index Fund 2,708,239 (410,169) Janus Worldwide Fund 3,948,328 (1,390,404) Credit Suisse Emerging Growth Fund 1,088,355 (355,154) PIMCO Total Return Fund 516 (15) L. B. Foster Company Stock Fund 1,312,514 443,032 -------------------------------- $ 34,487,003 $ (3,952,936) ================================
9 3. Investments (continued) The fair value of investments representing 5% or more of the Plan's assets at December 31, 2001 and 2000 is as follows: 2001 2000 -------------------------------- Fidelity Investments: Magellan Fund $ 7,720,290 $ 9,583,375 Equity Income Fund 2,834,987 3,136,194 Growth and Income Fund 5,046,509 6,047,373 Government Income Fund 2,168,979 1,993,344 Retirement Government Money Market Fund 4,941,431 4,352,312 Spartan U.S. Equity Index Fund 2,708,239 3,083,338 Janus Worldwide Fund 3,948,328 6,037,891 4. Income Tax Status The Plan has received a determination letter from the Internal Revenue Service (IRS) dated September 18, 1995, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the Code) and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan was amended subsequent to the IRS determination letter. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax-exempt. 5. Transactions with Parties-in-Interest Certain trustee, accounting, and administrative expenses relating to the maintenance of participant records and the Plan's administration are absorbed by the Company.
Other Financial Information
10 L. B. Foster Company Voluntary Investment Plan EIN: 25-1324733 Plan Number: 201 Schedule H, Line 4(i)--Schedule of Assets (Held at End of Year) December 31, 2001 Identity of Issue, Borrower, Shares Fair Market Lessor or Similar Party Description of Investment Held Value - ------------------------------------------------------------------------------------------------------------------- Fidelity Investments*: Magellan Fund Equities 74,077 $ 7,720,290 Equity Income Fund Equities 58,130 2,834,987 Growth and Income Fund Equities 135,006 5,046,509 Government Income Fund Government obligations 217,551 2,168,979 Asset Manager Fund Equities, money market, bonds 83,114 1,288,268 Low Price Stock Fund Equities 6,688 183,374 Freedom 2000 Equity funds, fixed income funds 24 279 Freedom 2010 Equity funds, fixed income funds 10,818 136,415 Freedom 2020 Equity funds, fixed income funds 13,249 166,671 Freedom 2030 Equity funds, fixed income funds 363 4,561 Freedom 2040 Equity funds, fixed income funds 1,257 9,288 Managed Income Fund Guaranteed investment contracts 927,999 927,999 Retirement Government Money Market Fund Government obligations, money market securities 4,941,431 4,941,431 Spartan U.S. Equity Index Fund Equities 66,640 2,708,239 Janus Worldwide Fund Equities 90,062 3,948,328 Credit Suisse Emerging Growth Fund Equities 40,324 1,088,355 PIMCO Total Return Fund Fixed income securities 49 516 - ------------------------------------------------------------------------------------------------------------------- Total mutual funds 33,174,489 L. B. Foster Company Stock Fund Interest-bearing cash 62,707 62,707 Common stock 277,735 1,249,807 - ------------------------------------------------------------------------------------------------------------------- 1,312,514 - ------------------------------------------------------------------------------------------------------------------- Outstanding participant loans Participant loans, interest rates ranging from 5.5% to 10.5%, various maturities ranging from 2 to 30 years 498,971 - ------------------------------------------------------------------------------------------------------------------- $ 34,985,974 =================================================================================================================== *Party-in-interest
Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Administrative Committee of the Plan have duly caused this Annual Report to be signed on its behalf by the undersigned hereunto duly authorized. L. B. Foster Company Voluntary Investment Plan ----------------------------------- (Name of Plan) June 27, 2002 By:/s/Stan L. Hasselbusch ----------------------------------- Stan L. Hasselbusch President and Chief Executive Officer
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement No.
333-65885 of L. B. Foster Company, as amended and restated, of our report dated
June 10, 2002, with respect to the financial statements and schedule of the L.
B. Foster Company Voluntary Investment Plan included in this Form 11-K for the
year ended December 31, 2001.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
June 26, 2002