UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þAnnual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 20142015

Or

 

      ¨Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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) 928-3400

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class Name of Each Exchange On Which Registered
Common Stock, Par Value $0.01 NASDAQ Global Select Market
Preferred Stock Purchase Rights NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ¨  Yes        x  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.    ¨  Yes        x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    x  Yes        ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).    x  Yes        ¨  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K.    ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  ¨

  Accelerated filer  x Non-accelerated filer  ¨  Smaller reporting company  ¨
                  (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes     x  No

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $526,238,000.$338,114,276.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

Class Outstanding at February 25, 201523, 2016
Common Stock, Par Value $0.01 10,360,33410,232,471 shares

Documents Incorporated by Reference:

Portions of the Proxy Statement prepared for the 20152016 Annual Meeting of Shareholders are incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K. The 20152016 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.


TABLE OF CONTENTS

 

PART I  
Item 1. 

Business

   4  
Item 1A. 

Risk Factors

   1110  
Item 1B. 

Unresolved Staff Comments

   15  
Item 2. 

Properties

   16  
Item 3. 

Legal Proceedings

   16  
Item 4. 

Mine Safety Disclosures

   16  
PART II  
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   17  
Item 6. 

Selected Financial Data

   20  
Item 7. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   21  
Item 7A. 

Quantitative and Qualitative Disclosures About Market Risk

   4036  
Item 8. 

Financial Statements and Supplementary Data

   4138  
Item 9. 

Change in and Disagreements with Accountants on Accounting and Financial Disclosure

   8179  
Item 9A. 

Controls and Procedures

   8179  
Item 9B. 

Other Information

   8381  
PART III  
Item 10. 

Directors, Executive Officers and Corporate Governance

   8381  
Item 11. 

Executive Compensation

   8381  
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   8381  
Item 13. 

Certain Relationships and Related Transactions, and Director Independence

   8381  
Item 14. 

Principal Accounting Fees and Services

   8381  
PART IV  
Item 15. 

Exhibits and Financial Statement Schedules

   8482  
 

Signatures

   8684  

Forward-Looking Statements

This Annual Report on Form 10-K contains “forward looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Many of the forward-looking statements are located in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Sentences containing words such as “believe,” “intend,” “plan,” “may,” “expect,” “should,” “could,” “anticipate,” “plan,” “estimate,” “predict,” “project,” or their negatives, or other similar expressions generally should be considered forward-looking statements. Forward-looking statements in this Annual Report on Form 10-K may concern, among other things, theL.B. Foster Company’s expectations regarding our strategy, goals, projections and plans regarding our financial position, liquidity and capital resources, the outcome of litigation and product warranty claims, results of operations, decisions regarding our strategic growth strategies,initiatives, market position, and product development, all of which are based on current estimates that involve inherent risks and uncertainties. The Company cautions readers that various factors could cause the actual results of the Company to differ materially from those indicated by forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Among the factors that could cause the actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties related to: general business conditions,an economic slowdown or a continuation of the current economic slowdown in the markets we serve, the risk of doing business in international markets, a decrease in freight or passenger rail traffic, continued and sustained declines in energy prices, a lack of state or federal funding for new infrastructure projects, an increase in manufacturing or material costs, our ability to effectuate our strategy including evaluation ofevaluating potential opportunities such as strategic acquisitions, joint ventures, and other initiatives, and our ability to effectively integrate new businesses and realize anticipated benefits, a decrease in freight or passenger rail traffic, sustained declines in energy prices, a lackcosts of state or federal funding for new infrastructure projects,and impacts associated with shareholder activism, the timeliness and availability of material from major suppliers, labor disputes, the impact of competition, the effective implementation of an enterprise resource planning system, variances in current accounting estimates and assumptions and their ultimate outcomes, the seasonality of the Company’s business, the adequacy of internal and external sources of funds to meet financing needs, the Company’s ability to curb its working capital requirements and manage indebtedness, domestic and international income taxes, foreign currency fluctuations, inflation, the impact of new regulations including regarding conflict minerals, the ultimate number of concrete ties that will have to be replaced pursuant to product warranty claims, an overall resolution of the related contract claims, as well asthe costs associated with and the outcome of a lawsuit filed by Union Pacific Railroad risk(“UPRR”), the loss of future revenues from current customers, risks inherent in litigation, and domestic and foreign governmental regulations. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated. The risks and uncertainties that may affect the operations, performance, and results of the Company’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors”Factors,” and elsewhere in this Annual Report on Form 10-K.

The forward looking statements in this report are made as of the date of this report and we assume no obligation to update or revise any forward looking statement, whether as a result of new information, future developments, or otherwise, except as required by securities laws.

PART I

(Dollars in thousands, except share data unless otherwise noted)

 

ITEM 1.BUSINESS

(Dollars in thousands, except share data unless otherwise noted)

Summary Description of Businesses

Formed in 1902, L.B. Foster Company is a Pennsylvania corporation with its principal office in Pittsburgh, PA. L.B. Foster Company is a leading manufacturer, fabricator, and distributor of products and services for the rail, construction, energy and utility markets. As used herein, “Foster”, the “Company”, “we”, “us”, and “our” or similar references refer collectively to L.B. Foster Company and its divisions and subsidiaries, unless the context otherwise requires. The

As a result of recently completed acquisitions, during the first quarter of 2015, the Company classifies its activities into three business segments:renamed the Rail Products, Construction Products and Tubular Products. Products business segments to be Rail Products and Services and Tubular and Energy Services, respectively. The name changes principally reflect the additional businesses conducted by those segments as a result of acquisitions that have enhanced our product and service offerings within the rail and energy markets.

The following table shows, for the last three fiscal years, the net sales generated by each business segment as a percentage of total net sales.

   Percentage of Net Sales 
   2015  2014  2013 

Rail Products and Services

   53  62  61

Construction Products

   28    29    32  

Tubular and Energy Services

   19    9    7  
  

 

 

  

 

 

  

 

 

 
   100  100  100
  

 

 

  

 

 

  

 

 

 

Financial information concerning these segments is set forth in Part II, Item 8, Note 2 to the financial statements included herein, which is incorporated by reference into this Item 1.

Business Developments

On July 7, 2014, the Company acquired Carr Concrete Corporation (Carr) for $12,480. Carr is a provider of pre-stressed and precast concrete products located in Waverly, WV. The transaction was funded with cash on hand. The results of Carr’s operations from the acquisition date through December 31, 2014 are included in our Construction Products segment and were not material to the periods presented.

On October 29, 2014, the Company acquired FWO, a business of Balfour Beatty Rail GmbH for $1,103 in non-domestic cash. The German business provides track lubrication and switch roller equipment for international railway applications. The results of FWO are included within the Rail Products segment from the acquisition date through December 31, 2014 and were not material to the periods presented.

On December 30, 2014, the Company acquired Chemtec Energy Services L.L.C. (Chemtec) for $66,719, net of cash received, which is inclusive of a $1,867 preliminary working capital adjustment. Located in Willis, TX, Chemtec is a manufacturer and turnkey provider of blending, injection, and metering equipment for the oil and gas industry. The results of operations of this acquired business are included within our Tubular Products segment from the acquisition date through December 31, 2014 and were not material to the periods presented.

Subsequent to year end, on January 13, 2015, the Company acquired the stock of Tew Holdings, LTD (Tew) for approximately $26,600, subject to the finalization of net debt and net working capital adjustments. Headquartered in Nottingham, UK, Tew provides application engineering solutions primarily to the rail market and other major industries. The transaction was funded with non-domestic cash.

More information regarding acquisitions is set forth in Part II, Item 8, Note 3 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 1.

Rail Products

L.B. Foster Company’s Rail Products and Services (“Rail”) segment is comprised of several manufacturing and distribution businesses that provide a variety of products and services for freight and passenger railroads transit authorities,and industrial companies and mining applications throughout North America and Europe. Ourthe world. The Rail Products segment has sales offices throughout the United States, Canada,Americas and Europe, and frequently bids on rail projects where it can offeroffers products manufactured by the Company, or sourced from numerous suppliers. These products may be provided as a package to rail lines, transit authorities,supply chain partners, and construction contractors which reduces the customer’s procurement efforts and provides value added, just in time delivery.aftermarket services. The Rail segment is composedcomprised of the following business units: rail manufacturing and distribution,Rail Products, Rail Technologies, and pre-stressed CXT Concrete Tie products.Ties.

Rail manufacturing and distributionProducts

The rail manufacturingRail Products business is comprised of the Company’s Rail Distribution, Allegheny Rail, Transit, and distribution businessTrackwork divisions.

Rail Distribution sells heavy and light new rail mainly to transit authorities,passenger and shortline freight railroads, industrial companies, and rail contractors for railroad sidings, plant trackage, and other carrier and material handling applications.the replacement of existing lines or expansion of new lines. Rail accessories sold by the Rail Distribution division include trackwork, track spikes, bolts, angle bars, and other products required

to install or maintain rail lines. These products are sold to railroads, rail contractors, industrial customers, and transit agencies and are manufactured by the Company or purchased from other manufacturers.manufacturers and distributed accordingly.

The Company’s Allegheny Rail Products (ARP)(“ARP”) division engineers and marketsfabricates insulated rail joints and related accessories for the railroadfreight and mass transit industries.passenger railroads and industrial customers. Insulated joints are manufactured at the Company’s facilities in Pueblo, CO and Niles, OH.

The Company’s Transit Products division supplies power rail, direct fixation fasteners, coverboards, and special accessories primarily for mass transitpassenger railroad systems. Most of theseThese products are manufacturedfabricated at Company facilities or by subcontractors and are usually sold by sealed bid to transit authoritiespassenger railroads or to rail contractors worldwide.contractors.

The Company’s Trackwork division sells trackwork forproducts to Class II and III railroads, industrial, and export markets. The Company also has two facilities that design, test, and fabricate rail products in Atlanta, GA and Niles, OH.

Rail Technologies

L.B. Foster Rail Technologies, Corp. (Rail Technologies)Inc. (“Rail Technologies”) engineers, manufactures, and assemblesfabricates friction management products railwayand application systems, railroad condition monitoring equipment, wheel impact load detection, railroad condition monitoring systems, rail anchors and spikes, wayside data collection and management systems, epoxy and related products. It also engineersnylon-encapsulated insulated rail joints, track fasteners, and manufactures stick friction modifiers and related application systems.provides aftermarket services. The Company’s friction management products control the friction at the rail/wheel interface, helping its customers to lowerreduce fuel usage andconsumption, improve train-operating efficiency,operating efficiencies, extend the life of operating assets such as rail and wheels, and reduce track stresses, and lower related maintenance and operating costs for customers.costs. Friction management products include mobile and wayside application systems that distributeapply lubricants and liquid or solid and liquid friction modifiers. Friction managementThese products and systems are designed, engineered, manufactured, and assembled in the United States andfabricated by certain wholly-owned subsidiaries located in Burnaby, British Columbia,the United States, Canada, Sheffield, United Kingdom, and Dusseldorf, Germany.

The Rail Technology business also manufactures a variety of track component products at our manufacturing facilities in St. Jean, Quebec, Canada and the United Kingdom. In Canada, these products primarily include rail anchors and rail spikes, which are products that are used to secure rails to wooden ties to restrain the movement of the rail. These products are sold primarily to Canadian railroads, with some products exported to the United States and to other international customers. In the United Kingdom, we design and manufacture a complete line of rail joints including epoxy insulated rail joints and nylon-encapsulated insulated joints, and also distribute a complete line of track fasteners to the United Kingdom railways and to other international customers.

Our 2014 acquisition of the railroad tuning unit, FWO, a business of Balfour Beatty Rail GmbH enhances our offerings to provide track lubrication and switch roller equipment for international railway applications.

Pre-stressed CXT Concrete Ties

The concrete products business, through the Company’s subsidiary, CXT Incorporated,L.B. Foster manufactures engineered concrete railroad ties for the railroad and transit industries at its facilitiessubsidiary, CXT Incorporated, for freight and passenger railroads and industrial companies at its facility in Spokane, WA and Tucson, AZ.WA.

Construction Products

The Construction products segment is composed of the following business units:product groups: Piling Products, Fabricated Bridge Products, and precast concrete buildings and products.Precast Concrete Products.

Piling Products

Sheet piling products are interlocking structural steel sections that are generally used to provide lateral support at construction sites. Bearing piling products are steel H-beam sections which are driven into the ground for support of structures such as bridge piers and high-rise buildings. Piling is often used in water and land applications including cellular cofferdams and OPEN CELL® structures in inland river systems and ports.

Piling products are sourced from various manufacturers and either sold or rented to project owners and contractors. The piling division, via a sales force deployed throughout the United States, markets and sells piling

domestically and internationally. This division offers its customers various types and dimensions of structural beam piling, sheet piling, and pipe piling. The Company is the primary distributor of domestic steel sheet piling for its primary supplier.

Fabricated Bridge Products

The fabricated products facility in Bedford, PA manufactures a number of fabricated steel and aluminum products primarily for the highway, bridge, and transit industries including concrete reinforced steel grid deck, open steel grid deck, aluminum bridge railing, and stay-in-place steel bridge forms.

Precast Concrete Products

The CXTprecast concrete buildingsproducts unit primarily manufactures concrete buildings primarily for national, state, and municipal parks. This unit manufactures restrooms, concession stands, and other protective storage buildings available in multiple designs, textures, and colors. The Company is a leading high-end supplier in terms of volume, product options, and capabilities. The buildings are manufactured in Spokane, WA and Hillsboro, TX. The Company’s 2014 acquisition of Carr Concrete enhances our presence in the concrete buildings market while increasing our product portfolio to includeunit also manufactures various other precast products such as burial vaults, bridge beams, box culverts, septic tanks, and other custom pre-stressed and precast concrete products. Carr ConcreteThe products are distributed from the Company’smanufactured in Spokane, WA, Hillsboro, TX, and Waverly, WV facility.WV.

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

Tubular and third quarters than during the first and fourth quarters of each year.

Tubular ProductsEnergy Services

The Tubular productsand Energy Services segment has three discrete business units:four primary product or service groups: Coated Pipe, Threaded Products, precision measurement systems and measurementupstream test and inspection services. The segment provides products and systems.services predominantly to the mid and upstream oil and gas markets.

Coated Pipe

There are two pipeline services locations that make up ourthe Coated Pipe business unit. OurThe Birmingham, AL facility coats the outside diameter and, to a lesser extent, the inside diameter of pipe primarily for oil & gas transmission pipelines. This location partners with its primary customer, a pipe manufacturer, to market fusion bonded epoxy coatings, abrasion resistant coatings, and internal linings for a wide variety of pipe diameters for pipeline projects throughout North America. The second location (Ball Winch), acquired on November 7, 2013, is located in Willis, TX. The Willis facility applies specialty outside and inside diameter coatings for a wide variety of pipe diameters for oil & gas transmission, mining, and waste water pipelines. This location also provides custom coatings for specialty fittings and field service connections.

Threaded Products

The Threaded Products unit, located inCompany’s Magnolia, TX facility cuts, threads, and paints pipe primarily for water well applications for the agriculture industry, and municipal water authorities. This location also provides threading services for theauthorities, and Oil Country Tubular Goods (“OCTG”) markets.

Precision Measurement Products and Systems

Our December 30, 2014 acquisition of Chemtec enhanced the Tubular product offering into an adjacent market to include the manufacturingThe Company manufactures and provision of blending,provides a turnkey solution for metering and injection and metering equipmentsystems for the oil and gas industry. The Willis, TX location operates a fabrication plant that builds metering systems for custody transfer applications including crude oil and other petroleum-based products. These systems are used at well sites, pipelines, refineries, chemical plants, and loading/unloading facilities. The Willis location also manufactures and installs additive and dye injection systems. These systems are used to inject performance additives and/or dyes into petroleum products.

Upstream Test and Inspection Services

The Company provides inspection and tubular integrity management services for the upstream oil and gas industry. Services include non-destructive testing, inspection, and other asset integrity services such as repair and threading for OCTG and drill tools. Inspection and testing of these products, which includes replaceable and re-usable products such as casing, production tubing, drill pipe, directional motors, drill collars, and related equipment is a critical preventative measure to ensure personnel and well-site safety, enhance efficiency, and avoid costly equipment failures and well-site shutdowns. The Company offers these services in every major oil and gas producing region throughout the United States.

L.B. Pipe Joint Venture

The Company is a member of a joint venture, LB Pipe & Coupling Products, LLC (LB(“LB Pipe JV)JV”), in which it maintains a 45% ownership interest. The LB Pipe JV manufactures, markets, and sells various precision couplings and other tubular products for the energy, utility, and construction markets and is scheduled to terminate on June 30, 2019. The Company has made all of its mandatory capital contributions under the JV agreement, totaling $3,000. More information concerning the LB Pipe JV is set forth in Part II, Item 8, Note 98 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 1.

Geographic and Segment Information

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
 
   2014  2013  2012 

Rail Products

   62  61  63

Construction Products

   29    32    29  

Tubular Products

   9    7    8  
  

 

 

  

 

 

  

 

 

 
   100  100  100
  

 

 

  

 

 

  

 

 

 

Information concerning the Company’s liquidity and capital resources and the Company’s working capital requirements can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Marketing and Competition

L.B. Foster Company generally markets its rail construction, and tubular products directly in all major industrial areas of the United States, Canada, and Europe throughEurope. The construction and energy products and services are primarily marketed domestically. The Company employs a sales force of approximately 80 people. The Company also utilizes100 people which is supplemented with a network of agents across Europe, South America, and Asia to supplement its internal sales force to reach current customers and cultivate potential customers in these areas. For the years ended 2015, 2014, and 2013, and 2012, approximately 16%, 18%, 17%, and 18%17%, respectively, of the Company’s total sales were outside the United States.

The major markets for the Company’s products are highly competitive. Product availability, quality, service, and price are principal factors of competition within each of these markets. No other company provides the same product mix to the various markets the Company serves. However, there are one or more companies that compete with the Company in each product line. Therefore, the Company faces significant competition from different groups of companies.

During 2015, 2014, 2013, and 2012,2013, no single customer accounted for more than 10% of the Company’s consolidated net sales.

Raw Materials and Supplies

Most of the Company’s inventory isproducts are purchased in the form of finished or semi-finished product.products. The Company purchases the majority of its inventorysupplies from domestic and foreign steel producers. TheGenerally, the Company has a number of vendor options. However, the Company has an agreementarrangement with a steel mill to distribute steel sheet piling in North America. Should sheet piling from its present supplier not be available for any reason, the Company risks not being able to provide product to its customers.

The Company’s purchases from foreign suppliers are subject to the usual risks associated with changes in international conditions and to United States and international laws whichthat could impose import restrictions on selected classes of products and for anti-dumping duties if products are sold in the United States at prices that are below certainspecified prices.

Backlog

The dollar amount of firm, unfilled customer orders at December 31, 20142015 and 20132014 by business segment is as follows:

 

   December 31, 
   2014   2013 

Rail Products

  $104,821    $121,853  

Construction Products

   65,843     53,483  

Tubular Products

   13,686     7,775  
  

 

 

   

 

 

 

Total from Continuing Operations

  $184,350    $183,111  
  

 

 

   

 

 

 

   December 31, 
   2015   2014 

Rail Products and Services

  $85,199    $104,821  

Construction Products

   45,371     65,843  

Tubular and Energy Services

   34,137     13,686  
  

 

 

   

 

 

 

Total

  $164,707    $184,350  
  

 

 

   

 

 

 

Approximately 2%4% of the December 31, 20142015 backlog is related to projects that will extend beyond 2015.2016. Backlog from businesses acquired during 20142015 represented 6%8% of the total.total at December 31, 2015.

Research and Development

Expenditures for research and development approximated $3,937, $3,096, and $3,154 in 2015, 2014, and $2,926 in 2014, 2013, and 2012, respectively. These expenditures were predominately associated with expanding product lines and capabilities within the Company’s Rail Technologies business.

Patents and Trademarks

The Company owns a number of United States, Canadian,domestic and Europeaninternational patents and trademarks. The Company has several patents ontrademarks primarily related to its Rail Technologies products, such as the Protector® IV application system, along with a significant numberproducts. Our business segments are not dependent upon any individual patent or related group of patents, related to its friction modifier product lines at Rail Technologies, which are of material importance to the business as a whole.or any licenses or distribution rights. We believe that, in the aggregate, the rights under our patents, trademarks, and trademarks give uslicenses are generally important to our operations, but we do not consider any individual patent, trademark, or any licensing or distribution rights related to a competitive advantage. We also rely on a combinationspecific process or product to be of trade secrets and other intellectual property laws, non-disclosure agreements, and other protective measuresmaterial importance in relation to establish and protect our proprietary rights in intellectual property.total business.

Environmental Disclosures

It is not possible to predict the outcome of actionsInformation regarding environmental matters particularly for future remediation and other compliance efforts. The Company has recorded its estimate of the outcome of certain environmental matters. In the opinion of management, compliance with current environmental protection laws will not have a material adverse effect on the financial condition, competitive position, or capital expenditures of the Company. However, the Company’s efforts to comply with stringent environmental regulations may have an adverse effect on the Company’s future earnings.

Seeis included in Part II, Item 3, Legal Proceedings included herein, for information regarding the Company’s environmental reserves8, Note 19, which is incorporated by reference into this Item I.

Employees and Employee Relations

As ofAt December 31, 2014,2015, the Company had approximately 1,1131,406 employees, 1181,245 within the Americas and 161 of whom were located in Canada, 70 of whom were located in Europe, with the remaining employees located in the United States.Europe. There were 591712 hourly production workers and 522694 salaried employees. Of the hourly production workers, approximately 190177 are represented by unions. The Company has not suffered any major work stoppages during the past five years and considers its relations with its employees to be satisfactory. No significant collective bargaining agreements expire prior to 2017.

Substantially all of the Company’s hourly paid employees are covered by one of the Company’s noncontributory, defined benefit plans or defined contribution plans. Substantially all of the Company’s salaried employees are covered by defined contribution plans.

Financial Information about Liquidity and Capital Resources

Information concerning the Company’s liquidity and capital resources and the Company’s working capital requirements can be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Financial Information about Geographic Areas

Financial information about geographic areas is set forth in Part II, Item 8, Note 2 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 1.

Financial Information about Segments

Financial information about segments is set forth in Part II, Item 8, Note 2 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 1.

Executive Officers of the Registrant

Information concerning the executive officers of the Company is set forth below.

Name

Age

Position

Robert P. Bauer

56President and Chief Executive Officer

Merry L. Brumbaugh

57Vice President — Tubular Products

Samuel K. Fisher

62Vice President — Rail Distribution

Patrick J. Guinee

45Vice President, General Counsel and Secretary

John F. Kasel

49Senior Vice President — Rail Products

Brian H. Kelly

55Vice President — Human Resources and Administration

Gregory W. Lippard

46Vice President — Rail Sales and Products

Konstantinos Papazoglou

62Vice President — Rail Technologies

David J. Russo

56Senior Vice President, Chief Financial Officer and Treasurer

David R. Sauder

44Vice President — Global Business Development

Christopher T. Scanlon

39Controller and Chief Accounting Officer

Mr. Bauer was elected President and Chief Executive Officer upon joining the Company in February 2012. Prior to joining the Company, Mr. Bauer previously served from June 2011 as President of the Refrigeration Division of the Climate Technologies business of Emerson Electric Company, a diversified global manufacturing and technology company. From January 2002 until May 2011, Mr. Bauer served as President of Emerson Network Power’s Liebert Division.

Ms. Brumbaugh was elected Vice President — Tubular Products in November 2004, having previously served as General Manager, Coated Products since 1996. Ms. Brumbaugh has served in various capacities with the Company since her initial employment in 1980.

Mr. Fisher’s was elected Vice President — Rail Distribution effective January 2011, as part of organizational changes within the Rail Products segment, having previously served as Senior Vice President — Rail since October 2002. From June 2000 until October 2002, Mr. Fisher served as Senior Vice President — Product Management. From October 1997 until June 2000, Mr. Fisher served as Vice President — Rail Procurement. Prior to October 1997, Mr. Fisher served in various other capacities with the Company since his employment in 1977.

Mr. Guinee was elected Vice President, General Counsel and Secretary in February 2014. Prior to joining the Company, Mr. Guinee served as Vice President — Securities & Corporate and Assistant Secretary at Education Management Corporation from July 2013 to February 2014, and was employed by H. J. Heinz Company from November 1997 to June 2013, last serving as Vice President — Corporate Governance & Securities and Assistant Secretary. He began his career as an attorney in private practice in Pittsburgh, PA in 1994.

Mr. Kasel was elected Senior Vice President — Rail Products in August 2012 having previously served as Senior Vice President — Operations and Manufacturing since May 2005 and Vice President — Operations and Manufacturing since April 2003. Mr. Kasel served as Vice President of Operations for Mammoth, Inc., a Nortek company from 2000 to 2003. His career also included General Manager of Robertshaw Controls and Operations Manager of Shizuki America prior to 2000.

Mr. Kelly was elected Vice President — Human Resources and Administration in August 2012 having previously served as Vice President, Human Resources since October 2006 after joining the organization in September 2006. Prior to joining the Company, Mr. Kelly headed Human Resources for 84 Lumber Company from June 2004. Previously, he served as a Director of Human Resources for American Greetings Corp. from June 1994 to June 2004, and he began his career with Nabisco in 1984, serving in progressively responsible generalist human resources positions in both plants and headquarters.

Mr. Lippard was elected Vice President — Rail Sales and Products in August 2012 having previously served as Vice President — Rail Product Sales since June 2000. Prior to re-joining the Company in 2000,

Mr. Lippard served as Vice President — International Trading for Tube City, Inc. from June 1998. Mr. Lippard served in various other capacities with the Company since his initial employment in 1991.

Mr. Papazoglou was elected Vice President — Rail Technologies in August 2012 having previously served as Vice President — Friction Management since March 2011. Prior to joining the Company in December 2010, Mr. Papazoglou served as Executive Vice President and Chief Operating Officer for Portec Rail Products, Inc. from October 2006. Mr. Papazoglou served in various other capacities with Portec since his initial employment in 1978.

Mr. Russo is the Senior Vice President, Chief Financial Officer and Treasurer having resigned as Chief Accounting Officer in August 2012 upon the appointment of Mr. Scanlon as Controller and Chief Accounting Officer in August 2012. Mr. Russo was previously elected Senior Vice President, Chief Financial and Accounting Officer and Treasurer in March 2010 having served previously as Senior Vice President, Chief Financial Officer and Treasurer since December 2002. From July 2002 to December 2002, Mr. Russo served as Vice President and Chief Financial Officer. Mr. Russo was Corporate Controller of WESCO International Inc. from 1999 until joining the Company in 2002. Prior to 1999, Mr. Russo served as Corporate Controller of Life Fitness Inc.

Mr. Sauder was elected Vice President — Global Business Development upon joining the Company in November 2008. Prior to joining the Company, Mr. Sauder was Director, Global Business Development at Joy Mining Machinery where he was responsible for leading mergers and acquisitions and new business initiatives from December 2007. Prior to that, he was Manager, Business Development for Eaton Corporation from April 2006 to December 2007. He previously held various positions of increasing responsibility at Duquesne Light Company from August 1998 to April 2006 and PNC Bank from February 1993 to August 1998.

Mr. Scanlon was elected Controller and Chief Accounting Officer in August 2012 after joining the Company in July 2012. Prior to joining the Company, Mr. Scanlon served as the Online Higher Education Division Controller of Education Management Corporation from November 2009 to July 2012. Mr. Scanlon served as Manager of Central Accounting Services for Bayer Corporation, from May 2007 until November 2009. From April 2005 until May 2007, Mr. Scanlon served as a financial reporting analyst for Respironics, Inc.

Officers are elected annually at the organizational meeting of the Board of Directors following the annual meeting of stockholders.

Code of Ethics

L.B. Foster Company has a legal and ethical conduct policy applicable to all directors and employees, including its Chief Executive Officer, Chief Financial Officer, and Controller. This policy is posted on the Company’s website,www.lbfoster.com. The Company intends to satisfy the disclosure requirement regarding certain amendments to, or waivers from, provisions of its policy by posting such information on the Company’s website. In addition, our ethics hotline can also be used by employees and others for the anonymous communication of concerns about financial controls, human resource concerns, and other reporting matters.

Available Information

The Company makes certain filings with the Securities and Exchange Commission (SEC)(“SEC”), including its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments and exhibits to those reports, available free of charge through its website,www.lbfoster.com, as soon as reasonably practicable after they are filed with the SEC. These filings are also available at the SEC’s Public Reference Room at 100 F Street N.E. Washington, D.C. 20549 or by calling 1-800-SEC-0330. These filings are also available on the internet atwww.sec.gov. The Company’s press releases and recent investor presentations are also available on its website.

Executive Officers of the Registrant

Information concerning the executive officers of the Company is set forth below.

Name

Age

Position

Robert P. Bauer

57President and Chief Executive Officer

Merry L. Brumbaugh

58Vice President — Tubular Products

Samuel K. Fisher

63Vice President — Rail Distribution

Patrick J. Guinee

46Vice President, General Counsel and Secretary

John F. Kasel

50Senior Vice President — Rail Products and Services

Brian H. Kelly

56Vice President — Human Resources and Administration

Gregory W. Lippard

47Vice President — Rail Sales and Products

Konstantinos Papazoglou

63Vice President — Rail Technologies

David J. Russo

57Senior Vice President, Chief Financial Officer and Treasurer

David R. Sauder

45Vice President — Global Business Development

Christopher T. Scanlon

40Controller and Chief Accounting Officer

Mr. Bauer was elected President and Chief Executive Officer upon joining the Company in 2012. Prior to joining the Company, beginning in 2011, Mr. Bauer previously served as President of the Refrigeration Division of the Climate Technologies business of Emerson Electric Company, a diversified global manufacturing and technology company. From 2002 until 2011, Mr. Bauer served as President of Emerson Network Power’s Liebert Division.

Ms. Brumbaugh was elected Vice President — Tubular Products in 2004, having previously served as General Manager, Coated Products since 1996. Ms. Brumbaugh has served in various capacities with the Company since her initial employment in 1980.

Mr. Fisher’s was elected Vice President — Rail Distribution effective 2011, having previously served as Senior Vice President — Rail since 2002. Mr. Fisher has served in various capacities within the Company since his initial employment 1977.

Mr. Guinee was elected Vice President, General Counsel and Secretary in 2014. Prior to joining the Company, Mr. Guinee served as Vice President — Securities & Corporate and Assistant Secretary at Education Management Corporation from 2013 to early 2014, and was employed by H. J. Heinz Company from 1997 to 2013, last serving as Vice President — Corporate Governance & Securities and Assistant Secretary.

Mr. Kasel was elected Senior Vice President — Rail Products and Services in 2012 having previously served as Senior Vice President — Operations and Manufacturing since 2005 and Vice President — Operations and Manufacturing since 2003. Mr. Kasel served as Vice President of Operations for Mammoth, Inc., a Nortek company from 2000 to 2003.

Mr. Kelly was elected Vice President — Human Resources and Administration in 2012 having previously served as Vice President, Human Resources since 2006. Prior to joining the Company, Mr. Kelly headed Human Resources for 84 Lumber Company from 2004. Previously, he served as a Director of Human Resources for American Greetings Corp. from 1994 to 2004.

Mr. Lippard was elected Vice President — Rail Sales and Products in 2012 having previously served as Vice President — Rail Product Sales since 2000. Prior to re-joining the Company in 2000, Mr. Lippard served as Vice President — International Trading for Tube City, Inc. from 1998. Mr. Lippard served in various other capacities with the Company since his initial employment in 1991.

Mr. Papazoglou was elected Vice President — Rail Technologies in 2012 having previously served as Vice President — Friction Management since 2011. Prior to joining the Company in 2010, Mr. Papazoglou served as

Executive Vice President and Chief Operating Officer for Portec Rail Products, Inc. from 2006. Mr. Papazoglou served in various other capacities with Portec since his initial employment in 1978.

Mr. Russo is the Senior Vice President, Chief Financial Officer and Treasurer having resigned as Chief Accounting Officer in 2012 upon the appointment of Mr. Scanlon as Controller and Chief Accounting Officer in 2012. Mr. Russo was previously elected Senior Vice President, Chief Financial and Accounting Officer and Treasurer in 2010 having served previously as Senior Vice President, Chief Financial Officer and Treasurer since 2002. Mr. Russo was Corporate Controller of WESCO International Inc. from 1999 until joining the Company in 2002.

Mr. Sauder was elected Vice President — Global Business Development upon joining the Company in 2008. Prior to joining the Company, Mr. Sauder was Director, Global Business Development at Joy Mining Machinery where he was responsible for leading mergers and acquisitions and new business initiatives from 2007.

Mr. Scanlon was elected Controller and Chief Accounting Officer in 2012. Prior to joining the Company, Mr. Scanlon served as the Online Higher Education Division Controller of Education Management Corporation from 2009 to 2012. Mr. Scanlon served as Manager of Central Accounting Services for Bayer Corporation, from 2007 until 2009.

Officers are elected annually at the organizational meeting of the Board of Directors following the annual meeting of stockholders.

ITEM 1A.RISK FACTORS

Risks and Uncertainties

We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could have a material adverse effect on our business, financial condition, and results of operations. The following risks highlight some of the more significant factors that have affected us and could affect us in the future. We may also be affected by unknown risks or risks that we currently believe are immaterial. If any such events actually occur, our business, financial condition, and results of operations could be materially adversely affected. You should carefully consider the following factors and other information contained in this Annual Report on Form 10-K before deciding to invest in our common stock.

We intendOur inability to pursuesuccessfully identify, manage and execute acquisitions, joint ventures, divestitures, and other significant transactions could harm our financial results, business, and prospects.

As part of our business strategy, we may acquire companies or businesses, divest businesses or assets, enter into strategic alliances thatand joint ventures, and make investments to realize anticipated benefits, which actions involve a number of inherent risks any of which may cause us not to realize anticipated benefits.

and uncertainties. We evaluate acquisition opportunities that have the potential to support and strengthen our business. We can give no assurances that the opportunities will be consummated or that financing will be available. In addition, acquisitions involve inherent risks that the acquired business will not perform in accordance with our expectations. We may not be able to achieve the synergies and other benefits we expect from the integration as successfully or rapidly as projected, if at all. Our failure to integrate newly-acquired operations could prevent us from realizing our expected rate of return on an acquired business and could have a material or adverse effect on our results of operations and financial condition.

Our future performance and market value could cause additional write-downs of long-lived and intangible assets in future periods.

We are required under U.S. generally accepted accounting principles to review intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may be considered to be a change in circumstances indicating that the carrying value of our intangible assets may not be recoverable include, but are not limited to, a decline in stock price and market capitalization, a significant decrease in the market value of an asset, or a significant decrease in operating or cash flow projections. During the third quarter of 2015, we per-

formed an interim goodwill test and concluded that the carrying amounts of the Inspection Oilfield Services, Inc. (“IOS”) and Chemtec Energy Services, L.L.C. (“Chemtec”) reporting units’ goodwill exceeded the implied fair values of that goodwill. We recognized a non-cash goodwill impairment charge of $80,337 ($63,887 net of taxes) to write down the carrying values to the implied fair values, of which $69,908 represents the full carrying value of goodwill related to the IOS acquisition and the remaining $10,429 relates to the Chemtec reporting unit. No assurances can be given that we will not be required to record future significant charges related to tangible or intangible asset impairments.

Our indebtedness could materially adversely affect our business, financial condition, and results of operations and prevent us from fulfilling our indebtedness obligations.

Our indebtedness could materially adversely affect our business, financial condition, and results of operations. For example, it could:

require us to dedicate a substantial portion of our cash flow from operations to payments of our indebtedness, which would reduce the availability of our cash flow to fund working capital, capital expenditures, expansion efforts, and other general corporate purposes;

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

place us at a competitive disadvantage compared to our competitors that have less debt; and

limit, among other things, our ability to borrow additional funds for working capital, capital expenditures, general corporate purposes, or acquisitions.

Our inability to comply with covenants in place or our inability to make the required principal and interest payments may cause an event of default, which could have a substantial adverse impact to our business, financial condition, and results of operation. There is no assurance that refinancings or asset dispositions could be effected on a timely basis or on satisfactory terms, if at all, particularly if credit market conditions deteriorate. Furthermore, there can be no assurance that refinancings or asset dispositions would be permitted by the terms of our credit agreements or debt instruments. Our existing credit agreements contain, and any future debt agreements we may enter into may contain, certain financial tests and other covenants that limit our ability to incur indebtedness, acquire other businesses, and impose various other restrictions. Our ability to comply with financial tests may be adversely affected by changes in economic or business conditions beyond our control, and these covenants may limit our ability to take advantage of potential business opportunities as they arise. We cannot be certain that we will be able to comply with the financial tests and other covenants, or, if we fail to do so, that we will be able to obtain waivers or amended terms from our lenders. An uncured default with respect to one or more of the covenants could result in the amounts outstanding under one or more of the agreements being declared immediately due and payable, which may also trigger an obligation to redeem our outstanding debt securities and repay all other outstanding indebtedness. Any such acceleration of our indebtedness would have a material adverse effect on our business, financial condition, and results of operations.

Prolonged low energy prices and other unfavorable changes in U.S., global, or regional economic and market conditions could adversely affect our business.

We could be adversely impacted by prolonged negative changes in economic conditions affecting either our suppliers or customers as well as the capital markets. Negative changes in government spending may result in delayed or permanent deferrals of existing or potential projects. No assurances can be given that we will be able to successfully mitigate various prolonged uncertainties including materials cost variability, delayed or reduced customer orders and payments, and access to available capital resources outside of operations.

In addition, current volatile market conditions and significant fluctuationsdeclines in energy prices may continue for an extended period, which could continue to negatively affectingaffect our business prospects. The oil and gas markets are currently very volatile, and we cannot predict future oil and natural gas prices. Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty, and a variety of additional factors that are beyond our control. Any prolonged substantial declineSustained declines, such as began to occur in 2015, in the price of oil and natural gas will likely continue to have a material adverse effect on our operations and financial condition.

Concentration of Credit Risk

The Company has financial instruments that are exposed to concentrations of credit risk and consist primarily of cash and cash equivalents and trade accounts receivable. The Company routinely maintains cash and temporary cash investments at certain financial institutions in amounts substantially in excess of Federal Deposit Insurance Corporation (“FDIC”) and other jurisdictions insurance limits. Management believes that these financial institutions are of high quality and the risk of loss is minimal.

Our ability to maintain or improve our profitability could be adversely impacted by cost pressures as well as fluctuations in interest rates and foreign currency exchange rates.pressures.

Our profitability is dependent upon the efficient use of our resources. Rising inflation, labor costs, labor disruptions, and other increases in costs in the geographies where we operate could have a significant adverse impact on our profitability and results of operations.

The majority of our products and services are sold in the United States, Canada, and Europe. Fluctuations in the relative values of the United States dollar, Canadian dollar, British pound, and Euro will require adjustments in reported earnings and operations to reflect exchange rate translation in our Canadian and European sales and operations. If the United States dollar strengthens in value as compared to the value of the Canadian dollar,

British pound, or Euro, our reported earnings in dollars from sales in those currencies will be unfavorable. Conversely, a favorable result will be reported if the United States dollar weakens in value as compared to the value of the Canadian dollar, British pound, or Euro.

Our business operates in highly competitive industries and a failure to react to changing market conditions could adversely impact our business.

We face strong competition in each of the markets in which we participate. A slow response to competitor pricing actions and new competitor entries into our product lines could negatively impact our overall pricing. Efforts to improve pricing could negatively impact our sales volume in all product categories. We may be required to invest more heavily to maintain and expand our product offerings. There can be no assurance that new product offerings will be widely accepted in the markets we serve. Significant negative developments in any of these areas could adversely affect our financial results and condition.

If we are unable to protect our intellectual property and prevent its improper use by third parties, our ability to compete may be harmed.

We own a number of patents and trademarks under the intellectual property laws of the United States, Canada, Europe, and other countries where product sales are possible. However, we have not perfected patent and trademark protection of our proprietary intellectual property for all products in all countries. The decision not to obtain patent and trademark protection in other countries may result in other companies copying and marketing products that are based upon our proprietary intellectual property. This could impede growth into new markets where we do not have such protections and result in a greater supply of similar products in such markets, which in turn could result in a loss of pricing power and reduced revenue.

Our success is in part dependent on the accuracy and proper utilization of our management information and communications systems.

We are currently working through an enterprise resource program (“ERP”) system upgrade and certain divisions of our Company will be transitioned into the new ERP system during 2016. The system upgrade is intended to enable us to better meet the information requirements of our users, increase our integration efficiencies, and identify additional synergies in the future. The implementation of our ERP system is complex because of the wide range of processes and systems to be integrated across our business. Project delays, business interruptions, or loss of expected benefits could have a material adverse effect on our business, financial condition, or results of operations. Any disruptions, delays, or deficiencies in the design, operation, or implementation of our various systems, or in the performance of our systems, particularly any disruptions, delays, or deficiencies that impact our operations, could adversely affect our ability to effectively run and manage our business, including our ability to receive, process, ship, and bill for orders in a timely manner or our ability to properly manage our inventory or accurately present our inventory availability or pricing.

We are subject to cybersecurity risks and may incur increasing costs in an effort to minimize those risks.

Our business employs systems and websites that allow for the storage and transmission of proprietary or confidential information regarding our customers, employees, job applicants, and other parties, including financial information, intellectual property, and personal identification information. Security breaches and other disruptions could compromise our information, expose us to liability, and harm our reputation and business. The steps we take to deter and mitigate these risks may not be successful. We may not have the resources or technical sophistication to anticipate or prevent current or rapidly evolving types of cyber-attacks. Data and security breaches can also occur as a result of non-technical issues, including an intentional or inadvertent breach by our employees or by persons with whom we have commercial relationships. Any compromise or breach of our security could result in a violation of applicable privacy and other laws, legal and financial exposure, negative impacts on our customers’ willingness to transact business with us, and a loss of confidence in our security measures, which could have an adverse effect on our results of operations and our reputation.

We are dependent upon key customers.

We could be adversely affected by changes in the business or financial condition of a customer or customers. A significant decrease in capital spending by our railroad customers could negatively impact our product revenue. Our CXTAs a result of the ongoing litigation and termination of the amended 2005 concrete rail products division and ARP division are dependent on thetie supply agreement with Union Pacific Railroad (UPRR) for a significant portion of their business.(“UPRR”), our sales to, and new orders from UPRR have ceased which has adversely affected our results during 2015. No assurances can be given that a significant downturn in the business or financial condition of a current customer, or customers, or potential litigation with a current customer, would not also impact our results of operations and/or financial condition.

An adverse outcome in any pending or future litigation or pending or future warranty claims against the Company or its subsidiaries or our determination that a customer has a substantial product warranty claim could negatively impact our financial results and/or our financial condition.

We are party to various legal proceedings. In addition, from time to time our customers assert claims against us relating to the warranties which apply to products we sell. There is the potential that a result materially adverse to us or our subsidiaries in pending or future legal proceedings or pending or future product warranty claims could materially exceed any accruals we have established and adversely affect our financial results and/or

financial condition. In addition, we could suffer a significant loss of business from a customer who is dissatisfied with the resolution of a warranty claim. For example, UPRR terminated our amended 2005 concrete tie supply agreement over allegedly defective ties and ceased new orders for other products which negatively impacted our 2015 results.

In January 2015, the UPRR filed a lawsuit against the Company asserting that we were in material breach of our 2012 amended 2005 concrete tie supply agreement with the UPRR due to claimed failures to provide warranty ties to replace alleged defective concrete ties. UPRR seeks various types of relief including incidental, consequential, and other damages in amounts to be determined at trial under various legal theories. See “Executive Level Overview”Part II, Item 8, Note 19 for additional information regarding the UPRR’s lawsuit. We continue to work with UPRR in an attempt to reach a resolution on this matter. However, we cannot predict that such discussions willmay not be successful, and the results of litigation or whetherand any settlement or judgment amounts willresulting from this matter may not be within the range of our estimated accruals for loss contingencies.accrual. Consequently, while we believe the claims in the UPRR lawsuit case are without merit, and we intend to vigorously defend ourselves and have asserted a counterclaim for damages in the UPRR lawsuit, an adverse outcome could result in a substantial judgment against us that could have a material adverse effect on our financial condition.condition, results of operations, liquidity, and capital resources. No assurances can be given that prior to any settlement or judgment, that we will not take additional material charges because our warranty reserve accrual for UPRR is based upon our current estimate of the number of defective concrete ties that need to be replaced will notand facts could emerge which would cause us to materially increase and result in our having to take additional charges, or that UPRR will not terminate the 2012 amended supply agreement and recover damages under its lawsuit, which events could have a material adverse effect on our financial statements, results of operations, liquidity, and capital resources.this estimate.

A portion of our sales are derived from our international operations, which exposes us to certain risks inherent in doing business on an international level.

Doing business outside the United States subjects the Company to various risks, including changing economic climate and political conditions, work stoppages, exchange controls, currency fluctuations, armed conflicts, and unexpected changes in United States and foreign laws relating to tariffs, trade restrictions, transportation regulations, foreign investments, and taxation. Increasing sales to foreign countries exposes the Company to increased risk of loss from foreign currency fluctuations and exchange controls as well as longer accounts receivable payment cycles. We have little control over most of these risks and may be unable to anticipate changes in international economic and political conditions and, therefore, unable to alter its business practices in time to avoid the adverse effect of any of these possible changes.

Changes in exchange rates for foreign currencies may reduce international demand for our products or increase our labor or supply costs in non-U.S. markets. Fluctuations in the relative values of the United States dollar, Canadian dollar, British pound, and Euro will require adjustments in reported earnings and operations to reflect exchange rate translation in our Canadian and European sales and operations. If the United States dollar strengthens in value as compared to the value of the Canadian dollar, British pound, or Euro, our reported earn-

ings in dollars from sales in those currencies will be unfavorable. Conversely, a favorable result will be reported if the United States dollar weakens in value as compared to the value of the Canadian dollar, British pound, or Euro.

Violations of foreign governmental regulations, including the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption laws could result in fines, penalties, and criminal sanctions against the Company, its officers, or both and could adversely affect our business.

Our foreign operations are subject to governmental regulations in the countries in which we operate as well as U.S. laws. These include regulations relating to currency conversion, repatriation of earnings, taxation of our earnings and the earnings of our personnel, and the increasing requirement in some countries to make greater use of local employees and suppliers, including, in some jurisdictions, mandates that provide for greater local participation in the ownership and control of certain local business assets.

The U.S. Foreign Corrupt Practices Act and similar other worldwide anti-corruption laws, such as the U.K. Bribery Act, prohibit improper payments for the purpose of obtaining or retaining business. Although we have established an internal control structure, corporate policies, compliance, and training processes to reduce the risk of violation, we cannot ensure that these procedures will protect us from violations of such policies by our employees or agents. Failure to comply with applicable laws or regulations could subject us to fines, and penalties, and suspension or debarment from contracting. Events of non-compliance could harm our reputation, reduce our revenues and profits, and subject us to criminal and civil enforcement actions. Violations of such laws or allegations of violation could disrupt our business and result in material adverse results to our operating results or future profitability.

Certain divisions of our business depend on a small number of suppliers. The loss of any such supplier could have a material adverse effect on our business, financial condition, and result of operations.

In our rail and piling distributed products businesses, we rely on a limited number of suppliers for key products that we sell to our customers. No assurances can be given that aIn addition, our piling business is predominantly dependent upon one supplier for sheet piling. A significant downturn in the business of one or more of these suppliers, a disruption in their manufacturing operations, an unwillingness to continue to sell to us, or a disruption in the availability of existing and new piling and rail products would notmay adversely impact our financial results.

Fluctuations in the price, quality, and availability of the primary raw materials used in our business could have a material adverse effect on our operations and profitability.

Most of our businesses utilize steel as a significant product component. The steel industry is cyclical and prices and availability are subject to these cycles as well as to international market forces. We also use significant amounts of cement and aggregate in our concrete railroad tie and our precast concrete products businesses. No assurances can be given that our financial results would not be adversely affected if prices or availability of these materials were to change in a significantly unfavorable manner.

Labor disputes may have a material adverse effect on our operations and profitability.

Four of our manufacturing facilities are staffed by employees represented by labor unions. Approximately 190177 employees employed at these facilities are currently working under three separate collective bargaining agreements. Disputes with regard to the terms of these agreements or our potential inability to renegotiate acceptable contracts with these unions could result in, among other things, strikes, work stoppages, slowdowns, or lockouts, which could cause a disruption of our operations and have a material adverse effect on our results of operations, financial condition, and liquidity.

Actions of activist shareholders could be disruptive and potentially costly and the possibility that activist shareholders may seek changes that conflict with our strategic direction could cause uncertainty about the strategic direction of our business.

In March 2014, we negotiatedFebruary 2016, the renewalCompany entered into an agreement with an activist investor, Legion Partners Asset Management, LLC and various of its affiliates (collectively, “Legion Partners”) that had filed a Schedule 13D

with the SEC with respect to the Company. Pursuant to that agreement, the Company agreed to appoint a representative of Legion Partners to the Company’s Board of Directors and Legion Partners agreed to various standstill provisions and to vote for the Company’s director nominees at the Company’s 2016 Annual Meeting of Shareholders.

Activist investors may attempt to effect changes in the Company’s strategic direction and how the Company is governed, or to acquire control over the Company. Some investors seek to increase short-term stockholder value by advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock repurchases, or even sales of assets or the entire company. While the Company welcomes varying opinions from all shareholders, activist campaigns that contest or conflict with our strategic direction could have an adverse effect on the Company’s results of operations and financial condition as responding to proxy contests and other actions by activist shareholders can disrupt our operations, be costly and time-consuming, and divert the attention of the collective bargaining agreement withCompany’s board and senior management from the pursuit of business strategies. In addition, perceived uncertainties as to our Bedford, PA workforce represented byfuture direction as a result of changes to the Shopman’s Local Union Number 527. This agreement, covering approximately 50 employees, expirescomposition of our Board may lead to the perception of a change in March 2017.

In September 2014, we negotiated the renewaldirection of the collective bargaining agreement withbusiness, instability or lack of continuity which may be exploited by our Spokane, WA workforce represented bycompetitors, may cause concern to our current or potential customers, may result in the United Steelworkers Local Number 338. This agreement, covering approximately 110 employees, expires in September 2017.

The bargaining unitloss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners. These types of actions could cause significant fluctuations in our St. Jean, Quebec, Canada workforce is represented bystock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the Canadian Steel Workers Union Local Number 9443. This agreement, covering approximately 30 employees, was finalized in November 2013. A five year agreement was ratified that will expire in August 2018.

These collective bargaining agreements forbid the respective labor organizations from endorsing any work stoppage during the lifeunderlying fundamentals and prospects of the agreements.our business.

Our success is highly dependent on the continued service and availability of qualified personnel.

Much of our future success depends on the continued availability and service of key personnel, including our Chief Executive Officer, the executive team, and other highly skilled employees. Changes in demographics, training requirements, and the availability of qualified personnel could negatively affect our ability to compete and lead to a reduction in our profitability.

Our future performance and market value could cause write-downs of intangible assets in future periods.

We are required under U.S. generally accepted accounting principles to review intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. Factors that may be considered to be a change in circumstances indicating that the carrying value of our intangible assets may not be recoverable include, but are not limited to, a decline in stock price and market capitalization, a significant decrease in the market value of an asset, or a significant decrease in operating or cash flow projections. No assurances can be given that we will not be required to record a significant adverse charge to earnings during the period in which any impairment of its goodwill or intangible assets occurs.

We may not foresee or be able to control certain events that could adversely affect our business.

Unexpected events including fires or explosions at our facilities, natural disasters, armed conflicts, unplanned outages, equipment failures, failure to meet product specifications, or a disruption in certain of our operations may cause our operating costs to increase or otherwise impact our financial performance.

Shifting federal, state, local, and foreign regulatory policies impose risks to our operations.

We are subject to regulation from federal, state, local, and foreign regulatory agencies. We are required to comply with numerous laws and regulations and to obtain numerous authorizations, permits, approvals, and certificates from governmental agencies. Compliance with emerging regulatory initiatives, delays, discontinuations, or reversals of existing regulatory policies in the markets in which we operate could have an adverse effect on our business, results of operations, cash flows, and financial condition.

A substantial portion of our operations are heavily dependent on governmental funding of infrastructure projects. Many of these projects have “Buy America” or “Buy American” provisions. Significant changes in the level of government funding of these projects could have a favorable or unfavorable impact on our operating results. Additionally, government actions concerning “Buy America” provisions, taxation, tariffs, the environment, or other matters could impact our operating results.

We may be impacted by new regulations related to conflict minerals.

The SEC, as directed in The Dodd-Frank Wall Street Reform and Consumer Protection Act, adopted new rules establishing disclosure and reporting requirements regarding the use of certain minerals referred to as “conflict minerals” in products. These new rules require us to determine, disclose, and report whether or not such conflict minerals originate from the Democratic Republic of the Congo or adjoining countries. The requirements could affect the sourcing, availability, and cost of minerals used in the manufacture of certain of the products we sell, including some that we contract to manufacture. In addition, our customers may require that our products be free of conflict minerals and our revenues may be harmed if we are unable to procure conflict-free minerals at a reasonable price. We may face reputation challenges with our customers and other stakeholders if we are unable to verify sufficiently the origins of all minerals used in our products.

 

ITEM 1B.UNRESOLVED STAFF COMMENTS

None.

ITEM 2.PROPERTIES

The location and general description of the principal properties which are owned or leased by L.B. Foster Company, together with the segment of the Company’s business using such properties, are set forth in the following table:

 

Location

  

Function

  

Acres

   

Business
Segment

  

Lease
Expiration

  

Function

  

Acres

   

Business Segment

  

Lease
Expiration

Bedford, PA

  Bridge component fabricating plant.   16    Construction  Owned  Bridge component fabricating plant   16    Construction  Owned

Birmingham, AL

  Pipe coating facility.   32    Tubular  2017  Pipe coating facility   32    Tubular and Energy  2017

Burnaby, British Columbia, Canada

  Friction management products plant.   N/A    Rail  2021  Friction management products plant   N/A    Rail  2021

Channelview, TX

  Threading, test, and inspection facility   73    Tubular and Energy  Owned

Columbia City, IN

  Rail processing facility and yard storage.   22    Rail  Owned  Rail processing facility and yard storage   22    Rail  Owned

Hillsboro, TX

  Precast concrete facility.   9    Construction  Owned  Precast concrete facility   9    Construction  Owned

Leicester, United Kingdom

  Material handling manufacturing plant.   N/A    Rail  2019

Kimball, NE

  Threading, test, and inspection facility   145    Tubular and Energy  Owned

Leming, TX

  Threading, test, and inspection facility   63    Tubular and Energy  Owned

Magnolia, TX

  Threading facility and joint venture manufacturing facility.   35    Tubular  Owned  Threading facility and joint venture manufacturing facility   35    Tubular and Energy  Owned

Morgantown, WV

  Test, and inspection facility   N/A    Tubular and Energy  2018

Niles, OH

  Rail fabrication, friction management products, and yard storage.   35    Rail  Owned  Rail fabrication, friction management products, and yard storage   35    Rail  Owned

Petersburg, VA

  Piling storage facility.   35    Construction  Owned  Piling storage facility   35    Construction  Owned

Pueblo, CO

  Rail joint manufacturing.   9    Rail  Owned  Rail joint manufacturing   9    Rail  Owned

Saint-Jean-sur-Richelieu, Quebec, Canada

  Rail anchors and track spikes manufacturing plant.   17    Rail  Owned  Rail anchors and track spikes manufacturing plant   17    Rail  Owned

Sheffield, United Kingdom

  Track component and friction management products facility.   N/A    Rail  2019  Track component and friction management products facility   N/A    Rail  2019

Spokane, WA

  CXT concrete tie plant.   13    Rail  2015*  CXT concrete tie plant   13    Rail  2020

Spokane, WA

  Precast concrete facility.   5    Construction  2015*  Precast concrete facility   5    Construction  2020

Tucson, AZ

  CXT concrete tie plant.   19    Rail  2017

Waverly, WV

  Precast concrete facility.   85    Construction  Owned  Precast concrete facility   85    Construction  Owned

Willis, TX (2)

  Pipe coating and measurement products and services facilities.   84    Tubular  Owned

Willis, TX

  Pipe coating facility   16    Tubular and Energy  Owned

Willis, TX

  Measurement services facility   68    Tubular and Energy  Owned

Included in the table above are certain facilities leased by the Company for which there is no acreage included in the lease. For these properties a “N/A” has been included in the “Acres” column.

*- Spokane lease is expected to be renewed during 2015.

Including the properties listed above, the Company has a total of 2728 sales offices, including its headquarters in Pittsburgh, PA and 2236 warehouses, plant, and yard facilities located throughout the United States, Canada, and Europe. The Company’s facilities are in good condition and suitable for the Company’s business as currently conducted and as currently planned to be conducted.

 

ITEM 3.LEGAL PROCEEDINGS

Information regarding the Company’s legal proceedings and other commitments and contingencies is set forth in Part II, Item 8, Note 2019 to the Consolidated Financial Statements included herein, which is incorporated by reference into this Item 3.

 

ITEM 4.MINE SAFETY DISCLOSURES

This item is not applicable to the Company.

PART II

 

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stock Market Information

The Company had 375336 common shareholders of record on February 25, 2015.23, 2016. Common stock prices are quoted daily through the NASDAQ Global Select Market quotation service (Symbol: FSTR). The following table sets forth the range of high and low sales prices per share of our common stock for the periods indicated:

 

  2014   2013   2015   2014 

Quarter

  High   Low   Dividends   High   Low   Dividends   High   Low   Dividends   High   Low   Dividends 

First

  $48.41    $40.09    $0.03    $45.43    $37.97    $0.03    $52.00    $37.00    $0.04    $48.41    $40.09    $0.03  

Second

   54.68     44.82     0.03     46.45     39.63     0.03     47.97     33.96     0.04     54.68     44.82     0.03  

Third

   56.72     45.93     0.03     47.91     39.14     0.03     36.07     12.10     0.04     56.72     45.93     0.03  

Fourth

   54.41     43.81     0.04     50.00     42.71     0.03     16.66     10.10     0.04     54.41     43.81     0.04  

Dividends

There have been no changes to the October 2014 Board of Directors authorization to increase the regular quarterly dividend to $0.04 per share. The Company expects to continue its policy of paying regular cash dividends, although there is no assurance as to future dividends because they depend on future earnings, capital requirements, and financial condition.

The Company’s September 23, 2014March 13, 2015 credit facility permits it to pay dividends and distributions and make redemptions with respect to its stock providing no event of default or potential default (as defined in the facility agreement) has occurred prior to or after giving effect to the dividend, distribution, or redemption. Dividends, distributions, and redemptions are capped at $25,000$25,000,000 per year when funds are drawn on the facility. If no drawings on the facility exist, dividends, distributions, and redemptions in excess of $25,000$25,000,000 per year are subjected to a limitation of $75,000$75,000,000 in the aggregate. The $75,000$75,000,000 aggregate limitation also permits certain loans, strategic investments, and acquisitions.

In October 2014, the Company’s Board of Directors authorized an increase to the regular quarterly dividend to $0.04 per share.

Performance Graph

In 2014, the Company changed itsThe Company’s peer group to align it with the Company’s comparator group as used by the Company’s compensation committee to evaluate the Company’s compensation practices. The Company’s new peer group (2014 Peer Group) consists of Accuride Corporation, Alamo Group, Inc., AM Castle & Co., American Railcar Industries, Inc., CIRCOR International, Inc., Columbus McKinnon Corporation, Furmanite Corporation, Gibraltar Industries, Inc., Houston Wire & Cable Company, Insteel Industries Inc., Lindsay Corporation, Lydall Inc., MYR Group, Inc., NN Inc., Northwest Pipe Co., Olympic Steel Inc., Orion Marine Group, Inc., Quanex Building Products Corporation, Raven Industries Inc., and Sterling Construction Co. Inc.

Prior to 2014, the Company’s old peer group (2013 Peer Group) consisted of Alamo Group, Inc., AM Castle & Co., American Railcar Industries, Inc., CIRCOR International, Inc., DXP Enterprises, Inc., Greenbrier Cos., Inc., Haynes International Inc., Houston Wire & Cable Company, Insteel Industries Inc., Lawson Products Inc., NN Inc., Olympic Steel Inc., RBC Bearings Inc., Skyline Corp., Sterling Construction Co. Inc., and Synalloy Corp.

The following tables compare total shareholder returns for the Company over the last five years to the NASDAQ Composite Index and the peer groups assuming a $100 investment made on December 31, 2009.2010. Each of the fourthree measures of cumulative total return assumes reinvestment of dividends. The stock performance shown on the graph below is not necessarily indicative of future price performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among L.B. Foster Company, the NASDAQ Composite Index,

2013 Peer Group, and 2014a Peer Group

 

 

*$100 invested on 12/31/0910 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

 

 12/09  12/10  12/11  12/12  12/13  12/14  12/10  12/11  12/12  12/13  12/14  12/15 

L.B. Foster Company

  $100.00    $137.34    $95.22    $146.67    $160.11    $164.88    $100.00    $69.33    $106.80    $116.58    $120.05    $34.02  

NASDAQ Composite

  100.00    117.61    118.70    139.00    196.83    223.74    100.00    100.53    116.92    166.19    188.78    199.95  

2013 Peer Group

  100.00    144.08    135.09    150.81    244.08    218.48  

2014 Peer Group

  100.00    123.58    110.11    124.66    176.21    157.97  

2015 Peer Group

  100.00    89.10    100.87    142.58    127.82    106.05  

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as ofat December 31, 20142015 with respect to compensation plans under which equity securities of the Company are authorized for issuance.

 

Plan Category Number of securities
to be issued upon
exercise of
outstanding options,
warrants, and rights
  Weighted-average
exercise price of
outstanding options,
warrants, and rights
  Number of securities remaining
available for future issuance

under equity compensation
plans (excluding securities

to be issued upon exercise of
outstanding options, warrants, or rights)
 

Equity compensation plans approved by shareholders

  7,500   $9.08    469,840  

Equity compensation plans not approved by shareholders

            
 

 

 

  

 

 

  

 

 

 

Total

  7,500   $9.08    469,840  
 

 

 

  

 

 

  

 

 

 
Plan CategoryNumber of securities
to be issued upon
exercise of
outstanding options,
warrants, and rights
Weighted-average
exercise price of
outstanding options,
warrants, and rights
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities

to be issued upon exercise of
outstanding options, warrants, or rights)

Equity compensation plans approved by shareholders

$407,307

Equity compensation plans not approved by shareholders

Total

$407,307

Under the 2006 Omnibus Incentive Plan, non-employee directors are automatically awarded up to 3,500 shares of the Company’s common stock as determined by the Board of Directors at each annual shareholder meeting at which such non-employee director is elected or re-elected, commencing May 24, 2006. Through December 31, 2014,2015, there were 110,642124,642 fully vested shares issued under the 2006 Omnibus Incentive Plan to non-employee directors. Additionally,During 2015, pursuant to the 2006 Omnibus Incentive Plan, during 2014 and 2012 the Company issued approximately 14,000 and 34,000 fully-vested shares in lieu of a cash payment earned under separate three year incentive plans, respectively.plans.

The Company grants eligible employees Restricted Stockrestricted stock and Performance Unit Awardsperformance unit awards under the 2006 Incentive Omnibus Plan. The forfeitable Restricted Stock Awardsrestricted stock awards granted prior to March 2015 generally time-vest after a four yearfour-year holding period, and those granted in March 2015 generally time-vest ratably over a three-year period, unless indicated otherwise by the underlying Restricted Stock Agreement.restricted stock award agreement. Performance Unit Awardsunit awards are offered annually under separate three-year long-term incentive programs.plans. Performance units are subject to forfeiture and will be converted into common stock of the Company based upon the Company’s performance relative to performance measures and conversion multiples as defined in the underlying program.

The 1998 Plan expired by its terms in 2008 and no awards may be granted under that Plan, which currently has outstanding stock option awards that expire in 2015.plan.

The Company will withhold or employees may tender shares of restricted stock when issued to pay for withholding taxes. During 2015, 2014, 2013, and 2012,2013, the Company withheld 25,340, 21,676, 16,166, and 23,56216,166 shares, respectively, for this purpose. The value of the shares withheld were $985, $708$1,114,000, $985,000, and $669$708,000 in 2015, 2014, 2013, and 2012,2013, respectively.

Issuer Purchases of Equity Securities

The Company’s purchases of equity securities for the three-month period ended December 31, 20142015 were as follows:

 

   Total number
of shares
purchased(1)
   Average
price
paid per
share
   Total number
of shares
purchased as
part of publicly
announced plans
or programs(2)
   Approximate
dollar
value of shares
that may yet be
purchased under
the plans or programs
(in thousands)
 

October 1, 2014 — October 31, 2014

       $         $15,000  

November 1, 2014 — November 30, 2014

                  15,000  

December 1, 2014 — December 31, 2014

   1,375     48.40          15,000  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1,375    $48.40         $15,000  
  

 

 

   

 

 

   

 

 

   

 

 

 

   Total number
of shares
purchased(1)
   Average
price
paid per
share
   Total number
of shares
purchased as
part of publicly
announced plans
or programs(2),(3)
   Approximate dollar
value of shares
that may yet be
purchased under
the plans or programs
(in thousands)
 

October 1, 2015 — October 31, 2015

       $         $13,413  

November 1, 2015 — November 30, 2015

                  13,413  

December 1, 2015 — December 31, 2015

   1,328     11.09          13,413  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   1,328    $         $13,413  
  

 

 

   

 

 

   

 

 

   

 

 

 
(1)Reflects shares withheld by the Company to pay taxes upon vesting of restricted stock. These shares do not impact the remaining authorization to repurchase shares under approved plans or programs.
(2)On December 4, 2013, the Board of Directors authorized the repurchase of up to $15,000$15,000,000 of the Company’s common shares until December 31, 2016. This authorization became effective January 1, 2014.

(3)On December 9, 2015, the Board of Directors authorized the repurchase of up to $30,000,000 of the Company’s common shares until December 31, 2017. This authorization became effective January 1, 2016 and replaces the prior authorization.

The Company did not purchase anypurchased 80,512 common shares for $1,587,000 during the year ended December 31, 2015 under theour previous share repurchase authorization, however, the Company withheld shares for employee tax payments during the year. During the first quarter of 2014, the Company withheld 17,045 shares at an average price of $43.86. During the second quarter of 2014, the Company withheld 3,256 at an average price of $52.55. There were no share withholdings during the third quarter of 2014.authorization.

 

ITEM 6.SELECTED FINANCIAL DATA

(Dollars in thousands, except per share data)

The following selected financial data has been derived from our audited financial statements. The financial data presented below should be read in conjunction with the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements of the Company and the Notes thereto included elsewhere in this Annual Report on Form 10-K.

 

 Year Ended December 31,  Year Ended December 31, 

Income Statement Data

 2014(1) 2013(2) 2012(3) 2011(4) 2010(5)  2015(1) 2014(2) 2013(3) 2012(4) 2011(5) 

Net sales

 $607,192   $597,963   $588,541   $575,337   $467,058   $624,523   $607,192   $597,963   $588,541   $575,337  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Operating profit

 $37,082   $41,571   $22,657   $30,812   $31,217   $28,760   $37,082   $41,571   $22,657   $30,812  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Income from continuing operations, net of tax

 $25,654   $29,276   $14,764   $22,067   $20,006  

(Loss) income from continuing operations, net of tax

 $(44,445 $25,656   $29,290   $14,764   $22,067  

Income from discontinued operations, net of tax

  2    14    1,424    828    486                1,424    828  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net income

 $25,656   $29,290   $16,188   $22,895   $20,492  

Net (loss) income

 $(44,445 $25,656   $29,290   $16,188   $22,895  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Basic earnings per common share:

     

Basic (loss) earnings per common share:

     

Continuing operations

 $2.51   $2.88   $1.46   $2.16   $1.96   $(4.33 $2.51   $2.88   $1.46   $2.16  

Discontinued operations

  0.00    0.00    0.14    0.08    0.05                0.14    0.08  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Basic earnings per common share

 $2.51   $2.88   $1.60   $2.24   $2.01  

Basic (loss) earnings per common share

 $(4.33 $2.51   $2.88   $1.60   $2.24  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Diluted earnings per common share:

     

Diluted (loss) earnings per common share:

     

Continuing operations

 $2.48   $2.85   $1.44   $2.14   $1.93   $(4.33 $2.48   $2.85   $1.44   $2.14  

Discontinued operations

  0.00    0.00    0.14    0.08    0.05                0.14    0.08  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Diluted earnings per common share

 $2.48   $2.85   $1.58   $2.22   $1.98  

Diluted (loss) earnings per common share

 $(4.33 $2.48   $2.85   $1.58   $2.22  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Dividends paid per common share

 $0.13   $0.12   $0.10   $0.10   $—     $0.16   $0.13   $0.12   $0.10   $0.10  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Operating profit represents the gross profit less selling and administrative expenses and amortization expense.

 

(1)2015 includes the results of the acquisitions of TEW Plus, LTD (“Tew Plus”) (November 23), IOS Holdings, Inc (“IOS”) (March 13), and TEW Holdings, LTD (“Tew”) (January 13). The results also include an $80,337 ($63,887 net of taxes) impairment of goodwill related to the IOS and Chemtec reporting units. More information about the impairment can be found in Part II, Item 8, Note 4.
(2)2014 includes CXT Concrete Tie warranty charges of $9,374 within the Rail Products and Services segment. The 2014 results also include the acquisitions of Carr Concrete Corporation (July 7), FWO (October 29), and Chemtec Energy Services, L.L.C. (December 30). More information about the warranty charges and acquisition activity can be found in Part II Item 8, Note 20 and Note 3, respectively, to the consolidated financial statements included herein, which is incorporated by reference into this Part II Item 6.

(2)(3)2013 includes the results of L.B. Foster Ball Winch, Inc., which was formed for the purpose of acquiring assetsacquisition of Ball Winch, LLC, beginning on November 7, 2013.(November 7).

(3)(4)2012 includes a $22,000 warranty charge and a pre-tax gain of $3,193, from the dispositions of SSD and Precise divisions, in income from discontinued operations, net of tax.

(4)(5)2011 includes a pre-tax gain of $577 associated with the early termination of the operating lease associated with the Company’s sale-leaseback transaction for our threaded products facility, formerly located in Houston, TX.

   December 31, 

Balance Sheet Data

  2015   2014   2013   2012   2011 

Total assets

  $566,660    $491,717    $413,193    $401,537    $379,894  

Working capital

   122,828     135,488     171,603     179,838     156,020  

Long-term debt

   167,419     25,752     25     27     51  

Stockholders’ equity

   282,832     335,888     316,397     287,575     269,815  

 

(5)2010 includes the results of Rail Technologies, beginning on December 15, 2010.

   December 31, 

Balance Sheet Data

  2014   2013   2012   2011   2010 

Total assets

  $495,121    $413,654    $406,122    $379,894    $378,402  

Working capital

   138,908     171,885     184,423     155,261     142,303  

Long-term debt

   25,752     25     27     51     2,399  

Stockholders’ equity

   335,888     316,397     287,575     269,815     255,747  

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in thousands, except share data unless otherwise noted)

Executive Level Overview

Recent Acquisitions by SegmentCurrent year acquisitions

Construction Products Acquisition

On July 7, 2014, the Company acquired Carr Concrete Corporation (Carr) for $12,480. Carr is a provider of pre-stressed and precast concrete products located in Waverly, WV and the transaction was funded with cash on hand.

Rail Products and Services Acquisitions

On October 29, 2014,November 23, 2015, the Company acquired FWO, a businessthe 75% balance of Balfour Beatty Rail GmbHthe remaining shares of Tew Plus for $1,103. The German business$2,130, net of cash acquired. Headquartered in Nottingham, UK, Tew Plus provides track lubricationtelecommunications and switch roller equipment for internationalsecurity systems to the railway applications.and commercial markets. Their offerings include full installation services including: design, project management, survey, and commissioning along with future maintenance.

Subsequent to year end, onOn January 13, 2015, the Company acquired the stockTew for $26,467, net of Tew Holdings, LTD (Tew) for approximately $26,600, subject to the finalization of net debt and net working capital adjustments.cash acquired. Headquartered in Nottingham, UK, Tew provides application engineering solutions primarily to the rail market and other major industries.

The transaction was fundedRail Products and Services segment acquisitions in the United Kingdom have enhanced our international product and service offerings. We have consolidated our Leicester, UK facility with non-domestic cash.the acquired business to establish a center of excellence in Nottingham, UK for engineering automation.

Tubular Productsand Energy Services Acquisition

On December 30, 2014,March 13, 2015, the Company acquired Chemtec Energy Services, L.L.C. (Chemtec)IOS for $66,719,$167,404, net of cash received, which is inclusive ofacquired and a $1,867 preliminarynet working capital adjustment. Located in Willis, TX, Chemtecreceivable adjustment of $2,363. IOS is a manufacturer and turnkeyleading independent provider of blending, injection, and metering equipment for thetubular management services with operations in every significant oil and gas industry.producing region in the continental United States. See Part 1, Item 8, Note 4 with respect to an impairment of the goodwill related to this acquisition.

The IOS acquisition provides the Company with a comprehensive footprint that we believe will generate significant long-term benefit to the Company. Over the course of the current year, the IOS business has been negatively impacted by a significant decline in oil prices and related drop in active rigs. Management has implemented and continues to evaluate the necessary cost reductions to weather the current downturn, however, we continue to believe that the business will generate substantial profits once the global oil and gas market stabilizes and begins to recover.

20142015 Developments and 2016 Outlook

During 2015, we:

Generated adjusted EBITDA of $60,606 (a)

Sold our Tucson, AZ concrete tie manufacturing assets for $2,750

Reduced borrowings on our outstanding revolving debt facility by $51,261 from March 31, 2015

Amended our credit agreement from a maximum credit line of $200,000 with a $100,000 accordion feature to a maximum credit line of $335,000 with a $100,000 accordion feature

Repurchased $1,587 of common shares under the share repurchase authorization

Continued application development work on a new Company-wide enterprise resource planning system

(a)The following table displays a reconciliation of this non-GAAP measure for the three-year periods ended December 31, 2015, 2014 and 2013. EBITDA adjusted for the current year goodwill impairment is a financial metric utilized by management to evaluate the Company’s performance on a comparable basis after excluding the non-cash impact of the 2015 impairment of goodwill.

   2015   2014   2013 

Adjusted EBITDA Reconciliation

      

Net (loss) income

  $(44,445  $25,656    $29,290  

Interest expense (income), net

   4,172     (18   (174

Income tax (benefit) expense

   (6,132   13,404     14,848  

Depreciation

   14,429     7,882     6,890  

Amortization

   12,245     4,695     3,112  
  

 

 

   

 

 

   

 

 

 

Total EBITDA

  $(19,731  $51,619    $53,966  

Impairment of goodwill

   80,337            
  

 

 

   

 

 

   

 

 

 

EBITDA adjusted for impairment of goodwill

  $60,606    $51,619    $53,966  
  

 

 

   

 

 

   

 

 

 

During 2015, market conditions deteriorated as the year progressed. Our largest business segment that serves transportation infrastructure markets experienced weakness that began in the second quarter. The Rail Products and Services segment was largely impacted by reduced spending that persisted through the year in the North American freight rail market. As the overall commodities markets experienced significant weakness, this translated into declining commodity carloads for rail carriers and pressure on pricing. Rail carloads are being adversely affected by the continuing shift away from coal to natural gas, declining crude by rail shipments, and reductions in most other metals, ores, and agriculture products. Bright spots exist in intermodal freight and shipments of passenger vehicles. North American freight rail companies began curtailing spending in the second half of 2015 which impacted most of our rail divisions. Spending in 2016 by the large freight rail operators in North America is expected to continue that trend according to their announcements. The European market was also weak in 2015 as a result of reduced spending by Network Rail, our primary customer in the United Kingdom. However, the outlook in the U.K. is more favorable for 2016. In the United States, passage of a new six year transportation bill “Fixing America’s Surface Transportation (FAST) Act” will provide additional funds for U.S. transit agencies to maintain and grow their systems.

As rail market conditions declined during 2015, and we experienced the loss of sales to UPRR, the management team acted to maximize profit margins. In addition to the acquisitions, 2014weakening freight rail market, we lost approximately $26,000 in sales from UPRR versus the prior year (from $41,000 to $15,000). Management took several actions to cut costs and delay capital to help offset the pressure from declining volume.

The spending that is getting priority among the freight rail operators is directed at safety improvement, operating efficiency, and other cost reductions. The Company continues to target products and solutions that help improve safety and operating efficiency as well as introduce services that help operators perform maintenance at lower costs. We believe that the freight rail operators will continue to harden their network infrastructure to handle the demanding loads and traffic expected in the coming decades. When imports and exports grow with the global economy, freight rail operators are expected to benefit from the need for intermodal networks to efficiently ship goods.

Funding for transit rail projects in North America continued at a steady pace in 2015. The Company’s revenues from this market is always affected by swings in large projects from one year to the next. Our results in 2015 were relatively strong, and we continue to believe the transit market will grow over the long run, although year to year sequential growth may not be consistent. Management believes that the global transit market represents a good opportunity for the Company. By focusing on products that can improve safety and efficiency, as well as passenger comfort, we are attempting to partner with key end users and OEM’s to serve this market. In addition, we have launched a broader set of automation solutions for passenger transit systems through our Tew business acquired in 2015. Innovative solutions from our team of engineers will be focused on helping transit system operations improve infrastructure and lower cost.

Within our Construction Products segment, heavy civil construction projects remained steady through 2015. The Company performed well in our core product areas of (a) bridge decking that provides new decking surfaces intended largely for bridge rehabilitation projects, (b) sheet piling for railway, highway, bridges, and port projects, and (c) precast concrete buildings. The Company did not perform well in other piling products targeted at (or utilized in) heavy civil projects that became very price competitive due to declining steel prices. Throughout the year, lower scrap input prices and very low factory utilization rates kept steel prices very competitive. As a result, the Company did not participate in some of the typical projects we serve with pipe pile and H-pile, resulting in lower annual volumes and sales.

Factory utilization in the steel industry is expected to remain at depressed levels into 2016. There is capacity in many world areas to provide supply for projects at very competitive prices. This industry is also being affected by the significant weakness in oil and gas exploration and development as well as other industrial markets where the commodity cycle has led to pressure on costs and lower capital spending.

The precast concrete buildings business was a bright spot in 2015. The introduction of new products provided support for growth, particularly in the Southwest region of the U.S. The market for buildings typically grows at a low pace, and we expect 2016 to mirror that trend.

The energy markets where our Tubular and Energy Services segment is focused, faced rapidly changing spending patterns in 2015. This volatility could exist throughout 2016. As the upstream, and to a lesser extent, midstream operators are adjusting capital spending plans, our orders have been difficult to forecast. Market conditions deteriorated throughout 2015 as end users adjusted to fluctuating oil prices and reacted to a changing climate around liquidity needs. The majority of our business is tied to investment in midstream pipeline infrastructure. However, the Company has exposure to investment in drilling, including the need for tubulars in hydraulic fracturing applications. Energy market weakness caused us to take restructuring actions mainly in the upstream test and inspection services business. These actions included many developmentsconsolidation of facilities and closures in markets that did not have sustainable demand.

It is our belief that there are widespread needs across the US for pipeline infrastructure in the long term, and new demand will be driven by already developed wells, future exporting potential, and transition from coal to natural gas plants. As a result of reduced forecasted capital spending across the energy industry, U.S. crude oil production is expected to decline in 2016, setting up the potential for a market rebalance later in 2016. Therefore, it is not clear as to whether 2016 will be the year that any measureable rebound will take place. We finished 2015 with a solid backlog for the coated pipe business and precision measurement systems, both aimed at pipeline applications. The upstream test and inspection business exited the year at a recent low point in sales, and has yet to experience a quarterly sequential increase in sales.

Management intends to stay focused on cost reduction actions and ways to streamline products and plant efficiency. We will launch a new ERP system in Q2 of 2016 that will provide efficienciesstart with operations from two Rail Products and opportunitiesServices divisions. Our long term objective is to expand our product lines. During 2014, we:bring modernization needed to the entire Company and develop a platform from which we can grow and leverage best in class business processes.

Ÿ

Generated $66,616 in cash flows from operations to fund current year acquisitions and strategic capital investments.

Ÿ

Completed the centralization of our friction management operations to increase our product offerings while reducing our overhead costs.

Ÿ

Entered into the completion phase of our facility upgrades at our Birmingham, AL facility which will lead to increased production capacity and efficiency.

Ÿ

Completed a track expansion in the Columbia City, IN yard to significantly increase efficiency.

Ÿ

Purchased an additional facility in Bedford, PA to support growth in our corrugated bridge business.

Ÿ

Amended our credit agreement from a maximum credit line of $125,000 with a $50,000 accordion feature to a maximum credit line of $200,000 with a $100,000 accordion feature.

Ÿ

Increased the quarterly dividend 33% to $0.04 per share during the fourth quarter.

Ÿ

Selected an enterprise resource planning system and acquired the software to begin the implementation.

Union Pacific Railroad (UPRR)UPRR Product Warranty Claim

On July 12, 2011, the UPRR notified (UPRR Notice) the Company and its subsidiary, CXT Incorporated (CXT), of a warranty claim under CXT’s 2005 supply contract relating to the sale of pre-stressed concrete railroad ties to the UPRR. The UPRR asserted that a significant percentage of concrete ties manufactured in 2006

through 2011 at CXT’s Grand Island, NE facility failed to meet contract specifications, had workmanship defects and were cracking and failing prematurely. Of the 3.0 million ties manufactured between 1998 and 2011 from the Grand Island, NE facility, approximately 1.6 million ties were sold during the period the UPRR had claimed nonconformance. The 2005 contract called for each concrete tie which failed to conform to the specifications or had a material defect in workmanship to be replaced with 1.5 new concrete ties, provided, that UPRR within five years of the sale of a concrete tie, notified CXT of such failure to conform or such defect in workmanship. The UPRR Notice did not specify how many ties manufactured during this period were defective nor the exact nature of the alleged workmanship defect.

Following the UPRR Notice, the Company worked with material scientists and pre-stressed concrete experts to test a representative sample of Grand Island, NE concrete ties and assess warranty claims for certain concrete ties made in its Grand Island, NE facility between 1998 and 2011. The Company discontinued manufacturing operations in Grand Island, NE in early 2011.

2012

During 2012, the Company completed sufficient testing and analysis to further understand this matter. Based upon testing results and expert analysis, the Company believed it discovered conditions, which largely related to the 2006 to 2007 manufacturing period, that can shorten the life of the concrete ties produced during this period. During the fourth quarter of 2012 and first quarter of 2013, the Company reached agreement with the UPRR on several matters including a process for the Company and the UPRR to work together to identify, prioritize, and replace defective ties that meet the criteria for replacement. This process applies to the ties the Company shipped to the UPRR from its Grand Island, NE facility from 1998 to 2011. During most of this period the Company’s warranty policy for UPRR carried a 5 year warranty with a 1.5:1 replacement ratio for any defective ties. In order to accommodate the UPRR and other customer concerns, the Company also reverted to a previously used warranty policy providing a 15 year warranty with a 1:1 replacement ratio. This change provided an additional 10 years of warranty protection. In the amended 2005 supply agreement, the Company and the UPRR also extended the supply of Tucson ties by five years and agreed on a cash payment of $12,000 to the UPRR as compensation for concrete ties already replaced by the UPRR during the investigation period.

During 2012, as a result of testing the Company conducted on concrete ties manufactured at its former Grand Island, NE facility and of the related developments of the UPRR and other customer matters, the Company recorded pre-tax warranty charges of $22,000 in “Cost of Goods Sold” within its Rail Products segment based on the Company’s estimate of the number of defective concrete ties that will ultimately require replacement during the applicable warranty periods.

2013

Throughout 2013, at the UPRR’s request and under the terms of the amended 2005 supply agreement, the Company provided warranty replacement concrete ties for use across certain UPRR subdivisions. The Company attempted to reconcile the quantity of warranty claims for ties replaced and obtain supporting detail for the ties removed. The Company believes that the UPRR did not replace concrete ties in accordance with the amended agreement and has not furnished adequate documentation throughout the replacement process in these subdivisions to support its full warranty claim. Based on the information received by the Company to date, the Company believes that a significant number of ties which the UPRR replaced in these subdivisions did not meet the criteria to be covered as warranty replacement ties under the amended 2005 supply agreement. The disagreement related to the 2013 warranty replacement activity includes approximately 170,000 ties where the Company provided detailed documentation supporting our position with reason codes that detail why these ties are not eligible for a warranty claim.

In late November 2013, the Company received notice from the UPRR asserting a material breach of the amended 2005 supply agreement. The UPRR’s notice asserted that the failure to honor its claims for warranty ties in these subdivisions was a material breach. Following receipt of this notice, the Company provided information to the UPRR to refute the UPRR’s claim of breach and included the reconciliation of warranty claims supported by substantial findings from the Company’s track observation team, all within the 90 day cure

period. The Company also proposed further discussions to reach agreement on reconciliation for 2013 replacement activities and future replacement activities and a recommended process that will ensure future replacement activities are done with appropriate documentation and per the terms of the amended 2005 supply agreement.

2014

During the first quarter of 2014, the Company further responded within the 90 day cure period to the UPRR’s claim and presented a reconciliation for the subdivisions at issue. This proposed reconciliation was based on empirical data and visual observation from Company employees that were present during the replacement process for a substantial majority of the concrete ties replaced. The Company has spent considerable time documenting facts related to concrete tie condition and track condition to assess whether the ties replaced met the criteria to be eligible for replacement under the terms of the amended 2005 supply agreement.

During the second quarter of 2014, the Company increased its accrual by an additional $4,000 based on revised estimates of ties to be replaced. The Company continued to work with UPRR to identify, replace, and reconcile defective ties related to the warranty claim in accordance with the amended 2005 supply agreement. The Company and UPRR met during the third quarter of 2014 to evaluate each other’s position in an effort to work towards agreement on the unreconciled 2013 and 2014 replacement activity as well as the standards and practices to be implemented for future replacement activity and warranty tie replacement. No agreement was reached and the Company continues to endeavor to reconcile the replaced warranty ties with UPRR.

As of December 31, 2014, the Company and the UPRR have not been able to reconcile the disagreement related to the 2013 and 2014 warranty replacement activity. The disagreement relating to the 2014 warranty replacement activity includes approximately 90,100 ties that the Company believes are not warranty-eligible.

As a result of the current year replacement activity and related discussions with the UPRR, during the fourth quarter of 2014 the Company recognized a $4,766 charge to increase the warranty obligation to reflect the Company’s current expectations of tie failures, based upon scientific testing and other analysis, adjusted for ties already provided to the UPRR. The accrued concrete tie warranty reserve of $10,331 as of December 31, 2014 is the best estimate of the expected value of defective ties that will be replaced as a result of our observation and analysis of ties in track. While the Company believes this is a reasonable estimate of these potential warranty claims, these estimates could change due to the receipt of new information and future events. In the event the UPRR continues to replace ties and assert warranty claims in future years in the same manner as 2013 and 2014, we are likely to have a disagreement in those future years relating to the number of ties eligible for warranty claim.

In November and December of 2014, the Company received additional notices from the UPRR asserting that ties manufactured in 2000 were defective and again asserting material breaches of the amended 2005 supply agreement relating to warranty tie replacements as well as certain new ties provided to the UPRR being out of specification. The Company again responded to the UPRR that it was not in material breach of the amended 2005 supply agreement relating to warranty tie replacements and that new ties being manufactured complied with the specifications provided by the UPRR.

Although the Company has denied it is in material breach of the amended 2005 supply agreement, this dispute could jeopardize our amended 2005 supply agreement. For the years ended December 31, 2014, 2013, and 2012, sales to the UPRR from our Tucson, AZ facility were approximately $15,297, $12,664, and $25,441, respectively. Additionally, as of December 31, 2014 we had long-lived assets with a net book value of approximately $978 associated with the Tucson, AZ facility.

On January 23, 2015, the UPRR filed a Complaint and Demand for Jury Trial in the District Court for Douglas County, NE against the Company and its subsidiary, CXT Incorporated, asserting among other matters, that the Company breached its express warranty, breached an implied covenant of good faith and fair dealing, and anticipatorily repudiated its warranty obligations, and that UPRR’s exclusive and limited remedy provisions in the supply agreement have failed of their essential purpose which entitles UPRR to recover all incidental and consequential damages. The complaint seeks to cancel all duties of UPRR under the contracts, to adjudge the Company as having no remaining rights under the contracts, and to recover damages in an amount to be determined at trial for the value of unfulfilled warranty replacement ties and ties likely to become warranty eligible, for costs of

cover for replacement ties and for various incidental and consequential damages. The amended 2005 supply agreement provides that UPRR’s exclusive remedy is to receive a replacement tie that meets the contract specifications for each tie that failed to meet the contract specifications or otherwise contained a material defect provided that the Company receives written notice of such failure or defect within 15 years after that tie was produced. The amended 2005 supply agreement continues to provide that the Company’s warranty does not apply to ties that (a) have been repaired or altered without the Company’s written consent in such a way as to affect the stability or reliability thereof, (b) have been subject to misuse, negligence or accident, or (c) have been improperly maintained or used contrary to the specifications for which such ties were produced. The amended 2005 supply agreement also continues to provide that the Company’s warranty is in lieu of all other express or implied warranties and that neither party shall be subject to or liable for any incidental or consequential damages to the other party.

The dispute is largely based on (1) claims submitted whichthat the Company believes are for ties inaccurately ratedclaimed for warranty replacement that are not the responsibility of the Company and claims that do not meet the criteria of a

warranty replacement and (2) UPRR’s assertion, which the Company vigorously disputes, that UPRR in future years UPRR will be entitled to warranty replacement ties for virtually all of the ties manufactured at the Company’s former Grand Island, ties.NE tie facility. Many thousands of Grand Island ties have been performing in track for over ten years. In addition, a significant amount of Grand Island ties were rated by both parties in the excellent category of the rating system. The Company believes UPRR’s claims are without merit and intends to vigorously defend itself.

On June 16 and 17, 2015, UPRR issued formal notice of the termination of the concrete tie supply agreement as well as the termination of the lease agreement that the Company had with UPRR for the Tucson, AZ production facility and rejection and revocation of its prior acceptance of certain ties manufactured at the Company’s Spokane, WA production facility.

On May 29, 2015, the Company and CXT filed an Answer, Affirmative Defenses and Counterclaims in response to the Complaint, denying liability to UPRR. As a result of UPRR’s subsequent June 16-17, 2015 actions and certain related conduct, the Company on October 5, 2015 amended the pending Answer, Affirmative Defenses and Counterclaims to add, among other things, assertions that UPRR’s conduct in question was wrongful and unjustified and constituted additional grounds for the affirmative defenses to UPRR’s claims and also for the Company’s counterclaims. By Scheduling Order dated September 3, 2015, a December 30, 2016 deadline for the completion of fact discovery has been established and trial may proceed at some future date after March 3, 2017, although no trial date has been set. The parties are currently conducting discovery.

The Company continues to engage in discussions in an effort to resolve this matter, however, we cannot predict that such discussions will be successful, or that the results of the litigation with UPRR, or whether any settlement or judgment amounts relating to this matter will be within the range of our estimated accruals for loss contingencies. Future potential costs pertaining to UPRR’s claims and the outcome of the UPRR litigation could result in a material adverse effect on our results of operations, financial condition, and cash flows. See Part II, Item 8, Note 19, included herein, for information regarding the Company’s commitments and contingent liabilities which is incorporated by reference into this Item 7.

Quarterly Results of Continuing Operations

 

  Three Months Ended
December 31,
   Percent of Total
Net Sales

Three Months
Ended

December 31,
 Percent
Increase/(Decrease)
  Twelve Months Ended
December 31,
 Percent of Total
Net Sales

Twelve Months
Ended
December 31,
 Percent
Increase/(Decrease)
 
  2014   2013   2014 2013 2014 vs. 2013  2015 2014 2013 2015 2014 2013 2015 vs.
2014
 2014 vs.
2013
 

Net Sales:

                

Rail Products

  $91,530   $85,824    56.8  54.8  6.6

Rail Products and Services

 $328,982   $374,615   $363,667    52.7  61.7  60.8  (12.2)%   3.0

Construction Products

   59,747    61,923    37.1   39.6   (3.5  176,394    178,847    191,751    28.2    29.5    32.1    (1.4  (6.7

Tubular Products

   9,872    8,711    6.1   5.6   13.3 

Tubular and Energy Services

  119,147    53,730    42,545    19.1    8.8    7.1    121.8    26.3  
  

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total net sales

  $161,149   $156,458    100.0  100.0  3.0 $624,523   $607,192   $597,963    100.0  100.0  100.0  2.9  1.5
  

 

   

 

      

 

  

 

  

 

      
  Three Months Ended
December 31,
   Gross Profit
Percentage

Three Months
Ended

December 31,
 Percent
Increase/(Decrease)
  Twelve Months Ended
December 31,
 Gross Profit
Percentage
Twelve Months
Ended
December 31,
 Percent
Increase/(Decrease)
 
  2014   2013   2014 2013 2014 vs. 2013  2015 2014 2013 2015 2014 2013 2015 vs.
2014
 2014 vs.
2013
 

Gross Profit:

                

Rail Products

  $18,920   $18,840    20.7  22.0  0.4

Rail Products and Services

 $75,276   $77,235   $74,986    22.9  20.6  20.6  (2.5)%   3.0

Construction Products

   10,565    9,973    17.7   16.1   5.9   34,169    32,391    29,224    19.4    18.1    15.2    5.5    10.8  

Tubular Products

   1,981    2,218    20.1   25.5   (10.7

LIFO income / (expense)

   238    (262   0.1   (0.2  **  

Tubular and Energy Services

  22,481    11,722    12,278    18.9    21.8    28.9    91.8    (4.5

LIFO income

  2,468    738    37    0.4    0.1        **    **  

Other

   (99   (158   (0.1  (0.1  (37.3  (741  (495  (586  (0.1  (0.1  (0.1  49.7    (15.5
  

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total gross profit

  $31,605   $30,611    19.6  19.6  3.2 $133,653   $121,591   $115,939    21.4  20.0  19.4  9.9  4.9
  

 

   

 

      

 

  

 

  

 

      
  Three Months Ended
December 31,
   Percent of Total
Net Sales

Three Months
Ended

December 31,
 Percent
Increase/(Decrease)
  Twelve Months Ended
December 31,
 Percent of Total
Net Sales
Twelve Months
Ended
December 31,
 Percent
Increase/(Decrease)
 
  2014   2013   2014 2013 2014 vs. 2013  2015 2014 2013 2015 2014 2013 2015 vs.
2014
 2014 vs.
2013
 

Expenses:

                

Selling and administrative expenses

  $21,546   $18,628    13.4  11.9  15.7 $92,648   $79,814   $71,256    14.8  13.1  11.9  16.1  12.0

Amortization expense

   1,191    1,010    0.7   0.6   17.9   12,245    4,695    3,112    2.0    0.8    0.5    160.8    50.9  

Impairment of goodwill

  80,337            12.9            100.0      

Interest expense

   137    109    0.1   0.1   25.7   4,378    512    485    0.7    0.1    0.1    **    5.6  

Interest income

   (99   (165   (0.1  (0.1  (40.0  (206  (530  (659      (0.1  (0.1  (61.1  (19.6

Equity in income of nonconsolidated investments

   (459   (424   (0.3  (0.3  8.3 

Equity in loss (income) of nonconsolidated investments

  413    (1,282  (1,316  0.1    (0.2  (0.2  (132.2  (2.6)  

Other income

   (377   (101   (0.2  (0.1  **    (5,585  (678  (1,077  (0.9  (0.1  (0.2  **    (37.0)  
  

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total expenses

  $21,939   $19,057    13.6  12.2  15.1 $184,230   $82,531   $71,801    29.5  13.6  12.0  123.2  14.9
  

 

   

 

      

 

  

 

  

 

      

Income from continuing operations before income taxes

  $9,666   $11,554    6.0  7.4  (16.3)% 

Income tax expense

   3,628    4,279    2.3   2.7   (15.2

(Loss) Income before income taxes

 $(50,577 $39,060   $44,138    (8.1)%   6.4  7.4  (229.5)%   (11.5)% 

Income tax (benefit) expense

  (6,132  13,404    14,848    (1.0  2.2    2.5    (145.7  (9.7
  

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Income from continuing operations

  $6,038   $7,275    3.7  4.6  (17.0)% 

Net (loss) income

 $(44,445 $25,656   $29,290    (7.1)%   4.2  4.9  (273.2)%   (12.4)% 
  

 

   

 

      

 

  

 

  

 

      

**  Results of calculation are not considered meaningful for presentation purposes.

Fourth QuarterFiscal 2015 Compared to Fiscal 2014 — Company Analysis

Net sales of $624,523 for the year ended December 31, 2015 increased by $17,331 or 2.9% compared to the prior year period. Included within the 2015 sales are acquisition-related revenues of $93,411, which generated 20.9% margins. The sales increase was attributable to increases of 121.8% in Tubular and Energy Services, which were partially offset by decreases of 12.2% and 1.4% in Rail Products and Services and Construction Products segment sales, respectively.

Gross profit margin for 2015 was 21.4%, or 138 basis points higher than the prior year. The Rail Products and Services segment recognized warranty-related charges of $1,092 and $9,374 in 2015 and 2014, respectively. Excluding the impact of the charges1, the current year gross profit margin was consistent with the prior year at 21.6%. Included in the 2015 gross profit was $2,468 related to the LIFO income compared to $738 in the prior year. The favorable change in LIFO primarily resulted from decreasing prices across our segments, as inventory levels in the aggregate were down slightly.

Selling and administrative expenses increased by $12,834, or 16.1%, over the prior year period. The cost increases for 2015 were attributable to costs from acquired businesses. Significant components of the acquired costs are personnel-related costs and to a much lesser extent insurance and travel costs.

During the third quarter of 2015, the Company recorded a non-cash goodwill impairment charge of $80,337 ($63,887 net of taxes) related to the IOS and Chemtec reporting units within the Tubular and Energy Services segment. The charge was primarily due to the impact of the depressed energy markets on both reporting units as well as the reduction in the active U.S. land oil rig count which specifically impacted the IOS reporting unit. These businesses are being adversely affected by reduced capital spending and cost reduction priorities that oil and gas developers and pipeline companies have implemented. These factors led to a reduction in demand causing the near term financial projections of the IOS and Chemtec reporting units to deteriorate. The Company performed an interim test for impairment of goodwill, and the long-term forecast did not indicate a timely recovery to support the carrying values of the goodwill, as further described in Part II, Item 8, Note 4 of this Annual Report on Form 10-K.

Other income during the current year was favorably impacted by the sale of assets at our Tucson, AZ facility resulting in a gain of $2,279 ($1,424 net of tax), realized and unrealized foreign exchange gains totaling $1,616, and other less significant income items.

The Company’s effective income tax rate for 2015 was 12.1%, compared to 34.3% in the prior year period. The Company’s effective income tax rate for 2015 differed from the federal statutory rate of 35% primarily due to the discrete impact of the $80,337 goodwill impairment in the third quarter. The impairment related to both tax deductible and nondeductible goodwill, and resulted in an income tax benefit of $16,450 during the current year period.

Net loss for the year ended December 31, 2015 was $44,445, or $4.33 per diluted share, which compares to net income for the 2014 period of $25,656, or $2.48 per diluted share. Excluding the current year impairment charge of $63,887, net of income tax benefit, net income would have been $19,442 or $1.88 per diluted share. This non-GAAP net income measure is inclusive of approximately 75,000 shares that were anti-dilutive on a GAAP basis.

Fiscal 2014 Compared to Fourth QuarterFiscal 2013 — Company Analysis

Net sales for the three month periodyear ended December 31, 2014 increased by $4,691,$9,229, or 3.0%1.5%, which was attributable to a 13.3%26.3% and 6.6% increase3.0% improvement in the Tubular and Energy Services and Rail Products segments,and Services segment sales, respectively, partially offset by a 3.5%6.7% reduction in the Construction Products segment.

The gross profit margin forsales. Approximately 1.8%, 0.8% and 0.1% of the 2014 and 2013 periods was 19.6%. The fourth quarter 2014 gross profit was diluted by the impact of a $4,766 warranty chargesales related to CXT concrete ties manufactured in our former Grand Island, NE facility which was closed in January 2011. Excluding the charge1, the gross profit margin would have been 22.6%. The adjusted increase over prior year was primarily generatedrevenues from acquired businesses within the Tubular and Energy Services, Construction and Rail Products business and was attributable to a favorable sales mix and operational cost reduction programs.

Selling and administrative expense increased by $2,918, or 15.7%, in the 2014 fourth quarter and was primarily attributable to increased personnel related costs associated with salaried headcount, costs related to the preparation for and identification of a new enterprise resource planning system, and a quarter over quarter increase of $1,373 in acquisition related costs. Included within the increased personnel expense are costs related to acquired businesses.

The Company’s effective income tax rate from continuing operations in the 2014 fourth quarter was 37.5%, compared to 37.0% in the prior year quarter. The increase in the Company’s effective tax rate compared to the prior year quarter was primarily due to increased nondeductible acquisition-related expenses in the current year quarter.

Net income from continuing operations for the 2014 fourth quarter was $6,038, or $0.58 per diluted share, compared to income from continuing operations of $7,275, or $0.71 per diluted share, in the prior year quarter.

Results of Continuing Operations — Segment Analysis

Rail Products

   Three Months Ended
December 31,
  Increase
(Decrease)
  Percent
Increase/
(Decrease)
 
   2014  2013  2014 vs. 2013  2014 vs. 2013 

Net Sales

  $91,530   $85,824   $5,706    6.6
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit

  $18,920   $18,840   $80    0.4
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit Percentage

   20.7  22.0  (1.3)%   (5.9)% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Fourth Quarter 2014 Compared to Fourth Quarter 2013

The Rail Products sales increase was due principally to volume growth in the Rail Distribution, CXT concrete tie, and Rail Technologies businesses. Partially offsetting this increase were reductions in our Transit Products division primarily related to the Honolulu, HI elevated transit project as it nears completion.

The Rail Products segment experienced a 28.7% decrease in new orders compared to the prior year quarter. The reduction primarily related to the Concrete Tie division which was driven by several large transit orders that were booked late in 2013.

The gross profit percentage declined due to a $4,766 warranty charge recognized during the fourth quarter of 2014 related to concrete ties manufactured at our former Grand Island, NE facility. Excluding the impact of the charge, the gross profit percentage would have been 25.9%. The adjusted margin compared to the prior year relates to improvements in each of the Rail Products divisions with the exception of CXT concrete ties. During the fourth quarter 2014, the Company benefited from an overall favorable product mix and the ongoing impact of lower costs driven by internal cost reduction efforts.Services segments, respectively.

 

1 

-All results excludingin this Form 10-K that exclude warranty charges and/or goodwill impairment are non-GAAP measures used for management reporting purposes. Management believes that these measures provide useful information to investors because it is a profitability measure used to evaluate earnings performance on a comparable year-over-year basis.

Construction Products

   Three Months Ended
December 31,
  (Decrease)
Increase
  Percent
(Decrease)/Increase
 
   2014  2013  2014 vs. 2013  2014 vs. 2013 

Net Sales

  $59,747   $61,923   $(2,176  (3.5)% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit

  $10,565   $9,973   $592    5.9
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit Percentage

   17.7  16.1  1.6  9.9
  

 

 

  

 

 

  

 

 

  

 

 

 

Fourth Quarter 2014 Compared to Fourth Quarter 2013

Construction Products segment sales declined by $2,176, or 3.5%, compared to the prior year quarter. The reduction principally relates to a 16.1% decrease in Piling Products revenues driven by reduced volumes in the 2014 quarter. The decline in Piling was largely offset by increases within the Fabricated Bridge and concrete products businesses. Included within concrete product sales were revenues related to the Company’s July 2014 acquisition of Carr Concrete.

The Construction Products segment experienced a 21.3% increase in new orders compared to the prior year quarter. New orders from the 2014 acquisition of Carr Concrete represented 9.0% of current quarter orders.

The gross profit percentage increased by 158 basis points due primarily to a favorable shift in product mix compared to the prior year period. Gross profit generated by the Fabricated Bridge Products and Piling divisions led to the increase over the prior year quarter.

Tubular Products

   Three Months  Ended
December 31,
  Increase
(Decrease)
  Percent
Increase/(Decrease)
 
   2014  2013  2014 vs. 2013  2014 vs. 2013 

Net Sales

  $9,872   $8,711   $1,161    13.3
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit

  $1,981   $2,218   $(237  (10.7)% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit Percentage

   20.1  25.5  (5.4)%   (21.2)% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Fourth Quarter 2014 Compared to Fourth Quarter 2013

Tubular Products segment sales increased by $1,161, or 13.3% was due to the effect of a full quarter of sales for the November 7, 2013 acquisition of Ball Winch. Partially offsetting the increase was a reduction in the Birmingham, AL coating facility sales as a result of a three week shutdown in December to upgrade the facility to improve efficiency, quality, and capacity at the plant.

During the 2014 fourth quarter, the Tubular Products business experienced a reduction of 36.6% in order input relative to the prior year quarter. The reduction in orders was driven by declines in the Coated Products business.

Gross profit declined 540 basis points as a result of the previously mentioned shutdown at the Birmingham, AL facility and to a lesser extent, costs incurred to develop additional infrastructure within the Coated Products field service market.

Year-to-date Results of Continuing Operations

  Twelve Months Ended
December 31,
  Percent of Total
Net Sales
Twelve Months
Ended December 31,
  Percent
Increase/(Decrease)
 
  2014  2013  2012      2014          2013          2012      2014 vs. 2013  2013 vs. 2012 

Net Sales:

        

Rail Products

 $374,615  $363,667  $370,322   61.7  60.8  62.9  3.0  (1.8)% 

Construction Products

  178,847   191,751   169,253   29.5   32.1   28.8   (6.7  13.3 

Tubular Products

  53,730   42,545   48,966   8.8   7.1   8.3   26.3   (13.1
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total net sales

 $607,192  $597,963  $588,541   100.0  100.0  100.0  1.5  1.6
 

 

 

  

 

 

  

 

 

      
  Twelve Months Ended
December 31,
  Gross Profit
Percentage

Twelve Months
Ended

December 31,
  Percent
Increase/(Decrease)
 
  2014  2013  2012      2014          2013          2012      2014 vs. 2013  2013 vs. 2012 

Gross Profit:

        

Rail Products

 $77,235  $74,986  $52,533   20.6  20.6  14.2  3.0  42.7

Construction Products

  32,391   29,224   25,080   18.1   15.2   14.8   10.8   16.5 

Tubular Products

  11,722   12,278   15,189   21.8   28.9   31.0   (4.5  (19.2

LIFO income

  738   37   1,118   0.1   —      0.2   **    (96.7

Other

  (495  (586  (1,651  (0.1  (0.1  (0.3  (15.5  (64.5
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total gross profit

 $121,591  $115,939  $92,269   20.0  19.4  15.7  4.9  25.7
 

 

 

  

 

 

  

 

 

      
  Twelve Months Ended
December 31,
  Percent of Total Net Sales
Twelve Months
Ended
December 31,
  Percent
Increase/(Decrease)
 
  2014  2013  2012  2014  2013  2012  2014 vs. 2013  2013 vs. 2012 

Expenses:

        

Selling and administrative expenses

 $79,814  $71,256  $66,651   13.1  11.9  11.3  12.0  6.9

Amortization expense

  4,695   3,112   2,961   0.8   0.5   0.5   50.9   5.1 

Interest expense

  512   485   542   0.1   0.1   0.1   5.6   (10.5

Interest income

  (530  (659  (452  (0.1  (0.1  (0.1  (19.6  45.8 

Equity in income of nonconsolidated investments

  (1,282  (1,316  (837  (0.2  (0.2  (0.1  (2.6  57.2 

Other income

  (674  (1,054  (426  (0.1  (0.2  (0.1  (36.1  **  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total expenses

 $82,535  $71,824  $68,439   13.6  12.0  11.6  14.9  4.9
 

 

 

  

 

 

  

 

 

      

Income from continuing operations before income taxes

 $39,056  $44,115  $23,830   6.4  7.4  4.0  (11.5)%   85.1

Income tax expense

  13,402   14,839   9,066   2.2   2.5   1.5   (9.7  63.7 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income from continuing operations

 $25,654  $29,276  $14,764   4.2  4.9  2.5  (12.4)%   98.3
 

 

 

  

 

 

  

 

 

      

** Results of calculation are not considered meaningful for presentation purposes.

The Year 2014 Compared to the Year 2013 — Company Analysis

Net sales for the year increased by $9,229, or 1.5%, which was attributable to a 26.3% and 3.0% improvement in Tubular and Rail Products segment sales, respectively, partially offset by 6.7% reduction in Construction Products sales. Approximately 1.8%, 0.8% and 0.1% of the sales related to revenues from acquired businesses within the Tubular, Construction and Rail Products segments, respectively.

The gross profit margin for 2014 was 20.0% compared to 19.4% in the prior year period.2013. Excluding the current year2014 warranty charges of $9,374, the Company would have generated a gross profit margin of 21.6%.

Selling and administrative costs increased $8,558, or 12.0%, compared to the prior year. Current year increasesfiscal 2013. Increases in 2014 were due to a variety of business developments including a sizeable increase toin employee headcount. Excluding current year2014 acquisitions, the Company headcount increased by approximately 6.3% over the prior year. The increase impacted personnel relatedpersonnel-related costs associated with salaried headcount and travel. Additionally, the Company incurred costs in 2014 related to the preparation for and identification of a new enterprise resource planning system. Lastly, acquisition related cost increases of $2,058 as well as recurring selling and administrative costs related to businesses acquired in the current year impacted2014 led to the increase.

Other income for the twelve monthsyear ended December 31, 2014 decreased to $674$678 compared to $1,054$1,077 during 2013. The decrease relatedwas principally due to a prior year recovery of escrowed funds during 2013 which related to a 2005 real estate transaction which wasthat had previously been written off as uncollectible.

The Company’s effective income tax rate from continuing operations for 2014 was 34.3%, compared to 33.6% in the prior year.2013. The increase in the Company’s effective tax rate was due to increased nondeductible acquisition-related expenses in the current year2014 and the recognition of uncertain state tax positions during the prior year,fiscal 2013, offset by greater U.S. domestic production activities deductions and a more favorable global mix of income.

Income from continuing operationsNet income for 2014 was $25,654,$25,656, or $2.48 per diluted share, which compares to net income from continuing operations for 2013 of $29,276,$29,290, or $2.85 per diluted share. Included in our 2014 results werewas $9,374 in pre-tax charges related to concrete ties manufactured at our former Grand Island, NE facility which was closed in January 2011.

The Year 2013 Compared to the Year 2012 — Company Analysis

Net sales for 2013 increased by $9,422, or 1.6%, which was attributable to a 13.3% improvement in Construction Product segment sales, partially offset by 1.8% and 13.1% reductions in Rail Products and Tubular Products sales, respectively.

The gross profit margin for 2013 was 19.4% compared to 15.7% in 2012. Excluding the 2012 warranty charge, the Company would have generated a gross profit margin of 19.4%.

Selling and administrative costs increased $4,605, or 6.9%, over the 2012 period primarily due to increases in personnel related costs associated with salaried headcount and travel partially offset by a reduction in concrete tie testing costs.

Other income for the twelve months ended 2013 increased to $1,054 compared to $426 during 2012. The increase related to fluctuations in realized foreign currency transaction gains in the current year compared to losses in 2012 as well as the recovery of escrowed funds related to a 2005 real estate transaction which was previously written off as uncollectible.

The effective income tax rate from continuing operations for 2013 was 33.6% compared to 38.0% in the prior year. The 2013 income tax rate from continuing operations was favorably impacted by the resolution of certain state income tax matters while the 2012 rate was negatively affected by certain discrete tax items and their pronounced impact on comparatively lower pretax income in 2012.

Income from continuing operations for 2013 was $29,276, or $2.85 per diluted share, which compares to income from continuing operations for 2012 of $14,764, or $1.44 per diluted share. Included in the 2012 results were charges related to concrete ties manufactured at our Grand Island, NE facility of $22,000.

Results of Continuing Operations — Segment Analysis

Rail Products and Services

 

 Twelve Months Ended
December 31,
 Increase (Decrease)
/Increase
 Percent
Increase
 Percent
(Decrease)

/Increase
  Twelve Months Ended
December 31,
 (Decrease)
Increase
 Increase Percent
(Decrease)/
Increase
 Percent
Increase
 
 2014 2013 2012 2014 vs. 2013 2013 vs. 2012 2014 vs. 2013 2013 vs. 2012  2015 2014 2013 2015 vs. 2014 2014 vs. 2013 2015 vs. 2014 2014 vs. 2013 

Net Sales

 $374,615  $363,667  $370,322  $10,948  $(6,655  3.0  (1.8)%  $328,982   $374,615   $363,667   $(45,633 $10,948    (12.2)%   3.0
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Gross Profit

 $77,235  $74,986  $52,533  $2,249  $22,453   3.0  42.7  $75,276   $77,235   $74,986   $(1,959 $2,249    (2.5)%   3.0
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Gross Profit Percentage

  20.6  20.6  14.2    6.4    45.1  22.9  20.6  20.6  2.3    11.2  
 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Fiscal 2015 Compared to Fiscal 2014

Rail Products and Services segment sales decreased $45,633, or 12.2%, compared to the prior year period. Included within the 2015 sales were revenues from acquired businesses of $16,715. During fiscal 2015, excluding an increase within the Transit Products business, all rail divisions experienced reductions in sales over the prior year period. The Yearsales decline was attributable to the loss of sales to UPRR, lower volumes from Rail Distribution and various track component businesses, international declines in the Rail Technologies division, and, to a lesser extent, reductions in the price of steel.

During the year ended December 31, 2015, the Rail Products and Services segment had a reduction in new orders of 16.5% compared to the prior year period. Contributing to the decline was the loss of business with UPRR, which represented 55.2% of the reduction in new orders, as well as overall reductions in freight rail spending.

The Rail Products and Services segment increased its 2015 gross profit margin by 226 basis points compared to fiscal 2014. Gross profit was impacted by warranty-related charges of $1,092, and $9,374 in 2015 and 2014, respectively. Excluding the impact of the charges in 2015 and 2014, the gross profit margin was 23.2%, or 9 basis points higher than the prior year.

Fiscal 2014 Compared to the YearFiscal 2013

Rail Products and Services sales increased $10,948, or 3.0%, compared to the prior year.fiscal 2013. The 2014 performance was highlighted by significant sales growth within the Rail Technologies business and to a lesser extent increases within the Allegheny Rail Products and CXT Concrete Tie businesses. Partially offsetting these improvements were declines in the Rail Distribution and Transit Products businesses.

Compared to the prior year,2013, the Rail Products and Services segment generated a 7.1% increase in new orders.

During 2014, the Rail segment incurred $9,374 in warranty charges related to our former Grand Island, NE concrete tie facility. The charge adversely impacted our Rail Products segmentand Services segment’s gross profit. Without the charge, Rail Products’Products and Services’ gross profit margins would have been 23.1% for the period ended December 31, 2014. The gross profit margin increase largely relates to favorable sales mix.

The Year 2013 Compared to the Year 2012

The 2013 sales results reflect a year in which a number of product lines had an excellent year, but the growth was more than offset by expected declines in other product lines. Transit products, Allegheny Rail Products, and friction management products all saw nice improvement year over year. The largest increase related to the Transit Products business. During 2013, Transit products benefitted from the Honolulu, HI elevated transit system project awarded during 2012. Reductions related to CXT concrete ties, rail distribution, and track components products drove the overall results in declining sales. Lower sales volume in CXT ties was planned as a result of the volume of warranty ties that consumed customer attention in 2013. Rail Technologies sales in the U.K. had a positive impact on sales results in 2013.

During 2012, warranty charges totaling $22,000 related to our former Grand Island, NE concrete tie facility adversely impacted our Rail Products segment gross profit. Without these charges, Rail Products’ gross profit margins would have been 20.1% for the period ended December 31, 2012.

Construction Products

 

  Twelve Months Ended
December 31,
  (Decrease)
Increase
  Increase  Percent
(Decrease)

/Increase
  Percent
Increase
 
  2014  2013  2012  2014 vs. 2013  2013 vs. 2012  2014 vs. 2013  2013 vs. 2012 

Net Sales

 $178,847  $191,751  $169,253  $(12,904 $22,498   (6.7)%   13.3
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit

 $32,391  $29,224  $25,080  $3,167  $4,144   10.8  16.5
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit Percentage

  18.1  15.2  14.8  2.9  0.4  19.1  2.7
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

  Twelve Months Ended
December 31,
  (Decrease)
Increase
  (Decrease)
Increase
  Percent
(Decrease)/

Increase
  Percent
(Decrease)/

Increase
 
  2015  2014  2013  2015 vs. 2014  2014 vs. 2013  2015 vs. 2014  2014 vs. 2013 

Net Sales

 $176,394   $178,847   $191,751   $(2,453 $(12,904  (1.4)%   (6.7)% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit

 $34,169   $32,391   $29,224   $1,778   $3,167    5.5  10.8
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit Percentage

  19.4  18.1  15.2  1.3  2.9  7.2  19.1
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Fiscal 2015 Compared to Fiscal 2014

Construction Products segment sales decreased $2,453, or 1.4%, compared to the 2014 period. The Yeardecline was primarily related to a 14.7% reduction in sales of piling products, which was partially offset by a 43.0% increase in sales of precast construction products. The precast construction products business is experiencing very strong state sales for buildings, which has helped the Construction Products segment offset the increased competition and steel pricing pressures impacting the Piling Products business.

New orders booked during 2015 were down 19.0% over the prior year period. The decline related primarily to the Piling Products business where heavy competition has led to a reduction in market share for pipe piling and H-piling.

The gross profit percentage increased by 126 basis points due to gross margin improvements in piling and fabricated bridge products divisions. The improvement was primarily driven by the sales mix caused by an increase in sheet piling sales within the piling products business.

Fiscal 2014 Compared to the YearFiscal 2013

Construction Products segment sales declined by $12,904, or 6.7%, compared to the prior period.fiscal 2013. The reduction was driven by a 20.8% reduction in Piling Product sales of piling products, which was partially offset by significant growth in the Fabricated Bridge Products business as well as revenues from the July 2014 acquisition of Carr Concrete. The Pilingpiling shortfall was partially attributable to insufficient product supply, which caused the segment to be unable to meet demand levels during much of the year.2014. During 2014, the Fabricated Bridge business experienced a record year and generated $8,800 in revenues related to the Newburgh-Beacon bridge project compared to $4,360 in the prior year.during 2013. The project is expected to bewas completed during 2015.

Including orders from Carr Concrete, the Construction Products segment generated an increase in new orders of 3.5% during 2014.

Leverage from engineered product sales created a favorable sales mix within the segment leading to a 287 basis point improvement over the prior year.2013.

The Year 2013 Compared to the Year 2012Tubular and Energy Services

During 2013,

  Twelve Months Ended
December 31,
  Increase
(Decrease)
  Increase
(Decrease)
  Percent
Increase/
(Decrease)
  Percent
Increase/
(Decrease)
 
  2015  2014  2013  2015 vs. 2014  2014 vs. 2013  2015 vs. 2014  2014 vs. 2013 

Net Sales

 $119,147   $53,730   $42,545   $65,417   $11,185    121.8  26.3
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit

 $22,481   $11,722   $12,278   $10,759   $(556  91.8  (4.5)% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit Percentage

  18.9  21.8  28.9  (2.9)%   (7.1)%   (13.3)%   (24.6)% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Fiscal 2015 Compared to Fiscal 2014

Tubular and Energy Services segment sales increases of $22,498,increased $65,417, or 13.3%121.8%, related to stronger demand within our Piling Products business and increased sales within our buildings business which was partially offset by reduced Fabricated Bridge sales. The pace of piling orders and sales was slow to start 2013, but ended with a much improved second half helping to contribute to the 13.3% overall increase. Concrete buildings turned in similar results as a slow start in the first half of 2013 led to a full year in which sales grew at nearly a double digit pace. The outlook for concrete buildings in early 2013 was hampered by uncertainty in government spending, only to finish the year with state spending making up for federal spending shortfalls. The Fabricated Bridge business was expected to decline as the operations started 2013 with lower backlog as key projects were approaching to completion. At the same time, order input activity saw some of the strongest activity in recent years resulting in an increase in backlog to start 2014.

Volume related sales increases in Piling Products along with solid project management helped improve gross profit margins. The concrete buildings business made significant progress in productivity while managing new growth opportunities. The combined efforts in these two product areas led to enhanced profitability of 40 basis points in gross profit in 2013 compared to the prior year results.period. The increase relates to revenues from acquired businesses of $71,954, which were partially offset by reductions of $6,537 in coated and threaded product sales. The 294 basis point decline in Tubular and Energy Services gross margins was largely due to acquired businesses and the related impact on sales mix. In addition to the new product mix, the divisions serving the upstream energy market are competing in the depressed oil and gas market which is experiencing less demand leading to a more challenging pricing environment.

The Tubular and Energy Services segment generated an increase in new orders of 160.7% compared to the prior year period principally due to orders from the acquisitions of Chemtec and IOS.

Tubular Products

  Twelve Months Ended
December 31,
  Increase /
(Decrease)
  Decrease  Percent
Increase/
(Decrease)
  Percent
Decrease
 
  2014  2013  2012  2014 vs. 2013  2013 vs. 2012  2014 vs. 2013  2013 vs. 2012 

Net Sales

 $53,730  $42,545  $48,966  $11,185  $(6,421  26.3  (13.1)% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit

 $11,722  $12,278  $15,189  $(556 $(2,911  (4.5)%   (19.2)% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit Percentage

  21.8  28.9  31.0  (7.1)%   (2.1)%   (24.6)%   (6.8)% 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The YearFiscal 2014 Compared to the YearFiscal 2013

Tubular Productsand Energy Services segment sales increased $11,185, or 26.3% compared to the prior year period.fiscal 2013. The increase was principally due to a full year of sales from Ball Winch which was acquired in November 2013. Adding to the improvement was a 6.2% increase in sales from the Birmingham, AL coated products business.

Compared to the prior year,2013, the Tubular Productsand Energy Services segment generated an increase in new orders of 31.2%. New orders from the 2013 acquisition of Ball Winch represented 23.7% of current year2014 orders.

Gross profit declines of 705 basis points were attributable to cost overruns on a Coated Productscoated products project completed during the 2014 third quarter as well as the impact of a three weekthree-week plant shutdown in Birmingham, AL. The shutdown was completed in January 2015.

The Year 2013 Compared to the Year 2012

The Threaded products business turned in another year of positive growth and new customer acquisition. However, we experienced order delays from Coated Products customers reacting to changing market conditions that led to a $6,421 reduction in 2013 sales compared to the prior year period. Although our threaded business was not impacted by the market uncertainty, our coated facility in Birmingham, AL entered the second half of 2013 with significantly reduced backlog levels compared to the prior year. We are accustomed to responding to rapidly changing order patterns in the energy market, and as a result, we utilized the lower production period to enhance our facilities in an effort to prepare for anticipated growth.

Gross profit declined at a rate lower than anticipated given the rapid change in volume. The decline was largely attributed to overhead costs in place for a year in which we expected similar volume to the prior year.

Liquidity and Capital Resources

Total debt at December 31, 2015 and 2014 was $168,754 and 2013 was $26,428, and $56, respectively, and was comprised of proceedsborrowings from the revolving credit facility to fund acquisitions as well as assets funded through financing agreements.

Our need for liquidity relates primarily to working capital requirements for continuing operating activities, debt service payments, capital expenditures, JV capital obligations, strategic acquisitions or alliances, share repurchases, and dividends.

The following table summarizeschange in cash and cash equivalents for the impact of these items:three-year periods ended December 31 are as follows:

 

   December 31, 
   2014   2013   2012 

Liquidity needs:

      

Working capital and other assets and liabilities

  $29,259    $(29,964  $2,900  

Capital expenditures

   (17,056   (9,674   (7,160

Capital contributions to equity method investments

   (82          

Other long-term debt repayments

   (125   (6   (2,373

Financing costs paid

   (473          

Treasury stock acquisitions

   (985   (708   (669

Dividends paid to common shareholders

   (1,345   (1,240   (1,029

Acquisitions, net of cash acquired

   (80,797   (37,500     

Cash interest paid

   (362   (330   (405
  

 

 

   

 

 

   

 

 

 

Net liquidity needs

   (71,966   (79,422   (8,736
  

 

 

   

 

 

   

 

 

 

Liquidity sources:

      

Internally generated cash flows before interest paid

   37,089     43,616     24,464  

Dividends from LB Pipe & Coupling Products, LLC

   630     558       

Proceeds from asset sales

   184          24  

Equity transactions

   467     238     321  

Other long-term debt proceeds

   24,516            

Foreign exchange effects

   (3,642   (2,106   940  
  

 

 

   

 

 

   

 

 

 

Net liquidity sources

   59,244     42,306     25,749  
  

 

 

   

 

 

   

 

 

 

Discontinued operations

   123     275     10,724  
  

 

 

   

 

 

   

 

 

 

Net Change in Cash

  $(12,599  $(36,841  $27,737  
  

 

 

   

 

 

   

 

 

 
   2015   2014   2013 

Net cash provided by operating activities

  $56,172    $66,739    $14,155  

Net cash used by investing activities

   (205,575   (97,751   (47,174

Net cash provided (used) by financing activities

   134,289     22,055     (1,716

Effect of exchange rate changes on cash and cash equivalents

   (3,598   (3,642   (2,106
  

 

 

   

 

 

   

 

 

 

Net decrease in cash and cash equivalents

   (18,712   (12,599   (36,841
  

 

 

   

 

 

   

 

 

 

Cash Flow from Continuing Operating Activities

During the current 2015 period, cash flows from operating activities provided $56,172, a decrease of $10,567, compared to the 2014 period. For the year ended December 31, 2015, income, adjustments to income from operating activities, and dividends from the LB Pipe joint venture provided $47,061 compared to $37,359 in the 2014 period. Working capital and other assets and liabilities provided $9,111 in the current period compared to providing $29,380 in the prior year period. The reduction in cash flows from operations was largely impacted by working capital movement.

During 2014, cash provided by continuing operating activities was $66,616$66,739 compared to $13,880$14,155 in 2013. During 2014, income, adjustments to income from continuing operating activities, and dividends from the joint venture provided $37,357$37,359 compared to providing $43,844$43,858 in 2013. Working capital and other assets and liabilities provided $29,259$29,380 in 2014 compared to working capital and other assets and liabilities use of $29,964$29,703 in 2013. The significant increase in cash flows primarily relates to additional emphasis on working capital management throughout 2014.

The Company’s calculation for days sales outstanding at December 31, 20142015 was 5056 days compared to 5250 days at December 31, 2013 and we2014. We believe our receivable portfolio continues to be strong.

During 2013, cash provided by continuing operating activities was $13,880 compared to $26,959 in 2012. During 2013, income, adjustments to income from continuing operating activities and dividends from the joint venture provided $43,844 compared to providing $24,059 in 2012. Working capital and other assets and liabilities used $29,964 in 2013 compared to working capital and other assets and liabilities providing $2,900 in 2012. Cash payments for taxes and changes in working capital, including warranty replacements, were the primary drivers of the 2013 reductions.good quality.

Cash Flow from Continuing Investing Activities

Investing activities during the year ended December 31, 2015 related primarily to the acquisitions of Tew Plus, Tew, and IOS. The total purchase price, net of cash acquired and working capital adjustments, was $196,001. Other investing activities included capital expenditures of $14,913 during 2015. Current year expenditures related primarily to the Birmingham, AL coated products facility upgrades, application development of a new enterprise resource planning system, and general plant and yard improvements across each segment. We anticipate 2016 capital expenditures to be in the $6,000—$8,000 range. Other investing activities related to cash proceeds of $5,339 from the sale of assets. The sale of the Tucson, AZ concrete tie facility contributed $2,750 of the total proceeds.

The primary investing activity in 2014 related to a cash use of $80,302 for the acquisitions of Chemtec, Carr Concrete, and FWO as well a $495 working capital distribution related to the 2013 acquisition of Ball Winch. Capital expenditures of $17,056 related to improvements to our machinery and equipment across each segment, strategic land acquisitions to increase production capacity, leasehold improvements, and plant upgrades at our Birmingham, AL facility. We anticipate 2015 capital expenditures to be in the $18,000 - $22,000 range.

The primary investing activity inInvesting activities during 2013 related to the $37,500 acquisition of assets from Ball Winch. CapitalWinch as well as capital expenditures of $9,674 related to improvements to our machinery and equipment across each segment, leasehold improvements, and plant upgrades at our Birmingham, AL facility. The 2012 capital expenditures were primarily used for our Burnaby, British Columbia, Canada Rail Technologies facility, moving into our new threaded products facility in Magnolia, TX, and other yard and plant upgrades.

Cash Flow from Continuing Financing Activities

As a resultDuring the year ended December 31, 2015, the Company had an increase in outstanding debt of additional financing needs$142,326 primarily related to drawings against the revolving credit facility to fund domestic acquisition activity. During 2015, the Company purchased 80,512 shares of common stock for $1,587 under our existing share repurchase authorization. Additionally, the Company withheld 25,340 shares for approximately $1,114 during 2015. These shares were withheld from employees to pay their withholding taxes in connection with the fourth quarterexercise and/or vesting of 2014, theoptions and restricted stock awards. Cash outflows related to dividends during 2015 were $1,656.

The primary financing activity during 2014 related to the receipt of proceeds from our revolving credit facility of $24,200. Additionally, we paid dividends of $0.04 per share during the fourth quarter of 2014 and $0.03 per share during each of the prior three quarters of 2014. During 2013, we paid quarterly dividends of $0.03 per share. We did not purchase any common shares of the Company under the share repurchase authorization in 2014 or 2013, however, the Company withheld 21,676 and 16,166 shares to pay employee withholding taxes in connection with the vesting of restricted stock awards for approximately $985 and $708, respectively.

We paid quarterly dividends of $0.03 and $0.025 per share in 2013 and 2012, respectively. During 2013 and 2012, we did not purchase any common shares of the Company under the share repurchase authorization, however, the Company withheld 16,166 and 23,562 shares for approximately $708 and $669 respectively, from employees to pay their withholding taxes in connection with the exercise and/or vesting of stock options and restricted stock awards.

Financial Condition

As ofThe Company generated $56,172 from cash flows from operations during 2015 that was utilized to fund capital expenditures and make payments against our revolving credit facility. At December 31, 2014,2015, we had $52,024$33,312 in cash and cash equivalents and credit facilities with $175,375$171,668 of availability. We believe this capacityliquidity will afford usprovide the flexibility to take advantage of opportunities as we explore both organic and external growth opportunities. As of December 31, 2014, we were in compliance with all of our credit agreements’ covenants.

Our priority remainsoperate the preservation of our principal cash balances while investing our fundsbusiness in a prudent manner to maximize returns and maintain liquidity while seeking the highest yield available. weather a continued downturn in our markets.

Approximately $49,233$29,700 of our cash and cash equivalents iswas held in non-domestic bank accounts, and is not available to fund domestic operations unless repatriated. It is management’s intent to indefinitely reinvest such funds outside of the United States. TheDuring 2015, the Company utilized non-domestic funds totaling approximately $27,600$28,597 for the acquisitions of FWOTew and Tew in October 2014 and January 2015, respectively. The Company is continuing to explore foreign acquisition opportunities and expects to utilize these non-domestic cash accounts to fund any such acquisitions.Plus.

Borrowings under the March 13, 2015 Amended Credit Agreement will bear interest at rates based upon either the base rate or Euro-rate plus applicable margins. Applicable margins are dictated by the ratio of the Company’s indebtedness less consolidated cash on hand to the Company’s consolidated EBITDA, as defined in the underlying Amended Credit Agreement. The base rate is the highest of (a) PNC Bank’s prime rate, (b) the Federal Funds Rate plus 0.50% or (c) the daily Euro-rate (as defined in the Amended Credit Agreement) plus 1.00%. The base rate and Euro-rate spreads range from 0.00% to 1.00%1.50% and 1.00% to 2.00%2.50%, respectively.

To reduce the impact of interest rate changes on outstanding variable-rate debt, the Company entered into forward starting LIBOR-based interest rate swaps with notional values totaling $50,000. The swaps will become effective in February 2017 at which point it will effectively convert a portion of the debt from variable to fixed-rate borrowings during the term of the swap contract.

The Amended Credit Agreement includes two financial covenants: (a) Leverage Ratio, defined as the Company’s indebtednessIndebtedness less cash on hand, in excess of $15,000, divided by the Company’s consolidated EBITDA, which must not exceed 3.25 to 1.00 and (b) Minimum Interest Coverage, defined as consolidated EBITDA less capital expendituresCapital Expenditures divided by consolidated interest expense, which must be no less than 3.00 to 1.00.

As of December 31, 2015, the Company was in compliance with the Amended Credit Agreement’s covenants. The agreement matures on March 13, 2020.

The Amended Credit Agreement permits the Company to pay dividends, distributions, and make redemptions with respect to its stock provided no event of default or potential default (as defined in the Amended Credit Agreement) has occurred prior to or after giving effect to the dividend, distribution, or redemption. Dividends, distributions, and redemptions are capped at $25,000 per year when funds are drawn on the facility. If no drawings on the facility exist, dividends, distributions, and redemptions in excess of $25,000 per year are subjected to a limitation of $75,000 in the aggregate.aggregate over the life of the facility. The $75,000 aggregate limitation also permits certain loans, investments, and acquisitions.

Other restrictions exist at all times including, but not limited to, limitation of the Company’s sale of assets, other indebtedness incurred by either the borrowers or the non-borrower subsidiaries of the Company, guarantees, and liens.

As of December 31, 2014, the Company was in compliance with the Amended Credit Agreement’s covenants.

Tabular Disclosure of Contractual Obligations

A summary of the Company’s required payments under financial instruments and other commitments at December 31, 20142015 are presented in the following table:

 

  Total   Less than
1 year
   1-3
years
   4-5
years
   More than
5 years
   Total   Less than
1 year
   1-3
years
   4-5
years
   More than
5 years
 

Contractual Cash Obligations

                    

Revolving credit facility (1)

  $24,200    $    $    $24,200    $    $165,000    $    $    $165,000    $  

Interest

   3,874     808     1,653     1,413          15,477     3,593     7,616     4,268       

Other debt

   2,228     676     1,474     78          3,754     1,335     1,679     740       

Pension plan contributions

   280     280                    271     271                 

Operating leases

   17,108     2,512     3,659     3,119     7,818     20,128     4,310     6,109     3,109     6,600  

Purchase obligations not reflected in the financial statements

   44,499     44,499                    40,698     40,698                 
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total contractual cash obligations

  $92,189    $48,775    $6,786    $28,810    $7,818    $245,328    $50,207    $15,404    $173,117    $6,600  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Other Financial Commitments

                    

Standby letters of credit

  $425    $425    $    $    $    $526    $526    $    $    $  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

 

(1)Repayments of outstanding loan balances are disclosed in Note 1110 of the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of this report.

Other long-term liabilities include items such as income taxes which are not contractual obligations by nature. The Company cannot estimate the settlement years for these items and has excluded them from the above table.

Management believes its internal and external sources of funds are adequate to meet anticipated needs, including those disclosed above, for the foreseeable future.

Off BalanceOff-Balance Sheet Arrangements

The Company’s off-balance sheet arrangements include the operating leases, purchase obligations, and standby letters of credit disclosed within the contractual obligations table above in the “Liquidity and Capital Resources” section. These arrangements provide the Company with increased flexibility relative to the utilization and investment of cash resources.

OutlookBacklog

Market conditions for 2015 are expected to differ between the businesses that serve the transportation infrastructure market and those that serve the energy infrastructure. Transportation infrastructure spending is expected

to have a favorable market environment. In particular, the rail industry, which is our primary market, continues to forecast increases in capital spending from freight railroads and ongoing expansion of transit networks in the United States and United Kingdom. Capital spending is expected to favor capacity expansions to support the growing “crude-by-rail” activity, as well as intermodal network capacity. The freight rails are also investing in hardening the track infrastructure and methods for improving velocity and throughput across their systems. These are all favorable trends for the markets that L.B. Foster serves.

The energy markets have an uncertain outlook as many companies make adjustments in spending in reaction to declining oil prices. While L.B. Foster primarily serves the midstream markets today which are typically less impacted by the price of oil, we expect to see more widespread unfavorable impact as a result of the overall environment. Most end users in the energy markets have already reduced operating and capital spending forecasts for 2015. Although we anticipate reduced spending in all energy markets in 2015 and into 2016, these markets remain attractive to L.B. Foster on a long term basis.

Our construction businesses, which are primarily driven by transportation infrastructure spending are forecasting market conditions that are on par with 2014. Specifically, we will see fewer sales in our Fabricated Bridge business as their backlog entering the year is lower than prior year, and we are in the process of completing the Newburgh-Beacon bridge project. There is opportunity for increases in Piling sales to offset this expected decline, and our concrete products businesses are expected to improve as a result of benefits from the July 7, 2014 Carr Concrete acquisition.

In addition to the current market dynamics within each of our business segments, the ongoing concrete tie warranty dispute with the UPRR may impact our sales and profitability within certain divisions of the Company in the event that there is a reduction in UPRR orders.

The Company is also completing some significant projects in 2015 associated with the modernization of facilities in Birmingham, AL and Niles, OH. These programs are intended to improve operational efficiency, increase capacity, and lower costs for the Coated Products and rail businesses they serve. Throughout 2014 the Company expanded operations in Bedford, PA as part of its initiative to enter the corrugated bridge form market.

As part of the Company’s strategic plan, a more aggressive acquisition program is supporting our objectives to seek growth in existing and adjacent markets. In 2015, we will focus on the opportunities presented by four recently completed acquisitions. Tew in the United Kingdom brings opportunities in automated solutions primarily for rail and transportation industry customers. FWO in Germany expands our expertise in friction management solutions for the rail industry and expands market coverage into the German transit market. Chemtec will allow us to expand the products and solutions we offer to midstream market operators with highly engineered metering and custody transfer systems. Lastly, Carr extends our precast concrete buildings presence into the eastern United States and creates new precast products for the transportation market. Each of these companies supports our strategic growth initiatives and brings valuable talent and market access necessary to succeed.

The Company plans to enter into the second phase of its Enterprise Resource Planning (ERP) modernization project in 2015. This phase will begin the application development related to the implementation of software configuration and process re-engineering that will start with a few divisions of our business. The program will eventually support all operating units of L.B. Foster and is expected to yield operational benefits and customer service improvements. The expected 2015 ERP related costs include approximately $7,000 of the 2015 capital expenditure budget.

Although backlog is not necessarily indicative of future operating results, total Company backlog at December 31, 2014 was $184,350. Thethe following table provides the backlog by business segment:

 

   Backlog 
   December 31,
2014
   December 31,
2013
   December 31,
2012
 

Rail Products

  $104,821    $121,853    $140,592  

Construction Products

   65,843     53,483     59,239  

Tubular Products

   13,686     7,775     11,087  
  

 

 

   

 

 

   

 

 

 

Total Backlog from Continuing Operations

  $184,350    $183,111    $210,918  
  

 

 

   

 

 

   

 

 

 

   Backlog 
   December 31,
2015
   December 31,
2014
   December 31,
2013
 

Rail Products and Services

  $85,199    $104,821    $121,853  

Construction Products

   45,371     65,843     53,483  

Tubular and Energy Services

   34,137     13,686     7,775  
  

 

 

   

 

 

   

 

 

 

Total Backlog

  $164,707    $184,350    $183,111  
  

 

 

   

 

 

   

 

 

 

Backlog from acquired businesses represents approximately 8% of the Company’s total unfilled customer orders at December 31, 2015. While a considerable portion of the Company’sour business is somewhat backlog driven, certain businesses, including the IOS acquisition in March 2015 and the Rail Technologies business, is less sensitive toare not driven by backlog at any given time. Backlog related to 2014 acquisitions represented 6% ofand therefore have insignificant levels throughout the total.year.

Critical Accounting Policies and Estimates

The Company’s significant accounting policies are described in Part II, Item 8, Note 1 to the Consolidated Financial Statements. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States. When more than one accounting principle, or the method of its application, is generally accepted, management selects the principle or method that is appropriate in the Company’s specific circumstance. Application of these accounting principles requires management to make estimates that affect the reported amount of assets, liabilities, revenues, and expenses, and the related disclosure of contingent assets and liabilities. The following critical accounting policies relate to the Company’s more significant judgments and estimates used in the preparation of its consolidated financial statements. There can be no assurance that actual results will not differ from those estimates. For a summary of our significant accounting policies, including those discussed below, see Part II, Item 8, Note 1 to the Consolidated Financial Statements.

Revenue Recognition — The Company’s revenues are comprised of product and service sales as well as products and services provided under long-term contracts. For product and service sales, the Company recognizes revenue when the following criteria have been satisfied; persuasive evidence of a sales arrangement exists, product delivery and transfer of title to the customer has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. Generally, product title passes to the customer upon shipment. In limited cases, title does not transfer and revenue is not recognized until the customer has received the products at its physical location. Revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold.

Revenues for products under long-term contracts are recognized using the percentage-of-completion method. Sales and gross profit are recognized as work is performed based upon the proportion of actual costs incurred to estimated total project costs. Sales and gross profit are adjusted prospectively for revisions in estimated total project costs and contract values. For certain products, the percentage-of-completion is based upon actual labor costs as a percentage of estimated total labor costs. At the time a loss contract becomes known, the entire amount of the estimated loss is recognized in the Consolidated Statement of Operations.

Revenue recognition involves judgments, including assessments of expected returns, the likelihood of nonpayment, and estimates of expected costs and profits on long-term contracts. In determining when to recognize revenue, we analyze various factors, including the specifics of the transaction, historical experience, creditworthiness of the customer, and current market and economic conditions. Changes in judgments on these factors could impact the timing and amount of revenue recognized with a resulting impact on the timing and amount of associated income.

Business Combinations, Goodwill, and Intangible Assets —We account for acquired businesses using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective estimated fair values. The cost to acquire a business is allocated to the underlying net assets of the acquired business based on estimates of their respective fair values. The purchase price allocation process requires management to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to: future expected cash flows from customer relationships, the acquired company’s trade name and trademarks as well as assumptions about the period of time the acquired trade name and trademarks will continue to be used in the combined company’s product portfolio, future expected cash flows from developed technology and discount rates. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates, or actual results.

Intangible assets are amortized over the expected life of the asset. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations. Fair values and useful lives are determined based on, among other factors, the expected future period of benefit of the asset, the various characteristics of the asset, and projected

cash flows. Because this process involves management making estimates with respect to future revenues and market conditions and because these estimates also form the basis for the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates.

Goodwill is required to be tested for impairment at least annually. The Company performs its annual impairment test as of October 1st or more frequently when indicators of impairment are present. The goodwill impairment test involves comparing the fair value of a reporting unit to its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, a second step is required to measure the goodwill impairment loss. This step compares the implied fair value of the reporting unit’s goodwill to the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds the implied fair value of the goodwill, an impairment loss equal to the excess is recorded as a component of continuing operations. The Company uses a combination of market approach and a discounted cash flow model (DCF model)(“DCF model”) and a market approach to determine the current fair value of the reporting unit. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including markets and market share, sales volume and pricing, costs to produce, and working capital changes. In times of adverse economic conditions in the global economy, the Company’s long-term cash flow projections are subject to a greater degree of uncertainty than usual. If we had established different reporting units or utilized different valuation methodologies or assumptions, the impairment test results could differ, and we could be required to record impairment charges.

The Company considers historical experience and available information at the time the fair values of its business are estimated. However, actual amounts realized may differ from those used to evaluate the impairment of goodwill. If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, the Company may be exposed to impairment losses that could be material to our results of operations.

The Company recorded impairment charges of $80,337 ($63,887 net of taxes) during 2015 related to the acquisitions of IOS in March 2015 and Chemtec in December 2014. There were no goodwill impairments recorded during the three years ended December 31, 2014.2014 and 2013. Additional information concerning the impairments is set forth in Part II, Item 8, Note 4 to the financial statements included herein, which is incorporated by reference into this Item 7.

Asset ImpairmentIntangible Assets, Long-Lived Assets, and Investments The Company is required to test for asset impairment whenever events or changes in circumstances indicate that the carrying value of an asset might not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. The applicable guidance for assets held for uses requires that, if the sum of the future expected cash flows associated with an asset, undiscounted and without interest charges, is less than the carrying value, an asset impairment must be recognized in the financial statements. The amount of the impairment is the difference between the fair value of the asset and the carrying value of the asset. For assets held for sale, to the extent the carrying value is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference. The accounting estimate related to asset impairment is highly susceptible to change from period to period and because it requires management to make assumptions about the existence of impairment indicators and cash flows over future years. These assumptions impact the amount of an impairment, which would have an impact on the income statement. Consolidated Statements of Operations.

The fair value of the Company’s equity investments is dependent on the performance of the investee companies as well as volatility inherent in the external markets for these investments. In assessing potential impairment of these investments, we consider these factors as well as the forecasted financial performance of the investees. If these forecasts are not met and indicate an other-than-temporary decline in value, impairment charges may be required.

There were no material asset impairments recorded duringof intangible assets, long-lived assets, or investments for the three years ended December 31, 2014.2015, 2014, or 2013.

Product Warranty — The Company maintains a current warranty for the repair or replacement of defective products. For certain manufactured products, an accrual is made on a monthly basis as a percentage of cost of sales. For long-term construction projects, a product warranty accrual is established when the claim is known and quantifiable. The product warranty accrual is periodically adjusted based on the identification or resolutionreso-

lution of known individual product warranty claims. The underlying assumptions used to calculate the product warranty accrual can change from period to period and are dependent upon estimates of the amount and cost of future product repairs or replacements.

At December 31, 20142015 and 2013,2014, the product warranty reserve was $11,500$8,755 and $7,483,$11,500, respectively. During the years ended December 31, 2015, 2014, 2013, and 2012,2013, the Company recorded product warranty expense of $972, $10,957, $1,695 and $24,252,$1,695, respectively. For additional information regarding the Company’s product warranty, refer to Part II, Item 8, Note 2019 to the Consolidated Financial Statements, “Commitments and Contingent Liabilities” included herein.

Contingencies and Litigation — The preparation of consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and also affect the amounts of revenues and expenses reported for each period.

In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against the Company. When a probable, estimable exposure exists, the Company accrues thean estimate of the probable costs for the resolution of these matters. These estimates have been developed in consultation with legal counsel involved in the defense of these matters and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. Future results of operations could be materially affected by changes in our assumptions or the outcome of these proceedings.

The Company’s operations are subject to national, state, foreign, and/or local laws and regulations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal, and management of, regulated materials and waste. These regulations impose liability for the costs of investigation, remediation, and damages resulting from, present and past spills, disposals, or other releases of hazardous substances or materials. Liabilities are recorded when remediation efforts are probable and the costs can be reasonably estimated. Estimates are not reduced by potential claims for recovery. Claims for recovery are recognized as agreements are reached with third parties or as amounts are received. Established reserves are periodically reviewed and adjusted to reflect current remediation progress, prospective estimates of required activity, and other factors that may be relevant, including changes in technology or regulations.

Refer to Part II, Item 8, Note 2019 to the Consolidated Financial Statements, “Commitments and Contingent Liabilities”Liabilities,” for additional information regarding the Company’s commitments and contingent liabilities.

Revenue Recognition — The Company’s revenues are comprised of product sales as well as products and services provided under long-term contracts. For product sales, the Company recognizes revenue when the following criteria have been satisfied; persuasive evidence of a sales arrangement exists, product delivery and transfer of title to the customer has occurred, the price is fixed or determinable, and collectability is reasonably assured. Within each segment, title generally passes to the customer upon shipment. In limited cases, title does not transfer and revenue is not recognized until the customer has received the products at its physical location. Revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold.

Revenues for products under long-term contracts are generally recognized using the percentage-of-completion method. Sales and gross profit are recognized as work is performed based upon the proportion of actual costs incurred to estimated total project costs. Sales and gross profit are adjusted prospectively for revisions in estimated total project costs and contract values. For certain products, the percentage of completion is based upon actual labor costs as a percentage of estimated total labor costs. At the time a loss contract becomes known, the entire amount of the estimated loss is recognized in the Consolidated Statement of Operations. Revenues recognized using percentage of completion are not material relative to the Company’s consolidated revenues.

Revenue recognition involves judgments, including assessments of expected returns, the likelihood of nonpayment and estimates of expected costs and profits on long-term contracts. In determining when to recognize revenue, we analyze various factors, including the specifics of the transaction, historical experience, creditworthiness of the customer, and current market and economic conditions. Changes in judgments on these factors could impact the timing and amount of revenue recognized with a resulting impact on the timing and amount of associated income.

Pension Plans —The calculation of the Company’s net periodic benefit cost (pension expense) and benefit obligation (pension liability) associated with its defined benefit pension plans (pension plans) requires the use of a number of assumptions that the Company deems to be critical accounting estimates. Changes in these assumptions can result in a different pension expense and liability amounts, and future actual experience can differ significantly from the assumptions. During 2014,In 2015, the Company adjusted its mortality assumption by adoptingto the Society of Actuaries updated RP-2014RP-2015 mortality tables. The Company believes that

Two critical assumptions impacting the two most critical assumptionsCompany’s pension obligation are the expected long-term rate of return on plan assets and the assumed discount rate.

The expected long-term rate of return reflects the average rate of earnings expected on funds invested or to be invested in the pension plans to provide for the benefits included in the pension liability. The Company establishes the expected long-term rate of return at the beginning of each fiscal year based upon information available to the Company at that time, including the plan’s investment mix and the forecasted rates of return on these types of securities. Any differences between actual experience and assumed experience are deferred as an unrecognized actuarial gain or loss. The unrecognized actuarial gains or losses are amortized in accordance with applicable accounting guidance.

The weighted average expected long-term rate of return determined by the Company for its 2015 and 2014 domestic pension expense was 5.50% and 6.50%, respectively.the expected long-term rate of return for 2016 will be 5.20%. The weighted average expected long-term rate of return determined by the Company for its 2015 and 2014 U.K. pension expense was 5.00% and 5.80%, respectively.the expected long-term rate of return for 2016 will be 5.21%. Pension expense increases as the expected long-term rate of return decreases. The long-term rates of return are reflective of the investment strategies of the underlying pension plan.

The assumed discount rate reflects the current rate at which the pension benefits could effectively be settled. In estimating that rate, applicable guidance requires the Company to utilize rates of return on high quality, fixed

income investments. The Company’s pension liability increases as the discount rate is reduced. Therefore, a decline in the assumed discount rate has the effect of increasing the Company’s pension obligation and future pension expense. The weighted average assumed discount rate used by the Company was 4.00%4.30% and 4.90%4.00%, respectively, as of December 31, 20142015 and 20132014 for its domestic pension plans. The weighted average assumed discount rate used by the Company was 3.60%4.00% and 4.60%3.60%, as of December 31, 20142015 and 20132014 for its U.K. pension plan. For additional information regarding the Company’s pension obligations, refer to Part II, Item 8, Note 16 to the Consolidated Financial Statements, “Retirement Plans,” included herein.

Income Taxes — The recognition of deferred tax assets requires management to make judgments regarding the future realization of these assets. As prescribed by FASB ASC 740, “Income Taxes,” valuation allowances must be provided for those deferred tax assets for which it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. This guidance requires management to evaluate positive and negative evidence regarding the recoverability of deferred tax assets. Determination of whether the positive evidence outweighs the negative evidence and quantification of the valuation allowance requires management to make estimates and judgments of future financial results.

The Company evaluates all tax positions taken on its federal, state, and foreign tax filings to determine if the position is more likely than not to be sustained upon examination. For positions that meet the more likely than not to be sustained criteria, the largest amount of benefit to be realized upon ultimate settlement is determined on a cumulative probability basis. A previously recognized tax position is derecognized when it is subsequently determined that a tax position no longer meets the more likely than not threshold to be sustained. The evaluation of the sustainability of a tax position and the expected tax benefit is based on judgment, historical experience, and various other assumptions. Actual results could differ from those estimates upon subsequent resolution of identified matters.

The Company’s income tax rate is significantly affected by the tax rate on global operations. In addition to local country tax laws and regulations, this rate depends on the extent earnings are indefinitely reinvested outside the United States. Indefinite reinvestment is determined by management’s judgment about and intentions

concerning the future operations of the Company. WeAt this time, we do not intend to repatriate theseany foreign earnings to fund U.S. operations. Should we decide to repatriate the foreign earnings, the Company would have to accrue income and withholding taxes in the period in which it is determined that the earnings will no longer be indefinitely invested outside the United States.

Refer to Part II, Item 8, Note 15,14, “Income Taxes”Taxes,” included herein for additional information regarding the Company’s deferred tax assets. The Company’s ability to realize these tax benefits may affect the Company’s reported income tax expense and net income.

ITEM 7A.New Accounting Pronouncements — See Part II, Item 8, Note 1 to the Consolidated Financial Statements for information regarding new accounting pronouncements.

ITEM 7A.    QUANTITATIVE     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

(Dollars in thousands)

Interest Rate Risk

In the ordinary course of business, the Company is exposed to interest rate risks that may adversely affect funding costs associated with its variable-rate debt. The Company does not purchase or hold any derivative financial instruments for trading purposespurposes. At contract inception, the Company designates its derivative instruments as hedges. The Company recognizes all derivative instruments on the balance sheet at fair value. Fluctuations in the fair values of derivative instruments designated as cash flow hedges are recorded in accumulated other comprehensive income and reclassified into earnings within other income as the underlying hedged items affect earnings. To the extent that a change in a derivative does not perfectly offset the change in value of the interest rate being hedged, the ineffective portion is recognized in earnings immediately.

During the year ended December 31, 2015, the Company entered into three forward starting LIBOR-based interest rate swap agreements with notional values totaling $50,000. At December 31, 2015, the Company recorded a long-term liability of $196 related to the swap agreements. The Company did not have any interest rate derivatives as ofat December 31, 2014 2013 or 2012.2013.

Foreign Currency Exchange Rate Risk

The Company is subject to exposures to changes in foreign currency exchange rates. The Company may manage its exposure to changes in foreign currency exchange rates on firm sale and purchase commitments by entering into foreign currency forward contracts. The Company’s risk management objective is to reduce its exposure to the effects of changes in exchange rates on these transactions over the duration of the transactions. The Company did not engage in significant foreign currency hedging transactions during the three-year period ended December 31, 2014, and no foreign currency hedges were outstanding as of December 31, 2014. Realized gains or losses from foreign currency hedges did not exceed $100 in any of the three years ended December 31, 2014.2015.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of L.B. Foster Company and Subsidiaries

We have audited the accompanying consolidated balance sheets of L. B.L.B. Foster Company and Subsidiaries as of December 31, 20142015 and 2013,2014, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2014.2015. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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.L.B. Foster Company and Subsidiaries at December 31, 20142015 and 2013,2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2014,2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), L. B.L.B. Foster Company and Subsidiaries’ internal control over financial reporting as of December 31, 2014,2015, based on criteria established inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 3, 2015,1, 2016, expressed an unqualified opinion thereon.

 

/s/    Ernst & Young LLP

Pittsburgh, Pennsylvania

March 3, 20151, 2016

L. B.L.B. FOSTER COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,

(In thousands, except share data)

   2014   2013 
   (In thousands, except
share data)
 

ASSETS

  

Current assets:

    

Cash and cash equivalents

  $52,024   $64,623 

Accounts receivable — net

   90,178    98,437 

Inventories — net

   95,089    76,956 

Current deferred tax assets

   3,497    461 

Prepaid income tax

   2,790    4,741 

Other current assets

   4,101    2,000 

Current assets of discontinued operations

        149 
  

 

 

   

 

 

 

Total current assets

   247,679    247,367 

Property, plant, and equipment — net

   74,802    50,109 

Other assets:

    

Goodwill

   82,949    57,781 

Other intangibles — net

   82,134    51,846 

Investments

   5,824    5,090 

Other assets

   1,733    1,461 
  

 

 

   

 

 

 

Total Assets

  $495,121   $413,654 
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

  

Current liabilities:

    

Accounts payable

  $67,166   $46,620 

Deferred revenue

   8,034    5,715 

Accrued payroll and employee benefits

   13,419    8,927 

Accrued warranty

   11,500    7,483 

Current maturities of long-term debt

   676    31 

Current deferred tax liabilities

   77    179 

Other accrued liabilities

   7,899    6,501 

Liabilities of discontinued operations

        26 
  

 

 

   

 

 

 

Total current liabilities

   108,771    75,482 

Long-term debt

   25,752    25 

Deferred tax liabilities

   10,945    11,798 

Other long-term liabilities

   13,765    9,952 

Stockholders’ equity:

    

Common stock, par value $.01, authorized 20,000,000 shares; shares issued at December 31, 2014 and December 31, 2013, 11,115,779; shares outstanding at December 31, 2014 and December 31, 2013, 10,242,405 and 10,188,521, respectively

   111    111 

Paid-in capital

   48,115    47,239 

Retained earnings

   322,672    298,361 

Treasury stock — at cost, common stock, shares at December 31, 2014 and December 31, 2013, 873,374 and 927,258, respectively

   (23,118   (24,731

Accumulated other comprehensive loss

   (11,892   (4,583
  

 

 

   

 

 

 

Total stockholders’ equity

   335,888    316,397 
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $495,121   $413,654 
  

 

 

   

 

 

 

   2015   2014 

ASSETS

  

Current assets:

    

Cash and cash equivalents

  $33,312    $52,024  

Accounts receivable — net

   78,487     90,178  

Inventories — net

   96,396     95,089  

Prepaid income tax

   1,131     2,790  

Other current assets

   5,148     4,101  
  

 

 

   

 

 

 

Total current assets

   214,474     244,182  

Property, plant, and equipment — net

   126,745     74,802  

Other assets:

    

Goodwill

   81,752     82,949  

Other intangibles — net

   134,927     82,134  

Deferred tax assets

   226     93  

Investments

   5,321     5,824  

Other assets

   3,215     1,733  
  

 

 

   

 

 

 

Total assets

  $566,660    $491,717  
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

  

Current liabilities:

    

Accounts payable

  $55,804    $67,166  

Deferred revenue

   6,934     8,034  

Accrued payroll and employee benefits

   10,255     13,419  

Accrued warranty

   8,755     11,500  

Current maturities of long-term debt

   1,335     676  

Other accrued liabilities

   8,563     7,899  
  

 

 

   

 

 

 

Total current liabilities

   91,646     108,694  

Long-term debt

   167,419     25,752  

Deferred tax liabilities

   8,926     7,618  

Other long-term liabilities

   15,837     13,765  

Stockholders’ equity:

    

Common stock, par value $.01, authorized 20,000,000 shares; shares issued at December 31, 2015 and December 31, 2014, 11,115,779; shares outstanding at December 31, 2015 and December 31, 2014, 10,221,006 and 10,242,405, respectively

   111     111  

Paid-in capital

   46,681     48,115  

Retained earnings

   276,571     322,672  

Treasury stock — at cost, common stock, shares at December 31, 2015 and December 31, 2014, 894,773 and 873,374, respectively

   (22,591   (23,118

Accumulated other comprehensive loss

   (17,940   (11,892
  

 

 

   

 

 

 

Total stockholders’ equity

   282,832     335,888  
  

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $566,660    $491,717  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

L. B.L.B. FOSTER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS FOR

THE THREE YEARS ENDED DECEMBER 31,

(In thousands, except share data)

   2014   2013   2012 
   (In thousands, except share data) 

Net sales

  $607,192   $597,963   $588,541 

Cost of goods sold

   485,601    482,024    496,272 
  

 

 

   

 

 

   

 

 

 

Gross profit

   121,591    115,939    92,269 

Selling and administrative expenses

   79,814    71,256    66,651 

Amortization expense

   4,695    3,112    2,961 

Interest expense

   512    485    542 

Interest income

   (530   (659   (452

Equity in income of nonconsolidated investments

   (1,282   (1,316   (837

Other income

   (674   (1,054   (426
  

 

 

   

 

 

   

 

 

 
   82,535    71,824    68,439 
  

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

   39,056    44,115    23,830 

Income tax expense

   13,402    14,839    9,066 
  

 

 

   

 

 

   

 

 

 

Income from continuing operations

   25,654    29,276    14,764 
  

 

 

   

 

 

   

 

 

 

Discontinued operations:

      

Income from discontinued operations before income taxes

   4    23    3,842 

Income tax expense

   2    9    2,418 
  

 

 

   

 

 

   

 

 

 

Income from discontinued operations

   2    14    1,424 
  

 

 

   

 

 

   

 

 

 

Net income

  $25,656   $29,290   $16,188 
  

 

 

   

 

 

   

 

 

 

Basic earnings per common share:

      

From continuing operations

  $2.51   $2.88   $1.46 

From discontinued operations

   0.00    0.00    0.14 
  

 

 

   

 

 

   

 

 

 

Basic earnings per common share

  $2.51   $2.88   $1.60 
  

 

 

   

 

 

   

 

 

 

Diluted earnings per common share:

      

From continuing operations

  $2.48   $2.85   $1.44 

From discontinued operations

   0.00    0.00    0.14 
  

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

  $2.48   $2.85   $1.58 
  

 

 

   

 

 

   

 

 

 

Dividends paid per common share

  $0.13   $0.12   $0.10 
  

 

 

   

 

 

   

 

 

 

   2015   2014   2013 

Sales of goods

  $537,214    $561,899    $559,846  

Sales of services

   87,309     45,293     38,117  
  

 

 

   

 

 

   

 

 

 

Total sales

   624,523     607,192     597,963  

Cost of goods sold

   420,169     449,964     458,043  

Cost of services sold

   70,701     35,637     23,981  
  

 

 

   

 

 

   

 

 

 

Total cost of sales

   490,870     485,601     482,024  
  

 

 

   

 

 

   

 

 

 

Gross profit

   133,653     121,591     115,939  
  

 

 

   

 

 

   

 

 

 

Selling and administrative expenses

   92,648     79,814     71,256  

Amortization expense

   12,245     4,695     3,112  

Impairment of goodwill

   80,337            

Interest expense

   4,378     512     485  

Interest income

   (206   (530   (659

Equity in loss (income) of nonconsolidated investments

   413     (1,282   (1,316

Other income

   (5,585   (678   (1,077
  

 

 

   

 

 

   

 

 

 
   184,230     82,531     71,801  
  

 

 

   

 

 

   

 

 

 

(Loss) Income before income taxes

   (50,577   39,060     44,138  

Income tax (benefit) expense

   (6,132   13,404     14,848  
  

 

 

   

 

 

   

 

 

 

Net (loss) income

  $(44,445  $25,656    $29,290  
  

 

 

   

 

 

   

 

 

 

Basic (loss) earnings per common share

  $(4.33  $2.51    $2.88  
  

 

 

   

 

 

   

 

 

 

Diluted (loss) earnings per common share

  $(4.33  $2.48    $2.85  
  

 

 

   

 

 

   

 

 

 

Dividends paid per common share

  $0.16    $0.13    $0.12  
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

L. B.L.B. FOSTER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME FOR

THE THREE YEARS ENDED DECEMBER 31,

(In thousands)

   2014   2013   2012 
   (In thousands) 

Net income

  $25,656    $29,290    $16,188  
  

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax:

      

Foreign currency translation adjustment

   (4,863   (3,475   1,724  

Pension and post-retirement benefit plans, net of tax (benefit) expense: ($1,383), $1,199, and ($481)

   (2,631   2,258     (1,043

Reclassification of pension liability adjustments to earnings, net of tax expense of $63, $134 and $125 *

   185     303     278  
  

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income, net of tax

   (7,309   (914   959  
  

 

 

   

 

 

   

 

 

 

Comprehensive income

  $18,347    $28,376    $17,147  
  

 

 

   

 

 

   

 

 

 

   2015   2014   2013 

Net (loss) income

  $(44,445  $25,656    $29,290  
  

 

 

   

 

 

   

 

 

 

Other comprehensive loss, net of tax:

      

Foreign currency translation adjustment

   (6,947   (4,863   (3,475

Unrealized loss on cash flow hedges, net of tax benefit of $76

   (121          

Pension and post-retirement benefit plans, net of tax expense (benefit): $208, ($1,383), and $1,199

   631     (2,631   2,258  

Reclassification of pension liability adjustments to earnings, net of tax expense of $160, $63 and $134 *

   389     185     303  
  

 

 

   

 

 

   

 

 

 

Other comprehensive loss, net of tax

   (6,048   (7,309   (914
  

 

 

   

 

 

   

 

 

 

Comprehensive (loss) income

  $(50,493  $18,347    $28,376  
  

 

 

   

 

 

   

 

 

 

 

*Reclassifications out of accumulated other comprehensive income for pension obligations are charged to selling and administrative expense.

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

L.B. FOSTER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR

THE THREE YEARS ENDED DECEMBER 31,

(In thousands)

   2014   2013   2012 
   (In thousands) 

CASH FLOWS FROM OPERATING ACTIVITIES:

      

Income from continuing operations

  $25,654    $29,276    $14,764  

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:

      

Deferred income taxes

   (2,914   3,244     (4,563

Depreciation and amortization

   12,577     10,002     12,973  

Equity in income of nonconsolidated investments

   (1,282   (1,316   (837

Loss on sales and disposals of property, plant, and equipment

   21     127     388  

Deferred gain amortization on sale-leaseback

             (456

Share-based compensation

   3,007     2,156     1,989  

Excess income tax benefit from share-based compensation

   (336   (203   (199

Change in operating assets and liabilities, net of acquisitions:

      

Accounts receivable

   15,188     (37,057   6,823  

Inventories

   (9,872   29,919     (17,644

Other current assets

   (1,004   (310   (243

Prepaid income tax

   2,530     (6,882   4,339  

Other noncurrent assets

   (386   264     (194

Dividends from LB Pipe & Coupling Products, LLC

   630     558       

Accounts payable

   16,285     (5,206   1,241  

Deferred revenue

   591     (1,805   1,467  

Accrued payroll and employee benefits

   2,542     (608   75  

Other current liabilities

   2,732     (7,561   6,655  

Other liabilities

   653     (718   381  
  

 

 

   

 

 

   

 

 

 

Net cash provided by continuing operating activities

   66,616     13,880     26,959  
  

 

 

   

 

 

   

 

 

 

Net cash provided by discontinued operations

   123     275     176  
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

      

Proceeds from the sale of property, plant, and equipment

   184          24  

Capital expenditures on property, plant, and equipment

   (17,056   (9,674   (7,160

Acquisitions, net of cash acquired

   (80,797   (37,500     

Capital contributions to equity method investments

   (82          
  

 

 

   

 

 

   

 

 

 

Net cash used by continuing investing activities

   (97,751   (47,174   (7,136
  

 

 

   

 

 

   

 

 

 

Net cash provided by discontinued operations

             10,548  
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

      

Repayments of long-term debt

   (125   (6   (2,373

Proceeds from long-term debt

   24,516            

Proceeds from exercise of stock options and stock awards

   131     35     122  

Financing fees

   (473          

Treasury stock acquisitions

   (985   (708   (669

Cash dividends on common stock paid to shareholders

   (1,345   (1,240   (1,029

Excess income tax benefit from share-based compensation

   336     203     199  
  

 

 

   

 

 

   

 

 

 

Net cash provided (used) by continuing financing activities

   22,055     (1,716   (3,750
  

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

   (3,642   (2,106   940  
  

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

   (12,599   (36,841   27,737  

Cash and cash equivalents at beginning of period

   64,623     101,464     73,727  
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $52,024    $64,623    $101,464  
  

 

 

   

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

      

Interest paid

  $362    $330    $405  
  

 

 

   

 

 

   

 

 

 

Income taxes paid

  $14,617    $18,697    $11,999  
  

 

 

   

 

 

   

 

 

 

Capital expenditures funded through financing agreements

  $1,981    $    $  
  

 

 

   

 

 

   

 

 

 

   2015   2014   2013 

CASH FLOWS FROM OPERATING ACTIVITIES:

      

Net (loss) income

  $(44,445  $25,656    $29,290  

Adjustments to reconcile net (loss) income to cash provided by operating activities:

      

Deferred income taxes

   (14,582   (2,914   3,244  

Depreciation

   14,429     7,882     6,890  

Amortization

   12,245     4,695     3,112  

Impairment of goodwill

   80,337            

Equity loss (income) and remeasurement gain

   (167   (1,282   (1,316

(Gain) loss on sales and disposals of property, plant, and equipment

   (2,064   21     127  

Share-based compensation

   1,471     3,007     2,156  

Excess income tax benefit from share-based compensation

   (253   (336   (203

Change in operating assets and liabilities, net of acquisitions:

      

Accounts receivable

   31,223     15,311     (36,782

Inventories

   4,331     (9,872   29,919  

Other current assets

   3,248     (1,004   (310

Prepaid income tax

   1,134     2,530     (6,882

Other noncurrent assets

   (909   (386   264  

Dividends from LB Pipe & Coupling Products, LLC

   90     630     558  

Accounts payable

   (17,204   16,285     (5,206

Deferred revenue

   (2,279   591     (1,805

Accrued payroll and employee benefits

   (5,136   2,542     (608

Other current liabilities

   (4,189   2,732     (7,561

Other liabilities

   (1,108   651     (732
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

   56,172     66,739     14,155  
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

      

Proceeds from the sale of property, plant, and equipment

   5,339     184       

Capital expenditures on property, plant, and equipment

   (14,913   (17,056   (9,674

Acquisitions, net of cash acquired

   (196,001   (80,797   (37,500

Capital contributions to equity method investments

        (82     
  

 

 

   

 

 

   

 

 

 

Net cash used by investing activities

   (205,575   (97,751   (47,174
  

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

      

Repayments of debt

   (161,068   (125   (6

Proceeds from debt

   301,063     24,516       

Proceeds from exercise of stock options and stock awards

   68     131     35  

Financing fees

   (1,670   (473     

Treasury stock acquisitions

   (2,701   (985   (708

Cash dividends on common stock paid to shareholders

   (1,656   (1,345   (1,240

Excess income tax benefit from share-based compensation

   253     336     203  
  

 

 

   

 

 

   

 

 

 

Net cash provided (used) by financing activities

   134,289     22,055     (1,716
  

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

   (3,598   (3,642   (2,106

Net decrease in cash and cash equivalents

   (18,712   (12,599   (36,841

Cash and cash equivalents at beginning of period

   52,024     64,623     101,464  
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $33,312    $52,024    $64,623  
  

 

 

   

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

      

Interest paid

  $3,674    $362    $330  
  

 

 

   

 

 

   

 

 

 

Income taxes paid

  $7,835    $14,617    $18,697  
  

 

 

   

 

 

   

 

 

 

Capital expenditures funded through financing agreements

  $288    $1,981    $  
  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

L.B. FOSTER COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE THREE YEARS ENDED DECEMBER 31, 20142015

 

                  Accumulated       Common
Stock
   Paid-in
Capital
   Retained
Earnings
   Treasury
Stock
   Accumulated
Other
Comprehensive
(Loss) Income
   Total 
                  Other       (In thousands, except share data) 
  Common   Paid-in   Retained   Treasury   Comprehensive     
  Stock   Capital   Earnings   Stock   (Loss) Income   Total 
  (In thousands, except share data) 

Balance, January 1, 2012

  $111   $47,349   $255,152   $(28,169  $(4,628  $269,815 

Balance, January 1, 2013

  $111    $46,290    $270,311    $(25,468  $(3,669  $287,575  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Net income

       16,188        16,188        29,290         29,290  

Other comprehensive (loss) income net of tax:

            

Other comprehensive loss, net of tax:

            

Pension liability adjustment

           (765   (765           2,561     2,561  

Foreign currency translation adjustment

           1,724    1,724            (3,475   (3,475

Issuance of 75,995 Common shares, net of shares withheld for taxes

     (3,247     2,701      (546

Stock based compensation and related excess tax benefit

     2,188          2,188 

Cash dividends on common stock paid to shareholders

       (1,029       (1,029
  

 

   

 

   

 

   

 

   

 

   

 

 

Balance, December 31, 2012

   111    46,290    270,311    (25,468   (3,669   287,575 
  

 

   

 

   

 

   

 

   

 

   

 

 

Net income

       29,290        29,290 

Other comprehensive income (loss) net of tax:

            

Pension liability adjustment

           2,561    2,561 

Foreign currency translation adjustment

           (3,475   (3,475

Issuance of 39,123 Common shares, net of shares withheld for taxes

     (1,410     737      (673

Issuance of 39,123 common shares,net of shares withheld for taxes

     (1,410     737       (673

Stock based compensation and related excess tax benefit

     2,359          2,359      2,359           2,359  

Cash dividends on common stock paid to shareholders

       (1,240       (1,240       (1,240       (1,240
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Balance, December 31, 2013

   111    47,239    298,361    (24,731   (4,583   316,397    111     47,239     298,361     (24,731   (4,583   316,397  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Net income

       25,656        25,656        25,656         25,656  

Other comprehensive loss net of tax:

            

Other comprehensive loss, net of tax:

            

Pension liability adjustment

           (2,446   (2,446           (2,446   (2,446

Foreign currency translation adjustment

           (4,863   (4,863           (4,863   (4,863

Issuance of 53,884 Common shares, net of shares withheld for taxes

     (2,467     1,613      (854

Issuance of 53,884 common shares, net of shares withheld for taxes

     (2,467     1,613       (854

Stock based compensation and related excess tax benefit

     3,343          3,343      3,343           3,343  

Cash dividends on common stock paid to shareholders

       (1,345       (1,345       (1,345       (1,345
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Balance, December 31, 2014

  $111   $48,115   $322,672   $(23,118  $(11,892  $335,888    111     48,115     322,672     (23,118   (11,892   335,888  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Net loss

       (44,445       (44,445

Other comprehensive loss, net of tax:

            

Pension liability adjustment

           1,020     1,020  

Foreign currency translation adjustment

           (6,947   (6,947

Unrealized derivative loss on cash flow hedges

           (121   (121

Purchase of 80,512 common shares for treasury

         (1,587     (1,587

Issuance of 59,113 common shares, net of shares withheld for taxes

     (3,158     2,114       (1,044

Stock based compensation and related excess tax benefit

     1,724           1,724  

Cash dividends on common stock paid to shareholders

       (1,656       (1,656
  

 

   

 

   

 

   

 

   

 

   

 

 

Balance, December 31, 2015

  $111    $46,681    $276,571    $(22,591  $(17,940  $282,832  
  

 

   

 

   

 

   

 

   

 

   

 

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

L.B. FOSTER COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.

(Dollars in thousands, except share data unless otherwise noted)

Note 1.

Summary of Significant Accounting Policies

Basis of financial statement presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, ventures, and partnerships in which a controlling interest is held. Inter-company transactions and accounts have been eliminated. The Company utilizes the equity method of accounting for companies where its ownership is less than or equal to 50% and significant influence exists.

Cash and cash equivalents

The Company considers cash and other instruments with maturities of three months or less, when purchased, to be cash and cash equivalents. The Company invests available funds in a manner to maximize returns, preserve investment principle,principal, and maintain liquidity while seeking the highest yield available.

Cash and cash equivalents held in non-domestic accounts was approximately $49,233$29,700 and $43,560$49,233 at December 31, 20142015 and 2013,2014, respectively. Included in non-domestic cash equivalents are investments in bank term deposits of approximately $25$1,939 and $32,947$25 at December 31, 20142015 and 2013,2014, respectively. The carrying amounts approximated fair value because of the short maturity of the instruments.

Domestic cash equivalents as of December 31, 2013 principally consisted of investments in money market funds and bank certificates of deposit. Invested cash of $18,276 was held in an actively traded BlackRock Liquidity Temporary Fund — Institutional account. This money market fund had various underlying securities all of which maintained AAA credit agency ratings. The carrying amount approximates fair value because of the short maturity of the instruments.

Inventories

Certain inventories are valued at the lower of the last-in, first-out (LIFO)(“LIFO”) cost or market. Approximately 43% in 2015 and 44% in 2014, and 38% in 2013, of the Company’s inventory is valued at average cost or market, whichever is lower. Slow-moving inventory is reviewed and adjusted regularly, based upon product knowledge, physical inventory observation, and the age of the inventory.

Property, plant, and equipment

Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of 5 to 40 years for buildings and 2 to 10 years for machinery and equipment. Leasehold improvements are amortized over 3 to 13 years, which represent the lives of the respective leases or the lives of the improvements, whichever is shorter. Depreciation expense is recorded within “cost of sales” and “selling and administrative” expenses based upon the particular asset’s use. The Company reviews a long-lived asset for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. There were no material asset impairments recorded for the years ended December 31, 2015, 2014, or 2013.

Maintenance, repairs, and minor renewals are charged to operations as incurred. Major renewals and betterments whichthat substantially extend the useful life of the property are capitalized at cost. Upon sale or other disposition of assets, the costs and related accumulated depreciation and amortization are removed from the accounts and the resulting gain or loss, if any, is reflected in income.

Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of 25 to 40 years for buildings and 3 to 10 years for machinery and equipment. Leasehold improvements are amortized over 2 to 14 years which represent the lives of the respective leases or the lives of the improvements, whichever is shorter. Depreciation expense is appropriately recorded within “costs of sales” and “selling and administrative” expenses based upon the assets’ use. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company did not record any material asset impairment charges during 2014, 2013, or 2012.

Allowance for doubtful accounts

The allowance for doubtful accounts is recorded to reflect the ultimate realization of the Company’s accounts receivable and includes assessment of the probability of collection and the credit-worthiness of certain

customers. Reserves for uncollectible accounts are recorded as part of selling and administrative expenses on the Consolidated Statements of Operations. The Company records a monthly provision for accounts receivable that are considered to be uncollectible. In order to calculate the appropriate monthly provision, the Company reviews its accounts receivable aging and calculates an allowance through application of historic reserve factors to overdue receivables. This calculation is supplemented by specific account reviews performed by the Company’s

credit department. As necessary, the application of the Company’s allowance rates to specific customers areis reviewed and adjusted to more accurately reflect the credit risk inherent within that customer relationship.

Investments

Investments in companies in which the Company has the ability to exert significant influence, but not control, over operating and financial policies (generally 20% to 50% ownership) are accounted for using the equity method. Under the equity method, investments are initially recorded at cost and adjusted for dividends and undistributed earnings and losses. The equity method of accounting requires a company to recognize a loss in the value of an equity method investment that is other than a temporary decline.

Goodwill and other intangible assets

Goodwill is tested annually for impairment or more often if there are indicators of impairment. The goodwill impairment test involves comparing the fair value of a reporting unit to its carrying value, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, a second step is required to measure the goodwill impairment loss. This step compares the implied fair value of the reporting unit’s goodwill to the carrying amount of that goodwill. If the carrying amount of the goodwill exceeds the implied fair value of the goodwill, an impairment loss equal to the excess is recorded as a component of continuing operations. The Company performs its annual impairment tests as of October 1st.

During 2015, the Company identified certain triggering events that indicated an interim impairment test was required. As a result of the interim assessment as of September 1, 2015, the Company recorded impairment charges of $80,337 ($63,887 net of taxes) during 2015 related to the acquisitions of IOS and Chemtec. The measurement of goodwill impairment is a Level 3 fair value measurement, as the primary assumptions, including estimates of future revenue growth, gross margin, and EBITDA margin, are not market observable and require management to make judgements regarding future outcomes. Additional information concerning the impairments is set forth in Note 4 to the financial statements. No additional charges were recorded as a result of the 2015 annual impairment test. No goodwill impairment was recognized during 2014 2013, or 2012.2013.

The Company has no significant indefinite-lived intangible assets. The Company reviews a long-lived intangible asset for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. All intangible assets are amortized over their useful lives ranging from 5 to 25 years, with a total weighted average amortization period of approximately 1614 years, as ofat December 31, 2014.

2015. See Note 5, “Goodwill and Other Intangible Assets,”4 for additional information including regarding the Company’s goodwill and other intangible assets.

Environmental remediation and compliance

Environmental remediation costs are accrued when the liability is probable and costs are estimable. Environmental compliance costs, which principally include the disposal of waste generated by routine operations, are expensed as incurred. Capitalized environmental costs, when appropriate, are depreciated over their useful life. Reserves are not reduced by potential claims for recovery. Claims for recovery are recognized as agreements are reached with third parties or as amounts are received. Reserves are periodically reviewed throughout the year and adjusted to reflect current remediation progress, prospective estimates of required activity, and other factors that may be relevant, including changes in technology or regulations. See Note 20,19, “Commitments and Contingent Liabilities,” for additional information regarding the Company’s outstanding environmental and litigation reserves.

Separately, the Company maintains liabilities for asset retirement obligations in conjunction with the leases of certain of our facilities. The obligations are included within “other long-term liabilities” and totaled $832 and $667 as of December 31, 2014 and 2013, respectively. The 2014 and 2013 activity related to settlements, revisions, and accretion expense was not material.

Earnings per share

Basic earnings per share is calculated by dividing net income by the weighted average of common shares outstanding during the year. Diluted earnings per share is calculated by using the weighted average of common shares outstanding adjusted to include the potentially dilutive effect of outstanding stock options and restricted stock utilizing the treasury stock method.

Revenue recognition

The Company’s revenues are composedcomprised of product and service sales andas well as products and services provided under long-term contracts. For product and service sales, the Company recognizes revenue when the following criteria have been satisfied; persuasive evidence of a sales arrangement exists, product delivery and transfer of title to the customer has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. Within each segment,Generally, product title generally passes to the customer upon shipment. In limited cases, title does not transfer and revenue is not recognized until the customer has received the products at its physical location. Revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold.

Revenues for products and services under long-term contracts are generally recognized using the percentage-of-completion methodmethod. Sales and gross profit are recognized as work is performed based upon the proportion of actual costs incurred to estimated total project costs. Sales and gross profit are adjusted prospectively for revisions in estimated total project costs and contract values. For certain products and services, the percentage of completion is based upon actual labor costs toas a percentage of estimated total labor costs. At the time a loss contract becomes known, the entire amount of the estimated loss is recognized in the Consolidated Statement of Operations. Revenues

Revenue recognition involves judgments, including assessments of expected returns, the likelihood of nonpayment, and estimates of expected costs and profits on long-term contracts. In determining when to recognize revenue, we analyze various factors, including the specifics of the transaction, historical experience, creditworthiness of the customer, and current market and economic conditions. Changes in judgments on these factors could impact the timing and amount of revenue recognized using percentagewith a resulting impact on the timing and amount of completion are not material relative to the Company’s consolidated revenues.associated income.

Costs in excess of billings are classified as work-in-process inventory. Projects with billings in excess of costs are recorded within deferred revenue.

Deferred revenue

Deferred revenue consists of customer payments received for which the revenue recognition criteria have not yet been met as well as billings in excess of costs on percentage of completion projects. Advanced payments from customers typically relate to contracts thatwith respect to which the Company has significantly fulfilled its obligations, and the customers have paid, but due to the Company’s continuing involvement with the material,project, revenue is precluded from being recognized until title, ownership, and risk of loss have passed to the customer.

Fair value of financial instruments

The Company’s financial instruments consist of cash equivalents, accounts receivable, accounts payable, interest rate swap agreements, and short-term and long-term debt.

The carrying amounts of the Company’s financial instruments at December 31, 20142015 and 20132014 approximate fair value. See Note 19,18, “Fair Value Measurements,” for additional information.

Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Stock-based compensation

The Company applies the provisions of FASB ASC 718, “Compensation — Stock Compensation,” to account for the Company’s share-based compensation. Under the guidance, share-based compensation cost is measured at the grant date based on the calculated fair value of the award. The expense is recognized over the employees’ requisite service period, generally the vesting period of the award. See Note 15, “Stare-based Compensation,” for additional information.

Product warranty

The Company maintains a current warranty liability for the repair or replacement of defective products. For certain manufactured products, an accrual is made on a monthly basis as a percentage of cost of sales.sales based upon

historical experience. For long-termlong-lived construction products, a warranty is established when the claim is known and quantifiable. The product warranty accrual is periodically adjusted based on the identification or resolution of known individual product

warranty claims or due to changes in the Company’s historical warranty experience. At December 31, 20142015 and 2013,2014, the product warranty reserve was $11,500$8,755 and $7,483,$11,500, respectively. See Note 20,19, “Commitments and Contingencies” for additional information regarding the product warranty.

Income taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred taxes are measured using enacted tax laws and rates expected to be in effect when such differences are recovered or settled. The effect of a change in tax rates on deferred taxes is recognized in income in the period that includes the enactment date of the change.

The Company makes judgments regarding the recognition of deferred tax assets and the future realization of these assets. As prescribed by FASB ASCFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Taxes” and applicable guidance, valuation allowances must be provided for those deferred tax assets for which it is more likely than not (a likelihood more than 50%) that some portion or all of the deferred tax assets will not be realized. The guidance requires the Company to evaluate positive and negative evidence regarding the recoverability of deferred tax assets. Determination of whether the positive evidence outweighs the negative evidence and quantification of the valuation allowance requires the Company to make estimates and judgments of future financial results.

The Company evaluates all tax positions taken on its federal, state, and foreign tax filings to determine if the position is more likely than not to be sustained upon examination. For positions that meet the more likely than not to be sustained criteria, the largest amount of benefit to be realized upon ultimate settlement is determined on a cumulative probability basis. A previously recognized tax position is derecognized when it is subsequently determined that a tax position no longer meets the more likely than not threshold to be sustained. The evaluation of the sustainability of a tax position and the expected tax benefit is based on judgment, historical experience, and various other assumptions. Actual results could differ from those estimates upon subsequent resolution of identified matters. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes.

Foreign currency translation

The assets and liabilities of our foreign subsidiaries are measured using the local currency as the functional currency and are translated into U.S. dollars at exchange rates as of the balance sheet date. Income statement amounts are translated at the weighted-average rates of exchange during the year. The translation adjustment is accumulated as a separate component of accumulated other comprehensive income (loss). Foreign currency transaction gains and losses are included in determining net income. Included in net income for the years ended December 31, 2015, 2014, 2013, and 20122013 were foreign currency transaction gains of approximately $1,616, $422, and $433, and losses of $238, respectively.

Research and development

The Company expenses research and development costs as costs are incurred. For the years ended December 31, 2015, 2014, 2013, and 2012,2013, research and development expenses were $3,937, $3,096, $3,154, and $2,926,$3,154, respectively, and were principally related to the Company’s friction management and railroad monitoring system products.

Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Certain accounts in the prior year consolidated financial statements have been reclassified for comparative purposes principally to conform to the presentation in the current year period.

Subsequent events

On January 13, 2015, These reclassifications include separately presenting sales of services and cost of services sold to reflect the Company acquired the stock of Tew Holdings, LTD (Tew) for approximately $26,600, subject to a net debt and net working capital adjustment. Headquartered in Nottingham, UK, Tew provides application engineering solutions primarilyCompany’s increased service offerings attributable to the rail marketrecent acquisitions disclosed in Note 3 and other major industries. The transaction was funded with non-domestic cash and the results of Tew’s operations will be included within the Rail Products segment.

We have evaluated all other subsequent events through the date the financial statements were issued. No material recognized subsequent events were identified and all material non-recognizable subsequent events have been disclosed.a change in GAAP, as further described below.

Recently adoptedissued accounting guidance

In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-08 (ASU 2014-08) “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU 2014-08 raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. It is effective for annual periods beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. We do not expect the impact of the adoption of ASU 2014-08 to be material to our consolidated financial statements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”), which supersedes the revenue recognition requirements in Accounting Standards Codification 605, “Revenue Recognition.” ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for fiscal years beginning after December 15, 2016,2017, including interim periods within that reporting period. The Company is currently evaluating its implementation approach and assessing the impact of ASU 2014-09 on our financial position and results of operations.

In August 2014,July 2015, the FASB issued ASU 2014-15, “PresentationNo. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Financial Statements — Going Concern — DisclosuresInventory.” The pronouncement was issued to simplify the measurement of Uncertainties about an entity’s Abilityinventory and changes the measurement from lower of cost or market to Continue as a Going Concern.” ASU 2014-15 provides new guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern by incorporatinglower of cost and expanding upon certain principles that are currently in U.S. auditing standards and to provide related footnote disclosures.net realizable value. This new guidancepronouncement is effective for the annual period endingreporting periods beginning after December 15, 2016, and for annual periods and interim periods thereafter.2016. The requirementsadoption of ASU 2014-15 are2015-11 is not expected to have a significant impact on our financial position or results of operations.

Recently adopted accounting guidance

In April 2015, the FASB issued ASU No. 2015-03, “Interest-Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issuance Costs”, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Debt issuance costs related to line of credit arrangements may continue to be reflected as an asset. The recognition and measurement guidance of debt issuance costs are not affected by the amendments in this update. The standard is effective for financial statements issued for annual periods beginning after December 15, 2015, and interim periods within those annual periods. The Company early adopted the new guidance in the fourth quarter of 2015 and there was no impact to the consolidated financial statements.statements from the adoption of this guidance.

In September 2015, the FASB issued ASU No. 2015-16 “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”). ASU 2015-16 requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Prior to the issuance of the standard, entities were required to retrospectively apply adjustments made to provisional amounts recognized in a business combination. ASU 2015-16 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015, and early adoption is permitted. Accordingly, the standard is effective for the Company on January 1, 2016. The Company early adopted the new guidance in the fourth quarter of 2015 and there was no impact to the consolidated financial statements from the adoption of this guidance.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). This new guidance requires businesses to classify deferred tax liabilities and assets on their balance sheets as noncurrent. Under existing accounting, a business must separate deferred income tax liabilities and assets into current and noncurrent. ASU 2015-17 was issued as a way to simplify the way businesses classify deferred tax liabilities and assets on their balance sheets. Public companies must apply ASU 2015-17 to fiscal years beginning after December 15, 2016. Companies must follow the requirements for interim periods within those fiscal years, but early adoption at the beginning of an interim or annual period is allowed for all entities. The Company adopted this guidance during the fourth quarter of 2015 on a retrospective

basis, which resulted in the reclassification of $3,497 current deferred tax assets and $77 current deferred tax liabilities to non-current as of December 31, 2014.

Note 2.

Business Segments

The Company is a leading manufacturer, fabricator, and distributor of products and services for rail, construction, energy, and utility markets. The Company is organized and evaluated by product group, which is the basis for identifying reportable segments. Each segment represents a revenue-producing component of the Company for which separate financial information is produced internally andthat is subject to evaluation by the Company’s chief operating decision maker in deciding how to allocate resources. Each segment is evaluated based upon their segment profit contribution to the Company’s consolidated results based uponresults.

As a result of recently completed acquisitions, during the first quarter of 2015, the Company renamed the Rail Products and Tubular Products business segments to be Rail Products and Services and Tubular and Energy Services, respectively. The name changes principally reflect the additional businesses conducted by those segments as a result of acquisitions that have enhanced our product and service offerings within the rail and energy markets. Excluding the addition of current year acquisitions, there were no changes to the divisions that have been aggregated within the segments nor were there changes to the historical reportable segment profit.results.

The Company markets its products directly in all major industrial areas of the United States, Canada, and Europe, primarily through an internal sales force.

The Company’s Rail Products and Services segment provides a full line of new and used rail, trackwork, and accessories to railroads, mines, and other customers in the rail industry. The Rail segment also designs and produces concrete railroad ties, insulated rail joints, power rail, track fasteners, concrete railroad ties, coverboards, and special accessories for mass transit and other rail systems. In addition, the Rail Products and Services segment engineers, manufactures, and assembles friction management products and railway wayside data collection and management systems.

The Company’s Construction Products segment sells and rents steel sheet piling, H-bearing pile, and other piling products for foundation and earth retention requirements. The Company’s Fabricated Products division

sells bridge decking, bridge railing, structural steel fabrications, expansion joints, bridge forms, and other products for highway construction and repair. The concrete products businesses produce precast concrete buildings and a variety of specialty precast concrete products.

The Company’s Tubular Productsand Energy Services segment suppliesprovides pipe coatings for natural gas pipelines and utilities, blending, injection,upstream test and metering equipmentinspection services, precision measurement systems for the oil and gas market, and produces threaded pipe products for the oil and gas markets as well as industrial water well and irrigation markets.

The following table illustrates net sales, profits,profit (loss), assets, depreciation/amortization, and expenditures for long-lived assets of the Company by segment from continuing operations.for the years ended or at December 31, 2015, 2014, and 2013. Segment profit is the earnings from continuing operations before income taxes and includes internal cost of capital charges for net assets used in the segment at a rate of generally 1% per month.month excluding recently acquired businesses. The internal cost of capital charges are eliminated during the consolidation process. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies except that the Company accounts for inventory on a First-In, First-Out (FIFO)(“FIFO”) basis at the segment level compared to a Last-In, First-Out (LIFO)(“LIFO”) basis at the consolidated level.

 

  2014   2015 
                  Expenditures   Net Sales   Segment
Profit (Loss)
 Segment
Assets
   Depreciation/
Amortization
   Expenditures for
Long-Lived
Assets
 
  Net   Segment   Segment   Depreciation/   for Long-Lived 
  Sales   Profit   Assets   Amortization   Assets 

Rail Products

  $374,615    $30,093    $239,951    $6,153    $5,115  

Rail Products and Services

  $328,982    $27,037   $241,222    $8,098    $4,273  

Construction Products

   178,847     13,106     102,978     2,232     3,343     176,394     12,958    86,335     2,720     1,260  

Tubular Products

   53,730     5,350     130,289     3,208     6,988  

Tubular and Energy Services

   119,147     (81,344)*   216,715     14,857     4,303  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

  

 

   

 

   

 

 

Total

  $607,192    $48,549    $473,218    $11,593    $15,446    $624,523    $(41,349 $544,272    $25,675    $9,836  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

  

 

   

 

   

 

 
          
  2013 
                  Expenditures 
  Net   Segment   Segment   Depreciation/   for Long-Lived 
  Sales   Profit   Assets   Amortization   Assets 

Rail Products

  $363,667    $28,692    $252,049    $6,505    $3,383  

Construction Products

   191,751     10,206     77,900     1,758     1,805  

Tubular Products

   42,545     9,208     51,497     1,054     2,460  
  

 

   

 

   

 

   

 

   

 

 

Total

  $597,963    $48,106    $381,446    $9,317    $7,648  
  

 

   

 

   

 

   

 

   

 

 
          
  2012 
                  Expenditures 
  Net   Segment   Segment   Depreciation/   for Long-Lived 
  Sales   Profit   Assets   Amortization   Assets 

Rail Products

  $370,322    $9,074    $243,072    $9,736    $4,180  

Construction Products

   169,253     7,859     73,804     2,119     474  

Tubular Products

   48,966     12,854     13,573     599     1,350  
  

 

   

 

   

 

   

 

   

 

 

Total

  $588,541    $29,787    $330,449    $12,454    $6,004  
  

 

   

 

   

 

   

 

   

 

 

   2014 
   Net Sales   Segment
Profit
   Segment
Assets
   Depreciation/
Amortization
   Expenditures for
Long-Lived
Assets
 

Rail Products and Services

  $374,615    $30,093    $239,951    $6,153    $5,115  

Construction Products

   178,847     13,106     102,978     2,232     3,343  

Tubular and Energy Services

   53,730     5,350     130,289     3,208     6,988  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $607,192    $48,549    $473,218    $11,593    $15,446  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   2013 
   Net Sales   Segment
Profit
   Segment
Assets
   Depreciation/
Amortization
   Expenditures for
Long-Lived
Assets
 

Rail Products and Services

  $363,667    $28,692    $252,049    $6,505    $3,383  

Construction Products

   191,751     10,206     77,900     1,758     1,805  

Tubular and Energy Services

   42,545     9,208     51,497     1,054     2,460  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $597,963    $48,106    $381,446    $9,317    $7,648  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

*- Segment loss includes impairment of goodwill as further described in Note 4.

During 2015, 2014, 2013, and 2012,2013, no single customer accounted for more than 10% of the Company’s consolidated net sales. Sales between segments are immaterial.

Reconciliations of reportable segment net sales, profits, assets, depreciation/amortization, and expenditures for long-lived assets from continuing operations to the Company’s consolidated totals from continuing operations are illustrated as follows:follows for the years ended and as of December 31:

 

   2014   2013   2012 

Income from Continuing Operations:

      

Total for reportable segments

  $48,549    $48,106    $29,787  

Adjustment of inventory to LIFO

   738     37     1,118  

Unallocated interest income

   530     659     452  

Unallocated equity in income of nonconsolidated investments

   1,282     1,316     837  

Unallocated corporate amounts

   (12,043   (6,003   (8,364
  

 

 

   

 

 

   

 

 

 

Income from continuing operations, before income taxes

  $39,056    $44,115    $23,830  
  

 

 

   

 

 

   

 

 

 

Assets:

      

Total for reportable segments

  $473,218    $381,446    $330,449  

Unallocated corporate assets

   30,192     41,235     84,737  

LIFO

   (8,289   (9,027   (9,064
  

 

 

   

 

 

   

 

 

 

Total assets

  $495,121    $413,654    $406,122  
  

 

 

   

 

 

   

 

 

 

Depreciation/Amortization:

      

Total for reportable segments

  $11,593    $9,317    $12,454  

Other

   984     685     519  
  

 

 

   

 

 

   

 

 

 

Total

  $12,577    $10,002    $12,973  
  

 

 

   

 

 

   

 

 

 

Expenditures for Long-Lived Assets:

      

Total for reportable segments

  $15,446    $7,648    $6,004  

Expenditures funded through financing agreements

   1,981            

Other expenditures

   1,610     2,026     1,156  
  

 

 

   

 

 

   

 

 

 

Total

  $19,037    $9,674    $7,160  
  

 

 

   

 

 

   

 

 

 

The following table summarizes the Company’s sales from continuing operations by major geographic region in which the Company has operations:

   2014   2013   2012 

United States

  $498,025    $495,710    $485,111  

Canada

   39,375     37,290     40,892  

United Kingdom

   22,625     16,548     18,698  

Other

   47,167     48,415     43,840  
  

 

 

   

 

 

   

 

 

 
  $607,192    $597,963    $588,541  
  

 

 

   

 

 

   

 

 

 

The following table summarizes the Company’s long-lived assets from continuing operations by geographic region:

   2014   2013   2012 

United States

  $66,905    $40,717    $31,961  

Canada

   7,440     8,833     9,773  

Europe

   457     559     599  
  

 

 

   

 

 

   

 

 

 
  $74,802    $50,109    $42,333  
  

 

 

   

 

 

   

 

 

 
   2015   2014   2013 

(Loss) income from Operations:

      

Total for reportable segments

  $(41,349  $48,549    $48,106  

Adjustment of inventory to LIFO

   2,468     738     37  

Unallocated interest income

   206     530     659  

Unallocated equity in (loss) income of nonconsolidated investments

   (413   1,282     1,316  

Unallocated corporate amounts

   (11,489   (12,039   (5,980
  

 

 

   

 

 

   

 

 

 

(Loss) income from operations, before income taxes

  $(50,577  $39,060    $44,138  
  

 

 

   

 

 

   

 

 

 

Assets:

      

Total for reportable segments

  $544,272    $473,218    $381,446  

Unallocated corporate assets

   28,209     26,788     40,774  

LIFO

   (5,821   (8,289   (9,027
  

 

 

   

 

 

   

 

 

 

Total assets

  $566,660    $491,717    $413,193  
  

 

 

   

 

 

   

 

 

 

Depreciation/Amortization:

      

Total for reportable segments

  $25,675    $11,593    $9,317  

Other

   999     984     685  
  

 

 

   

 

 

   

 

 

 

Total

  $26,674    $12,577    $10,002  
  

 

 

   

 

 

   

 

 

 

Expenditures for Long-Lived Assets:

      

Total for reportable segments

  $9,836    $15,446    $7,648  

Expenditures funded through financing agreements

   288     1,981       

Other expenditures

   5,077     1,610     2,026  
  

 

 

   

 

 

   

 

 

 

Total

  $15,201    $19,037    $9,674  
  

 

 

   

 

 

   

 

 

 

The following table summarizes the Company’s sales by major product line from continuing operations:geographic region in which the Company has operations for the years ended December 31:

 

   2014   2013   2012 

Rail distribution products

  $139,529    $144,911    $155,832  

Piling products

   111,182     140,302     114,070  

Rail Technologies products

   109,053     88,670     92,826  

CXT concrete tie products

   52,562     44,108     58,182  

Allegheny Rail Products

   45,008     36,666     33,046  

Concrete products

   36,396     32,969     30,195  

Other products

   113,462     110,337     104,390  
  

 

 

   

 

 

   

 

 

 
  $607,192    $597,963    $588,541  
  

 

 

   

 

 

   

 

 

 
   2015   2014   2013 

United States

  $522,404    $498,025    $495,710  

Canada

   40,545     39,375     37,290  

United Kingdom

   26,817     22,625     16,548  

Other

   34,757     47,167     48,415  
  

 

 

   

 

 

   

 

 

 
  $624,523    $607,192    $597,963  
  

 

 

   

 

 

   

 

 

 

The following table summarizes the Company’s long-lived assets by geographic region at December 31:

   2015   2014   2013 

United States

  $118,053    $66,905    $40,717  

Canada

   6,186     7,440     8,833  

Other

   2,506     457     559  
  

 

 

   

 

 

   

 

 

 
  $126,745    $74,802    $50,109  
  

 

 

   

 

 

   

 

 

 

The following table summarizes the Company’s sales by major product line:

   2015   2014   2013 

Rail distribution products

  $126,277    $139,529    $144,911  

Rail Technologies products

   98,237     109,053     88,670  

Piling products

   94,853     111,182     140,302  

Concrete products

   52,044     36,396     32,969  

Test and inspection services

   35,906            

CXT concrete tie products

   35,740     52,562     44,108  

Allegheny Rail Products

   35,155     45,008     36,666  

Other products

   146,311     113,462     110,337  
  

 

 

   

 

 

   

 

 

 
  $624,523    $607,192    $597,963  
  

 

 

   

 

 

   

 

 

 

Note 3.

Acquisitions

TEW Plus, LTD

On November 23, 2015, the Company acquired the 75% balance of the remaining shares of TEW Plus, LTD (“Tew Plus”) for $2,130, net of cash acquired. Headquartered in Nottingham, UK, Tew Plus provides telecommunications and security systems to the railway and commercial markets. Their offerings include full installation services including: design, project management, survey, and commissioning along with future maintenance. The results of Tew Plus’ operations are included within the Rail Products and Services segment from the date of acquisition.

Inspection Oilfield Services

On March 13, 2015, the Company acquired IOS Holdings, Inc. (“IOS”) for $167,404, net of cash acquired and a net working capital receivable adjustment of $2,363. The purchase agreement includes an earn-out provision for the seller to generate an additional $60,000 of proceeds upon achieving certain levels of EBITDA during the three year period beginning on January 1, 2015. The Company has not accrued an estimated earn-out obligation based upon a probability weighted valuation model of the projected EBITDA results, which indicates that the minimum target will not be achieved. Approximately $7,600 of the purchase price relates to amounts held in escrow to satisfy potential indemnity claims made under the purchase agreement. Headquartered in Houston, TX,

IOS is a leading independent provider of tubular management services with operations in every significant oil and gas producing region in the continental United States. The acquisition is included within our Tubular and Energy Services segment from the date of acquisition. See Note 4 with respect to an impairment of the goodwill related to this acquisition.

TEW Holdings, LTD

On January 13, 2015, the Company acquired TEW Holdings, LTD (“Tew”) for $26,467, net of cash acquired, working capital, and net debt adjustments totaling $4,200. The purchase price includes approximately $600 which is held in escrow to satisfy potential indemnity claims made under the purchase agreement. Headquartered in Nottingham, UK, Tew provides application engineering solutions primarily to the rail market and other major industries. The results of Tew’s operations are included within the Rail Products and Services segment from the date of acquisition.

Chemtec Energy Services, L.L.C.

On December 30, 2014, the Company acquired Chemtec Energy Services, L.L.C. (Chemtec)(“Chemtec”) for $66,719, net of cash received, which is inclusive of an estimated $1,867 related to working capital adjustments. The cash payment included $5,000 which will beis held in escrow to satisfy anypotential indemnity claims made under the purchase agreement. Headquartered in Willis, TX, Chemtec is a domestic manufacturer and turnkey provider of blending, injection, and metering equipment for the oil and gas industry. The acquired business is included within our Tubular Products segment fromand Energy Services segment. See Note 4 with respect to an impairment of the acquisition date through December 31, 2014, and was not materialgoodwill related to the periods presented.this acquisition.

FWO

On October 29, 2014, the Company acquired FWO, a business of Balfour Beatty Rail GmbH for $1,103, netinclusive of a $161 post-closing working capital receivable adjustment. Headquartered in Germany, FWO is engaged in the electronic track lubrication and maintenance business and has been included in our Rail Products segment for the period October 29 through December 31, 2014. FWO was not material to the periods presented.and Services segment.

Carr Concrete

On July 7, 2014, the Company acquired Carr Concrete Corporation (Carr)(“Carr”) for $12,480, inclusive of a $189 post-closing purchase price adjustment. Carr is a provider of pre-stressed and precast specialty concrete products located in Waverly, WV and the transaction was funded with cash on hand.WV. Included within the purchase price is $1,000 which will beis held in escrow to satisfy anypotential indemnity claims made under the purchase agreement. The results of Carr’s operations for the period July 7, 2014 through December 31, 2014 are included in our Construction Products segment and were not material to the periods presented.

Ball Winch

During 2013, the Company acquired Ball Winch, LLC (Ball Winch). Cash payments totaling $37,500 were made during 2013 and a post-closing working capital adjustment of $495 was paid in February 2014 resulting in a total purchase price of $37,995. Included within the purchase price was $3,300 which is held in escrow to satisfy any indemnity claims under the purchase agreement. The results of operations for Ball Winch are included in the Company’s Tubular Products segment.

Acquisition Summary

Each transaction was accounted for under the acquisition method of accounting under U.S. generally accepted accounting principles which requires an acquiring entity to recognize, with limited exceptions, all of the assets acquired and liabilities assumed in a transaction at fair value as of the acquisition date. Goodwill primarily representedrepresents the value paid for each acquisition’s enhancement ofto the Company’s product and service offerings and capabilities, as well as a premium payment related to the rightability to control the acquired assets. The Company has concluded that intangible assets and goodwill values resulting from thesethe Chemtec, FWO, and Carr transactions will be deductible for tax purposes.

The Company incurred $2,240$760 and $182$2,240 of acquisition-related costs which are included in the results of operations within selling and administrative costs for the years ended December 31, 20142015 and 2013.2014.

The following unaudited pro forma consolidated income statement presents the Company’s results as if the acquisitions of IOS, Tew, and Chemtec had occurred on January 1, 2014. The 2015 pro forma results include the impact of the current year impairment of goodwill as further described in Note 4.

   Twelve months ended
December, 31
 
   2015   2014 

Net sales

  $640,596    $806,384  

Gross profit

   138,123     183,163  

Net (loss) income

   (44,399   41,745  

Diluted (loss) earnings per share

    

As Reported

  $(4.33  $2.48  

Pro forma

  $(4.32  $4.04  

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of the acquisition:

 

Allocation of Purchase Price

  December 30,
2014  - Chemtec
   October 29,
2014  -  FWO
   July 7,
2014  - Carr
   November 7,
2013 - Ball Winch
  November 23,
2015 - Tew Plus
 March 13,
2015 - IOS
 January 13,
2015 - Tew
 December 30,
2014 - Chemtec
 October 29,
2014 - FWO
 July 7,
2014 - Carr
 

Current assets

  $15,528    $131    $3,180    $1,857   $4,420   $19,877   $12,125   $15,528   $131   $3,180  

Other assets

             45     64        708                45  

Property, plant, and equipment

   4,705          7,648     5,555    47    51,453    2,398    4,705        7,648  

Goodwill

   22,302     971     1,936     16,544    822    69,908  8,772    22,302  971    1,936  

Other intangibles

   33,130     419     1,348     14,682    1,074    50,354    14,048    33,130    419    1,348  

Current liabilities

   (6,756   (418   (1,677   (707

Liabilities assumed

  (3,597  (23,596  (6,465  (6,756  (418  (1,677
  

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total

  $68,909    $1,103    $12,480    $37,995   $2,766   $168,704   $30,878   $68,909   $1,103   $12,480  
  

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

 

*- See Note 4 with respect to an impairment of the goodwill related to this acquisition.

The following table summarizes the preliminary estimates of the fair values and amortizable lives of the identifiable intangible assets acquired in 2014:acquired:

 

Intangible Asset

  December 30,
2014 - Chemtec
   October 29,
2014  -  FWO
   July 7,
2014 -  Carr
   November 7,
2013  - Ball Winch
  November 23,
2015 - Tew Plus
 March 13,
2015 - IOS
 January 13,
2015 - Tew
 December 30,
2014 - Chemtec
 October 29,
2014 - FWO
 July 7,
2014 - Carr
 

Trade name

  $3,149    $    $613    $723   $   $2,641   $870   $3,149   $   $613  

Customer relationships

   23,934     34     524         817    41,171    10,035    23,934    34    524  

Technology

   4,930     341     87     11,129    203    4,364    2,480    4,930    341    87  

Non-competition agreements

   1,117     44     124     2,830    54    2,178    663    1,117    44    124  
  

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Total identified intangible assets

  $33,130    $419    $1,348    $14,682   $1,074   $50,354   $14,048   $33,130   $419   $1,348  
  

 

   

 

   

 

   

 

  

 

  

 

  

 

  

 

  

 

  

 

 

The purchase price allocationsallocation for Chemtec, FWO, and Carr areTew Plus is based on a preliminary valuations.valuation. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement recognized for assets or liabilities assumed, the Company will retrospectively adjustrecognize adjustments to provisional amounts that are identified during the amounts recognized as of the acquisition date. Intangible asset values for the 2013 acquisition of Ball Winch were finalized during 2014.

Note 4.

Discontinued Operations

On June 4, 2012, the Company sold substantially all of the assets and liabilities of its railway securement business, Shipping Systems Division (SSD), for $8,579, resulting in a pre-tax gain of approximately $3,508.

On August 30, 2012, the Company sold substantially all of the assets and liabilities of its precise structural products business (Precise), for $2,643, resulting in a pre-tax loss of approximately $315.

The operations of these divisions qualified as a “component of an entity” under FASB ASC 205-20, “Presentation of Financial Statements — Discontinued Operations”. The operations are classified as discontinued for all periods presented. Future expenses of discontinued operations are not expected to be material. SSD and Precise were previously reportedmeasurement period in the Rail Products and Construction Products segments, respectively.

Net sales and income, includingreporting period in which the 2012 pre-tax gain of $3,193, from discontinued operations were as follows for the three years ended December 31:adjustment amounts are determined.

   2014  2013  2012 

Net sales

  $2   $73   $8,705  
  

 

 

  

 

 

  

 

 

 

Income from discontinued operations

  $4   $23   $3,842  

Income tax expense

   2    9    2,418  
  

 

 

  

 

 

  

 

 

 

Income from discontinued operations

  $2   $14   $1,424  
  

 

 

  

 

 

  

 

 

 

Effective income tax rate

   50.0  39.1  62.9
  

 

 

  

 

 

  

 

 

 

Goodwill of $2,588 allocated to SSD for discontinued operations was not deductible for income tax purposes, resulting in a 62.9% effective tax rate for 2012.

Note 5.4.

Goodwill and Other Intangible Assets

The following table represents the goodwill balance by reportable segment:

 

  Rail Products   Construction Products   Tubular Products   Total   Rail Products
and Services
   Construction
Products
   Tubular and Energy
Services
   Total 

Balance at December 31, 2012

  $38,026    $3,211    $    $41,237  

Acquisitions

             16,544     16,544  
  

 

   

 

   

 

   

 

 

Balance at December 31, 2013

   38,026     3,211     16,544     57,781  

Balance at December 31, 2014

  $38,956    $5,147    $38,846    $82,949  

Acquisitions

   971     1,936     22,302     25,209     9,594          69,908     79,502  

Foreign currency translation impact

   (41             (41   (362             (362

Impairment charges

             (80,337   (80,337
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Balance at December 31, 2014

  $38,956    $5,147    $38,846    $82,949  

Balance at December 31, 2015

  $48,188    $5,147    $28,417    $81,752  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

The Company performs goodwill impairment tests annually during the fourth quarter, and also performs interim goodwill impairment tests if it is determined that it is more likely than not that the fair value of a reporting unit is less than the carrying amount. Qualitative factors are assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. During the third quarter of 2015, the Company’s IOS and Chemtec reporting units underperformed against their projections and revised their forecasts downward. Additionally, in August 2015, the Company revised its full year outlook as a result of trends in the energy market as well as the loss of sales to Union Pacific Railroad (“UPRR”). The impact of these factors led to a decline in the Company’s market capitalization which fell below the shareholder’s equity value. The Company concluded that the aggregation of these events were indications of potential impairments.

Based upon these indicators, with the assistance of an independent valuation firm, the Company performed an interim test for impairment of goodwill as of September 1, 2015. The valuation included the use of both the income and market approach. The Company applied greater weighting to the income approach as the Company believes it is the most reliable indication of value as it captures forecasted revenues and earnings for the reporting units in the projection period that the market approach may not directly incorporate.

The results of the test indicated that the IOS and Chemtec reporting units’ respective fair values were less than their carrying values. The fair values of all other reporting units that maintain goodwill exceeded their respective carrying values and were not at risk of impairment. As a result of the impact of the downturn within the energy markets on both reporting units, the expectations of a prolonged period before recovery, and the reduction in active U.S. land oil rig count, which specifically impacted the IOS reporting unit, the near term projections of these reporting units have deteriorated and the expected future growth of each of these reporting units was insufficient to support the carrying values.

The Company compared the implied fair values of the IOS and Chemtec goodwill amounts to the carrying amounts of that goodwill. The fair values of the IOS and Chemtec reporting units were allocated to all of the assets and liabilities of the respective reporting unit as if IOS and Chemtec had been acquired in business combinations as of the test date and the fair value was the purchase price paid to acquire each reporting unit. As a result of this valuation, it was determined that the carrying amounts of IOS’s and Chemtec’s goodwill exceeded the implied fair values of that goodwill. The Company recognized a non-cash goodwill impairment charge of $80,337 ($63,887 net of taxes) to write down the carrying values to the implied fair values, of which $69,908 represents the full carrying value of goodwill related to the IOS acquisition and the remaining $10,429 relates to the Chemtec reporting unit. No additional impairments were triggered as a result of the Company’s 2015 annual impairment test.

The Company performed a recoverability test on the long-lived tangible and definite lived intangible assets related to the IOS and Chemtec acquisitions and concluded that no impairment existed. The Company will continue to monitor these assets, including their respectful useful lives, in future periods.

The following table represents the gross intangible assets balance by reportable segment:segment at December 31:

 

   2014   2013 

Rail Products

  $44,781    $44,455  

Construction Products

   3,178     1,830  

Tubular Products

   47,812     14,682  
  

 

 

   

 

 

 
  $95,771    $60,967  
  

 

 

   

 

 

 
   2015   2014 

Rail Products and Services

  $59,226    $44,781  

Construction Products

   1,348     3,178  

Tubular and Energy Services

   98,166     47,812  
  

 

 

   

 

 

 
  $158,740    $95,771  
  

 

 

   

 

 

 

The components of the Company’s intangible assets are as follows:follows at:

 

  2014 
  Weighted Average   Gross       Net 
  Amortization Period   Carrying   Accumulated   Carrying   December 31, 2015 
  In Years   Value   Amortization   Amount   Weighted Average
Amortization
In Years
   Gross
Carrying
Value
   Accumulated
Amortization
   Net
Carrying
Amount
 

Non-compete agreements

   5    $4,143    $(705  $3,438     4    $6,984    $(2,495  $4,489  

Patents

   10     564     (189   375     10     378     (124   254  

Customer relationships

   19     44,450     (4,679   39,771     16     94,338     (8,441   85,897  

Supplier relationships

   5     350     (268   82     5     350     (335   15  

Trademarks and trade names

   14     10,765     (1,855   8,910     13     14,252     (3,025   11,227  

Technology

   14     35,499     (5,941   29,558     13     42,438     (9,393   33,045  
    

 

   

 

   

 

     

 

   

 

   

 

 
    $95,771    $(13,637  $82,134      $158,740    $(23,813  $134,927  
    

 

   

 

   

 

     

 

   

 

   

 

 

 

  2013 
  Weighted Average   Gross       Net 
  Amortization Period   Carrying   Accumulated   Carrying   December 31, 2014 
  In Years   Value   Amortization   Amount   Weighted Average
Amortization
In Years
   Gross
Carrying
Value
   Accumulated
Amortization
   Net
Carrying
Amount
 

Non-compete agreements

   5    $2,860    $(117  $2,743     5    $4,143    $(705  $3,438  

Patents

   10     639     (201   438     10     564     (189   375  

Customer relationships

   23     19,960     (3,575   16,385     19     44,450     (4,679   39,771  

Supplier relationships

   5     350     (213   137     5     350     (268   82  

Trademarks and trade names

   16     7,003     (1,334   5,669     14     10,765     (1,855   8,910  

Technology

   15     30,155     (3,681   26,474     14     35,499     (5,941   29,558  
    

 

   

 

   

 

     

 

   

 

   

 

 
    $60,967    $(9,121  $51,846      $95,771    $(13,637  $82,134  
    

 

   

 

   

 

     

 

   

 

   

 

 

Intangible assets are amortized over their useful lives ranging from 5 to 25 years, with a total weighted average amortization period of approximately 1614 years. Amortization expense from continuing operations for the years ended December 31, 2015, 2014, and 2013 was $12,245, $4,695, and 2012 was $4,695, $3,112, and $2,961, respectively.

Estimated amortization expense from continuing operations for the years 20152016 and thereafter is as follows:

 

  Amortization
Expense
   Amortization
Expense
 

2015

  $7,176  

2016

   7,012    $13,093  

2017

   6,981     12,200  

2018

   6,876     11,868  

2019

   6,152     11,137  

2020 and thereafter

   47,937  

2020

   10,706  

2021 and thereafter

   75,923  
  

 

   

 

 
  $82,134    $134,927  
  

 

   

 

 

Note 6.5.

Accounts Receivable

Accounts receivable from continuing operations at December 31, 20142015 and 20132014 are summarized as follows:

 

   2014   2013 

Trade

  $90,494    $98,474  

Allowance for doubtful accounts

   (1,036   (1,099
  

 

 

   

 

 

 
   89,458     97,375  

Other

   720     1,062  
  

 

 

   

 

 

 
  $90,178    $98,437  
  

 

 

   

 

 

 

Bad debt expense/(recovery) was $462, $236 and $ (319) in 2014, 2013, and 2012, respectively.

   2015   2014 

Trade

  $79,100    $90,494  

Allowance for doubtful accounts

   (1,485   (1,036
  

 

 

   

 

 

 
   77,615     89,458  

Other

   872     720  
  

 

 

   

 

 

 
  $78,487    $90,178  
  

 

 

   

 

 

 

The Company’s customers are principally in the Rail, Construction,rail, construction, and Tubular Products segments of the economy. As ofenergy sectors. At December 31, 20142015 and 2013,2014, trade receivables, net of allowance for doubtful accounts, from customers in these markets were as follows:

 

   2014   2013 

Rail Products

  $45,931    $57,342  

Construction Products

   33,760     35,711  

Tubular Products

   9,767     4,322  
  

 

 

   

 

 

 
  $89,458    $97,375  
  

 

 

   

 

 

 
   2015   2014 

Rail Products and Services

  $43,155    $45,931  

Construction Products

   20,489     33,760  

Tubular and Energy Services

   13,971     9,767  
  

 

 

   

 

 

 
  $77,615    $89,458  
  

 

 

   

 

 

 

Credit is extended based upon an evaluation of the customer’s financial condition and, while collateral is not required, the Company oftenperiodically receives surety bonds that guarantee payment. Credit terms are consistent with industry standards and practices.

Note 7.6.

Inventory

Inventories of continuing operations of the Company at December 31, 20142015 and 20132014 are summarized in the following table:

 

   2014   2013 

Finished goods

  $65,335    $55,166  

Work-in-process

   16,188     11,332  

Raw materials

   21,855     19,485  
  

 

 

   

 

 

 

Total inventories at current costs

   103,378     85,983  

Less: LIFO reserve

   (8,289   (9,027
  

 

 

   

 

 

 
  $95,089    $76,956  
  

 

 

   

 

 

 

   2015   2014 

Finished goods

  $62,547    $65,335  

Work-in-process

   20,178     16,188  

Raw materials

   19,492     21,855  
  

 

 

   

 

 

 

Total inventories at current costs

   102,217     103,378  

Less: LIFO reserve

   (5,821   (8,289
  

 

 

   

 

 

 
  $96,396    $95,089  
  

 

 

   

 

 

 

At December 31, 20142015 and 2013,2014, the LIFO carrying value of inventories for book purposes exceeded the LIFO value for tax purposes by approximately $5,046 and $11,697, and $12,241, respectively. As ofAt December 31, 2015, 2014, 2013, and 20122013 liquidation of certain LIFO inventory layers carried at costs whichthat were higher than the costs of current purchases resulted in increases in cost of goods sold of $115, $6 and $1,128, and $15 respectively.

Note 8.7.

Property, Plant, and Equipment

Property, plant, and equipment of continuing operations at December 31, 20142015 and 20132014 consist of the following:

 

  2014   2013   2015   2014 

Land

  $9,102    $4,862    $17,054    $9,102  

Improvements to land and leaseholds

   29,016     24,903     16,590     29,016  

Buildings

   22,807     15,834     39,366     22,807  

Machinery and equipment, including equipment under capitalized leases

   95,547     88,803     118,677     95,547  

Construction in progress

   12,033     3,567     11,844     12,033  
  

 

   

 

   

 

   

 

 
   168,505     137,969     203,531     168,505  
  

 

   

 

   

 

   

 

 

Less accumulated depreciation and amortization, including accumulated amortization of capitalized leases

   93,703     87,860     76,786     93,703  
  

 

   

 

   

 

   

 

 
  $74,802    $50,109    $126,745    $74,802  
  

 

   

 

   

 

   

 

 

Depreciation expense, including amortization of assets under capital leases, for the years ended December 31, 2015, 2014, 2013, and 20122013 amounted to $14,429, $7,882 $6,890 and $9,979,$6,890, respectively.

Note 9.8.

Investments

The Company is a member of a joint venture, L B Pipe and Coupling Products, LLC (LB(“LB Pipe JV)JV”), in which it maintains a 45% ownership interest. The LB Pipe JV manufactures, markets, and sells various precision coupling products for the energy, utility, and construction markets and is scheduled to terminate on June 30, 2019.

Under applicable guidance for variable interest entities in ASC 810, “Consolidation,” the Company determined that the LB Pipe JV is a variable interest entity. The Company concluded that it is not the primary beneficiary of the variable interest entity, as the Company does not have a controlling financial interest and does not have the power to direct the activities that most significantly impact the economic performance of the LB Pipe JV. Accordingly, the Company concluded that the equity method of accounting remains appropriate.

During the years ended December 31, 20142015 and 2013,2014, each of the LB Pipe JV members received proportional distributions of equity from the LB Pipe JV. The Company’s 45% ownership interest resulted in cash distributions of $630$90 and $558$630 as of December 31, 20142015 and 2013,2014, respectively. There were no changes to the members’ ownership interests as a result of the distribution.

The Company recorded equity in the (loss) income of the LB Pipe JV of approximately ($410), $1,286 $1,316 and $837$1,316 for the years ended December 31, 2015, 2014, 2013, and 2012,2013, respectively.

As of December 31, 20142015 and 2013,2014, the Company had a nonconsolidated equity method investment of $5,746$5,246 and $5,090,$5,746, respectively, in the LB Pipe JV and other investments totaling $75 and $78 as of December 31, 2014.2015 and 2014, respectively.

The Company’s exposure to loss results from its capital contributions, net of the Company’s share of the LB Pipe JV’s income or loss, and its net investment in the direct financing lease covering the facility used by the LB Pipe JV for its operations. The carrying amounts with the maximum exposure to loss of the Company at December 31, 20142015 and 2013,2014, respectively, are as follows:

 

  2014   2013   2015   2014 

LB Pipe JV equity method investment

  $5,746    $5,090    $5,246    $5,746  

Net investment in direct financing lease

   1,117     1,224     995     1,117  
  

 

   

 

   

 

   

 

 
  $6,863    $6,314    $6,241    $6,863  
  

 

   

 

   

 

   

 

 

The Company is leasing five acres of land and two facilities to the LB Pipe JV over a period of 9.5 years, through June 30, 2019, with a 5.5 year renewal period. In November 2012, the Company executed the first amendment to its lease with the JV. The amendment included the addition of a second facility built by the Company that was leased to the JV. The current monthly lease payments, including interest, approximate $17, with a balloon payment of approximately $488, which is required to be paid either at the termination of the lease, allocated over the renewal period, or during the initial term of the lease. This lease qualifies as a direct financing lease under the applicable guidance in ASC 840-30,Leases.

The following is a schedule of the direct financing minimum lease payments for the years 20152016 and thereafter

 

  Minimum
Lease
Payments
   Minimum Lease Payments 

2015

  $122  

2016

   131    $131  

2017

   140     140  

2018

   150     150  

2019

   574     574  

2020 and thereafter

     
  

 

   

 

 
  $1,117    $995  
  

 

   

 

 

As a result of the November 23, 2015 acquisition of Tew Plus, the Company remeasured its 25% equity investment in Tew Plus resulting in other income of $580 for the period ended December 31, 2015. Refer to Note 20, “Other Income,” for additional information on the gain.

Note 10.9.

Deferred Revenue

Deferred revenue of $6,934 and $8,034 and $5,715 as ofat December 31, 20142015 and 2013,2014, respectively, consists of customer payments received for which the revenue recognition criteria have not yet been met as well as billings in excess of costs on percentage of completion projects. Advanced payments from customers typically relate to contracts thatwith respect to which the Company has significantly fulfilled its obligations, and the customers have paid, but due to the Company’s continuing involvement with the material,project, revenue is precluded from being recognized until title, ownership, and risk of loss have passed to the customer.

Note 11.10.

Long-Term Debt and Related Matters

Long-term debt at December 31, 20142015 and 20132014 consists of the following:

 

  2014   2013   2015   2014 

Revolving credit facility

  $24,200    $    $165,000    $24,200  

Financing agreement payable in installments through July 1, 2017 with an interest rate of 3.00% at December 31, 2014

   1,781       

Lease obligations payable in installments through 2019 with a weighted average interest rate of 3.50% at December 31, 2014 and 5.37% December 31, 2013

   447     56  

Financing agreement payable in installments through July 1, 2017 with an interest rate of 3.00% at December 31, 2015

   1,247     1,781  

Lease obligations payable in installments through 2019 with a weighted average interest rate of 3.09% at December 31, 2015 and 3.50% December 31, 2014

   2,507     447  
  

 

   

 

   

 

   

 

 

Total

   26,428     56     168,754     26,428  

Less current maturities

   676     31     1,335     676  
  

 

   

 

   

 

   

 

 

Long-term portion

  $25,752    $25    $167,419    $25,752  
  

 

   

 

   

 

   

 

 

The maturities of long-term debt for each of the succeeding five years subsequent to December 31, 2014 are as follows:

 

2015

  $676  
  December 31, 2015 

2016

   853    $1,335  

2017

   621     1,121  

2018

   67     558  

2019

   24,211     500  

2020 and thereafter

     

2020

   165,240  

2021 and thereafter

     
  

 

   

 

 

Total

  $26,428    $168,754  
  

 

   

 

 

Borrowings

United States

On September 23, 2014, theMarch 13, 2015, L.B. Foster Company, its domestic subsidiaries, and certain of its Canadian subsidiaries (“L.B. Foster”) entered into an amended and restated $200,000$335,000 Revolving Credit Facility Credit Agreement (“Amended Credit Agreement”) with PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., and Citizens Bank of Pennsylvania.Pennsylvania, and Branch Banking and Trust Company. This Amended Credit Agreement modifies the prior revolving credit facility, which had a maximum credit line of $125,000.$200,000. The Amended Credit Agreement provides for a five-year, unsecured revolving credit facility that permits borrowingborrowings of up to $200,000$335,000 for the U.S. borrowers and a sublimit of the equivalent of $25,000 U.S. dollars that is available to the Canadian borrowers. The Amended Credit Agreement also modifies the accordion feature in the prior revolving credit facility which permitted a maximum increase of $50,000. The Amended Credit Agreement’s accordion feature permits the CompanyL.B. Foster to increase the available revolving borrowings under the facility by up to an additional $100,000 subject to the Company’sL.B. Foster’s receipt of increased commitments from existing lenders or new commitments from new lenders and to certain conditions being satisfied. The Amended Credit Agreement also increases the sublimit for the issuance of trade and standby letters of credit from $20,000 to $30,000.

Borrowings under the Amended Credit Agreement will bear interest at rates based upon either the base rate or Euro-rate plus applicable margins. Applicable margins are dictated by the ratio of the Company’sL.B. Foster’s indebtedness less consolidated cash on hand to the Company’sL.B. Foster’s consolidated EBITDA, as defined in the underlying Amended Credit Agreement. The base rate is the highest of (a) PNC Bank’s prime rate, (b) the Federal Funds Rate plus 0.50% or (c) the daily Euro-rate (as defined in the Amended Credit Agreement) plus 1.00%. The base rate and Euro-rate spreads range from 0.00% to 1.00%1.50% and 1.00% to 2.00%2.50%, respectively.

The Amended Credit Agreement includes two financial covenants: (a) Leverage Ratio, defined as the Company’s indebtednessL.B. Foster’s Indebtedness less consolidated cash on hand, in excess of $15,000, divided by the Company’sL.B. Foster’s consolidated

EBITDA, which must not exceed 3.25 to 1.00 and (b) Minimum Interest Coverage, defined as consolidated EBITDA less capital expendituresCapital Expenditures divided by consolidated interest expense, which must be no less than 3.00 to 1.00.

The Amended Credit Agreement permits the CompanyL.B. Foster to pay dividends, distributions, and make redemptions with respect to its stock provided no event of default or potential default (as defined in the Amended Credit Agreement) has occurred prior to or after giving effect to the dividend, distribution, or redemption. Dividends, distributions, and redemptions are capped at $25,000 per year when funds are drawn on the facility. If no drawings on the facility exist, dividends, distributions, and redemptions in excess of $25,000 per year are subjected to a limitation of $75,000 in the aggregate.aggregate over the life of the facility. The $75,000 aggregate limitation also permits certain loans, investments, and acquisitions.

Other restrictions exist at all times including, but not limited to, limitation of the Company’sL.B. Foster’s sale of assets, other indebtedness incurred by either the borrowers or the non-borrower subsidiaries of the Company,L.B. Foster, guarantees, and liens.

The Company had $24,200$165,000 outstanding borrowings under the Amended Credit Agreement at December 31, 20142015 and had available borrowing capacity of $175,375 and$169,474 at December 31, 2014.2015. As of December 31, 2013,2014, the Company had no$24,200 in outstanding borrowings and an available borrowing capacity of $124,186$175,375 under the previous $125,000 revolving facility.facility with a borrowing capacity of $200,000.

As ofAt December 31, 2014,2015, the Company was in compliance with the Amended Credit Agreement’s covenants.

Letters of Credit

At December 31, 20142015 and 2013,2014, the Company had outstanding letters of credit of approximately $425$526 and $814,$425, respectively.

United Kingdom

A subsidiary of the Company has a working capitalcredit facility with NatWest Bank for its United Kingdom operations which includes an overdraft availability of £1,500 pounds sterling (approximately $2,337$2,210 at December 31, 2014)2015). This credit facility supports the subsidiary’sUnited Kingdom’s working capital requirements and is collateralized by substantially all of the assets of its United Kingdom operations. The interest rate on this facility is the financial institution’s base rate plus 1.50%. Outstanding performance bonds reduce availability under this credit facility. The subsidiary of the Company hadThere were no outstanding borrowings under this credit facility as ofat December 31, 2014. There was $602015, however, there were $16 in outstanding guarantees (as defined in the underlying agreement) at December 31, 2013.2015. This credit facility was renewed and amended during the thirdfourth quarter of 2014 with no significant changes2015 to include Tew and Tew Plus as parties to the agreement. All other underlying terms orand conditions inremained unchanged as a result of the facility.renewal. It is the Company’s intention to renew this credit facility with NatWest Bank during the annual review over the credit facility in 2015.2016.

The United Kingdom loan agreements contain certain financial covenants that require that subsidiary to maintain senior interest and cash flow coverage ratios. The subsidiary was in compliance with these financial covenants as ofat December 31, 20142015 and 2013.2014. The subsidiary had available borrowing capacity of $2,337$2,194 and $2,424$2,337 at December 31, 2015 and 2014, and 2013, respectively.

Note 12.11.

Stockholders’ Equity

The Company had authorized shares of 20,000,000 in common stock with 11,115,779 shares issued at December 31, 20142015 and 2013.2014. The common stock has a par value of $.01$0.01 per share and the Company paid dividends of $0.03$0.04 per quarter through September 30, 2014. During the 2014 fourth quarter, the Board approved an increase to $0.04 per share per quarter.during 2015.

At December 31, 20142015 and 2013,2014, the Company had authorized shares of 5,000,000 in preferred stock. No preferred stock has been issued. No par value has been assigned to the preferred stock.

On December 4, 2013, the Company’s Board of Directors authorized the purchase of up to $15,000 in shares of its common stock through a share repurchase program at prevailing market prices or privately negotiated transactions. There were no share repurchasesThe Company repurchased 80,512 shares, for an aggregate price of $1,587, during 2014, and2015 under the authorization will expire onrepurchase program. On December 9, 2015, the Board of Directors authorized the repurchase of up to $30,000 of the Company’s common shares until December 31, 2016.2017. This authorization became effective January 1, 2016 and replaces the prior authorization.

As ofAt December 31, 20142015 and 2013,2014, the Company withheld 21,67625,340 and 16,16621,676 shares for approximately $985$1,114 and $708,$985, respectively, from employees to pay their withholding taxes in connection with the exercise and/or vesting of stock options and restricted stock awards.

Cash dividends of $1,656, $1,345 and $1,240 were declared and $1,029 were paid in 2015, 2014, 2013, and 2012,2013, respectively.

 

  Common Stock   Common Stock 

Share Activity

  Treasury   Outstanding   Treasury   Outstanding 
  (Number of Shares)   (Number of Shares) 

Balance at end of 2011

   1,042,376     10,073,403  

Issued for stock-based compensation plans

   (75,995   75,995  
  

 

   

 

 

Balance at end of 2012

   966,381     10,149,398     966,381     10,149,398  

Issued for stock-based compensation plans

   (39,123   39,123  

Issued for share-based compensation plans

   (39,123   39,123  
  

 

   

 

   

 

   

 

 

Balance at end of 2013

   927,258     10,188,521     927,258     10,188,521  

Issued for stock-based compensation plans

   (53,884   53,884  

Issued for share-based compensation plans

   (53,884   53,884  
  

 

   

 

   

 

   

 

 

Balance at end of 2014

   873,374     10,242,405     873,374     10,242,405  

Issued for share-based compensation plans

   (59,113   59,113  

Repurchased common shares

   80,512     (80,512
  

 

   

 

   

 

   

 

 

Balance at end of 2015

   894,773     10,221,006  
  

 

   

 

 

Note 13.12.

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax, for the years ended December 31, 20142015 and 2013,2014, are as follows:

 

  2014   2013   2015   2014 

Pension and post-retirement benefit plan adjustments

  $(4,089  $(1,643  $(3,069  $(4,089

Unrealized loss on interest rate swap contracts

   (121     

Foreign currency translation adjustments

   (7,803   (2,940   (14,750   (7,803
  

 

   

 

   

 

   

 

 
  $(11,892  $(4,583  $(17,940  $(11,892
  

 

   

 

   

 

   

 

 

Foreign currency translation adjustments are generally not adjusted for income taxes as they relate to indefinite investments in non U.S. subsidiaries. See Note 15, “Income Taxes”.

Note 14.13.

Earnings Per Common Share

(Share amounts in thousands)

The following table sets forth the computation of basic and diluted earnings per common share for the three years ended December 31:

 

   2014   2013   2012 

Numerator for basic and diluted earnings per common share —

      

Income available to common stockholders:

      

Income from continuing operations

  $25,654    $29,276    $14,764  

Income from discontinued operations

   2     14     1,424  
  

 

 

   

 

 

   

 

 

 

Net income

  $25,656    $29,290    $16,188  
  

 

 

   

 

 

   

 

 

 

Denominator:

      

Weighted average shares

   10,225     10,175     10,124  
  

 

 

   

 

 

   

 

 

 

Denominator for basic earnings per common share

   10,225     10,175     10,124  

Effect of dilutive securities:

      

Employee stock options

   6     11     16  

Other stock compensation plans

   101     74     94  
  

 

 

   

 

 

   

 

 

 

Dilutive potential common shares

   107     85     110  
  

 

 

   

 

 

   

 

 

 

Denominator for diluted earnings per common share — adjusted weighted average shares and assumed conversions

   10,332     10,260     10,234  
  

 

 

   

 

 

   

 

 

 

Basic earnings per common share:

      

Continuing operations

  $2.51    $2.88    $1.46  

Discontinued operations

   0.00     0.00     0.14  
  

 

 

   

 

 

   

 

 

 

Basic earnings per common share

  $2.51    $2.88    $1.60  
  

 

 

   

 

 

   

 

 

 

Diluted earnings per common share:

      

Continuing operations

  $2.48    $2.85    $1.44  

Discontinued operations

   0.00     0.00     0.14  
  

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

  $2.48    $2.85    $1.58  
  

 

 

   

 

 

   

 

 

 

Dividends paid per common share

  $0.13    $0.12    $0.10  
  

 

 

   

 

 

   

 

 

 
   2015   2014   2013 

Numerator for basic and diluted earnings per common share —

      

(Loss) income available to common stockholders:

      

Net (loss) income

  $(44,445  $25,656    $29,290  

Denominator:

      

Weighted average shares outstanding

   10,254     10,225     10,175  
  

 

 

   

 

 

   

 

 

 

Denominator for basic earnings per common share

   10,254     10,225     10,175  

Effect of dilutive securities:

      

Employee stock options

        6     11  

Other stock compensation plans

        101     74  
  

 

 

   

 

 

   

 

 

 

Dilutive potential common shares

        107     85  
  

 

 

   

 

 

   

 

 

 

Denominator for diluted earnings per common share — adjusted weighted average shares outstanding and assumed conversions

   10,254     10,332     10,260  
  

 

 

   

 

 

   

 

 

 

Basic (loss) earnings per common share

  $(4.33  $2.51    $2.88  
  

 

 

   

 

 

   

 

 

 

Diluted (loss) earnings per common share

  $(4.33  $2.48    $2.85  
  

 

 

   

 

 

   

 

 

 

Dividends paid per common share

  $0.16    $0.13    $0.12  
  

 

 

   

 

 

   

 

 

 

There were approximately 75 antidilutive shares in 2015 and no antidilutive shares in 2014 2013, and 2012.or 2013.

Note 15.14.

Income Taxes

Significant components of the Company’s deferred tax liabilities and assets as ofat December 31, 20142015 and 20132014 are as follows:

 

  2014   2013   2015   2014 

Deferred tax liabilities:

        

Goodwill and other intangibles

  $(10,800  $(11,360  $(5,801  $(10,800

Depreciation

   (3,763   (3,369   (14,134   (3,763

Inventories

   (3,188   (3,611        (3,188

Investment in LB Pipe joint venture

   (553   (587   (572   (553

Other

   (527   (437   (741   (527
  

 

   

 

   

 

   

 

 

Total deferred tax liabilities

   (18,831   (19,364   (21,248   (18,831
  

 

   

 

   

 

   

 

 

Deferred tax assets:

        

Pension and post-retirement liability

   2,147     1,033     1,801     2,147  

Warranty reserve

   4,180     2,689     3,153     4,180  

Deferred compensation

   1,755     1,525     2,275     1,755  

Accounts receivable

   369     388     622     369  

Contingent liabilities

   667     662     2,087     667  

Long-term insurance reserves

   660     569     655     660  

Net operating loss / tax credit carryforwards

   883     139     1,006     883  

Other

   645     843     949     645  
  

 

   

 

   

 

   

 

 

Total deferred tax assets

   11,306     7,848     12,548     11,306  
  

 

   

 

   

 

   

 

 

Net deferred tax liability

  $(7,525  $(11,516  $(8,700  $(7,525
  

 

   

 

   

 

   

 

 

Significant components of the provision for income taxes are as follows:

 

  2014   2013   2012   2015   2014   2013 

Current:

            

Federal

  $11,486    $8,776    $9,742    $5,571    $11,488    $8,785  

State

   1,491     837     1,977     1,540     1,491     837  

Foreign

   3,339     1,982     1,910     1,339     3,339     1,982  
  

 

   

 

   

 

   

 

   

 

   

 

 

Total current

   16,316     11,595     13,629     8,450     16,318     11,604  
  

 

   

 

   

 

   

 

   

 

   

 

 

Deferred:

            

Federal

   (2,321   3,200     (3,966   (12,016   (2,321   3,200  

State

   (122   273     (155   (2,014   (122   273  

Foreign

   (471   (229   (442   (552   (471   (229
  

 

   

 

   

 

   

 

   

 

   

 

 

Total deferred

   (2,914   3,244     (4,563   (14,582   (2,914   3,244  
  

 

   

 

   

 

   

 

   

 

   

 

 

Total income tax expense from continuing operations

  $13,402    $14,839    $9,066  

Total income tax (benefit) expense

  $(6,132  $13,404    $14,848  
  

 

   

 

   

 

   

 

   

 

  ��

 

 

At December 31, 2014,2015, the Company has not recorded deferred U.S. income taxes or foreign withholding taxes on $56,266$57,781 of undistributed earnings of its foreign subsidiaries. It is management’s intent and practice to indefinitely reinvest such earnings outside of the U.S. Determination of the amount of any unrecognized deferred income tax liability associated with these undistributed earnings is not practicable because of the complexities of the hypothetical calculation.

Income(Loss) income before income taxes, as shown in the accompanying consolidated statements of operations, includes the following components:

 

  2014   2013   2012   2015   2014   2013 

Domestic

  $30,762    $37,283    $16,600    $(55,061  $30,766    $37,306  

Foreign

   8,294     6,832     7,230     4,484     8,294     6,832  
  

 

   

 

   

 

   

 

   

 

   

 

 

Income from continuing operations, before income taxes

  $39,056    $44,115    $23,830  

(Loss) income from operations, before income taxes

  $(50,577  $39,060    $44,138  
  

 

   

 

   

 

   

 

   

 

   

 

 

The reconciliation of income tax computed at statutory rates to income tax (benefit) expense is as follows:

 

  2014 2013 2012   2015 2014 2013 

Statutory rate

   35.0  35.0  35.0   35.0  35.0  35.0

Foreign tax rate differential

   (2.2  (1.7  (3.0   0.8    (2.2  (1.7

State income taxes, net of federal benefit

   2.7    2.6    4.5     0.3    2.7    2.6  

Non-deductible goodwill impairment

   (25.2        

Non-deductible expenses

   1.8    0.6    1.4     (0.9  1.8    0.6  

Tax credits

   (0.9  (0.8  (2.2

Change in liability for unrecognized tax benefits

   (0.8  (1.9  0.9     0.4    (0.8  (1.9

Domestic production activities deduction

   (2.2  (1.2  (1.2   1.0    (2.2  (1.2

Other

   0.9    1.0    2.6     0.7        0.2  
  

 

  

 

  

 

   

 

  

 

  

 

 
   34.3  33.6  38.0   12.1  34.3  33.6
  

 

  

 

  

 

   

 

  

 

  

 

 

At December 31, 20142015 and 2013,2014, the tax benefit of net operating loss carryforwards available for state income tax purposes was $74$324 and $83,$74, respectively. The state net operating loss carryforwards will expire in various years from 20192024 through 2032.2035. At December 31, 2014,2015, the Company has foreign net operating loss carryforwards of $162,$1,320, which may be carried forward indefinitely. The Company has foreign tax credit carryforwards in the amount of $780$272 that will expire in 20232024 through 2025.2026. The Company anticipates utilizing these operating loss and credit carryforwards prior to their expiration and, therefore, has not provided a valuation allowance for these amounts.

The following table provides a reconciliation of unrecognized tax benefits as ofat December 31, 20142015 and 2013:2014:

 

  2014   2013   2015   2014 

Unrecognized tax benefits at beginning of period:

  $1,509    $2,045    $1,013    $1,509  

Increases based on tax positions for prior periods

   18     149     147     18  

Decreases based on tax positions for prior periods

   (325   (89        (325

Decreases related to settlements with taxing authorities

   (126   (596   (578   (126

Decreases as a result of a lapse of the applicable statute of limitations

   (63             (63
  

 

   

 

   

 

   

 

 

Balance at end of period

  $1,013    $1,509    $582    $1,013  
  

 

   

 

   

 

   

 

 

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $1,013$582 at December 31, 2014.2015. The Company accrues interest and penalties related to unrecognized tax benefits in its provision for income taxes. At December 31, 20142015 and 2013,2014, the Company had accrued interest and penalties related to unrecognized tax benefits of $443 and $335, and $342, respectively. As ofAt December 31, 2014,2015, the Company does not expect any material increases or decreases to its unrecognized tax benefits within the next 12 months. Ultimate realization of this decrease is dependent upon the occurrence of certain events, including the completion of audits by tax authorities and expiration of statutes of limitations.

The Company files income tax returns in the United States and in various state, local and foreign jurisdictions. The Company is subject to federal income tax examinations for the period 20112012 and forward. With respect to the state, local, and foreign filings, certain entities of the Company are subject to income tax examinations for the periods 20072011 and forward.

Note 16.15.

Stock-basedShare-based Compensation

The Company applies the provisions of FASB ASC 718,Compensation — Stock Compensation, to account for the Company’s share-based compensation. Share-based compensation cost is measured at the grant date based on the calculated fair value of the award and is recognized over the employees’ requisite service period. The Company recorded share-based compensation expense of $1,471, $3,007 $2,156 and $1,989$2,156 for the years ended December 31, 2015, 2014, 2013, and 2012,2013, respectively, related to fully-vested stock awards, restricted stock awards, and performance unit awards as follows. As ofawards. At December 31, 2014,2015, unrecognized compensation expense for awards the Company expects to vest approximated $2,896.$2,611. The Company will recognize this expense over the upcoming 3.23.5 year period through February 2018.June 2019.

Shares issued as a result of vested stock-based compensation generally will be from previously issued shares which have been reacquired by the Company and held as Treasury sharesstock or authorized but previously unissued common stock.

The excess tax benefit realized for the tax deduction from share-based compensation approximated $253, $336, $203 and $199$203 for the years ended December 31, 2015, 2014, 2013, and 2012,2013, respectively. This excess tax benefit is included in cash flows from financing activities in the Consolidated Statements of Cash Flows.

As ofAt December 31, 2014,2015, the Company had outstanding stock option and other stock awards issued pursuant to two shareholder-approved plans: Thethe 2006 Omnibus Incentive Plan as amended and restated in October 2013 (Omnibus Plan), and the 1998 Long-Term Incentive Plan for Officers and Directors, amended and restated in May 2006, (1998 Plan)(“Omnibus Plan”). The 1998 Plan expired by its terms in 2008 and no awards may be granted under that Plan, which currently has outstanding stock option awards that expire in 2015. The Company currently makes equity awards only under the Omnibus Plan.

The 1998 Plan provided for the award of stock options to key employees and directors to purchase up to 900,000 shares of common stock at no less than 100% of fair market value on the date of the grant. The 1998 Plan authorized the granting of “nonqualified options” and “incentive stock options” with a duration of not more than ten years from the date of grant. The 1998 Plan also provided that, unless otherwise set forth in the option agreement, stock options are exercisable in installments of up to 25% annually beginning one year from date of grant. Non-employee directors were automatically awarded fully vested, nonqualified stock options to acquire 5,000 shares of the Company’s common stock on each date the outside directors were elected at an annual shareholders’ meeting to serve as directors. The 1998 Plan was amended in May 2006 to remove the automatic awarding of stock options to outside directors. As noted above, the 1998 Plan expired by its terms in 2008 and there are remaining stock option awards outstanding which expire in 2015. The Company no longer issues awards under the 1998 Plan.

The Omnibus Plan allows for the issuance of 900,000 shares of common stock through the granting of stock options or stock awards (including performance units convertible into stock) to key employees and directors at no less than 100% of fair market value on the date of the grant. The Omnibus Plan provides for the granting of “nonqualified options” with a duration of not more than ten years from the date of grant. The Omnibus Plan also provides that, unless otherwise set forth in the option agreement, stock options are exercisable in installments of up to 25% annually beginning one year from the date of grant. No stock options have been granted under the Omnibus Plan and, as such, there was no share-based compensation expense related to stock options recorded in 2015, 2014, 2013, or 2012

2013

The Company also had 7,500 outstanding stock option awards that were granted under the former 1998 Long-Term Incentive Plan for Officers and Directors, amended and restated in May 2006 (“1998 Plan”). During 2015, all 7,500 outstanding stock option awards were exercised prior to their expiration. No future grants are permitted under the expired 1998 Plan and the Company currently makes equity awards under the Omnibus Plan.

Stock Option Awards

Certain information for the three years ended December 31, 20142015 relative to employee stock options is summarized as follows:

 

   2014   2013   2012 

Number of shares under the plans:

      

Outstanding and exercisable at beginning of year

   18,750     22,500     39,950  

Granted

               

Canceled

               

Exercised

   (11,250   (3,750   (17,450
  

 

 

   

 

 

   

 

 

 

Outstanding and exercisable at end of year

   7,500     18,750     22,500  
  

 

 

   

 

 

   

 

 

 

Certain information for the three years ended December 31, 2014 relative to stock options at respective exercise price ranges is summarized as follows:

       Options Outstanding and Exercisable 

December 31,

  Range of Exercise Prices   Number
of Shares
   Weighted Average
Remaining Life
   Weighted
Exercise Price
   Intrinsic
Value
 

2014

  $8.97 - $9.29     7,500     0.3    $9.08    $296  

2013

  $7.81 - $14.77     18,750     1.3     10.64     687  

2012

  $7.81 - $14.77     22,500     2.2     10.41     743  
   2015   2014   2013 

Number of shares under the plans:

      

Outstanding and exercisable at beginning of year

   7,500     18,750     22,500  

Granted

               

Canceled

               

Exercised

   (7,500   (11,250   (3,750
  

 

 

   

 

 

   

 

 

 

Outstanding and exercisable at end of year

        7,500     18,750  
  

 

 

   

 

 

   

 

 

 

The weighted average exercise price per share of the stock options exercised in 2015, 2014, and 2013 were $9.08, $11.67, and 2012 were $11.67, $9.30, and $7.03, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2015, 2014, and 2013 was $253, $426, and 2012 were $426, $124, and $457, respectively.

Fully-Vested Stock Awards

Non-employee directors are automatically awarded 3,500 fully vested shares or a lesser amount determined by the directors, of the Company’s common stock on each date the non-employee directors are elected at anthe annual shareholders’ meeting to serve as directors.

The non-employee directors were granted a total of 14,000, 10,182, 9,960, and 12,0009,960 fully-vested shares for the years ended December 31, 2015, 2014, 2013, and 2012,2013, respectively. Compensation expense recorded by the Company related to fully-vested stock awards to non-employee directors was approximately $534, $488, $450, and $337$450 for the years ended December 31, 2015, 2014, 2013, and 2012,2013, respectively.

The weighted average fair value of all the fully-vested stock grants awarded was $38.15, $47.94, $45.16, and $28.05$45.16 per share for 2015, 2014, 2013, and 2012,2013, respectively.

Restricted Stock Awards and Performance Unit Awards

Under the amended and restated 2006 Omnibus Plan, the Company grants eligible employees Restricted Stockrestricted stock and Performance Unit Awards.performance unit awards. The forfeitable Restricted Stock Awardsrestricted stock awards granted prior to March 2015 generally time-vest after a four year holding period, and those granted in March 2015 generally time-vest ratably over a three-year period, unless indicated otherwise by the underlying Restricted Stock Agreement.restricted stock agreement. Performance Unit Awardsunit awards are offered annually under separate three-year long-term incentive programs. Performance units are subject to forfeiture and will be converted into common stock of the Company based upon the Company’s performance relative to performance measures and conversion multiples as defined in the underlying program. If the Company’s estimate of the number of Performance Stock Awardsperformance stock awards expected to vest changes in a subsequent accounting period, cumulative compensation expense could increase or decrease. The change will be recognized in the current period for the vested shares and would change future expense over the remaining vesting period.

The following table summarizes the Restricted Stock Awardrestricted stock award and Performance Unit Awardperformance unit award activity for the periodthree-year periods ended December 31, 2014:2015, 2014, and 2013:

 

  Restricted
Stock Units
   Performance
Stock Units
   Weighted Average
Grant  Date

Fair Value
   Restricted
Stock
Units
   Performance
Stock

Units
   Weighted Average
Grant Date

Fair Value
 

Outstanding at January 1, 2012

   105,168     81,489    $31.24  

Outstanding at January 1, 2013

   176,646     59,725    $31.65  
  

 

   

 

   

 

   

 

   

 

   

 

 

Granted

   108,677     43,042     30.24     12,973     31,418     42.49  

Vested

   (36,599   (33,508   27.38     (41,579        29.18  

Adjustment for incentive awards expected to vest

        (31,298   31.79  

Canceled

   (600        38.44  
  

 

   

 

   

 

 

Outstanding at December 31, 2012

   176,646     59,725     31.65  
  

 

   

 

   

 

 

Granted

   12,973     31,418     42.49  

Vested

   (41,579        29.18  

Adjustment for incentive awards expected to vest

        (18,408   35.84  

Adjustment for incentive awards not expected to vest

        (18,408   35.84  

Canceled

   (18,314   (11,084   33.55     (18,314   (11,084   33.55  
  

 

   

 

   

 

   

 

   

 

   

 

 

Outstanding at December 31, 2013

   129,726     61,651     34.00     129,726     61,651    $34.00  
  

 

   

 

   

 

   

 

   

 

   

 

 

Granted

   19,051     34,652     44.07     19,051     34,652     44.07  

Vested

   (40,540   (13,588   34.59     (40,540   (13,588   34.59  

Adjustment for incentive awards expected to vest

        (7,845   43.59  

Adjustment for incentive awards not expected to vest

        (7,845   43.59  

Canceled

        (2,880   44.13          (2,880   44.13  
  

 

   

 

   

 

   

 

   

 

   

 

 

Outstanding at December 31, 2014

   108,237     71,990    $36.25     108,237     71,990    $36.25  
  

 

   

 

   

 

   

 

   

 

   

 

 

Granted

   29,656     41,114     44.93  

Vested

   (39,076   (23,877   32.35  

Adjustment for incentive awards not expected to vest

        (53,228   43.26  

Canceled

   (5,000        44.84  
  

 

   

 

   

 

 

Outstanding at December 31, 2015

   93,817     35,999    $39.66  
  

 

   

 

   

 

 

Performance units are subject to forfeiture and will be converted into common stock of the Company based upon the Company’s performance relative to performance measures and conversion multiples as defined in the underlying plan. The aggregate fair value in the above table is based upon achieving 100% of the performance targets as defined in the underlying plan. During 2014, and 2012, the Company reversed $702 and $807, respectively, of incentive compensation costs under its separate three-year long-term incentive plans caused by the impact of the product warranty charges on Company performance, as it related to the awards’ underlying performance conditions. More information on the product warranty charge can be found in Note 20, Commitments19, “Commitments and Contingent Liabilities.Liabilities”.

Excluding the fully-vested stock awards granted to non-employee directors, the Company recorded compensation expense of $937, $2,519, $1,706, and $1,652,$1,706, respectively, for the periods ended December 31, 2015, 2014, 2013, and 20122013 related to restricted stock and performance unit awards.

 

  2014   2013   2012   2015   2014   2013 

Number of shares available for future grant:

            

Beginning of year

   513,280     517,280     271,465     469,840     513,280     517,280  
  

 

   

 

   

 

   

 

   

 

   

 

 

End of year

   469,840     513,280     517,280     407,307     469,840     513,280  
  

 

   

 

   

 

   

 

   

 

   

 

 

The Company issued, pursuant to the Omnibus Plan, approximately 14,000 fully-vested shares during 2014 which were earned under the 2011 — 2013 three yearthree-year long-term incentive plan. This non-cash transaction of $454 was reflected as a decrease to Treasury Stockstock in the Consolidated Balance Sheet at December 31, 2014. During 2012, approximately 34,000 fully-vested shares were issued which were earned under the 2009 — 2011 three year long-term incentive plan. This non-cash transaction of $1,130 was reflected as a decrease to Treasury Stock in the Consolidated Balance Sheet at December 31, 2012.

Note 17.16.

Retirement Plans

The Company has sixseven retirement plans which cover its hourly and salaried employees in the United States: three defined benefit plans (one active / two frozen) and threefour defined contribution plans. Employees are eligible to participate in the appropriate plan based on employment classification. The Company’s fundingcontributions to the defined benefit and defined contribution plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA)(“ERISA”), applicable plan policy and investment guidelines.guidelines of the applicable plan. The CompanyCompany’s policy is to contribute at least the minimum in accordance with the funding standards of ERISA.

The Company’s subsidiary, L.B. Foster Rail Technologies (Rail Technologies)(“Rail Technologies”), maintains two defined contribution plans for its employees in Canada, as well as a post-retirement benefit plan. In the United Kingdom, Rail Technologies maintains both atwo defined contribution planplans and a defined benefit plan. These plans are discussed in further detail below.

United States Defined Benefit Plans

The following tables present a reconciliation of the changes in the benefit obligation, the fair market value of the assets, and the funded status of the plans:plans, as of December 31, 2015 and 2014:

 

  2014   2013   2015   2014 

Changes in benefit obligation:

        

Benefit obligation at beginning of year

  $16,112    $18,034    $18,925    $16,112  

Service cost

   23     33     38     23  

Interest cost

   771     707     742     771  

Actuarial loss (gain)

   2,753     (1,924

Actuarial (gain) loss

   (1,148   2,753  

Benefits paid

   (734   (738   (798   (734
  

 

   

 

   

 

   

 

 

Benefit obligation at end of year

  $18,925    $16,112    $17,759    $18,925  
  

 

   

 

   

 

   

 

 

Change to plan assets:

        

Fair value of assets at beginning of year

  $15,039    $13,262    $15,205    $15,039  

Actual gain on plan assets

   601     2,019  

Actual (loss) gain on plan assets

   (172   601  

Employer contribution

   299     496          299  

Benefits paid

   (734   (738   (798   (734
  

 

   

 

   

 

   

 

 

Fair value of assets at end of year

   15,205     15,039     14,235     15,205  
  

 

   

 

   

 

   

 

 

Funded status at end of year

  $(3,720  $(1,073  $(3,524  $(3,720
  

 

   

 

   

 

   

 

 

Amounts recognized in the consolidated balance sheet consist of:

        

Other long-term liabilities

  $(3,720  $(1,073  $(3,524  $(3,720
  

 

   

 

   

 

   

 

 

Amounts recognized in accumulated other comprehensive income consist of:

        

Net loss

  $4,429    $1,375    $3,993    $4,429  

Prior service cost

   3     4          3  
  

 

   

 

   

 

   

 

 
  $4,432    $1,379    $3,993    $4,432  
  

 

   

 

   

 

   

 

 

The actuarial loss included in accumulated other comprehensive loss that will be recognized in net periodic pension cost during 20152016 is $278,$276, before taxes.

Net periodic pension costs for the three years ended December 31, 20142015 are as follows:

 

  2014   2013   2012   2015   2014   2013 

Components of net periodic benefit cost:

    

Service cost

  $23    $33    $31    $38    $23    $33  

Interest cost

   771     707     748     742     771     707  

Expected return on plan assets

   (968   (856   (810   (816   (968   (856

Amortization of prior service cost

   1     1     1     3     1     1  

Recognized net actuarial loss

   65     212     194     275     65     212  
  

 

   

 

   

 

   

 

   

 

   

 

 

Net periodic pension (income) cost

  $(108  $97    $164  

Net periodic pension cost (income)

  $242    $(108  $97  
  

 

   

 

   

 

   

 

   

 

   

 

 

The weighted average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year.

 

  2014 2013 2012   2015 2014 2013 

Discount rate

   4.0  4.9  4.0   4.3  4.0  4.9
  

 

  

 

  

 

   

 

  

 

  

 

 

Expected rate of return on plan assets

   5.5  6.5  6.5   5.2  5.5  6.5
  

 

  

 

  

 

   

 

  

 

  

 

 

The expected long-term rate of return is based on numerous factors including the target asset allocation for plan assets, historical rate of return, long-term inflation assumptions, and current and projected market conditions. The decline in the expected rate of return on plan assets reflects a shift in the Plans’ investment strategy toward a higher focus on fixed income investments.

Amounts applicable to the Company’s pension plans with accumulated benefit obligations in excess of plan assets are as follows:follows at December 31:

 

  2014   2013   2015   2014 

Projected benefit obligation

  $18,925    $12,513    $17,759    $18,925  

Accumulated benefit obligation

   18,925     12,513     17,759     18,925  

Fair value of plan assets

  $15,205    $11,321    $14,235    $15,205  
  

 

   

 

   

 

   

 

 

Plan assets consist primarily of various fixed income and equity investments. The Company’s primary investment objective is to provide long-term growth of capital while accepting a moderate level of risk. The investments are limited to cash and cash equivalents, bonds, preferred stocks, and common stocks. The investment target ranges and actual allocation of pension plan assets by major category at December 31, 20142015 and 20132014 are as follows:

 

   Target  2014  2013 

Asset Category

    

Cash and cash equivalents

   0 - 10  2  4

Total fixed income funds

   25 - 50    34    27  

Total mutual funds and equities

   50 - 70    64    69  
   

 

 

  

 

 

 

Total

    100  100
   

 

 

  

 

 

 

   Target  2015  2014 

Asset Category

    

Cash and cash equivalents

   0 - 10  9  2

Total fixed income funds

   25 - 50    35    34  

Total mutual funds and equities

   50 - 70    56    64  
   

 

 

  

 

 

 

Total

    100  100
   

 

 

  

 

 

 

In accordance with the fair value disclosure requirements with FASB ASC 820, “Fair Value Measurements and Disclosures,” the following assets were measured at fair value on a recurring basis at December 31, 20142015 and 2013.2014. Additional information regarding FASB ASC 820 and the fair value hierarchy can be found in Note 19,18, Fair Value Measurements.

 

  2014   2013   2015   2014 

Asset Category

        

Cash and cash equivalents

  $347    $568    $1,248    $347  

Fixed income funds

        

Corporate bonds

   5,194     4,005     4,926     5,194  
  

 

   

 

   

 

   

 

 

Total fixed income funds

   5,194     4,005     4,926     5,194  

Equity funds and equities

        

Mutual funds

   3,566     9,142     8,061     3,566  

Common stock

   6,098     1,324          6,098  
  

 

   

 

   

 

   

 

 

Total mutual funds and equities

   9,664     10,466     8,061     9,664  

Total

  $15,205    $15,039    $14,235    $15,205  
  

 

   

 

   

 

   

 

 

Cash equivalents. The Company uses quoted market prices to determine the fair value of these investments in interest-bearing cash accounts and they are classified in Level 1 of the fair value hierarchy. The carrying amounts approximate fair value because of the short maturity of the instruments.

Fixed income funds. Investments within the fixed income funds category consist of fixed income corporate debt. The Company uses quoted market prices to determine the fair value of these fixed income funds. These instruments consist of exchange-traded government and corporate bonds and are classified in Level 1 of the fair value hierarchy.

Equity funds and equities. The valuation of investments in registered investment companies is based on the underlying investments in securities. Securities traded on security exchanges are valued at the latest quoted sales

price. Securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the average of the last reported bid and ask quotations. These investments are classified in Level 1 of the fair value hierarchy.

The Company currently does not anticipate contributions to its United States defined benefit plans in 2015.2016.

The following benefit payments are expected to be paid:

 

   Pension
Benefits
 

2015

  $793  

2016

   822  

2017

   882  

2018

   915  

2019

   993  

Years 2020 — 2024

   5,606  

   Pension
Benefits
 

2016

  $823  

2017

   879  

2018

   907  

2019

   974  

2020

   1,015  

Years 2021-2025

   5,611  

United Kingdom Defined Benefit Plan

The Portec Rail Products (UK) Limited Pension Plan covers certain current employees, former employees, and retirees. The plan has been frozen to new entrants since April 1, 1997 and also covers the former employees of a merged plan after January 2002. Benefits under the plan were based on years of service and eligible compensation during defined periods of service. Our funding policy for the plan is to make minimum annual contributions required by applicable regulations.

The funded status of the United Kingdom defined benefit plan at year endDecember 31, 2015 and 2014 is as follows:

 

  2014   2013   2015   2014 

Changes in benefit obligation:

        

Benefit obligation at beginning of year

  $8,450    $8,034    $8,797    $8,450  

Interest cost

   360     348     295     360  

Actuarial loss

   883     162  

Actuarial (gain) loss

   (416   883  

Benefits paid

   (397   (247   (339   (397

Foreign currency exchange rate changes

   (499   153     (475   (499
  

 

   

 

   

 

   

 

 

Benefit obligation at end of year

  $8,797    $8,450    $7,862    $8,797  
  

 

   

 

   

 

   

 

 

Change to plan assets:

        

Fair value of assets at beginning of year

  $6,769    $6,051    $6,757    $6,769  

Actual gain on plan assets

   502     545     307     502  

Employer contribution

   284     303     302     284  

Benefits paid

   (397   (247   (339   (397

Foreign currency exchange rate changes

   (401   117     (366   (401
  

 

   

 

   

 

   

 

 

Fair value of assets at end of year

   6,757     6,769     6,661     6,757  
  

 

   

 

   

 

   

 

 

Funded status at end of year

  $(2,040  $(1,681  $(1,201  $(2,040
  

 

   

 

   

 

   

 

 

Amounts recognized in the consolidated balance sheet consist of:

        

Other long-term liabilities

  $(2,040  $(1,681  $(1,201  $(2,040
  

 

   

 

   

 

   

 

 

Amounts recognized in accumulated other comprehensive income consist of:

        

Net loss

  $1,413    $906    $706    $1,413  

Prior service cost

   112     142     85     112  

Transition obligation

        (50
  

 

   

 

   

 

   

 

 
  $1,525    $998    $791    $1,525  
  

 

   

 

   

 

   

 

 

Net periodic pension costs for the three years ended December 31, 2015, 2014, and 2013 are as follows:

 

   2014   2013   2012 

Components of net periodic benefit cost:

      

Interest cost

  $360    $348    $338  

Expected return on plan assets

   (370   (321   (307

Amortization of transition obligation

   (50   (46   (49

Amortization of prior service cost

   30     22     23  

Recognized net actuarial loss

   185     229     221  
  

 

 

   

 

 

   

 

 

 

Net periodic pension cost

  $155    $232    $226  
  

 

 

   

 

 

   

 

 

 

   2015   2014   2013 

Components of net periodic benefit cost:

  

Interest cost

  $295    $360    $348  

Expected return on plan assets

   (324   (370   (321

Amortization of transition obligation

        (50   (46

Amortization of prior service cost

   27     30     22  

Recognized net actuarial loss

   225     185     229  
  

 

 

   

 

 

   

 

 

 

Net periodic pension cost

  $223    $155    $232  
  

 

 

   

 

 

   

 

 

 

The weighted average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year.

 

  2014 2013 2012   2015 2014 2013 

Discount rate

   3.6  4.6  4.3   4.0  3.6  4.6
  

 

  

 

  

 

   

 

  

 

  

 

 

Expected rate of return on plan assets

   5.0  5.8  5.2   5.2  5.0  5.8
  

 

  

 

  

 

   

 

  

 

  

 

 

Amounts applicable to the Company’s pension plans with accumulated benefit obligations in excess of plan assets are as follows:follows at December 31:

 

  2014   2013   2015   2014 

Projected benefit obligation

  $8,797    $8,450    $7,862    $8,797  

Accumulated benefit obligation

   8,797     8,450     7,862     8,797  

Fair value of plan assets

   6,757     6,769     6,661     6,757  
  

 

   

 

   

 

   

 

 

The Company has estimated the long-term rate of return on plan assets based primarily on historical returns on plan assets, adjusted for changes in target portfolio allocations, and recent changes in long-term interest rates based on publicly available information.

Plan assets are invested by the trustees in accordance with a written statement of investment principles. This statement permits investment in equities, corporate bonds, United Kingdom government securities, commercial property, and cash, based on certain target allocation percentages. Asset allocation is primarily based on a strategy to provide steady growth without undue fluctuations. The target asset allocation percentages for 20142015 are as follows:

 

   Portec Rail
Plan

Equity securities

  Up to 100%

Commercial property

  Not to exceed 50%

U.K. Government securities

  Not to exceed 50%

Cash

  Up to 100%

Plan assets held within the Portec Rail Plan consist of cash and marketable securities whichthat have been classified as Level 1 of the fair value hierarchy. All other plan assets have been classified as Level 2 of the fair value hierarchy.

The plan assets by category for the two years ended December 31, 2015 and 2014 are as follows:

 

  2014   2013   2015   2014 

Asset Category

      

Cash and cash equivalents

  $218    $369    $242    $218  

Equity securities

   2,156     2,803     2,656     2,156  

Bonds

   1,899     1,468     1,301     1,899  

Commercial property

   2,484     2,129     2,462     2,484  
  

 

   

 

   

 

   

 

 

Total

  $6,757    $6,769    $6,661    $6,757  
  

 

   

 

   

 

   

 

 

United Kingdom regulations require trustees to adopt a prudent approach to funding required contributions to defined benefit pension plans. The Company anticipates making contributions of $280$271 to the Portec Rail Plan during 2015.2016.

The following estimated future benefits payments are expected to be paid under the Portec Rail Plan:

 

  Pension
Benefits
   Pension
Benefits
 

2015

  $246  

2016

   270    $247  

2017

   288     268  

2018

   307     286  

2019

   334     303  

Years 2020 — 2024

   1,965  

2020

   321  

Years 2021-2025

   1,939  

Other Post-Retirement Benefit Plan

Rail Technologies’ operation near Montreal, Quebec, Canada, maintains a post-retirement benefit plan, which provides retiree life insurance, health care benefits, and, for a closed group of employees, dental care. Retiring employees with a minimum of 10 years of service are eligible for the plan benefits. The plan is not funded. Cost of benefits earned by employees is charged to expense as services are rendered. The expense related to this plan was not material for 20142015 and 2013.2014. Rail Technologies’ accrued benefit obligation was $1,172$823 and $1,080$1,172 as of December 31, 2015 and 2014, and 2013, respectively. Benefit payments anticipated for 2015 are not material. This obligation is recognized within other long-term liabilities. Benefit payments anticipated for 2016 are not material.

The weighted average assumptions in the following table represent the rates used to develop the actuarial present value of the projected benefit obligation for the year listed and also the net periodic benefit cost for the following year.

 

  2014 2013   2015 2014 

Discount rate

   4.0  5.0   4.2  4.0
  

 

  

 

   

 

  

 

 

Weighted average health care trend rate

   6.2  6.4   5.0  6.2
  

 

  

 

   

 

  

 

 

The weighted average health care rate trends downward to an ultimate rate of 4.4% in 2032.2035.

A 1% increase in the assumed health care cost trend rate will increase the service and interest cost components of the expense by $5 and increase the accumulated post-retirement benefit obligation by approximately $66 for 2014. A 1% decrease in the assumed health care cost trend rate will decrease the service and interest cost components of the expense by $7 and decrease the accumulated post-retirement benefit obligation by $77 for 2014.

Defined Contribution Plans

The Company sponsors sixeight defined contribution plans for hourly and salaried employees across our domestic and international facilities. The following table summarizes the expense associated with the contributions made to these plans.

 

  December 31, 
  2014   2013   2012   2015   2014   2013 

United States

  $2,425    $2,151    $2,107    $2,434    $2,425    $2,151  

Canada

   227     266     269     226     227     266  

United Kingdom

   158     136     116     494     158     136  
  

 

   

 

   

 

   

 

   

 

��  

 

 
  $2,810    $2,553    $2,492    $3,154    $2,810    $2,553  
  

 

   

 

   

 

   

 

   

 

   

 

 

Note 18.17.

Rental and Lease Information

The Company has capital and operating leases for certain plant facilities, office facilities, and equipment. Rental expense for the years ended December 31, 2015, 2014, 2013, and 20122013 amounted to $4,611, $3,062, $3,333, and $3,762,$3,333, respectively. Generally, land and building leases include escalation clauses.

The following is a schedule, by year, of the future minimum payments under capital and operating leases, together with the present value of the net minimum payments as ofat December 31, 2014:2015:

 

Year ending December 31,  Capital
Leases
   Operating
Leases
   Capital
Leases
   Operating
Leases
 

2015

  $156    $2,512  

2016

   149     1,850    $694    $4,310  

2017

   91     1,809     636     3,680  

2018

   68     1,635     591     2,429  

2019

   11     1,484     517     1,702  

2020 and thereafter

        7,818  

2020

   244     1,407  

2021 and thereafter

        6,600  
  

 

   

 

   

 

   

 

 

Total minimum lease payments

   475    $17,108     2,682    $20,128  
    

 

     

 

 

Less amount representing interest

   28       175    
  

 

     

 

   

Total present value of minimum payments

   447    

Less current portion of such obligations

   142    

Total present value of minimum payments with interest rates ranging from 3.00% to 5.25%

  $2,507    
  

 

     

 

   

Long-term obligations with interest rates ranging from 2.95% to 5.25%

  $305    
  

 

   

Assets recorded under capital leases are as follows:

 

   2014   2013 

Land improvements

        6,373  

Machinery and equipment at cost

   638     6,427  

Buildings

        399  
  

 

 

   

 

 

 
   638     13,199  

Less accumulated amortization

   181     12,676  
  

 

 

   

 

 

 

Net capital lease assets

  $457    $523  
  

 

 

   

 

 

 

Included in the Company’s 2012 “Other income” in the Consolidated Statements of Operations are gains totaling $577 which were recognized in connection with the Company’s 2008 sale-leaseback transaction. Including this amount, the Company recorded approximately $456 within “Other Income” related to this transaction for the period ended December 31, 2012.

   2015   2014 

Machinery and equipment at cost

   3,157     638  

Less accumulated amortization

   450     181  
  

 

 

   

 

 

 

Net capital lease assets

  $2,707    $457  
  

 

 

   

 

 

 

Note 19.18.

Fair Value Measurements

The Company determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data

obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions of what market participants would use. The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level 1:1: Quoted market prices in active markets for identical assets or liabilities.

Level 2:2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3:3: Unobservable inputs that are not corroborated by market data.

The classification of a financial asset or liability within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company has an established process for determining fair value for its financial assets and liabilities, principally cash and cash equivalents.equivalents and interest rate swaps. Fair value is based on quoted market prices, where available. If quoted

market prices are not available, fair value is based on assumptions that use as inputs market-based parameters. The following section describes the valuation methodologies used by the Company to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the key inputs to the valuations and any significant assumptions.

Cash equivalentsequivalents.. Included within “Cash and cash equivalents” are investments in money market funds with various underlying securities all of which maintain AAA credit ratings. Also included within cash equivalents are our investments in non-domestic bank certificates of deposit. The Company uses quoted market prices to determine the fair value of these investments and they are classified in Level 1 of the fair value hierarchy.term deposits. The carrying amounts approximate fair value because of the short maturity of the instruments. As

LIBOR-Based interest rate swaps. To reduce the impact of December 31, 2014,interest rate changes on outstanding variable-rate debt, the Company utilized its domestic cash equivalents for acquisitionsentered into forward starting LIBOR-based interest rate swaps with notional values totaling $50,000. The swaps will become effective in February 2017 at which point it will effectively convert a portion of the debt from variable to fixed-rate borrowings during the term of the swap contract. The fair value of the interest rate swaps is based on market-observable forward interest rates and transferredrepresents the majority of its non-domestic cash equivalentsestimated amount that the Company would pay to savings accounts.terminate the agreements. As such, the swap agreements have been classified as Level 2 within the fair value hierarchy.

The following assets of the Company were measured at fair value on a recurring basis subject to the disclosure requirements of ASC 820 at December 31, 20142015 and December 31, 2013:2014:

 

 Fair Value Measurements at Reporting Date
Using
    Fair Value Measurements at Reporting Date
Using
  Fair Value Measurements at Reporting Date
Using
    Fair Value Measurements at Reporting Date
Using
 
 December 31,
2014
 Quoted
Prices  in
Active
Markets
for
Identical
Assets

(Level 1)
 Significant
Other
Observable
Inputs
(Level 2)
 Significant
Unobservable
Inputs

(Level 3)
    December 31,
2013
 Quoted
Prices  in
Active
Markets
for
Identical
Assets

(Level 1)
 Significant
Other
Observable
Inputs
(Level 2)
 Significant
Unobservable
Inputs

(Level 3)
  December 31,
2015
 Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
 Significant
Other
Observable
Inputs
(Level 2)
 Significant
Unobservable
Inputs

(Level 3)
    December 31,
2014
 Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
 Significant
Other
Observable
Inputs
(Level 2)
 Significant
Unobservable
Inputs

(Level 3)
 

Assets

                      

Domestic money market funds

 $   $   $   $      $18,276  $18,276  $   $  

Non-domestic bank term deposits

  25   25              32,947   32,947          $1,939   $1,939   $   $      $25   $25   $   $  
 

 

  

 

  

 

  

 

     

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

     

 

  

 

  

 

  

 

 

Total Assets

 $25  $25  $   $      $51,223  $51,223  $   $   $1,939   $1,939   $   $      $25   $25   $   $  
 

 

  

 

  

 

  

 

     

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

     

 

  

 

  

 

  

 

 

Liabilities

           

Interest rate swaps

 $196   $   $196   $      $   $   $   $  
 

 

  

 

  

 

  

 

     

 

  

 

  

 

  

 

 

Total Liabilities

 $196   $   $196   $      $   $   $   $  
 

 

  

 

  

 

  

 

     

 

  

 

  

 

  

 

 

Information regarding the fair value disclosures associated with the assets of the Company’s defined benefit plans can be found in Note 17,16, Retirement Plans.

Note 20.19.

Commitments and Contingent Liabilities

The Company is subject to product warranty claims that arise in the ordinary course of its business. For certain manufactured products, the Company maintains a product warranty accrual that is adjusted on a monthly basis as a percentage of cost of sales. This product warranty accrual is periodically adjusted based on the identification or resolution of known individual product warranty claims.

The following table sets forth the Company’s product warranty accrual:

   Warranty Liability 

Balance at December 31, 2014

  $11,500  

Additions to warranty liability

   1,794  

Warranty liability utilized

   (4,650

Acquisitions

   111  
  

 

 

 

Balance at December 31, 2015

  $8,755  
  

 

 

 

Included within the above table are concrete tie warranty reserves of approximately $7,544 and $10,331, respectively, at December 31, 2015 and 2014. For the periods ended December 31, 2015, 2014, and 2013, the Company recorded approximately $972, $9,854 and $612, respectively, in pre-tax concrete tie warranty charges within “Cost of Goods Sold” in the Company’s Rail Products and Services segment primarily related to concrete ties manufactured at the Company’s former Grand Island, NE facility.

ProductUPRR Warranty Claims

On July 12, 2011, the UPRR notified (UPRR Notice)(the “UPRR Notice”) the Company and its subsidiary, CXT Incorporated (CXT)(“CXT”), of a warranty claim under CXT’s 2005 supply contract relating to the sale of pre-stressed concrete railroad ties to the UPRR. The UPRR asserted that a significant percentage of concrete ties manufactured in 2006 through 2011 at CXT’s Grand Island, NE facility failed to meet contract specifications, had workmanship defects and were cracking and failing prematurely. Of the 3.0 million ties manufactured between 1998 and 2011 from the Grand Island, NE facility, approximately 1.6 million ties were sold during the period the UPRR had claimed nonconformance. The 2005 contract called for each concrete tie which failed to conform to the specifications or had a material defect in workmanship to be replaced with 1.5 new concrete ties, provided, that, UPRR within five years of the sale of a concrete tie, UPRR notified CXT of such failure to conform or such defect in workmanship. The UPRR Notice did not specify how many ties manufactured during this period were defective nor the exact nature of the alleged workmanship defect.

Following the UPRR Notice, the Company worked with material scientists and pre-stressed concrete experts to test a representative sample of Grand Island, NE concrete ties and assess warranty claims for certain concrete ties made in its Grand Island, NE facility between 1998 and 2011. The Company discontinued manufacturing operations in Grand Island, NE in early 2011.

2012

During 2012, the Company completed sufficient testing and analysis to further understand this matter. Based upon testing results and expert analysis, the Company believed it discovered conditions, which largely related to the 2006 to 2007 manufacturing period, that can shorten the life of the concrete ties produced during this period. During the fourth quarter of 2012 and first quarter of 2013, the Company reached agreement with the UPRR on several matters including a process for the Company and the UPRR to work together to identify, prioritize, and replace defective ties that meet the criteria for replacement. This process applies to the ties the Company shipped to the UPRR from its Grand Island, NE facility from 1998 to 2011. During most of this period the Company’s warranty policy for UPRR carried a 5 year warranty with a 1.5:1 replacement ratio for any defective ties. In order to accommodate the UPRR and other customer concerns, the Company also reverted to a previously used warranty policy providing a 15 year15-year warranty with a 1:1 replacement ratio. This change provided an additional

10 years of warranty protection. In the amended 2005 supply agreement, the Company and the UPRR also extended the supply of Tucson ties by five years and agreed on a cash payment of $12,000 to the UPRR as compensation for concrete ties already replaced by the UPRR during the investigation period.

During 2012, as a result of the testing that the Company conducted on concrete ties manufactured at its former Grand Island, NE facility and of the developments related developments of theto UPRR and other customer matters, the Company recorded pre-tax warranty charges of $22,000 in “Cost of Goods Sold” within its Rail Products and Services segment based on the Company’s estimate of the number of defective concrete ties that will ultimately require replacement during the applicable warranty periods.

2013

Throughout 2013, at the UPRR’s request and under the terms of the amended 2005 supply agreement, the Company provided warranty replacement concrete ties for use across certain UPRR subdivisions. The Company attempted to reconcile the quantity of warranty claims for ties replaced and obtain supporting detail for the ties removed. The Company believes that the UPRR did not replace concrete ties in accordance with the amended agreement and has not furnished adequate documentation throughout the replacement process in these subdivisions to support its full warranty claim. Based on the information received by the Company to date, the Company believes that a significant number of ties which the UPRR replaced in these subdivisions did not meet the criteria to be covered as warranty replacement ties under the amended 2005 supply agreement. The disagreement related to the 2013 warranty replacement activity includes approximately 170,000 ties where the Company provided detailed documentation supporting our position with reason codes that detail why these ties are not eligible for a warranty claim.

In late November 2013, the Company received notice from the UPRR asserting a material breach of the amended 2005 supply agreement. The UPRR’s notice asserted that the failure to honor its claims for warranty ties in these subdivisions was a material breach. Following receipt of this notice, the Company provided information to the UPRR to refute the UPRR’s claim of breach and included the reconciliation of warranty claims supported by substantial findings from the Company’s track observation team, all within the 90 day cure period. The Company also proposed further discussions to reach agreement on reconciliation for 2013 replacement activities and future replacement activities and a recommended process that will ensure future replacement activities are done with appropriate documentation and per the terms of the amended 2005 supply agreement.

2014

During the first quarter of 2014, the Company further responded within the 90 day cure period to the UPRR’s claim and presented a reconciliation for the subdivisions at issue. This proposed reconciliation was based on empirical data and visual observation from Company employees that were present during the replacement process for a substantial majority of the concrete ties replaced. The Company has spent considerable time documenting facts related to concrete tie condition and track condition to assess whether the ties replaced met the criteria to be eligible for replacement under the terms of the amended 2005 supply agreement.

During the second quarter of 2014, the Company increased its accrual by an additional $4,000$8,766 based on revised estimates of ties to be replaced.replaced based upon scientific testing and other analysis, adjusted for ties already provided to UPRR. The Company continued to work with UPRR to identify, replace, and reconcile defective ties related to the warranty claim in accordance with the amended 2005 supply agreement.

The Company and UPRR met during the third quarter of 2014 to evaluate each other’s position in an effort to work towards agreement on the unreconciled 2013 and 2014 replacement activity as well as the standards and practices to be implemented for future replacement activity and warranty tie replacement. No agreement was reached

In November and December of 2014, the Company continuesreceived additional notices from UPRR asserting that ties manufactured in 2000 were defective and again asserting material breaches of the amended 2005 supply agreement relating to endeavorwarranty tie replacements as well as certain new ties provided to reconcile the replaced warranty ties with UPRR.UPRR being out of specification.

As of December 31, 2014, the Company and the UPRR havehad not been able to reconcile the disagreement related to the 2013 and 2014 warranty replacement activity. The disagreement relating to the 2014 warranty replacement activity includes approximately 90,100 ties that the Company believes are not warranty-eligible.

As a result of the current year replacement activity and related discussions with the UPRR, during the fourth quarter of 2014 the Company recognized a $4,766 charge to increase the warranty obligation to reflect the Company’s current expectations of tie failures, based upon scientific testing and other analysis, adjusted for ties already provided to the UPRR. The accrued concrete tie warranty reserve of $10,331 as of December 31, 2014 is the best estimate of the expected value of defective ties that will be replaced as a result of our observation and analysis of ties in track. While the Company believes this is a reasonable estimate of these potential warranty claims, these estimates could change due to the receipt of new information and future events. In the event the UPRR continues to replace ties and assert warranty claims in future years in the same manner as 2013 and 2014, we are likely to have a disagreement in those future years relating to the number of ties eligible for warranty claim.

In November and December of 2014, the Company received additional notices from the UPRR asserting that ties manufactured in 2000 were defective and again asserting material breaches of the amended 2005 supply agreement relating to warranty tie replacements as well as certain new ties provided to the UPRR being out of specification. The Company again responded to the UPRR that it was not in material breach of the amended 2005 supply agreement relating to warranty tie replacements and that new ties being manufactured complied with the specifications provided by the UPRR.

Although the Company has denied it is in material breach of the amended 2005 supply agreement, this dispute could jeopardize our amended 2005 supply agreement. For the years ended December 31, 2014, 2013, and 2012, sales to the UPRR from our Tucson, AZ facility were approximately $15,297, $12,664, and $25,441, respectively. Additionally, as of December 31, 2014 we had long-lived assets with a net book value of approximately $978 associated with the Tucson, AZ facility.2015

On January 23, 2015, the UPRR filed a Complaint and Demand for Jury Trial in the District Court for Douglas County, NE against the Company and its subsidiary, CXT, Incorporated, asserting, among other matters, that the Company breached its express warranty, breached an implied covenant of good faith and fair dealing, anticipatorily repudiated its warranty obligations, and that UPRR’s exclusive and limited remedy provisions in the supply agreement have failed of their essential purpose which entitles UPRR to recover all incidental and consequential damages. The complaintComplaint seeks to cancel all duties of UPRR under the contracts,contract, to adjudge the Company as having no remaining rights under the contracts, and to recover damages in an amount to be determined at trial for the value of unfulfilled warranty replacement ties and ties likely to become warranty eligible, for costs of cover for replacement ties, and for various incidental and consequential damages. The amended 2005 supply agreement provides that UPRR’s exclusive remedy is to receive a replacement tie that meets the contract specifications for each tie that failed to meet the contract specifications or otherwise contained a material defect provided that the Company receives written notice of such failure or defect within 15 years after that tie was produced. The amended 2005 supply agreement continues to provideprovides that the Company’s warranty does not apply to ties that (a) have been repaired or altered without the Company’s written consent in such a way as to affect the stability or reliability thereof, (b) have been subject to misuse, negligence, or accident, or (c) have been improperly maintained or used contrary to the specifications for which such ties were produced. The amended 2005 supply agreement also continues to provide that the Company’s warranty is in lieu of all other express or implied warranties and that neither party shall be subject to or liable for any incidental or consequential damages to the other party. The dispute is largely based on (1) claims submitted whichthat the Company believes are for ties claimed for warranty replacement inaccurately rated that are not the responsibility of the Company and claims that do not meet the criteria of a warranty replacement and (2) UPRR’s assertion, which the Company vigorously disputes, that UPRR in future years will be entitled to warranty replacement ties for virtually all of the Grand Island ties. Many thousands of Grand Island ties have been performing in track for over ten years. In addition, a significant amount of Grand Island ties were rated by both parties in the excellent category of the rating system.

In June 2015, UPRR delivered an additional notice alleging defects in ties produced in the Company’s Tucson and Spokane locations and other claimed material breaches which the Company contends are unfounded. The Company believesagain responded to UPRR that it was not in material breach of the amended 2005 supply agreement relating to warranty tie replacements and that new ties being manufactured complied with the specifications provided by UPRR.

On June 16 and 17, 2015, UPRR issued formal notice of the termination of the concrete tie supply agreement as well as the termination of the lease agreement at the Tucson, AZ production facility and rejection and revocation of its prior acceptance of certain ties manufactured at the Company’s Spokane, WA production facility. Since that time, UPRR has discontinued submitting purchase orders to the Company for shipment of warranty replacement ties.

On May 29, 2015, the Company and CXT filed an Answer, Affirmative Defenses and Counterclaims in response to the Complaint, denying liability to UPRR. As a result of UPRR’s subsequent June 16-17, 2015 actions and certain related conduct, the Company on October 5, 2015 amended the pending Answer, Affirmative Defenses and Counterclaims to add, among other things, assertions that UPRR’s conduct in question was wrongful and unjustified and constituted additional grounds for the affirmative defenses to UPRR’s claims and also for the Company’s counterclaims. By Scheduling Order dated September 3, 2015, a December 30, 2016 deadline for the completion of fact discovery has been established and trial may proceed at some future date after March 3, 2017, although no trial date has been set. The parties are without merit and intends to vigorously defend itself.currently conducting discovery.

The Company continues to engage in discussions in an effort to resolve this matter, however,matter. However, we cannot predict that such discussions will be successful, or that the results of the litigation with UPRR, or whether any settlement or judgment amounts will be within the range of our estimated accruals for loss contingencies. Future potential costs pertaining to UPRR’s claims and the outcome of the UPRR litigation could result in a material adverse effect on our results of operations, financial condition, and cash flows.

Other Legal Matters

The Company is also subject to product warrantyother legal proceedings and claims that arise in the ordinary course of its business. For certain manufactured products,In the Company maintainsopinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial condition or liquidity of the Company. The resolution, in any reporting period, of one or more of these matters could have a product warranty accrual which is adjusted on a monthly basis as a percentage of cost of sales. This product warranty accrual is periodically adjusted basedmaterial effect on the identification or resolutionCompany’s results of known individual product warranty claims. The following table sets forth the Company’s continuing operations product warranty accrual:

   Warranty Liability 

Balance at December 31, 2012

  $15,727  

Additions to warranty liability

   1,695  

Warranty liability utilized

   (9,939
  

 

 

 

Balance at December 31, 2013

  $7,483  

Additions to warranty liability

   10,957  

Warranty liability utilized

   (6,992

Warranty liabilities acquired

   52  
  

 

 

 

Balance at December 31, 2014

  $11,500  
  

 

 

 

Included within the above table are concrete tie warranty reserves of approximately $10,331 and $6,462, respectively, as of December 31, 2014 and 2013. For the periods ended December 31, 2014, 2013, and 2012, the Company recorded approximately $9,854, $612, and $23,019, respectively, in pre-tax concrete tie warranty charges within “Cost of Goods Sold” in the Company’s Rail Products segment primarily related to concrete ties manufactured at the Company’s former Grand Island, NE facility.for that period.

Environmental and Legal ProceedingsMatters

The Company is subject to national, state, foreign, and/or local laws and regulations relating to the protection of the environment. The Company is monitoring its potential environmental exposure related to current and former facilities. The Company’s efforts to comply with environmental regulations may have an adverse effect on its future earnings. In the opinion of management, compliance with the present environmental 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 also subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial condition or liquidity of the Company. The resolution, in any reporting period, of one or more of these matters could have a material effect onfollowing table sets forth the Company’s results of operationsundiscounted environmental obligation:

   Environmental liability 

Balance at December 31, 2014

  $3,344  

Additions to environmental obligations

   50  

Environmental obligations utilized

   (214

Acquisitions

   3,460  
  

 

 

 

Balance at December 31, 2015

  $6,640  
  

 

 

 

Note 20

Other Income

The following table summarizes the Company’s other income for that period.

As ofthe three years ended December 31, 2015, 2014, and 2013, the Company maintained environmental and litigation reserves of $3,344 and $2,190, respectively.2013.

   2015   2014   2013 

Gain on Tucson, AZ asset sale(a)

  $(2,279  $    $  

Foreign currency gains

   (1,616   (422   (433

Remeasurement gain on equity method investment(b)

   (580          

Legal settlement gain(c)

   (460          

Other

   (650   (256   (644
  

 

 

   

 

 

   

 

 

 
  $(5,585  $(678  $(1,077
  

 

 

   

 

 

   

 

 

 

a)On December 23, 2015, the Company sold certain assets related to the former Tucson, AZ precast concrete tie facility for $2,750 resulting in a pre-tax gain on sale of $2,279.
b)On November 23, 2015, the Company acquired the remaining 75% of shares of Tew Plus resulting in a gain of $580, which is recorded within other income as of December 31, 2015. The gain is included in equity loss (income) and remeasurement gain within the Consolidated Statements of Cash Flows.
c)During the fourth quarter the Company received $460 from the Steel Antitrust Settlement Fund related to a claim regarding steel purchased by the Company between 2005 and 2007.

Note 21.

Quarterly Financial Information (Unaudited)

As more fully described in Note 3, of the Notes to the Consolidated Financial Statements, “Acquisitions”“Acquisitions,” the Company acquired Tew, Tew Plus, and IOS during 2015 and Carr, FWO, and Chemtec and theduring 2014. The results of the subsidiary’s operations are included from the acquisition dates through December 31, 2014.

As more fully described in Note 4 of the Notes to the Consolidated Financial Statements, “Discontinued Operations,” the Company sold its SSD and Precise businesses in June 2012 and August 2012, respectively. The operations of these divisions qualified as a “component of an entity” under FASB ASC 205-20 and thus, the operations are classified as discontinued.dates.

Quarterly financial information for the years ended December 31, 20142015 and 20132014 is presented below:

 

   2014 
   First   Second   Third   Fourth     
   Quarter   Quarter   Quarter   Quarter   Total 

Net sales

  $111,414    $166,832    $167,797    $161,149    $607,192  

Gross profit

  $24,127    $30,700    $35,159    $31,605    $121,591  

Income from continuing operations

  $3,649    $6,848    $9,119    $6,038    $25,654  

Income (loss) from discontinued operations

  $    $14    $(3  $(9  $2  

Net income

  $3,649    $6,862    $9,116    $6,029    $25,656  

Basic earnings per common share:

          

From continuing operations

  $0.36    $0.67    $0.89    $0.59    $2.51  

From discontinued operations

  $    $0.00    $(0.00  $(0.00  $0.00  

Basic earnings per common share

  $0.36    $0.67    $0.89    $0.59    $2.51  

Diluted earnings per common share:

          

From continuing operations

  $0.35    $0.66    $0.88    $0.58    $2.48  

From discontinued operations

  $    $0.00    $(0.00  $(0.00  $0.00  

Diluted earnings per common share

  $0.35    $0.67    $0.88    $0.58    $2.48  

Dividends paid per common share

  $0.03    $0.03    $0.03    $0.04    $0.13  
   2015 
   First
Quarter
   Second
Quarter
   Third
Quarter(1)
   Fourth
Quarter(2)
 

Net sales

  $137,907    $171,419    $176,059    $139,138  

Gross profit

  $30,653    $37,089    $36,038    $29,872  

Net income (loss)

  $4,285    $5,362    $(57,422  $3,328  

Basic earnings (loss) per common share

  $0.42    $0.52    $(5.60  $0.33  

Diluted earnings (loss) per common share

  $0.41    $0.52    $(5.60  $0.32  

Dividends paid per common share

  $0.04    $0.04    $0.04    $0.04  

Differences between the sum of quarterly results and Consolidated Statement of Operations due to rounding.

 

   2013 
   First   Second   Third   Fourth     
   Quarter   Quarter   Quarter   Quarter   Total 

Net sales

  $129,321    $149,936    $162,248    $156,458    $597,963  

Gross profit

  $24,848    $29,175    $31,305    $30,611    $115,939  

Income from continuing operations

  $4,951    $7,257    $9,793    $7,275    $29,276  

(Loss) Income from discontinued operations

  $(24  $38    $    $    $14  

Net income

  $4,927    $7,295    $9,793    $7,275    $29,290  

Basic earnings per common share:

          

From continuing operations

  $0.49    $0.71    $0.96    $0.71    $2.88  

From discontinued operations

  $(0.00  $0.00    $    $    $0.00  

Basic earnings per common share

  $0.49    $0.72    $0.96    $0.71    $2.88  

Diluted earnings per common share:

          

From continuing operations

  $0.48    $0.71    $0.95    $0.71    $2.85  

From discontinued operations

  $(0.00  $0.00    $    $    $0.00  

Diluted earnings per common share

  $0.48    $0.71    $0.95    $0.71    $2.85  

Dividends paid per common share

  $0.03    $0.03    $0.03    $0.03    $0.12  
(1)- Third quarter 2015 includes $80,337 ($63,887 net of tax) impairment of goodwill related to the IOS and Chemtec reporting units.
(2)- Fourth quarter 2015 includes $2,279 pre-tax gain on sale of Tucson, AZ concrete tie facility.

   2014 
   First
Quarter
   Second
Quarter(1)
   Third
Quarter
   Fourth
Quarter(2)
 

Net sales

  $111,414    $166,832    $167,797    $161,149  

Gross profit

  $24,127    $30,700    $35,159    $31,605  

Net income

  $3,649    $6,862    $9,116    $6,029  

Basic earnings per common share

  $0.36    $0.67    $0.89    $0.59  

Diluted earnings per common share

  $0.35    $0.67    $0.88    $0.58  

Dividends paid per common share

  $0.03    $0.03    $0.03    $0.04  

(1)- Second quarter 2014 includes a $4,000 warranty charge related to UPRR warranty claim.
(2)- Fourth quarter 2014 includes a $4,766 warranty charge related to UPRR warranty claim.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

 

ITEM 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

L.B. Foster Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a–15(e)13a-15(e) under the Securities and Exchange Act of 1934, as amended (the(“the Exchange Act)Act”)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as ofat the end of the period covered by this report.

Managements’ Report on Internal Control Over Financial Reporting

The management of L.B. Foster Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a–15(f)13a-15(f). L.B. Foster Company’s internal control system is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. All internal control systems, no matter how well designed, have inherent limitations. Accordingly, even effective controls can provide only reasonable assurance with respect to financial statement preparation and presentation. There were no significant changes in internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fourth quarter of 20142015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

L.B. Foster Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014.2015. In making this assessment, management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)(“COSO”) inInternal Control-IntegratedControl-Integrated Framework (2013 Framework). Based on this assessment, management concluded that the Company maintained effective internal control over financial reporting as ofat December 31, 2014.2015.

The SEC’s general guidance permits the exclusion of an assessment of the effectiveness of a registrant’s disclosure controls and procedures as they relate to its internal controlscontrol over financial reporting for an acquired business during the first year following such acquisition, if among other circumstances and factors there is not adequate time between the acquisition date and the date of assessment. As previously discussed in Note 3, — Acquisitions“Acquisitions,” of the consolidated financial statements included in this Annual Report on Form 10-K, L.B. Foster Company completed the acquisition of FWOIOS Holdings, Inc. (“IOS”) on March 13, 2015 and Chemtec,Tew Plus, LTD (“Tew Plus”) on October 29, 2014 and December 30, 2014, respectively. TheNovember 23, 2015. These acquired businesses constituted approximately 16%$110.2 million of totalthe Company’s consolidated assets as ofat December 31, 20142015 and less than 1%$37.2 million of revenues and pre-tax incomethe Company’s consolidated sales for the year then ended.ended December 31, 2015. In addition, these acquired businesses contributed $5.3 million in pre-tax losses to the Company (which excludes goodwill impairment charges of $69.9 million related to IOS) as compared to its consolidated pre-tax loss of $44.4 million for the year ended December 31, 2015. Management’s assessment and conclusion on the effectiveness of the Company’s disclosure controls and procedures as ofand internal control over financial reporting at December 31, 20142015 excluded an assessment of the internal control over financial reporting of the assets and businessbusinesses acquired forin the FWOIOS and ChemtecTew Plus acquisitions.

Ernst & Young LLP, the independent registered public accounting firm that also audited the Company’s consolidated financial statements has issued an attestation report on the Company’s internal control over financial reporting. Ernst & Young’s attestation report on the Company’s internal control over financial reporting appears in Part II, Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders L. B.L.B. Foster Company and Subsidiaries

We have audited L.B. Foster Company and Subsidiaries’ internal control over financial reporting as of December 31, 2014,2015, based on criteria established inInternal Control — Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)framework) (the COSO criteria). L. B.L.B. Foster Company and Subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements’ Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Managements’ Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of FWOIOS Holdings, Inc. (IOS) and Chemtec Energy Services, L.L.C. (Chemtec)Tew Plus, LTD (Tew Plus), which are included in the 20142015 consolidated financial statements of L.B. Foster Company and Subsidiaries and constituted approximately 16%$110.2 million of totalconsolidated assets as of December 31, 20142015 and less than 1%$37.2 million of revenues and pre-tax incomeconsolidated sales for the year then ended. In addition, these acquired businesses contributed $5.3 million in pre-tax losses to the Company (which excludes goodwill impairment charges of $69.9 million related to IOS) as compared to its consolidated pre-tax loss of $44.4 million for the year ended December 31, 2015. Our audit of internal control over financial reporting of L.B. Foster Company and Subsidiaries also did not include an evaluation of the internal control over financial reporting of FWOIOS and Chemtec.Tew Plus.

In our opinion, L. B. Foster Company and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,2015, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of L. B.L.B. Foster Company and Subsidiaries, as of December 31, 20142015 and 2013,2014, and the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 20142015 and our report dated March 3, 20151, 2016 expressed an unqualified opinion thereon.

/s/    Ernst & Young LLP

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

March 3, 20151, 2016

ITEM 9B.OTHER INFORMATION

None.

PART III

 

ITEM 10.DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by this Item regarding the directors of the Company is incorporated herein by reference to the information included in the Company’s proxy statement for the 20152016 annual meeting of stockholders (the “Proxy Statement”) under the caption “Election of Directors.”

The information required by this Item regarding the executive officers of the Company is set forth in Part I of this Annual Report on Form 10-K under the caption “Executive Officers of the Registrant” and is incorporated herein by reference.

The information required by this Item regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated herein by reference to the information included in the Proxy Statement under the caption “Section 16(a) Beneficial Reporting Compliance.”

The information required by this Item regarding our Code of Ethics is set forth in Part I of this Annual Report on Form 10-K under the caption “Code of Ethics” and is incorporated herein by reference.

The information required by this Item regarding our audit committee and the audit committee financial expert(s) is incorporated herein by reference to the information included in the Proxy Statement under the caption “Corporate Governance — Governance—Board Committees — Committees—Audit Committee.”

 

ITEM 11.EXECUTIVE COMPENSATION

The information required by this Item regarding executive compensation is incorporated herein by reference to the information included in the Proxy Statement under the captions “Director Compensation — 2014,Compensation—2015,” “Executive Compensation,” “Summary Compensation Table (2014, 2013,(2015, 2014, and 2012)2013),” “Grants of Plan-Based Awards in 2014,2015,” “Outstanding Equity Awards At 20142015 Fiscal Year-End,” “2014“2015 Options Exercises and Stock Vested Table,” “2014“2015 Nonqualified Deferred Compensation,” “Change-In-Control,” “Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report.”

 

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item regarding the Company’s equity compensation plans is set forth in Part II, Item 5 of this Annual Report on Form 10-K under the caption “Securities Authorized for Issuance Under Equity Compensation Plans” and is incorporated herein by reference.

The information required by this Item regarding the beneficial ownership of the Company is incorporated herein by reference to the information included in the Proxy Statement under the caption “Stock Ownership.”

 

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item regarding transactions with related persons is incorporated herein by reference to the information included in the Proxy Statement under the caption “Corporate Governance — Governance—Transactions with Related Parties.”

The information required by this Item regarding director independence is incorporated herein by reference to information included in the Proxy Statement under the caption “Corporate Governance — Governance—The Board and Board Meetings.”

 

ITEM 14.14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item regarding principal accountant fees and services is incorporated herein by reference to information included in the Proxy Statement under the caption “Independent Registered Public Accountants’ Fees.”

PART IV

 

ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following documents are filed as a part of this Report:

(a)(1).Financial Statements

The following Reports of Independent Registered Public Accounting Firm, consolidated financial statements, and accompanying notes are included in Item 8 of this Report:

 

Reports of Independent Registered Public Accounting Firm.

  
Consolidated Balance Sheets as of December 31, 20142015 and 2013.2014.  
Consolidated Statements of Operations for the Years Ended December 31, 2015, 2014, 2013, and 2012.2013.  
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2015, 2014, 2013, and 2012.2013.  
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015, 2014, 2013, and 2012.2013.  
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2015, 2014, 2013, and 2012.2013.  
Notes to Consolidated Financial Statements.  

(a)(2).    Financial Statement Schedule

Schedules for the Years Ended December 31, 2015, 2014, 2013, and 2012:2013:

 

II Valuation and Qualifying Accounts.

The remaining schedules are omitted because of the absence of conditions upon which they are required.

(a)(3).    Exhibits

The Index to Exhibits immediately following the signature page are filed as part of this Annual Report on Form 10-K.

L. B. FOSTER COMPANY AND SUBSIDIARIES

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014, 2013, AND 20122013

 

      Additions           Balance at
Beginning
of Year
   Additions
Charged to
Costs and
Expenses
   Deductions (1)   Balance
at End
of Year
 
  Balance at   Charged to           Balance 
  Beginning   Costs and           at End 

2015

        

Deducted from assets to which they apply:

        

Allowance for doubtful accounts

  $1,036    $1,113    $664    $1,485  
  of Year   Expenses   Other (1)   Deductions (2)   of Year   

 

   

 

   

 

   

 

 

2014

                  

Deducted from assets to which they apply:

                  

Allowance for doubtful accounts

  $1,099    $462    $30    $555    $1,036    $1,099    $462    $525    $1,036  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

2013

                  

Deducted from assets to which they apply:

                  

Allowance for doubtful accounts

  $899    $236    $    $36    $1,099    $899    $236    $36    $1,099  
  

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

2012

          

Deducted from assets to which they apply:

          

Allowance for doubtful accounts

  $1,725    $(319  $    $507    $899  
  

 

   

 

   

 

   

 

   

 

 

 

(1)Assumed allowance related to acquisitions
(2)Notes and accounts receivable written off as uncollectible.

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

Date: March 3, 20151, 2016

  By: 

/s/    Robert P. Bauer

   (Robert P. Bauer,
   President and Chief Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

  

Name

 

Position

 

Date

By:

 

    /s/    Lee B. Foster II

 Chairman of the Board and Director March 3, 20151, 2016
 (Lee B. Foster II)  

By:

 

    /s/    Robert P. Bauer

 President, Chief Executive Officer March 3, 20151, 2016
 (Robert P. Bauer) and Director 

By:

 

    /s/    Peter McIlroy IIDirk Jungé

 Director March 3, 20151, 2016
 (Peter McIlroy II)Dirk Jungé)  

By:

 

    /s/    G. Thomas McKane

 Director March 3, 20151, 2016
 (G. Thomas McKane)  

By:

 

    /s/    Diane B. Owen

 Director March 3, 20151, 2016
 (Diane B. Owen)  

By:

 

    /s/    Robert S. Purgason

 Director March 3, 20151, 2016
 (Robert S. Purgason)  

By:

 

    /s/    William H. Rackoff

 Director March 3, 20151, 2016
 (William H. Rackoff)  

By:

 

    /s/    Suzanne B. Rowland

 Director March 3, 20151, 2016
 (Suzanne B. Rowland)

By:

    /s/    Bradley S. Vizi

DirectorMarch 1, 2016
(Bradley S. Vizi)  

By:

 

    /s/    David J. Russo

 Senior Vice President, March 3, 20151, 2016
 (David J. Russo) 

Chief Financial Officer

and Treasurer

 

By:

 

    /s/    Christopher T. Scanlon

 Controller and Chief Accounting Officer March 3, 20151, 2016
 (Christopher T. Scanlon)  

INDEX TO EXHIBITS

All exhibits are incorporated herein by reference:

 

  2.1Agreement and Plan of Merger dated March 13, 2015 among IOS Holdings, Inc., L.B. Foster Company, L.B. Foster Raven Merger Company and IOS Holding Company LLC, solely in its capacity as the representative of IOS’s shareholders is incorporated herein by reference to Exhibit 2.1 to the Current Report on Form 8-K/A, File No. 0-10436, filed on March 16, 2015.
3.1  Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, FileNo. 0-10436, filed on May 13, 2003.
3.2  Bylaws of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, File No. 0-10436, filed on November 8, 2012.
4.1  Rights Agreement, amended and restated as of November 19, 2012, between L.B. Foster Company and American Stock Transfer & Trust Company, including the form of Rights Certificate and the Summary of Rights attached thereto, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on November 20, 2012.
10.010.1  $200,000,000335,000,000 Amended and Restated Credit Agreement dated September 23, 2014,March 13, 2015, between Registrant and PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., and Citizens Bank of Pennsylvania, and Branch Banking and Trust Company is incorporated by reference to Exhibit 10.0 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on September 26, 2014.
10.1$125,000,000 Revolving Credit Facility Credit Agreement dated May 2, 2011, between Registrant and PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., and Citizens Bank of Pennsylvania, incorporated by reference to Exhibit 10.0 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on May 4, 2011.
10.2First Amendment to Credit Agreement, incorporatedherein by reference to Exhibit 10.1 to the Company’s QuarterlyCurrent Report on Form 10-Q for the quarter ended September 30, 2012,8-K/A, File No. 0-10436, filed on November 8, 2012.March 16, 2015.
10.310.2 **  Employment Agreement with Robert P. Bauer, dated January 18, 2012, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on January 23, 2012.
10.410.3 **  2006 Omnibus Incentive Plan, as amended and restated October 30, 2013, incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, File No. 0-10436, filed on February 27, 2014.
10.510.4 **  Form of Restricted Stock Agreement (for grants made prior to December 23, 2011), incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on December 21, 2011.
10.6Amended Form of Restricted Stock Agreement (for grants made on or after December 23, 2011), incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, FileNo. 0-10436, filed on December 21, 2011.
10.710.5 **  Restricted Stock Agreement between Registrant and David J. Russo dated May 28, 2010, incorporated by reference to Exhibit 10.62 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on June 1, 2010.
10.810.6 **  Retention Performance Share Unit Award Agreement between Registrant and David R. Sauder dated March 15, 2011, incorporated by reference to Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, File No. 0-10436, filed on March 15, 2012.
10.9Form of Performance Share Unit Award Agreement (2008 – 2011), incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, File No. 0-10436, filed on March 15, 2012.
10.9.1Form of Performance Share Unit Award Agreement (2012), incorporated by reference to Exhibit 10.15.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, File No. 0-10436, filed on March 15, 2012.

10.9.210.7 **  Form of Performance Share Unit Award Agreement (2013), incorporated by reference to Exhibit 10.13.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, File No. 0-10436, filed on March 8, 2013.
10.9.310.8 **  Form of Performance Share Unit Award Agreement (2014), incorporated by reference to Exhibit 10.10.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, File No. 0-10436, filed on February 27, 2014
10.1010.9 **  Executive Annual Incentive Compensation Plan (as Amended and Restated), incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement on Schedule 14A, filed on April 12, 2013.
10.1110.10 **  Amended and Restated Key Employee Separation Plan, incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, FileNo. 0-10436, filed on March 8, 2013.

10.12  10.11 **  Restated Supplemental Executive Retirement Plan, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, FileNo. 0-10436, filed on August 9, 2012.
10.13Amended and Restated 1998 Long-Term Incentive Plan as of May 25, 2005, incorporated by reference to Exhibit 10.34 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011.
10.14Amendment, effective May 24, 2006, to Amended and Restated 1998 Long-Term Incentive Plan as of May 25, 2005, incorporated by reference to Exhibit 10.34.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011.
10.15  10.12 **  Medical Reimbursement Plan (MRP1) effective January 1, 2006, incorporated by reference to Exhibit 10.45 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011.
10.16  10.13 **  Medical Reimbursement Plan (MRP2) effective January 1, 2006, incorporated by reference to Exhibit 10.45.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011.
10.17  10.14 **  Amendments to MRP2, incorporated by reference to Exhibit 10.45.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011.
10.18  10.15 **  Leased Vehicle Plan as amended and restated on September 1, 2007, incorporated by reference to Exhibit 10.46 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 0-10436, filed on March 16, 2011.
10.19Non-Employee Director Compensation, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, FileNo. 0-10436, filed on August 6, 2013.
10.20  10.16 **  2014 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 0-10436, filed May 5, 2014.
10.21  10.17 **  Form of 2014 Restricted Stock Agreement, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, FileNo. 0-10436, filed May 5, 2014.
10.222013 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 0-10436, filed May 5, 2014.
10.232012 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 0-10436, filed May 5, 2014.

10.24  10.18 **  Retirement and Consulting Agreement and Non-Competition and Non-Solicitation Agreement dated June 20, 2014 between L.B. Foster Company and Donald L. Foster, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on June 20, 2014.
10.25
  10.19 **
  Release Agreement dated June 20, 2014 between L.B. Foster Company and Donald L. Foster, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, FileNo. 0-10436, filed on June 20, 2014.
  10.20 **2015 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May 6, 2015.
  10.21 **2015 Form of Restricted Stock Agreement, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May 6, 2015.
  10.22 **2015 Performance Share Unit Program (2015-2017), incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May 6, 2015.
*10.23**Long Term Incentive Performance Share Unit Program (2016-2018).
*10.24**Form of Performance Share Unit Award Agreement (2016-2018).
*10.25**Form of Restricted Stock Award Agreement (2016).
*10.26**2016 Executive Annual Incentive Compensation Plan.
*10.27**2016 Free Cash Flow Program.
  10.28Agreement dated February 12, 2016, among L. B. Foster Company, Legion Partners, L.P. I, Legion Partners, L.P. II, Legion Partners Special Opportunities, L.P. II, Legion Partners Holdings, LLC, Legion Partners Asset Management, LLC, Legion Partners Holdings, LLC, Bradley S. Vizi, Christopher S. Kiper, and Raymond White, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on June 20, 2014.February 17, 2016.

  10.29Confidentiality Agreement dated February 12, 2016, among L.B. Foster Company, Legion Partners, L.P. I, Legion Partners, L.P. II, Legion Partners Special Opportunities, L.P. II, Legion Partners Holdings, LLC, Legion Partners Asset Management, LLC, Legion Partners Holdings, LLC, Bradley S. Vizi, Christopher S. Kiper, Raymond White, David A. Katz, and Justin Albert incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on February 17, 2016
*21  List of Subsidiaries
*23  Consent of Independent Registered Public Accounting Firm.
*31.1  Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2  Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
*32.0  Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002.
*101.INS  XBRL Instance Document.
*101.SCH  XBRL Taxonomy Extension Schema Document.
*101.CAL  XBRL Taxonomy Extension Calculation Linkbase Document.
*101.DEF  XBRL Taxonomy Extension Definition Linkbase Document.
*101.LAB  XBRL Taxonomy Extension Label Linkbase Document.
*101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document.
*  Exhibits marked with an asterisk are filed herewith.
**Exhibit represents a management contract or compensatory plan, contract or arrangement required to be filed as Exhibits to this Annual Report on Form 10-K.

 

8987