ITEM 1. BUSINESS
Summary Description of Businesses
L. B. Foster Company is engaged in the manufacture, fabrication and distribution of rail and trackwork, piling, pile driving equipment, highway products and tubular products. As used herein, "Foster" or the "Company" means L. B. Foster Company and its divisions and subsidiaries, unless the context otherwise requires.
For rail markets, Foster provides a full line of new and used rail, trackwork and accessories to railroads, mines and industry. The Company also designs and produces insulated rail joints, power rail, track fasteners, catenary systems, coverboards and special accessories for mass transit and other rail systems, worldwide.
For the construction industry, the Company sells and rents steel sheet piling and H-bearing pile for foundation and earth retention requirements and pile driving equipment and accessories for driving piling. In addition, Foster supplies bridge decking, expansion joints, overhead sign structures and other products for highway construction and repair.
For tubular markets, the Company supplies pipe and pipe coatings for pipelines and utilities. Foster manufactures spiralweld pipe for water transmission lines, foundation piling, slurry lines and many other applications. In addition, the Company produces pipe-related products for special markets, including water wells and irrigation.
The Company classifies its activities into three business segments: rail products, construction products and tubular products. Financial information concerning the segments is set forth in Note 19 to the financial statements included in the Company's Annual Report to Stockholders for 1996. 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.
RAIL PRODUCTS
L. B. Foster Company's rail products include heavy and light rail, relay rail, insulated rail joints, rail accessories, and transit products. The Company is a major rail products supplier to industrial plants, contractors, railroads, mines and mass transit systems.
The Company sells heavy rail mainly to transit authorities, industrial companies, and rail contractors for railroad sidings, plant trackage, and other carrier and material handling applications. Additionally, the Company makes some sales of heavy rail to railroad companies and to foreign buyers. The Company sells light rail for mining and material handling applications.
Rail accessories include trackwork, ties, track spikes, bolts, angle bars and other products required to install or maintain rail lines. These products are sold to railroads, rail contractors and industrial customers and are manufactured within the company or purchased from other manufacturers.
The Company's Allegheny Rail Products (ARP) division engineers and markets insulated rail joints and related accessories for the railroad and mass transit industries, worldwide. Insulated joints are made in-house and subcontracted.
The Company's Transit Products Division supplies power rail, direct fixation fasteners, catenary systems, coverboards and special accessories primarily for mass transit systems. Most of these products are manufactured by subcontractors and are usually sold by sealed bid to transit authorities or to rail contractors, worldwide.
The Company's Midwest Steel Division in Pomeroy, Ohio is the country's leading manufacturer of light trackwork for the mining industry. It also produces new heavy trackwork for industrial and export markets.
CONSTRUCTION PRODUCTS
L. B. Foster Company's construction products consist of sheet and bearing piling, fabricated highway products and pile driving/extracting and related equipment.
Sheet piling products are interlocking structural steel sections that are generally used to provide lateral support at construction sites. Bearing piling products are steel H-beam sections which, in their principal use, are driven into the ground for support of structures such as bridge piers and high-rise buildings. Sheet piling is sold or leased and bearing piling is sold principally to contractors and construction companies.
Other construction products consist of fabricated highway products and pile driving/extracting equipment. Fabricated highway products consist principally of bridge decking, aluminum bridge rail, overhead sign structures and other bridge products, which are fabricated by the Company. The major purchasers of these products are contractors for state, municipal and other governmental projects.
Two types of pile driving equipment, diesel and vibratory, have historically been sold or leased by the Company. Vibratory pile drivers also function as pile extractors. The majority of the Company's sales and leases of pile drivers, extractors and other construction equipment are to contractors. The Company also distributes a hydraulic pile driving hammer manufactured by a company located in the Netherlands.
Sales of the Company's construction products are partly dependent upon the level of activity in the construction industry. Accordingly, sales of these products have traditionally been somewhat higher during the second and third quarters than during the first and fourth quarters of each year.
TUBULAR PRODUCTS
L. B. Foster Company is a distributor of coated pipe. Coated line pipe is used for oil and gas transmission and for refinery, petrochemical plant and power plant construction, as well as water transmission. The Company, with the exception of Fosterweld pipe, generally purchases the pipe it sells from pipe manufacturers.
The Company includes within the tubular products segment, manufactured Fosterweld pipe and oil country tubular goods. Generally, the Company adds value to purchased tubular products by preparing them to meet customer specifications using various fabricating processes, including the finishing of oil country tubular goods and the welding, coating, wrapping and lining of other pipe products.
By converting purchased steel coils into pipe in continuous forming mills, Fosterweld pipe can be produced in sizes up to 120 inches in diameter and 100 feet or more in length for use in water transmission lines and other applications such as dredge pipe, slurry lines, pneumatic lines, ventilation pipe, foundation piling and caissons.
The Company provides fusion bond and other coatings for corrosion protection on oil, gas and other pipelines.
The Company also supplies special pipe products such as water well casing, column pipe, couplings, and related products for agricultural, municipal and industrial water wells.
MARKETING AND COMPETITION
L. B. Foster Company generally markets its rail, construction and tubular products directly in all major industrial areas of the United States through a national sales force of 49 salespeople. The Company maintains 10 sales offices and 14 plants or warehouses nationwide. During 1996, approximately 7% of the Company's total sales were for export.
The major markets for the Company's products are highly competitive. Product availability, quality, service and price are principal factors of competition within each of these markets. No other company provides the same product mix to the various markets the Company serves. There are one or more companies that compete with the Company in each product line. Therefore, the Company faces significant competition from different groups of companies.
RAW MATERIALS AND SUPPLIES
Most of the Company's inventory is purchased in the form of finished or semifinished product. With the exception of relay rail which is purchased from railroads or rail take-up contractors, the Company purchases most of its inventory from domestic and foreign steel producers. There are few domestic suppliers of new rail and piling products and the Company could be adversely affected if a domestic supplier ceased making such material available to the Company. Approximately 62% of the materials sold by the construction products segment are purchased from Bethlehem Structural Products Corporation which has announced the shutdown of its hot rolled sheet piling facility in the first quarter of 1997. See Note 17 to the consolidated financial statements for additional information on this matter.
The Company's purchases from foreign suppliers are subject to the usual risks associated with changes in international conditions and to United States laws which could impose import restrictions on selected classes of products and antidumping duties if products are sold in the United States below certain prices.
BACKLOG
The dollar amount of firm, unfilled customer orders at December 31, 1996 and 1995 by segment follows (in thousands):
Approximately 95% of the December 31, 1996 backlog is expected to be shipped in 1997.
RESEARCH AND DEVELOPMENT
The Company's expenditures for research and development are negligible.
ENVIRONMENTAL DISCLOSURES
While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly for future remediation and other compliance efforts, in the opinion of management compliance with environmental protection laws will not have a material adverse effect on the financial condition, competitive position, or capital expenditures of the Company. However, the Company's efforts to comply with increasingly stringent environmental regulations may have an adverse effect on the Company's future earnings.
EMPLOYEES AND EMPLOYEE RELATIONS
The Company has 526 employees, of whom 276 are hourly production workers and 250 are salaried employees. Approximately 82 of the hourly paid employees are represented by unions. The Company has not suffered any major work stoppages during the past five years and considers its relations with its employees to be satisfactory.
Substantially all of the Company's hourly paid employees are covered by one of the Company's noncontributory, defined benefit plans and a defined contribution plan. Substantially all of the Company's salaried employees are covered by a defined contribution plan established by the Company.
ITEM 2.
ITEM 2. PROPERTIES
The location and general description of the principal properties which are owned or leased by L. B. Foster Company, together with the segment of the Company's business using the properties, are set forth in the following table:
Including the properties listed above, the Company has 10 sales offices and 14 warehouse, plant and yard facilities located throughout the country. The Company's facilities are in good condition and the Company believes that its production facilities are adequate for its present and foreseeable requirements.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED MATTERS
STOCK MARKET INFORMATION
The Company had 1,249 common shareholders of record on January 28, 1997. Common stock prices are quoted daily through the National Association of Security Dealers, Inc. in its over-the-counter NASDAQ quotation service (Symbol FSTRA). The quarterly high and low bid price quotations for common shares (which represent prices between broker-dealers and do not include markup, markdown or commission and may not necessarily represent actual transactions) follow:
DIVIDENDS No dividends were paid on the Company's Common stock during 1996 and 1995. Cash dividends on the Company's Common stock are restricted under the terms of the Company's Revolving Credit Agreement (see Note 8 to consolidated financial statements). 			
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
(All amounts are in thousands except per share data.)
(1) Effective January 1, 1995, the Company adopted Financial Accounting Standards Board (FASB) Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The effect of the adoption was to decrease net income by $219,000 or $0.02 per share.
(2) Effective January 1, 1993, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes." The effect of the adoption was to increase net income by $670,000 or $0.07 per share. As permitted, prior periods were not restated.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Dollars in thousands)
FOURTH QUARTER of 1996 VS. FOURTH QUARTER of 1995
The net income for the current quarter was $1.0 million or $0.10 per share. This compares to a 1995 fourth quarter net income of $0.9 million or $0.09 per share. The Company's fourth quarter pretax income climbed to $1.6 million in 1996 versus $0.6 million in 1995. Net sales in 1996 were $64.5 million or 5% higher than the comparable quarter last year.
Rail products' net sales of $34.2 million increased 17% from the comparable period last year due to three large December shipments of new rail products, a general increase in relay rail business, and an increase in volume of Allegheny Rail Products' business. Construction products' net sales in the 1996 fourth quarter remained relatively unchanged in comparison to the fourth quarter of 1995. Tubular products' net sales declined 15% from 1995 as a result of the Company's withdrawal from the warehouse pipe market and lower sales of coated and Fosterweld pipe. Changes in net sales are primarily the result of changes in volume rather than changes in pricing.
The gross margin percentage for the total company in the 1996 fourth quarter increased to 12% versus 11% in the same quarter of 1995. The gross margin percentage for the Company's rail products segment remained relatively unchanged at 14% in both the 1996 and 1995 fourth quarters. Construction products' gross margin percentage in the fourth quarter of 1996 increased slightly to 13% as a result of higher margins on fabricated highway products. The gross profit margin percentage for tubular products increased to 8% in the 1996 fourth quarter from 3% in the year earlier quarter. The increase was primarily due to the continued improvement in Fosterweld pipe margins.
In the 1996 fourth quarter, selling and administrative expenses increased 2% from the same period in the prior year. Interest expense decreased 16% due primarily to lower borrowings. The income tax rate increased above the statutory rate in 1996 due to certain non-deductible expenses. The income tax rate was less than the statutory rate in 1995 principally as a result of a reduction in the deferred tax asset valuation reserve. See the year comparison section for a more detailed discussion of the income tax provisions.
THE YEAR 1996 COMPARED TO THE YEAR 1995
The net income for 1996 was $3.9 million or $0.39 per share. This compares to 1995 net income of $4.8 million or $0.49 per share. The Company's pretax income was $6.4 million in 1996 versus $4.7 million in 1995. In 1996, the Company recorded an income tax provision of $2.6 million versus an income tax benefit of $0.3 million in 1995.
Rail products' 1996 net sales were unchanged from 1995. Construction products' net sales decreased 12% in 1996 primarily due to the reduced availability of piling products. Sales of tubular products decreased 18% in 1996 as a result of the Company's withdrawal from the warehouse pipe market and a weakness in coating activity, which were partially offset by an increase in Fosterweld products sales. Changes in net sales are primarily the result of changes in volume rather than changes in pricing.
The gross profit margin percentage for the Company in 1996 increased to 13% from 11% in 1995. Rail products' gross margin percentage increased slightly to 14% due primarily to the higher margins in transit products business. Construction products' gross profit percentage increased to 13% in 1996 versus 11% in 1995 as a result of higher margins on fabricated highway products and a reduction in the sale of lower margin piling products. The gross margin percentage for the tubular products segment increased slightly in 1996 to 9% from 8% in 1995. Increased expenses were incurred to overcome production problems at the Birmingham pipe coating facility and volume at the Newport plant was lower than anticipated. These costs were offset by Fosterweld's increased gross profit contributions which resulted from improved market conditions.
Selling and administrative expenses for 1996 remained unchanged compared to 1995, while interest expense decreased 17% due primarily to lower borrowings. Other income in 1996 included $0.4 million of interest income. Other income in 1995 included $0.3 million of interest income and a $0.2 million gain on the sale of equipment held for disposal.
The income tax rate increased above the statutory rate in 1996 as a result of certain non-deductible expenses. In 1993, the Company recorded prior year net operating loss (NOL) carryforwards as assets to comply with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". In addition, the Company also established a valuation reserve to account for the possibility that all of the NOLs may not have been used. As the Company's taxable income has grown in recent years, the need for a reserve to reduce the value of NOLs was no longer necessary. During 1995 and 1994, the income tax rate was less than the statutory rate principally due to reductions in the valuation reserve. At December 31, 1996, the valuation reserve related to the potential non-recoverability of certain state NOLs was $150,000. Cash payments for income taxes were approximately $0.4 million. At the end of 1996, the Company had approximately $2.5 million in federal income tax NOLs and $1.1 million in Alternative Minimum Tax (AMT) credits.
The Company expects to provide for income taxes at approximately the statutory rate in 1997, while cash flow for taxes paid is expected to remain favorable until the remaining NOLs and AMT credits are used. See Note 13 to the consolidated financial statements for additional information on income taxes.
THE YEAR 1995 COMPARED TO THE YEAR 1994
The net income for 1995 was $4.8 million or $0.49 per share. This compares to 1994 net income of $5.4 million or $0.55 per share. Net sales in 1995 were $265.0 million or 13% higher than in 1994.
Rail products' net sales improved 26% in 1995 to $111.6 million as sales of new rail products increased. Despite a fourth quarter weakness in piling products, construction products' net sales for 1995 of $88.7 million were 4% higher than 1994 as increased shipments of piling and fabricated products offset reductions in pile driving equipment revenue. Tubular products' net sales in 1995 increased to $64.7 million or 8% from the prior year due to increased pipe coating volume at the Company's Birmingham, Alabama facility. Changes in net sales are primarily the result of changes in volume rather than changes in prices.
The gross margin percentage for the total company declined to 11% from 12% in 1994. Rail products' gross margin percentage decreased to 13% from approximately 16% in 1994 as a result of lower margins on running rail and used rail products. Construction products' gross margin percentage declined to 11% from 12% in 1994 as a result of lower margins on fabricated products and vibratory pile driving equipment. The gross margin percentage for the Company's tubular products increased to 8% from 6% last year. The increase was the result of a change in the mix of pipe coating products sold and improved Fosterweld pipe margins.
Selling and administrative expenses in 1995 of $22.4 million increased 5% from the prior year primarily as a result of the change in the employee vacation policy which reduced 1994 expense. Interest expense increased 37% principally as a result of higher borrowings. Other income in 1995 included $0.3 million of interest income and a $0.2 million gain on the sale of equipment held for disposal. Other income in 1994 included a gain of $0.3 million from the sale of the Company's Houston, Texas sales office and equipment depot.
The income tax rate is less than the statutory rate in both the 1995 and 1994 periods principally as a result of changes in net deferred tax assets and liabilities. The Company's deferred tax assets include net operating loss (NOL) carryforwards. In 1993, the Company recorded all available NOL carryforwards as assets net of a valuation reserve which reduced the carrying value of the NOL carryforwards to the amount projected to actually be used in future years (i.e. the net realizable value) in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". The net realizable value of the Company's NOL carryforwards is computed based on the average taxable income for the most recent three years projected forward for three years. During 1995 and 1994, the net realizable value of the NOL carryforwards increased and the Company reduced the valuation reserve related to the NOL carryforwards by $2.5 million and $2.4 million, respectively. These favorable adjustments of the valuation reserve were recorded as reductions of income tax expense. Expected utilization of the net deferred tax assets is contingent upon the Company earning in the aggregate approximately $11 million of taxable income in future years.
Effective January 1, 1995, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and recorded a charge of $0.2 million, net of income tax benefit, principally related to a Fosterweld facility held for sale (see Note 2 to consolidated financial statements).
LIQUIDITY AND CAPITAL RESOURCES
The Company generates internal cash flow ("liquidity") from the sale of inventory and the collection of accounts receivable. During 1996, the average turnover rates for accounts receivables and inventories were relatively unchanged from the prior year. Working capital at December 31, 1996 was $63.5 million compared to $57.9 million at December 31, 1995.
During 1996, the Company had capital expenditures of $2.3 million. Capital expenditures in 1997 are expected to be approximately $3 million and are anticipated to be funded by cash flows from operations.
Total revolving credit agreement borrowings at December 31, 1996 were $24.0 million or a decrease of $5.8 million from the end of the prior year. Outstanding letters of credit at December 31, 1996 were $0.8 million. At December 31, 1996, the Company had approximately $20.2 million in unused borrowing commitment. Management believes its internal and external sources of funds are adequate to meet anticipated needs.
OTHER MATTERS
The Company currently owns stock with a book value of approximately $2.0 million in a privately-held corporation. The market value of the stock is not readily determinable and, therefore, the investment is recorded in the Company's accounts at its historical cost of $0.2 million (see Note 7 to consolidated financial statements). If this business is sold, the Company believes that the potential sales price could significantly exceed the privately-held corporation's book value.
As stated previously, the Company has made a decision to divest its Fosterweld operations at the Parkersburg, West Virginia facility, which has fixed assets with a carrying value of $3.0 million. Currently, discussions are taking place with several potential buyers. (See Note 5 to consolidated financial statements). Additionally, the Company is considering the divestiture of its $3.0 million pile driving equipment product line. These actions are not expected to have a material impact on the financial condition of the Company.
Management continues to evaluate the overall performance of certain operations. A decision to terminate an existing operation could have a material effect on near-term earnings but would not be expected to have a material adverse effect on the financial condition of the Company.
OUTLOOK
The Company's primary supplier of piling products, Bethlehem Structural Products Corporation, has announced that its hot rolled sheet piling and structural products facility in Bethlehem, Pennsylvania, will be shut down in the first quarter of 1997. The Company has agreed to purchase Bethlehem's remaining piling production. A portion of this inventory will enable the Company to maintain its rental piling business beyond 1997. The Company is actively pursuing other options to preserve its position in the piling distribution market. Gross profit of the Bethlehem Structural Products Corporation's piling distribution business accounted for less than 10% of the Company's 1996 gross profit.
The rail segment of the business depends on one source for fulfilling certain trackwork contracts. The Company has provided $5,000,000 of working capital to this supplier in the form of loans and advance payments. If, for any reason, this supplier is unable to perform, the Company could experience a negative short term effect on earnings.
The Company's operations are in part dependent on governmental funding of infrastructure projects. Significant changes in the level of government funding of these projects could have a favorable or unfavorable impact on the operating results of the Company. Additionally, governmental actions concerning taxation, tariffs, the environment or other matters could impact the operating results of the Company. The Company's operations results may also be affected by the weather.
Although backlog is not necessarily indicative of future operating results, total Company backlog at December 31, 1996 was approximately $76 million or 7.0% lower than the backlog at the end of the previous year. The following table provides the backlog by business segment.
FORWARD-LOOKING STATEMENTS
The Company wishes to caution readers that various factors could cause the actual results of the Company to differ materially from those indicated by forward-looking statements made from time to time in news releases, reports, proxy statements, registration statements and other written communications (including the preceding sections of this Management's Discussion and Analysis), as well as oral statements made from time to time by representatives of the Company. Except for historical information, matters discussed in such oral and written communications are forward-looking statements that involve risks and uncertainties, including but not limited to general business conditions, the availability of material from major suppliers, the impact of competition, the seasonality of the Company's business, taxes, inflation, and governmental regulations.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.
During 1996, 1995, and 1994, the Company financed certain capital expenditures and related maintenance agreements totaling $137,000, $4,081,000 and $415,000, respectively, through the issuance of capital leases.		
See Notes to Consolidated Financial Statements.
See Notes to Consolidated Financial Statements.	
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES		
Basis of financial statement presentation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated. The term "Company" refers to L. B. Foster Company and its subsidiaries, as the context requires.		
Cash equivalents - The Company considers securities with maturities of three months or less, when purchased, to be cash equivalents.	
Inventories - Inventories are generally valued at the lower of the last-in, first-out (LIFO) cost or market. Other inventories of the Company, approximately 13 % in 1996 and 11% in 1995, are valued at average cost or market, whichever is lower.		
Property, plant and equipment - Maintenance, repairs and minor renewals are charged to operations as incurred. Major renewals and betterments which substantially extend the useful life of the property are capitalized. Upon sale or other disposition of assets, the cost and related accumulated depreciation and amortization are removed from the accounts and the resulting gain or loss, if any, is reflected in income. Depreciation and amortization are provided based upon the estimated useful lives principally under the straight-line method. Leasehold improvements are amortized over the lives of the respective leases or the lives of the improvements, whichever is shorter. Pile driving equipment held for rental is classified as property, plant and equipment. 			
Financial derivatives - To hedge against exposures to changes in interest rates on variable rate debt, the Company enters into interest rate swap agreements. The effects of movements in interest rates on these instruments are recognized as they occur.		
Environmental remediation and compliance - Environmental remediation costs are accrued, except to the extent costs can be capitalized, based on estimates of known environmental remediation exposures. Environmental compliance costs, which principally include the disposal of waste generated by routine operations, are expensed as incurred. Capitalized environmental costs are depreciated, when appropriate, over their useful life.
The Company is required to adopt Statement of Position 96-1, "Environmental Remediation Liabilities" as of January 1, 1997. The effect of the adoption will not be material.		
Net sales - Customers are invoiced and income is recognized when material is shipped from stock or when the Company is billed for material shipped directly from the vendor. Gross sales are reduced by sales taxes, discounts and freight to determine net sales.		
Income taxes - The Company accounts for income tax expense and liabilities under the liability method.
Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.		
Stock-based compensation - The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company follows the requirements of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting for stock-based compensation, and, accordingly, recognizes no compensation expense for stock option grants, but provides, when material, the pro forma disclosures required by the Statement of Financial Accounting Standards (SFAS) Statement No. 123, "Accounting for Stock-Based Compensation."
NOTE 2.	 CHANGE IN ACCOUNTING PRINCIPLES
The Company adopted the provisions of the Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," in its financial statements for the year ended December 31, 1995. The cumulative effect as of January 1, 1995 of adopting Statement 121 decreased net income by $219,000, net of an income tax benefit of $134,000, or $0.02 per share.
NOTE 3.	 ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1996 and 1995 are summarized as follows (in thousands):	
The Company's customers are in the rail, construction and tubular segments of the economy. As of December 31, 1996 and 1995, trade receivables, net of allowance for doubtful accounts, from customers in these markets were as follows (in thousands):	
Credit is extended on an evaluation of the customer's financial condition and generally collateral is not required.			
NOTE 4. INVENTORIES		
Inventories at December 31, 1996 and 1995 are summarized as follows (in thousands):		
At December 31, 1996 and 1995, the LIFO carrying value of inventories for book purposes exceeded the LIFO carrying value for tax purposes by approximately $5,241,000 and $5,441,000, respectively. During 1996, inventory quantities were reduced resulting in a liquidation of certain LIFO inventory layers carried at costs which were higher than the costs of current purchases. The effect of these reductions in 1996 and 1995 was to increase cost of goods sold by $217,000 and $287,000, respectively.			
NOTE 5.	 PROPERTY HELD FOR RESALE		
Property held for resale at December 31, 1996 and 1995 consists of the following (in thousands):		
The Parkersburg, West Virginia location produces Fosterweld spiralweld pipe used for water transmission and other applications. During 1995, the Company decided that this product did not meet the Company's long-term strategic goals. The assets of this operation include machinery and equipment, buildings and leasehold improvements. During 1996 and 1995, the location generated net sales and operating profit of approximately $13,300,000 and $2,000,000 and $10,300,000 and $300,000, respectively, which are included in the Company's tubular segment. The Company is currently negotiating with several buyers. However, the outcome of these discussions is uncertain at this time.
The Windsor, New Jersey, location formerly produced Fosterweld pipe and was used for yard storage. Assets of the location consisted of land and land improvements. During 1995, the effect of adopting SFAS No. 121 included an impairment loss of $268,000 based on the estimated sales value of the assets. The Company disposed of these assets in 1996 and received proceeds equal to the net book value of these assets.
The Marrero, Louisiana location was formerly used for yard storage. Assets of the location consist of land no longer used in the Company's business. The land is currently being leased to a third party. The Company does not anticipate disposing of the land during 1997.
The Houston, Texas location was formerly a pipe coal tar coating facility. Assets of the location consist of land no longer used in the Company's business. The land has been listed for sale, although no assurances can be given that the land will be sold during 1997.
The Navasota, Texas, location produced couplings used in the Company's threaded products business and was included in the tubular products business segment. The assets of this operation included machinery and equipment, buildings and land. Seperate net sales and operating profits for this location can not be identified. During 1996, the Company disposed of these assets through a capitalized lease and is recognizing the gain on these assets by using the installment method of accounting for this capitalized lease. The gain recognized was immaterial in 1996.
NOTE 6.	 PROPERTY, PLANT AND EQUIPMENT		
Property, plant and equipment at December 31, 1996 and 1995 consists of the following (in thousands):		
Property, plant and equipment include certain capitalized leases. The following is a schedule, by year, of the future minimum payments under these leases, together with the present value of the net minimum payments as of December 31, 1996 (in thousands):			
NOTE 7.	 OTHER ASSETS		
At December 31, 1996 and 1995, other assets include notes receivable and accrued interest totaling $2,072,000 and $1,896,000, respectively, from investors in a private corporation. The notes, which are recorded at face value, are due if there is a change in ownership of the private corporation or March 1997, whichever occurs earlier. However, the Company has agreed, in principle, subject to the execution of satisfactory documentation, to extend the due date until August 1998. Additionally, the Company owns stock in the private corporation which is recorded at historical cost of $193,000.			
NOTE 8.	 SHORT-TERM BORROWINGS		
Effective November 1995, the Company renegotiated its $45,000,000 revolving credit agreement. The interest rate is, at the Company's option, based on the prime rate, the domestic certificate of deposit rate (CD rate) or the Euro-bank rate. The interest rates are adjusted quarterly based on the fixed charge coverage ratio defined in the agreement. The ranges are prime to prime plus 0.25%, the CD rate plus 0.45% to the CD rate plus 1.125%, and the Euro-bank rate plus 0.45% to the Euro-bank rate plus 1.125%. Borrowings under the agreement, which expires July 1, 1999, are secured by accounts receivable and inventory.
The agreement includes financial covenants requiring a minimum net worth, and minimum levels for the fixed charge coverage ratio, the leverage ratio and the current ratio. The agreement also restricts dividends, investments, capital expenditures, indebtedness and sales of certain assets.
As of December 31, 1996, the Company was in compliance with all the agreement's covenants. At December 31, 1996, the Company had borrowed $24,000,000 under the agreement of which $18,000,000 was classified as long-term (see Note 9). Under the agreement, the Company had approximately $20,154,000 in unused borrowing commitment at December 31, 1996. At December 31, 1996, $3,436,000 was available for future dividend payments.
NOTE 9.	 LONG-TERM DEBT AND RELATED MATTERS		
Long-term debt at December 31, 1996 and 1995 consists of the following (in thousands):		
The $18,000,000 revolving credit borrowings included in long-term debt were obtained under the revolving loan agreement discussed in Note 8 and are subject to the same terms and conditions. This portion of the borrowings is classified as long-term because the Company does not anticipate reducing the borrowings below $18,000,000 during 1997.		
During 1995, the Company entered into an interest rate swap agreement to reduce the impact of changes in interest rates on a portion of its revolving credit borrowings. The LIBOR interest rate on the $10,000,000 swap agreement, which expires June 1999, is 6.142%. The Company believes that the credit and market risks associated with this agreement are not material. Any additional interest expense incurred under the agreement is accrued currently and paid quarterly.		
The maturities of long-term debt for each of the succeeding five years subsequent to December 31, 1996 are as follows:		
1997 - $1,366,000; 1998 - $1,299,000; 1999 - $19,025,000; 2000 - $753,000; 2001 - $418,000; and 2002 and beyond - $321,000.			
NOTE 10.	 STOCKHOLDERS' EQUITY		
At December 31, 1996 and 1995, the number of authorized shares of the Company's Class A Common stock were 20,000,000 shares and Class B Common stock were 1,391,000 shares. No Class B Common shares were issued. The Company's Class A and Class B Common stock each have a par value of $.01 per share and are generally identical except that the Class B Common stock has no stockholder voting rights, and except that such holders shall be entitled to one vote per share on matters such as consolidation or merger of the Company. Class B Common stock may be converted at any time on a share-for-share basis into Class A Common stock.		
No cash dividends on Common stock were paid in 1996, 1995, and 1994.			
NOTE 11.	 STOCK OPTIONS		
The 1985 Long-Term Incentive Plan (Plan) of the Company, as amended and restated in March 1994, provides for the award of options to key employees and directors to purchase up to 1,500,000 shares of Common stock at no less than 100% of fair market value on the date of the grant. The Plan provides for the granting of "nonqualified options" and "incentive stock options" with a duration of not more than ten years from the date of grant. The Plan also provides that, unless otherwise set forth in the option agreement, options are exercisable in installments of up to 25% annually beginning one year from date of grant. Stock to be offered under the Plan may be authorized but unissued Common stock or previously issued shares which have been reacquired by the Company and held as Treasury shares. At December 31, 1996, 1995 and 1994, Common stock options outstanding under the Plan had option prices ranging from $2.63 to $6.00, with a weighted average price of $3.40, $3.35, and $3.33 per share, respectively.
The weighted average remaining contractual life of the stock options outstanding for the three years ended December 31, 1996 are: 1996 - 4.2 years; 1995 - 4.7 years; and 1994 - 5.7 years.
The Option Committee of the Board of Directors which administers the Plan may, at its discretion, grant stock appreciation rights at any time prior to six months before the option's expiration date. Upon exercise of such rights, the participant surrenders the exercisable portion of the option in exchange for payment (in cash and/or Common stock valued at its fair market value) of an amount not greater than the spread, if any, by which the average of the high and low sales prices quoted in the Over-the-Counter Exchange on the trading day immediately preceding the date of exercise of the stock appreciation right exceeds the option price. No stock appreciation rights were issued or outstanding during 1996, 1995 or 1994.
Options exercised during 1996 and 1995 totaled 50,000 and 10,000 shares, respectively, at an exercise price of $3.00 per share. There were no options exercised during 1994.		
Certain information for the three years ended December 31, 1996 relative to employee stock options is summarized as follows:
The Company has adopted the disclose-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," but applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock option plans. Accordingly, no compensation expense has been recognized. Had compensation expense for the Company's stock option plans been determined using the method required by SFAS No. 123, the effect to the Company's net income and earnings per share would not be material.
NOTE 12.	 EARNINGS PER COMMON SHARE		
Earnings per common share are computed by dividing net income by the average number of Class A Common shares and common stock equivalents outstanding during the year. The weighted average number of Class A Common shares outstanding during the year ended December 31, 1996 were approximately 9,953,000 and approximately 9,927,000 and 9,923,000, respectively, during the years ended 1995 and 1994.		
Common stock equivalents are the net additional number of shares which would be issuable upon the exercise of the outstanding common stock options (see Note 11), assuming that the Company used the proceeds to purchase additional shares at market value. Common stock equivalents had no material effect on the computation of earnings per share for the three years ended December 31, 1996.			
NOTE 13.	 INCOME TAXES		
At December 31, 1996, the Company has available net operating loss carryforwards of approximately $2,450,000 for federal income tax purposes that expire in 2001. The federal carryforwards resulted from losses generated in 1986. The tax benefit of net operating loss carryforwards available for state income tax purposes was approximately $898,000 as of December 31, 1996. The Company also has alternative minimum federal tax credit carryforwards at December 31, 1996 of approximately $1,084,000. For financial purposes, a valuation allowance of $150,000 has been recognized to offset the deferred tax assets related to the state income carryforwards. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31, 1996 and 1995 are as follows (in thousands):		
The valuation allowance for deferred tax assets was reduced by $50,000, $2,499,000 and $2,374,000 during 1996, 1995 and 1994, respectively.		
Significant components of the provision for income taxes are as follows (in thousands):	
Income tax expense (benefit) is included in the consolidated statements of income as follows (in thousands):
The reconciliation of income tax computed at statutory rates to income tax expense (benefit) is as follows:		
NOTE 14. RENTAL AND LEASE INFORMATION
The Company leases certain plant facilities, office facilities and equipment. Rental expense for the years ended December 31, 1996, 1995 and 1994 amounted to $1,814,000, $1,867,000, and $1,693,000, respectively.	
At December 31, 1996, the Company is committed to total minimal rental payments under all noncancelable operating leases of $968,000. Generally, these leases include escalation clauses.		
The minimum future rental commitments are payable as follows: 1997 - $548,000; 1998 - $211,000; 1999 - $133,000; 2000 - $65,000; and 2001 - $11,000.			
NOTE 15.	 RETIREMENT PLANS		
Substantially all of the Company's hourly paid employees are covered by one of the Company's noncontributory, defined benefit plans and a defined contribution plan. Substantially all of the Company's salaried employees are covered by a defined contribution plan established by the Company.		
Benefits for hourly employees over age 21 are generally based on hours of service. The salaried plan for employees over age 21 is based on years of qualifying service.		
The Company's funding policy for defined benefit plans is to contribute the minimum required by the Employee Retirement Income Security Act of 1974. Net periodic pension cost for the three years ended December 31, 1996 is summarized as follows (in thousands):	
The hourly plan assets consist of various mutual fund investments. The following table presents a reconciliation of the funded status of the defined benefit plans at December 31, 1996 and 1995 with the accrued pension cost included in other current liabilities on the Company's balance sheet:
Assumptions used to measure the projected benefit obligation and develop net periodic pension costs for the three years ended December 31, 1996 were:	
There was no change to the discount rate in 1996. As a result of the change in the discount rate in 1995, the projected benefit obligation as of December 31, 1995 was approximately $270,000 more than it would have been using the previous	8% discount rate. The change had no effect on net pension cost in 1995.	
The Company's defined contribution plan, available to substantially all salaried employees, contains a matched savings provision that permits both pretax and after-tax employee contributions. Participants can contribute from 2% to 15% of their annual compensation and receive a 50% matching employer contribution on up to 6% of their annual compensation.	
Further, the plan requires an additional matching employer contribution, based on the ratio of the Company's pretax income to equity, up to 50% of 6% of the employee's annual compensation. Additionally, the Company contributes 1% of all salaried employees' annual compensation to the plan without regard for employee contribution. The Company may also make additional discretionary contributions to the plan. The defined contribution plan expense was: $827,000 in 1996, $727,000 in 1995 and $710,000 in 1994.	
NOTE 16.	 COMMITMENTS AND CONTINGENT LIABILITIES		
The Company is subject to laws and regulations relating to the protection of the environment and the Company's efforts to comply with increasingly stringent environmental regulations may have an adverse effect on the Company's future earnings. In the opinion of management, compliance with the present environmental protection laws will not have a material adverse effect on the financial condition, competitive position, or capital expenditures of the Company. 		
The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position of the Company.		
At December 31, 1996, the Company had outstanding letters of credit of approximately $846,000.				
NOTE 17. RISKS AND UNCERTAINTIES		
The Company's future operating results may be affected by a number of factors. The Company is dependent upon a number of major suppliers. If a supplier had operational problems or ceased making material available to the Company, operations could be adversely affected.
The Company's primary supplier of piling products, Bethlehem Structural Products Corporation, has announced that their hot rolled sheet piling and structural products facility in Bethlehem, Pennsylvania, will be shut down in the first quarter of 1997. The Company has agreed to purchase Bethlehem's remaining piling production. A portion of this inventory will enable the Company to maintain its rental piling business beyond 1997. The Company is actively pursuing other options to preserve its position in the piling distribution market. Gross profit of the Bethlehem Structural Products Corporation's piling distribution business accounted for less than 10% of the Company's 1996 gross profit.
The rail segment of the business depends on one source for fulfilling certain trackwork contracts. The Company has provided working capital for this supplier and a revolving note receivable which total $5,000,000. If, for any reason, this supplier is unable to perform, the Company could experience a negative short term effect on earnings.
The Company's operations are in part dependent on governmental funding of infrastructure projects. Significant changes in the level of government funding of these projects could have a favorable or unfavorable impact on the operating results of the Company.
Additionally, governmental actions concerning taxation, tariffs, the environment or other matters could impact the operating results of the Company. The Company's operations results may also be affected by the weather.		
NOTE 18.	 FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of accounts receivable, accounts payable, short term and long term debt, and an interest rate swap agreement.		
The carrying amounts of the Company's financial instruments at December 31, 1996, approximate fair value with the exception of the interest rate swap	agreement. At December 31, 1996, the interest rate swap agreement had no book value but had an intrinsic value of $(32,000) if the swap agreement had been canceled according to its terms on December 31, 1996.										
NOTE 19.	 BUSINESS SEGMENTS		
L. B. Foster Company is engaged in the manufacture, fabrication and distribution of rail, construction and tubular products. The Company's rail segment provides a full line of new and used rail, trackwork and accessories to railroads, mines and industry. The Company also designs and produces bonded rail joints, power rail, track fasteners, catenary systems, coverboards and special accessories for mass transit and other rail systems.		
The Company's construction segment sells and rents steel sheet piling and H-bearing pile for foundation and earth retention requirements and pile driving equipment and accessories for driving piling. In addition, the Company sells bridge decking, expansion joints, sign structures and other products for highway construction and repair.		
The Company's tubular segment supplies pipe and pipe coatings for pipelines and utilities. Additionally, the Company manufactures spiralweld pipe for water transmission lines, foundation piling, slurry lines and many other applications. The Company also produces pipe-related products for special markets, including water wells and irrigation.		
The Company markets its products directly in all major industrial areas of the United States through a national sales force.		
A summary of revenues, operating profit, identifiable assets, depreciation and amortization, and capital expenditures of each business segment for the three years ended December 31, 1996, follows (in thousands):		
Capital expenditures for 1996 do not include capitalized leases of $137,000 for the tubular segment.		
Capital expenditures for 1995 do not include the following capitalized leases: rail - $1,377,000; construction - $53,000; tubular - $2,587,000; corporate and other - $64,000.
Capital expenditures for 1994 do not include capitalized leases of $415,000 for corporate and other.
Sales to any individual customer do not exceed 10% of consolidated net sales. Sales between segments are immaterial. Identifiable assets by segment are those assets that are used exclusively by such segments. Corporate assets are principally cash, investments and deferred tax assets.		
Depreciation and capital expenditure amounts for the construction products segment include the regular replacement and depreciation of rental pool assets.			
NOTE 20.	 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)		
Quarterly financial information for the years ended December 31, 1996 and 1995 is presented below (in thousands, except per share amounts):		
The fourth quarter of 1996 includes the following: 1) a $388,000 reduction in the LIFO provision, 2) a $300,000 reduction in the accrual for employee medical expense and 3) a $200,000 provision for equipment obsolescence reserve.															
Effective January 1, 1995, the Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This change in accounting reduced net income reported for the first quarter of 1995 by $219,000 or $0.02 per share and increased income from continuing operations in the third quarter of 1995 by $250,000 or $0.03 per share. The second quarter of 1995 includes a change in estimate with respect to interest income of $197,000. The third quarter of 1995 includes a gain of $180,000 from the sale of equipment held for disposal. The fourth quarter of 1995 includes a tax benefit of $337,000 principally for changes in net operating loss recognition and the valuation reserve.													
REPORT OF INDEPENDENT AUDITORS AND RESPONSIBILITY FOR FINANCIAL STATEMENTS
To the Board of Directors and Stockholders of L. B. Foster Company:
We have audited the accompanying consolidated balance sheets of L. B. Foster Company and subsidiaries at December 31, 1996 and 1995, and the related consolidated statements of income, cash flows and stockholders' equity for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in the index at Item 14 (a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of L. B. Foster Company and subsidiaries at December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with 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.
As discussed in Note 2 to the financial statements, in 1995, the Company changed its methods of accounting for long-lived assets.	
/s/Ernst & Young LLP	
January 24, 1997 	 Pittsburgh, PA	
L. B. FOSTER COMPANY AND SUBSIDIARIES
To the Stockholders of L. B. Foster Company:	
The management of L. B. Foster Company is responsible for the integrity of all information in the accompanying consolidated financial statements and other sections of the annual report. Management believes the financial statements have been prepared in conformity with generally accepted accounting principles that reflect, in all material respects, the substance of events and transactions, and that the other information in the annual report is consistent with those statements. In preparing the financial statements, management makes informed judgments and estimates of the expected effects of events and transactions being accounted for currently.
The Company maintains a system of internal accounting control designed to provide reasonable assurance that assets are safeguarded and that transactions are executed in accordance with management's authorization and are properly recorded to permit the preparation of financial statements in accordance with generally accepted accounting principles. Underlying the concept of reasonable assurance is the evaluation of the costs and benefits derived from control. This evaluation requires estimates and judgments by the Company. The Company believes that its internal accounting controls provide an appropriate balance between costs and benefits.
The Board of Directors pursues its oversight role with respect to the financial statements through the Finance and Audit Committee which is composed of outside directors. The Finance and Audit Committee meets periodically with management, internal auditors and our independent auditors to discuss the adequacy of the internal accounting control, the quality of financial reporting and the nature, extent and results of the audit effort. Both the internal auditors and the independent auditors have free access to the Finance and Audit Committee.	
/s/Lee B. Foster II - -------------------	 Lee B. Foster II	 President and Chief Executive Officer		
/s/Roger F. Nejes - ----------------- Roger F. Nejes	 Senior Vice President Finance and Administration	 and Chief Financial Officer		
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors is set forth under "Election of Directors" in the Company's Proxy Statement for the 1997 annual meeting of stockholders ("1997 Proxy Statement"). Such information is incorporated herein by reference. Information concerning the executive officers who are not directors of the Company is set forth below. With respect to the period prior to August 18, 1977, references to the Company are to the Company's predecessor, Foster Industries, Inc.
Mr. Cook was elected Vice President - Strategic Planning & Acquisitions in October 1993. Prior to joining the Company in March 1993 as Director of Strategic Planning and Acquisitions, he was President of Cook Corporate Development, a business and financial advisory firm.
Mr. Dean was named a Vice President in September 1987. Prior to September 1987, he served in various other capacities with the Company since his employment in 1964.
Mr. Fisher was elected Vice President - Relay Rail in October 1996. Prior to October 1996, he served in various other capacities with the Company since his employment in 1977.
Mr. Frenz has served as Senior Vice President - Rail Products since December 1996, having previously served as Senior Vice President - Rail and Tubular Products from September, 1995, through November 1996, Senior Vice President - Product Management from October 1993, Vice President - Rail Products from June 1992 to September 1993 and as Vice President - Sales from August 1987 to May 1992. Mr. Frenz joined the Company in 1966.
Mr. Hasselbusch was elected Senior Vice President - Construction and Tubular Products in December, 1996, having previously served as Senior Vice President - Construction Products since September 1995 and as Senior Vice President - Sales from October 1993. Mr. Hasselbusch was the Company's Central/Western Regional Sales Manager from September 1990 through September 1993. Mr. Hasselbusch joined the Company in 1972.
Mr. Minor was elected Treasurer in February 1988 and was elected to the additional office of Vice President in February 1997. Mr. Minor joined the Company in 1983.
Mr. Nejes was elected Senior Vice President - Finance and Administration and Chief Financial Officer in October 1993, having served as Vice President - Finance and Chief Financial Officer from February 1988.
Mr. Ortwein was appointed Group Vice President - Rail Manufacturing Products in March 1997. Additionally, he served as Vice President - Rail Manufacturing from October 1993, President of Allegheny Rail Products, Inc. from May 1992 and as its Chief Operating Officer from January 1992. Previously, he was Midwest Steel Corporation's Vice President of Sales from January 1991 to December 1991 and its National Sales Manager from November 1989 to December 1990. Prior to joining Midwest Steel Corporation, he was a Regional Sales Manager for Bethlehem Steel Corporation from July 1986 to October 1989.
Mr. Rice was elected Vice President - Rail Distribution in October 1993, after having served as Manager - New Rail Products since 1985. Mr. Rice joined the Company in 1972.
Mr. Sigle was elected Vice President - Tubular Products in December 1990, having served as Vice President - Tubular and Coating Sales Development since September 1987, and in various capacities with the Company since his employment in 1965.
Ms. Terpenning was elected Vice President - Human Resources in October 1987. Ms. Terpenning joined the Company in 1985.
Mr. Voltz was elected Vice President, General Counsel and Secretary in December 1987, having previously served as General Counsel and Secretary since December 1986. Mr. Voltz joined the Company in 1981.
Mr. Vukmanic was elected Controller in February 1988 and was elected to the additional office of Vice President in February 1997. Mr. Vukmanic joined the Company in 1977.
Officers are elected annually at the organizational meeting of the Board of Directors following the annual meeting of stockholders.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under "Executive Compensation" in the 1997 Proxy Statement is incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under "Ownership of Securities by Management" and "Principal Stockholders" in the 1997 Proxy Statement is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under "Certain Transactions" in the 1997 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements
The following consolidated financial statements, accompanying notes and report of independent auditors in the Company's Annual Report to stockholders for 1996 have been included in Item 8 of this Report:
Consolidated Balance Sheets at December 31, 1996 and 1995.
Consolidated Statements of Income For the Three Years Ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows For the Three Years Ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Stockholders' Equity for the Three Years Ended December 31, 1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Report of Independent Auditors.
2. Financial Statement Schedule
Schedules for the Three Years Ended December 31, 1996, 1995 and 1994:
II - Valuation and Qualifying Accounts.
The remaining schedules are omitted because of the absence of the conditions upon which they are required.
3. Exhibits
The exhibits marked with an asterisk are filed herewith. All exhibits are incorporated herein by reference:
3.1 Restated Certificate of Incorporation as amended to date, filed as Exhibit 3.1 to Form 10-Q for the quarter ended March 31, 1987.
3.2 Bylaws of the Registrant, as amended to date, filed as Exhibit 3.2 to Form 10-K for the year ended December 31, 1993.
4.1 Amended and Restated Loan Agreement by and among the Registrant and Mellon Bank, N.A., NBD Bank, and Corestates Bank, N.A. dated as of November 1, 1995 and filed as Exhibit 4.1 to Form 10-K for the year ended December 31, 1995.
10.15 Lease between the Registrant and Amax, Inc. for manufacturing facility at Parkersburg, West Virginia, dated as of October 19, 1978, filed as Exhibit 10.15 to Registration Statement No. 2-72051.
10.16 Lease between Registrant and Greentree Building Associates for Headquarters office, dated as of June 9, 1986, as amended to date, filed as Exhibit 10.16 to Form 10-K for the year ended December 31, 1988.
10.16.1 Amendment dated June 19, 1990 to lease between Registrant and Greentree Building Associates, filed as Exhibit 10.16.1 to Form 10-Q for the quarter ended June 30, 1990.
10.19 Lease Between the Registrant and American Cast Iron Pipe Company for Pipe-Coating Facility in Birmingham, Alabama dated December 11, 1991 and filed as Exhibit 10.19 to Form 10-K for the year ended December 31, 1991.
* 10.33.2 Amended and Restated 1985 Long Term Incentive Plan, as amended and restated February 26, 1997. **
10.45 Medical Reimbursement Plan, filed as Exhibit 10.45 to Form 10-K for the year ended December 31, 1992. **
10.46 Leased Vehicle Plan, as amended to date. Filed as Exhibit 10.46 to Form 10-K for the year ended December 31, 1993. **
10.49 Lease agreement between Newport Steel Corporation and L. B. Foster Company dated as of October 12, 1994 and filed as Exhibit 10.49 to Form 10-Q for the quarter ended September 30, 1994.
* 10.50 L. B. Foster Company 1997 Incentive Compensation Plan. **
10.51 Supplemental Executive Retirement Plan. Filed as Exhibit 10.51 to form 10-K for the year ended December 31, 1994. **
10.52 L. B. Foster Company Officer Loan Program. Filed as Exhibit 10.52 to Form 10-Q quarter ended September 30, 1996.
* 10.53 Amendment to L. B. Foster Company Officer Loan Program.	
19 Exhibits marked with an asterisk are filed herewith.
* 23.7 Consent of Independent Auditors.
* 27 Financial Data Schedule
** Identifies management contract or compensatory plan or arrangement required to be filed as an Exhibit.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
L. B. FOSTER COMPANY March 26, 1997 By /s/ Lee B. Foster II ----------------------------- (Lee B. Foster II, 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 President, Chief Executive March 26, 1997 - --------------------------- Officer and Director	 (Lee B. Foster II)	
By: /s/ Roger F. Nejes Senior Vice President - March 26, 1997 - --------------------------- Finance & Administration	 (Roger F. Nejes) and Chief Financial Officer
By: /s/ John W. Puth Director March 26, 1997 - ---------------------------	 (John W. Puth)
By: /s/ William H. Rackoff Director March 26, 1997 - ---------------------------	 (William H. Rackoff)
By: /s/ Richard L. Shaw Director March 26, 1997 - ---------------------------	 (Richard L. Shaw)
By: /s/Donald F. Vukmanic Vice President - Controller March 26, 1997 - ---------------------------	 (Donald F. Vukmanic)
By: /s/ James W. Wilcock Chairman of the Board March 26, 1997 - ---------------------------	 (James W. Wilcock)
L. B. FOSTER COMPANY AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994 (In Thousands)
(1) Notes and accounts receivable written off as uncollectible. (2) The deduction is a result of a reduction in the specific tubular inventories to which the reserve applies. (3) Payments made on amounts accrued and reversals of accruals.