Item 9A. Controls and Procedures
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) under the Securities Exchange Act of 1934, as amended (“the Exchange 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 at 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). 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
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during the fourth quarter of 2022 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, 2022. In making this assessment, management used criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework (2013 Framework). Based on this assessment, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2022.
The SEC’s general guidance permits the exclusion of an assessment of the effectiveness of a registrant’s internal control 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 the assessment. As previously discussed in Part II, Item 8, Financial Statements and Supplementary Data, Note 3 to the Consolidated Financial Statements, the Company completed the acquisition of Skratch Enterprises Ltd. (“Skratch”) on June 21, 2022 and VanHooseCo Precast LLC (“VanHooseCo”) on August 12, 2022. These acquired businesses constituted approximately 17.9% of the Company’s consolidated assets as of December 31, 2022 and 4.2% of the Company’s consolidated net sales for the year ended December 31, 2022. Management’s assessment and conclusion on the effectiveness of the Company’s disclosure controls and procedures and internal control over financial reporting at December 31, 2022 excluded an assessment of the internal control over financial reporting of the assets and businesses acquired in the Skratch and VanHooseCo 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.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of L.B. Foster Company
Opinion on Internal Control Over Financial Reporting
We have audited L.B. Foster Company and subsidiaries’ internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, L.B. Foster Company and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
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 VanHooseCo Precast LLC and Skratch Enterprises Ltd., which are included in the 2022 consolidated financial statements of the Company and constituted 17.9% of total assets as of December 31, 2022 and 4.2% of total net sales for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of VanHooseCo Precast LLC and Skratch Enterprises Ltd.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes and the financial statement schedule listed in the Index at Item 15(a) and our report dated March 10, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 10, 2023
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ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
N/A
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 definitive Proxy Statement for the 2023 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 Exchange Act is incorporated herein by reference to the information included in the Proxy Statement under the caption “Section 16(a) Beneficial Reporting Compliance,” if applicable.
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 - Board 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 - 2022,” “Executive Compensation,” “Summary Compensation Table (2022, 2021, and 2020),” “Grants of Plan-Based Awards in 2022,” “Outstanding Equity Awards At 2022 Fiscal Year-End,” “2022 Options Exercises and Stock Vested Table,” “2022 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 - 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 - The Board, Board Meetings, Independence, and Tenure.”
ITEM 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 Accounting Firm Fees.”
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PART IV
ITEM 15. EXHIBITS AND 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 (PCAOB ID: 42 ), 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, 2022 and 2021.
Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021.
Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2022 and 2021.
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021.
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022 and 2021.
Notes to Consolidated Financial Statements.
(a)(2). Financial Statement Schedule
Schedules for the Years Ended December 31, 2022 and 2021:
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 Part IV, Item 16, Form 10-K Summary, filed as part of this Annual Report on Form 10-K and is incorporated by reference herein.
L.B. FOSTER COMPANY AND SUBSIDIARIES
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
Balance at Beginning of Year Additions Charged to Costs and Expenses Other adjustments (1) Balance at End of Year
Allowance for credit losses
For the year ended December 31,
2022 $ 547 $ 382 $ 116 $ 813
2021 $ 944 $ ( 87 ) $ 310 $ 547
1. Notes and accounts receivable written off as uncollectible or allowance reversed.
Balance at Beginning of Year Additions Charged to Costs and Expenses Other adjustments (1) Balance at End of Year
Valuation allowance for deferred tax assets
For the year ended December 31,
2022 $ 3,290 $ 37,895 $ 584 $ 40,601
2021 $ 1,483 $ 1,807 $ — $ 3,290
1. Consists primarily of adjustments related to unrealized income on interest rate swap contracts.
ITEM 16. FORM 10-K SUMMARY
We may voluntarily include a summary of information required by the Annual Report on Form 10-K under this Item 16. We have elected not to include such summary information.
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INDEX TO EXHIBITS
All exhibits are incorporated herein by reference:
Exhibit Number Description
2.1 Asset Purchase Agreement between L.B. Foster Company and J.D. Fields & Company, Inc. dated September 24, 2021, is incorporated herein by reference to Exhibit 2.1 to the Quarterly Report of Form 10-Q for the quarter ended September 30, 2021, File no. 0-10436, filed on November 3, 2021.
2.2 Asset Purchase Agreement between VanHooseCo Precast, LLC and CXT Incorporated. dated August 12, 2022, is incorporated herein by reference to Exhibit 2.1 to the Quarterly Report of Form 10-Q for the quarter ended September 30, 2022, File no. 0-10436, filed on November 8, 2022.
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, File No. 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 Description of Capital Stock of L.B. Foster Company.
10.1 Second Amendment dated January 29, 2021 to the Third Amended and Restated Credit Agreement dated April 30, 2019 between Registrant and PNC Bank, N.A., Bank of America, N.A., Wells Fargo Bank, National Association, Citizens Bank, N.A., and BMO Harris Bank, National Association is incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K, File No. 0-10436, filed on February 4, 2021.
10.2 Fourth Amended and Restated Credit Agreement dated August 13, 2021, between Registrant and PNC Bank, Citizens Bank, N.A., Wells Fargo Bank, National Association, Bank of America, N.A., and BMO Harris Bank, National Association is incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K, File No. 0-10436, filed on August 16, 2021.
10.3 Second Amendment dated August 12, 2022 to the Fourth Amended and Restated Credit Agreement dated August 13, 2021, between Registrant and PNC Bank, Citizens Bank, N.A., Wells Fargo Bank, National Association, Bank of America, N.A., and BMO Harris Bank, National Association is incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K/A, File No. 0-10436, filed on August 18, 2022.
10.4 ** 2006 Omnibus Incentive Plan, as amended and restated on May 25, 2016, incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, File No. 0-10436, filed on May 27, 2016.
10.5 ** Amended 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, File No. 0-10436, filed on December 21, 2011.
10.6 ** 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, File No. 0-10436, filed on August 9, 2012.
10.7 ** 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.
10.8 ** Executive Annual Incentive Compensation Plan (as Amended and Restated), incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2018, File no. 0-10436, filed on May 2, 2018.
10.9 ** Amended and Restated 2006 Omnibus Incentive Plan, effective as of May 24, 2018, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report of Form 10-Q for the quarter ended June 30, 2018, File no. 0-10436, filed on July 31, 2018.
10.11 ** 2020 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2020, File no. 0-10436, filed on May 6, 2020.
10.12 ** Form of Restricted Stock Award Agreement (2020), incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2020, File no. 0-10436, filed on May 6, 2020.
10.13 ** Long Term Incentive Performance Share Unit Program (2020-2022), incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2020, File no. 0-10436, filed on May 6, 2020.
10.14 ** Form of Performance Share Unit Award Agreement (2020-2022), incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2020, File no. 0-10436, filed on May 6, 2020.
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10.15 ** 2021 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2021, File no. 0-10436, filed on May 5, 2021.
10.16 ** Form of Restricted Stock Award Agreement (2021), incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2021, File no. 0-10436, filed on May 5, 2021.
10.17 ** Long Term Incentive Performance Share Unit Program (2021-2023), incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2021, File no. 0-10436, filed on May 5, 2021.
10.18 ** Form of Performance Share Unit Award Agreement (2021-2023), incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2021, File no. 0-10436, filed on May 5, 2021.
10.19 ** Performance-Based Stock Award Retention Program (2021-2026), incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2021, File no. 0-10436, filed on May 5, 2021.
10.20 ** Amended and Restated Key Employee Separation Plan (February 17, 2021), incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2021, File no. 0-10436, filed on May 5, 2021.
10.21 ** Executive Recoupment Policy (January 1, 2021), incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2021, File no. 0-10436, filed on May 5, 2021.
10.22 ** 202 2 Executive Annual Incentive Compensation Plan, incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 202 2 , File no. 0-10436, filed on May 10 , 202 2 .
10.22 ** Form of Restricted Stock Award Agreement (202 2 ), incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 202 2 , File no. 0-10436, filed on May 10 , 202 2 .
10.23 ** Form of Performance Share Unit Award Agreement (2022-2024), incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report of Form 10-Q for the quarter ended March 31, 2022, File no. 0-10436, filed on May 10, 2022.
10.24 ** 2022 Equity and Incentive Compensation Plan , incorporated by reference to Exhibit 10. 1 to the Company’s Quarterly Report of Form 10-Q for the quarter ended June 30 , 2022, File no. 0-10436, filed on August 9 , 2022.
10.25 ** Strategy Tr ansformati on Plan Description and Award (2022-2025) , incorporated by reference to Exhibit 10. 2 to the Company’s Quarterly Report of Form 10-Q for the quarter ended June 30, 2022, File no. 0-10436, filed on August 9, 2022.
10.26 ** 2022 Director Restricted Stock Award, incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report of Form 10-Q for the quarter ended June 30, 2022, File no. 0-10436, filed on August 9, 2022.
*10.27 Deferred Compensation Plan for Non-Employee Directors Under the 2022 Equity and Incentive Compensation Plan.
*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.
*104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
* Exhibits 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.
Schedules and exhibits omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant will furnish a copy of any omitted schedule or exhibit as a supplement to the SEC or its staff upon request.
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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
(Registrant)
Date: March 10, 2023 By: /s/ John F. Kasel
(John F. Kasel,
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/ Raymond T. Betler Chairman of the Board and Director March 10, 2023
(Raymond T. Betler)
By: /s/ John F. Kasel President, Chief Executive Officer, March 10, 2023
(John F. Kasel) and Director
By: /s/ Dirk Jungé Director March 10, 2023
(Dirk Jungé)
By: /s/ John E. Kunz Director March 10, 2023
(John E. Kunz)
By: /s/ Janet Lee Director March 10, 2023
(Janet Lee)
By: /s/ Diane B. Owen Director March 10, 2023
(Diane B. Owen)
By: /s/ Bruce E. Thompson Director March 10, 2023
(Bruce E. Thompson)
By: /s/ William M. Thalman Senior Vice President March 10, 2023
(William M. Thalman) and Chief Financial Officer
By: /s/ Sean M. Reilly Corporate Controller March 10, 2023
(Sean M. Reilly) and Principal Accounting Officer
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