Notes to Financial Statements
December 31, 2013 and 2012
1.
Description of Plan
The following brief description of the L.B. Foster Company 401(k) and Profit Sharing Plan (the Plan) is provided
for general information purposes. Participants should refer to the summary plan description for more complete information. The plan document is the governing instrument and should be referred to for a full description of the Plan and its provisions.
General
The Plan is a defined contribution plan
extended to all eligible employees of L.B. Foster Company (the Company) who have attained age 18. The L.B. Foster Company Investment Committee, appointed by the Board of Directors of the Company, collectively serves as the plan
administrator. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) as amended.
Contributions and
Forfeitures
Contributions under the Plan are made by both the participants and the Company. A participant who elects to make pretax contributions of
at least the maximum amount subject to company matching can also elect to make additional voluntary contributions on an after-tax basis.
Participants may
contribute up to 75% of their annual pretax compensation and up to 100% of their compensation on an after-tax basis, subject to Internal Revenue Code limitations. There is no limit on aggregate pretax and after-tax contributions. Participant
contributions and employer matching contributions are invested in accordance with participant elections. In the event that a participant does not make an investment election, contributions are invested in the Fidelity Freedom Fund (target date
retirement fund) that coincides with the participants date of normal retirement age, until such time as an election is made by the participant. The participant may transfer contributions defaulted to these funds into other investment options
at the participants discretion.
The Plan includes a provision for an immediate Company match. Participants receive a Company match of 100% of the
first 1% of their eligible compensation and 50% of the next 6% of their eligible compensation for a maximum Company match of 4%. To be eligible for the Companys matching contributions, participants must make pretax deferral contributions or
Roth 401(k)
after-tax
deferral contributions. The Plan will match the combined total of these contributions up to the matching limit.
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1. Description of Plan (continued)
The Company, upon resolution of the Board of Directors, may make a discretionary
profit-sharing
contribution of an amount out of, but not in excess of, the Companys current or accumulated profits. Participants must have attained one year of service as of the last day of the plan year in
order to be eligible for the discretionary
profit-sharing
contribution, if any, for that year. Discretionary
profit-sharing
contributions are directed into eligible
participant accounts based on the participants investment elections at the time the contribution is made. Discretionary
profit-sharing
contributions of $1,004,117 and $1,000,000 were approved for 2013
and 2012, respectively. Forfeitures of contributions are allocated back to the Company. The Companys matching contributions may be reduced by forfeitures that accumulate from terminations of participants with non-vested employer matching
contributions. During the year ended December 31, 2013, forfeitures of $42,000 were utilized to reduce Company contributions. At December 31, 2013 and 2012, forfeitures of $37,428 and $19,394, respectively, were available to reduce future
Company contributions.
Vesting
A participants
vested interest in the Plan on any date is equal to the sum of the values of (a) that portion of the participants account attributable to the participants contributions and (b) that portion of the participants account
attributable to the Companys contributions multiplied by the applicable vesting percentage, (c) plus related earnings (losses). Participants are 100% vested in Company contributions after two years of eligible service.
Notwithstanding the above, a participant who terminates from the Plan by reason of retirement, disability, or death is fully vested in their participant
account.
Distributions
Normal retirement age is 65.
Early retirement age is 55, provided that the participant has at least five years of service. In addition, a participant may obtain an early retirement distribution prior to reaching age 55, provided that the participant will turn 55 in the year the
distribution occurs and that the participant has at least five years of service.
As provided by the Plan, the distribution to which a participant is
entitled by reason of normal, early, late, or disability retirement, death, or termination of employment may be made in the form of direct rollover, annuity, cash, or partly in cash and partly as an annuity. The amount of such distribution is equal
to the participants vested account balance on the valuation date.
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1. Description of Plan (continued)
Withdrawals
Under the Plan, a participant may elect to withdraw voluntary, after-tax contributions made to the Plan prior to January 1, 1987. Such withdrawals are
subject to a $1,000 minimum. In the event of extreme hardship and subject to certain restrictions and limitations, a participant may withdraw their vested interest in the portion of their account, subject to a $500 minimum, attributable to matching,
fixed and discretionary contributions, and related earnings. The Plan also allows for age 59
1
⁄
2
in-service withdrawals of all or any portion of the
participants vested account balance.
Participant Accounts
Each participant account is credited with the participants pretax and voluntary contributions, the participants allocable share of Company
contributions, and related earnings of the funds. Participant accounts may be invested in 10% increments into Company stock or any of the mutual funds available under the Plan or other investment securities through a self-directed brokerage option,
at the direction of the participant.
Loans
A
participant may obtain a loan from the vested portion of their account, subject to a minimum of $1,000 and a maximum of $50,000. The loan proceeds are deducted from the participants account and are repaid by means of payroll deductions. Loans
are required to be repaid within 60 months from the date on which the loan is originally granted and may be prepaid early without penalty. The repayment period for a loan that is obtained for purchasing a primary residence may be as long as 120
months. The loan carries a reasonable interest rate as determined by the plan sponsor. The interest rate is computed on the date the loan is requested and remains fixed for the full term of the loan.
Plan Termination
Although it has not expressed any
intention to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. Should the Plan be terminated, participants will become fully vested in their
accounts, and the assets of the Plan would be distributed to the participants based on their individual account balances as determined under the Plan provisions.
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2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan
are maintained under the accrual method of accounting in conformity with the accounting principles generally accepted in the United States (GAAP).
Use of Estimates
The preparation of financial statements
in accordance with GAAP requires management to make estimates that affect the amounts reported in the financial statements, accompanying notes, and supplemental schedule. Actual results could differ from those estimates.
Valuation of Investments
Mutual fund values are based on
the underlying investments. Mutual fund securities traded on security exchanges are valued at the latest quoted sales price. Securities traded on a national securities exchange are valued at the last reported sales price on the last business day of
the plan year.
Realized gains or losses include recognized gains and losses on the sale of investments. Unrealized appreciation or depreciation
represents changes in value from original cost. Dividend income is recorded on the ex-dividend date and interest income is accrued as earned. Plan assets are concentrated in mutual funds consisting primarily of stocks and bonds. Realization of the
Plans net assets available for benefits is dependent on the results of these markets.
Notes Receivable From Participants
Notes receivable from participants represent participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest.
Interest income on notes receivable from participants is recorded when it is earned and is reported within interest and dividends on the statement of changes in net assets. No allowance for credit losses has been recorded as of December 31,
2013 or 2012. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be a distribution, the participant loan balance is reduced and a benefit payment is recorded.
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2. Summary of Significant Accounting Policies (continued)
Expenses
The Company, as provided by the Plan, pays expenses of the Plan. Expenses incurred to establish and maintain a loan are charged to the applicable participant.
Risks and Uncertainties
The Plan invests in various
investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the
values of investment securities will occur in the near term and that such changes could materially affect participants account balances and the amounts reported in the statements of net assets available for benefits. Market values for
investments may decline for a number of reasons, including changes in prevailing market and interest rates, increases in defaults, and credit rating downgrades. The fair values assigned to the investments by the Plan are based upon available
information believed to be reliable, which may be affected by conditions in the financial markets. The Plan may not be able to sell its investments when it desires to do so or to realize what it perceives to be its fair value in the event of a sale.
Subsequent Events
The Plans management
concluded that there were no subsequent events requiring adjustments to the financial statements or disclosures as stated herein.
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3. Investments
At December 31, 2013 and 2012, the fair value of investments representing 5% or more of the Plans net assets is as follows:
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2013
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2012
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Fidelity Investments Freedom 2020 Class K
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$
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4,978,267
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$
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4,349,802
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Fidelity Investments Spartan 500 Index Fund Advantage Class
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4,367,318
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2,996,975
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Sentinel Common Stock A Fund
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4,084,948
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3,310,984
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Fidelity Investments Retirement Government Money Market Fund
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4,073,556
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3,971,149
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Fidelity Investments Low Price Stock Fund
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4,071,775
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2,656,288
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*
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L.B. Foster Company Stock Fund
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3,677,317
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3,863,073
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Mutual Shares Class A
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3,649,762
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3,225,990
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Fidelity Investments Freedom 2030 Class K
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3,606,240
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2,907,555
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PIMCO Total Return Fund
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3,048,342
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*
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5,232,233
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*
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Presented for comparative purposes only.
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For the year ended December 31, 2013, the Plans
investments (including investments bought, sold, and held during the year) appreciated in value as follows:
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Year Ended
December 31, 2013
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Mutual Funds
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$
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7,430,892
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Employer Stock
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$
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317,236
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4. Income Tax Status
The
underlying volume submitter plan has received an advisory letter from the Internal Revenue Service (IRS) dated March 31, 2008 stating that the form of the plan is qualified under Section 401 of the Internal Revenue Code (the Code) and
therefore, the related trust is tax-exempt. In accordance with Revenue Procedures 2013-6 and 2011-49, the plan administrator has determined that it is eligible to and has chosen to rely on the current IRS volume submitter advisory letter. Once
qualified, the Plan is required to operate in conformity with the Code to maintain its qualified status. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and therefore believes the
Plan is qualified and the related trust is tax-exempt.
Accounting principles generally accepted in the United States require plan management to evaluate
uncertain tax positions taken by the Plan. The financial statement effects of a tax
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4. Income Tax Status (continued)
position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. The plan
administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2013, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to
uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for
years prior to 2010.
5. Transactions With Parties-in-Interest
Certain trustee, accounting, and administrative expenses relating to the maintenance of participant records and the Plans administration are absorbed by
the Company and may qualify as party-in-interest transactions under ERISA. The Plan also invests in L.B. Foster Company stock. L.B. Foster Company is the plan sponsor, and therefore, transactions may qualify as party-in-interest. Notes receivable
from participants also qualify as party-in-interest transactions.
6. Fair Value Measurements
The Plan applies the provisions of Accounting Standards Codification Topic 820,
Fair Value Measurements and Disclosures
(ASC 820), to its financial
assets carried in the financial statements at fair value on a recurring basis. ASC 820 defines fair value as the exchange price that would be received for an asset in an orderly transaction between market participants at the measurement date. ASC
820 also establishes a fair value hierarchy and requires categorization of assets measured at fair value into one of three levels based on the inputs used in the valuation. Assets are classified in their entirety based on the lowest level of input
significant to the fair value measurement. The three levels are defined as:
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Level 1 Observable inputs based on quoted prices (unadjusted) in active markets for identical assets.
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Level 2 Observable inputs, other than those included in Level 1, based on quoted prices for similar assets in active markets or quoted prices for identical assets in inactive markets.
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Level 3 Unobservable inputs that reflect an entitys own assumptions about the inputs a market participant would use in pricing the asset based on the best information available in the
circumstances.
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Investments included in the statements of net assets available for benefits include mutual funds totaling $62,710,171 and
$52,887,173, the Companys common stock fund of $3,677,317 and $3,863,073, and the Companys Stock Purchase Account of $977 and $948 are stated at fair value as of December 31, 2013 and 2012, respectively. These investments are valued
based upon daily unadjusted quoted prices and, therefore, are considered Level 1.
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Supplemental Schedule
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