<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission File Number 1-313
T H E L A M S O N & S E S S I O N S C O.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio 34-0349210
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
25701 Science Park Drive
Cleveland, Ohio 44122-9803
- ---------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
216/464-3400
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------- -------
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 31, 1995 the Registrant had outstanding 13,291,751 common shares.
- 1 -
<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF EARNINGS (Unaudited)
The Lamson & Sessions Co. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts.)
Third Quarter Ended Nine Months Ended
------------------------------ -------------------------------
1995 1994 1995 1994
- ------------------------------------------------------------------------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 85,716 $ 79,048 $ 229,584 $ 217,592
Cost of products sold 68,989 64,887 185,237 179,148
------------- ------------- ------------- -------------
GROSS MARGIN 16,727 14,161 44,347 38,444
Selling, general and
administrative expenses 11,847 10,267 32,724 30,301
------------- ------------- ------------- -------------
OPERATING EARNINGS 4,880 3,894 11,623 8,143
Interest 1,528 1,784 4,935 4,974
------------- ------------- ------------- -------------
EARNINGS FROM CONTINUING OPERATIONS 3,352 2,110 6,688 3,169
Loss on Discontinued Operations (Note C) (9,930)
------------- ------------- ------------- -------------
NET EARNINGS (LOSS)
$ 3,352 $ 2,110 $ 6,688 $ (6,761)
============= ============= ============= =============
EARNINGS (LOSS) PER COMMON SHARE
--------------------------------
Continuing Operations $ .25 $ .16 $ .50 $ .24
Discontinued Operations (.75)
------------- ------------- ------------- -------------
$ .25 $ .16 $ .50 $ (.51)
============= ============= ============= =============
AVERAGE COMMON SHARES 13,292 13,238 13,287 13,232
============= ============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
- 2 -
<PAGE> 3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)
The Lamson & Sessions Co. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands)
Nine Nine
Months Months
Ended Year End Ended
------------------------------------------------------
1995 1994 1994
------------------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 1,584 $ 1,885 $ 1,299
Accounts receivable 46,614 35,448 46,112
Inventories:
Finished goods and work-in-process 38,753 41,157 41,879
Raw materials and supplies 7,123 5,048 5,279
-------------- -------------- --------------
45,876 46,205 47,158
Prepaid expenses and other 4,196 3,988 2,677
-------------- -------------- --------------
TOTAL CURRENT ASSETS 98,270 87,526 97,246
OTHER ASSETS 3,067 1,899 6,905
NET ASSETS HELD FOR SALE (NOTE C) 3,742 3,742
PROPERTY, PLANT AND EQUIPMENT 118,625 115,914 114,235
Less allowances for depreciation and amortization 66,992 61,935 59,780
-------------- -------------- --------------
51,633 53,979 54,455
-------------- -------------- --------------
$ 152,970 $ 147,146 $ 162,348
============== ============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 22,825 $ 17,354 $ 27,909
Accrued expenses and other liabilities 26,386 27,167 26,669
Taxes 2,985 3,009 3,516
Current maturities of long-term debt 3,767 4,502 3,005
-------------- -------------- --------------
TOTAL CURRENT LIABILITIES 55,963 52,032 61,099
LONG-TERM DEBT 41,639 46,958 49,143
POSTRETIREMENT BENEFITS AND OTHER LONG-TERM 35,734 35,276 41,741
LIABILITIES
SHAREHOLDERS' EQUITY
Common shares 1,329 1,328 1,324
Other Capital 72,744 72,679 72,505
Retained earnings (deficit) (46,040) (52,728) (53,815)
Pension adjustment (8,399) (8,399) (9,649)
-------------- -------------- --------------
19,634 12,880 10,365
-------------- -------------- --------------
$ 152,970 $ 147,146 $ 162,348
============== ============== ==============
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
- 3 -
<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
The Lamson & Sessions Co. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands)
Nine Months Ended
-------------------------------
1995 1994
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) from continuing operations $ 6,688 $ 3,169
Adjustments to reconcile net earnings (loss) from continuing operations to
cash provided by continuing operations:
Depreciation and amortization 6,621 6,327
Net change in working capital accounts:
Accounts Receivable (11,166) (11,383)
Inventories 329 (3,810)
Prepaid expenses and other (208) 1,900
Other current liabilities 4,666 10,984
Net change in other long-term items (482) (700)
------------- -------------
Cash provided by continuing operations 6,448 6,487
Net earnings (loss) from discontinued operations (9,930)
Change in net assets 3,742 (2,399)
Non-cash expenses 4,903
------------- -------------
Cash provided (used) by discontinued operations 3,742 (7,426)
------------- -------------
CASH PROVIDED (USED) BY OPERATING ACTIVITIES 10,190 (939)
INVESTING ACTIVITIES
Proceeds from sale of discontinued operation 18,077
Purchases of property, plant and equipment (4,503) (4,105)
------------- -------------
CASH (USED) PROVIDED BY INVESTING ACTIVITIES (4,503) 13,972
FINANCING ACTIVITIES
Net change in secured credit agreement (2,953) 6,674
Payments on long-term borrowing and capital lease obligations (3,101) (19,691)
Exercise of stock options 66 95
------------- -------------
CASH USED BY FINANCING ACTIVITIES (5,988) (12,922)
(DECREASE) INCREASE IN CASH (301) 111
Cash at beginning of year 1,885 1,188
------------- -------------
CASH AT END OF THE PERIOD $ 1,584 $ 1,299
============= =============
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
- 4 -
<PAGE> 5
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the results of operations have been included. Certain 1994
amounts have been reclassified to conform with 1995 classifications.
NOTE B - LITIGATION
In the first quarter of 1995, the Company settled the complaint seeking
reimbursement for certain costs related to environmental remediation of
property sold by the Company. The resolution of this matter did not have a
material effect on the Company's consolidated financial position.
NOTE C - DISCONTINUED OPERATIONS
During the first quarter of 1994, the Company entered into a definitive
agreement to sell substantially all of the assets and certain liabilities
(including prospective pension and postretirement benefit obligations) of its
Midland Steel Products Division for $16,430,000, resulting in a loss of
$8,900,000 ($.67 per share) after related costs and expenses. Included in the
loss on disposal is a curtailment loss of $1,140,000 related to net pension
costs and a settlement gain of $650,000 related to postretirement benefits
other than pensions. The Company believes adequate provision has been made for
all contractual obligations, environmental costs, and other obligations
retained in the sale of the division. Included in the prior year's loss from
operations is interest of $1,836,000 allocated on the basis of the Company's
incremental borrowing rate applied on the net proceeds from the sale. The
assets held for sale at the end of 1994 are comprised of land and building
pending final resolution of certain contractual conditions. Upon completion of
the contractual conditions, these assets were sold in the second quarter of
1995, and the results were reflected in operating activities from discontinued
operations.
- 5 -
<PAGE> 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
REVENUES
Revenue grew 5.5% in the nine months ended and 8% in the third quarter over the
comparable periods of the prior year. Improved demand in the Company's core
businesses, supplemented by a favorable product mix, contributed to the higher
average selling prices and resulted in increased revenues. The aerospace
fastener unit had increased revenue in the nine months ended and third quarter
of 21% and 16% respectively, contributing to the overall revenue increase.
MARGINS
Improved selling prices, better product mix, and to a lesser extent, reduced
manufacturing costs in the nine months ended and third quarter of 1995 provided
4% and 6% improvement in gross margins to 19% and 20% compared to the same
periods a year ago. The higher production levels and improved pricing in the
aerospace fastener unit provided improved gross profit margins in the nine
months ended and third quarter of 1995 compared to the 1994 periods.
EXPENSES
Selling, general and administrative expenses were higher in the 1995 periods
over 1994 levels. Increased promotional expenses, commissions and nominal
salary increases in the nine months ended, along with staffing relocations and
training costs in the third quarter of 1995, were the primary reasons for the
higher expense levels. The restructured credit facility provided lower
interest rates in the third quarter and coupled with lower average borrowings,
reduced interest costs in the 1995 periods. Since there is no income against
which net operating losses can be carried back, the Company did not record any
current tax benefit for the period. The Company does have net operating loss
carryforwards which should reduce future income tax expense.
CASH FLOW LIQUIDITY AND CAPITAL RESOURCES
The Company's improved earnings and reduced investment in working capital items
generated cash flow from operations in 1995 over the prior year. Additionally,
the earnings growth in 1995 reduced long term debt and the total debt-to-equity
ratio strengthening the Company's balance sheet and liquidity. Reduced working
capital needs for the remainder of the year, coupled with improved flexibility
under the restructured credit facility should provide adequate cash flow from
operations to fund capital expenditures and debt reduction through the balance
of the year.
OUTLOOK
The Company anticipates continued strength in orders and shipments for the
balance of the year. Although cautious consumer spending, moderating general
construction activity and the downward trend in PVC resin prices may result in
very nominal to flat revenue growth in the Company's core businesses, the
Company still anticipates achieving earnings in line with analysts'
expectations.
The Company sold its aerospace fastener unit for cash effective November 7,
1995. The proceeds will be used to further reduce debt and the sale is not
expected to have a significant effect on earnings, but will result in lower
total revenues in the fourth quarter compared to last year. The financial
impact of this transaction will be reported as part of the Company's fourth
quarter results.
- 6 -
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
This improved liquidity combined with lower debt levels and interest expense
will contribute to the overall results. Liquidity will improve further as solid
operating earnings and reduced working capital needs will offset higher capital
spending and result in a moderate decline in the level of debt.
PART II
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K. There were no reports on Form 8-K
filed for the three months ended September 30, 1995.
- 7 -
<PAGE> 8
SIGNATURES
Pursuant to the requirements 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.
THE LAMSON & SESSIONS CO.
-------------------------
(Registrant)
DATE: November 14, 1995 By /s/ James J. Abel
----------------------- ---------------------------------------------
James J. Abel
Executive Vice President, Secretary, Treasurer
and Chief Financial Officer
- 8 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000057497
<NAME> THE LAMSON & SESSIONS CO.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,584
<SECURITIES> 0
<RECEIVABLES> 46,614
<ALLOWANCES> 0
<INVENTORY> 45,876
<CURRENT-ASSETS> 98,270
<PP&E> 118,625
<DEPRECIATION> 66,992
<TOTAL-ASSETS> 152,970
<CURRENT-LIABILITIES> 55,963
<BONDS> 0
<COMMON> 1,329
0
0
<OTHER-SE> 18,305
<TOTAL-LIABILITY-AND-EQUITY> 152,970
<SALES> 229,584
<TOTAL-REVENUES> 229,584
<CGS> 185,237
<TOTAL-COSTS> 217,961
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,935
<INCOME-PRETAX> 6,688
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,688
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,688
<EPS-PRIMARY> .50
<EPS-DILUTED> 0
</TABLE>
