<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 June 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-313
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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
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(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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
As of July 31, 1996 the Registrant had outstanding 13,301,084 common shares.
<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SECOND QUARTER ENDED FIRST HALF ENDED
-------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $ 77,405 $ 75,466 $141,383 $143,868
COST OF PRODUCTS SOLD 60,979 60,145 111,119 116,248
-------- -------- -------- --------
GROSS PROFIT 16,426 15,321 30,264 27,620
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 12,869 11,074 24,656 20,877
-------- -------- -------- --------
OPERATING INCOME 3,557 4,247 5,608 6,743
INTEREST 654 1,736 1,343 3,407
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 2,903 2,511 4,265 3,336
INCOME TAX BENEFIT 700 1,350
======== ======== ======== ========
NET INCOME $ 3,603 $ 2,511 $ 5,615 $ 3,336
======== ======== ======== ========
EARNINGS PER COMMON SHARE $ .26 $ .19 $ .41 $ .25
======== ======== ======== ========
AVERAGE COMMON SHARES 13,782 13,385 13,695 13,371
======== ======== ======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
<PAGE> 3
CONSOLIDATED BALANCE SHEET (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST HALF
ENDED YEAR END
-------------------------------------------
1996 1995
-------------------------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,678 $ 1,431
Accounts receivable 42,039 34,828
Inventories:
Finished goods and work-in-process 33,179 30,491
Raw materials and supplies 5,557 4,527
----------------- ----------------
38,736 35,018
Prepaid expenses and other 9,496 9,767
----------------- ----------------
TOTAL CURRENT ASSETS 91,949 81,044
OTHER ASSETS 3,458 2,680
PROPERTY, PLANT AND EQUIPMENT 116,632 111,129
Less allowances for depreciation and amortization 61,909 59,382
----------------- ----------------
54,723 51,747
----------------- ----------------
TOTAL ASSETS $ 150,130 $ 135,471
================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 24,780 $ 17,322
Accrued expenses and other liabilities 25,233 25,420
Taxes 3,652 3,875
Current maturities of long-term debt 3,476 3,767
----------------- ----------------
TOTAL CURRENT LIABILITIES 57,141 50,384
LONG-TERM DEBT 28,139 24,842
POST-RETIREMENT BENEFITS AND OTHER LONG-TERM LIABILITIES 28,290 29,326
SHAREHOLDERS' EQUITY
Common shares 1,330 1,329
Other Capital 72,768 72,743
Retained earnings (deficit) (35,039) (40,654)
Pension adjustment (2,499) (2,499)
----------------- ----------------
36,560 30,919
----------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 150,130 $ 135,471
================= ================
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
The Lamson & Sessions Co. and Subsidiaries
(Dollars in thousands)
<TABLE>
<CAPTION>
FIRST HALF ENDED
------------------
1996 1995
------- -------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 5,615 $ 3,336
Adjustments to reconcile net income to cash provided (used) by operations:
Depreciation and amortization 4,121 4,407
Deferred Income Tax Benefit (1,350)
Net change in working capital accounts:
Accounts Receivable (7,211) (8,997)
Inventories (3,718) (6,245)
Prepaid expenses and other 921 332
Current liabilities 7,048 2,055
Net change in other long-term items (1,114) (154)
------- -------
Cash provided (used) by operating activities 4,312 (5,266)
INVESTING ACTIVITIES
Proceeds from sale of businesses 3,742
Purchases of property, plant and equipment (7,097) (2,203)
------- -------
CASH (USED) PROVIDED BY INVESTING ACTIVITIES (7,097) 1,539
FINANCING ACTIVITIES
Net change in secured credit agreement 2,798 3,417
Net changes in long-term borrowing and capital lease obligations 208 (166)
Exercise of stock options 26 66
------- -------
CASH PROVIDED BY FINANCING ACTIVITIES 3,032 3,317
INCREASE (DECREASE) IN CASH 247 (410)
Cash at beginning of year 1,431 1,885
------- -------
CASH AT END OF THE PERIOD $ 1,678 $ 1,475
======= =======
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
<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 1995 amounts have been
reclassified to conform with 1996 classifications.
<PAGE> 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 29, 1996
AND COMPARABLE PERIODS ENDED JULY 1, 1995
CONSOLIDATED INCOME STATEMENT
Net sales increased almost 11% for the second quarter and over 6% for the
six-month period ended June 29, 1996, after excluding the Company's former
aerospace fastener business sales from 1995 results. Volume gains were the
result of market share improvement for electrical conduit and related fitting
products.
Gross profit increased 7% to 21% in the second quarter and 10% to 21% for the
first six months of 1996. The primary reasons for the improvement were higher
utilization rates in our manufacturing plants and stronger volume in electrical
fittings and wiring devices.
Selling, general and administrative expenses were at 17% of net sales in the
second quarter and second half, in line with current year budgets, compared to
15% in the comparable periods of 1995. The increases reflect accelerated
marketing efforts as well as increased staffing and associated costs for product
development programs and the TOPPS information technology project. Reduced
borrowing levels in the current quarter and year-to-date, combined with lower
financing rates, have generated the significant reductions in interest expense.
The Company recorded an income tax benefit of $.7 million in both the first and
second quarters from a reduction in the valuation allowance placed on deferred
tax assets due to continuing improvement in its overall performance.
CONSOLIDATED BALANCE SHEET
Accounts receivable increased approximately $7 million compared to year-end
levels due to higher sales volume during the mid-year period. Inventory
increased nearly $4 million compared to year-end levels due to higher raw
material costs and seasonal inventory building for the traditional higher volume
shipping months. Accounts payable increased $7 million compared to year-end
levels reflecting the expanded inventory levels and increased capital spending.
Total debt increased $3 million compared to year-end as seasonal working capital
requirements were funded using the revolving credit line.
CONSOLIDATED STATEMENT OF CASH FLOWS
Increased earnings, receipt of the sold aerospace fastener business receivable
and decreased working capital requirements accounted for a nearly $10 million
increase in operating cash flow in the first six months compared to the prior
year period.
Capital spending increased nearly $5 million over the prior year six months
mainly from requirements of projects relating to operating efficiency,
information systems and communication as well as product development programs.
OUTLOOK
The Company's favorable operating results in the first half reflect efforts to
pursue market share and product growth opportunities that are expected to
provide sustainable revenue and profit growth over time. Although current
uncertainty in raw material costs and related market pricing could hinder the
pace of earnings growth in the second half, management believes that positive
results will continue through the remainder of the year based on current
estimates for 1996 construction spending, housing starts, interest rates, retail
spending and general economic improvement.
<PAGE> 7
PART II
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 26, 1996, the Company held its Annual Meeting of Shareholders. At the
meeting, 12,182,082 common shares (91.65% of the common shares outstanding) were
voted. An increase in the number of common shares covered by The Lamson &
Sessions Co. 1988 Incentive Equity Performance Plan was approved by a vote of
9,529,922 shares For, 2,539,663 shares Against, and 112,497 shares Abstained.
The following directors were elected in Class III and received the votes
indicated next to their names:
<TABLE>
<CAPTION>
WITHHELD
CLASS III FOR AUTHORITY
------------------------------ --------------- ---------------
<S> <C> <C>
A. Malachi Mixon, III 11,862,430 319,652
John C. Morley 12,049,309 132,773
John B. Schulze 12,009,320 172,762
</TABLE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------------- -----------------------------------------------------
<S> <C> <C>
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
(b) One report, regarding certain factors which may influence the
Company's operating revenues and other prospects, was filed June
6, 1996 on Form 8-K, pursuant to Item 5 of that form. No
financial statements were filed as part of that report.
<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: August 13, 1996 By /s/ James J. Abel
------------------- --------------------------
James J. Abel
Executive Vice President, Secretary, Treasurer
and Chief Financial Officer
<PAGE> 1
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
EXHIBIT (11) - COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
SECOND QUARTER ENDED FIRST HALF ENDED
-------------------------------------- ----------------------------------------
PRIMARY 1996 1995 1996 1995
--------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Average common shares outstanding 13,295,417 13,290,195 13,293,584 13,284,490
Average common shares equivalents:
Stock options and warrants -
based on treasury stock method
using average market price 486,199 95,079 401,556 86,776
--------------- ---------------- ----------------- -----------------
TOTALS 13,781,616 13,385,274 13,695,140 13,371,266
FULLY DILUTED
Average common shares outstanding 13,295,417 13,290,195 13,293,584 13,284,490
Average common shares equivalents:
Stock options and warrants -
based on treasury stock method 516,838 95,079 427,784 86,776
--------------- ---------------- ----------------- -----------------
TOTALS 13,812,255 13,385,274 13,721,368 13,371,266
Net Earnings $ 3,603,000 $ 2,511,000 $ 5,615,000 $ 3,336,000
=============== ================ ================= =================
Earnings per common share and common
share equivalents
Primary Net Earnings Per Share $ .26 $ .19 $ .41 $ .25
=============== ================ ================= =================
Fully Diluted Net Earnings Per Share $ .26 $ .19 $ .41 $ .25
=============== ================ ================= =================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-29-1996
<CASH> 1,678
<SECURITIES> 0
<RECEIVABLES> 42,039
<ALLOWANCES> 0
<INVENTORY> 38,736
<CURRENT-ASSETS> 91,949
<PP&E> 116,632
<DEPRECIATION> 61,909
<TOTAL-ASSETS> 150,130
<CURRENT-LIABILITIES> 57,141
<BONDS> 28,139
<COMMON> 1,330
0
0
<OTHER-SE> 35,230
<TOTAL-LIABILITY-AND-EQUITY> 150,130
<SALES> 141,383
<TOTAL-REVENUES> 141,383
<CGS> 111,119
<TOTAL-COSTS> 111,119
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,343
<INCOME-PRETAX> 4,265
<INCOME-TAX> (1,350)
<INCOME-CONTINUING> 5,615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,615
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
</TABLE>
