<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
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
-----
THE LAMSON & SESSIONS CO.
------------------------------------------------------
(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 March 30, 1996 the Registrant had outstanding 13,291,751 common shares.
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<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
-------------------
1996 1995
------- -------
<S> <C> <C>
NET SALES $63,978 $68,402
COST OF PRODUCTS SOLD 50,140 56,103
------- -------
GROSS PROFIT 13,838 12,299
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 11,787 9,803
------- -------
INCOME FROM OPERATIONS 2,051 2,496
INTEREST 689 1,671
------- -------
INCOME BEFORE INCOME TAXES 1,362 825
INCOME TAX BENEFIT 650
------- -------
NET INCOME $ 2,012 $ 825
======= =======
EARNINGS PER COMMON SHARE $ .15 $ .06
======= =======
AVERAGE COMMON SHARES 13,609 13,279
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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<PAGE> 3
CONSOLIDATED BALANCE SHEET (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
First
Quarter
Ended Year Ended
---------------------------
1996 1995
---------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 431 $ 1,431
Accounts receivable 36,882 34,828
Inventories:
Finished goods and work-in-process 34,851 30,491
Raw materials and supplies 5,562 4,527
------------ ------------
40,413 35,018
Prepaid expenses and other 8,932 9,767
------------ ------------
TOTAL CURRENT ASSETS 86,658 81,044
OTHER ASSETS 2,566 2,680
PROPERTY, PLANT AND EQUIPMENT 113,789 111,129
Less allowances for depreciation and amortization 60,707 59,382
------------ ------------
53,082 51,747
------------ ------------
TOTAL ASSETS $ 142,306 $ 135,471
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 26,157 $ 17,322
Accrued expenses and other liabilities 23,323 25,420
Taxes 3,741 3,875
Current maturities of long-term debt 3,477 3,767
------------ ------------
TOTAL CURRENT LIABILITIES 56,698 50,384
LONG-TERM DEBT 23,587 24,842
POST-RETIREMENT BENEFITS AND OTHER LONG-TERM LIABILITIES 29,090 29,326
SHAREHOLDERS' EQUITY
Common shares 1,329 1,329
Other Capital 72,743 72,743
Retained earnings (deficit) (38,642) (40,654)
Pension adjustment (2,499) (2,499)
------------ ------------
32,931 30,919
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 142,306 $ 135,471
============ ============
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
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<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
The Lamson & Sessions Co. Subsidiaries
(Dollars in thousands)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
--------------------
1996 1995
--------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,012 $ 825
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization 2,063 2,239
Deferred Income Tax-Benefit (650)
Net change in working capital accounts:
Accounts Receivable (2,054) (2,744)
Inventories (5,395) (7,055)
Prepaid expenses and other 1,485 (84)
Current liabilities 6,604 6,572
Net change in other long-term items (122) 293
------- -------
CASH PROVIDED BY OPERATING ACTIVITIES 3,943 46
INVESTING ACTIVITIES
Net purchases of property, plant and equipment (3,398) (647)
------- -------
CASH USED BY INVESTING ACTIVITIES (3,398) (647)
FINANCING ACTIVITIES
Net change in secured credit agreement (1,849) (246)
Net change in long-term borrowings and capital lease obligations 304 (112)
------- -------
CASH USED BY FINANCING ACTIVITIES (1,545) (358)
------- -------
DECREASE IN CASH (1,000) (959)
Cash at beginning of year 1,431 1,885
------- -------
CASH AT END OF THE PERIOD $ 431 $ 926
======= =======
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
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<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.
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<PAGE> 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CONSOLIDATED STATEMENT OF INCOME
Sales for the quarter were up 2% compared to the prior year quarter after
excluding the Company's former aerospace fastener business sales from 1995
results. The strongest incremental sales increase was in the area of specialty
pipe products. Volume gains were also the result of a more aggessive pricing
strategy on rigid pipe products which resulted in market share improvement.
Gross margin percentage increased 20% to 21.6% in 1996. The majority of the
increase was generated by favorable product mix in our Carlon Telecom Systems
and Lamson Vylon Pipe business units. In addition, our manufacturing plants
operated at higher utilization rates which reduced cost variances.
Selling, general and administrative expenses were at 18% of net sales in
1996 compared to 14% in 1995. The increase reflects accelerated marketing
efforts, as well as increased staffing and associated costs for new product
development programs and the TOPPS Information Technology project. Reduced
borrowing levels in the current period, combined with lower financing rates have
generated the significant reduction in interest expense. The Company recorded an
income tax benefit of $.65 million in the first quarter from a reduction in the
valuation allowance placed on the Company's deferred tax assets due to
continuing improvement in its overall performance.
CONSOLIDATED BALANCE SHEET
Accounts receivable increased approximately $2 million compared to year end
levels due to stronger billing levels late in the quarter. Inventory increased
over $5 million compared to year end levels due to seasonal inventory building
in the first quarter for the traditional higher volume shipping months of May
through October. Prepaid expenses and other declined mainly due to the receipt
of the amount receivable at year end for the sale of the aerospace fastener
business and other non-trade receivables. Accounts payable increased nearly $9
million compared to year end levels reflecting the expanded inventory levels and
increased capital spending. Total debt decreased nearly $2 million compared to
year end as operating cash flow and accounts payable increases funded asset
growth while supporting certain scheduled debt reductions.
CONSOLIDATED STATEMENT OF CASH FLOWS
Increased earnings, decreased inventory growth, and receipt of the sold
aerospace fastener business receivable accounted for a nearly $4 million
increase in operating cash flow compared to the prior year quarter.
Capital spending increased nearly $3 million over the prior year quarter
mainly from requirements of projects relating to operating efficiency,
information systems and communication, as well as, product development programs.
Financing activities used over $1 million more cash than the prior year
quarter due to payments on the revolving credit agreement.
OUTLOOK
The Company's continuing operating improvement reflects efforts to pursue
market and product opportunities that are expected to provide sustainable
revenue and profit growth. Management believes that this positive trend 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.
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<PAGE> 7
PART II
ITEM 1 - LEGAL PROCEEDINGS
The Company is a party to various claims and matters of litigation
incidental to the normal course of its business. Management believes
that the final resolution of these matters will not have a material
adverse effect on the Company's financial position.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
10(V) Amendment No. 3 dated as of March 31, 1996 to the
GECC Loan Agreement, filed herewith.
27 Financial Data Schedule
(b) Reports on Form 8-K. There were no reports on Form
8-K filed for the three months ended March 30, 1996.
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<PAGE> 8
SIGNATURES
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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: May 14, 1996 By /S/ James J. Abel
----------------------------------------
James J. Abel
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
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<PAGE> 1
AMENDMENT NO. 3
Dated as of March 31, 1996
THIS AMENDMENT NO. 3 ("Amendment") is entered into as of March
31, 1996 by and among THE LAMSON & SESSIONS CO., an Ohio corporation (the
"Borrower"), GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GE
Capital"), as the sole "Lender" (as defined in the Loan Agreement referred to
below) and GE Capital as agent for the Lenders (in such capacity, the "Agent").
PRELIMINARY STATEMENT
A. The Borrower, the Lender and the Agent are parties to that
certain Loan Agreement dated as of February 13, 1992, as amended and restated as
of July 14, 1995 (as the same has been and may be further amended, restated,
supplemented or otherwise modified from time to time, the "Loan Agreement").
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Loan Agreement.
B. The Borrower, the Lender and the Agent have agreed to
amend the Loan Agreement on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises set forth
above, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Borrower, the Lender and the Agent hereby
agree as follows:
SECTION 1. Amendments to the Loan Agreement
--------------------------------
Effective as of the date hereof, subject to the satisfaction
of the conditions precedent set forth in Section 2 below, the Loan Agreement is
amended as follows:
(a) SECTION 1.1 of the Loan Agreement is amended by amending
and restating the definition of "Consolidated EDITDA to Consolidated Debt
Service Ratio" as follows:
"CONSOLIDATED EBITDA TO CONSOLIDATED DEBT
SERVICE RATIO" shall mean, for any period, the ratio
of (A) Consolidated EBITDA for the applicable period
to (B) Consolidated Debt Service for such period.
(b) SECTION 7.3(b) of the Loan Agreement is amended by
deleting the table set forth therein and substituting the following therefor:
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<PAGE> 2
<TABLE>
<CAPTION>
Fiscal Quarter Ending Nearest Ratio
----------------------------- -----
<S> <C>
March 31, 1996 and
each Fiscal Quarter 1.25 to 1
thereafter
</TABLE>
(c) SECTION 7.3 (e) of the Loan Agreement is amended by
deleting the table set forth therein and substituting the following therefor:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Nearest Ratio
----------------------------- -----
<S> <C>
March 31, 1996 and
each Fiscal Quarter 1.0 to 1
thereafter
</TABLE>
(d) SECTION 7.3 (f) of the Loan Agreement is amended by
deleting the entries for March 31, 1996, June 30, 1996, September 30, 1996 and
December 31, 1996 under the table set forth therein and substituting the
following therefor:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Nearest Amount
----------------------------- ------
<S> <C>
March 31, 1996 $ 2,800,000
June 30, 1996 $ 9,000,000
September 30, 1996 $ 16,500,000
December 31, 1996 $ 19,000,000
</TABLE>
(e) SECTION 8.9 of the Loan Agreement is amended by deleting
the table set forth therein and substituting the following therefor:
<TABLE>
<CAPTION>
Maximum Capital
Fiscal Year Expenditures
----------- ------------
<S> <C>
1996 $18,000,000
1997 and each Fiscal $15,000,000
Year thereafter
</TABLE>
SECTION 2. CONDITIONS PRECEDENT. This Amendment shall become
effective and be deemed effective as of the date first above written upon the
Agent's having received the following:
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<PAGE> 3
(a) four (4) copies of this Amendment duly executed by
the Borrower, the Lender and the Agent; and
(b) Reaffirmations of Guaranty and Security Agreement in
substantially the form of Exhibit A attached hereto, duly executed by each of
Carlon Chimes and Youngstown Steel Door.
SECTION 3. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE
BORROWER.
3.1 Except to the extent that any representation or warranty
expressly is made only with respect to an earlier date, upon the effectiveness
of this Amendment, the Borrower hereby reaffirms all covenants, representations
and warranties made by it in the Loan Agreement to the extent the same are not
amended hereby and agrees that all such covenants, representations and
warranties shall be deemed to have been re-made as of the effective date of this
Amendment. In addition, the Borrower covenants and agrees that it will not amend
or agree to amend the Purchase Agreement without the prior written consent of
the Agent.
3.2 The Borrower hereby represents and warrants that this
Amendment constitutes the legal, valid and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and general principles of equity which may limit the availability of
equitable remedies.
SECTION 4. REFERENCE TO AND EFFECT ON THE LOAN AGREEMENT
4.1 Upon the effectiveness of this Amendment, each reference
in the Loan Agreement to "this Agreement," "hereunder," "hereof," "herein,"
"hereby" or words of like import shall mean and be a reference to the Loan
Agreement as amended hereby, and each reference to the Loan Agreement in any
other document, instrument or Agreement executed and/or delivered in connection
with the Loan Agreement shall mean and be a reference to the Loan Agreement as
amended hereby.
4.2 Except as specifically amended hereby, the Loan Agreement
and other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
4.3 The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of any
Lender or the Agent under the Loan Agreement or any of the other Loan Documents,
nor constitute a waiver of any provision contained therein, except as
specifically set forth herein.
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<PAGE> 4
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
THE CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF ILLINOIS.
SECTION 6. EXECUTION IN COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 7. HEADINGS. Section headings in this Amendment are
included herein for convenience or reference only and shall not constitute a
part of this Amendment for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereto duly authorized as
of the date first written above.
THE LAMSON & SESSIONS CO.
By: /s/ James J. Abel
--------------------------------------
Title: Executive Vice President, Secretary,
Treasurer & Chief Financial Officer
--------------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION, as
the Agent and as the sole Lender
By: /s/ Shawn Pettit
--------------------------------------
Title: Duly Authorized Signatory
--------------------------------------
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<PAGE> 5
EXHIBIT A
TO
AMENDMENT
FORM OF REAFFIRMATION OF GUARANTY AND SECURITY AGREEMENT
---------------------------------------------------------
(ATTACHED.)
-13-
<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-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-30-1996
<CASH> 431
<SECURITIES> 0
<RECEIVABLES> 36,882
<ALLOWANCES> 0
<INVENTORY> 40,413
<CURRENT-ASSETS> 86,658
<PP&E> 113,789
<DEPRECIATION> 60,707
<TOTAL-ASSETS> 142,306
<CURRENT-LIABILITIES> 56,698
<BONDS> 23,587
<COMMON> 1,329
0
0
<OTHER-SE> 31,602
<TOTAL-LIABILITY-AND-EQUITY> 142,306
<SALES> 63,978
<TOTAL-REVENUES> 63,978
<CGS> 50,140
<TOTAL-COSTS> 50,140
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 689
<INCOME-PRETAX> 1,362
<INCOME-TAX> (650)
<INCOME-CONTINUING> 2,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,012
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
