<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 April 5, 1997
-------------
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
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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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of April 5, 1997 the Registrant had outstanding 13,306,084 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
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
-----------------------------
1997 1996
-----------------------------
<S> <C> <C>
Net sales $ 68,844 $ 63,978
Cost of products sold 53,951 50,140
-------- --------
GROSS PROFIT 14,893 13,838
Selling, general and
administrative expenses 12,691 11,787
Other income (62)
-------- --------
OPERATING INCOME 2,264 2,051
Interest 807 689
-------- --------
INCOME BEFORE INCOME TAXES 1,457 1,362
Income tax benefit 700 650
-------- --------
NET INCOME $ 2,157 $ 2,012
======== ========
EARNINGS PER COMMON SHARE $ 0.16 $ 0.15
======== ========
AVERAGE COMMON SHARES 13,546 13,609
======== ========
</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 END
------------------------------
1997 1996
------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,301 $ 758
Accounts receivable 49,023 36,626
Inventories
Finished goods and work-in-process 44,989 38,824
Raw materials and supplies 6,854 3,998
--------- ---------
51,843 42,822
Prepaid expenses and other 8,642 10,739
--------- ---------
TOTAL CURRENT ASSETS 110,809 90,945
OTHER ASSETS 9,846 9,703
PROPERTY, PLANT AND EQUIPMENT 115,778 113,937
Less allowances for depreciation and amortization 54,690 53,464
--------- ---------
61,088 60,473
--------- ---------
TOTAL ASSETS $ 181,743 $ 161,121
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 26,972 $ 19,084
Accrued expenses and other liabilities 23,945 24,803
Taxes 3,815 3,643
Current maturities of long-term debt 3,626 4,376
--------- ---------
TOTAL CURRENT LIABILITIES 58,358 51,906
LONG-TERM DEBT 48,842 36,911
POST-RETIREMENT BENEFITS AND OTHER LONG TERM LIABILITIES 27,296 27,238
SHAREHOLDERS' EQUITY
Common shares 1,331 1,330
Other Capital 72,815 72,792
Retained earnings (deficit) (24,869) (27,026)
Pension adjustment (2,030) (2,030)
--------- ---------
47,247 45,066
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 181,743 $ 161,121
========= =========
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
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<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
The Lamson & Sessions Co. and Subsidiaries
(Dollars in thousands)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
---------------------------
1997 1996
---------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,157 $ 2,012
Adjustments to reconcile net income to cash (used) provided by
operations:
Depreciation and amortization 1,714 2,063
Deferred income tax benefit (725) (732)
Net change in working capital accounts:
Accounts receivable (12,397) (2,054)
Inventories (9,021) (5,395)
Prepaid expenses and other 2,460 1,567
Current liabilities 7,202 6,604
Net change in other long-term items 176 (122)
-------- --------
CASH (USED) PROVIDED BY OPERATING ACTIVITIES (8,434) 3,943
INVESTING ACTIVITIES
Net purchases of property, plant and equipment (2,228) (3,398)
-------- --------
CASH USED BY INVESTING ACTIVITIES (2,228) (3,398)
FINANCING ACTIVITIES
Net change in secured credit agreement 11,307 (1,849)
Net changes in long-term borrowing and capital lease obligations (126) 304
Exercise of stock options 24
-------- --------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES 11,205 (1,545)
-------- --------
INCREASE (DECREASE) IN CASH 543 (1,000)
Cash at beginning of year 758 1,431
-------- --------
CASH AT END OF THE PERIOD $ 1,301 $ 431
======== ========
</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 1996
amounts have been reclassified to conform with 1997 classifications.
NOTE B - ACCOUNTING POLICIES
The Company will adopt Statement of Financial Accounting Standards No. 128,
"Earnings per Share" at year end 1997. Adoption of this standard is not expected
to have a material impact on calculation of earnings per share.
-5-
<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 nearly 8% compared to the prior year quarter. The
sales increase was driven by a greater than 15% increase in sales of flexible
and priority pipe products, fittings and wireless electrical products offset by
the planned exit of some rigid pipe products.
Gross profit increased over $1 million or 8% in the first quarter of 1997
compared to the first quarter of 1996. Additional gross profit generated from
increased non-commodity product sales was offset by significant raw material
cost increases on commodity products in the latter half of the quarter. Selling
price increases on commodity rigid pipe product contracts lagged raw material
price increases in accordance with historical trends. Higher freight and
distribution costs associated with the implementation phase of the new TOPPS
information technology project also had an unfavorable gross profit impact.
Selling, general and administrative expenses remained at 18% of net sales in the
first quarter of 1997 as in 1996. Higher selling costs related to the increased
non-commodity sales levels coupled with high current period administrative
costs, related to the aforementioned system conversion and prior year
acquisition integration, caused the percentage of sales for these expenses to
remain constant despite the higher base of sales. The growth in borrowing
generated the increase in interest expense. The Company recorded an income tax
benefit of $.7 million in the first quarter consistent with the prior year's
period.
CONSOLIDATED BALANCE SHEET
Accounts receivable increased approximately $12 million compared to year end
levels due to a higher concentration of sales later in the quarter period and
slowed billing and collection associated with the aforementioned system
conversion project. Inventory increased $9 million compared to year end levels
due to planned inventory increases to augment customer service and seasonal
inventory building in the first quarter for the traditional higher volume
shipping months of May through October. Accounts payable increased nearly $8
million compared to year end levels reflecting the expanded inventory levels.
Total debt increased $11 million compared to year end as the secured credit line
was used to fund working capital requirements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash generated by operations decreased $12 million from the prior year quarter.
The cash use occurred primarily because of the Accounts Receivable increase in
the quarter related to increased year to year March sales, as well as, billing
and collection issues mentioned previously.
Financing activities generated nearly $13 million more cash than the prior year
quarter due to draws on the revolving credit agreement to fund working capital
requirements.
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<PAGE> 7
Outlook:
- --------
The Company's efforts are directed toward the achievement of
sustainable revenue and profit growth over time. The Company's investment in
enhanced information technology and the development or acquisition of new
products which reduce the Company's sensitivity to commodity raw materials form
an important part of these efforts.
While the Company's performance in the first quarter of 1997 was in
line with expectations, these results were achieved despite incurring higher raw
material costs and with a less than favorable product mix of commodity rigid
pipe products. Information currently available to management indicates that the
Company's financial performance in the second quarter may be adversely affected
by the following factors: a) the implementation of a new fully-integrated
information system during the first quarter which has provided information in
the second quarter that has caused management to re-evaluate its estimates for
customer deductions and credits; and b) a fire that completely consumed the
Company's Brighton, Michigan facility has resulted in a disruption of business
that will adversely affect shipments of wireless electrical products in the
second and third quarters of 1997. This facility was an assembly, packaging and
distribution point which should be recreated in a few months. However, the
impact of insurance settlements related to the fire will not be known for some
time.
The extent to which these factors may adversely affect the current
quarter, as well as the entire year, are not yet estimable, but the Company's
second quarter may be below its expectations in revenues and earnings.
The Company is encouraged by the relative strength of its markets
year-to-date, and it expects market selling prices on commodity products to
improve in the remaining months of 1997. Forecasts of general economic strength,
as well as current estimates for construction spending, housing starts, retail
spending and consumer confidence appear to be consistent with the Company's
operating performance expectations.
The Company is also focusing its efforts on improving operating cash
flow throughout the remaining quarters of this year. Working capital is expected
to be reduced to a level more consistent with past trends in relation to sales
throughout the remainder of this year.
The Company will be pursuing additional financing opportunities during
the second and third quarters to augment available capital for use in
acquisitions and for other growth requirements.
These forward-looking comments are subject to the cautionary
limitations in connection with the `safe-harbor' provisions of the Private
Securities Litigation Reform Act of 1995 which are provided in the Company's
report on Form 10-K filed in March 1997.
<PAGE> 8
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.
11 Compilation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K. There were no reports on Form 8-K filed
for the three months ended April 5, 1997.
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<PAGE> 9
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: May 20, 1997 By /s/
------------------------------------
James J. Abel
Executive Vice President,
Secretary, Treasurer and Chief
Financial Officer
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<PAGE> 1
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
EXHIBIT (11) - COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
-------------------------------
PRIMARY 1997 1996
-------------------------------
<S> <C> <C>
Average common shares outstanding 13,306,084 13,291,751
Average common share equivalents:
Stock options and warrants - based
on treasury stock method using
average market price 239,532 316,913
----------- -----------
TOTALS 13,545,616 13,608,664
=========== ===========
FULLY DILUTED
Average common shares outstanding 13,306,084 13,291,751
Average common share equivalents:
Stock options and warrants - based
on treasury stock method 239,532 338,730
----------- -----------
TOTALS 13,545,616 13,630,481
=========== ===========
NET INCOME $ 2,157,000 $ 2,012,000
=========== ===========
Earnings per common share and common share equivalents:
Primary Net Earnings Per Share $ 0.16 $ 0.15
=========== ===========
Fully Diluted Net Earnings Per Share $ 0.16 $ 0.15
=========== ===========
</TABLE>
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000057497
<NAME> THE LAMSON & SESSSIONS CO.
<MULTIPLIER> 1,000
<CURRENCY> U.S. CURRENCY
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> APR-05-1997
<EXCHANGE-RATE> 1
<CASH> 1,301
<SECURITIES> 0
<RECEIVABLES> 49,023
<ALLOWANCES> 0
<INVENTORY> 51,843
<CURRENT-ASSETS> 110,809
<PP&E> 115,778
<DEPRECIATION> 54,690
<TOTAL-ASSETS> 181,743
<CURRENT-LIABILITIES> 58,358
<BONDS> 48,842
<COMMON> 1,331
0
0
<OTHER-SE> 45,916
<TOTAL-LIABILITY-AND-EQUITY> 181,743
<SALES> 68,844
<TOTAL-REVENUES> 68,844
<CGS> 53,951
<TOTAL-COSTS> 53,951
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 807
<INCOME-PRETAX> 1,457
<INCOME-TAX> (700)
<INCOME-CONTINUING> 2,157
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,157
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
