<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 28, 1996
-----------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 44122-7313
- ------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
216/464-3400
----------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange on which
Title of each class registered
<S> <C>
- ----------------------------------------------- --------------------------------------------
Common Shares, without par value New York Stock Exchange
- ----------------------------------------------- --------------------------------------------
Pacific Stock Exchange
- ----------------------------------------------- --------------------------------------------
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held as of February 14, 1997 by
non-affiliates of the registrant: $96,676,468.
As of February 14, 1997 the Registrant had outstanding 13,306,084 common shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1997 Annual Meeting of Shareholders are
incorporated by reference into Part III.
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<PAGE> 2
PART I
Item 1. - BUSINESS
The Lamson & Sessions Co., an Ohio corporation, (the "Company" or "Lamson &
Sessions"), founded in 1866, is a diversified manufacturer and distributor of a
broad line of thermoplastic electrical, consumer, telecommunications and fluid
drainage products for major domestic markets. The markets for thermoplastic
conduit, related fittings and accessories, wiring devices and sewer pipe
include: the construction, utility and telecommunications industries,
municipalities, other government agencies, and contractors; and do-it-yourself
home remodelers.
In November 1995, the Company completed the sale of its Valley-Todeco division
which was engaged in the manufacture and sale of fasteners serving the aerospace
industry. (Refer to Note J to the Consolidated Financial Statements.) Proceeds
from the sale were utilized to reduce debt.
PRINCIPAL PRODUCTS AND MARKETS
The Company is engaged in the manufacture and distribution of a broad line of
thermoplastic electrical, telecommunication and engineered sewer products. In
addition, the Company distributes a wide variety of consumer electrical wiring
devices, home security devices, wireless electrical and other wireless products.
All of the Company's thermoplastic products compete with and serve as
substitutes for similar metallic products. The Company's engineered sewer pipe
products compete with and serve as substitutes for clay, concrete, ductile iron,
asbestos cement and polyethylene products. The Company's thermoplastic products
offer several advantages over these other products. Specifically, nonmetallic
electrical conduit and related fittings and accessories are generally less
expensive, lighter and easier to install than metallic products. Furthermore,
thermoplastic conduit does not rust, corrode or conduct electricity.
Thermoplastic sewer pipe weighs less than alternative products, is easier and
more economical to install, does not degenerate due to sewer gases as do some
competing products, and eliminates avoidable problems which can be caused by
infiltration and exfiltration.
Four markets are served, each of which has unique product and marketing
requirements. These markets are: (i) Industrial, Residential, Commercial and
Utility Construction (served by Carlon Electrical Products) -- contractors
engaged in the installation of electrical systems in industrial, residential and
commercial construction, and electric power utility projects; original equipment
manufacturers who use components as subassemblies for their own products; and
industrial companies who maintain or repair their own facilities; (ii) Consumer
(served by Lamson Home Products) -- retail consumers of electrical products who
perform "do-it-yourself" home repairs; and small electrical contractors; (iii)
Telecommunications (served by Carlon Telecom Systems) -- cable television
("CATV"), telephone and telecommunications companies; and (iv) Engineered Sewer
Products (served by Lamson Vylon Pipe) -- various government and private
builders of sewer and drainage systems.
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<PAGE> 3
A breakdown of revenues as a percent of net sales related to significant classes
of product by major market segment for 1996, 1995 and 1994, respectively, is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- -------------------------- --------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Industrial, Residential,
Commercial & Utility
Construction $156,218 54% $151,701 51% $149,863 52%
Telecommunications 48,993 17% 55,456 19% 44,603 16%
Consumer 55,199 19% 51,213 17% 49,463 17%
Engineered Sewer
Products 28,642 10% 21,846 7% 24,878 9%
Aerospace Fastener 18,950 6% 18,838 6%
-------- --- -------- --- -------- ---
$289,052 100% $299,166 100% $287,645 100%
======== === ======== === ======== ===
</TABLE>
The following summarizes the principal products sold in each of the four
markets:
INDUSTRIAL, RESIDENTIAL, COMMERCIAL AND UTILITY CONSTRUCTION. The principal
products sold to this market include rigid conduit, flexible electrical
nonmetallic tubing, fittings and accessories, outlet boxes, and other products.
Other products in this market also include thermoplastic spirally extruded
liquidtight conduit, and a broad line of industrial nonmetallic enclosures.
TELECOMMUNICATIONS. The products included in this market are traditional smooth
wall communication duct and spacers used by telecommunication and CATV
industries to house telecommunications cable, multi-cell duct systems designed
to protect underground fiber optic cables and allow future cabling expansion,
and flexible conduit used inside buildings to protect communications cable.
CONSUMER. The products included in this market are products such as light
dimmers, fan speed controls, touch controls, wireless door chimes, motion
sensors and home security systems. In addition, the Company supplies this market
with products such as outlet boxes, electrical conduit, liquidtight conduit and
electrical fittings.
ENGINEERED SEWER PRODUCTS. Principal products utilized by this market include
closed profile engineered sewer pipe used for direct burial and sliplining as
well as traditional solid wall sewer and drain pipe used in residential
construction of sanitary drainage systems, sewer main and highway underdrain.
Products range in diameters from 4 to 48 inches.
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<PAGE> 4
COMPETITION
Each of the four markets in which the Company presently operates is highly
competitive based on service, price and quality. Most of the competitors are
either national or smaller regional manufacturers who compete with limited
product offerings. Unlike a majority of the Company's competitors, the Company
manufactures a broad line of thermoplastic products, complementary fittings and
accessories. The Company believes that its products will continue to compete
favorably. However, certain of the Company's competitors have greater financial
resources than the Company, which could adversely affect the Company through
price competition strategies.
DISTRIBUTION
The Company distributes its products through a nationwide network of more than
170 manufacturers' representatives and a direct sales force of 47. Currently,
three of these manufacturers' representatives maintain an inventory of the
Company's products. The Company has reduced the number of these inventory
locations and has developed its own strategically located distribution centers.
RAW MATERIALS
The Company is a large purchaser of pipe grade polyvinylchloride (PVC) resin and
has historically been able to obtain quantities adequate for its manufacturing
needs.
PATENTS AND TRADEMARKS
The Company owns various patents, patent applications, licenses, trademarks and
trademark applications relating to its products and processes. While the Company
considers that, in the aggregate, its patents, licenses and trademarks are of
importance in the operation of its business, it does not consider that any
individual patent, license or trademark, or any technically related group, is of
such importance that termination would materially affect its business.
SEASONAL FACTORS
Three of the Company's four business units experience moderate seasonality
caused principally by a decrease in construction activity during the winter
months. They are subject also to the economic cycles affecting the construction
industry. The Company's consumer products business unit is affected by consumer
spending and consumer confidence.
MAJOR CUSTOMERS
Sales to Affiliated Distributors, a buying group not otherwise affiliated with
the Company, totaled approximately 13% of net sales in 1996 and 12% of net sales
in 1995 and 1994.
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<PAGE> 5
BACKLOG
Due to the nature of the Company's business, orders are generally filled within
several weeks of order date. Therefore, the Company believes that statistics
relative to order backlog are not indicative of the status of the Company's
business at any point in time.
RESEARCH AND DEVELOPMENT
The Company is engaged in an aggressive new product development program in an
effort to introduce innovative applications for thermoplastic and consumer
electrical products. The Company maintains a separate product development center
in Cleveland, Ohio to facilitate the introduction of value-added products and
improve manufacturing processes. The Company sponsored research and development
activity totaled $4.0 million, $3.7 million, and $3.4 million in 1996, 1995 and
1994, respectively.
ENVIRONMENTAL REGULATIONS
The Company believes that its current operations and its use of property, plant
and equipment conform in all material respects to applicable environmental laws
and regulations presently in effect (Refer to Note C to the Consolidated
Financial Statements). The Company has facilities at numerous geographic
locations, which are subject to a range of federal, state and local
environmental laws and regulations. Compliance with these laws has, and will,
require expenditures on a continuing basis.
EMPLOYEES
At December 28, 1996, the Company had 1,164 employees, 874 of whom were employed
at the Company's manufacturing facilities and distribution centers. The
remainder of employees were employed at the Company's corporate headquarters and
product development facilities.
FOREIGN OPERATIONS
The net sales, operating earnings and assets employed outside the United States
are not significant. Export sales were approximately 1% of consolidated net
sales in 1996, 2% in 1995, and 1% in 1994, and were made principally to
countries in North America.
ACQUISITIONS
In October 1996, the Company purchased Dimango Products Corporation ("Dimango")
located in Brighton, Michigan to expand its market share in the wireless door
chimes, home security devices and other wireless products. The acquisition has
been accounted for under the purchase method.
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<PAGE> 6
Item 2. - PROPERTIES
The Company owns or leases manufacturing and distribution facilities which are
suitable and adequate for the production and marketing of its products. The
Company owns executive and administrative offices which are located in
Cleveland, Ohio and occupy 68,000 square feet in a suburban office complex. In
addition, the Company leases 7,000 square feet of administrative offices in an
office building near the corporate headquarters. The Company also has research
and development offices, located in Cleveland, Ohio, which occupy leased space
of 27,000 square feet. The following is a list of the Company's manufacturing
and distribution center locations:
<TABLE>
<CAPTION>
Approximate
Square Feet
-----------
<S> <C>
Manufacturing Facilities (Owned):
- ---------------------------------
Woodland, California 73,000
High Springs, Florida 113,000
Clinton, Iowa 156,000
Bowling Green, Ohio 61,000
Oklahoma City, Oklahoma 166,000
Nazareth, Pennsylvania 53,000
Pasadena, Texas 46,000
Distribution Centers (Leased):
- ------------------------------
Woodland, California 71,000
Montreal, Canada 20,000
Oklahoma City, Oklahoma 129,000
Allentown, Pennsylvania 65,000
</TABLE>
The Company operated the above manufacturing facilities at approximately 86% of
their productive capacity in 1996. The Company also owns a vacant 143,000 square
foot manufacturing plant in Aurora, Ohio which is being marketed for sale.
-6-
<PAGE> 7
Item 3. - 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 4. - SUBMISSION OF MATTERS TO SECURITY HOLDERS
None.
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<PAGE> 8
EXECUTIVE OFFICERS OF THE REGISTRANT
JOHN B. SCHULZE
Chairman, President and Chief Executive Officer
Chairman, President and Chief Executive Officer since January 1990. Age 59.
JAMES J. ABEL
Executive Vice President, Secretary, Treasurer and Chief Financial Officer
Executive Vice President, Secretary, Treasurer and Chief Financial Officer since
September 1994. Previously was Executive Vice President, Treasurer and Chief
Financial Officer February 1993 - September 1994. Previously was Senior Vice
President, Treasurer and Chief Financial Officer December 1990 - February 1993.
Age 51.
CHARLES E. ALLEN
Senior Vice President
Senior Vice President since September 1989. Age 56.
MARK R. BUCK
Vice President - Carlon Electrical Products
Vice President, Carlon Electrical Products since July 1993. Previously was Vice
President, Electrical Products Business Unit, April 1991 - July 1993. Previously
was Vice President, Marketing, Electrical Products, January 1990 - April 1991.
Age 43
ALBERT J. CATANI, II
Vice President - Manufacturing
Vice President, Manufacturing since August 1995. Previously was Independent
Consultant, Environmental Growth Chambers, March 1995 - August 1995. Previously
was Vice President, Operations, Universal Electronics, Inc., April 1993 - March
1995. Previously was Vice President, General Manager Mercury Plastics, Inc.,
November 1989 - April 1993. Age 49.
TIMOTHY A. HIBBARD
Vice President and Controller
Vice President and Controller since July 1996.
Previously was Division Controller, Kennametal, Inc. Metalworking Systems
Division June 1993 - June 1996. Previously was Operations Controller, Kennametal
Inc., Metalworking Manufacturing Division July 1988 - June 1993. Age 40.
MELVIN W. JOHNSON
Vice President
Vice President since February 1991. Age 60.
A. CORYDON MEYER
Vice President - Lamson Home Products
Vice President, Lamson Home Products since September 1993. Previously was Vice
President, Consumer Products Business Unit, April 1991 - September 1993.
Previously was Vice President, Marketing, Consumer Products, March 1990 - April
1991. Age 42.
WILLIAM R. RADON
Vice President and Chief Information Officer
Vice President & Chief Information Officer since September 1995. Previously was
Senior Manager, Ernst & Young, October 1988 - September 1995. Age 38.
LORI L. SPENCER
Vice President - Strategic Planning
Vice President, Strategic Planning since February 1997. Previously was Director,
Financial Planning & Internal Audit, September 1994 - February 1997. Previously
was Manager Internal Audit, August 1992 - September 1994. Previously was Senior
Manager, Ernst & Young, August 1990 - August 1992. Age 38.
NORMAN P. SUTTERER
Vice President - Carlon Telecom Systems
Vice President, Carlon Telecom Systems since January 1994. Previously was Vice
President Carlon Power & Telecom Systems, August 1992 - January 1994. Previously
was Vice President Utility/ Communication Business Unit, February 1989 - August
1992. Age 47.
-8-
<PAGE> 9
PART II
Item 5. - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange. High and low sales prices for the common stock are
included in Note K to the Consolidated Financial Statements. No dividends were
paid in 1996, 1995 or 1994. The approximate number of shareholders of record of
the Company's Common Stock at February 14, 1997 was 1,974.
-9-
<PAGE> 10
Item 6. - SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
- ---------------------------------------------------------------------------------------------------------------------------
(In Thousands except per Share Data, Shareholders, 1996 1995 1994 1993 1992
Associates and Percentages)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales $ 289,052 $ 299,166 $ 287,645 $ 259,572 $ 255,422
Cost of products sold 227,778 242,608 235,876 221,405 220,901
GROSS PROFIT 61,274 56,558 51,769 38,167 34,521
Selling, general and administrative expenses 49,135 42,520 40,840 35,500 33,404
Non-recurring charges 4,602
OPERATING INCOME (LOSS) 12,139 14,038 10,929 2,667 (3,485)
Net interest expense 2,611 5,864 6,673 5,784 5,815
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
AND EFFECT OF ACCOUNTING CHANGE 9,528 8,174 4,256 (3,117) (9,300)
Income tax benefit 4,100 3,900 800
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE EFFECT OF
ACCOUNTING CHANGE 13,628 12,074 4,256 (3,117) (8,500)
Loss from discontinued operations (9,930) (2,674) (10,956)
Cumulative effect of accounting change (26,860)
NET INCOME (LOSS) 13,628 12,074 (5,674) (5,791) (46,316)
- ---------------------------------------------------------------------------------------------------------------------------
Year-End Financial Position:
Current Assets $ 90,945 $ 80,244 $ 87,526 $ 83,842 $ 86,737
Other Assets 9,703 2,680 2,899 9,148 13,131
Assets Held for Sale 3,742 17,555 16,349
Property, Plant and Equipment 60,473 51,747 53,979 57,841 61,028
Total Assets 161,121 134,671 148,146 168,386 177,245
Current Liabilities 51,906 49,584 52,032 48,268 50,336
Long-Term Debt 36,911 24,842 46,958 62,730 58,579
Other Long-Term Liabilities 27,238 29,326 36,276 41,562 41,886
Shareholders' Equity 45,066 30,919 12,880 15,826 26,444
Working Capital 39,039 30,660 35,494 35,574 36,401
- ---------------------------------------------------------------------------------------------------------------------------
Statistical Information:
Average number of common shares and
common share equivalents 13,641 13,404 13,239 13,210 13,197
Number of shareholders of record 1,987 2,162 2,370 2,553 2,531
Number of associates 1,164 1,048 1,325 1,425 1,510
Book value per share $ 3.30 $ 2.33 $ 0.97 $ 1.20 $ 2.00
Market price per share $ 7-1/4 $ 7-3/4 $ 6 $ 4-3/4 $ 5-5/8
Market capitalization $ 96,433 $ 103,011 $ 79,673 $ 62,795 $ 74,277
Long-term debt as a % of market capitalization 38.3% 24.1% 58.9% 99.9% 78.9%
Total debt as a % of market capitalization 42.8% 27.8% 64.6% 103.8% 87.6%
Operating cash flow as a % of total debt 21.3% 66.6% 7.3% 5.7% -7.9%
Long-term debt as a % of equity 81.9% 80.3% 364.6% 396.4% 221.5%
Return on average equity from continuing operations 35.9% 55.1% 29.7% -14.7% -16.9%
- ---------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Common Share
Continuing operations $ 1.00 $ 0.90 $ 0.32 $ (0.24) $ (0.64)
Discontinued operations (0.75) (0.20) (0.83)
Accounting change (2.04)
Net earnings (loss) $ 1.00 $ 0.90 $ (0.43) $ (0.44) $ (3.51)
</TABLE>
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<PAGE> 11
Item 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
DISCUSSION OF THE CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------------------------
THE CONSOLIDATED STATEMENTS OF INCOME summarize Lamson & Sessions' operating
performance over the last three years. In 1996, the Company reported the highest
net income since 1988. This improvement primarily resulted from stronger gross
profit margins and significantly reduced interest expense which offset increased
administrative expenditures resulting from the Company's business process and
information technology project. In late 1995, the Company sold Valley Todeco,
its aerospace fastener business (see Note J to the Consolidated Financial
Statements). This divestiture allowed the Company to retire subordinated debt
and enabled the Company to focus on growth through acquisitions and new product
development in the electrical products markets which it serves.
NET SALES of $289 million for 1996 were 3% lower than net sales of $299 million
in 1995. However, excluding the results of Valley-Todeco, sold in the fourth
quarter of 1995, sales in 1995 were $280 million, or an adjusted sales increase
of 3% in 1996. The 1996 adjusted sales increase consisted of a 31% increase for
Lamson Vylon Pipe, an 8% increase for Lamson Home Products, a 3% increase for
Carlon Electrical Products, and a 12% decrease for Carlon Telecom Systems. The
sales increase consisted of a 31% volume increase in priority pipe products, led
by a 70% increase for Lamson Vylon Pipe, and a 6% volume increase in all other
product lines, offset by a 16% price decrease in rigid pipe products. The price
decrease in commodity rigid pipe products resulted directly from aggressive
price competition. Net sales for 1995 were 4% higher than net sales of $288 in
1994. Adjusted 1995 sales were $280 million compared to $269 million in adjusted
1994 sales. The adjusted 1995 sales increase consisted of a 24% increase for
Carlon Telecom Systems, a 4% increase for Lamson Home Products, a 1% increase
for Carlon Electrical Products, and a 12% decrease for Lamson Vylon Pipe. The
sales increase consisted of overall price increases of nearly 10%, a 15% new
product volume increase for Carlon Telecom Systems, offset by sales volume
decreases in engineered sewer products and electrical fittings.
GROSS MARGIN increased 12% to 21% of net sales in 1996, compared to 19% of net
sales in 1995. This margin improvement was due to a shift in product mix that
resulted in a greater than 10% increase in the percentage of revenue from
non-commodity products which generate margins more than twice as high as
commodity products. Gross margin percentage increased 5% to nearly 19% of net
sales in 1995, compared to 18% of net sales in 1994. This improvement reflected
the Company's continuing progress in implementing operating efficiencies,
improved product mix as evidenced by new product introductions in Carlon Telecom
Systems and reduced rigid pipe sales. Also in the fourth quarter, gross margin
was adversely affected by declining polyvinylchloride (PVC) resin costs. The
Company's continued emphasis on non-commodity products worked to minimize the
effect of highly variable PVC pricing.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES were 17% of sales in 1996 and 14%
of sales in 1995. The 16% expense increase from 1995 was a result of planned
increases in expenditures for the Company's business process and information
technology project as well as increased sales commissions and incentive programs
made in support of changes in the Company's product mix. Selling, general and
administrative expenses held constant at 14% of sales in 1995 and 1994. However,
excluding the aerospace fastener business, the Company experienced an increase
in these expenses of nearly 6%, reflecting marketing efforts and higher sales
commissions, as well as staffing costs associated with new product programs and
related support functions.
-11-
<PAGE> 12
INTEREST EXPENSE decreased 55% from 1995 to 1996 as a result of lower average
borrowings under the Company's secured credit agreement. In addition, the
Company benefited further from rate reductions as interest coverage requirements
continued to improve and the refinancing of industrial revenue bonds was
completed. Interest expense decreased 12% from 1994 to 1995. The decrease
resulted from a rate reduction due to the restructuring of the Company's secured
credit agreement, refinancing of Industrial Revenue Bonds and debt reduction
using cash generated from operating cash flow and the sale of assets.
INCOME TAX BENEFIT of approximately $4 million was generated in both 1996 and
1995 from a reduction in the valuation allowance placed on the Company's
deferred tax assets due to continuing improvement in operating results and the
outlook for sustained profitability. The Company recorded an alternative minimum
tax provision since it continues to be in a net operating loss carryforward
position.
DISCUSSION OF THE CONSOLIDATED BALANCE SHEET
- --------------------------------------------
THE CONSOLIDATED BALANCE SHEET shows Lamson & Sessions' financial position at
year end, compared to the previous year end. The statement provides information
to assist in assessing such factors as the Company's liquidity and financial
resources. The 1996 current ratio increased 13% to 1.8, mainly due to expanded
inventory levels at year end. The 1996 debt to equity ratio remained constant
compared to 1995 at approximately .9 to 1. Total debt increased over 40%, from
$29 million to $41 million, while equity increased 46% to over $45 million.
ACCOUNTS RECEIVABLE are primarily due from trade customers. Accounts Receivable
increased approximately $3 million in 1996 from 1995. Approximately half the
increase resulted from the Dimango acquisition.
INVENTORIES increased nearly $8 million in 1996 from 1995. The inventory
increase resulted primarily from a planned inventory build to support customers
during the Company's year end shutdown and the transition to new information
systems.
OTHER ASSETS increased $7 million in 1996 from 1995. The increase resulted from
a $4.3 million reduction in the Company's valuation allowance related to the
Company's deferred tax assets, and an increase in Patents and Goodwill.
LONG TERM DEBT increased $12 million during 1996. The revolving line of credit
was used to finance working capital needs, to fund a portion of capital
expenditures, and to acquire Dimango.
POST RETIREMENT BENEFITS AND OTHER LONG-TERM LIABILITIES decreased 7% from $29
million in 1995 to $27 million in 1996. The reduction related to improvements
made by the Company in the management and delivery of pension and retiree
medical benefits as well as a reduction in the assumed level of medical cost
inflation.
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<PAGE> 13
DISCUSSION OF THE CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------
THE CONSOLIDATED STATEMENTS OF CASH FLOWS show cash inflows and outflows from
the Company's operating, investing and financing activities. Cash and cash
equivalents decreased slightly at year end 1996 compared to 1995. Operating cash
flow decreased in 1996 compared to 1995 as a result of funding working capital
requirements.
CASH FLOWS FROM OPERATING ACTIVITIES - The Company generated nearly $9 million
in cash from operations in 1996, a decrease of $10 million from 1995. The
primary source of the operating cash decrease was $6 million from inventory
increases. The Company generated over $19 million in cash from operations in
1995, an increase of 405% over the prior year. The primary sources of the 1995
operating cash increase were the improvement in earnings from continuing
operations and nearly $5 million in cash flow from inventory reductions.
CASH FLOWS FROM INVESTING ACTIVITIES - The Company used $22 million for 1996
investing activities. The Company invested over $17 million in product and
process development programs and information technology and purchased Dimango.
The Company generated $3 million in cash flow from 1995 investing activities.
Cash receipts from the sale of a business unit exceeded the $11 million capital
expenditures made by the Company. 1995 purchases of plant, property and
equipment were targeted at reducing costs, providing efficiency in product
development and more effectively utilizing support functions.
CASH FLOWS FROM FINANCING ACTIVITIES - The Company provided $13 million of cash
flow from 1996 financing activities. The utilization of the revolving line of
credit was increased to cover the portion of 1996 investing activities not
covered by operating cash flow. The Company used over $22 million of cash flow
for 1995 financing activities. The Company retired $11 million in 14%
subordinated debt in 1995 and borrowings under the secured credit agreement were
reduced nearly $11 million.
Based upon the Company's past performance and current expectations, management
believes that internally generated cash flows and existing capacity under the
secured credit agreement are adequate to fund the Company's 1997 cash needs for
capital expenditures and general operating requirements.
OUTLOOK
- -------
The following paragraphs contain forward looking comments. These comments are
subject to, and the actual future results may be impacted by, the cautionary
limitations and factors outlined in the following narrative comments.
With the sale of its aerospace fastener business in the fourth quarter of 1995,
the Company completed its divestiture program and is focusing its business in
the four continuing business units. The Company's efforts are now directed at
continuing to improve growth in sales and earnings. These efforts include
pursuing internal growth opportunities such as the Company's investment in an
enhanced information technology system and the Company's continuous improvement
program. The Company is also pursuing and evaluating opportunities to grow
through acquisitions, such as the acquisition of Dimango. Based on a) current
estimates for 1997 construction spending, housing starts, interest rates and
retail spending, b) forecasts of general economic improvement and c) the
acquisition of Dimango, the Company expects to achieve continued sales and
earnings growth in 1997.
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<PAGE> 14
In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is providing the following cautionary
statements identifying factors that could cause the Company's actual results to
differ materially from those projected in forward-looking statements of the
Company made by, or on behalf of, the Company.
The statements made by the Company in its filings under the Exchange Act of
1934, as amended (the "Act"), its financial reporting and other forward-looking
comments are subject to certain risks and uncertainties that could cause actual
results to differ materially from those set forth in such forward-looking
statements. The risks that could cause actual results to differ materially
include, but are not limited to: (i) volatility of resin pricing, (ii) changes
in the pattern of construction spending in both the new construction, and repair
and rehabilitation markets, (iii) changes in the number and distribution of
housing starts, (iv) fluctuations in the interest rate affecting housing starts,
(v) unpredictable technological innovations that could make the Company's
products comparatively less attractive, (vi) changes in local, state and federal
regulations relating to building codes and the environment (in each case as they
may affect the attractiveness of the Company's products and manufacturing
costs), and (vii) a reversal in the country's general pattern of economic
improvement affecting the markets for the Company's products.
-14-
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF INCOME
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(In Thousands, except Per Share Data)
<TABLE>
<CAPTION>
Fiscal Years
-----------------------------------
1996 1995 1994
-----------------------------------
<S> <C> <C> <C>
Net sales $ 289,052 $ 299,166 $ 287,645
Cost of products sold 227,778 242,608 235,876
--------- --------- ---------
GROSS PROFIT 61,274 56,558 51,769
Selling, general and
administrative expenses 49,135 42,520 40,840
--------- --------- ---------
OPERATING INCOME 12,139 14,038 10,929
Interest (2,611) (5,864) (6,673)
--------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 9,528 8,174 4,256
Income Tax Benefit 4,100 3,900
--------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS 13,628 12,074 4,256
Loss from Discontinued Operations (9,930)
--------- --------- ---------
NET INCOME (LOSS) $ 13,628 $ 12,074 $ (5,674)
========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE
Continuing operations $ 1.00 $ 0.90 $ 0.32
Discontinued operations (0.75)
--------- --------- ---------
Net income (loss) $ 1.00 $ 0.90 $ (0.43)
========= ========= =========
AVERAGE COMMON SHARES 13,641 13,404 13,239
========= ========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
-15-
<PAGE> 16
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(Dollars in Thousands)
<TABLE>
<CAPTION>
FISCAL YEARS
--------------------------------
OPERATING ACTIVITIES 1996 1995 1994
--------------------------------
<S> <C> <C> <C>
Income from continuing operations $ 13,628 $ 12,074 $ 4,256
Adjustments to reconcile income from continuing
operations to cash provided by continuing operations:
Depreciation and amortization 8,770 8,758 8,544
Deferred income tax-benefit (4,300) (3,900)
Net change in working capital accounts:
Accounts receivable (1,551) (820) (719)
Inventories (5,818) 4,939 (2,857)
Prepaid expenses and other (166) (1,302) 589
Accounts payable, accrued expenses and other current
liabilities (476) (826) 1,200
Net change in other long-term items (1,290) 131 79
-------- -------- --------
CASH PROVIDED BY CONTINUING OPERATIONS 8,797 19,054 11,092
Loss from discontinued operations (9,930)
Adjustments to reconcile loss from discontinued operations to cash
used by discontinued operations:
Net change in assets held for sale (1,792)
Net change in other long-term items 4,403
--------
CASH USED BY DISCONTINUED OPERATIONS (7,319)
-------- -------- --------
CASH PROVIDED BY OPERATING ACTIVITIES 8,797 19,054 3,773
INVESTING ACTIVITIES
Purchase of business (5,427)
Net proceeds from sale of businesses 14,297 16,430
Net purchases of property, plant and equipment (16,771) (11,019) (6,074)
-------- -------- --------
CASH (USED) PROVIDED BY INVESTING ACTIVITIES (22,198) 3,278 10,356
FINANCING ACTIVITIES
Net borrowings under secured credit agreement 12,446 (10,903) (12,221)
Net change in long-term borrowings and capital lease obligations 232 (828) (1,484)
Retirement of subordinated debt (11,120)
Exercise of stock options 50 65 273
-------- -------- --------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES 12,728 (22,786) (13,432)
-------- -------- --------
(DECREASE) INCREASE IN CASH (673) (454) 697
Cash at beginning of year 1,431 1,885 1,188
-------- -------- --------
CASH AT END OF YEAR $ 758 $ 1,431 $ 1,885
======== ======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
-16-
<PAGE> 17
CONSOLIDATED BALANCE SHEET
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
December 28, 1996 and December 30, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
--------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 758 $ 1,431
Accounts receivable, less allowances;
1996--$2,895 and 1995--$2,129 36,626 34,028
Inventories:
Finished goods and work-in-process 38,824 30,491
Raw materials and supplies 3,998 4,527
-------- --------
42,822 35,018
Prepaid expenses and other 10,739 9,767
-------- --------
TOTAL CURRENT ASSETS 90,945 80,244
OTHER ASSETS 9,703 2,680
PROPERTY, PLANT AND EQUIPMENT
Land 3,751 3,751
Buildings 24,035 23,416
Machinery and equipment 86,151 83,962
-------- --------
113,937 111,129
Less allowances for depreciation
and amortization 53,464 59,382
-------- --------
60,473 51,747
-------- --------
TOTAL ASSETS $161,121 $134,671
======== ========
<FN>
See notes to consolidated financial statements.
</TABLE>
-17-
<PAGE> 18
CONSOLIDATED BALANCE SHEET
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
December 28, 1996 and December 30, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
----------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 19,084 $ 17,322
Accrued expenses and other liabilities 24,803 24,620
Taxes 3,643 3,875
Current maturities of long-term debt 4,376 3,767
--------- ---------
TOTAL CURRENT LIABILITIES 51,906 49,584
LONG-TERM DEBT 36,911 24,842
POST-RETIREMENT BENEFITS AND OTHER
LONG-TERM LIABILITIES 27,238 29,326
SHAREHOLDERS' EQUITY
Common shares, without par value, with stated
value of $.10 per share, authorized 20,000,000
shares; outstanding--13,301,084 shares in 1996
and 13,291,751 shares in 1995 1,330 1,329
Other capital 72,792 72,743
Retained earnings (deficit) (27,026) (40,654)
Pension adjustment (2,030) (2,499)
--------- ---------
45,066 30,919
--------- ---------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 161,121 $ 134,671
========= =========
<FN>
See notes to consolidated financial statements.
</TABLE>
-18-
<PAGE> 19
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(Dollars in Thousands)
<TABLE>
<CAPTION>
Retained Total
Common Other Earnings Pension Shareholders'
Shares Capital (Deficit) Adjustment Equity
-------- -------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $ 1,322 $ 72,412 (47,054) $(10,854) $15,826
Net Loss (5,674) (5,674)
Issuance of 58,750 common shares
under stock option plans 6 267 273
Pension adjustment 2,455 2,455
-------- -------- -------- -------- -------
Balance at December 31, 1994 $ 1,328 $ 72,679 $(52,728) $ (8,399) $12,880
Net Income 12,074 12,074
Issuance of 12,967 common shares
under stock option plans 1 64 65
Pension adjustment 5,900 5,900
-------- -------- -------- -------- -------
Balance at December 30, 1995 $ 1,329 $ 72,743 $(40,654) $ (2,499) $30,919
Net Income 13,628 13,628
Issuance of 9,333 common shares
under stock option plans 1 49 50
Pension adjustment 469 469
-------- -------- -------- -------- -------
Balance at December 28, 1996 $ 1,330 $ 72,792 $(27,026) $ (2,030) $45,066
======== ======== ======== ======== =======
<FN>
See notes to consolidated financial statements.
</TABLE>
-19-
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
Three fiscal years ended December 28, 1996
NOTE A--ACCOUNTING POLICIES
ORGANIZATION: The Company primarily is in one business segment and is engaged in
the manufacture and distribution of a broad line of thermoplastic electrical,
telecommunication and engineered sewer products. In addition, the Company
distributes a wide variety of consumer electrical wiring devices and a variety
of wireless electrical products. Products are sold primarily to national and
regional electrical distributors, power utilities, regional Bell operating
companies and other telecommunications providers, national and regional
retailers, and government and private builders of sewer and drainage systems.
Substantially all sales are made within North America. Sales to a single
customer totaled approximately 13% in 1996 and approximately 12% in 1995 and
1994.
FISCAL YEAR: The Company's fiscal year end is the Saturday closest to December
31.
PRINCIPLES OF CONSOLIDATION AND PRESENTATION: The consolidated financial
statements include the accounts of the Company and all domestic and foreign
subsidiaries after elimination of significant intercompany items and
transactions. Certain 1995 and 1994 items have been reclassified to conform with
1996 reporting classifications.
CASH AND CASH EQUIVALENTS: The Company considers all investments with an
original maturity of three months or less on their acquisition date to be cash
equivalents.
INVENTORIES: Inventories are valued at the lower of first-in, first-out (FIFO)
cost or market.
PROPERTY AND DEPRECIATION: Property, plant and equipment are recorded at cost.
For financial reporting purposes, depreciation and amortization are computed
principally by the straight-line method over the estimated useful lives of the
assets. Accelerated methods of depreciation are used for federal income tax
purposes.
INCOME TAXES: The Company accounts for income taxes using the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Investment tax credits are recorded using the flow-through
method.
EARNINGS (LOSS) PER COMMON SHARE: Earnings (loss) per common share are based on
the weighted average number of common shares and dilutive common share
equivalents outstanding during the year.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs consist of
company sponsored activities to develop new value-added products. Costs are
expensed as incurred. R&D expenditures were $4,000,000, $3,700,000, and
$3,400,000 in 1996, 1995 and 1994, respectively.
ADVERTISING EXPENDITURES: Advertising costs are expensed as incurred.
Advertising expenditures were $3,800,000, $3,200,000, and $2,100,000 for 1996,
1995 and 1994, respectively.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
-20-
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE B--LONG-TERM DEBT
Long-term debt consists of the following:
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Secured Credit Agreement:
Term $11,250 $14,250
Revolver 18,248 2,802
------- -------
29,498 17,052
Industrial Revenue Bonds 8,870 8,970
Building mortgage 2,332 2,587
Other 587
------- -------
41,287 28,609
Less amounts classified as current 4,376 3,767
------- -------
$36,911 $24,842
======= =======
</TABLE>
The Company's long-term $65,000,000 secured credit agreement was refinanced
effective July 14, 1995. The agreement is secured by the Company's accounts
receivable, inventory, and property, plant and equipment. The agreement consists
of both term and revolving credit facilities with interest variable on both
portions. The rate paid varies based on the Company's financial performance and
the pricing option chosen. Borrowings under this agreement carry interest based
on any of three pricing options (prime rate, LIBOR or commercial paper) plus the
applicable spread. Interest is paid in accordance with the maturity of the
pricing option selected. The term portion of this facility carried interest at
2.75% over the commercial paper rate (8.3%) at December 28, 1996 and requires
principal payments of $750,000 due the last day of each calendar quarter. The
remaining revolving credit portion permits borrowings up to $50,000,000 at any
time through December 31, 1999 and carries an average variable rate of 8.0% at
December 28, 1996. The agreement provides for the payment of a commitment fee on
the revolving line of credit of .375% per annum on the average daily unused
commitment. In addition to amounts borrowed, letters of credit related to
Industrial Revenue Bond financings and other contractual obligations total
approximately $12,800,000 under the agreement.
The Company's Industrial Revenue Bond financings include several issues due in
annual installments from 1997 through 2023 with interest at variable rates. The
weighted average rate for these bonds in December 1996 was 3.8%. The Company
maintains a letter of credit related to one of the Industrial Revenue Bonds for
approximately $1,900,000 with a local bank. The Company's headquarters facility
is subject to a mortgage payable in equal monthly installments through 2003 with
interest at 8.625%.
-21-
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE B--LONG-TERM DEBT--Continued
The Company's credit agreements contain various restrictive covenants pertaining
to maintenance of debt service, tangible net worth and certain other financial
ratios.
The aggregate minimum combined maturities of long-term debt for the years 1998
through 2001 are approximately $3,740,000, $23,614,000, $888,000 and $968,000,
respectively, with $7,701,000 due thereafter.
Interest expense includes $471,000, $803,000, and $850,000 for amortization of
deferred financing cost in 1996, 1995 and 1994, respectively. Interest
capitalized was $417,000 and $100,000 in 1996 and 1995, respectively. No
interest was capitalized in 1994. Interest paid was $2,647,000, $6,069,000, and
$6,847,000 in 1996, 1995 and 1994, respectively.
Rental expense related to operating leases was $3,699,000, $3,470,000, and
$3,015,000 in 1996, 1995 and 1994, respectively. Aggregate future minimum
payments related to operating leases with initial or remaining terms of one year
or more for the years 1997 through 2001 and thereafter are $2,368,000,
$1,516,000, $1,038,000, $787,000 and $441,000, respectively.
NOTE C--DISCONTINUED OPERATIONS
The results of discontinued operations are reflected on a restated basis as
follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
1994
----------
<S> <C>
Net Sales $ 23,337
==========
Loss from Operations $ 1,030
Loss on Disposal 8,900
----------
$ 9,930
==========
</TABLE>
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 1994 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.
-22-
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE D--PENSION PLANS
The Company sponsors defined benefit pension and defined contribution savings
plans covering substantially all employees. Plans covering salaried employees
provide benefits that are based on an employee's years of service and
compensation during the five-year period prior to retirement. Plans covering
hourly employees provide benefits of stated amounts for each year of service.
The Company annually contributes amounts to the plans which are actuarially
determined to provide sufficient assets to meet future benefit payment
requirements.
Pension expense from continuing operations is comprised of the following:
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Benefits earned $ 930 $ 1,091 $ 1,694
Interest on projected
benefit obligations 5,574 5,866 5,781
Actual return on assets (9,572) (7,799) (1,917)
Net amortization and deferral 3,889 2,546 (3,310)
Curtailment loss/(gain) 103 (759)
Defined contribution and other plans 772 800 813
------- ------- -------
$ 1,696 $ 1,745 $ 3,061
======= ======= =======
</TABLE>
The following table summarizes the funded status of the Company's defined
benefit pension plans and the related amounts recognized in the Company's
consolidated statement of financial position:
<TABLE>
<CAPTION>
1996 1995
STATUS OF PLANS STATUS OF PLANS
------------------- -------------------
(Dollars in Thousands) ASSETS BENEFITS ASSETS BENEFITS
EXCEED EXCEED EXCEED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Actuarial present
value of benefit
obligations:
Vested benefit
obligations $ 37,971 $ 35,133 $ 38,665 $ 36,221
======== ======== ======== ========
Accumulated benefit
obligations $ 38,637 $ 35,385 $ 39,190 $ 36,253
======== ======== ======== ========
Plan assets at fair
value $ 44,719 $ 26,691 $ 40,977 $ 26,709
Projected benefit
obligations (41,116) (35,785) (42,285) (36,671)
-------- -------- -------- --------
Plan assets in excess
of (less than)
projected benefit
obligations 3,603 (9,094) (1,308) (9,962)
Unrecognized prior service cost (58) 500 (55) 574
Unrecognized net loss 6,739 3,161 10,960 3,690
Unrecognized initial
net asset (1,424) (201) (1,566) (170)
Minimum liability (3,059) (3,677)
-------- -------- -------- --------
Pension assets
(liabilities) $ 8,860 $ (8,693) $ 8,031 $ (9,545)
======== ======== ======== ========
</TABLE>
-23-
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE D--PENSION PLANS--Continued
Accrued expenses and other liabilities include the current portion of pension
liabilities of $341,000 and $2,100,000 in 1996 and 1995, respectively. The
discount rates used in determining pension expense were 7.4%, 8.0%, and 7.25% in
1996, 1995 and 1994, respectively. The discount rates used for funded status
information were 7.4% in 1996 and 1995. The long-term rates of return on assets
used in determining the funded status information were 9.5% in 1996 and 1995.
Plan assets consist primarily of fixed income and equity marketable securities,
including Company securities with a fair market value at December 28, 1996 of
$2,992,000. The salary progression assumption used in determining the funded
status information was 5% in each year.
NOTE E--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides health care and life insurance benefits for certain of its
retired employees. The Company accrues the estimated cost of retiree benefit
payments, other than pensions, during the employees' active service period. The
Company funds these benefit costs on a pay-as-you-go basis, with the retiree, in
most instances, paying a portion of the costs.
Summary information for the Company's plans is as follows:
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
------- --------
Accumulated Postretirement Benefit Obligation (APBO):
<S> <C> <C>
Retirees $12,877 $14,150
Active participants eligible to receive
benefits 898 1,330
Other active plan participants 2,246 3,762
------- -------
Total APBO 16,021 19,242
Unamortized gain 6,541 3,182
------- -------
22,562 22,424
Less: current portion 1,800 1,800
------- -------
$20,762 $20,624
======= =======
</TABLE>
The decrease in APBO is principally due to the reduction in the assumed health
care cost trend rate. In addition, the Company remains contingently liable for
postretirement benefits of certain businesses previously sold.
-24-
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE E--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS--Continued
The components of periodic postretirement benefit cost reflected in continuing
operations are as follows:
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Benefits earned $ 279 $ 479 $ 698
Interest on postretirement benefit obligation 1,092 1,396 1,806
Amortization of unrecognized net gain (252)
------- ------ ------
$ 1,119 $1,875 $2,504
======= ====== ======
</TABLE>
The discount rate used in determining the APBO was 7.0% in 1996 and 1995. The
assumed health care cost trend rate used in measuring the APBO was an average of
10% in 1996 and 11% in 1995, declining to an ultimate rate of 5.5% in 2007 and
thereafter.
If the health care cost trend rate assumptions were increased by 1%, the APBO as
of December 28, 1996 would increase by 9.8%. The effect of this change on
periodic postretirement benefit cost for 1996 would be an increase of 16.4%, or
approximately $183,000.
-25-
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE F--LITIGATION
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.
NOTE G--PREFERRED AND PREFERENCE STOCK
The Company has authorized 1,200,000 and 3,000,000 shares of Serial Preferred
and Preference Stock, respectively, none of which is issued or outstanding at
December 28, 1996.
The Company has reserved for issuance 200,000 shares of Cumulative Redeemable
Serial Preference Stock, Series II, without par value, which is part of purchase
rights related to each outstanding common share. None of these shares were
issued in 1996 or 1995. The right associated with each common share entitles its
holder to purchase from the Company or acquiring company, one one-hundredth of a
share of preference stock at a price of $47 which is subject to adjustment. The
rights become exercisable only if a person or group acquires beneficial
ownership of 15% or more of the Company's common shares or takes certain other
actions. In any such event, a 15% or more owner is prohibited from exercising
the rights. When exercisable, the rights entitle each holder to purchase,
according to the agreement, either the Company's common shares or stock in the
acquiring entity worth twice the value of the then applicable purchase price.
Under certain circumstances, the Company has the authority to exchange each
right for one common share without payment required. Unless otherwise extended,
the Company may redeem the rights in their entirety, at a price of one cent per
right, at any time until the tenth calendar day following any public
announcement that beneficial ownership of 15% or more has occurred in the
Company's common shares, or upon certain other events, including Board of
Directors approval of a merger. The rights expire on September 7, 1998.
-26-
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE H--STOCK COMPENSATION PLANS
At December 28, 1996, the Company has three fixed stock-based compensation
plans. Under the 1994 Nonemployee Directors Stock Option Plan, the Company is
authorized to issue 60,000 non-qualified stock options. The options become
exercisable one year after date of grant and expire at the end of ten years.
Under the 1988 Incentive Equity Performance Plan, the Company is authorized to
issue 1,800,000 incentive stock options (ISO's), non-qualified stock options,
stock appreciation rights (SAR's), and restricted or deferred stock. Options
generally become exercisable, in part, one year after date of grant and expire
at the end of ten years. At December 28, 1996, under both plans, a total of
643,900 options were available for future grant. Options outstanding under the
1978 Non-Qualified Incentive Stock Option Plan have been granted for the
purchase of common shares. Options under the 1978 Plan will expire at the end of
ten years from the date of grant. No options are available for future grant
under the 1978 Plan.
The Company applies Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees" and related Interpretations in accounting for its
stock-based plans. Accordingly, no compensation cost has been recognized for the
fixed stock option plans. Had compensation cost for the Company's three
stock-based compensation plans, for options granted in 1996 and 1995, been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
(Dollars in Thousands, except Per Share Data)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C> <C>
Net income As reported $ 13,628 $ 12,074
Pro forma 13,383 11,821
Primary earnings per share As reported $ 1.00 $ 0.90
Pro forma 0.98 0.88
</TABLE>
For pro forma calculations, the fair value of each option grant is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1996 and 1995:
expected volatility of .304 percent, expected life of 5 years and risk-free
interest rate of 6.0 percent for issued options.
-27-
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE H--STOCK COMPENSATION PLANS--Continued
A summary of the status of the Company's three stock option plans as of December
28, 1996 and December 30, 1995 and changes during the respective years then
ended is presented below:
<TABLE>
<CAPTION>
(Shares in Thousands)
1996 1995
------------------------------- ------------------------------
Weighted- Weighted-
Average Average
Shares Exercise Price Shares Exercise Price
---------- ----------------- ---------- -----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 933 $ 6.04 726 $ 6.12
Granted 229 8.76 235 5.91
Exercised (9) 5.29 (13) 5.01
Forfeited (13) 7.60 (15) 8.22
------ ------- ---- -------
Outstanding at end of year 1,140 $ 6.58 933 $ 6.04
Options exercisable at year-end 896 478
Weighted-average fair value of
options granted during the year $ 3.32 $ 2.24
</TABLE>
The following table summarizes information about options outstanding at December
28, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------- ------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 12/31/96 Contractual Life (Yrs) Exercise Price at 12/31/96 Exercise Price
--------------- ----------- ---------------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 0-5 191,100 3.94 $ 4.42 191,100 $ 4.42
5-10 902,400 7.17 6.75 677,150 6.21
10-15 47,000 5.01 12.14 28,000 12.94
</TABLE>
-28-
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE I--INCOME TAXES
The Company has provided for income taxes (benefit) as follows:
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
Current:
<S> <C> <C>
Federal $ 200 $ 0
------- -------
200 0
Deferred (4,300) (3,900)
------- -------
$(4,100) $(3,900)
======= =======
</TABLE>
A deferred federal tax benefit of $4,300,000 and $3,900,000 was recorded in 1996
and 1995, respectively. No income tax benefit or expense was recorded in 1994.
The Company has available net operating loss carryforwards totaling
approximately $33 million which expire in the years 2003 to 2008. The Company
also has available general business tax credit carryforwards of $1.8 million
which expire through 2011 and alternative minimum tax credit carryforwards of
approximately $1 million which may be carried forward indefinitely.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities are presented below:
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 11,500 $ 12,600
Other accruals, credits and reserves 9,100 8,900
General business and alternative minimum tax 2,700 2,700
credits
Postretirement benefits other than pensions 7,600 7,900
-------- --------
30,900 32,100
Less: valuation allowance (16,900) (23,500)
-------- --------
Total net deferred tax assets 14,000 8,600
Deferred tax liabilities:
Tax in excess of book depreciation 5,500 4,300
Pensions 300 400
-------- --------
Total deferred tax liabilities 5,800 4,700
-------- --------
$ 8,200 $ 3,900
======== ========
</TABLE>
-29-
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE I -- INCOME TAXES -- Continued
The valuation allowance for net deferred tax assets decreased by $6,600,000 in
1996 and $6,500,000 in 1995. The reduction was the result of net changes in
temporary differences and the reversal of $4,300,000 in 1996 and $3,900,000 in
1995 of valuation allowance based on improved operating results for 1996 and
1995 and projected operating results for 1997.
The provision for income taxes is different than the amount computed using the
applicable statutory federal income tax rate with the differences summarized
below:
(Dollars in Thousands)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Tax expense (benefit) at statutory rates $ 3,335 $ 2,849 $(1,995)
Adjustment due to:
Change in valuation allowance (6,600) (6,500) 1,964
Other (835) (249) 31
------- ------- -------
$(4,100) $(3,900) $ -0-
======= ======= =======
</TABLE>
Income taxes paid in 1996 and 1995 were $282,000 and $26,000 respectively. In
1994, the Company received an income tax refund of $201,000.
NOTE J--ACQUISITION/DISPOSITION OF BUSINESSES
In October 1996, the Company acquired all the outstanding shares of Dimango
Products Corporation for $5.4 million (including the assumption of debt). The
results of operations for Dimango from the date of acquisition are included in
the Company's consolidated statement of income.
In November 1995, the Company sold its aerospace fastener business for
approximately $11,700,000. Net sales for 1995 through the sale date and 1994
were $18,951,000 and $18,838,000, respectively. Operating results, corporate
costs to prepare the business for sale, and anticipated future costs related to
the business resulted in losses of approximately $3,000,000 in 1995 and
$4,000,000 in 1994, respectively.
-30-
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(Dollars in Thousands, except Per Share Data)
NOTE K--SUMMARY OF QUARTERLY RESULTS OF OPERATIONS--(UNAUDITED)
<TABLE>
<CAPTION>
Earnings Market
Per Price Per
Net Gross Net Common Share
Sales Profit Income Share High Low
-------- ------- ------- -------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Fiscal 1996:
First quarter $ 63,978 $13,838 $ 2,012 $ 0.15 9-1/4 7-5/8
Second quarter 77,405 16,426 3,603 0.26 13-1/2 9-1/4
Third quarter 78,098 15,822 4,122 0.30 12-1/8 8-1/4
Fourth quarter 69,571 15,188 3,891 0.29 8-7/8 6-7/8
-------- ------- ------- --------
TOTALS $289,052 $61,274 $13,628 $ 1.00
======== ======= ======= ========
Fiscal 1995:
First quarter $ 68,402 $12,299 $ 825 $ 0.06 6-5/8 5-1/4
Second quarter 75,466 15,321 2,511 0.19 6-3/4 5-1/2
Third quarter 85,716 16,727 3,352 0.25 7-3/8 5-3/8
Fourth quarter 69,582 12,211 5,386 0.40 8 6
-------- ------- ------- --------
TOTALS $299,166 $56,558 $12,074 $ 0.90
======== ======= ======= ========
</TABLE>
-31-
<PAGE> 32
REPORT OF INDEPENDENT AUDITORS
- ------------------------------
Board of Directors and Shareholders
The Lamson & Sessions Co.
We have audited the accompanying consolidated balance sheet of The Lamson &
Sessions Co. and Subsidiaries as of December 28, 1996 and December 30, 1995, and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the three fiscal years in the period ended December 28, 1996.
Our audits also included the financial statement schedule listed in the Index at
Item 14 (a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Lamson & Sessions Co. and Subsidiaries at December 28, 1996 and December 30,
1995, and the consolidated results of their operations and their cash flows for
each of the three fiscal years in the period ended December 28, 1996, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
Ernst & Young LLP
Cleveland, Ohio
January 23, 1997
-32-
<PAGE> 33
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
----------------------------------------
We have prepared the financial statements and other financial information
contained in this Annual Report.
The management of Lamson & Sessions is primarily responsible for the integrity
of this financial information. The financial statements were prepared in
accordance with generally accepted accounting principles and necessarily include
certain amounts based on management's reasonable best estimates and judgments,
giving due consideration to materiality. Financial information contained
elsewhere in this annual report is consistent with that contained in the
financial statements.
Management is responsible for establishing and maintaining a system of internal
control designed to provide reasonable assurance as to the integrity and
reliability of financial reporting. The concept of reasonable assurance is based
on the recognition that there are inherent limitations in all systems of
internal control, and that the cost of such systems should not exceed the
benefits to be derived therefrom.
To meet management's responsibility for financial reporting, we have established
internal control systems which we believe are adequate to provide reasonable
assurance that our assets are protected from loss. These systems produce data
used for the preparation of published financial information and provide for
appropriate reporting relationships and division of responsibility. All
significant systems and controls are reviewed periodically by our internal
auditors in order to ensure compliance, and by our independent auditors to
support their audit work. It is management's policy to implement a high
proportion of recommendations resulting from these reviews.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets regularly with management, internal auditors, and our
independent auditors to review accounting, auditing and financial matters. Both
the independent auditors and the internal auditors have free access to the Audit
Committee, with or without management, to discuss the scope and results of their
audits and the adequacy of the system of internal controls.
/s/ John B. Schulze
- ----------------------------------
John B. Schulze
Chairman of the Board, President and
Chief Executive Officer
/s/ James J. Abel
- ----------------------------------
James J. Abel
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
-33-
<PAGE> 34
PART II
Item 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
Item 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors
The information set forth under the caption "Election of Directors" in the
Company's definitive proxy statement for its annual meeting of shareholders
to be held April 25, 1997 is hereby incorporated by reference.
(b) Executive Officers - See Part I
(c) Compliance with Section 16 (a) of the Exchange Act.
The information set forth in the last paragraph under caption "Election of
Directors" in the Company's definitive proxy statement for its annual
meeting of shareholders to be held April 25, 1997 is hereby incorporated by
reference.
Item 11. - EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in the
Company's definitive proxy statement for its annual meeting of shareholders to
be held April 25, 1997 is hereby incorporated by reference.
Item 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the captions "Ownership of the Company's Common
Shares," "Election of Directors" and "Security Ownership of Management" in the
Company's definitive proxy statement for its annual meeting of shareholders to
be held April 25, 1997 is hereby incorporated by reference.
Item 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
None.
-34-
<PAGE> 35
PART IV
Item 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
Consolidated financial statements of The Lamson & Sessions Co. and
Subsidiaries are included in Item 8 of this report:
1. Financial Statements
Consolidated Statements of Income for Fiscal Years Ended 1996, 1995
and 1994.
Consolidated Statements of Cash Flows for Fiscal Years Ended 1996,
1995 and 1994.
Consolidated Balance Sheet at December 28, 1996 and December 30, 1995.
Consolidated Statements of Shareholders' Equity for Fiscal Years Ended
1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts and Reserves.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions or are
inapplicable and, therefore, have been omitted.
3. The exhibits listed in the accompanying Exhibit Index and required by
Item 601 of Regulation S-K (numbered in accordance with Item 601 of
Regulation S-K) are filed or incorporated by reference as part of this
Report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three months ended December
28, 1996.
(c) Exhibits - See 14(a) 3.
-35-
<PAGE> 36
(d) Financial Statement Schedules
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
(Dollars in Thousands)
- -------------------------------------------------------------------------------------------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
DESCRIPTION PERIOD EXPENSES DEDUCTIONS PERIOD
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 28, 1996
Allowances deducted from assets:
Trade receivable allowances $2,129 $ 1,314 $ 548 (B)$2,895
Inventory obsolescence reserve 933 360 687 (C) 606
Other current and long-term assets 2,757 535 (E) 2,222
Accounts and loss reserves included in
current and long-term liabilities 6,423 977 (F) 5,446
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 30, 1995
Allowances deducted from assets:
Trade receivable allowances $1,653 $ 1,528 $1,052 (B)$2,129
Inventory obsolescence reserve 1,030 360 457 (C) 933
Other current and long-term assets 6,866 612 4,721 (E) 2,757
Accounts and loss reserves included in
current and long-term liabilities 7,909 1,486 (F) 6,423
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
Allowances deducted from assets:
Trade receivable allowances $1,559 $ 805 $ 711 (B)$1,653
Inventory obsolescence reserve 1,703 464 1,137 (C) 1,030
Other Assets 3,452 (3,414) (D) 6,866
Accounts and loss reserves included in
current and long-term liabilities 3,027 8,950 (A)4,068 (A) 7,909
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Note A - Provision for discontinued operations, costs relating to sales of
businesses and non-recurring charges. Note B - Principally write-off
of uncollectible accounts and disputed items, net of recoveries.
Note C - Principally the disposal of obsolete inventory. Note D - Adjustment to
provisions for previously sold business.
Note E - Adjustment to reserves and collection of note receivable for previously
sold businesses.
Note F - Principally payments on contractual obligations for previously sold
businesses.
-36-
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf of the undersigned, thereunto duly authorized, on this 7th day of March
1997.
THE LAMSON & SESSIONS CO.
By /s/ James J. Abel
-------------------------------------------
James J. Abel
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated as of March 7, 1997.
Signature Title
/s/ John B. Schulze Chairman of the Board, President
- --------------------------------- and Chief Executive Officer
John B. Schulze (Principal Executive Officer)
/s/ James J. Abel Executive Vice President, Secretary,
- --------------------------------- Treasurer and Chief Financial Officer
James J. Abel (Principal Financial Officer and
Principal Accounting Officer)
/s/ Francis H. Beam, Jr.* Director
- ---------------------------------
Francis H. Beam, Jr.
/s/ Leigh Carter* Director
- ---------------------------------
Leigh Carter
-37-
<PAGE> 38
/s/ Martin J. Cleary* Director
- ---------------------------------
Martin J. Cleary
/s/ William H. Coquillette* Director
- ---------------------------------
William H. Coquillette
/s/ John C. Dannemiller* Director
- ---------------------------------
John C. Dannemiller
/s/ George R. Hill* Director
- ---------------------------------
George R. Hill
/s/ A. Malachi Mixon III* Director
- ---------------------------------
A. Malachi Mixon III
/s/ John C. Morley* Director
- ---------------------------------
John C. Morley
/s/ D. Van Skilling* Director
- ---------------------------------
D. Van Skilling
* The undersigned, by signing his name hereto, does sign and execute this
Annual Report on Form 10-K pursuant to a Power of Attorney executed on
behalf of the above named directors of The Lamson & Sessions Co. and filed
herewith as Exhibit 24 on behalf of The Lamson & Sessions Co. and each such
person.
March 7, 1997
By /s/ James J. Abel
----------------------------------
James J. Abel, Attorney-in-fact
-38-
<PAGE> 39
EXHIBIT INDEX
EXHIBIT NO.
- -----------
Management Contracts and Compensatory Plans are identified with an asterisk (*).
3(a) Amended Articles of Incorporation of the Company (incorporated by
reference to Exhibit 1 to the Company's Registration Statement on
Form 8-A filed with the Securities and Exchange Commission on June
1, 1989).
3(b) Amended Code of Regulations of the Company (incorporated by
reference to Exhibit 3(b) to the Company's Annual Report on Form
10-K for the year December 31, 1994).
4(a) Specimen Certificate of Common Shares, without par value with Rights
legend (incorporated by reference to Exhibit 3 to the Company's
Registration Statement on Form 8-A filed with the Securities and
Exchange Commission on June 1, 1989).
4(e) Form of Rights Certificate (incorporated by reference to Exhibit
4(oo) to the Company's Registration Statement on Form 8-A filed with
the Securities and Exchange Commission on August 25, 1988).
4(g) Rights Agreement, amended and restated as of February 14, 1990, by
and between the Company and National City Bank (incorporated by
reference to Exhibit 4(g) to the Company's Annual Report on Form
10-K for the year ended December 30, 1995).
* 10(a) 1988 Incentive Equity Performance Plan (as amended on
September 22, 1988, February 23, 1989, December 20, 1990 and
April 24, 1992) (incorporated by reference to Exhibit 28 of the
Company's Registration Statement on Form S-8 and Form S-3
(Registration No. 33-54732) filed with the Securities and
Exchange Commission on November 20, 1992).
* 10(b) Form of Three-Year Employment Agreement between the Company and
certain executive officers (incorporated by reference to Exhibit
10(b) to the Company's Annual Report on Form 10-K for the year ended
December 30, 1995).
-39-
<PAGE> 40
* 10(c) Form of Two-Year Employment Agreement between the Company and
certain executive officers (incorporated by reference to Exhibit
10(c) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
* 10(d) Corporate Officers Incentive Compensation Plan (incorporated
by reference to Exhibit 10(d) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
* 10(e) Form of Amended and Restated Supplemental Executive Retirement
Agreement dated as of March 20, 1990 between the Company and certain
of its executive officers (incorporated by reference to Exhibit
10(e) to the Company's Annual Report on Form 10-K for the year ended
December 30, 1995).
* 10(f) The Company's Deferred Compensation Plan for Nonemployee
Directors (incorporated by reference to the Company's Registration
Statement, on Form S-8 (Registration No. 33-12585) filed with the
Securities and Exchange Commission on September 24, 1996).
* 10(g) Form of Indemnification Agreement between the Company and the
Directors and certain officers (incorporated by reference to Exhibit
10(g) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
* 10(h) The Company's Long Term Incentive Plan filed herewith.
10(j) Mortgage and Security Agreement, dated October 29, 1993, between The
Lamson & Sessions Co. and PFL Life Insurance Company (incorporated
herein by reference to Exhibit 10(j) to the Company's Annual Report
on Form 10-K for the year ended January 1, 1994).
10(k) Asset Purchase Agreement between Iochpe-Maxion Ohio, Inc. and
The Lamson & Sessions Co. dated as of May 4, 1994 (incorporated by
reference to Exhibit 10 to the Company's Current Report on Form
8-K dated as of May 27, 1994).
10(s) Amended and Restated Loan Agreement dated as of July 14, 1995 by and
between the Company and General Electric Capital Corporation
(incorporated by reference to Exhibit 10(g) to the Company's
Quarterly Report on Form 10-Q for the period ended July 1, 1995, the
"GECC Loan Agreement").
-40-
<PAGE> 41
10(t) Amendment No. 1 dated as of October 30, 1995, to the GECC Loan
Agreement (incorporated by reference to Exhibit 10(t) to the
Company's Annual Report on Form 10-K for the year ended December
30, 1995).
10(u) Amendment No. 2 and Consent dated as of November 8, 1995 to the
GECC Loan Agreement (incorporated by reference to Exhibit 10(u)
to the Company's Annual Report on Form 10-K for the year ended
December 30, 1995).
10(v) Amendment No. 3 dated as of March 31, 1996, to the GECC Loan
Agreement (incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the period ended March 30, 1996).
10(w) Amendment No. 4 dated as of October 25, 1996, to the GECC Loan
Agreement (incorporated by reference to Exhibit 10(w) to the
Company's Quarterly Report on Form 10-Q for the period ended
September 28, 1996).
10(y) Amendment No. 5 dated as of March 5, 1997, to the GECC
Loan Agreement, filed herewith.
* 10(z) The Company's Nonemployee Director Stock Option Plan
(incorporated by reference to the Company's Registration Statement
on Form S-8 (Registration No. 33-62443) filed with the Securities
and Exchange Commission on September 8, 1995).
11 Computation of Earnings Per Common Share filed herewith.
21 Subsidiaries of the Registrant filed herewith.
23 Consent of Independent Accountants filed herewith.
24 Powers of Attorney filed herewith.
27 Financial Data Schedule (Submitted for the SEC's Information)
filed herewith.
-41-
<PAGE> 1
Exhibit 10(h)
THE LAMSON & SESSIONS CO.
LONG-TERM INCENTIVE PLAN
1. PURPOSE
-------
The purpose of the Long-Term Incentive Plan (the "Plan") is to
promote the interests of the stockholders by furthering the long-term
performance of the Lamson & Sessions Co. (the "Company"). The Plan
provides for long-term incentives to be granted to those key
executives who have a critical impact on the long-term performance of
the Company, contingent upon the meeting of strategic goals which are
determined by the Compensation and Organization Committee of the
Board of Directors of the Company ("Committee"). The Plan is intended
to facilitate the securing and retaining of outstanding key
executives and motivate those key executives to achieve above average
objectives by providing rewards for those who contribute
significantly to the long-term performance of the Company.
2. ADMINISTRATION
--------------
The Plan is to be administered by the Committee. The Committee shall
have full power and authority to construe, interpret and administer
the Plan. All decisions, actions or interpretations of the Committee
shall be final, conclusive and binding on all parties.
In addition, the Committee shall, subject to the provisions of the
Plan, grant performance units ("Units"), determine the assigned value
of each Unit, determine the key executives to whom Units will be
granted and the number granted to each, determine the time that Units
will be granted and when they will be payable and determine and set
out the performance objectives for each Unit granted.
3. DESCRIPTION OF THE PLAN
-----------------------
The Plan is a performance plan which provides for the granting of
Units to key executives having a critical impact on the long-term
performance of the Company. It is anticipated that the Units will be
granted annually, for a Performance Period ("Period") of three years.
A Unit target value will be established and the key employees and the
number of units to be granted will be determined by the Committee.
Also, at this time the Committee will establish the financial
performance objective. Initially, performance objective attainment of
75% to 125% and above will earn payments of between 50% and 150% of
the target Unit value for that period. However, the Committee, in its
sole discretion, may alter the ratio or establish a different
1
<PAGE> 2
relationship between performance objectives and Unit payments.
4. PARTICIPATION
-------------
Participation in the Plan shall be limited to those key employees of
the Company and its subsidiaries selected by the Committee.
5. AWARDS OF PERFORMANCE UNITS
---------------------------
(a) Awards will be made in Units, the value of which will be
determined by the Committee, usually during the first
quarter of the first year of each Period. The Units will be
payable upon the achievement of performance objectives as
provided in Section 6 below.
(b) Grants will be made annually and each grant of Units will
have a three year Period. The Period for grants in prior or
subsequent years may overlap for key executives and each
Period Unit award may be subject to different financial
objectives. The Committee shall determine the number of
Units to be granted to each key executive at the beginning
of each Period. The Committee shall make awards to such key
executives and in such amounts as it solely shall determine.
The Committee, subject to the provisions of the Plan, may
receive recommendations and establish such guidelines as it
in its sole discretion shall determine.
5. PERFORMANCE OBJECTIVES
----------------------
(a) The financial performance objective or objectives
("Performance Objectives") applicable to participants for
each Period shall be determined by the Committee. In
determining the minimum, principal and maximum Performance
Objectives the Committee may use such measure or measures of
performance of the Company over the Period as it in its sole
discretion may select provided, however, that the market
price of the Company's equity securities shall not be used
as any such measure. Earnings per share, net income,
operating income or other financial determinants used in
Performance Objectives may be adjusted as provided in
Section 7 below.
(b) Attainment of the principal Performance Objective will
result in the Unit having 100% of its target
2
<PAGE> 3
value and failure to meet the minimum Performance Objective
will result in the Unit having no value to the participant.
Actual value of the Units will be determined at the end of
the three year Period. Initially, attainment of 75% to 125%
inclusive, or more, of the Performance Objective will result
in the Unit having the proportional value of 50% to 150% of
the Unit's target value. Stated differently, attainment of
75% of the Performance Objective results in a Unit having
50% of its target value and each percentage point increase
in attainment will increase the percentage of target value
by 2%. Thus, a 76% attainment results in a 52% Unit value,
80% attainment results in a 60% Unit value and so on.
Failure to meet 75% of the Performance Objective results in
a Unit having no value to the Participant. See Attachment
(a) for examples. The Committee in its sole discretion may
alter the ratio or establish a different relationship at any
time or from time to time of Performance Objective
attainment to the Unit payout value.
No interest shall be payable to any person upon any Unit
grant or installment thereof, whether contingent or
otherwise.
7. DETERMINATION OF UNIT VALUES AT END OF PERFORMANCE PERIOD
---------------------------------------------------------
The Committee will determine the value of Units at the end of each
Period based on the Unit target value and the attainment of the
Performance Objectives established at the beginning of the Period.
The Committee may adjust the Performance Objective at any time when
it deems such action is warranted by material and extraordinary
events such as acquisitions, material dispositions, material changes
in accounting practices, or other material changes not anticipated
when the Performance Objectives were established.
8. PAYMENTS
--------
The value of the Units shall be paid in cash within 75 days
following the end of the Period. The award earned and payable to the
Participant for each Period shall be equal to the value of a Unit for
a Period as established in Sections 5(b) and 7 above, multiplied by
the number of Units granted to a participant at the beginning of that
Period.
3
<PAGE> 4
9. TERMINATIONS
------------
If a participant should die; retire, as defined in the Company's
Salaried Employees' Retirement Plan (or the pension plan of a
subsidiary or operating unit if employed by a subsidiary or operating
unit); or become totally and permanently disabled, determined on the
basis of medical evidence satisfactory to the Committee during the
Period, the participant will receive a pro-rata portion of the award
payable upon completion of the Period. The pro-rata payment will be
based on the actual months of completed service by the Participant
during the Period. A participant who resigns or is terminated during
the Period shall forfeit the Unit award.
10. CHANGE IN CONTROL
-----------------
(a) In the event of:
(x) a "Change of Control" as defined in Section
10(b) or
(y) a "Potential Change in Control" as defined
in Section 10(c)
any or all Units outstanding on the date that such
Change in Control or Potential Change in Control is
determined to have occurred shall become fully
exercisable and vested as if Performance Objectives
had been attained 125%.
(b) For purposes of Section 10(a), a "Change in Control"
means the happening of any of the following:
(i) The Company is merged or consolidated or
reorganized into or with another corporation
or other legal person, as a result of such
merger, consolidation or reorganization less
than a majority of the combined voting power
of the then-outstanding securities of such
corporation or person immediately after such
transaction are held in the aggregate by the
holders of Voting Stock (as that term is
hereafter defined) of the Company
immediately prior to that transaction;
(ii) The Company sells or otherwise transfers all
or substantially all of its assets to any
other corporation or other legal person, and
less than a majority of the combined voting
power of the then-outstanding securities of
4
<PAGE> 5
such corporation or person immediately after
such sale or transfer is held in the
aggregate by the holders of Voting Stock of
the Company immediately prior to such sale
or transfer;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule,
form or report), each as promulgated
pursuant to the Securities and Exchange Act
(the "Exchange Act"), disclosing that any
person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act has become the beneficial owner
(as the term "beneficial owner" is defined
under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange
Act) of securities representing 15% or more
of the combined voting power of the
then-outstanding securities entitled to vote
generally in the election of directors of
the Company ("Voting Stock");
(iv) The Company files any report, proxy
statement or other document with the
Securities and Exchange Commission pursuant
to the Exchange Act or any rules or
regulations presently in effect or hereafter
promulgated under such Act disclosing that a
Change in Control of the Company has or may
have occurred or will or may occur in the
future pursuant to any then-existing
contract or transaction; or
(v) If during any period of two consecutive
years, individuals who to the beginning of
any such period constitute the Board cease
for any reason to constitute at least a
majority thereof, unless the election, or
the nomination for election by the Company's
shareholders, of each member of the Board
first elected during such period was
approved by a vote of at least two-thirds of
the Board then still in office who are
members of the Board at the beginning of any
such period.
Notwithstanding the foregoing provisions of Section
10(b)(iii) or 10(b)(iv) hereof, a Change in Control
shall not be deemed to have occurred for purposes of
Section 10(a) solely because (i)the Company, (ii) an
entity in which the Company directly or indirectly
beneficially owns 80% or more of the voting securities,
or (iii) any
5
<PAGE> 6
Company-sponsored employee stock ownership plan or
any other employee benefit plan of the Company,
either files or becomes obligated to file a report or
a proxy statement under or in response to Schedule
13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein)
under the Exchange Act, disclosing beneficial
ownership by it of shares of Voting Stock, whether in
excess of 15% or otherwise, or because the Company
reports that a Change in Control of the Company has
or may have occurred or will or may occur in the
future by reason of such beneficial ownership.
(c) Definition of "Potential Change in Control". For
purposes of Section 10(a), a "Potential Change in
Control" means the happening of any one of the
following:
(i) The entering into an agreement by the
Company, the consummation of which would
result in a Change of Control of the Company
as defined in Section 10(b); or
(ii) The acquisition of beneficial ownership,
directly or indirectly, by an entity, person
or group (other than the Company or a
Subsidiary of any Company employee benefit
plan) (including any trustee of such plan
acting as such trustee) of securities of the
Company representing 5% or more of the
combined voting power of the Company's
outstanding securities, and the adoption by
the Board of a resolution to the effect that
a "Potential Change in Control" of the
Company has occurred for the purposes of
this Plan.
11. ASSIGNABILITY
-------------
No grant or award under the Plan shall be assignable or transferable
by the participant, except by will or by the laws of descent and
distribution.
12. WITHHOLDING TAX
---------------
Cash payments under the Plan shall be net of an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements.
6
<PAGE> 7
13. EMPLOYMENT
----------
Nothing in the Plan or in any agreement entered into pursuant to the
Plan shall confer upon any participant the right to continue in the
employment of the Company or affect any right which the Company may
have to terminate the employment of such participant.
14. COMMITTEE DETERMINATIONS
------------------------
The Committee's determination under the Plan including, without
limitation, determination of the participants to receive awards, the
form, amount and timing of such awards, the terms and provisions of
such awards and the establishment of beginning and ending Unit values
and Performance Objectives need not be uniform and may be made by it
selectively among participants who receive, or are eligible to
receive awards under the Plan, whether or not such participants are
similarly situated.
15. LEAVE OF ABSENCE
----------------
The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of
any leave or absence taken by the participant or a change in
employment status of any award. Without limiting the generality of
the foregoing, the Committee shall be entitled to determine (i)
whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan and (ii) the
impact, if any, of any such leave of absence on awards under the Plan
theretofore made to any participant who takes such leave of absence.
16. AMENDMENT
---------
The Board of Directors of the Company may alter or amend the Plan,
in whole or in part, from time to time, or terminate the Plan at any
time, but no such action shall adversely affect any rights or
obligations with respect to awards previously made under the Plan.
17. EFFECTIVE DATE
--------------
This Plan shall become effective for the calendar year 1991 and
shall continue in effect until terminated by the Board of Directors.
7
<PAGE> 8
Attachment A
EXAMPLE OF PERFORMANCE ON UNIT VALUE
- Target Unit Value = $100.00
Actual Performance
to Objective Unit Value
- ----------------------- ----------------
74% -0-
75% $ 50.00
80% $ 60.00
90% $ 80.00
100% $ 100.00
110% $ 120.00
120% $ 140.00
125% $ 150.00
8
<PAGE> 1
Exhibit 10(y)
Execution Copy
AMENDMENT NO. 5
Dated as of March 5, 1997
THIS AMENDMENT NO. 5 ("Amendment") is entered into as of March
5, 1997 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 amended 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 Lenders 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
hereby amended as follows:
1.01. SECTION 7.3(D) 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, 1997 1.5 to 1.0
June 30, 1997 and each 2.75 to 1.0
Fiscal Quarter thereafter
</TABLE>
1.02. SECTION 7.3(E) of the Loan Agreement is amended by
deleting the table set forth therein and substituting the following therefor:
<PAGE> 2
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING NEAREST RATIO
----------------------------- -----
<S> <C>
March 31, 1997 0.6 to 1.0
June 30, 1997 and each 1.0 to 1.0
Fiscal Quarter thereafter
</TABLE>
1.03. SECTION 7.3(F) of the Loan Agreement is amended by
deleting the table set forth therein and substituting the following therefor:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING NEAREST AMOUNT
----------------------------- ------
<S> <C>
March 31, 1997 $ 2,500,000
June 30, 1997 $ 8,500,000
September 30, 1997 $16,500,000
December 31, 1997 $21,000,000
December 31, 1998 and $25,000,000
the last day of each
Fiscal Year thereafter
</TABLE>
1.04. SECTION 8.9 of the Loan Agreement is amended by
deleting the table set forth therein and substituting the following therefor:
<TABLE>
<CAPTION>
FISCAL YEAR MAXIMUM CAPITAL EXPENDITURES
----------- ----------------------------
<S> <C>
1997 $18,000,000
1998 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:
(i) four (4) copies of this Amendment duly executed by the
Borrower, the Lender and the Agent;
(ii) Reaffirmation of Guaranty and Security Agreement in
substantially the form of EXHIBIT A attached hereto, duly executed by
Carlon Chimes Co.; and
(iii) Reaffirmation of Guaranty and Security Agreement in
substantially the form of EXHIBIT B
-2-
<PAGE> 3
attached hereto, duly executed by Dimango Products Corporation.
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.
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.
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY
--------------
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
-3-
<PAGE> 4
(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 AND SESSIONS CO.
By:/S/ TIMOTHY A. HIBBARD
-----------------------------
Name: Timothy A. Hibbard
Title: Vice President and
Controller
GENERAL ELECTRIC CAPITAL
CORPORATION, as the Agent
and as the sole Lender
By:/S/ CATHARINE L. MIDKIFF
-----------------------------
Name: Catharine L. Midkiff
Title: Duly Authorized Signer
-4-
<PAGE> 5
EXHIBIT A
to
Amendment
Form of Reaffirmation of Guaranty and
SECURITY AGREEMENT FOR CARLON CHIMES CO.
----------------------------------------
(Attached.)
<PAGE> 6
REAFFIRMATION OF GUARANTY AND SECURITY AGREEMENT
The undersigned hereby (i) acknowledges receipt of that
certain Amendment No. 5 of even date herewith (the "Amendment") to the Loan
Agreement dated as of February 13, 1992, as amended and restated as of July 14,
1995 (as amended from time to time prior to the date hereof, the "Loan
Agreement") among THE LAMSON & SESSIONS CO. (the "Borrower"), GENERAL ELECTRIC
CAPITAL CORPORATION ("GE Capital"), as a "Lender" (as defined in the Loan
Agreement) and GE Capital, as agent for the Lenders (in such capacity, the
"Agent"), (ii) reaffirms all of its obligations under that certain Guaranty and
Security Agreement dated as of February 13, 1992, as amended from time to time,
("Guaranty and Security Agreement"), made by the undersigned in favor of the
Lenders, and (iii) acknowledges and agrees that such Guaranty and Security
Agreement remains in full force and effect notwithstanding the Amendment, and
that such Guaranty and Security Agreement is hereby ratified and confirmed.
Date: March 5, 1997
CARLON CHIMES CO.
By: /S/ TIMOTHY A. HIBBARD
-----------------------------
Title: Controller
<PAGE> 7
EXHIBIT B
to
Amendment
Form of Reaffirmation of Guaranty
AND SECURITY AGREEMENT FOR DIMANGO PRODUCTS CORPORATION
-------------------------------------------------------
(Attached.)
<PAGE> 8
REAFFIRMATION OF GUARANTY AND SECURITY AGREEMENT
The undersigned hereby (i) acknowledges receipt of that
certain Amendment No. 5 of even date herewith (the "Amendment") to the Loan
Agreement dated as of February 13, 1992, as amended and restated as of July 14,
1995 (as amended from time to time prior to the date hereof, the "Loan
Agreement") among THE LAMSON & SESSIONS CO. (the "Borrower"), GENERAL ELECTRIC
CAPITAL CORPORATION ("GE Capital"), as a "Lender" (as defined in the Loan
Agreement) and GE Capital, as agent for the Lenders (in such capacity, the
"Agent"), (ii) reaffirms all of its obligations under that certain Guaranty and
Security Agreement dated as of October 25, 1996, as amended from time to time,
("Guaranty and Security Agreement"), made by the undersigned in favor of the
Lenders, and (iii) acknowledges and agrees that such Guaranty and Security
Agreement remains in full force and effect notwithstanding the Amendment, and
that such Guaranty and Security Agreement is hereby ratified and confirmed.
Date: March 5, 1997
DIMANGO PRODUCTS CORPORATION
By: /S/ TIMOTHY A. HIBBARD
---------------------------
Title: Treasurer
<PAGE> 1
The Lamson & Sessions Co. and Subsidiaries
Exhibit (11) - Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------------------
PRIMARY 1996 1995 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Average common stocks outstanding 13,297,334 13,288,120 13,239,255
Average common share equivalents:
Stock options and warrants - based
on treasury stock method using
average market price 343,297 115,794
------------ ------------ ------------
TOTALS 13,640,631 13,403,915 13,239,255
FULLY DILUTED
Average common shares outstanding 13,297,334 13,288,120 13,239,255
Average common share equivalents:
Stock options and warrants - based
on treasury stock method 356,411 125,721
------------ ------------ ------------
TOTALS 13,653,745 13,413,841 13,239,255
Net income from continuing operations $ 13,628,000 $ 12,074,000 $ 4,256,000
Discontinued operations (9,930,000)
------------ ------------ ------------
Net Income (Loss) $ 13,628,000 $ 12,074,000 $ (5,674,000)
============ ============ ============
Earnings (Loss) per common share and
common share equivalents:
Primary
Earnings (Loss) from continuing operations $ 1.00 $ 0.90 $ 0.32
Discontinued operations $ (0.75)
------------ ------------ ------------
Net Earnings (Loss) $ 1.00 $ 0.90 $ (0.43)
============ ============ ============
Fully Diluted
Earnings (loss) from continuing operations $ 1.00 $ 0.90 $ 0.32
Discontinued operations (0.75)
------------ ------------ ------------
Net Earnings (Loss) $ 1.00 $ 0.90 $ (0.43)
============ ============ ============
</TABLE>
<PAGE> 1
Exhibit (21) - Subsidiaries
At December 28, 1996, the Company owned the following subsidiaries, all of which
are included in the consolidated financial statements filed as part of the Form
10-K:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PERCENTAGE
STATE OF OF
SUBSIDIARIES INCORPORATION OWNERSHIP
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Carlon Chimes Co. Delaware 100
Lamson & Sessions Ltd. Ontario, Canada 100
LMS Asia Limited Hong Kong 100
Dimango Products Corporation Michigan 100
</TABLE>
<PAGE> 1
Exhibit (23) - CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 and S-3 No. 33-54732, Form S-8 No. 2-67874, Form S-8 No. 33-62443 and
Form S-8 No. 33-12585) pertaining to the 1988 Incentive Equity Performance Plan,
the 1978 Nonqualified Incentive Stock Option Plan, the Non-Employee Directors
Stock Option Plan, and the Deferred Compensation Plan for Nonemployee Directors,
respectively, of our report dated January 23, 1997, with respect to the
consolidated financial statements and schedule of The Lamson & Sessions Co.,
included in the Annual Report (Form 10-K) for the year ended December 28, 1996.
ERNST & YOUNG LLP
Cleveland, Ohio
March 6, 1997
<PAGE> 1
THE LAMSON & SESSIONS CO.
-------------------------
DIRECTORS' POWER OF ATTORNEY
----------------------------
Each of the undersigned members of the Board of Directors of The Lamson &
Sessions Co., an Ohio Corporation, which anticipates filing with the Securities
and Exchange Commission, Washington, D.C., an annual report of the Corporation
on Form 10-K for the fiscal year ended December 28, 1996 ("1996 Form 10-K")
under the provisions of the Securities Act of 1934, as amended, does hereby
constitute and appoint James J. Abel and John B. Schulze, jointly and severally,
with full power and substitution and resubstitution, as attorney(s) to sign for
him and in his name, in the capacities indicated below, the 1996 Form 10-K,
including any amendments and exhibits thereto, with full power and authority to
do and perform any and all acts and things whatsoever necessary and required to
be done in connection with such signing as fully to all intents and purposes as
he would do if personally present, hereby ratifying and approving the acts of
said attorney(s) and any substitutes(s) therefor in connection with such
signing:
EXECUTED as of February 27, 1997.
/s/ Francis H. Beam, Jr. /s/ John C. Dannemiller
- ------------------------------- -------------------------------------
Francis H. Beam. Jr. - Director John C. Dannemiller - Director
/s/ Leigh Carter /s/ George R. Hill
- ------------------------------- -------------------------------------
Leigh Carter - Director George R. Hill - Director
/s/ Martin J. Cleary /s/ A. Malachi Mixon, III
- ------------------------------- -------------------------------------
Martin J. Cleary - Director A. Malachi Mixon, III - Director
/s/ William H. Coquillette /s/ John C. Morley
- ------------------------------- -------------------------------------
William H. Coquillette - Director John C. Morley - Director
/s/ D. Van Skilling
-------------------------------------
D. Van Skilling - Director
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000057497
<NAME> THE LAMSON & SESSIONS CO.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 758
<SECURITIES> 0
<RECEIVABLES> 36,626
<ALLOWANCES> 0
<INVENTORY> 42,822
<CURRENT-ASSETS> 90,945
<PP&E> 113,937
<DEPRECIATION> 53,464
<TOTAL-ASSETS> 161,121
<CURRENT-LIABILITIES> 51,906
<BONDS> 36,911
<COMMON> 1,330
0
0
<OTHER-SE> 43,736
<TOTAL-LIABILITY-AND-EQUITY> 161,121
<SALES> 289,052
<TOTAL-REVENUES> 289,052
<CGS> 227,778
<TOTAL-COSTS> 227,778
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,611
<INCOME-PRETAX> 9,528
<INCOME-TAX> (4,100)
<INCOME-CONTINUING> 13,628
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,628
<EPS-PRIMARY> $1.00
<EPS-DILUTED> $1.00
</TABLE>
