<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 5, 1997
------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ ------------
Commission File Number 1-313
T H E L A M S O N & S E S S I O N S C O.
--------------------------------------------
(Exact name of Registrant as specified in its charter)
Ohio 34-0349210
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
25701 Science Park Drive
Cleveland, Ohio 44122-9803
--------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
216/464-3400
----------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-- --
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
------ -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of July 31, 1997 the Registrant had outstanding 13,345,184 common shares.
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<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Second Quarter First Half
Ended Ended
-------------------------------------------
1997 1996 1997 1996
-------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 72,439 $ 77,405 $141,283 $141,383
Cost of products sold 59,667 60,979 113,618 111,119
-------- -------- -------- --------
GROSS PROFIT 12,772 16,426 27,665 30,264
Selling, general and
administrative expenses 10,916 12,869 23,607 24,656
Other Income (252) (314)
-------- -------- -------- --------
OPERATING INCOME 2,108 3,557 4,372 5,608
Interest 833 654 1,640 1,343
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 1,275 2,903 2,732 4,265
Income tax benefit 700 700 1,400 1,350
-------- -------- -------- --------
NET INCOME $ 1,975 $ 3,603 $ 4,132 $ 5,615
======== ======== ======== ========
EARNINGS PER COMMON SHARE $ 0.15 $ 0.26 $ 0.31 $ 0.41
======== ======== ======== ========
AVERAGE COMMON SHARES 13,541 13,782 13,543 13,695
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
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<PAGE> 3
CONSOLIDATED BALANCE SHEET (Unaudited)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
First Half
Ended Year End
----------------------
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 556 $ 758
Accounts receivable 48,701 36,626
Inventories
Finished goods and work-in-process 38,549 38,824
Raw materials and supplies 5,544 3,998
--------- ---------
44,093 42,822
Prepaid expenses and other 10,939 10,739
--------- ---------
TOTAL CURRENT ASSETS 104,289 90,945
OTHER ASSETS 10,403 9,703
PROPERTY, PLANT AND EQUIPMENT
Land 3,751 3,751
Buildings 23,836 24,035
Machinery and equipment 92,273 86,151
--------- ---------
119,860 113,937
Less allowances for depreciation and amortization 56,654 53,464
--------- ---------
63,206 60,473
TOTAL ASSETS $ 177,898 $ 161,121
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,086 $ 19,084
Accrued expenses and other liabilities 20,406 24,803
Taxes 3,724 3,643
Current maturities of long-term debt 3,626 4,376
--------- ---------
TOTAL CURRENT LIABILITIES 52,842 51,906
LONG-TERM DEBT 51,379 36,911
POST-RETIREMENT BENEFITS AND OTHER LONG TERM LIABILITIES 24,405 27,238
SHAREHOLDERS' EQUITY
Common shares 1,332 1,330
Other capital 72,864 72,792
Retained earnings (deficit) (22,894) (27,026)
Pension adjustment (2,030) (2,030)
--------- ---------
49,272 45,066
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 177,898 $ 161,121
========= =========
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
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<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
First Half Ended
--------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,132 $ 5,615
Adjustments to reconcile net income to cash (used) provided by
operations:
Depreciation and amortization 3,771 4,121
Deferred income tax benefit (1,450) (1,607)
Net change in working capital accounts:
Accounts receivable (12,075) (7,211)
Inventories (1,271) (3,718)
Prepaid expenses and other 526 1,003
Current liabilities 1,686 7,048
Net change in other long-term items (3,004) (939)
-------- --------
CASH (USED) PROVIDED BY OPERATING ACTIVITIES (7,685) 4,312
INVESTING ACTIVITIES
Net purchases of property, plant and equipment (6,309) (7,097)
-------- --------
CASH USED BY INVESTING ACTIVITIES (6,309) (7,097)
FINANCING ACTIVITIES
Net change in secured credit agreement 13,924 2,798
Net changes in long-term borrowing and capital lease obligations (206) 208
Exercise of stock options 74 26
-------- --------
CASH PROVIDED BY FINANCING ACTIVITIES 13,792 3,032
(DECREASE) INCREASE IN CASH (202) 247
Cash at beginning of year 758 1,431
-------- --------
CASH AT END OF THE PERIOD $ 556 $ 1,678
======== ========
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
-4-
<PAGE> 5
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements do not include all of
the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals
and changes in accounting estimates) considered necessary for a fair
presentation of the results of operations have been included. Certain
1996 amounts have been reclassified to conform with 1997
classifications.
NOTE B - ACCOUNTING POLICIES
The Company will adopt statement of Financial Accounting Standards No.
128, "Earnings per Share" at year end 1997. Adoption of this standard
is not expected to have a material impact on the calculation of
earnings per share.
-5-
<PAGE> 6
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JULY 5, 1997
AND COMPARABLE PERIODS ENDED JUNE 29, 1996
CONSOLIDATED STATEMENT OF INCOME
Net sales in the second quarter of 1997 decreased $5 million, or over 6%,
compared to the second quarter of 1996. Approximately $3 million of the sales
decrease in the second quarter resulted from customer deductions and credits
stemming from the implementation in the first quarter of 1997 of a new
fully-integrated information management system. In addition, the disruption to
the Company's wireless electrical products business from the fire that
completely consumed the Company's Brighton, Michigan, facility (which had been
acquired in October 1996) resulted in approximately $2 million in lower sales.
Sales for the first half were essentially unchanged from the same period last
year.
Gross profit decreased in excess of $3 million in the second quarter compared to
the second quarter of 1996, in part due to the factors which reduced the sales
level. In addition, due to competitive conditions, the Company was unable to
raise its prices on commodity rigid pipe products after absorbing substantial
raw material cost increases from February through May 1997. The inability to
recover these raw material cost increases adversely affected selling prices
thereby reducing gross profit levels. The Company remains exposed to commodity
raw material cost fluctuations. While the Company's historical reliance on these
commodity products is reducing, they still comprise a significant part of its
overall product mix. The Company's manufacturing plants operated at
significantly reduced production rates in May and June in order to reduce
inventory levels to better align them with the level of business activity.
Customer sales order patterns have moderated which reflects the less than
acceptable service levels and inefficiencies occurring during the implementation
of new operating systems and distribution center relocations. As a result, the
gross margin fell to 18% in the second quarter and compares unfavorably to 21%
for the same period in 1996.
Selling, general and administrative expenses at 15% of sales were nearly $2
million below year-ago levels in the second quarter. Reduced selling expenses
associated with the lower sales level and a decrease in administrative costs
supporting the business systems implementation contributed to the decline. For
the six-month period, selling, general and administrative costs fell $1 million
compared to a year ago, attributable to the decreased second quarter sales
level. The Company recorded an income tax benefit of $.7 million in the second
quarter, consistent with the prior-year period.
During the second quarter and first half, management changes in estimate of
certain reserves and accruals favorably impacted gross profit and selling,
general and administrative expense by approximately $4 million and mitigated the
effect of implementing the new operating system and business processes for the
Company. These changes in estimate primarily relate to the Company's operating
systems implementation ($1.7 million) and employee health, retirement and
incentive compensation plans ($2.0 million).
-6-
<PAGE> 7
CONSOLIDATED BALANCE SHEET
Accounts Receivable increased approximately $12 million compared to year-end
levels due to a higher concentration of sales later in the quarter period and
slowed billing and collection associated with the business systems
implementation. Inventories at the end of the second quarter increased $1
million from year-end levels, however, inventories decreased $8 million during
the second quarter to better align stocks with demand. Accounts Payable
increased $6 million from year-end primarily due to more favorable payment terms
from the Company's largest raw material vendors. Accrued expenses and other
liabilities decreased $4 million mainly due to the changes in accounting
estimates already discussed.
Long-term debt rose $2 million in the second quarter and nearly $14 million in
the first half due to working capital increases primarily in accounts
receivable. The Company expects to convert these billings to cash in the third
quarter and utilize it to reduce the long-term debt level at that time.
OUTLOOK
The Company's efforts are focused on reducing the inefficiencies and extra costs
incurred to deal with adverse factors which impacted the operating performance
in the first half. Improvement is being realized in customer service performance
and there has been easing in raw material costs, but management believes that
there will still be lingering effects from these factors which will tend to
lower sales and earnings expectations for the third quarter and full year.
Recovering the confidence of key customers is a top priority in the next few
months. This should improve sales order volume and operating efficiencies but
requires an outward focus toward customers that was not present in the first
half as the Company dealt with internal issues arising from cultural changes
associated with the implementation of the new operating systems.
The Company expects the demand levels in its markets to remain stable, but to
moderate with seasonal trends in construction activity. Project delays continue
to frustrate the Company's Lamson Vylon Pipe and Carlon Telecom Systems business
units. Retail activity and customer interest in new products is encouraging for
Lamson Home Products.
The Company expects a stronger operating cash flow and lower debt levels in the
third quarter as the inventory reduction program in the second quarter should
generate cash during the next few weeks. Strong working capital management and
moderated capital spending are expected to provide adequate liquidity.
Additional financing opportunities continue to be evaluated consistent with the
Company's growth requirements.
The foregoing outlook contains expectations that are forward-looking statements
within the meaning of the private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those expected as a result of a
variety of factors such as (i) the volatility of polyvinylchloride 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
of 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), (vii) the ability of the Company to pass
through raw material costs increases to its customers and (viii) a reversal in
the country's general pattern of economic improvement affecting the markets for
the Company's products.
-7-
<PAGE> 8
PART II
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 25, 1997, the Company held its Annual Meeting of Shareholders. At the
meeting, 13,306,084 common shares (92.20% of the common shares outstanding) were
voted. The following directors were elected in Class II and received the votes
indicated next to their names:
<TABLE>
<CAPTION>
CLASS II FOR AUTHORITY
--------------------------- ---------------- ----------------
<S> <C> <C>
John C. Dannemiller 12,166,253 102,573
George R. Hill 12,168,939 99,887
D. Van Skilling 12,168,215 100,611
</TABLE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
--------------- ---------------------------------------
<S> <C>
10(aa) Amendment 6 dated July 24, 1997, to the
GECC Loan Agreement filed herewith.
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K. There were no reports on Form 8-K filed
for the three months ended July 5, 1997.
-8-
<PAGE> 9
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE LAMSON & SESSIONS CO.
-------------------------
(Registrant)
DATE: August 19, 1997 By /s/ James J. Abel
--------------- --------------------------------------
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
-9-
<PAGE> 1
Exhibit 10(aa)
Execution Copy
AMENDMENT NO. 6
Dated as of July 24, 1997
THIS AMENDMENT NO. 6 ("Amendment") is entered into as of July
24, 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. INCREASE AND RESTATEMENT OF TERM LOAN; AMENDMENTS
TO THE LOAN AGREEMENT
The Term Loan currently has an outstanding principal balance
of $9,000,000. Subject to the satisfaction of the conditions precedent set forth
in SECTION 2 below, on the date hereof (the "Amendment No. 6 Effective Date"),
the Lender shall make an additional advance as part of the Term Loan so that the
outstanding balance of the Term Loan on the Amendment No. 6 Effective Date shall
be $15,000,000. On the Amendment No. 6 Effective Date, the Borrower shall
execute and deliver to the Lender a restated Term Note in the form attached as
EXHIBIT A to this Amendment (the "Restated Term Note"). From and after the
Amendment No. 6 Effective Date, all references in the Loan Agreement and the
other Loan Documents to (1) the Term Loan shall refer to the Term Loan as
restated by the Restated Term Note, and (2) the Term Note or the Term Notes
shall refer to the Restated Term Note. In connection with the additional advance
under the Term Loan, and the execution of the Restated Term Note, 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:
<PAGE> 2
1.01. The definition of "Commitment Termination Date" in
SECTION 1.1 of the Loan Agreement is amended by deleting "December 31, 1999" in
clause (i) and substituting "December 31, 2000" therefor.
1.02. SECTION 2.2(b) of the Loan Agreement is amended and
restated in its entirety as follows:
(b) The aggregate principal amount of the Term Loan shall be
payable in thirteen (13) quarterly installments, on the last
Business Day of each calendar quarter, commencing on December
31, 1997 and with a final payment on December 31, 2000. The
first twelve (12) installments shall be in the amount of
$750,000 each, and the final installment shall be in the
amount of $6,000,000; PROVIDED, HOWEVER, that in any event the
full unpaid principal amount of the Term Loan, together with
all accrued interest thereof, shall be due and payable on the
Commitment Termination Date.
1.03. SECTION 2.4(a) of the Loan Agreement is amended and
restated in its entirety as follows:
(a) Borrower shall have the right, on at least thirty (30)
days' prior written notice to the Agent, to prepay voluntarily the Term Loan in
whole or in part. Any prepayment, in whole or in part, of the Term Loan pursuant
to this SECTION 2.4 or SECTION 9.1 in an amount of $1,000,000 or greater shall
be accompanied by a prepayment fee (the "PREPAYMENT FEE") equal to the following
amount:
<TABLE>
<CAPTION>
Period in which
Prepayment Occurs Amount
----------------- ------
<S> <C>
July 1, 1997 to and
including June 30, 1998 $90,000
July 1, 1998 to and
including June 30, 1999 $90,000
</TABLE>
1.04. SECTION 7.3(f) of the Loan Agreement is amended by
deleting the table set forth therein and substituting the following therefor:
-2-
<PAGE> 3
<TABLE>
<CAPTION>
Fiscal Quarter Ending Nearest Amount
----------------------------- ------
<S> <C>
June 30, 1997 $ 5,500,000
September 30, 1997 $10,700,000
December 31, 1997 $14,000,000
December 31, 1998 and $25,000,000
the last day of each
Fiscal Year thereafter
</TABLE>
SECTION 2. AUDIT AND INSPECTION ACCESS. Pursuant to SECTION
12.4 of the Loan Agreement, within 60 days of the date hereof the Borrower will
allow the Agent and any of its officers, employees and/or agents to exercise
their right to inspect the properties and facilities of the Borrower and its
Subsidiaries and to inspect, audit and make extracts (at the Borrower's expense)
from all of the Borrower's and its Subsidiaries' records, files and books of
account.
SECTION 3. SALE OF PROPERTY. Notwithstanding the provisions of
SECTIONS 2.3 and 8.10 of the Loan Agreement, the Agent hereby agrees that the
Borrower may sell any or all of the four properties more particularly described
on SCHEDULE I hereto, PROVIDED that:
(a) the Agent finds in its sole discretion, with respect
to each sale, that both before and after giving
effect to such sale, no Default or Event of Default
is outstanding and the Borrower will be in compliance
with each of the financial covenants set forth in
SECTION 7.3 of the Loan Agreement, and the value of
the Collateral consisting of Equipment and Real
Estate will remain at a level acceptable to the
Agent;
(b) any such sale will take place before July 24, 1998;
and
(c) the proceeds of the sale of such properties shall be
used to prepay (i) FIRST, the outstanding principal
balance of the Revolving Credit Loan, and (ii)
SECOND, the other Obligations in such order as the
Agent may determine.
SECTION 4. 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
-3-
<PAGE> 4
the Borrower, the Lender and the Agent;
(ii) Reaffirmation of Guaranty and Security Agreement in
substantially the form of EXHIBIT B attached hereto, duly executed
by Carlon Chimes Co.;
(iii) Reaffirmation of Guaranty and Security Agreement in
substantially the form of EXHIBIT C attached hereto, duly executed
by Dimango Products Corporation;
(iv) the Restated Term Note, duly executed by the Borrower;
and
(v) an opinion of Jones, Day, Reavis & Pogue with respect to
the due authorization, execution and delivery of, and enforceability
of, this Amendment and the Restated Term Note.
SECTION 5. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE
BORROWER.
5.1 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.
5.2 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 6. REFERENCE TO AND EFFECT ON THE LOAN AGREEMENT.
6.1 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.
6.2 Except as specifically amended hereby, the Loan Agreement
and other documents, instruments and agreements
-4-
<PAGE> 5
executed and/or delivered in connection therewith shall remain in full force and
effect and are hereby ratified and confirmed.
6.3 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 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS
OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF ILLINOIS.
SECTION 8. 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 9. 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.
-5-
<PAGE> 6
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/ JAMES J. ABEL
---------------------------------
Executive Vice President
and Chief Financial Officer
GENERAL ELECTRIC CAPITAL
CORPORATION, as the Agent
and as the sole Lender
By: /S/ KATHERINE MIDKIFF
---------------------------------
Duly Authorized Signatory
-6-
<PAGE> 7
EXHIBIT A
to
Amendment
Form Of Restated Term Note
--------------------------
(Attached)
<PAGE> 8
PROMISSORY NOTE
---------------
U.S. $15,000,000 Dated: July 24, 1997
FOR VALUE RECEIVED, the undersigned, The Lamson & Sessions
Co., an Ohio corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order
of General Electric Capital Corporation (the "Lender") the principal amount of
FIFTEEN MILLION AND NO/1OO DOLLARS ($15,000,000) together with interest on the
unpaid principal balance hereof at such interest rates, and at such times, as
are specified in the Loan Agreement (as defined below) from the time such
principal is advanced until payment in full thereof.
The principal indebtedness evidenced hereby shall be payable
in thirteen quarterly installments, on the last Business Day of each calendar
quarter, commencing on December 31, 1997 and with a final payment on December
31, 2000, as follows:
<TABLE>
<CAPTION>
Quarterly Installment Quarterly Payment
--------------------- -----------------
<S> <C>
First through (and including)
twelfth quarterly installment $ 750,000 each
Thirteenth quarterly
installment $ 6,000,000
</TABLE>
PROVIDED, HOWEVER, that in any event the full unpaid principal amount hereof,
together with all accrued and unpaid interest thereon, shall be due and payable
on the Commitment Termination Date (as defined in the Loan Agreement).
Both principal and interest are payable in lawful money of the
United States of America to General Electric Capital Corporation, as agent (the
"Agent"), at such account of the Agent as it shall designate to the Borrower
from time to time in accordance with the Loan Agreement, in immediately
available funds.
This Promissory Note is one of the Term Notes referred to in,
and is entitled to the benefits of, the Loan Agreement dated as of February 13,
1992, as amended and restated as of July 14, 1995 among the Borrower, the Agent,
and the financial institutions from time to time parties thereto as lenders
(collectively, the "Lenders") (as the same has been and may be supplemented,
modified, amended or restated from time to time in accordance with the terms
thereof, including by Amendment No. 6 thereto which provides for the issuance of
this Promissory Note, the "Loan Agreement"). The Loan Agreement contains, among
other things, provisions for acceleration of the maturity hereof upon the
happening of certain stated events and also for mandatory and
<PAGE> 9
voluntary prepayments on account of principal hereof prior to the maturity
hereof upon the terms and conditions therein specified.
This Promissory Note amends and restates that certain
Promissory Note dated as of July 14, 1995 in the original principal amount of
$15,000,000 (the "Original Term Note") executed by the Borrower in favor of the
Lender, and evidences the outstanding indebtedness under the Original Term Note
and an additional advance made on the date hereof. It is expressly understood
and acknowledged that this Promissory Note is not in payment of the indebtedness
evidenced by the Original Term Note nor is it in any way intended to constitute
a novation of the Original Term Note.
This Promissory Note shall be governed by, and construed and
enforced in accordance with, the internal laws (as distinguished from the
conflicts of law provisions) and decisions of the State of Illinois.
THE LAMSON & SESSIONS CO.
By: /S/ JAMES J. ABEL
---------------------------
Executive Vice President
and Chief Financial Officer
<PAGE> 1
Exhibit 11
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
EXHIBIT (11) - COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
SECOND QUARTER ENDED FIRST HALF ENDED
------------------------- -------------------------
PRIMARY 1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Average common shares outstanding 13,310,351 13,295,417 13,308,218 13,293,584
Average common share equivalents:
Stock options and warrants - based
on treasury stock method using
average market price 230,205 486,199 234,869 401,556
----------- ----------- ----------- -----------
TOTALS 13,540,556 13,781,616 13,543,087 13,695,140
FULLY DILUTED
Average common shares outstanding 13,310,351 13,295,417 13,308,218 13,293,584
Average common share equivalents:
Stock options and warrants - based
on treasury stock method 273,973 516,838 256,753 427,784
----------- ----------- ----------- -----------
TOTALS 13,584,324 13,812,255 13,564,971 13,721,368
NET INCOME $ 1,975,000 $ 3,603,000 $ 4,132,000 $ 5,615,000
=========== =========== =========== ===========
Earnings per common share and common
share equivalents:
Primary Net Earnings Per Share $ 0.15 $ 0.26 $ 0.31 $ 0.41
=========== =========== =========== ===========
Fully Diluted Net Earnings Per Share $ 0.15 $ 0.26 $ 0.30 $ 0.41
=========== =========== =========== ===========
</TABLE>
-10-
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<CIK> 0000057497
<NAME> THE LAMSON & SESSIONS CO.
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0
0
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<INCOME-TAX> (700)
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<NET-INCOME> 1,975
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
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