<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 4, 1998
-------------
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
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T H E L A M S O N & S E S S I O N S C O.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
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)
</TABLE>
216/464-3400
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-- --
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
-- --
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of April 4, 1998 the Registrant had outstanding 13,415,684 common shares.
-1-
<PAGE> 2
PART I
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales $ 64,794 $ 68,844
Cost of products sold 52,536 53,951
-------- --------
GROSS PROFIT 12,258 14,893
Selling, general and
administrative expenses 11,447 12,629
-------- --------
OPERATING INCOME 811 2,264
Interest 1,137 807
-------- --------
(LOSS) INCOME BEFORE INCOME TAXES (326) 1,457
Income tax benefit -- 700
-------- --------
NET (LOSS) INCOME $ (326) $ 2,157
======== ========
BASIC (LOSS) EARNINGS PER COMMON SHARE: $ (0.02) $ 0.16
======== ========
DILUTED (LOSS) EARNINGS PER COMMON SHARE: $ (0.02) $ 0.16
======== ========
AVERAGE COMMON SHARES 13,416 13,546
======== ========
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
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<PAGE> 3
CONSOLIDATED BALANCE SHEET (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST QUARTER FIRST QUARTER
ENDED YEAR END ENDED
----------------------------------------------------
1998 1997 1997
----------------------------------------------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 773 $ l,410 $ l,301
Accounts receivable 38,939 32,951 49,023
Inventories
Finished goods and work-in-process 40,721 39,532 44,989
Raw materials and supplies 5,212 6,043 6,854
------------ ------------ --------------
45,933 45,575 51,843
Prepaid expenses and other 11,038 11,631 8,642
------------ ------------ --------------
TOTAL CURRENT ASSETS 96,683 91,567 110,809
OTHER ASSETS 14,959 14,598 9,846
PROPERTY, PLANT AND EQUIPMENT 111,322 111,211 115,778
Less allowances for depreciation and amortization 56,777 54,882 54,690
------------ ------------ --------------
54,545 56,329 61,088
------------ ------------ --------------
TOTAL ASSETS $ 166,187 $ 162,494 $ 181,743
============ ============ ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 24,189 $ 27,734 $ 26,972
Accrued expenses and other liabilities 21,981 22,272 23,945
Taxes 3,430 3,815 3,815
Current maturities of long-term debt 3,795 3,759 3,626
------------ ------------ --------------
TOTAL CURRENT LIABILITIES 53,395 57,580 58,358
LONG-TERM DEBT 52,666 44,712 48,842
POST-RETIREMENT BENEFITS AND OTHER LONG TERM LIABILITIES 23,462 23,221 27,296
SHAREHOLDERS' EQUITY
Common shares 1,342 1,341 1,331
Other Capital 73,417 73,409 72,815
Retained earnings (deficit) (37,005) (36,679) (24,869)
Pension adjustment (1,090) (1,090) (2,030)
------------ ------------ --------------
36,664 36,981 47,247
------------ ------------ --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 166,187 $ 162,494 $ 181,743
============ ============ ==============
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
-3-
<PAGE> 4
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
The Lamson & Sessions Co. and Subsidiaries
(Dollars in thousands)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
1998 1997
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (326) $ 2,157
Adjustments to reconcile net income to cash used by operations:
Depreciation and amortization 2,682 1,714
Deferred income tax benefit - (725)
Net change in working capital accounts:
Accounts receivable (5,988) (12,397)
Inventories (358) (9,021)
Prepaid expenses and other 593 2,460
Current liabilities (4,221) 7,202
Net change in other long-term items (214) 176
------------- --------------
CASH USED BY OPERATING ACTIVITIES (7,832) (8,434)
INVESTING ACTIVITIES
Net purchases of property, plant and equipment (804) (2,228)
------------- --------------
CASH USED BY INVESTING ACTIVITIES (804) (2,228)
FINANCING ACTIVITIES
Net change in secured credit agreement 8,080 11,307
Net changes in long-term borrowing and capital lease obligations (90) (126)
Exercise of stock options 9 24
------------- --------------
CASH PROVIDED BY FINANCING ACTIVITIES 7,999 11,205
(DECREASE) INCREASE IN CASH (637) 543
Cash at beginning of year 1,410 758
------------- --------------
CASH AT END OF THE PERIOD $ 773 $ 1,301
============= ==============
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited)
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<PAGE> 5
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of the results of operations have been included. Certain 1997
amounts have been reclassified to conform with 1998 classifications.
NOTE B - ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income" (SFAS 130) and Statement No. 131, "Disclosures
and Segments of an Enterprise and Related Information" (SFAS 131). Both
statements are required to be adopted in 1998. Currently, the Company's only
elements of comprehensive income are cumulative translation and pension minimum
liability adjustments. The Company plans to provide the SFAS 130 required
disclosures in its 1998 Consolidated Statement of Shareholders' Equity, however,
in the first quarter of 1998 and 1997 the components of comprehensive income
(loss), other than net income (loss), were immaterial and accordingly were not
reported herein. SFAS 131 requires that disclosure of annual and interim
financial and descriptive information about reportable operating segments be
reported on the same basis used internally for evaluating segment performance
and the allocation of resources. SFAS 131 will be adopted in the year-end fiscal
1998 financial statements.
NOTE C - INCOME TAXES
The difference in the first quarter of 1997 between the tax provision and the
applicable statutory tax rate is due to changes in the valuation allowance
related to the tax benefit arising from prior year net operating losses.
-5-
<PAGE> 6
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CONSOLIDATED STATEMENT OF OPERATIONS
Sales for the quarter were down 5.9% compared to the prior year quarter. This
decrease was driven by a 9% decline in the volume of rigid pipe products and by
the planned exit of some commodity sewer pipe products and wiring devices. It
also reflects a slight decrease in average PVC rigid pipe prices. These
decreases were partially offset by increases in sales of flexible pipe and
molded products sales.
Gross margin decreased by 12.5% to 18.9% in the first quarter of 1998 compared
to the first quarter of 1997. Plant utilization was slightly less than last
year's high first quarter rates. This reduced inventory levels and resulted in
less absorption of fixed manufacturing costs.
Selling, general and administrative expenses decreased 9.4% or $1.2 million in
the first quarter of 1998 compared to 1997. Lower commission expenses related to
lower sales levels coupled with controlled current period administrative costs,
allowed for these expenses to decrease slightly as a percentage of sales despite
the lower base of sales. In 1997, the Company incurred higher administrative
costs associated with the implementation of its business process and
information technology project.
The increase in outstanding debt and borrowing rates generated the increase in
interest expense compared to the first quarter of 1997.
CONSOLIDATED BALANCE SHEET
Accounts receivable increased approximately $6.0 million compared to year-end
levels due to a higher concentration of sales later in the quarter period.
Accounts receivable decreased by $10.1 million from the prior year quarter
primarily due to stronger collection efforts and a modestly lower sales level.
Inventory remained constant compared to year-end levels, but was reduced by $5.9
million from the prior year quarter. Accounts payable decreased nearly $2.5
million compared to year-end levels. Total debt increased $8.0 million compared
to year-end as the secured credit line was used to fund working capital
requirements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash used by operations was $7.8 million in 1998 compared to $8.4 million in the
prior year quarter. The cash use occurred primarily because of the seasonal
increase in accounts receivable during the quarter and the decrease in accounts
payable.
Investing activities used $1.4 million less in cash than the prior year quarter.
This reduction reflects the completion of the implementation of the business
process and information technology project during the first half of 1997.
-6-
<PAGE> 7
OUTLOOK
Despite lower sales and profitability this quarter compared to the same quarter
in the prior year, the Company is in a better position to take advantage of
continued strength in its markets. The Company has reduced the substantial
operating losses experienced in the second half of 1997 through increased
customer satisfaction and delivery performance, better management of accounts
receivable and inventory, and increased capacity to support molded and priority
products. These factors combined with the Company's enhanced information
technology cause management to expect continued improvement in operating
results.
The Company's efforts are focused on regaining market share and increasing
customer satisfaction. The Company is encouraged by the continued strength in
estimated housing starts, new home sales, retail spending and consumer
confidence.
Working capital management has improved over the prior year and will also be a
focus of management for the remainder of 1998 as the Company utilizes the
capabilities provided by the new information technology to drive stronger
operating cash flow.
As previously announced, the Company is conducting an evaluation of the
strategic alternatives available to reduce its exposure to highly volatile raw
material pricing. This evaluation process is continuing.
These forward-looking comments are subject to the cautionary limitations in
connection with the `safe-harbor' provisions of the Private Securities
Litigation Reform Act of 1995 which are provided in the Company's report on Form
10-K filed in February 1998.
-7-
<PAGE> 8
PART II
ITEM 1 - LEGAL PROCEEDINGS
The Company is a party to various claims and matters of litigation incidental to
the normal course of its business. Management believes that the final resolution
of these matters will not have a material adverse effect on the Company's
financial position.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
11 Compilation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K. There were no reports on Form 8-K filed for
the three months ended April 4, 1998.
-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: By /s/ James J. Abel
------------ ---------------------------------------------------------
James J. Abel
Executive Vice President, Secretary, Treasurer and
Chief Financial Officer
-9-
<PAGE> 1
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
EXHIBIT (11) - EARNINGS-PER-SHARE-CALCULATION
The following table sets forth the computation of basic and diluted earnings per
share:
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
-------------------------------
1998 1997
----------- --------------
<S> <C> <C>
BASIC (LOSS) EARNINGS-PER-SHARE-COMPUTATION
-------------------------------------------
Net (Loss) Income $ (326) $ 2,157
=========== ==============
Average Common Shares Oustanding 13,416 13,306
=========== ==============
Basic (Loss) Earnings Per Share $ (0.02) 0.16
=========== ==============
DILUTED (LOSS) EARNINGS PER SHARE COMPUTATION
---------------------------------------------
Net (Loss) Income $ (326) $ 2,157
=========== ==============
Basic Shares Oustanding 13,416 13,306
Stock Options Calculated Under the Treasury Stock Method - 240
----------- --------------
Total Shares 13,416 13,546
Diluted (Loss) Earnings Per Share $ (0.02) $ 0.16
=========== ==============
</TABLE>
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000057497
<NAME> THE LAMSON & SESSIONS CO.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> JAN-04-1998
<PERIOD-END> APR-04-1998
<EXCHANGE-RATE> 1
<CASH> 773
<SECURITIES> 0
<RECEIVABLES> 38,939
<ALLOWANCES> 0
<INVENTORY> 45,933
<CURRENT-ASSETS> 96,683
<PP&E> 111,322
<DEPRECIATION> 56,777
<TOTAL-ASSETS> 166,187
<CURRENT-LIABILITIES> 53,395
<BONDS> 52,666
0
0
<COMMON> 1,342
<OTHER-SE> 35,322
<TOTAL-LIABILITY-AND-EQUITY> 166,187
<SALES> 64,794
<TOTAL-REVENUES> 64,794
<CGS> 52,536
<TOTAL-COSTS> 52,536
<OTHER-EXPENSES> 11,447
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,137
<INCOME-PRETAX> (326)
<INCOME-TAX> 0
<INCOME-CONTINUING> (326)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (326)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
