-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bp1cPbI0VIMnGx8FflZjDOaYNwPb8sQtu6I5phGBXqldOsKJfPctS/lRSRNbpK/l C+TknmwlyV7+LkHmrG2YSA== 0000950152-99-004693.txt : 19990519 0000950152-99-004693.hdr.sgml : 19990519 ACCESSION NUMBER: 0000950152-99-004693 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAMSON & SESSIONS CO CENTRAL INDEX KEY: 0000057497 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 340349210 STATE OF INCORPORATION: OH FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00313 FILM NUMBER: 99629800 BUSINESS ADDRESS: STREET 1: 25701 SCIENCE PARK DR CITY: CLEVELAND STATE: OH ZIP: 44122-7313 BUSINESS PHONE: 2164643400 MAIL ADDRESS: STREET 1: 25701 SCIENCE PARK DR CITY: CLEVELAND STATE: OH ZIP: 44122 10-Q 1 THE LAMSON & SESSIONS CO. 10-Q 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 3, 1999 ------------- 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 44122-7313 - ---------------------------------------- --------------------------------- (Address of principal executive offices) (Zip Code) 216/464-3400 ------------------------------------------------------------ (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No ---- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: As of April 3, 1999 the Registrant had outstanding 13,444,534 common shares. -1- 2 PART I ITEM 1 - FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THE LAMSON & SESSIONS CO. AND SUBSIDIARIES (IN THOUSANDS, EXCEPT PER SHARE DATA)
FIRST QUARTER ENDED ---------------------- 1999 1998 -------- -------- NET SALES $ 67,198 $ 64,794 Cost of products sold 51,746 51,421 -------- -------- GROSS PROFIT 15,452 13,373 Operating expenses 12,601 12,562 -------- -------- OPERATING INCOME 2,851 811 Interest 827 1,137 -------- -------- INCOME (LOSS) BEFORE INCOME TAXES 2,024 (326) Income tax benefit 700 -- -------- -------- NET INCOME (LOSS) $ 2,724 $ (326) ======== ======== BASIC EARNINGS (LOSS) PER COMMON SHARE $ 0.20 $ (0.02) ======== ======== DILUTED EARNINGS (LOSS) PER COMMON SHARE $ 0.20 $ (0.02) ======== ======== AVERAGE COMMON SHARES 13,445 13,416 ======== ========
See Notes to Consolidated Financial Statements (Unaudited) -2- 3 CONSOLIDATED BALANCE SHEETS (UNAUDITED) THE LAMSON & SESSIONS CO. AND SUBSIDIARIES (DOLLARS IN THOUSANDS)
FIRST QUARTER FIRST QUARTER ENDED YEAR END ENDED ----------------------------------- 1999 1998 1998 ----------------------------------- ASSETS CURRENT ASSETS Cash $ 703 $ 1,937 $ 773 Accounts receivable 40,237 35,080 38,939 Inventories Finished goods and work-in-process 38,968 33,873 40,721 Raw materials and supplies 4,625 5,289 5,212 --------- --------- --------- 43,593 39,162 45,933 Deferred tax asset 6,057 6,057 5,357 Prepaid expenses and other 2,616 1,739 5,681 --------- --------- --------- TOTAL CURRENT ASSETS 93,206 83,975 96,683 PENSION ASSETS 15,748 15,347 11,700 OTHER ASSETS 11,615 10,610 9,740 PROPERTY, PLANT AND EQUIPMENT 115,565 113,842 111,322 Less allowances for depreciation and amortization 64,668 63,107 56,777 --------- --------- --------- 50,897 50,735 54,545 --------- --------- --------- TOTAL ASSETS $ 171,466 $ 160,667 $ 172,668 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 24,993 $ 20,077 $ 24,189 Accrued expenses and other liabilities 18,957 19,648 21,981 Taxes 3,586 3,705 3,430 Current maturities of long-term debt 3,886 3,848 3,795 --------- --------- --------- TOTAL CURRENT LIABILITIES 51,422 47,278 53,395 LONG-TERM DEBT 44,843 40,807 52,666 POST-RETIREMENT BENEFITS AND OTHER LONG-TERM LIABILITIES 28,357 28,451 29,943 SHAREHOLDERS' EQUITY Common shares 1,344 1,344 1,342 Other capital 73,574 73,574 73,417 Retained earnings (deficit) (27,276) (30,000) (37,005) Accumulated other comprehensive loss (798) (787) (1,090) --------- --------- --------- 46,844 44,131 36,664 --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 171,466 $ 160,667 $ 172,668 ========= ========= =========
See Notes to Consolidated Financial Statements (Unaudited) -3- 4 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THE LAMSON & SESSIONS CO. AND SUBSIDIARIES (DOLLARS IN THOUSANDS)
FIRST QUARTER ENDED ------------------- 1999 1998 ------- -------- OPERATING ACTIVITIES Net income (loss) $ 2,724 $ (326) Adjustments to reconcile net income (loss) to cash used by operations: Depreciation and amortization 2,507 2,682 Deferred income tax benefit (700) - Net change in working capital accounts: Accounts receivable (5,157) (5,988) Inventories (4,431) (358) Prepaid expenses and other (877) 593 Current liabilities 4,106 (4,221) Net change in other long-term items (911) (214) ------- ------- CASH USED BY OPERATING ACTIVITIES (2,739) (7,832) INVESTING ACTIVITIES Net purchases of property, plant and equipment (2,569) (804) ------- ------- CASH USED BY INVESTING ACTIVITIES (2,569) (804) FINANCING ACTIVITIES Net change in secured credit agreement 4,190 8,081 Net changes in long-term borrowing and capital lease obligations (116) (91) Exercise of stock options - 9 ------- ------- CASH PROVIDED BY FINANCING ACTIVITIES 4,074 7,999 DECREASE IN CASH (1,234) (637) Cash at beginning of year 1,937 1,410 ------- ------- CASH AT END OF THE PERIOD $ 703 $ 773 ======= =======
See Notes to Consolidated Financial Statements (Unaudited) -4- 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 1998 amounts have been reclassified to conform with 1999 classifications. NOTE B - INCOME TAXES The difference in the first quarter of 1999 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 loss carryforwards. NOTE C - BUSINESS SEGMENTS The Company's reportable segments are as follows: CARLON - INDUSTRIAL, RESIDENTIAL, COMMERCIAL, TELECOMMUNICATIONS AND UTILITY CONSTRUCTION: The major customers served are electrical contractors and distributors, original equipment manufacturers, electric power utilities, cable television (CATV), telephone and telecommunications companies. The principal products sold to this segment include rigid conduit, electrical and wire raceway systems and a broad line of nonmetallic enclosures, outlet boxes and electrical fittings. Examples of the applications for the products included in this segment 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 allowing future cabling expansion and flexible conduit used inside buildings to protect communications cable. LAMSON HOME PRODUCTS - CONSUMER: The major customers served are home centers and mass merchandisers for the "do-it-yourself" home repair market. The products included in this segment are 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. LAMSON VYLON PIPE - ENGINEERED SEWER PRODUCTS: Provides engineered sewer products to various municipalities and private contractors for drainage systems and sewer construction and rehabilitation. Principal products utilized by this segment include closed profile engineered sewer pipe for new sewer construction and existing sewer line rehabilitation. The products range in diameter from 4 to 54 inches. -5- 6 THE LAMSON & SESSIONS CO. AND SUBSIDIARIES NOTE C - BUSINESS SEGMENTS - CONTINUED (UNAUDITED) (DOLLARS IN THOUSANDS)
FIRST QUARTER FIRST QUARTER ------------- ------------- 1999 1998 ------------- ------------- NET SALES Carlon $ 47,166 $ 45,902 Lamson Home Products 14,198 14,829 Lamson Vylon Pipe 5,834 4,063 --------- --------- $ 67,198 $ 64,794 ========= ========= OPERATING INCOME (LOSS) Carlon $ 4,168 $ 3,116 Lamson Home Products 497 (314) Lamson Vylon Pipe 549 (2) Corporate Office (2,363) (1,989) --------- --------- $ 2,851 $ 811 ========= ========= IDENTIFIABLE ASSETS Carlon $ 86,724 $ 89,498 Lamson Home Products 35,321 37,456 Lamson Vylon Pipe 15,894 15,830 Corporate Office 33,527 29,884 --------- --------- $ 171,466 $ 172,668 ========= ========= DEPRECIATION AND AMORTIZATION Carlon $ 1,465 $ 1,577 Lamson Home Products 724 764 Lamson Vylon Pipe 318 341 --------- --------- $ 2,507 $ 2,682 ========= =========
-6- 7 THE LAMSON & SESSIONS CO. AND SUBSIDIARIES NOTE D - COMPREHENSIVE INCOME The components of comprehensive income (loss) for the first quarter of 1999 and 1998 are as follows: (DOLLARS IN THOUSANDS)
FIRST QUARTER ENDED APRIL 3, 1999 APRIL 4, 1998 ------------------ ----------------- Net income (loss) $ 2,724 $ (326) Foreign currency translation adjustments (11) - ------------------ ----------------- Comprehensive income (loss) $ 2,713 $ (326) ================== =================
The components of accumulated comprehensive loss, at April 3, 1999 and January 2, 1999, are as follows: (DOLLARS IN THOUSANDS)
April 3, 1999 January 2, 1999 ------------------ --------------------- Foreign currency translation adjustments $ (362) $ (351) Minimum pension liability adjustments (436) (436) ------------------ --------------------- Accumulated other comprehensive loss $ (798) $ (787) ================== =====================
-7- 8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONSOLIDATED STATEMENTS OF OPERATIONS Sales for the quarter increased by 3.7% compared to the prior year quarter. The largest increase, 43.6%, came from the Lamson Vylon Pipe segment as the unit's slipliner sewer rehabilitation products enjoyed strong shipments from backlog as project construction schedules avoided weather delays. The Carlon segment increased sales by almost 3% led primarily by gains in molded and specialty extrusion products. Overall rigid pipe volume was up by 2.2% but experienced lower pricing of 5.3% compared to the prior year quarter. Sales for Lamson Home Products declined by 4.3% from last year's first quarter. During 1998 several low-margin product groups were eliminated which lowered the segment revenue levels but favorably impacted its profitability. Gross margin improved by 11.4% to 23% in the first quarter 1999 compared to the first quarter 1998. The 1999 results included a restructuring charge of $527,000 related to the consolidation of distribution centers. Favorable product mix, higher utilization of capacity and tight plant and distribution spending controls contributed to this dramatic improvement. Operating expenses stayed constant with 1998 levels which resulted in a decline in their percentage of sales from 19.4% to 18.8%. Higher commission expenses were offset by reductions in other general and administrative expenses. Lower outstanding debt levels resulted in the decrease in interest expense compared to the first quarter 1998. CONSOLIDATED BALANCE SHEETS Accounts receivable increased $5.2 million compared to year-end levels due to higher sales in the current quarter. Although receivables were higher by $1.3 million compared to the prior year quarter, days sales outstanding improved from 57 days in 1998 to 50 days in the current quarter. Inventory was up $4.4 million from year-end but $2.3 million lower than the prior year quarter. This reflects the buildup of inventory heading into the construction season and also improved inventory control. Accounts payable are higher by $4.9 million from year-end and approximately equal to the prior year quarter. This increase is attributable to the funding of the inventory build. CONSOLIDATED STATEMENTS OF CASH FLOWS Cash used by operations was $2.7 million in 1999 compared to $7.8 million in the prior year quarter. The operating cash used was primarily caused by the seasonal increase in accounts receivable. Operating cash flow improved by $5.1 million over this same period last year due to improved earnings and lower paydown of current liabilities required. Cash used in investing activities increased significantly from the prior year first quarter as the Company prepared its new South Carolina distribution center for operations and increased the capacity of its molding operations. The Company believes that it has sufficient credit available to support the operating needs of the business and also fund capital projects. Alternative financing opportunities continue to be evaluated consistent with the Company's growth requirements. -8- 9 YEAR 2000 COMPLIANCE As is the case with most other companies utilizing information technology systems in their businesses, the Company is in the process of evaluating and addressing Year 2000 ("Y2K") Compliance of its information technology systems as set forth below. These efforts are designed to identify, address and resolve issues that may be created by information technology systems written using two digits rather than four to define the applicable year. This could result in a systems failure or miscalculations causing disruption of operations, including, among other things, a temporary inability to process transactions, invoices or engage in other normal business activities. In 1995, the Company began a comprehensive review of the operating systems which underlie its ability to conduct daily business activity. Over the next three years, concluding in 1997, the Company spent in excess of $15 million to replace its core business operations and communications software systems; virtually all of the computer and telecommunications hardware; and re-engineered or adopted best practices throughout its business process activities. The primary impetus for this investment was to support the attainment of strategic business objectives and to address Y2K concerns concurrently. This investment included a significant commitment to electronic commerce activities with our customers and manufacturers sales representative organizations. In addition, the Company has implemented extensive education and skill development programs to provide for continued knowledge transfer, ongoing support and functionality development. During 1998, the Company authorized an independent audit of all software and facilities equipment at each of its business sites to identify potential areas of exposure, representing a continuing proactive investment in addressing Y2K concerns. As a followup to this audit, a Y2K cross-functional team was formed to monitor and assess official compliance statements from our software and equipment vendors and to initiate remediation activities at the non-compliant sites where potentially there could be a material impact on our business. In addition, the Company has contacted our significant customers and suppliers to inform them of our compliance status, to determine their state of readiness and to identify any subsequent actions which may be needed by us. Current analysis indicates that our core business information system, to the best of our knowledge, is Y2K compliant. As we address potential areas of non-compliance, we are evaluating and prioritizing them on the basis of their materiality to our business. We are utilizing existing staff in the respective functional areas to assist in this evaluation process and take appropriate corrective action. We do not expect to incur significant additional costs based on what has been identified to date. We will continue our compliance investigation and develop contingency plans where necessary. We plan to complete the assessment phase by end of second quarter 1999, and expect to achieve Y2K readiness on our internal computer systems and facilities equipment by end of third quarter 1999. While the information we have received regarding third-party systems, on which the Company's systems rely, indicates that they are or will be Y2K compliant, we cannot guarantee this, nor can we estimate at this time any material effect on our Company and its operations if this would not be the case. The Company continues its aggressive assessment of these potential third-party exposures and will address the issues accordingly. -9- 10 However, our ability to achieve these dates may be impacted by (i) the timely availability of software patches by existing suppliers of software, (ii) the Company's ability to employ and retain qualified professionals to handle Year 2000 issues, (iii) the ability of third parties to complete their own Year 2000 compliance remediation efforts on a timely basis and (iv) the Company's ability to prepare and implement contingency plans. OUTLOOK The Company experienced a favorable product mix in the first quarter of 1999. Construction spending, new home sales and retail sales continue to maintain their strength heading into the 1999 construction season. Resin prices have experienced a moderate increase throughout the first quarter and into the second quarter of 1999. In order to continue the improved margins seen in year-to-date results, the Company will attempt to pass these price increases on to customers. The Company continues to make service improvements at its new South Carolina distribution center, with initial shipments to customers beginning in February. By all indications, the consolidation of the remaining East Coast distribution centers should be successfully completed by the end of the second quarter. As previously disclosed, the Company will incur a pre-tax restructuring charge of $1.2 million to $1.5 million, or 9 to 11 cents per diluted share, related to the consolidation of these distribution centers in the second quarter of 1999. The Company has already recorded charges related to this restructuring, totally $800,000 and $527,000 in the fourth quarter of 1998 and first quarter of 1999, respectively. If the Company is able to pass on resin price increases, it is expected to have sales growth and improvement in gross profit and operating income prior to restructuring charges for the remainder of 1999 compared to 1998. The Company announced, on April 19, 1999, the termination by the buyer of the agreement to acquire its PVC Pipe Business. The PVC business has been performing well, and the Company intends to operate the business in the best interests of the shareholders, customers and associates while it continues to pursue the sale of the business. The foregoing outlook contains expectations that involve risks and uncertainties 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 polyvinyl chloride resin pricing, (ii) the ability of the Company to pass through raw material cost increases to its customers, (iii) maintaining the current level of housing starts, consumer confidence and general construction trends and (iv) a reversal in the country's general pattern of economic improvement affecting the markets for the Company's products. -10- 11 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 affect on the Company's financial position. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. 11 Computation of Earnings Per Common 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 3, 1999. -11- 12 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) James J. Abel DATE: May 18, 1999 By /s/_____________________________________ James J. Abel Executive Vice President, Secretary, Treasurer and Chief Financial Officer -12- EX-11 2 EXHIBIT 11 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)
FIRST QUARTER ENDED ------------------- 1999 1998 ------------------- BASIC EARNINGS (LOSS)-PER-SHARE COMPUTATION - ------------------------------------------- Net Income (Loss) $ 2,724 $ (326) ======== ======== Average Common Shares Oustanding 13,445 13,416 ======== ======== Basic Earnings (Loss) Per Share $ 0.20 $ (0.02) ======== ======== DILUTED EARNINGS (LOSS)-PER-SHARE COMPUTATION - --------------------------------------------- Net Income (Loss) $ 2,724 $ (326) ======== ======== Basic Shares Oustanding 13,445 13,416 Stock Options Calculated Under the Treasury Stock Method 14 - -------- -------- Total Shares 13,459 13,416 Diluted Earnings (Loss) Per Share $ 0.20 $ (0.02) ======== ========
-13- EX-27 3 EXHIBIT 27
5 0000057497 THE LAMSON & SESSIONS CO. 1,000 3-MOS JAN-01-2000 JAN-03-1999 APR-03-1999 703 0 40,237 0 43,593 93,206 115,565 64,668 171,466 51,422 44,843 0 0 1,344 45,500 171,466 67,198 67,198 51,746 51,746 12,601 0 827 2,024 (700) 2,724 0 0 0 2,724 $0.20 $0.20
-----END PRIVACY-ENHANCED MESSAGE-----