Lamson & Sessions Reports Strong First Quarter 2005 Results
- Net Sales Rise 19 Percent to a Record $98.8 Million
- Diluted Earnings Per Share Rose to 15 Cents for the First Quarter of
2005 Versus 12 Cents in First Quarter of 2004
- Company Expects Net Sales to Grow 10-12 Percent in 2005
- Net Income and Diluted Earnings Per Share Expected to Increase 75-100
Percent for Full Year
CLEVELAND, April 29 /PRNewswire-FirstCall/ -- Lamson & Sessions
(NYSE: LMS) today announced record net sales of $98.8 million for the first
quarter of 2005, an increase of 19.0 percent over the $83.0 million reported
in the first quarter of 2004. Net sales improved by more than 10 percent in
each of the Company's three business segments as sales order rates
strengthened in its key markets of residential, commercial, industrial,
utility and telecom infrastructure construction.
Net income for the first quarter of 2005 rose to $2.2 million, or 15 cents
per diluted share, compared with $1.7 million, or 12 cents per diluted share,
in the first quarter of 2004. The prior-year first quarter includes income
from discontinued operations of $401,000 (net of tax), or 3 cents per diluted
share. Net income from continuing operations in the prior-year first quarter
was $1.3 million, or 9 cents per diluted share, which amount includes pretax
income of $924,000 ($554,000 net of tax, or 4 cents per diluted share) from
the gain on the sale of a manufacturing facility, and a $300,000 ($180,000 net
of tax, or 1 cent per diluted share) recovery from the Adelphia bankruptcy.
"We are pleased to see improving demand activity across several of our
markets, particularly in telecom infrastructure and non-residential
construction," said John B. Schulze, Chairman, President and Chief Executive
Officer. "These improving market conditions have allowed us to recover part of
the significant increases which we continue to experience in our raw material
costs."
The Company's gross margin improved to 17.2 percent in the first quarter
of 2005, from 16.0 percent in the first quarter of 2004. This improvement was
primarily due to a more favorable product mix, higher sales prices and
productivity improvements in the Company's operating facilities.
Operating expenses increased 12.2 percent to $11.4 million in the first
quarter, compared with $10.1 million in the prior-year first quarter,
reflecting higher selling and marketing costs to support the significantly
higher net sales level. As a percent of sales, operating expense for the
first quarter of 2005 decreased to 11.5 percent from the 12.2 percent level
reported in the first quarter of 2004.
Business Segments
All three of the Company's business segments experienced net sales growth
in excess of 10 percent and were profitable in the first quarter of 2005.
Carlon reported net sales growth greater than 23 percent primarily due to
a 35 percent growth rate in telecom product sales supporting the industry's
fiber-to-the-premise projects, and some strengthening in non-residential
construction activity. This improved demand has allowed Carlon to recover
some of the increases in raw material costs it is experiencing. Despite the
increased sales, Carlon's operating income was virtually flat in the first
quarter of 2005 compared with the prior-year period, which reflects the
challenge of recovering the higher raw material costs.
Lamson Home Products' net sales rose by 21.3 percent in the first quarter
of 2005, compared with the first quarter of 2004, primarily due to product
line expansions at key accounts and higher selling prices, which allowed the
business segment to recover a portion of the higher raw material costs it is
experiencing. Lamson Home Products' operating income rose to $3.6 million as
a result of improved product mix, restrained growth in distribution costs and
a partial recovery of higher raw material costs.
PVC Pipe net sales grew by 10.1 percent to $27.6 million due to higher
selling prices for electrical conduit and a favorable product mix of large
diameter sewer pipe. The business segment's operating income rose above the
breakeven level for the first time in several quarters. This improvement is
due to a 32 percent increase in sales prices, which offset a 30 percent rise
in the cost of polyvinyl chloride (PVC) resin over the past year. The
improved operating income also reflects some of the overhead cost savings
arising from the closure of the Company's Pasadena, Texas facility in 2004.
Liquidity and Working Capital
The Company previously announced on April 13, 2005 that it has concluded
its evaluation of strategic alternatives, including the possible sale of all
or part of the Company. Based on its review, the Board decided that it would
be in the best value creation interest of Lamson's shareholders to continue
operating the Company as it is. Therefore, the Company will proceed to
refinance its secured credit agreement. The Company believes that its
improved financial results and current conditions in the commercial bank
lending market will provide the opportunity for a new credit agreement with
more favorable terms and conditions than the Company's existing credit
arrangement.
The Company continues to manage its working capital effectively, with
accounts receivable days sales outstanding currently at 47 days at the end of
the first quarter of 2005, compared with 46 days in the first quarter of 2004.
Inventory turns are at 6.6 turns at the end of the first quarter, a modest
decline from the 6.8 turns reported in the prior-year first quarter.
Inventory investment rose to $44.7 million at the end of the first quarter of
2005, an increase of more than 20 percent over the levels reported in the
first and fourth quarters of 2004. The increase is entirely attributable to
higher raw material costs, as inventory units are generally unchanged.
Outlook
The Company is encouraged by the improving activity in key markets that it
experienced in the first quarter of 2005. Since the remaining quarters of the
year typically are stronger seasonally than the first quarter, the Company
expects that this growth trend will continue for the rest of the year. As a
result, the Company is anticipating net sales for the second quarter to be
between $112 million and $115 million, an increase of approximately 9-12
percent over the second quarter of 2004. The Company anticipates that this
net sales strength will result in net income of $4.1-$4.4 million, or 28-30
cents per diluted share, for the second quarter. This earnings range
represents a 47-58 percent increase over the 19 cents per diluted share
reported for the second quarter of 2004.
For the full year 2005, the Company is raising its net sales forecast to
$425-$435 million, from its previous forecast of $420-$430 million. The new
forecast represents an increase of approximately 10-12 percent over the $387.1
million reported for 2004. If this net sales level is achieved, the Company
projects net income of $11.5-$13.0 million, or 80-90 cents per diluted share,
for the full year, up from its previous estimate of 70-80 cents. The new
estimated earnings range represents an increase of 75-100 percent over the
$6.5 million, or 46 cents per diluted share, reported for 2004.
Conference Call
A live Internet broadcast of the Company's conference call regarding its
first quarter financial performance can be accessed via the Investor Relations
page on the Company's Web site ( www.lamson-sessions.com ) at 2:00 p.m.
Eastern Time on Friday, April 29, 2005.
Lamson & Sessions is a leading producer of thermoplastic enclosures,
fittings, wiring outlet boxes and conduit for the electrical,
telecommunications, consumer, power and wastewater markets. For additional
information, please visit our Web site at: www.lamson-sessions.com .
This press release contains forward-looking statements 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 resin
pricing, (ii) the ability of the Company to pass through raw material cost
increases to its customers, (iii) maintaining a stable level of housing
starts, telecommunications infrastructure spending, consumer confidence and
general construction trends, (iv) the continued availability and reasonable
terms of bank financing and the outcome and effects of the Company's
refinancing efforts and (v) any adverse change in the recovery trend of the
country's general economic condition affecting the markets for the Company's
products. Because forward-looking statements are based on a number of
beliefs, estimates and assumptions by management that could ultimately prove
to be inaccurate, there is no assurance that any forward-looking statement
will prove to be accurate.
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
First Quarter Ended
2005 2004
NET SALES $98,792 100.0% $82,995 100.0%
COST OF PRODUCTS SOLD 81,815 82.8% 69,677 84.0%
GROSS PROFIT 16,977 17.2% 13,318 16.0%
SELLING AND MARKETING EXPENSES 7,074 7.1% 5,801 7.0%
GENERAL AND ADMINISTRATIVE EXPENSES 3,812 3.9% 3,793 4.6%
RESEARCH AND DEVELOPMENT 476 0.5% 528 0.6%
OPERATING EXPENSES 11,362 11.5% 10,122 12.2%
OTHER (INCOME), NET - 0.0% (924) -1.2%
OPERATING INCOME 5,615 5.7% 4,120 5.0%
INTEREST 2,002 2.0% 1,955 2.4%
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 3,613 3.7% 2,165 2.6%
INCOME TAX PROVISION 1,409 1.5% 866 1.0%
INCOME FROM CONTINUING OPERATIONS 2,204 2.2% 1,299 1.6%
INCOME FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAX OF $256 - 0.0% 401 0.4%
NET INCOME $2,204 2.2% $1,700 2.0%
BASIC EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.16 $0.09
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX - 0.03
NET EARNINGS $0.16 $0.12
AVERAGE SHARES OUTSTANDING 13,999 13,787
DILUTED EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.15 $0.09
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX - 0.03
NET EARNINGS $0.15 $0.12
DILUTED AVERAGE SHARES OUTSTANDING 14,548 13,958
NOTE: Certain amounts in the prior periods have been reclassified to
conform with current period presentations.
THE LAMSON & SESSIONS CO.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
Quarter Quarter
Ended Year Ended Ended
April 2, January 1, April 3,
2005 2005 2004
ACCOUNTS RECEIVABLE, NET $53,020 $48,391 $50,612
INVENTORIES, NET 44,738 36,860 36,397
OTHER CURRENT ASSETS 13,471 15,494 14,347
PROPERTY, PLANT AND EQUIPMENT, NET 47,835 47,961 48,508
GOODWILL 21,480 21,480 21,519
PENSION ASSETS 30,693 30,513 30,140
OTHER ASSETS 18,270 17,803 22,420
TOTAL ASSETS $229,507 $218,502 $223,943
ACCOUNTS PAYABLE $31,598 $24,213 $31,258
SECURED CREDIT AGREEMENT - CURRENT 80,795 75,000 10,764
OTHER CURRENT LIABILITIES 26,092 31,899 28,329
LONG-TERM DEBT 11,682 11,876 84,104
OTHER LONG-TERM LIABILITIES 30,322 30,138 29,181
SHAREHOLDERS' EQUITY 49,018 45,376 40,307
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $229,507 $218,502 $223,943
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(In thousands)
First Quarter Ended
2005 2004
OPERATING ACTIVITIES
NET INCOME $2,204 $1,700
ADJUSTMENTS TO RECONCILE NET INCOME
TO CASH USED IN OPERATING ACTIVITIES:
DEPRECIATION 2,270 2,328
AMORTIZATION 403 400
GAIN ON SALE OF FIXED ASSETS - (924)
DEFERRED INCOME TAXES 723 957
NET CHANGE IN WORKING CAPITAL ACCOUNTS:
ACCOUNTS RECEIVABLE (4,629) (12,416)
INVENTORIES (7,878) (6,254)
PREPAID EXPENSES AND OTHER 571 (1,553)
ACCOUNTS PAYABLE 7,385 14,330
ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES (5,546) (660)
PENSION PLAN CONTRIBUTIONS (315) (81)
OTHER LONG-TERM ITEMS 406 (222)
CASH USED IN OPERATING ACTIVITIES (4,406) (2,395)
INVESTING ACTIVITIES
NET ADDITIONS TO PROPERTY, PLANT,
AND EQUIPMENT (2,144) (55)
PROCEEDS FROM SALE OF FIXED ASSETS - 1,536
ACQUISITIONS AND RELATED ITEMS (62) (62)
CASH (USED) PROVIDED BY INVESTING
ACTIVITIES (2,206) 1,419
FINANCING ACTIVITIES
NET BORROWINGS UNDER SECURED CREDIT
AGREEMENT 5,795 1,064
PAYMENTS ON OTHER LONG-TERM
BORROWINGS (194) (186)
EXERCISE OF STOCK OPTIONS 1,071 -
CASH PROVIDED BY FINANCING ACTIVITIES 6,672 878
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 60 (98)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 683 468
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $743 $370
THE LAMSON & SESSIONS CO.
BUSINESS SEGMENTS
(In thousands)
First Quarter Ended
2005 2004
NET SALES
CARLON $47,203 $38,163
LAMSON HOME PRODUCTS 23,971 19,754
PVC PIPE 27,618 25,078
$98,792 $82,995
OPERATING INCOME (LOSS)
CARLON $3,624 $3,639
LAMSON HOME PRODUCTS 3,543 2,384
PVC PIPE 13 (1,187)
CORPORATE OFFICE (1,565) (1,640)
OTHER INCOME - 924
$5,615 $4,120
DEPRECIATION AND AMORTIZATION
CARLON $1,269 $1,397
LAMSON HOME PRODUCTS 462 470
PVC PIPE 942 861
$2,673 $2,728
TOTAL ASSETS BY BUSINESS SEGMENT AT APRIL 2, 2005 AND JANUARY 1, 2005
April 2, 2005 January 1, 2005
IDENTIFIABLE ASSETS
CARLON $81,897 $77,473
LAMSON HOME PRODUCTS 35,217 34,190
PVC PIPE 51,177 44,650
CORPORATE OFFICE (INCLUDES CASH,
DEFERRED TAX, AND PENSION ASSETS) 61,216 62,189
$229,507 $218,502
SOURCE Lamson & Sessions Co.
/CONTACT: James J. Abel, Executive Vice President and Chief Financial
Officer of Lamson & Sessions, +1-216-766-6557/
/Web site: http://www.lamson-sessions.com /
(LMS)
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