Lamson & Sessions Reports Record Second Quarter 2006 Results
- Net Sales Increase 31 Percent in Second Quarter and 34 Percent in First
Half of 2006
- Second Quarter Net Income of 87 Cents Per Diluted Share, up from 35
Cents in Prior-year Quarter
- Carlon and PVC Pipe Segments Experience Strong Demand
- Company Raises 2006 Net Income Estimate to $2.50 to $2.60 per Diluted
Share
CLEVELAND, July 27 /PRNewswire-FirstCall/ -- Lamson & Sessions (NYSE: LMS)
today announced record net sales of $162.3 million for the second quarter of
2006, an increase of 30.9 percent from $124.0 million in the second quarter of
2005.
Net income was $14.0 million for the second quarter, or 87 cents per
diluted share, an increase of 169.2 percent compared with $5.2 million, or 35
cents per diluted share, for the prior-year quarter.
"We experienced strong demand in the Carlon and PVC Pipe business segments
as telecom infrastructure spending was steady and the commercial and
industrial construction markets expanded," said John B. Schulze, Chairman,
President and Chief Executive Officer. "Strong markets combined with our
ongoing operating improvements are continuing to produce excellent results for
our Company."
Gross profit for the quarter was $40.1 million, or 24.7 percent of net
sales, compared with $23.0 million, or 18.6 percent of net sales, in the
second quarter of 2005. The increase reflects the net sales growth in the
Company's Carlon and PVC Pipe business segments, a more favorable product mix
and improved utilization of manufacturing facilities.
Operating income for the second quarter was $23.6 million, or 14.5 percent
of net sales, an increase of 120 percent from the $10.7 million, or 8.6
percent of net sales, reported in the second quarter of 2005.
Operating expenses of $16.5 million, or 10.2 percent of net sales, for the
current quarter were 34.2 percent higher than the $12.3 million, or 10.0
percent of net sales, incurred in the prior-year second quarter, due
primarily to higher variable selling and marketing expenses. In addition,
legal and professional expenses were approximately $1.0 million higher than
last year's quarter because of increased professional fees, due diligence
assistance for potential acquisitions and activities related to Sarbanes-Oxley
compliance.
For the first six months of 2006, net sales were $297.7 million, an
increase of 33.6 percent from $222.8 million in the first half of 2005. Net
income was $23.2 million, or $1.45 per diluted share, for the six-month
period, up 213.5 percent from $7.4 million, or 51 cents per diluted share, a
year ago. These improved results benefited from increased sales and operating
activity in the Carlon and PVC Pipe segments, along with across-the-board
price increases that occurred early in 2006, which helped offset higher raw
material costs.
Interest expense of $1.1 million and $2.2 million for the second quarter
and first half of 2006, respectively, was approximately half of what was
reported in the year-earlier periods. This decline reflects the Company's
lower debt level and improved performance, which has lowered the interest rate
spread under the terms of the Company's Secured Credit Agreement.
Business Segments
The Carlon business segment continued to experience the effects of
expanding commercial, industrial and telecom infrastructure construction
markets. Net sales for this segment improved to $77.3 million in the second
quarter of 2006, a 31.0 percent increase from $59.0 million in the prior-year
quarter. Operating income rose 76.2 percent to $13.8 million, or 17.9 percent
of net sales, compared with $7.8 million, or 13.3 percent of net sales, in the
second quarter of 2005. Gross profit improved by approximately $7.0 million
compared with the prior-year second quarter due to higher sales volume,
improved manufacturing utilization, selling price increases that helped offset
material cost increases, and a more favorable product mix. For the first half
of 2006, net sales increased to $141.4 million, up 33.1 percent from the year-
ago period, and operating income rose 87.6 percent to $21.5 million.
Net sales for the Lamson Home Products business segment increased 2.0
percent to $26.9 million in the second quarter of 2006, compared with $26.4
million in the prior-year quarter. Price increases obtained in the first
quarter of 2006 and improved product mix offset an approximate 5 percent
decline in unit volume due to reduced demand from the residential construction
and do-it-yourself home improvement markets. Operating income was $4.1
million, compared with $4.6 million in the second quarter of 2005. For the
year to date, net sales were $53.9 million, a 7.0 percent increase from $50.3
million in the first half of 2005, while operating income was $6.7 million,
compared with $8.1 million for the year-ago period, as price increases did not
fully offset the raw material cost increases.
Net sales for the PVC Pipe segment remained very strong in the second
quarter as the weather on the West Coast improved and the commercial and
industrial construction market demand remained robust. Net sales increased
50.5 percent to $58.1 million, from $38.6 million in the second quarter of
2005. Gross margin was favorably impacted by sales price increases which
exceeded the average PVC resin cost increases. Operating income for the
segment was $9.6 million, up from essentially break-even in the prior-year
quarter. For the first six months of 2006, net sales were $102.5 million, an
increase of 54.7 percent from a year ago, while operating income was $18.5
million, compared with break-even a year ago.
Financial Highlights
Accounts receivable rose to $88.7 million and 48 days sales outstanding at
the end of the second quarter, reflecting the strength in net sales growth.
For the second quarter of 2005, accounts receivable totaled $64.4 million and
46.6 days sales outstanding.
Inventory increased to $53.6 million at the end of the second quarter as a
result of higher raw material costs compared with the $43.2 million at the end
of the second quarter of 2005. Inventory turns remained at 8.1 times for both
periods.
The Company's long-term debt was $50.8 million at July 1, 2006, which is a
reduction of approximately $40 million from the $90.6 million reported at July
2, 2005. This improvement is due to the Company's strong operating cash flow
generated over the last year.
Outlook
The Company has been encouraged by the sales order demand experienced in
the first half of 2006 and expects the third quarter to continue to display
strong growth compared with the third quarter of 2005. The non-residential
construction market has exhibited strength in all geographic regions of the
country and this trend is expected to continue in the second half of 2006 as
well. Historically, the telecom infrastructure market has shown greater
demand activity for the Company's products in the first half of the year and
this pattern is expected to recur in 2006 as well. The residential
construction market as measured by new housing starts has moderated to a more
sustainable level of approximately 1.8 million units from record levels of
more than 2 million units in 2005. In addition, the utility distribution
market is displaying renewed strength as a result of the latest transportation
spending authorization bill approved by Congress.
As a result, the Company is anticipating that net sales for the third
quarter of 2006 will range from $152 million to $155 million, which represents
an increase of 19 to 21 percent over the third quarter of 2005. This level of
net sales should result in net income of $11.2 million to $12.1 million, or 70
to 75 cents per diluted share, for the third quarter of 2006 which is more
than double the 35 cents per diluted share reported in the third quarter of
2005.
For the full year 2006, the Company continues to estimate a net sales
range of $575 million to $585 million reflecting the improved conditions
experienced in key end markets of commercial and telecom infrastructure
construction throughout the year. Based on this estimated net sales range and
the expectation that margins in the PVC Pipe business segment will continue to
moderate slowly, the Company now estimates that net income will reach a record
$40 million to $42 million, or $2.50 to $2.60 per diluted share in 2006, up
from the Company's previous estimate of $2.25 to $2.30 per diluted share. The
newly estimated net income level is a 46 to 53 percent increase over the $27.4
million, or $1.82 per diluted share, reported for 2005.
Conference Call
A live Internet broadcast of the Company's conference call regarding its
second quarter 2006 financial performance can be accessed via the investor
relations page on the Company's Web site (http://www.lamson-sessions.com) at
2:00 p.m. Eastern Time on Thursday, July 27, 2006.
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: http://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) the continued availability of raw materials
and consistent electrical power supplies, (iv) maintaining a stable level of
housing starts, telecommunications infrastructure spending, consumer
confidence and general construction trends and (v) any adverse change in 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)
Second Quarter Ended
2006 2005
NET SALES $162,313 100.0% $124,010 100.0%
COST OF PRODUCTS SOLD 122,241 75.3% 100,995 81.4%
GROSS PROFIT 40,072 24.7% 23,015 18.6%
SELLING AND MARKETING EXPENSES 9,564 6.0% 7,528 6.1%
GENERAL AND ADMINISTRATIVE EXPENSES 6,396 3.9% 4,326 3.5%
RESEARCH AND DEVELOPMENT 562 0.3% 462 0.4%
OPERATING EXPENSES 16,522 10.2% 12,316 10.0%
OPERATING INCOME 23,550 14.5% 10,699 8.6%
INTEREST 1,131 0.7% 2,211 1.8%
INCOME BEFORE INCOME TAXES 22,419 13.8% 8,488 6.8%
INCOME TAX PROVISION 8,430 5.2% 3,261 2.6%
NET INCOME $13,989 8.6% $5,227 4.2%
BASIC EARNINGS PER SHARE $0.90 $0.37
AVERAGE SHARES OUTSTANDING 15,519 14,146
DILUTED EARNINGS PER SHARE $0.87 $0.35
DILUTED AVERAGE SHARES OUTSTANDING 16,106 14,757
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
First Half Ended
2006 2005
NET SALES $297,714 100.0% $222,802 100.0%
COST OF PRODUCTS SOLD 226,659 76.1% 182,810 82.1%
GROSS PROFIT 71,055 23.9% 39,992 17.9%
SELLING AND MARKETING EXPENSES 18,311 6.1% 14,602 6.5%
GENERAL AND ADMINISTRATIVE EXPENSES 12,101 4.1% 8,138 3.7%
RESEARCH AND DEVELOPMENT 1,148 0.4% 938 0.4%
OPERATING EXPENSES 31,560 10.6% 23,678 10.6%
OPERATING INCOME 39,495 13.3% 16,314 7.3%
INTEREST 2,248 0.8% 4,213 1.9%
INCOME BEFORE INCOME TAXES 37,247 12.5% 12,101 5.4%
INCOME TAX PROVISION 14,038 4.7% 4,670 2.1%
NET INCOME $23,209 7.8% $7,431 3.3%
BASIC EARNINGS PER SHARE $1.51 $0.53
AVERAGE SHARES OUTSTANDING 15,419 14,073
DILUTED EARNINGS PER SHARE $1.45 $0.51
DILUTED AVERAGE SHARES OUTSTANDING 16,054 14,657
THE LAMSON & SESSIONS CO.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
Quarter Year Quarter
Ended Ended Ended
July 1, December 31, July 2,
2006 2005 2005
ACCOUNTS RECEIVABLE, NET $88,712 $68,507 $64,388
INVENTORIES, NET 53,586 43,987 43,206
OTHER CURRENT ASSETS 14,088 16,703 14,627
PROPERTY, PLANT AND EQUIPMENT, NET 51,767 48,833 47,551
GOODWILL 21,441 21,441 21,480
PENSION ASSETS 34,921 34,369 30,873
OTHER ASSETS 6,348 6,167 17,053
TOTAL ASSETS $270,863 $240,007 $239,178
ACCOUNTS PAYABLE $36,359 $30,943 $28,766
OTHER CURRENT LIABILITIES 39,694 41,035 34,770
LONG-TERM DEBT 50,816 55,026 90,562
OTHER LONG-TERM LIABILITIES 22,293 22,704 29,762
SHAREHOLDERS' EQUITY 121,701 90,299 55,318
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $270,863 $240,007 $239,178
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(In thousands)
First Half Ended
2006 2005
OPERATING ACTIVITIES
NET INCOME $23,209 $7,431
ADJUSTMENTS TO RECONCILE NET INCOME
TO CASH PROVIDED (USED) BY OPERATING
ACTIVITIES
DEPRECIATION 4,385 4,485
AMORTIZATION 106 806
STOCK-BASED COMPENSATION 1,816 -
DEFERRED INCOME TAXES 5,103 2,298
CHANGES IN OPERATING ASSETS AND
LIABILITIES
ACCOUNTS RECEIVABLE (20,205) (15,997)
INVENTORIES (9,599) (6,346)
PREPAID EXPENSES AND OTHER (446) 94
ACCOUNTS PAYABLE 5,416 4,553
ACCRUED EXPENSES AND OTHER CURRENT
LIABILITIES (3,179) (2,222)
TAX BENEFIT FROM EXERCISE OF STOCK
OPTIONS - 525
PENSION PLAN CONTRIBUTIONS (650) (697)
OTHER LONG-TERM ITEMS (206) (501)
CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 5,750 (5,571)
INVESTING ACTIVITIES
NET ADDITIONS TO PROPERTY, PLANT,
AND EQUIPMENT (7,319) (4,075)
ACQUISITIONS AND RELATED ITEMS - (124)
CASH USED IN INVESTING ACTIVITIES (7,319) (4,199)
FINANCING ACTIVITIES
NET (PAYMENTS) BORROWINGS UNDER
SECURED CREDIT AGREEMENT (4,000) 8,900
PAYMENTS ON OTHER LONG-TERM BORROWINGS (210) (214)
PURCHASE AND RETIREMENT OF TREASURY STOCK (421) -
EXERCISE OF STOCK OPTIONS 2,376 1,823
TAX BENEFIT FROM EXERCISE OF STOCK OPTIONS 4,276 -
CASH PROVIDED BY FINANCING ACTIVITIES 2,021 10,509
INCREASE IN CASH AND CASH EQUIVALENTS 452 739
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,210 683
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,662 $1,422
THE LAMSON & SESSIONS CO.
BUSINESS SEGMENTS
(In thousands)
Second Quarter Ended First Half Ended
2006 2005 2006 2005
NET SALES
CARLON $77,295 $59,004 $141,351 $106,207
LAMSON HOME PRODUCTS 26,893 26,375 53,872 50,346
PVC PIPE 58,125 38,631 102,491 66,249
$162,313 $124,010 $297,714 $222,802
OPERATING INCOME (LOSS)
CARLON $13,793 $7,829 $21,483 $11,453
LAMSON HOME PRODUCTS 4,100 4,570 6,668 8,113
PVC PIPE 9,564 349 18,516 362
CORPORATE OFFICE (3,907) (2,049) (7,172) (3,614)
$23,550 $10,699 $39,495 $16,314
DEPRECIATION AND AMORTIZATION
CARLON $852 $1,229 $1,699 $2,498
LAMSON HOME PRODUCTS 430 454 858 916
PVC PIPE 964 935 1,934 1,877
$2,246 $2,618 $4,491 $5,291
TOTAL ASSETS BY BUSINESS SEGMENT AT JULY 1, 2006, DECEMBER 31, 2005, AND
JULY 2, 2005
July 1, December 31, July 2,
2006 2005 2005
IDENTIFIABLE ASSETS
CARLON $100,094 $86,858 $86,499
LAMSON HOME PRODUCTS 47,774 38,286 36,405
PVC PIPE 67,893 57,985 54,535
CORPORATE OFFICE (INCLUDES CASH,
DEFERRED TAX, AND PENSION ASSETS) 55,102 56,878 61,739
$270,863 $240,007 $239,178
SOURCE The 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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