Lamson & Sessions Reports Record Sales and Strong Earnings for the Second Quarter of 2005
-
Net Sales Rose 21.4 Percent in the Second Quarter - Net Income Increased
90 Percent in the Second Quarter - Telecom Product Sales Increased 20 Percent
in the Second Quarter - Company Raises Diluted Earnings Per Share Guidance
to $1.00 to $1.05 for 2005
CLEVELAND, July 26, 2005 /PRNewswire-FirstCall via COMTEX/ -- Lamson & Sessions
(NYSE: LMS) today announced net sales of $124.0 million for the second
quarter of 2005, an increase of 21.4 percent over the $102.1 million reported
in the second quarter of 2004. Net sales growth in each of the Company's
three business segments was in excess of 19 percent and reflected improving
demand in the Company's key end markets.
Net income for the second quarter of 2005 rose to $5.2 million, or 35
cents per diluted share, an increase of 90 percent over the $2.7 million,
or 19 cents per diluted share, reported in the second quarter of 2004.
The Company provided earnings guidance earlier this month of $4.75 million
to $5.0 million, or 32 to 34 cents per diluted share.
"We are very pleased with the improving demand in our key end markets
so far this year," said John B. Schulze, Chairman and Chief Executive
Officer. "We anticipate that these market conditions will be sustained
in the second half of 2005, which should result in a continuation of the
financial performance that we have experienced."
Gross margin improved to 18.6 percent in the second quarter of 2005 compared
with 17.9 percent in the second quarter of 2004. This performance reflects
some raw material cost recovery and a favorable mix of higher margin product
sales.
Operating expenses increased in the second quarter of 2005 to $12.3 million
compared with $11.5 million reported in the second quarter of 2004. However,
operating expenses declined to 10.0 percent of net sales versus the 11.2
percent reported in the second quarter of 2004.
For the first half of 2005, the Company's net sales totaled $222.8 million,
an increase of 20.3 percent over the $185.1 million reported in the first
half of 2004. Net income for the first half of 2005 improved to $7.4 million,
or 51 cents per diluted share, an increase of 83.8 percent over the $4.0
million, or 29 cents per diluted share for continuing operations reported
in the first half of 2004.
Business Segments
Carlon net sales grew 19.3 percent in the second quarter of 2005, compared
with the same quarter a year ago. Telecom infrastructure market sales
rose 20 percent, and the residential housing market continued to show
strength. Carlon's operating income improved nearly 70 percent, reflecting
price increases implemented in the first quarter of 2005 and an improving
product mix. For the first half of 2005, Carlon net sales have risen 21.2
percent and operating income has increased 38.9 percent compared with
the first half of 2004, reflecting similar conditions to those experienced
in the second quarter of 2005.
Net sales for Lamson Home Products increased 27.6 percent in the second
quarter of 2005 to $26.4 million compared with $20.7 million in the second
quarter of 2004. Strong volume growth and improving product mix contributed
to both the higher net sales and improved profitability. In addition,
this segment also benefited from price increases implemented in the first
quarter of 2005 to recover a portion of higher raw material costs. Lamson
Home Products' operating income rose to $4.6 million in the second quarter
of 2005 compared with $2.5 million in the second quarter of 2004.
The PVC Pipe business segment experienced seasonally higher unit volume
and higher selling prices resulting in a 20.7 percent increase in net
sales for the second quarter of 2005 compared with the second quarter
of 2004. Higher raw material costs (24 percent) in the first half were
mostly recovered through higher selling prices (22 percent) compared with
the first half of 2004, but margins remain very tight in electrical products
due to the competitive environment. This segment's operating income was
essentially breakeven for the second quarter and first half of 2005.
Financial Highlights
- Accounts Receivable totaled $64.4 million at the end of
the second quarter of 2005, a 12.5 percent increase over the
similar period in 2004. This increase is due to the higher
net sales in the first half of 2005 and represents 46.6 days
sales outstanding, which is nearly three days better than the
49.3 days reported for the second quarter of 2004.
- Inventory totaled $43.2 million at the end of the second
quarter of 2005, an increase of about 6.0 percent over the
same period in 2004, which we consider to be excellent performance
in light of the higher raw material costs and growth in the
net sales. Inventory turns reached a record 8.1 times at the
end of the second quarter of 2005 and compares favorably with
the 7.6 times reported in the second quarter of 2004.
- During the second quarter of 2005, the Company renewed and
increased its secured credit facility to $125 million with
a consortium of banks led by Harris, N.A. This facility is
less restrictive than the previous agreement and reflects a
reduction of a minimum of 100 basis points in pricing based
on the Company's current financial performance with the opportunity
to further improve the spread in future quarters.
Outlook
The Company is encouraged by the current demand activity in its key end
markets and expects these conditions to continue throughout the second
half of 2005 and into 2006 based on the general economic and industry
data available.
As a result, the Company anticipates that net sales for the third quarter
of 2005 should range from $118 million to $121 million, an increase of
12 to 15 percent compared with $104.9 million reported in the third quarter
of 2004. If this sales performance is realized, the Company anticipates
that net income for the third quarter of 2005 will range between $5.2
million and $5.7 million, or 35 to 38 cents per diluted share. In the
third quarter of 2004, the Company reported diluted earnings per share
of 6 cents.
For the full year 2005, the Company anticipates that net sales will increase
to a range of $430 million to $440 million, or 11 percent to 14 percent
growth over the $387 million reported in 2004. In addition, the Company
anticipates that its net income for 2005 should increase to $15.0 million
to $15.75 million or $1.00 to $1.05 per diluted share. The Company previously
projected 2005 net sales of $425 million to $435 million and net income
of $11.5 million to $13.0 million, or 80 cents to 90 cents per diluted
share. In 2004, the Company reported net income of $6.5 million, or 46
cents per diluted share.
Conference Call
A live Internet broadcast of the Company's conference call regarding
its second quarter 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 Tuesday, July 26, 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: 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) maintaining a stable level of housing
starts, telecommunications infrastructure spending, consumer confidence
and general construction trends, (iv) maintaining a consistent level of
power availability for the Company's plants and distribution facilities,
(v) the continued availability and reasonable terms of bank financing
and (vi) 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)
Second Quarter Ended
2005 2004
NET SALES $124,010 100.0% $102,148 100.0%
COST OF PRODUCTS SOLD 100,995 81.4% 83,870 82.1%
GROSS PROFIT 23,015 18.6% 18,278 17.9%
SELLING AND MARKETING EXPENSES 7,528 6.1% 7,141 7.0%
GENERAL AND ADMINISTRATIVE EXPENSES 4,326 3.5% 3,769 3.7%
RESEARCH AND DEVELOPMENT 462 0.4% 549 0.5%
OPERATING EXPENSES 12,316 10.0% 11,459 11.2%
OTHER EXPENSE (INCOME), NET - 0.0% 298 0.3%
OPERATING INCOME 10,699 8.6% 6,521 6.4%
INTEREST 2,211 1.8% 1,950 1.9%
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 8,488 6.8% 4,571 4.5%
INCOME TAX PROVISION 3,261 2.6% 1,826 1.8%
INCOME FROM CONTINUING OPERATIONS 5,227 4.2% 2,745 2.7%
INCOME FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAX OF $256 - 0.0% - 0.0%
NET INCOME $5,227 4.2% $2,745 2.7%
BASIC EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.37 $0.20
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX - -
NET EARNINGS $0.37 $0.20
AVERAGE SHARES OUTSTANDING 14,146 13,784
DILUTED EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.35 $0.19
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX - -
NET EARNINGS $0.35 $0.19
DILUTED AVERAGE SHARES OUTSTANDING 14,747 14,099
NOTE: Certain amounts in the prior periods have been reclassified to
conform with current period presentations.
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
First Half Ended
2005 2004
NET SALES $222,802 100.0% $185,143 100.0%
COST OF PRODUCTS SOLD 182,810 82.1% 153,547 82.9%
GROSS PROFIT 39,992 17.9% 31,596 17.1%
SELLING AND MARKETING EXPENSES 14,602 6.5% 12,942 7.0%
GENERAL AND ADMINISTRATIVE EXPENSES 8,138 3.7% 7,563 4.1%
RESEARCH AND DEVELOPMENT 938 0.4% 1,076 0.6%
OPERATING EXPENSES 23,678 10.6% 21,581 11.7%
OTHER EXPENSE (INCOME), NET - 0.0% (626) -0.3%
OPERATING INCOME 16,314 7.3% 10,641 5.7%
INTEREST 4,213 1.9% 3,905 2.1%
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 12,101 5.4% 6,736 3.6%
INCOME TAX PROVISION 4,670 2.1% 2,692 1.4%
INCOME FROM CONTINUING OPERATIONS 7,431 3.3% 4,044 2.2%
INCOME FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAX OF $256 - 0.0% 401 0.2%
NET INCOME $7,431 3.3% $4,445 2.4%
BASIC EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.53 $0.29
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX - 0.03
NET EARNINGS $0.53 $0.32
AVERAGE SHARES OUTSTANDING 14,073 13,786
DILUTED EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.51 $0.29
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX - 0.03
NET EARNINGS $0.51 $0.32
DILUTED AVERAGE SHARES OUTSTANDING 14,647 14,028
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 Year Quarter
Ended Ended Ended
July 2, 2005 January 1, 2005 July 3, 2004
ACCOUNTS RECEIVABLE, NET $64,388 $48,391 $57,232
INVENTORIES, NET 43,206 36,860 40,753
OTHER CURRENT ASSETS 14,627 15,494 15,569
PROPERTY, PLANT AND EQUIPMENT,
NET 47,551 47,961 47,386
GOODWILL 21,480 21,480 21,519
PENSION ASSETS 30,873 30,513 30,264
OTHER ASSETS 17,053 17,803 19,957
TOTAL ASSETS $239,178 $218,502 $232,680
ACCOUNTS PAYABLE $28,766 $24,213 $35,528
SECURED CREDIT AGREEMENT -
CURRENT 5,000 75,000 8,705
OTHER CURRENT LIABILITIES 29,770 31,899 33,662
LONG-TERM DEBT 90,562 11,876 84,066
OTHER LONG-TERM LIABILITIES 29,762 30,138 27,507
SHAREHOLDERS' EQUITY 55,318 45,376 43,212
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $239,178 $218,502 $232,680
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(In thousands)
First Half Ended
2005 2004
OPERATING ACTIVITIES
NET INCOME $7,431 $4,445
ADJUSTMENTS TO RECONCILE NET INCOME
TO CASH
(USED) PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION 4,485 4,638
AMORTIZATION 806 800
GAIN ON SALE OF FIXED ASSETS - (933)
DEFERRED INCOME TAXES 2,298 2,548
NET CHANGE IN WORKING CAPITAL
ACCOUNTS:
ACCOUNTS RECEIVABLE (15,997) (19,036)
INVENTORIES (6,346) (10,610)
PREPAID EXPENSES AND OTHER 94 (599)
ACCOUNTS PAYABLE 4,553 18,600
ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES (1,697) 3,303
PENSION PLAN CONTRIBUTIONS (697) (809)
OTHER LONG-TERM ITEMS (501) (593)
CASH (USED) PROVIDED BY OPERATING
ACTIVITIES (5,571) 1,754
INVESTING ACTIVITIES
NET ADDITIONS TO PROPERTY, PLANT,
AND EQUIPMENT (4,075) (1,293)
PROCEEDS FROM SALE OF FIXED ASSETS - 1,595
ACQUISITIONS AND RELATED ITEMS (124) (125)
CASH (USED) PROVIDED BY INVESTING
ACTIVITIES (4,199) 177
FINANCING ACTIVITIES
NET BORROWINGS (PAYMENTS) UNDER
SECURED CREDIT AGREEMENT 8,900 (1,009)
PAYMENTS ON OTHER LONG-TERM
BORROWINGS (214) (210)
PURCHASE AND RETIREMENT OF TREASURY
STOCK - (205)
EXERCISE OF STOCK OPTIONS 1,823 57
CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 10,509 (1,367)
INCREASE IN CASH AND CASH EQUIVALENTS 739 564
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 683 468
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $1,422 $1,032
THE LAMSON & SESSIONS CO.
BUSINESS SEGMENTS
(In thousands)
Second Quarter Ended First Half Ended
2005 2004 2005 2004
NET SALES
CARLON $59,004 $49,467 $106,207 $87,630
LAMSON HOME PRODUCTS 26,375 20,673 50,346 40,427
PVC PIPE 38,631 32,008 66,249 57,086
$124,010 $102,148 $222,802 $185,143
OPERATING INCOME (LOSS)
CARLON $7,829 $4,608 $11,453 $8,247
LAMSON HOME PRODUCTS 4,570 2,468 8,113 4,852
PVC PIPE 349 1,019 362 (168)
CORPORATE OFFICE (2,049) (1,276) (3,614) (2,916)
OTHER (EXPENSE) INCOME - (298) - 626
$10,699 $6,521 $16,314 $10,641
DEPRECIATION AND AMORTIZATION
CARLON $1,229 $1,368 $2,498 $2,765
LAMSON HOME PRODUCTS 454 465 916 935
PVC PIPE 935 877 1,877 1,738
$2,618 $2,710 $5,291 $5,438
TOTAL ASSETS BY BUSINESS SEGMENT AT JULY 2, 2005, JANUARY 1, 2005 AND
JULY 3, 2004
July 2, 2005 January 1, 2005 July 3, 2004
IDENTIFIABLE ASSETS
CARLON $86,499 $77,473 $84,703
LAMSON HOME PRODUCTS 36,405 34,190 33,806
PVC PIPE 54,535 44,650 50,595
CORPORATE OFFICE (INCLUDES
CASH, DEFERRED TAX, AND
PENSION ASSETS) 61,739 62,189 63,576
$239,178 $218,502 $232,680
SOURCE Lamson & Sessions Co.
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