| -- Net Sales Reach Record Level -- Litigation Settlement Charge Reduces Net Income by $1.1 Million, or 8 Cents Per Diluted Share -- Telecom Infrastructure, Industrial/Commercial Construction Markets Improve CLEVELAND, Oct 28, 2004 /PRNewswire-FirstCall via Comtex/ -- Lamson & Sessions (NYSE: LMS)
today announced record net sales of $106.4 million for the third quarter of
2004, an increase of nearly 12 percent over the $95.3 million reported in the
third quarter of 2003. This growth reflects continuing improvement in the
telecom infrastructure and the industrial/commercial construction markets.
All three of the Company's business segments reported net sales growth in this
quarter.
The Company reported net income of $833,000, or 6 cents per diluted share,
for the third quarter of 2004, which includes a litigation settlement charge
of $1.7 million ($1.1 million net of tax or 8 cents per diluted share) and
costs associated with the closure of a plant that totaled $395,000 ($235,000
net of tax, or 2 cents per diluted share). In the third quarter of 2003, the
Company reported net income of $1.5 million, or 11 cents per diluted share.
Gross margin for the third quarter of 2004 decreased to 17.3 percent, from
18.8 percent in the second quarter of 2004, reflecting the competitive
challenge the Company has had in passing on raw material cost increases
through higher selling prices. However, this gross margin level compares
favorably to the 16.0 percent reported in the third quarter of 2003.
Operating expenses rose to $12.9 million due to higher sales commissions
and medical benefit costs, but remain well in line with expectations at 12.1
percent of net sales. The Company reported operating expenses of $10.7
million, or 11.2 percent of net sales, in the third quarter of 2003.
For the first nine months of 2004, net sales rose to $294.2 million from
$261.8 million a year earlier. Net income for the year to date was $5.3
million, or 37 cents per diluted share, including 3 cents per share from
discontinued operations, up from net income of $3.4 million, or 25 cents per
diluted share, for the first nine months of 2003.
Business Segments
The Carlon business segment continues to show impressive growth as net
sales rose more than 18 percent, to $51.9 million in the third quarter of
2004. A 25 percent improvement in telecom wireline product sales and a 6
percent improvement in electrical product sales primarily accounted for this
performance. Carlon's operating income rose more than 8 percent to $4.6
million in the third quarter of 2004 compared with the prior year's third
quarter.
Lamson Home Products net sales increased nearly 8 percent to $24.0 million
in the third quarter of 2004 as recent gains in door chimes and lighting
control products augmented continuing strength in its electrical outlet box
and fittings product lines. Operating income of $1.4 million in the third
quarter of 2004 compares unfavorably with the $3.7 million reported in last
year's third quarter. This reflects the business segment's limited ability,
due to the competitive environment, to pass through cost increases for
polyvinyl chloride (PVC) resin. The price of PVC has risen to historically
high levels, and is expected to continue to increase into 2005.
Net sales in the PVC Pipe business segment improved to $30.5 million for
the third quarter of 2004, an increase of 4.4 percent compared with the third
quarter of 2003. The improvement in net sales was a result of a resurgence in
sewer infrastructure spending and healthy residential construction demand
combined with a slight improvement in the industrial/commercial construction
market. This segment reported an operating loss of $597,000 for the third
quarter of 2004, which reflects an encouraging improvement over the $2.1
million operating loss reported in the third quarter of 2003. Market
conditions for these products remain very competitive, and as a result, only a
portion of raw material cost increases have been recovered.
Working Capital and Debt
Working capital levels have grown in support of the increased net sales
activity. Accounts receivable days sales outstanding rose to 50 days at the
end of the third quarter, compared with 47 days in the prior-year third
quarter. Very strong billing activity in September accounts for most of this
increase. Inventory levels also rose, primarily due to a 25 percent increase
in the cost of PVC resin since year-end 2003. However, inventory turns rose
to a record 7.7 times in the third quarter, compared with 7.3 times at the end
of the third quarter of 2003.
On October 5, 2004, the Company announced that it is reviewing various
strategic alternatives, which may include a sale of part or all of its
businesses. Once the Company completes its strategic evaluation, management
is confident that an appropriate refinancing can be completed in the first
half of 2005, which will reflect the Company's strengthened balance sheet
condition with significantly lower debt anticipated for the end of fiscal
2004. As a result, the Company's secured credit facility was classified as a
current debt at the end of the third quarter of 2004. The Company continues
to reduce its debt level and is not in violation of any financial covenants.
Business Outlook
"For the full year of 2004, we reaffirm our guidance for net sales growth
to $375 million to $385 million, an increase of 10 to 12 percent from last
year," said John B. Schulze, Chairman, President and Chief Executive Officer.
"We also currently project net income for the full year to be in the range of
$5.9 million to $6.6 million, or 43 cents to 48 cents per diluted share, which
is an increase of 59 percent to 78 percent from a year ago."
Conference Call
A live Internet broadcast of the Company's conference call regarding its
third 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 Thursday, October 28, 2004.
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) the continued availability and reasonable
terms of bank financing, (v) the outcome and effects of the Company's
exploration of strategic alternatives, 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)
Third Quarter Ended
2004 2003
NET SALES $106,403 100.0% $95,251 100.0%
COST OF PRODUCTS SOLD 87,993 82.7% 79,968 84.0%
GROSS PROFIT 18,410 17.3% 15,283 16.0%
OPERATING EXPENSES 12,903 12.1% 10,713 11.2%
LITIGATION SETTLEMENT 1,728 1.6% - 0.0%
OTHER EXPENSE (INCOME) 395 0.4% - 0.0%
OPERATING INCOME 3,384 3.2% 4,570 4.8%
INTEREST 1,992 1.9% 2,094 2.2%
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 1,392 1.3% 2,476 2.6%
INCOME TAX PROVISION 559 0.5% 958 1.0%
INCOME FROM CONTINUING OPERATIONS 833 0.8% 1,518 1.6%
INCOME FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAX OF $256 - 0.0% - 0.0%
NET INCOME $833 0.8% $1,518 1.6%
BASIC EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.06 $0.11
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX - -
NET EARNINGS $0.06 $0.11
AVERAGE SHARES OUTSTANDING 13,809 13,786
DILUTED EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.06 $0.11
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX - -
NET EARNINGS $0.06 $0.11
DILUTED AVERAGE SHARES OUTSTANDING 14,182 13,926
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
Nine Months Ended
2004 2003
NET SALES $294,153 100.0% $261,768 100.0%
COST OF PRODUCTS SOLD 241,752 82.2% 217,158 83.0%
GROSS PROFIT 52,401 17.8% 44,610 17.0%
OPERATING EXPENSES 36,879 12.5% 32,433 12.3%
LITIGATION SETTLEMENT 1,728 0.6% - 0.0%
OTHER EXPENSE (INCOME) (231) -0.1% - 0.0%
OPERATING INCOME 14,025 4.8% 12,177 4.7%
INTEREST 5,897 2.0% 6,432 2.5%
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 8,128 2.8% 5,745 2.2%
INCOME TAX PROVISION 3,251 1.1% 2,298 0.9%
INCOME FROM CONTINUING OPERATIONS 4,877 1.7% 3,447 1.3%
INCOME FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAX OF $256 401 0.1% - 0.0%
NET INCOME $5,278 1.8% $3,447 1.3%
BASIC EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.35 $0.25
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX 0.03 -
NET EARNINGS $0.38 $0.25
AVERAGE SHARES OUTSTANDING 13,793 13,785
DILUTED EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.35 $0.25
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX 0.03 -
NET EARNINGS $0.37 $0.25
DILUTED AVERAGE SHARES OUTSTANDING 14,080 13,861
THE LAMSON & SESSIONS CO.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
Quarter Quarter
Ended Year Ended Ended
October 2, January 3, October 4,
2004 2004 2003
ACCOUNTS RECEIVABLE, NET $59,561 $38,196 $52,467
INVENTORIES, NET 40,130 30,143 34,519
OTHER CURRENT ASSETS 14,787 13,038 15,009
PROPERTY, PLANT AND EQUIPMENT, NET 47,842 51,326 50,856
GOODWILL 21,519 21,519 21,558
PENSION ASSETS 30,388 30,016 30,232
OTHER ASSETS 18,805 24,075 20,919
TOTAL ASSETS $233,032 $208,313 $225,560
ACCOUNTS PAYABLE $32,388 $16,928 $26,654
SECURED CREDIT AGREEMENT - CURRENT 83,100 11,000 11,000
OTHER CURRENT LIABILITIES 32,533 29,098 29,425
LONG-TERM DEBT 11,756 82,990 89,619
OTHER LONG-TERM LIABILITIES 28,749 29,782 28,627
SHAREHOLDERS' EQUITY 44,506 38,515 40,235
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $233,032 $208,313 $225,560
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(In thousands)
Nine Months Ended
2004 2003
OPERATING ACTIVITIES
NET INCOME $5,278 $3,447
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION 6,901 6,890
AMORTIZATION 1,199 1,199
GAIN ON SALE OF FIXED ASSETS (933) -
DEFERRED INCOME TAXES 2,862 2,102
NET CHANGE IN WORKING CAPITAL ACCOUNTS:
ACCOUNTS RECEIVABLE (21,365) (15,781)
INVENTORIES (9,987) (2,335)
PREPAID EXPENSES AND OTHER (316) (104)
ACCOUNTS PAYABLE 15,460 5,445
ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES 2,349 (1,741)
OTHER LONG-TERM ITEMS 101 1,218
CASH PROVIDED BY OPERATING ACTIVITIES 1,549 340
INVESTING ACTIVITIES
NET ADDITIONS TO PROPERTY, PLANT,
AND EQUIPMENT (4,592) (5,787)
REFUND OF DEPOSITS ON EQUIPMENT
OPERATING LEASES 580 -
PROCEEDS FROM SALE OF FIXED ASSETS 1,595 -
ACQUISITIONS AND RELATED ITEMS (187) (750)
CASH USED IN INVESTING ACTIVITIES (2,604) (6,537)
FINANCING ACTIVITIES
NET BORROWINGS UNDER SECURED CREDIT AGREEMENT 1,700 6,000
PAYMENTS ON OTHER LONG-TERM BORROWINGS (734) (748)
PURCHASE AND RETIREMENT OF TREASURY STOCK (205) -
EXERCISE OF STOCK OPTIONS 359 2
CASH PROVIDED BY FINANCING ACTIVITIES 1,120 5,254
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 65 (943)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 468 1,496
CASH AND CASH EQUIVALENTS AT END OF PERIOD $533 $553
THE LAMSON & SESSIONS CO.
BUSINESS SEGMENTS
(In thousands)
Third Quarter Ended Nine Months Ended
2004 2003 2004 2003
NET SALES
CARLON $51,857 $43,755 $139,487 $116,879
LAMSON HOME PRODUCTS 24,019 22,259 67,053 59,834
PVC PIPE 30,527 29,237 87,613 85,055
$106,403 $95,251 $294,153 $261,768
OPERATING INCOME (LOSS)
CARLON $4,565 $4,204 $12,812 $9,885
LAMSON HOME PRODUCTS 1,431 3,696 6,283 9,544
PVC PIPE (597) (2,115) (765) (2,824)
CORPORATE OFFICE (1,620) (1,215) (4,536) (4,428)
OTHER (EXPENSE) INCOME (395) - 231 -
$3,384 $4,570 $14,025 $12,177
DEPRECIATION AND AMORTIZATION
CARLON $1,313 $1,688 $4,078 $5,136
LAMSON HOME PRODUCTS 458 433 1,393 1,286
PVC PIPE 891 615 2,629 1,667
$2,662 $2,736 $8,100 $8,089
TOTAL ASSETS BY BUSINESS SEGMENT AT OCTOBER 2, 2004, JANUARY 3, 2004, AND
OCTOBER 4, 2003
October 2, January 3, October 4,
2004 2004 2003
IDENTIFIABLE ASSETS
CARLON $87,075 $79,900 $89,470
LAMSON HOME PRODUCTS 33,484 30,065 31,674
PVC PIPE 50,307 34,232 41,667
CORPORATE OFFICE (INCLUDES CASH,
DEFERRED TAX, AND PENSION ASSETS) 62,166 64,116 62,749
$233,032 $208,313 $225,560
SOURCE Lamson & Sessions Co.
James J. Abel, Executive Vice President and Chief Financial
Officer of Lamson & Sessions, +1-216-766-6557
http://www.prnewswire.com
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