* Growth in Net Sales Reaches 9.7 Percent in Fourth Quarter and
9.3 Percent for the Full Year
* Diluted Earnings Per Share From Continuing Operations Were 2 Cents in
Fourth Quarter, and 27 Cents for 2003, in Line With Expectations
* Market Share Gains Drive Retail Performance
* Debt Reduction in Fourth Quarter Reflects Improved Inventory Turns
CLEVELAND, Feb. 19 /PRNewswire-FirstCall/ -- Lamson & Sessions (NYSE: LMS)
today reported strong net sales of $82.1 million in the fourth quarter of
2003, reflecting growth of 9.7 percent compared with $74.8 million in the
fourth quarter of 2002. For the full year, net sales grew 9.3 percent, to
$343.8 million in 2003, from $314.5 million in 2002. Retail market strength
is primarily responsible for the growth in both periods as Lamson's high
customer fill rates supported consumer spending activity for home
rehabilitation projects.
Net loss for the fourth quarter of 2003 was $2.4 million, or 18 cents per
diluted share, which amount includes a discontinued operations charge of
$2.7 million, net of tax. Income from continuing operations, before the
charge, was $293,000, or 2 cents per diluted share. The discontinued
operations charge relates to a contingent liability for certain post-
retirement medical and life insurance benefits for employees of a former
subsidiary sold in 1988. The Company previously estimated that the charge
would be in the $4 million to $5 million range, but based on additional facts,
the amount of the charge was determined to be $2.7 million. Net income for
the fourth quarter of 2002 was $780,000, or 6 cents per diluted share.
Net income for the year was $1.0 million, or 7 cents per diluted share,
after the discontinued operations charge. Income from continuing operations,
before the charge, totaled $3.7 million, or 27 cents per diluted share. In
2002, the Company reported a net loss of $41.2 million, or $2.99 per diluted
share, including a charge of $46.3 million, or $3.36 per diluted share,
representing the cumulative effect of a change in accounting principle related
to the implementation of Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets." Excluding this charge, the Company
reported net income of $5.0 million, or 36 cents per diluted share in 2002.
While net sales grew in the fourth quarter and full year, gross margin was
lower due to the very competitive pricing conditions in the Company's PVC Pipe
business segment. Higher raw material costs were incurred, reflecting the
increasing cost of the feedstocks for polyvinyl chloride (PVC) resin, one of
the Company's main raw materials. The Company was unable to fully recover
these higher raw material costs due to the continuing weak demand levels for
pipe products in its key markets of commercial and industrial construction and
telecom infrastructure construction. These market conditions weakened in the
fourth quarter of 2003 and, along with weather conditions, resulted in
unplanned or extended operating plant shutdowns in the last half of the
quarter.
The Carlon business segment experienced net sales growth of 9.7 percent in
the fourth quarter, which accounted for most of this segment's 3.4 percent net
sales growth for the year. However, the same aggressive price competition
similar to that seen by the PVC Pipe segment resulted in lower margins,
particularly in the Company's extruded products for the telecom market.
Lamson Home Products experienced extremely strong net sales growth in the
fourth quarter and the full year. For the quarter, net sales were
$25.0 million, an increase of 28.2 percent compared with the fourth quarter of
2002. For the full year, net sales were $84.9 million, and increase of
18.7 percent compared with the prior year. This performance reflects market
share gains at its two largest customers during the year as well as the
strength of consumer spending in this key retail market. Operating income
growth of 26.3 percent in the fourth quarter, and 33.3 percent for all of
2003, reflects the Company's ability to add volume without increasing fixed
costs, in addition to product mix improvements, which increased the level of
higher-margin product sales in the overall sales mix of this segment.
Operating expenses in the fourth quarter of 2003 were 12.7 percent of net
sales and remained in line with prior quarters of 2003 and the fourth quarter
of 2002. For the full year, operating expenses decreased by $0.6 million,
compared with 2002, despite the net sales growth of 9.3 percent. Reduced bad
debt and incentive compensation expense offset increases in employee benefit
costs during the year.
Working capital efficiency improved as the Company's accounts receivable
days outstanding fell to 49.8 days in 2003 from 52.7 days in 2002. In
addition, the Company's inventory investment was lowered to $30.1 million in
2003, from $32.2 million in 2002, reflecting improved turns in 2003 of
7.4 times versus 6.5 times in 2002. Improved bin accuracy in the Company's
distribution centers helped us to improve sales order fill rates without
additional inventory investment.
Operating cash flow of $9.7 million was lower than anticipated due to
timing differences as the Company's fiscal year ended on January 3, 2004.
Long-term debt was reduced by $1.4 million during the year, and the Company's
leverage ratio was reduced as well.
For 2004, the Company anticipates that the housing, construction and
rehabilitation markets will remain very strong as interest rates remain low
and consumer spending remains stable. In addition, the Company expects to see
the start of improved conditions in commercial, industrial and telecom
construction activity in the second half of 2004. The Company expects raw
material costs will continue to rise, and the Company expects to recover its
costs if market demand increases and plant capacity utilization improves.
Based on these expectations, the Company anticipates net sales growth of
6 percent to 8 percent in 2004, with net earnings per diluted share for
continuing operations increasing 25 percent to 30 percent to a range of 34 to
38 cents.
Conference Call:
A live Internet broadcast of the Company's conference call regarding its
fourth-quarter and full-year 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 Thursday, February 19, 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: 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 (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)
Fourth Quarter Ended
2003 2002
NET SALES $82,067 100.0% $74,813 100.0%
COST OF PRODUCTS SOLD 69,142 84.3% 62,041 82.9%
GROSS PROFIT 12,925 15.7% 12,772 17.1%
OPERATING EXPENSES 10,444 12.7% 9,518 12.7%
OPERATING INCOME 2,481 3.0% 3,254 4.4%
INTEREST 2,095 2.6% 1,716 2.3%
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 386 0.4% 1,538 2.1%
INCOME TAX PROVISION 93 0.1% 758 1.1%
INCOME FROM CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 293 0.3% 780 1.0%
LOSS FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAX OF $1,750 (2,738) -3.3% - 0.0%
(LOSS) INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE (2,445) -3.0% 780 1.0%
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF INCOME
TAX OF $13,750 - 0.0% - 0.0%
NET (LOSS) INCOME $(2,445) -3.0% $780 1.0%
BASIC (LOSS) EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.02 $0.06
LOSS FROM DISCONTINUED OPERATIONS,
NET OF TAX (0.20) -
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING
PRINCIPLE, NET OF TAX - -
NET (LOSS) EARNINGS $(0.18) $0.06
AVERAGE SHARES OUTSTANDING 13,786 13,778
DILUTED (LOSS) EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.02 $0.06
LOSS FROM DISCONTINUED OPERATIONS,
NET OF TAX (0.20) -
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAX - -
NET (LOSS) EARNINGS $(0.18) $0.06
DILUTED AVERAGE SHARES OUTSTANDING 13,786 13,778
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
Twelve Months Ended
2003 2002
NET SALES $343,835 100.0% $314,475 100.0%
COST OF PRODUCTS SOLD 286,300 83.3% 252,499 80.3%
GROSS PROFIT 57,535 16.7% 61,976 19.7%
OPERATING EXPENSES 42,877 12.4% 43,467 13.8%
OPERATING INCOME 14,658 4.3% 18,509 5.9%
INTEREST 8,527 2.5% 9,583 3.1%
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 6,131 1.8% 8,926 2.8%
INCOME TAX PROVISION 2,391 0.7% 3,900 1.2%
INCOME FROM CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 3,740 1.1% 5,026 1.6%
LOSS FROM DISCONTINUED OPERATIONS, NET
OF INCOME TAX OF $1,750 (2,738) -0.8% - 0.0%
(LOSS) INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 1,002 0.3% 5,026 1.6%
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF INCOME
TAX OF $13,750 - 0.0% (46,250) -14.7%
NET (LOSS) INCOME $1,002 0.3% $(41,224) -13.1%
BASIC (LOSS) EARNINGS PER SHARE:
EARNINGS (In thousands)
Year Ended Year Ended
January 3, 2004 December 28, 2002
ACCOUNTS RECEIVABLE, NET $38,196 $36,686
INVENTORIES, NET 30,143 32,230
OTHER CURRENT ASSETS 13,038 15,848
PROPERTY, PLANT AND EQUIPMENT, NET 51,326 51,749
GOODWILL 21,519 21,558
PENSION ASSETS 30,016 30,882
OTHER ASSETS 24,075 24,752
TOTAL ASSETS $208,313 $213,705
ACCOUNTS PAYABLE $16,928 $21,209
OTHER CURRENT LIABILITIES 40,098 42,903
LONG-TERM DEBT 82,990 84,350
OTHER LONG-TERM LIABILITIES 29,782 29,067
SHAREHOLDERS' EQUITY 38,515 36,176
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $208,313 $213,705
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(In thousands)
Twelve Months Ended
2003 2002
OPERATING ACTIVITIES
NET INCOME (LOSS) $1,002 $(41,224)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO CASH PROVIDED BY OPERATING
ACTIVITIES:
LOSS FROM DISCONTINUED OPERATIONS 2,738 -
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE - 46,250
DEPRECIATION 9,195 10,074
AMORTIZATION 1,599 1,599
DEFERRED INCOME TAXES 2,280 4,645
NET CHANGE IN WORKING CAPITAL ACCOUNTS:
ACCOUNTS RECEIVABLE (1,510) 2,518
INVENTORIES 2,087 9,853
PREPAID EXPENSES AND OTHER (689) 610
ACCOUNTS PAYABLE (4,281) (766)
ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES (2,041) 2,441
PENSION PLAN CONTRIBUTIONS (1,126) (6,477)
OTHER LONG-TERM ITEMS 457 (3,003)
CASH PROVIDED BY OPERATING ACTIVITIES 9,711 26,520
INVESTING ACTIVITIES
NET ADDITIONS TO PROPERTY, PLANT,
AND EQUIPMENT (8,562) (3,952)
ACQUISITIONS AND RELATED ITEMS (813) (1,000)
CASH USED IN INVESTING ACTIVITIES (9,375) (4,952)
FINANCING ACTIVITIES
NET PAYMENTS UNDER SECURED CREDIT AGREEMENT (600) (23,000)
PROCEEDS FROM REFINANCING - 4,250
PAYMENT ON OTHER LONG-TERM BORROWINGS (772) (1,487)
EXERCISE OF STOCK OPTIONS 8 -
CASH USED IN FINANCING ACTIVITIES (1,364) (20,237)
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (1,028) 1,331
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 1,496 165
CASH AND CASH EQUIVALENTS AT END OF PERIOD $468 $1,496
THE LAMSON & SESSIONS CO.
BUSINESS SEGMENTS
(In thousands)
Fourth Quarter Twelve Months
Ended Ended
2003 2002 2003 2002
NET SALES
CARLON $37,211 $33,935 $154,090 $149,037
LAMSON HOME PRODUCTS 25,028 19,517 84,862 71,486
PVC PIPE 19,828 21,361 104,883 93,952
$82,067 $74,813 $343,835 $314,475
OPERATING INCOME (LOSS)
CARLON $1,955 $2,734 $11,840 $14,395
LAMSON HOME PRODUCTS 4,222 3,342 13,766 10,324
PVC PIPE (2,295) (1,502) (5,119) (784)
CORPORATE OFFICE (1,401) (1,320) (5,829) (5,426)
$2,481 $3,254 $14,658 $18,509
DEPRECIATION AND AMORTIZATION
CARLON $1,665 $1,798 $6,801 $7,507
LAMSON HOME PRODUCTS 436 459 1,722 1,954
PVC PIPE 604 537 2,271 2,212
$2,705 $2,794 $10,794 $11,673
TOTAL ASSETS BY BUSINESS SEGMENT AT JANUARY 3, 2004 AND DECEMBER 28, 2002
January 3, 2004 December 28, 2002
IDENTIFIABLE ASSETS
CARLON $79,900 $83,750
LAMSON HOME PRODUCTS 30,065 27,222
PVC PIPE 34,232 35,862
CORPORATE OFFICE (INCLUDES CASH,
DEFERRED TAX, AND PENSION ASSETS) 64,116 66,871
$208,313 $213,705
SOURCE Lamson & Sessions Co.
/CONTACT: James J. Abel, Executive Vice President and Chief Financial
Officer of Lamson & Sessions, +1-216-766-6557/
/Website: http://www.lamson-sessions.com/
(LMS)
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