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Lamson & Sessions Reports First Quarter 2007 Results in Line With Estimates, Offers Guidance for Second Quarter and Year

• First Quarter Results in Expected Range, Lower Than Prior Year Due to Cyclical Weakness in PVC Pipe Business
• Company Expects Earnings of 55-65 Cents Per Diluted Share for the Second Quarter and $1.80-2.00 for Full Year 2007

CLEVELAND, April 30, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Lamson & Sessions (NYSE: LMS) today announced that net sales were $116.0 million in the first quarter of 2007, compared with $135.4 million in the first quarter of 2006. Net income for the 2007 first quarter was $4.6 million, or 28 cents per diluted share, compared with $9.2 million, or 58 cents per diluted share, for the prior year quarter.

As anticipated in the Company's first quarter outlook announced in its February 16, 2007 earnings release, net sales and income were lower in comparison with the exceptionally strong first quarter 2006 results. The prior year results benefited from a residential housing market that was more robust than it is currently, as well as increased selling prices that were implemented early in 2006 to essentially offset the rising raw material and energy costs that were occurring at the time.

"Our first quarter results primarily reflect the decline of selling prices in the PVC Pipe business segment, as well as reduced prices for high density polyethylene (HDPE) products as resin prices dropped from their historically high levels of a year ago," said Michael J. Merriman, Jr., President and Chief Executive Officer. "Lamson Home Products was our best performing business segment for the quarter, as some of our retail customers replenished inventories that had been depleted at the end of 2006. In addition, the light commercial and industrial construction markets continued to show strength, despite the impact of inventory reductions in the electrical distribution channel during the first quarter."

Gross profit for the first quarter was $21.8 million, or 18.8 percent of net sales, compared with $31.0 million, or 22.9 percent of net sales, a year earlier. Operating income was $7.9 million, or 6.8 percent of net sales, compared with $15.9 million, or 11.8 percent of net sales in the first quarter of 2006.

Operating expenses declined to $14.0 million, or 12.0 percent of net sales, compared with $15.0 million, or 11.1 percent of net sales, in the year earlier period.

Business Segment Performance

Net sales for the Company's Carlon business segment were $55.2 million in the first quarter of 2007, compared with $64.1 million in the 2006 first quarter. Reduced activity in the telecommunications infrastructure, residential construction and natural gas collection markets, along with lower selling prices, were the primary reasons for the decline. Gross margin for Carlon was slightly higher than in the first quarter of 2006 because of an improved product mix and a slight decline in polyvinyl chloride (PVC) and HDPE compound costs. Operating income for Carlon was $6.8 million for the current year quarter, compared with $7.7 million a year ago. Net sales and operating income improved for the Lamson Home Products business segment due to market share gains and customers restocking their inventories. Net sales were $30.9 million for the first quarter of 2007, compared with $27.0 million for the year earlier period. Gross profit and product margins improved primarily due to a more profitable product mix and slightly lower compound costs. Operating income increased to $6.5 million for the current year quarter, from $2.6 million for the 2006 first quarter.

The PVC Pipe business segment reported net sales of $29.9 million in the 2007 first quarter, compared with $44.4 million for the first quarter of last year. The business segment reported an operating loss of $3.0 million for the current year quarter, compared with operating income of $9.0 million a year earlier. Although actual shipments of PVC pipe pounds were 32.6 percent higher than in the first quarter of last year, the average selling price declined by approximately 47 percent from a year ago.

Other Financial Highlights

Interest expense of $567,000 was substantially lower for the first quarter of 2007, compared with $1.1 million in the prior year period. Cash used in operating activities was $2.6 million in the current year quarter, compared with $3.5 million in the 2006 first quarter.

Outlook

The Company expects demand to regain momentum in the commercial and industrial construction markets for the rest of 2007, while telecom and utility infrastructure product demand is expected to continue at levels similar to 2006 to support fiber-to-the-premise and other infrastructure projects. Meanwhile, the Company expects that while sales of some electrical products may be impacted by the reduction in residential construction, the decline will be offset somewhat by remodeling activity, which is generally counter-cyclical to new home construction. In addition, with lower PVC resin inventories and higher feedstock costs in the marketplace, resin costs have begun to rise in the second quarter and PVC pipe selling prices are expected to increase as well. Still, the Company expects PVC resin costs to be approximately 15 percent lower than in 2006, which have led to lower PVC conduit prices and margins compared with a year ago.

Based on these expectations, the Company anticipates net sales for the second quarter to be in the range of $142 million to $152 million and net income of $9.0 million to $10.5 million, or 55 to 65 cents per diluted share. For the full year, the Company expects net sales of $510 million to $540 million and net income of $29.5 million to $32.5 million, or $1.80 to $2.00 per diluted share.

Annual Meeting

On February 12, 2007, the Company announced that it had engaged Perella Weinberg Partners to assist the Company's Board and management in evaluating the strategic and financial alternatives available to the Company to enhance shareholder value. In light of this ongoing evaluation, the Board has determined to postpone setting an annual meeting date. "The Board of Directors has determined it would be in the best interests of shareholders to complete the strategic evaluation process without the distraction of a protracted proxy contest with Ramius Capital Group," Merriman said. "While we have discussed with Ramius its desire for Board representation, the Board believes that the current directors, with their extensive experience in the industry and particularly with the Company, are better suited to pilot this process." As discussed in its February 12 announcement, the Company intends to disclose developments regarding the process only if and when the Board of Directors has approved a specific transaction or course of action, but there can be no assurance that the exploration of alternatives will result in a transaction or particular course of action.

Conference Call

A live Internet broadcast of the Company's conference call regarding its first quarter 2007 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 Monday, April 30, 2007.

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) 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, (v) any adverse change in the country's general economic condition affecting the markets for the Company's products, (vi) the impact, outcome and effects of the Company's exploration of strategic alternatives and (vii) the ability of the Company to identify and complete a strategic transaction. 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
                                             2007              2006

    NET SALES                              $116,007  100.0%  $135,401  100.0%

    COST OF PRODUCTS SOLD                    94,178   81.2%   104,418   77.1%

    GROSS PROFIT                             21,829   18.8%    30,983   22.9%

    SELLING AND MARKETING EXPENSES            8,428    7.3%     8,747    6.5%

    GENERAL AND ADMINISTRATIVE EXPENSES       4,999    4.3%     5,706    4.2%

    RESEARCH AND DEVELOPMENT                    532    0.4%       585    0.4%

    OPERATING EXPENSES                       13,959   12.0%    15,038   11.1%

    OPERATING INCOME                          7,870    6.8%    15,945   11.8%

    INTEREST                                    567    0.5%     1,117    0.8%

    INCOME BEFORE INCOME TAXES                7,303    6.3%    14,828   11.0%

    INCOME TAX PROVISION                      2,751    2.4%     5,608    4.2%

    NET INCOME                               $4,552    3.9%    $9,220    6.8%

    BASIC EARNINGS PER SHARE                  $0.29             $0.60

    AVERAGE SHARES OUTSTANDING               15,725            15,318

    DILUTED EARNINGS PER SHARE                $0.28             $0.58

    DILUTED AVERAGE SHARES OUTSTANDING       16,242            16,001

                          THE LAMSON & SESSIONS CO.
                   CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                (In thousands)

                                             Quarter                  Quarter
                                              Ended     Year Ended     Ended
                                             March 31,  December 30,  April 1,
                                               2007        2006         2006

    ACCOUNTS RECEIVABLE, NET                 $66,484     $55,111     $73,616

    INVENTORIES, NET                          52,736      48,491      55,089

    OTHER CURRENT ASSETS                      12,267      14,723      17,155

    PROPERTY, PLANT AND EQUIPMENT, NET        52,984      53,576      50,667

    GOODWILL                                  21,402      21,402      21,441

    PENSION ASSETS                            13,848      13,605      34,696

    OTHER ASSETS                               8,570       8,702       4,480

    TOTAL ASSETS                            $228,291    $215,610    $257,144

    ACCOUNTS PAYABLE                         $27,798     $19,885     $35,756

    OTHER CURRENT LIABILITIES                 42,108      42,861      34,019

    LONG-TERM DEBT                             7,005       7,131      60,140

    OTHER LONG-TERM LIABILITIES               17,654      17,481      22,510

    SHAREHOLDERS' EQUITY                     133,726     128,252     104,719

    TOTAL LIABILITIES & SHAREHOLDERS'
     EQUITY                                 $228,291    $215,610    $257,144

                          THE LAMSON & SESSIONS CO.
               CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
                                (In thousands)

                                                       First Quarter Ended
                                                      2007              2006

    OPERATING ACTIVITIES
      NET INCOME                                     $4,552            $9,220
      ADJUSTMENTS TO RECONCILE NET INCOME
       TO CASH USED IN OPERATING ACTIVITIES
        DEPRECIATION AND AMORTIZATION                 2,320             2,245
        STOCK-BASED COMPENSATION                        831             1,505
        DEFERRED INCOME TAXES                           555             2,468
      CHANGES IN OPERATING ASSETS AND LIABILITIES
        ACCOUNTS RECEIVABLE                         (11,373)           (5,109)
        INVENTORIES                                  (4,245)          (11,102)
        PREPAID EXPENSES AND OTHER                       41              (102)
        ACCOUNTS PAYABLE                              7,913             4,813
        ACCRUED EXPENSES AND OTHER CURRENT
         LIABILITIES                                 (3,229)           (6,940)
        PENSION PLAN CONTRIBUTIONS                      (74)             (480)
        OTHER LONG-TERM ITEMS                            71                15
    CASH USED IN OPERATING ACTIVITIES                (2,638)           (3,467)

    INVESTING ACTIVITIES
      NET ADDITIONS TO PROPERTY, PLANT,
       AND EQUIPMENT                                 (1,807)           (4,008)
    CASH USED IN INVESTING ACTIVITIES                (1,807)           (4,008)

    FINANCING ACTIVITIES
      NET BORROWINGS UNDER SECURED CREDIT
       AGREEMENT                                      2,500             5,200
      PAYMENTS ON OTHER LONG-TERM BORROWINGS            (68)              (86)
      PURCHASE AND RETIREMENT OF TREASURY
       STOCK                                           (459)             (421)
      EXERCISE OF STOCK OPTIONS                         303             1,452
      TAX BENEFIT FROM EXERCISE OF STOCK
       OPTIONS                                          309             2,558
    CASH PROVIDED BY FINANCING ACTIVITIES             2,585             8,703

    (DECREASE) INCREASE IN CASH AND CASH
     EQUIVALENTS                                     (1,860)            1,228

    CASH AND CASH EQUIVALENTS AT BEGINNING
     OF YEAR                                          3,324             1,210

    CASH AND CASH EQUIVALENTS AT END OF
     PERIOD                                          $1,464            $2,438

                          THE LAMSON & SESSIONS CO.
                              BUSINESS SEGMENTS
                                (In thousands)

                                                     First Quarter Ended
                                                    2007              2006
    NET SALES
       CARLON                                      $55,213           $64,056
       LAMSON HOME PRODUCTS                         30,940            26,979
       PVC PIPE                                     29,854            44,366
                                                  $116,007          $135,401

    OPERATING INCOME (LOSS)
       CARLON                                       $6,837            $7,690
       LAMSON HOME PRODUCTS                          6,525             2,568
       PVC PIPE                                     (2,990)            8,952
       CORPORATE OFFICE                             (2,502)           (3,265)
                                                    $7,870           $15,945

    DEPRECIATION AND AMORTIZATION
       CARLON                                         $805              $847
       LAMSON HOME PRODUCTS                            470               428
       PVC PIPE                                      1,045               970
                                                    $2,320            $2,245

     TOTAL ASSETS BY BUSINESS SEGMENT AT MARCH 31, 2007, DECEMBER 30, 2006,
                                AND APRIL 1, 2006

                                            March 31,  December 30,  April 1,
                                              2007        2006        2006
    IDENTIFIABLE ASSETS
       CARLON                                $88,593     $81,833     $92,969
       LAMSON HOME PRODUCTS                   48,471      44,019      42,069
       PVC PIPE                               56,723      52,911      66,065
       CORPORATE OFFICE (INCLUDES CASH,
        DEFERRED TAX, AND PENSION
        ASSETS)                               34,504      36,847      56,041
                                            $228,291    $215,610    $257,144

            

SOURCE Lamson & Sessions

James J. Abel, Executive Vice President and Chief Financial Officer of Lamson &
Sessions, +1-216-766-6557
            
 
http://www.lamson-sessions.com/
 

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