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Lamson & Sessions Reports Record Net Sales for Fourth Quarter and Full-Year 2004
  • Net Sales Increase 20.3 Percent in Fourth Quarter and 13.7 Percent for the Full Year
  • Diluted Earnings Per Share Rose to 46 Cents for the Full Year, in Line With Expectations
  • Telecom Infrastructure Market Sales Increased 25 Percent
  • Outlook for 2005: Net Sales to Increase 8-11 Percent and Diluted Earnings Per Share Growth of 52-74 Percent

CLEVELAND, Feb. 17 /PRNewswire-FirstCall/ -- Lamson & Sessions (NYSE: LMS) today reported record net sales of $97.1 million for the fourth quarter of 2004, an increase of 20.3 percent over the $80.7 million reported in the fourth quarter of 2003. For the full year, net sales rose to $387.1 million, an increase of 13.7 percent compared with the $340.5 million reported in 2003.

Net income for the fourth quarter of 2004 was $1.3 million, or 9 cents per diluted share, which includes the final expenses associated with a plant closure of $444,000 ($280,000 net of tax, or 2 cents per diluted share). In the fourth quarter of 2003, the Company reported a net loss of $2.4 million, or 18 cents per diluted share, which included a loss from discontinued operations of $2.7 million net of tax, or 20 cents per diluted share.

Net income for the year increased to $6.5 million, or 46 cents per diluted share, which includes a litigation settlement charge of $1.7 million ($1.1 million net of tax, or 8 cents per diluted share) and total net costs associated with a plant closure of $213,000 ($134,000 net of tax, or 1 cent per diluted share). The $924,000, or 7 cents per diluted share, net gain on the sale of this facility, which occurred in the first quarter of this year, was more than offset by subsequent closure and relocation costs. In 2003, the Company reported net income of $1.0 million, or 7 cents per diluted share, which included a loss from discontinued operations of $2.7 million net of tax, or 20 cents per diluted share.

"We are very pleased that the operating improvements and cost-saving measures we have implemented in the past few years have helped us take greater advantage of the recovery in some of our key markets, such as commercial and industrial construction and telecom infrastructure construction," said John B. Schulze, Chairman, President and Chief Executive Officer. "This momentum is expected to carry over into 2005 and support our sales growth estimates of 8 to 11 percent for the year."

The Company experienced some strengthening of its gross margin in both the fourth quarter and full year 2004, despite incurring significantly higher raw material costs, particularly for polyvinyl chloride (PVC) and high density polyethylene (HDPE) resins. These raw material costs continue to be under pressure due to higher energy costs, and this trend is expected to continue in 2005.

Operating expenses rose by 19.7 percent in the fourth quarter and 11.5 percent for the full year 2004, reflecting higher variable sales costs and incentive compensation expense, as well as increased legal and professional fees associated with Sarbanes-Oxley compliance efforts.

Business Segments

The Carlon business segment net sales grew approximately 19 percent in both the fourth quarter and full year 2004 over the same periods in 2003. The primary factor in this growth resulted from a more than 25 percent increase in telecom market demand, compared with 2003 levels. This demand increase was driven by expansion in fiber-to-the-premise projects. Operating income in this segment doubled to $4.0 million in the fourth quarter of 2004 compared with $2.0 million in the fourth quarter of 2003. For the year, operating income increased 42 percent to $16.8 million in 2004 from $11.8 million in 2003, as a result of improved volume and higher sales prices.

The Lamson Home Products business segment experienced nearly flat net sales of $23.5 million in the fourth quarter of 2004 when compared with the $23.7 million reported in the fourth quarter of 2003. For the full year 2004, net sales rose 6.1 percent to $86.5 million compared with $81.5 million in 2003. Lamson Home Products saw its operating income fall by 41 percent in the fourth quarter, and 36 percent for the year, as raw material costs rose steadily throughout the year but selling prices remained flat.

The PVC Pipe business segment experienced consistently improving demand activity throughout the year as net sales increased by 47.3 percent in the fourth quarter and 11.4 percent for the full year of 2004, when compared with similar periods in 2003. Market activity strengthened shipment volume significantly throughout the fourth quarter, and sales prices improved as well. As a result, this business segment was able to substantially reduce its operating loss to $737,000 in the fourth quarter of 2004 compared with a $2.3 million loss in the fourth quarter of 2003. For the full year, the operating loss was reduced to $1.5 million from the $5.1 million reported in 2003.

Working Capital and Debt

Along with the strong net sales growth, the Company was able to improve its inventory turns to 7.5 times in 2004 compared with 7.4 times in 2003. In addition, the accounts receivable days outstanding improved to 51 days in 2004 compared with 52.5 days in 2003. This continuously improving working capital management contributed to a $7 million reduction in debt and further lowered the Company's debt leverage despite the need to support the net sales growth.

Business Outlook

For 2005, the Company anticipates further strengthening of its key construction markets which should allow for net sales growth to a range of $420-$430 million, or 8-11 percent for the year. This improved market activity is expected to assist the Company in its efforts to recover some of its raw material costs, and higher capacity utilization in the Company's plants should reduce manufacturing overhead variances. As a result, net income should strengthen progressively throughout the year and result in diluted earnings per share of 70-80 cents for the year, an increase of 52-74 percent over 2004.

As announced on October 5, 2004, the Company is reviewing various strategic alternatives to enhance shareholder value, which may include the sale of part or all of the Company. This evaluation process is continuing.

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 ( http://www.lamson-sessions.com ) at 2:00 p.m. Eastern Time on Thursday, February 17, 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 impact, outcome and effects of the Company's exploration of strategic alternatives, (ii) the volatility of resin pricing, (iii) the ability of the Company to pass through raw material cost increases to its customers, (iv) maintaining a stable level of housing starts, telecommunications infrastructure spending, consumer confidence and general construction trends, (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)

                                                 Fourth Quarter Ended
                                            2004             2003

    NET SALES                             $97,077  100.0%  $80,729  100.0%

    COST OF PRODUCTS SOLD                  82,088   84.6%   69,142   85.6%

    GROSS PROFIT                           14,989   15.4%   11,587   14.4%

    SELLING AND MARKETING EXPENSES          6,426    6.6%    5,228    6.5%

    GENERAL AND ADMINISTRATIVE EXPENSES     3,969    4.1%    3,409    4.2%

    RESEARCH AND DEVELOPMENT                  506    0.5%      469    0.6%

    OPERATING EXPENSES                     10,901   11.2%    9,106   11.3%

    LITIGATION SETTLEMENT                       -    0.0%        -    0.0%

    OTHER EXPENSE, NET                        444    0.4%        -    0.0%

    OPERATING INCOME                        3,644    3.8%    2,481    3.1%

    INTEREST                                2,028    2.1%    2,095    2.6%

    INCOME FROM CONTINUING OPERATIONS
     BEFORE INCOME TAXES                    1,616    1.7%      386    0.5%

    INCOME TAX PROVISION                      345    0.4%       93    0.1%

    INCOME FROM CONTINUING OPERATIONS       1,271    1.3%      293    0.4%

    (LOSS) INCOME FROM DISCONTINUED
     OPERATIONS, NET OF INCOME TAX OF
     $1,750 AND ($256)                          -    0.0%   (2,738)  -3.4%

    NET INCOME (LOSS)                      $1,271    1.3%  $(2,445)  -3.0%

    BASIC EARNINGS (LOSS) PER SHARE:

    EARNINGS FROM CONTINUING OPERATIONS     $0.09            $0.02

    (LOSS) EARNINGS FROM DISCONTINUED
     OPERATIONS, NET OF TAX                     -            (0.20)

    NET EARNINGS (LOSS)                     $0.09           $(0.18)

    AVERAGE SHARES OUTSTANDING             13,878           13,786

    DILUTED EARNINGS (LOSS) PER SHARE:

    EARNINGS FROM CONTINUING OPERATIONS     $0.09            $0.02

    (LOSS) EARNINGS FROM DISCONTINUED
     OPERATIONS, NET OF TAX                     -            (0.20)

    NET EARNINGS (LOSS)                     $0.09           $(0.18)

    DILUTED AVERAGE SHARES OUTSTANDING     14,417           13,786

     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)

                                                   Twelve Months Ended
                                              2004              2003

    NET SALES                              $387,139  100.0%  $340,487  100.0%

    COST OF PRODUCTS SOLD                   323,455   83.6%   286,300   84.1%

    GROSS PROFIT                             63,684   16.4%    54,187   15.9%

    SELLING AND MARKETING EXPENSES           26,527    6.8%    23,787    6.9%

    GENERAL AND ADMINISTRATIVE EXPENSES      15,349    4.0%    13,831    4.1%

    RESEARCH AND DEVELOPMENT                  2,198    0.6%     1,911    0.6%

    OPERATING EXPENSES                       44,074   11.4%    39,529   11.6%

    LITIGATION SETTLEMENT                     1,728    0.4%         -    0.0%

    OTHER EXPENSE. NET                          213    0.1%         -    0.0%

    OPERATING INCOME                         17,669    4.5%    14,658    4.3%

    INTEREST                                  7,925    2.0%     8,527    2.5%

    INCOME FROM CONTINUING OPERATIONS
     BEFORE INCOME TAXES                      9,744    2.5%     6,131    1.8%

    INCOME TAX PROVISION                      3,596    0.9%     2,391    0.7%

    INCOME FROM CONTINUING OPERATIONS         6,148    1.6%     3,740    1.1%

    (LOSS) INCOME FROM DISCONTINUED
     OPERATIONS, NET OF INCOME TAX OF
     $1,750 AND ($256)                          401    0.1%    (2,738)  -0.8%

    NET INCOME (LOSS)                        $6,549    1.7%    $1,002    0.3%

    BASIC EARNINGS (LOSS) PER SHARE:

    EARNINGS FROM CONTINUING OPERATIONS       $0.45             $0.27

    (LOSS) EARNINGS FROM DISCONTINUED
     OPERATIONS, NET OF TAX                    0.03             (0.20)

    NET EARNINGS (LOSS)                       $0.47             $0.07

    AVERAGE SHARES OUTSTANDING               13,815            13,785

    DILUTED EARNINGS (LOSS) PER SHARE:

    EARNINGS FROM CONTINUING OPERATIONS       $0.43             $0.27

    (LOSS) EARNINGS FROM DISCONTINUED
     OPERATIONS, NET OF TAX                    0.03             (0.20)

    NET EARNINGS (LOSS)                       $0.46             $0.07

    DILUTED AVERAGE SHARES OUTSTANDING       14,164            13,894

     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)

                                             Year Ended         Year Ended
                                           January 1, 2005   January 3, 2004

    ACCOUNTS RECEIVABLE, NET                       $48,391           $38,196

    INVENTORIES, NET                                36,860            30,143

    OTHER CURRENT ASSETS                            15,494            13,038

    PROPERTY, PLANT AND EQUIPMENT, NET              47,961            51,326

    GOODWILL                                        21,480            21,519

    PENSION ASSETS                                  30,513            30,016

    OTHER ASSETS                                    17,803            24,075

    TOTAL ASSETS                                  $218,502          $208,313

    ACCOUNTS PAYABLE                               $24,213           $16,928

    SECURED CREDIT AGREEMENT - CURRENT              75,000            11,000

    OTHER CURRENT LIABILITIES                       31,899            29,098

    LONG-TERM DEBT                                  11,876            82,990

    OTHER LONG-TERM LIABILITIES                     30,138            29,782

    SHAREHOLDERS' EQUITY                            45,376            38,515

    TOTAL LIABILITIES & SHAREHOLDERS' EQUITY      $218,502          $208,313

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

                                                       Twelve Months Ended
                                                      2004             2003

    OPERATING ACTIVITIES
      NET INCOME                                     $6,549           $1,002
      ADJUSTMENTS TO RECONCILE NET INCOME
       TO CASH PROVIDED BY OPERATING ACTIVITIES:
        LOSS FROM DISCONTINUED OPERATIONS                 -            2,738
        DEPRECIATION                                  9,140            9,195
        AMORTIZATION                                  1,599            1,599
        GAIN ON SALE OF FIXED ASSETS                   (933)               -
        DEFERRED INCOME TAXES                         3,913            2,280
        NET CHANGE IN WORKING CAPITAL ACCOUNTS:
          ACCOUNTS RECEIVABLE                       (10,195)          (1,510)
          INVENTORIES                                (6,717)           2,087
          PREPAID EXPENSES AND OTHER                    313             (689)
          ACCOUNTS PAYABLE                            7,285           (4,281)
          ACCRUED EXPENSES AND OTHER
           CURRENT LIABILITIES                          926           (2,041)
        PENSION PLAN CONTRIBUTIONS                   (1,866)          (1,126)
        OTHER LONG-TERM ITEMS                         1,821              457
    CASH PROVIDED BY OPERATING ACTIVITIES            11,835            9,711

    INVESTING ACTIVITIES
      NET ADDITIONS TO PROPERTY, PLANT,
       AND EQUIPMENT                                 (6,370)          (8,562)
      PROCEEDS FROM SALE OF FIXED ASSETS              1,595                -
      ACQUISITIONS AND RELATED ITEMS                   (250)            (813)
    CASH USED IN INVESTING ACTIVITIES                (5,025)          (9,375)

    FINANCING ACTIVITIES
      NET PAYMENTS UNDER SECURED CREDIT
       AGREEMENT                                     (6,400)            (600)
      PAYMENTS ON OTHER LONG-TERM
       BORROWINGS                                      (599)            (772)
      PURCHASE AND RETIREMENT OF TREASURY
       STOCK                                           (205)               -
      EXERCISE OF STOCK OPTIONS                         609                8
    CASH USED IN FINANCING ACTIVITIES                (6,595)          (1,364)

    INCREASE (DECREASE) IN CASH AND CASH
     EQUIVALENTS                                        215           (1,028)

    CASH AND CASH EQUIVALENTS AT BEGINNING
     OF YEAR                                            468            1,496

    CASH AND CASH EQUIVALENTS AT END OF
     PERIOD                                            $683             $468

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

                                           Fourth Quarter     Twelve Months
                                              Ended               Ended
                                          2004     2003      2004      2003
    NET SALES
       CARLON                            $44,313  $37,211  $183,800  $154,090
       LAMSON HOME PRODUCTS               23,548   23,690    86,510    81,514
       PVC PIPE                           29,216   19,828   116,829   104,883
                                         $97,077  $80,729  $387,139  $340,487

    OPERATING INCOME (LOSS)
       CARLON                             $4,024   $1,955   $16,836   $11,840
       LAMSON HOME PRODUCTS                2,493    4,222     8,776    13,766
       PVC PIPE                             (737)  (2,295)   (1,502)   (5,119)
       CORPORATE OFFICE                   (1,692)  (1,401)   (6,228)   (5,829)
       OTHER EXPENSE                        (444)       -      (213)        -
                                          $3,644   $2,481   $17,669   $14,658

    DEPRECIATION AND AMORTIZATION
       CARLON                             $1,264   $1,665    $5,342    $6,801
       LAMSON HOME PRODUCTS                  488      436     1,881     1,722
       PVC PIPE                              887      604     3,516     2,271
                                          $2,639   $2,705   $10,739   $10,794

      TOTAL ASSETS BY BUSINESS SEGMENT AT JANUARY 1, 2005 AND JANUARY 3, 2004

                                           January 1, 2005   January 3, 2004
    IDENTIFIABLE ASSETS
       CARLON                                      $77,473           $79,900
       LAMSON HOME PRODUCTS                         34,190            30,065
       PVC PIPE                                     44,650            34,232
       CORPORATE OFFICE (INCLUDES CASH,
        DEFERRED TAX, AND PENSION ASSETS)           62,189            64,116
                                                  $218,502          $208,313
              

SOURCE 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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