Lamson & Sessions Reports Strong Growth in Second Quarter 2004
- Net Sales Rise 18.8 Percent to $103.5 Million, Highest Quarterly
Sales in 16 Years
- Diluted Earnings Per Share Improve 61 Percent to 19 Cents for
the Second Quarter, Up From 12 Cents in the Second Quarter of
2003
- All Three Business Segments Report Net Sales Growth
- Renewed Demand in Telecom Infrastructure Market
CLEVELAND, July 28 /PRNewswire-FirstCall/ -- Lamson & Sessions
(NYSE: LMS) today announced net sales of $103.5 million for the
second quarter of 2004, an increase of 18.8 percent over the $87.1
million reported in the second quarter of 2003. This strong net
sales performance, the Company's highest second quarter sales since
1988, reflects improving sales order trends in several of the Company's
key markets. All three of the Company's business segments -- Carlon,
Lamson Home Products and PVC Pipe -- reported net sales increases
in excess of 10 percent in this quarter.
The Company reported net income of $2.7 million, or 19 cents per
diluted share, in the second quarter of 2004, an increase of 61
percent over the $1.7 million, or 12 cents per diluted share, reported
in the prior-year quarter. This improvement reflects better market
conditions, which have allowed the Company to recover some of the
increases in raw material costs that occurred throughout the first
half of 2004.
"We are strongly encouraged by the improved sales order levels
experienced in the second quarter," said John B. Schulze, Chairman,
President and Chief Executive Officer. "While conditions have improved
in the electrical, telecom and residential housing markets, our
strong net sales performance has also been enhanced by our commitment
to building key customer relationships and achieving very high service
levels."
Gross margin rose to 18.8 percent in the second quarter of 2004,
from 18.4 percent in 2003's second quarter. This improvement reflects
some raw material cost recovery and higher operating rates in the
Company's manufacturing facilities. Customer service levels remain
at very high rates despite the increasing unit demand levels.
Operating expenses rose in the second quarter of 2004, compared
with the prior-year period, but declined slightly as a percentage
of sales. Higher sales commissions and marketing expenses were primarily
responsible for the higher expense level.
Business Segments
Carlon net sales rose more than 26 percent in the second quarter
of 2004, compared with the same quarter a year ago. Continued demand
strength in the residential housing market and renewed demand in
the telecom infrastructure market fueled the substantial revenue
growth in the quarter. Similarly, Carlon's operating profit grew
in excess of 25 percent, compared with a year ago, as a result of
higher shipment levels and improved selling price levels which allowed
for the recovery of higher raw material costs.
Lamson Home Products experienced net sales growth of 15.7 percent
in the second quarter of 2004, compared with the prior-year period.
This growth resulted from market share gains with its largest customer
and continued strong demand for electrical products supporting residential
construction and rehabilitation projects through the retail home
center market. Operating income declined approximately 23 percent
from a year ago, primarily because of an inability to recover higher
raw material costs in the retail channel, as well as increased marketing
expenses related to product line expansions with key customers.
The PVC Pipe segment realized an increase of 10.6 percent in net
sales for the second quarter of 2004, compared with a year ago.
The increase was almost entirely the result of higher selling prices
reflecting recovery of raw material cost increases. Operating income
improved to $1.0 million for the second quarter, compared with a
break-even performance in the second quarter of 2003.
First Half Results
For the first half of 2004, the Company reported net sales of
$187.8 million, an increase of 12.8 percent over the $166.5 million
reported in the first half of 2003. Net income for the first half
was $4.4 million, or 32 cents per diluted share, compared with $1.9
million, or 14 cents per diluted share, a year ago.
All three business segments reported net sales increases in the
first half of 2004, primarily due to the continuing strength of
the residential housing market and the beginning of a recovery in
the telecom infrastructure market, which led to improved selling
prices and the recovery of some raw material cost increases.
The Carlon segment experienced net sales growth in excess of 19
percent in the first half of 2004, compared with the first half
of last year. Carlon's operating profits in the first half of 2004
grew to $8.2 million, a 45 percent increase over the first half
of 2003, due to strengthening conditions in key markets and higher
operating rates in the Company's plants and distribution centers.
Lamson Home Products reported a 14.5 percent increase in net sales
in the first half of 2004, compared with the same period in 2003,
due to market share gains with key customers and stable demand in
the retail market. Operating income fell 17 percent in the first
half, compared with the first half of last year, due to an inability
to recover increasing raw material costs and increased marketing
expenses.
The PVC Pipe segment reported a slight increase in net sales of
2.3 percent in the first half of 2004, compared with the prior-year
period, primarily due to higher selling prices in the second quarter
as raw material cost increases began to be recovered. In the first
half of 2004, the operating loss of this segment was reduced to
$168,000, compared with a $709,000 loss in the prior-year first
half.
Financial Highlights
* Accounts receivable rose $9 million as of the end of the first half of
2004, compared with a year earlier, due to the strong sales growth
reported this year. Accounts receivable days sales outstanding were 48
days at July 3, 2004, which is unchanged from the level attained at
July 5, 2003.
* Inventory reached $40.7 million at the end of the first half of 2004,
versus $42.7 million at the same point a year ago, despite significant
growth in net sales. Inventory turns improved to a record 7.6 turns,
compared with 6.8 turns at the end of the first quarter of 2004, and
6.1 turns at the end of the first half of 2003.
* As of July 3, 2004, long-term debt was $84.1 million, a decrease of
$7.3 million or 8 percent from the $91.4 million at July 5, 2003. The
Company is evaluating refinancing or debt extension alternatives as its
secured credit agreement matures in August 2005.
"We continue to focus on strong working capital management and
de- leveraging our balance sheet," said James J. Abel, Executive
Vice President and Chief Financial Officer. "By the end of 2004,
we anticipate a further significant reduction in our debt level."
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 Wednesday, July 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 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)
Second Quarter Ended
2004 2003
NET SALES $103,464 100.0% $87,072 100.0%
COST OF PRODUCTS SOLD 84,048 81.2% 71,016 81.6%
GROSS PROFIT 19,416 18.8% 16,056 18.4%
OPERATING EXPENSES 12,597 12.2% 11,043 12.7%
OTHER EXPENSE (INCOME) 298 0.3% - 0.0%
OPERATING INCOME 6,521 6.3% 5,013 5.7%
INTEREST 1,950 1.9% 2,125 2.4%
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 4,571 4.4% 2,888 3.3%
INCOME TAX PROVISION 1,826 1.7% 1,185 1.3%
INCOME FROM CONTINUING OPERATIONS 2,745 2.7% 1,703 2.0%
INCOME FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAX OF $256 - 0.0% - 0.0%
NET INCOME $2,745 2.7% $1,703 2.0%
BASIC EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.20 $0.12
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX - -
NET EARNINGS $0.20 $0.12
AVERAGE SHARES OUTSTANDING 13,784 13,786
DILUTED EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.19 $0.12
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX - -
NET EARNINGS $0.19 $0.12
DILUTED AVERAGE SHARES OUTSTANDING 14,099 13,869
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
First Half Ended
2004 2003
NET SALES $187,750 100.0% $166,517 100.0%
COST OF PRODUCTS SOLD 153,759 81.9% 137,190 82.4%
GROSS PROFIT 33,991 18.1% 29,327 17.6%
OPERATING EXPENSES 23,976 12.8% 21,720 13.0%
OTHER EXPENSE (INCOME) (626) -0.4% - 0.0%
OPERATING INCOME 10,641 5.7% 7,607 4.6%
INTEREST 3,905 2.1% 4,338 2.6%
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 6,736 3.6% 3,269 2.0%
INCOME TAX PROVISION 2,692 1.4% 1,340 0.8%
INCOME FROM CONTINUING OPERATIONS 4,044 2.2% 1,929 1.2%
INCOME FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAX OF $256 401 0.2% - 0.0%
NET INCOME $4,445 2.4% $1,929 1.2%
BASIC EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.29 $0.14
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX 0.03 -
NET EARNINGS $0.32 $0.14
AVERAGE SHARES OUTSTANDING 13,786 13,784
DILUTED EARNINGS PER SHARE:
EARNINGS FROM CONTINUING OPERATIONS $0.29 $0.14
EARNINGS FROM DISCONTINUED OPERATIONS,
NET OF TAX 0.03 -
NET EARNINGS $0.32 $0.14
DILUTED AVERAGE SHARES OUTSTANDING 14,028 13,829
THE LAMSON & SESSIONS CO.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
Quarter Year Quarter
Ended Ended Ended
July 3, 2004 January 3, 2004 July 5, 2003
ACCOUNTS RECEIVABLE, NET $57,232 $38,196 $48,240
INVENTORIES, NET 40,753 30,143 42,727
OTHER CURRENT ASSETS 15,569 13,038 15,620
PROPERTY, PLANT AND EQUIPMENT, NET 47,386 51,326 50,965
GOODWILL 21,519 21,519 21,558
PENSION ASSETS 30,264 30,016 30,449
OTHER ASSETS 19,957 24,075 22,343
TOTAL ASSETS $232,680 $208,313 $231,902
ACCOUNTS PAYABLE $35,528 $16,928 $33,390
OTHER CURRENT LIABILITIES 42,367 40,098 39,575
LONG-TERM DEBT 84,066 82,990 91,443
OTHER LONG-TERM LIABILITIES 27,507 29,782 29,088
SHAREHOLDERS' EQUITY 43,212 38,515 38,406
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $232,680 $208,313 $231,902
THE LAMSON & SESSIONS CO.
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(In thousands)
First Half Ended
2004 2003
OPERATING ACTIVITIES
NET INCOME $4,445 $1,929
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH
PROVIDED (USED) BY OPERATING ACTIVITIES:
DEPRECIATION 4,638 4,553
AMORTIZATION 800 800
GAIN ON SALE OF FIXED ASSETS (933) -
DEFERRED INCOME TAXES 2,548 1,111
NET CHANGE IN WORKING CAPITAL ACCOUNTS:
ACCOUNTS RECEIVABLE (19,036) (11,554)
INVENTORIES (10,610) (10,497)
PREPAID EXPENSES AND OTHER (599) 50
ACCOUNTS PAYABLE 18,600 12,181
ACCRUED EXPENSES AND OTHER
CURRENT LIABILITIES 3,303 (2,955)
OTHER LONG-TERM ITEMS (1,402) 1,233
CASH PROVIDED (USED) BY OPERATING ACTIVITIES 1,754 (3,149)
INVESTING ACTIVITIES
NET ADDITIONS TO PROPERTY, PLANT,
AND EQUIPMENT (1,873) (3,605)
REFUND OF DEPOSITS ON EQUIPMENT
OPERATING LEASES 580 -
PROCEEDS FROM SALE OF FIXED ASSETS 1,595 -
ACQUISITIONS AND RELATED ITEMS (125) (500)
CASH PROVIDED (USED) BY INVESTING ACTIVITIES 177 (4,105)
FINANCING ACTIVITIES
NET (PAYMENTS) BORROWINGS UNDER
SECURED CREDIT AGREEMENT (1,009) 7,300
PAYMENTS ON OTHER LONG-TERM BORROWINGS (210) (224)
PURCHASE AND RETIREMENT OF TREASURY STOCK (205) -
EXERCISE OF STOCK OPTIONS 57 -
CASH (USED) PROVIDED BY FINANCING ACTIVITIES (1,367) 7,076
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 564 (178)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 468 1,496
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,032 $1,318
THE LAMSON & SESSIONS CO.
BUSINESS SEGMENTS
(In thousands)
Second First
Quarter Ended Half Ended
2004 2003 2004 2003
NET SALES
CARLON $49,467 $39,145 $87,630 $73,124
LAMSON HOME PRODUCTS 21,989 19,011 43,034 37,575
PVC PIPE 32,008 28,916 57,086 55,818
$103,464 $87,072 $187,750 $166,517
OPERATING INCOME (LOSS)
CARLON $4,608 $3,675 $8,247 $5,681
LAMSON HOME PRODUCTS 2,468 3,225 4,852 5,848
PVC PIPE 1,019 (8) (168) (709)
CORPORATE OFFICE (1,276) (1,879) (2,916) (3,213)
OTHER (EXPENSE) INCOME (298) - 626 -
$6,521 $5,013 $10,641 $7,607
DEPRECIATION AND AMORTIZATION
CARLON $1,368 $1,721 $2,765 $3,448
LAMSON HOME PRODUCTS 465 420 935 853
PVC PIPE 877 523 1,738 1,052
$2,710 $2,664 $5,438 $5,353
TOTAL ASSETS BY BUSINESS SEGMENT AT JULY 3, 2004, JANUARY 3, 2004, AND
JULY 5, 2003
July 3, 2004 January 3, 2004 July 5, 2003
IDENTIFIABLE ASSETS
CARLON $84,703 $79,900 $89,534
LAMSON HOME PRODUCTS 33,806 30,065 31,172
PVC PIPE 50,595 34,232 46,596
CORPORATE OFFICE (INCLUDES
CASH, DEFERRED TAX, AND
PENSION ASSETS) 63,576 64,116 64,600
$232,680 $208,313 $231,902
SOURCE Lamson & Sessions
/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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