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Lamson & Sessions Continues Strong Growth in Third Quarter 2004
-- 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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