LMS Lamson Sessions

- First Quarter Results in Expected Range, Lower Than Prior Year Due to Cyclical Weakness in PVC Pipe Business CLEVELAND, April 30 /PRNewswire-FirstCall/ -- 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 (http://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: 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) 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 DATASOURCE: 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/

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