UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 1, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _______________
Commission File Number 1-313
THE LAMSON & SESSIONS CO.
(Exact name of Registrant as specified in its charter)
Ohio 34-0349210
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
25701 Science Park Drive
Cleveland, Ohio 44122-7313
(Address of principal executive offices) (Zip Code)
216/464-3400
(Registrant's telephone number, including area code)
___________________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No
----- -----
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes No X
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 1, 2005 the Registrant had outstanding 14,489,808 common shares.
PART I
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
THIRD QUARTER ENDED NINE MONTHS ENDED
----------------------------------- ---------------- ----------------
2005 2004 2005 2004
---------------- ---------------- ---------------- ----------------
NET SALES $128,052 100.0% $104,919 100.0% $350,854 100.0% $290,062 100.0%
Cost of products sold 105,144 82.1% 87,820 83.7% 287,954 82.1% 241,367 83.2%
-------- -------- -------- --------
GROSS PROFIT 22,908 17.9% 17,099 16.3% 62,900 17.9% 48,695 16.8%
Selling and marketing expenses 7,825 6.1% 7,159 6.8% 22,428 6.4% 20,101 6.9%
General and administrative expenses 4,269 3.3% 3,817 3.6% 12,406 3.5% 11,380 3.9%
Research and development expenses 467 0.4% 616 0.6% 1,405 0.4% 1,692 0.6%
-------- -------- -------- --------
Total operating expenses 12,561 9.8% 11,592 11.0% 36,239 10.3% 33,173 11.4%
Litigation settlement -- 0.0% 1,728 1.7% -- 0.0% 1,728 0.7%
Other expense (income), net -- 0.0% 395 0.4% -- 0.0% (231) -0.1%
-------- -------- -------- --------
OPERATING INCOME 10,347 8.1% 3,384 3.2% 26,661 7.6% 14,025 4.8%
Interest expense, net 1,419 1.1% 1,992 1.9% 5,632 1.6% 5,897 2.0%
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 8,928 7.0% 1,392 1.3% 21,029 6.0% 8,128 2.8%
Income tax provision 3,575 2.8% 559 0.5% 8,245 2.4% 3,251 1.1%
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS 5,353 4.2% 833 0.8% 12,784 3.6% 4,877 1.7%
Income from discontinued operations,
net of income tax of $256 -- 0.0% -- 0.0% -- 0.0% 401 0.1%
-------- -------- -------- --------
NET INCOME $ 5,353 4.2% $ 833 0.8% $ 12,784 3.6% $ 5,278 1.8%
======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE:
Earnings from continuing operations $ 0.37 $ 0.06 $ 0.90 $ 0.35
Earnings from discontinued operations,
net of tax -- -- -- 0.03
-------- -------- -------- --------
NET EARNINGS $ 0.37 $ 0.06 $ 0.90 $ 0.38
======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE:
Earnings from continuing operations $ 0.35 $ 0.06 $ 0.86 $ 0.35
Earnings from discontinued operations,
net of tax -- -- -- 0.03
-------- -------- -------- --------
NET EARNINGS $ 0.35 $ 0.06 $ 0.86 $ 0.37
======== ======== ======== ========
See notes to Consolidated Financial Statements (Unaudited).
2
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
THIRD QUARTER THIRD QUARTER
ENDED YEAR ENDED ENDED
2005 2004 2004
------------- ---------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,723 $ 683 $ 533
Accounts receivable, net of allowances of
$2,186, $1,522 and $1,634, respectively 69,812 48,391 59,561
Inventories, net
Raw materials 5,879 3,504 3,922
Work-in-process 4,899 5,160 4,827
Finished goods 29,140 28,196 31,381
-------- -------- --------
39,918 36,860 40,130
Deferred tax assets 8,171 9,683 8,961
Prepaid expenses and other 4,629 5,128 5,293
-------- -------- --------
TOTAL CURRENT ASSETS 124,253 100,745 114,478
PROPERTY, PLANT AND EQUIPMENT
Land 3,320 3,320 3,320
Buildings 25,279 25,130 24,897
Machinery and equipment 125,125 119,622 118,161
-------- -------- --------
153,724 148,072 146,378
Less allowances for depreciation and amortization 106,394 100,111 98,536
-------- -------- --------
TOTAL NET PROPERTY, PLANT AND EQUIPMENT 47,330 47,961 47,842
GOODWILL 21,480 21,480 21,519
PENSION ASSETS 31,053 30,513 30,388
DEFERRED TAX ASSETS 10,242 12,255 13,455
OTHER ASSETS 4,443 5,548 5,350
-------- -------- --------
TOTAL ASSETS $238,801 $218,502 $233,032
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 34,732 $ 24,213 $ 32,388
Accrued compensation and benefits 12,581 12,595 11,787
Customer volume & promotional accrued expenses 6,014 6,648 6,208
Other accrued expenses 9,224 8,509 9,940
Taxes 5,231 3,272 3,738
Secured credit agreement - current 5,000 75,000 83,100
Current maturities of long-term debt 775 875 860
-------- -------- --------
TOTAL CURRENT LIABILITIES 73,557 131,112 148,021
LONG-TERM DEBT 72,390 11,876 11,756
POST-RETIREMENT BENEFITS AND OTHER
LONG-TERM LIABILITIES 29,226 30,138 28,749
SHAREHOLDERS' EQUITY
Common shares 1,449 1,389 1,384
Other capital 81,310 76,130 75,787
Retained earnings (deficit) (14,496) (27,280) (28,551)
Accumulated other comprehensive income (loss) (4,635) (4,863) (4,114)
-------- -------- --------
TOTAL SHAREHOLDERS' EQUITY 63,628 45,376 44,506
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $238,801 $218,502 $233,032
======== ======== ========
See notes to Consolidated Financial Statements (Unaudited)
3
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(Dollars in thousands)
NINE MONTHS ENDED
-------------------
2005 2004
-------- --------
OPERATING ACTIVITIES
Net income $ 12,784 $ 5,278
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation 6,732 6,901
Amortization 1,182 1,199
Gain on sale of property, plant and equipment -- (933)
Deferred income taxes 5,016 2,942
Net change in working capital accounts:
Accounts receivable (21,421) (21,365)
Inventories (3,058) (9,987)
Prepaid expenses and other 499 (316)
Accounts payable 10,519 15,460
Accrued expenses and other current liabilities 2,556 2,269
Pension plan contributions (1,361) (1,792)
Other long-term items (109) 1,893
-------- --------
CASH PROVIDED BY OPERATING ACTIVITIES 13,339 1,549
INVESTING ACTIVITIES
Net additions to property, plant and equipment (6,101) (4,012)
Proceeds from sale of property, plant and equipment -- 1,595
Acquisitions and related items (187) (187)
-------- --------
CASH USED IN INVESTING ACTIVITIES (6,288) (2,604)
FINANCING ACTIVITIES
Net (payments) borrowings under secured credit agreement (8,750) 1,700
Payments on other long-term borrowings (836) (734)
Purchase and retirement of treasury stock -- (205)
Exercise of stock options (595,201 and 72,500 shares issued, respectively) 3,575 359
-------- --------
CASH (USED) PROVIDED BY FINANCING ACTIVITIES (6,011) 1,120
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 1,040 65
Cash and cash equivalents at beginning of year 683 468
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,723 $ 533
======== ========
See notes to Consolidated Financial Statements (Unaudited).
4
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements do not include all
of the information and notes required by accounting principles generally
accepted in the United States for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals and
changes in accounting estimates) considered necessary for a fair presentation
have been included. Certain 2004 amounts have been reclassified to conform with
2005 classifications. In particular, the Company has reclassified certain
co-operative advertising allowances and service commissions in the Lamson Home
Products business segment, reducing net sales and selling and marketing expenses
by $1.5 million and $4.1 million in the third quarter and first nine months of
2004, respectively.
NOTE B - INCOME TAXES
The year-to-date 2005 income tax provision was calculated based on management's
estimate of the annual effective tax rate of 39.2% for the year. The provision
for 2004 is primarily non-cash charges. The Company anticipates having to pay
(cash) approximately 40.0% of the 2005 income tax provision due to alternative
minimum tax requirements.
NOTE C - BUSINESS SEGMENTS
The Company's reportable segments are as follows:
Carlon - Industrial, Residential, Commercial, Telecommunications and Utility
Construction: The major customers served are electrical contractors and
distributors, original equipment manufacturers, electric power utilities, cable
television (CATV), telephone and telecommunications companies. The principal
products sold by this segment include electrical and telecommunications raceway
systems and a broad line of enclosures, electrical outlet boxes and fittings.
Examples of the applications for the products included in this segment are
multi-cell duct systems and High Density Polyethylene ("HDPE") conduit designed
to protect underground fiber optic cables, allowing future cabling expansion and
flexible conduit used inside buildings to protect communications cable.
Lamson Home Products - Consumer: The major customers served are home centers and
mass merchandisers for the "do-it-yourself" (DIY) home improvement market. The
products included in this segment are electrical outlet boxes, liquidtight
conduit, electrical fittings, door chimes and lighting controls.
PVC Pipe: This business segment primarily supplies electrical, power and
communications conduit to the electrical distribution, telecommunications,
consumer, power utility and sewer markets. The electrical and telecommunications
conduit is made from Polyvinyl Chloride ("PVC") resin and is used to protect
wire or fiber optic cables supporting the infrastructure of power or
telecommunications systems.
5
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE C - BUSINESS SEGMENTS - CONTINUED
(Dollars in thousands)
THIRD QUARTER ENDED NINE MONTHS ENDED
------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
NET SALES
Carlon $ 58,836 $ 51,857 $165,043 $139,487
Lamson Home Products 28,305 22,535 78,651 62,962
PVC Pipe 40,911 30,527 107,160 87,613
-------- -------- -------- --------
$128,052 $104,919 $350,854 $290,062
======== ======== ======== ========
OPERATING INCOME (LOSS)
Carlon $ 8,712 $ 4,565 $ 20,165 $ 12,812
Lamson Home Products 4,332 1,431 12,445 6,283
PVC Pipe (892) (597) (530) (765)
Corporate Office (1,805) (1,620) (5,419) (4,536)
Other (Expense) Income (see Note I) -- (395) -- 231
-------- -------- -------- --------
$ 10,347 $ 3,384 $ 26,661 $ 14,025
======== ======== ======== ========
DEPRECIATION AND AMORTIZATION
Carlon $ 1,206 $ 1,313 $ 3,704 $ 4,078
Lamson Home Products 474 458 1,390 1,393
PVC Pipe 943 891 2,820 2,629
-------- -------- -------- --------
$ 2,623 $ 2,662 $ 7,914 $ 8,100
======== ======== ======== ========
In September 2004 the Company settled its patent infringement litigation as the
result of a mediation process. The effect of this litigation settlement has
reduced operating income by $864,000 in both the Carlon and Lamson Home Products
business segments in the third quarter of 2004.
Total assets by business segment at October 1, 2005, January 1, 2005 and October
2, 2004 are as follows:
(Dollars in thousands)
OCTOBER 1, JANUARY 1, OCTOBER 2,
2005 2005 2004
---------- ---------- ----------
IDENTIFIABLE ASSETS
Carlon $ 87,290 $ 77,473 $ 87,075
Lamson Home Products 38,966 34,190 33,484
PVC Pipe 52,721 44,650 50,307
Corporate Office (includes deferred tax and
pension assets) 59,824 62,189 62,166
-------- -------- --------
$238,801 $218,502 $233,032
======== ======== ========
6
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE D - COMPREHENSIVE INCOME
The components of comprehensive income for the third quarter and the first nine
months of 2005 and 2004 are as follows:
(Dollars in thousands)
THIRD QUARTER ENDED NINE MONTHS ENDED
----------------------- -----------------------
OCTOBER 1, OCTOBER 2, OCTOBER 1, OCTOBER 2,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Net income $5,353 $833 $12,784 $5,278
Foreign currency translation adjustments 111 (56) 59 (78)
Interest rate swaps, net of tax 21 124 169 533
------ ---- ------- ------
Comprehensive income $5,485 $901 $13,012 $5,733
====== ==== ======= ======
The components of accumulated other comprehensive income (loss), at October 1,
2005, January 1, 2005 and October 2, 2004 are as follows:
(Dollars in thousands)
OCTOBER 1, JANUARY 1, OCTOBER 2,
2005 2005 2004
---------- ---------- ----------
Foreign currency translation adjustments $ (312) $ (371) $ (519)
Minimum pension liability adjustments,
net of tax (4,323) (4,323) (3,289)
Interest rate swaps, net of tax -- (169) (306)
------- ------- -------
Accumulated other comprehensive income (loss) $(4,635) $(4,863) $(4,114)
======= ======= =======
7
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE E - EARNINGS PER SHARE CALCULATION
The following table sets forth the computation of basic and diluted earnings per
share:
(Dollars and shares in thousands, except per share amounts)
THIRD QUARTER ENDED NINE MONTHS ENDED
------------------- -----------------
2005 2004 2005 2004
------- ------- ------- -------
BASIC EARNINGS-PER-SHARE COMPUTATION
Net Income $ 5,353 $ 833 $12,784 $ 5,278
======= ======= ======= =======
Average Common Shares Outstanding 14,364 13,809 14,170 13,793
======= ======= ======= =======
Basic Earnings Per Share $ 0.37 $ 0.06 $ 0.90 $ 0.38
======= ======= ======= =======
DILUTED EARNINGS-PER-SHARE COMPUTATION
Net Income $ 5,353 $ 833 $12,784 $ 5,278
======= ======= ======= =======
Basic Shares Outstanding 14,364 13,809 14,170 13,793
Stock Options Calculated Under
the Treasury Stock Method 847 373 665 287
------- ------- ------- -------
Total Shares 15,211 14,182 14,835 14,080
======= ======= ======= =======
Diluted Earnings Per Share $ 0.35 $ 0.06 $ 0.86 $ 0.37
======= ======= ======= =======
NOTE F - DERIVATIVES AND HEDGING
The Company recognizes all derivative financial instruments as either assets or
liabilities at fair value. Derivative instruments that are not hedges are
adjusted to fair value through net income. Changes in the fair value of
derivative instruments that are classified as fair value hedges are offset
against changes in the fair value of the hedged assets, liabilities, or firm
commitments, through net income. Changes in the fair value of derivative
instruments that are classified as cash flow hedges are recognized in other
comprehensive income until such time as the hedged items are recognized in net
income.
During the first quarter of 2001, the Company entered into two interest rate
swap agreements for a total notional amount of $58.5 million. The agreements
expired in August 2005.
The Company has no derivative instruments, either cash flow or fair value
hedges, which are currently outstanding.
8
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE G - DISCONTINUED OPERATIONS
As of the end of the first quarter of 2004 the Company was informed that YSD
Industries Inc. ("YSDI"), a business which the Company sold in 1988, was selling
the assets of the business and would be unable to fund (defaulted on its
obligations) certain post-retirement medical and life insurance benefits, for
which the Company was contingently liable. The Company had recorded a net charge
($2.7 million) in 2003 reflecting the actuarial calculation of this estimated
liability for payments to certain eligible participants through February 2011
when the Company's obligation will end and to write-off notes (cash advances) to
YSDI in 2003. As a result of YSDI's asset sale in 2004, the Company was able to
realize payment of $668,000 for these notes receivable that had been previously
written off as uncollectible in 2003. The net impact of this recovery, $401,000
(net of tax), has been recorded as income from discontinued operations in the
first quarter of 2004.
NOTE H - STOCK COMPENSATION PLANS
The Company currently has three stock compensation plans. The Company accounts
for those plans under the recognition and measurement principles of APB Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
No stock-based employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to the market
value of the underlying common stock on the date of grant. In accordance with
SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure," the following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value recognition
provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation,"
to stock-based employee compensation.
(Dollars in thousands, except per share data)
THIRD QUARTER ENDED NINE MONTHS ENDED
------------------- -----------------
2005 2004 2005 2004
------ ----- ------- ------
Net income As reported $5,353 $ 833 $12,784 $5,278
Total stock-based employee
compensation, net of tax (153) (135) (414) (374)
------ ----- ------- ------
Net income Pro forma $5,200 $ 698 $12,370 $4,904
====== ===== ======= ======
Basic earnings per share As reported $ 0.37 $0.06 $ 0.90 $ 0.38
Pro forma 0.36 0.05 0.87 0.36
Diluted earnings per share As reported $ 0.35 $0.06 $ 0.86 $ 0.37
Pro forma 0.34 0.05 0.83 0.35
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision
of FASB Statement No. 123, "Accounting for Stock-Based Compensation." Statement
123(R) supersedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and amends FASB Statement No. 95, "Statement of Cash Flows."
Generally, the approach in Statement 123(R) is similar to the approach described
in Statement 123. However, Statement 123(R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro forma disclosure is no longer
an alternative. Statement 123(R) must be adopted no later than the beginning of
fiscal year 2006. Early adoption will be permitted in periods in which financial
statements have not yet been issued. The Company will adopt Statement 123(R) on
January 1, 2006 and is still in the process of determining the impact on
operating results.
9
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE H - STOCK COMPENSATION PLANS - CONTINUED
The impact of adoption of Statement 123(R) cannot be predicted at this time
because it will depend on levels of share-based payments granted in the future.
Statement 123(R) also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather
than as an operating cash flow as required under current literature. This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption.
NOTE I - SALE OF ASSETS
At the end of 2003, the Company intended to vacate one of its manufacturing
facilities and proceed with its efforts to sell the property during 2004. The
asset had been written down in 2001 to its then estimated fair value. In the
first quarter of 2004, the Company sold the manufacturing facility located in
Pasadena, Texas for net proceeds of $1.5 million, realizing a gain on the sale
of $924,000 included as other income in the Consolidated Income Statement. The
Company relocated production equipment at this facility to other Lamson &
Sessions facilities in 2004 and incurred approximately $1.1 million in
severance, training, moving and other costs as detailed below. As of July 2,
2005 all severance payments had been made. This plant sale affected 40
employees, all of whom left the Company by December 31, 2004.
(Dollars in thousands)
TRAINING, MOVING
SEVERANCE AND OTHER COSTS TOTAL
--------- ---------------- ------
2004 charges $ 587 $ 550 $1,137
Payments in 2004 (151) (550) (701)
----- ----- ------
Balance at January 1, 2005 $ 436 $ -- $ 436
Payments in first quarter 2005 (312) -- (312)
----- ----- ------
Balance at April 2, 2005 $ 124 $ -- $ 124
Payments in second quarter 2005 (124) -- (124)
----- ----- ------
Balance at July 2, 2005 $ -- $ -- $ --
===== ===== ======
NOTE J - PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS
The Company sponsors several qualified and non-qualified pension plans and other
post-retirement benefit plans for its current and former employees. As of
January 1, 2003 the Company eliminated the salary defined benefit pension plan
for future employees. This action makes all defined benefit pension and other
post-retirement benefit plans closed to new entrants.
10
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE J - PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS - CONTINUED
The components of net periodic benefit cost (income) are as follows:
(Dollars in thousands)
THIRD QUARTER ENDED NINE MONTHS ENDED
---------------------------------- ----------------------------------
PENSION BENEFITS OTHER BENEFITS PENSION BENEFITS OTHER BENEFITS
----------------- -------------- ----------------- --------------
2005 2004 2005 2004 2005 2004 2005 2004
------- ------- ----- ---- ------- ------- ----- ----
Service cost $ 374 $ 298 $ -- $ 1 $ 1,122 $ 894 $ 1 $ 4
Interest cost 1,212 1,219 174 168 3,636 3,657 521 460
Expected return on assets (1,563) (1,486) -- -- (4,689) (4,458) -- --
Net amortization and deferral 479 388 (115) (53) 1,436 1,164 (347) (7)
Defined contribution plans 278 250 -- -- 777 815 -- --
------- ------- ----- ---- ------- ------- ----- ----
$ 780 $ 669 $ 59 $116 $ 2,282 $ 2,072 $ 175 $457
======= ======= ===== ==== ======= ======= ===== ====
The above information includes the effect of YSDI's other post-retirement
benefit costs which were assumed in April 2004 (see Note G).
On December 8, 2003, the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) was signed into law. The Act introduces a
prescription drug benefit under Medicare (Medicare Part D) as well as a federal
subsidy to sponsors of retiree health care benefit plans that provide a benefit
that is at least actuarially equivalent to Medicare Part D. In accordance with
FSP No. 106-2, "Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003," the effects of
the subsidy resulted in a $0.6 million reduction in 2004 of the accumulated
post-retirement benefit obligation with an annual reduction in other benefit
costs of approximately $0.1 million.
NOTE K - REFINANCING
On June 29, 2005 the Company entered into a Second Amended and Restated Credit
Agreement ("Credit Facility") with a consortium of banks led by Harris N.A. The
Credit Facility is for a total of $125.0 million, $40.0 million in term debt
(payable $1,250,000 quarterly) and an $85.0 million revolver and replaces the
$110.0 million secured revolving credit facility which was due in August 2005.
The Credit Facility is a five-year secured agreement with LIBOR-based pricing
plus a spread ranging from 0.875% to 2.0%, depending on the Company's
performance. It contains various restrictive covenants pertaining to maintenance
of net worth, certain financial ratios and limitations on the payment of
dividends or distributions. The agreement requires the prepayment of 50.0% of
excess cash flow at each year-end if the Company has not achieved a leverage
ratio of less than 2.0 to 1.0. The Company currently does not anticipate having
to prepay term debt. The Company, at its sole discretion, may increase the
revolver by up to $25.0 million. Total unused availability at October 1, 2005,
under the Credit Facility, approximates $45 million.
11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the Consolidated Financial Statements.
EXECUTIVE OVERVIEW
In the third quarter 2005, the Company continues to experience strong sales
growth for both electrical and telecom products, reporting record net sales for
the third consecutive quarter this year. While the growth of telecom product
sales slowed slightly from the approximate 30.0% rate in the first half of 2005,
shipments of HDPE conduit and other telecom products still expanded by around
10.0% this quarter. Electrical product sales continue to strengthen in the third
quarter 2005 as residential construction remains surprisingly strong and
industrial and light commercial construction markets are beginning to show some
modest growth.
Both PVC and HDPE resin costs continued to be relatively stable and consistent
with second quarter 2005 costs until September when the effect of the two major
Gulf Coast hurricanes began to be felt. Throughout September, the Company
attempted to manage the supply and cost of resin and other raw materials. The
Company was able to avoid any significant downtime in September, however,
inventories of PVC Pipe have been reduced to historically low levels, and the
backlog of orders has grown rapidly, extending order fulfillment lead times.
Transportation has continued to be an issue with fuel costs rising and truck
availability remaining tight. In addition, the hurricanes have exacerbated this
situation and have also caused rail transit delays.
During the third quarter, the Company encountered process control issues in
its PVC Pipe extrusion plants which increased inspection costs and material
scrap rates. In addition, a high number of weather related electrical power
interruptions were experienced which led to operating inefficiencies. The
Company has taken corrective action to address these issues
Finally, due to the Credit Facility the Company entered into during the second
quarter 2005, the Company lowered its effective interest rate paid from 6.10% in
the first half of 2005 to 5.49% in the third quarter of 2005. This lower rate,
along with the elimination of deferred financing fees amortized on the Company's
previous credit facility and the pay down of over $18.0 million in debt this
quarter lowered interest expense to $1.4 million this quarter.
Net income increased to $5.4 million and $12.8 million in the third quarter and
first nine months of 2005, respectively, from $0.8 million and $5.3 million in
the third quarter and first nine months of 2004. This resulted in diluted
earnings per common share of $0.35 in the current quarter compared with $0.06
per common share in the prior year quarter, and $0.86 diluted earnings per
common share in the first nine months of 2005 compared with $0.37 in the first
nine months of 2004.
2005 COMPARED WITH 2004
RESULTS OF CONTINUING OPERATIONS
The following table sets forth, for the periods indicated, items from the
Consolidated Income Statements as a percentage of net sales for the third
quarter and first nine months of 2005 and 2004, respectively.
12
(Dollars in thousands)
THIRD QUARTER ENDED NINE MONTHS ENDED
----------------------------------- -----------------------------------
2005 2004 2005 2004
---------------- ---------------- ---------------- ----------------
Net Sales $128,052 100.0% $104,919 100.0% $350,854 100.0% $290,062 100.0%
Cost of products sold 105,144 82.1% 87,820 83.7% 287,954 82.1% 241,367 83.2%
-------- -------- -------- --------
Gross profit 22,908 17.9% 17,099 16.3% 62,900 17.9% 48,695 16.8%
Total operating expenses 12,561 9.8% 11,592 11.0% 36,239 10.3% 33,173 11.4%
Litigation settlement -- 0.0% 1,728 1.7% -- 0.0% 1,728 0.7%
Other expense (income) -- 0.0% 395 0.4% -- 0.0% (231) -0.1%
-------- -------- -------- --------
Operating income 10,347 8.1% 3,384 3.2% 26,661 7.6% 14,025 4.8%
Interest expense, net 1,419 1.1% 1,992 1.9% 5,632 1.6% 5,897 2.0%
-------- -------- -------- --------
Income from continuing operations
before income taxes 8,928 7.0% 1,392 1.3% 21,029 6.0% 8,128 2.8%
Income tax provision 3,575 2.8% 559 0.5% 8,245 2.4% 3,251 1.1%
-------- -------- -------- --------
Income from continuing operations $ 5,353 4.2% $ 833 0.8% $ 12,784 3.6% $ 4,877 1.7%
======== ======== ======== ========
Net sales rose for the third quarter of 2005 to $128.1 million, an increase of
$23.1 million, or 22.1%, over the $104.9 million net sales level in the third
quarter of 2004. All business segments experienced strong (double-digit) net
sales growth this quarter as the underlying residential, commercial and telecom
construction and home improvement markets were solid. In addition, with the rise
in commodity PVC and HDPE material costs, the Company was able to recoup these
cost increases with higher selling prices. Year-to-date 2005, net sales are
$350.9 million, compared with $290.1 million recorded in the first nine months
of 2004, an increase of $60.8 million, or 21.0%. Growth rates exceeded 18.0% in
all business segments as further described below.
Gross profit in the third quarter of 2005 totaled $22.9 million, or 17.9% of net
sales, an increase of $5.8 million, or 34.0%, compared with $17.1 million, or
16.3% of net sales, in the third quarter of 2004. The growth in gross profit
primarily is a result of the higher net sales levels achieved in 2005. This
margin improvement reflects the effect of price increases being realized in
2005, which helped to offset raw material cost increases that began in 2004 and
the Company's ability to leverage its distribution operations with the higher
shipping volume. Somewhat offsetting these positive trends was higher freight
costs (20.0% more cents per pound shipped) driven by fuel costs and equipment
shortages and increased manufacturing variances ($1.5 million) in the PVC
extrusion plants due to higher scrap rates caused by process control issues and
a high number of weather related electrical power interruptions in the third
quarter. For the first nine months of 2005, gross profit was $62.9 million, or
17.9% of net sales, a $14.2 million, or 29.2%, increase over the $48.7 million,
or 16.8% of net sales, earned in the first nine months of 2004. These results
were impacted by the higher net sales levels, price increases, freight cost
inflation and manufacturing variance items described above. In addition, the
Company has benefited from approximately $1.5 million in lower medical costs for
active associates, due to improved year-to-date 2005 experience and implemented
cost control plans
Operating income was $10.3 million, or 8.1% of net sales, in the third quarter
of 2005, compared with $3.4 million, or 3.2% of net sales, in the third quarter
of 2004. Operating expenses were almost $1.0 million higher in the current
quarter at $12.6 million than were incurred in the prior year third quarter. The
primary causes of these higher costs were from variable selling expenses
($650,000) and incentive compensation costs ($300,000). The operating expenses
for the first nine months of 2005 were $36.2 million, or 10.3% of net sales,
compared with $33.2 million, or 11.4% of net sales for the first nine months of
2004, an increase of $3.1 million. Consistent with the current quarter, the
increase in operating expenses is comprised mainly of higher variable selling
($1.7 million) and incentive compensation costs ($1.4 million). In addition, the
2004 operating expenses were favorably impacted by a $300,000 recovery of a
previous bankruptcy claim and the 2005 operating expenses
13
reflect lower medical costs of approximately $300,000. Operating income for the
first nine months of 2005 was $26.7 million, or 7.6% of net sales, compared with
$14.0 million, or 4.8% of net sales for the first nine months of 2004. Included
in the 2004 third quarter and year-to-date results are the net effects of a
litigation settlement of $1.7 million completed in September 2004 and the sale
and closure of the Company's Pasadena, Texas facility (see Note I) reflected as
other expense (income).
Interest expense in the third quarter and first nine months of 2005 was $573,000
and $265,000 lower than the respective periods of 2004. The significant decline
in interest this quarter is due to the refinancing that occurred at the end of
the second quarter of 2005 (see Note K), which lowered effective interest rates
by about 50 basis points and eliminated approximately $1.0 million in annualized
amortization of deferred financing fees, compared with 2004. Average borrowings
over the first nine months of 2005 were lower by $4.0 million, compared with the
first nine months of 2004. Despite numerous LIBOR rate increases, average
interest rates paid were 5.49% in 2005, compared with 5.63% in 2004.
Year-to-date income tax provisions are based on an annual effective tax rate of
39.2% in 2005, compared with 40.0% in 2004.
BUSINESS SEGMENTS
CARLON
The Carlon business segment had net sales of $58.8 million in the third quarter
of 2005, an increase of $6.9 million, or 13.5%, over the net sales level of
$51.9 million in the third quarter of 2004. Year-to-date 2005 net sales for
Carlon were $165.0 million, an increase of 18.3%, or $25.5 million, compared
with net sales of $139.5 million for the first nine months of 2004. Growth rates
for telecom products have slowed to about 10.0% in the third quarter of 2005 as
customers balance inventories and moderate the rollout of Fiber-to-the-Premise
projects. Sales of these products, however, still represent approximately
50.0%-60.0% ($3.3 million and $15.6 million) of the business segment's increase
in net sales in the third quarter and year-to-date 2005, respectively.
Electrical product sales continued to have moderate unit growth of about 8.0% in
the third quarter of 2005 as residential construction remained strong,
commercial and industrial construction slowly expanded and the Company rolled
out several improved products to support those markets. Finally, price increases
on electrical products, most of which are made from PVC, were implemented in the
first quarter of 2005 and improved net sales in the third quarter of 2005 by
about $1.3 million and for the first nine months of 2005 by approximately $5.5
million.
Gross profit for Carlon is about $3.7 million and $8.7 million higher in the
third quarter 2005 and year-to-date 2005, compared with the prior year primarily
due to the higher sales volumes in both telecom and electrical products, which
allowed the Company to leverage the fixed costs within the supply chain,
including distribution operations. Gross margins have also been favorably
impacted in 2005 by the price increases implemented early in the year, which
offset rising raw material costs.
Operating income for the Carlon business segment totaled $8.7 million, or 14.8%
of net sales, in the third quarter 2005, an increase of $4.1 million, or 90.8%
from the $4.6 million, or 8.8% of net sales, earned in the third quarter 2004.
Year-to-date 2005 the business segment earned $20.2 million of operating income,
or 12.2% of net sales, compared with $12.8 million of operating income, or 9.2%
of net sales, year-to-date 2004 representing an improvement of $7.4 million, or
57.4%. The higher operating income in 2005 is primarily related to the gross
profit improvement. In addition, operating expenses in the third quarter 2004
included approximately $864,000 related to a litigation settlement. The third
quarter year-to-date 2005 operating expenses included about $400,000 and $1.2
million in higher variable selling expenses and increased incentive compensation
expenses. Finally, Carlon's 2004 operating expenses were favorably impacted by
the partial recovery ($300,000) of an account receivable that was previously
written-off.
14
LAMSON HOME PRODUCTS
The Lamson Home Products business segment realized net sales of $28.3 million in
the third quarter of 2005, a $5.8 million, or 25.6% increase, compared with
$22.5 million in net sales for the third quarter of 2004. The addition of
product lines at current customers accounted for $2.5 million of the net sales
growth in the current quarter. Approximately $1.5 million of this net sales
increase was the result of price increases implemented in the first quarter of
2005 in response to the significant PVC and other raw material cost increases.
There was also underlying market growth this quarter which was supported by
continued strong residential construction and home improvement markets. Net
sales for the first nine months of 2005 in Lamson Home Products were $78.7
million, compared with $63.0 million in the first nine months of 2004, a $15.7
million, or 24.9% increase. Similar to the third quarter of 2005, this growth
came from overall market expansion, including the growth of key customers ($8.2
million), product line introductions ($4.0 million) and price increases ($3.5
million).
Gross margin for Lamson Home Products in the third quarter and year-to-date 2005
are 2.5 to 3.0 percentage points better than the comparable periods of 2004. The
higher sales volume has improved the utilization of the Company's injection
molding facilities and has allowed successful leveraging of distribution
operations.
Operating income for Lamson Home Products increased to $4.3 million, or 15.3% of
net sales, in the third quarter of 2005, compared with $1.4 million, or 6.4% of
net sales, in the third quarter of 2004. Operating expenses in the current
quarter were $0.8 million less than the prior year, primarily due to the
$864,000 charge for a litigation settlement in the third quarter of 2004. For
the first nine months of 2005 operating income was $12.4 million, or 15.8% of
net sales, compared with $6.3 million, or 10.0% of net sales, for the first nine
months of 2004. These results reflect the improved gross profit and stable
operating expenses, excluding the 2004 litigation charge.
PVC PIPE
Net sales in the PVC Pipe segment surged in the third quarter 2005 to $40.9
million, an increase of $10.4 million, or 34.0%, compared with net sales of
$30.5 million in the third quarter of 2004. Year-to-date net sales for 2005 were
$107.2 million, compared with $87.6 million for year-to-date 2004, an increase
of $19.5 million, or 22.3%. PVC Pipe pounds shipped expanded in the current
quarter by almost 22.0% bringing year-to-date volumes up 2.0% to 3.0% over the
prior year. Shipments were very strong, especially late in the current quarter,
to fill pent up demand as inventories in the supply chain were low and price
increases and shortages are anticipated due to the hurricanes in the Gulf Coast
area. Pricing in the PVC Pipe business segment has also improved in 2005, with
average pipe price increases of about 14.0% in the third quarter of 2005 and
almost 20.0% for year-to-date 2005, compared with those respective periods in
2004. These increases have enabled the Company to recoup year-to-date PVC resin
cost increases of approximately 17.0%, compared with the first nine months of
2004.
Gross margin for the third quarter and first nine months of 2005 has remained
approximately the same as the prior year periods, as price increases have
neutralized the effect of rising resin costs so far this year. Rising freight
costs have impacted this business segment by about 0.5 percentage points this
year. Lastly, the PVC extrusion plants have incurred higher than usual scrap
rates and operating inefficiencies ($1.5 million) in the third quarter of 2005,
caused by process control issues and numerous weather related electrical power
interruptions.
The PVC Pipe segment had an operating loss in the third quarter of 2005 of $0.9
million, which is slightly higher than the loss in the third quarter of 2004 of
$0.6 million. The year-to-date operating loss was $0.5 million and $0.8 million
in 2005 and 2004, respectively. Other than an approximate $400,000 increase in
operating expenses year-to-date for variable selling expenses and incentive
compensation, there were no significant changes in operating expenses this year,
compared with 2004.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity and capital resources is cash
generated from operating activities and availability under its Secured Credit
Agreement.
15
The Company generated $13.3 million of cash from operating activities in the
first nine months of 2005, compared with $1.5 million in the first nine months
of 2004. Most of this increase in cash flow resulted from improved operating
results as overall investment in working capital continued to climb to support
higher net sales and related operations. At the end of the third quarter of
2005, accounts receivable were $69.8 million, an increase of $10.3 million, or
17.2% over the end of the third quarter of 2004 and $21.4 million, or 44.3% more
than at the 2004 year-end. The increase is all due to higher net sales activity
this quarter as days sales outstanding calculated using a three-month rolling
average, has declined to 46.1 days at October 1, 2005, compared with 50.8 days
at October 2, 2004.
Investment in inventory at the end of the third quarter of 2005 was $39.9
million, fairly even with the $40.1 million balance at the end of the third
quarter of 2004 and an increase of $3.1 million from year-end 2004. This
resulted in a new quarter-end inventory-turn high of 8.8 times at the end of the
third quarter 2005, compared with 7.7 times at the end of the third quarter
2004. The pounds of PVC resin in inventory at October 1, 2005 were a third less
than at October 2, 2004 and 25.0% less than the 2004 year-end, essentially
meeting the Company's goal of having a month of net sales demand in inventory,
reducing its exposure to resin cost fluctuations. The average cost of PVC resin
in inventory stabilized throughout the quarter and ended the third quarter 2005
up 4.0% from the end of the third quarter 2004.
Accounts payable at October 1, 2005 were $34.7 million, a $10.5 million increase
from year-end 2004 and $2.3 million higher than October 2, 2004. The increase in
payables primarily reflects the comparatively higher cost of inventory and
business activity in the current quarter.
Total accrued expenses have increased slightly to $33.1 million at October 1,
2005 from $31.0 million at year-end 2004 and $31.7 million, compared with
October 2, 2004. The increases were primarily due to higher anticipated income
tax payments of $1.5 million and increased freight ($1.3 million) and commission
($0.3 million) costs due to the increased net sales activity this quarter,
compared with the third quarter 2004. In addition, accrued compensation and
benefits reflects higher anticipated incentive compensation ($900,000) while
other accrued expenses are lower due to the final payment ($1.0 million) of the
2004 litigation settlement during 2005.
The Company used $6.3 million of cash in investing activities for the first nine
months of 2005, compared with $2.6 million used in the first nine months of
2004. Year-to-date 2005 the Company has spent $6.1 million in capital
expenditures, primarily to increase PVC extrusion efficiency and process quality
and to support productivity and tooling improvements in the injection molding
operations. In 2004, the Company received $1.5 million proceeds from the sale of
its Pasadena, Texas facility while capital expenditures were $4.0 million.
Cash used by financing activities totaled $6.0 million in the first nine months
of 2005, as the Company's strong operating cash flow allowed us to pay down $8.8
million of borrowings on its Credit Facility and $0.8 million in other long-term
borrowings, primarily in the third quarter. Year-to-date 2005, the Company
received $3.6 million from the issuance of 595,201 shares of stock from the
exercise of stock options.
CRITICAL ACCOUNTING ESTIMATES
We have no material changes to the disclosure on this matter since the end of
our most recent fiscal year, January 1, 2005.
OUTLOOK FOR 2005
During the third quarter 2005 telecom product sales continued to grow by double
digit rates, supporting the rollout of customers' Fiber-to-the-Premise projects.
A slowdown in the rate of network construction has been noted due to a
realignment of inventory in the field and some difficulty in obtaining certain
local rights of way. In addition, telecom companies are slowing spending near
year-end to meet annual budget constraints. The Company anticipates this rollout
activity to continue over the next several years supporting a lower but healthy
growth rate of 6.0% to 8.0%.
16
Despite expectations that residential construction would moderate in the second
half of 2005, September was the eighth month out of nine this year that housing
starts exceeded an annualized rate of 2.0 million units. Recent building permit
data supports the expectation that this construction level will be sustained
through the end of 2005. It is anticipated that residential construction will
decline slightly to around 1.8 million units in 2006, which would still provide
a solid sales base for the Company's products.
Both light commercial and industrial construction began to show some signs of
slow growth in the third quarter 2005, primarily in response to high residential
construction and improved corporate profits and general economic activities.
Based on various industry forecasts, including some impact from rebuilding
efforts in the Gulf Coast, management believes this end market will grow 3.0% to
4.0% in 2006.
PVC and HDPE resin costs had stabilized at relatively high levels throughout the
third quarter 2005, prior to two hurricanes hitting the Gulf Coast in the latter
part of the quarter. The damage from these storms has caused most major resin
suppliers to declare force majeure as they struggle to resume operations. This
situation has resulted in immediate and significantly higher resin and transit
costs and the subsequent raising of selling prices by the Company to recover
these additional costs. In addition, various suppliers have put their customers
on allocations making material shortages and uncertain delivery performance
probable. The Company currently has not had to significantly shutdown production
lines due to insufficient material, although it is a concern that is being
monitored closely. The expectation of future cost and price increases and the
constraint on supply has led to a large increase in pipe orders, which is
extending delivery lead times out to a month.
The high sales levels in the third quarter 2005 along with raw material
shortages during September have brought inventories down so that turns are at
record levels. This is expected to continue through the fourth quarter of 2005
as the Company works through its order backlog.
The Company generated $18.9 million in cash flow from operating activities
during the third quarter 2005 bringing the year-to-date total to $13.3 million.
It is anticipated that an additional $8.0 to $10.0 million of cash from
operations will be generated in the fourth quarter allowing further pay down of
debt, capital expenditures and the potential funding of voluntary pension plan
contributions. Capital expenditures for 2005 are anticipated to be around $10.0
million as the Company accelerates the purchase of key molds and replacement of
PVC extrusion equipment to support next year's plan and current growth
constraints.
The Company anticipates higher net sales than normal seasonality would suggest
in the fourth quarter of 2005 due to rising PVC pipe demand and related selling
prices. Therefore, the Company is increasing its estimates for net sales for the
fourth quarter of 2005 to a range of $110.0 - $115.0 million and for the full
year of 2005 to a range of $460.0 - $465 million.
The Company believes that the increased strength in net sales and higher
utilization rates in its plants will result in higher net income for the fourth
quarter of 2005 (compared with 2004) in the range of $4.6 million to $5.0
million, or 30 cents to 33 cents per diluted share. The Company had provided a
net earnings estimate of $3.5 million to $3.8 million, or 23 cents to 25 cents
per diluted share, on October 10, 2005. This increases the Company's net
earnings estimate for the full year 2005 to a range of $17.4 million to $17.8
million, or $1.16 to $1.19 per diluted share.
With respect to 2006 expectations, the Company believes that it will continue to
experience growth in its key end markets and anticipates that its organic growth
in net sales will meet its goal of 8.0% to 10.0% for the fourth consecutive
year. However, because of the inordinate volatility in the availability and
pricing of raw materials, due to the recovery issues created by the recent Gulf
Coast hurricanes, the Company will defer any further guidance on net sales or
net income until it releases its final 2005 results on February 16, 2006.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contain expectations that are 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) the continued availability and reasonable terms of bank
financing and (vi) any adverse change in the recovery trend of the country's
general
17
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.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have no material changes to the disclosure on this matter since the end of
our most recent fiscal year, January 1, 2005.
ITEM 4 - CONTROLS AND PROCEDURES
As of October 1, 2005, an evaluation was performed under the supervision and
with the participation of the Company's management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the Chief Executive
Officer and Chief Financial Officer, concluded that the Company's disclosure
controls and procedures were effective. During the Company's third quarter 2005,
there have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
their evaluation.
PART II
ITEM 1 - LEGAL PROCEEDINGS
The Company is a party to various claims and matters of litigation incidental to
the normal course of its business. Management believes that the final resolution
of these matters will not have a material adverse effect on the Company's
financial position, cash flows or results of operations.
ITEM 6 - EXHIBITS
Exhibits:
31.1 Certification of John B. Schulze, Chief Executive Officer,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of James J. Abel, Chief Financial Officer,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of John B. Schulze, Chief Executive Officer,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of James J. Abel, Chief Financial Officer,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE LAMSON & SESSIONS CO.
(Registrant)
October 28, 2005 By: /s/ James J. Abel
------------------------------------
James J. Abel
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
19