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1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended January 3, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 216/464-3400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
WHICH REGISTERED
TITLE OF EACH CLASS New York Stock Exchange
Common Shares, without par value Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held as of
February 13, 1998 by non-affiliates of the registrant: $84,850,565.
As of February 13, 1998 the Registrant had outstanding 13,415,684
common shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1998 Annual Meeting of
Shareholders are incorporated by reference into Part III.
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PART I
Item 1. - BUSINESS
The Lamson & Sessions Co., an Ohio corporation, (the "Company" or "Lamson &
Sessions"), founded in 1866, is a diversified manufacturer and distributor of a
broad line of thermoplastic electrical, consumer, telecommunications and fluid
drainage products for major domestic markets. The markets for thermoplastic
conduit, related fittings and accessories, wiring devices and sewer pipe
include: the construction, utility and telecommunications industries,
municipalities, other government agencies, and contractors; and do-it-yourself
home remodelers.
PRINCIPAL PRODUCTS AND MARKETS
The Company is engaged in the manufacture and distribution of a broad line of
thermoplastic electrical, telecommunication and engineered sewer products. In
addition, the Company distributes a wide variety of consumer electrical wiring
devices, home security devices, wireless electrical and other wireless products.
All of the Company's thermoplastic products compete with and serve as
substitutes for similar metallic products. The Company's engineered sewer pipe
products compete with and serve as substitutes for clay, concrete, ductile iron,
asbestos cement and polyethylene products. The Company's thermoplastic products
offer several advantages over these other products. Specifically, nonmetallic
electrical conduit and related fittings and accessories are generally less
expensive, lighter and easier to install than metallic products. Furthermore,
thermoplastic conduit does not rust, corrode or conduct electricity.
Thermoplastic sewer pipe weighs less than alternative products, is easier and
more economical to install, does not degenerate due to chemical attack as do
some competing products, and eliminates avoidable problems which can be caused
by infiltration and exfiltration.
Four markets are served, each of which has unique product and marketing
requirements. These markets are: (i) Industrial, Residential, Commercial and
Utility Construction (served by Carlon Electrical Products) -contractors engaged
in the installation of electrical systems in industrial, residential and
commercial construction, and electric power utility projects; original equipment
manufacturers who use components as subassemblies for their own products; and
industrial companies who maintain or repair their own facilities; (ii)
Telecommunications (served by Carlon Telecom Systems) -- cable television
("CATV"), telephone and telecommunications companies; (iii) Consumer (served by
Lamson Home Products) -- retail consumers of electrical products who perform
"do-it-yourself" home repairs; and small electrical contractors; and (iv)
Engineered Sewer Products (served by Lamson Vylon Pipe) -- various government
and private builders of sewer and drainage systems.
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A breakdown of revenues as a percent of net sales related to significant classes
of product by major market segment for 1997, 1996 and 1995, respectively, is as
follows:
1997 1996 1995
------------------------------ ------------------------------ -----------------------------
(Dollars in thousands)
Industrial, Residential,
Commercial & Utility
Construction $146,610 54% $156,218 54% $151,701 51%
Telecommunications 47,434 17% 48,993 17% 55,456 19%
Consumer 59,983 22% 55,199 19% 51,213 17%
Engineered Sewer
Products 17,753 7% 28,642 10% 21,846 7%
Aerospace Fastener 18,950 6%
-------------- ------------- --------------- ------------- -------------- -------------
$271,780 100% $289,052 100% $299,166 100%
============== ============= =============== ============= ============== =============
The following summarizes the principal products sold in each of the four
markets:
INDUSTRIAL, RESIDENTIAL, COMMERCIAL AND UTILITY CONSTRUCTION. The principal
products sold to this market include rigid conduit, flexible electrical
nonmetallic tubing, fittings and accessories, outlet boxes, and other products.
Other products in this market also include thermoplastic spirally extruded
liquidtight conduit, and a broad line of industrial nonmetallic enclosures.
TELECOMMUNICATIONS. The products included in this market are traditional smooth
wall communication duct and spacers used by telecommunication and CATV
industries to house telecommunications cable, multi-cell duct systems designed
to protect underground fiber optic cables and allow future cabling expansion,
and flexible conduit used inside buildings to protect communications cable.
CONSUMER. The products included in this market are products such as light
dimmers, fan speed controls, touch controls, wireless door chimes, motion
sensors and home security systems. In addition, the Company supplies this market
with products such as outlet boxes, electrical conduit, liquidtight conduit and
electrical fittings.
ENGINEERED SEWER PRODUCTS. Principal products utilized by this market include
closed profile engineered sewer pipe used for direct burial and sliplining.
Products range in diameters from 4 to 54 inches.
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COMPETITION
Each of the four markets in which the Company presently operates is highly
competitive based on service, price and quality. Most of the competitors are
either national or smaller regional manufacturers who compete with limited
product offerings. Unlike a majority of the Company's competitors, the Company
manufactures a broad line of thermoplastic products, complementary fittings and
accessories. The Company believes that its products will continue to compete
favorably. However, certain of the Company's competitors have greater financial
resources than the Company, which could adversely affect the Company through
price competition strategies.
DISTRIBUTION
The Company distributes its products through a nationwide network of more than
100 manufacturers' representatives and a direct sales force of 28. Currently,
two of these manufacturers' representatives maintain an inventory of the
Company's products.
RAW MATERIALS
The Company is a large purchaser of pipe grade polyvinylchloride (PVC) resin and
has historically been able to obtain quantities adequate for its manufacturing
needs.
PATENTS AND TRADEMARKS
The Company owns various patents, patent applications, licenses, trademarks and
trademark applications relating to its products and processes. While the Company
considers that, in the aggregate, its patents, licenses and trademarks are of
importance in the operation of its business, it does not consider that any
individual patent, license or trademark, or any technically related group, is of
such importance that termination would materially affect its business.
SEASONAL FACTORS
Three of the Company's four business units experience moderate seasonality
caused principally by a decrease in construction activity during the winter
months. They are subject also to the economic cycles affecting the construction
industry. The Company's consumer products business unit is affected by consumer
spending and consumer confidence.
MAJOR CUSTOMERS
Sales to Affiliated Distributors, a buying group not otherwise affiliated with
the Company, totaled approximately 13% of net sales in 1997 and 1996 and 12% of
net sales in 1995.
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BACKLOG
In three of the Company's four business units, the order to delivery cycle
ranges from several days to a few weeks. However, the Company's Engineered Sewer
Products business has become increasingly dependent upon order backlog as its
product line has shifted from small diameter products to large diameter products
which are more predominately sold via a formal project bidding process. The
business completed 1997 with an order backlog of $6.4 million compared to $5.0
million in 1996 which illustrates strong growth and a shift in the range of
products offered.
RESEARCH AND DEVELOPMENT
The Company is engaged in an aggressive new product development program in an
effort to introduce innovative applications for thermoplastic and wireless
electrical products. The Company maintains a separate product development center
in Cleveland, Ohio to facilitate the introduction of value-added products and
improve manufacturing processes. The Company sponsored research and development
activity totaled $4.6 million, $4.0 million, and $3.7 million in 1997, 1996 and
1995, respectively.
ENVIRONMENTAL REGULATIONS
The Company believes that its current operations and its use of property, plant
and equipment conform in all material respects to applicable environmental laws
and regulations presently in effect. The Company has facilities at numerous
geographic locations, which are subject to a range of federal, state and local
environmental laws and regulations. Compliance with these laws has, and will,
require expenditures on a continuing basis.
ASSOCIATES
At January 3, 1998, the Company had 1044 associates, 808 of whom were employed
at the Company's manufacturing facilities and distribution centers. The
remainder of associates were employed at the Company's corporate headquarters
and product development facilities.
FOREIGN OPERATIONS
The net sales, operating earnings and assets employed outside the United States
are not significant. Export sales were approximately 2% of net sales in 1997, 1%
in 1996, and 2% in 1995, and were made principally to countries in North
America.
ACQUISITIONS
In October 1996, the Company purchased Dimango Products Corporation ("Dimango")
located in Brighton, Michigan to expand its market share in the wireless door
chimes, home security devices and other wireless products. The acquisition has
been accounted for under the purchase method.
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Item 2. - PROPERTIES
The Company owns or leases manufacturing and distribution facilities which are
suitable and adequate for the production and marketing of its products. The
Company owns executive and administrative offices which are located in
Cleveland, Ohio and occupy 68,000 square feet in a suburban office complex. The
Company also has research and development offices, located in Cleveland, Ohio,
which occupy leased space of 27,000 square feet. The following is a list of the
Company's manufacturing and distribution center locations:
Approximate
Square Feet
-----------
MANUFACTURING FACILITIES (OWNED):
Woodland, California 73,000
High Springs, Florida 113,000
Clinton, Iowa 156,000
Bowling Green, Ohio 61,000
Oklahoma City, Oklahoma 166,000
Nazareth, Pennsylvania 53,000
Pasadena, Texas 46,000
DISTRIBUTION CENTERS (LEASED):
Woodland, California 103,000
Oklahoma City, Oklahoma 129,000
Allentown, Pennsylvania 65,000
The Company operated the above manufacturing facilities at approximately 87% of
their productive capacity in 1997.
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Item 3. - 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.
Item 4. - SUBMISSION OF MATTERS TO SECURITY HOLDERS
None.
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EXECUTIVE OFFICERS OF THE REGISTRANT
JOHN B. SCHULZE
Chairman, President and Chief Executive Officer
Chairman, President and Chief Executive Officer since January 1990. Age 60.
JAMES J. ABEL
Executive Vice President, Secretary, Treasurer and Chief Financial Officer
Executive Vice President, Secretary, Treasurer and Chief Financial Officer since
September 1994. Previously was Executive Vice President, Treasurer and Chief
Financial Officer February 1993 - September 1994. Previously was Senior Vice
President, Treasurer and Chief Financial Officer December 1990 - February 1993.
Age 51.
CHARLES E. ALLEN
Senior Vice President
Senior Vice President since September 1989. Age 57.
ALBERT J. CATANI, II
Vice President - Manufacturing
Vice President, Manufacturing since August 1995. Previously was Independent
Consultant, Environmental Growth Chambers, March 1995 - August 1995. Previously
was Vice President, Operations, Universal Electronics, Inc., April 1993 - March
1995. Previously was Vice President, General Manager Mercury Plastics, Inc.,
November 1989 - April 1993. Age 50.
DONALD A. GUTIERREZ
Vice President - Carlon Electrical Products
Vice President, Carlon Electrical Products since July 1997. Previously was
National Sales Manager since January 1997. Previously was Manager, Distributor
Sales August 1996 - January 1997. Previously was in Marketing and Sales with
General Electric 1979 - August 1996. Age 40.
MELVIN W. JOHNSON
Vice President
Vice President since February 1991. Age 61.
A. CORYDON MEYER
Vice President - Lamson Home Products
Vice President, Lamson Home Products since September 1993. Previously was Vice
President, Consumer Products Business Unit, April 1991 - September 1993. Age 43.
ROBERT J. MOYER
Vice President - Supply Chain Management
Vice President, Supply Chain Management since July 1997. Previously was Vice
President, Distribution since April 1997. Previously was Vice President, Supply
Chain Management, Little Tikes Co., 1994 - April 1997. Previously was Materials
Manager, Nordson Corp. 1988 - 1994. Age 44.
LORI L. SPENCER
Vice President and Controller
Vice President and Controller since August 1997. Previously was Vice President,
Strategic Planning since February 1997. Previously was Director, Financial
Planning & Internal Audit, September 1994 - February 1997. Previously was
Manager Internal Audit, August 1992 - September 1994. Age 39.
NORMAN P. SUTTERER
Vice President - Carlon Telecom Systems
Vice President, Carlon Telecom Systems since January 1994. Previously was Vice
President Carlon Power & Telecom Systems, August 1992 - January 1994. Age 48.
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PART II
Item 5. - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange and the
Pacific Stock Exchange. High and low sales prices for the common stock are
included in Note L to the Consolidated Financial Statements. No dividends were
paid in 1997, 1996 or 1995. The approximate number of shareholders of record of
the Company's Common Stock at February 13, 1998 was 1,812.
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Item 6. - SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL SUMMARY
Fiscal Years Ended
----------------------------------------------------------------------
(in thousands except per share data, shareholders, 1997 1996 1995 1994 1993
associates and percentages)
- ---------------------------------------------------------------------------------------------------------------------------
Operations:
Net sales $ 271,780 $ 289,052 $ 299,166 $ 287,645 $ 259,572
Cost of products sold 226,449 227,778 242,608 235,876 221,405
GROSS PROFIT 45,331 61,274 56,558 51,769 38,167
Selling, general and administrative expenses 47,826 49,135 42,520 40,840 35,500
OPERATING (LOSS) INCOME (2,495) 12,139 14,038 10,929 2,667
Net interest expense 3,768 2,611 5,864 6,673 5,784
(LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
AND EFFECT OF ACCOUNTING CHANGE (6,263) 9,528 8,174 4,256 (3,117)
Income tax benefit 1,550 4,100 3,900
(LOSS) INCOME FROM CONTINUING
OPERATIONS BEFORE EFFECT OF
ACCOUNTING CHANGE (4,713) 13,628 12,074 4,256 (3,117)
Loss from discontinued operations (9,930) (2,674)
Cumulative effect of accounting change (4,940)
NET (LOSS) INCOME (9,653) 13,628 12,074 (5,674) (5,791)
- ---------------------------------------------------------------------------------------------------------------------------
Year End Financial Position:
Current Assets $ 91,567 $ 90,945 $ 80,244 $ 87,526 $ 83,842
Other Assets 14,598 9,703 2,680 2,899 9,148
Assets Held for Sale 3,742 17,555
Property, Plant and Equipment 56,329 60,473 51,747 53,979 57,841
Total Assets 162,494 161,121 134,671 148,146 168,386
Current Liabilities 57,580 51,906 49,584 52,032 48,268
Long-Term Debt 44,712 36,911 24,842 46,958 62,730
Other Long-Term Liabilities 23,221 27,517 29,326 36,276 41,562
Shareholders' Equity 36,981 44,787 30,919 12,880 15,826
Working Capital 33,987 39,039 30,660 35,494 35,574
- ---------------------------------------------------------------------------------------------------------------------------
Statistical Information:
Average number of common shares and
common share equivalents 13,537 13,641 13,404 13,239 13,210
Number of shareholders of record 1,832 1,987 2,162 2,370 2,553
Number of associates 1,044 1,164 1,048 1,325 1,425
Book value per share $ 2.73 $ 3.28 $ 2.33 $ 0.97 $ 1.20
Market price per share $ 5-13/16 $ 7-1/4 $ 7-3/4 $6 $4-3/4
Market capitalization $ 77,970 $ 96,433 $ 103,011 $ 79,673 $ 62,795
Long-term debt as a % of market capitalization 57.3% 38.3% 24.1% 58.9% 99.9%
Total debt as a % of market capitalization 62.2% 42.8% 27.8% 64.6% 103.8%
Operating cash flow as a % of total debt 6.2% 21.3% 66.6% 7.3% 5.7%
Long-term debt as a % of equity 120.9% 82.4% 80.3% 364.6% 396.4%
Return on average equity from continuing operations (11.5)% 36.0% 55.1% 29.7% (14.7)%
- ---------------------------------------------------------------------------------------------------------------------------
Basic (loss) Earnings Per Common Share:
Continuing operations $ (0.35) $ 1.02 $ 0.91 $ 0.32 $ (0.24)
Discontinued operations (0.75) (0.20)
Cumulative effect of accounting change $ (0.37)
Net (loss) earnings $ (0.72) $ 1.02 $ 0.91 $ (0.43) $ (0.44)
Diluted (loss) Earnings Per Common Share:
Continuing operations $ (0.35) $ 1.00 $ 0.90 $ 0.32 $ (0.24)
Discontinued operations (0.75) (0.20)
Cumulative effect of accounting change $ (0.37)
Net (loss) earnings $ (0.72) $ 1.00 $ 0.90 $ (0.43) $ (0.44)
The earnings per share amounts prior to 1997 have been restated as required to
comply with Statement of Financial Accounting Standards No. 128, Earnings Per
Share. For further discussion of earnings per share and the impact of Statement
No. 128, see the notes to the consolidated financial statements beginning on
page 19.
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Item 7. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
DISCUSSION OF THE CONSOLIDATED STATEMENTS OF OPERATIONS
THE CONSOLIDATED STATEMENTS OF OPERATIONS summarize Lamson & Sessions' operating
performance over the last three years.
NET SALES of $272 million for 1997 were 6% lower than net sales of $289 million
in 1996. Lamson Vylon Pipe Business accounted for $11 million from this decline.
Approximately $4 million of the sales decrease resulted from a planned exit from
commodity sewer pipe products, and $7 million resulted from large diameter pipe
project delays. Despite the disruption to the Company's wireless electrical
products business from the fire at the Brighton, Michigan facility and customer
service and logistic support issues, Lamson Home Products was able to offset
these declines by the introduction of new products and retail market strength to
grow by 8%. Reduction of net sales in Carlon Electrical Products and Carlon
Telecom System Units were due primarily to the customer service problems
resulting from the implementation of new business processes and information
technology supply chain logistics issues, and a reduction in rigid pipe product
due to competitive pressures in the market.
Net Sales of $289 million for 1996 were 3% lower than net sales of $299 million
in 1995. However, excluding the results of Valley-Todeco, sold in the fourth
quarter of 1995, sales in 1995 were $280 million, and 1996 sales represented an
adjusted increase of 3%. The 1996 adjusted sales increases consisted of 31% for
Lamson Vylon Pipe, 8% for Lamson Home Products, and 3% for Carlon Electrical
Products, partially offset by a 12% decrease for Carlon Telecom Systems. The
sales increase consisted of a 31% volume increase in priority pipe products, led
by a 70% increase for Lamson Vylon Pipe, and a 6% volume increase in all other
product lines, offset by a 16% price decrease in rigid pipe products. The price
decrease in commodity rigid pipe products resulted directly from aggressive
price competition.
GROSS MARGIN decreased 21% to 17% of net sales for 1997 compared to 21% of net
sales in 1996. The gross margin decrease was due in part to the same factors
that reduced sales levels. In addition, because of competitive conditions and
customer service issues, the Company was unable to raise prices on its commodity
rigid pipe after absorbing substantial raw material price increases.
Manufacturing plants operated at reduced production rates for several months in
1997 in order to decrease the working capital investment in inventory.
Distribution costs were elevated due to logistic network changes and heavy
emphasis on increasing customer order fill rates and delivery timeliness to
regain customer confidence. Freight costs were also negatively impacted by the
UPS strike and Union Pacific rail logistic problems during the year.
Gross Margin increased 12% to 21% of net sales in 1996, compared to 19% of net
sales in 1995. This margin improvement was due to a shift in product mix that
resulted in a greater than 10% increase in the percentage of revenue from
non-commodity products which generate margins more than twice as high as
commodity products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES were reduced by 3% to $48 million
in 1997 compared to 1996. This decrease was primarily the result of lower sales
commissions, as 1997 net sales were 6% less than 1996. Despite the reduction in
expense, the total cost rose to 18% of net sales in 1997 compared to 17% in 1996
due to the decrease in net sales between the two periods.
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Selling, General and Administrative Expenses were 17% of sales in 1996 and 14%
of sales in 1995. The 16% expense increase from 1995 was a result of planned
increases in expenditures for the Company's business process and information
technology project as well as increased sales commissions and incentive programs
made in support of changes in the Company's product mix.
INTEREST EXPENSE of $4 million for 1997 reflects a 44% increase from 1996 and is
primarily attributable to increased debt levels, higher working capital
investment and the operating loss. The Company had planned to incur the cost of
the increased working capital investment in support of key projects that it was
implementing in 1997. The operating loss decreased the interest coverage under
the terms of the secured borrowing agreements and resulted in higher borrowing
rates.
Interest Expense decreased 55% from 1995 to 1996 as a result of lower average
borrowings under the Company's secured credit agreement. In addition, the
Company benefited further from rate reductions under the terms of the secured
credit agreements as interest coverage ratios continued to improve and the
refinancing of industrial revenue bonds was completed.
INCOME TAX BENEFIT of approximately $2 million in 1997 and $4 million in 1996
was generated from a reduction in the valuation allowance placed on the
Company's deferred tax assets. The reduction in the valuation allowance was
eliminated when the Company's operating performance resulted in a loss and will
not be utilized further until the Company reestablishes its profitability on a
sustainable basis.
CHANGE IN ACCOUNTING PRINCIPLE
The Company changed its accounting policy to expense as incurred all future
costs related to Business Process Re-engineering Costs as required by Emerging
Issues Task Force (EITF) Issue No. 97-13. This change resulted in a cumulative
adjustment of $4.9 million in the fourth quarter of 1997 and is discussed in
Note J of the Notes to Consolidated Financial Statements.
This charge is separate from the effect on operations which relates to the
implementation of new business processes and information technology as
previously described in this Discussion of the Consolidated Statement of
Operations.
DISCUSSION OF THE CONSOLIDATED BALANCE SHEET
THE CONSOLIDATED BALANCE SHEET shows Lamson & Sessions' financial position at
year end, compared to the previous year end. The statement provides information
to assist in assessing such factors as the Company's liquidity and financial
resources. The 1997 current ratio decreased 9% to 1.6, mainly due to increased
accounts payable. The 1997 total debt to equity ratio increased to 1.3 to 1 in
1997 compared to .9 to 1 in 1996. Total debt increased over 17%, from $41
million to $48 million, while equity decreased 17% to $37 million.
ACCOUNTS RECEIVABLE are primarily due from trade customers. Accounts Receivable
decreased approximately $4 million in 1997 from 1996 mainly due to lower sales
and strong cash management efforts in the second half of the year. This effort
reversed the trend of slower payment experienced earlier in the year as the
Company implemented new business processes and information technology.
INVENTORIES increased nearly $3 million in 1997 from 1996. The inventory
increase resulted primarily from a planned inventory build to support customer
service performance while the Company implemented key projects related to its
manufacturing and distribution operations.
OTHER ASSETS increased $5 million in 1997 from 1996. The increase resulted from
continued improvement in the funding condition of the Company's qualified
pension plans.
LONG-TERM DEBT increased $8 million during 1997. The revolving line of credit
was used to finance working capital needs, fund a portion of capital
expenditures, and continued funding of the Company's pension and retiree medical
plans.
POST-RETIREMENT BENEFITS AND OTHER LONG-TERM LIABILITIES decreased 15% from $27
million in 1996 to $23 million in 1997. The reduction related to actual payments
made for retiree medical benefits as well as management changes in estimates of
employee health, retirement and incentive compensation plans.
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DISCUSSION OF THE CONSOLIDATED STATEMENTS OF CASH FLOWS
THE CONSOLIDATED STATEMENTS OF CASH FLOWS show cash inflows and outflows from
the Company's operating, investing and financing activities. Cash and cash
equivalents increased slightly at year end 1997 compared to 1996.
CASH FLOWS FROM OPERATING ACTIVITIES - The Company generated $3 million in cash
from operations in 1997, a decrease of nearly $6 million from 1996. The decline
in cashflow from operations in 1997 relates to the decline in operating profits
between the two years offset by better management of accounts receivable and
accounts payable.
The Company generated nearly $9 million in cash from operations in 1996, a
decrease of $10 million from 1995. The primary use of operating cash was $6
million for inventory increases. The Company generated over $19 million in cash
from operations in 1995, an increase of 405% over the prior year. The primary
sources of the 1995 operating cash increase were the improvement in earnings
from continuing operations and nearly $5 million in cash flow from inventory
reductions.
CASH FLOWS FROM INVESTING ACTIVITIES - The Company used $12 million in 1997
investing activities for the purchases of equipment, primarily for increasing
capacity and production efficiencies, a decrease of $5 million from 1996 level.
This reduction is due to completion of the implementation of the business
process and information technology project. The Company successfully sold its
vacant manufacturing plant in Aurora, Ohio.
The Company used $22 million for 1996 investing activities. The Company invested
$17 million in product and process development programs, information technology
and purchased Dimango.
CASH FLOWS FROM FINANCING ACTIVITIES - The Company provided $8 million of cash
flow from 1997 financing activities and $13 million of cash flow from 1996
financing activities. The utilization of the revolving line of credit was
increased to cover the portion of investing activities not covered by operating
cash flow.
Based upon the Company's past performance and current expectations, management
believes that internally generated cash flows and existing capacity under the
secured credit agreement are adequate to fund the Company's 1998 cash needs for
capital expenditures and general operating requirements.
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OUTLOOK
The following paragraphs contain forward looking comments. These comments are
subject to, and the actual future results may be impacted by, the cautionary
limitations and factors outlined in the following narrative comments.
With the implementation of its new business process and information technology
project in 1997, the Company has laid the foundation to further foster a high
performance culture, improve operating efficiencies and deliver superior
customer service. The Company is considering strategic alternatives to address
its sensitivity to commodity raw materials which have resulted in lower than
acceptable margins. The Company's efforts in 1998 are focused on regaining
market share and increasing customer satisfaction, continuing to internally
develop new, innovative products and evaluating opportunities to grow through
acquisitions, especially in the industrial, telecom and retail markets. Based
on: a) current estimates of 1998 construction spending, housing starts, interest
rates and retail spending, b) forecasts of continued economic growth and, c) a
full year of Dimango product sales, the Company is positioned for sales growth
in each of the business units and profitability in 1998.
Concurrent with the implementation of new network, application and operating
systems software utilized in its information technology infrastructure, the
Company began evaluating all significant internal operating systems for their
compatibility with the date change in the Year 2000. The Company is currently
addressing all known non-compliance areas. This issue is a known uncertainty and
is not currently estimable. However, the Company believes the cost expected to
be incurred to address Year 2000 issues will not be material to its operating
results.
The foregoing outlook contains expectations that are forward-looking statements
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 polyvinylchloride resin
pricing, (ii) changes in the pattern of construction spending in both the new
construction, and repair and rehabilitation markets, (iii) changes in the number
and distribution of housing starts, (iv) fluctuations in the interest rate
affecting housing starts, (v) unpredictable technological innovations that could
make the Company's products comparatively less attractive, (vi) changes in
local, state and federal regulations relating to building codes and the
environment (in each case as they may affect the attractiveness of the Company's
products and manufacturing costs), (vii) the ability of the Company to pass
through raw material cost increases to its customers, (viii) recovering the
confidence of key customers, (ix) resolution of the Union Pacific rail logistics
problems, and (x) a reversal in the country's general pattern of economic
improvement affecting the markets for the Company's products.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED STATEMENTS OF OPERATIONS
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(In thousands, except per share data)
Fiscal Years
----------------------------------------------------------
1997 1996 1995
----------------------------------------------------------
Net sales $ 271,780 $ 289,052 $ 299,166
Cost of products sold 226,449 227,778 242,608
--------------- --------------- --------------
GROSS PROFIT 45,331 61,274 56,558
Selling, general and administrative expenses 47,826 49,135 42,520
--------------- --------------- --------------
OPERATING (LOSS) INCOME (2,495) 12,139 14,038
Interest (3,768) (2,611) (5,864)
--------------- --------------- --------------
(LOSS) INCOME BEFORE INCOME TAXES (6,263) 9,528 8,174
Income tax benefit 1,550 4,100 3,900
--------------- --------------- --------------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (4,713) 13,628 12,074
Cumulative effect of change in
accounting principle (4,940)
--------------- --------------- --------------
NET (LOSS) INCOME $ (9,653) $ 13,628 $ 12,074
=============== =============== ==============
BASIC (LOSS) EARNINGS PER COMMON SHARE:
(Loss) income before change in
accounting principle $ (0.35) $ 1.02 $ 0.91
Cumulative effect of accounting change (0.37)
--------------- --------------- --------------
Net (loss) income $ (0.72) $ 1.02 $ 0.91
=============== =============== ==============
DILUTED (LOSS) EARNINGS PER COMMON SHARE:
(Loss) Income before change in
accounting principle $ (0.35) $ 1.00 $ 0.90
Cumulative effect of accounting change (0.37)
--------------- --------------- --------------
Net (loss) Income $ (0.72) $ 1.00 $ 0.90
=============== =============== ==============
See notes to consolidated financial statements.
-14-
16
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(Dollars in thousands)
------------------------------------------
1997 1996 1995
------------------------------------------
OPERATING ACTIVITIES
Net (loss) income $ (9,653) $ 13,628 $12,074
Adjustments to reconcile net (loss) income
to cash provided by operations:
Depreciation and amortization 8,719 8,770 8,758
Deferred income tax-benefit (1,450) (4,300) (3,900)
Loss on sale of assets 1,038
Cumulative effect of accounting change 4,940
Net change in working capital accounts:
Accounts receivable 3,675 (1,551) (820)
Inventories (2,753) (5,818) 4,939
Prepaid expenses and other (166) (166) (1,302)
Accounts payable, accrued expenses and
other current liabilities 6,012 (476) (826)
Net change in other long-term items (7,351) (1,290) 131
------------ -------------- -----------
CASH PROVIDED BY OPERATIONS 3,011 8,797 19,054
INVESTING ACTIVITIES
Purchase of business (5,427)
Net proceeds from sale of assets 1,413 14,297
Net purchases of property, plant and equipment (11,584) (16,771) (11,019)
------------ -------------- -----------
CASH (USED) PROVIDED BY INVESTING ACTIVITIES (10,171) (22,198) 3,278
FINANCING ACTIVITIES
Net borrowings under secured credit agreement 7,817 12,446 (10,903)
Net change in long-term borrowings and capital lease
obligations (633) 232 (828)
Retirement of subordinated debt (11,120)
Exercise of stock options 628 50 65
------------ -------------- -----------
CASH PROVIDED (USED) BY FINANCING ACTIVITIES 7,812 12,728 (22,786)
------------ -------------- -----------
INCREASE (DECREASE) IN CASH 652 (673) (454)
Cash at beginning of year 758 1,431 1,885
------------ -------------- -----------
CASH AT END OF YEAR $ 1,410 $ 758 $ 1,431
============ ============== ===========
See notes to consolidated financial statements.
-15-
17
CONSOLIDATED BALANCE SHEET
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
January 3, 1998 and December 28, 1996
(Dollars in thousands)
1997 1996
-------- --------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,410 $ 758
Accounts receivable, less allowances;
1997--$2,975 and 1996--$2,895 32,951 36,626
Inventories:
Finished goods and work-in-process 39,532 38,824
Raw materials and supplies 6,043 3,998
-------- --------
45,575 42,822
Prepaid expenses and other 11,631 10,739
-------- --------
TOTAL CURRENT ASSETS 91,567 90,945
OTHER ASSETS 14,598 9,703
PROPERTY, PLANT AND EQUIPMENT
Land 3,586 3,751
Buildings 21,430 24,035
Machinery and equipment 86,195 86,151
-------- --------
111,211 113,937
Less allowances for depreciation
and amortization 54,882 53,464
-------- --------
56,329 60,473
-------- --------
TOTAL ASSETS $162,494 $161,121
======== ========
See notes to consolidated financial statements.
-16-
18
CONSOLIDATED BALANCE SHEET
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
January 3, 1998 and December 28, 1996
(Dollars in thousands)
1997 1996
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 27,734 $ 19,084
Accrued expenses and other liabilities 22,272 24,803
Taxes 3,815 3,643
Current maturities of long-term debt 3,759 4,376
--------- ---------
TOTAL CURRENT LIABILITIES 57,580 51,906
LONG-TERM DEBT 44,712 36,911
POST-RETIREMENT BENEFITS AND OTHER
LONG-TERM LIABILITIES 23,221 27,517
SHAREHOLDERS' EQUITY
Common shares, without par value, with stated
value of $.10 per share, authorized 20,000,000
shares; outstanding--13,414,184 shares in 1997
and 13,301,084 shares in 1996 1,341 1,330
Other capital 73,409 72,792
Retained earnings (deficit) (36,679) (27,026)
Other adjustments (1,090) (2,309)
--------- ---------
36,981 44,787
--------- ---------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 162,494 $ 161,121
========= =========
See notes to consolidated financial statements.
-17-
19
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(Dollars in thousands)
Retained Total
Common Other Earnings Other Shareholders'
Shares Capital (Deficit) Adjustments Equity
-------- -------- -------- -------- --------
Balance at December 31, 1994 $ 1,328 $ 72,679 $(52,728) $ (8,399) $ 12,880
Net Income 12,074 12,074
Issuance of 12,967 common shares
under stock option plans 1 64 65
Pension adjustment 5,900 5,900
-------- -------- -------- -------- --------
Balance at December 30, 1995 $ 1,329 $ 72,743 $(40,654) $ (2,499) $ 30,919
Net Income 13,628 13,628
Issuance of 9,333 common shares
under stock option plans 1 49 50
Other adjustments 190 190
-------- -------- -------- -------- --------
Balance at December 28, 1996 $ 1,330 $ 72,792 $(27,026) $ (2,309) $ 44,787
Net Loss (9,653) (9,653)
Issuance of 113,100 common
shares under stock option plans 11 617 628
Other adjustments 1,219 1,219
-------- -------- -------- -------- --------
Balance at January 3, 1998 $ 1,341 $ 73,409 $(36,679) $ (1,090) $ 36,981
======== ======== ======== ======== ========
See notes to consolidated financial statements.
-18-
20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
Three fiscal years ended January 3, 1998
NOTE A--ACCOUNTING POLICIES
ORGANIZATION: The Company is in one business segment and is engaged in the
manufacture and distribution of a broad line of thermoplastic electrical,
telecommunication and engineered sewer products. In addition, the Company
distributes a wide variety of consumer electrical wiring devices and a variety
of wireless electrical products. Products are sold primarily to national and
regional electrical distributors, power utilities, regional Bell operating
companies and other telecommunications providers, national and regional
retailers, and government and private builders of sewer and drainage systems.
Substantially all sales are made within North America. Sales to a single
customer totaled approximately 13% in 1997 and 1996, and 12% in 1995.
FISCAL YEAR: The Company's fiscal year end is the Saturday closest to
December 31.
PRINCIPLES OF CONSOLIDATION AND PRESENTATION: The consolidated financial
statements include the accounts of the Company and all domestic and foreign
subsidiaries after elimination of significant intercompany items and
transactions. Certain 1996 and 1995 items have been reclassified to conform with
1997 reporting classifications.
CASH AND CASH EQUIVALENTS: The Company considers all investments with an
original maturity of three months or less on their acquisition date to be cash
equivalents.
INVENTORIES: Inventories are valued at the lower of first-in, first-out (FIFO)
cost or market.
PROPERTY AND DEPRECIATION: Property, plant and equipment are recorded at cost.
For financial reporting purposes, depreciation and amortization are computed
principally by the straight-line method over the estimated useful lives of the
assets. Accelerated methods of depreciation are used for federal income tax
purposes.
INCOME TAXES: The Company accounts for income taxes using the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes." Investment tax credits are recorded using the flow-through
method.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs consist of
company sponsored activities to develop new value-added products. Costs are
expensed as incurred. R&D expenditures were $4,600,000, $4,000,000, and
$3,700,000 in 1997, 1996 and 1995, respectively.
ADVERTISING EXPENDITURES: Advertising costs are expensed as incurred.
Advertising expenditures were $3,500,000, $3,800,000, and $3,200,000 for 1997,
1996 and 1995, respectively.
-19-
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE A--ACCOUNTING POLICIES--Continued
BASIC AND DILUTED NET LOSS PER COMMON SHARE:
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all have been presented, restated to
conform to the Statement 128.
ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board issued Statement No. 130,
"Reporting Comprehensive Income" (SFAS 130) and Statement No. 131, "Disclosures
and Segments of an Enterprise and Related Information" (SFAS 131). Both
statements are required to be adopted in 1998. Currently, the Company's only
elements of comprehensive income are cumulative translation and pension minimum
liability adjustments. Once adopted, the Company plans to provide the SFAS 130
required disclosures in its Consolidated Statement of Shareholders' Equity and
related footnotes. SFAS 131 requires that annual and interim financial and
descriptive information about reportable operating segments be reported on the
same basis used internally for evaluating segment performance and the allocation
of resources. While the Company has not yet determined the impact of adopting
SFAS 131 on its financial statement disclosures, the Company does not expect any
change to its primary financial statements.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
-20-
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE B--LONG-TERM DEBT Long-term debt consists of the following:
(Dollars in thousands)
Fiscal Years
--------------------------------
1997 1996
--------------------------------
Secured Credit Agreement:
Term $ 14,250 $ 11,250
Revolver 23,065 18,248
------------- -------------
37,315 29,498
Industrial Revenue Bonds 8,770 8,870
Building mortgage 2,052 2,332
Other 334 587
------------- -------------
48,471 41,287
Less amounts classified as current 3,759 4,376
------------- -------------
$ 44,712 $ 36,911
============= =============
The Company's long-term $65,000,000 secured credit agreement was refinanced
effective July 14, 1995. The agreement was amended effective July 24, 1997 to
reset the term loan portion of the debt to $15,000,000 and extend the term. The
agreement is secured by the Company's accounts receivable, inventory, and
property, plant and equipment. The agreement consists of both term and revolving
credit facilities with interest variable on both portions. The rate paid varies
based on the Company's financial performance and the pricing option chosen.
Borrowings under this agreement carry interest based on any of three pricing
options (prime rate, LIBOR or commercial paper) plus the applicable spread.
Interest is paid in accordance with the maturity of the pricing option selected.
The term portion of this facility carried interest at a weighted average rate of
9.11% which is 3.25% over the commercial paper rate at January 3, 1998 and
requires principal payments of $750,000 due the last day of each calendar
quarter with a $6,000,000 balloon payment due December 31, 2000. The remaining
revolving credit portion permits borrowings up to $50,000,000 at any time
through December 31, 2000 and carries an average variable rate of 8.77% at
January 3, 1998. The agreement provides for the payment of a commitment fee on
the revolving line of credit of .375% per annum on the average daily unused
commitment. In addition to amounts borrowed, letters of credit related to
Industrial Revenue Bond financings and other contractual obligations total
approximately $11,275,000 under the agreement.
The Company's Industrial Revenue Bond financings include several issues due in
annual installments from 1998 through 2023 with interest at variable rates. The
weighted average rate for these bonds in December 1997 was 4.0%. The Company
maintains a letter of credit related to one of the Industrial Revenue Bonds for
approximately $1,900,000 with a local bank. The Company's headquarters facility
is subject to a mortgage payable in equal monthly installments through 2003 with
interest at 8.625%.
-21-
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE B--LONG-TERM DEBT--Continued
The Company's credit agreements contain various restrictive covenants pertaining
to maintenance of debt service, tangible net worth and certain other financial
ratios.
The aggregate minimum combined maturities of long-term debt for the years 1999
through 2002 are approximately $3,864,000, $32,204,000, $968,000 and $1,051,000,
respectively, with $6,625,000 due thereafter.
Interest expense includes $253,000, $471,000, and $803,000 for amortization of
deferred financing cost in 1997, 1996 and 1995, respectively. Interest
capitalized was $170,000, $417,000, and $100,000 in 1997, 1996 and 1995,
respectively. Interest paid was $3,895,000, $2,647,000, and $6,069,000 in 1997,
1996 and 1995, respectively.
Rental expense was $4,656,000, $3,699,000, and $3,470,000 in 1997, 1996 and
1995, respectively. Aggregate future minimum payments related to operating
leases with initial or remaining terms of one year or more for the years 1998
through 2002 are $1,581,000, $1,210,000, $904,000, $370,000 and $101,000,
respectively.
NOTE C--PENSION PLANS
The Company sponsors defined benefit pension and defined contribution savings
plans covering substantially all employees. Defined benefit plans covering
salaried employees provide benefits that are based on an employee's years of
service and compensation during the five-year period prior to retirement. All
hourly defined benefit plans have been frozen and replaced with defined
contribution plans. Company contributions to defined contribution plans are
based upon a fixed percentage of voluntary employee contributions. The Company
annually contributes amounts to the defined benefit plans which are actuarially
determined to provide sufficient assets to meet future benefit payment
requirements.
Pension expense is comprised of the following:
(Dollars in thousands)
Fiscal Years
---------------------------------------------
1997 1996 1995
---------------------------------------------
Benefits earned $922 $930 $1,091
Interest on projected
benefit obligations 5,483 5,574 5,866
Actual return on assets (11,283) (9,572) (7,799)
Net amortization and deferral 5,087 3,889 2,546
Curtailment loss/(gain) 106 103 (759)
Defined contribution and other plans 771 772 800
------------- ------------- -------------
$1,086 $1,696 $1,745
============= ============= =============
-22-
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE C--PENSION PLANS--Continued
The following table summarizes the funded status of the Company's defined
benefit pension plans and the related amounts recognized in the Company's
consolidated statement of financial position:
1997 1996
Status of Plans Status of Plans
--------------------------------------------------------------------
(Dollars in thousands) Assets Benefits Assets Benefits
Exceed Exceed Exceed Exceed
Benefits Assets Benefits Assets
-------------- -------------- -------------- --------------
Actuarial present value of
benefit obligations
Vested benefit obligations $ 45,712 $ 28,394 $ 37,971 $35,133
============== ============== ============== ==============
Accumulated benefit obligations $ 46,553 $ 28,757 $ 38,637 $35,385
============== ============== ============== ==============
Plan assets at fair value $ 54,449 $ 22,298 $ 44,719 $26,691
Projected benefit obligations (49,773) (29,048) (41,116) (35,785)
-------------- -------------- -------------- --------------
Plan assets in excess of (less than)
projected benefit obligations 4,676 (6,750) 3,603 (9,094)
Unrecognized prior service cost (39) 409 (58) 500
Unrecognized net loss 7,893 1,682 6,739 3,161
Unrecognized initial net asset (830) (687) (1,424) (201)
Minimum liability (1,135) (3,059)
-------------- -------------- -------------- --------------
Pension assets (liabilities) $ 11,700 $ (6,481) $ 8,860 $ (8,693)
============== ============== ============== ==============
-23-
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE C--PENSION PLANS--Continued
Accrued expenses and other liabilities include the current portion of pension
liabilities of $481,000 and $341,000 in 1997 and 1996, respectively. Excess
minimum liability resulted in a reduction of shareholders' equity of $812,000
and $2,030,000 at January 3, 1998 and December 28, 1996, respectively. The
discount rates used in determining pension expense were 7.4%, 7.4%, and 8.0% in
1997, 1996 and 1995, respectively. The discount rates used for funded status
information were 7.0% in 1997 and 7.4% in 1996. The change in the discount rate
had the effect of increasing the accumulated benefit obligation by approximately
$2,300,000. The long-term rates of return on assets used in determining the
funded status information were 9.5% in 1997 and 1996. Plan assets consist
primarily of fixed income and equity marketable securities, including Company
securities with a fair market value at January 3, 1998 of $2,399,000. The salary
progression assumption used in determining the funded status information was 5%
in each year.
NOTE D--POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides health care and life insurance benefits for certain of its
retired employees. The Company accrues the estimated cost of retiree benefit
payments, other than pensions, during the employees' active service period. The
Company funds these benefit costs on a pay-as-you-go basis, with the retiree, in
most instances, paying a portion of the costs.
Summary information for the Company's plans is as follows:
(Dollars in thousands)
Fiscal Years
---------------------------------
1997 1996
---------------------------------
Accumulated Post-retirement Benefit Obligation
(APBO):
Retirees $ 15,153 $ 12,877
Active participants eligible to receive
benefits 1,033 898
Other active plan participants 2,101 2,246
-------------- ---------------
Total APBO 18,287 16,021
Unamortized gain 1,844 5,703
-------------- ---------------
20,131 21,724
Less: current portion 1,800 1,800
-------------- ---------------
$ 18,331 $ 19,924
============== ===============
The Company remains contingently liable for post-retirement benefits of certain
businesses previously sold.
-24-
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE D--POST-RETIREMENT BENEFITS OTHER THAN PENSIONS--Continued
The components of periodic post-retirement benefit cost reflected in continuing
operations are as follows:
(Dollars in thousands)
Fiscal Years
--------------------------------------------
1997 1996 1995
--------------------------------------------
Benefits earned $ 294 $ 279 $ 479
Interest on post-retirement benefit 1,027 1,092 1,396
obligation
Amortization of unrecognized net gain (278) (252)
------------ ------------ ------------
$ 1,043 $ 1,119 $ 1,875
============ ============ ============
The discount rate used in determining the APBO was 7.0% in 1997 and 1996. The
assumed health care cost trend rate used in measuring the APBO was an average of
10% in 1997 and 1996, declining to an ultimate rate of 5.5% in 2007 and
thereafter.
If the health care cost trend rate assumptions were increased by 1%, the APBO as
of January 3, 1998 would increase by 6.9%. The effect of this change on periodic
post-retirement benefit cost for 1997 would be an increase of 10.8%, or
approximately $143,000.
-25-
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE E--LITIGATION
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.
NOTE F--PREFERRED AND PREFERENCE STOCK
The Company has authorized 1,200,000 and 3,000,000 shares of Serial Preferred
and Preference Stock, respectively, none of which is issued or outstanding at
January 3, 1998.
The Company has reserved for issuance 200,000 shares of Cumulative Redeemable
Serial Preference Stock, Series II, without par value, which is part of purchase
rights related to each outstanding common share. None of these shares were
issued in 1997 or 1996. The right associated with each common share entitles its
holder to purchase from the Company or acquiring company, one one-hundredth of a
share of preference stock at a price of $47 which is subject to adjustment. The
rights become exercisable only if a person or group acquires beneficial
ownership of 15% or more of the Company's common shares or takes certain other
actions. In any such event, a 15% or more owner is prohibited from exercising
the rights. When exercisable, the rights entitle each holder to purchase,
according to the agreement, either the Company's common shares or stock in the
acquiring entity worth twice the value of the then applicable purchase price.
Under certain circumstances, the Company has the authority to exchange each
right for one common share without payment required. Unless otherwise extended,
the Company may redeem the rights in their entirety, at a price of one cent per
right, at any time until the tenth calendar day following any public
announcement that beneficial ownership of 15% or more has occurred in the
Company's common shares, or upon certain other events, including Board of
Directors approval of a merger. The rights expire on September 7, 1998.
-26-
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE G--STOCK COMPENSATION PLANS
Under the 1994 Nonemployee Directors Stock Option Plan, the Company is
authorized to issue 60,000 non-qualified stock options. The options become
exercisable one year after date of grant and expire at the end of ten years.
Under the 1988 Incentive Equity Performance Plan, the Company is authorized to
issue 1,800,000 incentive stock options (ISO's), non-qualified stock options,
stock appreciation rights (SAR's), and restricted or deferred stock. Options
generally become exercisable, in part, one year after date of grant and expire
at the end of ten years. At January 3, 1998, under both of these plans, a total
of 489,450 options were available for future grant. At December 31, 1997, all
options outstanding under the 1978 Non-Qualified Incentive Stock Option Plan
expired.
The Company applies Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees" and related Interpretations in accounting for its
stock-based plans. Accordingly, no compensation cost has been recognized for the
fixed stock option plans. Had compensation cost for the Company's three
stock-based compensation plans, for options granted in 1997, 1996 and 1995, been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below:
(Dollars in thousands, except per share data)
Fiscal Years
---------------------------------------------------------
1997 1996 1995
---------------------------------------------------------
Net (loss) income As reported $ (9,653) $ 13,628 $ 12,074
Pro forma (9,932) 13,383 11,832
Basic (loss) earnings per share As reported $ (0.72) $ 1.02 $ 0.91
Pro forma (0.74) 1.01 0.89
Diluted (loss) earnings per share As reported $ (0.72) $ 1.00 $ 0.90
Pro forma (0.74) 0.98 0.88
For pro forma calculations, the fair value of each option grant is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants: 1997 - expected
volatility of 28.9 percent, expected life of 5 years and risk-free interest rate
of 6.34% for issued options; 1996 and 1995 - expected volatility of 30.4%,
expected life of 5 years and risk-free interest rate of 6.0% for issued options.
-27-
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE G--STOCK COMPENSATION PLANS--Continued
A summary of the status of the Company's three stock option plans as of January
3, 1998, December 28, 1996, and December 30, 1995 and changes during the
respective years then ended is presented below:
(Shares in thousands)
1997 1996 1995
----------------------------- ---------------------------- ----------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
---------- ----------------- --------- --------------- ---------- -------------
Outstanding at beginning of year 1,140 $ 6.58 933 $ 6.04 726 $ 6.12
Granted 251 7.91 229 8.76 235 5.91
Exercised (113) 5.55 (9) 5.29 (13) 5.01
Forfeited (99) 8.16 (13) 7.60 (15) 8.22
---------- ----------------- --------- -------------- ---------- -------------
Outstanding at end of year 1,179 $ 6.83 1,140 $ 6.58 933 $ 6.04
========== ================= ========= ============== ========== =============
Options exercisable at year-end 841 896 478
Weighted-average fair value of
options granted during the year $ 2.97 $ 3.32 $ 2.24
The following table summarizes information about options outstanding at January
3, 1998:
Options Outstanding Options Exercisable
---------------------------------------------------------------- --------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 1/3198 Contractual Life (Yrs) Exercise Price at 1/3/98 Exercise Price
- ------------------ -------------- ---------------------- ----------------- ------------- ----------------
$0-5 164,800 3.01 $4.43 164,800 $4.43
5-10 979,050 6.98 7.04 642,173 3.82
10-15 36,000 3.35 12.08 34,250 12.18
-28-
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE H--EARNINGS PER SHARE CALCULATION
The following table sets forth the computation of basic and diluted earnings per
share:
Fiscal Years
------------------------------------
1997 1996 1995
-------------------------------------
BASIC (LOSS) EARNINGS PER SHARE COMPUTATION
Net (Loss) Income $ (9,653) $ 13,628 $ 12,074
======== ======== ========
Average Common Shares Outstanding 13,349 13,297 13,288
======== ======== ========
Basic (Loss) Earnings Per Share $ (.72) $ 1.02 $ 0.91
======== ======== ========
DILUTED (LOSS) EARNINGS PER SHARE COMPUTATION
Net (Loss) Income $ (9,653) $ 13,628 $ 12,074
======== ======== ========
Basic Shares Outstanding 13,349 13,297 13,288
Stock Options Calculated Under
the Treasury Method 344 116
-------- -------- --------
Total Shares 13,349 13,641 13,404
======== ======== ========
Diluted (Loss) Earnings Per Share $ (.72) $ 1.00 $ 0.90
======== ======== ========
-29-
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE I--INCOME TAXES
The Company has provided for income taxes (benefit) as follows:
(Dollars in thousands)
1997 1996 1995
---- ---- ----
Current:
Federal $ (100) $ 200 $ 0
--------------- --------------- ---------------
(100) 200 0
Deferred (1,450) (4,300) (3,900)
--------------- --------------- ---------------
$ (1,550) $ (4,100) $ (3,900)
=============== =============== ===============
A deferred federal tax benefit of $1,450,000, $4,300,000 and $3,900,000 was
recorded in 1997, 1996 and 1995, respectively. The Company has available net
operating loss carryforwards totaling approximately $51 million which expire in
the years 2001 to 2012. The Company also has available general business tax
credit carryforwards of $1.7 million which expire through 2012 and alternative
minimum tax credit carryforwards of approximately $1 million which may be
carried forward indefinitely.
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities are presented below:
(Dollars in thousands) Fiscal Years
--------------------------------
1997 1996
--------------------------------
Deferred tax assets:
Net operating loss carryforwards $ 17,700 $ 11,500
Other accruals, credits and reserves 7,200 9,100
General business and alternative minimum tax
credits 2,700 2,700
Post-retirement benefits other than pensions 7,000 7,600
------------- --------------
34,600 30,900
Less: valuation allowance (18,800) (16,900)
------------- --------------
Total net deferred tax assets 15,800 14,000
Deferred tax liabilities:
Tax in excess of book depreciation 4,350 5,500
Pensions 1,800 300
------------- --------------
Total deferred tax liabilities 6,150 5,800
------------- --------------
$ 9,650 $ 8,200
============= ==============
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE I -- INCOME TAXES -- Continued
The valuation allowance for net deferred tax assets increased by $1,900,000 in
1997. The increase was the result of net changes in temporary differences and
the reversal of $1,450,000 in 1997 of valuation allowance based on projected
operating results and available tax planning strategies.
The provision for income taxes is different than the amount computed using the
applicable statutory federal income tax rate with the differences summarized
below:
(Dollars in thousands) Fiscal Years
-----------------------------------------------------
1997 1996 1995
-----------------------------------------------------
Tax expense (benefit) at statutory rates $ (3,921) $ 3,335 $ 2,849
Adjustment due to:
Change in valuation allowance 1,900 (6,600) (6,500)
Other 471 (835) (249)
-------------- --------------- --------------
$ (1,550) $ (4,100) $ (3,900)
============== =============== ==============
Income taxes paid in 1996 and 1995 were $282,000 and $26,000 respectively. In
1997, the Company received an income tax refund of $175,000.
NOTE J---CHANGE IN ACCOUNTING PRINCIPLE
As required by Emerging Issues Task Force (EITF) Issue No. 97-13, (Business
Process Re-engineering Costs), the Company changed its accounting policy in the
fourth quarter of 1997, regarding the business and information technology
project. Substantially all direct costs relating to the project were
capitalized, including the portion related to business process re-engineering.
Under the EITF consensus, all future costs for the business process
re-engineering component must be expensed as incurred and the unamortized
balance of these costs of $4.9 million must be written off as a cumulative
adjustment in the fourth quarter.
NOTE K--ACQUISITION/DISPOSITION OF BUSINESSES
In October 1996, the Company acquired all the outstanding shares of Dimango
Products Corporation for $5,400,000 (including the assumption of debt). The
results of operations for Dimango from the date of acquisition are included in
the Company's consolidated statement of income.
In November 1995, the Company sold its aerospace fastener business for
approximately $11,700,000. Net sales for 1995 through the sale date were
$18,951,000. Operating results, corporate costs to prepare the business for
sale, and anticipated future costs related to the business resulted in losses of
approximately $3,000,000.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
NOTE L--SUMMARY OF QUARTERLY RESULTS OF OPERATIONS--(UNAUDITED)
Basic Earnings (Loss) Diluted Earnings (Loss)
Net Income Per Common Share Per Common Share
(Loss) Before ----------------------------- ----------------------------------
Effect of Income (Loss) Net Income (Loss) Net
Net Gross Accounting Before Effect of Income Before Effect of Income
Sales Profit Change Accounting Change (Loss) Accounting Change (Loss)
----------- ----------- ------------- ----------------- ------- ----------------- ----------
Fiscal 1997:
First quarter $ 68,844 $ 14,893 $ 2,157 $ 0.16 $ 0.16 $ 0.16 $ 0.16
Second quarter 72,439 12,772 1,975 0.15 0.15 0.15 0.15
Third quarter 70,492 8,353 (5,647) (0.42) (0.42) (0.42) (0.42)
Fourth quarter 60,005 9,313 (8,138) (0.24) (0.61) (0.24) (0.61)
-------- -------- -------- -------- -------- -------- --------
TOTALS $271,780 $ 45,331 $ (9,653) $ (0.35) $ (0.72) $ (0.35) $ (0.72)
======== ======== ======== ======== ======== ======== ========
Fiscal 1996:
First quarter $ 63,978 $ 13,838 $ 2,012 $ 0.15 $ 0.15 $ 0.15 $ 0.15
Second quarter 77,405 16,426 3,603 0.27 0.27 0.26 0.26
Third quarter 78,098 15,822 4,122 0.31 0.31 0.30 0.30
Fourth quarter 69,571 15,188 3,891 0.29 0.29 0.29 0.29
-------- -------- -------- -------- -------- -------- --------
TOTALS $289,052 $ 61,274 $ 13,628 $ 1.02 $ 1.02 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== ========
Market
Price Per
Share
High Low
-----------------------------
Fiscal 1997:
First quarter $8-1/2 $ 6-3/4
Second quarter 8-3/4 7-1/4
Third quarter 8-5/8 7-3/8
Fourth quarter 7-3/16 5-13/16
TOTALS
Fiscal 1996:
First quarter $9-1/4 $7-5/8
Second quarter 13-1/2 9-1/4
Third quarter 12-1/8 8-1/4
Fourth quarter 8-7/8 6-7/8
TOTALS
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REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
The Lamson & Sessions Co.
We have audited the accompanying consolidated balance sheet of The
Lamson & Sessions Co. and Subsidiaries as of January 3, 1998 and
December 28, 1996, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the
three fiscal years in the period ended January 3, 1998. Our audits
also included the financial statement schedule listed in the Index
at Item 14 (a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedule
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of The Lamson & Sessions Co. and Subsidiaries at
January 3, 1998 and December 28, 1996, and the consolidated results
of their operations and their cash flows for each of the three
fiscal years in the period ended January 3, 1998, in conformity
with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth
therein.
As discussed in Note J to the financial statements, in 1997 the
Company changed its method of accounting for business process
reengineering costs as required by Emerging Issue Task Force Issue
No. 97-13 "Business Process Reengineering Costs".
Ernst & Young LLP
Cleveland, Ohio
January 29, 1998
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STATEMENT OF MANAGEMENT'S RESPONSIBILITY
----------------------------------------
We have prepared the financial statements and other financial information
contained in this Annual Report.
The management of Lamson & Sessions is primarily responsible for the integrity
of this financial information. The financial statements were prepared in
accordance with generally accepted accounting principles and necessarily include
certain amounts based on management's reasonable best estimates and judgments,
giving due consideration to materiality. Financial information contained
elsewhere in this annual report is consistent with that contained in the
financial statements.
Management is responsible for establishing and maintaining a system of internal
control designed to provide reasonable assurance as to the integrity and
reliability of financial reporting. The concept of reasonable assurance is based
on the recognition that there are inherent limitations in all systems of
internal control, and that the cost of such systems should not exceed the
benefits to be derived therefrom.
To meet management's responsibility for financial reporting, we have established
internal control systems which we believe are adequate to provide reasonable
assurance that our assets are protected from loss. These systems produce data
used for the preparation of published financial information and provide for
appropriate reporting relationships and division of responsibility. All
significant systems and controls are reviewed periodically by our internal
auditors in order to ensure compliance, and by our independent auditors to
support their audit work. It is management's policy to implement a high
proportion of recommendations resulting from these reviews.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets regularly with management, internal auditors, and our
independent auditors to review accounting, auditing and financial matters. Both
the independent auditors and the internal auditors have free access to the Audit
Committee, with or without management, to discuss the scope and results of their
audits and the adequacy of the system of internal controls.
/s/ John B. Schulze
- -------------------------------------
John B. Schulze
Chairman of the Board, President and
Chief Executive Officer
/s/ James J. Abel
- --------------------------------------
James J. Abel
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
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36
PART II
Item 9. - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
Item 10. - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors
The information set forth under the caption "Election of
Directors" in the Company's definitive proxy statement for
its annual meeting of shareholders to be held April 24,
1998 is hereby incorporated by reference.
(b) Executive Officers - See Part I
(c) Compliance with Section 16 (a) of the Exchange Act.
The information set forth in the last paragraph under
caption "Election of Directors" in the Company's
definitive proxy statement for its annual meeting of
shareholders to be held April 24, 1998 is hereby
incorporated by reference.
Item 11. - EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in the
Company's definitive proxy statement for its annual meeting of shareholders to
be held April 24, 1998 is hereby incorporated by reference.
Item 12. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the captions "Ownership of the Company's Common
Shares," "Election of Directors" and "Security Ownership of Management" in the
Company's definitive proxy statement for its annual meeting of shareholders to
be held April 24, 1998 is hereby incorporated by reference.
Item 13. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
During the past fiscal year, the Company, in the normal course of business,
utilized the services of the law firm of Jones, Day, Reavis & Pogue, in which
Mr. Coquillette, a director of the Company, is a partner. The Company plans to
continue using the services of the firm in 1998.
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PART IV
Item 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
Consolidated financial statements of The Lamson & Sessions Co.
and Subsidiaries are included in Item 8 of this report:
1. Financial Statements
Consolidated Statements of Operations for Fiscal Years
Ended 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for Fiscal Years
Ended 1997, 1996 and 1995.
Consolidated Balance Sheet at January 3, 1998 and
December 28, 1996.
Consolidated Statements of Shareholders' Equity for
Fiscal Years Ended 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts and
Reserves.
All other schedules for which provision is made
in the applicable accounting regulations of the
Securities and Exchange Commission are not
required under the related instructions or are
inapplicable and, therefore, have been omitted.
3. The exhibits listed in the accompanying Exhibit Index
and required by Item 601 of Regulation S-K (numbered in
accordance with Item 601 of Regulation S-K) are filed or
incorporated by reference as part of this Report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the three
months ended January 3, 1998.
(c) Exhibits - See 14(a) 3.
(d) Financial Statement Schedule
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SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in thousands)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at Charged to Balance at
Beginning of Costs and End of
Description Period Expenses Deductions Period
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended January 3, 1998
Allowances deducted from assets:
Trade receivable allowances $ 2,895 $ 1,022 $ 942 (A) $ 2,975
Inventory obsolescense reserve 606 420 266 (B) 760
Other current and long-term assets 2,222 1,822 (C) 400
Accounts and loss reserves included in
current and long-term liabilities 5,446 1,205 (D) 4,241
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended December 28, 1996
Allowances deducted from assets:
Trade receivable allowances $ 2,129 $ 1,314 $ 548 (A) $ 2,895
Inventory obsolescense reserve 933 360 687 (B) 606
Other current and long-term assets 2,757 535 (C) 2,222
Accounts and loss reserves included in
current and long-term liabilities 6,423 977 (D) 5,446
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended December 30, 1995
Allowances deducted from assets:
Trade receivable allowances $ 1,653 $ 1,528 $ 1,052 (A) $ 2,129
Inventory obsolescense reserve 1,030 360 457 (B) 933
Other current and long-term assets 6,866 612 4,721 (C) 2,757
Accounts and loss reserves included in
current and long-term liabilities 7,909 1,486 (D) 6,423
- ---------------------------------------------------------------------------------------------------------------------------------
Note A - Principally write-off of uncollectible accounts and disputed items, net of recoveries.
Note B - Principally the disposal of obsolete inventory.
Note C - Adjustment to reserves and collection of note receivable for previously sold businesses.
Note D - Principally payments on contractual obligations for previously sold businesses.
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf of the undersigned, thereunto duly authorized, on this 26th day of
February 1998.
THE LAMSON & SESSIONS CO.
By /s/ James J. Abel
-------------------------------------------
James J. Abel
Executive Vice President, Secretary,
Treasurer and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated as of February 26, 1998.
Signature Title
--------- -----
/s/ John B. Schulze Chairman of the Board, President
- ---------------------------------- and Chief Executive Officer
John B. Schulze (Principal Executive Officer)
/s/ James J. Abel Executive Vice President, Secretary,
- ---------------------------------- Treasurer and Chief Financial Officer
James J. Abel (Principal Financial Officer and
Principal Accounting Officer)
/s/ James T. Bartlett* Director
- ----------------------------------
James T. Bartlett
/s/ Francis H. Beam, Jr.* Director
- ----------------------------------
Francis H. Beam, Jr.
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40
/s/ Martin J. Cleary* Director
- ----------------------------------
Martin J. Cleary
/s/ William H. Coquillette* Director
- ----------------------------------
William H. Coquillette
/s/ John C. Dannemiller* Director
- ----------------------------------
John C. Dannemiller
/s/ George R. Hill* Director
- ----------------------------------
George R. Hill
/s/ A. Malachi Mixon III* Director
- ----------------------------------
A. Malachi Mixon III
/s/ John C. Morley* Director
- ----------------------------------
John C. Morley
/s/ D. Van Skilling* Director
- ----------------------------------
D. Van Skilling
* The undersigned, by signing his name hereto, does sign and
execute this Annual Report on Form 10-K pursuant to a Power of
Attorney executed on behalf of the above named directors of The
Lamson & Sessions Co. and filed herewith as Exhibit 24 on
behalf of The Lamson & Sessions Co. and each such person.
February 26, 1998
By /s/ James J. Abel
- ----------------------------------
James J. Abel, Attorney-in-fact
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EXHIBIT INDEX
EXHIBIT NO.
- ------------
Management Contracts and Compensatory Plans are identified with an asterisk (*).
3(a) Amended Articles of Incorporation of the Company (incorporated by
reference to Exhibit 4(a) to the Company's Registration Statement on
Form S-8, Registration No. 333-32875) filed with the Securities and
Exchange Commission on August 5, 1997).
3(b) Amended Code of Regulations of the Company (incorporated by
reference to Exhibit 3(b) to the Company's Annual Report on Form
10-K for the year December 31, 1994).
4(a) Specimen Certificate of Common Shares, without par value with Rights
legend (incorporated by reference to Exhibit 3 to the Company's
Registration Statement on Form 8-A filed with the Securities and
Exchange Commission on June 1, 1989).
4(e) Form of Rights Certificate (incorporated by reference to Exhibit
4(oo) to the Company's Registration Statement on Form 8-A filed with
the Securities and Exchange Commission on August 25, 1988).
4(g) Rights Agreement, amended and restated as of February 14, 1990, by
and between the Company and National City Bank (incorporated by
reference to Exhibit 4(g) to the Company's Annual Report on Form
10-K for the year ended December 30, 1995).
*10(a) 1988 Incentive Equity Performance Plan (as of April 26, 1996)
(incorporated by reference to the Company's Registration Statement
on Form S-8, Registration No. 333-32875) filed with the Securities
and Exchange Commission on August 5, 1997.
*10(b) Form of Three-Year Employment Agreement between the Company and
certain executive officers (incorporated by reference to Exhibit
10(b) to the Company's Annual Report on Form 10-K for the year ended
December 30, 1995).
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42
*10(c) Form of Two-Year Employment Agreement between the Company and
certain executive officers (incorporated by reference to Exhibit
10(c) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
*10(d) Corporate Officers Incentive Compensation Plan (incorporated by
reference to Exhibit 10(d) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
*10(e) Form of Amended and Restated Supplemental Executive Retirement
Agreement dated as of March 20, 1990 between the Company and certain
of its executive officers (incorporated by reference to Exhibit
10(e) to the Company's Annual Report on Form 10-K for the year ended
December 30, 1995).
*10(f) The Company's Deferred Compensation Plan for Nonemployee
Directors (incorporated by reference to the Company's Registration
Statement, on Form S-8 (Registration No. 33-12585) filed with the
Securities and Exchange Commission on September 24, 1996).
*10(g) Form of Indemnification Agreement between the Company and the
Directors and certain officers (incorporated by reference to Exhibit
10(g) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
*10(h) The Company's Long Term Incentive Plan filed (incorporated by
reference to Exhibit 10(h) Company's Annual Report on Form 10-K
for the year ended December 28, 1996).
10(j) Mortgage and Security Agreement, dated October 29, 1993, between The
Lamson & Sessions Co. and PFL Life Insurance Company (incorporated
herein by reference to Exhibit 10(j) to the Company's Annual Report
on Form 10-K for the year ended January 1, 1994).
10(k) Asset Purchase Agreement between Iochpe-Maxion Ohio, Inc. and
The Lamson & Sessions Co. dated as of May 4, 1994 (incorporated
by reference to Exhibit 10 to the Company's Current Report on
Form 8-K dated as of May 27, 1994).
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43
10(s) Amended and Restated Loan Agreement dated as of July 14, 1995 by
and between the Company and General Electric Capital Corporation
(incorporated by reference to Exhibit 10(g) to the Company's
Quarterly Report on Form 10-Q for the period ended July 1, 1995,
the "GECC Loan Agreement").
10(t) Amendment No. 1 dated as of October 30, 1995, to the GECC Loan
Agreement (incorporated by reference to Exhibit 10(t) to the
Company's Annual Report on Form 10-K for the year ended December
30, 1995).
10(u) Amendment No. 2 and Consent dated as of November 8, 1995 to the
GECC Loan Agreement (incorporated by reference to Exhibit 10(u) to
the Company's Annual Report on Form 10-K for the year ended
December 30, 1995).
10(v) Amendment No. 3 dated as of March 31, 1996, to the GECC Loan
Agreement (incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the period ended March 30, 1996).
10(w) Amendment No. 4 dated as of October 25, 1996, to the GECC Loan
Agreement (incorporated by reference to Exhibit 10(w) to the
Company's Quarterly Report on Form 10-Q for the period ended
September 28, 1996).
10(y) Amendment No. 5 dated as of March 5, 1997, to the GECC Loan
Agreement (incorporated by reference to Exhibit 10(y) to the
Company's Annual Report on Form 10-K for the year ended December
28, 1996).
*10(z) The Company's Nonemployee Director Stock Option Plan (incorporated
by reference to the Company's Registration Statement on Form S-8
(Registration No. 33-62443) filed with the Securities and Exchange
Commission on September 8, 1995).
10(aa) Amendment No. 6 dated as of July 24, 1997 to the GECC Loan
Agreement (incorporated by reference to Exhibit 10(aa) to the
Company's Quarterly Report on Form 10-Q for the period ended July
5, 1997).
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44
10(ab) Amendment No. 7 dated as of January 30, 1998 to the GECC Loan
Agreement filed herewith.
10(ac) Amendment to the 1988 Incentive Equity Performance Plan (as
amended as of April 26, 1996) effective as of February 26, 1998
and filed herewith.
21 Subsidiaries of the Registrant filed herewith.
23 Consent of Independent Accountants filed herewith.
24 Powers of Attorney filed herewith.
27 Financial Data Schedule (Submitted for the SEC's
Information) filed herewith.
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