##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 OR
 o
    
    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 001-00313
 THE    LAMSON    &    SESSIONS    CO.
  Ohio
    
    34-0349210(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer Identification No.)25701 Science Park DriveCleveland, Ohio
    
    44122-7313(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 
  þ o
   o þ o
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS:




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TABLE OF CONTENTS  PART IItem 1  FINANCIAL STATEMENTSITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSItem 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKItem 4  CONTROLS AND PROCEDURESPART IIItem 1  LEGAL PROCEEDINGSItem 1A  RISK FACTORSItem 4  Submission of Matters To A Vote of Security HoldersItem 6  ExhibitsSIGNATURESEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  
 PART I
 
 Item 1  FINANCIAL STATEMENTS
 THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 CONSOLIDATED INCOME STATEMENTS (Unaudited)
 Second Quarter Ended
    
    
    First Half Ended(Dollars in thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006NET SALES
    
    $
    138,112
    
    
    
    100.0
    %
    
    $
    162,313
    
    
    
    100.0
    %
    
    $
    254,119
    
    
    
    100.0
    %
    
    $
    297,714
    
    
    
    100.0
    %Cost of products sold
    
    
    108,128
    
    
    
    78.3
    %
    
    
    122,241
    
    
    
    75.3
    %
    
    
    202,306
    
    
    
    79.6
    %
    
    
    226,659
    
    
    
    76.1
    %GROSS PROFIT
    
    
    29,984
    
    
    
    21.7
    %
    
    
    40,072
    
    
    
    24.7
    %
    
    
    51,813
    
    
    
    20.4
    %
    
    
    71,055
    
    
    
    23.9
    %Selling and marketing expenses
    
    
    8,762
    
    
    
    6.3
    %
    
    
    9,564
    
    
    
    6.0
    %
    
    
    17,191
    
    
    
    6.8
    %
    
    
    18,311
    
    
    
    6.1
    %General and administrative expenses
    
    
    5,217
    
    
    
    3.8
    %
    
    
    6,396
    
    
    
    3.9
    %
    
    
    10,216
    
    
    
    4.0
    %
    
    
    12,101
    
    
    
    4.1
    %Research and development expenses
    
    
    529
    
    
    
    0.4
    %
    
    
    562
    
    
    
    0.3
    %
    
    
    1,060
    
    
    
    0.4
    %
    
    
    1,148
    
    
    
    0.4
    %Total operating expenses
    
    
    14,508
    
    
    
    10.5
    %
    
    
    16,522
    
    
    
    10.2
    %
    
    
    28,467
    
    
    
    11.2
    %
    
    
    31,560
    
    
    
    10.6
    %OPERATING INCOME
    
    
    15,476
    
    
    
    11.2
    %
    
    
    23,550
    
    
    
    14.5
    %
    
    
    23,346
    
    
    
    9.2
    %
    
    
    39,495
    
    
    
    13.3
    %Interest expense, net
    
    
    670
    
    
    
    0.5
    %
    
    
    1,131
    
    
    
    0.7
    %
    
    
    1,237
    
    
    
    0.5
    %
    
    
    2,248
    
    
    
    0.8
    %INCOME
BEFORE INCOME TAXES
    
    
    14,806
    
    
    
    10.7
    %
    
    
    22,419
    
    
    
    13.8
    %
    
    
    22,109
    
    
    
    8.7
    %
    
    
    37,247
    
    
    
    12.5
    %Income tax provision
    
    
    5,555
    
    
    
    4.0
    %
    
    
    8,430
    
    
    
    5.2
    %
    
    
    8,306
    
    
    
    3.3
    %
    
    
    14,038
    
    
    
    4.7
    %NET INCOME
    
    $
    9,251
    
    
    
    6.7
    %
    
    $
    13,989
    
    
    
    8.6
    %
    
    $
    13,803
    
    
    
    5.4
    %
    
    $
    23,209
    
    
    
    7.8
    %Net earnings per share:Basic
    
    $
    0.59
    
    
    
    
    
    
    $
    0.90
    
    
    
    
    
    
    $
    0.88
    
    
    
    
    
    
    $
    1.51Diluted
    
    $
    0.57
    
    
    
    
    
    
    $
    0.87
    
    
    
    
    
    
    $
    0.85
    
    
    
    
    
    
    $
    1.45
  2




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##### Table of Contents



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS (Unaudited)
 Second Quarter
    
    
    
    
    
    
    Second QuarterEnded
    
    
    Year Ended
    
    
    Ended(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2006ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    2,305
    
    
    $
    3,324
    
    
    $
    1,662Accounts receivable, net of allowances of
$2,178, $1,625 and $2,421, respectively
    
    
    76,246
    
    
    
    55,111
    
    
    
    88,712Inventories, netRaw materials
    
    
    4,600
    
    
    
    4,846
    
    
    
    5,582Work-in-process
    
    
    4,983
    
    
    
    5,198
    
    
    
    6,203Finished goods
    
    
    47,100
    
    
    
    38,447
    
    
    
    41,80156,683
    
    
    
    48,491
    
    
    
    53,586Deferred tax assets
    
    
    7,241
    
    
    
    9,054
    
    
    
    8,293Prepaid expenses and other
    
    
    3,471
    
    
    
    2,345
    
    
    
    4,133TOTAL CURRENT ASSETS
    
    
    145,946
    
    
    
    118,325
    
    
    
    156,386PROPERTY, PLANT AND EQUIPMENTLand
    
    
    3,320
    
    
    
    3,320
    
    
    
    3,320Buildings
    
    
    25,206
    
    
    
    25,436
    
    
    
    25,390Machinery and equipment
    
    
    120,072
    
    
    
    120,031
    
    
    
    119,311148,598
    
    
    
    148,787
    
    
    
    148,021Less allowances for depreciation and amortization
    
    
    96,085
    
    
    
    95,211
    
    
    
    96,254Total Net Property, Plant and Equipment
    
    
    52,513
    
    
    
    53,576
    
    
    
    51,767GOODWILL
    
    
    21,402
    
    
    
    21,402
    
    
    
    21,441PENSION ASSETS
    
    
    14,091
    
    
    
    13,605
    
    
    
    34,921DEFERRED TAX ASSETS
    
    
    4,437
    
    
    
    4,437
    
    
    
    2,598OTHER ASSETS
    
    
    3,992
    
    
    
    4,265
    
    
    
    3,750TOTAL ASSETS
    
    $
    242,381
    
    
    $
    215,610
    
    
    $
    270,863LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    32,127
    
    
    $
    19,885
    
    
    $
    36,359Accrued compensation and benefits
    
    
    9,345
    
    
    
    13,779
    
    
    
    12,681Customer volume & promotional accrued expenses
    
    
    5,446
    
    
    
    5,463
    
    
    
    4,994Other accrued expenses
    
    
    9,718
    
    
    
    5,999
    
    
    
    10,756Taxes
    
    
    2,650
    
    
    
    3,791
    
    
    
    5,488Current maturities of long-term debt
    
    
    15,104
    
    
    
    13,829
    
    
    
    5,775TOTAL CURRENT LIABILITIES
    
    
    74,390
    
    
    
    62,746
    
    
    
    76,053LONG-TERM DEBT
    
    
    6,870
    
    
    
    7,131
    
    
    
    50,816POST-RETIREMENT BENEFITS AND OTHER
LONG-TERM LIABILITIES
    
    
    17,464
    
    
    
    17,481
    
    
    
    22,293SHAREHOLDERS EQUITYCommon shares
    
    
    1,585
    
    
    
    1,579
    
    
    
    1,558Other capital
    
    
    102,791
    
    
    
    101,230
    
    
    
    98,129Retained earnings
    
    
    53,061
    
    
    
    39,258
    
    
    
    23,324Accumulated other comprehensive income (loss)
    
    
    (13,780
    )
    
    
    (13,815
    )
    
    
    (1,310
    )Total Shareholders Equity
    
    
    143,657
    
    
    
    128,252
    
    
    
    121,701TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    242,381
    
    
    $
    215,610
    
    
    $
    270,863
  3




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##### Table of Contents



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
 First Half Ended(Dollars in thousands)
    
    2007
    
    
    2006OPERATING ACTIVITIESNet income
    
    $
    13,803
    
    
    $
    23,209Adjustments to reconcile net income to cash provided (used) by
operating activities:Depreciation and amortization
    
    
    4,620
    
    
    
    4,491Stock based compensation
    
    
    1,386
    
    
    
    1,816Deferred income taxes
    
    
    1,813
    
    
    
    5,103Changes in operating assets and liabilities:Accounts receivable
    
    
    (21,135
    )
    
    
    (20,205
    )Inventories
    
    
    (8,192
    )
    
    
    (9,599
    )Prepaid expenses and other
    
    
    (1,126
    )
    
    
    (446
    )Accounts payable
    
    
    12,242
    
    
    
    5,416Accrued expenses and other current liabilities
    
    
    (1,873
    )
    
    
    (3,179
    )Pension plan contributions
    
    
    (155
    )
    
    
    (650
    )Other long-term items
    
    
    (147
    )
    
    
    (206
    )CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    1,236
    
    
    
    5,750INVESTING ACTIVITIESNet additions to property, plant and equipment
    
    
    (3,666
    )
    
    
    (7,319
    )CASH USED IN INVESTING ACTIVITIES
    
    
    (3,666
    )
    
    
    (7,319
    )FINANCING ACTIVITIESNet borrowings (payments) under secured credit agreement
    
    
    1,400
    
    
    
    (4,000
    )Payments on other long-term borrowings
    
    
    (170
    )
    
    
    (210
    )Purchase and retirement of treasury stock (15,617 and 24,782 shares in 2007
and 2006, respectively)
    
    
    (459
    )
    
    
    (421
    )Exercise of stock options (40,000 and 489,025 shares issued in 2007 and 2006,
repectively)
    
    
    314
    
    
    
    2,376Tax benefit from exercise of stock options
    
    
    326
    
    
    
    4,276CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    1,411
    
    
    
    2,021(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,019
    )
    
    
    452Cash and cash equivalents at beginning of year
    
    
    3,324
    
    
    
    1,210CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    2,305
    
    
    $
    1,662
  4




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THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 NOTE A  BASIS OF PRESENTATION
  NOTE B  INCOME TAXES
     NOTE C  BUSINESS SEGMENTS
  Carlon  Industrial, Residential, Commercial, Telecommunications and Utility Construction:
 Lamson Home Products  Consumer:
 PVC Pipe:
 5




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##### Table of Contents



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE C  BUSINESS SEGMENTS  (Continued)
 Second Quarter Ended
    
    
    First Half Ended(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net SalesCarlon
    
    $
    64,955
    
    
    $
    77,295
    
    
    $
    120,168
    
    
    $
    141,351Lamson Home Products
    
    
    36,425
    
    
    
    26,893
    
    
    
    67,365
    
    
    
    53,872PVC Pipe
    
    
    36,732
    
    
    
    58,125
    
    
    
    66,586
    
    
    
    102,491$
    138,112
    
    
    $
    162,313
    
    
    $
    254,119
    
    
    $
    297,714Operating Income (Loss)Carlon
    
    $
    9,994
    
    
    $
    13,793
    
    
    $
    16,831
    
    
    $
    21,483Lamson Home Products
    
    
    8,607
    
    
    
    4,100
    
    
    
    15,132
    
    
    
    6,668PVC Pipe
    
    
    (363
    )
    
    
    9,564
    
    
    
    (3,353
    )
    
    
    18,516Corporate Office
    
    
    (2,762
    )
    
    
    (3,907
    )
    
    
    (5,264
    )
    
    
    (7,172
    )$
    15,476
    
    
    $
    23,550
    
    
    $
    23,346
    
    
    $
    39,495Depreciation and AmortizationCarlon
    
    $
    796
    
    
    $
    852
    
    
    $
    1,601
    
    
    $
    1,699Lamson Home Products
    
    
    485
    
    
    
    430
    
    
    
    955
    
    
    
    858PVC Pipe
    
    
    1,019
    
    
    
    964
    
    
    
    2,064
    
    
    
    1,934$
    2,300
    
    
    $
    2,246
    
    
    $
    4,620
    
    
    $
    4,491
  June 30,
    
    
    December 30,
    
    
    July 1,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2006Identifiable AssetsCarlon
    
    $
    93,473
    
    
    $
    81,833
    
    
    $
    100,094Lamson Home Products
    
    
    50,487
    
    
    
    44,019
    
    
    
    47,774PVC Pipe
    
    
    63,063
    
    
    
    52,911
    
    
    
    67,893Corporate Office (includes deferred tax and
pension assets)
    
    
    35,358
    
    
    
    36,847
    
    
    
    55,102$
    242,381
    
    
    $
    215,610
    
    
    $
    270,863
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##### Table of Contents



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE D  COMPREHENSIVE INCOME
  Second Quarter Ended
    
    
    First Half Ended(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    9,251
    
    
    $
    13,989
    
    
    $
    13,803
    
    
    $
    23,209Foreign currency translation adjustments
    
    
    97
    
    
    
    40
    
    
    
    35
    
    
    
    70Comprehensive income
    
    $
    9,348
    
    
    $
    14,029
    
    
    $
    13,838
    
    
    $
    23,279
  June 30,
    
    
    December 30,
    
    
    July 1,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2006Foreign currency translation adjustments
    
    $
    (325
    )
    
    $
    (360
    )
    
    $
    (214
    )Pension and Other Benefits
    
    
    (13,455
    )
    
    
    (13,455
    )
    
    
    (1,096
    )Accumulated other comprehensive income (loss)
    
    $
    (13,780
    )
    
    $
    (13,815
    )
    
    $
    (1,310
    )
 7




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##### Table of Contents



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE E  EARNINGS PER SHARE CALCULATION
  (Dollars and shares in thousands, except per share amounts)
 Second Quarter Ended
    
    
    First Half Ended2007
    
    
    2006
    
    
    2007
    
    
    2006Basic Earnings-Per-Share ComputationNet Income
    
    $
    9,251
    
    
    $
    13,989
    
    
    $
    13,803
    
    
    $
    23,209Average Common Shares Outstanding
    
    
    15,734
    
    
    
    15,519
    
    
    
    15,729
    
    
    
    15,419Basic Earnings Per Share
    
    $
    0.59
    
    
    $
    0.90
    
    
    $
    0.88
    
    
    $
    1.51Diluted Earnings-Per-Share ComputationNet Income
    
    $
    9,251
    
    
    $
    13,989
    
    
    $
    13,803
    
    
    $
    23,209Basic Shares Outstanding
    
    
    15,734
    
    
    
    15,519
    
    
    
    15,729
    
    
    
    15,419Stock Based Awards Calculated Under
the Treasury Stock Method
    
    
    519
    
    
    
    587
    
    
    
    518
    
    
    
    635Total Shares
    
    
    16,253
    
    
    
    16,106
    
    
    
    16,247
    
    
    
    16,054Diluted Earnings Per Share
    
    $
    0.57
    
    
    $
    0.87
    
    
    $
    0.85
    
    
    $
    1.45
 8




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##### Table of Contents



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE F  PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS
   Second Quarter Ended
    
    First Half EndedPension Benefits
    
    
    Other Benefits
    
    
    Pension Benefits
    
    
    Other Benefits(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    391
    
    
    $
    349
    
    
    $
    
    
    
    $
    
    
    
    $
    782
    
    
    $
    698
    
    
    $
    
    
    
    $
    Interest cost
    
    
    1,387
    
    
    
    1,306
    
    
    
    111
    
    
    
    183
    
    
    
    2,775
    
    
    
    2,612
    
    
    
    222
    
    
    
    366Expected return on assets
    
    
    (1,821
    )
    
    
    (1,774
    )
    
    
    
    
    
    
    
    
    
    
    (3,642
    )
    
    
    (3,548
    )
    
    
    
    
    
    
    Net amortization and deferral
    
    
    236
    
    
    
    325
    
    
    
    (210
    )
    
    
    (74
    )
    
    
    471
    
    
    
    649
    
    
    
    (420
    )
    
    
    (148
    )Defined contribution plans
    
    
    332
    
    
    
    302
    
    
    
    
    
    
    
    
    
    
    
    662
    
    
    
    590
    
    
    
    
    
    
    
    $
    525
    
    
    $
    508
    
    
    $
    (99
    )
    
    $
    109
    
    
    $
    1,048
    
    
    $
    1,001
    
    
    $
    (198
    )
    
    $
    218
 NOTE G  ASSERTED AND UNASSERTED CLAIMS
  NOTE H  STOCK COMPENSATION PLANS
  9




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##### Table of Contents



ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Executive Overview
     10




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##### Table of Contents



2007 Compared with 2006
 Results of Continuing Operations
  Second Quarter Ended
    
    
    First Half Ended(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Net Sales
    
    $
    138,112
    
    
    
    100.0
    %
    
    $
    162,313
    
    
    
    100.0
    %
    
    $
    254,119
    
    
    
    100.0
    %
    
    $
    297,714
    
    
    
    100.0
    %Cost of products sold
    
    
    108,128
    
    
    
    78.3
    %
    
    
    122,241
    
    
    
    75.3
    %
    
    
    202,306
    
    
    
    79.6
    %
    
    
    226,659
    
    
    
    76.1
    %Gross profit
    
    
    29,984
    
    
    
    21.7
    %
    
    
    40,072
    
    
    
    24.7
    %
    
    
    51,813
    
    
    
    20.4
    %
    
    
    71,055
    
    
    
    23.9
    %Total operating expenses
    
    
    14,508
    
    
    
    10.5
    %
    
    
    16,522
    
    
    
    10.2
    %
    
    
    28,467
    
    
    
    11.2
    %
    
    
    31,560
    
    
    
    10.6
    %Operating income
    
    
    15,476
    
    
    
    11.2
    %
    
    
    23,550
    
    
    
    14.5
    %
    
    
    23,346
    
    
    
    9.2
    %
    
    
    39,495
    
    
    
    13.3
    %Interest expense, net
    
    
    670
    
    
    
    0.5
    %
    
    
    1,131
    
    
    
    0.7
    %
    
    
    1,237
    
    
    
    0.5
    %
    
    
    2,248
    
    
    
    0.8
    %Income before income taxes
    
    
    14,806
    
    
    
    10.7
    %
    
    
    22,419
    
    
    
    13.8
    %
    
    
    22,109
    
    
    
    8.7
    %
    
    
    37,247
    
    
    
    12.5
    %Income tax provision
    
    
    5,555
    
    
    
    4.0
    %
    
    
    8,430
    
    
    
    5.2
    %
    
    
    8,306
    
    
    
    3.3
    %
    
    
    14,038
    
    
    
    4.7
    %Net Income
    
    $
    9,251
    
    
    
    6.7
    %
    
    $
    13,989
    
    
    
    8.6
    %
    
    $
    13,803
    
    
    
    5.4
    %
    
    $
    23,209
    
    
    
    7.8
    %
    11




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##### Table of Contents



Business Segments
 Carlon
    Lamson Home Products
   12




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##### Table of Contents



PVC Pipe
    Liquidity and Capital Resources
     13




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##### Table of Contents



Critical Accounting Estimates
  Outlook for 2007
      14




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##### Table of Contents



Item 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 Item 4  CONTROLS AND PROCEDURES
  
 PART II
 
 Item 1  LEGAL PROCEEDINGS
  15




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##### Table of Contents



Item 1A  RISK FACTORS
  
 Item 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 Item 6  EXHIBITS
  10.1
    
    Supplemental Retirement Agreement (Post-2004), dated May 10, 2007, by
and between the Company and James J. Abel (incorporated by reference
to Exhibit 10.1 to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 15, 2007).31.1
    
    Certification of Michael J. Merriman, Jr., 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 Michael J. Merriman, Jr., 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.
 16




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##### Table of Contents



SIGNATURES
  THE LAMSON & SESSIONS CO.
(Registrant)July 27, 2007
    By:
    /s/ James J. AbelJames J. AbelExecutive Vice President, Secretary,
Treasurer and Chief Financial Officer 17