##### 



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 April 1, 2006
 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 1-313
 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)
  
  
  þ o
   o þ o
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS:




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##### 



PART I
 Item 1  Financial Statements
 CONSOLIDATED INCOME STATEMENTS (Unaudited)  The Lamson & Sessions Co. and Subsidiaries
 First Quarter Ended(Dollars in thousands, except per share data)
    
    2006
    
    
    2005NET SALES
    
    $
    135,401
    
    
    
    100.0
    %
    
    $
    98,792
    
    
    
    100.0
    %Cost of products sold
    
    
    104,418
    
    
    
    77.1
    %
    
    
    81,815
    
    
    
    82.8
    %GROSS PROFIT
    
    
    30,983
    
    
    
    22.9
    %
    
    
    16,977
    
    
    
    17.2
    %Selling and marketing expenses
    
    
    8,747
    
    
    
    6.5
    %
    
    
    7,074
    
    
    
    7.2
    %General and administrative expenses
    
    
    5,706
    
    
    
    4.2
    %
    
    
    3,812
    
    
    
    3.9
    %Research and development expenses
    
    
    585
    
    
    
    0.4
    %
    
    
    476
    
    
    
    0.5
    %Total operating expenses
    
    
    15,038
    
    
    
    11.1
    %
    
    
    11,362
    
    
    
    11.5
    %OPERATING INCOME
    
    
    15,945
    
    
    
    11.8
    %
    
    
    5,615
    
    
    
    5.7
    %Interest expense, net
    
    
    1,117
    
    
    
    0.8
    %
    
    
    2,002
    
    
    
    2.0
    %INCOME BEFORE INCOME TAXES
    
    
    14,828
    
    
    
    11.0
    %
    
    
    3,613
    
    
    
    3.7
    %Income tax provision
    
    
    5,608
    
    
    
    4.2
    %
    
    
    1,409
    
    
    
    1.4
    %NET INCOME
    
    $
    9,220
    
    
    
    6.8
    %
    
    $
    2,204
    
    
    
    2.2
    %Net earnings per share:Basic
    
    $
    0.60
    
    
    
    
    
    
    $
    0.16Diluted
    
    $
    0.58
    
    
    
    
    
    
    $
    0.15
  2




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##### 



CONSOLIDATED BALANCE SHEETS (Unaudited)  The Lamson & Sessions Co. and Subsidiaries
 (Dollars in thousands)
    
    First Quarter
    
    
    
    
    
    
    First QuarterEnded
    
    
    Year Ended
    
    
    Ended2006
    
    
    2005
    
    
    2005ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    2,438
    
    
    $
    1,210
    
    
    $
    743Accounts receivable, net of allowances of
$2,248, $1,827 and $1,730, respectively
    
    
    73,616
    
    
    
    68,507
    
    
    
    53,020Inventories, net
Raw materials
    
    
    5,873
    
    
    
    5,721
    
    
    
    4,185Work-in-process
    
    
    6,057
    
    
    
    6,221
    
    
    
    5,624Finished goods
    
    
    43,159
    
    
    
    32,045
    
    
    
    34,92955,089
    
    
    
    43,987
    
    
    
    44,738Deferred tax assets
    
    
    10,928
    
    
    
    11,806
    
    
    
    8,171Prepaid expenses and other
    
    
    3,789
    
    
    
    3,687
    
    
    
    4,557TOTAL CURRENT ASSETS
    
    
    145,860
    
    
    
    129,197
    
    
    
    111,229PROPERTY, PLANT AND EQUIPMENTLand
    
    
    3,320
    
    
    
    3,320
    
    
    
    3,320Buildings
    
    
    25,552
    
    
    
    25,533
    
    
    
    25,182Machinery and equipment
    
    
    120,822
    
    
    
    128,280
    
    
    
    121,592149,694
    
    
    
    157,133
    
    
    
    150,094Less allowances for depreciation and amortization
    
    
    99,027
    
    
    
    108,300
    
    
    
    102,259Total Net Property, Plant and Equipment
    
    
    50,667
    
    
    
    48,833
    
    
    
    47,835GOODWILL
    
    
    21,441
    
    
    
    21,441
    
    
    
    21,480PENSION ASSETS
    
    
    34,696
    
    
    
    34,369
    
    
    
    30,693DEFERRED TAX ASSETS
    
    
    684
    
    
    
    2,274
    
    
    
    13,223OTHER ASSETS
    
    
    3,796
    
    
    
    3,893
    
    
    
    5,047TOTAL ASSETS
    
    $
    257,144
    
    
    $
    240,007
    
    
    $
    229,507LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    35,756
    
    
    $
    30,943
    
    
    $
    31,598Accrued compensation and benefits
    
    
    10,395
    
    
    
    15,327
    
    
    
    9,734Customer volume & promotional accrued expenses
    
    
    5,812
    
    
    
    7,719
    
    
    
    3,704Other accrued expenses
    
    
    8,449
    
    
    
    7,787
    
    
    
    7,527Taxes
    
    
    3,588
    
    
    
    4,427
    
    
    
    4,252Secured credit agreement  current
    
    
    5,000
    
    
    
    5,000
    
    
    
    80,795Current maturities of long-term debt
    
    
    775
    
    
    
    775
    
    
    
    875TOTAL CURRENT LIABILITIES
    
    
    69,775
    
    
    
    71,978
    
    
    
    138,485LONG-TERM DEBT
    
    
    60,140
    
    
    
    55,026
    
    
    
    11,682POST-RETIREMENT BENEFITS AND OTHERLONG-TERM LIABILITIES
    
    
    22,510
    
    
    
    22,704
    
    
    
    30,322SHAREHOLDERS EQUITYCommon shares
    
    
    1,538
    
    
    
    1,508
    
    
    
    1,406Other capital
    
    
    95,196
    
    
    
    90,056
    
    
    
    77,473Retained earnings (deficit)
    
    
    9,335
    
    
    
    115
    
    
    
    (25,076
    )Accumulated other comprehensive income (loss)
    
    
    (1,350
    )
    
    
    (1,380
    )
    
    
    (4,785
    )Total Shareholders Equity
    
    
    104,719
    
    
    
    90,299
    
    
    
    49,018TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    257,144
    
    
    $
    240,007
    
    
    $
    229,507
  3




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##### 



CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
The Lamson & Sessions Co. and Subsidiaries
 (Dollars in thousands)
 First Quarter Ended2006
    
    
    2005OPERATING ACTIVITIESNet income
    
    $
    9,220
    
    
    $
    2,204Adjustments to reconcile net income to cash used in
operating activities:Depreciation
    
    
    2,174
    
    
    
    2,270Amortization
    
    
    71
    
    
    
    403Stock based compensation
    
    
    1,505
    
    
    
    Deferred income taxes
    
    
    2,468
    
    
    
    723Net change in working capital accounts:Accounts receivable
    
    
    (5,109
    )
    
    
    (4,629
    )Inventories
    
    
    (11,102
    )
    
    
    (7,878
    )Prepaid expenses and other
    
    
    (102
    )
    
    
    571Accounts payable
    
    
    4,813
    
    
    
    7,385Accrued expenses and other current liabilities
    
    
    (6,940
    )
    
    
    (5,781
    )Tax benefit from exercise of stock options
    
    
    
    
    
    
    235Pension plan contributions
    
    
    (480
    )
    
    
    (315
    )Other long-term items
    
    
    15
    
    
    
    406CASH USED IN OPERATING ACTIVITIES
    
    
    (3,467
    )
    
    
    (4,406
    )INVESTING ACTIVITIESNet additions to property, plant and equipment
    
    
    (4,008
    )
    
    
    (2,144
    )Acquisitions and related items
    
    
    
    
    
    
    (62
    )CASH USED BY INVESTING ACTIVITIES
    
    
    (4,008
    )
    
    
    (2,206
    )FINANCING ACTIVITIESNet borrowings under secured credit agreement
    
    
    5,200
    
    
    
    5,795Payments on other long-term borrowings
    
    
    (86
    )
    
    
    (194
    )Purchase and retirement of treasury stock (24,782 shares)
    
    
    (421
    )
    
    
    Exercise of stock options (306,000 and 168,750 shares issued
in 2006 and 2005, respectively)
    
    
    1,452
    
    
    
    1,071Tax benefit from exercise of stock options
    
    
    2,558
    
    
    
    CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    8,703
    
    
    
    6,672INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    1,228
    
    
    
    60Cash and cash equivalents at beginning of year
    
    
    1,210
    
    
    
    683CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    2,438
    
    
    $
    743
  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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##### 



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 Note C  Business Segments-continued
 (Dollars in thousands)
 First Quarter Ended2006
    
    
    2005Net SalesCarlon
    
    $
    64,056
    
    
    $
    47,203Lamson Home Products
    
    
    26,979
    
    
    
    23,971PVC Pipe
    
    
    44,366
    
    
    
    27,618$
    135,401
    
    
    $
    98,792Operating Income (Loss)Carlon
    
    $
    7,690
    
    
    $
    3,624Lamson Home Products
    
    
    2,568
    
    
    
    3,543PVC Pipe
    
    
    8,952
    
    
    
    13Corporate Office
    
    
    (3,265
    )
    
    
    (1,565
    )$
    15,945
    
    
    $
    5,615Depreciation and AmortizationCarlon
    
    $
    847
    
    
    $
    1,269Lamson Home Products
    
    
    428
    
    
    
    462PVC Pipe
    
    
    970
    
    
    
    942$
    2,245
    
    
    $
    2,673
  (Dollars in thousands)
 April 1,
    
    
    December 31,
    
    
    April 2,2006
    
    
    2005
    
    
    2005Identifiable AssetsCarlon
    
    $
    92,969
    
    
    $
    86,858
    
    
    $
    81,897Lamson Home Products
    
    
    42,069
    
    
    
    38,286
    
    
    
    35,217PVC Pipe
    
    
    66,065
    
    
    
    57,985
    
    
    
    51,177Corporate Office (includes deferred tax and
pension assets)
    
    
    56,041
    
    
    
    56,878
    
    
    
    61,216$
    257,144
    
    
    $
    240,007
    
    
    $
    229,507
 6




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##### 



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 Note D  Comprehensive Income
  (Dollars in thousands)
 First Quarter Ended2006
    
    
    2005Net income
    
    $
    9,220
    
    
    $
    2,204Foreign currency translation adjustments
    
    
    30
    
    
    
    (11
    )Interest rate swaps, net of tax
    
    
    
    
    
    
    89Comprehensive income
    
    $
    9,250
    
    
    $
    2,282
  (Dollars in thousands)
 April 1,
    
    
    December 31,
    
    
    April 2,2006
    
    
    2005
    
    
    2005Foreign currency translation adjustments
    
    $
    (254
    )
    
    $
    (284
    )
    
    $
    (382
    )Minimum pension liability adjustments,
net of tax
    
    
    (1,096
    )
    
    
    (1,096
    )
    
    
    (4,323
    )Interest rate swaps, net of tax
    
    
    
    
    
    
    
    
    
    
    (80
    )Accumulated other comprehensive income (loss)
    
    $
    (1,350
    )
    
    $
    (1,380
    )
    
    $
    (4,785
    )
 7




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##### 



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 Note E  Earnings Per Share Calculation
  (Dollars and shares in thousands, except per share amounts)
 First Quarter Ended2006
    
    
    2005Basic Earnings-Per-Share ComputationNet Income
    
    $
    9,220
    
    
    $
    2,204Average Common Shares Outstanding
    
    
    15,318
    
    
    
    13,999Basic Earnings Per Share
    
    $
    0.60
    
    
    $
    0.16Diluted Earnings-Per-Share ComputationNet Income
    
    $
    9,220
    
    
    $
    2,204Basic Shares Outstanding
    
    
    15,318
    
    
    
    13,999Stock Options Calculated Under
the Treasury Stock Method
    
    
    664
    
    
    
    558Total Shares
    
    
    15,982
    
    
    
    14,557Diluted Earnings Per Share
    
    $
    0.58
    
    
    $
    0.15
 Note F  Stock Compensation Plans
   8




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##### 



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 Note F  Stock Compensation Plans-continued
  First Quarter Ended(Dollars in thousands, except per share data)
    
    
    
    
    
    2005Net income
    
    As reported
    
    $
    2,204Total stock-based employee
compensation, net of tax
    
    
    
    
    
    
    (116
    )Net income
    
    Pro forma
    
    $
    2,088Basic earnings per share
    
    As reported
    
    $
    0.16Pro forma
    
    
    0.15Diluted earnings per share
    
    As reported
    
    $
    0.15Pro forma
    
    
    0.14
  2006
    
    2005Expected volatility
    
    
    60.0
    %
    
    
    55.5
    %Risk-free interest rates
    
    
    4.59
    %
    
    
    3.84
    %Average expected life
    
    6 years
    
    5 years
  9




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##### 



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 Note F  Stock Compensation Plans-continued
  WeightedWeighted
    
    
    Average
    
    
    AggregateNumber of
    
    
    Average
    
    
    Remaining
    
    
    Intrinsic(Shares and intrinsic value in thousands)
    
    Shares
    
    
    Exercise Price
    
    
    Contractual Term
    
    
    ValueOutstanding at December 31, 2005
    
    
    1,786
    
    
    $
    6.67Granted
    
    
    57
    
    
    
    28.90Exercised
    
    
    (306
    )
    
    
    4.75Forfeited
    
    
    
    
    
    
    Outstanding at April 1, 2006
    
    
    1,537
    
    
    $
    7.72
    
    
    
    6.35
    
    
    $
    30,909Exercisable at April 1, 2006
    
    
    981
    
    
    $
    6.11
    
    
    
    4.95
    
    
    $
    21,307
      10




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##### 



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 Note G  Pension and Other Post-Retirement Benefit Plans
   (Dollars in thousands)
 First Quarter EndedPension Benefits
    
    
    Other Benefits2006
    
    
    2005
    
    
    2006
    
    
    2005Service cost
    
    $
    349
    
    
    $
    374
    
    
    
    
    
    
    $
    2Interest cost
    
    
    1,306
    
    
    
    1,212
    
    
    $
    183
    
    
    
    310Expected return on assets
    
    
    (1,774
    )
    
    
    (1,563
    )
    
    
    
    
    
    
    Net amortization and deferral
    
    
    324
    
    
    
    479
    
    
    
    (74
    )
    
    
    (100
    )Defined contribution plans
    
    
    288
    
    
    
    231
    
    
    
    
    
    
    
    $
    493
    
    
    $
    733
    
    
    $
    109
    
    
    $
    212
 Note H  Long-Term Debt
   11




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##### 



Item 2  Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Executive Overview
      12




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##### 



2006 Compared with 2005
 Results of Operations
  (Dollars in thousands)
 First Quarter Ended2006
    
    
    2005Net Sales
    
    $
    135,401
    
    
    
    100.0
    %
    
    $
    98,792
    
    
    
    100.0
    %Cost of products sold
    
    
    104,418
    
    
    
    77.1
    %
    
    
    81,815
    
    
    
    82.8
    %Gross profit
    
    
    30,983
    
    
    
    22.9
    %
    
    
    16,977
    
    
    
    17.2
    %Total operating expenses
    
    
    15,038
    
    
    
    11.1
    %
    
    
    11,362
    
    
    
    11.5
    %Operating income
    
    
    15,945
    
    
    
    11.8
    %
    
    
    5,615
    
    
    
    5.7
    %Interest expense, net
    
    
    1,117
    
    
    
    0.8
    %
    
    
    2,002
    
    
    
    2.0
    %Income before income taxes
    
    
    14,828
    
    
    
    11.0
    %
    
    
    3,613
    
    
    
    3.7
    %Income tax provision
    
    
    5,608
    
    
    
    4.2
    %
    
    
    1,409
    
    
    
    1.5
    %Net Income
    
    $
    9,220
    
    
    
    6.8
    %
    
    $
    2,204
    
    
    
    2.2
    %
      13




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##### 



Business Segments
 Carlon
    Lamson Home Products
    PVC Pipe
  14




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##### 



Liquidity and Capital Resources
        15




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##### 



Critical Accounting Estimates
  Outlook for 2006
       16




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##### 



Item 3  Quantitative and Qualitative Disclosures about Market Risk
  Item 4  Controls and Procedures
  PART II
 Item 1  Legal Proceedings
  Item 1A  Risk Factors
  Item 6  Exhibits
  31.1
    
    Certification of John B. Schulze, Chief Executive Officer, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
 17




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##### 



31.2
    
    Certification of James J. Abel, Chief Financial Officer, pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of John B. Schulze, Chief Executive Officer, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of James J. Abel, Chief Financial Officer, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 18




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##### 



SIGNATURES
  THE LAMSON & SESSIONS CO.
          (Registrant)April 28, 2006
    By:
    /s/ James J. AbelJames J. AbelExecutive Vice President, Secretary,
Treasurer and Chief
               Financial Officer 19