##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 F O R M 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 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 1-313
 T H E    L A M S O N    &    S E S S I O N S    C O.
  Ohio
    
    34-0349210(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 25701 Science Park DriveCleveland, Ohio
    
    44122-7313(Address of principal executive offices)
    
    (Zip Code)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report.)
 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 6  EXHIBITSSIGNATURESEX-10.5EX-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)
 First Quarter Ended(Dollars in thousands, except per share data)
    
    2007
    
    
    2006NET SALES
    
    $
    116,007
    
    
    
    100.0
    %
    
    $
    135,401
    
    
    
    100.0
    %Cost of products sold
    
    
    94,178
    
    
    
    81.2
    %
    
    
    104,418
    
    
    
    77.1
    %GROSS PROFIT
    
    
    21,829
    
    
    
    18.8
    %
    
    
    30,983
    
    
    
    22.9
    %Selling and marketing expenses
    
    
    8,428
    
    
    
    7.3
    %
    
    
    8,747
    
    
    
    6.5
    %General and administrative expenses
    
    
    4,999
    
    
    
    4.3
    %
    
    
    5,706
    
    
    
    4.2
    %Research and development expenses
    
    
    532
    
    
    
    0.4
    %
    
    
    585
    
    
    
    0.4
    %Total operating expenses
    
    
    13,959
    
    
    
    12.0
    %
    
    
    15,038
    
    
    
    11.1
    %OPERATING INCOME
    
    
    7,870
    
    
    
    6.8
    %
    
    
    15,945
    
    
    
    11.8
    %Interest expense, net
    
    
    567
    
    
    
    0.5
    %
    
    
    1,117
    
    
    
    0.8
    %INCOME BEFORE INCOME TAXES
    
    
    7,303
    
    
    
    6.3
    %
    
    
    14,828
    
    
    
    11.0
    %Income tax provision
    
    
    2,751
    
    
    
    2.4
    %
    
    
    5,608
    
    
    
    4.2
    %NET INCOME
    
    $
    4,552
    
    
    
    3.9
    %
    
    $
    9,220
    
    
    
    6.8
    %Net earnings per share:Basic
    
    $
    0.29
    
    
    
    
    
    
    $
    0.60Diluted
    
    $
    0.28
    
    
    
    
    
    
    $
    0.58
 2




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##### Table of Contents



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS (Unaudited)
 First Quarter
    
    
    
    
    
    
    First QuarterEnded
    
    
    Year Ended
    
    
    Ended(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2006ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    1,464
    
    
    $
    3,324
    
    
    $
    2,438Accounts receivable, net of allowances of
$1,975, $1,625 and $2,248, respectively
    
    
    66,484
    
    
    
    55,111
    
    
    
    73,616Inventories, netRaw materials
    
    
    4,243
    
    
    
    4,846
    
    
    
    5,873Work-in-process
    
    
    4,792
    
    
    
    5,198
    
    
    
    6,057Finished goods
    
    
    43,701
    
    
    
    38,447
    
    
    
    43,15952,736
    
    
    
    48,491
    
    
    
    55,089Deferred tax assets
    
    
    8,499
    
    
    
    9,054
    
    
    
    10,928Prepaid expenses and other
    
    
    2,304
    
    
    
    2,345
    
    
    
    3,789TOTAL CURRENT ASSETS
    
    
    131,487
    
    
    
    118,325
    
    
    
    145,860PROPERTY, PLANT AND EQUIPMENTLand
    
    
    3,320
    
    
    
    3,320
    
    
    
    3,320Buildings
    
    
    24,829
    
    
    
    25,436
    
    
    
    25,552Machinery and equipment
    
    
    120,333
    
    
    
    120,031
    
    
    
    120,822148,482
    
    
    
    148,787
    
    
    
    149,694Less allowances for depreciation and amortization
    
    
    95,498
    
    
    
    95,211
    
    
    
    99,027Total Net Property, Plant and Equipment
    
    
    52,984
    
    
    
    53,576
    
    
    
    50,667GOODWILL
    
    
    21,402
    
    
    
    21,402
    
    
    
    21,441PENSION ASSETS
    
    
    13,848
    
    
    
    13,605
    
    
    
    34,696DEFERRED TAX ASSETS
    
    
    4,437
    
    
    
    4,437
    
    
    
    684OTHER ASSETS
    
    
    4,133
    
    
    
    4,265
    
    
    
    3,796TOTAL ASSETS
    
    $
    228,291
    
    
    $
    215,610
    
    
    $
    257,144LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    27,798
    
    
    $
    19,885
    
    
    $
    35,756Accrued compensation and benefits
    
    
    8,036
    
    
    
    13,779
    
    
    
    10,395Customer volume & promotional accrued expenses
    
    
    3,694
    
    
    
    5,463
    
    
    
    5,812Other accrued expenses
    
    
    8,578
    
    
    
    5,999
    
    
    
    8,449Taxes
    
    
    5,495
    
    
    
    3,791
    
    
    
    3,588Current maturities of long-term debt
    
    
    16,305
    
    
    
    13,829
    
    
    
    5,775TOTAL CURRENT LIABILITIES
    
    
    69,906
    
    
    
    62,746
    
    
    
    69,775LONG-TERM DEBT
    
    
    7,005
    
    
    
    7,131
    
    
    
    60,140POST-RETIREMENT BENEFITS AND OTHER
LONG-TERM LIABILITIES
    
    
    17,654
    
    
    
    17,481
    
    
    
    22,510SHAREHOLDERS EQUITYCommon shares
    
    
    1,584
    
    
    
    1,579
    
    
    
    1,538Other capital
    
    
    102,209
    
    
    
    101,230
    
    
    
    95,196Retained earnings
    
    
    43,810
    
    
    
    39,258
    
    
    
    9,335Accumulated other comprehensive income (loss)
    
    
    (13,877
    )
    
    
    (13,815
    )
    
    
    (1,350
    )Total Shareholders Equity
    
    
    133,726
    
    
    
    128,252
    
    
    
    104,719TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    228,291
    
    
    $
    215,610
    
    
    $
    257,144
  3




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THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
 First Quarter Ended(Dollars in thousands)
    
    2007
    
    
    2006OPERATING ACTIVITIESNet income
    
    $
    4,552
    
    
    $
    9,220Adjustments to reconcile net income to cash used in
operating activities:Depreciation and Amortization
    
    
    2,320
    
    
    
    2,245Stock based compensation
    
    
    831
    
    
    
    1,505Deferred income taxes
    
    
    555
    
    
    
    2,468Net change in working capital accounts:Accounts receivable
    
    
    (11,373
    )
    
    
    (5,109
    )Inventories
    
    
    (4,245
    )
    
    
    (11,102
    )Prepaid expenses and other
    
    
    41
    
    
    
    (102
    )Accounts payable
    
    
    7,913
    
    
    
    4,813Accrued expenses and other current liabilities
    
    
    (3,229
    )
    
    
    (6,940
    )Pension plan contributions
    
    
    (74
    )
    
    
    (480
    )Other long-term items
    
    
    71
    
    
    
    15CASH USED IN OPERATING ACTIVITIES
    
    
    (2,638
    )
    
    
    (3,467
    )INVESTING ACTIVITIESNet additions to property, plant and equipment
    
    
    (1,807
    )
    
    
    (4,008
    )CASH USED IN INVESTING ACTIVITIES
    
    
    (1,807
    )
    
    
    (4,008
    )FINANCING ACTIVITIESNet borrowings under secured credit agreement
    
    
    2,500
    
    
    
    5,200Payments on other long-term borrowings
    
    
    (68
    )
    
    
    (86
    )Purchase and retirement of treasury stock (15,617 and 24,782 shares
in 2007 and 2006, respectively)
    
    
    (459
    )
    
    
    (421
    )Exercise of stock options (38,000 and 306,000 shares issued
in 2007 and 2006, respectively)
    
    
    303
    
    
    
    1,452Tax benefit from exercise of stock options
    
    
    309
    
    
    
    2,558CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    2,585
    
    
    
    8,703(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,860
    )
    
    
    1,228Cash and cash equivalents at beginning of year
    
    
    3,324
    
    
    
    1,210CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    1,464
    
    
    $
    2,438
  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
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE C  BUSINESS SEGMENTS  (Continued)
 First Quarter Ended(Dollars in thousands)
    
    2007
    
    
    2006Net SalesCarlon
    
    $
    55,213
    
    
    $
    64,056Lamson Home Products
    
    
    30,940
    
    
    
    26,979PVC Pipe
    
    
    29,854
    
    
    
    44,366$
    116,007
    
    
    $
    135,401Operating Income (Loss)Carlon
    
    $
    6,837
    
    
    $
    7,690Lamson Home Products
    
    
    6,525
    
    
    
    2,568PVC Pipe
    
    
    (2,990
    )
    
    
    8,952Corporate Office
    
    
    (2,502
    )
    
    
    (3,265
    )$
    7,870
    
    
    $
    15,945Depreciation and AmortizationCarlon
    
    $
    805
    
    
    $
    847Lamson Home Products
    
    
    470
    
    
    
    428PVC Pipe
    
    
    1,045
    
    
    
    970$
    2,320
    
    
    $
    2,245
  March 31,
    
    
    December 30,
    
    
    April 1,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2006Identifiable AssetsCarlon
    
    $
    88,593
    
    
    $
    81,833
    
    
    $
    92,969Lamson Home Products
    
    
    48,471
    
    
    
    44,019
    
    
    
    42,069PVC Pipe
    
    
    56,723
    
    
    
    52,911
    
    
    
    66,065Corporate
Office (includes deferred tax and pension assets)
    
    
    34,504
    
    
    
    36,847
    
    
    
    56,041$
    228,291
    
    
    $
    215,610
    
    
    $
    257,144
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##### Table of Contents



THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE D  COMPREHENSIVE INCOME
  First Quarter Ended(Dollars in thousands)
    
    2007
    
    
    2006Net income
    
    $
    4,552
    
    
    $
    9,220Foreign currency translation adjustments
    
    
    (62
    )
    
    
    30Comprehensive income
    
    $
    4,490
    
    
    $
    9,250
  March 31,
    
    
    December 30,
    
    
    April 1,(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2006Foreign currency translation adjustments
    
    $
    (422
    )
    
    $
    (360
    )
    
    $
    (254
    )Pension and Other Benefits
    
    
    (13,455
    )
    
    
    (13,455
    )
    
    
    (1,096
    )Accumulated other comprehensive income (loss)
    
    $
    (13,877
    )
    
    $
    (13,815
    )
    
    $
    (1,350
    )
 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
  First Quarter Ended(Dollars and shares in thousands, except per share amounts)
    
    2007
    
    
    2006Basic Earnings-Per-Share ComputationNet Income
    
    $
    4,552
    
    
    $
    9,220Average Common Shares Outstanding
    
    
    15,725
    
    
    
    15,318Basic Earnings Per Share
    
    $
    0.29
    
    
    $
    0.60Diluted Earnings-Per-Share ComputationNet Income
    
    $
    4,552
    
    
    $
    9,220Basic Shares Outstanding
    
    
    15,725
    
    
    
    15,318Stock Based Awards Calculated Under
the Treasury Stock Method
    
    
    517
    
    
    
    683Total Shares
    
    
    16,242
    
    
    
    16,001Diluted Earnings Per Share
    
    $
    0.28
    
    
    $
    0.58
 8




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THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE F  PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS
   First Quarter EndedPension Benefits
    
    
    Other Benefits(Dollars in thousands)
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Service cost
    
    $
    391
    
    
    $
    349
    
    
    $
    
    
    
    $
    Interest cost
    
    
    1,388
    
    
    
    1,306
    
    
    
    111
    
    
    
    183Expected return on assets
    
    
    (1,821
    )
    
    
    (1,774
    )
    
    
    
    
    
    
    Net amortization and deferral
    
    
    235
    
    
    
    324
    
    
    
    (210
    )
    
    
    (74
    )Defined contribution plans
    
    
    330
    
    
    
    288
    
    
    
    
    
    
    
    $
    523
    
    
    $
    493
    
    
    $
    (99
    )
    
    $
    109
 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 Operations
  First Quarter Ended(Dollars in thousands)
    
    2007
    
    
    2006Net Sales
    
    $
    116,007
    
    
    
    100.0
    %
    
    $
    135,401
    
    
    
    100.0
    %Cost of products sold
    
    
    94,178
    
    
    
    81.2
    %
    
    
    104,418
    
    
    
    77.1
    %Gross profit
    
    
    21,829
    
    
    
    18.8
    %
    
    
    30,983
    
    
    
    22.9
    %Total operating expenses
    
    
    13,959
    
    
    
    12.0
    %
    
    
    15,038
    
    
    
    11.1
    %Operating income
    
    
    7,870
    
    
    
    6.8
    %
    
    
    15,945
    
    
    
    11.8
    %Interest expense, net
    
    
    567
    
    
    
    0.5
    %
    
    
    1,117
    
    
    
    0.8
    %Income before income taxes
    
    
    7,303
    
    
    
    6.3
    %
    
    
    14,828
    
    
    
    11.0
    %Income tax provision
    
    
    2,751
    
    
    
    2.4
    %
    
    
    5,608
    
    
    
    4.2
    %Net Income
    
    $
    4,552
    
    
    
    3.9
    %
    
    $
    9,220
    
    
    
    6.8
    %
     11




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##### Table of Contents



Business Segments
 Carlon
    Lamson Home Products
    PVC Pipe
   12




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Liquidity and Capital Resources
        Critical Accounting Estimates
  13




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Outlook for 2007
         14




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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
  15




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##### Table of Contents



Item 6  EXHIBITS
  10.1
    
    Amended and Restated Executive Change-in-Control Agreement, dated
March 16, 2007, by and between the Company and Michael J. Merriman,
Jr. (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 March 22, 2007).10.2
    
    Amended and Restated Executive Supplemental Retirement Agreement,
dated March 16, 2007, by and between the Company and Michael J.
Merriman, Jr. (incorporated by reference to Exhibit 10.2 to the
Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 22, 2007).10.3
    
    Agreement, dated March 16, 2007, by and between the Company and John
B. Schulze (incorporated by reference to Exhibit 10.3 to the
Companys Current Report on Form 8-K filed with the Securities and
Exchange Commission on March 22, 2007).10.4
    
    Agreement, dated March 16, 2007, by and between the Company and John
B. Schulze (regarding the Amended and Restated Supplemental
Retirement Agreement, as amended, between the Company and John B.
Schulze) (incorporated by reference to Exhibit 10.4 to the Companys
Current Report on Form 8-K filed with the Securities and Exchange
Commission on March 22, 2007).10.5
    
    The Lamson & Sessions Co. Deferred Compensation Plan for Non-Employee
Directors (Post-2004).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.
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SIGNATURES
  THE LAMSON & SESSIONS CO.(Registrant)May 1, 2007
    
    By:
    
    /s/ James J. Abel

James J. AbelExecutive Vice President, Secretary,Treasurer and Chief Financial Officer
 17