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For the vast majority of its over 135 years in business, The Lamson & Sessions Co. was a top manufacturer of industrial fasteners--including nuts, bolts, screws, and some exclusive parts--for original equipment manufacturers. But after inexpensive imports infiltrated the company's traditional markets beginning in the late 1960s, Lamson & Sessions made an ill-advised diversification into the manufacture of railroad freight cars. The utter collapse of that market in the early 1980s nearly caused the company's demise. After a series of debt restructurings, divestments, and strategic acquisitions, the reformed company was primarily involved in the production of thermoplastic products. By the early 2000s, Lamson & Sessions was headed by its Carlon division, producer of electrical and telecommunications conduit systems, enclosures, electrical outlet boxes, and fittings. Among the customers served by Carlon are electrical contractors and distributors, original equipment manufacturers, electrical power utilities, and cable television and telecommunications firms. Serving the consumer market is Lamson Home Products, producer of electrical conduit and outlet boxes, lighting controls, and door chimes. The company's PVC Pipe unit produces polyvinyl chloride conduit for electrical, power, utility, and telecommunications markets, as well as large-diameter thermoplastic pipe used in wastewater management systems. Lamson & Sessions operates 11 manufacturing facilities in California, Florida, Georgia, Iowa, Missouri, Ohio, Oklahoma, Pennsylvania, and Texas. Only about 3 percent of the firm's revenues are generated outside the United States, with the bulk coming from Canada.
Concentrating on Fasteners for First 100 Years
Lamson & Sessions was founded in 1866 as a partnership among three men--brothers Thomas H. and Isaac P. Lamson, and Samuel W. Sessions. Their Connecticut business hand-forged nuts and bolts for carriages and wheels using a technique developed during the Civil War. Each of the partners contributed his own expertise to the company: Sam was the office manager, Isaac managed the seven employees on the shop floor, and Thomas was in charge of packing and shipping. The company's 30-product line generated $20,000 in annual sales by 1867.
Growing markets, little competition, and plentiful sources of raw materials, fuel, labor, and transportation drew the company to the banks of northeast Ohio's Cuyahoga River in 1869. The company moved to a larger plant in 1882 and was incorporated in Cleveland in 1883 as The Lamson & Sessions Co. By the turn of the century, the company had begun producing standardized fasteners for the automotive industry. Production for the U.S. effort in World War I drove sales over the $1 million mark in 1916 and past the $2 million level in 1918.
Under a plan devised by George S. Case, Jr., and Roy Smith in the 1920s, the company grew through acquisition and internal expansion to become a leading producer of industrial fasteners. Lamson & Sessions acquired Falls Rivet Company in 1921, merged with the Kirk-Latty Manufacturing Company five years later, and added Foster Nut & Bolt Company, Lake Erie Bolt & Nut Company, and American Bolt Company in 1929. A new plant was constructed in Birmingham, Alabama, during this period as well. These additions not only expanded Lamson & Sessions' geographic reach but also broadened its line of fasteners to include parts for the railroad and auto industries, among others. The company made an initial public stock offering of 20,000 shares and earned a listing on the Cleveland Stock Exchange in 1928. Having achieved a successful expansion, George Case, Jr., was elected president of Lamson & Sessions in 1929.
In spite of the stock market crash in 1929 and the ensuing Depression that gripped the economy, Lamson & Sessions boasted eight plants and $11 million in annual revenues by 1930. But as the economic crisis deepened, the company's cash flow dried up. A $750,000 Reconstruction Finance Corporation loan kept the company afloat in 1935. Following the company's emergence from the Great Depression, Case added chairman of the board to his title. He would serve in that capacity through the late 1960s, overseeing an eightfold increase in annual revenues, from $11 million in 1930 to $89 million in 1969.
World War II-driven demand helped fuel another upturn at Lamson & Sessions in the 1940s, and the company was able to resume its growth through acquisition in the 1950s. The purchase of Stoker Locknut and Machinery Corporation (Pennsylvania) in 1954 was followed by Lamson & Sessions' first foray outside the fastener industry with its 1955 acquisition of Kent Machine Company, a job machine shop. The firm constructed new plants in Chicago and Cleveland and consolidated several operations in those cities over the course of the next two years. Lamson & Sessions closed the decade with the 1959 acquisition of a majority interest in Industria de Parafasos Mapri, S.A., a Brazilian company that ranked as South America's preeminent producer of nuts and bolts. The corporation ventured across the Atlantic Ocean to acquire a controlling interest in a West German fastener maker, Fastenrath-Lamson & Sessions GmbH, in 1964.
Beginning of Diversification: Mid- to Late 1960s
The growing company undertook a more deliberate diversification in the mid- to late 1960s. In 1966, the firm acquired Angell Manufacturing Company (Kentucky), manufacturer of decorative metal trim and brand identification plates for appliances. Lamson & Sessions also established a Canadian subsidiary that year, in Toronto, to make and distribute all its products in that country. The purchase two years later of Standard Mirror Company (New York) added a leading producer of automotive mirrors to Lamson & Sessions' roster of businesses. Seeking a high-margin niche in the fastener industry, Lamson & Sessions acquired Valley Bolt Corporation, a California manufacturer of specialized fasteners for the aerospace and aircraft industries, in the mid-1960s. Lamson & Sessions bought Todeco, Inc., another California producer of bearings and other engineered machine components for the same field, and merged the two as the Valley-Todeco, Inc. subsidiary. The 1970 purchase of Expert, Inc. (Michigan) expanded machining operations to include manufacture of machinery for automated assembly systems.
Harold F. Nunn succeeded George Case as president and CEO in 1968. When Nunn was sidelined just two years later with an illness, the board selected George Grabner to lead Lamson & Sessions. Although the company sold its Brazilian fastener subsidiary to U.S. Steel in 1970, it bolstered its domestic fastener business with the acquisition of Zimmer Manufacturing Industries, Inc. (Michigan) and American Screw Products Company (Ohio) in 1973 and 1974, respectively. But when cheap imports began to infiltrate the industry in the 1960s and competition intensified in the 1970s, the firm's management began to question their dedication to the fastener industry.
Ill-Timed Venture into Railroad Freight Cars: Late 1970s
In the late 1970s, Lamson & Sessions began a new program of diversification that focused on transportation. Specifically, the company acquired Youngstown Steel Door Company, the leading manufacturer of railroad freight cars and components in the United States, in 1976, and added Itel Railcar, Inc. (subsequently renamed United-American Car Co.), another company in that field, in 1979. Lamson & Sessions merged with Midsco, Incorporated in 1979 as well. Midsco's lead company was Midland Steel Products Co., the country's preeminent producer of midsized truck frames.
The entry into railcar manufacture could not have been more poorly timed. Lamson's two primary businesses, industrial fasteners and railcars, were in swift and irreversible decline. Worse, a recession bruised the company's truck frame business. Lamson & Sessions suffered a $15.5 million loss that year.
Grabner brought in Russel B. Every, who had been chairman and president of Midsco, to be president of Lamson & Sessions in 1980. The two men struggled mightily to stop the company's downward spiral. From 1981 through 1985, they divested the fastener interests (the bulk of which was sold to Russell, Burdsall & Ward Corporation in April 1981 for $20 million), sold several losing divisions, and shut down foundry and die-casting operations. The divestments and layoffs slashed employment by 78 percent, from 6,000 to 1,300. The company also reduced its selling and administrative expenses by more than half, from $31 million in 1980 to $14 million by 1986, and cut its debt from $100 million to $52 million through belt-tightening measures. Nonetheless, Lamson & Sessions' losses continued to mount, while annual revenues dropped. Sales declined from $216 million in 1981 to $130 million in 1982, while losses increased from $9 million to $18.8 million during the same period. The company's net worth plummeted from nearly $88 million in 1979 to just $300,000 in 1983, when net losses peaked at $44 million. Investors balked after Lamson & Sessions eliminated its dividend, depreciating the stock from $19 in 1980 to $1.75 per share in 1983.
According to an April 1983 article in the Cleveland Plain Dealer, Grabner continued to express confidence in the doomed railcar industry, asserting that the market "may be dormant right now, but demand for railroad cars and trucks will return." Unfortunately, he was wrong. Railroad car orders overall plummeted from 119,000 in 1979 to only 6,300 in 1982 and boxcar orders plunged from 4,200 to 250 over the same period.
In 1987 Russel B. Every told the Cleveland chapter of the Association for Corporate Growth, in a speech reprinted in the Journal of Corporate Growth, that "the sale of United-American Car in early 1984 saved Lamson & Sessions." That February, Emery and Grabner cut a handwritten, midnight deal for the divestment of United-American Car, thereby bringing in $10 million cash. According to Every, "That sale gave Lamson & Sessions the cash infusion we needed to make our massive debt restructuring program viable."
The executives had started bargaining with the company's 24 debt-holders, mostly insurance companies and banks, to restructure Lamson & Sessions' debt in 1983. Early in 1984, they used $15 million borrowed from Congress Financial Corp. to retire about $13 million of its $54 million debt. New, two-year notes for the remaining $41 million of the obligations were issued as interim financing. That July, Lamson & Sessions exchanged $12 million of the short-term notes for $12 million in newly created preferred stock that could be converted into about one-third of Lamson's common shares. The company completed the first phase of its financial restructuring by converting the remaining $29 million debt into low- and no-interest notes. These efforts helped lower annual debt service, free up operating capital, and thereby allowed the company to avoid Chapter 11 bankruptcy.
Every succeeded Grabner as CEO that same year and was elected chairman early in 1985 upon his predecessor's retirement. Every soon realized that Lamson & Sessions' contraction had positioned it primarily in "mature and possibly shrinking markets," as he noted in the Journal of Corporate Growth. The new CEO was convinced that his company would not be able to achieve "real health without a major acquisition of a company serving a growing market." The firm's creditors, however, had made strictures against the company assuming more debt as part of their restructuring agreement, and they were extremely reluctant to abandon that safety valve. Over six months of what Every called "lengthy and very difficult negotiations," Lamson & Sessions talked its creditors into taking $17.5 million in cash (part of which was again borrowed from Congress Financial) in exchange for the $31.4 million in securities and interest owed them. The lenders also surrendered part of their preferred stock in exchange for warrants to purchase 500,000 common shares. The restructuring gave Lamson & Sessions an extraordinary gain of $13.3 million and made possible the financing of a sizable acquisition.
Moving into Thermoplastics via Mid-1980s Acquisition of Carlon
Although Lamson & Sessions thought it had the wherewithal to make a major purchase, some industry observers disagreed. In 1986, the company targeted the Carlon division of TBG Inc. (New York), which ranked as a top American manufacturer of thermoplastic accessories for electrical applications. But neither Carlon's European owners (the Thyssen-Bornemisza Group) nor their financiers, Salomon Brothers, believed that Lamson & Sessions would be able to garner the financing commitments necessary to acquire Carlon. According to December 1987 coverage in the Cleveland Plain Dealer, Carlon was over twice the size of Lamson & Sessions. Every, however, had earned the confidence of Congress Financial Corp., which increased the company's $20 million credit line more than fivefold, to $110 million, in order to enable Lamson & Sessions to make the purchase. At the time, it was Congress Financial's largest ever acquisition line of credit. The company completed its $85 million leveraged buyout of Carlon late in 1986.
Transformed over the space of a few years from a company with 78 percent of its sales in the railroad and fastener businesses to one with 62 percent of its annual revenues in industrial construction, Lamson & Sessions was reorganized around its new subsidiary. It even moved its headquarters to the east Cleveland suburb of Beachwood, where Carlon was based. After the 1988 divestments of the Youngstown Steel Door Company (spun off to a management group) and a couple of other unrelated businesses, Lamson & Sessions was reorganized around its two remaining businesses. Midland Steel Products Co. and Valley-Todeco were organized as the Transportation Equipment Products division, while Carlon formed the Industrial/Construction Products division.
As it turned out, the Carlon acquisition was infinitely better timed than Lamson & Sessions' railroad fiasco. The division, which contributed 65 percent of the parent's 1987 sales of $340.4 million, prospered in the burgeoning construction environment of the late 1980s, posting a record-high net income of $9.4 million in fiscal 1988. Lamson & Sessions quickly became a darling of Wall Street investors. A 1987 stock offering raised about $58 million for debt reduction, and from January to October 1988 the shares appreciated 243.3 percent to almost $19. By mid-1988, Lamson & Sessions' net worth had rebounded to $56 million.
Although he had barely served a year with Lamson & Sessions, president and chief operating officer John B. Schulze was selected to succeed Russel B. Every as chief executive officer in January 1989. Schulze, formerly a longtime executive at appliance maker White Consolidated Industries Inc., advanced to chairman upon Every's retirement one year later.
Unfortunately, the early 1990s brought a recession that hit Lamson & Sessions' chief markets, construction and trucking, especially hard. The company's annual sales declined slightly in 1991 and continued to slip in 1992. Although revenues started to climb in 1993 and 1994, the company was unable to record a profit in any of these fiscal years. Losses totaled over $70 million and the stock dropped to just under $5 in early 1994.
It was around that time that Lamson & Sessions elected to exit the truck business. Midland Steel Products was sold to a subsidiary of Iochpe-Maxion S.A., a Brazilian firm, in mid-1994. The proceeds of the divestment were used to lower the company's debt service. In a seeming vindication of the decision, Lamson & Sessions reported that the year's fourth quarter was the company's first profitable quarter in five years. Although Carlon was also characterized as a cyclical business, CEO Schulze hoped that expanding its markets to include the consumer "do-it-yourself" segment would help to smooth the ups and downs. By 1994, that segment contributed 17 percent of annual revenues.
Late in 1995 Lamson & Sessions completed its exit from metalworking with the sale of its Valley-Todeco aerospace fastener unit to a subsidiary of the U.K. firm McKechnie PLC. Now focused exclusively on thermoplastic products, Lamson & Sessions for the first time in several years posted a full-year net profit in 1995--a total of $12.1 million on revenues of $299.2 million. In October of the following year, the company gained a greater presence in the retail home improvement sector with the acquisition of Brighton, Michigan-based Dimango Products Corporation, maker of wireless door chimes, home security devices, and other wireless products.
Ups and Downs in the Late 1990s and Early 2000s
Unfortunately, an April 1997 fire destroyed the Dimango Products plant, and a spike in resin prices contributed greatly to a third-quarter loss that year. In addition, the company ran into problems installing a new management information system, which led to customer service snafus and the loss of business. Lamson & Sessions consequently posted a net loss of $9.7 million for 1997, which included an extraordinary charge of $4 million for complying with an accounting change. Revenues fell 6 percent to $271.8 million.
Seeking to reduce debt and focus on its higher-margin product lines, Lamson & Sessions reached an agreement in December 1998 to sell its PVC pipe business to Eagle Pacific Industries Inc. for $58 million. Lamson & Sessions was at a competitive disadvantage in this commodity-like business as its rivals were vertically integrated, also being producers of PVC resin. In April 1999, however, Eagle Pacific backed out of the deal, and subsequent efforts by Lamson & Sessions to offload the business went for nought. This setback soon turned positive as the company's PVC pipe business experienced a boom in 1999 and 2000 partly because of a burgeoning construction market but particularly because of the explosive growth in telecommunications infrastructure. Lamson & Sessions then gained further capacity in this sector through a pair of 2000 acquisitions: the September buyout of Pyramid Industries, Inc. of Erie, Pennsylvania, for $51.9 million and the December purchase of Ameriduct Worldwide, Inc. of Fort Myers, Florida, for $63.8 million plus assumed debt of $3.9 million. Both of these firms produced high-density polyethylene (HDPE) conduit for telecommunications and utility infrastructure. For 2000, Lamson & Sessions turned in a particularly strong performance: profits of $21.4 million on revenues of $348.7 million.
The company's fortunes soon took another turn as one of the most noteworthy aspects of the severe economic downturn that began in 2001 was the dramatic collapse of the telecommunications market. Lamson & Sessions was forced into restructuring mode late in the year. It shut down one plant and also reduced its HDPE capacity by 15 percent by disposing of a number of excess extrusion lines. A $7.7 million restructuring charge led to a net loss for the year of $3.8 million.
Continued weakness in the construction and telecommunications markets in 2002 led to an 11 percent drop in revenues, to $314.5 million. The company reported a net loss of $41.2 million as a result of a $46.3 million after-tax goodwill impairment loss taken because of a change in accounting principles. Lamson & Sessions' stock fell to as low as $2.30 per share that year. This brought the firm's total market capitalization below the New York Stock Exchange's (NYSE) minimum of $50 million. Warned that it might be delisted, Lamson & Sessions developed an 18-month business plan for returning to compliance with NYSE criteria that was accepted by the stock exchange in January 2003. Through the first nine months of 2003, Lamson & Sessions recorded a 9.2 percent increase in net sales, and although the firm's shareholders' equity was on the increase, at $40.2 million it was still well below the required NYSE level.
Principal Subsidiaries: Carlon Chimes Co.; Lamson & Sessions Ltd. (Canada); LMS Asia Limited (Hong Kong); Dimango Products Corporation; Pyramid Industries II, Inc.
Principal Operating Units: Carlon; Lamson Home Products; PVC Pipe.
Principal Competitors: Compagnie de Saint-Gobain; Thomas & Betts Corporation; Hughes Supply, Inc.; AMSTED Industries Incorporated; Channell Commercial Corporation.
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