SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11c or Section 240.14a-12
THE LAMSON & SESSIONS CO.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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LAMSON & SESSIONS
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
March 31, 2005
To Our Shareholders:
On behalf of the Board of Directors and management of Lamson & Sessions, I
cordially invite you to attend the 2005 Annual Meeting of Lamson's shareholders
to be held on Friday, April 29, 2005, at 9:00 a.m., local time, at the Wyndham
Cleveland Hotel, 1260 Euclid Avenue, Cleveland, Ohio 44115.
At this meeting, shareholders are expected to elect three directors for a
three-year term ending in 2008.
In addition, there will be a report on current developments in the Company
and an opportunity for questions of general interest to shareholders.
It is extremely important that your shares be represented at the meeting.
Whether or not you plan to attend the Annual Meeting in person, you are
requested to mark, sign, date and return the enclosed proxy promptly in the
envelope provided or give your proxy by telephone or over the Internet by
following the instructions on the proxy card.
Sincerely,
/s/ John B. Schulze
JOHN B. SCHULZE
Chairman of the Board
and Chief Executive Officer
LAMSON & SESSIONS
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
NOTICE OF 2005 ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 2005
Notice is hereby given that the Annual Meeting of Shareholders of The
Lamson & Sessions Co. will be held at the Wyndham Cleveland Hotel, 1260 Euclid
Avenue, Cleveland, Ohio 44115 on April 29, 2005, beginning at 9:00 a.m., local
time, for the purpose of considering and acting upon the following:
1. The election of three Class III directors for three-year terms expiring
in 2008; and
2. Any other business as may properly come before the Annual Meeting or any
adjournment or postponements thereof.
If you were a shareholder of record at the close of business on March 3,
2005, you are entitled to notice of and to vote at the Annual Meeting and any
adjournment or postponements thereof.
By order of the Board of Directors.
/s/ John B. Schulze
JOHN B. SCHULZE
Chairman of the Board
and Chief Executive Officer
March 31, 2005
---------------------
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND, SO THAT YOUR VOTE WILL BE
COUNTED AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY PROMPTLY, USING THE RETURN ENVELOPE ENCLOSED, OR GIVE YOUR PROXY BY
TELEPHONE OR OVER THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD.
LAMSON & SESSIONS
25701 Science Park Drive
Cleveland, Ohio 44122
(216) 464-3400
---------------------------------
PROXY STATEMENT
---------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 29, 2005
DATE OF THE PROXY STATEMENT -- MARCH 31, 2005
GENERAL INFORMATION
INFORMATION ABOUT THE ANNUAL MEETING
Our Annual Meeting will be held on Friday, April 29, 2005 at 9:00 a.m.,
local time, at the Wyndham Cleveland Hotel, 1260 Euclid Avenue, Cleveland, Ohio
44115.
INFORMATION ABOUT THIS PROXY STATEMENT
We sent you this Proxy Statement and the enclosed proxy card because
Lamson's Board of Directors is soliciting your proxy to vote your shares at the
Annual Meeting. If you own Lamson common stock in more than one account, such as
individually and also jointly with your spouse, you may receive more than one
set of these proxy materials. To assist us in saving money and to provide you
with better shareholder services, we encourage you to have all your accounts
registered in the same name and address. You may do this by contacting Lamson's
Shareholder Relations Department at (216) 464-3400. This Proxy Statement
summarizes information that we are required to provide to you under the rules of
the Securities and Exchange Commission and which is designed to assist you in
voting your shares. On or about March 31, 2005, we began mailing this Proxy
Statement and the enclosed proxy card to all shareholders of record at the close
of business on March 3, 2005.
WHAT YOU MAY VOTE ON AT THE ANNUAL MEETING
The election of three directors in Class III, with terms expiring in 2008.
The Board recommends that you vote FOR each of the nominees for director.
The Board of Directors does not know of any other matter which will be
presented at the Annual Meeting other than the election of directors. However,
if any other matter properly comes before the Annual Meeting, the individuals
named on the enclosed proxy card ("proxies") will act on such proposal in their
discretion.
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INFORMATION ABOUT VOTING
Shareholders can vote on matters presented at the Annual Meeting in four
ways:
(a) By Proxy. You can vote by signing, dating and returning the enclosed
proxy card. If you do this, the proxies will vote your shares in the
manner you indicate. You may specify on your proxy card whether your
shares should be voted for all, some or none of the nominees for
director. If you do not indicate instructions on the card, your shares
will be voted FOR the election of the directors.
(b) By Telephone. After reading the proxy materials and with your proxy
and voting instruction form in front of you, you may call the toll-free
number 1-800-542-1160 using a touch-tone telephone. You will be
prompted to enter your Control Number from your proxy and voting
instruction form. This number will identify you and the Company. Then
you can follow the simple instructions that will be given to you to
record your vote.
(c) Over the Internet. After reading the proxy materials and with your
proxy and voting instruction form in front of you, you may use your
computer to access the Web site http://www.votefast.com. You will be
prompted to enter your Control Number from your proxy and voting
instruction form. This number will identify you and the Company. Then
you can follow the simple instructions that will be given to you to
record your vote.
(d) In Person. You may attend the Annual Meeting and cast your vote in
person.
The Internet and telephone voting procedures have been set up for your
convenience and have been designed to authenticate your identity, allow
you to give voting instructions and confirm that those instructions
have been recorded properly.
You may revoke your proxy at any time before it is exercised by sending a
written notice (or other verifiable form of communication) of revocation to
Lamson's Secretary, James J. Abel, prior to the Annual Meeting, or by submitting
a later-dated proxy to the Company.
Each share of Lamson common stock is entitled to one vote. As of the record
date, March 3, 2005, there were 14,060,997 shares of common stock outstanding.
CUMULATIVE VOTING
Each shareholder has the right to vote cumulatively subject to the
following notice provisions. Notice that cumulative voting is desired must be
given to the President, a Vice President or the Secretary of Lamson at least
forty-eight hours before the Annual Meeting. At the start of the Annual Meeting,
Lamson's Chairman or Secretary or the shareholder giving such notice must
announce notice was given that cumulative voting is desired. If the notice is
properly given, each shareholder will have the right to cumulate his or her
voting power and cast all of his or her votes for one or more of the nominees.
If voting for the election of directors is cumulative, the persons named in the
enclosed proxy will vote the shares represented thereby and by other proxies
held by them in such manner and in their discretion so as to elect as many as
possible of the three nominees in Class III.
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INFORMATION REGARDING TABULATION OF THE VOTE
Lamson's policy is that all proxies, ballots and votes tabulated at a
meeting of the shareholders are confidential. Representatives of National City
Bank will tabulate votes and act as Inspectors of Election at the Annual
Meeting.
QUORUM REQUIREMENT
A quorum of shareholders is necessary to hold a valid meeting. Under
Lamson's Amended Code of Regulations, if shareholders holding 75% of the voting
power are present in person or by proxy, a quorum will exist to elect directors
at the meeting. For all other business that may be properly conducted at the
Annual Meeting, the holders of common stock entitled to exercise two-thirds of
the voting power of the Company, present in person or by proxy, shall constitute
a quorum. Abstentions are counted as present for establishing a quorum but
broker non-votes are not. A broker non-vote occurs when a broker votes on some
matters on the proxy card but not on others because the broker does not have the
authority to do so.
The holders of a majority of the voting power represented at the Annual
Meeting, whether or not a quorum is present, may adjourn the meeting without
notice other than by announcement at the meeting of the date, time and location
at which the meeting will be reconvened.
INFORMATION ABOUT VOTES NECESSARY FOR ACTION TO BE TAKEN
Election of Directors
The three nominees for director receiving the greatest number of votes will
be elected at the meeting. Abstentions and broker non-votes will have no effect
on the result of the vote on the election of directors.
Other Matters
The Board of Directors does not know of any other matter which will be
presented at the Annual Meeting other than the election of directors discussed
in this Proxy Statement. However, if any other matter properly comes before the
Annual Meeting, your proxies will act on such proposal in their discretion.
REVOCATION OF PROXIES
If you give a proxy (either by mailing your proxy card, by telephone or
over the Internet), you may revoke it at any time before it is exercised by
giving notice to Lamson's Secretary in writing or by means of other verifiable
communication prior to the Annual Meeting or by submitting a later-dated proxy
to the Company.
COSTS OF PROXY SOLICITATION
Lamson will pay all the costs of soliciting these proxies. In addition to
solicitation by mail, proxies may be solicited personally, by telephone or
personal interview by an officer or regular employee of the Company. Lamson will
also ask banks, brokers and other institutions, nominees and fiduciaries to
forward the proxy materials to their principals and to obtain authority to
execute proxies, and reimburse them for expenses. In addition, Lamson has also
retained Georgeson Shareholder Communications, Inc. to aid in
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the distribution and solicitation of proxies and has agreed to pay Georgeson a
fee of approximately $6,500, plus reasonable expenses.
INFORMATION ABOUT LAMSON COMMON STOCK OWNERSHIP
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth as of December 31, 2004 (except as otherwise
noted), all persons (including any "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act")) we know to be "beneficial
owners" of more than five percent of Lamson's outstanding common stock, other
than directors or officers of Lamson. This information is based on reports filed
with the Securities and Exchange Commission ("SEC") by each of the individuals
or firms listed in the table below. If you wish, you may obtain these reports
from the SEC.
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------- ------------ --------
Gabelli Funds, Inc., et al. 1,820,000(2) 13.1%
c/o Gabelli Asset Management, Inc.
One Corporate Center
Rye, New York 10580
Farhad Fred Ebrahimi 1,633,500(3) 11.8%
475 Circle Drive
Denver, Colorado 80206
Royce & Associates, LLC 899,800(4) 6.5%
1414 Avenue of the Americas
New York, New York 10019
The Lamson & Sessions Co. 860,856(5) 6.2%
Investment Trust for Retirement Trusts
25701 Science Park Drive
Cleveland, Ohio 44122
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(1) "Beneficial Ownership" is a technical term broadly defined by the SEC to
mean more than ownership in the usual sense. So, for example, you
"beneficially" own Lamson common stock not only if you hold it directly, but
also if you indirectly (through a relationship, a position as a director or
trustee or a contract or understanding), have (or share) the power to vote
the stock, or to sell it, or you have the right to acquire it within 60
days.
(2) Mario J. Gabelli, Marc J. Gabelli and various entities which either one
directly or indirectly controls or for which either one acts as chief
investment officer reported the ownership of such shares on a Schedule 13F,
which was filed with the SEC on February 11, 2005.
(3) Farhad Fred Ebrahimi reported the beneficial ownership of such shares on a
Form 4, which was filed with the SEC on January 8, 2004.
(4) Royce & Associates, LLC, a registered investment advisor, reported the
beneficial ownership of such shares on a Schedule 13G, which was filed with
the SEC on January 31, 2005.
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(5) The Lamson & Sessions Co. Investment Trust for Retirement Trusts reported
the ownership of such shares (as of December 31, 2001) on a Schedule 13G/A,
which was filed with the SEC on March 19, 2002.
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth, as of March 18, 2005, the beneficial
ownership of Lamson's common stock by each of its five most highly-compensated
executive officers (the "Named Executive Officers") and each director
individually, and the percent of cumulative beneficial ownership of all
executive officers and directors as a group.
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OWNERSHIP(1)(2) CLASS
---- ----------------- ----------
John B. Schulze 973,639 6.03
James J. Abel 479,434 2.97
Donald A. Gutierrez 156,876 *
Norman P. Sutterer 170,431 1.06
Albert J. Catani, II 114,822 *
James T. Bartlett 66,524 *
Francis H. Beam, Jr. 36,857 *
Martin J. Cleary 44,000 *
William H. Coquillette 49,895 *
John C. Dannemiller 85,567 *
George R. Hill 89,090 *
A. Malachi Mixon, III 117,311 *
D. Van Skilling 98,616 *
All executive officers and directors as a group
(17 persons) 2,813,281 17.42
* Less than 1 percent.
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(1) Includes the following number of Common Shares which are not owned of record
but which could be acquired by the individual within 60 days after January
17, 2005 upon the exercise of outstanding options under the Company's stock
option plans: Mr. Schulze -- 621,667; Mr. Abel -- 274,667; Mr.
Gutierrez -- 133,667; Mr. Sutterer -- 126,334, Mr. Catani -- 92,500 and all
other directors and executive officers as a group--341,751.
(2) Includes shares held jointly or in the name of the director's spouse, minor
children, or relatives sharing his home, reporting of which is required by
applicable rules of the SEC. Unless otherwise indicated, or in the case of
joint ownership, the listed individuals possess sole voting power and sole
investment power with respect to such shares. The figure for Mr. Schulze
includes 30,700 shares owned by his wife, to which he has disclaimed
beneficial ownership. No other director or executive officer has disclaimed
beneficial ownership of any shares.
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ELECTION OF DIRECTORS
Nominees for Directors
The Board of Directors currently has ten members and is divided into three
classes. At least a majority of the Board must satisfy the independence criteria
established by the SEC and the New York Stock Exchange (the "NYSE"). Class III
currently consists of three members, Class I currently consists of four members
and Class II currently consists of three members. A single class of directors is
elected by the shareholders annually for a three-year term. The terms of the
following Class III directors expire at the Annual Meeting: James J. Abel, A
Malachi Mixon, III and John B. Schulze. For election as Class III directors at
the Annual Meeting, the Governance, Nominating and Compensation Committee has
recommended, and the Board of Directors has approved, the re-nomination of Mr.
Abel, Mr. Mixon and Mr. Schulze to serve as directors for the three-year term of
office which will expire at the Annual Meeting of Shareholders in 2008. Each
director elected will serve until the term of office of the class to which he is
elected expires and until the election and qualification of his successor.
The directors to be elected will be elected by a plurality of the votes
cast for directors. It is the intention of the persons named in the enclosed
proxy to vote such proxy as specified and, if no specification is made, to vote
such proxy for the election of Messrs. Abel, Mixon and Schulze as Class III
directors. The Board of Directors recommends that you vote FOR the three
nominees for director.
The Board of Directors has no reason to believe that the persons nominated
will not be available to serve. In the event that a vacancy among such original
nominees occurs prior to the Annual Meeting, shares of common stock of Lamson
(the "Common Shares") represented by the proxies so appointed will be voted for
a substitute nominee or nominees designated by the Board of Directors and for
the remaining nominees.
Listed below are the names of the three nominees for election to the Board
of Directors in Class III, and those continuing directors in Classes II and I,
who previously have been elected to terms which will expire in 2006 and 2007,
respectively. Also listed is the year in which each individual first became a
director of the Company, the individual's principal occupation, and certain
other information, based in part on data submitted by the directors.
NOMINEES FOR ELECTION AT THE MEETING
NAME, AGE YEAR FIRST
PRINCIPAL OCCUPATION BECAME A
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR
-------------------- ------------------- ----------
CLASS III: TERM EXPIRES IN 2008 IF ELECTED AT THE ANNUAL MEETING
James J. Abel (59) CPI Corp. 2002
Executive Vice President, Secretary, Treasurer
and Chief Financial Officer of the Company
A. Malachi Mixon, III (64) Invacare Corporation 1990
Chairman of the Board and Chief Executive The Sherwin-Williams Company
Officer, Invacare Corporation (Manufacturer and Cleveland Clinic Foundation
distributor of home healthcare products)
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NAME, AGE YEAR FIRST
PRINCIPAL OCCUPATION BECAME A
AND BUSINESS(1) OTHER DIRECTORSHIPS DIRECTOR
-------------------- ------------------- ----------
John B. Schulze (67) None 1984
Chairman of the Board, President and Chief
Executive Officer of the Company
CONTINUING DIRECTORS
CLASS II: TERM EXPIRES IN 2006
John C. Dannemiller (66) U-Store-It 1988
Retired Chairman, Applied Industrial
Technologies (Distributor of bearings, power
transmission components and related products)
George R. Hill (63) None 1990
Retired Senior Vice President, The Lubrizol
Corporation (Full service supplier of
performance chemicals and systems to worldwide
transportation and industrial markets)
William H. Coquillette (55) None 1997
Partner, Jones Day (Law firm)
CLASS I: TERM EXPIRES IN 2007
James T. Bartlett (68) Keithley Instruments, Inc. 1997
Advising Director, Primus Venture Partners Oglebay Norton Company
(Private investment firm)
Francis H. Beam, Jr. (69) None 1990
Retired President, Pepper Capital Corp.
(Venture capital firm)
Martin J. Cleary (69) Guardian Life Insurance 1989
Retired President and Chief Operating Officer, Company of America
The Richard E. Jacobs Group (Real estate CBL & Associates Properties,
developer) Inc.
D. Van Skilling (71) First American Corporation 1989
Retired Chairman and Chief Executive Officer, American Business Bank
Experian Information Solutions, Inc. (Supplier McDATA Corporation
of credit, marketing and real estate Onvia, Inc.
information and decision support systems)
---------------
(1) Each director and nominee either has held the position shown or has had
other executive positions with the same employer or its subsidiary for more
than five years.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors oversees the business and affairs of Lamson and
monitors the performance of management. Non-management directors meet in
executive session without management directors present at least quarterly. A
presiding non-management director is selected by all of the non-management
directors for each meeting. The Board met seven times during 2004. All of the
Directors attended at least 75% of the regularly scheduled and special meetings
of the Board and Board committees on which they served in 2004. All members of
the Board were present at the Company's 2004 Annual Meeting of Shareholders. All
Board members are expected to attend the 2005 Annual Meeting of Shareholders.
The Board has determined that to be considered independent, a director must
meet the independence criteria set forth in the NYSE's listing requirements.
That is, a director may not have a direct or indirect material relationship with
the Company. A material relationship is one which impairs or inhibits (or has
the potential to impair or inhibit) a director's exercise of critical and
disinterested judgment on behalf of the Company and its shareholders. In making
its assessment of independence, the Board considers any and all material
relationships not merely from the standpoint of the director, but also from that
of persons or organizations with which the director has or has had an
affiliation or those relationships which may be material, including commercial,
industrial, banking, consulting, legal, accounting, charitable and familial
relationships, among others. The Board also considers whether a director is a
former employee of the Company within the last five years. The Board consults
with the Company's counsel to ensure that the Board's determinations with
respect to the independence of directors are consistent with the NYSE listing
requirements, as well as all relevant securities and other laws and regulations.
Consistent with these considerations, the Board affirmatively has determined
that the following directors are independent directors: James T. Bartlett,
Francis H. Beam, Jr., Martin J. Cleary, John C. Dannemiller, George R. Hill, A.
Malachi Mixon, III and D. Van Skilling.
The Board has two standing committees: the Audit Committee and the
Governance, Nominating and Compensation Committee. Each committee reports to the
Board at the next meeting of the Board following a committee meeting. The Audit
Committee and the Governance, Nominating and Compensation Committee held six and
five meetings, respectively, in 2004.
STANDING COMMITTEES OF THE BOARD OF DIRECTORS
THE AUDIT COMMITTEE: The Audit Committee is a separately designated
standing committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act. The Audit Committee consists solely of independent directors (as
currently required by the NYSE listing standards). Messrs. Beam (Chairman) and
Cleary and Dr. Hill currently are the members of the Audit Committee. The
functions of the Audit Committee include (i) appointing, retaining, overseeing
and terminating the Company's independent registered public accounting firm,
both external and internal, and pre-approving all auditing and non-auditing
services to be performed by the independent auditors, (ii) reviewing the
independence of the independent registered public accounting firm, (iii)
reviewing the proposed audit programs (including both independent and internal
audits) and the results of the independent and internal audits, (iv) reviewing
and evaluating the adequacy of the Company's systems of internal accounting
controls, (v) reviewing the recommendations of the independent registered public
accounting firm, (vi) reviewing the quarterly and annual financial statements of
the Company prior to the filing of such statements with the SEC, and (vii)
reviewing such other matters in relation to the accounting, auditing and
financial reporting practices and procedures of the Company as the Audit
Committee, in its
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own discretion, may deem desirable in connection with the review functions
described above. The functions of the Audit Committee are more fully described
in its charter which is posted on the Company's Web site at
www.lamson-sessions.com via the Investor Relations page. The Audit Committee
meets privately with the independent audit groups for both internal and external
audits and the Company's management at each of its meetings.
THE GOVERNANCE, NOMINATING AND COMPENSATION COMMITTEE: The Governance,
Nominating and Compensation Committee (the "Committee") consists solely of
independent directors (as currently required by NYSE listing standards). Messrs.
Skilling (Chairman), Bartlett, Beam, Dannemiller and Mixon currently are the
members of the Committee. The Committee considers all material matters relating
to the compensation policies and practices of the Company, and administers the
Company's incentive plans and base salary policies as they relate to the
executive officers of the Company. The Committee also (i) reviews and recommends
candidates for election to the Board of Directors, (ii) recommends whether
incumbent directors should be nominated for re-election to the Board, and (iii)
recommends directors for appointment to any committee of the Board.
The Committee identifies potential director candidates through various
means, including recommendation from members of the Board of Directors and
shareholders. With respect to any nominee recommended by a shareholder of the
Company, a resume of the candidate's business experience and background should
be directed in writing to the attention of Lamson's Secretary, 25701 Science
Park Drive, Cleveland, OH 44122. The Company's Guidelines on Significant
Corporate Issues contain Board membership criteria that apply to assessments by
the Committee of potential nominees for a position on the Board. These
Guidelines provide that in evaluating and recommending director candidates, the
Committee consider a variety of factors, including experience, business judgment
and industry knowledge. In addition, the Committee evaluates the candidate's
qualifications in light of the needs of the Board and the Company at that time.
Finally, the Company requires that at least a majority of its directors satisfy
the independence criteria established by the NYSE Listing Requirements, any
applicable SEC rules and the Board's criteria for independence described above.
The Company's Guidelines on Significant Corporate Issues are posted on the
Company's Web site at www.lamson-sessions.com via the Investor Relations page.
The Committee also is responsible for developing and recommending corporate
governance principles applicable to the Board in compliance with rules and
regulations of the NYSE and the SEC. The functions of the Committee are more
fully described in its charter which is also posted on the Company's Web site at
www.lamson-sessions.com via the Investor Relations page.
COMMUNICATIONS WITH THE BOARD
Shareholders may communicate with the Board, the non-employee directors as
a group or any of the directors by sending written communications addressed to
the Board or any of the directors, c/o Secretary, The Lamson & Sessions Co.,
25701 Science Park Drive, Cleveland, OH 44122. The mailing envelope should
contain a clear notation indicating that the enclosed letter is a "Shareholder-
Board Communication" or "Shareholder-Director Communication." All communications
are compiled by the Secretary and forwarded to the Board or, if appropriate, a
committee of the Board or the individual director(s).
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COMPENSATION OF LAMSON'S DIRECTORS
Directors who are employees of Lamson do not receive any separate fees or
other remuneration for serving as a director of the Board. For fiscal year 2004,
non-employee directors were each paid an annual retainer of $15,000 for their
service on the Board of Directors, and received an additional fee of $1,500 for
each Board meeting and $2,500 for each Committee meeting attended. Each of the
Chairmen of the Audit Committee and the Governance, Nominating and Compensation
Committee received an additional annual fee of $5,000. Directors may also
participate in the Company's Deferred Compensation Plan for Non-Employee
Directors (the "Plan"), under which directors may elect to defer their annual
retainers and meeting fees. Under this Plan, deferred fees may be invested by
the trustee, at a director's option, in either a money market fund or Common
Shares of the Company. If a director elects to have this deferred compensation
invested in Common Shares of the Company, the director will receive an
additional sum equal to 25% of the deferred amount in the form of restricted
shares issued from the Company's 1998 Incentive Equity Plan, as amended and
restated as of April 30, 2004, (the "1998 Plan").
Lamson's current non-employee directors are provided with certain
retirement and death benefits under the Company's Outside Directors' Benefit
Program (the "Program"). All current non-employee directors have completed an
aggregate of one year of continuous service and are eligible to participate. The
Program generally provides for normal retirement benefits payable upon
retirement and completion of five years of continuous service. The Program also
contains provisions for early retirement benefits, vested deferred retirement
benefits, a "change in control" of the Company, disability retirement benefits
and survivors' benefits upon the death of a participant. Participants in the
Program, or their beneficiaries, are eligible to receive benefits in an amount
equal to the annual retainer being paid to the participant for service as a
non-employee director as of December 31, 2004, with such adjustments as are
necessary based on the date of retirement or death. Retirement or death benefits
under the Program are payable for a ten-year period on a quarterly basis,
commencing upon the date of retirement or death. Either the participant, the
participant's beneficiary or the Company can elect that such retirement or death
benefits be paid in an actuarially-equivalent, lump-sum payment. In 2004,
Lamson's Board of Directors "froze" the Program. As a result, only the current
non-employee Directors are eligible to receive benefits under the Program, and
any person not presently serving on the Board will not be entitled to
participate in the Program.
STOCK OPTION GRANTS TO NON-EMPLOYEE DIRECTORS: The 1998 Plan authorizes
the grant of options to non-employee directors for the purchase of Common
Shares. The 1998 Plan provides that each year on the Monday following the Annual
Meeting of Shareholders, each individual elected, re-elected or continuing as a
non-employee director automatically will receive a non-qualified option to
purchase 4,000 Common Shares. The exercise price for such options is the average
of the high and low prices at which the Common Shares traded on the NYSE on the
date of grant. Options become exercisable one year after the date of grant and
expire ten years after the date of the grant. Prior to April 30, 2004, such
option grants were made to non-employee directors under Lamson's Non-Employee
Directors Stock Option Plan (the "Directors Plan"). The Directors Plan expired
on April 22, 2004 and no future grants will be made thereunder. As of January 1,
2005, there were options outstanding under the Directors Plan representing
113,000 shares of the Company's Common Stock. The options outstanding under the
Directors Plan may be exercised pursuant to the terms of the stock option
agreements, which expire on or before May 5, 2013.
Options granted under the Directors Plan to a non-employee director must be
exercised within 36 months of retirement as a director or within 12 months from
the date a director resigns due to disability. Upon the death of a non-employee
director, the director's legal representative or heirs will have
10
twelve months from the date of death to exercise his stock options. However, in
no event will options be exercisable after the expiration of the 10-year option
period.
If a director resigns, or ceases to serve as a non-employee director for
any reason other than retirement, disability or death, only those options
exercisable on the date of termination will be exercisable. Such options may be
exercised within ninety days after termination.
In the event of a "change in control" of the Company (as defined in the
Directors Plan and in the 1998 Plan), all stock options fully vest and become
exercisable.
Pursuant to the 1998 Plan, on May 3, 2004 each non-employee director was
granted a non-qualified stock option to purchase 4,000 Common Shares at an
exercise price of $6.545 per share. These stock options are scheduled to become
exercisable on May 3, 2005.
EXECUTIVE COMPENSATION
The following table summarizes the compensation earned by each of the Named
Executive Officers with respect to the fiscal year shown for services rendered
to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------ ---------------------- -----------
OTHER RESTRICTED SECURITIES PERFORMANCE ALL OTHER
NAME AND ANNUAL STOCK UNDERLYING UNIT COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(5) AWARDS(3) OPTIONS(#) PAYOUTS (1)(2)
------------------ ---- -------- -------- --------------- ---------- ---------- ----------- ------------
John B. Schulze............... 2004 $470,000 $541,400 $5,296 $ -- 100,000 $ -- $35,858
Chairman of the Board, 2003 450,000 -- -- -- 100,000 -- 31,080
President and 2002 450,000 232,280 -- -- 100,000 -- 30,652
Chief Executive Officer
James J. Abel................. 2004 320,000 307,200 1,145 -- 45,000 -- 16,897
Executive Vice President, 2003 302,000 -- -- -- 40,000 -- 14,242
Secretary, Treasurer and 2002 302,000 97,425 -- 6,495 40,000 -- 46,031(3)
Chief Financial Officer
Donald A. Gutierrez(4)........ 2004 228,000 154,400 579 341 25,000 -- 36,419(3)
Senior Vice President 2003 221,000 -- -- -- 25,000 -- 16,531
2002 221,000 67,077 -- 1,491 25,000 -- 23,316(3)
Norman P. Sutterer(4)......... 2004 203,000 134,700 690 297 25,000 -- 33,766(3)
Senior Vice President 2003 195,000 -- -- -- 20,000 -- 16,244
2002 185,000 57,294 -- 1,273 20,000 -- 21,887(3)
Albert J. Catani, II(4)....... 2004 177,000 114,200 1,241 -- 12,000 -- 18,264
Vice President 2003 173,000 -- -- -- 12,000 -- 16,001
2002 173,000 38,205 -- 2,547 12,000 -- 28,675(3)
---------------
(1) Amounts shown for 2004 include the cost (exclusive of tax reimbursement and
gross-up) of split dollar insurance maintained by the Company to provide
death benefits for Mr. Schulze, Mr. Abel, Mr. Gutierrez, Mr. Sutterer and
Mr. Catani of $25,139, $6,178, $8,500, $8,047 and $16,500, respectively.
(2) Includes matching contributions up to 75% of the first 6% of an employee's
compensation contributed to the Company's 401(k) Deferred Savings Plan with
an additional 25% match based on the Company's profitability, which is
available to all salaried employees. On February 17, 2004, the Governance,
Nominating and Compensation Committee of the Board of Directors approved a
11
25% match based upon the Company's financial performance for fiscal year
2004. The matching contributions made by the Company under the Plan to the
accounts of: Mr. Schulze, Mr. Abel, Mr. Gutierrez, Mr. Sutterer and Mr.
Catani in 2004 totaled $10,719, $10,719, $10,719, $10,719 and $1,764,
respectively.
(3) Includes deferred compensation pursuant to Stock Ownership Guidelines for
Executive Officers implemented by the Governance, Nominating and
Compensation Committee of the Board of Directors. Pursuant to the Stock
Ownership Guidelines, officers may elect to defer income earned in a fiscal
year. However, the deferral for which the election is made does not occur
until February following the end of the fiscal year specified by the
officer's election, since bonuses for any fiscal year most recently ended
are not approved by the Governance, Nominating and Compensation Committee
until then. For fiscal year 2004, the income amounts deferred by Mr.
Gutierrez and Mr. Sutterer were $17,200 and $15,000, respectively. For
fiscal year 2003, there were no bonuses paid, therefore, no deferrals were
possible in February 2004. For fiscal year 2002, the income amounts deferred
by Mr. Abel, Mr. Gutierrez, Mr. Sutterer and Mr. Catani were $32,475,
$7,453, $6,366 and $12,735, respectively, which were deferred in February
2003, upon approval of bonuses for fiscal year 2002 by the Governance,
Nominating and Compensation Committee. In addition, for those officers who
elect to defer a portion of their bonuses, the Company matches 20% of the
deferred amounts in the form of restricted shares to these executives,
issued from the 1998 Plan.
(4) Mr. Gutierrez and Mr. Sutterer are responsible for the business segments of
Carlon and Lamson Home Products, respectively. Mr. Catani is responsible for
the manufacturing operations of the Company.
(5) Reflects reimbursement of taxes resulting from participation in the split
dollar insurance program.
STOCK OPTIONS
The following table sets forth information concerning stock option grants
made to the Named Executive Officers during fiscal year 2004 pursuant to the
1998 Plan.
OPTION GRANTS IN LAST FISCAL YEAR
GRANT DATE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------- ----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT
OPTIONS GRANTED TO EXERCISE DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SH) DATE VALUE(2)
---- ----------- ------------ -------- ---------- ----------
John B. Schulze..................... 100,000 34.48% $6.475 4/30/14 $340,000
James J. Abel....................... 45,000 15.52% 6.475 4/30/14 153,000
Donald A. Gutierrez................. 25,000 8.62% 6.475 4/30/14 85,000
Norman P. Sutterer.................. 25,000 8.62% 6.475 4/30/14 85,000
Albert J. Catani, II................ 12,000 4.14% 6.475 4/30/14 40,800
---------------
(1) Options are exercisable after April 30, 2005 and then only as follows:
one-third on each anniversary of the grant date over three years, with the
number of shares vested in each year rounded to the nearest whole share. In
the event of a "change in control" of the Company (as defined in the 1998
12
Plan), all stock options fully vest and become exercisable and all awards of
stock may be cashed out on the basis of the highest price paid or offered
for Common Shares during the preceding 60-day period.
(2) The present value determinations in this column were made pursuant to rules
promulgated by the SEC using a Black-Scholes option pricing model and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's Common Shares. The actual value, if any, an executive
officer may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance that the value realized by an executive officer will be at or near
the value estimated by the Black-Scholes model. The estimated values under
that model are based on arbitrary assumptions as to variables such as
interest rates, stock price volatility, time of exercise and dividend yield.
The Company determined the estimated values using volatility assumptions
based on 113 months of stock prices; interest rate assumptions based on the
five-year Treasury Strip Yield, as reported in The Wall Street Journal; a
dividend yield assumption of zero; and an assumed time of exercise of the
option of five years.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information about stock options exercised
during fiscal year 2004 by the Named Executive Officers and the fiscal year-end
values of unexercised options held by the Named Executive Officers. All of such
options were granted under the Company's 1988 Incentive Equity Performance Plan
and the 1998 Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
SHARES JANUARY 1, 2005 (#) JANUARY 1, 2005(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
John B. Schulze........ -- $-- 635,000 200,000 $1,605,855 $806,500
James J. Abel.......... -- -- 284,000 85,000 717,603 335,725
Donald A. Gutierrez.... -- -- 117,000 50,000 322,322 201,625
Norman P. Sutterer..... -- -- 128,001 44,999 337,816 174,420
Albert J. Catani, II... -- -- 84,500 24,000 206,296 96,780
---------------
(1) Based on the closing price on the NYSE -- Composite Transactions of the
Company's Common Shares on December 31, 2004 (the last trading day in fiscal
year 2004) of $9.10.
13
PENSION BENEFITS
The following table shows the estimated annual pension benefits under The
Lamson & Sessions Co. Salaried Employees' Retirement Plan ("Lamson & Sessions
Plan"), that would be payable to employees in various compensation
classifications upon retirement at age sixty-five during the year 2004.
ANNUAL NORMAL RETIREMENT BENEFITS
FOR YEARS OF CREDITED SERVICE INDICATED
AVERAGE ANNUAL -----------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS
-------------- -------- -------- -------- --------
$100,000 $ 25,000 $ 33,333 $ 41,667 $ 50,000
150,000 37,500 50,000 62,500 75,000
200,000 50,000 66,667 83,333 100,000
250,000 62,500 83,333 104,167 125,000
300,000 75,000 100,000 125,000 150,000
350,000 87,500 116,667 145,833 175,000
400,000 100,000 133,333 166,667 200,000
450,000 112,500 150,000 187,500 225,000
500,000 125,000 166,668 208,333 250,000
550,000 137,500 183,335 229,166 275,000
600,000 150,000 200,000 250,000 300,000
650,000 162,500 216,668 270,833 325,000
700,000 175,000 233,335 291,666 350,000
750,000 187,500 250,000 312,500 375,000
800,000 200,000 266,668 333,333 400,000
850,000 212,500 283,335 354,166 425,000
900,000 225,000 300,000 375,000 450,000
The amounts listed in the table are computed on a straight-life annuity
basis and are subject to an offset for Social Security benefits. These amounts
have been determined without regard to the maximum benefit limitations for
defined benefit plans and the limitations on compensation imposed by the
Internal Revenue Code of 1986, as amended (the "Code"). The Code places
limitations on the amount of compensation that may be taken into account in
calculating pension benefits and on the amount of pensions that may be paid
under federal income tax qualified plans such as the Lamson & Sessions Plan. For
benefits accruing in plan years beginning after 1999, no more than $205,000
(indexed for inflation) in annual compensation may be taken into account.
However, under the Supplemental Executive Retirement Plan agreements ("SERPs"),
described below, participating executives will receive the amounts to which they
otherwise would have been entitled under the Lamson & Sessions Plan provided
they meet the terms of the applicable SERP.
The amounts shown in the column under the heading "Average Annual
Compensation" are based on the highest five consecutive years of compensation
during the last ten years prior to retirement and include salary, overtime and
bonuses, but exclude commissions and stock option awards. Normal retirement
benefits under the Lamson & Sessions Plan are equal to the greater of (a) 50% of
a participant's average annual compensation based on the highest five
consecutive years during the last ten years prior to retirement less 50% of the
participant's primary Social Security benefit or (b) $3,600
14
times a fraction, the denominator of which is 30 and the numerator of which is
the participant's number of years of service up to 30.
Messrs. Schulze, Abel, Gutierrez, Sutterer and Catani are participants in
the Lamson & Sessions Plan with 17, 14, 8, 16 and 9 years of credited service,
respectively, under the Lamson & Sessions Plan. The Company has entered into
amended and restated SERPs with Messrs. Schulze and Abel. Messrs. Schulze and
Abel will not be able to achieve thirty years of service on their normal
retirement dates.
The SERPs provide that the executive will receive, upon normal retirement,
a supplemental retirement benefit equal to the difference between (i) the amount
that would have been payable to the executive under the Lamson & Sessions Plan,
without regard to any federal statutory limitation on the annual amount of
benefits payable under the Lamson & Sessions Plan and the amount of compensation
taken into account in calculating benefits under the Lamson & Sessions Plan, as
if the executive had completed thirty years of service with the Company, and
(ii) the amount actually payable to the executive under the Lamson & Sessions
Plan or under any other applicable plan for which the executive meets the
eligibility requirements. The SERPs also provide for, among other things,
disability benefits and benefits in the event the executive's employment with
the Company is terminated under certain circumstances prior to retirement and in
the event of the executive's death prior to retirement under certain
circumstances.
AGREEMENTS WITH CERTAIN OFFICERS
Lamson has entered into agreements with Messrs. Schulze, Abel, Gutierrez,
Sutterer and Catani and four other executives (as amended, the "Executive
Change-in-Control Agreements"), which specify certain financial arrangements
that the Company will provide upon the termination of such individuals'
employment with the Company under circumstances involving a "change in control"
(as defined in the Executive Change-in-Control Agreements) of the Company. The
Executive Change-in-Control Agreements are intended to ensure continuity and
stability of senior management of the Company.
Each of the Executive Change-in-Control Agreements provides that, in the
event of a "change in control" of the Company, the individual would continue
employment with the Company in the individual's then current position for a term
of three years for Mr. Schulze and two years for each of the other executives
following the "change in control." Following a "change in control," the
individual would be entitled during the ensuing period of employment to receive
base compensation and to continue to participate in incentive and employee
benefit plans consistent with past practices. Upon the occurrence of a "change
in control" followed by (i) a significant adverse change in the nature or scope
of the individual's duties or compensation, (ii) the individual's determination
of being unable effectively to carry out the current duties and
responsibilities, (iii) relocation of the individual's principal work location
to a place more than fifty miles from the principal work location immediately
prior to the "change in control," (iv) the liquidation, merger or sale of the
Company (unless the new entity assumes the Executive Change-in-Control
Agreement) or (v) a material breach of the Executive Change-in-Control
Agreement, the individual would be entitled to resign and would be entitled to
receive a lump sum payment equal to the present value of the then current base
compensation and incentive compensation (based on historical experience). The
individual would also be entitled to continue to participate in employee benefit
plans consistent with past practices for the remaining period of employment
provided in his Executive Change-in-Control Agreement. In the case of a "change
in control," the Executive Change-in-Control Agreements also provide for
protection of certain retirement benefits which would have been earned
15
during the years for which severance was paid and reimbursement for any
additional tax liability incurred as a result of excise taxes imposed or
payments deemed to be attributable to the "change in control."
The Executive Change-in-Control Agreements do not create employment
obligations for the Company unless a "change in control" has occurred, prior to
which time the Company and the individual each reserves the right to terminate
the employment relationship. Both before and after the occurrence of a "change
in control" the Company may terminate the employment of any of such individuals
for "cause."
The Company has established trust agreements pursuant to which amounts
payable under the SERPs, the Executive Change-in-Control Agreements and certain
expenses incurred by the officers in enforcing their rights under these
arrangements, must be deposited by the Company in trust and expended by the
trustee for such purposes. Such trusts are revocable, but upon the occurrence of
certain "change in control" events affecting the Company, will become
irrevocable. The trusts are currently nominally funded, but the Company is
obligated to fund them fully upon the occurrence of the "change in control"
events.
The Company has also entered into Indemnification Agreements with each
current member of the Board of Directors as well as each of the Company's
executive officers. These agreements provide that, to the extent permitted by
Ohio law, the Company will indemnify the director or officer against all
expenses, costs, liabilities and losses (including attorneys' fees, judgments,
fines or settlements) incurred or suffered by the director or officer in
connection with any suit in which the director or officer is a party or
otherwise involved as a result of the individual's service as a member of the
Board of Directors or as an officer if the individual's conduct that gave rise
to such liability meets certain prescribed standards.
GOVERNANCE, NOMINATING AND COMPENSATION COMMITTEE REPORT
OVERVIEW AND PHILOSOPHY
The Governance, Nominating and Compensation Committee of the Board of
Directors (the "Committee") is composed entirely of non-employee directors and
has been delegated the responsibility of approving the cash and non-cash
compensation of all executive officers of the Company and making recommendations
to the Board of Directors with respect to the establishment of the Company's
executive compensation plans. No member of the Committee has interlocking
relationships, reporting of which is required by applicable rules of the SEC.
In administering the various executive compensation plans, the aim of the
Committee is to attract and retain key executives critical to the long-term
success of the Company, to create incentives for executives to achieve long-term
strategic management objectives that enhance shareholder value, to provide a
balance between annual and long-term forms of compensation and, above all, to
ensure that total compensation is performance-oriented and related to Company
goals and objectives, using measurable criteria to the extent possible.
The Committee has considered the impact of Section 162(m) of the Code,
which disallows a deduction to publicly-held companies for compensation paid to
any executive officer whose compensation exceeds $1 million per year. Qualified
performance-based compensation is excluded from this deduction limitation if
certain requirements are met. The Committee believes that Section 162(m) should
not cause the Company to be denied a deduction for compensation paid to any
executive officer in 2004.
16
EXECUTIVE OFFICER BASE COMPENSATION
Each executive officer's base salary is reviewed by the Committee at the
time of the officer's annual performance review. The base salary is recommended
to the Committee by the Chairman of the Board and Chief Executive Officer (the
"Chairman") and falls within a salary range for each officer's job function that
has been established by an independent executive compensation consultant, based,
in part, on information collected by the consultant concerning compensation for
executives with similar responsibilities at companies with comparable size and
geographic location. Typically, salaries fall throughout the range and are not
based on an arbitrary percentage of the highest salary within the range. In each
case, the Committee reviews the recommendation of the Chairman and approves the
salary only after making an independent assessment of the individual executive's
performance.
Mr. Schulze's compensation is based upon the same factors considered with
regard to executive officer compensation generally. The components making up his
2004 compensation included base salary, short-term incentive compensation and
stock options. Pursuant to the annual incentives established by the Committee,
seventy-two percent of Mr. Schulze's base salary represents his target award,
the achievement of which was contingent upon the attainment of specific
financial performance goals. The Committee's award of stock options to Mr.
Schulze under the 1998 Plan was based on the same methodology used to calculate
the awards of options to other executive officers under the 1998 Plan and
designed to further align Mr. Schulze's interests with those of other
shareholders of the Company.
In determining Mr. Schulze's compensation, the Committee considered the
Company's performance. The Committee discusses and determines priorities with
Mr. Schulze at the beginning of the year and discusses his performance with
respect to these priorities periodically during the year and at the end of the
year.
Mr. Schulze is not present when the Committee reviews his performance and
determines his compensation.
SHORT-TERM INCENTIVE COMPENSATION
Target award levels are established annually by the Committee for each
executive officer of the Company. In 2004, Mr. Schulze's award is based solely
on the financial performance of the Company expressed in terms of earnings
before interest, taxes, depreciation and amortization (EBITDA). Other executive
officers' achievement of target awards is based 80 percent on the financial
performance of the Company and 20 percent on the achievement of specific
personal goals and objectives. In 2004, the Company's Short-Term Incentive Plan
provided target award opportunities for executive officers that ranged from 42
to 72 percent of base salary, although amounts could vary above and below that
range depending upon Company performance and individual accomplishment.
STOCK OPTIONS AND LONG-TERM INCENTIVE COMPENSATION
The Committee also is charged with the responsibility of administering the
1998 Plan, under which stock options are granted to executive officers and other
employees of the Company. The Committee believes that stock options align the
interests of the executive officers with those of the shareholders, providing a
way in which the executive officers can build a meaningful stake in the Company.
Accordingly, the Committee has approved the implementation of stock ownership
guidelines for the executive officers that are to be achieved over a fixed
period of time. The guidelines are based on each
17
executive officer's respective salary compensation level and they will be
reviewed by the Committee at appropriate intervals.
The Committee fixes the terms, vesting requirements and the size of the
grants of stock options awarded to the executive officers without regard to the
amount of options or the expiration dates of options already held by executive
officers. The size of each grant is based on the duties, responsibilities,
performance and experience of the executive officer and his anticipated
contribution to the Company. Options granted to executive officers vest
one-third on each anniversary over three years, with the number of shares vested
in each year rounded to the nearest whole share.
Because stock options under the 1998 Plan and grants under the Company's
Long-Term Incentive Plan are both forms of long-term executive compensation,
grants under both plans are generally considered at the same time. Awards under
the Long-Term Incentive Plan are made in the form of performance units payable
upon the achievement of three-year corporate goals, currently expressed in terms
of financial performance. The Committee determines the goals under which these
awards are made from year to year. The Committee did not approve the grant of
performance units under the Company's Long-Term Incentive Plan to executive
officers for 2004.
GOVERNANCE, NOMINATING AND COMPENSATION
COMMITTEE
D. Van Skilling,
Chairman John C. Dannemiller
James T. Bartlett A. Malachi Mixon, III
Francis H. Beam, Jr.
COMPANY STOCK PERFORMANCE
The following performance graph compares the five-year cumulative return,
including reinvestment of dividends, from investing $100 on December 31, 1999 in
each of the Company's Common Shares, the Russell 2000 Index and Standard &
Poor's Small Industrials Index.
18
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
------------------------------------------------------------------------------------------------------------------
12/99 12/00 12/01 12/02 12/03 12/04
------------------------------------------------------------------------------------------------------------------
Lamson & Sessions 100.00 215.38 107.69 66.05 118.36 186.67
------------------------------------------------------------------------------------------------------------------
Russell 2000 100.00 96.98 99.39 79.03 116.38 137.71
------------------------------------------------------------------------------------------------------------------
Standard & Poor's Small Cap 600
Industrials 100.00 119.23 123.66 110.30 147.34 184.18
------------------------------------------------------------------------------------------------------------------
There can be no assurances that the Company's stock performance will
continue into the future with the same or similar trends depicted in the
performance graph above. The Company does not make or endorse any predictions as
to future stock performance.
CERTAIN BUSINESS RELATIONSHIPS
During the past fiscal year, the Company, in the normal course of business,
utilized the services of the law firm of Jones Day in which Mr. Coquillette is a
partner. The Company plans to continue using the services of the firm in 2005.
19
DIRECTORS DEFERRED PLAN
The Directors Deferred Plan provides Directors the opportunity to defer
their annual retainers and meeting fees. Such deferred fees may be invested, at
each Directors election, in either a money market fund or in Common Shares of
the Company. If a Director elects to have this deferred compensation invested in
Common Shares, the director will receive restricted shares, issued from the 1998
Plan, equivalent to 25% of the dollar amount deferred by the director.
EXECUTIVE OFFICERS DEFERRED PLAN
The Executive Officers Deferred Plan provides designated executive officers
and other key employees of the Company the opportunity to defer bonus
compensation payable to them under the Company's annual incentive compensation
program. Such deferred compensation is invested in deferred Common Shares of the
Company. If a participant elects to have his or her bonus deferred, the Company
will issue Restricted Shares under the 1998 Plan to such participant in the
amount equal to 20% of the deferred annual incentive compensation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Lamson's executive officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC, the NYSE and the Pacific Stock Exchange, and to provide
Lamson with copies of such reports.
Based solely on review of the copies of such reports furnished to the
Company, or written representation that no forms were required to be filed, the
Company believes that during the year ended January 1, 2005, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than ten percent beneficial owners were complied with, except: (i) on April 30,
2004, each of the following executive officers: James J. Abel, Norman E. Amos,
Albert J. Catani, II, Eileen E. Clancy, Donald A. Gutierrez, Charles W. Hennon,
John B. Schulze, Lori L. Spencer and Norman P. Sutterer, was awarded a stock
option grant. Form 4s for these grants were not filed until August 6, 2004; (ii)
on May 3, 2004, each of the following non-employee directors: James T. Bartlett,
William H. Coquillette, John C. Dannemiller, George R. Hill, A. Malachi Mixon,
III and D. Van Skilling, was awarded a stock option grant. Form 4s for these
grants were not filed until July 23, 2004; and (iii) on May 3, 2004, each of the
following non-employee directors: Francis H. Beam, Jr. and Martin J. Cleary, was
awarded a stock option grant. Form 5s, reflecting their awards, were filed
January 24, 2005.
AUDIT COMMITTEE REPORT
The Board of Directors of the Company adopted a written Audit Committee
Charter. All members of the Audit Committee are independent as required by the
NYSE's current listing standards. The Committee met six times in 2004. The Audit
Committee has implemented procedures through which it devotes the attention that
it deems necessary and appropriate to carry out its responsibilities, during a
fiscal year, in each of the matters assigned to it under the Audit Committee
Charter, a copy of which is posted on the Company's Web site at
www.lamson-sessions.com via the Investor Relations page.
The Audit Committee has reviewed and discussed with the Company's
management and Ernst & Young LLP ("Ernst & Young"), the Company's independent
registered public accounting firm, the
20
audited financial statements of the Company contained in the Company's Annual
Report to Shareholders for the fiscal year ended January 1, 2005, as well as
quarterly financial statements all prior to their issuance. The Audit Committee
has also discussed with the Company's independent registered public accounting
firm the matters required to be discussed pursuant to SAS No. 61 (Codification
of Statements on Auditing Standards, Communication with Audit Committees) and
SAS No. 90 (Audit Committee Communications). The Committee's meetings include
executive sessions with the Company's independent registered public accounting
firm and with the Company's internal auditors, in each case without the presence
of the Company's management.
Among other things, the Committee also oversees management's implementation
and maintenance of effective systems of internal and disclosure controls,
including review of the Company's policies relating to legal and regulatory
compliance, ethics, conflicts of interest and the Company's internal auditing
process.
The Audit Committee has received and reviewed the written disclosures and
the letter from Ernst & Young required by Independence Standards Board Standard
No. 1 (titled, "Independence Discussions with Audit Committees"), and has
discussed with Ernst & Young their independence. The Audit Committee has also
considered whether the provision of non-audit services to the Company by Ernst &
Young is compatible with maintaining their independence and has pre-approved all
non-audit services.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
January 1, 2005, filed with the U.S. Securities and Exchange Commission.
AUDIT COMMITTEE
Francis H. Beam, Jr., Chairman
Martin J. Cleary
George R. Hill
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
For many years the firm of Ernst & Young in Cleveland, Ohio, has served as
the independent registered public accounting firm to the Company. In February
2004, Ernst & Young was reappointed by the Board of Directors of the Company, on
the recommendation of the Audit Committee, as the Company's independent
registered public accounting firm for the fiscal year ended January 1, 2005. The
Audit Committee has retained Ernst & Young for the Company's 2005 fiscal year.
Representatives of Ernst & Young are expected to be present at the Company's
Annual Meeting of Shareholders and will have the opportunity to make a statement
if they so desire. They are expected to be available to respond to proper
questions regarding the independent registered public accounting firm's
responsibilities.
AUDIT FEES
Fees for audit services totaled $615,020 in 2004 and $360,000 in 2003,
including fees associated with the annual financial statement audit and reviews
of the Company's quarterly reports on Form 10-Q and, in 2004, the audit of
internal control over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002.
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AUDIT-RELATED FEES
Fees for audit-related services totaled $52,500 in 2004 and $11,500 in
2003. Audit-related services principally include accounting consultations. The
Audit Committee approved one hundred percent of such fees in 2003 and 2004.
TAX FEES
Fees for tax services, including tax compliance, tax advice and tax
planning totaled $38,737 in 2004 and $37,025 in 2003. The Audit Committee
approved one hundred percent of such fees in 2003 and 2004.
ALL OTHER FEES
There were no other fees in 2003 or 2004 not included in the above totals.
AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that one member of the Audit Committee, Francis H.
Beam, Jr., has the qualifications to be an "audit committee financial expert" as
defined in the SEC's rules and regulations and also meets the standards of
independence adopted by the SEC for membership on an audit committee.
AUDIT COMMITTEE PRE-APPROVAL POLICY
The Audit Committee pre-approves, prior to engagement, all audit and
non-audit services provided by the Company's independent registered public
accounting firm and all fees to be paid for such services. The Audit Committee
has pre-approved all audit services to be provided by the Company's independent
registered public accounting firm related to the review of the Company's
quarterly financial reports on Form 10-Q for the Company's 2005 fiscal year. All
other services are considered and approved by the Audit Committee, on an
individual basis, as such proposed engagements are presented to the Audit
Committee.
SHAREHOLDER PROPOSALS FOR 2006 ANNUAL MEETING OF SHAREHOLDERS
Any shareholder proposal intended to be presented at the Annual Meeting of
Shareholders to be held in 2006 must be received by the Company's Secretary at
its principal office in Cleveland, Ohio, not later than December 1, 2005 for
inclusion in the Company's Proxy Statement and Form of Proxy relating to the
Annual Meeting of Shareholders in 2006. Each proposal submitted should be
accompanied by the name and address of the shareholder submitting the proposal
and the number of Common Shares owned. If the proponent is not a shareholder of
record, proof of beneficial ownership should also be submitted. All proposals
must be a proper subject for consideration and comply with the proxy rules of
the SEC.
If a shareholder intends to present a proposal at the Company's 2006 Annual
Meeting without inclusion of the proposal in the Company's proxy materials and
written notice of the proposal is not received by the Company on or before
February 14, 2006, proxies solicited by the Board of Directors will confer
discretionary authority to vote on the proposal if presented at the meeting.
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CODE OF ETHICS
The Company's Code of Corporate Conduct and Ethics that applies to its
directors and associates, including the Company's principal executive officer,
principal financial officer, principal accounting officer and any person
performing a similar function with the Company is posted on the Company's Web
site at www.lamson-sessions.com via the Investor Relations page. In addition,
the Company will provide, free of charge to any person, a copy of the Code of
Corporate Conduct and Ethics. Requests should be sent to: Secretary, The Lamson
& Sessions Co., 25701 Science Park Drive, Cleveland, OH 44122. The Company
intends to satisfy the disclosure requirements under Item 5.05 of Form 8-K
regarding certain amendments to or waivers of its Code of Corporate Conduct and
Ethics by posting such information on its Web site at www.lamson-sessions.com
via the Investor Relations page.
OTHER MATTERS
The Board of Directors of the Company is not aware of any matter to come
before the Annual Meeting other than as herein presented. However, if any other
matter is properly brought before the Annual Meeting, the persons appointed as
proxies in the accompanying proxy will have discretion to vote or act hereon
according to their best judgment.
The Company's 2004 Annual Report, including financial statements, has been
mailed contemporaneously with this Proxy Statement.
By Order of the Board of Directors.
/s/ James J. Abel
JAMES J. ABEL
Executive Vice President, Secretary,
Treasurer and Chief Financial
Officer
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VOTE BY TELEPHONE
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Have your proxy card available when you call
the Toll-Free number 1-800-542-1160 using a
touch-tone phone and follow the simple
instructions to record your vote.
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VOTE BY INTERNET
--------------------------------------------
Have your proxy card available when you
access the Web site http://www.votefast.com
and follow the simple instructions to record
your vote.
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VOTE BY MAIL
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Please mark, sign and date your proxy card
and return it in the postage-paid envelope
provided or return it to: National City
Bank, P.O. Box 535300, Pittsburgh, PA 15253-
9837.
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VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEB SITE and Return your proxy
Touch-Tone phone: Cast your vote: in the POSTAGE-PAID
1-800-542-1160 http://www.votefast.com envelope provided
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VOTE 24 HOURS A DAY, 7 DAYS A WEEK!
YOUR TELEPHONE OR INTERNET VOTE MUST BE RECEIVED BY 11:59 P.M. EASTERN TIME
ON APRIL 28, 2005 TO BE COUNTED IN THE FINAL TABULATION.
IF YOU VOTE BY TELEPHONE OR INTERNET, PLEASE DO NOT SEND YOUR PROXY BY MAIL.
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PROXY MUST BE SIGNED AND DATED BELOW.
| PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. |
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[LAMSON & SESSIONS LOGO]
25701 Science Park Drive
Cleveland, Ohio 44122
The undersigned hereby appoints James J. Abel and Lori L. Spencer, and each of
them, as proxies, each with the power to appoint a substitute. The undersigned
hereby authorizes the proxies to represent and to vote, as designated on the
reverse side, all the Common Shares of The Lamson & Sessions Co. held of record
by the undersigned on March 3, 2005, at the Annual Meeting of Shareholders to be
held on April 29, 2005 or any adjournment(s) thereof. This proxy is solicited on
behalf of the Company's Board of Directors.
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Signature(s)
------------------------------------
Signature(s)
Date: , 2005
------------------------
PLEASE SIGN EXACTLY AS NAME APPEARS.
WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN,
ETC., GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN
CORPORATE NAME BY AUTHORIZED OFFICER
AND GIVE TITLE. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
| PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING. |
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LAMSON & SESSIONS PROXY
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR ALL NOMINEES FOR THE ELECTION OF DIRECTORS, WITH DISCRETION TO VOTE UPON
SUCH OTHER MATTERS AS MAY BE BROUGHT BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.
1. ELECTION OF CLASS III DIRECTORS
Nominees:
(01) James J. Abel (02) A. Malachi Mixon, III (03) John B. Schulze
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as listed to the contrary below) for all nominees listed above
To withhold authority to vote for any individual nominee listed above, write
that nominee's name on the space provided below:
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(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)