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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

THE LAMSON & SESSIONS CO.
(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code: 216/464-3400

Securities registered pursuant to Section 12(b) of the Act:

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   X   No ___

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [   ]

      The aggregate market value of the voting stock held as of February 9, 2001 by non-affiliates of the Registrant: $143,808,987.

      As of February 9, 2001 the Registrant had outstanding 13,706,877 common shares.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Proxy Statement for the 2001 Annual Meeting of Shareholders are incorporated by reference into Part III.

PART I

Item 1. — Business

The Lamson & Sessions Co., an Ohio corporation, (the “Company” or “Lamson & Sessions”), founded in 1866, is a diversified manufacturer and distributor of a broad line of thermoplastic electrical, consumer, telecommunications and fluid drainage products for major domestic markets. The markets for thermoplastic electrical conduit, related fittings and accessories, wiring devices and sewer pipe include: the construction, utility and telecommunications industries, municipalities, other government agencies, and contractors; and “do-it-yourself” home remodelers.

Principal Products and Markets

The Company is engaged in the manufacture and distribution of a broad line of thermoplastic electrical, telecommunications and engineered sewer products. In addition, the Company distributes a wide variety of consumer electrical wiring devices, home security devices, wireless electrical and other wireless products.

All of the Company’s thermoplastic electrical products compete with and serve as substitutes for similar metallic products. The Company’s engineered sewer pipe products compete with and serve as substitutes for clay, concrete, ductile iron, asbestos cement and polyethylene products. The Company’s thermoplastic electrical products offer several advantages over these other products. Specifically, nonmetallic electrical and telecommunications conduit and related fittings and accessories are generally less expensive, lighter and easier to install than metallic products. They do not rust, corrode or conduct electricity. Thermoplastics, either polyvinyl chloride (PVC) or high density polyethylene (HDPE), are the materials of choice to protect fiber optic cable. Thermoplastic sewer pipe weighs less than alternative products, is easier and more economical to install, does not degenerate due to chemical attack as do some competing products, and eliminates avoidable problems which can be caused by infiltration and exfiltration.

Three markets are served, each of which has unique product and marketing requirements. These markets are:

Carlon —Industrial, Residential, Commercial, Telecommunications and Utility Construction: The major customers served are electrical contractors and distributors, original equipment manufacturers, electric power utilities, cable television (CATV), telephone and telecommunications companies. The principal products sold by this segment include electrical, telecommunications and wire raceway systems and a broad line of nonmetallic enclosures, outlet boxes and electrical fittings. Examples of the applications for the products included in this segment are multi-cell duct systems or HDPE conduit designed to protect underground fiber optic cables, allowing future cabling expansion and flexible conduit used inside buildings to protect communications cable. The two recent acquisitions of Pyramid Industries, Inc. (“Pyramid”) and Ameriduct Worldwide, Inc. (“Ameriduct”) are included as part of the Carlon segment.

Lamson Home Products —Consumer: The major customers served are home centers and mass merchandisers for the “do-it-yourself” home repair market. The products included in this segment are outlet boxes, liquidtight conduit, electrical fittings, chimes and lighting controls.

PVC Pipe: This business segment supplies electrical, power and communications conduit to the electrical distribution, telecommunications, consumer and power utility markets. The 1/2 inch to 6 inch electrical and telecommunications conduit is made from PVC and is used to protect wire or fiber optic cables supporting the infrastructure of our power or telecommunications systems. In addition, this segment provides closed profile engineered sewer pipe ranging in diameter from 21 inches to 54 inches to various municipalities and private contractors for drainage systems in new construction and rehabilitation markets.

A breakdown of revenues as a percent of net sales by major business segment for 2000, 1999 and 1998, is as follows:

See discussion of segment products in Note K of financial statements.

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Competition

Each of the three segments in which the Company presently operates is highly competitive based on service, price and quality. Most of the competitors are either national or smaller regional manufacturers who compete with limited product offerings. Unlike a majority of the Company’s competitors, the Company manufactures a broad line of thermoplastic products, complementary fittings and accessories. The Company believes that its products will continue to compete favorably. However, certain of the Company’s competitors have greater financial resources than the Company, which could adversely affect the Company through price competition strategies.

Distribution

The Company distributes its products through a nationwide network of more than 100 manufacturers’ representatives and a direct sales force of approximately 40. Currently, three manufacturers’ representatives maintain an inventory of the Company’s products.

Raw Materials

The Company is a large purchaser of pipe grade PVC and HDPE resins. The Company has entered into supply contracts for PVC which should stabilize its availability for the next several years. HDPE is purchased by the Company from various sources and is readily available.

Patents and Trademarks

The Company owns various patents, patent applications, licenses, trademarks and trademark applications relating to its products and processes. While the Company considers that, in the aggregate, its patents, licenses and trademarks are of importance in the operation of its business, it does not consider that any individual patent, license or trademark, or any technically related group, is of such importance that termination would materially affect its business.

Seasonal Factors

Two of the Company’s three business segments experience moderate seasonality caused principally by a decrease in construction activity during the winter months. They are subject also to the economic cycles affecting the residential, commercial and industrial construction industries and to a lesser degree the telecommunications infrastruction construction. The Company’s consumer products business unit is affected by consumer spending and consumer confidence.

Major Customers

Sales to Affiliated Distributors, a buying group within the Carlon and PVC Pipe segments not otherwise affiliated with the Company, totaled approximately 17% of consolidated net sales in 2000 and 1999 and 15% of consolidated net sales in 1998.

Backlog

In the Company’s three business segments, the order-to-delivery cycle ranges from several days to a few weeks. Therefore, the measurement of backlog is not a significant factor in the evaluation of the Company’s prospects.

Research and Development

The Company is engaged in product development programs which concentrate on identifying, creating and introducing innovative applications for thermoplastic and wireless electrical products. The Company maintains a separate product development center in Cleveland, Ohio, to facilitate this effort and improve manufacturing processes. The Company’s research and development expenditures totaled $3.3 million, $3.8 million and $3.7 million in 2000, 1999 and 1998, respectively.

Environmental Regulations

The Company believes that its current operations and its use of property, plant and equipment conform in all material respects to applicable environmental laws and regulations presently in effect. The Company has facilities at numerous geographic locations, which are subject to a range of federal, state and local environmental laws and regulations. Compliance with these laws has, and will, require expenditures on a continuing basis.

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During the second quarter of 1999, the Company reached a settlement on litigation involving environmental matters at a property sold by the Company in 1981 whereby the Company agreed to incur costs of certain remediation activities which will occur over several years. The settlement did not have a material impact on the Company’s financial position or results of operations.

Associates

At December 30, 2000, the Company had 1,246 associates, 1,020 of whom were employed at the Company’s manufacturing facilities and distribution centers. The remainder of associates were primarily employed at the Company’s corporate headquarters and product development facilities.

Foreign Operations

The net sales, operating earnings and assets employed outside the United States are not significant. Export sales were approximately 2% of consolidated net sales in 2000 and 1999 and 1% in 1998, and were made principally to countries in North America.

Item 2. — Properties

The Company owns (O) or leases (L) manufacturing and distribution facilities, which are suitable and adequate for the production and marketing of its products. The Company owns executive and administrative offices, which are located in Cleveland, Ohio, and occupy 68,000 square feet in a suburban office complex. The Company also has research and development offices, located in Cleveland, Ohio, which occupy leased space of 27,000 square feet, and administrative offices in Erie, Pennsylvania, which occupy 7,000 square feet of leased space. The following is a list of the Company’s manufacturing and distribution center locations:

The Company operated the above manufacturing facilities at approximately 91% of their productive capacity in 2000.

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Item 3. — Legal Proceedings

On September 23, 1999, the Company announced that a United States District Court jury in the Northern District of Illinois found that the Company willfully infringed on a patent held by Intermatic Incorporated of Spring Grove, Illinois, relating to the design of an in-use weatherproof electrical outlet cover, and awarded Intermatic $12.5 million in damages plus pre-judgment interest of approximately $1.5 million. The court declined to increase the damages with respect to the willfulness finding. The Company is pursuing a vigorous appeal and believes it has meritorious positions that will substantially reduce or eliminate the jury award. If, however, the appeal process is not successful, the final resolution of the matter could have a material adverse affect on the Company’s financial position, cash flows and results of operations. It is the Company’s understanding that the appeal process may require a one-to-two year period.

The Company has filed a suit to recover damages related to the termination of the agreement to sell its PVC Pipe business. This matter is scheduled for trial in March 2001. It is premature to estimate the timing for a resolution of this suit.

The Company is also a party to various other claims and matters of litigation incidental to the normal course of its business. Management believes that the final resolution of these matters will not have a material adverse affect on the Company’s financial position, cash flows or results of operations.

Item 4. — Submission of Matters to Security Holders

None.

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JOHN B. SCHULZE

JAMES J. ABEL

CHARLES E. ALLEN

ALBERT J. CATANI, II

DONALD A. GUTIERREZ

CHARLES W. HENNON

MELVIN W. JOHNSON

LORI L. SPENCER

NORMAN P. SUTTERER

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PART II

Item 5. — Market for the Registrant’s Common Stock and Related Security Holder Matters

The Company’s Common Stock is traded on the New York Stock Exchange and the Pacific Stock Exchange. High and low sales prices for the common stock are included in Note M to the Consolidated Financial Statements. No dividends were paid in 2000, 1999 or 1998. The approximate number of shareholders of record of the Company’s Common Stock at December 30, 2000 was 1,377.

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Item 6. — Selected Financial Data

FIVE-YEAR CONSOLIDATED FINANCIAL SUMMARY

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Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Discussion of the Consolidated Statements of Income

The Consolidated Statements of Income present Lamson & Sessions’ operating performance over the last three years.

Results of Operations

Net sales increased in 2000 to $348.7 million from $291.4 million in 1999 representing a 19.7% growth rate.Excluding the two acquisitions made by the Company during the year net sales would have increased by 14.6% or $42.7 million. All three business segments experienced healthy growth during this year. Carlon grew by $22 million or 18.2% primarily from the Pyramid and Ameriduct acquisitions, which added $14.7 million in combined net sales. This business unit generated a 6% growth from its core electrical and telecommunications products reflecting price increases early in the year and modest market growth. Lamson Home Products increased its net sales level by $10 million or 18.6% over 1999 to $63.4 million. This improvement in the top line is almost entirely from additional business at the unit’s second largest customer as price increases were negligible. The PVC Pipe business had an outstanding year as sales increased by 21.7% or $25.4 million to $142.4 million. These results reflect a 50% increase in selling price per unit as resin costs were up by an average of 30% during 2000 versus 1999. The Company gave up market share to maintain material spreads as the construction market was very strong throughout the first half of this year. Telecommunications duct volume was up by 12% this year, the mix improving from predominantly electrical conduit to a more balanced product distribution. Sales of large diameter sewer pipe have continued to decline due to extremely competitive pricing in the direct bury product lines (12% lower than 1999). However, the targeted rehabilitation pipe products have expanded rapidly this year, almost doubling in sales value.

Net sales increased in 1999 by 7.6% to $291.4 million from $270.9 million in 1998.The largest increase came in the Carlon business unit, which expanded sales by 10.5% or $11.5 million. The segment has continued to gain market acceptance of its engineered cable management products used in telecommunications network construction both for inside premise and outside plant applications. Strong construction markets and improved customer service led to solid growth across the board in electrical products. Lamson Home Products grew net sales by 6.1% or $3.1 million in 1999 compared with 1998.Continued strong growth in the home improvement market drove improved sales volume in electrical fittings, outlet boxes and liquidtight tubing. This segment was negatively impacted for 1999 by the Hechinger’s bankruptcy as well as the elimination of unprofitable wiring device products. Finally, the PVC Pipe business increased sales by 5.3%, with electrical and telecommunications conduit growing by 8.1%, primarily from increased resin costs, which we were able to pass on to our customers. This segment was negatively impacted by unexpected PVC resin shortages during the third quarter, which limited its supply of conduit to the electrical construction market. In addition, sales in large diameter sewer pipe declined by 5.7% due to increased competition and a softening demand for rehabilitation pipe.

Gross margins grew by over 20% to 25.4% in 2000 compared with 21.1% in 1999.This improvement was a result of better margins in both the Carlon and the PVC Pipe businesses from price increases and product mix improvements. Overall distribution and freight costs were around $5 million less on a comparable basis to 1999 primarily due to the consolidation of distribution operations completed last year and effective management of freight surcharges incurred in 2000.

Gross margins were 21.1% in 1999, a slight improvement from the 20.9% in 1998.The 1999 cost of products sold includes $2.1 million of costs for the consolidation of distribution operations. They consist primarily of associate relocation, training and start-up costs and asset dispositions. Better product mix, distribution and freight savings were partially offset by unfavorable volume variances caused by the raw material shortages experienced during the peak construction season.

Operating expenses were $54.1 million in 2000 ($6.1 million higher than 1999) or 15.5% of net sales compared with 16.5% of net sales in 1999.Continued productivity improvements in general administrative activities offset increases in sales commission and legal, professional and acquisition related expenses. The result was more than a two and a half times increase in operating income to $34.5 million (9.9% of net sales) in 2000 versus $13.3 million (4.6% of net sales) in 1999.

Operating expenses in 1999 declined to 16.5% of net sales or $48.1 million, 6.3% lower than the 17.6% in 1998.The Company continued to experience productivity improvements from its infrastructure investments in management information systems and associate training programs, which resulted in lower staffing levels. With the exception of

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higher commission expense due to increased sales, operating expenses actually declined by 1.3% from 1998.Operating income improved by almost 50% to $13.3 million in 1999 (4.6% of net sales) compared with $8.9 million (3.3% of net sales) in 1998.

Interest expense increased by a million dollars in 2000 due to the acquisition debt added late in the year. The new debt agreement entered into in August 2000, lowered the Company’s average borrowing rate by over one percentage point. In 1999, the interest expense had declined as a result of lower average debt levels and lower interest rates from improved operating performance.

The Company’s earnings before interest, taxes, depreciation and amortization (EBITDA) was $45.7 million for 2000, almost double the $23.5 million EBITDA earned in 1999.

Financial Condition

Working capital was $58 million at the end of 2000 compared with $38.5 million at the end of 1999.The current ratio increased to 1.76 in 2000 from 1.68 in 1999 as accounts receivable and inventory balances grew more than current related payables. Cash flow generated from operating activities was a strong $27.5 million in 2000 versus $12.2 million in 1999. These results reflect the significant improvement in operating results this year, which offset a $9.5 million increase in inventory.

Accounts receivable were $56.6 million at the end of 2000, which includes $15.8 in receivables from the acquisitions, compared with $40.7 million at the end of 1999.Days sales outstanding were about 49.2 this year compared with 49.8 days for 1999.

Inventory levels at the end of 2000 were $59.6 million compared with $42.6 million at the end of 1999.Of this $17.3 million increase, $7.5 million is inventory acquired in the Pyramid and Ameriduct purchases. Almost the entire remaining increase has occurred in the PVC Pipe business as pounds of resin are up almost 45% from the low level at the end of last year, while resin pricing at the end of 2000 is relatively the same as the prior year end.

Accounts payable at year end were approximately the same ($28.6 million) as last year, as the Company has decreased its purchasing activity in the last quarter to help adjust its inventory levels going into next year.

The current balance in deferred tax assets increased due to improved operating results allowing the Company to utilize net operating losses to reduce current expected tax payments. Accrued expenses reflect acquired liabilities to be paid in the next year and the expectation that outstanding legal cases will be resolved in the next year. The current portion of long-term debt has increased to reflect the amortization schedule of term debt provided in the new credit agreement.

The Company completed the refinancing of its debt during 2000 to provide up to $194 million in a five-year facility with a ten bank consortium of which $48.5 million is a term loan. During the year the Company utilized in excess of $110 million for the acquisitions of Pyramid and Ameriduct. Excluding these acquisitions, the Company would have paid down nearly $20 million in debt.

Capital expenditures totaled $11.1 million in 2000 compared with $7.6 million in 1999.The current year spending was primarily for conduit extrusion capacity additions, distribution center productivity, new product tooling and quality enhancements.

Outlook

The following paragraphs contain forward-looking comments. The comments are subject to, and the actual future results may be impacted by, the cautionary limitations and factors outlined in the following narrative comments.

We began to express caution with respect to the moderating effects on the general economy of interest rate increases in our Form 10-Q filings and quarterly earnings releases throughout 2000. The general level of economic activity slowed dramatically in the fourth quarter of 2000 and this slowing has continued into the first quarter of 2001, especially in the telecommunications market where funding sources for infrastructure development projects were sharply contracted or eliminated.

On January 30, 2001, in our fourth quarter 2000 earnings release and web cast conference call, we outlined our expectations for both the first quarter and full year 2001 which reflected the best information available to us at that time from economic data as well as input from customers and our sales force. Since then, we have experienced a significantly lower sales order rate which now causes us to reduce our earnings estimate accordingly. Recent announcements by major telecommunications companies lowering their growth forecasts and recognizing the severity of the economic slowdown are having an effect on our performance. The sales order activity from the telecommunication infrastructure market has fallen precipitously in light of the slowing or deferral of outside plant construction projects (including the installation of fiber optic backbone networks) over the past several weeks. While we continue to believe that the telecom infrastructure market’s prospects over the next two or three years are projected to be good, the near term decline reflects a combination of conservative capital spending and difficulty in gaining firm financing agreements as a result of general credit tightening measures.

Our Carlon business segment encompasses both the telecom market and the residential and commercial construction markets. While the telecom activity has slowed, we are encouraged by the continuing strength in housing permits and housing starts, which should begin to favorably impact our results in the second quarter.

The dramatic fall in consumer confidence, its lowest level in seven years, is likely to reduce the growth target of our Lamson Home Products business segment as evidenced by recent public statements by its largest customer, Home Depot.

The PVC Pipe business segment is highly sensitive to commodity raw material pricing volatility. Currently, margins are very tight due to aggressive competition trying to defend market share positions in a climate of soft demand.

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The length and depth of the economic slowing are problematic to estimate, at best. The spring months should bring some increased spending simply due to seasonal factors. If the economy begins to respond to the interest rate reductions over the next several months, we believe that some of the “wait and see’ conservatism will abate and more capital spending will begin to flow in the second half of 2001.

We previously disclosed a projected sales level of $95 to $100 million for the first quarter of 2001 which would likely result in an earnings range of 22 cents to 25 cents per diluted share. As a result of the factors described above, we now project an $85 million to $90 million sales range resulting in earnings of 3 cents to 8 cents per diluted share for the first quarter of 2001. This revised earnings level reflects the reduction in plant operating rates, particularly for high density polyethylene (HDPE) conduit that has resulted in unabsorbed fixed costs creating higher manufacturing variances.

For the full year 2001, we have previously indicated a range of $460 million to $470 million in net sales and an earnings range of $1.70 to $1.75 per diluted share. While we anticipate that demand will begin to strengthen in the second quarter, in light of the projected weaker first quarter described above and continued competitive pricing, we are revising our projection for the full year 2001 to a net sales range of $430 million to $440 million and net earnings of $1.00 to $1.10 per diluted share.

The volume levels currently being experienced, and those projected for the balance of the year, effectively preclude the Company from sustaining growth in earnings per share for 2001. We are disappointed that low volume will prevent the Company from fully demonstrating the improved performance made possible by continued progress in cost reduction and operating efficiency. Even at the reduced volume, which is now projected, the EBITDA level for 2001 is projected to exceed EBITDA for 2000 by $9 million. For 2001, the increase projected in EBITDA is offset by the projected increase of $7.2 million in interest expense resulting from the increased borrowings to finance the Company’s two recent acquisitions as well as projected increased charges of $5 million and $2 million for amortization of goodwill and income taxes, respectively.

Lamson & Sessions is a leading producer of thermoplastic enclosures, fittings, wiring outlet boxes and conduit for the electrical, telecommunications, consumer, power and wastewater markets. For additional information, please visit our Web site at: www.lamson-sessions.com.

The above statements contain expectations that are forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform act of 1995. Actual results may differ materially from those expected as a result of a variety of factors, such as: (i) the volatility of resin pricing, (ii) the ability of the Company to pass through raw material cost increases to its customers, (iii) maintaining stable level of housing starts, telecom infrastructure spending, consumer confidence and general construction trends, and (iv) further deterioration in the country’s general economic condition affecting the markets for the Company’s products.

Item 7(a). — Market Risk Disclosures

The following discussion about the Company’s market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. The Company is exposed to market risk related to changes in interest rates and commodity prices for PVC and HDPE resins. The Company does not use derivative financial instruments for speculative or trading purposes.

Almost all of the Company’s long-term debt obligations bear interest at a variable rate. In order to mitigate the risk associated with interest rate fluctuations, in January 2001, the Company entered into an interest rate swap with a notional amount of $48.5 million and effectively fixed the variable rate debt at 5.48% plus the Company’s risk premium of 1.125% to 1.875%.The notional amount is used to calculate the contractual cash flow to be exchanged and does not represent exposure to credit loss.

These risks and others that are detailed in this Form 10-K and in the Company’s Annual Report must be considered by any investor or potential investor in the Company.

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Item 8. — Financial Statements and Supplementary Data

CONSOLIDATED STATEMENTS OF INCOME

THE LAMSON & SESSIONS CO. AND SUBSIDIARIES

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

THE LAMSON & SESSIONS CO. AND SUBSIDIARIES

See notes to consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS

THE LAMSON & SESSIONS CO. AND SUBSIDIARIES

See notes to consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS

THE LAMSON & SESSIONS CO. AND SUBSIDIARIES

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

THE LAMSON & SESSIONS CO. AND SUBSIDIARIES

(Dollars in thousands)

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES

Three fiscal years ended December 30, 2000

NOTE A—ACCOUNTING POLICIES

Fiscal Year: The Company’s fiscal year end is the Saturday closest to December 31.

Principles of Consolidation and Presentation: The consolidated financial statements include the accounts of the Company and all domestic and foreign subsidiaries after elimination of intercompany items. Certain 1999 and 1998 items have been reclassified to conform with the 2000 financial statement presentation.

Recent Accounting Standard Changes: The Company will adopt Financial Accounting Standards Board Statement No. 133 (SFAS 133), Accounting for Derivatives and Hedging Activities, as amended, as of December 31, 2000, as required. SFAS 133 requires that all derivative instruments be recorded as either assets or liabilities at fair value. Gains or losses resulting from changes in the values of the derivative instruments may be recognized immediately or deferred depending on the use of the derivative and whether it qualifies as a hedge. The impact of complying with SFAS 133 will not have a material effect on the Company’s results of operations, financial position or cash flows.

Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents: The Company considers all investments with an original maturity of three months or less on their acquisition date to be cash equivalents.

Inventories: Inventories are valued at the lower of first-in, first-out (FIFO) cost or market.

Financial Instruments: The Company’s carrying value of its financial instruments approximates fair value.

Property and Depreciation: Property, plant and equipment are recorded at cost. For financial reporting purposes, depreciation and amortization are computed principally by the straight-line method over the estimated useful lives of the assets. Buildings are depreciated over periods up to 31.5 years. Machinery and equipment is depreciated over periods ranging from 3 years to 15 years. Accelerated methods of depreciation are used for federal income tax purposes.

Impairment of Long-Lived Assets: The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives at each balance sheet date. The Company would record an impairment charge or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, measured using undiscounted cash flows, or the useful life has changed.

Goodwill: Goodwill represents the cost in excess of fair value of net assets acquired in business combinations accounted for by the purchase method and is amortized on a straight line basis over the expected period of benefit ranging from 5 to 20 years. Accumulated amortization of goodwill was $1,318,000 and $451,000 at December 30, 2000 and January 1, 2000, respectively.

Income Taxes: The Company accounts for income taxes using the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes.“Investment tax credits are recorded using the flow-through method.

Revenue Recognition: Revenues are derived from sales to unaffiliated customers and are recognized when products are shipped and title has transferred.

Research and Development Costs: Research and Development (R&D) costs consist of Company-sponsored activities to develop new value-added products. R&D costs are expensed as incurred and expenditures were $3,300,000, $3,800,000 and $3,700,000 in 2000, 1999 and 1998, respectively. R&D costs are included in operating expenses in the Consolidated Statements of Income.

Advertising Costs: Advertising costs are expensed as incurred and totaled $3,000,000, $2,300,000 and $2,600,000 for 2000, 1999 and 1998, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE B—ACQUISITIONS

On September 22, 2000 and December 15, 2000, the Company acquired Pyramid for $45.4 million and Ameriduct for $63.8 million plus assumed debt of $3.9 million plus transaction costs. In addition, pursuant to terms of non-competition agreements, Lamson will pay three former Pyramid shareholders $6.5 million over a five-year period, including $1.5 million, which was paid at closing. The acquisitions were funded through the Company’s secured credit agreement. Both Pyramid and Ameriduct are leading manufacturers of HDPE conduit used in building telecommunications and utility infrastructure.

The acquisitions have been accounted for by the purchase method and, accordingly, the operating results have been included in the Company’s consolidated financial statements and the Carlon business segment since the respective dates of acquisition. The assets acquired and liabilities assumed were recorded at estimated fair values. For financial statement purposes, goodwill relating to these acquisitions is being amortized by the straight-line method over 20 years. The following summary of the assets acquired and liabilities assumed is based upon a preliminary purchase price allocation.

Unaudited pro forma results of operations as if the acquisition occurred as of January 2, 2000 and January 1, 1999 follows. The pro forma results include estimates and assumptions, which the Company’s management believes are reasonable. However, the pro forma results do not include any cost savings, revenue enhancements or other effects of the planned integration of the Company, Pyramid and Ameriduct and are not necessarily indicative of the results which would have occurred if the business combination had been in effect at the beginning of each of the years presented, or which may result in the future.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE C—LONG-TERM DEBT AND COMMITMENTS

Long-term debt consists of the following:

In August 2000, the Company completed the refinancing of its previous secured credit agreement by entering into a new five-year, $125 million revolving credit agreement with a consortium of banks led by Harris Trust of Chicago. In December 2000, in conjunction with the acquisition of Ameriduct, the agreement was amended and increased to a $194 million facility, consisting of $48.5 million in term debt and $145.5 million in a revolver. Beginning in the third quarter of 2001, the term portion of this agreement requires principal payments of $2 million at the end of the first and second quarter and $3.5 million at the end of the third and fourth quarter of each year with a balloon payment in August 2005.This agreement is secured by substantially all of the Company’s assets. Interest on this credit facility is at LIBOR plus 1.125% to 1.875%.The specific rate is determined based on the ratio of indebtedness to earnings before interest, taxes, depreciation and amortization and is adjusted quarterly. The rate at December 30, 2000 is 8.42%.In addition to amounts borrowed, letters of credit related to Industrial Revenue Bond financings and other contractual obligations total approximately $17,700,000 under the agreement. The Company’s credit agreement contains various restrictive covenants pertaining to maintenance of net worth, certain financial ratios and limits the amount of stock repurchases and dividend payments.

The Company’s Industrial Revenue Bond financings include several issues due in annual installments from 2000 through 2023 with interest at variable rates. The weighted average rate for these bonds at December 30, 2000 was 4.7%.The Company maintains a letter of credit related to one of the Industrial Revenue Bond financings of approximately $1,800,000 with a bank.

The Company’s headquarters is subject to a mortgage payable in equal monthly installments through 2003 with interest at 8.625%.

In January 2001, the Company entered into an interest rate swap with the bank group with a notional amount of $48.5 million which declines in conjunction with the term debt maturities, fixing the interest rate at 5.48% plus the Company’s risk premium of 1.125% to 1.875%.

The aggregate minimum combined maturities of long-term debt for the years 2002 through 2005 are approximately $12,451,000, $12,454,000, $12,060,000 and $87,060,000 respectively, with $6,251,000 due thereafter.

Interest paid was $4,026,000, $3,679,000 and $4,253,000 in 2000, 1999 and 1998, respectively.

Rental expense was $5,861,000, $4,908,000 and $4,092,000 in 2000, 1999 and 1998, respectively. Aggregate future minimum payments related to non-cancelable operating leases with initial or remaining terms of one year or more for the years 2001 through 2005 are approximately $3,840,000, $3,374,000, $2,836,000, $2,303,000 and $1,687,000, respectively, with $6,116,000 due thereafter.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE D—PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

The Company sponsors several qualified and nonqualified pension plans and other post-retirement benefit plans for its current and former employees. The following table provides a reconciliation of the changes in the benefit obligations and fair value of plan assets over each of the two years in the period ended December 30, 2000 and a statement of the funded status at both years end:

Effective January 1, 2000, the Company amended its salaried associates retirement benefits program by phasing out certain medical benefits.

Plan assets include 760,856 shares of the Company’s Common Stock with a fair market value at December 30, 2000 of $8 million and 682,756 common shares with a fair value of $3.3 million at January 1, 2000.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
THE LAMSON & SESSIONS CO. AND SUBSIDIARIES
NOTE D—PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS—Continued

The pension benefits table above provides information relating to the funded status of all defined benefit pension plans on an aggregated basis. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $4.4 million, $4.1 million and $0, respectively, as of December 30, 2000 and $4.2 million, $3.9 million and $0, respectively, as of January 1, 2000.

The following table provides the amounts recognized in the consolidated balance sheets for both years: