LAWSON PRODUCTS, INC. (Form: 8-K)  

 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

     
Date of Report (Date of Earliest Event Reported):   July 28, 2011

LAWSON PRODUCTS, INC.
__________________________________________
(Exact name of registrant as specified in its charter)

     
Delaware 0-10546 36-2229304
_____________________
(State or other jurisdiction
_____________
(Commission
______________
(I.R.S. Employer
of incorporation) File Number) Identification No.)
      
1666 E. Touhy Avenue, Des Plaines, Illinois   60018
_________________________________
(Address of principal executive offices)
  ___________
(Zip Code)
     
Registrant’s telephone number, including area code:   (847) 827-9666

Not Applicable
______________________________________________
Former name or former address, if changed since last report

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Top of the Form

Item 2.02 Results of Operations and Financial Condition.

On July 28, 2011, Lawson Products, Inc. issued a press release announcing its results for the second quarter of 2011. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.





Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

99.1 Press Release issued on July 28, 2011






Top of the Form

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
    LAWSON PRODUCTS, INC.
          
July 28, 2011   By:   Ronald J. Knutson
       
        Name: Ronald J. Knutson
        Title: Senior Vice President, Chief Financial Officer


Top of the Form

Exhibit Index


     
Exhibit No.   Description

 
99.1
  Press Release issued on July 28, 2011
EX-99.1

Lawson Products Reports Results for the Second Quarter of 2011

DES PLAINES, Ill. – (BUSINESS WIRE) – July 28, 2011 – Lawson Products, Inc. (NASDAQ:LAWS) (“Lawson” or the “Company”), a distributor of products and services to the MRO marketplace, announced second quarter results today, showing continued sales growth.

    Net sales grew by 4.8% year-over-year to $84.2 million for the quarter

    Operating income was $1.6 million for the second quarter of 2011 compared to $2.8 million a year ago. Exclusive of $2.4 million of ERP expenses in 2011 and $0.6 million in 2010, operating income was $4.0 million in the second quarter versus $3.4 million a year ago

    As of June 30, 2011 cash-on-hand was $22.7 million with no debt outstanding

“We have been able to grow sales as we continue to invest in our business transformation initiatives,” commented Thomas Neri, president and chief executive officer. “With a shift toward strategic and larger customers, we expected some pressure on margins. However, we have been able to leverage our recurring cost structure despite our ongoing transformation process. In the second half of 2011, we will continue to implement initiatives to drive sales and gross profit dollars.”

“Additionally, we will continue to make infrastructure investments throughout this year as we position the company for sustainable future growth. After months of extensive planning and preparation for our ERP implementation, we plan to go-live with the first phase during the third quarter. All of our initiatives, including the new ERP system, are focused on delivering an enhanced customer experience that should strengthen our position in the MRO marketplace, assist in growing sales, and help us to improve our operating performance,” concluded Mr. Neri.

Second Quarter 2011 Results

Net sales for the second quarter grew to $84.2 million, an increase of 4.8% over the prior year quarter as the Company entered into tougher comparables from a year ago. The $3.8 million net sales increase was primarily due to continued growth in the Company’s national, government, and automotive sectors combined with a moderate increase in the Company’s other sectors. The national and government sectors accounted for 17.8% of net sales in the second quarter of 2011, compared to 16.2% in the same quarter last year. The Company’s average daily sales for the second quarter increased to $1.315 million, from $1.255 million in the second quarter a year ago.

Gross profit for the period was $48.3 million compared to $48.8 million a year ago. As a percent of net sales, gross profit was 57.4% in the second quarter of 2011 compared to 60.7% in the second quarter of 2010. The decline reflects the strategic decision to pursue larger customers with slightly lower margins. This will allow the Company to better balance the account portfolio which should help deliver sustained top-line growth, increased customer retention, and margin dollar expansion over time.

Selling, general and administrative expenses (SG&A) decreased as a percentage of sales this quarter, from 55.8% last year to 54.9% in the 2011, while increasing 3.3% on a year-over-year basis. The Company realized lower SG&A expenses as a percent of net sales through lower insurance costs and decreased stock based and incentive compensation expenses while continuing to invest in both its new ERP system and sales transformation initiative. This initiative should provide the Company the ability to implement tiered pricing, sales force conversion and a multi-channel sales approach for the first time. The Company’s ERP expenditures totaled $4.8 million in the second quarter, of which $2.4 million was expensed, compared to $3.4 million, of which $0.6 million was expensed during the quarter in 2010. Excluding ERP, SG&A expenses decreased 0.7% compared with the 2010 quarter.

Excluding the impact of ERP, operating income was $4.0 million in the second quarter, an increase of $0.6 million over 2010. Inclusive of ERP expenses, operating income for the second quarter of 2011 was $1.6 million compared to $2.8 million in 2010. The Company reported income from continuing operations of $1.1 million or $0.13 per diluted share in the second quarter of 2011, compared to income from continuing operations of $1.5 million or $0.17 per diluted share in the prior year quarter. Net income for the second quarter of 2011 was $1.1 million, or $0.12 per diluted share, compared to $1.7 million, or $0.20 per diluted share in the second quarter of 2010.

Year to Date Results

For the six months ended June 30, 2011, net sales increased to $166.7 million, a 7.4% improvement over the first six months of 2010 driven by increases in the Company’s national, government and automotive sectors. While gross profit grew $3.1 million, it declined as a percent of sales to 58.9% for the first six months of 2011 compared to 61.3% for the first six months of 2010, due to our strategic shift toward larger customers and newly signed business at lower margins which the Company believes will help increase customer retention, grow sales, and promote margin dollar expansion over time. SG&A expenses for the first six months of 2011 decreased as a percent of sales to 55.0% compared to 57.0% in 2010, but increased 3.6% overall. SG&A expenses include $4.3 million of ERP implementation expenses in the 2011 period compared to $0.6 million in 2010. Excluding ERP, SG&A expenses decreased 0.6% from a year ago.

Excluding 2010 non-recurring items, operating income increased by $0.4 million, or 7.3%, over the previous year. In the first six months of 2010, the Company reported two non-recurring items which positively impacted results: a $1.7 million gain on the sale of the Company’s Dallas, Texas distribution center and a favorable legal settlement of $0.6 million. Excluding the non-recurring items previously mentioned and the related tax impact, diluted earnings per share from continuing operations increased to $0.36 in 2011 from $0.30 in the first six months of 2010.

Net income for the first six months of 2011 was $3.1 million, or $0.36 per diluted share, compared to $4.0 million, or $0.47 per diluted share in the prior year.

About Lawson Products, Inc.
Founded in 1952, Lawson Products, Inc. (NASDAQ: LAWS), is an industrial distributor of more than 300,000 different maintenance and repair supplies. Lawson Products serves its customers through a dedicated team of 1,100 experienced field sales agents and approximately 900 employees. The Company services the industrial, institutional, commercial and government markets in all 50 U.S. states, Canada and Puerto Rico.

This Release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. The terms “may,” “should,” “could,” “anticipate,” “believe,” “continues,” “estimate,” “expect,” “intend,” “objective,” “plan,” “potential,” “project” and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These statements are based on management’s current expectations, intentions or beliefs and are subject to a number of factors, assumptions and uncertainties that could cause or contribute to such differences or that might otherwise impact the business and include the risk factors set forth in Item 1A of the December 31, 2010 Form 10-K filed on February 17, 2011 and updated in Item 1A of the June 30, 2011 Form 10-Q filed on July 28, 2011. The Company undertakes no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements whether as a result of new information, future events or otherwise.

1

                                 
 LAWSON PRODUCTS, INC.    
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS    
(Amounts in thousands, except per share data)    
(Unaudited)    
    Three Months Ended   Six months ended
    June 30,   June 30,
    2011   2010   2011   2010
Net sales
  $ 84,154     $ 80,305     $ 166,733     $ 155,215  
Cost of goods sold
    35,855       31,516       68,495       60,101  
 
                               
Gross profit
    48,299       48,789       98,238       95,114  
 
                               
Operating expenses:
                               
Selling, general and administrative expenses
    46,242       44,773       91,691       88,492  
Severance expense
    465       1,224       1,210       1,650  
Gain on sale of assets
                      (1,701 )
Legal settlement
                      (550 )
 
                               
Operating income
    1,592       2,792       5,337       7,223  
 
                               
Other expense, net
    (8 )     (173 )     (504 )     (242 )
 
                               
 
                               
Income from continuing operations before income taxes
    1,584       2,619       4,833       6,981  
 
                               
Income tax expense
    496       1,139       1,695       3,269  
 
                               
 
                               
Income from continuing operations
    1,088       1,480       3,138       3,712  
 
                               
Discontinued operations, net of income tax
    (22 )     207       (52 )     307  
 
                               
Net income
  $ 1,066     $ 1,687     $ 3,086     $ 4,019  
 
                               
 
                               
Basic income per share of common stock:
                               
Continuing operations
  $ 0.13     $ 0.17     $ 0.37     $ 0.44  
Discontinued operations
    (0.01 )     0.03       (0.01 )     0.03  
 
                               
 Net income per share
  $ 0.12     $ 0.20     $ 0.36     $ 0.47  
 
                               
Diluted income per share of common stock:
                               
Continuing operations
  $ 0.13     $ 0.17     $ 0.36     $ 0.44  
Discontinued operations
    (0.01 )     0.03       (0.00 )     0.03  
 
                               
 Net income per share
  $ 0.12     $ 0.20     $ 0.36     $ 0.47  
Basic weighted average shares outstanding
    8,550       8,522       8,541       8,522  
Dilutive effect of stock based compensation
    60       7       67       4  
 
                               
Diluted weighted average shares outstanding
    8,610       8,529       8,608       8,526  
 
                               
Cash dividends declared per share of common stock
  $ 0.12     $ 0.06     $ 0.24     $ 0.12  
 
                               
 

2

                 
LAWSON PRODUCTS, INC.    
CONDENSED CONSOLIDATED BALANCE SHEETS    
(Amounts in thousands)    
    June 30,   December 31,
    2011   2010
    (Unaudited)        
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 22,734     $ 40,566  
Accounts receivable, less allowance for doubtful accounts
    37,313       33,398  
Inventories
    50,494       47,167  
Miscellaneous receivables and prepaid expenses
    6,750       8,905  
Deferred income taxes
    4,340       4,251  
Discontinued operations
    653       619  
 
               
Total current assets
    122,284       134,906  
 
               
Property, plant and equipment, net
    49,578       44,442  
Cash value of life insurance
    16,112       15,660  
Deferred income taxes
    10,075       11,492  
Goodwill
    28,550       28,307  
Other assets
    1,015       1,577  
 
               
Total assets
  $ 227,614     $ 236,384  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  $ 18,006     $ 18,195  
Accrued expenses and other liabilities
    26,390       35,348  
Discontinued operations
    590       2,008  
Total current liabilities
    44,986       55,551  
 
               
Security bonus plans
    25,109       25,602  
Deferred compensation
    10,923       10,792  
Other liabilities
    1,655       1,574  
 
               
 
    37,687       37,968  
 
               
Total Stockholders’ Equity
    144,941       142,865  
 
               
Total liabilities and stockholders’ equity
  $ 227,614     $ 236,384  
 
               

3

 
  LAWSON PRODUCTS, INC.
REGULATION G GAAP RECONCILIATIONS

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, the Company’s management believes that certain non-GAAP financial measures may provide users of this financial information additional meaningful comparisons between current results and results in prior operating periods. Management believes that these non-GAAP financial measures can provide additional meaningful reflection of underlying trends of the business because they provide a comparison of historical information that excludes certain infrequently occurring or non-operational items that impact the overall comparability. See the table below for supplemental financial data and corresponding reconciliations to GAAP financial measures for the three and six months ended June 30, 2011 and 2010. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported results prepared in accordance with GAAP.

                                 
TABLE 1 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP OPERATING INCOME
    (Amounts in thousands)    
    (Unaudited)    
    Three Months Ended   Six months ended
    June 30,   June 30,
    2011   2010   2011   2010
Operating income, as reported per GAAP
  $ 1,592     $ 2,792     $ 5,337     $ 7,223  
Gain on sale of assets (1)
                      (1,701 )
Legal settlement (2)
                      (550 )
 
                               
Adjusted non-GAAP operating income
  $ 1,592     $ 2,792     $ 5,337     $ 4,972  
 
                               

(1)   The $1.7 million gain on disposal of assets recorded in the six months ended June 30, 2010 relates to the sale of the Dallas, Texas distribution center.

(2)   The $0.6 million benefit recorded in the six months ended June 30, 2010 are proceeds received from legal remedies related to the actions of several former sales agents and the Share Corporation.

Contact: Lawson Products, Inc.
Ronald J. Knutson
SVP, Chief Financial Officer
847-827-9666, ext. 2665  

4