Lawson Products, Inc. Announces 2008 Fourth Quarter and Annual Results

DES PLAINES, Ill.--(BUSINESS WIRE)--Mar. 11, 2009-- Lawson Products, Inc. (NASDAQ:LAWS) (the "Company"), a distributor of services, systems and products to the MRO and OEM marketplaces, today announced results for its fourth quarter and year ended December 31, 2008.

Fourth Quarter and Full Year 2008 Highlights

• Revenue was $106.8 million for the quarter, and $485.2 million for the full year.
• Adjusted operating income was $23.0 million for the full year.
• Cash flow from operations for the year was $15.7 million.
• Company continues to implement cost control initiatives with the closing of its Charlotte, NC distribution facility.
• Company amends credit facility.

The slowdown in the global economy significantly impacted net sales for the quarter, which were $106.8 million, compared to net sales of $123.6 million for the prior year quarter. Gross profit declined $12.3 million to $60.3 million in 2008 as compared to 2007. Gross profit margins for the fourth quarter of 2008 were 56.5% as compared to 58.8% in the fourth quarter of 2007, primarily due to increased product and commodity costs that were not fully passed on to the customers. Operating loss for the fourth quarter of 2008 was $4.8 million compared to operating income of $7.2 million in 2007 reflecting the reduced gross profit and a non-cash charge of $2.3 million due to an impairment charge related to goodwill in the OEM segment. Selling, general and administrative expenses decreased by $2.2 million, or 3.5% as compared to the fourth quarter 2007, primarily due to lower sales commission expenses. The Company reported a net loss of $5.4 million, which compared to net income of $4.0 million in the fourth quarter of 2007. Net loss per share was $0.64 for the fourth quarter of 2008, compared to net income of $0.47 per share a year ago.

For the full year, net sales decreased 5.3% to $485.2 million in 2008 compared to $512.5 million in 2007 primarily as a result of the global economy’s significant pullback in the fourth quarter of 2008. Year-over-year gross profit decreased $24.8 million to $279.0 million in 2008 primarily due to the decline in net sales. Gross profit, as a percent of sales, declined 1.8 percentage points to 57.5% in 2008. The Company recorded a $20.2 million operating loss for the full year 2008 as compared to operating income of $20.4 million in 2007. Costs related to the settlement of the investigation by the U.S. Attorney’s Office for the Northern District of Illinois, severance costs, unclaimed property expenses and the goodwill impairment charge totaled $43.2 million in 2008 and $18.2 million in 2007. Excluding the effect of these charges, adjusted operating income was $23.0 million as compared to $38.6 million in 2007. Adjusted operating income is a non-GAAP financial measure – see “Reconciliation of GAAP to Adjusted Non-GAAP Operating (Loss) Income.” Net loss for the year ended December 31, 2008 was $27.6 million or $3.24 per share as compared to net income of $10.6 million or $1.25 per share for the year ended December 31, 2007.

In March 2009 the Company amended its credit facility (the “Amended Credit Facility”) adjusting many of its covenants and reducing the amount of the facility to $55.0 million. Further, the facility was converted from unsecured to secured and the quarterly dividend will be limited to $0.03 per share. Currently, borrowings against this facility are $6.7 million, and thus the Company retains ample access to capital with approximately $28 million of excess availability, net of the remaining $20 million monetary penalty due to the U.S. government ratably in 2009 and 2010.

Thomas Neri, President and Chief Executive Officer said, "2008 proved to be extremely challenging, particularly the last few months of the year, as demand across the industrial space was significantly impacted by the global recession. Despite the negative effects of the economy, we were able to take important steps to improve our operational and financial condition during 2008. We integrated previously separate businesses allowing our customers to access an expanded range of products from a single point of contact. The settlement with the United States Attorney’s Office for the Northern District of Illinois, substantially brings to a close the uncertainty created by the investigation initiated in 2005. Additionally, we were able to generate cash by reducing our working capital requirements primarily through initiatives taken to improve inventory management. We maintain ample liquidity and will continue to aggressively manage our cost structure throughout 2009.”

Mr. Neri continued, “While the duration of the economic downturn is uncertain, we are taking immediate steps to reduce our expenses. First, we have already begun the process of closing our Charlotte, NC distribution facility which will be complete by the end of March. We expect to further rationalize our distribution network throughout 2009 to properly service our customers and control costs. We will continue to aggressively pursue other cost reduction measures and right size our business for today’s economic environment.”

About Lawson Products, Inc.

Lawson Products, headquartered in Des Plaines, IL, is a leader in selling and distributing services, systems, and products to the industrial, commercial, and institutional maintenance, repair and operations (MRO) market. The company also manufacturers, sells, and distributes production and specialized component parts, and provides services and systems to original equipment manufacturers (OEMs).

This release contains certain forward-looking statements 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. Such statements speak only as of the date of the news release and are subject to a variety of risks and uncertainties, many of which are beyond the Company's control, which could cause actual results to differ materially from the expectations. These risks include, but are not limited to: the market reaction to the signing of a Deferred Prosecution Agreement with U.S. Attorney's office for the Northern District of Illinois and any subsequent breach of the terms and conditions of such agreement; excess and obsolete inventory; disruptions of the Company's information systems; risks of rescheduled or cancelled orders; increases in commodity prices; the influence of controlling stockholders; competition and competitive pricing pressures; the effect of general economic conditions and market conditions in the markets and industries the Company serves; the risks of war, terrorism, and similar hostilities; and, all of the factors discussed in the Company's "Risk Factors" set forth in its Annual Report on Form 10-K for the year ended December 31, 2008. The Company undertakes no obligation to update any such factor or to publicly announce the results of any revisions to any forward-looking statements contained herein whether as a result of new information, future events or otherwise.

Source: Lawson Products, Inc.

Lawson Products, Inc.
F. Terrence Blanchard
847-827-9666, ext. 2269