Lawson Products, Inc. Announces Results for First Quarter, 2005
DES PLAINES, Ill., April 27 /PRNewswire-FirstCall/ -- Lawson Products, Inc. (Nasdaq: LAWS) reported first quarter 2005 net sales increased 6.4% to $107.1 million, up $6.4 million from $100.7 million in the first quarter of 2004. Net income for the first quarter 2005 was $5.0 million or $.54 per diluted share, representing a 21.7% decline compared to 2004 first quarter net income of $6.5 million or $.69 per diluted share. First quarter 2005 net income per share was 25.6% and $1.0 million higher than the $.43 per diluted share earned in the fourth quarter of 2004.
First quarter 2005 earnings were impacted by higher product costs that were temporarily absorbed by the Company resulting in lower gross profit margins, higher operating costs related to compensation costs for performance- based management incentive programs and the addition of marketing and technology personnel, and a higher effective tax rate.
In the first quarter, sales in the Maintenance, Repair and Operations (MRO) segment grew by 6.3%, and in the Original Equipment Manufacturing (OEM) segment sales grew by 6.9% over the comparable period in the prior year. Sales growth was driven by the addition of new customers and improved penetration of existing customers.
Consolidated gross profit margins were 61.2% in the first quarter 2005, comparable to the 61.5% reported for the fourth quarter of 2004 and lower than the 65.0% reported for the first quarter of 2004. "We have felt the impact of raw material shortages and cost increases that started during mid-2004 and are continuing. Our first priority is to continue to assure ready availability of our complete lines to our customers," stated Robert J. Washlow, Chairman of the Board and CEO. Washlow continued, "The Company's management intends to maintain and enhance net profit margins through the implementation of various purchasing, cost management, marketing and technology initiatives."
Operating expenses increased by 3.9% to $57.5 million compared to $55.3 million in the first quarter of 2004, driven by higher compensation costs in the marketing and technology areas where Lawson is implementing various long- term programs, intended to enhance profitable growth. Compensation expenses in the first quarter 2005 also reflect costs associated with the Long-Term Capital Accumulation Plan and performance-based incentive plans for management implemented in 2004. Due to the timing of the adoption of those plans, no expenses were recorded for those plans in the first quarter of 2004.
First quarter operating results were negatively affected by a higher tax rate than the prior year first quarter. The effective tax rate of 42.3% for the quarter was 4.3 percentage points higher than the 38.0% rate in the same quarter in 2004. This increase is primarily due to foreign operating losses in 2005, for which no tax benefit was realized, resulting from reduced sales volume from a large customer.
During the quarter, Lawson announced an 11% increase in its quarterly dividend and continued repurchasing its outstanding shares. Approximately $5.7 million was expended on the repurchase of 117,972 shares. At the end of the first quarter, 419,191 shares remained under the current share repurchase authorization.
Lawson Products is an international seller and distributor of systems, services and products to the industrial, commercial, governmental and institutional maintenance, repair and replacement marketplaces. The Company also manufactures, sells and distributes production and specialized component parts and services to the original equipment marketplace, including the automotive, appliance, aerospace, construction and transportation industries.
This press release, including Mr. Washlow's statements, 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," "protect," and similar expressions are intended to identify forward-looking statements. 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 actual results to differ materially from those described in the forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Factors that could cause or contribute to such differences include, but are not limited to, those related to general economic conditions and market conditions in the original equipment manufacturers and maintenance, repair and replacement distribution industries in North America and to a lesser extent, the United Kingdom, the Company's ability to obtain new customers and manage growth, material or labor cost increases, competition in the Company's businesses, risks of the Company's inventory becoming obsolete, operating margin risk due to competitive pricing and operating efficiencies, seasonality, effectiveness of our sales and marketing programs, and the length and frequency of economic downturns in the Company's markets and other risks identified in the Company's Annual Report on Form 10-K for the year ended December 31, 2004. 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.
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
2005 2004
Net Sales $107,081,833 $100,657,758
Gross Profit 65,564,024 65,397,222
Operating Expenses 57,481,726 55,335,437
Operating Income 8,082,298 10,061,785
Income Before Taxes 8,585,873 10,527,262
Provision for Income Taxes 3,630,000 4,001,000
Net Income $4,955,873 $6,526,262
Net Income per share of Common Stock:
Basic $0.54 $0.69
Diluted $0.54 $0.69
Weighted Average Shares Outstanding:
Basic 9,208,285 9,486,789
Diluted 9,232,124 9,515,152
Condensed Consolidated Balance Sheets
Lawson Products, Inc. and Subsidiaries
March 31, December 31,
2005 2004
(UNAUDITED)
Current Assets:
Cash and Cash Equivalents $22,956,787 $28,871,594
Receivables, Net 51,913,994 52,129,231
Inventories, Net 69,036,350 65,686,622
Other Current Assets 10,403,073 11,289,142
Total Current Assets 154,310,204 157,976,589
Property, Plant and Equipment, Net 41,211,059 42,452,261
Other Assets, Net 60,769,539 60,120,733
Total Assets $256,290,802 $260,549,583
Current Liabilities $40,423,222 $42,947,151
Other Noncurrent Liabilities 38,101,542 37,270,975
Stockholders' Equity 177,766,038 180,331,457
Total Liabilities and Equity $256,290,802 $260,549,583
SOURCE Lawson Products, Inc.
-0- 04/27/2005
/CONTACT: Thomas Neri, Executive VP CFO-Corporate Planning of Lawson
Products, Inc., +1-847-827-9666/
(LAWS)
CO: Lawson Products, Inc.
ST: Illinois
IN: MAC
SU: ERN
SH-AM
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7436 04/27/2005 08:10 EDT http://www.prnewswire.com