Lawson Products, Inc. Announces Third Quarter 2007 Results
DES PLAINES, Ill., Oct 31, 2007 (BUSINESS WIRE) -- Lawson Products, Inc. (NASDAQ: LAWS)(the "Company"), a distributor of services, systems and products to the maintenance, repair and operations (MRO) and original equipment manufacturer (OEM) marketplaces, today announced financial results for its third quarter ended September 30, 2007. For the third quarter 2007, net sales from continuing operations were $127.9 million, an increase of $0.6 million from the comparable prior year quarter. Net income for the quarter was $2.4 million, compared to net income of $3.1 million in the third quarter of 2006. Diluted income per share was $0.28 for the quarter, compared to income of $0.34 per share a year ago.
Third quarter 2007 results include severance costs of $3.7 million related to several executive departures and re-alignment of the Company's sales management. The Company reported operating income of $5.4 million for the quarter compared to operating income of $5.8 million in the prior year.
Gross profit margins for the third quarter 2007 of 59.8 percent were lower compared to 60.1 percent gross profit margins in the third quarter of 2006. This decrease was primarily due to higher overall product costs.
Selling, general and administrative (SG&A) expenses were $67.4 million for the third quarter of 2007, which represents a decline from the respective prior period amounts of $70.7 million. Included in SG&A costs are legal costs associated with the ongoing investigation by the U.S. Attorney's Office for the Northern District of Illinois. The Company incurred expenses of $1.2 million for legal costs associated with this investigation in the quarter ended September 30, 2007, which represents a $0.6 million increase compared to $0.6 million in the prior year period.
The primary driver of lower SG&A in the third quarter 2007 was lower compensation costs, reflecting a $3.1 million reduction in costs associated with the Company's long-term based incentive plans due to the decline in the Company's financial performance in 2007.
The effective tax rate for the three months ended September 30, 2007 was 53.9 percent, which was higher than the 45.6 percent rate for the three months ended September 30, 2006. The higher rate for the third quarter 2007 was related to increases to estimated tax liabilities related to the Company's decision to exclude tax deductions for expenses associated with the Company's customer loyalty programs.
Share repurchase activities that occurred primarily in 2006 reduced the outstanding shares of common stock by approximately five percent and had a favorable impact on net income per share amounts when compared to the prior year.
Thomas Neri, President and Chief Executive Officer said, "In the third quarter, we continued to implement strategic initiatives that management believes are critical to driving the Company's long-term growth and shareholder value. Those initiatives included actions related to supply chain, sales management, and operations enhancement activities. In addition, several third quarter 2007 employee departures related to certain initiatives resulted in severance charges that negatively impacted our reported financial results for the current quarter. Despite the negative short-term financial impacts of these actions, I remain enthusiastic about the opportunities that these initiatives provide for delivering customer satisfaction and growth for the Company."
About Lawson Products, Inc.
Lawson Products, Inc. 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 to the original equipment marketplace (OEM) including the automotive, appliance, aerospace, construction and transportation industries.
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 impact of governmental investigations, such as the ongoing investigation by U.S. Attorney's Office for the Northern District of Illinois; 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, 2006. 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share data) September 30, December 31,
2007 2006
------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $1,664 $3,391
Accounts receivable, less allowance for
doubtful accounts 62,577 60,411
Inventories 91,008 90,272
Miscellaneous receivables and prepaid
expenses 7,970 5,529
Deferred income taxes 3,098 3,538
Discontinued current assets 1,171 2,056
------------- ------------
Total Current Assets 167,488 165,197
Property, plant and equipment, less
allowances for depreciation and
amortization 50,656 42,664
Deferred income taxes 22,803 20,341
Goodwill 27,999 27,999
Other assets 24,644 22,679
Discontinued non-current assets -- 3
------------- ------------
Total Assets $293,590 $278,883
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving line of credit $13,000 $--
Accounts payable 15,038 14,055
Accrued expenses and other liabilities 46,343 46,746
Income taxes -- 855
Discontinued current liabilities 1,065 1,770
------------- ------------
Total Current Liabilities 75,446 63,426
Accrued liability under security bonus
plans 26,549 25,522
Other 20,037 19,618
------------- ------------
46,586 45,140
Stockholders' Equity:
Preferred Stock, $1 par value:
Authorized - 500,000 shares
Issued and outstanding -- None -- --
Common Stock, $1 par value:
Authorized - 35,000,000 shares
Issued and outstanding-(2007-8,522,001
shares; 2006-8,521,001 shares) 8,522 8,521
Capital in excess of par value 4,774 4,749
Retained earnings 158,301 158,008
Accumulated other comprehensive loss (39) (961)
------------- ------------
Total Stockholders' Equity 171,558 170,317
------------- ------------
Total Liabilities and Stockholders'
Equity $293,590 $278,883
============= ============
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
(in thousands, except per share
data) 2007 2006 2007 2006
--------- --------- --------- ---------
Net sales $127,913 $127,335 $386,760 $386,727
Cost of goods sold 51,456 50,786 157,779 156,974
--------- --------- --------- ---------
Gross profit 76,457 76,549 228,981 229,753
Operating expenses:
Selling, general and
administrative expenses 67,435 70,740 205,124 209,620
Severance and other charges 3,659 -- 10,571 --
Loss on sale of equipment -- -- -- 806
--------- --------- --------- ---------
Operating income 5,363 5,809 13,286 19,327
Investment and other income 160 260 555 1,201
Interest expense (295) -- (662) --
--------- --------- --------- ---------
Income from continuing
operations before income taxes
and cumulative effect of
accounting change 5,228 6,069 13,179 20,528
Provision for income taxes 2,818 2,768 6,063 8,587
--------- --------- --------- ---------
Income from continuing
operations before cumulative
effect of accounting change 2,410 3,301 7,116 11,941
Loss from discontinued
operations, net of income
taxes (11) (226) (496) (312)
--------- --------- --------- ---------
Income before cumulative effect
of accounting change 2,399 3,075 6,620 11,629
Cumulative effect of accounting
change, net of income taxes -- -- -- (361)
--------- --------- --------- ---------
Net income $2,399 $3,075 $6,620 $11,268
========= ========= ========= =========
Basic income (loss) per share
of common stock:
Continuing operations
before cumulative effect
of accounting change $0.28 $0.37 $0.84 $1.33
Discontinued operations (0.00) (0.03) (0.06) (0.03)
Cumulative effect of
accounting change -- -- -- (0.04)
--------- --------- --------- ---------
$0.28 $0.34 $0.78 $1.25
========= ========= ========= =========
Diluted income (loss) per share
of common stock:
Continuing operations
before cumulative effect
of accounting change $0.28 $0.37 $0.83 $1.33
Discontinued operations (0.00) (0.03) (0.06) (0.03)
Cumulative effect of
accounting change -- -- -- (0.04)
--------- --------- --------- ---------
$0.28 $0.34 $0.78 $1.25
========= ========= ========= =========
Cash dividends declared per
share of common stock $0.20 $0.20 $0.60 $0.60
========= ========= ========= =========
Weighted average shares
outstanding:
Basic 8,522 8,998 8,522 8,987
========= ========= ========= =========
Diluted 8,524 9,004 8,524 8,993
========= ========= ========= =========
SOURCE: Lawson Products, Inc.
Lawson Products, Inc.
Scott F. Stephens
847-827-9666, ext. 2269