Lawson Products, Inc. Announces Third Quarter 2009 Results
Third Quarter 2009 Highlights:
- Net sales for the quarter were $95.1 million;
- Operating income for the quarter was $2.9 million;
- Net income for the quarter was $1.5 million or $0.18 per share;
- Net cash provided by operating activities pre settlement payment was $5.7 million;
- At September 30, 2009, cash on hand of $10.8 million and no debt;
- During the quarter, the company doubled its dividend to $0.06 per share.
Net sales for the third quarter of 2009 were $95.1 million, a 24.1% decrease compared to net sales of $125.4 million for the prior year period, reflecting reduced customer demand due to current economic conditions. Gross profit decreased to $56.4 million in the third quarter of 2009, a $14.7 million decline from the year ago quarter. Gross profit margin for the third quarter of 2009 increased to 59.3% compared to 56.7% in the third quarter of 2008. The margin improvement was due to improvements in the OEM gross margin along with an increase in the proportion of total sales generated by the higher margin MRO segment. Selling, general and administrative expenses decreased by 17.2% to $52.8 million as compared to $63.8 million in the third quarter 2008.
Operating income for the third quarter of 2009 was $2.9 million compared to operating income of $5.8 million in 2008. The Company reported net income of $1.5 million or $0.18 per share in the third quarter of 2009 compared to $3.1 million or $0.36 per share in the third quarter of 2008.
Net sales for the nine month period ended September 30, 2009, were $289.5 million, a 23.5% decrease compared to net sales of $378.4 million for the prior year period. Gross profit decreased to $166.4 million for the first nine months of 2009, a $52.2 million decline from the year ago period. Gross profit margin was 57.5% for the first nine months of 2009 as compared to 57.8% for the comparable period in 2008.
The operating loss for the first nine months of 2009 was $2.7 million compared to a loss of $15.4 million in 2008. Settlement and related costs, severance and unclaimed property charges, totaled $6.7 million in 2009 and $39.2 million in 2008. Excluding the effect of these charges, adjusted operating income for the first nine months of 2009 was $4.1 million as compared to adjusted operating income of $23.8 million in 2008. The Company reported a net loss of $2.6 million or $0.30 per share of common stock in the first nine months of 2009, which compared to a net loss of $22.2 million or $2.61 per share in the first nine months of 2008.
Thomas Neri, President and Chief Executive Officer commented, "We are pleased with our progress to date. Overall, we have seen our sales stabilize, with our MRO segment performing slightly better than our OEM segment. In addition, our gross margins have improved sequentially in the second and third quarters. By implementing a number of cost reduction initiatives earlier this year, primarily in the MRO segment, we have succeeded in establishing a much lower fixed cost structure to support our future operations. Further, we entered into a new credit agreement during the quarter which provides us with greater financial flexibility."
Mr. Neri concluded, "We are deeply committed to becoming a much more efficient organization capable of delivering greater value to our customers and shareholders. While we have worked hard to reduce costs and improve our productivity, we believe there are still substantial improvements available."
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 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 include the risk factors set forth in Item 1A of the December 31, 2008 Form 10-K filed on March 11, 2009. 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.
| LAWSON PRODUCTS, INC. AND SUBSIDIARIES | ||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (Amounts in thousands, except per share data) | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||||
| Net sales | $ | 95,125 | $ | 125,364 | $ | 289,539 | $ | 378,382 | ||||||||
| Cost of goods sold | 38,728 | 54,275 | 123,106 | 159,721 | ||||||||||||
| Gross profit | 56,397 | 71,089 | 166,433 | 218,661 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative expenses | 52,845 | 63,791 | 162,367 | 194,910 | ||||||||||||
| Severance and other | 659 | 1,144 | 6,622 | 7,617 | ||||||||||||
| Settlement and related costs | 23 | 394 | 114 | 31,562 | ||||||||||||
| Operating income (loss) | 2,870 | 5,760 | (2,670 | ) | (15,428 | ) | ||||||||||
| Other income | 110 | 55 | 886 | 328 | ||||||||||||
| Interest expense | (132 | ) | (247 | ) | (474 | ) | (690 | ) | ||||||||
| Income (loss) from continuing operations before income taxes | 2,848 | 5,568 | (2,258 | ) | (15,790 | ) | ||||||||||
|
Income tax expense |
1,327 | 2,500 | 244 | 5,853 | ||||||||||||
| Income (loss) from continuing operations | 1,521 | 3,068 | (2,502 | ) | (21,643 | ) | ||||||||||
| (Loss) income from discontinued operations, net of income taxes | (18 | ) | 10 | (96 | ) | (563 | ) | |||||||||
| Net income (loss) | $ | 1,503 | $ | 3,078 | $ | (2,598 | ) | $ | (22,206 | ) | ||||||
| Basic and diluted income (loss) per share of common stock: | ||||||||||||||||
| Continuing operations | $ | 0.18 | $ | 0.36 | $ | (0.29 | ) | $ | (2.54 | ) | ||||||
| Discontinued operations | - | - | (0.01 | ) | (0.07 | ) | ||||||||||
| $ | 0.18 | $ | 0.36 | $ | (0.30 | ) | $ | (2.61 | ) | |||||||
|
Cash dividends declared per share of
common stock |
$ | 0.06 | $ | 0.20 | $ | 0.12 | $ | 0.60 | ||||||||
| Basic weighted average shares outstanding: | 8,522 | 8,522 | 8,522 | 8,522 | ||||||||||||
| Diluted weighted average shares outstanding: | 8,522 | 8,523 | 8,522 | 8,522 | ||||||||||||
| LAWSON PRODUCTS, INC. AND SUBSIDIARIES | ||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
| (Amounts in thousands) | ||||||
| September 30, | December 31, | |||||
| 2009 | 2008 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 10,796 | $ | 4,300 | ||
| Accounts receivable, less allowance for doubtful accounts | 42,098 | 48,634 | ||||
| Inventories | 78,466 | 86,435 | ||||
| Miscellaneous receivables and prepaid expenses | 13,567 | 11,812 | ||||
| Deferred income taxes | 4,118 | 6,127 | ||||
| Property held for sale | 332 | - | ||||
| Discontinued current assets | 449 | 296 | ||||
| Total current assets | 149,826 | 157,604 | ||||
|
Property, plant and equipment, less accumulated
depreciation and amortization |
43,023 | 47,783 | ||||
| Cash value of life insurance | 16,487 | 17,970 | ||||
| Deferred income taxes | 15,219 | 18,159 | ||||
| Goodwill | 27,839 | 25,748 | ||||
| Other | 3,623 | 3,732 | ||||
| Total assets | $ | 256,017 | $ | 270,996 | ||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 19,006 | $ | 16,334 | ||
| Settlement payable - current | 15,000 | 10,000 | ||||
| Accrued expenses and other liabilities | 35,554 | 41,205 | ||||
| Discontinued current liabilities | - | 53 | ||||
| Total current liabilities | 69,560 | 67,592 | ||||
| Revolving line of credit | $ | - | $ | 7,700 | ||
| Security bonus plans | 25,960 | 26,218 | ||||
| Deferred compensation | 13,076 | 11,301 | ||||
| Settlement payable - noncurrent | - | 10,000 | ||||
| Other | 10,324 | 9,441 | ||||
| 49,360 | 64,660 | |||||
| Total Stockholders' Equity | 137,097 | 138,744 | ||||
| Total liabilities and stockholders' equity | $ | 256,017 | $ | 270,996 | ||
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
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 months and nine months ended September 30, 2009 and 2008. 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 (LOSS) | ||||||||||||||
| (Amounts in thousands) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, | September 30, | |||||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||||
| Operating income (loss), as reported per GAAP | $ | 2,870 | $ | 5,760 | $ | (2,670 | ) | $ | (15,428 | ) | ||||
| Severance and other | 659 | 794 | 6,622 | 3,667 | ||||||||||
| Settlement penalty (1) | - | - | - | 30,000 | ||||||||||
| Settlement related costs (2) | 23 | 394 | 114 | 1,562 | ||||||||||
| Unclaimed property charges (3) | - | 350 | - | 3,950 | ||||||||||
| Adjusted non-GAAP operating income | $ | 3,552 | $ | 7,298 | $ | 4,066 | $ | 23,751 | ||||||
(1) Provision for penalties in connection with the settlement of the investigation by the U.S. Attorney's Office for the Northern District of Illinois.
(2) Legal and other related expenses associated with the investigation by the U.S. Attorney's Office for the Northern District of Illinois.
(3) Unclaimed property charges relate primarily to years prior to 2003.
|
TABLE 2 - RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP NET CASH |
|||
| (Amounts in thousands) | |||
| (Unaudited) | |||
|
|
|
||
|
Three Months Ended |
|||
| Net cash provided by operating activities per GAAP | $ | 689 | |
| Settlement payment (4) | 5,000 | ||
| Adjusted non-GAAP net cash provided by operating activities before settlement payment |
$ |
5,689 |
|
(4) Payment made in connection with the settlement of the investigation by the U.S. Attorney's Office for the Northern District of Illinois.
SOURCE: Lawson Products, Inc.
Lawson Products, Inc.
F. Terrence Blanchard
847-827-9666, ext. 2269