SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------------------------------
FORM 10-Q
Quarterly Report under Section 13 or 15(d) of
The Securities Exchange Act of 1934
----------------------------------
For Quarter Ended March 31, 1996 Commission file no. 0-10546
LAWSON PRODUCTS, INC.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2229304
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1666 East Touhy Avenue, Des Plaines, Illinois 60018
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code: (847) 827-9666
Not applicable
- -----------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
11,600,614 Shares, $1 par value, as of April 19, 1996.
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
(Amounts in thousands) 1996 1995
------------- -------------
(UNAUDITED)
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 10,487 $ 10,432
Marketable securities 21,863 16,068
Accounts receivable, less
allowance for doubtful accounts 28,188 28,296
Inventories (Note B) 29,527 27,083
Miscellaneous receivables and
prepaid expenses 5,426 5,635
Deferred income taxes 636 464
------------- -------------
Total Current Assets 96,127 87,978
Marketable securities 15,775 20,847
Property, plant and equipment, less
allowances for depreciation and
amortization 35,586 35,501
Investments in real estate 3,197 3,152
Deferred income taxes 3,253 3,201
Other assets 10,661 9,935
------------- -------------
Total Assets $164,599 $160,614
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 4,086 $ 3,219
Accrued expenses and other liabilities 13,816 14,329
Income taxes 3,782 962
------------- -------------
Total Current Liabilities 21,684 18,510
------------- -------------
Accrued liability under security
bonus plans 11,735 11,422
Other 8,070 7,871
------------- -------------
19,805 19,293
------------- -------------
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 - (1996 - 11,600,614 shares;
1995 - 11,686,614 shares) 11,601 11,687
Capital in excess of par value 490 494
Retained earnings 111,832 111,321
------------- -------------
123,923 123,502
Other (813) (691)
------------- -------------
Total Stockholders' Equity 123,110 122,811
------------- -------------
Total Liabilities and Stockholders'
Equity $164,599 $160,614
============= =============
See notes to condensed consolidated financial statements.
- 2 -
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
(Amounts in thousands, except per share data)
For the
Three Months Ended
March 31,
1996 1995
--------- ---------
Net sales $ 56,108 $ 54,845
Investment and other income 631 1,026
--------- ---------
56,739 55,871
--------- ---------
Cost of goods sold (Note B) 16,678 15,421
Selling, general and
administrative expenses 33,272 32,211
49,950 47,632
--------- ---------
Income before income taxes 6,789 8,239
Provision for income taxes 2,765 3,214
--------- ---------
Net income 4,024 5,025
Retained earnings at
beginning of period 111,321 195,609
Deduct:
Treasury stock retired 2,005 ---
Cash dividends declared 1,508 1,482
--------- ---------
Retained earnings at end
of period $111,832 $199,152
========= =========
Net income per share of
common stock $0.35 $0.40
===== =====
Cash dividends declared per
share of common stock $0.13 $0.12
===== =====
Weighted average shares
outstanding 11,622 12,454
========= =========
See notes to condensed consolidated financial statements.
- 3 -
/TABLE
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Amounts in thousands)
For the
Three months ended
March 31,
1996 1995
--------- ---------
Operating activities:
Net income $ 4,024 $ 5,025
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,003 842
Changes in operating assets and liabilities 22 (2,835)
Other 545 499
--------- ---------
Net Cash Provided by Operating Activities 5,594 3,531
--------- ---------
Investing activities:
Additions to property, plant and equipment (1,079) (1,120)
Purchases of marketable securities (141,305) (60,404)
Proceeds from sale of marketable securities 140,409 63,491
Other 50 644
--------- ---------
Net Cash (Used in)/Provided by Investing Activities (1,925) 2,611
--------- ---------
Financing activities:
Purchases of treasury stock (2,095) (6,414)
Dividends paid (1,519) (1,512)
--------- ---------
Net Cash Used in Financing Activities (3,614) (7,926)
--------- ---------
Increase/(Decrease) in Cash
and Cash Equivalents 55 (1,784)
Cash and Cash Equivalents at Beginning of Period 10,432 9,853
--------- ---------
Cash and Cash Equivalents at End of Period $ 10,487 $ 8,069
========= =========
See notes to condensed consolidated financial statements.
- 4 -
/TABLE
Part I
NOTES TO CONDENSED CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
A) As contemplated by the Securities and Exchange Commission, the
accompanying consolidated financial statements and footnotes have
been condensed and therefore, do not contain all disclosures
required by generally accepted accounting principles. Reference
should be made to the Company's Annual Report to Stockholders for
the year ended December 31, 1995. The Condensed Consolidated
Balance Sheet as of March 31, 1996, the Condensed Consolidated
Statements of Income and Retained Earnings for the three month
periods ended March 31, 1996 and 1995 and the Condensed
Consolidated Statements of Cash Flows for the three month periods
ended March 31, 1996 and 1995 are unaudited. In the opinion of the
Company, all adjustments (consisting only of normal recurring
accruals) have been made, which are necessary to present fairly the
results of operations for the interim periods. Operating results
for the quarter ended March 31, 1996 are not necessarily indicative
of the results that may be expected for the year ending
December 31, 1996.
B) Inventories (consisting of finished goods) at March 31, 1996
and cost of goods sold for the three month periods ended
March 31, 1996 and 1995 were determined through the use of
estimated gross profit rates.
The following exhibits are attached to Part I:
1. Letter from independent accountants furnished
pursuant to Rule 10.01 (d) of regulation S-X.
2. Letter from independent accountants furnished
pursuant to Item 601, #15 of regulation S-K.
- 5 -
Part I
Independent Accountant's Review Report
Board of Directors
Lawson Products, Inc.
We have reviewed the accompanying condensed consolidated balance sheet
of Lawson Products, Inc. and subsidiaries as of March 31, 1996 and the
related condensed consolidated statements of income and retained
earnings and cash flows for the three month periods ended March 31, 1996
and 1995. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data, and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit in accordance with generally accepted
auditing standards, which will be performed for the full year with the
objective of expressing an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying condensed consolidated financial
statements referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Lawson Products,
Inc. as of December 31, 1995, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the year then
ended, not presented herein, and in our report dated February 26, 1996,
we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31,
1995, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
ERNST & YOUNG LLP
April 19, 1996
- 6 -
Part I
April 19, 1996
Board of Directors
Lawson Products, Inc.
We are aware of the incorporation by reference in the Registration
Statement (Form S-8 No. 33-17912 dated November 4, 1987) of Lawson
Products, Inc. of our report dated April 19, 1996 relating to the
unaudited condensed consolidated interim financial statements of Lawson
Products, Inc. which are included in its Form 10-Q for the quarter ended
March 31, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not
a part of the registration statement prepared or certified by
accountants within the meaning of Section 7 or 11 of the Securities Act
of 1933.
ERNST & YOUNG LLP
- 7 -
Part I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
Cash flows provided by operations for the three months ended March 31,
1996 increased to $5,594,000 from $3,531,000 in the comparable period of
the prior year. This advance was due primarily to an increase in
accrued income taxes. In addition to satisfying operating requirements,
current investments and cash flows from operations are expected to
finance the Company's future growth, cash dividends and capital
expenditures. Additions to property, plant and equipment were
$1,079,000 and $1,120,000, respectively, for the three months ended
March 31, 1996 and 1995. Capital expenditures during 1996 reflect
primarily purchases of computer related equipment, while 1995 additions
include the completion of a Lawson outbound facility in Addison,
Illinois, at a cost of approximately $5,600,000.
In December of 1994, the Board of Directors authorized the purchase of
up to 1,000,000 shares of the Company's common stock. During the first
three months of 1996, the Company expended $2,095,000 to acquire the
remaining 86,000 shares authorized for repurchase. Also, during the
three month period ended March 31, 1995, the Company purchased 252,500
shares at a cost of $6,414,000, relative to the share authorization
noted above.
Net sales for the three month period ended March 31, 1996, gained 2.3%
to $56,108,000 relative to the comparable period of 1995. The gain is
principally the result of an increase in the number of orders processed
which more than offset a decrease in the average order size.
Net income declined 19.9% to $4,024,000 ($.35 per share) for the three
months ended March 31, 1996 from $5,025,000 ($.40 per share) for the
similar period of 1995. This decrease is attributable to lower gross
margins and a higher effective income tax rate, which more than offset
the advance in net sales noted above. Results for the three months
ended March 31, 1995 include the effect of net life insurance proceeds
of approximately $300,000 ($.02 per share). Per share net income for
1996 and 1995 was positively impacted by the Company's share repurchase
program.
- 8 -
Part II
OTHER INFORMATION
Items 1, 2, 3, 4, and 5 are inapplicable and have been omitted
from this report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Not applicable.
(b) The registrant was not required to file Form 8-K
for the most recently completed quarter.
- 9 -
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 thereunto duly authorized.
LAWSON PRODUCTS, INC.
(Registrant)
Dated April 22, 1995 /s/ Bernard Kalish
Bernard Kalish
Chairman of the Board
Dated April 22, 1995 /s/ Joseph L. Pawlick
Joseph L. Pawlick
Vice President and Controller
- 10 -
5
1,000
3-MOS
DEC-31-1996
MAR-31-1996
10,487
37,638
28,188
0
29,527
96,127
35,586
0
164,599
21,684
0
11,601
0
0
111,509
164,599
56,108
56,739
16,678
16,678
0
252
10
6,789
2,765
4,024
0
0
0
4,024
0.35
0.35
