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 September 30, 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.
11,566,214 Shares, $1 par value, as of October 18, 1996.
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
(Amounts in thousands) 1996 1995
------------- -------------
(UNAUDITED)
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 14,114 $ 10,432
Marketable securities 15,988 16,068
Accounts receivable, less
allowance for doubtful accounts 31,746 28,296
Inventories (Note B) 35,856 27,083
Miscellaneous receivables and
prepaid expenses 5,903 5,635
Deferred income taxes 640 464
------------- -------------
Total Current Assets 104,247 87,978
Marketable securities 11,360 20,847
Property, plant and equipment, less
allowances for depreciation and
amortization 39,397 35,501
Investments in real estate 3,247 3,152
Deferred income taxes 3,719 3,201
Other assets 10,854 9,935
------------- -------------
Total Assets $172,824 $160,614
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 5,251 $ 3,219
Accrued expenses and other liabilities 14,806 14,329
Income taxes 1,428 962
------------- -------------
Total Current Liabilities 21,485 18,510
------------- -------------
Accrued liability under security
bonus plans 12,568 11,422
Other 8,931 7,871
------------- -------------
21,499 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 - 11,601,214 shares;
1995 - 11,686,614 shares) 11,601 11,687
Capital in excess of par value 498 494
Retained earnings 118,373 111,321
------------- -------------
130,472 123,502
Other (632) (691)
------------- -------------
Total Stockholders' Equity 129,840 122,811
------------- -------------
Total Liabilities and Stockholders'
Equity $172,824 $160,614
============= =============
See notes to condensed consolidated financial statements.
- 2 -
LAWSON PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Amounts in thousands, except per share data)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
--------- --------- --------- ---------
Net Sales $66,303 $56,177 $185,890 $167,117
Investment and other income 475 462 1,525 2,003
--------- --------- --------- ---------
66,778 56,639 187,415 169,120
--------- --------- --------- ---------
Cost of goods sold (Note B) 22,856 15,832 60,286 47,075
Selling, general and
administrative expenses 35,651 32,368 103,965 96,885
--------- --------- --------- ---------
58,507 48,200 164,251 143,960
--------- --------- --------- ---------
Income before income taxes 8,271 8,439 23,164 25,160
Provision for income taxes 3,443 3,348 9,583 9,767
--------- --------- --------- ---------
Net income $ 4,828 $ 5,091 $ 13,581 $ 15,393
========= ========= ========= =========
Net income per share of
common stock $0.42 $0.43 $1.17 $1.26
===== ===== ===== =====
Cash dividends declared per
share of common stock $0.13 $0.13 $0.39 $0.38
===== ===== ===== =====
Weighted average shares
outstanding 11,601 11,826 11,609 12,177
========= ========= ========= =========
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
Nine months ended
September 30,
1996 1995
--------- ---------
Operating activities:
Net income $ 13,581 $ 15,393
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,981 2,527
Changes in operating assets and liabilities (4,697) (6,722)
Other 2,353 2,090
--------- ---------
Net Cash Provided by Operating Activities 14,218 13,288
--------- ---------
Investing activities:
Additions to property, plant and equipment (2,774) (2,280)
Purchases of marketable securities (318,335) (184,507)
Proceeds from sale of marketable securities 327,600 197,988
Acquisition of Automatic Screw Machine Products,
net of cash acquired (10,506) ---
Other 100 684
--------- ---------
Net Cash (Used in)/Provided by Investing Activities (3,915) 11,885
--------- ---------
Financing activities:
Purchases of common stock (2,095) (21,292)
Dividends paid (4,535) (4,537)
Other 9 5
--------- ---------
Net Cash Used in Financing Activities (6,621) (25,824)
--------- ---------
Increase/(Decrease) in Cash
and Cash Equivalents 3,682 (651)
Cash and Cash Equivalents at Beginning of Period 10,432 9,853
--------- ---------
Cash and Cash Equivalents at End of Period $ 14,114 $ 9,202
========= =========
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 September 30, 1996 and the Condensed
Consolidated Statements of Income for the three and nine month
periods ended September 30, 1996 and 1995 and the Condensed
Consolidated Statements of Cash Flows for the nine month periods
ended September 30, 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.
B) Inventories (consisting of primarily finished goods) at
September 30, 1996 and cost of goods sold for the three and nine
month periods ended September 30, 1996 and 1995 were determined
through the use of estimated gross profit rates.
C) On April 30, 1996 the Company purchased substantially all of
the assets and liabilities of Automatic Screw Machine Products
Company (Automatic) for cash of approximately $10,746,000. This
transaction was accounted for as a purchase, accordingly, the
accounts and transactions of Automatic have been included in the
consolidated financial statements since the date of acquisition.
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 September
30, 1996 and the related condensed consolidated statements of
income for the three month and nine month periods ended September
30, 1996 and 1995 and the condensed consolidated statements of
cash flows for the nine month periods ended September 30, 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
October 18, 1996
- 6 -
Part I
October 18, 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 October 18,
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 September 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report
is not 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 nine months ended
September 30, 1996 increased slightly to $14,218,000 from
$13,288,000 in the comparable period of the prior year. This
increase was due primarily to an increase in net operating
liabilities, partially offset by a decrease in net income in the
similar period of 1995. 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 $2,774,000 and $2,280,000, respectively,
for the nine months ended September 30, 1996 and 1995. Capital
expenditures during 1996 reflect primarily purchases of computer
related equipment and facility improvements, while 1995 additions
include the completion of a Lawson outbound facility in Addison,
Illinois, at a cost of approximately of $5,600,000.
During the second quarter of 1996, the Company purchased
substantially all of the assets and liabilities of Automatic
Screw Machine Products Company (Automatic), headquartered in
Decatur, Alabama, at a cost of approximately $10,746,000.
Automatic is a manufacturer and distributor of production
components. The former business operations of Automatic are
conducted by new subsidiaries known as Assembly Component
Systems, Inc. and Automatic Screw Machine Products Company.
In December of 1994, the Board of Directors authorized the
purchase up to 1,000,000 shares of the Company's common stock.
During the first nine months of 1996, the Company expended
$2,095,000 to acquire the remaining 86,000 shares authorized for repurchase.
These treasury shares were subsequently retired. In
the similar period of 1995, the Company acquired 807,000 shares
at a cost of $21,292,000. These shares and 4,493,676 shares
purchased prior to 1995 were retired in the quarter ended
September 30, 1995. During the third quarter of 1996, the Board
of Directors authorized the purchase up to 1,000,000 shares of
the Company's common stock of which none have been purchased.
Net sales for the three and nine month periods ended September
30, 1996, advanced 18.0% to $66,303,000 and 11.2% to $185,890,000
relative to the comparable periods of 1995. The increases are
principally the result of gains in the number of orders processed
and sales made by ACS.
Net income for the third quarter decreased 5.2% to $4,828,000
($.42 per share) from $5,091,000 ($.43 per share) for the similar
period of 1995. Net income for the nine months ended September
30, 1996 decreased 11.8% to $13,581,000 ($1.17 per share) from
$15,393,000 ($1.26 per share) for the comparable period of 1995.
These decreases are attributable to lower gross margins and a
higher effective tax rate, which more than offset the gains in
net sales noted above. 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, and 5 are inapplicable and have been omitted
from this report.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of stockholders of Lawson
Products, Inc. was held on May 7, 1996.
(b) Not applicable.
(c) Set forth below is the tabulation of the votes on
each nominee for election as a director:
Withheld
For Authority
Ronald B. Port, M.D. 10,006,128 437,616
Robert G. Rettig 9,996,543 447,201
Peter G. Smith 10,002,833 440,911
(d) Not applicable.
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 October 18, 1996 /s/ Bernard Kalish
Bernard Kalish
Chairman of the Board
Dated October 18, 1996 /s/ Joseph L. Pawlick
Joseph L. Pawlick
Vice President and Controller
- 10 -
5
1,000
9-MOS
DEC-31-1996
SEP-30-1996
14,114
27,348
31,746
0
35,856
104,247
39,397
0
172,824
21,485
0
11,601
0
0
118,239
172,824
185,890
187,415
60,286
60,286
0
770
19
23,164
9,583
13,581
0
0
0
13,581
1.17
1.17
